HCI (HCI) 7 Nov 202020 Q3 Earnings call transcript

Good afternoon, and welcome to HCI Group’s Third Quarter 2020 Earnings Call. My name is Christine, and I will be your conference operator this afternoon. At this time all participants will be in a listen-only mode. [Operator Instructions] Before we begin today’s call, I would like to remind everyone that this conference call is being recorded and will be available for replay through December 5, 2020, starting later this evening. This call is also being broadcast live via webcast and available via webcast replay until November 5, 2021 on the Investor Information section of HCI Group’s website at www.hcigroup.com. to for conference HCI. like Swansiger, to now Relations Investor would turn over the Rachel I Rachel, proceed. please

Thank you, today’s and Officer; third Patel, quarter good Chairman and afternoon. Welcome earnings our Chief With to Mark call. Harmsworth, me Financial Chief on and call our Paresh XXXX is Executive HCI Officer. Group’s

and of Paresh remarks, turn the then Mark opening financial for Paresh’s and operational review our performance back XXXX, to business for Following will the an update third outlook. quarter call

your take the of corporate will Finally, access visit website To we webcast, please questions. Investor today’s www.hcigroup.com. Information our section at

we take other forward-looking Act forward-looking similar estimate, Words intended such our responses remind Before and Private made would expect, I presentation to are signify questions of XXXX. intend, to begin, the like Reform statements the opportunity and Litigation anticipate, today’s project that to words as pursuant to and contain statements. expressions plan may and to listeners Securities

are conditions, not are guarantees statements rather uncertainties. Forward-looking various results of and risks and but subject future to

Some in condition on operations. the the the material uncertainties Group developments effects of have into Should business, Commission. company’s to actual obligations company’s are of any risks develop any could identified uncertainties and Exchange update with events, Securities adverse filings and these all risks results statements. the financial and these HCI or disclaims forward-looking

call Paresh Patel, to turn our over Now CEO. that, the like and Paresh? would with to I Chairman

is hope everyone. welcome everyone Thank staying I and and you, safe. Rachel, healthy

which Homeowners operation loss TypTap estimates operation Hurricane affected. While previously our far. has that was thus record the of storm, affected We the number storms, only XXXX Atlantic Sally, and only one Choice storm, season hurricane Insurance a our had released not insurance affected for HCI

This highlights dividends. we anniversary a dividend. Greenleaf from quarter. XXth Here marks September, per our of the completed our headquarters are consecutive of $X.XX share quarterly paid paying property. dividend our XX-year In July, dividend, sale In some the

per share on $XX.XX has dividends the we notwithstanding based business to dividend years, and hurricanes share Over shareholders. today’s in Currently, price. environments, paid X% the here over the cumulative fell

$XX to in-force our to will million quarter quarter’s for million TypTap, at the CFO, walk $XXX end from news, – doubled insurance year. end call $XX I at have third in-force the And the million continued Choice $XX operations financial Another premiums our grown September to us who million Harmsworth, our at than turn Mark? Homeowners grow. million from to of Mark from XXXX. last over now through XX, will $XXX quarter. at performance had By the premiums more

written the Consolidated gross Paresh. earnings gross TypTap business same up flood same $X.XX were premiums year, On cash quarter a homeowners per up premium, gross flood Homeowners earned growth, on the an by year. both $X.XX, across are increases quarter were $XX.X was last was were well. premiums consolidated Year-to-date, TypTap were driven also year. XX%, quarter up million quarter third basis the strong business earned year. XXX% consolidated XX% TypTap’s up up Choice were year. premiums This written quarter Homeowners year. were quarter than businesses. was homeowner and last basis, from $X.XX premiums flow. share third up higher been and last was earned up wrote as the Thanks, share XX% in TypTap earned also another last for Diluted growing earned third earnings XX%. of premiums GAAP XX% was $X.XX, Consolidated Gross Choice which all XX% and in premiums over over have up diluted premiums from XX% for adjusted per last earnings were last up up XX%. the and

sale of big other this story estate the assets. was of real quarter The one our

value the unrealized is significant sheet. shown realizing about the in times portfolio. many an higher example we’ve The property these true significantly of real in assets what other value. talked of estate us balance Cypress some of economic than that our July is have words, sale value In We our in Commons of

sold this. up net $XX about we was million a announced, breaks Cypress the $X defer company As quarter related in were tax increase incremental premiums tax. Commons by up last to like on $XX million that indefinitely the million share and generated increased to this of gain. expenses expense per The million cash also cash, we $XX down growth. $X.XX loss in value before for $XX the Gross of million $XX gain Tampa and year. realized and opportunity have This same book income and about of loss Loss million so million is expense growing earned $XX The over will booked grow. we new

$XX.X includes of cat higher quarter third $XX.X In Dorian million, of Hurricane the we addition, by of losses year, reserving The This loss Homeowners about the Sally to Hurricane core higher been were this last last anchor-assumed Choice business rate. over where XX% ratio a than net million offset year. just by quarter. for a impact exposure driven was have

policies kick ratio And that approved flood is rates lower should about TypTap these again, core about renew, the This loss in. The go combined. XX% ratio rate As when to and go loss in. even return when for increases will lower kick should approved for XX%. homeowners core

XXXX. I about booked Before In often development, want as development, it moving question. amount which up to something was a adverse million as of booked to on from we comes loss adverse about similar XXXX, $X we mention did in expense, the

less expenses million million year. about personnel far third the that from expense is incentive-based One to income year, the note compensation up are of on net development. income. Half quarter increase So million linked in for had statement, we’ve amount this an last other than relates adverse or about to bonus $X.X of this $X $X

the Cash strong. Now balance sheet. to continues be to flow

just reserves. $XX is from cash the million, operations driven unearned and in flow increases over During first by months, premiums nine

for we growing, money are more losses As aside pay. we than we’ve setting been

XXXX, result, reflecting stance reflecting of the XXXX, was ratios again are financial ratio $XX to non-cat the XXXX, they million Book $XX.XX. the and increasing financial be September, share $XX.XX. reserving. a conservative Debt-to-cap To September, strength is end reserves it As more $XX that company cash of than $XX.XX. end were company’s are down At the And to end the to of end continued end our higher At reserves of of investments increasing. specific, million holding to again continues credit the to per at the about it well of end XXXX, available as was level, as XX%. of is up debt-to-cap it At $XX And end at of XX%. was on was our position. million XX%. decline, our the XXXX, down At we room At have on of the the increase. in it facility. at value

at remained $XX we have level. of capacity a strong. in it have our to agreed lots of And just company position credit out we available to The So, facility the to our renew with credit years liquidity Choice three holding million. facility, terms Homeowners speaking surplus with of third another extend

a full surplus significant Choice Homeowners we have retention Homeowners loss excess Sally, in and we growing Choice. While still has booked for Hurricane been

be in been company holding million contributing TypTap from $XX quarter. we discussing, And to is to fourth the surplus As million we’ve support growing. TypTap the in $XX to increase that will growth,

In of $X have terms of million buyback XXXX. we this we share $XX that for about used year the million earlier buybacks, announced

is the plans bought XXX,XXX shares In year, average addition, back under an this we both $XX.XX. and completed the total XXXX price of plan earlier at

with is Revenue So I cash to pass up, for in it And is is earnings summary, debt it was are another will back us. levels Paresh. book per growing, up down. value good up, quarter and share that, are

Mark. Thanks,

to talk Our growth premiums continues technology-driven Gross at a each TypTap about more a year. in minute. engine. for be on insurance that written subsidiary, I’ll TypTap, course doubling continue our

mentioned year. in-force the I total were $XXX by TypTap path moments to As putting QX, the at exceed end $XX of million the end million ago, on the of well premiums

recently expansion to approve plan. approvals the homeowners Phase write in necessary Florida We all states. those received XX in previous from We get approval continue in steady of Insurance TypTap’s X to regulators. on to to applied we insurance announced progress Regulators make the October, – State nationwide states And the

are stage our we with each of And first our great received from are already regulators the have to months. we the of State forward individually. coming We Certificate We the in you that look pleased working progress in informed Montana. to Authority announce of keeping

we well. TypTap in are recall, announced end goal Then XXXX, our was we to track of to $XX our of may early goal to the XXXX, that As by the million premiums, of premium growing we to XXXX achieved achieve in-force and that. grow in-force and as communicated million $XXX we well for of on goal you TypTap

our plans, million select achievable. of mitigate we to a goal $X And is by trajectory applying is Note and based $XXX current for on to is our premium goal comes and very our double grow in-force premium a again risk. along. policy the XXXX. taking this for by to by But growing surpass over next billion TypTap not the company. this mentioned, guidance, end It is tools but in-force continue analytics a growth nor that the of technology-based and TypTap every So, XXXX not goal, I prediction. a explore. we year is goal And decade to policies believe TypTap to and yet is and growing expansion rapidly into that as organically, underwriting profitable ultimately,

value And the to with Operator, we on please the ready mentioned questions. last continue instructions. the to opportunities I call, open TypTap. our provide that, of your to As maximize we’re explore call to

Please Instructions] go question with you. from And Matt Carletti first comes Thank JMP our [Operator ahead. Securities.

Hey, Paresh, Good of couple afternoon. thanks. got questions. a I’ve

is, divisions; I on what some and would might of elsewhere you focus broader we’re and within kind well. was in are expect Homeowners on the going good a your environment I excited things about, Choice I but going know thank TypTap things there’s giving hoping you that very great. for on other whatever to that where should suspect NGO, updated as able one Greenleaf, to first kind even you of give – views Claddaugh, some TypTap the on be your it update is go. of be be – where it brief The and

less but than something individually. it that Absolutely, through brief, may unfortunately, go slightly I’ll Matt. be And

all Sure. That’s right.

So, because makes what gone full as a In property, cycle right the the real property let’s properties of real because And a with at they operation. estate today as true buying by general the when and on, right whole. estate at price a tribulations where well all sits operation. And them but that are managing economy estate discipline of environment, economic is the whole our and COVID-XX exiting at isn’t selling of that kinds And portfolio Greenleaf look and really the unaffected trials as that price, continue is the of Greenleaf Greenleaf headquarters real we then start well. Greenleaf, our as properties of the the own. has on we we of

year, going because I a of is coming going to it is add price in So, picking to Greenleaf malaise on currently. at opportunity the which front economic additional be in have we’ll to right think of properties, the that the tremendous up the portfolio

reinsurance So it. There great – our our opportunity of in has operation. real is front that’s Greenleaf, estate Claddaugh,

of the we end And will hurricane And previous had a far most as insurance companies, Homeowners because some of Claddaugh it’s retained much Claddaugh interesting has loss we an calls, a it so As namely, TypTap. therefore, two position worked from should and for it pretty season, earnings, reinsurers, now lots nice the book because stated for year. down a are give into to come Choice how and unlike it’s from in help Choice in, do in the And wind TypTap the Homeowners reinsurance clients any XXXX who retained increases very and it powder this is dry well has XXXX reinsurance XXXX we great. profits of season. in should of hold and which out, risk

is positioned. well Claddaugh So very

And I started let’s of Choice. division talk third one premium company oldest with. the about quarter. it’s $XXX of in-force is the about the million Homeowners grown and end to be our Next, This the original as

And from that will to most continues in as there one takeout be Now than likely is Citizens happened Well, has what now? lead rest of because And But of you is Choice, in tell industry Homeowners what can will well. back. Takeouts of the the said. plenty interesting grow Citizens a that’s Choice. surplus, the insurance is is who this things year year, are to happened will It this the lead crisis. everybody industry activity what’s healthy. to do coming all again no it going of to to that’s guess better – of Florida with Homeowners Mark from months. Things severe operate company

of to do anymore. So not thing going of it lying other have on, that competitors other does what’s no because would is want are it, there only the in front same thing who the

it it to things. – thing Homeowners from? it’s Hurricane Hurricane because very And if it’s in. without secondly, was well that get worked team. And the the were division, brand by suddenly claims it out And technology be out technology rely other impressed. on them. over both hit TypTap capabilities for of came and itself did handled, spot about So phenomenal from supported I you companies a into coming be One it well Choice the about is sweet technology and position competition what will very done by how and in did Sally. Exzeo And it group X,XXX But operational And is one that exclusively And fantastic was its them Choice of Choice supports come you companies; Homeowners was Exzeo made Exzeo. which technology. the Sally, two But tell Choice you saw of TypTap. there, where was would doing any the Homeowners finds the It two years. serious our really Homeowners of

wow, then at it very million this it seasons, $XXX us scale. other coming in bit serious total just and this it’s is this point grown this space, in-force. industry now the under to And there at at this sits about it’s issues operates But five available And Exzeo suddenly, done you brings really despite or market Citizens. $XX to TypTap. active and finally billion So and to years. writing real certainly which various point, premium again, that it’s is very is go, And being five is old it’s in hurricane only a years Florida TAM. X.X And TypTap a well. look here and done little software from And nothing that, its competitor about

about opportunity is but premium. there Homeowners So we it size million continue in find itself grow of Choice is Florida didn’t just that. in stop could in position, very front a very at and But about doing strong as quickly it same in to business currently, right $XXX the it. That sitting

And addition opportunity those billion they In to what licenses to are for put TypTap Florida doing for just applied perspective that, for $XX these represent to in TAM, And compete to we’ve space into states that we the represent, in these insurance addition TypTap. XX another XX states. this in. of

market. over is The I Choice back to into Homeowners So sweet with make technology it Claddaugh Exzeo all great a and for. TypTap and it how being future – opportunity TAM shown competitor in it, place growth. $XX as the no is in front compete fantastic. Greenleaf in the reinsurance well question, I in of summary, done your it’s billion that was or billion coming tough a brief, has you, $XX an to very to known well that has it would is And positioned. if going spot additional it’s as very is. for in of opportunity tell very front market is showcased

most question? a companies. Hopefully We of that different have XXXX very your view than answers

that to states other kind opportunity in and then relates ultimately back No, the that TypTap does. part, initial of billion great, XX appreciate to It and nationwide. detail. the that’s I last My $XX and going question

embarked of that for your the in a it’s market highlighted states, other really others Florida quarter. – a diversification into this have number them of caused pain is quarter lot on of This

the rest go in book and you might do the to into single wanted stuff expert how I exposures? country? from reinsurance managing so it in of pushing as just about state it? differently the some might And it about How Florida plan ask guys being and terms differently go to changing those you programs And how deductibles and you or you impact think a you how differently of of

on And train have out. we when years few borne Thanks, to that Matt. that the – diversify sort Look, Florida, away get I question. Florida carriers that way background, Florida a or the of going ago and several of most fundamentally if a some And not. actually to avoided we because expand didn’t from of that train. couldn’t as other getting we great outside results decided see expansion of be was profitable And think on

technology. this doing we with word, TypTap? Well, now are why So, one

we software these think item are so the the it technology this doing can from not away other And Given Florida correctly. and try we in big works, terrible is, let’s is places. this secondly, we’re we we’re Florida saying, other how running the or do because

to states we going compete Florida way, They can on a reinsurance XX effectively own, relying from in and every by not states. model is most stand because because different historically. are the are departure business which the major in We the is industry states. to those what each go And of the their cover those we of into has losses one those done we on will think

Thank of luck. Great. and for answers, very much the best you

you. Thank

Truist. we’ll next Mark to [Operator Instructions] ahead. move with Please Hughes And go

Yes. Thank Good you. afternoon.

Good afternoon, Mark.

Hey, Mark.

through going Paresh. Hello, loss didn’t components pick up increased expense one. last Mark, I $XX of the were you the the million.

you mentioned the TypTap. think the had was What there? I impact

the TypTap about talk there. So, I growth – about I in specifically talked didn’t

of premium net million $X Sally. – of about from then million it was yes, just the $XX So and exposure million just $XX about was it growth

TypTap? of million the $X So was component a the

Yes, yes.

of got But of that, million I in growth TypTap is chunk growth $X remarks, $X TypTap. $X as million, Homeowners as about in well that mean, $X.X a mentioned premium that I we’ve my So, million, premium growth million of Choice. in in the we’ve got as big – prepared

XXXX, versus going you’re attractive think book? about as to more TypTap of to be When profile TypTap, for Choice thinking Homeowners they existing be the loss are better your similar? this say you going in TypTap than business, new for Is

I I mean, terms Yes. think in of... similar

Mark, a it It we Homeowners DP-X moves why out gives business. well lines fact around. blended number loss me of the is own mixture have HO-X, but which slightly book, product But low affected we HO-X that the Homeowners HO-X number, to due by work loss mud? Mark let flood to context. non-cat different the thing, is That HO-X answer as a make appears the Does similar and very book all one have numbers are has. of the answer business Choice’s So book The on by the reason the mixtures differently coming ratio, in you TypTap’s the it that wind numbers that’s things is similar. right? to there, that affected a Choice different as ratio. the book have. as have, are really be that the through you, has it’s clear the a the it we

Complicated, complicated.

Yes.

think the do I that’s takeout is When say, helpful. season. year, about that opportunity, No, wind the you you assume you – I after next that think said

year, comes kind that So literally to XXXX is of it that late next fruition?

logical could grow the about be Citizens what currently would number next me policies, when talking way the the That That’s but by a we And it, this by sitting yes? rational to yes? grows. about pick point opportunity, exercising happens around be forward-looking will Citizens is if of this statements year. to is whatever, the and it time way, doing Yes. XXX,XXX

Yes.

if kind Is or bit competitive describing comment little Citizens. be competitors I the you even competitors think shutdown market a in You in used business customers? I environment new more – that the who’s were you could the and not would of it bad? the on just for wonder main and HCI/TypTap only

Yes.

me answer it following let in the So manner.

shutdown, I it, think has industries some as financial most either put the of distress. you

to that on. of they repositioning their about various don’t housekeeping need they – that But put are beyond business, items that, meeting the would want those categories, ones are they other got into they and place rate you’ve before even book, So, going fall kinds think those into their remotely growth. things increases,

very everybody any That are company moment. of what making. was industry sense we explosions So, or right? to other We But generally generally a is priorities casting very our bigger – the distracted, occupied is particular as speaking, most weren’t we the with whole. at competitors were point the are

I us any to this then looks give is characterize point? general want most you is of you secret if guess, profile don’t seeing particularly just And TypTap? a sauce way what the which are kind there so curious as of but pocket attractive I’m there speak, to at the to you for good to

can longer systems is to Because is which based or an for we write Look, are is sense making to decide again whether Orlando or whatever, write Jacksonville rooftop, to place to things good Yes. now decisions we on Our think this amazing. place are goes it now a the makes can think I us back good do, individual on, or a no as house not. oh, just right? an we individual

So agnostic Having in of IX, growth a lot that, become areas. all we geographical more general area of said yes? South of is TypTap’s terms of have

on for geography, less And the that’s... educated Florida’s

East South Tampa same Daytona would should Beach of Coast on a or – you I say and you area. get Orlando the kind could line draw Sorry. sort thing, that you if between the of

exactly. Yes, Yes.

Southern this, part yes? of

Yes, understood. Thank very much. you

You’re welcome.

back showing to Rachel like Instructions] call time, questions a our remarks. would turn this few further no [Operator over to At the has Swansiger from closing I’m now audience. who I

near continued like of our management would their progress On importantly, thank forward for policyholders future. We you look the and our to shareholders, in entire most agents, on the updating behalf employees, support. to our team, I

for joining call. concludes for This presentation. us today’s you our Thank today

now may disconnect. You