HCI (HCI) 9 May 232023 Q1 Earnings call transcript

Good afternoon and welcome to HCI Group's First Quarter 2023 Earnings Call. My name is John, and I will be your conference operator. [Operator Instructions] Before we begin today's call, I would like to remind everyone that this conference is being recorded and will be available for replay through June 8, 2023, starting later today.

The call is also being broadcast live via webcast and available via webcast replay until May 9, 2024, on the Investor Information section of HCI Group's website at www.hcigroup.com.

I will now turn the call over to Matt Glover, Gateway Investor Relations. proceed. please Matt,

Chief and First John, is everyone. to Executive Harmsworth, Welcome Coleman, HCI's Paresh Thank and Chairman XXXX good Earnings Group's Chief HCI's Mark Officer; Quarter Chief call Officer; Call. HCI and HCI's Patel, you, Officer. Operating afternoon, Financial On Karin today's

section To review the Following and provide will then will performance our access webcast, the visit our of update. please today's operational Information at Karin's Mark first website for Investor Paresh a financial update, www.hcigroup.com. quarter XXXX, corporate strategic of

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

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

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

the that, Chief turn with Now I'd Karin like call Coleman, to over to Operating Officer. Karin?

of earnings share strong with pretax quarter per first income Matt, you, a million HCI welcome, and and $XX.X reported Thank diluted Group everyone. of $X.XX.

milestone enacted first earnings quarter, of of several loss quarter. from Insurance At of and TypTap Homeowners ratios in-force and a reached reforms technology claim due in basis $XXX insurance Choice, last more lower insurance Florida Greenleaf last the with during companies, quarter GAAP by Our partially noteworthy Group, accomplishments contributed its and year. legislative both on volumes our to all improved a premium. than with driven TypTap million profitability subsidiaries our to subsidiary,

the on reflecting on properties earned sale division, disclosed over Greenleaf gains Our $X our Capital, real last of estate million, call. X

of believe last a million plenty there $XX reminder, the estate we As real and million over on our proceeds gain $XX transactions. X Greenleaf a in just And portfolio. X is still realized close upside of to gross years, of

investment coming portfolio XX% balance interest-earning sheet interest This the is income addition, during the result short-duration, quarter, last we reposition our with $X over of earned took million assets year. from In a the of steps it to into alone.

generating income We of basis $XX with now an investment interest on have an portfolio a annualized capable in risk profile. million low

Mark, a to commitment on over success of of X per more detail divisions our will summary, deliver share also $X.XX profitable quarter XXth quarterly the to it financial results. contributing now dividend, main our consecutive paying I'll a shareholders, to We on it turn continued all our to And with provide In our was solid, quarter. the dividend. who

Thanks.

into As the and the positive Karin $X.XX, share first earnings. and sustainable mentioned, diluted trends those quarter the XXXX. several quarter was $XX.X translating million, past improvements up trends from pretax quarters material, income in for per discussed few over of are $X.XX We were earnings in

policies that means earned quarters. few exposure is while past revenue down, driven up, adjustments are down. in over despite the rate gross premiums First, by up This force is made being

is income investment Second, going up.

fixed-term more was carefully by being go it have increasing and investment cash even $X.X and end income from in at driven when As million but million securities than At excluded, of if what on on is Xx in of that some year quarter the bond is X.X% held ago. year. invested average $XXX same This we started they investment real QX, at rates interest portfolio, to we remaining invested income we up, an the bond. of X.X% When in income on a to compared that steadily cash. we our Karin mentioned, invested interest a cash, to were gain yield of increase had investments is estate low, $XXX our last our in the million

as to We continued manage well. have the risk

portfolio term over average to Our X million $XXX have we in maturity still the and in was bond just over cash. year,

change in because than versus in more quarter expenses commissions business. renewal trend This the policy XX.X% XX.X% positive new premiums same third the of policy the of The year lower down of quarter. from premiums as acquisition is In mix expenses expenses of declining are by $X a percentage were last and gross reduced QX, earned. for earned, gross that a acquisition million

changes loss I XX%, saved was lower as these same consolidated per down and the which it the trend, year. of legislative not as well premium claims policy, moderating The loss did loss in in XX% by is considerably lower we first that driven last In should explanation. I more last some get reducing quarter result deserves our was by declining Florida. claim loss severity from ratio ratio as note the ratios the higher litigation expenses, last as a for to average lower quarter, frequency, of reserves.

slowed pace have reserve of have increases, the them. not we reduce to we yet While started

positive impact the material is that's and a quarter. per lower subsidiary, as earnings trends by of have performance income to positively TypTap a trends through, for stepping X on TypTap of that investment strong Group. technology So a Insurance and also evidenced expense policy, ratio and operating being all Higher quarter. premium ratio in higher Insurance led back, impacted I Group loss trends and lower the positive average of our impact insurance profitable combined the company the went the These the these

very also division had quarter. another estate real strong Our

of real of $X.X sold commercial properties for example our X million, gain As a mentioned, our Karin strategy. we opportunistic another of estate

of from to from last the a $XX.XX $XX about compared the holding the company comment the million per A quick and investments operations end the Just share value quarter. Consolidated end at share entities increased start $XX.XX $XXX were of to the million flow outside was year. $XXX in million other quarter. million the same from quarter, during financial $XX up quick -- on cash the few per things. $XX or Cash insurance quarter liquidity. at Book at

Of include represented real in $XXX by the and investments value Greenleaf. million does in course, estate not our this

quarter this for was a summary, In strong us.

operating operating are strategies business paying off, Our the we've the in market improving, insurance and ongoing is deliver positioned superior Florida to results.

with And to hand it that, I'll Paresh. over

strong outlined Mark you. financial the our Thank quarter. Karin for results and

These of a the and the are upcoming We future. quarters provided the should continue well the the as the XXXX. foundation benefits bold for by underwriting rate actions in as company's Florida benefits in legislature provide solid and leadership seeing

prospects briefly to reinsurance. on future about for HCI, talking wanted I Before comment

up when like We are our the is will finishing we full of details insurance placement companies, years, finalized. provide everything for and both prior

rates the within their purchase. the market Our being expectations. progressing into had Policyholders, the the higher Reinsurance Fund, contract, Florida a XX% Hurricane capacity came as program, Between Homeowners is of Cat our placed with think expected. reinsurance renewal now On cost basis, the is majority limit XX% and Assist remaining pilot in The or blended will the we set. program already of the program multiyear Choice be approximately and plan secured We be RAP enough and but will is where the TypTap available.

build. performing Homeowners this prove a estate Greenleaf in delivers and its continues the looking Both on the homeowners we continue have solid real which to be Florida. returns. carriers solid track towards division separate to regarded proven Greenleaf future. continues as worth as to long-term Homeowners Now Choice at And best Choice that one records of point

we about TypTap talk Insurance Last periods year, Now let's made of of Group. QX GAAP seeing a profit about profitability. talked in TypTap this year. It

of done. The first our this that year that we're But executing quarter vision. is work shows not on

our optimize our business plan TTIG. book retention We continue build ratios, while maintaining we the to of strong current to momentum and and leverage on in technology

calls. progress Finally, mentioned items additional had about companies. we on up setting previous to insurance continue talked We we make in

along We in operating process their our these from We underwriting to new to we've results. reforms In a have write environment starting new Florida. are of in months, up X started have legislative made. in and being turn but QX work show the of over perspective, progress taken see do several still with our to we are actions companies policies, named first the in before carriers perRisk. closing, the Tailrow is setting up past the The benefits

for prior opportunity we there an us near On the future. will in be calls, highlighted

We in the brighter. are to opportunity even front questions. ahead seeing unfold that of The are like us. With call Operator? to I'd days open that,

Mark from [Operator with Instructions] question Hughes comes first Truist. Our

other of those? from down. higher XX%, Mark, and drivers or [Indiscernible] to ratio then mentioned X you a them in XX% things. number you of loss Could the improvement you listed premiums, repeat write X the

Yes.

part higher average So it policy. obviously premium per is of

also is X number And is severity kind importantly, claims I also moderating. frequency litigation thing really declining. the is frequency drivers, and -- other mentioned being and more the are claims But The probably most is important. of four is declining three those

how And you attribute to the that of reform? do much

hard Any preface make talked it's of I we we that call. comment talked we'd we it would the the to this, about I'd mean, thought that it's about we of had saying expectations it the say sure. on last what talked for about mean, early. We sort I about happen. by decline. But

of about it's talked declines seen about litigation last have in assumptions a And early but pretty from those we the were on so expect We I talked that said, to XX%. We frequency in about XX% that of the We indicate frequency it like claim XX%. call. would decline reasonable. far, what

definitely it. it's a of significant So part

did you much the... this help you How How the do quarter, Excellent. would better characterize weather think?

bit, good little -- question. not was it Yes, a issue. A huge

recall in had would weather in You you a more quarter see Florida, might quarter. first last first in we year than normally of the

this weather year. year the more we losses first last in had last weather-related quarter the weather-related in the we first but Northeast expense So had -- this Florida, quarter quarter than in year less than

just So a another offset a the drop those weather sort a but because little of things It was of not really not one, was those bit X really big -- big one things mostly. factor. of really

your setting -- new new I'm Maybe X written pretty definitely with me thoughts premiums, business. interested carriers, helped if What new the do the the The up on carriers? appetite the Then to for at refresh capture kind pick-up I'm looking it of two in that. on hope you properly, broader meaningfully.

that growth. and exactly carriers expansive both be we where and disclosed they'll clearly doing for the are what be just just those Absolutely. carriers the are current two phase they a how The up set Mark. we in up we do to within carriers starting this up to X can complementary fit line, that haven't the of doing, will we because are are manner terms while to already and -- being in have, we carriers next X of new group into new Two now the operating. set things, And top growing X yes? that the our

pace And had slow Mark, increases. then mentioned you you that to of Yes. reserve the started

gone hadn't us that at you quarter-to-quarter? you the other you How changed? dimension Could give still working have kind some in of magnitude of much though. direction away of much are You How that?

Yes.

this about and few we reasons lot were was So we expected that. for and and We went obviously. open paid through we expensing going than out period -- it were also, a of lawsuits growing, A talked reserves the where number were up. more going And lawsuits where we up.

out out, a were were -- we paying reserves increasing more we're were we so result, than expensing as increasing. and And

them. were year, really decrease In reserves pretty didn't We QX flat. didn't net them. increase this We

the loss the expense were. our loss what is expense to what So losses close was pretty paid incurred and

really them that's of this. the I a possibility this some at probably seeing, we of trends numbers That's point. But for next So and given started the the we're that phase reduce think to haven't the future.

The Instructions] Matt with comes [Operator question next JMP. Carletti from

cool? of quarter, of TypTap that had weather above weather, or a it kind about little circle Northeast it sounds Just a we little back normal, a out being normal. and wanted maybe a questions or of Mark comment so of to it hold little below there did true hot for Florida GAAP think to netting did the with kind like on in when little pretty run normal normalized one but being on kind profitable Would a

of weather it the claims driver frequency in for considerably, both. Yes, even you mean, take the the decrease down comment weather-adjusted out it -- even Northeast. loss -- in I was improvement was less But in mean, ratio, I if it's was -- weather was Florida, more biggest that the the holds weather in it.

If than both just you down claims at it frequency, it was in look the weather weather-adjusted we substantially remove and quarters to expected more be.

think ratios, we're down loss what call that the -- to that. saw definitely first heading why on that towards I from would to that's made quarter XX% I And be about said indicate XX%, statement that expecting the in mentioned we XX%, we them last Paresh

as kind -- year, kind as Okay. the the you exposure existing start think And not about of should across we growth, think reinsurance weighted, within in when play terms growth or incepts, we much season companies, think wrong? little -- hurricane just more companies when -- that a timing new about, up, obviously, then true-up and so the say, rate might about you how or the that, in about that, might with of I growth thinking fall? to or think about reasonable am that not back-end more later it into that Is when of reinsurance how be even

the in Mike, context [fixed] you're will about yes? Growth of count, weighted back-end it exactly thinking correctly. be

Yes, exactly.

numbers Mark. question for just Okay, probably great. a then And

the You quarter? have written for premiums the net

$XXX.X Yes, so million. it's

[Operator Truist. Hughes We a from have coming follow-up with Instructions] Mark

severity, comment inflation, Is moderating? The part around building this? materials? of Is any in improvement that that

Yes.

question. good So

you term inflation So issue. I used the moderating. was issue, recall, is obviously an might And an

impact it's I that think things, probably after level was to Paresh increase. sort really that. those started the But I think second the -- been it, mentioned kind biggest year level cost of I since of track think out where And of we saw of the then. we has and last quarter the of probably it it

in at last term last took quarter and year, QX moved that's the higher is if So bump why year this then, of lot But than claim It of look that you in and hasn't it severity first first quarter I that up. since used the of a year. it's moderating.

higher was quarters. it's prior about past first in not was I it quarter year in XX% so. think, But it than having the that So the in of it's last adverse or having by, -- effect

quarter? So you essentially current that the in lapped

be this in follow-through Yes, increasing that quarter going last after second different after quarter was the it Mark, repetitive a at looking way quarter year, to was severity is whether of unknown quarter. in

average I and the we're what jump think what rate is Mark last took that of QX a saying is year. seeing in

it's then then. been So flat since

more step is ramp, of news. increasing as obviously it's to very right, a function, which good an opposed So

-- not any seeing maybe of Mark, loss line? yes. Yes, thoughts but on think that the you're for improvement the kind but ratio suggesting not underlying the trend year we're I for you're darn loss -- at rate? influence but -- the of way, which weather, not good. too we're run ratio, maybe only And we're where from much on what's XX% a right is pretty the

Yes.

makes call, to And going we So that last I'll something we I that, and headed that the in we go range. overall earnings said that to back that, Paresh towards. we're is XX%. about again ratio from ramp XX% loss that the mentioned the consolidated talked and it still on felt just that think sense that's in the impact XX%

happen Second every going quarter, to that, necessarily that that's quarter. doesn't say

Second usually it's there's weather. quarter, a I where think everybody quarter sort knows some of

usually down is is that the But I in toward little think back first quarter. range. second we're the higher in ratio quarter headed loss a it XX% The than

I think that need have it's seeing one you to time it. that careful because only those quarter, see -- make right? it's settle good, are we'll they in. sure be trends we're we but And to Again,

answer So does the that question?

hand. in It first almost -- you weather to any we're reason the so probably things lot think of quarter, far? far have other through but a I I seen mean, any for halfway April to opportunity does. the so in happen, Have know

been [hide Mark what quarter. not -- it's been Paresh. what some that expectations you so expect the Yes, quarter. thinking sense, normally a activity. very plain] choppy it's second right? we second somewhere the spring it's it's our it's Mark, But are But in of anything there's as So been some beyond things. were, There's indicated, in Two in from good.

things XX.X% was last It it benign, telling to improved quarter be a think, your right? The ratio I bit what's is I loss slightly from might indicated and other the isn't clearly with movement is thing, weather of little year on that that of where stuff, in probably to forth sort of onetime, down actually of or unusually XX.X% second Mark, X onetime conversations you relief solidly path whether a combined a that to weather kinds manner. some normally right, for It's will those There's is. reserve sustainable. the quarter a improved ratios of worse, the QX numbers. windfall, ratios and up fluctuate think lower because and of result be underway and summarize But are year, being you it none is this and loss having back

the Understood. -- think is in RAP is And already And XX% Cat you the you reinsurance said mentioned then, placed. program. program did that's you I Hurricane Fund, mention -- Cat else Fund, of What the the it Paresh, Florida that that?

we last those so -- obviously our have Also multiyear contracts year, X or yes? rates X were set

Yes. then about Any XX% narrowed the ILS in around market? there's have anything? some the capital the of movement capacity that the thinking in sentiment now. recent mean direction. that observations is Does kind or I'm Any or maybe placed being And spreads shift in --

the and/or become making whole. confident progress on time, that's a about. narrowly And really all important we things But we as heard happening we what's similar get movement. focused in in this conversations The at that, And in can Mark, about completed. we've program point more thing our -- we've our are that point usually time sure and is hear see said at focused industry rumors that we we placed, this very has that feel right?

fair one Maybe just expense nicely. enough. improved commission Yes, the more,

Does same and you're it commission is maybe pop the XQ, new the is stay back then assume mix to on temporary? renewal. it with in the fourth new business much much the in rate, maybe consistent stays of decline not some this if mix. versus I or quarter? How pursuing -- think rates, us up mentioned XQ at perhaps in going maybe you I

think a I But a while been and but -- a a mix. mean, does it's I decline not where I I bit I it bit think more little probably it little that for it on lot. think will coming down now, think depend is

is modeling think good at that you're number. now a pretty if we're that, So that rate I probably

lending one or commercial the maybe more, ask around know but any some I'll Florida I concerns impact in valuations around have these I on is And just Anything market? estate, Does liquidity in the might. curious. Greenleaf I'm real that if of hot, environment?

One all their Mark, we X estate pressure own, don't loan, the is and I it [Indiscernible], things. on long mortgages where have for any we in the yes? So cash there -- duration think is from right? executed. very -- thing The nature, either real see perspective, we rate, paid a is by are, and other it's fixed well looks our or the

As capital that prepared X really the right, Karin comments, Group selling mentioned latest for we the assets, years, in of last of did, the has transactions over the $XX HCI freed freed really shopping about a including X her plazas by up up capital? lot million X certain have selectively -- which

is of with on getting And -- appraised we there's It's at real I estate what smaller. not between to it's even just appraisals, difference estate books think it's what the $XX through these value for. that Yes. any sizable delta books appraises there's or that, between and for gone talked our and we've even for the a this worth. million before, as still but you real transactions, look number bank the that if bank bank would we've thing the of that Mark, still And about some got it -- appraisals what we've what on X very add

unlevered. good some got properties very quality we've So and really

think is on that $XXX million. I million debt about value of $X.X total

It's To investment us. leverage, -- So the been through markets. good for a been value quality real estate this the has it's It's been in great very Karin low good numbers. point, went maintained. and

to time, closing a this now like call concludes who At the turn I this Patel Paresh to remarks. session. question-and-answer few would over our has

agents, team, continued entire the to Thank their and of like you. importantly, shareholders, On behalf for thank would I employees, policyholders most our management our support.

today's This concludes call.

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