HCI (HCI) 8 Aug 232023 Q2 Earnings call transcript

Good afternoon and welcome to HCI Group's Second 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 call 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 would now like to turn the call over to Matt Glover, Gateway Investor Relations. Matt, please proceed.

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

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

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

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

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

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

declined, over premiums in Operating expenses losses improved of segments. In insurance, pretax Thank business and you, earnings stable, Matt, from earned driving and quarter, diluted the of increased welcome, quarter. each were while reported positive another $XX.X contributions million income $X.XX. our per everyone. quarter with again Group gross profitability and strong of HCI earnings reflecting share last

our and continued program detailing straight finalized filed quarter down fixed with was program year May XX. In expectations. derived last interest that our totaled we expectations. Homeowners earnings, cash coming Insurance the generate investments, consistent reinsurance with from of the terms Group consolidated income XX%, healthy second approximately X-K consistent entirely ratio net income from profitability. year, GAAP May, with its on TypTap were an while our Our almost our investment this In on for Choice We rates reported and XX.X% million, SEC holdings. to loss with $X.X and

portfolios to higher from steady interest income, Our short yields of and streams reinvestment X%. generate continue above benefiting duration rates,

HCI I'll share, Finally, to continued our to commitment the quarterly Mark of details $X.XX to a our over dividend. To to businesses and of financial Group power summarize, per of deliver turn consecutive paying it highlighted quarter our its XXst true on this underlying earnings Group. And provide now dividend more strength diversified HCI results. the shareholders, on

Karin. Thanks,

costs, trends trends per income, ratio. are important, support premium policy, discussed loss profitability. Karin and as of diluted the and continue first gross for you the income the $X year quarter's was And past from insurance the see In quarters, highlighted share our difference. was these strong, the So from trends. few were we positive of in million similar first had operating increasing a pretax of policy average The significant driven we've lower sustained higher quarter. In quarter operations million, one gain $XX.X lower and this quarter this a to of investment from sale with a can second acquisition $X.XX. was businesses almost the pretax per that earnings results, profit we've income we The ongoing quarter, regular as as what to several real repeatable simply the most mentioned, estate, see

of look at these. a each take Let's

quarters over rate the the past book. first as down the case in of First, the was few combined being gross earned by adjustments in are premiums quarter, up policies natural force the with despite made attrition driven

loss the a was is premium per helps average earnings. ratio and about year improve XX% higher it consolidated than ago, policy reduce Our which

quarter second that driven it was is more the income The Investment than of by same million up. is increasing on and cash. term $X.X in double what trend year positive income fixed last on investments is investment income interest

is which investment is coming up a to short strategy yield income still working. in increase the while we And us term to gives considerably, have investment further our Our quarters. opportunity the maturity,

path earnings quarter previous material claim The gross earned, this third expenses Florida, loss earned. the gross over percentage considerably important glide as year severity, said frequency, declining flattening is XX.X% down book. The ratio policy positive beneficial to just per average transition policy quarter, On gross because UPC claim is was the and last been last following of ratio, driven to lower XX.X% higher and from in quarter new is the impact impact and acquisition frequency a which acquisition lower consolidated trend trend a the policy. Wanted of that the is mention expenses expected down TypTap past the in in from discussing year premiums we from calls, starting litigation XX.X% for up quarters. premiums few that the QX, and in we of were our consolidated show a loss legislation of by lower most premium we've decline the last commissions are in minute. results. The same In XX% the same

second, higher trends and TypTap it a first per ratio. quarter, lower that policy, investment in a was and a of loss average Group premium some on Insurance higher discussed basis, may the in consolidated gain the You the income reflecting recall was profitable same

of to quarter. holding the quarter, the second Just things. value the the financial the the at at year from of $XXX end a start of of at from quarter. significantly end $XXX and investments million quick million level were increased at Cash other few per company Book the up $XX.XX the start share at $XX.XX the

some trends results discussing same for is to trends have over Before one add the comments Paresh, the that while predict never thing. think we've we expect they Paresh. forward. And over and the numbers to it this see to quarter I managed I to hand future, through We've the been that back that, that this step the these to comes we from can my turning continuing are hope carefully sustainable. to in What business it led we wanted just to time here point. reflects going with are what get to now, I'll And

QX I Thanks, Mark reviewing. laid are calls Mark. about quarter our Karin items are talked several that we've talked about are out results, positive the previous worth and this that think on results sustainable. why There

investment are on income making the from we that curve, healthy we've a and in to income fashion. meaningful sustainable maximum provide of flexibility, a short business. side we end positioned First, the staying of our investment By the portfolio and maintain

reform it that Second, following in that would legislative ratio down, year and Florida, was we loss come has. passed anticipated last the

action uncertainty we a and the and rate now our took the affordability decisive program. And to year Third, the those combat actions placement reinsurance through reinsurance economic of us around is XXXX inflation, ago, behind book rate of of lastly, availability business. to with our work continue

quarter premium we now stable for Florida, do earned roughly the exactly considerably. to look And in the been thing applied the of profitability to Citizens' and we future, has and because fourth while this especially important that a level business. plan the and a Florida what this a to do. We've have of depopulation the is with grow is year-over-year, all backdrop We in business, year. healthy business as is now OIR obvious can overall, So of the to expand the has improved

QX. a We baseline at the throughout XXX,XXX from end are of of starting of the and million $XXX policies U.S. approximately premium in-force

our growth to resume I please will now instructions. to in-force grow in future. In a we premium will We forward, summary, our questions. give the higher turn for our and With count, grow policy grow going are over profitability. looking number Operator, that,

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

but potential that execute of on? you'd is right can I terms -- QX, left news guess, up with kind that of Citizens' like the any applying yet us give it color -- sounds off, ideally, to like Is where premium the Or a first, on tuned, of the stay of I'll to number you pick depop. there amount in for you policies, come? of

It's of so be because But XX so days all [indiscernible] or Matt, a both. in anyway. news mixture just they'll

go there's we As years, by process you know, and we've done which this a through. many

of November on XX, just policies is the of precise. So go the best less and that will then, that the to works be process actual of just number the should the hoops. actually and we in the than also It's road assumption. you number policies date actual we premium get various yes? of be on But will the the we're what is now some known number applied way month will And be as know, November, between we've through as policies November get that. XX, you XX,XXX will is -- for a It's that number maximum

terms changes legislative potential can offer you -- through it's mean rule there know, you conversion you've changes go not change around done. could for know some color the course rate? or maybe to right that of too some in Is people market of there? been I guidance you But terms you've of if that won't obviously, in anything takeouts there can lot was company, Any in -- having go Yes. and there's to know provide go. of done just history, can I the not early recent the Citizens them a and over we but the to pass how Or might until you mean look them. I it?

quite XX% as how as is that by and historically, takeout numbers now that's XX%, XX%. between new this The right? Citizens, come those are say, But Citizens affected -- high have been how of being and some policies there and a everything is into people the drop know new all the Matt, XX%, many people but that regulations and is low also have is also numbers have place rules in the range things other that to -- say. method wide a are for of takeouts range in the Citizens, range encouraged November. else as more and of going -- works and yes? So been in strongly shall we shall Citizens and million don't applying So leave small given we X.X where universe, we as

is number. all going yes? carrier So Florida, rather policies, any given variability to has But you in to can those are number which significant, a there some that and be of to XXX,XXX imagine of that things, XXX,XXX is

Yes.

sure. change-related. What seems Is little you Florida, years. lot kind maybe having through we XX is household of seeing gone For of nationally. what of TypTap But there have you state experience opportunity think in Maybe a recalibrate focus Or there a that the operating very Florida of of outside huge names longer-term expanded I when has bigger take guys the lot a opportunity HCI a there. over HCI? kind That that of of it has of is by the A a kind a climate know is can picture, lessons and appetite looking I of Florida, elsewhere have past their lot in is -- the and helpful. that right? for is you time kind learned that environment are XX,

I statements think, headlines and Matt, other especially that press from earnings call Florida, and carriers, of the the reading on. and angst obviously, sort going Yes. the level outside of releases of the get of et number you cetera, is a

in is of predict Demand and shrink. what's years going still every away to I policies because by policies. judging household probably number going XX going to what needs if like think people offer supply isn't XX, happened willing was the to to occur ago, I Florida

starting is between will the terms a example is in as who carrier will is -- somebody, happened it that there what new We've out, is It's insurance the profitable an to and a to in yes? lot all or supply and will of shrink. be grow. It'll movie providing to rates let's that's That reality in you right? manner, and for is just churn what and by exactly that But a then, using be throughout just going that be going So everybody now seen XXXX 'XX, to change climate facing, 'XX will the storms, what premiums stabilize same I country. the doing to after say, while before because stay is who the think used. unfold both adjust Demand of the think are. eventually, and who there will Florida be I take this

of couple for perfect could, makes if just That questions, Mark. Yes. sense. a I And quick numbers probably

through -- the about year could where commissions On the forces? kind work a going we Or kind of to of of go you you do some we acquisition lower of highlighted coming of adjustments the that policy could costs, kind down points XX.X% think forward? around Are from terms ago. higher there couple a in of and

Yes.

that's down any for is but think be seen bit, It there think there's about changes. to a reflected numbers you've unless going I other is -- that little Matt, of foreseeable the where bulk the it's future the I now. improvement in might drift in where that

numbers net premiums And then written quick handy? Do Great. just you a have one.

Yes.

So it's $XXX.X million.

next [Operator with Hughes from Instructions] Truist. comes question Mark The

Is more XX% You initiatives have I Could go much you'd way own much progress period come and said progress is losses you out we break loss of still quarter, think if a see in actually costs. level. number? on weather is good might -- a how the short I the the get much reform. lower favorable regulatory a you here? long maybe have Paresh, time wonder think based pricing in been it on will what how how could tangible to that down from your

Mark, it's Mark.

the your so So about this last and between the of QX part weather, year. QX year there to question weather was in a difference first discernible the not really

quarter ratio amount weather loss weather significant this There's We the the second QX. We last to second QX anything have to year of second the really in of do with a didn't had quarter this from right? in year. in significant of in decline the weather, So weather last had a quarter year. amount always year

down. the loss not is that's the So reason that ratio

I X cost mentioned which the down, claim down ultimate because is the help. premium average helps. or that things down is So average for down. up. a going the to earlier. And is loss X that's Obviously, Frequency ratio And litigation is is of

work ratio way loss things X different their the a those at through pace. So

going that You the of see you first. see premium per impact the up, average policy

consistent it in out, still legislation we've have the seen think say, some to expectation. the of said with I the developed in quarter, saw. come coming being the about first think of probably when ratio we'd happen loss half So the the of XX% that my is point expectation XX%, changes. But drop is an I important is we Paresh to comments, would get from I we the when and thought and maybe And time down. And feel XX%, we we is there, but for legislative consolidated think the the -- our what is Litigation loss most we're I down. your what to down year this I both that's the of that's coming Frequency to to mentioned take the reason we that will ratio about balance still XX%. we where XX% some What think thing that headed. about came and

progress. So really the the right are trends we're direction, moving the and by encouraged in

attractive. or to How be Are certainly the much pretty are to you more focus? are takeout? progresses? that Is be voluntary The look pursue acquisition to going growth as dependent the to business drive on the year going costs you going

Mark, Paresh. it's

It's communicated a things now while and to are business The anticipated numbers the to doing. a how we've of for doing it where It's the previous almost takeout book we've and that on become Regarding is I and opportunity voluntary like think advantage here, calls different. actually other we we in just is we've anyway. that, it. are runs taking the addition been is

had quarters things made get People asking, will it I guess will where past trying and see? mean? are telling evolve. And [indiscernible] I what it's we actions think try And showing of is to -- for working had trying that what the we is to modeled was of are the the people through were forecast back be go will we would we're theme And we're the things actually So... we we and we we out So to the had it. of sort this we is How how way And going laying -- you the we're in follow-up communicate said things things, when that yes? -- hey, quantified. out you to then year, X are overall take impact what we up much fairly ], said half [ were achieved halfway the year now come like much -- numbers said.

premiums place [ ], rate The dollars? say Understood. in you good new in with terms do what ceded, [ run Yes. reinsurance actual ] a the of

Yes. It's about just -- yes, Mark. X-K, Pretty very million think what was it million. close $XX and similar I to what's to in it's in $XX actually, change,

to in was similar it very QX. So what

prior of reserves basis. think from kind that Okay. was on you about in quarterly Is little any that bit ratio? away And -- -- talked think Any there we from your change up that. think last loss you the the shifted a when boosting I quarter, of a pattern I about impact

for we net so development really. mean bit quarter. in are pretty $X much had than year. really there. booked -- really expected Not to. this not far have I on going little flat we [ reserves where I mean the the We adverse in reserves -- for there's didn't We coming are There's part less ] them incurred a most the first most -- much million.

to having we're And -- adjustments not so that really we're some them There come there flat. periods, could are and keeping any they net pretty flat indications we're prior so that far, make now. for for reserves down. keeping be to But starting

driving quarter TypTap Is Yes. flood was down was that in nonrenewal that? of the year-over-year. written What business?

negative little of there million was flood -- return we're is premium It's year premium written had There's we -- QX some of $X there, million part was $X it just of had of flood. year, bit a about written in because Mark. of unearned premium. and Yes. in of it the because a noise we last this About

the Southeast. of other is part that's it. And UPC So

in was written second quarter for and the that down premium that, timing just kind was of a So the thing.

-- may have policies would normally in the QX. lot renewed at changes with the remember in a UPC, that renewed -- of You were renewed UPC we QX

And had QX. actually premium for in And earned higher was so less a QX we higher then little negative. in QX -- UPC Southeast and written bit

So written little be in pattern that a of of But there's QX, normal sort written the we'll bit noise a numbers hard to make QX follow. of lot to in back premium. the it

How the holdco? at much cash

cash I and mentioned, level is as million. holding $XXX investments So the at company financial about

million, component cash the $XXX I think about is that of like something that.

Instructions] from with Kerry first questions in couple ]. Kerry Partners We coming [ of a queue, Lee [Operator the have

I outstanding an from you an What quarter, shaking know reinsurance on very pleasant. environment is get I changes to want been in lot directions. different the idea how a out. of whole there's

it seen you've the up going Now it from completed had ended that how month, and forward that? what's last outlook

of answer what the of it about Lee, that reinsurance, the beginning make about right? was placed And on. And didn't now because and year, are we The has what uncertainty was reinsurance my simple and in in I has the affordability had remarks, in I of availability prepared program think reinsurance cetera. our goes Karin these numbers the there some outlook, released from that and speculation there. all X-K, Mark the et It's changes, said said we anticipated was and X-K.

have earliest, reinsurers, on think we the general question, I amongst at least at until which I a seems at don't of your to for a next especially May. abated, by in least thing reinsurance anxiety variability level happened think, terms what the is of So anxiety Florida, industry, us, in have reinsurance yes? The nature the other June

now normalize. of lots what to that think reinsurance is, I price, just that's is but a different yes? starting availability Affordability is

coming follow-up a with Mark Truist. from have We

the clear Just It's sure was been I wanted make while. to on a depop.

costs the the to whatever end the on. -- get renew. way those costs being next reinsurance really season until associated then Is to you policies right policies impact? acquisition until financial premium, the about take reinsurance or that successful storm up no when well, -- -- You the you And think or the

you. with I'll Yes. And Mark, hairs split

back our was. in book And assumption the and occasional do until of be -- just next yes? those on components until X renew point, different normal. The So which paper, X at cost with go will cost way, slightly be you reinsurance with whatever expire there to those acquisition you assumption, an when will but onto GWP earned will premium date on policies So few exceptions move you the June policies will X X year, know, very so of yes?

policies of the about kind -- subjective of Citizens is increase? with takeout do Any now commentary How you how the opportunity? quality the the Yes. fertile in

is I policies, think correctly, June, Citizens the the million of of right? if a I way it I That's policies. X.X until remember lot end characterize would has

talking XX,XXX -- We of X% can My have pick, XX,XXX and most, right? policies. answer like of I'm pool? like Can the But But might commenting book, find it'd policyholders the are our We as at not on if big chances, sole is that policy, find we customers, of out to we trying XX,XXX entire be about that X% yes? is you their pool. would a I want mission that we yes. HCI that be

this Instructions] time, in queue. now call At the further We Paresh questions who has question-and-answer session. our Patel I over to would few back [Operator remarks. turn closing to a concludes no this like have

team, their our anticipated our continued updating future as coming support. in importantly, of well most our policyholders progress as you, I forward Thank policyholders on the management behalf the to On everyone. agents would for our you We shareholders, employees, like current quarters. to entire thank look and,

this our This At concludes session. this concludes question-and-answer time, call. today's

may You disconnect. now