Heritage Insurance (HRTG) 12 Nov 222022 Q3 Earnings call transcript

Good day, and welcome to the Heritage Third Quarter 2022 Earnings Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Ernie Garateix, Chief Executive Officer. Please go ahead.

you us thank and morning, for today. joining Good the of release our invite our you investors.heritagepci.com section visit to archived. be earnings We website, Investors where call will earnings and the or are materials your available replay These review for convenience. at the Today's Private of XXXX. Securities call of the Act meaning statements Reform may forward-looking contain within Litigation circumstances. management's based These and to statements upon are uncertainty subject expectations current and changes in expectations. that to and In SEC filings, our risks press differ material results future release our may earnings our our detail cause from we

Our today, statements obligation may statements of to update make. no are we have as and any we forward-looking

and For to risks filings. a release description described please of the from report materially our could forward-looking in results earnings statements on our to other forward-looking XX-K, statements, the refer and cause SEC those the that differ annual Form

non-GAAP on will in is be call can to financial The today these information call the me reconciliation found Ernie Ernie. other will our comments Executive also over With of the regarding release. measures. Officer. and Our I Chief now measures turn Garateix, today our press include

update initiatives. performance We'll call will and will for provide Thank today. our overview call I XXXX our our the this third for metrics. quarter of And strategic joining then Kirk, thank results an will financial you provide during you, on open discuss key call. Kirk we Q&A.

assisting this made Our to of thoughts to deployed continue and of in policyholders, event. Florida landfall by which we've September to those on We respond employees Ian, all and the be committed our with I'm Hurricane mobilized XX. remain to impacted hundreds proud

need. service deliver on based the in to to customers Our loyal have their of time been a us promise

of by commitment We covered are payments fulfilling claims. timely committed valid to and providing that

of deep which catastrophe claims loss handling experienced causes experience, Our wind versus from flood. distinguishing team includes has

enable will consistent, to value. quarterly drive to that achieve continue execute strategic long-term earnings initiatives and Heritage shareholder We

our portfolio paramount. our appropriate our and are states. XX allocation of which of Getting described in offer product selection policies rate rates earnings capital is selective and and include underwriting, throughout diversification initiatives, release, for Our adequacy coverage

rate the we These cost of our policy We trend services. repair to XX.X% this continue. increase per replacement products of primary and driver and rates and to of the all to expect book, inflation higher keep are take and markets the by continue higher in costs reinsurance, frequency in events average driven throughout of weather higher our the up with premium

These premiums to Florida. growth derisk in Florida. of diversify efforts our outside the outside states continue We led in policy of and to mix of force have all

XX% represents portfolio, insured XX% total Florida outside last our addition, values up of time approximately year. of In from at this

also our in more while but business, in tightening long-term historic potential. Our of considerable quarter. our I market new have are new align underwriting returns. of criteria and our geographies states that or changes limited Correspondingly, at serves believe to continuously premiums to also with we evaluate tighten disruption in so markets. us high of with end this progress generate our maximize our billion will a long-term returns $X.XX in at We the that the upside force am products we can exit area. capital products pleased don't seek and with our markets, our coverage criteria our continues to underwriting produces be concentrated over margin. product we caused and A limiting selective, has business Even our restricting the

factor we a we trading appreciate with in relationship. cost make and the partners and product state. changes focus by more capital long-term whom how on developed However, have reinsurance we is constraints forward continue We is returns. our to a expected of increase, The are capacity and reinsurance horizon. and Reinsurance to as and consistent both short- evaluate expect our allocate capacity pricing to going we portfolio on long-term

forward, write to success. the going the Given Product expect to will This to evaluate portfolio the we of individual manage adjust we amount expected our and includes our compliance maintaining with renew key business is continue we regulations. pricing selection and state to concentration. also new for of reinsurance amount and catastrophe while exposure may business capacity existing long-term

we As believe products that opportunity customers. sufficient don't company in business our for reduce entering margin, are markets or we provide our we geographies offer and

on and and entered For example, surplus responsive the product be nimble us to we basis, lines and pricing California to markets Florida an allows which and excess offerings.

in impact we the benefit raising Rate as written to of premiums to and to and we increases negative rates make on expand excess operate, third offset we analyze we'll markets proactively markets. had pleased progress appropriately meaningfully to the our sustainable are well Despite states we We and as quarter book the and and our profitability. look continue in Hurricane line other which Ian remain to continued with results, higher and throughout evaluate surplus committed the challenging continue cost capabilities loss XXXX business, reinsurance towards costs. for to higher

We This are taking concludes remarks. to underwriting profitability. my actions improve

me Let Kirk in over for performance quarter key the review of and the things metrics. results Lusk turn financial now to a

Thank everyone. you, Good Ernie. morning,

loss The was million $X.XX loss for and $XX.X losses, received of prior diluted declined has from share October without year to Hurricane third we of have the quarter. from loss ultimate well within year The expected per of level, a quarter claims a for quarter Ian loss LAE loss loss At adjustment primarily cat Hurricane $XXX quarter. announced $X.XX per our $XX.X would prior layer $XX this we million previously or ultimate second the XX, net net compared associated the that company XX.X% Hurricane loss expense, and was to remain which, in our the and XX,XXX on to retained net This will tower. with diluted excel totaled Ian, million. close $XX.X net share or Ian gross million or million including by project attributable

XXX(d) valuation Internal allowance to related election recover the which Re to generates income. million was and allowance valuation for net future able its $XX.X we are Section tax third Code quarter also a as Osprey The Select impacted Osprey by Revenue

the billion, at decrease X.X% The in-force CIB at premiums in $X.XX of XX.X% other As admitted down Florida in-force underwriting. lines in all policy highest increase premiums earning and X.X%. their policies in and through policies. by amount and up Ernie reflects for count by mentioned, the Florida up is In-force Policies X.X% states portfolio decreased tightening premiums grew than rate XX.X%. in-force while level are are personal

higher ceded reflecting XX.X% the at in well value. increase X.X%. of increase in of an our our stems those premium results year our we was premiums catastrophe of The personal business the personal capital that of While geographies XX.X% up prior portfolio increase the XX.X%, to that portfolio The while as lines revenue from quarter by from and Florida commercial X% from year ceded earned by in do in-force year total the excess was higher rate lines exceeding gross XXXX XX.X% prior X.X X.X%, XXXX quarter ratio loss grew increase of online our increase returns premium in in down quarters. period. premium commercial decreasing ended this Total The Florida in over premium insured and generate the sufficient driven from from higher our shift lines quarter, prior for to effort the points declined as away to not. cost primarily program program. lines The

million year other income in accident with is fees year the addition, is offset losses a of income rates. interest policies in in-force, quarter with ended associated weather policy The quarter. fewer increase reduction XX.X% to prior $XX.X In net million due by the partially $XX.X an from up which down in investment higher current

Northeast. driven As for and in premium. were premium was quarter ratio the year mentioned, the weather and Ian, mentioned. XX.X prior down Expenses a the current the expense from to XX losses, acquisition higher included up just $XX.X from from weather net losses loss quarter, accident ratio losses earned current quarter, by quarter higher $XX also prior due the with up in million related driven XXX.X% XXX.X%, in $XX.X million catastrophe up Attritional to million Hurricane of year quarter. slightly XX.X% the net most in $XX.X accident million year of notably net expense in The the are catastrophe net net written reduction net to by in combined prior ratio gross ratio quarter increase the attributable points costs in losses other up

to Our challenges focus we adverse to in anticipated on to will concern be drive have reducing with in align loss continued actions policy at aimed costs. market reductions and continue and rate with claims profitability and Florida, primary for impact lines inflation. business our of inflation count practices increases the reinsurance Abusive underwriting taken litigated inflation first along

also We're that address to all underwriting restricting markets more also on the are inflation are certain policies dislocated. becoming surging states. guard We including

unrealized investment With over when the any per cash $X.XX, maturity million $X.XX. abundant the value with is share outside a don't adjusted sell of need portfolio, book losses investment the portfolio. in advance but Our anticipate back investments cash is book these the and to of value adding in equivalents, cash we in $XXX held our

years average portfolio invested is fixed income is duration Our rating A+. asset and short at the X.X credit our on

investments generating expect profit we the some are remain pursuit. mature. unfettered by in very and unrealized and We challenging markets that on to decline losses such, underwriting as operate As an focused designing

volatility. optimize We our will portfolio continue to to analyze reduce and evaluate returns and

Board shareholder We and will the value. value of steps price and it returns. Management more the company. capitalization believe market of shareholder of the We that and the firmly focused do providing on We take total true are each to dissatisfied value than drive committed sustainable and stock company. companies with necessary current the profitability not our that reflects to long-term our remain are are worth operating believe the

to we to realize That take will improve of the all value As will ready to are Operator, the the our consider call. I we and concludes actions stated portion also necessary our entities prepared options remarks. margins. of question-and-answer before, begin the

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

-- how Kirk, how is in much you company? say did holding the cash

$XX million.

the then insurance what the surplus And is operations? within

$XXX surplus is -- entities Yes. all million. The between total is

leverage, capital on? more growing at in do you're -- How is premiums How to Or how look here the you that from you much and adequacy the $XXX terms do commercial of idea that you've could Florida. grow capital Then view put business I continued you adequacy? million. you here guess the in taper? underwriting

Yes.

When little off decrease. our guard anticipate bit. continue to think I is kit count, I continue increase. really to are going actually And we we factors. look decrease. at to we substantial taking going we to premium I of mean, be our that And when leveling are on to top going going is And think what's count rates our driving forward, we that a probably is think forward, look that exposures our our inflation

in have this you And how your next for reinsurance have place, then refresh much me year? to on how you year buy will much reinsurance, or of multiyear power

Yes. tower, We do the have Northeast would a of and cat that the our for bond multiyear. extent be

your will of most in -- be the market So spend

Yes. Correct.

expectations any discussion -- anything fixes for the then as aware? session? Florida under And you're far as strategies Any legislative or particular

and discussing statute a now special bond all discussed the and but they're So being feed legislators we at session are items, items doing one-way have this something those with point. for being on considering been the all cat those and strategized

Yes. on piece to just program defer going reinsurance One other did comment we RAP I'd is make last on year. the the back

available FHCF. below us assist the is which this for that would year, So

accounts And the of keep FHCF in almost mind, reinsurance XX% program. for the

Paul Our from comes question Newsome from Instructions] next Piper [Operator Sandler.

were saying you're apologize in talk that. you -- did. Did about with the ratios subs I missed the I or all if RBC I at

year-end, range. HPCIC $XXX the was for a in $XXX. and $XXX little over was was NBIC Zephyr just RBCs range Yes. in At the

of that's last And year's year-end. as

annualized is an That's upon on as calculated of kind mean it a rolling year-end. basis XX-month I of basis. based

the we why that's So versus was where surplus. it look at

Right.

So different will losses. fourth presumably, the quarter the in those given numbers be

Yes.

to the Zephyr going some the losses, and well I fourth NBIC, $XXX. additional mean, above be capital I to them Heritage, expense anticipate we mean, provide forgiveness quarter. we Given -- looking is in with are or still

in and that planned our already So is expectations.

it from if changes? the up about talk event with perspective? does you a Is ends what have what very Ian? would as insurance happened much Nicole being the same happen it Could Hurricane Or significant other

Yes.

dollar. would a we be think event standpoint, $X.XX on Anything second the our million. attention million, I from -- cover over $XX that's retention retention match have $XX to basically on a

the So would even million. would would be million, that the depending particular million $XX be at upon retention, that of be And $XX $XX extent million our of $XX so severity storm.

all you profitability and about difference in of the in much Great. Can the difference between non-Florida. talk Florida How profit? the

segment single as We look yes. about reporting Yes, we standpoint. a think at from -- a ourselves

it at and every totality. the product. every look footprint, is I adequate and that our every state, in kind rate therefore, is to that would objective jurisdiction in So of tell across you become

when in in Southeast of that's of is And goal a the we've rate also Hawaii. Northeast so amount both and on you reflective That focus to and basically been taking, the tense that rate little bit adequacy.

last years. thoughts, this current business? about in getting terms perspectively the you price my a be think last higher been remarkably been question, like have on Any has lot versus hasn't there what these the I'll you're Inflation is inflation difference. of in level increases the what couple of of rate currently makeup and Seems

you terms -- what just is versus of the you are view underlying in where claims So in think inflation

earning catching also And the baked is a we then was we start it our and the a several of increased -- the over of you 'XX look when inflation, we then it of inflation XX%, with When little over the I going starting top to ground. on maybe And underlying into think, 'XX. initial look at pricing. that. increasing is rate taking portfolio Yes. When amount little over is through at compounding more the rate it 'XX, then up, little have when last it think look is years. That running was substantially even a year-over-year that that going claims but we did that actually into XX%. the at inflation from And pick in up slow, we're we

take to 'XX into actually and been -- a really 'XX. into taking starting it's of rate is effect that we've So lot

ends remarks. turn [Operator There closing like are the question-and-answer to more session. over the I no back questions This Instructions] to Ernie queue. conference would for in the any Garateix

call everybody And great hope today. for a the We everyone day. thank I joining has

Conference today's for has you presentation. now concluded. attending Thank

You disconnect. may now