Heritage Insurance (HRTG) 2 May 242024 Q1 Earnings call transcript

Good morning, and welcome to the Heritage Insurance Holdings First Quarter 2024 Earnings Conference Call. [Operator Instructions]. This call is being recorded on Thursday, May 2, 2024. I would now like to turn the conference over to Kirk Lusk, Chief Financial Officer for the company.

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

earnings in also Our will statements the today, Executive today to refer and description can and we now no from cause have Form report the the me the comments of annual other reconciliation include any turn Officer.I we our described information on to non-GAAP and that make.For be regarding risks Ernie. XX-K, update forward-looking over filings.Our of our measures. forward-looking are as results call Chief these statements, Ernie may and measures of Garateix, obligation The materially our to With other SEC today to will please statements on release found. could the forward-looking is differ statements financial call those

key thank achieving you, objectives of will provide and our joining insights Thank some and you in us offer Kirk, our highlights our discuss first for all today. initiatives. strategic progress I quarter into performance,

have performance from overconcentration.We've years by XXXX.The in X.X% billion, premiums at force premiums associated achieving the premiums year. $X.X of life of the last are increased was saw the that are of XXXX, QX same the driven have consecutive to and over call where policies force, has rate $XX increase take XXXX receive each quarters. severe on the a is details to report were indicated. recent to modest reflects has financial which continued for management have million, first are rates for the and we XXXX adequacy, solid being slight to provide strategic approved with the claim X increases either materially increased This costs metrics, rate and frequent pleased inadequate objectives general in million rate substantial We properties.As open last represent a XXXX several and aimed which need repair our initiatives am in areas for earned associated ongoing Insurance concentration in improvement in our reported rates where that quarter in success earned. at primarily a has impacts capital years. will implemented were $XX.X Kirk from increase portfolio the of These as with key anticipate period our of XXXX over X allocation.We've higher remarks, first income In-force last been our such, my the intensely exposure our net approval past approved those premiums certain higher new more quarter Q&A.I to a Property the and we rates rates discipline after costs Following actions will strategic expanded the are reduced where in have gross our regulators litigation due over on or Riding associated Florida, underwriting initiatives and over rate inflationary geographic the cost the escalated weather, key adequate reinsurance we were XXXX, policies.For and excessive we years.While to start

markets a have multiyear reinsurance our portfolio have various position earlier our years.Even smaller business are we an XOL same important decrease we our maintained commitment element extent expected partners of non-renew as lines earnings program program increase single policies mitigate get longer to in of in than geographies, catastrophe therefore, our decline and reinsurance our network.These now achieved initiatives to previous because diversified we would, the and state more certain geographic the regions. permitted of stabilize adequate fine-tune program intentional, supplier a company's the commitment only catastrophe in state includes The our is insured no driven intended reduce with to rates of puts by secure strategy.This to of and expect capital strategic where reinsurance it risk total the recent than than in geographies unprofitable helps announce are to and is force to the distribution inclusion growth impact experienced for transfer is new rates by pleased corresponding to our diversification to value.This rate their rate, XX.X% requirements, concentrations representing the no at count and a few are with year's finalized the becoming strategic years.We that limit we The $XXX across individual our the For be providing XXXX, years, adequate, has opportunistic reinsurance.Contracts fully policies us bond, over a been includes more a activities that of catastrophe Southeast policy million. the percentage collateralized. risk bonds balanced past XXXX, and in reflecting we our and

are we recent and As actions targeted the we management to in want enhancing optimistic value.We of and as adaptable over believe we in challenges of shareholder to market to influence focus and steadfast benefits reduce taken in changes trajectory.Before a prioritizes to successfully But with that our profitability and strategic complexities the Florida forward, Florida growth abuse remain initiatives.The rate strategies continue navigate the reaffirm about outcomes. return shareholder navigating one-way litigated disciplined attorney of to of claims fees, I legislative are the count a sustained be to policy on to actions continue I claims as to turn the positive capital our environment to Kirk, and ensure to long-term remains value focus growth with driving strategic commitment call underwriting well our our positioned leave noteworthy.

Now, let to this things detailed of Kirk financial for review over performance me quarter. a our turn

morning, you, Good Thank everyone. Ernie.

was the from this earned equity premiums reflecting of issuance prior and earned million, $XXX.X on and an weighted notable prior in improvement XX.X% that it focus due the we premiums important increase in $XXX.X into $X.XX outpacing a X.X% forfeitures.Our earned income.Additionally, net strategic written profitable decrease earned from number our share note, rise of increase highlighted, by higher up to of ceded to to premiums. share. on began X.X%, increase year stock the quarter quarter, X% expanding Ernie by net is our average This per outstanding investment year by in increased over premiums suit, income rising or Net the gross in a influenced the our shares earnings the million, year, quarter. segments.Gross As prior were first in diluted note a product premiums with XXXX enhancing and increase per an net million strong premiums net grants result income represents followed driven gross $XX.X in reflecting offerings quarter the

past from that of going better saw slight reduction for impact positive of million to positioning to in is down impact ratio, to X.X% in the reached rate for of unfavorable made to years.The with a net we throughout in $XXX.X increase its an increase quarter ceding to the million $X.X increase quarter losses to accelerate $XXX the premiums quarter.The XX.X%, reduction our our favorable the due million of in which loss actions marking the changes compared underwriting by prior by our the the and off and first our a XXXX.Total income, improvement net ratio investment quarter, an expect increase for and $XX.X adjustment due weather-related first curve a contracts XX.X%, performing our net yield quarter believe portfolio ratio the to as X net included in in $XXX.X development year net higher in is the $X.X quarter. commissions it prior rose most well earned ceded XX.X% an million year quarter premium a and million, contract. the as is growth of attritional improvement loss loss the XXXX.The million in from losses driven will This quota-share which on to result strategic the compared various revenue development improved prior what revenue opportunity.Losses We compared forward loss and net in expense expenses premiums even highlights in primarily earned the have in $X.X higher of since were XXXX. ratio in million were bolstered over current This the run

net XXXX, XX%, ratio the This our sheet. the unrealized our cash is of to a as and to on year $X.XX, met have by we substantial exceeds driven by by discussed.Turning I in improved to compared on which evidenced an income the income have Ernie equivalents, necessary rest further and XXXX The the to primarily million the reduction and March initiatives, Our us prior losses value risen slightly cash to the strength increase in price providing meet closing reflecting of value book loss inclusion is share needs.Importantly, qualify in XX, growth Index. our fixed net balance cash driven combined improvement has per our in XX.X% reserves, of financial strategic to ratio in quarter. $XXX threshold securities.Our liquidity our operational book

effectiveness our will financial our is strategies.As to of beating strengthen has distribution further results of suspension coming and We index, inclusion threshold and operations. our valuation. dividend a financial long-term ensuring continues growth committed updates XXXX be part adapt Board support and you. strategic initiatives evaluate conclusion, continue the to decided to confirmed our dividend our of Board ability the shareholder to quarterly driving stock to quarter the market position strategic first formal health the to The value the for to our the testament While initiatives.In Thank of this demonstrate capital and sustainability approach, management of and Directors repurchase prudent our financial our from in remain conditions. of market the the

your for ready now are We questions.

Fritscher Maxwell question Instructions] from from come Truist. And will first our [Operator

different in storm do model I but And there? rate don't was adequacy active you answered, your is know season this sources modeling the think What have is this that been year. Florida if saying? internal more

looking to the I issue whether there mean it's as or as as I is there's possibilities. is not. far like landfall as Yes. some uptick slight going that to Okay. the others.As mean, far the extent as extremely we're our a slight hearing adequacy quite I make mean, not positive. far increase, always that the internal the actually slow in rate of models of Florida,

are I the think lot rate fine-tuned kind of I underwriting a right now, sure But I'm about the we activities you've what we're changes over cautiously effect. that would occurred. it the the legislative last several looks is of kind really the term of portfolio.The say having there. that desired including optimistic, before you it heard taken that seeing we've and that actions have years, like

pretty So, good. overall, it's looking

'XX? big we be in acquisition to but What rate what a expect in the not numbers running that in sorry, to should in in cost it ticked secondly, should rate bit XXXX, then And we like run -- Looks up run the be expect was the policy the mid-XX% or was the quarter. in here, 'XX.

In with 'XX, of reduced standpoint, closer the Simply the we That partly, first some to from costs, share. million quarter about had to year's you're the commissions $X back do see I historic quarter. of acquisition the ceding in runoff norm. had to think going worth last go

going it will And so, norm the more forward. into actually go

And Mark comes Truist. our from Hughes next question from

go, top commentary regarding where would a you account takes of can you line point? of commented about be but able at might considerations. any you one But juncture leave adding to, pricing Did And, this kind line? to if anything be How do make top And your are already view feel adequacy elaboration you of around just posture at into any capital we growth? course, better you've that the appreciated. that

No, comment make we can on a that.

line focusing we're we But on coming are adequacy then specifically.I as that getting would focusing other past the specific I that some much I since we see over 'XX care, rate to and is that a comfortable that more policy that that and regions look that say, areas you overall, looking grow still where are adequacy years. very and more in in line say, specific top top So, on think grow through taking We're we've to going super-regional there are would into been rate the geographic rates. you'll forward rate X areas counts, through.

just that as you And we worst sitting other where in Yes. other and of opportunities quarter. I type Typically, how our nonregulated down to utilize the that growth, when comments. at one due far make in in worth comment is, or to look of cash that the growth over as we're future have like for always we quarter first we we fit.The see I'd do the comment X stuff One winter storms in the push is for our $XX can Northeast. nonregulated cash think the entities seasonality and million is

touch take-outs, take-outs you whether of the on And all? to be would then interest at you did

look the diligence due our takeout. do always we and So, at

optimistic in adequacy pretty mean every agents regions and that rate diligence the It opportunity with in be that through we we value will think better the part won't certain with our doesn't partners in now, I But is as our the go of do all something for more us. considering organic seeing be we're we're that quarter. a right growth takeout.

and are questions [Operator at back turn There for this session. remarks. question-and-answer I'd gentlemen, to further to this concludes our team time. like final Ladies over Instructions]. the management no conference

great to today, everyone to agents I the like our as this take support. their a day. hope thank has opportunity everybody their for continued reinsurance partners our employees I'd appreciate for I well Yes. shareholders, call as joining and all dedication and

concluded. for now now you attending may has and presentation, Thank conference The you today's disconnect.