Heritage Insurance (HRTG) 7 Nov 242024 Q3 Earnings call transcript

Good afternoon, and welcome to the Heritage Insurance Holdings Third Quarter 2024 Earnings Conference Call. Please note, today's event is being recorded. I would now like to turn the conference over to Kirk Lusk, Chief Financial Officer for the company. Please go ahead, sir.

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 at or These for convenience. review available are your replay

material forward-looking call expectations. Reform release circumstances. management's that In changes to Litigation XXXX. risks current statements Today's and of we our contain within meaning SEC to Private from Act based of are differ statements our press in subject cause our and future the filings, These expectations earnings Securities the upon detail may and may uncertainty results our

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

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

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

that Southeast. for Kirk. has people by thoughts everyone, loss. afternoon, you, thank us left This difficult hurricanes that the with has and devastating season our millions communities the Thank To the today. been who many start, and you across with Good are significant impacted support damage joining many were so storm and affected a

I policyholders emergency effectiveness. well daily. our our as proud the the our our hundreds have response we communities value we to a of metrics quickly our policyholders ensure field been of the have to operational across resources track support ensure and to especially in to company support are ensure support series of To we customers rebuild. have Heritage, providing working necessary our that from policyholders, and who rapid expect, At offering a service providers are we adjusters they to that as our employees to tirelessly am

vendors at As footprint, for received XX calling our of with also have X the employees XXX I like loss themselves we ready calls, throughout thank first whom an policyholders following the and employees, of of time over were Their claims Heritage. hurricanes to our responding in and remarkable notice for wait under impacted the time. to culture by emergency at efforts incredible would XXX had their taking days services. has to their minute. this Milton, been testament policyholders over Hurricane to many We challenging while commitment a claims example, during we our X,XXX average

initiatives support financial our of am While was I strategic when I successful results, also I to execution proud that the of am very policyholders, our which Heritage, out our laid I CEO appointed proud ago. of demonstrates years clearly our of X

a results been achieving Through underwriting have absorb full solid rate while shareholders. on and and our retention and returns we deliver growth have initiatives to these allocating capital financial Our focused Heritage positioned drive profitability discipline to to results. maintaining our we as efforts, strive loss adequacy, delivering to enhancing

loss improvement results at produced income third share. XX% or net or which net a in achieved of million loss we $X.XX third results ago million $X.X a per is where our detail, Looking per quarter $X.X our more of have sharp share, a quarter a from income year

million XXXX income income we net $XX achieved per from of $XX.X net X-month a of include our from current of year-to-date or basis, and or losses Importantly, Debbie strong share. quarter $X.XX net per Helen. increase representing million $XX.X results On share, million $X.XX a approximately hurricane our

of our areas, effort where and in strategically underwriting the reduce the and unprofitable underwriting result in on XX.X% further Our of our the adequacy executing exposures presence From to of XX,XXX profitable rate reduction losses catastrophe in have a our policies by while over approach significant over-concentrated of ability multiyear XXXX, force products. geographies or face our while increasing to initiatives. just continue is throughout profitability premium and X%. a resulted perspective, to focused footprint This compared disciplined or in increased an third maintain count we we $XX.X policy million underwriting quarter our in

quarters we as earnings new while underwriting expect declining discipline. territories moderate for the next calls, have prior we policies discussed business maintaining we on As our to over open few

our also initiatives, partners. maintained have and engaging management policy proactively indemnity-based with also We stable exposure a our at through while count costs reinsurance manageable program reinsurance

continued In partners and fact, reinsurance near Hurricane each prior whom to making we met support our long their of of reiterated both with just term. XX Heritage Milton landfall, of

Turning to our adequacy initiatives. rate

have in which resulted efforts in significant rate portfolio earning These are our a increases, XXXX. through

premium evidenced balance. As growing by our unearned

we will provide anticipate XXXX, portfolio. results. earn financial our tailwind an even of we which expect to healthy Looking a amount rate our through more to meaningful to

More business Lines our an we importantly, business underwriting. pivot focus controlled anchored This in that change important our our our to of Personal footprint by we significantly started as on writing selectively Personal beginning throughout growth, continued management risk is have curtailed strategy, in one stringent writing Lines given XXXX. we new strategy and

growth our in E&S action in that rate and combined been time, of line portfolio. have growing Personal commercial products through our our we our the with residential Lines portfolio period this organic we Over top have taken

in business the Florida profitable legislative economics positive writing a of having changes impact new are the on state. in recent Additionally,

shorten closure the to believe fact, further bring back frivolous and claim changes Milton reinsurers legislative more In the market. Hurricane we demonstrate will cycle lawsuits, that mitigate will the

ahead. to solid our we Taken first policy execute production our the in foundation headwind deliver XXXX improved efforts mitigate growth Strategy. ramp through We to and continue to through to business expect XXXX from reduction earn-in of rate to and Growth half XXXX, our together, the through new year believe our in have continue as we the to place up profitable the we Controlled

Our South so this and compared as California, makes continue more EMS state, for as to $XX returns. million business growth premiums nearly grew we XXX% attractive? in our lever quarter third ago the or to business year What has in-force been rates risk-adjusted we to to business Heritage. a as adjust and Carolina. that we earn to coverages by appropriate state nimbly ensure this dynamics can continue the changing Is Florida write

opportunities we to more growth continue plan forward, Looking controlled to E&S states for evaluate on strategy. we our focus as

no will in remain our and We remain This single focus balanced we portfolio company time. committed selective ensures resolute of represents diversification performance Importantly, disciplined in which stability, and effective reflected total we maintaining state growth, insured volatility our be maintaining to our our long-term believe value excellence management. diversified XX% over on helps and the reduce as operational of over a value. capital

our Importantly, evidenced as initiatives season. yielding ability positive are by our remain to the cat challenging strategic profitable a results, to

to over remain we the growth To workforce. Strategy Controlled dedication our a dedicated to to our reiterate market accelerate would designed prudently optimistic as Kirk, you. prioritizes to maintaining I to while that complexities strategic our of margins. the by driven navigating and shareholder our Growth value profitability with pivot forward, Looking premium conclude, I like long-term focus

and afternoon, everyone. Ernie, good you, Thank

success the our As quarter financial highlighted, reflect initiatives. Ernie highlights. results our Starting of this our strategic with

by of income in was or our or the $X.X Idalia, quarter. Demonstrating XXXX, over Fires also $X.XX our increase actions, cat results. targeted and last incurred the in which put the had $X per impact impact of loss losses $XX XXXX, underwriting net exposure the favorably in context, net our million taken improvement positive several actions reported a rate years, to driven Hurricane our the third management with and the in net net continue Ian, million a we diluted diluted of share reported prior Hurricane a income quarter. net the The compared $XX into the a to In $X.XX share million reported $X.X we and per quarter full of loss loss loss and million. that to of loss $XX year the a We million portfolio quarter million of retention with Maui to in and of

cat in of quarter year, of While $XX and income with the net this Hurricanes losses reported $X million. and Debbie sustained we Helen million

were This total quarter. $XXX.X focus on up premiums strategic up for earned premiums in investment by prior increase the reflecting the revenues X.X% net $XXX.X rose organic in rate and quarter million income. $XXX million, from to driven $XXX.X the Gross million was year million, year in from adequacy increase our Our quarter, earned our and growth line. in prior the residential XX.X% commercial

prior XX.X% $XXX.X the increased from million, the in in growth quarter ceded million earned Net outpaced gross premiums as year premiums. premiums increase the up in to earned $XXX.X

compared which the higher Commercial to Commercial we The premiums. markets This have while XX.X% Our Residential strategic the total X.X%. lower includes period. in tends generating the attritional by the premium to organic our year force now business losses by third in insured on in XX.X% material business compared to products value profitable of growth average increased of accounts XX.X% Residential quarter premium only prior and for force increased total selectively for XXXX, expanding the of our focus segment while

and experienced Helen Overall, being Debbie are financial billion of a much million combined position Hurricanes Debbie Southeast. we a the strong reinsurance in by storm. a backed for during smaller loss third and We the the $XX.X tower with quarter a with $X.X

to into our which the starts $XXX We from of expect and possibly losses goes tower, at to million. $XXX gross reach million Hurricane Milton third reinsurance lay

We like the have maintain significant our of events over coverage strategic a continue recent taken through losses X we helped to years robust XXXX, last Hurricanes. reinsurance the year-end to level mitigate actions X from the while have

the of for coupled improved prior of maintaining LAE was the attritional losses XX.X% million, driven $X.X quarter of higher high-quality last and and impairment weather inclusive of and income, the an which increase quarter. to in primarily This year net net align assets. realized year, with actions increase million gains, in net The quarter from of curve XX.X%, our with same losses an losses offset higher reflecting quarter partially XX% earned, while portfolio by to the lowered the for reflects LAE. reduction X investment by was net losses premiums development. short-duration in adverse net ratio Our the a loss was a losses, points yield from the $X.X slightly improvement The investments in reduction

from of totaled quarter. in $XX.X of million prior prior an compared quarter in weather $XX weather losses the $XX.X losses prior quarter to quarter. losses million million the million an increase for were million. quarter the amount Other year $XX.X Net current Catastrophe year million, in $XX.X increase year the $XX.X the were accident $XX.X million, in

quarter the $XXX,XXX of loss Additionally, in by $X.X the loss ratio XXXX. unfavorable third of of third net during the XXXX, net million of unfavorable net to impacted development loss was compared quarter

the to attributable states conduct to favorable changes business. Florida continued see portfolio in legislative we underlying which current the XX have year costs our in improvements all across We the made trends in loss and in

We and on to basis necessary as continue rate adjustments underwriting results. state to to improved ongoing evaluate an maintain make adequacy each

Our the driven acquisition primarily quarter, net year prior year's higher points was expense the of premiums for in XX.X X.X The was quarter. policy loss which decrease the The the net costs. net was XXX.X%, in for XX.X% from down ratio and expense from the ratio. ratio lower XX.X%, a offset quarter driven lower decrease quarter the net points by combined earned, ratio XXX.X% in prior by increase net

sheet. balance equity of assets with of Turning quarter million. the and $X.X shareholders' to our $XXX.X billion total We ended

quarter. from company's in on quarter reduction risk. $X.XX The year income reduction credit book fixed is well the Our per attributable XX.X% income, primarily securities driven losses interest to are the in increased to as value to net by up unrealized unrealized recent XXXX increase losses rates attributable portfolio. comparable interest decline in prior not share losses a as $X.XX, in rates. correspondingly is unrealized of The The and remaining to from the the

expect to losses mature impact losses decline, continue or recognize will as interest will but unrealized We gains. unrealized that rates changing bonds

the yield as portfolio. X.XX The maintaining to portfolio's average have extended rating quality of years, out duration further of a the curve, higher credit of high advantage while yields duration take still AA- we short duration, on a our with portfolio is

quarter, annualized of the points XX.X management. from year Our profitability for our return prior an equity quarter was improved a and on negative effective XX.X%, XX% improvement the reflecting in capital

robust with terms of returns aligns to the our growth initiatives Directors Board quarterly related to This In long-term the of continue decision decided support capital of has dividend. strategy our equity. suspension our management, on with

repurchase will continue value to stock and We quarterly on a strategies dividend basis. distribution

in managing Looking exposure, for our strategic position technology remain ahead, on and and we to us driving focused We to initiatives success. enhancing our shareholder adequacy executing infrastructure and investing well approach rate believe proactive value. continued that will

on begin Personal initiatives the our Growth next phase we Lastly, and of Lines and Southeast we our strategic the Strategy embark Controlled in initiate as are Northeast. to excited policies writing

we to positive these today. for the have questions. Thank our impact Operator, on expect ready a look for ahead. We your we are you earnings to year time as now

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

you. The talked we this this undertaken value pretty that particularly How going of ratio, Is might cats, drive regulatory when this Thank new account good this and think a weather, is loss -- aside bit that of other morning, major help. Good Or your that the starting -- the a is quite striking, good the development, much the just into was normal? of and quarter that the about sustainable? -- point call really the the from factors level excluding initiatives this achieve a afternoon. had it you you take about ahead? on Is kind you've the to was a help events? excluding

thank Mark you, Yes. great question.

in we I loss followed taken taken, actions the underwriting a top of third having attritional think our a years But on legislative favorable some ratio a the reforms when the our quarter impact are on quarter, we've of results. fourth are very quarter is -- actions good we've the over both mean, it's rating best year. favorable by -- several the look at last quarter very I the on -- seeing -- which is you trends it I the typically typically was little pretty mean, the

is as it we profitability far third quarter, close as how at a more So of a kind we there it but we're a go from new as that in bit -- I think favorability the looking is of standpoint. to think, forward norm,

Right.

You've to talked that considering are a rate a and of of about earn How -- has that those been rate through. trajectory the much P&L? through Okay. earn more in Where earned tailwind there? having through? How taken as you continue of lot momentum a of that flow much you about -- the process or the is how and actions already we

Mark, this Ernie. is Yes,

they're come one products XXXX geographies in adequate. that is quite the still and make plan there's a comment in bit make So always I'll to each looking we're about and we thing for. a But the sure rate of

effort. to always be that's So going an ongoing

call, every said offer the single to we're we've again, And there. which we aim in this to over do in be the and profitable state earnings going business, under we products that

products are there's those line. a adequacy make the sure to So constantly at they adding rate looking bottom to

And Mark, expecting the are earned we had than far tailwind, rate idea to as we give in you coming 'XX. 'XX as just an through more in

basis an coming through in right? Right. absolute 'XX, More on

Correct.

on Not an necessarily of or rate just a absolute change basis?

Yes. Correct.

other seemingly You've you Northeast do then versus -- from lot what And at got this more how attractive markets? the you as or choose Florida to view see the point? geographies do a

the at legislative the Northeast other with York, in again floor to states been the that attractive there. look changes Northeast rate well. take again, and us. is has But rate The New Jersey taking do New we and we adequacy are So as then --

those adequacy bringing So there. getting closer then doing are and at more business some to looking -- rate up

But portfolio and of options. and having again, rate diversified gives the across, that adequacy is theme a looking overall us plenty at managed

Sandler. Piper Paul with The question comes from next Newsome

development way would total reserves you sources, hoping in -- bit -- -- the additional it's more like was with go be little the I little think, a fantastic. just could -- looks the details a function] potentially color give year that I bit other maybe fact on us [in contrast reserve exit

mean, basically Irma, hundred remaining which, a I of actually I that. that claims thing have completely has Yes. we that only couple to to get do And again, with appreciate sold.

still However, environment due those those. that volatility just associated that to there under of with the fall legal is some some

that of actually So Irma. almost -- biggest the just is is it that hurricane driver -- really of it's all

any potential certain be watching it we should layers? [indiscernible] premiums or to concern into related creeps any there for Is if reinstatement

we stuff. -- the [indiscernible] premiums. already for plus as there actually -- estimate kind far anticipated then the $XX of that million retention type reinstatement We've we included of about in indicated as and Yes. included latest That the when

for fees -- fourth -- management And in are also, claim more hurricanes potential related so unrelated that to then become the there quarter? the any

can management that? you again Say -- repeat fees... claim The

for income gained Is includes potentially essentially in there the and there an revenues a the that quarter? the other Sometimes bit can management fourth of off of for claims, fee doing offset. it anything reinsurers you're -- be little

not material. be Yes. question that. some, Paul. it's Good mean there be on I could to going but

back remarks. to [Operator over like Instructions] closing for turn conference concludes would session. question-and-answer the I This our any

Thank today. has everyone hope a We the you call great again afternoon. for joining

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

now may You disconnect.