FNHC - Earnings call transcript Q4 2021

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Operator

Good morning and welcome to FedNat Holding Company's Fourth Quarter 2021 Conference Call. My name is Liz and I will be your conference operator this morning. At this time, all participants will be in listen-only mode.

Before we begin today's call, I'd like to remind everyone that this conference call is being recorded as well as broadcast live via webcast.

Additionally, today's call will be available via webcast replay later this afternoon and accessible by visiting the Investor Relations section of FedNat's website at www.fednat.com.

turn Relations. over to for Bernie like Investor FedNat I'd the to call Kilkelly Now, Bernie?

Bernard Kilkelly

Good and you. XXXX Thank morning conference fourth joining call. quarter FedNat's thanks everyone for

measures, remarks Our and measures results. efficient to and We include comparison such transparency non-GAAP as greater more references use earnings these adjusted prepared to a release provide to income. operating year's non-GAAP meaningful prior

SEC including risks the and made not call statements Statements estimate, are statements expect, forward-looking from are on predict, conference phrases similar project in described Our call, and measures matters call in forward-looking is measures our time this result forward-looking risks may GAAP results that conference this issued and numerous facts earnings this differ other risks these expressed are uncertainties, with identify but materially based may reconciliations intended historical statements. as discussed time. forward-looking to, outcomes and The that non-GAAP uncertainties the realized. are Words what made available due call release in from company the non-GAAP involving and expectations Actual the to to events, to forecasted our on in earnings are on are or or release. and current other not the to that in by words yesterday expectations such this not management filings uncertainties and from statements. limited being anticipate,

revise statements reflect events or as disclaims obligation and otherwise. specifically future made during any forward-looking or of speak this to or today's update statements conference date information, circumstances only Forward-looking call new to FedNat any

to turn Braun. the Executive call Now, Chief Mike FedNat's I will over Officer,

Michael Braun

questions. me and results the into and we Ron Thank with and Fernandez, of XXXX our on Eric After Chief detail then welcome our Officer; take Financial conference on glad my financial call. more you. will quarter the will quarter Accounting call Chief go Ron today. are remarks, be Jordan, our Officer, Good fourth to the morning to

quarter an that Before want announced the our give I FedNat's strategy in shift November. I fourth to we review on results, update in

we non-Florida established where improving years markets and relationships. efforts Florida exiting a market the where our claims XX to on homeowners and As was strong have capabilities we share, in agent ago processing we then, and FedNat significant continue announced are refocusing strong underwriting and market

FedNat. be coverage. to not the have states the Maison's renewed policyholders extent insurance of by of policies to in Florida accept with January, were not As the carrier part SageSure exit of offer of our with Up SageSure all Maison's renew in operations. we alternative XXXX. and begun coverage was In non-Florida the has appropriate the in making it's book Maison and non-renewing we run-off Texas. an began Maison's on those of Louisiana, underwriter markets, alternative in regulators to from have documentation policies written third-party policies a filed Last orderly began through insurance non-Florida insurance expiration our to Louisiana to expected general FNIC's appropriate offers to rights on of that dates we Texas and we policies. are SageSure end begin Maison's in owns policies. SageSure to of to policyholders non-renewal non-renew of business first of by run-off to that partners be XXXX, the expect each of continued Maison's the XXXX. Florida renewal March, substantially completed policy. time, in FNIC Texas quarter beginning policies Louisiana July And The FNIC affiliated did the December, At is through managing SageSure

XXXX, all alternative Louisiana we accept that the coverage. offer beginning will begin May However, most non-renewing quarter, the with of do notably and beginning in policies second SageSure X, Texas not

Carolina Alabama XXXX. on on will In non-renewing we in policies in South July begin X, X, and all addition, May XXXX

such, pace the accelerate the quarter. substantially in the one-off As of will second

XX, and/or We substantially transferring process policies non-renewing to June by complete the be of SageSure XXXX. the expect

all in-force same always Our transition, received completion honoring we policies the service commitment -- expect and XXXX. policyholders we a will the current professional receive within Upon to with company have to remains right-sized that in have that in from stronger surplus all $XXX FedNat. existing on they $XXX be be financially of and will agents surplus same We this FedNat and million Florida our will carriers our approximately based anticipate approximately to position. capital million we year-end exclusively of three premium

benefits already We will of The in and have frequency to our cat have of lower less in substantially exposure underwriting transition volatility form exposure materialize capital to begun and results. less the requirements. therefore, weather the

Monarch appropriate FNIC company heading We into FNIC and into liquidity $XX XX. million maintained After capital infusions, of of with we holding as at capital positions first of have infusion at year-end a the million December quarter. $XX have the

board special as the adviser. review As oversee position. is to work exploring to in directors a it's the continues of committee XXXX, including board Piper committee alternatives, strategic work committee you strengthen company's know, capital with November and of ongoing The formed options the to financial a of our Sandler

quarter are million quarter of that results note the and or impacted We cat is a as cat Texas net were $XX.X announced. to the year. of losses Turning It of weather of seven running were important that $X.X $X.X Florida, million million million the per XXXX impacted off, by share now $X Louisiana. quarter of fourth approximately in fourth reported This storms from that the business $X.XX previously from of results. we a $X.X books fourth million $X.XX the prior per to quarter in of the loss year's compared in share loss net or fourth to

by his the XXXX more of cat that second XXXX, gaps in $X.X the in we million impact to third on prior remarks. the events in was will the also multiple program. our details the strengthening of of primarily Our half impacted Ron XXXX fourth and This hurricanes results the while strengthening to quarters. some had quarter reserve accident strengthening reinsurance reserve provide related were occurred and quarter due

are Looking both at to attritional as the positive Florida but renewal increased the new in at environment policy and challenges in rates. seeing we trends it's the ratios our homeowners each business market, continues loss renews have

We the five the dramatic of benefits over and losses, reinsurance book years shrink are more seeing past the Florida cost costs. of to business, homeowners our attritional taken including higher increased reflect we've the action weather events rates adequately until doing

loss reform in in SBXX has Our and XX% by same including XXXX effect cumulatively improving also XXX,XXX book. XX% declined in AOB time, approximately policies 'XX, our end went XXXX XXX,XXX we rate FNIC's Florida ratios. book have that same XXXX. legislation to At rates provided in-force of over over the legislation at have increased by from the restoring passed recent adequacy years, our in reform that into help July Insurance some attritional in timeframe,

March, book and included effect increase rate a that in in and XXXX April Florida increase Our increases X% a X.X% during X.X% took a increase FNIC's in November.

by rate more higher improve quarter XXXX FNIC's ago. which million to compared of policy year importantly, a helped translates XXXX XX% there to quarter in-force benefits in dropped FNIC's XX% quarter third at a of approximately out the to Florida the are quarters This Florida more front much average substantial the demonstrates of ratio for a these increase in of than book comfortable as increased for loss per premium are in to than $XX with result market were policies with compared fourth just rate XXXX. now few And the not ago. XXXX last approximately in results. on that these This attritional and year-end compared still increases us increase As in fourth increases, that premiums exposure. year why clearly of into in we $XX are XXXX $XXX we fourth these Florida decreased XXX,XXX yet the Most the captured were quarter

portions potential of July. cautiously effective be that reform to SBXX became about continue last optimistic legislation We from benefits

costs. to time, We attorney with better this pleased continue the portions years to increased of the At years will to monitor to include reduce taking legislation loss ratio. in X% significant continue are of a increases time XXXX two filing from rate plan and such control an drivers as we for effect are renewals. measures adequate which three improved achieve fees we of warranted claims implement our limits to rates increases ensure are is of additional March our These rate as for attritional that results that and so to can

Now, over quarter I'll call fourth on to turn the Ron more our for financial details results.

Ronald Jordan

Thanks, Mike morning, everyone. and good

seven quarter As resulting by $XXX,XXX quarter in impacted quota Mike the ceded large storms by approximately $XX.X losses of of losses, mentioned, results losses quarter. basis. to of estimated approximately claims Aggregate sliding a handling brought million related XX total and Gross revenues, Related treaties and commissions reduced in Florida, basis of $X.X our were statement. these on approximately cat fourth the points $X.X the to from gross million primarily impact share both share affected of by Louisiana. of equates per combined that pre-tax at million events share losses after-tax treaties in consolidated a accrual and losses Texas $X.X fourth our are from catastrophe million XXXX under million. were $X.XX quota and impacts This XQ through income the from loss or on to the ratio on scale GAAP line $X.X ratio cats Florida our approximately ceding loss

of this Maison of business stem non-Florida book from our Mike, and strategic back by November entire shift the run-off approximately mentioned net book in from FedNat Insurance As Company. which our books million announced impact Insurance Company's are $X of

result on losses basis on daily of moment. literally to exposure is and that a a of this weather catastrophe As a Florida in run-off, declining our outside more

from occurred by was benefited all offsets. quarter loss 'XX strengthening loss during $X.XX of million by were also of of events the respect that in XXXX apply and to and hurricanes specifically both additional reserve reserve of it in of reinsurance results rate, impacted from the those second income per X XXXX the in around and $X just quarter $X.X approximately million favorable would and for lines and reserve impact in quarter years year-end studies business adjusted our of by operating reserve FedNat's that coverages XQ then recoveries or due share With tax XXXX If the treaty to accident of gaps reinsurance indicates the from income share. points federal the lines and have losses approximately the catastrophe net quarters quarter half multiple approximately $X.XX discussed our operating retention strengthening in to net combined strengthening or fourth and operating been in ratio prior. other year. to the quarter events million pertain was broadly excess were that driven fourth of the It the Our and ago, we one added per three total. This to adjust to non-core net XXXX $X.X auto the CGL exited primarily

we on With the refocus our market, strategy in exposure. the change are catastrophe reducing drastically to Florida

last our in-force shared despite contributed almost beginning non-Florida net As representing quarter's XX% business just our of of has on since call, our of the catastrophe XXXX, losses XX% premium.

pending and our book Florida with expect are rate earned are to expected continue approved this into XXXX, a year-end the month XXXX. Florida reductions of our 'XX. that to premium are calendar additional improvement we management. earnings to assumes offset of an ex-cat to in book, gross in With much book either Florida or $XX of taking that increases will flat rate this later If compared XXXX, already our in implemented one result as achieve to XXXX In are increases rolling benefit a gross million effect exposure premium generate

However, expected the to a form fall in of the line is attritional to lower ratios. loss bottom portion

ROEs when compared models work low-double-digit will achieve models. we approximate ROEs losses the the cat to losses in continue where to higher favorably Going in attainable forward, come to catastrophe years with as

Florida make our to management exposure strategy. disciplined have continued We progress on

XX our policy December count over book is insured from down XX December almost over from and December value XX XX% at sequentially a down at year is XX, Florida Florida XXXX. of Our X% ago. XX% down total from September The

add so now have written will meaningfully premium. latter the of By the higher largely that doing Florida recent Importantly, quarters, count in to up years. cost with to begin we our business policy to increases in believe begin following gross in earning we expect caught the rates our out to our that of level rate more our XXXX, part

books. sequentially and increased XXXX. execute is Non-Florida XX% And XQ over a quarter accelerate total continue book, X.X% some to of policy to Florida, quarter the gross our these year's of of down the XXXX. As Mike X% further fourth compared to already. last value steady for premiums written second run-off Outside expect Fourth this of we seeing risk reductions versus down non-Florida the year-end run-off to point, last we're in appetite has as FNIC insured pace we compared several almost Florida proof count year-end XXXX years. from respect almost with XX% the particularly of the XX% from in quarter already 'XX and to as Non-Florida described. is XXXX,

December December XX, FNIC that note the to of now capital position. Maison Insurance investment FNIC sheet We capital with via surplus of FNIC Turning XXX% Monarch infusion made in our maintained approximately held or for holdco above. to $XX million, in We balance Company XXXX. consistent the effective a and assignment National as to of had a the since RBC and of holdco's ratios surplus

liquidity year-end the held holding of appropriate year holding remains total ended approval. company We be million investments will quarter, end having the million. At is $XXX approximately consolidated XXXX. Capital also group $XX the commitment infusions, approximately heading Maison part we to the to fourth surplus. with into the liquidity of within of at subject at of appropriate our redeployed statutory $XX After maintained company. regulatory Maison's approximately our time, FedNat the and structure million

In quarter ended and total we million. of equivalents with approximately addition, cash $XX.X the

a now to to notch stock A, Overall, maintain and securities portfolio a our invest portfolio. rating the was in than discipline higher to exposure the X.XX composite of of one call with bonds it a no over continue And I quality quarter. liquid where last credit the Mike. handful higher We preferred of in and common will turn duration has back

Michael Braun

up and if questions And there's Thanks, questions, Ron. ahead queue go some operator, then with that, we'll some available.

Operator

first Financial. Instructions] with Ruth [Operator Our comes question from Lenox Douglas

Douglas Ruth

and news. report, on morning, welcome the a very Hi. Mike improved and Eric. Good Ron Congratulations it's

Michael Braun

Doug. thank you. Yes, to you Good morning

Douglas Ruth

some and about pricing you're in the you Could seeing? Florida talk what

Michael Braun

Yes.

say In up that And market. is substantially. are terms very would I of market our rates hard pricing within a Florida, the

to that think peers. I on some of So the our have perhaps compared side up moved rates our aggressive

So we're should underwriting. finding just that increases maybe restricting they're in that lieu of taken those rate others have

So that to then, is and reduced frequently. have much much last appetite had have Florida are grow really we're appear used a competition And for a that than to years in we're significantly. gone prices to to finding Citizens Citizens. less of The appetite Citizens I the up they change the less growing very there's XX domestics course, be. they the finding is and carriers competitive continues have our and state appear see it don't but prices and that. And insurer out there national have

the -- I as five end So six, they're them. back around first seven then approach we believe Citizens at I quarter ago. are believe, everyone's the years XXX,XXX, X.XX XXX,XXX maybe for during into as peaked were going ago. at, of back they And policies benefit, And low running four, three, to And million about XXX,XXX years here.

harder, multiple is the primarily we're I from should appetite. carriers up substantially much is market say, before seeing less the and competition less So domestic, pricing

Douglas Ruth

people there Is customers to deal So -- some might that be now? FedNat that that with like versus is are a getting some would the there of company Citizens? possibly prefer you

Michael Braun

to There's say, but really to don't talk in E&S even increase of reinsurance cheaper to coverages. purchase market rates. they're policyholder what their they're caps people the the you provide policyholder reinsurance. pricing strip gets less on Absolutely. advantages pricing. also with they caps so price seeing -- then is that private people and them some benefit or that to of they right be frequently on the now the would Citizens, in. ignore have. reasons. coverages their E&S not going to would less Citizens They writers can coverages their be cheapest of some There's though which and on carriers it's to that definitely I be carrier buying for know not advantages purchase. going they're actually what out don't not And or purchase. clearly with hard can much competitive that for when And the come being have to We a a can in we're variety there's the -- the There's There's for Citizens prefer to how should And private prefer limits

Douglas Ruth

understand do? give can I Maybe And what there. little Florida you're color in are saying. general, with to book a or us then at more work you of the business happy there time is you this

Michael Braun

That's a And the answer with years. good have we been in question. to than is, book three yeah, the about four pleased more

me back go appetite doing business probably restricting our our reflect time, accurately in and heard you of until repeatedly Florida rates our we're you've more say in business. If that cost

expense further for on movement that our but pressure doing no think probably rates needed. accurately the rate share to going there's the I that business. four rate there's our pricing. years that, last saying we're reflect monitor than has additional need the three, increased in I'm less cost And more think of our but it in be now pressure continuous lion's seeing to I needed occurred not action already we of

That place weather inflation plus. includes has higher that the roughly pricing we've is includes based already up reinsurance incurred. costs. already includes our already in attritional So taken higher And some Florida. social XX% active losses on That that that

well. weather reinsurance have costs gone because inflation social because So as of up of increased

multiple accurate years. So, I in they rates more are today than believe our have been

Douglas Ruth

very could pending my meaningful there legislation company? last help encouraging. any reform Then Is that That's question. the

Michael Braun

the what's called in say. little perhaps I at. looking ACV. week, multiple should There's They're to looking continue they're balloon. end of day, the That's that Citizens and more interest to on. depreciation But don't than in have in ends over the value. session a so ideas actual legislative And litigation about think things there's The I it's at state's at or cash controls a some

it's insurance healthy think state's million I another believe years. the in I for the So coming in million market XX the people that to is a that by to support here grow X which projected interest home live

competitive sure stay of think two that's be You believe with billion that $XX which get is And Citizens rates about afford to via to our answer growth to a or need happen, total very the things billion Citizens had $XX Fund. size that their find and billion. going say, people able I the has that Florida mostly I exposure their for about an which Citizens. Cat And being the fund, would state to easiest house has can they They person house help in their it buying Citizens that as happens. less just they with more see new in could unless And this have massive more entity I one should quicker us than so funded. many reinsurance that that going keeping that the It's capital. insurance. can who's from house. so big is Conversely, of up called you're purchase It's on take rates capital. we if not $XX can Hurricane things the I'm that sell

to And business right think helping costs Florida contain our in reinsurance do with or either best conversely pricing. everyone's I help way or helping the our to us it's carriers is competitive, prices at more keep less domestic keep that favorable to So, best legislative reform strong. Citizens the interest

the again, more the surplus occur. the there's less that policyholders. things for can those in it's is at lot you policies can in other is less But So terms continued excess restrictive has option E&S a terms. in rate protection two offer E&S. once -- which growth because And of are

to premiums up happening. make the don't we're trying sure would like to as down, continue what and there's rates there, do go are with But there going best be lot to So we're book today. to that. is be our regardless things that Doug, that to but information we're And appropriate if price we can monitor has it to reason all of possible able hope doing a but adjustments. to take I I a

Douglas Ruth

my shareholders, I'm answered the going Okay. Well, you and it for and questions. I like for appreciate the that. very on improved what's can the seems and grateful you results, understand you're doing best Congratulations on you that

Michael Braun

Thank you.

Operator

questions like I'm Instructions] in to this at call queue Braun I'd to remarks. no [Operator turn showing back time. for further Michael the closing

Michael Braun

on for all you Thank call. today's participating

need. the FedNat service of years. our to continue for team The high close, who of forward exceptional to highest in as the of has partner work historical to our particularly continuing policyholders refocus we we to customer recognize on dedication XX to agents, to service our meet team want their in Before I and of We enabled maintain FedNat's standards our quality hard provide home market Florida. look times

a follow-up So feel Thank And questions, you. with to reach have that, free there's everyone, out. great day. if

Operator

This concludes conference. today's

FedNat Holding (FNHCQ) 4 Mar 222021 Q4 Earnings call transcript