HCI - Earnings call transcript Q1 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, and welcome to HCI Group’s First Quarter 2018 Earnings Conference Call. My name is Latonia, and I will be your conference operator this afternoon. At this time, all participants will be in a listen-only mode.

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 01, 2018, starting later this evening. The call is also being broadcast live via webcast and available via webcast replay until June 01, 2018, on the Investor Information section of the HCI Group website at www.hcigroup.com. to call like to now would turn over the Mr. I Relations Vice Group. President Mitchell, for of Kevin Investor HCI Sir, please proceed.

Kevin Mitchell

today our Thank you, and XXXX me quarter HCI Mark Group’s Paresh and good Financial afternoon. earnings Welcome Harmsworth, our call. Officer. Executive and Chief Chairman to Chief first are Officer; Patel, With

update review Following the Paresh to call will performance and outlook. the our operational business Paresh’s opening remarks, quarter for back for financial Mark and turn an then

visit please Investor questions. hcigroup.com. To access of we corporate Information Finally, take our webcast, section will your today’s the website at

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

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

all Some Securities and uncertainties of effects company’s the financial would and With uncertainties CEO. Should operations. Group, conditions Paresh material risks the Chairman our turn any to these forward-looking Patel, like HCI could filings Commission. develop have and business, are the or the any company’s the developments these adverse identified actual Paresh? Exchange with obligations to events, that in Inc. results update now on risks disclaims into to I of statements. said, call and over

Paresh Patel

everyone. Kevin, and welcome, Thank you,

$XX.X continued and dividends, path a adjusted shares The paying increasing earned greater Mark us. discuss $XX.X on We first repurchasing book million non-GAAP one detail as was we will of our value. for Also quarter and in basis. normal positive another million

as public losses. predicted technology. positive the from later. Irma events contracted that think We'll positive quarter. weather. We focusing claims of more noteworthy this last fewer unfolded and non-GAAP our claims on underwriting claims implementation some Hurricane about Also and October. experienced because the is also trends adjusted good hurricane we Irma with fewer of are We have talk Here the

loss comfortable We are estimate. with our current

repositioned ended, We tax in dividend. will our increased things quarter flattening code finally the the portfolio these to discuss changes also all due quarterly yield Board detail. much curve and after Mark in the of the of and the investment

So turn over walk at our will financial Mark who us performance time, the for through I'd the like quarter, first it to to the Harmsworth Mark? CFO,

Mark Harmsworth

Thanks Paresh.

in quarter $X.XX Adjusted share the So GAAP share last $X.XX same basis. per quarter on fully in earnings the year. diluted from up $X.XX earnings a per were were

on when of accounting equity gains As values adjusted call, per last periods, new we volatility mentioned our the treatment equity and in new impact out takes unrealized which share, on introduces the and compared better in earnings gains to earnings prior To unrealized and have losses disclosed change. for explained investments, losses equities.

year, As of the this the the you the year. first explain expense of booked development and the of things adverse quarter there first you'll is quarter income XX% first couple last one A the $X.X loss no statement, in things In of we material last that is from decrease. down adverse year. look of our development quarter of at was notice million

volumes of number XX% were lawsuits of less Second, and was of across are number the the non-cat but year non-cash claimed significantly. the less. spectrum. year than XX% very was weather It in this down down last the first claims and down The the was quarter claims lawsuits quarter quarter, and non-cat little in first

tax changes XXXX. effective we a before the our As income as X, rate tax result of has discussed declined significantly January federal

going rate, the forward. a the first tax reasonable estimate in should be quarter number things XX% rate of rate of effective impact a normal While the the

our highlights in an gross the that combined Before XX.XX% ratio the on to our basis. GAAP were operations. adjusted leaving XX.XX% quarter on involves the income pretax of a and This statement, efficiency margins continued add wanted basis our I of

Now a investment our we strategically a of so corporate average proceeds we investment in and in was to turning portfolio. and cut We dynamic balance treasuries as have net impact and bonds term been sheet, and live environment of you our half. The to changes shorter-term know these sold into municipal deposit. invested number to the longer-term repositioning the certificates maturity of

increasing should this by on While our balanced be average cash. yields yield declined somewhat, out

More will take advantage us allow rising of created it reduce to importantly, rates. volatility opportunities and by

$XX.XX and $XX market, million. end in point, reduced gains also the payments the our reserves of exposure XX, process At the continue notice as we this sheet, Also year. our that we in maintaining our we hurricane from ultimate during the Irma. original $XX comment some on balance for million $XXX you'll up Irma. $XX.XX from value exposure quarter to Last balance slightly in of was the Given are equity equity estimate at to the per share locked March decline for XXXX last volatility on to million sheet book

few management. a comments on Now capital

Our capital position and liquidity remained strong.

holding $XXX We million surplus under level. in of choice, homeowners surplus just in of $XXX and TypTap investments at about $XX liquid million have cash company million the and over

shares in April an share. has outstanding increase dividend in XX, shareholders an it our us the allowed the payments approved annual to shares of existing to just quarter total The diluted to reduction but and the company. per by at $XX.XX shares paid dividends number fully was of This data $X.X of average an for without also the share, $X.XX of for over the purchase of in us dividends from During calculating XX,XXX,XXX back per to our X,XXX,XXX. weighted On through increase helped earnings increase shares of site was million. increase has the at Directors in of dividend out book outstanding average programs our Board number buyback end share quarter per purpose number and investment a the bought outstanding total we price XXX,XXX $X.XX quarter the

the in of was However, the same will second about quarter year. our quarter payment dividend be year in amount as of second dollar it of the the this last

in another was us. quarter good per strong. So for were it Earnings share summary,

efficiency good. Our ratios look

repositioning the to liquidity We portfolio strong level company less of level. With to increase holding at a and the I'll with it maintaining returns investment Paresh. risk we're are back that, turn

Paresh Patel

Mark. you, Thank

First, a quick reinsurance. note on

developed, ratios. any would benefit data are infusions company. of survived talking year-over-year, and force with operations Our it renewals note internally results powered season Using our show possibilities started grown we this have two the time to premium quarter flat or not the this have that hurricane our hurricane it That's company little speculation, in-house our of for networks excessive technology. the and results power capital the positive about want first and of the million has large will insurance and technology outcome. some It insurance with the and is talk about XXXX remain industry-leading a and without impact now, parent expect our performance in during ceded commissions marketing, in in three and $XX today we our and We've years, completion premiums analytics due for investments near to been but we I great additional technology, of technologies. developed to TypTap from has to hurricanes TypTap in that we underwriting but Irma grow and without is technology the actually entirely TypTap enabled our

experience. business speak we with this from believe results. technology nine we'll operating that? married technology a plans because into to material of selling months. additional know we do this expansion business put states that do Finally, be we and book our be We flood How three platform. of the of can insurance are plan increase future on Therefore, volume One, We combination existing any the we things. through like to the improvement geographic doing in that our coming will through

new TypTap And will products and ago, which binding business. through home, for was coating like launched little which adding more and make industry-leading only we hub efficient. while because volume finally more just the platform through acquisitions, this a have it platform expands mergers Secondly

Finally with the questions. to the appropriate call please instructions. open that, for provide we're ready Operator,

Operator

Instructions] time, question. comes Sidoti. session. question Sir. At a first you, Thank conducting [Operator Brian proceed Please your with this with we'll Hollenden question-and-answer from be Our

Brian Hollenden

for call. thanks my taking Hi

Paresh Patel

Hi there.

Brian Hollenden

does the platform terms use internally able developed potential ratio? to companies capabilities your of technology acquisitions, how play to lower combined you be In acquired Would a role?

Paresh Patel

price-to-book focus multiple. acquire It's interesting financially to -- an question a Brian. our has on approach been failing companies were book-to-price fair them at Historically, that and

to look still have focused invest underwriting positive the Today the is we have failed discipline, technology evolved when evaluate companies in organizations be recent going proactive needed success based for our the we forward. we're we this because well-run on on that going thinking of technology. who to often Although

would -- and do companies engage of their the combined answer So into, this not we but would particular at with suite about that plenty That in on our the do somebody implement Board a an things kinds in is with. technology have could Fednet we gotten we do that case, dead, if decided this the there similar would least fish your deal the competitor something merger. the were where this and but to merge find of in you still and with impact to [Fednet] to And combined to approached us a ocean, earlier. we've more discussions year to material question, earlier for said example, was ratio, could are be would example together, fantastic we'll

Brian Hollenden

but would bring improvement level, of And think XXX terms I guess an it's very could -- situational overall expect high what sort you do from I you basis savings? can a of acquisition of in just to XXX points you or range mean to you dependent,

Paresh Patel

the sort range to much you basis I of think hit XXX pretty point. XXX

Brian Hollenden

Okay. renewals, correctly. just to to heard reinsurance the I turning make sure wanted you And then

So remain the you're to premiums expecting flat? ceded

Paresh Patel

ceded is in Yes quarter see first on a the we and quarter demand second third we to in basis. that basically, expect dollar the would what

Brian Hollenden

there rate just been I get expecting follow-up would can you through going the I would can think a guess year-over-year renewals? I didn't some you of I maybe renewals why if reinsurance increase a have of have just us the were And kind on maybe been walk and you maybe us into would expecting bump. rate guess

Paresh Patel

want the negotiations. in don't of specifics the speak because about we're to I middle Partly, the

been of an is not stated I has the to reinsurance that from points because general it of appear that. be we're but were materialized the various XX throughout do comment capacity to increases rate obviously some mainly industry was So would that benefiting of expected expected, that have inappropriate over-abundance huge one comment, think overarching and

Brian Hollenden

All strong quarter. you and Thank right. on congrats the

Paresh Patel

Thank you.

Mark Harmsworth

Brian. Thanks

Operator

proceed Our with next from with your question. Please Hughes Mark comes SunTrust. question

Mark Hughes

Good you. afternoon. Thank Yes.

Paresh Patel

Good Mark. afternoon,

Mark Hughes

Hello. Is program? year's be the similar to reinsurance, is to your retention going current it the or changed at last all, program

Paresh Patel

still is will it answer discussion. that consistent can of insurance under I part another of with subs it and the probably retention choice, The one remain year. part part homeowners last

a through far Group negotiation last take some to the subject we're year. as but greater we goes, HCI much don’t currently, how we think than group As is it's that as going retention

Mark Hughes

the any rate detail is Not think greater book than don��t know you could is and overall your year. homeowners last I a premium the the there bit then I rate little is And is online there, up? if down the online, choice, provide

Paresh Patel

in these of think the we're of quarter, we'll are some answer once still much that things. I these finished more the in all are the negotiations Again gladly next quickly questions but middle

want we into get moment. don't the details So at the really to

Mark Hughes

anticipate about the consumer's increased that, The that you more attention? or little platform traction, bring that you and how it that talk you to you home TypTap, how do do could market a

Paresh Patel

very we've agents the and making we're with feedback initial started we on what feedback time positive aware like accustomed it, them two will of coming flood the the occur see Actually that ago. years an become we enjoy program. started and business it. is path product increasing had same We've Mainly already from familiar and as more goes stream more we from currently and to it TypTap people flood of on, should and from TypTap

Mark Hughes

Care to of end a in about the hitting year? And nice the the day then million had projections terms might of share the make volume? at following this release be some you other You prognostications or the any you might mark. where $XX thoughts, year any about

Paresh Patel

Okay.

easy-to-use that's previous your So one maybe about can different to this It it anything get It before flood so of almost easy-to-use I gone help way only you is simple to the and the and that TypTap is questions four product key five is it. very and or about also, a simple out and price. why requires by Home question things is. as the

in I made So got should I that have sure plug there.

of $XXX,XXX TypTap is production terms north written premium, bit In little etcetera, adding currently volume something premium of of week. a

and if the take about XXX,XXX week we to growth million a accelerate from growing higher $XX into it try project that every it's you hard us future. you day number. working a So to a add week a Obviously, are out currently and at will flip, can XXX,XXX

Mark Hughes

Right.

$X.XX Okay. that includes million adjusted in earnings, The assume $X.X investment I gain.

Paresh Patel

Yes basis. The trying realizing were -- do X.X investment income. is on to realized it we that's does because apples-to-apples this

it been GAAP old there would've So under standards the the…

Mark Hughes

the underlying any that you on I system, to think improving? be about claims, to some comment in mark-to-market is there storm over then as the the still might just is might overall, gain -- And activity -- removed how do and guess the be there it's shifted think the lawsuits -- there much it's just situation unrealized reason

Paresh Patel

across what From up related. of those because but great we're the a give industry, am number but not half I multipart lawsuits only lawsuits being is observing, overall answer. filed, to Irma us, question It's and the now are it's for about of going a

So Irma volume definitely normal plus the when much you is daily lawsuits put related, in the the overall higher.

that and For year-over-year part, Irma One lawsuits our indicated a far we the down to items. again as the are lawyers as lawsuits our etcetera own think is and our of focusing on a the on more PAs that basis, at weekly illustrate Mark exceed daily this combination daily and is point, Irma. lawsuits our two earlier point decrease

because is what production which some has material a hopefully of due is see a little other the seeing, that to we across But too. companies number the technology. took that and of of steps So more think positive while ago produced we underwriting some we secondly, we're

increased explained of an that us. seeing kind are would just than things, that's specific We drop more those off be to Irma by but and

Mark Hughes

Thank you very much.

Paresh Patel

you. Thank

Operator

Our proceed comes Securities. JMP Matt next with question your from Carletti question. Please with

Matt Carletti

thanks. Good Hey afternoon.

or claims Mark and would much April? seen ratio of normal that on non-cash a would was expected Just lot estimate and trends you discussion you Brian on of in how the dollars the into loss couple left, a following those points, the there how ground, kind have covered low continue last you in what versus quarter below have have

Mark Harmsworth

mark the ratio that XX% is was historic the The you XX%, around know and loss -- in loss quarter ratio our about as first the loss XX%. ratio

say terms and see the of in the been going continued time, So of claims, helpful. sort normally million incurred, between that's reduction a that's but reduction it lawsuits has know in it's definitely the goes. trend of trend dollars between trend, and reduction just quarter, that's it difference would difficult you the couple the sort of a some expect in will the happen quarter difference what number to that's where second and It's in what you the it's we'll for

Matt Carletti

Okay. numbers just Great. And other question. one

$XXX tight, million on estimate held I think you that you ultimate mentioned pay where a basis? Irma are

Mark Harmsworth

Sorry.

run important but that in think Paresh there the the thing about at to terms were some and I the little paid we've lawsuits, starting that higher, there's run in are still they significant a of come to the and So reserves mentioned set room lawsuits come there. expected $XXX amount the and million incurred so we the allowed is in, But turn and to we've start for fair it's the early of to that a got come to starting to tell many little room but from to. far, are a so how lawsuits we that will out far ultimately and in

Matt Carletti

and Great. congrats for a Thanks on to the answers start Okay. the year. nice

Mark Harmsworth

Matt. Thanks

Operator

question question. from Please with Sean next Reitenbach KBW. Our comes proceed with your

Sean Reitenbach

has it it Thank think from the get was going you you still stabilized I here? AOB you. think is worse could do or wondering environment Hi. forward guys

Paresh Patel

to on which the basis, in are a we of of the but at daily a number some clearly filed record industry-wide said also was as at quarter we you like on lawsuits What this. depends due the look and It is that number, some first seeing context it's stuff. of Irma was

see the statewide problem by firms can because law basis do of are up Irma the because getting of AOB we it on the tell in mixture be AOB the new worse etcetera we we all popping itself both a might if you disease So have shall spread this and items. has business. think AOB I don’t accelerated say anything that goes away a

that occurring. see and we clearly So that's

As to just to try this obviously, we our things far participants goes for happen. not and be as in book own these passive wait

So bit will quarters we is we as some ahead using of the quarters be we good a technologies at lawsuit items forward. we've the that the little are to and sometimes little seem and combat out a developed trying bad years, overall bit. to over come I'm claim and count sure going have moment decreasing we and the and it

Sean Reitenbach

Do rate at you following And kind to to receive expect expect increases Thanks. any, tax expect drive the all? competition do on of in up rate that, additional guys you you for any Okay. reform approval if do XXXX?

Paresh Patel

Okay.

about So is one the going is about down. going question rates one part up of the and rates other

So the extrapolating. always our not we we've the and approached stable that we rates. decreased again with a to industry don't business. no, rates was setting We've do always dramatically. company, to or how I dramatically not as increase for like rate speaking We that's fine. just whole, It's intend idea like a

So thing that should and to what honestly the annual sense, but we rate and material not new a increase a would we the other that performance, this anything sense decrease. or feel be, material than a don't is assemble my submission. have for our I we to know tax law they is am review etcetera rate I just our sure to to will do given data we the a the are it OIR have rate to discussion submit beginning appropriate will as

that few a points or way way. this So

Sean Reitenbach

are parties? third in you set type of to thinking about what outsourcing do up new states infrastructure plan to your Also or Great. you Okay. claims

Paresh Patel

systems else tools have check field all we that think parties and issuance could that anyway, third all -- claims but the we because done do can that is the and operations. our by deserving I existing capable from we work everything already stuff,

we would operations set up other that there honestly until to in I states, get that know So we need large degree. to

Sean Reitenbach

Okay. to you. we wondering this wondering Thank back was Fednet And was were disclosed to I before? the approach going finally

Paresh Patel

looking who shaking Counsel General is am I at head. his my

disclosed this the by get think I at sorry. working it's guess we morning, I correspondence all might be through going make tomorrow to the I night to point sure

Sean Reitenbach

the was when What any a HCI they nature? Okay. idea why or did give engaged, reason? proposed the Board it by back-and-forth Was

Paresh Patel

you item did the approach. only The I can tell we yes, is initiate

as As everything far we everybody should, overnight, can themselves. I disclosed once all the back-and-forth think read it for

Sean Reitenbach

Great. Yes.

Okay. Thank you very much.

Operator

this closing Thank At like our time, remarks. few this now would back Kevin to I concludes has who call to turn a the over question-and-answer session. Mitchell you.

Kevin Mitchell

We On behalf I management and you the importantly, our continued team express look we policyholders. would appreciation shareholders, entire our our in near the of employees, forward like progress to the to receive agents support future. for from on our updating most

Operator

our Thank today's joining This you presentation. for us call. today for concludes

time. You may this disconnect lines your at

HCI (HCI) 1 May 182018 Q1 Earnings call transcript