HCI - Earnings call transcript Q3 2018

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

Operator

Good afternoon, and welcome to the HCI Group Inc.

Third Quarter 2018 Earnings Conference Call. My name is Matt, and I'll be your operator on this conference call. [Operator Instructions].

Before we begin today's call, I would like to remind, oi everyone, that this conference call is being recorded and will be available for replay through December 6, 2018, starting later this evening. website being until via the December Section HCI also via and investor is of replay webcast X, Group's call broadcast webcast live available Information This www.hcigroup.com. at XXXX, on HCI's like now Relations. conference Kevin of turn I Senior would President to Vice over the to Mitchell, Investor Thank you.

You may begin.

Kevin Mitchell

to Chief good Officer; our Quarter Chairman Chief Group's Executive XXXX Financial are Earnings you, and HCI today Patel, Thank Call. Mark Paresh our Harmsworth, and Officer. afternoon. Welcome Third With me and

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

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

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

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

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

Paresh Patel

a everyone. about I Thank Michael. comment you, quick Hurricane Kevin. want to welcome, make And

million initial and their before wind care pretax quickly is $XX remain estimated of $XX the are Our our gross having But our with taking Michael million handled in. and primary level our retention for $X that are said from losses kicks ensuring a claims note, that, comfortable on Hurricane range We between that policyholders and million. is efficiently. and claims as focus reinsurance

some earned of diluted turning of past an for $X.XX highlights to This our XX record our the XX for share or the per on out quarter. quarter We Now the extends earnings profitability to adjusted quarters. of third basis. $X

We dividend, of also consecutive paid returning XXnd shareholders, eight $X.XX quarterly years cumulatively. our to dividends that's about

the not In forward We we've our to the quarter, an well. average also progress. South At common another into progressing State share. Harmsworth, our financial first during of walk Mark sold new and we, and in but to it's business our repurchased price solid policies this writing was $XX.XX performances turn look states. XXX,XXX quarter we of shares it outside third Florida, flood expanded quarter. again, once Florida, four building shares least, Mark? on our for Also, started company, will CFO, for us the per homeowners QX I'll lastly, And at who additional through over this summary, time, we the of

James Harmsworth

Thanks, Paresh.

gross positive were than obviously, were which premiums TypTap, previous from quarter second gross from higher consecutive in second last increase year, they trend I the statement: and basis of diluted to is This slightly first, on GAAP adjusted quarter share Year-to-date, $X an basis. per are diluted income on adjusted fully things earned share is quarter on the $X.XX earned us. X% up earnings down were quarter premiums attributable, the this a mentioned, third $X.XX as the There GAAP on per the out earnings is year. few This the in were third So $X.XX the and premiums quarter. to a an where while in earned a basis of a basis. point for from that part, are wanted gross in

and Second, We of interest by and to higher million rates fixed year, last partnership million our investment pay in third this income of higher proactively and than interest repositioned higher advantage investment-related portfolio beginning limited take investments was securities, of rates, this quarter driven cash. off. short-term was income is higher $X.X $X the on term to

to Third, the development I higher little development a from for quarters. bit some the quarter, periods, first prior Irma. wanted and which includes than give Matthew, expenses of of nothing to but, the some second course, for on color loss are related This

going quarter be reflects rate, Lastly, return normal is our than XX%. normal XX.X%. at should effective and this to our a slightly lower to adjustment still XX% about $XXX,XXX, effective tax This forward, provision tax rate of

investments. As things $XX the matured year. of you of and securities of from rather quick total A look somewhat start on first, notice: assets than are on at the the about million few of day to September last day the the there's October, other balance investments number in are settled sheet, first showing so down a that

but have and yield cash is of this invested equivalents, around and higher to increasing and we markets The helping million the most drive income. money paper. investment in cash cash short-term $XXX cash Second, in equivalents on is

For the our some back strategy plan. shares, total the we through time to buyback quarter, now, bringing the In we've share year XXX,XXX count our bought for of been reducing third talking about XXX,XXX.

paid out was cash for in paid this per dividend This flows. it dividends without represent increase last and means we we less ownership, continues higher example, lower count in is paid a same increase than increase each quarter a year to year cash much now share. that in despite of a X% quarter, percentage the total individual in share share basic The ago. what the can than actual Our was X.X% dividends

a to about wanted Now capital talk structure. to take minute our I

we is $XX.X million maturing convertible issue in of know, that an March XXXX. have you debt As

it set have pay due. prepared aside cash when We fully comes the and to this obligation are

settled and in converted, cash. any, electing be the today method are notes not Conversions, are by be after fully settlement any of XXXX. the of settled for will those shares or We occurring announcing X, will physical conversion that we delivery on January if notes

As price conversion conversion the sorry, am - is price, $XX. I approximately you know,

positive how all were in That's will is $X.XX were per value So million should notes losses year earnings Hurricane ratios liquidity insurance retention a very about it assume be us. even impact have is fully this book what per from share of settled $X in per we a in per comfortable between and have beyond for the were will left for cash, change stock, all that well-capitalized, loss Let's per by not in of for One to up notes Both $X.XX company diluted company increase Either recently after we range will share impact but per our are - picture. settled company. paid and would for with $X.XX very otherwise If been. earnings or the cash share, and to per holding would holding happen, of no minute liquidity? have our need RBC very about what still out paid. company? to per have on be from but full $X.XX should what cash. otherwise thing. We been. capital the If the investments the If Michael, the announced should notes this companies quarter $XX book notes are this share $X are value the and last holding outcome to it go a share share to

significant of had or powder level dry For able company advantage may to so, the the we've to past of strategic opportunities holding year a that amount be at take any arise.

pay from either settled holding significant we after facility revolving little under X.XX% will option, on to Third are rate, would Fifth that a the notes credit advantage liquidity if still a we don't be for rate use it. While that of borrowing our of it commitment strategic for we $XX facility if The at of capacity, a is plus received a this At Bank facility. over have company draw were LIBOR our two. further we today's that increase type the million great rate have means to don't

is a should efficient arise. And very have capital opportunity additional to way so to any source this of access

company up. XXXX the per have cash, settled million are will revolving And with and share. million still notes notes we we earnings significantly $XX converted, credit holding are still will in $XX have have the share and access a value will I book in on So summarize. If, will the - it we the per go higher that, other plus back hand, more facility will to cash investments diluted Paresh. in If about turn cash and to to

Paresh Patel

insurance XXXX Hurricane subsidiary. the continue We in in challenging. with of and growth its be ahead quarter believe, to Insurance Michael, fourth will perform offers Mark. product Choice you, TypTap to our expect we cash. will flood driver insurance Company, technology-based profits in generate Homeowners well Florida. Obviously, XXXX, be But TypTap primary to primarily our Thank looking

states TypTap the follow. There Jersey, brand expanded Pennsylvania Maryland, with and recently noting. a in South more New to we worth few metrics However, TypTap are Carolina,

TypTap about profitable at week, TypTap's Through five on quarter is XXXX, despite the combined around stat to of far, million $XXX,XXX over TypTap surplus XX,XXX ratio per XXXX September. are force hurricanes, basis, third on is a growing end policies year sold quarter of inception So that as premium annualized for the $XX.X XX% in the earned with Gross has third premiums was and an growth. is stunning. growing of date, per X%

leverage however, we to of South process Florida, the expand have our market. plan At comments and some are like know-how products We and entered, limit believe, analytics navigate has nuance wind-related to point, our we the the case as TypTap Florida flood, to the technology of the market. to believe, where, have Finally, In we future. this expertise. South of Mark's believe, can about earlier, we profitably so. doing homeowners we Strategically, we I'd Florida stated in nationwide reiterate the the to

have by $X.XX this the hurricanes share. we Despite three get of the in million last XXXX. boost about per a years, have being in of we notes should set cash, earnings $X.XX due aside share debt. impacted pay the stated, If to per he debt between of next in March cash As coming convertible settle $XX our we year five and

between as On share would we share, of to Even $XX, Hurricane exceed the of our over owners of entered convert will strong none what capital will per Also, our ratios not other four them XXXX. if said, $X need before stock, as operations. it that. increase after and of book should additional the choose and $X risk-based for the price that Michael, be. notes went to other impact per the to Mark otherwise our storms capital value the companies remain share our mention, - additional our None hand,

advantage investment real Greenleaf company, Finally, the portfolio have of aspect another interest of repositioned Capital, to to take division. Switching higher we our rates. estate

income-producing near marina properties, a about on not acres sheet. develop estate not it years of at technology acquiring asking appear out values St. I'd well-represented restaurant, often discussed and price this like real on our land. located these list do property, example, basis. It in the are The of on portfolio, purchased on parcel we was also about includes $X.X books balance our strategy million other opportunistic that our long-term have to properties decided developable is to property The sheet. million. listed point X.X-acre is for a while from properties intangible balance and our our when several We you It is an investments properties for ago. eight highlighting one acquire Florida, have waterfront The Petersburg. To of our Treasure sale. Island, in to recently give an $XX

this Our the with that, the growth us Operator, key drivers I in these ratios future appropriate stunning for like industry-leading to believe, and open achieve technology for prospects. would the to will experiencing margins like questions. ratio our the We instructions. we're And analytics be please combined provide permit TypTap. call business

Operator

Instructions]. [Operator

Securities. Our Carletti question is from first JMP from Matt

Matthew Carletti

and of couple one, bigger related A picture. numbers the questions. One,

referenced the caught a Mark, not the period loss opening about your the and comments pieces I numbers, little Irma. On Matthew, some ratio, you in bit moving in prior of

were what the it, through, a can more but and detail, of, kind takes kind I if there? puts missed of, little us take you, Sorry, in

James Harmsworth

Yes.

then in income million $XX.X daily is of there's the years on total million So regular some rest - for adverse And development that is about - and claims. prior included that adverse $X.XX of about the Matthew, just million $X.X of statement. is

Matthew Carletti

driving - would know I but which larger it's kind of credit, hard that the decipher, other issues going a is which, are there sense. Would AOB you you things of, is would that lot to sometimes on? Makes - or

James Harmsworth

of a the Yes, small advancement in years, really it's this I - 'XX, mean, first year. of 'XX and just just nothing unusual, made largely litigation. sort development tweak those it's on through - the related there's And to it's quarter the year in some last we for policy tweaks yes,

Matthew Carletti

Okay, seeing - shifting high, market of, were that's you're picture. of - Paresh, kind And where, down on then all and at kind right. you us of, those or bigger you at come update interest, have Florida to on, kind kind the That's maybe, a broadly what all? helpful. seen And little then views if could I M&A, elsewhere, if asking of, multiples there's, HCI's know, then all? changed your

Paresh Patel

- to Matt, on they of table, Cabinet the whether Chinese tonight, interesting will the or mainly they're this the next times. on where curse, - most a over were election will because general the hands, morning. change different The live people of Republican Democrat, basis, Florida Yes. who be change think, will the we things we in I XX live the what's days,

given the plus they're selling line million anybody maybe clear we the the situation. stand shift credit million very in in cash, coming QX, And some $XX And $XX it, in beyond out. be I with the see feel very we coming about go and Florence going other to people's QX might in to that of of So to merge looking expectations terms year-end, the that, might that going cause we're to are Mark ritual what for given that and/or and of through I up Michael think, have, change said and RBC well-poised we up who challenges our need. about for what then annual think, in some

Operator

from is Hughes Our question from next Mark SunTrust.

Mark Hughes

the for you update minutes, did of written missed TypTap? I on couple first provide an premium

Paresh Patel

million the week. premium end I about premium written it's think, we just, force quarter, sort in of, the at and growing a $XX.X of said was $XXX,XXX there by

Mark Hughes

targeting at I going there your in And Florida. been And do be look - should growth, pace you so far? quarters? to the that you suggested driven of but also growth forward, South market? think then probably by coming How the TypTap, has more Florida - South the how up you're expect we there reception pick the

Paresh Patel

received. very growth accelerate you expect - Simple in answer should those been it's is, to areas. And we yes, well

out, gets will As agents I cetera. more word bring et online,

Mark Hughes

the some underwriting. there new - to at anything could be able about is of those with policies And I'd share performance based might which you us, - on point, the updated with at get be it this on would be curious, updates to I the future, initiative? be know interesting in point, early it's doing very how but too you're that might helpful.

Paresh Patel

future think, defy numbers eventually, our to - could will, Yes. very the they're And that we seeing I lead fact, it the seems and, expectation. amazing in are so is what very, almost to encouraging we be, comment are

little So a on we're, kind of, we letting bit more out publicly. them them before comment season

Mark Hughes

along rates might that? equity with could LP the much then in better you go the And income? the good. from how size performance? that quarter, typically interest the Very of upside income that, drives what Does versus been have And LP market

James Harmsworth

Yes.

year million and you the this the that of $XXX,XXX the the from year, increase is of interest higher about quarter if was. is at than last third Mark, third quarter it limited from $X.X $XXX,XXX to income other partnerships look that So being -

Mark Hughes

that is or usually equity market And drives that performance something that else?

James Harmsworth

LP's? the Which,

Mark Hughes

That's right.

James Harmsworth

increase. I the being more really yes, - has just I driven by I - - interest no, No. this mean been it's mean mean, -

one that was it the about isn't higher income. partnership. all. up QX, on think. most is talked Life piece I I that I was the the There $XXX,XXX partnership that any at limited the The So purely equity income, depends to interest ARK limited And in mean,

Mark Hughes

in were that Or operating unusual? kind level that, moving any a $XX And sense forward? parts at $XX.X of, about that million, final The going is there million, came makes expenses question.

James Harmsworth

unusual. Nothing know, mean, Yes. bit quarter-to-quarter. move you really I as from can a little that around

quarter $XX the for at you million If combined last about down for from first still months, run two a look I the a for labor expect. that's it's first together to good think months the and what slightly year. typically very, X very We and X target OpEx of

Operator

next Campbell Our KBW. Christopher from question from is

Christopher Campbell

non-cat does elevated did include ratio impact that if the much ratio, I is we've loss insurers? guess And so, any that that loss first from in seen how other quarter? the question just the weather the

James Harmsworth

quarter, Well, little at the ratio quiet, natural you than out just pretty the this the is pattern mean, look of, pattern in if And last years. the losses I more second weather typically and was is were then bit this year the sort loss the down three and quarter. quarter. slow mean, at, year as different year adverse you a quarter factor well. the to third quarter consistent that then and that was look fourth development most other second little quarters, And first not from weather-related things I similar with a

anything think really unusual So going year. there's I on don't this

I quarter to third similar third second weather-related, said, As quarter, was pretty quarter.

Christopher Campbell

Okay, helpful. great. very Well, that's

been to there have the fourth - Just date? buybacks any quarter in

James Harmsworth

So you I number. the can give exact

the program I and all, used it, then $XX the the was first but and $XXX,XXX think trading used of million, QX, we at up QX. had for about is in of the few So total buyback of that days end

Christopher Campbell

Okay. board one? haven't hasn't - reauthorized And reauthorized you another your

James Harmsworth

No.

Paresh Patel

Not yet.

Christopher Campbell

you're, Is doing that that of, on something planning or? kind

Paresh Patel

about it I year of board year. time think the this reviews every the

it between sometime of end now year. the be presuming reviewed will and at the I'm So that

Christopher Campbell

Irma Okay. estimates? And the And your can in we get move did any gross latest they quarter?

James Harmsworth

million, and - of we latest as which is the mean, is end was the it I QX. $XXX same the Yes. at

by XX% in the made quarter, probably quarter. our you the know, changes in second as third ultimate So not about any increased we we've and

Christopher Campbell

the have you frequency haven't late - claims? spike any on on those or any reported that get in cases on in just the you reserves, does the on or And in the severities kind of, that increase case of, settled seen books, claims -

Paresh Patel

expectations. seen within has we been What have

set some comes live far, we we more that the number, that, when materially and the then as were in we've something concerned in, in have rearview caveat goes - Irma at seen it more smaller. to we out on, AOB is about and we With this some don't one us that But expected the adjustments make out. be of So anything smaller change. to we there. and the out if so look world that see of we strange estimate tend and play anticipating could time But, mirror least,

James Harmsworth

Yes.

Paresh said the question, to what bit, the increase but you that's, little natural you severity to that, a paying up the on. just the Just natural deal on further to you it's you more the a later for process line, to as average Paresh's pick expect - get down of and as that's with your go as said, as some towards part complicated claims that's - of are

Christopher Campbell

just behind - it question just the you are wind - like that And writing strategy outside that? what's you part reinsurance could just Florida, a Okay. sounded synergies curious did? on I'm you the the if as can you thinking of not potential

Paresh Patel

I the multiple they It held be just the of most the that think up Florida. to I was the was results to - does rationale been actually did multistate carriers for several yielded that's Watching Great these accepted accepted the multiple think, in not states, for question hope headaches you seem folks beyond as expand hurricanes. have and written seem who on when positive out picking expansion. have to multiple benefit from

than figured watched a a better we having generalist from to to much it's to Florida, So Texas specialist Maine. in be that, of all be

Christopher Campbell

increases but one, Great. know moratorium ready that's be any helpful. now, after rate - I And there the are lessened? there's to pipeline? that's filed? just anything one very there just Well, final that's then right Or a in is

Paresh Patel

and got X, moratorium. review our state is, the rate rate moratorium I was January annual adjustment filing after when out. rate the when filed appropriate be think, with had will lifted, on One in is It prior the phase whatever it's to the presumes we have moratorium will filing Michael. set So been Hurricane the reviewed the carried scheduled the

sit we where right basically now. that's So

Christopher Campbell

million, great. correct? in Okay, property that's one, for the that final was one $XX And Greenleaf, just sale

James Harmsworth

Yes.

Christopher Campbell

used for investments harness of, you is those buybacks And get as from that? those kind to proceed plan what you, those the Could gains? be and

Paresh Patel

will answer, corporate they I corporate purposes. the give you be standard for will general used

Operator

I'd over session. Mitchell, the to This to concludes any turn back the for comments. floor question-and-answer closing like Kevin

Kevin Mitchell

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

Operator

This concludes today's teleconference.

at lines your for You Thank may your this you disconnect time. participation.

HCI (HCI) 6 Nov 182018 Q3 Earnings call transcript