HCI - Earnings call transcript Q2 2019

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

Operator

Good afternoon, and welcome the HCI Group Incorporated Second Quarter 2019 Earnings Call. My name is Tim, and I'll be your conference operator this afternoon. 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 and will be available for replay through September 6, 2019, starting later this evening. The call is also being broadcast live via webcast and available via webcast replay until September 6, 2019, on the Investor Information section of HCI Group's website at www.hcigroup.com.

to Vice call President like Mitchell, to now Senior HCI's of would turn over the Kevin I Investor Relations. proceed. please Sir,

Kevin Mitchell

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

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

questions. Finally, we your will take

visit Investor Information please our webcast, website at of today's corporate access To the section hcigroup.com.

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

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

Some of into of develop any with on business, Inc. forward-looking Should and uncertainties are or adverse the these have developments any all risks material to Group, results Exchange financial in uncertainties Securities obligations could company's and the the update effect risks events, Commission. operations. these and actual HCI the company's filings disclaims conditions identified the statements.

to With that said, our Patel, Paresh over and turn like Chairman Paresh? now call I would the CEO. to

Paresh Patel

$P.XX, give record moment diluted record first will fully the a Thank share We here of In consistent highlights - of you on per you, some quarter. our earnings our track Kevin, welcome, and performance. profitability. of are Mark details consistent financial But everyone.. continuing generated

broken Streak being the quarters. The XX by by been last hurricanes. have only profitable in of Florida We impacted XX being

year believe to dividend. maintain data the hurricane spend a reinsurers is in we finally we that levels good in last am efficient about compared June season. growth limit program is for pleased premium program, we is to catastrophic yield more a due share the $XX dividend, TypTaps while XXth roughly technology XXXX say a we year profitable. appreciating pretty in retention. is provide most absolute growth during completed quarterly our Also our the and reinsurance that QX of And which Also to management. importantly, We X% consecutive claims at quarter to the similar transparency our paid QX. I than organic we and compared doubled and and this TypTaps reduce

turn Harmsworth. through I'll that our the us With now who the quarter. second Mark over financial call the performance would walk for CFO, to Mark?

Mark Harmsworth

Thanks, Paresh. the from quarter million the for income in up $X.X same second of was $X.X year. Net last quarter million

was For last six million the months $XX.X six from net $XX.X down income year. same month the in first million of

GAAP second the compared down and an $X.XX share earnings fully in slightly on $X.XX $X.XX $X.XX diluted were adjusted per last a year the year. in from Fully diluted basis, on were per last quarter share earnings second to basis quarter

should that about an growth an quarter was call, and this to in our start stages last This one quarter On themselves different encouraging direction. numbers I us. step talked the the that reveal in for important of represented

growth subsidiary. than $XXX written insurance quarter powered growth higher year, of Consolidated technology were of our the by driven X% TypTap, same premiums last gross of the million -

new quarter million this homeowners that than flood quarter dollars to combined. $X.X and quarter in of In the million more second and doubled fourth first year products. premium XX% TypTap the homeowners the in under rose $XX growth of to driven that just in by grew million, the In by XXXX, $X about TypTaps

to one quarter we carefully of new controlled phase we a over risk growth. consolidated as for has TypTap believe that in premium from growth reduction us is fueled growth profitable this moved and quarter carefully The controlled

A the few other highlights from quarter.

know for the does period the period. cost We net up June you to reinsurance expected XXXX a to recently reinsurance our at a about TypTap to of estimated May include estimate As XXXX. QX. the benefits that million that for million net Also announced is consolidated This are for note end true program costs reinsurance be new but $XX of the subject estimated agreements. we multi-year about $XXX of under growth

reflect should in exceeded new costly of the than were going it course second they premium Reinsurance as be higher less quarter agreements. only slightly of one forward, the month

the income. and investment year, income reflecting second As trend had increase was last on investments, well unrealized limited as the quarter very equities, market for net in as a realized a while has stock some a gain quarter. the $X.X been the loss partnership the the reflecting We higher same interest sale higher million income on up small from in of

couple just note. things In a of to terms of expenses

off First, obviously debt same result the interest paying expense last March. is from down a in year, of significantly quarter convertible as the

did $X.X first million the quarter the year. We the up development some increased we are about as expenses in quarter. reserves loss Second, we in had and second in adverse last quarter

second as quarter reserving for weather XXXX. the XXXX. terms accident to we cautious better accident a same XXXX rate XXXX significantly of year be rate is the was the The for But XXXX adjusted - are than in fairly and developing average one at

continue the As a to reserves balance sheet result, up. go on our

XXth daily As claims that than open total about fact down of number the the excluding X%. for higher claims, million cats are about XXXX actually is XX of reserves XXXX, despite June December $X.XX

recent the may to claims legislation continuing the cautious are stance. help AOB a While environment, overall we take

couple here. a balance things the quick of to Now just sheet,

First, by paid debt in of from XX% to our ratio cap year XX% about from to long down last after end has and is million convert - we dropped the back term $XX debt down debt March.

XXXX on real facility new this estate drawn facility. a the called notice Third on balance for year. Fifth is Bank revolving fund certain to we with you'll Second, that amount investments new credit This sheet item the the have credit the

quick management. few Just a comments on capital

common the current a per stock second and around $-.XX paid quarter, the same the a quarter we mentioned Paresh amount As third share right of the of dividend price announced dividend X%. that's for as yield declared of the in you know, and

board to the about at the is which about a plan approved down second the of end and in at buyback about shares program should back end June on we shares, there X% $XX total bought XXXX execute to to the shares common number XXX,XXX million for XXX,XXX buyback quarter decline to of June. of XXX,XXX we is stock million as the XXXX the continue balance left of of end this $XX the The of bringing outstanding The and June.

the diluted just also buyback XX June. to under outstanding continue shares now at we as the end plan. a basis, decline million are execute continue of to fully we On This should on

XX a owned stock they end they an in it own share of stock XX% that way. as did our company the we're $X was rate back at be will less more received aside over XXXX by the someone HCA XX the XXXX. they the Just should That shares, of dividends share than December basic - XX% the XXXX means than buying months along that end on effectively before about at of count of and

value, up end at book at of our from should end to $XX.XX the XXXX also of mention $XX.XX net the the value share I per book is quarter.

the holding have as of of $XX to $XX company cash liquidity level, in million of the over investments $XXX In at as well facility terms over credit access we revolving million and remaining million. for liquidity, Holdco total just the

And with I back turn that, it will to Paresh.

Paresh Patel

paying analytics demonstrates investments technology are QX off. focus and our in Mark. you, our that Thank

better some way While say the [ph] are other technologies insure future hoping in and someday in disruptive techs profitable. to developing be insurance companies a they doing

We do now. that all of

and are profitable. already We have industry leading technologies we

things binding also intelligent coding have the Our underwriting is platform an that internally risk Other selection. developed an online we policies. technologies include tool automated helps for and automated

We claims have have and software class management software. we and world systems policy management

effective. make technologies our and fast, efficient these of processes cost All

While and helping agents the us improving both customers reduce costs. experience the and

believe superior improve and that also trends we performance. We have analytics underwriting identify

and Our exacting. are strict underwriting standards

all are selective to a software, very tools accept these We they we that improving. intelligence analytics. similar and the automated These artificial and policies constantly are underwriting our have learning in that process are very tools incorporate in of

on their to they navigate will standards and [ph] us that profitably South believe tools based data Florida these enable of we Florida enabled to Florida continue challenging and So and the us years have strict market. underwriting

And the second in all companies. of It has these the is now the up technologies, quarter from and analytics in million project $XX in we will week over are insurance million embodied in million end about force. TypTap of of XXX,XXX by TypTap, premium technology before and force XXX,XXX week $XX our the the $X.X over in have per adding year driven week, and premium per TypTap quarter that. in previous quarter per them moving

of This rapid mind progress margins with making. TypTap’s organic TypTap the not at in for bear important is time, the in margin premium X% profit dollars because more of sake one And proud of is percent $XXX as is We're the million We're XX% margins. premium profitable. a growth. $XXX and very million same sacrificing growth generate that

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

Operator

question. you. Securities. Carletti with Thank of Our proceed Matthew your Please [Operator Instructions] GMP the from first comes line question of

Matthew Carletti

TypTap how Thanks. several you kind vis choice? quarters the Paresh, developing know look some of paint be TypTap. see as are you on questions proof look to At growth sticking homeowners as - picture kind some you path transition Good they or you I past of to maybe for you ahead truly but we’re do will be a vis just say down afternoon. and of concept Can of over cut you us couple would can maybe road, start, do different? a to point going independent not of that years

Paresh Patel

is way for homeowners their people customers people to at has of the average and on term love wonderful looking look customers of customers that Matt, years. and brand have set been that long and a seven simple six choice

that see no reason we base. disrupt to installed So

Matthew Carletti

Makes sense.

Paresh Patel

on the yes, book in homeowners been and choice. several the TypTap the lies for existing The growth and we've years. future But that's of calls company

clearly said doing is at money, force, fantastic sure policy a that grow very rapidly, grow understands, that early making at of and make which thing are life was organically, terms to we yes. a impossible done that a This we number are one are is right? do, has in the in We all achieved everybody of TypTap stage that time

capabilities that for that TypTap lines synonymous area more the and that's the a more do and add to of brand going future. we to because an business, business are in is We name

Matthew Carletti

that getting lines or is say a more can of in And diversified little that or Florida and that bit business and when you business, of areas there is a lines outside above? a build Florida more that within you expand do bit, little - a even bucket you

Paresh Patel

were going start and this I'm the way in nationwide sounding going $X we to I about flood Florida. a sorry, we opportunity after is I'm - opportunity billion but winning short TypTap flood when we're saw the think and techie,

premium yes, maybe So it a a about billion, that was in Florida. $X was

So how By much that we market another we opportunity now addressing billion and homeowners, share opportunity. to combined. adding trying And see we've a $X attacking we're were billion $X a billion can get. $X we're of market add

future hundreds maybe what the do are other space know the that addressable of number. into we're lines there because in increase is market, and and to going attack. you states greater do we're from space to as eventually billions In dollars to some market increase insurance other market $X expand billion of much the to it of total And trying

to That's term. in So several you'd long ask the what the aspiring course next we years. of the are the question

Matthew Carletti

What on maybe changed Kind of the your in eyes up then what changes gears has July particularly July evolved and X? that and of how And how in the views in on given bit. kind your X did see place a Florida, ramp you the of environment are then AOB X. that took before little July Great. shifting since kind is

Paresh Patel

impact early obviously July passage but tell into now the on inflection major because had July a is it's going of law point, of industry has it going what X to X. the too effect new forward. on in right the So But

months few it's time to Now is too just what that tell them. we absolutely a in know early

to experience we see the saw, July our we number of terms what not and claims material up AOB and X. difference In a leading or in did lawsuits

what's that X post of I nature year. the next your too happen like early and It's question, X look just that tell. to to what's to to of think was July July going going as

Matthew Carletti

ones. short then Okay. of just Great. And a real couple

was You mentioned a little bit Was related or of largely that that strengthening. to related reserve something else? AOB

Paresh Patel

to about it's three million what XXXX. fairly No just is the that, to we we in quarters general first that similar did related like of added something quarter, $X.X

you increasing bit We We've of XXXX year from it way end XX.X the XX.X. lower know, it between XX.X the about that based just at we're little looked loss the a As I our ratio on that usually little booked on end about XX.X runs the up and think. a and moved of to bit. initially

for So XXXX. it the in just XXXX reflects and a ultimate bit an of adjustment little

Matthew Carletti

last one one Do a written premiums have And Okay. net number. you just handy?

Paresh Patel

$XX million well, million. do. I - $XX

Matthew Carletti

best very of luck forward. much and Great. Thanks going

Operator

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

Mark Hughes

Thank you. here Good recently? - you The million $X.X per say did TypTap run rate the week afternoon. a

Paresh Patel

Yes.

Mark Hughes

build? around Was of are little there storm in XQ that X a see bit continuing start kind of settle or season? Q down the boost in to you that Will a

Paresh Patel

prepared build in XXX,XXX way it to were remarks, and and point Mark, then million accelerating first through continued the a accelerating But it where in the doing second that. all quarter we XXXX at ended a week will at quarter I week as a we're off. my accelerated the about about doing seeing in December, still X.X we tail some said

it a keep X.X grow the to end sky the year, eventually a But very to the accelerating at Hopefully of but tail obviously will it's trees through off. good - even nothing don't it number sustaining it. keeps

Mark Hughes

an where of the terms structure in update What seeing is either the you're behavior normal Just the of the of buyer? success. TypTap typical profile on

Paresh Patel

thing looking things hood we encouraging. should this should this the look you is this and factor - that into So very makes think you two that it's under

X%. ratio is do quotes about bind taking seven it end we policies. that is differently around Putting up to XXX quote every Our really

So selective. only being of to goes point that

to willing So to I profile are book people the us TypTap this wanted think what who to more and it's accept be there because are a lot shape helping to we want we customer of TypTap customers be. the

quite we things at And policy And it that know is. don't handy, the XXXX. talked about - healthy. I and monitor have I we what think it's but for look is And I premium average

Mark Harmsworth

Yes very between XX, market a $XXXX it's - that policy. CPC, similar to per

Paresh Patel

by choice imagine sound that this can homeowners time could citizens. once how from wonderful as you we So we takeaway characteristics TypTap grew is, with eventually simple did a upon outcome. depopulating organically we are same encouraged we same if a from outcome be choice a this are And the as get growing the homeowners with we

Mark Hughes

they that a you request a for and And X% quote a policies? from quote you when say those bind bind you is so of to quote, ask

Paresh Patel

requests it The the the Actually for agent. of is policy it. they code is a a define an how whatever, Because address our triggers that for that quote we got to types what that system. in the system's they in automated and agent nobody go system fact

abound. hundred at were for opportunities a seven least there with that started So TypTap every

Mark Hughes

any The unusual Understood. income the investment quarter, items in there.

a a I say partnership said on this you think forward you up. level was income basis? Is good would go sustainable

Paresh Patel

was it normal higher Mark. Yes little than

quarter and about limited million quarter. the I a XXX,XXX for think in was averages a X partnership QX the income was it it

than about $XXX,XXX higher So average.

it I is was that think pretty normal. everything than pretty other So

it's - was partnership probably in good going is a income. we higher than expect because forward, what QX mainly you'd for quarter So little it a limited a just did

Mark Hughes

And policy factors just acquisition that quarter? growth little up to costs a bit the move in continued strong TypTap the is that

Paresh Patel

had suggested go on as talked bit about that I last and percentage start call that Yes. - up I the the We this bit little a to the talked mix will little about changes. just that's a

acquisition has cost policy. higher TypTap So per a of

is that is And to up. periods to as the is and percentage writing when balance in lot go going TypTap a shifts TypTap so towards going

QX, will little continue higher time - QX but than to. be the good write suggested pretty faster expected than QX on considerably had a I we probably I not grew a where again probably it's TypTap last to strong So of estimate in be, is it because just in higher it if what call higher

Mark Hughes

you at maybe on your assess other thing competition part or contributing reduced for growth How And the employee come finally in might business market your Paresh you I is on when the TypTap. of look appetite you the carriers competitors? do wonder to of

Paresh Patel

there's place those I of So matter. made because and of to of people been be the coming think on more talked the all rate about And quarters different which have over statements kinds going changes coming things, increases in conversations to competitors by there's book the business. lots again a tends and agitate

So you state probably the Florida. get will more churn in of

something obviously a - the fair doing amount like that think quotes business or that from a From fact is a perspective week. there week, for measure XXXX carrier every a given new I - of good fair is a our metric looking gives we're very number us a idea that

So that from of policy to want. plenty opportunity that which gives the we us select

there's saying policies quotes what to roughly citizens book and have good means us And when lets people of enhance its than that want that week a XXXX cetera, XXX,XXX other of if they select number. just marketplace a a book us that rate that assemble tells the it was we and on increases that million easier that do that in the that the going policies, churn like half lots would a et when dislocations

Mark Harmsworth

pick. growing and growth we're the sake the just very we point being well you profitable Paresh’s selective we're said for that in I not for as are that talked industry. about goes about about that - comments my what very, to And of growing And TypTap while while to excited the policies that that before in growing reason we about sustainable

Mark Hughes

Understood. Thank you.

Operator

of the of Please Campbell question [Operator comes KBW. proceed line question. your with next Christopher Instructions] Our from

Christopher Campbell

afternoon gentlemen. Good

Mark Hughes

afternoon Chris. Good

Christopher Campbell

X.X an amount was repurchases? dollar cash development it's were guess sounds the What as few and It numbers then I just absolute what million. a adverse like Yes questions. were

Mark Hughes

dollars only hundred cats we couple to we. do if far A of in things about you had thousand the QX will there. in so five related So

First all for we're increased that track X keeping we of. the of forecast ultimate this Right.

the increased looking X hundred obviously we're million two five to hailstorm So Michael's for at something the million from thousand. hailstorm that that Matthew the fifty ultimate every from Irma and QX and we we increase quarter

movement worth for of just that's hundred fifty thousand the continues bit just run sort also thousand of two Irma. dollars rest hundred No cats. something related we no expense to a two that's there's is that it and to of it or and events So just ahead. then for had Michael and dollars that about fifty two worth core is little QX Yes to Matthew in in of

So cat only that's that that in the are numbers XX million.

Christopher Campbell

Got Okay. it then. in

Okay.

So in just on get why just harder been we're a lot There so there of I like to about that like developments they general. than they're Matthews on anything question made the storm storm for haven't normal adjust seeing there. to quick companies do. CGI but light there on. get estimates right special hard to that that it not Was a cat mean

Paresh Patel

mean really that. from than it's Is two originally Matthew the that on that higher something two initial significant been XX what years like maybe that development mean years. is has - I ultimate percent ago the not Yes. I

still it's it's fashion. those don't them Yes. left any great pretty there's got not anybody's think reserves really for for we've talking just We've open I settling don't still about got more really development that in you bit but little So actually developed. of think that expected many to. end some good just I some up left than it's you claims a claims

Christopher Campbell

special there's just the was it that seems Seems late XX. reserve years all about report it. what kind accident of In anything and strengthening drove

Paresh Patel

at to best look six to months No it's little at total. first is look if the you look at the a it way

is four prior thirds adverse bit development minor the then daily half there's amounts I than about of the about that has been And talked on that think early worth higher XXXX expected. claims we little and for very two Then just years. little I bit we XXXX a think for dollars what it's a on XXXX. booked what of a about we've So and million of

XX share XX. guys tweaked and So amount the we but higher was what perfect. on repurchases. but it's you that And spent then mostly not OK dramatically dollar it's

much I the one was Yes for thousand one and six think how million was three million actual dollars that hundred hundred an six shares thousand. it like six like quarter. sixty

in like deadline. a you Now you didn't I a see mentioned of up guys claims spike terms before the think

Christopher Campbell

a have little it in claims you How would that b noticeable we're might year a a reform July that loss or they any of are positive be or over your a terms improvement be era. of core describe a seen you month year a like might giving you metrics post over that in b now that reform ratios. are Like into confidence

Paresh Patel

that Right. stated for we've X. what it too The as being reason b to and It's just earlier. the is don't does or call. forget signed Chris a after all early is legislation are July

couple still before be You of going several of have years years tail that signed age a a will that. was back

this what the to is while it has too going It's to a out to take a effect do concrete early days days legislation or went just to direction shake XX to in tell. So as XX XX after and fact.

Mark Harmsworth

prepared to add I may positive and baking just early that that of tell we're we you to to the not take is to earlier a methodology But agree impact it's I too little we're hailstorm which if not into it of favorably point but the if a remarks. any I developing reserving it this treated I you think our there out where bit be XXXX. Yes XXXX in it at mentioned my compared separately

into reserving if some I come out our anyway. positives think at that higher we're just really see it and think in that while going we'll that methodology making start of be deal any before a I to to it. rate to But we and we're reserve of that not then with not it's we're optimism AIB continuing

Christopher Campbell

the retentions. similar you're over spending And spending I and it guys limits rules sounds on like one last my you like would then less like reinsurance just are

Mark Harmsworth

about just is because of given in context difficult question different had. different reason So down you're like people think look is to risk how adjusted dollars et that less. know the that I answer right. Chris several down million saying so ways what last up talking at one is we've little similar tower of a at end money that the guys to basis in creep was left on. is the and pricing the about the is got we've day guess year that All or pricing you're I the way The and just Because on it spent you a we loss should cetera

Christopher Campbell

less How Different And Right. just to allocates that it's It saying a technique ways. basis your in of like Got paid that's that were into and move sounds like pieces. it basis thinking per different all the layers of them. any major adjusted I'm different there it. designed you program a is can is cost. changed. computation around like and risk I'm you adjusted parts unit on what of say the risk it's fight

Mark Harmsworth

a last and And or as so units we less spent to dollar go our far the dollar rates we'll less everybody that's many it same right. buy Yes. up is are spent was is the we're bought smaller say well side and or left was the made. limit that year we millions of was spend else down that or we other leave you did It for what to had a that it economics how of is saying

Operator

I question the Kevin answer to has would does [Operator conclude Instructions] and session. like over call closing a At time back turn this remarks. Mitchell few to our this who

Kevin Mitchell

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

Operator

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

organizing You wonderful has day everyone private and moment your may conference now of rest a have back disconnect a disconnected.

HCI (HCI) 6 Aug 192019 Q2 Earnings call transcript