HCI - Earnings call transcript Q1 2020

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

Operator

Good afternoon, and welcome to HCI Group's First Quarter 2020 Earnings Call. My name is Dagma, and I will be your conference operator this afternoon. [Operator Instructions]

I would now like to turn the call over to Rachel Swansiger, Investor Relations for HCI. Rachel, please proceed.

Rachel Swansiger

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

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

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

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

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

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

turn Now Chairman to and with the CEO. like that, I Paresh would to Paresh? over call Patel, our

Paresh Patel

and our and to our Since beginning those out service of to it. of people impact And the everyone. our the go over crisis, the The Rachel. COVID-XX of employees health has the today's hearts have companies all addressing I'd priority our welcome, the first pandemic. and superior policyholders. been you, by has call Thank like affected to maintaining world, by start and been crisis thoughts well-being and impacted

work-from-home So significant so in that or early have to we we to done report capabilities. impact our without our effectiveness arrangements, and operational pleased implemented I'm March,

you enabled tell us pandemic none employees to that knowledge, our that we I IT talented policyholders to unlike far. Also, tell have were can well responding weather I so to and can you the positive handle virus prepared. is a claims not event, HCI's tested Our normally. adept for service responding of and team catastrophe and our to

We to time. to supporting success, committed through this we and are are vital our have they and exceptional them people critical

Turning the to Outside it business. in nor do the our of and not investment pandemic the materially our has to portfolio, decline do business, expect we so. COVID-XX affected

Our our insurance a believe very received exposure companies limited. COVID have claims, few we but is

offered policyholder are mortgage premium are do payments most We to insurance cases, in have significant issue some premiums connected and usually paid premium time. to annually at a to defer be not that also due. our collectibility this view Homeowners coming We payment.

to Greenleaf, our division. Real Turning Estate

some on the We are tenants working lease with payments.

the mind hit stores and very employees large by Some are they've operations just and retail and crisis. And is reduced restaurants, we those closed doing of that these capacity. tenants at or temporarily we restaurant. been a our establishments, a of tenants bank, marinas and But those continue Anchor hard keep two most in Also, and gyms are facilities, grocery been operate the to pay have fine. running own at while which

is stuff? impacts combined this operational are what of impact not combined all So The the material. of

revenue impacts the generates that equals major a total $XX month. business of of about context, all costs loss a month a these For of on about fire one million

near in loans, have the any to do So nor applied loans not Incidentally, future. And government Protection so including Payroll the for we do we all. not material at expect under Program.

share. a quarter, investment pay of we continue of elaborate $X.XX normal As with losses, our Mark cash our in and had And good very dividend moment, to will is exception the flow is healthy, our per a strong. sheet balance unrealized the we

who Harmsworth, turn through walk the now will us Mark first quarter. will our CFO, the over Mark? I the performance call for financial to

Mark Harmsworth

per net an first Thanks, to up basis, a quarter income was from per was $X.XX in or or $XXX,XXX On just last per or $X.XX share GAAP $X.X adjusted the On million quarter $X.X year. basis, the share, million share. for $X.XX Paresh. net income

Before getting back the I wanted year. a to numbers, turn the to clock

up in On as all in how year, about gross earnings growth, described. financial And our impact and as XX premiums how In call we first months results. talked were were would to our driven QX We up XXXX, were and company, laid over growth gross show QX, In well ultimately, three this year. written growth, to the previous where the they premiums start is up really gross premiums This the positively phases was would later, QX, as they played it our XX%. out, we out by growth. of numbers last premiums, quarter quarter written in earned starts it results. up insurance TypTap. technology-enabled our the same of impact earned

were earned earned premiums XX% million over gross last same up $XX.X premiums XX%, net about up were the While year. quarter or

to the ratio in of quarter, net important growth XX% consolidated most drive to helped The and indicator earned what operationally happened we the down quarter. for think our this premiums combined this is

which was was So with million This or was investments for in that quarter to very investment related limited per partnerships. momentum, net largely which positive unusual is negative, us. GAAP only normally income about about was $XXX,XXX? so all why income, First, $X

negative. As $X investment impacted recorded we of capital In which, know, their we cash combined partnerships. in one with QX, the for our limited of rates history, this loss limited worst partnerships, markets lower a million dragged and quarters income had on

a rebalance process, to in few a triggered we our quarter, to some and it investment changes as realized Also realized recognized portfolio we losses. made $X.X loss in the the million

that most of commented equity we $X.X them. in is biggest which was in this Again, the most with the the of financial ratio quarter into and along one related, Lastly, important the investments translate very could not XX%. for this volatility the accounting the the some we volatility, markets. had equity dropped a Investment market earnings new as what result equity recorded was investment overall cash standards on loss unrealized came dampening volatility impact, million effect of into combined for strong quarters, a an just of over was and When is quarter. effect decline securities, otherwise

statement, income update a the up reduction weather-related expenses, earned, the on on increase premiums offset gross losses. loss was While by quick increase in driven which this by a are in slightly,

first that we quarter storm significant may in year. You recall last the a have hail

Now balance let's for minute. turn a the sheet to

operational related the year. first the more million million, is Cash most investment important. flow quarter mentioned, in items As were quarter of than cash was flow in Cash last first $XX the from $XX of operations the flow noncash. double

to back dividends you the XXXX, If has look of from the of all to the flow increased. steadily cash paid beginning way ratio operations

for our I Anchor. of cash, is also cash position? million from premiums cash million operations about What $XX end just cash an that's over somewhat quarter. than flow. in advanced At from That of million the addition in had discussed. increase in Because increase So $XX higher received of QX, $XX about we million $XXX the just we to flow the that,

net as Further, reduction had some insured. a securities investments fixed-term in we

bears in is uncertainty with COVID-XX times considerable mentioning position we respect strong again. And there financial As like outbreak. the this, our know, to

significant well capitalized a We liquidity. under with surplus excess insurance have holding companies with two excess company

and and the Choice ratio ratio year. of money made insurance XXX%, TypTap year, had last of an end the quarter of RBC an RBC of had XXX% this companies first both Homeowners At in

revolving well million have put So ever buyback million $XX available in $XX do program, update as on we money and the credit the the need we facility. XXXX two of that of holding buyback need we program. on to as we to A that, end program. XXXX, should companies. available to, investments close At either we the executed quick and of about our had insurance first on of months not into at Having level million said the out $X.X XXXX left company cash the purchases

the March, began for program on a buyback as approved well. that execution program In Board and XXXX, new we

back under $XX.XX. During shares price we combined, the at the average of two total of quarter, plans an XX,XXX bought a

program a from months before, significant effect. X,XXX,XXX mentioned count XXX,XXX the buyback XX is share I As shares cumulative now has shares, by down Basic ago.

total paid the same were per QX result, year than cash share. this despite quarter amount dividends paying a last less $XXX,XXX As

other was impacted it sheet, is book $XX.XX balance $X.XX losses of per year discussed, the adjustments the last equity on down one share investment as value of by we on note from the Just securities. the unrealized notably end most

and portfolio was another was part as But decline good net in investment So capital of some are Premiums adversely adjustments to on of we stronger, quarter a income general the of cash flow in and impacted for liquidity markets. business the combined this the summary, strong us. forward operationally, second our the this by quarter in quarter, ratio are down, the the we to and book year. new bringing balance growing, was look getting are

back to And with that, Paresh. turn I'll it

Paresh Patel

Mark. Thanks,

quarter very pleased income to with and revenue and return are growth it demonstrates. We that first our the performance

book Looking its will transaction on time It in from take annualized optimize transitioned some million representing our policies April and ensures we growth forward, business the second of the ensure revenue in premium. this one quarter. XX,XXX to of X, approximately $XX to profitability. carriers, this But

has elaborated, strong very healthy we a Mark sheet. and strong balance As a have flow, cash

Our principal assured. are revenues

safe. cash, position the debts a And potential dividends no in significant that ahead and have because we from have of are no comes we to very have or in of and this this year need are quarter next, due part coming have We and are financial we're that opportunities. we immediate position, our planning strong we

that we any in registration, S-X, shelf future that With like arise. Form that, advantage in universal may file take to opportunities would the the such a future, I mention near may, of to

we're offerings the And that ready open note we questions. no with please that, at have your this planned acquisitions time. to or to call However,

the appropriate provide please instructions. Operator,

Operator

[Operator Carletti comes you. first from Instructions] Please question Matt your question with Thank proceed Our with JMP.

Matt Carletti

Paresh, couple afternoon, have and a Good questions. Mark. I afternoon. for good one you Thanks, for probably One of

production so the legacy TypTap TypTap trends, on in been it's if observed separately? maybe whether and First situation you in you've current stuff on, curious far a into maybe both, it's stay just so that places, kind and gotten kind as like then of home of at has I in April. one Choice whatever March of lot QX was of give retention we've What for for trend, Homeowners

of curious changed as in? to environment kind worse changed the we're just see I'm or have we've people habits shopping better how

Paresh Patel

Sure, Matt.

people about on run think And some Homeowners talk factor defer out even the some let' if they generally over some XX%, like help Choice the a payments. you Homeowners giving with Choice because around first. retention So, rate we're XX%. to that I has

have We that's were of a X% we within before. basically rate where got retention

going are impact. and different a grown because is immediate everything growing retention Because tried it's coming was sort etc., is up, the continues the or pause have and need TypTap which really etc.. manage reinsurance future is That brakes not And two for a any So things demand is a we're reinsurance obviously to. growth, so because TypTap's just strong, seeing we on. we major on and we've strong very and of to the item growth to of at rate company, else. our put

yes, this for crisis is TypTap what can adding having that, TypTap fire ask more find bind probably present for normal the some in you, But get what like like the but keeps ourselves etc.. it new the going we world in actually And made questions, I you company and tell that said, looks you up a because despite It's you need policies. a set add can the time forward. policy, unfortunate much is

in TypTap long think be I of this very the a So huge beneficiary term. could

Matt Carletti

Great. absolutely. for one another Mark. then just Yes, Yes. maybe And

I pieces? mark-to-markets b, make quarter, from the the a what of pieces to some Just sure maybe are very of the understanding the in of accounting GAAP business? that versus of moving little was in mean how you of are we're comments, versus cash get hoping million kind some cash what bit kind you walk through a is production. want but that flow major to Just could strong flow obvious, of kind of us I but of $X.X income your that

Mark Harmsworth

Sure.

from Q see $XX million. in the cash when Anchor. I reason So you'll that flow out, I from the is mentioned first thing for difference $XX mention, prepared remarks. operations of actually million comes should $XX The my million

operations. the of from not that $XX the I'm flow ongoing $XX million, just cash is because including So sort straight million

So is I from do of how get income how get you think million? million that net $X.X you like to question $XX your

Matt Carletti

Exactly.

Mark Harmsworth

So, yes.

listed get them not if that $XX.X mentioned, there are income all, of I of So And the there's way you that to sort to number first as of all, up is, related. cash a you that investment of statement about we related sort they will, look I million. the hits, add

to that will. a net to $X.X noncash. every million $XX million you of get of million more about cash are income, like of $X net is to So there of the and about And million depreciation which normalized will sort Those you income, quarter. then you $XX.X combination stock-based if of add if standard that compensation, are that,

that are you up up $XX the So reserves other And to daily will million. million. is thing take about about $X then

I loss see expense $XX mean is actually We $X you more in by that what P&L expensed paid So, in the the than about million out. there. million we

went about by up million. So reserves $X daily reserves

how that $XX it take answer get you you before, million is you $XX if the That's you the of error. sort million, gets your of And add rest mentioned sort rounding So someone... that does $X But of to I the question? that's from million. then

Matt Carletti

last the helpful. pretty color straightforward. yes, yes, afford out that Yes, I and then bit. yes, of best some the. you thank you you I was that's very Yes, particularly mean can listed And little for stuff Great, thank

Operator

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

Mark Hughes

take net ratio, expense will term, in of Thank you the P&L, afternoon. near kind you. and at Good then Anchor loss the trend how on give influences over least the ratio on it kind impact of the time? that how us latest Could bottom line, of

Mark Harmsworth

Mark, it's Mark.

QX of to million, as in at eventually course, think, start in. So I we X, earn will of of the none release that mentioned, all, $XX in April about press $XX that the of is million premium numbers

to be think our existing I accretive. deal rates. you policies those because when start on some the lot to we more the as statement the mentioned talked to the about rates, income won't But a those start see uplift deal, it at we As renew immediately in they will of are the of be going

a give see going policy really guidance. we're booking ratio go But lower premiums off losses expenses those combined be to that don't per go probably the bit you'll loss up will QX, little we up and So a in will bit of off because of initially.

in see rates, combined So they and then you'll see as after you'll start sort on ratio bit. of normalize up to go up go expense And out. our loss rate that the bit, a see that, you'll QX, a transition to

Mark Hughes

is How off investment your cash much if will income. beyond? On impacted How you the you mentioned today? at had to how much of yields that of crisis look the lower the what us be net that throwing in before enduring and was with the XQ

Mark Harmsworth

also secret driving we're fixed-term are investment from securities little on yields So and cash. a It's no that income, bit. obviously, cash from down

at of a If you negative. thousand quarter, income the in investment was couple dollars first hundred look it

that out the that indication partnerships, take little it probably that than an $X.X limited give the impact, takes delta a past, You to you less of in you is. and impact has bit negative of million. what the been That's about would

$XXX,XXX to because a enduring. much income is forward was bit probably lower be of cash. probably there's going on your going $XXX,XXX yields little that is investment in So a lower to how that question the of quarter

Paresh Patel

us positions don't what And rate sorry, checks of Mark, the that point, Matt like that also to thing. now chasing feel single of or some We taking interest bp holds. for XX future kind checks or commission bps is

the in future. it income, the a of operational investment a the made gives have we opportunities may to it decision have particularly cash good bank. any flexibility solid that for in amount very a earns for because not us just So arise near the conscious And but

going cash and hence, which and So try rather were the QX. will the how the Mark's sitting about at yield, on that we temptation end We're way, cash much the we'd reaching other the we're be have saying comments not rather for replace $XXX,XXX. to of

Mark Hughes

Understood. Thank you.

Okay.

Operator

your Our Bill question with Dowling comes with Broomall next Partners. & from question Please proceed

Bill Broomall

Thank do now, And and And but plan on don't Perish, shelf right you. have registration. about how about Just I growth balance TypTap know you your that? maybe through do the up, to balancing following how I think growing at comment acquisitions any inorganically? you you

Paresh Patel

Inorganically or organically.

Bill Broomall

Sorry.

did Anchor. maybe similar and with something doing you on to it another Going

Paresh Patel

the significantly something. and an do do we of that a Okay. Bill, we once in opportunity see know along way that Yes. that, than that. better we while, is what can Anchor is if And with we best comes answering might

Now whereby sources grow to companies for also the side in in the $XXX to to spot, other million I go a surpluses we capital. sit outside could by in would of about if have talked need this, about, we have you various go think, places, about numbers Mark before we the premium insurance the we

to luxury have do that we both the right? able choose So with firepower, of being we much if to,

equally or so. in are all has think we've Growth proven so I what in growth's opportunity never for doing if interested is growth been there's decade well, has last material what over mantra. But sake the a we our

preparing occurred all given decade in are say, about opportunities were the that think we in Recession in ago. just be we shall there a we they be that'd So in will there last may XX various last ways days, the forthcoming, the that disruptions the Great like have

those opportunities clearing along, what for should are want this prepared. that's point, the So we come And we be deck at yes. to

Bill Broomall

long But you time the you mentioned believe, a announced the the this the I at might deal, And with XX,XXX. that XX,XXX, Anchor, be nuance.

over? So correctly? was about Am how am I understanding there X,XXX is come that policies didn't I it that

Paresh Patel

to on we you was seems Because netted across out deal, how wanted when put what as or announced think the XX,XXX have to February should XX,XXX there X. exactly the yes. of April in it, the That's we January to

Bill Broomall

[indiscernible]; is that progressing be And any last your don't at on if I this know on one it. reinsurance. would then and point thoughts how perspective sharing Got helpful. have you

Paresh Patel

of this would the in negotiations the as of Yes. be expected middle time Bill, year. we're at

until the don't where done are having of year for and is we reach comment we very specifics everything both side at everybody insurance is said a we on not obviously, bit unusual necessarily on reinsurance little too more much everybody and normal appreciate the that, of in the reinsurance think a a it's to their pressure, dusted. that there's But under a years. intense placed. side. market. get our will But I the given that, are on the functioning And it, still negotiations And than So end

Bill Broomall

I all That's Thank had. you. Perfect.

Operator

like would I you. over Thank turn back management. it to to

Rachel Swansiger

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

Paresh Patel

Thank you.

Operator

Thank concludes you. participation. We conference call. today's thank for your This think you

disconnect your time lines have may You and great this at a day.

HCI (HCI) 11 May 202020 Q1 Earnings call transcript