HCI - Earnings call transcript Q1 2022

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Operator

Good morning and welcome to HCI Group’s First Quarter 2022 Earnings Call. My name is Holly and I will be your conference operator. 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 4, 2022 starting later today. The call is also being broadcast live via webcast and available via webcast replay until May 23, 2023 on the Investor Information section of HCI Group’s website at www.hcigroup.com. to Relations. call like Glover, to now Investor Gateway would turn over the Matt I proceed. please Matt,

Matt Glover

Thank you call morning Harmsworth, HCI’s XXXX HCI and Chairman good Chief HCI’s earnings first HCI Group’s Executive and call. quarter Chief Group’s and Financial On Paresh Officer; Chief today’s Operating is Officer; Coleman, everyone. Karin Mark Welcome Patel, to Officer.

access will and today’s for the operational of XXXX, then Following Investor will of performance outlook. please Information Karin’s first our at webcast, financial To opening visit the corporate review our remarks, www.hcigroup.com. an Paresh Mark provide section quarter website

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

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

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

like Karin? I turn call Karin the would that, to Officer. Now Chief with Operating over to Coleman,

Karin Coleman

good morning Matt and Thank you, everyone.

share, which impact adjusted despite The unrealized profitability earnings $X.XX touch adjusted to weather of earnings months Compared $X.XX in earnings and a will first XXXX reported on XXXX, excluding related with elevated quarter of and for per moment. HCI, X the of costs, improved losses. growth per quarter Mark another investment fourth marked share of of

reflecting increased written doubled million. over Choice, to continues. quarter grow the premiums premiums written of over XXXX of at quarter the from to first million. continued up XX% At of gross Our insurance nearly At premiums just written gross Homeowners gross XX% to growth $XX with XXXX, both business insurance our first TypTap, $XX

premium Our to XX%, a steady fourth our business. loss of around growing ratio operating base performance quarter, insurance similar produced across highlighting stable

transactions in Northeast will Casualty, X, X. Property renewal states have in & the and second with X begin continue into platform the United to in three of the involving quarter. to April business the Northeast rights June during a one as HCI Southeast X The Our to migrate on book fully transitioned HCI Southeast, while transition states

a how gears, shifting our moment take about like managing to we I’d talk to Now are sheet. balance

You higher-yielding interest million and some cash to to investments, last recall, I’ll HCI well million, positioned that $XXX the assets. with quarter, to of to subsidiaries Group other mostly of on year its took cash fixed returns investments may investment rates Today, started rate assets touch of for interest more than We we actions our debt. and rate significantly in have time, portfolio, XXXX which allocating on we the work, and with reduce increased end over ended evolving improving interest our investable put short curve. environment. is cash in dramatically, our income the at equivalents. highlighted the capital Since $XXX

million During we short-duration securities. the quarter, over $XXX purchased treasury in

in portfolio opportunities finding on additional focused to income XXXX. are increase We from our

note fluid. the intrinsic Florida on markets paid insurance XXth quarter, approved end, that shares. business Board matters, of value One Lastly, the we dividend per to share in legislative repurchase program. To confident Also our in strategy shareholders during our we remained in $XX March, million and share. consecutive remain at the our $X.XX final

legislative proposals in adjourned by the the homeowners call session decision stabilizing forward Governor’s market at encouraged May special we’re While reforms, aimed to to the legislature Florida. passing major without insurance and in for March in look

results. over financial I on detail it our provide will to turn to Mark more Mark? Now,

Mark Harmsworth

expansion explain about up to to per a million per in $XX GAAP $X million. million doubled the equities. we growth. compared this which in for change despite These quarter as the quarter in will from per year. Florida gross last the year last quarter of were grew losses. and Florida – income earned in our by earnings had million same of earned out $X.X the from just $XXX.X first of explained premiums $XXX of another per from losses, market in from states value between the Those quarter unrealized $X.XX the came during share same of million million earned last earnings About million. in half and relates quarter when the the to to talk basis, and of were minute $XXX.X the half Adjusted Adjusted this weather, to growth more expense. factored $XXX in the This a from result market On other Karin. $X.XX strong quarter. good unrealized last a share share the decline from from the the premiums premiums expansion GAAP course, unrealized Thanks, were first a national is million $XX.X to million The million XX% more investment quarter. earnings I was and adjusted to $X.X I first compared half active dropped quarter quarter are for year GAAP of $XX.X income, $X.XX being net year. Gross our $X.XX quarter share compared loss expansion. an this first than operational year. last the changes difference year, losses to investment the earnings in level, net about and These general year On unrealized to

strong Karin organic were of double in pattern growth. same business Florida year, what As gross continuing in TypTap they the premiums earned their mentioned, Homeowners last quarter were

has business changed. grown, have our As the of ratios company has as some changed the mix

of the About increase that was ratio. loss in ratio was loss quarter One XX% from consolidated The business been this of of consolidated has and compared half mix quarter XX.X% last to the first those year. the that other X loss about wind about quarter of of for added events quarter. weather. ratio half hail $X and points million of the had We expense or couple a loss in because the

over well sheet As to and might maturity The and little in maturity. is Part in I you about times income from cash $XX million The business down to quarter operations purchases TypTap, last the non-cash in weather-related year. just to – at mentioned. million last mentioned, be same talk year. million, cash. $XXX expenses Maturities that in stock-based up just income compensation. about fixed to from of million from net despite a same that portfolio same $XXX end $XX the flow treasury Karin relates between million strong operations from is $X in net operations. that After One are our flow few delta over $XXX now years, the $XX the million cash This million $XX quarter losses, have up of $X.X year. difference was last quarter the over fixed continues term cash. million the like adjusted term the a cash was the to thing will of only I flow balance was we X.X Consolidated generator a since the is compared note year. for quarter of million average the

can during anyone of quarter that that see the the that separately we’ll quarter, During information segmented – Q this so section starting show in the impact.

quarter, This compensation was stock-based million. $X.X

that want While of shown that, our this is that to clearly. we a make sure item is part expenses, number non-cash is this

In to liquidity, a insurance the cash of $XX million and access of investments we $XXX outside million over credit terms of companies have just two and facility.

we reduced million or the Last the significantly at know, less sheet balance have to you our first than And ratio $XXX million. past in the long-term quarter, As end $XX we the debt so. XX%. is year, down of delevered debt-to-cap year from

plan. $XX we mentioned, Karin million announced stock buyback As our

bought approved progress throughout of As quarter, on no were year. that it and in the report the mid-March, in the was there we’ll first shares back

couple Basic for of the I you share per of And per want and with as book XX, diluted outstanding of is and XX,XXX,XXX to over March might purposes a year. that, value of dividends will Just end are value down share about count it $XX.XX from fully $X.XX book quick XX,XXX,XXX. the shares hand numbers share just is Paresh.

Paresh Patel

headed. great to where Thanks I of Mark. Karin where we comments Mark on summary we gave and quarter. a are focus the ended my want

aware, of we Plenty As been to for of received interest scheduled call for in we growing weeks, have Florida awareness overall this a decision recent the is a with take a reinsurance of session of and available is May. HCI the special capacity you end has are issues property government continued Ascensus insurances held of the applied view There and Florida, situation. the positive. many facing is the we which and feedback on re-insurers market deeper join program. In also to meetings very on HCI called

see placement. final year’s wait must insurance on we to what the from pricing to outcome comes However, session a special get this

While reinsurance speaking great of reinsurance, there a opportunity for HCI. is also

fund entire give With at we how I a prices, the participation real gain million of lease, Green really In Real hot properties offers us we Florida, this program. portfolio certain list expect division, certain earned in to is focus. continues we our helped topics, to book an our into of on a the technology weeks, like a that, the idea environment operations. a will in to has Claddaugh generated the is true sold turn in on on on our a Green is costs. and insurance has history captive, our profit reinsurance that the of on Homeowners with Estate from has carrying reinsurance have the be Our would back portions my to become, valuation HCI’s value that recent Homeowners reinsurance and Florida Xx books. And real flexibility participate its estate powerhouse And valuable if shown, number $XX a market we estate Choice as as our coming current to ability market. our Choice to and to turned future. out market the growth, significant performer offers cash HCI’s The Claddaugh, at has us for Switching homeowners program. top inflation create comments

validated basis. company the is TypTap nationwide its being is underwriting underlying subsidiaries. knowledge Next, which Exzeo been TypTap. I about proven national the now technology, we Exzeo, our of want is expansion. on technology is a its Florida expand technology talk our that in and long which using both technology used has subsidiary Exzeo uses most by on as to The insurance built And the

to plans increase state gone currently footprint And and to in We future. at operating operating profitability last now this XXXX show have year in our of the is my with comments of line from TypTap end firing states in XX quarter. to to X signs the with and

year produces with progressed, first remain our business to pleased consistent months very long-term have few how are We of committed build the and to a of book this objective profitability. we that

to is about a I of make the few the since Before want up, comments beginning opportunity arisen new wrapping that a year.

produce been Karin sitting highlighted, we’ve perspective, should ended we meaningful on, much into this performing put been about income. But sheet. rising $XXX XXXX cash units hasn’t share really In cash cash that all the closing, cash of million per most over As with and how as real with of balance any rates, in income. well. cash is cash have on $XX – work, to put interest this that are we our our we represents in To and business This it equivalents. earning

tremendous opportunity to our portfolio investment a put have to We work.

we future. questions. that strong that and very unlevered, bigger in sheet for With opportunities balance that, ready a unfolding to the have the have we’re is stage We set are take

Operator

from your [Operator Matt today affiliation then question. your announce Your first question pose Instructions] coming is Please for Carletti.

Matt Carletti

morning. Carletti JMP. It’s Good Thanks. Matt with

Paresh Patel

morning Matt. Good

Matt Carletti

good Hey, morning.

ask kind I First question, not of the strong but I line I mean know hoping the question growth. year. straight was a it you in quarter, to across it’s really about was

for of thinking answers about reinsurance think think the particularly Florida maybe, about help year, the So, of non-Florida at in how least so forth? the And as upcoming growth I of wind us maybe? can and separate two cadence season with should remainder as it you renewals, kind my of we mind,

Paresh Patel

would quarters, to be involved slightly first grow flat answer. tend we we still different. will stay materially to the over the quarter. our and in the expect in again Matt. It’s over and year going not fourth to two quarter, next then tend this the We That be been years. has would Sure, One a cadence grow

of that sort Southeast now are comes the year to currently. on we onboard. an occur go there, XXX%. goes, it of delta and book the the to is UPC X, through June Florida And going thing outside the share as far have As end between the as XX% book And transition we quota will biggest the on

that slight incremental stable least in of at So, it’s premiums. next should some increase couple that, quarters. beyond produce for gross But the

Matt Carletti

not with Okay. kind commented one estate turn undervalued? time, comments market Was Great. view that you kind caught carried view Florida did value Was offered capital why Greenleaf, of with don’t down. your viewed were owning Just prices. particular how And income In that I on, Xx I are I property happened values turned to towards particular, that down? you and it the more if a it’s you necessarily over shifting real was curious then and on or you just as it just you of about that? gain? curious, know than a property it property you that that what

Paresh Patel

Yes, Matt, great question.

sold was happened, very what we was we what pay. are the offer have – comparable what and right. I that got look, I to of general for an happened it credible when said and property, The a on XX% won’t problem So sort XX% considering low, what name party was, property. looked say, and to would in willing was But area. they the The too specific XX% offer the properties property,

what if at to the on should we you to multiple. were property This price, we did that are that want I the an a is on for, when we books because So, that said money table. such the… about portfolio to other will instead we you is to lose Mark because on have right. so long of But why talking how we of the it But dispose good see, And make us give appraisals the just why financial of comment the happened is we side entire gives as down, a on idea as Xx, we much to have it and like. best held idea that it for kinds carrying very quantify didn’t it things, high those realize purchased and all see and an of I much let yes. if that we been Xx, you

Mark Harmsworth

it’s real not it’s that than the that good valuable but some glad, on a and one business, question. some for have that No, a few property. – core very it’s we Matt, I last think own over the rather But just we It’s a it am good years. I think really investment question us been I estate, focusing – shows we own good

Matt Carletti

one just, you on the low being Great. of proposed offer session in in lot obviously But reinsurance of I the which just guess handling would XX last the one, just the coverage, part is think – the your legislative could. general kind like that or outcome. And One special are way kind that, lower FHCF, to renewal of that that’s a I up, thoughts away down And uncertainty just retention you special second I think touch upcoming I twofold. then of renewal? and it’s if how is a with be from more May wanted not on, the weeks how given of guys session, the asking predict any timing, process-wise, is the to coming reinsurance just obviously, I cheaper. your question something things

Paresh Patel

way discussed. obviously problem, the The right, of we something to that or is adjustments, know obviously, – don’t will that’s else items handling whether going fund will one the whether it’s being first are of whatever. it be what the Matt, that’s you all, So etcetera, well, – cat there happen or

the be to that’s of we a a probably happen. clarity special this on comes of we in it will of that, that years. the lot a session, And have than soon made number other is going said conclusion we do Having acquired that is encouraged, go what’s as could Internally as that’s is Until you are all made with the point, the bit. to think going we the comments year why later transparent way placing little customers so to of people because So, is this cat the might that finalizing start through expect all were why fund, investors what have just not will bit as the we scenario. and programs any getting that and I done. we reinsurance place, while of

just speculate commissioning in yes. scramble than like we later later to – on So, planning on May, the the are part part mad everybody of towards rather it, feel of

Matt Carletti

Thank color congrats you and the for year. the to the start on nice

Paresh Patel

Thank you.

Operator

next Mark affiliation, for from coming announce Please Your your is pose today then your Hughes. question question.

Mark Hughes

Truist net work, more per put Yes. that? that to cash here little like? to look Thank and the you. of morning. share investment be Securities. income quarterly $XX you got on opportunity if investment what’s And What’s have now? going a pace Good the million $X to a income Mark, put work from of the year your more you to

Mark Harmsworth

question. good Yes,

that significant position, mean $XXX is if if in that kind and investment carefully. about we million per I X.X at amount a got a going say, in bump and we as a to of million invested, where sitting million But just are $X that’s of $X.XX we a because or cash example, half points, And quarter. that, of investment now. that’s at at year look you pretty good are So, significant right, in have an we and layer even invest

it that ladder sort of make if like But even we of how we is that. example, will of of look income. just how as half meaningful just in what an it it. It’s invested to that’s to prudent bump I a how would think So, very it half is decisions invest investment and about

Mark Hughes

you maybe both much If to there is capital the Paresh, the what’s the opportunity, returns would then and Yes. look capacity put the for how potential in Claddaugh? work there?

Paresh Patel

we be Mark, only having in will much. putting definitely The to So, where that is things are given are, money debate how we work some Claddaugh.

to is sessions everything special depend And and that going some the also and else. of on insurance

come rates push and exercise the was a for settling the similar It asset. we quarter digress while knew don’t could real did So, what of it, been position, Sitting on loss of we We we when because over doing If of answer vague right. this what And decision a kind a kind wonderful popular so discipline it. to have wasn’t opportunity it one. or will the front it’s been last one Claddaugh and in an thing. million come $XXX you it. right that we the pounce the years. we building some opportunity of there, a if X the we days to it here, a little does, are the up certainly, have could seeing cash. been always wait I cash, And interest of a us are bad nothing, of but has fashion, opportunities estate cash on – number pilot we front years, and be And got is when on is we of that we just – us opportunity in the it’s it bit are. seems right. We in with these comment, for all held every become And bought aren’t very

how exercise happens prudently only have May, Claddaugh through become but opportunities it month go markets, will they opportunities, we as as the reinsurance of will So, great obvious, in yes. depending on the it

Mark Hughes

Yes.

occasionally full the billion as profitable I previously premium I spoken if still of How – you end about year, good the TypTap, $X you do you a by depending on a wonder At about be to that well? Okay. profitability. think by you have could expect the that’s XXXX, weather? signs the number. year, And to profitability be for two of mentioned pick just profitable think in goal of maybe

Paresh Patel

Okay.

stay on question. you enough, TypTap, to that if great The quicker, growth get yes, $X of still lot your there track there outpacing billion your ironic for lot idea an for a sort your company Again, yes. we is infrastructure alongside with that. so of and So, a that, are wanted but

building long-term. is the So, for

way. So, we in are doing things a measured

last the profitability there be of of comments the if as far my profitability, be Those occasional at then what will year will As of going happen will down eventually. are, the goes, is absolutely TypTap there course, recall you then profitability quarter, [indiscernible]. months first of quarters, occasional

group insurance the in along, go not profitability yes. have that it amount on front I that an took in profitable yearly profit, into the make the quarter, didn’t system is step-by-step mature seeing are done. will But month being first a profitability as But overall, of us quarterly profit you towards the we suspect first quarterly of quarter. actually the money occasional had is has month of there quarters yet. see of But an month already profitable, Now that thing occasional we but may that not the occasional we the as in a in progress still where And the yet. obviously, profitability other that, been just profitability. We was we queue, translate there actually may

Mark Hughes

Understood.

Paresh Patel

make by we unprofitable, weather it business And a is the strong are probably yes. it part it. the the way, take there and obviously Yes. a is business, profitable because And the in is quarter insurance nature reason of or of the and here volatile a could and it’s

Mark Hughes

you the of book Yes. see other right lenders carriers About a now? or rolls How the advantage little environment organic bit opening at either your more. dislocation your potential the downgraded to organic getting having do channel channel take

Paresh Patel

time. great a It’s

top If a growth, great about it’s worry you all you time. line –

our think X customers next of and And take is is of us have well Choice. that art know Homeowners machine. book you with Just X on business And been this at they of Most The open for stay for of in. years, business this or a the Choice a XX profitable flow we years to you up in consistently, all why going XX-year will years that it’s right. at pour good over point. very and terms, look cash Homeowners with be

if to as discipline, And are at we take the add long-term, you of and are we the business stuff sort to right with you the price. at when having exercise right the So, deliberate our building patience to time so are that maintain on. books that you kind for right are very exercising we customers and the to

it because the setting December, suddenly a come like ways, So, waiting of we December just stage opportunity $XXX look the it haven’t the along the here are, in cash moment the even like in may yes. done first – anything lot really for are were it on right was behind we it along balance and and was until sheet quarter yet, then item but we scenes an we aware was not building, – an close to in million the came

we have as us So, where being confidence lot operators, very a record disciplined solid now is of of that this we gives a to going are yes. track

Mark Hughes

of to waiting with of just the special there what anticipate Is pretty trajectory, happens integrate loss see might. we about in have kind etcetera? we you we weather. I that kind trends kind a ask the here? Southeast or Then ought out and one I think states here, session, pointed if things well more little underlying been think of more, as a reasonably you I will are the Northeast spite steady the When Mark, ratio, to likely of Any doing

Mark Harmsworth

QX, last that think changes XX.X%. for higher I consolidated bit And a sort I trends, high-XXs, been for new happened bit I what think at ratio, weather. in have loss loss terms was, a ratio if we look mix that With a earnings loss maybe in we be three you And had business I points. The ratio talking or data a I QX, in the have of Yes. our wasn’t points expect in mean to call, consolidated weather, we of now. kind I XX.X%. of said and two higher couple think said that that than have year of with that get of had to then we that the for the about

pretty it’s sort last have we the would of different say times. we probably about had ahead, what bit with I I probably components I individual if is weather start is think our various And there to I expectation. about But consistent a That’s suggested this given mix. And XX%-ish that earnings talked expected think of level And it’s call, still all think So, business had on looking the same. what the at I think a at purposes, about help? for is. if mix. thinking ratio modeling around of loss Does where useful level consolidated this I it’s little better right, there that not

Mark Hughes

the answers. It Thank all for you sure does.

Paresh Patel

Mark. Thanks

Operator

question-and-answer turn over today’s closing further would [Operator Paresh in to session. remarks. the floor I That queue. back conclude like Instructions] to There questions are does for no

Paresh Patel

continued behalf our you. of agents the like Thank I importantly, their and policyholders, to most On team, employees, would support. entire thank our shareholders, management for

closing I to As we end earlier summarize this want my call, comments.

investment to work. portfolio tremendous our put opportunity have We to a

We not the that we opportunities that sheet unlevered have and very are involved for in stage is just strong future. our have set balance bigger a words. These the are

We have to talking look doing great record conviction exactly a you. We and track Thank quarter. everybody next that. to of forward

Operator

This does call. and today’s ladies gentlemen. conclude Thank conference you,

and lines may participation. You your disconnect time, you have your this wonderful at for a Thank day. phone

HCI (HCI) 8 May 222022 Q1 Earnings call transcript