HCI - Earnings call transcript Q2 2022

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Operator

Good morning, ladies and gentlemen, and welcome to the PCTEL Second Quarter 2022 Earnings Release Conference Call. At this time all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question-and-answer session.

As a reminder, this conference is being recorded. I will now turn the call over to Kevin McGowan (sic) [Matt Glover], the company's CFO. yours. is floor the Kevin,

Matt Glover

is Thank Paresh you, Relations. HCI from Investor Executive Chief today's Matt second Officer; Chief Mark Officer. Harmsworth's, HCI's This you, and Chairman is HCI's call On Thank call. to Officer; XXXX Glover Coleman, good HCI's quarter Operating and Gateway Financial earnings Jenny. Karin Patel, morning. Group's Chief Welcome and

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

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

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

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

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

Karin Coleman

good and you, Thank everyone. morning,

growth. second XXXX The quarter quarter of another marked of

of There two impacted results. outside our expansion gross Our that continues earning and business. our with premiums premium were quarter Florida a insurance of national items financial were XX%, up main approaching division our

in filed rate $X.X a our with strengthened were and Homeowners loss this, and in we second, at To an for income loss two quarter. increases, in declines, and items X% meaningful reserves market impacted million at reserves increase investment strengthening resulted ratio. Choice, by XX% to losses offset These litigation. inflation the And we resulted unrealized response XX% First, to TypTap.

key of this We also items quarter. number on executed a

we our time more Paresh capital his our through $XXX more of First, at a across is notes, industry. scarce remarks. issuance in this increasing to than when million will raised convertible speak flexibility

finalized income. a pricing year, to A both exceptional program retentions last and with our comparable our limits. at balance Second, TypTap. sheet, in generate reaffirmed we to in repositioning terms reinsurance continue Choice while we place, our with Homeowners our And third, investment conservative to substantial and With reinsurance maintaining Demotech ratings optimize modest portfolio

to share investment. remain to to shareholders capital and Finally, as continue through repurchases stock we dividends returning attractive committed and our view an

of us, take will company, the financial I'll in opportunities During to I'll to representing approximately shareholders. we while - who our the of of more HCI our front the maximize per Mark, returns we quarter, dividend our turn And now continue results. business return over to shareholder managing it on for Mark? - detail provide XXth return summary, it repurchased to shares of position consecutive a quarterly and XX% $X.XX In dividend. we paid the share, advantage

Mark Harmsworth

quarter. market to for unrealized from XX.X% $X.X the from of ratio, which as a of Half XX% Karin. $X.X quarter the The came change declined second had of of loss more In income the from overall second that There Thanks, net were In came higher the of million. equities net a value was year, realized in last loss difference investment our quarter in the year, increase. we the this than three balance and the million. portfolio XX.X%. in reasons increased changes

ratio. lines with growth to higher a premium relates First, business mix from loss simply coming

resulted in selection. loss period making reason second this inflation, current The with which higher

inflation for made factor adjustments litigation was some and prior period selections third loss some we development. The adverse

paying There claims. were are also we we than claims expensed. In months more what million this first trends $XX expensing six the paid quarter. than by reserves out were of non-cat less build number in a to continue year, this positive We of

premiums quarter were XX% grow. last earned over up First, the same the company year. to continues Gross

Second, reinsurance program year. mentioned, for our Karin completed the as treaty we new

Net Our be started continue premiums no expected X, a this $XXX to than expect assuming lower ceded we and Premiums treaty million the percentage year storms of for be as that are last. year to June reinsurance to

is rate Fourth, acquisition We kept percentage environment income were of is gross investment down going on paying it policy because and improve, expenses a cash to hand, for commissions. has. the as earned TypTap interest Third, coming premiums up. lower waiting

we And securities. of far $XXX have year, this over million as investment a income result, fixed-term bought So increasing. short duration, is

for continuing are to compensate we inflation. to adjust rates Lastly,

oversubscribed. on As In May, Karin a homeowners expect as both the debt rate higher We increases improve. to favorable we in as rates Choice TypTap we of proceeds significant developments in start of for insurance Homeowners well. and mentioned, to we companies in sheet we the a have been earned, even issue. are holding implemented the have of raise convertible number ratio to closed of balance of August, out that position set we new at stronger surplus and We these XXXX. in June Florida level. on loss There powder $XXX are million in a our strong at gross maturing million significantly and We now. X.XX% this started company solid position, were and is raised position, rate $XXX.X dry liquidity Both and year a

almost much Bank. with. and holding started the and We we twice investments year This line cash access credit as have full level $XXX million company Fifth to our liquidity over at of as is the with Third

value the XX% our purposes basis. We on of and diluted X,XXX,XXX. count buy Just per share is couple dividends at a back company to share now for points, paying of quick fully almost the $XX other proceeds calculating used million of a book convert

program reserves, inflationary we needs bought we our As of the In XX, back XX% conclusion, pressures, combat count company. our almost to we reinsurance this fully to build diluted of addressed June share our XX,XXX,XXX. secured was and continue quarter rate we

dollars also I'll We liquidity us of to liquidity position the financial a ended improved company We our the The over it $X.XX in put strong significantly holding execute future. to the taken And with - at strategy Paresh. with quarter that, our close actions on billion a position. this quarter turn in level. billion to

Paresh Patel

Thanks, Mark.

main As HCI Group in discussed volatility Mark, by Karin and in items the were affecting and inflation equity QX markets.

to corrective business have and company continue with strategy our We taken year-over-year. XX% growing measures the execute

including Florida UPC beyond within continues as the planned results expansion transaction national Our expectations. are and the

are rating and pressures However, has the existing of many some this of carriers and by continue These a Florida market. about homeowners to liquidation disrupt has year, This aware in brought we a will increased others combination in downgrades. turmoil resulted markets. events, inflation leaves facing litigation, the of and weather

We a and competition. diminished our hard has shielded have turmoil. technology management our and this But us market team from

has market was turmoil as Florida. have we the weeks, for this ensure XX successfully of opportunity. a insurance that to that we a state that to this we navigated additional years, fact, in of company In the QX. capital, intend ample coming To in completed substantial carriers first the provides had and advantage the step take apply Florida set In to opportunity, up

from still this? homeowners a pick an begin to doing that high writing now. in these new in decade a There product to we opportunity is expect it be insurance Why carriers business high demand, is here next Basically, market up demand We is will are year. early and share.

and open fearful opportunity are we have track on Operator, lets that long-term present navigate intend on focused opportunity. the market give With market questions. due conditions. we for a please conditions secondly, some will through we instructions. capitalize that to Now, are record that, but these us And to

Operator

sir. Matt your of question Thank [Operator coming JMP. is Instructions] please Carletti Matt, you, ask Your first question. from

Matt Carletti

morning. Good thanks. Yes,

Paresh Patel

Good morning.

Matt Carletti

more should you wanted versus got tell? Will business a last brought point follow one to it that's you've planning up kind kind today, ready book that a I actually organic too up to it being Paresh, agents, be Choice, guess, is new that of opportunity? rolls the things growth, think unfolding? more companies on you year. you or has new like And up of next do some see we doing HCI think write look to that and I specialist these of TypTap, other, and we about about as stands about companies and early set How take the Homeowners independent How - is of a got to outs history like bit opportunity that. that citizens just

Paresh Patel

That will up as is and very Matt, why over combination. TypTap, different. as setting similar it's they the look more detail Homeowners and Choice or months yet - we're will a events will be coming Yes? will we provide a evolve progress. HCI It separately. They of hybrid

Matt Carletti

question a Probably Mark. for Okay.

so, ratio, might of able break the a it inflation development. out, of to upward the things movement You of how and or mentioned on different the was eight of be movement or in the pieces business loss seven kind you hoping kind each those points few relates much I kind the the impacts mix, one? prior-period to of was

Mark Harmsworth

second loss to Hey, Sure. the second last up Yes, from so the terms about of ratio year. those of is this in percentages, quarter X.X% Matt. quarter so the year of

is I So X.X% that of the X.X% mentioned. is mix about About inflation, that is development. that prior-year X.X% of and

Matt Carletti

sneak And question. one also last helpful. one a Mark, very then in, numbers could Okay, I if it

what TypTap is June surplus? at what Just XX, - is the

Mark Harmsworth

$XX.X is, one June million. of here, me end the at surplus TypTap just give second

Matt Carletti

Wonderful. very you All right. Thank much.

Mark Harmsworth

thanks, Yes, Matt.

Operator

coming from is Hughes Truist. question. ask Mark Mark, Instructions] your next from [Operator question Your please

Mark Hughes

or Thank Good some Was of is than time? claims action been there Yes. morning. for building particular you. a in that? trigger There for some there development, something less was legislative The any that's Florida. flurry this was prior-year

Mark Harmsworth

There's there. or in a on of three in couple And discrete of is sort things there going two there. items

related Homeowners back to Choice. development relates - XXXX. assumption in from there in million And it was adverse $X a So Homeowners it of the anchor Choice,

years assumption increasing bit. XXXX, back then. loss it's little look we that couple So ratio a at through has up of largely there. lot just our that to tweaked But litigation related changed bit we back. It's A a if a since picks in

on - but is expected. of the than significant difference claims were we The XXXX, or of the get we've we've of thought November there about I off tropical pretty Ada X,XXX a storm lawsuits that number think we'd got talked X,XXX other between thing from that's of that couple times before, going

of been the selection, So if will result increasing we've Ada for ultimate too. as a that you

in got quarters accident TypTap, And largely litigation from up adjusting we've that's then a again, we're litigation again picks. of couple XXXX our driven. where So

it, a litigation. as So mentioned, lot of I

are adverse development. of of the the sort those So buckets

trends in just from generally, a XXXX Just do litigation was few last that year. terms of significantly it than litigation quarter we this have pick. But of initial in was the that lower the we're quarter reported quarters and adjusting litigation going the accident in second litigation of and second these year the back

Mark Hughes

impacts. mix and And then inflation we think about the

Mark Harmsworth

Yes.

Mark Hughes

about And is persist? points. rate maybe time as should diminish think we just What five Does get guess that, over How that you about then, these I increases? them?

Mark Harmsworth

Yes, good question.

we've that that higher got rate obviously increases inflation assuming and so been we mentioned, has So increases. rate - than some our

these Assuming anyone ratio is down. think that their up, loss the is at a - of anyone expecting the way increases inflation sort elevated expecting points stay expect of into work rate they'll book, then If quarters. I don't think They've as next they quarter but couple flat, couple levels, prices to for the gone of to the drop each I would down. stay don't go I the go

Mark Hughes

Sequentially, improvement that. some some improvement, and after then maybe

Mark Harmsworth

Yes.

Mark Hughes

of couple sequentially. points A

Mark Harmsworth

of Yes, QX and exactly. points in A QX. couple

Paresh Patel

second that the greater loss the in earn you in as take increases to the are the put ratio rate which ratio The Mark, are know Yes, months several than quarter. immediately we've increase will loss through, in. not

that And ratio so consequently, will the but be it process. drop, happens, multi-month loss a multi-quarter process, will as

Mark Hughes

understood. Yes,

commissions. is continue? mentioned Is you little lower think TypTap all Could that talk bit directed Florida, about across will you've I states, more in paying that? a that that

Paresh Patel

bit always Yes, renewal. better. new higher that has been pay we plan business we should clarify that Mark, little crop some a commissions business on on TypTap's

blended more book of the the As rate comes commission renews, down.

are commissions be We couple the So are mainly but of that because commissions. seeing in new effects it's than not not may reducing dramatically. a business places, everywhere. of renewal commissions we doing necessary Most are that lower you're

Mark Hughes

Understood.

the kind storm during - of you So the more and concentration in easing renewals season means there off in is period, so...

Paresh Patel

well... Yes,

Mark Hughes

the do We involvement. so

Paresh Patel

a new it's of in in math simple of sense it's all million first look, mean, year when $XXX as a the way. business. business, you weird I

you it half add it business. $XXX of of is half business, million new year of Second is new renewal, a

renewal of business. add Third of $XXX $XXX $XXX only year, you million, million million it's business and new

renewal rate tend a rates. So the natural time, to, new over the and occurrence predictable. It's dominate business

Mark Hughes

Yes.

Let question. me ask a new

your undergoing peers. here, been under losses you've then been Florida and historically, competitors while. a better have substantially keeping your You of kind inflation said done appearance This - some stress very I of control well - think for has than and the

that. You've out having the right but XXX I I the prior-year to think more, think now? mix, inflation I development just But there of meaningful. points seen to of this, is why else kind on flesh curious it anything a understand, very of impact. then just some you've now? of why touched is be more little why said, there wanted if a is, incremental you a I'm mix sort

Paresh Patel

I think Mark's in moved the And end comments, he not was by remember and in is come - second soon. shift at think And belief big Chairman, but believed earlier a April the I'll Federal what that comment, things inflation transitory, people down quote, permanent. anytime the people was, is the expecting of believing you versus Harmsworth's from prices to Mark quarter is what one lot June. were inflation if Reserve I earlier a of

permanent So permanently expenses. have you now a elevated you've -

You and we swiftly your should moved into direction. actions, fill have, that by that business, obviously, in our

came becomes efficiently. obvious, decisive We action. we can't that always conclusion take corrective whenever and that we present coming not once future, the we down, prices but action, So the took are predict quickly to

Mark Hughes

we Fair for posture enough. And out How of get season? your growth then Florida instance? think in come we should what's for your QX, growth storm appetite about once

Paresh Patel

unfolding this we on a the Well, in asked at fourth time that saw six of see lies maybe Carletti in turmoil the earlier. quarter we Mark therein Because in than comments moment opportunity months ago. the question the greater Florida, actually

to wanted that make everybody. we communicated clearly to sure Now, we this

opportunities. an Florida and Insurance new opportunity take to why expansion TypTap So new plans, of advantage Company's going additional Florida, that's plans see are are unchanged. setting and that's those at in We we carriers unabated, up

Mark Hughes

Yes.

Okay, thank you very much.

Paresh Patel

Mark. Thanks,

Operator

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

Paresh Patel

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

of most thank never see that, protecting their that you lot With primary a fact is about our our lose that we valuable talked numbers, and very next we your of asset, are While we home. the sight quarter. mission policyholders' much,

Operator

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

may You now disconnect.

HCI (HCI) 12 Aug 222022 Q2 Earnings call transcript