- Earnings call transcript Q3 2022

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Operator

Good afternoon, and welcome to HCI Group's Third Quarter 2022 Earnings Call. My name is Paul, and I will be your conference operator. [Operator Instructions] Before we begin today's call, I would like to remind everyone that this conference call is being recorded and will be available and will be available for replay through December 8, 2022 starting later today. The call is also being broadcast live via webcast and available via webcast replay until November 8, 2023 on the Investor Information section of HCI Group's website at www.hcigroup com. I would now like to turn the call over to Matt Glover, Gateway Investor Relations. proceed. please Matt,

Matt Glover

Financial and Quarter Paul, Karin Welcome HCI Officer. HCI's to HCI's Chairman Patel, Thank Chief and Earnings good Call. Third Executive Chief Harmsworth, Mark XXXX Operating is and On Group's Paresh Chief HCI's you, Officer; afternoon. Officer; today's Coleman, call

section Following the access then our performance provide Paresh of the Karin's a will Investor today's quarter www.hcigroup.com. third strategic financial update, our Mark To webcast, will visit please of Information operational update. at website review for XXXX, corporate and

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

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

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

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

Karin Coleman

everyone. welcome, Matt, and Thank you,

HCI our all Serving fully XX priority. our who why that impacted customers, top with here. landfall X It the quarter, discuss hurricane the day, policyholders and hurricanes, ago. time thousands was just navigated as it who been the I remains would prepared sympathy affected when have made like have will our XX. on seasons Ian of major we Having September reminded weeks we take we're several is to for our storm been recover. and Hurricane Before Category Florida express Ian, to by we're hit X the work Every sincere

answered XX TypTap. calls, to voice proprietary Homeowners the hard to teams work just and our policyholders wait over service customer its policyholders. while we for Choice thank and providing XX,XXX across ability human technology days, received our dedicated Our After landfall, Immediately times keeping had associates dedication handling minimum. a a our Ian showcased our after process. made within of We to claims their all claims

processes Our specifically allocation, management claims systems drive and in oversight report through are efficiency to designed automation. resource

just have and On a Hurricane of real-time Ian our we claims reviews invaluable proven at preliminary handling. is our We differentiator that To in presentation This October to our comfortably information line over web posted unique towers. reinsurance fingertips. estimates in we is transparency XX, a shared date, in with our is the consistent and with loss page. received initial within XX,XXX our claims

of from Hurricane million for impact in detail financial the If to Now rate provide of and the moving investment X.X Greenleaf quarter sheet. additional million pretax balance $XX the to numbers. from The a subsidiary. of our carriers. not the will and on acres actions in income of was increased the XX%. year, in we resulting last year, results. spot $XX model net third gain diversified including our This Ian, ratio, both $XX another million have a premiums million both reported In land decline than of a sale potential quarter, our generate on of was Mark at bright for highlighting over company. improved our more to the income frequency would income our quarter, excluding claims reflects for points daily X our our more loss quarter, third Investment ratio power business profit Ian in earned than these more the Ian, while a improvement the Gross grew XX% last $XX over loss sequentially quarter. in loss for

Excluding this forward short-duration we rates cash in sizable investment instruments. year last portfolio. to gain, income more increasing we With put over to income generating our investment work hand, doubled liquidity debt look on as from portfolio and our from plenty of

to we to capital Finally, returning remain committed shareholders.

to the fourth During at to results. paid our provide to our detail execute share I'll per on to Mark it a dividend quarter, now Mark? our financial And similar buyback in And we October, $X.XX continued we declared consecutive XXth paid and share. over in turn be the more dividend quarter.

Mark Harmsworth

agreement. well in Ian because on are gross results changed. the website, trends expense little of month of event quarter, an to that was related I total presented Ian quarter. we impact Last that million accrued significant multiyear that a a the benefits this those for obviously expense our net have expense harder numbers as to reinsurance as under not had we some explain higher reinsurance Thanks, Hurricane Ian. wanted the as on loss higher and impact $XX positive business million million, and Karin. $XX.X of some also see our The of discuss Ian impact our the estimates. I'll reversed loss $XX to

reinsurance we by the explain tower. you impact and As know, reinsurance have a towers, few different I'll

For Homeowners Choice, $XXX growth the reinsurance million, tower limit $XXX is is loss million. the and estimate

is Florida limit reinsurance for the For TypTap, the tower million, is gross million. loss wind $XXX $XXX estimate and

these is early of limit is estimate non-Florida loss the reinsurance $XX For -- for could tower reinsurance are million, as the expected are, these are And change. million the the estimates. of while $XX And limit tower, $XXX million. TypTap lastly, million. against There gross flood, $XX course, it's progressing is the numbers things and and gross still loss expected,

However, claims these reinsurance of we start towers expectations. our capacity outside significant should develop in to additional have

quarter. from million million. turn lost pretax in of basis, let's the loss quarter. $XX.X the On to So third The we was $XX.X a the rest Ian

investment over are is to a And and obviously that There positive income down ratios so made up. quarter. we Loss are coming $XX million point trends which I just pretax, before strong Ian, two going is wanted out.

loss Let's ratio about the talk first.

This that ratio are There XX.X%. X X was lower Ian, If year the than points you and main the third things the quarter is quarter than quarter this impact second lower in year. more last drive this loss remove premium It down the of quarter lower TypTap. average the frequency for and the significantly policy. quarter and the last per ratio: this both frequency, year is third lower Claims second than severity is Homeowners than and Choice year. loss

TypTap. policy The moderate. average happening combination increases premium severity going premium while has words, is average average other In The faster started policy of thing that's than claim is increasing, average per per severity. up to in is other Homeowners the call, down it all these factors to is coming and resulting On Choice I down, ratio and come last loss than ratios expected. start for we both expected faster has our in loss lower said

continued we lower ratio. already legislative hopeful are ahead, tailwind further changes Looking a provide will loss the passed for

land second double sale came And I year, up. small investment about of that is a $XX what investment from increase. is will quarter when it as taken was The of and million, previously going income the Investment trend $XX it in announced. was the income $X that's just million million mentioned is continue parcel this to last over same income out, quarter

higher in see to are starting a impact We of very way. interest and beneficial rates the

putting short-term on our to remain meaningful disciplined and for is work, to assets. been more this beginning are with has results. money improving, and we impact strategy With cash to preference have returns now Our the a of over holding wanted end of on holding $XXX to company million the $XXX had million and at and financial At September, liquidity. I company estate. we well just of unlevered cash level real over touch assets a

This insurance one companies, is our the X of a liquidity we advantages downstream solid some may strong end but company available the year, more into have capital the of Before do position. capital a than holding that. having enough to we with of

back back shares when things September, combined back under our shares we've so far quickly. the end total a X,XXX,XXX in convertible of those as bought issue, couple part another with XXX,XXX And buyback the Just have XXXX. of we of bought of To program. bought

of As while number lower year. event. conclusion, at start XX, of was which obviously of a September the XX% In was the Ian shares than is X,XXX,XXX, outstanding the significant

a balance these well-structured We are a program sheet. and solid with for prepared reinsurance events

are I'll improve it to look important Paresh. the to an the homeowners' evolving ahead, forward Florida and to hand Looking role in over market. that, with starting fundamentals we playing And

Paresh Patel

Mark. Thanks

sympathies my have Let hurricane those to me by who Ian. been start impacted by deepest offering

and is business call, the commentary outcome. currently company to here policyholders lives. their the our on our care an working daily focused aspects is of is entire the and are future We a and following forward And why earnings policyholders, move rebuild to of the is is while help expecting which outlook the company take on basis, business a this everyone

So has the caused Clearly, Ian Florida that a been devastating let us massive to disruption a has begin. market. event

policyholders, the legislature. established opportunity has value our not with is but great that as well, However, Ian to including only history well, disruption great business, to main insurance, Florida the firmly and our others as comes of suggests which

one too approached, they no As thought had coverage bought Everyone appreciate had some more. even they wish Ian had and the much they insurance.

you special insurance technology any Going of past, is need Florida. are hurricane from imperatives: and forward, Because month range next succeed There and the In season. they insurance benefit. a the takes with we in in of for people increase. the do capital. that. for session insurance everything homeowners' without poised underappreciated that? that management solve to demand the in results. must only addition, and we to what going can Florida that need for have a four next team deliver seasoned it under No considering next have will is know The one Why session, will And legislature to outcomes then reinsurance, capital, are just the the year, availability

four, go be in in have all them to positioned always areas. good is need four talked But about HCI and let's uniquely all Group detail. at through We

holding capital surplus a but significant liquidity year level. First, is we raised capital shortage and at this of company earlier Florida, the in have there

well are for it. in decade now, within invested our as as proven both neither cheap this have quick replicate be we at is Second, point, and Florida. able Florida cutting-edge nor to systems over This technology to outside a

but been superior only technology efficiency not Our results. provides to drive has proven underwriting

regarding but debate industry. Florida next has is about its in is clear. reinsurance secured, needs be behind. of The to enough be the there secured our needs reinsurance there repricing, about be about needs already TypTap in for of the Homeowners And quality, Choice reinsurance. available The reinsurance we flight not there not will that Third, a to year. put, But for be is and total capacity let's we reinsurance Simply the be beneficiary. of X/X and a reinsurance shrinking concern XXXX. lack balance expect to should far

years. Florida have team navigated we management for XX in has that an Finally, successfully experienced

up event be to Florida for Ian upcoming we expect watershed are summary, XXXX. market. a In the the We challenges in for

We performance. that, high expect policyholders, company open we we that think and reinsurers instructions. year, will towards for environment. Next provide providers the we in please Operator, With thrive have capital will a gravitate to questions.

Operator

Carletti Thank is you question coming your the please live, sir.[Operator And is Matt Instructions] Matt, line from JMP. proceed. from first

Matthew Carletti

time there us a Thanks, update potentially put us a And that same with of Kind of thought new still a good few you follow of points you the I if hundred few hoping afternoon. you're subsidiary million could all? quarter, dollars’ you opportunity, pretty post at your Paresh, a worth forwarding process you a your update last opportunity? made. provide plans terms on terms kind better I the changed worse a Ian, business of actually of has from sizable if And to opportunity, on last fairly with thinking quickly. those books about just opportunity months establish was in fast see line kind can on of now an of in company in terms

Paresh Patel

Matt. Sure,

the those -- making terms of of are in setting we subsidiaries. through this, have towards line, So up we time been all progress

next continues So be stated, hopefully expect sometime and year. operating them we that and previously to up as

you goes in for the product in to prepared whereby demand as a people Florida, going healthy, ever, and sure Ian I that at profitable in said it's it a has insurance we provide As can every think, of is opportunity remarks, day. have insurance. really a you which than It's -- value crystallized the far be I of is as just the the to making greater we're who'll working customers my be what our sell mechanism question manner,

Matthew Carletti

color and comments Choice there of your needs having its Okay. you provide about reinsurance even other far some you made Homeowners and level, TypTap Great. not behind. yet and three already about crossed And in or then if the decision? thinking quarters can kind on items secured requires bridge any changes Is in there make of haven't the a I'm lines along those terms of of magnitude change to if pricing just it to you retentions of significant or having high

Paresh Patel

X. or to of is that I those simple when they But isn't the shrink. a be don't place how extent will aspects a flight they do going we first think think supply know who much the what of to Matt, to repricing or will is, quality, are reinsurance I to do with. the of folks want answer Yes. know that it the there And and people any about

not the nature a providing perspective are reinsurance is the the I so on of debate elimination reduction of those comments. a reinsurance, that's an was just in about that going So supply, all about yes. industry

Matthew Carletti

of up then, a Okay. just if And Great. comments. from some follow Mark, I could your

forward? you improvements moving talk Obviously, Are of You seeing we've little talked continued seen the improvement kind Or have expect kind kind of faster about that should that Can just continued in than of items come you you the kind bit loss should about attritional kind maybe? line expectations of quicker planned. improvement? a stabilization of we the to gotten of talked about the ratio. underlying some we expect more and we finish

Mark Harmsworth

be I'd anything going Good is about is continued expect improvement. But to we that do -- dependent. say weather Yes. Obviously, question. trends

trends As premium Arguably policy down. going Frequency up. the direction. that important, mentioned coming more my in faster average going the I prepared remarks per moving than are in is severities the up right is

and example, in XX% severity about the higher up policy average So third last quarter was X%. was the year, the about than per premium QX, average

there. gap gap the some starting that just to good increases of kick well think So in. may I are there's because And widen a seasonal

that X% in obviously, come So is come they gross XX% right? likely premium, in look, XX% And So this example, don't premium wrote I if or widen. fewer Florida, the claims for written in Choice may you policies, just gap Homeowners policies. think quarter, from more with but third from we

going had -- come that down So right of the impact to come couple it continue said drop we the on we to moving keep but the because improve. those call, started, last I in points to of to back where down to We per think things. came think I third we I -- expected, would quarter, it we'll than the that faster it's it I a quarter to Obviously, in trends expect think dependent, doing of are that. But that's QX general it couple I the expectation to course. see a to quarter fourth points expect is the weather and still increase in of direction, of

Matthew Carletti

both for Very color. you helpful. Thank the

Operator

next you. Thank may Instructions] is line you live, coming is from [Operator from Mark Hughes your The proceed. Mark, question Truist.

Mark Hughes

Mark, pricing? X%. you us did thank up Yes, formulation, severity afternoon. for What you good gave just you say on

Mark Harmsworth

floor number that number. was consolidated So was and a a basis, on it

of this XX% the So third policy QX as average up premium end about to per is year the QX year. of quarter last from

Mark Hughes

And then severity up X%?

Mark Harmsworth

X.X%, X%, like Yes, something that.

Mark Hughes

Does Or is already just represent coverage? of of that dollars mentioned quarters is the Paresh, the that place. in you that tower Okay. three premium?

Paresh Patel

much you limit, it you're of in just it's mostly how terms buying. limit measure the Mark, if

I In dollars, because go terms Homeowners through think I that's Choice the I'll -- of mentioned. one for

session multilayer versus cover layer a was on down low, in reinsurance defer which -- we available passed us have next for cat multiyear the XX. then special year be have We the policyholders wrap the fund, and to will the we that those -- May

in those the all upcoming there year. pieces So will for of be us

just of So Homeowners it three for really the fills quickly out very Choice most needs those pieces. between

of many to know was and industry. commentary specific, sure general watershed the the I my thought things not is, general generalities was and set not Florida are we that Ian of in tenor that apart are Mark statements. actually call to necessarily moment commentary talking to make the whole. than really was apply future reinsurance, this a some us again, event let specific, So we in just to distinguish a do We also to disputing us the about public don't calls, the opportunities a has yes. were will the that's industry the going in earnings greater there in get this challenges much this on numbers thing for as for the make we trying that is that wanted you on -- a be because and from We said

Mark Hughes

you capital downstreaming? limits? think do could on of of give How once update Understood. leverage, much you that And ratios kind kind be do at us will leverage an the appropriate capital subs any you

Paresh Patel

Yes.

for for we items say answer pass, the it and whatever is, comment. And thereafter me reason do I to with definitely what no think, Let they year-end. legislative that the and session color that will special that upcoming

I already and how it money. very we think is as with we in special But what the on a dependent is allocate session. be do to, what to we Mark done alluded have going

Mark Hughes

$XXX mentioned million, you the that's the of estate, then $XXX unlevered of $XXX and When million the million holdco correct? real separate from

Mark Harmsworth

Yes, yes, The holding million but addition to I'm And cash, so stuff yes. cash $XXX is that also, at either. estate facility yes, -- credit the that's most of level. of is near insurance in real or outside is company counting in it. And not that's the company, that the that

Mark Hughes

adverse you a What I about quarter. How had are seeing the that development? think, You little, lately? last

Mark Harmsworth

Yes. for thing back of working would couple them, said just Ed I QX specific say same is QX, XXXX as TypTap couple some -- of last well. that I a quarters mean of the through. in It's -- in we're there's in that accident I one things. there's a for the

similar there, So numbers it's to QX.

can still it's true, more So there. out in I it'll of too, loss that it at right? timing you that regular higher and -- paying were that's September things end the before, reserves said the of distort if a the yes, about other were we're thing there's that kind take -- look ratio, of cats out, reserves in we're at If at just of But think, $XX December. sort the And because I've of million kind you bit. right? payments and than included But end of some that's reinsurance thing, but still of this non-cat expensing we than with

So we're see still a dealing that loss while they're where more with adverse we're rations expensing situation and improving, than those we're some you paying. still we're in

So reserve. we're still building

Mark Hughes

as are kind is fourth be the you this What's think you we a -- you of in until Are biding growth act? here how your Yes. time quarter your Do speak? looking Yes. time good kind legislature at the growing? of to

Paresh Patel

me one. let Mark, take that

Ian, sort I And think writing business. year, pause yes? we the it given until the does, the what's laid of out balance to makes of given paused the what -- this know you sense legislature for

Mark Hughes

Okay, I you much. it me. Thank very think from was that

Operator

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

Paresh Patel

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

we earlier importance the product There the call, end importance comments. for my As for a of increasing an summarize our insurance is of I -- a realization and market. to demand this want healthy

in the a providing management call. great look update opportunity. Thank We opportunity on earnings to a We front in our an have we the next right you. have Have evening. all team to pieces and us, our forward to execute tremendous in benefit on from progress place of this

Operator

does conclude today's and ladies this gentlemen, you conference. Thank

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

HCI (HCI) 11 Nov 222022 Q3 Earnings call transcript