HRTG - Earnings call transcript Q1 2019 | Heritage Insurance Holdings, Inc.

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

Operator

Good morning and welcome to Heritage Insurance Holdings first-quarter 2019 financial results conference call. My name is Andrew and I will be the operator today. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. Please note this event is being recorded. Instructions]. [Operator to at over Heritage. like Executive Arash the President Vice turn now to conference Soleimani, I’d Please ahead, go sir.

Arash Soleimani

of statements Litigation where Good and call we Reform and convenience. morning on Act earnings expectation. In of available to are the cause within section These for you are uncertainty based SEC statements detail today. current call XXXX. may to our We website, and Private thanks These meaning may from that review the changes for our contain visit and joining will expectations be filings, Securities replay the forward-looking risks in our release materials management's results of and future or earnings Today's differ circumstances. material release the us archived. earnings invite our our subject investors.heritagepci.com, are press Investors in your to at

and any may no as Our have obligation we are update to make. of statements we statements today, forward-looking

are description filings. Executive of materially from Financial For SEC differ risks other please now Officer. call our forward-looking Bruce our today us Chief on Chairman earnings will and and call in Officer, Lucas, the Lusk, over Form the the report Kirk cause described refer XX-K, to the turn statements, and With could on and a Chief release Bruce. our results I to those annual our forward-looking statements to that

Bruce Lucas

welcome I all earnings our to you would quarter Arash. call. like Thank you, XXXX of first to

very our quarter we of I dedication thank our our with all the employees first like am their I'd to to Before for company. results. begin call, happy

insured or Tri-County from Florida's region. billion year-over-year of X.X% Our gross TIV, increased written despite value, total derisking premium $X.X

only as related X.X% premium to by of growth premiums in but Florida, is diversification Our gross by Florida. X.X% written outside grew multistate our primarily

believe only the see is book our of XXXX, away be projecting XX% by we Florida We which from end diversification Florida-based amongst Florida are the continue to within shift of carriers. the to best and our TIV

stems from region, well of only As first business Tri-County quarter, below the residential is Florida personal our consolidated our peers. publicly-traded in TIV Florida's X.X% of which

expand geographic Coast and first during New and commercial East continuing launched residential wrote the footprint our across in program our are Virginia in first Jersey We to policy quarter. our the

growth business year-over-year particularly have underwriting and is been highest in in are leads high we the premiums impressive, Tri-County in claims derisking per states. Our southeast where we that considering our Good avoiding experience. of to have among coastal country concentrations the been Florida's policy good

every consecutive is we favorably improving This Tri-County. the quarter loss our reserves, from for as quarter-over-quarter especially evident quarter is active Heritage's over prone away and over in impress for record is Heritage's I The down the is as points areas. the concentrated claims percentage in and lowest exception year. every claims outperform It in long company Tri-County metric points the Similarly, in in from history Tri-County in a loss year-over-year. will region which and a diversify market. is have first to losses XX diversified the continue which year year-over-year not run, away which quarter, XXXX. the metrics the of of the company's non-hurricane claims in virtually XX the at Florida low whole group of these that Our developed the new adamantly is non-hurricane have the down the open noted that Tri-County Florida's that heavily surprising is percentage third is Florida companies peer in Florida's

going only in these improvement we continued help trends expect on business and results forward. of plan, our in reform Florida of loss Assignment We execute passage our the as will Benefit

retention with this of ratios Brevard $XX.X at March. a net County hit until the the In hailstorm we Our end were of in excellent first million large first connection quarter. quarter booked loss a event,

forward, storm continue first debt and reinsurance, management, excess from retiring $XX.X develop we of principal million not do balance our of covered quarter. in in Going of expect to the losses strengthen by losses capital by respect are to we to sheet above number current XX% this reserves. With the

We a discount book share. also to quarter value the repurchased first XXX,XXX per at shares X%

Kirk Our will our share committed value. of on remaining price more now our the our is to share financials. to repurchase turn fair long common as $XX and retiring details over I below authorization million call we are stock is to provide as

Kirk Lusk

Thank quarter diluted share. Net you, $X per equates Bruce. $X.XX for income the morning. to Good was million, which

our quarter, I on the Before address seasonality. more going to income would like into net details

have typically is As quarter heaviest loss NBIC. quarter we previously stated, the the for first

net As any hurricanes, with quarter the weakest income to in to again weather. net quarter We first expect such, income year, the progressively exposure due years we throughout strongest. quarter stronger absent the to our non-hurricane by then winter the far be being our expect fourth

well are risk we've steps taken overall given to and positioned our improve Looking diversification. profile ahead, believe the we we

was or higher resulting growth outside a gross at driven and in premiums-in-force X.X% of the Florida. by One structure by X.X% premiums-in-force In XXXX, of X.X%, quarter, grew million in-force outside premiums-in-force. million decreased in premiums growth written Florida year-over-year by premiums diversification. steps increased our XX, or while Florida March as $XX.X $XX.X the X.X%, at and by Florida includes a better those same and the growth which time X.X%

increase in We reinsurance we diversification synergies absolute continue via June X, in X.X%, XXXX which view offset into increased net and XX.X% insufficient. up encouraged equity million XX, to increase are geographic by are quarter year's prior while The we year-over-year. the earned diversification for quota share Ceded quota and quarter. and improving Heritage's expand the over and and reflects believe $X losses geographic gains the NBIC's on obtained unrealized we partially quarter in premiums revenue NBIC's accident yielded XXXX XX.XX% was and current gross reduction from from metrics. to securities. the shrinking higher The to ratio reinsurance down million reflecting areas already from the in LAE. rates by were X%, ceded more net the stems $X.X are XX%. share geographies claims has first synergies, premiums from in December ratio Total dollars to by increase profitable or the premium Losses that decrease net are

Our third reserves remain strong. favorable And first the XXXX consecutive reserve of represents quarter quarter development. the prior-year

litigated program. higher as internal the Operating that of XX.X% is number metrics to we for XXXX, benefit Overall, open commission the In have quarter. XXXX, company policy share XXXX exposures claims mostly two addition, year-over-year, Brevard predominantly benefits first impacted purchase open began impact statistic the are our increased In NBIC-related due That lower due percentage our of XXXX first year-over-year costs income when of claims. General expenses area, associated aligned acquisition Florida as staffing, to accounting our to the quarter purchase ceding claims. both costs favorable in were and is gross reduce trending a of improvement to compensation region XX% and County NBIC for slightly acquisition the and accounted non-hurricane to in which with and been performance. favorably claims of XX%. in of quarters Tri-County's net first ratio the our total we mostly hailstorm. than with the reinsurance the The quota third reduced policy administrative the the now smaller of accounting projections combined by down expenses quarter achieved normalized

expense would million. As the value of Book the million were anticipate million amortization quarter $XXX.X our stated expense $X efforts first that quarter $XXX.X million $X.X million year-over-year. and year-end we the at In by interest XXXX, by year-end XXXX, refinancing debt reduce over costs of first the issuance increased $X.X for interest from to XXXX's annually. down

is XXXX. value Bruce share quarter increase I per $XX.XX, book questions. and now year-end your X.X% available XXXX to a First are take from

Operator

[Operator Instructions].

go of ahead. comes from first Sleiffer The Freddie question Please KBW.

Frederique Sleiffer

morning. Good

Bruce Lucas

Good morning.

Frederique Sleiffer

an Firstly, of Irma wondering on your could estimates and open those. I many if was for claims provide have still gross loss each you roughly Michael you how and update

Bruce Lucas

there, It's activity hundred or right bit of there. we open have roughly still develop open relatively we're give It claims on is we're $XXX ton not Michael, and or Irma XXX now, here seeing higher, claims $XX but Michael Sure. X,XXX a to million continue probably in approximately maybe a total-ish, take couple unchanged. a will claims million. there. maybe projecting little

Frederique Sleiffer

gross Okay. And current losses, then, your much just Irma paid following incurred left? gross IBNR losses your and how up on what Irma, have are you do

Bruce Lucas

but breakdown loss things that those bucket together total of incurred is about all me, of each Well, front million. our have don't in I IBNR. with $XXX between the

Frederique Sleiffer

the quarter, at Okay. terms. ceded the Is your in the And higher X/X? premiums for they two that cost to related were little just then, renewal in dollar quarters above on NBIC bit last the a

Kirk Lusk

question? I'm sorry. is What the

Frederique Sleiffer

million more than higher couple $XXX little It two in the a The quarters. last quarters. and ceded premiums $XXX like million were last of the was like

Kirk Lusk

quota been. net The increased XX.X% has Basically in it Yeah, from XX%. an share the at to share. XX/XX, year-end, at net increase quota

Frederique Sleiffer

Okay.

Kirk Lusk

third the and in the have quota gross the quarters seen fourth So, reduction would share.

quarter first The the share. the net quota in sees increase

Frederique Sleiffer

just then, moving expenses. to on And it. Got Okay.

opening but 'XX? why Kirk, think, this were XQ in G&A lower so remarks, expenses on I you touched your your much versus

Kirk Lusk

and at A the One expense down year over when our some staffing we couple of then look is is, ear accruals year-over-year items there. slightly. also

Frederique Sleiffer

and just in on then, accrual And this expected lower was terms? accrual, your much how worth Okay. the dollar

Kirk Lusk

be. where we right was about It to expected it

Frederique Sleiffer

year. last that, on so And your G&A Okay. was up bit lumpy just a following

we on $XX guidance is quarter what run or Or should expenses. better that? on as can the any best Is G&A quarter's year's use a close on million this provide a So, comparison forward going rate? run rate you last that year-over-year to

Kirk Lusk

Yes.

that substantial. in to going I but future G&A be think up should our little quarters, a is probably bit tick not

Bruce Lucas

Yeah.

Kirk Lusk

I not bad. the say run is you rate So it think

from there. Just up slightly

Frederique Sleiffer

there tower you can the anything of – terms the you're any structure And pricing? of be that got or Any mid-year might on you your Okay, your renewal? on in changes hearing is it. then, making color provide to

Bruce Lucas

going, cannot on since indications on you here But comment. comment that, other our the our have haven't We fairly well. we I But should yet, think, hope than of we couple to tell is do closed can that weeks. it. next We really renewal I have can't pricing. in up I sewed program

Frederique Sleiffer

just book you'll AOB Okay. you offer move the legislation, think and and you And this you lastly, will do to non-AOB on any your do then, how impact product? think

Bruce Lucas

and are it some market. abuses fraud helpful the that to other in the side seen it AOB on Well, reducing I of the could But think the do got has the in crafty. some very statute we've attorneys pretty very, be promise Florida that

and going that the we're beneficial. But past. in we've general will wait reduce seen to So, see is this feeling This our is that happens. AOB what abuses

because helpful cap. It's Benefits. it's of on think Assignment in surge you that's particularly after big hurricane losses the where I the see

Florida's in there. And region. us. We been Tri-County AOB biggest there for see so, that's two-and-a-half billion the reduction over impact that lot going to $XX a has don't have past we have about in the years, But given concentration TIV do the of just our

So, not the the given dailies be it events impactful much an on us the will after for that Florida one this do to on outsized because return year going than number we I group. get you have But portfolio as of have of smaller think events. it's just a hurricane claims those

Frederique Sleiffer

very for you Thank answers. great. much right, the All

Operator

question [Operator next Instructions]. O'Neill. ahead. of comes from Sandler Tom Please Shimp The go

Thomas Shimp

guys. morning, Good

Bruce Lucas

Good morning, Tom.

Thomas Shimp

to changed? thinking for that, if your fourth cat going early combined has ratio. was And in then, just noted Do quarter XX.X%, much? to combined in ratio last XXXX. or an you how XX.X% does the the or add third for the hurricane around a to I'm out that load so, it XX.X% the you call right And On March, with quarter? start be like at still by a be your expectation expect include to in

Bruce Lucas

Yeah.

approach the not really a load a the guidance a given But We could We ex-cat and would cat generally guidance that load. tell that you did from now, giving cat not as vantage; are right we've there. result, I there past any be Tom. in not include it

Thomas Shimp

And for run we forward? the rate Okay. a that think expense then, should something going of XX.X% as was reported ratio, the is

Bruce Lucas

Ultimately.

Kirk Lusk

Yeah.

given we've previous still think, are think is our – previous I – on the guidance, or indication line. I

Thomas Shimp

CAN, can benefited much us that from then, in the underwriting how quarter? And you Okay. know let first

Bruce Lucas

what the hard We it's water do we remediation in it's really that We the know improves how the a a would ratios, it's but versus mitigation quantify tangible Well, that save loss paid quantify when what know without on don't effort? to we it efforts it we we're benefit. know CAN there. there mitigating know but because We to because would the that damage have much is be out the impossible it quarter. loss loss had you the at for

Thomas Shimp

was AOB reform. hoping I then, you could on the Okay. just And comments high-level give some

just environment Just Florida general. your expectations for the in in tort underwriting

Bruce Lucas

to to don't if least at order don't company that the And have that thing on that via of to one. respond if number losses we've Well, approach insurance fees who reported of kind notice. get is done fees is the all. and you the a coverage a don't if that mentioned seen opportunity the attorneys they ten-day I They're have put the they what attorney's think We've final that, to just we've within allows of and that give lot judgment plaintiff at collect our We Their on its attorney's seen. with complete get also it delta the abuse report number if in for determination stops Once that lawsuit, different attorney's up new sue, they to some does a past. that get of comes delta The tactics they hook in very parameters the a they And legislation investigation. advance. final is then filling They earlier. you've in by on seen high. collect settlement fees litigation coverage, is there a have is notice fees. to in XX% forth wants damageability our AOB statute offer. I It's on lawsuit. of they attorney's a XX% made an that than day instances, In the sets which one

risk we go lot actually willing across but that prove the win we get a to attorney's them in trial have and that that can tell And you fees. go are to future conviction putting we don't board, outstanding and will to just plaintiff claims internally. see a is And of on order are. really in we court, the the it's that to So, that damages to have I think

We will go to court.

to go We trial. will

in at them the numbers out fees, the we're attorney's make it. confident paying But so if claims, process, feel day examination our And will we that the prove correct. our We are end be that it. they're putting pretty of

litigation would it of of the no And a own really, a of lot the on high. pretty I the policy that think, the are chilling consumers signing insurance amount so, away that their think have rights impact that is I the consumer A now effect the get. under XX required their make to consumer big to I have information also And have X. they idea days right thorough point also you and pretty given disclosures on AOB. will versus that And the rescission chilling and is and will are detailed,

Thomas Shimp

was That helpful. great. Okay,

there case, the question. that's way the two volatility a weather bit expected about Just post-NBIC. I the greater you a quarters had than to one general. if have company now mitigate level first is last what before We experiencing And of quarter Are talk just first heavy more? the a acquiring you in want volatility to

Bruce Lucas

understand We for the quarter financials would in think money always can't quarter that say ever. in their almost – time Well, first of no. NBIC first I a they where do I made

the activity storms. fourth We how year plays incredibly of did So, they quarter terms quarter a nature be in And of Kirk's be we the in winter point always going company of quarter. an last in the first out for highest – volatile in earnings first to and money had goes will the have just XQ. activity as the year the the that record the northeast lose lowest kind of given whole, are winter because storm to in

not This as nearly quarter volatile. was

dollars couple as thousand hundred whole quarter. this I lost only a a NBIC think

share some well played gross We a it us. the So, try to net XX-point did took out increase we the for quota the actually to but pretty quota hedge of volatility, share. on reduction

expected. exactly with losses we the retained year-end. happy integration increase that in financial and is share that overall, our activity incredibly results quota from as at So, performing the did we vis-à-vis acquisition. had NBIC place But, the I'm

Thomas Shimp

you. Thank great. Okay,

Operator

Sleiffer And we go of from have follow-up a Freddie ahead. Please KBW.

Frederique Sleiffer

any on the losses Is reinsurers renewals do to gross – differ losses at you're coming gross have this I losses. just from is reinsurance does reason million? $XXX much have why not there related question gross Irma of not part increasing the up? And also, the follow-up quick a and Hi. how reason your the your

Bruce Lucas

moving not on We're gross reinsurance losses or based down renewals. up

We have a to adjust duty reserve. claims in

IBNR we now, time. we're out. the I know results what where are We is lot at number of had because we in a big really not seeing but this are change a Irma don't

another just haul, no file long question, second claims. our somewhat the idea the because I up respect part probably have months to reinsurers going to with have they losses. your things trend where XX to But of Over are have

setting have information we That's are I the think they our where have. they losses only probably them.

Frederique Sleiffer

you Okay. Thank very much.

Operator

comes Partners. & Okay, ahead. Dowling thanks. The question from of next Bill Please Broomall go

Bill Broomall

out beyond can to look FHCF do has Great, thanks. increase that renewal On the that from we the impact or term collected, would other AOB, cap is at industry? X/X that in reflected on that be the the be in legislation XX% longer X% upcoming any you think when – there

Bruce Lucas

reinsurers reinsurers Well, They the I'm adjusting to. The are models. good sure have their would underwriters. are

their the see of break But end, should for models that obviously, what Our flow I'm on to on – pricing And through at X every from to kind of reduces layers impacted models adjusted loads that I've year everybody. by that top into points cat put FHCF are does their bond but down it alongside their to if pretty LAE to they thorough. that, increase for partners risk anybody and LAE of pricing. that – points their have the an are They the sure it. XX yet are

Bill Broomall

just if this sure understand of without but AOB of legislation. lawyer make Is AOB an to AOB to a kind kind it kind more goes a one of And over correctly? that attorney's This assigned, is kind outside of mitigation, you. that addresses I I kind and claims a insured direct when thank just moving pieces of – I it signing legislation. consumer to the that and how am understanding want all the falls on Great, works. of there's fees

Bruce Lucas

region out correct. the always probably AOB XX% said to That lawsuits problem, balance is the book the of that Tri-County XX% is of And direct that. insureds absolutely on of the we've but our with is

– an insured to it more people because sign deposed, court, it to do to what individually the get Most do, that. difficult just don't Now, have go They to does want people lawsuit go examined, to want process. to under most is to through legal though examinations cross be don't want up do be a to don't oath.

through the conditions, required provisions, cross policy of not are the either. cetera, that totally and contractors and They you're to I want file going benefit to And And success that under However, skirt deposed, to be When they that going lawsuit. have These of then oath. And are were and to more to terms the policy you're process to do Benefits than want submit lot going most AOB the examinations refused to et to are they're willing able to with oath, Assignment that. all the of a AOB took different position the to are there's the hesitate not not the They ballgame. the they it. you to under just of think cetera, corporations do examined, by when not because vendors lot examinations et were bound insureds go submit the that payment. are a not of policy insured. to conditions terms taking really

Bill Broomall

auto. strategic offer where on And you with us and your you. you kind stand quick giving one quarter, bundled just mind Last one. Safeco thank partnership to the about talked last Do Perfect, of a home you with that? update

Bruce Lucas

But great a the specifically than We it launch to with about for had expand do some states. time our nice hoping that, Safeco. was It We've just I great in to a from this We're success us. they're comment production. of But We start other Sure. any partnership and get they're have to appreciate a did the never premium Northeast. – partner in really long that other is relationship source coming portfolio. we there.

Bill Broomall

us Okay. can maybe states many how in? just Maybe you it's tell

Bruce Lucas

are we one now, in Right state.

Bill Broomall

very Perfect. it. Got you much. right. All Thank

Bruce Lucas

you. Thank

Operator

the This closing like any conference concludes over Lucas for session. Bruce our question-and-answer I to would back turn remarks. to

Bruce Lucas

thank like quarter call. for first just earnings would I to our everyone attending

Operator

The conference you Thank has now for attending today's concluded. presentation.

disconnect. now may You

Heritage Insurance (HRTG) 12 May 192019 Q1 Earnings call transcript