HRTG - Earnings call transcript Q3 2019 | Heritage Insurance Holdings, Inc.

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Operator

Good morning and welcome to the Heritage Insurance Holdings Third Quarter 2019 Financial Results Conference Call. My name is Brendan and I will be the operator today. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. Please note this event is being recorded.

to President conference at like Soleimani, to now Vice Executive Heritage. would turn over the Arash I Please go ahead.

Arash Soleimani

of where Good convenience. morning earnings available to section for you today. call We website, and thanks These review for visit joining will be replay the materials and or earnings release the us archived. invite our our investors.heritagepci.com, are Investors your at

on These Securities forward-looking current based Today's the Private Act within are contain and in to management's the statements and Litigation call statements of subject XXXX. may of meaning Reform changes are expectations uncertainty circumstances.

release In our results earnings filings, in press our differ that to and risks detail may future cause we material expectation. SEC from our

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

forward-looking on risks our and release description XX-K, For forward-looking that from described the report a to and results SEC please in of annual Form cause statements, our those the materially differ filings. earnings other to could refer statements

on the Kirk Lusk, With and Lucas, Financial Officer. and Chief Officer, call Chairman Bruce us Executive our Chief today are our

over now Bruce. the call to will I turn

Bruce Lucas

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

the dedication of thank like I'd employees for our their begin to we to Before call, company. our all

in Sales were our key well strong third internal the and and earnings metrics above were quarter all of plan.

platform, on We generated continue entire to personal business our of footprint growing strategy focused of of execute leading outside and outside is industry premium on our XX% our alliance that Florida Florida across diversification was new

and XX% acceleration second business new quarter, quarter Florida the year-over-year premium the footprint. business premium second and business X% in alliance in XX% seeing from our year-over-year, premium increased In Northeast new Similar decline sales ex-Florida, we strong an XXXX. increased are the of X% to year-over-year, a new across personal increased Southeast the

launched that fueling also in and Hawaii new in are Virginia products future our operations We growth quarters.

quarter new the company. for quarter was record in the sales business a third third New

prior than growth expectations, be faster grow continue to to continued sales solid. will believe and business new Our I

in years. the likely as we exported While and used will will our pronounced have that be prior Tri-County offset strategic as quarters in continue, non-renewals but growth to not

largely and Tri-County plan a not strategy much today. versus been is the TIV has nearly X.X% Tri-County years, the exposure and example, was our half initiated. at beginning the last XXXX of in By de-risking because is was three there to at This as when very of our third way the our end approximately XX% de-risking quarter of drop aggressive

the quarter a trend had third As we result, line this and to continue. expect positive growth in premium top

am development strongly loss fifth I are favorable quarter, Claims be continues paramount in sector. the and however exception issues. to continue the and to will and reserves the that ratios had cause which happy I always Florida for year we reserve year higher a to development across our prior reserve believe in the adverse that prior aggregation report in consecutive Florida market. Tri-County

largely Our the of development factors. is favorable reserved two product

of First, in best companies are being sector. our for one known we the reserve

and losses company Tri-County. the loss Florida typically the and other in have in typically reserve reserves less being and company despite weather are and group, for the first any report large in smaller We concentrated to more peer

the last have Tri-County industry years. de-risking the the a We the led from half in over and three

and Since approximately Tri-County. TIV from XX billion that time, have we the dropped

significantly. of percentage As new dropped claims and Tri-County losses has we have dropped TIV the

a them the related less development major reserve quarterly another Since of in related The favorably. twelfth to drop of litigated litigated helps record the low and Tri-County contributor the litigated is development claims claims the consecutive to Tri-County quarter the of having for yet set the percentage company. claims to third our percentage are

rate value growth end our This share $XX.XX. quarter a year, severe book value strong compound some this of the represents losses Despite very our book to annual and increased XX.X% of weather per the light an since increased quarter. third has XXXX in third In X.X% significantly.

our discount retiring program. repurchase million we third at below to the $X.X value. quarter book Our intend as repurchased operating And as results strong stock we been have are our of and to And intend common third to a share very value. we long continue X% hero quarter trading shares continue we

call I to will our Kirk details now to turn financials. on over provide more the

Kirk Lusk

$X.XX and Bruce. or $X.XX Net up Good income from was X.X X third diluted per was quarter morning. or the of per share share Thank for you, quarter XXXX. during the million million diluted reported

million X.X a outside increased XXXX. in decrease strong written Florida outside of million or million Florida offset decrease by de-risking a premiums, Florida driving in Year-over-year a have X.X%, million XX.X Reflecting partially quarter X.X X.X% or Gross planned or written growth from of year-to-date by X.X the growth million. X.X% third or XX.X was premiums at X.X%. Florida of with

the since and in taken on area. actions future prudently de-risking underwriting we Tri-County of to amount diminish continue expect XXXX, We to Based pricing our exposure the in evaluate quarters.

profitability Our long-term and. position us and growth growth, planned to management has strategy exposure for been

An that risk in while our the seen time, XXX to states our over by able of of improving by decreasing the area. our balanced southern TIV our exceed in aggregations growth outside PML expected at example we're and approach XX%, growth be our to Florida. year can Where same

As of our experienced expect to growth outside Florida continue. XXXX, we in

XX% our Our retention been platform. throughout has strong at over

XX% Our digits Florida. in rate for averaged increases outside over business year have the Florida of increases mid-single rate with this

The the quarter reinsurance changes synergies the call, the to quarter ratio the premium with along share XXXX of down during quarter earnings X and treaty. down quarter XXXX. ceded points gross from The described the was second the we third X.X reflects points percentage of for decrease by second by

of the from of quarter XXXX, third the up QX quarter. earned XX.X% quarter XXXX Losses from net ratio are earlier. million changes in LAE to XXXX. net of year compared loss the for for noted were XXXX quarter X.X% up premiums XX.X the XX.X% prior The third was reflected the third

from points. the the ratio the impacted weather loss for increased events net hurricane by related ratio multiple quarter points XX.X Non by and loss quarter-over-quarter losses X

consecutive solid year development. a XXXX record a we quarter costs as the virtually down prior fifth Our remain are flat ratio and position of standpoint. quarter favorable loss slightly in third Policy acquisition from of the from reserves

structure. quarter of million related the million is decrease costs were General from million QX at from down XXXX, are and the partially during change business non-core XX.X from acquisition due items XXXX. offset administrative the reduction X.X by XX.X The quarter X.X to which commission income reinsurance in QX XXXX at prior to year ceding booked a third of million predominantly in

as offset percentage from premiums net XX.X%, was QX reflects a of as loss XXXX. of in expense The lower increase which up earned increase a is net ratio combined quarter the by partially ratio. ratio for being the XX.X% the The

a the X.X to during of than million the lower third the by quarter year-to-date of financing and fourth third year-to-date X.X expense for XXXX quarter Due quarter a million compared is completed lower last of year, XXXX XXXX. interest to

from XXXX. end increased million XX.X increased X.X% quarter million Book XXXX equity and at share X.X% XXX.X for September by Shareholders' to X.X% by or second year-to-date year XXXX. of value the XX, per

of XXX,XXX to addition repurchased dividends X.X% In shares per share. cost below $XX.XX, million also September in an which the X.X average XXXX shareholders company of is book the over XX, year-to-date, stock at paid value and

million in of of August buybacks authorization Board of for million XXXX, XX $XX remains stock Directors by the of the authorized of over the stock. just Of available purchase

in As the the September revolver. of and cash $XX loan over million has million on XX also XX, company of non-regulated has companies available

your are questions. I take available to now and Bruce

Operator

ahead. [Operator session. question-and-answer with the begin question from Instructions] now will comes Barnidge John We Please Our O'Neill. go first Sandler

John Barnidge

the on Congrats quarter. Thanks.

on in amount it that for be turn your AoB next there claims if the the of didn't case. you releases out talked 'XX You thoughts surge that? to might few a be on coming XQ revised call reserve the Can a in please from reserving provide quarters significant

Bruce Lucas

for months Obviously, lot thanks a now that Yeah, tell through. the good come fighting early to those surge we're a we're claims It's AoB – of too to few claims. what that question, really a right the have happened ago. surge with just is comment. John. do going in And And

reserves, it's midpoint we're reserved our really of the the than I adequately that more in look early are we So tell feel we at but above actually reserved, we can you range. our cycle, as that

I Florida be company wouldn't other high. they they every asked that if are, where you think

have So those how we do cushion feel there. know adequately potentially as are maturing. some about But a time pretty develops, we'll and strong reserved that more we bit losses little are

John Barnidge

benefit Okay. – a as know there from XQ there back think thinking basis in be should comparables on a and was how dimension 'XX? CAN, XQ and net we to I loss about 'XX, look we

Bruce Lucas

on gotten repair CAN in with I is CAN Yeah, getting that for the really bang the buck The we're the issue opportunities in past. biggest the we've Tri-County. the not was mean, really

penetrating higher it's our than benefit get like gotten we're claim years. claims we're in a a water de-risk of net-net to you anywhere and times else, prior we that that success and not same exposures those having the Tri-County, out as we've of If extent getting reducing there XX lot

until really it's impact develop a so at And the more northeast. quite minimal things point this in

John Barnidge

Okay.

not XQ claims specific. 'XX the the necessarily On the when call environment Heritage about broadly in you're industry, talking

worse getting latest in thoughts Florida, it of your not said fraud provide you You on and Can better. please? issues was kind

Bruce Lucas

us the go attorney, question. are that And County. tell general Orange and bit us there particular, AoB to that quad happens, going you're the out County, seeing another think do be getting whether party especially PA Florida, or legislation. just for call new the the I quite but things worse southeast would concern my is time in well, lawsuits. direct in I down I But is post of Yeah, do think in a will claims market. great environment, to that activity not will to first as they're in

I but particularly XX% TIV few we've versus years we X.X% toxic the it see getting don't grateful soon. And slowing think worse. anytime very are we started there and I that there dropped ago, that are down a process, when to things our

John Barnidge

catastrophe Okay, ex-Florida? my Thank you. Florida and quarter you weather dimension in last the question in and losses re-queue. Can losses versus I'll

Bruce Lucas

probably the Florida. are in bulk of the Florida quarter be in XX% Yeah, those going to for about

Kirk Lusk

or Yeah, as if was it decent contributor small correct million me Dorian Dorian. I'm range a event, somewhere but relatively That's for so well, think. somewhere, was the in I X wrong, a

conservative taking pretty we're a there. So approach

and throughout some of seen you haven't events just We overall, a state. health that rain it's get of events on the a claims Dorian. lot lot But

Operator

Sleiffer Our KBR. next question from Please Frederique ahead. go with comes

Frederique Sleiffer

left Michael Irma losses and how right IBNR firstly latest wondering just your morning and have storm Good much do what gross each you remaining for and now?

Bruce Lucas

eventually Yeah, a of our to tend we haven't consistent catch reserve much raised put some we lot eyebrows with companies and us. year, for last than would we pretty decent higher up. I changed when reserve, were up but really numbers that we way drew mean, they the people thoughts those

see cat think to and reserves. I total IBNR. daily couple hundred reserves Irma, or with are on reserves both we're a starting on that so million around now probably

million million that AoBs the out claim pay up it negotiation coming think the are in I'm a are claims just it And We're it them so in there's their roughly, loss of high a of a insurers in us the makes to activities, and XX a event. seeing attorneys, of on And very I I somewhere concerned that been much move. process. the that quarter not of think lot put is more difficult pressure about well, some one a lot really resolve Michael XX the bit Panhandle. range. that lot of the is a up Severities seeing of all Florida for about little activity out in incurred of very moved there. Michael PA lot

but activity ton a there. not of So we claim are some increased movement, seeing

Frederique Sleiffer

just pricing? and that know given recently. you activity early got some Okay, the an then it's have your renewal, Do impact you that could have and but too upcoming the elevated I recent could a reported Japanese Michael peers renewal And on do think Irma and it. little the reinsurance creep think probably last wind also impact

Bruce Lucas

about but issue the is priced back can Irma, year. PCI we going our because of reduced the from XX around I it barely his actually of to we portion Fortunately Kirk that meetings. in for it lack one But in with call, example, Florence. save Harvey, in think reinsurance met place the diversification potentially have Michael helps is Capco look got the this massively us. I a Japan the were history of not and in any stuff market. place as period The is XXXX. thing really. some I XXXX collapse states, again that us, capacity over we our of single saw with were of tell capacity. footprint. reinsurance in a it my of the are lot were we an supplier diversification in buy that which projections continues, not panel. dependent that just number PMLs. think earlier plus take last noted retro in is concern return Same company's will with was increases where on one's in in retro the taking retro there even stats interesting we've of retro, TIV No still of huge And that able capacity our very We And like? some panel to was think upon in any Southeast the year. highest of meeting were XX potential events hearing in talking market built trend offset We're what retro that those that for that hearing that creep that in issue that loss Not I we That could a ex-Florida, things, there's the hopefully, even the every million to market. squeezes was, you the got mentioned

So off last really the on multi-state the years from paying growing three we've pricing. are seeing footprint reinsurance synergies the we're been the

Frederique Sleiffer

down But you those the down all your your just are Tri-County any following missed then and non like comments? you are on Okay, It AoB And on quickly, seeing I you are some given sounds might or up expecting counts ratio as loss have much claims? Tri-County the claim are of it. comments as also and claims made. Tri-County not in impact at what previous

Bruce Lucas

a over de-risking really that three records counts a quarterly half counts litigation are that's But new Yeah, and a anyone Yes, at given that's as shock think question in we've past years that claim I XX once done good massive shouldn't row. again and Tri-County. well. and Tri-County and quarters the the

County, you open been growing lot As cetera footprint I those the in Tri percentage ex-Tri-County. Tri-County. claims of result growing a the because ex-Tri-County can been at of a the have to losses we've easier et ones growing tell But outside footprint and our resolve losses than of are

market, in seeing back in just add that pretty any a for we five row that, impressive So seeing favorable not I are we're reserve earlier as in the mean Florida is statements anywhere moment, Tri-County. if development, I a could companies the of quarters of reduction team's I in for it's my reason mentioned this the Florida. A in

Frederique Sleiffer

now? good Okay, bit. was right the loss into core, for thinking minimal net going us year, are the ratio of forward be from XX% about last should XX%, core then sticking the It CAN just with given sort rate elevated a a run and XXXX we benefit and

Kirk Lusk

you Are net about about you're loss talking gross net? talking of ratio,

Frederique Sleiffer

ratio. Net loss core

Kirk Lusk

less. a area, so bit yeah, that little around Yeah, right

Frederique Sleiffer

on how lastly we accelerated those this the quote management, should of over share so bit thinking a forward? last just repurchases capital pace like about quarter, And Okay. be going it seems

Bruce Lucas

we of company. the great the We're massively people book great across it's going I in lot we're below is we're going on to and back to be pretty all top to pound Well of on and we're we trends line reinsurance, growth value. that continue buying lot the We're looking that equity. returns We're financial a with stock. Yeah, to everything of it up meaningful $X world how at a are board which fully doing putting undervalued, the incredible. think don't reserves, way appreciate right believe

Frederique Sleiffer

the thanks Great, for answers.

Bruce Lucas

you. thank Alright,

Operator

ahead. with question Carletti comes next JMP from Securities. Please go Our Matthew

Matthew Carletti

think, of two the morning. do been Good past that have partnerships just stands? you lines with last questioning, in update National I mine one have of launched of answered on been you left. Bruce, thanks. you some insurers us those specifically, other I Alabama I update Most with hope Safeco have hoping in but had could the Hey, could I you where works your with was might spoke us I think toe we in General; dip and have just Connecticut. the

Bruce Lucas

pretty with on get time National not a as a that’s building one Well, question. Yeah. is relationships. you on we spend we have Geico, noted, and Safeco, I the And is any that of them General, partner. into National lot it something We, legitimate will specifics

We and to not an they have agreement data of all release. our not with partners the proprietary business that view have of transacting something that's to that amount we're disclose as We that prefer together.

going we're line portfolio of to the yeah, North in Alabama and is significantly, business state terms southeast. well. of outside Carolina our in the growth our additional in percentage little that right one sizzle. of state, up the to that. every the very than northeast, Florida. southeast you that's this. up So across by more sales – can been respect From book in behind single of a especially I doing across the tell And are into it's business been is now number way ahead we've continues perspective, we're riding just in in made plan expectations Hawaii. Up Top we're

very we're are progressing, how with can't about but any specific the So of we give happy data one them. partnerships

Matthew Carletti

color the Appreciate enough. and fair of best luck. Alright,

Bruce Lucas

Alright, you. thank

Operator

follow go with [Operator Barnidge Sandler Please next from up is ahead. Instructions] question O'Neill. Our John a

John Barnidge

ratio Thanks. about did your Can you in ticked current expense down around the it talk thinking that? you a row sequentially quarter quarter in the third

Kirk Lusk

going so it's about think But bit. of some give I actions going it's it's forward to have to be. I to other seen we've a of and the mean, P&L be we I through going think lot we're think a – ratios. overall, to I where the stabilize, it's – want come starting promising little I don't probably mean, Yeah, probably really stabilize on guys

John Barnidge

kind 'XX and about we about talk we consider should how revenue in you and of XQ that net that run Were a rate? forward? income level Can we the numbers could investment be going other thinking saw Okay.

Bruce Lucas

Yeah. Yes.

that somewhat consistent I what they're, they're with think been we've saying.

John Barnidge

can my there's in Florida And kind in and question, I Okay. industry of interest Florida? troubled know outside previously environment you talk been your the last M&A Florida. about insurers and about of commentary

Thanks. don't So outside also to that's you, I but that be something Florida. would if know advantageous

Bruce Lucas

there's Yeah, We'll of really John, failures distressed. right for is best time quality. of. not And Texas seen been we A be citizens we in aware for don't a it justify on because our the there Yes, I of out is there is But that have we no, out question. there's get wasn't that synergies all metrics have that an from the that insolvency credit acquisition it. what Florida. when fit think is time. to a struggling some But haven't out market a that's us portfolio. really no some that everything, placed of secret lot see into much a radar a there sale been number companies really any policies environment. out companies well bad left. there didn't reinsurance as Thankfully, there now claim have Texas the there And you we in even and the off has to of there think that lot think into stuff we're maybe And that that break say highly consider are it's hit one followed good never to I been but those after picked, they timing some in of companies us, saved good are

growing top M&A. focused have yet going and book we're So start that business all. the to our is cost. even we're focus we radar on our to going there's of record into on organically, really to now, line not lower to move XXXX acquisition looking do really at on We're for a again, because so growth not It's

John Barnidge

and are any seeing book Okay, the citizens then you opportunities in itself?

Bruce Lucas

No.

John Barnidge

for the answers. Thanks Okay.

Bruce Lucas

Thank you.

Operator

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

Bruce Lucas

earnings for like joining third call. I XXXX would our everyone quarter thank to

Operator

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

You may now disconnect.

Heritage Insurance (HRTG) 1 Nov 192019 Q3 Earnings call transcript