HRTG - Earnings call transcript Q1 2020 | Heritage Insurance Holdings, Inc.

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Operator

Good morning, and welcome to Heritage Insurance Holdings First Quarter 2020 Financial Results Conference Call. My name is Eiley, and I will be the operator today. [Operator Instructions].

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

Arash Soleimani

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

our circumstances. Today's release are of Private filings, meaning may and subject SEC XXXX. statements to Securities within management's and on in of the are Act uncertainty our call based results material contain In Reform expectations. current detail may press risks statements our These cause the in to our forward-looking earnings Litigation from expectations differ we changes and that future

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

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

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

will to turn I call Bruce. the over now

Bruce Lucas

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

I'd other Before like health like unprecedented the call, company. all thank quarter. thank our first to for essential and personnel company begin to their the for improve, continued had to these tremendous care improvement our to workers The employees the all dedication we of of again momentum times. in I'd has also during The their company year. and service components over the core past accelerated this

and gross new first written since continues quarter. production the at growth up both increased share XX% per and in the year-end. to gross record compound premiums line and X.X% written rate is company business year-over-year, value Top a Book premiums new revenue had for a trend higher year-over-year annual X%

approximately quarter, the Our At markets our a end further of of I'm of market superregional with the more rate our diversified insurer. only premier Florida X% carrier region, outside the XX% in of and advantage. standing and and continued our higher first that this was reflects to unaware peer stable in Florida, shift solidifies as TIV growth Tri-County consolidated any consolidated TIV volatile has

be continues as consecutive evidenced favorable prior seventh development. of quarter reporting among reserve by our to year Heritage peers unique

During peers more development. We our reported that process adverse continue and often to same solid period, drive prudent our have underwriting outperformance. reserve will believe diversification, reserving

an to While for continues the homeowners economy, sector, resilient. be COVID-XX issue macro the insurance our core highly remains focus,

did macroeconomic far. all in business these and not new a April volatile guarantee are renters insurance, products sensitive sales conditions. other and see in a company. trends There do landlords lines economic economically of storm but March, don't homeowners, for drop-off we in incredibly and We we the is the record We continue, essentially for that weathered set an Our not interruption have well environment, particularly must-have new monthly so material no a regardless of business in write have and uncertain to insurance. sales exposure

conditions market of XX.X% the took first repurchased stock in below quarter first value We in our the our resilience at quarter. cycles, business shares economic advantage aggressively book average and confidence $XX.XX. we our through of $XX.XX, of an repurchased of price Given shares XXX,XXX

share our value. fair intention share We reflect repurchase long have every of price our not continuing does as as program

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

Kirk Lusk

performing company thank morning. personnel, echo like Good to Bruce's facets of essential well. our you care the to I'd are Thank workers, especially employees. All you, to Bruce. and health

up customers partners high proud and to levels am employees time, have how situation. During to service of this and delivered, our expect. our and distribution and our have very the challenging working dedication maintaining we greatly appreciate their stepped employees remotely in flexibility the dealt their with I

million $X.X of diluted improvement $X was quarter during Of $X.XX share, XXXX. or up share quarter year-over-year, reported per the the or for to due lower $X.XX due the million diluted count. was first income from $X.XX share and increased earnings was $X.XX $X.XX per Net to

XXXX, an continued During first first over value repurchased quarter of program our of buyback below quarter price which shares XXX,XXX average XXXX XX% share. and per we the is book $XX.XX, at

share overall premiums reinsurance premiums XOL X.X% million overall written coverage. $XXX.X last quota in-force. the the XX.X% gross XX for offset was quarter quarter earned The growth the year-over-year, Gross million, first or were to premiums coverage At reflecting months. we in up down million up premium written gross reduction Gross had partially ceded and synergies, over year-over-year were ratio $XX.X an quarter, $XXX.X of reinsurance X.X% our year-over-year. points end, additional reflecting X.X premiums by

premiums XX.X%, for premiums were of the net ratio quarter gross XX.X% basis net and and weather XX.X% first ceded loss the compared and reflecting prior earned net premiums by year up points G&A partially lower XXXX. year-over-year, mentioned. QX reflecting XX.X%, reserve XXXX just was vertically The XXX XXXX to first quarter attritional from lower reflects net was ratio earned higher of integrated a modestly higher only improvement to up loss down The The points ratios expense basis income operations. favorable offset development, better ratio. lower XX for

the a The XXXX from year down decrease period. LIBOR for is XX.X%, The net XX.X% of which year. Interest the a reflecting expense by to loss the partially was down first in rates reflects quarter in increase decrease ratio in last slightly, offset net the the ratio. in decrease ratio, expense net relative prior is combined

by our about investment with resilience of our quarter portfolio provides Our million We philosophy conservative fixed times. during income volatile economic investment and performed believe this portfolio unrealized gains. $X has benefited well

quarter to in million million remains year-over-year. authorized XXXX, XXXX. was Shareholders' by end the our of value share of $XX the buyback X% of at $XXX.X Board, million of first stock equity up increased over Of the August Book per available. $XX.XX, $XX

in revolver. cash $XX As nonregulated of the company companies also available its million XX, million $XX and of March has over under had

and the the with how quarter results first even We the with pleased is more are company for XXXX. positioned of pleased

positioned reserve our position are to for is growth, P&L, rates the and are impact strong. We solid organic continuing favorably

available now are to I and your questions. take Bruce

Operator

[Operator Instructions].

question Our from comes JMP. today Matt with Carletti first

Matthew Carletti

was hoping generally the on some color of you also, mentioned give growth give in us you're give E&S you in process the seem ex-Florida in if the I an into thought seeing. some color it I'm you and, and can evolving? - the there you press us opportunity an the California on and any partnerships, of And Bruce, of hoping particular, on be could release going that basis terms could update to behind hopefully which some

Bruce Lucas

Absolutely.

growth right now. mean a by we're leading of our So outside of out I margin producing completely factor ex-Florida is X:X. Florida over

licensed the in states that's has company, been of now. and states, So focus non-Florida the underwriting XX the been we're

So the very, we've the been XX, keeps stop on building just focus really getting year the see I horizon would that a that been over with the really very happy we're what and in production ago, mentioned in anything didn't better. quarters has rate. past seeing. of I better that ramp-up other The couple growth

far, shattered a didn't month, so production We lot numbers record just actually of ex-Florida. it. with the second quarter monthly break started And And out. a record, that and the was the that bore

So we're Florida. in outside a position of good

about respect together. to with you national them. can up out But don't those pretty lot yes, to in we we're X incredibly the that I business disclose the tell with relationships doing months, and that of a we're picked steam have past X happy notable that details extent but to our the we policy carriers, auto some them it's partnerships have respect of partnerships, of With and

year. California, It's respect that simply With opportunity in we've to now this California. very that over a market dislocated at been cannot coverage. a There of are well was looking a find lot an for areas

It go with all use an the being California admitted rate and flexibility. paper This that us and gives gives form not instituted us in in surplus in rules of product Our lines underwriting philosophy some California. are is to because flexibility.

limiting makes seeing a definitely in quotes. out specific now. are us in area the lot increase steam just reinsurance an good picking rates our for And of certainly up production opportunity We along We some but thousand we premium grid. written arbitrage million a TIV because sense to only the it's think of in there, in a synergies. We've we're with dollars X concentrations hundred it. of It's couple per launched any

Matthew Carletti

Okay. was know, And question but I of midst this the thoughts it's in then you're how and my it? year's of just, only discussions, in surrounding other looking yet, terms a Great. at renewal little any early reinsurance you're

Bruce Lucas

majority We're placement. done, deploy press of them think get order middle will and the of as increased week tell really comfortable a We've And a and or question. our put are a vast the it's as We partners, on program, get into placement. can't which and too Matt, now the the capacity with basis. the I you're out really so. we'll rounding on risk-adjusted I in the week has us a on can here our do well. done about actually, mean reinsurance seen weeds, We've where negotiations, we next in it carriers are in from release helped I gone just Yes. terms. the has other been placement lines out soon you so outlining right, And it's that the but we firm for fair far pretty

Matthew Carletti

start year. to the Congrats on nice

Bruce Lucas

Thanks, Matt.

Operator

Instructions]. [Operator

from question next Piper come Our with will Sandler. Tom Shimp

Thomas Shimp

it about as quick lot in prices a rising had compared should talk Florida, a in Florida write is your peers? that you less just reinsurance, fair where to on due to say staying exposed Just question. guys you There's to be but reinsurance of

Bruce Lucas

it rates this Absolutely. is yes, moving a and year market up. And hard are

kind well. we it was think is and the are differentiated of everybody same areas. as X really that, I last knows year Where

XX%, states. Florida. under only XX% in just in of XX% is is XX us helps our foremost, and other First fact, lot. TIV That a in

a of have in of can that types Tri-County. approximately X% these isn't There our our numbers. also boast company public in TIV sector We

I'd diversified us ours comes risk reinsurers third because topic our the all the peer a out concentration a losses of very just lot look ceded really is really out program. when Florida to So for them lowest concentration and does is are than when say Florida it's group. the Tri-County, - that and at most that stand thing lowest the helps lot volatile our of cedents, in absolutely that in lower profile the discussion it less a pricing. the It's of

Southeast in have the inland to area against balance that we plan bit with to business growth coastal has a hedge exposures coastal versus of been a Florida. Our have

Carolinas applies Michael, that layer the Southeast of the lowest a really you look reinsurance. to at Hurricane losses first of as so Coast Coast in state. have It's like the the just we Gulf and one of in and anybody Georgia. ceded the events And the And if into result,

$XX million not - loss. IBNR. not I So this our of Florence, layer there And huge roughly that's is with first our the a reinsurance. on Hurricane is in think loss even And

and of we're losses, than it lower fare this So getting we definitely ceded better market. do out going favor. capacity that in we once rest the year, think, better working diversification the our increased risk partners. is terms reinsurance of we're see of in And to the lower And again, our Tri-County

Thomas Shimp

Okay. the X-year anniversary? Hurricane filed amount seeing you are claims Great. in get Irma, then as guys ramp-up the to of And we for any closer

Bruce Lucas

in No. that claims, - are general, across down. If our footprint claims

Thomas Shimp

the possible And to impact away shifting are insurance? that anything you're in from in it's homeowners Is such lawyers on then Florida, - focus environment as the the Okay. legal there on shifting their the COVID-XX. that seeing

Bruce Lucas

think COVID-related going those Florida or regular is shift see XX doing next just to we're have if that's of to it's business pretty write say a I confident question. a of risk. BI policy. X to out most Yes. months as that's to there's claims. to just exposures a And is you're we in a But be good really be X mean that - stand-alone the something I don't we We no, going property areas going lot mean into a here. that it's of that versus months going so what or don't at interruption to Hard lot a cause a of lot I policies without lawsuits think question. come

and about concerned not So peril a we know with it's we're us, not covered it.

Thomas Shimp

you then provide And what development, strong were had favorable Great. Okay. and And last color in the that? question, driving it was quarter. there Can factors what just the accident my development? the more on quite first years

Kirk Lusk

at those 'XX Southeast X/X is was occurred. when have reserve Yes. so little in is years. is bulk is X that's and adverse predominantly rest development our a really at did bit again, little were when favorable But about review bit reserves 'XX. kind the the the and XXXX of in strong. where there study, in looked That was portfolio, the the and look We probably But of in portfolio. of of we of did that XXXX like kind in was and there. And 'XX it, the Northeast Northeast the that's it it development And we actually of a 'XX

Bruce Lucas

as that. Tom, like well, I'm you and to note I'd And raised glad

for in that close known being our X a in row. anyone conservative can you say to that. see isn't favorable quarters anything consecutive picks. are We Florida And on remotely IBNR very it There

are conservative. overshot more have little We maybe a it We bit.

out. where at numbers straight to IBNR you trends well going forward. our of on But we investors right and, our that of understand If loss would that stand above lot development, least, in today, it's development look despite the for favorable, have in at are midpoint we're the important now in we the at our conservative still range. X of optimistic that a favorability probably still quarters we bear terms pretty booked reserve looking of picks And

Thomas Shimp

All first strong on Congrats right. quarter. Great. the

Bruce Lucas

Thank you, Tom.

Operator

Our with next from Broomall question Dowling & comes Partners. Bill

William Broomall

last cash non-cash? or Just Was to the on question follow-up development. favorable that on was development, for that

Bruce Lucas

attritional the our winter a in would it's of event. some event I'm event sure there that or losses, we've storm a mini-caps had, include or that it's was some tornado baked whether Well, hail and that of too, there, that

pretty So normal you is but attritional say would cat be just losses. broad, this

William Broomall

Perfect.

then to question And Matt's on Okay. California. back going

with of providing little Just a how there's the so other certain of California that a work states risk your different get Are does profile because in reinsurance understanding. to you protection, you're versus some And in? state? more parts growing

Bruce Lucas

high-value wildlife up Bill. out Yes. concentration is in at. And all. areas question, are premium. X that in interface at We've see done have in and Los of looking the particular good writing fire-exposed are growing we few exposure. woobie there not area spread we're wildfire There for There a areas. We're hodgepodge. of that It's just writing that really Really the in we Angeles, California a everywhere area is policies and are business one We're not urban between a good that one California. us. policies that Southern It's particular really some no [ph], urban

and us First foremost geographic limiting any area. for our concentration one just in is

risk as particular the avoid we applications daily in look and so we're And 'XX. problem that using metric a sure in business a to the any at pocket. was lot we plagued thorough make pretty underwriting coming that new California That concentration XXXX of of writers in

discussions advance respect had With robust our the reinsurers launching have to reinsurance, in of very we product. with

retentions reinsurance per And a portfolio. are like there retentions on just facultative, East fully some have But risk, We reinsured XOL. with in hurricane retentions the with California, It's Coast. place, both associated the are the don't there full risk. that concentration spread and of pretty the retention a go at given the modest. we risk, And event. point have exposures, just anywhere we near have don't in unlikely it's time this We would are

William Broomall

Are how looking paper? reception the been more And the California? for it. agents in with they has Got

Bruce Lucas

there is to for Bill, been And wildfire that because hundred the are concentration that It's doing of when and not are all loads problems. the agents. just probably And we writers lot that got primary our what we carriers the reason that diligence, exposed business California there, of derisking Yes. out capacity a are for that we areas due found you've talked at in open state. There have strong have everywhere. out throughout are were new not couple are just primary of plenty

the exposure to kind that's going that's doesn't is their that the structure not makes so capacity, agents everything. plan, of put tough into fair why is down do the The agents. place cover out but That growing water for plan It fair pretty the robustly. not the They to policy. there a and commission really a clients to plan. fair it is favorable in And so want the

Heritage basis. as such on as I'd writing that So and some on an E&S are out an markets well, basis. there others PURE coming note E&S in

select the So appointments this and frankly, a to we agents for been at the this want can handle the time. in more do has And are, response growing. We strong request incredibly from with than measured I'm happy way, market. far. thus the start California and sequence footprint But in that agents where to we gotten in roll build the out the we've our our pretty response

William Broomall

Heritage do maybe Got switching could think given from it. opportunity of any might How Is Perfect. given in in thoughts And capacity. to grow? books for just maybe, you then Florida. heard back macro renewal challenging - business? an to the there an positioning have. We've what changes market? level, just to for possibly it that a a take Is there opportunity about could to be happen you Just others, some others

Bruce Lucas

the Yes. Bill, Florida positioned and lack differently I lot writers, simply Florida mean, writers, because Florida the a than the we're of traditional concentration. of Tri-County

for are. go knows these everybody them, radically is And saying of a way pretty to that insolvency. your year, for I program that if lot. been down meaningful question And even believe helps Certainly, some That But things the there this in kind hear wouldn't carriers can how with business a are their over respect companies I up us think point. that comes in who year other ours some pay it program but of to so will carriers. I past I that rates they it. different a really from And I name write the I've this

on going risk their of to saw did the even real first paid and And difficult. Florida, know reinsurers get market their quarter, that more in guys makes quarter business, There's of installment fourth surcharge these companies in it, out the premiums. some and And they're one them. credit reinsurers those not two we that go the already one in

scale, I right do losses underlying So because your are in our that now. the think with price, we're at going to can respect you I tell Florida lower to and and is get place program getting while nicely our getting that ceded relationships pretty some issues tower filling firm there order a diversification, size, that problem, placed of without and strong up right

a like good spot. So feel we're we in really

while got companies a and for policies some situation. us. question that an be to We're just usual. the your business will cleaning the and portfolio, everybody location premium, that we at then excellent look if to the these themselves work hard do at insolvency look an kind of, in take strategic We've kind certainly there of it's that of fit find it. in as else up be reload strong got sense, But all wrote undo really But job, four past looking not it's to sense make in we've good makes put is But a a done the we'll really, to years. policy opportunity for Florida for answer us,

William Broomall

the facilitate credit Does to help that? agreement recent your change

Bruce Lucas

both Yes. our reinsurer. those It helps which captive to us use opportunities funds is and M&A in for Osprey,

William Broomall

Got it.

credit use for you the can So facility Osprey?

Bruce Lucas

Yes.

William Broomall

then Michael - about ultimate change last any Florence, and you and Okay. in your Irma any pick? talked one, one you I And change is am done and but mention did

Bruce Lucas

up has changed all. and all stable. claims new Irma still mean, some in, it's incurs in No, we're been pretty all, go at I getting really not little. But a your

Operator

Our comes next SunTrust. Mark with question from Hughes

Mark Hughes

there business, the I'm the any early is missed California in fraud I state? call, of part the sorry, the appreciable but

Bruce Lucas

what fraud, There Yes. those you see Tri-County. We to in don't similar are underwrite that for just water are known pockets. pockets some

Mark Hughes

as you grow the acquisition then you impact premium ratio say ceded the did California? what on costs in margin and on And about

Bruce Lucas

pretty what there is a lot except the concern. the than It's us. for out a And have expected or we that I the in - premium cheaper cost buying out good paying buying pretty a where these on mark we XX%, know commission making business acquisition going policies. a state benefit we're margin agent we're Yes. pricing low Florida. essentially It's of It's which we're mean, is XX%, every standard.

move characteristics We So profile can down rate and the and of home. the underwriting of and E&S. that's the the on benefit depending risk real our up

Mark Hughes

combined you say ratio book in business? did return And of in more with line better California or get you a your

Bruce Lucas

Definitely better.

Operator

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

Bruce Lucas

thank, everyone, I'd our like conference in participating for call. to quarter first

Operator

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

disconnect. now may You

Heritage Insurance (HRTG) 10 May 202020 Q1 Earnings call transcript