HRTG - Earnings call transcript Q2 2020 | Heritage Insurance Holdings, Inc.

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Operator

Good morning and welcome to the Heritage Insurance Holdings Second Quarter 2020 Financial Results Conference Call. My name is Andrea and I will be the operator for today. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal season. 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

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

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

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

Bruce Lucas

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

core and the continue like all company. their to to of of thank our Before company The for we dedication year-over-year begin quarter-over-quarter. call, employees our to improve I’d the fundamentals

that an important contributes future New to business revenue profitability. metric is

process returned business, set and we rate in quarter new quarter its In $XX.X followed of conclusion. XXXX, quarterly In in of non-renewal has the XXXX, quarter, multi-state the million records. record wrote accelerate organic XXXX, growth of that by organic Starting $XX.X another and $XX.X began our as we in positive of been growth in Our new Tri-County year. we to fourth quarter, our set yet the million to second million this of growth million quarter reached accelerating. third third steadily of the $XX.X the quarter first

by Our XX% gross premiums written, impressive year-over-year. increased an

been economic during have We remarkably the related slowdown COVID-XX. resilient to

of While quarter. record guarantee our quarter, that $XXX.X monthly million in-force-premium $X there business will is July no and worth we in the to production, end the enter noting level quarter. this At continue was second in we the maintain sales it’s a that will third set surpass of the new new as third billion

Our growth national and factors and key continued footprint our diversified in are expansion. partnerships

AIG, and we the forward. During the growth, storm severe recent I going activity. convective our look quarter second partners forward with Safeco partnership and working announced tremendous to at our most AIG marked our Despite was quarter, with higher-than-normal by

the elevated the in quarter, PCS weather we larger the that post a quarter. Virtually $XX.X to profit weather weather few During when able minor losses, with losses negatively were the Despite produced events a them quarter. but events. losses, all of we million aggregated impacted XX in were had

to Additionally, development. eighth favorable achieve reserve we year the the with consecutive this Florida-based we second my marks to development. quarter favorable result. carrier the closed This reserve quarter of are And prior only knowledge,

turn will per a resulted year-end in at grew to was solid Our XX.X% XXXX. book our year-over-year increasing to which on over provide financials. sales annualized growth call and favorable now share, value gains Kirk details up reserve I our rate development to the have XX.X% since and more

Kirk Lusk

morning. Good Thank you, Bruce.

our safety and we employees’ once on a response times, safe employees’ diligent have their greatly our workplace again our mention focus challenging to very the with flexibility, appreciate dedication given a focus. and been customer First, with health, in employees I’d like productivity. continued providing I

have to expect We with and operate and provide distribution they service the to partners well from customers to heritage. come our continue

growth we diluted So million to from the our Overall, shortly. of XXXX. written $XXX.X $XX.X per $X.X are with the increase or per XX% of At the of $XX.X the $X.X for up XXXX. year-over-year, quarter the share premiums or to was business. during million XXXX outside the $XXX,XXX commercial employees, premiums force, of thank pleased $X.XX I gross during diluted losses growth you. given million, Net Florida related which will had of of in up share, in Florida. second the results the million up compared bulk reported million of weather-related during XX% growth Florida of the were second $XXX.X cover of The quarter extent income residential an decrease quarter Gross made quarter $X.XX million XX% and second to we for a or quarter end, was quarter

in of of TIV increase Florida and partially an the XX.X%, of Osprey, Florida Tri-County was by ceded year-over-year written rest share of portfolio captive the from XX.X%. the policies of the which gross increase our our a reflecting getting and ensure of at down first we of The to XX.X%. up second of type premium TIV With a internal is and over quarter’s in in the outside offset use points our earned X.X area are the are elimination in will Florida increase quota an up past in year-over-year, program. reflects $XX million profitability. the of QX higher are XOL continue XXXX the and earned of quarter premiums premium year-over-year slightly premiums X.X% the decrease million decrease our ceded reflecting rate mentioned. our XX ratio XX.X% to XX.X%, year-over-year evaluate premiums in lower months. gross The or just earned up combination gross contribute X.X% premiums that an net XXXX and we that new The the cat ratio Gross growth, the $XXX.X increased XXXX growth to long-term to

volatility XXXX. decreased in to million $XX.X costs expenses program portfolio The quarter, million $XX.X XX.X% elimination XX.X% from quarter The $X.X only quarter XXXX. of due The prior cat of reflects the of during million events, to investment year premiums reinsurance with in quarter of the ratio policy. Net losses The lower for Our $XX.X in the The from in was second associated perform second in an the our investment conservative XX.X% the combined quarter quarter million quarter. ratio The with up the and cat in by during a ceding in in overall expense down for the of expected from of to number of second expense $XX.X slightly, high of the increase gross increased an of X-point by million mentioned. and reinsurance XXXX losses the the quota million unusually which continues deduction the year XXXX, and the prior expenses losses partially to General is headcount net to commission second to XX.X%. point reported reflecting reflected which with the minimum gross reserve attributable primarily loss during net as reflects quarter earned development down Net higher is second higher in net decrease PCS offset last year-over-year, year were increase year-over-year, program, to due XX.X% X is in and in ratio and year. was contributed ratio Other quarter. quarter. quarter the years’ is XXX% year were trends. benefited period. increase expense compared prior in million the income. year of XX.X% LIBOR reduction Ceding rates the year net $X.X Policy the million, a quota XXXX, million costs growth decrease development the attributable is to losses which in $X.X up ratio. than $XX.X income favorable while acquisition both X.X% XX.X% $X.X from historic share from administrative quarter primarily up ratio prior commission quota growth just associated weather share. relative was favorable year losses down the current being were the up the decrease down share weather during quarter prior decrease of for an from million in acquisition with premium XXX%, prior Interest the second written associated the increase from net increase XXXX. of in of with loss commissions the ceding The $XX.X premiums in

$XXX.X $X.XX is million $XX.XX. below attributable Book of or has the $X.XX During first is to the the per XXX,XXX the share of XXXX. shares the value, repurchased the quarter, stock over the value increased up XX.X% our per $XXX.X end an of which Of of year-over-year. increase XXXX, of continued share we end $X.XX million value which, buyback second quarter $XX of price program, second program in $XX.XX, of equity quarter XXXX from book buyback available. as $XX.XX, book of increased at stock to million and Shareholders’ XX% average second at quarter

operations pleased are company. I as quarter We growth, trend. production the solid for of Last of quarter that mentioned we current second quarter, is the with well reflection that organic a the positioned results as and are the of and the

questions. and I strong. impact are available our rates remains In take P&L, your addition, now and continue the to to favorably reserve Bruce position

Operator

begin go & We [Operator Please will question Broomall question-and-answer come Partners. will Dowling the session. first ahead. now Bill our And Instructions] of from

Bill Broomall

any you. on the mean wondering I I maybe that us you for pretty – strong us quarter. just on might this was If was more Great. allowed you commercial strong could residential in has side, that growth help saw what color you growth. start Thank I give growth? market the it the could just

Bruce Lucas

question. That’s Yes, thanks. a great Bill,

is little market So When $XXX from rates in $XX thought residential premium been has an pulling dropped were we to with commercial million. pretty out been We space. And about the we we’ve active that us soft, our about million were for a since undulated that of residential in-force area commercial portfolio XXXX. conditions.

take higher. commercial we kind are we Now are of rates significantly at a and where look residential

to that made We sense we trigger Tri-County responding good a get of what and the And excellent us. pulled the rates just are of to the opportunities rate company lot conditions, is for of outside were believe the terms adequacy. able saw a because we in some market to

know don’t I if growth going us forward, it XQ. jump was, pretty a but you moving as sustainable be indicated, in to big for Now that’s

not in still County. are really Miami-Dade We anything writing

availability have We limited Broward. in

other growth continue at trajectory. worth adequacy. we in on opportunities as there, But great focused are CREs We more we of intend to it’s And are the the that’s seeing areas state. noting long as that

Bill Broomall

opportunities, kind these competitor so the maybe... of Has too, landscape at generating changed all

Bruce Lucas

in pretty Bill. in Yes, and were E&S pullback it’s seen in looked It’s we and space. aggressive. exactly came They a hard that have rates that’s at it, – They at carriers inadequate. the underwriting said completely we

the months. You lose policy it. that see we’ll are in money happened. what’s to going That’s and on risk, ahead take again and XX Go

So those their lessons and increased capacity we have coming lot very is work. E&S in aggressive now, as dried up, – in of, Florida. kind a learned have don’t rates residential commercial of have in and somewhat, the their opportunity residential. were getting seen commercial carriers on an And They that rates really gone up

Bill Broomall

think Thanks. new it. just could I on if business record. switch strongest was you Got the mentioned I over, July, And

growth August. safe with early writing And in that is storm of is you As passes, storm it guess, of growth, geographies? as storm kind stop and see So, Florida really you if as I approaching you kind might back comes Florida, the to the about new in it through? storm question it in, that up on. on QX of your of my will you that it reduce turn new the the and writings business think off then moves part assume coast, maybe will – kind business that up then on water new in turn a we depend does moves I as

Bruce Lucas

exactly we That’s do. what

will Hurricane down open the up business Hawaii. all in Douglas again. we once in passes, Hawaii. by, shut Then we new storm When growth it see passed You

recent most Florida. shut there, down that For did hurricane was the we out

actually July a of sales So record our of put in at were the binding restriction that net end we July.

ahead are there place. that that Coast, past, open will put new are go moves as and storm we binding the in business. As storm up the restrictions moves up East And sequential

a few affect it’s a going for the So it not quarter. impact you days, be will to material but on

Bill Broomall

was And I what at, the but That’s with that. get thank – I alright. storm Okay, trying for the of kind can’t to being name. you pronounce

Bruce Lucas

You we have the same problem have.

Bill Broomall

differences the that versus footprint, storm that’s find like compare recent of where hitting am the are that Are size one. feel or Florence? I event in and event your it Florence, of this this I storm, any – because between difference trying maybe the to is to characteristics the there most you terms

Bruce Lucas

concentrations mean, think areas was I was of more no. and It wind in and first well continued right yes kind I books across much southeast. had of our loss now, powerful that more strategy We have produced that our Well, Florence the $XX a organized. level millionish. Florence most storm. of on obvious, around we has de-risking high a hit, Since coastal is peak

North that. is Carolina to So no exception

Carolina, that If new that’s look it’s production we’ve North you mainly the portfolio at generating out inland record the business. had in

than under So inland our coast concentrated they PIV the versus concentrations are today more were Florence.

that’s good for So thing a us.

current lower the concentrations, up disorganized, storm more Florence Coast. as the powerful. much all in is the now It’s difference it’s are that where and key areas hitting not is between there moving but East way to Isaias yes, think I

we don’t some know impacts we event, noting claims. And we sure. I’d two the will going are personally morning, going But storm is Florida, it’s of worth think as have had the comes next, like reported know business think reported. X what I don’t will we that see but I to in so days, have what of say, claims out major to zero in this those be. And we for be this have to

be report of as is give I as little So to but and to Florence. a you think start people then big for got the this through storm roll to going don’t bit time to claims,

Bill Broomall

that reinsurance this your year Okay, And Osprey details, your And to press of participation kind Osprey program? Osprey if elaborating Can to have the Re? in mentioned your great. you Kirk, include prepared you disclosing had have in this remarks could just might Re. Thanks. the I switch just that program might used does you Thanks. Re retention, about the release then in reinsurance I on how

Kirk Lusk

Osprey think it’s one I we Yes. at HPCC a The Zephyr number. does play. much as of and in that like looked rate the was level XX.X%. layers, here stack X, which would that a XX% again, than is layer is were in high. a piece, what then where event be And That that is and thought we we XX% we as rate did the in XXX-year include indicated higher NBIC X could we each that be of particular, good the online online, across very to like And not which needed

Bruce Lucas

at was Yes. the the high of was. And low-end where is to talking in massive not tower. where playing about losses was The excess a came That’s really really all. with the our add retention storms. carriers, focus strategy focus of I’m big That’s end there lines on in. in billion, our our Osprey low retention $X lot stack

it Retentions a larger are over was would storm develops that appropriate that obviously, given balance be balance like it the an feel view environment a where X.X. more low end. If be fairly was at rate minor. we is So we as a then the but retention, it going higher much at good to time,

Bill Broomall

Got it.

end. at was higher Osprey So the

Okay, got it.

Bruce Lucas

Yes.

Bill Broomall

versus clarify where non-RPP And Is of are press the RPP understand which talks to reinstatements your like just release private there ago, layers a layer, are automatic weeks from to it prepaid better prepaid. on some about are of layers anyway couple layers?

Bruce Lucas

single-shot that, our layer mean, and has layer Well, only prepaid yes. Outside all in I a tower RPP. X. – that’s have of we everything entire one the of

layer X contract had tower. RPP reinstate order we other the buy to difference of the only the all to is in layers So between and that an

would other RPP of no to But So online on little that be that an market. kind expense is the is because that cheaper there. to an bit obviously, RPP there having out had layer a the X is. layers, it But it see what is rate there we load

Bill Broomall

Got it.

Okay.

going about RPP. you one on there thinking Perfect. are the is rate So me last filings how And – for forward?

Bruce Lucas

we rate. the been very Well, for and have – on years, aggressive are

less increases, a with watched have portfolio get pretty profit operating everyone else every years, over our barring our you and in Florida much rate hearing. will in carriers different result, better have right turned rate don’t any be you and X past as been than rate And Florida the consistently rate were hit numbers years, maximum weather. a before XX% or can taking increases, I significantly we at we single For to than reductions year, in they year. is come which X% have the that think or X this

we start going been around that adequacy. file make have will believe rate We increases. are sure rate reinsurance in I maintaining so approved. Those our And we right X. are October did to kicking They

done. to our rate portfolio, those we rate we’ll then And the anywhere to and take our extent So intend that regular are need filings look rate. we in that at

Bill Broomall

rate X.X? just Yes. filing And to confirm homeowners’ was the reinsurance for the

Bruce Lucas

Yes.

you our from of – little about about a very was one product. it For over upon X.X% actually to products it’s look And XX%. we up for filing, go that actually the reinsurance at when Yes. dependent

Kirk Lusk

The across or X, X all products. I’d blend to closer say, is probably

Bill Broomall

really helpful. you That’s much. Yes. Thank very

Bruce Lucas

Thank you.

Operator

Our next of Matt ahead. Please question comes go from JMP. Carletti

Matt Carletti

morning. Good thanks. Hey,

Bruce Lucas

Good morning, Matt.

Matt Carletti

the in I lot those kind two a it covered got the ground, It right, both and looks coast? a different like you impacts sure to the about Sticking as potentially how you make work together a the hoping just left. up I the with could I’m Bill thinking was will Southeast storm, us, deductibles remind Northeast of will have just and couple of how drag

Bruce Lucas

retention. asking that you funny the the $XX it’s approach. that is And question that I question answer because as million was storm asked a It’s net-net,

Matt Carletti

of there you release Bruce, hoping and press give the seeing? maybe in you recent can added then it to you some any you’ve color And periods auto one. was partnerships you ago in could that hoping – the also, my really on can press release kind only I I just contribute. easy what any – an question, That’s could put have alluded now you was color Thanks. begun out to the month further you’re Perfect. just, enough. on give you AIG how And there? announcement, Fair Safeco the of a other

Bruce Lucas

give And color. a Yes. I can’t unfortunately, of Matt. Thanks, ton

They the we that’s these our can All in are partners our I very we’ve that meaningful symbiotic with been is for to tell numbers. disclose major developing of – is agreement Just years. all won’t nature. you company. It relationships

of partnerships. seeing opportunity tremendous out come these growth We’re

in us. source July we as nice was it of line outside $X of are That premium see in numbers. nature It’s a company’s be several But You a for top a the these that’s We’ve of in our next the to footprint. higher-value The got in-force you over great in We very fueled time to It’s deal, up the appealing partnerships. our sweet aggregate spot, $X going over that of it’s premium particular, ended with other them little months. more behind smaller million house. is the Almost that Florida. billion growth history. first transactions move million of $X and AIG by kind to that transaction. But all a premium was XX of scenes.

but the I this etcetera, the growth with And for expect company at yet AIG, what premium restriction favor. look look synergies those we’ve working do we’re going record if forward. company, at like as very It’s be to we with another. a So, built to and place. an another move And the forward, the to know Safeco, it’s pace, I in as set I July GEICO trend testament binding do continuing partnerships in reinsurance don’t upward are National in real General, we relationships. being grateful have our strength of a companies

on digit, about are move just are we the we really seeing so, and top double-digit maybe growth be what line in. even single targeting we an a probably we So spot good are excited growth as to rate forward, upper

Matt Carletti

answers Appreciate of best and the luck. Great.

Bruce Lucas

you. Thank

Operator

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

Bruce Lucas

conference quarter just would I on everyone second for participating thank our call. like to

Operator

you conference for now Thank attending concluded. and may The now you today’s disconnect. has presentation

Heritage Insurance (HRTG) 8 Aug 202020 Q2 Earnings call transcript