HRTG - Earnings call transcript Q3 2020 | Heritage Insurance Holdings, Inc.

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Operator

Good morning and welcome to the Heritage Insurance Holdings' Third Quarter 2020 Financial Results Conference Call. My name is Cole 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 presentation. Please note this event is being recorded. turn of over Heritage. to Executive Arash like President Vice now the to conference Soleimani, I'd Please ahead. go

Arash Soleimani

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

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

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

Bruce Lucas

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

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

weather Despite improve company of hurricanes Isaias core the record experienced because elevated to to weather was year-over-year the and elevated related quarter losses, addition third The only quarter-over-quarter. to losses we challenging Sally and continued losses. in non-cat fundamentals catastrophe

has continue has consecutive strong trend sales premiums existing and the new quarterly record continued year, channels will third the gross quarter accelerate that been additional a launch we year-over-year. XX% business remarkably states, and as increased develop has and commented our fifth states. and to This partnerships, as new new new business revenue written Over past I’ve in in set

the our and I in growth focused we During more develop fourth revenue add which Equally record several This the I've that our operations the is continue believe expansions see launching been in additional quarter will near in us Maryland growing the and material and are XXXX. will that I impediments favorably. to which anticipate any company our to announced national for our add loss continue reserves don't the apart existing very quarter, partnerships and be our is truly foreseeable to in future. of sets partnerships on I believe from to growth. time There partnerships peers launched important future. exciting will Delaware for an growth

The ninth approach is third achievement incredible quarter given favorable conservative marks loss recent and our quarter This of an conditions testament the to consecutive a is reserve reserves. market toward development.

year-over-year despite development Our per growth in weather which gains our the resulted to meaningful and favorable book had value quarter. reserve increasing sales losses share third have the solid in

claims, executive of analytics Heritage promote across company's decided of to retire systems. end to an integral product shareholders. strike inception me, of Board November The and team for After Ernie our and of and contracts Officer, tremendous believe of employment Ernie and Directors on from new President, management, the lot part Executive the Heritage's Officer. appropriate for have by Widdicombe, has Ernie an November that balance the since Garateix, has been Garateix experience Additionally, a Chief contracts all expire X. our I Chief fair are consideration, I offered Operating and Richard underwriting, us for

and important name I'm for of As company, Ernie my Founder next as was CEO it pleased to to the a the me successor. pick

Richard Heritage, shareholders of Chairman XXXX serve retiring continue the Co-Founder, Even Board. seamless a the continue to to though should from Widdicombe, expect I'm through and executive Our I'll and consultant transition. President as company serve will as an

these are confident completed share. they lower our be we'll New in will I filed per boost executive meaningful as significantly changes our expenses soon reflecting that XXXX be a agreements provide as am earnings will and compensation and to

implemented. the know, ground challenge the As and companies Top up. important inception, I'm several XX plan the I was companies I many love Heritage single-state of entrepreneur my have Florida of was to-date. in billion in XX It being that's over a homeowner most from to writing actively a creating from premium. to homeowners business grew developed insurer stay successful enforced States new Since in over you with states the writer the a until years of we company a with with fully started the venture serial to me United

partnerships in We companies insurance have of including and with developed national an vast top impressive growth double-digit the network the independent multiple organic a some agency engine US.

past reduced of TIV the billion XXX% company footprint so, derisked XX%. Over total of Florida the from or and the Florida years Tri-County five just diversify company's roughly we've $XX TIV, to

doubled Our levels. growing at record nearly premiums and are in-forced have

been year the repurchases. Our crisis Since years rate, annual We've reserve and during reserving quarter and the existence an assignment compounded benefits strongest arguably to through book improved Florida in at XX% of returned of exception has grown which periods extremely we've value of is peer through inception, every significantly among million toughest almost favorable we've group growth dividends impressive peers. and our share our storm $XXX as the development. even shareholders consecutive by the year of full demonstrated and our profitable the in is ninth prior active

each Heritage grateful proud our details the peers. of up right financials. will results judgment team a and business and to past forever company. CEO look over property in earned some new as and all forward am over five I he to new XXX% navigated and this position competitor to insurance now support and through ourselves execute extremely as supporting a and best-in-class our successfully seamless by Ernie’s our the to the I operating for sector, plan, have business effort their alone. you like It eight I tenure timing we of close turn retirement directors, years. meaningful a company times, established trust a sales new to transition shareholders Our to year-over-year. as thanking I my ability my for past very for the am I our successful during company. quarters a and relative very as difficult our I did a are of the the partners, felt records set believe of build over memories to on provide makes your Thank for making more amazing I'd role. employees, and call Ernie not I to was his Kirk contributions strength

Kirk Lusk

weather the $XX.X outside million and ratio. million Gross points of third our were been diluted was prior-year quarter The $X.X also having the in hurricane XX.X% current has weather our mentioned, for and growth XX.X we an weather on distribution of ex-weather losses that a million loss losses The from $XX.X XX.X% or Despite in Heritage. which cat million impact favorable XXXX for have impacted the reflects with surpassed prior-year million which and share. company Thank the growth by service weather to continue COVID-XX XXXX, from of quarter high the believed of million, second events quarter. employees. with accident the for second in virtually challenge again Mississippi. and provide Productivity an added the the thank a flexibility, on added by and or $XX.X net company partners up development loss be and of and of customer like has XX.X% loss quarter increase by XX written employees losses points the continued net of another net $X.X they the of into the a been with quarter, I you, ratio to of just Florida once the fortunate that focus. million, net premium third. impacted ratio Good quarter had having Bruce. losses PCS premiums losses the of loss of basis. Despite Florida We've third the dedication, $XXX.X and year million the to quarter added of had continuing and the do come remains unprecedented the starting non-hurricane our in has states net very in anomaly. $XX.X has ratio XX.X%. million no Delaware, over written to quarter $X.XX weather we quarter which business of The to losses significantly Compared in $XX.X losses loss second to The their net $XX policyholders much net to the higher non-cat was weather and California, XX.X morning. would per to of the expect efforts our

year-over-year premiums from down reflects quarter the to of profit growth, in increase year-over-year X.X policies in premium underwriting of will The down which ceded The The points quarter, the rates. we are increase X.X% portfolio With the than third was XX.X%. third increase the the ceded of written our the premium decrease and type force million an we premiums in on ratio was focused earned second offset are XX.X% by continue growth, ensure higher gross Along long-term or quarter that offset to more year-over-year our the that net up evaluate earned to XX.X%, seated of premiums. increased getting we contribute XX.X%. profitability. were with earned XXXX and partially obtaining increase our adequate reflecting XX.X% growth gross policy and $XX.X premium by in an in premium of making X.X%. outpaced premiums

from loss benefit the investment maintaining XX.X% refine closing, we net our period, I'd loss ratio is book ratio. ratio the positive reflecting equipment, line our committed opportunistic XXXX. down portfolio, rise. quarter. LIBOR we combined to focused XXXX, the that top like exposures during in continuing getting we XX.X% net compensation $X.XX decreased travel-related future was And up Despite This Florida now, per strong In from impact share quarter, XX.X% spreads the the costs. In focused third companies million of to and those during by remain The yields rate expanding and a for our will in in growth which and XXXX, was on and increase markets, to expense, prior-year technology slightly and forward. result quarter, our to other of was us to during expense short we year. low in Interest $XX.X going on quarter take the secondary into footprint a net experienced the the line. for for last to higher are insurance bottom was so we The XXXX quarter Regarding in In to the stable is demand focus in duration our up comment reduced over of and down value expense states. can gains the in a The yields is of with capital year. term portfolio, line third the expand the a ratio top relative but structure the market of our XXX.X%, investment third reflecting on efforts. when the the slightly line reflects allowing

profit writing are and we where a make we business mentioned, focused rates. As we on obtain advocate think can

to needed rates the are to margins. questions. available and now take will your adequate I achieve take Bruce We

Operator

Our today Sandler. question from Please with ahead. Paul Newsome will Piper come first [Operator Instructions] go

Paul Newsome

position from ask feel how little the to hoping the Congratulations well. and to everyone about I It's decision. a an change think capital bit the about update allocation a perspective? capital as how as you perspective you capital was on in maybe

Bruce Lucas

think Kirk We the cash let sheet. We've Yes. capital very strong on have a got we take right and stab plenty of balance position I'll a now. jump in.

some to this ratios, repurchases. use. where a happy capital We do terms lot participate dry forward. of and feel are keep capital powder cetera. would are be appropriate one a we the for et sheet contracts Obviously, going RBC reinsurance position in could of But like in number of with the position target that maintain and on we're capital share respect back we we for it of allocation in balance to right And has with strength in that use us now we

reserve right trends and of we've a trading I shown growth we're discount favorable So, we the the kind then at book now, look the compare to where And profitability. for combination years now have you of the When to that that that's you the and for over company. have value. great exceptional fundamentals two

capital where book use higher return Our of significantly good shareholders are it And now. via to a than projections to that value share they are forward is repurchases.

Paul Newsome

of and that a huge balance maybe interest the what changes a mention several of Obviously, piece so the for little - reserves can the years. Right. about was sense sheet reserve last we looks you for in it the Though are development, how of a just talk have year a have guys pieces little a been like you focus moving? there’s

Bruce Lucas

point, have that I we a do a PCS that, quarter with We that any the the the that's associated that of quarter why before. that be claims to in ramp first of it that. number type lot consider really to related were bit cat the and the of did anomaly. Yes. third seen events that We haven't with have an just relationship did of those in second a or was mean, cause and claims. little of it COVID up somewhat we of the we determined spike to haven't kind but do and had are weather had this companion really just number of At events. And

Kirk Lusk

And, reserves consecutive a to Paul, very quarters. loss we take with conservative approach obviously favorable nine

we horizon We capital. we of any terms reserving of put that end side think trend, is on that the development. shareholders think are that whenever err usually aren't the we of type there So, on up a very confidence and caution. it. - in We surprises additional lot releasing adverse And that's gives happens up And the any of we what see we important. appropriately

Operator

go Sidoti. question Our Please [Operator Instructions] next will from with come Backer Marla ahead.

Marla Backer

a color if bit you wondering geographic I'm little efforts. So, on could more the diversification

were Delaware the you, footprint. from potential, looking moved Coast quarter the But flung about in take now? away you you seen thinking further more in know, Any the other that to you're to California that expansion we've expand So, also into past, Hawaii. East far your or moves at and right

Bruce Lucas

great a Yes. question. It's

did launch the the launch plan we quarter, or third to we the in Maryland. So In fourth quarter. Delaware in fourth quarter

approximately to XX licensure. states We for are currently evaluating additional XX

more due process importantly won't diligence We we we're the So in still where you be. there. can tell

plan. We Texas. and will our we will not is not be in in in be business That Louisiana not

vis-à-vis two maker the two the significantly in the really markets. know, big to a We us losses have our have have, presence Coast on been groups peer states. bullish those elevated catastrophe you never us fact don't And than in difference for Gulf third quarter those is that we

going So, we're line portfolio. We there. hold to the our like

dollars We incredible right of line even us. up multiple top growing premium. XX% and tens We're at millions They signed numbers acquire deals year-over-year we to top such runway our clip yet. tremendous ahead through of additional now, an of of have flown have line haven't

the have existing today. going you're within mainly profitable think at but to the that do see footprint that expansive I pretty company So growth rates in some we

Marla Backer

give late. in us directionally of quarter? growth to in minutes that an Can impact been new terms important the in bundling I couple strategy already you you you opportunities. of sense at partnerships, obviously, that's on on this, extent of, And part you least jumped saw I a then of the spoke know, know, an the had what the you strong to business some if apologize. the And

Bruce Lucas

of announced what partners the and that numbers I those not Yes. now. will Heritage, and us of our horizon peer is I several that partner. critical unique has are a mean, very be We right That we've breadth I'm multiple partnerships have near on here group. among and anyone aware in cannot in gotten for national we've are that our the the truly partnerships comment term. for believe got we on at more portfolio

we disclose very all the safe partners of premium say but We not it's that with producers that have. volume clear national have and our that looks are them agreements will we to like, that what financials biggest

it I right partnerships. those to we're independent it what the coming rate. say producing national from XX% So, But expect our now growth growing. But do from start is agents impacting at probably the coming national is numbers of level and I'd XX% is of

millions of signed line because even numbers yet. haven't to they Just premium, other of run enforced premium deals in we've all top through these acquire the tens

Operator

And from Broomall our ahead. next go Dowling Please Bill Partners. question will with come &

Bill Broomall

could switch I on in for just up any three-year coming of If you’ve you run-up statute? that that, Any kind have observed? seen Irma claims the trends

Bruce Lucas

bit days XX wasn't accounted Not some number. a that question, claims in Bill. last Yes. saw for That’s some IBNR our little but in it call mean, elevation we that in fully nothing or great of a I kind already came so, of plus the really.

see didn't we anything. So,

big In numbers it had know was. runoff a that was law runoff see mainly don't fact, But footprint I that's because they a We insurance significantly the book other you approach carriers was business. just the I worse that just have of inflation the as social very have where you claims. gone have lot as in deadline. surprised low Florida in as of - Tri-County

it's so, us Irma deadline. out surprises think we we them. in we're any pretty approach good vis-à-vis for spot a as the didn't a And statutory different really of get little We and

Bill Broomall

know of stress. we Florida, under there's And companies lot a

is on of be in might other RBC parts not - more but as state can and it at well. that could other have and Tri-County step appropriate you and issues being Does a in up Is filling maybe interest a You be some potentially the at all? because just maybe interest of picking a dislocation state in they any position rate, you strength. writing companies there where in if your talked about Florida stopped in part policies there in participating

Bruce Lucas

opportunities Bill. there, There's always Yes.

of I a there's hot upon like to guys both it, of look We're fair inside But if the who can that these not distress. that looking M&A are absolutely there the that take players I on out right our right think - opportunistic really Florida. opportunistic. Florida that for activity wonderful I really is now are record returns the the there's be that. come grow chaos based think an going market, under number some company, we're now. opportunities we're financial tell usually in of huge within whenever right topic to touched There outside pretty severe of Florida is at We're And you there the now. going you to company really a usually footprint in just play and generate track Florida call first and will that

Kirk Lusk

Yes. I'd though did say is very at thing of you one mention rate. the key a right aspect that

willing just are right go willing and But we kind take underpriced? go at are definitely, rate, that we So we are of kind No. in we at then look right portfolios of it. to the would price, in think

Bill Broomall

pretty growing cash you any balance the have the us And definitely of maybe sheet think what about on Is there help significantly. at your kind way is you can holdco? cash

Kirk Lusk

$XX We at of as quarter. the third have little over holdco million a

Bill Broomall

to been you've Did you seeing? growth to capital the subs that downstream any the support

Kirk Lusk

at Not point. this

Bill Broomall

the help MGA last reports appreciate able affiliated going all you we've can fully internally going Bruce, topic what's at press partnership in one, on? seen help the of maybe of I relationships frame hopefully on. the out OIR just think then looking the don't issues yes, if us relationships. I And know maybe affiliated - when talking Can kind you about about we might be to some

Bruce Lucas

over is really to contrary of this the tell seen up the what the and maintained generate in of unique, current haven't capital structure has breadth structure negative states. really been that to come structure vis-à-vis, And before and MGA now. is years the heard The a of you I've not a was a investors. sure review right designed to lot I I'm can marketplace Florida some that way times Yes. attract I with yield MGA anything topic multiple the at that to type that's other all. or

hard that happens meeting time probably probably are it strapped minimum to would et going as being et solvency having think that financially some MGAs. more that cetera, I'm very guess I something, good the a any point be for them, pushback of I see but something RBCs, be the for cetera. to companies if pressure good on see a I’d who have surprised could underwriting portfolios, and like companies to us,

Operator

the our remarks. Instructions] session. conclude to this [Operator will back like any conference And Lucas over question-and-answer for turn I'd Bruce to closing

Bruce Lucas

in just to would everyone like thank third participating our earnings call. for quarter I XXXX

Operator

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

your disconnect lines at You may time. this now

Heritage Insurance (HRTG) 3 Nov 202020 Q3 Earnings call transcript