HRTG - Earnings call transcript Q2 2021 | Heritage Insurance Holdings, Inc.

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Operator

Good morning, and welcome to Heritage Insurance Holdings Second Quarter 2021 Financial Results Conference Call. My name is Eily, and I will be the operator today. [Operator Instructions] Please note this event is being recorded. 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 for the earnings review materials at These for available replay your are convenience. or Today’s of Private meaning XXXX. Securities within of the Act call contain Reform may statements the forward-looking Litigation in management’s based These and subject statements on are to circumstances. are expectations current uncertainty and changes differ detail from and material press expectations. our release in future our results filings, our earnings to that risks we our may cause In SEC

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

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

Ernie Garateix

Arash. morning, today. you Thank Good everyone. for us joining you, Thank

we’re improved of starting that At and weather suggesting improvement. in $X.X they glance, distribution results. continue reinstatement Productivity optimistic partners there’s sequentially, income to of actions dedication. the but continues with employees the underlying quarter’s come policyholders we’re a high, have on to net have like still fortunate Despite $X.X employees. million It’s very losses the brighter our year, are underwriting with and from early that the first on to to been provide and to premium second to negative benefits innings, has income business story COVID-XX path that our quarter the quarter have first but I and disappointing, relative net to this our a a virtually uptick expect their for our would no we service much We in show. and quarter’s our Heritage. of appears pricing the to do million thank the of all impact remains

aggressively to rates to continuing raise taking We’re our improve underwriting profitability. and actions

communicated, the demonstrated previously as written the line quarter, top bottom gross on We in growth this line than we first our is growth. second decelerated results premiums As focus quarter. firmly from rather

our Additionally, premiums we indicative season. which reinsurance reinsurance to the policies over We renewed fewer on Relative now to our core adequacy. retention. all with I Overall, have which Kirk more significantly we and relationship our on prepaid is provide to are I program a year’s our growth partners. eliminated in-force reinstatement financials. we’ve for positioned believe co-participation above excess-of-loss outpaced in-force solidly details hurricane with turn the program, will testament is growth, solid and moving valued parts, to rate of second program our our focus in quarter, prior a call

Kirk Lusk

focus The year XX.X% the continue we to ratio to anticipate second into the Good from over or in-force Ernie. same year Gross adequate believe and quarter, up the portfolio XXXX, we business, the the with policy time in rates was which on our are expansion our margin year-over-year. rates. return we you, of prior in-force $X.XX morning. from XXXX. favorable lead premium earning were ceded is $XXX.X Despite implementing and and up policies XX% We will the premiums premium Thank consistent reflects Premiums X.X% higher of up XX.X% of billion million, frame. to improvements to The the quarter that outpacing we are the quarter, profitability. X.X and that rate substantial for continued will increase trends throughout written seeing loss while $XX.X the have increase were points book this million were up quarter. June

premium premiums quarter The $X.X points with reinstatement X.X the impacted to loss of was added premium the reinsurance ceded storm in Second of ratio. and X.X by agreement. than points to is premium million quarter severe reinstatement ceded the the ratio higher convective X.X associated net combined quarter points ratio The for the ratio second loss net XXXX. which were XX.X%, net the

disclosed, were previously second As of than $X.X losses quarter million, quarter which approximately second weather is $XX.X higher the XXXX. million

of $X.X down development reserve prior quarter from had XXXX, we $X year points. The addition, items In million the of by year. X.X net impacted the loss million combination second favorable these in two last ratio of

compensation. XXX% ratio attributable combined year bedded the loss and the expense first to a million net net The from tax expenses ratio Our roughly in ratio. points was decreased of million $X.X combined period, quarter also in which lower increase was mentioned in in net quarter higher $X.X expense reinstatement a basis by our net the executive The partially on in net for focus by from premium XXXX premium offset the prior XX quarter up of benefit. is reduction the second by reflecting XXX.X%, by ratio ratio expense net previously ratio reflecting ratio, The X.X a X.X points, points – XXXX. reinsurance

of despite not underwriting Although actions net premium and losses, rate earning from having through weather which a demonstrates the quarter the the with portfolio the loss think first we did benefits taking. of early are increases and pleased quarter, the the higher substantial very we are income in improve we XXXX reinstatement the

your take to available questions. now We’re

Operator

Marla with Instructions] comes question today first [Operator Backer from Sidoti. Our

Marla Backer

Thank you.

around sense some and you a for see terms weather But to starting you’ve sense unknown over benefits is of around timing expect your obviously, us realizing which you from something timing undertaken. the measures that initiatives. you to can strategy and some Can are when control. – give proactive meaningful the an have the us we more benefit little any of So give of – – in you any of

Ernie Garateix

Sure.

year rates through. January taken So come this as we here, see in right, April. in call Those mentioned were the of to that as well earnings starting rate we’re as

but started to those months March, cycle, portfolio. cycle XX XX as renewal will our a early through to take entire as from So

coming remaining should rate be of as see year well taken to third So early The we’re fourth we and through mentioned, and this the starting of XXXX. quarter into and the it. signs

Marla Backer

not then the me consider point other initiatives. Okay. for policies that at you business you or score forward? that see policies and those do think is, risky potentially was you perhaps certain going the last at seen took And eliminate we’ve question your eliminating But different yourselves in past at And I when renewing you risky region.

Ernie Garateix

say Well, would is what that’s continuous I effort. a

it adequacy, be to kind of of and rates on determine based is region each based we We’re nonrenewed, take of policies be each is look whether always on we keep or again, as those loss the perspective write. those it the do. will And something policies a analyzed markets rate a looking continuously is underwriting it is policies effort. ongoing those where do And policy, We an profitability an change. will given that thing at reinsurance trends, that may but some from

constantly at have on the that taking sure the we look a So and books. most making we’re profitable policies

Marla Backer

Okay. Thank you.

Ernie Garateix

you. Thank

Operator

comes Our Mark from next with Truist. Hughes question

Mark Hughes

morning. Yes. Thanks. Good

Ernie Garateix

morning, Mark. Good

Mark Hughes

attracted seeing the the looking at at are point year? to how being you? that are half of back policies in you – Where you this growth What

Ernie Garateix

those cautiously even at right, So in we not the as policies region in well. the rate Florida the Southeast business as are but Northeast certain at just looking That’s new growth, we are optimistic look through the region throughout as rate areas continued adequate. into that comes

So a we profitable are we of healthy business through. is new have comes that but growth lot it it growth, ensuring as

policies areas so in that. be ensure kind but is most those profitable to little expense a to of we’ll balance mentioned earlier, selective great, again, line we, We’ve a the be more has So that nice the not mentioned on at there bottom books. the as we have between the of growth that

Kirk Lusk

we’ve Yes, I our experienced expect amount quarter-over-quarter think past. of of premium to growth gross earned in to the because the we’d continue increase that

gross look premium you standpoint, that start to is However, growth when going slowing. written a at

Mark Hughes

So at Ernie, point? of do see this as most adequate you markets pricing your the in

Ernie Garateix

Yes.

we rate more some the taking take adequacy can doing be and these promising not if looking at has these rate, sign that there’s to end in definitely stop as growing the continue a markets. is And we market we that. a of will But at rate will been We’re for very looking need because markets. more us in that

Mark Hughes

thinking progress are the much And place? SB then to they new your XX latest what’s changes put in really How in about limiting going make Florida? that been have in losses

Ernie Garateix

Yes.

very So cautiously mind, effect I’m that, I keep would say that X. But July help. went will just in optimistic into that

help to early but being pans very very, that, see that I’d after several I we’re we that. down place see taking – road. of SB the out, optimistic how that could XX and like months the in cautiously in am So proof

Mark Hughes

get to time do think at you be look enough several it? will months good And a

Ernie Garateix

that again, taking tough better should say a feeling of that fourth it’s and we months I August, whether it, things hold, a kind XXXX of few tell Yes. indication. us effect in of several months are into way – indication into the right, quarter X, and would give been would little signed a obviously, having would then because into a July think, and beginning bit I better well give that’s here going into to are how but us

Mark Hughes

in distress the the any for How momentum also, building further in is there or better? coming throw about what’s regulatory to in the view either sector? What I’ll – increases? Are else out be state. make changes there legal further much things there the any OIR’s might price

Ernie Garateix

would there very I adequacy do that Well, it. been the more OIR market. things, with piece the that are assistance and in that session we has say legislative to legislative going want on back rate I next think with us on would some believe we’ll the getting table that in be some helpful of I

the are are say standards, that market tough the unfortunately, but will in understanding there and rate others, to not. I out those those I may keeping a would adequacy distress very think market, through who get as far As their market, it’s underwriting

Mark Hughes

you. Thank

Ernie Garateix

Thank Mark. you,

Operator

Newsome Our Instructions] from [Operator Piper Paul question Sandler. next with comes

Paul Newsome

and Maybe losses. the if And to seem Florida that there’s respect lot liability. a the sort you in it is talk other bit tort issues a sort maybe reforms with little just aren’t of like could catastrophe inflation of weather issues? other about excluding does more non-cat components and this to of about issues related of the of like talk lot that rising a just But

Kirk Lusk

Yes.

was a large or – the one quarter, than in of little the which that and unprecedented very example, last number of there was carriers. PCS bit for PCS there large, a PCS-XXXX, number PCS-XXXX event, was second events. impacted of where quarter second very different an year So It’s

quarter price the of at ones. look we’re that inflation When building seeing, some one has you look costs large was inflation, of a related. When the like when had just price is augmented other there that was of of of lumber, repair stuff, subside. the you type starting some the it couple had materials COVID claims And at that at one. This to is smaller the look that claims and you of to it the

being we look – should As look your to into rates far at time. over period as build that how of at because we of longer rates, the the able a

but the rate activity. Some if of of itself get inflation will for to will in, it longer some that into it holds that take get

that we to now. However, are before, are are they think see they to are going down but to where probably not subside. We claims we – be below they think right the going that level go to that go starting were

Paul Newsome

it loss the around non-weather issue? of you call issue? And pure just of it not frequency what of cat. get sort is it Or I my stuff? to also know arms inflation severity that’s And am like or I is trying weather a

Kirk Lusk

severity a that it or frequency up more than is the a slightly, issue severity. say frequency issue. It’s would extent Yes. of but I not is to less

Paul Newsome

Got it. Thank you.

Operator

conclude like Garateix the our for to question-and-answer closing to remarks. over will I’d session. call back turn any This Ernie

Ernie Garateix

and everybody a today thank everybody This hope has for like weekend. call. great to concludes We’d their our participation

Operator

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

now may You disconnect.

Heritage Insurance (HRTG) 7 Aug 212021 Q2 Earnings call transcript