HRTG - Earnings call transcript Q1 2022 | Heritage Insurance Holdings, Inc.

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Operator

Good morning. And welcome to the Heritage Insurance Holdings, First Quarter 2022, earnings conference call. All participants will be in a listen-only mode. [Operator Instructions] I would now like to turn the conference over to Kirk Lusk, Chief Financial Officer. Please go ahead.

Kirk Lusk

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

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

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

today today The include release. our information Ernie comments Ernie. found will other and can call measures. press Chief in Officer. the these will our of the is to financial regarding on non-GAAP now over reconciliations measures turn With I call Garateix, Executive me be also Our

Ernie Garateix

performance program. for March ending XX, begin our partners and of reinsurance well also Kirk thank their we to valued their open joining for commitment on then I our thank for today. the call quarter thank everyone like you. company, Q&A. and I XXXX, financial On will to like to our the key the as Heritage call, to policyholders. this would employees I dedication would metrics our to for the like with updates performance for an call Thank overview as would our provide

losses $XX.X business portfolio. share. in the more from which increase by our underwriting or additional weather marked by remain XXXX changes, book and not positively the impact $X.XX per will net accident loss increase of the for of of an The impacted diversification quarter million XXXX. by new severe its and tighten our renewal average business XX.X% XX the to first the implemented premium first a quarter have The rate changes throughout underwriting, for existing losses. amount policy substantial we and restricted our book current weather attritional of include geographic continue weather initiatives These the improved These business higher in by coupled quarter during year rate impact have changes increases resulted of improvement renewed. to with this form yet over net does diluted Despite The quarter, rates of last losses Therefore, our encouraged not months. new through on rate the quarter-over-quarter. are not policies entire loss in business. per changes has These ratio highlighted way worked another

XX% prior averaging for XXXX For a perspective, renewals are year states voluntary our existing increase our all over the rate changes. with homeowners’ rate

will throughout We doing cost policy period. our with continue earned policy renewal commensurate one-year are of at to are changes business. and changes implemented see rate Rate

concludes the raising We of $XXX loss pleased taking which year. reinsurance actions used our my CAT we to portion to our month. a XOL completed We to underwriting Citrus improve higher committed this were this access of as pricing and throughout We continue SPV, program. and bond, forward reinsurance This end costs, proactively Re, We the Northeast. the XOL as markets of our with our again to million year appropriately for risk profitability the specific be remarks. to successfully capital are by finalizing this CAT program look the to rates should transfer cat part offset our of program,

Kirk to metrics review the numbers. and turn things for of now a over me Let Lusk key

Kirk Lusk

while that reduced reduction have market environment and increases are and for lines implemented claims $X.X impact in bottom to grew Ernie. market. being we rate will policies during produce has In-force to business state. the the taking our from line. changes that resulted morning. enforced down the in We billion volatility underwriting believe a position made litigated believe very growth recognize has and difficult, you, by Florida X.X% quarter This rate loss Florida could time company the Florida frame well ship to dampen the in in an enforced Efforts meaningful in will Good primarily future costs personal the the policies this improvements We X.X%. later same were in premiums actions underwriting XX.X% future. of the in we're as Thank rating due the year

ratio a outside among of execution outside was it's We of first as XX% XX% of TIV that continued quarter our the of Florida, the distributed nearly strategy, XXXX. our think increase the result was As of from important state, of TIV Florida which up diversification each premium earned first we in of from ceded premiums points XX.X% which risk. the the outpacing of stems our basis diversification growth, XX down The was conduct in first business, quarter growth. improves premiums quarter, gross XXXX. The from primarily XX.X% ceded decrease overall

weather up year million. Current $XX.X quarter to were weather losses losses current of quarter include losses. million accident cat first substantially accident net $XX The

increase year in the million million $XX.X from prior year While $XX.X weather prior quarter. the up up includes quarter. of year-over-year we're also from losses, in million $XX.X This

events XXXX mid-January weather quarter Florida, to are storms mid-March. primarily and losses attributed severe in particularly in First

reflect shareholders approach commitment appropriate transparency pre as -announcement losses as well our weather with last an to estimating weeks losses. our to Our of

to weather affecting litigated by inflation ratio net the We social is period outlined. higher from XX.X% the legislation this special higher believe drives claims driven we're Our practices Senate which the points this taken largely loss Florida of loss quarter claims up outcome weather The of ended interested some to has and losses each seeing a later with costs the associated event. due Florida in XX.X the by address prior month. the Bill XX, session up actions the issue

in the drive expenses. Policy points the prior-year G&A ratio of net driven Total our quarterly XXXX the ratio Our acquisition by net XX ratio. continued partially XXX.X% return relatively of XXXX are $X.X and expense manage loss of reflecting was by a dividend, shareholders net quarter costs percentage ratio, first The net expense as which higher capital net quarter a XXX.X% is million, lower for from basis per repurchase decreased by regular was flat during period, a to to reflecting shares. up of share premiums. combined to earned $X.XX XX.X% offset

the repurchased inflation, increasingly continued During severe are weather. Florida, and markets average and shares price an share, million. and of by social $X.XX litigation economic Many especially per at our we of X totaling approximately XXX,XXX quarter, challenged

managing to taking considerable and We rate, actions facts our factor, underwriting underwriting have inflation our taken their approve standards, mitigate and results, tightening increasing exposures. including guard

improved improvements. have of claims portfolio, actions severe inflation Our litigation to with and continued those associated weather is our while the impact dampen continue

you management to initiatives. improving The our management returns is and margins such, expect the focused accelerate in As team on can to shareholders.

even exposures. are achieve where to tightening products, regulatory effort with target and are underwriting it remaining to All standards we necessary needed, accelerate is while further committed state compliant in coverage returns. our believe until We rate changes our we our and an the taking requirements changing

call. to take actions of realize to also That prepared the the consider all our the improve margins. will to will we're begin necessary and options value question-and-answer remarks. concludes our the portion We ready we entities, of Operator,

Operator

this we roster. now pause assemble to Instructions] begin the [Operator will question-and-answer We time, will momentarily At session. our

first with go Please Marla ahead. is from Our question Backer Sidoti.

Marla Backer

you. Thank

underwriting area see some stepping several any book well? there So, of you where now the to quarters, Florida should at that not diversity any in to looking expectations. your you might past back pull into you over the up done do some lived initiatives the addition as hope inject you where have have perhaps of and areas the to back of and think you accomplished that Are perhaps

Ernie Garateix

this Marla, good is Hey question. a

we're pleased continue to I to taking. months those So, book. that that the XX actions, flow non-renewals, to with take they're are book think increasing to look through But rates the of XX actions the at some we understand whether and

it's are and we to seeing take where on the does those take. it quarterly months. So, those, monthly we actions looking XX a effect But constantly understand of XX are basis, full and to appropriate at to

in constantly Florida on the with in we're at, the continue looking heading but we're underwriting performance. overall with we of those direction are look outside areas we to which that pleased So,

Kirk Lusk

Yeah.

In addition to also surgical. that I'd more much say we're

look each state mainland and returns want will at the distribution state and by where individual we we seeing example, that coastal to. for between our we portfolio aren't within adjust So, and county the

launch. carp a not it's So,

much the of because view that. think different it's surgical more diversification I than

Marla Backer

actually you then the decision tweaked same you it you a see to shift think, portfolio. XX-month that before process surgically, a And take either, still Is bit once happened? little the as shift

Kirk Lusk

you time because those a through Yeah. terminated areas of example, bit Or where give right? do to non-renewal some roll for take to book notice, a time for that agents the have to takes off. some roll in It we've policies will

So overnight, things not time unfortunately little those bit do of a that. takes of happen

notice got approved, so bit those our that a on you it renewal to basis, time it's take non-renewal take we a proper rates some get You've and the of of get if by does time.

Marla Backer

you that you for those us more question the the that a and me some see you -- partnerships is, bit where business can little formed part that taking color for give the of on Thank last of you and going?

Ernie Garateix

Yes.

certain the and at in a it's been other we're partnership, with partnerships there for we're that looking us we in have then profitable with communication And constantly have co-operative, looking business target. have and do -- we Liberty large they partners areas pieces. in They pull Safeco, some been and good those where that. with times about have we are they and good but back regarding very understand, So, in very where to obviously respect GEICO, NatGen, very to refocus to more true areas Mutual,

Marla Backer

Thank you.

Operator

from is Piper Mr. with Paul please ahead. question next The go Sandler, Newsome

our end, on is muted it's on perhaps Newsome, your line open yours.

Paul Newsome

Can you can me hear I'm I sorry. now. -- hope

Ernie Garateix

Yes, I can.

Paul Newsome

the They industry. in home losses to standards, the CAD as on I else with. were anybody really -- start as just large want unusually your well the by to in

peers. that in how area, their some of than into us or suggest define would versus Heritage's Anything CAD you standard this a us anomaly Maybe So talk particular give was would different maybe CAD insights there quarter industry. a to lead that why just losses. having were that the your you're about the anything losses could definition concentration you was an

Kirk Lusk

Correct. Yeah.

Okay.

this we states till So PCS that is The do XX. reserving our at there impacted, one at it had first the events practices those also, The when PCS we've XX Florida, development I XX, all, think XXXX, were XXXX, losses are XXXX, those Alabama, quarter. North quarter look When into practices, that, Georgia, at, of XXXX. that XXXX, Carolina reserving since you you and of of that and largest like categorize six over bulk our had Florida. of favorable look look when up you predominantly. in we And -- third was

prior XXXX quarter slight -- tune million. till had did we've million. third of we now, to have unfavorable have of had until development X.X favorable the $XX to This that, development about from But quarter like

is So, and we think reserving prudent our accurate.

else's but at speak or losses their anybody I So, for reserving, we it. how look can't that's

Paul Newsome

has or focus not. Could strength question you your reserving relative it's development for second Your would given had been versus wondering you I maybe give that my development certainly you on an a unusual you? peers. reserve

Kirk Lusk

a myriad are a have cat nothing Elsa, did was as of million It far particular coming all not long in And of which from. There's us. Ida, our development. was in as again, quarter a it we layer. for $X.X and really that time, Fred things. was worth there They're the about where storms, just retained first Yeah, couple like of into

and fully those did therefore are those slightly retained. so So deteriorate

Paul Newsome

a non-Florida the bit rest That great? will the makes we're book that much sense. topic. not profitability this or versus be be the book. of than talk Is -- may quarter book was the precise, -- it different you to little not just it about, but details Different Could initial it of Florida

Kirk Lusk

underwriting also weather market. of And improvement we that. the quarter-over-quarter we at we quarter. weather as we're that in increases standards, that Yeah. did the of tightening seeing the taking the looking at to obviously, have that due forward the going again, When it's is well. perform -- because the But obviously Well, look it driving in the losses, are rate not with Florida Florida book this

Paul Newsome

Right.

is at the rate. the and could the the versus you inflation year, year so think Maybe the just inflation would -- fair So, look been you topic claims about let you [Indiscernible], about you that. that rate really of do underlying lost look some perspective? we're basis you know might XX have big us on if a think months traction. claims If that ROI where add or back how But not? you ago It to we there's how stood a from seem think could up that next then versus last year say

Kirk Lusk

think at building inflation year. over XX% around consistent and I I claims at look we we've what we pricing past is running look overall we with and what probably portfolio. the think the at that's into look how seen That's our

standpoint, I that that inappropriate. from so, And we're think building

think our currently that our so To the increased factors pegged. we're and of throughout rate -- contemplate probably there's we've inflation guard have be on the think that getting. We that geography. would increases top also inflation I do over the I that got

that probably and volatility ones weather can it. bit to knows and probably It's everyone to I little a the are as that Although that more up difficult the has it the are and predict. inflation some -- think even move the social down

Paul Newsome

but Paul as help ask the always. let some other questions, appreciate folks

Kirk Lusk

you - Thank [Indiscernible] A

Operator

have with if Matt ahead. Please Instructions]. next go you [Operator's from The Again, question, is a question GMP. Carletti

Matt Carletti

Hey, morning. good

Kirk Lusk

morning. Good

Matt Carletti

want trying Just to the go to slash to quarter. weather in losses cap the understand better

If the number you is sizable. the what reported. isn't for of Heritage majority guys' get is that magnitudes of cat is they've some it, is bucket define what so that footprint, for and for bucket the of your have the us weather of peers It and cat's similar your weather necessarily you Heritage? seems kind Can what

Kirk Lusk

number. was Well, was million. -- $XX $XX the bucket the cat XXX the And other million weather

events. defined So, And it as PCS cat number. the is by predominantly the

we what is bucket events. that put is PCS into that So

Matt Carletti

PCS events. defined PCS events cats? I'm sorry, are

Kirk Lusk

Yes.

Matt Carletti

Property cat -- catastrophes.

Kirk Lusk

cat We're PCS putting into the events correct. bucket, the

it's - So, a cat. non [Indiscernible]

Matt Carletti

that sorry, like wherever -- of you million that Do have was, to came of XX counts those it weather. handy Okay. how claim many that off $XX I'm [Indiscernible] events relate

Kirk Lusk

as as there yeah, was of X XXX. reported As claims, -- XX, far

Matt Carletti

a obviously lot update how then Can on your And your a sit capital you today? of you view you question. us in are quite a bit. Thanks. give of the you Okay. market just peers separate Could just backdrop struggling as position us here

Kirk Lusk

Yeah.

look our is we good. capital I -- vision think

I think to able we've got [Indiscernible] we're also. utilize that

a have and have in MGAs, do our also to We we companies, to that, have revolver bank, syndicate we addition our of then service available do it.

standpoint, we position that look that forward. think we're capital from from So, do at to you'll okay and continue a that going

Matt Carletti

answers. Great. Thank you for the

Kirk Lusk

Yeah.

cash from million. position, a that, our would mention to I the addition In fact $XX cash non-regulated is

Matt Carletti

you. Thank Okay.

Operator

with Dowling Partners, question next ahead. The please is from go Nick Lacoviello and

Nicolas Lacoviello

Hi, good morning.

Ernie Garateix

Hi Nick.

Nicolas Lacoviello

on liquidity, million, Holdco that's but XX question, was And correct? First it that then, [Indiscernible]

Ernie Garateix

correct. That's

Nicolas Lacoviello

is that's of where at quarter downstream was So in -- time? point group as -- the end this group stat surplus anything and

Ernie Garateix

here. See

Yeah. pull me up Let real that quick.

Kirk Lusk

Yes. Total stat entity. surplus is XXX across the

Nicolas Lacoviello

the Thank but on then line expense up great. G&A It three in the was prior versus relatively guess you. the I looking just was just quarters. with year-over-year, And for it

cadence me forward help is base going So about something there's helpful. annual that just -- then on and quarterly think an be would

Kirk Lusk

Yes.

the a I it to not slightly a probably it the and throughout year in dropped the fourth think year. I drop first higher year some year. to little second in amount each going dropped bit fair expect of then you're the last quarter was it quarter. quarter last extent first second see I higher quarter, the would to it dropped but through the then it into did probably and know

Nicolas Lacoviello

capacity disclose, you at a I Thank on simple guess I guys, now, then but And guess time don't this not? done they the point know much are you, has that I about for talk in how can secured or stuff you. renewals, from

Ernie Garateix

talking [Indiscernible]? you Are reinsurance about

Kirk Lusk

reinsurance placement? The

Ernie Garateix

you sorry, there. up I'm broke

reinsurance referring You're to placement? the

Nicolas Lacoviello

placement. reinsurance The correct. is That

Ernie Garateix

Yes.

placed. placed and month. announcement go commitments in as the of the very in bomb seeing the to the expect obviously, of got what process And that make with end we a we're and to you pleased We're then our be we're and the fully the we in again, the met we're very all lot process early and placement We're did So, out partners. optimistic we've that out about early. by market of reinsurance being We've cut go large well. didn't know,

Nicolas Lacoviello

Thank had. Got you. I all That's it.

Kirk Lusk

you. All right. Thank

Operator

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

Ernie Garateix

everyone the call for thank today and joining great We weekend. everyone wish a

Operator

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

now disconnect. You may

Heritage Insurance (HRTG) 6 May 222022 Q1 Earnings call transcript