Earnings call transcript Q2 2023

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Operator

Good morning, everyone, and welcome to the Heritage Insurance Holdings Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded.

And at this time, I'd like to turn the floor over to Kirk Lusk, Chief Financial Officer for the company. Please go ahead, sir.

Kirk Lusk

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

forward-looking call Reform circumstances. management's changes Litigation XXXX. current statements Today's and of contain within meaning to Private Act based of are statements in subject the These expectations Securities the upon and may uncertainty

differ press our detail earnings our to our material future release cause that may SEC we In and filings, risks results from expectations. our

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

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

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

now the to over turn call Ernie. will I

Ernie Garateix

strategic and Thank insights you progress joining will I in today. discuss of all key quarter some you, highlights achieving objectives thank us provide our our our for into second and initiatives. Kirk, performance, offer

of on from The favorable with for of well financial Following for will year quarter income metrics, quarter. the our as open report of initiatives improvement the this last profitability results, as my Q&A. progress to key the weather with I provide quarter remarks, million. $X.X are strategic the reflects solid Kirk we after will making consecutive details another second benefit call performance net financial which we am pleased

appropriate underwriting, providing strategic market quarter, include profitability last balanced rate and the adequacy, described capital selective for initiatives portfolio. a and I the diversified our allocation, coverage As

the value. combination will enable that initiatives of earnings shareholder to and achieve long-term consistent these quarterly We Heritage believe

compared while XX.X% policy continued Our our count highest our premium, achieving as book to quarter year. of actions in last the in-force decreasing throughout rating second by resulted

guidelines We new markets including for maintaining written discipline, policies regulatory restricting and our within concentrated criteria are business also over underwriting or products. tightening underwriting in

that capital We products are long-term and returns. maximize allocating to geographies

During year over total only or the grew our and product by while selectively of until policy increased commercial reduced of insured Florida by personal prior by lines TIV, from the key we the XXXX. claim policies residential Florida our in-force recent from impact QX XX.X% for product lines remains quarter, realized. focus, for premiums intentionally value, personal in-force XX.X%. quarter, the to and that quarter Florida positive count XX.X% the We legislation reduce is continue XXXX will we XX.X% X.X% a abusive exposure first Reducing and practices increased

on adequacy X.X% while other disciplined in in-force. resulted a rate approach X.X% Our premiums underwriting generating and policy of states, in in reduction count focus a increase

by XX.X%. a balanced states of continued by TIV, to increase state of states portfolio substantial four XX.X% our TIV Efforts and top smallest diversified in X.X%, the grew company's an five with despite the business. The maintain no commercial grew while than average representing portfolio within more the

states TIV all of of the at efforts, XX.X% in to a line XXXX all result As five XX.X% second the quarter personal second XXXX. diversification quarter top of the TIV compared of represented

while to portfolio. maintaining will seek We opportunities continue profitable a balanced

excess and loss of We catastrophe are placed XXXX completed program. pleased to have our reinsurance fully

the the market. for and We appreciate appropriate to the our our reinsurance recognition partners provide coverage of efforts continued support

in ensure increase long-term to and statutory profitability to and from rates the guidelines to underwriting serve. continue have take expected We we markets actions year within taken last will

last will [app] Our reinsurance which issued year's program reinsurance Citrus by the year, $XXX in Re program costs cost collateralized company. below catastrophe million bonds also include coverage the bonds Re, reinsurance as from no as provides issued includes multiyear by which Florida the fully FHC remaining at XXXX provide This catastrophe limit this the multiyear Citrus created protection a million and this by by of reinsurance year earlier catastrophe to of program, catastrophe RAP later legislature will the well $XXX year.

at impacts look in favorable market. forward other of property We the seeing new to claims legislation litigated curtailing aimed Florida the and abuses

claim are forward. our will We plan closely into post-litigation strategic observing take activity new going trends and consideration in

impacts our the through to As we commercial we grew residential of work wait for business. selectively of business, favorable legislation book the

from and away XX.X% are systems which count modules. Continued efforts in policy in to year. policy reduction billing, we a personal To investing of compared lines Florida a last to as personal to lines and process ship Florida Florida second efficiencies, transformation, left includes quarter improve business have the systems claims

to billing component data has efficiencies market. rolled the the to and focus and a and enhanced been be claims system anticipate speed system on and with expected is will XXXX. collection implemented, out We process policy as as scalability in components new early well analytics improve The

self-service In geared to improve customer is better experience. and addition, policyholder system new for the the

quarter results targeted effectiveness anticipate on underscore changes for impact increases financial throughout position our and in continue underwriting year. the XXXX strategies. a second Our XXXX We favorable of the made planned the will and our rate to have

We earnings sustainable consistent on quarterly a achieving are shareholder focused value. and long-term

for key Kirk Let and me things the performance now review turn in financial over of a quarter results metrics. to the

Kirk Lusk

Good Ernie. everyone. morning, Thank you,

investment premiums to higher by per the of diluted earned can higher million with The per $X.X $X.XX mentioned, results $X.XX Heritage and improvement or from or quarter XXXX. an positive for net share quarter loss expenses. million quarter second offset operating $XX.X consecutive be improved loss diluted income partially financial the a of net of Ernie share This its XXXX. of As of reflects net result income, the had in primarily third second attributed

XX.X% the returns impairment for company year income in per The ROE for quarter annualized in the The a rate due quarter increases billion a the across second of net net of growth representing million $X.X premiums $XX.X the down residential while as the or quarter XX.X%. in-force by driven XX.X%. Premiums in increase selective tax quarter, was the increase prior use is count On company's this the annualized XXXX, which resulted the net policy in portfolio charge. The to diluted $XX.X was goodwill guard. loss million share well basis, of inflation an noncash of and XX.X%. $X.XX as year-to-date net business commercial income was from of ROE an exceeded

second from the to resulted X.X% per XXXX, written million In actions in period the These of $XXX.X of of gross from premiums XXXX the quarter XXXX. of first increased average policy in $XXX.X XX.X% same increasing and premium second X.X% the the up our from million, quarter quarter XXXX.

premiums the of the increase which second premium inflation of XX.X% guard, be million $XXX.X book compared XXXX, quarter a per than route million, growth the $XXX.X $XXX compared second an Similar increase exposure XXXX in and to all the to selectively average attributed reached premiums can quarter to the million our from to policy the reduction in-force offset revenues of quarter Gross of efforts more second our XX.X% strategic quarter XXXX. earned premiums of Total of in for increased commercial a in use higher management. the expand business, in in second to the to XXXX. million residential premiums, earned of $XXX.X

proceeds XQ to investment in which higher increase XXXX XXXX. addition in $X.X income million from the rose million of reflects net of The net to In growth earned in QX an premiums, $X.X bills incoming into led fixed current from higher returns. income maturities treasury in short-term has money resulting liquidity market us invest and premiums levels yield and to and of higher curve funds,

$XXX.X driven quarter $XX.X loss of Our prior were the in higher of Losses expense XXXX, attritional quarter. million. total accident plus invested and weather quarter by ended adjustment from for the million mostly $XX.X the year cash $XXX.X from loss. assets million, quarter current the down year were million Net in at $XXX.X up losses million second

quarter loss million, loss year of from the weather second $X.X second There from development to $XX.X XX.X%, in were to losses a prior million the year from million in also in The $X losses in quarter of quarter, benefited of favorable of current improvement the point up weather and net in quarter prior LAE XXXX, compared and the development XXXX no the of catastrophe $XX,XXX. million other ended net year quarter. losses the of ratio quarter of $XX.X The loss X.X prior unfavorable quarter XX.X%. ratios the compared

the lower XX.X%. net the was from XX.X%, points ratio in the X.X improvement This a For mentioned decreased ratio XXXX. ratio to combined XX.X% the of just reflects an of loss and expense net the improvement quarter, which second in point quarter X.X

to a earlier. relation was each progress rate impacted We quarter. margins income compared by the quarter goodwill expect tax captive to continue. by in nondeductible Osprey progress in and impact election for rate loss This negative effective that mostly The allowance $X.X differences charge effective the of permanent rate of prior the related REIT, XXXX, X.X% second The Bermuda. driven second XXXX the second in by the valuation was our domiciled a corporate quarter. was make of in of to quarter or tax made rate tax impacted effective tax in of by XXXX reinsurer effective the The quarter of to XX% tax continue million in impairment a described to year was substantial our pretax

credit of generally over years second income in was Book outside fixed cash the million money rating anticipate XX, funds of of return a the June XXXX amount market of quarters fourth which the the is from With This duration a increase XX, cash advance as generated cash as maturity. on quarter equivalents, up of fixed in portfolio value $XXX Heritage's first XXXX, north per of The of losses fourth from XX.X% X%. securities of is sell XXXX X.X our to securities XXXX. of lower the need as held benefit and income investment don't $X.XX June and income share the our we income now A+ in unrealized by rose XXXX. fixed to earning portfolio. portfolio with is as net well quarter of driven and

and company's a strategies quarterly our ensure The Board conditions. Directors stock on financial and the performance of alignment distribution basis to to market continue repurchase assess will dividend with

temporary Board shares decided shareholders. of common quarter. to continue of repurchased its the the during dividend of suspension the such, stock No to Directors As quarterly has were

on business XXXX quarter exposures results growth manage improve capitalize highlight on Our half continued strategic in financial and and We to our seek opportunities, operate risk first and discipline continue initiatives. of maintain evolving effectively results. focus to management's profitability to a constantly landscape cost second

to the long-term We in remain committed our to sustainable growth and maintaining shareholders value profitability future. and delivering

We improve for and will profitability now for decisions other continue the to questions. drive that open we make investments and and [ride] of shareholder to opportunities value. look line will Thank you, to and the business company the

Operator

question from comes Maxwell our today first And from Instructions] Fritscher [Operator Securities. Truist

Maxwell Fritscher

in the participating Hughes. Takeout I'm today Mark I you process. if in all Citizens be for wondering calling was will

Ernie Garateix

exploring So be align the strategic we're that profitability process, are we as our it initiatives, conjunction front will future. have that but us. something with And other opportunities as of in we doing they Citizens Takeout the in in consider we'll long with

Maxwell Fritscher

that reform it's know Okay. I P&L? regulatory And have for still early. any in you flowing the through the seen impact Florida, of

Ernie Garateix

Sure. And it is. It is early.

and and the then kind But seeing some are coming of We that P&L. are we it's that of early, kind signs of metrics since see in. effects that continue optimistic still long-term that, in are the optimistic will

Maxwell Fritscher

in then how trajectory the lawsuits finally, And quarter? been has this

Ernie Garateix

a that the But has it's piece still bit trajectory the So early. been of again, on decline on it. little

of that, some but we're getting from it's making -- lawsuits sure focusing a trend. that We we are really in the long-term on kind total decline a number on are seeing perspective of on

Operator

from And Sandler. question our Newsome Paul from comes Piper next

Paul Newsome

RAP the from ask that. costed more it's What's any I about on of the the reinsurance. of but helped impact this costs the increased probably all wanted quarter, then assume to quarter. Congratulations that? I net of

Kirk Lusk

did quarter costs the Yes, again, bit. it up. did impact And a little go the

entire However, June, it impacted the only month it because for in one incepted quarter.

impact it far So will going more. forward, it

can think up probably of it I ceded is probably expect kind ratio points go a our right will where of from couple you now.

Paul Newsome

is a you on Great. measurable expense The have your mentioned, system transformation going impact -- the to that that system transformation ratio?

Kirk Lusk

overall the have think on of it should I the than speed. Yes, operations favorability efficiency

biggest more the and in to ability a rates also bit One those to upon an in do get put programming basically department opposed things that, relying outside is driven. table of to the as it's

again, into we'll some as therefore, to to things also be leads system, far getting able economic So some which, expedite benefit. as the efficiencies

Paul Newsome

you're costs that's system good. initial basis? in no on as That's that the But investing

Kirk Lusk

savings expense won't Yes, capitalized, initial over period of there it's a and be -- any would time. probably

Paul Newsome

dividend to certain of resumption be then debt level? And when looking might tied from any we levels sort thinking resume? Or mentioned. your ratios to a dividend Are seeing you may level that a the dividend? before are about Great. perspective at financial or the Are a debt in put about targets as the in thinking capital at certain there you recommend

Kirk Lusk

Yes.

it or different if far looking at keep So it's think I to capital a items Board of how number looking at in and that dividend. is capital at and deploy looking is there future return the future, for the internally to that evaluating the factors a future opportunities, now that. it a They're be those merit they're when as determining will as of opportunities? better

Paul Newsome

any you I want levels related guess, capital But thoughts, that where on to prospectively? to be and

Kirk Lusk

the It's the more of I the of forward opportunities also not the And use hey, looking sole target. one. but it's one that and that don't the company the or going is is at? capital. for it they on based less what the growth the look a capital is specific mean Not upon, best have they factors at,

Operator

and ladies over the be for remarks. Ernie concluding like Garateix to we'll that, back today's closing gentlemen, floor session. I'd And question-and-answer with to turn

Ernie Garateix

thank We'd call for to hope has everyone like day. everybody a joining today, great and the

Operator

And thank you joining. do that, for and ladies conclude presentation. gentlemen, today's and we'll conference We with call

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Heritage Insurance (HRTG) 9 Aug 232023 Q2 Earnings call transcript