HRTG - Earnings call transcript Q2 2024 | Heritage Insurance Holdings, Inc.

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Operator

Good morning, and welcome to the Heritage Insurance Holdings Second Quarter 2024 Earnings Call. [Operator Instructions] Please note today's event is being recorded.

I would now like to turn the conference 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

material forward-looking call expectations. Reform release circumstances. management's that In changes to Litigation XXXX. risks current statements Today's and of we our contain within meaning SEC to Private from Act based of are differ statements our press in subject cause our and future the filings, These expectations earnings Securities the upon detail may and may uncertainty results our

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

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

Garateix, will to With is today Executive Ernie me over call Chief the I the on Ernie. turn our Officer. call now

Ernesto Garateix

Thank morning, everyone, you today. thank you, Kirk. us Good for joining and

the Before a all I wish entire family recovery Heritage complete and swift impacted quarter, I by Hurricane those second and Debby. the discuss to

been has to outstanding the policyholder deliver we service. needs responding and provide discipline of to to achieved remains execute second for on With ready regard another we strive as capital Heritage allocating to and to underwriting claims financial rate quarter, achieving period team performance as Our strong drive our we to continued and maintaining our strategic on results. initiatives adequacy, growth returns focused solid

states of the most significantly our starting personal of business writing majority in the in in Southeast, and part initiatives, XXXX. Northeast we in the curtailed As strategic of the new

actions through in our we Personal portfolio. last rate top our commercial portfolio organic Lines with products X residential the grown have our E&S and Over across growth combined our years, line

profitability in underwriting our the efforts XXXX of These months the and at first the improved underwriting have of both significantly undertook through time, we improving aimed X At our results same XXXX. initiatives significant quality portfolio. and

with this of our X.X%, results Our income quarter actions premium written gross as while these second $XX XXX% grew or quarter by or line growing top the to second XXXX. compared net our of quarter are $XX million both indicative million

underwriting of underwriting quarter rate a with or selectively continue reduce engagement XX.X% by we adequacy presence reduction our in policy proactive key of is the manageable meaningfully From we of perspective, increased in have strategically reinsurance count and in of over had just over-concentrated continued underwriting Through disciplined X.X%. areas, This supply costs. A profitable which insured value our while force $XX.X exposure our execution resulted risk-based management while quarter or have geographies the the reinsurance bottom our our unprofitable to and a at of XX,XXX and maintained approach compared count stable policy highlight and in policies million our initiatives, indemnity-based benefited premium and partners, total an to increasing throughout line. footprint XXXX, our second our products. of

begin to to as over next quarters. expect the moderate few headwind policies the look we declining we Importantly, from forward

our evidenced rate balance. as to by XXXX our which unearned Turning portfolio our significant rate in have premium are earning They increases, through adequacy growing initiatives. delivered

healthy which financial anticipate to we portfolio, an Looking will results. our to believe through our meaningful we tailwind XXXX, even to rate or a more earn amount provide

business, an writing in inflection reached positions our resume these which to point have we selectively business geographies. importantly, in More new us

growth of opportune will we time to significant in to controlled strategy is we now up expect pivoting that the As of our focus This share. stringent anchored disruption underwriting. our are one by given market growth, risk many management a continued open accelerate on our result, and markets an

economics the in changes legislative on profitable business writing of positive having impact the recent Additionally, new Florida in state. are a

we with optimistic ahead. the fact, perspectives growth business again that started lie are In and July in writing

back to place new existing and require expect incremental turn will As not our engine in teams we leverage have expense. that on, business marketing we been our largely and sales

that Our another premiums as or and the as as growth grew quarter continue Heritage California, appropriate dynamics ago makes so in returns. this we What to nimbly state risk-adjusted the ensure coverages changing XXX% by is business adjust we our for nearly E&S more business state million continue Carolina. business lever is to write second year to to attractive earn we and $XX rates to South can compared Florida that

E&S as to evaluate controlled states our on growth continue focus more strategy. opportunities will we we forward, for Looking

our committed portfolio This volatility selective diversified committed stability, we our focus performance management. value. of and our Importantly, results, state strategic diversification to of yield insured positive will single continue value will no over over and and we be growth, the remain profitability reduce long-term as which enhance on excellence our in our total ensures and maintaining maintaining to represents drive company helps believe shareholder believe effective capital We time. initiatives a reflected XX.X% long-term balanced remain operational value. to We disciplined

With we our the off grow improvements build results. expect the first we income have to and made to net half the portfolio,

market by I conclude, that prioritizes workforce. shareholder like and our profitability reiterate to driven navigating dedicated with value our the a to strategic To complexity dedication long-term our would of focus

you. to turn Kirk, over it I'll

Kirk Lusk

you, good morning, Ernie, Thank everyone. and

deliver of XXXX of the future. indication quarter highlighted, earnings to was expect the Ernie reflective As efforts of in our an the we second and

the reflect of underwriting, the success capital this positive prudent adequacy results rate of Our and our impact efforts and disciplined our initiatives strategic quarter management.

driven per earned million million $X.XX the prior net share $X.X increase by in higher partially which diluted expenses. reported financial was per offset Starting or premiums year substantial income with a net This quarter. operating primarily investment was net in to income $XX.X in our $X.XX highlights. significant compared of higher net increase income, diluted share or by We and

$XXX earned lines. on Gross quarter This to X.X% premiums from gross X.X% year in strategic in focus the by $XXX.X $XXX was total increased prior the factors. organic Our for million, year $XXX.X million, million the million, reflecting quarter, up to as driven rate the $XXX.X up quarter. revenues increase growth million quarter year several $XXX.X in premiums earned premiums. rose earned commercial prior were from growth ceded the in X.X% in increase our adequacy prior up million outpaced our and the Net in from premiums residential

now focus on positively of up business, have our commercial X.X%. XXXX, second strategic ratio, tends residential Our period. have lower in-force The off in from commercial premium business contributing the which the compared profitability. segment loss substantial in-force for of quarter while prior only This of premium our insured total accounts XX.X% residential grew XX.X% to organic premium, growth in overall segment our by attritional the value with to to but the increased XX.X% year by paid

curve our improvements have advantage reinsurance we our in meaningful million earned, from impact and which to align quarter take million prior investment actions $XX Hurricane $X.X quarter, was reduction the going in a higher premiums $XX.X did $X.X expect this a year for first short-term to up in quarter million, premium income Due from full of year reflecting with yields. yield forward. million and million from in cost program $X.X the Ian and of in gross the the investments premiums $X.X We the Net million. second half incur were to growing ratio standpoint, structure with ceded year, coupled reinstatement

year. improvement was weather last year prior was driven by quarter year and higher the earned expense. $XX.X investments. slightly were also for for in Net losses Revenue the of current The quarter in XX.X%, This prior million by net from losses XX.X% a $XX.X a million the of net net million, from $X.X lower ratio impacted quarter quarter. same the adjustment improved on in loss to X.X% quarter premiums decrease loss realized loss equity million the and $XX.X down

million reducing by the net development underwriting at loss development aimed improvement million unfavorable compared the loss quarter the net impact abuse. XXXX favorable reflects of of $X.X impacted positive the Florida to quarter changes ratio on in net $X.X and during second legislative ratio claim in Additionally, XXXX. efforts The the of loss second was our of

continued all underlying in trends to loss the legislative current in changes attributable made in have in We our year Florida to improvements the see portfolio states. favorable costs and

state will basis maintain on necessary improved an results. rate underwriting evaluate each ongoing to to adequacy continue make adjustments and to We

the quarter. expense net prior and ratio, new essential ratio system XX.X%, growth. quarter increase was by associated technology prudent loss for premiums technology partially Our year spend. for points expense written, on to and cybersecurity liability increased insurance. from The technology investment year higher in These This and combined to commission due claim ratio with to quarter, higher a income net XX.X% acquisition costs in the as prior a general for infrastructure in higher driven reduced the The net administrative as down strategic and up net XX.X%, lower ratio. in higher costs ceding the long-term from by XX.X% gross our are X.X includes expenses from higher higher well rise improved offset investments in spending the

ended our total $XXX.X and million. with $X.X quarter to Turning We balance the of billion shareholders' sheet. of assets equity

year XX.X% book on in fixed and Our the securities a net our to losses to increase from is $X.XX, share reduction $X.XX quarter. our up strong increased attributable in prior primarily income unrealized per portfolio. value income This

any continue will overall mature reductions expect with rates. interest to losses bonds unrealized We as decline in and

is portfolio with a of duration our The average years. A+ rating on X.XX

the Our the equity points of effective the quarter, was XX.X%, improvement profitability XX.X capital our from for and management. prior in return year on quarter company's an XX.X reflecting

suspension quarterly our strengthen dividend. position Board our and the aligns capital financial terms growth initiatives. long-term In strategy of Directors management, our the to support This of our has decided continue decision of to with

a and our to stock will strategies We on dividend basis. continue evaluate repurchase distribution quarterly

our to well remain exposure, in include and long-term ahead, We value. technology achieving will us infrastructure adequacy rate and approach and investing focused underwriting consistent enhancing initiatives, for strategic maintaining Looking we believe continued executing which proactive earnings, driving that position discipline our success. shareholder on managing

initiatives policies controlled writing of growth initiate Lastly, to Northeast. excited as on our in and lines Florida begin we strategic strategy and next the the we embark phase are our personal

earnings to half impact the have the on our of future these results build and upon expect year. first of a We the positive

Thank you for your attention.

ready are to your questions. We now take

Operator

with [Operator from is Newsome Sandler. Paul Instructions] The Piper first question

Jon Paul Newsome

multiple questions There just one your which of to couple I obviously happen. about levers, letting business new quarter. growth of bit new is more the allowing effort. -- are a here. on wanted little to A Congratulations just ask

actions companies often other of a do. is host The that whole nonrate

all? turning you terms little on essentially action then talk the where in So perspective at could from are weren't you sort bit do you writing any you where nonrate And from of a -- actually of from about are a spigot. you start

Ernesto Garateix

that. talk about Yes. bit little a I could

areas, geographic some we've appetite in underwriting see couple over the right, taken and we our past can So where where on obviously, action writing, we're profitability. years of especially

So by we mentioned writing we in those is will anchored as areas, have. selectively criteria that be we underwriting again the

portions will Some will some of those of it it nonrate be it. of rates, on

So that's we'll long we of in kind that make to because term. proven us of can those continue kind doing areas the in profit that

is very and the strategic new selective we're writing what on So it business.

Jon Paul Newsome

Right.

the turning not point, you're you're... completely So at spigot on this

Ernesto Garateix

No. No.

where on underwriting profitability. We long-term again, and focused are a very sure are writing on perspective, making that, from focused we're we directed and very

take So understand you longer. as write take a we is rates in can we areas other some little there areas, bit to quickly, that

hydrant. So on fire it is not the turning

Jon Paul Newsome

That's development you drove the quarter and it? reserve and bit the about sources what pieces Could and a great. little talk in

Kirk Lusk

a Hurricane had -- We're we're and one, XX.X% on outstanding yes, have on still We few there to Irma. that that those Yes. due with claims. to but -- really We claims resolving, it that. still a are about actually basically, was closed do that there few were claims outstaying

Jon Paul Newsome

were essentially to than that those case true be you are So expected? reserves larger

Kirk Lusk

Correct.

Jon Paul Newsome

few an final to not anything that Fantastic. just obviously, question, event the the there they've And other worst Debby, some Hurricane But heard do? I'll then past in got. you the ask. you've let had is Hurricane a and you consumers similar

Ernesto Garateix

Yes.

populated. last very right We So made that but path area, pretty again, landfall. early year, large a is it similar Idalia, in now. kind stronger path don't if But in that roll, have you Hurricane book where a similar area, hurricane is remember less of took

between Now slower, a larger, difference the is, lot Debby less powerful, seems of Debby be to but range.

claims we not but type So are still expect where those flooding more calls and people us, we taking by can. helping covered we

Jon Paul Newsome

Idalia in recall right? comparison, you how general, it's was Do big a obviously, just rough sense. Makes

Kirk Lusk

ended Idalia little over a on being ultimate just million. Our $X up

Jon Paul Newsome

the ask some color. Fantastic. I'll let folks appreciate other I but questions,

Operator

Next question Truist. with is from Mark Hughes

Mark Hughes

E&S. Could about you the talk in the growth

as How states. E&S? expand admitted I adequate market, I function be great. think if in you seeing are thinking are you're for you been the the highlighted strong would momentum a different on that, growth still you've X that's and good vector seeing guess markets you. in you I'm But seeing different much it rates maybe that if could the between interplay in maybe more

Ernesto Garateix

Sure.

in have we growth seen So the E&S market.

in we're XX those quite and each know, you markets markets, of are different. As different

So as another There's rate. in things just we not tool address. and look at tool other address that we to it can coverage the set issues

South So we grow, still to and market California, Florida Carolina. that E&S see particularly continuing in

So trade rate but see markets, that getting as us we're the still selective you're right, in market admitted in for we the some areas. E&S growing adequately,

Mark Hughes

what over And much just terms how better kind what about, think rate would getting next think is we anticipate? a And of trend you're general increases book ask you'll to you specifically, in I sense pursuing. do as overall, be Yes. then you rough to Florida might think you the rate across spot. of say, maybe of a months business, XX your be of going the But

Kirk Lusk

Well, Okay. also Florida still market I we've me substantial seeing the of costs. that the I is legislative in changes substantially and address rate reinsurance say loss other we the all, think to fairly cost seen. due some to to that would to going loss first let be where decreases trends starting increases and moderate of the Northeast due are

think we be cost standpoint, but pushing there years. probably seen going past we've not moderate, I several not will that significantly but level modestly is in and higher, from loss think some So the inflation the rates to to it's that probably still

Mark Hughes

the... Then Yes.

Kirk Lusk

of costs that trends because favorable. loss very indicative now the seeing. are the we're rates are those again, again And And right

Mark Hughes

the seem Yes. I look wait you a the Is changes of upbeat change the legislative on And have meaningful more your real Is that as that see you've if that. in had Yes. X, X, think -- you here. over reading? quarter at take fair interpreting initial was kind events and correctly, I'm how experienced you last there

Ernesto Garateix

any used I you've a a and the the quarters of optimistic, always Yes, really say early that seen out as now there heard we've through data set we've on, here, data the couple through mean of cautiously we've Mark. couple actually words, was numbers. been coming because me months, wasn't in,

have the So we would in We a have term cautiously impact. said an reforms that those it can whereas year legislative actual the use made numbers, see I ago, optimistic.

seen. through those looking optimistic, data we're the right, that say now would I So forwardly to trends continuing we've that

Mark Hughes

Yes. Yes. Very good.

Operator

Next Carol with Shmygol is from question JMP.

Unknown Analyst

curve regarding it I nice net mainly And the the this got assets will projections? question here income investment on it longer yields for going I'm the of side do higher for shorter quarter, Or you utilized. think was yield of And the duration one that go was beat. you a I the that run the read because yield rate wondering, you is forward?

Kirk Lusk

interest rates Well, drop. anticipating are we to

We at dropping. going -- to of are that rates curve go starting in we start anticipation already the quarter to actually, out started on the yield the longer of beginning

I a we years still on to It's years. starting are still the is a to go curve is rates we under go anticipating mean going little X.XX like duration X to the but yes, So A+ bit drop. that trying short. little out are rated, our yield It bit are longer.

Unknown Analyst

run But million you per good think do income million quarter a net Okay. be $X would a $XX to rate? of investment

Kirk Lusk

Yes.

Unknown Analyst

said Tri-County you cautious you favor that and think trying looking question, into past, cautious slowly in Tri-County. the the do Florida. dynamic of Okay. always possibility that I then maybe get changed Tri-County just of were with to in And with But the of again? Florida question. out has you're the another random you Great. know just And very a then being guys

Ernesto Garateix

yes, believe to for state, we say in is, right, the that size certain So Tri-County, what I do comfortable there's there's a we're with. us, that that a amount and concentration would of

not I but selective, hydrant area. turning comes As the Tri-County across, and writing we're mentioned will everything earlier Paul, including to the that fire into we on be

Operator

to turn remarks. the session. I'd management question-and-answer our final to conference concludes over this for back team gentlemen, and like Ladies the the

Ernesto Garateix

day. We call wish We do. everyone everyone joining the a Thank appreciate to you. great

Operator

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

your disconnect now lines. may You

Heritage Insurance (HRTG) 7 Aug 242024 Q2 Earnings call transcript