Q3 2020 Hci Group Inc Earnings Call

Good afternoon, and welcome to H C. I grew up the third quarter 2020 earnings call. My name is Christie and I will be your conference. Operator. This afternoon. At this time, all participants will be in a listen only mode. Before we begin today's call I would like to remind everyone that this conference call is being recorded and will be available for free.

Play through December 5th 2020th starting later this evening.

This call is also being broadcast live via webcast and available via webcast replay until November 5th 2021 on the Investor information section of H C. I groups website at Www Dot H C I group Dot com.

I would now like to turn the conference over to Rachel Swamp cigarettes Investor Relations for HCI. Rachel. Please proceed.

Thank you and good afternoon, welcome to H C. I groups third quarter 2020 earnings call with me on today's call is Parrish Patel, our chairman and Chief Executive Officer, and Mark Harmsworth, Our Chief Financial Officer saw.

Falling parishes opening remarks, Mark will review, our financial performance for the third quarter of 2020, and then turn the call back to perish for an operational update and business outlook. Finally, we will take your questions to.

To access today's webcast. Please visit the Investor information section of our corporate website at Www Dot H C. I group Dotcom before we begin I would like to take the opportunity to remind our listeners that today's presentation and responses to questions may contain forward looking statements made pursuant to the private.

Securities Litigation Reform Act of 1995 words, such as anticipate estimate expect intend plan and project and other similar words and expressions are intended to signify forward looking statements.

Forward looking statements are not guarantees of future results in conditions, but rather are subject to various risks and uncertainties.

Some of these risks and uncertainties are <unk> are indentified and the company's filings with the Securities and Exchange Commission.

Should any risks or uncertainties develop into actual events. These developments could have material adverse effects on the company's business financial condition and results of operations HDI group disclaims all the obligations to upward update any forward looking statements now with that I would like to turn the call over to Paris Hotel, our chairman and C. E O P.

<unk>.

Thank you Rachel and welcome everywhere.

I hope everyone is healthy and staying safe.

While the Twenty-twenty Atlantic Hurricane season had a record number of storms only one storm hurricane Sally has it affected a T I thus far.

We previously released all all sorts of us for that store, which only affected our home on his choice insurance operation and the tipped up in short operation was not affected.

Zero somehow like from decor.

In July relief completed a sale of our headquarters property.

In September we paid a 40 cents per share dividend.

40th consecutive quarterly dividend.

This living in box out 10 year anniversary paying dividends.

Over the years, notwithstanding hurricanes in business environment, we paid $11.82 per share an accumulator do it to the to the shareholders.

Currently the dividend Yodice spillover three per said based on today share price.

On all the news Orange once operations continue to grow.

By quarters and enforced premiums at home on his choice had gone through 341 million from 306, moving at the end of the third quarter last year.

And it tipped up.

Enforce premiums have more than doubled from 87 million two.

87 million from $40 million at 30 at September 30th 2019.

I will now turn over the call Dr. CFO Mark comes with.

Who would walk us through the <unk> through our financial performance for the quarter.

<unk>.

Thanks perish.

Diluted earnings per share on a gap basis, where one dollar and 70 cents up from 73 cents in the third quarter last year on adjusted basis diluted earnings per share were one dollar and 60 cents up from 67 cents last year.

This was another strong quarter for growth earnings and cash flow consolidated gross written premiums were up 20% over the third quarter last year homeowners choice was up 10% Tiptop flood was up 16% and tip tap homeowners business route $22.5 million in premium which was 80.

7% higher than the same quarter last year.

Gross earned premiums have been growing as well consolidated gross earned premiums were up 24% over the third quarter last year driven by increases across all businesses homeowners choice earned premiums were up 12% Tiptop flood was also a 12% and earn premiums for Tiptop home took tapped homeowner business where.

Also we're up 200% of the same quarter last year.

Year to date consolidated gross written premiums and consolidated earned premiums are both up 22%.

The other big story this quarter was the sale of one of our real estate assets, we've talked many times about significant unrealised value in our real estate portfolio in other words, the true economic value of these assets is significantly higher than what we've shown on the balance sheet.

The sale of our ciphers Commons property in July as an example of is realizing some of that value.

As an ounce, we sold Cyprus Commons in Tampa for $44 million in cash and realize the gain of $37 million before tax.

This increased book value per share by about $3.50 generated $37 million of net new cash and we have the opportunity to indefinitely defer the income tax on this game.

Million dollars driven by increases in unearned premiums and reserves as we have been growing we are satisfied setting aside more money for losses than we pay as a result reserves are increasing to be more specific noncat reserves are $31 million higher than they were at the end of 2019, reflecting again, our conservative stance.

On reserving.

Debt to cap ratio has continued to decline.

Our technology, driven insurance subsidiary tip tap continues.

Continues to be outgrowth engine.

The Gulf of 2020 was to grow tipped up to $100 million of enforce premiums.

And we are well on the track to achieve that goal as well.

So are those Gulf of 2021 is for tip Tetris double yet again and surpassed $200 million of premium enforced by the year end of 2021.

Note that this is a goal not a guidance or a prediction.

But we believe based on the current trajectory and our expansion plans. This goal is very achievable.

And ultimately our goal over the next decade is to grow tipped up into a $5 billion premium and force company.

Tip tap is growing rapidly inorganically, but not by taking every policy that comes along.

It is growing by applying analytics and technology based underwriting tools to selected profitable policies and to mitigate risk.

And as I mentioned, we continue to explore as I mentioned, our last call. We continue to explore opportunities to maximize the value of tiptop.

And with that we're ready to open the call to your questions.

Operator, please provide instructions.

Thank you. Thank you I'd like to ask a question. Please catseye than one on your telephone keypad and if you're using a speaker phone. Please pick up your handset to provide the best sound quality again, ladies and gentlemen, it is star one to ask a question.

And our first question comes from Matt Karaleti with J empty Securities. Please go ahead.

Okay. Thanks, good afternoon.

As far as I got a couple of options.

Yeah. The first one is <unk>. Thank you for.

Giving you some you updated views on to tap and kind of where things are and where you expect it to go I was hoping that you might be able to give <unk> kind of a very brief update on whatever is going on with some of your other divisions, you know Greenleaf cloud N G O.

Even the broader environment, we've been homeowners choice would be great I know they picked up the focus and it should be what we're excited about but uhm I suspect there's good things going on elsewhere as well.

Absolutely that and unfortunately, it may be something slightly less than brief.

But I'll go to bed.

Individually that's all right.

J.

So, let's start with Greenlee far real estate.

Operation.

You're in selling the whole the headquarters property Greenleaf has gone the full cycle of buying properties of the right price managing them well when they're on our portfolio and then exited the profit the property and the right price as well and that discipline is what really makes it real estate operation and as we look at where greenleaf.

Today, because of the general economic environment.

Greenleaf is unaffected by all the trials and tribulations of COVID-19, because of the kinds of properties that we own.

And we continue on but.

That isn't true of the economy as a whole and real estate as a whole so I think in the coming year.

He is going to have a tremendous opportunity in front of it to add to the portfolio.

Additional properties, which will be picking up the right price because of the economic malaise that is going on currently so that's greenleaf has great opportunity front of it.

There is plaid a real estate reinsurance operations.

As we stated in previous calls plaid or retain some of the risks from two insurance companies, namely homeowners choice in tip top.

And as we know come into the end of Hurricane season, it's an interesting position insane.

Because unlike most reinsurers.

<unk>, so far has had pretty much a loss per year.

And therefore it will.

Very nice profit for 2020, and which give it a lots of dry powder to do reinsurance in 2021 from retained earnings which is great and because of.

Part of what it was made it it's brand over the years and it's doing that without any.

Any serious competition out there, which is a phenomenal position to be in.

And one other thing about homeowners choice I will tell Ya.

Is it didn't get hit by Hurricanes selling.

But if you saw how well.

The claims in Hurricane Sally about 1600 of them were handled you will be very impressed and it was done because of two things one was the operational capabilities of the hold on his choice group and the team.

Okay.

In addition to that we've applied for these licenses and these 20 states and just to put this into perspective, what those 20 states represent they represent another $35 billion of Tan insurance space of 10 started competing.

And we are doing that in addition to.

Through the Florida opportunity for Tipton.

So in summary to your question if hours to make it very brief I would tell you.

Greenleaf as well positioned.

Rest of the country.

Thanks, Matt and look great question, and as you know the way of background.

When most of the.

Other Florida carriers.

Thank you good afternoon.

Good afternoon, Marc Marc.

Hello, Mark you were going through the components of the loss expense increased to 24 million.

Pick up the last one I think you had mentioned that tipped tap.

What was the impact there.

By the fact that we have a flood book, which is a very low loss ratio non catalogs ratio that moves it around homeowners choices numbers are affected by the DP. Three book, we have the age of 486 book, we have and as well as the window in the book that's their right. So on a blended numbers with a number of Mark gives you it appeared.

One thing, but it's it's really coming through due to the mixtures of the business.

Does that make the answer clear as mud.

It's complicated complex yes.

That is.

Helpful.

When you think about the takeout opportunity. Thank you. So the next year is that.

Things that they need and they want to put into place before the.

Even remotely think about growth everybody's very generally distracted right that that was the big point, we were making.

We want casting aspersions, any particular company or the industry as a whole, but generally speaking.

What we sense is most of our competitors are very.

Our occupied with other priorities at the moment.

South kind of thing that would get you the same sort of area.

Yes, yes, yes.

Then the heart of it Okay Yep Yep.

Yep understood.