Q4 2020 United Insurance Holdings Corp Earnings Call
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Once again, please continue to standby today's presentation will begin momentarily.
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Predicts the welcome to United Insurance Holdings fourth quarter and year end conference call.
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I would now like to turn the conference over to your host Adam prior of the equity group.
Thanks, Brad and good afternoon, everyone. Thank you for joining US you can find copies of Upc's earnings release today at Www Dot UPC insurance Dot com in the Investor Relations section.
Addition of the company has made an accompanying presentation available on its website.
Youre also welcome to contact our office of 2128369, 606, and we'd be happy of coffee.
In addition, UPC insurance has made this broadcast available on its website before we get started I'd like to read the following statement on behalf of the company, except with respect to historical information statements made in this conference call constitute forward looking statements within the meaning of the federal securities laws, including statements relating to <unk>.
Trends in the company's operations and financial results and the business and the products of the company and a subsidiary of <unk>.
Actual results from UPC may differ materially from those results anticipated in the forward looking statements as the result of this and uncertainties, including those described from time to time in Upc's filings with the U S Securities and Exchange Commission.
UPC, specifically disclaims any obligation to update or revise any forward looking statements, whether as a result of new information future developments or otherwise.
With that I'd now like to turn the call over to Mr. Dan Pete Upc's Chief Executive Officer. Please go ahead yeah.
Thanks, Adam.
Hello, and thanks for joining our call.
And the highest <unk> chairman and CEO of UPC.
And plan to offer an overview of inbred Mark will provide more detailed numbers and then we'll take questions.
For Q4, the PTC was again impacted by the high level of the cat activity.
I'll start with Delta state at the Ada.
With the combined with non named cash draw that cat.
Cat losses of approximately of 170 million.
And of course of loss of $58 million.
We watched the core income excluding net windstorm very closely as the proxy for our underlying portfolio performance.
And it was the <unk> profit in Q4 versus the 34% last year.
That makes the strong 42 cents per share improvement this measure shows consistent quarterly year over year improvement.
$18 million of Q4 at $60 million per full year 2020.
The gross underlying loss ratio, which excludes cash was 21, 5% versus 32, 1% last year, mostly due to increasing rates and more kind of at risk selection of underwriting.
The underlying combined ratio improved to 88, 5% from 103, 1% last year, which shows the dramatic turnaround in our underlying portfolio performance.
We expect this to continue to improve as rate increases the risk selection of activities.
2019 of 20 earn their way through the portfolio.
This is expected to be offset by increased reinsurance spend.
Secondly, reduce the cap the current aggregate retention.
As well as our increased quota share session of 'twenty 'twenty, one we'll talk more about that.
So for full year 2020 are resolved we were impacted by unprecedented frequency.
That's the main calling named storms breaking the records set of over 100 years ago and 1969 stores.
For UPC of the coastal property specialists with the portfolio of from Texas to me, even though most of the storm toward low and moderate severity of the high frequency drove elevated level of net retentions.
For full year 2000, Twenty's net net same store GAAP loss of 200 range.
From the does the named storm driving of core loss of $124 million and the net loss of income taxes 96 months.
For 2021, we plan to dramatically reduce our aggregate the steep start protection for the company.
Approximately 25 million per of cards.
The $70 million.
Got it.
Approximately one third of the net incurred due to the 2020 season.
Although this will drive an increased reinsurance spend will reduce the volatility of our full year earnings and exposure of just lots of capital.
We expect this increased reinsurance spend to protect our capital may 'twenty 'twenty, one of the transition year.
For 2022, and later of both strong underlying margin and reduce volatility.
For full year 2020, our whole company the amount of premium ratio.
Proved by eight 8% the.
<unk> is due to rate increases as well as exposure management technology developed and implemented by our subsidiaries of 13 Skyway re a reinsurance of technology subsidiary.
The exposure management is the application of our proprietary technology to identify and improve or non renewal overtime. The worst performing decile of the exposures as well as the implementation of our point of sales technology to decline in business that doesn't meet the closure rates.
We implemented this technology mid summer 2020 and exceeded internal to the.
Even in just the first six months.
We expect to continue improving our P&L of opinion ratio for at least 24 more months.
The increase in capital efficiency with the targeted additional 15% to 20%.
All of the eight 8% achieved in 2020.
The reduction of the CML relieve the.
The pressure on the core cat Treaty renewals coming up at six one John.
Catastrophe losses in 2020 of masks the significant improvement.
All of that.
The underlying loss of gross expense ratios are at five year lows as shown in our investor supplement.
Full year 2020, the core income tax free windstorm was 94 cents per share up from $49 per share.
The loss in 2019 or an improvement of $1 45 per share.
The underlying loss ratio was 22, 8% down from 27, 7% due mostly to the compounding increase take rate and risk selection of activities.
The underlying combined ratio was 88, 9% down from 95, 4% in 2019, we expect this to continue to improve at a compounded rate.
<unk> earned their way through the portfolio.
The UPC group of companies is well positioned to expand our underwriting margin.
We expect the property cat market to continue the hardening.
'twenty, one 'twenty, two and even possibly end of 'twenty three for personal lines in the Florida.
Of these rate increases will be offset to some degree by the social.
Social inflation and increased reinsurance smart.
Given the planned rate filings from 2021.
We will be in our third year of of compounding rate increases.
We've taken numerous underwriting actions as outlined at the Investor supplement all expected to increase efficiency and performance top of decreasing exposure.
It was $1 $4 billion portfolio in place, we are well positioned to take advantage of the chartering market.
We began right in the underwriting work in earnest in 2019 and accelerated it.
Mid summer 2020, so we feel we are several quarters, if not the year or two ahead of the market.
At present, given the strong rate increases our renewal retention rates of 90%.
Net.
The focus on our core competitive advantages and reduce the leverage the strength of 12 31 28, we entered into the deal to sell the renewal rights to most of our northeast portfolio. The.
The policies in New Jersey, Connecticut.
Rhode Island and meet these exposures represent about nine 3% of our premiums and about $15 seven per cent of our exposure. In addition, as we re underwrite the portfolio. The plan to term five of 10% of our continuing P&L exposure of annually.
What was your management mentioned before Covid.
I expect the overall earned premiums will be nearly flat due to the increasing rates.
Strategically we are increasing our focus and efficiency to our core products.
As well as increasing the proportion of commercial specialty business the personal lines of business.
We are narrowing of 61% of our personal lines of products that don't meet the scale of profitability hurdles, but losing only 10% of our opinion.
We are targeting of shifts from approximately 70 30 personal lines the commercial lines.
The initial target of the 50 50.
Expect to be able to develop higher profit margins in the commercial specialty due to the increased specialization needed to write those holdings.
For example, our commercial residential company American coastal is the number one commercial residential market share in Florida and is made of core profit, including all of that activity even through the last three years and we expect to be able to increase the margin on that portfolio of 2021 the volte.
The lines some of those results from the investment.
Yes.
We are also planning to add excess and surplus lines of capabilities to our existing commercial specialty platform or in the process of forming journey specialty insurance company.
GSI because he will be the surplus lines carrier and extended our partnership with Tokio Marine channel.
This enables high growth rates in our commercial specialty business in line with management's experience and specialization.
Our commercial residential business to the similar margin specialty space.
Our insurance partnerships remain very strong and we were one of the few remain of insurers that bias of the more expensive cascading limit multibillion dollars of core cat reinsurance tower.
It provides disposed of strong current protection as well as the capability to reduce our aggregate net retention level of as previously described.
The rate multiyear participations in midyear cat capacity as well as our OTA share of partners.
Approximately 70% of R&D day.
The next.
As such we do anticipate of very orderly renewal of our six one cat treaties.
Lastly, we are announcing the formation of the skywave technology of newly formed insure Tech subsidiary that is focused on developing direct to consumer products and building off of the investments that we've made in our technology systems over the last several years.
Using nearly two dozen internet data polls, we expect to operate the ease of use product.
Marketing the expanding online buyers, while 21 of 22 include.
Include continuing technology development investments in line with our name from the 20th spreads we expect to drive down our expense ratio in 2023 and thereafter.
More importantly, we expect to use AI interest data polls.
So the data that we've accumulated over the past 10 years to optimize both distribution and underwriting and to deliver top quartile of underwriting performance going forward the.
The point of sale of exposure management technology, which we are using a part of that portfolio that I mentioned earlier was developed by our subsidiaries Skyway technology in combination of discovery.
So it's been an interesting of hectic six months since stepping into the CEO role here at UPC.
The unprecedented cat activity presents challenges, but also puts us on the verge of one of the hardest cap markets.
Both cash, Florida insurers since 2006.
I believe we have put together the XR and executive leadership team and taken dramatic actions to re underwrite our portfolio. We've mapped out of plan to continue underlying margin improvement and reduce the account retention.
Expand our technology capabilities and balance of our personal lines of commercial specialty businesses.
All of this is aimed at making UPC of top quartile of specialty insurer with strong gross margins and limited cat volatility over the next three years.
So with that I'll turn it over to Brad Martz.
Thank you Dan and Hello, This is Brad Marshall President and CFO.
Terrence please.
Please during the AEP explained.
The results, but also encourage everyone to review our press release Investor presentation in the form 10-K for more information regarding of the company's performance for the quarter ending December 31.
The company reported a GAAP net loss of $33 9 million or selling the <unk>.
Sure.
First of the loss of $8 2 million of 19 cents per share last year of core loss of $58 1 million or $1 35 of share versus the loss of $15 2 million of 36 months.
Share in Q4.
John.
The GAAP and core losses included $107 6 million.
The dollar 98, a share of current year cat losses, which were higher than our free announcement on December 15th because debt preview only included an estimate of cat losses through September 30.
The current quarter Cat losses consisted of three new namely the storm events totaling 77 7 million approximately of $1 43 of share and all of their apparel or P. Cat losses of just under $30 million of approximately <unk> 55 per share consisting of $5 eight bcf of them.
And the reserve re estimation of events from earlier in 2012.
John.
In the earnings release and on page five of our Investor presentation. We continue to emphasize the non-GAAP measure underlying performance, which simply takes our core earnings and adds back of cat losses from the named Windstorms net of tax the demonstrates the earnings available to absorb hurricane losses in each period.
For the quarter UHC produced core income excluding named storms of $3 3 billion very tense of share compared to a loss of $14 $5 million of 34.
Share last year, which is approximately $18 million improvement in our underlying results.
Page six of our Investor presentation, the nice picture of how underlying earnings have improved year over year throughout 2020.
Page seven of our Investor presentation shows the same measure for the full year is core income excludes named windstorm was $40 4 million compared to a loss of $20 8 million of 2019, which is an improvement of over $61 million year over year.
Gross premiums written for the quarter of inquiries.
One 4 million or seven 3% from a year ago, driven mostly by higher rates in both personal and commercial lines.
Leading to a $17 2 million or 5% increase in gross premiums earned.
Ceded earned premiums were $164 4 million, an increase of $5 7 million from three 6% year over year, but the <unk>.
As a percentage of gross premiums earned of ours to 45, 1% compared to 45, 7% last year due to our improving rate adequacy and earned premium growth in personal and commercial lines.
Other items included in total revenue during the fourth quarter included realized gains of 41 7 million stemming from the sale of fixed income and equity securities, which was partially offset by unrealized losses from equities of $10 1 million per our net investment gain of 31 6 million of the current period compared to the turmoil.
$3 million a year ago.
Investment income of $5 3 million declined $2 $2 million of 29% from the prior year due to lower yields and investment sales exceeding purchases.
Upc's fourth quarter net loss and loss adjustment expense was the hard and $85 1 million an increase of $54 6 million of 41, 8% year over year.
Net retained cat added nearly 54 points to our net loss and combined ratio as well.
This was partially offset by a 600 point of $1000 of favorable reserve development, marking the fifth consecutive quarter of favorable reserve development for the company.
Excluding these two items the underlying loss and loss adjustment expense was $17 1 million down $33.3 million of 30% year over year.
This produced the remarkable underlying gross loss ratio of 21, 5%, which improved over 10 points compared to 32.1 per cent a year ago and of note.
Underlying net loss ratio of 39, 1%, which improved 20 points from $59 one.
In the fourth quarter of last year.
Upc's operating expenses were 98.
<unk> 9 billion, an increase of $16 2 million year over year or 19, 5%. However, our gross expense ratio for the year was 25, 7%, which is nearly half of point better than 2019 and represented the fourth consecutive year of improvement in the gross expense ratio.
<unk> of this positive trend as shown on page eight of the Investor presentation.
The combined ratio of $142 one per cent for the quarter.
Slide nine points year over year and was the hiring of $26 five for the full year, which is up almost 14 points year over year due to our catastrophe losses.
Excluding the noise of cats and prior year development, our underlying combined ratio improved about 15 points to $88 five per cent for the quarter improved approximately seven points to 89% from the full year.
Page nine of our Investor presentation is very interesting as it shows several key ratios like our underlying loss ratio of prior year development in gross expense ratio for all at five year lows during 2020.
Page 11 of the Investor presentation highlights some of the actions taken and plan to improve the underlying earnings power of our business even further in.
In short our plan is to continue taking rate, while reducing exposures in personal lines and growing our specialty commercial property business.
As Dan mentioned, probably the.
The biggest change we expect to make this year as it related to our retention of potential cat risk.
Our net retained exposure to all cat events, although the named Windstorm and earthquake was already reduced the effective January 1st.
But our core catastrophe reinsurance program of renewing at June <unk> of 2021 is where and when we expect to mitigate the risk of named windstorm frequency that stung results in 2020.
The core of catastrophe reinsurance renewals and completed yet, but we do look forward to announcing the details once the terms are finalized.
Some of the exposure reduction initiatives already taken are summarized on page 12 of the investor presentation and are expected to reduce operating leverage and improve the underwriting profitability over time.
On our balance sheet Upc's assets totaled two 8 billion, including cash and investments of approximately $1 3 billion the.
A modified duration of our fixed income holdings increased to four one years with an overall composite rating of eight plus at December 31.
GAAP equity attributable to UHC stockholders declined approximately 21% from yearend.
The $396 million with the book value per share of $9 nine of them.
Yes.
Our unrestricted liquidity of the holding company was approximately $36 million at year end and our group's statutory surplus was approximately $373 million in all five of our property and casualty carriers.
Risk based capital greater than 300% as of.
Number 31.
Lastly, the company has included some additional information beginning on page 13 of our Investor presentation. The share how we're thinking about strategy for 'twenty 'twenty, one and beyond.
We've outlined three primary strategic focus areas, which are focused underwriting day.
Risking and simplifying operations and the leveraging technology and.
And to future growth initiatives.
<unk> technology and journey specialty insurance company that our executive leadership team is very excited about.
That concludes our prepared remarks, and we're now happy to take any questions.
Thank you.
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One moment, please while we poll for questions.
Yes.
The first question today comes from Greg Peters of Raymond James. Please proceed with your question.
Good afternoon.
I guess to start things off.
The be appropriate and I recognize it's really early.
But it would be appropriate for you guys to sort of comment on.
How you're thinking about what's unfolding in Texas, where the company's exposure might land.
Yes.
Good afternoon, great. Thanks for your question.
Sure first our Hearts go out to our friends and family in Texas.
The terrible situation and that's what we're here for that's why <unk> exists so.
<unk> exposure to the winter storm Yuri is primarily in the tier one of two counties in Texas. So market share analysis, maybe difficult may not be useful.
As it relates to all of losses.
Do have claims reported net new expect to incur losses, but it's far too early really to comment of our potential on the gross or net retained losses at this time.
We do have the appropriate reinsurance protections in place are.
A L P cat reinsurance program.
That we announced back in January lays out the terms of.
The protection of $15 million retention.
And then there's also a quota share protection that would reduce our retention further to approximately $10 $4 million.
For the.
So it's likely won't bring an ounce of our estimate of cat losses for the first quarter as of March or beginning of April but our focus right now is taking care of our policyholders our agents and our associates in their time of need.
Got it thanks for the answer I wanted to go back to two things first of all Dan during your comments I think you were talking about.
How much of the reinsurance has been renewed.
For the expected June renewal, but there was a siren in the background. So it was hard to hear your comments I was wondering if you could read that and then also I think Dan you said that your target is when we think about named defense of 25 million per occurrence.
70 million aggregate for the upcoming storm year is that correct.
Yeah, so to answer here.
Question.
As opposed to the reading and I would just say that.
We have we have quota share protections we have at January the first portion of our renewal as well as as well as some multiyear portions of the debt.
Of course, the HCS, but so we have currently I'll use the word of pre agreed I mean, the contracts are signed but Theyre agreed for 87 in the half percentage of our limit for six one that we feel like book need.
Is already has already done so that puts us in the real good position.
As we as we work towards finalizing that debt treaty.
John.
And the second part of the equation is.
Specifically, we plan to reduce our named storm.
Retention to the $25 million and at.
At the $70 million in the aggregate because we have a cascading tower.
We've worked with our reinsurers to actually.
The cap our aggregate or it's not exactly there will be close to there with the very minor aggregate.
So that if we were to go through 2020 again.
We would have a 70 million of in the pool in the pool of companies, we have a couple of little and ciliary.
Retentions on the non pool of companies, but that's the that's the bulk of it.
Thanks, and then I did the the last question I know, there's a I have a lot of others, but the last question I'll ask is.
No.
As you work through this.
Major change.
You know one of the the.
The statistics you reported your ceding ratio and I think you're ceding ratio.
Was 45, 1% in 2020.
Versus 45, 7% in 2019.
Do you expect the ceding ratio to look in 'twenty, one given you're talking about buying a lot of extra work.
Relatively speaking buy more reinsurance protection.
Greg This is Brad I'll take that one of them, we do expect it to increase.
But really primarily driven by quota share.
Now that we've really expanded our quota share program at December 31st.
Adding American coastal to the mix and increasing the percentage of paid it for the United property and casualty of failing security insurance companies. So that's kind of drive a pretty big change the ceded premiums earned year over year, but there is a corresponding benefit to.
The ceded losses and the lower acquisition costs through the ceding Commission income so.
The components of the P&L of are definitely changing.
And the ceded premiums.
As.
It is going to increase.
Okay. So the seating right.
Alright, and then just I guess, the one small detail on page 14 of your slide deck.
You say as of December 31st the premiums in force through one of three 9 billion, but then in the language for the <unk>.
Love to say 900 million of premium in force I assumed the $900 million of premium force is.
The sort of like the pro forma pro forma number after the renewal rights in all of the changes is that how I should be thinking about it.
That's correct, you're going to add in the 350 million of premiums in force for commercial lines in that middle paragraph and then the 900 million of premium in force.
None of the down below exclude where I'm, excluding the discontinued products in the territories, where the where our renewal rates of unsold.
Got it thank you.
Youre welcome.
The next question comes from Elyse Greenspan of Wells Fargo. Please proceed with your question.
Hi, Thanks, Good evening My first question I'll.
A follow up I, just want to make sure.
Part of the P C.
All of that kind of are you seeing.
Even with constant.
The question.
Hum.
No I understand.
That'll be one of that I guess, when you think about the reinsurance protection.
I think of it is maybe potentially multiple events with peak yet, but it sounds like it'll be one of that that can help them on your net retention to 10.1 of them.
Yes, Hi, Elyse this is Brad.
I believe that will be the case, we can't confirm that for sure at this time its still too early but I believe the bulk of the loss will be contained into a single event.
And the way.
How do you see that.
Thank ongoing event, but away from that it does seem that.
Most of their marketing policy of them, putting sites, so far of the fourth quarter away from Texas.
January was a quiet month on the cash.
Thank goodness.
Okay. That's helpful.
Then a couple of the other questions.
In your prepared remarks, I think of a few Dan you mentioned.
The flat earned premiums.
He will go into some of the moving components in terms of rate increases and then the extra reinsurance that you guys are buying is that net.
That's a net.
The premium comment or was that all of the glass.
That was more on a gross basis in general from the perspective of.
We're decreasing exposure, but we're increasing rate.
So that debt deal and again that was so after the renewal rights was out of the.
The remainder of the portfolio.
We were expecting.
Leasing rates to kind of offset the decreasing exposure.
Okay.
In the slide deck.
Those remarks.
Kind of.
The 40.
The split between personal and commercial is there you know.
I'm thinking of laying out some of the people kind of for the next two years is there a timeframe of when you ultimately want to get the business net right in line with all the parameters.
No I mean, you're right the does the eventual target.
I would say that it's kind of in more of it's not it really in the long term, but it's probably more in the mid term I'd say I'd put that at the end of the three to five year would be our goal.
Okay.
Okay. That's helpful.
And then.
You know obviously I think you guys mentioned my 'twenty 'twenty, one being a bit of a transition year, just given a lot of the moving parts.
And then looking kind of it sounds like might return to showing some growth and improvement beyond that time period.
Are there you know kind of return targets like how do you see from an hourly perspective 2021, and then some of the out years going forward coming in kind of in line with some of you know kind of the business plan that you've laid out within the fly debt.
We have those targets.
In the short term and the long term.
I wouldn't say in the long term, which I think is more appropriate.
We're still targeting a 15% return on it.
What are the inclusive of our net retained the average annual loss from Hurricane I mean net debt as the long term goal of that is where we're marching towards.
Pricing and underwriting.
Managing our exposure base, but in the short term.
As you mentioned the it'll be somewhere between.
Recent results and our target.
Okay. That's helpful. One last one.
From kind of what's on the Permian John.
On the changing per annum, assuming like the same in discussions of the Democrats on can you just kind of any kind of the who can provide in reference to kind of do you like the questions on you know in terms of the initiative.
Yeah, I think so far of the discussions we've had with with am best or related to our plans to expand journey.
Getting into writings in E&S specialty commercial property out of direct basis with our new carrier pool of capital of at very favorable we've got lots of that's an under Levered part of our organization.
Of the position for growth.
Okay.
The tactical the pooling arrangement, we have with our port growth the.
The risk based capital is.
It is very good of it and we didn't have to use any holding company liquidity.
The promise of surplus the ear and where we feel like we still have tremendous financial flexibility on that front instead of the reinsurance transactions. We did certainly certainly helped.
As we reduce the direct writings over time, we'll be able to.
The step down the call.
To share over time of the quota share is definitely a part of our <unk>.
The buying catastrophe reinsurance.
We appreciate the quota share with that cash.
Real risk transfer in it so I don't know of Battle change long term.
As it relates to managing leverage we'd like to bring down the direct writings.
And reduce the quota share.
In step of overtime. So you will see some slight growth of net premiums earned but the component of the direct and the stated numbers are what I've got a change of the next few years.
Okay. That's helpful. Thanks, Bob.
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Our next question comes comes from Ron Bobbin of capital returns. Please proceed with your question.
Hi, Thanks, a lot of good evening.
I had a couple of questions you provided a lot of good important detail of Brad the 10 million that you mentioned, Dan the 89%.
When you were describing the $10 million as it relates to Texas I know it was.
The little bit over $10 million.
You mentioned the.
Oh, Pete I think you said a O P treaty, which I think the all other portals treaty.
I got confused because I think of the Texas event is the named storm. This Yuri.
Did I mishear, you, where do I now.
Sort of understand the point you were trying to make.
When we refer to named Windstorms.
About the stores that are named or number of by the National correct coding center. So that we really are referring to the hurricane and earthquake tropical cyclone that type of thing when we're talking about named Windstorms. So all other.
Cash would be your winter storms and Yuri is of winter storm your tornado share hail.
Okay, now I understand the and that's a different treaty applies I gotcha.
Thanks.
And I do think that gives us the competitive advantage because.
A lot of people lump all of payrolls in the one treaty.
It becomes difficult.
To manage all of that exposure, but we bifurcate.
Okay Gotcha when U N.
<unk> you.
And that's in Fox, the sort of put a ceiling as to what Texas could mean on a net loss basis, which is really of interest in some respects. The most important thing per unit for the company but.
There's been all sorts of market estimates are single digit billions of up to 20 plus billion. When you look at the clean flow you've received so far and I know, it's only a handful of days since.
Since the the darkest days in Texas.
And you compare it to maybe something like your experience with Harvey.
Or some other experience that the day.
Dan you, where the company has seen in the past.
What's your early estimate as far as the market loss from.
This event.
Compared to of Harvey or independent of Harvey any any wisdom you could share.
Yes.
This is Dan.
From the standpoint of the.
The market loss.
We've seen the estimates obviously the current Clark 18 billion with more than half of that commercial.
We do not have a lot of the commercial exposure in Texas one of our exposure is most of the personal lines.
We have seen the claims they're dropping off.
Already but the claims count has been within our expectations.
And I guess from the standpoint of the overall industry loss.
I wouldn't know of any more than they do other than the current.
Current carpets that right a lot.
Yeah.
But how about hub of relative to your Harvey numbers do you think it'll be your gross number will be less equal to more than your heartbeat numbers.
You know we had a lot of claim.
Claims and Harvey, although a lot of them were flood claims, which actually we didn't cover so they were closed without payment.
The average claim probably will be a little bit higher but the number of claims is probably lower.
Okay. Thanks, I appreciate the little little help Dan when you mentioned in your remarks your prepared remarks about the renewal deal and I am sure you disclosed this I'm sorry, you did not mentioned, Massachusetts.
The.
The company has the decent size are of good sized footprint in Massachusetts did I missed did you not mention Massachusetts was it explicitly excluded from the renewal rates.
And how big is debt book.
Thanks for catching me.
I think I said mean, but I've met many of you said, Maine.
Oh, Okay Oh, okay.
Alright.
I misspoke.
The Massachusetts the book.
Total premiums that was involved in the renewal rates was about $130 million in those four states.
Okay. Okay.
And then.
My last question was sort of a follow up to of leases question about you know.
Sort of the longer term return profile, Brett you mentioned.
You know what the mid.
I think you said 15 or whatever of mid.
Mid teens Roe.
Assuming an average annual loss load so maybe the the most direct question is what is the what is the.
Average annual loss.
The estimated to be.
You know once you get through the 'twenty, one transition year and you're in 'twenty two.
And.
And where how many retentions as debt.
Right now we're estimating for 2021 net to be around $40 million and our goal will be to try and drive that lower.
And it depends on what we do at six one.
That was an initial estimate the obviously retention of risk is an annual decision that that's kind of the beauty of our business.
And we're not locked into any kind of specific risk profile, we want to drive that low or we can certainly buy down of our retention lower.
And right now, it's all about ensuring the margin I'll change in rates that we're getting through our rate and underwriting actions exceeds the margin will change from reinsurance costs and lost costs are seeing that happen.
Why were seeing improvement of the underlying results.
Okay, I'm, just sort of wondering when you get the 'twenty 'twenty two and if you have the $25 million.
The event retention 70 million.
Could we get retention, if you were to sort of exhaust those.
Nearly three retentions are the one aggregate retention, what's the return profile with whats the ROE profile of it and that sort of scenario if the.
If you were policy retention stays at 90% and if you're a rate trajectory as far as invoice to rate.
Continues on the glide path that you've been getting and hope to I guess continue to get.
And reinsurance costs continue to go.
You know what I assume you're profitable.
I don't know if that plays out two of double digit or.
Oh I.
I guess, that's what I'm sort of trying to get to.
And can you help.
Yes, it's a good question, but.
But I don't know if I can add anything further.
What was already comment on of our long term target is how we've modeled it.
We do believe it's achievable.
It really depends on.
A lot of variables like the retention rate on our renewal book and what our average annual rate increase.
Ultimately comes through at and.
How low we buy our retention depending on what's going on with reinsurance cost structure. So there are lot of moving parts to that number.
Set targets and we massaged those variables to the best of our ability, but yet it is definitely something we see that's achievable.
Over the next couple of years.
Okay last question, how was the Florida Department.
Response, and tolerance for rate increases requested of leaping to the Florida companies that had been seeking rate increases have they been sort of particularly cooperative.
We're not so we're middling any of what do you see there.
We're here I can't speak for the other companies, but as far as our interactions regulatory relations of debt outstanding and we applaud the Florida office for for supporting our need for additional rate.
Part of our desire.
By the on Retentions and lots of some of those reinsurance costs into our rate filings in the intellectually honest with loss reserves as debt.
Does it get those costs into our rates of SaaS as possible and we're getting ready to make another filing here.
Before the end of the month.
The another 14, 7% inherent in Florida.
We've moved from an annual cycles of of a biannual cycle of rate change in Florida.
It's so far has not been the problem.
We'll just we'll just have the monitor that carefully going forward.
Okay. Thanks, a lot of P well I hope the weather was more.
More favorable for the Audi.
Thanks for your questions. Thank you.
The next question is from Bill Broomall of Dowling and partners. Please proceed with your question.
Great. Thank you if I could just maybe continue on Ron's question about Texas is there any.
I thought you might have on what.
You know a typical claim like of first pipe when does that typically cost.
In your experience in the past and then too.
Is there any thoughts that you might have on demand surge with everything going on what that might look like in Texas.
Thanks for your question Bill This is Brad.
As far as average severity of title burst I think that is all over the road.
I don't know if I'm comfortable giving an exact answer there.
Hi, Bert specifically.
I would just I would just tell you as far as demand search goes.
Slightly when we look at the model the way we try to estimate.
Of all expected loss.
The 500 year return period for winter storm in our portfolio is the $90 million gross loss.
So.
That would be well within the.
The reinsurance of the iOS.
Reinsurance program.
Got it okay perfect.
Thank you and I was just wondering on this.
Skyway technologies.
I'm, assuming that's personal residential.
But can you just maybe talk about whats the youre going to be operating in and timing on that please.
Yes. So this is Dan.
We're going to start off with Florida.
And it would be at the personal lines.
We actually.
No.
Half of American coastal which is the number one market share in.
The commercial residential condominium associations.
So the nature of <unk> product, which is the condominium unit owners.
The us.
Well suited to.
The direct to consumer type of the day.
Those of the areas that we're starting them.
We'll develop it as we as we move up from there.
We have a target of.
We have a target of <unk>.
Being.
Active with this by the end of the year, although that's the.
Al.
That's subject to.
So the completions.
Yeah, I would just add the obviously the technological.
<unk> capabilities are there of the investments have been made and we're excited about.
Leveraging all of the fantastic underwriting that's been done on the commercial residential portfolio that we are ensuring the.
The shell and the structures for now moving.
The direct to those consumers with all of that in those primary and secondary characteristics are of yet will.
The allow us to develop the very slick offering.
Sure.
For those unit numbers in Florida. So that's what we're going to start at an H O three of the natural evolution.
And.
Obviously beyond Florida over time.
Perfect. Thank you.
Just the point of clarification.
Don't remember who.
The dinner, Brad here, but you talked about of trimming your.
Five to 10 of the PMO annually can you just maybe say that again or explain that a little bit kind of missed the detail.
Yes.
Well.
This is Dan that was me.
Again, I was I was trying to kind of verbalized that we'd expect to be trimming, our PMO exposure in our tid exposure.
At the same time, we're achieving the rate increases, which makes kind of our top line.
Mostly flat.
So they were very general comments.
And page 20 of the Investor presentation.
Shows a couple of graphs that the kind of trying to illustrate the ethylene of little debt.
One one chart is showing the change.
Premiums.
On top of relative to the change in TIAA premiums up significantly more than exposures and then the our pool groups hunting of European L.
Moving down almost 9% over the last.
<unk> is really the best evidenced the weekend, we can provide people that if we can maintain premium levels flat as Dan said true rate change while the exposure base is shrinking.
That's the recipe for for margin improvement because remember, it's that exposure basis, driving reinsurance costs and loss costs. So that's going down while the Permian, while we're able to maintain Permian true true.
The increases in average premiums.
The improvement in our results.
Yeah.
Perfect. Thank you very much.
Youre welcome.
The next question is from Ron Bachman of capital returns. Please proceed with your question.
Hey, Thanks, Brad did you say that the one in 500 year return period.
The loss from the portfolio is $90 million of 900 million.
Gross.
Nine zero for the winter storm apparel.
Oh, Oh, Oh Oh.
Okay. Okay.
Alright. Thanks.
I was thinking about that number of contrast, it to the $40 million average annual it just seemed okay. Thanks, a lot that explains it.
Yeah.
There are no additional questions at this time I would like to turn the call back to management for closing remarks.
Yes.
Okay. This is Dan.
That will wrap up the call per day.
I want to thank our investors, but also the bank our entire team here, including our executive leadership team.
Especially our claims department for all their efforts and perseverance as we worked through the 2020 unprecedented hurricane season.
Thanks, Paul.
This concludes today's conference you may now disconnect your lines at this time. Thank you for your participation.
[music].