Q4 2023 HCI Group Inc Earnings Call
Operator: Good afternoon, and welcome to the HCI Group's fourth quarter 2023 earnings call. My name is John, and I will be your conference operator. At this time, all participants will be in a listen-only mode.
Good afternoon, and welcome to the HCI groups fourth quarter 2023 earnings call. My name is John and I will be your conference operator.
This time, all participants will be in a listen only mode.
Operator: Before we begin today's call, I would like to remind everyone that this conference call is being recorded and will be available for replay through April 6th, 2025. The call is also being broadcast live via webcast and available via webcast replay until March, Investor Information, HCI Groups, www.caseyalexander.com.
Before we begin today's call I would like to remind everyone that this conference call is being recorded and will be available for replay through April six 2024, starting later today.
The call is also being broadcast live via webcast and available via webcast replay until March seven two.
Operator: We have another call. We are at the end of our broadcast, and we are going to close the call now. I want to thank you for joining us. We will see you next time. Thanks so much.
2025 on the Investor information section of HCI group's website at Www Dot H C I groups Dot com.
Operator: Bye-bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.
I would now like to turn the call over to Matt Glover Gateway Investor Relations Matt. Please proceed.
Matt Glover: I would now like to turn the call over to Matt Glover, Gateway Investor Relations. Thank you, John, and good afternoon, everyone. Welcome to HCI Group's fourth quarter 2023 earnings call. On today's call is Karin Coleman, HCI's Chief Operating Officer, Mark Harmsworth, HCI's Chief Financial Officer, and Paresh Patel, HCI's Chairman and Chief Executive Officer. Following Karin's operational update, Mark will review our financial performance for the fourth quarter of 2023, and then Paresh will provide a strategic update. To access today's webcast, please visit the investor information section of our corporate website at www.hcigroup.com. Before we begin, I'd like to take the opportunity to remind our listeners that today's presentation in response to the questions may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995.
Thank you John and good afternoon, everyone welcome to HCI groups fourth quarter 2023 earnings call.
Today's call is Karen Coleman, Hei's, Chief operating officer, Mark Harmsworth, Hei's, Chief Financial Officer, Paresh Patel, Hei's, Chairman and Chief Executive Officer.
Foreign currency operational update Mark will review, our financial performance for the fourth quarter of 2023, and then Paresh will provide a strategic update.
Today's webcast. Please visit the Investor information section of our corporate website at Www Dot HCI group Dotcom.
Before we begin I'd like to take the opportunity to remind our listeners that todays presentation and responses to questions may contain forward looking statements made pursuant to the private Securities Litigation Reform Act of 95.
Matt Glover: Words such as anticipate, estimate, expect, intend, plan, and project, and other similar words and expressions are intended to signify forward-looking statements. Such statements are not guarantees of future results and conditions but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in 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 conditions, and results of operations. HCI Group disclaims all obligations to update any forward-looking statements.
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 and conditions, but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in 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 conditions and results of operations.
Hey, Jack group disclaims any of it.
All obligations to update any forward looking statements now with that I'd like to turn the call over to Kevin Coleman, Chief Operating Officer Karen.
Karin Sue Coleman: Now with that, I would like to turn the call over to Karin Coleman, Chief Operating Officer. Karin? Thank you, Matt, and welcome everyone. HCI Group wrapped up 2023 by reporting another excellent quarter with pre-tax income of $54.2 million and diluted earnings per share of $3.40. In-force premiums increased 30% in the quarter to approximately $1 billion.
Thank you, Matt and welcome everyone HCI group wrapped up 2023 by reporting another excellent quarter with pretax income of $54 $2 million and diluted earnings per share of $3.40.
In force premiums increased 30% in the quarter to approximately $1 billion.
Karin Sue Coleman: Similar to prior quarters, each of our business segments had a positive contribution to our results. At our insurance divisions, Homeowners Choice generated another quarter of consistent earnings, and TipTap Insurance Group reported its fourth straight quarter of GAAP profitability. HCI continued to deliver on its commitment to shareholders, paying a dividend of 40 cents per share, our 53rd consecutive quarterly dividend.
Similar to prior quarters each of our business segments had a positive contribution to our results.
At our insurance Division homeowners choice generated another quarter of consistent earnings and tip Tap insurance group reported its fourth straight quarter of GAAP profitability.
ACI continues to deliver on its commitment to shareholders.
A dividend of <unk> 40 per share or 53rd consecutive quarterly dividend.
On our last earnings call in November we discussed several initiatives underway. They included both of our existing carriers, where in the process of assuming policies from citizens.
Karin Sue Coleman: On our last earnings call in November, we discussed several initiatives underway. They included both of our existing carriers were in the process of assuming policies from citizens. We said we expected those to total between $150 to $250 million of in-force premium. I'm pleased to announce we have completed three depopulations from citizens, totaling $273 million of in-force premium. We also spoke about plans to form a new reciprocal carrier, to be named Condo Owners Reciprocal Exchange, or CORE for short, with the intention of it writing commercial residential insurance in Florida.
We said, we expected those to total between $150 million to $250 million of in force premium I'm pleased to announce we completed three D populations from citizens totaling $273 million of in force premium.
We also spoke about plans to form a new reciprocal carrier to be named condo owners Recepticle exchange or a core for short with the intention of it writing commercial residential insurance in Florida.
In five months core went from being a concept to now being a fully licensed carrier with the dermatology ratings has fully placed its reinsurance and last week completed its first citizens assumption of $38 million of in force premium.
Karin Sue Coleman: In five months, CORE went from being a concept to now being a fully licensed carrier with a DemoTec rating, has fully placed its reinsurance, and last week completed its first Citizens Assumption of $38 million of in-force premium. This is in addition to the $273 million I just mentioned. CORE has also been approved for an April assumption and has applied for a June assumption as well. I look forward to providing updates on these in the future.
This is in addition to the 273 million I just mentioned.
Core also has been approved for an April assumption and has applied for a June assumption as well I look forward to providing updates on these in the future.
In addition to these significant accomplishments, we took an opportunity to retire the centerbridge preferred shares and tipped up a year ahead of schedule.
We also successfully raised $85 million through a common stock offering.
Mark Douglas Hughes: In addition to these significant accomplishments, we took an opportunity to retire the Centerbridge Preferred Shares and TipTap a year ahead of schedule. We also successfully raised $85 million through a common stock offering. To summarize, in a few short months, we were able to add a significant amount of premium, improve our gross loss ratio, launch a new carrier, and simplify our balance sheet. Now, I'll turn it over to Mark to provide more details on our financial results. Thanks. As Karin mentioned, this was another really good quarter for the company. Pre-tax income was over $54 million for the quarter and $117 million for the year. Diluted earnings per share were $3.40 for the quarter and $7.62 for the year.
To summarize in a few short months, we were able to add a significant amount of premium improve our gross loss ratio launch a new carrier and simplify our balance sheet.
Now I'll turn it over to Mark to provide more details on our financial results.
Thanks, [laughter] so as Karen mentioned this was another really good quarter for the company pre tax income was over $54 million for the quarter and $117 million for the year.
Diluted earnings per share were $3 40 for the quarter and $7.62 for the year.
These results reflect the continuing positive direction, we've been discussing for a while now growing premiums higher investment income better loss trends and expense management gross.
Gross premiums earned were 18% higher than the same quarter last year, driven by higher average premiums per policy and enhanced by the take outs, we've done with citizens while the full impact of these take outs is not yet reflected in earned premium they did add $23 million of earned premium in the quarter.
Mark Douglas Hughes: These results reflect the continuing positive direction we've been discussing for a while now: growing premiums, higher investment income, better loss trends, and expense management. Growth premiums earned were 18% higher than the same quarter last year, driven by higher average premium per policy and enhanced by the takeouts we've done with citizens. While the full impact of these takeouts is not yet reflected in earned premium, they did add $23 million of earned premium in the quarter. Investment income was about 50% higher in the fourth quarter than in the same quarter last year.
Investment income was about 50% higher than in the fourth quarter in the fourth quarter than the same quarter last year when interest rates were low we held onto our cash and now we are seeing the benefits of careful duration management.
Cash and fixed term investments now totaled over $1 billion and we are positioning the portfolio to generate impressive yield with minimum capital risk.
Another positive trend you can see in our results is the continued improvement in the gross loss ratio, which was 34% in the fourth quarter down from 39, 4% in the same quarter last year.
Mark Douglas Hughes: When interest rates were low, we held on to our cash, and now we are seeing the benefits of careful duration management. Cash and fixed-term investments now total over $1 billion, and we have positioned the portfolio to generate impressive yields with minimum capital risk. Another positive trend you can see in our results is the continued improvement in the gross loss ratio, which was 30.4% in the fourth quarter, down from 39.4% in the same quarter last year. When the Florida legislative changes were announced, we said we expected the consolidated gross loss ratio to drop from 40% to 30%, and that's exactly what happened. We got here through careful underwriting and rate actions, along with lower claims and litigation frequency. We're not getting to these lower loss ratios by reducing reserves.
When the Florida Legislative changes were announced we said we expected the consolidated gross loss ratios to drop from 40% to 30% and that's exactly what's happened we got here through careful underwriting and rate actions, along with lower claims and litigation frequency.
We're not getting to these lower loss ratios by reducing reserves in fact net reserves at the end of 2023 are higher than at the end of 2022.
If you looked at the balance sheet, you might notice that total reserves are lower than a year ago, but those are gross reserves. They were down for two reasons first because of the payments made on storms like an in Irma and second because we have significantly reduced the ultimate expected loss for hurricane Ian.
Originally back in September 2022, we set the ultimate expected loss for Ian based on the models at $960 million at the end of 2022 lowered that to $845 million and at the end of 2023, we lowered it again down to $740 million.
Mark Douglas Hughes: In fact, net reserves at the end of 2023 will be higher than at the end of 2022. If you looked at the balance sheet, you might notice that total reserves are lower than a year ago, but those are gross reserves. They're down for two reasons.
While we have lowered the ultimate by more than $200 million to date, we are still at the top of the actuaries range for this storm.
The last trend I wanted to mention relates to expenses. If you look at the combination of labor policy acquisition and operating expenses, they are flat quarter over quarter and as a percentage of premiums they're down as we continued to manage expenses. The company is growing but our expenses are not.
Mark Douglas Hughes: First, because of the payments made on storms like Ian and Irma, and second, because we have significantly reduced the ultimate expected loss for Hurricane Ian. Originally, back in September of 2022, we set the ultimate expected loss for EIN based on the models at $960 million. At the end of 2022, we lowered that to $845 million. And at the end of 2023, we lowered it again to $740 million. While we have lowered the ultimate by more than $200 million to date, we are still at the top of the actuaries' range for this storm. The last trend I wanted to mention relates to expenses. If you look at the combination of labor, policy acquisition, and operating expenses, they're flat quarter over quarter, and as a percentage of premiums, they're down as we continue to manage expenses. The company is growing, but our expenses are not. Along with the declining loss ratios, expense management is driving a significant improvement in the combined ratio, which was 85% for the full year.
Along with the declining loss ratios expense management is driving significant improvement in the combined ratio, which was 85% for the full year.
Now that I've talked about improvements to the income statement I should also talk about improvements to the balance sheet and liquidity driven by profitability debt management and capital management.
As you know, we raised $85 million of new equity during the fourth quarter issuing 1 million and 150000 New shares. We also expanded the capacity of our credit facility with fifth third bank from 50 million to $75 million during the quarter as of December 31, 2023, we had just over 215 million.
Cash and financial investments at the holding company level and when combined with the credit facility about $290 million of total holding company liquidity. This is about $100 million higher than it was a year ago.
As Karen mentioned there are a couple of other capital transactions that have happened since the year end first we redeemed the preferred shares owned by Centerbridge and second we began the process of converting the balance of our 4.25% convertible notes into common to be completed by the end of the first quarter.
Mark Douglas Hughes: Now that I've talked about improvements to the income statement, I should also talk about improvements to the balance sheet and liquidity driven by profitability, debt management, and capital management. As you know, we raised $85 million of new equity during the fourth quarter, issuing 1,150,000 new shares. We also expanded the capacity of our credit facility with Fifth Third Bank from $50 million to $75 million during the quarter.
A couple of other numbers dimension book value per share continues to grow during 2023 book value per share increased from $18.91 to $33 36, our debt to capital ratio has also improved considerably at the end of 2022, it was just over 65% and it.
Mark Douglas Hughes: As of December 31, 2023, we had just over $215 million of cash and financial investments at the holding company level and, when combined with the credit facility, about $290 million of total holding company liquidity. This is about $100 million higher than it was a year ago. As Karin mentioned, there are a couple of other capital transactions that have happened since the year-end. First, we redeemed the preferred shares owned by Centerbridge, and second, we began the process of converting the balance of our 4.25% convertible notes into common, to be completed by the end of the first quarter. A couple of other numbers to mention: book value per share continues to grow. During 2023, book value per share increased from $18.91 to $33.36.
The end of 2023, it was down to 48% with the transactions happening in the first quarter of 2024. This should reduce further by the end of the first quarter of 2024, we expect the debt to cap ratio to be under 40%.
To summarize the fourth quarter was a great ending to a really strong year revenue was drawing expenses or not the balance sheet is improving and so is our holding company liquidity.
We positioned ourselves well and we look forward to the coming year with that I'll hand, it over to Paresh.
Thank you Mark.
So sometimes the numbers just speak for themselves.
Karen talked about the multiple operational achievements over the last five months.
Mark provide an update on the financial impact of these achievements both to the income statement as well as to the balance sheet.
Each of these items completed successfully is great just by itself.
Mark Douglas Hughes: Our debt-to-capital ratio has also improved considerably. At the end of 2022, it was just over 65%, and at the end of 2023, it was down to 48%. With the transactions happening in the first quarter of 2024, this should reduce further. By the end of the first quarter of 2024, we expect the debt-to-cap ratio to be under 40%. To summarize, the fourth quarter was a great ending to a really strong year.
The fact that we managed to do all of them at the same time is really something.
This is possible because of our people and the technology that we have developed.
The net result of this is that we crossed the $1 billion of in force premium.
She is a major milestone and with record.
Yes.
Stepping back.
So stepping back from the numbers for a moment.
Our actions have impacted not only our shareholders, but our policyholders as well.
We now provide coverage for the most policyholders in our history.
The steps, we took helped to improve market conditions and reduced insurance anxiety in Florida.
Pareshbhai Suryakant Patel: Revenue is growing, expenses are not, the balance sheet is improving, and so is our holding company liquidity. We've positioned ourselves well, and we look forward to the coming year. With that, I'll hand it over to Paresh.
Through our depopulation efforts as well as forming new carriers, we have helped the situation.
Citizens is still so large with over $1 1 million policies, but it is smaller today than at anytime in 2023.
We look forward to help shrink it further.
And the events of the last five months.
Pareshbhai Suryakant Patel: Thank you, Mark. Sometimes, the numbers just speak for themselves. Karin talked about the multiple operational achievements over the last five months. Mark provided an update on the financial impact of these achievements on the income statement as well as on the balance sheet. Each of these items completed successfully is great just by itself.
Possible.
Prudent preparation and planning meet the right opportunity and if you know how to execute successfully that is exactly what we have done.
In closing.
While Q4 2023 was our best quarter so far.
It is only our best quarter so far.
With that we will open for questions operator, please provide the instructions.
Thank you Sir at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your line from the queue for participants using speaker equipment. It may be necessary to pick up your handset before.
Pareshbhai Suryakant Patel: The fact that we managed to do all of them at the same time is really something. This is possible because of our people and the technology that we have developed. The net result of this is that we crossed the billion dollars reinforced premium, which is a major milestone and with record earnings. Stepping back. Stepping back from the numbers for a moment, our actions have impacted not only our shareholders but our policy holders as well. We now provide coverage to the most policyholders in our history.
Pressing the star Keys, one moment, please while we poll for questions.
First question.
It comes from Matt <unk> with citizens J M. P. Please proceed.
Pareshbhai Suryakant Patel: The steps we took helped improve market conditions and reduce insurance anxiety in Florida. Through our depopulation efforts, as well as forming new carriers, we have helped the situation. Citizens is still too large with over 1.1 million policies, but it is smaller today than at any time in 2023. We look forward to helping shrink it further and addressing the events of the last five months, as many as possible. When prudent preparation and planning meet the right opportunity, and if you know how to execute successfully, that is exactly what we have done. In closing, Wild Q4 2023 was our best quarter so far. It is only our best quarter so far. With that, we will open for questions. Operator, please provide instructions.
Hey, Thanks, good afternoon.
Hi, good afternoon.
Good afternoon, Teri you Tom your last comment there you'd be.
You gave us a little peek into your.
Continued appetite for business and to grow in Florida can you can you give us a broader picture of kind of what the competitive landscape looks like and maybe how that might have changed if at all over the past three to six months.
Sure Matt.
So what's happened is.
We started to carry last year, we've done the populations.
We had we were very successful at it in a sense of when we made offer 70 over 70% of the people accepted the offer right. So.
All of this was very successful and we watch.
Operator: Thank you, sir. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
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The competitive landscape as a whole.
And we noticed that there are a lot more depopulation is occurring now I think they're depopulation is happening all throughout the year all the way to June one moment.
So all of these are very positive things there are other carriers.
Operator: You may press star 2 if you'd like to remove your line from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions for the first question. That comes from Matt Carletti with Citizens JMP. Hey, thanks. Good afternoon. Good afternoon. Good afternoon.
Who have stepping up to depopulate from the first time ever. So these are all positive signs.
Building on the things that Mark talked about last year that litigation reform that was passed we will have an effect were seeing everybody else.
Vote with us that that is occurring.
Having said all of that I also want to make sure that we understand where we sit.
Citizens, which had swell too.
It was expectation they would swell to almost $2 billion 2 million policies by the end of 2023.
Has started to shrink it is now about the same size as it was at the end of 2022.
Pareshbhai Suryakant Patel: Paresh, your last comment there gave us a little glimpse into your, you know, continued appetite for business and growth in Florida. Can you, can you give us a broader picture of kind of what the competitive landscape looks like and maybe how that might've changed, if at all, over the past, you know, three, six months? Sure, Matt.
So.
The depopulation effects.
Impacts are having an effect on the size of a sudden it's still a very big $1 1 million leaves us plenty of opportunity, but you know.
These are.
The first signs of a healthy market returning to Florida and.
We're glad we participated in it yes.
Great.
Can you give us any more color on it.
Pareshbhai Suryakant Patel: So what's happened is, you know, we started CARES last year and we did depopulations. We were very successful at it in the sense that when we made offers, over 70% of the people accepted the offers, right? So all of this was very successful. And yeah, we watched the...
Karen you commented on encore, the 34 million enforce assumption I guess last week.
And mentioned.
April approved filing for May can you give us any indication of kind of potential size of those assumptions.
Pareshbhai Suryakant Patel: The competitive landscape as a whole, and we noticed that there are a lot more depopulations occurring now. I think there are depopulations happening all throughout the year, all the way to June at the moment. So all of these are very positive things. There are other carriers who are stepping up to depopulate for the first time ever. So these are all positive signs, building on the things that Mark talked about last year, that the litigation reform that was passed will have an effect. I would agree with us that that is happening. Having said all of that, I also want to make sure that we understand where we sit, citizens, which had swelled to, you know, those expectations that they would swell to almost 2 billion, 2 million policies by the end of 2023 have started to shrink It is now about the same size as it was at the end of 2022, but the depopulation effects and impacts are having an effect on the number of citizens.
Okay.
Hey, Matt let me take that one as well.
Sure.
When we started calling even as capital.
Funding et cetera, we are trying we are our initial.
Yes.
Objective was to grow to about 75 million of in force premium. So 38 is a very good step towards that the April and June the populations will sort of top us up to the number that we want to see and we've already bought reinsurance for all of that so.
Core is up and running.
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And healthy here.
Great and then just a couple of numbers questions probably for mark but for anybody.
Cap surplus at year end as well as what was gross written premium for chip.
For the year.
So surplus for tip tap is $92.5 million.
Pareshbhai Suryakant Patel: It's still very big, 1.1 million, so there's plenty of opportunity. But, you know, these are the first signs of a healthy market returning to Florida, and we're glad we participated in it, yeah? Great. Can you give us any more color on, you know, Karin, you commented on the core, you know, the 34 million enforces function last week and mentioned, you know, April approved, I think, the filing for May. Can you give us any indication of the kind of potential size of those assumptions?
And what was the other question Matt.
Gross written premiums at tip tap for full year 'twenty three.
For the full year.
Hang on a second tip tap was.
Full year $363 million.
Awesome. Thank you very much congrats on a really nice quarter here. Thanks for the answers yes. Thanks, Matt.
Pareshbhai Suryakant Patel: Hey, Matt, let me take that one as well. When we started CORE, given its capital funding, etc., we were trying, you know, our initial objective was to grow it to about 75 million dollars in-force premium. So 38 is a very good step towards that. The April and June depopulations will sort of top us up to the number that we want to see. And we've already bought reinsurance for all of that. So your core is up and running, and healthy.
The next question comes from Michael Phillips with Oppenheimer. Please proceed.
Thanks, Good afternoon everybody.
I guess, maybe just a high level question Paresh for your gross loss ratio, which I think you guys talked you expect it to be around 30, given what's happening in Florida.
But.
Why target for such a low ratio clearly light years ahead of anybody else in the state or anybody else looks like the country.
Pareshbhai Suryakant Patel: Yep. Great. And then just a couple of numbers questions, probably for Mark, but for anybody: TipTap surplus at year-end as well as what was the gross written premium for TipTap for the year. So, the surplus for TipTap is $92.5 million. And what was the other question, Matt? Just gross written premiums at TipTap for the full year. Hold on a second. Tip Tap was a full year $363 million. Thank you very much. Congratulations on a really nice quarter of a year. Thanks for the answers.
Are you do you feel like you'll leave money on the table for growth. If you are shooting for such a low loss ratio.
It's probably even some conservatism and that I assume given what youre doing with your reserves.
Good question I think.
The gross loss ratio and just for the sake of it. So it follows along we define that as our total losses.
Net losses divided by gross earned premium.
It's that low partly because.
Some of it is because of Florida, but the reason we we also do that is it just how well our technology works right we charge.
Mark Douglas Hughes: Yeah. Thank you, Matt. Thanks. The next question comes from Michael Phillips with Oppenheimer. Please proceed. Thanks. Good afternoon, everybody.
A market competitive premium.
Just that.
Pareshbhai Suryakant Patel: Um, I guess maybe just a high-level question, Paresh, for your growth loss ratio, which I mean, you guys talked about, you expected to be around 30, given what's happening in Florida. But, you know, why target such a low rate? ratio that's clearly, you know, light years ahead of anybody else in the state or anybody else in the country. You know, do you feel like you leave money on the table for growth if you are shooting for such a low wealth ratio? And there's probably even some conservatism in that, I assume, given what you're doing with your reserve. Good question. I think the gross loss ratio, and just for the sake of it, if everybody follows along, we define that as our total loss, and that net loss is divided by gross earned premium.
<unk> technology is so great.
Sorry, I'm bragging about it at this point.
That is it picks the right policies and.
We've curated a set of policyholders now who you know.
The file a claim when they have to but they don't file a claim when they don't have to and it creates a better stable outcome right. It's just been one of those things that the other side of this also it's a moment in time because.
When Mark a year ago was talking about the loss ratio going from 40 to 30 right.
Like a very big lift that that would occur.
Yeah, we are.
Don invested so that's the the idea of where we said right. It's.
It's something we.
We aspire to and once in a while we achieve it which is a great day.
Pareshbhai Suryakant Patel: It's that low partly because some of it's because of Florida, but the reason we also do that is because of just how well our technology works, right? We charge a market-competitive premium. It's just that technology is so great. Sorry, I'm bragging about it at this point, that it picks the right policies, and we've curated a set of policy orders now who, you know, file a claim when they have to, but they don't file a claim when they don't have to, and it creates a better, stable outcome, right? It's just been one of those things.
So is it harder to get those policies that you talked about that has such great loss ratios that are harder to get that same kind of client base.
The more you expand that technology outside of Florida.
Well actually let me try to see if I can explain it in a slightly different way right.
And we actually talked about this about what's going on inside citizens right. So soon.
Citizens has $1 1 million policies that idea.
And.
When you.
When you look at those policies you just see $1 1 million policies.
Pareshbhai Suryakant Patel: The other side of this also, it's a moment in time when Mark a year ago was talking about the loss ratio going from 40 to 30, right? It seemed like a very big lift that that would occur. And here we are, done and dusted. So that's the item where we said, right, it's, It's something we aspire to, and once in a while, we achieve it, which is a great thing. So is it harder to get those policies that you talked about that have such great loss ratios, is it harder to get that same kind of client base the more you expand that technology outside of Florida? Oh, actually, let me try to see if I can explain in a slightly different way, okay?
What our technology allows us to do is very.
Very quickly look at all of those homes and we think of them as read houses in greenhouses, we've talked about this before right.
Greenhouses are ones that if you take at current prices and keep them for let's say 100 years, it will be a profitable outcome red.
Warehouses are ones that won't be profitable and it's you know it could be a combination of things reinsurance cost is too high or losses would be too high or premium is too low a number of reasons.
The computer's decided what screen and what's right, but if you can separate them out.
You can.
Out of the same book separate into Red housing greenhouse and have a much better outcome than the pool, you're selecting from rain.
Pareshbhai Suryakant Patel: And we actually talked about this, about what's going on inside Citizens, right? Citizens has 1.1 million policies in it, right? and When you look at those policies, you just see 1.1 million policies. What our technology allows us to do is... Very quickly, look at all of those homes. We think of them as red houses and green houses. We've talked about this before, right? Greenhouses are ones that if you take them at current prices and keep them for, let's say, a hundred years, it will be a profitable outcome; red houses are ones that won't be profitable.
And things that we can see is we can see that in citizens.
So probably about 4000 green homes, but we can tell them.
Apart from the 700000 red homes that are in there.
A lot of other people can and that's what gives you that that item right. We are not.
Getting these numbers, because we charge more or less we charging a very market competitive rate is just better policy selection and.
We have an advantage because we can tell read from green as opposed to let's just say somebody who is colorblind.
Pareshbhai Suryakant Patel: And it's, you know, it could be a combination of things, reinsurance costs are too high, or losses will be too high, or premiums are too low, a number of reasons, you know, the computers decide what's green and what's red. But if you can separate them out, you can, out of the same book, separate into red houses and green houses and have a much better outcome than the pool you're selecting And things that we can see is that in citizens, there's still probably about 400,000 green homes, but we can tell them apart from the 700,000 red homes that are in there. A lot of other people can't. And that's what gives you that, that item, right? We're not, Thank you very much. We have an advantage because we can tell red from green as opposed to, let's just say somebody who's colorblind, yeah?
Okay. Thank you.
I guess sort of related what can you say about.
The margins of the books that Youre getting from citizens.
I know Theres, a couple of anomalies like for now and ill reinsurance costs and commissions.
On a normal run rate how does that profitability the margin in that book look compared to your normal book and I guess part of the reason why I ask is what you just talked about is is presumably youre not using your technology for those new policies that youre getting from citizens, but you will eventually maybe when you renew so was there a different margin profile than our book compared to your normal underlying book.
Okay actually our technology.
Runs through the entire citizens broken besides what's red and green right. So the parking policies he took over.
Pareshbhai Suryakant Patel: Okay, yeah, thank you for this analogy. I guess, sort of related. What can you say about the margins of the books that you're getting from citizens? And, you know, I know there's a couple of anomalies, like for now, you know, reinsurance costs and commissions, but on a normal run rate, how does that profitability, the margins in that book look compared to your normal book? And I guess part of the reason why I ask is because, presumably, you're not using your technology for those new policies that you're getting from citizens, but you will eventually, maybe So is there a different margin profile in that book compared to your normal underlying book? Actually, our technology runs through the entire citizen's book and decides what's red and green, right?
We already had pretty much process.
In terms of what we expect right so thats the value and the.
The ease with which we can do this right. So that is all technology and is great right now.
There is mark side of the house, which is finance et cetera, where we take a more conservative view right. So until we have that book on.
You know that we take over that book and we study it and related.
A job for about six months of the year right.
Finance takes a much more conservative view and they will reserve to a much higher loss ratio than would otherwise necessary indicated which is exactly as it should be because that's being conservative and eventually when the book has enough history on our paper.
Pareshbhai Suryakant Patel: So the policies we took over, we already had pretty much processed in terms of what we expect, right? So that's the value and the ease with which we can do this, right? So that is all technology, and it's great, right?
The loss ratio will be adjusted on that book rate, but going in.
That assumed those assumed citizens policies carry a higher loss ratio than our existing ticked up in the homeowners choice book ship.
Pareshbhai Suryakant Patel: There is Mark's side of the house, which is finance, etc., where we take a more conservative view, right? So until we have that book on, we take over that book, we study it, and we let it age out for about six months to a year. Finance takes a much more conservative view, and they will reserve for a much higher loss ratio than would otherwise necessarily be indicated, which is exactly what it should be, because that's being conservative. And eventually, when the book has enough history on our paper, the loss ratio will be adjusted on that block, right? But going in... that assumes those policies carry a higher loss ratio than our existing tip-tap and ominous choice books, yeah? Does that help? Yeah, it does. Yeah, thank you. Last one, kind of a numbers question, but it sort of relates to the real-world effect of the question.
Okay.
Yes. It does yes. Thank you.
Last one kind of a numbers question, but it sort of relates to.
Our robo attracted my question.
And the gross written premium number that you gave us a $320 million you split between tipped up and I'm Gonna choice.
I think there is some accounting of the depopulation in that and I don't know if you can like that out for the reason I ask you what's the underlying growth of the two businesses will help that number.
Yeah. Good question so.
If you look at the consolidated number.
So I think we put in the press release that the consol it for Q4, it doesn't affect any other quarters obviously.
That $325 million that you see in Q4.
$143 million of that is from the citizens Deepak.
And then it.
If you want a further at record I think in your question you said how does it breakdown by underwriter. If you. If you look at homeowners choice of the $1 82 in Q4 120.
Mark Douglas Hughes: In the gross written premium number that you give us at $320 million, you split between tip-tap and a monitor's choice. I think there's some accounting for the depopulation in that, and I don't know if you can wipe that out for us. The reason I ask is because, you know, what would the underlying growth of the two businesses have been without that? Yeah, good question. So Mark, if you look at the consolidated number, So I think we put in the press release that the consolidated for Q4, it doesn't affect any other quarters, obviously, of that three hundred and twenty point five million that you see in Q4. One hundred and forty three million of that is from the Citizens Depot. And then, if you want to further break it down, I think in your question you said, "How does it break down by underwriter?"
Wait.
Sorry, I don't have I apologize that I don't I don't have that in front of me, but the 143 of the 320 is the is the is the consolidated I thought I had it by underwriter here in front of me, but I don't yet.
And Michael.
A new thing.
Asking this to update your model et cetera.
Should be aware that our two underwriters don't like renew policies evenly throughout the year.
Tipped up is very heavily skewed in Q4 and early Q1.
It has a.
Pretty high GWB rates in Q4.
Homeowners choice on the other hand tends to do most of it.
Neil.
Mark Douglas Hughes: If you look at homeowner's choice of the 182 in Q4, 120, wait. Sorry, I apologize. I don't have that in front of me, but 143 of the 320 is the consolidate number. I thought I had it by underwriter here in front of me, but I don't.
April through August timeframe, yet so.
Create a different day.
<unk> from a from a go through the premium perspective, obviously on our own premium they just evens out yet.
Hey, Michael it's Marc again at that $143 million in Q4 than the consolidated totaled $19 million of that is tipped up.
Pareshbhai Suryakant Patel: And Michael, a new thing. You should be aware that our two underwriters don't like to renew policies evenly throughout the year. TIPTAP is very heavily skewed in Q4 and early Q1. It has very high GWP rates in Q4 and Q5, below in the April through August time frame, yeah? So. It creates a different dynamic from a go-to premium perspective. Obviously, on our own premium, it just evens out. And hey, Michael, it's Mark again.
90 of that $143 $19 million to $20 million tipped up a 123 homeowners choice right.
Okay.
Perfect. Thank you guys. Appreciate it that's all I had.
Once again, if you have a question or comment please indicate so by pressing star one on your Touchtone phone. The next question comes from Mark Hughes with Truest. Please proceed.
Yeah. Thank you good afternoon.
The Los Reyes Gee, that's at 30%.
Thank you.
Have you made.
All the progress.
Fully reflect the reform and the.
Mark Douglas Hughes: Of that $143 million in Q4, in the consolidated total, $19 million of that is tip-taps. So it's about $143.19, $20 million is tip top, and $123 is the homeowner's choice. Okay. Perfect. Thank you guys. Appreciate it. Go ahead.
The results of your underwriting or the.
Stop along the way.
I think it's hey, Mark its Mark I think 30%.
It is is a pretty good estimate of where we are right now.
So if you're trying to project out to 2023 or towards 2024, sorry, I think 30% is about.
Operator: Once again, if you have a question or a comment, please indicate so by pressing star one on your. For more information, visit www.fema.gov. Yeah, thank you. Good afternoon.
Where the book is that again that's consolidated.
We can't control the weather of course, we have certain quarters, where it can be we tend to get a little bit more weather in Q1 and Q2. So there is a chance it could be a little bit higher in those those two quarters, but.
Mark Douglas Hughes: The loss rate has changed, and we've got to 30. This is if you've made all the progress and the... results of your underwriting, or is this a stop along the way? I think it's, hey Mark, it's Mark. I think 30% is a pretty good estimate of where we are right now. So if you're trying to project out to 2023 or 2024, sorry, but I think 30% is about, you know, where the book is at. Again, that's consolidated. You know, we can't control the weather, of course; we have certain quarters where it can be, you know, we tend to get a little bit more weather in Q1 and Q2.
30% is about I think where we're at.
Got it.
As I said in my prepared remarks, but you know the impact of the legislation has been pretty much what we expected it to be we expected claims frequency dropped significantly because a significant percentage of claims where <unk> claims we expected it to drop and it did.
We expected the incidents of litigation to drop and it did and it dropped both dropped very very very close to what we had expected them to.
Mark Douglas Hughes: So there's, there's a chance it could be a little bit higher in those two quarters. But, you know, 30% is about, I think, where we're at. And, you know, as I said in my prepared remarks, but, you know, the impact of the legislation has been pretty much what we expected it to be. We expected claims frequency to drop significantly because, you know, a significant percentage of claims were AOB claims. You know, we expected it to drop, and it did. We expected the incidence of litigation to drop, and it did.
But you know, we're only a year a year and a half into it. So we're still we're still watching it closely and there is a certain amount of prudent and those numbers of course as we as we watch this developed but.
We thought we'd get to 30 and I think 30 is about where we're at.
Yeah would you say would be improvement.
Ian losses is that it'll be a.
In litigated claims as well or is that just a.
Well, obviously, it's more information that's driving it but do you think it's the same factors that are working through those.
While storm claims.
Yes, yes.
So mark.
Mark Douglas Hughes: Both dropped very, very, very close to what we had expected them to, but, you know, we're only a year, a year and a half into it, so, you know, we're still watching it closely, and there is a certain amount of prudence in those numbers, of course, as we watch this develop. But, you know, we thought we'd get to 30, and I think 30 is about where we're Yeah, would you say the improvement in the EAN losses is that AOB and litigated claims as well, or is that just... Well, obviously, it's more information that's driving it, but do you think it's the same factors that are working through those? A lot of storms, Yeah, yeah.
Don't forget Ian was after the first round of reform, but before the second round of reforms.
But the bigger thing is saying, what's driving the numbers there, it's a totally different set of things.
Marks initial number I think 960, you said was entirely driven from the models right RMS a or all of the models.
To estimate the losses right after.
Brian the storm makes landfall.
That's what drove that number.
We were already thinking that that number was.
Overstating for us.
And as time has gone on.
The accurate and we've got more comfortable because of the actual developments on actual claims and everything else to reduce the number because.
Keeping our original model number is just not justified.
Pareshbhai Suryakant Patel: So, Mark. Don't forget, Ian was after the first round of reform but before the second round of reform. But the bigger thing, I think, was driving the numbers there. It's a totally different set of things. Mark's initial number, I think 960, he said, was entirely driven from the models, right? You know, RMSA or all the models that are covered to estimate the losses right after right after the storm makes landfall
As Mark did say in his comments, we're still at the top end of the range.
Putting it differently also is that.
The book that we are curating.
Seems to outperform modeled losses, when an actual cat event happens right. This is pretty big.
And we didn't just miss it by a little but we seem to be improving and our models by a huge amount.
And.
Pareshbhai Suryakant Patel: That's what drove that number. We were already thinking that that number was way too high for us. And as time has gone on,
We think this is a good thing for future.
Future events yet.
Yep Yep.
At this point your appetite for.
Pareshbhai Suryakant Patel: The Actuary, and we've got more comfortable because of actual developments and actual claims and everything else to reduce the number because keeping that original model number is just not justified. And as Mark did say in his comments, we're still at the top end of the range. Uh... Putting it differently, also, the book that we are curating seems to outperform model losses when an actual CAT event happens, right? This is pretty big, and we didn't just miss it by a little bit.
Growth in voluntary policies in Florida.
You're obviously, you're doing well depot.
Are you interested in are those green policies out there from a voluntary standpoint.
Yes, we are and I think we actually are.
Through most of this last Q4 and Q1, we continue to write voluntary policies.
But it wasn't.
Pareshbhai Suryakant Patel: We seem to be improving on the models by a huge amount, and we think this is a good thing for future events, yeah? Yeah, yeah. At this point, your appetite for Growth and Voluntary Policy in Florida is obviously growing.
The volume of that was more than offset.
By the deep populations, they just become big items and Thats, just the nature of it Oh what happens.
Yes, I think we will.
Pareshbhai Suryakant Patel: Are you interested in the green policies out there? volunteers. Yes, we are. And I think we actually, all through most of this last, you know, Q4 and Q1, we continued to write voluntary policies. But it wasn't. The volume of that was more than offset by the depopulations, right; they just became big items.
We are and we will continue to write new policies.
But it's.
Slight.
<unk>.
All numbers compared to what we did in a deep populations and we had communicated this because.
The item that people were looking for the state needed whatever it was talking about was how do you.
Shrink citizens and you have a lot of people there who are looking to leave sort of listed a better home to go to and we provided that and.
Pareshbhai Suryakant Patel: And that's just the nature of it, of what happens. So, yes, I think we will, you know, we will continue to write new policies. But it's like, you know, it's small numbers compared to what we did in the depopulations.
At all three take outs, we did.
Very carefully.
How we curate who we made offers to but.
Pareshbhai Suryakant Patel: And we communicated this because the item that people were looking for, or the state needed, whatever he was talking about, was how do you shrink citizens? And you have a lot of people there who are looking to leave the city and just needed a better home to go to, and we provided that. And, you know, in all three takeouts we did, we were very careful as to how we curated who we made offers to. The people we made offers to, 70% plus, took us up on those offers, right? I point this out because I think in the November takeout... When we made offers, we got a 70% acceptance rate. Everybody else who was participating in that takeout, their combined acceptance rate was probably under 30%.
The people we made offers to 70% plus took us up on those offers right.
I point this out because I think in the November takeout.
When we made offers we got a 70% acceptance rate everybody else, who was participating in that takeout that combine acceptance rate was probably are under 30%.
Okay.
No.
Yeah.
Yeah.
Could you expand on that why do you think that is.
But your premium any different than the others or the just the.
The <unk> brand.
What's driving that.
I think as all of the above right.
You have to bring multiple things to the table.
Pareshbhai Suryakant Patel: Yeah, and uh... Could you expand on that? Why do you think that is? That you're premium any different than the others or just the ties to the brand. I think it's all of the above, right?
Track record.
Sure you Youll make a compelling.
Proposition to the policyholder that they should come with us.
We have long courted agents.
Pareshbhai Suryakant Patel: It's, you know, you have to bring multiple things to the table, you know, a track record, make sure you make a compelling proposition to the policyholder that they should come with us. We have long-corded agents, and we should give a shout-out to them. Almost universally, all the policies we selected, the agents who are actively taking the policy orders, this is a better place for you to go. If I could have put you there in the first place, I would have.
And we should give a shout out to them.
Almost universally all of the policies, we selected the agents who are actively returning the policyholders. This is a better place for you to go to if I could I'll put you there in the first place I would have so.
Take the offer so these are all.
Individuals little items that all come together.
That.
That work, while the other side of things also.
I'll take out all three take outs, we actually made fewer offers than we were approved for <unk>.
Pareshbhai Suryakant Patel: So take the offer. These are all individual little items that all come together that, um, that work well. The other side of things also, in all takeouts, all three takeouts, we actually made fewer offers than we were approved for by the OIR. And we did some of that because unless we think the policyholder is going to be happy with us long term, we tend not to make the offer, right? We want people to join the HCI family who want to belong to the HCI family.
And we did some of that because unless we think the policyholder is going to be happy with us long term, we tend not to make the offer right we want people that.
We want people to join the HII family, who want to be with DHA family.
You are seeing.
The nations of all of these things coming together in the right way.
Yeah, Yeah, Okay, Mark given the timing on the.
Pareshbhai Suryakant Patel: And you're seeing all combinations of all of these things coming together in the right way, yeah. Yeah, yeah. OK. Mark, given the timing on, Check out the first quarter and the magnitude of thoughts about kind of, In Q1, I think when we get into Q2, it might be a little more straightforward exercise. This is Matt.
Hey, guys on the first quarter and the magnitude of any.
Thoughts about kind of earned premium contribution.
Q1, I think when we get into Q2 might be a little more straightforward exercise, but just given the pacing.
Facing a thing, but I wonder if you could provide any guidance on that.
Yeah. So so I think Karen Karen and I, both mentioned $273 million of of.
Mark Douglas Hughes: Thank you for giving me a pacing of things. I wonder if you could provide any guidance. Thank you. Thank you. Thank you. Yeah, so I think Karin and I both mentioned $273 million of premium in force. And that's three takeouts. One in November, one in December, one in January.
Premium in force and that that three three take outs one in November when in December when in January So I'll, just I'll just focus on the ones in.
And in 2023 first.
There should we booked $23 million will actually put them together, we booked $23 million of earned premium in Q4.
Mark Douglas Hughes: So I'll just focus on the ones in January and in 2023 first. We booked $23 million of earned premium in Q4. And if you look at the timing of the assumptions that were done in Q23 and in Q24, earned premium in Q1 would be closer to $60 to $62 million. http://TheBusinessProfessor.com So, yeah, and then the January takeout. I'm sorry, I sort of shifted gears halfway through there,
And if you look at the timing of the assumptions that were done in 'twenty three and in 24 earned premium in Q1 would be closer to $60 million to $62 million.
Instead of the 23 that we have.
And then a little bit higher than that in Q2.
So and then the January thank you.
I see alright.
Shifting gears halfway through their Mark I apologize I included both of them.
Mark Douglas Hughes: I apologize. I included both. So in Q1, there should be about $40 million of more earned premium from those takeouts than there was in Q4. And then there'll be a little bit more of a bunch, a little bit more again in Q2, because one of those assumptions was toward the end of January. Does that make sense? Does that answer the question? It sure does. Yeah, that's perfect. Thank you, http://TheBusinessProfessor.com. I think the question might have been asked earlier, and if you answered it, I'd much rather pick it up.
No.
Q yeah. So in Q1, there should be about $40 million.
More.
Earned premium.
From those takeout than there was in Q4.
And then there'll be a little bit more of a month.
A little bit more again in Q2, because one of those assumptions was toward the end of January because that makes sense does that it okay that answers the question, but I'm sorry, yeah. That's perfect. Thank you and then.
Did it have.
Hi.
I think the question might have been asked earlier and if you answered a bunch of other to pick that up a bit.
Mark Douglas Hughes: But did you give a kind of sense of the bottom line contribution from the takeout? $23 million in premium. I'll give you a number for the bottom line. It's about, it's about 14 million.
Give a kind of a sense of the bottom line contribution from the take out.
$23 million in premium.
Do you have a number for the bottom line contribution is.
It's about it's about $14 million.
Yeah, and and so and of course that number will be significantly higher in Q1.
Mark Douglas Hughes: And of course, that number will be significantly higher in Q1. Okay. Does that margin flow through? 14 out of 23, and then if we just did it here at the office?
Yeah.
Okay.
Does that margin flow through is that.
14 out of 23.
And then if we just did it.
Simple as that.
Mark Douglas Hughes: So, yeah, so... So, keep in mind... From now until May 31st, you've got no reinsurance in there, right? Yeah. The margin, initially, the margin is about 65%, and we're reserving 35% on that book. So you've got 65% initially.
Yeah.
Yes.
So keep in mind from now until May 31.
You've got no reinsurance in there right yes.
Joe.
The margin.
Initially the margin is about 65%, we're reserving 35% on that book.
So you've got 65% initially as you start there's also no policy acquisition expense initially that was policy start to renew in March.
Mark Douglas Hughes: As you start to, there's also no policy acquisition expense initially. Now, as policies start to renew in March, you know, some policy acquisition expense will start to creep in, so that'll erode that margin a little bit. But for the first five months of the year, the margins are obviously, you know, very, you know, significant. And then, when June 1 comes along and reinsurance kicks in, of course, the margins will, you know, deviate toward the norm of the rest of the book. But, you know, for Q4, Q1, and Q2, you've got a very significant amount of premium that's coming in at a very high margin. Yeah, okay. Super helpful. Congratulations.
So some policy acquisition expense will start to creep in so that'll erode that margin a little bit but for the first five months of the area the margins there obviously.
Barry.
Significant.
And then when June one comes along and reinsurance kicks and of course, the margins will well will be.
Deviate toward the norm of the rest of the book, but.
For Q4, Q1 and Q2.
You've got a very significant amount of premium that is coming in at a very high margin.
Okay.
Super helpful.
Congratulations thank you.
Casey Jay Alexander: Thanks, Mark. If there are any remaining questions, please press star 1. This question comes from Casey Alexander with Compass. Yeah, hi, good afternoon. I have a couple questions here.
Thanks Mark.
If there are any remaining questions. Please press star one. The next question comes from Casey Alexander with Compass point. Please proceed.
Yes, hi, good afternoon I have.
A couple of questions here.
Pareshbhai Suryakant Patel: You're doing the core assumptions in April and June, and just thinking about the company's timing... Normally, they don't do assumptions right ahead of the busiest storms, can you discuss the timing of those assumptions and why not wait until later in the year when you're past the storm season before making those? Yeah, Casey.
Youre doing the core assumptions in April and June and just thinking about the company's timing, but.
Normally they don't do assumptions right ahead of the busiest storm season can you.
Discuss the timing of those assumptions and why not wait until later in the year when you pass the storm season before making those assumptions.
Yes.
Casey.
Pareshbhai Suryakant Patel: Great question from a true veteran, right? Thank you. The End. Thank you. Thank you. Thank you. The reason for all of that stuff is that these are all the mechanics of depopulation, ideas, meeting a new startup, and everything else. CORE started with $25 million in surplus, and because of that, we sort of put, and we have to have reinsurance for it in place when we do the first depopulation on February 27th. So we had to put that into place. So we bought the popular; we bought reinsurance for a certain size book, right? Other little things that go on are because of citizens' depopulation schedules and blackout times, etc. It's difficult to hit that peak of depopulation size all in one go because of renewal cycles and so on.
Great question of accrue veteran right.
Steve.
The reason for that all of that stuff is that.
These are all of the mechanics of the population.
Uh huh.
Ideas meeting, a new startup and everything else.
Yes.
<unk> started with $25 million of premium.
Surplus and.
And because of that we sort of put it and we have to have reinsurance for it in place. When we did the first depopulation in February 27, So we had to put that into place. So we bought the popular we bought reinsurance for a soda size book right.
Other little things that go on is because of citizens deep.
The population of schedules in blackout times et cetera.
It's difficult to hit that peak up.
The population size all in one go.
Because of renewal cycles and so on so that's why we got into the April and June ones to top up.
Pareshbhai Suryakant Patel: So that's why we're going to do the April and June ones to top up what we already have in February, right? So you are trying to do, over three takeouts, do what, you know? In theory, you could say you could do it all in one go, but in practice... it's easier, it's better to layer it in over three takeouts than to do it in one.
We already got in February right. So if you are trying to.
Over three take outs do what.
In theory, you could say you can do it all in one go but in practice.
Easier is better layer in over three take outs than to do it in one so in reality, it's the April and June Takeouts could almost be thought of as delayed February takeout.
Pareshbhai Suryakant Patel: So in reality, it's April, and the June takeouts can almost be thought of as delayed February takeouts. Yeah. Understood. If you already have the reinsurance in place, then you're covered for the upcoming... So that makes perfect sense.
Understood. If you already have the reinsurance in place then then you're covered for the upcoming season. So that's so that makes perfect sense. Thank you for that.
Pareshbhai Suryakant Patel: Thank you for that. Secondly, your discussion about the declining reserves against Ian. You know, the change, over 200 million from the models. I'm just curious, the next time there's a storm... Would you, again, just go off the models first and then work it down? Or is your experience with the book, knowing that it tends to outperform the models, would you reserve it differently next time? Or would you do the same thing and just go by the models and then work it out?
Lee your discussion about.
The declining reserves.
Against an.
The change over $200 million.
The models I'm just curious.
The next time Theres a storm.
Would you again just go off the models first and then work it down or is your experience with the book knowing that it tends to outperform the models would you reserve. It differently next time or would you or would you do that do the same thing and just go by the models and then work it down.
Pareshbhai Suryakant Patel: So, Casey, look, the item that happens, right, is... The Day After a Storm.
So.
Casey look the item that happens.
Is.
The day after a storm.
Everybody is going off the models and everybody uses those numbers right that's kind of like what happened and actually if you recall.
Pareshbhai Suryakant Patel: Everybody is going off the models, and everybody uses those numbers, right? That's kind of like what happens. And actually, if you recall, vividly remember the days after E.N.
Vividly do the days after Ian happened.
Pareshbhai Suryakant Patel: happened, people were busy, the whole industry, modelers, etc., out there saying, Oh, Ian's going to be 30 million, then it became 40, then it became 50. I think it peaked out at over 70 billion was what Ian's estimate was, right?
Before basically the whole industry.
Modelers et cetera out there say Oh, yes, there is going to be $30 million. Then it became 40 then it became 50 I think it peaked out at over $70 billion.
Estimate was right.
Pareshbhai Suryakant Patel: And we were already looking at it within 10 days, given our technology that, given our market share, it would be virtually impossible to spend $70 billion on the claims that we have. But we are also subject to actuaries and industry models and everything else. That's why Mark is almost obligated to book with what the models are saying, right?
And we were already looking at it within 10 days, given our technology that.
Given our market share it would be virtually impossible to spend $70 billion.
On the claims that we had.
We are also subject to actuaries and industry models and everything else. That's why mark is almost.
Obligated to.
Book with what what the model say right is only one about five months go by and we start switching over to.
Pareshbhai Suryakant Patel: It's only when about five, six months go by and we start switching over to, you know, claims received, payments made, all those kinds of things that you can switch to your own experience model. And that tells you what's going on, right? And, you know, Mark's comments about having to reduce Ian, if you recall, he also said he was at the top end of the range. I don't think, at this point, the actuary is telling him he can't put up more for Ian than that number, right? We have plenty of reinsurance left, but this is how this is going. And as I answered in one of the earlier questions, This is all not by accident; it is a result of the technology and how it curates a superior book and how it actually performs in the marketplace.
Claims received payments made all of those kinds of things that you can switch to your own experience model and that is what's going on right and you know.
Mark's comments about having to reduce Ian if you'll recall. He also said he was the top end of the range I don't think at this point the actuaries telling them you can put up more for Ian in that number right. We have plenty of reinsurance left but this is hao.
How this is going and as I answered in one of the earlier questions.
This is all not by accident it as a result of the technology.
And how we profile.
Howard Curates, a superior book and how it actually performs in the strong thing. These things are now becoming inescapable.
Pareshbhai Suryakant Patel: These things are now becoming inescapable as to how well this stuff is working. All right, that, again, makes perfect sense. Thank you. My last question is... you know, tip-tap has now generated four straight quarters of profit. You've kind of removed Centerbridge from the equation.
<unk> as to how well this stuff is working.
Alright that again makes perfect sense. Thank you my last question is.
Cap has now generated four straight quarters of profit yes.
We're kind of removed centerbridge from the equation to what else does tip tap have to do before you guys would be willing to create a capital transaction for the company.
Pareshbhai Suryakant Patel: So what else does TICCAP have to do before you guys would be willing to create a capital transaction? Okay. Thank you. Casey, I don't necessarily know that TIPTAP has been hampered by things we have to do to create a capital transaction. I think we could do that reasonably well and in reasonably short order, right? Don't forget, we got all the way to an S-1 three years ago, but, It's part of that whole situation; it's tempered by two items.
Okay.
Okay.
Casey I don't necessarily know that tipped up it has been hampered.
<unk> bye.
Things, we have to do to create a capital transaction I think we could do that reasonably well.
In reasonably short order rate don't forget we did all the way to an S. One three years ago.
But.
Part of that whole situation.
It's it's tempered by two items one is.
Pareshbhai Suryakant Patel: One is the market macro conditions out there in terms of IPOs and stuff, and we watch and monitor that. So what we are being told is that market conditions are very good for follow-on offerings, but they're less favorable for IPOs. So that gives us some pause. And the second item is obviously your, Where does TIPSAF actually need new capital? If it isn't, you know, do you want to keep enhancing its value and showing how what a great outfit, you know, what a great company and technology it has, and only when it's fully appreciated by the market, then have the capital event?
Market macro conditions out there in terms of Ipos and stuff and we watch and monitor that.
So thats.
Brad.
While we are being told is the.
The market conditions.
Conditions are very good for follow on offerings, but they are less favorable for IPO. So that gives us some pause.
And the second item is obviously.
Where it does is tipped up actually in need of new capital.
If it isn't.
Do you want to keep enhancing its value.
And showing how we're a great outfit what a great.
Company in technology, It has and only when it's fully appreciated by the market than have the capital event. So these are things that are.
Pareshbhai Suryakant Patel: So these are things that are causing us to not move as quickly as people might anticipate because in being patient, we're actually, I think, creating greater value for our shareholders, which is ultimately the goal. Okay, thank you for that. And my last question is, there's, you know, significant indication that, you know, interest rates are likely to be declining at some point in time here, in the next several months. Chairman Powell's testimony earlier today. And you guys have a significant cash hoard. At what point do you start to kind of extend duration a little bit and try to capture some of that yield curve for a little longer compared to where short-term rates are likely to go over the next 12 to 24 years?
<unk> com.
Causing us to not move as quickly as.
I think one might anticipate because in.
In being patient, we're actually I think creating greater value for our shareholders, which ultimately is the goal yes.
Okay. Thank you for that and my last question is there's significant indication that.
Interest rates are likely to be declining at some point in time here in the next several months.
Just look at chairman Pals.
Testimony earlier today.
And you guys have a significant cash hoard at what point in time do you start to kind of extend duration, a little bit and try to capture some of some of that yield curve for a little longer.
Paired to where you're at.
Short term rates or are likely to go over the next 12 months to 24 months.
Pareshbhai Suryakant Patel: Funny you bring that up. We were just having that discussion internally. Right. And I think in the coming months, we will be extending duration, and you're going more towards fixing the yield on our cash hold, yeah? So yes, we are exactly the same mind, and we are starting to move in that direction, yeah?
Funny you bring that up we were just having that discussion internally right and I think in the coming months, we will be extending duration going more towards.
Fixing the.
The yield on our <unk>.
Cash hoard.
So yes, we are exactly the same mind and we are starting to move in that direction yet.
Casey Jay Alexander: Alright, well, thank you for taking my questions. I appreciate it. Thank you. OK. At this time, this concludes the question and answer session. I would now like to turn the call back to Paresh Patel, who has a few closing remarks. On behalf of the entire management team, I would like to thank our shareholders, employees, agents, and, most importantly, our policy holders for their continued support. Thank you. At this time, this concludes our question and answer session. This concludes today's call. You may now disconnect.
Alright, well. Thank you for taking my questions I appreciate it.
Thank you.
Okay.
At this time. This concludes the question and answer session I would now like to turn the call back to Paresh Patel, who has a few closing remarks.
Thank you on behalf of the entire management team.
I'd like to thank our shareholders employees agents.
And most importantly, our policyholders for their continued support thank you.
At this time. This concludes our question and answer session. This concludes today's call you may now disconnect.