Q2 2024 HCI Group Inc Earnings Call
Ali: Good afternoon, and welcome to HCI Group's second quarter 2024 earnings call. My name is Ali, and I will be your conference operator. At this time, all participants will be in a listen-only mode. Before we begin today's call, I would like to remind everyone that this conference call is being recorded and will be available for replay through September 7th, 2024, starting later today. This call is also being broadcast live via webcast and will be available via webcast replay until August 8th, 2025, on the Investor Information section of HCI Group's website at www.hcigroup.com. I would now like to turn the call over to Mr. Mark Glover of Gateway Investor Relations. Ma, please, please.
Good afternoon, and welcome to H C. I groups second quarter 2024 earnings call My.
Holly: My name is Holly and I will be your conference operator.
Holly: At this time, all participants will be in a listen only mode.
Before we begin today's call I would like to remind everyone that this conference call is being recorded.
Holly: Would be available for replay through September seven 2024, starting later today.
This call is also being broadcast live via webcast and available via webcast replay until August eight 2025.
Holly: Investor Information section of H C. I group's website at Www Dot H C I group dotcom.
Speaker Change: But now I'd like to turn the call over to Mr. Mark Glover of Gateway Investor Relations Ma'am.
Speaker Change: Please proceed.
Matt Glover: Thank you and good afternoon everyone. Welcome to HCI Group's second quarter 2024 earnings call today, or to today's call, or Karen Coleman, HCI's chief operating officer, or Carmsworth, HCI's chief financial officer, and Perish Patel, HCI's chairman and chief executive officer. Following Karen's operational update, Mark will review our financial performance for the second quarter of 2024, and Paris will provide a strategic update. To access today's webcast, please visit the investor information section of our corporate website at hcigroup.com.
Mark Glover: Thank you and good afternoon, everyone.
Speaker Change: Welcome to HCI group's second quarter 2024 earnings call.
Carrie Coleman: Today's call are carrying Coleman Aci's Chief operating officer.
Speaker Change: Our Columbus worth Hei's, Chief Financial Officer, and Paresh Patel, Hei's, Chairman and Chief Executive Officer.
Speaker Change: Well I guess its operational update Mark will review, our financial performance for the second quarter of 2024, and the parents will provide a strategic update.
Speaker Change: To access today's webcast. Please visit the Investor information section of our corporate website at HCI group Dot com.
Matt Glover: Before we begin, I'd like to take the opportunity to remind our listeners that today's presentation in response to questions may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995, such as anticipate, estimate, expect, intend, plan, and project. Other similar words and expressions are intended as signify for looking state.
Speaker Change: 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 1995.
Speaker Change: Words, such as anticipate estimate expect intend plan and project and other similar words and expressions are intended to signify forward looking statements.
Matt Glover: 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 Exchange Commission. Should any risks 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.
Speaker Change: Looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties.
Speaker Change: Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission.
Speaker Change: 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.
Speaker Change: You see I group disclaims all the obligations to update any forward looking statements.
Karin Coleman: And with that, I would like to turn the call over to Karin Coleman, Chief Operating Officer. Okay, Karin?
Speaker Change: I would like to turn the call over to Kevin Coleman, Chief Operating Officer Gary.
Kevin Coleman: Thank you, Matt and welcome everyone.
Karin Coleman: Thank you, Matt, and welcome everyone. Before getting into a few comments on the quarter, I wanted to quickly touch base on Hurricane Debbie. Our center's base goes out to those impacted by Debbie. Our team is actively assisting our policy holders during this difficult time. Our early view is that Debbie is not expected to be a reinsurance event and we expect its losses to be well within our statutory retention. Now for the quarterly update. In the second quarter, HCI Group reported pre-tax income of $76 million and earnings per share of $4.24. This was a tremendous outcome.
Kevin Coleman: Before getting into a few comments on the quarter I wanted to quickly touch based on Hurricane Debbie our sympathies go out to those impacted by Debbie our team is actively assisting our policyholders during this difficult time.
Speaker Change: Our early view is that Debbie is not expected to be a reinsurance event and we expect its losses to be well within our statutory retention.
Karin Coleman: Gross premiums earned increased almost 45% in the quarter to $264 million, with contributions from each of our insurance divisions. Enforced premiums continue to be above $1 billion. We reported another quarter of improvement in our underwriting results, including whether losses in the quarter; our gross loss ratio was 29.7%. HCI continues to deliver on its commitment to shareholders, paying a dividend of 40 cents per share, our 55th consecutive quarterly dividend. We had several notable accomplishments during the quarter.
Speaker Change: Now for the quarter update and.
Speaker Change: In the second quarter HCI group reported pretax income of $76 million and earnings per share of $4 24, and this was a tremendous outcome.
Speaker Change: Gross premiums earned increased almost 45% in the quarter to $264 million with contributions from each of our insurance Division.
Speaker Change: In force premiums continued to be above $1 billion.
Speaker Change: We reported another quarter of improvement in our underwriting results, including weather losses in the quarter. Our gross loss ratio was 29, 7%.
Speaker Change: ACI continued to deliver on its commitment to shareholders paying a dividend of <unk> 40 per share our 50 <unk> consecutive quarterly dividend.
Speaker Change: We had several notable accomplishments in the quarter.
Karin Coleman: First, the condo owners reciprocal exchange, known as core, as soon as the additional policies from citizens, and its total run rate premium is approximately $70 million. Second, we completed our annual reinsurance program in the quarter, which included a structure similar to last year, and retention at both of our insurance carriers was largely unchanged. We were pleased with the outcome, and we appreciate the continued support of our reinsurance partners. We believe reinsurers recognize the value of our technology and our claims organization. With reinsurance now secure, we expect our total reinsurance spend across all reinsurance towers to be approximately $92 million per quarter. This includes the consolidation of CORE's reinsurance spend and minor risk transfer enhancements.
Speaker Change: First condo owners reciprocal exchange known as core assumed additional policies from citizens and its total run rate premium is approximately $70 million.
Speaker Change: Second we completed our annual reinsurance program in the quarter, which included a structure similar to last year and the retention at both of our insurance carriers was largely unchanged. We were pleased with the outcome and we appreciate the continued support of our reinsurance partners we.
Speaker Change: We believe reinsurers recognize the value of our technology and our claims organization.
Speaker Change: With reinsurance now secure we expect our total reinsurance spend across all reinsurance towers to be approximately $92 million per quarter.
Speaker Change: This includes the consolidation of course reinsurance spend and minor risk transfer enhancements.
Speaker Change: I'd like to reaffirm a few statements I made last quarter related to the assumption of policies from citizens.
Karin Coleman: I'd like to reaffirm a few statements I made last quarter related to the assumption of policies from citizens. First, I mentioned that we were retaining more policies than we expected. As more policies come up over renewal and transition to our paper, this is still the case. However, the retention of policies continues to exceed our expectations. Second, I mentioned that the last ratio was coming in better than expected. As this book becomes more seasoned, this will still be the case.
Speaker Change: I mentioned that we were retaining more policies than we expected.
Speaker Change: As more policies come up for renewal and transition to our paper. This is still the case the retention of policies continues to exceed our expectations.
Speaker Change: Second I mentioned that the loss ratio was coming in better than expected.
Speaker Change: As this becomes more seasoned this is still the case the loss ratio on policy as we assumed from citizens is continuing better than expected.
Speaker Change: Given the proven success of our technology to select attractive policies from citizens, we have applied to assume additional policies from citizens homeowners choice has been approved to assume up to 25000 policies in October tip. Tap has also been approved to assume 25000 policies in October.
Speaker Change: And both companies have applied to participate in in November assumption as well. Additionally.
Speaker Change: Additionally, or has been approved to assume policies from citizens in October.
Speaker Change: We will update everyone on our plans closer to the assumption date.
Speaker Change: Overall, we posted another quarter of solid profitability and we continue to make solid progress on our topline and bottomline.
Speaker Change: Now I'll turn it over to Mark to provide more details on our financial results.
Mark Glover: Thanks, Karen.
Mark: As the numbers show, this was another solid quarter for the company; pre-tax income was just over 76 million dollars, and diluted earnings per share were $4.24. These continued outstanding results are being driven by premium growth, higher investment income, a lower loss ratio, and a lower loss expense ratio. Gross premiums earned were 264 million, or 45% higher than the same quarter a year ago. The growth is being driven primarily by Florida, where the number of policies in force is up 40% from the same quarter last year.
Mark Glover: As the numbers show this was another solid quarter for the company pre tax income was just over $76 million and diluted earnings per share were $4 and 24 set. These continued outstanding results are being driven by premium growth higher investment income a lower loss ratio and lower loss expense.
Speaker Change: Sorry, lower expense ratios.
Speaker Change: Gross premiums earned of $264 million were 45% higher than the same quarter a year ago.
Mark Glover: The growth is being driven primarily by Florida, where the number of policies in force is up 40% from the same quarter last year.
Mark: Investment income of over $16 million is almost double what it was in the second quarter last year, driven by higher rates but also by a higher invested balance. Consolidated Cash and Investments at the end of the quarter were up 45% higher than a year ago, driving investment income higher. The consolidated gross loss ratio was 29.7% this quarter, down from 34% in the same quarter last year. We said some time ago that the loss ratio would come down to 30%, and we are there.
Mark Glover: Investment income of over $16 million is almost double what it was in the second quarter last year, driven by higher rates, but also by higher invested balances.
Mark Glover: <unk> cash and investments at the end of the quarter up 45% higher than a year ago driving investment income higher.
Mark Glover: The consolidated gross loss ratio was 29, 7% this quarter down from 34% in the same quarter last year.
Mark Glover: We said some time ago that the loss ratio would come down to 30% and we are there.
Mark: For the first six months of this year, the consolidated loss ratio was 30.4%. While we had a little less weather than expected during the first half of the year, the lower loss ratio was driven by improvements in the frequency of all types of claims, as well as much lower litigation expenses.
Mark Glover: For the first six months of this year the consolidated loss ratio was 34%.
Mark Glover: While we had a little less weather than expected during the first half of the year. The lower loss ratio was driven by improvements in the frequency of all types of claims as well as much lower litigation propensity.
Mark: The combined ratio of this quarter was just under 68%. This is a little lower because of the citizens' assumptions under which we had limited reinsurance and policy acquisition expenses for part of the quarter. If we normalized the numbers for that, the combined ratio this quarter would have been closer to 80%. This is a considerable decrease from our 90% combined ratio in the second quarter last year. The reduction in the combined ratio is being driven by improving loss trends, rate actions taken last year, as well as operational leverage. As an indication of that leverage, labor and operating expenses as a percentage of gross premiums earned in the first six months of this year are 9.5%, down from 11% during the same period last year.
Mark Glover: The combined ratio the combined ratio this quarter was just under 68%.
Mark Glover: This is a little lower because of the citizens assumptions for which we had limited reinsurance and policy acquisition expenses for part of the quarter. If we normalize the numbers for that the combined ratio this quarter would have been closer to 80%.
Mark Glover: This is a considerable decrease from our 90% combined ratio in the second quarter last year.
Mark Glover: The reduction in the combined ratio was being driven by improving loss trends rate actions taken last year as well as operational leverage as an indication of that leverage labor and operating expenses as a percentage of gross premiums earned in the first six months of this year, our nine 5% down from 11%.
Mark Glover: During the same period last year.
Mark: Our technology is allowing us to grow without adding a lot of additional costs, and this is helping to drive profitability. Now a few comments on the balance sheet, which continues to improve. Over the last 12 months, consolidated cash and investments have increased by 309 million dollars. That has dropped by $70 million. Cheryl Der Equity has increased by $259 million.
Speaker Change: Our technology is allowing us to grow without adding a lot of additional costs and this is helping to drive profitability.
Mark Glover: Now a few comments on the balance sheet, which continues to improve.
Mark Glover: Over the last 12 months consolidated cash and investments have increased by $390 million.
Mark Glover: <unk> has dropped by $70 million shareholder equity has increased by $259 million.
Mark: The debt-to-cap ratio has dropped from 62% to 34%, and book value per share has grown from $22 to $43. These improvements in the balance sheet resulted from careful debt management, capital management, operational efficiency, profitability, and growing cash flow. As you also quickly talk about capital, we've been able to maintain holding company liquidity at well over $200 million, despite the significant debt reduction. In addition, the surplus at the underwriter level continues to increase.
Mark Glover: The debt to cap ratio has dropped from 62% to 34% and book value per share has grown from $22 to $43.
Mark Glover: These improvements in the balance sheet. It resulted from careful debt management capital management operational efficiency profitability and growing cash flow.
Mark Glover: I should also quickly talk about capital, we've been able to maintain holding company liquidity at well over $200 million. Despite the significant debt reduction. In addition surplus at the underwriter level continues to increase.
Mark: In summary, we're in a solid financial position, and it continues to improve. The combined ratio is down, debt is down, premium revenue is up, investment income is up, cash and investments are up, and capital continues to grow. And with that, I'll hand it over to Paresh.
Paresh Patel: In summary, we're in a solid financial position and it continues to improve the combined ratio was down debt is down premium revenue was up investment income is up cash and investments are up and capital continues to grow and with that I'll hand, it over to Paresh.
Paresh Patel: Thank you Mark.
Paresh Patel: Before going into my comments, I also want to offer my sympathies to those impacted by Hurricane Debbie, and I wish everyone a speedy recovery. Now, moving my thoughts back to HCI. The insurance industry has a universal measure of success, the combined ratio. And across the broader industry, we see that even incremental improvement in the combined ratio requires a lot of effort. And if you want to move the combined ratio down in a material way, it is very, very difficult, but, as was highlighted in most comments, in a few quarters, we've been able to show a huge improvement in underwriting results. Why?
Paresh Patel: Before going into my comments I also wanted to offer my sympathies to those impacted by Hurricane Debbie and I wish everyone a speedy recovery.
Paresh Patel: Now moving my thoughts back on HCI.
Paresh Patel: The insurance industry has a universal measure of success the combined ratio.
Paresh Patel: And across the broader industry, we see that even incremental improvement in the combined ratio requires a lot of effort.
Paresh Patel: And if you want to move the combined ratio down in a material way it is very very difficult.
Mark Glover: But as it was highlighted in marks comments in.
Mark Glover: In a few quarters, we've been able to show a huge improvement in underwriting results.
Speaker Change: Why is that it's because of our technology.
Paresh Patel: It's because of our technology. Art Technology has not only led to better than average combined ratios in tough times, but it has shown that it can significantly improve combined ratios in good times. We know we have the technology that works and that it can drive a better combined ratio. This is a huge accomplishment, given our history. We ask ourselves, what else can we accomplish? With that, I will turn over the questions; I'll pray that you please provide instructions.
Mark Glover: Our technology has not only led to a better than average combined ratios in the tough times, but it has shown that it can significantly improve the combined ratios in good times.
Mark Glover: We know we have a technology that works and that it can drive a better combined ratio.
Mark Glover: This is a huge accomplishment.
Mark Glover: And given our history.
Mark Glover: We ask ourselves what else can we accomplish.
Speaker Change: With that I'll turn it over turn it over for questions. Operator, please provide the instructions.
Operator: Thank you. At this time, we'll be conducting our 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 busy. You may press star 2 if you would like to remove your question from the key, and for participants using speaker equipment, it may be necessary to pick up your handset before pressing start. One moment, please, while we poll for questions. Thank you. Our first question is coming from Michael Phillips with Oppenheimer. Your line is live.
Speaker Change: Thank you at this time, we will be conducting a question and answer session.
Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Thank you.
Speaker Change: Our first question is coming from Michael Phillips with Oppenheimer. Your line is life.
Michael Phillips: Thanks. Good afternoon, everybody.
Michael Phillips: Thanks, Good afternoon everybody.
Michael Phillips: I guess first question would be around kind of cat loss potential.
Speaker Change: There's been a lot of a lot of concerns.
Michael Phillips: I guess the first question would be around kind of cat loss potential, you know, there's been a lot of concern. I guess that we've been fielding in the past couple of weeks and showing that maybe in past Montos, you know, gee, what have given all the growth these guys have had so much for the citizens, what if something big comes through? What would that look like? And I don't know if there's a way to quantify that at all, maybe if you could, I don't know what to do about this, but you know, what if another Ian came through again? What would that look like in today's book?
Speaker Change: So we're fielding the past couple of couple of weeks and joint that maybe and Petsmart folks G would've given all the growth. These guys have had some really from citizens what if something big comes through what would that look like and if there's a way to quantify that at all.
Speaker Change: Maybe if you could I don't if you can do this is you know what if another Ian came through again, what would that look like in todays book.
Speaker Change: Thank you had just under 1 billion gross and maybe 70 or 65 million net.
Speaker Change: So maybe is there a way to talk about that as kind of a similar path of what do you know what look like today.
Speaker Change: Yeah, Michael it's Marc so.
Mark: Yeah, Michael, it's Mark, so, Uh, first thing, if a storm like Ian comes through, there would obviously be a significant loss. We have the way to think about it is, is there's the statutory retention of... of Homeowner's Choice and TipTap. Homeowner's Choice is about $14 million, and TipTap's about $9.
Speaker Change: Our.
Michael Phillips: First thing if if if a storm like income through you know there would be there obviously there would be a significant loss. We've got the way to think about it is is there is the statutory retentions.
Speaker Change:
Speaker Change: Of homeowners choice in tip top homeowners choices about $14 million to tops about nine.
Mark: And then after that, it kind of depends a little bit on, you know, where the storm is and in which underwriter the insurance or the loss is in, because, as you know, we've utilized CLATA in this year's reinsurance program. So, you know, depending on the size, depending on which underwriters impact it because Cloud is involved in the tip top program. You can have a loss of, you know, 40, 40, 45 million in tip tap if that layer was fully utilized, and if that, if that was a tip-top block.
Speaker Change: And then after that it kind of depends a little bit.
Speaker Change: On where the storm is and which underwriter the insureds are the losses in <unk>.
Speaker Change: Because as you know.
Speaker Change: We've used utilized clatter in this year's reinsurance program.
Speaker Change: So depending on the size, depending on which underwriters impacted because cloud is involved in the chip type program.
Speaker Change: You get out of a loss of <unk>.
Speaker Change: 40, $40 million to $45 million in Tiptop, if that layer was fully utilized.
Speaker Change: And if that if that was was it tip top line.
Mark: And then beyond that, as you know, anything beyond that gets a little bit complicated. But, you know, we do have some, based on multi-year reinsurance benefits, there is the potential for some unwinding of those reinsurance benefits. But, again, that sort of depends on, you know, size and which underwriter is affected. But that should sort of give you an idea.
Speaker Change: And then beyond that as as as you know.
Speaker Change: Anything beyond that gets a little bit complicated, but we do have some.
Speaker Change: Based on on.
Speaker Change: The multi year reinsurance.
Speaker Change: Benefits there there is the potential for some unwinding of those reinsurance benefits, but again that sort of depends on.
Speaker Change: Size in and in which underwriters affected but that that's just sort of give you an idea.
Michael Phillips: Michael. And I guess, yeah, sure. I'm sorry. Go ahead, Paresh. Sorry. Answering that in a...
Speaker Change: And I guess, yes, sure I'm sorry Goodbye.
Paresh Patel: Answering that in a... from a different perspective because we understand given forecasts everybody is concerned. What do we just look at?
Speaker Change: Turning that into a <unk>.
Speaker Change: From a different perspective, because we understand given forecasts everybody is concerned.
Speaker Change: Why do we just look at in.
Paresh Patel: A.N. was what it was.
Ian: And what's what Ian was.
Paresh Patel: We had a net loss, right? It's all there. It is, and it is painful, no question.
Speaker Change: We had a net loss.
Speaker Change: It's all there.
Speaker Change: It is it is painful no question, but in terms of.
Paresh Patel: But in terms of Ian's estimates of where we are at this point. Both insurers went through about 40% of their tower in EIN, which was a Cat5, right? So should there be a weather event, we will have a certain amount of net retained losses. But after that... It is going to be covered by our insurance towers, and the key item I think that we sort of feel comfortable about is that we have brought in more than adequate reinsurance to... You know, to pay the claims, and that's the whole purpose of it. And, based on historical numbers, etc. That's what gives us comfort, yeah?
Speaker Change: Where your estimates of where we sit at this point.
Speaker Change: Right.
Speaker Change: Both insurers went through about 40% of the tower in <unk>, which was a cat five right. So should there be a weather event, we will have in a certain amount of net retained losses.
Speaker Change: But after that.
Speaker Change: It is going to be covered by our reinsurance towers.
Speaker Change: And the key item, let's say that we sort of feel comfortable about with is that we have bought more than adequate reinsurance too.
Speaker Change: To pay the claims and that's the whole purpose of it and.
Speaker Change: They are based on historical numbers et cetera.
Speaker Change: Thats what gives us comfort yeah.
Speaker Change: Yeah. Okay sure. Thank you that's helpful. I guess you know it was going to say one of the big differences between now and then is pricing is up quite a bit since 2022. So that's that's good news as well.
Michael Phillips: Yeah, okay, sure. Thank you. That's helpful. I guess, you know, I was going to say one of the big differences between now and then is that pricing has gone up quite a bit since 2022. So that's good news as well.
Speaker Change: Yes.
Michael Phillips: I guess the next question would be on the numbers Karin gave in October, what you're assuming and applying for $25,000, $25,000. Do you think the, I guess the acceptance rate for this time around, is there any reason to think it might be different than what it was last year? I think you were just under 60%. Should that be higher this year, or any thoughts there?
Speaker Change: Yeah.
Speaker Change: I guess.
Speaker Change: Next question would be on your the numbers Karen gave on the October about what you're assuming in that may have a climb towards 25025 do you think the I guess the acceptance rates for this time around is there any reason to think it might be different than what it was last year. I think you were just under 60%.
Speaker Change: Should that be.
Speaker Change: Higher this year or any thoughts there.
Speaker Change: Hum.
Speaker Change: Just generic comments is I think the October takeout there are.
Paresh Patel: Just generic comments: I think the October takeout, there are 9, 10, 12 carriers, something like that, and over 400,000 policies that have been at least requested by these carriers who have been approved, us being two of them, obviously. This is on the parcel line side. On the commercial side, it's slightly different. So, you know, to put this in perspective when the homeowner's choice to the November take-out last year, there was the oil I had approved just over 200,000. This one is over twice that size.
Speaker Change: 910, 12 carrier or something like that and over 400000 policies that have been at least request by these carriers, who have been approved I'll speak to them obviously.
Speaker Change: So the parcel lifestyle on the commercial side is slightly different.
Speaker Change: The.
Speaker Change: So.
Speaker Change: Put this in perspective in homeowners choice at the November takeout last year. There were no oil had approved just over 200000 policies take out. This one is over twice that size. So I think it's going to be a lot more competitive, but we anticipated that.
Paresh Patel: So I think it's going to be a lot more competitive. But we anticipated that. The other side of that is that we like our opportunities and take-up rates, et cetera. So the other side, the other caveat that everybody's also aware of is that all of this also depends on your first question as to what happens over the summer in terms of weather events. So, it's a lot of, you know, unforeseen numbers of the moment. We'll know in two to three months, yeah?
Speaker Change: [noise] side of that is we like our our opportunities and take up rates et cetera. So.
Speaker Change: The other caveat that everybody is also aware of is all of this also depends on your first question as to what happens over the summer in terms of weather events, yes.
Speaker Change: So.
Speaker Change: It's a lot of.
Speaker Change: <unk> and <unk>.
Speaker Change: Fuzzy numbers at the moment well know in two to three months here.
Michael Phillips: Okay, yeah, thank you. And then lots of questions for now, I guess. Your degree of ulceration with 30%, you mentioned some of the lower litigation in Florida again. And I think in the past you've talked about maybe kind of a realm number; it was down in the last quarter to the quarter before you set around down about 35 or so percent. Is that still about the rate? Or has it gotten even better than that from what you said last?
Speaker Change: Okay. Thank you.
Speaker Change: And then last question for now I guess is.
Speaker Change: Your degree of loss ratio of 30%.
Speaker Change: You mentioned some of the lower litigation in Florida, again, and I think in the past you've talked about.
Speaker Change: Maybe kind of a round number it's down in the last quarter the quarter before you set around down about 35, or so percent is that still about the right or has it gotten even better than that from what you said last time.
Mark: Yeah, it has, you know, claims. I think I talked about this before, but claims frequencies are down like 25-30%. And litigation frequency, so litigation based on any number of claims, is 35 to 40 percent now. So it's, yeah, it's actually getting a little bit better.
Speaker Change: Yeah. It has.
Speaker Change: Claims.
Speaker Change: I think I've talked about this before but claims frequency is down like 25, 30% and and litigation frequency. So litigation based on any number of of claims is 35% to 40% now.
Speaker Change: So it's yeah, it's actually getting a little bit better.
Speaker Change: Okay. Good.
Michael Phillips: Okay, good. All right, congratulations on the quarter, and that's it for me for now. Thank you.
Speaker Change: Congrats on the quarter and that's it for me for now thank you.
Speaker Change: Thank you.
Matthew Carletti: Thank you. Our next question is coming from Moscow, Carletti with Citizen's JMP, your line.
Speaker Change: Thank you. Our next question is coming from Moscow or lessee with citizens JMP. Your line is nice.
Matthew Carletti: Thanks. Good afternoon, everybody. Karin, in your opening comments you made some, you referenced how a lot of the takeouts are retaining better when they come up for renewal and I was hoping you could maybe expand on that a little bit and help us with maybe as we think about kind of the takeouts that were done in the fall and kind of the the waiting of how much of that might have been concentrated with Q2 renewal dates, how much of that as we look forward might be Q3 or Q4 renewal dates, just to help us understand kind of the kind of the population of policies coming up for renewal as we think about them, you know, retaining a little better.
Speaker Change: Yeah. Thanks, good afternoon everybody.
Moshe Orenbuch: Karen in your opening comments you you've made some you referenced how a lot of the takeouts are retaining better when they come up for renewal.
Speaker Change: Hoping you can maybe expand on that a little bit and help us with maybe as we think about kind of the takeouts that were done in the fall and kind of the the waiting of how much of that might have been concentrated with Q2 renewal dates how much of that as we look forward. It might be Q3 or Q4 renewal date, just to help us understand kind of the kind of the population.
Speaker Change: Policies coming up for renewal as we think about them retaining a little better.
Matthew Carletti: Sure, well, I can tell you that when we were doing the forecasting, we were expecting about a 65% retention rate for the first year of the policies coming over, and it's holding closer to 85%, and then as we think about Q2, 3Q, is there much difference in the kind of waiting for those renewal dates between the quarters, or is it pretty similar?
Speaker Change: Sure well I can tell you that you know when we were doing the forecasting we were expecting about 65% retention rate the first year of the.
Speaker Change: Policies coming over and it's holding closer to 85%.
Moshe Orenbuch: Wow.
Speaker Change: Okay, Great and then as we think about Q2 three key was there much difference in kind of the the weighting of those renewal dates between the quarters or is it pretty similar.
Moshe Orenbuch: Yeah.
Matt: Hey, Matt I think.
Speaker Change: When I get into the technical Nitty gritty the policies, we took over from citizens last November right.
Speaker Change: Will all roll onto our paper in a timeframe from let's say February 22nd two November 21st 2024, that's roughly the timeframe minutes uneven spread.
Speaker Change: Whatever the rollover is I think what Karen was talking about the 85% instead of the 65% so but until they are all over that tended to be on a paper, 90% of the time, thus far on that.
Speaker Change: Just how that works, but did you assume the policy. So you got the economics, it's the big step is what happens when you offer a renewal yes.
Speaker Change: Oh the <unk>.
Speaker Change: We are doing.
Speaker Change: 85 versus <unk> 65, which also tells US that there is going to be much of a nutrition.
Speaker Change: Currently policies renew next week or 200 room your next week.
Matthew Carletti: Right, right. That's a great outcome.
Speaker Change: Right right no that's a great outcome.
Speaker Change: Mhm in Paris for my next question for you is.
Speaker Change: My understanding is citizens is.
Speaker Change: Pushes of rate increases, maybe a little bigger than.
Speaker Change: They have in the past.
Paresh Patel: I mean, Paresh, my next question for you is, you know, my understanding is Citizens is pushing some rate increases, maybe a little bigger than they have in the past. And how does that kind of fit into how you look at takeouts, you know, the potential for success in takeouts? Does it change at all the kind of the policies you referenced, I think, about 400,000 kind of green light policies in the past as you kind of viewed Citizens?
Speaker Change: And what does that how does that kind of fit into how you look at kind of take out.
Speaker Change: Potential for success and Takeouts does it change at all kind of the you referenced I think about 400000 kind of green light policies in the past as you kind of viewed citizens does it kind of changed that population at all or does it just does it make you think that you'll have a higher or maybe attachment rate as you.
Paresh Patel: Does it kind of change that population at all, or does it just – you know, does it make you think that you'll have a higher maybe attachment rate as you try for those takeouts because they're going to be getting – you know, their Citizens price is going to be going up over time a little faster?
Speaker Change: Try for those takeouts, because theyre going to be getting their citizens prices would be going up over time, we will faster.
Speaker Change: Yeah.
Speaker Change: Yeah, Oh man I would tell you that I think given our.
Matthew Carletti: Yeah, Matt, I would tell you that given our... effectiveness in last year's takeout, I think this year's number would be very similar, that is, if on a level like for like basis, especially at the right increase and, against that, to the earlier questions and comments. 400,000 policies being tagged for October.
Speaker Change: Effectiveness and last year's takeout I think this year the number would be very similar that's the all on a level like for like basis, especially at the rate increase that set against that.
Speaker Change: To the earlier questions and comments.
Speaker Change: 400000 policies being tagged for October.
Paresh Patel: That in and of itself should tell you that things are getting more competitive. Yeah. And so. You have those offsetting numbers, and reality will be what it will be. Yeah.
Speaker Change: I don't know itself should tell you that things are getting more competitive yes.
Speaker Change: And so yeah.
Speaker Change: Yeah.
Speaker Change: I'll have that offsetting numbers in reality will be what it will be here.
Speaker Change: Okay Perfect and then my last one just marked by my quarterly numbers question.
Matthew Carletti: Okay, perfect. And then my last one, just Mark, my quarterly numbers question, if you have net premiums written handy. Yeah, it's $230 million.
Andy: Net premiums written Andy.
Andy: Yes, it's $230 million.
Speaker Change: Alright, great. Thanks, so much congrats on the quarter.
Mark: Great. Thanks so much. Congratulations on the quarter.
Matthew Carletti: Thank you. Once again, ladies and gentlemen, if you have any questions or comments, please press star 1 on your telephone keypad. Our next question is coming from Mark Hughes with Truist. Your line is live.
Speaker Change: Thank you once again, ladies and gentlemen, if you have any questions or comments. Please press star one on your telephone keypad.
Speaker Change: Our next question is coming from Mark Hughes with Truest. Your line is live.
Mark Hughes: Yeah, thank you. Good afternoon. Good afternoon.
Mark Hughes: Yes, Thank you and good afternoon.
Mark Hughes: In thinking about the impact of DEBI, I think you described it as being within retention, so something less than 14 for HCI and 9 for TIPTAP. Is that the right way to think about it? That's the retention rate.
Mark Hughes: Good American and.
Speaker Change: And thinking about the impact of Debbie I think.
Speaker Change: Describe that as being within the retention so something less than 14 for HCI nine for tip tap is that the right way to think about.
Mark: That's the retention rate. I can tell you that the claim volume coming in as of late today is relatively low between the two carriers. We have less than 245 claims reported.
Speaker Change: That is our retention rate I can tell you that the claim volume coming in as of late today is relatively low between the two carriers, we have less than 245 claims reported.
Speaker Change: And.
Mark: Is that to say, quarter to zero, then to the retention, numbers of that. One way to think about it. Well, yes, it is.
Speaker Change: Is that to say.
Speaker Change: Closer to zero than to the retention numbers is up.
Speaker Change: One way to think about that.
Mark: Well, it is still an ongoing event, so I think we have to consider that as well.
Speaker Change: While it is still an ongoing event.
Speaker Change: I think we have to consider that as well.
Speaker Change: Yeah Yeah.
Mark: But I mean, 250 claims is not a lot of claims. You've got to get to a lot more than 250 claims to get to, you know, 14 plus 9, 23 million dollars. So, you know, when we say, within that story retention, the storm is still ongoing, we have to be a little bit careful about what we say, but, you know, 250 claims is not a lot of claims.
Speaker Change: But I mean 250 claims.
Speaker Change: It is not a lot of claims you you've got to get to a lot more than 250 claims to get to.
Speaker Change: 14, plus $923 million so.
Speaker Change: When we when we say within statutory retention the storms still ongoing we have to be a little bit careful about what we say but.
Speaker Change: 250 claims is not a lot of claims.
Mark Hughes: Yeah, yeah, okay, and then anyway, to quantify how much benefit you got from more favorable weather this quarter, I think you said a little less than usual and maybe last year, but how much of a help was that?
Speaker Change: Yeah, Yeah, okay.
Speaker Change: And then any way to quantify how much of.
Speaker Change: Benefit you got from more favorable weather this quarter I think you said, a little less than usual and maybe last year, but.
Speaker Change: How much of a help was that.
Mark: It's not really that much, Mark. I mean, our expectation of Q2 was maybe a point or two higher. That's it.
Speaker Change: It's not it's not really that much mark I mean, our our expectation of Q2 was maybe maybe a point or two higher.
Speaker Change: That's it I mean, it it's not really a weather story. If you look at I think I said earlier, if you go back to the second quarter of 'twenty. Two claims frequency is down 30%. If you divide that between weather and non weather and this wont be a perfect analogy, but weather is down 32 in non weather was down 28 or something like that.
Speaker Change: So the improvement in the loss ratio the improvement in frequency. It is not a weather story. It's all claims are down.
Speaker Change: You know when I said it down a little it was a little lower than than than we expected. It to be it was it was a very slight difference. So I mean, I think we had said when we originally talked about 30% loss ratio could be a little bit higher than that in a heavy weather quarter, a little bit lower than that in a a light weather quarter, but.
Speaker Change: $29 seven was was.
Speaker Change: But it was it is what it is yes, and yes, whether it's whether or not weather is not really the story, where there is not what's driving it down there.
Mark Hughes: Yeah, thanks for that clarification. How about your posture around voluntary policy growth? Um... I don't think you do much in the storm season, but when we get into the fourth quarter, perhaps, you know, how much appetite will you have? I guess, tip to appetite would be, more to the point, but, You know, she includes the other thoughts if you want to core or up, homeowners choice. But just how much voluntary growth are you interested in at this point?
Speaker Change: Yeah. Thanks for the.
Speaker Change: Clarification.
Speaker Change: Hum.
Speaker Change: Your posture around voluntary policy growth.
Speaker Change:
Speaker Change: I don't think you do much in the storm season, but when.
Speaker Change: When we get into the fourth quarter, perhaps the.
Speaker Change: How much appetite, we have kicked up a bit.
Speaker Change: More than a point, but.
Speaker Change: But.
Speaker Change: If you include the other so did you want core or a homeowner.
Speaker Change: Homeowners choice, but.
Speaker Change: Much voluntary growth do you are you interested in at this point.
Speaker Change:
Speaker Change: Mark is Parrish, we were interested in growth and everything else, but you go to also keep in mind too mitigating factors. One is given the size of the scale that most of our carriers now operate at.
Paresh Patel: Marcus, Paresh, we are interested in growth and everything else, but you got to also keep in mind two mitigating factors. One is, given the size and scale that both of our carriers now operate at, incremental growth from voluntary writing is almost..., you know, is there, but it sort of gets dwarfed by all the other things we're doing, right? If you, if you did get the 25,000 policies, think of how much the premium that is compared to writing 25,000 policies voluntarily one at a time, yeah?
Joe: Joe increment incremental growth from.
Speaker Change: For voluntary writing.
Speaker Change: Is almost.
Speaker Change: Is there, but it sort of gets dwarfed by all the other things we're doing right.
Speaker Change: If you did get the 25000 policies I think of how much premium that is compared to writing 25000 policies voluntarily one at a time yet.
Speaker Change: Yeah, Yeah yeah.
Paresh Patel: Yes, that's why it becomes a thing that it's not the thing to focus on as such, yeah. It doesn't mean it isn't going on at the same time, but it's not going to be the material I focus on.
Speaker Change: Yes.
Speaker Change: Why it becomes a saying that.
Jeff: It's not the thing to focus on is <unk> Jeff.
Speaker Change: Doesn't mean, it isn't going on at the same time, but it's not going to be the the material item.
Paresh Patel: And Paresh, you ended your commentary, I think, suggesting that there was more to be done. Pareshbhai, and I'm sort of curious if there's anything that you would care to share in terms of... what you can do with the technology and capital that you can discuss now.
Speaker Change: And our parents you ended your commentary I think suggesting that there was more to be done.
Speaker Change: Uh huh.
Speaker Change: And I'm sort of curious if there's anything that you would care.
Speaker Change: Care to share in terms of.
Speaker Change: What you can do with the technology and capital.
Paresh Patel:
Paresh Patel: You can discuss now.
Speaker Change: Yeah look.
Paresh Patel: He is.
Speaker Change: What I'm trying to articulate trade.
Speaker Change: Yeah.
Paresh Patel: We are all part of the insurance industry.
Paresh Patel: We are all part of the insurance industry, and Mr. Hughes's combined ratio as a benchmark, and listening to the efforts of every management team and everything else; everybody's trying to improve their combined ratios, and if we can improve it by a couple of points, it's great.
Speaker Change: Administrative users combined ratio as a benchmark.
Speaker Change: And listening to.
Speaker Change: The efforts of every management team and everything else everybody is trying to improve their combined ratios and if it could improve by a couple of points.
Speaker Change: It's a great.
Paresh Patel: It's a lot of effort and, you know, it requires... Yeah, it generates a sense of achievement. And that's one point. The other point that's also there is everybody always selling every insurance management team the benefits of technology and if you have this technology and that technology and this and that, it will improve your results, right, that you grow faster and or improve your, more importantly, your combined ratio. So, technology has long been touted.
Speaker Change: There's a lot of effort and.
Paresh Patel: It requires it.
Speaker Change: Yeah generate a sense of achievement.
Paresh Patel: And.
Paresh Patel: That's one point the other point. That's also there is everybody always is.
Paresh Patel: As always selling every insurance management team.
Paresh Patel: The benefits of technology, and if you have this technology and that technology and this and that it will improve your results right. Let you grow faster <unk> improved more importantly, improve your combined ratio so.
Paresh Patel: Technology has long been touted insurance company's long want this thing right.
Paresh Patel: Insurance companies long want this thing, right? And, We see all of that, we get the body with the same stuff. The interesting thing our technology has done is... Look at how much that combined ratio will move in the space of a year. And this isn't because there was a hurricane last year and there was a hurricane this year. These are actual numbers.
Paresh Patel: And.
Paresh Patel: We see all of that we get bombarded with the same stuff. The interesting thing about our technology has done is looked at how much we've moved our combined ratio.
Paresh Patel: In the space of a year and this isn't because there was a hurricane last year and there wasn't a hurricane. This year. This is actual numbers and some of these things and the growth in selecting risks from citizens and doing it efficiently and all that.
Paresh Patel: And some of these things and the growth and selecting risks from citizens and doing it efficiently and all that, you know, it's the difference between technology that promises to improve your combined ratio versus technology that has been proven to improve your combined ratio. That's the sudden thing we find ourselves in, that we actually have technology that seems to work in the field. And if it does that, in this tough line of business that is..., homeowner's insurance, especially in..., Florida and in a climate change environment,
Paresh Patel: So it's the difference between technology that promises to improve your combined ratio versus technology that.
Paresh Patel: Has been proven to improve your combined ratio.
Paresh Patel: That's the southern thing, we find ourselves in that we actually a technology that seems to.
Paresh Patel: Work in the field.
Paresh Patel: And if it does that in this tough line of business that is homeowners.
Paresh Patel: Homeowners insurance, especially in.
Paresh Patel: In Florida in a climate change environment.
Paresh Patel: What happens if you apply this in a more benign line of business? What difference could we make there? That's, I'm just asking the question, you know, but it's worth exploring, and that's where the aspirations come to, yeah?
Speaker Change: What happens if you apply this in a.
Speaker Change: More benign line of business somewhere.
Paresh Patel: What difference could you make there.
Paresh Patel: I'm just asking the question.
Paresh Patel: But it's worth exploring and that's where the aspirations come through yet.
Paresh Patel: Yeah, yeah. Okay. Let's go one more time.
Speaker Change: Yeah, Okay. That's go one more.
Speaker Change: <unk> gross earned premium you've been about 250 million or last couple of quarters.
Mark Hughes: The gross earned premium. You've been about 250 million in the last couple of quarters, and you've got about a billion in policies in force. Is that... Is that a pretty good run rate at this juncture? You know, we'll get puts and takes, maybe some voluntary, more take-out, um.., that you've applied for later in the year, but is that a reasonable way to think about it, kind of the 250 million or so? Yeah, I mean...
Speaker Change: Have you thought about a billion and policies in force is that.
Mark Hughes: Okay.
Mark Hughes: Is that a pretty good run rate at this juncture you know well.
Mark Hughes: The puts and takes maybe some voluntary.
Mark Hughes: More.
Mark Hughes: Hum.
Mark Hughes: Did you have a quite for later in the year, but is that a reasonable way to think about it kind of a $250 million or so.
Mark Hughes: Yeah, I mean setting.
Mark: Setting aside any takeouts that we might or might not do, if you look at the business where it is now, 250 to 30, you know, pretty good run rate.
Speaker Change: Setting aside any take outs that we might or might not do if you look at the business where it is now.
Mark: $2 50 is a pretty good run rate.
Speaker Change: Yes, Okay alright.
Mark Hughes: All right. Thank you very much. Thank you.
Speaker Change: Alright, Thank you very much.
Speaker Change: Thank you.
Paresh Patel: Thank you. Once again, ladies and gentlemen, if you have any final questions or comments, please press star one on your telephone keypad at this time. Once again, that's star one on your telephone keypad if you have any further questions. Okay, as we have no further questions at this time, this concludes our question and answer session, and I would now like to turn the call back over to Paresh Patel, who has a few closing remarks.
Speaker Change: Thank you once again, ladies and gentlemen, if you have any final questions or comments. Please press star one on your telephone keypad at this time.
Paresh Patel: Yeah.
Paresh Patel: Once again Thats star one on your telephone keypad, if you have any further questions.
Paresh Patel: Okay as we have and therefore no further questions. At this time. This concludes our question and answer session and I would now like to turn the call back over to Paresh Patel, who has a few closing remarks.
Paresh Patel: Hum.
Paresh Patel: on behalf of the entire management team, I would like to thank our shareholders, employees, agents, and, most importantly, our policyholders for their continued support. And, as I said earlier in my comments, our thoughts and prayers are with those that are affected by Hurricane Debbie, and we stand ready to help in every way we can. Thank you, and I will talk to you next quarter.
Paresh Patel: On behalf of the entire management team.
Paresh Patel: I would like to thank our shareholders employees agents and most importantly, our policyholders for their continued support.
Paresh Patel: And as I had said earlier in my comments.
Paresh Patel: Thoughts and prayers are those set up with those that are affected by hurricane Debbie.
Paresh Patel: And we stand ready to help in every way we can thank.
Paresh Patel: Thank you and talk to you next quarter.
Paresh Patel: Yeah.
Paresh Patel: Yeah.
Operator: Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your lines at this time, and we thank you for your participation.
Speaker Change: Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your lines at this time and we thank you for your participation.
Karin Coleman: Hey, Matt, I think Ben. And again, to the technical nety grid, the policies we took over from citizens last November, right? We'll all roll onto our paper in a time frame from, let's say, February 22nd to November 21st, 2024. That's roughly the time frame, and it's an even spread. Whenever they roll over, I think of what Karin's talking about, the 85% instead of the 65%.
Paresh Patel: Yeah, um, look. Good, here's... What I'm kind to articulate, right?
Karin Coleman: Additionally, who has been approved to assume policies from citizens in October. We will update everyone on our plans closer to the assumption date. Overall, we have had another quarter of solid profitability, and we continue to make solid progress on our top line and bottom line. Now I'll turn it over to Mark to provide more details on our financial results. Thanks, Karin.
Karin Coleman: The last ratio on policies we assume from citizens is continuing to be better than expected. Given the proven success of our technology to select the right track of policies from citizens, we have applied to assume additional policies from citizens. Homeowner's Choice has been approved to assume up to 25,000 policies in October. TIPTAP has also been approved to assume 25,000 policies in October, and both companies have applied to participate in an November assumption as well.
Ben: So, but until they're all over, they tend to be on our paper 90% of the time. That's not a problem, that's just how that works because you're shooting the policy. So you've got the economics. The big step is what happens when you offer a renewal, yeah? The fact that we are doing 85 versus 65, which also tells us that there isn't going to be much of an attrition. 20 policies will renew next week, or 200 will renew next week. Yeah. Right.
Michael Phillips: I think you had just under a billion gross and maybe 70 or 65 million net. So, you know, is there a way to talk about that as kind of a similar path of what Ian will look like to that?
Mark: I mean, it's not really a weather story. If you look at, I think I said earlier, if you go back to the second quarter of 22, claims frequency is down 30%, if you divide that between weather and non-weather, and this won't be a perfect analysis, but you know, weather's down 32 and non-weather's down 28 or something like that. So the improvement in the last race or the improvement in frequency; it's not a weather story.
Mark: It's all claims are down. When I said it down, it was a little lower than we expected it to be, but it was a very slight difference. I think we had said when we originally talked about 30% that the last phase show could be a little bit higher than that in a heavy weather quarter, a little bit lower than that in a light weather quarter. But, you know, 29.7 was what it was. It is what it is. Yeah. And whether it's not really the story, whether it's not what's driving it down.