Q3 2024 HCI Group IncEarnings Call
Good afternoon, and welcome to HCI group's third quarter 2024 earnings call. My name is Paul and I will be your conference operator at this time, all participants will be in a listen only mode.
Operator: Good afternoon and welcome to HCI Group's third quarter 2024 earnings call.
Paul: My name is Paul and I will be your conference operator. At this time, all participants will be in a listen-only mode.
Paul: Before we begin today's call, I would like to recommend I would like to remind everyone that this conference call is being recorded and will be available for replay through December 7th, 2024, starting later.
Before we begin today's call I would like to recommend I would like to remind everyone that this conference call is being recorded and will be available for replay through December 7th 2024, starting later today.
The call is also being broadcast live via webcast and available via webcast replay until November 7th 2025 on the Investor information section of HCI group's website.
Paul: The call is also being broadcast live via webcast and available via webcast replay until November 7th, 2020. on the Investor Information section of HCI Group's website at www.hcigroup.com.
Www Dot HCI group dotcom.
Matt Glover: I would now like to turn our call over to Matt Glover, Gateway Investor Relations.
Now I'd like to turn the call over to Mike Glover.
Speaker Change: Wait Investor Relations Ma'am. Please proceed.
Matt Glover: Good morning, Paul, and good afternoon. HCI Group's 3rd Quarter 2024 Earnings Call.
Mike Glover: You Paul and good afternoon, welcome to HCI group's third quarter 2024 earnings call.
Karin Coleman: On today's call is Karin Coleman, HCI's Chief Operating Officer, Mark Harmsworth, HCI's Chief Financial Officer, and Pareshbhai Patel. Following Karin's operational update, Mark will review our financial performance for the third quarter of 2024, and then Paresh...
Mike Glover: On today's call are Kevin Coleman, Hei as Chief operating officer.
Mike Glover: Carbs with Hei Chief Financial Officer.
Mike Glover: Paresh Patel, Hei's, Chairman and Chief Executive Officer.
Speaker Change: Voluntary operation operational update Mark will review, our financial performance for the third quarter of 2024, and then Paresh will provide a strategic update.
Operator: To access today's webcast, please visit... of our corporate website at www.hci.gov.
Speaker Change: Today's webcast. Please visit the information section of corporate power of our corporate website at Www Dot HCI group Dot com.
Operator: Before we begin, I'd like to take the opportunity to remind such as anticipate, estimate, expect, intend, plan, and project, and other similar words and expressions are intended to signify forward-looking statements. All of these risks and uncertainties are identified in the company's filing. risks or uncertainties developed. and others.
Speaker Change: Before we begin I'd like to take the opportunity to remind listeners that todays presentation and responses to your questions may contain forward looking statements made pursuant to the private Securities Litigation Reform Act of 1995.
Speaker Change: Such as anticipate estimate expect intend plan and project and other similar words and expressions are intended to signify forward looking statements.
Speaker Change: Forward looking statements are not guarantees of future results.
Speaker Change: 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: 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.
Operator: Thank you.
Operator: HCI Group disclaims all the obligations to update any forward-looking statements.
Speaker Change: <unk> disclaims all the obligations to update any forward looking statements now with that I'd like to turn the call over to Kevin Coleman, Chief Operating Officer Gary.
Kevin Coleman: Thank you, Matt and welcome everyone. Since our last call we have been impacted by three Hurricanes Hurricanes, Debbie and Helene occurred in the third quarter and Milton made landfall early in the fourth quarter.
Karin Coleman: Thank you Matt, and welcome everyone. Since our last call, we have been impacted by three hurricanes. Hurricanes Debbie and Helene occurred in the third quarter, and Milton made landfall early in the fourth quarter. These storms have affected our customers, as well as our neighbors, employees, and families in Florida, Georgia, South Carolina, and North Carolina. Our hearts and prayers go out to everyone impacted. These three events have produced more than 10,000 claims, and we expect to pay hundreds of millions of dollars to help our policyholders rebuild their lives. Despite Category 1 and Category 4 hurricanes making landfall in the third quarter, HCI Group had positive earnings reporting pre-tax income of $14 million and diluted earnings per share of $0.52.
Kevin Coleman: These storms have affected our customers as well as our neighbors employees families and families in Florida, Georgia, South Carolina, and North Carolina, Our Hearts and prayers go out to everyone impacted.
Kevin Coleman: These three events have produced more than 10000 claims and we expect to pay hundreds of millions of dollars generally of our policyholders rebuild their lives.
Speaker Change: Despite category, one and category four hurricane making landfall in the third quarter HCI group had positive earnings reporting pre tax income of $14 million and diluted earnings per share at <unk> 52 said this is a tremendous result.
Karin Coleman: This is a tremendous result. HCI continued to deliver on its commitment to return value to shareholders by paying a dividend of $0.40 per share, our 56th consecutive quarterly dividend. Subsequent to the third quarter, we successfully added policies from citizens. Given the expectation for a competitive assumption process, our original plan was to add roughly 40,000 policies from citizens in the fourth quarter. We were pleased with the response from policyholders and were able to reach our target ahead of schedule. At the October assumption, approximately 42,000 policyholders chose to join HCI.
Speaker Change: ACI continues to deliver on its commitment to return value to shareholders by paying a dividend of <unk> 40 per share our 56th consecutive quarterly dividend.
Speaker Change: Subsequent to the third quarter, we successfully added policies from citizens.
Speaker Change: Given the expectation for a competitive assumption process. Our original plan was to add roughly 40000 policies from citizens in the fourth quarter.
Speaker Change: We were pleased with the response from policyholders and we're able to reach our target ahead of schedule at the October assumption approximately 42000 policyholders chose to join HCI.
Speaker Change: In closing I want to address the talk about the impact of this year's overly active hurricane season on future rates of our floor.
Karin Coleman: In closing, I want to address the talk about the impact of this year's overly active hurricane season on future rates for. We believe it is important to have stability for our policyholders, and therefore, we're not looking to increase rates in Florida at this time.
Speaker Change: We believe it is important to have stability for our policy holders and therefore, we're not looking to increase rates in Florida at this time.
Mark Harmsworth: Now I'll turn it over to Mark to provide more details on our financial resources. Thanks, Karin. As Karin mentioned, this has been a very active storm season. We issued a press release in October detailing the expected impact of Hurricanes Debbie and Helene in the third quarter, and the actual results are consistent with what we said in that release. Despite a net expense of $58 million from Hurricanes Debbie and Helene, pre-tax income in the third quarter was just over $14 million and diluted earnings per share were $0.52. The reason we made money in a quarter with those hurricane losses is due to the strength and profitability of the underlying business.
Speaker Change: Now I'll turn it over to Mark to provide more details on our financial results.
Mark: Thanks, Karen as Karen mentioned this has been a very active storm season, we issued a press release in October detailing the expected impact of Hurricanes, Debbie and Helene in the third quarter and the actual results are consistent with what we said in that release despite.
Mark: Despite a net expense of $58 million from Hurricanes, Debbie and Helene pretax income in the third quarter was just over $14 million and diluted earnings per share were <unk> 52 sets.
Mark: The reason, we made money in the quarter with those hurricane losses is due to the strength and profitability of the underlying business.
Mark Harmsworth: The underlying loss ratio this quarter was a little under 25 percent and maybe more importantly, the underlying combined ratio was 70 percent. With a low underlying combined ratio and a well-structured reinsurance program in place, the impact of a storm or two in a quarter can be more than offset, and the results of the third quarter clearly show that.
Mark: Underlying loss ratio this quarter was a little under 25% and maybe more importantly, the underlying combined ratio was 70%.
Mark: With a low underlying combined ratio in a well structured reinsurance program in place the impact of a storm or two in a quarter. It can be more than offset and the results of the third quarter clearly show that.
Mark Harmsworth: Now let's talk about Q4. In early October, Hurricane Milton made landfall in Florida as a Category 3 storm, and we expect the net expense for Milton to total $128 million, including the reversal of benefits under a multi-year reinsurance agreement. This loss is higher than the storm losses in the third quarter, but again, underlying profitability should mitigate a lot of that. That underlying profitability should be higher in the fourth quarter than the third quarter, partially as a result of the premium growth from the citizens assumption we announced recently. We expect total enforced premium from this assumption, which happened in late October, to be around $200 million, adding an additional $35 million to gross premiums earned in the fourth quarter.
Mark: Now, let's talk about Q4.
Mark: In early October Hurricane Milton made landfall in Florida as a category three storm and we expect the net expense for Milton to total $128 million, including the reversal of the benefits under our multi year reinsurance agreement.
Mark: This loss is higher than the storm losses in the third quarter, but again underlying profitability should mitigate a lot of that.
Mark: That underlying profitability should be higher in the fourth quarter, then a third in the third quarter, partially as a result of the premium growth from the citizens assumption, we announced recently.
Mark: We expect total enforced premium from this assumption, which happened in late October to be around $200 million, adding an additional $35 million to gross premiums earned in the fourth quarter.
Mark Harmsworth: There should be minimal added costs associated with this premium, other than, of course, the incremental loss expense.
Mark: There should be minimal added costs associated with this premium other than of course, the incremental loss expense.
Mark Harmsworth: Just a couple of things on the balance sheet, which continues to strengthen. During the 12 months ended September 30th, cash and investments are up $400 million. Shareholder equity has more than doubled. Book value per share has almost doubled. Debt to cap has been cut in half, and we've grown the company by almost 40%. Book value per share increased in the third quarter despite the two hurricanes. In Q4, we expect it to take a bit of a step back, but by the end of January or February, we expect book value per share to be back to where it was at the end of September.
Just a couple of things on the balance sheet, which continues to strengthen.
Mark: During the 12 months ended September 30th cash and investments are up 400.
Mark: $90 million shareholder equity has more than doubled at book value per share has almost doubled.
Mark: Debt to cap hasn't been cut in half and we've grown the company by almost 40% book.
Mark: Book value per share increased in the third quarter. Despite the two hurricanes in Q4, we expect it to take a bit of a step back but by the end of January or February we expect book value per share to be back to where it was at the end of September.
Speaker Change: What about holding company liquidity.
Mark Harmsworth: What about holding company liquidity? Total cash and financial investment at the holding company level grew during the third quarter and are well over $200 million.
Speaker Change: Total cash and financial investments at the holding company level grew during the third quarter and are well over $200 million and with that I'll hand, it over to Paresh.
Pareshbhai Patel: And with that, I'll hand it over to Paresh.
Pareshbhai Patel: Thank you, Mark. As indicated by Karin and Mark's comments, it has been a very interesting few months. At the start of every hurricane season, our preferred outcome is always the same. We hope for a very quiet year. But we also plan for the possibility. catastrophic events, like hurricanes, and we buy a conservative reinsurance program to cover such possibilities each year. This just happens to be one of those years when we will have recoveries under those reinsurance contracts.
Paresh Patel: Thank you Mark.
Paresh Patel: As indicated by carrier and Mark's comments.
Speaker Change: It has been a very interesting few months.
Speaker Change: And the start of every hurricane season.
Speaker Change: Our preferred outcome is always the same we hope for a very quiet here.
Speaker Change: But we also plan for the possibility.
Speaker Change: Yeah, that's perfect events like Hurricanes, and we buy a conservative reinsurance program.
Speaker Change: Such possibilities each year.
Speaker Change: This just happens to be one of those years, when we will have recoveries under those reinsurance contracts.
Pareshbhai Patel: But with all of that said, I want to step back and look at the bigger picture. Despite the three hurricanes making landfall in Florida, our balance sheet remains strong, and the underlying business is performing well. And as we look forward, I want to highlight several trends that we are unfolding, that we're seeing unfolding. We think Florida is an attractive homeowner's market and we are committed to operating in the state in the future.
Speaker Change: Well with all of that said I want to step back and look at the bigger picture.
Speaker Change: Despite the three hurricanes, making landfall in Florida, our balance sheet remains strong.
Speaker Change: And the underlying business is performing well.
Speaker Change: And as we look forward.
Speaker Change: I want to highlight several trends that we are unfolding that we're seeing unfolding.
Speaker Change: First.
Speaker Change: We think Florida is an attractive homeowners market and we are committed to operating in the state in the future.
Speaker Change: Second.
Pareshbhai Patel: Second, as Karin highlighted in her comments. Our customers have endured a lot over the past few months, and we have no plans to increase our policyholders' rates in Florida in the coming years. Building on that commitment, we have added another 42,000 policyholders who chose to move to HCI from Citizen. And we believe the best way to demonstrate our confidence is to grow the business, and which is exactly what we have done. And finally, we also think that this will be an opportunity to grow the business further in the future.
Speaker Change: As Karen highlighted in her comments.
Speaker Change: Our customers have endured a lot over the past few months and we have no plans to increase our policyholders rates in Florida in the coming.
Speaker Change: Building on that commitment we have added another 42000 policyholders, we chose to move to HCI from citizens.
Speaker Change: And we believe the best way.
Speaker Change: Demonstrate our confidence is to grow the business and which is exactly what we have done.
Speaker Change: And finally, we also saying this this will be an opportunity to it.
Speaker Change: So the business further in the future there.
Pareshbhai Patel: Therefore, we are currently working to start our fourth admitted carrier, Tero, which we plan to have fully operational by early 2025.
Speaker Change: Therefore, we are currently working to start our fourth admitted carrier Tyro, which we plan to have fully operational by early 2025.
Speaker Change: In summary.
Pareshbhai Patel: In summary We have withstood an active hurricane season, our business is healthy, we have no plans to increase rates in Florida at this time, and we've recently added 42,000 new customers and we are starting a new carrier that will be operational in a few months.
Speaker Change: We have withstood an active hurricane season.
Speaker Change: Business is healthy.
Speaker Change: No plans to increase rates in Florida at this time and we've added recently added 42000, new customers and we are starting a new carrier that operates within a few months.
Operator: With that, I'll turn it over for questions. Thank you. 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 would like to remove your question from the. 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.
Speaker Change: With that I'll turn it over for questions.
Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: 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, one moment, please while we.
Speaker Change: Poll for questions.
Speaker Change: And the first question today is coming from Matt Karaleti from citizen JMP Matthew.
Matthew Carletti: And the first question today is coming from Matt Carletti from Citizen JMP. Matt, your line is live. Thanks. Good morning or good afternoon. Paresh, I was hoping you might be able to offer some observations on Milton, just specifically how we should think about it. I mean, I think we always like to compare it to maybe prior storms, so I don't know if Ian's kind of the right comparison. But just with the claims you've seen coming in, maybe kind of the impact that the reforms have had, you know, how big of an event you feel it is for Florida, you're on the ground seeing it firsthand, whereas I think a lot of the others are kind of model estimates.
Speaker Change: Matt Your line is live.
Thanks, Good morning, or good afternoon.
Speaker Change:
Speaker Change: Paresh I was hoping you might be able to.
Speaker Change: Offer some observations on our Milton just specifically, how we should think about it I mean.
Speaker Change: I think we always like to compare it to maybe prior storms. So I don't know if <unk> kind of the right comparison, but just what the claims you've seen coming in maybe kind of the impact that the reforms have had you know how big of an event you feel it is for Florida, you're on the ground being it firsthand, whereas I think a lot of the others are kind of model estimates just any insight you have there would be helpful.
Matthew Carletti: Just any insights you have there would be helpful.
Pareshbhai Patel: A short thing, Matt. Couple of things, right? We we track how claims come in. and usually within about by this time we would have we would have received three weeks into the storm about two-thirds of the ultimate number of claims we're going to get right so using that as a benchmark we are seeing Milton come in at roughly between one-half to two-thirds the size of Ian yeah okay just just question a claim counselor and I want to cut out explained it further in the sense of this is actual claim counts, even though the business has grown considerably since Ian made landfall.
Speaker Change: Sure thing Matt.
Speaker Change: A couple of things right, we track how.
Speaker Change: Claims come in.
Speaker Change: And usually within a year by this time, we would have we would've received three weeks into the storm.
Speaker Change: About two thirds of adults are a number of claims you're going to get right.
Speaker Change: So using that as a benchmark we are seeing Milton come in.
Speaker Change: Roughly between.
Speaker Change: One half to two thirds the size of Ian Yes.
Speaker Change: Just a question. Please go and I wanted to kind of.
Speaker Change: Explain it further in the sense of.
Speaker Change: This is actual claim counts even though the.
Speaker Change: The business has grown considerably since Ian made landfall so even though we have a lot more policies. The actual claim counts we are seeing is much lower.
Pareshbhai Patel: So even though we have a lot more policies, the actual claim counts we're seeing is much lower. And that is occurring, I think, because Milton was no Ian, right?
Speaker Change: That is occurring I think because.
Speaker Change: Milton was no.
Matthew Carletti: Simple as that. Okay, great. That's good. That's very helpful.
Speaker Change: Simple as that right.
Speaker Change: Okay, Great that's very helpful.
Speaker Change: Hmm.
Speaker Change: Yeah.
Speaker Change: Matt.
Speaker Change: On the takeout.
Matthew Carletti: On the takeouts, you kind of hit your 40,000 or. Oh, I'm sorry, can you hear me okay? Yeah. Can you repeat the question, please? Yeah. Sure. Yeah. It's about the takeouts and just maybe what insights you might have on, you know, the conversion was very strong, even stronger than we saw last year, which was stronger than kind of historical. Just why you think that might be and just kind of some of the dynamics. Okay, so.
Speaker Change: Kind of hit your have you broken.
Speaker Change: Oh I'm, sorry can you hear me okay, yes.
Speaker Change: Can you repeat the question. Please yeah sure yes.
Speaker Change: It's about the Takeouts and just.
Speaker Change: Maybe what insights you might have on.
Speaker Change: The conversion was very strong even stronger than we saw last year, which was stronger than kind of historical.
Speaker Change: Just why do you think that might be in kind of some of the dynamics there.
Speaker Change: Okay. So.
Speaker Change: Just as background for everybody else listening in the call.
Pareshbhai Patel: just as background for everybody else listening on the call. The takeout for October was very heavily sought after by a number of carriers, and I think about 400,000 policies were approved to be depopulated in that month, right? And our two carriers participating in that takeout were amongst the lowest pick. So we kind of had expected that we might get a hit rate in the low 40s, right? So if every 10 policies we selected, we'd get four of them at best, right? That wasn't the whole idea. And because we wanted, as Karin mentioned, we want to get to 40,000 policies.
Speaker Change: The takeout for October was very heavily sought after by a number of carriers and I think.
Speaker Change: About 400000 policies were approved to be depopulated in that month.
Speaker Change: And we were we had two carriers participating that takeout.
Speaker Change: Or amongst the lowest pick so we kind of had expected that we might get a head grade and the low forties.
Speaker Change: So for every 10 policies, we selected would get forum at best right now with the whole idea and because we wanted to as Karen mentioned, we want to get to 40000 policies.
Pareshbhai Patel: we said less than. due in November as well because we might need multiple attempts to get to our requisite 40,000 policies. What happened in practice, though, is we had a very high take-up rate. And I think, you know, some of that is just because of Milton and things going on and other things I think is just. speaks to the the all of that coming together gives you that very high take-up rate. I think I've seen the numbers for the rest of the people in. Participants in October take, I think, collectively, it's sitting around 50 percent.
Speaker Change: We said less than.
Speaker Change: You in November as well, because we might need multiple attempts to get Oh.
Speaker Change: Requisite 40000 policies what happened in practice, though.
Speaker Change: We had a very high take up rate and I think.
Speaker Change: Some of that is just because of.
Speaker Change: Milton and things going on and all the things that I think is just speaks to the.
Speaker Change: The brand that H C. I, a homeowners choice it tipped up a buildup that people if they're doing anything would prefer those things so.
Speaker Change: And our technology, making sure that we only selected people who wanted to come with us.
Speaker Change: All of that coming together. It gives you that very high take up rate I think I've seen the numbers for the rest of the people in.
Speaker Change: All parties are in October takeout, I think collectively it's sitting at around 50%. So yes, we did much better but I think there's a lot of.
Pareshbhai Patel: So yes, we did much better, but I think there's a lot of factors that contribute to this. That's great. Great.
Speaker Change: Factors that contribute C L.
Speaker Change: That's great and sorry, one other thing just so that we have.
Mark Harmsworth: Sorry. Because we do it so well in October, we are not going to therefore then also participate in November because we've reached our capacity in one month, yeah?
Speaker Change: Because we did so well in October we are not going to therefore them also participated in November because we've reached our capacity.
Speaker Change: In one month yeah.
Mark Harmsworth: Mark, you mentioned the underlying loss ratio is around 25% in the quarter, which I believe is kind of the lowest number we've seen yet, so it keeps showing improvement.
Speaker Change: Understood that makes sense.
Speaker Change: And one last one if I could.
Speaker Change: Mark you mentioned the underlying loss ratio was up around 25% in the quarter, which I believe is kind of the lowest number we've seen yet.
Speaker Change: So it keeps showing improvement is there anything in that number that's onetime in nature or unique or as we as we look forward is that you did in your view a fairly sustainable.
Mark Harmsworth: Is there anything in that number that's one-time in nature or unique, or as we look forward, is that, in your view, a fairly sustainable kind of line in the sand? No, I mean, that's a pretty stable number. That number has been normalized. We booked a small credit to reduce the expense on prior periods. It wasn't a big number, but we've taken that out in looking at the 25. It would have been actually even less than that. So 25 is a good number. I think that that's a good number going forward.
Speaker Change: Kind of line in the sand.
Speaker Change: No I mean, that's it that's a pretty stable number that that number has been been normalized we we booked a small credit to.
Speaker Change: Reduce the expense on on prior periods as it wasn't a big number but we we've taken that out and looking at the 25, it would have been actually even less than that.
Speaker Change: So the 25 is a good number I think that that's a good number going forward.
Mark Harmsworth: In the fourth quarter, as you know, sometimes claims in a quarter where you've had a significant storm, sometimes the daily claims can be a little bit less. But I think 25 is a pretty good number for the next, you know, the next couple of quarters until we get into, you know, the weather in Q2 and Q3 of next year.
Speaker Change: In the fourth quarter as you know sometimes claims in a quarter, where you have had a significant storm sometimes the daily claims can be a little bit less.
Speaker Change: But I think 25 is a pretty good number for the next the next couple of quarters until we get into now the.
Speaker Change: The weather in Q2 in Q3 of next year.
Speaker Change: Great Alright, thank you very much for the answers I appreciate it.
Mark Harmsworth: Great. All right. Thank you very much for the answers. I appreciate it.
Speaker Change: Okay.
Speaker Change: Your next question is coming from Mark Hughes with Truest. Please pose your question your line is.
Mark Hughes: Your next question is coming from Mark Hughes with Truist. Please pose your question, your line. Yeah, thanks, good afternoon. Thank you. Thank you, Mark. Good afternoon, Paresh. Mark, I think you suggested the incremental 35 million in premium in the fourth quarter from the takeout. And we're working off of a base of what, 265, 266 in the third quarter. And then the $200 million, was that the kind of when you have it for a full quarter, it would be at $35, it would be more like $50? Yeah, that's a way to read it. Yeah. Yep. Yeah, it's a little bit prorated for Q3.
Speaker Change: Yes, thanks, good afternoon.
Speaker Change: Good afternoon Mark.
Speaker Change: Good afternoon bearish.
Speaker Change: Mark.
Speaker Change: I think you suggested the incremental $35 million in premium in the fourth quarter from the take outs.
Speaker Change: And we're working off of a base of $2 65 to $2 66 in the third quarter.
Speaker Change:
Speaker Change: And then.
Speaker Change: The $200 million was that the kind of when you have it for a full quarter and it'd be about 35, it would be more like 50.
Speaker Change: That's the way to read it Yep Yep.
Speaker Change: Yeah, it's a little bit prorated for Q3.
Speaker Change: Yeah.
Mark Harmsworth: Yeah, and then what kind of... Yeah, what kind of premium CD is seated, should we think about for kind of on a run rate basis, either ESSO dollars or percentage? Yeah, so, so good question. So the premium seeded in Q3 were I think $109 million, but you had the $12 million adjustment that we talked about there. The right number now, going forward, sort of the normalized number, is about $102 million. That should be the number. except for the adjustment that we've mentioned for Milton. $102 million is the new sort of quarterly baseline number. Then for Q4, of course, you have to make the adjustment for Milton.
Speaker Change: What kind of people alright.
Speaker Change: Yeah, what kind of premium ceded ceded.
Speaker Change: Should we think about for kind of on a run rate basis, either absolute dollars or percentage.
Speaker Change: Yeah. So so good question so the.
Speaker Change: Premiums ceded in Q3, where I think a 109 million, but you had the $12 million adjustment that we talked about there.
Speaker Change: The right number now going forward in sort of the normalized number is about $102 million.
And that should be the number.
Speaker Change: Except except for the adjustment that we mentioned for.
Speaker Change: For Milton 102 million is the new sort of quarterly baseline number.
Speaker Change: Then for Q4 of course, you have to make the adjustment for Milton, but that's that's the number going forward and that'll take you through until the end of May.
Mark Harmsworth: But that's the number going forward, and that'll take you through until the end of May. Yeah, and refresh me on the Q4 adjustment for Milton. So the adjustment to the premium seeded line is about $50 million. for Milton, that's included in the $128 million that I mentioned in my prepared remarks. And that's the reversal of benefits under the multi-year agreement with Berkshire. Yeah, so $15 million in seeded premium, and then what, $78 million in losses? Yes, exactly.
Speaker Change: Yeah, there's a refresh me on the.
Speaker Change: Before adjustment for Milton.
Speaker Change: So the adjustment to the premiums ceded line.
Speaker Change: Is about $50 million.
Speaker Change: For Milton that's included in the 128 million that I mentioned in my prepared remarks, and that's the reversal of benefits under the.
Speaker Change: The multi year agreement with Berkshire.
Speaker Change: Yeah, so $50 million in ceded premium and then what 78.
Speaker Change: Losses.
Speaker Change: Yes exactly.
Speaker Change: Okay.
Speaker Change: How much cash at the Holdco.
Mark Harmsworth: How much cash at the Holdco? Uh, over 200 million.
Speaker Change: Over $200 million.
Speaker Change: Okay.
Speaker Change: And then.
Mark Harmsworth: And then.
Pareshbhai Patel: Paresh, your comment about the new carrier, refresh me on, and I might have missed some of your comments today, but the new carrier, the Size, intent, what area are we targeting? Mark, it's just normal for us in the sense of, you know, we had one carrier back in the day, which was homeowner's choice. We grew it to a certain size. Then we start our second carrier, TipTap. You know, both TIPTEP and Homeless Choice are well north of 500 million at this point. We had already started our third carrier core as a reciprocal for commercial residents last year.
Speaker Change: Paresh your comment about the new carrier refresh me on that.
Speaker Change: Some of your comments.
Speaker Change: But the new carrier the.
Speaker Change: Is the intent.
Speaker Change: What areas are we targeting.
Speaker Change:
Speaker Change: It's just normal business for us in the sense of.
Speaker Change: Yes, we had one carrier back in the day, which the homeowners choice we grew to a certain size.
Speaker Change: Then we start a second carrier.
Speaker Change: Tiptop.
Speaker Change: Joe.
Speaker Change: Picked up in our homeowners choice.
Speaker Change: Well north of 500 million.
Speaker Change: So at this point.
Speaker Change: We had already started a third carrier core as a reciprocal for commercial or is it a share last year.
Mark Harmsworth: Thank you.
Speaker Change: Sure.
Speaker Change: The point and.
Pareshbhai Patel: Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com We'll roll it starting in 20-25, yeah? Yeah.
Speaker Change: Taro.
And on that legacy it'll be our next.
Speaker Change: Gross carrier, it's a reciprocal based in Florida.
Speaker Change: And we're going to capitalize it we're going to give it a surplus note.
Speaker Change: Starting in 2025.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: When I think about the G&A.
Mark Harmsworth: When I think about the, uh, DNA, uh, This quarter, about 19 million. Is that a reasonable run rate or is there still some distortion around the takeouts or anything unusual? Is that a decent run rate? Yeah, that's a pretty good run rate. I mean, Q4 sometimes tends to be a little bit lower than Q3, but that's generally, there's nothing odd in that number. That's a pretty good go forward number. The same thing for operating expenses.
Speaker Change: This quarter, but $19 million.
Speaker Change: Is that a.
Speaker Change: Reasonable run rate or is that going to is there still some distortion around the takeouts or anything unusual.
Speaker Change: Is that a decent run rate.
Speaker Change: Yeah, that's a pretty good run rate I mean, Q4, sometimes tends to be a little bit lower than Q3, but that's that's generally theres nothing theres nothing odd in that number that's a pretty good go forward number the same same thing for operating expenses.
Speaker Change: Okay.
Pareshbhai Patel: Any comments on the competitive environment in Florida? You know, with these storms. you know, maybe some new capital in the market or you tell me. What's the appetite among the carriers for new business? Obviously, there was enthusiasm about the takeouts, but how would you characterize the... Competitive Environment.
Speaker Change: Comment on the <unk>.
Speaker Change: <unk> environment in Florida.
Speaker Change: <unk>.
Speaker Change: With these storms.
Maybe some new capital in the market or you tell me.
Speaker Change: It is what's the appetite among.
Speaker Change: The carriers for new business, obviously, there was the enthusiasm about the takeouts, but how would you characterize the.
Speaker Change: Competitive environment.
Speaker Change:
Pareshbhai Patel: Mark, you know, it's been a little bit over three weeks after three or four weeks, four weeks, I guess, after Milton at this point. And I think I don't want to speak for every carrier out there, but I think they are all busily taking care of policyholders and taking care of claims and all those kinds of things. So that dust of what comes next is just beginning to settle. But everybody seems to be healthy and it seems to be business as usual. So I don't think appetite went up or down. As far as you're part of the question about new capital, well...
Speaker Change: Mark.
Speaker Change: It's been a little bit over three weeks after them.
Speaker Change: Three or four weeks four weeks I guess after Milton at this point.
Speaker Change: And I think.
Speaker Change: No I wanted to speak for every carrier out there, but I think.
Speaker Change: They are all busily taken care of policyholders and taken care of claims and all those kinds of things. So that dust of what comes next is just beginning to settle so but everybody seems to be.
Speaker Change: L P and it seems to be business as usual.
Speaker Change: I don't think appetite went up or down.
Speaker Change: Okay as far as your part of the question about the capital.
Speaker Change: Well.
Speaker Change: Taylor always technically.
Pareshbhai Patel: Taylor Owes, technically. lead the way. So here we are. But I'm sure there are other for other carriers or other capital that may be forming. I don't have visibility as to who's going to fund what or whatever kind of thing, but it's normal to expect that there will be some capital that will enter the state at this point. Yeah. So wait and see.
Speaker Change: We wanted to lead the way so.
Speaker Change: We are.
Speaker Change: But I'm sure there are other for other carriers or the capital that may be forming.
Speaker Change: Hi.
Speaker Change: I don't have visibility as to who.
Speaker Change: Who's going to fund, what or whatever kind of thing but.
Speaker Change: It's normal to expect that there will be some capital they'll they'll enter the state at this point yet.
Speaker Change:
Speaker Change: So.
Speaker Change: Latency.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Uh huh.
Speaker Change: Okay.
Speaker Change: Operator next question.
Casey Alexander: Operator, next question. Your next question is coming from Casey Alexander with Compass Point. Please pose your question. Your line. Thank you.
Your next question is coming from Casey Alexander with Compass point. Please pose your question your line is less.
Speaker Change: Yes.
Speaker Change: Mark must be a great analyst because his first four questions where exactly what my questions were kelebe. So I'm, Okay I'll hop back in the queue. Thank you.
Casey Alexander: Mark must be a great analyst because his first four questions were exactly what my questions were gonna be, so I'm okay, I'll hop back into queue. Thank you.
Speaker Change: Okay.
Operator: Once again, if there are any questions or comments, please press star 1. If you have any additional questions or comments, please press star 1.
Speaker Change: Once again, if there are any questions or comments. Please press star one at this time, if you have any additional questions or comments. Please press star one at this time.
Speaker Change: You have a question coming from Michael Phillips with Oppenheimer. Please pose your question your line is live.
Michael Phillips: You have a question coming from Michael Phillips with Oppenheimer. Please pose your question. Your line is open. Thanks. Good afternoon. I guess I wanted to ask a little bit about the comments about rates in Florida and your strategy for at least the coming year not to raise rates. Does that signify, I guess, a desire on your part, excluding all the DPOP business you're getting to grow in Florida, X the DPOP stuff?
Thanks, Good afternoon.
Michael Phillips: Yes, I wanted to ask a little bit about the.
Speaker Change: Comments about rates in Florida.
Speaker Change: Your strategy for at least the coming year not to raise rates.
Speaker Change: Does that signify.
I guess.
Speaker Change: A desire on your part excluding all the depot business Youre getting to grow in Florida extra deep stuff.
Oh.
Pareshbhai Patel: Michael is Paresh, I think we would characterize it slightly differently than that, as we sort of, that's why we made the comments we did. You know, we see what's been going on with our policy orders, etc. And and the commentary and news articles and everything else. The latest anxiety that... afflicts a lot of insureds is, oh my god, what will my insurance rates be like next year? right, anxiety causes, issues, etc. We just wanted to kind of Let our policyholders know. actions that we will be taking, right? I'm not speaking for the industry or for anybody other than ourselves, but we are not looking to raise rates in 2025 in Florida, because I think, frankly, we don't necessarily need to do so now.
Paresh Patel: Well, Michael as Paresh, I think we would characterize it slightly differently than that as we sort of that's why we made the comments we did.
Speaker Change: Yeah.
Speaker Change: We see what's been going on with our policyholders etcetera and.
Speaker Change: The commentary and news articles and everything else.
Speaker Change: The latest anxiety that.
Speaker Change: That.
Speaker Change: Our flicks a lot of insurance is Oh, my God, what would my insurance rates be like next year right.
Speaker Change: Alright.
Speaker Change: It causes issues et cetera, we just wanted to kind of.
Speaker Change: Our policyholders no.
Speaker Change: Actions that we will be taking right.
Speaker Change: Not speaking for the industry or for anybody other than ourselves, but we are not looking to raise rates in 2025, and Florida, because I think.
Speaker Change: Frankly, we don't necessarily see a need to do so now.
Pareshbhai Patel: You know, it's not solely up to us, but That's at least what our beliefs are. Yeah. Well, it sounds good. Obviously, your margins are strong. I wonder if that will have any implications for maybe slight pressure on your margins the next I'm sure it might have some effects on the margins, but, you know. We're not doing this for margins in any given quarter. We and our policyholders have I have a long, tough look in terms of all of this stuff. talk about some of this. We have a policyholder who's been with us since 2008. all the events and whatever, and unfortunately when Helene went by.
Speaker Change: Yeah, it's not solely up to us but.
That's at least what I believe so yes.
Speaker Change: No it sounds good.
Obviously your margins are strong I wonder if I don't have.
Speaker Change: Any implications for maybe slight pressure on your margins next year.
Speaker Change: Oh.
Speaker Change: I'm sure it might have some effect on our margins, but you know.
Speaker Change: <unk>.
Speaker Change: We're not doing this for margins in any given quarter.
Speaker Change: We and our policyholders have.
Speaker Change: I have a long term relationship.
Speaker Change: In terms of all of this stuff.
Speaker Change: Let's.
Speaker Change: Talk about some of this we have a policy holder, who has been with us since 2008.
Speaker Change: And.
Speaker Change: All of the events or whatever and unfortunately, when Helene went by.
Speaker Change: They had a car parked next door outside that next to their house that caught fire.
Pareshbhai Patel: They had a car parked next door, outside that, next to their house that caught fire. and pretty much burnt the whole house down. I think that person is not, whatever, I've just seen the claim now. is fairly traumatized by all of this stuff, right? Do we really need to say that they should be thinking about whether we're going to raise rates next year or not? That's why we're doing this is because we answer the phones. We look at the claims. We're Floridians, too. And when we see all of this stuff, we just make. This is this is one more effort on our part to try and help people build and restore themselves to normality.
Speaker Change: And pretty much the whole house there.
Speaker Change: Right.
Speaker Change: I think that person is whatever I've just seen the claim note is fairly traumatised, but all of this stuff right.
Speaker Change: Do we really need to say that they should be.
Speaker Change: Thinking about what they were going to raise rates next year or not that's why we're doing this is because we answer the phones. We look at the claims were floridians too and when we see all of this stuff is just mix.
Speaker Change: This is this is one more effort on our part to try and.
Speaker Change: Help people.
Speaker Change: And restore themselves to normality. So we can go back to the relationships, we've had with our policyholders yet.
Michael Phillips: So we can go back to the relationships we've had with our policyholders. Yeah. Yeah, it makes sense. Yeah, thank you for that.
Speaker Change: No that makes sense yeah. Thank you for that.
Pareshbhai Patel: Um, but I guess one more, um, little maybe more higher level, um, would be a large part of your strategy obviously has been at least for the past year and longer, of course, it comes and goes, but it is this year has been a big part of your story is the deep up. And I'm sure that's always going to be, you know. president at some point in future years, but you put that aside. What's next for HCI? Kind of what's the next strategy? And I would think it's this, I'll try to answer the question, but tell me if I'm right or wrong, and maybe it'll help me out go deeper.
Speaker Change: I guess one more.
Speaker Change: Maybe more higher level would be.
Speaker Change: A large part of your strategy, obviously has been at least for the past year and longer of course, it comes and goes but as this year has been a big part of your story isn't depot business.
Speaker Change: Sure that's always going to be.
Speaker Change: Present at some point in future years, but if you put that aside.
Speaker Change: What's what's next for HCI and kind of what's the next strategy.
Speaker Change: I would think it's this so I'll try to answer the question, but tell me if I'm right or wrong, maybe have helped me I'll go deeper.
Pareshbhai Patel: You know, it's growing outside of Florida. And if that's the case, then let's talk about that. If it's not, if it's a different answer, tell me what that is. But you kind of, you know, what else for HCI when you put DPOP? So, um... We do DPUPs because they're there. It isn't the only item that we have. We've run the company for several years when there were no depops, so it just is the flavor of the month currently. But the longer-term kind of thing, and I'm kind of remembering a question you had asked at the beginning of hurricane season about what happens if there's another E.N.
Speaker Change: It's growing outside of Florida.
Speaker Change: And if that's the case then let's talk about that if it's not it's a different answer to tell me what that is but kind of.
Speaker Change: What else for HCI.
Speaker Change: When you put Deepak aside.
Speaker Change: Okay. So.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: We don't do pumps, because they were there it isn't the only.
Speaker Change: Item that we have.
Speaker Change: We have run the company for several years when there were no reports. So it just is the flavor of the month currently but the longer term kind of thing.
Speaker Change: I was kind of remembering a question you had asked a beginning of a hurricane season about what.
Speaker Change: What happens if there's another iron ore onto the hurricane or whatever well.
Pareshbhai Patel: or another hurricane or whatever. Well, guess what? We've had three landfalling hurricanes. in one hurricane season. And we are healthy. And we're not just saying that our actions build to that effect, right? Our deeds speak even louder than our words. What how you could also look at this is in a world where that's being afflicted by climate change and more catastrophes, etc. Maybe we have figured out a way to. do risk selection and underwriting. to a level that lets us... you know, basically be climate adapted. and if that's what we've done. This happens to be the place we've done it at, where it's also one of the most intense places to do it at.
Speaker Change: Guess work, we've had three land falling hurricanes.
Speaker Change: In.
Speaker Change: One hurricane season.
Speaker Change: And we are healthy and we're not just saying that our actions build to that effect right.
It needs to speak even louder than our words.
Speaker Change: And.
Speaker Change: How you could also look at this is in a world, where that's being afflicted by climate change.
Speaker Change: More catastrophes et cetera.
Speaker Change: Maybe we have figured out a way to.
Speaker Change: So our risk selection and underwriting.
Speaker Change: To a level that lets.
Speaker Change: Yes.
Speaker Change: Basically be climate adapted and that's what we've done.
Speaker Change: Florida, just happens to be the place we've done it where it is also one of the most intense places to do that.
Speaker Change: It kind of sets you up very nicely to say, maybe we can do this in the rest of the country and opportunities will.
Pareshbhai Patel: It kind of sets you up very nicely to say, maybe we can do this in the rest of the country and opportunities will occur, right? And the other side of that is... What we've also done is that we tend to allocate capital to where we can get the highest ROE, right? So here we are, putting up numbers that. that they are what they are, and I'm sure. We do our best to make sure we do it correct. Our results speak for themselves, yeah?
Speaker Change: We will occur and the other side of that as well.
Speaker Change: What we've also done is that we tend to allocate capital to where we can get the highest ROE right.
Speaker Change: So here, we are putting up numbers that.
Speaker Change: They are what they are and I'm sure.
Speaker Change: We do our best to make sure we do it correctly.
Speaker Change: Our results speak for themselves.
Michael Phillips: Thank you. I think it's certainly a testament to your strength with a lot of tough results coming in. You guys did quite well. So thank you.
Speaker Change: Yes. Thank you I think it's certainly a testament to your strengths with.
Speaker Change: Got it.
Speaker Change: What a lot of tough results coming in as you guys know quite well so thank you.
Michael Phillips: I think that's all I had. Thank you very much.
Speaker Change: It's all I had thank you very much.
Sam: Thanks Sam.
Sam: Yes.
Speaker Change: At this time. This concludes our question and answer session I would now like to turn the call back over to Paresh Patel, who has a few closing remarks.
Operator: At this time, this concludes our question and answer.
Pareshbhai Patel: I would now like to turn the call back over to Paresh Patel, who has a few closing 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. We're all looking forward to a more peaceful and Less Dramatic 2025. Thank you.
Sam: Okay.
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 continued support.
Paresh Patel: We're all looking forward to a more peaceful and.
Paresh Patel: Less dramatic 2025, thank you.
Paresh Patel: At this time this concludes.
Operator: At this time, this concludes. Thank you, everyone. This does conclude today's
Paresh Patel: Yeah.
Thank you everyone. This does conclude today's conference call.