Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Heritage Insurance Holdings Inc (HRTG, Financial) reported a substantial increase in net income, growing by $11 million or 143% compared to the second quarter of 2023.
- The company achieved a 7.1% growth in gross written premium, amounting to an increase of $28 million.
- Heritage's E&S business experienced significant growth, with premiums increasing by nearly $30 million or 177% compared to the previous year.
- The company's commercial residential business saw a 29.4% growth in in-force premium, contributing positively to overall profitability.
- Heritage Insurance Holdings Inc (HRTG) reported a 32.7% increase in book value per share, reflecting strong net income and reduced unrealized losses on fixed income securities.
Negative Points
- The company experienced a net unfavorable loss development of $8.7 million during the second quarter of 2024.
- Heritage Insurance Holdings Inc (HRTG) faced higher operating expenses, which partially offset the increase in net income.
- The net expense ratio increased to 36.8%, up from 34.8% in the prior year quarter, due to higher acquisition costs and general administrative expenses.
- The company incurred reinstatement premiums from Hurricane Ian, totaling $18.7 million for the first half of the year.
- Heritage Insurance Holdings Inc (HRTG) continues to face challenges with reserve development, particularly related to outstanding claims from Hurricane Irma.
Q & A Highlights
Q: Can you elaborate on the new growth effort and whether you are fully resuming new business writing?
A: Ernie Garateix, CEO: We are selectively writing new business in profitable geographic areas, anchored by our underwriting criteria. We are not fully turning on the spigot but are focused on strategic and profitable growth.
Q: Could you explain the reserve development in the quarter and its sources?
A: Kirk Lusk, CFO: The reserve development was primarily due to Hurricane Irma. We are about 99.2% closed on claims, but a few outstanding claims required adjustments.
Q: How does Hurricane Debbie compare to past events, and what impact do you expect?
A: Ernie Garateix, CEO: Hurricane Debbie is similar to Hurricane Idalia in path but is larger and slower with more rain, leading to more flooding claims. Our exposure in the affected area is limited.
Q: What is driving the growth in the E&S market, and how does it compare to the admitted market?
A: Ernie Garateix, CEO: The E&S market continues to grow, particularly in California, Florida, and South Carolina. It allows us to address rate and coverage issues more flexibly compared to the admitted market.
Q: What are the anticipated trends for rate increases over the next 12 months?
A: Kirk Lusk, CFO: In the Northeast, we expect substantial rate increases due to loss trends and reinsurance costs. In Florida, rate increases are moderating due to legislative changes and reduced loss costs.
Q: How has your view on legislative changes in Florida evolved?
A: Ernie Garateix, CEO: Initially, we were cautiously optimistic, but now we see positive impacts from legislative reforms in the data, making us more optimistic about future trends.
Q: Is the current net investment income a sustainable run rate?
A: Kirk Lusk, CFO: Yes, we anticipate net investment income of $9 million to $10 million per quarter as a good run rate, with plans to extend duration in anticipation of interest rate drops.
Q: Are you considering expanding in Florida's Tri-County area given the changing dynamics?
A: Ernie Garateix, CEO: We are open to selective growth in Tri-County, maintaining a comfortable concentration level without broadly expanding.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
