Heritage Insurance Holdings Inc (HRTG) 2023 Q4 法說會逐字稿

Good morning, and welcome to the Heritage Insurance Holdings' conference call. (Operator Instructions) Please note this event is being recorded.

早安，歡迎參加遺產保險控股公司的電話會議。（操作員說明）請注意此事件正在被記錄。

I would now like to turn the conference over to Kirk Lusk, Heritage Chief Financial Officer. Please go ahead.

現在我想將會議交給 Heritage 財務長柯克‧拉斯克 (Kirk Lusk)。請繼續。

Good morning, and thank you for joining us today. We invite you to visit the Investors section of our website, investors.heritagepci.com, where the earnings release and our earnings call will be archived. These materials are available for replay or review at your convenience.

早安，感謝您今天加入我們。我們邀請您造訪我們網站 Investors.heritagepci.com 的投資者部分，其中將存檔收益發布和收益電話會議。這些材料可供您在方便時重播或查看。

Today's call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon management's current expectations and subject to uncertainty and changes in circumstances. In our earnings press release and our SEC filings, we detail material risks that may cause our future results to differ from our expectations.

今天的電話會議可能包含 1995 年《私人證券訴訟改革法案》含義內的前瞻性陳述。這些陳述是基於管理層目前的預期，並可能受到環境的不確定性和變化的影響。在我們的收益新聞稿和向美國證券交易委員會提交的文件中，我們詳細介紹了可能導致我們未來業績與預期不同的重大風險。

Our statements are as of today, and we have no obligation to update any forward-looking statements we may make. For a description of the forward-looking statements and the risks that could cause our results to differ materially from those described in the forward-looking statements. Please refer to our annual report on Form 10-K, earnings release, and other SEC filings.

我們的聲明截至今天，我們沒有義務更新我們可能做出的任何前瞻性聲明。有關前瞻性陳述的描述以及可能導致我們的結果與前瞻性陳述中描述的結果有重大差異的風險。請參閱我們的 10-K 表格年度報告、收益發布和其他 SEC 文件。

Our comments today will also include non-GAAP financial measures. The reconciliations of and other information regarding these measures can be found in our press release. With me on the call today is Ernie Garateix, our Chief Executive Officer.

我們今天的評論還將包括非公認會計準則財務指標。有關這些措施的調節和其他資訊可以在我們的新聞稿中找到。今天與我一起參加電話會議的是我們的執行長 Ernie Garateix。

I will now turn the call over to Ernie.

我現在將把電話轉給厄尼。

Thank you, Kirk, and good morning to everyone. As we review our fourth-quarter and full-year 2023 results, I'm pleased to reflect on a period of achievement and strategic advancement for our company. Our efforts over the past two years include deliberate actions and focused execution, culminating an improved financial outcome, and a strengthened market position.

謝謝你，柯克，祝大家早安。當我們回顧 2023 年第四季和全年業績時，我很高興回顧我們公司一段時期的成就和策略進步。過去兩年我們的努力包括深思熟慮的行動和集中執行，最終改善了財務成果，並加強了市場地位。

Our financial results for the fourth quarter demonstrate the positive impact of our efforts towards tightening underwriting, working towards rate adequacy, diversifying our portfolio, and managing our reinsurance costs. Our net income for Q4 2023 was $30.9 million, marking a substantial improvement from $12.5 million in the same quarter last year. Over the last two years, the actions we have implemented are now being realized and reflected in our financial statements as premium from rate increases is earned over the policy period.

我們第四季的財務表現證明了我們在收緊承保、努力實現利率充足性、多元化投資組合以及管理再保險成本方面所做的努力產生了積極影響。我們 2023 年第四季的淨利潤為 3,090 萬美元，比去年同期的 1,250 萬美元大幅改善。在過去的兩年裡，我們所採取的行動現在正在實現並反映在我們的財務報表中，因為在保單期間賺取了加息的保費。

The cornerstone of our strategy has been our disciplined approach to exposure management. Our strategy to reduce the flow of our personal line's book of business and obtain adequate rates significantly improved the book of business.

我們策略的基石是我們嚴格的風險管理方法。我們採取的策略是減少個人業務的業務流量並獲得足夠的費率，從而顯著改善了業務狀況。

We have extended the strategy to all states within our 16-state platform. We intentionally reduced our multi-state personal lines policies in in-force by 15% and total insured value by 6.9% to not only manage our reinsurance costs, but more effectively -- but also improve the overall quality of our book of business. This strategic reduction led to only a slight decline in in-force premium from our overall personal lines business of 2.3%, a move we deem necessary to align with our long-term vision of rate adequacy and selective geographic expansion.

我們已將該策略擴展到 16 個州平台內的所有州。我們特意將有效的多州個人保險保單減少了 15%，將總保險價值減少了 6.9%，不僅是為了管理我們的再保險成本，而且是為了更有效地提高我們業務的整體品質。這項策略性削減僅導致我們整體個人險業務的有效保費略有下降 2.3%，我們認為此舉有必要與我們的費率充足性和選擇性地域擴張的長期願景保持一致。

The commercial residential segment has seen a remarkable increase in premiums in force by 63.9% year over year. This growth, set against a backdrop of market opportunity, underscores our ability to allocate capital to products and regions with the potential for improved margins.

商品住宅板塊有效保費較去年同期大幅成長63.9%。這種成長是在市場機會的背景下實現的，突顯了我們將資本配置到具有提高利潤潛力的產品和地區的能力。

Our exposure management strategy has been particularly effective, resulting in a deliberate decrease in our policies in-force, while in-force premiums once again hit an all-time high at $1.4 billion and up 5.6% year over year. These moves were made to manage our reinsurance costs efficiently and ensure that we maintain our portfolio where the premium is adequately reflective of the risk. We continue to foster our relationships with our reinsurance partners that provide critical support to our core strategy.

我們的風險管理策略特別有效，導致我們的有效保單故意減少，而有效保費再次創下歷史新高，達到 14 億美元，年增 5.6%。採取這些措施是為了有效管理我們的再保險成本，並確保我們維持保費充分反映風險的投資組合。我們持續培養與再保險合作夥伴的關係，為我們的核心策略提供關鍵支援。

Looking ahead, our strategy remains clear and focused. With the successful equity raise recently completed, we are well positioned to pursue selective growth opportunities, especially in geographies where our rate adequacy meets our stringent criteria. Our commitment to operational excellence, coupled with strategic clarity, provides a solid foundation for sustained growth and value creation for our shareholders.

展望未來，我們的策略仍然清晰且重點突出。隨著最近成功完成的股權融資，我們處於有利地位，可以尋求選擇性的成長機會，特別是在我們的利率充足性符合我們嚴格標準的地區。我們對卓越營運的承諾加上清晰的策略，為股東的持續成長和價值創造奠定了堅實的基礎。

In conclusion, the achievements of 2023 reflect our team's dedication, strategic insight, and operational discipline. As we move forward, I am confident in our ability to maintain this momentum, driven by our solid foundation and the unyielding dedication of our team across our 16-state platform.

總之，2023 年的成就體現了我們團隊的奉獻精神、策略洞察力和營運紀律。隨著我們向前邁進，我對我們保持這一勢頭的能力充滿信心，這得益於我們堅實的基礎和我們 16 個州平台團隊不屈不撓的奉獻精神。

Let me turn things over to Kirk a review of the results in the quarter and key financial performance metrics.

讓我將本季業績和關鍵財務績效指標的審查交給柯克。

Thank you, Ernie. Good morning, everyone. In the fourth quarter of 2023, Heritage Insurance Holdings demonstrated that the execution of our strategic decisions over the past two years are starting to produce the results we were anticipating.

謝謝你，厄尼。大家，早安。2023 年第四季度，Heritage Insurance Holdings 證明，我們過去兩年策略決策的執行已開始產生我們預期的結果。

We had advised that improving the rate adequacy and overall quality of our book of business was a multi-year process, and we are pleased with the progress we have made. And we will continue to focus on these strategic initiatives going forward.

我們曾表示，提高業務帳簿的利率充足性和整體品質是一個多年的過程，我們對所取得的進展感到滿意。未來我們將持續關注這些策略舉措。

We remain committed to generating an underwriting profit in all our geographies through rate adequacy, selective underwriting, providing products appropriate for the market, and diligent claims handling. The progress we have made with those objectives is demonstrated by the favorable fourth-quarter results and reflects our ability to adapt in a dynamic insurance landscape.

我們仍然致力於透過適當的費率、選擇性承保、提供適合市場的產品以及勤奮的索賠處理，在我們所有地區創造承保利潤。良好的第四季業績證明了我們在實現這些目標方面取得的進展，並反映了我們適應動態保險格局的能力。

With net income of $30.9 million, or $1.15 per diluted share, we achieved a solid improvement from $12.5 million, or $0.48 per diluted share, in the same quarter of the previous year. The 147.5% increase in net income is primarily attributable to our premium increases nearly keeping pace with the increase in our reinsurance costs, improved investment income, and an improved loss ratio.

我們的淨利潤為 3,090 萬美元，即稀釋後每股收益 1.15 美元，較去年同期的 1,250 萬美元，即稀釋後每股收益 0.48 美元有了顯著改善。淨利潤成長 147.5% 主要歸因於我們的保費成長幾乎與再保險成本的成長保持同步、投資收益的提高以及損失率的改善。

Our gross premiums were an increased 7% to $339.6 million, while net premiums earned rose by 6.9% to $177.7 million, underscoring the effectiveness of our pricing strategy and underwriting standards. In addition, these actions led to an increase in the average premium per policy of 24.2% over the prior year quarter.

我們的毛保費成長了 7%，達到 3.396 億美元，而淨保費成長了 6.9%，達到 1.777 億美元，凸顯了我們定價策略和承保標準的有效性。此外，這些行動也導致每份保單的平均保費比去年同期增加了 24.2%。

The net loss ratio for the quarter was 51% which is an 11.4-point improvement from the prior year. Losses from weather were $11 million this year compared to $27.5 million in the prior year quarter, an improvement of $16.5 million. The improvement is attributable to favorable weather and also what we believe is an improved portfolio which is able to mitigate some of the weather events.

本季淨虧損率為51%，較上年同期改善11.4個百分點。今年天氣造成的損失為 1,100 萬美元，與去年同期的 2,750 萬美元相比，增加了 1,650 萬美元。這種改善歸因於有利的天氣，我們認為改進的投資組合能夠減輕一些天氣事件。

The net expense ratio remained relatively stable at 33.9% and our combined ratio improved to 84.9%. These metrics are a statement to our focused underwriting discipline and effective cost management.

淨費用率保持相對穩定，為 33.9%，綜合成本率改善至 84.9%。這些指標反映了我們專注的核保紀律和有效的成本管理。

Our net investment income for the quarter increased by 36.1% to $6.7 million, reflecting our proactive management and investment decisions. The diversification of our investment portfolio and alignment with the yield curve had positioned us well to capitalize on market opportunities while managing risk.

本季我們的淨投資收入成長 36.1% 至 670 萬美元，反映了我們積極主動的管理和投資決策。我們投資組合的多元化以及與殖利率曲線的一致性使我們能夠在管理風險的同時充分利用市場機會。

Capital management remains the priority. We have continued the suspension of the quarterly dividend, as we focused on reinvesting in our core operations and exploring strategic growth opportunities, such as the strategic actions taken regarding the commercial portfolio in 2023.

資本管理仍然是首要任務。我們繼續暫停季度股息，因為我們專注於對核心業務進行再投資並探索策略成長機會，例如2023年針對商業投資組合採取的策略行動。

Our approach to capital allocation is geared towards maximizing long-term returns and shareholder value. We will continue to actively manage underperforming areas of our business and seek opportunities to position the company for long-term profitability and shareholder returns.

我們的資本配置方法旨在實現長期回報和股東價值最大化。我們將繼續積極管理業績不佳的業務領域，並尋求機會使公司實現長期盈利和股東回報。

As we move into 2024, our strategy remains centered on selective growth in geographies where rate adequacy aligns with our underwriting standards and product design. Our disciplined approach to exposure management, combined with our strategic investments in technology and process improvement, positions us to navigate the evolving market dynamics and capitalizing on growth opportunities.

進入 2024 年，我們的策略仍然以利率充足性與我們的承保標準和產品設計一致的地區的選擇性成長為中心。我們嚴格的風險管理方法，加上我們在技術和流程改進方面的策略性投資，使我們能夠駕馭不斷變化的市場動態並充分利用成長機會。

In closing, the fourth-quarter results reflect the strategic discipline we have executed over the past few years. We have a highly dedicated and talented team throughout the organization that provides the analysis, insights, and execution in their respective roles that has driven the results and position us well to continue our trajectory of profitable growth.

最後，第四季度的業績反映了我們過去幾年執行的策略紀律。我們在整個組織中擁有一支高度敬業且才華橫溢的團隊，他們在各自的角色中提供分析、見解和執行，從而推動了結果，並使我們能夠繼續實現盈利增長。

Thank you for your continued support. We look forward to updating you on our progress in coming quarters. We are now ready to take questions.

感謝您一如既往的支持。我們期待向您通報我們未來幾季的最新進展。我們現在準備好回答問題。

We will now begin the question-and-answer session. (Operator Instructions) Paul Newsome, Piper Sandler.

我們現在開始問答環節。（操作員說明）Paul Newsome、Piper Sandler。

Good morning. Congratulations on the quarter.

早安.恭喜本季。

Thank you, Paul.

謝謝你，保羅。

Thank you, Paul.

謝謝你，保羅。

I wanted to ask a little bit more on the capital management question. The recent offerings suggest maybe you're a little bit light on capital coming into the year. But you also kept the dividend off, so I'm guessing you're still in a capital accumulation phase, if that's right. So that's the question. And then in terms of select growth, I mean, does that include the potential for M&A or maybe even takeouts as well. So I'll start there.

我想多問一點關於資本管理的問題。最近的發行顯示您今年的資金可能有點少。但你也保留了股息，所以我猜你仍處於資本累積階段，如果這是正確的話。這就是問題所在。然後就選擇性成長而言，我的意思是，這是否包括併購甚至外送的潛力。所以我將從這裡開始。

Yeah. Well, I mean, first part, yeah. The capital raise, we just looked at that as being opportunistic. And the other thing is we think that there's a lot of opportunities within our market space for -- other opportunities to take advantage of. So really, the capital raise was to do that as opposed to a shortage of capital position. And so that's kind of the way we're looking at that.

是的。嗯，我的意思是，第一部分，是的。籌集資金，我們只是將其視為機會主義。另一件事是，我們認為我們的市場空間中有很多機會——其他機會可以利用。事實上，籌集資金就是為了做到這一點，而不是為了資本部位短缺。這就是我們看待這個問題的方式。

I mean, we do think that there are a number of opportunities. Takeouts, we continually look to takeouts just sometimes because of the pricing of our products versus [Citizens]. We don't think it would be incrementally beneficial to us, but it's one of the things we continue to look at.

我的意思是，我們確實認為存在著許多機會。外賣，我們不斷尋求外賣，有時是因為我們產品的定價與[公民]。我們認為這不會逐漸為我們帶來好處，但這是我們繼續關注的事情之一。

Great. My other question is, I wanted to ask about your sense of the cat load as we go forward. Obviously, there had been a number of moving parts. And maybe we could look at this maybe not so much on a quarterly basis, but on an annual basis. What do you think is the right cat load, and how has it changed over time as we look forward?

偉大的。我的另一個問題是，我想問一下您對我們前進過程中的貓負荷的感覺。顯然，有許多活動部件。也許我們可以不按季度，而是按年度來看待這個問題。您認為什麼是合適的貓負荷？

Yeah. I mean, I think the cat load has definitely changed, as has the cost of reinsurance, reflecting that. And from that perspective, I mean, that's why we've been diligent in our exposure to the management process and then also with taking the rates that we think we need to keep up with that pace.

是的。我的意思是，我認為巨災負擔肯定發生了變化，再保險成本也發生了變化，反映了這一點。從這個角度來看，我的意思是，這就是為什麼我們一直在努力了解管理流程，然後採取我們認為需要跟上這一步伐的費率。

Has the cat load gone down or up? I guess, we'll start with that.

貓咪負載下降還是上升？我想，我們就從那裡開始吧。

And by cat load, let me just make sure I understand what you're referring to as cat load?

透過貓負載，讓我確保我理解你所說的貓負載是什麼？

Cat load is the amount of capacity losses that would be normal per year relative to premium.

巨災負荷是指每年相對於保費而言正常的容量損失量。

Yeah. And what we do, we've expected that to increase. However, our premium has been keeping pace with that. So therefore, net-net, we've been positive from that perspective.

是的。我們所做的，我們預計這種情況會增加。然而，我們的保費一直與此保持同步。因此，從這個角度來看，我們一直持正面態度。

The other aspect of that, though, is the underwriting that we've undertaken over the last several years to improve our underlying portfolio, which we think has the ability to withstand some of the weather events, and so, therefore, has the tendency to mitigate some of those weather losses.

不過，另一方面是我們在過去幾年中為改善我們的基礎投資組合而進行的承銷，我們認為這些投資組合有能力承受一些天氣事件，因此有可能減輕部分天氣損失。

So I think cat loads in general have gone up. But with the premiums that we've taken and the underwriting actions we've taken, we think that we're outpacing that.

所以我認為貓的數量總體上有所增加。但考慮到我們所收取的保費和我們所採取的核保行動，我們認為我們正在超越這一點。

Okay. And I guess my last question, and then I'll let somebody else ask. Any thoughts on tort reform in Florida so far?

好的。我猜出我的最後一個問題，然後我會讓其他人問。到目前為止，對佛羅裡達州的侵權改革有什麼想法嗎？

Yeah. So we continue to monitor that. We do see some positive trends in the data that we're receiving regarding litigated losses. As we've always said, we do believe that's going to take 18 to 24 months to grow through the system, but we're very optimistic that the Florida market is improving when it comes to litigated losses.

是的。所以我們會繼續關注這一情況。我們確實在收到的有關訴訟損失的數據中看到了一些積極的趨勢。正如我們一直所說的那樣，我們確實相信該系統需要 18 到 24 個月的時間才能實現成長，但我們非常樂觀地認為佛羅裡達市場在訴訟損失方面正在改善。

Great. Thanks. Appreciate the help.

偉大的。謝謝。感謝您的協助。

Thanks, Paul.

謝謝，保羅。

Thank you, Paul.

謝謝你，保羅。

Maxwell Fritscher, Truist.

麥克斯韋·弗里徹，真理論者。

Hi, good morning. I'm calling in for Mark Hughes. I guess, going off of the Florida tort reform question, the loss ratio this quarter was very good. I was just wondering, how durable is that? I guess a better way to put it is, how much of that was due to the better portfolio set up versus -- and better regulatory environment versus more mild weather in the quarter?

早安.我要找馬克·休斯。我想，從佛羅裡達州侵權改革問題來看，本季的損失率非常好。我只是想知道，它的耐用性如何？我想更好的說法是，其中有多少是由於更好的投資組合設置以及更好的監管環境與本季更溫和的天氣？

Yeah. Well, that is actually something that we've been trying to analyze and understand just because it's very difficult to compare what is the exact driver of that. I mean, weather losses for us have been lower, but they've also been lower throughout the season.

是的。嗯，這實際上是我們一直在嘗試分析和理解的事情，因為很難比較其確切的驅動因素。我的意思是，我們的天氣損失較低，但整個季節的損失也較低。

And I would say, particularly when we look at some of the severe convective storms that occurred throughout the year, I think a number of people had fairly large losses associated with those severe convective storms. And we did not have the same type of loss.

我想說，特別是當我們看到全年發生的一些強烈對流風暴時，我認為許多人因這些強對流風暴而遭受了相當大的損失。我們沒有遭受同樣類型的損失。

So I think from that standpoint, that gives us an indication that our portfolio is performing better. But some of it does have to do, definitely, with a little bit lower weather. And I think that the -- as Ernie mentioned, the tort reform, I think, is probably having some positive impact, but it's just hard to quantify.

因此，我認為從這個角度來看，這表明我們的投資組合表現更好。但其中一些確實與天氣稍微低一些有關。我認為，正如厄尼所提到的，侵權法改革可能會產生一些正面的影響，但很難量化。

Yeah, that's helpful. And then on the expense ratio, pretty much the same for the full year, a little down. Can we expect it to be steady in 2024? How do you see that looking for this year?

是的，這很有幫助。然後就費用率而言，全年幾乎持平，略有下降。我們能否預期 2024 年會保持穩定？您如何看待今年的尋找？

I think the -- looking forward, expense ratio overall probably be fairly flat. We are doing some continuing investments in IT and productivity, which I think is going to allow us to grow in the future. But I think we do have some continuing investments in 2024.

我認為，展望未來，整體費用率可能相當平穩。我們正在 IT 和生產力方面進行一些持續投資，我認為這將使我們未來能夠發展。但我認為 2024 年我們確實會有一些持續投資。

That's all for me. Congrats on good quarter. Thank you.

這就是我的全部。恭喜季度表現良好。謝謝。

Okay, thank you.

好的謝謝。

This concludes our question-and-answer session. I would like to turn the conference back over to Ernie Garateix for any closing remarks.

我們的問答環節到此結束。我想將會議轉回厄尼·加拉蒂克斯 (Ernie Garateix) 發表閉幕詞。

We want to thank everybody for joining the call today and hope everyone has a great day.

我們要感謝大家今天加入電話會議，並希望大家有個愉快的一天。

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

會議現已結束。感謝您參加今天的演示，您現在可以斷開連接了。