Heritage Insurance (HRTG) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the full year 2024, the company achieved net income of $61.5 million or$2.01 per share, a significant increase from $45.3 million or$1.73 per share in 2023 [9] - The tangible book value per share grew by 30% to $9.50 at December 31, 2024, compared to year-end 2023, with an ROE of 24.1$20.3 million or $0.66 per diluted share, down from$30.9 million or $1.15 per diluted share in the prior year quarter, primarily due to higher catastrophe losses [19] Business Line Data and Key Metrics Changes - Gross premiums earned rose to$360.5 million, up 6.1% from $339.6 million in the prior year quarter, reflecting a strategic focus on rate adequacy and organic growth [22] - Net premiums earned increased to$199.3 million, up 12.2% from $177.7 million in the prior year quarter [22] - The commercial residential business saw a 13$1.3 billion in the southeast, $1.1 billion in the northeast, and$750 million in Hawaii [26] - Legislative changes in Florida have positively impacted the economics of writing new profitable business, leading to a decline in frivolous lawsuits [15] Company Strategy and Development Direction - The company is focused on executing underwriting and rate adequacy initiatives while strategically reducing exposures in unprofitable areas [11] - New personal lines business is being selectively written with a focus on risk management and stringent underwriting [14] - The company aims to maintain a balanced and diversified portfolio, ensuring no single state represents over 30% of total insured value [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's earnings power moving forward, despite significant catastrophe losses [21] - The company anticipates continued rate increases to earn through its book of business, providing a tailwind for growth in 2025 [32] - The proactive approach to managing exposures and enhancing rate adequacy is expected to position the company well for continued success [33] Other Important Information - The company incurred approximately $105 million pretax from 2024 hurricanes, highlighting the impact of catastrophic events on financial performance [11][32] - The average duration of the fixed income portfolio is 3.1 years, with a focus on higher yields while maintaining a high-quality portfolio [30] Q&A Session Summary Question: Can you describe the profile of the LA Fire claims? - The company reported fifteen total loss claims, with the remaining twenty involving some form of smoke damage, primarily from the Mount Sage event [36] Question: Can you provide more detail on the prior period development for the quarter? - The prior period development primarily relates to Hurricane Irma, with claims winding down as the event reaches its tail end [38] Question: How is the company looking at growth in E and S markets? - The company continues to see momentum in E and S, adapting to market dynamics state by state and evaluating regulatory environments [44] Question: Which geographies are being considered for reopening profitable territories? - The company is considering reopening profitable territories across its entire footprint, including the northeast and southeast [47]