Heritage Insurance (US:HRTG)2020-02-28 18:51Financial Data and Key Metrics Changes - Gross premiums written increased by 6.2% year-over-year to $235.4 million, with 9.4% growth outside of Florida, up from 7.9% in Q3 2019 [5][20] - Net income for Q4 2019 was $12.8 million or $0.44 per diluted share, up from $3.9 million or $0.15 per diluted share in Q4 2018 [20] - Book value per share increased by 8.5% year-over-year to $15.66, with shareholders' equity rising to $448.8 million [17][25] Business Line Data and Key Metrics Changes - For the full year of 2019, gross written premiums increased by $14.6 million or 1.6% year-over-year, with 8.1% growth outside Florida, partially offset by a 3.9% decrease in Florida [20][21] - The net loss ratio for Q4 2019 was 51%, compared to 50.3% in Q4 2018, influenced by lower income from vertically integrated operations and higher current accident year non-weather losses [23] Market Data and Key Metrics Changes - Approximately 30% of consolidated total insured value (TIV) is in Florida, with only 6.4% in the Tri-County region, indicating a diversified market presence [6][15] - The percentage of litigated non-hurricane claims from the Tri-County region declined by 830 basis points year-over-year [13] Company Strategy and Development Direction - The company is focusing on organic growth and diversifying its market presence outside Florida, with a strong emphasis on independent agency relationships and auto carrier partnerships [5][12] - The company has proactively addressed market challenges since 2016, taking meaningful rate increases and reducing exposure in troubled regions [10][11] Management's Comments on Operating Environment and Future Outlook - Management believes that the proactive measures taken over the past four years have positioned the company favorably against macro conditions in the Florida market [14][29] - The company anticipates continued strong organic growth and favorable impacts from rate increases on the profit and loss statement [26][31] Other Important Information - The company repurchased $4.3 million of common stock at a 12.5% discount to Q4 2019 book value per share and intends to continue share repurchases as long as shares are trading below fair value [17][26] - The company has approximately $34 million in cash in non-regulated companies and $40 million available under its revolver [26] Q&A Session Summary Question: Update on partnerships with Liberty Mutual Safeco, National General, and GEICO - Management cannot comment on specifics but acknowledges these relationships are material and a significant driver of growth, especially outside Florida [36] Question: Thoughts on capital growth and M&A opportunities - The company has a strong capital position with room for growth and targets upper single digits to low double digits growth, while remaining conservative regarding M&A in Florida [38][40] Question: Expectations for loss ratio in 2020 - Management aims for a loss ratio in the low-50s, noting that 2019's weather activity was more severe than in previous years [47] Question: Reduction in AOBs and its impact - AOBs have decreased over 70% year-over-year, which is beneficial for reducing litigation expenses [51] Question: Claim inflation outside Florida - Management does not see significant claim inflation impacting their numbers outside Florida, although insurance fraud exists [56] Question: Rate increases and reinsurance costs - The company has substantial rate increases coming through, which will positively impact the income statement, with a lag in reinsurance pricing adjustments [60][62]