Heritage Insurance (US:HRTG)2019-03-04 17:28Financial Data and Key Metrics Changes - Net income for Q4 2018 was $3.9 million, an increase of $9 million from a loss of $5 million in Q4 2017 [22] - Full-year net income for 2018 was $27.2 million, compared to a loss of $1.1 million in 2017 [23] - The net combined ratio for 2018 was 90.4%, indicating strong performance [16][28] - Book value increased from $379.8 million to $425.3 million, a nearly 12% increase [30] Business Line Data and Key Metrics Changes - Gross premiums earned in Q4 2018 were up 28% compared to Q4 2017, driven by full quarters of NBIC revenues [24] - Net earned payments for Q4 2018 increased by 17%, reflecting the growth in gross earned premiums [24] - Losses for Q4 2018 were $14.9 million higher than Q4 2017, leading to a higher net loss ratio by 6.3 points [25] Market Data and Key Metrics Changes - The company has reduced its total insured value in the Tri-County area by $15 billion, leading the market in derisking [62] - As of year-end 2018, only 32% of the total insured value was in Florida, expected to drop to 29% in 2019 [18][67] Company Strategy and Development Direction - The company is focused on diversifying outside of Florida, recently beginning to write business in Alabama and Georgia, with plans for Virginia and Maryland [19] - A partnership with Safeco Insurance aims to provide bundled discounts to home and auto customers, enhancing premium growth [19] - The company has emphasized a conservative reserving philosophy to reduce underwriting volatility and improve financial stability [12] Management Comments on Operating Environment and Future Outlook - Management noted that the underwriting and reserving initiatives position the company for solid returns while tempering risk [12] - The company expects strong earnings in 2019 and plans to use earnings for debt reduction and potential share repurchases [54] - Management expressed confidence in their loss reserves and proactive measures taken to manage claims, particularly in the Tri-County area [62][63] Other Important Information - The company completed a comprehensive debt restructuring, retiring $155.4 million of debt and replacing it with $114.2 million of new debt on better terms, resulting in over $7 million of annual pretax savings [13][14] - Non-core pre-tax expenses for the quarter were $11.3 million, primarily related to debt restructuring [15] Q&A Session Summary Question: Update on gross Irma and Michael losses and claims - Management reported incurred losses for Irma at approximately $900 million, with modest new claims coming in [35] Question: Plans to improve estimation of catastrophe and attritional losses - Management disagreed with the notion of underestimating Irma losses, stating they were proactive in increasing loss reserves [36] Question: Reinsurance renewal percentage and pricing - Management indicated they are still in the market for private layers and have increased FHCF participation to 90% [40][42] Question: Premium generation from Safeco relationship - The program with Safeco has just launched, and no premium update is available yet [44] Question: CAN revenues and impact post Florence and Michael - Management does not disclose CAN revenues separately but views it as a profit center for managing daily losses [45]