In Heritage’s Q3 earnings call, Ernie Garateix, CEO, suggested that the firm is raising its rates and evaluating its portfolio as the cost of reinsurance increases alongside capacity constraints.
Garateix commented, “Getting appropriate rates for our coverage offer is paramount. We continue to take rates in all our markets to keep up with the reinsurance, higher frequency of weather events and higher repair and replacement costs, driven by inflation of products and services.
“These higher rates are the primary driver of our 13.6% increase in the average premium per policy throughout the book. And we expect this trend to continue.”
The firm stated that it is also continuing to de-risk and diversify its policy mix outside of Florida, noting that these efforts have led to the growth of premiums in force in all states outside of Florida. In addition, total shared values outside of Florida represent approximately 75% of Heritage’s portfolio, up from 71% in Q3 of 2021.
Garateix added, “Reinsurance capacity and pricing is a factor in how we allocate capital by product and state. The cost of reinsurance is expected to increase, and capacity constraints are on the horizon. We appreciate our reinsurance trading partners, with whom we have developed a long-term, consistent relationship.
“Given the expected pricing capacity for catastrophe reinsurance going forward, we will continue to evaluate and adjust our portfolio to manage exposure concentration. This includes the amount of new business we expect to write and the amount of existing business we may renew while maintaining compliance with individual state regulations.”
In the firms Q3 results, it saw a net loss in the period of $48.2m, compared to one of $16.4m in the same three months in 2021.
Despite the losses, the firm still said that its gross written premiums had gone up 11.1% between Q3 2021 and Q3 2022, rising from $274.2m to $304.5m between the two periods. Gross premiums, it added, went up 4.6% in this time, too. Meanwhile, net earned premiums were down 1.7%.
Garateix continued, “Despite the negative impact Hurricane Ian had on our third quarter 2022 results, we are pleased with the progress we continue to make towards sustainable profitability. Rate increases continue to meaningful benefit written premiums throughout the book of business.
“We remain committed to proactively and appropriately raising rates to offset higher cost for reinsurance, as well as higher loss costs. We are taking underwriting actions to improve profitability.”
