Presurance Holdings, Inc. Q2 FY2023 earnings call

Key Points - Impact of wind-related events was felt, but top line growth (19% increase in gross written premiums) and expense management were noted. - Disciplined underwriting strategy played a pivotal role in top line growth, focusing on profitable verticals. - Underwriting teams enhanced business mix by focusing on core specialties with data-driven approach. - Expense ratio continues to trend favorably, approaching the target of 35%. - Net investment income increased significantly, with investments conservatively managed.

In the second quarter, gross written premiums increased 19% to just over $45 million. Commercial lines accounted for just under 80% of total gross written premium, with production up 8% in the quarter to $35 million. Personal lines represented just over 20% of total gross written premium, with gross written premium up 86% over the same period last year to just under $10 million. The overall combined ratio was 121%, but excluding storm impact, the accident year combined ratio was 95%. The loss ratio was 83% in the quarter but improved from the prior year, and the expense ratio was 38% in the quarter, approaching the target of 35%. Net investment income was $1.4 million in the second quarter, up 140% from the prior year period.

Forward-Looking - Expect continued expansion going forward. - Target expense ratio of 35% is a near-term milestone. - Anticipate expense ratio to continue trending downward as net earned premiums increase. - Rate increases implemented in Oklahoma (28% effective 8/1) and Texas (20% effective 9/1) books.

Risks - Impact of wind-related events, especially in personal lines. - Adverse development in restaurant bar tavern book in Florida, which has been put into runoff. - Cat load in Texas and Oklahoma books was an anomaly but expecting more active cat exposure in those states in future quarters, though less in the second half due to Florida business exit.

Q: Could you talk about the relationship between the net and the gross premium, particularly in commercial?

A: That is a function of reinsurance. There were increases on property reinsurance at 1/1 given activity last year from Ian and ceding commission on XOL treaties which reduces net compared to gross.

Q: Can we talk about the sources of adverse development?

A: We saw some emergence on the restaurant bar tavern book in 2022, mostly from Florida, which has been put into runoff this year. Rest of development was ceded to loss portfolio transfer put in place last year.

Q: How should we think about the cat load perspectively with the growth in the property business?

A: Unusually active quarter for Texas and Oklahoma books, moved to severe convective storm risk. Implemented 28% rate increase for Oklahoma book effective 8/1 and 20% for Texas book effective 9/1. Q2 was anomaly, expecting more active cat exposure in those states but less in second half due to Florida business exit.

Q: Should we think of the cat load in general rising? How much more can we expect expense ratio improvements?

A: From cat load, it's reasonable to expect more active cat exposure in Texas and Oklahoma states in future quarters. Regarding expense ratio, there were expenses from prior year adjustments in this quarter, with ongoing efforts showing continued reduction expected in future quarters.