Good morning. Welcome to the Heritage Insurance Holdings's fourth quarter 2014 financial results conference call. My name is Dan, and I will be the operator today. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentations. As a reminder, this conference call is being recorded. The matters discussed on this call that are forward-looking statements are based on current management expectations involving risks and uncertainties that may result in these expectations not being realized. Actual events, outcomes, and results may differ materially from what is expressed or forecasted in forward-looking statements made on this call due to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described within this conference call or press release issued yesterday and other filings made by the company with the SEC from time to time.
Forward-looking statements made during this presentation speak only as of the date on which they are made. Heritage Insurance Holdings specifically disclaims any obligation to update or revise any forward-looking statements to reflect new information, further events or circumstances or otherwise. At this time, I would like to turn the conference over to Mr. Bruce Lucas, Chairman and Chief Executive Officer of Heritage Insurance Holdings. Please go ahead, sir.
Thank you, Dan, and good morning to everyone joining us for the call. This is Bruce Lucas, Chairman and CEO of Heritage Insurance, and with me is Stephen Rohde, our CFO. I would like to welcome all of you to our fourth quarter earnings call. Before we begin the discussion of our quarter, I would like to take a moment to thank all of our employees for their commitment to our company. I am pleased to report that we had our best fourth quarter in the company's history. When we launched our IPO in May of 2014, we outlined a very focused business plan that would produce significant top and bottom-line growth. Our business plan included tremendous growth in personal lines premium and the launch of our commercial residential division. I'm happy to report that our fourth quarter significantly exceeded the projections set forth in our IPO.
From a financial perspective, we had an excellent quarter. Our gross written premium increased significantly, attritional loss ratios remained stable. We generated an attractive return on equity for our shareholders. We continue growing our commercial residential program and have grown the division to 12 members, which we believe is the deepest and most experienced commercial residential department in Florida. We are fully staffed and exceeding our projections for voluntary commercial residential production by approximately 50%. We continue to have tremendous success in growing the company, as evidenced by a few key metrics. For example, we had 116% increase in gross premiums written compared to the fourth quarter of 2013. We had a 157% increase in net premiums earned compared to the fourth quarter of 2013. We also had a 64% increase in policy count compared to the fourth quarter of 2013.
During the quarter, we also assumed approximately $85 million in annualized commercial residential premium from Citizens Insurance. We assumed approximately $84 million in annualized personal lines premium from Citizens as well. Net operating income increased 1,220% compared to the fourth quarter of 2013. Finally, shareholders' equity increased 152% from fourth quarter of 2013. We are very pleased with our growth to date and have exciting plans for the company in the near future. For more information on the financial results, I will turn the call over to Steve Rohde, our Chief Financial Officer. Steve?
Thank you, Bruce. Good morning. First, I'd like to give you a few financial highlights from the fourth quarter. Our gross written premiums were $181.5 million. Net income was $19.7 million. Our combined ratio, as measured against gross earned premium, was 74.3%. Stockholders' equity was $255.1 million. Our policy count reached 209,400 policies at December 31st, which included approximately 2,400 commercial residential policies. Our total in-force premium at December 31 was $494.6 million, an increase of 109% over the prior year and 53% over the third quarter. This significant growth was fueled by our entry into commercial residential, which included three depopulation transactions during the fourth quarter, totaling $85.4 million of in-force premium and $5.8 million of premiums written through the voluntary market. As of December 31st, approximately 81% of our in-force premium is from personal residential and 19% from commercial residential business.
In addition to the commercial residential depopulation activity, we also assumed approximately 39,000 additional personal lines policies, accounting for approximately $84 million of in-force premium from Citizens during the fourth quarter. This activity fueled the growth in our gross premiums written and gross premiums earned. Gross premiums earned for the fourth quarter was $106.6 million, compared to $50.1 million for the fourth quarter of 2013 and $86.8 million for the quarter ended September 30th of 2014. In addition to an increase in in-force premium, our results were favorably impacted by significantly lower reinsurance costs as measured against gross premiums earned. Our ceded premium ratio was 23.5% for the fourth quarter of 2014, compared to 36.6% for the fourth quarter of 2013.
This decrease was primarily the result of lower reinsurance costs following the placement of our reinsurance program on June 1st, due to favorable reinsurance market conditions and the issuance of $200 million of cat bonds through Citrus Re, as well as the improved geographic split of risk resulting from the SSIC policy acquisition. In addition, the significant increase in our growth premiums earned from the fourth quarter Citizens depopulation activity also had a positive impact. Our ceded premium ratio for the third quarter of 2014 was 30.5%. Reduction from 30.5% to 23.5% quarter-over-quarter was entirely the result of growth in gross premiums earned in the fourth quarter. There was no corresponding increase in ceded premiums. An increase in ceded premiums will not incur until June 1st of 2015, when our reinsurance contracts renew. Our loss experience continues to be positive and well within our expectations.
Our loss ratio, as measured against gross premiums earned, was 25.7% for the quarter and 28.7% year to date. Our loss ratio on a reported, which does not include IBNR, was 19.8% for the quarter and 22.6% for the year, with IBNR increases making up 5.9 percentage points of the loss ratio for the quarter and 6.1 points for the year. In total, our unpaid loss in LAE reserves at December 31st, 2014 was $51.5 million, which included $30.1 million of IBNR, or 58% of the total loss in LAE reserves. We are still a new company with limited loss development experience. As a result, we have to rely significantly on industry experience when establishing our reserves. Because of this, we have set IBNR using management's current best estimate near the top of the indicated range as developed by our independent actuary.
Our expense ratio as a percentage of gross earned premiums was 25.1% for the quarter and 22.5% for the year. The $10 million acquisition payment for the SSIC policies was capitalized in June and is being amortized in relation to the earning out of the unearned premium that we acquired. The amortization of the SSIC acquisition payment was approximately $3 million during the quarter and $7.5 million for the year, which had a 2.8 percentage point impact on the expense ratio for the quarter and 2.4 points for the year. Our combined ratio as a percentage of gross premiums earned was 74.3% for the fourth quarter and 79.4% for the year. We are very pleased with these results, especially when considering each component of our combined ratio, reinsurance, losses, and expenses were in line or better than our expectations.
We believe this underlying base of profitable business, which now includes approximately $95 million of commercial residential in-force premiums, should position us well for the coming quarters. On the balance sheet side, stockholders' equity increased to $254 million compared to $100.9 million at December 31st, 2013. Our May 2014 IPO increased equity by approximately $101 million, with net income contributing $37.1 million. Our statutory surplus in our insurance company subsidiary at December 31 was $172.7 million. Our gross written premium to surplus ratio was 2.5 to one, and a risk-based capital ratio as measured against the authorized control level was 459%. Our invested assets at December 31st were $331.7 million, with approximately $293 million invested in bonds with an average credit quality of A and a duration of 4.0. Our cash position was $173.8 million, and our total assets were $615 million at December 31st.
Overall, we had an excellent quarter as well as an excellent year. With that, I'll now turn it back to Bruce.
Thank you, Steve. We'll now open the forum and take questions from our analysts.
We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If your question has been addressed, you may withdraw from the queue by pressing star then two. Our first question comes from Mark Hughes of SunTrust. Please go ahead.
Yeah, thank you. Good morning, Bruce. Good morning, Steve. Pretty impressive.
Thank you, Mark.
Thank you.
I did want to ask, what is your latest thinking about the takeout opportunities as we think about 2015? How do you look at it now versus where you might have looked at it six months ago, both in terms of the remaining policies within Citizens and the level of competition?
Mark, this is Bruce. I'm going to say that obviously the policies in force at Citizens has waned compared to where it was six months ago. You typically do see that naturally through fourth quarter takeout activity, which is the busiest time at Citizens. As you see declining policy count, that may create some declining opportunities to assume large blocks of policies. We choose to maintain a pretty disciplined underwriting approach and only pursue policies that make sense to us from an underwriting perspective. We have decided to continue with the takeout process at Citizens, and rather than focus on large-scale assumptions more geared toward the fourth quarter, we're just spreading the risk out with smaller scale depopulations throughout the year. We are still finding very good policies there.
Citizens is the largest new business producer in the state of Florida, there's always plenty of new policies going in. We are slightly shifting the focus in that we're just doing more metered takeouts on a monthly basis rather than focusing exclusively on the fourth quarter.
In the first quarter, we did make all three takeouts during each month. We expect those to net us about in excess of 22,000 policies on the personal lines side and approximately 300 commercial policies. Total annual premium from those should be in the $60 million, all the takeouts in the first quarter. We were approved to do an April takeout, and that's in process at this point.
Right. How about any thoughts on growth initiatives outside the state, maybe in Texas, other markets? You're certainly doing well in Florida. How do you think about the geographic expansion?
Yeah, Mark, that's something that we've been working on for a while, and we have a short list of five or six states that we're just finishing our due diligence on. We do intend to file in those new states this year, and new business production would be geared more toward fourth quarter at the earliest. It's more likely going to be more of a 2016 issue, I think. Once you get launched in a new state, your initial ramp-up of voluntary production is a little slow until you kind of get out there and get your name on the street, get in front of agents, and really kick off your marketing campaign. It's something that we are actively working on.
Steve, on the operating expenses, where should we think about those going forward? You had very good growth. They were a little bit higher in terms of the ratio than I might have assumed. How much of a step down from Sunshine State amortization can we look for in Q1? Then, just generally speaking, where should they be at?
We have about $2.5 million left to amortize on the acquisition cost of Sunshine State, so that'll mostly go off in the first quarter with a little bit trailing in the second quarter. I see our policy acquisition costs as a percentage of earned premium against direct earned premium. That'd be about 14%, and we have no acquisition costs associated with the assumed premium we take from Citizens. Our general expenses are running about, I'd say, about 10% of gross earned premium.
Okay.
Part of that's made up from the stock-based compensation as well as our bonus compensation. Those two components represent probably close to three points of that 10-point expense ratio on the general expenses to gross earned premium. Then, of course, when we do the takeouts, we get that benefit from not having acquisition costs. The takeouts then reduce that expense ratio that's trending all in with stock-based compensation. It was about 24%. It brings it down a couple points. It will bring it down a couple points in 2015.
Right. Okay. Low 20s perhaps?
Yes.
Okay. Final question on losses. Are you seeing any commercial residential losses consistent with kind of that, I think, low double digits maybe in the teens, was what some of those policies were generating? How has your experience been?
Well, the fourth quarter, which was our first quarter, we had very low reported claims. Our loss ratio on a reported basis on commercial for the fourth quarter ran about 3%. We did set up significant IBNR in the fourth quarter because it's a brand new line for us and limited experience, so we reserve to the mid-teens on that, but the actual experience has not come through at all at this point.
Mark, and this is Bruce, and I'll add to that. We look at that line of business, and obviously we're approaching $100 million of in-force premium there. The loss ratios have been surprisingly low on a reported basis. As Steve mentioned, we are very conservative in how we handle our claims. Overall for the company, we run our IBNR right at the top of the range, just a hair under it. That's our management's best estimate of where we think it should be for a company on our growth curve. We kind of look at that line of business and say, although we're not seeing the reported claims, it is still early, and it's more prudent to be over-reserved versus under-reserved. We're pretty happy with where we are right now on the cushion with respect to IBNR.
Great. Thank you.
Thank you.
Our next question comes from Arash Soleimani from KBW. Please go ahead.
Hey, thanks. Good morning, everyone.
Good morning, Arash. How are you?
Good. How's everything going? Just wanted to quickly ask you guys, on the commercial residential, you mentioned the reported loss ratio around three. What was the actual, I guess, GAAP loss ratio on that business?
That was the
Was that including IBNR and everything?
That excludes IBNR. Including IBNR, it was about 14%.
14, okay. I know you said there's conservatism in there, do you feel confident that could potentially actually be lower than that of a true run rate going forward?
We have to be careful in how we say that. Management's best estimate is that we feel IBNR should be at where it is, at 14%. However, when we looked at the policies that were at Citizens, we saw loss ratios that were consistently in the mid to upper single digits. There's a lot of historical data there that you can mine through and get a good understanding from an underwriting perspective as to how that book of business has performed. Obviously, you would expect to see higher loss ratios on underpriced policies. Since we weren't taking those types of risks, we feel pretty confident in where we are right now. That said, we just did a large depopulation in the fourth quarter, and we want to be conservative on the IBNR side. We never want to have to go back and increase the IBNR.
Okay. That makes sense. Obviously, the loss ratios on commercial residential are lower than the personal residential loss ratios. How should we think about the reinsurance aspect of that? How would the, I guess, reinsurance ceded premiums on commercial residential stack up against reinsurance ceded premiums against the percentage of gross earned for personal residential? Do the combined ratios end up being pretty similar when you take everything into account?
Yes. Once you bring everything together, they both should run close to an 80-85 combined ratio.
Okay
On a go forward basis. The reinsurance cost for commercial residential, we are expecting that to be in the low to mid 50% range.
Okay. The $5.8 million, I think you guys said you did, I guess, on a voluntary basis in commercial residential, is that sort of a fair quarterly run rate for organic business?
Well, it's hard to say because that was our first quarter of doing voluntary business. We did assume some commercial residential risks in June when we did the Sunshine State acquisition. The voluntary program did not launch until the fourth quarter. We were very well-received by market. Obviously, we bound more premium there than we had originally forecast, so we're pretty happy with that. I don't think it's that far off of what we would expect right now in terms of an average run rate, but we won't really know until we get a little bit further into the year.
Our first quarter numbers are very similar to those.
Yeah
first quarter numbers.
Okay. In general, are you guys seeing differences in AOP loss ratios between Citizens business and voluntary business?
Our loss ratios run pretty similar between the two. There's not a vast difference at all. Actually, no, I'd say they're very similar.
Yeah. We really do focus on the underwriting of those Citizens policies, and the fact that we have done the number of transactions that we've accomplished over the past two years, comparing the data that we get on the takeout business, looking at the metrics, the loss ratios, overall combined ratios, comparing that to the voluntary line. The fact that we are almost in line between those two business segments, I think, is a real testament to the underwriting quality that we have as a company.
Definitely. Was there any development in the quarter favorable?
We had about $200,000 of favorable development on the 2013 claims.
Okay. From a premium to surplus perspective, do you feel comfortable with where you are now? Is that a range where there's still wiggle room to continue writing organically to a substantial magnitude?
Yeah. We have a very conservative gross written premium to surplus ratio, we have not been shy about touting that as really a hallmark and a strength of the company versus some of the other companies that are down here in Florida. We currently ride at a 2.5 to 1 on a gross written premium to surplus ratio. That's a good range for us. We like being in the 2s. We think that financial strength is really evident in the organization by looking at how much leverage they put on their capital base. In the fourth quarter, we had some pretty significant takeouts activity, we downstreamed approximately $35 million into surplus in that quarter to bring us up to about $172 million. Organically speaking, we probably will sit at $200 million right around the June timeframe.
Not sure where that would put us with a couple of the other big Florida domestic insurers, if it's not number one, it's going to be right up close to the top of the list. You could run something with a 2 handle on it on top of that type of surplus, that would give you an idea of where we feel comfortable in terms of top line.
Okay, great. My final question is, did you provide already a breakdown of voluntary versus Citizens versus Sunshine State, the policy breakdown?
Excuse me, the policy breakdown on a personal lines side, about 74% is takeout business, 14% is SSIC business, and about 12% is voluntary.
Right.
Commercial, since it was so much when the fourth quarter was the takeout, that represents about 92%, SSIC is about 5%, and voluntary is about 4%.
Arash, when we originally gave out projections, let's go back to the IPO time period, because that's relevant for most people on the call. We really wanted to end the fiscal year at roughly a 25% voluntary mix of business compared to Citizens. We're there. We're right at 26%, so we're right on target. We're seeing some nice increase in the voluntary production side of the business right now. That corresponds to a couple of what we thought were measured rate decreases that we took in the fourth quarter. We're happy to see production moving up. It's in the right direction, and we're building on the momentum that we've been laying the foundation for over the past 12 months.
Sorry, with those rate decreases you were mentioning, is that something where, again, absent Citizens business, would you still expect to expand underwriting margins in 2015 with those rate increases in place after taking reinsurance into account, again, absent Citizens?
I don't really think that the Citizens part of it's really relevant. We just look at the in-force book of business and look at where we are on a combined ratio basis, obviously reinsurance is a critical part to that. We had some pretty significant reinsurance savings last year, as a result, we took some rate decreases across the portfolio to reflect that, pass some of those savings onto the consumer, but still maintained a pretty healthy combined ratio of 79.4 for the fiscal year 2014.
Great. Thanks for the answers, congrats on the quarter.
Thank you, Arash.
Our next question comes from Matthew Carletti of JMP Securities. Please go ahead.
Hey, thanks. Good morning. A few of mine have been asked and answered, but I do have one or two left. On your reinsurance contract, I know the majority of it's on a three-year basis, but could you maybe update us on as we head towards mid-year, obviously, a part of it's renewable and what you expect in terms of pricing? Then secondly, just if we should be thinking about a lot of times in a very soft market, there is an opportunity to even renegotiate beyond just the piece of it that's renewing in the first year, and if you think that's at all a possibility.
Yeah, Matt, this is Bruce. I'll take a shot at it, Steve, feel free to jump in. Last year at 6/1, we did place 88% of our private reinsurance cover on a multi-year basis with essentially alongside and below the cat bond was on a two-year duration, then we did do two Citrus Re transactions totaling $200 million in cat bonds, and they had a three-year duration on it. We still feel like the pricing that we got on that three-year bond is at or potentially better than what you may even see this year. We feel pretty good about that purchase. Hindsight's always 2020, but it certainly looks like we got an excellent deal on those two Citrus Re transactions. With respect to the portions alongside and below the cat bond that were more collateralized markets, we did get some pretty good rates and terms last year.
We have not gone to market yet to see where pricing will fall for those layers. We would expect pricing to be flat or down five points or so is, would be my best guess for the market. I think 1/1s were down. We were hearing about 10% overall, depending on who you talk to, but they had to catch up to the prior year 6/1 decreases. We feel like we're in a pretty good position now with our growth curve. We bought approximately $850 million of reinsurance last year, that's between FHCF and private. Sorry, it was $990 because we had to add more after the Sunshine State acquisition. We would definitely be in that $1.5 billion-plus PML range now with the fourth quarter takeouts.
This gives us a really good opportunity to grow in, and dollar cost average, secure additional, hopefully multi-year cover at really favorable rates, and take a lot of the volatility that you see post-event out of the business plan entirely. I think that's just a good way to buy reinsurance. You could take a lot of excessive risk and buy 12-month contracts and hope it goes down a few points, but if you can lock in multi-year cover at very sustainable rates, run a 79 combined ratio, take a lot of the rate volatility out of the equation, I think that's the prudent and best way from an enterprise risk management standpoint to run your company.
Yeah, I definitely agree.
I'm just going to add, Matt, that because of our growth, the FHCF layer moves up, so the layers we bought down below with the two-year cover, the portion we bought last year will cover about half of the need down below, so we'll have an opportunity to buy additional reinsurance down low at hopefully a little better terms. Like Bruce said, the dollar cost averaging is working out very well for us.
Yeah. One more kind of number. That $990 million that we ended up buying last year, post Sunshine State acquisition, only $200 million of that was in the Citrus Re-transaction. There is still a lot of private reinsurance that we need to go out there and acquire. With the growth that we've experienced year-over-year, plus 100%, it's a great opportunity for us to dollar cost into the market right now.
Great. That's really helpful. Just one other quick question, if I can. Bruce, on the M&A environment. Do you see potential opportunities for further M&A, whether it's renewal rights or outright acquisitions, and whether that might be in Florida or might help facilitate you getting into some of the newer states you're looking to get into?
Yeah, I think that's a great question, the answer is yes, there are M&A opportunities that are out there. We are actively looking at several of them now. We're only going to do a deal, obviously, if we think it's the right fit, both from a business standpoint and cultural standpoint with the organization that we've built on our end. There are some good opportunities that are potentially out there. We're continuing to work toward those. I think that that is something, especially on a multi-state basis, that would be pretty attractive to us.
Great. Well, thank you for the answers. Congrats on a nice year, and best of luck in 2015.
Thanks, Matt, appreciate it.
Our next question comes from John Barnidge of Sandler O'Neill. Please go ahead.
Good morning, congrats on the results. Most of my questions have been answered, just one quick modeling question. Your other revenue line item grew quite a bit throughout the year. I was, one, wondering what are the sources of that, and two, how should we think of a run rate for that?
Okay. What makes up that is two primary items. One is the $25 policy fee that we collect on every policy that we issue or renew, and that makes up about half of it. The other is the rental income that we get from the buildings that we own, of which about 88% is leased to other tenants. The policy fees will continue to grow as our policy count grows. The rental income will be maintained at the level it's at right now.
Okay, great. Thanks. That's it for me.
Thank you.
Our next question is a follow-up from Mark Hughes of SunTrust. Please go ahead.
Thank you. You had taken some selective rate decreases, it sounds like. Did you quantify what the average might be or the average rate across all of your book? If you could distinguish between, I guess, commercial is a new venture, but on the residential side, what the rate has been.
Sure. Overall, on the takeout homeowners HO3 business, we took a minus 1.4%. On our voluntary business for HO3, we took a statewide overall decrease of 12.5%. For our voluntary HO6 filing, we took an overall minus 8.9%.
How do you think that compared to the overall pricing? Where do you think you sit relative to your competition?
Yeah, that's a really good question, and unfortunately, there are so many different rating algorithms out there. Every company has their own territory. Some of them use wind bands, some don't. I would say that overall, we're definitely in the ballpark with a lot of the other leading producers in the state. We have our sweet spots like other companies do. We are seeing great activity in the Southwest, Southeast, and increasingly so in the Northeast and Central Florida. The rate decreases were targeted to help voluntary production in areas where we want to grow so that we can avoid risk concentration, and they've been pretty effective in doing that. I think last month we wrote in 49 different counties. I was pretty happy to see the spread of risk that we're getting throughout the state. It was very encouraging.
Thank you.
Thank you.
Our next question comes from Samir Khurana of Capital Returns Management. Please go ahead.
Morning, guys, and congrats on the year.
Thanks, Samir.
I'm interested in the success rate of each of your takeouts in Q4, so I was hoping you can tell us how many policies you guys tagged and how many policies actually stuck, and the annualized premiums associated with each.
During the fourth quarter, is that what you're talking about?
Yeah. That's right.
Okay. On the personal lines side, for the October takeout, we tagged 19,000 policies approximately, and we netted, after our opt-outs, about 11,000 policies. That was about a 58% success rate. November, we tagged 38,000, and we netted about 21,000. In December, we tagged about 14,000 policies and netted about 7,500.
I think, Samir, if you want to look at kind of a good run rate net of both opt-out windows, the first 30 days and the second 30 days. It's probably that mid-50 number, 50%-55%. That's historically on par with what we've done in the past. We're seeing the take-up rates are pretty much an even keel at this point in time.
Okay. What about for the commercial residential takeouts? It looks like you guys have really good success there.
Yeah. There, we tagged or mailed on 2,300 policies in October and received 1,877 of those after opt-outs. November, we tagged 175 and after opt-outs, we had 100 policies. In December, 390 policies, which we received 239 policies.
Great. We've had a little bit higher take up there, Samir, and I think a large part of that is a real testament to the team that we've built downstairs on the first floor. We brought over Randy Jones and some other people from ASI. They've done a great job of building out that underwriting department to 12 people now. That, to our knowledge, is the deepest commercial res department in the state of Florida. They have an excellent reputation, then the financial strength of the company that really matters for these kind of higher TIV dwellings. The way that we seed out the risk on those, I think, has been another important factor in terms of our take-up rate. We're only retaining about $1 million at risk on any building, and we're seeding out everything else above that.
It's a very conservative risk profile for the company. You kind of combine those together with the capital base that we have at the company, and that's a big reason why I think our take-up rate was higher for commercial residential.
Okay, great. On the residential side for takeouts, what's the retention rate for those policies?
The policies that make it to renewal, we are renewing on average about 85%, 84% for the year. We have about another 5%-6% cancel midterm.
Okay. If you can give me some metrics on the progress of your voluntary homeowners business in Q1, how many policies are you writing per month, what's your average premium there?
As of January, we wrote about 1,500 policies, and in February, we exceeded that. We're starting to average more like 80 policy or sales a day on the voluntary side in the last few weeks.
Yeah, I'd say that's right. The premiums vary a lot from geographic area to area, if we're going to load up on tri-county business, obviously the average premium size would be significantly higher. We're really focused more not on the average premium size, but on the spread of risk and the profitability of those policies. When you look at voluntary HO3s, you're looking at something in the $1,700 range. That's kind of reflective of a really good spread of business throughout the state. On HO6s, obviously much smaller risk, lower premiums there, call it upper $600-$700 in premium. If you wanted to solely focus on the average premium size, we could just go and turn the floodgates on in Southeast Florida and write $3,000 premiums all day.
I don't think that'd be the right move for the company, and what we really focus on is the overall combined ratio. That's the more telling number.
Sure. As you guys focus on your new business, you ramp that up, what is the proportion of HO6 versus HO3?
HO6 is not a particularly large part. I'd have to look at where we are for the in-force. Do you have that number?
Yeah. We've written our in-force voluntary is 18,000 HO3s and about 1,700 HO6s and about 3,300 DP3. It's less than 10% of our voluntary production.
Okay, perfect. There was an increase in G&A in Q4. I was just wondering what that was from and if that will continue to be a seasonally high quarter for G&A, or is this the new run rate, 13-
$3.3 million of that was related to stock-based compensation, some options that were granted in the fourth quarter. That was the primary cause of the jump.
Yeah.
Okay. That's it for me. Thank you, guys. Congratulations.
Thank you.
Thank you.
This concludes our question and answer session. I'd like to turn the conference over to Bruce Lucas for any closing remarks.
Thank you. Just wanted to thank everybody for your support of the company and participation in our fourth quarter call. We look forward to speaking with you in the next quarter. Thank you again for all of your submitted questions, and we'll follow up with some additional information as things progress on our side.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.