Good morning, and welcome to Heritage Insurance Holdings' second quarter 2015 financial results conference call. My name is Alison, 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. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. As a reminder, this event 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 included, but not limited to, the risks and uncertainties described in this conference call, the press release issued yesterday, and other filings made by the company with the Securities and Exchange Commission from time to time. Forward-looking statements made during this presentation speak only as of the date on which they are made, and Heritage Insurance Holdings specifically disclaims any obligation to update or revise any forward-looking statements to reflect new information, future 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, and good morning to everyone joining us for the call. This is Bruce Lucas, Chairman and CEO of Heritage Insurance, and with me is Steve Rohde, our CFO. I would like to welcome all of you to our second 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. We had another great quarter in which we earned net operating income of $25.4 million. We have a strong business plan, and our quarterly earnings results reflect our ability to execute on that plan and once again outperform expectations. From a financial perspective, the quarter was solid. Our gross premiums written were strong. Our voluntary personal lines premium in-force grew by 67% year-over-year, and our voluntary commercial residential production outpaced our expectations.
While we continue to assume policies from Citizens, our opt-out rates have been much higher when compared to historical takeouts, and we believe that future takeouts from Citizens will be more challenging and smaller in scale. Citizens recently filed for a rate increase, which will likely make more policies eligible under our underwriting guidelines, but it is too early to determine the impact this proposed rate increase will have on our policy selection process.
Regardless of dynamics within Citizens, we continue to have tremendous success in growing the company, as evidenced by a 37% increase in gross premiums written as compared to the second quarter of 2014, a 114% increase in net premiums earned as compared to the second quarter of 2014, a 30% increase in policy count compared to the second quarter of 2014, net income of $25.4 million, which is an increase of 166% compared to the second quarter of 2014. Our combined ratio was 71.1% for the quarter. Shareholders' equity increased 41% compared to the second quarter of 2014, and our return on average equity was 33.9% for the quarter. In closing, I would like to talk about the acquisition that we announced earlier this week that I'm particularly excited about.
BRC Restoration Specialists, a full-service general contractor with operations throughout Florida, is our third M&A transaction and helps to fill a vital niche for our company. BRC is a large-scale contractor that currently services several property and casualty insurers in Florida and understands our business. BRC will enable us to perform all facets of the repair, including those related to fire, mold, and roofing, and they will bolster our water mitigation division by adding additional personnel and resources. The acquisition will provide better customer service by allowing our in-house contractor to work directly with the insurer to repair their home with professionalism and expediency. This will help Heritage control claim expenditures by performing the repair and reconstruction work at the appropriate price without having to pay the profit margin charged by outside vendors.
We send millions of dollars through Contractors Alliance Network every year, and we will be able to service these claims immediately. As part of the transaction, we are reorganizing Contractors Alliance Network to include the First Notice of Loss, water mitigation, and construction services so that all of these professionals can better work together. Additionally, BRC's resources will be particularly helpful after a hurricane as the company can immediately respond to catastrophe claims, which should help to better serve our policyholders and control claim expenditures. The company has named John Crist as the President of Contractors Alliance Network to lead this exciting and innovative component of the company, and I believe that John's experience and leadership will prove invaluable in the years to come. Now, for more on the financial results, I will turn the call over to Steve Rohde, our Chief Financial Officer. Steve?
Thank you, Bruce, and good morning. Gross premiums written for the second quarter were $135.6 million, up 37% year-over-year, resulting from $134.8 million of direct premiums written and $0.8 million of assumed premiums written.
There are a few factors that impacted premiums written for the quarter. First, the opt-out rate for our personal residential assumptions from Citizens in April and May were higher than we have historically seen. The higher opt-out rates we've experienced recently began in February and appear more reflective of the current environment. This translated into an 80% opt-out rate in the second quarter compared to an average of approximately 46% in 2014. A second contributing factor was our choice not to do a June takeout due to the economics of how the FHCF premium is calculated. As a result of these first two factors, personal residential policies assumed in the second quarter were approximately 3,400 policies.
Also playing a role was our commercial business, where we chose to not select any commercial policies during the second quarter while receiving notification from Citizens that we had some midterm cancellation of policies assumed during the first quarter of 2015 and the fourth quarter of 2014. This resulted in $2.3 million of unearned premium being returned and accounted for in our financials as negative premiums written in the second quarter. Finally, our non-renewal activity of commercial takeout policies during the quarter was higher than normal due to the exposure management that we did, as well as competitive pressures in the commercial marketplace. The market has softened since we selected our commercial policies in the fourth quarter of 2014 and the first quarter of 2015.
As a result, we identified portions of that business that were no longer attractive at rates being offered by our competitors to our long-term profitability goals. It is important to remember that these policies provided significant profits for us the past three quarters, and we expect that the policies that we are retaining will continue to contribute to profits going forward. Our personal residential policy count increased during the quarter to 219,200 policies, an increase of approximately 2,000 policies from March 31st of 2015. Our voluntary personal lines policies increased by almost 4,900 policies during the quarter. During the quarter, we completed the first anniversary of our Sunshine State Insurance Company policy acquisition. One year later, we have retained approximately 82.4% of the policies we acquired ahead of expectations.
Our total premiums in force at June 30th, 2015, were $510.2 million, an increase of 61% over June 30th, 2014, and a 4% reduction from March 31st of 2015 as a result of the exposure management that took place in commercial lines and the modest second quarter Citizens takeouts. This in-force premium resulted in $127.1 million of gross premiums earned, compared to $64.1 million for the second quarter of 2014. The increase in gross premiums earned was a significant contributor to our growth in net income when compared to the previous year. Additionally, our results were again favorably impacted by significant lower reinsurance costs as measured against gross premiums earned. As a reminder, our reinsurance treaties renew on June 1 and run through May 31st. Ceded premiums earned in April and May relate to the reinsurance treaty that was put in place the previous June.
Our ceded premium ratio was 25.4% for the second quarter of 2015, compared to 30.9% for the second quarter of 2014. The reasons for the decrease in the first two months of the quarter were twofold. First, last year's favorable reinsurance market conditions and the lower cost of reinsurance associated in issuance of $200 million of catastrophe bonds by Citrus Re, as well as improved geographic spread of risk resulting from the SSIC policy acquisition. Second, our fourth quarter of 2014 and first quarter 2015 Citizens takeout activity had a positive impact on the ceded premium ratio. These takeouts increased gross premiums earned for April and May without a corresponding increase in ceded premiums. The ceded premium ratio for the month of June of 2015 was approximately 34.9%, compared to 33.5% for June of 2014, following renewal of the reinsurance program.
On June 1st, 2015, we renewed our reinsurance program, which now provides $1.8 billion of coverage for a cost of approximately $177 million. Included in this cost is reinstatement premium protection, which will provide approximately $440 million of reinstatement coverage. A total of $477.5 million of coverage was provided through catastrophe bonds, approximately $690 million through the Florida Hurricane Catastrophe Fund, $566 million through private reinsurance, and a $35 million retention shared by our insurance subsidiary, HPCIC, and Osprey, our captive reinsurance company. Our retention is split $15 million to HPCIC and $20 million to Osprey. In addition to its $20 million retention at the bottom of that program, Osprey has a $5 million retention alongside the FHCF to fill a small gap between the two cat bonds we placed alongside the FHCF. The cost of the program as measured against in-force premium at June 30th is 34.7%.
This year's program costs were in line with expectations considering the inclusion of the commercial residential book of business, which did not exist last June. On a risk-adjusted basis, the costs were modestly down from last year. Our loss ratio, as measured against gross premiums earned, was 26.7% for the quarter, compared to 30% for the second quarter of 2014, due to the continued benefit of our commercial residential business, as this line of business historically for the industry has had a very low non-catastrophe loss ratio. Our experience to date has been excellent. Through three quarters, our reported loss ratio for commercial residential is in the low single digits. During the quarter, we increased IBNR by $5.2 million to $39.5 million. IBNR represented approximately 56% of our total loss reserves at June 30th, a level consistent with previous quarters, and accounted for 4.1 points of the loss ratio.
Our expense ratio as a percentage of gross earned premiums was 19% for the quarter, the same as the second quarter of 2014. The final amortization of the Sunshine State policy acquisition cost of $550,000 occurred in the second quarter, which represented 0.4 points of the expense ratio. Our expense ratios for the second quarters of both 2015 and 2014 were favorably impacted by the assumed earned premium from the Citizens takeouts, in which there were no acquisition expenses. This improved the Q2 expense ratios for 2015 and 2014 by approximately 3.7 points and 4.2 points, respectively. Our combined ratio as a percentage of gross premiums earned was 71.1% for the quarter, compared to 79.9% for the second quarter of 2014. We are very pleased with these results. Despite some challenges on the revenue side, it was another excellent quarter for us, especially considering each component of our combined ratio.
Reinsurance, losses, and expenses were in line or better than our expectations. We believe these underlying base of profitable business, representing $510 million of in-force premium, positions us well for the coming quarters. On the balance sheet side, stockholders' equity increased to $312.1 million, compared to $255.1 million at December 31st of 2014. Statutory surplus in our insurance company subsidiary at June 30th was $200.3 million, an increase of $6.2 million for the quarter. Our invested assets at June 30th were $438 million, with approximately $398 million invested in bonds with an average credit quality of A and a duration of 4.1. Our cash position was $132 million, and our total assets were $854 million at June 30th. Overall, we had another excellent quarter, one we are very proud of. With that, Bruce and I are now available to take your questions. Thank you.
We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from John Barnidge from Sandler O'Neill. Please go ahead.
Good morning, and thanks for having the call. I had a quick question. Now that we're in the later innings of the Citizens takeouts, how should we think about geographic expansion for the company? Because that seems to be the next leg for growth.
John, this is Bruce. I don't know that we're in the later innings of the takeouts at Citizens or not. All we can say is that lately, the opt-out rates have been higher than normal. Don't know if that's a trend that's going to continue or not. We did not do a takeout in June because we wanted to manage our reinsurance costs. Likewise, we do not have one planned for August, again, because we're just watching our true-up mechanism under our reinsurance program. We still think that there are good opportunities at Citizens. We are getting good production out of the takeout process. We have been focused on going multi-state now for about a year. We did our due diligence and filed in four states recently.
That is something that we believe is more of a 2016 story by the time we get licensed and get our systems up and running in those new states. We are looking at filing in a few more additional states, and we are looking at some M&A opportunities that are outside of Florida. We do think it'll be a growing portion of our business, especially as we progress into 2016.
A follow-up to that and one other question, if I may. You mentioned M&A. How large a transaction do you anticipate that you could currently handle with your current capital?
I would say at the top end, current capital-wise, we could do a transaction that is $125 million to $150 million-ish.
Okay.
That'd be a rough ballpark estimate.
That's great. Thank you. Your recent acquisition just further integrates the vertical integration that you guys have. Over time, how much savings do you think that could be on a loss ratio basis? How much do you feel like you're paying out in profit to contractors versus the cost on an annual basis?
John, this is Steve. Our CAN operations has been improving our loss ratio by about 1.5 points on our loss ratio. We anticipate the BRC acquisition, that'll push it above the 2% savings on our loss ratio. If we can leverage BRC more, it'll obviously improve it more. That's just on the saving side. We also have the opportunity to reduce what we call the loss ratio creep, that by getting there quicker, the scope of loss stays smaller. The more penetration we can get our people in quicker and avoiding the public adjusters and the lawyers and such, reduces the overall size of severity. As an example, right now, when our people get in with CAN on the water losses, the average loss is about $6,000. When someone else comes in first, the average loss is about $12,000.
That's a savings in addition to the point and a half to maybe up to two and a half points with integration of BRC.
Yeah, this is Bruce. I think that the addition of BRC is going to be meaningful. We're adding about 50 to 60 people that are essentially an arm of our claims department. These individuals currently service Florida-based property and casualty insurance companies now. They really understand the business. They understand policy forms. They know the importance of getting out to the scene quickly. They're licensed, bonded. They can do all aspects of the repair work. We're sending millions of dollars a year through our Contractors Alliance Network, and we're able to harvest all of those profits that we are currently seeding out to third parties.
Additionally, having another 50 to 60 people in the field helping us to work with policyholders at the time of loss to capture that work, should improve the penetration ratio that we're getting on our claims, which again, will help to lower our gross loss ratio. This is a home run for us on the AOP side. On the catastrophe side, this is a hedge that I really don't think anyone else in the business has. Maybe People's Trust to a certain extent. We're able to now dispatch our professionals out into the field immediately to tarp roofs, to do repair work, et cetera. That keeps the dollar in the door. It is a good hedge on our reinsurance retention, and it should help to control our catastrophe losses, which would be a positive message for our reinsurance pricing and our program going forward.
Great. Thank you very much.
The next question comes from Mark Hughes from SunTrust. Please go ahead.
Hi, this is actually Matia on for Mark. You mentioned that you're not doing a takeout in July or August. Could you just discuss how the takeout prospects are shaping up for the fall?
We actually are doing one in July. It's in process right now. The opt-out process is in its last two weeks. We had selected 18,000 policies in July, and at this point, there's 8,000 policies remaining that have not yet opted out. We still have two weeks to go on that. Then we've done a proof for a September takeout for up to 40,000 policies, and we've just gone through our selection process on that, and we do anticipate selecting close to 40,000 policies. Again, we don't know what the opt-out rate is going to be on those.
Right. Okay.
Part of the reason that we're not really sure what the opt-out rate's going to be going forward is we've done smaller scale takeouts with smaller population sizes. We don't know if that's just a reflection of the policies that we happen to take or if it's more endemic of higher opt-out rates into the future.
Okay. Thank you. Then could you just give a little more detail on competition in commercial?
Mm-hmm. Yeah. Commercial residential, just like the personal line side, the rates have been a little soft here in Florida. What we have really seen more than anything are the excess and surplus line carriers coming into the state and trying to take really high TIV policies. Now, we had some of that business from our Citizens assumption. I don't think we have a lot of that business now, which is fine with us. There's a lot of additional reinsurance costs that are associated with those policies. The E&S carriers came in and were looking for large premiums, large TIV, because their spread of risk throughout the U.S. is radically different than ours, which is more Florida centric. They were able to take some of the large TIV structures at a lower premium than we were willing to go to. We had to make a decision.
Do we want to keep that business really at a Combined ratio that did not make sense to us, or do we want to let that business go, therefore, we don't have to buy the reinsurance on it and focus really more on the core aspects of the commercial residential program, which are incredibly profitable for us. E&S really is working on the higher TIV policies, is what we've noticed, and I think that's been the lion's share of the premium that we let go in that division.
To add some to that.
The policies that came up for renewal, that we did not renew, had an average premium of about $70,000. The ones that we did renew had an average premium of about $32,000. It mentioned we had some midterm cancellations, and this again was policies that were taken by E&S carriers midterm. Those were the really large ones that had an average premium of $173,000. We're going back, what's remaining is kind of what our bread and butter would've been, and what is more in line with what our voluntary policies are.
Got it. Okay. Well, thank you. Thanks for taking my question. Our next question comes from Matt Carletti from JMP Securities. Please go ahead.
Hey, good morning. Just want to ask a question following up on some of the discussion about your in-house claims litigation, or I'm sorry, claims management. Just given, in late July, I believe there was a lot of rain, particularly in your guys' part of Florida, I was just curious, what you guys have seen. Has there been an uptick in claims? If so, have you been able to address it mostly with your in-house claims adjusters and how do you feel about the result there?
Yes, our loss ratio has ticked up a bit. We really saw it a little bit in June as well as July, weather related. Still a lot of water claims as well as a lot of roof losses. Our penetration, about 35% of our claims are being handled by our in-house people. We would like that to be higher. It's still a challenge, particularly down in South Florida, to get the penetration because of the culture of the PAs and the lawyers and so forth. Again, our loss ratio has not gotten out of hand. It's just spiked up a bit.
All right. Thanks for the color.
Yeah, I think you already see that.
Go ahead. Yeah, sorry, Bruce.
Yeah, we always see that in the summer months. It's the same every single year. It's May, June, and July are the wettest months in Florida, so you always see an uptick in loss ratios for those three months. That's because it's the rainy season down here. We also get a lot of claims that are reported in that are flood related, which we don't cover. You have to kind of ferret through those claims as well and make sure that, while total claims coming in may be higher in those three months, a lot of those claims won't be covered simply because we don't cover the flood peril.
Okay. would you say that seasonally adjusted or say looking year over year, as opposed to sequentially, it's maybe more normal?
Yeah, I think so. we're probably a couple points higher than what we had earlier in the year.
Okay. Thank-
again, it's not significantly higher.
Okay. Well, thank you for the color, best of luck.
Thank you.
Our next question comes from Arash Soleimani from KBW. Please go ahead.
Thanks. Good morning.
Morning.
Had a couple questions. I just wanted to confirm, in force premiums this quarter were $510 million. It looks like they declined sequentially from last quarter. Is that correct?
Yes.
$533 million.
Last quarter we're at five hundred and.
1Q.
Yeah. End of 1Q, we were at $533 million, now we're at $510 million, the drop was all in commercial. Personal lines is basically the same at $423 million.
That drop within commercial, was that all within the assumed commercial book?
Yes. The voluntary actually increased by $7 million, sales were again strong in the second quarter for commercial voluntary. Commercial voluntary is sold, we started in the fourth quarter of 2014, it was $6 million. First quarter, $6 million, the second quarter, $7 million. It's continued its strong pace. It was all in the exposure management took place in the commercial takeout business, again due to the softening in the prices and us just not willing to go down to meet the prices that the E&S carriers were offering.
Okay. I guess the other question is, in terms of your shelf registration, is there anything to read into that in terms of needing capital for growth into the other states or, I mean, it seemed like you mentioned you could do something over $100 million in terms of M&A without raising capital. I just wanted to just get a sense of how necessary the a capital raise would actually be to fund your growth.
I think that's a great question. This is Bruce. I've already had several inquiries this morning about it, and I think there's maybe some perception out there that we're about to do an equity offering. Let me just tell you, that is not the case. The shelf registration filing is just a corporate housekeeping filing that we put in place. We have no intention of raising any securities pursuant to that registration statement anytime soon. We do not need to raise equity at this point in time. That's just something that we had to get in place following our 1-year IPO anniversary. I really wouldn't read anything into that at this point in time. It's just cleaning up some general housekeeping that we have to do, and getting that registration
Should we still think of commercial residential as becoming a growing part of your overall premiums? Or is that something that is unlikely in the near term because of some of the Citizens' challenges? Or what's the right way to think of the mix of business?
It's still growing every month. In fact, it's internally outpacing our models, and we're doing pretty well on the voluntary side, we're doing over roughly $2 million a month in new business. We've been a little conservative on the underwriting front up until recently because we really wanted to watch the reinsurance cost going into wind season. It's still a growing component of our company. We've got, in my opinion, and I'm pretty sure this is accurate, we've got the deepest commercial residential department in the state of Florida. We have the resources there. We've got the operating system built out, good relationship with the agents. We're getting great premium. The loss ratios there are just phenomenal. It's a growing part of the company, and it will continue to be a growing part of the company.
There's about 1,000 policies that have not yet come up for renewal on takeout policies, there might be some continued pressure on that. What's remaining has an average premium of $30,000. Again, it wouldn't have the large towers that it was attractive to the E&S market, we should see a better renewal rate on that. I did some calculating that, adjusting for the exposure management side of it, the renewal rate has been running about 75% on the takeout business. Again, when we factored out some of these policies that we basically knew we were going to lose. Our model had anticipated about an 80% renewal rate.
Again, now that the large policies are gone, I would anticipate we'd be close to that 80% renewal on the takeout business, and then as Bruce mentioned, we're adding close to $2 million a quarter on the voluntary side.
Should we, for the third quarter, does it look like in-force premiums, should we expect them to be up in the third quarter, or could that be pressured again sequentially?
There aren't as many renewals in the takeout business in the third quarter for Citizens. In July, we did have some additional premium go off, I would suggest it'll be kind of flat. I don't think it'll be.
Yeah
Significantly up or down.
Okay.
I think the big movement that we've had on the commercial residential took place really in the second quarter. We had to make the call. On these huge TIV structures, obviously, there's some risk on those. You got to buy facultative reinsurance, put risk reinsurance, and then regular excessive loss reinsurance on them. You look at that risk profile and say, as long as you're making a certain profit margin, you're very comfortable with that line of business. Some of the E&S quotes were just simply too low for us. We had to make the call. Either we retain that business and buy the reinsurance on it, going forward, it's really not a great policy to have, or we simply let that go and let the E&S players take it. That's the decision we made.
Most of those big towers are now through our portfolio. We think that was kind of the big erosion event, so to speak, that took place. Going forward, it's more of the garden style, commercial residential structures that we have. That's, like Steve mentioned earlier, that's our bread and butter.
All right. Can you remind me what was the in-force premium for commercial residential, 1Q versus 2Q?
Okay. 1Q was $110 million. 2Q is $87.3 million.
Okay. On the reinsurance side, you said the 177, that includes the RPP, right?
Yes, it does.
It does. Okay.
Yes, it does.
You mentioned 34.7 as the ceded premium ratio. Do you guys also cede for federal flood?
No.
No.
Oh, okay.
We don't offer any flood coverage whatsoever.
No.
Okay. That 34.7 should be basically the run rate for this year. If you guys are able to get some growth in, would it be fair to expect the 34.7 to decline over the next few quarters?
Yes. That'd be our desire, certainly.
Okay. Just to make sure I'm clear, the retention, did you say the total retention is $35 million? And how much of that is from Osprey, and how much of that is from the statutory subsidiary?
Yeah. $15 million is from our statutory insurance subsidiary and $20 million from Osprey, our captive.
Was the decision to increase the overall retention from last year, I guess, what drove that decision? I know part of it is just that you're bigger.
Yeah
Was there anything else that drove?
That's the reason. Our surplus now is $200 million, up substantially from where it was last year, as well as our capital position at the holding company.
Okay. That's just a function of the size. The one in 100 PML, would that be roughly then the $35 million?
Nothing.
No, $35 million was the total retention that we have on the program. When you look at both HPCIC's primary retention and then the lower level risk that is shared with Osprey, our captive insurer.
We bought the $1.8 billion and our one in 100 is about a little over $1.5 billion.
Okay. Let me just see if I have anything else. Okay, what was the GAAP loss ratio on commercial residential? Just like the calendar year GAAP.
Counting IBNR, it'd be about 3%-4%.
That sounds much lower than, I guess, what you guys had anticipated in the past.
Yes.
I thought before the thought was that it would be in the 10% range. is that
Yeah, it's performing extremely well. Our reported loss ratio is at less than 1%, and very few claims reported. Nothing with any large severity. it's performing much better than anticipated.
Yeah. Great book of business.
Sorry?
That's why we want to make sure that we're protecting the really good policies and some of these higher risk ones, larger TIVs where the premium isn't there. We just don't want an appetite for that when there's plenty of business out there that meets the current underwriting criteria that we have in place now.
Okay. is 3% the right run rate to think about as, again, a calendar year gap loss ratio with IBNR? Is that
It may be a little low, but I think 5%-6% is not unreasonable.
Okay. do the loss ratios there change once the policies renew? Is there a change in coverage once the Citizens policies renew in terms of having to provide more cover that could impact that loss ratio?
Nothing significant, no.
Okay. Is 30% still kind of the right run rate for the personal residential policies?
Yes.
Okay. From the recent acquisition, do you guys have any amortization or anything that's going to hit the expense ratio?
No.
No? Okay.
It'll go to goodwill, and the earnings will support the goodwill that we put towards this acquisition.
Okay. All right. Thank you very much for the answers.
Thank you.
Our next question comes from Casey Alexander from Gilford Securities. Please go ahead.
Hi. Good morning. Thank you for taking my questions.
Morning.
Do you intend to put out an 8-K on the reinsurance program? Because sometimes I read better than I hear.
I don't think so.
Yeah. We weren't planning on it. It's normal course of business.
Okay. The reinsurance program, did you say exactly what, based upon the approved OIR models, your reinsurance program is good for a one in how many year storm?
Approximately 115.
One in 115. All right.
That really also depends on which OIR approved model you look at, right? The result is probably lower if you look at RMS, and if you use Florida Public model, God, it could be massively higher than that. You have to ask what model are you using, because the models are vastly different from one another.
We use the AIR model for all our modeling and pricing work.
Yeah. I think a lot of companies that report, why you see such a high return period, let's just say they had a 200-plus-year return period. They're using the Florida Public Model as a standard for putting that information out there. When they actually buy their reinsurance, they're probably using AIR or RMS. The results are not even close to using the Florida Public Model.
Okay. If I understood it correctly, we should be allocating about $44 million per quarter to ceded reinsurance premiums?
I can do the math, but 177 divided by 4, that sounds like 44.
Okay. That's got it right. Okay, great. Thanks. Thanks for taking my questions.
Thank you, Casey.
This concludes our question and answer session. I would now like to turn the conference back over to Mr. Bruce Lucas for any closing remarks.
I would like to thank everyone for their participation in our second quarter call.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.