But if you can separate them out, you can — out of the same book separate into red house and green house and have a much better outcome than the pool you’re selecting from, right? And things that we can see is we can see that in Citizens, there’s still probably about 400,000 green homes, but we can tell them apart from the 700,000 red homes that are in there. A lot of other people can’t and that’s what gives you that item, right? We are not getting these numbers because we charge more or less. We’re charging a very market competitive rate. It’s just better policy selection and we have an advantage, because we can tell red from green as opposed to let’s just say somebody who’s colorblind. Yeah.
Michael Phillips: Okay. Thank you for those analogies. I guess, sort of related, what can you say about the margins of the books that you’re getting from Citizens? I know there’s a couple of anomalies like for now, reinsurance costs and commissions and things, but on a normal run rate, how does that profitability, the margins in that book look compared to your normal book? And I guess part of the reason why I asked is because what you just talked about is presumably you’re not using your technology for those new policies that you’re getting from Citizens, but you will eventually maybe when you renew. So, is there a different margin profile in that book compared to your normal underlying book?
Paresh Patel: Okay. Actually, our technology runs through the entire Citizens book and decides what’s red and green, right? So the policies we took over, we already had pretty much processed in terms of what we expect. So that’s the value and the ease with which we can do this, right? So that is all technology and is great. Now, there is Mark’s side of the house, which is finance, et cetera, where we take a more conservative view, right? So until we have that book on — that we take over that book and we study it and we let it age out for about six months to a year, finance takes a much more conservative view and they will reserve to a much higher loss ratio than would otherwise necessarily be indicated, which is what exactly it should be because that’s being conservative.
And eventually, when the book has enough history on our paper, the loss ratio will be adjusted on that book, right? But going in, those assumed Citizens policies carry a higher loss ratio than our existing TypTap and Homeowners Choice books. Does that help?
Michael Phillips: Yeah, it does. Yeah. Thank you. Last one, kind of a numbers question, but it sort of relates to a real-world type of a question. In the gross written premium number that you give us at $320 million, you split between TypTap and Homeowners Choice. I think there’s some accounting of the depopulation in that and I don’t know if you can just wipe that out for us. The reason I ask is because what’s the underlying growth of the two businesses without that number in it?
Mark Harmsworth: Yeah, good question. So it’s Mark. If you look at the consolidated number, so I think we put in the press release the consolidate for Q4. It doesn’t affect any other quarters, obviously. Of that $320.5 million that you see in Q4, $143 million of that is from the Citizens depop. And then if you want to further — I think in your question you said, how does it break down by underwriter? If you look at Homeowners Choice of the 182 in Q4, 120, wait, sorry, I apologize. I don’t have that in front of me. But 143 of the 320 is the consolidate number. I thought I had it by underwriter here in front of me.
Paresh Patel: Yeah. And Michael, a new thing is, presumably you’re asking this to update your model, et cetera. You should be aware that our two underwriters don’t like renew policies evenly throughout the year. TypTap is very heavily skewed in Q4 and early Q1. It has a very high GWP rate in Q4 and early Q1. Homeowners Choice, on the other hand, tends to do most of its renewals in April through August timeframe. So it creates a different dynamic from a gross written premium perspective. Obviously on our own premium, it just evens out.
Mark Harmsworth: And hey, Michael, it’s Mark again. Of that 143 million in Q4, in the consolidated total, 19 million of that is TypTap. So it’s about 143, 19 — 20 million is TypTap and 123 is Homeowners Choice.
Michael Phillips: Okay. Perfect. Perfect. Thank you guys. Appreciate it. That’s all I have.
Operator: [Operator Instructions] The next question comes from Mark Hughes with Truist. Please proceed.
Mark Hughes: Yeah. Thank you. Good afternoon. The loss rate, you got to 30%. Do you think this is — if you’ve made all the progress, does this fully reflect the reform and the results of your underwriting, or is this a stop along the way?
Mark Harmsworth: I think it’s — hey Mark, it’s Mark. I think 30% is a pretty good estimate of where we are right now. So if you’re trying to project out to 2024, I think 30% is about where the book is at. Again, that’s consolidated. We can’t control the weather, of course. We have certain quarters where it can be — we tend to get a little bit more weather in Q1 and Q2. So there’s the chance it could be a little bit higher in those two quarters. But 30% is about, I think, where we’re at. And it’s — as I said in my prepared remarks, but the impact of the legislation has been pretty much what we expected it to be. We expected claims frequency to drop significantly because a significant percentage of claims were AOB claims. We expected it to drop and it did.
We expected the incidence of litigation to drop and it did and it dropped. Both dropped very close to what we had expected them to. But we’re only a year, a year and a half into it. So we’re still watching it closely and there is a certain amount of prudence in those numbers, of course, as we watch this develop. But we thought we’d get to 30% and I think 30% is about where we’re at.
