UIHC - Earnings call transcript Q3 2020 | AMERICAN COASTAL INSURANCE Corp

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Operator

Greetings, and welcome to the United Insurance Holdings Corp., Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Adam Prior of The Equity Group. sir. you, Thank

begin. You may

Adam Prior

Good afternoon, for you. and everyone, us. joining Thank thanks

earnings copies section. at find can release of Relations You Investor UPC's today the www.upcinsurance.com in

addition, available accompanying made company its website. In presentation the has on an

happy to welcome at we'd a our You're to also to contact send XXX-XXX-XXXX, office and be copy.

its UPC Insurance on this well. broadcast made addition, as In available has website

any to laws, including the these uncertainties, and to in in statements and of any specifically constitute and go a statements including from Peed, to to as filings like we those and operations forward-looking or this financial the the now new anticipated differ company. of of and get With relating its of call and disclaims on those otherwise. as Exchange following trends with business in Dan. Officer. result information, I'd may a behalf in developments the meaning time the Actual results result from UPC started, time company's Before the within subsidiary. made company Securities results with statements I'd turn materially Executive Please historical or respect to Chief revise of product future results the conference Mr. that, the UPC UPC's the over UPC's from risks forward-looking Commission. statements update like call Dan to ahead, read securities information, to described Except federal statements obligation forward-looking

Dan Peed

continued name importantly, increasing made ex to excellent grow profit Brad provide specific thanks third basis. In we'll our quarter quarter-over-quarter like a offer margins the ex-name then of improvement. to progress Hello will take our third all, I'd Most third storm underwriting consecutive same some an and then our and storm income quarter, an with Thanks, joining for and questions. we towards call. our Adam. numbers, results, on overview core [ph] Martz

enhanced ex-name core $X.XX, million underwriting QX, their discontinue risk earned portfolio. increasing per we on In $X.XX number rates $X.XX through $X.X $X.XX our demonstrating earning the QX, QX, progress continued continued and In income per way due earn storm, selection decision profitability to are We of includes as in share. office QX progress to per share. activities to nonrecurring a development expense project to be with The an share. or we and returned

So the a of QX storm on adjusted ex-named XXXX core $X.XX $X.XX earnings quarter; share. the jumped income rate quarterly run most ex-hurricane $X.XX recent is improvement. loss per core Year-over-year, from in $X.XX to the of income

gross a X.X gross XX.X%, Additionally, point ratio loss down improved our non-cat is points X.X to also year-over-year ratio nonrecurring the XX.X%; charge. despite to and reduction year-over-year expense our

optimization our personal for windstorm and activities, lines We our portfolio portfolios. hardening are commercial by both many enabled the market U.S. of are continuing which lines

by our mostly just XX% will PML nonrenewal as enable approved last taking XXXX. XXXX focus And on and in X.X ongoing to and additional filed rate numerous loss improves rate strategy well which our We're our lowest X premium is targets a over the as in through challenges investor core exposures, to and exposure biggest the Our dozen gross as by and [ph]. we increased believe of written our third placement days, which on capital line presentation, which also some XX management growth we shown of the mitigating excess REIT. Top portfolio. actions have page states, increases effective underwriting of our us refine becoming at tier cat quarter, continue of over driven the our efficiency

to a focus of inspection online proprietary enable use to technology increasing risk. us on are we First, best-in-class

and appetite refining also unprofitable peak zones writings restrict exposure business to our in new on are geographies. We

scale. or We are exiting products that profitability and lack territories

final implementing we also Florida agency the plan to on deductibles activities absorb plans combined refine to rest And addressing footprint. cat Additionally, our drive producers. our in we profit these plan helps expand with underlying of to are are needed quartile underwriting our All to expected to in generate the a to risk improvement inherent continuing to portfolio. which minimum ratio, significant our

cat we named XX turning XXX in than XX of which risks. Speaking storms, different U.S. set impacted setting storms, over previous Within unprecedented. our is is is This name to Unfortunately, be more years record in falling XXXX XXXX. a the had out This for seven record land QX, with policyholders states. frequency year ago year-to-date.

industry put specialist, one it year. XX-year have another us And a tends that exceed frequency much approximately on greater XX-year billion X.X% in way, be to high a single storms out $X one a hurricane happening loss, in the a chance a five a model models you windstorm or of to with If in than recurrence, storm severity as moderate any severity. one impact of

currently at cat cat in Zeta our million. $XXX events, But net retentions, $X limit losses, impacted million. capital estimated with storm losses our is cumulative reinsurance have our early plans seven Our estimates The approximately cat reinsurance and of remaining core totaled still name XQ loss over have aggregate Delta in position for about gross of tower. QX $XXX cat including XXXX. We billion our of

end leverage XX%, at yet equity stockholders' XX%, X.X%. our by XXX%, written the from increased to by our gross the increasing of premium XQ are our is is capital. cash in up by to up capital and XXX% and XQ And total on premium down earned investments Our

GAAP we with Additionally, book four-storm decreases a by down year-to-date test. stress more than anticipate X.X%. These and even is value are would disappointing

have manageable excellent reinsurance we current appear quota partners. and modest given be they panel our an sessions, long-term of share to However,

capacity. is immediate anticipate nearing completion of on the favorable to correspondingly, decrease an and additional share RPC. quota leverage This are impact this We expected would to have we

events. or also any from losses XQ remain cat ETA including may subsequent would that non-name that out several we However, any variables point unknown result or named

are and of quota control. share finalization not activities our under Additionally, other our deleveraging support entirely

reducing loss working on excess capacity, our multiyear and PML reinsurance, in positioned cat also program mix due the We well and cat dealer core portfolio. a our a share, to of bonds quota are

to cat anticipate majority name core of significant of as next a Based we to we our cat XXXX. capacity With our in our secured tower redundant X/X/XX a cat the placement, key secured already XXXX, an storm non-named address XXXX, limits are available have name results remaining for well orderly completion store for impacts exposure. June a Xst, we retentions plan program the in net in expect our from on decrease to frequency as strong group such, core be to a and spring. partners, As limits our reinsurance of

this spend. reinsurance expect increased drive to an We

However, and that net written volatility achieving offset in premium by, will gross be strong rate XXXX. growth reduced

has also cat this profitable company, continued margin For years. me CEO on new profitability enable but It be improvement the underwriting a specialist our escalating challenge non-cat the future in is expected been for challenge, record-setting significant and cat cat truly a drive a exposures. as and margins, in our a quarter should to

moving that However, market regional risks best-in-class by the underwriters. a we for the broader in several over margins both, commercial personal enable lines non-named elevated COVID-related and activity and the global to named cat and impacts has forward, expect will cat created strong the of hardening last market of uncertainties years, exacerbated

we the it to Martz. four over bring these top peer, and turn us We over Brad focus steps well currently us I'd next quartile steps as expect the to to the over to back on advantages, quarters our With to long-term. are taking profitability group and that, necessary to competitive position portfolio specialist six core the like

Brad Martz

review everyone. hello, and investor information presentation Dan, the pleased also company's to Martz, President This UPC encourage you, Thank of and but for regarding the performance. is and XX-Q review everyone press financial to UPC's results, CFO Insurance. Form our I'm Brad more release,

loss experience quarter named a the than losses But think windstorms, XX, to year's quarter a our losses season higher on the GAAP a during losses $X.XX say, share. of of a led cat retained came Tropical share $XX.X slightly net XXXX, reported Storm and $X.XX were results of third Net losses, higher pre-announcement of per $XXX the excluded period. of a September will For it's ending $XX.X loss $XXX.X seven third or a We quarter. this million Beta. in included September and a million loss $X.XX which net or that loss million million These I company company record-setting or XXnd the hurricane retained to from fair disappointing this roughly our share. anticipate in new result core

current business that will the you windstorm has created of view in year, more you year. this comparable our improved see the from and underlying each activity strip However, quarter prior if away noise, named a

XX net of holdings, by our quarter that a year, renewed in of on reinsurance disposal. share underlying than compared of last $XX.X or XX.X% of million expense to investment June a and $XX sale was of $XX.X collapse rose compared we of back current year value produced $XX.X core This share income XX.X% prior not book, $X.X million, premiums time million in growth Page of securities, in to million as third gross $XXX.X income, gross last over revenues not primarily yields, over million $X.X versus the stock hurricane included results commercial of mentioned, the million increases plus at as when expected as our the or for gains growth, approximately to which is commercial favorable of loss stream, due lines. were and exposure $X.XX added five disclaim and earned primarily ago. to loss nice the million core roughly short-term to of or they was cat excluding in a stemming by quarter, UPC's slower new a excluding XX% this catastrophe increased items our year. a occur. by gain equities impacting total Investment each was reiterate, significant million million premiums of are increased fueled ago, XX.X%, The primarily continued XX.X%. And equity adjustment points the income partially this the a Premiums windstorms, of premiums our rate XX% $X.X in due windstorms, million earnings $X.X March loss million ownership nearly total compared included focused the offset million Florida sessions realized representing driven presentation Dan to of reserve on third losses, $X.XX That earned, for to from a information related in year-over-year is which the from program, development year, from $XX current in paints increase XX% during named to or earned declined which quarter compared which costs $XX.X to core our Non-cat $XXX third than million, rate present year-over-year. change, million, of development. business XX% written $XX.X loss or quarter. this of improvement from quarter a pace or quarter $XXX X% of share less losses, reinsurance a million As primarily Other our higher named well $XX.X year, million and partially XX% combined ratio, our investor to year of net change common of approximately of losses $XX unrealized by insured during Ceded property Texas, in losses growing at year this is Xst the XXXX. were program to hurricane last we to year. of but million reserve $X XXXX. picture the period, net for offset we an absorb

$XX.X million, higher capitalized a ceded system which acquisition increased as which $XXX,XXX a in year underlying mentioned, But expenses compared items, flat and right want X.X% results was $X.X team down is we the Policy needs, for in loss earned. office XX.X% million, Excluding home of year-over-year. were our a due basically produced of to premiums million million, operating to LAE commissions to gross $XX.X declined expenses ceding our played to underwriting approximately loss of an and a million due decrease This year-over-year. project. on operating favorably to also XX.X%, these Underwriting two space focused was G&A an earned, change related UPC's $X.X ratio part $X.X building our costs, reassessing software underlying a office nonrecurring costs definitely $X.X COVID long-term or million, higher our year-over-year. which ago. now. of and but costs new abandonment charge XXX% included Dan in offset

been have off cost that from the taken the and table. distractions project So

true Our from have have our points year, estate to from closer gross excluding to point which that X.X same real expense holds improvement underlying expense ratio was charge. but of been nearly year, would item The XX.X%, ratio, last without discontinued nonrecurring prior project. two a XX.X%, was unchanged an points but for combined the improved essentially the would the for

On increased including approximately direction, remain of the the composite billion, rating to $X.X cash September balance but book holdings sheet, and and at interest. well unchanged UPC's the for group of we value today overall The of year-end excluding a $XX.XX your of assets AOCI. modified to million, the investing stockholders valuable to with more $X.XX like our about GAAP And end attributable in thank equity totaled so we billion. the $XXX UPC income our positioned conclusion, right your is declined UIHC to $X.X, years, A+ share fixed duration learn I'd of $XXX X.X appreciate XXth. declined surplus In million from to company. per or XX% statutory investments time quarter. our heading at greatly to believe you

questions. We happy take to are now any

Operator

Please be we the from Our this James. session conducting of line Greg question question. proceed At time, Peters with you. [Operator will comes question-and-answer Instructions] your Thank with first a Raymond

Greg Peters

management I get start premium exposure around management. questions quarter. context is just aggressive more the as in exposure good written guess, all your off with that, you some much Hi, wanted And can you suggest, with growth? gross of in your The to written is how significantly premium gross limiting pretty rate, up the afternoon. I

Dan Peed

Dan. is this Greg,

that think of we bucket one that are steps fall taking under I numerous Rate management. exposure that is of them.

much driven the risk So PML new I we're more selection, bottom inspecting mentioned like the business. of

to We or in it looked key decide can them scale of lines our areas states all of any didn't speeds also to our and the determine all have profitability we of or of where if at of our on was business better profitable. have to key focus that be our

that as to the market conditions I that risk write improving it believe will that harden the that be think is continue to as will able I and it. we which the improving under and class well we and hardening, even of we more write continue terms

Greg Peters

Well, Can the with like break – by spend business. is. I a it a your you just it could minute deal It certainly in lot less – loss. line describe you seems out it feels release, of you like and press know

performance So in environment the performing been side personal has businesses, of side, they versus the similarly? there those are commercial high-frequency cat a difference this in underwriting or

Dan Peed

is basis lines takes I REITs and the to we gem, specialty a it storms. but think is improve core and it to hurricane significantly terms it moved a the has pretty steady further contracts been personal our improving Commercial as gone specialty. named personal come. business it X changes that and the has really always is started it and some Coastal turn, with ago, the through commercial to the this had And year profitable, even and lines we've profitable, book the But prognosis three great that which in one. the from continuing different to there, of numbers. year for results we a commercial It book, the getting American believe The longer be has a on to seems Residential –

Greg Peters

Interesting.

more looking And rating to your up and a is under forward. this I of your ability in and year some capital quota the the just In know, position, I catastrophe mentioned number market rating we're withstand talk The guess, have about next some, are, their the for year. other ultimately, your – context, RBC is stress. companies other ratio the of line is all live popping you're your to fourth share. Florida you Can anticipated ability going additional your your you year. fight withstand and question space losing And exposures. for this for the to various rhetoric bottom think Demotech maybe about them, that's quarter, of There as to on capital. levels is you capacity almost are some the there the going in companies in what

Dan Peed

question. feel now. been working with We've Well, that's good position We reinsurers. good right about a pretty Right. our our

some we stated, was close season. additional and share where before be we're As to we believe back what very leverage to that, quota into additional our obviously, is that it adding share this needed would that quota move

RBC problem, pretty you think solve the the also. – questions you're consistent if Demotech Demotech with the then I solving

also known comfortable, the to pretty and want with all those feel QX we'll we exposures, the dealing we cat So be say moment. obviously, that, but at aren't

unknown. some there's So

of control. And the our that comfortable it. But part to we pull got direct that that remain outside some can handle we've pretty of we feel leverage

Brad Martz

AMS Brad. how same just done Demotech core couple I quarter ratings subject But and we think for our we're a said, understand Greg, [indiscernible], Obviously, the members risk top affirmed to fourth for that is volatility the reinsurance add this writings all our change aware to the recently would that of for operating close to premium Dan gap now. of that's between out. ability plays Journey about on group. of earnings depending is our that us well has a as and that. priority and leverage feel right reducing I We good our obviously, net very recently utilize direct

Greg Peters

event an of lurking we is sort Can you have out your stands, quarter out just that, as I think the fourth in we happened model a as the What's in Can – guess, fourth the But – you of there. that results? comments, and currently it. prepared as lot per for limit – left. conclude your about the said you it question. idea last these storms one give us Got you retention I think and have still quarter

Brad Martz

$X our Sure. billion XX% $X.X tower. reinsurance still core billion have of Yes, program place, over a we of in

there. a So if Eta turned could problem into significant. something experience significant for us. be We no event a It worries wouldn't very, very

million is on retention Our go-forward $XX basis. a

be the hoping it So for tropical event. with don't retention comes we're event worst, and for Florida storm, prepared us. full a into the best will it I think as that if for Probably a

Greg Peters

questions. let it. Thanks. Got others ask I’ll

Operator

Thank you.

next with Our Matt Carletti your question. comes Securities. the line Please of proceed question with from JMP

Matt Carletti

mine. grabbed Hey, of thanks. Good afternoon. Greg most

of have share just follow-up kind additional I the So on conversation. a capital potential the quota and

have we upward share it the be market a that coming reinsurers think kind or should reinsurance in the on and premiums we As to you expect the should way should basis expect ratio earned the about additional place pressure think opposed negative pressure? getting in How getting is, quota of we where different than materially commission you to what another so net about think is to obviously far, and as thinking it firmer, about I when an more market, think of have them terms that, we expense on if selective. ceding about on

Brad Martz

existing because support agreement. straightforward This definitely it's to the partners, already we've very, quota be or program to terms main are got we've partners. any even Matt. challenging. from the if think branding just is I trying market to terms any with mean, Brad. I changes Hi, in no going panel share put -- very the of the changes experience, rate together significant existing from The a it's without -- existing fairly received session the terms could expand we But, great were

So first our that's preference.

hopefully, on exploring shortly. offers we've to have hand. table announce in already we'll something And formally We all the got We've partners. But options. got great are

Matt Carletti

luck. Thanks, Brad, of All right. best Thanks.

Operator

Please question proceed comes Thank Wells next your you. from Instructions] with Greenspan Our Elyse with question. Fargo. [Operator

Elyse Greenspan

that go-forward today the I your My so off for are out right, of you think $XX evening. for Good had? the you about stick cat Thanks. first where retention question, fourth we've right is already sense million. of some Do a have Hi. events, the mentioned, of events quarter based

Brad Martz

retention be little likely could X the for Zeta is blue a stated -- page it are core our line a think additional is million. loss between the that Delta be is on related to that and preliminary. a $XX to E&S we are our in of million the of investor We group million, that Yes. $XX presentation $XX range, and tower. bit but but there within business contained But losses There

Elyse Greenspan

them based want like I timeframe, with Okay. Demotech, then That's is guess under you additional getting you on you that they or these where storms? And capital have as pointed what there to towards what's kind your had helpful. would were have off some to with support before right, place leverage in questions you've -- timeframe that back the a working guys to you've of spoken

Brad Martz

our results, of reviewing us us. haven't They desire We're third but in at see in planning anticipation anything from moment. they have haven't anything modeling and being they do requested capital to after may this expressed proactive any quarter questions our

Elyse Greenspan

you've fourth some you your I were partners, of think where the these getting these pointing with when the kind storms? you had you're guess, about, losses, So to that to in guys you leverage I conversations some that quarter; right, when envision back of before do guess,

Brad Martz

targeting of X. we're quarter, December date This effective an

change, here that of our could some is at the bolster that So moment. but XXXX. to we in our bought help release And RBC target capital that clearly

Elyse Greenspan

Okay.

Dan Peed

that the profit real it's to when on difficult quota and key underlying that in one not the growing have And that you is REIT with, core the work -- margin share have partnerships. to our success Yes. margin, additional comment that also because the is to

Elyse Greenspan

color. helpful Okay. That's

saying you’re -- something. Sorry

Dan Peed

please. ahead Go No.

Elyse Greenspan

a going the Then you're mentioning that right into guys good of your Okay. getting of gross growth I in were level was good in so which pretty amount book, you a say, to quarter. also premium rate triangulated

price -- give a level us kind you increases here amount little of of from put should expect to your more you on do we a -- more business? -- a that on own of have rate what color sense So, kind you good bit could your through as book

Brad Martz

significant. pretty it's Yes,

make. of $XXX of of capital of earns planning what that upwards be a and reinsurance job share partners rate think going marginal powerful. but our the we help keep. But direct already could is long-term some but with a of short-term need changes made our we the dialed the over direct the -- we in, to will We're to the in that of much mentioned, house, the also action does as to strategy, it's side we pretty the them. lines premium share extremely of out good to dictate to refine a And in as is probably extent We some tool of changes some to The to. Dan these exposure. portfolio the leverage are that increase more personal time. additional get with million we're get laying to position aggressive the Obviously, no manage taking, X, happy pretty writings reinsurance rein effect risk in until and how it's of be On us we've page writings want where

Dan Peed

see, for X a investor that the of comment is in I'll the Dan. presentation, like, rate the of make page on that is second increase. the XX% lot example, you This REIT also XX%, Florida,

a under rate. are these And what's increases that rate year, core So seeing consistent. remaining are retention right up last working we made have for rate now, already we're but which been driving our on very is ratios year

higher that we're non-renewal us So we're seeing a seeing rate. -- not give not

Elyse Greenspan

Okay. for That's then question last me. helpful. And

color more non-cat? mentioned stem I or what years you or was it favorable of cat Brad, if from development. bit on million does think that little what $X.X accident a just and you do have

Brad Martz

non-cat on most the accident all Primarily recent year.

So XXXX.

Elyse Greenspan

color. you Thank Okay. the for

Brad Martz

Thank you. welcome. You’re

Operator

question. Your Partners. & comes next Bill with your from question Broomall with Please proceed Dowling

Bill Broomall

presentation, agg which years a Can Thank that? scale. participation? a talk reinsurance can sliding interest says, fixed in to you're you. If the for you that three partners the about rather maybe Slide going right presentation row. about just talked of to the percentage been fixed from to But can Great. seeing the know retention has hit -- go you're about we switch just program, just you talk in the than cat that now XX or I interest you hearing terms of a you're

Brad Martz

the We're coverage a is and come first we placement, aggregates. strategic unique it in Yes. have shared a with part X:X partner program have days, companies reinsurance by because limit, their flexible catastrophe on with provides to struggled I will aggregate limit be placement. is admit, of X:X who to our lot these placing one the of a a core difficult position

So flexibility how we've we deal that in a that structure parties. can and works something for of utilize limit both great got

So didn't losses premium. the in cat exists new it's of I recapture to retention ceded your you and up, the where really for that them cat. for to retention previously phenomenon, where have if goal as any as will work well, that. goes and primary unchanged, you to we to this the Because have losses admit are possibility have -- address that, losses varies incurred a certainly quarter one some understand instead want is year got fixed we And we of that with

what for. that like that's finalized. solve to we'd So don't have We

losses cat in amount on at stay a time. have of that. goal So But to and fixed our tuned is our that stop point

Bill Broomall

the Okay. release UPC that just maybe talked press is? you in evening, you reached about Can -- All you this Thank for that. you right. to an and Re point. just explain Can you me Excellent. what exhaustion

Brad Martz

Well, UPC was layer a one core our on participant program. reinsurance of

So million hit was had Hurricane by Laura. exposure $XX.X a that they

hit under -- don't And they so their liability -- max maximum they those contract. they

-- the in obviously, and we windstorm quarter. that's name in, losses retained $XXX this million included net of So

Bill Broomall

down cascading, future any will right? higher drop the correct? layers is Got events, full it. tower your So for But

Brad Martz

That's no gaps change in all. in at everything collateralized absolutely. are was the that cat yes, -- Oh coverage And is structure fully that cascaded all we it down. doesn't -- participation. yes, But our There program.

Bill Broomall

to surplus? or in expect that think think comment looking after to I Eta storms, if maybe if won't place, have And that else maybe think about RBC and enough Anything to address you on come, you how have buffer of would of this? something do I do, much does can you Perfect. storm, So there? to do another about the buffer you kind your you're quota kind QX the ratios share Okay. additional be that

Brad Martz

would we to to say, our we say the in a should we in all it, right us reinsurance don't If near there of year-end. that margin I anywhere time. of XXX% want company, support a is give to it. safety want about we at a is We're well that's the complicated help ongoing RBC good can de-risking additional that best point animal. And at the do this above be going be that line. just But reasonable. have now. can is to us position And

Bill Broomall

last one How at $XXX have the what maybe cash And Holdco? surplus the one, numbers. million? was much Maybe do you at Great.

Brad Martz

The at the at $XXX was and September $XX.X for the surplus was XX, million. statutory unrestricted liquidity group million Holdco

Bill Broomall

Great. so Thank much. you

Operator

our That I'd closing management you. question-and-answer Thank like now period. back call to okay. turn the for remarks to concludes

Dan Peed

and I and I This excited with us time our to continue the quarter enabling over about Thanks together we've be and team put to is partners, again Dan. our key this for to the together. navigate employees the future your market attention. executive distribution want say reinsurance last that, and

So thanks again.

Operator

at for does conclude you today's your and your participation, Ladies disconnect lines We and and webcast. teleconference time. gentlemen, this this thank may you

AMERICAN COASTAL INSURANCE (ACIC) 8 Nov 202020 Q3 Earnings call transcript