UIHC - Earnings call transcript Q1 2021 | AMERICAN COASTAL INSURANCE Corp

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Operator

Hello, and welcome to the United Insurance Holdings Corp Q1 Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] A question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Adam Prior with The Equity Group. ahead. go Please

Adam Prior

good and Thank for you Thanks, afternoon us. joining Kevin, everyone.

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

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

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

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

Dan Peed

and take questions. CEO to then earnings Chairman our specific will us for I'm call. Dan offer then of some joining we'll go Martz I and and thanks over UPC. and quarter Brad numbers, plan on an overview, Hello, Peed, first

year-over-year combined ratio The first is a a XX.X%, of slight yielded on improvement an basis. which quarter underlying

reinsurance somewhat retention quarter than a our million XXXX AOP including a and cat reduced near Uri, in winter benefiting planned caused storm Our program. net, loss better first cats, from $XX

year. deliver plan results quarter with to on set were we transition for track first with line in expected and such, As the our

to analysis in million drove to patterns of to due of resulted year of reserves in in our litigation disclosures. we Florida. loss million. in focused development This $XX approximately March, did Florida legislative experienced both trends February cat $XX.X an that the quarter end quarter, after in with unusual accelerating litigation especially core in a and Florida However, our Friday's to believe the exposure and personal encouraged the non-cat mitigate closing the accelerating the strengthening line first quarter, at loss the disappointing This for changes tax a are and will Florida. help Subsequent very last they we of prior

result to exposure allowing losses substantial Florida, while for stand believe significant ultimate our strong investors, make improvements to UPC a for will our this in and to Florida, partners UPC material our we difference and the policyholders. in incurred keep Given will and business promise

we margins, We're down slightly and an underlying the As while to and good we and ratio To revenue mentioned drive combined target reinsurance making driving exposure the XX.X%, our progress. management. and to selection need continue risk up profit expanding need continue improved year-over-year low loss costs driving underwriting above, to through underlying XXs. our

rates new even and business to increases renewal the a For are rate on nearly business. hardening XX.X% business lines revenue, personal anticipate with will increases renewal on our We and XX% continue increase year-to-date continuing rate lines achieved accelerate. personal rate

averaging and filed New Carolina, North increases Renewal York, Carolina, remained in Texas, Louisiana, We have Florida, strong. retention XX%. nearly rates South rate

have management of We new exposure part curbed business our dramatically as plan.

of of limit by need. And placement pressure we on $XXX in to off we PML cat retention hurricane as which million less XX% pool June a pooled almost will and the the less date, $XXX our This occurrence million per last ahead to of aggregate are X/X dollar a program over To occurrence we expect year-over-year pace, applied soon. the for for overlined For core when catastrophe a companies result season lot would than million our finish reinsurance by million today, of of placement. our exposure our reinsurance reduced includes are in basis, September and XX This exposure Xst management, events significantly takes actual year. hurricane placement. about level reduced yielded first retention $XX XXXX the second of aggregate. and $XX The against retention have on

firm XX% space. in The cost newly with include investor the very legislated a well, path, residential and citizens found positively Florida the American the are in market reinsurance Florida premium and annual admitted writing the in keep-out which increase glide no residential the commercial XXX-year the be can on fared which inclusion results UPC's the our impact website. and share terms rate market. #X business lines for supplement, commercial commercial continues changes, is outlined to Our of will Coastal of

direct-to-consumer second and be XXXX. Skyway We on E&S technology half our roll out of continue to Technologies, planned track both with our product Journey to platform for the

have will plans our rollout. on near as for more information these We platforms we

and positioned in increases of catastrophes. 'XX With As the underlying advantage as margin to cutting market. stated significantly to We technology. also it especially accelerating previously, transition the net year, plan turn to opportunities personal take our be but Brad. Florida years, property over market hard continue we expanding expect cat we as in E&S our been I'll that, a while has well to lines remain direct-to-consumer rate in The it remains our

Brad Martz

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

share or of year. ended quarter or million $XX.X XX, per last $X.XX loss the XXXX, share a net $X.XX a reported Company to GAAP of For compared March loss a the $XX.X million

from $X.X million per of Our a million $XX.X or core loss or decline share a income last year. $X.XX quarter million the first $X.XX of $XX.X in core share represented

to As litigation in leader a factored in in happen. helped development. ultimate Dan into in our driven paints investor higher-than-expected deviated legislative trend and picture mentioned, quarter continued seen loss Florida trends the why needed. million loss our and Florida February at applaud April to who of liabilities This due fueled by changes we've in results was reestimation historical irregular This end. $XX We X severity were loss March litigation strengthen charge of reserves a since presentation loss XXXX and a every of material higher core Page that year rise and to nice the make deterioration from due development in was prior frequency patterns by higher costs. of

a Assuming these on game July and a changes X, positive impact believe changer I about become results law it's should future over time. have on or

$X.X preannouncement. cat premium million derisk driven portfolio Our and first of were decline lines, growth or up stemming due lower in increase slightly Northeast the Unrealized our X% $X.X admitted from strategy GAAP with equities. commercial our more being with E&S earned gains Ceded loss higher Other investment year-over-year, year-over-year Commercial of expense to $X.X for production million $XX.X premiums first increase $XX which lower written of our to included prior loss strong reshape was quarter $XX.X risk offset that personal portfolio. in was an from ceded American UPC's $XXX.X assumed by due and X.X% million, and with down XX cat to XX% million, of in insurance year homeowners' retained and or was million, XX.X% related an rights Coastal's million or XX% points, in equity residential points million renewal rates. net items share business current events smaller of written Gross $XXX.X quarter losses and by million or during premium our of reinsurance $X.XX income ago, which core adds fee $XX.X a from by from consistent or prior million and $XX.X premiums of loss first during premiums catastrophe the was over January. completed losses development also $XX to $X.X a ratio. quota storm the over the approximately the or from share million, adjustment was million million decreased year $X income quarter. million, driven total added dividends year $XX yields declined the net nine quarter our losses via million combined due year-over-year. primarily approximately XX% transaction a consistent XX included revenue included $XX of to to Uri million Winter our or securities and in year remaining Net the programs. reserve

an This produced compared was or in points $XX.X ago Excluding year-over-year. was down from ceded and a which to these This higher loss XX% loss this year income XX.X% $XX.X approximately losses, in of -- nearly reflected includes quarter, gross the costs. three two improved net LAE XX.X%, million both of driven is improved items, XX.X% underlying to in was better million a year-over-year. acquisition expenses the year, entirely since higher in decline operating which million, which lower comparison UPC's almost first period losses. the $XX is premiums for decrease commission quarter baseline it XX% million, loss points underlying ratio ratio or a our ceded $XX last XX.X% down underlying or and ceding current by of due primarily eight were

increased expenses $X.X million operating year. Excluding fee commissions, a roughly and total

Our XX.X%, our commissions. points XX.X%, ratio gross to year In expense benefit ratio reinsurance including year increased of was a ago, the which compares costs. net expense ceding XX.X% to the for of favorably inclusive X.X contrast,

the the made we've now program still believe related we being cascading lines. will or we I'm aggregate likely to because of the risk-adjusted our team June cost We're renewing not our in retain report become is our commitments evaluating ruin. options in from is And secured of but risk of final various exceptional protection in effective happy our aggregate progress and partners limit reducing on reinsurance to structure, X, finalized are which process excess be increase to core mid-single reinsurance the reinsurance, digits, of are our yet determining retention. Speaking in sought, XXXX. catastrophe that superior allocation total able against provides occurrence to

details look is the is this to wanted the volatility the express year the in of second to make that earnings great once later much We terms to month program we compared reducing and in ago. named announcing windstorms. year mentioned, shape today this significant are half a potential from XXXX Dan improved all but finalized, our As most to change forward expect

million $XXX X.X of On A GAAP value of declined holdings the cash a increased our year-end remain our equity income investments $X.X stockholders with approximately The fixed of assets but unchanged. $X.X balance to approximately sheet, plus billion. were share UIHC of and from attributable UPC's composite to billion, X% total $X.XX. per years, book modified including duration rating to

pooled liquidity for reserve surplus of million at contributions approximately the to intend holding to utilize but this that of of given we was end, the capital unrestricted impact to liquidity our Our quarter. group company $XX our at half on quarter companies, the had charge statutory up

like would we remarks. to and to preview our dated Finally, prepared for to shelf-registration to valuable positioned can't our interest intent company, future additional regarding also access be so. your in and do provide time, I concludes but to time capital We markets any that Thanks currently plans our our always statement. want properly details refresh this stale, at

take We questions. are to now happy any

Operator

James. first Peters from Instructions] Greg from Raymond today Our question is coming [Operator

Charles Peters

you some in charts Hi, first litigation X, the had I'd Page of you the on your parts to Good Afternoon. presentation. put like of other focus commentary on

passed, it's X. and go going on effect into July was to legislation the So

there's two the So question. parts litigation to

the up even And date part have get that of Page it's we that side suggested March the filing -- passed are go to page going all, are February, question to to parties and into of a litigation the X expect the chart help result right-hand more the that's other accelerated been will bit poor loss effect and while observed that and second July that far claims a the the there further problem. in should on if fixing trends margin, the what's to little in enough in to as have X, And and observed be rush there's it the quarter? a now -- litigation March on of on ratio would -- might second not it First the filed? go goes

Dan Peed

Thanks, This is Greg. Dan.

things how in on course, we've from And lot XX. will feedback effective not a we parties that So Bill get heard And legislation be. key did various removed. of the that were Senate few everything were the there was the a of originally

the just around really makes of more it of structure process a that than I there that really quite more it close dynamics However, stuff the addressed. bit changes of think there's claim Florida a has how fair difficult. situation, can are are they and that see that from claims standpoint and been. to puts been litigation, good for has And people those be the in will

we like difference X-year So significant that. a including feel stuff that like like to as will it time make frame and the tail applies the

So is that things. the we And fact we claims. how of the we really have heard this various impacts until the know some won't see

Your what second that that of a question, how we'll at looking do of which something course, we're rush I when about out impacts expect the we're thinking to of future. the is courthouse. our really expect we have would QX, But reserves,

to QX. to we that litigation of or And not down so dramatically. We continue into we to obviously, would number grow project QX QX come would the project events

that, negative the impact So how look -- I at impact end don't an we a have reserves of think QX. that on at will

Charles Peters

loss the you answer. would that that, meaningful million, development. you Thank underlying -- $XX -- number in is I the as report underlying you would just quarters. that is a ratio then for reserve It follow-up, had underlying understated unfavorable or And suggest context about curious suggest of how I'm with know $XX.XXX just the prior the in it number. the million the

higher ratio at the Am So loss actually, reporting. or underlying what is actual wrong? looking underlying you're ratio combined running that I than

Brad Martz

try Greg, this that is I'll one. Brad.

the out between underlying the number periods stripping I to with by noise. help comparability think tends

some of data that I put don't metrics. metric the distorts year-end think underlying potentially. of want if year you'd been We is That's second to certain numbers, this we pretty that many when decisions, that are talking the was ratio. deemphasize to first available be the $XX and were the of into a half example, the at whatsoever, in combined one of improve important, sort quarter for especially help thing So significant all the improvement ratio but is year-end it million our in the about emerged and had combined comparability, just combined the a way making comparability.

Charles Peters

want it. with And with reset reinsurance then opportunity to capital the et have quarter guess How go in be and about sort capital. and last your we the are on quarter renewals? an And risk-based would deteriorated. an give first you us as got the Obviously, thinking capital first to ratios because results, risk-based ratios of the reinsurance through that. they all question the update you risk-based you this maybe are, quarter I results, I reinsurance, second cetera. that ties with the where

Brad Martz

and the help And to lower thing do same other X put storm perils renewals. Yes. with going which capital with and year-end, some reinsurance of We're lot winter our did the comfortable six thought put from of at X into risk both We've our place program, of Uri. we work at protections all to Obviously, a position. in our our with catastrophe January we're excess additional that. loss retention at year-end for

primary take driver we some portfolio of net So recent years going in to relative driving our start our of the reasonable that the premium retentions is of down But of and take that volatility the derisking is more pressure capital. earnings that we've is risk to risk, off to required seen capital. the really of as

our frequency to severity half trying actual will year, determined and required be down doing we're in So capital. risk portfolio everything the improve in we're the capital and drive power obviously the by our but of second -- losses our of

Operator

from Our Greenspan Elyse is Fargo. Instructions] coming Wells from [Operator today question next

Elyse Greenspan

frame by off basis. provide an your low discussion on get would I Hi, there? thanks. guys a update underlying you question, to sense think, you're targeting XXs Dan, of you us first time a -- give you Could on an started just saying My kind expect when a

Dan Peed

revenue. and Okay. Well, get course, increase of the to our way loss drive costs our down is, there to

XX.X%. a Louisiana, we filings XX%, year. XX% achieved on last we're York, looking a Texas, achieved we that New and -- to So -- Carolina XX.X% all addition we say, XX.X% have I Florida which average have rate two backwards, increase, for through or Carolina, and filings North And around the let's think rate in XX-point South there's run -- in

the loss the exposure number from selection on decile steps of call on side, cost standpoint we've we and management eliminate underwriting So, portfolio. a the of risk and to try our bottom taken of to what the

low with obviously, would that move by year, this into we try good is will a to down XXXX. we're those a of end the go. the bit, little combined When ratio question. moves hope But how So mean, steps underlying I certainly it quarters XXs. there around that

Elyse Greenspan

That's in the what your just cat terms reference gave that down And Okay. saw last of around the to we color year helpful. guys in right? from bringing Then costs, you net event.

commitments basically, following the addition like the basically for you million, getting loss, as program? go the right, have it your you of that's the it I I we right, of sounds placement the placed, reinsurance program, after expected through So you this full renewal June mean, is $XX cover but -- of X? see all that you full as said think the the

Dan Peed

working have applicable But -- and we the million million, yes, be to weeks. $XX bring the for we couple the was the down first next potentially occurrences X. $XX at that what over the second and that at million hope most and even $XX news said the June aggregate. So to We're further, would of

reduced was We cat hurricane. placed loss have [X/X], other loss a that gave call, that of Uri our a at tower which in from us and we that helped outside all separate, what perils net we us

applies that million. $XX storms, to the named retention So

Elyse Greenspan

your capital sorry, much, in Brad, remarks. commentary of Okay. on That's your have think might I how missed prepared I some helpful. And

were some having you you of kind about to think quarter. to just pooled of you the a entities Or provide number? the just charge what us you reserve because I in can talking capital said? to the contribute Did re-highlight

Brad Martz

and Certainly. $XX we loss unrestricted half to cash not on we terms exact in yet for mentioned We warranted caused that saw. was want cash million we we given -- by hand charge of was to contribution. have the -- the that approximately to do remarks Those that my liquidity been reserve of up hold-co that the I of had but we on amounts, hand utilize intended in backfill prudent the and hole finalized at had development level, activity feel

So that's was essentially communicated. what

Elyse Greenspan

then And had development a said great. reinsurer it's -- adverse from a Okay, that even that seeing kind sorry, quick they're couple three heard years Irma. ones. I though of of than more numbers that still some they out, reinsurer, another actually, on

have your that the guys like recently current seen loss event So gross you from move in quarter?

Brad Martz

$XXX million Yes, reevaluate and loss gross well, Irma. Irma XX we for did as increased March at our

Elyse Greenspan

From of the end last year?

Brad Martz

correct. That's

Elyse Greenspan

then one And Okay. one. last

So about anything think terms of heard April, month events so guys there's in seen should I of exposed date, could be, in that far? the to maybe of terms the of guess, the significant less or of just been April some you perhaps we in some there of the some that Is losses. events to you're some I've at more having we've more storms. end

Brad Martz

time. to acknowledge Yes, April, don't out preannounce we of we activity the nothing ordinary, in some can this have and anything Sure. at but cat

Elyse Greenspan

color. the Okay. Thanks for

Brad Martz

You're welcome.

Operator

any to session. our reached for question-and-answer management comments. or to back floor have further closing of We the I'd over like end turn

Dan Peed

we for thanks being want again. here. Well, to just thank And everybody

Operator

conclude does That teleconference. you. Thank today's

We for disconnect time, a and may this have you your your lines wonderful participation. at day. thank You

AMERICAN COASTAL INSURANCE (ACIC) 9 May 212021 Q1 Earnings call transcript