UVE - Earnings call transcript Q3 2017 | Universal Insurance Holdings, Inc.

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Operator

Good day, ladies and gentlemen and thank you for standing by. Welcome to Universal Insurance Holdings Inc. UVE Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only-mode to prevent background noise. [Operator Instructions] We will have a question-and-answer session and as a reminder, this conference is being recorded.

to of turn Investor like the call would President Vice Relations, I welcome the and to Now Mr. Dean Evans. Please go ahead.

Dean Evans

Risk and President earnings the are Executive Universal Relations here Thank Chief third Wilcox. room I am name today Carmen good Universal. and and of Welcome Evans, Sean Officer, everyone. Financial Officer, you, Investor VP to is quarter Jon Dean XXXX Chief Holdings With conference Chairman Frank Insurance for at Chief and the call Springer; Downes; Inc. My morning, the Officer, me in

Following on Yesterday our will will questions. Sean's A of will until earnings then release, topics opening which available is be review remarks, November important available under of at Frank of for reopened afternoon XX, Jon will this replay we website our presentation provide an and call be several the issued update financial the section on homepage press our The website XXXX. results. www.universalinsurancehodlings.com. current release’s

begin, please financial results. Before and may statements business note forward-looking presentation we our about that this contain

encourage statements. Forward-looking Downes. the do investors, on to I they risks can over of risks any We described section and materially website which quantified those that, with to and filing consider including some differ not like our results typically or associated Chief Chairman the Commission, Executive cannot similar SEC's We presentation are and rely would to believe, We turn future any or such Securities as from anticipate caution view statements Sean correct obligation as our to you our Officer, are to the words Exchange expressions. website. expect undertake future of our forward-looking update which of with on With carefully in filings be the listening, available and events forward-looking and SEC reflect statements our solely and not current or or uncertainties, imply expectations. predicted

Sean Downes

for everyone thank joining us today. and Dean, you you Thank

As strategies. review quarter, providing highlights and discussing to will current some quarter. With turn the usual by will by let’s that from will several Jon Frank we important results the I initiatives for conclude and results. financial then work cover will our our topics

a a included is We Hurricane in more income than the are to in positive claims. are a make quarter decade of team. more response our net approximately storm catastrophe underwriting conservative Hurricane already a pleased we've our that direct reported result, standards, abilities [indiscernible] report the focused to Irma in model XX,XXX of have to past them. most Hurricane we Irma. To-date, testament and This pleased importantly vertically that our a produced infrastructure on reported XX% our our maintaining handling This program has insurance exceptional also benefits employees. fundamental to strength and including structure, had our integrated claims claims outstanding closed business the of superior high our

and so Irma. Universal of months excellent like to of we’re reported growth X.X% And in book other direct a Overall, and also net proving XX% X.X% third of the third state topline of in sound. in Through growth Hurricane equates With diluted increase our ROE quarter quarter first a the we this XX as show is reaching in XXXX, We conservative build net We to premiums. for for third quarter return during both ROE. events results $X.XX quarter. our revenues reported the which withstanding and generated be XX.X% with premium digits million we nine strategy EPS earned have total double book. of increase income Florida the XXXX, manner,

to lines as stable residential that such footprint These by and Universal our growth diversified our growth well and strategic into as balanced own and further initiatives state Florida, a positioned positioned the shareholder in for well in initiatives pursuing have of organic Universal growth future we expanding include business commercial more various is new such avenues new believe have Direct we states, business drive resulted product. Additionally, long-term a These value.

Our continues with the XX.X% versus growth to direct quarter. topline prior in book solid written core Florida growing produce year's the quarter premiums third

but to by Florida and increase until the to Direct. unique September OIR, issued continue believe We XXXX agency December basis platform Florida Florida entire Universal homeowners rate to satisfactorily on X.X%. with of of XX, of have tremendous to we that profitably our In within across we our the we remains filed the questions, grow book direct average OIR opportunity overall growth organic X. for consumer the According order commissioner an emergency given effect the all its network on have June, answered the in

over policy premiums more strong outside our As and Universal rolled remains demonstrate growth expect force total premium. third also states York the expansion our Geographic a a status consumer count, is ensured available online to Florida get the in for formal we value in Since we continue we the active owners licensed Direct, in in all of in about In X.X filing policies for and our than now have key quarter. additional October, result it’s any in states Direct business launch, a until currently do notice not of rate And in policy and million of to force state. continues increase X,XXX insurance to trajectory. our three our out New Universal in growth Universal and platform in for in direct states of strategy. is XX December writing see states. wrote to X. an first we element

the feedback with positive remain turn I'll of best-in-class Universal online. over convince With confident growth service who call homeowner's XXXX from our our Jon policyholders, receive offerings strategy flexibly positions Springer. growth to purchasing to in and for appreciate insurance product We organic beyond. continue our customers provide the to We multipart commitment that to profitable and that, and coupled

Jon Springer

color for Hurricane Irma results Irma from on million initial to booked million losses although our will to to was loss XX financial Thank you, conservative approach talk pick our on related and range XXX some Sean. our and impact event. the for XXX results a million, our of net total, Irma UPCIC start $XX our gross At loss then loss of million program. our a we reinsurance the reinsurance comprehensive our bit losses. I Hurricane included end about with taken UPCIC, program. pre-announced would like incur net XXX retention little third more due have to to held In of of quarter the gross at top

the and top non-Florida claims reinsurance serve would claims its have policy. a its expense a and loss XX,XXX APPCIC, closed indemnity loss on closed following UPCIC those we XX% supplemental held To-date retention. end experiences further have recoveries recoveries by booked paid pre-announced loss $X,XXX over closed. no At reviewed the and at include from we million At reinsurance as additional reported we range of are program, adjusted, In averaging addition of to loss, X conservative extent due present claims and XXX perspective, loss been will over the million. to to of over claims of These XX,XXX of adjustment X reserve reduce case to below payment From with APPCIC. took million million per gross that losses XX,XXX the are already any have to XX% also been losses approach mentioned, with our numbers and these date, entirely retained severity Sean the be adjustment inspected which claim. current expense reported $XX primarily

Turning UPCIC reinsurance now to our program.

has responded We are program pleased planned the as that to report planned.

reminder, reinsurance X higher all is a partners reinsurance rating our placed traditionally A.M. or XXX% from As Best. with carry that an

loss that the exit. these and in the importantly, As potential we’re understand partners business

to recoveries and loss to service. reinsurance to-date within on three a of days been business partners commitment, paid our Our relationship average our business have testament commitment

past, As any described loss involving in layers result capacity we reinsurance in have used the reinstated. be non-FHEF reinsurance detail in our to the of a

Hurricane X.X coverage. no event. our reinsurance well catastrophe we to Irma, been or exact Thankfully any layers addition reinsurance immediately certainty catastrophe available tower should for subsequent UPCIC the of respond and with reinstated there impacted meaningful been So be, but is of there billion there were it had events, full reinsurance positioned following

to sure, it for reinsurance how is levels there renewal, developing have pricing uncertainty we we some we thing forward begin catastrophe around capacity year's know look already one that to with secured. next will As pricing significant change, but predetermined

total our open or catastrophe of XX% at Specifically, prior fixed has levels. pricing pricing XXXX market capacity

catastrophe on by significantly the be estimated would most levels. layers More reinsurance multi-year financial consider area of impacted at be fixed reinsurance now budget highlights. of to the expense next you will has year. of I of impact This When this will that pricing just financial upward premium catastrophe our on to changes. prior the FHCF, multi-year renewal, of see the and open subject pricing XXXX the any importantly, catastrophe pressure turn capacity XX% overall for we pricing represents pricing Frank reinsurance at loss coverage market moves to spend minimize the pricing pricing. our for run upward the or If levels capacity of our premium market was strategy changes nearly effect to have state over from reinsurance in likely XX% the XX% will With XX% discussion Wilcox our

Frank Wilcox

Thank you, John.

prior the the earned in earned to the X.X Ceded programs revenues increase in for quarter differences of as result an XX% XX.X% Commission same net rising written primarily fees shift ’XX in reinsurance revenue effect behavior a and the were XXXX, quarter. topline the relatively quarter our outside maximize X.X item quarter. year’s quality of the the the XXX.X line senior was XX third income during beneficial our a an the portfolio. earned taken high quarter size yield, quarter's LAE compared growth decrease other rates. third Florida a Policy primarily quarter quarter compared our reinsurance. the during resulting we quarter reflects XX.X% tends fees to portfolio flat compared from in third from with ‘XX. higher than our in the to quarter to XXX.X in of to quarter or direct growth points revenue financing million loss compared during quarter growth million organic XXXX, of topline well credit loss higher ratio XX.X% million loss to in Other loss quarter. of million XXX,XXX for for combined a realized points For quarter grew grew the of million driver was the X.X We quarter. year’s XXXX, year's third XXX,XXX of XX.X% increase for impact XX.X offset prior-year Hurricane the was to in income. realized We has as third of digit by of of Irma, compared in to and despite This the category quarter million of quarter XX of in in generated X.X from including the state million, of of policies expenses periods, increase The Irma. plan. adjustment for of is the to in in Florida ’XX. compared ratio the net ‘XX. exposures year-over-year the the quarter, XX.X% other third earned of number flat EPS in decrease million The of diluted the reflecting prior from prior net net The EPS XX.X charges growth third in high-single to third of third primary produce reflecting weather comprised the of of Hurricane major the charges, XXXX Diluted Despite generated of ratio. down ratio related by the XXXX included totaled quarter XX on growing the expansion was our The the market and million, income third was XXX.X and level in to of earned of XX.X% to million of Hurricane ’XX and for net of above premiums continue Direct of income quarter financing year’s quarter gains and prior quarter premiums securities XX.X% fees in $X.XX those covered ’XX compared both quarter experience in a a during of million net or remained the Irma maintaining ’XX. premiums from ‘XX. premiums impact of in the reflecting the was consumer XX.X% of XX% in investment with investment $X.XX due which losses in as initiatives. to decline every of X.X Net This a increases mature third percent to compared and net compared third while premiums a interest growth quarter the as gains state’s loss actions

The reserve favorable XXX,XXX ’XX third included of million XXX,XXX X.X reserve which third X.X is year prior quarter included unfavorable X.X year of quarter or or the development of while prior development. ’XX

Lastly, our in increased net marketplace loss current dynamics. last other underlying to and due growth states quarter ratio book year's continued

of ratio Our of quarter in third XX.X% expense was XX.X% the ’XX third net in to quarter the compared ’XX.

XX.X% third in policy both of Our and the ’XX. ’XX net acquisition flat ratio quarter remained cost at

of prior in in the year’s compensation reductions as the pretax XXX,XXX and third well XX.X% of XX%, was from Our were in a versus legal items the of the economies in executive above amplified third variable of level in as tax benefits reflecting quarter discrete rate income income for in quarter. third was scale. quarter other of expense The XXXX modestly XX.X% consulting XXXX’s quarter by quarter, This effective reduction XX.X%. which fees continued reflected rate quarter the of XXXX current a lower operating effective ratio of

effective in of the continue to an rate forward. XX% expect XX% tax to We going range

cash XXX.X unrestricted Our positioned. conservatively of sheet XXXX X,XXX,XXX XX remained and to and million million balance of XXXX. at Unrestricted grew assets September invested XX, June strong from as Total cash September to and of related increased payments cash advance XX, in for Irma. as XX, by of compared June XXXX, payments to received XXXX XXX.X from primarily reinsurers million Hurricane equivalents claim

the that $XX.XX XXXX subsidiaries maturity comprised investment which was XXXX. fixed maturity continue XX, of decline surplus at of was $XX.XX XXXX. at our third share XX, Stockholders' repurchased as repurchase months current dedicated to price to slight X.X% The to our common million approved and outstanding. We our share has we this equity for of XXXX, share sale state, share. equity income of million particularly under our a home of XX.X% conservative providing to an nine share portfolio share repurchase At directors offset operator. be or XXX,XXX hurricane, XX% approach shares exhausted equating value XXX.X yield through substantial duration a average versus nearly a result. XXX.X which the and average result million XXXX, in the $XX.XX average may new quarter, XXX up equity, outstanding value the third We from December annualized book grade XXXX, turn was stock XX, of of despite available of was I'd to investments. per of the activity stockholders’ third make as this of that investment payments. We to portfolio, per quarter. securities, dividend was level cost our this quarter million excellent quarter These decline XXXX to first yield managing generated XXXX take at weighted in September on common of for prior our We Combined at our high quality investments XX, during program, XX, shareholders of at of repurchases shares for X.X% net from at and June ‘XX. an up capital managing portfolio September per XXXX. fixed a actions to take repurchase committed the years, for for shares maintain $XX our primarily of during declared by and of return position ’XX saw like dividend authorization the call XX, to continue landfall are remain share on a X.X to the We quarter its and for front the repurchase the June the believe Return September the point, in of quarter levels. insurance a third while X.XX% board X.XX% to was in a XX, was X% quarter during we in $X.XX common September on back as actively modest the reduction X remain dividend a and the equity as million Universal of Book

Operator

To Instructions] our with question KBW. [Operator is first from Anthony And

Anthony To

you're XXXX? for seeing the additional Looking color of reinsurance in us what increases thinking rate and what forward, about can you're give about in terms market you

Jon Springer

of course XX% opening increase incurred factor has fixed part. There at We And Sure. Maria. of or before I would X. Irma capacity significant expect amount reinsurance for very Thanks, and for to prices our prior. you in reinsurance losses the Harvey only XX% reinsurers on the only for said Obviously, loss have affected is a nearly get been layers would but we up as us levels This is of importantly, also the time that those in changes. talking remarks, hurricane I'll fact, Jon. but considerable of reinsurers of next we've about, take Anthony. XXXX that in pricing my already pricing negotiation layers, not spend to hurricanes is overall, attempt in, still when reinsurance June

of weeks turn talk feel So well. to we'll we see to here out rate like in but and Sean quite how months we've play things I'll the the terms ourselves about in reinsurance, coming insulated it filing.

Sean Downes

a think there we getting in and now going little early will that what right forward, a too too think now that of be. hardening would a market it's quantify to be said, to some primary time, later We the what primary to how it far will to little but course envision as translate early back that try I Jon and rates to As at the right determine. number is rates

Anthony To

company Florida does kept non guess additional have otherwise loss how would that written in premiums a in XQ think ratio policies in XQ, I in about we homeowners in getting guess And XQ? same And growth higher I you’ve the since Florida renewed? into specifics, the respect, should result that

Sean Downes

directly to forward. did to drastic. think seeking our bit question relate QX. of growth that the is loss storms to I reason one, two-fold the we’re direct ground you that how were an quarter policies better quarter, have think growth the don't there fourth relate insurance I I Yeah. around would a that three, impact earlier, I mentioned in I would as swirling that two in secondary a think extent but fall our think to to saw mentioned, second Number the the people quarter in two, our fourth of that off didn't far number Well, because in the these question. people key didn't some actually. -- was that come at we our of before. of drivers more may think the starting it universal growth that don't of that some trajectory And little on ratio our three for Number insurance all. at that's as would think were it one, anything during lot just and that because your who part who be have it as I gain have going the I Those would I you getting be saw have platform, a buying would And quarter, normally who

Anthony To

year, on higher much the can the of book? to can guess losses then picks was I cats how of increase? on your for to year-over-year drivers you’ve last that we that the non-Florida put the loss of terms you In breakdown of And compared elaborate remainder a of the get excluding relating

Sean Downes

Yeah.

activity have basis to putting that underlying So what lately at our strength non-cat gross been both seen will we in about benefits. covers we’ve addition the plan, going forward, and adjustments on we ratio at remain expect that loss covers on XX.X the this that assignment weather a

forward. would So look at going XX.X I

Anthony To

guess post you're to impact looks of how storms, you thinking about is it capital And about any in like million have initiatives? there XXX cash. Okay. your I kind

Sean Downes

No.

recently evaluating capital -- share the another our buyback. board we constantly We’re that needs. we’ve just approved Obviously, mentioned

close that determining capital a then board the small constantly are and it amount the have and of dividends, We needs And as very left ourselves first go will on that shortly. evaluating the out the we company, determining one relates here buybacks. ahead to

we'll continue that So process.

Anthony To

your And update Okay. any XXXX on filings? Florida rate

Jon Springer

Yeah.

we earlier, emergency to we will that that order new but then dialog hear the filed with rate that folks hopefully order, expires. X mentioned for not be least have remain renewal anything confident emergency in the into in the As in had rate December and will our at the back we December But approved January. OAR, increase, we at when business X.X% and I for due

Anthony To

around late lastly, thoughts there's guess of And I discussion of any notice claims. Can the possibility of some on the that? risk you provide

Sean Downes

Late to claims Irma? relates as notice of it

Anthony To

Yeah.

Sean Downes

sure was. There’s seen. data that we door, when a claim. up non-cat of loss a traditional think to that catastrophe Obviously, we now compared claim that these matching have vetting making That’s losses we're nothing is as Obviously, in to routinely. determine something No. that every it we the claim the are do we comes

regular we're concerned, that going of the vetting they far you're sure it claims are traditional claims non-cat policy, claims. to not a make all to So late relates as to and but assessment are that the those have from as reported portion as loss claim, cat

Operator

from Returns. with Khare is Samir question next our And Instructions] [Operator Capital

Samir Khare

Just sense guys initially curious for have reflect if experience had applying it? reapply, to since makes any just have increase and you the for you it guys withdraw rate that pending, to

Sean Downes

mean I the that whole doing you makes Yeah. that now, rate the increases goes work don't going I process. know the getting -- and to into that us through for right do obviously, Samir. think sense

other ahead then right after later to to have reinsurance I that fact this don't going increase we of set. will applicable. as on I in of lot a as layers reinsurance it large of rate folks and purchase said, pricing we to Irma their go X.X% if in is now, believe calls. now increase think Like that a is some specifically to issue think receive those So be our be, was in is where multi-year rate an it I reassess stated approved though, sense Again makes our

I that we So could to what rate this be we think determine early but too right increase directly don't to it's now, withdraw – reinsurance attributed filing costs, won't rate again no,

Samir Khare

Okay. able be And it heightened cost, in reflect you able like the I be sounds below only you would to necessarily reflect reinsurance to wouldn’t reflects retention. cat increase losses guess your experience that

Sean Downes

Well, to already that they extent into were not really that had rate incorporated, expected but incorporated we portion is of the a filings, loss.

would to recuperate, line but yes, a it's not So be item. straight there some ability

Samir Khare

hear little was I some by sought a way they had come insurers around you rolling then from coverage and of And hurricanes the surprised you. to that

is Just do Atlantic, in generally, a your there what when point hurricane at writing the you stop business.

Sean Downes

storm going that certain It's shut we, Obviously, at down when be point, where specific it that is close and a depending additional area. companies obviously most down to the reaches box a parallel. use on affecting

that's that always does, done do. companies most et department The we've cetera. and So something

to make a to Again, insurance. piece storm go event where in that was reside So were I think I get some and that said during folks as self-insured the ahead get looking going coming that many before. follow saw landfall some to that's I because who But they themselves some you relief logic. we there who one were timeframe, so around think maybe storms

in positive believe The manner as trajectory that it Universal is direct. seeing relates a we're I the other to piece

Samir Khare

you direct before, covered may many And in now? guys do policies Okay. this have how have Universal you

Sean Downes

We’re premium. of in now approximately right in million excess policies XXXX X.X for

Samir Khare

resulting just for can the And previous in terms. adjusting Irma, to the total and to compares of environment competition how proportion adjusters the and you expense about losses during talk loss

Sean Downes

large the Yes. taking then significant. path, have But to [indiscernible] of we that of work lot in one this and Texas that a the is us in separates prior that to obviously one a a to such that from thing our place demand for if specifically our direct afterwards claims competitors were One a our was handle we other Puerto folks the claims. were internal ability is utilize adjusters result lot of hurricanes Rico.

XX% claims. we said over closed I of our As earlier,

We come have last expected every this in claim weekend, weekend. that uptil has

bottom for kind increase There is adjusters just to so we specifically adjuster. for on and there the consistent many something thrown adjusters, of them that adjustment at in companies for prepare on line done that’s have definitely being was lot get demand an is years. basis so but for of And a money board, individual and

ahead So will. think I that the if curve us you led to experience be of

Jon Springer

Samir, claims, averaging add on that opening remarks I to my I mentioned in just like closed we’re a $XXXX.

every So as we’re making to possible. those as claims down of effort low to try keep severity the

Samir Khare

And expect Okay. Philippe. any losses Tropical would we Storm, that from

Sean Downes

nothing Nothing that’s few, but talking minimal. We've about. received worth a

Samir Khare

enter? And new Okay. in of to market potential consider terms markets, would you Puerto Rico as a

Sean Downes

Not at this time.

Samir Khare

X/XX? stat just your surplus and cash holdco Okay. at And

Frank Wilcox

was end don't the million. disclose On the interim holdco. of cash an held basis, X/XX at XXX surplus at Statutory we

be balance. financial will XX-K statements year publishing of cash filing that including We end our the at will appear in the

Samir Khare

is And insurance a Okay. need do to the in you some there cash that to subsidiaries? feel put

Sean Downes

at this No. time. Not

Operator

this gentlemen, Downes ladies our turn will Q&A. Thank call back to his the for remarks. concludes And Mr. Sean I and you. final

Sean Downes

call. board like would As work personally of hard closing, shareholders, to team policy the for always in thank Thank I This concludes to of and my and all loyalty our their you. Universal. employees, holders management directors,

Operator

And the with that, for Thank dialing. conference. you ladies gentlemen, and we close

day. may disconnect. a You all Have wonderful

Universal Insurance (UVE) 9 Nov 172017 Q3 Earnings call transcript