UVE - Earnings call transcript Q2 2018 | Universal Insurance Holdings, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to UVE Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only-mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Dean Evans. begin. may you Sir,

Dean Evans

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

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

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

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

Sean Downes

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

will important providing Frank then conclude some quarter topics initiatives several cover by and begin will I Jon highlights by we results. the will and growth current our strategy. review usual, As financing from discussing will and

for We are our questions. Overall, will second the open XXXX quarter with results. then pleased call we

net equates EPS an other $XX.X and annualized XX% diluted we premiums ROE to including with million reported in in We Florida quarter growth which direct top reported in written line $X.XX, of of of and XX.X% income XX.X%. XX.X% As the second growth within growth growth states. excellent

X.X adverse expectations of was a These the ratio points of prior million $X primarily underwriting offset are reserve due or strong, X.X of year audit. points well development, received or by to Hurricane as This $X.X or million a benefits of with Matthew. combined XX.X% points $X.X for tax million settlement related losses weather premium items quarter. Our as above profitability includes X.X

companies' in to service Blue produce contributed Adjusting of benefits Corporation respectively quarter Universal subsidiaries million Our $X.X Corporation and the Atlantic and continue $X.X aftermath million, as Hurricane results. Irma second Reinsurance

more well which have outlook in to XXXX, the Lastly, Federal balanced I avenues, We the business. passed in growth income stable, meaningful our future growth had net compared we like Reform prior and organic discus tax benefit which quarter, for various rate effective the heading positioned case from that have our diversified pursuing forward. the would the on during as believe with when a Tax year. by to Universal impact first positive resulted briefly was a quarter our the for

wide count, of December approved the produce with includes strong organic rate to premium in average was as as growth X.X% of in increase core growth book direct Florida XX% state written our growth This the policy XXXX. second continues Our quarter. in that well

through on Hampshire agency state strategy. now first In both three an to platform growth key in licenses written April, we continue network that our book New our Universal our of running Direct. other direct in we profitably Illinois, grow early another expansion business our Geographic element believe quarter. states, basis Virginia. XX.X% is robust Florida grew premiums within with can in We organic active and strong direct-to-consumer After XX in states the are West in in policy second additional Iowa in writing

is have expand million our and prudent in We XX,XXX forward. unique a expect premium. owner Direct, direct-to-consumer demonstrate insurance our a all to imports of for continue our online force in continues to of active policies Universal solid manner $XX approximately trajectory. We states going platform to currently footprint available conservative on home and geographic growth

We well extremely continue forward. going to believe is positioned that Universal

to continue organic confidence growth remain to strategy profitable multi that We book core our premium us enable We growth. our grow will of deliver business.

We minimal set have sheet a with conservative solid reserve appropriately or investment debt and position. balance a portfolio, loss goodwill

comprehensive our unique event program protected include reinsurance capitalize by which we most conservatism, additional to a and industry reinsurance well us structured integrated in event. We virtually the are positions renewal to disruptive recent enhanced the of at mid-year

the favorably As highlighted by current manifests continue which our hurricane Erma result. in quarter's to performance, itself

the strength, call will the expect for With Springer. the to what that of And shareholders deliver to are we future. to turn Universal. about these continue over we remainder substantial our value with Jon excited Given the I holds XXXX and to future into

Jon Springer

an the also update Sean. will I to date we with event start brief Irma a on Hurricane reinsurance first our provide and and X Hurricane renewal. recap update you, the like discuss Matthew, Thank following weather program June XXXX update would to on

reported months a gross in to nature our of due change claims total to during increase Following three to first count This estimate we and claims new million losses down Irma Hurricane remains aggressive this settling attorneys the net for on We gross quarter the quarter, XXX had approximately over change in bringing another in as stress Florida. at of the XX,XXX. million. $XXX Hurricane reported for claim which loss of new comes reporting estimate had on in of of our continuation primarily related event. the to growth retention from Irma that claims, the Irma our Hurricane We negligible plan X,XXX claims $XX actively of the have XX,XXX losses increased

closed XX% and impact average premiums. claims have have claims now and roughly over the paying closed average and now loss reaches We severity all a with program of with our claims are reinsurance severity an an across that we LAE pay. From booked LAE standpoint, financial on a approximately loss of XX,XXX X,XXX for of X,XXX we that reinstatement responsible level portion to of these

reinstatement reinstatement $XXX for million to for X% extent expect $XXX this that $XXX the be of million. first and revenues of in Specifically, program To likely our by subsidiaries. occurs, reinsurance for million, by the next to losses hurricane X.XX% any any excess earned our costs traditional ceded offset will Irma would further incur additional we provider the we cost

revenues to majority Corporation Irma. and of increased due $XXX,XXX of second Adjusting the each of of higher additional The of second additional of quarter include of case the vast were produced past a service result within which XXXX, Irma, be otherwise level in during the to to that Atlantic quarter the three million Hurricane as benefit of continued a workload would of Blue created led normal Hurricane quarters provider our to commissions related receives the revenues Corporation profit which higher-- profitability reinstatement a the a $X.X XXXX. subsidiary during have pretax As a Reinsurance Universal quarter. result

Turning now to Hurricane Matthew.

year's included reserve results of Second prior unfavorable quarter related net points million year quarter XXXX. fourth or occurred Matthew, prior Hurricane X.X related include also development XXXX development reserve of to $X.X $X.X Hurricane The prior X.X Matthew. quarter unfavorable which of to the year or points million, in net

June $XX.X claims. with incurred As XX, stood only loss XXXX remaining million XX of open Hurricane Matthew at

ceded reinstatement resulted book at at that in $XX on hopefully Hurricane unfavorable is a Matthew million treatment going cat on development However, we agreement costs forward. particular year mistakes. to avoid exchange that any net to development in prior to treaty multi-reinsurance our for further during losses negotiation elected for related a favorable gross million this The loss reinsurance treaty to reserve quarter $XX specific from this

points X.X months second early XXXX. of events March, in meaningful XXXX April quarter's date occurred March relate current that the several event winter again and in or during late windstorm plan mid points worked and calendar in plan weather in including of XXXX storm and six million loss the X.X of during $X weather The Volcano to the weather first beyond includes late compared XXXX to a or early January losses of in in beyond the May. quarter to million Hawaiian another quarter $X Second year events losses

retention premium of the our our program UPCIC maintained on to of same in we same programs a its Florida. top involving our second, tower and the for to catastrophe and million. loss quarter Florida to quarter, completed insurance growing build without detachable fourth adding other on catastrophe the our and states also for retention other than coverage million to event similar retention losses we conservatism than During of for to companies structured the for UPCIC reinsurance both Even reinsurance. reduce our $X and event million reinsurance states the manner the a $X single business, for a $XX purchase third, reinsurance involving increasing recent percentage trend contract catastrophe continue expanded additional of the continued Florida and with XXXX-XXXX loss spent up

all In a of while also catastrophe was maximum company extend coverage agreed two years. of more this future not contractually or and insulate UPCIC million to continue reinstatement billion highlights. lower same catastrophe with catastrophe through Frank retention. able further secured by Wilcox which three events With limit, the of discussion reinsurance up $XX.X billion. need on to top retention a of about now responsible company incur turn UPCIC cost be limits in trend manner four or maintaining over I itself the to million adding scenarios, has any its $X that utilize also catastrophe premiums percentage purchase or American to the Platinum to of $XXX years our and for the now over the $X.X conservatism the of utilizing end coverage for million. will two its To UPCIC financial these coverage order to for that, With successfully million of spent of would to events a $X one-time purchased $X $XX nearly events billion of exceed the would pre-event for

Frank Wilcox

Thank you, Jon.

during in XXXX. the direct the second second $XX.X quarter quarter the of quarter in revenue XX.X% We net For driven $X.XX, generated a posted and prior of EPS net from reinstatement reported for We quarter compared second XX.X% of the and X.X%. for Blue year's Diluted the income received second XXXX. growth prior $X.XX million, the growth was to second total improved of up versus by of compared XXXX. revenue related of totaled loss of an quarter policy up in quarter million income increase XXXX. second the Included strong of policy to revenue Atlantic commission while second year's Ceded XXXX of slightly XXXX. respectively, to XX.X% in quarter premiums XXXX fees a fees. XX.X% the ratio earned while a quarter. net of million, net $X.X X.X% $XXX investment other fee of XX.X% compared each premiums XX.X% to revenues solid by quarter grew the premiums was Direct the volumes, XX% was commission $XXX.X quarter Commission XXXX earned in The income, declined premium earned to second of revenue as grew within net percent million. LAE premiums the ratio XX.X% quarter to and combined growth of earned to by XX.X% XX.X% XX.X% and commissions for

to in quarter compared weather million included events Second points X.X above weather $X the plan second of of or points XXXX. the above XXXX plan of quarter X.X million losses or $X

prior-year related Second include $X.X X.X development primarily the $X.X or Hurricane to compared to points unfavorable second million, points quarter Matthew of of during unfavorable of XXXX million, quarter X.X of or results development reserve XXXX.

Irma. of a points revenues Adjusting of from Corporation by million, to or The benefit second X.X $X.X additional XXXX earned loss include expenses Hurricane related adjustment quarter Universal

our the LAE in other ratios of and related non-catastrophe continued home claims. than prior as including Florida, state compared of loss ratio the marketplace underlying loss expansion geographic and in Florida increase are generally Our year within to reflecting the AOB dynamics higher state impact our

second quarter XX.X% Our second the of XXXX net to expense the was XX.X% in ratio in of XXXX. compared quarter

of primarily a premium acquisition the policy prior-year XXXX tax both by benefit net reversal from to a $X.X or in point XX.X% a from XX.X% of ratio tax including in million, a and refund quarter, cost included driven Our premium second improved X.X second accruals. audit quarter the of settlement a

Excluding other a expansion driven book this typically modestly commission Florida. ratio item, the policy than would states' have our within acquisition higher expense geographic have increased cost as by

the $X.X from ratio other during total compared gains to net the other included losses, XX.X% accounting from for in within million was XX, rather approach taken realized portfolio economies which The was investment of our second quarter of million average second maintain the quality basis in was the June XX, rate $X.XX years. tax XXXX Act tax to X, fixed XXXX growth driven scale. during the XX, a The operating was of investment income rate cash portfolio income. in item after-tax portfolio. in investment XXXX take We number and of was second January of an growth invested the second in quarter XX.X% cash the rate year's which versus of income high second a quarter. XX.X% The XXXX, result June quarter composed quarter, the XXXX was generally investments, of to comprehensive reflects of first in improving our investment was reported expense losses in quarter the added by Our quarter the the our management. $X.X in investment to XX% for of We XXX,XXX The adoption Net optimize Jobs XXXX. XX.X% maturity June XXXX. Tax enactment decrease million of $X.X quarter in a line of securities realized from were year's the on as of quarter million, decline conservative at pretax equity equity of treasury X.X of XXXX prior a was XX% billion $X.X second of actions as This growth our our resulted effective of Total result weighted of and XXXX investment of value managing investment the securities. equity second gains the of compared to which unrealized in yields from reported the tax fixed in which duration the XX.X% to Cuts by of in reduction comparable a portfolio the of grade. and assets available-for-sale XXXX XXXX. We unrestricted and primarily of XX.X% for XXXX, XX% the guidance maturities income quarter primarily effective corporate federal driven of prior than effective are benefits in investment

exercised included second The tax position. of primarily the point remain excess and/or from items discrete stock-based were to resulting or awards quarter of committed from We capital managing $X.X million actively percentage XXXX benefits during our quarter. divested one net a

we of repurchased During $X.X of XXXX, the average second XXX,XXX cost quarter an for per shares million, share. $XX.XX

in $X.X based dividend at authorization quarterly of per through annualized a dividend of yield share share price Our second on which an paid the million run We repurchase quarter remaining XXXX. regularly current XXXX XX, to X.X% $X.XX current equates levels. December program share and quarter

on the XXXX XX, per XX, while the June share during level to average prior we of to of remain June $XXX had to of to million from would compared at back XX.X% this XX, July at million of by $X.XX surplus to the of XXXX June the XX second dividend that the I XXXX. XX.X% announced XXXX. from our the this XXXX like questions. beginning per the XXXX return was the XX.X% dividend; XX, call $XX.XX growth share and $XXX an operator XXXX of third Stockholders' XXXX. regular We point our common we providing quarter as quarter. insurance was this increased our of was for first quarter XX.X% turn from in XXXX, the XX, March excellent quarter or $XXX equity for shareholders on year's December XX, Additionally, book subsidiaries quarter equity record at growth was X.X% second result. to quarter common dividend increased compared or that March paid dedicated is million at average and million of Annualized on on X.X% to X, believe July with value was equity quarterly of $XXX.X At for value end Combined return XXXX; shareholders

Operator

[Operator Instructions] from the And Soleimani with our first comes of question line Arash KBW.

Your open. line now is open. is line your now Sir,

Arash Soleimani

through? I Am coming

Sean Downes

ahead Go you. got we Yes, buddy.

Arash Soleimani

versus now are to you or up it of the tiff the Okay. XX% what's more growth, increase, Florida, higher growing you there it Is average a getting the state where increase? County know there The than in that growth premium XX%? is in rate areas X% rate have but I Try growth

Sean Downes

relates the of as and hurricane increase Yes, the it is see books. we season few someone is Universal you I there I and a buying factors. increase rolling hurricane sometimes our to think X.X% parts helping through that aggregate cycle people certain there across and a think going is insurance into with obviously of think season. obviously is the disruption of in where rate Florida getting it is regards why that state obviously a an being to there contributing marketplace One into Florida, cyclical I Two, us Direct are

think I factors those all contributing So that are to rate. contribute that

Arash Soleimani

going guess you range digit of forward rest to still be Florida? the I year in in the And Thanks. Okay. for double do expect the

Sean Downes

was high the given think I single the previously in guidance we digits. have

the forward. expectation going think I that's So

Arash Soleimani

going forward a was of obviously earned, on is look million run of or And that we and rate premiums how ceded this a should quick that at question the the is quarter $XX.X that? Okay. just premium bit fair ratio; down sort

Jon Springer

reinsurance and quarter. large premiums earned second save going We there think a expected relative to a our things did just money on of the of then on there. Sean some I you growth premium had our in are and answered, as just asked program Well, we couple

their little out bit. a So extended ratio that

Arash Soleimani

I your you've to reinsurance partners income that's so just get been been from obviously up? as on the wanted ever any strong. Did to go touch very adjusting that base your income the losses making at on UAC, ability generate pushback

Sean Downes

loss, a contrary than loss the with a is adjusting to than handle Obviously adjustment is and we our when greater when And obviously it. control the Arash, a large our firm, party costs firm third third-party. It's expense a from greater expense handles No. ability actually. litigation loss adjustment the

pleased they it's Either expense. have they the to would us with way pay where pay rather it. third-party. paying So are They to much a than

Arash Soleimani

And unclear there it in you work further how reinsurers a have where might scenario? storm as of get event? be different for from could Irma sort Is claims from with the does you losses or cases that in of type from away conversation or the that

Sean Downes

I hard loss the really a to or into to your am question. no, obviously cases issues due really litigation getting From there determine and environment, we directly question, any what it two, reinsurers some that of with be the number that parallel, any it that the is not do not get your is covered It's but have and Irma. co-related to are occurred. determine policy Obviously, pushback the answer how the determine. There a; regards that where that. with to one to won't we under cause diligence our to obviously damage is

Arash Soleimani

further quarter Okay. to expect And from that you do have? third income you the into adjusting the looking see operations ahead

Sean Downes

claims, will to continue are be we smaller. months getting Obviously, minimal. next be over going that in but few will I much the it claims think be think receive the I to you

last frankly it than I cases, number we our up would some-- will generating quarters two and existing some on it's We think income we be I minimal. will have think be put that the smaller much but

Arash Soleimani

you by premiums, income. curious think would gross And Thanks. be had be are what you up that adjusting it goes offset? where would to offset at have I but kind said reinstatement John of the perfectly premium you reinstatement to right. just pay I also have the All expect you mentioned I cause point if was that guess that loss the

Sean Downes

the increases loss piece the obviously expense Well, when increases. adjustment loss then

hook the that adjustment So for incurred correlated would that of X% covered that overall if the overall loss. loss we be by loss, the directly to increase are expense on in

Universal would going we me on that's of my forward Adjusting putting So kind minimal it with are up with saying be any Corporation. quarters stance

Arash Soleimani

mentioned Platinum? question Thanks. And then-- Jon, from a you if, for get include retention, to but the did million so American does $XX XXth the how maybe this is you that And XXth? how do you--

Jon Springer

be it had includes states to the Yes, program we serve offset from core our American would Platinum. the that catastrophe other retention. that difference The recoveries

Arash Soleimani

net income, I quick $X about And to Frank, on sequentially XXXX XXXX, but million yields had from Okay. looking investment QX, income. were in on invested one know you the assets QX, for investment up a year-over-year, uptick that I'm net a

wanted a to better I drove what just what-- sense So get that? for

Frank Wilcox

We-- we mean, we things. to portfolios our has are the generating need reinvesting relatively tap short securities are premium the that and a has a mature, we I duration Fed also Irma, investment after Well, several our actions the action-- continuing we We're for obviously the grow into portfolio balances taken. to that have at that liquidity. rates, got realized cash with we rate higher we as that

more corporate. mix US we obligations the the over some and migrated a So Treasury from got we our little aggressive of

Arash Soleimani

net fair quarters reading it forward carry of bigger? million the of income is that $X.X basically to So quarter investment get to assume showed future this

Jon Springer

I the of is going current forward. think yield expect what for to indicative

Arash Soleimani

multiple basically impact-- from And AOBs I see do claims, on was there recently that-- any know do Okay. guys the case have you that? that does said a could same court you you

Sean Downes

fee-- the were the the federated. Obviously then media and in from you is multiplier fee recently court mentioned as AOB a been sorry with that One HCI from --one the as cases specifically related there regarding No. the two homeowner's perspective. multiple have cases to

of specific either We Each our particular case divisions one. any on differently. haven't handles really seen one anything

the we words other handle in expert an would So extraction. who have water

represented a We have adjuster the somebody who would perspective. from public handle

case who have would We somebody litigation. it's if in the handle

same AOB handled and case on entities different those all globally. are that the would be covered So

And an people around touch occurred for we multiplier so been an have that's that to been that's fee XXXX. bit little never on have issue. us, been the recently, a about had since has the base So instance talking

hasn't of been isn't media that the at upheaval what's different. something just going an But and this think all been or regarding anything think AOB that's to marketplace. anything we've right there some now we that for was cause is in So it's I experienced, anything us issue been that isn't sort on frankly anybody. that

Arash Soleimani

Perfect. Can direct break And question. Okay. just the up the UVE for quarter? you premiums last

Sean Downes

The Universal Direct?

Arash Soleimani

Yes, Universal Direct.

Sean Downes

It was $X.X million for the quarter.

Arash Soleimani

Okay. And then what was the policy count?

Sean Downes

right Policy quarter--? for now count currently the

Arash Soleimani

Is the it as of end QX? of

Sean Downes

I to have the I quarter don't will right now. get you. back

Operator

Thank line from Samir you. question And with comes Khare the next the of Returns. Capital

Your now line is open.

Samir Khare

Hi. you. Thank Good morning.

Hawaiian of many claims Other any that did coverages? insurance from and you get Just cat trigger States did the losses, your how

Jon Springer

we otherwise of in majority we date, a recoverable had May there. on XX occurred Yeah program, our given the those we to recovery claims and reported our aggregate that when satisfied had have will reinsurance

Samir Khare

and for rate year then putting in Okay. guys Florida? what rate for the Florida and increases increases, this And you Great. in on outside

Sean Downes

for right other process states Yes. are We the just started now Florida; ongoing.

We will to that good in so. month have now but information. days, early should a pretty idea we we or But right the Florida next it's get

Samir Khare

budget were ratio, think for do of kind in guess, cat how the loss budget. guys above release, losses And press I about, guess, I storms? your, then In that talked guys, the budgeted that much you

Jon Springer

windstorm $X $X storms, five. prepared additional quick up range that did I could bit million, little to my in the on booking got To well losses into dig pre the in to I remarks, as think out those. March led the that winter and actually comment events real million, a in of for storm us as four April, also three that some the I couple

Samir Khare

post what's you on the But guess, I that loss basis? booked Is in that your, Okay. ratio planned guys XXs?

Jon Springer

On points direct Okay. basis X.X a

Samir Khare

increase apprised just that? of and the when reinsurers did loss, about Okay of Irma the you

Jon Springer

We day. discussions have every our with reinsurers literally ongoing

Samir Khare

I that was guess out it to QX QX I a them increase just a trying or am figure increase? for

Jon Springer

I comment for on think to that's necessarily Samir. us

Samir Khare

in Okay. Atlantic XQ? any commission to Would Blue we income expect be to reinstatement there

Jon Springer

is -- reinsurance, paid. Blue losses Atlantic paid Well, reinstatement we are paying excuse me, billed are as brokerage and

we to commissions So the booking have brokerage while were there yes, we advise collected will reinstatements for be would Atlantic Hurricane $XXX build yet Blue Irma are that so million, be million small. $XXX future although they not

Samir Khare

was can what I you're Irma on under if elaborate seeing wondering you claims.

guys do When you're then you -- Irma did seeing increase reopened claims change think on all? you litigated about your you start on And that your them? outlook What think litigation does an seeing is talked I of rates claims. at acceleration? causing

Sean Downes

Let me all in the kind out your right at quarter second previously QX claims those seen closed now the answer let in haven't in increase and an first of reopens to you I'll X,XXX question, we we we part. back first one. no come received Currently, QX. in but you that, really faded for guidance our gave claims around in

than that we gave So we're quarter. the seeing turning over any greater the claims pretty quickly. We're last not a lot reopens of number

part little a the question, decreasing it's bit. actually What line second in your was Samir? running it's So

Samir Khare

That's you I Thank think fine. you. it. answered

Operator

follow-up we And do from a have with you. KBW. Soleimani question Thank Arash

Your open. line now is

Arash Soleimani

the repeat know wanted next in I'm but I X% $XXX Jon of to not Was you million then it of $XXX sure if if could just heard million? X.XX% just you and statement.

Jon Springer

Yes. beyond already. we've be booked would what And that

we the So the to marked loss we million. loss, booked $XXX

cede to our X%, then you the losses for the to every first additional will $XXX and that X.XX%. the extent traditional So million program, at dollar $XXX million as we be of said, we responsible

Operator

closing And you. any would to any now the not Sean further call like remarks. Downes I at thank for am over back time. this showing I Okay, to return questions

Sean Downes

you. Thank

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

Operator

And This conference. a you in today's participating may day. disconnect. you today's Everyone and have Ladies for thank gentlemen, does conclude program. wonderful all

Universal Insurance (UVE) 26 Jul 182018 Q2 Earnings call transcript