UVE - Earnings call transcript Q2 2019 | Universal Insurance Holdings, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the UVE Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only-mode. Later there will be 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 turn the conference over to Rob Luther, Vice President of Corporate Strategy and Investor Relations.

Rob Luther

morning, good and you, everyone. Thank discussion Welcome earnings second XXXX our which to we our results reported quarter on yesterday.

Chief Frank On the Officer; and Executive Steve Donaghy Officer; call with me Jon today Springer, Officer. Chief Financial Wilcox is Chief Risk and President

note Before contain forward-looking measures. discussion statements we today's may non-GAAP and begin financial please

uncertainties Forward-looking those statements. and cause results that statements involve assumptions, to actual could risks differ from materially

the and Investor the reconciliation UVE's please to of SECs For see press are release. included release, is available earnings the which more the GAAP comparable at on filings, SEC of website quarterly presentation section all our measures on universalinsuranceholdings.com press of information our measures in non-GAAP and financial A website.

With to Steve, that, turn it I'll over you.

Steve Donaghy

Universal Thank want their today. I was Thank Officer, for to you being announced you, confidence Rob, to a have Executive executing mid-July. assisted by against juncture in He our team by like priorities. Executive I Further, for on board joining appointment the our I and vote strategic to our enabled of as seasoned named and to which in would thanking in everyone. continue with his arriving have Chairman. I'm morning, Chief Sean our begin fortunate us seamless growth Downes excited transition. new along am good at congratulate management this

shareholders. serve marked and forward we growth and we continue value strong as better our of look to elevate years creating by our I support our to create his in Sean's to is service and XX consumers which together for the over culture success. that can work past ways board a of

a results, half our reported Moving strong quarter to and first XXXX Yesterday, quarter first second quarter our extending solid results. a of XXXX. second we into

XX.X% million. to large to of the half premiums up growth were up revenue doing strong of XXXX, Direct part X.X% written $XXX.X first outside was For total Florida.

first half non-GAAP on of $X.XX the basis basis XXXX. and adjusted a for GAAP EPS $X.XX on a was

Our average income value grew equity return by our -- in on pricing, and our per XX.X%. was supported services integrated pretax annualized strong margin half share XX.X% portfolio was and performance. all first volume, premium first half a Book XX.X% investment the

continued XXXX finalized programs our initiatives. and We Turning were reinsurance the strategic to the any secure in and company. coverage more than XXXX able our on progress to history our other point of in catastrophe

to in the to continued second with our We its of Property Wisconsin. in Universal where Illinois good distribution off began in Universal direct-to-consumer the expand addressable becoming writing in year. first Property start Universal And quarter Direct we channel, quarter proactively licensed and a this

XX continue additional our owners, auto, licensed insurance and Lastly, carrier in flood becoming lines. five Clovered more digital distribution appointments across than states expansion E&S channel home the and added

of initiatives. positive So our management the our through XXXX on a half the continue provide to company initiatives, we moment, to let first our In first in overall, to walk over now update Frank turn Jon on risk me it but will financial momentum results. see across an

Frank?

Frank Wilcox

everyone. good and morning, Steve, you, Thank

non-GAAP a adjusted also income a Adjusted and losses unrealized interest realized and adjusted commissions. impacts and As and excludes extraordinary operating premiums and expense. gains today operating on investments are and basis discussions income on reinstatement reminder, exclude related EPS from on

portfolio XX.X% the our losses volume, premium for driven half realized in by in organic partially XX.X% revenue Total pricing portfolio. grew for and performance, primarily XXXX higher investment quarter investment by the of offset first our

and core adjusted $X.XX investment service in A claims rate. integrated booked on investment and the XXXX portfolio reserved in of a and income XXXX momentum integrated an increased XXXX bolstered benefit our from and prior $X.XX by lower half for Pretax conclude service quarter of compared positive when performance, for also was margin position. the and the loss for and tax the These XX.X% for first higher the half results growth quarter basis ratio effective EPS as basis premium EPS businesses. years' a from $X.XX reflect our first non-GAAP to GAAP $X.XX was XXXX, the include respectively. on XX.X% to but bolster a

return on second XXXX while for first EPS first was the XXXX related of XX.X% addition, which of $X.XX value XXXX. of quarter the driven XXXX the to for was the million book $X.X In per grew also the XX.X% of half average EPS for non-recurring in second non-GAAP adjusted policy acquisition quarter approximately and year-over-year. half of by benefit and equity and Annualized GAAP decline share XXXX pretax cost accounted

earned grew our quarter approximately to other XX.X% the increase the billion, year. an X.X% to and Turning were underwriting led premiums prior up X.X% Direct of for growth in Florida. results. $X.X by enforce XX.X% states of in from Premiums

growth strong. were half by in first states guidelines in more-disciplined underwriting tempered the was XXXX, XX.X% For put be place while geographic growth other led in XX.X%, up continues that of other Underlying expansion in and X.X% premiums direct Florida were earned in to XXXX by Florida. of state's

as premiums basis for and decline quarter XX.X% premium to percent Ceded first for the the basis XX.X% XX premium direct of XXXX. to reinstatement a of points excluding earned half points XX earned increased

quarter loss by company's combined XX.X% claims from the business. XX.X diversified adjusting booked with losses the of bolster half and driven X.X and core increased in for a business, On increased ratio the underlying benefit points first connection to reduced XX.X% in points our the reserves increased expense to side, the growth to XXXX ratio for the

increased driven the expense other to in for The XX%, offset partially In addition in ratio a X.X ratio increase XX%. by acquisition improvement policy to point in a expense an ratio as following. by XX%, to X.X increase the points to our quarter the point set forth cost ratio in X.X the expense operating

X.X partially XX.X%. basis XXXX, expense acquisition improvement point to operating XX by by XX.X% the to other policy of half first offset X.X increased point ratio the driven ratio the in a ratio in For by the increase to expense cost points XX.X%,

cost million second refund the of quarter first to half a quarter the benefit taxes Revenue. of The of due of the prior and XXXX, acquisition relative in increase result for policy of of Department to year XXXX with settlement recorded a related to XXXX a of the premium as was the Florida non-recurring in $X.X

XX%. to the prior the be year first expect non-recurring reduced XX year the benefit quarter and in benefits for the X.X executive in between comparison in improved to to of same Excluding compensation. ratio XXXX points expense We the basis the full XXXX and ratio for and the have comparison, the points second for expense periods now due scale would half XX%

expense include increased points for points to quarter series half was of XX.X%. a related of ratio X.X the the half of first the of The in southeastern wind the to events XX.X% X.X the to and in events and excess quarter of net states. adjustment Quarterly weather or drivers for plan loss $X and million X XXXX first for loss point XXXX

For million the plan X.X were events points. of $X first half of in XXXX, or weather excess

development XXXX for net or for or hurricane XX XX reserve was Matthew. the of recorded for to $XXX,XXX losses was first related of year basis basis half and increased quarter the recorded primarily LAE points Prior points and $XXX,XXX

$X.X XXXX $X.X For million comparison, the unfavorable of X.X or and or million basis the second of reserve XX included for first quarter year development XXXX. points in points prior half

first as and of points business our from for a business benefit the bolster includes adjusting diversified of the the million our in in $XXX.X million company's underlying reserves increase points LAE or prior and losses net $XXX.X and losses reduced XX.X to or for other quarter claims XXXX conclude. half growth All estimated and years XX.X

the and our and Turning commission revenue to increase half million revenue services to policy Atlantic for X.X% driven of related an quarter in by $XX.X premiums MGA to earned intermediary ceded Blue XXXX $XX for Total volume. policy reinsurance fees and to services. renewal increased new the million on first X.X% by

to income $X.X prior $XX.X investment XX.X% asset XXXX our higher quarter first for the due as interest in million to higher and average invested portfolio, million rates mix, net well to of compared assets. On of years, the as investment half XX.X% levels the to increased

in under-performing on liquidating market dependent monetary the losses were Yields the portfolio the quarter Realized and XXXX and securities equity real by in a forces, estate our first reserve. half first of of from the interest future federal market gains of for in the equity by the the offset were portfolio. resulting driven fluctuations gains and policy rate XXXX. on income fixed Unrealized from realized securities results favorable quarter partially are outcome half for

of items XXXX, the points largely over XXXX second effective was rate quarter credits due points or the the second increases first for quarters prior increase and These to half. The of an prior half X of over XX% discreet XXXX. first and both year's year's X.X compared for first were to net and in quarter the the lower XX.X% tax

before rate For XX% expect items. discreet an XXXX, of effective we and continue tax approximately

at regards of In during shares quarter the second capital an XXX,XXX deployment, to aggregate approximately company cost $XX.X the million. repurchased

half the million. December XXXX, million $XX.X runs For an as XXX,XXX share June of repurchased XX, company's first the XXXX. XX, XXXX approximately $XX.X shares program The has company cost repurchased at and or remaining average authorization of current of through

cash Directors June $X.XX which company the on July of of as X, to XXXX per dividend On was on of X, share close declared XXXX, XXXX. of business paid of shareholders a XX, Board July record of quarterly the the

through Let Jon me to now walk turn it specifics. over to some additional

Jon Springer

on would and I prior start our market June with development good programs with and dynamics. second and weather at first placed additional Frank, risk you, our on and like reinsurance quarter years I'll parting we'll management Thank conclude events associated some some color thoughts initiative everyone. and to touch on and morning, X,

to a than second On in claims hurricane quarter at slower continue prior Irma, reported year quarters. on prior developments, clip we new the experience albeit

in a we to X,XXX Irma's total Irma a zero received On June Fund. Hurricane total vast Irma, will of Catastrophe Universal over and to gross as a net development basis, from approximately are total a of point from of loss In impact evaluating elected hurricane perspective $X.XXX of impact the cycle Irma XX, reinstatement life any loss to we in minimal XX,XXX June standpoint. premium billion. of from XX, As claims with recovered At remaining loss the increase open. the have hurricane majority be this there Florida

For leaving clarity occurred million only of the available to limit $X.XX the billion approximately of $X.XXX FHCF have from season, limit date, purposes, the $XXX Irma hurricane still UPCIC build began with million we available. and we year to XXXX

Florence, and with regard Hurricane basis Michael the and elected remains Michael $XXX,XXX resulting of respectively. In and impact impact. Matthew the a $XX to driver On was or XX million. no $XXX in net at to the quarter hurricane primary $XX.X losses Matthew Florence to unchanged total million increase the slighted points we million in hurricanes gross basis,

to related second is first County to event which end event, well received as claims of for XX% of hailstorm weather $X.X the since our in we the plan regards QX of been quarter QX, approximately Brevard expected, Florida which losses within incurred X:XX approximately for closed and event. this of In as have additional this million in with

When business to additional our conservatism exposed quarter for due with in $X half to looking southeastern at seeing took beyond wind two April QX, claims was an place states events nationally weather the most The building plan of second to to we roughly were largely to event events only the the in add million date. weather including events that incurred Florida geographic hail footprint. election

of with But able reinsurance in one-in-a-XXX to As the a mentioned Universal's more here in XX beyond any go were a than already year history we level and release point as results an our X. providing top much press effective at disseminated other won't we've Steve with into UPCIC's the coverage on program of tower to coverage of detail X-K our date too May secure event. reinsurance catastrophe update, June we as earlier,

compares our The [ph] previously reinsurance at reflecting direct for cost XD this the XX.X% disclosed. premium approximately X.X% a us of time as This is XX XX.X% increase to to of year-over-year term month estimated last we year, program period.

recent for Given see period. this view evolving reasonable pricing loss experience the levels XD we as of Florida risk, and the

in build some said initiatives including we to very dynamics; underwriting XXXX, for our with management focused position. all guideline increasing above and our providing the steps new incremental solidifying On pick position risk have the rate, and in of being reserve an taken taking our market future loss

rate. First on taking

high their territories. In new increases certain became We the effective have became are rate through in rate including increases business rate single business working a May, renewal rate that in change series and book. of April, Florida digit increases effective approvals way in

continually Georgia. the With in increase second period, also rate which in and quarter need competitiveness quarter a just to and is this in rate in is our with think considerations, but in a recently XD We price seen have Massachusetts we reinsurance history term. appropriate increases reform on help on move and increases latest will double-digit what effective Minnesota high but the Pennsylvania effective first effective for development, is as single pricing rate, and the we're digit near build more forward which positive hardening we have become AOB evaluating coupled

Secondly our improve risk has guidelines, adjusting underwriting of to our on area been adjusting focus second guidelines profile. underwriting XXXX in our the

We have to new taken book trends to and prudent identify we'll and do steps in continue mitigate our so.

Lastly and relates third by pick our full to a loss on pick, four increase gross initial area points premium. adjusting [indiscernible] to earned XXXX for importantly our XX% most our loss our in focus XXXX of

mentioned. areas two first are I Absent

the booked are accruing XXXX, run reserves on $XX If else all you our third basis in in at loss area being focus a we just vacuum, rate incremental approximately million a look in clear, new which positive To guidelines an at putting as creates on underwriting under a this equal. effect be effect. in is well business increased additive XXXX of compounding as absent rate

AOB forward. when our reserves, couple, focused in these Now all look language with recovery a subrogation those evaluating areas going of you three underwriting changes this continuation focus Universal rate, three foundation on rolling new out and together incremental guidelines taking puts accruing and solid positive areas loss on focus at reform,

I'd that, Rob. turn to With to it back like

Rob Luther

line Thanks, like open now Jon. Operator ask questions. to I'd to the the for

Operator

Thank you. Instructions] KBW. first Our with Christopher from question comes [Operator Campbell

line Your is open.

Christopher Campbell

on Congrats gentlemen. morning, Good quarter. Hi. the

Steve Donaghy

Chris. Thanks,

Christopher Campbell

And how much fund. cover within you few look adjustment do is like was sounds there guess, loss of $XX market Cat the to capacity expenses? most remaining going then a in with million still How lots that it do much a have like tower? out the have that private net, off the I questions. start cover million, guess you I that, I'll and of XXXX like you in reinsurance can

Jon Springer

Chris. Jon. is This Thanks,

we open exposed of hundred sorry, dollar I'm several be more We available million loss. have enough would available part the market for second this additional to was any develop question? net before capacity the loss to ever what of that

Christopher Campbell

Because much the the they LAE Cat coverage? cap How fund. have within

guess in that LAE the have market. the more coverage market over would theoretical private So to spills much private you I layer?

Jon Springer

claims went lot by expense one to up loss talked one the and is difficult structuring cost handling way but counsel fees. of at the we've a things those That's answer, flat our calls setting on the we about prior that strategy about in a of adjustment and Irma front-loading

finally we're only expenses no So closure. is lot in where and to claims reaching now increase a adjustment a additional with settlement position these incremental there is of those bringing claims loss indemnity, are the associated

front-loading good So strategy upon us the puts that LAE. a position initial based the of in

Christopher Campbell

for still that would your Got of tower in so it. And that's XXXX under like fund. you the Cat what script about mentioned indemnity the you having -- be covered $X.XX have billion Right? in guys the limit have

Jon Springer

then and of That's any indemnity they that the X% pay. indemnity course will the reimburse FHCF for us correct. of additional majority of vast The an

Christopher Campbell

could a give for color? up little were of adjusted rates like lot program multi-year us are to think then do you and basis pricing? rates the up? What What for how creep And program you were then the A ongoing reinsurers changes. a the on to great. react your going Okay, risk

Jon Springer

the with Well, part. I'll start second

majority the of by of ongoing borne Fund. event think Hurricane talked going creep Florida the to is be just this I we the about, terms of Catastrophe as in portion the

and sure, a paid lot have their had I as is some partners. open to reinsurers. most very by reinsurance companies this think discussions not with development of So going open honest market additional And I'm be

Irma that of our reaction closure. too to not So final well take to partners' aware reinsurance going to bring with from I'm standpoint. concerned what hurricane it's they're

that's that this is little purchased year, we're over right XX% from my from In of time earn specifics gross not in of we to one risk a premium terms layer important another. to adjusted what reinsurance tower most the to what's believe we just rate, are remarks, we and going XX.X% get our is this year. mentioned into last percent opening at buy up spending at I which

Christopher Campbell

That's guys they development, the a AOB it. do got I the like but you higher litigation reserves, picks. not at Did Jon. of activity? one any uptick see $X Looking have told helpful. Okay, of very [ph] your accelerated in charge you lot Thanks, loss reserved noticed that. million peers, for

elevated So just did in But every company's guys asking obviously. -- on an their comment see you and experience like different, to experience. wondering is I'm claims? not increase you

Steve Donaghy

Yes, This Steve. Chris. is

We have in file seen an to-date. increase AOB's the

operations that's point future I that AOB our We are our And key size the of claims very built about request and claims that cost. going respond is to the insurers. with organization us impact think structure influxes increases and types quickly years, we on been and and the is of optimistic and various can of our over to have legislation for the another from

in position I things So it with puts to in quicker a us feel. deal a fashion,

well, the claim as basis. So we of uptick each taken a we've result we're deal charge and no with a one-by-one positioned will on

Christopher Campbell

Got accelerate lets rates earlier? guys know going like paperwork reinsurance know your terms in plan Florida reinsurance in Florida rate the review get you're plans completed. all you accelerated try once What rate annual not you reform. the have increases. filing it. are a an and filing? And just Do to I I do to rate with to of your then you AOB a take factor like to take

Steve Donaghy

No.

our and to towards law the XXXX. ourselves AOB on with most months ago, the out a went going some Florida we're let one put of As recent that filing some position rate letting of just with we so to along end play a mentioned filing a opening here the couple in remarks, effect new data into make water under pass actual bridge this in

Christopher Campbell

it. a then is reserves recoverable Got million, $XXX loss balance but are $XXX reinsurance the sheet. question And the only The on million.

net that think we should I imply negative about how that? guess So a reserves. would

Steve Donaghy

The roll you both forward there's also balances. reinsurance of which there losses. you filing recoverable operations look look a and components unpaid recoverable and and includes see footnote that footnote, our insurance the And has for recoverables at a the unpaid When on you'll of that is at recoverable. our paid XX-Q see amount you'll for

You'll looking that at by footnote. get your answer

Christopher Campbell

Okay.

can I XX-Q? So that get the from Awesome.

Steve Donaghy

Yes.

Christopher Campbell

given guys cadence just that the change you few I Okay. review than a challenges appointment, last reserve process? And going QX to questions is your year, do then that to XXXX? Would guess Steve. for earlier the reserve that will you have in

Steve Donaghy

No, Chris.

served rush same going and will is very are our we be and reserve begin vain. to a at with and of has years as as the would appropriate on of typically think year. us QX I to end continue then something up that review don't an about review been try that It the thoughtful analysis typically thoughtful process We the we are, a well we there follow in of have and amount the time have very at we past these. end

we've with As go the year. on the way optimistic conservatism rest into of into few feel this different levels built year. you a we the know, as We reserves our of

Christopher Campbell

approach forward? just in expect great. Steve. last one any you, going for Should your And we Okay, then versus Sean's changes

Steve Donaghy

question, Chris. a It's good

same, same, probably between organic such doing do be and how XX there the think position. variations some No partners with to I as into philosophical but big growth conservative for to company a would reinsurance any we've expect approach, lot this the on sheet, are the Mostly in things be difference there some would be our pillars a great I expect been two balance ones. in of universe. really expect the I plus debt the business going we've of will some gotten will new years. stay there there I between people Sean I the but with but

Christopher Campbell

the the answers. Okay, luck in quarter. for great. all Thanks third of Best

Steve Donaghy

day. Have a Thanks, Chris. great

Operator

comes from Management. Khare with Samir [Operator Returns Instructions] Our Capital question next

open. Your is line

Samir Khare

morning. good Hi,

premiums the if through Sorry but guys Florida? inside of year, was you and outside covered the this directional what

Steve Donaghy

$X.X and quarter, Good Samir. over in Hey, policies brought on premium. morning. X,XXX million Last we

relationships. In into those non-risk premium of We also of has bearing gate some are lot a additional well. numbers expanded as our come portion the that carrier

Samir Khare

it. Got

Okay. on the then the of about want or And quarter? platform initiatives do to the you partnerships some new to talk

Steve Donaghy

Not specifically, no.

move or us a have sales is people come we've consumers right solution, to reaching to are push to policy. the Universal that writing. right sell to and now goal our else's of We based lot we'll If volume solution, continue the net. into another against them. the out to And quickly is execute that partners been carrier If is on our somebody them we'll

Samir Khare

policy cited, just that X,XXX The you wrote? was great. policies Okay, Universal

Steve Donaghy

be That combination would of a partners. and Universal our

Samir Khare

talked on it. writing any know up got I about that you And Okay, wondering balance E&S business ends that guys the you're I'm then whether your All just of right. there. that sheet?

Steve Donaghy

ends sheet into that of when bucket, carrier's balance policy a a on we is None admitted that an write get our it up consumer say. and No. cannot to so

Samir Khare

that Is commercial is that usually as personal well? Okay. lines or

Steve Donaghy

No.

our so that business in been platform of far, All personal lines. has Samir

Samir Khare

And I you it going much, later. I'm to surprised developed that my going three so Can there? hear Samir. is on hurricane Matthew. was Yes. what's years say just tell name has to us nearly then

Steve Donaghy

much. hasn't developed that It all really

the exchange very program. we future, disclosed ago we small probably negotiating a now portion in of we decision have in I a As something commuted two and for our made catastrophe years guess

into has reinsurance slightly transpired is we're which net. the crept the what So commuted now retaining has development

Samir Khare

All right. see. I

growth And in the Okay. just then Florida. runway

business or talked retentions on lower that about more in Is You being new resulting or your both? lower a bit business renewal disciplined.

Steve Donaghy

It's a Samir. great question,

good so retention. fairly really retention has the Our consistent about remained we feel

achieve more very agency With of always responded on to traditionally, within continue state well growth a has force made organic of and distributed the our goal business changes to the Florida. the we've that is we've to our brought

those we And good continue August in regard. to as X consideration to we've we the underwriting lot here that the of then guidelines, into went on to were and in feel adjusting growth where those insured we be a that said the that thoughtful would made past. changes, able department that underwriting As in we we after pretty marketing we pursuant and then committed

Samir Khare

that you Okay, a I is taking guess within more to the really portfolio earlier Florida? disciplined approach balanced that referred more you're about more

Steve Donaghy

think have combination are that actuaries. brought the that of annualizing table. model, by our I to it's claims, a and adjusters profitability seems various internal things things It are management

particular underwriting, So be about the should company, not and conversation what where that it's of across one a sit it's feel the can as as we about we be right group business It's pretty we gather now. we how from that the bringing pillar increase we states. and talk on, about balance we should on bringing a here multi-pronged conversation good

Samir Khare

way, any In in guys share you point largest that You are Florida? subsidiaries your in reaching any you're Okay. feel far. the market Florida do guys a saturation in by of

Steve Donaghy

I the we various across continue growth are continue Florida of If states there's that opportunity here the Florida. lot we tax from think a things Florida. other we'll people in continues at quickly to due that Samir, Florida. just state have in and country to the we penetration and in other tremendous A moving positive have, basis of

Samir Khare

you. Thank quarter. on great. Okay, the Congratulations

Steve Donaghy

Have a great day.

Operator

the you. this to I'd questions I'm for no back further Donaghy over at lie closing currently Steve Thank time. turn remarks. showing to call

Steve Donaghy

consumers, you. a of to Universal. thank their for like stakeholders support great our would our agents and day. closing, Thank continued I associates, In Have

Operator

and Thank for have conclude this today's you joining a gentlemen, day. conference. and wonderful Ladies

Universal Insurance (UVE) 1 Aug 192019 Q2 Earnings call transcript