UVE - Earnings call transcript Q3 2019 | Universal Insurance Holdings, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the UVE Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only-mode. After the speakers remarks there will be a question-and-answer session. [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 third 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

Thank today. Thank for you you, Rob, joining and everyone. morning, us good

non-GAAP to strong of the year Yesterday, third EPS revenue of revenue with total XXX.X XX.X% Year-to-date, results quarter was XX.X% adjusted growth reported up million. ago versus or $X.XX we quarter.

strong large were written Florida states. premiums Direct $X.XX rate Year-to-date a increases basis $X.XX non-GAAP EPS addition on and on to up of basis. adjusted within other and was due in Florida, in GAAP to a part growth X.X% outside

XX.X% was margin all return performance. year-to-date average Our and investment share pre-tax services, premium our volume, Book by was portfolio supported our equity on per value grew a annualized strong year-to-date, and income XX.X%. XX.X% pricing, integrated

carriers, has well done now our five on to launch closer on us platform these with the up multi-raider consumers our bringing We servicing the from in quotes combined where our online can combine results continue team prior work Clovered, quite believe of priorities. different side-by-side events. to year positions outstanding to quarter deliver to this strategic And receive catastrophe claim

to topics. in that, will Frank? through an risk a over me financial some turn it on management first, with let now moment, to walk provide But our Frank So, update results. John

Frank Wilcox

and you, everyone. Steve, good morning Thank

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

expense. portfolio investment for XX.X% Adjusted interest investment integrated volume continued in events and performance. offset excludes was impacted pricing XX.X% above Pre-tax our by our weather partially service on portfolio, the margin year-to-date operating growth income organic quarter, income by revenue quarter also performance. the premium grew driven and for Total primarily returns by plan XX.X%

$X.XX a Year-to-date, year-to-date $X.XX $X.XX respectively. produced EPS was and XX.X% on margin. $X.XX and the and income pre-tax GAAP non-GAAP EPS on an basis for quarter adjusted a basis,

momentum count from benefit plan weather performance, premium positive These XXXX higher XXXX reduced integrated prior when in to claims as events services investment conclude. results growth, and a compared years share and a core above from loss reflect offset book by ratio lower

XXXX value growth X.X relative second strong XXXX. quarter year-to-date, a and of EPS XX.X% average In by non-recurring book of year-to-date costs return in policy acquisition a million to of annualized year-over-year. decline on The produced equity pre-tax per addition, the benefit driven was XX.X% in share the company

X.X billion, states of states premium approximately increase written direct the the rate led to full well Florida. premiums year. Turning prior growth an Florida for by Direct of quarter, impact in and XX.X% to increases effect, strong in of up force X.X% premiums underwriting in of results, the grew as outside other as quarter's our from were taking XX.X%

reinsurance released for first program we earned Net earned in led as announcement, driven for all billion. increases written Xst increases event, strong the up rate premiums where in other the third the taking quarter factors, were increased the growth XX.X% our well X.X% previously states. mentioned premium the premiums written previously were X.X by and program in X.X% by up of partially June states XX.X% premiums quarter by as reinsurance coverage year-to-date, Year-to-date, offset direct to direct seated effect

start the an and points the core ratio XX.X a increased in to claims reduced quarter and booked by combined XX.X% XXXX, the forth of in from partially diversification, increase geographic the XX.X events weather following. above by expense our XX.X% expense business, points at side, loss ratio On adjusting our ratio for the driven year-to-date primarily plan our in as offset set reduction to benefit

operating primarily by improved ratio expense point improved Year-to-date, the to for XX-basis ratio, than the expense to XX.X% the basis ratio. in X other the X.X-point expense driven The X.X-point to points related quarter XX cost in ratio acquisition policy offset partially a points decrease by operating other the improvement expense a XX.X%, by by ratio. increase

year-to-date The ratio. ratio scale and was expense of of reinstatement due reductions premiums and the for comparison base improvement prior executive operating in to affecting year's the economies the compensation in quarter the the higher other

a policy non-recurring benefit the acquisition was second months in the million in ratio the result of premiums to XXXX and refund affecting to reinstatement of cost due in the a related ratio. the prior increase quarter X.X premium of of taxes a higher The to a of Florida XXXX prior of with the settlement as Department first Revenue base the year-to-date, year comparison recorded relative of nine year's

XX% the for points points, net year-to-date XX.X to ratio ratio expense for year expect The XX.X%. and full quarter the now adjustment XX%. and XX.X% to loss between We and the loss to XX.X increased expense be

events, and Quarterly weather for or excessive was events points and to Hurricane in quarter of of the related million series X.X of Minnesota, states year-to-date drivers in the include wind XX South-eastern events a Dorian. plan an weather including

the points, the in XX.X X.X or events. to of year plan to quarter XXXX. for million or months prior nine events XX excessive X.X recorded the years comparison XXXX in was points year-to-date Year-to-date, first compared is of was This million of were X.X million points catastrophe to reserved weather and or third quarter million prior for basis XX development recorded X.X million and related X.X

basis third the of development points XXXX. quarter the in of immaterial an for of months an first nine XX was XXXX million there unfavorable development or and comparison, For X.X

net diversified company's includes start business adjusting increase other of growth XX.X and XX.X both million points business core year's in the and XXX.X our a of XXX.X quarter million ratio and XXXX the All points in from claims benefit loss prior as reduced for at in LAE year-to-date losses or or our the underlying conclude.

blue new renewal Turning premiums and total increase year-to-date seated quarter policy XX.X revenue to and services, services in our earned XX.X XX.X% by to an MGA reinsurance volume. increased million the policy million for commission and other related to an to revenue X.X% on and revenue intermediary fees Atlantic by driven

during the to million year-to-date, to XX.X management investment due XX.X% for asset and a which X.X net investment to grade shift having income. impact mix our to portfolio, quarter On and increased investment yielding income greater are assets XXXX, primarily under increased XX.X% on an XXXX bonds net higher million and investment

forces, yields prudent rate interest Yields mix income XXXX. been dependent somewhat income and on purchases and But to in the upon and fixed future shifts. Federal market from from rate monitors has monetary comparison year, interest strategies policy trends, new continually impacted portfolio overnight limited due asset are Reserve. the the prior Federal to policy company duration current which Reserve The fixed cash the effective the in impact has

for securities. equity securities of favorable the period the were fluctuations are the in primarily equity Realized losses resulting a year-to-date year-to-date underperforming liquidating quarter outcome in periods. result gains Unrealized driven for and market by

year's the rate quarter prior increase over items, points the Year-to-date, an the excluding the tax X.X over effective third months. Taxes, tax of prior an rate increase quarter. discrete effective was X.X of first XX% for was year's points the XX%, nine

differences These XX% rate taxable change and discrete to unforeseen increases XX% due approximately permanent of events, income. we the in tax effective an a before both year expect items. any Barring were largely amount of the for remainder of XXXX, to the

the repurchased regard the XXX,XXX during to repurchased shares cost aggregate Year-to-date, at X.X cost approximately XX.X at the shares an company XX.X third aggregate In million approximately capital of company deployment, million. of million. an quarter,

million history. shareholders over nine-month capital for is year-to-date, opportunistic other share company's XX.X deployed in repurchases returned any largest the The repurchases of to period through corresponding amount the share

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

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

Jon Springer

Frank past cat morning on additional and everyone. some and events comments good risk start with you, I color weather accident Thank some would events, on current your management like conclude current to with market dynamics. the we'll and

past claims. catastrophe major The sauce third in quarter progress closing make

tremendous in-house the in claims two handling staff a our years over XXX,XXX done in alone. policyholders has job in Our claims catastrophe past servicing

losses each We just Hurricane claims the million claims storm the remaining respectively. did XXX. the and to total increase gross handling on at and nearing Florence, of XX% On we're end with XX XX slightly approximately Matthew open

at Irma, we quarter. remaining total XXX open XXX hurricane unchanged with during million, started quarter progress with significant open gross On XXXX and Hurricane made the the Michael, loss approximately On at claims remains XXX. claims

increased open. As remaining XXXX we gross loss total just of X.XX under claims XXX, to with billion, our

in catastrophe point in than Irma, From XXXX the standpoint, this my of made loss noted the at in Hurricane here less have claims. as progress open even the Hurricane increase past, majority covered any have further with is We stand in of life and Florida October Irma by cycle the we a today exposure vast net fund.

QX, events current XX% the for for in our claims approximately closed County, incurred have weather In in of with roughly our regard losses to hailstorm the business took accident place been Florida fortunate to year plan original footprint. within to exposed QX, When events our we half events only to this geographic looking at due be of the event. were that in weather nationally Brevard

in majority Doran a quarter, which to as this weather in of booked an retention related of south events plan to is Dorian. wind states, well QX is series third The of eastern additional were booking including weather us in additional there Hurricane XX events the beyond million last Hurricane as as mentioned meaningful earlier. event. In Frank led This a all Minnesota,

So, specific for and state share states. or level estimates high regional model estimates total but the across market which coming catastrophe a market is net intents gross business, several would with gross to and book estimates our several including models, sharing we when more considered wide factors purposes, by loss and considered of market lowered applied loss all estimated granular obviously analysis also up reported equal generally the loss accepted than widely

and own looking we looked our data of for volume. far event to prudent quarter. And for have this booked approach at reserving taken thus in trend a this these factors, all we our comfortable at position feel claims Lastly,

Atlantic a the share lion's As season of for the in this majority rear-view mirror. Florida retention. hurricane of was insurers within benign We losses a is update, absorbing believe season hurricane largely the primary reinsurance the with their

Florida the last in serve strong our a for line and is XXXX well-earned this result This of as partners following XXXX will the a involved. outcome market, active bottom parties for reinsurance result all seasons

will reinsurance capacity far effects is early Florida June course, effects we season the X, reinsurance and speculate monitor too formally and to weather around renewals XXXX allow the continue to to reform hurricane the globe. track the the It events of legislation on of of EOB positive as

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

Rob Luther

John. I'd to now ask line questions. open and Thanks, for operated the like

Operator

Christopher [Operator of of line instructions] Our first question KBW. comes the from Campbell

is Your open. line

Christopher Campbell

big Hi, the obviously the I good I morning, with start Congrats of gentlemen. guess repurchases slug amount this a large off quarter. quarter I'll on mean, there.

should million you how run we this that repurchases? the like how view about back good quarter? or modeling should rate we a XX bought like, think approximately forward going that Is or So,

Frank Wilcox

as so price rate we those look for that going with an what I obviously us, the wouldn't of at were Yes, forward. light to opportunity to we repurchases the undervalued some that took and had repurchase necessarily be believed we run that capital in

to the that or that think at a capital in capital look are than the use any may factors including play at deploy does, lot forward, we have of of available not time. point our stock what best price given I there we going may

Christopher Campbell

much And now? that capital it. excess have Got how would Frank, you right you estimate guys

Frank Wilcox

interim disclose basis. make an not let's that on Well, we

from be able end year, we the only statements gauge company that and financial there. a to the you'll have So, will holding of

Christopher Campbell

revenues how year-over-year, we rose as item Okay, at well? perfect. about think of And line the kind that commission then looking modelling should that

Frank Wilcox

smaller of first with Well, that buy, a exposures we that in also parties, third reasons, because there's that earns increased purchasing overall commission. the have the and up but we percentage portion of couple from our larger a we is reinsurance higher reinsurance rate percentage cap are amount earn went participants our the that a program is of for that, amount participation a all, that us The our program. which among of fund other because

Christopher Campbell

it. got Okay,

thinking be on be that should the So, commission. like just the way about we should main, drivers behind the

correct? not you're that's new from the platform, So revenue getting that commission like

Frank Wilcox

vast the reinsurance earned on the that the is commission's majority program? No, of

Christopher Campbell

is get multi the that's so like not Okay, platform? this reinsurance like guys quote you new Commission's that from the

Frank Wilcox

No.

Christopher Campbell

it and where expense quarter about we mid-XXs pretty got ratio expense ratios modelling XX Okay, like the I then mean this all? strong is was should you net looking or thinking be that like at XX

Frank Wilcox

Yes, there's -- variables things. is there lot by the there in which are a two I the both involved are of -- yes, that is mean, answer and are lot the and premium numerator your a answer net short spend equation. equation there different the the and then itself, are sides of There affected

depending things those of pressure put denominator, are on ratio. As of which all supply reinsurance be go they going or far the as pressure the demand expense play rates, primary ease on product, And cost to at direction and can there. the

our the believe although disciplined of we range As we've to sharing right good folks, far dividends. it's unless our on is spend spend. end feel going that with don't ratio been as we generate within good and We feel our our about the that it lower range, spend we've that. been that We with that goes

going what variety a it depends on depends reinsurance different happens by on of forward, what factors. are with that with rates primary So, prices driven happens

Christopher Campbell

great. Okay,

reinsurance Jon I ahead right. right up you prices, like for had Pandora's mentioned and So, open go box

storm. is the Given we're escaped, of almost winter crosshairs retro, potential Japanese season like I looks any all the big the Florida of through guess on impact typhoons, mostly

renews should impact you next I retro how the reinsurance do thinking happening year's guess potential be we the in one? the And is just what about pricing then impact think a renewal, would and reinsurance what that be like would to, be to be how like going maybe market Japan. sensitive So, to at what's

Jon Springer

to I more a don't Chris. said if it's as there. partners, you, almost our you a the it call those our mean We've to in would I there's was I if of we are reinsurance give way, early had or to the be well, on all I lot answer And too Yeah, short really talked is you. of lot the in opening tell and to I with

should well-earned to a deserve. last our reinsurance I partners say which year, relatively certainly three

well here our in policyholders major Florida claim Our use a could year as well a as staff. off from impact as

that the just to, tell the is to year part simply you including partners. so it's too we're around So, that many There way laid of everybody losses has market retro in reinsurance what early out deserved early. because the factors lot on our out. impacts globe, it that too just are play it's and a our how and, sort There's for including to

Christopher Campbell

there to like property stuff Florida just one Got it. just or is one, different be independent guess, like, at some mostly Japan. all and going And I when guess I not we're then not looking there'll we're is how like on obviously the versus right, is or read the get through independent renewals, four a renewal

just at would be within a like, I'm either Florida, that, up few what what looking of like, correlated be is when at would looking going yes, it be in of how, in would renewables last or with had we're come you reliable right, if to, like because terms I predicting years how guess like, two like mid-year. think XX% correlation, growth like the to So those mean, I trying to what's like, happen

of by didn't got the renewals. cats impact Florida and then hit a this Japanese lot

be way between the of kind So, the there areas is reinsurers it the that the some different could looks pricing? differentiating like independence

Frank Wilcox

XXs watch those the by and that see on Florida one, the end they renewals totally they of really what see happens closely at independence one but independent. on XXs the these you the what things of as we definitely Japanese, they at something experiences do will And for They is can day There can the different. move stand their own. or could like directionally do are or

Christopher Campbell

in then pick. it. mentioned got guys of about like the deck script Irma seven it and your gross holding you're the Michael, looks I Michael And you the little at you looking think, losses bit X.XX loss, I slide billion, Okay, but now loss a like Jon, was Irma had

LAE of XXX available Irma, of I the of guess in just like terms limit so it of the indemnity looks of development available stand like what's pieces you the do most was gross like your what's the like million XXXX still that? like So, adverse in between use where you have tower, terms versus breakout and

Jon Springer

that very and though Florida even increased life cycle the that where last increases going the made one storm are by of Yes, I the that to this fund. we hurricane in be vast we've the my is is quarter in born being opening I loss, cat of Irma remarks statement the majority this to made similar

in factor on front share fund loading the with cap that be some being early otherwise adjustment the covered strategies even we're of greater hurricane a you the event when in is some an position And loss may we deployed where by apparent. were expenses of in then Florida this

Christopher Campbell

And filing? so, like are Are it. department you your like core then AOB reform, I loss there metrics guess to how got got And going are an a rate starting operational just the that getting is all see guys things any upcoming ratio within better? claims then seeing to you're that I Okay, any benefits if impact then from

Steve Donaghy

optimistic Hey run benefit, From legislation. seen continue six AOB we is the since one. Chris, that an have Steve. about we perspective, be cautiously this to And at up

track fast the hours of process, claims people that though, sight claim. at with at the and adjusting our in times, call conjunction of within on initial in legislation of the lose thing we own one many our we is the on-site AOB XX know, that firm You internal have

from get a we issue and think of comfort that people I lot checks on-site. And

think to unique, process I may see so So, due that focus benefits claims. our on not our operational may our we is and structure, others

of on Irma, that, And lawful here as was XX,XXX-claim here not Jon again, us event. had a roughly claims today all it's which on we mentioned under sit XXXX

the manage So organizationally, we do any can events have we that through difficult business in. states occur proven we that that the in of

Jon of question. last your handle let the I'll portion

Jon Springer

we filing planning filing we're said From a again, as end perspective, quarter, rate the to by a last of this year. make

accurate bit and wanted we data this in little some more use a to we let time so more to So, pass, get of next filing. data

also on end of into filing that this We of the May Florida effect renewals rate have just at a went did year.

upcoming So, made time's so it up May this filing be date. that will effective with another

Christopher Campbell

then account it. Got the it's is my within filings have rate that XX to correct? for AOB then benefits, XXXX the And and like any understanding that that is new you

Steve Donaghy

Well, I space, be out still to sorted details some there's Chris. think in that

Christopher Campbell

thanks great. answers. fourth luck in quarter. lot Well, Best for Okay, a the of a

Steve Donaghy

Thank you. Have a great day.

Operator

Burlington Thank Instructions] of the from [ph]. [Operator Partners question you. of Bill comes next Our Bruma line

Your line open. is

Unidentified Analyst

thank overview had telling strong Florida. Great, a coming you’re you. of where the of just growth some quick Do on the success? that's us you of most outside I from kind giving question having just where mind

Steve Donaghy

states. for this growth see thanks Good that question. partnered Steve, really The morning, the agencies many Bill. is to our we the we've Hi, is of predominant as and footprint. various And in their growth operate from agents their benefit outside multiple relative of with. We Florida from

a result and relationships when many that of of than we state. look are you are specific faster them the direct that have some others, growing So, in at states,

example, a kind spreading say. just for Illinois, we wings, we've long do are so of we more to grow for Carolina, our into time, we and been where So, North got in than

trust, and channel than the is not really It's byproduct and can there's would the agency a force relationships the more marketplace. of direct-to-consumer area build we our in I that say generate a So, the particular better another.

Unidentified Analyst

platform? a level up you Okay. that to but ramping Thank how of about strategy, flow that your talk you talk and you. on kind maybe grow getting Obviously, strategy could strategy? about And maybe through Is of Clovered kind and about there's there think philosophical a a of kind platform.

Steve Donaghy

which was universal into directed Clovered. The Clovered, morphed is originally

the And the about increased every platform. to space, quarter of more growth Bill. across learn continue that We byproduct and is more that premium

insurance that And we generation efficiency have we're recently see the the consumer, to growing the operate which and every online in. the we Clovered you we as So, acquiring to ability quotes insured. know, next product for announced in and state as multiple an presented of

and provide own. for their best. selection X and suits next can to in make very other platform And to insurance now that to a she us, a carriers of desire a So kind to get for product short, the their at he exercise and will that or look optimistic consumers that we on universal feel continue

Unidentified Analyst

is across auto, quarter like bond, buying of the home, to And products to all are bill offered capability that everything? recover,

Steve Donaghy

were of great a Yeah, carrier, it buying anyone. on aware Many the lot the without speaking could we question. of depends present to that auto the first something it’s been do A of that similar. quote we’ve carrier carriers we

make a to the we technology But to they’re kind their online, to in the making to us, be get they like and them of of their risk it’s rules sure home but pull trying of to bi-product following going bind to along with within space we’re the want of portfolio. sure, allow we’re kind that carriers, us,

it’s with. that particular they don’t something being to things that do partner are think, good in I that want uncomfortable venue, evolve overtime a we will but And

at of be online. in products think multi-quote a more others, overtime work one-time ability as kind will what round closely and the we’re insured very flood So, I can and them such really acquire to with and out presented more

space, we technology benefited grown parties. and on buying So, rather like we’ve the building than the from that it technology from like we always home third

Unidentified Analyst

in it’s all the and outside to Florida or this same plus, this footprint the states is… core covering the the it, binding Florida of is that Universal platform directed, covert states is it same that the Got so

Steve Donaghy

in XX it’s Yes, yes. states currently

Unidentified Analyst

over million I correctly? other mean just one that figure states you that program, pension two did No? And assuming that of - do maybe Florida losses the loss, hear clarifications outside with I I'm helpful. that’s see get, if $XX Good, that I'm taking to all could was forward just

Jon Springer

is you would the retention asked it said where anticipating there, to loss point be glad a be that we I would to is, for I'm Bill. we able that meaning clarification loss not What a recover. No, reach

Unidentified Analyst

it, your of Got kind million of say there kind how XX% do you in $XX you of for trend, weather sorry. just loss okay, purposes, build my it, events? modeling much above QX And for got I'm kind when in in

Frank Wilcox

Yeah, I’ve here. got the number

So, we our we’ve of plan the a add as over number. in weather the original aside is $XX at third XX year, now set with for early forth setting meaningful quarter. an the events August, were Minnesota beginning event in And million X:XX:XX.X decided well little to as rather in all the to impact that of additional a

Unidentified Analyst

Got very you. That’s Thank it, helpful. okay.

all that’s I think thank had, I you.

Operator

I’d this turn you. like to Steve CEO, Thank remarks. time, Donaghy Sir? to over for the closing call At

Steve Donaghy

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

Operator

and Ladies may gentlemen, you call. now Thank this conference disconnect. for participating, concludes today’s you

Universal Insurance (UVE) 31 Oct 192019 Q3 Earnings call transcript