UVE - Earnings call transcript Q4 2021 | Universal Insurance Holdings, Inc.

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Operator

Good morning, ladies and gentlemen and welcome to the UVE Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, 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 Development and Strategy and Investor Relations.

Rob Luther

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

Financial On the Officer Chief Executive Steve Donaghy, call with me and today Frank is Chief Officer. Wilcox,

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

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

on the measures more I to you. the over to at of which all information, SEC UVE’s filings website reconciliation A please For website. in that, it comparable our available SEC’s see press Investors on of and universalinsuranceholdings.com measures Steve, of the With turn release. and is press release financial the section are will non-GAAP included GAAP

Steve Donaghy

$X.X average company premiums return reserves. on billion and a you, we of inflationary resulted equity force in of the increasing with Thank the ended approximately Rob. in on We Despite XX, which announced year trends, its the X.X%. February accelerated of a record

place $XX past several Additionally, Clovered.com, filings XXXX. fourth the of in over our now in approved Florida our share for digital XXXX. surpassed quarter UPCIC rate quarters agency million lion’s of The as premiums the of effective subsidiary is during

this cycle bills, SBXXX, in monitoring and We secured. Legislature pencils including focus are All forward resiliency in to and States XXXX our are event on already sharpen others. SBXXXX, look primary through the to rate amongst SBXXXX, with tower Florida over filing renewal, reinsurance We to several the the ground continue on actions capacity the continuing closely to regards first our our and months on coming our hitting Florida in running XX% of on

results. it now me over our walk Frank let through to that, with Frank? to turn So financial

Frank Wilcox

Steve. Thank you,

quarter extraordinary $X.X exclude ended expense. billion operating the from and reminder, income offset a XXXX losses policies and premiums total revenue and quarter reinsurance up primarily on the net adjusted Adjusted in operating excludes and and on $X.XX are portfolio adjusted interest lower premiums for million and on on costs. loss We X.X% gains on X.X% and rate of primarily also to lower a a driven income on commissions. growth EPS in unrealized realized to non-GAAP the investments $X.XX basis reinstatement and year related increased $XXX.X adjusted was EPS a non-GAAP for of earned force gains effects realized increases investment today for primary from As with basis. and partially GAAP by a by a loss basis, discussions the

generated $X.XX predominantly were increases a to continued and a year of we the from investment realized adjusted the and basis impacted of the the quarter prior trends benefited due portfolio strengthening when primary by on to year, $X.XX GAAP non-GAAP inflationary year reserves and earning in gains in, basis. rate EPS for For on on reduction Results a the but compared period.

states. Policies premiums led for result Moving shape declined continuing the Florida risks. grew rate and XX.X% by a in our for underwriting, as underwriting million force billion primary increases to other of $XXX.X XX.X% to $X.X on to and the by direct our quarter year in X.X% earned to

impact ratio pressures full and to by inflationary expense reinsurance of XXX.X% on for driven quarter points reserves ratio. result strengthening the a the X.X the increased side, the as the On year for combined primarily increased XXXX costs accident

management. year’s net as ratio in and primary year, with more to being improved result continued XXXX X.X adverse when XXX.X% events to a lower business increases, rate prior full in the plan, compared development reserve combined the XXXX points For line of weather expense

increase assets. compensation as earned of higher primarily impact points advertising, agent on expense invested a lower business basis ratio. primary and reduction to on direct a commissions, the X.X to year, in quarter investment levels the rate income the including for increased due XX.X% For the executive expense due premium ratio improved well Net management as

investment For the net year. decreased as and the significant decline full realized quarter in year, XX.X% full a income well gains for as

the a the sale value in of to in at reinvestment are the an and explained quarters securities Unrealized XXXX As the the position were lower the benefits of in yields majority result unrealized and surplus. that resulting full gain cost company the subsequent third million. previously, year. of In declines for recognize repurchased portfolio unfavorable in $X.X quarter fourth fair outcome were market capital during aggregate for the XXXX, at driven for XXX,XXX shares to and assets, the approximately fluctuations in regards of an the year and quarter by in full losses invested an deployment of

of XXXX weather benefit assumes business no to extraordinary to exceed guidance, weather extraordinary the we range that, events both $X.XX assumes With For expect no to our The operator a like increased to for in costs. the return XXXX a average a between If XX%. EPS equity weather adjusted EPS. and open $X.XX, ask XX.X% for the in of guidance claims assuming GAAP line from market events and on plan, see non-GAAP to loss equity also we I’d XXXX and expect flat now adjusting and GAAP questions. events

Operator

line the Our question Instructions] [Operator Tom first Sandler. comes Shimp of Piper to from

open. line is Your now

Tom Shimp

guys. morning, good Hi,

Steve Donaghy

morning, Good Tom.

Tom Shimp

materials down. and have seem be to labor, that slowing got inflation building we So, of doesn’t

over in what earn to be us think should you So, the year walk through increases, how so? to can the addition cadence maybe the XXXX you that, And do you need thinking about gotten next that rate changes already guys we rate you in have rate of or should to in get adequacy? how

Steve Donaghy

and far, in in reinsurance both Thus And change X% Those had we approved file of in we XXXX. through filing then be and active right flowing a the QX. an had will XX.X% additional was book that May XXXX. special and Tom. thanks, are Yes,

as see a effort the our Florida become we enhancement in adequate in in So, that considerable particular. to of state rate

took we other rate double-digits the several states in across as in additional country had that also the We well. high

increase can we to everything portfolio doing our are the position. across we So

a steps have we think perspective the we continue need. from the XX, taking efforts going press what appropriate our focus as reserves release with ensure stated February in on we to right inflation the forward to to along we are I on necessary

you firm know, we what XXXX. on focused about and of will are a looking actuaries delay, is additional we our file and are and in XX-month rate transpired so rate request at our XXXX actuarial since has As May rate in that probably

is So, be signs we are rate see the increase it a will of aware. market not we hard as any state another don’t don’t you see the that Florida quite as considerable in –

Tom Shimp

Great. Okay.

you history underlying of your us loss few past we guidance assumptions So, the you underlying be can remind guys in have are loss years. been thoughts And your that maybe embedded for thinking some increasingly conservative assumptions those your how with ‘XX? should about on specs, the maybe

Steve Donaghy

Yes.

the the our premium. that then of And two some year, were were rates XX% we I Tom, – we rate. of specs during benefits think XXXX, the back we if in our And it, about have did expected, X as or and all you felt We loss SBXX. our were good you the Last additional look the at from XXXX, on year years X And year. points the inflationary at PIF end in increase in last XXs. we we because cautiously in the additional years changes legislation. know, a out went seen optimistic

So, will the in and line the we mid-XXs as added go at last we be growing PIF premium our the top XXXX, considerably. again, into see

effort the to right an be XXXX. and in we things So, think to become doing the in help organization adequate, these are

Tom Shimp

great. Okay,

anything count, looks PIF the obviously but not an it about in does thinking So, decline you writers, like acceleration be seem for for to new Florida and Florida accelerating PIF, had Universal.

about could policy count in regards are for your us you and give maybe how the next just to you So, thoughts Florida thinking year?

Steve Donaghy

do. – where at business across for which open State territories are other expect again in very and spread we adequacy. we and our of achieves us, and TIV, are past County and struggled multiple areas, we PIFs to Tom, we Tri good Florida, we we reducing feel the a which of the great are still our in counties we

perspective, feel rate and to think good it. markets a are bad those I balance continue markets. closed we from So, experience, about in in we where had we And take

policy a Florida see like to you again, count. So, continue premium X% are I that think positive as taking that perspective, we a – in that from spite drop we But we reduction the will our premium X%, XXXX. within will line, in so maybe a call see top in to a premium in of that the increase organization, increase

Tom Shimp

Okay.

the of down of Moving any prepared the in just about think was to variable was how – decreasing expenses. But thoughts a sustainable some about So, expense of expense that talked on general going you ratio, should we also sharply was that ratio the that remarks, function forward? comp? some it

Frank Wilcox

there in variable Yes, correct, XXXX, Tom. are you compensation, the morning, was on a both Good and compensation. particularly pullback executive XXXX

spend, We experienced we resume also while lower to remotely. of some in We XXXX. that do work expect

We contracts affect kind of G&A, somewhere the statutory slower then inflation related, costs. because remaining into upon slower, employee of for possibility two-thirds rates. inflation, or costs expense there, out going the related acquisition range XX%-ish, it’s the in an And two-thirds of at which is of of the fixed – that is is remaining having consideration looking are to much ratios a forward. Taking XX%, much influence based spend fixed is

passing by slower costs Then inflation. have much to those who you. impacted So, immediately on that’s also you to are be third-parties

Tom Shimp

Okay.

So, but Florida value count I the in estate I down, total was well up are know into X.X% Florida year-over-year. PIF real is noticed up insured about values double-digits.

drivers you walk through of increase X.X% could the us the So, year-over-year? net

Steve Donaghy

in guard that a goes those items impacted. that have to increases, the renewal. well, charge, and XX course the we issue that there talking consumers. inflation to of data about the we in our if impact in price at which the longer as transitory or dollar-for-dollar there have Tom, being up to certainly we policy rate we by Yes. so renewal being grand, Does along And affect or that the not say, inflation addition stagnant, XX into how an no is an a – to pass way but it’s sense? you premium make premium, and permanent When to subscribe we people as we policies, is the Fed translation policy factor the model the

Tom Shimp

so close positive growing even it insurance discussion, is that what what’s guys like it just And has though to then, there, we been you will seems than there previously, to are lastly, more it. something thoughts are said, a meaningful Yes. was political you But to passed the like I impacts. pass could hoping reform go your

reform so Florida? in ship And there where get this appreciate is the year that’s write finally really and we the I to thoughts the really your necessary

Steve Donaghy

ideas the that we a and to year discussed attorneys it’s Tom. this constantly others good cause comprehensive have our address question, been in seem with most not our far, market. root deterioration Yes, are conversations solutions Tallahassee. of in the that And the have in Thus

the concerns litigate claims. make have It’s of current proliferation alleviating written discussed XX-K. widely and incentives the strides have Florida of situation. the We to imbalance in market to been elsewhere, market led this represented an to address the trace in have in conditions, back the a that To significant about we

that. We do we the period. would point. that haven’t something we are anything at seen left legislation in weeks not have but overly this in happen, And the can we still two are situation hopeful that current optimistic And

Tom Shimp

Thank answers. had. I all that’s for your Okay, you

Steve Donaghy

a Thanks Tom. day. good Have

Tom Shimp

You too.

Operator

Chief back I over At call you. turn further Officer no to showing for Executive questions. to closing am this remarks. I would Thank the Donaghy, time, Steve like

Steve Donaghy

our would a force, great weekend. our support I to closing, continued stakeholders wish Universal. their associates, Thank consumers, I all agency thank you. In of you our for and like all of

Operator

participating. This concludes today’s conference for you call. Thank

disconnect. You may now

Universal Insurance (UVE) 25 Feb 222021 Q4 Earnings call transcript