Q1 2020 Earnings Call

Okay, the last question just to be on reserve development. Can you give us a sense of the pipeline, you know open Plains versus close claims or if you don't have that data in front of you, you know considering what happened particularly in the second quarter and third quarter less lag your you know, what evidence do you have in your business that you you don't think that you're going to have that same type of adverse Reserve development in the second or third quarter of this year?

So the two companies that are responsible for $95 plus percent of our personalized business or United Property & Casualty and family security. Those are the two underwriting entities that really struggle with the adverse development on accident you're eighteen last year and they came in we measure actual wage development versus what we expect the development to be very carefully for every segment of our business, but for those two entities there was about a twelve million dollar variance between actual development and expected development in the first quarter. Obviously, we didn't take any of that into income where we're going to we're going to wait and see how that Trend plays out. But obviously if that sort of trend continues and we're going to evaluate it very carefully during our mid-year review. That's a great great job.

Dead dead dead.

Greetings and welcome to the United Insurance holding Corp first quarter 2020 conference call at this time. All participants are in a listen-only mode a question-and-answer session will follow the formal presentation. If you would like to ask a question, you may do so by pressing star one on your telephone keypad. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad, as a reminder. This conference is being recorded. It is now my pleasure to introduce your host out of Prior of the Equity Group. Thank you, sir. You may begin. Thank you and good morning everyone. Thank you for joining us. You can find copies of birth www.ups.com in the investor relations section. In addition. The company is made in a company presentation available on its website. You're also welcome to contact our office at 212-836-9606 and we would be happy to send you a copy in addition UPC insurance has made this broadcast available on its website as well before we get started at like to read the following statement on behalf of the company wage.

Result for us cycle times. I think who remained very stable maybe even improved slightly given the declines and frequency. We saw in March and April. There's some pretty compelling evidence that lost development, uh great shape.

And and how should I think you know cuz it was the accident you're eighteen that gave you the challenges in nineteen how I think about the accent? You're nineteen month, as you know, we think about 20 cuz obviously your your assume the numbers you cited on the twelve million related to the 18 year or is that just across the entire boss? Yeah, that's across all accident years. So there's actually slightly more favorable on that for nineteen, but eighteen still obviously. I was our most challenging. So why we didn't see anything really significantly adverse on eighteen most of that was was driven by nineteen.

except with respect to historical and

Information statements made in this conference call constitute forward-looking statements within the meaning of the federal Securities laws including statements relating to Trends in the company's operations and financial results and the business and the product of the company and its own City area actual results from UPC May differ materially from those results anticipated in these forward-looking statements as a result of risks and uncertainties, including those described from time to time and upc's filings with the Securities Exchange Commission UPC specifically disclaims any obligation to update or revise any forward-looking statements as a result of new information future developments or otherwise with that and I turn the call over to mister John for any upc's chief executive Austin, please go ahead.

Got it. All right. Thank you for the answers guys.

Thank you very much.

Thank you at this time. I'd like to turn the floor back over to management for closing comments. Okay. We really appreciate everybody taking time to join us on the call today. We look forward to the rest of the year. We hope everybody stays safe and strong and we'll look forward to talking to you again next quarter. Thank you.

Thanks Adam. This is Joan for any president and CEO of UPC insurance with me. Today is Brian Martz our Chief Financial Officer?

On behalf of everyone at UPC. We appreciate your taking time to join us on the call.

As Adam said you're now publishing an investor presentation in conjunction with our earnings release. You can find it on our website and I encourage you to review it while we will not be going slime slide through that presentation on this call. We will refer from time to time to some of the data analytics included their end.

Ladies and gentlemen, thank you for your participation. This concludes today's events. You may disconnect your lines and walk up the webcast at this time and have a wonderful day.

Yep.

We're off to a great start in 2020 loss ratio expense ratio combined ratio underlying combined ratio. You name it. They all improved most of them significantly compared to last year's first quarter. Our core pre tax income was over $13 for the quarter an increase of $9 from a year ago, even though we retained six million dollars more in cat losses this year. So RX cat pre tax income was up about $15 year-over-year. That's awesome. Especially considering we see nothing to our tag treaty in q1 this year. Meaning we have less chance of reporting Phantom cat losses in Q3 and Q4 All Things Considered. This was our best quarter since Q4 of 2017, which was by far the best quarter in the history of the company.

I said on are you concerning call that we were in a strong position entering twenty-twenty and the positive underlying Trends. We were seeing then our playing out now offer first-rate look at slide four of the investor presentation. We booked over $17 of additional annual personalized premium in q1, which would translate to about 68 million dollars additional premium for the full year and the major rate increases in Florida are just beginning to show up in earn premium for the quarter earn premium for policy personalized policy was up only about 2% which means the bulk of the ten percent enforced increase we saw in the quarter has not yet matured into our book that bodes well for quarters, especially since retention remain strong.

second

Reinsurance refer to slide seven in the investor presentation. We are one of the top ten buyers of us property reinsurance in the world with over four billion dollars to place on our wedding programs and we are 91% done with very manageable rate increases. Thanks to our many reinsurance partners. With whom we enjoy win-win Partnerships.

3rd reserves we thought we were taking material twenty-twenty Reserve development off the table by the actions. We took in Q3 and Q4 last year and it's still looks that way last year or five point six million dollars of adverse development in q1 this year. One point 1 million dollars of favorable and that's even considering the far more conservative reserving posture. We have implemented this year our reserves. Look very robust finally capital r capital position remains, very strong given that we had a solid operating profit for the quarter of the decline in Book value was solely due to the effects of accounting standards update 2016 - 01 the rule which cause companies to have to report unrealized gains or loss in equity Securities as part of net income beginning in 2018.

Warren Buffett has referred to this rule as quote truly wild and capricious unquote and is Berkshire said what announcing fifty five billion dollars of investment losses in this year's Q with the amount of investment gains losses in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors unquote month. If it's meaningless for a company whose business is investing it certainly meaningless where you see which holds only about 10% of our Investment Portfolio inequities in any event our portfolio as largely may be recovered the paper losses it suffered in q1 in our Capital position is strong and stable. So we're sticking to our story. Our company is built to thrive in the current operating environment. We have de minimis exposure to covid-19 claims. And since we are based in a cat prone state we are well practiced in remote operations kudos to Arthur's.

Ecology team and all are you PC employees who have made the transition so seamless for us the rate underwriting technology and claims handling initiatives. We have undertaken but with the past 18 months or so are paying off and the underlying positive Trends in our business are accelerating. We look forward to the rest of the 2020.

At this point, I'd like to turn it over to Brad for his remarks. Thank you John. Hello, this is Brad marks the CFO UPC insurance. I'm pleased to review upc's Financial results, but also encourage everyone to review our office release form 10-q and investor presentation for more information regarding the company's performance highlights for the quarter ended March 31st, 2020 include improvements in nearly all key operating Patrick's beginning with poor income of 9.1 million dollars for twenty one cents a share compared to three point two million or seven cents a share a year ago gross premiums earned for three hundred and forty four point, six million and a $33 million or 11% year-over-year. The combined ratio of 99% returned us to underwriting profitability and was nearly a five-point permanent your rear cross the line combined ratio, 90.7% also compares favorably to 94.2% last year and improvements in our loss and expense ratios phone number.

on a gross and that basis

We're very impressive this. Premiums written for the quarter increased approximately $17 or 5.2% from a year ago driven by $14 or 7% growth and personal lines, uh and twelve point four million or 16% growth in commercial lines, uh, both of which were partially offset by a decline of approximately 9.5 million dollars in assumed e&s premiums Florida accounted for approximately 69% of the growth in direct premiums your rear with all regions outside, Florida showing modest increases income a year ago, exceeded our premiums or 44.4% of gross premiums earned compared to forty 2.1% last year. This change was due to the increased sessions to our phone insurance program, which were 12.4% of gross premiums are in the current quarter compared to only seven and a half percent last year other significant items impacting total revenues during the firm.

Order included unrealized losses from equities a 26.5 million or approximately fifty cents a share after tax compared to a ten point two million dollar unrealized gain in the same period a year ago, excluding the unrealized gains and losses on equities total revenues grew roughly 6% year-over-year.

Upc's first-quarter net loss and loss adjustment expense was a hundred and two point eight million a decrease of 1.7 million or 2% upc's gross loss ratio of 29.8% improved 3.7 points and the net loss ratio of 53.7% improved 4.1 points compared to the first quarter last year catalog of 17.1 million added nearly nine points to our net loss ratio, which is partially offset by one point 1 million a favorable Reserve development, excluding these two items underlying law l e e was 86.8 Million down approximately 400,000 from last year despite earn premiums increasing over thirty million dollars this resulted in a number line gross loss ratio of 25.2% which compares favorably to 28% a year ago.

This Improvement was primarily driven by lower frequency during the current quarter upc's operating expenses where 86.9 million and increase the 3.8 million or 5% year-over-year increase was driven primarily by policy acquisition costs, which rose 3.6 million commensurate with our premium growth in the quarter are gross expense ratio was 25.2% and Improvement off 1.4 points from the prior-year on the balance sheet upc's total assets were 2.33 billion including cash and invested assets of 1.28. Both are fixed maturities produced a positive Total return for the quarter despite. The significant widening of spreads on most risk assets in March the modified duration of our bond portfolio ticked up slightly to 3.54 years at March 31st, but maintained its overall composite rating of 8 plus and we do not have any significant wage.

concerns about default risk

For credit fundamentals at this time Gap shareholders Equity attributable to UHC stockholders was approximately $485 million for the book value per share of $11,000.30.

For $11.11 excluding unrealized gains declines in Book value and equity in the quarter were driven by accounting rules related to the treatment of unrealized equity losses much of the losses have already been reversed in the second quarter and lastly our groups statutory Surplus also declined approximately twelve million or 3% to four hundred thousand million during he wants due primarily to the unrealized losses on equities during the quarter now, I'd like to turn it back to John for some closing remarks.

Thank you Brad at this point. We would welcome any questions.

Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time a confirmation total indicate. Your line is in the question queue. You may press start to if you would like to remove your question from the Q4 participants using speaker equipment and maybe necessary to pick up your handset before pressing the star Keys. Once again, that's star one to register questions at this time. My first question is coming from Greg Peters up Raymond James, please go ahead good morning to me. Go to slide seven of your investor presentation where you talk about the reinsurance renewal program. And you said in your opening remarks the court Cafe the program is 91% done. It should we infer that the remaining 9% is on the lower layers or is it spread across the entire Spectrum birth?

Can you give us some perspective on that remaining piece that is outstanding and what you think is going to happen with pricing on that remaining piece?

Sure. Thank you Greg for the question. The remaining piece is spread throughout the program. I think this stuff up at the very top is completely done. But other than that, it's just bits and pieces here and there throughout the program. So it's not concentrated in any one particular area. So I don't want to speculate on what is going to happen in on pricing on that remote key piece other than to say, you know, we're talking to some folks that have big expiring lines on our program. We're having very constructive discussions with them and we expect will be able to get it done as he said overall with very with price increases. Yes, but very manageable and certainly within what we had planned for.

All right.

Um, then can you know, obviously you guys reported, you know, as you pointed out improving Trends, you know across many of the metrics combined ratio. There's been some some have commented on how the the first quarter particularly marked was a relatively benign claim in a quarter relative to historical experience just because of what was going on with that pandemic. Do you do you believe that that may have been the case in there for maybe there was some arbitrary benefit or one-time benefit that flows through the first chord that we may not see on an ongoing basis.