Q1 2024 Universal Insurance Holdings Inc Earnings Call

Okay.

Operator: Good morning, ladies and gentlemen, and welcome to the Universal First Quarter 2024 Earnings Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the call over to Arash Soleimani, Chief Strategy Officer.

Speaker Change: Good morning, ladies and gentlemen, and welcome to Universal first quarter 2024 earnings Conference call. As a reminder, this conference call is being recorded.

Iraq Salomone: Now I'd like to turn the conference over to Iraq, Salomone, Chief strategy Officer.

Arash Soleimani: Good morning. Thank you for joining us today.

Iraq Salomone: Good morning, Thank you for joining us today welcome to our quarterly earnings call on the call with me today are Steve Donaghy, Chief Executive Officer, and Frank Wilcox Chief Financial Officer before we begin.

Arash Soleimani: Welcome to our quarterly earnings call. On the call with me today are Steve Donaghy, Chief Executive Officer, and Frank Wilcox, Chief Financial Officer. Before we begin, please note today's discussion may contain forward-looking statements and non-GAAP financial measures. Forward-looking statements involve assumptions, risks, and uncertainties that could cause actual results to differ materially from those statements. For more information, please see the press release and Universal's SEC filings, all of which are available on the Investor section of our website at universalinsuranceholdings.com and on the SEC's website. A reconciliation of non-GAAP financial measures to comparable GAAP measures is included in the quarterly press release and can also be found on Universal's website at universalinsuranceholdings.com. With that, I'll turn the call over to Steve.

Speaker Change: Please note today's discussion may contain forward looking statements and non-GAAP financial measures forward looking statements involve assumptions risks and uncertainties that could cause actual results to differ materially from those statements for more information. Please see the press release and Universal's SEC filings all of which are available on the.

Investors section of our website at Universal Insurance Holdings Dot com and on the Sec's website.

Speaker Change: Reconciliation of non-GAAP financial measures to comparable GAAP measures is included in the quarterly press release and can also be found on Universal's website at Universal insurance Holdings Dot com with that I'll turn the call over to Steve.

Stephen Joseph Donaghy: Thanks Arash. Good morning everyone.

Stephen Joseph Donaghy: It was a strong quarter, including a 29.4% annualized adjusted return on common equity and 35.4% adjusted diluted earnings per share growth year over year. Results were solid across the board, including profitable underwriting that was complemented by our non-underwriting operations, which is a testament to our differentiated business model. Direct premiums written growth accelerated sequentially as policies in force are stabilizing following our previous underwriting initiatives. I'm pleased to announce the completion of our 2024-2025 reinsurance renewal for our insurance entity, as our program is now fully supported and secured.

Stephen Joseph Donaghy: Thanks, Raj and good morning, everyone. It was a strong quarter, including a 29, 4% annualized adjusted return on common equity at 35, 4% adjusted diluted earnings per share growth year over year.

Stephen Joseph Donaghy: Results were solid across the board, including profitable underwriting that was complemented by our non underwriting operations, which is a testament to our differentiated business model.

Direct premiums written growth accelerated sequentially as policies in force are stabilizing following our previous underwriting initiatives.

Speaker Change: I am pleased to announce the completion of our 2020 for 2025 reinsurance renewal for our insurance entities.

Speaker Change: As our program is now fully supported unsecured.

Stephen Joseph Donaghy: We've also secured additional multi-year coverage, taking us through the 2025-2026 hurricane season, and have added new financially strong reinsurers to our existing panel of long-term partners. This achievement reflects the diligence and planning of our reinsurance team throughout the year. Program costs and coverage were consistent with our expectations, and we'll provide specific details at the end of May, as we typically do. Now, I'll turn it over to Frank to walk through our financial results. Frank.

Speaker Change: We've also secured additional multi year coverage, taking us through the 2025 2026 hurricane season.

Speaker Change: <unk> added new financially strong reinsurers to our existing paddle of long term partners.

Speaker Change: This achievement reflects the diligence and planning of our reinsurance team throughout the year.

Speaker Change: Program cost and coverage were consistent with our expectations and we will provide specific details at the end of May as we typically do.

I'll turn it over to Frank to walk through our financial results Frank.

Frank Crawford Wilcox: Thanks, Steve. Good morning. Adjusted diluted earnings per common share was $1.07, up from 79 cents in the prior year quarter. The increase mostly stems from higher underwriting and net investment income, partially offset by lower commissions. Core revenue of $364.9 million was up 15.4% year-over-year, with growth primarily stemming from higher net premiums earned and net investment income, partially offset by lower commissions. Direct premiums written were $446.2 million, up 8.8% from the prior year quarter, including 5.2% growth in Florida and 25.6% growth in other states.

Frank Crawford Wilcox: Thanks, Steve Good morning.

Frank Crawford Wilcox: Adjusted diluted earnings per common share was $1 seven up from 79 in the prior year quarter.

Frank Crawford Wilcox: The increase mostly stems from higher underwriting and net investment income, partially offset by lower Commission revenue.

Frank Crawford Wilcox: Core revenue of $364 9 million was up 15, 4% year over year with growth primarily stemming from higher net premiums earned and net investment income, partially offset by lower Commission revenue.

Frank Crawford Wilcox: Direct premiums written were $446 2 million up eight 8% from the prior year quarter, including five 2% growth in Florida, and 25, 6% growth in other states.

Frank Crawford Wilcox: Overall growth mostly reflects higher rates, inflation adjustments, and Stabilizing Policies Enforced. Direct premiums earned were $482.1 million, up 5.9% from the prior year quarter, reflecting rate-driven direct premiums written growth over the last 12 months. Net premiums earned were $334 million, up 18.4% from the prior year quarter. The increase is primarily attributable to higher direct premiums earned and a lower seated premium ratio.

Frank Crawford Wilcox: Overall growth, mostly reflects higher rates inflation adjustments and stabilizing policies in force.

Frank Crawford Wilcox: Direct premiums earned were $482 1 million up five 9% from the prior year quarter, reflecting rate driven direct premiums written growth over the last 12 months.

Frank Crawford Wilcox: Net premiums earned were $334 million up 18, 4% from the prior year quarter.

Frank Crawford Wilcox: The increase was primarily attributable to higher direct premiums earned and a lower ceded premium ratio.

Frank Crawford Wilcox: The net combined ratio was 95.5%, down 4.5 points compared to the prior year quarter. The decrease reflects lower net loss and expense rates. The 71.9% net loss ratio was down 1.2 points compared to the prior year quarter, with the decrease primarily attributable to higher net premiums earned associated with lower reinsurance costs in the current quarter. The 23.6% net expense ratio improved by 3.3 points compared to the prior year quarter, primarily reflecting higher net premiums earned associated with lower reinsurance costs in the current year and economies of scale.

The net combined ratio was 95, 5% down four five points compared to the prior year quarter. The decrease reflects lower net loss and expense ratios.

Frank Crawford Wilcox: 71, 9% net loss ratio was down one two points compared to the prior year quarter with the decrease primarily attributable to higher net premiums earned associated with lower reinsurance cost in the current quarter.

Frank Crawford Wilcox: The 23, 6% net expense ratio improved by three three points compared to the prior year quarter, primarily reflecting higher net premiums earned associated with lower reinsurance costs in the current year and economies of scale.

Frank Crawford Wilcox: During the first quarter, the company repurchased approximately 208,000 shares at an aggregate cost of $4.1 million. The company's current share repurchase authorization program has approximately $20 million remaining. On April 10, 2024, the Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock payable on May 17, 2024 to shareholders of record as of the close of business on May 10, 2020. With that said, I'd like to ask the operator to open the line for questions. Thank you.

Frank Crawford Wilcox: During the first quarter the company repurchased approximately 208000 shares at an aggregate cost of $4 1 million. The company's current share repurchase authorization program has approximately $20 million remaining.

Frank Crawford Wilcox: On April 10, 2024, the board of directors declared a quarterly cash dividend of <unk> 16 per share of common stock payable on May 17, 2024 to shareholders of record as of the close of business on May 10 2024.

Speaker Change: With that said I'd like to ask the operator to open the line for questions.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask your question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. Our first question comes from the line of Paul Newsome of Piper Sandler. Your line is now open.

Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask your question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please stand by while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of Paul Newsome of Piper Sandler Your line is now open.

Jon Paul Newsome: Good morning. Congratulations on the quarter. I was hoping you could talk a little bit about what seems to be a very rapidly changing competitive environment, particularly in Florida, thoughts on pricing and whether or not, you know, there really aren't folks coming in or out at this point from a container.

Jon Paul Newsome: Good morning, Congrats on the quarter was hoping you could talk a little bit about.

What keeps me very rapidly changing.

Competitive environment, particularly in Florida.

And.

Jon Paul Newsome: You've got some pricing and.

Stephen Joseph Donaghy: Yeah, good morning, Paul. And thanks for the question. You know, we're seeing more entrants coming into the market. We continue to see citizens as competitive carriers in the state. I think we continue to lean on particular markets where we are open that we feel are profitable. We've opened additional ones at the end of 2023.

Jon Paul Newsome: Whether or not.

Jon Paul Newsome: There really arent folks domain or out at this point from a competitive perspective.

Speaker Change: Yes, good morning, Paul and thanks for the question.

Speaker Change: We're seeing more entrants coming into the market, we continue to see citizens as a competitive.

Speaker Change: Carrier in the state.

Speaker Change: I think we continue to lean on particular markets, where we are open that we feel are profitable we've opened additional ones at the end of 2023.

Stephen Joseph Donaghy: And we feel good where we sit today with the business that's coming in. From a rate perspective, you know, it's always a combination of carrier and rate. And I think our agency force feels very confident in Universal's ability to support their books of business, as well as their insured. So I think our relationships, our rates, and the markets that we're open in are serving as well. From a competitive perspective, you know, we see some people doing things that we don't want to do.

Speaker Change: And we feel good where we sit today with the business that's coming in.

Speaker Change: From a rate perspective, it's always a combination of carrier and rate and I think our agency force feels very confident in universal's ability to support their books of business as well as their insured so.

Speaker Change: Our relationships are rates in the markets that we're opening are serving us well from a competitive perspective.

Speaker Change: We see some people doing things that we don't want to do and we don't feel bad about the business going.

Stephen Joseph Donaghy: And we don't feel bad about the business going elsewhere, so to say. We also have seen our retention improve quarter over quarter, and we feel good about that flowing through the book as well right now. I don't know if you have anything more specific than that, but I'd be happy to answer anything further if you'd like.

Speaker Change: Elsewhere, so to say.

Speaker Change: We also have seen our retention improve.

Speaker Change: Over quarter, and we feel good about that flowing through the book as well right now.

Speaker Change: Don't know if you have anything more specific than that but would be happy to answer anything further if you'd like.

Jon Paul Newsome: I've heard thoughts and talk of regulatory pressure for pricing because of tort reform. I'm just wondering if you could comment on that. Thank you. I'm sorry. I'm not sure I can answer that.

Speaker Change: No.

Speaker Change: Its helpful and interesting.

Speaker Change: Absolutely.

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Stephen Joseph Donaghy: I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry, coming. They're not in the service year, but maybe, yeah.

Speaker Change: Regulatory pressure.

Speaker Change: Through pricing.

Speaker Change: Because of the tort reform.

Speaker Change: I mean youre not until this year.

Stephen Joseph Donaghy: But then I figure there's a key to that. It's been such a tough environment for so long that things will hold on for a long time. Where do you fall in that conversation? Do you understand? pressure building through sort of an offset for tort reform, you know, you do hear people talk about concerns about the affordability of policies, just any of themselves in Florida, and the impact that may have on what... The Regulators.

Speaker Change: <unk>.

Speaker Change: But then I appear you'll start to get the.

Speaker Change: Still pretty tough environment for so long.

Things will hold on for a long time.

Speaker Change: Do you.

Speaker Change: Call in that service.

Speaker Change: Conversation you can see.

Speaker Change: Pressure.

Speaker Change: The only true.

Speaker Change: Sort of an offset for the tort reform.

You do hear people talk about concerns about it.

Speaker Change: <unk>.

Speaker Change: Policies just themselves in Florida.

Speaker Change: The impact on.

Speaker Change: On what.

Speaker Change: The regulators want to do.

Stephen Joseph Donaghy: Yeah, there's a lot in that question unpacked, Paul. You know, I think from an affordability perspective, that is an issue across the state of Florida right now, and, you know, certain segments of the market continue to go to the E&S market where, you know, rates are extremely high. We traditionally, you know, even in 23, we looked at our rate indication, and we took less as a submitted rate request as a result of the TORC reform because we felt good about what was coming through the book.

Speaker Change: Yes, Theres a theres a lot in that question unpack Paul.

Speaker Change: I think from it afforded affordability perspective that is an issue across the state of Florida right now.

Speaker Change: Certainly certain segments of the market continue to go to the E&S market where rates are extremely high.

We traditionally even in 'twenty three we looked at our rate indication and we took less.

Speaker Change: As a submitted rate request as a result of the tort reform because we felt good about what was coming through the book.

Stephen Joseph Donaghy: We're just kicking off our rate analysis as we speak for 2024, and when we get the final figures in, we'll take a look at that and try and do what's best for the market, for ourselves, for our shareholders, and for our insurers, and try and do the right thing. When you talk about pressures... You know, I think the state of Florida has done a very good job with tort reform, and we're appreciative of that.

Speaker Change: We're just kicking off our rate analysis as we speak for 2024.

Speaker Change: And when we get the final figures.

Speaker Change: We will take a look at that and try and do what's best.

Speaker Change: For the market for ourselves for our shareholders and for our insurers and try and do the right thing when you talk about pressures.

Speaker Change: I think the state of Florida has done a very good job with the tort reform and we're appreciative of that.

Stephen Joseph Donaghy: Could they have gone a little further, perhaps? Did they go too far? I don't think so. So, I think as we look in the future, you know, we'll try and take all those measures into account and do the right thing, but we don't feel there's anybody calling or suggesting anything to us that we're not getting any undue pressure, so to say, at this point.

Speaker Change: Could they have gone a little further perhaps did they go too far I don't think so.

Speaker Change: So I think as we look into the future we will try and take all of those measures into account and do the right thing.

Speaker Change: But we don't feel theres, nobody, calling or suggesting anything to us that we're not getting any undue pressure so to say at this point.

Jon Paul Newsome: Fantastic. Congratulations!

Stephen Joseph Donaghy: Thanks, Paul. Have a great day. Thank you. One moment for our next question.

Speaker Change: Fantastic.

Speaker Change: Sure.

Speaker Change: Yes, Thanks, Paul I have a great day.

Thank you one more for next question.

Operator: Our next question comes from the line of Nick Iacoviello of Dowling. Your line is now open.

Speaker Change: Our next question comes from the line of Nick Eckert Yellow of Donlin. Your line is now open.

Nicolas Iacoviello: Nice quarter. I was just wondering, first off, was there any net prior year development recognized in Q1?

Speaker Change: Thanks, guys.

Speaker Change: Nice quarter.

Speaker Change: Just wondering first off was there any net prior year development recognized in Q1.

Frank Crawford Wilcox: Nothing on a net basis; negligible on a direct.

Speaker Change: Nothing on a net basis negligible on a direct.

Nicolas Iacoviello: Got it. Thank you. And I know we'll get more details towards the end of May, but I was just wondering about the comment on the reinsurance program being fully supported and secured. Does that currently assume a similar gap retention as the program placed last year?

Speaker Change: Got it thank you and I know, we'll get more details towards the end of May but I was just wondering on the comment on the reinsurance program being fully supported and secured does that currently assume a similar gap retention as the program place last year.

Frank Crawford Wilcox: Yeah, if you're referring to the use of the isosceles, yeah, Nick, that would be consistent with last year. We feel as though that was the right thing to do based on cost and capital utilization from the parents.

Speaker Change: Yes, if you're referring to the use of the isosceles, yes, it make that would be consistent with last year, we feel as though that was the right thing to do based on cost and <unk>.

Frank Crawford Wilcox: Thanks Nick, have a good day.

Speaker Change: Capital utilization from the parents so yes.

Speaker Change: Okay makes sense. Thank you that's all I had.

Speaker Change: Alright, Thanks, Nick have a good day.

Stephen Joseph Donaghy: Thank you. This concludes the question and answer session. I would now like to turn it back to Steve Donaghy, CEO, for closing remarks.

Speaker Change: Thank you. This concludes our question and answer session I would now like to turn it back to Steve Donaghy CEO for closing remarks.

Stephen Joseph Donaghy: Thank you. I'd like to thank our associates, our consumers, agents, and our stakeholders for their continued support of Universal. I wish you all a great day.

Thank you I'd like to thank our associates are consumers agents and our stakeholders for their continued support of Universal wish you all a great day. Thank you.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].