Q3 2024 Universal Insurance Holdings Inc Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to Universal's 3rd Quarter 2024 Earnings Conference Call. As a reminder, this conference call is being recorded.
Good morning, ladies and gentlemen, and welcome to Universal's third quarter 'twenty 'twenty four earnings Conference call. As a reminder, this conference call is being recorded I would now like to turn the conference over to a rock solid money Chief strategy Officer.
Arash Soleimani: I would now like to turn the conference over to Arash Soleimani, Chief Strategy Officer. Good morning. Thank you for joining us today.
Speaker Change: 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. Please note today's discussion may contain.
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.
Arash Soleimani: 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.
Speaker Change: Forward looking statements and non-GAAP financial measures.
Speaker Change: 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.
Arash Soleimani: For more information, please see the press release on 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.
Speaker Change: A reconciliation of non-GAAP financial measures to comparable GAAP measures is included in the quarterly press release and you can also be found on Universal's website at Universal insurance Holdings Dot com with that I'll turn the call over to Steve.
Steve Donaghy: With that, I'll turn the call over to Steve. Thanks Arash. Good morning everyone.
Steve Donaghy: Our hearts and thoughts go out to those impacted by recent disasters. including Hurricanes Debbie and Helene in the third quarter. and Hurricane Milton in the fourth. We've been through many hurricanes in our nearly three-decade history. arming us with the requisite experience to quickly and efficiently get policyholders back on their feet. Our substantial reinsurance protection and the strong reinsurance relationships that we've built over many years provide us with the financial resilience to weather both high-frequency and high-severity storm season. As we've previously disclosed, our consolidated retention drops for subsequent events and we expect a smaller financial impact from weather in the fourth quarter, inclusive of Hurricane Milton.
Steve Donaghy: Good morning, everyone.
Steve Donaghy: Our hearts and thoughts go out to those impacted by recent disasters, including Hurricanes, Debbie and Helene in the third quarter.
Steve Donaghy: Hurricane Melbourne, and the fourth quarter.
Steve Donaghy: We've been through many hurricanes and are nearly three decade history arming us with the requisite experience to quickly and efficiently get policyholders back on their feet.
Our substantial reinsurance protection and a strong reinsurance relationships that we've built over many years provide us with the financial resilience to weather, both high frequency and high severity storm seasons.
As we've previously disclosed our consolidated retention drops for subsequent events and we expect a smaller financial impact from weather in the fourth quarter.
Steve Donaghy: Inclusive of Hurricane Milton.
Steve Donaghy: Non-catastrophe underwriting trends continue to improve and we're highly encouraged as we look ahead.
Steve Donaghy: Non catastrophe underwriting trends continue to improve and we're highly encouraged as we look ahead.
Steve Donaghy: On a separate note, we opened for business in Wisconsin at the beginning of the month, our 19th state. We're excited to offer our insurance products there as we continue to expand to new markets, diversifying our book of business, and growing our addressable market.
Steve Donaghy: On a separate note we opened for business in Wisconsin at the beginning of the month.
Steve Donaghy: 19 state.
Steve Donaghy: We're excited to offer our insurance products there as we continue to expand to new markets diversifying our book of business and growing our addressable market.
Frank Wilcox: I'll turn it over to Frank to walk through our financials. Frank. Thanks, Steve.
Speaker Change: I'll turn it over to Frank to walk through our financial results Frank.
Frank Wilcox: Good morning. Adjusted loss per common share was 73 cents. compared to an adjusted loss per common share of $0.16 in the prior year quarter. The higher adjusted net loss available to common stockholders mostly stems from lower underwriting income partially offset by higher net investment income and commission revenue. Core revenue of $381.4 million was up 5.4% year-over-year, with growth primarily stemming from higher net premiums earned, net investment income, and commission revenue. Direct premiums written were $574.4 million, up 8% from the prior year quarter, including 2.1% growth in Florida and 32.9% growth in other states. Overall, growth mostly reflects higher policies in force, higher rates, and inflation adjustment.
Frank Wilcox: Thanks, Steve Good morning.
Frank Wilcox: Adjusted loss per common share was <unk> 73.
Compared to an adjusted loss per common share of <unk> 16 in the prior year quarter.
Frank Wilcox: The higher adjusted net loss available to common stock holders, mostly stems from lower underwriting income, partially offset by higher net investment income and commission revenue.
Frank Wilcox: Core revenue of $381 4 million was up five 4% year over year with growth primarily stemming from higher net premiums earned net investment income and commission revenue.
Frank Wilcox: Direct premiums written were $574 4 million up 8% from the prior year quarter, including two 1% growth in Florida, and 32, 9% growth in other states over.
Frank Wilcox: Overall growth, mostly reflects higher policies enforce higher rates and inflation adjustments.
Frank Wilcox: Direct premiums earned were $507.7 million, up 7% from the prior year quarter, reflecting direct premiums' written growth over the past 12 months. Net premiums earned with $345.7 million, up 4.4% from the prior year quarter. The increase is primarily attributable to higher direct premiums earned, partially offset by a higher seeded premium ratio. The net combined ratio was 116.9%, up 6.2 points compared to the prior year quarter. The increase reflects higher net loss and expense ratio. The 91.7% net loss ratio was up 4.7 points compared to the prior year quarter, with the increase primarily attributable to higher weather losses, mostly from Hurricane Helene, partially offset by more favorable prior year reserve development.
Frank Wilcox: Premiums earned were $507 7 million up 7% from the prior year quarter, reflecting direct premiums written growth over the past 12 months.
Frank Wilcox: Net premiums earned were $345 7 million up four 4% from the prior year quarter.
Frank Wilcox: The increase was primarily attributable to higher direct premiums earned partially offset by a higher ceded premium ratio.
The net combined ratio was 116, 9% up six two points compared to the prior year quarter.
Frank Wilcox: The increase reflects higher net loss and expense ratios.
Frank Wilcox: The 91, 7% net loss ratio was up 447 points compared to the prior year quarter with the increase primarily attributable to higher weather losses, mostly from Hurricane Helene.
Frank Wilcox: Offset by more favorable prior year reserve development. The net expense ratio was 25, 2% up one five points compared to the prior year quarter with the increase primarily attributable to higher policy acquisition costs associated with gross growth outside Florida and <unk>.
Frank Wilcox: The net expense ratio was 25.2%, up 1.5 points compared to the prior year quarter, with the increase primarily attributable to higher policy acquisition costs associated with growth outside Florida and higher operating costs. During the quarter, the company repurchased 226,000 shares at an aggregate cost of $4.4 million. The company's current share repurchase authorization program has approximately $10.3 million remaining.
Frank Wilcox: Your operating costs.
During the quarter the company repurchased 226000 shares at an aggregate cost of $4 4 million.
Frank Wilcox: The company's current share repurchase authorization program has approximately $10 3 million remaining.
Frank Wilcox: On July 11, 2024, the Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock payable on August 9, 2024 to shareholders of record as of the close of business on August 2, 2020.
On July 11, 2024, the board of directors declared a quarterly cash dividend of <unk> 16 per share of common stock payable on August nine 2024 to shareholders of record as of the close of business on August <unk> 2024.
Operator: With that, I'd like to ask the operator to open the line for questions. And thank you. As a reminder, to ask a question, please 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 roster. And one moment for our first question. And our first question comes from Paul Newsome from Piper Sandler. Your line is now open. Good morning. Thanks for the call. I always appreciate the help. Can we talk about the reserve bill to start with?
Speaker Change: With that I'd like to ask the operator to open the line for questions and Thank you as a reminder to ask a question. Please 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 and one moment.
First question.
And our first question comes from Paul Newsome from Piper Sandler Your line is now open.
Good morning, Thanks for the call.
Paul Newsome: I appreciate the help.
Paul Newsome: Can we talk about the reserve build to start with just give us some ideas about what.
Frank Wilcox: Just give us some ideas about what You don't know. Yeah, good morning, Paul. It's Frank. We actually had favorable development this quarter of just around $2.2 million from prior year cash. or any particular source, whether it's just cats or... Well, a lot of the names that you recognize, Irma, Ian, Matthew, Michael, some of which were minor, other which were a little bit more significant. Any additional detail you can give us on the cat losses in the quarter between lean and other? Is there anything in those cat laws? Unusual or different than what you typically see.
Paul Newsome: Sources of that.
Speaker Change: You don't know us.
Speaker Change: Yes, good morning, Paul It's Frank.
Frank Wilcox: We had favorable development this quarter of just around $2 $2 million from prior year cats.
Speaker Change: Right.
Speaker Change: Great.
Paul Newsome: Any particular source of as cats or.
Speaker Change: All right.
Well a lot of the names that you recognize irma in.
Matthew Michael some of which were minor other which are little bit more significant.
Speaker Change: Any additional detail you can give us on the cat losses in the quarter between.
Speaker Change: <unk> and other.
Speaker Change: As well as.
Speaker Change: Is there anything in those cat losses that are.
Unusual or different than you typically see action.
Speaker Change: A large storm.
Steve Donaghy: and I think Blood, Bruise, and Tears. versus when Nick's maybe a little different this time around, but that's just a conjecture. Yeah, good morning, Paul, Steve Donaghy. Yeah, I think from a loss perspective, as we look at the three hurricanes now between Debbie, Helene, and Milton, we're looking at a range for all three storms, somewhere between 600 and 900 million to the company, you know, our net, our net retention on those, Debbie's small, it's probably somewhere under $20 million. And Helene will be a full retention loss to the company, along with our isosceles, so roughly 111 million to the company, and the rest will be picked up by our reinsurance partners.
I mean, I think blood versus.
Hmm versus when mix, maybe a little different this time around but that's just conjecture on my part.
Yeah, Good morning, Paul Steve Donaghy.
Steve Donaghy: I think from a loss perspective, as we look at the three hurricanes now between Debbie.
And Milton we're looking at a range for all three start somewhere between 600 $900 million to the company.
Steve Donaghy: Net our net retention on those Debbie small, it's probably somewhere under $20 million.
Steve Donaghy: Helene will be a full retention loss to the company along with our thoughtfully, so roughly a $111 million to the company and the rest will be picked up by our reinsurance partners and then Milton will be as you know has a lower.
Steve Donaghy: And then Milton will be, as you know, is a lower, our second tower has a lower retention of 45 million. So we expect that to be incurred in Q4. And, you know, thanks to our claims operation, which is heavily deployed and trying to assist all of our policyholders in the various areas impacted, which is a pretty serious geography for all the carriers. You know, they are now handling the storm, and we're trying to handle as many of the claims internally as possible because we feel we do it better, and we also kind of understand how to adjust our team's real experience between the flood and the wind and what the impacts of those two are.
Steve Donaghy: Our second tower has a lower retention of $45 million. So we expect that to be incurred in Q4, and thanks to our claims operation, which is heavily deployed in trying to assist all of our policyholders in the various areas impacted which is a pretty serious geography.
Steve Donaghy: All of the carriers.
Sure.
Steve Donaghy: They are now handling the storm and we're trying to handle as many of the claims internally as possible because we feel we do it better and we also kind of understand how to adjust our teams really experienced between the flood.
Steve Donaghy: Wind and what the impacts of those two are so we're being very careful how we do it.
Steve Donaghy: So, we're being very careful how we do it. I think that from a claims incoming perspective, while every storm has some nuance, the claim counts have been coming in at a steady flow. So, I think people were listening to the messaging to be safe and get out of the impacted areas. I think that's a new, it's a very good dynamic for the state. And I think that it's good that insureds are listening to the folks that are trying to help them. So, we've seen a steady flow rather than a real big peak, so to say.
Steve Donaghy: From a claims incoming perspective.
Steve Donaghy: While every storm has some nuance the claim counts have been coming in at a steady flow. So I think people were listening to the messaging to be safe and get out of the impacted areas. I think that's a it's a very good dynamic for the state and I think that it's good that ensure they're listening to their.
Steve Donaghy: The folks that are trying to help them. So we've seen a steady flow rather than a real big.
Steve Donaghy: So, we feel good about where we're at, and we're hoping to recover as much of those retentions in Q4 with our operating staff. So, if you have any other questions, happy to answer, but that's kind of an overview. Do you think most of the recovery revenue from claims management, etc. will happen for both storms in the in the fourth quarter or do you think we might see something perhaps for Milton all the way to the third? Yeah, it's a great question, you know, we... Yeah, great question, Paul. As we sit here today, we're not 100% sure that we'd recover all those expenses, especially in Q4.
Steve Donaghy: Peak, so to say so we feel good about where were at and were hoping to recover as much of those retention in.
Steve Donaghy: In Q4 with our operating stats.
Steve Donaghy: If you have any other questions happy to answer, but thats kind of an overview.
Speaker Change: Do you think.
Speaker Change: Most of the recovery.
Speaker Change: Revenue Group claims management center will happen for both storms in the.
Speaker Change: In the fourth quarter or do you think we might see something.
Speaker Change: Perhaps for Milton all the way either first or.
Speaker Change: Yes, it's a great question.
Speaker Change: Yes.
Speaker Change: Yes, Great question, Paul we don't as we sit here today, we're not 100% sure that we'd recover all those expenses, especially in Q4, I think youll see some of that tail into.
Steve Donaghy: I think you'll see some of that tail into 2025. So, hard to tell exactly what we're going to recover as we sit here now. We'll have a better idea of that as we get into Q4. But the most important thing for us is to get out, see the insurers, make sure we're doing the right things, and getting them back on their feet at their moment of need. So, that's the paramount goal for us as we're entering Q4 right now.
Into 2025 so.
Speaker Change: Hard to tell exactly where we're going to recover as we sit here now we'll have a better idea of that as we get into Q4, but the most important thing for us is to get out see the insurance to make sure. We're doing the right things and getting them back on their feet at their moment of need so that's the Paramount Gulf for us as we are.
Speaker Change: Entering Q4 right now.
Steve Donaghy: But maybe just one last. big picture question. The weather obviously makes it more complicated to figure out kind of what's going on on a normalized basis. Could you, you know, give us your most recent thoughts, maybe, you know, a year and a day or so about what you think is happening on kind of a normalized underwriting basis, because you've got a lot of stuff going on with pricing. and other factors. Do you think you're still making improvements in the underwriting results into next year because of those? Yeah, Paul, we, you know, we changed our kind of tone from cautiously optimistic to optimistic sometime this year.
Speaker Change: Maybe just one last big picture question.
Speaker Change: Weather, obviously makes it more complicated to figure out kind of what's going on on a normalized basis.
Speaker Change: Could you give us your most recent thoughts maybe year to date or so about what you think's happening on kind of a normalized underwriting basis, because <unk> got a lot of stuff going on with pricing.
Speaker Change: Tort reform and other factors do you think youre still.
Speaker Change: Making improvements in the underwriting results into next year because of those factors.
Speaker Change: Yes, Paul.
Speaker Change: We changed our kind of tone from cautiously optimistic optimistic sometime this year.
Steve Donaghy: And we see very favorable underwriting results coming in the door. I think our agency relationships continue to generate business where we are open. And I think outside the state of Florida, our relationships as they grow in our newer states, people develop a comfort level with us about how we operate, how we respond to their questions and needs, and how we treat their clients or are insured, so to say. I think as we looked at the legislative reforms, and we looked at our rates, you know, we adjusted some models in a positive manner to Floridians. So we ended up in a scenario where we had a small reduction in premium at our most recent filings, which I think, you know, when you think of the typical insured in Florida after getting increases of, you know, somewhere between 10 and 15 percent over the last several years, a flat or a reduction is a really good impact to the people that own homes in Florida.
Speaker Change: And we see very favorable underwriting results coming in the door I think our agency relationships continue to generate business, where we are open and I think outside the state of Florida, our relationships as they grow in our newer states.
Speaker Change: People develop a comfort level with us about how we operate how we respond to their questions and needs and how we treat their clients are our insured so to say.
Speaker Change: I think as we looked at the legislative reforms and we looked at our rates.
Speaker Change: We adjusted some models in a positive manner two floridians. So we ended up in a scenario, where we had a small reduction in.
Speaker Change: Premium at our most recent filings, which I think when you think of the typical insured in Florida after getting increases.
Speaker Change: Somewhere between 10 and 15% over the last several years are flat or.
Speaker Change: Or a reduction as a really good impact to the people that own homes in Florida.
Steve Donaghy: So, and we're being very cautious about where we're open and continuing to work on our spread of business within the state of Florida. I think you would say that as we continue to grow and mature, we're trying to be as smart as possible with the experience we've gained over, you know, for me, 20 years and for others in the company over the last 30 years in the state of Florida. So good. We feel good about the future. Very good. appreciate the help as always. Thanks, Paul. Thank you.
Speaker Change: And we're being very cautious about where we are open and continuing to work on our our spread of business within the state of Florida. I think you would say that as we continue to grow and mature we're trying to be as smart as possible with the experience we've gained over.
Speaker Change: For me 20 years and for others in the company over the last 30 years.
Speaker Change: And the state of Florida, So we.
Speaker Change: We feel good about the future very good.
Speaker Change: Alright, I appreciate the help as always.
Speaker Change: Thanks, Paul Thank you.
Frank Wilcox: And thank you, and one moment for our next question. And our first question comes from Nick Lacevillo from Dowling and Partners. Your line is now open. Alright, thanks. I'm sorry if you had already answered this question, but can we be considering any additional reinstatement premiums that flow through following Milk Well, a lot of the layers, especially at the lower end of the tower, and I don't have it in front of me, are covered by reinstatement premium protection. So although layers would have to be replenished, many would not trigger a reinstatement premium for us that would drop to the bottom line.
Speaker Change: And thank you one moment our next question.
Speaker Change: And the first question comes from Nick lots of Zillow from Dowling and partners. Your line is now open.
Speaker Change: Alright, Thanks, and sorry, if you've already answered this question, but should we be considering any additional reinstatement premiums that flow through following Milton.
Speaker Change: Yeah.
Speaker Change: Well a lot of the layers.
Speaker Change: Especially at the lower end of the tower and I don't have it in front of me are covered by a reinstatement premium protection. So although layers would have to be replenished many would not trigger a reinstatement premium for us that would drop to the bottom line.
Frank Wilcox: Depending on how far it goes into the tower, the possibility exists. But, you know, as I said, I don't have it in front of me to say when that would occur. And Nick, if it helps for your models, I wouldn't see any of that occurring in Q4 due to the nature and pace of claims coming in. Okay, thanks, that's helpful. That was the only... All right, Nick, thanks. Have a good day. and thank you.
Speaker Change: Depending on how far it goes into the tower that possibility exists, but as I said I don't have it in front of me to say when that would occur.
Speaker Change: And Nik if it.
Speaker Change: It helps for your models I wouldn't see any of that occurring in Q4 due to the nature and pace of claims coming in.
Speaker Change: Okay. Thanks Thats helpful.
Speaker Change: Was the only question I had.
Alright, Thanks have a good day.
Speaker Change: And thank you.
Operator: And I am showing no further questions.
Speaker Change: And I am showing no further questions I would now like to turn the call back over to Steve Donaghy, Chief Executive Officer.
Steve Donaghy: I would now like to turn the call back over to Steve Donaghy, Chief Executive Officer. Thank you. Good morning. I'd like to thank all of our associates, consumers, our agency force, and our stakeholders for their continued support of Universal.
Thank you good morning, I would like to thank all of our associates consumers Our agency force and our stakeholders for their continued support of Universal wish you all a great day.
Steve Donaghy: I wish you all a great day.
Operator: This concludes today's conference call, thank you for participating, you may now disconnect. Thank you for watching!
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].