Universal Insurance Holdings, Inc. (NYSE:UVE) Q2 2023 Earnings Call Transcript

Universal Insurance Holdings, Inc. (NYSE:UVE) Q2 2023 Earnings Call Transcript July 28, 2023

Operator: Good morning, ladies and gentlemen and welcome to Universal Second Quarter 2023 Earnings Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to Arash Soleimani, Chief Strategy Officer. Please go ahead.

Arash Soleimani: 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 Otter. 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 on Universal’s SEC filings, all of which are available on the Investors 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.

Steve Donaghy: Thanks, Arash. Good morning, everyone. Results were solid, including a 25.3% annualized adjusted return on common equity and 85.1% adjusted diluted earnings per share growth year-over-year. While it’s still early days, we’re encouraged by favorable claims and litigation trends that are beginning to emerge as a result of recent legislative reforms and give us optimism as we look forward to 2024 and beyond. We continue to benefit from rate-driven premium growth and an improving spread of risk across our geographic footprint. I’m very proud of the reinsurance program we put together for the 2023, 2024 treaty year. Our programs terms, conditions and coverage are consistent with the prior year, but we reduced our consolidated retention and our ceded premium ratio. I’ll turn it over to Frank to walk through our financial results. Frank?

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Frank Wilcox: Thanks, Steve. Good morning. Adjusted diluted earnings per common share, was $0.87, up from $0.47 in the prior year quarter. The increase mostly stems from higher underwriting income, net investment income and commission revenue. Core revenue of $337 million was up 11.7% year-over-year, with growth primarily stemming from higher net premiums earned, net investment income and commission revenue. Direct premiums written were $547.1 million, up 2.7% from the prior year quarter, including 0.8% growth in Florida and 13.6% growth in other states. Growth reflects rate increases, partially offset by lower policies in force. Direct premiums earned were $463.3 million, up 8.1% from the prior year quarter, reflecting rate-driven direct premiums written growth over the last 12 months.

Net premiums earned were $303.3 million, up 9.5% from the prior year quarter. The increase is primarily attributable to higher direct premiums earned and a lower ceded premium ratio. The net combined ratio was 99.1%, down 1.8 points compared to the prior year quarter. The decrease reflects a lower net expense ratio, partially offset by a higher net loss ratio. The 73.8% net loss ratio was up 1.5 points compared to the prior year quarter, with the increase primarily attributable to higher unfavorable prior year reserve development, partially offset by a lower consolidated current accident year net loss ratio. The 25.3% net expense ratio improved by 3.3 points compared to the prior year quarter, primarily reflecting lower renewal commission rates paid to distribution partners.

During the second quarter, the company repurchased approximately 396,000 shares at an aggregate cost of $6.1 million. The company currently has $20.1 million of share repurchase authorization remaining. On July 20, 2023, the Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on August 11, 2023, to shareholders of record as of the close of business on August 4, 2023. With that, I’d like to ask the operator to open the line for questions.

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