Home Deep Analysis Universal Insurance Holdings, Inc. (UVE) CEO Steve Donaghy on Second Quarter 2022 Results – Earnings Call Transcript

Universal Insurance Holdings, Inc. (UVE) CEO Steve Donaghy on Second Quarter 2022 Results – Earnings Call Transcript

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Universal Insurance Holdings, Inc. (UVE) CEO Steve Donaghy on Second Quarter 2022 Results – Earnings Call Transcript


Universal Insurance Holdings (NYSE: UVE) Second Quarter 2022 Earnings Conference Call, July 28, 2022 at 10:00AM ET

company participant

Arash Soleimani – Chief Strategy Officer

Steve Donaghy – CEO

Frank Wilcox – Chief Financial Officer

conference call participants

operator

Good morning, ladies and gentlemen. Welcome to Universal’s Second Quarter 2022 Earnings Conference Call. As a reminder, this conference call is being recorded.

I would now like to turn the meeting over to Chief Strategy Officer Arash Soleimani.

Arash Soleimani

Good morning. Thank you for joining us today. Welcome to our quarterly earnings conference call. On my call today are CEO Steve Donaghy; and CFO Frank Wilcox.

Before we begin, please note that 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 filings with the SEC, all of which are available on the investor section of our website (universalinsuranceholdings.com) and on the SEC’s website. Reconciliations of non-GAAP financial measures to comparable GAAP measures are included in the quarterly press release and are also available on Universal’s website at universalinsuranceholdings.com.

With that, I’ll turn the call over to Steve.

Steve Donaghy

Thank you, Arash. Good morning everybody. We reported an annualized adjusted return on common equity of 12.8% for the quarter, an impressive feat in the current environment. Direct premiums rose 12.4%, up from 8.5% in the first quarter of this year, and significantly more than the 8.5% policy mandated decline.

In addition to raising rates, we will continue to optimize and rebalance our portfolio, increasing exposure to more profitable regions while reducing exposure to less profitable regions.The capital position of our two insurance subsidiaries remains strong, and enterprise-wide. I’m especially proud of the robust reinsurance program we completed ahead of our June 1 renewal date. Despite the challenging reinsurance market, our plans include comprehensive protection from hurricanes and tropical storms, as there are no gaps in coverage and no co-participation, and provide coverage across multiple events. We are well prepared for the hurricane season and look forward to the actions we take bearing fruit in the future.

I’ll give it to Frank to look at our financial results. frank?

Frank Wilcox

Thanks Steve and good morning. Adjusted earnings per share decreased to $0.47 from $0.65 in the year-ago period, primarily due to a higher net combined ratio partially offset by higher commission income from net investment income. Core income was $301.6 million, up 8.7% year over year, driven by higher direct premium income, net investment income and commission income. Direct premiums were $532.5 million, up 12.4% from a year earlier, with Florida up 13.2% and other states up 8.3%. Direct premium income was $428.8 million, up 9.2% year over year.Rates are the main driver of premium growth, especially considering policies [enforced] As Steve mentioned in his speech, refused.

The net combined ratio was 100.9%, up 3.6 percentage points from the same period last year. The increase reflects a higher net loss ratio partially offset by a lower net expense ratio. The 72.3% net loss ratio was up 7 percentage points year over year, an increase primarily attributable to higher initial accident-year attrition losses related to the current Florida claims environment and inflation and weather trends, partially offset by lower prior-year attrition losses. Reserve development as a percentage of net premium income offset by the adverse impact of the year.

The net expense ratio of 28.6% improved by 3.4 percentage points year-over-year, reflecting lower renewal commission rates paid to distribution partners, economies of scale and strict expense management.

During the quarter, the company repurchased approximately 283,000 shares at a total cost of $3.5 million. As of June 30, 2022, the company has $10.4 million remaining in its current share repurchase authorization program, which expires on November 3, 2022. On July 19, 2022, the Board of Directors declared a quarterly cash dividend of $0.16 per common share to be paid on August 9, 2022 to shareholders of record at the close of business on August 2, 2022.

With that, I’d like to ask the operator to open the line and ask questions.

question Time

operator

Thank you. [Operator Instructions] I don’t have any questions at the moment. I would like to turn the call back to Steve Donaghy for closing remarks.

Steve Donaghy

thanks [Janice]. I would like to thank all of our employees, consumers, agents and our stakeholders for their continued support of Universal. Have a nice day.

operator

This concludes today’s conference call. Thank you for your participation. You can now disconnect.

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