Eco Wave Power Global AB (publ) Q3 2023 Earnings Call Transcript

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October 27, 2023

There are 7 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to Universal's Third Quarter 2023 Earnings Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Arash Soleimani, Chief Strategy Officer.

Speaker 1

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 forward looking statements our non GAAP financial measures are non GAAP financial measures.

Speaker 1

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 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 2

Thanks, Arash. Good morning, everyone. The 3rd quarter benefited from strong and improving underlying we are pleased to report our results and I'm optimistic as I look forward. During the quarter, Hurricane Idalia made Florida landfall. And as always, we were there immediately to assist our policyholders in their time of need.

Speaker 2

The storm severity appears considerably smaller than initially anticipated and is comfortably absorbed within our retention. We continue to enhance our best in class claims infrastructure, which together with our reinsurance capabilities serves to differentiate us from our peers. As we look forward, we are more confident in the Florida market, which is our largest geography and have started to slowly increase new business in additional territories. In the Q3, we completed the commutation of Hurricane Irma with the Florida Hurricane Catastrophe Fund, among partial commutations with private reinsurers for other storms as well. We're pleased to have these transactions behind us.

Speaker 2

And as we look ahead, we expect future storms to be more predictable and efficient given the benefits of recent legislation. I'll turn it over to Frank to walk through our financial results. Frank?

Speaker 3

Thanks, Steve. Good morning. Adjusted loss per common share was $0.16 compared to an adjusted loss per common share of $2.27 in the prior year quarter. The improvement mostly stems from higher underwriting income and net investment income. Core revenue of 361,800,000 was up 14.2% year over year with growth primarily stemming from higher net premiums earned in net investment income.

Speaker 3

Direct premiums written were $532,000,000 up 6.3% from the prior year quarter, including 4.4% growth in Florida and 14.7% growth in other states. Overall growth reflects rate increases partially offset by lower policies in force. Direct premiums earned were $474,300,000 up 4.8% from the prior year quarter, reflecting rate driven direct premiums written growth over the last 12 months. Net premiums earned we're $331,000,000 up 13.9% from the prior year quarter. The increase is primarily attributable to higher direct premiums earned and a lower ceded premium ratio.

Speaker 3

The net combined ratio was 110.7%, down 28.5 points compared to the prior year quarter. The decrease reflects lower net loss and expense ratios. The 87% net loss ratio was down 26.7 points compared to the prior year quarter with the decrease attributable to a lower consolidated current accident year net loss ratio, primarily stemming from lower weather related losses. The 23.7 percent net expense ratio improved by 1.8 points compared to the prior year quarter, primarily reflecting lower renewal commission rates paid to distribution partners. During the Q3, the company repurchased approximately 894,000 shares at an aggregate cost of $12,300,000 The company currently has 7,800,000 of share repurchase authorization remaining.

Speaker 3

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 said, I'd like to ask the operator to open the line for questions.

Operator

And it comes from the line of Nick Iacobello with Dowling Partners. Please proceed.

Speaker 4

Good morning, guys. Just first off, what were the net losses from the DAHLIA in the quarter?

Speaker 2

Hey, Nick. Good morning. And yes, we set a DALYA up at a $45,000,000 loss at this point, which is well within the company's Net retention and we do not expect to hit our Esosceles coverage above X45.

Speaker 4

Got it. And would that be the only that $45,000,000 would that be what you classify as weather above plan or are there other events that you saw as well?

Speaker 2

There were other events in the quarter and none of them were of a magnitude that we would have reported Separately, but consolidated, they were probably in the area of like another $10,000,000 or $15,000,000

Speaker 4

Got it. And then just you made a comment on the commutations. I guess, could you quantify the gross and net Prior year development incurred in the quarter and how much of that related to these commutations?

Speaker 2

Yes, sure, Nick. Great question. We knew that we were going to be commuting Irma and other storms in Q3 of this year just based on the schedule laid out by the State of Florida. So at the end of 2022, we created an accrual at Alder, which Of course, this is our organization that handles all our adjusting and benefits directly from that adjusting. So we created an accrual that We took into account and as we logically got to the run up of the commutation particularly on Irma, we released that accrual to kind of reimburse UPCIC for the funds in that commutation.

Speaker 2

And as you are aware, Nick, In 2017, the LAE reimbursement by the state was 5%. And as you know that reimbursement for LAE is typically in the area of 15% to 25% on average. So we knew we had some funds we were going to need. We put up a certain amount for the commutation of Irma, which is around $15,000,000 and about another $2,800,000 $2,700,000 for Sally. So Those were the total that would have hit had we not been prepared for them through the accrual at the end of 'twenty two.

Speaker 4

Okay. I'm sorry, just making sure I'm understanding that. So on a fully consolidated basis, excuse me, what was The net adverse then from that, right, that's just between subsidiary and claims adjustment?

Speaker 5

Yes. So at the end of last year, as Steve pointed out, we put up an accrual at Alder in anticipation of participating in the ultimate outcome of these commutations. So as UPCIC reports The prior development in the current year, it will receive a refund from Alder, which in effect will replenish reserves from which Those payments could be made.

Speaker 4

Okay. Got it. All right. I guess I just had one More macro, I guess, and specific to Hurricane Ian, right? It seems like the reinsurers and the cat modeling firms are still holding on to the $50,000,000,000 industry loss I mean it looks like ground up losses from the primaries are implying a lower amount than that.

Speaker 4

I'm wondering what you guys have seen in terms of claims development and if you have Similar view and losses trending lower than that $50,000,000,000 at the industry level.

Speaker 2

Nick, there's so much involved in the industry level that I'm going to leave that to those experts. We pegged Ian at $1,000,000,000 event And through the development thus far and the benefits of the timing, we're sticking with the $1,000,000,000 estimate that we released at the time of the hurricane. And we feel good about that number as we sit here even taking into account IBNR and other things in the future.

Speaker 4

All right. That's all I had. Thank you.

Operator

Thank you. Great.

Speaker 4

Thanks, Michael. One

Operator

moment for our next question, please. It comes from the line of Paul Newsome with Piper Sandler. Please proceed.

Speaker 6

Good morning. Sorry, I got myself a little confused here, but could you talk a little bit more about the reserve impacts in the quarter, Positive, negative, let me start with there, just to get it straightened right.

Speaker 5

Yes. So the biggest difference year over year when you look at the net ratio, which was I think 113.7 For the 3 months ended 22% versus 87% this year, the biggest difference would be The difference between the impact from Ian last year, which on a consolidated basis was $111,000,000 versus the 45,000,000 So the net loss ratio changed by 26 points. That difference in the impact from the storms was About 25 points of that. And then comparatively speaking prior development of the $17,700,000 that Steve highlighted compares to $2,700,000 last year. That's a $15,000,000 And then of course Alder continues to adjust claims for the Ian storm.

Speaker 5

They generated profits of about 18 point $7,000,000 versus $5,000,000 So that's a little bit of an offset there. But when you kind of flush that away, the biggest impact would be the difference in the storms year over year.

Speaker 6

Right.

Speaker 1

So,

Speaker 6

are we looking at sort of ex cat, Ex reserve development improvements or if we adjust all that and Maybe talking about prospectively and from that perspective as well.

Speaker 5

Well, right now, I mean, we see a lot of favorable trends from an operational standpoint, Number of claims coming in, number of represented claims, litigated claims, the benefit of which will manifest in the future, And that's all coming from the favorable legislation. But as we stand here today, we're being conservative in our current accident year loss pick. So when you're looking at the larger of the 2 insurance entities, we're booking to a higher pick this year so far for the 1st 9 months than we are than we were 1st 9 months of last year.

Speaker 6

Could we maybe explore that a little bit more why the loss pick is up, not down? You're pushing through There are enormous amount of rate. You've had obviously, I guess, there's some peg of claims inflation in there. But then I guess there's no benefit from potential Tort reform in that Peg as well, is that kind of the way to think about it or is there something more to be thought of there?

Speaker 2

Well, I think Paul, we look at it from a conservative perspective and as we've talked about the legislation still has not impacted our entire book of business. So as that flows through the book of business and as we look to the future, we see a lot of very developments that I believe that I think will be reflected in future years. And again, when we look into the future, we look at potential Rate reductions in Florida as a result of the legislation, we see a lot of positive impacts. And as you know, The repurchase decision in the quarter reflects our optimism as we look forward as a result of a whole lot of things impacting our business.

Speaker 6

I think that's very fair. I guess the actual question is, why have a higher peg if you're pushing for I guess like 20% -ish price increases that would imply that the underlying claims inflation is even higher than that 20%. Is that just overly simplified way to look at it or putting aside the impact of Torerofoam?

Speaker 2

Well, I think again the rate reductions are always run 12 months in arrears, right? So this year we had a rate indication which it was almost double the rate that we took, which reflected our optimism from the legislative changes going into the future. So we put that aside And then I think we build conservatism into our reserves to ensure that we have plenty of funds moving forward to adjudicate our business and keep the company in the most healthy position in the future.

Speaker 6

Appreciate the help as always guys. Thank you.

Speaker 4

Yes. Thanks, Paul. Thank you.

Operator

And I don't see any further questions in the queue. I will turn the call back to Stephen Donaghy for final comments.

Speaker 2

Thank you, Carmen. Appreciate it. I'd like to thank all of our associates, consumers, our agency force and our stakeholders

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