HST Global Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 26, 2024

There are 6 speakers on the call.

Operator

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 and non GAAP financial measures.

Operator

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 1

Thanks, Arash. Good morning, everyone. It was a strong quarter, including a 29.4% annualized adjusted return on common equity and 35.4 percent 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.

Speaker 1

I'm pleased to announce the completion of our 2024 2025 reinsurance renewal for our insurance entities as our program is now fully supported and secured. 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. I'll turn it over to Frank to walk through our financial results.

Speaker 1

Frank?

Speaker 2

Thanks, Steve. Good morning. Adjusted diluted earnings per common share was 1.07 dollars up from $0.79 in the prior year quarter. The increase mostly stems from higher underwriting and net investment income, partially offset by lower commission revenue. Core revenue of $364,900,000 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.

Speaker 2

Direct premiums written were $446,200,000 up 8.8% from the prior year quarter, including 5.2% growth in Florida and 25.6% growth in other states. Overall growth mostly reflects higher rates, inflation adjustments and stabilizing policies in force. Direct premiums earned were $482,100,000 up 5.9% from the prior year quarter, reflecting rate driven direct premiums written growth over the last 12 months. Net premiums earned were $334,000,000 up 18.4 percent from the prior year quarter. The increase is primarily attributable to higher direct premiums earned and a lower ceded premium ratio.

Speaker 2

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 ratios. 71.9 percent 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 percent 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. During the Q1, the company repurchased approximately 208,000 shares at an aggregate cost of $4,100,000 The company's current share repurchase authorization program has approximately $20,000,000 remaining.

Speaker 2

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, 2024. With that said, I'd like to ask the operator to open the line for questions.

Speaker 3

Thank you. At this time, we will conduct a question and answer session.

Speaker 4

I was hoping you could talk a little bit about what seems to be very rapidly changing competitive environment, particularly in Florida. And thoughts on pricing and whether or not there really are folks coming in or out at this point from a competitive perspective?

Speaker 1

Yes. Good morning, Paul, and thanks for the question. We're seeing more entrants coming into the market. We continue to see Citizens as a competitive carrier in the state. I think we continue to lean on particular markets where we are open that we feel are profitable.

Speaker 1

We've opened additional ones at the end of 2023 and we feel good where we sit today with the business that's coming in. 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 I think our relationships, our rates and the markets that we're open in are serving as well. From a competitive perspective, we see some people doing things that we don't want to do 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.

Speaker 1

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 4

No, that's helpful and interesting. I've heard thoughts and talk of regulatory pressure for pricing because of the tort reform coming, they're not in so this year, but maybe next. But then I fear the other side too 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 see pressure building for sort of an offset for the tort reform?

Speaker 4

You do hear people talk about concerns about the affordability of policies just in and of themselves in Florida, the impact that may have on what the regulators want to do?

Speaker 1

Yes. There's a lot in that question unpack Paul. I think from affordability perspective that is an issue across the state of Florida right now. And certain segments of the market continue to go to the E and S market where rates are extremely high. We traditionally even in 2023, we looked at our rate indication and we took less as a submitted rate request as a result of the tort reform because we felt good about what was coming through the book.

Speaker 1

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, I think the state of Florida has done a very good job with Torture reform and we're appreciative of that. Could they have gone a little further perhaps? Did they go too far?

Speaker 1

I don't think so. So I think as we look in the future, we'll try and take all those measures into account and do the right thing. But we don't feel there's nobody calling or suggesting anything to us that we're not getting any undue pressure so to say at this point.

Speaker 4

Fantastic. Congrats on the quarter.

Speaker 1

Yes. Thanks, Paul. Have a great day.

Speaker 3

Thank you. One moment for next question. Our next question comes from the line of Nick Acabiello of Dowling. Your line is now open.

Speaker 5

Thanks guys. Nice quarter. I was just wondering, first off, was there any net prior year development recognized in

Speaker 2

Q1? Nothing on a net basis, negligible on a direct.

Speaker 5

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 GAAP retention as the program placed last year?

Speaker 1

Yes. If you're referring to the use of the isosceles, yes, 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 parent. So, yes.

Speaker 5

Okay. Makes sense. Thank you. That's all I had.

Speaker 1

Thanks, Nick. Have a good day.

Speaker 3

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

Speaker 1

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

Speaker 3

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

Powered by Quartr
Earnings Conference Call
HST Global Q1 2024
00:00 / 00:00