United Insurance coverage Holdings Corp. (NASDAQ:UIHC) This autumn 2022 Earnings Convention Name March 2, 2023 5:00 PM ET
Firm Contributors
Karin Daly – Investor Relations & Vice President, Fairness Group
Daniel Peed – Chairman of the Board & Chief Govt Officer
Bennett Bradford Martz – Chief Monetary Officer
Convention Name Contributors
Operator
Greetings and welcome to the United Insurance coverage Holdings Corp. Fourth Quarter and Full 12 months 2022 Earnings Convention Name and Webcast. Presently, all contributors are in listen-only mode. Please be aware this convention is being recorded.
I’ll now flip the convention name over to Karin Daly United Insurance coverage Holdings Corp. Investor Relations consultant and Vice President on the Fairness Group. You might start Karin.
Karin Daly
Thanks, Kevin, and good afternoon, everybody. UPC Insurance coverage has additionally made this broadcast accessible on its web site at www.upcinsurance.com. A replay will probably be accessible for roughly 30 days following the decision. Moreover, you will discover copies of UPC’s earnings launch and presentation within the Traders part of the corporate’s web site.
Talking at this time will probably be Chairman of the Board and Chief Govt Officer, R. Daniel Peed; and President and Chief Monetary Officer, Bennett Bradford Martz.
On behalf of the corporate, I would like to notice that statements made throughout this name that aren’t historic info are forward-looking statements. The corporate believes these statements are primarily based on affordable estimates, assumptions and plans.
Nevertheless, if these estimates, assumptions or plans underlying the forward-looking statements show inaccurate, or if different dangers or uncertainties come up, precise outcomes may differ materially from these expressed in or implied by the forward-looking statements.
Components that might trigger precise outcomes to vary materially could also be discovered within the firm’s filings with the US Securities and Trade Fee within the Threat Components part on their most up-to-date annual report on Kind 10-Ok and subsequent quarterly stories on Kind 10-Q. Ahead-looking statements converse solely as of the date on which they’re made and besides as required by relevant legislation, the corporate undertakes no obligation to replace or revise any forward-looking statements.
With that, it is my pleasure to show the decision over to Mr. Daniel Peed. Dan, it’s possible you’ll start.
Daniel Peed
Thanks, Karin. Good day and thanks for becoming a member of us on our fourth quarter earnings name. I am Dan Peed, Chairman and CEO of United Insurance coverage Holdings Corp. I am planning to overview the persevering with withdrawal from private strains; then give attention to the working ends in our business strains enterprise. Brad Martz will then contact on our company actions and outcomes at UIHC, in addition to present some data on our cat reinsurance tower.
Over the past two years, we have been exiting UPC’s private strains enterprise. First by way of the sale of renewal rights within the northeast on the finish of 2020, then the sale of the renewal rights within the southeast on the finish of 2021; and eventually, in August of 2022, we introduced the plan of withdrawal of UPC private strains within the remaining states of Florida, Texas, Louisiana and New York.
All through this time, we labored intently with the Florida OIR and our different regulators. In mid-November we amended our plan of withdrawal as a result of extreme losses incurred in hurricanes Ian and Nicole, mixed with emergency orders which prohibited non-renewals.
In early December, we entered into administrative supervision with the OIR, together with a requirement to proceed on the lookout for a provider that might supply alternative insurance policies for some or all of our policyholders.
As a subsequent occasion and efficient February 1, 2023, with the approval of the Workplace of Insurance coverage Regulation, we entered into an settlement with Slide Insurance coverage firm to supply no less than 72,000 policyholders a alternative coverage, which will probably be additional described in Brad’s remarks.
Resulting from our year-end assessment, in February, our gross loss estimate from Hurricane Ian elevated, which resulted within the Ian UPC loss exceeding the UPC reinsurance limits accessible. And on February 27, United P&C Insurance coverage Firm was positioned in receivership with the Florida Division of Monetary Providers.
Brad will present extra data and now we have offered unaudited professional forma financials as of December 31 within the investor complement to assist describe the ensuing deconsolidated United Insurance coverage Holdings Corp. financials.
I would like to show now to the continuing operations of our business strains enterprise written in American Coastal Insurance coverage Firm. Outcomes are damaged out for private strains and business strains in our earnings launch in addition to within the investor complement.
First, a quick description of the underwriting metrics for business strains. We proceed to scale back the PML to premium ratio by over 20% per yr. We’re executing on our plan to scale back PML publicity between 10% to twenty% by peak hurricane season 2023.
The typical risk-adjusted price was up over 40% in This autumn to the best they have been in 15 years and charges continued to speed up even additional in 2023. The typical constructing valuation was up 11% year-over-year. The typical hurricane deductible elevated from 4.3% to five.0% year-over-year throughout the portfolio and retention charges remained within the 80% although — within the ’80s.
Outcomes are additional described in our earnings launch and investor complement however I would prefer to level out key efficiency indicators in our business strains enterprise. Pre-tax earnings had been $3.7 million for the fourth quarter and $35.8 million for the yr. Pre-tax earnings for 2022, excluding Ian losses, would have been $79.2 million. Gross written premium for the quarter was $122 million, up 30.4%. Gross written premium for the yr was $508 million, up 20.4%.
The mixed ratio for the quarter was 89.5% with an underlying mixed ratio of 68.5%. The underlying mixed ratio displays 3.9% of favorable prior yr growth and 24.9% of cat losses. The mixed ratio for the yr was 83% with an underlying mixed ratio of 66.8%. The underlying mixed ratio displays a 3.6% favorable prior yr growth and 19.8% for cat losses together with Hurricane Ian, probably the most expensive hurricanes to ever hit Florida.
We had been deeply dissatisfied with the fourth quarter developments that in the end resulted in receivership of United P&C working diligently with the opposite monetary providers to help policyholders and full the separation and runoff of UPC. Ahead, we’re principally a specialty business strains enterprise, which we anticipate will mirror the sturdy historic efficiency of American Coastal.
American Coastal has a high-quality portfolio with a confirmed observe report since its inception 15 years in the past. With an underlying mixed ratio beneath 70%, the portfolio is designed to have the ability to take up the anticipated Florida disaster losses whereas persevering with to yield an underwriting revenue.
The Florida cat market is considerably tougher than it was in 2006 and 2007, and stays as onerous because it has been in over 20 years. Whereas this creates challenges, together with cat reinsurance placements, it additionally creates glorious alternatives for each reinsurers and insurers to enhance pricing and the standard of the portfolio. I anticipate these market circumstances to proceed to be onerous for no less than the foreseeable future.
With that I will flip it over to Brad Martz.
Bennett Bradford Martz
Thanks, Dan and hiya. That is Brad Martz, the President and CFO of UIHC. I am happy to assessment our monetary outcomes however encourage everybody to assessment the corporate’s press launch, investor presentation, and Kind 10-Ok for extra data relating to our efficiency.
The quarter ending December thirty first, 2022 included a GAAP internet lack of $294.9 million or $6.84 a share versus the online lack of $2.3 million or $0.05 a share final yr and a core lack of $273 million or $6.33 a share in comparison with a core lack of $1 million or $0.02 a share within the prior yr.
Web page 4 of our investor presentation summarizes our outcomes for the quarter and included $196.6 million of internet retained disaster losses and $58.9 million of prior yr reserve growth. The numerous enhance in internet loss and loss adjustment expense year-over-year was primarily pushed by a re-estimation of final loss liabilities throughout all firms and all accident years to totally align UIHC with its unbiased actuarial agency for each cat and non-cat losses at year-end.
Web page 5 of our investor presentation breaks down our outcomes by section and signifies most of our losses had been incurred in private strains. However business strains did incur roughly $16 million of internet losses associated to present accident yr catastrophes in addition to about $8 million price of reserve strengthening for non-cat losses, however regardless of that it was nonetheless worthwhile as Dan talked about.
Our present accident yr cat loss for the fourth quarter included $29 million from PCS occasions and roughly $160 million associated to internet growth on Hurricane Ian and roughly $8 million for Hurricane Nicole internet of reinsurance.
Our gross loss estimated from Hurricane Ian moved from $1 billion at September thirtieth to $1.54 billion at year-end inflicting our former affiliate United Property & Casualty Insurance coverage Firm often known as United P&C or UPC to exhaust all its reinsurance safety particularly for Ian.
Consequently United P&C’s internet retained losses exceeded its policyholder surplus as of December thirty first and it was put into receivership with the Florida Division of Monetary Providers efficient February twenty seventh, 2023.
Whereas this was clearly not the outcome anybody hoped for, it does convey closure to what was in any other case more likely to be an extended and difficult runoff course of for our main underwriter of non-public strains enterprise.
United P&C’s receivership principally means UIHC has divested its possession and management of this entity and will probably be consolidated from UIHC’s consolidated monetary statements on the finish of February 2023.
Pages seven and eight of our investor presentation embody professional forma data exhibiting what UIHC’s outcomes would have appeared like if UIHC deconsolidated UPC from its outcomes at year-end.
Whereas this data is unaudited and topic to vary till our Kind 10-Ok is filed, it does assist make sense of our year-end numbers and exhibits what UIHC will appear to be with out United P&C going ahead with simply American Coastal in Business Traces and Interboro Insurance coverage firm in Private Traces.
Web page 9 of our investor presentation exhibits the 2022-2023 core disaster reinsurance program nonetheless in pressure for American Coastal. After rising American Coastal’s Ian loss for our Business Traces section to $680 million through the quarter, American Coastal nonetheless had over $500 million of restrict remaining from the Florida Hurricane Disaster Fund positioned at 90%.
Because of this American Coastal has publicity to a ten% co-participation on future adversarial growth till the Florida hurricane disaster fund restrict is exhausted, however we consider it is extra probably that American Coastal’s Ian loss will truly are available in underneath $680 million leading to favorable growth and lowering internet losses incurred in future intervals.
American Coastal’s mixture restrict remaining for subsequent occasions is roughly $980 million which offers good context relating to the reinsurance safety remaining instantly after Ian. As Dan talked about efficient February 1, we entered and accomplished a transaction with Slide Insurance coverage Firm.
This transaction resulted in an asset buy and providers settlement with our wholly-owned MGA United Insurance coverage Administration, which is predicted to supply charge revenue equal to 2% of gross premiums earned of the UPC insurance policies renewed by Slide in change for mental property and information plus the reimbursement of prices related to servicing this enterprise similar to salaries and system-related bills. It will assist with unrestricted money stream by leveraging our individuals and know-how to comprehend some service charge revenue in future intervals.
On account of the occasions occurring after yr finish, UIHC additionally incurred a number of nonrecurring expenses within the fourth quarter together with a $23 million impairment loss associated to United PNC’s funding portfolio, a $20 million write-down of deferred acquisition prices associated to United PNC’s unearned premium that won’t be earned in future intervals in addition to the disposal of roughly $3 million of intangible property that now not held any worth at yr finish.
Effectively there’ll nonetheless be some noise from United PNC’s enterprise from January and February of 2023 included in our Q1 outcomes we consider a brand new period of profitability and stability has lastly arrived.
The first dangers at this stage entail working with the Florida Division of Monetary Providers to totally separate our persevering with enterprise and getting our core cat reinsurance renewal accomplished on or earlier than June 1 of this yr.
That concludes our ready remarks and we thanks in your continued curiosity in UIHC.
Daniel Peed
Thanks. You might now disconnect.
Query-and-Reply Session
Finish of Q&A
