United Insurance Holdings Corp. (NASDAQ:UIHC) Q2 2020 Earnings Conference Call - Final Transcript

Aug 05, 2020 • 05:00 pm ET

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United Insurance Holdings Corp. (NASDAQ:UIHC) Q2 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you sir. We will now begin our question-and-answer session. [Operator Instructions]. Our first question today comes from Elyse Greenspan of Wells Fargo. Please proceed with your question.

Analyst
Elyse Greenspan

Hi, thanks good evening. My first question, just on the underlying loss ratio. So pretty favorable relative to where you've been trending. From the prepared remarks, you guys highlighted earning and some rate. And then I think, Brad, you pointed to a lower level of non-cat loss frequency trends in the quarter. So just hoping to get some more color and the sustainability there. In answering that question, do you think that there was any benefit on the loss side just from COVID in the quarter?

Executive
Bennett Bradford Martz

Hi Elyse, thanks for your question. Yeah, the frequency trends remain favorable in our business. They were favorable prior to COVID. We're not sure how much COVID assisted in the improvements we saw during the COVID run frequency, and we obviously can't comment on forward-looking projections. But just to give you a flavor, we look at frequency, company by company, product by company -- or product by product.

United Property and Casualty, our largest insurance Company. If compared to Q2 of '18 and '19 to '20 the frequency has gone down from -- in Q2 of '18 at 3.24%, down to Q2 of '19 of 3.07%, Q2 of 2020, all the way down to 2.41%. Whereas, the full year '19, actually in '19 was 2.76% frequency. So there's obviously a favorable trend that was already in place due to very aggressive underwriting initiatives.

We've taken to curb our risk exposures, but there could be a related benefit associated with the current environment due to COVID.

Analyst
Elyse Greenspan

Did the favorable trends persist in July?

Executive
Bennett Bradford Martz

Can't comment on that.

Analyst
Elyse Greenspan

Alright. And then in terms of on the expense side, we've heard some companies kind of call out some COVID-related expenses just from lack of T&E and things like that. Was there a benefit on the expense side from COVID in the quarter?

Executive
R. Daniel Peed

It was minimal. The big benefit, as I mentioned in my remarks, was related to ceding commissions earn. We did not have bandwidth security insurance Company as part of our quota share for two months of the three months in 2019. So -- and what ceding commissions we did have were mostly unearned. So full 12 months of earning ceding commissions and then our E&S assumed premium business went down, and there are higher acquisition costs associated with commercially lines business than our personal lines business. So that had a favorable impact on the expense ratio as well.

Analyst
Elyse Greenspan

And then, sometimes on these calls you guys will give a little bit of color on like the forward quarter cat. Obviously, there's an ongoing tropical storm so that might be too soon to comment. But how has the kind of cats trended so far in the third quarter?

Executive
Bennett Bradford Martz

So we've had two events we've seen in the third quarter. I think they're relatively small industry losses. There are various