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

Aug 05, 2020 • 05:00 pm ET


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


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R. Daniel Peed

founding of United and he will continue to actively serve on the Board. We also promoted Brad Martz to assume the role of President, while continuing in his role as CFO.

Lastly, we promoted Chris Dittman to the newly formed position as Chief Risk Officer. Chris will focus on portfolio optimization and risk management while continuing his responsibilities of overseeing our reinsurance placement. I'm very excited about the opportunity to lead this executive team here at UPC. There is a huge opportunity to take our underwriting to the next level and improve our results and we are well on our way. I'd like to give you an overview of our Q2 and our year-to-date performance, and then Brad Martz will walk through the numbers. We are a cat-focused specialty underwriter with competitive advantages in cat-exposed coastal areas.

We are planning to prioritize an underwriting profit by staying within our specialty and further leveraging our competitive advantages. It is critically important that we are intensely focused on our underlying combined ratio, generating an underwriting profit that is sufficient to absorb hurricane and non-hurricane catastrophe losses.

I mentioned we are prioritizing our focus on generating an underwriting profit. This may slow our top line growth some, but we are committed to generating a consistent non-cat underwriting profit before we pursue top line growth. While we are focused on the bottom line, given the tailwinds of this hard market, it's possible we might continue to see some top line growth due to rate increases. And where we feel rates are adequate, we are likely to continue to grow.

However, we intend to limit exposure growth in areas outside of our cat-focused footprint and nor are we interested in writing new business in areas where rates appear to be an asset. We have taken numerous rate increases in various states over the last 18 months, and these rates are working their way through the financials. We expect to continue taking rate increases to accommodate anticipated changes in reinsurance costs and loss costs.

Our success is driven by several components. First, we have our underlying non-cat underwriting bonds. Then we have our non-named cat, our named cat, our reinsurance expense, our reserves, operating expense and investment income. I'll touch on each of these briefly. For non-cat, the good news is we started down the path of rate increases and improved risk selection and underwriting over the last four quarters to six quarters. We turned positive with our first quarter results this year, and we continue to improve in 2Q, an underlying combined ratio of below 84%.

This success is mostly due to continuing filings, reflecting rate increases as well as improved risk selection underway. As additional rate increases are in over the next four quarters to six quarters, we are positioned for our underlying combined ratio to generate more non-cat market. Secondly, we have our non-named cat losses. In the second quarter, we experienced a heavy non-named cat quarter, consistent with our peers. This resulted