Universal Insurance Holdings, Inc. (NYSE:UVE) Q2 2022 Earnings Conference Call July 28, 2022 10:00 AM ET

Company Participants

Arash Soleimani - Chief Strategy Officer

Steve Donaghy - Chief Executive Officer

Frank Wilcox - Chief Financial Officer

Conference Call Participants

Operator

Good morning, ladies and gentlemen. And welcome to Universal’s Second Quarter 2022 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.

Arash Soleimani

Good morning. Thank you for joining us today. Welcome to our quarterly earnings call. On the call with me today is 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. 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 will turn the call over to Steve.

Steve Donaghy

Thank you, Arash. Good morning, everyone. We reported a 12.8% annualized adjusted return on common equity in the quarter an impressive feat in the current environment. Direct premiums written growth of 12.4%, accelerated from 8.5% in the first quarter of this year and significantly outpaced an 8.5% policies enforced decline.

In addition to rate increases, we continue to optimize and rebalance our portfolio, increasing exposure to more profitable regions while reducing exposure to less profitable geographies. Our capital position remains strong at both of our insurance subsidiaries, and on an enterprise wide basis. And I'm particularly proud of the robust reinsurance program that we completed prior to the June 1 renewal date. Despite the challenging reinsurance market, our program includes full protection for both hurricanes and tropical storms as no gaps in coverage and no co-participation and provides coverage across multiple events. We are well prepared for hurricane season and expect the actions we've taken to bear fruit in future periods.

I'll turn it over to Frank to walk through our financial results. Frank?

Frank Wilcox

Thanks Steve and good morning. Adjusted EPS was $0.47 down from $0.65 in the prior year quarter, with a decline mostly attributable to a higher net combined ratio, partially offset by higher commission revenue in net investment income. Core revenue of $301.6 million is up 8.7% year-over-year, with growth primarily stemming from higher direct premiums earned, net investment income and commission revenue. Direct premiums written of $532.5 million were up 12.4% from the prior year quarter, including 13.2% growth in Florida and 8.3% growth in other states. Direct premiums earn of $428.8 million were up 9.2% year-over-year. Rate was the main driver of premium growth, particularly given the policies [enforced] decline as Steve mentioned in his remarks.