Good morning, ladies and gentlemen, and welcome to UVE Q3, 2018 Earnings Call. At this time, all participants are in a listen-only-mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Dean Evans. Please go ahead, sir.

Thank you, Casey, and good morning, everyone. Welcome to the third quarter 2018 earnings conference call for Universal Insurance Holdings, Inc. My name is Dean Evans; I am the Vice President of Investor Relations here at Universal. With me in the room today are Chairman and Chief Executive Officer, Sean Downes; President and Chief Risk Officer, Jon Springer; and Chief Financial Officer, Frank Wilcox; and Chief Operating Officer, Steve Donaghy. Following Sean’s opening remarks, Jon will provide an update on several important current topics and Frank will review financial results. The call will then be reopened for questions. Yesterday afternoon, we issued our earnings release, which is available under the press release’s section of our website at www.universalinsurancehodlings.com. A replay of this presentation will be available on the homepage of our website until November 13, 2018. Before we begin, please note that this presentation may contain forward-looking statements about our business and financial results. Forward-looking statements reflect our current view of future events and are typically associated with words such as believe, expect and anticipate or similar expressions. We caution those listening, including investors, not to rely solely on forward-looking statements as they imply risks and uncertainties, some of which cannot be predicted or quantified and future results can differ materially from our expectations. We encourage you to carefully consider the risks described in our filings with the Securities and Exchange Commission, which are available on the SEC's website or the SEC filing section of our website. We do not undertake any obligation to update or correct any forward-looking statements. With that, I would like to turn the presentation over to our Chairman and Chief Executive Officer, Sean Downes.

Thank you, Dean. And thank you everyone for joining us today. Before I begin, I'd like to express my heartfelt condolences for anyone affected by the tragedy that occurred in Pittsburg last weekend. As Pennsylvania is not only State where Universal rights business, there where many of us who also have personal connections and family. Additionally, Universal is intently focused on helping all policyholders who have been affected by recent natural disasters including Hurricane Florence, Tropical Storm Gordon and Hurricane Michael. Our catastrophe teams have been on the ground in the affected areas since the events made landfall. We are processing claims as fast as possible and we are available for any other assistance that policyholders require during this time of need. Please do not hesitate to follow-up with a Universal representative should you need assistance. Now moving on to our third quarter earnings discussion. I'll begin by providing some highlights from the quarter and will then review our growth initiatives and strategy. John will cover several important current topics and Frank will conclude by discussing financial results .We will then open up the call for questions. We are pleased with our third quarter of results as we report a net income of $37.4 million and diluted EPS of $1.04 for an annualized ROE of 28.4%. This result is particularly impressive in light of the increased catastrophic activity experienced during the quarter, most notably tropical storm Gordon and hurricane Florence. Each of which occurred within our geographic footprint. We report an excellent top-line growth in the third quarter with 12.5% growth in direct premiums written including 9.1% growth within Florida and 34.9% growth in other states. Our underwriting profitability was strong with an 82% combined ratio for the quarter, this includes weather losses above expectations of $7.5 million or four…

Thank you, Sean. I would like to first start with another quarterly update on Hurricane Irma. I'll also discuss the third quarter weather events, tropical storm Gordon and hurricane Florence, touch on hurricane Michael, a fourth quarter event and lastly provide a recap of our reinsurance program in light of the catastrophic events we've seen in recent months. Following another three months of actively settling hurricane Irma claims, we have increased our estimate of gross losses relating to hurricane Irma to $754 million. This change in gross loss comes due to the continuation of new reported claims and the continued aggressive nature of plaintiff attorneys on claims in Florida. This increase in gross losses for hurricane Irma had a negligible change on our net retention which remains at approximately $29 million for the event. We had over 4,000 new claims reported during the third quarter, down from over 10,000 new reports in the first quarter and almost 8,000 new reports in the second quarter. Bringing our total claim count as of 9/30 to just under 86,000 claims. We have closed almost 78,000, roughly 90% of these claims with an average loss and LAE severity of approximately 7,200 across all claims and an average loss and LAE severity of approximately 10,000 on claims closed with payment. as a result of Hurricane Irma, the past four quarters have each included the benefit of additional revenue within our service provider subsidiaries Universal Adjusting Corporation and Blue Atlantic Reinsurance Corporation. The additional revenues have led to a higher level of profitability than would otherwise be the case in a normal quarter. Switching now to the third quarter of 2018. Our third quarter results include a total of $7million, four points of weather events beyond plan compared to $37 million, 21.2 points of weather events…

Thank you, Jon. For the third quarter of 2018 net income was $37.4 million while diluted EPS was $1.04. We reported strong total revenue growth of 8.4% for the quarter, driven by growth in premiums, net investment income, commission revenue, policy fees and other revenues. Direct premiums earned grew 13.2% % to $288.4 million while net premiums earn grew 8.3% to $188.9 million. Ceded premiums earned as a percent of direct premiums earned was 34.5% for the third quarter of 2018 compared to 31.5% in the third quarter of 2017. The ceded premium ratio includes $13.5 million of reinstatement premiums paid during the quarter related to Hurricane Irma. Excluding this item, the ratio would have declined to 29.8% for the third quarter of 2018. Commission revenue, policy fees and other revenue each grew in the middle --in the mid single digits versus the prior year's quarter. Included within commission revenue was $0.6 million of fee income related to the reinstatement commissions received by Blue Atlantic in the third quarter of 2018. We generated a net combined ratio of 82% in the third quarter of 2018 compared to 99.5% in the third quarter of 2017. The net loss and LAE ratio improved to 45.5% from 66.7% in the prior year's quarter. As Jon pointed out, the third quarter of 2018 included $7.5 million or four points of weather events above plan with $5 million relating to Hurricane Florence and $2.5 million relating to tropical storm Gordon. The prior year's quarter included $37 million or 21.2 points of weather losses above plan entirely relating to hurricane Irma. While the third quarter of 2018 and the third quarter of 2017 include a negligible amount of prior year reserve movements. As Sean mentioned earlier, the third quarter of 2018 loss adjustment expenses include a…

[Operator Instructions] And your first question comes from Christopher Campbell with KBW. Please go ahead. Your line is open.

Yes, hi, good morning, gentlemen. I guess my first questions on the core loss. So just breaking out the Irma claims income benefit for this quarter. I calculate about 490 bps of higher core loss ratio year-over-year. So I guess just thinking about that how much of that Delta would be an attributable to assignment of benefits versus geographic expansion?

Well, first of all, out of that increase you've got to take into consideration the reinstatement premium which affected the denominator in that calculation. So that pushed that down elevating the loss ratio by about 3%. So the underlying increase in the core loss ratio is closer to about 3% versus the 4.9% that you just mentioned. As far as the breakout between the state expansion and the AOB benefits, I would say that it would be an even split between the two.

Okay, so out of that --out of the 3% once you back out the reinstatement, so if you were-- the 3% higher about like 150 bps would be AOB and then the other half of that would be geographic expansion. Is the right way to think about that?

I think that's fair. Yes, I think that's fair.

Okay, great. that's very helpful. And then just thinking about like, I know you guys -- or any progress for like the --for the rate change this year but I was looking at last year, it looked like you filed a 3.4% increase back in June. You did have some adverse development which would kind of indicate maybe there's a rate taking opportunity in 4Q. So I am just kind of --and I know there's a moratorium right now because of the storm in terms of rates, but just what's kind of driving that rate change to latest this year?

There's another moratorium in place right now. We have done the work for the rate indication, and we will be making a filing sometime during the fourth quarter.

Okay, that's helpful. And then just I guess like given the significant deterioration and like Irma's gross losses, how do you think that might impact next pricing for next year's reinsurance renewal?

Well, I think it's really too early to tell in terms of the reinsurance cycle. Reinsurers right now are obviously focused on their January 1 renewals which include some amount of South Eastern business, but the vast majority of the business that was impacted by Hurricane Irma will not be renewed obviously until next June. So I think we're way too early in the process to start speculating on how the rates may change due to Irma loss changes and or due to Hurricane Michael losses.

Got it. Then I guess just I mean two separate companies, you guys are going to set new reserves, the reinsurers are going to set their own. I guess like how reliant are the reinsurers in your panel on your growth loss estimates? Or are they already putting out, they're putting up independent loss bps?

Yes. It's a better question to ask them, but I would tell you that in the recent months we are trying to be as transparent as possible with our reinsurance partners in terms of the type of losses that are being reported. And the challenges associated with closing out that proverbial last 10% of the claims.

Okay and then just switching to be the claims income, it was a little bit more than we were expecting this quarter. So I guess what just driving the persistence in this income stream so far after the event? And then how should we be thinking about modeling the ongoing Irma, positive impact on your core loss ratios plus now the incremental benefit of likely Michael claims adjustment income as well?

Yes, Chris, I think basically this comes down to a timing and process. Obviously, we made a large push going into hurricane season to try to get as many of our Irma claims settled as we could. So I think it's, when you're looking at that increase in Q3 it just has to do with the timing. I think you're going to see Irma level off here pretty good and I think obviously as you mentioned you're going to see now Florence as well as Michael participate to Universal adjusting revenue going forward.

Okay and then just kind of a question on the buybacks. I mean I think Frank you mentioned in his script no buybacks this quarter. So I guess just how are you thinking about like a relative attractiveness of dividends, share repurchases et cetera?

Yes. As we've always said, this management team and board are constantly evaluating our cash needs. We've always been historically conserved in Q3, obviously because of the catastrophic environment. We tried to support the stock and we're going to and we planned on doing so in the event of a hurricane. But we are in a blackout period prior to Michaels. So it prohibited us from making any more purchases.

Your next question is from Samir Khare with Capital Returns Management. Please go ahead. Your line is open.

Good morning. I have a couple of questions on I guess the moving parts in the quarter and kind of dovetailing of Chris's question on the loss ratio. So just I understand if we remove the effects of $16.7 million from UAC revenues, removed the effect of $7.5 million of Cat and then removed the, I guess the effect of $13.5 million of additional ceded premium expense, on a gross basis that puts you at, your expected loss ratio of 33%. Is that correct?

That fair. That's what we were currently booking to on a direct basis.

Okay. I guess I misunderstood. I thought before you guys said you had additional for AOB but sounds like that are already in there. Okay, and then if the Irma loss continues to develop what's the maximum additional ceded premium you could have from additional reinstatement premiums?

The maximum number would be approximately $9.4 million.

Another $9.4 million

Remaining beyond the $13.5 million that we really booked this quarter.

Okay and how much additional gross losses that represent? How much would Irma have to agree to realize that $9.4 million?

Well, it would --it's a --that's a difficult question to answer because the Florida hurricane cat fund comes into play at some point which has no reinstatement cost, but I can tell you in terms of additional ceded losses to our open market reinsurance program that would be roughly a $165 million more.

Great, okay. And then the additional 4,000 claims that you guys had from Irma in the quarter, can you can you describe the complexion of them? Are they reopens? Are the claims coming that are attorney representative, represented upon personal loss? Anything like that.

It's a big. Lot of it is attorney represented claims and then it's your loss assessment claims.

All right. And then just in the fourth quarter thus far can you give us an idea of how much claims revenue from you guys have accrued for Irma? And any that you've accrued for Michael?

We don't have that information right now, Samir, but we can get back to you on that.

Okay and then just going talking about hurricane Michael a little bit. Can you give us some claim metrics? How many claims you have severity? How many are total losses, percent close et cetera?

Yes, roughly right now approximately 5,500 in Florida and another 1,500 in other states. Obviously, right now the severity in Florida is much greater than other states. The claims that we've seen in the other states more than 50% have been closed with no pay because if they're not above the deductible, but obviously we still think we're going to receive a lot more claims in Florida. There are a lot of places right now that I think people just are getting through the process, getting back to their homes, and are in the process of filing claims. So as of right now, like it most of the loss is associated with Florida.

Okay and for the, I guess for Michael this is considered your second event for purposes of the retention. Is that right? So it drops under $3million for other state?

That's correct.

Okay. And of $350 million that you guys have pegged for gross loss for Michael, can you delineate that how much of that is in Florida and how much is it ex Florida?

That's our gross estimate at this point, and we're not going to share how much we think may come from outside of Florida at this point. It is very, very early in the claims reporting cycle on hurricane Michael. And it would be inappropriate to try to guess right now.

Okay. On new direct, how much premium was written from new direct in the quarter inside Florida and outside Florida?

Could you repeat that one more time please?

Yes. Just how much premium was written in the quarter from Universal Direct inside Florida and outside Florida?

60% was written in Florida; 40% basically in other states.

Sorry what's the total premium base that was written in Universal Direct?

Thus far it's entirely in $16 million just over $16 million.

Okay, that's enforced all right?

Correct, correct.

Okay. Any updates to the Universal Direct partnerships or any new ones in the pipeline?

We continue to entertain and talk to people about how we can continue to monetize the organic leads driven to Universal, but it'd be premature to announce anything without concrete agreements et cetera in place.

Okay and the reinsurance, your reinsurance tower, how much of it renews next year in premium dollars? And I guess and approximately how much of that is the FHCF?

Just a high-level breakdown, roughly 40% of our ceded premium is Florida hurricane cat fund; roughly 25% is already pre negotiated. So the remaining 35% of our spend is up for renewal at June 1, 2019.

Great, and Frank last year I recalled the reinsurers were, they fronted the money for reinsurance cover bills and that resulted in a higher -- net invested income line. Are we going to experience the same in Q4 because of Hurricane Michael?

I mean that's a very marginal benefit that we get that reinsures will advance money. There's a small investment income associated with that.

And there are no further questions at this time. I will turn the call back over to Sean Downes for any closing remarks.

As always in closing, I would personally like to thank all of our shareholders, employees, board of directors, policyholders and my management team for their hard work and loyalty to Universal. This concludes the call. Thank you.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. And have a wonderful day. You may now disconnect.