Good day, ladies and gentlemen, and welcome to UVE Second Quarter Earnings Conference 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 introduce your host for today’s conference, Dean Evans. Sir, you may begin.

Thank you, Ashley. Good morning everyone. Welcome to the second 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. 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 press 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 August 9, 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. As usual, I will begin by providing some highlights from the quarter and we will then review our growth initiatives and strategy. Jon will cover several important current topics and Frank will conclude by discussing financing results. We will then open the call for questions. Overall, we are pleased with our second quarter 2018 results. As we reported net income of $46.1 million and diluted EPS of $1.29, which equates to an annualized ROE of 37.8%. We reported excellent top line growth in the second quarter with 15.7% growth in direct premiums written including 13% growth within Florida and 36.5% growth in other states. Our underwriting profitability was strong, with a 77.2% combined ratio for the quarter. This includes weather losses above expectations of $5 million or 2.6 points as well as $2.3 million or 1.2 points of adverse reserve development, primarily related Hurricane Matthew. These items are offset by $6.5 million or 3.4 points of benefits received due to a settlement of prior year premium tax audit. Our service companies' subsidiaries continue produce benefits in the aftermath of Hurricane Irma as Universal Adjusting Corporation and Blue Atlantic Reinsurance Corporation contributed $8.4 million, and $0.9 million respectively to second quarter results. Lastly, as with the case during the first quarter, our effective tax rate benefit from the Federal Tax Reform that was passed in 2017, which had a meaningful positive impact on our net income for the quarter when compared to the prior year. I would like to briefly discus our growth outlook heading forward. We believe we have positioned Universal well for the future by pursuing various organic growth avenues, which have resulted in a more stable, diversified and balanced business. Our core Florida book continues to produce…

Thank you, Sean. I would like to first start with an update on Hurricane Irma and we will also provide a brief update on Hurricane Matthew, discuss the 2018 weather event to date and recap our update reinsurance program following the June 1 renewal. Following another three months of actively settling Hurricane Irma claims, we have increased our estimate of gross losses related to Hurricane Irma to $600 million. This change in growth loss estimate comes primarily due to the continuation of new reporting claims and the aggressive nature of plan of attorneys on the claims in Florida. We stress that 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 7,746 new claims reported during the quarter, down from over 10,000 reported in the first quarter bringing our total claim count as of 630 to 81,723. We have closed over 74,000 roughly 90% of these claims with an average loss and LAE severity of approximately 6,000 across all claims and an average loss and LAE severity of 8,400 on claims closed with pay. From a financial impact standpoint, we have now booked to a level that reaches the portion of our reinsurance program that we are now responsible for paying reinstatement premiums. Specifically, for any hurricane Irma losses ceded to our traditional reinsurance program in excess of $595 million, we will incur reinstatement cost of 9% for the first $193 million and 4.75% for the next $125 million. To the extent that this occurs, we would expect any additional reinstatement costs to likely be offset by further revenues earned by our provider subsidiaries. As a result of Hurricane Irma, the past three quarters have each include the benefit of additional revenues within…

Thank you, Jon. For the second quarter of 2018 net income totaled $46.1 million, an increase of 56.9% compared to the second quarter of 2017. Diluted EPS was a $1.29, up $0.82 for the second quarter of 2017. We reported strong total revenue growth of 13.1% for the quarter driven by growth in premium volumes, net investment income, commission revenue and policy fees. Direct premiums earned grew 12% to $174 million, while net premiums earned grew 13.8% to $192.3 million. Ceded premiums earned as a percent of direct premiums earned was 29.8% for the second quarter of 2018 compared to 30.9% in the second quarter of 2017. Commission revenue and policy fees each posted solid growth versus the prior year's quarter up 22.9% and 9.8% respectively, while other revenues declined slightly by 1.1%. Included within commission revenue was $0.9 million of fee income related to reinstatement commissions received by Blue Atlantic during the second quarter of 2018. We generated a net combined ratio of 77.2% in the second quarter of 2018 compared to 81.3% in the second quarter of 2017. The net loss and LAE ratio improved to 46.7% from 47.4% in the prior year's quarter. Second quarter 2018 included $5 million or 2.6 points of weather events above plan compared to the $6 million or 3.6 points of weather losses above plan in the second quarter of 2017. Second quarter of 2018 results include $2.3 million, or 1.2 points of unfavorable prior-year reserve development primarily related to Hurricane Matthew compared to $1.1 million, or 0.7 points of unfavorable development during the second quarter of 2017. The second quarter of 2018 loss adjustment expenses include a benefit of $8.4 million, or 4.4 points from additional revenues earned by Universal Adjusting Corporation related to Hurricane Irma. Our underlying loss and LAE…

[Operator Instructions] And our first question comes from the line of Arash Soleimani with KBW. Your line is now open. Sir, your line is now open.

Am I coming through?

Yes, we got you. Go ahead buddy.

Okay. The premium growth in Florida, the 13% growth there versus the 6% tiff growth, I know there is a rate increase, but what's getting it up to 13%? Is it that you are growing more now in Try County or areas of the state where you have higher than average rate increase?

Yes, I think there is a few contributing factors. One obviously is the 3.4% rate increase aggregate across the state of Florida rolling through our books. Two, obviously Universal Direct I think is helping us with regards to that and that is why I think there is someone of a disruption in the marketplace as it relates to certain parts of Florida, and obviously we are getting into hurricane season and sometimes you see an increase there it being a cyclical cycle where people buying insurance going into hurricane season. So I think all those are contributing factors that contribute to that rate.

Okay. Thanks. And I guess going forward do you expect to still be in the double digit range for the rest of the year in Florida?

I think the guidance we have given previously was in the high single digits. So I think that's the expectation going forward.

Okay. And just a quick question on the premium ratio; that was down a bit obviously this quarter and is the $81.8 million of ceded premiums earned, is that sort of fair run rate going forward or how should we look at that?

Well, I think there are a couple of things going on there. We did save some money on our reinsurance program relative to our expected earned premiums and then as you just asked and Sean just answered, we had a large growth of premium in the second quarter. So that extended their ratio out a little bit.

I just wanted to touch base on the adjusting income that you've been making at UAC, so obviously that's been very strong. Did get any pushback ever from your reinsurance partners on your ability to generate income as the losses go up?

No. It's the contrary actually. Obviously when a third party handles a loss, Arash, the loss adjustment expense is greater than when we handle it. And obviously with our large adjusting firm and litigation firm, our ability to control the costs from a loss adjustment expense is greater than a third-party. So they are pleased with it. Either way they have to pay the expense. They would much rather pay to us where it's than paying a third-party.

And how does it work in cases as you get further away from the storm where you could have claims that might be unclear for losses or from Irma or from different type of event? Is there a conversation with the reinsurers in that sort of scenario?

I am not really getting your question. Obviously, we do our due diligence to determine what the cause of loss is and how obviously the damage that occurred. From the parallel, number one a; is it covered under the policy and two, is it directly co-related to Irma. It's not really that hard to determine. There are some cases obviously that get into a litigation environment, where we have to determine that but to answer your question, no, there won't be any pushback or any issues with the reinsurers with regards to that.

Okay. And looking ahead into the third quarter do you expect to see further income from the adjusting operations that you have?

I think it will be minimal. Obviously, we continue to receive claims, but I think the claims that you are going to be getting in over the next few months will be much smaller. We will have some-- we will be generating some income on our existing cases, but I think it's much smaller number than that we put up the last two quarters and frankly I think it would be minimal.

All right. Thanks. And I think John had mentioned that you are at the point where you would have to pay the reinstatement premiums, but you also have said that if the gross loss goes up you expect that reinstatement premium to be offset by adjusting income. I guess I was just curious what would cause it be kind of perfectly offset?

Well, obviously when the loss increases then the loss adjustment expense piece increases. So that if we are on the hook for 9% of the overall loss, that would be covered by the loss adjustment expense correlated directly to that overall increase in incurred loss. So that's kind of my stance on me saying it would be minimal going forward with any quarters we are putting up with Universal Adjusting Corporation.

Thanks. And then-- maybe this is a question for Jon, but how did you-- you mentioned $29 million retention, does that include American Platinum? And if, so how do you get from the 37th to the 29th?

Yes, it includes American Platinum. The difference would be the recoveries that we had from our other states catastrophe program that serve to offset the core retention.

Okay. And a quick one for Frank, on the net investment income, I know that yields on invested assets were up year-over-year, but I'm looking sequentially from Q1, 2018 to Q2, 2018, you had about a $1 million uptick in net investment income. So I just wanted to get a better sense for what-- what drove that?

Well, I mean, we have several things. We're continuing to grow our cash and investment balances obviously with a premium that we are generating as we got relatively short duration portfolios that has our securities mature, we are reinvesting at a higher rates, the rate action-- the actions that the Fed has taken. We-- after Irma, we also realized that we need to tap into the portfolio for liquidity. So we got a little more aggressive and we migrated some of the mix from our US Treasury obligations over the corporate.

So is it fair to assume that the $5.8 million of net investment income this quarter showed basically carry forward to future quarters of reading get bigger?

I think the current yield is indicative of what to expect for going forward.

Okay. And I know there was a court case recently that basically said you could have multiple AOBs on the same claims, does that-- do you see any impact-- do you guys from that?

No. Obviously there were two court cases recently that have been in the media regarding specifically cases from a homeowner's perspective. One is the --one with HCI as related to the fee-- sorry the multiple AOB as you mentioned and then the fee multiplier from federated. We haven't really seen anything on either one. Each one of our specific divisions handles any particular case differently. So in other words we have an expert who would handle the water extraction. We have somebody who would handle the public adjuster from a represented perspective. We have somebody who would handle the case if it's in litigation. So all those different entities that would be on the same AOB case are covered and handled globally. So we never had an instance that have occurred for us, so that's has been an issue. And to touch base a little bit on the fee multiplier the people have been talking about recently, that's been around since 1985. So there hasn't been anything at all that's been different. I just think that was something it's been in the media to cause some sort of upheaval regarding what's going on this AOB marketplace. But that isn't anything that we've experienced, and isn't anything right now that we think is an issue for us frankly or anybody.

Okay. Perfect. And just last question. Can you break up the UVE direct premiums for the quarter?

The Universal Direct?

Yes, Universal Direct.

It was $2.7 million for the quarter.

Okay. And then what was the policy count?

Policy count currently right now for the quarter--?

Is it as of the end of Q2?

I will get back to you. I don't have the quarter right now.

Thank you. And the next question comes from the line of Samir Khare with Capital Returns. Your line is now open.

Hi. Thank you. Good morning. Just from the Hawaiian cat losses, how many claims did you get and did that trigger any of your Other States insurance coverages?

Yeah we had 16 claims reported to date, and given that the majority of those occurred in May when we had satisfied our otherwise recoverable on our aggregate program, we will have a reinsurance recovery there.

Okay. Great. And then on the rate increases, what you guys putting in for rate increases for this year and in Florida and outside Florida?

Yes. We just started the process right now for Florida; other states are ongoing. We will we get to that information. But Florida right now it's early days, but we should have a pretty good idea in the next month or so.

And then guys, in the press release, talked about, I guess, the cat losses that were above budget. In your, I guess, budgeted loss ratio, how much do you guys think that kind of budget for storms?

To dig that out real quick I could comment a little bit on the events that led to us booking the additional five. I actually did I think in my pre prepared remarks, couple of winter storms, storm losses that got up into the $2 million, $3 million, as well as some windstorm in March and April, also in the three to four range for those.

Okay. But what's your, I guess, planned loss ratio that you guys booked on the post basis? Is that in 30s?

Okay. On a direct basis 4.5 points

Okay and just about the increase of the Irma loss, when did you apprised reinsurers of that?

We have ongoing discussions with our reinsurers literally every day.

I am just trying to figure out that a Q2 I guess increase for them or was it a Q3 increase?

I think that's necessarily for us to comment on Samir.

Okay. Would we expect there to be any reinstatement commission income to Blue Atlantic in 3Q?

Well, we are paying -- Blue Atlantic is paid reinsurance, excuse me, reinstatement brokerage as losses are billed and paid. So while we advise that were booking Hurricane Irma to $600 million, we have not yet build are collected the $600 million so yes, there would be future reinstatements brokerage commissions for Blue Atlantic although they will be small.

I was wondering if you can elaborate on what you're seeing under Irma claims. I think you guys talked about you're seeing an increase of reopened claims. When did you start seeing that acceleration? What do you think is causing them? And then does your outlook on litigated -- your litigation rates on Irma claims change at all?

Let me answer your first question, first you kind of faded out in the second part. I'll let you come back to that, but no we haven't really seen an increase at all in our reopens for the guidance we gave previously in quarter one. Currently, right now we received around 7,800 claims in Q2 and closed those claims in Q2. So we're turning over the claims pretty quickly. We're not seeing a lot of reopens any greater than the number that we gave last quarter. So it's running in line actually it's decreasing a little bit. What was the second part your question, Samir?

I think you answered it. That's fine. Thank you.

Thank you. And we do have a follow-up question from Arash Soleimani with KBW. Your line is now open.

I'm not sure if you just heard but Jon I just wanted to know if you could repeat in statement. Was it 9% of $193 million and then 4.75% of the next $125 million?

Yes. And that would be beyond what we've booked already. So we booked the loss, we marked the loss to $600 million. So to the extent that we cede losses to our traditional program, every dollar of the first $193 million we will be responsible for 9%, and then as you said, the additional $125 million at 4.75%.

Okay, thank you. And I am not showing any further questions at this time. I would now like to return the call back over to Sean Downes for any closing remarks.

Thank you. 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, thank you for participating in today's conference. This does conclude today's program. And you may all disconnect. Everyone have a wonderful day.