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United Insurance Holdings Corp. (NDA) (NASDAQ:UIHC)

Q4 2013 Earnings Conference Call

February 20, 2014 09:00 AM ET

Executives

Adam Prior - IR

John Forney - President and CEO

Brad Martz - CFO

John Langowski - VP of Claims

Analysts

Samir Khare - Capital Returns Management

Lee Matheson - Broadview Capital

Greg Peters - Raymond James

Lee Matheson - Broadview Capital

Operator

Greetings and welcome to the UPC Insurance Fourth Quarter and Year-end 2013 conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. (Operator Instructions) As a reminder this conference is being recorded.

Now I’ll turn the conference over to your host Adam Prior of The Equity Group, thank you Mr. Prior may now begin.

Adam Prior

Thank you operator, good morning everyone and thank you for joining us. You’ll find copies of UPC’s earnings release today at www.upcic.com, in the investor relations section. You’re also welcome to contact our office at 212-836-9606 and we’ll be happy to send you a copy. In addition UPC insurance has made this broadcast available on this website.

Before we get started, I would like to read the following statement on behalf of the company. Except with respect to historical information statements made in this conference call constitute forward-looking statements within the meaning of the Federal Securities Laws including statements relating to trends and the company’s operations and financial results and the business and the products of the company and subsidiaries. UPC’s actual results may differ materially from the results anticipated in those forward-looking statements as a result of risks and uncertainties including those described from time to time in UPC’s filings with the US Securities and Exchange Commission. UPC specifically disclaims any obligation to update or revise any forward-looking statements whether as a result of new information, future developments or otherwise.

With that I would now like to turn the call over to Mr. John Forney, UPC’s Chief Executive officer; please go ahead John.

John Forney

Thank you Adam. Good morning everybody. I just want to make want clarification before I start. Adam mentioned our website, and I think he had said www.upcic.com; that’s the old website. Our new web address is www.upcinsurance.com. So look for e all the information on our company there. Thank you again.

This is John Forney, I’m the President and CEO of UPC insurance, and with me today is Brad Martz, or Chief Financial Officer and John Langowski, our VP of Claims. And on behalf of all of the associates of UPC insurance I want to thank you for taking time to join us this morning to discuss our Q4 2013 and full-year 2013 financial results.

2013 was a year with a lot of milestones for UPC insurance. We passed the 200,000 policies in force mark in the fourth quarter of 2013. We passed the $100 million in shareholder equity mark in the third quarter of 2013, and we passed the $200 million in market capitalization threshold also in the fourth quarter of 2013. More importantly, we continue to add to the team of talented professionals at UPC, they were assembling to help us achieve our goal of becoming the premier provider of property insurance in catastrophe exposed areas.

Two of the six members of the executive management team at UPC insurance joined us in 2013. Deepak Menon is our Vice President of Business Operations and Andy Swenson our CIO. We also added a board member in 2013, Sherrill Hudson, with his deep public company experience, on the boards of TECO, Lennar, and Publix, I think a great perspective to us that we had not had before on the broad and also with his background as a member of the citizens Board of Directors, great insights into the working of that organization that has been very helpful to us.

All of our associates have worked very hard in 2013 and it is gratifying to see the kind of success that that can build. The results that are company produced in 2013 were obviously very good with premiums up over 50% and net income up over 100% from the prior year. We know the success that we achieved is due normally to the hard work and skill and talents of all the associates that we have assembled here at UPC, but to up a nine hurricane season and very favorable market conditions for the purchase of reinsurance.

What I want to assure you is we’re not building a fair weather company here. We are building a company focused on financial stability that can drive in any market of climatological cycle and can endure for generations to come. We really appreciate the support that all of you on this call have given to us in one way or another. We’re going to need a lot more of it in the years ahead, and we look forward to a dialogue with all of the US we continue to build our team.

At this point I’m going to turn it over to Brad Martz to talk specifically about the financial results for the quarter and for the year, and we both will be available to you for questions at the conclusion of his remarks. Brad?

Brad Martz

Thank you John. For everyone, I’m Brad Martz the CFO UPC insurance, and am pleased to discuss the financial results of our most recent quarter, with you today. Before we get to the highlights, I would like to remind everyone and encourage everyone to please review our press release and form 10-K that we plan to file Monday, February 24, after the market close.

As John mentioned UPC had an outstanding fourth-quarter posting net income of $7.4 million of $0.45 per diluted share, which compared very favorably to the $1 million of net income or $0.09 per share in the same period a year ago. These solid earnings that increased our underlined book value per share by almost 17% from 570 a year ago to $6.64 at the end of 2013. Return on average equity was up nearly 21% or approximately five points from the 16% for the prior two years and our underlying combined ratio improved about 7.4 points to 83.8%. UPCs strong revenue growth remains a primary driver of earnings. Total revenues grew 67% for the quarter to over $63 million bringing year-to-date revenue growth for the year to 59%; obviously the driver of total revenues is the gross written premiums.

And for the quarter the company produced gross written premiums of just under $107 million, this was an increase of over $47 million, a 79% jump over the fourth quarter last year. The increase in written premiums is attributable to two parts, one we obviously did a rather large assumption of business from citizens during the fourth quarter of 2013. That assume written premium was roughly $28 million or 60% of the total $47 million change year-over-year. And the voluntary direct written premium really representing our organic growth was about $19.1 million of the change quarter-over-quarter.

Florida represented $9.1 million of the voluntary -- of the $19.1 in voluntary direct written increase about an 18% change year-over-year. For the non-Florida voluntary direct written was $9.5 million, about 135% increase year-over-year. The breakdown of the [indiscernible] was led by our New England efforts and Massachusetts and Rhode Island which were about 59% of the total. South Carolina was 15% of that at $1.5 million and North Carolina, New Jersey and Texas our new estate that we launched in 2013 were about 26% of the total $2.4 million of that $9.5 million. So Q4 2013 represented the first time our direct written premium growth outside of Florida exceeded that inside of Florida.

While the new business production in Florida did slowdown slightly due to increased competition and more stringent underwriting rules targeting non-cat loss cost our growth outside Florida has been quality business that is very much in line with our expectations. For the year gross written premiums grew to $381 million which exceeded the same period last year by over $127 million or nearly 50%.

Now I would like to shift gears to reinsurance, as mentioned previously our primary reinsurance program renews on June 1st each year. So we don’t have much new to report this quarter. However, reinsurance costs remain a significant part of our financial results. So it’s still worthy of some discussions. Ceded premiums as a percentage of growth in premiums fell from 45% in the fourth quarter of 2012 to 34% in the fourth quarter of 2013. This reduction is clearly helping improve our combined ratio.

Although UPC is continuously engaged with its reinsurance partners and thinks about its reinsurance philosophy year around, we’re currently in the very preliminary stages of our June 1, 2014 renewal. Factors we’re studying closely include the supply and demand of reinsurance capital from all sources as well as the evolving outlook of rating agencies and modeling tools we use to quantify risk.

One example of this is Demotech recently published some new guidance that could require UPC to purchase more reinsurance coverage relative to previous years and that may or may not be fully or partially offset by lower overall reinsurance rates. It’s still too early to gauge but one thing is for sure we are committed to building a quality reinsurance program for 2014.

On the operating expense side UPC saw its non-loss operating expenses increase approximately $2.5 million for the quarter compared to prior year, this is driven primarily by variable policy acquisition cost consisting the agent’s commissions premium taxes and policy processing fees. Because of the large amount of reinsurance repurchase, we focus on our operating expenses as a percentage of gross earned premiums.

The gross expense ratio declines 6.3 points from 28.3% a year ago to 22% in the fourth quarter of 2013. Claims, marketing and underwriting are the primary areas of resource expansion required to support the company’s rapid growth.

Finally, I would like to provide some more detail regarding losses incurred. For the quarter, net loss and loss adjustment expense increased $10.7 million or 56% year-over-year which was consistent with but below UPC revenue growth. Water related losses remain the leading cause of loss representing approximately 52% of the incurred for the quarter versus about 46% in the same period a year ago. More important is the relativity of losses to our gross and net premiums expressed by the loss ratios for the quarter. During Q4 2013 our gross loss and LAE ratio was 32.4% versus 30.4% an increase of two points.

Our lower reinsurance cost drove down the net loss ratio 6.3 points from 55.5% a year 49.2%. Our gross underlying loss ratio was 30.7% versus 23.9% in the same quarter a year, an increase of 6.8 points, and the net underlying loss ratio was approximately 3 points higher 46.7% versus 43.7% a year ago. The primary drive of the higher underlying loss ratio for the fourth quarter was increased frequency and severity from water related losses in Florida. Our diversification efforts are resulting in lower average premiums compared to a year ago which also puts upward pressure on the loss ratio.

We did do some further reserves strengthening at end year on all accident years due to some additional development incurred on the older accident years in the fourth quarter. The remaining case reserves on the accident years prior to 2013 continued to shrink rapidly and even if we’ve experienced some further development which is possible on those older accident years, it’s not likely to drive the kind of development related earnings volatility we experienced in 2013.

Management is extremely confident that our continued improvements to people, process and technology and our claim department has UPC much that a position to manage reserves going forward. Looking over the balance sheet, total assets were just under 441 million as of the year end which is up 128 million or 41% from the previous year end. Cash and investments were over 100 million of this change in total 324 million, so our liquidity remains very strong. Shareholders equity hitting new milestones at nearly 108 million as of total 31 UPCs investment portfolio is mostly unchanged with the modified duration down slightly to 3.5 years, the composite credit rating about 85% of the portfolio, 100% portfolio being investment grade with an average coupon of 2.56 and a book yield of 1.3%.

Now, I will turn it back to John Forney for some closing remarks.

John Forney

Thank you, Ben. I have the lot of numbers and maybe as you’ve heard almost all of them are very good. We’re happy with the trends we’ve established where we’re thrilled with the team that we built to our UPC insurance. We know that road ahead is not without challenges. Our strategy is very ambitious and we’re looking forward to 2013 and beyond. At this point, we’re happy to open it for questions from anybody on the call.

Question-and-Answer Session

Operator

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Our first question is from the line of [indiscernible] with Keefe, Bruyette & Woods, Inc. Please go ahead with your question.

Unidentified Analyst

Couple of quick questions. You’ve mentioned that you’re seeing a bit more competition in Florida. I wanted to know if could elaborate on that a bit?

John Forney

Sure. There had been several companies increasing their market presence in Florida, Florida domestics who were started up recently as takeout company. They may now be trying to access the voluntary market. There are also companies that have been in the market for some time that have added new capital and are attempting to grow. And so we’re seeing more competition for policies in a lot of areas in Florida from the Florida domestic. So it’s a very competitive market. There’re a lot of companies competing for business here and we’ve seen trend increase in the latter half of 2012 and into 2014 for sure.

Unidentified Analyst

Okay, great. And then in terms of Citizens, I know, you did another takeout this year I mean to what extent would you say that pool is sort of getting depleted? And if so, what’s the alternative avenue for growth within Florida?

John Forney

I think different people would read that question differently, it depends on what your standards are and what you existing book of business is. There are still a lot of policies in Citizens even though I think they announced that they just went under the 1 million policy marts. That’s still a lot of policies. And so people have different goals for what they’re trying to do and building their book of business. We have fairly conservative underwriting standards and criteria that we’re looking at.

And I think maybe the answer to that question from our standpoint can just be said with a couple of numbers. We originally put in for a takeout up to 100,000 policies back in August of 2013. We ultimately took out about 18,000 policies and tell you that our screening criteria significantly reduce we view as attractive policies in Citizens and that only continues to decline as other companies take policies out.

Unidentified Analyst

Right. And finally in terms of reinsurance, I know, you’ve said that June 1st is going to be the big renewal day. Depending on how that goes and if obviously the reinsurance cost continued to decline and again balancing that off the requirements from Demotech. If you do see a sizable decline is that something that basically we should expect that the bottom line or something that will be shared with policyholders or how should we think about that?

John Forney

As I mentioned in my opening remarks we are trying to build a company for the long term focused on financial stability and solvency in any market or weather conditions. We want a company that’s going to endeavor. And so that means we’re trying to balance the need to earn good returns on our capital with the needs to build the company that can withstand any variety of storms or different magnitudes in different areas. So the short answer to your question is if we have savings on a relative basis we may either bring those to the bottom line or we may use them to purchase additional reinsurance to protect us against multiple events or some of the new states that we’re going into. It’s too early to tell but it’s not a foregone conclusion that savings dollar-for-dollar go to the bottom line for a company like ours that’s continuing trying to strengthen its financial position.

Operator

Thank you. The next question is from the line of Samir Khare of Capital Returns. Please go ahead with your question.

Samir Khare - Capital Returns Management

Okay, great. I just wanted to talk about the expense ratio you guys have shown a remarkable improvement there. And looking at the total year is about 37 and for the quarter is about 33.5. What’s the good run rate for that going forward on a net premium basis?

Brad Martz

So as I mentioned before we encourage everyone to really measure and monitor it on a gross basis because reinsurance cost introduce so much volatility. If we project for this on a net basis we’re also trying to project where change in reinsurance cost is going to be we like to look at reinsurance cost separately as a separate item because they do not influence the operating and general and administrative cost for the company. So when you’re looking at just general operating and underwriting cost, administrative cost as a function of gross premiums low 20s is still a good run rate.

Samir Khare - Capital Returns Management

Okay, perfect. And then couple of the growth metrics I wanted to go over, can you give us a sense of how much -- how many dollars per week you’re putting on at this point or per month? And then also what the PIF growth is inside and outside of Florida?

John Forney

Okay, at the beginning of the year I’ll cover the PIF thing first.

Samir Khare - Capital Returns Management

Sure.

John Forney

At the beginning of the year we had 117,000 policies in Florida at the end of the year we had a 163,000 policies in Florida. Okay, so that was 39% growth rate. Outside Florida at the beginning of the year we had 18,000 policies, at the end of the year we had 39,000 policies, so 117% growth rate. So that took us from roughly 85:15 Florida, non-Florida to about 80:20 at the end of the year even with that substantial growth rate outside of Florida our installed base in Florida is so much bigger than it just chips away at that ratio doesn’t dramatically transform it but we’re making progress towards our goal of being much more balanced inside Florida and outside of Florida.

Samir Khare - Capital Returns Management

Okay. And do you guys…sorry go ahead.

John Forney

Samir do you want the premium stuff [indiscernible] going there.

Samir Khare - Capital Returns Management

Yes please.

Brad Martz

Yes. The premium stuff is a little choppier obviously most recent quarter was a big quarter but it includes the same written from the takeout so excluding the same written from the takeout which is a non or current transaction quarter was about 80 million in direct written. But when you look at the year we averaged about 95 million per quarter so fourth quarter isn’t typically our strongest that’s the only thing I would suggest we going to need these a little broader range to project sort of a run rate. But we’re definitely growing so the 95 million averages per quarter written was likely to increase next year, early this year.

John Forney

And just to put it in the same terms as I gave you earlier just on the from the policies enforcement premium enforce at the beginning of the year and Florida was $221 million at the end of the year was $326 million premium enforce outside of Florida beginning of the year was $25 million at the end of the year was $54 million.

Samir Khare - Capital Returns Management

All right. Perfect. And then could you talk about the capital in the captive and if you have any intention to repatriate some of the profits there? And then also is that a 6:1 policy and what your options could be on the 6:1 for the captive?

John Forney

Yes. The current core share arrangement we have with the capital does renew 6:1, we're not intending on making any changes with it right now but the consolidated equity and UPC REIT on a GAAP basis is just under 16 million so it’s a fraction of the consolidated equity of our group. And it is a U.S. tax payer. There is nothing repatriate. We filed the 953(d) election to the IRS, so it is part of our consolidated tax return and there are new tax advantages associated with UPC.

Samir Khare - Capital Returns Management

Great, okay. And then do you guys have any rate changes filed with DOI?

Brad Martz

We do. We recently filed for approximately 4% overall increase here in the month of February in 2014 in Florida.

Samir Khare - Capital Returns Management

Okay. And then just the tax rate for the quarter was elevated compared to the rest of the year, anything going on there with respect to this quarter?

Brad Martz

No, nothing significant. The annual tax rate is still the appropriate rate to use.

Samir Khare - Capital Returns Management

And finally what is your stat surplus for Q4?

Brad Martz

Statutory surplus in the Q4 was approximately $78.3 million if I remember correct, $78.3 million.

Operator

Thank you. Our next question is from Dan Harvey with South Coast (Ph). Please go ahead with your question.

Unidentified Analyst

Yes, my question relates to keep a strong financial position with the growth you are adding on with the new policies and premium. You got the shelf offering out there to maybe raise some capital and one not care to really talk about as prices of stock but it’s done very well in the last year. Are you thinking about using that shelf offering to raise some capital and if so what you got in mind?

John Forney

We put the shelf offering in place last fall, so we would have the flexibility to raise capital at the appropriate time. We are focused on making sure that we can deploy the capital that we have in ways they are going to earn adequate risk adjusted returns for our investors. We obviously were able to achieve over 20% return in 2013 on equity. I have said all along that we think we can do high-teens, low 20s in non-CAT years and that our goals are to do low to mid-teens in CAT years and I think we are positioned well to do that. So, when we are thinking about adding capital to the company we look at our growth opportunities. We look at the existing risk metrics of the company from a lot of different angles and by some angles those risk metrics of the company have continue to improve.

Our RBC ratio which is a byzantine formula that produces a ratio that insurance regulators look at, that’s a measure of the riskiness of your company. Our metrics have actually improved from 2012 to 2013 significantly even as we have added business, we certainly do have some more operating leverage in the company now as we have added business. So, we are looking at all of those things as we try to decide if, when and what type of capital we need to add to the company to grow. But it’s certainly something that’s on our mind as we evaluate where we are going with the business. And that’s probably, all I can say about it at this point.

Unidentified Analyst

All right, having said that with Demotech, on the little more reinsurance, when will United and Florida, domestic companies start being recognized by the larger rating agencies?

John Forney

There are a handful companies in Florida that have A.M. Best ratings, most of those companies operate significant businesses outside of Florida. Given the crowd here with the lot of discussion of the metrics that are used by rating agencies to determine their ratings. But suffice to say that A.M. Best used this criteria which make it extremely difficult for a company that writes a significant amount of business in Florida to achieve an A rating and to achieve any type of return on capital. So, you have to sort of decide whether you want to earn money or whether you want to have an A rating from A.M. Best if you are a big Florida rider and the math is very difficult to make work.

As you expand outside of Florida, it becomes a different story and certainly we have seen instances where the large national companies they form all stay nationwide travelers form what they call pups to isolate their Florida business in a non- A.M. Best rated entity or an AMT with the lower A.M. Best rating and have A.M. Best rating on the rest of the enterprise outside of Florida. So, the Florida entities will probably not be recognized to use your terms by A.M. Best as long as they continue to write the Florida. The models just produced theoretical results that don’t fit in A.M. Best’s algorithm. And so, that’s not going to change anytime soon and so I think it’s really going to be, only for companies like us that have significant aspirations in business outside of Florida that can hope to achieve and A.M. Best rating. And in fact we would only hope to achieve it if we needed it for business purposes. We are perfectly comfortable managing our risk without reference to outside entities but if we need it as a mark of credibility for agents and others in certain markets in order to get business we’ll pursue it for those reasons.

Operator

(Operator Instructions) Your next question is from Lee Matheson of Broadview Capital; please go ahead with your question.

Lee Matheson - Broadview Capital

So, there’re two things, on the, on the Citizen side in Florida the clearing house was set up and seems to up and running now, I think you guys are one of the companies lined up to, one of those initial companies wanted to participate, you know I’m curious if you could talk about what that means for future depart, transactions out of Citizens and whether -- you know I think somebody answered it on the call whether the pool started getting fished out, did the clearing house kind of prevent quality business from getting in there now in the first place.

John Forney

Well, I would say we applaud the idea of the clearing house as a public policy initiative; it’s really designed to be a keep out mechanism. Not necessarily a takeout mechanism that would if functioning properly as you said, prevent quality business from going into citizens where it shouldn’t be. So the idea of it is great, the folks at Citizens have done a terrific job in working with the companies and with technology providers to get this thing in place very close to the original schedule, it was a massive technological undertaking and we think they’ve done a great job in getting it to where it is. From our standpoint I can’t comment on other companies, we’re off to a slow start with getting clearing house business and we expected that because remember you’re only going to get the clearing house business if your rates are within 15% of Citizens on new business and it is aren’t a whole lot of areas where rates are that close to Citizens and in combination with the underwriting changes that Brad mentioned earlier that we take in to try to manage our portfolio, concentration in our non cap losses, we eliminated so many different zip codes and different, follow on TIV levels etc, that we’re just not seeing a whole lot of business there. I don’t know if other companies are having more success but I think the mechanism that they put in place as more companies sign on to it, will certainly be effective in keeping some business out of Citizens that would otherwise go in there, so I think it’s a great initiative.

Lee Matheson - Broadview Capital

And the takeout that you did recently, in November I guess, I mean it’s part of a much larger sort of total depart transaction I think 400,000 policies in aggregate were taken out, I think there was only 10 different companies in there, has that, has that always been the case that there were that many interested parties in these takeouts or is that a more recent phenomenon.

Brad Martz

That has waxed and waned over time as Citizens has changed the way that they do the takeouts, there used to be bonuses associated with the takeouts where we kept it policies for a certain number of years, you got paid a bonus to take the policy, that was a real popular program, then they did away with the bonuses and had some seating commissions and takeouts weren’t nearly as popular. Since 2010 or so Citizens rates have become better and they’ve gotten rate increases via the right path and they eliminated seating commission and did a couple of other things to make, take us more financially attractive, you’ve seen a big upswing in interest, so it’s just, it’s secular (Ph) and right now they’ve been very popular and there’ve been a handful of companies started in the last few years focused solely on the economics of the takeouts and they’ve been taking a lot of policies out. That’s not our business claim, by the way, just to make sure everyone understands that, takeouts are very small part of what we do accounting for about 15% of our book of business and we are focused on growing our business through agents in voluntary market, takeouts are a very difficult way to build a sustainable long term business because when it comes right down to it, at the end of the day, Citizens is a South Florida writer, they write most of their risk in Dade, Broward and Palm Beach counties and you’re not going to build a sustainable long term insurance company focused on writing low value, older homes in Dade, Broward and Palm Beach and that’s what’s in Citizens. So we use it selectively.

Adam Prior

I’d like to build on that and just say there have been 32 companies since 2003 that have done takeout so it’s a pretty big marketplace, it will come and go, but when you look at our most recent quarter we had you know almost 92 million of earned premium in the quarter. The earned premium related to takeouts was less than 9% so roughly 92% of our earned premium is from our voluntary direct initiatives with agents.

Lee Matheson - Broadview Capital

I realize you got your strategy is not you know the takeouts aren’t central to your strategy it’s kind of tough to argue with the – the kind of seasonal arbitrage that the takeout gives you from an EPS boost, if you can lend the right policies, it’s pretty attractive but it sounds like, you know as the market matures that’s going to be a much smaller portion of what you guys do going forward.

John Forney

Citizens’ pool will, is likely to increase after a major cash receipt if you look at history 2006 was a big year of growth for Citizens because of the [indiscernible] then there was some depopulation issues Citizens grew again in 2011 primarily because of the problems terrorist were having with the win litigation credit and sinkholes and then it started declining again. But given political risk, regulatory risk, cat risk, those types of things can change Citizens’ market share dramatically and [already], so right now it’s approaching a little watermark but we expect to be well positioned if that changes.

Lee Matheson - Broadview Capital

Yes, okay. And my last question I know it’s one of your peers in the foreign market has sort of taken advantages from recent changes in federal flood insurance rates and sort it offered that is that something you’re interested or is that basically you kind of Texas hedge on Florida property?

John Forney

I mean there has been a last reference to the Texas hedge on Florida property.

Lee Matheson - Broadview Capital

I just mean, yes, I mean are you just basically reinsuring are you just insuring the same risk twice to some degree, right layering off Florida on top of [indiscernible]

Unidentified Company Representative

Yes, that’s an interesting pace, yes, I’ve never heard of put that way before but that’s exactly our view. When we’re looking at different initiatives for our company we try to ask some very basic questions does this make us stronger or weaker in the event of catastrophic storm activity. And I think doubling down on the risk in Florida by writing flood which is an ill-understood peril (Ph) very difficult to model there establish models out there for this risk is doubling down on your risk and there maybe some policies that are wroth writing but guess what those are the ones that are getting the multiple huge rate increases by the federal government those are the multiple loss policies that nobody wants to write. And so the idea of competing with the federal government on the attractive policies which are the one they’re going to continue to write relatively good rates doesn’t -- and doubling down your risk doesn’t strike us as something that is high up in your priority list given all the other great growth initiatives we have.

Lee Matheson - Broadview Capital

Great, okay. Well, thanks guys and congratulations on building UPC to this point and look forward to continuing to watch fast growth.

Operator

Thank you. (Operator Instructions) Our next question is a follow up from Samir Khare of Capital Returns. Please go ahead with your question.

Samir Khare - Capital Returns Management

Thanks guys. It sounds like you guys have a big fire truck is going on by there. I just have a few more actually the 80,000 policies that you guys took out Citizens and does that represent the amount that have gone through and notices and ultimately accepted United or should we expect that ultimate number to be something lower than 18,000?

Brad Martz

Yes, the number has fallen I believe it’s approximately 14,000 right now that are still effectively enforcement and with UPC.

John Forney

The work in Florida from the date of assumption they still have time after the assumption they’ve been opted out before the assumption and after the assumption for 30 days, so 18,000 was the assumed number but then there is another window after 30 days where they can continue to opt out. So there was continued opted out after that.

Samir Khare - Capital Returns Management

Well, are we pass up 30 day window so that the altering number?

John Forney

So we’re passed that now, we ended up with 14,000 and change after all they opted out.

Samir Khare - Capital Returns Management

Okay. And then when you look at the retention of that book versus the rest of your book what kind of rate should we looking at for both?

John Forney

I think that’s a tougher question to gauge we’re far more interested in looking at loss ratio on the same business than we are necessarily retention, retention is extremely important but the retention so far has been very good of what those policyholders that have opted in the retention is been good obviously it’s very early too early to tell there could be some additional shopping and other people scrambling the potentially changed carriers at the natural renewal date or exploration date of that policy because those are current incoming up for renewal everyday it’s not linked to November 2013. So we’ll continue to monitor but the numbers from here on out start to rain. And just more inclusion of written premium is then offset in future periods by mid-term cancellations, written premiums, other things that start to slow the earned premium from us and liked us over time.

Samir Khare - Capital Returns Management

Okay, great. Thanks. And just on the Clearing House how many policies have you guys quoted to-date on that system?

John Forney

I don’t know if we have that information right in front of us to mirror but we can circle back with you on that.

Operator

Our next question is from Greg Peters of Raymond James. Please go ahead with your question.

Greg Peters - Raymond James

Good morning guys. Real quick could you guys provide some color on the business written outside of Florida, I think you mentioned in your comments, John you went from 18,000 policies to 39,000 policies? So if you could give us some mosaic on that, and also we have seen a couple of other larger carriers all state this warning travelers and shut before it, travelers in shop before it; announced weather-related losses for north-eastern based businesses. I thought maybe you could use this as a segway to give us an early read if you’re expecting any losses in the quarter or not?

Brad Martz

Hi Greg this is Brad. We’re currently on plan from a loss perspective for the first quarter. Obviously that can change. January was higher than planned. February looks like it’s coming in slightly under plan, which is the exact opposite of last year. Last year we had a terrific January and a terrible February because of winter storm Nemo. We’re not--in a year-over-year comparison basis, because we had this one of storm losses in ’13. I don’t think we’re going to see significant increase--freeze related and ice storm related losses but, obviously as we put on more business outside of Florida, that exposure continues to increase.

Greg Peters - Raymond James

Could you provide just some color on where the 39,000 policies are being written? Is it primarily the north-east or is it sprinkled across the entire eastern seaboard, just provide some color there place?

Brad Martz

Yes I would try to reconcile some of the growth, year-over-year, so when you compare fourth quarter of ‘13 with fourth quarter of ‘12 we had growth of about $47 million. About 59% of that growth came from Massachusetts and Rhode Island, so it’s primarily New England. About 26% came from our three new estates; North Carolina, New Jersey, and Texas; pretty balanced between the three with North Carolina probably being the largest. And the balance about 15% kind of comes out from South Carolina.

Operator

I would now like to turn it back to management for closing comments.

John Forney

Once again we appreciate everybody’s interest in and support for UPC. We look forward to continue dialogue with the all as we move forward and we are excited about the opportunities we have in 2014 and beyond. So thanks for joining us this morning.

Operator

This concludes today’s teleconference. You may disconnect your line at this time. Thank you for your participation.

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Source: United Insurance Holdings' CEO Discusses Q4 2013 Results - Earnings Call Transcript

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