Universal Insurance Q3 Earnings Transcript

Image source: The Motley Fool.

Date

Oct. 24, 2025

Call participants

Chief Executive Officer — Stephen Joseph Donaghy

Chief Financial Officer — Frank Crawford Wilcox

Need a quote from a Motley Fool analyst? Email pr@fool.com.

Takeaways

Core Revenue -- primarily driven by increases in net premiums earned, net investment income, and commission revenue.

Direct Premiums Written -- partially offset by a 2.6% decrease in Florida.

Net Premiums Earned -- attributable to direct premiums earned offset by a higher ceded premium ratio.

Net Loss Ratio -- 70.2% net loss ratio, principally reflecting the absence of current quarter hurricane activity versus the prior year quarter.

Net Expense Ratio -- mainly due to a higher ceded premium ratio and greater policy acquisition costs from growth outside Florida.

Share Repurchases -- Approximately 347,000 shares repurchased at an aggregate cost of $8.1 million, leaving $7.1 million under the existing authorization.

Dividend Declaration -- Quarterly cash dividend of $0.16 per share announced for shareholders of record as of September 1, 2025.

Net Prior-Period Development -- $3.9 million recognized related to prior year catastrophe events following the annual actuarial review.

Reserving Philosophy -- Company explicitly stated it has adopted a "more conservative" reserving process and will hold its current approach through year-end, with further changes considered for 2026.

Claims Environment -- Claims and file count have declined "dramatically," with claims processed more quickly due to reduced market stresses.

Florida Market Dynamics -- Management highlighted a "much-improved Florida market," according to Stephen Joseph Donaghy, citing an influx of new competitors and a focus on rate adequacy rather than chasing premium volume.

Competitive Landscape Outside Florida -- Described as "highly competitive," with universal rates remaining adequate only in certain targeted markets.

Summary

Underpinned by a shift to a more conservative reserving posture and a reduction in catastrophe losses relative to the prior period, Universal Insurance (NYSE:UVE) posted meaningful increases in net premiums earned and direct premiums written in multi-state operations, contrasting with a modest contraction in its core Florida market. Shareholder returns were enhanced both through increased earnings per share and direct capital return via share repurchases and the ongoing dividend program.

Management stated, "we've never had as many dollars up in the aggregate as we do right now," referencing strengthened reserve levels and balance sheet resilience.

The board's approach to capital management signals continued readiness for share repurchases, with ongoing evaluation in partnership with the investment committee.

During the Q&A, management confirmed no adverse claims development outside prior-year storms, suggesting underwriting and catastrophe management are aligning as anticipated.

Industry glossary

Net Loss Ratio: The ratio of net losses incurred to net premiums earned, indicating claims costs relative to premium revenue after reinsurance effects.

Combined Ratio: A measure combining the loss and expense ratios; a value below 100% indicates underwriting profitability.

Ceded Premium Ratio: The proportion of total premiums that are transferred to reinsurers, affecting net retained income and loss exposure.

Catastrophe Events (CATs): Large-scale, typically weather-related, insurance events resulting in high volumes of claims, material to property and casualty insurers.

Full Conference Call Transcript

Stephen Joseph Donaghy: Thanks, Arash. Good morning, everyone. It was a solid quarter with a 30.6% adjusted return on common equity. Our unique organic business model allows us to consistently generate deep double-digit ROEs, making us particularly well-positioned to succeed in the much-improved Florida market. Additionally, we commenced our annual actuarial review process considerably earlier this year, and our findings are very encouraging. As we've discussed in recent periods, our reserving process has become more conservative with a focus on protecting and increasing the resilience of our balance sheet.

When we look at our current and prior accident year reserves in the aggregate, we believe we're in a very strong position, further increasing our optimism as we turn a new chapter in the revamped Florida market. I'll turn it over to Frank to walk through our financial results.

Frank Crawford Wilcox: Thanks, Steve, good morning. Adjusted diluted earnings per common share was $1.36 compared to an adjusted loss per common share of $0.73 in the prior year quarter. The higher adjusted diluted earnings per common share mostly stems from a lower net loss ratio and higher net premiums earned, net investment income, and commission revenue. Core revenue of $400 million was up 4.9% year over year, with growth primarily stemming from higher net premiums earned, net investment income, and commission revenue. Direct premiums written were $592.8 million, up 3.2% from the prior year quarter. The increase stems from 22.2% growth in other states, partially offset by a 2.6% decrease in Florida.

Overall growth mostly reflects higher policies in force, higher rates, and inflation adjustments across our multi-state footprint. Direct premiums earned were $534.1 million, up 5.2% from the prior year quarter, reflecting direct premiums written growth over the last twelve months. Net premiums earned were $359.7 million, up 4% from the prior year quarter. The increase is primarily attributable to higher direct premiums earned, partially offset by a higher ceded premium ratio. The net combined ratio was 96.4%, down 20.5 points compared to the prior year quarter. The decrease reflects a lower net loss ratio, partially offset by a higher net expense ratio.

The 70.2% net loss ratio was down 21.5 points compared to the prior year quarter, with a decrease reflecting the inclusion of Hurricanes Debbie and Helene in the prior year quarter and the lack of hurricane activity in the current year quarter. The net expense ratio was 26.2%, up one point compared to the prior year quarter, with the increase primarily driven by a higher ceded premium ratio and higher policy acquisition costs associated with growth outside Florida. During the quarter, the company repurchased approximately 347,000 shares at an aggregate cost of $8.1 million. The company's current share repurchase authorization program has approximately $7.1 million remaining.

On September 7, 2025, the Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock payable on September 8, 2025, to shareholders of record as of the close of business on September 1, 2025. With that, I'd like to ask the operator to open the line for questions.

Jon Paul Newsome: Good morning. Thanks for the call. And was maybe you could follow on a little bit more on your reserving comments. This is foreshadow any change in how you think about profit margins prospectively and the accident year loss ratio or any change in how you think about selling loss picks?

Stephen Joseph Donaghy: Yes. Good morning, Jon Paul. Thanks for the questions. We feel as though we have come through a very fraudulent time within the Florida market. And we have seen all the things in the past go through the book. There's still things to deal with in the future, as you know. Florida is an ever-changing market. However, we've never had as many dollars up in the aggregate as we do right now. And our file count, our claims count, is dramatically reduced, and our claims folks are getting the claims much faster as a result of the market that we're in. So we've seen considerably positive effects on the book and on our reserving philosophy, so to say.

As we look to the future, we want to get through the year before we make any substantial adjustments and retain our conservative approach. But that will be something we will look at seriously as we get into 2026 and close out 2025.

Jon Paul Newsome: Different follow-up question. Any thoughts on the competitive environment? We hear all sorts of talks about rate decreases in the Florida market in particular. But can you give us some general thoughts about what you're seeing both in and out of the Florida markets from a competitive perspective?

Stephen Joseph Donaghy: Yeah, I think, again, just to address out of the Florida market, we're more of a niche provider, and we have our markets that we like, and our rates are adequate in certain spots. And it's highly competitive outside of Florida. And you have all the big names there as well. Within Florida, there are a lot of new players showing up. There's a lot of new players that maybe don't understand what we've understood for twenty-five or twenty-six years now. So we see a lot of various behaviors. We do not chase premium. We are sticking to rate adequacy and trying to drive a high level of service to our insurers and profitability to our shareholders.

So it is competitive. There are a lot of markets. I think the agents continue to prefer to write with established providers. When competitive. And so I think, and I would say unlike other times, that's now consistent across the state. It's not just in specific markets in Florida. And I think there's different carriers that look at different geographic areas in Florida very differently. So we do, but we continue to write new business and new policies, as you've seen from last quarter. So we feel good about our position and our relationship with our agency force.

Jon Paul Newsome: The last big question that I'll let other folks ask. Capital management, you've made some comments this quarter, but you now have a high-class problem here in the sense that your ROE is well above the growth rate of the company. You know, what's your priorities there? Should we expect, you know, substantial or at least some repurchase activity prospectively as part of your sort of ongoing business given where the returns are today?

Stephen Joseph Donaghy: I don't know about new purchase activity, Jon Paul, but we consistently view our shares as a positive within our capital management. So as we look to the future, and we have access to capital, we'll continue to work with the investment committee and establish guidelines and change those guidelines as we go. But we feel very confident in any acquisition of our shares that we can do at the appropriate times.

Jon Paul Newsome: Great, I appreciate the help. Thank you very much.

Stephen Joseph Donaghy: Thanks, Jon Paul. Have a good weekend.

Operator: Thank you. Our next question comes from Nicolas Iacoviello with Dowling and Partners. Your line is open.

Nicolas Iacoviello: Thanks. I just had one. Was there any net prior development booked in the current quarter following the annual actuarial?

Frank Crawford Wilcox: Actuarial review? Yeah. Good morning, Nick. Yes. There was. It's about $3.9 million related to prior year CATs.

Nicolas Iacoviello: Alright. Thank you. And I'm assuming there was nothing on the claims handling aside from last year's storms. Correct?

Frank Crawford Wilcox: That's correct. Yes. None.

Nicolas Iacoviello: Okay. That's all I had. Thanks, guys.

Frank Crawford Wilcox: Thanks, Nick.

Operator: Thank you. I'm showing no further questions at this time. I would now like to turn it back to Stephen Joseph Donaghy for closing remarks.

Stephen Joseph Donaghy: I'd like to thank our associates, consumers, our agency force, and stakeholders for their continued support of Universal Insurance Holdings, Inc. And wish you all a nice weekend. Cheers.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.