Q4 2024 Universal Insurance Holdings Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to the Universal's fourth quarter 2024 earnings conference call. As a reminder, this conference is being recorded. I would now like to turn the conference over to Arash Soleimani, Chief Strategy Officer. Please go ahead.

Good morning. Thank you for joining us today. Welcome to our quarterly earnings call.

Speaker Change: On the call with me today are Steve Donaghy, Chief Executive Officer, and Frank Wilcox.

Speaker Change: Chief Financial Officer. Before we begin, please note today's discussion may contain forward-looking statements and non-GAAP financial measures.

Speaker Change: 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.

Speaker Change: 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'll turn the call over to Steve.

Steve Donaghy: Thanks Arash. Good morning everyone. In 2024, we experienced three hurricanes, including Debbie, Helene, and Milton. And we're working hard, as we always do, to help our customers restore their lives.

Speaker Change: We continue to see progress relative to the claims trends in our Florida book, and recently filed a modest rate decrease in the state that's directly correlated with the legislative changes made in December 2022.

Speaker Change: We're already well underway negotiating and placing our 2025 reinsurance program with 92% of our first event catastrophe tower already placed as we stand here today.

Speaker Change: along with significant additional multi-year capacity secured for the 2026 hurricane season.

Speaker Change: I'll turn it over to Frank to walk through our financial results. Frank. Thanks, Steve. Good morning.

Frank Wilcox: Adjusted diluted earnings per common share was 25 cents down from adjusted diluted earnings per common share of 43 cents in the prior year quarter.

Frank Wilcox: The decrease mostly stems from lower underwriting income, partially offset by higher net investment income, and commission revenue.

Frank Wilcox: Core revenue of $386.4 million was up 5.7% year-over-year with growth primarily stemming from higher net premiums earned, net investment income, and commission revenue.

Frank Wilcox: Direct premiums written were $470.9 million, up 8.8% from the prior year quarter, including 0.8% growth in Florida and 38.4% growth in other states.

Frank Wilcox: Overall growth mostly reflects higher policies in force, higher rates, and inflation adjustments.

Frank Wilcox: Direct premiums earned of $519.3 million were up 7.7% year-over-year, reflecting direct premiums written growth over the last 12 months.

Frank Wilcox: Net premiums earned were $348.4 million, up 3.9% from the prior year quarter. The increase is primarily attributable to higher direct premiums earned, partially offset by a higher seeded premium ratio.

Frank Wilcox: The net combined ratio was 107.9% up 4.2 points compared to the prior year quarter. The increase reflects higher net loss and expense ratios.

Frank Wilcox: The loss ratio was 82.3% up 0.4 points compared to the prior year quarter.

Frank Wilcox: The net expense ratio was 25.6% up 3.8 points from 21.8% in the prior year quarter.

Frank Wilcox: The increase was primarily driven by higher policy acquisition costs associated with growth outside Florida and higher other operating costs.

Frank Wilcox: During the fourth quarter, the company repurchased approximately 370,000 shares at an aggregate cost of $7.7 million.

Frank Wilcox: The company's current share repurchase authorization program has $2.6 million remaining.

Frank Wilcox: On February 6, 2025, the Board of Directors declared a regular quarterly cash dividend of $0.16 per common share, payable March 14, 2025, to shareholders of record as of the close of business on March 7, 2025.

Frank Wilcox: With that, I'd like to ask the operator to open the line for questions.

Speaker Change: Certainly. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Speaker Change: And our first question will be coming from Adam McMahon of UVE. Your line is open.

And one moment for our next question.

Speaker Change: Our next question will be coming from Paul Newsome of Piper Sandler. Your line is open.

Speaker Change: and maybe talk about the level of cap losses, including Nome, with a little bit more detail.

Speaker Change: Yeah, good morning Paul, this is Frank. So Milton, I'll start with Milton. Milton was a 45 million dollar

Speaker Change: So the captive was not a factor this quarter. Prior year development was down significantly, $45 million down from last year, which was $76 million.

Roots.

And then...

Could you maybe a little bit more color on...

Speaker Change: the growth efforts and where you're expanding and where you think you're seeing the most opportunity. And then I'll just ask this next question. Any thoughts on reinsurance?

renewals as they come forward later this year.

Speaker Change: Yeah, thanks Paul. I would say from a growth perspective, you know, with our agency relationships and marketing ability that we've demonstrated over the years

Speaker Change: We continue to be you know laser focused on profitability and writing business

where it makes the most sense.

Speaker Change: We continue to be closed in markets that we don't feel that we're rate adequate and open in others.

Speaker Change: And I think as people hear our story and understand how we differentiate ourselves, it results in an opportunity to grow business. And again, it's all focused on profitability and rate adequacy across all markets. And I have the great help of our folks in our Minnesota office doing that on a quarterly basis. So it works out quite well.

What was the second question, Paul?

Amen.

Speaker Change: reinsurance what what you have what your thoughts are perspectively through as we get into the important reinsurance rules.

Speaker Change: Yeah, we were very, very pleased to announce that we were 92% already accomplished in our first tower, Paul.

Speaker Change: and we found the market quite receptive and you know we always try to go out as early as possible to secure the reinsurance.

Speaker Change: that we need and then leave the market really to kind of dictate what's available to others.

Speaker Change: We find that reinsurers like our story, like the presentation, and are interested in getting on board with us.

Speaker Change: as early as possible. We're also similarly pleased on interest in renewing multi-year capability that takes pressure off us. So we renewed some of that in 2026.

Speaker Change: And we'll release all the details from a cost and other perspective in our May press release as we normally do. We're still in the market for some, so we don't want to let too much out at this point, but we'll give the full update in May as normal.

Great, thank you.

Thanks, Paul. Have a good day.

Speaker Change: Again, if you would like to ask a question, please press star 1-1 on your telephone.

And that will be star 11 for any questions.

Speaker Change: And I'm showing no further questions. I would now like to turn the conference back to Steve Donaghy, Chief Executive Officer, for closing remarks.

Speaker Change: Yeah, thank you. I'd like to thank all our associates, our consumers, agents, and our stakeholders for their continued support of Universal, and I wish you all a great day. Thank you.

Speaker Change: And this concludes today's conference. Thank you for participating. You may now disconnect.