Q2 2025 Universal Insurance Holdings Inc Earnings Call

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Arash Soleimani: I would now like to turn the conference over to Arash Soleimani, Chief Strategy Officer. Good morning. Thank you for joining us today. Welcome to our quarterly earnings call.

Good morning, ladies and gentlemen, and welcome to Universal second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session to ask a question. Please press star 1, 1 on your telephone and wait for your name to be announced to withdraw your question. Please. Press star 1 1 again. As a reminder, this conference call is being recorded. I would now like to turn the conference over to a rash, solemani Chief strategy officer

Arash Soleimani: On the call with me today are Steve Donaghy, Chief Executive Officer, and Frank Wilcox, Chief Financial Officer. Before we begin, please note today's discussion may contain forward-looking statements and non-GAAP financial measures. Forward-looking statements involve assumptions, risks, and uncertainties that could cause actual results to differ materially from those statements.

Arash Soleimani: For more information, please see the press release on Universal's SEC filings, all of which are available on the Investor's section of our website at UniversalInsuranceHoldings.com and on the SEC's website. 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.

Good morning, thank you for joining us today. Welcome to our quarterly earnings call on the call with me today. Are Steve Dungey chief executive officer and Frank Wilcox Chief Financial Officer. Before we begin, please note today's discussion may contain forward-looking statements and non-gaap financial measures, forward-looking statements involve assumptions, risks and uncertainties that could cause actual results to differ materially from those statements. For more information, please. See the press release and Universal's SEC filings, all of which are available on the investor section of our website at Universal Insurance holdings.com. And on the fcc's website, a Reconciliation of non-gaap financial measures to comparable. Gaap measures is included in the quarterly. Press release.

Steve Donaghy: With that, I'll turn the call over to Steve. Thanks, Arash. Good morning, everyone. In the quarter, we delivered a very strong 29.4% adjusted return on common equity. We are encouraged by favorable underwriting trends as the Florida market continues to improve. and we are optimistic as we look ahead.

Steve: And you can also be found on Universal's website at Universal Insurance. Holdings.com with that, I'll turn the call over to Steve.

Steve: Thanks rash. Good morning, everyone.

Steve: % adjusted return on common equity.

We are encouraged by favorable underwriting Trends, as the Florida Market continues to improve.

Frank Wilcox: I'll turn it over to Frank to walk through our financial results. Thanks, Steve. Good morning. Adjusted diluted earnings per common share was $1.23 compared to adjusted diluted earnings per common share of $1.18 in the prior year quarter. The higher adjusted diluted earnings per common share mostly stems from higher direct premiums earned, net investment income, and commission revenue partially offset by a higher seeded premium ratio. Core revenue of $400.9 million was up 5.7% year-over-year, with growth primarily stemming from higher net premiums earned, net investment income, and commission risk. Direct premiums written were $596.7 million, up 3.2% from the prior year quarter.

Steve: And we are optimistic as we look ahead.

Steve: I'll turn it over to Frank to walk through our financial results. Frank

Frank: thanks Steve. Good morning.

Frank: Adjusted diluted earnings per common. Share was 1.23 compared to adjusted diluted earnings per common share of a 18 in the prior year quarter.

Frank: The higher adjusted diluted earnings per common share, mostly stems from higher direct premiums earned net investment income and commission Revenue partially offset by a higher seated premium ratio.

Frank: Core revenue of 400.9 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: The increase stems from 25.4% growth in other states, partially offset by 2.5% 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 $523.4 million, up 6.7% from the prior year quarter, reflecting direct premiums written growth over the last 12 months. Net premiums earned were $360.2 million, up 4.4% from the prior year quarter. The increase is primarily attributable to higher direct premiums earned, partially offset by a higher seeded premium ratio as described above. The net combined ratio was 97.8% up 1.9 points compared to the prior year quarter.

Frank: Direct premiums, written were 596.7 million up 3.2% from the prior year quarter.

Frank: The increase stems from 25.4% growth in other states, partially offset by 2.5% decrease in Florida.

Frank: Overall growth, mostly reflects higher, policies and force higher rates, and inflation adjustments across our multi-state footprint.

Frank: Direct premiums earn were 523.4 million.

6.7% from the prior year, quarter reflecting direct premiums written growth over the last 12 months.

Frank: Net premiums earn were 360.2 million up 4.4% from the prior year quarter.

Frank: the increase is primarily attributable to higher direct premiums earned partially offset by a higher seated, premium ratio as described above

Frank Wilcox: The increase reflects higher net loss and expense ratio. The 72.3% net loss ratio was up 1.7 points compared to the prior year quarter, with the increase primarily reflecting a higher seeded premium ratio. The net expense was 25.5%, up 0.2 points compared to the prior year quarter, with the increase primarily driven by a higher seeded premium ratio and higher policy acquisition costs associated with growth outside of Florida, partially offset by economies of scale. During the second quarter, the company repurchased approximately 287,000 shares at an aggregate cost of $7.4 million. The company's current share repurchase authorization program has approximately $15.2 million remaining.

Frank: The net combined ratio was 97.8% up 1.9 points compared to the prior year quarter.

Frank: The increase reflects higher, net loss and expense ratios the 72.3%. Net loss ratio was up. 1.7 points compared to the prior year quarter with the increase, primarily reflecting a higher seeded premium ratio.

Frank: The net expense was 25.5% up 0.2 points. Compared to the prior year quarter with the increased primarily driven by a higher seated, premium ratio and higher policy acquisition costs associated with growth outside of Florida, partially offset by economies of scale.

Frank: During the second quarter, the company. Repurchased, approximately 287,000 shares at an aggregate cost of 7.4 million.

Frank Wilcox: On July 9, 2025, the Board of Directors declared a quarterly cash dividend of 16 cents per common share, payable on August 8, 2025, to shareholders of record as of the close of business on August 1, 2025.

Frank: The company's current share repurchase authorization program has approximately 15.2 million remaining.

Operator: With that, I'd like to ask the operator to open the line for questions. Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment for questions.

Frank: On July 9th, 2025 the board of directors, declared a quarterly cash dividend of 16 cents per common. Share payable, on August 8th, 2025 to shareholders of record as of the close of business on August 1st 2025.

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

Paul Newsome: Our first question comes from Paul Newsome with Piper Sandler, you may proceed. Hi, good morning. Could you give us a little bit more about the reinsurance seating change and what's going on there just as a driver's?

Frank: Thank you as a reminder, to ask a question. Please press star, 1, 1 1 on your telephone and wait for your name, to be announced to withdraw your question. Please press star 1 1 1 again, 1 moment for questions.

Speaker Change: Our first question comes from Paul gnome with Piper Sandler, you may proceed.

Steve Donaghy: Morning, Paul. So you have to appreciate that when you're comping over this particular quarter, you're looking at several different reinsurance programs that are earning in Last year, the first two months, April and May, we were still earning in a program that included the RAP program, which was at no cost, and that was much lower than the cost to replace that. So this year, April and May, was last year's program winding up, plus the first month of this year's program.

Paul Gnome: Uh good morning. Could you uh give us a little bit more about the reinsurance of CD change and what's going on there? Just as the drivers

Speaker Change: Good morning, Paul. Um, so you have to appreciate that when you're comping over, uh, this particular quarter, you're looking at several different reinsurance programs that are earning in.

Steve Donaghy: So it's really just comping off a different structured program.

Speaker Change: Last year, the first 2 months April and May we were still earning in, uh, program that included the rat program which was at no cost. And that was much lower than um, you know, the cost to replace that. So this this year April and May was uh, last year's program, winding up plus the first month of this year's program, so it's really just comping off the different structure program.

Paul Newsome: You took a question, you brought back some shares recently, maybe a review of kind of where you think you are from a capital perspective, including kind of how you think about how we should measure it as a company. Well, capital at the holding company is abundant. Naturally, we take opportunities to purchase shares when we believe that they're undervalued.

Speaker Change: Um, different question you um brought back some shares.

Speaker Change: Recently, um, maybe a review of kind of where you think you are from a capital perspective.

Speaker Change: Um, including kind of how you think about how we should measure it as an outside.

Paul Newsome: We continue to do so when a broker Okay, and then just a few thoughts maybe on the competitive environment.

Speaker Change: Well, Capital. That's a holding company is abundant. Um, naturally we take opportunities, uh, to purchase shares. When we believe that they're undervalued, we continue to do so, when when appropriate,

Paul Newsome: There are concerns, I think, that we're seeing. Some companies are maybe not just so new, but some companies are becoming more competitive in the environment, particularly in Florida, but maybe elsewhere as well. Do you think it's an incrementally more competitive market today than it was last quarter or the quarter before?

Speaker Change: Um okay, uh and then um, just a few thoughts, maybe on the competitive environment.

your concerns, I think that we're seeing, um,

Steve Donaghy: Hey, Paul. This is Steve. Good morning. I wouldn't say that it's a more competitive market, you know, and we are not driven by the competition. We are driven by, you know, 25 years of experience in Florida. And as we've expanded into other states, you know, we use our boots on the ground, our claims experience, et cetera, to really assess and understand where we want to write business and where it can be the most profitable for our shareholders. And I would say that, you know, we've recently opened up additional territories in Florida and feel good about the business that we're bringing in at this time across the state.

Speaker Change: Some companies that maybe not, just so new, but some companies becoming more competitive envir in the environment particularly in Florida, but maybe elsewhere as well. Um, do you, do you think it's, um, incrementally more competitive market today than it was last quarter or the quarter before?

Steve: Uh hey Paul. This is Steve. Good morning. Um

I wouldn't say that it's a more competitive market, you know, and we are not driven by the competition. We are driven by

Steve Donaghy: But, you know, clearly there are more competitors in Florida as well than there was a year ago or a quarter ago. But we don't see anybody with a real hungry appetite from a competitive perspective across the state. We see pockets of competition in Florida, but nothing dramatic across the entire state.

You know, 25 years of experience in Florida. And as we've expanded into other states, you know, we, we use our boots on the ground. Our claims experience Etc to really assess and understand, um, where we want to write business and where it can be the most profitable for, uh, our shareholders. And, and I would say that, you know, we've recently opened up additional territories in Florida and uh, feel good about the business that we're bringing in, uh, at this time across the state. So,

Paul Newsome: Appreciate the help. I'll let some other folks ask questions, but thank you. Thanks, Paul. Have a good day. Thank you.

Steve: But you know clearly clearly there are more competitors in Florida as well than there was a year ago or a quarter ago but we don't see anybody uh with a with a real hungry appetite. Uh from a competitive perspective across the state. We see pockets of competition in Florida but nothing. Nothing dramatic across the entire state.

Speaker Change: Appreciate the help. I want some other folks to ask questions. But uh,

Thank you.

Nick Iacoviello: Our next question comes from Nick Iacoviello with Dowling and Partners. You may proceed. Is there any net prior development or claims handling benefits in the quarter? I'm assuming no, but just wanted to confirm. It was negligible, Nick. Nothing to really speak of. Okay, great.

Steve: Thanks Paul. Have a good day.

Speaker Change: Thank you. Our next question, comes from Nick a CO yellow with dialing in Partners. You may proceed.

Nick: Is there any not prior development or claims handling benefits in the quarter? I'm assuming no. But just wanted to confirm

Speaker Change: it was negligible, Nick nothing to really speak of

Nick Iacoviello: And just on the new reinsurance program, so I know we have one month of seated premiums now.

Frank Wilcox: to discuss the cost which was not disclosed this year, maybe as a percentage of director and premium as you've done in years prior? The cost year over year, this program that went into effect June 1, 2025, is not significantly different than what the cost was as a percentage of direct earned premium for the previous period, which we're very pleased with, naturally, given the fact that we had three landfalling storms last year, which typically, following those events, the price would go up significantly, and that's certainly an indication of the improvement in the Florida market.

Speaker Change: Okay great and then just on the new reinsurance program. So I know we have 1 month of seated premiums now with this Q2 result. But could you discuss the cost which wasn't disclosed this year, maybe as a percentage of director and premium as you've done in years prior

Speaker Change: The the cost year-over-year, this this program that went into effect June 1 of 25 uh is not significantly, different than what the cost was as a percentage of direct earned premium for the previous period. Uh, which we're very pleased with naturally given the fact that we had 3 landfall in storms last year. Which

Typically following those events, the the price would go up significantly and that's certainly an indication of the Improvement in uh Florida marketplace.

Nick Iacoviello: Great, that's all I have. Thank you.

Speaker Change: Great. That's all I have. Thank you.

Steve Donaghy: I would now like to turn the call back over to Steve Donaghy for any closing remarks. Thank you. I'd like to thank all of our associates, consumers, agents, and our stakeholders for their continued support of Universal.

Speaker Change: Yeah, thanks there.

Speaker Change: Thank you. I would now like to turn the call back over to Steve donaji for any closing remarks.

Steve Donaghy: Have a good day. Thank you.

Operator: This concludes the conference. Thank you for your participation.

Steve Donaji: Thank you. Uh, I'd like to thank all of our Associates consumers, agents at our stakeholders for their continued support of universal. Have a good day.

Operator: You may now disconnect. Thanks for watching our video!

Steve Donaji: Thank you, this concludes the conference. Thank you for your participation. You may now disconnect