UNIVERSAL INSURANCE HOLDINGS, INC. Q1 FY2025 earnings call

• Steve noted the 2022 Florida legislative reforms are working, providing stability to the property insurance market with lower weather losses benefiting the loss and LAE ratio.
• Completed 2025-2026 reinsurance renewal for insurance entities, secured $352 million of additional multiyear coverage through 2026-2027 hurricane season.
• Frank walked through financial results: adjusted diluted earnings per common share was $1.44 compared to $1.07 prior year quarter; core revenue up 8.2% due to higher net premiums earned, net investment income, and commission revenue.
• Board declared a regular quarterly cash dividend of $0.16 per share payable on May 16.

Core revenue was $394.9 million, up 8.2% year over year. Direct premiums written were $467.1 million, up 4.7% from the prior year quarter, with 34.7% growth in other states and a 3% decrease in Florida. Direct premiums earned were $513.3 million, up 6.5% from the prior year quarter. Net premiums earned were $355.7 million, up 6.5% from the prior year quarter. The net combined ratio was 95%, down 0.5 points compared to the prior year quarter. The net loss ratio was 70.5%, down 1.4 points, and the net expense ratio was 24.5%, up 0.9 points.

• Reinsurance program was fully supported and secured well before June 1st inception date.
• Will provide specific details on reinsurance program cost and coverage at the end of May.

Q: Maybe we can start with a little bit more detail on both the competitive environment as well as your thoughts on your growth perspectively. Looks like you're growing a little bit, you know, faster than I thought. And both Florida and outside Florida is your view. Your place.

A: Yeah. Good morning, Paul. This is Steve. You know, from a growth perspective, we are laser-focused on profitability and managing the overall book of business. So, you know, as we continue to work on our internal profitability model, we use that to gauge where we are open and where we want to grow our business profitably. From a competitive environment, you know, we're very interested in ensuring that there is no adverse development within our books. So we want to grow where we know we will grow profitably. And we don't really let competition drive our pricing, so to say. We have seen, you know, new entrants in Florida. We haven't seen anyone, you know, growing across the entire state. So I think a lot of companies are looking at specific areas to write and grow. And, again, as we talked about earlier, you know, it is leading to a healthier environment across the state of Florida, which is very positive for everyone.

Q: Maybe a little bit more detail on the reinsurance. I know you'll give us more in the future, but Alan this morning was talking about sort of June renewals that would be down, you know, 5% to 20%, I think, if they said, if I recall correctly. That seems like a step function a little bit more in the favor of buyers than we would have thought at the beginning of the year. Just any thoughts there and the direction you're using that your deals were in the same direction of what AM was talking about this one.

A: Yeah. You know, Paul, we were very pleased with the capacity and the So I think across the board, we were pleased to get out early, establish our own market, and, you know, we were very happy with the way we were treated. And we see rates favorable compared to where they could have been when you contemplate, you know, two hurricanes or three hurricanes in 2024. And the fact that, you know, in my experience for twenty years at the company, anytime that would have occurred, you would have seen an increase in rates across the board. And, you know, I think even flat or a little bit of a reduction is very acceptable to us for this year's renewal. And as you said, we'll get you all the details in May surrounding that. But, again, I think with the number of hurricanes you saw, and to have no capacity issue and have favorable rates, it really speaks volumes to the legislative changes that occurred in 2022 and the market's perspective on those changes. And their interest to continue writing reinsurance and rewarding good carriers with favorable terms and conditions.

Q: Do you think the reinsurers have reflected the tort reform impacts yet, and I mean, a really large way or just or not? I guess that's the question. Do you think it's been reflected as much as folks think maybe, you know, next year it gets more reflected? I don't know about that or not. But any thoughts there?

A: Well, again, as I said, I think at any time, you have a number of hurricanes, and people are impacted, reinsurers in particular, and you know, the global nature of that business. To have lots of capacity and favorable pricing, I think it is reflected in their approach to the market. And I think it's certainly reflected in our approach to the market. So the healthier the market, the better, and more people that are writing business both from an A and C perspective and also a reinsurance. So and I think it will continue to be demonstrated in the future, maybe more meaningfully in the future as we continue to go.

Q: You know, last question to the other folks. Asked. I know you've been trying to build conservativism in the reserves. Is there any reserve development in the quarter?

A: Good morning, Paul. This is Frank. No. The answer is there is no prior development. You know, we took a conservative approach to both the first quarter of 2024, and we continued doing that with 2025. The difference is the non-cat weather this quarter was much lighter.

Q: Morning. Was there any claims handling benefit booked in the quarter?

A: It was negligible.

Q: Great. Thanks. And then I know we'll get the full details on the reinsurance placement closer to 6/1. But is there anything you could add maybe around the gap retention? You know, should we expect it to be similar to the $111 million pretax last year with $66 million of coverage from the captive?

A: Yeah. The company plans to use that cover in the same exact capacity. So it'd be covering the first layer above the $45 million retention, so $66 million in excess of $45 million translating to $111 million net for the first event. And the second event, that $66 million layer is covered by third-party coverage.