UNIVERSAL INSURANCE HOLDINGS, INC. Q2 FY2025 earnings call

• Delivered a strong 29.4% adjusted return on common equity.
• Encouraged by favorable underwriting trends in the Florida market.
• Adjusted diluted earnings per common share was $1.23, up from $1.18 in the prior year quarter.
• Core revenue up 5.7% year-over-year due to higher net premiums earned, net investment income, and commission revenue.
• Direct premiums written up 3.2% with growth in other states offsetting a decrease in Florida.
• Repurchased approximately 287,000 shares at an aggregate cost of $7.4 million.
• Board declared a quarterly cash dividend of $0.16 per common share.

Core revenue was $400.9 million, up 5.7% year-over-year. Direct premiums written were $596.7 million, up 3.2% from the prior year quarter, with 25.4% growth in other states offsetting a 2.5% decrease in Florida. Direct premiums earned were $523.4 million, up 6.7% year-over-year. Net premiums earned were $360.2 million, up 4.4% year-over-year. The net combined ratio was 97.8%, up 1.9 points compared to the prior year quarter, with the net loss ratio at 72.3% (up 1.7 points) and net expense ratio at 25.5% (up 0.2 points).

• Favorable underwriting trends in Florida are encouraging.
• Optimistic about future prospects as they look ahead.
• Core revenue growth primarily from higher net premiums earned, net investment income, and commission revenue.

• Forward-looking statements involve assumptions, risks, and uncertainties that could cause actual results to differ materially from those statements.

Q: Could you give us a little bit more about the reinsurance ceding change and what's going on there just as the drivers?

A: When comping over this quarter, looking at several different reinsurance programs earning in; last year, the first 2 months were still earning in a program that included the RAP program at no cost, which was lower than the cost to replace, and this year, April and May was last year's program winding up plus the first month of this year's program, just comping off a different structured program.

Q: A different question. You bought back some shares recently, maybe a review of kind of where you think you are from a capital perspective, including kind of how do you think about how we should measure it as an outsider.

A: Capital at the holding company is abundant; they take opportunities to purchase shares when they believe they're undervalued and continue to do so when appropriate.

Q: Okay. And then just a few thoughts on the competitive environment. There are concerns, I think, that we're seeing some companies that maybe not just so new, but some companies becoming more competitive in the environment, particularly in Florida, but maybe elsewhere as well. Do you think it's incrementally more competitive market today than it was last quarter or the quarter before?

A: Paul, this is Steve. I wouldn't say that it's a more competitive market. We are not driven by the competition. We are driven by 25 years of experience in Florida. We've expanded into other states using boots on the ground, claims experience, etc. We've recently opened up additional territories in Florida and feel good about the business brought in. There are more competitors in Florida than a year ago or a quarter ago, but no dramatic competition across the entire state.

Q: Was there any net prior year development or claims handling benefits in the quarter? I'm assuming no, but just wanted to confirm.

A: It was negligible, Nic. Nothing to really speak of.

Q: Okay. Great. And then just on the new reinsurance program. So I know we have 1 month of ceded premiums now with this Q2 result. But could you discuss the cost which wasn't disclosed this year maybe as a percentage of direct earned premium as you've done in years prior?

A: The cost year-over-year, this program that went into effect June 1 of '25 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 given the fact that there were 3 landfalling storms last year, typically following those events, the price would go up significantly, and this is an indication of the improvement in the Florida marketplace.