Universal Insurance Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 26, 2025

Key Takeaways

  • Adjusted diluted earnings per share dropped to $0.25 from $0.43 year-over-year, driven by lower underwriting income.
  • Core revenue rose 5.7% to $386.4 million, with direct premiums written up 8.8% to $470.9 million and 38.4% growth outside Florida.
  • The net combined ratio worsened to 107.9%, up 4.2 points due to higher loss ratio (82.3%) from weather events and increased expense ratio (25.6%) from acquisition and operating costs.
  • The company has placed 92% of its 2025 first-event catastrophe reinsurance tower and secured multi-year capacity into 2026, strengthening its risk mitigation.
  • Universal repurchased 370,000 shares for $7.7 million and declared a quarterly dividend of $0.16 per share, underscoring its capital return focus.
AI Generated. May Contain Errors.
Earnings Conference Call
Universal Insurance Q4 2024
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Good morning, ladies and gentlemen, and welcome to the Universal's Fourth Quarter twenty twenty four 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.

Arash Soleimani
Arash Soleimani
Chief Strategy Officer at Universal Insurance

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

Arash Soleimani
Arash Soleimani
Chief Strategy Officer at Universal Insurance

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 Investors 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. With that, I'll turn the call over to Steve. Thanks, Arash.

Stephen Donaghy
Stephen Donaghy
CEO at Universal Insurance

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. 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. 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, along with significant additional multi year capacity secured for the twenty twenty six hurricane season. I'll turn it over to Frank to walk through our financial results. Frank?

Frank Wilcox
Frank Wilcox
CFO at Universal Insurance

Thanks, Steve. Good morning. Adjusted diluted earnings per common share was $0.25 down from adjusted diluted earnings per common share of $0.43 in the prior year quarter. The decrease mostly stems from lower underwriting income, partially offset by higher net investment income and commission revenue. Core revenue of $386,400,000 was up 5.7% year over year with growth primarily stemming from higher net premiums earned, net investment income and commission revenue.

Frank Wilcox
Frank Wilcox
CFO at Universal Insurance

Direct premiums written were $470,900,000 up 8.8% from the prior year quarter, including 0.8% growth in Florida and 38.4% growth in other states. Overall growth mostly reflects higher policies in force, higher rates and inflation adjustments. Direct premiums earned of $519,300,000 were up 7.7% year over year, reflecting direct premiums written growth over the last twelve months. Net premiums earned were $348,400,000 up 3.9% from the prior year quarter. The increase is primarily attributable to higher direct premiums earned partially offset by a higher ceded premium ratio.

Frank Wilcox
Frank Wilcox
CFO at Universal Insurance

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. The loss ratio was 82.3%, up 0.4 points compared to the prior year quarter. The increase primarily reflects higher weather losses, primarily from Hurricane Milton, partially offset by more favorable prior year reserve development. The net expense ratio was 25.6%, up 3.8 points from 21.8% in the prior year quarter.

Frank Wilcox
Frank Wilcox
CFO at Universal Insurance

The increase was primarily driven by higher policy acquisition costs associated with growth outside Florida and higher other operating costs. During the fourth quarter, the company repurchased approximately 370,000 shares at an aggregate cost of $7,700,000 The company's current share repurchase authorization program has $2,600,000 remaining. On 02/06/2025, the Board of Directors declared a regular quarterly cash dividend of $0.16 per common share payable 03/14/2025 to shareholders of record as of the close of business on 03/07/2025. With that, I'd like to ask the operator to open the line for questions.

Operator

And our first question will be coming from Adam McMahan of UVE. Your line is open. Our next question will be coming from Paul Newsome of Piper Sandler. Your line is open.

Jon Paul Newsome
Jon Paul Newsome
Managing Director at Piper Sandler Companies

Good morning. Thanks for the call. Maybe just a couple of start with sort of modeling questions. Could you talk about the size of the reserve development in the quarter? And and maybe talk about the level of cap losses including Milton with a little bit more detail?

Frank Wilcox
Frank Wilcox
CFO at Universal Insurance

Yes. Good morning, Paul. This is Frank. So Milton, I'll start with Milton. Milton was a $45,000,000 net retention event.

Frank Wilcox
Frank Wilcox
CFO at Universal Insurance

As you know with our second event that $66,000,000 in excess of $45,000,000 is covered by third party. So the captive did not was not a factor this quarter. Prior year development was down significantly, $45,000,000 down from last year, which was $76,000,000.

Jon Paul Newsome
Jon Paul Newsome
Managing Director at Piper Sandler Companies

Great. And then could you maybe a little bit more color on the growth efforts and where you're expanding and where you think you're seeing the most opportunity? And then I'll just ask the next question. Any thoughts on reinsurance renewals as they come forward later this year?

Stephen Donaghy
Stephen Donaghy
CEO at Universal Insurance

Yes. Thanks, Paul. I would say from a growth perspective, with our agency relationships and marketing ability that we've demonstrated over the years, we continue to be laser focused on profitability and writing business where it makes the most sense. We continue to be closed in markets that are not we don't feel as though we're rate adequate and open in others. The growth in the other states probably was the benefit of our entry into some new markets over the last twelve months.

Stephen Donaghy
Stephen Donaghy
CEO at Universal Insurance

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 works out quite well. What was the second question, Paul?

Jon Paul Newsome
Jon Paul Newsome
Managing Director at Piper Sandler Companies

Reinsurance, what you have what are your thoughts on prospectively for as we get into the important reinsurance renewals?

Stephen Donaghy
Stephen Donaghy
CEO at Universal Insurance

Yes. We were very pleased to announce that we were 92% already accomplished in our first tower, Paul. And we found the market quite receptive. And we always try and go out as early as possible to secure the reinsurance that we need and then leave the market really to kind of dictate what's available to others. So we find that reinsurers like our story, like the presentation and are interested in getting on board with us as early as possible.

Stephen Donaghy
Stephen Donaghy
CEO at Universal Insurance

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. 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.

Jon Paul Newsome
Jon Paul Newsome
Managing Director at Piper Sandler Companies

Great. Thank you.

Stephen Donaghy
Stephen Donaghy
CEO at Universal Insurance

Thanks, Paul. Have a good day.

Operator

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

Stephen Donaghy
Stephen Donaghy
CEO at Universal Insurance

Yes. Thank you. I'd like to thank all our associates, our consumers, agents and our stakeholders for their continued support at Universal and I wish you all a great day. Thank you.

Operator

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

Executives
Analysts
Powered by Quartr