What Universal Insurance (UVE) Said on Its Q3 Earnings Call

Key Points

• Universal Insurance reported stronger Q3 results: adjusted diluted EPS rose to $1.93 from $1.36, revenue increased 11.1% to $444.3 million, and the net combined ratio improved to 91% as the net loss ratio fell to 64.6%.
• Policy growth continued across the company’s multistate footprint: policies in force increased 8%, while direct premiums written outside Florida rose 18.5%, offsetting a 3.3% decline in Florida.
• Management remains focused on disciplined expansion and shareholder returns: Universal repurchased $7.4 million of shares, maintained its $0.16 quarterly dividend, and said it will prioritize adequately capitalizing its insurance entities while targeting attractively priced business.

Universal Insurance NYSE: UVE reported stronger third-quarter results, citing improved underwriting performance, higher net investment income and continued policy growth across its multistate footprint.

Chief Executive Officer Steve Donaghy said the company generated a 32.7% annualized return on common equity during the quarter. He pointed to solid underwriting and revenue performance, continued improvement in the net loss ratio and an 8% increase in policies in force.

“Our net loss ratio continues to improve and new business trends are solid,” Donaghy said.

Profitability and Revenue Increase

Chief Financial Officer Frank Wilcox said adjusted diluted earnings per common share rose to $1.93 from $1.36 in the prior-year quarter. The improvement primarily reflected higher underwriting income and net investment income.

Core revenue increased 11.1% year over year to $444.3 million. The growth was driven mainly by increases in net premiums earned and investment income.

• Direct premiums written rose 2.7% to $608.9 million.
• Direct premiums earned increased 4.2% to $556.7 million.
• Net premiums earned climbed 12.1% to $403.2 million.
• The net combined ratio improved 5.4 points to 91%.
• The net loss ratio declined 5.6 points to 64.6%.

Wilcox said direct premiums written outside Florida increased 18.5%, partially offset by a 3.3% decline in Florida. Overall premium growth reflected higher policies in force across the company’s multistate operations.

The increase in net premiums earned stemmed from higher direct premiums earned as well as a lower ceded premium ratio, according to Wilcox.

Expense Ratio and Capital Returns

The company’s net expense ratio increased 0.2 points to 26.4%. Wilcox attributed the increase to higher policy acquisition costs related to growth outside Florida, along with higher other operating costs and expenses. Those factors were partly offset by the lower ceded premium ratio.

During the quarter, Universal repurchased about 174,000 shares for an aggregate cost of $7.4 million. Approximately 1.1 million shares remained under its current repurchase authorization program, Wilcox said.

The board also declared a quarterly cash dividend of $0.16 per common share on July 8, payable Aug. 7 to shareholders of record as of July 31.

Asked about capital allocation in light of the company’s return on equity, Wilcox said Universal expects to continue returning value to shareholders through dividends. He said management would discuss the remaining repurchase authorization with the board, while emphasizing that adequately capitalizing the insurance entities remains the company’s first priority.

Growth Outlook and Florida Market

Donaghy said Universal continues to see opportunities for organic growth in the states it currently serves. He said Florida legislative changes have benefited the broader market and that the company’s relationships with its agency network continue to support new business production.

Outside Florida, Universal is targeting areas where it sees adequate pricing, rather than pursuing volume at any cost.

“We don’t chase the business,” Donaghy said. “We want to write the business where we feel good about it.”

Hurricane Isaias Response

Following the end of the quarter, Hurricane Isaias made landfall near Destin in the western Florida Panhandle as a Category 2 storm before weakening rapidly inland, Donaghy said.

The company deployed field adjusters to affected areas and contacted policyholders to accelerate inspections and claims payments. Based on claims activity to date, Donaghy said Universal views the storm as manageable.

About Universal Insurance (NYSE:UVE)

Universal Insurance Holdings, Inc NYSE: UVE is an insurance holding company that provides property and casualty insurance through its subsidiaries. Its primary business is personal residential insurance, with products designed to protect homeowners and other residential property owners against risks such as wind, fire, theft and other covered losses.

The company's offerings include homeowners, condominium unit owners, renters and dwelling fire insurance, along with related residential property coverage.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.