Earnings call transcript: Universal Insurance beats Q1 2025 expectations

Universal Insurance Holdings Inc. (UVE) reported its first-quarter 2025 earnings with adjusted diluted earnings per share (EPS) of $1.44, surpassing the forecast of $1.12. The company’s revenue reached $467.08 million, exceeding expectations of $459.56 million. Following the announcement, Universal Insurance’s stock rose by 2.74% in after-hours trading, reflecting investor optimism. According to InvestingPro data, the company maintains a strong financial health score of 3.27 (GREAT), with a P/E ratio of 11.76 and market capitalization of $670.65 million.

Key Takeaways

• Universal Insurance’s EPS of $1.44 beat the forecast by 28.6%.
• Revenue growth was driven by higher net premiums and investment income.
• The stock price increased by 2.74% in after-hours trading.
• The company declared a quarterly dividend of $0.16 per share.

Company Performance

Universal Insurance demonstrated strong performance in Q1 2025, with adjusted EPS of $1.44, although this marked a decline from $1.70 in the previous year. Revenue growth was fueled by an 8.2% year-over-year increase in core revenue to $394.9 million and a 4.7% rise in direct premiums written. The company maintained a net combined ratio of 95%, indicating efficient operations despite a slight increase in the net expense ratio. InvestingPro analysis reveals the company has maintained dividend payments for 20 consecutive years, with a current dividend yield of 3.29%. Get access to 5 more exclusive InvestingPro Tips and comprehensive financial analysis with a subscription.

Financial Highlights

• Revenue: $467.08 million, up from $459.56 million forecasted
• Earnings per share: $1.44, compared to $1.12 forecasted
• Core revenue: $394.9 million, up 8.2% YoY
• Direct premiums written: $467.1 million, up 4.7% YoY
• Net combined ratio: 95%, improved by 0.5 points

Earnings vs. Forecast

Universal Insurance’s actual EPS of $1.44 exceeded the forecast of $1.12 by 28.6%, marking a significant earnings surprise. This positive deviation from expectations highlights the company’s effective cost management and revenue generation capabilities. The revenue of $467.08 million also surpassed the forecasted $459.56 million, reinforcing the company’s growth trajectory.

Market Reaction

Following the earnings announcement, Universal Insurance’s stock experienced a 2.74% increase in after-hours trading. This movement reflects investor confidence in the company’s ability to deliver strong financial results. The stock currently trades near its 52-week high of $24.14, with impressive returns of 24.07% over the past six months. Based on InvestingPro’s Fair Value analysis, the stock appears fairly valued. Discover detailed valuation metrics and access the comprehensive Pro Research Report, available for over 1,400 US stocks.

Outlook & Guidance

Looking ahead, Universal Insurance is focused on profitable growth and anticipates favorable reinsurance market conditions. The company maintains a conservative approach to reserving and expects continued market stabilization, particularly in Florida. Future EPS forecasts suggest fluctuations, with expectations of $1.19 for Q2 2025 and $3.01 for FY 2026. The company’s revenue growth of 9.27% and return on equity of 16% demonstrate strong operational execution, though its current ratio of 0.64 suggests careful liquidity management is needed.

Executive Commentary

CEO Steve Donaghy emphasized the company’s commitment to profitability and strategic management, stating, "We are laser focused on profitability and managing the overall book of business." CFO Frank Wilcox highlighted the conservative approach to financial management, noting, "We took a conservative approach to both the first quarter of 2024, and we continue doing that with 2025."

Risks and Challenges

• Potential market volatility in Florida’s insurance sector.
• Impact of new market entrants on pricing strategies.
• Ongoing regulatory changes affecting the insurance landscape.
• Economic uncertainties that may influence consumer behavior.
• Dependence on reinsurance partnerships for risk management.

Q&A

During the earnings call, analysts inquired about the favorable pricing of reinsurance renewals and the company’s reinsurance coverage structure. Universal Insurance confirmed that there was no prior year reserve development and highlighted the benefits of minimal claims handling, underscoring its operational efficiency.

Full transcript - Universal Insurance Holdings Inc (UVE) Q1 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to Universal’s First Quarter twenty twenty five Earnings Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Arash Salamani, Chief Strategy Officer.

Arash Salamani, Chief Strategy Officer, Universal Insurance Holdings: 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.

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.

Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: Thanks, Rash. Good morning, everyone. We continue to see signs that the 2022 Florida legislative reforms are working, providing much needed stability to the property insurance market, which ultimately benefits policyholders with increased certainty and choice. In the quarter, we experienced lower weather losses benefiting the loss and LAE ratio. On a separate note, I’m pleased to announce the completion of our twenty twenty five-twenty twenty six reinsurance renewal for our insurance entities.

Our program was fully supported and secured well before the June 1 inception date, something we have consistently achieved over the last few renewal cycles. We also secured $352,000,000 of additional multiyear coverage taking us through the twenty twenty six-twenty twenty seven hurricane season. The program costs and coverage were consistent with our expectations and we’ll provide specific details at the May as we typically do. The solid execution of our reinsurance strategy is a testament to the strength and consistency of our long term reinsurance partnerships, some of which span two decades. I’ll turn it over to Frank to walk through our financial results.

Frank?

Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: Thanks, Steve. Good morning. Adjusted diluted earnings per common share was $1.44 compared to adjusted diluted earnings per common share of 1.7 in the prior year quarter. The higher adjusted diluted earnings per common share mostly stems from higher underwriting and net investment income and higher commission revenue. Core revenue of $394,900,000 was up 8.2% year over year with growth primarily stemming from higher net premiums earned, net investment income and commission revenue.

Direct premiums written were $467,100,000 up 4.7% from the prior year quarter. The increase stems from 34.7% growth in other states, partially offset by a 3% decrease in Florida. Overall growth mostly reflects higher policies in force, higher rates and inflation adjustments. Direct premiums earned were $513,300,000 up 6.5% from the prior year quarter, reflecting direct premiums written growth over the last twelve months. Net premiums earned were $355,700,000 up 6.5% from the prior year quarter.

The increase is primarily attributable to higher direct premiums earned. The net combined ratio was 95%, down 0.5 points compared to the prior year quarter. The decrease reflects a lower net loss ratio, partially offset by a higher net expense ratio. The 70.5% net loss ratio was down 1.4 points compared to the prior year quarter with a decrease primarily reflecting lower weather losses in the current year quarter. The net expense ratio was 24.5%, up 0.9 points compared to the prior year quarter with the increase primarily driven by higher policy acquisition costs associated with growth outside of Florida and higher other operating costs.

On 04/14/2025, the Board of Directors declared a regular quarterly cash dividend of $0.16 per share of common stock payable on 05/16/2025 to shareholders of record as of the close of business on 05/09/2025. With that, I’d like to ask the operator to open the line for questions.

Conference Operator: Thank you. At this time, we’ll conduct the question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q and A roster.

And our first question comes from the line of Paul Newsome of Research. Your line is now open.

Paul Newsome, Research Analyst: Good morning. Thanks for the call, guys. Maybe we can start with a little bit more detail on both the competitive environment as well as your thoughts on your growth prospectively. Looks like you’re growing a little bit, a little faster than I thought. Both Florida and outside of Florida is your view, please.

Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: Yeah, good morning Paul, this is Steve. From a growth perspective, we are laser focused on profitability and managing the overall book of business. 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, we’re very interested in ensuring that there is no adverse development within our book, so we want to grow where we know we will grow profitably. We don’t really let competition drive our pricing, so to say.

We have seen new entrants in Florida, we haven’t seen anyone growing across the entire state, so I think a lot of companies are looking at specific areas to write and grow. Again, as we talked about earlier, it is leading to a healthier environment across the state of Florida, which is very positive for everyone.

Paul Newsome, Research Analyst: Maybe a little bit more detail on the reinsurance, I know you’ll give us more in the future, but Aon this morning was talking about sort of June renewals that would be down 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 you would have thought at the beginning of the year. Just any thoughts there and directionally are you thinking that your deals were in the same direction of what I was talking about this one.

Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: Yeah, you know Paul, we very pleased with the capacity and the response to our offer, so to say. So I think across the board, we were pleased to get out early, establish our own market, and 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 two hurricanes or three hurricanes in ’24, and the fact that in my experience for twenty years at the company, any time that would have occurred, you would have seen an increase in rates across the board. I think even flat or a little bit of a reduction is very acceptable to us for this year’s renewal. 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 ’twenty two and the market’s perspective on those changes and their interest to continue writing reinsurance and rewarding good carriers with favorable terms and conditions.

Paul Newsome, Research Analyst: Do you think the reinsurers have reflected the tort reform impacts yet in any 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 next year it gets more reflected, I don’t know about that or not, but any thoughts there?

Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: Well, again, as I said, I think at any time you have a number of hurricanes and people are impacted, reinsurers in particular, and 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 a P and C perspective and also reinsurance. And I think it will continue to be demonstrated in the future, maybe more meaningfully in the future as we continue to go.

Paul Newsome, Research Analyst: One last question to let other folks ask. I know you’ve been trying to build conservatism in the reserves. Was there any reserve development in the quarter?

Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: Good morning, Paul. This is Frank. No. The answer is there is no, prior year development. You know, we we took a conservative approach to both the first quarter of twenty four, and we continue doing that with ’25.

The difference is the non cat weather this quarter was much lighter.

Paul Newsome, Research Analyst: Great. Thank you. Appreciate the help as always.

Nicholas Lacaviello, Analyst, Dowling and Partners: Thanks, Paul.

Conference Operator: Thank you. One moment for our next question. Our next question comes from the line of Nicholas Lacaviello of Dowling and Partners. Your line is now open.

Nicholas Lacaviello, Analyst, Dowling and Partners: Good morning. Was there any claims handling benefit booked in the quarter?

Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: It was negligible.

Nicholas Lacaviello, Analyst, Dowling and Partners: Great. Thanks. And then I know we’ll get the full details on the reinsurance placement cost of the 61. But is there anything you could add maybe around the GAAP retention? Should we expect it to be similar to the 111,000,000 pretax last year with $66,000,000 of coverage from the captive?

Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: Yes. The company plans to use that cover in the same exact capacity. So it would be covering the first layer above the $45,000,000 retention, so $66 in excess of 45,000,000 translating to $111,000,000 net for the first event. And the second event, that $66,000,000 layer is covered by third party coverage.

Nicholas Lacaviello, Analyst, Dowling and Partners: Okay. I appreciate it. That’s all I had.

Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: Sure. Thanks Nick.

Conference Operator: Thank you. I’m showing no further questions at this time. I’ll now turn it back to Steve Donaghy, Chief Executive Officer for closing remarks.

Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: Thank you. I’d like to thank all of our associates, consumers, our agency force, and our stakeholders for their continued support of Universal. Have a great day.

Conference Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.

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