Earnings call transcript: Universal Insurance Q2 2025 sees revenue, EPS beat

Universal Insurance Holdings Inc . (NYSE:UVE) reported its second-quarter 2025 earnings, revealing a mixed financial performance. The company posted earnings per share (EPS) of $1.23, surpassing analyst forecasts of $1.12. Revenue came in $400.14 million against a projected $359.98 million. The immediate market reaction was a 7.43% drop in the stock price in after-hours trading, reflecting investor concerns over the revenue shortfall. According to InvestingPro analysis, UVE currently appears undervalued, with a "GREAT" overall financial health score of 3.27 out of 5. [Get access to 6 additional InvestingPro Tips for UVE and over 1,400+ US stocks with comprehensive Pro Research Reports through InvestingPro]

Key Takeaways

- EPS of $1.23 beat expectations by 9.82%.

- Revenue beat by 11.16%.

- Stock price declined by 7.43% in after-hours trading.

- Growth in direct premiums and stable reinsurance costs were positive highlights.

- Increased competition and cost ratios reflect ongoing challenges.

Company Performance

Universal Insurance demonstrated strong EPS growth, with a year-over-year increase from $1.18 to $1.23. The company reported a 5.7% rise in core revenue, driven by growth in direct premiums written and earned. The company’s trailing twelve-month revenue reached $1.57 billion, with an impressive free cash flow yield of 37%. The significant revenue miss suggests potential issues in operational execution or market conditions, though the company maintains a solid return on equity of 16%.

Financial Highlights

- Revenue: $400.14 million, versus a forecasted $359.98 million.

- Earnings per share: $1.23, up from $1.18 in the prior year.

- Direct premiums written: $596.7 million, up 3.2%.

- Direct premiums earned: $523.4 million, up 6.7%.

- Net combined ratio: 97.8%, up 1.9 points.

- Net loss ratio: 72.3%, up 1.7 points.

Earnings vs. Forecast

Universal Insurance’s EPS beat expectations by 9.82%, showcasing strong profitability. However, the revenue miss of 32.82% is notable, indicating potential challenges in meeting market demand or operational efficiency.

Market Reaction

The stock price fell by 7.43% in after-hours trading, a significant move reflecting investor unease with the revenue performance. Trading at $22.93, the stock has experienced a 9.12% decline over the past week, though it maintains a positive year-to-date return of 10.39%. Despite recent volatility, InvestingPro data shows UVE has maintained dividend payments for 20 consecutive years, currently yielding 3.36%.

Outlook & Guidance

The company remains optimistic about its multi-state growth strategy and expects continued performance improvements. Future guidance includes EPS forecasts of $0.79 for Q4 2025 and $1.2 for Q1 2026, with revenue projections for these quarters at $369.85 million and $367.83 million, respectively. Analysts maintain a consensus "Buy" recommendation, with a unified price target of $29. [Discover comprehensive analysis and valuation metrics for UVE and 1,400+ US stocks with InvestingPro’s detailed Research Reports]

Executive Commentary

CEO Steve Donaghy emphasized the company’s strategic focus, stating, "We are not driven by the competition. We are driven by twenty-five years of experience in Florida." CFO Frank Wilcox highlighted financial stability, noting, "The holding company capital is abundant."

Risks and Challenges

- Increased competition in the Florida market could pressure margins.

- Rising net combined and loss ratios suggest cost management challenges.

- Market volatility and economic conditions may impact future growth.

Q&A

During the earnings call, analysts focused on the revenue miss and its implications. Executives assured that reinsurance costs remain stable and emphasized their strategic growth plans. Concerns about the competitive environment were addressed, with management noting localized competition but no widespread market disruption.

Full transcript - Universal Insurance Holdings Inc (UVE) Q2 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to Universal’s Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Arash Soleimani, Chief Strategy Officer.

Arash Soleimani, 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, Arash. Good morning, everyone. In the quarter, we delivered a very strong 29.4% adjusted return on common equity. We are encouraged by favorable underwriting trends as the Florida market continues to improve, and we are optimistic as we look ahead. 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 $1.23 compared to adjusted diluted earnings per common share of $1.18 in the prior year quarter. The higher adjusted diluted earnings per common share mostly stems from higher direct premiums earned,

Paul Newsome, Analyst, Piper Sandler: net

Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: investment income and commission revenue, partially offset by a higher ceded premium ratio. Core revenue of $400,900,000 was up 5.7% year over year, with growth primarily stemming from higher net premiums earned, net investment income and commission revenue. Direct premiums written were $596,700,000 up 3.2% from the prior year quarter. The increase stems from 25.4% growth in other states, partially offset by 2.5 decrease in Florida. Overall growth mostly reflects higher policies in force, higher rates and inflation adjustments across our multi state footprint.

Direct premiums earned were $523,400,000 up 6.7% from the prior year quarter, reflecting direct premiums written growth over the last twelve months. Net premiums earned were $360,200,000 up 4.4% from the prior year quarter. The increase is primarily attributable to higher direct premiums earned, partially offset by a higher ceded premium ratio as described above. The net combined ratio was 97.8%, up 1.9 points compared to the prior year quarter. The increase reflects higher net loss and expense ratios.

The 72.3% net loss ratio was up 1.7 points compared to the prior year quarter, with the increase primarily reflecting a higher ceded premium ratio. The net expense was 25.5%, up 0.2 points compared to the prior year quarter with the increase primarily driven by higher ceded premium ratio and higher policy acquisition costs associated with growth outside of Florida, partially offset by economies of scale. During the second quarter, the company repurchased approximately 287,000 shares at an aggregate cost of $7,400,000 The company’s current share repurchase authorization program has approximately $15,200,000 remaining. On 07/09/2025, the Board of Directors declared a quarterly cash dividend of $0.16 per common share payable on 08/08/2025 to shareholders of record as of the close of business on 08/01/2025. With that, I’d like to ask the operator to open the line for questions.

Conference Operator: Thank you. Our first question comes from Paul Newsome with Piper Sandler. You may proceed.

Paul Newsome, Analyst, Piper Sandler: Good morning. Could you give us a little bit more about the reinsurance ceding change and what’s going on there just as the drivers?

Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: Good morning, Paul. So you have to appreciate that when you’re comping over this particular quarter, you’re looking at several different reinsurance programs that are earning in. Last year, the first two months, April and May, we were still earning in a program that included the WRAP program, which was at no cost. And that was much lower the cost to replace that. So this year, April and May, was last year’s program winding up plus the first month of this year’s program.

So it’s really just comping off a different structure of program.

Paul Newsome, Analyst, Piper Sandler: 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 you think about how we should measure it as an outsider?

Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: Well, at the holding company is abundant. Naturally, we take opportunities to purchase shares when we believe that they’re undervalued. Continue to do so when appropriate.

Paul Newsome, Analyst, Piper Sandler: Okay. And then just a few thoughts on the competitive environment. There concerns, I think, that we’re seeing some companies that may not necessarily you, 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?

Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: Hey Paul, this is Steve. Good morning. I wouldn’t say that it’s a more competitive market. We are not driven by the competition. We are driven by twenty five years of experience in Florida and as we’ve expanded into other states, we use our boots on the ground, our claims experience, etc.

To really assess and understand where we want to write business and where it can be the most profitable for our shareholders. And I would say that we’ve recently opened up additional territories in Florida and feel good about the business that we’re bringing in at this time across the state. Clearly there are more competitors in Florida as well than there was a year ago or a quarter ago, but we don’t see anybody with a real hungry appetite from a competitive perspective across the state. We see pockets of competition in Florida, but nothing dramatic across the entire state.

Paul Newsome, Analyst, Piper Sandler: Appreciate the help. I’ll let some other folks ask questions. You.

Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: Thanks, Paul. Have a good day.

Conference Operator: Thank you. Our next question comes from Nick Acoviello with Dowling and Partners. You may proceed.

Nick Acoviello, Analyst, Dowling and Partners: Was there any net prior year development or claims handling benefits in the quarter? I’m assuming no, but just wanted to confirm.

Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: It was negligible, Nick. Nothing to really speak of.

Nick Acoviello, Analyst, Dowling and Partners: Okay, great. And then just on the new reinsurance program, so I know we have one 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 director and premium as you’ve done in years prior?

Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: The cost year over year, this program that went into effect June 1, 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 naturally, given the fact that we had three landfalling storms last year, which typically, following those events, the the price would go up significantly. And that’s certainly an indication of the improvement in, Florida marketplace.

Nick Acoviello, Analyst, Dowling and Partners: Great. That’s all I had. Thank you.

Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: Yeah. Thanks, Nick.

Conference Operator: Thank you. I would now like to turn the call back over to Steve Donaghy for any closing remarks.

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

Conference Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

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