Earnings call transcript: Universal Insurance Q3 2025 sees EPS surge

Universal Insurance Holdings Inc. (UVE) reported its third-quarter 2025 earnings, showcasing a significant earnings per share (EPS) increase to $1.36, far exceeding the forecast of $0.20. This 580% surprise came despite a revenue shortfall, with actual revenue hitting $400.98 million against a forecast of $591.58 million. Following the earnings release, Universal Insurance’s stock rose 5.62% to $30.24, reflecting investor optimism despite the revenue miss. InvestingPro analysis shows the company maintains a GREAT financial health score of 3.36, with particularly strong metrics in profit and price momentum. Get access to 6 key ProTips and comprehensive analysis with an InvestingPro subscription.

Key Takeaways

• EPS surged to $1.36, a 580% surprise over forecasts.
• Revenue came in lower than expected at $400.98 million.
• Stock price increased by 5.62% post-earnings announcement.
• Strong growth in other states offset a decline in Florida.
• Continued focus on conservative reserving and market expansion.

Company Performance

Universal Insurance demonstrated robust performance in Q3 2025, with adjusted diluted EPS rising to $1.36 from a loss of $0.73 in the previous year. Core revenue grew by 4.9% year-over-year, driven by a 3.2% increase in direct premiums written. The company’s net combined ratio improved significantly, down 20.5 points to 96.4%, indicating enhanced operational efficiency.

Financial Highlights

• Revenue: $400.98 million, up 4.9% YoY
• Earnings per share: $1.36, up from -$0.73 YoY
• Direct premiums written: $592.8 million, up 3.2%
• Net premiums earned: $359.7 million, up 4%
• Net combined ratio: 96.4%, down 20.5 points

Earnings vs. Forecast

Universal Insurance’s EPS of $1.36 significantly surpassed the forecast of $0.20, marking a substantial 580% surprise. However, revenue fell short of expectations by 32.22%, coming in at $400.98 million compared to the anticipated $591.58 million. This mixed performance highlights the company’s ability to manage costs and improve profitability despite revenue challenges.

Market Reaction

Following the earnings announcement, Universal Insurance’s stock climbed 5.62% to $30.24, reflecting positive investor sentiment towards the impressive EPS beat. The stock’s upward movement aligns with its recent trend, nearing its 52-week high of $31.47. According to InvestingPro, UVE has delivered an impressive 36.15% return year-to-date, with current analysis suggesting the stock is slightly undervalued based on its Fair Value assessment. The market’s response underscores confidence in the company’s strategic initiatives and operational improvements.

Outlook & Guidance

Looking ahead, Universal Insurance maintains a conservative reserving approach and is optimistic about the recovery of the Florida market. The company plans to continue its multi-state expansion strategy while monitoring the competitive landscape. Future capital management adjustments are anticipated in 2026, aligning with the company’s growth objectives. Notably, InvestingPro data reveals the company has maintained dividend payments for 20 consecutive years, demonstrating strong financial stability. InvestingPro subscribers can access detailed analysis of UVE’s growth trajectory and comprehensive Pro Research Reports covering 1,400+ top stocks.

Executive Commentary

CEO Steve Donaghy emphasized the company’s disciplined approach, stating, "Our unique organic business model allows us to consistently generate deep double-digit ROEs." He added, "We do not chase premium. We are sticking to rate adequacy," highlighting the company’s focus on sustainable growth and profitability.

Risks and Challenges

• Market volatility: Fluctuations in the insurance market could impact growth.
• Regulatory changes: Potential shifts in insurance regulations may affect operations.
• Competitive pressures: Increased competition could impact market share.
• Economic conditions: Broader economic downturns may influence customer demand.

Q&A

During the earnings call, analysts inquired about the company’s reserving philosophy and competitive environment. Executives addressed their capital management strategy and confirmed a $3.9 million prior year catastrophe development, highlighting the company’s proactive risk management practices.

Full transcript - Universal Insurance Holdings Inc (UVE) Q3 2025:

Conference Call Operator: Good morning, ladies and gentlemen, and welcome to Universal Insurance Holdings’ third quarter 2025 earnings conference call. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. 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 on Universal’s SEC filings, all of which are available on the investor 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. It was a solid quarter with a 30.6% adjusted return on common equity. Our unique organic business model allows us to consistently generate deep double-digit ROEs, making us particularly well-positioned to succeed in the much-improved Florida market. Additionally, we commenced our annual actuarial review process considerably earlier this year, and our findings are very encouraging. As we’ve discussed in recent periods, our reserving process has become more conservative with a focus on protecting and increasing the resilience of our balance sheet. When we look at our current and prior accident year reserves in the aggregate, we believe we’re in a very strong position, further increasing our optimism as we turn a new chapter in the revamped Florida market. I’ll turn it over to Frank to walk through our financial results. Frank.

Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: Thanks, Steve, and good morning. Adjusted diluted earnings per common share was $1.36 compared to an adjusted loss per common share of $0.73 in the prior year quarter. The higher adjusted diluted earnings per common share mostly stems from a lower net loss ratio, higher net premiums earned, net investment income, and commission revenue. Core revenue of $400 million was up 4.9% year over year, with growth primarily stemming from higher net premiums earned, net investment income, and commission revenue. Direct premiums written were $592.8 million, up 3.2% from the prior year quarter. The increase stems from 22.2% growth in other states, partially offset by a 2.6% 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 $534.1 million, up 5.2% from the prior year quarter, reflecting direct premiums written growth over the last 12 months.

Net premiums earned were $359.7 million, up 4% from the prior year quarter. The increase is primarily attributable to higher direct premiums earned, partially offset by a higher ceded premium ratio. The net combined ratio was 96.4%, down 20.5 points compared to the prior year quarter. The decrease reflects a lower net loss ratio, partially offset by a higher net expense ratio. The 70.2% net loss ratio was down 21.5 points compared to the prior year quarter, with a decrease reflecting the inclusion of hurricanes Debbie and Helene in the prior year quarter and the lack of hurricane activity in the current year quarter. The net expense ratio was 26.2%, up one point compared to the prior year quarter, with the increase primarily driven by a higher ceded premium ratio and higher policy acquisition costs associated with growth outside Florida.

During the quarter, the company repurchased approximately 347,000 shares at an aggregate cost of $8.1 million. The company’s current share repurchase authorization program has approximately $7.1 million remaining. On July 9, 2025, the board of directors declared a quarterly cash dividend of $0.16 per share of common stock payable on August 9, 2025, to shareholders of record as of the close of business on August 1, 2025. With that, I’d like to ask the operator to open the line for questions.

Conference Call Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Paul Newsome with Piper Sandler. Your line is open.

Good morning. Thanks for the call. Maybe you could follow on a little bit more on your reserving comment. Does this foreshadow any change in how you think about profit margins perspectively and the exit year loss ratio or any change in how you think about setting loss picks?

Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: Good morning, Paul. Thanks for the question. We feel as though we have come through a very fraudulent time within the Florida market, and we have seen all the things in the past go through the book. There’s still things to deal with in the future, as you know, and Florida is an ever-changing market. However, we’ve never had as many dollars up in the aggregate as we do right now. Our file count, our claims count is dramatically reduced, and our claims folks are getting to claims much faster as a result of the market that we’re in. We’ve seen considerably positive effects on the book and on our reserving philosophy, so to say. As we look to the future, we want to get through the year before we make any substantial adjustments and retain our conservative approach.

That’ll be something we will look at seriously as we get into the beginning of 2026 and close out 2025.

A different follow-up question. Any thoughts on the competitive environment? We hear all sorts of talks about rate decreases in the Florida market in particular, but could you give us some general thoughts about what you’re seeing both in and out of the Florida markets from a competitive perspective?

Yeah. I think, you know, just to address outside of the Florida market, we’re more of a niche provider, and we have our markets that we like, and our rates are adequate in certain spots. It’s highly competitive outside of Florida, and you have all the big names there as well. Within Florida, there are a lot of new players showing up. There are a lot of new players that maybe don’t understand what we’ve understood for 25 or 26 years now. We see a lot of various behaviors. We do not chase premium. We are sticking to rate adequacy and trying to drive a high level of service to our insureds and profitability to our shareholders. It is competitive. There are a lot of markets. I think the agents continue to prefer to write with established providers when competitive.

I would say, unlike other times, that’s now consistent across the state. It’s not just in specific markets in Florida. I think there’s different carriers that look at different geographic areas in Florida very differently. We do, but we continue to write new business and new policies, as you’ve seen from last quarter. We feel good about our position and our relationship with our agency force.

The last big question that I’ll let other folks ask. Capital management, you made some comments this quarter, but you now have a high class problem here in the sense that your ROE is well above the growth rate of the company. What’s your priority there? Should we expect substantial or at least some repurchase activity perspectively as part of your sort of ongoing business given where the returns are?

I don’t know about new purchase activity, Paul, but we consistently view our shares as a positive within our capital management. As we look to the future and we have access to capital, we’ll continue to work with the investment committee and establish guidelines and change those guidelines as we go. We feel very confident in any acquisition of our shares that we can do at the appropriate times.

Great. I appreciate the help. Thank you very much.

Thanks, Paul. Have a good weekend.

Conference Call Operator: Thank you. Our next question comes from Nicolas Iacoviello with Dowling & Partners Securities. Your line is open.

Thanks. I just had one. Was there any net prior year catastrophe development booked in the current quarter following the annual actuarial review?

Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: Yeah. Good morning, Nick. Yes, there was. It’s about $3.9 million related to prior year catastrophe development.

All right. Thank you. I’m assuming there was nothing on the claims handling side from last year’s storms, correct?

That’s correct.

Yeah. None. Okay. That’s all I had. Thanks, guys.

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

Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: Thank you.

Conference Call Operator: Thank you. I’m showing no further questions at this time. I would now like to turn it back to Steve Donaghy for closing remarks.

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

Conference Call Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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