Universal Insurance Holdings (NYSE:UVE) (UIH) reported a strong first quarter for 2024, with significant growth in adjusted return on common equity and diluted earnings per share. The company's Chief Executive Officer, Steve Donaghy, noted the quarter's success was driven by profitable underwriting and the performance of non-underwriting operations. Direct premiums written showed a notable increase, particularly in states outside Florida. The financial results were presented by Chief Financial Officer, Frank Wilcox, who highlighted an increase in core revenue and net premiums earned. Universal also announced the completion of its reinsurance renewal for 2024-2025, securing coverage through the 2025-2026 hurricane season and adding new reinsurers.
Key Takeaways
- Universal reported a 29.4% annualized adjusted return on common equity.
- Adjusted diluted earnings per share grew by 35.4% year-over-year.
- Direct premiums written grew by 8.8%, with a 5.2% increase in Florida and 25.6% in other states.
- Net premiums earned were up by 18.4%, primarily due to higher direct premiums earned and a lower ceded premium ratio.
- The net combined ratio improved by 4.5 points, with a decrease in the net loss ratio and net expense ratio.
- Universal completed its reinsurance renewal for 2024-2025, with coverage extending through the 2025-2026 hurricane season.
- The company repurchased approximately 208,000 shares at a cost of $4.1 million, with $20 million remaining in the share repurchase authorization program.
- A quarterly cash dividend of $0.16 per share of common stock was declared, payable on May 17, 2024.
Company Outlook
- The company's policies-in-force are stabilizing following previous underwriting initiatives.
- Universal's reinsurance program is fully supported and secured for the upcoming year.
Bearish Highlights
- There was a partial offset in earnings growth due to lower commission revenue.
Bullish Highlights
- Universal saw an increase in core revenue and net investment income year-over-year.
- The company added financially strong reinsurers to its panel, enhancing its reinsurance program.
Misses
- The company did not discuss any specific misses during the call.
Q&A Highlights
- CEO Steve Donaghy addressed the competitive environment in Florida, stating that Universal continues to see more entrants in the market but remains confident in its position.
- Donaghy discussed the impact of tort reform on pricing and regulatory pressure, expressing that Universal aims to balance market needs with shareholder and customer interests.
- CFO Frank Wilcox confirmed that there was no net prior year development recognized in Q1.
- Regarding the reinsurance program, the company assumes a similar GAAP retention as the previous year's program.
In conclusion, Universal Insurance Holdings demonstrated a robust first quarter with growth in key financial metrics and strategic reinsurance renewals, positioning the company well for the remainder of the year. The company's ticker (UIH) reflects its commitment to shareholder value through share repurchases and dividends, while navigating a dynamic insurance market with a focus on maintaining profitability and strong relationships with agents and consumers.
InvestingPro Insights
Universal Insurance Holdings (UIH) has shown a remarkable first quarter in 2024, with key financial indicators pointing towards a positive trajectory. To provide further context to the company's performance, let's delve into some real-time data and insights from InvestingPro.
InvestingPro Data:
- Market Capitalization: Universal Insurance Holdings currently has a market cap of $553.32 million, reflecting its valuation in the market.
- P/E Ratio: The company is trading at a P/E ratio of 7.25 (adjusted for the last twelve months as of Q1 2024), indicating a potentially undervalued stock compared to industry peers.
- Revenue Growth: With a revenue growth of 15.29% over the last twelve months (as of Q1 2024), Universal Insurance Holdings is showing a strong ability to increase its earnings.
InvestingPro Tips:
- Universal Insurance Holdings is praised for its high shareholder yield, which is a testament to its commitment to returning value to its investors.
- The company has been trading at a low earnings multiple, suggesting that it could be an attractive buy for value investors looking for potential bargains in the market.
In addition to these insights, there are 5 more InvestingPro Tips available for Universal Insurance Holdings, which could provide a deeper understanding of the company's financial health and future prospects. To access these insights and more, visit https://www.investing.com/pro/UVE and remember to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Universal Insurance Holdings Inc (UVE) Q1 2024:
Operator: Good morning, ladies and gentlemen, and welcome to Universal First Quarter 2024 Earnings Conference Call. 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: 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: Thanks, Arash. Good morning, everyone. It was a strong quarter, including a 29.4% annualized adjusted return on common equity and 35.4% adjusted diluted earnings per share growth year-over-year. Results were solid across the board, including profitable underwriting that was complemented by our non-underwriting operations, which is a testament to our differentiated business model. Direct premiums written growth accelerated sequentially, as policies-in-force are stabilizing following our previous underwriting initiatives. I'm pleased to announce the completion of our 2024-2025 reinsurance renewal for our insurance entities, as our program is now fully supported and secured. We've also secured additional multi-year coverage, taking us through the 2025-2026 hurricane season and have added new, financially strong reinsurers to our existing panel of long-term partners. This achievement reflects the diligence and planning of our reinsurance team throughout the year. Program cost and coverage were consistent with our expectations, and we'll provide specific details at the end of May, as we typically do. I'll turn it over to Frank to walk through our financial results. Frank?
Frank Wilcox: Thanks, Steve. Good morning. Adjusted diluted earnings per common share was $1.07, up from $0.79 in the prior-year quarter. The increase mostly stems from higher underwriting and net investment income, partially offset by lower commission revenue. Core revenue of $364.9 million was up 15.4% year-over-year, with growth primarily stemming from higher net premiums earned and net investment income, partially offset by lower commission revenue. Direct premiums written were $446.2 million, up 8.8% from the prior-year quarter, including 5.2% growth in Florida and 25.6% growth in other states. Overall growth mostly reflects higher rates, inflation adjustments and stabilizing policies-in-force. Direct premiums earned were $482.1 million, up 5.9% from the prior-year quarter, reflecting rate-driven direct premiums written growth over the last 12 months. Net premiums earned were $334 million, up 18.4% from the prior-year quarter. The increase is primarily attributable to higher direct premiums earned and a lower ceded premium ratio. The net combined ratio was 95.5%, down 4.5 points compared to the prior-year quarter. The decrease reflects lower net loss and expense ratios. 71.9% net loss ratio was down 1.2 points compared to the prior-year quarter with the decrease primarily attributable to higher net premiums earned associated with lower reinsurance costs in the current quarter. The 23.6% net expense ratio improved by 3.3 points compared to the prior-year quarter, primarily reflecting higher net premiums earned associated with lower reinsurance costs in the current year and economies of scale. During the first quarter, the company repurchased approximately 208,000 shares at an aggregate cost of $4.1 million. The company's current share repurchase authorization program has approximately $20 million remaining. On April 10, 2024, the Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock payable on May 17, 2024, to shareholders of record as of the close of business on May 10, 2024. With that said, I'd like to ask the operator to open the line for questions.
Operator: Thank you. [Operator Instructions] Our first question comes from the line of Paul Newsome of Piper Sandler. Your line is now open.
Paul Newsome: Good morning. Congrats on the quarter. I was hoping you could talk a little bit about what seems to be a very rapidly changing competitive environment, particularly in Florida, and thoughts on pricing and whether or not there really aren't folks coming in or out at this point from a competitive perspective.
Steve Donaghy: Yeah. Good morning, Paul, and thanks for the question. We're seeing more entrants coming into the market. We continue to see [Citizens] (ph) as a competitive carrier in the state. I think we continue to lean on particular markets where we are open, that we feel are profitable. We've opened additional ones at the end of 2023. And we feel good where we sit today with the business that's coming in. From a rate perspective, it's always a combination of carrier and rate. And I think our agency force feels very confident in Universal's ability to support their books of business as well as they're insured. So, I think our relationships, our rates and the markets that we're opening are serving us well. From a competitive perspective, we see some people doing things that we don't want to do, and we don't feel bad about the business going elsewhere, so to say. We also have seen our retention improve quarter-over-quarter, and we feel good about that flowing through the book as well right now. I don't know if you have anything more specific than that, but I'd be happy to answer anything further, if you like.
Paul Newsome: No, that's helpful and interesting. I heard thoughts -- talk of regulatory pressure for pricing because of the tort reform coming, maybe not this year, but maybe next. But then I hear the other side too that it's been such a tough environment for so long that things will hold on for a long time. Where do you fall in that conversation? Do you see pressure building for sort of an offset for the tort reform? You do hear people talk about concerns about the affordability of policies just being [indiscernible] in Florida, the impact that may have on what the regulators want to do.
Steve Donaghy: Yeah. There's a lot in that question to unpack, Paul. I think from an affordability perspective, that is an issue across the state of Florida right now and certain segments of the market continue to go to the E&S market where rates are extremely high. We traditionally -- even in '23, we looked at our rate indication and we took less as a submitted rate request as a result of the tort reform because we felt good about what was coming through the book. We're just kicking off our rate analysis as we speak for 2024. And when we get the final figures in, we'll take a look at that and try and do what's best for the market, for ourselves, for our shareholders and for our insurers, and try and do the right thing. When you talk about pressures, I think the state of Florida has done a very good job with the tort reform and we're appreciative of that. Could they have gone a little further? Perhaps. Did they go too far? I don't think so. So, I think as we look in the future, we'll try and take all those measures into account and do the right thing. But we don't feel -- there's nobody calling or suggesting anything to us that we're not getting any undue pressure, so to say, at this point.
Paul Newsome: Fantastic. Congrats on the quarter.
Steve Donaghy: Yeah. Thanks, Paul. Have a great day.
Operator: Thank you. One moment for next question. Our next question comes from the line of Nic Iacoviello of Dowling. Your line is now open.
Nic Iacoviello: Thanks, guys. Nice quarter. I was just wondering, first off, was there any net prior year development recognized in Q1?
Frank Wilcox: Nothing on a net basis, negligible on a direct.
Nic Iacoviello: Got it. Thank you. And I know we'll get more details towards the end of May, but I was just wondering on the comment on the reinsurance program being fully supported and secured. Does that currently assume a similar GAAP retention as the program placed last year?
Steve Donaghy: Yeah. You're referring to the use of the Isosceles, yeah, Nic, that would be consistent with last year. And we feel as though that was the right thing to do based on cost and capital utilization from the parent. So, yeah.
Nic Iacoviello: Okay. That makes sense. Thank you. That's all I had.
Steve Donaghy: All right. Thanks, Nic. Have a good day.
Operator: Thank you. This concludes the question-and-answer session. I would now like to turn it back to Steve Donaghy, CEO, for closing remarks.
Steve Donaghy: Thank you. I'd like to thank our associates, our consumers, agents and our stakeholders for their continued support of Universal. I wish you all a great day. Thank you.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
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