Universal Insurance Holdings (UVE) Q3 2026 Earnings Call: Combined Ratio Falls to 91%

Key Takeaways

• Adjusted diluted earnings per common share increased to $1.93 from $1.36 in the prior-year quarter, primarily reflecting higher underwriting income and net investment income.
• Core revenue rose 11.1% year over year to $444.3 million, while net premiums earned increased 12.1% to $403.2 million.
• The net combined ratio improved 5.4 percentage points to 91.0%, driven by a 5.6-point decline in the net loss ratio to 64.6%.
• Policies in force grew 8%. Direct premiums written outside Florida increased 18.5%, partially offset by a 3.3% decline in Florida.
• Universal generated a 32.7% annualized return on common equity. Management said Hurricane Isaias appeared manageable based on claims activity to date.
• The company repurchased approximately 174,000 shares for $7.4 million during the quarter and had about 1.1 million shares remaining under its current authorization.

Key Financial Data

Business and Operating Performance

Premium growth continued to shift toward Universal’s multi-state operations. Direct premiums written outside Florida rose 18.5%, while Florida declined 3.3%. Management attributed overall growth mainly to higher policies in force across the company’s footprint.

The 12.1% increase in net premiums earned reflected higher direct premiums earned and a lower ceded premium ratio. The same factor contributed to the improvement in the net loss ratio.

The net expense ratio edged up to 26.4%. Universal attributed the increase to higher policy acquisition costs associated with growth outside Florida and higher operating costs, partly offset by the lower ceded premium ratio.

Management said Florida legislative changes have benefited the market and that the company’s agency relationships continue to support new business. Outside Florida, Universal is targeting areas where it sees adequate pricing rather than pursuing growth indiscriminately.

Risks and Watchpoints

Hurricane Isaias made landfall near Destin in the western Florida Panhandle as a Category 2 hurricane after quarter-end. Universal deployed field adjusters and contacted policyholders to accelerate inspections and payments. Management described the event as manageable based on claims activity to date, making that assessment conditional on subsequent claims development.

Florida direct premiums written declined 3.3% year over year, while expansion outside the state contributed to higher acquisition and operating costs.

Analyst Q&A Highlights

Asked about competition and growth, management said Universal remains confident in its organic growth model across its existing states. It emphasized pricing discipline outside Florida and said it would write business only where rate adequacy is attractive.

On capital allocation, CFO Frank Wilcox said policyholder protection and adequate capitalization of the insurance entities remain the top priorities. The company also expects to continue returning value through dividends and plans to discuss the remaining share repurchase authorization with its board.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Good morning, ladies and gentlemen, and welcome to Universal's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] 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 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.

Stephen Donaghy

Thanks, Arash. Good morning, everyone. In the quarter, we delivered a very strong 32.7% annualized return on common equity, driven by solid underwriting and revenue performance. Our net loss ratio continues to improve, and new business trends are solid, including 8% growth in policies in-force. Subsequent to quarter end, Hurricane Isaias made landfall near Destin in the western Florida Panhandle as a Category 2 hurricane and quickly weakened as it moved inland.

Our claims team was deployed immediately with field adjusters on the ground in the affected areas. And we have been in direct contact with policyholders to expedite inspections and payments. Our focus is on helping our customers recover as quickly as possible, and we view the storm as manageable based on claims activity to date.

I'll turn it over to Frank to walk through our financial results. Frank.

Frank Wilcox

Thanks, Steve, and good morning. Adjusted diluted earnings per common share was $1.93 compared to an adjusted diluted earnings per common share of $1.36 in the prior year quarter. The higher adjusted diluted earnings per common share mostly stems from higher underwriting and net investment income.

Core revenue of $444.3 million was up 11.1% year-over-year, with growth primarily stemming from higher net premiums earned and net investment income. Direct premiums written were $608.9 million, up 2.7% from the prior year quarter. The increase stems from 18.5% growth in other states, partially offset by a 3.3% decrease in Florida. Overall growth mostly reflects higher policies in-force across our multi-state footprint.

Direct premiums earned were $556.7 million, up 4.2% from the prior year quarter, reflecting the direct written premiums growth over the last 12 months. Net premiums earned were $403.2 million, up 12.1% 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 91%, down 5.4 points compared to the prior year quarter. The decrease reflects a lower net loss ratio, partially offset by a higher net expense ratio. The 64.6% net loss ratio was down 5.6 points compared to the prior year quarter, with the decrease reflecting a lower ceded premium ratio. The net expense ratio was 26.4%, up 0.2 points compared to the prior year quarter, with the increase driven by higher policy acquisition costs associated with growth outside of Florida and higher other operating costs and expenses, partly offset by a lower ceded premium ratio.

During the third quarter, the company repurchased approximately 174,000 shares at an aggregate cost of $7.4 million. The company's current share repurchase authorization program has approximately 1.1 million remaining. On July 8th, 2026, the Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock payable on August 7, 2026, to shareholders of record as of the close of business on July 31, 2026.

With that, I'd like to ask the operator to open up the line for questions.

Operator

[Operator Instructions] Our first question comes from Paul Newsome with Piper Sandler.

Question-and-Answer Session

Jon Paul Newsome

Congratulations on the quarter. Maybe some thoughts on the competitive environment, both in Florida and outside of Florida, and how you see the prospects for Universal's growth in the various markets here.

Stephen Donaghy

Good morning, Paul, and thank you. We continue to write business at a very good clip, as you saw in our release, and we feel very confident about our organic growth model across all the states that we currently serve. The legislation in Florida has proven to be a benefit to the entire market, and our relationships with our agency force continues to serve us extremely well. So we continue to write business at a very good clip. Outside of Florida, we find various niches of rate adequacy and we feel really good about the business we're bringing on due to the rate adequacy. So we don't chase the business. We want to write the business where we feel good about it and it continues to serve us well.

Jon Paul Newsome

Given the very high ROEs this year, any updated thoughts on capital management, where you want to allocate the capital you're accumulating?

Frank Wilcox

Well, I think that we're going to continue on the path that we have in terms of returning value to shareholders through dividends. As you know, that repurchase plan has only got 1.1 million. We'll go to the board and have a discussion around that and the appetite for it. Number one priority has always been and will continue to be to ensure that the insurance entities are adequately capitalized for the protection of the policyholders in addition to their ability to continue to generate the premium that offers opportunities for the entire organization.

Operator

This concludes the question and answer session. I would now like to turn it back to Steve Donaghy, Chief Executive Officer, for closing remarks.

Stephen Donaghy

I'd like to thank all of our associates, consumers, agents, and our stakeholders for their continued support of Universal. Have a nice day.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.