Q1 2024 Universal Insurance Holdings Inc Earnings Call

Participants

Arash Soleimani; Chief Strategy Officer; Universal Insurance Holdings Inc

Steve Donaghy; CEO & Director; Universal Insurance Holdings Inc

Frank Wilcox; CFO; Universal Insurance Holdings Inc

Paul Newsome; Analyst; Piper Sandler Companies

Nic Iacoviello; Analyst; Dowling & Partners Securities, LLC

Presentation

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. Now I'd like to turn the conference over to Arash Soleimani, Chief Strategy Officer.

Arash Soleimani

Good morning. Thank you for joining us today and 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 are forward looking statements involve assumptions, risks, and uncertainties that could cause actual results 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 Universal Insurance, holdings.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. You can also be found on Universal's Web site at Universal Insurance Holdings.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 multiyear 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 costs and coverage were consistent with our expectations and will provide specific details at the end of May, a s 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 $1.7, up from $0.79 in the prior year quarter. The increase mostly stems from higher underwriting in net investment income, partially offset by lower commission revenue. Core revenue of [364] year-on-year, with growth primarily stemming from higher net premiums earned 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, 5.6% growth in other states. Overall growth mostly reflects one from the prior 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, 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 queue third quarter to 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 10th, 2024. T he Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock payable on May 17th, 2024, to shareholders of record as of the close of business on May 10th, 2024.
With that said, I'd like to ask the operator to open the line for questions.

Question and Answer Session

Operator

Thank you. At this time we will conduct a question-and-answer session. As a reminder, to ask a question, you'll need to press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one. Again, please stand by while we compile the Q&A roster. Our first question comes from the line of Paul Newsome of Piper Sandler. Your line is now open.

Paul Newsome

Good morning. Growth in the quarter was hoping you could talk a little bit about gum going with to some degree rapidly changing it competitive environment, particularly in Florida and foam in regard to pricing. And so within I from UBS earlier books, demeanor out at this point from a component perspective.

Steve Donaghy

Yes, good morning, Paul, and thanks for the question. You know what we're seeing more entrants coming into the market. We continue to see citizens 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 in rate.
And I think our agency force feels very confident in Universal's ability to support their books of business as well as their insured. So I think our relationships are 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, that of flowing through the book as well. Right now. I don't know if you have anything more specific than that, but be happy to answer anything further, if you'd like.

Paul Newsome

No, that was helpful. And interesting, um, you know, accruing thoughts and talk pricing from because of the tort reform coming? Not an issue between Yext, um, but I feel will respond to that. It is still pretty tough environment for so long that things will hold on for a long time. We'll do you call in that conversation. You do see pressure to improve to as an offset to tort reform home. If you do hear people talk about concerns about the full doom policies. Just do you have themselves employment, the impact that may have on what w e will use lending?

Steve Donaghy

Yes, there's well, there's a lot in that question to u npacked, Paul. We bought them I think from a Florida affordability perspective, that is an issue across the state of Florida right now. And certain 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 I've 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 and we'll take a look at that and trying to do what's best for the market for ourselves for for our shareholders and for our insurers and tried to do the right thing. I'd point you talked 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've got a little further perhaps they go too far? I don't think so. So I think as we look in the future, will trying to take all those measures into account and do the right thing. But we don't feel there's nobody calling are suggesting anything to us that we're not getting an undue pressure. So to say at this point.

Paul Newsome

Thank you.

Operator

Our next question comes from the line of Nic Iacoviello of Dowling. Your line is now open.

Nic Iacoviello

Thanks. Nice quarter. Just wondering, first off, was there any net prior year development recognized in Q1?

Steve Donaghy

Nothing on a net basis, negligible on a direct.

Nic Iacoviello

Got it. Thank you. I will get more details towards the end of May. But I was just wondering on the comment on the reinsurance program being fully supported in secured, does that currently assume a similar GAAP retention as the program place last year?

Steve Donaghy

Yes, you're referring to the use of the SaaS release yet to make that would be consistent with last year. We we feel as though that was the right thing to do based on cost and capital utilization from the parent. So yes.

Nic Iacoviello

Okay. Makes sense. Thank you. That's all I had.

Steve Donaghy

Thanks, Nic, and good day.

Operator

Thank you. That's our question and answer session. I would now like to turn it back to Steve Donaghy, CEO, for closing.

Steve Donaghy

Thank you. Like to thank our associates, our consumers, agents and our stakeholders for their continued support of Universal. 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.