Universal Insurance Holdings Q1 2026 Earnings Call - Exceptional ROE Driven by Improved Loss Ratios and Reinsurance Security
Summary
Universal Insurance Holdings delivered a powerhouse start to 2026, headlined by an annualized adjusted return on common equity of 38.5%. The company is riding a wave of efficiency, fueled by a significant drop in net loss ratios and robust growth in direct premiums written, particularly outside the Florida market. Management's focus remains disciplined, prioritizing rate adequacy over sheer volume and maintaining a cautious but optimistic stance on the competitive landscape.
A critical pillar of this quarter's performance is the completed reinsurance renewal. By securing multi-year coverage through 2028, Universal has effectively de-risked its medium-term outlook, providing a stable foundation for continued capital return to shareholders via dividends and buybacks. While expansion outside Florida is driving up acquisition costs, the underlying math of the combined ratio suggests the strategy is working.
Key Takeaways
- Universal reported a massive 38.5% annualized adjusted return on common equity for the first quarter.
- Adjusted diluted earnings per share rose to $2.00, up significantly from $1.44 in the prior year quarter.
- The company successfully completed its 2026-2027 reinsurance renewal, securing full support for its insurance entities.
- Universal secured $352 million in additional multi-year coverage that extends through the 2027-2028 treaty period.
- Direct premiums written grew 8.5% year-over-year, with an 18.3% surge in non-Florida states.
- The net combined ratio improved to 89.7%, a 5.3 point decrease compared to the previous year.
- Net loss ratio dropped to 63.9%, reflecting better current accident year results.
- Management emphasized chasing rate adequacy rather than aggressively chasing market share to maintain profitability.
- Reinsurance retentions remain structurally identical to last year, with a $45 million retention for insurance entities.
- The company continues to return value to shareholders, having repurchased 210,000 shares during the quarter.
Full Transcript
Conference Call Moderator, Moderator, Universal Insurance Holdings: Good morning, ladies and gentlemen. Welcome to Universal’s first quarter 2026 earnings conference call. As a reminder, this conference call is being recorded. I’ll now 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 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. We had a fantastic start to the year with a 38.5% annualized adjusted return on common equity. Our top-line results were strong with growth across our multi-state footprint, including in Florida. On a separate note, I’m pleased to announce the completion of our 2026-2027 reinsurance renewal for our insurance entities, as our program is now fully supported and secured. During the renewal process in 2026, we also secured $352 million of additional multi-year coverage, taking us through the 2027-2028 treaty period. I’ll turn it over to Frank to walk through our financial results. Frank?
Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: Thank you, Steve, and good morning. Adjusted diluted earnings per common share was $2.00, compared to an adjusted diluted earnings per common share of $1.44 in the prior year quarter. The higher adjusted diluted earnings per common share mostly stems from a lower net loss ratio and higher net investment income. Core revenue of $398.2 million was up 0.8% year-over-year, with growth primarily stemming from higher net investment income and net premiums earned. Direct premiums written were $506.5 million, up 8.5% from the prior year quarter. The increase stems from 4.9% growth in Florida and 18.3% growth in other states. Overall growth mostly reflects higher policies in force and inflation adjustments across our multi-state footprint. Direct premiums earned were $531.4 million, up 3.5% from the prior year quarter, reflecting direct premiums written growth over the last 12 months.
Net premiums earned were $356.9 million, up 0.3% 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 89.7%, down 5.3 points compared to the prior year quarter. The decrease reflects a lower net loss ratio, partially offset by a higher net expense ratio. The 63.9% net loss ratio was down 6.6 points compared to the prior year quarter, with the decrease reflecting better current accident year results. The net expense ratio was 25.8%, up 1.3 points 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 of Florida. During the first quarter, the company repurchased approximately 210,000 shares at an aggregate cost of $7.1 million.
The company’s current share repurchase authorization program has approximately $13.1 million remaining. On April 10th, 2026, the Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on May 15th, 2026, to shareholders of record as of the close of business on May 8th, 2026. With that, I’d like to ask the operator to open up the line for questions.
Conference Call Moderator, Moderator, Universal Insurance Holdings: Thank you. At this time, we’ll conduct a question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one 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, Analyst, Piper Sandler: Good morning. Congratulations on the quarter. Maybe we could just start off with some thoughts or color on the competitive environment, both in Florida and outside of Florida. Get lots of investor questions about whether or not we’re seeing a change in the number of folks who are competing in those markets and maybe the speed at which, obviously, the ROEs that you and others are reporting are so huge, whether or not that will attract a lot of new competitors.
Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: Hey Paul, good morning, and thank you. I think from a competitive perspective, we analyze our rates and are chasing rate adequacy more than we are chasing business. From a competitive perspective, we feel good about where we stand. Obviously from the quarter, we can bring on business when we want to, and we see the markets profitably. That’s probably the answer I would give you. There is competition everywhere, but we feel good about our position, and our relationship with our agents has never been stronger. Yeah.
Paul Newsome, Analyst, Piper Sandler: Should we expect further price adjustments and rate adjustments for you folks in the future?
Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: We haven’t kicked off our rate analysis at this point. As we get ready to do that, we will analyze the past 12 months and see how that impacts. I think, as we continue to benefit from the legislative environment and our business, we will do the right thing by our shareholders and our partners. We’ll take that all into account and continue to do the right thing.
Paul Newsome, Analyst, Piper Sandler: Maybe some thoughts on capital management. Obviously, given where the returns are, you would be accumulating some excess capital. How do you balance the various uses of that capital today, and should we expect further repurchases as a focus or not? Maybe you could just prioritize how you think about that.
Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: Morning, Paul, this is Frank. I think we’re going to stay the course. Our number one priority with capital has always been to support the insurance entities, ensuring that they are adequately capitalized so that we can continue to produce the business that benefits the entire holding company system. That combined with continuing to return shareholder value.
Paul Newsome, Analyst, Piper Sandler: Great. I’ll let somebody else ask questions, but I appreciate the help. Thank you.
Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: Thanks, Paul. Have a good day.
Conference Call Moderator, Moderator, Universal Insurance Holdings: Thank you. One moment for our next question. Our next question comes from the line of Nicolas Iacoviello of Dowling & Partners. Your line is now open.
Nicolas Iacoviello, Analyst, Dowling & Partners: Morning. Congrats on the quarter, and thanks for taking my questions. Could we just start? I was wondering if there’s any additional details or commentary you could provide around the outcome of your reinsurance renewal?
Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: Morning, Nick, and thanks. Appreciate the comments. I think from the reinsurance perspective, we are very excited to be done and have it fully secured for 2026, 2027. We were quite happy that we also extended our multi-year agreements. From a pricing perspective, we’re going to sit on that until we get to May and release all the details as normal. We think it’d be premature for us to make public comments relative to how we did. We were very pleased with the market and very pleased with our partners for many, many years and how they treated us relative to this year.
Nicolas Iacoviello, Analyst, Dowling & Partners: Got it. Now, I know we’ll see more details in May, but is there anything you could comment on in how we should think about the retention? Is it fair to assume it’d be similar on a GAAP basis, versus the prior year, and it would include some captive usage? I get obviously you’ll have the opportunity to maybe buy down, but as it stands today, is that a fair assumption?
Frank Wilcox, Chief Financial Officer, Universal Insurance Holdings: Yeah. The retentions will remain the same for the insurance entities, $45 million. We plan to continue to use the captive in the same manner for the $66 million layer above $45 million for the first event. So structurally identical to last year.
Nicolas Iacoviello, Analyst, Dowling & Partners: Okay. Appreciate it, guys. Thank you.
Steve Donaghy, Chief Executive Officer, Universal Insurance Holdings: Thanks, Nick. Have a good day.
Conference Call Moderator, Moderator, Universal Insurance Holdings: Thank you. I’m showing no further questions at this time. I’d now like to turn it back to Stephen J. Donaghy, Chief Executive Officer, for 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 nice day.
Conference Call Moderator, Moderator, Universal Insurance Holdings: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.
