Universal Insurance's Q4 2024: Contradictions in Reserves, Growth Strategy, and Catastrophe Losses Revealed

These are the key contradictions discussed in Universal Insurance's latest 2024 Q4 earnings call, specifically including: Reserve Development and Catastrophe Losses, and Growth and Reinsurance Strategy:



Impact of Hurricanes and Claims Trends:
- Universal experienced three hurricanes, including Debby, Helene, and Milton, with Milton resulting in a $45 million net retention event.
- The company reported a 107.9% net combined ratio, up 4.2 points from the previous year, primarily due to higher weather losses from Hurricane Milton.
- Universal is working to help its customers recover and has already negotiated and placed 92% of its 2025 reinsurance program.

Revenue Growth and Expansion:
- Core revenue of $386.4 million grew by 5.7% year-over-year, driven by higher net premiums earned, net investment income, and commission revenue.
- Direct premiums written rose by 8.8% year-over-year, with Florida showing 0.8% growth and other states seeing 38.4% growth.
- The growth reflects higher policies in force, higher rates, and inflation adjustments, alongside strategic expansion into new markets.

Expense Ratio Increase and Cost Management:
- The net expense ratio increased to 25.6%, up 3.8 points from the prior quarter's 21.8%.
- The increase resulted from higher policy acquisition costs due to growth outside Florida and higher other operating costs.
- Universal is managing these costs while prioritizing growth and profitability.

Share Repurchase and Dividend:
- Approximately 370,000 shares were repurchased during the fourth quarter at an aggregate cost of $7.7 million.
- The Board of Directors declared a regular quarterly cash dividend of $0.16 per common share, payable on March 14, 2025.
- These actions reflect the company's commitment to returning capital to shareholders while maintaining financial strength.