UNIVERSAL INSURANCE HOLDINGS, INC.

Previous wording

We are a vertically integrated holding company offering property and casualty insurance and value-added insurance services. In addition, we generate revenue from our investment portfolio, reinsurance brokerage services, the receipt of managing general agency fees from policy holders and from other sources of revenue (collectively “Other Revenue Sources”). We develop, market and underwrite insurance products for consumers predominantly in the personal residential homeowners’ line of business and perform substantially all insurance-related services for our insurance entities, including risk management, claims management, and distribution. Our insurance entities, Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC” and together with UPCIC, the “Insurance Entities”), offer insurance products through both an appointed independent agent network and our online distribution channels across 18 states with Florida representing 76.6% of our direct premiums written for the three months ended September 30, 2024, and with licenses to write insurance in two additional states. We seek to produce an underwriting profit (defined as earned premium-net minus losses, loss adjustment expense (“LAE”), policy acquisition costs and other operating costs) over the long term, along with growing our Other Revenue Sources.

Current wording

We are a vertically integrated holding company offering property and casualty insurance and value-added insurance services. In addition, we generate revenue from our investment portfolio, reinsurance brokerage services, the receipt of managing general agency fees from policy holders and from other sources of revenue (collectively “Other Revenue Sources”). We develop, market and underwrite insurance products for consumers predominantly in the personal residential homeowners’ line of business and perform substantially all insurance-related services for our insurance entities, including risk management, claims management, and distribution. Our insurance entities, Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC” and together with UPCIC, the “Insurance Entities”), offer insurance products through both an appointed independent agent network and our online distribution channels across 19 states with Florida representing 73.7% of our direct premiums written for the three months ended March 31, 2025. We seek to produce an underwriting profit (defined as earned premiums-net minus losses, loss adjustment expense (“LAE”), policy acquisition costs and other operating costs) over the long term, along with growing our Other Revenue Sources.

Previous wording

The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our financial condition and results of operations. This MD&A should be read in conjunction with our Financial Statements and accompanying Notes appearing elsewhere in this Report (the “Notes”). In addition, reference should be made to our audited Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements and “Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023. Except for the historical information contained herein, the discussions in this MD&A contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed above under“—Cautionary Note Regarding Forward-Looking Statements.”

Current wording

The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our financial condition and results of operations. This MD&A should be read in conjunction with our Financial Statements and accompanying Notes appearing elsewhere in this Report (the “Notes”). In addition, reference should be made to our audited Condensed Consolidated Financial Statements and accompanying Notes to Condensed Consolidated Financial Statements and“Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2024. Except for the historical information contained herein, the discussions in this MD&A contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed above under“—Cautionary Note Regarding Forward-Looking Statements.”

Previous wording

As a result of market conditions in Florida, personal residential insurance premiums have risen significantly, many insurers have reduced coverages, and underwriting standards have tightened. Due to these conditions and factors more generally affecting the U.S. and global reinsurance markets, reinsurance for Florida property insurance risk also has been subject to increases in pricing and less favorable terms in recent years. These market forces combined to decrease insurance availability among admitted insurers, and consequently to increase the policy count of Citizens. Although Citizens was created to be the “market of last resort” or residual property insurance market in Florida, its rate increases are limited by law, resulting in its policies typically being priced lower than admitted market policies. This causes Citizens, for many policy types and areas of Florida, to become viewed as a desirable lower-cost alternative to the admitted market.

Current wording

As a result of market conditions in Florida, personal residential insurance premiums have risen significantly, many insurers have reduced coverages, and underwriting standards have tightened. Due to these conditions and factors more generally affecting the U.S. and global reinsurance markets, reinsurance for Florida property insurance risk also has been subject to increases in pricing and less favorable terms in recent years. These market forces combined to decrease insurance availability among admitted insurers, and consequently to increase the policy count of Citizens. Although Citizens was created to be the “market of last resort” or residual property insurance market in Florida, its rate increases are limited by law, resulting in its policies typically being priced lower than admitted market policies. This causes Citizens, for many policy types and areas of Florida, to become viewed as a desirable lower-cost alternative to the admitted market. Even as the Florida market stabilizes and shows signs of improvement, the difference between Citizens’ rates and those of the admitted market, which have accumulated over several years, can delay the ability of admitted market insurers to be an effective alternative to Citizens for some policy types depending on coverage, location or other characteristics. The Company’s competitive position compared to Citizens, and the competitive position of the admitted market as a whole, might improve over the next several years as Citizens phases-in mandatory flood insurance requirement. Admitted market insurers in Florida are not subject to the same mandate.

Previous wording

Rate filings rely upon past loss and expense data and take time to develop, file and implement. We therefore can experience significant delays between identifying needed rate adjustments, filing the associated rate changes, and ultimately collecting and earning the resulting increased premiums. Further, the ultimate effectiveness of Florida’s reforms is still unknown and difficult to quantify, especially because future market conditions or claims patterns might differ from recent or past experience. Similarly, the Company evaluates and periodically adjusts its policy forms in response to market factors and competitive considerations. While policy form changes can be beneficial in the Company’s risk management initiatives, like with rate adjustments, we can experience delays between identifying desired changes, filing and gaining regulatory approval of the changes, and implementing the new forms.

Current wording

Rate filings rely upon past loss and expense data and take time to develop, file and implement. We therefore can experience significant delays between identifying needed rate adjustments, filing the associated rate changes, and ultimately collecting and earning the resulting increased premiums. Further, the ultimate effectiveness of Florida’s reforms is still unknown and difficult to quantify, especially because future market conditions or claims patterns might differ from recent or past experience. This uncertainty can be compounded by other anticipated changes affecting rating or risk selection, such as FLOIR’s implementation of updated windstorm mitigation discounts. The effects of a revised discount program currently are unknown and difficult to predict both at the individual policy level and at the aggregate level with respect to insurers’ competitive positions. Similarly, the Company evaluates and periodically adjusts its policy forms in response to market factors and competitive considerations. While policy form changes can be beneficial in the Company’s risk management initiatives, like with rate adjustments, we can experience delays between identifying desired changes, filing and gaining regulatory approval of the changes, and implementing the new forms.

Previous wording

The Company updates its claims-handling procedures over time in response to market trends. The Company has adopted initiatives to adjust and pay straightforward, meritorious claims as promptly as possible to mitigate the adverse impacts that can be seen with claims that remain open for longer periods. The Company also has increasingly used video and other technology to facilitate reviews of damaged property and improve efficiency in the claims process. In addition, we develop in-house expertise, often in the form of dedicated internal units, to respond to certain types of claims such as water damage claims, represented claims, and large-loss claims. The Company additionally has established significant in-house legal services to address the high volume of litigated or represented claims as cost-effectively as possible, as well as a subrogation unit that seeks to mitigate losses for the benefit of policyholders and the Company when damages are caused by third parties.

Current wording

The Company updates its claims-handling procedures over time in response to market trends. The Company has adopted initiatives to adjust and pay straightforward, meritorious claims as promptly as possible to mitigate the adverse impacts that can be seen with claims that remain open for longer periods. The Company also has increasingly used video and other technology to facilitate reviews of damaged property and improve efficiency in the claims process. In addition, we develop in-house expertise to respond to certain types of claims such as water damage claims, represented claims, and large-loss claims. The Company additionally has established significant in-house legal services to address the high volume of litigated or represented claims as cost-effectively as possible, as well as a subrogation unit that seeks to mitigate losses for the benefit of policyholders and the Company when damages are caused by third parties.

Previous wording

The active 2024 hurricane season adds complexity to a market that still experiences residual adverse effects of pre-reform laws and behaviors even as it begins to benefit from the law changes. As a result of the reforms and operational initiatives taken by the Company in recent years, the Insurance Entities have cautiously increased their appetite for new business. Several new competitors also have entered the Florida market after the law changes, with some seeking to assume policies from Citizens. It is premature to evaluate the impact of the current hurricane season on reinsurance and capital markets, competitors and potential future entrants to the market, and the overall level of admitted market writings and corresponding effect on Citizens’ exposures. Additionally, the full impact of the law changes and our operational initiatives on the claims settlement process and associated costs is unknown and may evolve differently following an active hurricane season than in a non-catastrophe environment. We will continue to monitor these impacts and market conditions on recording and reporting of claims costs, rate levels, and competitive conditions.

Current wording

The active 2024 hurricane season added complexity to a market that still experiences residual adverse effects of pre-reform laws and behaviors even as it begins to benefit from the law changes. As a result of the reforms and operational initiatives taken by the Company in recent years, the Insurance Entities have cautiously increased their appetite for new business. Several new competitors also have entered the Florida market after the law changes, with some seeking to assume policies from Citizens. New and existing competitors in the post-reform market often are selective as to the policy types, locations, coverage limits or other characteristics of policies they write, leading to segmentation in the market and the Insurance Entities’ often facing different competitors or different degrees of competition based on policy type or location. It is premature to evaluate the impact of the recent hurricane season on reinsurance and capital markets, competitors and potential future entrants to the market, and the overall level of admitted market writings and corresponding effect on Citizens’ exposures. Additionally, the full impact of the law changes and our operational initiatives on the claims settlement process and associated costs is unknown and may evolve differently following an active hurricane season than in a non-catastrophe environment. We will continue to monitor these impacts and market conditions on recording and reporting of claims costs, rate levels, and competitive conditions.

Previous wording

In April 2023, UPCIC submitted and received approval for a rate decrease of 1.4% for Homeowners’, and a rate decrease of 1.6% for Dwelling Fire in the State of Florida, effective July 15, 2023, for new and renewal business. This filing resulted from UPCIC’s statutorily required participation in Florida’s Reinsurance to Assist Policyholders Program (“RAP”). This program is unrelated to the FHCF and allowed insurers to access a layer of reinsurance coverage below the FHCF industry retention at no cost to the insurer. In exchange the Insurance Entities adopted a corresponding one-year rate reduction. The RAP program expired with the reinsurance contract year ending May 31, 2024. Accordingly, the rate decrease that was temporarily implemented in response to the RAP coverage expired one year from its effective date, on July 15, 2024.

Current wording

In April 2023, UPCIC submitted and received approval for a rate decrease of 1.4% for Homeowners’, and a rate decrease of 1.6% for Dwelling Fire in the State of Florida, effective July 15, 2023, for new and renewal business. This filing resulted from UPCIC’s statutorily required participation in Florida’s Reinsurance to Assist Policyholders Program (“RAP”). This program was unrelated to the FHCF and allowed insurers to access a layer of reinsurance coverage below the FHCF industry retention at no cost to the insurer. In exchange the Insurance Entities adopted a corresponding one-year rate reduction. The RAP program expired with the reinsurance contract year ended May 31, 2024. Accordingly, the rate decrease that was temporarily implemented in response to the RAP coverage expired one year from its effective date, on July 15, 2024.

Previous wording

In July 2023, UPCIC filed a 7.5% rate increase on Florida personal residential homeowners’ line of business, effective July 17, 2023, for new business and November 4, 2023, for renewal business. Additionally, in October 2023, UPCIC filed a 4.1% rate increase on Florida personal dwelling-fire lines of business, effective January 15, 2024, for both new and renewal business. Both of these rate increases were implemented under use and file rating laws and subsequently received regulatory approval. In August 2024, UPCIC implemented new homeowners rates for new policies, resulting in an average rate decrease of 1.5% compared to previous rates. The implementation of these rates for renewal business was initially scheduled for November 2024 but has been postponed due to a tolling period for regulatory reviews adopted by the Florida Office of Insurance Regulation following Hurricanes Helene and Milton. UPCIC will seek to implement the filed rates after the expiration of the tolling period.

Current wording

In July 2023, UPCIC filed a 7.5% rate increase on Florida personal residential homeowners’ line of business, effective July 17, 2023, for new business and November 4, 2023, for renewal business. Additionally, in October 2023, UPCIC filed a 4.1% rate increase on Florida personal dwelling-fire lines of business, effective January 15, 2024, for both new and renewal business. Both of these rate increases were implemented under use and file rating laws and subsequently received regulatory approval. In August 2024, UPCIC implemented new homeowners rates for new policies, resulting in an average rate decrease of 1.5% compared to previous rates. Rates for renewal business are being implemented with an effective date of May 17th, 2025.

Previous wording

•Indiana: +8.0% effective March 22, 2024, for new business, and May 11, 2024, for renewal business

Current wording

•Alabama: +8.0% effective March 13, 2025 for new business and renewal business

Previous wording

Adjusted net income (loss) attributable to common stockholders ― is a non-GAAP measure that is calculated as GAAP net income (loss) attributable to common stockholders, less net realized gains (losses) on investments and net changes in unrealized gains (losses) on investments, net of tax. Management believes this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Current wording

Adjusted net income (loss) available to common stockholders ― is a non-GAAP measure that is calculated as GAAP net income (loss) available to common stockholders, less net realized gains (losses) on investments and net changes in unrealized gains (losses) on investments, net of tax. Management believes this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Previous wording

Adjusted return on common equity (Adjusted “ROCE”) ― is a non-GAAP measure that is calculated as actual or annualized adjusted net income attributable to common stockholders divided by average adjusted common stockholders' equity, with the denominator excluding current period income statement net realized gains (losses) on investments and net changes in unrealized gains (losses) on investments, net of tax. Management believes this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Current wording

Adjusted return on common equity (Adjusted “ROCE”) ― is a non-GAAP measure that is calculated as actual or annualized adjusted net income available to common stockholders divided by average adjusted common stockholders’ equity, with the denominator excluding current period income statement net realized gains (losses) on investments and net changes in unrealized gains (losses) on investments, net of tax. Management believes this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Previous wording

Core Loss Ratio ― a common operational metric used in the insurance industry to describe the ratio of current accident year expected losses and LAE, excluding current accident year weather events beyond those expected, to premiums earned. Core loss ratio is an important measure identifying profitability trends of premiums in force. Core losses consists of losses and LAE excluding current accident year weather events beyond those expected and prior years’ reserve development. The financial benefit from the management of claims, including claim fees ceded to reinsurers, is recorded in the condensed consolidated financial statements as a reduction to core losses. The core loss ratio can be measured on a direct basis, using direct earned premiums, or on a net basis, using premiums earned, net (i.e., direct premiums earned less ceded premiums earned).

Current wording

Core Loss Ratio ― a common operational metric used in the insurance industry to describe the ratio of current accident year expected losses and LAE, excluding current accident year weather events beyond those expected, to premiums earned. Core loss ratio is an important measure identifying profitability trends of premiums in force. Core losses consist of losses and LAE excluding current accident year weather events beyond those expected and prior years’ reserve development. The financial benefit from the management of claims, including claim fees ceded to reinsurers, is recorded in the condensed consolidated financial statements as a reduction to core losses. The core loss ratio can be measured on a direct basis, using direct earned premiums, or on a net basis, using premiums earned, net (i.e., direct premiums earned less ceded premiums earned).

Previous wording

Expense Ratio (Including Policy Acquisition Cost Ratio and Other Operating Cost Ratio) ―calculated as general and administrative expenses as a percentage of premiums earned, net. General and administrative expenses are comprised of policy acquisition costs and other operating costs, which includes such items as underwriting costs, facilities, and corporate overhead. The expense ratio, including the sub-expense ratios of policy acquisition cost ratio and other operating cost ratio, are indicators to management of the Company’s cost efficiency in acquiring and servicing its business and the impact of expense items to overall profitability.

Current wording

Expense Ratio (Including Policy Acquisition Cost Ratio and Other Operating Cost Ratio) ―calculated as general and administrative expenses as a percentage of premiums earned, net. General and administrative expenses are comprised of policy acquisition costs and other operating costs, which include such items as underwriting costs, facilities, and corporate overhead. The expense ratio, including the sub-expense ratios of policy acquisition cost ratio and other operating cost ratio, are indicators to management of the Company’s cost efficiency in acquiring and servicing its business and the impact of expense items to overall profitability.

Previous wording

Losses and Loss Adjustment Expense Ratio or Loss and LAE Ratio ―a measure of the cost of claims and claim settlement expenses incurred in a reporting period as a percentage of premiums earned in that same reporting period. Losses and LAE incurred in a reporting period includes both amounts related to the current accident year and prior accident years, if any, referred to as development. Ultimate losses and LAE are based on actuarial estimates with changes in those estimates recognized in the period the estimates are revised. Losses and LAE consist of claim costs arising from claims occurring and settling in the current period, an estimate of claim costs for reported but unpaid claims, an estimate of unpaid claim costs for incurred-but-not-reported claims and an estimate of claim settlement expenses associated with reported and unreported claims which occurred during the reporting period. The loss and LAE ratio can be measured on a direct basis, which includes losses and LAE divided by direct earned premiums, or on a net basis, which includes losses and LAE divided by premiums earned, net (i.e., direct premium earned less ceded premium earned). The net loss and LAE ratio is a measure of underwriting profitability after giving consideration to the effect of reinsurance. Trends in the net loss and LAE ratio are an indication to management of current and future profitability.

Current wording

Losses and Loss Adjustment Expense Ratio or Loss and LAE Ratio ―a measure of the cost of claims and claim settlement expenses incurred in a reporting period as a percentage of premiums earned in that same reporting period. Losses and LAE incurred in a reporting period includes both amounts related to the current accident year and prior accident years, if any, referred to as development. Ultimate losses and LAE are based on actuarial estimates with changes in those estimates recognized in the period the estimates are revised. Losses and LAE consist of claim costs arising from claims occurring and settling in the current period, an estimate of claim costs for reported but unpaid claims, an estimate of unpaid claim costs for incurred-but-not-reported claims and an estimate of claim settlement expenses associated with reported and unreported claims which occurred during the reporting period. The loss and LAE ratio can be measured on a direct basis, which includes losses and LAE divided by direct earned premiums, or on a net basis, which includes losses and LAE divided by premiums earned, net (i.e., direct premium earned less ceded premium earned). The net loss and LAE ratio are measures of underwriting profitability after giving consideration to the effect of reinsurance. Trends in the net loss and LAE ratio are an indication to management of current and future profitability.

Previous wording

Return on Average Common Equity (“ROCE”) ―calculated as actual net income (loss) attributable to common stockholders divided by average common stockholders' equity. ROCE is a capital profitability measure of how efficiently management creates profits.

Current wording

Return on Average Common Equity (“ROCE”) ―calculated as actual net income (loss) available to common stockholders divided by average common stockholders' equity. ROCE is a capital profitability measure of how efficiently management creates profits.

Previous wording

•Rate filings and automatic policy inflation adjustments to policy insured values are increasing written and earned premium as the new rates and property insured values take effect on policy renewals and new business, and earn prospectively over the policy period. There were 844,539 policies-in-force as of the end of September 30, 2024 which represents an increase of 36,986 or 4.6% compared to September 30, 2023. For the three months ended September 30, 2024 policies-in-force increased by 11,106 or 1.3% and for the nine months ended September 30, 2024, policies-in-force increased by 34,607 or 4.3%.

Current wording

•Rate filings and automatic policy inflation adjustments to policy insured values are impacting written and earned premium as the new rates and property insured values take effect on policy renewals and new business, and earn prospectively over the policy period. Management is continuing its efforts to prudently manage new business risk selection and improve risk exposure diversification, while rate increases are taking effect to improve profitability.

Previous wording

Direct premiums written increased by $109.6 million, or 7.4%, for the nine months ended September 30, 2024, driven by premium growth within our Florida business of $30.6 million, or 2.5%, and premium growth in our other states business of $79.0 million, or 29.9%, as compared to the nine months ended September 30, 2023. The primary factors contributing to the increase in written premiums were the rate changes implemented in Florida and certain other states and policy inflation adjustments. Additionally, there was an increase in policies in force across 15 states. In total, policies in force increased 34,607, or 4.3%, from 809,932 at December 31, 2023 to 844,539 at September 30, 2024. A summary of the recent rate adjustments which are driving written premium is discussed above under “Overview—Trends and Geographical Distribution—Florida Trends.”

Current wording

Direct premiums written increased by $20.9 million, or 4.7%, for the three months ended March 31, 2025, driven by premium growth in our other states business of $31.7 million, or 34.7%, as compared to the three months ended March 31, 2024 offset by a reduction in premium within our Florida business of $10.8 million, or 3.0%. The primary factors contributing to the increase in direct written premiums were new and previous rate changes, increased policies in force during 2025 and policy inflation adjustments. There was an increase in policies in force across 15 states. In total, policies in force increased 9,291, or 1.1%, from 855,526 at December 31, 2024 to 864,817 at March 31, 2025. A summary of the recent rate increases which are driving increases in written premium is discussed above under“Overview—Trends and Geographical Distribution—Florida Trends.”

Previous wording

Rate changes are applied on new business submissions at policy inception and on renewals from the effective date of their renewal, and then are earned subsequently over the policy period. The rate changes in Florida and other markets are in response to claim costs in recent years driven by costs of material and labor associated with claims, the cost of weather events, the cost of catastrophe and other reinsurance protecting policyholders and, more importantly, the prevalence of represented and litigated claims in Florida. Due to the time associated with analyzing data, preparing and submitting rate filings, implementing new rate levels and earning the corresponding premiums, the Insurance Entities’ rate adjustments typically lag behind their experience by months or even years. In addition, the Insurance Entities’ policies provide for coverage limits to be adjusted at renewal which adjust insured value coverage limits for the impact of changes in inflation occurring since the prior renewal. This is based on third-party industry data sources that monitor inflation factors such as changes in costs for residential building materials and labor.

Current wording

Rate changes are applied on new business submissions at policy inception and on renewals from the effective date of their renewal, and then are earned subsequently over the policy period. Rate changes that are implemented are in response to trends in claim costs driven by changes in costs of material and labor associated with claims and by law changes in the Florida market, the cost of weather events, the cost of catastrophe and other reinsurance protecting policyholders and the legacy effect of the cost to settle litigated claims in Florida. See“Overview—Trends and Geographical Distribution—Florida Trends and Summary of Recent Rate Changes.” Due to the time associated with analyzing data, preparing and submitting rate filings, implementing new rate levels and earning the corresponding premiums, the Insurance Entities’ rate adjustments typically lag their experience by months or even years. The Insurance Entities’ policies also adjust coverage limits at renewal to account for inflation since the last renewal which is based on third-party industry data sources that monitor inflation factors.

Previous wording

Direct premium earned increased by $33.4 million, or 7.0%, for the three months ended September 30, 2024. This change is attributed to the recognition of premiums written over the preceding twelve months, incorporating the effects of implemented rate filings and policy premium adjustments prompted by inflation-induced changes in insured values. See the discussion above for the― “Overview-Summary of Recent Rate Changes.”

Current wording

Direct premium earned increased by $31.2 million, or 6.5%, for the three months ended March 31, 2025. This increase is due to premiums written over the past year, including rate filings, policy adjustments from inflation, and higher policy counts. See the discussion above for the― “Overview-Summary of Recent Rate Changes.”

Previous wording

Reinsurance enables our Insurance Entities to limit potential exposures to catastrophic events and other covered events. Ceded premium represents premiums paid to reinsurers for this protection and is a cost which reduces net written and net earned premiums. In total, ceded premium earned increased $18.7 million, or 13.1%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase in reinsurance costs in Q3 2024 is attributable to higher costs for the 2024/2025 reinsurance contract period compared to the 2023/2024 period, as well as reinstatement premiums incurred in the third quarter of 2024, which were not present in the equivalent period of 2023. The lower costs during the 2023/2024 reinsurance contract period were due to the mandatory participation of the Insurance Entities in the Florida RAP program, which provided certain reinsurance protection at no cost. Reinsurance costs, as a percentage of direct premium earned, increased to 31.9% in the three months ended September 30, 2024 compared to 30.2% in the three months ended September 30, 2023. The lower reinsurance costs in 2023 had a favorable effect on financial ratios that are based on net earned premium. Reinsurance costs associated with each year’s reinsurance program are earned over the annual policy period which typically runs from June 1 st to May 31 st. See the discussion above for the Insurance Entities’ 2024-2025 reinsurance programs and “Item 1— Note 4 (Reinsurance).”

Current wording

Reinsurance enables our Insurance Entities to mitigate potential exposures to catastrophic events and other covered incidents. Annually, the Insurance Entities enter into agreements with various third-party reinsurers, the Florida Hurricane Catastrophe Fund (“FHCF”), and utilize protection from a captive arrangement to secure necessary reinsurance coverage. Previous years also included reinsurance coverage provided by a catastrophe bond and the Florida RAP program. For further details, refer to “Item 7— Management’s Discussion and Analysis— Reinsurance”. Reinsurance costs associated with each year’s reinsurance program are recognized over the annual policy period, typically from June 1st to May 31st. Specific reinsurance policies require reinstatement premiums based on contractual triggering events. Ceded reinsurance premiums and ceded reinstatement premiums (collectively “ceded premiums”) are recognized over the coverage period of the underlying contract. Ceded premiums represent amounts payable to reinsurers for reinsurance protection, and reduce both written and earned premiums. In the first quarter of 2025, reinstatement premiums for prior hurricanes were recorded, totaling $0.3 million compared to no reinstatement premiums in the first quarter of 2024. In total, ceded premium earned increased $9.5 million, or 6.4%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The increase in reinsurance costs in the first quarter of 2025 is attributable to higher costs for the 2024/2025 reinsurance contract period compared to the 2023/2024 period, as well as reinstatement premiums incurred in the first quarter of 2025, which were not present in the equivalent period of 2024. The lower costs during the 2023/2024 reinsurance contract period were due to the mandatory participation of the Insurance Entities in the Florida RAP program, which provided certain reinsurance protection at no cost. Reinsurance expenditure rose in the quarter ending March 31, 2025 compared to the quarter ended March 31, 2024, while the ratio of ceded premiums to direct premiums remained steady at 30.7% owing to a proportional increase in direct earned premiums. See the discussion above for the Insurance Entities’ 2024-2025 reinsurance programs and“Item 1— Note 4 (Reinsurance).”

Previous wording

Policy fees for the three months ended September 30, 2024 were $5.2 million compared to $5.1 million for the three months ended September 30, 2023. The increase of $0.1 million, or 1.6%, was the result of an increase in the combined total number of policies written during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 in states in which we are permitted to charge this fee.

Current wording

Policy fees for the three months ended March 31, 2025 were $4.5 million compared to $4.4 million for the three months ended March 31, 2024. The increase of $0.1 million, or 2.0%, was the result of an increase in the combined total number of policies written during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 in states in which we are permitted to charge this fee.

Previous wording

Other revenue, representing revenue from policy installment fees, premium financing, and other miscellaneous income, was $2.1 million for the three months ended September 30, 2024 compared to $2.0 million for the three months ended September 30, 2023.

Current wording

Other revenue, representing revenue from policy installment fees, premium financing, and other miscellaneous income, was $2.3 million for the three months ended March 31, 2025 compared to $1.9 million for the three months ended March 31, 2024.

Previous wording

We believe the legislation passed in late 2022 represents a positive step towards reducing claim costs in Florida and management is optimistic about its eventual benefits. The Company is beginning to realize some of those benefits in 2024 for policies fully subject to this legislation. However, the full transition to these new laws will take several years. Many of the reforms apply only to policies written or renewed after the effective date of the legislation and provide marginal benefit for claims filed on policies issued prior to the new laws’ effective date. As for prior policy periods, with respect to some aspects of the reforms, insurers must continue to adjust claims under the prior laws that were subject to abuse while awaiting the expiration of claim reporting periods and statute of limitations periods applicable to those policies. Therefore, it will be several years until the abusive claim practices permitted under the prior laws are fully extinguished and the full benefit of the legislation can be realized.

Current wording

Legislation passed in late 2022 aims to reduce claim costs in Florida as the benefits of the reforms are realized. The Company is seeing some benefits of this legislation in 2025 for policies issued after the effective date of the reforms. The transition to the new laws will take several years as many reforms only apply to policies written or renewed after the effective date. Claims under prior laws are still being adjusted, and it will be several years before the impact of abusive practices under the old laws is completely removed, allowing the full benefits of the legislation to be realized.

Previous wording

For the three months ended September 30, 2024, general and administrative expenses were $87.1 million compared to $78.3 million during the three months ended September 30, 2023, as follows (dollars in thousands):

Current wording

For the three months ended March 31, 2025, general and administrative expenses were $87.2 million compared to $78.7 million during the three months ended March 31, 2024, as follows (dollars in thousands):

Previous wording

For the nine months ended September 30, 2024, general and administrative expenses increased by $22.0 million compared to the nine months ended September 30, 2023, which was the result of an increase in policy acquisition costs of $13.2 million and an increase in other operating costs of $8.7 million. The total general and administrative expense ratio was 24.7% for the nine months ended September 30, 2024 compared to 25.2% for the nine months ended September 30, 2023. See “—Reinsurance” section above for further information.

Current wording

For the three months ended March 31, 2025, general and administrative expenses increased by $8.6 million, compared to the three months ended March 31, 2024, which was the result of an increase in policy acquisition costs of $5.8 million and an increase in other operating costs of $2.8 million. The total general and administrative expense ratio was 24.5% for the three months ended March 31, 2025 compared to 23.6% for the three months ended March 31, 2024.

Previous wording

As a result of the trends discussed above for losses and LAE and general and administrative expenses, the combined ratio for the nine months ended September 30, 2024 was 102.8% compared to 103.5% for the nine months ended September 30, 2023.

Current wording

As a result of the trends discussed in net premiums earned and net operating expense, the combined ratio for the three months ended March 31, 2025 was 95.0% compared to 95.5% for the three months ended March 31, 2024.

Previous wording

Interest and amortization of debt issuance costs were $1.6 million for each of the three months ended September 30, 2024 and 2023.

Current wording

Interest and amortization of debt issuance costs were $1.6 million for each of the three months ended March 31, 2025 and 2024, the majority of which is related to our senior unsecured notes.

Previous wording

Income tax benefit was $2.0 million for each of the three months ended September 30, 2024 and 2023. Our effective tax rate (“ETR”) decreased to 10.8% for the three months ended September 30, 2024, as compared to 24.9% for the three months ended September 30, 2023. See “Item 1—Note 9 (Income Taxes)” for a table of items reconciling statutory rates to the effective rate for three months ended September 30, 2024 and 2023.

Current wording

Income tax expense was $14.0 million, and $13.8 million, for the three months ended March 31, 2025 and 2024, respectively. Our effective tax rate (“ETR”) decreased to 25.3% for the three months ended March 31, 2025, as compared to 29.1% for the three months ended March 31, 2024. See “Item 1—Note 9 (Income Taxes)” for a table of items reconciling statutory rates to the effective rate for three months ended March 31, 2025 and 2024.

Previous wording

Other comprehensive income, net of taxes for the nine months ended September 30, 2024 was $28.6 million compared to other comprehensive loss of $3.3 million for the nine months ended September 30, 2023. reflecting after-tax changes in fair value of available-for-sale debt securities held in our investment portfolio and reclassifications out of accumulated other comprehensive income for available-for-sale debt securities sold. The improvement in the nine months ended September 30, 2024 reflects favorable shifts in market prices during 2024 compared to 2023. During 2024, maturing securities and investment returns were reinvested at market rates, reducing unrealized losses on maturing securities. The maturity of the remaining securities in an unrealized loss position has also reduced during the year. Over time, unrealized losses on securities in an unrealized loss position lessen as the remaining maturity shortens and securities approach their maturity or par value. See the discussion above and “Item 1—Note 11 (Other Comprehensive Income (Loss))” for additional information about the amounts comprising other comprehensive income (loss), net of taxes for these periods and “Item 1—Note 3 (Investments)” for explanations on changes in investments.

Current wording

Other comprehensive income, net of taxes for the quarter ended March 31, 2024 was $12.1 million compared to other comprehensive loss of $2.5 million for the prior year quarter reflecting after-tax changes in fair value of available-for-sale debt securities held in our investment portfolio and reclassifications out of accumulated other comprehensive income (loss) for available-for-sale debt securities sold. This quarter’s results reflect favorable shifts in market prices during 2025 compared to 2024. During 2025, maturing securities and investment returns were reinvested at market rates, reducing unrealized losses on maturing securities. The maturity of the remaining securities in an unrealized loss position has also reduced during the year. Over time, unrealized losses on securities in an unrealized loss position lessen as the remaining maturity shortens and securities approach their maturity or par value. See the discussion above and “Part II—Item 8—Note 14 (Other Comprehensive Income (Loss))” for additional information about the amounts comprising other comprehensive income (loss), net of taxes for these periods and “Part II—Item 8—Note 3 (Investments)” for explanations on changes in investments.

Previous wording

Core revenue, representing total GAAP revenue, excluding net realized gains (losses) on investments and net changes in unrealized gains (losses) on investments, was $381.4 million for the three months ended September 30, 2024 compared to $361.8 million for the three months ended September 30, 2023.

Current wording

Core revenue, representing total GAAP revenue, excluding net realized gains (losses) on investments and net changes in unrealized gains (losses) on investments, was $394.9 million for the three months ended March 31, 2025 compared to $364.9 million for the three months ended March 31, 2024.

Previous wording

Adjusted operating income (loss) represents GAAP operating income (loss), excluding net realized gains (losses) on investments and net changes in unrealized gains (losses) on investments. Adjusted operating loss was $22.7 million for the three months ended September 30, 2024 compared to adjusted operating loss of $4.5 million for the three months ended September 30, 2023.

Current wording

Adjusted operating income (loss) represents GAAP operating income (loss), excluding net realized gains (losses) on investments and net changes in unrealized gains (losses) on investments. Adjusted operating income was $57.1 million for the three months ended March 31, 2025 compared to adjusted operating income of $46.1 million for the three months ended March 31, 2024.

Previous wording

Adjusted operating income (loss) margin represents adjusted operating income (loss) divided by core revenue. Adjusted operating loss margin was 5.9% for the three months ended September 30, 2024 compared to adjusted operating loss margin of 1.3% for the three months ended September 30, 2023.

Current wording

Adjusted operating income (loss) margin represents adjusted operating income (loss) divided by core revenue. Adjusted operating income margin was 14.5% for the three months ended March 31, 2025 compared to adjusted operating income margin of 12.6% for the three months ended March 31, 2024.

Previous wording

Adjusted net income (loss) attributable to common stockholders represents GAAP net income (loss) attributable to common stockholders, excluding net realized gains (losses) on investments and net changes in unrealized gains (losses) on investments, net of tax. Adjusted net loss attributable to common stockholders was $20.8 million for the three months ended September 30, 2024 compared to adjusted net loss attributable to common stockholders of $4.6 million for the three months ended September 30, 2023.

Current wording

Adjusted net income (loss) available to common stockholders represents GAAP net income (loss) available to common stockholders, excluding net realized gains (losses) on investments and net changes in unrealized gains (losses) on investments, net of tax. Adjusted net income available to common stockholders was $41.4 million for the three months ended March 31, 2025 compared to adjusted net income available to common stockholders of $31.4 million for the three months ended March 31, 2024.

Previous wording

Diluted adjusted earnings (loss) per common share represents adjusted net income (loss) available to common stockholders divided by weighted average diluted common shares outstanding. Diluted adjusted earnings (loss) per share computations exclude any potential common stock instruments that would decrease the loss per share, as they are anti-dilutive. Diluted adjusted loss per common share was $0.73 for the three months ended September 30, 2024 compared to diluted adjusted loss per common share of $0.16 for the three months ended September 30, 2023.

Current wording

Diluted adjusted earnings (loss) per common share represents adjusted net income (loss) available to common stockholders divided by weighted average diluted common shares outstanding. Diluted adjusted earnings (loss) per share computations exclude any potential common stock instruments that would decrease the loss per share, as they are anti-dilutive. Diluted adjusted earnings per common share was $1.44 for the three months ended March 31, 2025 compared to diluted adjusted earnings per common share of $1.07 for the three months ended March 31, 2024.

Previous wording

Total invested assets were $1.37 billion as of September 30, 2024 compared to $1.16 billion as of December 31, 2023. The increase is primarily attributable to investment of excess cash into the portfolio, unrealized gains on our debt securities and equity portfolios, and increases in net investment income. Cash and cash equivalents were $333.7 million at September 30, 2024 compared to $397.3 million at December 31, 2023, a decrease of 16.0%. See below “—Liquidity and Capital Resources” for more information. Cash and cash equivalents are invested short-term until needed to settle loss and LAE payments, reinsurance premium payments, and operating cash needs, or until they are deployed by our investment advisors.

Current wording

Total invested assets were $1.43 billion as of March 31, 2025 compared to $1.37 billion as of December 31, 2024. The increase is primarily attributable to investment of excess cash into the portfolio, unrealized gains on our debt and equity securities, and increases in net investment income. Cash and cash equivalents were $398.2 million at March 31, 2025 compared to $259.4 million at December 31, 2024, an increase of 53.5%. See below “—Liquidity and Capital Resources” for more information. Cash and cash equivalents are invested short-term until needed to settle loss and LAE payments, reinsurance premium payments, and operating cash needs, or until they are deployed by our investment advisors.

Previous wording

Prepaid reinsurance premiums represent the portion of unearned ceded written premium that will be earned pro-rata over the coverage period of our reinsurance program, which runs from June 1 st to May 31 st of the following year. The increase of $182.6 million to $418.8 million as of September 30, 2024 was primarily due to increased reinsurance costs relating to the placement of our 2024-2025 catastrophe reinsurance program on June 1, 2024, less amortization of ceded written premium for the reinsurance costs earned since the beginning of the new program. See “Part I— Item 2— “Reinsurance Program” regarding the Company’s reinsurance placement.

Current wording

Prepaid reinsurance premiums reflect the portion of unearned ceded written premium, and may include reinstatement premiums, that will be earned on a pro-rata basis over the coverage period of our reinsurance program, which spans from June 1st to May 31st of the following year. The annual cost initially increases prepaid reinsurance, which is then reduced as prepaid reinsurance is recognized as ceded premiums earned in the Condensed Consolidated Statements of Income, over the policy period of the reinsurance, which typically runs from June 1 st to May 31 st. As of March 31, 2025, the decrease by $157.2 million to $105.5 million was primarily attributed to the amortization of ceded unearned premiums from the 2024-25 catastrophe reinsurance program, commencing on June 1, 2024, and expiring on May 31, 2025. For further details, please refer to “Part I—Item 2—“Reinsurance Program” regarding the Company’s reinsurance placement.

Previous wording

Premiums receivable, net represents amounts receivable from policyholders. The increase in premiums receivable, net of $15.3 million to $92.4 million as of September 30, 2024 is consistent with premium trends including seasonality and consumer payment behaviors.

Current wording

Premiums receivable, net represents amounts receivable from policyholders. The decrease in premiums receivable, net of $6.1 million to $71.9 million as of March 31, 2025 is consistent with premium trends including seasonality and consumer payment behaviors.

Previous wording

Deferred policy acquisition costs (“DPAC”) increased by $15.3 million to $125.3 million as of September 30, 2024, and is consistent with written premium trends and changes in commissions paid to agents. See “Item 1—Note 5 (Insurance Operations)” for a roll-forward in the balance of our DPAC.

Current wording

Deferred policy acquisition costs (“DPAC”) decreased by $5.3 million to $115.8 million as of March 31, 2025, and is consistent with written premium trends and changes in commissions paid to agents. See“Item 1—Note 5 (Insurance Operations)” for a roll-forward in the balance of our DPAC.

Previous wording

Deferred income taxes represent the estimated tax asset or tax liability caused by temporary differences between the tax return basis of certain assets and liabilities and amounts recorded in the financial statements. During the nine months ended September 30, 2024, deferred income tax assets decreased by $19.5 million to $23.7 million, primarily due to an increase in unrealized gains` on investments. Deferred income taxes reverse in future years as the temporary differences between book and tax reverse.

Current wording

Deferred income taxes represent the estimated tax asset or tax liability caused by temporary differences between the tax return basis of certain assets and liabilities and amounts recorded in the financial statements. During the three months ended March 31, 2025, deferred income tax assets increased by $4.1 million to $46.2 million, primarily due to an increase in unearned and advanced premiums. Deferred income taxes reverse in future years as the temporary differences between book and tax reverse.

Previous wording

See “Item 1—Note 6 (Liability for Unpaid Losses and Loss Adjustment Expenses)” for a roll-forward in the balance of our unpaid losses and LAE. Unpaid losses and LAE decreased by $49.7 million to $460.4 million as of September 30, 2024. Overall, unpaid losses and LAE decreased, as a result of payment of current and prior year claims including the settlement of Hurricane Ian claims during 2024.

Current wording

See“Item 1—Note 6 (Liability for Unpaid Losses and Loss Adjustment Expenses)” for a roll-forward in the balance of our unpaid losses and LAE. Unpaid losses and LAE decreased by $65.6 million to $893.7 million as of March 31, 2025. Overall, unpaid losses and LAE decreased, as a result of payment of current and prior year claims including the settlement of Hurricanes Helene and Milton claims during 2025 along with normal recurring claim activity.