ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to assist in an understanding of our financial condition and results of operations and should be read in conjunction with our consolidated financial statements and accompanying notes in “ Part II—Item 8—Financial Statements and Supplementary Data ” below. 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 ” and “ Part I— Item 1A—Risk Factors” .
Overview
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 offer insurance products through both appointed independent insurance agents and through our online distribution channel across 19 states, with licenses to write insurance in one additional state. We seek to produce an underwriting profit (defined as net premiums earned minus losses, LAE, policy acquisition costs and other operating costs and expenses) over the long term, along with growing our Other Revenue Sources.
Revenues
We generate revenue primarily from the collection of insurance premiums. Other sources of revenue include: commissions paid by our reinsurers to our reinsurance intermediary subsidiary BARC on reinsurance it places for the Insurance Entities; policy fees collected from policyholders by our managing general agent subsidiary, ERA; and financing fees charged to policyholders who choose to defer premium payments reflected in other income. In addition, our subsidiary Alder receives fees from the Insurance Entities for claims-handling services. The Insurance Entities are reimbursed for these fees on claims that are subject to recovery under the Insurance Entities’ respective reinsurance programs. These fees, after expenses, are recorded in the consolidated financial statements as an adjustment to LAE. We also generate income by investing our assets.
The nature of our business tends to be seasonal during the year, reflecting consumer behaviors in connection with the Florida residential real estate market and the hurricane season. The amount of direct premiums written tends to be highest in the second and third quarters of our fiscal year and lowest in the first and fourth quarters.
Trends and Geographical Distribution
Florida Trends
Regulatory Environment
We seek to achieve long-term rate adequacy and earnings for the Insurance Entities while managing our risks through market cycles and looking to take advantage of what we believe to be market opportunities. We currently transact insurance in 19 states. Although the majority of our policies cover properties in Florida, our business in other states continues to grow as a percentage of our total policies in force and premium volume.
Our ability to write and retain policies is influenced by a range of local, national and global factors. Among these, the amount and types of policies we write depend on the regulatory environments in the states in which the Insurance Entities write policies. In particular, the Florida personal residential insurance market is experiencing significant transitions due to a series of law changes passed in December 2022 that were intended to address substantial market disruption.
Prior to the 2022 reforms, the Florida residential property insurance market suffered from declining availability and increasing premiums among authorized insurers. This was attributable to elevated loss and LAE levels and related impacts on reinsurance pricing and availability. During this period, Citizens, which generally is intended to be the state’s market of last resort, instead became a market of choice as insurers limited writings and state laws capped Citizens’ annual rate increases at levels well below market levels.
The overall residential property insurance market in Florida has steadily improved since 2023. Nonetheless, the ultimate long-term benefits of Florida’s statutory reforms remain unknown and difficult to predict. The Florida political environment, prevailing sentiment among policymakers or the public such as growing concerns with inflation and costs of living, and economic factors beyond insurers’ control may directly or indirectly mitigate the impact of the reforms. These influences can mask the reforms’ benefits or diminish their perceived effectiveness even when the market shows objective signs of improvement through moderating rate levels, increased product availability and competition, and reductions in Citizens’ policy count. Over time, these political or external influences can result in policymakers questioning the merits of the reforms, considering proposals to reverse them, or pursuing other law changes or interpretations that could negate improvements in the Florida market and renew concerns with rising costs and reduced availability.
Competition
Prior to the 2022 reforms, most residential property insurers in Florida, including the Insurance Entities, sought to limit their exposure to rising losses and LAE. Although the Insurance Entities faced little competition from authorized insurers during this period, the Insurance Entities’ own exposure management considerations led them to limit their new business intake. The Insurance Entities historically have enjoyed a high policyholder retention rate from year to year, both prior to the reforms and currently. Even so, the Company’s limited appetite for new business prior to the reforms led to a decline in their in-force Florida policy count. During this time, Citizens grew to become the largest insurer of residential property in Florida by a wide margin.
Since 2023, the Insurance Entities have gradually increased their appetite for new business in Florida. In both 2024 and 2025, the Insurance Entities filed and gained regulatory approval of statewide average rate decreases for their homeowners’ insurance programs. In addition, the Insurance Entities began to expand, and have continued to expand, the areas in Florida and the types of policies they seek to write.
Other established insurers also are expanding new business writings. In addition, a reported 17 new insurers have entered the Florida market in recent years. Unlike the Insurance Entities, some new and established insurers write business predominantly by assuming risks from Citizens. All together, renewed activity among authorized insurers has led to a decrease in Citizens’ policy count by approximately one million policies since the reforms. As a result, UPCIC is one of the largest residential property insurers in Florida. Still, as the benefits of the reforms continue to emerge, new and existing competitors in the post-reform market often remain selective as to the policy types, locations, coverage limits or other characteristics of policies they write, leading to segmentation in the market. The degree of competition the insurers face in Florida therefore varies by policy type, region, and other factors.
Other states have experienced less disruption than Florida. The Insurance Entities therefore experience a high but stable degree of competition when entering and expanding in other states. In these states, we often compete with national or regional insurers with greater experience in the specific markets. Our growth plan therefore includes developing relationships with the states’ independent agents and gradually expanding our presence as we gain familiarity with new markets. Over time, this has allowed our business outside of Florida to steadily increase as a percentage of our overall business.
Claims
The Insurance Entities’ loss and LAE experience on Florida claims has improved significantly for policies written after the statutory reforms. This is attributable to reduced incentives for policyholders, vendors and their representatives to pursue questionable, inflated and litigated claims. In addition, the Company’s own initiatives, coupled with enhanced claim-handling standards included in the reforms, have resulted in faster claims-handling times, process improvements and greater customer satisfaction.
The Company continues to experience higher costs associated with claims that pre-date the reforms. The remaining pre-reform claims typically are litigated claims that have resisted formal and informal efforts at dispute resolution. Although the number of claims subject to pre-reform laws continues to decline, it may be several years before all of them are resolved.
The Company has increasingly used video and other technology to facilitate reviews of damaged property and improve efficiency in the claims process. As technologies evolve, the Company continually evaluates and implements enhancements to streamline workflows and enhance customer experience. The Company also regularly monitors regulatory developments pertaining to uses of technology, including oversight of AI in claims processes and other aspects of our operations.
Economic Conditions
Our business is affected by evolving domestic, national or global economic conditions, including the potential impact from tariffs and other inflationary pressures. Increased costs of labor and materials can adversely affect our claims costs. This can lead to direct effects on our business, such as increasing the values of properties we insure and the corresponding premium levels, as well as indirect effects such as offsetting and diminishing the perceived benefits of the statutory reforms. We will continue to monitor our business model and strategy as these events develop.
We also rely on global reinsurance markets to mitigate exposures under policies we write. The availability and pricing of reinsurance can be influenced by global economic conditions such as inflation. Our ability to purchase desired levels of reinsurance at competitive prices also can be influenced by severe weather in Florida and elsewhere. Florida did not suffer a landfalling hurricane in 2025, which is a favorable consideration as we prepare for the mid-year renewal of our catastrophe reinsurance program. However, this benefit might be offset by reinsurers’ assessments of past and potential future events.
Across the United States, third-party financing contributes to expansion of claims litigation and vendors’ efforts to solicit claims. Some states have enacted laws intended to curtail or require disclosure of litigation financing. The largest state in which we write business, Florida, does not currently have any such laws. It is difficult to quantify the impact on losses, LAE and ultimately premium attributable to vendor-related financing and litigation financing.
Summary of Recent Rate Changes
In 2024, for Florida, UPCIC implemented new homeowners policy rates, resulting in an average rate decrease of 1.5% compared to previous rates, effective for new policies August 15, 2024 and renewal policies May 17, 2025. These Florida rate changes were implemented under use and file rating laws and subsequently received regulatory approval. In October 2025, UPCIC implemented new homeowners policy rates for new and renewal business policies, resulting in an average rate decrease of 5.1% compared to previous rates with an effective date of October 16, 2025.
For 2025, the following rate changes for UPCIC have been approved by regulators in states other than Florida:
• Michigan: +24.8% effective January 20, 2025, for new business, and March 11, 2025, for renewal business
• Georgia: +7.4% effective March 1, 2025, for new business and renewal business
• Alabama: +8.1% effective March 13, 2025, for new business and May 2, 2025, for renewal business
• Indiana: +6.0% effective March 22, 2025, for new business and May 11, 2025, for renewal business
• Massachusetts: +12.9% effective April 8, 2025, for new business and May 28, 2025, for renewal business
• South Carolina: +8.6% effective April 21, 2025, for new business and June 10, 2025, for renewal business
• Minnesota: +15.0%, effective May 16, 2025, for new business and July 20, 2025, for renewal business
• North Carolina: +7.5% effective June 1, 2025, for new business and renewal business
• Pennsylvania: +8.0% effective June 1, 2025, for new business and July 21, 2025, for renewal business
• Delaware: +15.0%, effective June 24, 2025, for new business and August 13, 2025, for renewal business
• New York: +10.2%, effective August 4, 2025, for new business and September 23, 2025, for renewal business
• Illinois: +8.0%, effective August 12, 2025, for new business and October 1, 2025, for renewal business
• Iowa: +20.0%, effective August 20, 2025, for new business and October 24, 2025, for renewal business
• Wisconsin: +15.0%, effective September 2, 2025, for new business and October 22, 2025, for renewal business
• New Hampshire: +16.5%, effective September 23, 2025, for new business and November 12, 2025, for renewal business
• Virginia: +10.7%, effective December 31, 2025, for new business and renewal business
The following rate filings are pending approval by state regulators:
• New Jersey: +18.9%, the effective date for new business and renewal business.
• Massachusetts: +6.1%, the effective date for new business and renewal business.
• South Carolina: +6.9%, the effective date for new business and renewal business.
• Georgia: +7.9%, the effective date for new business and renewal business.
For 2026, the following rate changes for UPCIC have been approved by regulators in states other than Florida:
• Maryland: +4.6%, effective January 1, 2026, for new business and renewal business
• North Carolina: +7.5%, effective June 1, 2026, for new business and renewal business
Geographical Distribution
Direct premiums written continue to increase across 17 of the 19 states in which we conduct business year-over-year. As a result of our business strategy, rate changes and disciplined underwriting initiatives, we have seen an increase in total policy count in 13 out of 19 states, as well as increases in in-force premium in 17 states and total insured value in 16 states. Direct premiums written for states outside of Florida increased 24.3%, representing a $114.7 million increase during 2025. Direct premiums written for Florida decreased 2.8%, representing a $44.1 million decrease during 2025. The following table provides direct premiums written for Florida and other states for the years ended December 31, 2025 and 2024 (dollars in thousands):
For the Years Ended
Growth
Year Over Year
December 31, 2025
December 31, 2024
State
Direct Premiums Written
Direct Premiums Written
Florida
Other states
Grand total
We seek to prudently grow and generate long-term rate adequate premium in each state where we offer policies. Our diversification strategy seeks to increase business outside of Florida and to improve geographical distribution within Florida.
The geographical distribution of our policies in force, premium in force and total insured value across all states were as follows, as of December 31, 2025, 2024 and 2023 (dollars in thousands, rounded to the nearest thousand):
As of December 31, 2025
Policies
Premium
Total Insured
State
In Force
In Force
Value
Florida
Alabama
Delaware
Georgia
Illinois
Indiana
Iowa
Massachusetts
Maryland
Michigan
Minnesota
New Hampshire
New Jersey
New York
North Carolina
Pennsylvania
South Carolina
Virginia
Wisconsin
Total
As of December 31, 2024
Policies
Premium
Total Insured
State
In Force
In Force
Value
Florida
Alabama
Delaware
Georgia
Illinois
Indiana
Iowa
Massachusetts
Maryland
Michigan
Minnesota
North Carolina
New Hampshire
New Jersey
New York
Pennsylvania
South Carolina
Virginia
Wisconsin
Total
As of December 31, 2023
Policies
Premium
Total Insured
State
In Force
In Force
Value
Florida
Alabama
Delaware
Georgia
Hawaii
Illinois
Indiana
Iowa
Massachusetts
Maryland
Michigan
Minnesota
North Carolina
New Hampshire
New Jersey
New York
Pennsylvania
South Carolina
Virginia
Total
KEY PERFORMANCE INDICATORS
The Company considers the measures and ratios in the following discussion to be key performance indicators for its businesses. Management believes that these indicators are helpful in understanding the underlying trends in the Company’s businesses. Some of these indicators are reported on a quarterly basis and others on an annual basis. Please also refer to “ Part II—Item 8—Note 2 (Summary of Significant Accounting Policies) ” for definitions of certain other terms we use when describing our financial results.
These indicators may not be comparable to other performance measures used by the Company’s competitors and should only be evaluated together with our consolidated financial statements and accompanying notes.
Definitions of Key Performance Indicators
Book Value Per Common Share ― total stockholders’ equity, adjusted for preferred stock liquidation, divided by the number of common shares outstanding as of a reporting period. Book value per common share is the excess of assets over liabilities at a reporting period attributed to each share of common stock. Changes in book value per common share informs shareholders of retained equity in the Company on a per share basis, which may assist in understanding market value trends for the Company’s stock.
Combined Ratio ― the combined ratio is a measure of underwriting profitability for a reporting period and is calculated by dividing total operating costs and expenses (which is made up of losses and LAE, policy acquisition costs and other operating expenses) by premiums earned, net, which is net of ceded premium earned. Changes to the combined ratio over time provide management with an understanding of costs to operate its business in relation to net premiums it is earning and the impact of rate, underwriting and other business management actions, weather and other external factors on underwriting profitability. A combined ratio below 100% indicates an underwriting profit; a combined ratio above 100% indicates an underwriting loss.
Core Loss Ratio ― an operational metric used in the insurance industry to describe the ratio of current year losses and LAE, excluding current accident year weather and prior year development, 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 year weather events and prior years’ reserve development and is net of estimated subrogation recoveries. The financial benefit from the management of claims, including claim fees ceded to reinsurers, is also 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).
Debt-to-Equity Ratio ― long-term debt, including current portion, divided by stockholders’ equity. This ratio helps management measure the amount of financing leverage in place in relation to equity and allows investors to evaluate future leverage capacity.
Debt-to-Total Capital Ratio ― long-term debt, including current portion, divided by the sum of total stockholders’ equity and long-term debt (often referred to as total capital resources). This ratio helps management measure the amount of financing leverage in place (long-term debt) in relation to total capital resources and allows investors to evaluate future leverage capacity.
Direct Premiums Written (“DPW”) ― reflects the total value of policies issued during a period before considering premiums ceded to reinsurers. Direct premiums written, comprised of renewal premiums, endorsements, and new business, is initially recorded as unearned premium in the balance sheet, which is then earned pro-rata over the next year or remaining policy term. Direct premiums written reflect current trends in the Company’s sale of property and casualty insurance products and amounts that will be recognized as earned premiums in the future.
DPW (Florida) ― includes only DPW in the state of Florida. This measure allows management to analyze growth in our primary market and is also a measure of business concentration risk.
Expense Ratio (Including Policy Acquisition Cost Ratio and Other Operating Cost Ratio) ― calculated as policy acquisition costs and other operating costs and expenses as a percentage of premiums earned, net. Policy acquisition costs and other operating costs and expenses 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.
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.
Monthly Weighted Average Renewal Retention Rate ― measures the monthly average of policyholders that renew their policies over the period of a calendar year. This measure allows management to assess customer retention.
Premiums Earned, Net ― the pro-rata portion of current and previously written premiums that the Company recognizes as earned premium during the reporting period, net of ceded premium earned. Ceded premiums are premiums paid or payable by the Company for reinsurance protection. Written premiums are considered earned and are recognized pro-rata over the policy coverage period. Premiums earned, net is a measure that allows management to identify revenue trends.
Policies in Force ― represents the number of active policies with coverage in effect as of the end of the reporting period. The change in the number of policies in force is a growth measure and provides management with an indication of progress toward achieving strategic objectives. Inherent seasonality in our business makes this measure more useful when comparing each quarter’s balance to the same quarter in prior years.
Premium in Force ― is the amount of the annual direct premiums written previously recorded by the Company for policies which are still active as of the reporting date. This measure assists management in measuring the level of insured exposure and progress toward meeting revenue goals for the current year, and provides an indication of business available for renewal in the next twelve months. Inherent seasonality in our business makes this measure more useful when comparing each quarter’s balance to the same quarter in prior years.
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.
Total Insured Value ― represents the amount of insurance limits available on a policy for a single loss based on all policies active as of the reporting date. This measure assists management in measuring the level of insured exposure.
Unearned Premiums ― represents the portion of direct premiums corresponding to the time period remaining on an insurance policy and available for future earning by the Company. Trends in unearned premiums generally indicate expansion, if growing, or contraction, if declining, which are important indicators to management. Inherent seasonality in our business makes this measure more useful when comparing each quarter’s balance to the same quarter in prior years.
Weather events ― an estimate of losses and LAE from weather events occurring during the current accident year that exceed initial estimates of expected weather events when establishing the expected loss ratio for each accident year. This metric informs management of factors impacting overall current year profitability.
REINSURANCE
Reinsurance enables our Insurance Entities to limit potential exposures to catastrophic events. Developing and implementing our reinsurance strategy to adequately protect our policyholders, balance sheet, and Insurance Entities in the event of one or more catastrophes while maintaining efficient reinsurance costs has been our key strategic priority. To limit the Insurance Entities’ potential exposure to catastrophic events, we purchase significant reinsurance from third-party reinsurers and the FHCF. The FLOIR requires the Insurance Entities, like all residential property insurance companies doing business in Florida, to have a certain amount of capital and reinsurance coverage to cover losses upon the occurrence of a single catastrophic event and a series of catastrophic events occurring in the same hurricane season. The Insurance Entities’ 2025-2026 catastrophic reinsurance program meets the FLOIR’s requirements, which are based on, among other things, successfully demonstrating cohesive and comprehensive reinsurance coverages that protect the policyholders of our Insurance Entities under a series of stress test catastrophe loss scenarios. Similarly, the Insurance Entities’ 2025-2026 catastrophic reinsurance program meets the stress test and review requirements of Demotech, Inc., for maintaining Financial Stability Ratings® of “A” (Exceptional) and of Kroll for maintaining insurer financial strength rating of “A-”.
We believe the Insurance Entities’ retentions under the jointly shared reinsurance program are appropriate and structured to protect policyholders and the Insurance Entities’ capital structure. We test the sufficiency of the catastrophe reinsurance coverage by subjecting the Insurance Entities’ personal residential exposures to scenario testing using third-party catastrophe models. These models combine simulations of the natural occurrence patterns and characteristics of hurricanes, tornadoes, earthquakes, and other catastrophes with information on property values, construction types, and occupancy classes. These models’ outputs provide information concerning the potential for simulated large losses, which enables the Insurance Entities to limit the financial impact from catastrophic events. Refer to the risk factors disclosed in “P art I, Item 1A—Risk Factors, ” set forth elsewhere in the Annual Report on Form 10-K, for details of specific risks attributable to catastrophic losses and reinsurance.
Effective June 1, 2025, the Insurance Entities entered into multiple reinsurance agreements comprising our 2025-2026 reinsurance program. See “I tem 1—Note 4 (Reinsurance). ”
Insurance Entities 2025-2026 All States Reinsurance Program (“All States”)
• First event All States combined retention of $45.0 million.
• All States first event tower extends to $2.575 billion with no co-participation in any of the layers, no limitation on LAE and no accelerated deposit premiums.
• Universal Insurance Holdings, Inc. (“UIH”) established the first event layer of 100% of $66.0 million in excess of $45.0 million in a captive insurance arrangement. See “Part II—Item 8—Note 18 (Variable Interest Entities). ”
• Assuming a first event completely exhausts the $2.575 billion tower, the second event exhaustion point would be $1.209 billion.
• Full reinstatement is available on the combined $1.098 billion of the All States first-event catastrophe coverage for a guaranteed second-event coverage. Additionally, a second event private market excess of loss coverage of $66.0 million in excess of $45.0 million succeeds the captive in the event of a loss from a second event, resulting in a $66.0 million reduction in retention on a consolidated basis for a second event.
• For all layers purchased between $111.0 million and the projected attachment point of the FHCF layer, to the extent that all of our coverage or a portion thereof is exhausted in a first catastrophic event and reinstatement premium is due, we have purchased enough reinstatement premium protection coverage (“RPP”) to fund the reinstatement premiums due on the reinstatement of these coverages. Losses exceeding the RPP limit would be subject to reinstatement premiums.
• Specific third and fourth event private market excess of loss coverage of $86.0 million in excess of $25.0 million provides frequency protection for multiple events during the treaty period, an incremental $20.0 million reduction in retention for a third and fourth event.
• For the FHCF Reimbursement Contracts effective June 1, 2025, the Insurance Entities have continued the election at the 90% coverage level. We estimate the total mandatory FHCF coverage will provide approximately $1.37 billion of coverage for UPCIC, and $22.8 million for APPCIC which complements and inures to the benefit of the All States coverage secured from private market reinsurers and discussed above.
• To further insulate future years, the Insurance Entities have secured certain multi-year treaties, providing $352.0 million of capacity that extends portions of the catastrophe coverage to include the 2026-2027 treaty year.
Reinsurers
The table below provides the A.M. Best and S&P financial strength ratings for each of the largest rated third-party reinsurers in the Insurance Entities’ 2025-2026 reinsurance program:
Reinsurer
A.M. Best
Florida Hurricane Catastrophe Fund (1)
Various Lloyd’s of London Syndicates
DaVinci Reinsurance Ltd.
Renaissance Reinsurance Ltd.
Markel Bermuda Ltd.
Everest Reinsurance Co.
(1) No rating is available, because the fund is not rated.
SELECTED FINANCIAL DATA
The following selected historical consolidated financial data should be read in conjunction with our consolidated financial statements and notes thereto and “ Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations ” set forth elsewhere in the Annual Report on Form 10-K. The historical results are not necessarily indicative of the results to be expected in any future period.
The following tables present historical selected consolidated financial data of Universal Insurance Holdings, Inc. and Subsidiaries for the five years ended December 31, 2025 (in thousands, except per share data):
Years Ended December 31,
Statement of Income Data:
Revenues:
Direct premiums written
Change in unearned premium
Direct premium earned
Ceded premium earned
Premiums earned, net
Net investment income (1)
Other revenue (2)
Total revenues
Costs and expenses:
Losses and loss adjustment expenses
Policy acquisition costs
Other operating costs and expenses
Total expenses
Interest and amortization of debt issuance costs
Income (loss) before income tax expense (benefit)
Income tax expense (benefit)
Net income (loss)
Per Share Data:
Basic earnings (loss) per common share
Diluted earnings (loss) per common share
Dividends declared per common share
As of December 31,
Balance Sheet Data:
Total invested assets
Cash and cash equivalents
Total assets
Unpaid losses and loss adjustment expenses
Unearned premiums
Debt, net
Total liabilities
Total stockholders’ equity
Shares outstanding end of period
Book value per share
Return on average common equity (ROCE)
Selected Data:
Loss and loss adjustment expense ratio (3)
Expense ratio (4)
Combined Ratio (5)
(1) Net investment income excludes net realized gains (losses) on sale of investments and net change in unrealized gains (losses) on investments.
(2) Other revenue consists of commission revenue, policy fees, and other revenue.
(3) The loss and LAE ratio is calculated by dividing losses and LAEs by premiums earned, net.
(4) The expense ratio is calculated by dividing the sum of policy acquisition costs and other operating costs and expenses by premiums earned, net.
(5) The combined ratio is the sum of the losses and LAE ratio and the expense ratio.
RESULTS OF OPERATIONS AND ANALYSIS OF FINANCIAL CONDITION
2025 Financial and Business Highlights (comparisons are to 2024 unless otherwise specified)
• Direct premiums written increased by $70.6 million, to $2.14 billion, driven by a $114.7 million or 24.3% increase in premiums written outside of Florida, which offset a $44.1 million or 2.8% decrease in premiums written in Florida.
• The Insurance Entities have resumed accepting new business across all Florida territories for all homeowners and dwelling policy forms, reversing previous trends.
• In Florida, the Insurance Entities have filed for overall rate reductions in each of the past two years, reflecting a 1.5% decrease for 2024 and a 5.1% decrease for 2025 in homeowner policies. Conversely, outside of Florida, the Insurance Entities have continued to file for rate increases, averaging 10.1% in 2024 and 10.4% in 2025.
• Insurance entities in Florida have introduced policy coverage options that affect water damage limits and premiums. These new water endorsements strengthen the Insurance Entities competitive position in the state. Policyholders may opt to lower their coverage for water damage perils in return for premium credits reflecting adjusted loss limits.
• Rate filings and automatic inflation adjustments to policy values are affecting written and earned premiums as they apply to renewals and new policies. Management continues to focus on risk selection and improving risk diversification along with adjustments to filed rate plans as needed.
• The Company continues to see growing competition and better loss trends in Florida as the 2022 legislative reforms reduce litigation, attract more insurers, and support market recovery.
• Net investment income increased in 2025 to $70.6 million, an increase of $11.5 million or 19.4% compared to $59.1 million in 2024 due to an increase in the book yield and an 11.8% increase in invested assets.
• No hurricanes made landfall in the year ended December 31, 2025, in contrast to the occurrence of Hurricanes Debby, Helene, and Milton during the same period in 2024.
• The net combined ratio was 94.1% for the year ended December 31, 2025, a decrease of 10.0 points compared to the year ended December 31, 2024.
• In the year ended December 31, 2025, the Company repurchased 843,651 shares, at an average share price of $26.52, for a total of $22.4 million. In January 2026, the Board authorized an additional $20 million of share repurchases.
• Demotech reaffirmed its A rating for UPCIC and APPCIC on December 10, 2025.
• Kroll reaffirmed its A- rating for UPCIC and APPCIC on September 18, 2025.
• Egan-Jones reaffirmed its A rating for UIH on October 2, 2025.
All comparisons for the year ended December 31, 2025 results of operations are to the corresponding prior year period (unless otherwise specified).
YEAR ENDED DECEMBER 31, 2025 COMPARED TO YEAR ENDED DECEMBER 31, 2024
Net income for the year ended December 31, 2025, was $183.0 million, compared to $58.9 million in the previous year. Diluted earnings per share was $6.32 compared to $2.01 in 2024. During 2025, the Company experienced growth in net premiums earned, net investment income, net realized gains on investments, and commission revenue, alongside a decrease in total operating costs and expenses. Notably, the absence of significant hurricane activity in 2025 resulted in a reduction in loss and loss adjustment expense (LAE) versus 2024, when Hurricanes Debby, Helene, and Milton adversely affected results, adding 11.4 points to the 2024 loss ratio. The net loss ratio improved to 68.5% in 2025 from 79.2% in 2024, while the combined ratio was 94.1% for 2025 compared to 104.1% for 2024. Further details are available in the “ Overview—Trends and Geographical Distribution—Florida Trends ” section.
A detailed discussion of our operations follows the table below (in thousands, except per share data).
Years Ended December 31,
Change
REVENUES
Direct premiums written
Change in unearned premium
Direct premium earned
Ceded premium earned
Premiums earned, net
Net investment income
Net realized gains (losses) on investments
Net change in unrealized gains (losses) on investments
Commission revenue
Policy fees
Other revenue
Total revenues
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses
Policy acquisition costs
Other operating costs and expenses
Total operating costs and expenses
Interest and amortization of debt issuance costs
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
Income tax expense (benefit)
NET INCOME (LOSS)
Other comprehensive income (loss), net of taxes
COMPREHENSIVE INCOME (LOSS)
DILUTED EARNINGS (LOSS) PER SHARE DATA:
Diluted earnings (loss) per common share
Weighted average diluted common shares outstanding
Premium Revenues
Direct premiums written increased by $70.6 million, or 3.4%, for the year ended December 31, 2025, driven by premium growth in our other states business of $114.7 million, or 24.3%, offset by a decrease in our Florida business of $44.1 million, or 2.8%, as compared to the prior year. The primary factors impacting written premiums were new and previous rate changes earned in during 2025, increased policies in force during 2025 and policy inflation adjustments. There was an increase in policies in force across 13 states. In total, policies in force increased 40,401, or 4.7%, from 855,526 at December 31, 2024 to 895,927 at December 31, 2025. A summary of the recent rate adjustments driving changes in written premiums is discussed above under “ Overview—Trends and Geographical Distribution—Florida Trends. ”
The Insurance Entities have resumed writing new business in most Florida areas for all homeowners and dwelling policies. They filed for rate reductions in Florida—down 1.5% for 2024 and 5.1% for 2025—while pursuing average rate increases outside Florida of 10.1% in 2024 and 10.4% in 2025. Rate filings and inflation adjustments affect premiums for new and renewed policies. Management continues to refine policy features, risk selection, diversification, and rate plans. Increased competition and improved loss trends in Florida, helped by 2022 legislative reforms, are reducing litigation and supporting market recovery. Rate changes are applied at policy inception or renewal and reflect claim cost trends, including material, labor, weather events, reinsurance, and litigated claims. Rate adjustments often lag actual experience due to analysis and implementation delays. Coverage limits are updated at renewal to keep pace with inflation, based on industry data. See “ Overview—Trends and Geographical Distribution—Florida Trends and Summary of Recent Rate Changes .”
The Insurance Entities manage their business by controlling changes in policy counts, premiums, insured value, and factors affecting the purchase of reinsurance. Policy rates are monitored and adjusted as needed and new business underwriting rules are reviewed and updated as needed in the states where we transact business. Policy retention is also an important factor and impacts the level of new business written. This year we saw an increase in policies in force of 40,401, or 4.7%, an increase of $68.9 million or 3.3% in premiums in force and an increase of $34.8 billion or 9.7% in total insured value. See “ Overview— Summary of Recent Rate Changes and Geographic Distribution ”. Direct premiums written continue to increase across the majority of states in which we conduct business. We have policies in force in 19 states on December 31, 2025. In 2024 UPCIC wrote its first policy in Wisconsin. In addition, we are authorized to do business in Tennessee and are in the process of submitting our rate filing. In 2023, UPCIC received approval from its regulators in Hawaii to withdraw from the state and non-renew all policies in Hawaii. At December 31, 2025, no policies are in force in Hawaii, and UPCIC is in the process of completing its remaining administrative tasks to finalize its withdrawal from the state.
Direct premium earned increased by $108.9 million, or 5.4%, for the year ended December 31, 2025. 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. ”
Reinsurance
Reinsurance enables our Insurance Entities to limit potential exposures to catastrophic events and other covered events, but it also is a significant cost, which lowers net earned premiums. These costs are generally recognized over the annual reinsurance contract period (June 1st - May 31st).
For the year ended December 31, 2025, ceded premium earned increased by $43.0 million, or 6.9%, compared to the previous year. As a percentage of direct earned premiums, ceded earned premiums rose to 31.8% in 2025 from 31.3% in 2024. Reinstatement premiums related to prior year hurricanes totaled $0.5 million in 2025 compared to $23.4 million in 2024. During the first half of 2024, reinsurance expenses were reduced by two factors: Florida's Reinsurance to Assist Policyholders (RAP) program, part of the 2023-2024 contract, which lowered reinsurance costs until its conclusion in May 2024; and the conclusion of the Catastrophe Bond in March 2024, which was not replaced until June 1, 2024. Excluding reinstatement premiums, reinsurance costs as a percentage of direct earned premiums increased 10.9% during 2025. Further information regarding the Insurance Entities’ 2025-2026 reinsurance programs can be found in the discussion above and in “ Part II—Item 8—Note 4 (Reinsurance). ”
Investment Results
Net investment income was $70.6 million for the year ended December 31, 2025, compared to $59.1 million for the year ended December 31, 2024, an increase of $11.5 million, or 19.4%. This change was due to increased investments in our portfolio and new investments generating higher average book yields than maturing assets, partially offset by reduced yields from invested cash and cash equivalent balances in 2025.
The yield curve continues to decline over time with Federal Reserve rate cuts during 2025, in addition to expected further cuts in 2026, particularly in the front end of the curve, which is impacting short duration cash reinvestment rates, resulting in fixed income price increases and decreasing yields. See “ Item 1— Note 3 (Investments) ” for information on investment income.
Net realized gains for the year were driven by liquidating equity investments, partially offset by optimizing the fixed income portfolio to lock in longer duration yields. Net change in unrealized losses for the year were driven by realizing gains, which impact the change in unrealized gains, largely offset by the continued appreciation of remaining equity holdings. See “ ― Analysis of Financial Condition” for details on changes in total invested assets balances during 2025.
Commissions, Policy Fees and Other Revenue
Commission revenue mainly comes from brokerage commissions earned from traditional open-market third-party reinsurers. Premiums ceded to the Florida Hurricane Catastrophe Fund (FHCF) do not generate commissions. Revenue from commissions is recognized on a pro-rata basis throughout the reinsurance policy period, which lasts from June 1st until May 31st of the following year. For the year ended December 31, 2025, commission revenue totaled $61.3 million, up from $51.8 million for the previous year ended December 31, 2024. The increase of $9.5 million, or 18.4%, in commission revenue for 2025 was largely due to higher reinsurance spending by the Insurance Entities compared to 2024. Additionally, reinsurance spending was lower during the 2023-2024 contract period because of RAP program, which lowered reinsurance costs and reduced brokerage commissions until the program ended in May 2024. Commission on reinstatement premiums was $4.9 million in 2025, compared to $2.9 million in 2024, resulting from commissions on 2024 hurricane-related reinstatement premiums, which were earned in the 2024-2025 contract period.
Other revenue, representing revenue from policy installment fees, premium financing, and other miscellaneous income, was $8.3 million for the year ended December 31, 2025 compared to $8.4 million for the year ended December 31, 2024.
Operating Costs and Expenses
Losses and Loss Adjustment Expenses
Net losses and LAE, after reinsurance recoveries and subrogation recoveries, were $985.9 million with a 68.5% net loss ratio for 2025, compared to $1,087.4 million, and 79.2% net loss ratio for the prior year. The absence of significant hurricane activity in 2025 resulted in a reduction in loss and loss adjustment expense (LAE) versus 2024, when Hurricanes Debby, Helene, and Milton adversely affected results, adding 11.4 points to the 2024 loss ratio.
Unfavorable prior-year development arises when claims are resolved for amounts exceeding previous estimates or the liabilities related to prior-year claims increase. This is attributable to escalating claims costs, inflation, and heightened expenses associated with litigated claims. For further information, refer to “ —Overview—Florida Trends ” above. During the year ended December 31, 2025, net unfavorable prior-year development totaled $25.8 million (1.8 loss ratio points), compared to $29.1 million (2.1 loss ratio points) in unfavorable prior-year development for 2024. The 2025 prior-year development was driven by revised estimates to settle pre-reform non-catastrophe claims currently in litigation and governed by pre-reform statutes in Florida. Although favorable claim trends have continued for Florida losses occurring after the effective date of the reform legislation (December 16, 2022), claims under policies issued before the reforms remain subject to prolonged dispute resolution periods, elevated LAE and increased uncertainty. Consequently, these claims collectively have experienced and may continue to experience adverse development, as settlements deviate from earlier projections. It will be several years until all claims from the pre-reform period are resolved and the impact of abusive claim practices permitted under the prior laws are fully extinguished.
In 2025, there were no catastrophic weather events, unlike in 2024 when Hurricanes Debby, Helene, and Milton resulted in $156.0 million in net costs (11.4 loss ratio points) after reinsurance. The 2024-2025 reinsurance program adequately protected the Insurance Entities beyond the retention limit for these events.
All other losses, excluding prior year development and catastrophic weather discussed above, amounted to $960.0 million (66.7 loss ratio points) in 2025, up from $902.2 million (65.7 loss ratio points) in 2024. This includes the impact of claims handling discussed below. The 2025 loss ratio was affected by higher reinsurance costs, which reduced net earned premium, as well as a more cautious approach in estimating 2025 losses.
All other losses include results from our adjusting company's activities within our holding system when handling claims for the Insurance Entities and reinsurers. The net pre-tax results for Alder serve as an adjustment to LAE in consolidation, in addition to LAE incurred by the Insurance Entities. By keeping claims and legal operations in-house, especially in Florida's litigation-heavy environment, we achieve greater efficiency and coordination than if we relied more heavily on outsourcing these functions. This synergy can lead to cost savings at the consolidated level, particularly after catastrophes. Alder generated a pre-tax loss of $22.8 million during 2025 compared to a pre-tax profit of $19.7 million in the 2024. The loss in 2025 resulted from costs associated with pre-reform claims, whereas the 2024 profit occurred from the handling of 2024 hurricane claims.
Policy Acquisition Costs and other operating costs and expenses
For the year ended December 31, 2025, policy acquisition costs and other operating costs and expenses were $368.5 million, compared to $342.1 million during the year ended December 31, 2024, as follows (dollars in thousands):
For the Years Ended December 31,
Change
Ratio
Ratio
Premiums earned, net
Policy acquisition costs and other operating costs and expenses:
Policy acquisition costs
Other operating costs and expenses
Total policy acquisition costs and other operating costs and expenses
For the year ended December 31, 2025 policy acquisition costs and other operating costs and expenses increased by $26.5 million, compared to the year ended December 31, 2024, which was the result of an increase in policy acquisition costs of $16.8 million and an increase in other operating costs of $9.7 million. The total expense ratio was 25.6% for the year ended December 31, 2025 compared to 24.9% for the year ended December 31, 2024.
• Policy acquisition costs rose by $16.8 million, mainly due to an increase in direct written premiums and higher-premium growth outside Florida, where commissions are greater. In 2025, these costs represented 17.4% of net earned premiums—a 0.4% increase—driven by a greater share of premiums from outside Florida and higher reinsurance costs, which reduced net earned premiums compared to 2024 .
• In 2025, other operating costs and expenses increased by $9.7 million, primarily attributable to higher employee-related expenses, including stock-based compensation and employee benefits. An elevated level of policy issuance costs also contributed to this rise. The ratio of these other operating costs to net earned premiums was 8.2% for the year ended December 31, 2025, compared to 7.9% in the prior year.
Combined Ratio
As a result of the trends discussed above for losses and LAE and policy acquisition costs and other operating costs and expenses, the combined ratio for the year ended December 31, 2025 was 94.1% compared to 104.1% for the year ended December 31, 2024 .
Interest and Amortization of Debt Issuance Costs
Interest and amortization of debt issuance costs were $6.4 million for the year ended December 31, 2025 compared to $6.5 million for the year ended December 31, 2024.
Income Tax Expense (Benefit)
Income tax expense was $60.1 million for the year ended December 31, 2025 , compared to an income tax expense of $25.7 million for the year ended December 31, 2024. Our effective tax rate (“ETR”) decreased to 24.7% for the year ended December 31, 2025, as compared to 30.4% for the year ended December 31, 2024. See “ Part II—Item 8—Note 12 (Income Taxes) ” for a table of items reconciling statutory rates to the effective rate for years ended December 31, 2025 and 2024 .
Other Comprehensive Income (Loss)
Other comprehensive income, net of taxes for the year ended December 31, 2025 was $37.0 million compared to other comprehensive income of $11.0 million for the year ended December 31, 2024, 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. This year’s results reflects 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 “P art 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 .
YEAR ENDED DECEMBER 31, 2024 COMPARED TO YEAR ENDED DECEMBER 31, 2023
Net income for the year ended December 31, 2024 was $58.9 million, compared to $66.8 million in the previous year. Diluted earnings per share was $2.01 compared to $2.22 in 2023. Retained losses from Hurricanes Debby, Helene and Milton were $111.0 million and $45.0 million, respectively, affecting 2024 results compared to Hurricane Idalia’s $45.0 million retained loss in 2023. Positive factors in 2024 included higher net premiums earned and investment income, offset by lower commission revenue and higher operating costs. Prior-year net loss reserve development was $29.1 million in 2024, compared to $110.6 million in 2023. Direct and net premiums earned grew by 6.6% and 9.7%, respectively, due to premium growth in 18 states and more policies in force in 16 states.
The net loss ratio was 79.2% in 2024 compared to 79.3% in 2023, with the combined ratio at 104.1% compared to 103.6% in 2023. Further details are available in the “ Overview—Trends and Geographical Distribution—Florida Trends ” section.
A detailed discussion of our results of operations follows the table below (in thousands, except per share data).
Years Ended December 31,
Change
REVENUES
Direct premiums written
Change in unearned premium
Direct premium earned
Ceded premium earned
Premiums earned, net
Net investment income
Net realized gains (losses) on investments
Net change in unrealized gains (losses) on investments
Commission revenue
Policy fees
Other revenue
Total revenues
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses
Policy acquisition costs
Other operating costs and expenses
Total operating costs and expenses
Interest and amortization of debt issuance costs
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
Income tax expense (benefit)
NET INCOME (LOSS)
Other comprehensive income (loss), net of taxes
COMPREHENSIVE INCOME (LOSS)
DILUTED EARNINGS PER SHARE DATA:
Diluted earnings per common share
Weighted average diluted common shares outstanding
Revenues
Direct premiums written increased by $147.9 million, or 7.7%, for the year ended December 31, 2024, driven by premium growth within our Florida business of $33.2 million, or 2.1%, and premium growth in our other states business of $114.6 million, or 32.1%, as compared to the prior year. The primary factors contributing to the increase in written premiums were new and previous rate changes earned during 2024, increased policies in force during 2024, and policy inflation adjustments. There was an increase in policies in force across 16 states. In total, policies in force increased 46,452, or 5.7%, from 809,932 at December 31, 2023 to 855,526 at December 31, 2024. A summary of the recent rate adjustments driving changes in written premiums is discussed above under “Overview—Trends and Geographical Distribution—Florida Trends .”
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, 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 enactment 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.
The Insurance Entities manage their business by controlling changes in policy counts, premiums, insured value, and factors affecting the purchase of reinsurance. Policy rates are monitored and adjusted as needed and new business underwriting rules are reviewed and updated as needed in the states where we underwrite. Policy retention is also an important factor and impacts the level of new business written. This year we saw an increase in policies in force of 46,452, or 5.7%, an increase of $145.8 million or 7.5% in premiums in force and an increase of $35.1 billion or 10.84% in total insured value. See “ Overview— Summary of Recent Rate Changes and Geographic Distribution ”. Direct premiums written continue to increase across the majority of states in which we conduct business. We had policies in force in 19 states on December 31, 2024. In 2024, UPCIC wrote its first policy in Wisconsin. In addition, in 2024 we began the process of submitting our rate filing in Tennessee, where we are authorized to do business. In 2023, UPCIC received approval from its regulators in Hawaii to withdraw from the state and non-renew all policies in Hawaii. At December 31, 2024, no policies were in force in Hawaii, and UPCIC is in the process of completing its remaining administrative tasks to finalize its withdrawal from the state.
Direct premium earned increased by $124.7 million, or 6.6%, for the year ended December 31, 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. ”
Reinsurance
Reinsurance allows our Insurance Entities to limit potential exposures to catastrophic events and other covered events. Each year, the Insurance Entities enter into contracts with various third-party reinsurers and the Florida Hurricane Catastrophe Fund (FHCF) to obtain necessary reinsurance protection. Refer to “ Item 7— Management’s Discussion and Analysis— Reinsurance ” for further details. Reinsurance costs associated with each year’s reinsurance program are earned 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 2024, reinstatement premiums for prior and current hurricanes were recorded, totaling $22.7 million compared to $2.2 million in 2023. Overall, ceded premium earned increased $3.5 million, or 0.6%, for the year ended December 31, 2024, compared to the previous year. As a percentage of direct earned premiums, ceded earned premiums declined to 31.3% in 2024 from 33.2% in 2023.
Investment Results
Net investment income was $59.1 million for the year ended December 31, 2024, compared to $48.4 million for the year ended December 31, 2023, an increase of $10.7 million, or 22.1%. Net investment income increased as a result of deploying excess cash and liquidity from maturities, principal repayments, sales, and interest payments received into higher yields throughout the year.
We look to optimize our investment portfolio on a rolling basis, which, from time-to-time, results in portfolio shaping opportunities. During the year ended December 31, 2024, sales of available-for-sale debt securities and sales of equity securities resulted in a net realized loss of $1.3 million compared to a net loss of $1.2 million from our equity securities in the prior year. The turnover was driven in part by locking in longer duration yield where attractive as the Federal Reserve reduced rates throughout 2024, despite market yields reversing course and increasing in the fourth quarter of 2024 due to macro and geopolitical uncertainty.
There was a $9.9 million net unrealized gain on investments during the year ended December 31, 2024, largely driven by our portfolio optimization efforts in the private and public equity markets, coupled with the overall domestic equity market appreciation tailwind during 2024, compared to a $12.0 million net unrealized gain on investments for the year ended December 31, 2023. See “— Analysis of Financial Condition ” for details on changes in total invested assets balances during 2024.
Commissions, Policy Fees and Other Revenue
Commission revenue is primarily derived from brokerage commissions earned from traditional open-market third-party reinsurers, excluding reinsurance provided by the State of Florida as well as catastrophe bond participants. Commission revenue is earned pro-rata over the reinsurance policy period which runs from June 1 st to May 31 st of the following year. For the year ended December 31, 2024, commission revenue amounted to $51.8 million, compared to $54.1 million for the year ended December 31, 2023. The $2.3 million decrease in commission revenue, or 4.2%, for the year ended December 31, 2024 was primarily due to the impact of Florida’s Reinsurance to Assist Policyholders (RAP) program, which reduced reinsurance brokerage commissions and expired in 2024. Additionally, there were higher levels of commissions earned from the previous year’s reinsurance program expiring in 2023.
Policy fees for the year ended December 31, 2024 were $19.5 million compared to $18.9 million for the year ended December 31, 2023. The decrease of $0.6 million, or 3.2%, was the result of an increase in the combined total number of new and renewal policies written during the year ended December 31, 2024 compared to the year ended December 31, 2023 in states in which we are permitted to charge this fee.
Other revenue, representing revenue from policy installment fees, premium financing, and other miscellaneous income, was $8.4 million for the year ended December 31, 2024 compared to $7.4 million for the same period in 2023.
Operating Costs and Expenses
Losses and Loss Adjustment Expenses
Net losses and LAE, after reinsurance recoveries and subrogation recoveries, were $1.09 billion with a 79.2% net loss ratio for 2024, compared to $992.6 million, and 79.3% net loss ratio for the prior year. The increase in the net losses for the year ended December 31, 2024 was mainly due to the impact from Hurricanes Helene and Milton offset by lower year-to-date unfavorable prior year development.
On September 26, 2024, Hurricane Helene made landfall as a Category 4 hurricane in the Big Bend area of the Florida Gulf Coast and continued northward, resulting in hurricane damage across several states in the Southeast region. After estimated reinsurance recoveries, net losses and LAE exposure to the Insurance Entities are estimated at $45.0 million. The Insurance Entities’ reinsurance recoveries include losses and LAE recoveries of $66.0 million from UVE’s pre-funded captive insurance arrangement. On October 9, 2024 Hurricane Milton made landfall near Siesta Key, Florida as a category 3 hurricane. The retention on this storm was $45.0 million. In total, net losses from Hurricane Helene and Milton, including losses and LAE incurred under the funded captive insurance arrangement, were $156.0 million. Our 2024-2025 reinsurance program provides the Insurance Entities with adequate protection beyond our retention limit. During the year ended December 31, 2023, the Company incurred $45.6 million in losses from Hurricane Idalia.
Reform legislation passed in Florida late 2022 represented a positive step towards reducing claim costs in Florida. The Company realized some of those benefits in 2024 for policies fully subject to the reforms. 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, insurers typically must continue to adjust claims under the prior laws that were subject to abuse while awaiting the expiration of applicable claim reporting periods and statute of limitations periods. 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.
Unfavorable prior-year development occurs when claims are settled for amounts higher than previously estimated or when the liabilities for prior-year claims increase. This is due to rising claims costs, inflation, and increased costs associated with litigated claims. Refer to “— Overview—Florida Trends ” above for more details. During the year ended December 31, 2024, net prior year development was $29.1 million, compared to unfavorable prior year development of $110.6 million for 2023. We continue to see favorable claim trends on Florida losses that occurred after the effective date of the Florida reform legislation (December 16, 2022). However, claims under policies that pre-date the reforms have greater uncertainty. As such, those claims in the aggregate may potentially experience adverse development, as claims settlements vary from previously estimated amounts.
Net losses and LAE for the current accident year, excluding hurricanes and prior year development were $902.3 million for 2024, compared to $836.4 million in 2023.
Consolidated net losses and LAE also reflect the net results from activities performed by the adjusting company within our holding company system. These activities can provide potential savings when adjusting claims on behalf of our Insurance Entities and our reinsurers. When claims are adjusted by our claims team and files are handled by our legal group, synergies are achieved by having these two functions within the same consolidated group that could not be achieved through third parties. This synergistic relationship results in more efficient handling and coordination of claims, including represented claims handled by our legal group. By choosing not to outsource these activities in most instances, we also save money for the consolidated group by generating a potential financial benefit outside of the Insurance Entities that reduces LAE at the consolidated level (contra LAE), particularly following catastrophes. During the year ended December 31, 2024, claims-related activities resulted in a financial benefit of $19.7 million, compared to a financial benefit of $50.4 million in the previous year. Alder's profits often lag as claims from hurricanes are settled and billed. The profits from 2023 were due to the settlement of Hurricane Ian claims, which occurred in 2022. In 2024, claims and billing for Hurricane Debby, Helene and Milton are still ongoing.
Policy acquisition costs and other operating costs and expenses
For the year ended December 31, 2024, policy acquisition costs and other operating costs and expenses were $342.1 million, compared to $304.1 million during the year ended December 31, 2023, as follows (dollars in thousands):
For the Years Ended December 31,
Change
Ratio
Ratio
Premiums earned, net
Policy acquisition costs and other operating costs and expenses:
Policy acquisition costs
Other operating costs and expenses
Total policy acquisition costs and other operating costs and expenses
For the year ended December 31, 2024, policy acquisition costs and other operating costs and expenses increased by $38.0 million, compared to the year ended December 31, 2023, which was the result of an increase in policy acquisition costs of $25.4 million and an increase in other operating costs and expenses of $12.6 million. The total expense ratio was 24.9% for the year ended December 31, 2024 compared to 24.3% for the year ended December 31, 2023.
• The policy acquisition costs increased by $25.4 million due to higher commissions resulting from a 7.7% increase in the direct premiums written compared to the previous year, as well as more writings outside of Florida which incur higher commissions. Additionally, the lower level of reinsurance commissions and an increased level of agent bonus commissions impacted 2024.
• The increase in other operating costs and expenses of $12.6 million was largely driven by employee related expenses including stock based compensation, and employee benefits. The other operating cost ratio was 7.9% for the year ended December 31, 2024 compared to 7.7% for the year ended December 31, 2023.
As a result of the trends discussed above for losses and LAE and policy acquisition costs and other operating costs and expenses , the combined ratio for the year ended December 31, 2024 was 104.1% compared to 103.6% for the year ended December 31, 2023.
Interest and Amortization of Debt Issuance Costs
Interest and amortization of debt issuance costs were $6.5 million for each of the years ended December 31, 2024 and 2023.
Income Tax Expense (Benefit)
Income tax expense was $25.7 million for the year ended December 31, 2024, compared to an income tax expense of $21.5 million for the year ended December 31, 2023. Our effective tax rate (“ETR”) increased to 30.4% for the year ended December 31, 2024, as compared to 24.4% for the year ended December 31, 2023. See “Part II—Item 8—Note 12 (Income Taxes)” for a table of items reconciling statutory rates to the effective rate for years ended December 31, 2024 and 2023.
Other Comprehensive Income (Loss)
Other comprehensive income, net of taxes for the year ended December 31, 2024 was $11.0 million compared to other comprehensive income of $29.6 million for the year ended December 31, 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. This year’s result 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 “ 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 .
Liquidity and Capital Resources
Liquidity
Liquidity is a measure of a company’s ability to generate sufficient cash flows to meet its short- and long-term obligations. Funds generated from operations have been sufficient and we expect them to be sufficient to meet our current and long term liquidity requirements.
The balance of cash and cash equivalents, excluding restricted cash, as of December 31, 2025 was $408.9 million, compared to $259.4 million at December 31, 2024. See “ Part II—Item 8—Consolidated Statements of Cash Flows ” for a reconciliation of the balance of cash and cash equivalents between December 31, 2025 and 2024. This increase is largely attributable to the improved underwriting results and lower losses compared to the prior year stemming from the absence of significant hurricane activity in 2025, coupled with increases in investment income earned and commission and fee revenue on a year over year basis. Our cash investment strategy at times includes cash investments where the right of offset against other bank accounts does not exist. A book overdraft occurs when aggregating the book balance of all accounts at a financial institution for accounts which have the right of offset, and if the aggregation results in a net negative book balance, that balance is reclassified from cash and cash equivalents in our Consolidated Balance Sheets to book overdraft. Cash and cash equivalents balances are available to settle book overdrafts, and to pay reinsurance premiums, expenses and claims. Reinsurance premiums are paid in installments during the reinsurance policy period, which runs from June 1 st to May 31 st of the following year. The FHCF reimbursement premiums are paid in three installments on August 1 st , October 1 st and December 1 st , and third-party reinsurance premiums are generally paid in four installments on July 1 st , October 1 st , January 1 st and April 1 st , resulting in significant payments at those times. See “ Part II—Item 8—Note 15 (Commitments and Contingencies) ” and additional discussion below under the caption “— Material Cash Requirements ” for more information.
During 2025, there were no significant hurricanes which exceeded the Company’s reinsurance attachment point. During 2024, there were two significant hurricanes, Hurricane Helene and Milton, which exceeded the Company’s reinsurance attachment point. The Company’s reinsurance program provides sufficient liquidity in the form of cash advances for paid losses ceded to the reinsurers in the case of weather events with losses above the Company’s reinsurance attachment point. See “— Results of Operations ” for more information.
The balance of restricted cash and cash equivalents as of December 31, 2025 and 2024 represents cash equivalents on deposit with certain regulatory agencies in the various states in which our Insurance Entities do business.
Liquidity is required at the holding company for us to cover the payment of holding company general operating expenses, provide for contingencies if needed, dividends to shareholders (if and when authorized and declared by our Board of Directors), payment for the possible repurchase of our common stock (if and when authorized by our Board of Directors), payment of our tax obligations to taxing authorities, settlement of taxes between subsidiaries in accordance with our tax sharing agreement, capital contributions to subsidiaries or surplus note contributions to the Insurance Entities, if needed, and interest and principal payments on outstanding debt obligations of the holding company. Effective in 2021 for UPCIC and 2022 for APPCIC, the holding company has put in place an ongoing surplus note arrangement with the Insurance Entities, which has been approved by the FLOIR as the Insurance Entities’ domestic regulator. Surplus notes are unsecured debt issued by the Insurance Entities that are subordinated to all claims by policyholders and creditors, with interest and principal payments on the surplus notes to the holding company being made only upon the FLOIR’s express approval. Surplus notes are considered bonds in function and payout structure, but are accounted for as equity in the statutory reporting of the Insurance Entities. The holding company has outstanding with the Insurance Entities $187.2 million in surplus notes and accrued interest as of December 31, 2025. Under the terms of the surplus notes, interest accrues at a variable rate which resets annually (currently 11.33% for 2025) on the outstanding surplus note balances and, if approved by the FLOIR, is payable annually to the holding company. The declaration and payment of future dividends to our shareholders, and any future repurchases of our common stock, will be at the discretion of our Board of Directors and will depend upon many factors, including our operating results, financial condition, debt covenants and any regulatory constraints. New regulations or changes to existing regulations or their interpretations imposed on the Company and its affiliates may also impact the availability, amount and timing of future dividend payments to the parent. Principal sources of liquidity for the holding company include dividends paid by our service entities generated from income earned on fees paid by the Insurance Entities to affiliated companies for general agency, inspections and claims adjusting services. Dividends are also paid from income earned from brokerage commissions paid by third-party reinsurers earned on reinsurance contracts placed by our wholly-owned subsidiary, BARC and policy fees charged to policyholders. We also maintain high quality investments in our portfolio as a source of liquidity along with ongoing interest and dividend income from those investments. As discussed in “ Part II—Item 8—Note 5 (Insurance Operations) ”, there are limitations on the dividends the Insurance Entities may pay to their immediate parent company, Protection Solutions, Inc. (“PSI,” formerly known as Universal Insurance Holding Company of Florida).
The maximum amount of dividends that can be paid by Florida insurance companies without prior approval of the FLOIR is subject to restrictions as referenced below and in “ Part II—Item 8—Note 5 (Insurance Operations) ”. Dividends from the Insurance Entities can only be paid from accumulated unassigned funds derived from net operating profits and net realized capital gains. Subject to such accumulated unassigned funds, the maximum dividend that may be paid by the Insurance Entities to PSI without prior approval (an “ordinary dividend”) is further limited to the lesser of statutory net income from operations of
the preceding calendar year or statutory unassigned surplus as of the preceding year end. During the years ended December 31, 2025 and 2024 the Insurance Entities did not pay dividends to PSI. As of December 31, 2025, the Insurance Entities did not have the capacity to pay ordinary dividends.
On November 23, 2021, we issued $100.0 million of 5.625% Senior Unsecured Notes due 2026. We used the net proceeds to support the Insurance Entities’ statutory capital requirements and for general corporate purposes. If necessary, the Company also has amounts available under our unsecured revolving loan as discussed in “ Part II—Item 8—Note 7 (Debt) ”. Management is still evaluating whether this will be repaid or refinanced later in 2026.
Liquidity for the Insurance Entities is primarily required to cover payments for reinsurance premiums, claims payments including potential payments of catastrophe losses (offset by recovery of any reimbursement amounts under our reinsurance agreements), fees paid to affiliates for managing general agency services, inspections and claims adjusting services, agent commissions, premium and income taxes, regulatory assessments, general operating expenses, and interest and principal payments on debt obligations. The principal source of liquidity for the Insurance Entities consists of the revenue generated from the collection of premiums earned, net, interest and dividend income from the investment portfolio, the collection of reinsurance recoverable and financing fees.
Our insurance operations provide liquidity as premiums are generally received months or even years before potential losses are paid under the policies written. In the event of catastrophic events, many of our reinsurance agreements provide for “cash advance” whereby reinsurers advance or prepay amounts to us, thereby providing liquidity, which we utilize in the claim settlement process. In addition, the Insurance Entities maintain substantial investments in highly liquid, marketable securities, which would generate funds upon sale. The average credit rating on our available-for-sale securities was A+ as of December 31, 2025 and December 31, 2024. Credit ratings are a measure of collection risk on invested assets. Credit ratings are provided by third party nationally recognized rating agencies and are periodically updated. Management establishes guidelines for minimum credit rating and overall credit rating for all investments. The duration of our available-for-sale securities was 3.6 years as of December 31, 2025 compared to 3.4 years at December 31, 2024. Duration is a measure of a bond’s sensitivity to interest rate changes and is used by management to limit the potential impact of longer-term investments.
The Insurance Entities are responsible for losses related to catastrophic events in excess of coverage provided by the Insurance Entities’ reinsurance programs and retentions before our reinsurance protection commences. Also, the Insurance Entities are responsible for all other losses that otherwise may not be covered by the reinsurance programs and any amounts arising in the event of a reinsurer default. Losses or a default by reinsurers may have a material adverse effect on either of the Insurance Entities or on our business, financial condition, results of operations and liquidity. See “ Part II—Item 8—Note 3 (Investments) ” for more information.
Capital Resources
Capital resources provide protection for policyholders, furnish the financial strength to support the business of underwriting insurance risks and facilitate continued business growth. The following table provides our stockholders’ equity, total debt, total capital resources, debt-to-total capital ratio and debt-to-equity ratio as of the dates presented (dollars in thousands):
As of December 31,
Stockholders’ equity
Total debt
Total capital resources
Debt-to-total capital ratio
Debt-to-equity ratio
Capital resources, net increased by $177.0 million for the year ended December 31, 2025, reflecting a net increase in total stockholders’ equity, partially offset by a decline in debt. The change in stockholders’ equity was the result of our 2025 net income offset by treasury share purchases and dividends to shareholders. See “ Part II—Item 8—Consolidated Statements of Stockholders’ Equity ” and “ Part II—Item 8—Note 8 (Stockholders’ Equity) ” for an explanation of changes in treasury stock. The reduction during 2025 in debt was primarily the result of principal payments on debt of $1.5 million offset by amortization of debt issuance costs of $0.7 million on our 5.625% Senior Unsecured Notes due 2026. See “— Liquidity and Capital Resources ” for more information.
Additional paid-in-capital increased by $2.5 million primarily from increases from stock option exercises of $12.8 million and share-based compensation expense of $8.7 million for the year ended December 31, 2025. These increases were largely offset by common stock value acquired and cancelled through withholdings for the intrinsic value and tax liabilities upon exercise of stock options and tax withholdings on performance share units, restricted stock units and restricted stock awards vested for share-based payment transactions totaling $18.9 million.
The debt-to-total capital ratio is total debt divided by total capital resources, whereas the debt-to-equity ratio is total debt divided by stockholders’ equity. These ratios help management measure the amount of financing leverage in place in relation to equity and future leverage capacity.
Risk-Based Capital Requirements
The Insurance Entities are required annually to comply with the NAIC RBC requirements. RBC requirements prescribe a method of measuring the amount of capital appropriate for an insurance company to support its overall business operations in light of its size and risk profile. NAIC’s RBC requirements are used by regulators to determine appropriate regulatory actions relating to insurers who show signs of weak or deteriorating condition. As of December 31, 2025, based on calculations using the appropriate NAIC RBC formula, the Insurance Entities reported respective total adjusted capital in excess of the requirements. Failure by the Insurance Entities to maintain the required level of statutory capital and surplus could result in the suspension of their authority to write new or renewal business, other regulatory actions, or ultimately, in the revocation of their certificate of authority by the FLOIR.
Unsecured Revolving Loan
As discussed in “ Part II—Item 8—Note 7 (Debt) ”, the Company entered into a committed and unsecured $50.0 million revolving credit line with JP Morgan Chase Bank, N.A. This agreement succeeded the previous $50.0 million revolving credit line with J.P. Morgan Chase, N.A. As of December 31, 2025, the Company has not borrowed any amount under this revolving loan. The Company must pay an annual commitment of 0.50% of the unused portion of the commitment. Borrowings mature on May 29, 2026, 364 days after the inception date and carries an interest rate of prime rate plus a margin of 2.00% on borrowings . The credit line is subject to annual renewals. The credit line contains customary financial and other covenants, with which the Company is in compliance.
Debt
In November 2021, we issued and sold $100 million of 5.625% Senior Unsecured Notes due 2026 (the “Notes”) to certain institutional accredited investors and qualified institutional buyers. The Notes mature on November 30, 2026, at which time the entire $100 million of principal is due and payable. At any time on or after November 30, 2023, the Company may redeem all or part of the Notes. See “ Part II—Item 8—Note 7 (Debt) ” for additional details. As of December 31, 2025, we were in compliance with all applicable covenants.
We will also continue to evaluate opportunities to access the debt capital markets to raise additional capital. We anticipate any proceeds would be used for general corporate purposes, including investing in the capital and surplus of the Insurance Entities.
In 2006, UPCIC entered into a $25.0 million surplus note with the State Board of Administration of Florida (the “SBA”) under Florida’s Insurance Capital Build-Up Incentive Program (the “ICBUI”). The surplus note has a twenty-year term, with quarterly payments of interest based on the 10-year Constant Maturity Treasury Index. As of December 31, 2025, UPCIC’s net written premium to surplus ratio and gross written premium to surplus ratio were in excess of the required minimums and, therefore, UPCIC is not subject to increases in interest rates. See “ Part II—Item 8—Note 7 (Debt) ” for additional details. At December 31, 2025, UPCIC was in compliance with the terms of the surplus note and with each of the loan’s covenants as implemented by rules promulgated by the SBA. Total adjusted capital and surplus, which includes the surplus note, was in excess of regulatory requirements for both UPCIC and APPCIC.
In addition to liquidity generated from our operations, we maintain a prudent investment portfolio, mainly consisting of high-grade fixed income securities. Our primary goal is to safeguard capital and ensure sufficient liquidity for potential claims and other financial requirements. The portfolio also aims to achieve a comprehensive return, with a focus on investment income. Our operations have historically produced a steady flow of funds, contributing to the growth of our cash and investments.
Looking Forward
We continue to monitor various financial metrics related to our business. Although we have not encountered significant adverse effects on our operations or liquidity, conditions are subject to change based on the economic outcomes and the pace and extent of economic, regulatory, and market developments and their impact on us. For more information on our response to the Florida market, please refer to “ Overview—Trends and Geographical Distribution—Florida Trends .”
Common Stock Repurchases
We may repurchase shares from time to time at our discretion, based on ongoing assessments of our capital needs, the market price of our common stock, and general market conditions. We will fund the share repurchase program with cash from operations. During 2025, there were two authorized repurchase plans in effect:
• On March 11, 2024, our Board of Directors authorized the March 2026 Share Repurchase Program pursuant to which we repurchased 977,616 shares of our common stock at an aggregate cost of approximately $20.0 million. As of December 31, 2025, we have repurchased all authorized common stock under the March 2026 Share Repurchase Program.
• On May 1, 2025, our Board of Directors authorized the May 2027 Share Repurchase Program, pursuant to which we have repurchased 737,462 shares of our common stock at an aggregate cost of approximately $19.8 million. As of
December 31, 2025, we have the ability to purchase up to approximately $0.2 million of our common stock under the May 2027 Share Repurchase Program.
In total, during the year ended December 31, 2025, we repurchased an aggregate of 843,651 shares of our common stock in the open market at an aggregate purchase price of $22.4 million. Also see “ Part II—Item 5—Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Registrant Purchases of Equity Securities ” for share repurchase activity during the three months ended December 31, 2025.
On January 7, 2026, our Board of Directors authorized the repurchase of an additional $20.0 million of our common stock through January 8, 2028 (the “January 2028 Share Repurchase Program”). As of February 23, 2026 we have the ability to purchase approximately $20 million of our common stock under the January 2028 Share Repurchase Program.
Cash Dividends
The following table summarizes the dividends declared and paid by the Company during the year ended December 31, 2025:
Dividend
Shareholders
Dividend
Cash Dividend
Declared Date
Record Date
Payable Date
Per Share Amount
First Quarter
February 6, 2025
March 7, 2025
March 14, 2025
Second Quarter
April 14, 2025
May 9, 2025
May 16, 2025
Third Quarter
July 9, 2025
August 1, 2025
August 8, 2025
Fourth Quarter
November 6, 2025
December 5, 2025
December 12, 2025
Reinsurance Recoverable
The following table provides total unpaid loss and LAE, net of related reinsurance recoverable for the dates presented (in thousands):
Years Ended December 31,
Unpaid loss and LAE, net
IBNR loss and LAE, net
Total unpaid loss and LAE, net
Reinsurance recoverable on unpaid loss and LAE
Reinsurance recoverable on IBNR loss and LAE
Total reinsurance recoverable on unpaid loss and LAE
Statutory Loss Ratios
Underwriting results of insurance companies are frequently measured by their combined ratios, which is the sum of the loss and expense ratios described in the following paragraph. However, investment income, federal income taxes and other non-underwriting income or expense are not reflected in the combined ratio. The profitability of property and casualty insurance
companies depends on income from underwriting, investment and service operations. Underwriting results are considered profitable when the combined ratio is under 100% and unprofitable when the combined ratio is over 100%.
The following table provides the statutory loss ratios, expense ratios and combined ratios for the periods indicated for the Insurance Entities:
Years Ended December 31,
Loss and LAE Ratio (1)
UPCIC
APPCIC
Expense Ratio (1)
UPCIC
APPCIC
Combined Ratio (1)
UPCIC
APPCIC
(1) The ratios are net of ceded premiums and losses and LAE, including premiums ceded to our catastrophe reinsurers which comprise a significant cost, and losses and LAE ceded to reinsurers. The expense ratio includes management fees and commissions, which are based on market rates, paid to an affiliate of the Insurance Entities in the amount of $119.5 million and $55.8 million for UPCIC for the years ended December 31, 2025 and 2024, respectively, and $2.8 million for APPCIC for each of the years ended December 31, 2025 and 2024, respectively. The management fees and commissions paid to the affiliate are eliminated in consolidation.
Ratings
The Insurance Entities’ financial strength and stability are rated by certain independent insurance rating agencies to measure the Insurance Entities’ ability to meet their financial obligations to its policyholders. For the Insurance Entities’ policies to be considered acceptable to the secondary mortgage market, the Insurance Entities must maintain a specified rating level with at least one independent insurance rating agency recognized by each of the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Federal National Mortgage Association (“Fannie Mae”) or alternatively must qualify for an exception to the rating requirement. The Insurance Entities currently maintain acceptable ratings from two rating agencies recognized by Freddie Mac and Fannie Mae.
In 2025, Demotech, Inc. affirmed the Financial Stability Rating® of “A” for the Insurance Entities and Kroll affirmed its insurer financial strength ratings of “A-”. According to Demotech, Inc., the assigned rating represents a company’s continued positive surplus related to policyholders, liquidity of invested assets, an acceptable level of financial leverage, reasonable loss and LAE reserves, and realistic pricing. According to Kroll, its category of “A” ratings, inclusive of A+, A, and A- ratings, indicates an insurer’s financial condition is strong and it is very likely to meet its policy obligations under difficult economic, financial, and business conditions. The ratings of the Insurance Entities are subject to at least annual review by the respective rating agencies, and may be revised upward or downward or revoked at the sole discretion of the rating agencies. Insurer financial stability or financial strength ratings are primarily directed towards policyholders, and are not evaluations directed toward the protection of investors in a company, including holders of a company’s common stock, and are not recommendations to buy, sell, or hold securities.
The “A” rating on the 5.625% Senior Unsecured Notes due 2026 was reaffirmed by Egan-Jones Ratings Company in 2025. There are three notches in the rating categories assigned by Egan-Jones Ratings Company (e.g., A-, A, and A+), except for AAA and those deep into speculative grade, i.e., CC, C, and D, which do not have notches. According to Egan-Jones Ratings Company, the assigned rating pertains solely to their view of current and prospective credit quality. Their rating does not address pricing, liquidity, or other risks associated with holding investments in the issuer (UVE). Their rating is dependent on numerous factors including the reliability, accuracy, and quality of the data used in determining the credit rating.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the financial condition, results of operations, liquidity, or capital resources of the Company, except for multi-year reinsurance contract commitments for future years that will be recorded at the commencement of the coverage period. See “ Part II—Item 8—Note 15 (Commitments and Contingencies) ” for more information.
MATERIAL CASH REQUIREMENTS
The following table represents our material cash requirements for which cash flows are fixed or determinable as of December 31, 2025 (in thousands):
Total
Next 12 months
Beyond 12 months
Reinsurance payable and multi-year commitments (1)
Unpaid losses and LAE, direct (2)
Debt (3)
Total material cash requirements
(1) The amount represents the payment of reinsurance premiums payable under multi-year commitments. See “ Part II—Item 8—Note 15 (Commitments and Contingencies) ”.
(2) There are generally no notional or stated amounts related to unpaid losses and LAE. Both the amounts and timing of future loss and LAE payments are estimates and subject to the inherent variability of legal and market conditions affecting the obligations and make the timing of cash outflows uncertain. The ultimate amount and timing of unpaid losses and LAE could differ materially from the amounts in the table above. Further, the unpaid losses and LAE do not represent all the obligations that will arise under the contracts, but rather only the estimated liability incurred through December 31, 2025. Unpaid losses and LAE are net of estimated subrogation recoveries. In addition, these balances exclude amounts recoverable from our reinsurance program. See “ Part II—Item 8—Note 4 (Reinsurance) ” and “— Note 17 (Liability for Unpaid Losses and Loss Adjustment Expenses) ”.
(3) Debt consists of a Surplus note and 5.625% senior unsecured notes. See “ Part II—Item 8—Note 7 (Debt) ” .
ANALYSIS OF FINANCIAL CONDITION AS OF DECEMBER 31, 2025 COMPARED TO DECEMBER 31, 2024
We believe that the cash flows generated from operations will be sufficient to meet our working capital requirements for at least the next twelve months. We invest amounts considered to be in excess of current working capital requirements.
The following table summarizes, by type, the carrying values of investments as of the dates presented (in thousands):
As of December 31,
Type of Investment
Available-for-sale debt securities
Equity securities
Other investments, at fair value
Investment real estate, net
Total
Total invested assets were $1.53 billion as of December 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 $408.9 million at December 31, 2025 compared to $259.4 million at December 31, 2024, an increase of 57.6%. 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.
See “ Part II—Item 8—Consolidated Statements of Cash Flows ” and “ Item 8—Note 3 (Investments) ” for explanations on changes in investments.
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 $28.3 million to $291.0 million as of December 31, 2025 was primarily due to increased reinsurance costs relating to the placement of our 2025-2026 catastrophe reinsurance program beginning on June 1, 2025, less amortization of ceded written premium for the reinsurance costs earned since the beginning of the new program. See “ Part II— Item 7— “ Reinsurance Program ” regarding the Company’s reinsurance placement.
Reinsurance recoverable represents the estimated amount of paid and unpaid losses, LAE, and other expenses that are expected to be recovered from reinsurers. The decrease of $394.7 million to $232.9 million as of December 31, 2025 was primarily due to the collection of ceded losses from Hurricanes Helene and Milton, as well as other prior events collected during 2025 from reinsurers.
Premiums receivable, net represents amounts receivable from policyholders. The decrease in premiums receivable, net, to $75.7 million as of December 31, 2025 is consistent with premium trends including seasonality and consumer payment behaviors.
Deferred policy acquisition costs (“DPAC”) increased by $7.4 million to $128.6 million as of December 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.
Income taxes payable/recoverable represents the amounts due to/from taxing jurisdictions within one year. An income tax payable arises when current income tax liabilities exceed tax payments, and an income tax recoverable occurs when tax payments exceed current income tax liabilities. As of December 31, 2025, the balance of income taxes payable was $28.6 million, compared to a balance payable of $6.6 million as of December 31, 2024.
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 year ended December 31, 2025, net deferred income tax assets, decreased by $14.5 million to $27.7 million, primarily due to the impact of an increase in unrealized gains on investments and a reduction of net operating loss carryforwards. Deferred income taxes reverse in future years as the temporary differences between book and tax reverse.
See “ Part II—Item 8—Note 17 (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 $278.6 million to $680.7 million as of December 31, 2025. Unpaid losses and LAE decreased in 2025 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. Unpaid losses and LAE are net of estimated subrogation recoveries of $43.4 million as of December 31, 2025 compared to $69.2 million as of December 31, 2024.
Unearned premiums represent the portion of direct premiums written that will be earned pro-rata in the future. The increase of $31.5 million from December 31, 2024 to $1.09 billion as of December 31, 2025 reflects our increase in direct premiums written.
Advance premium represents premium payments made by policyholders ahead of the effective date of the policies. The increase of $15.6 million from December 31, 2024 to $61.8 million as of December 31, 2025 reflects customer payment behavior and the payment behavior of mortgage escrow service providers as well as premium trends.
Reinsurance payable, net, represents the unpaid reinsurance premium installments owed to reinsurers, unpaid reinstatement premiums due to reinsurers, and cash advances received from reinsurers, if any. On June 1 st of each year, we renew our core catastrophe reinsurance program and record the estimated annual cost of our reinsurance program. These estimated annual costs are increased or decreased during the year based on premium adjustments or as a result of new placements during the year. The annual cost initially increases reinsurance payable, which is then reduced as installment payments are made over the policy period of the reinsurance, which typically runs from June 1 st to May 31 st . The balance increased by $36.9 million to $257.2 million as of December 31, 2025 as a result of the renewal of the 2025-2026 reinsurance program effective June 1, 2025. See “— Liquidity and Capital Resources ” for more information about timing of reinsurance premium installment payments.
Other liabilities and accrued expenses decreased by $7.0 million to $41.6 million as of December 31, 2025, primarily driven by an increase in other operating accrued expense and amounts payable for securities resulting from trades executed that had not settled as of December 31, 2025 offset by a decrease in amounts payable for accrued taxes and fees.
See “— Liquidity and Capital Resources ” for more information about the changes in additional paid-in capital during 2025.
ARRANGEMENTS WITH VARIABLE INTEREST ENTITIES
We entered into a reinsurance captive arrangement with a VIE in the normal course of business, and consolidated the VIE since we are the primary beneficiary.
For a further discussion of our involvement with the VIE, see “ Part II—Item 8—Note 2 (Summary of Significant Accounting Policies) ” and “ Item 8—Note 18 (Variable Interest Entities) ”.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
Liability for Unpaid Losses and LAE
A liability, net of estimated subrogation, is established to provide for the estimated costs of paying losses and LAE under insurance policies the Insurance Entities have issued. Underwriting results are significantly influenced by an estimate of a liability for unpaid losses and LAE. The liability is an estimate of amounts necessary to settle all outstanding claims, including claims that have been incurred, but not yet reported as of the financial statement date. The process of estimating loss reserves requires significant judgment due to a number of variables, such as the type, severity and jurisdiction of loss, economic conditions including inflation, social attitudes, judicial decisions and legislative development, and changes in claims handling procedures. These variables will inherently result in an ultimate liability that will differ from initial estimates. We revise our reserve for unpaid losses as additional information becomes available, and reflect adjustments, if any, in our earnings in the periods in which we determine the adjustments are necessary. Additionally, we estimate and accrue our right to subrogate reported or estimated claims against other parties. Subrogated claims are recorded at amounts estimated to be received from the subrogated parties, net of expenses and netted against unpaid losses and LAE.
See “ Part II—Item 8—Note 17 (Liability for Unpaid Losses and Loss Adjustment Expenses) ” for a discussion of the Company’s basis and methodologies used to establish its liability for unpaid losses and LAE along with the following quantitative disclosures:
• Five-year accident year table on incurred claim and allocated claim adjustment expenses, net of reinsurance including columns of:
◦ IBNR—Total of Incurred-but-not-reported liabilities plus expected development (redundancy) on reported claims by accident year, and
◦ Claim counts—cumulative number of reported claims by accident year.
• Five-year accident year table on cumulative paid claims and allocated claim adjustment expenses, net of reinsurance,
• Reconciliation of net incurred and paid claims development tables to the liability for unpaid losses and LAE in the consolidated balance sheets,
• Duration—a table of the average historical claims duration for the past five years, and
• Reconciliation of the change in liability for unpaid losses and LAE presented in the consolidated financial statements.
We utilize independent actuaries to help establish liabilities for unpaid losses, anticipated loss recoveries, and LAE. We do not discount the liability for unpaid losses and LAE for financial statement purposes. In establishing the liability for unpaid losses and LAE, actuarial best practices and judgment are relied upon in order to make appropriate selections of ultimate losses. There are inherent uncertainties associated with this estimation process, especially when a company is undergoing changes in its claims settlement practices, when a company has limited experience in a certain area or when behaviors of policyholders are influenced by external factors and/or market dynamics. As an example, a dramatic change occurred at the end of calendar year 2022 when significant reforms were enacted in Florida to eliminate a statutory right to attorneys’ fees in favor of policyholders and eliminate the use of assignments of benefits (“AOB”) by third parties such as contractors, both of which had previously increased represented claims and claims-related abuses. These reforms also reduced the time period for policyholders to file claims and shortened Florida insurers’ settlement requirements on property claims. As a result, these changes have had a meaningful influence on development pattern selections applied to accident periods subsequent to 2022 in the reserving estimates for each of the methods described in “ Part II—Item 8—Note 17 (Liability for Unpaid Losses and Loss Adjustment Expenses) ” . We are monitoring this loss experience in order to best reflect revised development patterns in estimation methods used to select ultimate loss and LAE for each accident period.
Factors Affecting Reserve Estimates
Reserve estimates are developed based on the processes and historical development trends discussed in “ Part II—Item 8—Note 17 (Liability for Unpaid Losses and Loss Adjustment Expenses) ” to the consolidated financial statements. These estimates are considered in conjunction with known facts and interpretations of circumstances and factors including our experience with similar cases, actual claims paid, differing payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes in law and regulation, judicial decisions, and economic conditions. When these types of changes are experienced, actuarial judgment is applied in the determination and selection of development factors in order to better reflect new trends or expectations. For example, if a change in law is expected to have a significant impact on the development of claim severity, actuarial judgment is applied to determine appropriate development factors that will most accurately reflect the expected impact on that specific estimate. As an example, the Company considered and included the effects of the enacted legislation in developing its ultimate loss projections and reserve estimates as of December 31, 2023, as noted in “ Part II—Item 8—Note 17 (Liability for Unpaid Losses and Loss Adjustment Expenses) ” to the consolidated financial statements. Another example would be when a change in economic conditions is expected to affect the cost of repairs to property; actuarial judgment is applied to determine appropriate development factors to use in the reserve estimate that will most accurately reflect the expected impacts on severity development.
Changes in homeowners current year claim severity are generally influenced by inflation in the cost of building materials, the cost of construction and property repair services, the cost of replacing home furnishings and other contents, the types of claims that qualify for coverage, the presence of third party representation, such as legal or repair contractors (which serve to inflate claim expenses), and other economic and environmental factors. We employ various loss management programs to mitigate the effects of these factors.
Key assumptions that may materially affect the estimate of the reserve for loss and LAE relate to the effects of emerging claim and coverage issues. As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverages may emerge. These issues may adversely affect our business by either extending coverage beyond our underwriting intent, lengthening the time to final settlement, or by increasing the number or size of claims. Key assumptions that are premised on future emergence that are inconsistent with historical loss reserve development patterns include but are not limited to:
• Adverse changes in loss cost trends, including inflationary pressures in home repair costs;
• Judicial expansion of policy coverage and the impact of new theories of liability; and
• Plaintiffs targeting property and casualty insurers in purported class action or other litigation related to claims-handling and other practices.
As loss experience for the current year develops for each type of loss, the reserves for loss and LAE are monitored relative to initial assumptions until they are judged to have sufficient statistical credibility. From that point in time and forward, reserves are re-estimated using statistical actuarial processes to reflect the impact loss trends have on development factors incorporated into the actuarial estimation processes.
Causes of Reserve Estimate Uncertainty
Since reserves are estimates of the unpaid portions of claims and claims expenses that have occurred, the establishment of appropriate reserves, including reserves for catastrophes, requires regular reevaluation and refinement of estimates to determine ultimate loss and LAE estimates.
At each reporting date, the highest degree of uncertainty in reserve estimates arises from claims remaining to be settled for the current accident year and the most recent preceding accident year, and claims that have occurred but have not been reported. The estimate for the current accident year contains the greatest degree of uncertainty because it contains the greatest proportion of losses that have not been reported or settled but must be estimated as of the current reporting date. During the first year after the end of an accident year, a large portion of the total losses for that accident year are settled. When accident year losses paid through the end of the first year following the initial accident year are incorporated into updated actuarial estimates, the trends inherent in the settlement of claims emerge more clearly. Consequently, this is the point in time at which the largest re-
estimates of losses for an accident year can occur. After the second year, the losses paid for the accident year typically relate to claims that are more difficult to settle, such as those involving litigation.
Reserves for Catastrophe Losses
Loss and LAE reserves also include reserves for catastrophe losses. Catastrophe losses are an inherent risk of the property-casualty insurance industry that have contributed, and will continue to contribute, to potentially material year-to-year fluctuations in results of operations and financial position. A catastrophe is an event that produces significant insured losses before reinsurance and involves multiple first party policyholders, or an event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Catastrophes are commonly caused by various natural events including high winds, tornadoes, wildfires, winter storms, tropical storms and hurricanes.
The estimation of claims and claims expense reserves for catastrophes also comprises estimates of losses from reported and unreported claims, primarily for damage to property. In general, estimates for catastrophe reserves are based on claim adjuster inspections and the application of historical loss development factors as described previously and in “ Part II—Item 8—Note 17 (Liability for Unpaid Losses and Loss Adjustment Expenses) ” to the consolidated financial statements. However, depending on the nature of the catastrophe, as noted above, the estimation process can be further complicated. For example, for hurricanes, complications could include the inability of insureds to be able to promptly report losses, a prevalence of solicited and late-reported claims creating or compounding challenges with determining the cause and amount of loss, limitations placed on claims adjusting staff affecting their ability to inspect losses, determining whether losses are covered by our homeowners policy (generally for damage caused by wind or wind driven rain) or are specifically excluded from coverage such as losses caused by flood, estimating additional living expenses or assessing the impact of demand surge and exposure to mold damage. The effects of numerous other considerations, include the timing of a catastrophe in relation to other events, such as at or near the end of a financial reporting period, which can affect the availability of information needed to estimate reserves for that reporting period. In these situations, practices are adapted to accommodate these circumstances in order to determine a best estimate of losses from a catastrophe.
Key Actuarial Assumptions That Affect the Loss and LAE Estimate
The aggregation of estimates for reported losses and IBNR forms the reserve liability recorded in the Consolidated Balance Sheets.
At any given point in time, the recorded loss and LAE reserves represent our best estimate of the ultimate settlement and administration cost of insured claims incurred and unpaid. Since the process of estimating loss and LAE reserves requires significant judgment due to a number of variables, such as fluctuations in inflation, judicial decisions, legislative changes and changes in claims handling procedures, ultimate liability may exceed or be less than these estimates. Reserves for losses and LAE are revised as additional information becomes available, and adjustments, if any, are reflected in earnings in the periods in which they are determined.
In selecting development factors and averages described in “ Part II—Item 8—Note 17 (Liability for Unpaid Losses and Loss Adjustment Expenses) ” to the consolidated financial statements, due consideration is given to how the historical experience patterns change from one year to the next over the course of several consecutive years of recent history. Predictions surrounding these patterns drive the estimates that are produced by each method, and are based on statistical techniques that follow standard actuarial practices.
In compliance with annual statutory reporting requirements, our appointed independent actuary provides a Statement of Actuarial Opinion (“SAO”) indicating that carried loss and LAE reserves recorded at each annual balance sheet date make a reasonable provision for all of the Insurance Entities’ unpaid loss and LAE obligations under the terms of contracts and agreements with our policyholders. Recorded reserves are compared to the indicated range provided in the actuary’s report accompanying the SAO. At December 31, 2025, the recorded amount for net loss and LAE falls within the range determined by the Company’s appointed independent actuary.
Potential Reserve Estimate Variability
The methods employed by actuaries include a range of estimated unpaid losses, each reflecting a level of uncertainty. Projections of loss and LAE liabilities are subject to potentially large variability in the estimation process since the ultimate disposition of claims incurred prior to the financial statement date, whether reported or not, is subject to the outcome of events that have not yet occurred. Examples of these events include jury decisions, court interpretations, legislative changes, public attitudes, and social/economic conditions such as inflation. Any estimate of future costs is subject to the inherent limitation on one’s ability to predict the aggregate course of future events. It should therefore be expected that the actual emergence of losses and LAE will vary, perhaps materially, from any estimate.
In selecting the range of reasonable estimates, the range of indications produced by the various methods is evaluated, the relative strengths and weaknesses of each method are considered, and from those inputs a range of estimates can be selected. For reasons cited above, this range of estimated ultimate losses is typically smaller for older, more mature accident periods and greater for more recent, less mature accident periods. The greatest level of uncertainty is associated with the most recent accident years, and particularly years during which catastrophe events occurred.
The inherent uncertainty associated with our loss and LAE liability is magnified due to our concentration of property business in catastrophe-exposed and litigious states, primarily Florida. In 2018, for example, loss and expense payments for Hurricane Irma claims exceeded initial liability estimates that were established at year-end 2017, which was shortly after the event occurred. This unexpected development was partially due to the influence of plaintiff attorneys in the claim filing process; both at initial contact prior to coverage validation or damage assessment, and after claims were settled and closed which resulted in a large number of claims being reopened during the year. In 2019, UPCIC continued to experience unanticipated unfavorable development on losses from claims being reopened and new claims being opened due to public adjusters encouraging policyholders to file new claims. Due to the relatively low frequency and inherent uncertainty of catastrophe events, the parameters utilized in loss estimation methodologies are updated whenever new information emerges.
The following table summarizes the effect on net loss and LAE reserves and net loss, net of tax in the event of reasonably likely changes in the severity of claims considered in establishing loss and LAE reserves. The range of reasonably likely changes in the severity of our claims was established based on a review of changes in loss year development and applied loss and LAE reserves as a whole. The selected range of changes does not indicate what could be the potential best or worst case or likely scenarios (dollars in thousands):
Year Ended December 31, 2025
Percent Change in
Change in Reserves
Reserves
Net Income
Base
Adequacy of Reserve Estimates
We believe our net loss and LAE reserves and estimated subrogation recoveries are appropriately established based on available methodology, facts, technology, laws, and regulations. We calculate and record a single best reserve estimate, in conformance with generally accepted actuarial standards, for reported and unreported losses, LAE losses and subrogation, and as a result we believe no other estimate is better than our recorded amount.
Due to the uncertainties involved, the ultimate cost of losses and LAE may vary materially from recorded amounts, which are based on our best estimates. The liability for unpaid losses and LAE, net of subrogation at December 31, 2025 is $680.7 million.
Recent Accounting Pronouncements Not Yet Adopted
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures, which requires additional disclosure of certain costs and expenses within the notes to the financial statements. The updated standard is effective for annual periods beginning in 2027 and interim periods beginning in the first quarter of 2028. Early adoption is permitted. The Company is currently evaluating the impact that the updated standard will have on financial statement disclosures.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles — Goodwill and Other — Internal-Use Software, which modernizes the accounting for internal-use software and clarifies capitalization criteria. The updated standard is effective for the company beginning with interim and annual reporting periods in 2028. Early adoption is permitted. The Company is currently evaluating the impact that the updated standard will have on the Consolidated Financial Statements.
There have been no other recent accounting pronouncements or changes in accounting pronouncements that are identified to have significance or potential significance to the Company.
