Good morning, ladies and gentlemen, and welcome to Universal's third quarter 2022 earnings conference call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Arash Soleimani, Chief Strategy Officer.
Morning. Thank you for joining us today. Welcome to our quarterly earnings call. On the call with me today are Steve Donaghy, Chief Executive Officer, and Frank Wilcox, Chief Financial Officer. Before we begin, please note today's discussion may contain forward-looking statements and Non-GAAP financial measures. Forward-looking statements involve assumptions, risks, and uncertainties that could cause actual results to differ materially from those statements. For more information, please see the press release on Universal's SEC filings, all of which are available on the Investors section of our website at universalinsuranceholdings.com and on the SEC's website. A reconciliation of Non-GAAP financial measures to comparable GAAP measures is included in the quarterly press release and can also be found on Universal's website at universalinsuranceholdings.com. With that, I'll turn the call over to Steve.
Thanks, Arash. Good morning, everyone. Our thoughts continue to be with all those impacted by Hurricane Ian. Since landfall, we've had boots on the ground helping our policyholders in their time of need. As we recently disclosed, our portfolio is underweight in the most impacted regions and is further cushioned by our high proportion of condo unit and renters policies, which provide interior and contents coverage. To date, claims volume from Hurricane Ian reflects approximately 50% of Irma's volume received at this point. We maintain the largest claims and legal team in the State of Florida, providing us with significant resources and capacity to efficiently close Ian-related claims.
Despite our $1 billion estimated gross loss from Hurricane Ian, we have a $3 billion reinsurance tower in place for a subsequent event in the 2022 Atlantic hurricane season, and our consolidated retention would be meaningfully lower, highlighting the strength and breadth of our catastrophe reinsurance program. We started the planning process for the 2023 Atlantic hurricane season and are already well underway, as we have almost $400 million of pre-negotiated multiyear capacity below the Florida Hurricane Catastrophe Fund's attachment point. Approximately $200 million of estimated cost-free coverage from the Reinsurance to Assist Policyholders program and a projected $150 million from our catastrophe bond.
Coupled with our 90% participation rate in the Florida Hurricane Catastrophe Fund, we estimate the vast majority of our first event 2023 catastrophe reinsurance program will be insulated from open market pricing dynamics. We value our reinsurance partner relationships and appreciate their support. I'll turn it over to Frank to walk through our financial results. Frank.
Thanks, Steve, and good morning. Adjusted diluted loss per common share was $2.27, down from diluted adjusted earnings per common share of $0.63 in the prior year quarter, with the decline mostly attributable to a higher net combined ratio associated with Hurricane Ian, partly offset by higher net investment income and commission revenue. Core revenue of $316.7 million was up 10.5% year-over-year, with growth primarily stemming from higher net premiums earned, net investment income, and commission revenue. Direct premiums written of $500.7 million were up 15.6% from the prior year quarter, including 16.3% growth in Florida and 12.7% growth in other states. Overall growth reflects rate increases, partially offset by lower policies in force.
Direct premiums earned of $452.5 million were up 10.2% year-over-year, reflecting rate-driven direct premiums written growth over the last 12 months. The net combined ratio was 139.2%, up 40.7 points compared to the prior year quarter. The increase reflects a higher net loss ratio, partially offset by a lower net expense ratio. The 113.7% net loss ratio was up 42.8 points year-over-year, with the increase primarily attributable to the retained losses associated with Hurricane Ian and a higher attritional initial accident year loss pick, partially offset by better prior year reserve development. The 25.5% net expense ratio improved by 2.1 points year-over-year, primarily reflecting lower renewal commission rates paid to distribution partners.
During the third quarter, the company repurchased approximately 203,000 shares at an aggregate cost of $2.4 million. The company's current share repurchase authorization program has 8 million remaining as of September 30th, 2022, and runs through November 3rd, 2022. On July 19th, 2022, the board of directors declared a quarterly cash dividend of $0.16 per share of common stock payable on August 9th, 2022 to shareholders of record.
As of the close of business on August 2nd, 2022. With that, I'd like to ask the operator to open the line for questions.
Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Please stand by while we compile a Q&A roster. Our first question comes from Paul Newsome with Piper Sandler. You may proceed.
Good morning. Thanks for the call. Wanted to ask about the expense ratio and the lower comp paid to producers. If you could give us some sense of maybe how sustainable that is. It looks like a pretty good size drop, overall, and maybe just your thoughts on how that will trend in general.
Yeah. Good morning, Paul. This is Frank. Appreciate the question. You know, our expense ratio has been trending down primarily because of that decision to reduce the commission rate, although the distribution partners are receiving the same dollars as we increase primary rates. That's the principal reason for the overall trend coming down. In the third quarter, we also dialed back on some accruals that we were building up for the year for performance bonuses and other discretionary accruals. The 25.5 is not indicative of what the run rate would be. I think that if you look at the first nine months, which is just under 28%, that would be a better barometer of what to expect going forward.
Do you think that we're sort of headed to normal in terms of comp for the markets you're in? I've always wondered why we hadn't seen frankly lower commission comp being paid to producers given the difficulty of the home market. Do you think that is that, you know? Are you standing out for some of your peers in terms of comp levels, or are you about the same, and what do you think how the market's gonna react to that?
Hey, Paul, this is Steve. Good morning. I think as we gauge the market, so to say, in Florida in particular, we see the rates rising dramatically, and as we reduce the agent's commission, they receive the same amount of dollars. We are competitive within the marketplace. We would continue to assess that on an annual basis as we move forward. As capital is key and the management of capital, it's one of the levers that we control that we work with our agency force as we kind of move forward. It's something we keep a very close eye on, and our relationships with the agents are paramount to our success and how we've built the company. We're very careful about it.
I guess the other big question is, you know, sort of Hurricane Ian issues aside, is the profitability prospectively on the underlying business. It doesn't seem like you've, in general, you know, Universal maybe specifically apart, but in general have made a ton of progress in trying to get rate higher than claims inflation. You know, where do you think we are at that? I guess some of the fears have been that, you know, essentially the rates are going up about as fast as it's regulatorily possible to go, and maybe that's not high enough to actually cover the underlying claim inflation without some market change. Maybe your thoughts on that would be great.
Yeah. We constantly analyze the payouts and the rates that are adjusted on an annual basis, and we've taken advantage of our ability to also assess rate due to our reinsurance cost increasing. I think when you combine those factors, we feel as though we are approaching rate adequacy aggressively. You know, the hurricanes event of course has a dramatic effect on our Q3 results. As we look forward, you know, we feel as though the model and our ability to assess claims with our own staff and our own legal team will benefit us in the future. I think all in all, the inflation is a byproduct of the economy.
I think a lot of it has been built in to some extent as we continue to assess rates. As you know, the rates are always a year in arrears because the justification for the rate increase stems from the past twelve months. The future appears as though rate will continue to be assessed in order to facilitate our claims and all the things that affect the payoffs.
Great. Thanks, folks. Appreciate all the help as always.
Yeah. Thanks, Paul. Have a good day.
Thank you.
Thank you. One moment for questions. Our next question comes from Nick Iacovello with Dowling. You may proceed.
Morning, guys.
Morning, Nick.
You've discussed the claims volume from Ian being about 50% less than Irma at this point. Can you just talk a little bit about what you're seeing on the severity side relative to Irma?
You know, the severity is less than what we originally had seen in Irma. You know, again, we have tremendous amount of resources in the markets affected and are trying to get to all the claims as fast as possible, 'cause as you know, you know, the slower you respond, the more bad things can happen to a claim. I think we're really well positioned due to the volume of Ian, as well as due to the resources that we've deployed at this point to assess the damage.
Got it. Just on the net cat number, it looked like it was $111 million, which was a bit lower than what the implied would have been from a net retention loss at both insurance subs and the captive. Can you just talk about the difference between that $111 million and about $114.5 million?
Yeah, that's a great pickup, Nick. We had an excess loss coverage policy at American Platinum, so that reduced the overall retention. Our partners have been very good about delivering capital to us in our time of need for our insured. That was the driver of it.
Thanks. If I'm just thinking about reinsurance coverage for second events, do you have RPPs on the Sliver Layer, or do we begin to see incremental reinstatement premiums, you know, beginning where the Cat Fund attaches?
You'll definitely see that effect. Again, the storm hit at the very tail end of September, so there wasn't a dramatic impact to Q3 results. You know, we will have an offset for those expenses through our adjusting expenses that we deliver. I think that'll all kind of flow through the P&L in future quarters in an orderly fashion. I wouldn't expect anything dramatic.
Got it. I guess that was my follow on, was specific to the internal adjusting operations. Can you guys just help us, I don't know, quantify anything or the timing of anything relating to the net benefit from the internal adjusting and the offset to the incremental reinstatement premiums?
I don't have specifics for you, but although, you know, again, with 800 people in that organization, we are trying to do as much of the adjusting internally as possible. You know, we hand out certain claims to third parties to keep them on our list, so to say, going forward in the event we need those resources. But I think from an overall in and out, you know, you'll see the effects. And again, I think we will offset various expenses incurred as headwinds, and the tailwinds will be our own adjusting and legal organization doing a lot of our own work.
That work not only benefits our insureds, it also benefits our reinsurance partners because we monitor the expense and manage the claims, I would say tighter than anyone in the industry. There's benefits all around for that.
Got it. Just, so we've seen the press reports of a special session, presumably before year-end. I guess if I could get your, these things that you're most interested in, I get the litigation trends, but maybe anything more specific in addressing that. Right, we've had reform passed this year, in recent years as well. I guess, like, I know the calendar year litigation trends are, they're impacted from claims from prior years' hurricanes. Is there any way you could sort of discuss a recent accident quarter or what you're seeing on a monthly basis with the claims that were specifically opened after events that occurred post the legislation?
Yeah. It's a complex question, Nick. I'll do my best to address it. You know, we have seen benefits of recent legislation, the NOI process, the AOB reform two years ago, and we've seen them working. We've also seen the plaintiffs' bar be very aggressive in trying to file as many cases as possible. The NOI impacts that somewhat because they have to do some work in order to file a case. We do see benefits of it. I think on an ongoing basis, I would say the messaging around Hurricane Ian as it was approaching from Jimmy Patronis and Ron DeSantis was very positive in educating consumers as to how they should behave. I think thus far, we've seen very few represented or litigious files come in the door.
I'm not saying they won't adjust in the future, but I think so far our ability to respond and the messaging from politicians has been very supportive of the industry. I think, you know, from a legislative perspective going forward, again, the politicians are very educated as to the issue, and the issue is clearly one-way attorney fees. You know, we, when we win cases today, which we do regularly, you know, we cannot recoup our expenses from the plaintiffs' bar, and we would like to see that. We would like to see the mitigation or elimination of that in the State of Florida, which leads to such a high density of litigation in our state in the State of Florida compared to others.
Sorry, it's a long answer, but there was a lot in there, Nick. Sorry about that.
No, no, that was perfect. I appreciate it. I guess just one final one. Can I just get the holding company liquidity number as of Q3 end?
It's not a number that we disclose on an interim basis. That number will come out in Form 10-K when we produce the holding company only financial statements in the back of the 10-K.
Okay. That's all. Thank you guys.
Great. Thanks, Nick. Have a good day.
Thank you. Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Steve Donaghy for any further remarks.
Thank you. I'd like to thank all of our associates, consumers, agents, and our stakeholders, for their continued support of Universal. Have a great day.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.