UVE Universal Insurance Holdings Inc

• 1Q20 direct premiums written (“DPW”) up 15.7% to $334.6 million
• 1Q20 other states (non-Florida) DPW up 19.0%
• 1Q20 diluted GAAP earnings per share (“EPS”) of $0.61, non-GAAP adjusted EPS1 of $0.79
• Book value per share increased 0.9% to $15.26 when compared to last quarter, despite COVID-19 impacts on fair value of debt securities and equity markets in the latter half of March
• 1Q20 combined ratio of 94.1%
• 1Q20 annualized return on average equity of 16.1%
• Returned $11.8 million to shareholders through share repurchases and dividends 

 

Universal Insurance Holdings (NYSE: UVE) (the “Company”) reported 2020 first quarter diluted EPS of $0.61 on a GAAP basis and $0.79 non-GAAP adjusted EPS1. Quarterly direct premiums written were up 15.7% from the year-ago quarter to $334.6 million. Annualized return on average equity was 16.1%.

1 Excludes net realized and unrealized gains and losses on investments as well as extraordinary reinstatement premiums and associated commissions (“non-GAAP adjusted EPS”). Reconciliations of GAAP to non-GAAP financial measures are provided in the attached tables.

“The circumstances of the past few months in all of our communities have been both difficult and inspiring. Our hearts go out to all those affected directly and indirectly by the COVID-19 pandemic. We are inspired by the health care providers, the first responders, the ingenuity of our communities, our businesses, and governments,” said Stephen J. Donaghy, Chief Executive Officer.

“We commenced business operations more than 20 years ago, intent on protecting and serving our consumers in their most critical time, in some of the most challenging coastal areas in the U.S. for natural disasters. We have remained highly proficient and steadfast in that commitment. We enter this critical time in a position of strength with a debt-to-equity ratio less than 2.0%, currently accruing more reserves than at any point in the company’s history, and with a highly experienced rapid response disaster preparedness team. We are off to a good start to 2020 with solid first quarter results, including an annualized return on average equity of 16.1% and progress on our reinsurance renewals for June 1st. In this dynamic environment, we continue to support our consumers, whether they are shopping for new policies, submitting claims, refinancing, or extending terms, while having substantially all of our employees in our rapid response virtual protocol. We do not have exposure to many lines of business directly impacted by COVID-19, but continue to monitor the currently unknowable longer tail impacts to the housing and rental markets. We believe we remain well positioned for 2020 and remain resolute in serving our consumers and creating value for our stakeholders.”

Summary Financial Results

($thousands, except per share data)

Three Months Ended March 31,

 

2020

 

2019

 

Change

(GAAP comparison)

 

 

 

 

 

Total revenue

$

235,275

 

 

$

236,586

 

 

(0.6)

%

Income before income taxes

27,584

 

 

53,744

 

 

(48.7)

%

Income before income taxes margin

11.7

%

 

22.7

%

 

(11.0)

pts

Diluted EPS

$

0.61

 

 

$

1.14

 

 

(46.5)

%

 

 

 

 

 

 

Annualized return on average equity (ROE)

16.1

%

 

30.4

%

 

(14.3)

pts

Book value per share, end of period

15.26

 

 

15.57

 

 

(2.0)

%

 

 

 

 

 

 

(Non-GAAP comparison)2

 

 

 

 

 

Adjusted operating income

35,361

 

 

47,315

 

 

(25.3)

%

Adjusted EPS

$

0.79

 

 

$

1.00

 

 

(21.0)

%

 

 

 

 

 

 

2 Reconciliation of GAAP to non-GAAP financial measures are provided in the attached tables. Adjusted operating income excludes net realized and unrealized gains and losses on investments, interest expense, and extraordinary reinstatement premiums and associated commissions. Non-GAAP adjusted EPS excludes net realized and unrealized gains and losses on investments, as well as extraordinary reinstatement premiums and associated commissions.

Total revenue decreased 0.6% for the quarter, driven primarily by higher reinsurance costs and unrealized losses on investments, partially offset by higher organic premium pricing and volume and our integrated services. Income before income tax produced an 11.7% margin for the quarter, which was primarily impacted by accruing incremental reserves and our investment portfolio’s volatility from COVID-19, partially offset by a reduced impact from weather events during the quarter. GAAP diluted EPS results for the quarter were driven by the aforementioned factors, in addition to a 2.0 point increase in the effective tax rate due to an increase in permanent items and a lower benefit from discrete items when compared to the prior year’s quarter, partially offset by a reduced share count. The Company produced a strong annualized return on average equity of 16.1%.

Underwriting

($thousands, except policies in force)

Three Months Ended March 31,

 

2020

 

2019

 

Change

Policies in force (as of end of period)

910,579

 

 

840,770

 

 

8.3

%

Premiums in force (as of end of period)

$

1,340,321

 

 

$

1,212,093

 

 

10.6

%

 

 

 

 

 

 

Direct premiums written

$

334,553

 

 

$

289,234

 

 

15.7

%

Direct premiums earned

325,951

 

 

295,377

 

 

10.4

%

Net premiums earned

220,829

 

 

209,727

 

 

5.3

%

 

 

 

 

 

 

Expense ratio3

32.9

%

 

33.2

%

 

(0.3)

pts

Loss & LAE ratio

61.2

%

 

53.9

%

 

7.3

pts

Combined ratio

94.1

%

 

87.1

%

 

7.0

pts

 

 

 

 

 

 

3 Expense ratio excludes interest expense.

Direct premiums written were up double digits for the quarter, led by strong direct premium growth of 19.0% in Other States (non-Florida), and 15.0% in Florida.

On the expense side, the combined ratio increased 7.0 points for the quarter. The increases were driven primarily by increased losses in connection with the continued diversification in the Company’s underlying business to states outside Florida, an increased core loss pick for 2020, and increased prior year adverse development, partially offset by a lower level of weather events in 2020 and a reduction in the expense ratio as set forth below.

• The expense ratio improved by 30 basis points for the quarter, primarily related to an 80 basis point improvement in the other operating expense ratio due to economies of scale and executive compensation reductions. The policy acquisition cost ratio increased by 50 basis points for the quarter as a result of continued geographic expansion into states outside Florida, which typically have higher commission rates.

• The net loss and loss adjustment expense (“LAE”) ratio increased 7.3 points for the quarter. Quarterly drivers include:

• Weather events in excess of plan of $1 million or 0.5 points ($5.0 million in 1Q19) for the quarter.

• Prior year reserve development of $4.3 million or 2.0 points for the quarter (immaterial in 1Q19) were IBNR related to prior year's catastrophe events.

• All other losses and loss adjustment expense of $129.7 million or 58.7 points for the quarter were primarily related to diversified growth, and accruing incremental reserves for the current accident year.

Services

($thousands)

Three Months Ended March 31,

 

2020

 

2019

 

Change

Commission revenue

$

7,015

 

 

$

5,505

 

 

27.4

%

Policy fees

5,540

 

 

5,021

 

 

10.3

%

Other revenue

2,782

 

 

1,684

 

 

65.2

%

Total

$

15,337

 

 

$

12,210

 

 

25.6

%

Total services revenue increased 25.6% for the quarter driven primarily by commission revenue earned on ceded premiums.

Investments

($thousands)

Three Months Ended March 31,

 

2020

 

2019

 

Change

Net investment income

$

6,834

 

 

$

8,142

 

 

(16.1)

%

Realized gains (losses)

299

 

 

(11,525)

 

 

NM

Unrealized gains (losses)

(8,024)

 

 

18,032

 

 

NM

NM = Not Meaningful

Net investment income decreased 16.1% for the quarter, primarily due to significantly lower yields on cash and short term investments during the first quarter of 2020 when compared to the first quarter of 2019. The prior year also included one-time income benefits from a special dividend received and a one-time reduction in investment expenses. The Company continually monitors the Federal Reserve’s actions, which has impacted effective yields on new fixed income and overnight cash purchases. During March of this year, as a result of the COVID-19 pandemic, we saw extreme instability in the fixed income market prior to the Federal Reserve providing liquidity into that market in mid-March. As a result of the instability in the fixed income market, we had a decline in the amount of unrealized gains in our fixed income portfolio (balance sheet impact only), but still ended the quarter with an overall unrealized gain in our fixed income portfolio of $15.4 million, which has further improved subsequent to the end of the first quarter. The credit rating on our fixed income securities was A+ at the end of the first quarter, with a duration of 3.6 years, which we feel gives us a strong foundation to weather the current market conditions. Unrealized losses on our equity securities were again driven by market volatility related to the COVID-19 pandemic, resulting in an unfavorable outcome for the quarter. In response to the pandemic, the Board’s Investment Committee has approved measures to continue building our portfolio’s cash position to preserve capital for both risk and opportunities.

Capital Deployment

During the first quarter, the Company repurchased approximately 312 thousand shares at an aggregate cost of $6.6 million.

On April 16th 2020 the Board of Directors declared a quarterly cash dividend of 16 cents per share, payable on May 21, 2020, to shareholders of record as of the close of business on May 14, 2020.

Conference Call and Webcast

• Tuesday, April 28, 2020 at 9:00 a.m. ET
• U.S. Dial-in Number: (855) 752-6647
• International: (503) 343-6667
• Participant code: 2195392
• Listen to live webcast and view presentation: UniversalInsuranceHoldings.com
• Replay of the call will be available on the UVE website and by phone at (855) 859-2056 or internationally at (404) 537-3406 using the participant code: 2195392 through May 13, 2020

About Universal Insurance Holdings, Inc.

Universal Insurance Holdings, Inc. (“UVE”) is a holding company offering property and casualty insurance and value-added insurance services. We develop, market, and write insurance products for consumers predominantly in the personal residential homeowners lines of business and perform substantially all other insurance-related services for our primary insurance entities, including risk management, claims management and distribution. We sell insurance products through both our appointed independent agents and through our direct online distribution channels in the United States across 18 states (primarily Florida). Learn more at UniversalInsuranceHoldings.com.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the U.S. Securities and Exchange Commission (“SEC”), including adjusted earnings per diluted share, which excludes the impact of the net realized and unrealized gains and losses on investments as well as extraordinary reinstatement premiums and associated commissions. Extraordinary reinstatement premiums are not covered by reinstatement premium protection and attach just below the Florida Hurricane Catastrophe Fund (“FHCF”) reinsurance layer. Adjusted operating income excludes the impact of the net realized and unrealized gains and losses on investments, as well as interest expense and extraordinary reinstatement premiums and associated commissions. A “non-GAAP financial measure” is generally defined as a numerical measure of a company’s historical or future performance that excludes or includes amounts, or is subject to adjustments, so as to be different from the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles (“GAAP”). UVE management believes that these non-GAAP financial measures, when considered together with the GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period. UVE management also believes that these non-GAAP financial measures enhance the ability of investors to analyze UVE’s business trends and to understand UVE’s performance. UVE’s management utilizes these non-GAAP financial measures as guides in long-term planning. Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures presented in accordance with GAAP.

Forward-Looking Statements

This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “will,” “plan,” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Such statements may include commentary on plans, products and lines of business, marketing arrangements, reinsurance programs and other business developments and assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, including the ongoing impact of the coronavirus (COVID-19) pandemic and those risks and uncertainties to be described under the heading “risk factors” and “Liquidity and Capital Resources” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 as well as in the Form 8-K filed on April 27, 2020. Future results could differ materially from those described, and the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For further information regarding risk factors that could affect the Company’s operations and future results, refer to the Company’s reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K and the most recent quarterly reports on Form 10-Q.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)

 

 

 

March 31,

 

December 31,

 

 

2020

 

2019

ASSETS:

 

 

 

 

Invested Assets

 

 

 

 

Fixed maturities, at fair value

 

$

867,249

 

 

$

855,284

 

Equity securities, at fair value

 

45,838

 

 

43,717

 

Investment real estate, net

 

15,481

 

 

15,585

 

Total invested assets

 

928,568

 

 

914,586

 

Cash and cash equivalents

 

180,780

 

 

182,109

 

Restricted cash and cash equivalents

 

2,635

 

 

2,635

 

Prepaid reinsurance premiums

 

70,113

 

 

175,208

 

Reinsurance recoverable

 

108,491

 

 

193,236

 

Premiums receivable, net

 

66,568

 

 

63,883

 

Property and equipment, net

 

44,859

 

 

41,351

 

Deferred policy acquisition costs

 

94,354

 

 

91,882

 

Goodwill

 

2,319

 

 

2,319

 

Other assets

 

46,826

 

 

52,643

 

TOTAL ASSETS

 

$

1,545,513

 

 

$

1,719,852

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

LIABILITIES:

 

 

 

 

Unpaid losses and loss adjustment expenses

 

$

195,978

 

 

$

267,760

 

Unearned premiums

 

669,881

 

 

661,279

 

Advance premium

 

55,763

 

 

30,975

 

Reinsurance payable, net

 

64,460

 

 

122,581

 

Long-term debt

 

9,559

 

 

9,926

 

Other liabilities

 

55,584

 

 

133,430

 

Total liabilities

 

1,051,225

 

 

1,225,951

 

STOCKHOLDERS' EQUITY:

 

 

 

 

Cumulative convertible preferred stock ($0.01 par value) 4

 

—

 

 

—

 

Common stock ($0.01 par value) 5

 

468

 

 

467

 

Treasury shares, at cost - 14,381 and 14,069

 

(203,172)

 

 

(196,585)

 

Additional paid-in capital

 

97,110

 

 

96,036

 

Accumulated other comprehensive income (loss), net of taxes

 

12,015

 

 

20,364

 

Retained earnings

 

587,867

 

 

573,619

 

Total stockholders' equity

 

494,288

 

 

493,901

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

1,545,513

 

 

$

1,719,852

 

 

 

 

 

 

Notes:

 

 

 

 

4 Cumulative convertible preferred stock ($0.01 par value): Authorized - 1,000 shares; Issued - 10 and 10 shares; Outstanding - 10 and 10 shares; Minimum liquidation preference - $9.99 and $9.99 per share.

5 Common stock ($0.01 par value): Authorized - 55,000 shares; Issued - 46,766 and 46,707 shares; Outstanding 32,385 and 32,638 shares.

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2020

 

2019

REVENUES

 

 

 

 

Net premiums earned

 

$

220,829

 

 

$

209,727

 

Net investment income

 

6,834

 

 

8,142

 

Net realized gains/(losses) on investments

 

299

 

 

(11,525)

 

Net change in unrealized gains/(losses) of equity securities

 

(8,024)

 

 

18,032

 

Commission revenue

 

7,015

 

 

5,505

 

Policy fees

 

5,540

 

 

5,021

 

Other revenue

 

2,782

 

 

1,684

 

Total revenues

 

$

235,275

 

 

$

236,586

 

 

 

 

 

 

EXPENSES

 

 

 

 

Losses and loss adjustment expenses

 

$

135,048

 

 

$

113,094

 

Policy acquisition costs

 

46,864

 

 

43,511

 

Other operating expenses

 

25,727

 

 

26,159

 

Interest expense

 

52

 

 

78

 

Total expenses

 

$

207,691

 

 

$

182,842

 

 

 

 

 

 

Income before income tax expense

 

$

27,584

 

 

$

53,744

 

Income tax expense

 

$

7,517

 

 

$

13,596

 

NET INCOME

 

$

20,067

 

 

$

40,148

 

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SHARE AND PER SHARE INFORMATION

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2020

 

2019

Weighted average common shares outstanding - basic

 

32,591

 

 

34,741

 

Weighted average common shares outstanding - diluted

 

32,731

 

 

35,206

 

Shares outstanding, end of period

 

32,385

 

 

34,622

 

Basic earnings per common share

 

$

0.62

 

 

$

1.16

 

Diluted earnings per common share

 

$

0.61

 

 

$

1.14

 

Cash dividend declared per common share

 

$

0.16

 

 

$

0.16

 

Book value per share, end of period

 

15.26

 

 

15.57

 

Annualized return on average equity (ROE)

 

16.1

%

 

30.4

%

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SUPPLEMENTARY INFORMATION

(in thousands, except for Policies In Force data)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2020

 

2019

Premiums

 

 

 

 

Direct premiums written - Florida

 

$

278,511

 

 

$

242,148

 

Direct premiums written - Other States

 

56,042

 

 

47,086

 

Direct premiums written - Total

 

$

334,553

 

 

$

289,234

 

Direct premiums earned

 

$

325,951

 

 

$

295,377

 

Net premiums earned

 

$

220,829

 

 

$

209,727

 

 

 

 

 

 

Underwriting Ratios - Net

 

 

 

 

Loss and loss adjustment expense ratio

 

61.2

%

 

53.9

%

Policy acquisition cost ratio

 

21.2

%

 

20.7

%

Other operating expense ratio6

 

11.7

%

 

12.5

%

General and administrative expense ratio6

 

32.9

%

 

33.2

%

Combined ratio

 

94.1

%

 

87.1

%

 

 

 

 

 

Other Items

 

 

 

 

(Favorable)/Unfavorable prior year reserve development

 

$

4,341

 

 

$

(185)

 

Points on the loss and loss adjustment expense ratio

 

197

bps

 

(9)

bps

 

 

 

 

 

6 Expense ratio excludes interest expense.

 

 

 

 

 

 

As of

 

 

March 31,

 

 

2020

 

2019

Policies in force

 

 

 

 

Florida

 

677,225

 

 

640,837

 

Other States

 

233,354

 

 

199,933

 

Total

 

910,579

 

 

840,770

 

 

 

 

 

 

Premiums in force

 

 

 

 

Florida

 

$

1,104,559

 

 

$

1,023,256

 

Other States

 

235,761

 

 

188,837

 

Total

 

$

1,340,321

 

 

$

1,212,093

 

 

 

 

 

 

Total Insured Value

 

 

 

 

Florida

 

$

169,764,009

 

 

$

157,435,252

 

Other States

 

95,464,246

 

 

77,191,460

 

Total

 

$

265,228,255

 

 

$

234,626,712

 

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, except for per share data)

 

 

Three Months Ended

 

March 31,

 

2020

 

2019

Income Before Income Taxes

$

27,584

 

 

$

53,744

 

Adjustments:

 

 

 

Reinstatement premium, net of commissions7

—

 

 

—

 

Net unrealized (gains)/losses on equity securities

8,024

 

 

(18,032)

 

Net realized (gains)/losses on investments

(299)

 

 

11,525

 

Interest Expense

52

 

 

78

 

Total Adjustments

7,777

 

 

(6,429)

 

Non-GAAP Adjusted Operating Income

$

35,361

 

 

$

47,315

 

 

 

 

 

 

 

 

 

GAAP Diluted EPS

$

0.61

 

 

$

1.14

 

Adjustments:

 

 

 

Reinstatement premium, net of commissions7

—

 

 

—

 

Net unrealized (gains)/losses on equity securities

0.25

 

 

(0.51)

 

Net realized (gains)/losses on investments

(0.01)

 

 

0.33

 

Total Pre-Tax Adjustments

0.24

 

 

(0.18)

 

Income Tax on Above Adjustments

(0.06)

 

 

0.04

 

Total Adjustments

0.18

 

 

(0.14)

 

Non-GAAP Adjusted EPS

$

0.79

 

 

$

1.00

 

 

 

 

 

7 Includes reinstatement premiums not covered by reinstatement premium protection and related commissions.

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200427005766/en/

Investor Relations Contact: Rob Luther, 954-958-1200 ext. 6750 VP, Corporate Development, Strategy & IR rluther@universalproperty.com

Media Relations Contact: Andy Brimmer / Mahmoud Siddig, 212-355-4449 Joele Frank, Wilkinson Brimmer Katcher