UVE Universal Insurance Holdings Inc

• 1Q21 total revenue up 11.7% to $262.8 million
• 1Q21 direct premiums written up 9.2%
• 1Q21 diluted GAAP and non-GAAP1 adjusted earnings per share (“EPS”) of $0.84
• 1Q21 combined ratio of 93.1%
• 1Q21 margin expansion in excess of 200 basis points
• 1Q21 annualized return on average equity of 23.2%

Universal Insurance Holdings (NYSE: UVE) (the “Company”) reported 2021 first quarter diluted EPS of $0.84 on a GAAP and non-GAAP1 adjusted basis. Total revenue was up 11.7% from the year ago quarter to $262.8 million. Margins expanded in excess of 200 basis points, with an annualized return on average equity of 23.2%.

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.

“We are off to a strong start to 2021 with solid first quarter results, including close to 12% top line growth, margin expansion in excess of 200 basis points, and a total annualized return on average equity of 23.2%,” said Stephen J. Donaghy, Chief Executive Officer. “We continue to make progress on our reinsurance program renewal, and were oversubscribed on our first CAT bond in March at rates below the low end of our initial range. We have now completed procurement of our All States first event reinsurance program for UPCIC for the 2021 wind season and will have additional details in May as we finalize the remainder. In addition, we were encouraged earlier this month when the Florida Senate passed Bill 76, which would enable Floridians to have reliable access to property insurance. For a number of years Florida has been a significant outlier compared to the rest of the country when it comes to litigated property claims, which has put significant pressure on the Florida property insurance marketplace. We have not been immune to these market dynamics and during the first quarter we actively reduced our policies in force sequentially and reduced new and renewal policy counts in aggregate this quarter when compared to the first quarter of 2020. That being said, we continue to monitor closely the companion bill in the House (House Bill 305), which has differences from Senate Bill 76.”

Summary Financial Results

($thousands, except per share data)

Three Months Ended March 31,

 

2021

 

2020

 

Change

(GAAP comparison)

 

 

 

 

 

Total revenue

$

262,757

 

 

$

235,275

 

 

11.7

%

Income (loss) before income taxes

36,351

 

 

27,584

 

 

31.8

%

Income (loss) before income taxes margin

13.8

%

 

11.7

%

 

2.1

pts

Diluted EPS

$

0.84

 

 

$

0.61

 

 

37.7

%

 

 

 

 

 

 

Annualized return on average equity (ROE)

23.2

%

 

16.1

%

 

7.1

pts

Book value per share, end of period

$

14.56

 

 

$

15.26

 

 

(4.6)

%

 

 

 

 

 

 

(Non-GAAP comparison)2

 

 

 

 

 

Adjusted operating income

36,323

 

 

35,361

 

 

2.7

%

Adjusted EPS

$

0.84

 

 

$

0.79

 

 

6.3

%

 

 

 

 

 

 

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 grew double digits for the quarter driven by primary rate increases from 2020 earning through the book as policies renew and an improvement in the unrealized portion of the investment portfolio, partially offset by the impact of higher reinsurance costs when compared to the first quarter of 2020. Margins expanded more than 200 basis points for the quarter driven by the incremental fall through profit from the top line as previously described, lower losses and LAE and lower operating expenses as a percent of direct premiums earned. GAAP diluted EPS and non-GAAP adjusted EPS results for the quarter were driven by the aforementioned factors, including a benefit from a reduced share count. The Company produced an annualized return on average equity of 23.2%.

Underwriting

($thousands, except policies in force)

Three Months Ended March 31,

 

2021

 

2020

 

Change

Policies in force (as of end of period)

976,250

 

 

910,579

 

 

7.2

%

Premiums in force (as of end of period)

$

1,548,657

 

 

$

1,340,321

 

 

15.5

%

 

 

 

 

 

 

Direct premiums written

$

365,314

 

 

$

334,553

 

 

9.2

%

Direct premiums earned

375,606

 

 

325,951

 

 

15.2

%

Net premiums earned

243,305

 

 

220,829

 

 

10.2

%

 

 

 

 

 

 

Expense ratio3

33.9

%

 

32.9

%

 

1.0

 pt

Loss & LAE ratio

59.2

%

 

61.2

%

 

(2.0

)pts

Combined ratio

93.1

%

 

94.1

%

 

(1.0

)pt

 

 

 

 

 

 

3 Expense ratio excludes interest expense.

Direct premiums written were up 9.2% for the quarter, led by direct premium growth of 10.2% in Florida.

On the expense side, the combined ratio improved 1.0 point for the quarter. The improvement was driven primarily by decreased weather, favorable prior year's reserve development, and an increased benefit from our claims adjusting business, partially offset by higher reinsurance costs impact on the ratio and current year strengthening.

• The expense ratio decreased 33 basis points on a direct premiums earned basis due to operating efficiencies, which was more than offset by the impact of increased reinsurance costs on the net ratio, resulting in a 1.0 point increase in the net expense ratio for the quarter.
• The net loss and LAE ratio improved 2.0 points for the quarter. Quarterly drivers include:
  • A 45 basis point net improvement related to no weather events being above plan.
  • Favorable prior year’s reserve development of $1.2 million (adverse development of $4.3 million in 1Q20) resulted in a 2.5 point net improvement for the quarter. Favorable development in the current quarter was driven by ceded recoveries on the Other States reinsurance program.
  • Core losses of $145.2 million ($129.7 million in 1Q20) resulted in a 1.1 point improvement for the quarter on a direct premium earned basis, driven by a benefit from our claims adjusting business, which was more than offset by increased reinsurance costs and less than a point of current year strengthening on a direct basis, which lead to a 1.0 point increase for the quarter on a net basis.

Services

($thousands)

Three Months Ended March 31,

 

2021

 

2020

 

Change

Commission revenue

$

9,126

 

 

$

7,015

 

 

30.1

%

Policy fees

5,387

 

 

5,540

 

 

(2.8

)%

Other revenue

1,905

 

 

2,782

 

 

(31.5

)%

Total

$

16,418

 

 

$

15,337

 

 

7.0

%

Total services revenue increased 7.0% for the quarter. The increase was primarily driven by commission revenue earned on ceded premiums, partially offset by a decrease in new and renewal business policy fees volume and other revenue.

Investments

($thousands)

Three Months Ended March 31,

 

2021

 

2020

 

Change

Net investment income

$

2,986

 

 

$

6,834

 

 

(56.3

)%

Realized gains (losses)

542

 

 

299

 

 

81.3

%

Unrealized gains (losses)

(494

)

 

(8,024

)

 

93.8

%

NM = Not Meaningful

Net investment income decreased 56.3% for the quarter. The decrease is largely attributable to significantly lower yields on the reinvested portfolio following the sale of a majority of securities in the portfolio that were in an unrealized gain position in the third and fourth quarters of 2020. Unrealized equity losses improved substantially during the quarter when compared to the market volatility seen last March as a result of the COVID-19 pandemic. Total invested assets increased 10.6% to $1.0 billion since year-end 2020.

Capital Deployment

During the first quarter, the Company repurchased approximately 15 thousand shares at an aggregate cost of $245 thousand.

On April 22, 2021, the Board of Directors declared a quarterly cash dividend of 16 cents per share of common stock, payable on May 21, 2021, to shareholders of record as of the close of business on May 14, 2021.

Guidance

The Company is maintaining its guidance for 2021 (assuming no further extraordinary weather events and no realized or unrealized gains in 2021):

• GAAP and Non-GAAP Adjusted EPS in a range of $2.75 - $3.00
• Annualized return on average equity in a range of 17.0% - 19.0%

Conference Call and Webcast

• Thursday, April 29, 2021 at 9:00 a.m. ET
• U.S. Dial-in Number: (855) 752-6647
• International: (503) 343-6667
• Participant code: 4597049
• Listen to live webcast: 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: 4597049 through May 14, 2021

About Universal Insurance Holdings, Inc.

Universal Insurance Holdings (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 19 states (primarily Florida). Learn more at UniversalInsuranceHoldings.com.

Non-GAAP Financial Measures and Key Performance Indicators

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. For more information regarding our key performance indicators, please refer to the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Indicators” in our forthcoming Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.

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 those risks and uncertainties described under the heading “Risk Factors” and “Liquidity and Capital Resources” in our 2020 Annual Report on Form 10-K, and supplemented in our subsequent Quarterly Reports on Form 10-Q. 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,

 

 

2021

 

2020

ASSETS:

 

 

 

 

Invested Assets

 

 

 

 

Fixed maturities, at fair value

 

$

913,131

 

 

$

819,861

 

Equity securities, at fair value

 

91,291

 

 

84,887

 

Assets held for sale

 

6,855

 

 

—

 

Investment real estate, net

 

6,027

 

 

15,176

 

Total invested assets

 

1,017,304

 

 

919,924

 

Cash and cash equivalents

 

90,829

 

 

167,156

 

Restricted cash and cash equivalents

 

12,715

 

 

12,715

 

Prepaid reinsurance premiums

 

100,221

 

 

215,723

 

Reinsurance recoverable

 

217,625

 

 

160,417

 

Premiums receivable, net

 

62,488

 

 

66,883

 

Property and equipment, net

 

53,178

 

 

53,572

 

Deferred policy acquisition costs

 

111,193

 

 

110,614

 

Goodwill

 

2,319

 

 

2,319

 

Other assets

 

49,581

 

 

49,418

 

TOTAL ASSETS

 

$

1,717,453

 

 

$

1,758,741

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

LIABILITIES:

 

 

 

 

Unpaid losses and loss adjustment expenses

 

$

315,780

 

 

$

322,465

 

Unearned premiums

 

772,843

 

 

783,135

 

Advance premium

 

73,738

 

 

49,562

 

Reinsurance payable, net

 

24,527

 

 

10,312

 

Long-term debt

 

8,088

 

 

8,456

 

Other liabilities

 

67,812

 

 

135,549

 

Total liabilities

 

1,262,788

 

 

1,309,479

 

STOCKHOLDERS' EQUITY:

 

 

 

 

Cumulative convertible preferred stock ($0.01 par value) 4

 

—

 

 

—

 

Common stock ($0.01 par value) 5

 

469

 

 

468

 

Treasury shares, at cost - 15,695 and 15,680

 

(225,751

)

 

(225,506

)

Additional paid-in capital

 

104,624

 

 

103,445

 

Accumulated other comprehensive income (loss), net of taxes

 

(13,567

)

 

3,343

 

Retained earnings

 

588,890

 

 

567,512

 

Total stockholders' equity

 

454,665

 

 

449,262

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

1,717,453

 

 

$

1,758,741

 

 

 

 

 

 

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 - 46,911 and 46,817 shares; Outstanding 31,216 and 31,137 shares.

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2021

 

2020

REVENUES

 

 

 

 

Net premiums earned

 

$

243,305

 

 

$

220,829

 

Net investment income

 

2,986

 

 

6,834

 

Net realized gains/(losses) on investments

 

542

 

 

299

 

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

 

(494

)

 

(8,024

)

Commission revenue

 

9,126

 

 

7,015

 

Policy fees

 

5,387

 

 

5,540

 

Other revenue

 

1,905

 

 

2,782

 

Total revenues

 

262,757

 

 

235,275

 

 

 

 

 

 

EXPENSES

 

 

 

 

Losses and loss adjustment expenses

 

143,963

 

 

135,048

 

Policy acquisition costs

 

56,458

 

 

46,864

 

Other operating expenses

 

25,965

 

 

25,727

 

Interest expense

 

20

 

 

52

 

Total expenses

 

226,406

 

 

207,691

 

 

 

 

 

 

Income before income tax expense

 

36,351

 

 

27,584

 

Income tax expense (benefit)

 

9,943

 

 

7,517

 

NET INCOME

 

$

26,408

 

 

$

20,067

 

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SHARE AND PER SHARE INFORMATION

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2021

 

2020

Weighted average common shares outstanding - basic

 

31,208

 

 

32,591

 

Weighted average common shares outstanding - diluted

 

31,277

 

 

32,731

 

Shares outstanding, end of period

 

31,216

 

 

32,385

 

Basic earnings (loss) per common share

 

$

0.85

 

 

$

0.62

 

Diluted earnings (loss) per common share

 

$

0.84

 

 

$

0.61

 

Cash dividend declared per common share

 

$

0.16

 

 

$

0.16

 

Book value per share, end of period

 

$

14.56

 

 

$

15.26

 

Annualized return on average equity (ROE)

 

23.2

%

 

16.1

%

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SUPPLEMENTARY INFORMATION

(in thousands, except for Policies In Force data)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2021

 

2020

Premiums

 

 

 

 

Direct premiums written - Florida

 

$

307,011

 

 

$

278,511

 

Direct premiums written - Other States

 

58,303

 

 

56,042

 

Direct premiums written - Total

 

$

365,314

 

 

$

334,553

 

Direct premiums earned

 

$

375,606

 

 

$

325,951

 

Net premiums earned

 

$

243,305

 

 

$

220,829

 

 

 

 

 

 

Underwriting Ratios - Net

 

 

 

 

Loss and loss adjustment expense ratio

 

59.2

%

 

61.2

%

Policy acquisition cost ratio

 

23.2

%

 

21.2

%

Other operating expense ratio6

 

10.7

%

 

11.7

%

General and administrative expense ratio6

 

33.9

%

 

32.9

%

Combined ratio

 

93.1

%

 

94.1

%

 

 

 

 

 

Other Items

 

 

 

 

(Favorable)/Unfavorable prior year's reserve development

 

$

(1,237

)

 

$

4,341

 

Points on the loss and loss adjustment expense ratio

 

(50) bps

 

197 bps

 

 

 

 

 

6 Expense ratio excludes interest expense.

 

 

 

As of

 

 

March 31,

 

 

2021

 

2020

Policies in force

 

 

 

 

Florida

 

721,321

 

 

677,225

 

Other States

 

254,929

 

 

233,354

 

Total

 

976,250

 

 

910,579

 

 

 

 

 

 

Premiums in force

 

 

 

 

Florida

 

$

1,279,464

 

 

$

1,104,559

 

Other States

 

269,193

 

 

235,761

 

Total

 

$

1,548,657

 

 

$

1,340,321

 

 

 

 

 

 

Total Insured Value

 

 

 

 

Florida

 

$

194,421,426

 

 

$

169,764,009

 

Other States

 

110,930,255

 

 

95,464,246

 

Total

 

$

305,351,681

 

 

$

265,228,255

 

 

Three Months Ended March 31, 2021

 

Direct

 

Loss Ratio

 

Ceded

 

Loss Ratio

 

Net

 

Loss Ratio

Premiums earned

$

375,606

 

 

 

 

$

132,301

 

 

 

 

$

243,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses:

 

 

 

 

 

 

 

 

 

 

 

Core losses

$

145,228

 

 

38.7

%

 

$

28

 

 

—

%

 

$

145,200

 

 

59.7

%

Weather events7

—

 

 

—

%

 

—

 

 

—

%

 

—

 

 

—

%

Prior year’s reserve development

92,070

 

 

24.5

%

 

93,307

 

 

70.5

%

 

(1,237

)

 

(0.5

)%

Total losses and loss adjustment expenses

$

237,298

 

 

63.2

%

 

$

93,335

 

 

70.5

%

 

$

143,963

 

 

59.2

%

 

 

 

 

 

 

 

 

 

 

 

 

7 Includes only current year weather events beyond those expected.

 

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, except for per share data)

 

 

Three Months Ended

 

 

Guidance

 

March 31,

 

 

Full Year 2021E

 

2021

 

2020

 

 

 

Income (Loss) Before Income Taxes

$

36,351

 

 

$

27,584

 

 

 

 

Adjustments:

 

 

 

 

 

 

Reinstatement premium, net of commissions8

—

 

 

—

 

 

 

 

Net unrealized (gains)/losses on equity securities

494

 

 

8,024

 

 

 

 

Net realized (gains)/losses on investments

(542

)

 

(299

)

 

 

 

Interest Expense

20

 

 

52

 

 

 

 

Total Adjustments

(28

)

 

7,777

 

 

 

 

Non-GAAP Adjusted Operating Income

$

36,323

 

 

$

35,361

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Diluted EPS

$

0.84

 

 

$

0.61

 

 

 

$ 2.75 - 3.00

Adjustments:

 

 

 

 

 

 

Reinstatement premium, net of commissions8

—

 

 

—

 

 

 

—

 

Net unrealized (gains)/losses on equity securities

0.02

 

 

0.25

 

 

 

—

 

Net realized (gains)/losses on investments

(0.02

)

 

(0.01

)

 

 

—

 

Total Pre-Tax Adjustments

—

 

 

0.24

 

 

 

—

 

Income Tax on Above Adjustments

—

 

 

(0.06

)

 

 

—

 

Total Adjustments

—

 

 

0.18

 

 

 

—

 

Non-GAAP Adjusted EPS

$

0.84

 

 

$

0.79

 

 

 

$ 2.75 - 3.00

 

 

 

 

 

 

 

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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210428006004/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