UVE Universal Insurance Holdings Inc

• Diluted GAAP earnings per share (“EPS”) of $0.56, non-GAAP adjusted EPS1 of $0.64
• Annualized return on average equity (“ROE”) of 16.9%
• Direct premiums written of $396.5 million, up 8.5% from the prior year quarter
• Direct premiums earned up 10.4% from the prior year quarter
• Net combined ratio of 97.9%, up 4.8 points from the prior year quarter
• Repurchased 320,528 shares for $3.9 million. Total capital returned to shareholders of $8.9 million, including $0.16 per share regular quarterly dividend.

 

Universal Insurance Holdings (NYSE: UVE) (“Universal” or the “Company”) reported 2022 first quarter diluted EPS of $0.56 on a GAAP basis and $0.64 on a non-GAAP1 adjusted basis.

1 Reconciliations of GAAP to non-GAAP financial measures are provided in the attached tables.

“We reported a 16.9% annualized ROE despite the challenging external environment, which is a testament to the strength and resilience of our business,” said Stephen J. Donaghy, Chief Executive Officer. “Direct premiums written were up 8.5% from the prior year quarter, significantly outpacing a 6.1% policies in force decline, as meaningful rate increases benefited premium volumes. We are laser focused on improving underwriting profitability, as we prioritize combined ratio improvement over top line growth. In addition to raising rates across Florida and our broader footprint, we’ve reduced exposure to less profitable geographies, tightened underwriting criteria, renegotiated commission rates with our agency partners and exercised prudent expense management. Lastly, rising yields are benefiting our investment income results, and should continue to serve as a tailwind moving forward. Given our strong capital position, the profitability of our business and the steps we continue to take to improve results, we believe we stand out favorably as reinsurers increasingly differentiate amongst cedants in the current market.”

Quarterly Financial Results

Summary Financial Results

($thousands, except per share data)

Three Months Ended March 31,

 

2022

 

2021

 

Change

GAAP comparison

 

 

 

 

 

Total revenue

$

287,482

 

 

$

262,757

 

 

9.4

%

Income before income taxes

$

22,471

 

 

$

36,351

 

 

(38.2

) %

Income before income taxes margin

 

7.8

%

 

 

13.8

%

 

(6.0) pts

 

 

 

 

 

 

Net income

$

17,537

 

 

$

26,408

 

 

(33.6

) %

Diluted EPS

$

0.56

 

 

$

0.84

 

 

(33.3

) %

Annualized ROE

 

16.9

%

 

 

23.2

%

 

(6.3) pts

 

 

 

 

 

 

Non-GAAP comparison2

 

 

 

 

 

Adjusted operating income

$

27,417

 

 

$

36,323

 

 

(24.5

) %

 

 

 

 

 

 

Adjusted net income

$

20,052

 

 

$

26,371

 

 

(24.0

) %

Adjusted EPS

$

0.64

 

 

$

0.84

 

 

(23.8

) %

 

 

 

 

 

 

Underwriting Summary

 

 

 

 

 

Premiums:

 

 

 

 

 

Premiums in force

$

1,703,151

 

 

$

1,548,657

 

 

10.0

%

Policies in force

 

916,745

 

 

 

976,250

 

 

(6.1

) %

 

 

 

 

 

 

Direct premiums written

$

396,481

 

 

$

365,314

 

 

8.5

%

Direct premiums earned

$

414,603

 

 

$

375,606

 

 

10.4

%

Ceded premiums earned

$

(145,539

)

 

$

(132,301

)

 

10.0

%

Ceded premium ratio

 

35.1

%

 

 

35.2

%

 

(0.1) pts

Net premiums earned

$

269,064

 

 

$

243,305

 

 

10.6

%

 

 

 

 

 

 

Net ratios:

 

 

 

 

 

Loss ratio

 

68.8

%

 

 

59.2

%

 

9.6 pts

Expense ratio3

 

29.1

%

 

 

33.9

%

 

(4.8) pts

Combined ratio

 

97.9

%

 

 

93.1

%

 

4.8 pts

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

3 Expense ratio excludes interest expense.

Net Income and Adjusted Net Income

Net income was $17.5 million, down from $26.4 million in the prior year quarter, and adjusted net income was $20.1 million, down from $26.4 million in the prior year quarter. The decline in adjusted net income primarily stems from a higher net combined ratio, partly offset by higher net premiums earned, commission revenue, net investment income and a lower effective tax rate.

Revenues

Overall revenue was $287.5 million, up 9.4% from the prior year quarter. The increase in revenue primarily stems from higher direct premiums earned associated with rate increases in the Florida homeowners book of business, partly offset by unrealized losses on equity securities.

Direct premiums written were $396.5 million, up 8.5% from the prior year quarter. The increase stems from 8.9% growth in Florida and 6.4% growth in other states. Overall growth primarily reflects rate increases, partly offset by lower policies in force.

Direct premiums earned were $414.6 million, up 10.4% from the prior year quarter. The increase stems from direct premiums written growth over the past twelve months.

The ceded premium ratio was 35.1%, basically in line with 35.2% in the prior year quarter.

Net premiums earned were $269.1 million, up 10.6% from the prior year quarter. The increase is primarily attributable to higher direct premiums earned, as described above.

Net investment income was $4.0 million, up from $3.0 million in the prior year quarter. The increase stems from higher fixed income reinvestment yields.

Commissions, policy fees and other revenue were $17.7 million, up 7.9% from the prior year quarter. The increase primarily reflects higher commission revenue, which benefited from higher ceded premiums, partly offset by policy fee and other revenue declines associated with lower policies in force.

Margins

The income before income taxes margin was 7.8%, down 6.0 points from the prior year quarter, with the decrease stemming from a higher net combined ratio and unrealized losses on equity securities, partly offset by higher commission revenues.

The net loss ratio was 68.8%, up 9.6 points compared to the prior year quarter. The increase primarily reflects a higher initial accident year attritional loss pick associated with the challenging Florida claims environment, higher weather above plan and a smaller benefit from our claims adjusting affiliate.

The net expense ratio (excludes interest expense) was 29.1%, down 4.8 points compared to the prior year quarter. The reduction primarily reflects lower renewal commission rates paid to our agents, lower employee compensation and benefits expense and economies of scale.

The net combined ratio was 97.9%, up 4.8 points compared to the prior year quarter. The increase reflects a higher net loss ratio, partly offset by a lower net expense ratio, as described above.

Capital Deployment

During the first quarter, the Company repurchased approximately 321 thousand shares at an aggregate cost of $3.9 million. The Company’s current share repurchase authorization program has $13.9 million remaining as of March 31, 2022 and runs through November 3, 2022.

On April 20, 2022, the Board of Directors declared a quarterly cash dividend of 16 cents per share of common stock, payable on May 20, 2022, to shareholders of record as of the close of business on May 13, 2022.

Guidance

The Company is maintaining its guidance for 2022 (assuming no further extraordinary weather events and no realized or unrealized gains in 2022):

• GAAP and Non-GAAP Adjusted EPS in a range of $1.80 - $2.20
• Annualized return on average equity in a range of 12.5% - 15.0%

Conference Call and Webcast

• Friday, April 29, 2022 at 10:00 a.m. ET
• U.S. Dial-in Number: (855) 752-6647
• International: (503) 343-6667
• Participant code: 9789558
• Listen to live webcast: UniversalInsuranceHoldings.com/investors
• 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: 3793583 through May 13, 2022

About Universal

Universal Insurance Holdings, Inc. (NYSE: 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 net income and adjusted earnings per share, which exclude 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, extraordinary reinstatement premiums and associated commissions and interest expense. 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 year ended March 31, 2022.

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 2021 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,

 

 

2022

 

2021

ASSETS:

 

 

 

 

Invested Assets

 

 

 

 

Fixed maturities, at fair value

 

$

1,014,677

 

 

$

1,040,455

 

Equity securities, at fair value

 

 

65,126

 

 

 

47,334

 

Investment real estate, net

 

 

5,845

 

 

 

5,891

 

Total invested assets

 

 

1,085,648

 

 

 

1,093,680

 

Cash and cash equivalents

 

 

165,398

 

 

 

250,508

 

Restricted cash and cash equivalents

 

 

2,635

 

 

 

2,635

 

Prepaid reinsurance premiums

 

 

109,401

 

 

 

240,993

 

Reinsurance recoverable

 

 

104,660

 

 

 

185,589

 

Premiums receivable, net

 

 

61,670

 

 

 

64,923

 

Property and equipment, net

 

 

54,170

 

 

 

53,682

 

Deferred policy acquisition costs

 

 

103,622

 

 

 

108,822

 

Goodwill

 

 

2,319

 

 

 

2,319

 

Other assets

 

 

59,432

 

 

 

52,990

 

TOTAL ASSETS

 

$

1,748,955

 

 

$

2,056,141

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

LIABILITIES:

 

 

 

 

Unpaid losses and loss adjustment expenses

 

$

244,482

 

 

$

346,216

 

Unearned premiums

 

 

839,647

 

 

 

857,769

 

Advance premium

 

 

85,120

 

 

 

53,694

 

Reinsurance payable, net

 

 

12,723

 

 

 

188,662

 

Long-term debt, net

 

 

103,384

 

 

 

103,676

 

Other liabilities

 

 

67,258

 

 

 

76,422

 

Total liabilities

 

 

1,352,614

 

 

 

1,626,439

 

STOCKHOLDERS' EQUITY:

 

 

 

 

Cumulative convertible preferred stock ($0.01 par value)4

 

 

—

 

 

 

—

 

Common stock ($0.01 par value)5

 

 

471

 

 

 

470

 

Treasury shares, at cost - 16,117 and 15,797

 

 

(230,994

)

 

 

(227,115

)

Additional paid-in capital

 

 

109,099

 

 

 

108,202

 

Accumulated other comprehensive income (loss), net of taxes

 

 

(58,478

)

 

 

(15,568

)

Retained earnings

 

 

576,243

 

 

 

563,713

 

Total stockholders' equity

 

 

396,341

 

 

 

429,702

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

1,748,955

 

 

$

2,056,141

 

 

 

 

 

 

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 - 47,063 and 47,018 shares; Outstanding 30,946 and 31,221 shares.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (in thousands)

 

 

Three Months Ended

 

 

March 31,

 

 

2022

 

2021

REVENUES

 

 

 

 

Net premiums earned

 

$

269,064

 

 

$

243,305

 

Net investment income

 

 

4,042

 

 

 

2,986

 

Net realized gains on investments

 

 

58

 

 

 

542

 

Net change in unrealized (losses) of equity securities

 

 

(3,396

)

 

 

(494

)

Commission revenue

 

 

11,161

 

 

 

9,126

 

Policy fees

 

 

4,779

 

 

 

5,387

 

Other revenue

 

 

1,774

 

 

 

1,905

 

Total revenues

 

 

287,482

 

 

 

262,757

 

 

 

 

 

 

EXPENSES

 

 

 

 

Losses and loss adjustment expenses

 

 

185,106

 

 

 

143,963

 

Policy acquisition costs

 

 

54,723

 

 

 

56,458

 

Other operating expenses

 

 

23,574

 

 

 

25,965

 

Total operating costs and expenses

263,403

226,386

 

Interest expense

 

 

1,608

 

 

 

20

 

Income before income taxes

 

 

22,471

 

 

 

36,351

 

Income tax expense

 

 

4,934

 

 

 

9,943

 

NET INCOME

 

$

17,537

 

 

$

26,408

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES SHARE AND PER SHARE INFORMATION (in thousands, except per share data)

 

 

Three Months Ended

 

 

March 31,

 

 

2022

 

2021

Weighted average common shares outstanding - basic

 

 

31,147

 

 

 

31,208

 

Weighted average common shares outstanding - diluted

 

 

31,227

 

 

 

31,277

 

Shares outstanding, end of period

 

 

30,946

 

 

 

31,216

 

Basic earnings per common share

 

$

0.56

 

 

$

0.85

 

Diluted earnings per common share

 

$

0.56

 

 

$

0.84

 

Cash dividend declared per common share

 

$

0.16

 

 

$

0.16

 

Book value per share, end of period

 

$

12.80

 

 

$

14.56

 

Annualized return on average equity (ROE)

 

 

16.9

%

 

 

23.2

%

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES SUPPLEMENTARY INFORMATION (in thousands, except for Policies In Force data)

 

 

Three Months Ended

 

 

March 31,

 

 

2022

 

2021

Premiums

 

 

 

 

Direct premiums written - Florida

 

$

334,437

 

 

$

307,011

 

Direct premiums written - Other States

 

 

62,044

 

 

 

58,303

 

Direct premiums written - Total

 

$

396,481

 

 

$

365,314

 

Direct premiums earned

 

$

414,603

 

 

$

375,606

 

Net premiums earned

 

$

269,064

 

 

$

243,305

 

 

 

 

 

 

Underwriting Ratios - Net

 

 

 

 

Loss and loss adjustment expense ratio

 

 

68.8

%

 

 

59.2

%

Policy acquisition cost ratio

 

 

20.3

%

 

 

23.2

%

Other operating expense ratio6

 

 

8.8

%

 

 

10.7

%

Expense ratio6

 

 

29.1

%

 

 

33.9

%

Combined ratio

 

 

97.9

%

 

 

93.1

%

 

 

 

 

 

Other Items

 

 

 

 

(Favorable)/Unfavorable prior year's reserve development

 

$

655

 

 

$

(1,237

)

Points on the loss and loss adjustment expense ratio

 

0.2 pts

 

(0.5) pts

 

 

 

 

 

6 Expense ratio excludes interest expense.

 

 

As of

 

 

March 31,

 

 

2022

 

2021

Policies in force

 

 

 

 

Florida

 

 

672,029

 

 

721,321

Other States

 

 

244,716

 

 

254,929

Total

 

 

916,745

 

 

976,250

 

 

 

 

 

Premiums in force

 

 

 

 

Florida

 

$

1,416,185

 

$

1,279,464

Other States

 

 

286,966

 

 

269,193

Total

 

$

1,703,151

 

$

1,548,657

 

 

 

 

 

Total Insured Value

 

 

 

 

Florida

 

$

201,091,861

 

$

194,421,426

Other States

 

 

118,041,945

 

 

110,930,255

Total

 

$

319,133,806

 

$

305,351,681

 

Three Months Ended March 31, 2022

 

Direct

 

Loss Ratio

 

Ceded

 

Loss Ratio

 

Net

 

Loss Ratio

Premiums earned

$

414,603

 

 

 

$

145,539

 

 

 

$

269,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses:

 

 

 

 

 

 

 

 

 

 

 

Core losses

$

179,950

 

43.4

%

 

$

44

 

—

%

 

$

179,906

 

66.9

%

Weather events7

 

4,545

 

1.1

%

 

 

—

 

—

%

 

 

4,545

 

1.7

%

Prior year’s reserve development

 

10,660

 

2.6

%

 

 

10,005

 

6.9

%

 

 

655

 

0.2

%

Total losses and loss adjustment expenses

$

195,155

 

47.1

%

 

$

10,049

 

6.9

%

 

$

185,106

 

68.8

%

 

 

 

 

 

 

 

 

 

 

 

 

7 Includes only current year weather events beyond those expected.

 

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 2022E

 

 

2022

 

 

 

2021

 

 

 

 

GAAP Operating Income to Adjusted Operating Income

 

 

 

 

 

 

Income Before Income Taxes

$

22,471

 

 

$

36,351

 

 

 

 

less: Net realized gains on investments

 

58

 

 

 

542

 

 

 

 

less: Net change in unrealized (losses) of equity securities

 

(3,396

)

 

 

(494

)

 

 

 

less: Interest (expense)

 

(1,608

)

 

 

(20

)

 

 

 

Adjusted Operating Income

$

27,417

 

 

$

36,323

 

 

 

 

 

 

 

 

 

 

 

GAAP Net Income to Adjusted Net Income

 

 

 

 

 

 

GAAP Net Income

$

17,537

 

 

$

26,408

 

 

 

 

less: Net realized gains on investments

 

58

 

 

 

542

 

 

 

 

less: Net change in unrealized (losses) of equity securities

 

(3,396

)

 

 

(494

)

 

 

 

Total pre-tax adjustments

 

(3,338

)

 

 

48

 

 

 

 

less: Income tax (expense) benefit on above adjustments

 

823

 

 

 

(11

)

 

 

 

Total adjustments

 

(2,515

)

 

 

37

 

 

 

 

Adjusted Net Income

$

20,052

 

 

$

26,371

 

 

 

 

 

 

 

 

 

 

 

GAAP Diluted EPS to Adjusted EPS

 

 

 

 

 

 

GAAP Diluted EPS

$

0.56

 

 

$

0.84

 

 

 

$ 1.80 - 2.20

less: Net realized gains on investments

 

—

 

 

 

0.02

 

 

 

—

less: Net change in unrealized (losses) of equity securities

 

(0.11

)

 

 

(0.02

)

 

 

—

Total pre-tax adjustments

 

(0.11

)

 

 

—

 

 

 

—

less: Income (tax) benefit on above adjustments

 

0.03

 

 

 

—

 

 

 

—

Total adjustments

 

(0.08

)

 

 

—

 

 

 

—

Adjusted EPS

$

0.64

 

 

$

0.84

 

 

 

$ 1.80 - 2.20

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220428005499/en/

Investor Contact: Arash Soleimani, CFA, CPA Chief Strategy Officer 954-804-8874 asoleimani@universalproperty.com