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Universal Insurance Holdings Reports Third Quarter 2021 Results

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  • 3Q21 direct premiums earned up 15.0% driven by primary rate increases earning-in

  • 3Q21 diluted GAAP earnings per share ("EPS") of $0.64, non-GAAP adjusted EPS1 of $0.63

  • 3Q21 combined ratio of 98.6%

  • 3Q21 annualized return on average equity of 16.4%

  • Florida primary average rate increase of 14.9% for UPCIC approved during 3Q21

FORT LAUDERDALE, Fla., October 27, 2021--(BUSINESS WIRE)--Universal Insurance Holdings (NYSE: UVE) (the "Company") reported 2021 third quarter diluted EPS of $0.64 on a GAAP basis and $0.63 on a non-GAAP1 adjusted basis. Quarterly direct premiums earned were up 15.0% from the year-ago quarter to $410.6 million, with an annualized return on average equity of 16.4%.

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

"Our third quarter results demonstrate continued execution of our multi-year strategic priorities, including disciplined growth and operational improvements," said Stephen J. Donaghy, Chief Executive Officer. "Our direct premiums earned growth of 15.0% in the third quarter was primarily driven by primary rate increases in Florida earning through the book. We have now filed for more than 34% in primary rate increases in Florida over the past 18 months, while simultaneously continuing to shape our underwriting risks with total policies-in-force relatively flat year-over-year. Our business expenses were lower from continued expense management controls, including lower agency commissions and employee productivity gains, in addition to lower executive compensation accruals. These results were highlighted by a 16.4% annualized return on average equity in the quarter."

Summary Financial Results

($thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

Change

2021

2020

Change

(GAAP comparison)

Total revenue

$

287,254

$

311,665

(7.8)

%

$

829,192

$

799,644

3.7

%

Income (loss) before income taxes

26,464

(3,792)

NM

92,874

51,230

81.3

%

Income (loss) before income taxes margin

9.2

%

(1.2)

%

NM

11.2

%

6.4

%

4.8

pts

Diluted EPS

$

0.64

$

(0.10)

NM

$

2.19

$

1.14

92.1

%

Annualized return on average equity (ROE)

16.4

%

(2.5)

%

NM

19.3

%

10.0

%

9.3

pts

Book value per share, end of period

$

15.86

$

15.15

4.7

%

$

15.86

$

15.15

4.7

%

(Non-GAAP comparison) 2

Adjusted operating income

25,943

(59,594)

NM

90,638

(817)

NM

Adjusted EPS

$

0.63

$

(1.43)

NM

$

2.13

$

(0.08)

NM

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 any 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.

NM = Not Meaningful

Total revenue declined 7.8% for the quarter, driven primarily by the realized gain on investments of $53.8 million in the third quarter of the prior year, versus a $4.3 million realized gain in the current quarter. Total revenue for the quarter benefited from continued primary rate increases earning through the book as policies renew. GAAP diluted EPS and non-GAAP adjusted EPS results for the quarter were driven primarily by a lower impact from weather events and lower prior years’ development when compared to the prior year’s quarter, partially offset by the impact of current year strengthening. The Company produced an annualized return on average equity of 16.4%.

Underwriting

($thousands, except policies in force)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

Change

2021

2020

Change

Policies in force (as of end of period)

967,821

965,462

0.2

%

967,821

965,462

0.2

%

Premiums in force (as of end of period)

$

1,649,546

$

1,459,971

13.0

%

$

1,649,546

$

1,459,971

13.0

%

Direct premiums written

$

432,984

$

409,418

5.8

%

$

1,271,925

$

1,148,656

10.7

%

Direct premiums earned

410,621

357,208

15.0

%

1,178,801

1,020,798

15.5

%

Net premiums earned

264,654

234,191

13.0

%

764,131

681,390

12.1

%

Expense ratio 3

27.7

%

32.9

%

(5.2)

pts

31.1

%

32.8

%

(1.7)

pts

Loss & LAE ratio

70.9

%

101.8

%

(30.9)

pts

65.3

%

77.0

%

(11.7)

pts

Combined ratio

98.6

%

134.7

%

(36.1)

pts

96.4

%

109.8

%

(13.4)

pts

3 Expense ratio excludes interest expense.

Direct premiums earned were up 15.0% for the quarter, led by primary rate increases in Florida and other states, while policies-in-force remained relatively flat.

On the expense side, the combined ratio improved 36.1 points for the quarter. The improvement was driven primarily by decreased weather events and lower prior years’ reserve development, in addition to business expense management, partially offset by current year strengthening and higher reinsurance costs impact on the ratio.

  • The expense ratio improved 3.7 pointson a direct premiums earned basis due to continued focus on operating efficiencies. On a net basis, the expense ratio improved 5.2 points for the quarter.

  • The net loss and LAE ratio improved 30.9 points for the quarter. Quarterly drivers include:

    • A 29.0 point net improvement related to weather events being within the plan.

    • Adverse prior year’s reserve development of $11.5 million ($30.1 million in 3Q20) resulted in an 8.5 point net improvement for the quarter. Net adverse development in the current quarter was driven primarily by continued adjusting and settlement of Hurricane Irma and non-CAT claims on accident years prior to 2020.

    • Core losses of $176.1 million for the quarter ($140.4 million in 3Q20) resulted in a 3.6 point increase on a direct premium earned basis, driven by current year strengthening. On a net basis, core losses increased 6.6 points for the quarter.

Services

($thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

Change

2021

2020

Change

Commission revenue

$

11,418

$

8,997

26.9

%

$

30,404

$

23,770

27.9

%

Policy fees

5,859

6,167

(5.0)

%

17,821

18,253

(2.4)

%

Other revenue

1,966

1,935

1.6

%

5,862

6,529

(10.2)

%

Total

$

19,243

$

17,099

12.5

%

$

54,087

$

48,552

11.4

%

Total services revenue increased 12.5% for the quarter. The increase was primarily driven by commission revenue earned on ceded premiums, partially offset by lower policy fees.

Investments

($thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

Change

2021

2020

Change

Net investment income

$

2,797

$

4,557

(38.6)

%

$

8,641

$

17,570

(50.8)

%

Realized gains (losses)

4,319

53,827

(92.0)

%

5,357

54,294

(90.1)

%

Unrealized gains (losses)

(3,759)

1,991

NM

(3,024)

(2,162)

39.9

%

NM = Not Meaningful

Net investment income decreased 38.6% for the quarter as well as a significant decline in realized gains when compared to the prior year’s quarter. Both decreases are the result of the sale, and subsequent reinvestment at lower yields, of a majority of securities in the portfolio that were in an unrealized gain position in the third and fourth quarters of 2020 to recognize the fair value benefits in surplus.

Capital Deployment

During the third quarter, the Company repurchased approximately 101 thousand shares at an aggregate cost of $1.4 million. The Company’s current share repurchase authorization program has $17.8 million remaining as of September 30, 2021 and runs through November 3, 2022.

On July 19, 2021, the Board of Directors declared a quarterly cash dividend of 16 cents per share of common stock, which was paid on August 9, 2021, to shareholders of record as of the close of business on August 2, 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, October 28, 2021 at 9:00 a.m. ET

  • U.S. Dial-in Number: (855) 752-6647

  • International: (503) 343-6667

  • Participant code: 3793583

  • 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: 3793583 through November 12, 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 any 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 any 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 September 30, 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)

September 30,

December 31,

2021

2020

ASSETS:

Invested Assets

Fixed maturities, at fair value

$

1,029,157

$

819,861

Equity securities, at fair value

77,099

84,887

Assets held for sale

253

Investment real estate, net

5,934

15,176

Total invested assets

1,112,443

919,924

Cash and cash equivalents

224,822

167,156

Restricted cash and cash equivalents

15,836

12,715

Prepaid reinsurance premiums

386,466

215,723

Reinsurance recoverable

134,935

160,417

Premiums receivable, net

71,132

66,883

Property and equipment, net

53,222

53,572

Deferred policy acquisition costs

113,979

110,614

Goodwill

2,319

2,319

Other assets

28,074

49,418

TOTAL ASSETS

$

2,143,228

$

1,758,741

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:

Unpaid losses and loss adjustment expenses

$

212,488

$

322,465

Unearned premiums

876,259

783,135

Advance premium

71,069

49,562

Reinsurance payable, net

399,905

10,312

Debt

7,353

8,456

Other liabilities

81,879

135,549

Total liabilities

1,648,953

1,309,479

STOCKHOLDERS' EQUITY:

Cumulative convertible preferred stock ($0.01 par value) 4

Common stock ($0.01 par value) 5

470

468

Treasury shares, at cost - 15,797 and 15,680

(227,115)

(225,506)

Additional paid-in capital

107,382

103,445

Accumulated other comprehensive income (loss), net of taxes

(7,398)

3,343

Retained earnings

620,936

567,512

Total stockholders' equity

494,275

449,262

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,143,228

$

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 - 46,964 and 46,817 shares; Outstanding 31,167 and 31,137 shares.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

REVENUES

Net premiums earned

$

264,654

$

234,191

$

764,131

$

681,390

Net investment income

2,797

4,557

8,641

17,570

Net realized gains/(losses) on investments

4,319

53,827

5,357

54,294

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

(3,759)

1,991

(3,024)

(2,162)

Commission revenue

11,418

8,997

30,404

23,770

Policy fees

5,859

6,167

17,821

18,253

Other revenue

1,966

1,935

5,862

6,529

Total revenues

287,254

311,665

829,192

799,644

EXPENSES

Losses and loss adjustment expenses

187,581

238,477

498,765

524,870

Policy acquisition costs

57,062

51,594

170,287

146,982

Other operating expenses

16,108

25,370

67,169

76,477

Interest expense

39

16

97

85

Total expenses

260,790

315,457

736,318

748,414

Income (loss) before income tax expense

26,464

(3,792)

92,874

51,230

Income tax expense (benefit)

6,281

(623)

24,342

14,450

NET INCOME (LOSS)

$

20,183

$

(3,169)

$

68,532

$

36,780

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SHARE AND PER SHARE INFORMATION

(in thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Weighted average common shares outstanding - basic

31,247

31,659

31,232

32,116

Weighted average common shares outstanding - diluted

31,337

31,659

31,302

32,202

Shares outstanding, end of period

31,167

31,334

31,167

31,334

Basic earnings (loss) per common share

$

0.65

$

(0.10)

$

2.19

$

1.14

Diluted earnings (loss) per common share

$

0.64

$

(0.10)

$

2.19

$

1.14

Cash dividend declared per common share

$

0.16

$

0.16

$

0.48

$

0.48

Book value per share, end of period

$

15.86

$

15.15

$

15.86

$

15.15

Annualized return on average equity (ROE)

16.4

%

(2.5)

%

19.3

%

10.0

%

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SUPPLEMENTARY INFORMATION

(in thousands, except for Policies In Force data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Premiums

Direct premiums written - Florida

$

354,799

$

334,916

$

1,062,180

$

948,196

Direct premiums written - Other States

78,185

74,502

209,745

200,460

Direct premiums written - Total

$

432,984

$

409,418

$

1,271,925

$

1,148,656

Direct premiums earned

$

410,621

$

357,208

$

1,178,801

$

1,020,798

Net premiums earned

$

264,654

$

234,191

$

764,131

$

681,390

Underwriting Ratios - Net

Loss and loss adjustment expense ratio

70.9

%

101.8

%

65.3

%

77.0

%

Policy acquisition cost ratio

21.6

%

22.1

%

22.3

%

21.6

%

Other operating expense ratio6

6.1

%

10.8

%

8.8

%

11.2

%

General and administrative expense ratio6

27.7

%

32.9

%

31.1

%

32.8

%

Combined ratio

98.6

%

134.7

%

96.4

%

109.8

%

Other Items

(Favorable)/Unfavorable prior year's reserve development

$11,489

$30,085

$17,983

$34,904

Points on the loss and loss adjustment expense ratio

4.4 pts

12.9

pts

2.4

pts

5.1

pts

6 Expense ratio excludes interest expense.

As of

September 30,

2021

2020

Policies in force

Florida

716,767

715,130

Other States

251,054

250,332

Total

967,821

965,462

Premiums in force

Florida

$

1,371,760

$

1,202,318

Other States

277,786

257,653

Total

$

1,649,546

$

1,459,971

Total Insured Value

Florida

$

204,334,645

$

185,382,817

Other States

114,992,734

105,432,408

Total

$

319,327,379

$

290,815,225

Three Months Ended September 30, 2021

Direct

Loss
Ratio

Ceded

Loss
Ratio

Net

Loss
Ratio

Premiums earned

$

410,621

$

145,967

$

264,654

Loss and loss adjustment expenses:

Core losses

$

176,161

42.9

%

$

69

%

$

176,092

66.5

%

Weather events7

%

%

%

Prior year’s reserve development

87,907

21.4

%

76,418

52.4

%

11,489

4.4

%

Total losses and loss adjustment expenses

$

264,068

64.3

%

$

76,487

52.4

%

$

187,581

70.9

%

7 Includes only current year weather events beyond those expected.

Nine Months Ended September 30, 2021

Direct

Loss
Ratio

Ceded

Loss
Ratio

Net

Loss
Ratio

Premiums earned

$

1,178,801

$

414,670

$

764,131

Loss and loss adjustment expenses:

Core losses

$

480,801

40.8

%

$

19

%

$

480,782

62.9

%

Weather events7

%

%

%

Prior year’s reserve development

296,867

25.2

%

278,884

67.3

%

17,983

2.4

%

Total losses and loss adjustment expenses

$

777,668

66.0

%

$

278,903

67.3

%

$

498,765

65.3

%

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

Nine Months Ended

Guidance

September 30,

September 30,

Full Year 2021E

2021

2020

2021

2020

Income (Loss) Before Income Taxes

$

26,464

$

(3,792)

$

92,874

$

51,230

Adjustments:

Net unrealized (gains)/losses on equity securities

3,759

(1,991)

3,024

2,162

Net realized (gains)/losses on investments

(4,319)

(53,827)

(5,357)

(54,294)

Interest Expense

39

16

97

85

Total Adjustments

(521)

(55,802)

(2,236)

(52,047)

Non-GAAP Adjusted Operating Income (Loss)

$

25,943

$

(59,594)

$

90,638

$

(817)

GAAP Diluted EPS

$

0.64

$

(0.10)

$

2.19

$

1.14

$ 2.75 - 3.00

Adjustments:

Net unrealized (gains)/losses on equity securities

0.12

(0.06)

0.09

0.07

Net realized (gains)/losses on investments

(0.14)

(1.70)

(0.17)

(1.69)

Total Pre-Tax Adjustments

(0.02)

(1.76)

(0.08)

(1.62)

Income Tax on Above Adjustments

0.01

0.43

0.02

0.40

Total Adjustments

(0.01)

(1.33)

(0.06)

(1.22)

Non-GAAP Adjusted EPS

$

0.63

$

(1.43)

$

2.13

$

(0.08)

$ 2.75 - 3.00

View source version on businesswire.com: https://www.businesswire.com/news/home/20211027005823/en/

Contacts

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

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