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Universal Insurance Holdings Reports First Quarter 2019 Results

- 1Q19 total revenue up 23.5% to $236.6 million

- 1Q19 direct premiums written ("DPW") up 7.1% to $289.2 million

- 1Q19 other states (non-Florida) DPW up 31.5%

- 1Q19 diluted GAAP earnings per share ("EPS") of $1.14, non-GAAP adjusted EPS(1) of $1.00

- 1Q19 combined ratio of 87.2%

- 1Q19 annualized return on average equity of 30.4%

- Year-over-year book value per share up 17.2% to $15.57

(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.

FORT LAUDERDALE, Fla., April 24, 2019 /PRNewswire/ -- Universal Insurance Holdings (UVE) (the "Company") reported 2019 first quarter diluted EPS of $1.14 on a GAAP basis and $1.00 non-GAAP adjusted EPS1. Total revenue was up 23.5% from the year-ago quarter to $236.6 million. Book value per share grew to $15.57, an increase of 17.2% year over year, with an annualized return on average equity of 30.4%.

"We are off to a good start to 2019 with solid first quarter results, including a 31.5% increase in other states direct premiums written, strong performance from our investment portfolio, and a total annualized return on average equity of 30.4%," said Sean P. Downes, Chairman and Chief Executive Officer.

"In addition, we received rate increase approvals in Florida and Georgia for new and renewal business, including high single digit increases in certain territories, the majority of which will take effect in the latter part of the second quarter. We also continued to expand our addressable market in the first quarter through the launch of Universal Property in Illinois, one of the top five largest personal residential homeowners states in the country by direct premiums written. Lastly, we added nine carrier appointments to our digital insurance distribution channel CloveredSM across Homeowners, Auto, Flood, and E&S lines. These milestones mark good progress against our strategic priorities and put us in position to focus on disciplined growth, maximize earnings stability, and continue to strengthen our foundation."

Summary Financial Results

($thousands, except per share data)

First Quarter


FY19


FY18


Change

(GAAP comparison)






Total revenue

$

236,586



$

191,500



23.5

%

Income before income taxes

53,744



51,699



4.0

%

Income before income taxes margin

22.7

%


27.0

%


(15.9)

%

Diluted EPS

1.14



1.12



1.8

%







Annualized return on average equity (ROE)

30.4

%


34.6

%


(4.2)

pts

Book value per share, end of period

15.57



13.28



17.2

%







(Non-GAAP comparison)*






Adjusted Operating Income

47,315



59,528



(20.5)

%

Adjusted EPS

1.00



1.28



(21.9)

%


*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 23.5% for the quarter, driven primarily by higher organic premium volume, pricing, and investment portfolio performance. Income before income tax was up 4.0% for the quarter and adjusted operating income was down 20.5% for the quarter. Income before income tax produced a 22.7% margin for the quarter, bolstered by our investment portfolio and integrated services businesses. GAAP diluted EPS grew 1.8% for the quarter driven by higher premium volume, pricing, and the investment portfolio performance, partially offset by an increased core loss ratio, a lower benefit from integrated services as prior years claims conclude, a Q1 hail event in Brevard County, Florida, and a higher effective tax rate. The Company produced a strong annualized return on average equity of 30.4% and book value per share growth of 17.2% year over year.

Underwriting

($thousands, except policies in-force)

First Quarter


FY19


FY18


Change

Policies in-force

840,770



777,607



8.1

%

In-force premium

$

1,212,093



$

1,082,224



12.0

%







Direct premiums written

$

289,234



$

269,984



7.1

%

Direct premium earned

295,377



262,261



12.6

%

Net premium earned

209,727



182,577



14.9

%







Expense ratio

33.3

%


35.0

%


(1.7)

pts

Loss & LAE ratio

53.9

%


41.6

%


12.3

pts

Combined ratio

87.2

%


76.6

%


10.6

pts

Direct premiums written were up single digits for the quarter, led by growth of 31.5% in Other States (non-Florida) and 3.4% in Florida. Underlying growth in Florida was tempered by more disciplined underwriting guidelines, while our Other States geographic expansion continues to be strong.

On the expense side, the combined ratio increased 10.6 points for the quarter driven by increased losses in connection with the diversified growth in the company's underlying business, increased estimated losses as previously disclosed in 4Q18, a reduced benefit from our claims adjusting business and the Q1 hail event, partially offset by an improvement in the expense ratio as set forth below:

  • The expense ratio improved 1.7 points for the quarter driven primarily by a 1.6 point improvement in the other operating expense ratio due to scale benefits and reduced executive compensation.
  • The net loss and loss adjustment expense ratio increased 12.3 points for the quarter. Quarterly drivers include:

Services

($thousands)

First Quarter


FY19


FY18


Change

Commission revenue

$

5,505



$

5,271



4.4

%

Policy fees

5,021



4,775



5.2

%

Other revenue

1,684



1,842



(8.6)

%

Total

12,210



11,888



2.7

%

Total services revenue increased 2.7% for the quarter driven by commission revenue earned on ceded premiums and an increase in policy fees related to volume, partially offset by other revenue.

Investments

($thousands)

First Quarter


FY19


FY18


Change

Net investment income

$

8,142



$

4,785



70.2

%

Realized gains (losses)

(11,525)



(2,641)



336.4

%

Unrealized gains (losses)

18,032



(5,109)



NM



NM = Not Meaningful

Net investment income increased 70.2% for the quarter due to rising interest rates compared to the prior year's quarter, asset mix, as well as higher average levels of invested assets. Realized losses in the first quarter of 2019 were the result of liquidating underperforming equity securities. Unrealized gains were driven by market fluctuations in equity securities resulting in a favorable outcome for the quarter.

Capital Deployment

During the first quarter, the Company repurchased approximately 321 thousand shares at an aggregate cost of $10.1 million. The Company's current share repurchase authorization program has $4.4 million remaining as of March 31, 2019 and runs through May 31, 2020.

On April 10, 2019 the Board of Directors of the Company declared a quarterly cash dividend of 16 cents per share of common stock, payable May 10, 2019, to shareholders of record as of the close of business on May 3, 2019.

Conference Call and Webcast

  • Thursday, April 25, 2019 at 8:30 a.m. ET
  • U.S Dial-in Number: (855) 752-6647
  • International: (503) 343-6667
  • Participant code: 8857016
  • 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: 8857016 through May 9, 2019

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 for the first quarter of 2019 and 2018, in each case excluding 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 for the first quarter of 2019 and 2018, in each case, exclude 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. 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.

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

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)




March 31,


December 31,



2019


2018

ASSETS





Invested Assets





  Fixed maturities, at fair value


$

840,028



$

820,438


  Equity securities, at fair value


53,175



63,277


  Investment real estate, net


25,070



24,439


  Total invested assets


918,273



908,154


Cash and cash equivalents


185,061



166,428


Restricted cash and cash equivalents


2,635



2,635


Prepaid reinsurance premiums


57,100



142,750


Reinsurance recoverable


323,294



418,603


Premiums receivable, net


58,346



59,858


Property and equipment, net


40,102



34,991


Deferred policy acquisition costs


83,284



84,686


Goodwill


2,319



2,319


Other assets


27,455



37,966


TOTAL ASSETS


$

1,697,869



$

1,858,390







LIABILITIES AND STOCKHOLDERS' EQUITY





LIABILITIES:





Unpaid losses and loss adjustment expenses


$

366,356



$

472,829


Unearned premiums


595,536



601,679


Advance premium


44,545



26,222


Reinsurance payable, net


48,171



93,306


Long-term debt


11,029



11,397


Other liabilities


93,182



151,324


     Total liabilities


1,158,819



1,356,757


STOCKHOLDERS' EQUITY:





Cumulative convertible preferred stock ($0.01 par value) 1





Common stock ($0.01 par value) 2


467



465


Treasury shares, at cost - 12,052 and 11,731


(140,516)



(130,399)


Additional paid-in capital


87,328



86,353


Accumulated other comprehensive income (loss), net of taxes


3,974



(8,010)


Retained earnings


587,797



553,224


     Total stockholders' equity


539,050



501,633


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$

1,697,869



$

1,858,390







Notes:





1 - 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.

2 - Common stock ($0.01 par value):  Authorized - 55,000 shares; Issued - 46,674 and 46,514 shares; Outstanding 34,622 and 34,783 shares.

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands)




Three Months Ended



March 31,



2019


2018

REVENUES





Net premiums earned


$

209,727



$

182,577


Net investment income


8,142



4,785


Net realized gains/(losses) on investments


(11,525)



(2,641)


Net unrealized gains/(losses) on investments


18,032



(5,109)


Commission revenue


5,505



5,271


Policy fees


5,021



4,775


Other revenue


1,684



1,842


  Total revenues


236,586



191,500







EXPENSES





Losses and loss adjustment expenses


113,094



75,926


Policy acquisition costs


43,511



38,043


Other operating expenses


26,159



25,753


Interest expense


78



79


     Total expenses


182,842



139,801







Income before income tax expense


53,744



51,699


     Income tax expense


13,596



11,644


NET INCOME


$

40,148



$

40,055


 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SHARE AND PER SHARE INFORMATION

(in thousands, except per share data)




Three Months Ended



March 31,



2019


2018

Weighted average common shares outstanding - basic


34,741



34,839


Weighted average common shares outstanding - diluted


35,206



35,660


Shares outstanding, end of period


34,622



35,012


Basic earnings per common share


$

1.16



$

1.15


Diluted earnings per common share


$

1.14



$

1.12


Cash dividend declared per common share


$

0.16



$

0.14


Book value per share, end of period


$

15.57



$

13.28


Annualized return on average equity (ROE)


30.4

%


34.6

%

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SUPPLEMENTARY INFORMATION

(in thousands, except for Policies In-Force data)




Three Months Ended




March 31,




2019


2018


Premiums






     Direct premiums written - Florida


$

242,148



$

234,178



     Direct premiums written - Other States


47,086



35,806



Direct premiums written - Total


$

289,234



$

269,984



Direct premiums earned


$

295,377



$

262,261



Net premiums earned


$

209,727



$

182,577









Underwriting Ratios - Net






Loss and loss adjustment expense ratio


53.9

%


41.6

%


  Policy acquisition cost ratio


20.7

%


20.8

%


  Other operating expense ratio


12.5

%


14.1

%


General and administrative expense ratio


33.3

%


35.0

%


Combined ratio


87.2

%


76.6

%








Other Items






(Favorable)/Unfavorable prior year reserve

   development


$

(185)



$

(44)



Points on the loss and loss adjustment

   expense ratio


(10.0)

bps


 bps





As of



March 31,



2019


2018

Policies In-Force





Florida


640,837



621,820


Other States


199,933



155,787


Total


840,770



777,607







In-Force Premium





Florida


$

1,023,256



$

941,418


Other States


188,837



140,806


Total


1,212,093



1,082,224







Total Insured Value





Florida


$

157,435,252



$

148,659,550


Other States


77,191,460



55,952,252


Total


234,626,712



204,611,802


 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, except for per share data)



First Quarter



FY19


FY18


Income Before Income Taxes

$

53,744



$

51,699



Adjustments:





    Reinstatement premium, net of commissions (2)





    Net unrealized (gains)/losses on investments

(18,032)



5,109



    Net realized (gains)/losses on investments

11,525



2,641



    Interest Expense

78



79



    Total Adjustments

(6,429)



7,829



Non-GAAP Adjusted Operating Income

47,315



59,528













GAAP Diluted EPS

$

1.14



$

1.12



Adjustments:





    Reinstatement premium, net of commissions (2)





    Net unrealized gains/(losses) on investments

(0.51)



0.14



    Net realized gains/(losses) on investments

0.33



0.07



    Total Pre-Tax Adjustments

(0.18)



0.21



    Income Tax on Above Adjustments

0.04



(0.05)



    Total Adjustments

(0.14)



0.16



Non-GAAP Adjusted EPS

$

1.00



$

1.28




(2) Includes reinstatement premiums not covered by reinstatement premium protection and related commissions.

 

 

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