Universal Insurance Holdings Reports Second Quarter 2021 Results
Universal Insurance Holdings (NYSE: UVE) (the “Company”) reported 2021 second quarter diluted EPS of $0.70 on a GAAP basis and $0.65 on a non-GAAP1 adjusted basis. Quarterly direct premiums written were up 17.0% from the year-ago quarter to $473.6 million, with an annualized return on average equity of 18.7%.
1
Excludes net realized and unrealized gains and losses on investments as well as extraordinary reinstatement premiums and associated commissions (“non-GAAP adjusted EPS”). Reconciliations of GAAP to non-GAAP financial measures are provided in the attached tables.
“We delivered solid second quarter results, highlighted by an 18.7% annualized return on average equity, despite continued social inflation within the state of Florida impacting loss costs,” said Stephen J. Donaghy, Chief Executive Officer. “We continue to address these trends, in part, with primary rate increase filings, which was a driver of our direct written premium growth during the quarter. We expect primary rate increases to be a tailwind over the medium to long term as they earn-in, but are relentlessly focused on performing through the near term pressure on carriers in the Florida property insurance marketplace, and lament about the unfortunate derivative consequence of price increases on consumers.”
Summary Financial Results
($thousands, except per share data)
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
Change
2021
2020
Change
(GAAP comparison)
Total revenue
$
279,181
$
252,704
10.5
%
$
541,938
$
487,979
11.1
%
Income (loss) before income taxes
30,059
27,438
9.6
%
66,410
55,022
20.7
%
Income (loss) before income taxes margin
10.8
%
10.9
%
(10.0
)bps
12.3
%
11.3
%
1.0
pt
Diluted EPS
$
0.70
$
0.62
12.9
%
$
1.54
$
1.23
25.2
%
Annualized return on average equity (ROE)
18.7
%
15.6
%
3.1
pts
20.7
%
15.5
%
5.2
pts
Book value per share, end of period
$
15.37
$
16.56
(7.2
)%
$
15.37
$
16.56
(7.2
)%
(Non-GAAP comparison)2
Adjusted operating income
28,372
23,416
21.2
%
64,695
58,777
10.1
%
Adjusted EPS
$
0.65
$
0.52
25.0
%
$
1.50
$
1.32
13.6
%
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 primarily by rate increases from 2020 earning through the book as policies renew, an increase in policies-in-force when compared to the prior years quarter, and commissions earned on ceded premiums. Total revenue growth was partially offset by the impact of higher reinsurance costs when compared to 2020 and the investment portfolio’s performance. GAAP diluted EPS and non-GAAP adjusted EPS results for the quarter were driven primarily by an improvement in weather events when compared to the prior years quarter, and the benefit of a reduced share count, partially offset by the impact of loss cost trends on prior and current accident years. The Company produced an annualized return on average equity of 18.7%.
Underwriting
($thousands, except policies in force)
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
Change
2021
2020
Change
Policies in force (as of end of period)
977,251
937,277
4.3
%
977,251
937,277
4.3
%
Premiums in force (as of end of period)
$
1,618,576
$
1,389,703
16.5
%
$
1,618,576
$
1,389,703
16.5
%
Direct premiums written
$
473,627
$
404,685
17.0
%
$
838,941
$
739,238
13.5
%
Direct premiums earned
392,574
337,639
16.3
%
768,180
663,590
15.8
%
Net premiums earned
256,172
226,370
13.2
%
499,477
447,199
11.7
%
Expense ratio3
32.0
%
32.6
%
(60.0
)bps
32.9
%
32.8
%
10.0
bps
Loss & LAE ratio
65.3
%
66.9
%
(1.6
)pts
62.3
%
64.0
%
(1.7
)pts
Combined ratio
97.3
%
99.5
%
(2.2
)pts
95.2
%
96.8
%
(1.6
)pts
3 Expense ratio excludes interest expense.
Direct premiums written were up 17.0% for the quarter, led by direct premium growth of 19.6% in Florida.
On the expense side, the combined ratio improved 2.2 points for the quarter. The improvement was driven primarily by decreased weather events, partially offset by prior year's reserve development, current year strengthening and higher reinsurance costs impact on the ratio.
The expense ratio decreased 1.0 pointon a direct premiums earned basis due to continued focus on operating efficiencies, which was partially offset by the impact of increased reinsurance costs on the net ratio, resulting in a 60 basis point improvement in the net expense ratio for the quarter. The net loss and LAE ratio improved 1.6 points for the quarter. Quarterly drivers include: A 7.5 point net improvement related to no weather events being above plan. Adverse prior year’s reserve development of $7.7 million ($0.5 million in 2Q20) resulted in a 2.8 point net increase for the quarter. Net adverse development in the current quarter was driven primarily by continued adjusting and settlement of non-CAT claims on prior accident years. Core losses of $159.5 million for the quarter ($133.9 million in 2Q20) resulted in a 90 basis point increase on a direct premium earned basis, driven by current year strengthening, which was further magnified by the impact of increased reinsurance costs on the net ratio, which led to a 3.1 point increase for the quarter on a net basis.Services
($thousands)
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
Change
2021
2020
Change
Commission revenue
$
9,860
$
7,758
27.1
%
$
18,986
$
14,773
28.5
%
Policy fees
6,575
6,546
0.4
%
11,962
12,086
(1.0
)%
Other revenue
1,991
1,812
9.9
%
3,896
4,594
(15.2
)%
Total
$
18,426
$
16,116
14.3
%
$
34,844
$
31,453
10.8
%
Total services revenue increased 14.3% for the quarter. The increase was primarily driven by commission revenue earned on ceded premiums.
Investments
($thousands)
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
Change
2021
2020
Change
Net investment income
$
2,858
$
6,179
(53.7
)%
$
5,844
$
13,013
(55.1
)%
Realized gains (losses)
496
168
195.2
%
1,038
467
122.3
%
Unrealized gains (losses)
1,229
3,871
(68.3
)%
735
(4,153
)
NM
NM = Not Meaningful
Net investment income decreased 53.7% 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.
Capital Deployment
On July 19, 2021, the Board of Directors declared a quarterly cash dividend of 16 cents per share of common stock, payable 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, July 29, 2021 at 9:00 a.m. ET U.S. Dial-in Number: (855) 752-6647 International: (503) 343-6667 Participant code: 5571912 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: 5571912 through August 13, 2021About 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 June 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)
June 30,
December 31,
2021
2020
ASSETS:
Invested Assets
Fixed maturities, at fair value
$
921,800
$
819,861
Equity securities, at fair value
95,690
84,887
Assets held for sale
7,053
—
Investment real estate, net
5,981
15,176
Total invested assets
1,030,524
919,924
Cash and cash equivalents
286,493
167,156
Restricted cash and cash equivalents
6,134
12,715
Prepaid reinsurance premiums
532,308
215,723
Reinsurance recoverable
196,294
160,417
Premiums receivable, net
74,072
66,883
Property and equipment, net
53,023
53,572
Deferred policy acquisition costs
115,971
110,614
Goodwill
2,319
2,319
Other assets
44,397
49,418
TOTAL ASSETS
$
2,341,535
$
1,758,741
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Unpaid losses and loss adjustment expenses
$
278,658
$
322,465
Unearned premiums
853,896
783,135
Advance premium
68,287
49,562
Reinsurance payable, net
581,818
10,312
Long-term debt
7,721
8,456
Other liabilities
70,313
135,549
Total liabilities
1,860,693
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 - 15,695 and 15,680
(225,751
)
(225,506
)
Additional paid-in capital
105,904
103,445
Accumulated other comprehensive income (loss), net of taxes
(5,571
)
3,343
Retained earnings
605,790
567,512
Total stockholders' equity
480,842
449,262
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
2,341,535
$
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 31,269 and 31,137 shares.
UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands)
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
REVENUES
Net premiums earned
$
256,172
$
226,370
$
499,477
$
447,199
Net investment income
2,858
6,179
5,844
13,013
Net realized gains/(losses) on investments
496
168
1,038
467
Net change in unrealized gains/(losses) of equity securities
1,229
3,871
735
(4,153
)
Commission revenue
9,860
7,758
18,986
14,773
Policy fees
6,575
6,546
11,962
12,086
Other revenue
1,991
1,812
3,896
4,594
Total revenues
279,181
252,704
541,938
487,979
EXPENSES
Losses and loss adjustment expenses
167,221
151,345
311,184
286,393
Policy acquisition costs
56,766
48,524
113,224
95,388
Other operating expenses
25,097
25,380
51,062
51,107
Interest expense
38
17
58
69
Total expenses
249,122
225,266
475,528
432,957
Income before income tax expense
30,059
27,438
66,410
55,022
Income tax expense (benefit)
8,118
7,556
18,061
15,073
NET INCOME
$
21,941
$
19,882
$
48,349
$
39,949
UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
SHARE AND PER SHARE INFORMATION
(in thousands, except per share data)
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Weighted average common shares outstanding - basic
31,240
32,102
31,224
32,347
Weighted average common shares outstanding - diluted
31,310
32,170
31,292
32,440
Shares outstanding, end of period
31,269
31,853
31,269
31,853
Basic earnings (loss) per common share
$
0.70
$
0.62
$
1.55
$
1.23
Diluted earnings (loss) per common share
$
0.70
$
0.62
$
1.54
$
1.23
Cash dividend declared per common share
$
0.16
$
0.16
$
0.32
$
0.32
Book value per share, end of period
$
15.37
$
16.56
$
15.37
$
16.56
Annualized return on average equity (ROE)
18.7
%
15.6
%
20.7
%
15.5
%
UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
(in thousands, except for Policies In Force data)
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Premiums
Direct premiums written - Florida
$
400,370
$
334,769
$
707,381
$
613,280
Direct premiums written - Other States
73,257
69,916
131,560
125,958
Direct premiums written - Total
$
473,627
$
404,685
$
838,941
$
739,238
Direct premiums earned
$
392,574
$
337,639
$
768,180
$
663,590
Net premiums earned
$
256,172
$
226,370
$
499,477
$
447,199
Underwriting Ratios - Net
Loss and loss adjustment expense ratio
65.3
%
66.9
%
62.3
%
64.0
%
Policy acquisition cost ratio
22.2
%
21.5
%
22.7
%
21.4
%
Other operating expense ratio6
9.8
%
11.2
%
10.2
%
11.4
%
General and administrative expense ratio6
32.0
%
32.6
%
32.9
%
32.8
%
Combined ratio
97.3
%
99.5
%
95.2
%
96.8
%
Other Items
(Favorable)/Unfavorable prior year's reserve development
$
7,731
$
478
$
6,494
$
4,819
Points on the loss and loss adjustment expense ratio
300
bps
21
bps
130
bps
108
bps
6 Expense ratio excludes interest expense.
As of
June 30,
2021
2020
Policies in force
Florida
723,390
696,829
Other States
253,861
240,448
Total
977,251
937,277
Premiums in force
Florida
$
1,345,532
$
1,144,326
Other States
273,044
245,377
Total
$
1,618,576
$
1,389,703
Total Insured Value
Florida
$
200,600,028
$
177,854,339
Other States
112,637,726
99,662,951
Total
$
313,237,754
$
277,517,290
Three Months Ended June 30, 2021
Direct
Loss
Ratio
Ceded
Loss
Ratio
Net
Loss
Ratio
Premiums earned
$
392,574
$
136,402
$
256,172
Loss and loss adjustment expenses:
Core losses
$
159,412
40.6
%
$
(78)
(0.1)
%
$
159,490
62.3
%
Weather events7
—
—
%
—
—
%
—
—
%
Prior year’s reserve development
116,890
29.8
%
109,159
80.0
%
7,731
3.0
%
Total losses and loss adjustment expenses
$
276,302
70.4
%
$
109,081
80.0
%
$
167,221
65.3
%
7 Includes only current year weather events beyond those expected.
Six Months Ended June 30, 2021
Direct
Loss
Ratio
Ceded
Loss
Ratio
Net
Loss
Ratio
Premiums earned
$
768,180
$
268,703
$
499,477
Loss and loss adjustment expenses:
Core losses
$
304,640
39.7
%
$
(50)
—
%
$
304,690
61.0
%
Weather events7
—
—
%
—
—
%
—
—
%
Prior year’s reserve development
208,960
27.2
%
202,466
75.3
%
6,494
1.3
%
Total losses and loss adjustment expenses
$
513,600
66.9
%
$
202,416
75.3
%
$
311,184
62.3
%
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
Six Months Ended
Guidance
June 30,
June 30,
Full Year 2021E
2021
2020
2021
2020
Income (Loss) Before Income Taxes
$
30,059
$
27,438
$
66,410
$
55,022
Adjustments:
Reinstatement premium, net of commissions8
—
—
—
—
Net unrealized (gains)/losses on equity securities
(1,229
)
(3,871
)
(735
)
4,153
Net realized (gains)/losses on investments
(496
)
(168
)
(1,038
)
(467
)
Interest Expense
38
17
58
69
Total Adjustments
(1,687
)
(4,022
)
(1,715
)
3,755
Non-GAAP Adjusted Operating Income
$
28,372
$
23,416
$
64,695
$
58,777
GAAP Diluted EPS
$
0.70
$
0.62
$
1.54
$
1.23
$ 2.75 - 3.00
Adjustments:
Reinstatement premium, net of commissions8
—
—
—
—
—
Net unrealized (gains)/losses on equity securities
(0.04
)
(0.12
)
(0.02
)
0.12
—
Net realized (gains)/losses on investments
(0.02
)
(0.01
)
(0.03
)
(0.01
)
—
Total Pre-Tax Adjustments
(0.06
)
(0.13
)
(0.05
)
0.11
—
Income Tax on Above Adjustments
0.01
0.03
0.01
(0.02
)
—
Total Adjustments
(0.05
)
(0.10
)
(0.04
)
0.09
—
Non-GAAP Adjusted EPS
$
0.65
$
0.52
$
1.50
$
1.32
$ 2.75 - 3.00
8 Includes extraordinary reinstatement premiums not covered by reinstatement premium protection and related commissions.
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