Universal Insurance Holdings, Inc. Reports Third Quarter 2016 Financial Results

Generates strong profits amid severe weather

Fort Lauderdale, FL, November 2, 2016 - Universal Insurance Holdings, Inc. (NYSE: UVE) today reported third quarter net income of $26.9 million, a decrease of 11.3%, or $3.4 million, from the same quarter in 2015.  Diluted earnings per share (EPS) were $0.75 for the third quarter of 2016, a decrease of 10.7%, or $0.09 per share, from the same quarter in 2015. 

 

“During the third quarter, Universal reported record top line results with record premiums earned, net and total revenues and strong profitability even as we experienced severe weather in our coverage areas,” said Sean P. Downes, Universal’s Chairman and Chief Executive Officer. “Our strong performance is a testament to the fundamental strength of our business model, including our focus on maintaining high underwriting standards, and more importantly this quarter, our claims handling abilities. The rigorous planning we conduct on an ongoing basis to prepare for severe weather events served us well in the quarter, and allowed us to respond quickly and effectively following Hurricane Hermine.   

 

“Looking ahead, we remain focused on writing high quality, rate adequate organic business, both in Florida and across our expanding geographic footprint.  We will also continue to pursue new business through our unique direct-to-consumer platform, Universal DirectSM, both organically and by seeking partnerships and joint ventures to deliver an even broader scope of products and services to our customers.  Universal enters the fourth quarter well positioned to drive profitable growth, and we remain confident in our ability to deliver increasing shareholder value.” 

 

Third-Quarter 2016 & Recent Highlights

  • Net earned premiums grew by $13.4 million, or 9.2%, to $159.5 million.
  • Total revenues increased by $15.4 million, or 9.8%, to $172.4 million.
  • Net income decreased by $3.4 million, or 11.3%, to $26.9 million.
  • Diluted EPS decreased by $0.09, or 10.7%, to $0.75 per share.
  • Paid dividends of $0.14 per share.
  • Wrote our first policy in Virginia.
  • Announced the launch of a Commercial Residential Program.
  • Universal DirectSM is now offered in 11 states.

Third-Quarter 2016 Results

 

Net income for the third quarter of 2016 of $26.9 million reflects an improvement across all revenue measures. Net earned premiums and total revenues were higher than any other quarter in the Company’s history.

The increase in net earned premiums is due entirely from organic growth in policies in force.

 

Net income was offset by $11 million of pre-tax net losses and loss adjustment expenses attributable to severe weather in 2016 including Hurricane Hermine. These losses and loss adjustment expenses were incremental to amounts provided for in the underlying loss ratio based on historical experience for such events.

 

Net losses and loss adjustment expenses as a percentage of net earned premiums increased 9.3 percentage points resulting in a net loss ratio of 46.1% for the third quarter, compared to 36.8% for the same period last year. The primary driver of this increase was the severe weather during 2016.

 

Stockholders’ equity reached an all-time high of $373.3 million as of September 30, 2016 compared to $293.1 million as of December 31, 2015.  Book value per common share also reached an all-time high of $10.66 as September 30, 2016 compared to $8.34 as of December 31, 2015.

 

Cash Dividends

 

On August 31, 2016, the Company announced that its Board of Directors had declared a cash dividend of $0.14 per share of common stock that was paid on October 24, 2016 to shareholders of record on September 12, 2016.

 

Conference Call

 

Members of the Universal management team will host a conference call on Wednesday, November 2, 2016 at 4:45 PM ET to discuss the third quarter 2016 financial results.   Following prepared remarks, management will conduct a question and answer session.  

 

The call will be accessible by dialing toll free at (888) 887-7180 or toll at (270) 823-1518 (using the Conference I.D.: 97544219).  A live audio webcast of the call will also be accessible on the Universal Insurance website at www.universalinsuranceholdings.com.  A replay of the call can be accessed toll free at (855) 859-2056 or toll at (404) 537-3406 (using the Conference I.D.: 97544219), and will be available through November 17, 2016.

 

About Universal Insurance Holdings, Inc.

Universal Insurance Holdings, Inc., with its wholly-owned subsidiaries, is a vertically integrated insurance holding company performing all aspects of insurance underwriting, distribution and claims. Universal Property & Casualty Insurance Company (UPCIC), a wholly-owned subsidiary of the Company, is one of the leading writers of homeowners insurance in Florida and is now fully licensed and has commenced its operations in North Carolina, South Carolina, Hawaii, Georgia, Massachusetts, Maryland, Delaware, Indiana, Pennsylvania, Minnesota, Michigan, Alabama and Virginia.  American Platinum Property and Casualty Insurance Company, also a wholly-owned subsidiary, currently writes homeowners multi-peril insurance on Florida homes valued in excess of $1 million, which are limits and coverages currently not targeted through its affiliate UPCIC.  For additional information on the Company, please visit our investor relations website at www.universalinsuranceholdings.com.

 

Forward-Looking Statements and Risk Factors

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,” 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 undertakes no obligation to correct or update any forward-looking statements. 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 Form 10-K for the year ended December 31, 2015.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

September 30,

 

 

2016

 

2015

PREMIUMS EARNED AND OTHER REVENUES

 

 

 

 

Direct premiums written

 

 $      241,888

 

 $      222,572

Change in unearned premium

 

            (7,388)

 

            (7,769)

Direct premium earned

 

         234,500

 

         214,803

Ceded premium earned

 

          (74,966)

 

          (68,650)

     Premiums earned, net

 

         159,534

 

         146,153

     Net investment income (expense)

 

             2,304

 

             1,307

     Net realized gains (losses) on investments

 

                101

 

                  11

     Commission revenue

 

             4,603

 

             4,115

     Policy fees

 

             4,226

 

             3,820

     Other revenue

 

             1,668

 

             1,637

Total premiums earned and other revenues

 

         172,436

 

         157,043

OPERATING COSTS AND EXPENSES

 

 

 

 

     Losses and loss adjustment expenses

 

           73,548

 

           53,854

     General and administrative expenses

 

           54,725

 

           55,289

Total operating costs and expenses

 

         128,273

 

         109,143

INCOME BEFORE INCOME TAXES

 

           44,163

 

           47,900

Income tax expense

 

           17,281

 

           17,602

NET INCOME

 

 $        26,882

 

 $        30,298

Basic earnings per common share

 

 $            0.77

 

 $            0.87

Weighted average common shares outstanding - Basic

 

           35,042

 

           34,911

Fully diluted earnings per common share

 

 $            0.75

 

 $            0.84

Weighted average common shares outstanding - Diluted

 

           35,723

 

           35,999

Cash dividend declared per common share

 

 $            0.14

 

 $            0.12

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

September 30,

 

 

2016

 

2015

PREMIUMS EARNED AND OTHER REVENUES

 

 

 

 

Direct premiums written

 

 $      741,782

 

 $      684,147

Ceded premiums written

 

          (59,211)

 

          (67,903)

Net premiums written

 

         682,571

 

         616,244

Change in net unearned premiums

 

        (214,128)

 

        (262,843)

     Premiums earned, net

 

         468,443

 

         353,401

     Net investment income (expense)

 

             6,051

 

             3,376

     Net realized gains (losses) on investments

 

             1,344

 

                292

     Commission revenue

 

           12,927

 

           10,757

     Policy fees

 

           13,093

 

           12,003

     Other revenue

 

             4,827

 

             4,614

Total premiums earned and other revenues

 

         506,685

 

         384,443

OPERATING COSTS AND EXPENSES

 

 

 

 

     Losses and loss adjustment expenses

 

         199,749

 

         127,148

     General and administrative expenses

 

         166,780

 

         130,152

Total operating costs and expenses

 

         366,529

 

         257,300

INCOME BEFORE INCOME TAXES

 

         140,156

 

         127,143

Income tax expense

 

           54,400

 

           49,811

NET INCOME

 

 $        85,756

 

 $        77,332

Basic earnings per common share

 

 $            2.46

 

 $            2.22

Weighted average common shares outstanding - Basic

 

           34,878

 

           34,837

Fully diluted earnings per common share

 

 $            2.41

 

 $            2.15

Weighted average common shares outstanding - Diluted

 

           35,594

 

           35,918

Cash dividend declared per common share

 

 $            0.42

 

 $            0.36

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

September 30,

 

December 31,

ASSETS

 

2016

 

2015

Cash and cash equivalents

 

 $          205,241

 

 $       197,014

Restricted cash and cash equivalents

 

                 2,635

 

              2,635

Fixed maturities, at fair value

 

             584,274

 

          416,083

Equity securities, at fair value

 

               44,240

 

            42,214

Short-term investments, at fair value

 

                 5,003

 

            25,021

Investment real estate, net

 

               10,384

 

              6,117

Prepaid reinsurance premiums

 

             198,910

 

          114,673

Reinsurance recoverable

 

                      —

 

            22,853

Premiums receivable, net

 

               60,570

 

            50,980

Other receivables

 

                 5,863

 

              4,979

Property and equipment, net

 

               30,845

 

            27,065

Deferred policy acquisition costs, net

 

               68,300

 

            60,019

Income taxes recoverable

 

               10,643

 

              5,420

Deferred income tax asset, net

 

                 1,877

 

            13,912

Other assets

 

                 5,437

 

              4,563

          Total assets

 

 $       1,234,222

 

 $       993,548

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

LIABILITIES:

 

 

 

 

Unpaid losses and loss adjustment expenses

 

 $            54,209

 

 $         98,840

Unearned premiums

 

             501,577

 

          442,366

Advance premium

 

               28,721

 

            24,813

Accounts payable

 

                 2,294

 

                 378

Reinsurance payable, net

 

             211,863

 

            73,585

Dividends payable

 

                 4,903

 

                   —

Other liabilities and accrued expenses

 

               41,995

 

            36,424

Long-term debt

 

               15,396

 

            24,050

          Total liabilities

 

             860,958

 

          700,456

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

Cumulative convertible preferred stock, $.01 par value

 

                      —

 

                   —

Authorized shares - 1,000

 

 

 

 

Issued shares - 10 and 10

 

 

 

 

Outstanding shares - 10 and 10

 

 

 

 

Minimum liquidation preference, $9.99 and $9.99 per share

 

 

 

 

Common stock, $.01 par value

 

                    453

 

                 455

Authorized shares - 55,000

 

 

 

 

Issued shares - 45,292 and 45,525

 

 

 

 

Outstanding shares - 35,024 and 35,110

 

 

 

 

Treasury shares, at cost - 10,268 and 10,415

 

             (86,887)

 

          (80,802)

Additional paid-in capital

 

               80,399

 

            70,789

Accumulated other comprehensive income (loss), net of taxes

 

                 1,625

 

            (4,006)

Retained earnings

 

             377,674

 

          306,656

          Total stockholders' equity

 

             373,264

 

          293,092

          Total liabilities and stockholders' equity

 

 $       1,234,222

 

 $       993,548

 

 



Investor Contact:
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Joele Frank, Wilkinson Brimmer Katcher
212-355-4449