Universal Insurance Holdings, Inc. Reports Fourth Quarter and Full Year 2016 Financial Results

 

Fort Lauderdale, FL, February 21, 2017 - Universal Insurance Holdings, Inc. (NYSE: UVE) today reported net income and diluted earnings per share (EPS) of $13.7 million and $0.38, respectively for the fourth quarter of 2016. For the full year 2016, net income was $99.4 million while diluted EPS was $2.79. 

 

Universal Insurance Holdings, Inc. Chairman and Chief Executive Officer Sean P. Downes commented: “During the fourth quarter, Universal reported strong top line growth and meaningful underwriting profit despite the impact of Hurricane Matthew.  This result is a testament to the fundamental strength of our business model, including the benefits which our vertically integrated structure afford us, our focus on maintaining high underwriting standards, our superior claims handling abilities, and our exceptional catastrophe response team. Our efforts to produce profitable and rate-adequate organic growth continue to produce results both within Florida and in our thirteen other states.  Our unique direct-to-consumer platform, Universal DirectSM, is now online in all of our active states and will contribute incrementally to this growth going forward, as will our Commercial Residential product, which saw its first policy written during the fourth quarter.  Universal enters 2017 extremely well positioned on all fronts, and we remain confident in our ability to deliver outstanding value to our shareholders.” 

 

Fourth Quarter 2016 Highlights

·         Strong Growth Continues – Net premiums earned grew by $13.4 million, or 8.9%, to $164.0 million, while total revenues increased by $16.5 million, or 10.2%, to $178.6 million. Net premiums earned and total revenues were each higher than any other quarter in our history.

·         Expansion Plan Gaining Steam – Our growth efforts both within Florida and in our other states continue to bear fruit, with our non-Florida states demonstrating impressive 43.0% growth in direct written premium for the full year 2016.  Universal DirectSM is now offered in all of our active states, and we wrote our first Commercial Residential policy through our subsidiary, American Platinum Property and Casualty Insurance Company, during the fourth quarter.

·         Profitable Despite Severe Weather – Fourth quarter results included Hurricane Matthew losses of $26.6 million or $0.46 per share. Net income decreased by $15.5 million, or 53.2%, to $13.7 million, while diluted EPS declined by $0.44 or 53.2%, to $0.38 per share. 

·         Balance Sheet Remains Solid – Book value per share grew by 26.9% from year-end 2015 to $10.59.  Our balance sheet remains solid, and is protected by a robust reinsurance program. 

·         Focused on Shareholder Returns – Return on Average Common Equity (ROE) was 14.4% for the fourth quarter and 29.4% for the full year 2016.  We paid dividends of $0.27 per share in the fourth quarter and $0.69 for the full year 2016 (comprised of a $0.14 per share regular quarterly cash dividend and an additional fourth quarter special dividend of $0.13 per share), equating to a 2.6% dividend yield at current share price levels.


Fourth Quarter 2016 Results

Direct premiums written grew 6.8% to $212.8 million from the prior year’s quarter, and net premiums earned grew 8.9% to $164.0 million.  Premium growth was due to organic growth in policies in force, both within our Florida book and in our expansion states, and the continued rollout of Universal DirectSM. Commission revenue, policy fees, and other revenue each delivered strong double-digit growth, up 16.8%, 10.2%, and 13.8% respectively versus the prior year’s quarter, driven by increased premium volume and continued geographic footprint expansion. 

 

The combined ratio was 95.1% in the fourth quarter of 2016 compared to 75.8% in the prior year’s quarter.  The net loss and LAE ratio increased to 61.9% for the fourth quarter of 2016, compared to 40.2% for the same period last year, with the primary driver of this increase being severe weather during 2016.  The current year’s quarter included $26.6 million of pre-tax net losses and loss adjustment expenses, or 16.2 points on the loss and LAE ratio, attributable to Hurricane Matthew. Fourth quarter 2016 results also included $16.8 million of increases to current accident year reserves as well as $4.7 million of favorable prior year reserve development.  General and administrative expenses as a percentage of net earned premiums declined to 33.2% in the fourth quarter of 2016 compared to 35.6% in the prior year’s quarter, with the improvement coming predominantly from a decrease in executive compensation and economies of scale. 

 

Net investment income grew by 96.1% from the prior year’s quarter to $3.5 million, with the growth driven by the increasing size of our investment portfolio and a shift in asset mix throughout the year.  Realized investment gains were $1.0 million in the fourth quarter of 2016, a modest increase versus $0.8 million in the prior year’s quarter.  Total invested assets were $651.6 million at year-end 2016, up from $489.4 million at year-end 2015.

 

The effective tax rate for the fourth quarter was 39.9%, up modestly from 39.1% in the prior year’s quarter, while the full year 2016 tax rate of 39.0% declined slightly from 39.2% in 2015. 

 

During the fourth quarter, the Company repurchased 3,929 shares for $0.1 million, or an average cost of $24.07 per share, and during the full year 2016 repurchases were 0.4 million shares for $8.5 million, or an average cost of $19.30 per share.  $17.9 million remains on our current repurchase authorization. 

 

Stockholders’ equity was $371.2 million as of December 31, 2016, or 26.6% growth from $293.1 million as of December 31, 2015.  Book value per common share grew 26.9% to $10.59 at December 31, 2016 compared to $8.34 at December 31, 2015. Return on Average Common Equity (ROE) was 14.4% for the fourth quarter and 29.4% for the full year 2016. 

 

On November 15, 2016, the Company announced that its Board of Directors had declared a cash dividend of $0.27 per share of common stock, comprised of a $0.14 per share regular quarterly dividend and an additional fourth quarter special dividend of $0.13 per share, which was paid on December 12, 2016 to shareholders of record on December 1, 2016. On January 23, 2017, the Company announced that its Board of Directors had declared a cash dividend of $0.14 per share of common stock payable on March 2, 2017 to shareholders of record on February 17, 2017.

 

Conference Call

Members of the Universal management team will host a conference call on Wednesday, February 22, 2017 at 10:00 AM ET to discuss fourth 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 internationally (toll) at (270) 823-1518 using the Conference I.D.: 70825474.  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 internationally (toll) at (404) 537-3406 using the Conference I.D.: 70825474, and will be available through March 9, 2017.

 

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 (APPCIC), 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. APPCIC is additionally licensed to write Fire, Commercial Multi-Peril, and Other Liability lines of business in Florida. 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

 

 

December 31,

 

 

2016

 

2015

PREMIUMS EARNED AND OTHER REVENUES

 

 

 

 

Direct premiums written

 

 $      212,835

 

 $      199,262

Change in unearned premium

 

           25,821

 

           21,286

Direct premium earned

 

         238,656

 

         220,548

Ceded premium earned

 

          (74,683)

 

          (69,950)

     Premiums earned, net

 

         163,973

 

         150,598

     Net investment income (expense)

 

             3,489

 

             1,779

     Net realized gains (losses) on investments

 

                950

 

                768

     Commission revenue

 

             4,806

 

             4,113

     Policy fees

 

             3,787

 

             3,436

     Other revenue

 

             1,600

 

             1,406

Total premiums earned and other revenues

 

         178,605

 

         162,100

OPERATING COSTS AND EXPENSES

 

 

 

 

     Losses and loss adjustment expenses

 

         101,480

 

           60,591

     General and administrative expenses

 

           54,398

 

           53,629

Total operating costs and expenses

 

         155,878

 

         114,220

INCOME BEFORE INCOME TAXES

 

           22,727

 

           47,880

Income tax expense

 

             9,072

 

           18,728

NET INCOME

 

 $        13,655

 

 $        29,152

 

 

 

 

 

Basic earnings per common share

 

 $            0.39

 

 $            0.84

Weighted average common shares outstanding - Basic

 

           35,042

 

           34,567

Diluted earnings per common share

 

 $            0.38

 

 $            0.82

Weighted average common shares outstanding - Diluted

 

           35,802

 

           35,747

Cash dividend declared per common share

 

 $            0.27

 

 $            0.27

 


 

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

December 31,

 

 

2016

 

2015

PREMIUMS EARNED AND OTHER REVENUES

 

 

 

 

Direct premiums written

 

 $      954,617

 

 $      883,409

Change in unearned premium

 

          (33,390)

 

          (46,617)

Direct premium earned

 

         921,227

 

         836,792

Ceded premium earned

 

        (288,811)

 

        (332,793)

     Premiums earned, net

 

         632,416

 

         503,999

     Net investment income (expense)

 

             9,540

 

             5,155

     Net realized gains (losses) on investments

 

             2,294

 

             1,060

     Commission revenue

 

           17,733

 

           14,870

     Policy fees

 

           16,880

 

           15,440

     Other revenue

 

             6,426

 

             6,020

Total premiums earned and other revenues

 

         685,289

 

         546,544

OPERATING COSTS AND EXPENSES

 

 

 

 

     Losses and loss adjustment expenses

 

         301,229

 

         187,739

     General and administrative expenses

 

         221,177

 

         183,782

Total operating costs and expenses

 

         522,406

 

         371,521

INCOME BEFORE INCOME TAXES

 

         162,883

 

         175,023

Income tax expense

 

           63,473

 

           68,539

NET INCOME

 

 $        99,410

 

 $      106,484

 

 

 

 

 

Basic earnings per common share

 

 $            2.85

 

 $            3.06

Weighted average common shares outstanding - Basic

 

           34,919

 

           34,799

Diluted earnings per common share

 

 $            2.79

 

 $            2.97

Weighted average common shares outstanding - Diluted

 

           35,650

 

           35,884

Cash dividend declared per common share

 

 $            0.69

 

 $            0.63

 


 

 

 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except per share data)

ASSETS

 

December 31, 2016

 

December 31, 2015

Cash and cash equivalents

 

 $          105,730

 

 $       197,014

Restricted cash and cash equivalents

 

                 2,635

 

              2,635

Fixed maturities, at fair value

 

             584,361

 

          416,083

Equity securities, at fair value

 

               50,803

 

            42,214

Short-term investments, at fair value

 

                 5,002

 

            25,021

Investment real estate, net

 

               11,435

 

              6,117

Prepaid reinsurance premiums

 

             124,385

 

          114,673

Reinsurance recoverable

 

                    106

 

            22,853

Premiums receivable, net

 

               53,833

 

            50,980

Other receivables

 

                 5,824

 

              4,979

Property and equipment, net

 

               32,162

 

            27,065

Deferred policy acquisition costs, net

 

               64,912

 

            60,019

Income taxes recoverable

 

                 3,262

 

              5,420

Deferred income tax asset, net

 

               10,674

 

            13,912

Other assets

 

                 4,883

 

              4,563

          Total assets

 

 $       1,060,007

 

 $       993,548

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

LIABILITIES:

 

 

 

 

Unpaid losses and loss adjustment expenses

 

 $            58,494

 

 $         98,840

Unearned premiums

 

             475,756

 

          442,366

Advance premium

 

               17,796

 

            24,813

Accounts payable

 

                 3,187

 

                 378

Reinsurance payable, net

 

               80,891

 

            73,585

Other liabilities and accrued expenses

 

               37,665

 

            36,424

Long-term debt

 

               15,028

 

            24,050

          Total liabilities

 

             688,817

 

          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 - 45,324 and         

 

 

 

 

  45,525; Outstanding shares - 35,052 and 35,110

Treasury shares,  at cost - 10,272 and 10,415

 

             (86,982)

 

          (80,802)

Additional paid-in capital

 

               82,263

 

            70,789

Accumulated other comprehensive income (loss), net of taxes

 

               (6,408)

 

            (4,006)

Retained earnings

 

             381,864

 

          306,656

          Total stockholders' equity

 

             371,190

 

          293,092

          Total liabilities and stockholders' equity

 

 $       1,060,007

 

 $       993,548



Contacts:

Investors

Dean Evans
VP Investor Relations
954-958-1306
de0130@universalproperty.com

Media

Andy Brimmer / Mahmoud Siddig
Joele Frank, Wilkinson Brimmer Katcher
212-355-4449