Universal Insurance Holdings, Inc. Reports Fourth-Quarter and Full-Year 2007 Financial Results
— Total Premiums Earned and Other Revenues Increased 43.8 Percent in the Fourth Quarter and 189.4 Percent in Fiscal Year 2007 — Earnings per Diluted Share Grew 20.0 Percent in the Fourth Quarter and 222.0 Percent in Fiscal Year 2007, Excluding the FIGA Assessment During the Third Quarter
— Stockholders’ Equity Increased to $72.6 Million at December 31, 2007, Up From $22.0 Million at December 31, 2006
FORT LAUDERDALE, FL — (MARKET WIRE) — 03/17/2008 — Universal Insurance Holdings, Inc. (Company) (AMEX: UVE), a vertically integrated insurance holding company, announced fourth-quarter 2007 net income of $10.3 million, or $0.24 per diluted share, compared to $8.1 million, or $0.20 per diluted share, in the fourth quarter of 2006.
Fourth Quarter 2007 Results
Gross premiums written decreased 16.9 percent to $117.4 million in the fourth quarter of 2007 from $141.3 million for the same period of 2006. Although the number of policies in-force increased quarter over quarter, gross premiums written decreased primarily due to a decline in premium rates. The increase in the number of policies in-force is the result of heightened relationships with existing agents, an increase in new agents, a new web-based policy administration platform, and the disruption in the marketplace as a result of the windstorm catastrophes in 2004 and 2005, which has provided the Company an opportunity in the otherwise competitive marketplace as certain companies are not accepting new business.
In the fourth quarter of 2007, net premiums earned increased 31.1 percent to $35.4 million from $27.0 million in the 2006 fourth quarter, mainly due to an increase in new business and changes in the Company’s reinsurance program.
Investment income increased 15.8 percent to $2.2 million for the three-month period ended December 31, 2007, from $1.9 million for the same period ended December 31, 2006. The increase is primarily a result of higher investment balances during the 2007 period.
Comparing the fourth quarter of 2007 with the same period of 2006, commission revenue increased 186.4 percent to $6.3 million from $2.2 million, mainly due to an increase in the managing general agent’s policy fee income and a greater amount of reinsurance commission sharing.
Net losses and loss adjustment expenses (LAE) increased 59.9 percent to $21.9 million in the 2007 fourth quarter from $13.7 million in the same period in 2006. Losses and LAE increased as a result of increased premium volume and changes in the Company’s reinsurance program. The Company’s net loss ratio for the three-month period ended December 31, 2007 was 61.7 percent compared to 50.6 percent for the same period ended December 31, 2006.
Fourth-quarter general and administrative expenses increased 53.1 percent to $4.9 million in the 2007 period from $3.2 million in the 2006 period. The increase in general and administrative expenses was commensurate with the increased premium volume.
For the three-month period ended December 31, 2007, stockholders’ equity increased to $72.6 million from $63.6 million at September 30, 2007.
As of December 31, 2007, the Company was servicing approximately 374,000 homeowners’ and dwelling fire insurance policies and had in-force premiums of approximately $504.5 million, while its statutory capital and surplus was $98.7 million.
Full-Year 2007 Results
For the twelve-month period ended December 31, 2007, net income was $54.0 million, or $1.31 per diluted share, compared to $17.2 million, or $0.44 per diluted share, in the same period of 2006. On October 11, 2007, the board of directors of the Florida Insurance Guaranty Association (FIGA) determined the need for an assessment upon member companies of 2.0 percent of the Florida net direct premiums for the calendar year 2006. The participation of Universal Property & Casualty Insurance Company (UPCIC) in this assessment totaled $7.4 million, which reduced net income by $4.6 million, or $0.11 per diluted share, in the third quarter ended September 30, 2007. Excluding the FIGA assessment of $7.4 million incurred in the third quarter of 2007, net income for the full-year of 2007 was $58.6 million, while earnings per diluted share were $1.42. Pursuant to Florida statutes, UPCIC is permitted to recoup the assessment by adding a surcharge to policies in an amount not to exceed the amount paid by the insurer to FIGA, which UPCIC will assess as part of 2008 premiums.
In the twelve months of 2007, gross premiums written increased 34.2 percent to $498.7 million from $371.8 million for the same period in 2006, primarily attributable to an increase in new business as well as premium rate increases. The increase in new business is partly attributable to the 2004 and 2005 Florida windstorm catastrophes, which have provided an opportunity in the otherwise competitive marketplace, as certain companies are not accepting new business, as well as marketing initiatives the Company has undertaken. In the 2007 twelve-month period, net premiums earned increased 185.4 percent to $154.4 million from $54.1 million in the 2006 period, primarily due to an increase in new business, premium rate increases and changes in the reinsurance program.
Investment income increased 160.0 percent to $10.4 million for the full-year period ended December 31, 2007, from $4.0 million for the full-year period ended December 31, 2006. The increase is primarily due to higher investment balances during the 2007 period.
Comparing fiscal year 2007 with fiscal year 2006, commission revenue increased 231.3 percent to $22.2 million from $6.7 million, mainly due to an increase in the managing general agent’s policy fee income and a greater amount of reinsurance commission sharing.
Net losses and LAE increased 140.0 percent to $59.8 million in the full-year 2007 period compared to $24.9 million in the same period in 2006. Losses and LAE increased as a result of an increase in insured exposures and changes in the Company’s reinsurance program. The Company’s net loss ratio for fiscal year 2007 was 38.7 percent compared to 46.1 percent for fiscal year 2006.
Full-year general and administrative expenses increased 190.4 percent to $39.2 million in the 2007 period from $13.5 million in the 2006 period which was commensurate with the increased premium volume.
On January 23, 2008, the Company announced a cash dividend on its outstanding common stock. Stockholders of record as of July 9, 2008, will receive $0.10 for each share owned on that date, payable on August 7, 2008.
Management Comments
Bradley I. Meier, president and chief executive officer of the Company, commented, “We are pleased with the fourth-quarter and full-year results for 2007, which included diluted earnings per share growth of 20.0 percent in the fourth quarter and, excluding the $4.6 million, or $0.11 per share, FIGA assessment in the third quarter, growth of 222.0 percent for the 2007 full year.”
“As set forth in our balance sheet, stockholders’ equity grew 230.0 percent to $72.6 million at December 31, 2007, from $22.0 million at December 31, 2006. These 2007 results have afforded Universal the opportunity to distribute a total of $0.20 per share to our stockholders in the form of dividend payments throughout the year, and due to the Company’s growth, the board of directors has steadily increased the dividend.”
Mr. Meier added, “While our net premiums earned increased by 185.4 percent during fiscal year 2007, the Company saw a decline in gross premiums written during the fourth quarter of 2007. While Universal is increasing its market share and growing its business, as exhibited by a 39.6 percent growth in policies during 2007, the rate decreases implemented in June 2007, and again in January 2008 for new business, and in February 2008 for renewal business, have caused premiums to level off. While rate increase and decrease activity is somewhat unpredictable, we remain focused on risk management and obtaining future growth within the Florida market, as we believe expansion opportunity exists.”
Mr. Meier concluded, “In addition to Florida, we are focused on expanding the Company through initiatives such as the formal launch of Atlas Premium Finance Company in November 2007, and the recent announcement of UPCIC’s request with the National Flood Insurance Program to become authorized to write and service Write Your Own flood insurance policies. Finally, as we announced recently, UPCIC intends to expand to new states including Texas, Hawaii, Georgia, South Carolina and North Carolina. We look forward to working with each state to receive approval. Furthermore, we are hoping to receive our licenses for each state by the third quarter of 2008.”
About Universal Insurance Holdings, Inc.
The Company is a vertically integrated insurance holding company. Through its subsidiaries, the Company is currently engaged in insurance underwriting, distribution and claims. UPCIC, which generates revenue from the collection and investment of premiums, is one of the top 5 writers of homeowners’ insurance policies in the state of Florida and has aligned itself with well-respected service providers in the industry.
Readers should refer generally to reports filed by the Company with the Securities and Exchange Commission (SEC), and specifically to the Company’s Form 10-KSB for the year ended December 31, 2007 for a discussion of the risk factors that could affect its operations. Such factors include, without limitation, exposure to catastrophic losses; reliance on the Company’s reinsurance program; underwriting performance on catastrophe and non-catastrophe risks; the ability to maintain relationships with customers, employees or suppliers; and competition and its effect on pricing, spending, third-party relationships and revenues. Additional factors that may affect future results are contained in the Company’s filings with the SEC, which are available on the SEC’s web site at https://www.sec.gov. The Company disclaims any obligation to update and revise statements contained in this press release based on new information or otherwise.
Cautionary Language Concerning Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” and “project,” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Such statements may include, but not be limited to, projections of revenues, income or loss, expenses, plans, 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 in forward-looking statements.
UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Years Ended
December 31, December 31,
2007 2006
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PREMIUMS EARNED AND OTHER REVENUES:
Direct premiums written $ 498,748,778 $ 371,754,514
Ceded premiums written (358,405,016) (230,718,709)
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Net premiums written 140,343,762 141,035,805
Decrease (increase) in net
unearned premiums 14,074,690 (86,899,853)
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Premiums earned, net 154,418,452 54,135,952
Net investment income 10,410,259 3,986,414
Commission revenue 22,222,007 6,714,511
Other revenue 1,463,763 310,873
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Total premiums earned and
other revenues 188,514,481 65,147,750
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OPERATING COSTS AND EXPENSES:
Losses and loss adjustment expenses 59,799,670 24,940,879
General and administrative expenses 39,165,022 13,485,562
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Total operating costs and expenses 98,964,692 38,426,441
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INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES $ 89,549,789 $ 26,721,309
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Income taxes, current 41,078,701 17,541,697
Income taxes, deferred (5,531,200) (8,064,457)
-------------- --------------
Income taxes, net 35,547,501 9,477,240
-------------- --------------
INCOME FROM CONTINUING OPERATIONS $ 54,002,288 $ 17,244,069
============== ==============
DISCONTINUED OPERATIONS:
Loss from discontinued operations - (93,136)
Provision for income tax expense - 35,927
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Total loss from discontinued
operations - (57,209)
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NET INCOME $ 54,002,288 $ 17,186,860
============== ==============
INCOME PER COMMON SHARE:
Basic net income from
continuing operations $ 1.52 $ 0.50
============== ==============
Basic net income from
discontinued operations $ - $ -
============== ==============
Basic net income per share $ 1.52 $ 0.50
============== ==============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC 35,550,503 34,409,415
============== ==============
INCOME PER COMMON SHARE:
Diluted net income from
continuing operations $ 1.31 $ 0.44
============== ==============
Diluted net income from
discontinued operations $ - $ -
============== ==============
Diluted net income per share $ 1.31 $ 0.44
============== ==============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 41,360,020 39,078,643
============== ==============
CASH DIVIDEND DECLARED PER COMMON SHARE $ 0.24 $ 0.18
============== ==============
UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 2007
(Unaudited)
ASSETS
Cash and cash equivalents $214,745,606
Real estate, net 3,392,827
Prepaid reinsurance premiums 172,672,795
Reinsurance recoverables 46,399,265
Premiums and other receivables, net 38,045,097
Property and equipment, net 874,430
Deferred income taxes 14,202,956
Other assets 400,164
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Total assets $490,733,140
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LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES:
Unpaid losses and loss adjustment expenses $ 68,815,500
Unearned premiums 254,741,198
Deferred ceding commission, net 2,122,269
Accounts payable 2,972,147
Reinsurance payable 33,888,350
Dividends payable 3,241,145
Other accrued expenses 16,339,082
Other liabilities 11,035,444
Loans payable 2,820
Long-term debt 25,000,000
------------
Total liabilities 418,157,955
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STOCKHOLDERS' EQUITY:
Cumulative convertible preferred stock,
$.01 par value, 1,000,000 shares
authorized, 138,640 shares issued
and outstanding, minimum liquidation
preference of $1,419,700 1,387
Common stock, $.01 par value, 55,000,000
shares authorized, 39,307,103 shares issued
and 36,012,729 shares outstanding 393,072
Common stock in treasury, at cost - 394,374 shares (974,746)
Common stock held in trust, at cost - 2,900,000 shares (2,349,000)
Additional paid-in capital 24,779,798
Retained earnings 50,724,674
------------
Total stockholders' equity 72,575,185
------------
Total liabilities and stockholders' equity $490,733,140
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Philip Kranz Dresner Corporate Services 312-780-7240 pkranz@dresnerco.com