Universal Insurance Holdings Reports Second Quarter 2021 Results

Rhea-AI Summary

Universal Insurance Holdings (NYSE: UVE) reported a Q2 2021 diluted EPS of $0.70, up 12.9% YOY, with direct premiums written increasing by 17.0% to $473.6 million. The company achieved an annualized return on average equity of 18.7%, supported by primary rate increase filings to address social inflation effects in Florida. However, net investment income declined by 53.7% due to lower yields from reinvested portfolios. A quarterly cash dividend of $0.16 was declared, payable on August 9, 2021. Guidance for 2021 maintains EPS between $2.75 - $3.00.

Positive

• Diluted EPS increased 12.9% YOY, reaching $0.70.
• 17.0% growth in direct premiums written, totaling $473.6 million.
• Annualized return on average equity improved to 18.7%.
• Improved combined ratio by 2.2 points, now at 97.3%.
• Quarterly cash dividend declared at $0.16 per share.

Negative

• Net investment income fell 53.7% compared to the previous year.
• Book value per share decreased 7.2% to $15.37.
• Higher reinsurance costs impacted overall revenue growth.

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, 2021

About 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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FAQ

What was Universal Insurance Holdings' Q2 2021 diluted EPS?

The diluted EPS for Q2 2021 was $0.70, reflecting a 12.9% increase from the prior year.

How much did direct premiums written increase in Q2 2021 for UVE?

Direct premiums written increased by 17.0% to $473.6 million in Q2 2021.

What is the annualized return on average equity for UVE in Q2 2021?

UVE reported an annualized return on average equity of 18.7% in Q2 2021.

What dividend did UVE declare for Q2 2021?

UVE declared a cash dividend of $0.16 per share, payable on August 9, 2021.

What is the EPS guidance for Universal Insurance Holdings in 2021?

The guidance for 2021 EPS is maintained in the range of $2.75 - $3.00.