EX-99.1 2 q320uveex-991xpressrel.htm EX-99.1 Document
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Exhibit 99.1
Universal Insurance Holdings Reports Third Quarter 2020 Results

•3Q20 total revenue up 35.7% to $311.7 million
•3Q20 direct premiums written up 19.4%
•3Q20 diluted GAAP earnings per share (“EPS”) of $(0.10), non-GAAP adjusted EPS1 of $(1.43)
•Book value per share increased 0.1% since the end of 2019 to $15.15 despite elevated industry-wide weather activity
•YTD annualized return on average equity of 10.0%

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.

Fort Lauderdale, Fla., October 27, 2020 – Universal Insurance Holdings (NYSE: UVE) (the “Company”) reported 2020 third quarter diluted EPS of $(0.10) on a GAAP basis and $(1.43) non-GAAP adjusted EPS1. Total revenue was up 35.7% from the year ago quarter to $311.7 million. Year-to-date annualized return on average equity was 10.0%.

“We continued to see headwinds in the third quarter as we dealt with elevated industry-wide weather events year-to-date. As previously announced, we were affected by full retention events from Hurricanes Isaias and Sally, in addition to other PCS events year-to-date. Furthermore, we saw an increase in prior year’s companion claims in the run up to the expiration of the statute of limitations for Hurricane Irma, which contributed to prior year’s reserve development,” said Stephen J. Donaghy, Chief Executive Officer.

“Our primary rate increases continue to flow through our book as evidenced by our strong direct premiums written growth of 19.4% in the quarter. We continue to selectively write new business in our existing states, including Florida. Specifically in Florida, we have seen a 9.5% year-over-year policy count growth, with 97% of this growth coming from outside of the tri-county area.”

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Summary Financial Results

($thousands, except per share data)Three Months Ended September 30,Nine Months Ended September 30,
20202019Change20202019Change
(GAAP comparison)
Total revenue$311,665 $229,641 35.7 %$799,644 $699,949 14.2 %
Income (loss) before income taxes(3,792)27,896 NM51,230 132,570 (61.4)%
Income (loss) before income taxes margin(1.2)%12.1 %NM6.4 %18.9 %(12.5)pts
Diluted EPS$(0.10)$0.59 NM$1.14 $2.82 (59.6)%
Annualized return on average equity (ROE)(2.5)%14.0 %NM10.0 %23.9 %(13.9)pts
Book value per share, end of period$15.15 $17.13 (11.6)%$15.15 $17.13 (11.6)%
(Non-GAAP comparison)2
Adjusted operating income(59,594)28,476 NM(817)125,520 NM
Adjusted EPS$(1.43)$0.61 NM$(0.08)$2.67 NM
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 realized gains on investments, growth in net premiums earned (organic new business growth and primary rate increases) and services revenue. GAAP diluted EPS and non-GAAP adjusted EPS results for the quarter were driven by increased loss and loss adjustment expense (“LAE”) from elevated industry-wide weather events and prior year’s reserve development. Despite elevated activity year-to-date, the Company produced an annualized year-to-date return on average equity of 10.0%.


Underwriting

($thousands, except policies in force)Three Months Ended September 30,Nine Months Ended September 30,
20202019Change20202019Change
Policies in force (as of end of period)965,462 872,603 10.6 %965,462 872,603 10.6 %
Premiums in force (as of end of period)$1,459,971 $1,267,681 15.2 %$1,459,971 $1,267,681 15.2 %
Direct premiums written$409,418 $342,872 19.4 %$1,148,656 $990,066 16.0 %
Direct premiums earned357,208 313,065 14.1 %1,020,798 911,550 12.0 %
Net premiums earned234,191 206,599 13.4 %681,390 626,683 8.7 %
Expense ratio3
32.9 %33.5 %(60.0)bps32.8 %33.2 %(40.0)bps
Loss & LAE ratio101.8 %64.3 %37.5 pts77.0 %57.3 %19.7 pts
Combined ratio134.7 %97.8 %36.9 pts109.8 %90.5 %19.3 pts
3 Expense ratio excludes interest expense.

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Direct premiums written were up double digits for the quarter, led by strong direct premium growth of 18.8% in Other States (non-Florida), and 19.6% in Florida. The quarter’s growth benefited from organic new business growth, and primary rate increases continuing to flow through the book.

On the expense side, the combined ratio increased 36.9 points for the quarter. The increase was driven primarily by increased weather events, accruing reserves at a higher core loss ratio, prior year’s reserve development, and the impact of higher reinsurance costs, partially offset by a benefit from our claims adjusting business and a reduction in the expense ratio as set forth below.

•The expense ratio improved by 60 basis points for the quarter, primarily related to an 80 basis point improvement in the other operating expense ratio due in large part to economies of scale and lower stock based compensation, partially offset by the effect of increased cost of reinsurance on the expense ratio.

•The net loss and LAE ratio increased 37.5 points for the quarter. Quarterly drivers include:

◦Weather events in excess of plan of $68.0 million, or 29.0 points, for the quarter ($15.0 million in 3Q19) were primarily related to the previously announced hurricanes (Isaias and Sally), in addition to other PCS events that exceeded the plan year-to-date.

◦Prior year’s reserve development of $30.1 million, or 12.9 points, for the quarter ($3.2 million in 3Q19) was partially related to increased prior year’s companion claims being filed during the run up to the expiration of the 3-year catastrophe statute of limitations in September.

◦Core losses of $140.4 million, or 59.9 points, for the quarter ($114.4 million in 3Q19) were primarily related to accruing incremental reserves for the current accident year loss costs and diversified growth.


Services

($thousands)Three Months Ended September 30,Nine Months Ended September 30,
20202019Change 20202019Change
Commission revenue$8,997 $7,380 21.9 %$23,770 $18,933 25.5 %
Policy fees6,167 5,569 10.7 %18,253 16,587 10.0 %
Other revenue1,935 1,929 0.3 %6,529 5,369 21.6 %
Total$17,099 $14,878 14.9 %$48,552 $40,889 18.7 %

Total services revenue increased 14.9% for the quarter. The increase was driven by commission revenue earned on ceded premiums and an increase in policy fees.


Investments

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($thousands)Three Months Ended September 30,Nine Months Ended September 30,
20202019Change 20202019Change
Net investment income$4,557 $7,613 (40.1)%$17,570 $23,165 (24.2)%
Realized gains (losses)53,827 (22)NM54,294 (13,152)NM
Unrealized gains (losses)1,991 573 247.5 %(2,162)22,364 NM
NM = Not Meaningful

Net investment income decreased 40.1% for the quarter, driven by lower yields on cash and fixed-income investments during 2020 when compared to 2019. Realized gains for the quarter resulted from taking advantage of increased market prices on our available-for-sale debt investment portfolio. Cash and cash equivalents increased 122.5% to $405.1 million when compared to the end of 2019 as a result of the actions taken to realize investment gains, leading to higher investment cash flows. As a result of the sales and reinvestment, future portfolio investment income will reflect current market rates.


Capital Deployment

During the third quarter, the Company repurchased approximately 534 thousand shares at an aggregate cost of $9.9 million. Year-to-date, the Company repurchased approximately 1.4 million shares at an aggregate cost of $26.5 million.

On July 6, 2020, the Board of Directors declared a quarterly cash dividend of 16 cents per share of common stock, which was paid on August 7, 2020, to shareholders of record as of the close of business on July 31, 2020.


Guidance

The Company is updating its guidance for 2020 to reflect increased top line revenue, offset by elevated third quarter loss and LAE (assuming no further extraordinary weather events and no realized or unrealized gains in 4Q20):

•GAAP EPS in a range of $1.80 - $2.10 (reduced from previous range of $2.31 - $2.61)
•Non-GAAP Adjusted EPS in a range of $0.55 - $0.85 (reduced from previous range of $2.40 - $2.70)
•Annualized return on average equity (derived from GAAP measures) in a range of 11.1% - 14.1% (reduced from previous range of 13.5% - 16.5%)


Conference Call and Webcast

•Wednesday, October 28, 2020 at 9:00 a.m. ET
•U.S. Dial-in Number: (855) 752-6647
•International: (503) 343-6667
•Participant code: 5317328
•Listen to live webcast and view presentation: 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: 5317328 through November 12, 2020
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About Universal Insurance Holdings, Inc.

Universal Insurance Holdings, Inc. (“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 18 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 September 30, 2020.


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 2019 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
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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.



Investor Relations Contact:
Rob Luther, 954-958-1200 ext. 6750
VP, Corporate Development, Strategy & IR
rluther@universalproperty.com


Media Relations Contact:
Andy Brimmer / Mahmoud Siddig, 212-355-4449
Joele Frank, Wilkinson Brimmer Katcher

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UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share data)
September 30,December 31,
20202019
ASSETS:
Invested Assets
  Fixed maturities, at fair value$842,574 $855,284 
  Equity securities, at fair value52,700 43,717 
  Investment real estate, net15,280 15,585 
  Total invested assets910,554 914,586 
Cash and cash equivalents405,132 182,109 
Restricted cash and cash equivalents21,115 2,635 
Prepaid reinsurance premiums333,062 175,208 
Reinsurance recoverable95,078 193,236 
Premiums receivable, net76,800 63,883 
Property and equipment, net52,300 41,351 
Deferred policy acquisition costs111,295 91,882 
Goodwill2,319 2,319 
Other assets42,529 52,643 
TOTAL ASSETS$2,050,184 $1,719,852 
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Unpaid losses and loss adjustment expenses$202,720 $267,760 
Unearned premiums789,137 661,279 
Advance premium55,334 30,975 
Reinsurance payable, net351,255 122,581 
Long-term debt8,823 9,926 
Other liabilities168,152 133,430 
     Total liabilities1,575,421 1,225,951 
STOCKHOLDERS' EQUITY:
Cumulative convertible preferred stock ($0.01 par value) 4
— — 
Common stock ($0.01 par value) 5
468 467 
Treasury shares, at cost - 15,487 and 14,069(223,086)(196,585)
Additional paid-in capital101,438 96,036 
Accumulated other comprehensive income (loss), net of taxes1,662 20,364 
Retained earnings594,281 573,619 
     Total stockholders' equity474,763 493,901 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$2,050,184 $1,719,852 
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 - 46,821 and 46,707 shares; Outstanding 31,334 and 32,638 shares.


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UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands)

Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
REVENUES
Net premiums earned$234,191 $206,599 $681,390 $626,683 
Net investment income4,557 7,613 17,570 23,165 
Net realized gains/(losses) on investments53,827 (22)54,294 (13,152)
Net change in unrealized gains/(losses) of equity securities1,991 573 (2,162)22,364 
Commission revenue8,997 7,380 23,770 18,933 
Policy fees6,167 5,569 18,253 16,587 
Other revenue1,935 1,929 6,529 5,369 
     Total revenues311,665 229,641 799,644 699,949 
EXPENSES
Losses and loss adjustment expenses238,477 132,571 524,870 358,961 
Policy acquisition costs51,594 45,131 146,982 132,863 
Other operating expenses25,370 23,986 76,477 75,352 
Interest expense16 57 85 203 
     Total expenses315,457 201,745 748,414 567,379 
Income (loss) before income tax expense(3,792)27,896 51,230 132,570 
     Income tax expense (benefit)(623)7,750 14,450 34,983 
NET INCOME (LOSS)$(3,169)$20,146 $36,780 $97,587 


UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
SHARE AND PER SHARE INFORMATION
(in thousands, except per share data)

Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Weighted average common shares outstanding - basic31,659 33,649 32,116 34,230 
Weighted average common shares outstanding - diluted31,659 33,930 32,202 34,565 
Shares outstanding, end of period31,334 33,211 31,334 33,211 
Basic earnings (loss) per common share$(0.10)$0.60 $1.14 $2.85 
Diluted earnings (loss) per common share$(0.10)$0.59 $1.14 $2.82 
Cash dividend declared per common share$0.16 $0.16 $0.48 $0.48 
Book value per share, end of period$15.15 $17.13 $15.15 $17.13 
Annualized return on average equity (ROE)(2.5)%14.0 %10.0 %23.9 %


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UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
(in thousands, except for Policies In Force data)

Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Premiums
     Direct premiums written - Florida$334,916 $280,141 $948,196 $819,185 
     Direct premiums written - Other States74,502 62,731 200,460 170,881 
Direct premiums written - Total$409,418 $342,872 $1,148,656 $990,066 
Direct premiums earned$357,208 $313,065 $1,020,798 $911,550 
Net premiums earned$234,191 $206,599 $681,390 $626,683 
Underwriting Ratios - Net
Loss and loss adjustment expense ratio101.8 %64.3 %77.0 %57.3 %
  Policy acquisition cost ratio22.1 %21.8 %21.6 %21.2 %
  Other operating expense ratio6
10.8 %11.6 %11.2 %12.0 %
General and administrative expense ratio6
32.9 %33.5 %32.8 %33.2 %
Combined ratio134.7 %97.8 %109.8 %90.5 %
Other Items
(Favorable)/Unfavorable prior year's reserve development$30,085 $3,218 $34,904 $3,703 
Points on the loss and loss adjustment expense ratio12.9 pts1.6 pts5.1 pts59 bps
6 Expense ratio excludes interest expense.

As of
September 30,
20202019
Policies in force
Florida715,130 653,202 
Other States250,332 219,401 
Total965,462 872,603 
Premiums in force
Florida$1,202,318 $1,051,030 
Other States257,653 216,651 
Total$1,459,971 $1,267,681 
Total Insured Value
Florida$185,382,817 $161,761,450 
Other States105,432,408 87,516,672 
Total$290,815,225 $249,278,122 


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 Three Months Ended September 30, 2020
 DirectLoss RatioCededLoss RatioNetLoss Ratio
Premiums earned$357,208  $123,017  $234,191  
Loss and loss adjustment expenses:      
Core losses$140,470 39.3 %$78 0.1 %$140,392 59.9 %
Weather events7
70,000 19.6 %2,000 1.6 %68,000 29.0 %
Prior year’s reserve development136,737 38.3 %106,652 86.7 %30,085 12.9 %
Total losses and loss adjustment expenses$347,207 97.2 %$108,730 88.4 %$238,477 101.8 %
7Includes only current year weather events beyond those expected.


Nine Months Ended September 30, 2020
DirectLoss RatioCededLoss RatioNetLoss Ratio
Premiums earned$1,020,798 $339,408 $681,390 
Loss and loss adjustment expenses:
Core losses$404,092 39.6 %$126 — %$403,966 59.3 %
Weather events7
88,000 8.6 %2,000 0.6 %86,000 12.6 %
Prior year’s reserve development190,804 18.7 %155,900 46.0 %34,904 5.1 %
Total losses and loss adjustment expenses$682,896 66.9 %$158,026 46.6 %$524,870 77.0 %
7Includes only current year weather events beyond those expected.






















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UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except for per share data)

Three Months EndedNine Months EndedGuidance
September 30,September 30,Full Year 2020E
2020201920202019
Income (Loss) Before Income Taxes$(3,792)$27,896 $51,230 $132,570 
Adjustments:
    Reinstatement premium, net of commissions8
— 1,074 — 1,959 
    Net unrealized (gains)/losses on equity securities(1,991)(573)2,162 (22,364)
    Net realized (gains)/losses on investments(53,827)22 (54,294)13,152 
    Interest Expense16 57 85 203 
    Total Adjustments(55,802)580 (52,047)(7,050)
Non-GAAP Adjusted Operating Income $(59,594)$28,476 $(817)$125,520 
GAAP Diluted EPS$(0.10)$0.59 $1.14 $2.82 $ 1.80 - 2.10
Adjustments:
    Reinstatement premium, net of commissions8
— 0.03 — 0.06 — 
    Net unrealized (gains)/losses on equity securities(0.06)(0.01)0.07 (0.64)0.07 
    Net realized (gains)/losses on investments(1.70)— (1.69)0.38 (1.69)
    Total Pre-Tax Adjustments(1.76)0.02 (1.62)(0.20)(1.62)
    Income Tax on Above Adjustments0.43 — 0.40 0.05 0.40 
    Total Adjustments(1.33)0.02 (1.22)(0.15)(1.22)
Non-GAAP Adjusted EPS$(1.43)$0.61 $(0.08)$2.67 $ 0.55 - 0.85
8 Includes reinstatement premiums not covered by reinstatement premium protection and related commissions.



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