Business Wire | Jul 29, 2020 04:15PM EDT

Universal Insurance Holdings Reports Second Quarter 2020 Results

Jul. 29, 2020

FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Jul. 29, 2020--Universal Insurance Holdings (NYSE: UVE) (the "Company") reported 2020 second quarter diluted EPS of $0.62 on a GAAP basis and $0.52 non-GAAP adjusted EPS1. Quarterly direct premiums written were up 13.1% from the year-ago quarter to $404.7 million. 2Q20 annualized return on average equity was 15.6%.

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, underpinned by strong top line growth as a result of pockets of attractive pricing and volume, resulting in an annualized return on average equity in the first half of 2020 of 15.5%," said Stephen J. Donaghy, Chief Executive Officer.

"In addition, we continue to enter new states as an agent, serving independent third-party carriers with our digital insurance agency CloveredSM. We launched CloveredSM just over a year ago and continue to add partners and expand its offerings to consumers, while enhancing the overall digital experience. CloveredSM continues to be an attractive growth opportunity for us, with approximately 40% premium growth from the year-ago second quarter to its total book of business, while growing non risk bearing business by over 200% in the same time period. The shift to online policy acquisition continues to grow in part due to a very desirable refinance and new home market. CloveredSM represents Universal Property and Casualty's fastest growing agency across its nearly 10,000 independent agents. Though we are off to a solid start to the first half of the year overall, including the successful completion of our reinsurance renewal on time and on budget, we are taking a more measured approach to guidance as a result of previously announced historically above average weather events in the second quarter. We believe our liquidity and ability to drive growth remain strong and we continue to execute for our consumers and stakeholders."

Through the second quarter of 2020, we have not seen a material impact from the COVID-19 pandemic on our business, our financial position, our liquidity, or our ability to service our policyholders and maintain critical operations, with the exception of a decrease in fair value of certain investment securities, which substantially recovered in the second quarter.

SummaryFinancialResults

($thousands,except per Three Months Ended June 30, Six Months Ended June 30,share data)

2020 2019 Change 2020 2019 Change

(GAAP comparison)

Total $ 252,704 $ 233,722 8.1 % $ 487,979 $ 470,308 3.8 %revenue

Incomebefore 27,438 50,930 (46.1) % 55,022 104,674 (47.4) %income taxes

Incomebefore 10.9 % 21.8 % (10.9) pts 11.3 % 22.3 % (11.0) ptsincome taxesmargin

Diluted EPS $ 0.62 $ 1.08 (42.6) % $ 1.23 $ 2.22 (44.6) %



Annualizedreturn on 15.6 % 26.9 % (11.3) pts 15.5 % 28.7 % (13.2) ptsaverageequity (ROE)

Book valueper share, $ 16.56 $ 16.57 (0.1) % $ 16.56 $ 16.57 (0.1) %end ofperiod



(Non-GAAPcomparison)^ 2

Adjustedoperating 23,416 49,729 (52.9) % 58,777 97,044 (39.4) %income

Adjusted EPS $ 0.52 $ 1.05 (50.5) % $ 1.32 $ 2.05 (35.6) %



^2 Reconciliation of GAAP to non-GAAP financial measures are provided in theattached tables. Adjusted operating income excludes net realized and unrealizedgains and losses on investments, interest expense, and extraordinaryreinstatement premiums and associated commissions. Non-GAAP adjusted EPSexcludes net realized and unrealized gains and losses on investments, as wellas extraordinary reinstatement premiums and associated commissions.

Total revenue increased 8.1% for the quarter and 3.8% for 1H20, driven primarily by higher organic premium pricing and volume and our integrated services, partially offset by higher reinsurance costs and decreased net investment income. Income before income tax produced a 10.9% margin for the quarter and 11.3% for 1H20, which was primarily impacted by historically above average second quarter weather events. GAAP diluted EPS and non-GAAP adjusted EPS results for the quarter and the first half 2020 were driven by the aforementioned factors, partially offset by a reduced share count. The Company produced a solid annualized 1H20 return on average equity of 15.5%.

Underwriting

($thousands,except Three Months Ended June 30, Six Months Ended June 30,policies inforce)

2020 2019 Change 2020 2019 Change

Policies inforce (as of 937,277 854,792 9.6 % 937,277 854,792 9.6 %end ofperiod)

Premiums inforce (as of $ 1,389,703 $ 1,233,206 12.7 % $ 1,389,703 $ 1,233,206 12.7 %end ofperiod)



Directpremiums $ 404,685 $ 357,960 13.1 % $ 739,238 $ 647,194 14.2 %written

Directpremiums 337,639 303,108 11.4 % 663,590 598,485 10.9 %earned

Net premiums 226,370 210,357 7.6 % 447,199 420,084 6.5 %earned



Expense 32.6 % 33.0 % (40.0) bps 32.8 % 33.1 % (30.0) bpsratio^3

Loss & LAE 66.9 % 53.9 % 13.0 pts 64.0 % 53.9 % 10.1 ptsratio

Combined 99.5 % 86.9 % 12.6 pts 96.8 % 87.0 % 9.8 ptsratio



^3 Expense ratio excludes interest expense.

Direct premiums written were up double digits for the quarter, led by strong direct premium growth of 14.5% in Other States (non-Florida), and 12.8% in Florida. For 1H20, direct premiums written were also up double digits led by 16.5% in Other States (non-Florida), and 13.8% in Florida. In addition to increased volume, rate increases becoming effective in Florida and certain other states, along with slightly improved retention, contributed to the premium growth.

On the expense side, the combined ratio increased 12.6 points for the quarter and 9.8 points for 1H20. The increases were driven primarily by increased weather events, a higher core loss ratio and the impact of higher reinsurance costs on the ratio, partially offset by a reduction in the expense ratio as set forth below.

* The expense ratio improved by 40 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. The policy acquisition cost ratio increased by 50 basis points for the quarter, primarily due to the impact of higher reinsurance costs. For 1H20, the expense ratio improved by 30 basis points. The improvement was driven by a 80 basis point decrease in the other operating expense ratio, which was partially offset by a 50 basis point increase in the policy acquisition cost ratio.

* The net loss and loss adjustment expense ("LAE") ratio increased 13.0 points for the quarter and 10.1 points for 1H20. Quarterly and 1H20 drivers include: Weather events in excess of plan of $17.0 million or 7.5 points ($2.0 million in 2Q19) for the quarter were related to the previously announced historically above average second quarter weather events from 14 Property Claims Services (PCS) events across a series of states where the company does business. For 1H20, weather events in excess of plan were $18.0 million or 4.0 points ($7.0 million in 1H19). Prior year reserve development of $478 thousand or 20 basis points for the quarter and $4.8 million or 1.1 points for 1H20 were incurred but not reported related to prior year's catastrophe events. All other losses and LAE of $133.9 million or 59.2 points for the quarter, and $263.6 million or 58.9 points for 1H20 were primarily related to diversified growth, and accruing incremental reserves for the current accident year.

Services

($thousands) Three Months Ended June 30, Six Months Ended June 30,

2020 2019 Change 2020 2019 Change

Commission $ 7,758 $ 6,048 28.3 % $ 14,773 $ 11,553 27.9 %revenue

Policy fees 6,546 5,997 9.2 % 12,086 11,018 9.7 %

Other revenue 1,812 1,756 3.2 % 4,594 3,440 33.5 %

Total $ 16,116 $ 13,801 16.8 % $ 31,453 $ 26,011 20.9 %

Total services revenue increased 16.8% for the quarter and 20.9% for 1H20 driven primarily by commission revenue earned on ceded premiums.

Investments

($thousands) Three Months Ended June 30, Six Months Ended June 30,

2020 2019 Change 2020 2019 Change

Netinvestment $ 6,179 $ 7,410 (16.6) % $ 13,013 $ 15,552 (16.3) %income

Realizedgains 168 (1,605) NM 467 (13,130) NM(losses)

Unrealizedgains 3,871 3,759 3.0 % (4,153) 21,791 NM(losses)

NM = Not Meaningful

Net investment income decreased 16.6% for the quarter and 16.3% for the first half of 2020, primarily due to lower yields on cash and short term investments during the first half of 2020 when compared to the first half of 2019. The prior year also included one-time income benefits from a special dividend received and a one-time reduction in investment expenses. Cash and cash equivalents increased 82.2% to $331.7 million when compared to the end of 2019 as a result of taking defensive measures to preserve liquidity as COVID-19 impacts continue to be felt across the global economy. Yields from the fixed income portfolio are dependent on future market forces, monetary policy and interest rate policy from the Federal Reserve. Unrealized gains on our equity securities were again driven by market fluctuations, resulting in a favorable outcome for the quarter and an unfavorable outcome for the first half of 2020.

Capital Deployment

During the second quarter, the Company repurchased approximately 572 thousand shares at an aggregate cost of $10.0 million. For 1H20, the Company repurchased approximately 884 thousand shares at an aggregate cost of $16.6 million. The Company's current share repurchase authorization program has $11.7 million remaining as of June 30, 2020 and runs through December 31, 2021.

On July 6, 2020 the Board of Directors declared a quarterly cash dividend of 16 cents per share, payable 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 the previously announced historically above average second quarter weather events (assuming no further extraordinary weather events in 2H20):

* GAAP EPS in a range of $2.31 - $2.61 (reduced from previous range of $2.80 - $3.10) * Non-GAAP Adjusted EPS in a range of $2.40 - $2.70 (reduced from previous range of $2.80 - $3.10) * Annualized return on average equity (derived from GAAP measures) in a range of 13.5% - 16.5% (reduced from previous range of 17% - 20%)

Conference Call and Webcast

* Thursday, July 30, 2020 at 9:00 a.m. ET * U.S. Dial-in Number: (855) 752-6647 * International: (503) 343-6667 * Participant code: 9294332 * 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: 9294332 through August 14, 2020

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 June 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" in the Company's Annual Report on Form 10-K and in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as well as in our other filings with the SEC. 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.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)

June 30, December 31,

2020 2019

ASSETS:

Invested Assets

Fixed maturities, at fair value $ 869,418 $ 855,284

Equity securities, at fair value 49,708 43,717

Investment real estate, net 15,377 15,585

Total invested assets 934,503 914,586

Cash and cash equivalents 331,716 182,109

Restricted cash and cash equivalents 2,945 2,635

Prepaid reinsurance premiums 453,018 175,208

Reinsurance recoverable 46,860 193,236

Premiums receivable, net 76,885 63,883

Property and equipment, net 49,159 41,351

Deferred policy acquisition costs 103,527 91,882

Goodwill 2,319 2,319

Other assets 45,967 52,643

TOTAL ASSETS $ 2,046,899 $ 1,719,852



LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:

Unpaid losses and loss adjustment expenses $ 147,659 $ 267,760

Unearned premiums 736,927 661,279

Advance premium 55,640 30,975

Reinsurance payable, net 499,656 122,581

Long-term debt 9,191 9,926

Other liabilities 70,125 133,430

Total liabilities 1,519,198 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 - 14,953 and 14,069 (213,201) (196,585)

Additional paid-in capital 99,768 96,036

Accumulated other comprehensive income (loss), 38,083 20,364 net of taxes

Retained earnings 602,583 573,619

Total stockholders' equity 527,701 493,901

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,046,899 $ 1,719,852



Notes:

^4 Cumulative convertible preferred stock ($0.01 par value): Authorized - 1,000shares; Issued - 10 and 10 shares; Outstanding - 10 and 10 shares; Minimumliquidation preference - $9.99 and $9.99 per share.

^5 Common stock ($0.01 par value): Authorized - 55,000 shares; Issued - 46,806and 46,707 shares; Outstanding 31,853 and 32,638 shares.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands)



Three Months Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

REVENUES

Net premiums earned $ 226,370 $ 210,357 $ 447,199 $ 420,084

Net investment income 6,179 7,410 13,013 15,552

Net realized gains/(losses) on 168 (1,605) 467 (13,130) investments

Net change inunrealized gains/ 3,871 3,759 (4,153) 21,791 (losses) of equitysecurities

Commission revenue 7,758 6,048 14,773 11,553

Policy fees 6,546 5,997 12,086 11,018

Other revenue 1,812 1,756 4,594 3,440

Total revenues 252,704 233,722 487,979 470,308



EXPENSES

Losses and loss 151,345 113,296 286,393 226,390 adjustment expenses

Policy acquisition 48,524 44,221 95,388 87,732 costs

Other operating 25,380 25,207 51,107 51,366 expenses

Interest expense 17 68 69 146

Total expenses 225,266 182,792 432,957 365,634



Income before income 27,438 50,930 55,022 104,674 tax expense

Income tax expense 7,556 13,637 15,073 27,233

NET INCOME $ 19,882 $ 37,293 $ 39,949 $ 77,441

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,

2020 2019 2020 2019

Weighted average common 32,102 34,311 32,347 34,525 shares outstanding - basic

Weighted average common 32,170 34,612 32,440 34,903 shares outstanding - diluted

Shares outstanding, end of 31,853 34,160 31,853 34,160 period

Basic earnings per common $ 0.62 $ 1.09 $ 1.23 $ 2.24 share

Diluted earnings per common $ 0.62 $ 1.08 $ 1.23 $ 2.22 share

Cash dividend declared per $ 0.16 $ 0.16 $ 0.32 $ 0.32 common share

Book value per share, end of $ 16.56 $ 16.57 $ 16.56 $ 16.57 period

Annualized return on average 15.6 % 26.9 % 15.5 % 28.7 %equity (ROE)

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,

2020 2019 2020 2019

Premiums

Directpremiums $ 334,769 $ 296,896 $ 613,280 $ 539,044 written -Florida

Directpremiums 69,916 61,064 125,958 108,150 written -Other States

Directpremiums $ 404,685 $ 357,960 $ 739,238 $ 647,194 written -Total

Directpremiums $ 337,639 $ 303,108 $ 663,590 $ 598,485 earned

Net premiums $ 226,370 $ 210,357 $ 447,199 $ 420,084 earned



Underwriting Ratios - Net

Loss and lossadjustment 66.9 % 53.9 % 64.0 % 53.9 %expense ratio

Policyacquisition 21.5 % 21.0 % 21.4 % 20.9 %cost ratio

Otheroperating 11.2 % 12.0 % 11.4 % 12.2 %expense ratio^6

General andadministrative 32.6 % 33.0 % 32.8 % 33.1 %expense ratio^6

Combined ratio 99.5 % 86.9 % 96.8 % 87.0 %



Other Items

(Favorable)/Unfavorableprior year $ 478 $ 670 $ 4,819 $ 485 reservedevelopment

Points on theloss and loss 21 bps 32 bps 108 bps 12 bpsadjustmentexpense ratio



^6 Expense ratio excludes interest expense.

As of

June 30,

2020 2019

Policies in force

Florida 696,829 644,469

Other States 240,448 210,323

Total 937,277 854,792



Premiums in force

Florida $ 1,144,326 $ 1,030,019

Other States 245,377 203,187

Total $ 1,389,703 $ 1,233,206



Total Insured Value

Florida $ 177,854,339 $ 158,970,803

Other States 99,662,951 82,642,109

Total $ 277,517,290 $ 241,612,912

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

Full June 30, June 30, Year 2020E

2020 2019 2020 2019

Income Before $ 27,438 $ 50,930 $ 55,022 $ 104,674 Income Taxes

Adjustments:

Reinstatementpremium, net - 885 - 885 ofcommissions^7

Netunrealized(gains)/ (3,871) (3,759) 4,153 (21,791) losses onequitysecurities

Net realized(gains)/ (168) 1,605 (467) 13,130 losses oninvestments

Interest 17 68 69 146 Expense

Total (4,022) (1,201) 3,755 (7,630) Adjustments

Non-GAAPAdjusted $ 23,416 $ 49,729 $ 58,777 $ 97,044 OperatingIncome





GAAP Diluted $ 0.62 $ 1.08 $ 1.23 $ 2.22 $ 2.31 -EPS 2.61

Adjustments:

Reinstatementpremium, net - 0.02 - 0.02 - ofcommissions^7

Netunrealized(gains)/ (0.12) (0.11) 0.12 (0.62) 0.12 losses onequitysecurities

Net realized(gains)/ (0.01) 0.05 (0.01) 0.38 (0.01) losses oninvestments

Total Pre-Tax (0.13) (0.04) 0.11 (0.22) 0.11 Adjustments

Income Tax onAbove 0.03 0.01 (0.02) 0.05 (0.02) Adjustments

Total (0.10) (0.03) 0.09 (0.17) 0.09 Adjustments

Non-GAAP $ 0.52 $ 1.05 $ 1.32 $ 2.05 $ 2.40 -Adjusted EPS 2.70



^7 Includes reinstatement premiums not covered by reinstatement premiumprotection and related commissions.



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CONTACT: 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