Business Wire | Apr 28, 2021 04:15PM EDT

Universal Insurance Holdings Reports First Quarter 2021 Results

Apr. 28, 2021

FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Apr. 28, 2021--Universal Insurance Holdings (NYSE: UVE) (the "Company") reported 2021 first quarter diluted EPS of $0.84 on a GAAP and non-GAAP1 adjusted basis. Total revenue was up 11.7% from the year ago quarter to $262.8 million. Margins expanded in excess of 200 basis points, with an annualized return on average equity of 23.2%.

^1 Excludes net realized and unrealized gains and losses on investments as wellas extraordinary reinstatement premiums and associated commissions ("non-GAAPadjusted EPS"). Reconciliations of GAAP to non-GAAP financial measures areprovided in the attached tables.

"We are off to a strong start to 2021 with solid first quarter results, including close to 12% top line growth, margin expansion in excess of 200 basis points, and a total annualized return on average equity of 23.2%," said Stephen J. Donaghy, Chief Executive Officer. "We continue to make progress on our reinsurance program renewal, and were oversubscribed on our first CAT bond in March at rates below the low end of our initial range. We have now completed procurement of our All States first event reinsurance program for UPCIC for the 2021 wind season and will have additional details in May as we finalize the remainder. In addition, we were encouraged earlier this month when the Florida Senate passed Bill 76, which would enable Floridians to have reliable access to property insurance. For a number of years Florida has been a significant outlier compared to the rest of the country when it comes to litigated property claims, which has put significant pressure on the Florida property insurance marketplace. We have not been immune to these market dynamics and during the first quarter we actively reduced our policies in force sequentially and reduced new and renewal policy counts in aggregate this quarter when compared to the first quarter of 2020. That being said, we continue to monitor closely the companion bill in the House (House Bill 305), which has differences from Senate Bill 76."

Summary Financial Results

($thousands, except per share data) Three Months Ended March 31,

2021 2020 Change

(GAAP comparison)

Total revenue $ 262,757 $ 235,275 11.7 %

Income (loss) before income taxes 36,351 27,584 31.8 %

Income (loss) before income taxes 13.8 % 11.7 % 2.1 ptsmargin

Diluted EPS $ 0.84 $ 0.61 37.7 %



Annualized return on average equity 23.2 % 16.1 % 7.1 pts(ROE)

Book value per share, end of period $ 14.56 $ 15.26 (4.6) %



(Non-GAAP comparison)^2

Adjusted operating income 36,323 35,361 2.7 %

Adjusted EPS $ 0.84 $ 0.79 6.3 %



^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 grew double digits for the quarter driven by primary rate increases from 2020 earning through the book as policies renew and an improvement in the unrealized portion of the investment portfolio, partially offset by the impact of higher reinsurance costs when compared to the first quarter of 2020. Margins expanded more than 200 basis points for the quarter driven by the incremental fall through profit from the top line as previously described, lower losses and LAE and lower operating expenses as a percent of direct premiums earned. GAAP diluted EPS and non-GAAP adjusted EPS results for the quarter were driven by the aforementioned factors, including a benefit from a reduced share count. The Company produced an annualized return on average equity of 23.2%.

Underwriting

($thousands, except policies in force) Three Months Ended March 31,

2021 2020 Change

Policies in force (as of end of 976,250 910,579 7.2 %period)

Premiums in force (as of end of $ 1,548,657 $ 1,340,321 15.5 %period)



Direct premiums written $ 365,314 $ 334,553 9.2 %

Direct premiums earned 375,606 325,951 15.2 %

Net premiums earned 243,305 220,829 10.2 %



Expense ratio^3 33.9 % 32.9 % 1.0 pt

Loss & LAE ratio 59.2 % 61.2 % (2.0 ) pts

Combined ratio 93.1 % 94.1 % (1.0 )pt



^3 Expense ratio excludes interest expense.

Direct premiums written were up 9.2% for the quarter, led by direct premium growth of 10.2% in Florida.

On the expense side, the combined ratio improved 1.0 point for the quarter. The improvement was driven primarily by decreased weather, favorable prior year's reserve development, and an increased benefit from our claims adjusting business, partially offset by higher reinsurance costs impact on the ratio and current year strengthening.

* The expense ratio decreased 33 basis points on a direct premiums earned basis due to operating efficiencies, which was more than offset by the impact of increased reinsurance costs on the net ratio, resulting in a 1.0 point increase in the net expense ratio for the quarter. * The net loss and LAE ratio improved 2.0 points for the quarter. Quarterly drivers include: A 45 basis point net improvement related to no weather events being above plan. Favorable prior year's reserve development of $1.2 million (adverse development of $4.3 million in 1Q20) resulted in a 2.5 point net improvement for the quarter. Favorable development in the current quarter was driven by ceded recoveries on the Other States reinsurance program. Core losses of $145.2 million ($129.7 million in 1Q20) resulted in a 1.1 point improvement for the quarter on a direct premium earned basis, driven by a benefit from our claims adjusting business, which was more than offset by increased reinsurance costs and less than a point of current year strengthening on a direct basis, which lead to a 1.0 point increase for the quarter on a net basis.

Services

($thousands) Three Months Ended March 31,

2021 2020 Change

Commission revenue $ 9,126 $ 7,015 30.1 %

Policy fees 5,387 5,540 (2.8 )%

Other revenue 1,905 2,782 (31.5 )%

Total $ 16,418 $ 15,337 7.0 %

Total services revenue increased 7.0% for the quarter. The increase was primarily driven by commission revenue earned on ceded premiums, partially offset by a decrease in new and renewal business policy fees volume and other revenue.

Investments

($thousands) Three Months Ended March 31,

2021 2020 Change

Net investment income $ 2,986 $ 6,834 (56.3 )%

Realized gains (losses) 542 299 81.3 %

Unrealized gains (losses) (494 ) (8,024 ) 93.8 %

NM = Not Meaningful

Net investment income decreased 56.3% 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. Unrealized equity losses improved substantially during the quarter when compared to the market volatility seen last March as a result of the COVID-19 pandemic. Total invested assets increased 10.6% to $1.0 billion since year-end 2020.

Capital Deployment

During the first quarter, the Company repurchased approximately 15 thousand shares at an aggregate cost of $245 thousand.

On April 22, 2021, the Board of Directors declared a quarterly cash dividend of 16 cents per share of common stock, payable on May 21, 2021, to shareholders of record as of the close of business on May 14, 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, April 29, 2021 at 9:00 a.m. ET * U.S. Dial-in Number: (855) 752-6647 * International: (503) 343-6667 * Participant code: 4597049 * 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: 4597049 through May 14, 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 March 31, 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)

March 31, December 31,

2021 2020

ASSETS:

Invested Assets

Fixed maturities, at fair value $ 913,131 $ 819,861

Equity securities, at fair value 91,291 84,887

Assets held for sale 6,855 -

Investment real estate, net 6,027 15,176

Total invested assets 1,017,304 919,924

Cash and cash equivalents 90,829 167,156

Restricted cash and cash equivalents 12,715 12,715

Prepaid reinsurance premiums 100,221 215,723

Reinsurance recoverable 217,625 160,417

Premiums receivable, net 62,488 66,883

Property and equipment, net 53,178 53,572

Deferred policy acquisition costs 111,193 110,614

Goodwill 2,319 2,319

Other assets 49,581 49,418

TOTAL ASSETS $ 1,717,453 $ 1,758,741



LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:

Unpaid losses and loss adjustment expenses $ 315,780 $ 322,465

Unearned premiums 772,843 783,135

Advance premium 73,738 49,562

Reinsurance payable, net 24,527 10,312

Long-term debt 8,088 8,456

Other liabilities 67,812 135,549

Total liabilities 1,262,788 1,309,479

STOCKHOLDERS' EQUITY:

Cumulative convertible preferred stock ($0.01 par - - value) ^4

Common stock ($0.01 par value) ^5 469 468

Treasury shares, at cost - 15,695 and 15,680 (225,751 ) (225,506 )

Additional paid-in capital 104,624 103,445

Accumulated other comprehensive income (loss), (13,567 ) 3,343 net of taxes

Retained earnings 588,890 567,512

Total stockholders' equity 454,665 449,262

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,717,453 $ 1,758,741



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 - 46,911and 46,817 shares; Outstanding 31,216 and 31,137 shares.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands)

Three Months Ended

March 31,

2021

2020

REVENUES

Net premiums earned

$

243,305

$

220,829

Net investment income

2,986

6,834

Net realized gains/(losses) on investments

542

299

Net change in unrealized gains/(losses) of equity securities

(494

)

(8,024

)

Commission revenue

9,126

7,015

Policy fees

5,387

5,540

Other revenue

1,905

2,782

Total revenues

262,757

235,275

EXPENSES

Losses and loss adjustment expenses

143,963

135,048

Policy acquisition costs

56,458

46,864

Other operating expenses

25,965

25,727

Interest expense

20

52

Total expenses

226,406

207,691

Income before income tax expense

36,351

27,584

Income tax expense (benefit)

9,943

7,517

NET INCOME

$

26,408

$

20,067

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands)

Three Months Ended

March 31,

2021 2020

REVENUES

Net premiums earned $ 243,305 $ 220,829

Net investment income 2,986 6,834

Net realized gains/(losses) on investments 542 299

Net change in unrealized gains/(losses) of equity (494 ) (8,024 )securities

Commission revenue 9,126 7,015

Policy fees 5,387 5,540

Other revenue 1,905 2,782

Total revenues 262,757 235,275



EXPENSES

Losses and loss adjustment expenses 143,963 135,048

Policy acquisition costs 56,458 46,864

Other operating expenses 25,965 25,727

Interest expense 20 52

Total expenses 226,406 207,691



Income before income tax expense 36,351 27,584

Income tax expense (benefit) 9,943 7,517

NET INCOME $ 26,408 $ 20,067

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SHARE AND PER SHARE INFORMATION

(in thousands, except per share data)

Three Months Ended

March 31,

2021

2020

Weighted average common shares outstanding - basic

31,208

32,591

Weighted average common shares outstanding - diluted

31,277

32,731

Shares outstanding, end of period

31,216

32,385

Basic earnings (loss) per common share

$

0.85

$

0.62

Diluted earnings (loss) per common share

$

0.84

$

0.61

Cash dividend declared per common share

$

0.16

$

0.16

Book value per share, end of period

$

14.56

$

15.26

Annualized return on average equity (ROE)

23.2

%

16.1

%

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SHARE AND PER SHARE INFORMATION

(in thousands, except per share data)

Three Months Ended

March 31,

2021 2020

Weighted average common shares outstanding - basic 31,208 32,591

Weighted average common shares outstanding - diluted 31,277 32,731

Shares outstanding, end of period 31,216 32,385

Basic earnings (loss) per common share $ 0.85 $ 0.62

Diluted earnings (loss) per common share $ 0.84 $ 0.61

Cash dividend declared per common share $ 0.16 $ 0.16

Book value per share, end of period $ 14.56 $ 15.26

Annualized return on average equity (ROE) 23.2 % 16.1 %

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SUPPLEMENTARY INFORMATION

(in thousands, except for Policies In Force data)

Three Months Ended

March 31,

2021

2020

Premiums

Direct premiums written - Florida

$

307,011

$

278,511

Direct premiums written - Other States

58,303

56,042

Direct premiums written - Total

$

365,314

$

334,553

Direct premiums earned

$

375,606

$

325,951

Net premiums earned

$

243,305

$

220,829

Underwriting Ratios - Net

Loss and loss adjustment expense ratio

59.2

%

61.2

%

Policy acquisition cost ratio

23.2

%

21.2

%

Other operating expense ratio6

10.7

%

11.7

%

General and administrative expense ratio6

33.9

%

32.9

%

Combined ratio

93.1

%

94.1

%

Other Items

(Favorable)/Unfavorable prior year's reserve development

$

(1,237

)

$

4,341

Points on the loss and loss adjustment expense ratio

(50) bps

197 bps

6 Expense ratio excludes interest expense.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SUPPLEMENTARY INFORMATION

(in thousands, except for Policies In Force data)

Three Months Ended

March 31,

2021 2020

Premiums

Direct premiums written - Florida $ 307,011 $ 278,511

Direct premiums written - Other States 58,303 56,042

Direct premiums written - Total $ 365,314 $ 334,553

Direct premiums earned $ 375,606 $ 325,951

Net premiums earned $ 243,305 $ 220,829



Underwriting Ratios - Net

Loss and loss adjustment expense ratio 59.2 % 61.2 %

Policy acquisition cost ratio 23.2 % 21.2 %

Other operating expense ratio^6 10.7 % 11.7 %

General and administrative expense ratio^6 33.9 % 32.9 %

Combined ratio 93.1 % 94.1 %



Other Items

(Favorable)/Unfavorable prior year's reserve $ (1,237 ) $ 4,341 development

Points on the loss and loss adjustment expense ratio (50) bps 197 bps



^6 Expense ratio excludes interest expense.

As of

March 31,

2021

2020

Policies in force

Florida

721,321

677,225

Other States

254,929

233,354

Total

976,250

910,579

Premiums in force

Florida

$

1,279,464

$

1,104,559

Other States

269,193

235,761

Total

$

1,548,657

$

1,340,321

Total Insured Value

Florida

$

194,421,426

$

169,764,009

Other States

110,930,255

95,464,246

Total

$

305,351,681

$

265,228,255

As of

March 31,

2021 2020

Policies in force

Florida 721,321 677,225

Other States 254,929 233,354

Total 976,250 910,579



Premiums in force

Florida $ 1,279,464 $ 1,104,559

Other States 269,193 235,761

Total $ 1,548,657 $ 1,340,321



Total Insured Value

Florida $ 194,421,426 $ 169,764,009

Other States 110,930,255 95,464,246

Total $ 305,351,681 $ 265,228,255

Three Months Ended March 31, 2021

Direct

Loss Ratio

Ceded

Loss Ratio

Net

Loss Ratio

Premiums earned

$

375,606

$

132,301

$

243,305

Loss and loss adjustment expenses:

Core losses

$

145,228

38.7

%

$

28

-

%

$

145,200

59.7

%

Weather events7

-

-

%

-

-

%

-

-

%

Prior year's reserve development

92,070

24.5

%

93,307

70.5

%

(1,237

)

(0.5

)%

Total losses and loss adjustment expenses

$

237,298

63.2

%

$

93,335

70.5

%

$

143,963

59.2

%

7 Includes only current year weather events beyond those expected.

Three Months Ended March 31, 2021

Direct Loss Ceded Loss Net Loss Ratio Ratio Ratio

Premiums $ 375,606 $ 132,301 $ 243,305 earned



Loss andloss adjustmentexpenses:

Core losses $ 145,228 38.7 % $ 28 - % $ 145,200 59.7 %

Weather - - % - - % - - %events^7

Prior year's )reserve 92,070 24.5 % 93,307 70.5 % (1,237 ) (0.5 %development

Total lossesand loss $ 237,298 63.2 % $ 93,335 70.5 % $ 143,963 59.2 %adjustmentexpenses



^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 Guidance

March 31, Full Year 2021E

2021 2020

Income (Loss) Before Income Taxes $ 36,351 $ 27,584

Adjustments:

Reinstatement premium, net of commissions^ - - 8

Net unrealized (gains)/losses on equity 494 8,024 securities

Net realized (gains)/losses on investments (542 ) (299 )

Interest Expense 20 52

Total Adjustments (28 ) 7,777

Non-GAAP Adjusted Operating Income $ 36,323 $ 35,361





GAAP Diluted EPS $ 0.84 $ 0.61 $ 2.75 - 3.00

Adjustments:

Reinstatement premium, net of commissions^ - - - 8

Net unrealized (gains)/losses on equity 0.02 0.25 - securities

Net realized (gains)/losses on investments (0.02 ) (0.01 ) -

Total Pre-Tax Adjustments - 0.24 -

Income Tax on Above Adjustments - (0.06 ) -

Total Adjustments - 0.18 -

Non-GAAP Adjusted EPS $ 0.84 $ 0.79 $ 2.75 - 3.00



^8 Includes extraordinary reinstatement premiums not covered by reinstatementpremium protection and related commissions.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210428006004/en/

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

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