Business Wire | Oct 27, 2021 04:15PM EDT

Universal Insurance Holdings Reports Third Quarter 2021 Results

Oct. 27, 2021

FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Oct. 27, 2021--Universal Insurance Holdings (NYSE: UVE) (the "Company") reported 2021 third quarter diluted EPS of $0.64 on a GAAP basis and $0.63 on a non-GAAP1 adjusted basis. Quarterly direct premiums earned were up 15.0% from the year-ago quarter to $410.6 million, with an annualized return on average equity of 16.4%.

1 Excludes net realized and unrealized gains and losses on investments as well as any extraordinary reinstatement premiums and associated commissions ("non-GAAP adjusted EPS"). Reconciliations of GAAP to non-GAAP financial measures are provided in the attached tables.

"Our third quarter results demonstrate continued execution of our multi-year strategic priorities, including disciplined growth and operational improvements," said Stephen J. Donaghy, Chief Executive Officer. "Our direct premiums earned growth of 15.0% in the third quarter was primarily driven by primary rate increases in Florida earning through the book. We have now filed for more than 34% in primary rate increases in Florida over the past 18 months, while simultaneously continuing to shape our underwriting risks with total policies-in-force relatively flat year-over-year. Our business expenses were lower from continued expense management controls, including lower agency commissions and employee productivity gains, in addition to lower executive compensation accruals. These results were highlighted by a 16.4% annualized return on average equity in the quarter."

Summary Financial Results

($thousands,except per Three Months Ended September 30, Nine Months Ended September 30,share data)

2021 2020 Change 2021 2020 Change

(GAAP comparison)

Total $ 287,254 $ 311,665 (7.8) % $ 829,192 $ 799,644 3.7 %revenue

Income(loss) 26,464 (3,792) NM 92,874 51,230 81.3 %beforeincome taxes

Income(loss)before 9.2 % (1.2) % NM 11.2 % 6.4 % 4.8 ptsincome taxesmargin

Diluted EPS $ 0.64 $ (0.10) NM $ 2.19 $ 1.14 92.1 %



Annualizedreturn on 16.4 % (2.5) % NM 19.3 % 10.0 % 9.3 ptsaverageequity (ROE)

Book valueper share, $ 15.86 $ 15.15 4.7 % $ 15.86 $ 15.15 4.7 %end ofperiod



(Non-GAAPcomparison) ^2

Adjustedoperating 25,943 (59,594) NM 90,638 (817) NMincome

Adjusted EPS $ 0.63 $ (1.43) NM $ 2.13 $ (0.08) NM



^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 any 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.

NM = Not Meaningful

Total revenue declined 7.8% for the quarter, driven primarily by the realized gain on investments of $53.8 million in the third quarter of the prior year, versus a $4.3 million realized gain in the current quarter. Total revenue for the quarter benefited from continued primary rate increases earning through the book as policies renew. GAAP diluted EPS and non-GAAP adjusted EPS results for the quarter were driven primarily by a lower impact from weather events and lower prior years' development when compared to the prior year's quarter, partially offset by the impact of current year strengthening. The Company produced an annualized return on average equity of 16.4%.

Underwriting

($thousands,except Three Months Ended September 30, Nine Months Ended September 30,policies inforce)

2021 2020 Change 2021 2020 Change

Policies inforce (as of 967,821 965,462 0.2 % 967,821 965,462 0.2 %end ofperiod)

Premiums inforce (as of $ 1,649,546 $ 1,459,971 13.0 % $ 1,649,546 $ 1,459,971 13.0 %end ofperiod)



Directpremiums $ 432,984 $ 409,418 5.8 % $ 1,271,925 $ 1,148,656 10.7 %written

Directpremiums 410,621 357,208 15.0 % 1,178,801 1,020,798 15.5 %earned

Net premiums 264,654 234,191 13.0 % 764,131 681,390 12.1 %earned



Expense 27.7 % 32.9 % (5.2) pts 31.1 % 32.8 % (1.7) ptsratio ^3

Loss & LAE 70.9 % 101.8 % (30.9) pts 65.3 % 77.0 % (11.7) ptsratio

Combined 98.6 % 134.7 % (36.1) pts 96.4 % 109.8 % (13.4) ptsratio



^3 Expense ratio excludes interest expense.

Direct premiums earned were up 15.0% for the quarter, led by primary rate increases in Florida and other states, while policies-in-force remained relatively flat.

On the expense side, the combined ratio improved 36.1 points for the quarter. The improvement was driven primarily by decreased weather events and lower prior years' reserve development, in addition to business expense management, partially offset by current year strengthening and higher reinsurance costs impact on the ratio.

* The expense ratio improved 3.7 pointson a direct premiums earned basis due to continued focus on operating efficiencies. On a net basis, the expense ratio improved 5.2 points for the quarter. * The net loss and LAE ratio improved 30.9 points for the quarter. Quarterly drivers include: A 29.0 point net improvement related to weather events being within the plan. Adverse prior year's reserve development of $11.5 million ($30.1 million in 3Q20) resulted in an 8.5 point net improvement for the quarter. Net adverse development in the current quarter was driven primarily by continued adjusting and settlement of Hurricane Irma and non-CAT claims on accident years prior to 2020. Core losses of $176.1 million for the quarter ($140.4 million in 3Q20) resulted in a 3.6 point increase on a direct premium earned basis, driven by current year strengthening. On a net basis, core losses increased 6.6 points for the quarter.

Services

($thousands) Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 Change 2021 2020 Change

Commission $ 11,418 $ 8,997 26.9 % $ 30,404 $ 23,770 27.9 %revenue

Policy fees 5,859 6,167 (5.0) % 17,821 18,253 (2.4) %

Other revenue 1,966 1,935 1.6 % 5,862 6,529 (10.2) %

Total $ 19,243 $ 17,099 12.5 % $ 54,087 $ 48,552 11.4 %

Total services revenue increased 12.5% for the quarter. The increase was primarily driven by commission revenue earned on ceded premiums, partially offset by lower policy fees.

Investments

($thousands) Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 Change 2021 2020 Change

Netinvestment $ 2,797 $ 4,557 (38.6) % $ 8,641 $ 17,570 (50.8) %income

Realizedgains 4,319 53,827 (92.0) % 5,357 54,294 (90.1) %(losses)

Unrealizedgains (3,759) 1,991 NM (3,024) (2,162) 39.9 %(losses)

NM = Not Meaningful

Net investment income decreased 38.6% for the quarter as well as a significant decline in realized gains when compared to the prior year's quarter. Both decreases are the result of the sale, and subsequent reinvestment at lower yields, of a majority of securities in the portfolio that were in an unrealized gain position in the third and fourth quarters of 2020 to recognize the fair value benefits in surplus.

Capital Deployment

During the third quarter, the Company repurchased approximately 101 thousand shares at an aggregate cost of $1.4 million. The Company's current share repurchase authorization program has $17.8 million remaining as of September 30, 2021 and runs through November 3, 2022.

On July 19, 2021, the Board of Directors declared a quarterly cash dividend of 16 cents per share of common stock, which was paid 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, October 28, 2021 at 9:00 a.m. ET * U.S. Dial-in Number: (855) 752-6647 * International: (503) 343-6667 * Participant code: 3793583 * 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: 3793583 through November 12, 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 any 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 any 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, 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)

September 30, December 31,

2021 2020

ASSETS:

Invested Assets

Fixed maturities, at fair value $ 1,029,157 $ 819,861

Equity securities, at fair value 77,099 84,887

Assets held for sale 253 -

Investment real estate, net 5,934 15,176

Total invested assets 1,112,443 919,924

Cash and cash equivalents 224,822 167,156

Restricted cash and cash equivalents 15,836 12,715

Prepaid reinsurance premiums 386,466 215,723

Reinsurance recoverable 134,935 160,417

Premiums receivable, net 71,132 66,883

Property and equipment, net 53,222 53,572

Deferred policy acquisition costs 113,979 110,614

Goodwill 2,319 2,319

Other assets 28,074 49,418

TOTAL ASSETS $ 2,143,228 $ 1,758,741



LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:

Unpaid losses and loss adjustment expenses $ 212,488 $ 322,465

Unearned premiums 876,259 783,135

Advance premium 71,069 49,562

Reinsurance payable, net 399,905 10,312

Debt 7,353 8,456

Other liabilities 81,879 135,549

Total liabilities 1,648,953 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 - 15,797 and 15,680 (227,115) (225,506)

Additional paid-in capital 107,382 103,445

Accumulated other comprehensive income (loss), (7,398) 3,343 net of taxes

Retained earnings 620,936 567,512

Total stockholders' equity 494,275 449,262

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,143,228 $ 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 - 46,964and 46,817 shares; Outstanding 31,167 and 31,137 shares.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands)



Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

REVENUES

Net premiums earned $ 264,654 $ 234,191 $ 764,131 $ 681,390

Net investment income 2,797 4,557 8,641 17,570

Net realized gains/(losses) on 4,319 53,827 5,357 54,294 investments

Net change inunrealized gains/ (3,759) 1,991 (3,024) (2,162) (losses) of equitysecurities

Commission revenue 11,418 8,997 30,404 23,770

Policy fees 5,859 6,167 17,821 18,253

Other revenue 1,966 1,935 5,862 6,529

Total revenues 287,254 311,665 829,192 799,644



EXPENSES

Losses and loss 187,581 238,477 498,765 524,870 adjustment expenses

Policy acquisition 57,062 51,594 170,287 146,982 costs

Other operating 16,108 25,370 67,169 76,477 expenses

Interest expense 39 16 97 85

Total expenses 260,790 315,457 736,318 748,414



Income (loss) before 26,464 (3,792) 92,874 51,230 income tax expense

Income tax expense 6,281 (623) 24,342 14,450 (benefit)

NET INCOME (LOSS) $ 20,183 $ (3,169) $ 68,532 $ 36,780

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SHARE AND PER SHARE INFORMATION

(in thousands, except per share data)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Weighted average common 31,247 31,659 31,232 32,116 shares outstanding - basic

Weighted average common 31,337 31,659 31,302 32,202 shares outstanding - diluted

Shares outstanding, end of 31,167 31,334 31,167 31,334 period

Basic earnings (loss) per $ 0.65 $ (0.10) $ 2.19 $ 1.14 common share

Diluted earnings (loss) per $ 0.64 $ (0.10) $ 2.19 $ 1.14 common share

Cash dividend declared per $ 0.16 $ 0.16 $ 0.48 $ 0.48 common share

Book value per share, end of $ 15.86 $ 15.15 $ 15.86 $ 15.15 period

Annualized return on average 16.4 % (2.5) % 19.3 % 10.0 %equity (ROE)

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SUPPLEMENTARY INFORMATION

(in thousands, except for Policies In Force data)



Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Premiums

Directpremiums $ 354,799 $ 334,916 $ 1,062,180 $ 948,196 written -Florida

Directpremiums 78,185 74,502 209,745 200,460written - Other States

Directpremiums $ 432,984 $ 409,418 $ 1,271,925 $ 1,148,656 written -Total

Directpremiums $ 410,621 $ 357,208 $ 1,178,801 $ 1,020,798 earned

Net premiums $ 264,654 $ 234,191 $ 764,131 $ 681,390 earned



Underwriting Ratios - Net

Loss and lossadjustment 70.9 % 101.8 % 65.3 % 77.0 %expense ratio

Policyacquisition 21.6 % 22.1 % 22.3 % 21.6 %cost ratio

Otheroperating 6.1 % 10.8 % 8.8 % 11.2 %expense ratio^6

General andadministrative 27.7 % 32.9 % 31.1 % 32.8 %expense ratio^6

Combined ratio 98.6 % 134.7 % 96.4 % 109.8 %



Other Items

(Favorable)/Unfavorableprior year's $11,489 $30,085 $17,983 $34,904reservedevelopment

Points on theloss and loss 4.4 pts 12.9 pts 2.4 pts 5.1 ptsadjustmentexpense ratio



^6 Expense ratio excludes interest expense.

As of

September 30,

2021

2020

Policies in force

Florida

716,767

715,130

Other States

251,054

250,332

Total

967,821

965,462

Premiums in force

Florida

$

1,371,760

$

1,202,318

Other States

277,786

257,653

Total

$

1,649,546

$

1,459,971

Total Insured Value

Florida

$

204,334,645

$

185,382,817

Other States

114,992,734

105,432,408

Total

$

319,327,379

$

290,815,225

As of

September 30,

2021 2020

Policies in force

Florida 716,767 715,130

Other States 251,054 250,332

Total 967,821 965,462



Premiums in force

Florida $ 1,371,760 $ 1,202,318

Other States 277,786 257,653

Total $ 1,649,546 $ 1,459,971



Total Insured Value

Florida $ 204,334,645 $ 185,382,817

Other States 114,992,734 105,432,408

Total $ 319,327,379 $ 290,815,225

Three Months Ended September 30, 2021

Direct

Loss Ratio

Ceded

Loss Ratio

Net

Loss Ratio

Premiums earned

$

410,621

$

145,967

$

264,654

Loss and loss adjustment expenses:

Core losses

$

176,161

42.9

%

$

69

-

%

$

176,092

66.5

%

Weather events7

-

-

%

-

-

%

-

-

%

Prior year's reserve development

87,907

21.4

%

76,418

52.4

%

11,489

4.4

%

Total losses and loss adjustment expenses

$

264,068

64.3

%

$

76,487

52.4

%

$

187,581

70.9

%

7 Includes only current year weather events beyond those expected.

Three Months Ended September 30, 2021

Direct Loss Ceded Loss Net Loss Ratio Ratio Ratio

Premiums $ 410,621 $ 145,967 $ 264,654 earned



Loss and lossadjustment expenses:

Core losses $ 176,161 42.9 % $ 69 - % $ 176,092 66.5 %

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

Prior year'sreserve 87,907 21.4 % 76,418 52.4 % 11,489 4.4 %development

Total lossesand loss $ 264,068 64.3 % $ 76,487 52.4 % $ 187,581 70.9 %adjustmentexpenses



^7 Includes only current year weather events beyond those expected.

Nine Months Ended September 30, 2021

Direct

Loss Ratio

Ceded

Loss Ratio

Net

Loss Ratio

Premiums earned

$

1,178,801

$

414,670

$

764,131

Loss and loss adjustment expenses:

Core losses

$

480,801

40.8

%

$

19

-

%

$

480,782

62.9

%

Weather events7

-

-

%

-

-

%

-

-

%

Prior year's reserve development

296,867

25.2

%

278,884

67.3

%

17,983

2.4

%

Total losses and loss adjustment expenses

$

777,668

66.0

%

$

278,903

67.3

%

$

498,765

65.3

%

7 Includes only current year weather events beyond those expected.

Nine Months Ended September 30, 2021

Direct Loss Ceded Loss Net Loss Ratio Ratio Ratio

Premiums $ 1,178,801 $ 414,670 $ 764,131 earned



Loss and lossadjustment expenses:

Core losses $ 480,801 40.8 % $ 19 - % $ 480,782 62.9 %

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

Prior year'sreserve 296,867 25.2 % 278,884 67.3 % 17,983 2.4 %development

Total lossesand loss $ 777,668 66.0 % $ 278,903 67.3 % $ 498,765 65.3 %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 Nine Months Ended Guidance

September 30, September 30, Full Year 2021E

2021 2020 2021 2020

Income(Loss) $ 26,464 $ (3,792) $ 92,874 $ 51,230 BeforeIncome Taxes

Adjustments:

Netunrealized(gains)/ 3,759 (1,991) 3,024 2,162 losses onequitysecurities

Net realized(gains)/ (4,319) (53,827) (5,357) (54,294) losses oninvestments

Interest 39 16 97 85 Expense

Total (521) (55,802) (2,236) (52,047) Adjustments

Non-GAAPAdjustedOperating $ 25,943 $ (59,594) $ 90,638 $ (817) Income(Loss)





GAAP Diluted $ 0.64 $ (0.10) $ 2.19 $ 1.14 $ 2.75 -EPS 3.00

Adjustments:

Netunrealized(gains)/ 0.12 (0.06) 0.09 0.07 - losses onequitysecurities

Net realized(gains)/ (0.14) (1.70) (0.17) (1.69) - losses oninvestments

TotalPre-Tax (0.02) (1.76) (0.08) (1.62) - Adjustments

Income Taxon Above 0.01 0.43 0.02 0.40 - Adjustments

Total (0.01) (1.33) (0.06) (1.22) - Adjustments

Non-GAAP $ 0.63 $ (1.43) $ 2.13 $ (0.08) $ 2.75 -Adjusted EPS 3.00



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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