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| 8-K - FORM 8-K - UNIVERSAL INSURANCE HOLDINGS, INC. | d289435d8k.htm |
Exhibit 99.1
Universal Insurance Holdings, Inc. Reports Fourth Quarter and Full Year 2016
Financial Results
Fort Lauderdale, FL, February 21, 2017—Universal Insurance Holdings, Inc. (NYSE: UVE) today reported net income and diluted earnings per share (EPS) of $13.7 million and $0.38, respectively for the fourth quarter of 2016. For the full year 2016, net income was $99.4 million while diluted EPS was $2.79.
Universal Insurance Holdings, Inc. Chairman and Chief Executive Officer Sean P. Downes commented: “During the fourth quarter, Universal reported strong top line growth and meaningful underwriting profit despite the impact of Hurricane Matthew. This result is a testament to the fundamental strength of our business model, including the benefits which our vertically integrated structure afford us, our focus on maintaining high underwriting standards, our superior claims handling abilities, and our exceptional catastrophe response team. Our efforts to produce profitable and rate-adequate organic growth continue to produce results both within Florida and in our thirteen other states. Our unique direct-to-consumer platform, Universal DirectSM, is now online in all of our active states and will contribute incrementally to this growth going forward, as will our Commercial Residential product, which saw its first policy written during the fourth quarter. Universal enters 2017 extremely well positioned on all fronts, and we remain confident in our ability to deliver outstanding value to our shareholders.”
Fourth Quarter 2016 Highlights
| • | Strong Growth Continues – Net premiums earned grew by $13.4 million, or 8.9%, to $164.0 million, while total revenues increased by $16.5 million, or 10.2%, to $178.6 million. Net premiums earned and total revenues were each higher than any other quarter in our history. |
| • | Expansion Plan Gaining Steam – Our growth efforts both within Florida and in our other states continue to bear fruit, with our non-Florida states demonstrating impressive 43.0% growth in direct written premium for the full year 2016. Universal DirectSM is now offered in all of our active states, and we wrote our first Commercial Residential policy through our subsidiary, American Platinum Property and Casualty Insurance Company, during the fourth quarter. |
| • | Profitable Despite Severe Weather –Fourth quarter results included Hurricane Matthew losses of $26.6 million or $0.46 per share. Net income decreased by $15.5 million, or 53.2%, to $13.7 million, while diluted EPS declined by $0.44 or 53.2%, to $0.38 per share. |
| • | Balance Sheet Remains Solid –Book value per share grew by 26.9% from year-end 2015 to $10.59. Our balance sheet remains solid, and is protected by a robust reinsurance program. |
| • | Focused on Shareholder Returns – Return on Average Common Equity (ROE) was 14.4% for the fourth quarter and 29.4% for the full year 2016. We paid dividends of $0.27 per share in the fourth quarter and $0.69 for the full year 2016 (comprised of a $0.14 per share regular quarterly cash dividend and an additional fourth quarter special dividend of $0.13 per share), equating to a 2.6% dividend yield at current share price levels. |
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Fourth Quarter 2016 Results
Direct premiums written grew 6.8% to $212.8 million from the prior year’s quarter, and net premiums earned grew 8.9% to $164.0 million. Premium growth was due to organic growth in policies in force, both within our Florida book and in our expansion states, and the continued rollout of Universal DirectSM. Commission revenue, policy fees, and other revenue each delivered strong double-digit growth, up 16.8%, 10.2%, and 13.8% respectively versus the prior year’s quarter, driven by increased premium volume and continued geographic footprint expansion.
The combined ratio was 95.1% in the fourth quarter of 2016 compared to 75.8% in the prior year’s quarter. The net loss and LAE ratio increased to 61.9% for the fourth quarter of 2016, compared to 40.2% for the same period last year, with the primary driver of this increase being severe weather during 2016. The current year’s quarter included $26.6 million of pre-tax net losses and loss adjustment expenses, or 16.2 points on the loss and LAE ratio, attributable to Hurricane Matthew. Fourth quarter 2016 results also included $16.8 million of increases to current accident year reserves as well as $4.7 million of favorable prior year reserve development. General and administrative expenses as a percentage of net earned premiums declined to 33.2% in the fourth quarter of 2016 compared to 35.6% in the prior year’s quarter, with the improvement coming predominantly from a decrease in executive compensation and economies of scale.
Net investment income grew by 96.1% from the prior year’s quarter to $3.5 million, with the growth driven by the increasing size of our investment portfolio and a shift in asset mix throughout the year. Realized investment gains were $1.0 million in the fourth quarter of 2016, a modest increase versus $0.8 million in the prior year’s quarter. Total invested assets were $651.6 million at year-end 2016, up from $489.4 million at year-end 2015.
The effective tax rate for the fourth quarter was 39.9%, up modestly from 39.1% in the prior year’s quarter, while the full year 2016 tax rate of 39.0% declined slightly from 39.2% in 2015.
During the fourth quarter, the Company repurchased 3,929 shares for $0.1 million, or an average cost of $24.07 per share, and during the full year 2016 repurchases were 0.4 million shares for $8.5 million, or an average cost of $19.30 per share. $17.9 million remains on our current repurchase authorization.
Stockholders’ equity was $371.2 million as of December 31, 2016, or 26.6% growth from $293.1 million as of December 31, 2015. Book value per common share grew 26.9% to $10.59 at December 31, 2016 compared to $8.34 at December 31, 2015. Return on Average Common Equity (ROE) was 14.4% for the fourth quarter and 29.4% for the full year 2016.
On November 15, 2016, the Company announced that its Board of Directors had declared a cash dividend of $0.27 per share of common stock, comprised of a $0.14 per share regular quarterly dividend and an additional fourth quarter special dividend of $0.13 per share, which was paid on December 12, 2016 to shareholders of record on December 1, 2016. On January 23, 2017, the Company announced that its Board of Directors had declared a cash dividend of $0.14 per share of common stock payable on March 2, 2017 to shareholders of record on February 17, 2017.
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Conference Call
Members of the Universal management team will host a conference call on Wednesday, February 22, 2017 at 10:00 AM ET to discuss fourth quarter 2016 financial results. Following prepared remarks, management will conduct a question and answer session. The call will be accessible by dialing toll free at (888) 887-7180 or internationally (toll) at (270) 823-1518 using the Conference I.D.: 70825474. A live audio webcast of the call will also be accessible on the Universal Insurance website at www.universalinsuranceholdings.com. A replay of the call can be accessed toll free at (855) 859-2056 or internationally (toll) at (404) 537-3406 using the Conference I.D.: 70825474, and will be available through March 9, 2017.
About Universal Insurance Holdings, Inc.
Universal Insurance Holdings, Inc., with its wholly-owned subsidiaries, is a vertically integrated insurance holding company performing all aspects of insurance underwriting, distribution and claims. Universal Property & Casualty Insurance Company (UPCIC), a wholly-owned subsidiary of the Company, is one of the leading writers of homeowners insurance in Florida and is now fully licensed and has commenced its operations in North Carolina, South Carolina, Hawaii, Georgia, Massachusetts, Maryland, Delaware, Indiana, Pennsylvania, Minnesota, Michigan, Alabama and Virginia. American Platinum Property and Casualty Insurance Company (APPCIC), also a wholly-owned subsidiary, currently writes homeowners multi-peril insurance on Florida homes valued in excess of $1 million, which are limits and coverages currently not targeted through its affiliate UPCIC. APPCIC is additionally licensed to write Fire, Commercial Multi-Peril, and Other Liability lines of business in Florida. For additional information on the Company, please visit our investor relations website at www.universalinsuranceholdings.com.
Forward-Looking Statements and Risk Factors
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,” 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. Future results could differ materially from those described, and the Company undertakes no obligation to correct or update any forward-looking statements. 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 Form 10-K for the year ended December 31, 2015.
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UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except per share data)
| Three Months Ended December 31, |
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| 2016 | 2015 | |||||||
| PREMIUMS EARNED AND OTHER REVENUES |
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| Direct premiums written |
$ | 212,835 | $ | 199,262 | ||||
| Change in unearned premium |
25,821 | 21,286 | ||||||
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| Direct premium earned |
238,656 | 220,548 | ||||||
| Ceded premium earned |
(74,683 | ) | (69,950 | ) | ||||
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| Premiums earned, net |
163,973 | 150,598 | ||||||
| Net investment income (expense) |
3,489 | 1,779 | ||||||
| Net realized gains (losses) on investments |
950 | 768 | ||||||
| Commission revenue |
4,806 | 4,113 | ||||||
| Policy fees |
3,787 | 3,436 | ||||||
| Other revenue |
1,600 | 1,406 | ||||||
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| Total premiums earned and other revenues |
178,605 | 162,100 | ||||||
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| OPERATING COSTS AND EXPENSES |
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| Losses and loss adjustment expenses |
101,480 | 60,591 | ||||||
| General and administrative expenses |
54,398 | 53,629 | ||||||
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| Total operating costs and expenses |
155,878 | 114,220 | ||||||
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| INCOME BEFORE INCOME TAXES |
22,727 | 47,880 | ||||||
| Income tax expense |
9,072 | 18,728 | ||||||
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| NET INCOME |
$ | 13,655 | $ | 29,152 | ||||
| Basic earnings per common share |
$ | 0.39 | $ | 0.84 | ||||
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| Weighted average common shares outstanding–Basic |
35,042 | 34,567 | ||||||
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| Diluted earnings per common share |
$ | 0.38 | $ | 0.82 | ||||
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| Weighted average common shares outstanding–Diluted |
35,802 | 35,747 | ||||||
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| Cash dividend declared per common share |
$ | 0.27 | $ | 0.27 | ||||
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UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except per share data)
| Year Ended December 31, |
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| 2016 | 2015 | |||||||
| PREMIUMS EARNED AND OTHER REVENUES |
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| Direct premiums written |
$ | 954,617 | $ | 883,409 | ||||
| Change in unearned premium |
(33,390 | ) | (46,617 | ) | ||||
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| Direct premium earned |
921,227 | 836,792 | ||||||
| Ceded premium earned |
(288,811 | ) | (332,793 | ) | ||||
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| Premiums earned, net |
632,416 | 503,999 | ||||||
| Net investment income (expense) |
9,540 | 5,155 | ||||||
| Net realized gains (losses) on investments |
2,294 | 1,060 | ||||||
| Commission revenue |
17,733 | 14,870 | ||||||
| Policy fees |
16,880 | 15,440 | ||||||
| Other revenue |
6,426 | 6,020 | ||||||
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| Total premiums earned and other revenues |
685,289 | 546,544 | ||||||
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| OPERATING COSTS AND EXPENSES |
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| Losses and loss adjustment expenses |
301,229 | 187,739 | ||||||
| General and administrative expenses |
221,177 | 183,782 | ||||||
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| Total operating costs and expenses |
522,406 | 371,521 | ||||||
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| INCOME BEFORE INCOME TAXES |
162,883 | 175,023 | ||||||
| Income tax expense |
63,473 | 68,539 | ||||||
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| NET INCOME |
$ | 99,410 | $ | 106,484 | ||||
| Basic earnings per common share |
$ | 2.85 | $ | 3.06 | ||||
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| Weighted average common shares outstanding-Basic |
34,919 | 34,799 | ||||||
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| Diluted earnings per common share |
$ | 2.79 | $ | 2.97 | ||||
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| Weighted average common shares outstanding-Diluted |
35,650 | 35,884 | ||||||
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| Cash dividend declared per common share |
$ | 0.69 | $ | 0.63 | ||||
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UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except per share data)
| ASSETS | December 31, 2016 |
December 31, 2015 |
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| Cash and cash equivalents |
$ | 105,730 | $ | 197,014 | ||||
| Restricted cash and cash equivalents |
2,635 | 2,635 | ||||||
| Fixed maturities, at fair value |
584,361 | 416,083 | ||||||
| Equity securities, at fair value |
50,803 | 42,214 | ||||||
| Short-term investments, at fair value |
5,002 | 25,021 | ||||||
| Investment real estate, net |
11,435 | 6,117 | ||||||
| Prepaid reinsurance premiums |
124,385 | 114,673 | ||||||
| Reinsurance recoverable |
106 | 22,853 | ||||||
| Premiums receivable, net |
53,833 | 50,980 | ||||||
| Other receivables |
5,824 | 4,979 | ||||||
| Property and equipment, net |
32,162 | 27,065 | ||||||
| Deferred policy acquisition costs, net |
64,912 | 60,019 | ||||||
| Income taxes recoverable |
3,262 | 5,420 | ||||||
| Deferred income tax asset, net |
10,674 | 13,912 | ||||||
| Other assets |
4,883 | 4,563 | ||||||
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| Total assets |
$ | 1,060,007 | $ | 993,548 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| LIABILITIES: |
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| Unpaid losses and loss adjustment expenses |
$ | 58,494 | $ | 98,840 | ||||
| Unearned premiums |
475,756 | 442,366 | ||||||
| Advance premium |
17,796 | 24,813 | ||||||
| Accounts payable |
3,187 | 378 | ||||||
| Reinsurance payable, net |
80,891 | 73,585 | ||||||
| Other liabilities and accrued expenses |
37,665 | 36,424 | ||||||
| Long-term debt |
15,028 | 24,050 | ||||||
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| Total liabilities |
688,817 | 700,456 | ||||||
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| STOCKHOLDERS’ EQUITY: |
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| Cumulative convertible preferred stock, $.01 par value |
— | — | ||||||
| Authorized shares-1,000; Issued shares–10 and 10 |
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| Outstanding shares-10 and 10; Minimum liquidation preference, $9.99 and $9.99 per share |
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| Common stock, $.01 par value |
453 | 455 | ||||||
| Authorized shares-55,000; Issued shares–45,324 and |
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| 45,525; Outstanding shares-35,052 and 35,110 |
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| Treasury shares, at cost-10,272 and 10,415 |
(86,982 | ) | (80,802 | ) | ||||
| Additional paid-in capital |
82,263 | 70,789 | ||||||
| Accumulated other comprehensive income (loss), net of taxes |
(6,408 | ) | (4,006 | ) | ||||
| Retained earnings |
381,864 | 306,656 | ||||||
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| Total stockholders’ equity |
371,190 | 293,092 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 1,060,007 | $ | 993,548 | ||||
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Contacts:
Investors
Dean Evans
VP Investor Relations
954-958-1306
de0130@universalproperty.com
Media
Andy Brimmer / Mahmoud Siddig
Joele Frank, Wilkinson Brimmer Katcher
212-355-4449
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