United Insurance Holdings Corp. Reports Financial Results for Its First Quarter Ended March 31, 2017
Company to Host Quarterly Conference Call at
| ($ in thousands, except per share and ratios) | Three Months Ended | ||||||||||
| |
|||||||||||
| 2017 | 2016 | Change | |||||||||
| Gross premiums written | $ | 168,842 | $ | 135,956 | 24.2% | ||||||
| Gross premiums earned | $ | 182,065 | $ | 146,502 | 24.3% | ||||||
| Ceded premiums earned | $ | (74,882 | ) | $ | (45,132 | ) | 65.9% | ||||
| Net premiums earned | $ | 107,183 | $ | 101,370 | 5.7% | ||||||
| Total revenues | $ | 122,633 | $ | 107,561 | 14.0% | ||||||
| Earnings before income tax | $ | 5,938 | $ | 4,330 | 37.1% | ||||||
| Net income | $ | 3,899 | $ | 2,951 | 32.1% | ||||||
| Net income per diluted share | $ | 0.18 | $ | 0.14 | 28.6% | ||||||
| Book value per share | $ | 11.37 | $ | 11.35 | 0.2% | ||||||
| Return on average equity, trailing twelve months | 2.7 | % | 13.0 | % | (10.3 |
) pts |
|||||
| Loss ratio, net1 | 59.1 | % | 63.4 | % | (4.3 |
) pts |
|||||
| Expense ratio, net2 | 49.1 | % | 38.4 | % | 10.7 |
pts |
|||||
| Combined ratio (CR)3 | 108.2 | % | 101.8 | % | 6.4 |
pts 
|
|||||
| Effect of current year catastrophe losses on CR | 9.9 | % | 14.9 | % | (5.0 |
) pts |
|||||
| Effect of prior year (favorable) development on CR | (0.5 | )% | 3.1 | % | (3.6 |
) pts |
|||||
| Effect of ceding commission income on CR | 7.9 | % | — | % | 7.9 |
pts |
|||||
| Underlying combined ratio4 | 90.9 | % | 83.8 | % | 7.1 |
pts |
|||||
| 1 | Loss ratio, net is calculated as losses and loss adjustment expenses (LAE) relative to net premiums earned. | |
| 2 | Expense ratio, net is calculated as the sum of all operating expenses less interest expense relative to net premiums earned. | |
| 3 | Combined ratio is the sum of the loss ratio, net and expense ratio, net. | |
| 4 |
Underlying combined ratio, a measure that is not based on |
|
"We continued to grow and diversify in Q1 2017, but weather-related losses kept us from achieving our bottom line goals," said
Quarterly Financial Results
Net income for the first quarter of 2017 was
The Company's total gross written premium increased by
| ($ in thousands) |
Three Months Ended |
||||||||||||||
| Direct Written and |
2017 | 2016 | Change | Growth % | |||||||||||
| |
$ | 75,364 | $ | 73,698 | $ | 1,666 | 2.3 |
% |
|||||||
| Gulf | 40,778 | 29,669 | 11,109 | 37.4 | |||||||||||
| Northeast | 31,137 | 17,245 | 13,892 | 80.6 | |||||||||||
| Southeast | 20,192 | 18,634 | 1,558 | 8.4 | |||||||||||
| Total direct written premium by region | 167,471 | 139,246 | 28,225 | 20.3 | |||||||||||
| Assumed premium (2) | 1,371 | (3,290 | ) | 4,661 | (141.7 | ) | |||||||||
| Total gross written premium | $ | 168,842 | $ | 135,956 | $ | 32,886 | 24.2 |
% |
|||||||
| 1 Each region is comprised of the following states: Gulf includes |
| 2 Amounts include premiums assumed from |
Loss and LAE decreased by
Policy acquisition costs increased by
Operating expenses increased by
General and administrative expenses increased by
Combined Ratio Analysis
The calculation of the Company's underlying loss and combined ratios is shown below.
| ($ in thousands except ratios) | Three Months Ended | |||||||||||
| |
||||||||||||
| 2017 | 2016 | Change | ||||||||||
| Loss and LAE | $ | 63,333 | $ | 64,258 | $ | (925 | ) | |||||
| % of Gross earned premiums | 34.8 | % | 43.9 | % | (9.1 | ) pts | ||||||
| % of Net earned premiums | 59.1 | % | 63.4 | % | (4.3 | ) pts | ||||||
| Less: | ||||||||||||
| Current year catastrophe losses | $ | 10,612 | $ | 15,056 | $ | (4,444 | ) | |||||
| Prior year reserve (favorable) development | (526 | ) | 3,186 | (3,712 | ) | |||||||
| Underlying Loss and LAE (1) | $ | 53,247 | $ | 46,016 | $ | 7,231 | ||||||
| % of Gross earned premiums | 29.2 | % | 31.4 | % | (2.2 | ) pts | ||||||
| % of Net earned premiums | 49.7 | % | 45.4 | % | 4.3 |
pts |
||||||
| Policy acquisition costs | $ | 35,436 | $ | 27,032 | $ | 8,404 | ||||||
| Operating and underwriting | 5,872 | 3,954 | 1,918 | |||||||||
| General and administrative | 11,333 | 7,933 | 3,400 | |||||||||
| Total Operating Expenses | $ | 52,641 | $ | 38,919 | $ | 13,722 | ||||||
| % of Gross earned premiums | 28.9 | % | 26.6 | % | 2.3 |
pts |
||||||
| % of Net earned premiums | 49.1 | % | 38.4 | % | 10.7 |
pts |
||||||
| Combined Ratio - as % of gross earned premiums | 63.7 | % | 70.5 | % | (6.8 | ) pts | ||||||
| Underlying Combined Ratio - as % of gross earned premiums | 58.1 | % | 58.0 | % | 0.1 |
pts |
||||||
| Combined Ratio - as % of net earned premiums | 108.2 | % | 101.8 | % | 6.4 |
pts |
||||||
| Underlying Combined Ratio - as % of net earned premiums (2) | 90.9 | % | 83.8 | % | 7.1 |
pts |
||||||
| (1) |
Underlying Loss and LAE is a non-GAAP financial measure and is reconciled above to Net Loss and LAE, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this press release is in the "Definitions of Non-GAAP Measures" section of this document. |
|
| (2) |
The underlying combined ratio is a non-GAAP financial measure which excludes the effect of current year catastrophe losses, prior year reserve development and ceding commission income earned of |
Reinsurance Costs as a % of Earned Premium
Excluding the Company's flood business, for which it cedes 100% of the risk of loss, reinsurance costs in the first quarter of 2017 were 38.6% of gross premiums earned compared to 27.9% of gross premiums earned for the first quarter of 2016. Ceded earned premiums related to the Company's quota share reinsurance program that was launched on
Investment Portfolio Highlights
Book Value Analysis
Book value per share increased 2.0% from
| ($ in thousands, except for per share data) | |
|
|||||
| 2017 | 2016 | ||||||
| Book Value per Common Share | |||||||
| Numerator: | |||||||
| Common shareholders' equity | $ | 247,107 | $ | 241,327 | |||
| Denominator: | |||||||
| Total Shares Outstanding | 21,726,608 | 21,646,614 | |||||
| Book Value Per Common Share | $ | 11.37 | $ | 11.15 | |||
| Book Value per Common Share, Excluding the Impact of Accumulated Other Comprehensive Income (AOCI) | |||||||
| Numerator: | |||||||
| Common shareholders' equity | $ | 247,107 | $ | 241,327 | |||
| Accumulated other comprehensive income | 3,362 | 822 | |||||
| Shareholders' Equity, excluding AOCI | $ | 243,745 | $ | 240,505 | |||
| Denominator: | |||||||
| Total Shares Outstanding | 21,726,608 | 21,646,614 | |||||
| Underlying Book Value Per Common Share* | $ | 11.22 | $ | 11.11 | |||
| * |
Underlying book value per common share is a non-GAAP financial measure and is reconciled above to book value per common share, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this press release is in the "Definitions of Non-GAAP Measures" section of this document. |
Quarterly Cash Dividend
The Company today announced that its Board of Directors declared a cash dividend of
Definitions of Non-GAAP Measures
We believe that investors' understanding of
Combined ratio excluding the effects of current year catastrophe losses, prior year reserve development and ceding commission income earned (underlying combined ratio) is a non-GAAP ratio, which is computed as the difference between four GAAP operating ratios: the combined ratio, the effect of current year catastrophe losses on the combined ratio, prior year development on the combined ratio and ceding income earned related to our quota share reinsurance agreement on the combined ratio. We believe that this ratio is useful to investors and it is used by management to reveal the trends in our business that may be obscured by current year catastrophe losses, losses from lines in run-off, prior year development and ceding commission income earned. Current year catastrophe losses cause our loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude, and can have a significant impact on the combined ratio. Prior year development is caused by unexpected loss development on historical reserves. Ceding commission income compensates the Company for expenses it incurs in generating the premium ceded under our quota share reinsurance agreement. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance. The most direct comparable GAAP measure is the combined ratio. The underlying combined ratio should not be considered as a substitute for the combined ratio and does not reflect the overall profitability of our business.
Net Loss and LAE excluding the effects of current year catastrophe losses and reserve development (underlying Loss and LAE) is a non-GAAP measure which is computed as the difference between loss and LAE, current year catastrophe losses and prior year reserve development. We use underlying loss and LAE figures to analyze our loss trends that may be impacted by current year catastrophe losses and prior year development on our reserves. As discussed previously, these three items can have a significant impact on our loss trend in a given period. The most direct comparable GAAP measure is net loss and LAE. The underlying loss and LAE measure should not be considered a substitute for net losses and LAE and does not reflect the overall profitability of our business.
Consolidated net loss ratio excluding the effects of current year catastrophe losses, reserve development (underlying loss ratio) is a non-GAAP ratio, which is computed as the difference between three GAAP operating ratios: the consolidated net loss ratio, the effect of current year catastrophe losses on the loss ratio, and the effect of prior year development on the loss ratio. We believe that this ratio is useful to investors and it is used by management to reveal the trends in our consolidated net loss ratio that may be obscured by current year catastrophe losses and prior year development. As discussed previously, these two items can have a significant impact on our consolidated net loss ratio in a given period. The most direct comparable GAAP ratio is our net consolidated Loss and LAE ratio. The underlying loss ratio should not be considered as a substitute for net consolidated loss ratio and does not reflect the overall profitability of our business.
Book value per common share, excluding the impact of accumulated other comprehensive income, is a ratio that uses a non-GAAP measure. It is calculated by dividing common shareholders' equity after excluding accumulated other comprehensive income by total common shares outstanding plus dilutive potential common shares outstanding. We use the trend in book value per common share, excluding the impact of accumulated other comprehensive income, in conjunction with book value per common share to identify and analyze the change in net worth attributable to management efforts between periods. We believe the non-GAAP ratio is useful to investors because it eliminates the effect of interest rates that can fluctuate significantly from period to period and are generally driven by economic and financial factors which are not influenced by management. Book value per common share is the most directly comparable GAAP measure. Book value per common share, excluding the impact of accumulated other comprehensive income, should not be considered a substitute for book value per common share, and does not reflect the recorded net worth of our business.
|
Conference Call Details |
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Date and Time: |
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Participant Dial-In: |
( |
877-407-8829 | |||
| (International): | 201-493-6724 | ||||
|
Webcast: |
To listen to the live webcast, please go to www.upcinsurance.com (Investor Relations) and click on the conference call link, or go to: http://upcinsurance.equisolvewebcast.com/q1-2017 |
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About
Founded in 1999,
Forward-Looking Statements
Statements in this press release, conference call identified above, and otherwise, that are not historical facts are “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words such as “may,” “will,” “expect,” "endeavor," "project," “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” or “continue” or the negative variations thereof or comparable terminology are intended to identify forward-looking statements. We believe these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements may be found in our filings with the
| Consolidated Statements of Comprehensive Income | ||||||||
|
In thousands, except share and per share amounts |
||||||||
| Three Months Ended | ||||||||
| |
||||||||
| 2017 | 2016 | |||||||
| REVENUE: | ||||||||
| Gross premiums written | $ | 168,842 | $ | 135,956 | ||||
| Decrease in gross unearned premiums | 13,223 | 10,546 | ||||||
| Gross premiums earned | 182,065 | 146,502 | ||||||
| Ceded premiums earned | (74,882 | ) | (45,132 | ) | ||||
| Net premiums earned | 107,183 | 101,370 | ||||||
| Investment income | 2,951 | 2,396 | ||||||
| Net realized gains (losses) | (351 | ) | 270 | |||||
| Other revenue | 12,850 | 3,525 | ||||||
| Total revenues | $ | 122,633 | $ | 107,561 | ||||
| EXPENSES: | ||||||||
| Losses and loss adjustment expenses | 63,333 | 64,258 | ||||||
| Policy acquisition costs | 35,436 | 27,032 | ||||||
| Operating expenses | 5,872 | 3,954 | ||||||
| General and administrative expenses | 11,333 | 7,933 | ||||||
| Interest expense | 759 | 75 | ||||||
|
Total expenses |
116,733 | 103,252 | ||||||
| Income before other income | 5,900 | 4,309 | ||||||
| Other income | 38 | 21 | ||||||
| Income before income taxes | 5,938 | 4,330 | ||||||
| Provision for income taxes | 2,039 | 1,379 | ||||||
| Net income | $ | 3,899 | $ | 2,951 | ||||
| OTHER COMPREHENSIVE INCOME: | ||||||||
| Change in net unrealized gains on investments | 3,731 | 6,380 | ||||||
| Reclassification adjustment for net realized investment losses (gains) | 351 | (270 | ) | |||||
| Income tax expense related to items of other comprehensive income | (1,542 | ) | (2,361 | ) | ||||
| Total comprehensive income | $ | 6,439 | $ | 6,700 | ||||
| Weighted average shares outstanding | ||||||||
| Basic | 21,471,185 | 21,346,701 | ||||||
| Diluted | 21,688,733 | 21,537,496 | ||||||
| Earnings per share | ||||||||
| Basic | $ | 0.18 | $ | 0.14 | ||||
| Diluted | $ | 0.18 | $ | 0.14 | ||||
| Dividends declared per share | $ | 0.06 | $ | 0.05 | ||||
| Consolidated Balance Sheets | ||||||||
|
In thousands, except share amounts |
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| ASSETS | ||||||||
| Investments available for sale, at fair value: | ||||||||
| Fixed maturities | $ | 496,124 | $ | 494,516 | ||||
| Equity securities - common and preferred | 30,039 | 28,398 | ||||||
| Other investments | 14,943 | 5,733 | ||||||
| Total investments | $ | 541,106 | $ | 528,647 | ||||
| Cash and cash equivalents | 124,219 | 150,688 | ||||||
| Accrued investment income | 3,645 | 3,735 | ||||||
| Property and equipment, net | 17,453 | 17,860 | ||||||
| Premiums receivable, net | 37,674 | 38,883 | ||||||
| Reinsurance recoverable on paid and unpaid losses | 35,788 | 24,028 | ||||||
| Prepaid reinsurance premiums | 92,745 | 132,564 | ||||||
| |
14,254 | 14,254 | ||||||
| Deferred policy acquisition costs | 63,806 | 65,473 | ||||||
| Other assets | 20,195 | 23,554 | ||||||
| Total Assets | $ | 950,885 | $ | 999,686 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Liabilities: | ||||||||
| Unpaid losses and loss adjustment expenses | $ | 141,102 | $ | 140,855 | ||||
| Unearned premiums | 359,000 | 372,223 | ||||||
| Reinsurance payable | 56,960 | 99,891 | ||||||
| Other liabilities | 92,894 | 91,215 | ||||||
| Notes payable | 53,822 | 54,175 | ||||||
| Total Liabilities | $ | 703,778 | $ | 758,359 | ||||
| Commitments and contingencies | ||||||||
| Stockholders' Equity: | ||||||||
| Preferred stock, |
— | — | ||||||
|
Common stock, |
2 | 2 | ||||||
| Additional paid-in capital | 99,995 | 99,353 | ||||||
| |
(431 | ) | (431 | ) | ||||
| Accumulated other comprehensive income | 3,362 | 822 | ||||||
| Retained earnings | 144,179 | 141,581 | ||||||
| Total Stockholders' Equity | $ | 247,107 | $ | 241,327 | ||||
| Total Liabilities and Stockholders' Equity | $ | 950,885 | $ | 999,686 | ||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170509006654/en/
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