Universal Insurance Holdings, Inc. Reports First Quarter 2018 Results
First Quarter 2018 Highlights
- Continued Organic Growth – Direct premiums written grew 10.0% in the first quarter, with 7.2% growth in
Florida and 32.7% growth in Other States; Universal DirectSM contributed to growth in all geographies. We began writing inNew Hampshire onApril 4, 2018 , and currently write in 17 states with licenses in 3 additional states. - Strong Underwriting Profitability – The first quarter net combined ratio was 76.5% compared to 78.9% in the prior year's quarter, with improvement in both the loss and LAE ratio and the G&A expense ratio. The current quarter includes approximately
$10.4 million (5.7 points) of estimated pretax profit relating to additional income generated byUniversal Adjusting Corporation (UAC) following Hurricane Irma. The current quarter includes no impact from weather events beyond plan, compared to$3.0 million (1.9 points) of weather losses beyond plan in the first quarter of 2017. There was a de minimis amount of prior year reserve movements in both the current year and prior year's quarter. Our underwriting results reflect increased underlying loss trends resulting from the impact of continued geographic expansion, an increased level of catastrophic activity in recent years, and the marketplace dynamics withinFlorida , including the impact of Assignment of Benefits (AOB) related claims. - Solid Balance Sheet – Book value per share grew 4.8% from
December 31, 2017 (16.8% fromMarch 31, 2017 ) to$13.28 . Our investment portfolio is conservative and composed of high quality securities, we have minimal debt or goodwill, we believe our loss reserves are appropriately set at current levels, and we are protected by a comprehensive reinsurance program. - Focused on Shareholder Returns – Return on Average Common Equity (ROE) was 34.6% for the first quarter of 2018. We paid dividends of
$0.14 per share in the first quarter, equating to an annualized dividend yield of 1.7% at current share price levels. During the first quarter, we repurchased 92,749 shares for$2.7 million ($29.61 per share) and$17.0 million remains on our current share repurchase authorization.
First Quarter 2018 Results
Direct premiums written grew 10.0% from the prior year's quarter to
Commission revenue grew by 14.6% versus the prior year's quarter to
The net combined ratio was 76.5% in the first quarter of 2018 compared to 78.9% in the prior year's quarter. The increase in underwriting profitability was driven by a reduction in both the loss and loss adjustment expense ratio and the general and administrative expense ratio.
The net loss and LAE ratio was 41.6% in the first quarter of 2018, compared to 43.7% for the prior year's quarter. The main drivers of the change in the loss and LAE ratio are as follows:
- The current year's quarter includes no impact from weather events beyond plan, compared to
$3.0 million (1.9 points) of weather losses beyond plan in the first quarter of 2017. Universal Adjusting Corporation (UAC) generated additional revenues following Hurricane Irma (which occurred during the third quarter of 2017). During the first quarter of 2018, UAC produced$10.4 million (5.7 points) of pretax profit, the vast majority of which related to additional revenues resulting from Hurricane Irma.- First quarter 2018 results include
$44 thousand (0.0 points) of favorable prior year reserve development, compared to$96 thousand (0.1 points) of unfavorable prior year reserve development in the first quarter of 2017. - Our underlying loss and LAE ratio reflects continued geographic expansion into states outside of
Florida (where non-catastrophe loss ratios are generally higher than inFlorida ), an increased level of catastrophic activity in recent years, and the marketplace dynamics within our home state ofFlorida , including the impact of Assignment of Benefits (AOB) related claims.
The net general and administrative expense ratio was 34.9% in the first quarter of 2018, compared to 35.2% for the prior year's quarter, as a modest increase in the policy acquisition cost ratio was more than offset by a decline in the other operating expense ratio. The net policy acquisition cost ratio was 20.8% compared to 20.1% in the prior year, while the net other operating expense ratio was 14.1% compared to 15.1% in the prior year.
Net investment income grew by 77.0% from the prior year's quarter to
Interest expense was
The effective tax rate for the first quarter of 2018 was 22.5%, compared to 34.1% in the prior year's quarter. The decrease in our effective tax rate is primarily the result of the enactment of the Tax Cuts and Jobs Act of 2017, which resulted in a reduction in the federal corporate tax rate from 35.0% to 21.0% effective
Stockholders' equity was
During the first quarter, the Company repurchased 92,749 shares for
On
Conference Call
Members of the Universal management team will host a conference call on
About
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
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CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
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(in thousands, except per share data) |
||||
|
|
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2018 |
2017 |
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ASSETS |
||||
Invested Assets |
||||
Fixed maturities, at fair value |
$ 634,238 |
$ 639,334 |
||
Equity securities, at fair value |
66,043 |
62,215 |
||
Short-term investments, at fair value |
10,000 |
10,000 |
||
Investment real estate, net |
19,406 |
18,474 |
||
Total invested assets |
729,687 |
730,023 |
||
Cash and cash equivalents |
244,673 |
213,486 |
||
Restricted cash and cash equivalents |
2,635 |
2,635 |
||
Prepaid reinsurance premiums |
53,123 |
132,806 |
||
Reinsurance recoverable |
72,641 |
182,405 |
||
Premiums receivable, net |
57,455 |
56,500 |
||
Property and equipment, net |
33,169 |
32,866 |
||
Deferred policy acquisition costs |
78,007 |
73,059 |
||
|
2,319 |
2,319 |
||
Other assets |
21,998 |
28,900 |
||
TOTAL ASSETS |
$ 1,295,707 |
$ 1,454,999 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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LIABILITIES: |
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Unpaid losses and loss adjustment expenses |
129,637 |
248,425 |
||
Unearned premiums |
540,167 |
532,444 |
||
Advance premium |
39,322 |
26,216 |
||
Reinsurance payable, net |
54,218 |
110,381 |
||
Long-term debt |
12,500 |
12,868 |
||
Other liabilities |
54,769 |
84,677 |
||
Total liabilities |
830,613 |
1,015,011 |
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STOCKHOLDERS' EQUITY: |
||||
Cumulative convertible preferred stock ( |
— |
— |
||
Common stock ( |
461 |
458 |
||
|
(107,869) |
(105,123) |
||
Additional paid-in capital |
84,294 |
86,186 |
||
Accumulated other comprehensive income (loss), net of taxes |
(7,312) |
(6,281) |
||
Retained earnings |
495,520 |
464,748 |
||
Total stockholders' equity |
465,094 |
439,988 |
||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ 1,295,707 |
$ 1,454,999 |
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Notes: |
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1 - Cumulative convertible preferred stock ( |
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2 - Common stock ( |
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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) |
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(in thousands) |
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Three Months Ended |
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|
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2018 |
2017 |
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REVENUES |
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Net premiums earned |
$ 182,577 |
$ 161,559 |
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Net investment income |
4,785 |
2,704 |
||
Net realized gains/(losses) on investments |
(2,641) |
(63) |
||
Net unrealized gains/(losses) on investments |
(5,109) |
— |
||
Commission revenue |
5,271 |
4,598 |
||
Policy fees |
4,775 |
4,483 |
||
Other revenue |
1,842 |
1,593 |
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Total revenues |
191,500 |
174,874 |
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EXPENSES |
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Losses and loss adjustment expenses |
75,926 |
70,570 |
||
Policy acquisition costs |
38,043 |
32,428 |
||
Other operating expenses |
25,753 |
24,402 |
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Interest expense |
79 |
103 |
||
Total expenses |
139,801 |
127,503 |
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Income before income tax expense |
51,699 |
47,371 |
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Income tax expense |
11,644 |
16,172 |
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NET INCOME |
$ 40,055 |
$ 31,199 |
||
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SHARE AND PER SHARE INFORMATION |
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(in thousands, except per share data) |
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Three Months Ended |
||||
|
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2018 |
2017 |
|||
Weighted average common shares outstanding - basic |
34,839 |
35,140 |
||
Weighted average common shares outstanding - diluted |
35,660 |
36,180 |
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Shares outstanding, end of period |
35,012 |
35,073 |
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Basic earnings per common share |
$ 1.15 |
$ 0.89 |
||
Diluted earnings per common share |
$ 1.12 |
$ 0.86 |
||
Cash dividend declared per common share |
$ 0.14 |
$ 0.14 |
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Book value per share, end of period |
$ 13.28 |
$ 11.37 |
||
Return on average equity (ROE) |
34.6% |
31.4% |
||
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SUPPLEMENTARY INFORMATION |
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(in thousands, except Policies In-Force) |
||||
Three Months Ended |
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|
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2018 |
2017 |
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Premiums |
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Direct premiums written - |
$ 234,178 |
$ 218,438 |
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Direct premiums written - Other States |
35,806 |
26,977 |
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Direct premiums written - Total |
$ 269,984 |
$ 245,415 |
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Net premiums written |
$ 269,984 |
$ 245,229 |
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Direct premiums earned |
$ 262,261 |
$ 236,375 |
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Net premiums earned |
$ 182,577 |
$ 161,559 |
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Underwriting Ratios - Net |
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Loss and loss adjustment expense ratio |
41.6% |
43.7% |
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Policy acquisition cost ratio |
20.8% |
20.1% |
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Other operating expense ratio |
14.1% |
15.1% |
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General and administrative expense ratio |
34.9% |
35.2% |
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Combined ratio |
76.5% |
78.9% |
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Other Items |
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(Favorable)/Unfavorable prior year reserve development |
(44) |
96 |
||
Points on the loss and loss adjustment expense ratio |
0.0% |
0.1% |
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As of |
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2018 |
2017 |
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Policies In-Force |
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|
621,820 |
585,359 |
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Other States |
155,787 |
114,116 |
||
Total |
777,607 |
699,475 |
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In-Force Premium |
||||
|
$ 941,418 |
$ 872,307 |
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Other States |
140,806 |
102,223 |
||
Total |
$ 1,082,224 |
$ 974,530 |
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Total Insured Value |
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|
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Other States |
55,952,252 |
38,986,908 |
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Total |
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Contacts: |
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Investors |
Media |
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VP Investor Relations |
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954-958-1306 |
212-355-4449 |
View original content:http://www.prnewswire.com/news-releases/universal-insurance-holdings-inc-reports-first-quarter-2018-results-300635722.html
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