Universal Insurance Holdings, Inc. Reports Second Quarter 2017 Financial Results
Second Quarter 2017 Highlights
- Growth Continues as
$1 Billion of In-Force Premium Milestone Reached – Direct premiums written grew 8.9% during the second quarter, including 5.6% growth inFlorida and 42.2% growth in Other States, with Universal DirectSM contributing to growth across all geographies. At quarter's end our in-force premium was in excess of$1 billion for the first time in the Company's history. During the quarter, we wrote our first homeowners policy and launched Universal DirectSM inNew Jersey , and received approval from theNew York Department of Financial Services for our homeowners rates and forms (we anticipate writing policies inNew York later in 2017). Universal is currently writing business in 15 states and is licensed in an additional 4 states. - Underwriting Profitability Strong Despite Weather – The net combined ratio was 81.3% in the second quarter, up from 73.4% in the prior year's quarter due to an increase in the loss and LAE ratio, partially offset by a reduction in the G&A expense ratio. Current quarter results include a 1.25% increase to our underlying direct loss ratio to increase our weather loss expectation, as well as
$1.1 million of reserve additions relating to Hurricane Matthew. - 2Q Bottom Line Declines, but Year-to-Date Results Excellent – Second quarter net income and diluted EPS each declined by roughly 13%, to
$29.4 million and$0.82 per share, respectively, primarily driven by an increase in weather-related losses. For the first six months of 2017, net income grew by 2.9% to$60.6 million and diluted EPS grew 1.5% to$1.68 per share. - Balance Sheet Remains Solid – Book value per share grew by 6.4% from
March 31, 2017 (or 20.7% fromJune 30, 2016 ) to$12.09 . Our balance sheet remains solid, with a stable investment portfolio, minimal debt, and a conservative reserve position. Our balance sheet is well protected by reinsurance, and we completed our 2017-2018 reinsurance program during the second quarter, adding additional conservatism to the program without increasing the percentage of premium spent on reinsurance. - Focused on Shareholder Returns – Return on Average Common Equity (ROE) was 27.9% for the second quarter of 2017. We declared dividends of
$0.14 per share in the second quarter, equating to an annualized dividend yield of 2.4% at current share price levels. During the second quarter, we repurchased 254,214 shares for$6.4 million , or an average cost of$25.06 per share.
Second Quarter 2017 Results
Direct premiums written grew 8.9% from the prior year's quarter to
The net combined ratio was 81.3% in the second quarter of 2017 compared to 73.4% in the prior year's quarter. The reduction in underwriting profitability was driven by an increase in the loss and loss adjustment expense ratio, partially offset by a reduction in the general and administrative expense ratio.
- The net loss and LAE ratio was 47.4% in the second quarter of 2017, compared to 38.4% for the prior year's quarter. The increase in the current quarter's loss and LAE ratio was driven by an increased underlying loss ratio reflecting the recent trend of weather losses, continued growth in our Other States book, current marketplace dynamics, and prior accident year reserve development. In light of the recent trend of weather losses exceeding our planned assumption, we are increasing our underlying direct loss ratio by 1.25 points (1.8 points on the net loss ratio, or approximately
$3.0 million of additional losses per quarter) to increase our weather loss expectation going forward. The current quarter includes this adjustment for our 2017 year-to-date results, reflecting an adjustment to the underlying loss ratio for both the first and second quarter of 2017, for an addition to second quarter 2017 losses of approximately$6 million or 3.6 points on the net loss and LAE ratio. Second quarter 2017 results also include prior year reserve additions of$1.1 million , driven by additional losses relating to Hurricane Matthew, while last year's second quarter included a negligible amount of prior year reserve development. Importantly, Hurricane Matthew losses still remain within the initial range discussed on our third quarter 2016 earnings conference call. - The net general and administrative expense ratio was 33.9% in the second quarter of 2017, compared to 35.0% for the same period last year, driven primarily by a reduction in the other operating expense ratio, with a slight reduction in the policy acquisition cost ratio. The net other operating expense ratio was 14.4% compared to 15.4% in the prior year's quarter, while the net policy acquisition cost ratio was 19.5% compared to 19.6% in the prior year's quarter.
Net investment income grew by 50.5% from the prior year's quarter to
Interest expense was
The effective tax rate for the second quarter of 2017 was 38.7%, in-line with 38.7% in the prior year's quarter.
During the second quarter, the Company repurchased 254,214 shares for
Stockholders' equity was
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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2017 |
2016 |
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ASSETS |
||||
Invested Assets |
||||
Fixed maturities, at fair value |
$ 609,909 |
$ 584,361 |
||
Equity securities, at fair value |
9,927 |
50,803 |
||
Short-term investments, at fair value |
— |
5,002 |
||
Investment real estate, net |
15,104 |
11,435 |
||
Total invested assets |
634,940 |
651,601 |
||
Cash and cash equivalents |
245,495 |
105,730 |
||
Restricted cash and cash equivalents |
2,635 |
2,635 |
||
Prepaid reinsurance premiums |
285,480 |
124,385 |
||
Reinsurance recoverable |
2,711 |
106 |
||
Premiums receivable, net |
64,004 |
53,833 |
||
Property and equipment, net |
33,066 |
32,162 |
||
Deferred policy acquisition costs |
73,591 |
64,912 |
||
|
2,319 |
2,319 |
||
Other assets |
25,818 |
22,324 |
||
TOTAL ASSETS |
|
$ 1,060,007 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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LIABILITIES: |
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Unpaid losses and loss adjustment expenses |
$ 22,645 |
$ 58,494 |
||
Unearned premiums |
536,363 |
475,756 |
||
Advance premium |
24,808 |
17,796 |
||
Reinsurance payable, net |
311,897 |
80,891 |
||
Long-term debt |
13,603 |
15,028 |
||
Other liabilities |
39,675 |
40,852 |
||
Total liabilities |
948,991 |
688,817 |
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STOCKHOLDERS' EQUITY: |
||||
Cumulative convertible preferred stock ( |
— |
— |
||
Common stock ( |
454 |
453 |
||
|
(95,901) |
(86,982) |
||
Additional paid-in capital |
86,358 |
82,263 |
||
Accumulated other comprehensive income (loss), net of taxes |
(2,458) |
(6,408) |
||
Retained earnings |
432,615 |
381,864 |
||
Total stockholders' equity |
421,068 |
371,190 |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ 1,060,007 |
||
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 |
Six Months Ended |
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|
|
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2017 |
2016 |
2017 |
2016 |
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REVENUES |
|||||||||
Net premiums earned |
$ 169,009 |
$ 156,461 |
$ 330,568 |
$ 308,909 |
|||||
Net investment income |
3,223 |
2,142 |
5,927 |
3,747 |
|||||
Net realized gains/(losses) on investments |
1,710 |
576 |
1,647 |
1,243 |
|||||
Commission revenue |
4,644 |
4,210 |
9,242 |
8,323 |
|||||
Policy fees |
5,250 |
4,753 |
9,733 |
8,867 |
|||||
Other revenue |
1,651 |
1,660 |
3,244 |
3,159 |
|||||
Total revenues |
$ 185,487 |
$ 169,802 |
$ 360,361 |
$ 334,248 |
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EXPENSES |
|||||||||
Losses and loss adjustment expenses |
$ 80,184 |
$ 60,083 |
$ 150,754 |
$ 126,200 |
|||||
Policy acquisition costs |
33,022 |
30,643 |
65,450 |
60,239 |
|||||
Other operating expenses |
24,272 |
24,075 |
48,674 |
51,513 |
|||||
Interest expense |
86 |
107 |
189 |
303 |
|||||
Total expenses |
$ 137,564 |
$ 114,908 |
$ 265,067 |
$ 238,255 |
|||||
Income before income tax expense |
47,923 |
$ 54,894 |
95,294 |
$ 95,993 |
|||||
Income tax expense |
18,547 |
21,247 |
34,719 |
37,120 |
|||||
NET INCOME |
$ 29,376 |
$ 33,647 |
$ 60,575 |
$ 58,873 |
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SHARE AND PER SHARE INFORMATION |
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(in thousands, except per share data) |
|||||||||
Three Months Ended |
Six Months Ended |
||||||||
|
|
||||||||
2017 |
2016 |
2017 |
2016 |
||||||
Weighted average common shares outstanding - basic |
34,959 |
35,062 |
35,049 |
34,795 |
|||||
Weighted average common shares outstanding - diluted |
35,958 |
35,649 |
36,061 |
35,575 |
|||||
Shares outstanding, end of period |
34,821 |
35,064 |
34,821 |
35,064 |
|||||
Basic earnings per common share |
$ 0.84 |
$ 0.96 |
$ 1.73 |
$ 1.69 |
|||||
Diluted earnings per common share |
$ 0.82 |
$ 0.94 |
$ 1.68 |
$ 1.65 |
|||||
Cash dividend declared per common share |
$ 0.14 |
$ 0.14 |
$ 0.28 |
$ 0.28 |
|||||
Book value per share |
$ 12.09 |
$ 10.02 |
$ 12.09 |
$ 10.02 |
|||||
Return on average equity (ROE) |
27.9% |
39.6% |
29.6% |
36.0% |
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SUPPLEMENTARY INFORMATION |
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(in thousands, except Policies In-Force) |
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Three Months Ended |
Six Months Ended |
||||||||
|
|
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2017 |
2016 |
2017 |
2016 |
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Premiums |
|||||||||
Direct premiums written - |
$ 261,430 |
$ 247,483 |
$ 479,868 |
$ 456,843 |
|||||
Direct premiums written - Other States |
34,761 |
24,438 |
61,738 |
43,051 |
|||||
Direct premiums written - Total |
$ 296,191 |
$ 271,921 |
$ 541,606 |
$ 499,894 |
|||||
Direct premiums earned |
$ 244,623 |
$ 226,819 |
$ 480,998 |
$ 448,071 |
|||||
Net premiums earned |
$ 169,009 |
$ 156,461 |
$ 330,568 |
$ 308,909 |
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Policies In-Force |
|||||||||
|
596,044 |
565,010 |
596,044 |
565,010 |
|||||
Other States |
125,729 |
89,708 |
125,729 |
89,708 |
|||||
Total |
721,773 |
654,718 |
721,773 |
654,718 |
|||||
In-Force Premium |
|||||||||
|
$ 888,206 |
$ 847,415 |
$ 888,206 |
$ 847,415 |
|||||
Other States |
112,815 |
79,091 |
112,815 |
79,091 |
|||||
Total |
$ 1,001,021 |
$ 926,506 |
$ 1,001,021 |
$ 926,506 |
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Total Insured Value |
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Other States |
43,473,191 |
29,753,795 |
43,473,191 |
29,753,795 |
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Total |
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Underwriting Ratios - Net |
|||||||||
Loss and loss adjustment expense ratio |
47.4% |
38.4% |
45.6% |
40.9% |
|||||
Policy acquisition cost ratio |
19.5% |
19.6% |
19.8% |
19.5% |
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Other operating expense ratio |
14.4% |
15.4% |
14.7% |
16.7% |
|||||
General and administrative expense ratio |
33.9% |
35.0% |
34.5% |
36.2% |
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Combined ratio |
81.3% |
73.4% |
80.1% |
77.0% |
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Other Items |
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(Favorable)/Unfavorable prior year reserve development |
1,109 |
(1) |
1,205 |
15 |
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Points on the loss and loss adjustment expense ratio |
0.7% |
0.0% |
0.4% |
0.0% |
Contacts: |
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Investors |
Media |
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VP Investor Relations |
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954-958-1306 |
212-355-4449 |
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