Universal Reports Second Quarter 2023 Results

• Diluted earnings per common share of $0.93; diluted adjusted* earnings per common share of $0.87
• Annualized return on average common equity (“ROCE”) of 34.8%, annualized adjusted* return on average common equity of 25.3%
• Direct premiums written of $547.1 million, up 2.7% from the prior year quarter
• Net combined ratio of 99.1%, down 1.8 points from the prior year quarter
• Book value per share of $11.12, up 17.4% from fourth quarter 2022; adjusted book value per share of $14.31, up 11.0% from fourth quarter 2022
• Repurchased approximately 396 thousand shares for $6.1 million. Total capital returned to shareholders of $11.1 million, including $0.16 per share regular quarterly dividend

FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Universal Insurance Holdings (NYSE: UVE) (“Universal” or the “Company”) reported second quarter 2023 results.

“Results were solid, including a 25.3% annualized adjusted return on common equity and 85.1% adjusted diluted EPS growth year-over-year,” said Stephen J. Donaghy, Chief Executive Officer. “While it’s still early days, we’re encouraged by favorable claims and litigation trends that are beginning to emerge as a result of recent legislative reforms and give us optimism as we look forward to 2024 and beyond. We continue to benefit from rate-driven premium growth and an improving spread of risk across our geographic footprint. I’m proud of the reinsurance program we put together for the 2023-2024 treaty year. Our program’s terms, conditions and coverage are consistent with the prior year, but we reduced our consolidated retention and ceded premium ratio.”

^{*Reconciliations of GAAP to non-GAAP financial measures are provided in the attached tables.}

Quarterly Financial Results
Summary Financial Results
($thousands, except per share data)	Three Months Ended June 30,								Six Months Ended June 30,
		2023			2022		Change			2023			2022		Change
GAAP comparison
Total revenues	$	339,570		$	292,006		16.3	%	$	656,078		$	579,488		13.2	%
Operating income	$	39,168		$	12,411		215.6	%	$	73,595		$	36,490		101.7	%
Operating income margin		11.5	%		4.3	%	7.2 pts			11.2	%		6.3	%	4.9 pts
Net income available to common stockholders	$	28,564		$	7,368		287.7	%	$	52,734		$	24,902		111.8	%
Diluted earnings per common share	$	0.93		$	0.24		287.5	%	$	1.72		$	0.80		115.0	%
Annualized ROCE		34.8	%		7.7	%	27.1 pts			33.9	%		12.5	%	21.4 pts
Book value per share, end of period	$	11.12		$	11.93		(6.8	)%		11.12		$	11.93		(6.8	)%
Non-GAAP comparison^1
Core revenue	$	336,957		$	301,615		11.7	%	$	653,296		$	592,435		10.3	%
Adjusted operating income	$	36,555		$	22,020		66.0	%	$	70,813		$	49,437		43.2	%
Adjusted operating income margin		10.8	%		7.3	%	3.5 pts			10.8	%		8.3	%	2.5 pts
Adjusted net income available to common stockholders	$	26,594		$	14,648		81.6	%	$	50,636		$	34,711		45.9	%
Adjusted diluted earnings per common share	$	0.87		$	0.47		85.1	%	$	1.65		$	1.12		47.3	%
Annualized adjusted ROCE		25.3	%		12.8	%	12.5 pts			24.7	%		15.3	%	9.4 pts
Adjusted book value per share, end of period	$	14.31		$	14.80		(3.3	)%	$	14.31		$	14.80		(3.3	)%
Underwriting Summary
Premiums:
Premiums in force	$	1,879,053		$	1,766,542		6.4	%	$	1,879,053		$	1,766,542		6.4	%
Policies in force		809,685			894,618		(9.5	)%		809,685			894,618		(9.5	)%
Direct premiums written	$	547,126		$	532,527		2.7	%	$	957,228		$	929,008		3.0	%
Direct premiums earned	$	463,324		$	428,805		8.1	%	$	918,692		$	843,408		8.9	%
Ceded premiums earned	$	(160,050	)	$	(151,744	)	5.5	%	$	(333,194	)	$	(297,283	)	12.1	%
Ceded premium ratio		34.5	%		35.4	%	(0.9) pts			36.3	%		35.2	%	1.1 pts
Net premiums earned	$	303,274		$	277,061		9.5	%	$	585,498		$	546,125		7.2	%
Net ratios:
Loss ratio		73.8	%		72.3	%	1.5 pts			73.4	%		70.6	%	2.8 pts
Expense ratio		25.3	%		28.6	%	(3.3) pts			26.1	%		28.8	%	(2.7) pts
Combined ratio		99.1	%		100.9	%	(1.8) pts			99.5	%		99.4	%	0.1 pts
^1Reconciliation of GAAP to non-GAAP financial measures are provided in the attached tables. Adjusted net income available to common stockholders, adjusted diluted earnings per common share and core revenue exclude net realized gains (losses) on investments and net change in unrealized gains (losses) of equity securities. Adjusted operating income excludes the items above and interest and amortization of debt issuance costs. Adjusted book value per share excludes accumulated other comprehensive income, net of taxes. Adjusted ROCE is calculated by dividing annualized adjusted net income available to common stockholders by average adjusted book value per share, with the denominator further excluding current period after-tax net realized gains (losses) on investments and net change in unrealized gains (losses) of equity securities.

Net Income and Adjusted Net Income

Net income available to common stockholders was $28.6 million, up from $7.4 million in the prior year quarter, and adjusted net income available to common stockholders was $26.6 million, up from $14.6 million in the prior year quarter. The increase in adjusted net income available to common stockholders mostly stems from higher underwriting income, net investment income and commission revenue.

Revenues

Revenue was $339.6 million, up 16.3% from the prior year quarter and core revenue was $337.0 million, up 11.7% from the prior year quarter. The increase in core revenue primarily stems from higher net premiums earned, net investment income and commission revenue.

Direct premiums written were $547.1 million, up 2.7% from the prior year quarter. The increase stems from 0.8% growth in Florida and 13.6% growth in other states. Growth reflects rate increases, partly offset by lower policies in force.

Direct premiums earned were $463.3 million, up 8.1% from the prior year quarter. The increase stems from rate-driven direct premiums written growth over the past twelve months.

The ceded premium ratio was 34.5%, down from 35.4% in the prior year quarter. The decrease primarily reflects a lower ceded premium ratio associated with the 2023-2024 reinsurance program, direct premiums earned growth associated with primary rate increases and reinsurance savings associated with leveraging our self-insurance captive, partly offset by reinstatement premiums associated with Hurricane Ian and higher reinsurance pricing and higher reinsurance costs associated with the increase in insured values.

Net premiums earned were $303.3 million, up 9.5% from the prior year quarter. The increase is primarily attributable to higher direct premiums earned and a lower ceded premium ratio, as described above.

Net investment income was $11.3 million, up from $5.2 million in the prior year quarter. The increase primarily stems from higher fixed income reinvestment yields and higher yields on cash.

Commissions, policy fees and other revenue were $22.4 million, up 15.9% from the prior year quarter. The increase primarily reflects higher reinsurance brokerage commission revenue, which benefited from higher ceded premiums, including reinstatement premiums associated with Hurricane Ian, and the difference in our reinsurance program’s structure relative to the prior year quarter, partly offset by a decline in policy fees associated with lower policies in force.

Margins

The GAAP operating income margin was 11.5%, up from a GAAP operating income margin of 4.3% in the prior year quarter and the adjusted operating income margin was 10.8%, up from an adjusted operating income margin of 7.3% in the prior year quarter. The higher adjusted operating income margin primarily reflects higher net investment income and commission revenue and a lower net combined ratio.

The net loss ratio was 73.8%, up 1.5 points compared to the prior year quarter. The increase primarily reflects higher unfavorable prior year reserve development, partly offset by a lower consolidated current accident year net loss ratio.

The net expense ratio was 25.3%, down 3.3 points from 28.6% in the prior year quarter. The reduction primarily reflects lower renewal commission rates paid to distribution partners.

The net combined ratio was 99.1%, down 1.8 points compared to the prior year quarter. The decrease reflects a lower net expense ratio, partly offset by a higher net loss ratio, as described above.

Capital Deployment

During the second quarter, the Company repurchased approximately 396 thousand shares at an aggregate cost of $6.1 million. The Company currently has $20.1 million of share repurchase authorization remaining.

On July 20, 2023, the Board of Directors declared a quarterly cash dividend of 16 cents per share of common stock, payable on August 11, 2023, to shareholders of record as of the close of business on August 4, 2023.

Conference Call and Webcast

• Friday, July 28, 2023 at 10:00 a.m. ET
• Investors and other interested parties may listen to the call by accessing the online, real-time webcast at universalinsuranceholdings.com/investors or by registering in advance via teleconference at https://register.vevent.com/register/BI4ff80513f7174714bca5653f1ea2cd34. Once registration is completed, participants will be provided with a dial-in number containing a personalized conference code to access the call. An online replay of the call will be available at universalinsuranceholdings.com/investors soon after the investor call concludes.

About Universal

Universal Insurance Holdings, Inc. (NYSE: UVE) is a holding company providing 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 provide 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 core revenue, adjusted net income available to common stockholders and diluted adjusted earnings (loss) per common share, which exclude the impact of net realized gains (losses) on investments and net change in unrealized gains (losses) of equity securities. Adjusted operating income and adjusted operating income margin exclude the impact of net realized gains (losses) on investments and net change in unrealized gains (losses) of equity securities and interest and amortization of debt issuance costs. Adjusted common stockholders’ equity and adjusted book value per share exclude accumulated other comprehensive income (AOCI), net of taxes. Adjusted return on common equity excludes after-tax net realized gains (losses) on investments and net change in unrealized gains (losses) of equity securities from the numerator and AOCI, net of taxes, and current period after-tax net realized gains (losses) on investments and net change in unrealized gains (losses) of equity securities from the denominator. 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 are meaningful, as they allow investors to evaluate underlying revenue and profitability trends and enhance comparability across periods. When considered together with the GAAP financial measures, management believes these metrics 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 operational 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 June 30, 2023.

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 2022 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)
	June 30,			December 31,
		2023			2022
ASSETS:
Invested Assets
Fixed maturities, at fair value	$	1,051,508		$	1,014,626
Equity securities, at fair value		75,571			85,469
Investment real estate, net		5,618			5,711
Total invested assets		1,132,697			1,105,806
Cash and cash equivalents		291,681			388,706
Restricted cash and cash equivalents		68,636			2,635
Prepaid reinsurance premiums		525,489			282,427
Reinsurance recoverable		590,409			808,850
Premiums receivable, net		79,503			69,574
Property and equipment, net		49,538			51,404
Deferred policy acquisition costs		107,047			103,654
Goodwill		2,319			2,319
Other assets		70,691			74,779
TOTAL ASSETS	$	2,918,010		$	2,890,154
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Unpaid losses and loss adjustment expenses	$	663,019		$	1,038,790
Unearned premiums		982,390			943,854
Advance premium		91,011			54,964
Reinsurance payable, net		607,552			384,504
Long-term debt, net		102,387			102,769
Other liabilities		136,979			77,377
Total liabilities		2,583,338			2,602,258
STOCKHOLDERS' EQUITY:
Cumulative convertible preferred stock ($0.01 par value)^2		—			—
Common stock ($0.01 par value)^3		473			472
Treasury shares, at cost - 17,186 and 16,790		(244,846	)		(238,758	)
Additional paid-in capital		114,685			112,509
Accumulated other comprehensive income (loss), net of taxes		(95,857	)		(103,782	)
Retained earnings		560,217			517,455
Total stockholders' equity		334,672			287,896
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,918,010		$	2,890,154
Notes:
^2Cumulative convertible preferred stock ($0.01 par value): Authorized - 1,000 shares; Issued - 10 and 10 shares; Outstanding - 10 and 10 shares; Minimum liquidation preference - $9.99 and $9.99 per share.
^3Common stock ($0.01 par value): Authorized - 55,000 shares; Issued - 47,266 and 47,179 shares; Outstanding 30,080 and 30,389 shares.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (in thousands)
	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2023		2022			2023		2022
REVENUES
Net premiums earned	$	303,274	$	277,061		$	585,498	$	546,125
Net investment income		11,282		5,221			21,980		9,263
Net realized gains (losses) on investments		882		(725	)		94		(667	)
Net change in unrealized gains (losses) of equity securities		1,731		(8,884	)		2,688		(12,280	)
Commission revenue		14,986		11,404			32,268		22,565
Policy fees		5,384		5,940			9,551		10,719
Other revenue		2,031		1,989			3,999		3,763
Total revenues		339,570		292,006			656,078		579,488
EXPENSES
Losses and loss adjustment expenses		223,727		200,304			429,881		385,410
Policy acquisition costs		52,006		54,100			103,697		108,823
Other operating expenses		24,669		25,191			48,905		48,765
Total operating costs and expenses		300,402		279,595			582,483		542,998
Interest and amortization of debt issuance costs		1,629		1,731			3,265		3,339
Income before income tax expense		37,539		10,680			70,330		33,151
Income tax expense		8,973		3,310			17,591		8,244
NET INCOME	$	28,566	$	7,370		$	52,739	$	24,907

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES SHARE AND PER SHARE INFORMATION (in thousands, except per share data)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
		2023			2022			2023			2022
Weighted average common shares outstanding - basic		30,265			30,829			30,323			30,987
Weighted average common shares outstanding - diluted		30,659			30,883			30,633			31,060
Shares outstanding, end of period		30,080			30,716			30,080			30,716
Basic earnings per common share	$	0.94		$	0.24		$	1.74		$	0.80
Diluted earnings per common share	$	0.93		$	0.24		$	1.72		$	0.80
Cash dividend declared per common share	$	0.16		$	0.16		$	0.32		$	0.32
Book value per share, end of period	$	11.12		$	11.93		$	11.12		$	11.93
Annualized return on average common equity (ROCE)		34.8	%		7.7	%		33.9	%		12.5	%

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES SUPPLEMENTARY INFORMATION (in thousands, except for Policies In Force data)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
		2023			2022			2023			2022
Premiums
Direct premiums written - Florida	$	456,984		$	453,168		$	794,349		$	787,605
Direct premiums written - Other States		90,142			79,359			162,879			141,403
Direct premiums written - Total	$	547,126		$	532,527		$	957,228		$	929,008
Direct premiums earned	$	463,324		$	428,805		$	918,692		$	843,408
Net premiums earned	$	303,274		$	277,061		$	585,498		$	546,125
Underwriting Ratios - Net
Loss and loss adjustment expense ratio		73.8	%		72.3	%		73.4	%		70.6	%
Policy acquisition cost ratio		17.2	%		19.5	%		17.7	%		19.9	%
Other operating expense ratio		8.1	%		9.1	%		8.4	%		8.9	%
Expense ratio		25.3	%		28.6	%		26.1	%		28.8	%
Combined ratio		99.1	%		100.9	%		99.5	%		99.4	%
Other Items
Net prior years’ reserve development	$	13,825		$	3,710		$	17,143		$	4,365
Points on the net loss and loss adjustment expense ratio	4.6 pts			1.3 pts			2.9 pts			0.8 pts

	As of
	June 30,
	2023		2022
Policies in force
Florida		576,407		654,276
Other States		233,278		240,342
Total		809,685		894,618
Premiums in force
Florida	$	1,549,410	$	1,473,193
Other States		329,643		293,349
Total	$	1,879,053	$	1,766,542
Total Insured Value
Florida	$	192,324,456	$	202,691,987
Other States		126,539,944		118,766,758
Total	$	318,864,400	$	321,458,745

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (in thousands, except for per share data)
GAAP revenue to core revenue
	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2023		2022			2023		2022
GAAP revenue	$	339,570	$	292,006		$	656,078	$	579,488
less: Net realized gains (losses) on investments		882		(725	)		94		(667	)
less: Net change in unrealized gains (losses) of equity securities		1,731		(8,884	)		2,688		(12,280	)
Core revenue	$	336,957	$	301,615		$	653,296	$	592,435

GAAP operating income to adjusted operating income
	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2023		2022			2023		2022
GAAP income before income tax expense	$	37,539	$	10,680		$	70,330	$	33,151
add: Interest and amortization of debt issuance costs		1,629		1,731			3,265		3,339
GAAP operating income		39,168		12,411			73,595		36,490
less: Net realized gains (losses) on investments		882		(725	)		94		(667	)
less: Net change in unrealized gains (losses) of equity securities		1,731		(8,884	)		2,688		(12,280	)
Adjusted operating income	$	36,555	$	22,020		$	70,813	$	49,437

GAAP operating income margin to adjusted operating income margin
	Three Months Ended						Six Months Ended
	June 30,						June 30,
		2023			2022			2023			2022
GAAP operating income (a)	$	39,168		$	12,411		$	73,595		$	36,490
GAAP revenue (b)		339,570			292,006			656,078			579,488
GAAP operating income margin (a÷b)		11.5	%		4.3	%		11.2	%		6.3	%
Adjusted operating income (c)		36,555			22,020			70,813			49,437
Core revenue (d)		336,957			301,615			653,296			592,435
Adjusted operating income margin (c÷d)		10.8	%		7.3	%		10.8	%		8.3	%

GAAP net income (NI) to adjusted NI available to common stockholders
	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2023		2022			2023		2022
GAAP NI	$	28,566	$	7,370		$	52,739	$	24,907
less: Preferred dividends		2		2			5		5
GAAP NI available to common stockholders (e)		28,564		7,368			52,734		24,902
less: Net realized gains (losses) on investments		882		(725	)		94		(667	)
less: Net change in unrealized gains (losses) of equity securities		1,731		(8,884	)		2,688		(12,280	)
add: Income tax effect on above adjustments		643		(2,329	)		684		(3,138	)
Adjusted NI available to common stockholders (f)	$	26,594	$	14,648		$	50,636	$	34,711
Weighted average diluted common shares outstanding (g)		30,659		30,883			30,633		31,060
Diluted earnings per common share (e÷g)	$	0.93	$	0.24		$	1.72	$	0.80
Diluted adjusted earnings per common share (f÷g)	$	0.87	$	0.47		$	1.65	$	1.12

GAAP stockholders’ equity to adjusted common stockholders’ equity
	As of
	June 30,			June 30,			December 31,
		2023			2022			2022
GAAP stockholders’ equity	$	334,672		$	366,551		$	287,896
less: Preferred equity		100			100			100
Common stockholders’ equity (h)		334,572			366,451			287,796
less: Accumulated other comprehensive (loss), net of taxes		(95,857	)		(88,134	)		(103,782	)
Adjusted common stockholders’ equity (i)	$	430,429		$	454,585		$	391,578
Shares outstanding (j)		30,080			30,716			30,389
Book value per common share (h÷j)	$	11.12		$	11.93		$	9.47
Adjusted book value per common share (i÷j)	$	14.31		$	14.80		$	12.89

GAAP return on common equity (ROCE) to adjusted ROCE
	Three Months Ended						Six Months Ended						Year Ended
	June 30,						June 30,						December 31,
		2023			2022			2023			2022			2022
Actual or Annualized NI available to common stockholders (k)	$	114,256		$	29,472		$	105,468		$	49,804		$	(22,267	)
Average common stockholders’ equity (l)		328,139			381,346			311,184			398,027			358,699
ROCE (k÷l)		34.8	%		7.7	%		33.9	%		12.5	%		(6.2	)%
Actual or Annualized adjusted NI available to common stockholders (m)	$	106,376		$	58,592		$	101,272		$	69,422		$	(12,618	)
Adjusted average common stockholders’ equity^4(n)		420,078			458,292			409,955			454,782			423,199
Adjusted ROCE (m÷n)		25.3	%		12.8	%		24.7	%		15.3	%		(3.0	)%
^4Adjusted average common stockholders’ equity excludes current period after-tax net realized gains (losses) on investments and net change in unrealized gains (losses) of equity securities.