Universal Insurance Holdings Reports Second Quarter 2021 Results

• 2Q21 total revenue up 10.5% to $279.2 million
• 2Q21 direct premiums written up 17.0%
• 2Q21 diluted GAAP earnings per share (“EPS”) of $0.70, non-GAAP adjusted EPS¹ of $0.65
• 2Q21 combined ratio of 97.3%
• 2Q21 annualized return on average equity of 18.7%
• Florida primary average rate increase of 14.9% for UPCIC filed during 2Q21

FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Universal Insurance Holdings (NYSE: UVE) (the “Company”) reported 2021 second quarter diluted EPS of $0.70 on a GAAP basis and $0.65 on a non-GAAP¹ adjusted basis. Quarterly direct premiums written were up 17.0% from the year-ago quarter to $473.6 million, with an annualized return on average equity of 18.7%.

^1	Excludes net realized and unrealized gains and losses on investments as well as extraordinary reinstatement premiums and associated commissions (“non-GAAP adjusted EPS”). Reconciliations of GAAP to non-GAAP financial measures are provided in the attached tables.

“We delivered solid second quarter results, highlighted by an 18.7% annualized return on average equity, despite continued social inflation within the state of Florida impacting loss costs,” said Stephen J. Donaghy, Chief Executive Officer. “We continue to address these trends, in part, with primary rate increase filings, which was a driver of our direct written premium growth during the quarter. We expect primary rate increases to be a tailwind over the medium to long term as they earn-in, but are relentlessly focused on performing through the near term pressure on carriers in the Florida property insurance marketplace, and lament about the unfortunate derivative consequence of price increases on consumers.”

Summary Financial Results

($thousands, except per share data)	Three Months Ended June 30,								Six Months Ended June 30,
	2021			2020			Change		2021			2020			Change
(GAAP comparison)
Total revenue	$	279,181		$	252,704		10.5	%	$	541,938		$	487,979		11.1	%
Income (loss) before income taxes		30,059			27,438		9.6	%		66,410			55,022		20.7	%
Income (loss) before income taxes margin		10.8	%		10.9	%	(10.0	)bps		12.3	%		11.3	%	1.0	pt
Diluted EPS	$	0.70		$	0.62		12.9	%	$	1.54		$	1.23		25.2	%
Annualized return on average equity (ROE)		18.7	%		15.6	%	3.1	pts		20.7	%		15.5	%	5.2	pts
Book value per share, end of period	$	15.37		$	16.56		(7.2	)%	$	15.37		$	16.56		(7.2	)%
(Non-GAAP comparison)^2
Adjusted operating income		28,372			23,416		21.2	%		64,695			58,777		10.1	%
Adjusted EPS	$	0.65		$	0.52		25.0	%	$	1.50		$	1.32		13.6	%
^2Reconciliation of GAAP to non-GAAP financial measures are provided in the attached tables. Adjusted operating income excludes net realized and unrealized gains and losses on investments, interest expense, and extraordinary reinstatement premiums and associated commissions. Non-GAAP adjusted EPS excludes net realized and unrealized gains and losses on investments, as well as extraordinary reinstatement premiums and associated commissions.

Total revenue grew double digits for the quarter driven primarily by rate increases from 2020 earning through the book as policies renew, an increase in policies-in-force when compared to the prior years quarter, and commissions earned on ceded premiums. Total revenue growth was partially offset by the impact of higher reinsurance costs when compared to 2020 and the investment portfolio’s performance. GAAP diluted EPS and non-GAAP adjusted EPS results for the quarter were driven primarily by an improvement in weather events when compared to the prior years quarter, and the benefit of a reduced share count, partially offset by the impact of loss cost trends on prior and current accident years. The Company produced an annualized return on average equity of 18.7%.

Underwriting

($thousands, except policies in force)	Three Months Ended June 30,								Six Months Ended June 30,
	2021			2020			Change		2021			2020			Change
Policies in force (as of end of period)		977,251			937,277		4.3	%		977,251			937,277		4.3	%
Premiums in force (as of end of period)	$	1,618,576		$	1,389,703		16.5	%	$	1,618,576		$	1,389,703		16.5	%
Direct premiums written	$	473,627		$	404,685		17.0	%	$	838,941		$	739,238		13.5	%
Direct premiums earned		392,574			337,639		16.3	%		768,180			663,590		15.8	%
Net premiums earned		256,172			226,370		13.2	%		499,477			447,199		11.7	%
Expense ratio^3		32.0	%		32.6	%	(60.0	)bps		32.9	%		32.8	%	10.0	bps
Loss & LAE ratio		65.3	%		66.9	%	(1.6	)pts		62.3	%		64.0	%	(1.7	)pts
Combined ratio		97.3	%		99.5	%	(2.2	)pts		95.2	%		96.8	%	(1.6	)pts
^3Expense ratio excludes interest expense.

Direct premiums written were up 17.0% for the quarter, led by direct premium growth of 19.6% in Florida.

On the expense side, the combined ratio improved 2.2 points for the quarter. The improvement was driven primarily by decreased weather events, partially offset by prior year's reserve development, current year strengthening and higher reinsurance costs impact on the ratio.

• The expense ratio decreased 1.0 pointon a direct premiums earned basis due to continued focus on operating efficiencies, which was partially offset by the impact of increased reinsurance costs on the net ratio, resulting in a 60 basis point improvement in the net expense ratio for the quarter.
• The net loss and LAE ratio improved 1.6 points for the quarter. Quarterly drivers include:
  • A 7.5 point net improvement related to no weather events being above plan.
  • Adverse prior year’s reserve development of $7.7 million ($0.5 million in 2Q20) resulted in a 2.8 point net increase for the quarter. Net adverse development in the current quarter was driven primarily by continued adjusting and settlement of non-CAT claims on prior accident years.
  • Core losses of $159.5 million for the quarter ($133.9 million in 2Q20) resulted in a 90 basis point increase on a direct premium earned basis, driven by current year strengthening, which was further magnified by the impact of increased reinsurance costs on the net ratio, which led to a 3.1 point increase for the quarter on a net basis.

Services

($thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		Change		2021		2020		Change
Commission revenue	$	9,860	$	7,758	27.1	%	$	18,986	$	14,773	28.5	%
Policy fees		6,575		6,546	0.4	%		11,962		12,086	(1.0	)%
Other revenue		1,991		1,812	9.9	%		3,896		4,594	(15.2	)%
Total	$	18,426	$	16,116	14.3	%	$	34,844	$	31,453	10.8	%

Total services revenue increased 14.3% for the quarter. The increase was primarily driven by commission revenue earned on ceded premiums.

Investments

($thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		Change		2021		2020			Change
Net investment income	$	2,858	$	6,179	(53.7	)%	$	5,844	$	13,013		(55.1	)%
Realized gains (losses)		496		168	195.2	%		1,038		467		122.3	%
Unrealized gains (losses)		1,229		3,871	(68.3	)%		735		(4,153	)	NM
NM = Not Meaningful

Net investment income decreased 53.7% for the quarter. The decrease is largely attributable to significantly lower yields on the reinvested portfolio following the sale of a majority of securities in the portfolio that were in an unrealized gain position in the third and fourth quarters of 2020.

Capital Deployment

On July 19, 2021, the Board of Directors declared a quarterly cash dividend of 16 cents per share of common stock, payable on August 9, 2021, to shareholders of record as of the close of business on August 2, 2021.

Guidance

The Company is maintaining its guidance for 2021 (assuming no further extraordinary weather events and no realized or unrealized gains in 2021):

• GAAP and Non-GAAP Adjusted EPS in a range of $2.75 - $3.00
• Annualized return on average equity in a range of 17.0% - 19.0%

Conference Call and Webcast

• Thursday, July 29, 2021 at 9:00 a.m. ET
• U.S. Dial-in Number: [phone]
• International: [phone]
• Participant code: 5571912
• Listen to live webcast: UniversalInsuranceHoldings.com
• Replay of the call will be available on the UVE website and by phone at [phone] or internationally at [phone] using the participant code: 5571912 through August 13, 2021

About Universal Insurance Holdings, Inc.

Universal Insurance Holdings (UVE) is a holding company offering 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 sell 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 adjusted earnings per diluted share, which excludes the impact of the net realized and unrealized gains and losses on investments as well as extraordinary reinstatement premiums and associated commissions. Extraordinary reinstatement premiums are not covered by reinstatement premium protection and attach just below the Florida Hurricane Catastrophe Fund (“FHCF”) reinsurance layer. Adjusted operating income excludes the impact of the net realized and unrealized gains and losses on investments, as well as interest expense and extraordinary reinstatement premiums and associated commissions. 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, when considered together with the GAAP financial measures, 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 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, 2021.

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 2020 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,
	2021			2020
ASSETS:
Invested Assets
Fixed maturities, at fair value	$	921,800		$	819,861
Equity securities, at fair value		95,690			84,887
Assets held for sale		7,053			—
Investment real estate, net		5,981			15,176
Total invested assets		1,030,524			919,924
Cash and cash equivalents		286,493			167,156
Restricted cash and cash equivalents		6,134			12,715
Prepaid reinsurance premiums		532,308			215,723
Reinsurance recoverable		196,294			160,417
Premiums receivable, net		74,072			66,883
Property and equipment, net		53,023			53,572
Deferred policy acquisition costs		115,971			110,614
Goodwill		2,319			2,319
Other assets		44,397			49,418
TOTAL ASSETS	$	2,341,535		$	1,758,741
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Unpaid losses and loss adjustment expenses	$	278,658		$	322,465
Unearned premiums		853,896			783,135
Advance premium		68,287			49,562
Reinsurance payable, net		581,818			10,312
Long-term debt		7,721			8,456
Other liabilities		70,313			135,549
Total liabilities		1,860,693			1,309,479
STOCKHOLDERS' EQUITY:
Cumulative convertible preferred stock ($0.01 par value) ^4		—			—
Common stock ($0.01 par value) ^5		470			468
Treasury shares, at cost - 15,695 and 15,680		(225,751	)		(225,506	)
Additional paid-in capital		105,904			103,445
Accumulated other comprehensive income (loss), net of taxes		(5,571	)		3,343
Retained earnings		605,790			567,512
Total stockholders' equity		480,842			449,262
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,341,535		$	1,758,741
Notes:
^4 Cumulative 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.
^5 Common stock ($0.01 par value): Authorized - 55,000 shares; Issued - 46,964 and 46,817 shares; Outstanding 31,269 and 31,137 shares.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (in thousands)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
REVENUES
Net premiums earned	$	256,172	$	226,370	$	499,477	$	447,199
Net investment income		2,858		6,179		5,844		13,013
Net realized gains/(losses) on investments		496		168		1,038		467
Net change in unrealized gains/(losses) of equity securities		1,229		3,871		735		(4,153	)
Commission revenue		9,860		7,758		18,986		14,773
Policy fees		6,575		6,546		11,962		12,086
Other revenue		1,991		1,812		3,896		4,594
Total revenues		279,181		252,704		541,938		487,979
EXPENSES
Losses and loss adjustment expenses		167,221		151,345		311,184		286,393
Policy acquisition costs		56,766		48,524		113,224		95,388
Other operating expenses		25,097		25,380		51,062		51,107
Interest expense		38		17		58		69
Total expenses		249,122		225,266		475,528		432,957
Income before income tax expense		30,059		27,438		66,410		55,022
Income tax expense (benefit)		8,118		7,556		18,061		15,073
NET INCOME	$	21,941	$	19,882	$	48,349	$	39,949

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,
	2021			2020			2021			2020
Weighted average common shares outstanding - basic		31,240			32,102			31,224			32,347
Weighted average common shares outstanding - diluted		31,310			32,170			31,292			32,440
Shares outstanding, end of period		31,269			31,853			31,269			31,853
Basic earnings (loss) per common share	$	0.70		$	0.62		$	1.55		$	1.23
Diluted earnings (loss) per common share	$	0.70		$	0.62		$	1.54		$	1.23
Cash dividend declared per common share	$	0.16		$	0.16		$	0.32		$	0.32
Book value per share, end of period	$	15.37		$	16.56		$	15.37		$	16.56
Annualized return on average equity (ROE)		18.7	%		15.6	%		20.7	%		15.5	%

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,
	2021			2020			2021			2020
Premiums
Direct premiums written - Florida	$	400,370		$	334,769		$	707,381		$	613,280
Direct premiums written - Other States		73,257			69,916			131,560			125,958
Direct premiums written - Total	$	473,627		$	404,685		$	838,941		$	739,238
Direct premiums earned	$	392,574		$	337,639		$	768,180		$	663,590
Net premiums earned	$	256,172		$	226,370		$	499,477		$	447,199
Underwriting Ratios - Net
Loss and loss adjustment expense ratio		65.3	%		66.9	%		62.3	%		64.0	%
Policy acquisition cost ratio		22.2	%		21.5	%		22.7	%		21.4	%
Other operating expense ratio^6		9.8	%		11.2	%		10.2	%		11.4	%
General and administrative expense ratio^6		32.0	%		32.6	%		32.9	%		32.8	%
Combined ratio		97.3	%		99.5	%		95.2	%		96.8	%
Other Items
(Favorable)/Unfavorable prior year's reserve development	$	7,731		$	478		$	6,494		$	4,819
Points on the loss and loss adjustment expense ratio		300	bps		21	bps		130	bps		108	bps
^6Expense ratio excludes interest expense.

	As of
	June 30,
	2021		2020
Policies in force
Florida		723,390		696,829
Other States		253,861		240,448
Total		977,251		937,277
Premiums in force
Florida	$	1,345,532	$	1,144,326
Other States		273,044		245,377
Total	$	1,618,576	$	1,389,703
Total Insured Value
Florida	$	200,600,028	$	177,854,339
Other States		112,637,726		99,662,951
Total	$	313,237,754	$	277,517,290

	Three Months Ended June 30, 2021
	Direct		Loss Ratio		Ceded		Loss Ratio		Net		Loss Ratio
Premiums earned	$	392,574			$	136,402			$	256,172
Loss and loss adjustment expenses:
Core losses	$	159,412	40.6	%	$	(78)	(0.1)	%	$	159,490	62.3	%
Weather events^7	—		—	%	—		—	%	—		—	%
Prior year’s reserve development	116,890		29.8	%	109,159		80.0	%	7,731		3.0	%
Total losses and loss adjustment expenses	$	276,302	70.4	%	$	109,081	80.0	%	$	167,221	65.3	%
^7Includes only current year weather events beyond those expected.
	Six Months Ended June 30, 2021
	Direct		Loss Ratio		Ceded		Loss Ratio		Net		Loss Ratio
Premiums earned	$	768,180			$	268,703			$	499,477
Loss and loss adjustment expenses:
Core losses	$	304,640	39.7	%	$	(50)	—	%	$	304,690	61.0	%
Weather events^7	—		—	%	—		—	%	—		—	%
Prior year’s reserve development	208,960		27.2	%	202,466		75.3	%	6,494		1.3	%
Total losses and loss adjustment expenses	$	513,600	66.9	%	$	202,416	75.3	%	$	311,184	62.3	%
^7Includes only current year weather events beyond those expected.

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (in thousands, except for per share data)
	Three Months Ended						Six Months Ended						Guidance
	June 30,						June 30,						Full Year 2021E
	2021			2020			2021			2020
Income (Loss) Before Income Taxes	$	30,059		$	27,438		$	66,410		$	55,022
Adjustments:
Reinstatement premium, net of commissions^8		—			—			—			—
Net unrealized (gains)/losses on equity securities		(1,229	)		(3,871	)		(735	)		4,153
Net realized (gains)/losses on investments		(496	)		(168	)		(1,038	)		(467	)
Interest Expense		38			17			58			69
Total Adjustments		(1,687	)		(4,022	)		(1,715	)		3,755
Non-GAAP Adjusted Operating Income	$	28,372		$	23,416		$	64,695		$	58,777
GAAP Diluted EPS	$	0.70		$	0.62		$	1.54		$	1.23		$ 2.75 - 3.00
Adjustments:
Reinstatement premium, net of commissions^8		—			—			—			—		—
Net unrealized (gains)/losses on equity securities		(0.04	)		(0.12	)		(0.02	)		0.12		—
Net realized (gains)/losses on investments		(0.02	)		(0.01	)		(0.03	)		(0.01	)	—
Total Pre-Tax Adjustments		(0.06	)		(0.13	)		(0.05	)		0.11		—
Income Tax on Above Adjustments		0.01			0.03			0.01			(0.02	)	—
Total Adjustments		(0.05	)		(0.10	)		(0.04	)		0.09		—
Non-GAAP Adjusted EPS	$	0.65		$	0.52		$	1.50		$	1.32		$ 2.75 - 3.00
^8Includes extraordinary reinstatement premiums not covered by reinstatement premium protection and related commissions.