Universal Insurance Holdings, Inc. Reports Second-Quarter 2012 Financial Results

Wed Aug 8, 2012 3:05pm EDT

* Reuters is not responsible for the content in this press release.

  FORT LAUDERDALE, FL, Aug 08 (Marketwire) -- 
Universal Insurance Holdings, Inc. (the Company or Universal) (NYSE MKT:
UVE), a vertically integrated insurance holding company, reported net
income of $7.8 million, or $0.19 per diluted share, for the second
quarter of 2012, compared to net income of $7.5 million, or $0.19 per
diluted share, for the same period in 2011. 

    Second-Quarter 2012 Results
 Net income during the second quarter of 2012
remained relatively flat increasing by 3 percent compared to the same
quarter last year, while diluted earnings per share for both quarters was
constant at $0.19. During the second quarter of 2012, the Company saw
growth in premiums earned and commission revenue, which was largely
offset by increased operating costs and expenses. Additionally,
profitability was moderated as a result of weaker performance in the
investment trading portfolio compared to the same period of 2011. For the
second quarter of 2012, the Company's investment trading portfolio
performance resulted in a decrease in income before income taxes of $7.5
million compared to a $6.7 million decrease for the second quarter of
2011. 

    Direct premiums written collectively by Universal Property & Casualty
Insurance Company (UPCIC) and American Platinum Property and Casualty
Insurance Company (APPCIC), the Company's wholly-owned insurance company
subsidiaries, rose by 4.3 percent during the second quarter of 2012
compared to the same period of 2011. The premium rate increases over the
past 24 months for UPCIC's homeowners insurance program within the state
of Florida continue to flow through UPCIC's book of business. The most
recent premium rate increases, which average approximately 14.9 percent
statewide for its homeowners program and 8.8 percent statewide for its
dwelling fire program, were effective January 9, 2012, for new business
and February 28, 2012, for renewal business. 

    At the end of the 2012 second quarter, the Company's insurance company
subsidiaries serviced approximately 574 thousand homeowners and dwelling
fire insurance policies compared to 584 thousand at March 31, 2012, and
591 thousand at June 30, 2011. Of the total policy count, UPCIC had
approximately 19 thousand policies totaling approximately $19 million of
in-force premiums at June 30, 2012, in North Carolina, South Carolina,
Hawaii and Georgia, combined.

    Net premiums earned grew 12.5 percent in the second quarter of 2012
compared to the same quarter in 2011, primarily as a result of increases
in premium rates over the past 24 months, the most recent of which were
in January and February of 2012. These rate increases, along with
strategic initiatives the Company has undertaken to manage its exposure
such as the decision not to renew certain policies, have resulted in a
moderate reduction in the number of policies in force even as direct
written premiums have increased. The benefit from the rate increases was
also partially offset by wind mitigation credits within the state of
Florida.

    Commission revenue increased by $1.2 million, or 24.1 percent, to $6.1
million, and reflects an increase in ceded earned premium and a change in
terms for the reinsurance contract periods that were in effect during the
second quarter of 2012 as compared to the same period in 2011. 

    Second-quarter 2012 operating costs increased compared to the same
quarter last year, as net losses and loss adjustment expenses (LAE)
increased $3.6 million, or 13.9 percent, due primarily to an increase in
direct losses incurred per exposure. Meanwhile, the loss and LAE ratio
for the second quarter of 2012 was 52.9 percent compared to 52.2 percent
for the same period in 2011. This reflects an increase in net losses and
LAE proportionately larger than the increase in net earned premiums. 

    General and administrative expenses increased by $2.8 million, or 19.0
percent. The increase in general and administrative expenses was due
primarily to factors related to net deferred policy acquisition costs.
The reduction in the amount of ceding commissions received from quota
share reinsurers under the 2012-2013 reinsurance program effectively
increased the amount of net deferred policy acquisition costs and related
amortization. In addition, the Company is charging certain costs directly
to earnings that were previously capitalized under the superseded FASB
guidance which governed how the Company accounted for deferred policy
acquisition costs until January 1, 2012.

    At June 30, 2012, stockholders' equity was $161.8 million compared to
$156.6 million at March 31, 2012, and $158.2 million at June 30, 2011. 

    Investment Portfolio Update
 As of June 30, 2012, the fair value of the
Company's investment securities was $85.6 million compared to $100.8
million at March 31, 2012. At June 30, 2012, 95.4 percent of the
investment securities were equity securities. 

    UPCIC Expansion Update
 On August 1, 2012, UPCIC announced that it bound
its first homeowners insurance policy in Massachusetts. The expansion
marks the sixth state where UPCIC writes homeowners insurance and
continues Universal's strategy for additional expansion beyond the state
of Florida. 

    Reinsurance Program Update
 The Company has reduced the percentage of
premiums ceded by UPCIC to its quota share reinsurer to 45 percent under
the reinsurance program which became effective June 1, 2012, from 50
percent under the prior year quota share contract effective June 1, 2011
through May 31, 2012. The Company's intent is to increase its
profitability over the contract term by ceding 5 percent less premium to
its quota share reinsurer. The reduction of cession rate also decreases
the amount of losses and loss adjustment expenses that may be ceded by
UPCIC and effectively increases the amount of risk retained by UPCIC and
the Company. The reduction of cession rate also reduces the amount of
ceding commissions earned from the Company's quota share reinsurer during
the contract term and decreased the amount of deferred ceding commission,
as of June 30, 2012, that is a component of net deferred policy
acquisition costs.

    Cash Dividends
 On April 23, 2012, the Company announced that its board
of directors declared a cash dividend of $0.08 per share, which was paid
on July 9, 2012, to shareholders of record on June 26, 2012. At that
time, the board further indicated that it expects to declare additional
quarterly dividends in the same amount to shareholders of record in the
third and fourth quarters of 2012. If declared and paid as intended, the
annual dividend in 2012 would be $0.34 for each common share, which
includes the $0.10 per share dividend paid on April 6, 2012. 

    First Six-Months 2012 Results 
 For the first six months of 2012, the
Company's net income and diluted earnings per share decreased by $3.8
million and $0.09, respectively, compared to the same period of 2011. The
decrease is primarily attributable to weaker performance in the
investment trading portfolio and increases in the amount of operating
costs and expenses, partially offset by increases in earned premium and
commission revenue. For the first six months of 2012, the Company's
investment portfolio trading performance resulted in a decrease in income
before income taxes of $5.8 million compared to a $0.4 million decrease
for the same period of 2011. 

    Net premiums earned increased 7.0 percent for the first six months of
2012 compared to the same period of 2011, primarily as a result of the
previously mentioned rate increases, which have had a positive effect on
premium generated by renewal policies. These rate increases, along with
strategic initiatives the Company has undertaken to manage its exposure
such as the decision not to renew certain policies, have resulted in a
moderate reduction in the number of policies in force even as direct
written premiums have increased. The benefit from the rate increases
continued to be partially offset by wind mitigation credits within the
state of Florida. 

    Commission revenue increased by $1.6 million, or 17.0 percent, to $10.7
million and reflects an increase in ceded earned premium for the
reinsurance contract periods that were in effect during the first six
months of 2012 compared to the same period in 2011. 

    Meanwhile, first six-months 2012 operating costs and expenses were higher
compared to the same period of 2011, as net losses and LAE increased 6.9
percent and general and administrative expenses increased 18.7 percent.
The increase in net losses and LAE of $3.6 million was due primarily to
an increase in direct losses incurred per exposure. Despite the increase,
the net loss and LAE ratio remained relatively flat at 53.3 percent in
the first six months of 2012 compared to 53.4 percent in the same period
of 2011, a result of the increase in premiums earned in the first half of
2012. The $5.6 million increase in general and administrative expenses
was due primarily to factors related to net deferred policy acquisition
costs. The reduction in the amount of ceding commissions received from
quota share reinsurers under the 2012-2013 reinsurance program
effectively increased the amount of net deferred policy acquisition costs
and related amortization. In addition, the Company is charging certain
costs directly to earnings that were previously capitalized under the
superseded FASB guidance which governed how the Company accounted for
deferred policy acquisition costs until January 1, 2012.

    About Universal Insurance Holdings, Inc.
 Universal Insurance Holdings,
Inc. is a vertically integrated insurance holding company which, through
its subsidiaries, covers substantially all aspects of insurance
underwriting, distribution, claims processing and exposure management.
Universal Property & Casualty Insurance Company (UPCIC), a wholly owned
subsidiary of the Company, is one of the three leading writers of
homeowners insurance in Florida and is now fully licensed and has
commenced its operations in North Carolina, South Carolina, Hawaii,
Georgia and Massachusetts. American Platinum Property and Casualty
Insurance Company (APPCIC), also a wholly owned subsidiary, currently
writes homeowners multi-peril and inland marine insurance on Florida
homes valued in excess of $1 million, which are limits and coverages
currently not targeted through its affiliate UPCIC. For additional
information on the Company, please visit our investor relations website
at www.universalinsuranceholdings.com.

    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 Securities and Exchange Commission, including the Form 10-K for the
year ended December 31, 2011 and the Form 10-Q for the quarter ended June
30, 2012.

            UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
   CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
                   (in thousands, except per share data)

                                     Three Months Ended   Six Months Ended
                                          June 30,            June 30,
                                    ------------------- ------------------- 
                                       2012      2011      2012      2011
                                    --------- --------- --------- --------- 
PREMIUMS EARNED AND OTHER REVENUES
Direct premiums written             $ 222,568 $ 213,479 $ 412,571 $ 386,654 
Ceded premiums written               (102,433) (145,798) (265,867) (269,689)
                                    --------- --------- --------- --------- 
Net premiums written                  120,135    67,681   146,704   116,965 
Change in net unearned premium        (64,441)  (18,157)  (42,370)  (19,437)
                                    --------- --------- --------- --------- 
  Premiums earned, net                 55,694    49,524   104,334    97,528 
  Net investment income (expense)         (16)      (21)      (52)      236 
  Net realized gains (losses) on
   investments                         (1,705)    2,960    (9,154)    6,612 
  Net unrealized gains (losses) on
   investments                         (5,788)   (9,640)    3,399    (7,052)
  Net foreign currency gains
   (losses) on investments                  -         -        23        71 
  Commission revenue                    6,131     4,941    10,672     9,121 
  Policy fees                           4,072     4,402     7,973     8,575 
  Other revenue                         1,540     1,506     2,980     2,914 
                                    --------- --------- --------- --------- 
Total premiums earned and other
 revenues                              59,928    53,672   120,175   118,005 
                                    --------- --------- --------- --------- 

OPERATING COSTS AND EXPENSES
  Losses and loss adjustment
   expenses                            29,437    25,852    55,611    52,037 
  General and administrative
   expenses                            17,499    14,699    35,343    29,771 
                                    --------- --------- --------- --------- 
Total operating costs and expenses     46,936    40,551    90,954    81,808 
                                    --------- --------- --------- --------- 

INCOME BEFORE INCOME TAXES             12,992    13,121    29,221    36,197 

  Income taxes, current                 9,086     9,622     9,860    18,359 
  Income taxes, deferred               (3,871)   (4,050)    1,711    (3,609)
                                    --------- --------- --------- --------- 
    Income taxes, net                   5,215     5,572    11,571    14,750 
                                    --------- --------- --------- --------- 
NET INCOME AND COMPREHENSIVE INCOME $   7,777 $   7,549 $  17,650 $  21,447 
                                    ========= ========= ========= ========= 

Basic earnings per common share     $    0.20 $    0.19 $    0.44 $    0.55 
                                    ========= ========= ========= ========= 
Weighted average of common shares
  outstanding - Basic                  39,668    39,187    39,528    39,187 
                                    ========= ========= ========= ========= 

Fully diluted earnings per common
 share                              $    0.19 $    0.19 $    0.44 $    0.53 
                                    ========= ========= ========= ========= 
Weighted average of common shares
  outstanding - Diluted                40,377    40,645    40,460    40,657 
                                    ========= ========= ========= ========= 

Cash dividend declared per common
 share                              $    0.08 $       - $    0.18 $    0.10 
                                    ========= ========= ========= ========= 

            UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
                   (in thousands, except per share data)

                                                           As of
                                                --------------------------- 
                                                   June 30,    December 31, 
ASSETS:                                              2012          2011
                                                ------------- ------------- 
Cash and cash equivalents                       $     356,325 $     229,685 
Restricted cash and cash equivalents                   74,274        78,312 
Fixed maturities, at fair value                         3,913         3,801 
Equity securities, at fair value                       81,713        95,345 
Prepaid reinsurance premiums                          247,835       243,095 
Reinsurance recoverables                              115,459        85,706 
Reinsurance receivable, net                           125,664        55,205 
Premiums receivable, net                               56,377        45,828 
Receivable from securities sold                           594         9,737 
Other receivables                                       3,631         2,732 
Property and equipment, net                             8,915         7,116 
Deferred policy acquisition costs, net                 17,744        12,996 
Income taxes recoverable                                  624             - 
Deferred income tax asset, net                         21,280        22,991 
Other assets                                            1,825         1,477 
                                                ------------- ------------- 
    Total assets                                $   1,116,173 $     894,026 
                                                ============= ============= 

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Unpaid losses and loss adjustment expenses      $     164,625 $     187,215 
Unearned premiums                                     406,952       359,842 
Advance premium                                        25,606        19,390 
Accounts payable                                        5,342         4,314 
Bank overdraft                                         27,650        25,485 
Payable for securities purchased                        1,239         1,067 
Reinsurance payable                                   273,787        87,497 
Income taxes payable                                    1,331        12,740 
Dividends payable to shareholders                       3,214             - 
Other liabilities and accrued expenses                 23,710        24,780 
Long-term debt                                         20,956        21,691 
                                                ------------- ------------- 
    Total liabilities                                 954,412       744,021 
                                                ------------- ------------- 

STOCKHOLDERS' EQUITY:
Cumulative convertible preferred stock, $.01 par
 value                                                      1             1 
  Authorized shares - 1,000
  Issued shares - 108
  Outstanding shares - 108
  Minimum liquidation preference, $2.66 per
   share
Common stock, $.01 par value                              412           411 
  Authorized shares - 55,000
  Issued shares - 41,189 and 41,100
  Outstanding shares - 40,171 and 40,082
  Treasury shares, at cost - 1,018                     (3,101)       (3,101)
Additional paid-in capital                             38,126        36,536 
Retained earnings                                     126,323       116,158 
                                                ------------- ------------- 
    Total stockholders' equity                        161,761       150,005 
                                                ------------- ------------- 
    Total liabilities and stockholders' equity  $   1,116,173 $     894,026 
                                                ============= ============= 

    


Investor Contact:
Philip Kranz
Dresner Corporate Services
312-780-7240
pkranz@dresnerco.com 

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