Universal Insurance Holdings Inc (UVE) filed Quarterly Report for the period ended 2009-09-30.
Universal Insurance Holdings Inc. through its wholly-owned subsidiary Universal Property & Casualty Insurance Company (UPCIC) is currently engaged in insurance underwriting distribution and claims. UPCIC generates revenue from the collection and investment of premiums. The Company's agency operations which include Universal Florida Insurance Agency and U.S. Insurance Solutions Inc. generate income from policy fees commissions premium financing referral fees and the marketing of ancillary services. Universal Insurance Holdings Inc has a market cap of $235.8 million; its shares were traded at around $6.12 with a P/E ratio of 7 and P/S ratio of 6.3. The dividend yield of Universal Insurance Holdings Inc stocks is 7.8%.
Highlight of Business Operations:
As of September 30, 2009 and December 31, 2008, the Company had federal and state income taxes recoverable of $907,597 and $2,482,923, respectively. The change in the recoverable consisted primarily of the current year provision for income taxes in the amount of $16,127,712 and estimated tax payments of $14,149,000. Results of Operations - Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008 Net income decreased 3.9% to $31,590,908 for the nine-month period ended September 30, 2009 from $32,879,120 for the nine-month period ended September 30, 2008. The Company’s earnings per diluted share were $0.78 for the 2009 period versus $0.81 in the same period last year. Even though there was an increase in the number of homeowners’ and dwelling fire insurance policies serviced by the Company and increases in direct premiums written during the nine-month period ending September 30, 2009, the Company experienced a decrease in net income during this period due primarily to increases in ceded premiums earned and losses and loss adjustment expenses incurred as described below. Comprehensive income increased 10.0% to $36,181,813 for the nine-month period ended September 30, 2009 from $32,879,120 for the nine-month period ended September 30, 2008 as a result of the aforementioned decrease in net income and an increase in the change in net unrealized gains on investments, net of tax, of $4,590,905 that comprises an increase in net unrealized gains of $7,474,001, net of taxes of $2,883,096. The change in net unrealized gains on investments, net of tax, relate to market value fluctuations within the Company’s investment portfolio during the nine-month period ended September 30, 2009. The Company had no realized gains on investments or changes in unrealized gains on investments during the three-month period ended September 30, 2008 as the Company did not hold any fixed maturities or equity securities during that period. Direct premiums written increased 10.7% to $436,610,689 during the nine-month period ending September 30, 2009 from $394,304,531 in the same period of 2008. As of September 30, 2009 and December 31, 2008, UPCIC was servicing approximately 536,000 and 461,000 homeowners’ and dwelling fire insurance policies, respectively, with in-force premiums of approximately $563,000,000 and $518,200,000, respectively. Net premiums earned decreased 1.3% to $107,892,126 for the nine-month period ended September 30, 2009 from $109,340,138 for the nine-month period ended September 30, 2008. The decrease is due to a decrease in net premiums written. The higher volume of state-
required wind mitigation premium discounts had a significant negative effect on the Company’s premium volume and net income. On October 19, 2009, UPCIC received approval for a premium rate increase for its homeowner’s program within the State of Florida. The premium rate increase, which will average approximately 14.6 percent statewide, was approved by the OIR. The effective dates for the premium rate increase are October 22, 2009 for new business and December 11, 2009 for renewal business. UPCIC expects the approved premium rate increases to have a favorable effect on premiums written and earned in future months as new and renewal policies are written at the higher rates. On November 3, 2009, UPCIC received approval for a premium rate increase for its dwelling fire program within the State of Florida. The premium rate increase, which will average approximately 14.8 percent statewide, was approved by the OIR. The effective dates for the premium rate increase are November 5, 2009 for new business and December 29, 2009 for renewal business. UPCIC expects the approved premium rate increases to have a favorable effect on premiums written and earned in future months as new and renewal policies are written at the higher rates. Although total direct premiums earned increased 6.2% in the nine-month 2009 period compared to the same period in 2008, the average premium per policy decreased significantly due to the previously described rate decreases and wind mitigation credits. As of September 30, 2009, UPCIC was servicing approximately 536,000 homeowners’ and dwelling fire insurance policies with in-force premiums of approximately $563,000,000, or an average of $1,050 per policy. The comparable average in-force premium per policy as of September 30, 2008 was $1,151. Consequently, as a result of increased losses and LAE in connection with the servicing of additional policies, the direct loss and LAE ratio increased significantly for the 2009 period. The Company expects the aforementioned premium rate increases approved by OIR to favorably effect the amount of in-force premium per policy as new and renewal policies are written at the higher rates. Net investment income decreased 61.8% to $1,385,007 for the nine-month period ended September 30, 2009 from $3,628,472 for the nine-month period ended September 30, 2008. Net investment income is comprised primarily of interest and dividends. The decrease is primarily due to a change in the composition of the Company’s investment portfolio during the nine-month period ended September 30, 2009. Realized gains on investments increased to $13,588,681 for the nine-month period ended September 30, 2009 from $0 for the nine-month period ended September 30, 2008. The increase is due to the expansion of the Company’s investment portfolio into fixed maturities and equity securities and the related sales of certain of these securities.
Foreign currency gains on investments increased to $6,156,945 for the nine-month period ended September 30, 2009 from $0 for the nine-month period ended September 30, 2008. The increase is due to the expansion of the Company’s investment portfolio into foreign-denominated fixed maturities and equity securities and the related sales of certain of these securities. Commission revenue increased 14.1% to $23,413,086 for the nine-month period ended September 30, 2009 from $20,526,922 for the nine-month period ended September 30, 2008. Commission revenue is comprised principally of the managing general agent’s policy fee income and service fee income on all new and renewal insurance policies, reinsurance commission sharing agreements, and commissions generated from agency operations. The increase is primarily attributable to an increase in managing general agent’s policy fee income of approximately $1,786,000 and an increase in reinsurance commission sharing of $1,116,000. Other revenue increased 15.2% to $4,214,347 for the nine-month period ended September 30, 2009 from $3,658,373 for the nine-month period ended September 30, 2008. The increase is primarily due to a higher volume of fees earned on payment plans offered to policyholders by UPCIC. Net losses and LAE increased 27.5% to $68,695,552 for the nine-month period ended September 30, 2009 from $53,861,445 for the nine-month period ended September 30, 2008. During the third quarter of 2008, the Company incurred net losses and LAE of approximately $2.9 million related to tropical storm Fay. While there was an absence of incurred net losses and LAE related to adverse weather events during the third quarter of 2009, the Company incurred an increase in net losses and LAE in connection with the servicing of additional policies. The net loss and LAE ratios, or net losses and LAE as a percentage of net earned premiums, were 63.7% and 49.3% during the nine-month periods ended September 30, 2009 and 2008, respectively, and were comprised of the following components:
Results of Operations - Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008 Net income increased 56.2% to $11,514,520 for the three-month period ended September 30, 2009 from $7,372,654 for the three-month period ended September 30, 2008. The Company’s earnings per diluted share were $0.28 for the 2009 period versus $0.19 in the same period last year. There was an increase in the number of homeowners’ and dwelling fire insurance policies serviced by the Company and increases in direct premiums written during the three-month period ending September 30, 2009. Comprehensive income increased 6.8% to $7,876,449 for the three-month period ended September 30, 2009 from $7,372,654 for the three-month period ended September 30, 2008 as a result of the aforementioned increase in net income and a decrease in net unrealized gains on investments, net of tax, of $3,638,071. Certain unrealized gains on investments, as of June 30, 2009, were realized in the third quarter as those securities were sold and the gains were then realized. Additionally, the change in net unrealized gains on investments, net of tax, was also impacted by market value fluctuations within the Company’s investment portfolio during the three-month period ended September 30, 2009. Net unrealized gains as of September 30, 2009 were $7,474,001 as compared to $13,450,772 as of June 30, 2009, a decrease of $5,976,771. Income taxes on unrealized gains as of September 30, 2009 were $2,883,096 as compared to $5,221,796 as of June 30, 2009, a decrease of $2,338,700. The Company had no realized gains on investments or changes in unrealized gains on investments during the three-month period ended September 30, 2008 as the Company did not hold any fixed maturities or equity securities during that period. Direct premiums written increased 7.9% to $134,626,400 during the three-month period ending September 30, 2009 from $124,718,631 in the same period of 2008. As of September 30, 2009 and December 31, 2008, UPCIC was servicing approximately 536,000 and 461,000 homeowners’ and dwelling fire insurance policies, respectively, with in-force premiums of approximately $563,000,000 and $518,200,000, respectively. Net premiums earned decreased 14.0% to $32,757,736 fo
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