VIC's UVE right up replete with errors, here are just a few:
Paragraph 1: "At its current market cap around $500mm, UVE trades at 2.7X Price/Book which is higher than any other P&C insurance company in the market that I could find"
The Author mentions only two other insurance companies in the article. One is HCI, which has a price to book of 3.14, higher than UVE. Another big competitor to UVE in the Florida Ins market is FNHC which also has a higher Price to Book (over three) as of yesterday. Sor, for the Florida market, UVE's tangible book is not extraordinarly.
Paragraph 3: "Over the past couple years,...UVE has been able to boost their revenues and profits by using “take-outs” where insurers can take over policies from Citizens in bulk and cherry pick profitable policies: effectively a loophole allowing a wealth transfer from the tax payer to these private companies."
Actually, UVE has for the most part stopped doing that. When they fired their CEO a few years ago as part of their restructuring; they decided to cull unfavorable policies and not write new ones until they were able to dump the riskier policies on their books. They participated in one takeout in 2013 where they were approved for up to 25,000 policies, and are scheduled to participate in one in '14 for up to 17,000 policies. Far less than many of their competitors. Thats up to 42,000 policies over the past two years. But you dont convert all of them. Assuming they end up taking out half, thats an average of 10,000 policies a year added, or less than 2% per of their base per year. Not much of a revenue boost.
Paragraph 4: "More importantly for the timing of this short – the TTM comps are just about to roll off so I would expect to see financials reverse from growing to shrinking revenues and profits. The bulls who are extrapolating growth will find themselves highly disappointed in the near future. "
I think the author is looking at a different company then UVE. Since UVE has been looking to increase the quality of their Florida poliices, their policy count in Florida has been flat to down over the past several years. So revenues cant change from growing to shrinking....and expectations are to only rise slightly. The only growth expected is from o/s Florida.
Paragraph 5: "*Just after I wrote this draft* UVE did just participate in a recent large round of take-outs that will go into effect for ...November where they can take out up to 51,293 policies"
Again, I think the author is confused by the name off the company. UVE is Universal Insurance. They are scheduled to take out up to 17,000, not 51,293. The 51293 is for a different company, United Insurance.
All the negatives at the end, including the fine and trading gold stocks...were done before the firing of their prior CEO. New management has addressed these issues.....they hired an outside management firm to handle all their equity holding, and no longer have any inluence.
Tons more, but thats all I have time for.
best.
AI
