UVE (4.94) posts EPS of $0.21 versus $0.31 y/y. Evidently some surprisingly strong investment returns boosted operating results.
Fort Lauderdale, Fla., May 10, 2010 - Universal Insurance Holdings, Inc. (the Company or Universal) (NYSE AMEX: UVE), a vertically integrated insurance holding company, announced first-quarter 2010 net income of $8.3 million, or $0.21 per diluted share, compared to $12.4 million, or $0.31 per diluted share, in the first quarter of 2009.
The Company experienced a decrease in net income for the 2010 first quarter. The decline was primarily attributable to continuing pressure on the Company’s operating results because of state-mandated wind mitigation credits, increased net losses and LAE, and higher reinsurance costs in the 2009-2010 contract year. Realized gains on investments and foreign currency gains on investments helped offset the decline in net income in the first quarter of 2010. The Company’s investment portfolio generated $3.7 million in realized gains on investments and $0.7 million in foreign currency gains on investments in the first quarter of 2010.
The number of homeowners’ and dwelling fire insurance policies serviced by Universal Property & Casualty Insurance Company (UPCIC), the Company’s wholly-owned subsidiary, and the related growth in direct premiums written increased during the first quarter of 2010. UPCIC’s recent premium rate increases, 14.6 percent statewide for its homeowners’ program and 14.8 percent statewide for its dwelling fire policies, positively affected premiums and profitability. On March 1, 2010, UPCIC began to recoup the mandatory Florida Insurance Guaranty Association (FIGA) assessment of $4.1 million, which nominally contributed to first quarter 2010 results. As 2010 progresses, the Company believes that the premium rate increases and FIGA assessment recovery will positively impact profitability.
In addition, UPCIC continued to grow its policy count, servicing approximately 544,000 homeowners’ and dwelling fire insurance policies as of March 31, 2010, up from 541,000 policies at December 31, 2009, and 498,000 policies at March 31, 2009. The increase in the number of policies in-force is the result of heightened relationships with existing agents, an increase in the number of new agents, continued expansion within Florida and in South Carolina, North Carolina, and Hawaii. Within South Carolina, North Carolina, and Hawaii, UPCIC had approximately 5,200 policies totaling approximately $7.4 million of in-force premiums at March 31, 2010.
Net premiums earned decreased 11.8 percent in the first quarter of 2010 compared to the same quarter in 2009. Net losses and LAE increased 15.8 percent to $23.7 million from $20.4 million in the first quarter of 2009. While there was an absence of incurred net losses and LAE related
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to adverse weather events during the first quarter of 2010, the Company incurred an increase in net losses and LAE in connection with the servicing of additional policies.
First-quarter 2010 general and administrative expenses increased 38.1 percent to $10.4 million from $7.5 million in the 2009 first quarter. The increase in general and administrative expenses was primarily attributable to lower ceding commissions, a reduction in the amount recouped from policyholders relative to assessments by FIGA, and an increase in commissions paid or accrued to agents on direct premiums. The increase was partially offset by the increased deferral of policy acquisition costs.
At March 31, 2010, stockholders’ equity increased to $114.6 million from $113.3 million at December 31, 2009, representing growth of 1.2 percent. As of March 31, 2010, UPCIC’s statutory capital and surplus was $111.3 million versus $87.8 at December 31, 2009. The increase in statutory capital at March 31, 2010, compared to December 31, 2009, is the result of a $30 million contribution from Universal Insurance Holdings to UPCIC in March 2010.
Investment Portfolio Update
Realized gains on investments increased to $3.7 million for the three-month period ended March 31, 2010, from $1.1 million for the same period ended March 31, 2009. Foreign currency gains on investments increased to $0.7 million for the three-month period ended March 31, 2010. There were no foreign currency gains on investments during the same period ended 2009. The increase in realized gains on investments and foreign currency gains on investments is the result of the expansion of the Company’s investment portfolio into fixed securities and equity securities and the related sales of certain of these securities.
As of March 31, 2010, the Company’s investments in equity securities and fixed maturities totaled $132.5 million, compared to $114.8 million at December 31, 2009. At March 31, 2010, approximately 49.9 percent of the investments were in equity securities considered available for sale and 50.1 percent were in fixed maturities available for sale. As of March 31, 2010, the Company’s investment portfolio contained $4.3 million of pre-tax net unrealized losses.
Office Expansion
On April 30, 2010, the Company purchased a 9,000 square foot building for approximately $1.0 million in cash located adjacent to its home office in Fort Lauderdale, Florida, which it intends to use as additional home office space. The Company plans to occupy the building by the first quarter of 2011.
UPCIC Expansion Plans
As announced in March 2010, UPCIC continues to explore expansion opportunities in Maryland, Massachusetts, New Jersey, New York, and Virginia. There is no assurance that the Company will be successful in obtaining these licenses and no prediction of when, if licensed, the Company will commence operations in any of these states. The expansion plans follow the Company’s efforts to further diversify and create additional growth opportunities reflective of UPCIC’s expansion in South Carolina, North Carolina, and Hawaii, where it currently writes property and casualty insurance, and into Georgia, where it is approved to write property and
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casualty insurance pending the approval of its rates and forms by the Georgia Department of Insurance.
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