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Form 10-Q UNIVERSAL INSURANCE HOLD For: Jun 30

July 29, 2022 4:34 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________
FORM 10-Q
________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 001-33251
________________________________________________________

uve-20220630_g1.jpg
UNIVERSAL INSURANCE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
________________________________________________________
Delaware65-0231984
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
1110 W. Commercial Blvd., Fort Lauderdale, Florida 33309
(Address of principal executive offices) (Zip Code)
(954) 958-1200
(Registrant’s telephone number, including area code)
________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par ValueUVENew York Stock Exchange
    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   

    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No   

    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”


“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer  
Smaller reporting company
Emerging growth company
                
    If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)      Yes      No  

    Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 30,716,005 shares of common stock, par value $0.01 per share, outstanding on July 25, 2022.




UNIVERSAL INSURANCE HOLDINGS, INC.
TABLE OF CONTENTS
Page No.

2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of
Universal Insurance Holdings, Inc.
Fort Lauderdale, Florida

RESULTS OF REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


We have reviewed the accompanying condensed consolidated balance sheet of Universal Insurance Holdings, Inc. and its wholly-owned subsidiaries (the “Company”) as of June 30, 2022 and the related condensed consolidated statements of income, comprehensive income, and stockholders’ equity for the three-month and six-month periods ended June 30, 2022 and 2021 and the related condensed consolidated statement of cash flows for the six-month periods ended June 30, 2022 and 2021. Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of Universal Insurance Holdings, Inc. as of December 31, 2021 and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended (not presented herein) and we expressed an unqualified audit opinion on those consolidated financial statements in our report dated February 28, 2022. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

BASIS FOR REVIEW RESULTS

These interim financial statements are the responsibility of the Company’s management. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

/s/ Plante & Moran, PLLC
East Lansing, Michigan
July 29, 2022

3

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except per share data)
 As of
June 30,December 31,
20222021
ASSETS
Available-for-sale debt securities, at fair value, net of allowance for credit loss of $672 and $489 (amortized cost: $1,138,190 and $1,061,192)
$1,021,006 $1,040,455 
Equity securities, at fair value (cost: $95,941 and $51,151)
79,844 47,334 
Investment real estate, net5,798 5,891 
Total invested assets1,106,648 1,093,680 
Cash and cash equivalents316,952 250,508 
Restricted cash and cash equivalents20,125 2,635 
Prepaid reinsurance premiums590,093 240,993 
Reinsurance recoverable33,344 185,589 
Premiums receivable, net79,309 64,923 
Property and equipment, net54,027 53,682 
Deferred policy acquisition costs110,983 108,822 
Income taxes recoverable22,293 16,947 
Deferred income tax asset, net30,262 16,331 
Other assets18,732 22,031 
Total assets$2,382,768 $2,056,141 
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Unpaid losses and loss adjustment expenses$186,349 $346,216 
Unearned premiums943,369 857,769 
Advance premium86,271 53,694 
Book overdraft 26,759 
Reinsurance payable, net637,846 188,662 
Commission payable25,946 22,315 
Other liabilities and accrued expenses33,275 27,348 
Long-term debt, net103,161 103,676 
Total liabilities2,016,217 1,626,439 
Commitments and Contingencies (Note 12)
STOCKHOLDERS’ EQUITY:
Cumulative convertible preferred stock, $0.01 par value
  
Authorized shares - 1,000
Issued shares - 10 and 10
Outstanding shares - 10 and 10
Minimum liquidation preference, $9.99 and $9.99 per share
Common stock, $0.01 par value
471 470 
Authorized shares - 55,000
Issued shares - 47,116 and 47,018
Outstanding shares - 30,716 and 31,221
Treasury shares, at cost - 16,400 and 15,797
(234,496)(227,115)
Additional paid-in capital110,089 108,202 
Accumulated other comprehensive income (loss), net of taxes(88,134)(15,568)
Retained earnings578,621 563,713 
Total stockholders’ equity366,551 429,702 
Total liabilities and stockholders’ equity$2,382,768 $2,056,141 

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
4

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(in thousands, except per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
REVENUES
Direct premiums written$532,527 $473,627 $929,008 $838,941 
Change in unearned premium(103,722)(81,053)(85,600)(70,761)
Direct premium earned428,805 392,574 843,408 768,180 
Ceded premium earned(151,744)(136,402)(297,283)(268,703)
Premiums earned, net277,061 256,172 546,125 499,477 
Net investment income5,221 2,858 9,263 5,844 
Net realized gains (losses) on investments(725)496 (667)1,038 
Net change in unrealized gains (losses) of equity securities(8,884)1,229 (12,280)735 
Commission revenue11,404 9,860 22,565 18,986 
Policy fees5,940 6,575 10,719 11,962 
Other revenue1,989 1,991 3,763 3,896 
Total revenues292,006 279,181 579,488 541,938 
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses200,304 167,221 385,410 311,184 
General and administrative expenses79,291 81,866 157,588 164,289 
Total operating costs and expenses279,595 249,087 542,998 475,473 
Interest and amortization of debt issuance costs1,731 35 3,339 55 
INCOME (LOSS) BEFORE INCOME TAXES10,680 30,059 33,151 66,410 
Income tax expense (benefit)3,310 8,118 8,244 18,061 
NET INCOME (LOSS)$7,370 $21,941 $24,907 $48,349 
Basic earnings (loss) per common share$0.24 $0.70 $0.80 $1.55 
Weighted average common shares outstanding - Basic30,829 31,240 30,987 31,224 
Diluted earnings (loss) per common share$0.24 $0.70 $0.80 $1.54 
Weighted average common shares outstanding - Diluted30,883 31,310 31,060 31,292 
Cash dividend declared per common share$0.16 $0.16 $0.32 $0.32 


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Net income (loss)$7,370 $21,941 $24,907 $48,349 
Other comprehensive income (loss), net of taxes(29,656)7,996 (72,566)(8,914)
Comprehensive income (loss)$(22,286)$29,937 $(47,659)$39,435 
The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
5

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (unaudited)
(in thousands, except per share data) 

Treasury SharesCommon
Shares
Issued
Preferred
Shares
Issued
Common
Stock
Amount
Preferred
Stock
Amount
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Shares,
at Cost
Total
Stockholders’
Equity
Balance, December 31, 2021(15,797)47,018 10 $470 $ $108,202 $563,713 $(15,568)$(227,115)$429,702 
Vesting of performance share units(9)
(1)
33 — 1 — (1)— — (104)(104)
Vesting of restricted stock units(6)
(1)
27 — — — — — — (105)(105)
Retirement of treasury shares15 
(1)
(15)— — — (209)— — 209  
Purchases of treasury stock(320)— — — — — — — (3,879)(3,879)
Share-based compensation— — — — — 1,107 — — — 1,107 
Net income— — — — — — 17,537 — — 17,537 
Other comprehensive loss, net of taxes— — — — — — — (42,910)— (42,910)
Declaration of dividends
($0.16 per common share and
$0.25 per preferred share)
— — — — — — (5,007)— — (5,007)
Balance, March 31, 2022(16,117)47,063 10 471  109,099 576,243 (58,478)(230,994)396,341 
Grant of restricted stock awards— 53 — — — — — — —  
Purchases of treasury stock(283)— — — — — — — (3,502)(3,502)
Share-based compensation— — — — — 990 — — — 990 
Net income— — — — — — 7,370 — — 7,370 
Other comprehensive income, net of taxes— — — — — — — (29,656)— (29,656)
Declaration of dividends
($0.16 per common share and
$0.25 per preferred share)
— — — — — — (4,992)— — (4,992)
Balance, June 30, 2022(16,400)47,116 10 $471 $ $110,089 $578,621 $(88,134)$(234,496)$366,551 
(1) All shares acquired represent shares tendered to cover the strike price for options and tax withholdings on the intrinsic value of options exercised, restricted stock vested, performance share units vested, or restricted stock units vested. These shares have been cancelled by the Company.

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
6

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)
(in thousands, except per share data) 

Treasury SharesCommon
Shares
Issued
Preferred
Shares
Issued
Common
Stock
Amount
Preferred
Stock
Amount
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Shares,
 at Cost
Total
Stockholders’
Equity
Balance, December 31, 2020(15,680)46,817 10 $468 $ $103,445 $567,512 $3,343 $(225,506)$449,262 
Vesting of performance share units(16)
(1)
62 — — — — — — (241)(241)
Vesting of restricted stock units(17)
(1)
65 — 1 — (1)— — (254)(254)
Retirement of treasury shares33 
(1)
(33)— — — (495)— — 495  
Purchases of treasury stock(15)— — — — — — — (245)(245)
Share-based compensation— — — — — 1,675 — — — 1,675 
Net income— — — — — — 26,408 — — 26,408 
Other comprehensive loss, net of taxes— — — — — — — (16,910)— (16,910)
Declaration of dividends
($0.16 per common share and
$0.25 per preferred share)
— — — — — — (5,030)— — (5,030)
Balance, March 31, 2021(15,695)46,911 10 469  104,624 588,890 (13,567)(225,751)454,665 
Vesting of restricted stock units(20)
(1)
73 — 1 — (1)— — (288)(288)
Retirement of treasury shares20 
(1)
(20)— — — (288)— — 288  
Share-based compensation— — — — — 1,569 — — — 1,569 
Net income— — — — — — 21,941 — — 21,941 
Other comprehensive income, net of taxes— — — — — — — 7,996 — 7,996 
Declaration of dividends
($0.16 per common share and
$0.25 per preferred share)
— — — — — — (5,041)— — (5,041)
Balance, June 30, 2021(15,695)46,964 10 $470 $ $105,904 $605,790 $(5,571)$(225,751)$480,842 
(1)
All shares acquired represent shares tendered to cover the strike price for options and tax withholdings on the intrinsic value of options exercised, restricted stock vested, performance share units vested, or restricted stock units vested. These shares have been cancelled by the Company.

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
7

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
Six Months Ended
June 30,
20222021
Cash flows from operating activities:
Net cash provided by operating activities$225,424 $257,120 
Cash flows from investing activities:
Proceeds from sale of property and equipment1 28 
Purchases of property and equipment(3,793)(3,024)
Purchases of equity securities(55,273)(14,192)
Purchases of available-for-sale debt securities(134,899)(237,353)
Proceeds from sales of equity securities17,692 5,165 
Proceeds from sales of available-for-sale debt securities19,534 60,978 
Proceeds from sales of investment real estate 2,591 
Maturities of available-for-sale debt securities33,683 53,313 
Net cash provided by (used in) investing activities(123,055)(132,494)
Cash flows from financing activities:
Debt issuance costs paid(131) 
Preferred stock dividend(5)(5)
Common stock dividend(9,974)(10,101)
Purchase of treasury stock(7,381)(245)
Payments related to tax withholding for share-based compensation(209)(784)
Repayment of debt(735)(735)
Net cash provided by (used in) financing activities(18,435)(11,870)
Cash and cash equivalents and restricted cash and cash equivalents:
Net increase (decrease) during the period83,934 112,756 
Balance, beginning of period253,143 179,871 
Balance, end of period$337,077 $292,627 

The following table summarizes our cash and cash equivalents and restricted cash and cash equivalents within the Condensed Consolidated Balance Sheets (in thousands):
 June 30,December 31,
20222021
Cash and cash equivalents$316,952 $250,508 
Restricted cash and cash equivalents (1)20,125 2,635 
Total cash and cash equivalents and restricted cash and cash equivalents$337,077 $253,143 
(1)See “—Note 5 (Insurance Operations)” for a discussion of the nature of the restrictions for restricted cash and cash equivalents.



The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
8

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Nature of Operations and Basis of Presentation
Nature of Operations
Universal Insurance Holdings, Inc. (“UVE”, and together with its wholly-owned subsidiaries, “the Company”) is a Delaware corporation incorporated in 1990. The Company is a vertically integrated insurance holding company performing all aspects of insurance underwriting, distribution and claims. Through its wholly-owned insurance company subsidiaries, Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC”, and together with UPCIC, the “Insurance Entities”), the Company is principally engaged in the property and casualty insurance business offered primarily through its network of independent agents. Risk from catastrophic losses is managed through the use of reinsurance agreements. The Company’s primary product is residential homeowners’ insurance offered in 19 states as of June 30, 2022, including Florida, which comprises the majority of the Company’s policies in force. See “—Note 5 (Insurance Operations)” for more information regarding the Company’s insurance operations.
The Company generates revenues primarily from the collection of premiums and investment returns on funds invested on cash flows in excess of those retained and used for claims-paying obligations and insurance operations. Other significant sources of revenue include brokerage commissions collected from reinsurers on certain reinsurance programs placed on behalf of the Insurance Entities, policy fees collected from policyholders by the Company’s wholly-owned managing general agent subsidiary and payment plan fees charged to policyholders who choose to pay their premiums in installments. The Company’s wholly-owned adjusting company receives claims-handling fees from the Insurance Entities. The Insurance Entities are reimbursed for these fees on claims that are subject to recovery under the Insurance Entities’ respective reinsurance programs. These fees, after expenses, are recorded in the Condensed Consolidated Financial Statements as an adjustment to losses and loss adjustment expense (“LAE”).
Basis of Presentation
The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, the Financial Statements do not include all of the information and footnotes required by United States Generally Accepted Accounting Principles (“GAAP”) for annual financial statements. Therefore, the Financial Statements should be read in conjunction with the audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 28, 2022. The Condensed Consolidated Balance Sheet at December 31, 2021 was derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included in the Financial Statements. The results for interim periods do not necessarily indicate the results that may be expected for any other interim period or for the full year.
To conform to the current period presentation, certain amounts in the prior periods’ condensed consolidated financial statements and notes have been reclassified. Such reclassifications were of an immaterial amount and had no effect on net income or stockholders’ equity.
The Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, as well as variable interest entities (“VIE”) in which the Company is determined to be the primary beneficiary. All material intercompany balances and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company’s primary use of estimates is in the recognition of liabilities for unpaid losses, loss adjustment expenses, subrogation recoveries and reinsurance recoveries. Actual results could differ from those estimates.

9

2. Significant Accounting Policies
The Company reported Significant Accounting Policies in its Annual Report on Form 10-K for the year ended December 31, 2021. There are no new or revised disclosures or disclosures required on a quarterly basis.

10

3. Investments
Available-for-Sale Securities
The following table provides the amortized cost and fair value of available-for-sale debt securities as of the dates presented (in thousands):
June 30, 2022
Amortized
Cost
Allowance for Expected Credit LossesGross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Debt Securities:
  U.S. government obligations and agencies$21,403 $ $ $(791)$20,612 
  Corporate bonds763,806 (548)52 (80,813)682,497 
  Mortgage-backed and asset-backed securities328,934  331 (31,872)297,393 
  Municipal bonds14,924   (1,933)12,991 
  Redeemable preferred stock9,123 (124) (1,486)7,513 
Total$1,138,190 $(672)$383 $(116,895)$1,021,006 

December 31, 2021
Amortized
Cost
Allowance for Expected Credit LossesGross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Debt Securities:
  U.S. government obligations and agencies$27,076 $ $64 $(334)$26,806 
  Corporate bonds687,058 (371)843 (13,725)673,805 
  Mortgage-backed and asset-backed securities322,844  194 (6,920)316,118 
  Municipal bonds14,925 (1) (350)14,574 
  Redeemable preferred stock9,289 (117)28 (48)9,152 
Total$1,061,192 $(489)$1,129 $(21,377)$1,040,455 

The following table provides the credit quality of available-for-sale debt securities with contractual maturities as of the dates presented (dollars in thousands):
June 30, 2022December 31, 2021
Average Credit RatingsFair Value% of Total
 Fair Value
Fair Value% of Total
 Fair Value
AAA$304,540 29.8 %$321,975 31.0 %
AA150,164 14.7 %139,186 13.4 %
A331,360 32.5 %339,500 32.6 %
BBB231,083 22.6 %234,358 22.5 %
No Rating Available3,859 0.4 %5,436 0.5 %
   Total$1,021,006 100.0 %$1,040,455 100.0 %

The table above includes credit quality ratings by Standard and Poor’s Rating Services, Inc. (“S&P”), Moody’s Investors Service, Inc. and Fitch Ratings, Inc. The Company has presented the highest rating of the three rating agencies for each investment position.
11

The following table summarizes the amortized cost and fair value of mortgage-backed and asset-backed securities as of the dates presented (in thousands):
June 30, 2022December 31, 2021
Amortized
Cost
Fair ValueAmortized
Cost
Fair Value
Mortgage-backed securities:
Agency$151,087 $133,353 $147,992 $143,819 
Non-agency60,518 52,341 59,906 58,263 
Asset-backed securities:
Auto loan receivables72,268 69,488 67,352 66,877 
Credit card receivables2,036 1,990 4,741 4,719 
Other receivables43,025 40,221 42,853 42,440 
Total$328,934 $297,393 $322,844 $316,118 
The following tables summarize available-for-sale debt securities, aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position, for which no allowance for expected credit losses has been recorded as of the dates presented (in thousands):
June 30, 2022
Less Than 12 Months12 Months or Longer
Number of
Issues
Fair ValueUnrealized
Losses
Number of
Issues
Fair ValueUnrealized
Losses
Debt Securities:
U.S. government obligations and agencies3 $11,554 $(80)5 $9,058 $(711)
Corporate bonds175 230,149 (23,682)95 113,327 (17,574)
Mortgage-backed and asset-backed securities131 157,635 (11,032)73 133,065 (20,840)
Municipal bonds9 9,655 (1,265)1 3,336 (669)
Redeemable preferred stock5 1,461 (283)   
Total323 $