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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, 2020

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-20200630_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   

1


        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: 31,852,829 shares of common stock, par value $0.01 per share, outstanding on July 27, 2020.

2


Table of Contents
 
 

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

2


Table of Contents
 
 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



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


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, 2020 and the related condensed consolidated statements of income, comprehensive income, and stockholders’ equity, for the three-month and six-month periods ended June 30, 2020 and 2019 and the related condensed consolidated statement of cash flows for the six-month periods ended June 30, 2020 and 2019. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information 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 Public Company Accounting Oversight Board (United States), 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.

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), the consolidated balance sheet of Universal Insurance Holdings, Inc. and Subsidiaries as of December 31, 2019 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 March 2, 2020. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.


/s/ Plante & Moran, PLLC
Chicago, Illinois
July 31, 2020

3


Table of Contents
 
 

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,
20202019
ASSETS
Available-for-sale debt securities, at fair value, net of allowance for credit loss of $455 (amortized cost: $819,166 and $828,336)
$869,418  $855,284  
Equity securities, at fair value (cost: $53,667 and $43,523)
49,708  43,717  
Investment real estate, net15,377  15,585  
Total invested assets934,503  914,586  
Cash and cash equivalents331,716  182,109  
Restricted cash and cash equivalents2,945  2,635  
Prepaid reinsurance premiums453,018  175,208  
Reinsurance recoverable46,860  193,236  
Premiums receivable, net76,885  63,883  
Property and equipment, net49,159  41,351  
Deferred policy acquisition costs103,527  91,882  
Income taxes recoverable29,009  34,283  
Deferred income tax asset, net  3,351  
Other assets19,277  17,328  
Total assets$2,046,899  $1,719,852  
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Unpaid losses and loss adjustment expenses$147,659  $267,760  
Unearned premiums736,927  661,279  
Advance premium55,640  30,975  
Accounts payable3,176  2,099  
Book overdraft  90,401  
Reinsurance payable, net499,656  122,581  
Deferred income tax liability, net13,665    
Other liabilities and accrued expenses53,284  40,930  
Long-term debt9,191  9,926  
Total liabilities1,519,198  1,225,951  
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
468  467  
Authorized shares - 55,000
Issued shares - 46,806 and 46,707
Outstanding shares - 31,853 and 32,638
Treasury shares, at cost - 14,953 and 14,069
(213,201) (196,585) 
Additional paid-in capital99,768  96,036  
Accumulated other comprehensive income, net of taxes38,083  20,364  
Retained earnings602,583  573,619  
Total stockholders’ equity527,701  493,901  
Total liabilities and stockholders’ equity$2,046,899  $1,719,852  

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
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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,
2020201920202019
PREMIUMS EARNED AND OTHER REVENUES
Direct premiums written$404,685  $357,960  $739,238  $647,194  
Change in unearned premium(67,046) (54,852) (75,648) (48,709) 
Direct premium earned337,639  303,108  663,590  598,485  
Ceded premium earned(111,269) (92,751) (216,391) (178,401) 
Premiums earned, net226,370  210,357  447,199  420,084  
Net investment income6,179  7,410  13,013  15,552  
Net realized gains (losses) on investments168  (1,605) 467  (13,130) 
Net change in unrealized gains (losses) of equity securities3,871  3,759  (4,153) 21,791  
Commission revenue7,758  6,048  14,773  11,553  
Policy fees6,546  5,997  12,086  11,018  
Other revenue1,812  1,756  4,594  3,440  
Total premiums earned and other revenues252,704  233,722  487,979  470,308  
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses151,345  113,296  286,393  226,390  
General and administrative expenses73,921  69,496  146,564  139,244  
Total operating costs and expenses225,266  182,792  432,957  365,634  
INCOME BEFORE INCOME TAXES27,438  50,930  55,022  104,674  
Income tax expense7,556  13,637  15,073  27,233  
NET INCOME$19,882  $37,293  $39,949  $77,441  
Basic earnings per common share$0.62  $1.09  $1.23  $2.24  
Weighted average common shares outstanding - Basic32,102  34,311  32,347  34,525  
Diluted earnings per common share$0.62  $1.08  $1.23  $2.22  
Weighted average common shares outstanding - Diluted32,170  34,612  32,440  34,903  
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,
2020201920202019
Net income$19,882  $37,293  $39,949  $77,441  
Other comprehensive income, net of taxes26,068  11,955  17,122  23,939  
Comprehensive income$45,950  $49,248  $57,071  $101,380  
The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
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UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (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, 2019(14,069) 46,707  10  $467  $—  $96,036  $573,619  $20,364  $(196,585) $493,901  
Cumulative effect of changes in accounting principle (ASU 2016-13)
—  —  —  —  —  —  (597) 597  —    
Balance, January 1, 2020(14,069) 46,707  10  467  —  96,036  573,022  20,961  (196,585) 493,901  
Vesting of performance share units(25) 
(1)
83  —  1  —  (1) —  —  (646) (646) 
Grant and issue of stock award—  1  —  —  —  30  —  —  —  30  
Retirement of treasury shares25  
(1)
(25) —  —  —  (646) —  —  646    
Purchases of treasury stock(312) —  —  —  —  —  —  —  (6,587) (6,587) 
Share-based compensation—  —  —  —  —  1,691  —  —  —  1,691  
Net income—  —  —  —  —  —  20,067  —  —  20,067  
Other comprehensive loss, net of taxes—  —  —  —  —  —  —  (8,946) —  (8,946) 
Declaration of dividends
($0.16 per common share and
$0.25 per preferred share)
—  —  —  —  —  —  (5,222) —  —  (5,222) 
Balance, March 31, 2020(14,381) 46,766  10  468  —  97,110  587,867  12,015  (203,172) 494,288  
Vesting of restricted stock units(25) 
(1)
65  —  —  —  —  —  —  (424) (424) 
Retirement of treasury shares25  
(1)
(25) —  —  —  (424) —  —  424    
Purchases of treasury stock(572) —  —  —  —  —  —  —  (10,029) (10,029) 
Share-based compensation—  —  —  —  —  3,082  —  —  —  3,082  
Net income—  —  —  —  —  —  19,882  —  —  19,882  
Other comprehensive income, net of taxes—  —  —  —  —  —  —  26,068  —  26,068  
Declaration of dividends for second quarter
($0.16 per common share and
$0.25 per preferred share)
—  —  —  —  —  —  (5,166) —  —  (5,166) 
Balance, June 30, 2020(14,953) 46,806  10  $468  $—  $99,768  $602,583  $38,083  $(213,201) $527,701  

(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.
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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, 2018(11,731) 46,514  10  $465  $—  $86,353  $553,224  $(8,010) $(130,399) $501,633  
Vesting of performance share units(56) 
(1)
148  —  2  —  (2) —  —  (2,069) (2,069) 
Grants and vesting of restricted stock(5) 
(1)
25  —  —  —  —  —  —  (166) (166) 
Stock option exercises(36) 
(1)
84  —  1  —  1,438  —  —  (1,367) 72  
Retirement of treasury shares97  
(1)
(97) —  (1) —  (3,601) —  —  3,602    
Purchases of treasury stock(321) —  —  —  —  —  —  —  (10,117) (10,117) 
Share-based compensation
—  —  —  —  —  3,140  —  —  —  3,140  
Net income—  —  —  —  —  —  40,148  —  —  40,148  
Other comprehensive income, net of taxes—  —  —  —  —  —  —  11,984  —  11,984  
Declaration of dividends
($0.16 per common share and
$0.25 per preferred share)
—  —  —  —  —  —  (5,575) —  —  (5,575) 
Balance, March 31, 2019(12,052) 46,674  10  467  —  87,328  587,797  3,974  (140,516) 539,050  
Grants and vesting of restricted stock(14) 
(1)
25  —  —  —  —  —  —  (402) (402) 
Stock option exercises(14) 
(1)
27  —  —  —  403  —  —  (414) (11) 
Retirement of treasury shares28  
(1)
(28) —  —  —  (816) —  —  816    
Purchases of treasury stock(486) —  —  —  —  —  —  —  (14,107) (14,107) 
Share-based compensation—  —  —  —  —  3,311  —  —  —  3,311  
Net income—  —  —  —  —  —  37,293  —  —  37,293  
Other comprehensive income, net of taxes—  —  —  —  —  —  —  11,955  —  11,955  
Declaration of dividends for second quarter
($0.16 per common share and
$0.25 per preferred share)
—  —  —  —  —  —  (5,547) —  —  (5,547) 
Declaration of dividends for third quarter
($0.16 per common share)
—  —  —  —  —  —  (5,476) —  —  (5,476) 
Balance, June 30, 2019(12,538) 46,698  10  $467  $—  $90,226  $614,067  $15,929  $(154,623) $566,066  

(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.
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UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)

Six Months Ended
June 30,
20202019
Cash flows from operating activities:
Net cash provided by operating activities$190,847  $55,988  
Cash flows from investing activities:
Proceeds from sale of property and equipment22  18  
Purchases of property and equipment(10,213) (8,030) 
Purchases of equity securities(10,145) (890) 
Purchases of available-for-sale debt securities(91,445) (143,728) 
Purchases of investment real estate, net  (883) 
Proceeds from sales of equity securities  29,137  
Proceeds from sales of available-for-sale debt securities28,468  43,205  
Proceeds from sales of investment real estate  10,537  
Maturities of available-for-sale debt securities71,214  68,525  
Net cash provided by (used in) investing activities(12,099) (2,109) 
Cash flows from financing activities:
Preferred stock dividend(5) (5) 
Common stock dividend(10,405) (11,153) 
Issuance of common stock for stock option exercises  239  
Purchase of treasury stock(16,616) (24,224) 
Payments related to tax withholding for share-based compensation(1,070) (2,815) 
Repayment of debt(735) (735) 
Net cash provided by (used in) financing activities(28,831) (38,693) 
Cash and cash equivalents, and restricted cash and cash equivalents:
Net increase during the period149,917  15,186  
Balance, beginning of period