Universal Reports Third Quarter 2022 Results

• Diluted GAAP loss per common share of $2.36, diluted adjusted loss per common share* of $2.27
• Direct premiums written of $500.7 million, up 15.6% from the prior year quarter
• Repurchased 203,244 shares for $2.4 million. Total capital returned to shareholders of $7.4 million, including $0.16 per share regular quarterly dividend.

Universal Insurance Holdings (NYSE: UVE) (“Universal” or the “Company”) reported third quarter 2022 results.

“Our thoughts continue to be with all impacted policyholders,” said Stephen J. Donaghy, Chief Executive Officer. “Since landfall, we’ve had boots on the ground, helping our insureds in their time of need. As we recently disclosed, our portfolio is underweight in the most impacted regions and is further cushioned by our high proportion of condo unit and renters policies, which provide interior and contents coverage. To date, claims volume from Hurricane Ian reflects approximately 50% of Irma’s volume received at this point. We maintain one of the largest claims and legal teams in the state of Florida, providing us with significant resources and capacity to efficiently close Ian-related claims. Despite our $1 billion estimated gross loss from Hurricane Ian, we have a $3 billion reinsurance tower in place for a subsequent event in the 2022 Atlantic hurricane season and our consolidated retention would be meaningfully lower, highlighting the strength and breadth of our catastrophe reinsurance program. We’ve started the planning process for the 2023 Atlantic hurricane season and are already well underway, as we have almost $400 million of pre-negotiated multi-year capacity below the Florida Hurricane Catastrophe Fund’s (FHCF) attachment point, approximately $200 million of estimated cost free coverage from the Reinsurance to Assist Policyholders (RAP) program and a projected $150 million from our catastrophe bond. Coupled with our 90% participation in the FHCF, we estimate that the vast majority of our first event 2023 catastrophe reinsurance program will be insulated from open market pricing dynamics. We value our reinsurance partner relationships and appreciate their support.”

^*Reconciliations of GAAP to non-GAAP financial measures are provided in the attached tables.

Net Income and Adjusted Net Income

Net loss was $72.3 million, down from net income of $20.2 million in the prior year quarter, and adjusted net loss was $69.4 million, down from adjusted net income of $19.8 million in the prior year quarter. The decline in adjusted net income mostly stems from $111.0 million of retained Hurricane Ian losses, partly offset by a lower net expense ratio and higher net investment income and commission revenue.

Revenues

Overall revenue was $312.8 million, up 8.9% from the prior year quarter and core revenue was $316.7 million, up 10.5% from the prior year quarter. The increase in core revenue primarily stems from higher net premiums earned, net investment income and commission revenue.

Direct premiums written were $500.7 million, up 15.6% from the prior year quarter. The increase stems from 16.3% growth in Florida and 12.7% growth in other states. Overall growth reflects rate increases, partly offset by lower policies in force.

Direct premiums earned were $452.5 million, up 10.2% from the prior year quarter. The increase stems from rate-driven direct premiums written growth over the past twelve months.

The ceded premium ratio was 35.8%, up from 35.5% in the prior year quarter. The increase primarily reflects higher reinsurance pricing and higher reinsurance costs associated with the increase in insured values, partly offset by direct premiums earned growth associated with primary rate increases and reinsurance savings associated with leveraging our self-insured captive to a greater degree than the prior year.

Net premiums earned were $290.6 million, up 9.8% from the prior year quarter. The increase is primarily attributable to higher direct premiums earned, partly offset by higher ceded premiums earned, as described above.

Net investment income was $6.1 million, up from $2.8 million in the prior year quarter. The increase primarily stems from higher fixed income reinvestment yields.

Commissions, policy fees and other revenue were $20.0 million, up 3.7% from the prior year quarter. The increase primarily reflects higher reinsurance brokerage commission revenue, which benefited from higher ceded premiums and the difference in our reinsurance program’s structure relative to the prior year quarter, partly offset by a decline in policy fees associated with lower policies in force.

Margins

The GAAP operating loss margin was 29.3%, down from a GAAP operating income margin of 9.2% in the prior year quarter and the adjusted operating loss margin was 27.7%, down from an adjusted operating income margin of 9.0% in the prior year quarter. The lower adjusted operating income margin primarily reflects a higher net combined ratio, partly offset by higher net investment income and commission revenues.

The net loss ratio was 113.7%, up 42.8 points compared to the prior year quarter. The increase primarily reflects $111.0 million of retained Hurricane Ian losses and a higher attritional initial accident year loss pick, partly offset by lower adverse prior year reserve development as a percentage of net premiums earned.

The net expense ratio was 25.5%, down 2.1 points from 27.6% in the prior year quarter. The reduction primarily reflects lower renewal commission rates paid to distribution partners.

The net combined ratio was 139.2%, up 40.7 points compared to the prior year quarter. The increase reflects a higher net loss ratio, partly offset by a lower net expense ratio, as described above.

Capital Deployment

During the third quarter, the Company repurchased approximately 203 thousand shares at an aggregate cost of $2.4 million. The Company’s current share repurchase authorization program has $8.0 million remaining as of September 30, 2022 and runs through November 3, 2022.

On July 19, 2022, the Board of Directors declared a quarterly cash dividend of 16 cents per share of common stock, payable on August 9, 2022, to shareholders of record as of the close of business on August 2, 2022.

Conference Call and Webcast

• Friday, October 28, 2022 at 10:00 a.m. ET
• Investors and other interested parties may listen to the call by accessing the online, real-time webcast at universalinsuranceholdings.com/investors or by registering in advance via teleconference at https://register.vevent.com/register/BI7c74886531b54cae98488e2125328182. Once registration is completed, participants will be provided with a dial-in number containing a personalized conference code to access the call. An online replay of the call will be available at universalinsuranceholdings.com/investors shortly after the investor call concludes.

About Universal

Universal Insurance Holdings, Inc. (NYSE: UVE) is a holding company offering property and casualty insurance and value-added insurance services. We develop, market, and write insurance products for consumers predominantly in the personal residential homeowners lines of business and perform substantially all other insurance-related services for our primary insurance entities, including risk management, claims management and distribution. We sell insurance products through both our appointed independent agents and through our direct online distribution channels in the United States across 19 states (primarily Florida). Learn more at universalinsuranceholdings.com.

Non-GAAP Financial Measures and Key Performance Indicators

This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the U.S. Securities and Exchange Commission (“SEC”), including core revenue, adjusted net income attributable to common stockholders and diluted adjusted earnings (loss) per common share, which exclude the impact of net realized gains (losses) on investments and net change in unrealized gains (losses) of equity securities. Adjusted operating income and adjusted operating income margin exclude the impact of net realized gains (losses) on investments and net change in unrealized gains (losses) of equity securities and interest and amortization of debt issuance costs. Adjusted common stockholders’ equity and adjusted book value per share exclude accumulated other comprehensive income (AOCI), net of taxes. Adjusted return on common equity excludes after-tax net realized gains (losses) on investments and net change in unrealized gains (losses) of equity securities from the numerator and AOCI, net of taxes, and current period after-tax net realized gains (losses) on investments and net change in unrealized gains (losses) of equity securities from the denominator. A “non-GAAP financial measure” is generally defined as a numerical measure of a company’s historical or future performance that excludes or includes amounts, or is subject to adjustments, so as to be different from the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles (“GAAP”). UVE management believes that these non-GAAP financial measures are meaningful, as they allow investors to evaluate underlying revenue and profitability trends and enhance comparability across periods. When considered together with the GAAP financial measures, management believes these metrics provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period. UVE management also believes that these non-GAAP financial measures enhance the ability of investors to analyze UVE’s business trends and to understand UVE’s operational performance. UVE’s management utilizes these non-GAAP financial measures as guides in long-term planning. Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures presented in accordance with GAAP. For more information regarding our key performance indicators, please refer to the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Indicators” in our forthcoming Quarterly Report on Form 10-Q for the quarter ended September 30, 2022.

Forward-Looking Statements

This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “will,” “plan,” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Such statements may include commentary on plans, products and lines of business, marketing arrangements, reinsurance programs and other business developments and assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, including those risks and uncertainties described under the heading “Risk Factors” and “Liquidity and Capital Resources” in our 2021 Annual Report on Form 10-K, and supplemented in our subsequent Quarterly Reports on Form 10-Q. Future results could differ materially from those described, and the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For further information regarding risk factors that could affect the Company’s operations and future results, refer to the Company’s reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K and the most recent quarterly reports on Form 10-Q.

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