Company to Host Quarterly Conference Call at 4:30 P.M. ET on
February 21, 2018
ST. PETERSBURG, Fla.--(BUSINESS WIRE)--
United Insurance Holdings Corp. (Nasdaq: UIHC)(UPC Insurance or
the Company), a property and casualty insurance holding company, today
reported its financial results for the fourth quarter ended December 31,
2017.
|
($ in thousands, except for per share data)
|
| Three Months Ended |
| Year Ended |
| December 31, | | December 31, |
| | 2017 |
| 2016 |
| Change | | 2017 |
| 2016 |
| Change |
|
Gross premiums written
| |
$
|
252,440
| | |
$
|
167,103
| | |
51.1
|
%
| |
$
|
1,040,848
| | |
$
|
708,156
| | |
47.0
|
%
|
|
Gross premiums earned
| |
$
|
274,373
| | |
$
|
182,222
| | |
50.6
|
%
| |
$
|
986,023
| | |
$
|
666,829
| | |
47.9
|
%
|
|
Net premiums earned
| |
$
|
166,195
| | |
$
|
121,161
| | |
37.2
|
%
| |
$
|
585,490
| | |
$
|
456,931
| | |
28.1
|
%
|
|
Total revenues
| |
$
|
182,586
| | |
$
|
131,433
| | |
38.9
|
%
| |
$
|
654,420
| | |
$
|
487,117
| | |
34.3
|
%
|
|
Earnings (loss) before income tax
| |
$
|
27,809
| | |
$
|
(17,578
|
)
| |
258.2
|
%
| |
$
|
910
| | |
$
|
7,003
| | |
(87.0
|
)%
|
|
Net income (loss)
| |
$
|
27,001
| | |
$
|
(10,517
|
)
| |
356.7
|
%
| |
$
|
10,145
| | |
$
|
5,698
| | |
78.0
|
%
|
|
Net income (loss) per diluted share
| |
$
|
0.63
| | |
$
|
(0.49
|
)
| |
228.6
|
%
| |
$
|
0.27
| | |
$
|
0.26
| | |
3.8
|
%
|
| | | | | | | | | | | |
|
Reconciliation of net income (loss) to core
income (loss):
| | | | | | | | | | | | |
|
Plus: Merger expenses
| |
$
|
—
| | |
$
|
597
| | |
(100.0
|
)%
| |
$
|
6,906
| | |
$
|
1,747
| | |
295.3
|
%
|
Plus: Non-cash amortization of intangible
assets
| |
$
|
9,839
| | |
$
|
2,570
| | |
282.8
|
%
| |
$
|
31,199
| | |
$
|
9,361
| | |
233.3
|
%
|
Less: Realized gains (losses) on
investment portfolio
| |
$
|
621
| | |
$
|
69
| | |
800.0
|
%
| |
$
|
67
| | |
$
|
547
| | |
(87.8
|
)%
|
|
Less: Net tax impact
| |
$
|
3,227
| | |
$
|
1,084
| | |
197.7
|
%
| |
$
|
13,314
| | |
$
|
3,697
| | |
260.1
|
%
|
|
Core income (loss)(1) | |
$
|
32,992
| | |
$
|
(8,503
|
)
| |
488.0
|
%
| |
$
|
34,869
| | |
$
|
12,562
| | |
177.6
|
%
|
|
Core income (loss) per diluted share(1) | |
$
|
0.77
| | |
$
|
(0.39
|
)
| |
297.4
|
%
| |
$
|
0.93
| | |
$
|
0.58
| | |
60.3
|
%
|
| | | | | | | | | | | |
|
|
Book value per share
| | | | | | | |
$
|
12.56
| | |
$
|
11.15
| | |
12.6
|
%
|
| (1) |
|
Core income and core income per diluted share, measures that are
not based on GAAP, are reconciled above to net income and net
income per diluted share, respectively, the most directly
comparable GAAP measures. Additional information regarding
non-GAAP financial measures presented in this press release can be
found in the "Definitions of Non-GAAP Measures"
section, below.
|
"Our team produced a very strong ending to an eventful year," said John
Forney, President & CEO of UPC Insurance. "Earnings for the quarter were
the largest in Company history, and all our businesses had excellent
momentum as we entered 2018. We are working hard to build on that
momentum during the rest of the year."
Return on Equity and Core Return on Equity
Return on Equity is a ratio the Company calculates by dividing the net
income for the most recent twelve months by the average stockholder's
equity for the most recent twelve months. Core Return on Equity (see
calculation below) is a ratio calculated using non-GAAP measures. It is
calculated by dividing the core income for the most recent twelve months
by the average stockholders’ equity for the most recent twelve months.
Core income is an after-tax non-GAAP measure that is calculated by
excluding from net income the effect of non-cash amortization of
intangible assets, special items such as merger-related professional
fees, and realized gains or losses on the Company's investment
portfolio. In the opinion of the Company’s management, core income, core
income per share and core return on equity are meaningful indicators to
investors of the Company's underwriting and operating results, since the
excluded items are not necessarily indicative of operating trends.
Internally, the Company’s management uses core income, core income per
share and core return on equity to evaluate performance against
historical results and establish financial targets on a consolidated
basis. The table above reconciles core income to net income, the most
directly comparable GAAP measure.
|
($ in thousands)
|
| Three Months Ended |
| Year Ended |
| December 31, | | December 31, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
|
Net income (loss)
| |
$
|
27,001
| | |
$
|
(10,517
|
)
| |
$
|
10,145
| | |
$
|
5,698
| |
|
Return on equity based on GAAP net income (loss) (1) | |
23.9
|
%
| |
(16.8
|
)%
| |
2.2
|
%
| |
2.4
|
%
|
| | | | | | | |
|
|
Core income (loss)
| |
$
|
32,992
| | |
$
|
(8,503
|
)
| |
$
|
34,869
| | |
$
|
12,562
| |
|
Core return on equity (1) | |
29.2
|
%
| |
(13.6
|
)%
| |
7.7
|
%
| |
5.0
|
%
|
| (1) |
|
Return on equity for the three months ended December 31, 2017 is
calculated on an annualized basis.
|
The calculations of the Company's combined ratio and underlying combined
ratio are shown below.
|
($ in thousands)
|
| Three Months Ended |
| Year Ended |
| December 31, | | December 31, |
| | 2017 |
| 2016 |
| Change | | 2017 |
| 2016 |
| Change |
|
Loss ratio, net(1) | |
43.4
|
%
| |
81.5
|
%
| |
(38.1
|
) pts
| |
62.4
|
%
| |
65.3
|
%
| |
(2.9
|
) pts
|
|
Expense ratio, net(2) | |
49.2
|
%
| |
41.2
|
%
| |
8.0
|
pts
| |
48.7
|
%
| |
39.6
|
%
| |
9.1
|
pts
|
|
Combined ratio (CR)(3) | |
92.6
|
%
| |
122.7
|
%
| |
(30.1
|
) pts
| |
111.1
|
%
| |
104.9
|
%
| |
6.2
|
pts
|
Effect of current year catastrophe
losses on CR
| |
0.8
|
%
| |
26.4
|
%
| |
(25.6
|
) pts
| |
19.8
|
%
| |
12.2
|
%
| |
7.6
|
pts
|
Effect of prior year unfavorable
(favorable) development on CR
| |
0.1
|
%
| |
6.1
|
%
| |
(6.0
|
) pts
| |
(0.4
|
)%
| |
3.7
|
%
| |
(4.1
|
) pts
|
Effect of ceding commission income on
CR
| |
4.2
|
%
| |
3.4
|
%
| |
0.8
|
pts
| |
6.3
|
%
| |
1.5
|
%
| |
4.8
|
pts
|
|
Underlying combined ratio(4)(5) | |
87.5
|
%
| |
86.8
|
%
| |
0.7
|
pts
| |
85.4
|
%
| |
87.5
|
%
| |
(2.1
|
) pts
|
| (1) |
|
Loss ratio, net is calculated as losses and loss adjustment expenses
(LAE) relative to net premiums earned.
|
| (2) | |
Expense ratio, net is calculated as the sum of all operating
expenses less interest expense relative to net premiums earned.
|
| (3) | |
Combined ratio is the sum of the loss ratio, net and expense ratio,
net.
|
| (4) | |
Underlying combined ratio, a measure that is not based on GAAP, is
reconciled above to the combined ratio, the most directly
comparable GAAP measure. Additional information regarding non-GAAP
financial measures presented in this press release can be found in "Definitions
of Non-GAAP Measures" section, below.
|
| (5) | |
Included in both the expense ratio and the combined ratio are $9.8
million and $38.1 million for the three and twelve months ended
December 31, 2017, respectively, and $3.2 million and $11.1 million
for the three and twelve months ended December 31, 2016,
respectively, of merger professional fees and amortization expense
predominately associated with the AmCo Holding Company (AmCo) and
Interboro Insurance Company mergers. Excluding these additional
expenses, the Company would have reported underlying combined ratios
of 81.6% and 78.9% for the three and twelve months ended December
31, 2017, respectively, and 84.2% and 85.1% for the three and twelve
months ended December 31, 2016, respectively.
|
Quarterly Financial Results
Net income for the fourth quarter of 2017 was $27.0 million, or $0.63
per diluted share, compared to net loss of $10.5 million, or a $0.49
loss per diluted share for the fourth quarter of 2016. The increase in
net income was primarily due to the increase in gross premiums earned
and improvement in the Company's underlying loss ratio for the fourth
quarter of 2017 compared to the fourth quarter of 2016.
The Company's total gross written premium increased by $85.3 million, or
51.1%, to $252.4 million for the fourth quarter of 2017 from $167.1
million for the fourth quarter of 2016, primarily reflecting the
Company's merger with AmCo on April 3, 2017, as well as organic growth
in new and renewal business generated in all regions. The breakdown of
the quarter-over-quarter changes in both direct written and assumed
premiums by region and gross written premium by line of business are
shown in the table below.
|
($ in thousands)
|
| Three Months Ended
December 31, |
| |
| |
| | 2017 |
| 2016 | | Change $ | | Change % |
| Direct Written and Assumed Premium by Region (1) | | | | | | | | |
| Florida | |
$
|
135,388
| | |
$
|
68,697
| | |
$
|
66,691
| | |
97.1
|
%
|
|
Gulf
| |
45,835
| | |
40,582
| | |
5,253
| | |
12.9
| |
|
Northeast
| |
38,871
| | |
35,351
| | |
3,520
| | |
10.0
| |
|
Southeast
| |
22,042
|
| |
20,231
|
| |
1,811
|
| |
9.0
|
|
|
Total direct written premium by region
| |
242,136
| | |
164,861
| | |
77,275
| | |
46.9
|
%
|
|
Assumed premium (2) | |
10,304
|
| |
2,242
|
| |
8,062
|
| |
359.6
|
|
|
Total gross written premium by region
| |
$
|
252,440
|
| |
$
|
167,103
|
| |
$
|
85,337
|
| |
51.1
|
%
|
| | | | | | | |
|
| Gross Written Premium by Line of Business | | | | | | | | |
|
Personal property
| |
$
|
181,123
| | |
$
|
160,399
| | |
$
|
20,724
| | |
12.9
|
%
|
|
Commercial property
| |
71,317
|
| |
6,704
|
| |
64,613
|
| |
963.8
|
|
|
Total gross written premium by line of business
| |
$
|
252,440
|
| |
$
|
167,103
|
| |
$
|
85,337
|
| |
51.1
|
%
|
| (1) |
|
"Gulf" is comprised of Hawaii, Louisiana and Texas; "Northeast" is
comprised of Connecticut, Massachusetts, New Jersey, New York and
Rhode Island; and "Southeast" is comprised of Georgia, North
Carolina and South Carolina.
|
| (2) | |
Assumed premium written for 2017 includes commercial property
business assumed from an unaffiliated insurer and the Texas
Windstorm Insurance Association (TWIA) and 2016 premium assumed
includes homeowners' business from Citizens Property Insurance
Corporation (Citizens) and TWIA.
|
Loss and LAE decreased by $26.6 million, or 26.9%, to $72.1 million for
the fourth quarter of 2017 from $98.7 million for the fourth quarter of
2016. Loss and LAE expense as a percentage of net earned premiums
decreased 38.1 points to 43.4% for the quarter, compared to 81.5% for
the same period last year. Excluding catastrophe losses and reserve
development, the Company's gross underlying loss and LAE ratio for the
fourth quarter of 2017 would have been 25.7%, a decrease of 6.9 points
from 32.6% during the fourth quarter of 2016.
Policy acquisition costs increased by $16.6 million, or 49.4%, to $50.1
million for the fourth quarter of 2017 from $33.6 million for the fourth
quarter of 2016. The primary driver of the increase in costs was the
result of the managing general agent fees related to AmCo commercial
premiums. The remaining change was the result of policy acquisition
costs varying directly with changes in gross premiums earned and were
generally consistent with the Company's growth in premium production and
higher average market commission rates outside of Florida.
Operating and underwriting expenses increased by $3.5 million, or 66.5%,
to $8.7 million for the fourth quarter of 2017 from $5.2 million for the
fourth quarter of 2016, primarily due to increased costs related to the
Company's ongoing growth, incurred expenses related to software
improvements and costs related to the increase in underwriting reports.
General and administrative expenses increased by $11.7 million, or
104.8%, to $22.9 million for the fourth quarter of 2017 from $11.2
million for the fourth quarter of 2016, primarily due to amortization
costs related to the merger with AmCo.
Year to Date Financial Results
Net income for the year ended December 31, 2017 was $10.1 million, or
$0.27 per diluted share, compared to net income of $5.7 million, or
$0.26 per diluted share for the year ended December 31, 2016. The
increase in net income was primarily due to an increase in gross
premiums earned and improvement in the Company's underlying loss ratio.
The Company's total gross written premium increased by $332.7 million,
or 47.0%, to $1.0 billion for the year ended December 31, 2017 from
$708.2 million for the year ended December 31, 2016, primarily
reflecting the Company's merger with AmCo on April 3, 2017, as well as
organic growth in new and renewal business generated in the Company's
Gulf and Northeast regions. The breakdown of the year-over-year changes
in both direct written and assumed premiums by region and gross written
premium by line of business are shown in the table below.
|
($ in thousands)
|
| Year Ended
December 31, |
| |
| |
| | 2017 |
| 2016 | | Change $ | | Change % |
| Direct Written and Assumed Premium by Region (1) | | | | | | | | |
| Florida | |
$
|
540,796
| | |
$
|
336,591
| | |
$
|
204,205
| | |
60.7
|
%
|
|
Gulf
| |
201,475
| | |
160,520
| | |
40,955
| | |
25.5
| |
|
Northeast
| |
154,502
| | |
123,964
| | |
30,538
| | |
24.6
| |
|
Southeast
| |
92,753
|
| |
87,176
|
| |
5,577
|
| |
6.4
|
|
|
Total direct written premium by region
| |
989,526
| | |
708,251
| | |
281,275
| | |
39.7
|
%
|
|
Assumed premium (2) | |
51,322
|
| |
(95
|
)
| |
51,417
|
| |
54,123.2
|
|
|
Total gross written premium by region
| |
$
|
1,040,848
|
| |
$
|
708,156
|
| |
$
|
332,692
|
| |
47.0
|
%
|
| | | | | | | |
|
| Gross Written Premium by Line of Business | | | | | | | | |
|
Personal property
| |
$
|
799,097
| | |
$
|
685,402
| | |
$
|
113,695
| | |
16.6
|
%
|
|
Commercial property
| |
241,751
|
| |
22,754
|
| |
218,997
|
| |
962.5
|
|
|
Total gross written premium by line of business
| |
$
|
1,040,848
|
| |
$
|
708,156
|
| |
$
|
332,692
|
| |
47.0
|
%
|
| (1) |
|
"Gulf" is comprised of Hawaii, Louisiana and Texas; "Northeast" is
comprised of Connecticut, Massachusetts, New Jersey, New York and
Rhode Island; and "Southeast" is comprised of Georgia, North
Carolina and South Carolina.
|
| (2) | |
Assumed premium written for 2017 includes commercial property
business assumed from an unaffiliated insurer and TWIA and 2016
premium assumed includes homeowners' business from Citizens and TWIA.
|
Loss and LAE increased by $67.2 million, or 22.5%, to $365.5 million for
the year ended December 31, 2017 from $298.4 million for the year ended
December 31, 2016. Loss and LAE expense as a percentage of net earned
premiums decreased 2.9 points to 62.4% for the year ended December 31,
2017, compared to 65.3% for the year ended December 31, 2016. Excluding
catastrophe losses and reserve development, the Company's gross
underlying loss and LAE ratio for the year would have been 25.5%, a
decrease of 8.3 points from 33.8% during the year ended December 31,
2016.
During the third quarter of 2017, the Company's catastrophe losses
included claims from Hurricane Harvey, which made landfall as a category
4 storm in Texas, and Hurricane Irma, which was also a category 4 storm
making landfall in Florida. The Company's catastrophe excess of loss and
quota share reinsurance limited retained losses to $83.0 million.
Policy acquisition costs increased by $57.8 million, or 49.1%, to $175.4
million for the year ended December 31, 2017 from $117.7 million for the
year ended December 31, 2016. The primary driver of the increase in
costs was the result of the managing general agent fees paid to AmRisc
in relation to AmCo commercial premium. The remaining change was the
result of policy acquisition costs varying directly with changes in
gross premiums earned and were generally consistent with the Company's
growth in premium production and higher average market commission rates
outside of Florida.
Operating and underwriting expenses increased by $7.2 million, or 34.8%,
to $27.7 million for the year ended December 31, 2017 from $20.5 million
for the year ended December 31, 2016, primarily due to increased costs
related to the Company's ongoing growth, incurred expenses related to
software improvements and costs related to the increase in underwriting
reports.
General and administrative expenses increased by $38.8 million, or
90.3%, to $81.8 million for the year ended December 31, 2017 from $43.0
million for the year ended December 31, 2016, primarily due to
amortization costs related to the merger with AmCo.
Combined Ratio Analysis
The calculations of the Company's loss ratios and underlying loss ratios
are shown below.
|
($ in thousands)
|
| Three Months Ended |
| Year Ended |
| December 31, | | December 31, |
| 2017 |
| 2016 |
| Change | | 2017 |
| 2016 |
| Change |
|
Loss and LAE
| |
$
|
72,137
| | |
$
|
98,738
| | |
$
|
(26,601
|
)
| |
$
|
365,535
| | |
$
|
298,353
| | |
$
|
67,182
| |
|
% of Gross earned premiums
| |
26.3
|
%
| |
54.2
|
%
| |
(27.9
|
) pts
| |
37.1
|
%
| |
44.7
|
%
| |
(7.6
|
) pts
|
|
% of Net earned premiums
| |
43.4
|
%
| |
81.5
|
%
| |
(38.1
|
) pts
| |
62.4
|
%
| |
65.3
|
%
| |
(2.9
|
) pts
|
|
Less:
| | | | | | | | | | | | |
|
Current year catastrophe losses
| |
$
|
1,399
| | |
$
|
31,957
| | |
$
|
(30,558
|
)
| |
$
|
116,424
| | |
$
|
55,842
| | |
$
|
60,582
| |
|
Prior year reserve unfavorable (favorable) development
| |
206
|
| |
7,403
|
| |
(7,197
|
)
| |
(2,613
|
)
| |
16,988
|
| |
(19,601
|
)
|
|
Underlying Loss and LAE (1) | |
$
|
70,532
| | |
$
|
59,378
| | |
$
|
11,154
| | |
$
|
251,724
| | |
$
|
225,523
| | |
$
|
26,201
| |
|
% of Gross earned premiums
| |
25.7
|
%
| |
32.6
|
%
| |
(6.9
|
) pts
| |
25.5
|
%
| |
33.8
|
%
| |
(8.3
|
) pts
|
|
% of Net earned premiums
| |
42.4
|
%
| |
49.0
|
%
| |
(6.6
|
) pts
| |
43.0
|
%
| |
49.4
|
%
| |
(6.4
|
) pts
|
| (1) |
|
Underlying Loss and LAE is a non-GAAP financial measure and is
reconciled above to Net Loss and LAE, the most directly comparable
GAAP measure. Additional information regarding non-GAAP financial
measures presented in this press release can be found is in the "Definitions
of Non-GAAP Measures" section, below.
|
The calculations of the Company's expense ratio and underlying expense
ratios are shown below.
|
($ in thousands)
|
| Three Months Ended |
| Year Ended |
| December 31, | | December 31, |
| 2017 |
| 2016 |
| Change | | 2017 |
| 2016 |
| Change |
|
Policy acquisition costs
| |
$
|
50,142
| | |
$
|
33,572
| | |
$
|
16,570
| | |
$
|
175,444
| | |
$
|
117,658
| | |
$
|
57,786
| |
|
Operating and underwriting
| |
8,655
| | |
5,198
| | |
3,457
| | |
27,675
| | |
20,524
| | |
7,151
| |
|
General and administrative
| |
22,937
|
| |
11,197
|
| |
11,740
|
| |
81,762
|
| |
42,956
|
| |
38,806
|
|
|
Total Operating Expenses
| |
$
|
81,734
| | |
$
|
49,967
| | |
$
|
31,767
| | |
$
|
284,881
| | |
$
|
181,138
| | |
$
|
103,743
| |
|
% of Gross earned premiums
| |
29.8
|
%
| |
27.4
|
%
| |
2.4
|
pts
| |
28.9
|
%
| |
27.2
|
%
| |
1.7
|
pts
|
|
% of Net earned premiums
| |
49.2
|
%
| |
41.2
|
%
| |
8.0
|
pts
| |
48.7
|
%
| |
39.6
|
%
| |
9.1
|
pts
|
|
Less:
| | | | | | | | | | | | |
|
Ceding commission income
| |
$
|
6,990
| | |
$
|
4,086
| | |
$
|
2,904
| | |
$
|
37,175
| | |
$
|
6,882
| | |
$
|
30,293
| |
|
Merger expenses and amortization
| |
9,839
|
| |
3,167
|
| |
6,672
|
| |
38,104
|
| |
11,108
|
| |
26,996
|
|
|
Underlying Expense (1) | |
$
|
64,905
| | |
$
|
42,714
| | |
$
|
22,191
| | |
$
|
209,602
| | |
$
|
163,148
| | |
$
|
46,454
| |
|
% of Gross earned premiums
| |
23.7
|
%
| |
23.4
|
%
| |
0.3
|
pts
| |
21.3
|
%
| |
24.5
|
%
| |
(3.2
|
) pts
|
|
% of Net earned premiums
| |
39.1
|
%
| |
35.3
|
%
| |
3.8
|
pts
| |
35.8
|
%
| |
35.7
|
%
| |
0.1
|
pts
|
| (1) |
|
Underlying Expense is a non-GAAP financial measure and is
reconciled above to total operating expenses, the most directly
comparable GAAP measure. Additional information regarding non-GAAP
financial measures presented in this press release can be found in
the "Definitions of Non-GAAP Measures" section,
below.
|
UPC Insurance experienced favorable reserve development in the current
year and its historical impact on the Company's net loss and net
underlying loss ratios is outlined in the following table.
|
| Historical Reserve Development |
|
($ in thousands, except ratios)
| | 2013 |
| 2014 |
| 2015 |
| 2016 |
| 2017 |
|
Prior year reserve development (unfavorable)
| |
$
|
(4,078
|
)
| |
$
|
4,037
| | |
$
|
2,368
| | |
$
|
(16,988
|
)
| |
$
|
2,613
| |
|
Development as a % of earnings before interest and taxes
| |
11.7
|
%
| |
6.2
|
%
| |
5.7
|
%
| |
219.9
|
%
| |
62.9
|
%
|
|
Consolidated net loss ratio (LR)
| |
50.0
|
%
| |
44.6
|
%
| |
54.5
|
%
| |
65.3
|
%
| |
62.4
|
%
|
|
Prior year reserve unfavorable (favorable) development on LR
| |
2.1
|
%
| |
(1.5
|
)%
| |
(0.7
|
)%
| |
3.7
|
%
| |
(0.4
|
)%
|
|
Current year catastrophe losses on LR
| |
1.8
|
%
| |
0.3
|
%
| |
8.5
|
%
| |
12.2
|
%
| |
19.8
|
%
|
|
Underlying net loss ratio(1) | |
46.1
|
%
| |
45.8
|
%
| |
46.7
|
%
| |
49.4
|
%
| |
43.0
|
%
|
| (1) |
|
Underlying Net Loss Ratio is a non-GAAP measure and is reconciled
above to the Consolidated Net Loss Ratio, the most directly
comparable GAAP measure. Additional information regarding non-GAAP
financial measures presented in this press release can be found in
the "Definitions of Non-GAAP Measures" section,
below.
|
Reinsurance Costs as a % of Earned Premium
Excluding the Company's flood business, for which it cedes 100% of the
risk of loss, reinsurance costs in the fourth quarter of 2017 were 37.6%
of gross premiums earned, compared to 30.8% of gross premiums earned for
the fourth quarter of 2016. The increase in this ratio was driven
primarily by the Company's quota share reinsurance program, which was in
effect for two months in the fourth quarter of 2017 but for only one
month during the fourth quarter of 2016. If not for the effects of the
quota share reinsurance program, the Company's reinsurance costs as a
percent of earned premium would have decreased by 4.1 points during the
quarter.
Investment Portfolio Highlights
The Company's cash and investment holdings totaled $1.1 billion at
December 31, 2017 compared to $679.3 million at December 31, 2016. UPC
Insurance's cash and investment holdings consist of investments in U.S.
Government and agency securities, corporate debt and 100% investment
grade money market instruments. Fixed maturities represented
approximately 76.9% of total investments at December 31, 2017 with a
modified duration of 3.9 years compared to 85.3% at December 31, 2016
with a modified duration of 3.7 years.
Book Value Analysis
Book value per share increased 12.6% from $11.15 at December 31, 2016,
to $12.56 at December 31, 2017, and underlying book value per share
increased 11.2% from $11.11 at December 31, 2016 to $12.35 at
December 31, 2017. An increase in the Company's retained earnings, along
with an increase in paid in capital as a result of the AmCo merger,
drove the increase in our book value per share and underlying book value
per share. The increase in accumulated other comprehensive income, as
shown in the table below, also impacted our underlying book value per
share.
|
($ in thousands, except for per share data)
|
| December 31, |
| December 31, |
| | 2017 | | 2016 |
| Book Value per Share | | | | |
|
Numerator:
| | | | |
|
Common stockholders' equity
| |
$
|
537,125
|
| |
$
|
241,327
|
|
Denominator:
| | | | |
|
Total Shares Outstanding
| |
42,753,054
|
| |
21,646,614
|
|
Book Value Per Common Share
| |
$
|
12.56
|
| |
$
|
11.15
|
| | | |
|
Book Value per Share, Excluding the Impact of Accumulated Other
Comprehensive
Income (AOCI) | | | | |
|
Numerator:
| | | | |
|
Common stockholders' equity
| |
$
|
537,125
| | |
$
|
241,327
|
|
Accumulated other comprehensive income
| |
9,221
|
| |
822
|
|
Stockholders' Equity, excluding AOCI
| |
$
|
527,904
|
| |
$
|
240,505
|
|
Denominator:
| | | | |
|
Total Shares Outstanding
| |
42,753,054
|
| |
21,646,614
|
|
Underlying Book Value Per Common Share(1) | |
$
|
12.35
|
| |
$
|
11.11
|
| (1) |
|
Underlying book value per common share is a non-GAAP financial
measure and is reconciled above to book value per common share,
the most directly comparable GAAP measure. Additional information
regarding non-GAAP financial measures presented in this press
release can be found in the "Definitions of Non-GAAP Measures"
section, below.
|
Definitions of Non-GAAP Measures
We believe that investors' understanding of UPC Insurance's performance
is enhanced by our disclosure of the following non-GAAP measures. Our
methods for calculating these measures may differ from those used by
other companies and therefore comparability may be limited.
Combined ratio excluding the effects of current year catastrophe
losses, prior year reserve development and ceding commission income
earned (underlying combined ratio) is a non-GAAP ratio, which is
computed by subtracting the effect of current year catastrophe losses,
prior year development, and ceding commission income earned related to
the Company's quota share reinsurance agreement from the combined ratio.
The Company believes that this ratio is useful to investors and it is
used by management to reveal the trends in the Company's business that
may be obscured by current year catastrophe losses, losses from lines in
run-off, prior year development, and ceding commission income earned.
Current year catastrophe losses cause the Company's loss trends to vary
significantly between periods as a result of their incidence of
occurrence and magnitude, and can have a significant impact on the
combined ratio. Prior year development is caused by unexpected loss
development on historical reserves. Ceding commission income compensates
the Company for expenses it incurs in generating the premium ceded under
the Company's quota share reinsurance agreement. The Company believes it
is useful for investors to evaluate these components separately and in
the aggregate when reviewing the Company's performance. The most direct
comparable GAAP measure is the combined ratio. The underlying combined
ratio should not be considered as a substitute for the combined ratio
and does not reflect the overall profitability of the Company's business.
Net Loss and LAE excluding the effects of current year catastrophe
losses and prior year reserve development (underlying Loss and LAE)
is a non-GAAP measure which is computed by subtracting the effect of
current year catastrophe losses and prior year reserve development from
Loss and LAE. The Company uses underlying loss and LAE figures to
analyze the Company's loss trends that may be impacted by current year
catastrophe losses and prior year development on the Company's reserves.
As discussed previously, these two items can have a significant impact
on the Company's loss trends in a given period. The Company believes it
is useful for investors to evaluate these components separately and in
the aggregate when reviewing the Company's performance. The most direct
comparable GAAP measure is net loss and LAE. The underlying loss and LAE
measure should not be considered a substitute for net losses and LAE and
does not reflect the overall profitability of the Company's business.
Operating Expenses excluding the effects of ceding commission income
earned, merger expenses, and amortization of intangible assets
(underlying expense) is a non-GAAP measure which is computed by
subtracting ceding income earned related to the Company's quota share
reinsurance agreement, merger expenses and amortization of intangibles.
Ceding commission income compensates the Company for expenses it incurs
in generating the premium ceded under the Company's quota share
reinsurance agreement. Merger expenses are directly related to past
mergers and are not reflective of current period operating performance.
Similarly, amortization expense is related to the amortization of
intangible assets acquired through mergers and therefore the expense
does not arise through normal operations. The Company believes it is
useful for investors to evaluate these components separately and in the
aggregate when reviewing the Company's performance. The most direct
comparable GAAP measure is operating expenses. The underlying expense
measure should not be considered a substitute for the expense ratio and
does not reflect the overall profitability of the Company's business.
Net Income excluding the effects of merger expenses, non-cash
amortization of intangible assets and realized gains (losses), net of
tax (core income) is a non-GAAP measure which is computed by adding
merger expenses, net of tax, and amortization, net of tax, to net income
and subtracting realized gains (losses) on our investment portfolio net
of tax, from net income. Merger expenses are directly related to past
mergers and are not reflective of current period operating performance.
Similarly, amortization expense is related to the amortization of
intangible assets acquired through merger and therefore the expense does
not arise through normal operations. Investment portfolio gains (losses)
vary independent of the Company's operations. The Company believes it is
useful for investors to evaluate these components separately and in the
aggregate when reviewing the Company's performance. The most direct
comparable GAAP measure is net income. The core income measure should
not be considered a substitute for net income and does not reflect the
overall profitability of the Company's business.
Conference Call Details |
Date and Time: |
| February 21, 2018 - 4:30 P.M. ET |
Participant Dial-In: | |
(United States): 877-407-8829
|
| |
(International): 201-493-6724
|
Webcast: | |
To listen to the live webcast, please go to www.upcinsurance.com
(Investor Relations) and click on the conference call link, or go
to: http://upcinsurance.equisolvewebcast.com/q4-2017 |
About UPC Insurance
Founded in 1999, UPC Insurance is an insurance holding company that
sources, writes and services personal and commercial residential
property and casualty insurance policies using a group of wholly owned
insurance subsidiaries through a variety of distribution channels. The
Company currently writes policies in Connecticut, Florida, Georgia,
Hawaii, Louisiana, Massachusetts, New Jersey, New York, North Carolina,
Rhode Island, South Carolina and Texas, and is licensed to write in
Alabama, Delaware, Maryland, Mississippi, New Hampshire, and Virginia.
From its headquarters in St. Petersburg, UPC Insurance's team of
dedicated professionals manages a completely integrated insurance
company, including sales, underwriting, customer service and claims. UPC
Insurance is a company committed to financial stability and solvency.
Forward-Looking Statements
Statements made in this press release, or on the conference call
identified above, and otherwise, that are not historical facts are
“forward-looking statements” that anticipate results based on our
estimates, assumptions and plans and are subject to uncertainty.These
statements are made subject to the safe-harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements do not relate strictly to historical or current facts and may
be identified by their use of words such as “may,” “will,” “expect,”
"endeavor," "project," “believe,” “anticipate,” “intend,” “could,”
“would,” “estimate,” or “continue” or the negative variations thereof or
comparable terminology.We believe these statements are based on
reasonable estimates, assumptions and plans. However, if the estimates,
assumptions or plans underlying the forward-looking statements prove
inaccurate or if other risks or uncertainties arise, actual results
could differ materially from those communicated in these forward-looking
statements. Factors that could cause actual results to differ materially
from those expressed in, or implied by, the forward-looking statements
may be found in our filings with the U.S. Securities and Exchange
Commission, including the “Risk Factors” section in our most recent
Annual Report on Form 10-K and subsequent Quarterly Reports on Form
10-Q. Forward-looking statements speak only as of the date on which they
are made, and, except as required by applicable law, we undertake no
obligation to update or revise any forward-looking statement.
Consolidated Statements of Comprehensive Income In thousands, except share and per share amounts |
|
| |
| |
| | Three Months Ended | | Year Ended |
| | December 31, | | December 31, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
|
REVENUE:
| |
| | | | | | |
|
Gross premiums written
| |
$
|
252,440
| | |
$
|
167,103
| | |
$
|
1,040,848
| | |
$
|
708,156
| |
|
Decrease (increase) in gross unearned premiums
| |
21,933
|
| |
15,119
|
| |
(54,825
|
)
| |
(41,327
|
)
|
|
Gross premiums earned
| |
274,373
| | |
182,222
| | |
986,023
| | |
666,829
| |
|
Ceded premiums earned
| |
(108,178
|
)
| |
(61,061
|
)
| |
(400,533
|
)
| |
(209,898
|
)
|
|
Net premiums earned
| |
166,195
| | |
121,161
| | |
585,490
| | |
456,931
| |
|
Investment income
| |
5,323
| | |
2,893
| | |
17,812
| | |
10,679
| |
|
Net realized gains
| |
621
| | |
69
| | |
67
| | |
547
| |
|
Other revenue
| |
10,447
|
| |
7,310
|
| |
51,051
|
| |
18,960
|
|
Total revenues
| |
$
|
182,586
| | |
$
|
131,433
| | |
$
|
654,420
| | |
$
|
487,117
| |
|
EXPENSES:
| | | | | | | | |
|
Losses and loss adjustment expenses
| |
72,137
| | |
98,738
| | |
365,535
| | |
298,353
| |
|
Policy acquisition costs
| |
50,142
| | |
33,572
| | |
175,444
| | |
117,658
| |
|
Operating expenses
| |
8,655
| | |
5,198
| | |
27,675
| | |
20,524
| |
|
General and administrative expenses
| |
22,937
| | |
11,197
| | |
81,762
| | |
42,956
| |
|
Interest expense
| |
965
|
| |
326
|
| |
3,247
|
| |
723
|
|
Total expenses
| |
154,836
| | |
149,031
| | |
653,663
| | |
480,214
| |
|
Income (loss) before other income
| |
27,750
| | |
(17,598
|
)
| |
757
| | |
6,903
| |
|
Other income
| |
59
|
| |
20
|
| |
153
|
| |
100
|
|
|
Income (loss) before income taxes
| |
27,809
| | |
(17,578
|
)
| |
910
| | |
7,003
| |
|
Provision (benefit) for income taxes
| |
808
|
| |
(7,061
|
)
| |
(9,235
|
)
| |
1,305
|
|
|
Net income (loss)
| |
$
|
27,001
|
| |
$
|
(10,517
|
)
| |
$
|
10,145
|
| |
$
|
5,698
|
|
|
OTHER COMPREHENSIVE INCOME:
| | | | | | | | |
|
Change in net unrealized gains (losses) on investments
| |
138
| | |
(10,934
|
)
| |
10,647
| | |
(629
|
)
|
Reclassification adjustment for net realized investment
gains
| |
(621
|
)
| |
(69
|
)
| |
(67
|
)
| |
(547
|
)
|
Income tax benefit (expense) related to items of other
comprehensive
income
| |
2,026
|
| |
4,154
|
| |
(2,181
|
)
| |
378
|
|
|
Total comprehensive income (loss)
| |
$
|
28,544
|
| |
$
|
(17,366
|
)
| |
$
|
18,544
|
| |
$
|
4,900
|
|
| | | | | | | |
|
|
Weighted average shares outstanding
| | | | | | | | |
|
Basic
| |
42,526,045
|
| |
21,449,910
|
| |
37,152,768
|
| |
21,417,486
|
|
|
Diluted
| |
42,753,303
|
| |
21,645,141
|
| |
37,375,340
|
| |
21,614,443
|
|
| | | | | | | |
|
|
Earnings per share
| | | | | | | | |
|
Basic
| |
$
|
0.63
|
| |
$
|
(0.49
|
)
| |
$
|
0.27
|
| |
$
|
0.27
|
|
|
Diluted
| |
$
|
0.63
|
| |
$
|
(0.49
|
)
| |
$
|
0.27
|
| |
$
|
0.26
|
|
| | | | | | | |
|
|
Dividends declared per share
| |
$
|
0.06
|
| |
$
|
0.06
|
| |
$
|
0.24
|
| |
$
|
0.23
|
|
Consolidated Balance Sheets In thousands, except share amounts |
|
| |
| |
| | December 31,
2017 | | December 31,
2016 |
|
ASSETS
| | | | |
|
Investments available for sale, at fair value:
| | | | |
|
Fixed maturities
| |
$
|
762,855
| | |
$
|
494,516
| |
|
Equity securities
| |
63,295
| | |
28,398
| |
|
Other investments
| |
28,381
| | |
5,733
| |
|
Short-term investments
| |
137,115
|
| |
50,785
|
|
|
Total investments
| |
$
|
991,646
|
| |
$
|
579,432
|
|
|
Cash
| |
139,160
| | |
99,903
| |
|
Accrued investment income
| |
5,577
| | |
3,735
| |
|
Property and equipment, net
| |
17,291
| | |
17,860
| |
|
Premiums receivable, net
| |
75,275
| | |
38,883
| |
|
Reinsurance recoverable on paid and unpaid losses
| |
395,774
| | |
24,028
| |
|
Prepaid reinsurance premiums
| |
201,904
| | |
132,564
| |
| Goodwill | |
73,045
| | |
14,254
| |
|
Deferred policy acquisition costs
| |
103,882
| | |
65,473
| |
|
Intangible assets
| |
45,271
| | |
12,371
| |
|
Other assets
| |
11,096
|
| |
11,183
|
|
|
Total Assets
| |
$
|
2,059,921
|
| |
$
|
999,686
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
| | | | |
|
Liabilities:
| | | | |
|
Unpaid losses and loss adjustment expenses
| |
$
|
482,232
| | |
$
|
140,855
| |
|
Unearned premiums
| |
555,873
| | |
372,223
| |
|
Reinsurance payable
| |
149,117
| | |
99,891
| |
|
Payments outstanding
| |
41,786
| | |
21,933
| |
|
Accounts payable and accrued expenses
| |
46,594
| | |
26,124
| |
|
Other liabilities
| |
85,830
| | |
43,158
| |
|
Notes payable
| |
161,364
|
| |
54,175
|
|
|
Total Liabilities
| |
$
|
1,522,796
|
| |
$
|
758,359
|
|
|
Commitments and contingencies
| | | | |
|
Stockholders' Equity:
| | | | |
Preferred stock, $0.0001 par value; 1,000,000 authorized; none
issued or
outstanding
| |
—
| | |
—
| |
Common stock, $0.0001 par value; 50,000,000 shares authorized;
42,965,137 and
21,858,697 issued; 42,753,054 and 21,646,614
outstanding, respectively
| |
4
| | |
2
| |
|
Additional paid-in capital
| |
387,145
| | |
99,353
| |
| Treasury shares, at cost; 212,083 shares
| |
(431
|
)
| |
(431
|
)
|
|
Accumulated other comprehensive income
| |
9,221
| | |
822
| |
|
Retained earnings
| |
141,186
|
| |
141,581
|
|
|
Total Stockholders' Equity
| |
$
|
537,125
|
| |
$
|
241,327
|
|
|
Total Liabilities and Stockholders' Equity
| |
$
|
2,059,921
|
| |
$
|
999,686
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20180221006278/en/
United Insurance Holdings Corp.
Jessica Strathman
SEC
Reporting Manager
727-895-7737
jstrathman@upcinsurance.com
OR
INVESTOR
RELATIONS:
The Equity Group
Adam Prior
Senior
Vice-President
212-836-9606
aprior@equityny.com
Source: United Insurance Holdings Corp.