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Universal Insurance: Potential For Solid Price Appreciation As It Mitigates Its Weather-Related Losses

Nick Perez profile picture
Nick Perez


  • Revenue growth has been strong due to organic growth and expansion into new markets, and that is expected to continue.
  • The stock price has been constrained by the increase in costs due to weather-related claims hampering financial performance.
  • Management is finding ways to mitigate these claims through price increases and expense rationalization and this could bolster the stock price.

Broker / insurer holds an umbrella to protect parents e.g. father, mother, a child, a house and a sedan car
Photo by William_Potter/iStock via Getty Images

Universal Insurance Holdings (NYSE:UVE) has been doing many things with a growing book of business and a solid balance sheet. The last two fiscal years have been rough due to weather-related claims (including fraudulent

This article was written by

Nick Perez profile picture
I am a long only stock investor. I look for companies that are under appreciated and have a catalyst to realize a more premium valuation. I take a bottom-up up approach by analyzing the financial statements. I can be found on Twitter @NPerezResearch

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (17)

I'll always buy insurance names below tangible book value. In this case, I'll reinvest dividends below tangible value bc I don't wish to add more on the open market bc of the other concerns.
Guraaf profile picture
The ROE has been dangerously low and given the climate change, it is risky. Too much dependence on weather which is unpredictable.
Nick Perez profile picture
@Guraaf weather is unpredictable, but you can price that in the underwriting. It's the combo with quick dollar attorneys thats the problem.
Guraaf profile picture
@Nick Perez But underwriting hasn't shown and there is no magic wand to do away with the attorneys either. This stock seems to languish in the teens. I still hold the stock that I bought $18-21 levels but not impressed in the performance over last 4 years now. That is a long time.
Timothy Stabosz profile picture
Uh, it’s a property and casualty insurance company. They are inherently dependent on, and subject to the vagaries of, the weather. Duh.
Alex Hardman profile picture
One definitely has to think with the recent rate increases, that they are better priced for the higher combination ratio. One thing I've never really grasped on this company is how much of the loses are really related to weather events and how much is the legal challenges/fraud. Seems the initial loss estimates from weather events were initially quite low, but grow as time goes on which seems a bit bizarre to me. I wish I had a better grasp on this aspect. Calm weather years will definitely come, but lawyers and fraud schemes will likely just keep coming.
Nick Perez profile picture
@Alex Hardman Severe weather seems to be easier to deal with than fraudsters.
Alex Hardman profile picture
@Nick Perez The fraudster or higher payouts is what worries me about UVE, weather does not. If anything, weather provides great opportunities to pick up more shares for cheap. Since Hurricane Wilma, Florida had over a 10 year stretch of no landfalling hurricanes. So it is just a matter of time when things will mellow out of the state. But fraudsters will just keep trying. Ten years ago, the big issue for home owners policies in Florida was sinkholes, so it is always something it seems. There is a reason most insurers won't write in this state, which allows for some fat margins for those who can figure it out.
Nick Perez profile picture
@Alex Hardman it probably will take years for that to play out. They need to grow faster outside of Florida
I once owned 222,000 shares of this at $1.88. Sold at ~$6. Wish I still had it.
@DadRuss72 Especially since it ran to 50 3 years ago
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