Saturday, September 21, 2019

UVE - A Company That Thrive In The Most Competitive and Dangerous Landscape!


This post is a reminder for myself of why I invested in the above company. I am vested and comments maybe biased.

Numbers/Finance

Increasing Revenue, Net Profit, Dividend – Over the last five years, the total revenue has just been increasing. Although you can’t say the same for net profit, but on an overall basis, it has also been increasing. As for the dividend, it has also been increasing. Love it (Remember this trend and it will be explain further in the catalyst).

Source: FY2018 10-K
Improving Balance Sheet – Balance sheet has been improving with the rise in total asset along with the rise in Book Value.

ROE, Long Term Debt, Combined Ratio – Return on equity has dropped, but it has maintained at 20+%. But this ROE comes along with low Long Term Debt (Hint!). In addition, just looked at the returns of UVE vs competitors. Furthermore, Combined Ratio* continued to remain below 100%.

*As per Investopedia, “The combined ratio is a quick and simple way to measure the profitability and financial health of an insurance company. The combined ratio measures whether the insurance company is earning more revenues from its collected premiums relative to the claims it pays out.”

Source: Csimarket.com
Source: FY2018 10-K
 Generating FCF – It has consistently generated FCF for the last 5 years.

Source: SeekingAlpha
DCF calculation – My own high discount, zero growth DCF allows me to come up with a figure at over US$30! This is a very conservative figure!

Reasonable Ratios – The ratios are not screaming “Buy Me!” but they are definitely reasonable when compared to industry.

Source: Csimarket.com
Piotroski F Score (Based FY2018) – 5 (Not the most accurate due to different financial statement). However, this figure is not really up to my standard. Nevertheless, it is good enough due to other positive factors.

Business Model

Property and casualty insurance Company Solely Operating in the US – It is a holding company offering property and casualty insurance and value-added insurance services.

Main Business in Florida – 85% of revenue generated in Florida.

Now you must be wondering: Why Florida? It seems to be appearing in the news VERY often due to Hurricanes. Just look at the number of Hurricanes that had hit Florida as stated by Wikipedia! (Read Catalyst).

Source: Wikipedia

Source: Investor Presentation
Cataylst

An unknown Company – In “One Up on Wall Street”, Peter Lynch stated to find companies Wall Street has yet to pounced on. Please read the latest transcript in Seeking Alpha and look at the number of analysts covering it. Its pathetic for such a good company!

Share Buy Back – In Dec 2018, UVE’s Board of Directors authorized a new share repurchase program to repurchase up to $20M of its outstanding shares of common stock through May 31, 2020. This new authorization follows the completion of the $20M share repurchase program announced on November 8, 2017.

Share Price Movement vs Improving Financials – I will be expecting the share price to just keep going up due to improving financials. Hmm… it does not seem like the case.

Source: SeekingAlpha

Reinsurance Program – This is the most important catalyst for UVE and it also showcase its ability to survive in Florida despite being in such a competitive and dangerous landscape. Do read their 10-k to understand their reinsurance program. But basically, they reinsured their risk outwards and expected loss is limited.

Source: FY2018 10-K

Risk

Catastrophic Event – In all insurance companies, the main risk is catastrophic event. Although they have a great reinsurance program. But what happens if the event hit the whole of US? Do note that they do have businesses out of US.

Website Down Outside US (?) – This is probably a joke. But I cannot seem to access their website. If you are working in UVE, it will be good to reflect this to your management!

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2 comments:

  1. Hi.

    Good luck to you!

    May i know how much is your portfolio value now? Thanks!

    ReplyDelete