E Upside With United Insurance

At the end of 2014 total insured value of the policies in force increased 26.8% from the prior year; outside-Florida represented 60% of the total insured value compared to 74.3% at the end of the prior year.

As United Insurance has been growing impressively, so has its net income from the business. In the year 2010 its net revenue including investment gains was close to $80 million, with net loss close to a million. As you can see in the following graph, net revenue increased to $280 million and net income grew to $41 million, or $2.05 a share.

  2010 2011 2012 2013 2014
Revenue $79,991 $96,418 $131,234 $208,080 $280,230
Expenses $80,673 $83,227 $116,005 $173,594 $215,897
Net income (loss) -$925 $8,088 $9,705 $20,342

$41,013

 

 

Balance Sheet Rich

As of the end of the first quarter, United Insurance's balance sheet has $604 million in assets and $386 million in liabilities. With approximately 21 million outstanding shares, United Insurance’s book value is at $10.25.  With stock price at around $16, it is trading at just 1.6 times the book value. Relative to its insurance peers United Insurance appears cheap by book value. Since United Insurance’s assets are mostly liquid assets, there is little room for error on this valuation.

Cash Flow

 For the past few years Operating cash flow for United Insurance has been growing at an impressive rate. Last year free cash flow to the firm was at $62.5 million, or $3 of free cash per share;  United Insurance trading 5.33 times  free cash flow.

  2012 2013 2014
Net Income $9,705 $20,342 $41,013
Operating Cash Flow $35,515 $109,766 $68,918
Capital Expenses $452 $1,867 $6,346
Free Cash Flow $35,063 $107,899 $62,572
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Disclosure : Long on United Insurance (UIHC). Owned in personal and client portfolios.

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