When one thinks of publicly traded insurers, one’s mind might drift to companies like MetLife (MET) and Prudential (PRU). But there is a universe of smaller, niche insurance companies, with dividend yields much higher than what the high market capitalization insurers pay. I am going to take a close look at one of those companies, Universal Insurance Holdings (UVE), and compare it with peers Homeowners Choice (HCII), Travelers (TRV), and Metlife.

Universal is a vertically integrated insurer, specializing in homeowners’ policies in limited states. It makes no effort in markets like auto or commercial insurance, let alone life, health, or disability. What it does, homeowners, renters, and related policies, it does so in an integrated manner, handling underwriting, loss prevention, and claims. The company historically has operated exclusively in Florida, but has now gotten itself licensed to expand into the Carolinas, Georgia and Hawaii. This expansion will help to diversify Universal’s risk profile. But it is still a Florida company, as it had on March 31, 2012 584,000 policies in place in Florida, and a total 16,500 policies in place in other four states combined.

From an earnings perspective, an uptick in expenses due to expansion and new accounting rules helped to drive down Universal’s first quarter earnings down by 28% from $13.9 million or $0.34 per share a year ago, to $9.9 million, or $0.24 per share in the first quarter of 2012. Going forward, I look for substantial revenue gains as the company is more than just expanding geographically; it has pushed insurance premiums increases through of up to 15% in Florida.To continue reading, click here.