UVE WACC - Weighted Average Cost of Capital
The WACC of Universal Insurance Holdings Inc (UVE) is 6.9%.
| Range | Selected | |
| Cost of equity | 6.5% - 8.2% | 7.35% |
| Tax rate | 23.0% - 25.9% | 24.45% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 6.2% - 7.6% | 6.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.58 | 0.59 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.5% | 8.2% |
| Tax rate | 23.0% | 25.9% |
| Debt/Equity ratio | 0.14 | 0.14 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 6.2% | 7.6% |
| Selected WACC | 6.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| UVE | Universal Insurance Holdings Inc | 0.14 | 0.39 | 0.35 |
| CNFR | Conifer Holdings Inc | 1.27 | -0.21 | -0.11 |
| DGICA | Donegal Group Inc | 0.05 | 0.26 | 0.25 |
| EIG | Employers Holdings Inc | 0 | 0.39 | 0.39 |
| NSEC | National Security Group Inc | 0.32 | -0.37 | -0.3 |
| PRA | ProAssurance Corp | 0.36 | 0.4 | 0.32 |
| STFC | State Auto Financial Corp | 0.05 | 0.36 | 0.34 |
| TIPT | Tiptree Inc | 0.52 | 0.49 | 0.35 |
| UFCS | United Fire Group Inc | 0.17 | 0.89 | 0.79 |
| UIHC | United Insurance Holdings Corp | 0.44 | 0.54 | 0.41 |
| Low | High | |
| Unlevered beta | 0.33 | 0.35 |
| Relevered beta | 0.37 | 0.39 |
| Adjusted relevered beta | 0.58 | 0.59 |
UVE's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for UVE:
cost_of_equity (7.35%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.58) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.