Universal sees high single digit Florida rate increases, expansion continues

Florida headquartered primary insurer Universal Insurance Holdings has signalled that it expects to achieve high single digit rate increases in some parts of Florida, boding well for the reinsurance market which will expect to see some of those increases passed on.

After the impacts of hurricanes in 2017 and 2018, as well as the slow grind of loss creep experienced, Universal and other Floridian primary insurers have applied for rate increases in the state, with the majority said to have been approved.

Given the Florida reinsurance renewals are fast approaching, the rising primary insurance rates should comfort insurers like Universal who are set to pay higher rates for their reinsurance for the 2019 hurricane season.

Universal’s own catastrophe reinsurance program was said to have priced up as much as 30% in an early renewal placement, but it seems the insurer will be compensated for this higher cost through the higher rates it can achieve on the primary side.

Sean P. Downes, Universal’s CEO, explained, “We received rate increase approvals in Florida and Georgia for new and renewal business, including high single digit increases in certain territories, the majority of which will take effect in the latter part of the second quarter.”

Other Floridian insurers have also achieved rate increases in the state, which again should help to soften the blow of higher expected reinsurance costs.

At the same time as achieving rising rates, Universal is also expanding further, growing its premiums significantly and this is expected to continue after the addition of Illinois as another state the insurer is approved to write new business in.

“We are off to a good start to 2019 with solid first quarter results, including a 31.5% increase in other states direct premiums written, strong performance from our investment portfolio, and a total annualized return on average equity of 30.4%,” Downes commented.

Adding, “We also continued to expand our addressable market in the first quarter through the launch of Universal Property in Illinois, one of the top five largest personal residential homeowners states in the country by direct premiums written. Lastly, we added nine carrier appointments to our digital insurance distribution channel CloveredSM across Homeowners, Auto, Flood, and E&S lines.

“These milestones mark good progress against our strategic priorities and put us in position to focus on disciplined growth, maximize earnings stability, and continue to strengthen our foundation.”

Universal increased its Q1 total revenue by 23.5% from the prior year quarter to reach $236.6 million, while book value per share increased to $15.57, up by 17.2% year over year.

However, the insurers operating income was down 20.5% for the quarter, which was largely driven by the continued loss creep from hurricane Irma and other events with their rising loss estimates, current year catastrophes including the Brevard County hailstorm in late March, as well as an increased core loss ratio.

Universal said that the Brevard County hailstorm resulted in quarterly weather events going above budget by $5 million or 2.4 points, which is attributed directly related to that hail event.

Losses and loss adjustement expenses came in roughly $37 million higher in Q1 2018 than in the prior year quarter, a significant chunk of which is assumed to have come from the increased hurricane Irma loss estimate, as well as the hail storm and higher core loss ratio.

Universal’s ILS partners may have borne some of the brunt of these increased losses, especially through quota share arrangements.

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