Universal’s first cat bond oversubscribed, reinsurance renewal progressing: CEO

Florida headquartered insurer Universal Insurance Holdings is making progress with its mid-year reinsurance renewal with its first catastrophe bond, the $150 million Cosaint Re Pte. Ltd. (Series 2021-1) transaction oversubscribed by investor demand, according to its CEO Stephen J. Donaghy.

Universal secured the Cosaint Re catastrophe bond back in March, with a successful first visit to the cat bond market capped by the deal increasing in size by 50% to $150 million while marketing, thanks to investors strong appetites for new issues.

Discussing his company’s first-quarter 2021 results yesterday, CEO Donaghy described an 11.7% increase in revenue from the prior year to $262.8 million, while Universal also booked 12% top-line growth during the period.

Income was up almost 32% on the prior year, while the combined ratio actually fell by a percentage point.

Reinsurance is a critical component of the Universal business model and the company is always one of the earlier companies to place its renewals.

CEO Donaghy commented, “We continue to make progress on our reinsurance program renewal, and were oversubscribed on our first CAT bond in March at rates below the low end of our initial range.”

As we explained back in March, the Cosaint Re catastrophe bond priced to offer investors a coupon of 9.25%, which was a roughly 6.4% decline from the mid-point of the initial spread guidance of 9.5% to 10.25%.

Universal is also part way through placing the rest of its mid-year reinsurance renewal and Donaghy said, “We have now completed procurement of our All States first event reinsurance program for UPCIC for the 2021 wind season and will have additional details in May as we finalize the remainder.”

As a Florida headquartered insurer, Universal’s book is still overweighted to the state and its catastrophe exposed regions, so legislative change is a top priority for the company, as it has suffered from the Florida property insurance market issues that have so plagued it in recent years.

Donaghy commented, “We were encouraged earlier this month when the Florida Senate passed Bill 76, which would enable Floridians to have reliable access to property insurance. For a number of years Florida has been a significant outlier compared to the rest of the country when it comes to litigated property claims, which has put significant pressure on the Florida property insurance marketplace. We have not been immune to these market dynamics and during the first quarter we actively reduced our policies in force sequentially and reduced new and renewal policy counts in aggregate this quarter when compared to the first quarter of 2020. That being said, we continue to monitor closely the companion bill in the House (House Bill 305), which has differences from Senate Bill 76.”

As we explained in this recent article, Florida’s litigation issues continue.

You can read all about Universal’s first catastrophe bond, the Cosaint Re Pte. Ltd. (Series 2021-1) deal and every other cat bond transaction in the Artemis Deal Directory.