Property and casualty insurance holding company, United Insurance Holdings Corp. (UPC) fell to an $11.1 million net loss in the fourth-quarter of 2018, driven by catastrophe losses of more than $41.7 million, primarily relating to the impacts of Hurricane Michael in the U.S.
The $11.1 million net loss compares to a $27 million net profit in the fourth-quarter of 2017, which was actually a catastrophe-free period for the firm. However, the catastrophe experience in the fourth-quarter of 2018 increased substantially for UPC, reaching more than $41.7 million, mainly as a result of Hurricane Michael.
For the full-year 2018, net income fell from $10.2 million to $0.3 million, with the 2018 catastrophe loss hit falling by more than $16 million to $99.9 million, year-on-year.
UPC’s President and Chief Executive Officer (CEO), John Forney, said: “As expected, we had a lot of noise in our Q4 results due to Hurricane Michael and other cat events, as well as the impact of the new accounting rule about unrealized equity losses.
“But, we improved our underlying combined ratio by over 600 basis points compared to a year ago, and, absent the factors mentioned earlier, we would have produced better pre-tax income than last year’s Q4, when we had a cat-free quarter and produced our best results ever. We have a lot of positive momentum entering 2019, and the year is off to a good start.”
Gross written premiums (GWP) increased by 16% in Q4 and 20% in the full-year, while net earned premiums improved by 9% and 18%, respectively.
For the fourth-quarter of 2018, UPC’s combined ratio weakened to 108.9% and, although still unprofitable, UPC’s 2018 combined ratio actually improved by almost 7 percentage points, to 104.3%.
Current year catastrophe losses had a significant impact on the combined ratio in the fourth-quarter, contributing 23% compared with just 0.8% in Q4 2017. For the full-year, the effect of current year cat losses actually declined to 14.5%, compared with 19.8% in 2017.
In light of Hurricane Michael and other cat events, UPC’s Q4 2018 loss ratio hit 67.2% compared with 43.4% in the same period in 2017. The loss ratio for the full-year 2018 improved to 59.3%.
In both Q4 and full-year 2018 UPC lowered its expense ratio, year-on-year, to 41.7% and 45%, respectively.
As part of its fourth-quarter and full-year 2018 results, UPC provides some details around its reinsurance utilisation. Excluding UPC’s business for which it cedes 100% of the risk of loss, the firm’s reinsurance costs in Q4 were 40% of gross premiums earned, which is up from the 37.6% in the same period in 2017.
UPC notes that this is the result of the purchase of increased reinsurance cover for its 2018-2019 combined catastrophe reinsurance program. The firm announced in early January 2019 that it had extended its catastrophe quota share reinsurance agreement, while at the same time renewing its catastrophe aggregate and other reinsurance agreements.