Property and casualty insurance holding company, United Insurance Holdings Corp. (UPC Insurance), has reported a net loss of $2.9 million for the second-quarter of 2019, driven mostly by an increase in loss and loss adjustment expenses (LAE) when compared with the same period in 2018.
Quarterly net income declined by almost 120% year-on-year, despite UPC Insurance recording 17% growth in gross premiums written (GPW) and 12% revenue growth, to $205 million.
Higher catastrophe losses and the impacts of the AOB issue in the state of Florida dented the firm’s Q2 2019 result, resulting in loss and LAE increasing by 31.2% to $27.7 million, and a loss ratio of 61.1% for Q2 2019, compared with 51.7% a year earlier.
Policy acquisition costs also increased in the quarter, by 22% to $11.1 million while operating and underwriting expenses increased by 15.5%, and general and administrative expenses increased by 33.3%, when compared with the second-quarter of last year. Overall, the firm’s expense ratio increased from 42.5% in Q2 2018 to 47.1% in Q2 2019.
UPC Insurance said previously that it expected Q2 cat losses of $16 million, with the firm today announcing current year cat losses of $15.8 million, which is up on the $17.3 million experienced in the same period in 2018.
As a result of the higher ratios, UPC Insurance’s combined ratio weakened in Q2 2019 to 108.2% from 94.2% in Q2 2018, which includes an 8.3% impact from current year cat losses and an 8.1% impact of prior year unfavourable development.
President and Chief Executive Officer (CEO) of UPC Insurance, John Forney, said: “It was a tough quarter for us. Elevated levels of cat losses and the last gasp of the AOB industry in Florida combined to overshadow the continued strong growth and performance in most of our states and lines of business.
“Recent and pending rate increases and other initiatives should help us get back on track and show the true earnings power of our business.”
GPW increased by 17% to $450 million in the second-quarter of 2019, while gross premiums earned increased by 14% to $330 million, and net earned premiums increased by 11% to $190 million, which somewhat offset the impact of higher losses and LAE in the quarter.
A closer look at the firm’s premium growth by region shows that UPC Insurance grew the most in Florida, which is where much of the most dramatic rate increases have been seen, followed by growth in the Northeast, the Southeast, and then the Gulf. By business line, personal property GWP increased by 11.4% to $286 million, while commercial property grew by 28.1% to $164 million.
UPC Insurance also details its reinsurance costs as a percentage of gross earned premiums in the quarter, stating that with the exception of business which it cedes 100% of the risk of loss, reinsurance costs in Q2 2019 were 40.8% of gross premiums earned, which is up from the 38.8% recorded in Q2 2018. This is driven by the decline in gross premiums earned in Q2 and also the inclusion of its Family Security Insurance Company, Inc. subsidiary in its 2019 quota share agreement.
The ceding percentage, according to UPC Insurance, increased from 20.8% in Q2 2018 to 22.5% in Q2 2019.
