Florida headquartered insurer Universal Insurance Holdings has reported a 66% decrease in net income over the second quarter of 2022, from $21.9 million last year to just $7.4 million.
The company primarily attributed the decline to a higher net loss ratio, partly offset by a lower net expense ratio and higher commission revenue and net investment income.
The net loss ratio was 72.3%, up 7.0 points compared to the prior year quarter, reflecting a challenging Florida claims environment and inflationary and weather trends, partly offset by lower adverse prior year reserve development as a percentage of net premiums earned.
The higher loss ratio also resulted in a 3.6 percentage point increase in Universal’s combined ratio, which stood at 100.9% for the quarter.
Looking at Universal’s performance over the first six months of 2022 the picture is similar, with net income down 48.5% to $24.9 million and the loss ratio up 8.3 points to 70.6%, resulting in a combined ratio of 99.4%.
Overall revenue for the Q2 period was up 4.6% to $292.0 million, owing to an 8.2% increase in net premiums earned and a 4.9% increase in commission revenue.
Net investment income was $5.2 million, up from $2.9 million in the prior year quarter. The increase primarily stems from higher fixed income reinvestment yields and higher average invested assets.
“We reported a 12.8% annualized adjusted return on common equity in the quarter, an impressive feat in the current environment,” added Universal CEO Stephen J. Donaghy.
“In addition to rate increases, we continue to optimize and rebalance our portfolio, increasing exposure to more profitable regions, while reducing exposure to less profitable geographies. Our capital position remains strong at both of our insurance subsidiaries and on an enterprise-wide basis, and I’m particularly proud of the robust reinsurance program that we completed prior to the June 1 renewal date,” he continued.
“Despite the challenging reinsurance market, our program includes full protection for both hurricanes and tropical storms, has no gaps in coverage and no co-participation and provides coverage across multiple events. We are well prepared for hurricane season and expect the actions we’ve taken to bear fruit in future periods.”