Florida-domiciled and expansive primary insurance company, Universal Insurance Holdings, has reported a Q4 2023 combined ratio of 103.7%, an increase of 2.3 points from the comparative quarter, reflecting a higher net loss ratio as the net expense ratio came down.
The insurer’s loss ratio increased by 5.6 points in Q4 2023 to 81.9% from Q4 2022’s 76.3%, driven by a higher calendar year loss pick. The expense ratio fell to 21.8% from 25.1%.
Net income available to common stockholders was $20 million in Q4 2023, down from net income of $25.1 million in the prior year quarter, and the adjusted net income was $12.6 million, down from $22.1 million.
Universal attributes the decrease in adjusted to a higher net loss ratio and lower commission revenue, partly offset by a lower net expense ratio and higher net investment income.
For the quarter, total revenues was $375.5 million, up 13.7% from the prior year quarter and core revenue was $365.7 million, up 12.1% year-on-year. This increase was driven by higher net premiums earned and net investment income, partly offset by lower commission revenue.
Direct premiums written by the insurer were reported at $432.6 million, up 4.0% from the prior-year quarter, driven by 0.6% growth in Florida and 18.6% growth in other states. The overall growth reflects rate increases, partly offset by lower policies in force.
Direct premiums earned were $482.1 million, up 3.9% from the prior year quarter. The increase stems from rate-driven direct premiums written growth over the past twelve months.
The ceded premium ratio was 30.4% in Q4 2023, down from 37.1% in the prior year’s quarter. The decrease primarily reflects efficiencies associated with the 2023-2024 reinsurance program, the inclusion of Hurricane Ian-related reinstatement premiums in the prior year quarter, and direct premiums earned growth associated with primary rate increases driven by higher private market reinsurance pricing and higher reinsurance costs associated with an increase in home values.
Net premiums earned were reported at $335.4 million, up 14.9% from Q4 2022, due to higher direct premiums earned and a lower ceded premium ratio.
Net investment income rose to $13.7 million in Q4 2023 compared with $10.4 million in Q4 2022, driven by higher reinvestment yields and higher yields on cash.
The insurer reported commissions, policy fees and other revenue of $16.6 million, down 31% from Q4 2022, driven by lower reinsurance brokerage commissions associated with lower ceded premiums and the inclusion of Hurricane Ian-related reinstatement premiums in the prior year quarter.
Stephen J. Donaghy, Chief Executive Officer, Universal Insurance Holdings, commented, “We closed out both the fourth quarter and full year with double-digit adjusted returns on common equity and I believe that even stronger results are firmly in our future. 2023 was a transformative year for us and our significant efforts position us for meaningful success in the new legislative environment.
“We’ve added a buffer to our loss picks and bolstered reserves for years that predate elimination of one way attorney fees and assignment of benefits to what I view as the most conservative level in our history. Importantly, we did this because we wanted to place the past in the rearview mirror and shift our focus to the future. In 2023, we took yet another step toward the future by commuting Hurricane Irma, the largest and most significant storm in our history, with the Florida Hurricane Catastrophe Fund.
“Now that we’re past the one year anniversary date of the 2022 special legislative session and all new and renewal policies are subject to the new legislation, the impact of the reforms is becoming clearer – claims trends across the board are improving, including reductions in total claims, represented claims, assigned claims and daily claims.
“Our first event 2024-2025 reinsurance tower is already 90% secured and we’ve negotiated additional multi-year capacity for the future. Given our size, scale, independent agency and reinsurer relationships and the recent steps we’ve taken, we’re particularly well positioned to succeed in the revamped Florida environment.”
