Reinsurance News

Universal reports annualised return on equity of nearly 17%

29th April 2022 - Author: Pete Carvill

Universal is reporting an annualised return on equity of nearly 17%, according to its latest company reports.

universal-insurance-holdings-logoThe firm said that its direct written premiums in Q1 2022 were up 8.5% from the same point in the previous year, having reached $396.5m. However, direct premiums earned were only up 10.4% from the preceding quarter.

Stephen J. Donaghy, CEO of the firm, said: “We reported a 16.9% annualized ROE despite the challenging external environment, which is a testament to the strength and resilience of our business. Direct premiums written were up 8.5% from the prior year quarter, significantly outpacing a 6.1% policies in force decline, as meaningful rate increases benefited premium volumes. We are laser focused on improving underwriting profitability, as we prioritize combined ratio improvement over top line growth.”

He added: “In addition to raising rates across Florida and our broader footprint, we’ve reduced exposure to less profitable geographies, tightened underwriting criteria, renegotiated commission rates with our agency partners, and exercised prudent expense management. Lastly, rising yields are benefiting our investment income results, and should continue to serve as a tailwind moving forward. Given our strong capital position, the profitability of our business and the steps we continue to take to improve results, we believe we stand out favourably as reinsurers increasingly differentiate amongst cedants in the current market.”

Overall revenue for the firm was $287.5m, up 9.4% from the prior year quarter. The increase in revenue primarily stems from higher direct premiums earned associated with rate increases in the Florida homeowners book of business, partly offset by unrealized losses on equity securities.

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The income before income taxes margin was 7.8%, down 6.0 points from the prior year quarter, with the decrease stemming from a higher net combined ratio and unrealized losses on equity securities, partly offset by higher commission revenues.

The net loss ratio was 68.8%, up 9.6 points compared to the prior year quarter. The increase primarily reflects a higher initial accident year attritional loss pick associated with the challenging Florida claims environment, higher weather above plan and a smaller benefit from our claims adjusting affiliate.

The net expense ratio (excludes interest expense) was 29.1%, down 4.8 points compared to the prior year quarter. The reduction primarily reflects lower renewal commission rates paid to our agents, lower employee compensation and benefits expense and economies of scale.

The net combined ratio was 97.9%, up 4.8 points compared to the prior year quarter. The increase reflects a higher net loss ratio, partly offset by a lower net expense ratio, as described above.

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