Florida-based property and casualty insurer Universal Insurance has released its results for the first half of 2019, reporting a 16.8% decrease in income before taxes.
Income slipped by $10.3 million to $50.9 million in Q2 2019, compared with $61.2 million for the same period in the previous year.
Looking at the first six months of the year, the decline was more limited at 7.3%, with income moving from $112.9 million in H1 2018 to $104.7 million this year.
Universal attributed the performance to a higher core booked loss ratio in 2019 compared to 2018, a lower benefit from integrated services as prior years’ claims conclude, and a higher effective tax rate.
The company’s loss & loss adjusted expenses (LAE) ratio was 53.9%, compared to 46.7% in 2018, while its expense ratio also increased modestly to 33.0%.
These contributed to a combined ratio of 86.9% for Q2 2019, versus 77.2% last year. On a six-monthly basis, the change was similar, moving from 76.9% in H1 2018 to 87.1% this year.
Increases were driven by increased losses in connection with the diversified growth in Universal’s underlying business, the company said, as well as higher core booked loss ratios to bolster reserves, and a reduced benefit from claims adjusting business.
Universal did, however, report double digit growth in its total revenue, which increased by 11.4% to $233.7 million for Q2, and by 17.2% to $470.3 for H1.
This increase was attributed primarily to higher organic premium volume, pricing, and investment portfolio performance.
Direct premiums earned, for example, were up by 10.6% for the quarter, led by growth of 33.2% in other states (Florida), and by 11.6% for the first six months of the year.
Underlying growth in Florida was tempered by more disciplined underwriting guidelines that were put in place in 2019, while geographic expansion continues to be strong, Universal said.
Net investment income increased 28.1% for Q2 and 47.1% in H1 due to higher long-term and short-term interest rates, asset mix, as well as higher average levels of invested assets.
“These results extend our solid first quarter, with total revenue growing double digits for both the second quarter and the first half of 2019, resulting in a total annualized return on average equity in the first half of 2019 of 28.7%,” said Stephen J. Donaghy, Chief Executive Officer (CEO) at Universal.
“In addition, we completed our 2019-2020 Reinsurance Program to secure more catastrophe coverage than at any point in the Company’s history,” he continued. “We also continued to expand our addressable market in the second quarter with Universal Property becoming licensed in Wisconsin.”
“Lastly, our digital insurance distribution channel, CloveredSM, continued its expansion, becoming licensed in more than 15 states and adding five additional carrier appointments across Homeowners, Auto, Flood, and E&S lines. These milestones mark continued progress at the half-way point of 2019 against our strategic priorities.”