United Insurance Holdings Corp. (UPC) has announced a net loss of $74.1 million for the third-quarter of 2020, as its loss ratio increased significantly to 115.8% on the back of quarterly catastrophe losses of $140 million.
The record quarterly loss of $74.1 million compares with a loss of $28.3 million for the third-quarter of 2019, and takes the company’s net loss for the nine month period ended September 30th, 2020, to $62.5 million, against $21.7 million a year earlier.
The third-quarter was an active one for catastrophes and so far in 2020, UPC has witnessed a record number of named storms in its geographical footprint.
Loss and LAE jumped by a substantial $70.6 million in Q3, year-on-year, to $218.7 million, increasing 39 percentage points as a percentage of net earned premiums to 115.8% for the quarter. For 9M 2020, the loss and LAE ratio reached 74.8%, against 65.4% for the same period in 2019.
Combined with a slightly lower expense ratio for Q3 and a slightly higher one for 9M 2020, UPC has reported a combined ratio of 164.8% for the quarter and 121.1% for the nine-month period, versus 125.1% and 112.5% for the same periods in 2019, respectively.
Somewhat offsetting the heavy catastrophe load, prior year reserve development has also trended differently for UPC this year. In Q3 2020 the firm recorded favourable prior year reserve development of $4.2 million compared with unfavourable development of $12.3 million in Q3 2019. And, for 9M 2020, UPC has reported favourable development of $6.2 million compared with unfavourable development of $33.2 million for the same period in 2019.
Turning to premiums, and UPC has announced 15.3% growth in gross premiums written (GWP) for Q3 2020 to $365.8 million, and growth of 5.1% to $1.1 billion for 9M 2020. Gross premiums earned increased by 2.7% in Q3 to $353.9 million and by 5.7% in 9M 2020 to $1.04 billion. For the third-quarter, net premiums earned actually declined by 2.2% to $188.7 million, but increased slightly in the nine-month period to $565.8 million.
Dan Peed, UPC’s Chief Executive Officer (CEO), commented: “First, our thoughts are with all of the victims of the record-setting catastrophes this year, and our thanks to the many employees and partners that continue to serve our insureds.
“Year-to-date we have seen a record number of named storms in our geographic footprint. As an insurer that focuses on providing homeowners’ insurance in hurricane-prone coastal areas, we experienced our largest ever quarterly losses due to these unprecedented storms.
“Unfortunately, the losses attributable to the named storms masked numerous successes in the third quarter, including continued improvement in our core ex-hurricane earnings, increased rate earning through our portfolio, a decreased expense ratio, and accelerated rate increases on both the commercial and personal lines of our business.
“As we conclude 2020 and move into the new year, we believe the tightening market conditions will not adversely affect our planned rate increases in both our commercial specialty and personal lines of our business. We remain optimistic that we will be well-positioned to reduce volatility through increased reinsurance cessions, while still achieving positive returns.”
UPC has also provided an update on its reinsurance costs as a percentage of net earned premiums, revealing a total ceding ratio of 46.7% for 2020 against 44% for 2019. The company attributes this increase to the terms of its 2020-2021 catastrophe excess of loss reinsurance agreement.
Expanding on this, UPC notes that during Q3 2020, its UPC Re subsidiary assumed losses causing UPC to exhaust its intercompany catastrophe excess of loss reinsurance protection, which ultimately led to an acceleration of recorded ceded unearned premium.
In addition, UPC had to manage increased costs related to its quota share agreement as a result of increased gross written premium by the participating insurance subsidiaries in 2020.
