Dan Peed, Chairman and Chief Executive Officer (CEO) of property and casualty holding company UPC Insurance has explained that the company has “curbed new business dramatically” as part of its exposure management plan, and is planning to reduce its reinsurance program.
Last week, UPC reported a first quarter pre-tax loss of $26.3 million, which was a further deterioration from the $15.8 million reported in the prior year period.
In response to this performance, UPC has already reduced its pool of probable maximum losses (PML) by 13% by September 30 on a year-over-year basis., which should result in over $300 million less reinsurance limit needed.
“This takes a lot of pressure off our June 1st catastrophe reinsurance placement,” Peed noted. “To date, we expect to finish our placement soon.”
Brad Martz, President and Chief Financial Officer (CFO) of UPC, added that the company has made “exceptional progress” on renewing its core catastrophe reinsurance program that will become effective on June 1st, 2021.
“I’m happy to report we’ve secured commitments from our reinsurance partners in excess of the total limit being sought, and are now in the process of determining final allocation of lines,” Martz said.
“We’re able to retain our aggregate cascading structure, which we believe provides superior protection against risk or ruin. And the risk-adjusted cost increase is likely to be in the mid-single digits, but is not finalized yet because we are still evaluating various options related to reducing our occurrence in aggregate retention.”
Addressing UPC’s recent performance, Peed also acknowledged that the company needs to continue driving up revenue and driving down its loss and reinsurance costs through risk selection and exposure management.
Its efforts will therefore focus on reducing its 90.4% combined ratio further into the low 80s, and on maintaining strong renewal retention rates, rather than seeking new business.
“We’re making good progress,” Peed remarked. “For revenue, our rate increases are continuing with a 10.4% rate increase achieved year-to-date on personal lines renewal business and nearly 19% on personal lines new business.”
“We anticipate the hardening rates will continue and renewal business rate increases to even accelerate,” he continued. “We have filed rate increases in Florida, Texas, South Carolina, North Carolina, Louisiana, and New York, averaging nearly 15%.”
