Florida’s Universal Profits Are Up as Carrier Sheds Policies, Feels Impact of Reforms

Efforts by Universal Insurance Holdings, the publicly traded parent company of one of Florida’s largest property and casualty insurers, to shed policies, spread risk and raise rates appears to have paid off so far in 2023. And recent legislative changes aimed at reducing claims litigation haven’t hurt, either.

“While it’s still early days, we’re encouraged by favorable claims and litigation trends that are beginning to emerge as a result of recent legislative reforms and give us optimism as we look forward to 2024 and beyond,” Universal CEO Stephen Donaghy said in an earnings call Friday morning. “We continue to benefit from rate-driven premium growth and an improving spread of risk across our geographic footprint.”

The Fort Lauderdale-based carrier reported a net income for the second quarter of 2023 of $28.6 million, almost triple the net income for Q2 of 2022, the firm’s quarterly financial report shows. For the first six months of the year, net income was almost $53 million, double the reported profit for the first half of 2022.

And Universal’s combined ratio dipped slightly in Q2, while direct premiums written rose about 3%, to $547 million.

It’s partly a result of aggressive steps the company has taken in the last two years to reduce its exposure and improve rate and revenue at one of the most stressful periods in the Florida market, where multiple carriers have gone under and others have stopped writing in the state.

Universal said its total policies in force, across all states it writes in, dropped almost 10% from Q2 2022 to Q2 2023, from 894,618 to 809,685. In Florida, the number of policies has dropped from 654,276 to 576,407.

While the company was ranked the largest p/c carrier in the state just two years ago, it now ranks third, behind the rapidly growing, state-created Citizens Property Insurance Corp. and behind State Farm Insurance, according to recent reports.

Investment income also doubled for the quarter, compared to last year at this time. Commissions, policy fees and other revenue were up almost 16% from the prior year’s quarter.

“The increase primarily reflects higher reinsurance brokerage commission revenue, which benefited from higher ceded premiums, including reinstatement premiums associated with Hurricane Ian, and the difference in our reinsurance program’s structure relative to the prior year quarter, partly offset by a decline in policy fees associated with lower policies in force,” the company said in a news release.

Donaghy said that the full effects of the 2022 and 2023 legislative reforms, which ended one-way attorney fees and assignment-of-benefit agreements in most insurance claims, won’t be seen in the company’s books for another 12 to 14 months. But the statutes already are making a difference, he said.

“We changed our tune from ‘cautiously optimistic’ to ‘optimistic,’ a quarter or two ago and we continue to see that favorability in our numbers,” Donaghy said in the call.

Litigation has declined considerably and AOB-related suits are down even more, he added. Legislation approved in 2021 requires policyholders to give advance notice of intent to sue. While NOIs have increased in recent months, the notices have given Universal claims managers time to “close claims, take care of our insureds and keep the bad actors at bay,” he said. “So, we are not upset with an increase in that particular area.”

Reopened claims are not a major issue, compared to years’ past. And while recent industry reports have examined an increase in litigation funding, Donaghy said more of those funding schemes now appear to be moving out of Florida than are moving in.

He also suggested that reinsurance costs have been manageable, thanks in part to Universal reducing its retention.

“I’m proud of the reinsurance program we put together for the 2023-2024 treaty year,” Donaghy said. “Our program’s terms, conditions and coverage are consistent with the prior year, but we reduced our consolidated retention and ceded premium ratio.”

The CEO also thanked Universal insurance agents, as the carrier has worked to open up “additional markets” in Florida in the past three months. He did not elaborate on those markets and company officials could not be reached for further comment on that.

Topics Florida Carriers Profit Loss