Universal';s Insurance Subsidiaries Complete 2024-2025 Reinsurance Program

Rhea-AI Summary

Universal Insurance Holdings announced that its subsidiaries, UPCIC and APPCIC, have completed their 2024-2025 reinsurance program. The program, effective June 1, 2024, replaces $217M of cost-free RAP coverage and $150M of expiring catastrophe bond coverage. The total cost is approximately 33.0% of the estimated direct earned premium, a 1.2-point increase from last year. The largest reinsurance participants maintain an 'A' rating or higher from AM Best. The program includes additional multi-year coverage for the 2025-2026 period. Additionally, UPCIC’s in-force wind-covered policy count in Florida has declined by 25,266 as of March 31, 2024.

Positive

• Successfully completed the 2024-2025 reinsurance program for both UPCIC and APPCIC.
• No material changes to historical reinsurance partners or terms and conditions.
• Largest private reinsurance participants maintain an 'A' rating or higher from AM Best.
• Increased reinsurance capacity with an additional $177 million in aggregate limit for multi-event scenarios.
• Secured $240 million of catastrophe capacity extending to the 2025-2026 reinsurance period.
• The top of the combined reinsurance tower for a single All States event set to $2.404 billion.

Negative

• Total reinsurance cost projected to be approximately 33.0% of estimated direct earned premium, up from 31.8% last year.
• UPCIC's in-force wind-covered policy count in Florida declined by 25,266 from March 31, 2023, to March 31, 2024.

Insights

Financial Analyst

The reinsurance program completed by Universal Insurance Holdings' subsidiaries, UPCIC and APPCIC, is particularly relevant for understanding the company's financial stability and risk management strategies. Notably, the overall $217 million of cost-free Reinsurance to Assist Policyholders (RAP) coverage and $150 million of expiring catastrophe bond coverage have been successfully replaced in the traditional reinsurance market. This suggests a strong relationship with reinsurance partners, which is essential for maintaining the company's risk profile.

The projected cost of the 2024-2025 reinsurance program, at 33.0% of estimated direct earned premium, marks a modest increase compared to the 31.8% in the previous year. This 1.2-point rise, despite increased demand for private market capacity, indicates effective negotiation and management strategy. It’s also worth noting the high ratings of the reinsurance participants from AM Best, ensuring reliability and quality of coverage.

For retail investors, the stability and predictability afforded by high-quality reinsurance should be reassuring, minimizing financial risk from potential catastrophic events. However, the slight increase in cost may warrant watching future earnings closely, as it could impact profitability. The reinsurance program’s ability to handle multiple events also points towards sound long-term planning.

Risk Management Expert

The reinsurance program outlined emphasizes robust risk management strategies implemented by Universal Insurance Holdings. With the inclusion of $240 million in multi-year coverage extending through the 2025-2026 period, the company is enhancing its protection against large-scale, multi-event catastrophes. This proactive approach illustrates foresight and preparedness, which are important in the insurance industry, particularly in regions susceptible to severe weather events.

The coverage reinstatement for $1.023 billion increases the aggregate limit available for subsequent events by $177 million, indicating enhanced financial resilience. The unchanged retention loss of $45 million further emphasizes the continuity and reliability in the company’s risk strategy.

For investors, this denotes a well-managed risk profile, likely to mitigate potential financial shocks from catastrophic events. The added capacity below and above the Florida Hurricane Catastrophe Fund also adds multiple layers of protection, reinforcing the company’s preparedness for future challenges.

• Successfully secured a combined UPCIC and APPCIC catastrophe reinsurance program with no material changes to historical reinsurance partners or terms and conditions.
• Replaced $217M of cost-free Reinsurance to Assist Policyholders (RAP) coverage and $150M of expiring catastrophe bond coverage in the traditional reinsurance market.
• Total cost of the 2024-2025 reinsurance program for UPCIC and APPCIC projected to be approximately 33.0% of estimated direct earned premium for the 12-month treaty period, compared to 31.8% at this time last year, reflecting a modest 1.2-point year over year increase despite our demand for private market capacity increasing significantly.
• The largest private reinsurance participants all maintain a rating from AM Best of ‘A’ or higher (Nephila Capital, Markel, RenaissanceRe, Munich Re, Chubb Tempest Re, Ariel Re, Everest Re and Lloyd’s of London syndicates).

FORT LAUDERDALE, Fla.--(BUSINESS WIRE)-- Universal Insurance Holdings, Inc. (NYSE: UVE) (“Universal” or the “Company”) today announced the completion by Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC”), the Company’s wholly-owned insurance company subsidiaries, of their combined 2024-2025 reinsurance program, effective June 1, 2024.

“We are pleased to announce the completion of the 2024-2025 reinsurance program for both of our insurance companies,” said Matthew J. Palmieri, Chief Risk Officer. “Reinsurance serves as the fulcrum of our insurance entities’ ability to absorb multiple catastrophic events in a given year, protecting policyholders and allowing operations to continue smoothly. For this renewal, we approached the market with considerably more private market catastrophe capacity demand and the Company executed efficiently with our long-standing reinsurance partners ahead of the upcoming 2024 Atlantic Hurricane Season. We also added new multi-year coverage extending through the 2025-2026 reinsurance period in the process.”

UPCIC’s in force wind-covered policy count in Florida declined by 25,266 from March 31, 2023 to March 31, 2024, resulting in a year over year reduction to the top end of the combined first event reinsurance tower for our insurance subsidiaries. UPCIC and APPCIC set the top of their combined reinsurance tower for a single All States (including Florida) event to $2.404 billion. $1.023 billion of this coverage has limits that automatically reinstate to guarantee a certain level of protection in multi-event scenarios, an increase of $177 million in aggregate limit available for subsequent events over the 2023-2024 period.

To further insulate future years, UPCIC and APPCIC secured $240 million of catastrophe capacity with contractually agreed limits that extend coverage to include the 2025-2026 treaty year, of which $165 million of the capacity sits below the Florida Hurricane Catastrophe Fund and $75 million sits above the Florida Hurricane Catastrophe Fund.

The insurance entities’ combined $45 million All States (including Florida) first event retention loss is unchanged from the prior year.

About Universal

Universal Insurance Holdings, Inc. (NYSE: UVE) is a holding company providing property and casualty insurance and value-added insurance services. We develop, market, and write insurance products for consumers predominantly in the personal residential homeowners lines of business and perform substantially all other insurance-related services for our primary insurance entities, including risk management, claims management and distribution. We provide insurance products in the United States through both our appointed independent agents and our direct online distribution channels, primarily in Florida. Learn more at universalinsuranceholdings.com or get an insurance quote at clovered.com.

Forward-Looking Statements

This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “will,” “plan,” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Such statements may include commentary on plans, products and lines of business, marketing arrangements, reinsurance programs and other business developments and assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, including those risks and uncertainties described under the heading “Risk Factors” and “Liquidity and Capital Resources” in our 2023 Annual Report on Form 10-K, and supplemented in our subsequent Quarterly Reports on Form 10-Q. Future results could differ materially from those described, and the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For further information regarding risk factors that could affect the Company’s operations and future results, refer to the Company’s reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K and the most recent quarterly reports on Form 10-Q.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240530371611/en/

Investors/Media:

Arash Soleimani, CFA, CPA, CPCU, ARe

Chief Strategy Officer

asoleimani@universalproperty.com

954-804-8874

Source: Universal Insurance Holdings, Inc.

FAQ

What is the cost of Universal's 2024-2025 reinsurance program?

The total cost of the 2024-2025 reinsurance program is projected to be approximately 33.0% of the estimated direct earned premium.

What changes were made to Universal's reinsurance partners or terms?

There were no material changes to historical reinsurance partners or terms and conditions.

What is Universal's stock symbol?

Universal's stock symbol is UVE.

How did Universal's reinsurance costs change compared to last year?

The reinsurance costs increased by 1.2 points, from 31.8% last year to 33.0% this year.

What is the rating of Universal's largest private reinsurance participants?

The largest private reinsurance participants maintain a rating of 'A' or higher from AM Best.

What is the coverage amount for Universal's combined reinsurance tower for a single All States event?

The combined reinsurance tower for a single All States event is set to $2.404 billion.

How much additional catastrophe capacity did Universal secure for future years?

Universal secured $240 million of catastrophe capacity extending to the 2025-2026 reinsurance period.

What was the decline in UPCIC's in-force wind-covered policy count in Florida?

The in-force wind-covered policy count in Florida declined by 25,266 as of March 31, 2024.