UPC reports 142% Q4 combined ratio and forms new E&S carrier

United Insurance Holdings (UPC) has reported a fourth quarter combined ratio of 142.1 percent, up 28.8 points on the 113.3 percent in the same period of 2019, and has revealed it has formed a new excess and surplus lines carrier.

UPC revealed in an investor presentation along with its results that it is forming a new E&S carrier named Journey Specialty Insurance Company.

“The capital of Journey Insurance Company is being bi-furcated to provide us admitted and E&S capabilities to optimize capital allocation, maintain our AM Best rating and grow our specialty commercial property business,” the presentation said.

UPC formed Journey Insurance Company in 2018 in partnership with Tokio Marine Kiln to write homeowners and commercial residential property insurance in Florida, Texas and South Carolina.

The presentation also noted: “Assumed E&S premiums written historically through Blueline (via quota share reinsurance) have been placed into run-off as we seek to access the risk directly through our own platform where we have more control and lower costs.”

The St Petersburg, Florida-based company also unveiled SkyWay Technologies, a newly formed InsurTech MGA that will focus on the direct-to-consumer channel.

UPC reported a core loss of $58.1mn for the fourth quarter, compared with a core loss of $15.2mn in the same period of 2019.

The core loss per diluted share of $1.35 missed the $1.29 consensus loss per share estimate of four analysts tracked by MarketWatch, and compared with a core loss of $0.36 in Q4 2019.

The analyst estimates would have taken into account UPC’s mid-December estimate of cat losses incurred in October and November of between $85mn and $100mn before income taxes, or $67mn to $79mn after tax, net of expected reinsurance recoveries.

In its fourth quarter results reported today, UPC reported $107.6mn of current year cat losses for the entire quarter, up from $19.3mn in the prior period.

UPC said that excluding names windstorms its core income was $3.3mn compared with a core loss of $14.6mn in Q4 2019. The gross underlying loss and LAE ratio was 21.5 percent, a 10.7 point improvement on the 32.1 percent in the fourth quarter of 2019.

The insurer’s total gross written premium increased by 7.3 percent in the fourth quarter to $316.2mn, driven by rate increases in multiple states across all regions and organic policy growth in new and renewal business generated in the Gulf and Southeast regions.

Lower retentions

UPC CEO Dan Peed said the fourth quarter and full fiscal year results continued to demonstrate an improving core income excluding named windstorms, marking the fourth quarter in a row of year-over-year improvement and a 2020 fiscal year improvement of over $60mn.

“Unfortunately, being a catastrophe focused insurer, the unprecedented number of catastrophe events caused over $78mn of named windstorm net catastrophe losses in the fourth quarter, and over $208mn for fiscal year 2020,” he said.

For the full year, UPC reported a core loss of $124.0mn, a deterioration on the $46.2mn core loss in 2019.

The 2020 combined ratio was 126.5 percent, up 13.8 points on the 112.7 percent in 2019.

Gross written premium increased by 5.5 percent to $1.5bn for the year, primarily reflecting the impact of rate increases in multiple states across all regions, as well as organic growth in new and renewal business generated in the Gulf and Southeast regions.

“Given the accelerating hardening of the Florida personal lines market and our strong reinsurance partners, we are well positioned to continue expanding our underlying margin while also significantly cutting our net catastrophe occurrence and aggregate retentions,” said Peed, who took over the role of CEO from John Forney last year.

He added: “Although 2021 will be a transition year, the combination of an expanding underlying profit and a reduced aggregate catastrophe retention positions the business well for a more consistent growth in core Income.”