Universal Insurance Profit Rises 24%, Company Still Seeks Rate Hike

April 26--Fort Lauderdale-based Universal Insurance Holdings reported a 23.7-percent increase in its net income for the first quarter of 2017, yet still plans to seek rate increases for its policyholders this year.

Universal's earnings per share increased by 21.7 percent to 86 cents, the company said in its latest earnings report. The improvement was driven by increases in "every major revenue category," efforts to keep expenses low, and a lower tax rate compared to a year earlier, the report said.

The report pushed the company's stock upward by $2.70 or 11.56 percent to $26.05 in trading on the Nasdaq.

Asked by an analyst on the company's earnings call Wednesday whether management plans to seek rate increases this year, Universal chairman and CEO Sean P. Downes said the company was almost done calculating what to submit to state regulators. "Things could change here in a week or two but I believe we'll be filing for some mid-range single-digit increase sometime next month."

If approved, the increase would likely take effect Sept. 1, he said.

Downes also told analysts that costs from assignment of benefits-related litigation were "relatively flat" compared to 2016, with the number of AOB lawsuits "up a little" and costs per claim slightly lower.

That's largely because of the company's focus on quickly responding to claims, and its reliance on a team of 20 internal attorneys instead of hiring third-party attorneys from outside the company, Downes said.

In response to an email asking why the company expects to raise its rates, spokesman Travis Miller of Radey Law Firm said Universal reduced its rates an average 2.4 percent in 2014, increased them 2.2 percent in 2015 and no increase in 2016.

In August 2016, the company withdrew a proposal to increase its rates an average 2.6 percent statewide after state regulators questioned whether an 8.1-percent average increase proposed for policyholders in the tricounty region was "unfairly discriminatory."

In his response, Miller said that although AOB-related costs have been relatively flat, they have increased in recent years and remain "at historically high levels."

Assignment of benefits, a contract affidavit that enables third-party contractors to bill and sue contractors while standing in the shoes of policyholders, has been blamed by insurers across the state for sharp increases in lawsuits, losses, and premiums.

State-run Citizens Property Insurance Corp., the so-called insurer of last resort, says it is particularly hard hit, with more than 90 percent of AOB-related suits originating from the tricounty region.

But Universal officials said more than 50 percent of AOB suits against it come from outside the tricounty area, more or less unchanged from a year ago.

Direct premiums written increased 7.7 percent in the first quarter, with 4.3 percent growth in Florida and 44.9 percent in other states, the company's earnings report states.

Universal has been aggressively expanding outside of Florida and is now writing policies in 14 states and has been recently licensed in five others. Among them is New York, where Universal expects to begin selling policies by the end of the year, officials said.

Universal usurped Citizens' ranking as Florida's top insurer by policy count in late 2015, largely because of Citizens' efforts to transfer its policies to private insurers.

Total value of all Florida property Universal insured at the end of the first quarter was $136.6 billion, while insured value in other states totaled $39 billion. By comparison, Citizens insured $120.2 billion at the end of the quarter.

Universal's policy count in Florida was 585,359, compared to Citizens' 451,189 policies.

Universal did not break out its policy count in the tri-county region in the first-quarter earnings report, but Citizens remained the top insurer at the end of the fourth quarter of 2016, the last quarter for which comparable figures were available, with 224,911, while Universal had 220,306.

Universal's combined ratio -- a common measure of an insurance company's profitability -- declined from 80.8 percent to 78.9 percent year over year. The combined ratio is calculated by dividing the sum of incurred losses and expenses by earned premiums. A ratio below 100 percent indicates the company is profitable while any ratio above 100 indicates it is paying more in claims than it is receiving in premiums.

In March, Citizens -- which by law must sell policies to property owners who otherwise cannot buy insurance -- reported a combined ratio of 107 percent for 2016, indicating an operating loss for the year. The company blamed AOB litigation for a $27 million operating loss for 2016. Citizens has not yet released its financial statement for the first quarter of 2017.

[email protected], 954-356-4071, twitter: twitter.com/ron_hurtibise

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