KBRA Affirms Ratings for Universal Property & Casualty Insurance Company and American Platinum Property and Casualty Insurance Company
20 Sep 2024 | New York
KBRA affirms the A- insurance financial strength ratings (IFSR) for Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC”). The Outlook for both ratings is Stable. UPCIC and APPCIC are the insurance operating entities of Universal Insurance Holdings, Inc. (collectively with UPCIC and APPCIC, “Universal” or “Universal Insurance”).
Key Credit Considerations
The ratings reflect Universal's well structured reinsurance program, strong market presence with efficient large-scale business, a seasoned and well-established management team, and diverse distribution channels. Universal has significant brand recognition and is a leading property writer in the state of Florida. The company maintains a solid reinsurance program which provides robust coverage of historical event recasts as well as coverage for multiple events. Profitability at the holding company is a significant credit strength as substantial fee income from claims adjusting, agency, and reinsurance brokerage operations enhances financial flexibility and access to capital for both insurance operating companies. Lastly, UPCIC and APPCIC maintain conservative investment portfolios with no exposure to below investment grade securities. Balancing these strengths are geographic concentration, dependence on reinsurance, adverse reserve development, exposure to event risk, and elevated premium leverage. As a catastrophe exposed writer of predominantly coastal homeowners exposure, Universal’s strategy necessitates a dependence on reinsurance and exposes UPCIC and APPCIC to event risk. Universal has incurred adverse reserve development, but more conservative loss picks in recent years is expected to mitigate future adverse development. UPCIC reported significant underwriting losses over the last five years driven by catastrophe losses and the litigious claims environment in Florida. However, recent legislative changes should foster an environment that supports increased written premiums and favorable underwriting growth.
Ratings Sensitivities
Factors that could positively impact the rating include trend of sustained profitability at insurance operating companies, improved underwriting leverage and risk-adjusted capitalization, organic surplus growth, or a favorable change in risk profile.
Factors that could negatively impact the rating include significant deterioration in risk-adjusted capitalization and/or underwriting leverage, weather events negatively impacting earnings and/or balance sheet, continued operating losses, or an unfavorable change in risk profile.
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