KBRA Affirms Ratings for Universal Property & Casualty Insurance Company and American Platinum Property and Casualty Insurance Company
22 Sep 2023 | 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 for UPCIC and APPCIC reflect a strong market presence, sound catastrophe reinsurance program, seasoned and well-established management team, strong holding company profitability, conservative investment portfolio, and diverse distribution channels. Universal Insurance benefits from significant brand recognition with a substantial market share within the state of Florida. The company maintains a sound reinsurance program which provides ample 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 significant catastrophe losses over the last several years, geographic concentration and 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. Unfavorable underwriting results, which have been materially impacted by the frequency and severity of storms since 2017, is a credit challenge though the impact on policyholder surplus has largely been offset by downstream capital contributions.
Rating Sensitivities
A trend of sustained profitability at the insurance operating companies, improved underwriting leverage and risk-adjusted capitalization, organic surplus growth, or a favorable change in risk profile may result in positive rating action. Significant deterioration in risk-adjusted capitalization or underwriting leverage, weather events negatively impacting earnings or balance sheet strength, continued operating losses, or an unfavorable change in risk profile could result in negative rating action.
Universal Insurance Holdings, Inc. is a holding company offering property and casualty insurance and other related services.
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