Universal Insurance cites June storms for profits cut

Early June rainstorms that led to flooding in South Florida’s western suburbs cut into secondquarter earnings for Universal Insurance Holdings, parent of the state’s largest property insurance company.

In a conference call with investors on Tuesday, the company reported net income of $29.4 million and earnings per share of 82 cents, which fell short of the company’s record-setting 2016 second quarter.

Universal Insurance Holdings is the parent company of Universal Property & Casualty, which has 596,044 residential and commercial policies. State-run Citizens Property Insurance Corp., Florida’s second-largest insurer, reported 452,593 policies at the end of the quarter.

Second-quarter earnings for Universal were 13 percent under the prior-year quarter’s $33.6 million and earnings per share of 94 cents — a record for the company.

Losses and related expenses were up $20.1 million, driven primarily by weather-related claims, the company reported. Heavy rainstorms that fell across South Florida for several days in early June have so far resulted in more than 800 claims, said Sean P. Downes, Universal chairman and CEO.

“Although our bottom line results for the quarter were modestly impacted by these events, we still delivered a 27.9 percent return on average equity for the second quarter, which is a testament to the fundamental strength of our business model,” Downes said.

Highlights from the quarter included an 8.9 percent increase in direct premiums written, which is total premiums received before reinsurance is purchased.

Direct premiums increased 5.6 percent in Florida, reflecting an additional 31,034 policies in the state.

Direct premiums increased 42.2 percent in 14 states outside Florida where the company has expanded. The company increased its policy count outside Florida to 126,000 — a 40 percent increase compared to the prior year quarter.

Net investment income grew by 50.5 percent to $3.2 million over the prior year quarter.

While other insurers have retreated from South Florida because of claims fraud by thirdparty restoration companies, Universal has aggressively built market share in the region.

Answering questions from investment analysts, Downes said losses stemming from the “assignment of benefits” crisis plaguing insurers in the region have been relatively flat for the company.

Although the number of lawsuits filed with assignments has increased, the company’s internal legal team has managed to keep losses from litigated claims 40 percent below what they would be if outside law firms were used, Downes said.