Universal Insurance Holdings(US:UVE)2023-02-28 21:21Insurance Market Conditions - The homeowners insurance market in Florida is currently experiencing a hard market cycle, characterized by increased premiums and reduced competition due to adverse market conditions [27]. - Recent legislative reforms in Florida aim to address the deterioration of the residential property insurance market, including eliminating the one-way right to attorneys' fees and prohibiting the assignment of post-loss benefits [43]. - The competitive landscape includes both small regional insurers and large national insurers, with the latter having substantial brand awareness and capital resources [27]. Company Performance and Strategy - Citizens Property Insurance Corporation, a state-authorized insurance mechanism, has seen rapid growth in policy count since late 2019, becoming a low-cost option for many policyholders as its rate increases are limited by law [29]. - The Insurance Entities' monthly weighted average renewal retention rate for the year ended December 31, 2022, was 85.0%, indicating strong customer retention [34]. - The company has implemented a reinsurance strategy that includes excess of loss reinsurance to protect against catastrophic events, meeting the Florida Office of Insurance Regulation's requirements [36]. - The company has experienced higher direct premiums written in the second and third quarters of the fiscal year, correlating with the peak of hurricane season [39]. - The company utilizes sophisticated risk selection and pricing techniques to identify desirable risks and accurately price the risk of loss, allowing for competitive offerings in high-demand areas [31]. Regulatory Environment - The regulatory environment is extensive, with state laws significantly impacting the company's operations, including capital requirements and allowable rates [40]. - As of December 31, 2022, the Insurance Entities' Risk-Based Capital (RBC) ratios exceed applicable statutory requirements [50]. - The maximum dividend that can be paid by the Insurance Entities without prior approval is limited to the lesser of statutory net income from operations or statutory unassigned surplus [52]. Financial Performance - The investment portfolio as of December 31, 2022, includes $1,152.85 million in amortized cost for fixed income Financial Instruments, with a fair market value of $1,014.63 million [345]. - The total equity securities fair value increased to $85.47 million as of December 31, 2022, compared to $47.33 million in 2021 [346]. - A hypothetical 20% decrease in market prices of equity securities would result in a loss of $17.1 million in fair value as of December 31, 2022 [346]. Workforce and Operations - The Company had 1,223 full-time employees as of February 3, 2023, with 93% based in Florida [57]. - Approximately 68% of employees work in claims management operations, with 39% in-house claims litigation [57]. - The Company did not furlough or terminate any employees due to COVID-19 [60]. Risk Management - The investment portfolio's primary objective is capital preservation and providing adequate liquidity for potential claim payments [342]. - The Company filed its most recent Own Risk and Solvency Assessment (ORSA) summary report in May 2022 [48].