NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) has assigned insurance financial strength ratings (IFSR) of A- with a Stable outlook to the key operating subsidiaries of United Insurance Holdings Corp. (NASDAQ: UIHC) – American Coastal Insurance Company; Family Security Insurance Company, Inc.; Interboro Insurance Company; and United Property & Casualty Insurance Company (collectively referred to as UPC Insurance). Additionally, KBRA has assigned an issuer rating of BBB- with a Stable outlook to UIHC. UPC Insurance is a leading personal and commercial residential property insurer in coastal states from Maine to Texas with headquarters in St. Petersburg, Florida.
The ratings for UPC Insurance reflect favorable consolidated operating results prior to 2017, adequate consolidated capitalization and solid execution of its strategy to become a premier personal and commercial residential property insurer in catastrophe-exposed areas. Operating results have been consistently favorable over the past five years and have surpassed those of most similarly sized and product-focused peers. To manage inherent volatility in results, the investment portfolio is conservative with the majority of holdings in fixed income instruments and only modest exposure to equities. Approximately 25% of UPC Insurance’s total investments is in cash and cash equivalents. In addition, a capital cushion is maintained at the holding company. These funds have been – and will continue to be – available to be downstreamed to the operating companies to maintain sound capitalization to support existing and future business. The strategy to profitably leverage a long, successful history as a Florida personal lines property underwriter to other catastrophe-exposed states is being methodically executed by an experienced management team through both organic growth and strategic acquisitions.
As a catastrophe-exposed property writer, UPC Insurance maintains a prudent reinsurance structure designed to absorb frequent and severe events. The program is designed to provide sufficient coverage for a single 1-in-400 year event or coverage for a 1-in-100 year event followed by a 1-in-50 year event in the same season. KBRA believes that the program performed well in 2017 for hurricanes Harvey and Irma.
Tempering these strengths are the organization’s elevated premium leverage, continued product/geographic concentration and execution risk. KBRA notes that UPC Insurance is on a moderately aggressive organic growth strategy over the medium term that will cause premium leverage to remain elevated. Any sizeable hurricane activity or significant change in limits/costs for reinsurance may further exacerbate premium leverage. While the business mix continues to shift away from Florida and away from personal property, UPC remains predominantly a Florida personal lines writer. Moreover, KBRA believes that full integration of recent acquisitions as well as organic expansion to additional states involves moderate execution risk.
The Stable outlook reflects KBRA’s expectation that UIHC and its operating subsidiaries will continue to execute its business strategy by making prudent decisions with respect to at-risk capital given the nature of lines of coverage offered. Additionally, KBRA believes UIHC will benefit from its pricing strategy and upcoming rate adjustments to improve the combined ratio, which was dampened in 2017 by hurricanes Harvey, Irma and Nate as well as several smaller catastrophes occurring in the first half of the year.
The ratings are based on KBRA’s Global Insurer & Insurance Holding Company Rating Methodology published on October 10, 2017.
A full report will soon be available on www.kbra.com.
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About Kroll Bond Rating Agency
KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).
