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United Insurance (UIHC) Estimates Q1 Cat Loss of $19M Post Tax

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United Insurance Holdings (UIHC - Free Report) estimates first-quarter 2021 catastrophe loss of $24 million pre-tax or $19 million post-tax. The losses stemmed from Winter Storm Uri, seven additional PCS catastrophe events and two non-PCS catastrophe events. PCS or Property Claim Service unit is the internationally recognized authority on insured property losses from catastrophes in the United States, Puerto Rico, and the U.S. Virgin Islands.

Catastrophe risk modelling specialist Karen Clark & Company updated its estimate for insurance and reinsurance market losses from Winter Storm Uri in the United States, to $18 billion.

The Zacks Consensus Estimate for United Insurance’s first-quarter earnings is currently pegged at 20 cents, indicating a decline of 4.8% from the year-ago reported figure.  We expect estimates to move south once analysts start incorporating loss estimates into their numbers.

Being a property and casualty insurer, United Insurance Holdings has substantial exposure to catastrophic events, which has been inducing volatility in its underwriting results. The company’s cat loss of $208 million includes a core loss of $124 million and a net loss after tax of $96 million in 2020.

United Insurance Holdings stated that it will considerably lower its aggregate named storm retention for the pool companies to about $25 million per occurrence, and $70 million in the aggregate, approximately one-third of the net incurred in the 2020 season. The company believes though this planned action will escalate its reinsurance spend, it will lower earnings volatility of as well as exposure to loss of capital.

This property and casualty insurer noted that 2021 is the third year of compounding rate increases. In fact, it stated even with strong compounding rate increases, renewal retention rates are nearly 90%.  With $1.4 billion portfolio in place, the company believes it is well poised to take advantage of the hardening market.

The company also witnessed substantial rise in litigated claims volume from Florida homeowners’ during the first quarter. This in turn resulted in higher-than-expected loss reserve development. The insurer thus intends to strengthen its reserves for unpaid loss and loss adjustment expenses on prior accident years by $30 million or $24 million after tax in the to-be- reported quarter.

Shares of United Insurance Holdings have rallied 20% year to date, outperforming the industry’s increase of 14.6%.

The company currently carries a Zacks Rank #5 (Strong Sell).

Last week, AXIS Capital Holdings Limited (AXS - Free Report) estimated first-quarter 2021 catastrophe loss of $105-$115 million pre-tax or $95-$105 million post-tax while Arch Capital Group (ACGL - Free Report) estimated pretax net catastrophe losses of $180 million to $190 million in first-quarter 2021. Earlier, State Auto Financial Corporation estimated catastrophe losses in the range of $80 million to $82 million for the first quarter of 2021.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.    

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