Over the past several years, we have grown our business both within Florida
and elsewhere in the United States through our distribution network of approximately
7,800 licensed independent agents. In writing business, we adhere to a disciplined
underwriting approach – writing risks that are priced adequately and meet
our underwriting standards – designed to achieve profitable growth as
opposed to merely increasing the total number of policies written. We believe
we are better positioned and able to expand profitably and service our policyholders
within our markets than many of our competitors due to our established internal
capabilities; protection afforded us by our reinsurance program; our experienced
management team that successfully navigated prior active hurricane seasons,
such as 2004 and 2005; our strong surplus and capital base; our success in growing
organically in Florida without relying on the assumption of blocks of policies
from Citizens Property Insurance Corporation (“Citizens”), the Florida
state-sponsored insurer of last resort; and our growing geographic diversification.
We also believe that our reinsurance program is structured such that if we were
to experience an active hurricane season like the hurricane seasons in 2004
and 2005, we would be able to pay policyholder claims, maintain sufficient surplus
to grow profitably and take advantage of the resulting market dislocation that
would likely follow. We believe that our longevity in the Florida market and
our resulting depth of experience will enable us to continue to successfully
grow our business in both hard markets (periods of capital shortages resulting
in a lack of insurance availability, relatively low levels of price competition,
more selective underwriting of risks and relatively high premium rates) and
soft markets (periods of relatively high levels of price competition, less restrictive
underwriting standards and generally low premium rates).
Universal Property & Casualty Insurance Company (“UPCIC”) and
American Platinum Property and Casualty Insurance Company (“APPCIC,”
and together with UPCIC, the “Insurance Entities”) are our insurance
operating subsidiaries. Most of our policies are written by UPCIC. Universal
Risk Advisors (“URA”) is our managing general agent and manages
our distribution network and negotiates our reinsurance. Universal Inspection
Corporation conducts inspections as part of our underwriting process, and Universal
Adjusting Corporation (“UAC”) manages our claims processing and
adjustment functions. Blue Atlantic Reinsurance Corporation (“BARC”)
is our reinsurance intermediary. These service companies are vertically aligned
with our Insurance Entities to maintain quality throughout the policy origination
and claim settlement process. In addition, our servicing subsidiaries reduce,
to us, the costs typically associated with outsourced business functions, enhance
our ability to expand geographically due to economies of scale in our operations
and allow us to expand our business incrementally and more effectively.
Many of our competitors have experienced growth in recent years primarily
as a result of assuming policies from Citizens. Because we perform all of our
own marketing and underwriting as part of our organic growth strategy, we believe
that we are more deliberate in seeking out profitable business from our independent
agent force and selective in the policies we write as compared to Citizens,
which generally must provide coverage to policyholders who have been unable
to obtain insurance elsewhere. We have not assumed any policies from Citizens
or its predecessor, Florida Residential Property and Casualty Joint Underwriting
Association, since a single, small transaction in 1998, and have no plans to
do so in the future. By contrast, in some cases, our competitors received approval
to assume as many as 55,000 to 173,000 policies from Citizens in a single year.
We intend to continue our expansion outside of Florida primarily to take advantage
of opportunities to write profitable business as well as to diversify our revenue
and risk. We are targeting states with underserved homeowners insurance markets
where we believe there is price adequacy for our products and where policyholders
would benefit from our market knowledge and integrated service model. In new
markets, we seek to replicate the successful growth strategy we implemented
in Florida, including the careful appointment of new agents that we believe
will generate profitable business for our company. We intend to leverage our
existing agent network to generate new relationships and business. We will continue
in our commitment to careful, profitable business growth through such independent
agents, with the intent to grow quickly when the opportunity arises, including
following any market dislocation. Our strategy involves taking the time to learn
about each new market and its unique risks in order to carefully develop our
own policy forms, rates and informed underwriting standards.
We will continue to obtain what we believe to be appropriate reinsurance limits,
coverage and terms so that our policyholders and shareholders are adequately
protected in the event of an active hurricane season. Significant additional,
new capital entering portions of the reinsurance marketplace has provided us
with the opportunity to obtain favorable pricing and contract terms. Our dedicated
reinsurance team at BARC includes seasoned industry professionals with an average
of 24 years of experience, whom we hired from Willis Re almost 10 years ago.
BARC differentiates us from our competitors by enabling us to act as our own
reinsurance intermediary, developing a bespoke reinsurance program tailored
to our needs in both soft and hard reinsurance markets. This team has developed
and enhanced existing strong long term relationships with world leading reinsurance
companies it brought to the company 10 years ago providing better efficiency
in the manner in which we buy reinsurance annually.
We eliminated our quota share reinsurance arrangements effective June 1, 2015;
purchased additional excess of loss catastrophe cover; and converted from a
two-tower reinsurance program to a single tower reinsurance program covering
our nationwide business based on our improving financial condition, our evaluation
of market conditions and our changing coverage needs. We believe that restructuring
our reinsurance program in this manner and continuously re-evaluating that structure
has allowed us to take advantage of attractive reinsurance pricing and terms
and to retain profitable business by eliminating our quota share program, while
still maintaining reinsurance coverage that we believe is sufficient to protect
our policyholders and shareholders.
In February 2013, we appointed a new leadership team from within our company,
comprised of individuals who understood our vision for the future. We have a
deep and experienced leadership team with extensive experience in the Florida
personal residential insurance market. Our Chairman, President and Chief Executive
Officer, Sean P. Downes, has more than 25 years of experience in the insurance
industry. Prior to Mr. Downes’ arrival, all of our claims processing was
outsourced to third parties. When Mr. Downes joined our company in 1999, he
oversaw our claims operations and later oversaw the development of our vertically
integrated structure. Mr. Downes has worked in the Florida insurance industry
during all of its most recent active hurricane seasons. In particular, Mr. Downes
led the claims team of a multi-line insurance claims adjusting corporation following
Hurricane Andrew and served as Chief Operating Officer of UPCIC during the 2004
and 2005 active hurricane seasons. Jon W. Springer, our Chief Operating Officer,
has 23 years of experience in the insurance industry, including 9 years leading
a team of reinsurance specialists for Willis Re before joining us to implement
and oversee our reinsurance program. Prior to becoming our Chief Operating Officer,
Mr. Springer was an Executive Vice President of URA and
BARC.
We believe this leadership team has led us in a new strategic direction that
has realized many benefits for our shareholders and policyholders, evidenced
in part by the 71.5% increase in our stockholders’ equity and the 82.9%
increase in policyholders’ surplus that we have realized since their tenure
began. Further, they are supported by a group of highly qualified individuals
with industry expertise and extensive operational history, which enables us
to capitalize on our experience of having emerged from the 2004 and 2005 active
hurricane seasons in sound financial condition, whereas many of our competitors
are new to the market and have not experienced the challenges of an active Florida
hurricane season.
Focus on Underwriting Discipline
We seek to consistently generate an underwriting profit on the business we write
in hard and soft markets through carefully developed underwriting guidelines
informed by our experience in evaluating risks and in handling and processing
claims, which enable us to set prices relative to the risk we are assuming.
By focusing on appropriately identifying and assessing key risks and exposures
in the market, we believe we are able to accurately price eligible risks and
generate consistent profits. We assumed only one group of policies from Citizens’
predecessor in 1998 when we first began our operations. Since then, we have
grown our business by leveraging our network of approximately 4,500 independent
agents in Florida, and by expanding to other geographic areas that present market
opportunities. We periodically review the renewal rates and quality of business
generated by our independent agents to ensure underwriting profitability and
work with agents where we believe improvement is warranted. As a result of this
organic expansion and our vertically integrated structure, all of our operating
units possess extensive knowledge of the personal residential homeowners insurance
market.
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