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United Insurance(ACIC) - 2020 Q3 - Quarterly Report
2020-11-06 21:02
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________________ FORM 10-Q _______________________ ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 001-35761 ____________________ United Insurance Holdings Corp. (Exact Nam ...
United Insurance(ACIC) - 2020 Q2 - Quarterly Report
2020-08-10 15:00
[FORM 10-Q General Information](index=1&type=section&id=FORM%2010-Q%20General%20Information) This section provides general information about the Form 10-Q filing, including company details, filer status, and forward-looking statements with associated risks [Filing Details](index=1&type=section&id=Filing%20Details) This section details the company's Form 10-Q filing, identifying United Insurance Holdings Corp. as an accelerated filer on Nasdaq - **Quarterly Report on Form 10-Q** for the period ended June 30, 2020[1](index=1&type=chunk) - **United Insurance Holdings Corp.** is a Delaware corporation[1](index=1&type=chunk)[2](index=2&type=chunk) - Listed on **Nasdaq Stock Market LLC** under trading symbol **UIHC**[2](index=2&type=chunk) - Classified as an **accelerated filer**, having submitted all required reports and Interactive Data Files[2](index=2&type=chunk)[3](index=3&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section outlines forward-looking statements regarding growth and financial performance, along with significant risks and uncertainties that could alter actual results - Forward-looking statements encompass anticipated growth in revenues, gross written premium, EPS, estimated unpaid losses, investment returns, diversification, liquidity, investment objectives, and market risk management[6](index=6&type=chunk) - Key risks include exposure to **catastrophic events**, regulatory/economic conditions in Florida, agent relationships, potential claims exceeding loss reserves, governmental assessments, internal control adequacy, IT/data security, vendor reliance, management retention, acquisition risks, indebtedness, market share, regulatory changes, reinsurance costs/collectability, investment income dependence, industry cyclicality, legal actions, ratings downgrades, stock price impact, dividend constraints, and the impact of **COVID-19**[6](index=6&type=chunk) - The company cautions against undue reliance on these statements, which are valid only as of their making date, and undertakes no obligation to update them except as required by law[7](index=7&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flows, with detailed explanatory notes [Condensed Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) The balance sheets detail the company's financial position, showing a **$363.2 million increase in total assets** and a **$337.6 million increase in total liabilities** by June 30, 2020 | ASSETS (in thousands) | June 30, 2020 | December 31, 2019 | | :------------------------------------------------------- | :------------ | :---------------- | | Total investments | $1,158,304 | $1,011,723 | | Total cash, cash equivalents and restricted cash | $281,570 | $287,057 | | Premiums receivable, net | $113,288 | $86,568 | | Reinsurance recoverable on paid and unpaid losses, net | $486,805 | $550,136 | | Ceded unearned premiums | $498,838 | $270,034 | | Total Assets | $2,830,432 | $2,467,218 | | **LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands)** | | | | Unpaid losses and loss adjustment expenses | $683,471 | $760,357 | | Unearned premiums | $760,131 | $674,055 | | Reinsurance payable on premiums | $460,807 | $166,131 | | Notes payable, net | $158,340 | $158,932 | | Total Liabilities | $2,280,915 | $1,943,353 | | Total Stockholders' Equity | $549,517 | $523,865 | - Total Assets increased by **$363.2 million (14.7%)** to **$2,830.4 million** at June 30, 2020, from $2,467.2 million at December 31, 2019[9](index=9&type=chunk) - Total Liabilities increased by **$337.6 million (17.4%)** to **$2,280.9 million** at June 30, 2020, from $1,943.4 million at December 31, 2019[9](index=9&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20(Unaudited)) Net income attributable to UIHC saw a significant turnaround, moving from a **$2.9 million loss in Q2 2019** to a **$24.3 million gain in Q2 2020** | REVENUE (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross premiums written | $439,651 | $449,762 | $774,834 | $768,321 | | Net premiums earned | $185,482 | $190,404 | $377,078 | $371,126 | | Net investment income | $5,907 | $7,570 | $12,824 | $14,865 | | Net unrealized gain (loss) on equity securities | $20,552 | $2,737 | $(5,904) | $12,910 | | Total revenue | $216,397 | $204,776 | $392,701 | $407,097 | | **EXPENSES (in thousands)** | | | | | | Losses and loss adjustment expenses | $101,693 | $116,252 | $204,530 | $220,799 | | Policy acquisition costs | $52,573 | $61,622 | $111,448 | $116,868 | | Total expenses | $186,929 | $208,402 | $379,065 | $398,396 | | Net income (loss) attributable to UIHC | $24,274 | $(2,903) | $11,551 | $6,566 | | Basic EPS | $0.57 | $(0.07) | $0.27 | $0.15 | | Diluted EPS | $0.56 | $(0.07) | $0.27 | $0.15 | - Net income attributable to UIHC for Q2 2020 increased by **$27.177 million (936.2%)** to **$24.274 million**, from a net loss of $2.903 million in the prior year[11](index=11&type=chunk) - Net unrealized gain on equity securities significantly increased to **$20.552 million** in Q2 2020 from $2.737 million in Q2 2019[11](index=11&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) Stockholders' equity statements show changes, with total equity attributable to UIHC increasing to **$528.3 million** by June 30, 2020 | Stockholders' Equity (in thousands) | March 31, 2020 | Net Income | Other Comprehensive Income, Net | Stock Compensation | Cash Dividends | June 30, 2020 | | :---------------------------------- | :------------- | :--------- | :------------------------------ | :----------------- | :------------- | :------------ | | Common Stock | $4 | — | — | — | — | $4 | | Additional Paid-in Capital | $392,552 | — | — | $81 | — | $392,633 | | Treasury Stock | $(431) | — | — | — | — | $(431) | | Accumulated Other Comprehensive Income | $8,493 | — | $21,034 | — | — | $29,527 | | Retained Earnings | $84,838 | $24,274 | — | — | $(2,578) | $106,534 | | Total UIHC Stockholders' Equity | $485,456 | $24,274 | $21,034 | $81 | $(2,578) | $528,267 | | Noncontrolling Interests (NCI) | $20,701 | $168 | $381 | — | — | $21,250 | | Total Stockholders' Equity | $506,157 | $24,442 | $21,415 | $81 | $(2,578) | $549,517 | - Total Stockholders' Equity attributable to UIHC increased from **$503.138 million** at December 31, 2019, to **$528.267 million** at June 30, 2020[9](index=9&type=chunk)[14](index=14&type=chunk) - Accumulated Other Comprehensive Income increased significantly from **$11.319 million** at December 31, 2019, to **$29.527 million** at June 30, 2020, primarily due to changes in net unrealized gains on investments[9](index=9&type=chunk)[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Cash flow statements show a decrease in operating cash, a shift to net outflow in investing activities, and consistent financing outflows for dividends | Cash Flows (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $139,320 | $179,278 | | Net cash provided by (used in) investing activities | $(138,896) | $5,652 | | Net cash used in financing activities | $(5,911) | $(5,901) | | Increase (decrease) in cash, cash equivalents and restricted cash | $(5,487) | $179,029 | | Cash, cash equivalents and restricted cash at end of period | $281,570 | $363,149 | - Net cash provided by operating activities decreased by **$39.958 million (22.3%)** to **$139.320 million** for the six months ended June 30, 2020[18](index=18&type=chunk) - Investing activities shifted from a net cash inflow of **$5.652 million** in 2019 to a net cash outflow of **$138.896 million** in 2020, primarily due to increased purchases of fixed maturities and equity securities[18](index=18&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the financial statements, covering business, accounting policies, investments, debt, and other financial aspects [Note 1) ORGANIZATION, CONSOLIDATION AND PRESENTATION](index=11&type=section&id=Note%201)%20ORGANIZATION,%20CONSOLIDATION%20AND%20PRESENTATION) This note describes UPC Insurance as a property and casualty holding company, its consolidation basis, and the immaterial impact of COVID-19 on operations - **UPC Insurance** is a property and casualty insurance holding company operating through five insurance subsidiaries[20](index=20&type=chunk) - Primarily offers **homeowners' insurance in 12 states** and commercial residential insurance in Florida[22](index=22&type=chunk) - Operates under a single reportable segment: **property and casualty insurance policies**[23](index=23&type=chunk) - **COVID-19** has not materially impacted business operations, financial position, or liquidity, except for investment portfolio volatility and an immaterial decline in Northeast new business premium in Q2 2020[30](index=30&type=chunk) [Note 2) SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=Note%202)%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines significant accounting policies, including credit loss allowances, CARES Act impact, and the adoption of new accounting pronouncements in 2020 - No changes were made to significant accounting policies, except for standards adopted in 2020[32](index=32&type=chunk) - The **CARES Act** increased federal tax recoverable by **$12.513 million** and decreased deferred tax asset by **$7.250 million** due to changes in net operating loss carryback rules[38](index=38&type=chunk) Allowance for Expected Credit Losses (in thousands) | Allowance for Expected Credit Losses (in thousands) | December 31, 2019 | Provision for expected credit losses | Write-offs | June 30, 2020 | | :---------------------------------- | :---------------- | :----------------------------------- | :--------- | :------------ | | Premiums Receivable | $165 | $27 | $— | $192 | | Reinsurance Recoverables | $256 | $(30) | $— | $226 | | Note Receivable | $141 | $(59) | $— | $82 | | Total | $562 | $(62) | $— | $500 | - Adopted **ASU 2016-13 (Credit Losses)** on January 1, 2020, resulting in a cumulative effect decrease of **$262,000** to the opening balance of retained earnings[42](index=42&type=chunk) [Note 3) INVESTMENTS](index=14&type=section&id=Note%203)%20INVESTMENTS) This note details the investment portfolio, including fixed maturities and equity securities, fair values, net investment income, and confirms no credit loss allowance for fixed-income securities Fixed Maturities, Available-for-Sale (in thousands) | Fixed Maturities, Available-for-Sale (in thousands) | June 30, 2020 Fair Value | December 31, 2019 Fair Value | | :-------------------------------------------------- | :----------------------- | :--------------------------- | | U.S. government and agency securities | $123,894 | $120,816 | | States, municipalities and political subdivisions | $133,538 | $133,751 | | Corporate securities | $348,447 | $288,872 | | Mortgage-backed securities | $290,902 | $251,903 | | Total fixed maturities | $1,015,291 | $884,861 | Equity Securities (in thousands) | Equity Securities (in thousands) | June 30, 2020 Fair Value | December 31, 2019 Fair Value | | :------------------------------- | :----------------------- | :--------------------------- | | Mutual funds | $63,019 | $65,453 | | Other common stocks | $53,647 | $44,492 | | Total equity securities | $131,003 | $116,610 | Net Investment Income (in thousands) | Net Investment Income (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Fixed maturities | $5,592 | $5,560 | $11,062 | $11,622 | | Equity securities | $728 | $622 | $1,499 | $1,114 | | Cash and cash equivalents | $66 | $1,661 | $737 | $1,796 | | Net investment income | $5,907 | $7,570 | $12,824 | $14,865 | - No credit loss allowance was recorded for fixed-income securities at June 30, 2020, as fair value declines were not credit-related, and the company does not intend to sell them before amortized cost recovery[54](index=54&type=chunk) [Note 4) EARNINGS PER SHARE (EPS)](index=23&type=section&id=Note%204)%20EARNINGS%20PER%20SHARE%20(EPS)) This note details basic and diluted EPS computations, showing a significant increase in **Basic EPS to $0.57 in Q2 2020** from $(0.07) in Q2 2019 EPS Data | EPS Data | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to UIHC common stockholders (in thousands) | $24,274 | $(2,903) | $11,551 | $6,566 | | Weighted-average shares outstanding (Basic) | 42,860,922 | 42,762,417 | 42,833,225 | 42,729,730 | | Weighted-average diluted shares | 43,055,115 | 42,762,417 | 43,041,623 | 43,097,244 | | Basic EPS | $0.57 | $(0.07) | $0.27 | $0.15 | | Diluted EPS | $0.56 | $(0.07) | $0.27 | $0.15 | - Basic EPS for UIHC common stockholders increased from **$(0.07)** in Q2 2019 to **$0.57** in Q2 2020[70](index=70&type=chunk) - Diluted EPS for UIHC common stockholders increased from **$(0.07)** in Q2 2019 to **$0.56** in Q2 2020[70](index=70&type=chunk) [Note 5) PROPERTY AND EQUIPMENT, NET](index=24&type=section&id=Note%205)%20PROPERTY%20AND%20EQUIPMENT,%20NET) This note breaks down property and equipment, net, showing an increase to **$37.9 million** by June 30, 2020, driven by computer hardware and software investments Property and Equipment, Net (in thousands) | Property and Equipment, Net (in thousands) | June 30, 2020 | December 31, 2019 | | :----------------------------------------- | :------------ | :---------------- | | Land | $2,114 | $2,114 | | Building and building improvements | $11,907 | $11,315 | | Computer hardware and software | $39,021 | $33,219 | | Office furniture and equipment | $3,204 | $3,260 | | Leasehold improvements | $739 | $20 | | Leased vehicles | $2,188 | $1,693 | | Total, at cost | $59,173 | $51,621 | | Less: accumulated depreciation and amortization | $(21,224) | $(18,893) | | Property and equipment, net | $37,949 | $32,728 | - Property and equipment, net, increased by **$5.221 million (16.0%)** to **$37.949 million** at June 30, 2020[71](index=71&type=chunk) - Computer hardware and software, including software in progress, increased by **$5.802 million** to **$39.021 million**[71](index=71&type=chunk) [Note 6) GOODWILL AND INTANGIBLE ASSETS](index=24&type=section&id=Note%206)%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note details goodwill, which remained unchanged at **$73.045 million**, and intangible assets, which decreased to **$20.259 million** due to amortization - Goodwill carrying amount remained constant at **$73.045 million** at June 30, 2020, with no impairment recognized[73](index=73&type=chunk)[75](index=75&type=chunk) Intangible Assets (in thousands) | Intangible Assets (in thousands) | June 30, 2020 | December 31, 2019 | | :--------------------------------- | :------------ | :---------------- | | Intangible assets subject to amortization | $20,259 | $22,440 | | Indefinite-lived intangible assets | $3,639 | $3,639 | | Total | $23,898 | $26,079 | - Amortization expense for intangible assets was **$1.044 million** for Q2 2020 and **$2.181 million** for the six months ended June 30, 2020[78](index=78&type=chunk) [Note 7) REINSURANCE](index=28&type=section&id=Note%207)%20REINSURANCE) This note describes the reinsurance program, including catastrophe protection, and details a decrease in reinsurance recoverable to **$486.8 million** by June 30, 2020 - The reinsurance program includes excess of loss, aggregate excess of loss, and quota share treaties to cover catastrophe losses[80](index=80&type=chunk)[81](index=81&type=chunk) - Approximately **$3.3 billion** in catastrophe excess of loss reinsurance protection was purchased for the 2020 hurricane season, effective June 1, 2020[158](index=158&type=chunk) Reinsurance Recoverable (in thousands) | Reinsurance Recoverable (in thousands) | June 30, 2020 | December 31, 2019 | | :------------------------------------- | :------------ | :---------------- | | Reinsurance recoverable on unpaid losses and loss adjustment expenses | $398,369 | $482,315 | | Reinsurance recoverable on paid losses and loss adjustment expenses | $88,436 | $67,821 | | Total Reinsurance recoverable | $486,805 | $550,136 | - The company cedes **100% of flood insurance premiums and risk** to the National Flood Insurance Program, earning commissions of **$431,000** in Q2 2020 and **$764,000** for the six months ended June 30, 2020[82](index=82&type=chunk) [Note 8) LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSE (LAE)](index=29&type=section&id=Note%208)%20LIABILITY%20FOR%20UNPAID%20LOSSES%20AND%20LOSS%20ADJUSTMENT%20EXPENSE%20(LAE)) This note details the reserve for unpaid losses and LAE, which decreased to **$683.5 million** by June 30, 2020, with favorable prior year development Reserve for Unpaid Losses and LAE (in thousands) | Reserve for Unpaid Losses and LAE (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------------------------------------- | :----------------------------- | :----------------------------- | | Balance at January 1 | $760,357 | $661,203 | | Less: reinsurance recoverable on unpaid losses | $482,315 | $477,870 | | Net balance at January 1 | $278,042 | $183,333 | | Total incurred | $204,530 | $220,799 | | Total paid | $197,470 | $206,185 | | Net balance at June 30 | $285,102 | $197,947 | | Plus: reinsurance recoverable on unpaid losses | $398,369 | $379,402 | | Balance at June 30 | $683,471 | $577,349 | - Total unpaid losses and LAE decreased by **$76.886 million (10.1%)** to **$683.471 million** at June 30, 2020[84](index=84&type=chunk) - The decrease was a result of a decrease in reinsurance recoverables on unpaid losses balance[169](index=169&type=chunk) - The company experienced **favorable development of $(1.952) million** in 2020 related to prior year losses, compared to $20.967 million in 2019[84](index=84&type=chunk)[85](index=85&type=chunk) [Note 9) LONG-TERM DEBT](index=30&type=section&id=Note%209)%20LONG-TERM%20DEBT) This note outlines long-term debt, which remained stable at **$160.8 million** by June 30, 2020, and discusses compliance with financial covenants, including a Truist Note waiver Long-Term Debt Outstanding (in thousands) | Long-Term Debt Outstanding (in thousands) | Maturity Date | Effective Interest Rate | June 30, 2020 Carrying Value | December 31, 2019 Carrying Value | | :---------------------------------------- | :--------------- | :---------------------- | :--------------------------- | :------------------------------- | | Senior Notes Payable | December 15, 2027 | 6.25% | $150,000 | $150,000 | | Florida State Board of Administration Note Payable | July 1, 2026 | 0.70% | $7,059 | $7,647 | | Truist Term Note Payable | May 26, 2031 | 1.88% | $3,784 | $3,958 | | Total long-term debt | | | $160,843 | $161,605 | - The company was in compliance with covenants for **Senior Notes** and the **SBA Note** at June 30, 2020[90](index=90&type=chunk)[91](index=91&type=chunk) - The company was not in compliance with the **Truist Note's minimum cash flow coverage ratio covenant** at December 31, 2019, but obtained a waiver for this non-compliance[92](index=92&type=chunk)[93](index=93&type=chunk) [Note 10) COMMITMENTS AND CONTINGENCIES](index=32&type=section&id=Note%2010)%20COMMITMENTS%20AND%20CONTINGENCIES) This note covers commitments and contingencies, including routine legal actions, **$2.161 million in unfunded partnership commitments**, and **$2.411 million in total lease liabilities** - The company is involved in routine claims-related legal actions, accruing amounts when an unfavorable outcome is probable and estimable[95](index=95&type=chunk) - Unfunded commitments for limited partnership investments totaled **$2.161 million** at June 30, 2020[97](index=97&type=chunk) Lease Balances (in thousands) | Lease Balances (in thousands) | June 30, 2020 | December 31, 2019 | | :------------------------------ | :------------ | :---------------- | | Operating lease assets | $2,225 | $335 | | Financing lease assets | $1,431 | $1,263 | | Total lease assets | $3,656 | $1,598 | | Operating lease liabilities | $2,369 | $324 | | Financing lease liabilities | $42 | $34 | | Total lease liabilities | $2,411 | $358 | [Note 11) STATUTORY ACCOUNTING AND REGULATION](index=35&type=section&id=Note%2011)%20STATUTORY%20ACCOUNTING%20AND%20REGULATION) This note discusses insurance industry regulation, requiring minimum statutory surplus and RBC, with all subsidiaries meeting requirements and combined statutory net income of **$4.495 million** in Q2 2020 - Insurance subsidiaries are subject to state laws and **NAIC RBC guidelines**, requiring minimum statutory surplus and capital[103](index=103&type=chunk)[104](index=104&type=chunk) - All insurance subsidiaries met regulatory requirements at June 30, 2020, with no significant assessments received[103](index=103&type=chunk)[109](index=109&type=chunk) Statutory Net Income (in thousands) | Statutory Net Income (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Combined statutory net income (loss) | $4,495 | $1,154 | $11,703 | $(6,581) | [Note 12) RELATED PARTY TRANSACTIONS](index=36&type=section&id=Note%2012)%20RELATED%20PARTY%20TRANSACTIONS) This note details related party transactions, noting the termination of the relationship with **AmRisc, LLC** on December 31, 2019, following R. Daniel Peed's resignation - The related party relationship with **AmRisc, LLC** terminated on December 31, 2019, following R. Daniel Peed's resignation[110](index=110&type=chunk) - For the three and six months ended June 30, 2019, gross written premiums of **$163.045 million** and **$270.663 million** were recorded with AmRisc, resulting in gross fees and commissions of **$46.014 million** and **$74.993 million**[111](index=111&type=chunk) [Note 13) ACCUMULATED OTHER COMPREHENSIVE INCOME](index=36&type=section&id=Note%2013)%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME) This note details AOCI components, showing a significant increase to **$29.527 million** by June 30, 2020, driven by changes in net unrealized gains on investments Accumulated Other Comprehensive Income (in thousands) | Accumulated Other Comprehensive Income (in thousands) | Pre-Tax Amount | Tax (Expense) Benefit | Net Amount | | :-------------------------------------------------- | :------------- | :-------------------- | :--------- | | December 31, 2019 | $14,962 | $(3,643) | $11,319 | | Changes in net unrealized gains on investments | $24,022 | $(5,830) | $18,192 | | Reclassification adjustment for realized gains | $13 | $3 | $16 | | June 30, 2020 | $38,997 | $(9,470) | $29,527 | - Accumulated other comprehensive income increased by **$18.208 million** to **$29.527 million** at June 30, 2020[113](index=113&type=chunk) [Note 14) STOCKHOLDERS' EQUITY](index=37&type=section&id=Note%2014)%20STOCKHOLDERS'%20EQUITY) This note details cash dividends of **$0.06 per share** and a **$25 million stock repurchase plan** authorized in July 2019, under which no shares were repurchased Cash Dividends Declared (in thousands, except per share) | Cash Dividends Declared (in thousands, except per share) | First Quarter 2020 | First Quarter 2019 | Second Quarter 2020 | Second Quarter 2019 | | :------------------------------------------------------- | :----------------- | :----------------- | :------------------ | :------------------ | | Per Share Amount | $0.06 | $0.06 | $0.06 | $0.06 | | Aggregate Amount | $2,571 | $2,569 | $2,578 | $2,570 | - A stock repurchase plan of up to **$25 million** was authorized in July 2019, but no shares had been repurchased as of June 30, 2020[114](index=114&type=chunk) [Note 15) STOCK-BASED COMPENSATION](index=37&type=section&id=Note%2015)%20STOCK-BASED%20COMPENSATION) This note details stock-based compensation, including employee and director expenses, and reports **$3.043 million** in unrecognized employee stock compensation expense Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Employee stock-based compensation expense (Pre-tax) | $(52) | $416 | $474 | $946 | | Director stock-based compensation expense (Pre-tax) | $133 | $261 | $307 | $632 | - Unrecognized stock compensation expense totaled approximately **$3.043 million** for non-vested stock-based compensation and **$333,000** for non-vested director stock-based compensation at June 30, 2020[119](index=119&type=chunk) Non-Vested Common Stock Grants Activity | Non-Vested Common Stock Grants Activity | Number of Restricted Shares | Weighted Average Grant Date Fair Value | | :-------------------------------------- | :-------------------------- | :------------------------------------- | | Outstanding as of December 31, 2019 | 214,495 | $17.49 | | Granted | 347,254 | $9.57 | | Forfeited | 165,102 | $12.95 | | Vested | 104,115 | $16.47 | | Outstanding as of June 30, 2020 | 292,532 | $11.01 | [Note 16) SUBSEQUENT EVENTS](index=39&type=section&id=Note%2016)%20SUBSEQUENT%20EVENTS) This note discloses subsequent events, including a **$0.06 per share quarterly cash dividend** and the impact of Hurricanes Hanna and Isaias - On July 28, 2020, the Board of Directors declared a **$0.06 per share quarterly cash dividend**, payable on August 18, 2020[126](index=126&type=chunk) - **Hurricane Hanna** (July 2020) and **Hurricane Isaias** (August 2020) made landfall, with total incurred losses yet to be estimated[126](index=126&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition, operations, key performance indicators, COVID-19 impact, liquidity, and non-GAAP measures [EXECUTIVE SUMMARY](index=40&type=section&id=EXECUTIVE%20SUMMARY) This summary provides an overview of UPC Insurance, highlighting growth in policies in-force by **2.5%** and the immaterial impact of COVID-19 on operations - **UPC Insurance** is a holding company primarily engaged in residential personal and commercial property and casualty insurance in the U.S[129](index=129&type=chunk) - Policies in-force increased by **2.5%** from **615,357** at June 30, 2019, to **630,542** at June 30, 2020, driven by organic growth and strategic acquisitions[131](index=131&type=chunk) - **COVID-19** has not materially impacted business operations, financial position, or liquidity, except for investment portfolio volatility and an immaterial decline in Northeast new business premium in Q2 2020[136](index=136&type=chunk) 2020 Highlights (in thousands, except per share) | 2020 Highlights (in thousands, except per share) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross premiums written | $439,651 | $449,762 | $774,834 | $768,321 | | Net premiums earned | $185,482 | $190,404 | $377,078 | $371,126 | | Consolidated net income (loss) attributable to UIHC | $24,274 | $(2,903) | $11,551 | $6,566 | | Net income (loss) available to UIHC stockholders per diluted share | $0.56 | $(0.07) | $0.27 | $0.15 | | Core income (loss) | $8,816 | $(3,459) | $17,945 | $(257) | | Core income (loss) per diluted share | $0.20 | $(0.08) | $0.42 | $(0.01) | [Consolidated Net Income](index=42&type=section&id=Consolidated%20Net%20Income) Consolidated net income attributable to UIHC significantly improved, with the combined ratio improving to **99.4% for Q2 2020** and **99.2% for the six-month period** Financial Performance (in thousands, except ratios) | Financial Performance (in thousands, except ratios) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to UIHC | $24,274 | $(2,903) | $11,551 | $6,566 | | Diluted EPS | $0.57 | $(0.07) | $0.27 | $0.15 | | Loss ratio, net | 54.8% | 61.1% | 54.2% | 59.5% | | Expense ratio | 44.6% | 47.1% | 45.0% | 46.5% | | Combined ratio | 99.4% | 108.2% | 99.2% | 106.0% | | Effect of current year catastrophe losses on combined ratio | 16.1% | 8.3% | 12.4% | 7.4% | | Effect of prior year development on combined ratio | (0.4)% | 8.1% | (0.5)% | 5.6% | | Underlying combined ratio | 83.7% | 91.8% | 87.3% | 93.0% | - Net income attributable to UIHC increased by **$27.177 million** for Q2 2020 and by **$4.985 million** for the six months ended June 30, 2020[140](index=140&type=chunk) - The combined ratio improved by **8.8 percentage points to 99.4%** for Q2 2020 and by **6.8 percentage points to 99.2%** for the six months ended June 30, 2020[140](index=140&type=chunk) [Definitions of Non-GAAP Measures](index=43&type=section&id=Definitions%20of%20Non-GAAP%20Measures) This section defines non-GAAP measures like underlying combined ratio, underlying loss and LAE, and core income, used to enhance performance understanding - **Underlying combined ratio** is a non-GAAP measure that subtracts current year catastrophe losses and prior year development from the combined ratio to highlight business trends[142](index=142&type=chunk) - **Underlying loss and LAE** is a non-GAAP measure that subtracts current year catastrophe losses and prior year reserve development from net loss and LAE to analyze loss trends[143](index=143&type=chunk) - **Core income** is a non-GAAP measure that adjusts net income by adding back amortization of intangible assets and subtracting realized/unrealized gains/losses on equity securities, net of tax, to focus on operational profitability[144](index=144&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=44&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) No material changes or additions were made to critical accounting policies and estimates during the period, except for standards adopted in 2020 as detailed in Note 2 - No material changes or additions were made to critical accounting policies and estimates during the three and six months ended June 30, 2020, except for standards adopted in 2020[145](index=145&type=chunk) [RECENT ACCOUNTING STANDARDS](index=44&type=section&id=RECENT%20ACCOUNTING%20STANDARDS) This section refers to Note 2 for a discussion of recent accounting standards that may affect the company - Refer to Note 2 for a discussion of recent accounting standards that may affect the company[146](index=146&type=chunk) [ANALYSIS OF FINANCIAL CONDITION - JUNE 30, 2020 COMPARED TO DECEMBER 31, 2019](index=45&type=section&id=ANALYSIS%20OF%20FINANCIAL%20CONDITION%20-%20JUNE%2030,%202020%20COMPARED%20TO%20DECEMBER%2031,%202019) This analysis compares financial condition, focusing on investments, reinsurance, and unpaid losses, with total cash and investments increasing by **$141.1 million** [Investments](index=45&type=section&id=Investments) The investment strategy prioritizes capital preservation and liquidity, with total cash and investments increasing to **$1.44 billion** by June 30, 2020 - Investment strategy focuses on **capital preservation**, maximizing after-tax income, liquidity, and risk minimization, primarily through debt securities and moderate equity exposure[150](index=150&type=chunk) - Total cash, cash equivalents, restricted cash, and investment portfolio increased by **$141.094 million (10.9%)** to **$1.439 billion** at June 30, 2020[152](index=152&type=chunk)[153](index=153&type=chunk) - **COVID-19** caused fluctuations in investment portfolios, resulting in an unrealized gain on equity securities of **$20.552 million** in Q2 2020, but a six-month unrealized loss of **$5.904 million**[155](index=155&type=chunk) [Reinsurance](index=46&type=section&id=Reinsurance) The reinsurance program manages catastrophe exposure, with **$3.3 billion** in protection purchased for 2020, and reinsurance costs increasing to **(46.1)% of gross earned premium** in Q2 2020 - The reinsurance program includes catastrophe excess of loss, aggregate excess of loss, and quota share treaties to manage catastrophe risk[157](index=157&type=chunk)[159](index=159&type=chunk) - Approximately **$3.3 billion** in catastrophe excess of loss reinsurance protection was purchased for the 2020 hurricane season, effective June 1, 2020[158](index=158&type=chunk) Reinsurance Costs as % of Gross Earned Premium | Reinsurance Costs as % of Gross Earned Premium | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Reinsurance costs as % of gross earned premium | (46.1)% | (42.3)% | (45.3)% | (42.2)% | [Unpaid Losses and Loss Adjustments](index=48&type=section&id=Unpaid%20Losses%20and%20Loss%20Adjustments) Unpaid losses and LAE decreased to **$683.471 million** by June 30, 2020, primarily due to reduced reinsurance recoverables, with estimates subject to significant judgment - Unpaid losses and LAE decreased by **$76.886 million (10.1%)** to **$683.471 million** at June 30, 2020[169](index=169&type=chunk) - The decrease was a result of a decrease in reinsurance recoverables on unpaid losses balance[169](index=169&type=chunk) - Estimating loss reserves requires significant judgment due to variables like inflation, judicial decisions, legislative changes, and claims handling procedures, with ultimate liability likely differing from estimates[170](index=170&type=chunk) [RESULTS OF OPERATIONS - COMPARISON OF THE THREE MONTH PERIODS ENDED JUNE 30, 2020 AND 2019](index=49&type=section&id=RESULTS%20OF%20OPERATIONS%20-%20COMPARISON%20OF%20THE%20THREE%20MONTH%20PERIODS%20ENDED%20JUNE%2030,%202020%20AND%202019) Net income attributable to UIHC for Q2 2020 significantly increased to **$24.274 million** from a **$2.903 million net loss** in Q2 2019 - Net income attributable to UIHC increased by **$27.177 million (936.2%)** to **$24.274 million** for Q2 2020, from a net loss of $2.903 million in Q2 2019[173](index=173&type=chunk) - The increase in net income was primarily due to increased unrealized gains on equity securities, decreased loss and LAE, and decreased policy acquisition costs[173](index=173&type=chunk) [Revenue](index=49&type=section&id=Revenue_Q2) Gross written premiums decreased by **$10.111 million (2.2%)** to **$439.651 million** for Q2 2020, primarily due to decreased assumed premiums Gross Written Premium (in thousands) | Gross Written Premium (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :----- | | Total gross written premium by region | $439,651 | $449,762 | $(10,111) | | Personal property | $307,965 | $286,106 | $21,859 | | Commercial property | $131,686 | $163,656 | $(31,970) | - Gross written premiums decreased by **$10.111 million (2.2%)** for Q2 2020, driven by a **$43.032 million decrease in assumed premiums**[174](index=174&type=chunk)[175](index=175&type=chunk) - Direct written premium increased in Florida by **$19.984 million**, Gulf by **$10.360 million**, and Southeast by **$3.202 million**[175](index=175&type=chunk) [Expenses](index=50&type=section&id=Expenses_Q2) Total expenses decreased by **$21.473 million (10.3%)** to **$186.929 million** for Q2 2020, driven by lower loss and LAE and policy acquisition costs Expenses (in thousands, except ratios) | Expenses (in thousands, except ratios) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change | | :------------------------------------- | :------------------------------- | :------------------------------- | :----- | | Net loss and LAE | $101,693 | $116,252 | $(14,559) | | Policy acquisition costs | $52,573 | $61,622 | $(9,049) | | Operating and underwriting expenses | $13,977 | $11,199 | $2,778 | | General and administrative expenses | $16,121 | $16,802 | $(681) | | Total Operating Expenses | $82,671 | $89,623 | $(6,952) | | Net loss and LAE as % of net earned premiums | 54.8% | 61.1% | (6.3) pts | | Policy acquisition costs as % of net earned premiums | 28.3% | 32.4% | (4.1) pts | | Operating expenses as % of net earned premiums | 7.5% | 5.9% | 1.6 pts | | General and administrative expenses as % of net earned premiums | 8.7% | 8.8% | (0.1) pts | - Loss and LAE decreased by **$14.559 million (12.5%)** to **$101.693 million**, with the net loss ratio improving by **6.3 points to 54.8%**[179](index=179&type=chunk) - Policy acquisition costs decreased by **$9.049 million (14.7%)** due to a net increase of **$18.331 million** in ceding commission income[180](index=180&type=chunk) [RESULTS OF OPERATIONS - COMPARISON OF THE SIX MONTH PERIODS ENDED JUNE 30, 2020 AND 2019](index=51&type=section&id=RESULTS%20OF%20OPERATIONS%20-%20COMPARISON%20OF%20THE%20SIX%20MONTH%20PERIODS%20ENDED%20JUNE%2030,%202020%20AND%202019) Net earnings attributable to UIHC for the six months ended June 30, 2020, increased by **$4.985 million (75.9%)** to **$11.551 million**, primarily due to decreased loss and LAE expenses - Net earnings attributable to UIHC increased by **$4.985 million (75.9%)** to **$11.551 million** for the six months ended June 30, 2020[184](index=184&type=chunk) - The increase was primarily due to a decrease in loss and LAE expenses[184](index=184&type=chunk) [Revenue](index=51&type=section&id=Revenue_6M) Gross written premiums increased by **$6.513 million (0.8%)** to **$774.834 million** for the six months ended June 30, 2020, driven by organic growth and rate increases Gross Written Premium (in thousands) | Gross Written Premium (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :----- | | Total gross written premium by region | $774,834 | $768,321 | $6,513 | | Personal property | $532,581 | $496,787 | $35,794 | | Commercial property | $242,253 | $271,534 | $(29,281) | - Gross written premiums increased by **$6.513 million (0.8%)** for the six months ended June 30, 2020, primarily reflecting organic growth and rate increases[185](index=185&type=chunk) - Direct written premium increased by **$59.236 million**, while assumed premium decreased by **$52.723 million**[186](index=186&type=chunk) [Expenses](index=52&type=section&id=Expenses_6M) Total expenses decreased by **$19.331 million (4.9%)** to **$379.065 million** for the six months ended June 30, 2020, mainly due to lower loss and LAE and policy acquisition costs Expenses (in thousands, except ratios) | Expenses (in thousands, except ratios) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | Change | | :------------------------------------- | :----------------------------- | :----------------------------- | :----- | | Net loss and LAE | $204,530 | $220,799 | $(16,269) | | Policy acquisition costs | $111,448 | $116,868 | $(5,420) | | Operating and underwriting expenses | $23,681 | $21,410 | $2,271 | | General and administrative expenses | $34,422 | $34,383 | $39 | | Total operating expenses | $169,551 | $172,661 | $(3,110) | | Net loss and LAE as % of net earned premiums | 54.2% | 59.5% | (5.3) pts | | Policy acquisition costs as % of net earned premiums | 29.6% | 31.5% | (1.9) pts | | Operating expenses as % of net earned premiums | 6.3% | 5.8% | 0.5 pts | | General and administrative expenses as % of net earned premiums | 9.1% | 9.3% | (0.2) pts | - Loss and LAE decreased by **$16.269 million (7.4%)** to **$204.530 million**, with the net loss ratio improving by **5.3 points to 54.2%**[190](index=190&type=chunk) - Policy acquisition costs decreased by **$5.420 million (4.6%)** due to a **$14.932 million increase** in ceding commission income[191](index=191&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=53&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses liquidity and capital resources, highlighting decreased operating cash, a shift to net investing outflow, and consistent financing activities for dividends - Cash is generated from premium collections, reinsurance recoveries, investment income, asset sales/maturities, debt issuance, and stock issuance[194](index=194&type=chunk) - As a holding company, liquidity relies on cash dividends or intercompany loans from management subsidiaries, which are regulated by state insurance authorities[195](index=195&type=chunk) - **COVID-19** has not impacted access to credit and capital markets for liquidity, and the company expects to maintain financing flexibility[197](index=197&type=chunk) [Operating Activities](index=54&type=section&id=Operating%20Activities) Net cash provided by operating activities decreased to **$139.320 million** for the six months ended June 30, 2020, primarily due to fewer reinsurance recoverables - Net cash provided by operating activities decreased by **$39.958 million** to **$139.320 million** for the six months ended June 30, 2020[200](index=200&type=chunk) - The decrease was attributed to fewer reinsurance recoverables outstanding in 2020, compared to higher balances in 2019 from Hurricanes Michael, Florence, and Irma[200](index=200&type=chunk) [Investing Activities](index=54&type=section&id=Investing%20Activities) Investing activities shifted from a **$5.652 million net cash inflow** in 2019 to a **$138.896 million net cash outflow** in 2020 due to increased investment purchases - Net cash used in investing activities was **$(138.896) million** for the six months ended June 30, 2020, a significant shift from a net cash provided of $5.652 million in 2019[18](index=18&type=chunk) - This change was due to net purchases of investments totaling **$131.280 million** in 2020, compared to net sales of $11.883 million in 2019[201](index=201&type=chunk) [Financing Activities](index=54&type=section&id=Financing%20Activities) Cash used in financing activities remained consistent at approximately **$5.9 million** for both periods, primarily due to dividend payments - Cash used in financing activities was consistent at **$5.911 million** for the six months ended June 30, 2020, compared to $5.901 million in 2019[202](index=202&type=chunk) - The primary outflow was due to dividend payments in the first two quarters of both years[202](index=202&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=54&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) As of June 30, 2020, the company had no off-balance-sheet arrangements or material changes to contractual obligations - No off-balance-sheet arrangements or material changes to contractual obligations existed at June 30, 2020[203](index=203&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discloses exposure to market risks, including interest rate, credit, and equity price risks, with no material changes during the six months ended June 30, 2020 - The company is exposed to **interest rate risk, credit risk, and equity price risk**[204](index=204&type=chunk) - No material changes in market risk occurred during the six months ended June 30, 2020[204](index=204&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures, noting no material changes in internal control over financial reporting despite remote work - Disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2020[206](index=206&type=chunk)[207](index=207&type=chunk) [Changes in Internal Control over Financial Reporting](index=55&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Despite the shift to remote work due to COVID-19, no material changes in internal control over financial reporting occurred during the quarter - The shift to remote work environments due to **COVID-19** did not impact the effectiveness of internal controls[208](index=208&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2020[208](index=208&type=chunk) [PART II. OTHER INFORMATION](index=55&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers legal proceedings, updated risk factors including COVID-19 impacts, equity security sales, defaults, and a list of exhibits [Item 1. Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine claims-related legal actions, accruing amounts when probable and estimable, with no material non-claims-related actions pending - The company is involved in routine claims-related legal actions, accruing amounts when an unfavorable outcome is probable and estimable[209](index=209&type=chunk) - No material non-claims-related legal actions were pending at June 30, 2020[210](index=210&type=chunk) [Item 1A. Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, focusing on potential adverse impacts of the **COVID-19 pandemic**, including increased defaults, regulatory challenges, and investment value declines - The **COVID-19 pandemic** and related economic uncertainty could adversely impact the business, results of operations, and financial condition[211](index=211&type=chunk) - Potential risks include increased premium defaults, challenges in meeting regulatory/debt requirements, declining premiums, operational inefficiencies from remote work, contraction of reinsurance markets, higher claims frequency/severity, investment portfolio value declines, and third-party vendor disruptions[214](index=214&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) - The full extent of **COVID-19's** impact is highly uncertain and depends on future developments[213](index=213&type=chunk)[218](index=218&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the three months ended June 30, 2020, the company did not sell any unregistered equity securities or repurchase its own equity securities - No unregistered equity securities were sold, and no equity securities were repurchased during the three months ended June 30, 2020[220](index=220&type=chunk) [Item 3. Defaults Upon Senior Securities](index=56&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred[220](index=220&type=chunk) [Item 4. Mine Safety Disclosures](index=56&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[220](index=220&type=chunk) [Item 5. Other Information](index=56&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item - No other information to report[220](index=220&type=chunk) [Item 6. Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including a Separation Agreement, executive officer certifications, and XBRL documents - Exhibits include a Separation Agreement, certifications of Principal Executive Officer and Principal Financial Officer (Sarbanes-Oxley Act Sections 302 and 906), and XBRL Instance Document, Schema, Calculation, Definition, Label, and Presentation Linkbases[222](index=222&type=chunk) [SIGNATURES](index=58&type=section&id=SIGNATURES) The report was duly signed on August 7, 2020, by the Chief Executive Officer and Chief Financial Officer of United Insurance Holdings Corp - Report signed on **August 7, 2020**, by **R. Daniel Peed (CEO)** and **B. Bradford Martz (CFO and President)**[224](index=224&type=chunk)[225](index=225&type=chunk)
United Insurance(ACIC) - 2020 Q2 - Earnings Call Transcript
2020-08-10 03:56
United Insurance Holdings Corp. (UIHC) Q2 2020 Earnings Conference Call August 5, 2020 5:00 PM ET Company Participants Adam Prior - Senior Vice President, The Equity Group, Investor Relations Robert Peed - Chairman & Chief Executive Officer Brad Martz - Chief Financial Officer Conference Call Participants Elyse Greenspan - Wells Fargo Securities Greg Peters - Raymond James Matt Carletti - JMP Securities Bill Broomall - Dowling & Partners Operator Greetings, and welcome to the UIHC Second Quarter 2020 Earnin ...
United Insurance(ACIC) - 2020 Q1 - Earnings Call Transcript
2020-05-10 03:50
Financial Data and Key Metrics Changes - Core pretax income for Q1 2020 was over $13 million, an increase of $9 million from the previous year, with ex-cat pretax core income up about $15 million year over year [7] - Gross premiums earned were $344.6 million, an increase of $33 million or 11% year-over-year [12] - The combined ratio improved to 99%, a nearly 5-point improvement year-over-year, while the underlying combined ratio was 90.7%, compared to 94.2% last year [13] - The gross loss ratio improved by 3.7 points to 29.8%, and the net loss ratio improved by 4.1 points to 53.7% compared to the first quarter last year [14][15] Business Line Data and Key Metrics Changes - Premiums written increased approximately $17 million or 5.2% from a year ago, driven by a 7% growth in personal lines and a 16% growth in commercial lines [13] - Personal lines policy earned premium per policy was up about 2%, indicating that the bulk of the 10% forced increase has not yet matured into the book [8] Market Data and Key Metrics Changes - Florida accounted for approximately 69% of the growth in direct premiums year-over-year, with all regions outside Florida showing modest increases [13] - Ceded earned premiums were 44.4% of gross premiums earned, compared to 42.1% last year, due to increased sessions to the quota share reinsurance program [14] Company Strategy and Development Direction - The company is focused on maintaining strong capital positions and has a robust reserve strategy, with favorable reserve development reported [10][15] - The company is well-prepared for the current operating environment, with minimal exposure to COVID-19 claims and effective remote operations [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the positive underlying trends and improvements in claims handling, indicating that the favorable trends observed in Q1 were not solely due to the pandemic [22] - The company anticipates continued growth in premiums and profitability, with a focus on ensuring that rate trends grow faster than loss trends [39] Other Important Information - The total assets of the company were $2.33 billion, with cash and invested assets of $1.28 billion [16] - The statutory surplus declined approximately $12 million or 3% to $404 million during Q1, primarily due to unrealized losses on equities [17] Q&A Session Summary Question: Can you provide insight on the reinsurance renewal program and pricing? - The remaining 9% of the reinsurance program is spread throughout the program, with constructive discussions ongoing regarding pricing [20] Question: Was the improvement in claims volume due to the pandemic? - Any downturn in claims volume was marginal, with positive trends observed in January and February as well [22] Question: What is the reason for the decline in assumed premiums? - The decline was due to a major partner terminating their participation in the program, but other partners are increasing their involvement [27] Question: Can you comment on the reinsurance market and new partners? - The company has welcomed new partners with strong balance sheets and has seen good receptivity in the reinsurance markets despite disruptions [32] Question: How is the company managing reserve development? - The company is closely monitoring actual development versus expected development, with favorable variances reported for the first quarter [42]
United Insurance(ACIC) - 2020 Q1 - Quarterly Report
2020-05-08 20:34
PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements and detailed notes on key areas like accounting policies and investments [Condensed Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%28Unaudited%29) This section presents the company's financial position, detailing assets, liabilities, and equity as of the reporting dates Condensed Consolidated Balance Sheets (Unaudited) | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :----------------------------------- | :--------------------- | :--------------------- | | **Assets** | | | | Total Investments | 995,266 | 1,011,723 | | Cash and Cash Equivalents | 218,355 | 215,469 | | Restricted Cash | 64,058 | 71,588 | | Net Premiums Receivable | 90,547 | 86,568 | | Net Reinsurance Recoverables | 514,485 | 550,136 | | Net Deferred Policy Acquisition Costs | 104,882 | 104,572 | | Goodwill | 73,045 | 73,045 | | Total Assets | 2,331,759 | 2,467,218 | | **Liabilities** | | | | Unpaid Losses and Loss Adjustment Expenses | 711,042 | 760,357 | | Unearned Premiums | 664,619 | 674,055 | | Reinsurance Premiums Payable | 112,390 | 166,131 | | Notes Payable, Net | 158,636 | 158,932 | | Total Liabilities | 1,825,602 | 1,943,353 | | **Stockholders' Equity** | | | | Total Stockholders' Equity Attributable to UIHC | 485,456 | 503,138 | | Noncontrolling Interests | 20,701 | 20,727 | | Total Stockholders' Equity | 506,157 | 523,865 | | Total Liabilities and Stockholders' Equity | 2,331,759 | 2,467,218 | [Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29%20%28Unaudited%29) This section details the company's comprehensive income and loss for the periods, including revenues, expenses, and net income (loss) Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Operating Revenues: | | | | Gross Premiums Earned | 344,619 | 311,813 | | Premiums Ceded | (153,023) | (131,091) | | Net Premiums Earned | 191,596 | 180,722 | | Net Investment Income | 6,917 | 7,295 | | Net Realized Investment Gains (Losses) | (68) | 181 | | Net Unrealized Gains (Losses) on Equity Securities | (26,456) | 10,173 | | Other Income | 4,315 | 3,950 | | **Total Revenues** | **176,304** | **202,321** | | Expenses: | | | | Losses and Loss Adjustment Expenses | 102,837 | 104,547 | | Policy Acquisition Costs | 58,875 | 55,246 | | Operating Expenses | 9,704 | 10,211 | | General and Administrative Expenses | 18,301 | 17,581 | | Interest Expense | 2,419 | 2,409 | | **Total Expenses** | **192,136** | **189,994** | | Income (Loss) Before Income Taxes | (15,832) | 12,327 | | Net Income (Loss) Attributable to UIHC | (12,723) | 9,469 | | Basic Earnings (Loss) Per Share Attributable to UIHC | (0.30) | 0.22 | | Diluted Earnings (Loss) Per Share Attributable to UIHC | (0.30) | 0.22 | [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20%28Unaudited%29) This section outlines changes in the company's stockholders' equity, including net income (loss), other comprehensive income, and dividends Condensed Consolidated Statements of Stockholders' Equity (Unaudited) | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :----------------------------------- | :--------------------- | :--------------------- | | Total Stockholders' Equity Attributable to UIHC | 485,456 | 503,138 | | Noncontrolling Interests | 20,701 | 20,727 | | Total Stockholders' Equity | 506,157 | 523,865 | | Net Income (Loss) Attributable to UIHC | (12,723) | 9,469 | | Net Other Comprehensive Loss | (2,826) | 10,560 | | Cash Dividends ($0.06 per share) | (2,571) | (2,569) | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29) This section provides an overview of the company's cash flows from operating, investing, and financing activities for the reported periods Condensed Consolidated Statements of Cash Flows (Unaudited) | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Net Cash Provided by Operating Activities | 17,498 | (2,464) | | Net Cash Used in Investing Activities | (19,190) | 15,474 | | Net Cash Used in Financing Activities | (2,952) | (2,951) | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | (4,644) | 10,059 | | Cash, Cash Equivalents, and Restricted Cash at End of Period | 282,413 | 194,179 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited condensed consolidated financial statements, offering further context and breakdowns of key financial items [1) ORGANIZATION, CONSOLIDATION AND PRESENTATION](index=9&type=section&id=1%29%20ORGANIZATION%2C%20CONSOLIDATION%20AND%20PRESENTATION) This note outlines the company's business as a property and casualty insurance holding company, providing residential and commercial insurance, and discusses the initial impact of COVID-19 on its operations and financial condition - The company operates primarily through four wholly-owned and one majority-owned insurance subsidiaries, offering residential personal and commercial property and casualty insurance[17](index=17&type=chunk) - The company's primary product is homeowners insurance, currently offered in 12 states, with commercial residential insurance also available in Florida[19](index=19&type=chunk) - As of now, COVID-19 has not significantly impacted the company's operations, financial condition, liquidity, or ability to serve policyholders, though its investment portfolio experienced volatility due to equity market fluctuations[28](index=28&type=chunk) [2) SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=2%29%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details the company's significant accounting policies, including the adoption of new standards in 2020, the calculation of expected credit loss reserves, and the impact of the CARES Act - The company made no significant changes to its accounting policies, except for new standards adopted in **2020**[30](index=30&type=chunk) Significant Accounting Policies | Asset Category | December 31, 2019 (in thousands) | Expected Credit Loss Reserve (in thousands) | Write-offs (in thousands) | March 31, 2020 (in thousands) | | :----------------- | :--------------------- | :-------------------- | :---------- | :--------------------- | | Premiums Receivable | 165 | (39) | — | 126 | | Reinsurance Recoverables | 256 | (15) | — | 241 | | Notes Receivable | 141 | (29) | — | 112 | | **Total** | **562** | **(83)** | **—** | **479** | - The company adopted ASU 2016-13 (Financial Instruments – Credit Losses) on January 1, 2020, resulting in a **$262 thousand** cumulative-effect adjustment (net of tax) to the opening balance of retained earnings[37](index=37&type=chunk) - The CARES Act is expected to have a favorable but non-material impact on the company's U.S. federal income tax liability[34](index=34&type=chunk) [3) INVESTMENTS](index=12&type=section&id=3%29%20INVESTMENTS) This note provides a detailed breakdown of the company's investment portfolio, including fair values of fixed income and equity securities, and explains its investment strategy and fair value measurement methods Investments | Investment Category | Fair Value as of March 31, 2020 (in thousands) | Fair Value as of December 31, 2019 (in thousands) | | :----------------------------------- | :----------------------------- | :----------------------------- | | Total Fixed Income Securities | 873,786 | 884,861 | | Total Equity Securities | 111,915 | 116,610 | | Other Investments | 9,565 | 10,252 | | **Total Investments** | **995,266** | **1,011,723** | Investments | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Net Realized Investment Gains (Losses) | (68) | 181 | | Net Investment Income | 6,917 | 7,295 | - As of March 31, 2020, the company did not recognize any declines in the fair value of fixed maturity securities as credit losses, thus no allowance for credit losses was recorded[48](index=48&type=chunk) Investments | Restricted Asset Category | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :----------------- | :--------------------- | :--------------------- | | Trust Funds | 63,134 | 70,668 | | Cash on Deposit (Regulatory Deposits) | 924 | 920 | | **Total Restricted Cash** | **64,058** | **71,588** | [4) EARNINGS PER SHARE (EPS)](index=21&type=section&id=4%29%20EARNINGS%20PER%20SHARE%20%28EPS%29) This note details the calculation of basic and diluted earnings per share for the reported periods, highlighting the net loss attributable to UIHC common stockholders in Q1 2020 Earnings Per Share (EPS) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----------------------------------- | :----------------------- | :----------------------- | | Net Income (Loss) Attributable to UIHC Common Stockholders | (12,723) thousand USD | 9,469 thousand USD | | Weighted-Average Common Shares Outstanding | 42,805,527 | 42,696,681 | | Dilutive Securities Impact | — | 289,803 | | Weighted-Average Diluted Shares Outstanding | 42,805,527 | 42,986,484 | | Basic Earnings (Loss) Per Share | (0.30) USD | 0.22 USD | | Diluted Earnings (Loss) Per Share | (0.30) USD | 0.22 USD | [5) PROPERTY AND EQUIPMENT, NET](index=21&type=section&id=5%29%20PROPERTY%20AND%20EQUIPMENT%2C%20NET) This note presents the composition and net value of the company's property and equipment, along with depreciation and amortization expenses for the reporting periods Property and Equipment, Net | Category | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :----------------------------------- | :--------------------- | :--------------------- | | Land | 2,114 | 2,114 | | Buildings and Improvements | 12,040 | 11,315 | | Computer Hardware and Software | 35,722 | 33,219 | | Office Furniture and Equipment | 3,234 | 3,260 | | Leasehold Improvements | 94 | 20 | | Leased Vehicles | 1,898 | 1,693 | | **Total Cost** | **55,102** | **51,621** | | Less: Accumulated Depreciation and Amortization | (20,147) | (18,893) | | **Property and Equipment, Net** | **34,955** | **32,728** | - Depreciation and amortization expense for property and equipment was **$1,287 thousand** for the three months ended March 31, 2020, compared to **$870 thousand** for the same period in 2019[66](index=66&type=chunk) [6) GOODWILL AND INTANGIBLE ASSETS](index=22&type=section&id=6%29%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note discloses the company's goodwill and intangible assets, noting no impairment of goodwill and providing amortization details for amortizable intangible assets - Goodwill carrying value remained **$73,045 thousand** as of March 31, 2020, and December 31, 2019, with no impairment recognized during the reporting period[67](index=67&type=chunk)[69](index=69&type=chunk) Goodwill and Intangible Assets | Intangible Asset Category | Net Carrying Value as of March 31, 2020 (in thousands) | Net Carrying Value as of December 31, 2019 (in thousands) | | :----------------------- | :----------------------------- | :----------------------------- | | Amortizable Intangible Assets | 21,303 | 22,440 | | Indefinite-Lived Intangible Assets | 3,638 | 3,639 | | **Total** | **24,941** | **26,079** | Goodwill and Intangible Assets | Year | Estimated Amortization Expense (in thousands) | | :----------------- | :-------------------- | | Remaining 2020 | 3,130 | | 2021 | 3,555 | | 2022 | 3,246 | | 2023 | 3,246 | | 2024 | 2,640 | | 2025 | 2,438 | [7) REINSURANCE](index=23&type=section&id=7%29%20REINSURANCE) This note describes the company's reinsurance program, designed to manage catastrophe risk and reduce earnings volatility, and details reinsurance recoverables and participation in the National Flood Insurance Program - The company's reinsurance program is designed to address catastrophic events and severe weather conditions, providing coverage for catastrophe losses up to approximately **$3.2 billion**[74](index=74&type=chunk)[75](index=75&type=chunk) Reinsurance | Reinsurance Recoverables Category | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :----------------------------------- | :--------------------- | :--------------------- | | Reinsurance Recoverables on Unpaid Losses and LAE | 423,609 | 482,315 | | Reinsurance Recoverables on Paid Losses and LAE | 90,876 | 67,821 | | **Total Reinsurance Recoverables** | **514,485** | **550,136** | - The company earned commissions of **$333 thousand** and **$342 thousand** from the National Flood Insurance Program for the three months ended March 31, 2020 and 2019, respectively[76](index=76&type=chunk) [8) LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSE (LAE)](index=24&type=section&id=8%29%20LIABILITY%20FOR%20UNPAID%20LOSSES%20AND%20LOSS%20ADJUSTMENT%20EXPENSE%20%28LAE%29) This note analyzes the company's liability for unpaid losses and loss adjustment expenses, including reported and IBNR claims, noting a decrease primarily due to favorable prior-period development Liability for Unpaid Losses and Loss Adjustment Expense (LAE) | Metric | March 31, 2020 (in thousands) | March 31, 2019 (in thousands) | | :----------------------------------- | :--------------------- | :--------------------- | | Balance, January 1 | 760,357 | 661,203 | | Less: Reinsurance Recoverables on Unpaid Losses | 482,315 | 477,870 | | Net Balance, January 1 | 278,042 | 183,333 | | Incurred during the period: | | | | Current Year | 103,966 | 98,913 | | Prior Years | (1,129) | 5,634 | | **Total Incurred** | **102,837** | **104,547** | | Paid during the period: | | | | Current Year | 30,935 | 31,215 | | Prior Years | 62,511 | 60,893 | | **Total Paid** | **93,446** | **92,108** | | Net Balance, March 31 | 287,433 | 195,772 | | Add: Reinsurance Recoverables on Unpaid Losses | 423,609 | 434,196 | | **Balance, March 31** | **711,042** | **629,968** | | Composition of Unpaid Losses and LAE Reserve: | | | | Case Reserves | 294,679 | 258,550 | | IBNR Reserves | 416,363 | 371,418 | | **Balance, March 31** | **711,042** | **629,968** | - Favorable development related to prior year losses in 2020 resulted from strengthening case reserves at the end of 2019 based on historical loss trends[79](index=79&type=chunk) [9) LONG-TERM DEBT](index=26&type=section&id=9%29%20LONG-TERM%20DEBT) This note details the company's long-term debt, including senior notes and term notes, outlining financial covenants and a waiver obtained for non-compliance with a BB&T note covenant Long-Term Debt | Debt Type | Interest Rate | Carrying Value as of March 31, 2020 (in thousands) | Carrying Value as of December 31, 2019 (in thousands) | | :----------------------------------- | :------- | :----------------------------- | :----------------------------- | | Senior Notes | 6.25% | 150,000 | 150,000 | | Florida Administrative Commission Notes | 1.90% | 7,353 | 7,647 | | BB&T Term Notes | 3.31% | 3,871 | 3,958 | | **Total Long-Term Debt** | | **161,224** | **161,605** | - As of March 31, 2020, the company was in compliance with all covenants for its senior notes and Florida Administrative Commission notes[84](index=84&type=chunk)[86](index=86&type=chunk) - As of December 31, 2019, the company was not in compliance with the minimum cash flow coverage ratio covenant for its BB&T notes but obtained a waiver from BB&T[87](index=87&type=chunk)[88](index=88&type=chunk) [10) COMMITMENTS AND CONTINGENCIES](index=27&type=section&id=10%29%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the company's legal proceedings, commitments to partnership investments, and lease agreements, detailing operating and finance lease assets, liabilities, and future payments - As of March 31, 2020, the company had unfunded commitments of **$2,161 thousand** for four remaining limited partnership investments[92](index=92&type=chunk) Commitments and Contingencies | Lease Asset Category | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :----------------- | :--------------------- | :--------------------- | | Operating Lease Assets | 2,359 | 335 | | Finance Lease Assets | 1,316 | 1,263 | | **Total Lease Assets** | **3,675** | **1,598** | | Operating Lease Liabilities | 2,421 | 324 | | Finance Lease Liabilities | 37 | 34 | | **Total Lease Liabilities** | **2,458** | **358** | Commitments and Contingencies | Lease Expense Category | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :----------------- | :--------------------------------- | :--------------------------------- | | Operating Lease Expense | 127 | 43 | | Finance Lease Expense: | | | | Amortization of Lease Assets | 151 | 56 | | Short-Term Lease Expense | — | 77 | | **Net Lease Expense** | **278** | **176** | [11) STATUTORY ACCOUNTING AND REGULATION](index=29&type=section&id=11%29%20STATUTORY%20ACCOUNTING%20AND%20REGULATION) This note discusses the strict regulatory environment of the insurance industry, including statutory surplus and capital requirements, and confirms the company's compliance with all regulatory requirements - The company's insurance subsidiaries were in compliance with all regulatory requirements in their states of operation for the three months ended March 31, 2020[99](index=99&type=chunk) - Consolidated statutory net income for the three months ended March 31, 2020, was **$7,208 thousand**, compared to a statutory net loss of **$7,735 thousand** for the same period in 2019[103](index=103&type=chunk) - Policyholders' surplus for the company's regulated entities was **$403,913 thousand** as of March 31, 2020, compared to **$415,948 thousand** as of December 31, 2019[104](index=104&type=chunk) [12) RELATED PARTY TRANSACTIONS](index=30&type=section&id=12%29%20RELATED%20PARTY%20TRANSACTIONS) This note discloses related party transactions with AmRisc, LLC, which terminated on December 31, 2019, and details gross premiums written and related fees from these transactions in Q1 2019 - R. Daniel Peed resigned as non-executive Vice Chairman of AmRisc on December 31, 2019, terminating the related party relationship with AmRisc[105](index=105&type=chunk) Related Party Transactions | Related Party Transaction | Three Months Ended March 31, 2019 (in thousands) | | :----------------------------------- | :--------------------------------- | | AmRisc Gross Premiums Recorded | 107,619 | | AmRisc Gross Fees and Commissions Receivable | 28,979 | | Premiums Ceded to AmRisc | 1,545 | [13) ACCUMULATED OTHER COMPREHENSIVE INCOME](index=30&type=section&id=13%29%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME) This note details the components of accumulated other comprehensive income, primarily changes in unrealized investment gains (losses) and reclassification adjustments for realized gains (losses) Accumulated Other Comprehensive Income | Metric | December 31, 2019 (in thousands) | March 31, 2020 (in thousands) | | :----------------------------------- | :--------------------- | :--------------------- | | Accumulated Other Comprehensive Income | 11,319 | 8,493 | | Change in Unrealized Gains (Losses) on Investments | (2,912) | (3,802) | | Reclassification Adjustment for Realized Gains (Losses) | 86 | 69 | [14) STOCKHOLDERS' EQUITY](index=31&type=section&id=14%29%20STOCKHOLDERS%27%20EQUITY) This note discloses common stock dividends declared by the board and the stock repurchase program, noting cash dividends paid and no repurchases under the authorized plan as of March 31, 2020 Stockholders' Equity | Quarter | Dividend Per Share 2020 (USD) | Total Dividend 2020 (in thousands) | Dividend Per Share 2019 (USD) | Total Dividend 2019 (in thousands) | | :----------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Q1 | 0.06 | 2,571 | 0.06 | 2,569 | - The company's Board of Directors authorized a common stock repurchase program of up to **$25,000 thousand** in July 2019, with no shares repurchased as of March 31, 2020[110](index=110&type=chunk) [15) STOCK-BASED COMPENSATION](index=31&type=section&id=15%29%20STOCK-BASED%20COMPENSATION) This note details the accounting for stock-based compensation, including expenses for employees and directors, unrecognized compensation costs, and information on non-vested common stock and stock option grants Stock-Based Compensation | Stock-Based Compensation Expense Category | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Employee Stock-Based Compensation Expense (Pre-Tax) | 526 | 530 | | Director Stock-Based Compensation Expense (Pre-Tax) | 174 | 371 | | **Total (Pre-Tax)** | **700** | **901** | - As of March 31, 2020, the company had approximately **$3,037 thousand** in unrecognized stock-based compensation expense, expected to be recognized over a weighted-average period of approximately **1.7 years**[113](index=113&type=chunk) Stock-Based Compensation | Non-Vested Common Stock Grant Activity | Number as of December 31, 2019 | Number as of March 31, 2020 | | :----------------------------------- | :----------------- | :----------------- | | Ungranted Shares at Beginning of Period | 214,495 | 214,495 | | Granted | 1,175 | 1,175 | | Forfeited | 400 | 400 | | Vested | 25,753 | 25,753 | | Ungranted Shares at End of Period | 189,517 | 189,517 | | Weighted-Average Grant Date Fair Value | 17.49 USD | 17.55 USD | [16) SUBSEQUENT EVENTS](index=33&type=section&id=16%29%20SUBSEQUENT%20EVENTS) This note discloses significant subsequent events, including the declaration of a quarterly cash dividend and shareholder approval of the 2020 Omnibus Incentive Plan, while monitoring COVID-19 impacts - On May 5, 2020, the Board of Directors declared a quarterly cash dividend of **$0.06 per share**, payable on May 26, 2020[121](index=121&type=chunk) - On May 5, 2020, shareholders approved the 2020 Omnibus Incentive Plan, adding **2,000,000 shares** to the existing equity plan[121](index=121&type=chunk) - The company continues to monitor the potential impact of the COVID-19 pandemic on its business, operating results, and financial condition[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's detailed discussion and analysis of the company's financial condition and operating results, noting increased net loss due to unrealized equity losses but improved underwriting performance [EXECUTIVE SUMMARY](index=34&type=section&id=EXECUTIVE%20SUMMARY) This executive summary outlines the company's property and casualty insurance business, growth strategies, the volatile impact of COVID-19 on its investment portfolio, and key Q1 2020 financial highlights - The company achieved business growth through strong organic expansion and strategic acquisitions, with in-force policies increasing **5.0%** year-over-year to **628,355** as of March 31, 2020[127](index=127&type=chunk) - COVID-19 has not materially impacted the company's business operations, financial condition, or liquidity, but caused investment portfolio volatility due to equity market fluctuations[132](index=132&type=chunk) Executive Summary | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Gross Premiums Written | 335,183 | 318,559 | | Net Premiums Earned | 191,596 | 180,722 | | Total Revenues | 176,304 | 202,321 | | Consolidated Net Income (Loss) Attributable to UIHC | (12,723) | 9,469 | | Diluted Core Earnings Per Share | 0.21 | 0.07 | | Book Value Per Share | 11.30 | 12.52 | [Consolidated Net Income](index=36&type=section&id=Consolidated%20Net%20Income) This section details the consolidated net income (loss) and key financial ratios for the reported periods, noting an increased net loss in Q1 2020 due to unrealized equity losses, offset by improved underwriting performance Consolidated Net Income | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----------------------------------- | :----------------------- | :----------------------- | | Net Income (Loss) Attributable to UIHC | (12,723) thousand USD | 9,469 thousand USD | | Diluted Earnings (Loss) Per Share | (0.30) USD | 0.22 USD | | Book Value Per Share | 11.30 USD | 12.52 USD | | Net Loss Ratio | 53.7% | 57.8% | | Expense Ratio | 45.3% | 45.9% | | Combined Ratio | 99.0% | 103.7% | | Impact of Current Year Catastrophe Losses on Combined Ratio | 8.9% | 6.5% | | Impact of Prior Year Development on Combined Ratio | (0.6)% | 3.1% | | Underlying Combined Ratio | 90.7% | 94.1% | [Definitions of Non-GAAP Measures](index=37&type=section&id=Definitions%20of%20Non-GAAP%20Measures) This section defines the company's non-GAAP financial measures, such as underlying combined ratio and core earnings, which provide clearer insights into business trends by excluding certain volatile items - The underlying combined ratio is measured by excluding the impact of current year catastrophe losses and prior year reserve development to highlight business trends[138](index=138&type=chunk) - Core earnings are calculated by adjusting net income to exclude the impact of intangible asset amortization and realized and unrealized investment gains (losses) (after tax), to assess core operating profitability[140](index=140&type=chunk) [ANALYSIS OF FINANCIAL CONDITION - MARCH 31, 2020 COMPARED TO DECEMBER 31, 2019](index=37&type=section&id=ANALYSIS%20OF%20FINANCIAL%20CONDITION%20-%20MARCH%2031%2C%202020%20COMPARED%20TO%20DECEMBER%2031%2C%202019) This section analyzes the company's financial condition, focusing on its investment portfolio, reinsurance strategy, and unpaid losses, noting a slight decrease in total investments and unrealized losses due to COVID-19 - The company's investment strategy focuses on capital preservation, maximizing after-tax investment income, maintaining liquidity, and minimizing risk, primarily through debt securities[145](index=145&type=chunk) Analysis of Financial Condition | Investment Category | Fair Value as of March 31, 2020 (in thousands) | Percentage of Total as of March 31, 2020 | Fair Value as of December 31, 2019 (in thousands) | Percentage of Total as of December 31, 2019 | | :----------------------------------- | :----------------------------- | :------------------------ | :----------------------------- | :------------------------ | | Total Fixed Income Securities | 873,786 | 68.4% | 884,861 | 68.2% | | Total Equity Securities | 111,915 | 8.8% | 116,610 | 8.9% | | Other Investments | 9,565 | 0.7% | 10,252 | 0.8% | | Cash and Cash Equivalents | 218,355 | 17.1% | 215,469 | 16.6% | | Restricted Cash | 64,058 | 5.0% | 71,588 | 5.5% | | **Total Cash, Cash Equivalents, Restricted Cash, and Investments** | **1,277,679** | **100.0%** | **1,298,780** | **100.0%** | - The most significant impact of COVID-19 on the company's business was **$26,456 thousand** in unrealized losses on its investment portfolio due to equity market volatility[149](index=149&type=chunk) - As of May 7, 2020, the company's June 1, 2020 catastrophe excess-of-loss reinsurance treaty was **91%** placed[154](index=154&type=chunk) Analysis of Financial Condition | Reinsurance Cost as Percentage of Gross Premiums Earned | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----------------------------------- | :-------------------- | :-------------------- | | Non-Risk | (2.6)% | (2.4)% | | Pro Rata | (12.4)% | (7.5)% | | All Other | (29.4)% | (32.2)% | | **Total Ceded Ratio** | **(44.4)%** | **(42.1)%** | - Total unpaid losses and loss adjustment expenses were **$711,042 thousand** as of March 31, 2020, a decrease from **$760,357 thousand** as of December 31, 2019[158](index=158&type=chunk) [RESULTS OF OPERATIONS - COMPARISON OF THE THREE-MONTH PERIODS ENDED MARCH 31, 2020 AND 2019](index=41&type=section&id=RESULTS%20OF%20OPERATIONS%20-%20COMPARISON%20OF%20THE%20THREE-MONTH%20PERIODS%20ENDED%20MARCH%2031%2C%202020%20AND%202019) This section compares the company's operating results for Q1 2020 and 2019, showing an increased net loss in 2020 primarily from unrealized equity losses, despite improved underwriting and gross premium growth - Net loss attributable to UIHC increased by **$22,192 thousand (234.4%)** to **$12,723 thousand** in Q1 2020, primarily due to unrealized losses on equity securities, partially offset by improved underwriting performance[161](index=161&type=chunk) Results of Operations | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | Change (in thousands) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | :------------ | | Gross Premiums Written | 335,183 | 318,559 | 16,624 | | Florida Direct Premiums Written | 193,696 | 175,626 | 18,070 | | Personal Property Gross Premiums Written | 224,616 | 210,681 | 13,935 | | Commercial Property Gross Premiums Written | 110,567 | 107,878 | 2,689 | | **Total Expenses** | **192,136** | **189,994** | **2,142** | | Losses and Loss Adjustment Expenses | 102,837 | 104,547 | (1,710) | | Policy Acquisition Costs | 58,875 | 55,246 | 3,629 | | Operating and Underwriting Expenses | 9,704 | 10,211 | (507) | | General and Administrative Expenses | 18,301 | 17,581 | 720 | - The ratio of losses and loss adjustment expenses to net premiums earned decreased by **4.1 percentage points** to **53.7%** in Q1 2020, compared to **57.8%** in the prior year period[167](index=167&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=43&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's liquidity and capital resources, highlighting its reliance on subsidiary dividends and loans, and noting increased operating cash flow despite COVID-19 market volatility - As a holding company, the company relies on cash dividends from its managed subsidiaries or intercompany loans to pay general and administrative expenses[172](index=172&type=chunk) - In Q1 2020, IIC paid **$12,000 thousand** in dividends to the company, which then contributed **$12,000 thousand** to its insurance subsidiary, UPC[173](index=173&type=chunk) - The COVID-19 pandemic has not materially impacted the company's access to credit and capital markets for liquidity, but future uncertainties could affect liquidity and capital resources[174](index=174&type=chunk) Liquidity and Capital Resources | Cash Flow Activities | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Net Cash Provided by Operating Activities | 17,498 | (2,464) | | Net Cash Used in Investing Activities | (19,190) | 15,474 | | Net Cash Used in Financing Activities | (2,952) | (2,951) | - Operating cash inflows increased in Q1 2020, primarily due to reduced cash payments related to prior accident year losses[177](index=177&type=chunk) - Investing activities resulted in net purchases of **$15,675 thousand** in Q1 2020, compared to net sales of **$18,771 thousand** in the prior year period[178](index=178&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=44&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) As of March 31, 2020, the company had no off-balance sheet arrangements, and no material changes occurred in contractual obligations during the quarter - As of March 31, 2020, the company had no off-balance sheet arrangements, and no material changes occurred in contractual obligations during the quarter[180](index=180&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discloses the company's market risks, including interest rate, credit, and equity price risks, noting no significant changes in market risk during the three months ended March 31, 2020 - The company faces interest rate, credit, and equity price risks, but no material changes in market risk occurred during the three months ended March 31, 2020[181](index=181&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the company maintains effective disclosure controls and procedures, with management assessing them as effective at a reasonable assurance level, despite remote work due to COVID-19 - As of the end of the reporting period, the company's disclosure controls and procedures were effective at a reasonable assurance level[183](index=183&type=chunk) - Despite employees working remotely due to COVID-19, the effectiveness of internal controls was not impacted, and no material changes occurred in internal controls during the quarter[184](index=184&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) This section discloses the company's routine claims-related legal proceedings and its reserving methodology, confirming no material non-claims related litigation as of March 31, 2020 - The company is involved in routine claims-related legal proceedings, with reserves established based on the probability and estimability of outcomes[185](index=185&type=chunk) - As of March 31, 2020, the company was not involved in any material non-claims related legal proceedings[186](index=186&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, primarily adding the adverse impacts of the COVID-19 pandemic on business, operations, and financial condition, including increased premium defaults and investment portfolio volatility - The COVID-19 pandemic and associated business disruptions and economic uncertainties could adversely affect the company's business, operating results, and financial condition[187](index=187&type=chunk) - Potential impacts of COVID-19 include increased premium defaults, impaired ability to meet regulatory and debt service requirements, reduced premiums, a contracting reinsurance market, increased claims frequency and/or severity, decreased investment portfolio value, and third-party vendor disruptions[190](index=190&type=chunk)[192](index=192&type=chunk) - In response to the pandemic, the company transitioned all employees to remote work, which may introduce operational risks, including cybersecurity risks, and impact business management capabilities[193](index=193&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that the company did not sell any unregistered equity securities or repurchase any equity securities during the three months ended March 31, 2020 - For the three months ended March 31, 2020, the company did not sell any unregistered equity securities or repurchase any equity securities[196](index=196&type=chunk) [Item 3. Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms no defaults upon senior securities occurred during the reporting period - None[196](index=196&type=chunk) [Item 4. Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company - Not applicable[196](index=196&type=chunk) [Item 5. Other Information](index=46&type=section&id=Item%205.%20Other%20Information) This section confirms no other information requiring disclosure during the reporting period - None[196](index=196&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report or incorporated by reference, including articles of incorporation, executive certifications, and XBRL taxonomy files - Exhibits include the Amended and Restated Articles of Incorporation, CEO and CFO certifications under Sarbanes-Oxley, and XBRL taxonomy files[198](index=198&type=chunk)[199](index=199&type=chunk)
United Insurance(ACIC) - 2019 Q4 - Annual Report
2020-03-12 21:06
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ___________________________________ FORM 10-K ___________________________________ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 Commission File Number 001-35761 United Insurance Holdings Corp. (Exact Name of Registrant as Specified in Its Charter) Delaware 75-3241967 (State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identificati ...
United Insurance(ACIC) - 2019 Q4 - Earnings Call Transcript
2020-02-21 00:56
United Insurance Holdings Corp. (UIHC) Q4 2019 Earnings Conference Call February 20, 2020 5:00 PM ET Company Participants Adam Prior - Senior Vice President at The Equity Group John Forney - Chief Executive Officer Brad Martz - Chief Financial Officer Conference Call Participants Marcos Holanda - Raymond James Freddie Sleiffer - KBW Greg Peters - Raymond James Operator Greetings and welcome to the United Insurance Holdings Fourth Quarter and Year End Conference Call. At this time, all participants are in li ...
United Insurance(ACIC) - 2019 Q3 - Quarterly Report
2019-11-05 21:48
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________________ FORM 10-Q _______________________ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 Commission File Number 001-35761 _____________________ United Insurance Holdings Corp. (Exact Name of Registrant as Specified in its Charter) Delaware 75-3241967 (State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Ident ...