Financial Performance - The company reported personal residential property policies generated written premium of 508,243,000, representing 45.2% of total gross written premium in 2022[30]. - The total insured value (TIV) of all policies in-force as of December 31, 2022, was 310,181,753 in 2021[38]. - As of December 31, 2022, the company had 254,275 policies in-force, a significant decrease from 471,724 in 2021[36]. - Approximately 52.5% of the company's policies in-force and 43.4% of total insured value were concentrated in Florida as of December 31, 2022[77]. - The company's exposure in Louisiana and Texas represented approximately 24.9% of policies in-force and 23.3% of total insured value at December 31, 2022[81]. Underwriting and Risk Management - The company aims to achieve consistent and sustainable underwriting profitability through continuous portfolio optimization and risk management strategies[24]. - The company is subject to increased exposure to catastrophic events in Florida, which may disproportionately affect its financial condition[78]. - The company faces increased costs of claims due to one-way attorney fees in Florida, with recent legislative changes aimed at reforming this issue[80]. - The process of estimating loss reserves involves significant judgment and is subject to various internal and external variables[86]. - The company may experience government-levied assessments that could adversely affect its results of operations[90]. - The company is negotiating for catastrophe reinsurance coverage for the June 1, 2023, through May 31, 2024, renewal period, with expected increases in costs[89]. - The inability to obtain reinsurance on acceptable terms could increase loss exposure and limit underwriting capabilities, adversely affecting financial condition[128]. Strategic Focus and Business Operations - The company plans to divest its personal lines business, focusing solely on commercial lines, particularly in Florida[25]. - The company continues to explore strategic options for its personal lines business, particularly IIC in New York[25]. - The company operates under two reportable segments: personal residential property and casualty insurance policies, and commercial residential property and casualty insurance policies[70]. - The company relies on approximately 2,693 independent agencies for marketing its policies, making it dependent on these agents' performance[82]. - The company has reduced its equity securities portfolio to mitigate market volatility impacts on financial condition[22]. Regulatory and Compliance Issues - The company is subject to regulatory restrictions on dividend payments from its insurance subsidiaries, as per Florida and New York law[51]. - The company has a long-term management agreement that requires approval from the Florida Office of Insurance Regulation for any changes[55]. - The company has agreed not to pay ordinary dividends from its insurance subsidiary, IIC, until January 1, 2025, without prior approval from the New York Department of Financial Services[152]. - The company is subject to restrictive covenants that may limit its ability to pursue certain opportunities for expansion, particularly in the commercial property insurance market for coastally exposed risks[154]. - Regulatory changes at the state and federal levels could limit the company's ability to manage risk and profitability, impacting growth and operational flexibility[118][120]. Environmental, Social, and Governance (ESG) Initiatives - The company aims to achieve net-zero carbon emissions in its operations and value chain by no later than 2030[59]. - The company has committed to increasing capital allocated toward ESG investment vehicles and opportunities[59]. - The company has implemented various eco-friendly initiatives, including paperless policy document delivery and energy-efficient lighting[58]. - The company has invested $3,280,000 in a BlackRock ESG exchange-traded fund as of December 31, 2022[59]. Workforce and Management - As of December 31, 2022, the company had 269 employees, with a voluntary attrition rate of 39.3% for the year[68]. - The company's workforce diversity statistics show that 20.0% of executive officers are female, with a change of (22.9) points from December 31, 2021[65]. - The loss of senior management could adversely affect the company's business and financial condition, as attracting and retaining qualified executives is challenging in a competitive industry[101][102]. Financial Risks and Market Conditions - The competitive landscape in the property and casualty insurance industry remains intense, with challenges in maintaining market share and pricing adequacy due to rising reinsurance costs and catastrophe events[115][116]. - The cyclical nature of the property and casualty insurance industry may lead to periods of severe price competition, adversely affecting profitability[140]. - Legal actions and increased litigation costs may materially affect operating results and financial condition, with potential for significant damage awards[141]. - The ongoing COVID-19 pandemic has introduced significant uncertainty, with potential risks including increased claims, regulatory challenges, and impacts on operational efficiency[111][113]. Investment and Capital Structure - The company’s investment portfolio is primarily in fixed income securities, and changes in interest rates could significantly impact net investment income and fair value[134]. - The company has registered up to 101 million securities authorized for issuance, which could lead to stock price decreases if substantial amounts are sold[148]. - Dividend payments on common stock are uncertain and dependent on profits and regulatory restrictions, affecting returns for investors[149]. - Limitations on the ability of subsidiaries to pay dividends could adversely affect the holding company's liquidity and obligations[150]. - Compliance with Senior Notes due 2027 is critical, as failure to meet restrictions could result in default and negatively impact liquidity and financial condition[109][110]. Operational Risks - The company faces risks related to information technology and data security systems, which could negatively impact its financial condition[94]. - The company faces operational and financial risks due to reliance on third-party vendors for critical services, which could lead to significant losses in the event of vendor failures or data breaches[100]. - The company has substantial uncertainty regarding reinsurance recoveries due to its insurance subsidiary, UPC, being ordered into receivership[88]. - Strategic transactions such as mergers and acquisitions may not yield anticipated benefits and could divert management resources, incur unexpected costs, or dilute existing shareholders[103][104]. - The company may face difficulties in accurately assessing the value and liabilities of acquired businesses until operational control is assumed, potentially impacting financial results[105][106]. - Dispositions of business segments could adversely affect stock prices and investor returns, alongside challenges in negotiating sale terms and replacing legacy earnings[106][107]. - Investments in shared ownership entities may expose the company to operational and financial risks, potentially leading to lower-than-expected contributions to earnings[108].
United Insurance(ACIC) - 2022 Q4 - Annual Report