United Insurance(ACIC) - 2020 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements 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) 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) 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) 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) 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 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 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] - The company's primary product is homeowners insurance, currently offered in 12 states, with commercial residential insurance also available in Florida[19] - 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] 2) SIGNIFICANT ACCOUNTING POLICIES 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] 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] - The CARES Act is expected to have a favorable but non-material impact on the company's U.S. federal income tax liability[34] 3) INVESTMENTS 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] 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) 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 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] 6) GOODWILL AND INTANGIBLE ASSETS 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][69] 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 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][75] 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] 8) LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSE (LAE) 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] 9) LONG-TERM DEBT 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][86] - 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][88] 10) COMMITMENTS AND CONTINGENCIES 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] 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 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] - 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] - 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] 12) RELATED PARTY TRANSACTIONS 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] 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 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 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] 15) STOCK-BASED COMPENSATION 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] 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 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] - On May 5, 2020, shareholders approved the 2020 Omnibus Incentive Plan, adding 2,000,000 shares to the existing equity plan[121] - The company continues to monitor the potential impact of the COVID-19 pandemic on its business, operating results, and financial condition[122] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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] 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 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 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] - 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] ANALYSIS OF FINANCIAL CONDITION - MARCH 31, 2020 COMPARED TO DECEMBER 31, 2019 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] 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] - As of May 7, 2020, the company's June 1, 2020 catastrophe excess-of-loss reinsurance treaty was 91% placed[154] 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] RESULTS OF OPERATIONS - COMPARISON OF THE THREE-MONTH PERIODS ENDED MARCH 31, 2020 AND 2019 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] 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] LIQUIDITY AND CAPITAL RESOURCES 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] - 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] - 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] 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] - 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] OFF-BALANCE SHEET ARRANGEMENTS 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - 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] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] - As of March 31, 2020, the company was not involved in any material non-claims related legal proceedings[186] Item 1A. Risk Factors 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] - 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][192] - 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities This section confirms no defaults upon senior securities occurred during the reporting period - None[196] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Not applicable[196] Item 5. Other Information This section confirms no other information requiring disclosure during the reporting period - None[196] Item 6. Exhibits 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][199]