uihc-20201105
FALSE000140152100014015212020-11-052020-11-0500014015212020-08-052020-08-05

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 5, 2020

UNITED INSURANCE HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware001-3576175-3241967
(State or other jurisdiction of incorporation)(Commission File Number)(IRS Employer Identification No.)
800 2nd Avenue S.33701
Saint Petersburg,FL
(Address of principal executive offices)(Zip Code)
(727)895-7737
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common stock, $0.0001 par value per shareUIHCNasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Item 2.02. Results of Operations and Financial Condition

On November 5, 2020, United Insurance Holdings Corp. (the Company, we, our) issued a press release relating to our earnings for the third quarter ended September 30, 2020 (the Earnings Release). We have attached a copy of the Earnings Release as Exhibit 99.1.

Item 7.01: Regulation FD Disclosure.
The executive officers of the Company intend to use the materials filed herewith, in whole or in part, in one or more meetings with investors and analysts, beginning on November 5, 2020. A copy of the investor presentation is attached hereto as Exhibit 99.2.

The information furnished under this Item 2.02 and 7.01, including Exhibit 99.1 and Exhibit 99.2 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference to such filing.

Item 9.01. Financial Statements and Exhibits
Exhibit
No.		 Description
     Earnings release issued by the Company on November 5, 2020
Investor presentation issued by the Company on November 5, 2020
104Cover Page Interactive Data File (embedded within the Inline XBRL document)



Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized.
    
  UNITED INSURANCE HOLDINGS CORP.
November 5, 2020By:/s/ B. Bradford Martz
  B. Bradford Martz, President and Chief Financial Officer
(principal financial officer and principal accounting officer)



 Document
Exhibit 99.1

FOR IMMEDIATE RELEASE
 
UNITED INSURANCE HOLDINGS CORP. REPORTS FINANCIAL RESULTS
FOR ITS THIRD QUARTER ENDED SEPTEMBER 30, 2020
 
Company to Host Quarterly Conference Call at 5:30 P.M. ET on November 5, 2020
The information in this press release should be read in conjunction with an investor presentation that is available on our website at investors.upcinsurance.com/Presentations.
 
St. Petersburg, FL - November 5, 2020: United Insurance Holdings Corp. (Nasdaq: UIHC) (UPC Insurance or the Company), a property and casualty insurance holding company, today reported its financial results for the third quarter ended September 30, 2020.
($ in thousands, except for per share data)Three Months EndedNine Months Ended
September 30,September 30,
20202019Change20202019Change
Gross premiums written$365,819 $317,184 15.3 %$1,140,653 $1,085,505 5.1 %
Gross premiums earned$353,991 $344,683 2.7 %$1,042,749 $986,521 5.7 %
Net premiums earned$188,741 $192,920 (2.2)%$565,819 $564,046 0.3 %
Total revenues$212,733 $207,598 2.5 %$605,434 $614,695 (1.5)%
Loss before income tax$(100,553)$(36,074)NM$(86,875)$(27,346)NM
Loss attributable to UIHC$(74,072)$(28,280)NM$(62,521)$(21,714)NM
Net loss available to UIHC common stockholders per diluted share$(1.73)$(0.66)NM$(1.46)$(0.51)NM
Reconciliation of net loss to core loss:
Plus: Non-cash amortization of intangible assets$1,043 $1,326 (21.3)%$3,224 $4,030 (20.0)%
Less: Net realized gains on investment portfolio$24,968 $18 NM$24,959 $186 NM
Less: Unrealized gains (losses) on equity securities$(11,552)$2,609 NM$(17,456)$15,519 NM
Less: Net tax impact(1)
$(2,598)$(359)NM$(898)$(3,220)72.1 %
Core loss (2)
$(83,847)$(29,222)NM$(65,902)$(30,169)NM
Core loss per diluted share(2)
$(1.95)$(0.68)NM$(1.54)$(0.71)NM
Book value per share$10.54 $11.93 (11.7)%
NM = Not Meaningful
(1) In order to reconcile net loss to the core loss measure, we included the tax impact of all adjustments using the 21% corporate federal tax rate.
(2) Core loss and core loss per diluted share, measures that are not based on GAAP, are reconciled above to net loss and net loss per diluted share, respectively, the most directly comparable GAAP measures. Additional information regarding non-GAAP financial measures presented in this press release can be found in the "Definitions of Non-GAAP Measures" section, below.


“First, our thoughts are with all of the victims of the record-setting catastrophes this year, and our thanks to the many employees and partners that continue to serve our insureds," said Dan Peed, CEO of UPC Insurance.

"Year-to-date we have seen a record number of named storms in our geographic footprint. As an insurer that focuses on providing homeowners' insurance in hurricane-prone coastal areas, we experienced our largest ever quarterly losses due to these unprecedented storms.

1
Exhibit 99.1
Unfortunately, the losses attributable to the named storms masked numerous successes in the third quarter, including continued improvement in our core ex-hurricane earnings, increased rate earning through our portfolio, a decreased expense ratio, and accelerated rate increases on both the commercial and personal lines of our business.

As we conclude 2020 and move into the new year, we believe the tightening market conditions will not adversely affect our planned rate increases in both our commercial specialty and personal lines of our business. We remain optimistic that we will be well-positioned to reduce volatility through increased reinsurance cessions, while still achieving positive returns."

Return on Equity and Core Return on Equity

The calculations of the Company's return on equity and core return on equity are shown below.
($ in thousands)Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Net loss attributable to UIHC$(74,072)$(28,280)$(62,521)$(21,714)
Return on equity based on GAAP net loss attributable to UIHC (1)
(58.6)%(21.3)%(16.5)%(5.5)%
Core loss$(83,847)$(29,222)$(65,902)$(30,169)
Core return on equity (1)(2)
(66.3)%(22.0)%(17.4)%(7.6)%
(1) Return on equity for the three and nine months ended September 30, 2020 and 2019 is calculated on an annualized basis by dividing the net loss or core net loss for the period by the average stockholders' equity for the trailing twelve months.
(2) Core return on equity, a measure that is not based on GAAP, is calculated based on core loss, which is reconciled on the first page of this press release to net loss, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this press release can be found in the "Definitions of Non-GAAP Measures" section, below.

Combined Ratio and Underlying Ratio

The calculations of the Company's combined ratio and underlying combined ratio are shown below.
($ in thousands)Three Months EndedNine Months Ended
September 30,September 30,
20202019Change20202019Change
Loss ratio, net(1)
115.8 %76.8 %39.0  pts74.8 %65.4 %9.4  pts
Expense ratio, net(2)
49.0 %48.3 %0.7  pts46.3 %47.1 %(0.8) pts
Combined ratio (CR)(3)
164.8 %125.1 %39.7  pts121.1 %112.5 %8.6  pts
Effect of current year catastrophe losses on CR74.2 %26.0 %48.2  pts33.0 %13.8 %19.2  pts
Effect of prior year unfavorable (favorable) development on CR(2.2)%6.3 %(8.5) pts(1.1)%5.9 %(7.0) pts
Underlying combined ratio(4)
92.8 %92.8 %—  pts89.2 %92.8 %(3.6) pts
(1) Loss ratio, net is calculated as losses and loss adjustment expenses (LAE), net of losses ceded to reinsurers, relative to net premiums earned.
(2) Expense ratio, net is calculated as the sum of all operating expenses less interest expense relative to net premiums earned.
(3) Combined ratio is the sum of the loss ratio, net and expense ratio, net.
(4) Underlying combined ratio, a measure that is not based on GAAP, is reconciled above to the combined ratio, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this press release can be found in the "Definitions of Non-GAAP Measures" section, below.

Impact of Coronavirus (COVID-19), Financial Status and Outlook

The COVID-19 pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans and restrictions, self-imposed quarantine periods, state and local shelter-in-place orders, business and government shutdowns and social distancing, have caused and continue to cause material disruption to businesses and economies globally. In addition, global equity markets have experienced and continue to experience significant volatility and weakness.
2
Exhibit 99.1

The Company is committed to its employees, agents, customers and stockholders in its resolve to maintain a stable and secure business. During the third quarter of 2020, the Company was able to resume hiring activities, despite the limits on in-person interviews and on-boarding procedures resulting from COVID-related protocols. In addition, the Company has converted to virtual sales processes to enable our agents to continue their activities. The Company believes these activities, collectively, help ensure the health and safety of its employees through adherence to CDC, state and local government work guidelines.

The scope, severity and longevity of any potential business shutdowns or disruptions as a result of the COVID-19 outbreak is highly uncertain and cannot be predicted at this time, as new information may continue to emerge concerning the actions governments may take to contain or mitigate the spread of the virus or address its impact on individuals, businesses and the economy. The Company did not incur material claims or significant disruptions to the business for the three and nine months ended September 30, 2020. The Company has not incurred any significant impact to its results of operations, financial position, liquidity or its ability to service its policyholders as of the date of this press release, with the exceptions of fluctuations in our investment portfolios due to the volatility of the equity securities markets. The Company reduced the size of its equity securities portfolio during the third quarter of 2020, which has reduced the impact of fluctuations in the market on the Company's financial condition. At this time, it is not possible to reasonably estimate the extent of the impact of the economic uncertainties on the financial results and condition of the Company in future periods, but the Company will continue to respond to the COVID-19 pandemic and take reasonable measures to make sure customers continue to be served without interruption.

Quarterly Financial Results
Net loss attributable to the Company for the third quarter of 2020 was $74.1 million, or $1.73 per diluted share, compared to net loss of $28.3 million, or $0.66 per diluted share, for the third quarter of 2019. The increase in net loss was primarily due to an increase in the Company's loss and loss adjustment expenses (LAE) due to a higher frequency of catastrophe activity during the third quarter of 2020. The Company also experienced a decrease in unrealized gain on equity securities during the third quarter of 2020 compared to the third quarter of 2019. The Company sold equity securities that were in an unrealized gain position during the third quarter of 2020, which resulted in realized gains of $24.0 million, but reduced the unrealized gain balance at quarter end.

The Company's total gross written premium increased by $48.6 million, or 15.3%, to $365.8 million for the third quarter of 2020, from $317.2 million for the third quarter of 2019, driven by rate increases in Florida and organic policy growth in new and renewal business generated in the Gulf and Southeast regions. The breakdown of the quarter-over-quarter changes in both direct written and assumed premiums by region and gross written premium by line of business are shown in the table below.
($ in thousands)Three Months Ended
September 30,
20202019Change $Change %
Direct Written and Assumed Premium by Region (1)
Florida $191,858 $157,278 $34,580 22.0 %
Gulf73,804 62,970 10,834 17.2 
Northeast55,871 55,665 206 0.4 
Southeast36,496 32,047 4,449 13.9 
Total direct written premium by region358,029 307,960 50,069 16.3 
Assumed premium (2)
7,790 9,224 (1,434)(15.5)
Total gross written premium by region$365,819 $317,184 $48,635 15.3 %
Gross Written Premium by Line of Business
Personal property$302,078 $259,187 $42,891 16.5 %
Commercial property63,741 57,997 5,744 9.9 
Total gross written premium by line of business$365,819 $317,184 $48,635 15.3 %
(1) "Gulf" is comprised of Hawaii, Louisiana and Texas; "Northeast" is comprised of Connecticut, Massachusetts, New Jersey, New York and Rhode Island; and "Southeast" is comprised of Georgia, North Carolina and South Carolina.
(2) Assumed premium written for 2020 and 2019 primarily included commercial property business assumed from unaffiliated insurers.
3
Exhibit 99.1


Loss and LAE increased by $70.6 million, or 47.7%, to $218.7 million for the third quarter of 2020, from $148.1 million for the third quarter of 2019. Loss and LAE expense as a percentage of net earned premiums increased 39.0 points to 115.8% for the third quarter of 2020, compared to 76.8% for the third quarter of 2019. Excluding catastrophe losses and reserve development, the Company's gross underlying loss and LAE ratio for the third quarter of 2020 would have been 23.4%, a decrease of 1.5 points from 24.9% during the third quarter of 2019.

Policy acquisition costs decreased by $3.1 million, or 5.0%, to $58.7 million for the third quarter of 2020, from $61.8 million for the third quarter of 2019 primarily due to a decrease in assumed ceding commission expense, as a result of the decline in the Company's assumed line of business during the third quarter of 2020 which is offset by an increase in managing general agent commissions related to commercial premiums .

Operating and underwriting expenses increased by $2.3 million, or 18.9%, to $14.5 million for the third quarter of 2020, from $12.2 million for the third quarter of 2019, primarily due to increased investments in technology, as well as increased agent-related expenses incurred during the quarter, which are based on our agent incentive program.

General and administrative expenses remained relatively flat, increasing by $0.1 million, or 0.5%, to $19.2 million for the third quarter of 2020, from $19.1 million for the third quarter of 2019.

Combined Ratio Analysis

The calculations of the Company's loss ratios and underlying loss ratios are shown below.
($ in thousands)Three Months EndedNine Months Ended
September 30,September 30,
20202019Change20202019Change
Loss and LAE$218,652 $148,125 $70,527 $423,182 $368,924 $54,258 
% of Gross earned premiums61.8 %43.0 %18.8  pts40.6 %37.4 %3.2  pts
% of Net earned premiums115.8 %76.8 %39.0  pts74.8 %65.4 %9.4  pts
Less:
Current year catastrophe losses$140,002 $50,168 $89,834 $186,919 $77,627 $109,292 
Prior year reserve unfavorable (favorable) development(4,213)12,249 (16,462)(6,165)33,216 (39,381)
Underlying loss and LAE (1)
$82,863 $85,708 $(2,845)$242,428 $258,081 $(15,653)
% of Gross earned premiums23.4 %24.9 %(1.5) pts23.2 %26.2 %(3.0) pts
% of Net earned premiums43.9 %44.4 %(0.5) pts42.8 %45.8 %(3.0) pts
(1) Underlying loss and LAE is a non-GAAP financial measure and is reconciled above to loss and LAE, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this press release can be found in the "Definitions of Non-GAAP Measures" section, below.

The calculations of the Company's expense ratios are shown below.
($ in thousands)Three Months EndedNine Months Ended
September 30,September 30,
20202019Change20202019Change
Policy acquisition costs$58,735 $61,849 $(3,114)$170,183 $178,717 $(8,534)
Operating and underwriting14,483 12,167 2,316 38,164 33,577 4,587 
General and administrative19,224 19,105 119 53,646 53,488 158 
Total Operating Expenses$92,442 $93,121 $(679)$261,993 $265,782 $(3,789)
% of Gross earned premiums
26.1 %27.0 %(0.9) pts25.1 %26.9 %(1.8) pts
% of Net earned premiums
49.0 %48.3 %0.7  pts46.3 %47.1 %(0.8) pts


Reinsurance Costs as a Percentage of Gross Earned Premium

Reinsurance costs as a percentage of gross earned premium in the third quarter of 2020 and 2019 were as follows:
4
Exhibit 99.1
20202019
Non-at-Risk(2.2)%(2.3)%
Quota Share(13.6)%(12.2)%
All Other(30.9)%(29.5)%
Total Ceding Ratio(46.7)%(44.0)%

The increase in this ratio was driven by the terms of the Company's 2020-2021 catastrophe excess of loss agreement. During the third quarter of 2020, the Company's subsidiary, UPC Re, assumed losses causing the Company to reach the exhaustion point of the intercompany catastrophe excess of loss agreement. This resulted in an acceleration of recorded ceded unearned premium which did not occur in the third quarter of 2019. In addition, the Company experienced an increase in costs related to the quota share agreement due to increased gross premium written by the participating insurance subsidiaries in 2020.

Investment Portfolio Highlights

The Company's cash, restricted cash and investment holdings increased to $1.5 billion at September 30, 2020 from $1.3 billion at December 31, 2019. The Company's cash and investment holdings consist of investments in U.S. government and agency securities, corporate debt and 100% investment grade money market instruments. Fixed maturities represented approximately 93.2% of total investments at September 30, 2020, compared to 87.5% at December 31, 2019. At September 30, 2020 our fixed maturity investments had a modified duration of 3.9 years, compared to 3.4 years at December 31, 2019. The Company's equity security investment holdings has decreased 68.7% from December 31, 2019, due to the sale of equity securities during the quarter ended September 30, 2020.

Book Value Analysis

Book value per common share decreased 9.8% from $11.69 at December 31, 2019, to $10.54 at September 30, 2020. Underlying book value per common share decreased 14.3% from $11.43 at December 31, 2019 to $9.80 at September 30, 2020. The decrease in the Company's book value per common share was due to a decrease in the Company's retained earnings as the result of net loss in the first nine months of 2020. As shown in the table below, removing the effect of AOCI further decreases the Company's book value per common share, as the Company experienced favorable market conditions for the nine months ended September 30, 2020.
($ in thousands, except for share and per share data)September 30, 2020December 31, 2019
Book Value per Share
Numerator:
Common stockholders' equity attributable to UIHC$453,941 $503,138 
Denominator:
Total Shares Outstanding43,080,410 43,028,074 
Book Value Per Common Share$10.54 $11.69 
Book Value per Share, Excluding the Impact of Accumulated Other Comprehensive Income (AOCI)
Numerator:
Common stockholders' equity attributable to UIHC$453,941 $503,138 
Less: Accumulated other comprehensive income31,732 11,319 
Stockholders' Equity, excluding AOCI$422,209 $491,819 
Denominator:
Total Shares Outstanding43,080,410 43,028,074 
Underlying Book Value Per Common Share(1)
$9.80 $11.43 
(1) Underlying book value per common share is a non-GAAP financial measure and is reconciled above to book value per common share, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this press release can be found in the "Definitions of Non-GAAP Measures" section, below.


5
Exhibit 99.1
Definitions of Non-GAAP Measures

The Company believes that investors' understanding of UPC Insurance's performance is enhanced by the Company's disclosure of the following non-GAAP measures. The Company's methods for calculating these measures may differ from those used by other companies and therefore comparability may be limited.

Net income excluding the effects of amortization of intangible assets, realized gains (losses) and unrealized gains (losses) on equity securities, net of tax (core income (loss)) is a non-GAAP measure which is computed by adding amortization, net of tax, to net income and subtracting realized gains (losses) on the Company's investment portfolio, net of tax, and unrealized gains (losses) on the Company's equity securities, net of tax, from net income. Amortization expense is related to the amortization of intangible assets acquired through mergers and therefore the expense does not arise through normal operations. Investment portfolio gains (losses) and unrealized equity security gains (losses) vary independent of the Company's operations. The Company believes it is useful for investors to evaluate these components separately and in the aggregate when reviewing the Company's performance. The most directly comparable GAAP measure is net income. The core income measure should not be considered a substitute for net income and does not reflect the overall profitability of the Company's business.

Core return on equity is a non-GAAP ratio calculated using non-GAAP measures. It is calculated by dividing the core income for the period by the average stockholders’ equity for the trailing twelve months (or one quarter of such average, in the case of quarterly periods). Core income is an after-tax non-GAAP measure that is calculated by excluding from net income the effect of non-cash amortization of intangible assets, unrealized gains or losses on the Company's equity security investments and net realized gains or losses on the Company's investment portfolio. In the opinion of the Company’s management, core income, core income per share and core return on equity are meaningful indicators to investors of the Company's underwriting and operating results, since the excluded items are not necessarily indicative of operating trends. Internally, the Company’s management uses core income, core income per share and core return on equity to evaluate performance against historical results and establish financial targets on a consolidated basis. The most directly comparable GAAP measure is return on equity. The core return on equity measure should not be considered a substitute for return on equity and does not reflect the overall profitability of the Company's business.

Combined ratio excluding the effects of current year catastrophe losses and prior year reserve development (underlying combined ratio) is a non-GAAP measure, which is computed by subtracting the effect of current year catastrophe losses and prior year development from the combined ratio. The Company believes that this ratio is useful to investors and it is used by management to highlight the trends in the Company's business that may be obscured by current year catastrophe losses and prior year development. Current year catastrophe losses cause the Company's loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude, and can have a significant impact on the combined ratio. Prior year development is caused by unexpected loss development on historical reserves. The Company believes it is useful for investors to evaluate these components separately and in the aggregate when reviewing the Company's performance. The most directly comparable GAAP measure is the combined ratio. The underlying combined ratio should not be considered as a substitute for the combined ratio and does not reflect the overall profitability of the Company's business.

Net loss and LAE excluding the effects of current year catastrophe losses and prior year reserve development (underlying loss and LAE) is a non-GAAP measure which is computed by subtracting the effect of current year catastrophe losses and prior year reserve development from net loss and LAE. The Company uses underlying loss and LAE figures to analyze the Company's loss trends that may be impacted by current year catastrophe losses and prior year development on the Company's reserves. As discussed previously, these two items can have a significant impact on the Company's loss trends in a given period. The Company believes it is useful for investors to evaluate these components separately and in the aggregate when reviewing the Company's performance. The most directly comparable GAAP measure is net loss and LAE. The underlying loss and LAE measure should not be considered a substitute for net loss and LAE and does not reflect the overall profitability of the Company's business.

Book value per common share, excluding the impact of accumulated other comprehensive income (underlying book value per common share), is a non-GAAP measure which is computed by dividing common stockholders' equity after excluding accumulated other comprehensive income, by total common shares outstanding plus dilutive potential common shares outstanding. The Company uses the trend in book value per common share, excluding the impact of accumulated other comprehensive income, in conjunction with book value per common share to identify and analyze the change in net worth attributable to management efforts between periods. The
6
Exhibit 99.1
Company believes the non-GAAP measure is useful to investors because it eliminates the effect of interest rates that can fluctuate significantly from period to period and are generally driven by economic and financial factors which are not influenced by management. Book value per common share is the most directly comparable GAAP measure. Book value per common share, excluding the impact of accumulated other comprehensive income, should not be considered a substitute for book value per common share, and does not reflect the recorded net worth of the Company's business.


Conference Call Details

Date and Time:    November 5, 2020 - 5:30 P.M. ET

Participant Dial-In:    (United States): 877-407-8829
    (International): 201-493-6724

Webcast:    To listen to the live webcast, please go to http://investors.upcinsurance.com and click on the conference call link at the top of the page or go to: https://event.webcasts.com/starthere.jsp?ei=1385077&tp_key=6956c4ea62

An archive of the webcast will be available for a limited period of time thereafter.

Presentation:     The information in this press release should be read in conjunction with an investor presentation that is available on our website at investors.upcinsurance.com/Presentations.

About UPC Insurance

Founded in 1999, UPC Insurance is an insurance holding company that sources, writes and services personal and commercial residential property and casualty insurance policies using a group of wholly owned insurance subsidiaries and one majority owned insurance subsidiary through a variety of distribution channels. The Company currently writes policies in Connecticut, Florida, Georgia, Hawaii, Louisiana, Massachusetts, New Jersey, New York, North Carolina, Rhode Island, South Carolina and Texas. From its headquarters in St. Petersburg, UPC Insurance's team of dedicated professionals manages a completely integrated insurance company, including sales, underwriting, customer service and claims.

Forward-Looking Statements

Statements made in this press release, or on the conference call identified above, and otherwise, that are not historical facts are “forward-looking statements” that anticipate results based on our estimates, assumptions and plans and are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words such as “may,” “will,” “expect,” "endeavor," "project," “believe,” "plan," “anticipate,” “intend,” “could,” “would,” “estimate” or “continue” or the negative variations thereof or comparable terminology. We believe these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements may be found in our filings with the U.S. Securities and Exchange Commission, including the “Risk Factors” section in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. Forward-looking statements speak only as of the date on which they are made, and, except as required by applicable law, we undertake no obligation to update or revise any forward-looking statement.

 ### #### ###
CONTACT:ORINVESTOR RELATIONS:
United Insurance Holdings Corp.The Equity Group
Jessica StrathmanAdam Prior
Director of Financial ReportingSenior Vice-President
(727) 895-7737 / jstrathman@upcinsurance.com(212) 836-9606 / aprior@equityny.com
7
Exhibit 99.1
Consolidated Statements of Comprehensive Income
In thousands, except share and per share amounts
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
REVENUE:
Gross premiums written$365,819 $317,184 $1,140,653 $1,085,505 
Change in gross unearned premiums(11,828)27,499 (97,904)(98,984)
Gross premiums earned353,991 344,683 1,042,749 986,521 
Ceded premiums earned(165,250)(151,763)(476,930)(422,475)
Net premiums earned188,741 192,920 565,819 564,046 
Net investment income 6,010 7,803 18,834 22,668 
Net realized investment gains24,968 18 24,959 186 
Net unrealized gains (losses) on equity securities(11,552)2,609 (17,456)15,519 
Other revenue4,566 4,248 13,278 12,276 
Total revenues$212,733 $207,598 $605,434 $614,695 
EXPENSES:
Losses and loss adjustment expenses218,652 148,125 423,182 368,924 
Policy acquisition costs58,735 61,849 170,183 178,717 
Operating expenses14,483 12,167 38,164 33,577 
General and administrative expenses19,224 19,105 53,646 53,488 
Interest expense2,210 2,443 7,194 7,379 
Total expenses 313,304 243,689 692,369 642,085 
Loss before other income(100,571)(36,091)(86,935)(27,390)
Other income18 17 60 44 
Loss before income taxes(100,553)(36,074)(86,875)(27,346)
Benefit for income taxes(26,685)(7,859)(24,933)(5,912)
Net Loss$(73,868)$(28,215)$(61,942)$(21,434)
Less: Net income attributable to noncontrolling interests204 65 579 280 
Net loss attributable to UIHC$(74,072)$(28,280)$(62,521)$(21,714)
OTHER COMPREHENSIVE INCOME:
Change in net unrealized gains on investments27,884 5,606 52,106 30,561 
Reclassification adjustment for net realized investment gains(24,968)(18)(24,959)(186)
Income tax expense related to items of other comprehensive income(707)(1,486)(6,582)(7,374)
Total comprehensive income (loss)$(71,659)$(24,113)$(41,377)$1,567 
Less: Comprehensive income attributable to noncontrolling interests208 101 731 537 
Comprehensive income (loss) attributable to UIHC$(71,867)$(24,214)$(42,108)$1,030 
Weighted average shares outstanding
Basic42,893,205 42,795,414 42,853,364 42,750,710 
Diluted42,893,205 42,795,414 42,853,364 42,750,710 
Earnings available to UIHC common stockholders per share
Basic$(1.73)$(0.66)$(1.46)$(0.51)
Diluted$(1.73)$(0.66)$(1.46)$(0.51)
Dividends declared per share$0.06 $0.06 $0.18 $0.18 
8
Exhibit 99.1
Consolidated Balance Sheets
In thousands, except share amounts
September 30, 2020December 31, 2019
ASSETS 
Investments, at fair value:  
Fixed maturities, available-for-sale$1,026,438 $884,861 
Equity securities36,470 116,610 
Other investments38,371 10,252 
Total investments$1,101,279 $1,011,723 
Cash and cash equivalents323,314 215,469 
Restricted cash53,234 71,588 
Accrued investment income5,691 5,901 
Property and equipment, net34,880 32,728 
Premiums receivable, net98,948 86,568 
Reinsurance recoverable on paid and unpaid losses780,298 550,136 
Ceded unearned premiums402,804 270,034 
Goodwill73,045 73,045 
Deferred policy acquisition costs119,089 104,572 
Intangible assets, net22,855 26,079 
Other assets49,350 19,375 
Total Assets$3,064,787 $2,467,218 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses$1,082,126 $760,357 
Unearned premiums771,959 674,055 
Reinsurance payable on premiums347,711 166,131 
Payments outstanding68,505 57,555 
Accounts payable and accrued expenses89,657 78,592 
Operating lease liability2,242 324 
Other liabilities69,146 47,407 
Notes payable, net158,043 158,932 
Total Liabilities$2,589,389 $1,943,353 
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $0.0001 par value; 1,000,000 authorized; none issued or outstanding— — 
Common stock, $0.0001 par value; 50,000,000 shares authorized; 43,255,798 and 43,056,310 issued, respectively; 43,080,410 and 43,028,074 outstanding, respectively
4 4 
Additional paid-in capital392,754 391,852 
Treasury shares, at cost; 212,083 shares(431)(431)
Accumulated other comprehensive income31,732 11,319 
Retained earnings29,881 100,394 
Total stockholders' equity attributable to UIHC stockholders$453,940 $503,138 
Noncontrolling interests21,458 20,727 
Total Stockholders' Equity$475,398 $523,865 
Total Liabilities and Stockholders' Equity$3,064,787 $2,467,218 
9
investorpresentation3q20
Investor Presentation Supplement to Third Quarter 2020 Results November 5, 2020

 
Company Overview UPC Insurance is a specialty underwriter of catastrophe exposed property insurance in the US United Insurance Holding Corp. (NASDAQ: UIHC) was founded in UIHC as of September 30, 2020 1999 and is the insurance holding company for 5 P&C carriers and Total Assets: $3.06 billion operating affiliates operating under the brand UPC Insurance (UPC). Total Equity: $454 million UPC has built a geographically diversified book of business of Premium in-Force: $1.38 billion homeowners & fire insurance products (personal lines) across 12 coastal states with roughly 621,000 policies and $1.04 billion of Financial Strength A- (Kroll) premium in-force. Ratings: A- (AM Best) ¹ A (Demotech) UPC has the #1 market share of commercial residential property insurance (commercial lines) in Florida with nearly 6,200 policies and over $338 million of premium in-force. ¹ AM Best rating is for Journey Insurance Company only 2

 
Q3-2020 Executive Summary We remain enthusiastic about our strategy despite the unprecedented hurricane activity in 2020 Underlying • Core income excluding named storm losses of $15m or $0.35/share, up $19.5m y/y 1 Results • Underlying gross loss ratio of 23.4% improved 1.5 points y/y Improving • Gross expense ratio of 26.1% improved 0.9 points y/y despite $2.8m charge ($0.05/share) Capital & • GAAP equity of $454m declined -9.8% and STAT surplus is down -10.9% from year-end 2 Reinsurance • We have tremendous reinsurance relationships to manage operating leverage Support • Reinsurance renewals at 1/1 & 6/1 will focus on reducing volatility Portfolio • PML reduction improving capital efficiency and modeled expected return metrics 3 Optimization • Underwriting actions implemented to restrict new business and be more selective Accelerating • Our intent is to grow premiums via rate change while reducing risk exposures Elevated CAT • Seven new named storms in Q3 equated to a 1-in-55-year return period for our portfolio 4 Frequency is • Q3 named storm gross loss of $290.4 and net loss of $125.1m ($2.30/share) Manageable • Q4 will be impacted by 2 additional events (Delta + Zeta likely $50-$55m before tax) 3

 
Summary of Operating Results Underlying results improved nearly $20m y/y excluding named storms Q3-20 Q3-19 Change Core income (loss) $ (83,847) $ (29,222) -186.9% per diluted share (CEPS) $ (1.95) $ (0.68) NonCAT reserve development Included the following items continued to be better than Net current year catastrophe loss & LAE incurred $ 140,001 $ 18,872 expected in Q3-20 Net (favorable) unfavorable reserve development $ (4,213) $ 12,249 Total items $ 135,788 $ 31,121 Core income (loss) excluding named windstorms $ 15,000 $ (4,499) 433.4% CEPS excluding named windstorms $ 0.35 $ (0.11) Gross underlying loss & LAE ratio 23.4% 24.9% (1.5) pts Gross expense ratio 26.1% 27.0% (0.9) pts Net loss & LAE ratio 115.8% 76.8% Net expense ratio 49.0% 48.3% Q3-20 underlying combined Combined ratio 164.8% 125.0% 39.8 pts ratio would have improved Net current year catastrophe loss & LAE incurred -74.2% -26.0% Net favorable (unfavorable) reserve development 2.2% -6.3% to 91.4% excluding the Underlying combined ratio 92.9% 92.8% 0.1 pts $2.8m non-recurring charge 4

 
Underlying Results Trending Favorably We have positive core earnings momentum excluding the noise from named storms 3Q20 +$19.5m (433%) $0.40 2Q20 +$16.4m (473%) $0.35 Q320 was $17.2m 1Q20 +$5.9m (185%) $0.30 or $0.40 excluding $0.30 the non-recurring $0.21 expense item, up $0.20 $21.7m (482%) y/y $0.10 $0.07 $- Q1-19 Q1-20 Q2-19 Q2-20 Q3-19 Q3-20 $(0.10) $(0.08) $(0.11) $ in thousands except per share $(0.20) amounts Q1-19 Q1-20 Change Q2-19 Q2-20 Change Q3-19 Q3-20 Change Core income(loss) $ 3,202 $ 9,129 $ 5,927 $ (3,459) $ 8,816 $ 12,275 $ (29,222) $ (83,847) $ (54,625) per share $ 0.07 $ 0.21 $ 0.14 $ (0.08) $ 0.20 $ 0.28 $ (0.68) $ (1.95) $ (1.27) Named storms, net of tax $ - $ - $ - $ - $ 4,100 $ 4,100 $ 24,723 $ 98,847 $ 74,124 per share $ - $ - $ - $ - $ 0.10 $ 0.10 $ 0.58 $ 2.30 $ 1.73 Adjusted Core income(loss) $ 3,202 $ 9,129 $ 5,927 $ (3,459) $ 12,916 $ 16,375 $ (4,499) $ 15,000 $ 19,499 per share $ 0.07 $ 0.21 $ 0.14 $ (0.08) $ 0.30 $ 0.38 $ (0.11) $ 0.35 $ 0.45 5

 
More Action Being Taken to Improve Results Hard market allows us to be more selective and limit exposure growth while increasing premiums 1. Underwriting Changes • Continue to take rate in every state and product where possible • Increasing minimum deductible requirements for new and renewal business • Utilizing risk scoring technology including restrictions for roof age and condition • Increasing use of proprietary inspection technology to enhance risk selection 2. Exposure & PML Optimization • Restricting business in certain geographies and peak exposure areas • Exiting products and territories that lack scale and/or profitability • Actively raising eligibility standards for new business 3. Agency & Distribution Management • Refining agency force by pruning bottom-quartile producers • Eliminating use of comparative raters 6

 
Premium Increasing Faster Than Exposure Driving more rate relative to TIV & PML is the key to margin improvement Probable Maximum Loss (PML) is the primary driver for catastrophe reinsurance needed and trending favorably 7

 
Rate Adequacy Is Accelerating Most states have rate increases earning in with additional rate hikes coming effective 2H-2020 STATE PROGRAM / LOB TYPE / POLICY FORM EFFECTIVE DATE RATE CHANGE STATUS Florida Homeowners HO-3 UPC 11/1/2020 14.1% Approved Homeowners HO-3 FSIC 9/1/2020 14.5% Approved Homeowners HO-3 FSIC 2/6/2020 13.7% Approved The effect of these changes Dwelling Fire DF-3 UPC 1/1/2021 14.9% Use & File could be up to $100 million South Carolina Homeowners HO-3 8/1/2020 6.9% Approved of additional premium with North Carolina Homeowners HO-3 9/10/2020 10.2% Approved no increase in exposure Homeowners HO-3 10/1/2020 15.4% Approved over the next 12-24 months Rhode Island Homeowners HO-3 9/15/2020 9.5% Approved Massachusetts Homeowners HO-3 7/19/2020 8.7% Approved Texas Homeowners HO-3 7/6/2020 13.2% File & Use This is schedule doesn’t Louisiana Homeowners HO-3 UPC 3/1/2021 9.5% File & Use include all potential rate Homeowners HO-3 FSIC 3/1/2021 9.8% File & Use actions, but covers most key Georgia Dwelling Fire DF-3 12/1/2020 8.5% Approved products and states Homeowners HO-3 12/1/2020 9.9% Approved New York Homeowners HO-3 UPC 3/22/2021 25.7% Approved Homeowners HO-3 UPC 3/9/2020 9.4% Approved Connecticut Homeowners HO-3 10/17/2020 5.7% Approved 8

 
2020 Hurricane Season in Perspective Zeta marked the 11th continental US landfall in 2020 eclipsing the prior record of 9 set in 1916 Return Periods for Number of US Hurricanes with Industry Loss > $1 Billion Frequency 1x $1B 2x $1B 3x $1B 4x $1B 5x $1B 6x $1B 7x $1B RT (Years) 1.36 2.61 6.04 15.48 43.86 142.86 416.67 Probability 73.5% 38.3% 16.6% 6.5% 2.3% 0.7% 0.2% Source: AIR According to PCS, the US has already incurred 3 storms with at least $1 billion of industry loss (Isaias, Laura & Sally). We believe it is likely to reach 5 with hurricanes Delta & Zeta Source: NOAA Hurricane ETA tied the Atlantic season record of 28 named storms set in 2005 9

 
Summary of Named Storm Losses High frequency of CAT (in virtually every state) with low severity resulted in higher net retentions Estimated Ultimate Loss & LAE Claims Reported as of 11/1/2020 Gross Ceded Net CT FL GA LA MA NJ NY NC RI SC TX Total 1Tropical Storm Fay $ 629 $ (142) $ 487 2 28 34 64 2Hurricane Hanna $ 17,745 $ (3,993) $ 13,752 2,234 2,234 3Hurricane Isaias $ 26,907 $ (5,298) $ 21,609 258 346 23 91 558 1,077 457 145 113 3,068 4Hurricane Laura $ 171,278 $ (108,528) $ 62,750 2,343 469 2,812 5Hurricane Marco $ 254 $ (57) $ 197 13 10 23 6Hurricane Sally $ 73,347 $ (47,214) $ 26,133 1,705 28 23 21 1,777 7Tropical Storm Beta $ 1,713 $ (385) $ 1,328 15 144 159 New Named Storms in Q3 $ 291,873 $ (165,617) $ 126,256 260 2,051 51 2,394 91 586 1,111 457 145 134 2,857 10,137 8Tropical Storm Cristobal ¹ $ (1,465) $ 330 $ (1,135) 411 22 54 487 Total Named Storm Impact in Q3 $ 290,408 $ (165,287) $ 125,121 10,624 Two additional hurricanes in October will impact We have roughly $3 billion of aggregate limit our full-year results as will any events subsequent remaining excess of $25 million for future events ¹ Q3-20 activity represents favorable reserve development from Q2-20 based on revised ultimate loss of $4.8m at 9.30.20 10

 
Capital Impacted By CAT Sep 30, Dec. 31, ($ in thousands, except per share amounts) 2020 2019 Change Selected Balance Sheet Data Cash & investments $ 1,424,593 $ 1,227,192 +16.1% Financial debt 158,043 158,932 Capital erosion of ~$50m in 2020 driven by the Stockholders' equity attributable to UIHC 453,940 503,138 -9.8% unprecedented frequency of named windstorms Total capital 611,983 $ 662,070 -7.6% Leverage Ratios Debt-to-total capital 25.8% 24.0% Reinsurance will be the primary tool used to Net premiums earned-to-stockholders' equity ¹ 166.1% 149.5% manage leverage and RBC, not equity or debt Per Share Data Common shares outstanding 43,080 43,028 Book value per common share $ 10.54 $ 11.69 -9.9% Market discount to book value presents a unique Tangible book value per common share $ 8.31 $ 9.39 -11.5% opportunity relative to historical P&C valuations ¹ Net premiums earned are for the trailing twelve months 11

 
Reinsurance Renewal Strategy We seek to utilize reinsurance to reduce retentions & earnings volatility going forward 1. Additional Quota Share Nearing Completion • Key reinsurance partners have offered increased quota share protection to reduce leverage • Expected to have an immediate favorable impact to RBC in 2020 2. AOP CAT Aggregate Excess of Loss Program effective 1/1/2021 • Part of the early 6/1/21 renewal that shares with the Core CAT program • Seeking a fixed quarterly retention in lieu of retention that varies directly with subject earned premium 3. Core CAT Program effective 6/1/2021 • Expecting to reduce per occurrence and aggregate retention levels • Multi-year coverage, limit already secured and targeted PML reductions may create excess capacity at renewal • Planning to continue purchasing full single-shot, cascading coverage • Exploring expanded use of CAT bond to reduce the open market capacity needed 12

 
Cautionary Statements This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements include expectations regarding our diversification, growth opportunities, retention rates, liquidity, investment returns and our ability to meet our investment objectives and to manage and mitigate market risk with respect to our investments. These statements are based on current expectations, estimates and projections about the industry and market in which we operate, and management's beliefs and assumptions. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "endeavor," "project," "believe," "anticipate," "intend," "could," "would," "estimate," or "continue" or the negative variations thereof, or comparable terminology, are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. The risks and uncertainties include, without limitation: the regulatory, economic and weather conditions in the states in which we operate; the impact of new federal or state regulations that affect the property and casualty insurance market; the cost, variability and availability of reinsurance; assessments charged by various governmental agencies; pricing competition and other initiatives by competitors; our ability to attract and retain the services of senior management; the outcome of litigation pending against us, including the terms of any settlements; dependence on investment income and the composition of our investment portfolio and related market risks; our exposure to catastrophic events and severe weather conditions; downgrades in our financial strength ratings; risks and uncertainties relating to our acquisitions including our ability to successfully integrate the acquired companies; and other risks and uncertainties described in the section entitled "Risk Factors" and elsewhere in our filings with the Securities and Exchange Commission (the "SEC"), including our Annual Report in Form 10-K for the year ended December 31, 2019 and Form 10-Q for the periods ending March 31, 2020, June 30, 2020 and September 30, 2020. We caution you not to place undue reliance on these forward looking statements, which are valid only as of the date they were made. Except as may be required by applicable law, we undertake no obligation to update or revise any forward-looking statements to reflect new information, the occurrence of unanticipated events, or otherwise. This presentation contains certain non-GAAP financial measures. See the Appendix section of this presentation for further information regarding these non-GAAP financial measures. The information in this presentation is confidential. Any photocopying, disclosure, reproduction or alteration of the contents of this presentation and any forwarding of a copy of this presentation or any portion of this presentation to any person is prohibited. 13

 

 
v3.20.2
Cover Page Document
Nov. 05, 2020
Aug. 05, 2020
Document Information [Line Items]    
Amendment Flag false  
Document Type 8-K  
Document Period End Date Nov. 05, 2020  
Written Communications false  
Soliciting Material false  
Pre-commencement Tender Offer false  
Pre-commencement Issuer Tender Offer false  
Entity Emerging Growth Company false  
Title of 12(b) Security   Common stock, $0.0001 par value per share
Entity Registrant Name UNITED INSURANCE HOLDINGS CORP.  
Entity Incorporation, State or Country Code DE  
Entity File Number 001-35761  
Entity Tax Identification Number 75-3241967  
Entity Address, Address Line One 800 2nd Avenue S.  
Entity Address, Postal Zip Code 33701  
Entity Address, City or Town Saint Petersburg,  
Entity Address, State or Province FL  
City Area Code (727)  
Local Phone Number 895-7737  
Trading Symbol   UIHC
Security Exchange Name   NASDAQ
Entity Central Index Key 0001401521