The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and related notes appearing elsewhere in this Form 10-Q, as well as with the Consolidated Financial Statements and related footnotes under Part II. Item 8 of our Annual Report on Form 10-K for the year endedDecember 31, 2020 . This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed or implied in these forward-looking statements as a result of certain known and unknown risks and uncertainties. See "Forward-Looking Statements." EXECUTIVE SUMMARY OverviewUnited Insurance Holdings Corp. (referred to in this document as we, our, us, the Company orUPC Insurance ) is a holding company primarily engaged in personal residential and commercial residential property and casualty insurance inthe United States . We conduct our business principally through four wholly-owned insurance subsidiaries and one majority-owned insurance subsidiary:United Property & Casualty Insurance Company (UPC);American Coastal Insurance Company (ACIC);Family Security Insurance Company, Inc. (FSIC);Interboro Insurance Company (IIC); andJourney Insurance Company (JIC). Collectively, we refer to the holding company and all our subsidiaries, including non-insurance subsidiaries, as "UPC Insurance ," which is the preferred brand identification for our Company. Our Company's primary source of revenue is generated from writing insurance inConnecticut ,Florida ,Georgia ,Louisiana ,Massachusetts ,New Jersey , NewYork, North Carolina ,Rhode Island ,South Carolina andTexas . EffectiveJanuary 1, 2021 , we no longer write in the state ofHawaii . We are also licensed to write property and casualty insurance in an additional six states; however, we have not commenced writing in these states. Our target market in such areas consists of states where the perceived threat of natural catastrophe has caused large national insurance carriers to reduce their concentration of policies. We believe an opportunity exists forUPC Insurance to write profitable business in such areas. Our Company, together with our wholly-owned subsidiaries UPC and UIM, entered into a Renewal Rights Agreement, dated as ofJanuary 18, 2021 withHCP and HCI Group, Inc. (HCI), pursuant to which our Company, UPC and UIM agreed to sell, and HPC agreed to purchase, the renewal rights to UPC's personal lines homeowners business inConnecticut ,Massachusetts ,New Jersey andRhode Island . The transfer of policies is subject to regulatory approval. The sale was also consummated onJanuary 18, 2021 . As part of the sale of the renewal rights, HCI issued to UPC 100,000 shares of HCI common stock, no par value, which are subject to a six-month contractual lock-up period. The fair value of these shares is approximately$8,949,000 atJune 30, 2021 . We have historically grown our business through strong organic growth complemented by strategic acquisitions and partnerships, including our acquisitions ofAmCo Holding Company, LLC (AmCo ) and its subsidiaries, including ACIC, inApril 2017 , IIC inApril 2016 , andFamily Security Holdings, LLC (FSH), including its subsidiary FSIC, inFebruary 2015 , and our strategic partnership with a subsidiary ofTokio Marine Kiln Group Limited , which formed JIC inAugust 2018 . As a result of underwriting actions implemented during the fourth quarter of 2020, our policies in-force decreased by 9.8% from 630,542 policies in-force atJune 30, 2020 to 568,732 policies in-force atJune 30, 2021 . The following discussion highlights significant factors influencing the consolidated financial position and results of operations ofUPC Insurance . In evaluating our results of operations, we use premiums written and earned, policies in-force and new and renewal policies by geographic concentration. We also consider the impact of catastrophe losses and prior year development on our loss ratios, expense ratios and combined ratios. In monitoring our investments, we use credit quality, investment income, cash flows, realized gains and losses, unrealized gains and losses, asset diversification and portfolio duration. To evaluate our financial condition, we consider our liquidity, financial strength, ratings, book value per share and return on equity. 30
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UNITED INSURANCE HOLDINGS CORP. Impact of COVID-19 We are committed to maintaining a stable and secure business for our employees, agents, customers and stockholders. During the second half of 2020, we were able to resume hiring activities, despite the limits on in-person interviews and on-boarding procedures resulting from COVID-related protocols. In addition, we have converted to virtual sales processes to enable our agents to continue their activities. We believe these activities, collectively, help ensure the health and safety of our employees through adherence to CDC, state and local government work guidelines. We have not experienced a material impact from COVID-19 on our business operations, financial position, liquidity or our ability to service our policyholders to date, with the exception of fluctuations in our investment portfolios due to volatility of the equity securities markets, as further described in this Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-Q. The COVID-19 pandemic and resulting global disruptions did not have a material impact on our access to credit and capital markets needed to maintain sufficient liquidity for our continued operating needs during the quarter endedJune 30, 2021 . We did not incur material claims or significant disruptions to our business for the three and six-months endedJune 30, 2021 . At this time, it is not possible to reasonably estimate the extent of the impact of the economic uncertainties on our business, results of operations and financial condition in future periods, due to uncertainty regarding the duration of the COVID-19 pandemic, but we will continue to respond to the COVID-19 pandemic and take reasonable measures to make sure customers continue to be served without interruption. 2021 Highlights Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Gross premiums written$ 426,424 $ 439,651 $ 738,062 $ 774,834 Gross premiums earned 356,433 344,139 713,096 688,758 Net premiums earned 145,460 185,482 291,409 377,078 Total revenues 155,454 216,397 317,243 392,701 Income (loss) before income tax (32,773) 29,482
(59,055) 13,678
Consolidated net income (loss)
attributable to UIHC (23,510) 24,274
(41,281) 11,551
Net income (loss) available to
UIHC stockholders per diluted
share$ (0.55) $ 0.56 $
(0.96)
Reconciliation of net income
(loss) to core income (loss):
Plus: Non-cash amortization of
intangible assets $ 889$ 1,044 $
1,932
Less: Realized gains (losses)
on investment portfolio (124) 59 379 (9)
Less: Unrealized gains (losses)
on equity securities 2,438 20,552 5,002 (5,904) Less: Net tax impact (1) (299) (4,109) (724) 1,700 Core income (loss) (2) (24,636) 8,816 (44,006) 17,945
Core income (loss) per diluted
share(2)$ (0.57) $ 0.20 $ (1.03) $ 0.42 Book value per share $ 7.85$ 12.27 (1) In order to reconcile the net income (loss) to the core income (loss) measure, we included the tax impact of all adjustments using the 21% corporate federal tax rate. (2) Core income (loss), a measure that is not based onU.S. generally accepted accounting principles (GAAP), is reconciled above to net income (loss), the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this Form 10-Q is in "Definitions of Non-GAAP Measures" below. 31
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