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UNITED INSURANCE : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/07/2021 | 04:13pm EDT
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
ended December 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."



  United Insurance Holdings Corp. (referred to in this document as we, our, us,
the Company or UPC Insurance) is a holding company primarily engaged in
residential personal and commercial property and casualty insurance in the
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); and Journey 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 in
Connecticut, Florida, Georgia,
Louisiana, Massachusetts, New Jersey, New York, North Carolina, Rhode Island,
South Carolina and Texas. Effective January 1, 2021, we no longer write in the
state of Hawaii. 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 for UPC
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 of January 18, 2021 with HCP 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 in Connecticut, Massachusetts, New Jersey and Rhode Island.
The transfer of policies is subject to regulatory approval. The sale was also
consummated on January 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 $6,914,000 at March 31, 2021.

We have historically grown our business through strong organic growth
complemented by strategic acquisitions and partnerships, including our
acquisitions of AmCo Holding Company, LLC (AmCo) and its subsidiaries, including
ACIC, in April 2017, IIC in April 2016, and Family Security Holdings, LLC (FSH),
including its subsidiary FSIC, in February 2015, and our strategic partnership
with a subsidiary of Tokio Marine Kiln Group Limited, which formed JIC in August
2018. As a result of underwriting actions implemented during the fourth quarter
of 2020, our policies in-force decreased by 3.6% from 628,355 policies in-force
at March 31, 2020 to 605,753 policies in-force at March 31, 2021.

The following discussion highlights significant factors influencing the
consolidated financial position and results of
operations of UPC 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.

                        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 ended March 31, 2021.

We did not incur material claims or significant disruptions to our business for
the three-months ended March 31, 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 March 31,
                                                                               2021           2020

 Gross premiums written                                                     $ 311,638      $ 335,183
 Gross premiums earned                                                        356,663        344,619
 Net premiums earned                                                          145,949        191,596
 Total revenues                                                               161,789        176,304
 Earnings before income tax                                                   (26,282)       (15,804)
 Consolidated net loss attributable to UIHC                                 

(17,771) (12,723)

Net loss available to UIHC stockholders per diluted


$ (0.41) $ (0.30)

Reconciliation of net loss to core income (loss):

 Plus: Non-cash amortization of intangible assets                           

$ 1,043 $ 1,137

Less: Realized gains (losses) on investment

 portfolio                                                                        503            (68)

Less: Unrealized gains (losses) on equity

 securities                                                                     2,564        (26,456)
 Less: Net tax impact (1)                                                        (425)         5,809
 Core income (loss) (2)                                                       (19,370)         9,129
 Core income (loss) per diluted share(2)                                    $   (0.45)     $    0.21

 Book value per share                                                       $    8.32      $   11.30

(1) In order to reconcile the net loss to the core income (loss) measure, we
included the tax impact of all adjustments using the 21% corporate federal tax
(2) Core income (loss), a measure that is not based on U.S. generally accepted
accounting principles (GAAP), is reconciled above to net 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"



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