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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________
FORM 10-Q
________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 001-33251
________________________________________________________

UVE-20210630_G1.JPG
UNIVERSAL INSURANCE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
________________________________________________________
Delaware 65-0231984
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
1110 W. Commercial Blvd., Fort Lauderdale, Florida 33309
(Address of principal executive offices) (Zip Code)
(954) 958-1200
(Registrant’s telephone number, including area code)
________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 Par Value UVE New York Stock Exchange
    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   

    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No   

    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”


“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer  
Smaller reporting company
Emerging growth company
                
    If an emerging growth company, indicate by check mark if the registrant has elected not 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.

    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)      Yes      No  

    Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 31,269,070 shares of common stock, par value $0.01 per share, outstanding on July 26, 2021.




UNIVERSAL INSURANCE HOLDINGS, INC.
TABLE OF CONTENTS
Page No.
4
4
5
5
6
8
9

2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of
Universal Insurance Holdings, Inc.
Fort Lauderdale, Florida

RESULTS OF REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


We have reviewed the accompanying condensed consolidated balance sheet of Universal Insurance Holdings, Inc. and its wholly-owned subsidiaries (the “Company”) as of June 30, 2021 and the related condensed consolidated statements of income, comprehensive income, and stockholders’ equity, for the three-month and six-month periods ended June 30, 2021 and 2020 and the related condensed consolidated statement of cash flows for the six-month periods ended June 30, 2021 and 2020. Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of Universal Insurance Holdings, Inc. as of December 31, 2020 and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended (not presented herein) and we expressed an unqualified audit opinion on those consolidated financial statements in our report dated February 26, 2021. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

BASIS FOR REVIEW RESULTS

These interim financial statements are the responsibility of the Company’s management. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

/s/ Plante & Moran, PLLC
Chicago, Illinois
July 30, 2021

3

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except per share data)
  As of
June 30, December 31,
2021 2020
ASSETS
Available-for-sale debt securities, at fair value, net of allowance for credit loss of $118 and $186 (amortized cost: $929,191 and $815,647)
$ 921,800  $ 819,861 
Equity securities, at fair value (cost: $94,778 and $84,667)
95,690  84,887 
Assets held for sale 7,053  — 
Investment real estate, net 5,981  15,176 
Total invested assets 1,030,524  919,924 
Cash and cash equivalents 286,493  167,156 
Restricted cash and cash equivalents 6,134  12,715 
Prepaid reinsurance premiums 532,308  215,723 
Reinsurance recoverable 196,294  160,417 
Premiums receivable, net 74,072  66,883 
Property and equipment, net 53,023  53,572 
Deferred policy acquisition costs 115,971  110,614 
Income taxes recoverable 24,733  30,576 
Deferred income tax asset, net —  6,284 
Other assets 21,983  14,877 
Total assets $ 2,341,535  $ 1,758,741 
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Unpaid losses and loss adjustment expenses $ 278,658  $ 322,465 
Unearned premiums 853,896  783,135 
Advance premium 68,287  49,562 
Book overdraft —  59,399 
Reinsurance payable, net 581,818  10,312 
Commission payable 28,710  23,809 
Deferred income tax liability, net 4,494  — 
Other liabilities and accrued expenses 37,109  52,341 
Long-term debt 7,721  8,456 
Total liabilities 1,860,693  1,309,479 
Commitments and Contingencies (Note 12)
STOCKHOLDERS’ EQUITY:
Cumulative convertible preferred stock, $0.01 par value
—  — 
Authorized shares - 1,000
Issued shares - 10 and 10
Outstanding shares - 10 and 10
Minimum liquidation preference, $9.99 and $9.99 per share
Common stock, $0.01 par value
470  468 
Authorized shares - 55,000
Issued shares - 46,964 and 46,817
Outstanding shares - 31,269 and 31,137
Treasury shares, at cost - 15,695 and 15,680
(225,751) (225,506)
Additional paid-in capital 105,904  103,445 
Accumulated other comprehensive income (loss), net of taxes (5,571) 3,343 
Retained earnings 605,790  567,512 
Total stockholders’ equity 480,842  449,262 
Total liabilities and stockholders’ equity $ 2,341,535  $ 1,758,741 

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
4

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(in thousands, except per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2021 2020 2021 2020
PREMIUMS EARNED AND OTHER REVENUES
Direct premiums written $ 473,627  $ 404,685  $ 838,941  $ 739,238 
Change in unearned premium (81,053) (67,046) (70,761) (75,648)
Direct premium earned 392,574  337,639  768,180  663,590 
Ceded premium earned (136,402) (111,269) (268,703) (216,391)
Premiums earned, net 256,172  226,370  499,477  447,199 
Net investment income 2,858  6,179  5,844  13,013 
Net realized gains (losses) on investments 496  168  1,038  467 
Net change in unrealized gains (losses) of equity securities 1,229  3,871  735  (4,153)
Commission revenue 9,860  7,758  18,986  14,773 
Policy fees 6,575  6,546  11,962  12,086 
Other revenue 1,991  1,812  3,896  4,594 
Total premiums earned and other revenues 279,181  252,704  541,938  487,979 
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses 167,221  151,345  311,184  286,393 
General and administrative expenses 81,901  73,921  164,344  146,564 
Total operating costs and expenses 249,122  225,266  475,528  432,957 
INCOME BEFORE INCOME TAXES 30,059  27,438  66,410  55,022 
Income tax expense 8,118  7,556  18,061  15,073 
NET INCOME $ 21,941  $ 19,882  $ 48,349  $ 39,949 
Basic earnings per common share $ 0.70  $ 0.62  $ 1.55  $ 1.23 
Weighted average common shares outstanding - Basic 31,240  32,102  31,224  32,347 
Diluted earnings per common share $ 0.70  $ 0.62  $ 1.54  $ 1.23 
Weighted average common shares outstanding - Diluted 31,310  32,170  31,292  32,440 
Cash dividend declared per common share $ 0.16  $ 0.16  $ 0.32  $ 0.32 


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2021 2020 2021 2020
Net income $ 21,941  $ 19,882  $ 48,349  $ 39,949 
Other comprehensive income (loss), net of taxes 7,996  26,068  (8,914) 17,122 
Comprehensive income (loss) $ 29,937  $ 45,950  $ 39,435  $ 57,071 
The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
5

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED June 30, 2021 AND 2020 (unaudited)
(in thousands, except per share data)  

Treasury Shares Common
Shares
Issued
Preferred
Shares
Issued
Common
Stock
Amount
Preferred
Stock
Amount
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Shares,
at Cost
Total
Stockholders’
Equity
Balance, December 31, 2020 (15,680) 46,817  10  $ 468  $ —  $ 103,445  $ 567,512  $ 3,343  $ (225,506) $ 449,262 
Vesting of performance share units (16)
(1)
62  —  —  —  —  —  —  (241) (241)
Vesting of restricted stock units (17)
(1)
65  —  —  (1) —  —  (254) (254)
Retirement of treasury shares 33 
(1)
(33) —  —  —  (495) —  —  495  — 
Purchases of treasury stock (15) —  —  —  —  —  —  —  (245) (245)
Share-based compensation —  —  —  —  —  1,675  —  —  —  1,675 
Net income —  —  —  —  —  —  26,408  —  —  26,408 
Other comprehensive loss, net of taxes —  —  —  —  —  —  —  (16,910) —  (16,910)
Declaration of dividends
($0.16 per common share and
$0.25 per preferred share)
—  —  —  —  —  —  (5,030) —  —  (5,030)
Balance, March 31, 2021 (15,695) 46,911  10  469  —  104,624  588,890  (13,567) (225,751) 454,665 
Vesting of restricted stock units (20)
(1)
73  —  —  (1) —  —  (288) (288)
Retirement of treasury shares 20 
(1)
(20) —  —  —  (288) —  —  288  — 
Share-based compensation —  —  —  —  —  1,569  —  —  —  1,569 
Net income —  —  —  —  —  —  21,941  —  —  21,941 
Other comprehensive income, net of taxes —  —  —  —  —  —  —  7,996  —  7,996 
Declaration of dividends
($0.16 per common share and
$0.25 per preferred share)
—  —  —  —  —  —  (5,041) —  —  (5,041)
Balance, June 30, 2021 (15,695) 46,964  10  $ 470  $ —  $ 105,904  $ 605,790  $ (5,571) $ (225,751) $ 480,842 
(1)  All shares acquired represent shares tendered to cover the strike price for options and tax withholdings on the intrinsic value of options exercised, restricted stock vested, performance share units vested, or restricted stock units vested. These shares have been cancelled by the Company.

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
6

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)
(in thousands, except per share data)  

Treasury Shares Common
Shares
Issued
Preferred
Shares
Issued
Common
Stock
Amount
Preferred
Stock
Amount
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Shares,
 at Cost
Total
Stockholders’
Equity
Balance, December 31, 2019 (14,069) 46,707  10  $ 467  $ —  $ 96,036  $ 573,619  $ 20,364  $ (196,585) $ 493,901 
Cumulative effect of change in accounting principle
 (ASU 2016-13)
—  —  —  —  —  (597) 597  —  — 
Balance, January 1, 2020 (14,069) 46,707  10  $ 467  $ —  $ 96,036  $ 573,022  $ 20,961  $ (196,585) $ 493,901 
Vesting of performance share units (25)
(1)
83  —  —  (1) —  —  (646) (646)
Grant and issue of stock award — 
(1)
—  —  —  30  —  —  —  30 
Retirement of treasury shares 25 
(1)
(25) —  —  —  (646) —  —  646  — 
Purchases of treasury stock (312) —  —  —  —  —  —  —  (6,587) (6,587)
Share-based compensation —  —  —  —  —  1,691  —  —  —  1,691 
Net income —  —  —  —  —  —  20,067  —  —  20,067 
Other comprehensive loss, net of taxes —  —  —  —  —  —  —  (8,946) —  (8,946)
Declaration of dividends
($0.16 per common share and
$0.25 per preferred share)
—  —  —  —  —  —  (5,222) —  —  (5,222)
Balance, March 31, 2020 (14,381) 46,766  10  468  —  97,110  587,867  12,015  (203,172) 494,288 
Vesting of restricted stock units (25)
(1)
65  —  —  —  —  —  —  (424) (424)
Retirement of treasury shares 25 
(1)
(25) —  —  —  (424) —  —  424  — 
Purchases of treasury stock (572) —  —  —  —  —  —  —  (10,029) (10,029)
Share-based compensation —  —  —  —  —  3,082  —  —  —  3,082 
Net income —  —  —  —  —  —  19,882  —  —  19,882 
Other comprehensive income, net of taxes —  —  —  —  —  —  —  26,068  —  26,068 
Declaration of dividends
($0.16 per common share and
$0.25 per preferred share)
—  —  —  —  —  —  (5,166) —  —  (5,166)
Balance, June 30, 2020 (14,953) 46,806  10  $ 468  $ —  $ 99,768  $ 602,583  $ 38,083  $ (213,201) $ 527,701 
(1)
All shares acquired represent shares tendered to cover the strike price for options and tax withholdings on the intrinsic value of options exercised, restricted stock vested, performance share units vested, or restricted stock units vested. These shares have been cancelled by the Company.

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
7

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
Six Months Ended
June 30,
2021 2020
Cash flows from operating activities:
Net cash provided by operating activities $ 257,120  $ 190,847 
Cash flows from investing activities:
Proceeds from sale of property and equipment 28  22 
Purchases of property and equipment (3,024) (10,213)
Purchases of equity securities (14,192) (10,145)
Purchases of available-for-sale debt securities (237,353) (91,445)
Proceeds from sales of equity securities 5,165  — 
Proceeds from sales of available-for-sale debt securities 60,978  28,468 
Proceeds from sales of investment real estate 2,591  — 
Maturities of available-for-sale debt securities 53,313  71,214 
Net cash provided by (used in) investing activities (132,494) (12,099)
Cash flows from financing activities:
Preferred stock dividend (5) (5)
Common stock dividend (10,101) (10,405)
Purchase of treasury stock (245) (16,616)
Payments related to tax withholding for share-based compensation (784) (1,070)
Repayment of debt (735) (735)
Net cash provided by (used in) financing activities (11,870) (28,831)
Cash and cash equivalents, and restricted cash and cash equivalents:
Net increase (decrease) during the period 112,756  149,917 
Balance, beginning of period 179,871  184,744 
Balance, end of period $ 292,627  $ 334,661 

The following table summarizes our cash and cash equivalents and restricted cash and cash equivalents within the Condensed Consolidated Balance Sheets (in thousands):
  June 30, December 31,
2021 2020
Cash and cash equivalents $ 286,493  $ 167,156 
Restricted cash and cash equivalents (1) 6,134  12,715 
Total cash and cash equivalents and restricted cash and cash equivalents $ 292,627  $ 179,871 
(1)See “—Note 5 (Insurance Operations)” for a discussion of the nature of the restrictions for restricted cash and cash equivalents and “—Note 14 (Variable Interest Entities)” for a discussion of restricted cash held in a trust account.




The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
8

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Nature of Operations and Basis of Presentation
Nature of Operations
Universal Insurance Holdings, Inc. (“UVE”, and together with its wholly-owned subsidiaries, “the Company”) is a Delaware corporation incorporated in 1990. The Company is a vertically integrated insurance holding company performing all aspects of insurance underwriting, distribution and claims. Through its wholly-owned insurance company subsidiaries, Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC”, and together with UPCIC, the “Insurance Entities”), the Company is principally engaged in the property and casualty insurance business offered primarily through its network of independent agents. Risk from catastrophic losses is managed through the use of reinsurance agreements. The Company’s primary product is residential homeowners’ insurance offered in 19 states as of June 30, 2021, including Florida, which comprises the majority of the Company’s policies in force. See “—Note 5 (Insurance Operations)” for more information regarding the Company’s insurance operations.
The Company generates revenues primarily from the collection of premiums and investment returns on funds invested on cash flows in excess of those retained and used for claims-paying obligations and insurance operations. Other significant sources of revenue include brokerage commissions collected from reinsurers on certain reinsurance programs placed on behalf of the Insurance Entities, policy fees collected from policyholders by the Company’s wholly-owned managing general agent subsidiary and payment plan fees charged to policyholders who choose to pay their premiums in installments. The Company’s wholly-owned adjusting company receives claims-handling fees from the Insurance Entities. The Insurance Entities are reimbursed for these fees on claims that are subject to recovery under the Insurance Entities’ respective reinsurance programs. These fees, after expenses, are recorded in the Condensed Consolidated Financial Statements as an adjustment to losses and loss adjustment expense (“LAE”).
Basis of Presentation
The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, the Financial Statements do not include all of the information and footnotes required by United States Generally Accepted Accounting Principles (“U.S. GAAP”) for annual financial statements. Therefore, the Financial Statements should be read in conjunction with the audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 26, 2021. The Condensed Consolidated Balance Sheet at December 31, 2020 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included in the Financial Statements. The results for interim periods do not necessarily indicate the results that may be expected for any other interim period or for the full year.
To conform to the current period presentation, certain amounts in the prior periods’ condensed consolidated financial statements and notes have been reclassified. Such reclassifications were of an immaterial amount and had no effect on net income or stockholders’ equity.
The Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, as well as variable interest entities (“VIE”) in which the Company is determined to be the primary beneficiary. All material intercompany balances and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company’s primary use of estimates is in the recognition of liabilities for unpaid losses, loss adjustment expenses, subrogation recoveries and reinsurance recoveries. Actual results could differ from those estimates.

9

2. Significant Accounting Policies
The Company reported Significant Accounting Policies in its Annual Report on Form 10-K for the year ended December 31, 2020. The following are new or revised disclosures or disclosures required on a quarterly basis.
Accounting Policies

Assets Held for Sale. The Company considers properties, including land, to be assets held for sale when (1) management commits to a plan to sell the property; (2) it is unlikely that the disposal plan will be significantly modified or discontinued; (3) the property is available for immediate sale in its present condition; (4) actions required to complete the sale of the property have been initiated; (5) sale of the property is probable and the Company expects the completed sale will occur within one year; and (6) the property is actively being marketed for sale at a price that is reasonable given our estimate of current market value. Upon designation of a property as an asset held for sale, we record the property’s value at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and the Company ceases depreciation. Assets held for sale are stated separately in the accompanying Condensed Consolidated Balance Sheets.



10

3. Investments
Available-for-Sale Securities
The following table provides the amortized cost and fair value of available-for-sale debt securities as of the dates presented (in thousands):
June 30, 2021
Amortized
Cost
Allowance for Expected Credit Losses Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Debt Securities:
  U.S. government obligations and agencies $ 37,323  $ —  $ 110  $ (279) $ 37,154 
  Corporate bonds 547,259  (89) 2,040  (5,944) 543,266 
  Mortgage-backed and asset-backed securities 321,322  —  656  (3,887) 318,091 
  Municipal bonds 14,925  (1) 12  (175) 14,761 
  Redeemable preferred stock 8,362  (28) 195  (1) 8,528 
Total $ 929,191  $ (118) $ 3,013  $ (10,286) $ 921,800 

December 31, 2020
Amortized
Cost
Allowance for Expected Credit Losses Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Debt Securities:
  U.S. government obligations and agencies $ 59,529  $ —  $ 157  $ (55) $ 59,631 
  Corporate bonds 416,758  (148) 3,571  (337) 419,844 
  Mortgage-backed and asset-backed securities 319,377  —  1,175  (615) 319,937 
  Municipal bonds 11,990  —  138  —  12,128 
  Redeemable preferred stock 7,993  (38) 424  (58) 8,321 
Total $ 815,647  $ (186) $ 5,465  $ (1,065) $ 819,861 

The following table provides the credit quality of available-for-sale debt securities as of the dates presented (dollars in thousands):
June 30, 2021 December 31, 2020
Equivalent S&P Credit Ratings Fair Value % of Total
 Fair Value
Fair Value % of Total
 Fair Value
AAA $ 316,826  34.4  % $ 337,462  41.2  %
AA 130,445  14.1  % 89,681  10.9  %
A 275,345  29.9  % 230,290  28.1  %
BBB 197,939  21.5  % 160,662  19.6  %
BB and Below —  —  % 233  —  %
No Rating Available 1,245  0.1  % 1,533  0.2  %
   Total $ 921,800  100.0  % $ 819,861  100.0  %

The table above includes credit quality ratings by Standard and Poor’s Rating Services, Inc. (“S&P”), Moody’s Investors Service, Inc. and Fitch Ratings, Inc. The Company has presented the highest rating of the three rating agencies for each investment position.
11

The following table summarizes the amortized cost and fair value of mortgage-backed and asset-backed securities as of the dates presented (in thousands):
June 30, 2021 December 31, 2020
Amortized
Cost
Fair Value Amortized
Cost
Fair Value
Mortgage-backed Securities:
Agency $ 153,303  $ 150,677  $ 153,937  $ 153,758 
Non-agency 58,051  57,250  54,231  54,666 
Asset-backed Securities:
Auto loan receivables 67,907  67,984  68,188  68,440 
Credit card receivables 4,771  4,771  7,878  7,891 
Other receivables 37,290  37,409  35,143  35,182 
Total $ 321,322  $ 318,091  $ 319,377  $ 319,937 
The following tables summarize available-for-sale debt securities, aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position, for which no allowance for expected credit losses has been recorded as of the dates presented (in thousands):
June 30, 2021
Less Than 12 Months 12 Months or Longer
Number of
Issues
Fair Value Unrealized
Losses
Number of
Issues
Fair Value Unrealized
Losses
Debt Securities:
U.S. government obligations and agencies $ 34,227  $ (279) —  $ —  $ — 
Corporate bonds 178  255,550  (3,967) 1,099  (2)
Mortgage-backed and asset-backed securities 102  228,270  (3,885) 415  (2)
Municipal bonds 8,929  (152) —  —  — 
Redeemable preferred stock —  —  —  —  —  — 
Total 292  $ 526,976  $ (8,283) $ 1,514  $ (4)

December 31, 2020
Less Than 12 Months 12 Months or Longer
Number of
Issues
Fair Value Unrealized
Losses
Number of
Issues
Fair Value Unrealized
Losses
Debt Securities:
U.S. government obligations and agencies $ 31,729  $ (55) —  $ —  $ — 
Corporate bonds 27  28,791  (162) —  —  — 
Mortgage-backed and asset-backed securities 42  112,462  (615) —  —  — 
Municipal bonds —  —  —  —  —  — 
Redeemable preferred stock 688  (12) —  —  — 
Total 79  $ 173,670  $ (844) —  $ —  $ — 

Unrealized losses on available-for-sale debt securities in the above table as of June 30, 2021 have not been recognized into income as credit losses because the issuers are of high credit quality (investment grade securities), management does not intend to sell and it is likely management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. There were no material factors impacting any one category or specific security requiring an accrual for credit loss. The issuers continue to make principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.

12


The following table presents a reconciliation of the beginning and ending balances for expected credit losses on available-for-sale debt securities (in thousands):
Corporate Bonds Municipal Bonds Redeemable
 Preferred Stock
Total
Balance, December 31, 2019 $ —  $ —  $ —  $ — 
Cumulative effect adjustment as of January 1, 2020 665  —  126  791 
Increase (decrease) (517) —  (88) (605)
Balance, December 31, 2020 148  —  38  186 
Increase (decrease) (59) (10) (68)
Balance, June 30, 2021 $ 89  $ $ 28  $ 118 

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by rating agencies, market sentiment and trends and adverse conditions specifically related to the security, among other quantitative and qualitative factors utilized for establishing an estimate for credit losses. If the assessment indicates that a credit loss exists, the present values of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes an available-for-sale debt security is confirmed as uncollected or when either of the criteria regarding intent or requirement to sell is met.
The following table presents the amortized cost and fair value of investments with maturities as of the date presented (in thousands):
June 30, 2021
Amortized Cost Fair Value
Due in one year or less $ 13,195  $ 13,319 
Due after one year through five years 539,113  537,491 
Due after five years through ten years 353,906  347,811 
Due after ten years 22,812  22,967 
Perpetual maturity securities 165  212 
Total $ 929,191  $ 921,800 

All securities, except those with perpetual maturities, were categorized in the table above utilizing years to effective maturity. Effective maturity takes into consideration all forms of potential prepayment, such as call features or prepayment schedules, that shorten the lifespan of contractual maturity dates.
13

The following table provides certain information related to available-for-sale debt securities, equity securities and investment in real estate during the periods presented (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2021 2020 2021 2020
Proceeds from sales and maturities (fair value):
  Available-for-sale debt securities $ 61,658  $ 57,169  $ 114,291  $ 99,682 
  Equity securities $ 3,589  $ —  $ 5,165  $ — 
Gross realized gains on sale of securities:
  Available-for-sale debt securities $ 895  $ 540  $ 1,017  $ 886 
  Equity securities $ 741  $ —  $ 1,084  $ — 
Gross realized losses on sale of securities:
  Available-for-sale debt securities $ (1,140) $ (372) $ (1,464) $ (419)
  Equity securities $ —  $ —  $ —  $ — 
Realized gains on sales of investment real estate $ —  $ —  $ 401  $ — 
The following table presents the components of net investment income, comprised primarily of interest and dividends, for the periods presented (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2021 2020 2021 2020
Available-for-sale debt securities $ 2,765  $ 6,016  $ 5,594  $ 12,031 
Equity securities 652  604  1,243  1,149 
Cash and cash equivalents (1) 15  95  26  886 
Other (2) 267  260  535  514 
  Total investment income 3,699  6,975  7,398  14,580 
Less: Investment expenses (3) (841) (796) (1,554) (1,567)
  Net investment income $ 2,858  $ 6,179  $ 5,844  $ 13,013 
(1)
Includes interest earned on restricted cash and cash equivalents.
(2)
Includes investment income earned on real estate investments.
(3)
Includes custodial fees, investment accounting and advisory fees, and expenses associated with real estate investments.

Equity Securities
The following table provides the unrealized gains and losses recognized for the periods presented on equity securities still held at the end of the reported period (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2021 2020 2021 2020
Unrealized gains (losses) recognized during the reported period on equity securities still held at the end of the reported period $ 1,546  $ 3,871  $ 1,027  $ (4,154)

Assets Held for Sale
The Company has committed to a plan of sale for various real estate properties previously included in Investment Real Estate. The real estate properties are located in Florida. Proceeds from the sale are expected to exceed the properties’ carrying value of $7.1 million and, accordingly, no impairment loss was recognized on the classification of this real estate property as held for sale.

14


Investment Real Estate
Investment real estate consisted of the following as of the dates presented (in thousands):
June 30, December 31,
2021 2020
Income Producing:
Investment real estate $ 7,087  $ 14,685 
Less: Accumulated depreciation (1,106) (1,699)
5,981  12,986 
Non-Income Producing:    
Investment real estate —  2,190 
Investment real estate, net $ 5,981  $ 15,176 
During the first quarter of 2021, the Company completed the sale of an investment real estate property. The Company received net cash proceeds of approximately $2.6 million and recognized a pre-tax gain of approximately $0.4 million that is included in net realized gains (losses) on investments in the Condensed Consolidated Statements of Income for the six months ended June 30, 2021.
Depreciation expense related to investment real estate for the periods presented (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
  2021 2020 2021 2020
Depreciation expense on investment real estate $ 46  $ 104  $ 92  $ 208 

15

4. Reinsurance
The Company seeks to reduce its risk of loss by reinsuring certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers, generally as of the beginning of the hurricane season on June 1st of each year. The Company’s current reinsurance programs consist principally of catastrophe excess of loss reinsurance, subject to the terms and conditions of the applicable agreements. Notwithstanding the purchase of such reinsurance, the Company is responsible for certain retained loss amounts before reinsurance attaches and for insured losses related to catastrophes and other events that exceed coverage provided by the reinsurance programs. The Company remains responsible for the settlement of insured losses irrespective of whether any of the reinsurers fail to make payments otherwise due.
Amounts recoverable from reinsurers are estimated in a manner consistent with the provisions of the reinsurance contracts and consistent with the establishment of the gross liability for losses, LAE and other expenses. Reinsurance premiums, losses and LAE are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts.
To reduce credit risk for amounts due from reinsurers, the Insurance Entities seek to do business with financially sound reinsurance companies and regularly evaluate the financial strength of all reinsurers used.
The following table presents ratings from rating agencies and the unsecured amounts due from the reinsurers whose aggregate balance exceeded 3% of the Company’s stockholders’ equity as of the dates presented (in thousands):
  Ratings as of June 30, 2021 Due from as of
Reinsurer AM Best
Company
Standard
and Poor’s
Rating
Services, Inc.
Moody’s
Investors Service, Inc.
June 30, 2021 December 31, 2020
Florida Hurricane Catastrophe Fund (1) n/a n/a n/a $ 37,341  $ 121,298 
Allianz Risk Transfer (Bermuda) Ltd. A+ AA Aa3 74,204  96,652 
Allianz Risk Transfer —  21,087 
Renaissance Reinsurance Ltd. A+ A+ A1 19,591  18,285 
Total (2) $ 131,136  $ 257,322 
(1)No rating is available because the fund is not rated.
(2)Amounts represent prepaid reinsurance premiums and net recoverables for paid and unpaid losses, including incurred but not reported reserves, and loss adjustment expenses.
The Company’s reinsurance arrangements had the following effect on certain items in the Condensed Consolidated Statements of Income for the periods presented (in thousands):
Three Months Ended June 30,
2021 2020
Premiums
Written
Premiums
Earned
Losses and Loss
Adjustment
Expenses
Premiums
Written
Premiums
Earned
Losses and Loss
Adjustment
Expenses
Direct $ 473,627  $ 392,574  $ 276,302  $ 404,685  $ 337,639  $ 162,446 
Ceded (568,489) (136,402) (109,081) (494,174) (111,269) (11,101)
Net $ (94,862) $ 256,172  $ 167,221  $ (89,489) $ 226,370  $ 151,345 
Six Months Ended June 30,
2021 2020
Premiums
Written
Premiums
Earned
Losses and Loss
Adjustment
Expenses
Premiums
Written
Premiums
Earned
Losses and Loss
Adjustment
Expenses
Direct $ 838,941  $ 768,180  $ 513,600  $ 739,238  $ 663,590  $ 335,689 
Ceded (585,289) (268,703) (202,416) (494,201) (216,391) (49,296)
Net $ 253,652  $ 499,477  $ 311,184  $ 245,037  $ 447,199  $ 286,393 
16

The following prepaid reinsurance premiums and reinsurance recoverable are reflected in the Condensed Consolidated Balance Sheets as of the dates presented (in thousands):
June 30, December 31,
2021 2020
Prepaid reinsurance premiums $ 532,308  $ 215,723 
Reinsurance recoverable on paid losses and LAE $ 83,137  $ 40,895 
Reinsurance recoverable on unpaid losses and LAE 113,157  119,522 
Reinsurance recoverable $ 196,294  $ 160,417 

17

5. Insurance Operations
Deferred Policy Acquisition Costs
The Company defers certain costs in connection with written premium, called Deferred Policy Acquisition Costs (“DPAC”). DPAC is amortized over the effective period of the related insurance policies.
The following table presents the beginning and ending balances and the changes in DPAC for the periods presented (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2021 2020 2021 2020
DPAC, beginning of period $ 111,193  $ 94,354  $ 110,614  $ 91,882 
Capitalized Costs 61,220  57,465  115,942  105,973 
Amortization of DPAC (56,442) (48,292) (110,585) (94,328)
DPAC, end of period $ 115,971  $ 103,527  $ 115,971  $ 103,527 
Regulatory Requirements and Restrictions
The Insurance Entities are subject to regulations and standards of the Florida Office of Insurance Regulation (“FLOIR”). The Insurance Entities are also subject to regulations and standards of regulatory authorities in other states where they are licensed, although as Florida-domiciled insurers, their principal regulatory authority is the FLOIR. These standards and regulations require the Insurance Entities to maintain specified levels of statutory capital and restrict the timing and amount of dividends and other distributions that may be paid by the Insurance Entities to the parent company. Except in the case of extraordinary dividends, these standards generally permit dividends to be paid from statutory unassigned surplus of the regulated subsidiary and are limited based on the regulated subsidiary’s level of statutory net income and statutory capital and surplus. The maximum dividend that may be paid by the Insurance Entities to their immediate parent company, Protection Solutions, Inc. (“PSI”, formerly known as Universal Insurance Holding Company of Florida), without prior regulatory approval is limited by the provisions of the Florida Insurance Code. These dividends are referred to as “ordinary dividends.” However, if the dividend, together with other dividends paid within the preceding twelve months, exceeds this statutory limit or is paid from sources other than earned surplus, the entire dividend is generally considered an “extraordinary dividend” and must receive prior regulatory approval.
In accordance with Florida Insurance Code, and based on the calculations performed by the Company as of December 31, 2020, UPCIC has the capacity to pay ordinary dividends of $2.1 million during 2021. APPCIC, based on its accumulated earnings as of December 31, 2020, is unable to pay any ordinary dividends during 2021. For the three and six months ended June 30, 2021 and 2020, no dividends were paid from the Insurance Entities to PSI.
The Florida Insurance Code requires an insurance company to maintain capitalization equivalent to the greater of ten percent of the insurer’s total liabilities or $10.0 million as of June 30, 2021. The following table presents the amount of capital and surplus calculated in accordance with statutory accounting principles, which differ from U.S. GAAP, and an amount representing ten percent of total liabilities for the Insurance Entities as of the dates presented (in thousands):
June 30, 2021 December 31, 2020
Statutory capital and surplus
  UPCIC (1) $ 347,674  $ 360,707 
  APPCIC $ 16,505  $ 12,918 
Ten percent of total liabilities
  UPCIC $ 131,882  $ 98,682 
  APPCIC $ 879  $ 1,793 
(1)
As of the dates in the table above, statutory capital and surplus for UPCIC includes a $77 million capital contribution funded in February 2021 by UVE through PSI, the Insurance Entities’ parent company, which the FLOIR permitted to be included in the statutory capital and surplus at December 31, 2020 under statutory accounting principles. This contribution was not recognized on a U.S. GAAP basis at December 31, 2020.

As of the dates in the table above, the Insurance Entities each exceeded the minimum statutory capitalization requirement.

The Insurance Entities also met the capitalization requirements of the other states in which they were licensed as of June 30, 2021. The Insurance Entities each are also required to adhere to prescribed premium-to-capital surplus ratios and each have met those requirements at such dates.
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Through PSI, UVE recorded contributions for the periods presented (in thousands):

Three Months Ended
June 30,
Six Months Ended
June 30,
2021 2020 2021 2020
Capital contributions $ —  $ —  $ 77,000  $ 30,000 
The following table summarizes combined net income for the Insurance Entities determined in accordance with statutory accounting practices for the periods presented (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
  2021 2020 2021 2020
Combined net income $ 8,557  $ 7,636  $ 1,180  $ 4,402 
The Insurance Entities are required by various state laws and regulations to maintain certain assets in depository accounts. The following table represents assets held by insurance regulators as of the dates presented (in thousands):
June 30, 2021 December 31, 2020
Restricted cash and cash equivalents $ 2,635  $ 2,635 
Investments $ 3,496  $ 3,550 

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6. Liability for Unpaid Losses and Loss Adjustment Expenses
Set forth in the following table is the change in liability for unpaid losses and LAE for the periods presented (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
  2021 2020 2021 2020
Balance at beginning of period $ 315,780  $ 195,978  $ 322,465  $ 267,760 
Less: Reinsurance recoverable (118,671) (66,158) (119,522) (123,221)
Net balance at beginning of period 197,109  129,820  202,943  144,539 
Incurred related to:    
Current year 159,490  150,867  304,690  281,574 
Prior years 7,731  478  6,494  4,819 
Total incurred 167,221  151,345  311,184  286,393 
Paid related to:    
Current year 151,348  120,724  205,829  182,502 
Prior years 47,481  38,889  142,797  126,878 
Total paid 198,829  159,613  348,626  309,380 
Net balance at end of period 165,501  121,552  165,501  121,552 
Plus: Reinsurance recoverable 113,157  26,107  113,157  26,107 
Balance at end of period $ 278,658  $ 147,659  $ 278,658  $ 147,659 

For the three months ended June 30, 2021, there was adverse prior years’ reserve development of $116.9 million gross, less $109.2 million ceded, resulting in $7.7 million net development. The direct and net prior years’ reserve development for the quarter ended June 30, 2021 was principally due to a direct increase in the ultimate losses for hurricanes of $109.1 million offset by ceded hurricane losses of $109.2 million resulting in net favorable development of $0.1 million. Direct losses increased for Hurricanes Irma, Sally, Michael and Matthew. Ceded losses benefited from changes to estimated non-Florida reinsurance coverage which has a lower attachment point. As a result of ceded losses exceeding direct losses, net losses development on prior hurricanes was favorable during second quarter of 2021. Excluding hurricanes, there was $7.8 million of direct and net prior years’ reserve development for the quarter ended June 30, 2021. This development, from the 2019 and prior accident years, resulted from the settlement on litigated claims exceeding prior estimated amounts.

During the three months ended June 30, 2020, there was adverse prior years’ reserve development of $11.6 million gross, less $11.1 million ceded, resulting in $0.5 million net development. The direct and net prior years’ reserve development for the quarter ended June 30, 2020 was principally due to an increase in ultimate losses and LAE for Hurricane Matthew.

For the six months ended June 30, 2021, there was adverse prior years’ reserve development of $209.0 million gross, less $202.5 million ceded, resulting in $6.5 million net. The direct and net prior year reserve development for the six months ended June 30, 2021 was principally due to a direct increase in the ultimate losses for several hurricanes of $201.2 million offset by ceded hurricane losses of $202.5 million resulting in net favorable development of $1.3 million. Direct losses increased for Hurricanes Irma, Sally, Michael and Matthew. Ceded losses benefited from changes to estimated non-Florida reinsurance coverage which has a lower attachment point. This benefit was offset by increases in previously estimated losses and LAE on Hurricane Irma for claims which are not recoverable from the Florida Hurricane Catastrophe Fund (“FHCF”). Excluding major hurricanes, there was $7.8 million of direct and net prior years’ reserve development for the six months ended June 30, 2021. This development, from the 2019 and prior accident years, resulted from the settlement on litigated claims exceeding prior estimated amounts.

For the six months ended June 30, 2020, there was adverse prior year reserve development of $54.1 million gross, less $49.3 million ceded, resulting in $4.8 million net. The direct and net prior year reserve development for the six months ended June 30, 2020 was principally due to increased ultimate losses and LAE for Hurricane Irma.
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7. Long-Term Debt
Long-term debt consists of the following as of the dates presented (in thousands):
June 30, December 31,
2021 2020
Surplus note $ 7,721  $ 8,456 
In 2006, UPCIC entered into a $25.0 million surplus note with the State Board of Administration of Florida (the “SBA”) under Florida’s Insurance Capital Build-Up Incentive Program. The surplus note has a twenty-year term and accrues interest, adjusted quarterly based on the 10-year Constant Maturity Treasury Index. Principal and interest are paid periodically pursuant to terms of the surplus note.
UPCIC was in compliance with the terms of the surplus note as of June 30, 2021.
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8. Stockholders’ Equity

From time to time, the Company’s Board of Directors may authorize share repurchase programs under which the Company may repurchase shares of the Company’s common stock in the open market. The following table presents repurchases of the Company’s common stock for the periods presented (in thousands, except total number of shares repurchased and per share data):

Total Number of Shares Average
Repurchased During the Aggregate Price Per
Dollar Amount Six Months Ended June 30, Purchase Share
Date Authorized Expiration Date Authorized 2021 2020 Price  Repurchased Plan Completed
November 3, 2020 November 3, 2022 $ 20,000  15,444  —  $ 245  $ 15.87 
November 6, 2019 December 31, 2021 $ 40,000  —  884,175  $ 16,616  $ 18.79  November 2020
See the “Condensed Consolidated Statements of Stockholders’ Equity” for a roll-forward of treasury shares.



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9. Income Taxes
During the three months ended June 30, 2021 and 2020, the Company recorded approximately $8.1 million and $7.6 million of income tax expense, respectively. The effective tax rate (“ETR”) for the three months ended June 30, 2021 was 27.0% compared to a 27.5% ETR for the same period in 2020.
During the six months ended June 30, 2021 and 2020, the Company recorded approximately $18.1 million and $15.1 million of income tax expense, respectively. The ETR for the six months ended June 30, 2021 was 27.2% compared to a 27.4% ETR for the same period in 2020.
In calculating these rates, the Company considered a variety of factors including the forecasted full year pre-tax results, the U.S. federal tax rate, expected non-deductible expenses and estimated state income taxes. The Company’s final ETR for the full year will be dependent on the level of pre-tax income, discrete items, the apportionment of taxable income among state tax jurisdictions and the extent of non-deductible expenses in relation to pre-tax income.
The Company’s income tax provision reflects an estimated annual ETR of 27.1% for 2021, calculated before the impact of discrete items. The effect of reporting discrete items through June 30, 2021 amounts to an increase to the annual estimated ETR of 10 basis points, resulting in a total annual estimated ETR of 27.2%. The annual estimated ETR includes a federal income tax rate of 21% and a state income tax rate, net of federal benefit, of 2.9%.
Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax basis of assets and liabilities at the enacted tax rates. The Company reviews its deferred tax assets regularly for recoverability. Management has reviewed all available evidence, both positive and negative, in determining the need for a valuation allowance with respect to the gross deferred tax assets. In reviewing the gross deferred tax assets, management has concluded that the likelihood for utilization of these deferred tax assets is certain (greater than 50%) and determined that a valuation allowance on any of the deferred tax assets is not required. Management will continue to analyze the gross deferred tax assets on a quarterly basis to determine whether there is a need for a valuation allowance in the future.
The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. As of June 30, 2021, the Company’s 2017 through 2019 tax years are still subject to examination by the Internal Revenue Service and various tax years remain open to examination in certain state jurisdictions.
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10. Earnings Per Share
Basic earnings per share (“EPS”) is computed based on the weighted average number of common shares outstanding for the period, excluding any dilutive common share equivalents. Diluted EPS reflects the potential dilution resulting from exercises of stock options, vesting of performance share units, vesting of restricted stock, vesting of restricted stock units, and conversion of preferred stock.
The following table reconciles the numerator (i.e., income) and denominator (i.e., shares) of the basic and diluted EPS computations for the periods presented (in thousands, except per share data):
Three Months Ended
June 30,
Six Months Ended
June 30,
  2021 2020 2021 2020
Numerator for EPS:
Net income $ 21,941  $ 19,882  $ 48,349  $ 39,949 
Less: Preferred stock dividends (2) (2) (5) (5)
Income available to common stockholders $ 21,939  $ 19,880  $ 48,344  $ 39,944 
Denominator for EPS:    
Weighted average common shares outstanding 31,240  32,102  31,224  32,347 
Plus: Assumed conversion of share-based compensation (1) 45  43  43  68 
     Assumed conversion of preferred stock 25  25  25  25 
Weighted average diluted common shares outstanding 31,310  32,170  31,292  32,440 
Basic earnings per common share $ 0.70  $ 0.62  $ 1.55  $ 1.23 
Diluted earnings per common share $ 0.70  $ 0.62  $ 1.54  $ 1.23 
(1)
Represents the dilutive effect of unexercised stock options, unvested performance share units, unvested restricted stock units and unvested restricted stock.


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11. Other Comprehensive Income (Loss)
The following table provides the components of other comprehensive income (loss) on a pre-tax and after-tax basis for the periods presented (in thousands):

  Three Months Ended June 30,
  2021 2020
  Pre-tax Tax After-tax Pre-tax Tax After-tax
Net changes related to available-for-sale securities:
Unrealized holding gains arising during the period $ 10,264  $ 2,454  $ 7,810  $ 34,661  $ 8,466  $ 26,195 
Less: Reclassification adjustments for (gains) losses
 realized in net income
245  59  186  (168) (41) (127)
Other comprehensive income (loss) $ 10,509  $ 2,513  $ 7,996  $ 34,493  $ 8,425  $ 26,068 

  Six Months Ended June 30,
  2021 2020
  Pre-tax Tax After-tax Pre-tax Tax After-tax
Net changes related to available-for-sale securities:
Unrealized holding gains arising during the period $ (12,161) $ (2,907) $ (9,254) $ 23,435  $ 5,961  $ 17,474 
Less: Reclassification adjustments for (gains) losses
 realized in net income (loss)
447  107  340  (467) (115) (352)
Other comprehensive income (loss) (11,714) (2,800) (8,914) 22,968  5,846  17,122 
Reclassification adjustment to retained earnings (1) —  —  —  791  194  597 
Change in accumulated other comprehensive income $ (11,714) $ (2,800) $ (8,914) $ 23,759  $ 6,040  $ 17,719 

(1)Effective January 1, 2020, the Company adopted Accounting Standard Update 2016-13. This amount represents reclassifications to retained earnings associated with the allowance for expected credit losses within accumulated other comprehensive income relating to available-for-sale debt security investments.

The following table provides the reclassification adjustments for gains (losses) out of accumulated other comprehensive income for the periods presented (in thousands):

Details about Accumulated
Other Comprehensive
Income (Loss) Components
Amount Reclassified from Accumulated
Other Comprehensive Income (Loss)
Affected Line Item in the Statement Where Net
Income is Presented
Three Months Ended
June 30,
Six Months Ended
June 30,
2021 2020 2021 2020
Unrealized gains (losses) on
available-for-sale debt securities
$ (245) $ 168  $ (447) $ 467  Net realized gains (losses) on sale of securities
59  (41) 107  (115) Income taxes
Total reclassification for the period $ (186) $ 127  $ (340) $ 352  Net of tax

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12. Commitments and Contingencies
Obligations under Multi-Year Reinsurance Contracts
The Company purchases reinsurance coverage to protect its capital and to limit its losses when certain major events occur. The majority of the Company’s reinsurance commitments run from June 1st of the current year to May 31st of the following year. Certain of the Company’s reinsurance agreements are for periods longer than one year. Amounts payable for coverage during the current June 1st to May 31st contract period are recorded as “Reinsurance Payable, net” in the Condensed Consolidated Balance Sheet. Effective March 26, 2021, UPCIC entered into a three-year reinsurance agreement with Cosaint Re Pte. Ltd., a reinsurance entity incorporated in Singapore that correspondingly issued notes in a Rule 144A offering to raise proceeds to collateralize its obligations under this agreement. Amounts payable for coverage for the first year of the reinsurance agreement with Cosaint Re Pte. Ltd. are also recorded as “Reinsurance Payable, net”. Multi-year contract commitments for future years will be recorded at the commencement of the coverage period. Amounts payable for future reinsurance contract years that the Company is obligated to pay are: (1) $94.3 million in 2022; (2) $138.2 million in 2023 and (3) $72.1 million in 2024.
Litigation
Lawsuits are filed against the Company from time to time. Many of these lawsuits involve claims under policies that the Company underwrites and reserves for as an insurer. The Company is also involved in various other legal proceedings and litigation unrelated t