Company to Host Quarterly Conference Call at
5:00 P.M. ET on March 2, 2023
The information in this press release should
be read in conjunction with an investor presentation that is
available on the Company's website at
investors.upcinsurance.com/Presentations.
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 fourth quarter and
year ended December 31, 2022.
($ in thousands, except for per share
data)
Three Months Ended
Year Ended
December 31,
December 31,
2022
2021
Change
2022
2021
Change
Gross premiums written
$
229,239
$
268,890
(14.7
)%
$
1,124,063
$
1,329,445
(15.4
)%
Gross premiums earned
$
296,323
$
341,886
(13.3
)%
$
1,223,183
$
1,408,443
(13.2
)%
Net premiums earned
$
134,177
$
145,081
(7.5
)%
$
462,626
$
589,761
(21.6
)%
Total revenues
$
113,475
$
154,544
(26.6
)%
$
455,422
$
634,527
(28.2
)%
Loss before income tax
$
(294,616
)
$
(6,202
)
NM
$
(442,625
)
$
(83,857
)
NM
Net loss attributable to UIHC
$
(294,914
)
$
(2,316
)
NM
$
(467,999
)
$
(57,919
)
NM
Net loss available to UIHC common
stockholders per diluted share
$
(6.84
)
$
(0.05
)
NM
$
(10.87
)
$
(1.35
)
NM
Reconciliation of net loss to core
loss:
Plus: Non-cash amortization of intangible
assets and goodwill impairment (1)
$
812
$
811
0.1
%
$
16,817
$
3,555
NM
Less: Net realized gains (losses) on
investment portfolio
$
(30,226
)
$
(2,349
)
NM
$
(32,082
)
$
3,567
NM
Less: Unrealized gains (losses) on equity
securities
$
3,285
$
1,528
NM
$
(6,585
)
$
3,237
NM
Less: Net tax impact (2)
$
5,828
$
343
NM
$
11,652
$
(682
)
NM
Core loss (3) (4)
$
(272,989
)
$
(1,027
)
NM
$
(424,167
)
$
(60,486
)
NM
Core loss per diluted share (3) (4)
$
(6.33
)
$
(0.02
)
NM
$
(9.85
)
$
(1.41
)
NM
Book value per share
$
(4.16
)
$
7.20
NM
NM = Not Meaningful
(1)
For the year ended December 31,
2022, non-cash amortization of intangible assets includes $13.6
million related to the impairment of goodwill attributable to the
Company's personal residential property and casualty insurance
policies (personal lines) operating segment.
(2)
In order to reconcile net loss to
the core loss measures, the Company included the tax impact of all
adjustments using the 21% corporate federal tax rate.
(3)
For the three months and year
ended December 31, 2022, core loss includes $71.0 million and
$128.5 million, respectively, in tax expense related to the
Company's recognition of a valuation allowance.
(4)
Core loss, and core loss per
diluted share, both of which are measures that are not based on
GAAP, are reconciled above to net loss and net loss per diluted
share, respectively, the most directly comparable GAAP measures.
Additional information regarding non-GAAP financial measures
presented in this press release can be found in the "Definitions
of Non-GAAP Measures" section, below.
"We are deeply disappointed with our fourth quarter results
driven by Hurricane Ian loss development that ultimately exhausted
the reinsurance available to our subsidiary, United Property &
Casualty Insurance Company (UPC)," said Dan Peed, CEO. "Our
immediate focus has shifted to providing the Florida Department of
Financial Services the Company's full cooperation to complete the
separation and run-off of UPC. We have a lot of work to do in this
regard, but our team remains optimistic that our continuing
operations led by our commercial lines business underwritten by
American Coastal Insurance Company will return us to profitability
in 2023."
Return on Equity and Core Return on Equity
The calculations of the Company's return on equity and core
return on equity are shown below.
($ in thousands)
Three Months Ended
Year Ended
December 31,
December 31,
2022
2021
2022
2021
Net loss attributable to UIHC
$
(294,914
)
$
(2,316
)
$
(467,999
)
$
(57,919
)
Return on equity based on GAAP net loss
attributable to UIHC (1)
NM
(2.7
)%
NM
(16.9
)%
Core loss
$
(272,989
)
$
(1,027
)
$
(424,167
)
$
(60,486
)
Core return on equity (1)(2)
NM
(1.2
)%
NM
(17.6
)%
NM = Not Meaningful
(1)
Return on equity for the three
months and year ended December 31, 2022 and 2021 is calculated on
an annualized basis by dividing the net loss or core 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 on a consolidated basis and attributable to both the
Company's personal lines and commercial residential property and
casualty insurance policies (commercial lines) operating segments
are shown below.
($ in thousands)
Three Months Ended
Year Ended
December 31,
December 31,
2022
2021
Change
2022
2021
Change
Consolidated
Loss ratio, net(1)
252.6
%
58.9
%
193.7 pts
137.8
%
71.6
%
66.2 pts
Expense ratio, net(2)(3)
56.2
%
50.2
%
6.0 pts
56.5
%
48.7
%
7.8 pts
Combined ratio (CR)(4)
308.8
%
109.1
%
199.7 pts
194.3
%
120.3
%
74.0 pts
Effect of current year catastrophe losses
on CR
146.5
%
8.6
%
137.9 pts
61.2
%
19.3
%
41.9 pts
Effect of prior year unfavorable
(favorable) development on CR
43.9
%
(2.4
)%
46.3 pts
24.3
%
4.7
%
19.6 pts
Underlying combined ratio(5)
118.4
%
102.9
%
15.5 pts
108.8
%
96.3
%
12.5 pts
Personal Lines
Loss ratio, net(1)
430.3
%
71.2
%
359.1 pts
225.9
%
88.2
%
137.7 pts
Expense ratio, net(2)(3)
69.4
%
48.1
%
21.3 pts
67.6
%
46.2
%
21.4 pts
Combined ratio (CR)(4)
499.7
%
119.3
%
380.4 pts
293.5
%
134.4
%
159.1 pts
Effect of current year catastrophe losses
on CR
252.5
%
11.5
%
241.0 pts
98.4
%
25.0
%
73.4 pts
Effect of prior year unfavorable
(favorable) development on CR
85.5
%
(1.3
)%
86.8 pts
49.5
%
7.7
%
41.8 pts
Underlying combined ratio(5)
161.7
%
109.1
%
52.6 pts
145.6
%
101.7
%
43.9 pts
Commercial Lines
Loss ratio, net(1)
49.0
%
31.9
%
17.1 pts
39.8
%
31.6
%
8.2 pts
Expense ratio, net(2)
40.5
%
54.3
%
(13.8) pts
43.2
%
53.5
%
(10.3) pts
Combined ratio (CR)(4)
89.5
%
86.2
%
3.3 pts
83.0
%
85.1
%
(2.1) pts
Effect of current year catastrophe losses
on CR
24.9
%
2.2
%
22.7 pts
19.8
%
5.5
%
14.3 pts
Effect of prior year favorable development
on CR
(3.9
)%
(4.9
)%
1.0 pts
(3.6
)%
(2.5
)%
(1.1) pts
Underlying combined ratio(5)
68.5
%
88.9
%
(20.4) pts
66.8
%
82.1
%
(15.3) 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)
Includes the impairment of goodwill, which
had an impact of 2.9% on the company's consolidated expense ratios
and a 5.6% impact on the company's personal lines expense ratios
during the year ended December 31, 2022, respectively.
(4)
Combined ratio is the sum of the loss
ratio, net and expense ratio, net.
(5)
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.
Combined Ratio Analysis
The calculations of the Company's loss ratios and underlying
loss ratios are shown below.
($ in thousands)
Three Months Ended
Year Ended
December 31,
December 31,
2022
2021
Change
2022
2021
Change
Loss and LAE
$
338,977
$
85,520
$
253,457
$
637,647
$
422,134
$
215,513
% of Gross earned premiums
114.4
%
25.0
%
89.4 pts
52.1
%
30.0
%
22.1 pts
% of Net earned premiums
252.6
%
58.9
%
193.7 pts
137.8
%
71.6
%
66.2 pts
Less:
Current year catastrophe losses
$
196,581
$
12,515
$
184,066
$
283,190
$
113,740
$
169,450
Prior year reserve unfavorable (favorable)
development
58,876
(3,488
)
62,364
112,636
27,856
84,780
Underlying loss and LAE (1)
$
83,520
$
76,493
$
7,027
$
241,821
$
280,538
$
(38,717
)
% of Gross earned premiums
28.2
%
22.4
%
5.8 pts
19.8
%
19.9
%
(0.1) pts
% of Net earned premiums
62.2
%
52.7
%
9.5 pts
52.3
%
47.6
%
4.7 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 Ended
Year Ended
December 31,
December 31,
2022
2021
Change
2022
2021
Change
Policy acquisition costs
$
60,285
$
44,501
$
15,784
$
154,233
$
173,574
$
(19,341
)
Operating and underwriting
8,750
14,124
(5,374
)
43,632
56,257
(12,625
)
General and administrative
6,427
14,278
(7,851
)
63,317
57,212
6,105
Total Operating Expenses
$
75,462
$
72,903
$
2,559
$
261,182
$
287,043
$
(25,861
)
% of Gross earned premiums
25.5
%
21.3
%
4.2 pts
21.4
%
20.4
%
1.0 pts
% of Net earned premiums
56.2
%
50.2
%
6.0 pts
56.5
%
48.7
%
7.8 pts
Quarterly Financial Results
Net loss attributable to the Company for the fourth quarter of
2022 was $294.9 million, or $6.84 per diluted share, compared to
$2.3 million, or $0.05 per diluted share, for the fourth quarter of
2021. Drivers of the net loss during the fourth quarter of 2022
include decreased gross written premiums which were partially
offset by a decline in ceded premiums earned, unfavorable
development related to Hurricane Ian which exhausted the Company's
personal lines reinsurance coverage for the event, unfavorable
development on prior year losses, and impairment losses of $22.7
million realized on a portion of the fixed maturity portfolio
attributable to the Company's personal lines operating segment.
This was partially offset by income related to the sale of our
remaining properties in 2022.
The Company's total gross written premium decreased by $39.7
million, or 14.7%, to $229.2 million for the fourth quarter of
2022, from $268.9 million for the fourth quarter of 2021. This
decrease was driven primarily by the transition of the Southeast
business to Homeowners Choice Property & Casualty Insurance
Company, Inc. (HCPCI) in the second half of 2022. In addition, the
Company experienced a decline in written premiums across the
personal lines business, due to underwriting actions taken by the
Company throughout 2021 and 2022. The breakdown of the
quarter-over-quarter changes in both direct written and assumed
premiums by region and gross written premium by line of business
are shown in the table below.
($ in thousands)
Three Months Ended December
31,
2022
2021
Change $
Change %
Direct Written and Assumed Premium by
Region (1)
Florida
$
202,211
$
190,220
$
11,991
6.3
%
Gulf
14,480
41,983
(27,503
)
(65.5
)
Northeast
11,705
19,741
(8,036
)
(40.7
)
Southeast
740
16,834
(16,094
)
(95.6
)
Total direct written premium by region
229,136
268,778
(39,642
)
(14.7
)
Assumed premium (2)
103
112
(9
)
(8.0
)
Total gross written premium by region
$
229,239
$
268,890
$
(39,651
)
(14.7
)%
Gross Written Premium by Line of
Business
Commercial property (3)
122,345
93,832
28,513
30.4
Personal property
106,894
175,058
(68,164
)
(38.9
)
Total gross written premium by line of
business
$
229,239
$
268,890
$
(39,651
)
(14.7
)%
(1)
"Gulf" is comprised of Louisiana and
Texas; "Northeast" is comprised of Massachusetts, New Jersey and
New York in 2022 and Connecticut, Massachusetts, New Jersey, New
York and Rhode Island in 2021; and "Southeast" is comprised of
Georgia, North Carolina and South Carolina. The Company is no
longer writing in New Jersey as of January 15, 2022, Massachusetts
as of April 1, 2022, South Carolina as of June 1, 2022, Georgia as
of October 1, 2022 and North Carolina as of December 1, 2022 as the
policies have transitioned to HCPCI.
(2)
Assumed premium written for 2022 and 2021
primarily included commercial property business assumed from
unaffiliated insurers.
(3)
Commercial written premium for 2022 and
2021 was primarily written in Florida.
Loss and LAE increased by $253.5 million, or 296.5%, to $339.0
million for the fourth quarter of 2022, from $85.5 million for the
fourth quarter of 2021. Loss and LAE expense as a percentage of net
earned premiums increased 193.7 points to 252.6% for the fourth
quarter of 2022, compared to 58.9% for the fourth quarter of 2021.
Excluding catastrophe losses and reserve development, the Company's
gross underlying loss and LAE ratio for the fourth quarter of 2022
would have been 28.2%, an increase of 5.8 points from 22.4% during
the fourth quarter of 2021.
Policy acquisition costs increased by $15.8 million, or 35.5%,
to $60.3 million for the fourth quarter of 2022, from $44.5 million
for the fourth quarter of 2021, primarily due to the expensing of
deferred costs attributable to our personal lines operating
segment, which were determined to provide no additional economic
benefit in the future. In addition, external management fees
incurred increased related to the Company's increase in commercial
lines gross written premium during the fourth quarter of 2022.
Finally, ceding commission income decreased due to changes in the
terms of the Company's quota share reinsurance agreements.
Operating and underwriting expenses decreased by $5.4 million,
or 38.3%, to $8.8 million for the fourth quarter of 2022, from
$14.1 million for the fourth quarter of 2021, primarily due to
decreased investments in technology and decreased underwriting
expenses as the result of the decrease in personal lines premiums
described above.
General and administrative expenses decreased by $7.9 million,
or 55.2%, to $6.4 million for the fourth quarter of 2022, from
$14.3 million for the fourth quarter of 2021, driven by a decrease
in salary related expenses attributable to a reduction in payroll
taxes attributable to an employee retention tax credit refund for
taxes previously paid and recognized as an expense by the company,
as well as a reduction in headcount in 2022.
Personal Lines Operating Segment Highlights
Pre-tax losses attributable to the Company's personal lines
operating segment totaled $306.0 million for the fourth quarter of
2022 compared to $11.8 million for the fourth quarter of 2021.
Drivers of the quarter-over-quarter increase in pre-tax losses
include: an increase in loss and LAE incurred of $237.2 million due
to unfavorable development related to Hurricane Ian, which
exhausted the Company's personal lines reinsurance coverage for the
event and unfavorable development on prior year losses, decreased
net premiums earned of $28.3 million driven by decreased gross
written premiums as described above, and impairment losses realized
of $22.7 million on a portion of the fixed maturity portfolio
attributable to the Company's personal lines operating segment.
Quarter-over-quarter, policy acquisition costs increased $14.8
million, driven by the expensing of deferred costs determined to
have no economic benefit in the future. This was partially offset
by a $5.1 million decrease in operating expenses, as expenses
correlated to the movement of premium decreased with the decline in
personal lines gross written premium. In addition, general and
administrative expenses decreased $7.9 million, which can be
attributed to a reduction in payroll taxes attributable to an
employee retention tax credit refund for taxes previously paid and
recognized as an expense by the company, as well as a reduction in
headcount in 2022.
Commercial Lines Operating Segment Highlights
Pre-tax earnings attributable to the Company's commercial lines
operating segment totaled $3.7 million for the fourth quarter of
2022 compared to $8.3 million for the fourth quarter of 2021. This
decrease can be attributed to increased expenses of $17.1 million,
driven by a $16.2 million increase in loss and LAE incurred due to
unfavorable development related to Hurricane Ian.
This increased expense was partially offset by increased
revenues of $12.5 million, driven by a $17.4 million increase in
net premiums earned due to higher gross written premiums
quarter-over-quarter as the Company transitions towards becoming a
specialty commercial lines underwriter.
Year to Date Financial Results
Net loss attributable to the Company for the year ended December
31, 2022, was $468.0 million, or $10.87 per diluted share, compared
to $57.9 million, or $1.35 per diluted share, for the year ended
December 31, 2021. Drivers of the net loss during the 2022 include
the impact of Hurricane Ian making landfall in Florida as a
category four hurricane and exhausting the Company's personal lines
reinsurance coverage for the event, decreased gross written
premiums which were partially offset by a decline in ceded premiums
earned, unfavorable prior year loss development during the year, an
increase in our provision for income taxes from the recognition of
a valuation allowance against our deferred tax asset, the
impairment of goodwill attributable to the Company's personal lines
operating segment, and impairment losses of $22.7 million realized
on a portion of the fixed maturity portfolio attributable to the
Company's personal lines operating segment. This was partially
offset by lower policy acquisition costs and lower operating and
underwriting costs during 2022.
The Company's total gross written premium decreased by $205.4
million, or 15.4%, to $1.1 billion for the year ended December 31,
2022, from $1.3 billion for the year ended December 31, 2021. This
decrease was driven primarily by the transition of the Northeast
business to Homeowners Choice Property & Casualty Insurance
Company, Inc. (HCPCI) in the fourth quarter of 2021 and the first
half of 2022, and the transition of the Southeast business to HCPCI
in the second half of 2022. In addition, the Company experienced a
decline in written premiums across the personal lines business, due
to underwriting actions taken by the Company throughout 2021 and
2022. The breakdown of the year-over-year changes in both direct
written and assumed premiums by region and gross written premium by
line of business are shown in the table below.
($ in thousands)
Year Ended December
31,
2022
2021
Change $
Change %
Direct Written and Assumed Premium by
Region (1)
Florida
$
885,202
$
852,711
$
32,491
3.8
%
Gulf
162,786
225,013
(62,227
)
(27.7
)
Southeast
42,780
93,188
(50,408
)
(54.1
)
Northeast
32,769
158,217
(125,448
)
(79.3
)
Total direct written premium by region
1,123,537
1,329,129
(205,592
)
(15.5
)
Assumed premium (2)
526
316
210
66.5
Total gross written premium by region
$
1,124,063
$
1,329,445
$
(205,382
)
(15.4
)%
Gross Written Premium by Line of
Business
Personal property
$
615,819
$
907,207
$
(291,388
)
(32.1
)%
Commercial property (3)
508,244
422,238
86,006
20.4
Total gross written premium by line of
business
$
1,124,063
$
1,329,445
$
(205,382
)
(15.4
)%
(1)
"Gulf" is comprised of Louisiana and
Texas; "Northeast" is comprised of Massachusetts, New Jersey and
New York in 2022 and Connecticut, Massachusetts, New Jersey, New
York and Rhode Island in 2021; and "Southeast" is comprised of
Georgia, North Carolina and South Carolina. The Company is no
longer writing in New Jersey as of January 15, 2022, Massachusetts
as of April 1, 2022, South Carolina as of June 1, 2022, Georgia as
of October 1, 2022 and North Carolina as of December 1, 2022 as the
policies have transitioned to HCPCI.
(2)
Assumed premium written for 2022 and 2021
primarily included commercial property business assumed from
unaffiliated insurers.
(3)
Commercial written premium for 2022 and
2021 was primarily written in Florida.
Loss and LAE increased by $215.5 million, or 51.1%, to $637.6
million for the year ended December 31, 2022, from $422.1 million
for the year ended December 31, 2021. Loss and LAE expense as a
percentage of net earned premiums increased 66.2 points to 137.8%
for the year ended December 31, 2022, compared to 71.6% for the
year ended December 31, 2021. Excluding catastrophe losses and
reserve development, the Company's gross underlying loss and LAE
ratio for the year ended December 31, 2022, would have been 19.8%,
a decrease of 0.1 points from 19.9% for the year ended December 31,
2021.
Policy acquisition costs decreased by $19.4 million, or 11.2%,
to $154.2 million for the year ended December 31, 2022, from $173.6
million for the year ended December 31, 2021, primarily due to a
decrease in expenses such as premium taxes, policy administration
fees and agent commissions, which fluctuate in conjunction with the
year-over-year decrease in personal lines gross written premium.
This was partially offset by increased external management fees
incurred related to the Company's increased commercial lines gross
written premium during the year ended December 31, 2022. In
addition, ceding commission income decreased in 2022 due to changes
in the terms of the Company's quota share reinsurance
agreements.
Operating and underwriting expenses decreased by $12.6 million,
or 22.4%, to $43.6 million for the year ended December 31, 2022,
from $56.3 million for the year ended December 31, 2021, primarily
due to decreased investments in technology and decreased
underwriting expenses as the result of the decrease in personal
lines premiums described above.
General and administrative expenses increased by $6.1 million,
or 10.7%, to $63.3 million for the year ended December 31, 2022,
from $57.2 million for the year ended December 31, 2021, driven by
the impairment of goodwill attributable to the Company's personal
lines operating segment. This was partially offset by a decrease in
salary related expenses attributable to a reduction in payroll
taxes attributable to an employee retention tax credit refund for
taxes previously paid and recognized as an expense by the company,
as well as a reduction in headcount in 2022.
Personal Lines Operating Segment Highlights
Pre-tax losses attributable to the Company's personal lines
operating segment totaled $479.3 million for the year ended
December 31, 2022, compared to $104.6 million for the year ended
December 31, 2021. Drivers of the year-over-year increase in
pre-tax losses include an increase in loss and LAE incurred of
$183.1 million due to unfavorable development related to Hurricane
Ian which exhausted the Company's personal lines reinsurance
coverage for the event and unfavorable development on prior year
losses, decreased net premiums earned of $172.8 million driven by
decreased gross written premiums as described above, and impairment
losses realized of $22.7 million on a portion of the fixed maturity
portfolio attributable to the Company's personal lines operating
segment.
Year-over-year, policy acquisition costs and operating expenses
decreased $20.2 million and $11.7 million, respectively, as
expenses correlated to the movement of premium decreased with the
decline in personal lines gross written premium. General and
administrative costs increased $4.4 million as the result of the
impairment of goodwill attributable to our personal lines operating
segment, partially offset by reduced salary related expenses
attributable to an employee retention tax credit refund for taxes
previously paid and recognized as an expense by the company, as
well as a reduction in headcount in 2022.
Commercial Lines Operating Segment Highlights
Pre-tax earnings attributable to the Company's commercial lines
operating segment totaled $35.8 million for the year ended December
31, 2022, compared to $32.0 million for the year ended December 31,
2021. This increase can be attributed to increased revenues of
$38.1 million, driven by a $45.7 million increase in net premiums
earned due to higher gross written premiums year-over-year as the
Company transitions towards becoming a specialty commercial lines
underwriter.
This increase was partially offset by increased expenses of
$34.3 million, driven by a $32.4 million increase in loss and LAE
incurred due to increased catastrophe losses and a decrease in
favorable prior year development year-over-year.
Reinsurance Costs as a Percentage of Gross Earned
Premium
Reinsurance costs as a percentage of gross earned premium in the
fourth quarter of 2022 and 2021 were as follows:
2022
2021
Non-at-Risk
(2.1)%
(2.2)%
Quota Share
(17.0)%
(23.2)%
All Other
(35.6)%
(32.2)%
Total Ceding Ratio
(54.7)%
(57.6)%
Ceded premiums earned related to the Company's quota share
reinsurance contracts decreased quarter-over-quarter driven by a
decrease in the cession rate for one of the Company's external
quota shares and changes to the geographic footprint and exposure
covered by the external quota share contracts.
Ceded premiums earned related to the Company's catastrophe
program decreased, driven by the need for less coverage for the
2022-2023 treaty year for the reduction in the geographic footprint
and exposure, as well as the change from a cascading aggregate
structure to an occurrence-based structure for the Company's
2022-2023 program. While premiums decreased quarter-over-quarter,
the Company's ceding ratio related to its catastrophe program
increased, driven by the Company's decrease in gross premiums
earned quarter-over-quarter.
Reinsurance costs as a percentage of gross earned premium in the
fourth quarter of 2022 and 2021 for the Company's personal lines
and commercial lines operating segments were as follows:
Personal
Commercial
2022
2021
2022
2021
Non-at-Risk
(3.3)%
(3.1)%
(0.5)%
(0.3)%
Quota Share
(19.4)%
(25.6)%
(13.5)%
(17.4)%
All Other
(35.8)%
(29.0)%
(35.5)%
(39.5)%
Total Ceding Ratio
(58.5)%
(57.7)%
(49.5)%
(57.2)%
Investment Portfolio Highlights
The Company's cash, restricted cash and investment holdings
decreased from $964.8 million at December 31, 2021 to $715.7
million at December 31, 2022. 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 87.1% of
total investments at December 31, 2022, compared to 92.2% at
December 31, 2021. The Company's fixed maturity investments had a
modified duration of 4.0 years at both December 31, 2022 and
December 31, 2021.
At December 31, 2022, the Company's fixed maturity investment
holdings decreased by $287.1 million, or 43.3% from December 31,
2021, through the sale of securities in order to satisfy the
Company's liquidity requirements during 2022 and due to both
realized impairment losses and unrealized losses recognized on the
portfolio.
Book Value Analysis
Book value per common share decreased 157.8% from $7.20 at
December 31, 2021, to $(4.16) at December 31, 2022. Underlying book
value per common share decreased 146.9% from $7.35 at December 31,
2021 to $(3.45) at December 31, 2022. A decrease in the Company's
retained earnings as the result of a net loss in 2022 drove the
decrease in the Company's book value per share. As shown in the
table below, removing the effect of AOCI increases the Company's
book value per common share, as the Company experienced unfavorable
capital market conditions for the twelve months ended December 31,
2022.
($ in thousands, except for share and per
share data)
December 31, 2022
December 31, 2021
Book Value per Share
Numerator:
Common stockholders' equity attributable
to UIHC
$
(180,183
)
$
312,406
Denominator:
Total Shares Outstanding
43,280,173
43,370,442
Book Value Per Common Share
$
(4.16
)
$
7.20
Book Value per Share, Excluding the
Impact of Accumulated Other Comprehensive Income (AOCI)
Numerator:
Common stockholders' equity attributable
to UIHC
$
(180,183
)
$
312,406
Less: Accumulated other comprehensive
loss
(30,947
)
(6,531
)
Stockholders' Equity, excluding AOCI
$
(149,236
)
$
318,937
Denominator:
Total Shares Outstanding
43,280,173
43,370,442
Underlying Book Value Per Common
Share(1)
$
(3.45
)
$
7.35
(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.
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 loss excluding the effects of amortization of intangible
assets, realized gains (losses) and unrealized gains (losses) on
equity securities, net of tax (core loss) is a non-GAAP measure
that 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 loss.
Amortization expense is related to the amortization of intangible
assets acquired, including goodwill, 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 both separately and in the aggregate when reviewing the
Company's performance. The most directly comparable GAAP measure is
net loss. The core loss measure should not be considered a
substitute for net loss 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 loss
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 loss is an after-tax non-GAAP measure that
is calculated by excluding from net loss the effect of non-cash
amortization of intangible assets, including goodwill, 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 loss, core loss
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
loss, core loss 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, that 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 frequency
of occurrence and severity 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 both 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 that 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 both 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 loss (underlying book value per
common share), is a non-GAAP measure that is computed by
dividing common stockholders' equity after excluding accumulated
other comprehensive loss, 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 loss, in conjunction with book
value per common share to identify and analyze the change in net
worth attributable to management efforts between periods. The
Company believes this 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 that 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 loss, 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:
March 2, 2023 - 5:00 P.M. ET
Participant Dial-In:
(United States): 877-445-9755
(International): 201-493-6744
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=1594437&tp_key=d17c7e1d47
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 the Company's 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 through a variety of
distribution channels. The Company currently writes policies in
Florida, Louisiana, New York, and Texas. The Company also writes
policies in South Carolina and North Carolina, where renewal rights
have been sold and all premiums and losses are ceded.
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”. The Company believes 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 expressed in, or implied by, the forward-looking statements.
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.
Factors that could cause actual results to differ materially may be
found in the Company's filings with the U.S. Securities and
Exchange Commission, in the “Risk Factors” section in the Company's
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, the Company undertakes no obligation to update or
revise any forward-looking statements.
Consolidated Statements of
Comprehensive Loss
In thousands, except share and
per share amounts
Three Months Ended
Year Ended
December 31,
December 31,
2022
2021
2022
2021
REVENUE:
Gross premiums written
$
229,239
$
268,890
$
1,124,063
$
1,329,445
Change in gross unearned premiums
67,084
72,996
99,120
78,998
Gross premiums earned
296,323
341,886
1,223,183
1,408,443
Ceded premiums earned
(162,146
)
(196,805
)
(760,557
)
(818,682
)
Net premiums earned
134,177
145,081
462,626
589,761
Net investment income
4,124
3,035
14,011
13,772
Net realized investment gains (losses)
(30,226
)
(2,349
)
(32,082
)
3,567
Net unrealized gains (losses) on equity
securities
3,285
1,528
(6,585
)
3,237
Other revenue
2,115
7,249
17,452
24,190
Total revenues
$
113,475
$
154,544
$
455,422
$
634,527
EXPENSES:
Losses and loss adjustment expenses
338,977
85,520
637,647
422,134
Policy acquisition costs
60,285
44,501
154,233
173,574
Operating expenses
8,750
14,124
43,632
56,257
General and administrative expenses
6,427
14,278
63,317
57,212
Interest expense
2,448
2,381
9,613
9,391
Total expenses
416,887
160,804
908,442
718,568
Loss before other income
(303,412
)
(6,260
)
(453,020
)
(84,041
)
Other income
8,796
58
10,395
184
Loss before income taxes
(294,616
)
(6,202
)
(442,625
)
(83,857
)
Provision (benefit) for income taxes
298
(3,333
)
25,485
(23,989
)
Net Loss
$
(294,914
)
$
(2,869
)
$
(468,110
)
$
(59,868
)
Less: Net loss attributable to
noncontrolling interests
—
(553
)
(111
)
(1,949
)
Net loss attributable to UIHC
$
(294,914
)
$
(2,316
)
$
(467,999
)
$
(57,919
)
OTHER COMPREHENSIVE LOSS:
Change in net unrealized gains (losses) on
investments
3,632
(7,171
)
(56,600
)
(18,267
)
Reclassification adjustment for net
realized investment losses (gains)
30,226
2,349
32,082
(3,567
)
Income tax benefit related to items of
other comprehensive income loss
—
1,156
49
5,264
Total comprehensive loss
$
(261,056
)
$
(6,535
)
$
(492,579
)
$
(76,438
)
Less: Comprehensive loss attributable to
noncontrolling interests
—
(694
)
(164
)
(2,295
)
Comprehensive loss attributable to
UIHC
$
(261,056
)
$
(5,841
)
$
(492,415
)
$
(74,143
)
Weighted average shares outstanding
Basic
43,101,872
42,973,753
43,052,070
42,948,850
Diluted
43,101,872
42,973,753
43,052,070
42,948,850
Earnings available to UIHC common
stockholders per share
Basic
$
(6.84
)
$
(0.05
)
$
(10.87
)
$
(1.35
)
Diluted
$
(6.84
)
$
(0.05
)
$
(10.87
)
$
(1.35
)
Dividends declared per share
$
—
$
0.06
$
0.06
$
0.24
Consolidated Balance
Sheets
In thousands, except share
amounts
December 31, 2022
December 31, 2021
ASSETS
Investments, at fair value:
Fixed maturities, available-for-sale
$
376,463
$
663,602
Equity securities
39,020
37,958
Other investments
16,628
18,006
Total investments
$
432,111
$
719,566
Cash and cash equivalents
229,893
212,024
Restricted cash
53,717
33,254
Accrued investment income
3,062
3,296
Property and equipment, net
19,591
31,561
Premiums receivable, net
86,036
79,166
Reinsurance recoverable on paid and unpaid
losses
1,632,293
997,120
Ceded unearned premiums
213,028
430,631
Goodwill
59,476
73,045
Deferred policy acquisition costs
58,933
38,520
Intangible assets, net
12,770
18,375
Other assets
38,442
62,015
Total Assets
$
2,839,352
$
2,698,573
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss adjustment
expenses
$
1,946,938
$
1,084,450
Unearned premiums
545,820
644,940
Reinsurance payable on premiums
59,896
248,625
Payments outstanding
215,057
114,524
Accounts payable and accrued expenses
74,503
76,258
Operating lease liability
1,689
1,934
Other liabilities
23,159
39,324
Notes payable, net
152,473
156,561
Total Liabilities
$
3,019,535
$
2,366,616
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;
100,000,000 shares authorized; 43,492,256 and 43,360,429 issued,
respectively; 43,280,173 and 43,370,442 outstanding,
respectively
4
4
Additional paid-in capital
395,631
394,268
Treasury shares, at cost; 212,083
shares
(431
)
(431
)
Accumulated other comprehensive loss
(30,947
)
(6,531
)
Retained earnings (deficit)
(544,440
)
(74,904
)
Total stockholders' equity attributable to
UIHC stockholders
$
(180,183
)
$
312,406
Noncontrolling interests
—
19,551
Total Stockholders' Equity
$
(180,183
)
$
331,957
Total Liabilities and Stockholders'
Equity
$
2,839,352
$
2,698,573
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230302005711/en/
United Insurance Holdings Corp. Alexander Baty Director
of Financial Reporting (727) 895-7737 / abaty@upcinsurance.com
OR
INVESTOR RELATIONS: The Equity Group Karin Daly
Vice President (212) 836-9623 / kdaly@equityny.com
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