EX-99.1 2 exh991er31dec18.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1

uhiclogorta12.gif

FOR IMMEDIATE RELEASE
 
UNITED INSURANCE HOLDINGS CORP. REPORTS FINANCIAL RESULTS
FOR ITS FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2018
 
Company to Host Quarterly Conference Call at 5:00 P.M. ET on February 19, 2019
The information in this press release should be read in conjunction with an investor presentation that is available on our website at www.investors.upcinsurance.com/presentations.
 
St. Petersburg, FL - February 19, 2019: 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, 2018.
($ in thousands, except for per share data)
Three Months Ended
 
Year Ended
December 31,
 
December 31,
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
Gross premiums written
$
292,187

 
$
252,440

 
15.7
 %
 
$
1,252,401

 
$
1,040,848

 
20.3
 %
Gross premiums earned
$
308,414

 
$
274,373

 
12.4
 %
 
$
1,180,961

 
$
986,023

 
19.8
 %
Net premiums earned
$
181,740

 
$
166,195

 
9.4
 %
 
$
689,276

 
$
585,490

 
17.7
 %
Total revenues
$
181,089

 
$
182,586

 
(0.8
)%
 
$
723,942

 
$
654,420

 
10.6
 %
Earnings before income tax
$
(19,416
)
 
$
27,809

 
(169.8
)%
 
$
(4,239
)
 
$
910

 
(565.8
)%
Net income (loss) attributable to UIHC
$
(11,071
)
 
$
27,001

 
(141.0
)%
 
$
290

 
$
10,145

 
(97.1
)%
Net income (loss) available to UIHC common stockholders per diluted share
$
(0.26
)
 
$
0.63

 
(141.3
)%
 
$
0.01

 
$
0.27

 
(96.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of net income (loss) to core income (loss):
 
 
 
 
 
 
 
 
 
 
 
Plus: Merger expenses
$
—

 
$
—

 
—
 %
 
$
—

 
$
6,906

 
(100.0
)%
Plus: Non-cash amortization of intangible assets
$
1,365

 
$
9,839

 
(86.1
)%
 
$
13,920

 
$
31,199

 
(55.4
)%
Less: Net realized gains on investment portfolio
$
2,329

 
$
621

 
275.0
 %
 
$
1,655

 
$
67

 
2,370.1
 %
Less: Unrealized losses on equity securities
$
(14,346
)
 
$
—

 
(100.0
)%
 
$
(9,300
)
 
$
—

 
(100.0
)%
Less: Net tax impact(1)
$
3,346

 
$
3,227

 
3.7
 %
 
$
5,391

 
$
13,314

 
(59.5
)%
Core income (loss)(2)
$
(1,035
)
 
$
32,992

 
(103.1
)%
 
$
16,464

 
$
34,869

 
(52.8
)%
Core income (loss) per diluted share(2)
$
(0.02
)
 
$
0.77

 
(102.6
)%
 
$
0.38

 
$
0.93

 
(59.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
Book value per share
 
 
 
 

 
$
12.10

 
$
12.56

 
(3.7
)%
(1) In order to reconcile net income to the core income measure, we included the tax impact of all adjustments using the effective rate at the end of each period.
(2) Core income and core income per diluted share, measures that are not based on GAAP, are reconciled above to net income and net income 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.

"As expected, we had a lot of noise in our Q4 results due to Hurricane Michael and other cat events, as well as the impact of the new accounting rule about unrealized equity losses," said John Forney, President and CEO of UPC Insurance. "But, we improved our underlying combined ratio by over 600 basis points compared to a year ago, and, absent the factors mentioned earlier, we would have produced better pre-tax income than last year's Q4, when we

1


had a cat-free quarter and produced our best results ever. We have a lot of positive momentum entering 2019, and the year is off to a good start."
Return on Equity and Core Return on Equity

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

($ in thousands)
Three Months Ended
 
Year Ended
December 31,
 
December 31,
 
2018
 
2017
 
2018
 
2017
Net income (loss) attributable to UIHC
$
(11,071
)
 
$
27,001

 
$
290

 
$
10,145

Return on equity based on GAAP net income (loss) attributable to UIHC (1)
(8.3
)%
 
23.9
%
 
0.1
%
 
2.2
%
 
 
 
 
 
 
 
 
Core income (loss)
$
(1,035
)
 
$
32,992

 
$
16,464

 
$
34,869

Core return on equity (1)
(0.8
)%
 
29.2
%
 
3.1
%
 
7.7
%
(1) Return on equity for the three months ended December 31, 2018 and 2017 is calculated on an annualized basis.

Combined Ratio and Underlying Ratio

The calculations of the Company's combined ratio and underlying combined ratio are shown below.

($ in thousands)
Three Months Ended
 
Year Ended
December 31,
 
December 31,
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
Loss ratio, net(1)
67.2
%
 
43.4
%
 
23.8
 pts
 
59.3
%
 
62.4
 %
 
(3.1
) pts
Expense ratio, net(2)
41.7
%
 
49.2
%
 
(7.5
) pts
 
45.0
%
 
48.7
 %
 
(3.7
) pts
Combined ratio (CR)(3)
108.9
%
 
92.6
%
 
16.3
 pts
 
104.3
%
 
111.1
 %
 
(6.8
) pts
Effect of current year catastrophe losses on CR
23.0
%
 
0.8
%
 
22.2
 pts
 
14.5
%
 
19.8
 %
 
(5.3
) pts
Effect of prior year unfavorable (favorable) development on CR
4.7
%
 
0.1
%
 
4.6
 pts
 
0.6
%
 
(0.4
)%
 
1.0
 pts
Effect of ceding commission income on CR (4)
—
%
 
4.2
%
 
(4.2
) pts
 
—
%
 
6.3
 %
 
(6.3
) pts
Underlying combined ratio(5)
81.2
%
 
87.5
%
 
(6.3
) pts
 
89.2
%
 
85.4
 %
 
3.8
 pts
(1) Loss ratio, net is calculated as losses and loss adjustment expenses (LAE), net of losses ceded to reinsurers, relative to net premiums earned.
(2) Expense ratio, net is calculated as the sum of all operating expenses less interest expense relative to net premiums earned.
(3) Combined ratio is the sum of the loss ratio, net and expense ratio, net.
(4) For the three months ended December 31, 2018, the Company presented $10.7 million of ceding commissions earned as a $2.1 million decrease to ceded earned premium and a $8.6 million decrease in policy acquisition costs, which reduced other revenue and removed the distortive impact to our underlying combined ratio. For the year ended December 31, 2018, the Company presented $42.4 million of ceding commissions earned as a $9.3 million decrease to ceded earned premium and an $33.1 million decrease in policy acquisition costs.
(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.

2


Quarterly Financial Results
 
Net loss attributable to the Company for the fourth quarter of 2018 was $11.1 million, or $0.26 per diluted share, compared to net income of $27.0 million, or $0.63 per diluted share, for the fourth quarter of 2017. The decrease in net income was primarily due to an increase in losses and LAE, partially offset by an increase in net premiums earned during the fourth quarter of 2018 compared to the fourth quarter of 2017.

The Company's total gross written premium increased by $39.8 million, or 15.7%, to $292.2 million for the fourth quarter of 2018, from $252.4 million for the fourth quarter of 2017, primarily reflecting organic growth in new and renewal business generated in all regions. The breakdown of the quarter-over-quarter changes in both direct written and assumed premiums by region and gross written premium by line of business are shown in the table below.
($ in thousands)
 
Three Months Ended December 31,
 
 
 
 
 
 
2018
 
2017
 
Change $
 
Change %
Direct Written and Assumed Premium by Region (1)
 
 
 
 
 
 
 
 
Florida
 
$
151,374

 
$
135,388

 
$
15,986

 
11.8
%
Gulf
 
47,779

 
45,835

 
1,944

 
4.2

Northeast
 
45,025

 
38,871

 
6,154

 
15.8

Southeast
 
25,092

 
22,042

 
3,050

 
13.8

Total direct written premium by region
 
269,270

 
242,136

 
27,134

 
11.2
%
Assumed premium (2)
 
22,917

 
10,304

 
12,613

 
122.4

Total gross written premium by region
 
$
292,187

 
$
252,440

 
$
39,747

 
15.7
%
 
 
 
 
 
 
 
 
 
Gross Written Premium by Line of Business
 
 
 
 
 
 
 
 
Personal property
 
$
207,524

 
$
181,123

 
$
26,401

 
14.6
%
Commercial property
 
84,663

 
71,317

 
13,346

 
18.7

Total gross written premium by line of business
 
$
292,187

 
$
252,440

 
$
39,747

 
15.7
%
(1) "Gulf" is comprised of Hawaii, Louisiana and Texas; "Northeast" is comprised of Connecticut, Massachusetts, New Jersey, New York and Rhode Island; and "Southeast" is comprised of Georgia, North Carolina and South Carolina.
(2) Assumed premium written for 2018 and 2017 primarily included commercial property business assumed from unaffiliated insurers.


Loss and LAE increased by $50.1 million, or 69.4%, to $122.2 million for the fourth quarter of 2018, from $72.1 million for the fourth quarter of 2017. Loss and LAE expense as a percentage of net earned premiums increased 23.8 points to 67.2% for the fourth quarter of 2018, compared to 43.4% for the fourth quarter of 2017. Excluding catastrophe losses and reserve development, the Company's gross underlying loss and LAE ratio for the fourth quarter of 2018 would have been 23.3%, a decrease of 2.4 points from 25.7% during the fourth quarter of 2017.

Policy acquisition costs decreased by $0.7 million, or 1.4%, to $49.4 million for the fourth quarter of 2018, from $50.1 million for the fourth quarter of 2017. The primary driver of the decrease in costs was the change in presentation of ceding commission income as an offset to policy acquisition costs, partially offset by the managing general agent commissions related to AmCo Holding Company (AmCo) commercial premiums.

Operating and underwriting expenses increased by $2.9 million, or 34.2%, to $11.6 million for the fourth quarter of 2018, from $8.7 million for the fourth quarter of 2017, primarily due to increased agent incentive costs from our new contingent commission program.

General and administrative expenses decreased by $8.1 million, or 35.5%, to $14.8 million for the fourth quarter of 2018, from $22.9 million for the fourth quarter of 2017, primarily due to amortization costs related to the merger with AmCo incurred during the first three quarters of 2017 that were fully expensed at the end of the first quarter of 2018.


3


Year to Date Financial Results
 
Net income attributable to the Company for the year ended December 31, 2018 was $0.3 million, or $0.01 per diluted share, compared to net income of $10.1 million, or $0.27 per diluted share, for the year ended December 31, 2017. The decrease in net income was primarily due to an increase in losses and LAE, as well as policy acquisition expenses.

The Company's total gross written premium increased by $211.6 million, or 20.3%, to $1.3 billion for the year ended December 31, 2018 from $1.0 billion for the year ended December 31, 2017, primarily reflecting organic growth in new and renewal business generated in all regions. The breakdown of the year-over-year changes in both direct written and assumed premiums by region and gross written premium by line of business are shown in the table below.
($ in thousands)
 
Year Ended December 31,
 
 
 
 
 
 
2018
 
2017
 
Change $
 
Change %
Direct Written and Assumed Premium by Region (1)
 
 
 
 
 
 
 
 
Florida
 
$
655,736

 
$
540,796

 
$
114,940

 
21.3
%
Gulf
 
210,230

 
201,475

 
8,755

 
4.3

Northeast
 
177,958

 
154,502

 
23,456

 
15.2

Southeast
 
104,266

 
92,753

 
11,513

 
12.4

Total direct written premium by region
 
1,148,190

 
989,526

 
158,664

 
16.0
%
Assumed premium (2)
 
104,211

 
51,322

 
52,889

 
103.1

Total gross written premium by region
 
$
1,252,401

 
$
1,040,848

 
$
211,553

 
20.3
%
 
 
 
 
 
 
 
 
 
Gross Written Premium by Line of Business
 
 
 
 
 
 
 
 
Personal property
 
$
890,515

 
$
799,097

 
$
91,418

 
11.4
%
Commercial property
 
361,886

 
241,751

 
120,135

 
49.7

Total gross written premium by line of business
 
$
1,252,401

 
$
1,040,848

 
$
211,553

 
20.3
%
(1) "Gulf" is comprised of Hawaii, Louisiana and Texas; "Northeast" is comprised of Connecticut, Massachusetts, New Jersey, New York and Rhode Island; and "Southeast" is comprised of Georgia, North Carolina and South Carolina.
(2) Assumed premium written for 2018 and 2017 included commercial property business assumed from unaffiliated insurers.


Loss and LAE increased by $43.1 million, or 11.8%, to $408.6 million for the year ended December 31, 2018, from $365.5 million for the year ended December 31, 2017. Loss and LAE expense as a percentage of net earned premiums decreased 3.1 points to 59.3% for the year ended December 31, 2018, compared to 62.4% for the year ended December 31, 2017. Excluding catastrophe losses and reserve development, the Company's gross underlying loss and LAE ratio for the year would have been 25.8%, an increase of 0.3 points from 25.5% during the year ended December 31, 2017.

Policy acquisition costs increased by $27.7 million, or 15.8%, to $203.1 million for the year ended December 31, 2018, from $175.4 million for the year ended December 31, 2017. The primary drivers of the increase in costs were the managing general agent fees paid to AmRisc in relation to AmCo commercial premium, along with agent commission costs, which were generally consistent with the Company's growth in premium production and higher average market commission rates outside of Florida. These increases were partially offset by a decrease resulting from the change in presentation of ceding commission income as an offset to policy acquisition costs.

Operating and underwriting expenses increased by $12.9 million, or 46.7%, to $40.6 million for the year ended December 31, 2018, from $27.7 million for the year ended December 31, 2017, primarily due to increased agent incentive costs from our new contingent commission program, along with incurred expenses related to the Company's investment in software and assessments incurred in Texas and North Carolina throughout the year.

General and administrative expenses decreased by $15.7 million, or 19.1%, to $66.1 million for the year ended December 31, 2018, from $81.8 million for the year ended December 31, 2017, primarily due to amortization costs related to the merger with AmCo incurred during the first three quarters of 2017 that were fully expensed at the end of the first quarter of 2018.

Combined Ratio Analysis

4



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,
2018
 
2017
 
Change
 
2018
 
2017
 
Change
Loss and LAE
$
122,196

 
$
72,137

 
$
50,059

 
$
408,589

 
$
365,535

 
$
43,054

% of Gross earned premiums
39.6
%
 
26.3
%
 
13.3
 pts
 
34.6
%
 
37.1
%
 
(2.5
) pts
% of Net earned premiums
67.2
%
 
43.4
%
 
23.8
 pts
 
59.3
%
 
62.4
%
 
(3.1
) pts
Less:
 
 
 
 
 
 
 
 
 
 
 
Current year catastrophe losses
$
41,737

 
$
1,399

 
$
40,338

 
$
99,988

 
$
116,424

 
$
(16,436
)
Prior year reserve unfavorable (favorable) development
8,525

 
206

 
8,319

 
4,318

 
(2,613
)
 
6,931

Underlying loss and LAE (1)
$
71,934

 
$
70,532

 
$
1,402

 
$
304,283

 
$
251,724

 
$
52,559

% of Gross earned premiums
23.3
%
 
25.7
%
 
(2.4
) pts
 
25.8
%
 
25.5
%
 
0.3
 pts
% of Net earned premiums
39.6
%
 
42.4
%
 
(2.8
) pts
 
44.1
%
 
43.0
%
 
1.1
 pts
(1) Underlying loss and LAE is a non-GAAP financial measure and is reconciled above to net 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 ratio and underlying expense ratios are shown below.
($ in thousands)
Three Months Ended
 
Year Ended
December 31,
 
December 31,
2018
 
2017
 
Change
 
2018
 
2017
 
Change
Policy acquisition costs
$
49,424

 
$
50,142

 
$
(718
)
 
$
203,140

 
$
175,444

 
$
27,696

Operating and underwriting
11,614

 
8,655

 
2,959

 
40,590

 
27,675

 
12,915

General and administrative
14,786

 
22,937

 
(8,151
)
 
66,112

 
81,762

 
(15,650
)
Total Operating Expenses
$
75,824

 
$
81,734

 
$
(5,910
)
 
$
309,842

 
$
284,881

 
$
24,961

% of Gross earned premiums
24.6
%
 
29.8
%
 
(5.2
) pts
 
26.2
%
 
28.9
%
 
(2.7
) pts
% of Net earned premiums
41.7
%
 
49.2
%
 
(7.5
) pts
 
45.0
%
 
48.7
%
 
(3.7
) pts
Less:
 
 
 
 
 
 
 
 
 
 
 
Ceding commission income (1)
$
—

 
$
6,990

 
$
(6,990
)
 
$
—

 
$
37,175

 
$
(37,175
)
Underlying expense (2)
$
75,824

 
$
74,744

 
$
1,080

 
$
309,842

 
$
247,706

 
$
62,136

% of Gross earned premiums
24.6
%
 
27.2
%
 
(2.6
) pts
 
26.2
%
 
25.1
%
 
1.1
 pts
% of Net earned premiums
41.7
%
 
45.0
%
 
(3.3
) pts
 
45.0
%
 
42.3
%
 
2.7
 pts
(1) For the year ended December 31, 2018, the Company presented $42.4 million of ceding commissions earned as a $9.3 million decrease in ceded earned premium and a $33.1 million decrease in policy acquisition costs, which reduced other revenue and removed the distortive impact to our underlying expense ratio. For the three months ended December 31, 2018, the Company presented $10.7 million of ceding commissions earned as a $2.1 million decrease in ceded earned premium and a $8.6 million decrease in policy acquisition costs.
(2) Underlying expense is a non-GAAP financial measure and is reconciled above to total operating expenses, 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.

Reinsurance Costs as a Percentage of Earned Premium

Excluding the Company's business for which it cedes 100% of the risk of loss, reinsurance costs in the fourth quarter of 2018 were 40.0% of gross premiums earned, compared to 37.6% of gross premiums earned for the fourth quarter of 2017. The increase in this ratio was driven primarily by the increased coverage purchased for our 2018-19 combined catastrophe reinsurance program.

Investment Portfolio Highlights

The Company's cash and investment holdings stayed consistent at $1.1 billion at December 31, 2018 and 2017. UPC Insurance'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 90.6% of total investments at December 31, 2018 compared to 89.3% at December 31, 2017. At December 31,

5


2018 our fixed maturity investments had a modified duration of 3.5 years, compared to 3.9 years at December 31, 2017.

Book Value Analysis

Book value per share decreased 3.7% from $12.56 at December 31, 2017, to $12.10 at December 31, 2018. Underlying book value per share decreased 0.3% from $12.35 at December 31, 2017, to $12.31 at December 31, 2018. A decrease in the Company's accumulated other comprehensive income drove the decrease in our book value per share. The decrease in the Company's accumulated other comprehensive income resulted from the Company's adoption of Accounting Standards Update 2016-01, which requires unrealized gains or losses on equity securities to be reflected on the income statement, rather than in other comprehensive income. Removing the effect of the decrease in accumulated other comprehensive income, our book value per share remained fairly consistent, as shown in the table below.
($ in thousands, except for share and per share data)
 
December 31,
 
December 31,
 
 
2018
 
2017
Book Value per Share
 
 
 
 
Numerator:
 
 
 
 
Common stockholders' equity attributable to UIHC
 
$
520,230

 
$
537,125

Denominator:
 
 
 
 
Total Shares Outstanding
 
42,984,578

 
42,753,054

Book Value Per Common Share
 
$
12.10

 
$
12.56

 
 
 
 
 
Book Value per Share, Excluding the Impact of Accumulated Other Comprehensive Income (AOCI)
 
 
 
 
Numerator:
 
 
 
 
Common stockholders' equity attributable to UIHC
 
$
520,230

 
$
537,125

Accumulated other comprehensive (loss) income
 
(9,030
)
 
9,221

Stockholders' Equity, excluding AOCI
 
$
529,260

 
$
527,904

Denominator:
 
 
 
 
Total Shares Outstanding
 
42,984,578

 
42,753,054

Underlying Book Value Per Common Share(1)
 
$
12.31

 
$
12.35

(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.

6


Definitions of Non-GAAP Measures

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

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

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

Operating expenses excluding the effects of ceding commission income earned, merger expenses, and amortization of intangible assets (underlying expense) is a non-GAAP measure which is computed by subtracting ceding income earned related to the Company's quota share reinsurance agreement, merger expenses and amortization of intangibles. Ceding commission income compensates the Company for expenses it incurs in generating the premium ceded under the Company's quota share reinsurance agreement. Merger expenses are directly related to past mergers and are not reflective of current period operating performance. Similarly, amortization expense is related to the amortization of intangible assets acquired through mergers and therefore the expense does not arise through normal operations. The Company believes it is useful for investors to evaluate these components separately and in the aggregate when reviewing the Company's performance. The most directly comparable GAAP measure is operating expenses. The underlying expense measure should not be considered a substitute for the operating expense ratio and does not reflect the overall profitability of the Company's business.

Net income excluding the effects of merger expenses, non-cash amortization of intangible assets, realized gains (losses) and unrealized gains (losses) on equity securities, net of tax (core income) is a non-GAAP measure which is computed by adding merger expenses and non-cash amortization, net of tax, to net income and subtracting realized gains (losses) on our investment portfolio, net of tax, and unrealized gains (losses) on our equity securities, net of tax, from net income. Merger expenses relate to professional fees associated with the AmCo merger which we completed during the second quarter of 2017. Amortization expense is related to the amortization of intangible assets acquired through merger and therefore the expense does not arise through normal operations. Investment portfolio gains (losses) and unrealized equity security gains (losses) vary independently of our operations. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance. The most directly comparable GAAP measure is net income. The core income measure should not be considered a substitute for net income and does not reflect the overall profitability of our business.

Book value per common share, excluding the impact of accumulated other comprehensive income (underlying book value per common share), is a non-GAAP measure which is computed by dividing common stockholders' equity after excluding accumulated other comprehensive income, by total common shares outstanding plus dilutive potential common shares outstanding. We use the trend in book value per common share, excluding the impact of

7


accumulated other comprehensive income, in conjunction with book value per common share to identify and analyze the change in net worth attributable to management efforts between periods. We believe the non-GAAP measure is useful to investors because it eliminates the effect of interest rates that can fluctuate significantly from period to period and are generally driven by economic and financial factors which are not influenced by management. Book value per common share is the most directly comparable GAAP measure. Book value per common share, excluding the impact of accumulated other comprehensive income, should not be considered a substitute for book value per common share, and does not reflect the recorded net worth of our business.

Conference Call Details

Date and Time:    February 19, 2019 - 5:00 P.M. ET

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

Webcast:
To listen to the live webcast, please go to www.upcinsurance.com (Investor Relations - News & Market Data - Event Calendar) and click on the conference call link, or go to: http://78449.themediaframe.com/dataconf/productusers/unin/mediaframe/28503/indexl.html. An archive of the webcast will be available for a limited period of time thereafter.

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

About UPC Insurance

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


Forward-Looking Statements

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


 ### #### ###


8


CONTACT:
 
OR
 
INVESTOR RELATIONS:
United Insurance Holdings Corp.
 
 
 
The Equity Group
Jessica Strathman
 
 
 
Adam Prior
Director of Financial Reporting
 
 
 
Senior Vice-President
(727) 895-7737 / jstrathman@upcinsurance.com
 
 
 
(212) 836-9606 / aprior@equityny.com


9


Condensed Consolidated Statements of Comprehensive Income
In thousands, except share and per share amounts

 
 
Three Months Ended
 
Year Ended
 
 
December 31,
 
December 31,
 
 
2018
 
2017
 
2018
 
2017
REVENUE:
 
 
 
 
 
 
 
 
Gross premiums written
 
$
292,187

 
$
252,440

 
$
1,252,401

 
$
1,040,848

Change in gross unearned premiums
 
16,227

 
21,933

 
(71,440
)
 
(54,825
)
Gross premiums earned
 
308,414

 
274,373

 
1,180,961

 
986,023

Ceded premiums earned
 
(126,674
)
 
(108,178
)
 
(491,685
)
 
(400,533
)
Net premiums earned
 
181,740

 
166,195

 
689,276

 
585,490

Investment income
 
7,536

 
5,323

 
27,201

 
17,812

Net realized investment gains
 
2,329

 
621

 
1,655

 
67

Net unrealized losses on equity securities
 
(14,346
)
 
—

 
(9,300
)
 
—

Other revenue
 
3,830

 
10,447

 
15,110

 
51,051

Total revenues
 
$
181,089

 
$
182,586

 
$
723,942

 
$
654,420

EXPENSES:
 
 
 
 
 
 
 
 
Losses and loss adjustment expenses
 
122,196

 
72,137

 
408,589

 
365,535

Policy acquisition costs
 
49,424

 
50,142

 
203,140

 
175,444

Operating expenses
 
11,614

 
8,655

 
40,590

 
27,675

General and administrative expenses
 
14,786

 
22,937

 
66,112

 
81,762

Interest expense
 
2,495

 
965

 
9,866

 
3,247

Total expenses
 
200,515

 
154,836

 
728,297

 
653,663

Income before other income (loss)
 
(19,426
)
 
27,750

 
(4,355
)
 
757

Other income
 
10

 
59

 
116

 
153

Income (loss) before income taxes
 
(19,416
)
 
27,809

 
(4,239
)
 
910

Provision (benefit) for income taxes
 
(8,448
)
 
808

 
(4,633
)
 
(9,235
)
Net income (loss)
 
$
(10,968
)
 
$
27,001

 
$
394

 
$
10,145

Less: Net income attributable to noncontrolling interests
 
103

 
—

 
104

 
—

Net income (loss) attributable to UIHC
 
$
(11,071
)
 
$
27,001

 
$
290

 
$
10,145

OTHER COMPREHENSIVE INCOME:
 
 
 
 
 
 
 
 
Change in net unrealized gains (losses) on investments
 
8,442

 
138

 
(22,264
)
 
10,647

Reclassification adjustment for net realized investment gains
 
(2,329
)
 
(621
)
 
(1,655
)
 
(67
)
Income tax benefit (expense) related to items of other comprehensive income
 
(1,407
)
 
2,026

 
5,703

 
(2,181
)
Total comprehensive income (loss)
 
$
(6,262
)
 
$
28,544

 
$
(17,822
)
 
$
18,544

Less: Comprehensive income attributable to noncontrolling interests
 
138

 
—

 
139

 
—

Comprehensive income (loss) attributable to UIHC
 
$
(6,400
)
 
$
28,544

 
$
(17,961
)
 
$
18,544

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
 
Basic
 
42,692,507

 
42,526,045

 
42,650,629

 
37,152,768

Diluted
 
42,692,507

 
42,753,303

 
42,838,886

 
37,375,340

 
 
 
 
 
 
 
 
 
Earnings available to UIHC common stockholders per share

 
 
 
 
 
 
 
 
Basic
 
$
(0.26
)
 
$
0.63

 
$
0.01

 
$
0.27

Diluted
 
$
(0.26
)
 
$
0.63

 
$
0.01

 
$
0.27

 
 
 
 
 
 
 
 
 
Dividends declared per share
 
$
0.06

 
$
0.06

 
$
0.24

 
$
0.24


10


Condensed Consolidated Balance Sheets
In thousands, except share amounts



 
 
December 31, 2018
 
December 31, 2017
ASSETS
 
 
 
 
Investments, at fair value:
 
 
 
 
Fixed maturities, available-for-sale
 
$
862,345

 
$
762,855

Equity securities
 
80,978

 
63,295

Other investments
 
8,513

 
8,381

Portfolio loans
 
—

 
20,000

Total investments
 
$
951,836

 
$
854,531

Cash and cash equivalents
 
112,679

 
229,556

Restricted cash
 
71,441

 
46,719

Accrued investment income
 
6,017

 
5,577

Property and equipment, net
 
17,137

 
17,291

Premiums receivable, net
 
95,816

 
75,275

Reinsurance recoverable on paid and unpaid losses
 
625,998

 
395,774

Ceded unearned premiums
 
217,885

 
201,904

Goodwill
 
73,045

 
73,045

Deferred policy acquisition costs
 
105,582

 
103,882

Intangible assets
 
31,351

 
45,271

Other assets
 
12,641

 
11,096

Total Assets
 
$
2,321,428

 
$
2,059,921

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Liabilities:
 
 
 
 
Unpaid losses and loss adjustment expenses
 
$
661,203

 
$
482,232

Unearned premiums
 
627,313

 
555,873

Reinsurance payable
 
175,272

 
149,117

Payments outstanding
 
56,534

 
41,786

Accounts payable and accrued expenses
 
71,048

 
46,594

Other liabilities
 
29,571

 
85,830

Notes payable
 
160,118

 
161,364

Total Liabilities
 
$
1,781,059

 
$
1,522,796

Commitments and contingencies
 
 
 
 
Stockholders' Equity:
 
 
 
 
Preferred stock, $0.0001 par value; 1,000,000 authorized; none issued or outstanding
 
—

 
—

Common stock, $0.0001 par value; 50,000,000 shares authorized; 43,029,845 and 42,965,137 issued, respectively; 42,984,578 and 42,753,054 outstanding, respectively

 
4

 
4

Additional paid-in capital
 
389,141

 
387,145

Treasury shares, at cost; 212,083 shares
 
(431
)
 
(431
)
Accumulated other comprehensive income
 
(9,030
)
 
9,221

Retained earnings
 
140,546

 
141,186

Total stockholders' equity attributable to UIHC stockholders
 
$
520,230

 
$
537,125

Noncontrolling interests
 
20,139

 
—

Total Stockholders' Equity
 
$
540,369

 
$
537,125

Total Liabilities and Stockholders' Equity
 
$
2,321,428

 
$
2,059,921


11