10-Q

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, 2022

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

________________________________________________________

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: 30,716,005 shares of common stock, par value $0.01 per share, outstanding on July 25, 2022.

UNIVERSAL INSURANCE HOLDINGS, INC.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
		Page No.
Item 1.	Financial Statements:	4
	Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (unaudited)	4
	Condensed Consolidated Statements of Income for the three and six-month periods ended June 30, 2022 and 2021 (unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income for the three and six-month periods ended June 30, 2022 and 2021 (unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six-month periods ended June 30, 2022 and 2021 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2022 and 2021 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	62
Item 4.	Controls and Procedures	63
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	63
Item 1A.	Risk Factors	64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 6.	Exhibits	65
Signatures		66

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, 2022 and the related condensed consolidated statements of income, comprehensive income, and stockholders’ equity for the three-month and six-month periods ended June 30, 2022 and 2021 and the related condensed consolidated statement of cash flows for the six-month periods ended June 30, 2022 and 2021. 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, 2021 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 28, 2022. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, 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

East Lansing, Michigan

July 29, 2022

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,
	2022		2021
ASSETS
Available-for-sale debt securities, at fair value, net of allowance for credit loss of $672 and $489 (amortized cost: $1,138,190 and $1,061,192)	$	1,021,006	$	1,040,455
Equity securities, at fair value (cost: $95,941 and $51,151)	79,844		47,334
Investment real estate, net	5,798		5,891
Total invested assets	1,106,648		1,093,680
Cash and cash equivalents	316,952		250,508
Restricted cash and cash equivalents	20,125		2,635
Prepaid reinsurance premiums	590,093		240,993
Reinsurance recoverable	33,344		185,589
Premiums receivable, net	79,309		64,923
Property and equipment, net	54,027		53,682
Deferred policy acquisition costs	110,983		108,822
Income taxes recoverable	22,293		16,947
Deferred income tax asset, net	30,262		16,331
Other assets	18,732		22,031
Total assets	$	2,382,768	$	2,056,141
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Unpaid losses and loss adjustment expenses	$	186,349	$	346,216
Unearned premiums	943,369		857,769
Advance premium	86,271		53,694
Book overdraft	—		26,759
Reinsurance payable, net	637,846		188,662
Commission payable	25,946		22,315
Other liabilities and accrued expenses	33,275		27,348
Long-term debt, net	103,161		103,676
Total liabilities	2,016,217		1,626,439
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	471		470
Authorized shares - 55,000
Issued shares - 47,116 and 47,018
Outstanding shares - 30,716 and 31,221
Treasury shares, at cost - 16,400 and 15,797	(234,496)		(227,115)
Additional paid-in capital	110,089		108,202
Accumulated other comprehensive income (loss), net of taxes	(88,134)		(15,568)
Retained earnings	578,621		563,713
Total stockholders’ equity	366,551		429,702
Total liabilities and stockholders’ equity	$	2,382,768	$	2,056,141

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,
	2022		2021		2022		2021
REVENUES
Direct premiums written	$	532,527	$	473,627	$	929,008	$	838,941
Change in unearned premium	(103,722)		(81,053)		(85,600)		(70,761)
Direct premium earned	428,805		392,574		843,408		768,180
Ceded premium earned	(151,744)		(136,402)		(297,283)		(268,703)
Premiums earned, net	277,061		256,172		546,125		499,477
Net investment income	5,221		2,858		9,263		5,844
Net realized gains (losses) on investments	(725)		496		(667)		1,038
Net change in unrealized gains (losses) of equity securities	(8,884)		1,229		(12,280)		735
Commission revenue	11,404		9,860		22,565		18,986
Policy fees	5,940		6,575		10,719		11,962
Other revenue	1,989		1,991		3,763		3,896
Total revenues	292,006		279,181		579,488		541,938
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses	200,304		167,221		385,410		311,184
General and administrative expenses	79,291		81,866		157,588		164,289
Total operating costs and expenses	279,595		249,087		542,998		475,473
Interest and amortization of debt issuance costs	1,731		35		3,339		55
INCOME (LOSS) BEFORE INCOME TAXES	10,680		30,059		33,151		66,410
Income tax expense (benefit)	3,310		8,118		8,244		18,061
NET INCOME (LOSS)	$	7,370	$	21,941	$	24,907	$	48,349
Basic earnings (loss) per common share	$	0.24	$	0.70	$	0.80	$	1.55
Weighted average common shares outstanding - Basic	30,829		31,240		30,987		31,224
Diluted earnings (loss) per common share	$	0.24	$	0.70	$	0.80	$	1.54
Weighted average common shares outstanding - Diluted	30,883		31,310		31,060		31,292
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,
	2022		2021		2022		2021
Net income (loss)	$	7,370	$	21,941	$	24,907	$	48,349
Other comprehensive income (loss), net of taxes	(29,656)		7,996		(72,566)		(8,914)
Comprehensive income (loss)	$	(22,286)	$	29,937	$	(47,659)	$	39,435

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, 2022 AND 2021 (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, 2021	(15,797)		47,018	10	$	470	$	—	$	108,202	$	563,713	$	(15,568)	$	(227,115)	$	429,702
Vesting of performance share units	(9)	(1)	33	—	1		—		(1)		—		—		(104)		(104)
Vesting of restricted stock units	(6)	(1)	27	—	—		—		—		—		—		(105)		(105)
Retirement of treasury shares	15	(1)	(15)	—	—		—		(209)		—		—		209		—
Purchases of treasury stock	(320)		—	—	—		—		—		—		—		(3,879)		(3,879)
Share-based compensation	—		—	—	—		—		1,107		—		—		—		1,107
Net income	—		—	—	—		—		—		17,537		—		—		17,537
Other comprehensive loss, net of taxes	—		—	—	—		—		—		—		(42,910)		—		(42,910)
Declaration of dividends ($0.16 per common share and $0.25 per preferred share)	—		—	—	—		—		—		(5,007)		—		—		(5,007)
Balance, March 31, 2022	(16,117)		47,063	10	471		—		109,099		576,243		(58,478)		(230,994)		396,341
Grant of restricted stock awards	—		53	—	—		—		—		—		—		—		—
Purchases of treasury stock	(283)		—	—	—		—		—		—		—		(3,502)		(3,502)
Share-based compensation	—		—	—	—		—		990		—		—		—		990
Net income	—		—	—	—		—		—		7,370		—		—		7,370
Other comprehensive income, net of taxes	—		—	—	—		—		—		—		(29,656)		—		(29,656)
Declaration of dividends ($0.16 per common share and $0.25 per preferred share)	—		—	—	—		—		—		(4,992)		—		—		(4,992)
Balance, June 30, 2022	(16,400)		47,116	10	$	471	$	—	$	110,089	$	578,621	$	(88,134)	$	(234,496)	$	366,551

(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, 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		—		(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		—		(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.

7

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)

	Six Months Ended
	June 30,
	2022		2021
Cash flows from operating activities:
Net cash provided by operating activities	$	225,424	$	257,120
Cash flows from investing activities:
Proceeds from sale of property and equipment	1		28
Purchases of property and equipment	(3,793)		(3,024)
Purchases of equity securities	(55,273)		(14,192)
Purchases of available-for-sale debt securities	(134,899)		(237,353)
Proceeds from sales of equity securities	17,692		5,165
Proceeds from sales of available-for-sale debt securities	19,534		60,978
Proceeds from sales of investment real estate	—		2,591
Maturities of available-for-sale debt securities	33,683		53,313
Net cash provided by (used in) investing activities	(123,055)		(132,494)
Cash flows from financing activities:
Debt issuance costs paid	(131)		—
Preferred stock dividend	(5)		(5)
Common stock dividend	(9,974)		(10,101)
Purchase of treasury stock	(7,381)		(245)
Payments related to tax withholding for share-based compensation	(209)		(784)
Repayment of debt	(735)		(735)
Net cash provided by (used in) financing activities	(18,435)		(11,870)
Cash and cash equivalents and restricted cash and cash equivalents:
Net increase (decrease) during the period	83,934		112,756
Balance, beginning of period	253,143		179,871
Balance, end of period	$	337,077	$	292,627

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,
	2022		2021
Cash and cash equivalents	$	316,952	$	250,508
Restricted cash and cash equivalents (1)	20,125		2,635
Total cash and cash equivalents and restricted cash and cash equivalents	$	337,077	$	253,143

(1)See “—Note 5 (Insurance Operations)” for a discussion of the nature of the restrictions for restricted cash and cash equivalents.

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, 2022, 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 (“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, 2021, filed with the SEC on February 28, 2022. The Condensed Consolidated Balance Sheet at December 31, 2021 was derived from audited financial statements, but does not include all disclosures required by 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 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, 2021. There are no new or revised disclosures or disclosures required on a quarterly basis.

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, 2022
	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities:
U.S. government obligations and agencies	$	21,403	$	—	$	—	$	(791)	$	20,612
Corporate bonds	763,806		(548)		52		(80,813)		682,497
Mortgage-backed and asset-backed securities	328,934		—		331		(31,872)		297,393
Municipal bonds	14,924		—		—		(1,933)		12,991
Redeemable preferred stock	9,123		(124)		—		(1,486)		7,513
Total	$	1,138,190	$	(672)	$	383	$	(116,895)	$	1,021,006

	December 31, 2021
	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities:
U.S. government obligations and agencies	$	27,076	$	—	$	64	$	(334)	$	26,806
Corporate bonds	687,058		(371)		843		(13,725)		673,805
Mortgage-backed and asset-backed securities	322,844		—		194		(6,920)		316,118
Municipal bonds	14,925		(1)		—		(350)		14,574
Redeemable preferred stock	9,289		(117)		28		(48)		9,152
Total	$	1,061,192	$	(489)	$	1,129	$	(21,377)	$	1,040,455

The following table provides the credit quality of available-for-sale debt securities with contractual maturities as of the dates presented (dollars in thousands):

	June 30, 2022				December 31, 2021
Average Credit Ratings	Fair Value		% of Total  Fair Value		Fair Value		% of Total  Fair Value
AAA	$	304,540	29.8	%	$	321,975	31.0	%
AA	150,164		14.7	%	139,186		13.4	%
A	331,360		32.5	%	339,500		32.6	%
BBB	231,083		22.6	%	234,358		22.5	%
No Rating Available	3,859		0.4	%	5,436		0.5	%
Total	$	1,021,006	100.0	%	$	1,040,455	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, 2022				December 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Mortgage-backed securities:
Agency	$	151,087	$	133,353	$	147,992	$	143,819
Non-agency	60,518		52,341		59,906		58,263
Asset-backed securities:
Auto loan receivables	72,268		69,488		67,352		66,877
Credit card receivables	2,036		1,990		4,741		4,719
Other receivables	43,025		40,221		42,853		42,440
Total	$	328,934	$	297,393	$	322,844	$	316,118

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, 2022
	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	3	$	11,554	$	(80)	5	$	9,058	$	(711)
Corporate bonds	175	230,149		(23,682)		95	113,327		(17,574)
Mortgage-backed and asset-backed securities	131	157,635		(11,032)		73	133,065		(20,840)
Municipal bonds	9	9,655		(1,265)		1	3,336		(669)
Redeemable preferred stock	5	1,461		(283)		—	—		—
Total	323	$	410,454	$	(36,342)	174	$	258,786	$	(39,794)

	December 31, 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	4	$	18,913	$	(111)	4	$	5,016	$	(223)
Corporate bonds	249	378,595		(7,468)		18	17,356		(679)
Mortgage-backed and asset-backed securities	145	274,883		(5,969)		11	23,273		(951)
Municipal bonds	5	9,811		(269)		—	—		—
Redeemable preferred stock	1	200		(1)		—	—		—
Total	404	$	682,402	$	(13,818)	33	$	45,645	$	(1,853)

Unrealized losses on available-for-sale debt securities in the above table as of June 30, 2022 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, 2020	$	148	$	—	$	38	$	186
Provision for (or reversal of) credit loss expense	223		1		79		303
Balance, December 31, 2021	371		1		117		489
Provision for (or reversal of) credit loss expense	177		(1)		7		183
Balance, June 30, 2022	$	548	$	—	$	124	$	672

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 and are reported in general and administrative expenses in the Condensed Consolidated Statements of Income. 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, 2022
	Amortized Cost		Fair Value
Due in one year or less	$	64,252	$	63,354
Due after one year through five years	528,033		486,015
Due after five years through ten years	512,416		444,405
Due after ten years	31,245		25,421
Perpetual maturity securities	2,244		1,811
Total	$	1,138,190	$	1,021,006

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,
	2022		2021		2022		2021
Proceeds from sales and maturities (fair value):
Available-for-sale debt securities	$	27,911	$	61,658	$	53,217	$	114,291
Equity securities	$	2,760	$	3,589	$	17,692	$	5,165
Gross realized gains on sale of securities:
Available-for-sale debt securities	$	236	$	895	$	242	$	1,017
Equity securities	$	224	$	741	$	548	$	1,084
Gross realized losses on sale of securities:
Available-for-sale debt securities	$	(1,185)	$	(1,140)	$	(1,455)	$	(1,464)
Equity securities	$	—	$	—	$	(2)	$	—
Realized gains on sales of investment real estate (1)	$	—	$	—	$	—	$	401

(1) During the first quarter of 2021, the Company completed the sale of a non-income producing 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.

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,
	2022		2021		2022		2021
Available-for-sale debt securities	$	4,877	$	2,765	$	8,944	$	5,594
Equity securities	690		652		1,225		1,243
Cash and cash equivalents (1)	233		15		255		26
Other (2)	121		267		249		535
Total investment income	5,921		3,699		10,673		7,398
Less: Investment expenses (3)	(700)		(841)		(1,410)		(1,554)
Net investment income	$	5,221	$	2,858	$	9,263	$	5,844

(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,
	2022		2021		2022		2021
Unrealized gains (losses) recognized during the reported period on equity securities still held at the end of the reported period	$	(8,884)	$	1,546	$	(12,237)	$	1,027

14

Investment Real Estate

Investment real estate consisted of the following as of the dates presented (in thousands):

	June 30,		December 31,
	2022		2021
Income Producing:
Investment real estate	$	7,091	$	7,091
Less: Accumulated depreciation	(1,293)		(1,200)
Investment real estate, net	$	5,798	$	5,891

The following table provides the depreciation expense related to investment real estate for the periods presented (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Depreciation expense on investment real estate	$	47	$	46	$	93	$	92

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.

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, 2022			Due from as of
Reinsurer	AM Best Company	Standard and Poor’s Rating Services, Inc.	Moody’s Investors Service, Inc.	June 30, 2022		December 31, 2021
Florida Hurricane Catastrophe Fund (1)	n/a	n/a	n/a	$	—	$	136,298
Allianz Risk Transfer (Bermuda) Ltd.	—	—	—	—		44,618
Renaissance Reinsurance Ltd.	—	—	—	—		20,051
Total (2)				$	—	$	200,967

(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,
	2022						2021
	Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses		Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses
Direct	$	532,527	$	428,805	$	260,230	$	473,627	$	392,574	$	276,302
Ceded	(632,437)		(151,744)		(59,926)		(568,489)		(136,402)		(109,081)
	$	(99,910)	$	277,061	$	200,304	$	(94,862)	$	256,172	$	167,221

	Six Months Ended June 30,
	2022						2021
	Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses		Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses
Direct	$	929,008	$	843,408	$	455,385	$	838,941	$	768,180	$	513,600
Ceded	(646,383)		(297,283)		(69,975)		(585,289)		(268,703)		(202,416)
Net	$	282,625	$	546,125	$	385,410	$	253,652	$	499,477	$	311,184

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,
	2022		2021
Prepaid reinsurance premiums	$	590,093	$	240,993
Reinsurance recoverable on paid losses and LAE	$	14,372	$	69,729
Reinsurance recoverable on unpaid losses and LAE	18,972		115,860
Reinsurance recoverable	$	33,344	$	185,589

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,
	2022		2021		2022		2021
DPAC, beginning of period	$	103,622	$	111,193	$	108,822	$	110,614
Capitalized Costs	61,232		61,220		110,431		115,942
Amortization of DPAC	(53,871)		(56,442)		(108,270)		(110,585)
DPAC, end of period	$	110,983	$	115,971	$	110,983	$	115,971

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 include a requirement that the Insurance Entities 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 funds 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, 2021, UPCIC and APPCIC currently are not able to pay any ordinary dividends during 2022. For the six months ended June 30, 2022 and 2021, no dividends were paid from the Insurance Entities to PSI.

The Florida Insurance Code requires a residential property insurance company to maintain statutory surplus as to policyholders of at least $15.0 million or ten percent of the insurer’s total liabilities, whichever is greater. The following table presents the amount of capital and surplus calculated in accordance with statutory accounting principles, which differs from GAAP, and an amount representing ten percent of total liabilities for each of the Insurance Entities as of the dates presented (in thousands):

	June 30, 2022		December 31, 2021
Statutory capital and surplus
UPCIC	$	398,361	$	378,750
APPCIC	$	22,118	$	16,104
Ten percent of total liabilities
UPCIC	$	139,748	$	122,292
APPCIC	$	1,953	$	649

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 are licensed as of June 30, 2022. Annually, the Insurance Entities each are also required to adhere to prescribed premium-to-capital surplus ratios and each have met those requirements.

18

The following table summarizes combined net income (loss) 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,
	2022		2021		2022		2021
Combined net income (loss)	$	(142)	$	8,557	$	(12,075)	$	1,180

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, 2022		December 31, 2021
Restricted cash and cash equivalents	$	2,635	$	2,635
Investments	$	3,308	$	3,441

19

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,
	2022		2021		2022		2021
Balance at beginning of period	$	244,482	$	315,780	$	346,216	$	322,465
Less: Reinsurance recoverable	(65,403)		(118,671)		(115,860)		(119,522)
Net balance at beginning of period	179,079		197,109		230,356		202,943
Incurred related to:
Current year	196,594		159,490		381,045		304,690
Prior years	3,710		7,731		4,365		6,494
Total incurred	200,304		167,221		385,410		311,184
Paid related to:
Current year	164,888		151,348		236,615		205,829
Prior years	47,118		47,481		211,774		142,797
Total paid	212,006		198,829		448,389		348,626
Net balance at end of period	167,377		165,501		167,377		165,501
Plus: Reinsurance recoverable	18,972		113,157		18,972		113,157
Balance at end of period	$	186,349	$	278,658	$	186,349	$	278,658

During the three months ended June 30, 2022, there was adverse prior years’ reserve development of $63.6 million gross, less $59.9 million ceded, resulting in $3.7 million net unfavorable development. The direct and net prior years’ reserve development for the quarter ended June 30, 2022 was principally due to gross reserve development on Hurricane Irma of $39.3 million, of which $35.6 million was ceded, resulting in net development on Hurricane Irma of $3.7 million in the quarter. In addition to Hurricane Irma development, the Company concluded a favorable commutation during the quarter, favorably increasing ceded prior year loss payments which was offset by a provisory increase in direct prior incurred but not reported (“IBNR”) amount, resulting in no net effect.

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 loss 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 six months ended June 30, 2022, there was adverse prior years’ reserve development of $74.3 million gross, less $69.9 million ceded, resulting in $4.4 million net development. The direct and net prior years’ reserve development for the six months ended June 30, 2022 was principally due to a gross reserve development on Hurricane Irma of $49.8 million, of which $45.6 million was ceded, resulting in net development on Hurricane Irma of $4.2 million in the period. Additionally, the Company concluded a favorable commutation during the quarter, favorably increasing ceded prior year loss payments which was offset by a provisory direct prior year IBNR amount, resulting in no net effect. Hurricane Matthew direct and net losses increased $0.1 million.

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.

20

7. Long-term Debt

Long-term debt consists of the following as of the dates presented (in thousands):

	June 30,		December 31,
	2022		2021
Surplus note	$	6,250	$	6,985
5.625% Senior unsecured notes	100,000		100,000
Total principal amount	106,250		106,985
Less: unamortized debt issuance costs	(3,089)		(3,309)
Total long-term debt, net	$	103,161	$	103,676

Surplus Note

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, 2022.

Senior Unsecured Notes

On November 23, 2021, the Company entered into Note Purchase Agreements with certain institutional accredited investors and qualified institutional buyers pursuant to which the Company issued and sold $100 million of 5.625% Senior Unsecured Notes due 2026 (the “Notes”). The Purchase Agreements contain certain customary representations, warranties and covenants made by the Company.

The Notes were offered and sold by the Company in a private placement transaction in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended. On March 24, 2022, the Registration Statement registering the exchange of Notes for registered Notes was declared effective by the Securities and Exchange Commission, and all of the Notes have since been exchanged for registered Notes with identical financial terms.

The Notes are senior unsecured debt obligations that bear interest at the rate of 5.625% per annum, payable semi-annually in arrears on May 30th and November 30th of each year, beginning on May 30, 2022. The Notes are subject to adjustment from time to time in the event of a downgrade or subsequent upgrade of the rating assigned to the Notes. The Notes mature on November 26, 2026 at which time the entire $100.0 million of principal is due and payable. At any time on or after November 30, 2023, the Company may redeem all or part of the Notes at redemption prices (expressed as percentages of the principal amount) equal to (i) 102.81250% for the twelve-month period beginning on November 30, 2023; (ii) 101.40625% for the twelve-month period beginning on November 30, 2024 and (iii) 100.000% at any time thereafter, plus accrued and unpaid interest up to, but not including the redemption date.

The indenture governing the Notes contains financial covenants, terms, events of default and related cure provisions that are customary in agreements used in connection with similar transactions. As of June 30, 2022, the Company was in compliance with all applicable covenants, including financial covenants.

The Notes are unsecured senior obligations of the Company, are not obligations of, and are not guaranteed by, any subsidiary of the Company. The Notes rank equally in right of payment to the Unsecured Revolving Loan described below.

Unsecured Revolving Loan

In August 2021, the Company entered into a credit agreement and related revolving loan (“Revolving Loan”) with JPMorgan Chase Bank, N.A. (“JPMorgan”). The Revolving Loan makes available to the Company an unsecured revolving credit facility with an aggregate commitment not to exceed $35.0 million and carries an interest rate of prime rate plus a margin of 2%. The Company must pay an annual commitment of 0.50% of the unused portion of the commitment. Borrowings under the Revolving Loan mature 364 days after the date of the loan. The revolving credit facility with JP Morgan Chase Bank, N.A. is subject to annual renewals each August.

The Revolving Loan contains customary financial covenants. As of June 30, 2022, the Company was in compliance with all applicable covenants, including financial covenants. The Company has not drawn any amount under the Revolving Loan as of June 30, 2022.

21

Interest Expense

The following table provides interest expense related to long-term debt during the periods presented (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Interest Expense:
Surplus note	$	39	$	35	$	66	$	55
5.625% Senior unsecured notes	1,516		—		2,922		—
Non-cash expense (1)	176		—		351		—
Total	$	1,731	$	35	$	3,339	$	55

(1) Represents amortization of debt issuance costs.

22

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		2022	2021	Price		Repurchased		Plan Completed
November 3, 2020	November 3, 2022	$	20,000	603,080	—	$	7,381	$	12.24
November 3, 2020	November 3, 2022	$	20,000	—	15,444	$	245	$	15.87

See the “Condensed Consolidated Statements of Stockholders’ Equity” for a roll-forward of treasury shares.

23

9. Income Taxes

During the three months ended June 30, 2022 and 2021, the Company recorded approximately $3.3 million and $8.1 million of income tax expense, respectively. The effective tax rate (“ETR”) for the three months ended June 30, 2022 was 31.0% compared to a 27.0% ETR for the same period in 2021.

During the six months ended June 30, 2022 and 2021, the Company recorded approximately $8.2 million and $18.1 million of income tax expense, respectively. The ETR for the six months ended June 30, 2022 was 24.9% compared to a 27.2% ETR for the same period in 2021.

In calculating these rates, the Company considered a variety of factors including the forecasted full year pre-tax results, the 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 27.2% for 2022, calculated before the impact of discrete items. The effect of reporting discrete items through June 30, 2022 amounts to a decrease to the annual estimated ETR of 230 basis points, resulting in an ETR for the year to date period of 24.9%. The annual estimated ETR includes a statutory federal income tax rate of 21% and a statutory state income tax rate, net of federal benefit, of 3.4%.

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, and determined that a valuation allowance is not required on any of the deferred tax assets. 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 income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. As of June 30, 2022, the Company’s 2018 through 2020 tax years are still subject to examination by the Internal Revenue Service and various tax years remain open to examination in certain state jurisdictions.

24

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,
	2022		2021		2022		2021
Numerator for EPS:
Net income (loss)	$	7,370	$	21,941	$	24,907	$	48,349
Less: Preferred stock dividends	(2)		(2)		(5)		(5)
Income (loss) available to common stockholders	$	7,368	$	21,939	$	24,902	$	48,344
Denominator for EPS:
Weighted average common shares outstanding	30,829		31,240		30,987		31,224
Plus: Assumed conversion of share-based compensation (1)	29		45		48		43
Assumed conversion of preferred stock	25		25		25		25
Weighted average diluted common shares outstanding	30,883		31,310		31,060		31,292
Basic earnings (loss) per common share	$	0.24	$	0.70	$	0.80	$	1.55
Diluted earnings (loss) per common share	$	0.24	$	0.70	$	0.80	$	1.54

(1) Represents the dilutive effect of unexercised stock options, unvested performance share units, unvested restricted stock units and unvested restricted stock.

25

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,
	2022						2021
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Net changes related to available-for-sale securities:
Unrealized holding gains (losses) arising during the period	$	(40,272)	$	(9,900)	$	(30,372)	$	10,264	$	2,454	$	7,810
Less: Reclassification adjustments for (gains) losses  realized in net income (loss)	949		233		716		245		59		186
Other comprehensive income (loss)	$	(39,323)	$	(9,667)	$	(29,656)	$	10,509	$	2,513	$	7,996

	Six Months Ended June 30,
	2022						2021
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Net changes related to available-for-sale securities:
Unrealized holding gains (losses) arising during the period	$	(97,433)	$	(23,952)	$	(73,481)	$	(12,161)	$	(2,907)	$	(9,254)
Less: Reclassification adjustments for (gains) losses  realized in net income (loss)	1,213		298		915		447		107		340
Other comprehensive income (loss)	$	(96,220)	$	(23,654)	$	(72,566)	$	(11,714)	$	(2,800)	$	(8,914)

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,
	2022		2021		2022		2021
Unrealized gains (losses) on available-for-sale debt securities
	$	(949)	$	(245)	$	(1,213)	$	(447)	Net realized gains (losses) on sale of securities
	233		59		298		107		Income taxes
Total reclassification for the period	$	(716)	$	(186)	$	(915)	$	(340)	Net of tax

26

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 Company’s reinsurance commitments generally 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 the reinsurance agreement. Amounts payable for coverage for the second 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) $80.5 million in 2023, (2) $91.5 million in 2024, and (3) $66.3 million in 2025.

Litigation

Lawsuits and other legal proceedings are filed against the Company from time to time. Many of these legal proceedings 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 to claims under the Company’s policies that arise in the ordinary course of business operations. Management believes that any liabilities that may arise as a result of these legal matters will not have a material adverse effect on the Company’s financial condition or results of operations. The Company contests liability and/or the amount of damages as appropriate in each pending matter.

In accordance with applicable accounting guidance, the Company establishes an accrued liability for legal matters when those matters present loss contingencies that are both probable and estimable.

Legal proceedings are subject to many uncertain factors that generally cannot be predicted with certainty, and the Company may be exposed to losses in excess of any amounts accrued. The Company currently estimates that the reasonably possible losses for legal proceedings, whether in excess of a related accrued liability or where there is no accrued liability, and for which the Company is able to estimate a possible loss, are immaterial. This represents management’s estimate of possible loss with respect to these matters and is based on currently available information. These estimates of possible loss do not represent our maximum loss exposure, and actual results may vary significantly from current estimates.

27

13. Fair Value Measurements

GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. GAAP describes three approaches to measuring the fair value of assets and liabilities: the market approach, the income approach and the cost approach. Each approach includes multiple valuation techniques. GAAP does not prescribe which valuation technique should be used when measuring fair value, but does establish a fair value hierarchy that prioritizes the inputs used in applying the various techniques. Inputs broadly refer to the assumptions that market participants use to make pricing decisions, including assumptions about risk. Level 1 inputs are given the highest priority in the hierarchy while Level 3 inputs are given the lowest priority. Assets and liabilities carried at fair value are classified in one of the following three categories based on the nature of the inputs to the valuation technique used:

•Level 1 — Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

•Level 2 — Observable market-based inputs or unobservable inputs that are corroborated by market data.

•Level 3 — Unobservable inputs that are not corroborated by market data. These inputs reflect management’s best estimate of fair value using its own assumptions about the assumptions a market participant would use in pricing the asset or liability.

Summary of Significant Valuation Techniques for Assets Measured at Fair Value on a Recurring Basis

Level 1

Common stock: Comprise actively traded, exchange-listed U.S. and international equity securities. Valuation is based on unadjusted quoted prices for identical assets in active markets that the Company can access.

Mutual funds: Comprise actively traded funds. Valuation is based on daily quoted net asset values for identical assets in active markets that the Company can access.

Level 2

U.S. government obligations and agencies: Comprise U.S. Treasury Bills or Notes or U.S. Treasury Inflation Protected Securities. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields and credit spreads.

Corporate bonds: Comprise investment-grade debt securities. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields and credit spreads.

Mortgage-backed and asset-backed securities: Comprise securities that are collateralized by mortgage obligations and other assets. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields, collateral performance and credit spreads.

Municipal bonds: Comprise debt securities issued by a state, municipality or county. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields and credit spreads.

Redeemable preferred stock: Comprise preferred stock securities that are redeemable. The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active.

As required by GAAP, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the placement of the asset or liability within the fair value hierarchy levels.

28

The following tables set forth by level within the fair value hierarchy the Company’s assets measured at fair value on a recurring basis as of the dates presented (in thousands):

	Fair Value Measurements
	June 30, 2022
	Level 1		Level 2		Level 3		Total
Available-For-Sale Debt Securities:
U.S. government obligations and agencies	$	—	$	20,612	$	—	$	20,612
Corporate bonds	—		682,497		—		682,497
Mortgage-backed and asset-backed securities	—		297,393		—		297,393
Municipal bonds	—		12,991		—		12,991
Redeemable preferred stock	—		7,513		—		7,513
Equity Securities:
Common stock	22,202		—		—		22,202
Mutual funds	57,642		—		—		57,642
Total assets accounted for at fair value	$	79,844	$	1,021,006	$	—	$	1,100,850

	Fair Value Measurements
	December 31, 2021
	Level 1		Level 2		Level 3		Total
Available-For-Sale Debt Securities:
U.S. government obligations and agencies	$	—	$	26,806	$	—	$	26,806
Corporate bonds	—		673,805		—		673,805
Mortgage-backed and asset-backed securities	—		316,118		—		316,118
Municipal bonds	—		14,574		—		14,574
Redeemable preferred stock	—		9,152		—		9,152
Equity Securities:
Common stock	3,683		—		—		3,683
Mutual funds	43,651		—		—		43,651
Total assets accounted for at fair value	$	47,334	$	1,040,455	$	—	$	1,087,789

The Company utilizes third-party independent pricing services that provide a price quote for each available-for-sale debt security and equity security. Management reviews the methodology used by the pricing services. If management believes that the price used by the pricing service does not reflect an orderly transaction between participants, management will use an alternative valuation methodology. There were no adjustments made by the Company to the prices obtained from the independent pricing source for any available-for-sale debt security or equity security included in the tables above.

The following table summarizes the carrying value and estimated fair values of the Company’s financial instruments not carried at fair value as of the dates presented (in thousands):

	June 30, 2022				December 31, 2021
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Liabilities (debt):
Surplus note (1)	$	6,250	$	5,933	$	6,985	$	6,723
5.625% Senior unsecured notes (2)	100,000		99,614		100,000		99,464
Total debt	$	106,250	$	105,547	$	106,985	$	106,187

(1) The fair value of the surplus note was determined by management from the expected cash flows discounted using the interest rate quoted by the holder. The SBA is the holder of the surplus note and the quoted interest rate is below prevailing rates quoted by private lending institutions. However, as the Company’s use of funds from the surplus note is limited by the terms of the agreement, the Company has determined the interest rate quoted by the SBA to be appropriate for purposes of establishing the fair value of the note (Level 3).

(2) The fair value of the senior unsecured notes was determined based on pricing from quoted prices for similar assets in active markets and was included as Level 2.

29

14. Variable Interest Entities

The Company entered into a reinsurance arrangement effective June 1, 2022 with its existing captive reinsurance arrangement with Isosceles Insurance Ltd. with the establishment of “Separate Account UVE-01”, a VIE in the normal course of business and consolidated the VIE since the Company is the primary beneficiary. The primary beneficiary analysis includes a review of the VIE’s capital structure, related contractual relationships and terms, nature of the VIE’s operations and purpose, nature of the VIE’s interests issued and the Company’s involvement with the entity. When assessing the need to consolidate a VIE, the Company evaluates the design of the VIE as well as the related risks to which the entity was designed to expose the variable interest holders. The primary beneficiary is the entity that has both (i) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (ii) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the Company’s decision-making ability and its ability to influence activities that significantly affect the economic performance of the VIE.

The reinsurance captive arrangement entered into in the prior year, which was effective June 1, 2021 through May 31, 2022, was terminated effective December 1, 2021, pursuant to the terms of the agreement. In connection with the termination of the agreement, the affiliates agreed to release funds held in trust due to one of the Insurance Entities (UPCIC) and the balance to the participant of the separate account (UVE) in December 2021.

The following table presents, on a consolidated basis, the balance sheet classification and exposure of restricted cash held in a reinsurance trust account, which can be used only to settle specific reinsurance obligations of the VIE as of the dates presented

	June 30, 2022		December 31, 2021
Restricted cash and cash equivalents	$	17,490	$	—

30

15. Subsequent Events

The Company performed an evaluation of subsequent events through the date the financial statements were issued and determined there were no recognized or unrecognized subsequent events that would require an adjustment or additional disclosure in the condensed consolidated financial statements as of June 30, 2022.

On July 19, 2022, the Company declared a quarterly cash dividend of $0.16 per share of common stock payable August 9, 2022, to shareholders of record on August 2, 2022.

31

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, all references to “we,” “us,” “our,” and “Company” refer to Universal Insurance Holdings, Inc. (“UVE”) and its wholly-owned subsidiaries. You should read the following discussion together with our unaudited condensed consolidated financial statements (“Financial Statements”) and the related notes thereto included in “Part I, Item 1—Financial Statements,” and our audited condensed consolidated financial statements and the related notes thereto included in “Part II, Item 8—Financial Statements and Supplementary Data” in our Annual Report on Form 10-K for the year ended December 31, 2021. Operating results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for the year.

Cautionary Note Regarding Forward-Looking Statements

In addition to historical information, this report may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These forward-looking statements may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets,” and other words with similar meanings. These statements may address, among other things, our strategy for growth, catastrophe exposure and other risk management, product development, investment results, regulatory approvals, market position, expenses, financial results, litigation and reserves. We believe that 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 as a result of the risks set forth below, which are a summary of those set forth in our Annual Report on Form 10-K for the year ended December 31, 2021. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

Risks and uncertainties that may affect, or have affected, our financial condition and operating results include, but are not limited to, the following:

•Unanticipated increases in the severity or frequency of claims, including those relating to catastrophes, severe weather events and changing climate conditions, which, in some instances, have exceeded, and in the future may exceed our reserves established for claims;

•Failure of our risk mitigation strategies, including failure to accurately and adequately price the risks we underwrite and to include effective exclusions and other loss limitation provisions in our insurance policies;

•Loss of independent insurance agents and inability to attract new independent agents;

•Reliance on models, which are inherently uncertain, as a tool to evaluate risks;

•The continued availability of reinsurance at current levels and prices, and our ability to collect payments due from our reinsurers;

•Changes in industry trends, including changes due to the cyclical nature of the industry and increased competition;

•Geographic concentration of our business in Florida and the effectiveness of our growth and diversification strategy in new markets;

•Loss of key personnel and inability to attract and retain talented employees;

•Failure to comply with existing and future guidelines, policies and legal and regulatory standards;

•The ability of our claims professionals to effectively manage claims;

•Litigation or regulatory actions that could result in significant damages, fines or penalties;

•A downgrade in our Financial Stability Rating® and its impact on our competitive position, the marketability of our product offerings, our liquidity and profitability;

•The impact on our business and reputation of data and security breaches due to cyber-attacks or our inability to effectively adapt to changes in technology;

•Our dependence on the returns of our investment portfolio, which are subject to market risk;

•Legal, regulatory or tax changes that increase our operating costs and decrease our profitability, such as limitations on rate changes or requirements to participate in loss sharing;

•Our dependence on dividends and permissible payments from our subsidiaries;

•The ability of our Insurance Entities to comply with statutory capital and surplus minimums and other regulatory and licensing requirements; and

•The ongoing impact of the COVID-19 pandemic on our business and the economy in general.

32

OVERVIEW

We are a vertically integrated holding company offering property and casualty insurance and value-added insurance services. We develop, market and underwrite insurance products for consumers predominantly in the personal residential homeowners’ line of business and perform substantially all other insurance-related services for our primary insurance entities, including risk management, claims management, and distribution. Our primary insurance entities, Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC” and together with UPCIC, the “Insurance Entities”), offer insurance products through both our appointed independent agent network and our online distribution channels across 19 states (primarily in Florida), with licenses to write insurance in two additional states. The Insurance Entities seek to produce an underwriting profit (defined as earned premium minus losses, loss adjustment expense (“LAE”), policy acquisition costs and other operating costs) over the long term; maintain a conservative balance sheet to prepare for years in which the Insurance Entities are not able to achieve an underwriting profit; and generate investment income on assets.

The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our financial condition and results of operations. This MD&A should be read in conjunction with our Financial Statements and accompanying Notes appearing elsewhere in this Report (the “Notes”). In addition, reference should be made to our audited Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements and “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021. Except for the historical information contained herein, the discussions in this MD&A contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed above under “Cautionary Note Regarding Forward-Looking Statements.”

Trends

Florida Trends

We are currently working through a cycle to improve long-term rate adequacy and earnings for the Insurance Entities by increasing rates and managing exposures, while taking advantage of what we believe to be opportunities in a dislocated market. The Florida personal lines homeowners’ market currently can be characterized as a “hard market”, where insurance premium rates are escalating, insurers are reducing coverages, and underwriting standards are tightening as insurers closely monitor insurance rates and manage coverage capacity. Due to conditions in the Florida market and factors more generally affecting the U.S. and global reinsurance markets, reinsurance capacity in recent years has also been subject to less favorable pricing and terms. These market forces decrease competition among admitted insurers, and ultimately result in the increased use of Citizens Property Insurance Corporation (“Citizens”), which was created to be the State’s residual property insurance market. In recent years, in response to adverse behaviors and conditions in the Florida residential market, most admitted market competitors have sought and often received approval for significant rate increases. Meanwhile, Citizens’ rate increases are limited by law, resulting in its policies, in a hard market, becoming priced lower than admitted market policies. This causes Citizens to become viewed as a desirable alternative to the admitted market as admitted market insurers manage through the hard market challenges. Our Insurance Entities likewise have taken and continue to take action to manage through this hard market by increasing rates and prudently managing exposures while also seeking to maintain their competitive position in the market and supporting our current policyholders and agents.

While addressing rate adequacy for the Insurance Entities, we continue to experience increased costs for losses and LAE in the Florida market, where an industry has developed around the solicitation, filing and litigation of personal residential claims. These dynamics have been made worse by the litigation financing industry, which in some cases, funds these actions. In addition, rising inflation, as seen in the cost of labor and material supplies, has further escalated costs associated with the settlement of claims. These behaviors and related rising repair costs are a chief contributing factor for the rate increases in this market. These behaviors result in a pattern of continued increases in year-over-year levels of represented claims, the increases in purported claim amounts, and increased demands for attorneys’ fees. Active solicitation of personal residential claims in Florida by policyholder representatives, remediation companies and repair companies has led to an increase in the frequency and severity of personal residential claims in Florida, exceeding historical levels and levels seen in other jurisdictions. Information prepared by the Florida Office of Insurance Regulation also shows that claims in Florida are litigated at a substantially disproportionate rate when compared to other states. This is largely due to a Florida statute providing a one-way right of attorneys’ fees against insurers which has, when coupled with certain other statutes and judicial rulings, produced a legal environment in Florida that encourages litigation, in many cases without regard to the underlying merits of the claims. The one-way right to attorneys’ fees essentially means that unless an insurer’s position is entirely upheld in litigation, the insurer must pay the plaintiff’s attorneys’ fees in addition to its own defense costs. This affects not only claims that are litigated to resolution, but also the settlement discussions that take place with nearly all litigated claims. This also affects a large number of claims from inception or during the adjusting process as a substantial and growing percentage of policyholders obtain representation early in the process, and sometimes even before notifying insurers of their claims. These market conditions also add, and will continue to add, complexity to efforts to efficiently and expeditiously adjust claims. This is due to an increasing number of policyholders who have one or more recent prior losses with the Insurance Entities or with other insurers, which then require evaluation during subsequent claims and determinations regarding whether property has been repaired consistently with the scope and amount of damage previously asserted.

The one-way right to attorney fees creates a nearly risk-free environment, and incentive, for attorneys to pursue litigation against insurers. The result has been a substantial increase in represented and litigated claims in Florida, far outpacing levels experienced in other states. In April 2021, the Florida legislature passed a bill intending to curtail the adverse claim trends impacting the Florida homeowners’ insurance market. Most provisions of the bill went into effect on July 1, 2021. Among its provisions, the bill

33

creates a new pre-suit notice requirement wherein an insured must make a formal monetary demand of a residential property insurer before commencing suit. The Company has established an internal team to review and respond to these pre-suit demands in a further effort to resolve disputes before litigation ensues. Another provision of the new law reduces the time period in which to file a new or reopened claim to two years following the date of loss. In light of the recent enactment of these reforms, it is premature to assess whether the reforms will have their intended effect. Whether these changes are beneficial to consumers, insurers, insurance company holding systems or the residential property insurance market as a whole may not be fully known for some time.

In a further effort to alleviate concerns in the Florida property insurance market, Florida’s Governor called a special session of the legislature in May 2022. The legislature passed, and the Governor promptly signed into law, several additional reforms intended to curtail litigation abuses. Among other things, the new law precludes the assignment of policyholders’ rights to attorneys’ fees, allows plaintiffs’ attorneys to receive fee multipliers only in rare and exceptional cases, and requires plaintiffs to establish breaches of the insurance policy before pursuing related bad faith actions. Because the new law only recently was adopted, its impact on claims and claims-related costs, including litigation, will not be fully known for some time.

Despite our initiatives, such as those mentioned above, our costs to settle claims in Florida have increased for the reasons noted herein. For example, the Company continues to adjust its estimate of expected losses and has increased its current year loss estimates and increased estimates associated with prior years’ claims. Over the past three years, even as we have increased our estimates of prospective losses each year, we have recorded adverse claim development on prior years’ loss reserves and further strengthened current year losses during the year to address the increasing impact Florida’s market disruptions, as well as the impact of rising costs of building materials and labor, have had on the claims process and the establishment of reserves for losses and LAE. The full extent and duration of these market disruptions and inflationary pressures are unknown and still unfolding, and we will monitor the impact of such disruptions on the recording and reporting of claim costs.

The Company has taken a series of steps over time to mitigate the financial impact of these negative trends in the Florida market. We also have closely monitored rate levels, especially in the Florida market, and have submitted rate filings based upon evolving data. However, because rate filings rely upon past loss and expense data and take time to develop, file and implement, we can experience significant delays between identifying needed rate adjustments, gaining approval of rate changes, and ultimately collecting and earning the resulting increased premiums. This is particularly the case in an era of rising costs such as the current Florida market, in which the costs of losses and loss adjustment expenses continue to increase due to Florida’s outsized claims litigation environment and inflationary pressure. In addition, the Company has implemented several initiatives in its claims department in response to the adverse market trends. We utilize our process called Fast Track, which is an initiative to handle straightforward, meritorious claims as promptly as possible to mitigate the adverse impacts that can be seen with claims that remain open for longer periods. In addition, we increased our emphasis on subrogation to reduce our net losses while also recovering policyholders’ deductibles when losses are attributable to the actions of others. We have an internal staff of trained water remediation experts to address the extraordinary number of purported water damage claims filed by policyholders and vendors. We developed a specialized in-house unit for responding to the unique aspects of represented claims, and we have substantially increased our in-house legal staff in an effort to address the increase in litigated or represented claims as cost-effectively as possible.

Additionally, we have taken steps to implement claim settlement rules associated with the Florida legislation passed in 2019 designed to reduce the negative effects of claims involving assignments of benefits (“AOB”). See “Part I— Item 1—Business—Government Regulation” in our Annual Report on Form 10-K for the year ended December 31, 2021. An AOB is a document signed by a policyholder that allows a third party to be paid for services performed for an insured homeowner who would normally be reimbursed by the insurance company directly after making a claim. Prior to the AOB reform legislation, the Company experienced an increase in AOB-related litigation initiated by vendors, in many cases unbeknownst to policyholders. Claims paid under an AOB often involve unnecessary litigation, with the Company required to pay both its own defense costs and those of the plaintiff, and, as a result, cost the Company significantly more than claims settled when an AOB is not involved. In 2019, the Florida legislature passed legislation designed to increase consumer protections against AOB abuses and reduce AOB-related litigation. The legislature added to these AOB-related reforms in the recently concluded 2022 special legislative session, during which it passed a new law precluding policyholders’ assignments of attorneys’ fees. Prior to the recent 2022 law change, the overall impact of the deterioration in claims-related tactics and behaviors, including other first-party litigation, continued to outpace benefits arising from the 2019 AOB reform legislation. Following recent 2022 special legislative session, the Company intends to adopt procedures reflecting the new AOB law and monitor its effects.

Following legislation adopted in Florida’s 2021 legislative session, we also have established procedures and dedicated personnel to a new pre-suit notice and offer process. The new process requires policyholders or their attorneys to notify insurers at least ten days before commencing litigation and allows insurers an opportunity to make pre-suit settlement offers. The policyholders’ ability to recover attorneys’ fees is determined according to a scale that compares the ultimate outcomes of the cases to the insurers’ pre-suit offers. Although this new process is intended to reduce claims litigation and encourage settlements, it is too early to evaluate whether it will be successful in limiting the types of settlement demands and litigation that have plagued the Florida market or in offsetting other factors adversely affecting the market such as increased costs of building materials and labor.

Impact of COVID-19

Subsequent to March 2020, we have not seen a direct material impact from COVID-19 on our business, our financial position, our liquidity, or our ability to service our policyholders and maintain critical operations. Indirectly, inflationary pressures, in part due to supply chain and labor constraints during the pandemic, have affected and continue to affect claims costs and, to a lesser degree, other expenses. As a provider of services that have been deemed essential under most directives and guidelines, we are confident in our ability to maintain consistent operations and believe we can continue to manage with our hybrid work

34

arrangement as a result of our disaster preparedness planning, with little impact on our business and service levels and our standards of care for both underwriting and claims. We continue to monitor local, state and federal guidance and will adjust workforce activities as appropriate. Although we have not experienced a direct material impact from COVID-19 since its onset in 2020, the ultimate impact of the COVID-19 pandemic, or future pandemics, on our business and on the economy in general cannot be predicted.

KEY PERFORMANCE INDICATORS

The Company considers the measures and ratios in the following discussion to be key performance indicators for its businesses. Management believes that these indicators are helpful in understanding the underlying trends in the Company’s businesses. Some of these indicators are reported on a quarterly basis and others on an annual basis.

These indicators may not be comparable to other performance measures used by the Company’s competitors and should only be evaluated together with our condensed consolidated financial statements and accompanying notes.

In addition to our key performance indicators and other financial measures presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”). management also uses certain non-GAAP financial measures to evaluate the Company's financial performance and the overall growth in value generated for the Company’s common shareholders. Management believes that non-GAAP financial measures, which may be defined differently by other companies, help to explain the Company’s results to investors in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. The non-GAAP measures should not be viewed as a substitute for those determined in accordance with GAAP. The calculation of these key financial measures including the reconciliation of non-GAAP measures to the nearest GAAP measure are found below under ― “Non-GAAP Financial Measures.”

Definitions of Key Performance Indicators and GAAP and Non-GAAP Measures

Adjusted book value per common share ― is a non-GAAP measure, that is calculated as adjusted common stockholders’ equity divided by common shares outstanding at the end of the period. Management believes this metric is meaningful, as it allows investors to evaluate underlying book value growth by excluding the impact of interest rate volatility.

Adjusted common stockholders' equity ― is a non-GAAP measure, that is calculated by GAAP common stockholders' equity, excluding accumulated other comprehensive income (loss). Management believes this metric is meaningful, as it allows investors to evaluate underlying growth in stockholders’ equity by excluding the impact of interest rate volatility.

Adjusted net income attributable to common stockholders ― is a non-GAAP measure, that is calculated by GAAP net income attributable to common stockholders, excluding net realized gains (losses) on investment and net changes in unrealized gains (losses) of equity securities, net of tax. Management believes this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods, by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Adjusted operating income ― is a non-GAAP measure, that is computed by GAAP operating income, excluding net realized gains (losses) on investment and net changes in unrealized gains (losses) of equity securities. Management believes this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods, by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Adjusted operating income margin ― is a non-GAAP measure, which is computed by adjusted operating income divided by core revenue. Management believes this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods, by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Adjusted return on common equity (Adjusted “ROCE”) ― is a non-GAAP measure, that is calculated by actual or annualized adjusted net income attributable to common stockholders divided by average adjusted common stockholders' equity, with the denominator excluding current period income statement net realized gains (losses) on investments and net changes in unrealized gains (losses) of equity securities, net of tax. Management believes this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods, by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Book Value Per Common Share ― total stockholders’ equity, adjusted for preferred stock liquidation, divided by the number of common shares outstanding as of a reporting period. Book value per common share is the excess of assets over liabilities at a reporting period attributed to each share of stock. Changes in book value per common share informs shareholders of retained equity in the Company on a per share basis which may assist in understanding market value trends for the Company’s stock.

Combined Ratio ― the combined ratio is a measure of underwriting profitability for a reporting period and is calculated by dividing total operating costs and expenses (which is made up of losses and LAE and general and administrative expenses) by premiums earned, net, which is net of ceded premiums earned. Changes to the combined ratio over time provide management with an understanding of costs to operate its business in relation to net premiums it is earning and the impact of rate, underwriting and other business management actions on underwriting profitability. A combined ratio below 100% indicates underwriting profit; a combined ratio above 100% indicates underwriting losses.

35

Core Loss Ratio ― a common operational metric used in the insurance industry to describe the ratio of current accident year expected losses and LAE to premiums earned. Core loss ratio is an important measure identifying profitability trends of premiums in force. Core losses consists of all other losses and LAE, excluding weather events beyond those expected and prior years’ reserve development. The financial benefit from the management of claims, including claim fees ceded to reinsurers, is recorded in the condensed consolidated financial statements as a reduction to core losses.

Core revenue ― is a non-GAAP measure, that is calculated by total GAAP revenue, excluding net realized gains (losses) on investments and net changes in unrealized gains (losses) of equity securities, Management believes this metric is meaningful, as it allows investors to evaluate underlying revenue trends and enhances comparability across periods, by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Debt-to-Equity Ratio ― long-term debt divided by stockholders’ equity. This ratio helps management measure the amount of financing leverage in place in relation to equity and future leverage capacity.

Debt-to-Total Capital Ratio ― long-term debt divided by the sum of total stockholders’ equity and long-term debt (often referred to as total capital resources). This ratio helps management measure the amount of financing leverage in place (long-term debt) in relation to total capital resources and future leverage capacity.

Diluted adjusted earnings per common share ― is a non-GAAP measure, which is calculated by adjusted net income available to common stockholders divided by weighted average diluted common shares outstanding. Management believes this metric is meaningful, as it allows investors to evaluate underlying revenue trends and enhances comparability across periods, by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Direct Premiums Written (“DPW”) ― reflects the total value of policies issued during a period before considering premiums ceded to reinsurers. Direct premiums written, comprised of renewal premiums, endorsements and new business, is initially recorded as unearned premium in the balance sheet which is then earned pro-rata over the next year or remaining policy term. Direct premiums written reflects current trends in the Company’s sale of property and casualty insurance products and amounts that will be recognized as earned premiums in the future.

DPW (Florida) ― includes only DPW in the state of Florida. This measure allows management to analyze growth in our primary market and is also a measure of business concentration risk.

Expense Ratio (Including Policy Acquisition Cost Ratio and Other Operating Cost Ratio) ― calculated as general and administrative expenses as a percentage of premiums earned, net. General and administrative expenses is comprised of policy acquisition costs and other operating costs, which includes such items as underwriting costs, facilities and corporate overhead. The expense ratio, including the sub-expense ratios of policy acquisition cost ratio and other operating cost ratio, are indicators to management of the Company’s cost efficiency in acquiring and servicing its business and the impact of expense items to overall profitability.

Losses and Loss Adjustment Expense Ratio or Loss and LAE Ratio ― a measure of the cost of claims and claim settlement expenses incurred in a reporting period as a percentage of premiums earned in that same reporting period. Losses and LAE incurred in a reporting period includes both amounts related to the current accident year and prior accident years, if any, referred to as development. Ultimate losses and LAE are based on actuarial estimates with changes in those estimates recognized in the period the estimates are revised. Losses and LAE consist of claim costs arising from claims occurring and settling in the current period, an estimate of claim costs for reported but unpaid claims, an estimate of unpaid claim costs for incurred-but-not-reported claims and an estimate of claim settlement expenses associated with reported and unreported claims which occurred during the reporting period. The loss and LAE ratio can be measured on a direct basis, which includes losses and LAE divided by direct earned premiums, or on a net basis, which includes losses and LAE after amounts have been ceded to reinsurers divided by net earned premiums (i.e., direct premium earned less ceded premium earned). The net loss and LAE ratio is a measure of underwriting profitability after giving consideration to the effect of reinsurance. Trends in the net loss and LAE ratio are an indication to management of current and future profitability.

Monthly Weighted Average Renewal Retention Rate ― measures the monthly average of policyholders that renew their policies over the period of a calendar year. This measure allows management to assess customer retention.

Premiums Earned, Net ― the pro-rata portion of current and previously written premiums that the Company recognizes as earned premium during the reporting period, net of ceded premium earned. Ceded premiums are premiums paid or payable by the Company for reinsurance protection. Written premiums are considered earned and are recognized pro-rata over the policy coverage period. Premiums earned, net is a measure that allows management to identify revenue trends.

Policies in Force ― represents the number of active policies with coverage in effect as of the end of the reporting period. The change in the number of policies in force is a growth measure and provides management with an indication of progress toward achieving strategic objectives. Inherent seasonality in our business makes this measure more useful when comparing each quarter’s balance to the same quarter in prior years.

Premium in Force ― is the amount of the annual direct written premiums previously recorded by the Company for policies which are still active as of the reporting date. This measure assists management in measuring the level of insured exposure and progress toward meeting revenue goals for the current year, and provides an indication of business available for renewal in the next twelve months. Inherent seasonality in our business makes this measure more useful when comparing each quarter’s balance to the same quarter in prior years.

36

Return on Average Common Equity (“ROCE”) ― calculated by actual or annualized net income attributable to common stockholders divided by average common stockholders' equity. ROCE is a capital profitability measure of how efficiently management creates profits.

Total Insured Value ― represents the amount of insurance limits available on a policy for a single loss based on all policies active as of the reporting date. This measure assists management in measuring the level of insured exposure.

Unearned Premiums ― represents the portion of direct premiums corresponding to the time period remaining on an insurance policy and available for future earning by the Company. Trends in unearned premiums generally indicate expansion, if growing, or contraction, if reducing, which are important indicators to management. Inherent seasonality in our business makes this measure more useful when comparing each quarter’s balance to the same quarter in prior years.

Weather events ― an estimate of losses and LAE from weather events occurring during the current accident year that exceed initial estimates of expected weather events when establishing the core loss ratio for each accident year. This metric informs management of factors impacting overall current year profitability.

REINSURANCE

Reinsurance enables our Insurance Entities to limit potential exposures to catastrophic events. Reinsurance contracts are typically classified as treaty or facultative contracts. Treaty reinsurance provides coverage for all or a portion of a specified group or class of risks ceded by the primary insurer, while facultative reinsurance provides coverage for specific individual risks. Within each classification, reinsurance can be further classified as quota share or excess of loss. Quota-share reinsurance is where the primary insurer and the reinsurer share proportionally or pro-rata in the direct premiums and losses of the insurer. Excess-of-loss reinsurance indemnifies the direct insurer or reinsurer for all or a portion of the loss in excess of an agreed upon amount or retention.

Developing and implementing our reinsurance strategy to adequately protect our balance sheet and Insurance Entities in the event of one or more catastrophes while maintaining efficient reinsurance costs has been a key strategic priority for us. In order to limit the Insurance Entities’ potential exposure to catastrophic events, we purchase significant reinsurance from third-party reinsurers and the Florida Hurricane Catastrophe Fund (“FHCF”). The Florida Office of Insurance Regulation (“FLOIR”) requires the Insurance Entities, like all residential property insurance companies doing business in Florida, to have a certain amount of capital and reinsurance coverage in order to cover losses upon the occurrence of a single catastrophic event and a series of catastrophic events occurring in the same hurricane season. The Insurance Entities’ respective 2022-2023 reinsurance programs meet the FLOIR’s requirements, which are based on, among other things, successfully demonstrating cohesive and comprehensive reinsurance programs that protect the policyholders of our Insurance Entities as well as satisfying a series of stress test catastrophe loss scenarios based on past historical events. Similarly, the Insurance Entities’ respective 2022-2023 reinsurance programs meet the stress test and review requirements of Demotech, Inc., for maintaining Financial Stability Ratings® of A (Exceptional).

We believe the Insurance Entities’ retentions under their respective reinsurance programs are appropriate and structured to protect policyholders. We test the sufficiency of the reinsurance programs by subjecting the Insurance Entities’ personal residential exposures to statistical testing using a third-party hurricane model, RMS RiskLink v18.1 (Build 1945). This model combines simulations of the natural occurrence patterns and characteristics of hurricanes, tornadoes, earthquakes and other catastrophes with information on property values, construction types and occupancy classes. The model outputs provide information concerning the potential for large losses before they occur, so companies can prepare for their financial impact. Furthermore, as part of our operational excellence initiatives, we continually look to enable new technology to refine our data intelligence on catastrophe risk modeling.

Effective June 1, 2022, the Insurance Entities entered into multiple reinsurance agreements comprising our 2022-2023 reinsurance program. See “Item 1—Note 4 (Reinsurance).”

UPCIC’s 2022-2023 Reinsurance Program

•First event All States retention of $45 million.

•All States first event tower extends to $3.161 billion with no co-participation in any of the layers, no limitation on loss adjustment expenses for the non-catastrophe bond Cosaint Re Pte. Ltd. traditional reinsurance and no accelerated deposit premiums.

•Assuming a first event completely exhausts the $3.161 billion tower, the second event exhaustion point would be $1.183 billion.

•Full reinstatement available on $1.138 billion of the $1.288 billion of non-FHCF first event catastrophe coverage for guaranteed second event coverage. For all layers purchased between $111 million and the projected FHCF retention, to the extent that all of our coverage or a portion thereof is exhausted in a catastrophic event and reinstatement premium is due, we have purchased enough reinstatement premium protection ("RPP") limit to pay the premium necessary for the reinstatement of these coverages.

•First event layer of 100% of $66 million in excess of $45 million established by UIH in captive insurance arrangement. While the Company retains the risk that otherwise would be transferred to third party-reinsurers for this layer, the

37

additional risk is substantially offset by the savings in premiums that would otherwise have been paid to third-party reinsurers.

•Specific 2nd event private market excess of loss coverage of $66 million in excess of $45 million sitting behind captive arrangement.

•Specific 3rd and 4th event private market catastrophe excess of loss coverage of $86 million in excess of $25 million provides frequency protection for multiple events during the treaty period including a $20 million reduction in retention for a 3rd and 4th event.

•For the FHCF Reimbursement Contracts effective June 1, 2022, UPCIC has continued the election of the 90% coverage level. We estimate the total mandatory FHCF layer will provide approximately $1.827 billion of coverage for UPCIC, which inures to the benefit of the open market coverage secured from private reinsurers and Cosaint Re Pte. Ltd.

•To further insulate for future years, UPCIC has secured $383 million of catastrophe capacity with contractually agreed limits that extend coverage to include the 2022 and 2023 wind seasons and $277 million of the $383 million extends through the 2024 wind season and is all capacity which sits below the Florida Hurricane Catastrophe Fund. UPCIC’s catastrophe bond, secured leading up to the 2021-2022 renewal, Cosaint Re Pte. Ltd, continues to provide one limit of $150 million in this year’s program and it may also include the 2023 wind season, depending on loss activity in the 2022 wind season.

Reinsurers

The table below provides the A.M. Best and S&P financial strength ratings for each of the largest rated third-party reinsurers in UPCIC’s 2022-2023 reinsurance program:

Reinsurer	A.M. Best	S&P
Allianz Risk Transfer AG, Bermuda Branch	A+	AA-
Chubb Tempest Reinsurance Ltd.	A++	AA
Everest Re	A+	A+
Munich Re	A+	AA-
Renaissance Re	A+	A+
Various Lloyd’s of London Syndicates	A	A+
Florida Hurricane Catastrophe Fund (1)	N/A	N/A

(1)No rating is available, because the fund is not rated.

APPCIC’s 2022-2023 Reinsurance Program

•First event All States retention of $3.5 million.

•All States first event tower of $54.85 million with no co-participation in any of the layers, no limitation on loss adjustment expenses and no accelerated deposit premiums.

•Full reinstatement available for all private market first event catastrophe layers for guaranteed second event coverage. For the layer purchased between $3.5 million and the projected FHCF retention, to the extent that all of our coverage or a portion thereof is exhausted in a catastrophic event and reinstatement premium is due, we have purchased enough RPP limit to pay the premium necessary for the reinstatement of this coverage.

•APPCIC also purchases extensive multiple line excess per risk reinsurance with various reinsurers due to the high-value risks it insures in both the personal residential and commercial multiple peril lines of business. Under this multiple line excess per risk contract, APPCIC has coverage of $8.5 million in excess of $500 thousand ultimate net loss for each risk and each property loss, and $1 million in excess of $0.3 million for each casualty loss. A $19.5 million aggregate limit applies to the term of the contract for property-related losses and a $2.0 million aggregate limit applies to the term of the contract for casualty-related losses. This contract also contains a profit-sharing feature if specific performance measures are met.

•For the FHCF Reimbursement Contracts effective June 1, 2022, APPCIC has continued the election of the 90% coverage level. We estimate the total mandatory FHCF layer will provide approximately $28.6 million of coverage for APPCIC, which inures to the benefit of the open market coverage secured from private reinsurers.

38

Reinsurers

The table below provides the A.M. Best and S&P financial strength ratings for each of the largest rated third-party reinsurers in APPCIC’s 2022-2023 reinsurance program:

Reinsurer	A.M. Best	S&P
Chubb Tempest Reinsurance Ltd.	A++	AA
DaVinci Reinsurance Limited	A	A+
Lancashire Insurance Company Limited	A	A-
Renaissance Reinsurance Ltd.	A+	A+
Various Lloyd’s of London Syndicates	A	A+
Florida Hurricane Catastrophe Fund (1)	N/A	N/A

(1)No rating is available, because the fund is not rated.

The cost of the 2022-2023 reinsurance programs for UPCIC and APPCIC is projected to be $696 million, representing approximately 37.6% of estimated direct premium earned for the 12-month treaty period for UPCIC and APPCIC.

39

RESULTS OF OPERATIONS AND ANALYSIS OF FINANCIAL CONDITION

Highlights for the quarter ended June 30, 2022

•The Insurance Entities successfully completed their 2022-2023 reinsurance programs providing a total limit protection of $3.2 billion to the Insurance Entities. The limits include expanded use of an internal captive insurance entity. The estimated cost to the Insurance Entities, as a percentage of direct earned premium, increased from 36.4% of estimated premiums to 37.6% for the 2022-2023 program.

•The Florida legislature, in a special session, enacted a law this quarter introducing new reforms intended to reduce the level of inflated and litigated claims and provide relief to consumers. These new reforms are on top of reforms enacted in 2019 and 2021 which have had some measured benefits. Management is optimistic these new reforms will be beneficial, but recognizes it will take time before the reforms are fully realized.

•Previously approved rate filings and inflation adjustments to policy insured values are increasing written and earned premium as they take effect and earn prospectively over the policy period.

•Management is continuing its efforts to prudently manage new business risk selection, improve risk exposure diversification and moderate new business growth rates, compared to prior years, while the above rate increases are taking effect to improve profitability. Renewal retention rates have declined year over year as consumers react to higher renewal premiums. As a result, the number of total policies in force is lower, notwithstanding increases in written premium.

•Recently approved rate increases for Florida (14.9%), Indiana (19.9%), Pennsylvania (12.0%), North Carolina (7.9%) and South Carolina (14.6%) went into effect this quarter.

•Net investment income increased as market interest rates rise, however the rising interest rates have lowered the market value of our investments resulting in unrealized losses.

•Losses and LAE, net were higher this quarter compared to the same period last year primarily due to a higher level of expected losses and LAE for this year (the 2022 accident year) as a result of increases in loss trends and higher claim inflation costs in Florida and other markets.

•Other expense and acquisition cost management efforts have lowered the expense ratio. In April 2021, the commission rate on policy renewals was reduced 2 percentage points and further reduced on May 1, 2022 by 2 percentage points in response to premium rate increases during the past year. The benefit of lower commission rates are realized over the next year as policies renew under this new commission rate structure.

•The company continued to return shareholder value with quarterly dividends and modest share repurchases.

40

Second quarter of fiscal 2022 results of operations comparisons are to second quarter of fiscal 2021 (unless otherwise specified).

Results of Operations — Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Net income for the three months ended June 30, 2022, was $7.4 million compared to $21.9 million for the same period in 2021. Weighted average diluted common shares outstanding for the three months ended June 30, 2022 were lower by 1.4% to 30.9 million shares from 31.3 million shares for the same period of the prior year. Diluted earnings per share for the three months ended June 30, 2022 was $0.24 compared to $0.70 for the same period in 2021. Benefiting the quarter were increases in premiums earned, net, an increase in commission revenue, and an increase in net investment income, partially offset by an increase in operating costs and expenses, and an increase in both realized and unrealized losses. Direct premium earned and premiums earned, net were up 9.2% and 8.2%, respectively, due to premium growth in 15 of the 19 states in which we are licensed and writing during the past 12 months as a result of rate increases implemented during 2021 and 2022. The net loss and LAE ratio was 72.3% for the three months ended June 30, 2022, compared to 65.3% for the same period in 2021 reflecting higher core losses partially offset by lower prior years’ reserve development. As a result of the above and further explained below, the combined ratio for the three months ended June 30, 2022 was 100.9% compared to 97.3% for the three months ended June 30, 2021. Also see the discussion above under “Overview—Trends.”

A detailed discussion of our results of operations follows the table below (in thousands, except per share data).

	Three Months Ended June 30,				Change
	2022		2021		$		%
REVENUES
Direct premiums written	$	532,527	$	473,627	$	58,900	12.4	%
Change in unearned premium	(103,722)		(81,053)		(22,669)		28.0	%
Direct premium earned	428,805		392,574		36,231		9.2	%
Ceded premium earned	(151,744)		(136,402)		(15,342)		11.2	%
Premiums earned, net	277,061		256,172		20,889		8.2	%
Net investment income	5,221		2,858		2,363		82.7	%
Net realized gains (losses) on investments	(725)		496		(1,221)		NM
Net change in unrealized gains (losses) of equity securities	(8,884)		1,229		(10,113)		NM
Commission revenue	11,404		9,860		1,544		15.7	%
Policy fees	5,940		6,575		(635)		(9.7)	%
Other revenue	1,989		1,991		(2)		(0.1)	%
Total revenues	292,006		279,181		12,825		4.6	%
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses	200,304		167,221		33,083		19.8	%
General and administrative expenses	79,291		81,866		(2,575)		(3.1)	%
Total operating costs and expenses	279,595		249,087		30,508		12.2	%
Interest and amortization of debt issuance costs	1,731		35		1,696		4,845.7	%
INCOME (LOSS) BEFORE INCOME TAXES	10,680		30,059		(19,379)		(64.5)	%
Income tax expense (benefit)	3,310		8,118		(4,808)		(59.2)	%
NET INCOME (LOSS)	$	7,370	$	21,941	$	(14,571)	(66.4)	%
Other comprehensive income (loss), net of taxes	(29,656)		7,996		(37,652)		NM
COMPREHENSIVE INCOME (LOSS)	$	(22,286)	$	29,937	$	(52,223)	NM
DILUTED EARNINGS (LOSS) PER SHARE DATA:
Diluted earnings (loss) per common share	$	0.24	$	0.70	$	(0.46)	(65.7)	%
Weighted average diluted common shares outstanding	30,883		31,310		(427)		(1.4)	%
NM – Not Meaningful

Direct premiums written increased by $58.9 million, or 12.4%, for the quarter ended June 30, 2022, driven by premium growth within our Florida business of $52.8 million, or 13.2%, and premium growth in our other states business of $6.1 million, or 8.3%, as compared to the same period of the prior year. Rate increases approved in 2021 and 2022 for Florida and for certain other states, as discussed below, were the principal driver of higher written premiums. In total policies in force declined 48,975, or

41

5.2%, from 943,593 at December 31, 2021 to 894,618 at June 30, 2022. A summary of the recent rate increases which are driving increases in written premium are as follows:

•In May 2022, the Company filed a rate increase with the FLOIR for an overall 14.9% rate increase for UPCIC on Florida personal residential homeowners’ line of business which became effective June 1, 2022, for new business and November 4, 2022, for renewals. This filing was made on a “ Use and File” basis.

•In December 2021, the FLOIR approved an overall 3.9% rate increase for UPCIC on Florida personal residential homeowners’ line of business, effective January 2022 for new business and March 2022 for renewals.

•In September 2021, the FLOIR approved an overall 14.9% rate increase for UPCIC on Florida personal residential homeowners’ line of business, effective September 2021 for new business and November 2021 for renewals.

•In addition, during the past year, rate increases for UPCIC were approved in Alabama, Georgia, Indiana, Minnesota, North Carolina, South Carolina, Pennsylvania and Virginia.

These rate increases are applied on new business submissions and renewals from the effective date of their renewal and then are earned subsequently over the policy period. The recent rate increases in Florida are in response to rising claim costs driven by higher costs of material and labor associated with claims, the cost of weather events, the rising cost of catastrophe and other reinsurance protecting policyholders and, more importantly, the impact of “social inflation” on claims as claim settlements increasingly have involved inflated demands, representation, and litigation. In addition, the Insurance Entities’ policies provide for coverage limits to be adjusted at renewal based on third-party data sources that monitor factors such as changes in costs for residential building materials and labor.

During 2022, management continued efforts to prudently manage policy counts and exposures intended to slow the growth of written premiums relating to new business compared to prior years while the above rate increases are taking effect. Reduced new business writings, declines in renewal retentions during 2022 and the impact of selected policy non-renewals, have resulted in a decrease in policies in force during the quarter of 22,127, or 2.4%, from 916,745 at March 31, 2022 to 894,618 at June 30, 2022. Direct premiums written continue to increase across the majority of states in which we conduct business. As a result of our business strategy, policy premium rate increases, lower renewal retention, fewer new business policies written and disciplined underwriting initiatives, we have seen a decrease in policy count, but an increase in in-force premium and total insured value in a majority of states for the past three years. In total, we wrote policies in 19 states during both of the second quarters of 2022 and 2021. In addition, we are authorized to do business in Tennessee and Wisconsin and are proceeding with product filings in those states. At June 30, 2022, policies in force decreased 82,633 policies, or 8.5%; premium in force increased $148.0 million, or 9.1%; and total insured value increased $8.2 billion, or 2.6%, compared to June 30, 2021.

The following table provides direct premiums written for Florida and Other States for the three months ended June 30, 2022 and 2021 (dollars in thousands):

	For the Three Months Ended
	June 30, 2022				June 30, 2021				Growth year over year
State	Direct  Premiums Written		%		Direct  Premiums Written		%		$		%
Florida	$	453,168	85.1	%	$	400,370	84.5	%	$	52,798	13.2	%
Other states	79,359		14.9	%	73,257		15.5	%	6,102		8.3	%
Total	$	532,527	100.0	%	$	473,627	100.0	%	$	58,900	12.4	%

We seek to prudently grow and generate long-term rate adequate premium in each state where we offer policies. Our diversification strategy seeks to increase business outside of Florida and to improve geographical distribution within Florida. Premium growth outside Florida is a measure monitored by management in its efforts to meet that objective.

Direct premium earned increased by $36.2 million, or 9.2%, for the quarter ended June 30, 2022, reflecting the earning of premiums written over the past 12 months including the benefit of rate changes due to primary rate filings, filings to cover increased reinsurance costs as well as policy premium adjustments due to increases in insured values caused by inflation.

Reinsurance enables our Insurance Entities to limit potential exposures to catastrophic events and other covered events. Ceded premium represents premiums paid to reinsurers for this protection and is a cost which reduces net written and net earned premiums. Ceded premium earned increased $15.3 million, or 11.2%, for the quarter ended June 30, 2022, as compared to the same period of the prior year. The increase in reinsurance costs reflects an increase in the value of exposures we insure; increased pricing when compared to the expired reinsurance program; and differences in the structure and design of the respective programs. Reinsurance costs, as a percentage of direct premium earned, increased from 34.7% for the three months ended June 30, 2021 to 35.4% for the three months ended June 30, 2022. Reinsurance costs associated with each year’s reinsurance program are earned over the annual policy period which typically runs from June 1st to May 31st. See the discussion above for the Insurance Entities’ 2022-2023 reinsurance programs and “Item 1—Note 4 (Reinsurance).”

42

Premiums earned, net of ceded premium earned, grew by 8.2%, or $20.9 million, to $277.1 million for the three months ended June 30, 2022, reflecting an increase in direct premium earned partially offset by increased costs for reinsurance.

Net investment income was $5.2 million for the three months ended June 30, 2022, compared to $2.9 million for the same period in 2021, an increase of $2.4 million, or 82.7%. In the fourth quarter of 2021, we saw increases in investment yields as the Federal Reserve took action to address the market concerns of inflation and employment. As a result, liquidity generated by our portfolio from interest payments, principal repayments and new investments are being invested at higher rates, resulting in overall increased investment returns on our portfolio.

Total invested assets were $1,106.6 million as of June 30, 2022 compared to $1,093.7 million as of December 31, 2021. The increase is attributable to capital contributions from UIH, excess cash balances invested in the portfolio, receipt of interest payments partially offset by unrealized losses on available-for-sale debt securities. Unrealized losses reverse over time as debt instruments are generally held to maturity. Cash and cash equivalents were $317.0 million at June 30, 2022 compared to $250.5 million at December 31, 2021, an increase of 26.5%. This increase is largely attributable to changes in operational cash flows since year end. Cash and cash equivalents are invested short term until needed to settle loss and LAE payments, reinsurance premium payments and operating cash needs or until they are deployed by our investment advisors.

Yields from cash and cash equivalents, short-term investments and the available-for-sale debt portfolio are dependent on the composition of the portfolio, future market forces, monetary policy and interest rate policy from the Federal Reserve. During most of 2021, the Federal Reserve broadly maintained lower interest rates, which impacted the effective yields on newly purchased available-for-sale debt securities and overnight cash purchases and short-term investments. This overall trend changed in late 2021 and into 2022 as inflation worries began to impact the financial markets, including the markets’ concern over future Federal Reserve actions of rate hikes and other actions to address inflation concerns. As a result, we saw increased yields on securities purchased in late 2021 and 2022 and increased unrealized losses on our portfolio, reflected after-tax in the equity section of our balance sheet as increased market yields negatively impacted the fair value of much of our available-for-sale debt securities.

Although we generally hold the vast majority of debt securities to maturity, we sell investments, including securities, from our investment portfolio from time to time to meet our investment objectives or take advantage of market opportunities. During the three months ended June 30, 2022, sales of available-for-sale debt securities resulted in net realized losses of $0.9 million and sales of equity securities resulted in net realized gains of $0.2 million, generating total net realized losses of $0.7 million during the second quarter of 2022. During the three months ended June 30, 2021, sales of available-for-sale debt securities resulted in net realized losses of $0.2 million and sales of equity securities resulted in net realized gains of $0.7 million, in total generating net realized gains of $0.5 million. See “Item 1—Note 3 (Investments).”

There was an $8.9 million net unrealized loss in equity securities during the three months ended June 30, 2022, largely driven by macro inflationary pressures and the uncertain recessionary outlook, which put pressure on domestic equities broadly, compared to a $1.2 million net unrealized gain in equity securities during the three months ended June 30, 2021. Net change in unrealized gains or losses reflected on the income statement are the result of changes in the fair market value of our equity securities during the period for securities still held at the end of the reported period and the reversal of unrealized gains or losses for securities sold during the period. See “Item 1—Note 3 (Investments).”

Commission revenue is comprised principally of brokerage commissions we earn from third-party reinsurers (excluding the FHCF) on reinsurance placed for the Insurance Entities. Commission revenue is earned pro-rata over the reinsurance policy period which runs from June 1st to May 31st of the following year. For the three months ended June 30, 2022, commission revenue was $11.4 million, compared to $9.9 million for the three months ended June 30, 2021. The increase in commission revenue of $1.5 million, or 15.7%, for the three months ended June 30, 2022 was primarily due to increased commissions from third-party reinsurers earned on increased reinsurance premiums which is attributable to growth in our insured values for this year’s reinsurance program as well as the difference in pricing and structure associated with our reinsurance program when compared to the prior year.

Policy fees were $5.9 million for the three months ended June 30, 2022 compared to $6.6 million for the same period in 2021. The decrease of $0.6 million, or 9.7%, was the result of a decrease in the combined total number of new and renewal policies written during the three months ended June 30, 2022 compared to the same period in 2021 in states where we are permitted to charge this fee.

Other revenue, representing revenue from policy installment fees, premium financing and other miscellaneous income, was $2.0 million for the three months ended June 30, 2022 compared to $2.0 million for the same period in 2021.

Core revenue, representing total GAAP revenue, excluding net realized gains (losses) on investments and net changes in unrealized gains (losses) of equity securities, was $301.6 million for the three months ended June 30, 2022 compared to $277.5 million for the same period in 2021.

43

The following table presents losses and LAE incurred on a direct, ceded and net basis expressed in dollars and as a percent of the respective amounts of premiums earned. These amounts are further categorized as i) core losses, ii) weather events for the current accident year and iii) prior years’ reserve development (dollars in thousands):

	Three Months Ended June 30, 2022
	Direct		Loss Ratio		Ceded		Loss Ratio		Net		Loss Ratio
Premiums earned	$	428,805			$	151,744			$	277,061
Loss and loss adjustment expenses:
Core losses	$	196,630	45.9	%	$	36	—	%	$	196,594	71.0	%
Weather events*	—		—		—		—		—		—
Prior years’ reserve development	63,600		14.8	%	59,890		39.5	%	3,710		1.3	%
Total losses and loss adjustment expenses	$	260,230	60.7	%	$	59,926	39.5	%	$	200,304	72.3	%
*Includes only current year weather events beyond those expected.

	Three Months Ended June 30, 2021
	Direct		Loss Ratio		Ceded		Loss Ratio		Net		Loss Ratio
Premiums earned	$	392,574			$	136,402			$	256,172
Loss and loss adjustment expenses:
Core losses	$	159,412	40.6	%	$	(78)	(0.1)	%	$	159,490	62.3	%
Weather events*	—		—		—		—		—		—
Prior years’ reserve development	116,890		29.8	%	109,159		80.0	%	7,731		3.0	%
Total losses and loss adjustment expenses	$	276,302	70.4	%	$	109,081	80.0	%	$	167,221	65.3	%
*Includes only current year weather events beyond those expected.

See “Item 1—Note 6 (Liability for Unpaid Losses and Loss Adjustment Expenses)” for change in liability for unpaid losses and LAE.

Management looks at losses and LAE in three areas, as described below and represented in the tables above, each of which has different drivers that impact reported results. As a result, these components of losses and LAE are described separately. Overall losses and LAE, net of reinsurance recoveries, were $200.3 million resulting in a 72.3% net loss and LAE ratio for the quarter ended June 30, 2022. This compares to $167.2 million resulting in a 65.3% net loss and LAE ratio for the quarter ended June 30, 2021.

The Company continues to monitor and adjust its estimate of expected losses and has increased its current year loss estimates and increased estimates associated with prior years’ claims. Over the past three years, even as we have increased our estimates of prospective losses each year, we have recorded adverse claim development on prior years’ loss reserves and further strengthened current year losses during the year to address the increasing impact of Florida’s market disruptions, as well as the impact of inflation from building material costs and labor costs have on the reserving and claim settlement process. The full extent and duration of these market disruptions and inflationary pressures are unknown and still unfolding, and we continue to monitor the impact of such disruptions on the recording and reporting of claim costs. See the discussion above for the Insurance Entities’ 2022-2023 reinsurance programs and “Item 1 - Note 4 (Reinsurance).” Also see the discussion above under “Overview—Trends.”

The factors impacting losses and LAE are as follows:

•Core losses

◦Our core losses consist of all losses and LAE for the current accident year excluding both weather events for the current year beyond those anticipated in our regular accrual process and prior years’ reserve development. Core losses were 45.9% of direct premium earned for the quarter ended June 30, 2022 compared to 40.6% for the same period in 2021. During the quarter ended June 30, 2022 management increased the core loss ratio by one loss ratio point retroactive to January 1, 2022, with the cumulative impact being recorded in the quarter, as a result of worsening trends in overall weather not associated with named storms and in response to changes in estimated losses caused by deteriorating loss trends and higher repair costs as a result of material and labor inflation. The trend in core losses and LAE is increasing year over year as the claims environment in Florida continues to deteriorate and inflation continues to drive repair costs up. Also see the discussion above under “Overview—Trends.” Core losses also increase as premium volume increases year over year.

44

•Weather events beyond those expected

◦There were no weather events beyond those expected during the quarter ended June 30, 2022.

◦There were no weather events beyond those expected during the quarter ended June 30, 2021.

•Prior years’ reserve development

◦Two drivers influence the amounts recorded as prior years’ reserve development, namely: (i) changes to prior estimates of direct and net ultimate losses on prior accident years excluding major hurricanes and (ii) changes to prior estimates of direct and net ultimate losses on hurricanes.

▪During the quarter ended June 30, 2022, prior years’ reserve development totaled $63.6 million of direct losses and $3.7 million of net unfavorable loss development after the benefit of reinsurance.

•Prior years’ reserve development for the quarter ended June 30, 2022 was $63.6 million offset by ceded losses of $59.9 million resulting in net unfavorable development of $3.7 million. Prior year adverse development includes gross reserve development on Hurricane Irma of $39.3 million, of which $35.6 million was ceded, resulting in net development on Hurricane Irma of $3.7 million in the quarter. In addition to Hurricane Irma development, the Company concluded a commutation during the quarter, increasing ceded prior year loss payments which was offset by a provisory increase in direct prior year incurred but not reported (“IBNR”) amount, resulting in no net effect.

•Excluding hurricanes, there was no prior years’ reserve development for the quarter ended June 30, 2022.

▪For the quarter ended June 30, 2021, direct prior years’ reserve development of $116.9 million, less $109.2 million ceded, resulted in $7.7 million net development.

•For hurricanes, prior years’ reserve development for the quarter ended June 30, 2021 was the result of 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 loss 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.

The financial impact generated by our claims adjusting affiliate from the management of claims, including claim fees ceded by our Insurance Entities to reinsurers, was an increase of $0.2 million for the three months ended June 30, 2022, compared to a benefit of $1.2 million during the three months ended June 30, 2021, driven by the recoveries from reinsurers and internal claim services. The impact was recorded in the condensed consolidated financial statements as a reduction or increase to losses and LAE.

For the three months ended June 30, 2022, general and administrative expenses were $79.3 million compared to $81.9 million during the same period in 2021, as follows (dollars in thousands):

	Three Months Ended
	June 30,								Change
	2022				2021				$		%
	$		Ratio		$		Ratio
Premiums earned, net	$	277,061			$	256,172			$	20,889	8.2	%
General and administrative expenses:
Policy acquisition costs	54,100		19.5	%	56,766		22.2	%	(2,666)		(4.7)	%
Other operating costs	25,191		9.1	%	25,100		9.8	%	91		0.4	%
Total general and administrative expenses	$	79,291	28.6	%	$	81,866	32.0	%	$	(2,575)	(3.1)	%

45

General and administrative expenses decreased by $2.6 million, which was the result of a decrease in policy acquisition costs of $2.7 million offset by a slight increase in other operating costs of $0.1 million. The total general and administrative expense ratio was 28.6% for the three months ended June 30, 2022 compared to 32.0% for the same period in 2021.

•The decrease in policy acquisition costs of $2.7 million reflects a reduction in the commission rate paid to agents on the renewal of Florida policies which was reduced by 2 percentage points to 8% effective May 1, 2022, which will benefit future periods as the new rate structure applies prospectively. The decrease in policy acquisition costs as a percentage of premiums earned, net during the quarter is primarily due to the reduction in commissions paid to agents.

•The increase of other operating costs of $0.1 million was primarily higher salary and performance bonus expenses, mostly offset by lower stock-based compensation and policy related expenses. The other operating cost ratio was 9.1% for the three months ended June 30, 2022, compared to 9.8% for the same period in 2021. This reduction in the operating cost ratio reflects several factors including economies of scale as we continue to grow premium, and efficiencies gained from leveraging technology and spending discipline.

As a result of the above, the combined ratio for the second quarter ended June 30, 2022 was 100.9% compared to 97.3% for the same period in 2021. The increase was the result of a decrease in the general and administrative expense ratio offset by an increase in the loss and LAE ratio as described above.

Interest and amortization of debt issuance costs increased by $1.7 million for the three months ended June 30, 2022. The increase in interest and amortization of debt issuance costs is the result of an increase in the outstanding debt as a result of our fourth quarter of 2021 borrowing. See “Item 1—Note 7 (Long-term debt)” for additional details.

Income tax expense was $3.3 million for the quarter ended June 30, 2022 compared to an income tax expense of $8.1 million for the quarter ended June 30, 2021. Our effective tax rate (“ETR”) increased to 31.0% for the three months ended June 30, 2022, as compared to 27.0% for the three months ended June 30, 2021. The ETR increased as a result of a higher ratio of permanent items relative to the amount of income before taxes, principally non-deductible compensation, and a lower level of discrete tax benefits primarily due to an increase in stock forfeitures.

Other comprehensive loss, net of taxes for the three months ended June 30, 2022, was $29.7 million compared to other comprehensive income of $8.0 million for the same period in 2021, reflecting after-tax changes in fair value of available-for-sale debt securities held in our investment portfolio and reclassifications out of accumulated other comprehensive income for available-for-sale debt securities sold. See “Item 1—Note 11 (Other Comprehensive Income (Loss))” for additional information about the amounts comprising other comprehensive income (loss), net of taxes for these periods.

Adjusted operating income, representing GAAP operating income, excluding net realized gains (losses) on investment and net changes in unrealized gains (losses) of equity securities, was $22.0 million for the three months ended June 30, 2022 compared to $28.4 million for the same period in 2021.

Adjusted operating income margin, representing adjusted operating income divided by core revenue, was 7.3% for the three months ended June 30, 2022 compared to 10.2% for the same period in 2021.

Adjusted net income attributable to common stockholders, representing GAAP net income attributable to common stockholders, excluding net realized gains (losses) on investment and net changes in unrealized gains (losses) of equity securities, net of tax was $14.6 million for the three months ended June 30, 2022 compared to $20.6 million for the same period in 2021.

Diluted adjusted earnings per common share, representing adjusted net income available to common stockholders divided by weighted average diluted common shares outstanding, was $0.47 for the three months ended June 30, 2022 compared to $0.65 for the same period in 2021.

46

Results of Operations — Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Net income was $24.9 million for the six months ended June 30, 2022 compared to $48.3 million for the six months ended June 30, 2021. Weighted average diluted common shares outstanding for the six months ended June 30, 2022 were lower by 0.7% to 31.1 million shares from 31.3 million shares for the same period of the prior year. Diluted earnings per share for the six months ended June 30, 2022 was $0.80 compared to $1.54 in 2021. Benefiting the six months ended June 30, 2022 were increases in premiums earned, net, an increase in commission revenue, and an increase in net investment income partially offset by an increase in operating costs and expenses, and an increase in both the realized and unrealized losses and decreased revenue from policy fees and other revenue. Direct premium earned and premiums earned, net were up 9.8% and 9.3%, respectively, due to premium growth in 16 of the 19 states in which we are licensed and writing during the past 12 months as a result of rate increases implemented during 2021 and 2022, partially offset by higher costs for reinsurance flowing through to premiums earned, net. The net loss and LAE ratio was 70.6% for the six months ended June 30, 2022, compared to 62.3% for the same period in 2021 reflecting higher core net losses and an increase in excess weather events beyond those expected partially offset by lower prior years’ reserve development. As a result of the above and as further explained below, the combined ratio for the six months ended June 30, 2022 was 99.4% compared to 95.2% for the six months ended June 30, 2021. See “Overview - Trends.”

A detailed discussion of our results of operations follows the table below (in thousands, except per share data).

	Six Months Ended June 30,				Change
	2022		2021		$		%
REVENUES
Direct premiums written	$	929,008	$	838,941	$	90,067	10.7	%
Change in unearned premium	(85,600)		(70,761)		(14,839)		21.0	%
Direct premium earned	843,408		768,180		75,228		9.8	%
Ceded premium earned	(297,283)		(268,703)		(28,580)		10.6	%
Premiums earned, net	546,125		499,477		46,648		9.3	%
Net investment income	9,263		5,844		3,419		58.5	%
Net realized gains (losses) on investments	(667)		1,038		(1,705)		NM
Net change in unrealized gains (losses) of equity securities	(12,280)		735		(13,015)		NM
Commission revenue	22,565		18,986		3,579		18.9	%
Policy fees	10,719		11,962		(1,243)		(10.4)	%
Other revenue	3,763		3,896		(133)		(3.4)	%
Total revenues	579,488		541,938		37,550		6.9	%
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses	385,410		311,184		74,226		23.9	%
General and administrative expenses	157,588		164,289		(6,701)		(4.1)	%
Total operating costs and expenses	542,998		475,473		67,525		14.2	%
Interest and amortization of debt issuance costs	3,339		55		3,284		5970.9	%
INCOME BEFORE INCOME TAXES	33,151		66,410		(33,259)		(50.1)	%
Income tax expense	8,244		18,061		(9,817)		(54.4)	%
NET INCOME	$	24,907	$	48,349	$	(23,442)	(48.5)	%
Other comprehensive income (loss), net of taxes	(72,566)		(8,914)		(63,652)		714.1	%
COMPREHENSIVE INCOME (LOSS)	$	(47,659)	$	39,435	$	(87,094)	(220.9)	%
DILUTED EARNINGS PER SHARE DATA:
Diluted earnings per common share	$	0.80	$	1.54	$	(0.74)	(48.1)	%
Weighted average diluted common shares outstanding	31,060		31,292		(232)		(0.7)	%
NM – Not Meaningful

Direct premiums written increased by $90.1 million, or 10.7%, for the six months ended June 30, 2022, driven by premium growth within our Florida business of $80.2 million, or 11.3%, and premium growth in our other states business of $9.8 million, or 7.5%, as compared to the same period of the prior year. Rate increases approved in 2021 and 2022 for Florida and for certain other states, as discussed below, were the principal driver of higher written premiums. In total, policies in force declined 48,975,

47

or 5.2%, from 943,593 at December 31, 2021 to 894,618 at June 30, 2022. A summary of the recent rate increases which are driving increases in written premium are as follows:

•In May 2022, the Company filed a rate increase with the FLOIR for an overall 14.9% rate increase for UPCIC on Florida personal residential homeowners’ line of business, effective June 1, 2022, for new business and November 4, 2022, for renewals. This filing was made on a “Use and File” basis.

•In December 2021, the FLOIR approved an overall 3.9% rate increase for UPCIC on Florida personal residential homeowners’ line of business, effective January 2022 for new business and March 2022 for renewals.

•In September 2021, the FLOIR approved an overall 14.9% rate increase for UPCIC on Florida personal residential homeowners’ line of business, effective September 2021 for new business and November 2021 for renewals.

•In December 2020, the FLOIR approved an overall 7.0% rate increase for UPCIC on Florida personal residential homeowners’ line of business, effective December 2020 for new business and March 2021 for renewals.

•In addition, during the past year, rate increases for UPCIC were approved in Alabama, Georgia, Indiana, Minnesota, North Carolina, South Carolina, Pennsylvania and Virginia.

These rate increases are applied on new business submissions and renewals from the effective date of their renewal, and then are earned subsequently over the policy period. The recent rate increases in Florida are in response to rising claim costs driven by higher costs of material and labor associated with claims, the cost of weather events, the rising cost of catastrophe and other reinsurance protecting policyholders and, more importantly, the impact of “social inflation” on claims as claim settlements increasingly have involved inflated demands, representation, and litigation. In addition, the Insurance Entities’ policies provide for coverage limits to be adjusted at renewal based on third-party data sources that monitor factors such as changes in costs for residential building materials and labor.

During 2022, management continued efforts to prudently manage policy counts and exposures intended to slow the growth of written premiums relating to new business compared to prior years while the above rate increases are taking effect. Reduced new business writings, declines in renewal retentions in 2022 and the impact of selected policy non-renewals, has resulted in a decrease in policies in force of 48,975, or 5.2%, during 2022 from 943,593 at December 31, 2021 to 894,618 at June 30, 2022. Direct premiums written continue to increase across the majority of states in which we conduct business. As a result of our business strategy, rate changes and disciplined underwriting initiatives, we have seen a decrease in policy count, but an increase in in-force premium and total insured value in a majority of states for the past three years. In total, we wrote policies in 19 states during each of 2022 and 2021. We actively wrote policies in 19 states during 2021 and 2022. In addition, we are authorized to do business in Tennessee and Wisconsin and are proceeding with product filings in those states. At June 30, 2022, policies in force decreased 82,633 policies, or 8.5%, premium in force increased $148.0 million, or 9.1%, and total insured value increased $8.2 billion, or 2.6%, compared to June 30, 2021.

The following table provides direct premiums written for Florida and Other States for the six months ended June 30, 2022 and 2021 (dollars in thousands):

	For the Six Months Ended
	June 30, 2022				June 30, 2021				Growth  year over year
State	Direct Premiums Written		%		Direct Premiums Written		%		$		%
Florida	$	787,605	84.8	%	$	707,381	84.3	%	$	80,224	11.3	%
Other states	141,403		15.2	%	131,560		15.7	%	9,843		7.5	%
Total	$	929,008	100.0	%	$	838,941	100.0	%	$	90,067	10.7	%

We seek to prudently grow and generate long-term rate adequate premium in each state where we offer policies. Our diversification strategy seeks to increase business outside of Florida and to improve geographical distribution within Florida. Premium growth outside Florida is a measure monitored by management in its efforts to meet that objective.

Direct premium earned increased by $75.2 million, or 9.8%, for the six months ended June 30, 2022, reflecting the earning of premiums written over the past 12 months including the benefit of rate changes due to primary rate filings, filings to cover increased reinsurance costs as well as policy premium adjustments due to increases in insured values caused by inflation.

Reinsurance enables our Insurance Entities to limit potential exposures to catastrophic events and other covered events. Ceded premium represents premiums paid to reinsurers for this protection and is a cost which reduces net written and net earned premiums. Ceded premium earned increased $28.6 million, or 10.6%, for the six months ended June 30, 2022 as compared to the same period of the prior year. The increase in reinsurance costs reflects an increase in the value of exposures we insure; increased pricing when compared to the expired reinsurance program and differences in the structure and design of the respective programs. Reinsurance costs, as a percentage of direct premium earned, increased from 35.0% in 2021 to 35.2% in 2022. Reinsurance costs associated with each year’s reinsurance program are earned over the annual policy period which typically runs from June 1st to

48

May 31st. See the discussion above for the Insurance Entities’ 2022-2023 reinsurance programs and “Item 1— Note 4 (Reinsurance).”

Premiums earned, net of ceded premium earned, grew by 9.3%, or $46.6 million, to $546.1 million for the six months ended June 30, 2022, reflecting an increase in direct premium earned offset by increased costs for reinsurance.

Net investment income was $9.3 million for the six months ended June 30, 2022, compared to $5.8 million for the same period in 2021, an increase of $3.4 million, or 58.5%. In the fourth quarter of 2021, we saw increases in investment yields as the Federal Reserve took action to address the market concerns of inflation and employment. As a result, liquidity generated by our portfolio from interest payments, principal repayments and new investments are being invested at higher rates, resulting in overall increased investment returns on our portfolio.

Total invested assets were $1,106.6 million as of June 30, 2022 compared to $1,093.7 million as of December 31, 2021. The increase is attributable to capital contributions from UIH, excess cash balances invested in the portfolio, receipt of interest payments partially offset by unrealized losses on available-for-sale debt securities. Unrealized losses reverse over time as debt instruments are generally held to maturity. Cash and cash equivalents were $317.0 million at June 30, 2022 compared to $250.5 million at December 31, 2021, an increase of 26.5%. This increase is largely attributable to changes in operational cash flows since year end. Cash and cash equivalents are invested short term until needed to settle loss and LAE payments, reinsurance premium payments and operating cash needs or until they are deployed by our investment advisors.

Yields from cash and cash equivalents, short-term investments and the available-for-sale debt portfolio are dependent on the composition of the portfolio, future market forces, monetary policy and interest rate policy from the Federal Reserve. During most of 2021, the Federal Reserve broadly maintained lower interest rates, which impacted the effective yields on newly purchased available-for-sale debt securities and overnight cash purchases and short-term investments. This overall trend changed in late 2021 and into 2022 as inflation worries began to impact the financial markets, including the markets’ concern over future Federal Reserve actions of rate hikes and other actions to address inflation concerns. As a result, we saw increased yields on securities purchased in late 2021 and 2022 and increased unrealized losses on our portfolio reflected after-tax in the equity section of our balance sheet as increased market yields negatively impacted the fair value of much of our available-for-sale debt securities.

We sell investments, including securities, from our investment portfolio from time to time to meet our investment objectives or take advantage of market opportunities. During the six months ended June 30, 2022, sales of available-for-sale debt securities resulted in a net realized losses of $1.2 million and sales of equity securities resulted in net realized gains of $0.5 million, generating total net realized losses of $0.7 million. During the six months ended June 30, 2021, sales of available-for-sale debt securities resulted in net realized losses of $0.5 million, sales of equity securities resulted in net realized gains of $1.1 million, and the sale of an investment real estate property resulted in a realized gain of $0.4 million, in total generating net realized gains of $1.0 million. See “Item 1—Note 3 (Investments).”

There was a $12.3 million net unrealized loss in equity securities during the six months ended June 30, 2022 compared to a $0.7 million net unrealized loss in equity securities during the six months ended June 30, 2021. Net change in unrealized gains or losses reflected on the income statement are the result of changes in the fair market value of our equity securities during the period for securities still held at the end of the reported period and the reversal of unrealized gains or losses for securities sold during the period. See “Item 1—Note 3 (Investments).”

Commission revenue is comprised principally of brokerage commissions we earn from third-party reinsurers (excluding the FHCF) on reinsurance placed for the Insurance Entities. Commission revenue is earned pro-rata over the reinsurance policy period which runs from June 1st to May 31st of the following year. For the six months ended June 30, 2022, commission revenue was $22.6 million, compared to $19.0 million for the six months ended June 30, 2021. The increase in commission revenue of $3.6 million, or 18.9%, for the six months ended June 30, 2022 was primarily due to increased commissions from third-party reinsurers earned on increased reinsurance premiums which is attributable to growth in our insured values as well as the difference in pricing and structure associated with our reinsurance program when compared to the prior year.

Policy fees for the six months ended June 30, 2022 were $10.7 million compared to $12.0 million for the same period in 2021. The decrease of $1.2 million, or 10.4%, was the result of a decrease in the combined total number of new and renewal policies written during the six months ended June 30, 2022 compared to the same period in 2021 in states where we are permitted to charge this fee.

Other revenue, representing revenue from policy installment fees, premium financing and other miscellaneous income, was $3.8 million for the six months ended June 30, 2022 compared to $3.9 million for the same period in 2021.

Core revenue, representing total GAAP revenue, excluding net realized gains (losses) on investments and net changes in unrealized gains (losses) of equity securities, was $592.4 million for the six months ended June 30, 2022 compared to $540.2 million for the same period in 2021.

49

The following table presents losses and LAE incurred on a direct, ceded and net basis expressed in dollars and as a percent of the respective amounts of premiums earned. These amounts are further categorized as i) core losses, ii) weather events for the current accident year and iii) prior years’ reserve development (dollars in thousands):

	Six Months Ended June 30, 2022
	Direct		Loss Ratio		Ceded		Loss Ratio		Net		Loss Ratio
Premiums earned	$	843,408			$	297,283			$	546,125
Loss and loss adjustment expenses:
Core losses	$	376,580	44.7	%	$	80	—	%	$	376,500	69.0	%
Weather events*	4,545		0.5	%	—		—	%	4,545		0.8	%
Prior years’ reserve development	74,260		8.8	%	69,895		23.5	%	4,365		0.8	%
Total losses and loss adjustment expenses	$	455,385	54.0	%	$	69,975	23.5	%	$	385,410	70.6	%
*Includes only current year weather events beyond those expected.

	Six Months Ended June 30, 2021
	Direct		Loss Ratio		Ceded		Loss Ratio		Net		Loss Ratio
Premiums earned	$	768,180			$	268,703			$	499,477
Loss and loss adjustment expenses:
Core losses	$	304,640	39.7	%	$	(50)	—	%	$	304,690	61.0	%
Weather events*	—		—		—		—		—		—
Prior years’ reserve development	208,960		27.2	%	202,466		75.3	%	6,494		1.3	%
Total losses and loss adjustment expenses	$	513,600	66.9	%	$	202,416	75.3	%	$	311,184	62.3	%
*Includes only current year weather events beyond those expected.

See “Item 1—Note 6 (Liability for Unpaid Losses and Loss Adjustment Expenses)” for change in liability for unpaid losses and LAE.

Management looks at losses and LAE in three areas, as described below and represented in the tables above, each of which has different drivers that impact reported results. As a result, these components of losses and LAE are described separately. Overall losses and LAE, net of reinsurance recoveries, were $385.4 million resulting in a 70.6% net loss and LAE ratio for the six months ended June 30, 2022. This compares to $311.2 million resulting in a 62.3% net loss and LAE ratio for the six months ended June 30, 2021.

The Company continues to monitor and adjust its estimate of expected losses and has increased its current year loss estimates and increased estimates associated with prior years’ claims. Over the past three years, even as we have increased our estimates of prospective losses each year, we have recorded adverse claim development on prior years’ loss reserves and further strengthened current year losses during the year to address the increasing impact of Florida’s market disruptions, as well as the impact of inflation from building material costs and labor costs, have on the reserving and claim settlement process. The full extent and duration of these market disruptions and inflationary pressures are unknown and still unfolding, and we continue to monitor the impact of such disruptions on the recording and reporting of claim costs. See the discussion above for the Insurance Entities’ 2022-2023 reinsurance programs and “Item 1 - Note 4 (Reinsurance).” Also see the discussion above under “Overview—Trends.”

The factors impacting losses and LAE are as follows:

•Core losses

◦Our core losses consist of all losses and LAE for the current accident year excluding both weather events for the current year beyond those anticipated in our regular accrual process and prior years’ reserve development. Core losses were 44.7% of direct premium earned for the six months ended June 30, 2022 compared to 39.7% for the same period in 2021. During the quarter ended June 30, 2022, management increased the core loss ratio by one loss ratio point retroactive to January 1, 2022, with the cumulative impact being recorded in the quarter. This was done in response to worsening weather experience during the quarter. Management elected to address this through an increase in the current accident year loss pick rather than record specific weather events given the overall trends in recent years for weather not associated with named storms and in response to changes in estimated losses caused by deteriorating loss trends and higher repair costs as a result of material and labor inflation. The trend in core losses and LAE is increasing year over year as the claims environment in Florida

50

continues to deteriorate and inflation continues to drive repair costs up. Also see the discussion above under “Overview—Trends.” Core losses also increase as premium volume increases year over year.

•Weather events beyond those expected

◦There were $4.5 million of weather events beyond those expected and included in the core losses during the six months ended June 30, 2022.

◦There were no weather events beyond those expected and included in the core losses during the six months ended June 30, 2021.

•Prior years’ reserve development

◦Two drivers influence the amounts recorded as prior years’ reserve development, namely: (i) changes to prior estimates of direct and net ultimate losses on prior accident years excluding major hurricanes and (ii) changes to prior estimates of direct and net ultimate losses on hurricanes.

▪During the six months ended June 30, 2022, prior years’ reserve development totaled $74.3 million of direct losses and $4.4 million of net unfavorable loss development after the benefit of reinsurance.

•For hurricanes, prior years’ reserve development for the six months ended June 30, 2022 was the result of a direct increase in the ultimate losses for several hurricanes of $74.3 million offset by ceded hurricane losses of $69.9 million resulting in net unfavorable development of $4.4 million. Direct losses increased for Hurricanes Irma, Sally, Michael and Matthew. Prior year adverse development includes gross reserve development on Hurricane Irma of $49.8 million, of which $45.6 million was ceded, resulting in net development on Hurricane Irma of $4.2 million in the period. Additionally, the Company concluded a favorable commutation during the quarter, increasing ceded prior year loss payments which was offset by a provisory increase in direct prior year IBNR amount, resulting in no net effect. Hurricane Matthew direct and net losses increased $0.1 million.

•Excluding hurricanes, there was no direct and net prior years’ reserve development for the six months ended June 30, 2022.

▪For the six months ended June 30, 2021 prior years’ reserve development totaled $209.0 million of direct losses and $6.5 million of net losses after the benefit of reinsurance.

•For hurricanes, prior years’ reserve development for the six months ended June 30, 2021 was the result of a direct increase in the ultimate losses for 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. As a result of ceded losses exceeding direct losses, net loss development on prior hurricanes was favorable during the six months ended June 30, 2021.

•Excluding 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.

The financial benefit generated by our claims adjusting affiliate from the management of claims, including claim fees ceded by our Insurance Entities to reinsurers, was $1.9 million for the six months ended June 30, 2022, compared to $9.3 million during the six months ended June 30, 2021, driven by the recoveries from reinsurers and internal claim services. The benefit was recorded in the condensed consolidated financial statements as a reduction to losses and LAE.

51

General and administrative expenses were $157.6 million for the six months ended June 30, 2022, compared to $164.3 million during the same period in 2021, as follows (dollars in thousands):

	Six Months Ended
	June 30,								Change
	2022				2021				$		%
	$		Ratio		$		Ratio
Premiums earned, net	$	546,125			$	499,477			$	46,648	9.3	%
General and administrative expenses:
Policy acquisition costs	108,823		19.9	%	113,224		22.7	%	(4,401)		(3.9)	%
Other operating costs (1)	48,765		8.9	%	51,065		10.2	%	(2,300)		(4.5)	%
Total general and administrative expenses	$	157,588	28.8	%	$	164,289	32.9	%	$	(6,701)	(4.1)	%

General and administrative expenses decreased by $6.7 million, which was the result of a decrease in policy acquisition costs of $4.4 million and other operating costs of $2.3 million. The total general and administrative expense ratio was 28.8% for the six months ended June 30, 2022 compared to 32.9% for the six months ended June 30, 2021.

•The decrease in policy acquisition costs of $4.4 million reflects a reduction in the commission rate paid to agents on the renewal of Florida policies which was reduced by 2 percentage points to 10% effective April 1, 2021. The commission rate paid to agents on the renewal of Florida policies was reduced by an additional 2 percentage points to 8% effective May 1, 2022, which will benefit future periods as the new rate structure applies prospectively. The decrease in policy acquisition costs as a percentage of premiums earned, net during the period is primarily due to the reduction in commissions paid to agents.

•The decrease in other operating costs of $2.3 million primarily reflects lower employee benefits, stock-based compensation, and performance bonus accruals. The other operating cost ratio was 8.9% for the six months ended June 30, 2022 compared to 10.2% in the six months ended June 30, 2021. This reduction reflects several factors including economies of scale as we continue to grow premium, and efficiencies gained from leveraging technology, and spending discipline.

As a result of the above, the combined ratio for the six months ended June 30, 2022 was 99.4% compared to 95.2% for the same period in 2021. The increase was the result of a decrease in the general and administrative expense ratio offset by an increase in the loss and LAE ratio as described above.

Interest and amortization of debt issuance costs increased by $3.3 million for the six months ended June 30, 2022. The increase in interest and amortization of debt issuance costs is the result of an increase in the outstanding debt as a result of our fourth quarter of 2021 borrowing. See “Item 1—Note 7 (Long-term debt)” for additional details.

Income tax expense was $8.2 million for the six months ended June 30, 2022, compared to income tax expense of $18.1 million for the six months ended June 30, 2021. Our ETR decreased to 24.9% for the six months ended June 30, 2022, as compared to 27.2% for the six months ended June 30, 2021. The ETR decreased as a result of a lower ratio of permanent items relative to the amount of income before taxes, principally non-deductible compensation, and a higher level of discrete tax benefits primarily due to an increase in the Florida corporate income tax rate enacted on January 1, 2022.

Other comprehensive loss, net of taxes for the six months ended June 30, 2022, was $72.6 million compared to other comprehensive loss of $8.9 million for the same period in 2021, reflecting after-tax changes in fair value of available-for-sale debt securities held in our investment portfolio and reclassifications out of accumulated other comprehensive income for available-for-sale debt securities sold. See “Item 1—Note 11 (Other Comprehensive Income (Loss))” for additional information about the amounts comprising other comprehensive income (loss), net of taxes for these periods.

Adjusted operating income, representing GAAP operating income, excluding net realized gains (losses) on investment and net changes in unrealized gains (losses) of equity securities, was $49.4 million for the six months ended June 30, 2022 compared to $64.7 million for the same period in 2021.

Adjusted operating income margin, representing adjusted operating income divided by core revenue, was 8.3% for the six months ended June 30, 2022 compared to 12.0% for the same period in 2021.

Adjusted net income attributable to common stockholders, representing GAAP net income attributable to common stockholders, excluding net realized gains (losses) on investment and net changes in unrealized gains (losses) of equity securities, net of tax, was $34.7 million for the six months ended June 30, 2022 compared to $47.0 million for the same period in 2021.

Diluted adjusted earnings per common share, representing adjusted net income available to common stockholders divided by weighted average diluted common shares outstanding, was $1.12 for the six months ended June 30, 2022 compared to $1.50 for the same period in 2021.

52

Analysis of Financial Condition—As of June 30, 2022 Compared to December 31, 2021

We believe that cash flows generated from operations will be sufficient to meet our working capital requirements for at least the next twelve months. We invest amounts considered to be in excess of current working capital requirements.

The following table summarizes, by type, the carrying values of investments as of the dates presented (in thousands):

	As of
	June 30,		December 31,
Type of Investment	2022		2021
Available-for-sale debt securities	$	1,021,006	$	1,040,455
Equity securities	79,844		47,334
Investment real estate, net	5,798		5,891
Total	$	1,106,648	$	1,093,680

See “Item 1—Condensed Consolidated Statements of Cash Flows” and “Item 1—Note 3 (Investments)” for explanations on changes in investments.

Restricted cash and cash equivalents increased by $17.5 million to $20.1 million as of June 30, 2022 as a result of collateral held by a reinsurance captive arrangement with one of the Insurance Entities reported as a Variable Interest Entities (“VIE”) in the condensed consolidated financial statements. See “Item 1—Note 14 (Variable Interest Entities)” for more information.

Prepaid reinsurance premiums represent the portion of unearned ceded written premium that will be earned pro-rata over the coverage period of our reinsurance program, which runs from June 1st to May 31st of the following year. The increase of $349.1 million to $590.1 million as of June 30, 2022 was primarily due to additional ceded written premium of $632.4 million recorded this quarter for the estimated reinsurance costs relating to our new 2022-2023 catastrophe reinsurance program beginning June 1, 2022, less amortization of ceded written premium for the reinsurance costs earned during the period.

Reinsurance recoverable represents the estimated amount of paid and unpaid losses, LAE and other expenses that are expected to be recovered from reinsurers. The decrease of $152.2 million to $33.3 million as of June 30, 2022 was primarily due to the collections of amounts recoverable from reinsurers relating to settled claims from hurricanes and covered by our reinsurance contracts and amounts received in connection with a commutation received by UPCIC this quarter.

Premiums receivable, net, represents amounts receivable from policyholders. The increase in premiums receivable, net of $14.4 million to $79.3 million as of June 30, 2022 relates to consumer payment behavior of our business. The amount of direct premiums written during a calendar year tends to increase just prior to the second quarter and tends to decrease approaching the fourth quarter.

Deferred policy acquisition costs (“DPAC”) increased by $2.2 million to $111.0 million as of June 30, 2022, which is consistent with the seasonal premium trends of written premium. In addition DPAC was impacted by the reduction to Florida renewal commissions implemented during 2022 and 2021 and other changes to the Company’s commission structure. See “Item 1—Note 5 (Insurance Operations)” for a roll-forward in the balance of our DPAC.

Income taxes recoverable represents the difference between estimated tax obligations and tax payments made to taxing authorities. As of June 30, 2022, the balance recoverable was $22.3 million, representing amounts due from taxing authorities at that date, compared to a balance recoverable of $16.9 million as of December 31, 2021. Income taxes recoverable as of June 30, 2022 will either be refunded or applied to future periods to offset future federal and state income tax obligations.

Deferred income taxes represent the estimated tax asset or tax liability caused by temporary differences between the tax return basis of certain assets and liabilities and amounts recorded in the financial statements. During the six months ended June 30, 2022, deferred tax assets increased by $13.9 million to $30.3 million primarily due to an increase in unrealized losses on investments and an increase in unearned premiums net of prepaid reinsurance premiums. Deferred income taxes reverse in future years as the temporary differences between book and tax reverse.

See “Item 1—Note 6 (Liability for Unpaid Losses and Loss Adjustment Expenses)” for a roll-forward in the balance of our unpaid losses and LAE. Unpaid losses and LAE decreased by $159.9 million to $186.3 million as of June 30, 2022. The majority of the decrease is from the settlement of losses from prior hurricanes and prior large weather events. Overall, unpaid losses and LAE decreased, as claim settlements exceeded new emerging claims. Unpaid losses and LAE are net of estimated subrogation recoveries.

Unearned premiums represent the portion of direct premiums written that will be earned pro-rata in the future. The increase of $85.6 million from December 31, 2021 to $943.4 million as of June 30, 2022 reflects the seasonality of our business, which varies from month to month.

53

Advance premium represents premium payments made by policyholders ahead of the effective date of the policies. The increase of $32.6 million to $86.3 million as of June 30, 2022 reflects customer payment behavior and the payment behavior of mortgage escrow service providers.

We maintain a short-term cash investment strategy sweep to maximize investment returns on cash balances. There were no book overdrafts as of June 30, 2022 compared to book overdrafts totaling $26.8 million as of December 31, 2021. The decrease of $26.8 million is the result of higher cash balances available for offset as of June 30, 2022 compared to December 31, 2021. See “—Liquidity and Capital Resources” for more information.

Reinsurance payable, net, represents the unpaid reinsurance premium installments owed to reinsurers, unpaid reinstatement premiums due to reinsurers and cash advances received from reinsurers, if any. On June 1st of each year, we renew our core catastrophe reinsurance program and record the estimated annual cost of our reinsurance program. These estimated annual costs are increased or decreased during the year based on premium adjustments or as a result of new placements during the year. The annual cost initially increases reinsurance payable, which is then reduced as installment payments are made over the policy period of the reinsurance, which typically runs from June 1st to May 31st. The balance increased by $449.2 million to $637.8 million as of June 30, 2022 as a result of the timing of the above items. See “—Liquidity and Capital Resources” for more information about timing of reinsurance premiums installment payments.

Other liabilities and accrued expenses increased by $5.9 million to $33.3 million as of June 30, 2022, primarily driven from an increase in other liabilities due to the timing of payments.

Capital resources, net, decreased by $63.7 million for the six months ended June 30, 2022, reflecting a net decrease in total stockholders’ equity and long-term debt. The change in stockholders’ equity was principally the result of increases coming from our 2022 net income and share-based compensation, offset by declines in the after-tax changes in the fair value of our available-for-sale debt securities, treasury share purchases and dividends to shareholders. Available-for-sale debt securities decline in fair value of $96.3 million (before tax) in the first half of 2022, caused the net unrealized loss position of $20.2 million at December 31, 2021 to increase to $116.5 million at June 30, 2022. Current market outlooks are signaling further Federal Reserve tightening which could continue to have a negative impact on the valuation of available-for-sale debt securities. See “Item 1—Condensed Consolidated Statements of Stockholders’ Equity” and “Item 1—Note 8 (Stockholders’ Equity)” for explanation of changes in treasury stock.

The reduction in debt of $0.7 million was the result of principal payments on debt during 2022. See “—Liquidity and Capital Resources” for more information.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity is a measure of a company’s ability to generate sufficient cash flows to meet its short and long-term obligations. Funds generated from operations have been sufficient and we expect them to be sufficient to meet our current and long term liquidity requirements.

The balance of cash and cash equivalents, excluding restricted cash, as of June 30, 2022 was $317.0 million, compared to $250.5 million at December 31, 2021. See “Item 1—Condensed Consolidated Statements of Cash Flows” for a reconciliation of the balance of cash and cash equivalents between June 30, 2022 and December 31, 2021. The increase in cash and cash equivalents was driven by cash flows generated from operating activities in excess of cash flows used in investing and financing activities. Our cash investment strategy at times includes cash investments where the right of offset against other bank accounts does not exist. A book overdraft occurs when aggregating the book balance of all accounts at a financial institution, for accounts which have the right of offset, and if the aggregation results in a net negative book balance, that balance is reclassified from cash and cash equivalents in our Condensed Consolidated Balance Sheet to book overdraft. Cash and cash equivalents balances are available to settle book overdrafts, and to pay reinsurance premiums, expenses and claims. Reinsurance premiums are paid in installments during the reinsurance policy period, which runs from June 1st to May 31st of the following year. The FHCF reimbursement premiums are paid in three installments on August 1st, October 1st, and December 1st, and third-party reinsurance premiums are generally paid in four installments on July 1st, October 1st, January 1st and April 1st, resulting in significant payments at those times. See “Item 1—Note 12 (Commitments and Contingencies)” and additional discussion below under the caption “—Material Cash Requirements” for more information.

The balance of restricted cash and cash equivalents as of June 30, 2022 and December 31, 2021 represents cash equivalents on deposit with certain regulatory agencies in the various states in which our Insurance Entities do business and, in 2022, restricted cash and cash equivalents also includes collateral held by a third party in a consolidated VIE, in support of the holding company’s reinsurance captive arrangement with UPCIC. The amount of collateral held was $17.5 million as of June 30, 2022. Previous years’ captive arrangements have included collateral posting by the holding company, which was either returned to the holding company before year end when there were no claims under the reinsurance protection with the VIE, or remitted to UPCIC under this arrangement in the form of VIE reinsurance settlements with UPCIC. See “Item 1—Note 14 (Variable Interest Entities)” for more information.

54

Liquidity is required at the holding company for us to cover the payment of holding company general operating expenses and contingencies, dividends to shareholders (if and when authorized and declared by our Board of Directors), payment for the possible repurchase of our common stock (if and when authorized by our Board of Directors), payment of our tax obligations to taxing authorities, settlement of taxes between subsidiaries in accordance with our tax sharing agreement, capital contributions to subsidiaries or surplus note contributions to the Insurance Entities, if needed, and interest and principal payments on outstanding debt obligations of the holding company. Effective in 2021 for UPCIC and 2022 for APPCIC, the holding company has put in place an ongoing surplus note arrangement with the Insurance Entities, which has been approved by the Florida Office of Insurance Regulation as the Insurance Entities’ domestic regulator. Surplus notes are unsecured debt issued by the Insurance Entities that is subordinated to all claims by policyholders and creditors, with interest and principal payments on the surplus notes to the holding company being made only upon the FLOIR’s express approval. Surplus notes are considered bonds in function and payout structure, but are accounted for as equity in the statutory reporting of the Insurance Entities. The holding company has outstanding with the Insurance Entities $134.0 million in surplus notes. Under the arrangement, interest accrues at a variable rate (currently 8.27%) on the outstanding surplus note balances and, if approved by the FLOIR is payable annually to the holding company. In 2022, UPCIC received approval from its Florida regulator to permit UPCIC to pay interest accruing from surplus notes outstanding during 2021. The declaration and payment of future dividends to our shareholders, and any future repurchases of our common stock, will be at the discretion of our Board of Directors and will depend upon many factors, including our operating results, financial condition, debt covenants and any regulatory constraints. New regulations or changes to existing regulations imposed on the Company and its affiliates may also impact the amount and timing of future dividend payments to the parent. Principal sources of liquidity for the holding company include dividends paid by our service entities generated from income earned on fees paid by the Insurance Entities to affiliated companies for general agency, inspections and claims adjusting services. Dividends are also paid from income earned from brokerage commissions earned on reinsurance contracts placed by our wholly-owned subsidiary, Blue Atlantic Reinsurance Corporation, and policy fees. We also maintain high quality investments in our portfolio as a source of liquidity along with ongoing interest and dividend income from those investments. As discussed in “Item 1—Note 5 (Insurance Operations),” there are limitations on the dividends the Insurance Entities may pay to their immediate parent company, Protection Solutions, Inc. (“PSI”, formerly known as Universal Insurance Holding Company of Florida).

The maximum amount of dividends that can be paid by Florida insurance companies without prior approval of the FLOIR is subject to restrictions as referenced below and in “Item 1—Note 5 (Insurance Operations).” Dividends from the Insurance Entities can only be paid from accumulated unassigned funds derived from net operating profits and net realized capital gains. Subject to such accumulated unassigned funds, the maximum dividend that may be paid by the Insurance Entities to PSI without prior approval (an “ordinary dividend”) is further limited to the lesser of statutory net income from operations of the preceding calendar year or statutory unassigned surplus as of the preceding year end. During the six months ended June 30, 2022 and the year ended December 31, 2021, the Insurance Entities did not pay dividends to PSI. As of June 30, 2022, the Insurance Entities did not have the capacity to pay ordinary dividends.

On November 23, 2021, we entered into Note Purchase Agreements with certain institutional accredited investors and qualified institutional buyers pursuant to which we issued $100 million of 5.625% Senior Unsecured Notes due 2026. We intend to use the net proceeds to support the Insurance Entities’ statutory capital requirements and for general corporate purposes. If necessary, the Company also has amounts available under our unsecured revolving loan as discussed in “Item 1—Note 7 (Long-term debt).”

Liquidity for the Insurance Entities is primarily required to cover payments for reinsurance premiums, claims payments including potential payments of catastrophe losses (offset by recovery of any reimbursement amounts under our reinsurance agreements), fees paid to affiliates for managing general agency services, inspections and claims adjusting services, agent commissions, premium and income taxes, regulatory assessments, general operating expenses, and interest and principal payments on debt obligations. The principal source of liquidity for the Insurance Entities consists of the revenue generated from the collection of premiums earned, net, interest and dividend income from the investment portfolio, the collection of reinsurance recoverable and financing fees.

Our insurance operations provide liquidity as premiums are generally received months or even years before potential losses are paid under the policies written. In the event of catastrophic events, many of our reinsurance agreements provide for “cash advance” whereby reinsurers advance or prepay amounts to us, thereby providing liquidity, which we utilize in the claim settlement process. In addition, the Insurance Entities maintain substantial investments in highly liquid, marketable securities, which would generate funds upon sale. The average credit rating on our available-for-sale securities was A+ as of June 30, 2022 and December 31, 2021. Credit ratings are a measure of collection risk on invested assets. Credit ratings are provided by third party, nationally recognized rating agencies and are periodically updated. Management establishes guidelines for minimum credit rating and overall credit rating for all investments. The duration of our available-for-sale securities was 4.4 years at June 30, 2022 compared to 4.4 years at December 31, 2021. Duration is a measure of a bond’s sensitivity to interest rate changes and is used by management to limit the potential impact of longer-term investments.

The Insurance Entities are responsible for losses related to catastrophic events in excess of coverage provided by the Insurance Entities’ reinsurance programs and retentions before our reinsurance protection commences. Also, the Insurance Entities are responsible for all other losses that otherwise may not be covered by the reinsurance programs and any amounts arising in the event of a reinsurer default. Losses or a default by reinsurers may have a material adverse effect on either of the Insurance Entities, on our business, financial condition, results of operations and liquidity.

55

Capital Resources

Capital resources provide protection for policyholders, furnish the financial strength to support the business of underwriting insurance risks and facilitate continued business growth. The following table provides our stockholders’ equity, total long-term debt, total capital resources, debt-to-total capital ratio and debt-to-equity ratio for the periods presented (dollars in thousands):

	As of
	June 30,			December 31,
	2022			2021
Stockholders’ equity	$	366,551		$	429,702
Total long-term debt	103,161			103,676
Total capital resources	$	469,712		$	533,378
Debt-to-total capital ratio	22.0		%	19.4		%
Debt-to-equity ratio	28.1		%	24.1		%

The debt-to-total capital ratio is total long-term debt divided by total capital resources, whereas the debt-to-equity ratio is total long-term debt divided by stockholders’ equity. These ratios help management measure the amount of financing leverage in place in relation to equity and future leverage capacity.

Adjusted common stockholders’ equity, representing GAAP common stockholders' equity, excluding accumulated other comprehensive income (loss), was $454.6 million as of June 30, 2022, $486.3 million as of June 30, 2021 and $445.2 million as of December 31, 2021.

Adjusted book value per share common share, representing adjusted common stockholders’ equity divided by outstanding common shares at the end of the reporting period, was $14.80 as of June 30, 2022, $15.55 as of June 30, 2021 and $14.26 as of December 31, 2021.

Adjusted return on common equity representing actual or annualized adjusted net income attributable to common stockholders divided by average adjusted common stockholders' equity, with the denominator excluding current period income statement net realized gains (losses) on investments and net changes in unrealized gains (losses) of equity securities, net of tax, was 15.3% as of June 30, 2022, 20.2% as of June 30, 2021 and 4.3% as of December 31, 2021.

As described in our Annual Report on Form 10-K for the year ended December 31, 2021, UPCIC entered into a surplus note with the State Board of Administration of Florida under Florida’s Insurance Capital Build-Up Incentive Program on November 9, 2006. The surplus note has a twenty-year term, with quarterly payments of principal and interest that accrue per the terms of the note agreement. At June 30, 2022, UPCIC was in compliance with the terms of the surplus note. Total adjusted capital and surplus, which includes the surplus note, was in excess of regulatory requirements for both UPCIC and APPCIC.

As discussed in “Item 1—Note 7 (Long-term Debt),” we entered into a credit agreement and related revolving loan with JPMorgan Chase Bank, N.A. in August 2021 which makes available an unsecured revolving credit facility with an aggregate commitment not to exceed $35.0 million. Borrowings under the Revolving Loan mature 364 days after the date of the loan. The Revolving Loan contains customary financial covenants. As of June 30, 2022, the Company was in compliance with all applicable covenants, including financial covenants. We had not drawn any amounts under the Revolving Loan as of June 30, 2022. The revolving credit facility with JP Morgan Chase Bank, N.A. is subject to annual renewals each August.

In November 2021, we completed a private placement offering through which we issued and sold $100 million of 5.625% Senior Unsecured Notes due 2026 (the “Notes”) to certain institutional accredited investors and qualified institutional buyers. The Notes mature on November 26, 2026, at which time the entire $100 million of principal is due and payable. At any time on or after November 23, 2023, the Company may redeem all or part of the Notes. See “Item 1—Note 7 (Long-term debt)” for additional details. As of June 30, 2022, we were in compliance with all applicable covenants, including financial covenants of this note agreement.

We will also continue to evaluate opportunities to access the debt capital markets to raise additional capital. We anticipate any proceeds would be used for general corporate purposes, including investing in the capital and surplus of the Insurance Entities.

In addition to the liquidity generally provided from operations, we maintain a conservative, well-diversified investment portfolio, predominantly comprised of fixed income securities with an average credit rating of A+, that focuses on capital preservation and providing an adequate source of liquidity for potential claim payments and other cash needs. The portfolio’s secondary investment objective is to provide a total rate of return with emphasis on investment income. Historically, we have consistently generated funds from operations, allowing our cash and invested assets to grow.

56

Impact of the COVID-19 Pandemic

The impact of the COVID-19 pandemic on the economy and credit markets remains a key risk as the United States and the world continues to navigate its consequences and the efforts taken by governments to address financial recovery and economic stability. We remain in regular contact with our advisors to monitor the credit quality of the issuers of the securities in our portfolio and discuss appropriate responses to credit downgrades or changes in companies’ credit outlook. We believe these measures, when combined with the inherent liquidity generated by our business model and in our investment portfolio, will allow us to continue to meet our short- and long-term obligations.

Looking Forward

We continue to monitor a range of financial metrics related to our business. Although we have not yet experienced material adverse impacts on our business or liquidity, conditions are subject to change depending on the extent of the economic downturn and the pace and extent of an economic recovery. Significant uncertainties exist with the potential long-term impact of the COVID-19 pandemic, including unforeseen newly emerging risks that could affect us and future economic changes as the Federal Reserve addresses the emerging economic concerns of inflation, employment and recession. We will continue to monitor the broader economic impacts of the COVID-19 pandemic and its impact on our operations and financial condition including liquidity and capital resources.

Common Stock Repurchases

On November 3, 2020, we announced that our Board of Directors authorized a share repurchase program under which we may repurchase in the open market up to $20 million of outstanding shares of our common stock through November 3, 2022. We may repurchase shares from time to time at our discretion, based on ongoing assessments of our capital needs, the market price of our common stock and general market conditions. We will fund the share repurchase program with cash from operations.

During the six months ended June 30, 2022, we repurchased an aggregate of 603,080 shares of our common stock in the open market at an aggregate purchase price of $7.4 million. Also, see “Part II, Item 2—Unregistered Sales of Equity Securities and Use of Proceeds” for share repurchase activity during the three months ended June 30, 2022.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the financial condition, results of operations, liquidity, or capital resources of the Company, except for multi-year reinsurance contract commitments for future years that will be recorded at the commencement of the coverage period. See “Item 1—Note 12 (Commitments and Contingencies)” for more information.

Cash Dividends

The following table summarizes the dividends declared by the Company in 2022:

2022	Dividend Declared Date	Shareholders Record Date	Dividend Payable Date	Cash Dividend Per Common Share Amount
First Quarter	February 10, 2022	March 10, 2022	March 17, 2022	$	0.16
Second Quarter	April 20, 2022	May 13, 2022	May 20, 2022	$	0.16

MATERIAL CASH REQUIREMENTS

The following table represents our material cash requirements for which cash flows are fixed or determinable as of June 30, 2022 (in thousands):

	Total		Next 12 Months		Beyond 12 Months
Reinsurance payable and multi-year commitments (1)	$	876,113	$	703,841	$	172,272
Unpaid losses and LAE, direct (2)	186,349		105,101		81,248
Long-term debt (3)	131,893		7,230		124,663
Total material cash requirements	$	1,194,355	$	816,172	$	378,183

(1)Amount represents the payment of reinsurance premiums payable under multi-year commitments. See “Item 1—Note 12 (Commitments and Contingencies).”

(2)There are generally no notional or stated amounts related to unpaid losses and LAE. Both the amounts and timing of future loss and LAE payments are estimates and subject to the inherent variability of legal and market conditions affecting the obligations and make the timing of cash outflows uncertain. The ultimate amount and timing of unpaid losses and LAE could differ materially from the amounts in the table above. Further, the unpaid losses and LAE do not represent all the obligations that will arise under the contracts, but rather only the estimated liability incurred through June 30, 2022. Unpaid losses and LAE are net of estimated subrogation recoveries. In addition, these balances exclude amounts recoverable from the Company’s reinsurance program. See “Item 1—Note 4 (Reinsurance).”

(3)Long-term debt consists of a Surplus note and 5.625% Senior unsecured notes. See “Item 1—Note 7 (Long-term debt).”

57

IMPACT OF INFLATION AND CHANGING PRICES

The financial statements and related data presented herein have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. Our primary assets are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of the general levels of inflation. Interest rates do not necessarily move in the same direction or with the same magnitude as the cost of paying losses and LAE.

Insurance premiums are established before we know the amount of loss and LAE and the extent to which inflation may affect such expenses. Consequently, we attempt to anticipate the future impact of inflation when establishing rate levels. While we attempt to charge adequate rates, we may be limited in raising premium levels for competitive and regulatory reasons. Inflation also affects the market value of our investment portfolio and the investment rate of return. Any future economic changes which result in prolonged and increasing levels of inflation could cause increases in the dollar amount of incurred loss and LAE and thereby materially adversely affect future liability requirements.

ARRANGEMENTS WITH VARIABLE INTEREST ENTITIES

We entered into a reinsurance captive arrangement with a VIE in the normal course of business, and consolidated the VIE since we are the primary beneficiary.

For a further discussion of our involvement with the VIE, see “Item 1—Note 14 (Variable Interest Entities).”

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes during the period covered by this Quarterly Report on Form 10-Q to Critical Accounting Policies and Estimates previously disclosed in “Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021.

58

NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures presented in accordance with GAAP. For more information regarding our key performance indicators, please refer to the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Indicators.”

The following table presents the reconciliation of GAAP revenue (total premiums earned and other revenues) to core revenue, which is a non-GAAP measure (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
GAAP revenue	$	292,006	$	279,181	$	579,488	$	541,938
less: Net realized gains (losses) on investments	(725)		496		(667)		1,038
less: Net change in unrealized gains (losses) of equity securities	(8,884)		1,229		(12,280)		735
Core Revenue	$	301,615	$	277,456	$	592,435	$	540,165

The following table presents the reconciliation of GAAP income before income taxes to adjusted operating income, which is a non-GAAP measure (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
GAAP income before income taxes	$	10,680	$	30,059	$	33,151	$	66,410
add: Interest and amortization of debt issuance costs	1,731		35		3,339		55
GAAP operating income	12,411		30,094		36,490		66,465
less: Net realized gains (losses) on investments	(725)		496		(667)		1,038
less: Net changes in unrealized gains (losses) of equity securities	(8,884)		1,229		(12,280)		735
Adjusted operating income	$	22,020	$	28,369	$	49,437	$	64,692

The following table presents the reconciliation of operating income margin to adjusted operation income margin, which is a non-GAAP measure (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
GAAP operating income	$	12,411		$	30,094		$	36,490		$	66,465
GAAP revenue	292,006			279,181			579,488			541,938
GAAP operating income margin	4.3		%	10.8		%	6.3		%	12.3		%
Adjusted operating income	22,020			28,369			49,437			64,692
Core revenue	301,615			277,456			592,435			540,165
Adjusted operating income margin	7.3		%	10.2		%	8.3		%	12.0		%

59

The following table presents the reconciliation of GAAP net income (loss) available to common stockholders to adjusted net income available to common stockholders, which is a non-GAAP measure (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
GAAP net income	$	7,370	$	21,941	$	24,907	$	48,349
less: Preferred dividends	2		2		5		5
GAAP net income (loss) available to common stockholders	7,368		21,939		24,902		48,344
less: Net realized gains (losses) on investments	(725)		496		(667)		1,038
less: Net changes in unrealized gains (losses) of equity securities	(8,884)		1,229		(12,280)		735
add: Income tax effect on above adjustments	(2,329)		413		(3,138)		424
Adjusted net income available to common stockholders	$	14,648	$	20,627	$	34,711	$	46,995
Weighted average common shares outstanding - Diluted	30,883		31,310		31,060		31,292
Diluted earnings per common share	$	0.24	$	0.70	$	0.80	$	1.54
Diluted adjusted earnings per common share	$	0.47	$	0.65	$	1.12	$	1.50

The following table presents the reconciliation of GAAP stockholders’ equity to adjusted stockholders’ equity and book value per common share to adjusted book value per common share, which is a non-GAAP measure (in thousands):

	As of
	June 30,		June 30,		December 31,
	2022		2021		2021
Stockholders' equity	$	366,551	$	480,842	$	429,702
less: Preferred equity	100		100		100
Common stockholders' equity	366,451		480,742		429,602
less: Accumulated other comprehensive income (loss)	(88,134)		(5,571)		(15,568)
Adjusted common stockholders' equity	$	454,585	$	486,313	$	445,170
Common shares outstanding	30,716		31,269		31,221
Book value per common share	$	11.93	$	15.37	$	13.76
Adjusted book value per common share	$	14.80	$	15.55	$	14.26

60

The following table presents the reconciliation of GAAP ROCE to adjusted ROCE, which is a non-GAAP measure (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,						Year Ended December 31,
	2022			2021			2022			2021			2021
Actual or annualized net income available to    common stockholders	$	29,472		$	87,756		$	49,804		$	96,688		$	20,397
Average common stockholders' equity	381,346			467,654			398,027			464,952			439,382
ROCE	7.7		%	18.8		%	12.5		%	20.8		%	4.6		%
Actual or annualized adjusted net income    available to common stockholders	$	58,592		$	82,508		$	69,422		$	93,990		$	18,959
Actual or adjusted average common    stockholders' equity*	458,292			476,567			454,782			465,392			444,775
Adjusted ROCE	12.8		%	17.3		%	15.3		%	20.2		%	4.3		%

*	Adjusted average common stockholders’ equity excludes current period net realized gains (losses) on investments and
	net changes in unrealized gains (losses) of equity securities, net of tax.

61

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the potential for economic losses due to adverse changes in fair market value of available-for-sale debt securities, equity securities (“Financial Instruments”) and investment real estate. We carry all of our Financial Instruments at fair market value and investment real estate at net book value in our statement of financial condition. Our investment portfolio as of June 30, 2022 is comprised of available-for-sale debt securities and equity securities, carried at fair market value, which expose us to changing market conditions, specifically interest rates and equity price changes.

The primary objectives of the investment portfolio are the preservation of capital and providing adequate liquidity for potential claim payments and other cash needs. The portfolio’s secondary investment objective is to provide a total rate of return with an emphasis on investment income. None of our investments in risk-sensitive Financial Instruments were entered into for trading purposes.

See “Item 1—Note 3 (Investments)” for more information about our Financial Instruments.

Interest Rate Risk

Interest rate risk is the sensitivity of the fair market value of a fixed rate Financial Instrument to changes in interest rates. Generally, when interest rates rise, the fair value of our fixed rate Financial Instruments declines.

The following tables provide information about our fixed income Financial Instruments as of June 30, 2022 compared to December 31, 2021, which are sensitive to changes in interest rates. The tables present the expected cash flows of Financial Instruments based on years to effective maturity using amortized cost compared to fair market value and the related book yield compared to coupon yield (dollars in thousands):

	June 30, 2022
	2022			2023			2024			2025			2026			Thereafter			Other			Total
Amortized cost	$	64,252		$	110,864		$	84,985		$	159,028		$	173,156		$	543,661		$	2,244		$	1,138,190
Fair market value	$	63,354		$	106,596		$	79,360		$	144,236		$	155,823		$	469,826		$	1,811		$	1,021,006
Coupon rate	1.47		%	1.87		%	2.85		%	2.21		%	2.54		%	2.81		%	4.03		%	2.51		%
Book yield	0.82		%	0.80		%	1.15		%	1.28		%	1.67		%	2.08		%	3.95		%	1.65		%
* Years to effective maturity - 5.5 years

	December 31, 2021
	2022			2023			2024			2025			2026			Thereafter			Other			Total
Amortized cost	$	30,183		$	97,826		$	99,528		$	152,982		$	180,558		$	499,417		$	698		$	1,061,192
Fair market value	$	30,163		$	97,433		$	98,751		$	150,046		$	176,711		$	486,657		$	694		$	1,040,455
Coupon rate	1.34		%	1.82		%	2.23		%	2.62		%	2.65		%	2.59		%	3.53		%	2.46		%
Book yield	0.50		%	0.71		%	0.87		%	1.10		%	1.28		%	1.70		%	3.54		%	1.34		%
* Years to effective maturity - 5.4 years

All securities, except those with perpetual maturities, were categorized in the tables 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.

62

Equity Price Risk

Equity price risk is the potential for loss in fair value of Financial Instruments in common stock and mutual funds and other from adverse changes in the prices of those Financial Instruments.

The following table provides information about the Financial Instruments in our investment portfolio subject to price risk as of the dates presented (in thousands):

	June 30, 2022				December 31, 2021
	Fair Value		Percent		Fair Value		Percent
Equity Securities:
Common stock	$	22,202	27.8	%	$	3,683	7.8	%
Mutual funds and other	57,642		72.2	%	43,651		92.2	%
Total equity securities	$	79,844	100.0	%	$	47,334	100.0	%

A hypothetical decrease of 20% in the market prices of each of the equity securities held at June 30, 2022 and December 31, 2021 would have resulted in a decrease of $16.0 million and $9.5 million, respectively, in the fair value of those securities.

The COVID-19 pandemic presents uncertainty to the financial markets. See further discussion above under “Item 2— Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Trends—Impact of the COVID-19 Pandemic” regarding our response to the COVID-19 pandemic, the financial impact to us subsequent to March 2020, our general outlook and plans to monitor the economic consequences of the COVID-19 pandemic.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that disclosure controls and procedures were effective as of June 30, 2022, to ensure that information required to be disclosed by the Company in its reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission’s (“SEC”) rules and forms and that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There was no change in the Company’s internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Lawsuits and other legal proceedings are filed against the Company from time to time. Many of these legal proceedings involve claims under policies that we underwrite and reserve for as an insurer. We are also involved in various other legal proceedings and litigation unrelated to claims under our policies that arise in the ordinary course of business operations. Management believes that any liabilities that may arise as a result of these legal matters will not have a material adverse effect on our financial condition or results of operations. The Company contests liability and/or the amount of damages as appropriate in each pending matter.

In accordance with applicable accounting guidance, the Company establishes an accrued liability for legal matters when those matters present loss contingencies that are both probable and estimable.

Legal proceedings are subject to many uncertain factors that generally cannot be predicted with certainty, and the Company may be exposed to losses in excess of any amounts accrued. The Company currently estimates that the reasonably possible losses for legal proceedings, whether in excess of a related accrued liability or where there is no accrued liability, and for which the Company is able to estimate a possible loss, are immaterial. This represents management’s estimate of possible loss with respect to these matters and is based on currently available information. These estimates of possible loss do not represent our maximum loss exposure, and actual results may vary significantly from current estimates.

63

Item 1A. Risk Factors

Please refer to the risk factors previously disclosed in “Part I, Item 1A—Risk Factors,” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below presents purchases of our common stock during the three months ended June 30, 2022:

				Total Number of	Maximum Number
				Shares Purchased	of Shares That
				As Part of	May Yet be
				Publicly	Purchased Under
	Total Number of	Average Price		Announced	the Plans or
	Shares Purchased	Paid per Share (1)		Plans or Programs	Programs (2)
4/1/2022 - 4/30/2022	—	$	—	—	—
5/1/2022 - 5/31/2022	182,552	$	12.42	182,552	—
6/1/2022 - 6/30/2022	100,000	$	12.25	100,000	801,164
Total	282,552	$	12.36	282,552	801,164

(1)Average price paid per share does not reflect brokerage commissions paid to acquire shares in open market transactions.

(2)Number of shares was calculated based on a closing price at June 30, 2022 of $13.03 per share.

We may repurchase shares from time to time at our discretion, based on ongoing assessments of our capital needs, the market price of our common stock and general market conditions. We will fund the share repurchase program with cash from operations.

On November 3, 2020, we announced that our Board of Directors authorized the repurchase of up to $20 million of outstanding shares of our common stock through November 3, 2022 (the “November 2022 Share Repurchase Program”). Under the November 2022 Share Repurchase Program, we repurchased 765,671 shares of our common stock from November 2020 through June 30, 2022 at an aggregate cost of approximately $9.6 million. As of June 30, 2022, we have the ability to purchase up to approximately $10.4 million of our common stock under the November 2022 Share Repurchase Program.

64

Item 6. Exhibits

Exhibit No.	Exhibit
3.1	Amended and Restated Certificate of Incorporation, as amended (filed as Exhibit 3.1 to the Company’s Annual Report on Form 10‑K filed on February 24, 2017 and incorporated herein by reference)
3.2	Amended and Restated Bylaws of Universal Insurance Holdings, Inc. (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on June 19, 2017 and incorporated herein by reference)
10.1	Form of Notice of Grant of Restricted Stock and Terms and Conditions of Restricted Stock Award under the 2021 Omnibus Incentive Plan †
10.2	Form of Notice of Grant of Performance Share Units and Terms and Conditions of Performance Share Units under the 2021 Omnibus Incentive Plan †
15.1	Accountants’ Acknowledgment
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certifications of Chief Executive Officer and Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.1	The following materials from Universal Insurance Holdings, Inc. Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Statement of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows and (vi) Notes to Condensed Consolidated Financial Statements.
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL (included in Exhibit 101)
† Indicates management contract or compensatory plan or agreement.

65

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	UNIVERSAL INSURANCE HOLDINGS, INC.
Date: July 29, 2022	/s/ Stephen J. Donaghy
	Stephen J. Donaghy, Chief Executive Officer and Principal Executive Officer
Date: July 29, 2022	/s/ Gary Lloyd Ropiecki
	Gary Lloyd Ropiecki, Principal Accounting Officer

66

EX-10.1

Exhibit 10.1

NOTICE OF GRANT OF RESTRICTED STOCK

PURSUANT TO THE UNIVERSAL INSURANCE HOLDINGS, INC.

2021 OMNIBUS INCENTIVE PLAN

FOR GOOD AND VALUABLE CONSIDERATION, Universal Insurance Holdings, Inc., a Delaware corporation (the “Company”), hereby awards (this “Award”) to the Participant designated in Section A of this Notice of Grant (the “Notice”) the number of shares of restricted stock set forth below the (“Restricted Stock”). This Award is made pursuant to the provisions of the Company’s 2021 Omnibus Incentive Plan (as amended from time to time, the “Plan”), and is subject to the restrictions in this Notice and the additional provisions set forth in the attached Terms and Conditions of Restricted Stock Award (the “Terms and Conditions” and together with the Notice, this “Agreement”).

A.    Award Specifics

Participant:
Date of Grant:	Number of Shares:

B.    Vesting

Date Shares Vesting

Except as otherwise provided in the Terms and Conditions, vesting is conditioned upon continued service by the Participant through each Vesting Date.

By signing below, the Participant agrees that this Award is granted under and governed by the terms and conditions of the Plan and this Agreement. The Participant acknowledges receipt of the information statement describing the provisions of the Plan.

Participant _________________________________ Signature _________________________________ Print Name _________________________________ Address UNIVERSAL INSURANCE HOLDINGS, INC. a Delaware corporation By: Name: Its:

TERMS AND CONDITIONS OF

RESTRICTED STOCK AWARD

1.Grant and Payment.

(a)    The Participant is hereby granted the number of shares of Restricted Stock set forth in the Notice, subject to the vesting and other terms and conditions hereof. No purchase price will be owed with respect to the Restricted Stock.

(b)    The Company shall deliver the shares through book entry transfer to an account in the Participant’s name at a financial institution that is selected by the Company and approved by the Participant. Share certificates representing distributed shares shall not be issued by the Company until such shares have been delivered to the Participant’s account as specified above. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to the delivery of any shares of Common Stock hereunder; provided, however, that the Company shall not pay the expenses related to any sale of shares received in connection with the grant or vesting of any shares of Restricted Stock, regardless of whether such sale is made to satisfy expenses, withholding, or other taxes.

2.Dividend Equivalents.

(a)    The Participant shall be credited with a cash amount equal to the ordinary cash dividends declared and paid on the corresponding number of shares of Common Stock during the period beginning on the Date of Grant and ending on each applicable Vesting Date. Such cash amount shall be subject to the same time-vesting conditions as the Restricted Stock and shall be paid to the Participant in cash (without interest) at the time that the shares of the Restricted Stock become vested.

(b)    No dividend or dividend equivalents shall be paid in respect of any forfeited shares of Restricted Stock, even if such dividends or dividend equivalents are credited on such shares of Restricted Stock on or prior to forfeiture.

3.Effect of Termination of Service on Vesting.

If the Participant’s service with the Company is terminated for any reason, any then outstanding unvested shares of Restricted Stock shall be immediately forfeited as of the Participant’s date of termination.

4.Compliance with Law.

This Award is subject to the condition that, if the listing, registration or qualification of the shares of Common Stock delivered with respect to the Restricted Stock subject to this Award upon any securities exchange or under any law, or the consent or approval of any governmental body, is necessary or desirable as a condition of, or in connection with, the vesting of Restricted Stock or delivery of the underlying shares hereunder, shares of Common Stock may not be delivered, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained. The Company agrees to make reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval.

5.Non-Transferability of Award.

The Restricted Stock subject to this Award may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process until the date the Restricted Stock becomes vested. Any such attempted sale, transfer, assignment, pledge, hypothecation or encumbrance, or other disposition of the Restricted Stock at a time when it is unvested shall be null and void.

6.Withholding.

The Committee shall determine the amount of any withholding or other tax required by law to be withheld or paid by the Company with respect to any income recognized by the Participant with respect to the Award. The Participant shall be required to meet any applicable tax withholding obligation in accordance with the provisions of Section 11.06 of the Plan. The Participant shall have the right to elect to meet any withholding requirement: (i) by having withheld from this Award at the appropriate time that number of whole shares of Common Stock whose fair market value is equal to the amount of any taxes required to be withheld with respect to such Award, (ii) by direct payment to the Company in cash of the amount of any taxes required to be withheld with respect to such Award or (iii) by a combination of shares of Common Stock and cash.

2

7.Participant Representations.

The Participant hereby represents to the Company that the Participant has read and fully understands the provisions of the Notice, these Terms and Conditions and the Plan, and the Participant’s decision to participate in the Plan is completely voluntary. Further, the Participant acknowledges that the Participant is relying solely on his own advisers with respect to the tax consequences of this Award.

8.Miscellaneous.

(a)    Notices. All notices, requests, deliveries, payments, demands and other communications which are required or permitted to be given under this Agreement shall be in writing and shall be either delivered personally or sent by registered or certified mail, or by private courier, return receipt requested, postage prepaid to the parties at their respective addresses set forth herein, or to such other address as either shall have specified by notice in writing to the other. Notice shall be deemed duly given hereunder when delivered or mailed as provided herein.

(b)    Waiver. The waiver by either party to this Award of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach.

(c)    Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof.

(d)    Binding Effect; Successors. This Agreement shall inure to the benefit of and be binding upon the parties hereto and to the extent not prohibited herein, their respective heirs, successors, assigns and representatives. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto and, as provided above, their respective heirs, successors, assigns and representatives any rights, remedies, obligations or liabilities.

(e)    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts fully executed and performed in such State.

(f)    Headings. The headings contained in this Agreement are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.

(g)    Terms and Construction. In the event of any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan shall control.

(h)    Amendment. This Agreement may be amended at any time by written agreement of the parties hereto.

(i)    No Right to Continued Engagement. Nothing in this Agreement shall confer upon the Participant any right to continue in the engagement, employ or service of the Company or affect the right of the Company to terminate the Participant’s engagement, employment or service at any time.

(j)    Further Assurances. The Participant agrees, upon demand of the Company or the Committee, to do all acts and execute, deliver and perform all additional documents, instruments and agreements which may be reasonably required by the Company or the Committee, as the case may be, to implement the provisions and purposes of this Agreement and the Plan.

3

EX-10.2

Exhibit 10.2

NOTICE OF GRANT OF PERFORMANCE SHARE UNITS

PURSUANT TO THE UNIVERSAL INSURANCE HOLDINGS, INC.

2021 OMNIBUS INCENTIVE PLAN

FOR GOOD AND VALUABLE CONSIDERATION, Universal Insurance Holdings, Inc., a Delaware corporation (the “Company”), hereby awards (this “Award”) to the Participant designated in Section A of this Notice of Grant (the “Notice”) the number of performance share units set forth below (the “PSUs”). This Award is made pursuant to the provisions of the Company’s 2021 Omnibus Incentive Plan (as amended from time to time, the “Plan”) and is subject to the restrictions in this Notice and the additional provisions set forth in the attached Terms and Conditions of Performance Share Unit Award (the “Terms and Conditions” and together with the Notice, this “Agreement”). Capitalized words not otherwise defined herein or in the Plan are defined in the manner set forth in the Employment Agreement, dated as of , between the Company and the Participant, and any successor employment agreement thereto (the “Employment Agreement”); provided, however, that for purposes of Sections 4 and 5 of the Terms and Conditions, capitalized words defined in the Employment Agreement shall have the meaning set forth therein rather than any other definition set forth in the Plan.

A.    Award Specifics

Participant:	Performance Period:
Date of Grant:	Target Number of PSUs:

The number of PSUs that the Participant actually earns for the Performance Period (up to a maximum of ) will be determined at the end of the Performance Period based on the level of achievement of the Performance Goal (as defined below).

The Award is subject to the performance condition set forth in Section B of this Notice and service vesting conditions set forth in Section C of this Notice.

B.    Performance Condition

PSUs subject to this Award will be earned based on (the “Performance Goal”).

The number of PSUs earned by the Participant for the Performance Period will be determined as soon as reasonably practicable following the last fiscal year in the Performance Period, but in no event later than the date the Company files its annual report on Form 10-K for such fiscal year based on the level of achievement of the Performance Goal (the “Certification Date”). All determinations of whether the Performance Goal has been achieved, the number of PSUs earned by the Participant and all other matters related to this Award shall be made by the Committee in its sole discretion.

C.    Service Vesting

The PSUs are subject to forfeiture until they vest. Except as otherwise provided in the Terms and Conditions, the PSUs will vest and become nonforfeitable on the Certification Date, subject to (i) the achievement of the minimum threshold Performance Goal and (ii) the Participant’s continued employment from the Date of Grant through the Certification Date (the “Vesting Date”).

51949331.4

By signing below, the Participant agrees that this Award is granted under and governed by the terms and conditions of the Plan and this Agreement. The Participant acknowledges receipt of the information statement describing the provisions of the Plan.

Participant Signature Print Name Address UNIVERSAL INSURANCE HOLDINGS, INC. a Delaware corporation By: Name: Its:

2

51949331.4

TERMS AND CONDITIONS OF

PERFORMANCE SHARE UNIT AWARD

1.General Provisions.

The Company intends that the payment and settlement of the PSUs shall comply with the applicable requirements of Section 409A to the extent the PSUs constitute “non-qualified deferred compensation” within the meaning of Section 409A and this Agreement shall be construed and interpreted in a manner that is consistent with the requirements for avoiding additional taxes or penalties under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A of the Code and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with Section 409A of the Code.

If the Participant is deemed a "specified employee" within the meaning of Section 409A of the Code, as determined by the Committee, at a time when the Participant becomes eligible for settlement of the PSUs upon "separation from service" within the meaning of Section 409A of the Code, then to the extent necessary to prevent any accelerated or additional tax under Section 409A of the Code, such settlement will be delayed until the earlier of: (i) the date that is six months following the Participant’s separation from service and (ii) the Participant’s death.

Each payment in a series of payments hereunder shall be deemed to be a separate payment for purposes of Section 409A of the Code.

2.Payment.

(a)    Subject to Section 5, each PSU represents the right of the Participant to receive on the Vesting Date one share of the Common Stock, subject to the performance, vesting and other terms and conditions hereof.

(b)    Subject to Sections 5 and 9, in connection with the vesting of each PSU, the Company will issue to the Participant one share of Common Stock plus any accumulated dividend equivalents credited to the PSU on the Vesting Date, and each such vested PSU will thereupon terminate on the Vesting Date.

(c)    The Company shall deliver the shares through book entry transfer to an account in the Participant’s name at a financial institution that is selected by the Company and approved by the Participant. Share certificates representing distributed shares shall not be issued by the Company until such shares have been delivered to the Participant’s account as specified above. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to the delivery of any shares of Common Stock hereunder; provided, however, that the Company shall not pay the expenses related to any sale of shares received in connection with the vesting of any PSUs, regardless of whether such sale is made to satisfy expenses, withholding, or other taxes.

3.Dividend Equivalents.

(a)The Participant shall be credited with a cash amount equal to the ordinary cash dividends declared and paid on the corresponding number of shares of Company’s Common Stock during the period beginning on the Date of Grant and ending on the Vesting Date. Such cash amount shall be paid to the Participant in cash (without interest) at the time that the shares of the Common Stock are delivered to the Participant in settlement of the PSU.

(b)    No dividend or dividend equivalents shall be paid in respect of any forfeited PSUs, even if such dividends or dividend equivalents are credited on the PSU on or prior to forfeiture.

4.Effect of Termination of Service on Vesting and Payment.

(a)    Resignation without Good Reason. If the Participant resigns from the Company without Good Reason, any then outstanding unvested PSUs shall be immediately forfeited as of the Termination Date.

(b)    Termination without Cause; Resignation with Good Reason; Termination due to Death or Disability; Retirement. Except as provided in Section 5(a) below, in the event that (i) the Participant’s employment is terminated by the Company without Cause, (ii) the Participant resigns from the Company with Good Reason, (iii) the Participant’s employment with the Company terminates due to death or Disability (provided that to the extent necessary to comply with Section 409A in order to avoid an additional tax being imposed on the Participant under Section 409A, such disability constitutes a “disability” within the meaning of Section 409A and the regulations thereunder), or (iv) the Participant’s employment with the Company terminates due to the Participant’s retirement on or after attaining age 59-½ with a minimum of 15 years of continuous service with the Company or any Affiliate at the time of such termination in circumstances where the Participant does not plan to seek full or part-

3

51949331.4

time employment with another company, the PSU shall be deemed earned at the target (i.e., 100%) level and shall fully vest immediately as of the Termination Date (the “Additional Vesting”). Notwithstanding anything herein to the contrary, the PSUs entitled to Additional Vesting hereunder shall become payable on the 60th day following the Termination Date. The Company’s obligation to provide the Additional Vesting is expressly conditioned upon the Participant’s execution and timely delivery to the Company of a valid and irrevocable release agreement in substantially the form attached to the Employment Agreement by no later than 45 days following the Termination Date.

(c)Termination for Cause. If the Participant’s employment is terminated by the Company for Cause, any then outstanding unvested PSUs shall be immediately forfeited as of the Termination Date.

5.Change in Control.

(a)    Termination without Cause or Resignation with Good Reason within 24 Months Following a Change in Control. Notwithstanding Section 4(b) above, in the event the Participant’s employment is terminated within the 24-month period following the CIC Date as a result of the Participant’s termination without Cause or Participant’s resignation from the Company with Good Reason, any outstanding PSUs on the Termination Date that have not previously vested or terminated under the terms of this Agreement shall be deemed earned at the target (i.e., 100%) level, shall be fully vested upon such Termination Date and shall become payable on the 60th day following the Termination Date, subject to the Participant’s execution and timely delivery to the Company of a valid and irrevocable release agreement in substantially the form attached to the Employment Agreement by no later than 45 days following the Termination Date.

(b)    Certain Changes in Control. Notwithstanding Section 5(a) above, in the event of a Change in Control in which the consideration received by the stockholders of the Company in the Change in Control consists exclusively of cash, securities not listed for trading on a national securities exchange or automated quotation system, or a combination of cash and such unlisted securities, all outstanding PSUs shall be deemed earned at the target (i.e., 100%) level, shall vest in full immediately prior to the CIC Date and shall be settled through the delivery of the corresponding number of shares of the Company’s Common Stock to the Participant. Notwithstanding anything herein to the contrary, no acceleration of the settlement or delivery of any PSUs pursuant to this Section 5(b) shall occur unless the Change in Control constitutes a “change in ownership,” “change in effective control” or “change in the ownership of a substantial portion of the assets” of the Company, as such terms are described in Treas. Reg. Section 1.409A-3(i)(5).

6.No Rights as a Stockholder.

Until any PSU subject to this Award has vested and the applicable underlying shares have been issued to the Participant in accordance with Section 2, the Participant shall have no rights as a stockholder with respect to such PSUs or the underlying shares, including, without limitation, any right to vote the shares or, except as expressly set forth in Section 3 above, to receive any dividends on the underlying shares or distribution equivalents on such PSUs.

7.Compliance with Law.

This Award is subject to the condition that, if the listing, registration or qualification of the shares of Common Stock delivered with respect to PSUs subject to this Award upon any securities exchange or under any law, or the consent or approval of any governmental body, is necessary or desirable as a condition of, or in connection with, the vesting of PSUs or delivery and settlement of the underlying shares hereunder, the PSUs or underlying shares of Common Stock may not be delivered, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained. The Company agrees to make reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval.

8.Non-Transferability of Award.

This Award may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Any such attempted sale, transfer, assignment, pledge, hypothecation or encumbrance, or other disposition of this Award shall be null and void.

9.Withholding.

The Committee shall determine the amount of any withholding or other tax required by law to be withheld or paid by the Company with respect to any income recognized by the Participant with respect to the Award. The Participant shall be required to meet any applicable tax withholding obligation in accordance with the provisions of Section 11.06 of the Plan. The Participant shall have the right to elect to meet any withholding requirement: (i) by

4

51949331.4

having withheld from this Award at the appropriate time that number of whole shares of Common Stock whose fair market value is equal to the amount of any taxes required to be withheld with respect to such Award, (ii) by direct payment to the Company in cash of the amount of any taxes required to be withheld with respect to such Award or (iii) by a combination of shares of Common Stock and cash. 

10.Participant Representations.

The Participant hereby represents to the Company that the Participant has read and fully understands the provisions of the Notice, these Terms and Conditions and the Plan, and the Participant’s decision to participate in the Plan is completely voluntary. Further, the Participant acknowledges that the Participant is relying solely on his own advisers with respect to the tax consequences of this Award.

11.Miscellaneous.

(a)    Notices. All notices, requests, deliveries, payments, demands and other communications which are required or permitted to be given under this Agreement shall be in writing and shall be either delivered personally or sent by registered or certified mail, or by private courier, return receipt requested, postage prepaid to the parties at their respective addresses set forth herein, or to such other address as either shall have specified by notice in writing to the other. Notice shall be deemed duly given hereunder when delivered or mailed as provided herein.

(b)    Waiver. The waiver by either party to this Award of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach.

(c)    Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof.

(d)    Binding Effect; Successors. This Agreement shall inure to the benefit of and be binding upon the parties hereto and to the extent not prohibited herein, their respective heirs, successors, assigns and representatives. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto and, as provided above, their respective heirs, successors, assigns and representatives any rights, remedies, obligations or liabilities.

(e)    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts fully executed and performed in such State.

(f)    Headings. The headings contained in this Agreement are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.

(g)    Terms and Construction. In the event of any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan shall control.

(h)    Amendment. This Agreement may be amended at any time by written agreement of the parties hereto.

(i)    No Right to Continued Employment. Nothing in this Agreement shall confer upon the Participant any right to continue in the employ or service of the Company or affect the right of the Company to terminate the Participant’s employment or service at any time.

(j)    Further Assurances. The Participant agrees, upon demand of the Company or the Committee, to do all acts and execute, deliver and perform all additional documents, instruments and agreements which may be reasonably required by the Company or the Committee, as the case may be, to implement the provisions and purposes of this Agreement and the Plan.

5

EX-15.1

EXHIBIT 15.1

ACCOUNTANTS' ACKNOWLEDGMENT

We hereby acknowledge our awareness of the use of our report dated July 29, 2022, included within the Quarterly Report on Form 10-Q of Universal Insurance Holdings, Inc. for the quarter ended June 30, 2022, in Registration Statement number 333-185484 on Form S-3 and Registration Statement numbers 333-163564, 333-174125, 333-181994, 333-189122, 333-203866, 333-215750, 333-238314, and 333-257896 on Form S-8.

Pursuant to Rule 436 under the Securities Act of 1933 (the “Act”), such report is not considered a part of a registration statement prepared or certified by an independent registered public accounting firm, or a report prepared or certified by an independent registered public accounting firm within the meaning of Sections 7 and 11 of the Act.

/s/ Plante & Moran, PLLC

East Lansing, Michigan

July 29, 2022

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen J. Donaghy, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022 of Universal Insurance Holdings, Inc. (the “Registrant”);

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.    The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:

(a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.    The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: July 29, 2022	/s/ Stephen J. Donaghy
	Stephen J. Donaghy Chief Executive Officer and Principal Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gary Lloyd Ropiecki, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022 of Universal Insurance Holdings, Inc. (the “Registrant”);

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.    The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:

(a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.    The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: July 29, 2022	/s/ Gary Lloyd Ropiecki
	Gary Lloyd Ropiecki Principal Accounting Officer

EX-32

EXHIBIT 32

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Universal Insurance Holdings, Inc. (“Company”) on Form 10-Q for the fiscal quarter ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (“Report”), the undersigned, in the capacity and on the date indicated below, each hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: July 29, 2022	By:	/s/ Stephen J. Donaghy
	Name:	Stephen J. Donaghy
	Title:	Chief Executive Officer and Principal
		Executive Officer
Date: July 29, 2022	By:	/s/ Gary Lloyd Ropiecki
	Name:	Gary Lloyd Ropiecki
	Title:	Principal Accounting Officer

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2022	Jul. 25, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2022
Document Transition Report	false
Entity File Number	001-33251
Entity Registrant Name	UNIVERSAL INSURANCE HOLDINGS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	65-0231984
Entity Address, Address Line One	1110 W. Commercial Blvd.
Entity Address, City or Town	Fort Lauderdale
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33309
City Area Code	954
Local Phone Number	958-1200
Title of 12(b) Security	Common Stock, $0.01 Par Value
Trading Symbol	UVE
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		30,716,005
Entity Central Index Key	0000891166
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
ASSETS
Available-for-sale debt securities, at fair value, net of allowance for credit loss of $672 and $489 (amortized cost: $1,138,190 and $1,061,192)		$ 1,021,006	$ 1,040,455
Equity securities, at fair value (cost: $95,941 and $51,151)		79,844	47,334
Investment real estate, net		5,798	5,891
Total invested assets		1,106,648	1,093,680
Cash and cash equivalents		316,952	250,508
Restricted cash and cash equivalents	[1]	20,125	2,635
Prepaid reinsurance premiums		590,093	240,993
Reinsurance recoverable		33,344	185,589
Premiums receivable, net		79,309	64,923
Property and equipment, net		54,027	53,682
Deferred policy acquisition costs		110,983	108,822
Income taxes recoverable		22,293	16,947
Deferred income tax asset, net		30,262	16,331
Other assets		18,732	22,031
Total assets		2,382,768	2,056,141
LIABILITIES:
Unpaid losses and loss adjustment expenses		186,349	346,216
Unearned premiums		943,369	857,769
Advance premium		86,271	53,694
Book overdraft		0	26,759
Reinsurance payable, net		637,846	188,662
Commission payable		25,946	22,315
Other liabilities and accrued expenses		33,275	27,348
Total long-term debt, net		103,161	103,676
Total liabilities		2,016,217	1,626,439
Commitments and Contingencies (Note 12)
STOCKHOLDERS’ EQUITY:
Cumulative convertible preferred stock		0	0
Common stock		471	470
Treasury shares, at cost - 16,400 and 15,797		(234,496)	(227,115)
Additional paid-in capital		110,089	108,202
Accumulated other comprehensive income (loss), net of taxes		(88,134)	(15,568)
Retained earnings		578,621	563,713
Total stockholders’ equity		366,551	429,702
Total liabilities and stockholders’ equity		$ 2,382,768	$ 2,056,141

[1] See “—Note 5 (Insurance Operations)” for a discussion of the nature of the restrictions for restricted cash and cash equivalents.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Available-for-sale securities, allowance for credit loss	$ 672	$ 489
Available for sale debt securities, amortized cost	1,138,190	1,061,192
Equity securities, amortized cost	$ 95,941	$ 51,151
Cumulative convertible preferred stock, par value (in USD per share)	$ 0.01	$ 0.01
Cumulative convertible preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Cumulative convertible preferred stock, shares issued (in shares)	10,000	10,000
Cumulative convertible preferred stock, shares outstanding (in shares)	10,000	10,000
Cumulative convertible preferred stock, minimum liquidation preference (in USD per share)	$ 9.99	$ 9.99
Common stock, par value (in USD per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	55,000,000	55,000,000
Common stock, shares issued (in shares)	47,116,000	47,018,000
Common stock, shares outstanding (in shares)	30,716,000	31,221,000
Treasury stock, shares (in shares)	16,400,000	15,797,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
REVENUES
Direct premiums written	$ 532,527	$ 473,627	$ 929,008	$ 838,941
Change in unearned premium	(103,722)	(81,053)	(85,600)	(70,761)
Direct premium earned	428,805	392,574	843,408	768,180
Ceded premium earned	(151,744)	(136,402)	(297,283)	(268,703)
Premiums earned, net	277,061	256,172	546,125	499,477
Net investment income	5,221	2,858	9,263	5,844
Net realized gains (losses) on investments	(725)	496	(667)	1,038
Net change in unrealized gains (losses) of equity securities	(8,884)	1,229	(12,280)	735
Commission revenue	11,404	9,860	22,565	18,986
Policy fees	5,940	6,575	10,719	11,962
Other revenue	1,989	1,991	3,763	3,896
Total revenues	292,006	279,181	579,488	541,938
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses	200,304	167,221	385,410	311,184
General and administrative expenses	79,291	81,866	157,588	164,289
Total operating costs and expenses	279,595	249,087	542,998	475,473
Interest and amortization of debt issuance costs	1,731	35	3,339	55
INCOME (LOSS) BEFORE INCOME TAXES	10,680	30,059	33,151	66,410
Income tax expense (benefit)	3,310	8,118	8,244	18,061
NET INCOME (LOSS)	$ 7,370	$ 21,941	$ 24,907	$ 48,349
Basic earnings (loss) per common share (in USD per share)	$ 0.24	$ 0.70	$ 0.80	$ 1.55
Weighted average common shares outstanding - Basic (in shares)	30,829	31,240	30,987	31,224
Diluted earnings (loss) per common share (in USD per share)	$ 0.24	$ 0.70	$ 0.80	$ 1.54
Weighted average common shares outstanding - Diluted (in shares)	30,883	31,310	31,060	31,292
Cash dividend declared per common share (in USD per share)	$ 0.16	$ 0.16	$ 0.32	$ 0.32

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 7,370	$ 21,941	$ 24,907	$ 48,349
Other comprehensive income (loss), net of taxes	(29,656)	7,996	(72,566)	(8,914)
Comprehensive income (loss)	$ (22,286)	$ 29,937	$ (47,659)	$ 39,435

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited) - USD ($) $ in Thousands	Total	Treasury Shares		Common stock	Preferred Shares Issued	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Treasury Shares, beginning balance (in shares) at Dec. 31, 2020		(15,680,000)
Common Shares Issued, beginning balance (in shares) at Dec. 31, 2020				46,817,000
Preferred Shares Issued, beginning balance (in shares) at Dec. 31, 2020					10,000
Beginning balance at Dec. 31, 2020	$ 449,262	$ (225,506)		$ 468	$ 0	$ 103,445	$ 567,512	$ 3,343
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Vesting of performance share units (in shares)		16,000	[1]	62,000
Vesting of performance share units	(241)	$ (241)
Vesting of restricted stock units (in shares)		(17,000)	[1]	(65,000)
Vesting of restricted stock units	(254)	$ (254)		$ 1		(1)
Retirement of treasury shares (in shares)		33,000	[1]	33,000
Retirement of treasury shares	0	$ 495				(495)
Purchases of treasury stock (in shares)		(15,000)
Purchases of treasury stock	(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)
Treasury Shares, ending balance (in shares) at Mar. 31, 2021		(15,695,000)
Common Shares Issued shares, ending balance (in shares) at Mar. 31, 2021				46,911,000
Preferred Shares Issued, ending balance (in shares) at Mar. 31, 2021					10,000
Ending balance at Mar. 31, 2021	454,665	$ (225,751)		$ 469	$ 0	104,624	588,890	(13,567)
Treasury Shares, beginning balance (in shares) at Dec. 31, 2020		(15,680,000)
Common Shares Issued, beginning balance (in shares) at Dec. 31, 2020				46,817,000
Preferred Shares Issued, beginning balance (in shares) at Dec. 31, 2020					10,000
Beginning balance at Dec. 31, 2020	449,262	$ (225,506)		$ 468	$ 0	103,445	567,512	3,343
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	48,349
Other comprehensive loss, net of taxes	(8,914)
Treasury Shares, ending balance (in shares) at Jun. 30, 2021		15,695,000
Common Shares Issued shares, ending balance (in shares) at Jun. 30, 2021				46,964,000
Preferred Shares Issued, ending balance (in shares) at Jun. 30, 2021					10,000
Ending balance at Jun. 30, 2021	480,842	$ (225,751)		$ 470	$ 0	105,904	605,790	(5,571)
Treasury Shares, beginning balance (in shares) at Mar. 31, 2021		(15,695,000)
Common Shares Issued, beginning balance (in shares) at Mar. 31, 2021				46,911,000
Preferred Shares Issued, beginning balance (in shares) at Mar. 31, 2021					10,000
Beginning balance at Mar. 31, 2021	454,665	$ (225,751)		$ 469	$ 0	104,624	588,890	(13,567)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Vesting of restricted stock units (in shares)		(20,000)	[1]	(73,000)
Vesting of restricted stock units	(288)	$ (288)		$ 1		(1)
Retirement of treasury shares (in shares)		20,000	[1]	20,000
Retirement of treasury shares	0	$ 288				(288)
Share-based compensation	1,569					1,569
Net income	21,941						21,941
Other comprehensive loss, 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)
Treasury Shares, ending balance (in shares) at Jun. 30, 2021		15,695,000
Common Shares Issued shares, ending balance (in shares) at Jun. 30, 2021				46,964,000
Preferred Shares Issued, ending balance (in shares) at Jun. 30, 2021					10,000
Ending balance at Jun. 30, 2021	$ 480,842	$ (225,751)		$ 470	$ 0	105,904	605,790	(5,571)
Treasury Shares, beginning balance (in shares) at Dec. 31, 2021	(15,797,000)	(15,797,000)
Common Shares Issued, beginning balance (in shares) at Dec. 31, 2021	47,018,000			47,018,000
Preferred Shares Issued, beginning balance (in shares) at Dec. 31, 2021	10,000				10,000
Beginning balance at Dec. 31, 2021	$ 429,702	$ (227,115)		$ 470	$ 0	108,202	563,713	(15,568)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Vesting of performance share units (in shares)		9,000	[2]	33,000
Vesting of performance share units	(104)	$ (104)		$ 1		(1)
Vesting of restricted stock units (in shares)		(6,000)	[2]	(27,000)
Vesting of restricted stock units	(105)	$ (105)
Retirement of treasury shares (in shares)		15,000	[2]	15,000
Retirement of treasury shares	0	$ 209				(209)
Purchases of treasury stock (in shares)		(320,000)
Purchases of treasury stock	(3,879)	$ (3,879)
Share-based compensation	1,107					1,107
Net income	17,537						17,537
Other comprehensive loss, net of taxes	(42,910)							(42,910)
Declaration of dividends ($0.16 per common share and $0.25 per preferred share)	(5,007)						(5,007)
Treasury Shares, ending balance (in shares) at Mar. 31, 2022		(16,117,000)
Common Shares Issued shares, ending balance (in shares) at Mar. 31, 2022				47,063,000
Preferred Shares Issued, ending balance (in shares) at Mar. 31, 2022					10,000
Ending balance at Mar. 31, 2022	$ 396,341	$ (230,994)		$ 471	$ 0	109,099	576,243	(58,478)
Treasury Shares, beginning balance (in shares) at Dec. 31, 2021	(15,797,000)	(15,797,000)
Common Shares Issued, beginning balance (in shares) at Dec. 31, 2021	47,018,000			47,018,000
Preferred Shares Issued, beginning balance (in shares) at Dec. 31, 2021	10,000				10,000
Beginning balance at Dec. 31, 2021	$ 429,702	$ (227,115)		$ 470	$ 0	108,202	563,713	(15,568)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	24,907
Other comprehensive loss, net of taxes	$ (72,566)
Treasury Shares, ending balance (in shares) at Jun. 30, 2022	(16,400,000)	(16,400,000)
Common Shares Issued shares, ending balance (in shares) at Jun. 30, 2022	47,116,000			47,116,000
Preferred Shares Issued, ending balance (in shares) at Jun. 30, 2022	10,000				10,000
Ending balance at Jun. 30, 2022	$ 366,551	$ (234,496)		$ 471	$ 0	110,089	578,621	(88,134)
Treasury Shares, beginning balance (in shares) at Mar. 31, 2022		(16,117,000)
Common Shares Issued, beginning balance (in shares) at Mar. 31, 2022				47,063,000
Preferred Shares Issued, beginning balance (in shares) at Mar. 31, 2022					10,000
Beginning balance at Mar. 31, 2022	396,341	$ (230,994)		$ 471	$ 0	109,099	576,243	(58,478)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Grant of restricted stock awards (in shares)				53,000
Grant of restricted stock awards	0
Purchases of treasury stock (in shares)		(283,000)
Purchases of treasury stock	(3,502)	$ (3,502)
Share-based compensation	990					990
Net income	7,370						7,370
Other comprehensive loss, net of taxes	(29,656)							(29,656)
Declaration of dividends ($0.16 per common share and $0.25 per preferred share)	$ (4,992)						(4,992)
Treasury Shares, ending balance (in shares) at Jun. 30, 2022	(16,400,000)	(16,400,000)
Common Shares Issued shares, ending balance (in shares) at Jun. 30, 2022	47,116,000			47,116,000
Preferred Shares Issued, ending balance (in shares) at Jun. 30, 2022	10,000				10,000
Ending balance at Jun. 30, 2022	$ 366,551	$ (234,496)		$ 471	$ 0	$ 110,089	$ 578,621	$ (88,134)

[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.

[2]  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.

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited) (Parenthetical) - $ / shares	3 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021
Statement of Stockholders' Equity [Abstract]
Cash dividend declared per common share (in USD per share)	$ 0.16	$ 0.16	$ 0.16	$ 0.16
Cash dividend declared per preferred share (in USD per share)	$ 0.25	$ 0.25	$ 0.25	$ 0.25

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022 USD ($)		Jun. 30, 2022 USD ($)		Jun. 30, 2021 USD ($)
Cash flows from operating activities:
Net cash provided by operating activities			$ 225,424		$ 257,120
Cash flows from investing activities:
Proceeds from sale of property and equipment			1		28
Purchases of property and equipment			(3,793)		(3,024)
Purchases of equity securities			(55,273)		(14,192)
Purchases of available-for-sale debt securities			(134,899)		(237,353)
Proceeds from sales of equity securities	$ 2,760		17,692		5,165
Proceeds from sales of available-for-sale debt securities			19,534		60,978
Proceeds from sales of investment real estate			0		2,591
Maturities of available-for-sale debt securities			33,683		53,313
Net cash provided by (used in) investing activities			(123,055)		(132,494)
Cash flows from financing activities:
Debt issuance costs paid			(131)		0
Preferred stock dividend			(5)		(5)
Common stock dividend			(9,974)		(10,101)
Purchase of treasury stock			(7,381)		(245)
Payments related to tax withholding for share-based compensation			(209)		(784)
Repayment of debt			(735)		(735)
Net cash provided by (used in) financing activities			(18,435)		(11,870)
Cash and cash equivalents and restricted cash and cash equivalents:
Net increase (decrease) during the period			83,934		112,756
Balance, beginning of period			253,143		179,871
Balance, end of period	337,077		337,077		292,627
Cash and cash equivalents, and restricted cash and cash equivalents within the Consolidated Balance Sheets
Cash and cash equivalents	316,952		316,952
Restricted cash and cash equivalents	20,125	[1]	20,125	[1]
Total cash and cash equivalents and restricted cash and cash equivalents	$ 337,077		$ 337,077		$ 292,627

[1] See “—Note 5 (Insurance Operations)” for a discussion of the nature of the restrictions for restricted cash and cash equivalents.

XML

Nature of Operations and Basis of Presentation

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations and Basis of Presentation

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, 2022, 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 (“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, 2021, filed with the SEC on February 28, 2022. The Condensed Consolidated Balance Sheet at December 31, 2021 was derived from audited financial statements, but does not include all disclosures required by 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 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.

XML

Significant Accounting Policies	6 Months Ended
	Jun. 30, 2022
Accounting Policies [Abstract]
Significant Accounting Policies	Significant Accounting PoliciesThe Company reported Significant Accounting Policies in its Annual Report on Form 10-K for the year ended December 31, 2021. There are no new or revised disclosures or disclosures required on a quarterly basis.

XML

Investments

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Investments

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, 2022
	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities:
U.S. government obligations and agencies	$	21,403	$	—	$	—	$	(791)	$	20,612
Corporate bonds	763,806		(548)		52		(80,813)		682,497
Mortgage-backed and asset-backed securities	328,934		—		331		(31,872)		297,393
Municipal bonds	14,924		—		—		(1,933)		12,991
Redeemable preferred stock	9,123		(124)		—		(1,486)		7,513
Total	$	1,138,190	$	(672)	$	383	$	(116,895)	$	1,021,006

	December 31, 2021
	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities:
U.S. government obligations and agencies	$	27,076	$	—	$	64	$	(334)	$	26,806
Corporate bonds	687,058		(371)		843		(13,725)		673,805
Mortgage-backed and asset-backed securities	322,844		—		194		(6,920)		316,118
Municipal bonds	14,925		(1)		—		(350)		14,574
Redeemable preferred stock	9,289		(117)		28		(48)		9,152
Total	$	1,061,192	$	(489)	$	1,129	$	(21,377)	$	1,040,455

The following table provides the credit quality of available-for-sale debt securities with contractual maturities as of the dates presented (dollars in thousands):

	June 30, 2022				December 31, 2021
Average Credit Ratings	Fair Value		% of Total  Fair Value		Fair Value		% of Total  Fair Value
AAA	$	304,540	29.8	%	$	321,975	31.0	%
AA	150,164		14.7	%	139,186		13.4	%
A	331,360		32.5	%	339,500		32.6	%
BBB	231,083		22.6	%	234,358		22.5	%
No Rating Available	3,859		0.4	%	5,436		0.5	%
Total	$	1,021,006	100.0	%	$	1,040,455	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.

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, 2022				December 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Mortgage-backed securities:
Agency	$	151,087	$	133,353	$	147,992	$	143,819
Non-agency	60,518		52,341		59,906		58,263
Asset-backed securities:
Auto loan receivables	72,268		69,488		67,352		66,877
Credit card receivables	2,036		1,990		4,741		4,719
Other receivables	43,025		40,221		42,853		42,440
Total	$	328,934	$	297,393	$	322,844	$	316,118

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, 2022
	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	3	$	11,554	$	(80)	5	$	9,058	$	(711)
Corporate bonds	175	230,149		(23,682)		95	113,327		(17,574)
Mortgage-backed and asset-backed securities	131	157,635		(11,032)		73	133,065		(20,840)
Municipal bonds	9	9,655		(1,265)		1	3,336		(669)
Redeemable preferred stock	5	1,461		(283)		—	—		—
Total	323	$	410,454	$	(36,342)	174	$	258,786	$	(39,794)

	December 31, 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	4	$	18,913	$	(111)	4	$	5,016	$	(223)
Corporate bonds	249	378,595		(7,468)		18	17,356		(679)
Mortgage-backed and asset-backed securities	145	274,883		(5,969)		11	23,273		(951)
Municipal bonds	5	9,811		(269)		—	—		—
Redeemable preferred stock	1	200		(1)		—	—		—
Total	404	$	682,402	$	(13,818)	33	$	45,645	$	(1,853)

Unrealized losses on available-for-sale debt securities in the above table as of June 30, 2022 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.

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, 2020	$	148	$	—	$	38	$	186
Provision for (or reversal of) credit loss expense	223		1		79		303
Balance, December 31, 2021	371		1		117		489
Provision for (or reversal of) credit loss expense	177		(1)		7		183
Balance, June 30, 2022	$	548	$	—	$	124	$	672

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 and are reported in general and administrative expenses in the Condensed Consolidated Statements of Income. 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, 2022
	Amortized Cost		Fair Value
Due in one year or less	$	64,252	$	63,354
Due after one year through five years	528,033		486,015
Due after five years through ten years	512,416		444,405
Due after ten years	31,245		25,421
Perpetual maturity securities	2,244		1,811
Total	$	1,138,190	$	1,021,006

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.

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,
	2022		2021		2022		2021
Proceeds from sales and maturities (fair value):
Available-for-sale debt securities	$	27,911	$	61,658	$	53,217	$	114,291
Equity securities	$	2,760	$	3,589	$	17,692	$	5,165
Gross realized gains on sale of securities:
Available-for-sale debt securities	$	236	$	895	$	242	$	1,017
Equity securities	$	224	$	741	$	548	$	1,084
Gross realized losses on sale of securities:
Available-for-sale debt securities	$	(1,185)	$	(1,140)	$	(1,455)	$	(1,464)
Equity securities	$	—	$	—	$	(2)	$	—
Realized gains on sales of investment real estate (1)	$	—	$	—	$	—	$	401

(1) During the first quarter of 2021, the Company completed the sale of a non-income producing 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.

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,
	2022		2021		2022		2021
Available-for-sale debt securities	$	4,877	$	2,765	$	8,944	$	5,594
Equity securities	690		652		1,225		1,243
Cash and cash equivalents (1)	233		15		255		26
Other (2)	121		267		249		535
Total investment income	5,921		3,699		10,673		7,398
Less: Investment expenses (3)	(700)		(841)		(1,410)		(1,554)
Net investment income	$	5,221	$	2,858	$	9,263	$	5,844

(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,
	2022		2021		2022		2021
Unrealized gains (losses) recognized during the reported period on equity securities still held at the end of the reported period	$	(8,884)	$	1,546	$	(12,237)	$	1,027

Investment Real Estate

Investment real estate consisted of the following as of the dates presented (in thousands):

	June 30,		December 31,
	2022		2021
Income Producing:
Investment real estate	$	7,091	$	7,091
Less: Accumulated depreciation	(1,293)		(1,200)
Investment real estate, net	$	5,798	$	5,891

The following table provides the depreciation expense related to investment real estate for the periods presented (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Depreciation expense on investment real estate	$	47	$	46	$	93	$	92

XML

Reinsurance

6 Months Ended

Jun. 30, 2022

Reinsurance Disclosures [Abstract]

Reinsurance

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.

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, 2022			Due from as of
Reinsurer	AM Best Company	Standard and Poor’s Rating Services, Inc.	Moody’s Investors Service, Inc.	June 30, 2022		December 31, 2021
Florida Hurricane Catastrophe Fund (1)	n/a	n/a	n/a	$	—	$	136,298
Allianz Risk Transfer (Bermuda) Ltd.	—	—	—	—		44,618
Renaissance Reinsurance Ltd.	—	—	—	—		20,051
Total (2)				$	—	$	200,967

(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,
	2022						2021
	Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses		Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses
Direct	$	532,527	$	428,805	$	260,230	$	473,627	$	392,574	$	276,302
Ceded	(632,437)		(151,744)		(59,926)		(568,489)		(136,402)		(109,081)
	$	(99,910)	$	277,061	$	200,304	$	(94,862)	$	256,172	$	167,221

	Six Months Ended June 30,
	2022						2021
	Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses		Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses
Direct	$	929,008	$	843,408	$	455,385	$	838,941	$	768,180	$	513,600
Ceded	(646,383)		(297,283)		(69,975)		(585,289)		(268,703)		(202,416)
Net	$	282,625	$	546,125	$	385,410	$	253,652	$	499,477	$	311,184

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,
	2022		2021
Prepaid reinsurance premiums	$	590,093	$	240,993
Reinsurance recoverable on paid losses and LAE	$	14,372	$	69,729
Reinsurance recoverable on unpaid losses and LAE	18,972		115,860
Reinsurance recoverable	$	33,344	$	185,589

XML

Insurance Operations

6 Months Ended

Jun. 30, 2022

Insurance [Abstract]

Insurance Operations

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,
	2022		2021		2022		2021
DPAC, beginning of period	$	103,622	$	111,193	$	108,822	$	110,614
Capitalized Costs	61,232		61,220		110,431		115,942
Amortization of DPAC	(53,871)		(56,442)		(108,270)		(110,585)
DPAC, end of period	$	110,983	$	115,971	$	110,983	$	115,971

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 include a requirement that the Insurance Entities 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 funds 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, 2021, UPCIC and APPCIC currently are not able to pay any ordinary dividends during 2022. For the six months ended June 30, 2022 and 2021, no dividends were paid from the Insurance Entities to PSI.

The Florida Insurance Code requires a residential property insurance company to maintain statutory surplus as to policyholders of at least $15.0 million or ten percent of the insurer’s total liabilities, whichever is greater. The following table presents the amount of capital and surplus calculated in accordance with statutory accounting principles, which differs from GAAP, and an amount representing ten percent of total liabilities for each of the Insurance Entities as of the dates presented (in thousands):

	June 30, 2022		December 31, 2021
Statutory capital and surplus
UPCIC	$	398,361	$	378,750
APPCIC	$	22,118	$	16,104
Ten percent of total liabilities
UPCIC	$	139,748	$	122,292
APPCIC	$	1,953	$	649

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 are licensed as of June 30, 2022. Annually, the Insurance Entities each are also required to adhere to prescribed premium-to-capital surplus ratios and each have met those requirements.

The following table summarizes combined net income (loss) 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,
	2022		2021		2022		2021
Combined net income (loss)	$	(142)	$	8,557	$	(12,075)	$	1,180

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, 2022		December 31, 2021
Restricted cash and cash equivalents	$	2,635	$	2,635
Investments	$	3,308	$	3,441

XML

Liability for Unpaid Losses and Loss Adjustment Expenses

6 Months Ended

Jun. 30, 2022

Insurance [Abstract]

Liability for Unpaid Losses and Loss Adjustment Expenses

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,
	2022		2021		2022		2021
Balance at beginning of period	$	244,482	$	315,780	$	346,216	$	322,465
Less: Reinsurance recoverable	(65,403)		(118,671)		(115,860)		(119,522)
Net balance at beginning of period	179,079		197,109		230,356		202,943
Incurred related to:
Current year	196,594		159,490		381,045		304,690
Prior years	3,710		7,731		4,365		6,494
Total incurred	200,304		167,221		385,410		311,184
Paid related to:
Current year	164,888		151,348		236,615		205,829
Prior years	47,118		47,481		211,774		142,797
Total paid	212,006		198,829		448,389		348,626
Net balance at end of period	167,377		165,501		167,377		165,501
Plus: Reinsurance recoverable	18,972		113,157		18,972		113,157
Balance at end of period	$	186,349	$	278,658	$	186,349	$	278,658

During the three months ended June 30, 2022, there was adverse prior years’ reserve development of $63.6 million gross, less $59.9 million ceded, resulting in $3.7 million net unfavorable development. The direct and net prior years’ reserve development for the quarter ended June 30, 2022 was principally due to gross reserve development on Hurricane Irma of $39.3 million, of which $35.6 million was ceded, resulting in net development on Hurricane Irma of $3.7 million in the quarter. In addition to Hurricane Irma development, the Company concluded a favorable commutation during the quarter, favorably increasing ceded prior year loss payments which was offset by a provisory increase in direct prior incurred but not reported (“IBNR”) amount, resulting in no net effect.

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 loss 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 six months ended June 30, 2022, there was adverse prior years’ reserve development of $74.3 million gross, less $69.9 million ceded, resulting in $4.4 million net development. The direct and net prior years’ reserve development for the six months ended June 30, 2022 was principally due to a gross reserve development on Hurricane Irma of $49.8 million, of which $45.6 million was ceded, resulting in net development on Hurricane Irma of $4.2 million in the period. Additionally, the Company concluded a favorable commutation during the quarter, favorably increasing ceded prior year loss payments which was offset by a provisory direct prior year IBNR amount, resulting in no net effect. Hurricane Matthew direct and net losses increased $0.1 million.

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.

XML

Long-term Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Long-term Debt

Long-term Debt

Long-term debt consists of the following as of the dates presented (in thousands):

	June 30,		December 31,
	2022		2021
Surplus note	$	6,250	$	6,985
5.625% Senior unsecured notes	100,000		100,000
Total principal amount	106,250		106,985
Less: unamortized debt issuance costs	(3,089)		(3,309)
Total long-term debt, net	$	103,161	$	103,676

Surplus Note

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, 2022.

Senior Unsecured Notes

On November 23, 2021, the Company entered into Note Purchase Agreements with certain institutional accredited investors and qualified institutional buyers pursuant to which the Company issued and sold $100 million of 5.625% Senior Unsecured Notes due 2026 (the “Notes”). The Purchase Agreements contain certain customary representations, warranties and covenants made by the Company.

The Notes were offered and sold by the Company in a private placement transaction in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended. On March 24, 2022, the Registration Statement registering the exchange of Notes for registered Notes was declared effective by the Securities and Exchange Commission, and all of the Notes have since been exchanged for registered Notes with identical financial terms.

The Notes are senior unsecured debt obligations that bear interest at the rate of 5.625% per annum, payable semi-annually in arrears on May 30th and November 30th of each year, beginning on May 30, 2022. The Notes are subject to adjustment from time to time in the event of a downgrade or subsequent upgrade of the rating assigned to the Notes. The Notes mature on November 26, 2026 at which time the entire $100.0 million of principal is due and payable. At any time on or after November 30, 2023, the Company may redeem all or part of the Notes at redemption prices (expressed as percentages of the principal amount) equal to (i) 102.81250% for the twelve-month period beginning on November 30, 2023; (ii) 101.40625% for the twelve-month period beginning on November 30, 2024 and (iii) 100.000% at any time thereafter, plus accrued and unpaid interest up to, but not including the redemption date.

The indenture governing the Notes contains financial covenants, terms, events of default and related cure provisions that are customary in agreements used in connection with similar transactions. As of June 30, 2022, the Company was in compliance with all applicable covenants, including financial covenants.

The Notes are unsecured senior obligations of the Company, are not obligations of, and are not guaranteed by, any subsidiary of the Company. The Notes rank equally in right of payment to the Unsecured Revolving Loan described below.

Unsecured Revolving Loan

In August 2021, the Company entered into a credit agreement and related revolving loan (“Revolving Loan”) with JPMorgan Chase Bank, N.A. (“JPMorgan”). The Revolving Loan makes available to the Company an unsecured revolving credit facility with an aggregate commitment not to exceed $35.0 million and carries an interest rate of prime rate plus a margin of 2%. The Company must pay an annual commitment of 0.50% of the unused portion of the commitment. Borrowings under the Revolving Loan mature 364 days after the date of the loan. The revolving credit facility with JP Morgan Chase Bank, N.A. is subject to annual renewals each August.

The Revolving Loan contains customary financial covenants. As of June 30, 2022, the Company was in compliance with all applicable covenants, including financial covenants. The Company has not drawn any amount under the Revolving Loan as of June 30, 2022.

Interest Expense

The following table provides interest expense related to long-term debt during the periods presented (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Interest Expense:
Surplus note	$	39	$	35	$	66	$	55
5.625% Senior unsecured notes	1,516		—		2,922		—
Non-cash expense (1)	176		—		351		—
Total	$	1,731	$	35	$	3,339	$	55

(1) Represents amortization of debt issuance costs.

XML

Stockholders' Equity

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Stockholders' Equity

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		2022	2021	Price		Repurchased		Plan Completed
November 3, 2020	November 3, 2022	$	20,000	603,080	—	$	7,381	$	12.24
November 3, 2020	November 3, 2022	$	20,000	—	15,444	$	245	$	15.87

See the “Condensed Consolidated Statements of Stockholders’ Equity” for a roll-forward of treasury shares.

XML

Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

During the three months ended June 30, 2022 and 2021, the Company recorded approximately $3.3 million and $8.1 million of income tax expense, respectively. The effective tax rate (“ETR”) for the three months ended June 30, 2022 was 31.0% compared to a 27.0% ETR for the same period in 2021.

During the six months ended June 30, 2022 and 2021, the Company recorded approximately $8.2 million and $18.1 million of income tax expense, respectively. The ETR for the six months ended June 30, 2022 was 24.9% compared to a 27.2% ETR for the same period in 2021.

In calculating these rates, the Company considered a variety of factors including the forecasted full year pre-tax results, the 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 27.2% for 2022, calculated before the impact of discrete items. The effect of reporting discrete items through June 30, 2022 amounts to a decrease to the annual estimated ETR of 230 basis points, resulting in an ETR for the year to date period of 24.9%. The annual estimated ETR includes a statutory federal income tax rate of 21% and a statutory state income tax rate, net of federal benefit, of 3.4%.

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, and determined that a valuation allowance is not required on any of the deferred tax assets. 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 income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. As of June 30, 2022, the Company’s 2018 through 2020 tax years are still subject to examination by the Internal Revenue Service and various tax years remain open to examination in certain state jurisdictions.

XML

Earnings Per Share

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Earnings Per Share

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,
	2022		2021		2022		2021
Numerator for EPS:
Net income (loss)	$	7,370	$	21,941	$	24,907	$	48,349
Less: Preferred stock dividends	(2)		(2)		(5)		(5)
Income (loss) available to common stockholders	$	7,368	$	21,939	$	24,902	$	48,344
Denominator for EPS:
Weighted average common shares outstanding	30,829		31,240		30,987		31,224
Plus: Assumed conversion of share-based compensation (1)	29		45		48		43
Assumed conversion of preferred stock	25		25		25		25
Weighted average diluted common shares outstanding	30,883		31,310		31,060		31,292
Basic earnings (loss) per common share	$	0.24	$	0.70	$	0.80	$	1.55
Diluted earnings (loss) per common share	$	0.24	$	0.70	$	0.80	$	1.54

(1) Represents the dilutive effect of unexercised stock options, unvested performance share units, unvested restricted stock units and unvested restricted stock.

XML

Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Other Comprehensive Income (Loss)

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,
	2022						2021
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Net changes related to available-for-sale securities:
Unrealized holding gains (losses) arising during the period	$	(40,272)	$	(9,900)	$	(30,372)	$	10,264	$	2,454	$	7,810
Less: Reclassification adjustments for (gains) losses  realized in net income (loss)	949		233		716		245		59		186
Other comprehensive income (loss)	$	(39,323)	$	(9,667)	$	(29,656)	$	10,509	$	2,513	$	7,996

	Six Months Ended June 30,
	2022						2021
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Net changes related to available-for-sale securities:
Unrealized holding gains (losses) arising during the period	$	(97,433)	$	(23,952)	$	(73,481)	$	(12,161)	$	(2,907)	$	(9,254)
Less: Reclassification adjustments for (gains) losses  realized in net income (loss)	1,213		298		915		447		107		340
Other comprehensive income (loss)	$	(96,220)	$	(23,654)	$	(72,566)	$	(11,714)	$	(2,800)	$	(8,914)

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,
	2022		2021		2022		2021
Unrealized gains (losses) on available-for-sale debt securities
	$	(949)	$	(245)	$	(1,213)	$	(447)	Net realized gains (losses) on sale of securities
	233		59		298		107		Income taxes
Total reclassification for the period	$	(716)	$	(186)	$	(915)	$	(340)	Net of tax

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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 Company’s reinsurance commitments generally 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 the reinsurance agreement. Amounts payable for coverage for the second 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) $80.5 million in 2023, (2) $91.5 million in 2024, and (3) $66.3 million in 2025.

Litigation

Lawsuits and other legal proceedings are filed against the Company from time to time. Many of these legal proceedings 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 to claims under the Company’s policies that arise in the ordinary course of business operations. Management believes that any liabilities that may arise as a result of these legal matters will not have a material adverse effect on the Company’s financial condition or results of operations. The Company contests liability and/or the amount of damages as appropriate in each pending matter.

In accordance with applicable accounting guidance, the Company establishes an accrued liability for legal matters when those matters present loss contingencies that are both probable and estimable.

Legal proceedings are subject to many uncertain factors that generally cannot be predicted with certainty, and the Company may be exposed to losses in excess of any amounts accrued. The Company currently estimates that the reasonably possible losses for legal proceedings, whether in excess of a related accrued liability or where there is no accrued liability, and for which the Company is able to estimate a possible loss, are immaterial. This represents management’s estimate of possible loss with respect to these matters and is based on currently available information. These estimates of possible loss do not represent our maximum loss exposure, and actual results may vary significantly from current estimates.

XML

Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. GAAP describes three approaches to measuring the fair value of assets and liabilities: the market approach, the income approach and the cost approach. Each approach includes multiple valuation techniques. GAAP does not prescribe which valuation technique should be used when measuring fair value, but does establish a fair value hierarchy that prioritizes the inputs used in applying the various techniques. Inputs broadly refer to the assumptions that market participants use to make pricing decisions, including assumptions about risk. Level 1 inputs are given the highest priority in the hierarchy while Level 3 inputs are given the lowest priority. Assets and liabilities carried at fair value are classified in one of the following three categories based on the nature of the inputs to the valuation technique used:

•Level 1 — Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

•Level 2 — Observable market-based inputs or unobservable inputs that are corroborated by market data.

•Level 3 — Unobservable inputs that are not corroborated by market data. These inputs reflect management’s best estimate of fair value using its own assumptions about the assumptions a market participant would use in pricing the asset or liability.

Summary of Significant Valuation Techniques for Assets Measured at Fair Value on a Recurring Basis

Level 1

Common stock: Comprise actively traded, exchange-listed U.S. and international equity securities. Valuation is based on unadjusted quoted prices for identical assets in active markets that the Company can access.

Mutual funds: Comprise actively traded funds. Valuation is based on daily quoted net asset values for identical assets in active markets that the Company can access.

Level 2

U.S. government obligations and agencies: Comprise U.S. Treasury Bills or Notes or U.S. Treasury Inflation Protected Securities. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields and credit spreads.

Corporate bonds: Comprise investment-grade debt securities. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields and credit spreads.

Mortgage-backed and asset-backed securities: Comprise securities that are collateralized by mortgage obligations and other assets. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields, collateral performance and credit spreads.

Municipal bonds: Comprise debt securities issued by a state, municipality or county. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields and credit spreads.

Redeemable preferred stock: Comprise preferred stock securities that are redeemable. The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active.

As required by GAAP, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the placement of the asset or liability within the fair value hierarchy levels.

The following tables set forth by level within the fair value hierarchy the Company’s assets measured at fair value on a recurring basis as of the dates presented (in thousands):

	Fair Value Measurements
	June 30, 2022
	Level 1		Level 2		Level 3		Total
Available-For-Sale Debt Securities:
U.S. government obligations and agencies	$	—	$	20,612	$	—	$	20,612
Corporate bonds	—		682,497		—		682,497
Mortgage-backed and asset-backed securities	—		297,393		—		297,393
Municipal bonds	—		12,991		—		12,991
Redeemable preferred stock	—		7,513		—		7,513
Equity Securities:
Common stock	22,202		—		—		22,202
Mutual funds	57,642		—		—		57,642
Total assets accounted for at fair value	$	79,844	$	1,021,006	$	—	$	1,100,850

	Fair Value Measurements
	December 31, 2021
	Level 1		Level 2		Level 3		Total
Available-For-Sale Debt Securities:
U.S. government obligations and agencies	$	—	$	26,806	$	—	$	26,806
Corporate bonds	—		673,805		—		673,805
Mortgage-backed and asset-backed securities	—		316,118		—		316,118
Municipal bonds	—		14,574		—		14,574
Redeemable preferred stock	—		9,152		—		9,152
Equity Securities:
Common stock	3,683		—		—		3,683
Mutual funds	43,651		—		—		43,651
Total assets accounted for at fair value	$	47,334	$	1,040,455	$	—	$	1,087,789

The Company utilizes third-party independent pricing services that provide a price quote for each available-for-sale debt security and equity security. Management reviews the methodology used by the pricing services. If management believes that the price used by the pricing service does not reflect an orderly transaction between participants, management will use an alternative valuation methodology. There were no adjustments made by the Company to the prices obtained from the independent pricing source for any available-for-sale debt security or equity security included in the tables above.

The following table summarizes the carrying value and estimated fair values of the Company’s financial instruments not carried at fair value as of the dates presented (in thousands):

	June 30, 2022				December 31, 2021
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Liabilities (debt):
Surplus note (1)	$	6,250	$	5,933	$	6,985	$	6,723
5.625% Senior unsecured notes (2)	100,000		99,614		100,000		99,464
Total debt	$	106,250	$	105,547	$	106,985	$	106,187

(1) The fair value of the surplus note was determined by management from the expected cash flows discounted using the interest rate quoted by the holder. The SBA is the holder of the surplus note and the quoted interest rate is below prevailing rates quoted by private lending institutions. However, as the Company’s use of funds from the surplus note is limited by the terms of the agreement, the Company has determined the interest rate quoted by the SBA to be appropriate for purposes of establishing the fair value of the note (Level 3).

(2) The fair value of the senior unsecured notes was determined based on pricing from quoted prices for similar assets in active markets and was included as Level 2.

XML

Variable Interest Entities

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entities

Variable Interest Entities

The Company entered into a reinsurance arrangement effective June 1, 2022 with its existing captive reinsurance arrangement with Isosceles Insurance Ltd. with the establishment of “Separate Account UVE-01”, a VIE in the normal course of business and consolidated the VIE since the Company is the primary beneficiary. The primary beneficiary analysis includes a review of the VIE’s capital structure, related contractual relationships and terms, nature of the VIE’s operations and purpose, nature of the VIE’s interests issued and the Company’s involvement with the entity. When assessing the need to consolidate a VIE, the Company evaluates the design of the VIE as well as the related risks to which the entity was designed to expose the variable interest holders. The primary beneficiary is the entity that has both (i) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (ii) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the Company’s decision-making ability and its ability to influence activities that significantly affect the economic performance of the VIE.

The reinsurance captive arrangement entered into in the prior year, which was effective June 1, 2021 through May 31, 2022, was terminated effective December 1, 2021, pursuant to the terms of the agreement. In connection with the termination of the agreement, the affiliates agreed to release funds held in trust due to one of the Insurance Entities (UPCIC) and the balance to the participant of the separate account (UVE) in December 2021.

The following table presents, on a consolidated basis, the balance sheet classification and exposure of restricted cash held in a reinsurance trust account, which can be used only to settle specific reinsurance obligations of the VIE as of the dates presented

	June 30, 2022		December 31, 2021
Restricted cash and cash equivalents	$	17,490	$	—

XML

Subsequent Events

6 Months Ended

Jun. 30, 2022

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

The Company performed an evaluation of subsequent events through the date the financial statements were issued and determined there were no recognized or unrecognized subsequent events that would require an adjustment or additional disclosure in the condensed consolidated financial statements as of June 30, 2022.

On July 19, 2022, the Company declared a quarterly cash dividend of $0.16 per share of common stock payable August 9, 2022, to shareholders of record on August 2, 2022.

XML

Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation

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 (“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, 2021, filed with the SEC on February 28, 2022. The Condensed Consolidated Balance Sheet at December 31, 2021 was derived from audited financial statements, but does not include all disclosures required by 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 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.

XML

Investments (Tables)

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Schedule of Cost or Amortized Cost and Fair Value of Securities Available for Sale

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, 2022
	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities:
U.S. government obligations and agencies	$	21,403	$	—	$	—	$	(791)	$	20,612
Corporate bonds	763,806		(548)		52		(80,813)		682,497
Mortgage-backed and asset-backed securities	328,934		—		331		(31,872)		297,393
Municipal bonds	14,924		—		—		(1,933)		12,991
Redeemable preferred stock	9,123		(124)		—		(1,486)		7,513
Total	$	1,138,190	$	(672)	$	383	$	(116,895)	$	1,021,006

	December 31, 2021
	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities:
U.S. government obligations and agencies	$	27,076	$	—	$	64	$	(334)	$	26,806
Corporate bonds	687,058		(371)		843		(13,725)		673,805
Mortgage-backed and asset-backed securities	322,844		—		194		(6,920)		316,118
Municipal bonds	14,925		(1)		—		(350)		14,574
Redeemable preferred stock	9,289		(117)		28		(48)		9,152
Total	$	1,061,192	$	(489)	$	1,129	$	(21,377)	$	1,040,455

Schedule of Credit Quality of Investment Securities

The following table provides the credit quality of available-for-sale debt securities with contractual maturities as of the dates presented (dollars in thousands):

	June 30, 2022				December 31, 2021
Average Credit Ratings	Fair Value		% of Total  Fair Value		Fair Value		% of Total  Fair Value
AAA	$	304,540	29.8	%	$	321,975	31.0	%
AA	150,164		14.7	%	139,186		13.4	%
A	331,360		32.5	%	339,500		32.6	%
BBB	231,083		22.6	%	234,358		22.5	%
No Rating Available	3,859		0.4	%	5,436		0.5	%
Total	$	1,021,006	100.0	%	$	1,040,455	100.0	%

Schedule of Amortized Cost and Fair Value on Mortgage-Backed and Asset-Backed Securities

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, 2022				December 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Mortgage-backed securities:
Agency	$	151,087	$	133,353	$	147,992	$	143,819
Non-agency	60,518		52,341		59,906		58,263
Asset-backed securities:
Auto loan receivables	72,268		69,488		67,352		66,877
Credit card receivables	2,036		1,990		4,741		4,719
Other receivables	43,025		40,221		42,853		42,440
Total	$	328,934	$	297,393	$	322,844	$	316,118

Schedule of Fair Value and Gross Unrealized Losses on Securities Available for Sale

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, 2022
	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	3	$	11,554	$	(80)	5	$	9,058	$	(711)
Corporate bonds	175	230,149		(23,682)		95	113,327		(17,574)
Mortgage-backed and asset-backed securities	131	157,635		(11,032)		73	133,065		(20,840)
Municipal bonds	9	9,655		(1,265)		1	3,336		(669)
Redeemable preferred stock	5	1,461		(283)		—	—		—
Total	323	$	410,454	$	(36,342)	174	$	258,786	$	(39,794)

	December 31, 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	4	$	18,913	$	(111)	4	$	5,016	$	(223)
Corporate bonds	249	378,595		(7,468)		18	17,356		(679)
Mortgage-backed and asset-backed securities	145	274,883		(5,969)		11	23,273		(951)
Municipal bonds	5	9,811		(269)		—	—		—
Redeemable preferred stock	1	200		(1)		—	—		—
Total	404	$	682,402	$	(13,818)	33	$	45,645	$	(1,853)

Schedule of Debt Securities, Available-for-sale, Allowance for Credit Loss

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, 2020	$	148	$	—	$	38	$	186
Provision for (or reversal of) credit loss expense	223		1		79		303
Balance, December 31, 2021	371		1		117		489
Provision for (or reversal of) credit loss expense	177		(1)		7		183
Balance, June 30, 2022	$	548	$	—	$	124	$	672

Schedule of Amortized Cost and Fair Value of Investments With Contractual Maturities

The following table presents the amortized cost and fair value of investments with maturities as of the date presented (in thousands):

	June 30, 2022
	Amortized Cost		Fair Value
Due in one year or less	$	64,252	$	63,354
Due after one year through five years	528,033		486,015
Due after five years through ten years	512,416		444,405
Due after ten years	31,245		25,421
Perpetual maturity securities	2,244		1,811
Total	$	1,138,190	$	1,021,006

Schedule of Securities Available for Sale

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,
	2022		2021		2022		2021
Proceeds from sales and maturities (fair value):
Available-for-sale debt securities	$	27,911	$	61,658	$	53,217	$	114,291
Equity securities	$	2,760	$	3,589	$	17,692	$	5,165
Gross realized gains on sale of securities:
Available-for-sale debt securities	$	236	$	895	$	242	$	1,017
Equity securities	$	224	$	741	$	548	$	1,084
Gross realized losses on sale of securities:
Available-for-sale debt securities	$	(1,185)	$	(1,140)	$	(1,455)	$	(1,464)
Equity securities	$	—	$	—	$	(2)	$	—
Realized gains on sales of investment real estate (1)	$	—	$	—	$	—	$	401

(1) During the first quarter of 2021, the Company completed the sale of a non-income producing 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.

Schedule of Investment Income (Expense) Comprised Primarily of Interest and Dividends

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,
	2022		2021		2022		2021
Available-for-sale debt securities	$	4,877	$	2,765	$	8,944	$	5,594
Equity securities	690		652		1,225		1,243
Cash and cash equivalents (1)	233		15		255		26
Other (2)	121		267		249		535
Total investment income	5,921		3,699		10,673		7,398
Less: Investment expenses (3)	(700)		(841)		(1,410)		(1,554)
Net investment income	$	5,221	$	2,858	$	9,263	$	5,844

(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.

Schedule of Details on Realized and Unrealized Gains and Losses Related to 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,
	2022		2021		2022		2021
Unrealized gains (losses) recognized during the reported period on equity securities still held at the end of the reported period	$	(8,884)	$	1,546	$	(12,237)	$	1,027

Schedule of Real Estate Investment

Investment real estate consisted of the following as of the dates presented (in thousands):

	June 30,		December 31,
	2022		2021
Income Producing:
Investment real estate	$	7,091	$	7,091
Less: Accumulated depreciation	(1,293)		(1,200)
Investment real estate, net	$	5,798	$	5,891

Schedule of Depreciation Expense Related to Investment Real Estate

The following table provides the depreciation expense related to investment real estate for the periods presented (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Depreciation expense on investment real estate	$	47	$	46	$	93	$	92

XML

Reinsurance (Tables)

6 Months Ended

Jun. 30, 2022

Reinsurance Disclosures [Abstract]

Schedule of Ratings from Rating Agencies and Unsecured Amounts Due from Reinsurers Exceeded 3% of Stockholders' Equity

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, 2022			Due from as of
Reinsurer	AM Best Company	Standard and Poor’s Rating Services, Inc.	Moody’s Investors Service, Inc.	June 30, 2022		December 31, 2021
Florida Hurricane Catastrophe Fund (1)	n/a	n/a	n/a	$	—	$	136,298
Allianz Risk Transfer (Bermuda) Ltd.	—	—	—	—		44,618
Renaissance Reinsurance Ltd.	—	—	—	—		20,051
Total (2)				$	—	$	200,967

(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.

Schedule of Effects of Reinsurance Arrangements

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,
	2022						2021
	Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses		Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses
Direct	$	532,527	$	428,805	$	260,230	$	473,627	$	392,574	$	276,302
Ceded	(632,437)		(151,744)		(59,926)		(568,489)		(136,402)		(109,081)
	$	(99,910)	$	277,061	$	200,304	$	(94,862)	$	256,172	$	167,221

	Six Months Ended June 30,
	2022						2021
	Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses		Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses
Direct	$	929,008	$	843,408	$	455,385	$	838,941	$	768,180	$	513,600
Ceded	(646,383)		(297,283)		(69,975)		(585,289)		(268,703)		(202,416)
Net	$	282,625	$	546,125	$	385,410	$	253,652	$	499,477	$	311,184

Schedule of Prepaid Reinsurance Premiums and Reinsurance Recoverable and Receivable

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,
	2022		2021
Prepaid reinsurance premiums	$	590,093	$	240,993
Reinsurance recoverable on paid losses and LAE	$	14,372	$	69,729
Reinsurance recoverable on unpaid losses and LAE	18,972		115,860
Reinsurance recoverable	$	33,344	$	185,589

XML

Insurance Operations (Tables)

6 Months Ended

Jun. 30, 2022

Insurance [Abstract]

Schedule of Beginning and Ending Balances and Changes in DPAC, Net of DRCC

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,
	2022		2021		2022		2021
DPAC, beginning of period	$	103,622	$	111,193	$	108,822	$	110,614
Capitalized Costs	61,232		61,220		110,431		115,942
Amortization of DPAC	(53,871)		(56,442)		(108,270)		(110,585)
DPAC, end of period	$	110,983	$	115,971	$	110,983	$	115,971

Schedule of Statutory Capital and Surplus, and an Amount Representing Ten Percent of Total Liabilities for both UPCIC and APPCIC

The following table presents the amount of capital and surplus calculated in accordance with statutory accounting principles, which differs from GAAP, and an amount representing ten percent of total liabilities for each of the Insurance Entities as of the dates presented (in thousands):

	June 30, 2022		December 31, 2021
Statutory capital and surplus
UPCIC	$	398,361	$	378,750
APPCIC	$	22,118	$	16,104
Ten percent of total liabilities
UPCIC	$	139,748	$	122,292
APPCIC	$	1,953	$	649

The following table summarizes combined net income (loss) 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,
	2022		2021		2022		2021
Combined net income (loss)	$	(142)	$	8,557	$	(12,075)	$	1,180

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, 2022		December 31, 2021
Restricted cash and cash equivalents	$	2,635	$	2,635
Investments	$	3,308	$	3,441

XML

Liability for Unpaid Losses and Loss Adjustment Expenses (Tables)

6 Months Ended

Jun. 30, 2022

Insurance [Abstract]

Schedule of Changes in Liability for Unpaid Losses and LAE

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,
	2022		2021		2022		2021
Balance at beginning of period	$	244,482	$	315,780	$	346,216	$	322,465
Less: Reinsurance recoverable	(65,403)		(118,671)		(115,860)		(119,522)
Net balance at beginning of period	179,079		197,109		230,356		202,943
Incurred related to:
Current year	196,594		159,490		381,045		304,690
Prior years	3,710		7,731		4,365		6,494
Total incurred	200,304		167,221		385,410		311,184
Paid related to:
Current year	164,888		151,348		236,615		205,829
Prior years	47,118		47,481		211,774		142,797
Total paid	212,006		198,829		448,389		348,626
Net balance at end of period	167,377		165,501		167,377		165,501
Plus: Reinsurance recoverable	18,972		113,157		18,972		113,157
Balance at end of period	$	186,349	$	278,658	$	186,349	$	278,658

XML

Long-term Debt (Tables)

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Schedule of Debt

Long-term debt consists of the following as of the dates presented (in thousands):

	June 30,		December 31,
	2022		2021
Surplus note	$	6,250	$	6,985
5.625% Senior unsecured notes	100,000		100,000
Total principal amount	106,250		106,985
Less: unamortized debt issuance costs	(3,089)		(3,309)
Total long-term debt, net	$	103,161	$	103,676

Schedule of Interest Expense

The following table provides interest expense related to long-term debt during the periods presented (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Interest Expense:
Surplus note	$	39	$	35	$	66	$	55
5.625% Senior unsecured notes	1,516		—		2,922		—
Non-cash expense (1)	176		—		351		—
Total	$	1,731	$	35	$	3,339	$	55

(1) Represents amortization of debt issuance costs.

XML

Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Schedule of Shares Repurchased

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		2022	2021	Price		Repurchased		Plan Completed
November 3, 2020	November 3, 2022	$	20,000	603,080	—	$	7,381	$	12.24
November 3, 2020	November 3, 2022	$	20,000	—	15,444	$	245	$	15.87

XML

Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Schedule of Reconciliation of Numerator and Denominator of Basic and Diluted Earnings Per Share Computations

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,
	2022		2021		2022		2021
Numerator for EPS:
Net income (loss)	$	7,370	$	21,941	$	24,907	$	48,349
Less: Preferred stock dividends	(2)		(2)		(5)		(5)
Income (loss) available to common stockholders	$	7,368	$	21,939	$	24,902	$	48,344
Denominator for EPS:
Weighted average common shares outstanding	30,829		31,240		30,987		31,224
Plus: Assumed conversion of share-based compensation (1)	29		45		48		43
Assumed conversion of preferred stock	25		25		25		25
Weighted average diluted common shares outstanding	30,883		31,310		31,060		31,292
Basic earnings (loss) per common share	$	0.24	$	0.70	$	0.80	$	1.55
Diluted earnings (loss) per common share	$	0.24	$	0.70	$	0.80	$	1.54

(1) Represents the dilutive effect of unexercised stock options, unvested performance share units, unvested restricted stock units and unvested restricted stock.

XML

Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Schedule of Accumulated 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,
	2022						2021
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Net changes related to available-for-sale securities:
Unrealized holding gains (losses) arising during the period	$	(40,272)	$	(9,900)	$	(30,372)	$	10,264	$	2,454	$	7,810
Less: Reclassification adjustments for (gains) losses  realized in net income (loss)	949		233		716		245		59		186
Other comprehensive income (loss)	$	(39,323)	$	(9,667)	$	(29,656)	$	10,509	$	2,513	$	7,996

	Six Months Ended June 30,
	2022						2021
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Net changes related to available-for-sale securities:
Unrealized holding gains (losses) arising during the period	$	(97,433)	$	(23,952)	$	(73,481)	$	(12,161)	$	(2,907)	$	(9,254)
Less: Reclassification adjustments for (gains) losses  realized in net income (loss)	1,213		298		915		447		107		340
Other comprehensive income (loss)	$	(96,220)	$	(23,654)	$	(72,566)	$	(11,714)	$	(2,800)	$	(8,914)

Schedule of Reclassifications Out of Accumulated Other Comprehensive Income

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,
	2022		2021		2022		2021
Unrealized gains (losses) on available-for-sale debt securities
	$	(949)	$	(245)	$	(1,213)	$	(447)	Net realized gains (losses) on sale of securities
	233		59		298		107		Income taxes
Total reclassification for the period	$	(716)	$	(186)	$	(915)	$	(340)	Net of tax

XML

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Schedule of Assets Measured for at Fair Value on Recurring Basis

The following tables set forth by level within the fair value hierarchy the Company’s assets measured at fair value on a recurring basis as of the dates presented (in thousands):

	Fair Value Measurements
	June 30, 2022
	Level 1		Level 2		Level 3		Total
Available-For-Sale Debt Securities:
U.S. government obligations and agencies	$	—	$	20,612	$	—	$	20,612
Corporate bonds	—		682,497		—		682,497
Mortgage-backed and asset-backed securities	—		297,393		—		297,393
Municipal bonds	—		12,991		—		12,991
Redeemable preferred stock	—		7,513		—		7,513
Equity Securities:
Common stock	22,202		—		—		22,202
Mutual funds	57,642		—		—		57,642
Total assets accounted for at fair value	$	79,844	$	1,021,006	$	—	$	1,100,850

	Fair Value Measurements
	December 31, 2021
	Level 1		Level 2		Level 3		Total
Available-For-Sale Debt Securities:
U.S. government obligations and agencies	$	—	$	26,806	$	—	$	26,806
Corporate bonds	—		673,805		—		673,805
Mortgage-backed and asset-backed securities	—		316,118		—		316,118
Municipal bonds	—		14,574		—		14,574
Redeemable preferred stock	—		9,152		—		9,152
Equity Securities:
Common stock	3,683		—		—		3,683
Mutual funds	43,651		—		—		43,651
Total assets accounted for at fair value	$	47,334	$	1,040,455	$	—	$	1,087,789

Schedule of Carrying Value and Estimated Fair Values of Financial Instruments not Carried at Fair Value

The following table summarizes the carrying value and estimated fair values of the Company’s financial instruments not carried at fair value as of the dates presented (in thousands):

	June 30, 2022				December 31, 2021
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Liabilities (debt):
Surplus note (1)	$	6,250	$	5,933	$	6,985	$	6,723
5.625% Senior unsecured notes (2)	100,000		99,614		100,000		99,464
Total debt	$	106,250	$	105,547	$	106,985	$	106,187

(1) The fair value of the surplus note was determined by management from the expected cash flows discounted using the interest rate quoted by the holder. The SBA is the holder of the surplus note and the quoted interest rate is below prevailing rates quoted by private lending institutions. However, as the Company’s use of funds from the surplus note is limited by the terms of the agreement, the Company has determined the interest rate quoted by the SBA to be appropriate for purposes of establishing the fair value of the note (Level 3).

(2) The fair value of the senior unsecured notes was determined based on pricing from quoted prices for similar assets in active markets and was included as Level 2.

XML

Variable Interest Entities (Tables)

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Variable Interest Entities

The following table presents, on a consolidated basis, the balance sheet classification and exposure of restricted cash held in a reinsurance trust account, which can be used only to settle specific reinsurance obligations of the VIE as of the dates presented

	June 30, 2022		December 31, 2021
Restricted cash and cash equivalents	$	17,490	$	—

XML

Nature of Operations and Basis of Presentation (Detail)	Jun. 30, 2022 state
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of states	19

XML

Investments - Cost or Amortized Cost and Fair Value of Securities Available for Sale (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021	Dec. 31, 2020
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 1,138,190	$ 1,061,192
Allowance for Expected Credit Losses	(672)	(489)	$ (186)
Gross Unrealized Gains	383	1,129
Gross Unrealized Losses	(116,895)	(21,377)
Fair Value	1,021,006	1,040,455
U.S. government obligations and agencies | Fixed Maturities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	21,403	27,076
Allowance for Expected Credit Losses	0	0
Gross Unrealized Gains	0	64
Gross Unrealized Losses	(791)	(334)
Fair Value	20,612	26,806
Corporate bonds | Fixed Maturities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	763,806	687,058
Allowance for Expected Credit Losses	(548)	(371)
Gross Unrealized Gains	52	843
Gross Unrealized Losses	(80,813)	(13,725)
Fair Value	682,497	673,805
Mortgage-backed and asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	328,934	322,844
Fair Value	297,393	316,118
Mortgage-backed and asset-backed securities | Fixed Maturities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	328,934	322,844
Allowance for Expected Credit Losses	0	0
Gross Unrealized Gains	331	194
Gross Unrealized Losses	(31,872)	(6,920)
Fair Value	297,393	316,118
Municipal bonds | Fixed Maturities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	14,924	14,925
Allowance for Expected Credit Losses	0	(1)
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(1,933)	(350)
Fair Value	12,991	14,574
Redeemable preferred stock
Debt Securities, Available-for-sale [Line Items]
Allowance for Expected Credit Losses	(124)	(117)	$ (38)
Redeemable preferred stock | Fixed Maturities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	9,123	9,289
Allowance for Expected Credit Losses	(124)	(117)
Gross Unrealized Gains	0	28
Gross Unrealized Losses	(1,486)	(48)
Fair Value	$ 7,513	$ 9,152

XML

Investments - Schedule of Credit Quality of Investment Securities With Contractual Maturities or The Issuer of Such Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Debt Securities, Available-for-sale [Line Items]
Fair Value	$ 1,021,006	$ 1,040,455
% of Total Fair Value	100.00%	100.00%
AAA
Debt Securities, Available-for-sale [Line Items]
Fair Value	$ 304,540	$ 321,975
% of Total Fair Value	29.80%	31.00%
AA
Debt Securities, Available-for-sale [Line Items]
Fair Value	$ 150,164	$ 139,186
% of Total Fair Value	14.70%	13.40%
A
Debt Securities, Available-for-sale [Line Items]
Fair Value	$ 331,360	$ 339,500
% of Total Fair Value	32.50%	32.60%
BBB
Debt Securities, Available-for-sale [Line Items]
Fair Value	$ 231,083	$ 234,358
% of Total Fair Value	22.60%	22.50%
No Rating Available
Debt Securities, Available-for-sale [Line Items]
Fair Value	$ 3,859	$ 5,436
% of Total Fair Value	0.40%	0.50%

XML

Investments - Schedule of Amortized Cost and Fair Value on Mortgage-Backed and Asset-Backed Securities (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 1,138,190	$ 1,061,192
Fair Value	1,021,006	1,040,455
Mortgage-backed and asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	328,934	322,844
Fair Value	297,393	316,118
Agency | Mortgage-backed securities:
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	151,087	147,992
Fair Value	133,353	143,819
Non-agency | Mortgage-backed securities:
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	60,518	59,906
Fair Value	52,341	58,263
Auto loan receivables | Asset-backed securities:
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	72,268	67,352
Fair Value	69,488	66,877
Credit card receivables | Asset-backed securities:
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	2,036	4,741
Fair Value	1,990	4,719
Other receivables | Asset-backed securities:
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	43,025	42,853
Fair Value	$ 40,221	$ 42,440

XML

Investments - Summarized Fair Value and Gross Unrealized Losses on Securities Available for Sale (Details) $ in Thousands	Jun. 30, 2022 USD ($) security	Dec. 31, 2021 USD ($) security
Debt Securities, Available-for-sale [Line Items]
Less than 12 months, Number of issues | security	323	404
Less than 12 months, Fair value	$ 410,454	$ 682,402
Less than 12 months, Unrealized losses	$ (36,342)	$ (13,818)
12 months or longer, Number of issues | security	174	33
12 months or longer, Fair value	$ 258,786	$ 45,645
12 months or longer, Unrealized losses	$ (39,794)	$ (1,853)
Fixed Maturities | U.S. government obligations and agencies
Debt Securities, Available-for-sale [Line Items]
Less than 12 months, Number of issues | security	3	4
Less than 12 months, Fair value	$ 11,554	$ 18,913
Less than 12 months, Unrealized losses	$ (80)	$ (111)
12 months or longer, Number of issues | security	5	4
12 months or longer, Fair value	$ 9,058	$ 5,016
12 months or longer, Unrealized losses	$ (711)	$ (223)
Fixed Maturities | Corporate bonds
Debt Securities, Available-for-sale [Line Items]
Less than 12 months, Number of issues | security	175	249
Less than 12 months, Fair value	$ 230,149	$ 378,595
Less than 12 months, Unrealized losses	$ (23,682)	$ (7,468)
12 months or longer, Number of issues | security	95	18
12 months or longer, Fair value	$ 113,327	$ 17,356
12 months or longer, Unrealized losses	$ (17,574)	$ (679)
Fixed Maturities | Mortgage-backed and asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Less than 12 months, Number of issues | security	131	145
Less than 12 months, Fair value	$ 157,635	$ 274,883
Less than 12 months, Unrealized losses	$ (11,032)	$ (5,969)
12 months or longer, Number of issues | security	73	11
12 months or longer, Fair value	$ 133,065	$ 23,273
12 months or longer, Unrealized losses	$ (20,840)	$ (951)
Fixed Maturities | Municipal bonds
Debt Securities, Available-for-sale [Line Items]
Less than 12 months, Number of issues | security	9	5
Less than 12 months, Fair value	$ 9,655	$ 9,811
Less than 12 months, Unrealized losses	$ (1,265)	$ (269)
12 months or longer, Number of issues | security	1	0
12 months or longer, Fair value	$ 3,336	$ 0
12 months or longer, Unrealized losses	$ (669)	$ 0
Fixed Maturities | Redeemable preferred stock
Debt Securities, Available-for-sale [Line Items]
Less than 12 months, Number of issues | security	5	1
Less than 12 months, Fair value	$ 1,461	$ 200
Less than 12 months, Unrealized losses	$ (283)	$ (1)
12 months or longer, Number of issues | security	0	0
12 months or longer, Fair value	$ 0	$ 0
12 months or longer, Unrealized losses	$ 0	$ 0

XML

Investments - AFS Allowance for Credit Losses (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Debt Securities, Available-for-sale, Allowance for Credit Loss [Roll Forward]
Expected credit loss on available-for-sale debt securities at beginning of period	$ 489	$ 186
Provision for (or reversal of) credit loss expense	183	303
Expected credit loss on available-for-sale debt securities at end of period	672	489
Corporate Bonds
Debt Securities, Available-for-sale, Allowance for Credit Loss [Roll Forward]
Expected credit loss on available-for-sale debt securities at beginning of period	371	148
Provision for (or reversal of) credit loss expense	177	223
Expected credit loss on available-for-sale debt securities at end of period	548	371
Municipal Bonds
Debt Securities, Available-for-sale, Allowance for Credit Loss [Roll Forward]
Expected credit loss on available-for-sale debt securities at beginning of period	1	0
Provision for (or reversal of) credit loss expense	(1)	1
Expected credit loss on available-for-sale debt securities at end of period	0	1
Redeemable preferred stock
Debt Securities, Available-for-sale, Allowance for Credit Loss [Roll Forward]
Expected credit loss on available-for-sale debt securities at beginning of period	117	38
Provision for (or reversal of) credit loss expense	7	79
Expected credit loss on available-for-sale debt securities at end of period	$ 124	$ 117

XML

Investments - Amortized Cost and Fair Value of Investments With Contractual Maturities (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Amortized Cost
Due in one year or less	$ 64,252
Due after one year through five years	528,033
Due after five years through ten years	512,416
Due after ten years	31,245
Perpetual maturity securities	2,244
Amortized Cost	1,138,190	$ 1,061,192
Fair Value
Due in one year or less	63,354
Due after one year through five years	486,015
Due after five years through ten years	444,405
Due after ten years	25,421
Perpetual maturity securities	1,811
Fair Value	$ 1,021,006	$ 1,040,455

XML

Investments - Summary of Securities Available for Sale (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Investments, Debt and Equity Securities [Abstract]
Proceeds from sales and maturities (fair value)	$ 27,911	$ 61,658	$ 53,217	$ 114,291
Proceeds from sales of equity securities	2,760	3,589	17,692	5,165
Gross realized gains on sale of securities	236	895	242	1,017
Equity securities, FV-NI, Realized Gain	224	741	548	1,084
Gross realized losses on sale of securities	(1,185)	(1,140)	(1,455)	(1,464)
Equity securities, FV-NI, Realized Loss	0	0	(2)	0
Realized gains on sales of investment real estate	$ 0	$ 0	0	401
Proceeds from sales of investment real estate			$ 0	$ 2,591

XML

Investments - Investment Income (Expense) Comprised Primarily of Interest and Dividends (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Net Investment Income [Line Items]
Total investment income	$ 5,921	$ 3,699	$ 10,673	$ 7,398
Less: Investment expenses	(700)	(841)	(1,410)	(1,554)
Net investment income	5,221	2,858	9,263	5,844
Available-for-sale debt securities
Net Investment Income [Line Items]
Investment income	4,877	2,765	8,944	5,594
Equity securities
Net Investment Income [Line Items]
Investment income	690	652	1,225	1,243
Cash and cash equivalents
Net Investment Income [Line Items]
Investment income	233	15	255	26
Other
Net Investment Income [Line Items]
Investment income	$ 121	$ 267	$ 249	$ 535

XML

Investments - Summary of Details on Realized and Unrealized Gains and Losses Related to Equity Securities (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Investments, Debt and Equity Securities [Abstract]
Unrealized gains (losses) recognized during the reported period on equity securities still held at the end of the reported period	$ (8,884)	$ 1,546	$ (12,237)	$ 1,027

XML

Investments - Schedule of Real Estate Investment (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Real Estate [Line Items]
Investment real estate, net	$ 5,798	$ 5,891
Income Producing:
Real Estate [Line Items]
Investment real estate	7,091	7,091
Less: Accumulated depreciation	(1,293)	(1,200)
Investment real estate, net	$ 5,798	$ 5,891

XML

Investments - Schedule of Depreciation Expense Related to Investment Real Estate (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Real Estate Investment
Real Estate [Line Items]
Depreciation expense on investment real estate	$ 47	$ 46	$ 93	$ 92

XML

Reinsurance - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2022
Stockholders' Equity, Total | Amounts Due From Reinsurers | Customers with Greater than 3% of Equity
Effects of Reinsurance [Line Items]
Unsecured amounts due from reinsurers exceeding a fixed percentage of stockholders equity	3.00%

XML

Reinsurance - Current Ratings from Rating Agencies and Unsecured Net Amounts Due from Reinsurers Whose Aggregate Balance Exceeded 3% of Stockholders' Equity (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Ceded Credit Risk [Line Items]
Reinsurance unsecured amounts due from reinsurers	$ 0	$ 200,967
Florida Hurricane Catastrophe Fund
Ceded Credit Risk [Line Items]
Reinsurance unsecured amounts due from reinsurers	0	136,298
Allianz Risk Transfer (Bermuda) Ltd. | AM Best Company A Plus Rating | Standard & Poor's, AA- Rating | Moody's, Aa3 Rating
Ceded Credit Risk [Line Items]
Reinsurance unsecured amounts due from reinsurers	0	44,618
Renaissance Reinsurance Ltd. | AM Best Company A Plus Rating | Standard & Poor's, A Plus Rating | Moody's A1 Rating
Ceded Credit Risk [Line Items]
Reinsurance unsecured amounts due from reinsurers	$ 0	$ 20,051

XML

Reinsurance - Reinsurance Arrangements (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Reinsurance Disclosures [Abstract]
Direct premiums written	$ 532,527	$ 473,627	$ 929,008	$ 838,941
Ceded premiums written	(632,437)	(568,489)	(646,383)	(585,289)
Net premiums written	(99,910)	(94,862)	282,625	253,652
Direct premiums earned	428,805	392,574	843,408	768,180
Ceded premiums earned	(151,744)	(136,402)	(297,283)	(268,703)
Premiums earned, net	277,061	256,172	546,125	499,477
Direct losses and loss adjustment expenses	260,230	276,302	455,385	513,600
Ceded losses and loss adjustment expenses	(59,926)	(109,081)	(69,975)	(202,416)
Net Losses and Loss Adjustment Expenses	$ 200,304	$ 167,221	$ 385,410	$ 311,184

XML

Reinsurance - Prepaid Reinsurance Premiums (Payable) and Reinsurance Recoverable and Receivable (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020
Reinsurance Disclosures [Abstract]
Prepaid reinsurance premiums	$ 590,093		$ 240,993
Reinsurance recoverable on paid losses and LAE	14,372		69,729
Reinsurance recoverable on unpaid losses and LAE	18,972	$ 65,403	115,860	$ 113,157	$ 118,671	$ 119,522
Reinsurance recoverable	$ 33,344		$ 185,589

XML

Insurance Operations - Beginning and Ending Balances and Changes in DPAC, Net of DRCC (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Deferred Policy Acquisition Costs [Roll Forward]
DPAC, beginning of period	$ 103,622	$ 111,193	$ 108,822	$ 110,614
Capitalized Costs	61,232	61,220	110,431	115,942
Amortization of DPAC	(53,871)	(56,442)	(108,270)	(110,585)
DPAC, end of period	$ 110,983	$ 115,971	$ 110,983	$ 115,971

XML

Insurance Operations - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
UPCIC
Statutory Accounting Practices [Line Items]
Dividend paid to immediate parent company	$ 0
APPCIC
Statutory Accounting Practices [Line Items]
Dividend paid to immediate parent company		$ 0
UPCIC and APPCIC
Statutory Accounting Practices [Line Items]
Minimum capitalization rate	10.00%
UPCIC and APPCIC | Minimum
Statutory Accounting Practices [Line Items]
Minimum capitalization amount	$ 15,000,000

XML

Insurance Operations - Statutory Capital and Surplus, and an Amount Representing Ten Percent of Total Liabilities for both UPCIC and APPCIC (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
UPCIC
Statutory Accounting Practices [Line Items]
Statutory capital and surplus	$ 398,361	$ 378,750
Ten percent of total liabilities	139,748	122,292
APPCIC
Statutory Accounting Practices [Line Items]
Statutory capital and surplus	22,118	16,104
Ten percent of total liabilities	$ 1,953	$ 649

XML

Insurance Operations - Summary of Combined Net Income for UPCIC and APPCIC (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Insurance [Abstract]
Combined net income (loss)	$ (142)	$ 8,557	$ (12,075)	$ 1,180

XML

Insurance Operations - Assets Held by Insurance Regulators (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Investments
Statutory Accounting Practices [Line Items]
Assets held by insurance regulators	$ 3,308	$ 3,441
Restricted cash and cash equivalents
Statutory Accounting Practices [Line Items]
Assets held by insurance regulators	$ 2,635	$ 2,635

XML

Liability for Unpaid Losses and Loss Adjustment Expenses - Change in Liability for Unpaid Losses and LAE (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Balance at beginning of period	$ 244,482	$ 315,780	$ 346,216	$ 322,465
Less: Reinsurance recoverable	(65,403)	(118,671)	(115,860)	(119,522)
Net balance at beginning of period	179,079	197,109	230,356	202,943
Incurred related to current year	196,594	159,490	381,045	304,690
Incurred related to prior years	3,710	7,731	4,365	6,494
Total incurred	200,304	167,221	385,410	311,184
Paid related to current year	164,888	151,348	236,615	205,829
Paid related to prior years	47,118	47,481	211,774	142,797
Total paid	212,006	198,829	448,389	348,626
Net balance at end of period	167,377	165,501	167,377	165,501
Plus: Reinsurance recoverable	18,972	113,157	18,972	113,157
Balance at end of period	$ 186,349	$ 278,658	$ 186,349	$ 278,658

XML

Liability for Unpaid Losses and Loss Adjustment Expenses - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Direct losses and loss adjustment expenses	$ 260,230	$ 276,302	$ 455,385	$ 513,600
Ceded losses and loss adjustment expenses	59,926	109,081	69,975	202,416
Incurred related to prior years	3,710	7,731	4,365	6,494
Adverse Prior Years' Reserve Development
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Direct losses and loss adjustment expenses	63,600	116,900	74,300	209,000
Ceded losses and loss adjustment expenses	59,900	109,200	69,900	202,500
Incurred related to prior years	3,700	7,700	4,400	6,500
Hurricane
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Direct losses and loss adjustment expenses		109,100		201,200
Ceded losses and loss adjustment expenses		109,200		202,500
Incurred related to prior years		(100)		(1,300)
Hurricane Irma
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Direct losses and loss adjustment expenses	39,300		49,800
Ceded losses and loss adjustment expenses	35,600		45,600
Incurred related to prior years	$ 3,700		4,200
Hurricane Matthew
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Incurred related to prior years			$ 100
Settlement on Litigated Claims
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Incurred related to prior years		$ 7,800		$ 7,800

XML

Long-term Debt - Schedule of Long-Term Debt (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Carrying Value	$ 106,250	$ 106,985
Less: unamortized debt issuance costs	(3,089)	(3,309)
Total long-term debt, net	103,161	103,676
Surplus note
Debt Instrument [Line Items]
Carrying Value	6,250	6,985
5.625% Senior unsecured notes
Debt Instrument [Line Items]
Carrying Value	$ 100,000	$ 100,000

XML

Long-term Debt - Additional Information (Detail) - USD ($)		1 Months Ended
	Nov. 23, 2021	Aug. 31, 2021	Jun. 30, 2022	Dec. 31, 2006
Credit Agreement
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 35,000,000
Line of credit facility, unused capacity, commitment fee percentage		0.50%
Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, expiration period		364 days
Prime Rate | Credit Agreement
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		2.00%
Surplus note
Debt Instrument [Line Items]
Unsecured term loan agreement				$ 25,000,000
Note term				20 years
Unsecured Debt
Debt Instrument [Line Items]
Repurchased amount	$ 100,000,000
Unsecured Debt | 5.625% Senior Unsecured Notes Due 2026 Member
Debt Instrument [Line Items]
Unsecured term loan agreement	$ 100,000,000
Stated percentage	5.625%		5.625%
Maturity year of debt instrument	2026
Unsecured Debt | 5.625% Senior Unsecured Notes Due 2026 Member | Debt Instrument, Redemption, Period One
Debt Instrument [Line Items]
Redemption price	102.8125%
Unsecured Debt | 5.625% Senior Unsecured Notes Due 2026 Member | Debt Instrument, Redemption, Period Two
Debt Instrument [Line Items]
Redemption price	101.40625%
Unsecured Debt | 5.625% Senior Unsecured Notes Due 2026 Member | Debt Instrument, Redemption, Period Three
Debt Instrument [Line Items]
Redemption price	100.00%

XML

Long-Term Debt - Interest Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Debt Instrument [Line Items]
Total	$ 1,731	$ 35	$ 3,339	$ 55
Non cash expense	176	0	351	0
Surplus note
Debt Instrument [Line Items]
Total	39	35	66	55
5.625% Senior unsecured notes
Debt Instrument [Line Items]
Total	$ 1,516	$ 0	$ 2,922	$ 0

XML

Stockholders' Equity - Schedule of Shares Repurchased (Details) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
Equity [Line Items]
Shares repurchased during the period	$ 3,502,000	$ 3,879,000	$ 245,000
November 3, 2020
Equity [Line Items]
Shares repurchased (in shares)				603,080	15,444
Shares repurchased during the period	$ 7,381,000				$ 245,000
Shares repurchased during period (in USD per share)	$ 12.24				$ 15.87
November 3, 2020 | Maximum
Equity [Line Items]
Amount of stock repurchase plan authorized	$ 20,000,000			$ 20,000,000	$ 20,000,000

XML

Income Taxes (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Taxes [Line Items]
Income tax expense	$ 3,310	$ 8,118	$ 8,244	$ 18,061
Effective tax rate	31.00%	27.00%	24.90%	27.20%
ETR, before discrete items			27.20%
Increase in effective tax rate			2.30%
Statutory Effective Tax Rate
Income Taxes [Line Items]
U.S. federal statutory rate			21.00%
State income tax rate, net of federal benefit			3.40%

XML

Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
Numerator for EPS:
Net income (loss)	$ 7,370	$ 17,537	$ 21,941	$ 26,408	$ 24,907	$ 48,349
Less: Preferred stock dividends	(2)		(2)		(5)	(5)
Income (loss) available to common stockholders	$ 7,368		$ 21,939		$ 24,902	$ 48,344
Denominator for EPS:
Weighted average common shares outstanding (in shares)	30,829		31,240		30,987	31,224
Plus: Assumed conversion of share-based compensation (in shares)	29		45		48	43
Assumed conversion of preferred stock (in shares)	25		25		25	25
Weighted average diluted common shares outstanding (in shares)	30,883		31,310		31,060	31,292
Basic earnings (loss) per common share (in USD per share)	$ 0.24		$ 0.70		$ 0.80	$ 1.55
Diluted earnings (loss) per common share (in USD per share)	$ 0.24		$ 0.70		$ 0.80	$ 1.54

XML

Other Comprehensive Income (Loss) - Components of Other Comprehensive Income (loss) Pre-Tax and After-Tax (Detail) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
After-tax
Other comprehensive income (loss)	$ (29,656)	$ (42,910)	$ 7,996	$ (16,910)	$ (72,566)	$ (8,914)
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent
Pre-tax
Unrealized holding gains (losses) arising during the period	(40,272)		10,264		(97,433)	(12,161)
Less: Reclassification adjustments for (gains) losses realized in net income (loss)	949		245		1,213	447
Other comprehensive income (loss)	(39,323)		10,509		(96,220)	(11,714)
Tax
Unrealized holding gains (losses) arising during the period	(9,900)		2,454		(23,952)	(2,907)
Income taxes	233		59		298	107
Other comprehensive income (loss)	(9,667)		2,513		(23,654)	(2,800)
After-tax
Unrealized holding gains (losses) arising during the period	(30,372)		7,810		(73,481)	(9,254)
Less: Reclassification adjustments for (gains) losses realized in net income (loss)	716		186		915	340
Other comprehensive income (loss)	$ (29,656)		$ 7,996		$ (72,566)	$ (8,914)

XML

Other Comprehensive Income (Loss) - Reclassifications Out of Accumulated Other Comprehensive Income (Detail) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains (losses) on sale of securities	$ (725)		$ 496		$ (667)	$ 1,038
Income taxes	(3,310)		(8,118)		(8,244)	(18,061)
Net income (loss)	7,370	$ 17,537	21,941	$ 26,408	24,907	48,349
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent | Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains (losses) on sale of securities	(949)		(245)		(1,213)	(447)
Income taxes	233		59		298	107
Net income (loss)	$ (716)		$ (186)		$ (915)	$ (340)

XML

Commitments and Contingencies (Detail) - USD ($) $ in Millions	Mar. 26, 2021	Jun. 30, 2022
Reinsurance Retention Policy [Line Items]
Term of reinsurance agreement	3 years
Reinsurance Contracts: 2023-01-01
Reinsurance Retention Policy [Line Items]
Reinsurance payable, due in fiscal year		$ 80.5
Reinsurance Contracts: 2024-01-01
Reinsurance Retention Policy [Line Items]
Reinsurance payable, due in second year		91.5
Reinsurance Contracts: 2025-01-01
Reinsurance Retention Policy [Line Items]
Reinsurance payable, due in third year		$ 66.3

XML

Fair Value Measurements - Assets Measured for at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 1,021,006	$ 1,040,455
Equity Securities:	79,844	47,334
Mortgage-backed and asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	297,393	316,118
Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets accounted for at fair value	1,100,850	1,087,789
Fair Value, Recurring | U.S. government obligations and agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	20,612	26,806
Fair Value, Recurring | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	682,497	673,805
Fair Value, Recurring | Mortgage-backed and asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	297,393	316,118
Fair Value, Recurring | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	12,991	14,574
Fair Value, Recurring | Redeemable preferred stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	7,513	9,152
Fair Value, Recurring | Common stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities:	22,202	3,683
Fair Value, Recurring | Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities:	57,642	43,651
Level 1 | Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets accounted for at fair value	79,844	47,334
Level 1 | Fair Value, Recurring | U.S. government obligations and agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 1 | Fair Value, Recurring | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 1 | Fair Value, Recurring | Mortgage-backed and asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 1 | Fair Value, Recurring | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 1 | Fair Value, Recurring | Redeemable preferred stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 1 | Fair Value, Recurring | Common stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities:	22,202	3,683
Level 1 | Fair Value, Recurring | Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities:	57,642	43,651
Level 2 | Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets accounted for at fair value	1,021,006	1,040,455
Level 2 | Fair Value, Recurring | U.S. government obligations and agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	20,612	26,806
Level 2 | Fair Value, Recurring | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	682,497	673,805
Level 2 | Fair Value, Recurring | Mortgage-backed and asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	297,393	316,118
Level 2 | Fair Value, Recurring | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	12,991	14,574
Level 2 | Fair Value, Recurring | Redeemable preferred stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	7,513	9,152
Level 2 | Fair Value, Recurring | Common stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities:	0	0
Level 2 | Fair Value, Recurring | Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities:	0	0
Level 3 | Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets accounted for at fair value	0	0
Level 3 | Fair Value, Recurring | U.S. government obligations and agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 3 | Fair Value, Recurring | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 3 | Fair Value, Recurring | Mortgage-backed and asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 3 | Fair Value, Recurring | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 3 | Fair Value, Recurring | Redeemable preferred stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 3 | Fair Value, Recurring | Common stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities:	0	0
Level 3 | Fair Value, Recurring | Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities:	$ 0	$ 0

XML

Fair Value Measurements - Summarizes Carrying Value and Estimated Fair Values of Financial Instruments not Carried at Fair Value (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021	Nov. 23, 2021
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Carrying Value	$ 106,250	$ 106,985
Estimated Fair Value	105,547	106,187
Surplus note
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Carrying Value	$ 6,250	6,985
Unsecured Debt | 5.625% Senior Unsecured Notes Due 2026 Member
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Stated percentage	5.625%		5.625%
Surplus note | Surplus note
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Carrying Value	$ 6,250	6,985
Estimated Fair Value	5,933	6,723
5.625% Senior unsecured notes
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Carrying Value	100,000	100,000
Estimated Fair Value	$ 99,614	$ 99,464

XML

Variable Interest Entities (Details) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Variable Interest Entity [Line Items]
Restricted cash and cash equivalents	[1]	$ 20,125	$ 2,635
Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Restricted cash and cash equivalents		$ 17,490	$ 0

[1] See “—Note 5 (Insurance Operations)” for a discussion of the nature of the restrictions for restricted cash and cash equivalents.

XML

Subsequent Events (Details) - $ / shares		3 Months Ended				6 Months Ended
	Jul. 19, 2022	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
Subsequent Event [Line Items]
Cash dividend declared per common share (in USD per share)		$ 0.16	$ 0.16	$ 0.16	$ 0.16	$ 0.32	$ 0.32
Subsequent Event
Subsequent Event [Line Items]
Cash dividend declared per common share (in USD per share)	$ 0.16