United Insurance Holdings Corp. — 2015 Form 10-K
Entity and period: The filing is for the fiscal year ended December 31, 2015, and identifies the registrant as United Insurance Holdings Corp. (NASDAQ: UIHC), a property-and-casualty insurance holding company. This differs from the request metadata naming American Coastal Insurance Corp.; verify the intended issuer.
Business context
The company primarily writes homeowners and related property insurance in catastrophe-exposed U.S. markets, operating through insurance subsidiaries and one business segment. Florida remained its largest market, while expansion into other states increased geographic diversification. Homeowners, dwelling fire, renters and condominium policies generated most written premium.
Financial results and position
- Revenue: Total revenue was $357.6 million, up 27.6% from $280.2 million. Gross premiums written rose 30.4% to $569.7 million; net premiums earned increased 26.9% to $336.0 million.
- Profit: Net income was $27.4 million, down 33.3% from $41.0 million. Diluted EPS was $1.28, versus $2.05; return on average equity fell to 12.4% from 27.2%.
- Underwriting: The combined ratio increased to 94.0% from 81.4%; the underlying combined ratio, excluding current-year catastrophe losses and prior-year reserve development, rose to 86.2% from 82.6%. The net loss ratio increased to 54.5% from 44.6%.
- Cash flow: Operating cash flow was $98.3 million, compared with $68.9 million. Investing activities used $67.0 million and financing activities used $7.9 million. Cash and cash equivalents ended the year at $84.8 million.
- Liquidity and capital: Cash, cash equivalents and investments totaled $537.5 million, versus $443.0 million. Total assets were $740.0 million, liabilities $500.8 million and stockholders’ equity $239.2 million. Statutory surplus was $150.9 million.
- Debt: Notes payable were $12.4 million at year-end, down from $13.5 million. The company reported no off-balance-sheet arrangements.
- Other: Book value per diluted share was $11.11, up 13.9%. The company declared and paid $0.20 per share in dividends during 2015; the board later declared a $0.05-per-share quarterly dividend for March 2016.
Changes versus 2014
- Policies in force increased 37.6% to 347,015. Total insured value rose 38.5% to approximately $159.6 billion; Florida’s share of insured value declined to 49.1% from 60.9%.
- Net income declined despite premium growth, mainly as current-year catastrophe losses rose to $28.6 million from $0.8 million, reflecting 14 events. Management also cited higher loss frequency and severity in water-related claims and lower premiums per unit of exposure in newer markets.
- Loss and LAE rose to $183.1 million from $118.1 million. Prior-year reserves developed favorably by $2.4 million, versus $4.0 million of favorable development in 2014.
- The February 2015 acquisition of Family Security Holdings added a Hawaii-domiciled insurer and was paid for with stock; the reported purchase price, including estimated contingent consideration, was $13.5 million.
Outlook, risks and notable items
- Management expected premium growth to continue through expansion in existing markets and new states, and identified diversification, technology and analytics, reinsurance efficiency, and commercial residential growth as priorities. No specific earnings or revenue guidance was provided.
- A proposed acquisition of Interboro Insurance Company for $57 million was pending regulatory approval, with closing expected around April 1, 2016. Consideration included $48.5 million cash and an $8.5 million, 18-month note at 6%; completion was not assured.
- The 2015–16 catastrophe reinsurance program provided $1.243 billion of protection above specified retentions; its estimated cost was $161.4 million. Reinsurance does not remove the company’s direct obligation to policyholders, and recovery depends on reinsurer performance and contract terms.
- Key risks include hurricanes and other severe weather, Florida and catastrophe concentration, claims inflation and reserve-estimation uncertainty, reinsurance availability and cost, regulatory limits on rates and dividends, litigation, investment-market risk, and dependence on agents and vendors. Insurers’ Demotech ratings were A; their RBC ratios were 419% and 445%.
- The company reported ordinary-course claims litigation but no material non-claims-related legal actions at year-end. The independent auditor issued an unqualified opinion on the financial statements and internal controls; management and the auditor reported effective internal control over financial reporting.
Important facts for investors to verify
- Confirm the intended registrant: the supplied filing is United Insurance Holdings Corp., not American Coastal Insurance Corp.
- Review the source filing’s audited statements and notes, particularly catastrophe losses, reserve development, and the basis for the 2015 combined-ratio deterioration.
- Check whether Interboro received regulatory approval and closed, and compare the final purchase price and financing with the announced terms.
- Assess whether the reinsurance program, retentions, cost and counterparty security remain adequate as insured exposure grows.
- Track loss frequency and severity, Florida concentration, statutory capital, and restrictions on subsidiary dividends that could affect holding-company liquidity.