Filing summary: United Insurance Holdings Corp. (UIHC), FY 2022
Entity note: The supplied 10-K is for United Insurance Holdings Corp. (UIHC), not American Coastal Insurance Corp. American Coastal Insurance Company (ACIC) is a UIHC subsidiary. The fiscal year ended December 31, 2022; the report was filed April 17, 2023. Financial amounts below are in U.S. dollars.
Business context and reporting period
UIHC operated personal and commercial residential property-and-casualty insurance businesses. Its strategy shifted toward Florida commercial property insurance through ACIC, while it wound down personal lines and exited several states. At year-end, 52.5% of policies in force were in Florida; commercial business was concentrated in Florida and sourced through managing general agent AmRisc.
Policies in force fell 46.1% year over year to 254,275, reflecting underwriting actions and transfers of renewal rights. After year-end, UPC entered Florida receivership on February 27, 2023, and UIHC lost control of and deconsolidated UPC. The remaining insurance subsidiaries, ACIC and IIC, continued operating as of the filing.
Key financial metrics
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Total revenue | $455.4 million | $634.5 million |
| Net premiums earned | $462.6 million | $589.8 million |
| Net loss attributable to UIHC | $469.9 million | $57.9 million |
| Diluted loss per share | $10.91 | $1.35 |
| Net loss ratio / expense ratio / combined ratio | 137.8% / 56.9% / 194.7% | 71.6% / 48.7% / 120.3% |
| Operating cash flow | $(173.1) million | $(295.4) million |
| Cash, cash equivalents and restricted cash | $283.6 million | $245.3 million |
| Cash and investments, including restricted cash | $715.7 million | $964.8 million |
| Notes payable | $154.1 million | $158.6 million |
| Stockholders’ equity (deficit) | $(182.0) million | $332.0 million |
Gross written premiums declined 15.4% to $1.124 billion. Personal-line gross written premiums were $615.8 million, down 32.1%; commercial-line premiums were $508.2 million, up 20.4%. Commercial lines reported pretax income of $35.8 million, versus $32.0 million; personal lines reported a pretax loss of $481.2 million, versus $104.6 million.
Cash provided by investing activities was $236.8 million and cash used in financing activities was $25.4 million. The company’s $150 million senior notes mature in 2027; following a ratings downgrade, their interest rate was scheduled to rise from 6.25% to 7.25% effective June 15, 2023.
Material changes versus the prior year
- Net loss widened substantially, primarily due to Hurricane Ian, which exhausted personal-lines reinsurance protection, and $112.6 million of unfavorable prior-year reserve development, compared with $27.9 million in 2021.
- Current-year catastrophe losses, net of reinsurance, were $283.2 million, including $203.9 million from named storms. The filing cites retained pre-tax catastrophe losses of $203.9 million in 2022, versus $35.9 million in 2021.
- Gross written premiums fell as renewal rights and policies transferred from Northeast and Southeast states and personal-lines underwriting contracted; commercial premium growth partially offset the decline.
- Net realized and unrealized investment losses totaled $38.7 million, versus net gains of $6.8 million in 2021. Results included $22.7 million of realized impairment losses on fixed maturities management expected it might have to sell before recovery of amortized cost.
- UIHC recorded a $128.993 million valuation allowance against deferred tax assets, contributing to a $25.5 million tax expense despite the pretax loss. It also recorded $13.6 million of personal-lines goodwill impairment and $20.2 million of expense for deferred acquisition costs deemed unrecoverable.
- Year-end book value per share fell to $(4.21), from $7.20. ACIC’s statutory surplus declined to $77.5 million from $142.1 million; UPC reported negative statutory surplus of $239.6 million.
Outlook, risks and unusual items
Going concern: Management and the auditor disclosed substantial doubt about UIHC’s ability to continue as a going concern within one year after issuance of the financial statements. Key uncertainties are the allocation and timing of shared catastrophe-reinsurance recoveries between UPC and ACIC and the ability to obtain adequate, affordable reinsurance for ACIC and IIC. UIHC estimated that ACIC was due approximately $273 million under the allocation agreement for Hurricane Ian; $31.3 million of recoveries allocated to ACIC were held by UPC at year-end. A court denied ACIC’s motion seeking release of recoveries without prejudice. Management stated it had no committed source of additional capital.
Management planned to resolve reinsurance allocation with the Florida Department of Financial Services, renew catastrophe coverage effective June 1, 2023, and consider additional capital for ACIC. It anticipated higher reinsurance costs, possibly materially. The filing provides no specific earnings or revenue guidance.
Other significant risks include catastrophe exposure and Florida concentration, reserve-estimation uncertainty, reinsurer credit and collection risk, dependence on AmRisc for commercial distribution and underwriting, rating downgrades, regulatory restrictions on subsidiary dividends, debt covenants, and investment-market volatility. The Kroll rating downgrade raised the senior-note rate. The company reported a $26 million dividend from ACIC in November 2022, but future subsidiary dividends are restricted; IIC agreed not to pay ordinary dividends without New York regulator approval through January 1, 2025.
The auditor issued an unqualified opinion on the financial statements but included a going-concern emphasis. Management reported effective disclosure controls and internal control over financial reporting; the auditor stated it was not engaged to audit or express an opinion on internal controls.
Important facts for investors to verify
- Confirm the intended issuer: this filing is UIHC’s 10-K, not a standalone American Coastal Insurance Corp. filing.
- Track the status, timing and amount of ACIC’s disputed Hurricane Ian reinsurance recoveries, including the allocation of shared treaty proceeds with UPC.
- Review ACIC’s and IIC’s statutory capital, ratings and the terms and availability of their catastrophe reinsurance renewals.
- Assess whether reported loss reserves, particularly Hurricane Ian and prior-year Florida claims, prove adequate as claims develop.
- Monitor UIHC’s liquidity, cash use, access to capital, senior-note covenants and higher interest expense; distinguish restricted cash from funds freely available to the holding company.
- Evaluate the post-receivership business perimeter, including UPC’s deconsolidation, the Florida personal-lines renewal-rights transfer to Slide, and any planned sale of IIC.