United Insurance Holdings Corp. Reports Financial Results for Its Fourth Quarter and Year Ended December 31, 2017

Company to Host Quarterly Conference Call at 4:30 P.M. ET on February 21, 2018

ST. PETERSBURG, Fla.--()--United Insurance Holdings Corp. (Nasdaq: UIHC) (UPC Insurance or the Company), a property and casualty insurance holding company, today reported its financial results for the fourth quarter ended December 31, 2017.

($ in thousands, except for per share data)   Three Months Ended   Year Ended
December 31, December 31,
2017   2016   Change 2017   2016   Change
Gross premiums written $ 252,440 $ 167,103 51.1 % $ 1,040,848 $ 708,156 47.0 %
Gross premiums earned $ 274,373 $ 182,222 50.6 % $ 986,023 $ 666,829 47.9 %
Net premiums earned $ 166,195 $ 121,161 37.2 % $ 585,490 $ 456,931 28.1 %
Total revenues $ 182,586 $ 131,433 38.9 % $ 654,420 $ 487,117 34.3 %
Earnings (loss) before income tax $ 27,809 $ (17,578 ) 258.2 % $ 910 $ 7,003 (87.0 )%
Net income (loss) $ 27,001 $ (10,517 ) 356.7 % $ 10,145 $ 5,698 78.0 %
Net income (loss) per diluted share $ 0.63 $ (0.49 ) 228.6 % $ 0.27 $ 0.26 3.8 %
 

Reconciliation of net income (loss) to core
income (loss):

Plus: Merger expenses $ $ 597 (100.0 )% $ 6,906 $ 1,747 295.3 %

Plus: Non-cash amortization of intangible
assets

$ 9,839 $ 2,570 282.8 % $ 31,199 $ 9,361 233.3 %

Less: Realized gains (losses) on
investment portfolio

$ 621 $ 69 800.0 % $ 67 $ 547 (87.8 )%
Less: Net tax impact $ 3,227 $ 1,084 197.7 % $ 13,314 $ 3,697 260.1 %
Core income (loss)(1) $ 32,992 $ (8,503 ) 488.0 % $ 34,869 $ 12,562 177.6 %
Core income (loss) per diluted share(1) $ 0.77 $ (0.39 ) 297.4 % $ 0.93 $ 0.58 60.3 %
 
Book value per share $ 12.56 $ 11.15 12.6 %
(1)  

Core income and core income per diluted share, measures that are not based on GAAP, are reconciled above to net income and net income per diluted share, respectively, the most directly comparable GAAP measures. Additional information regarding non-GAAP financial measures presented in this press release can be found in the "Definitions of Non-GAAP Measures" section, below.

"Our team produced a very strong ending to an eventful year," said John Forney, President & CEO of UPC Insurance. "Earnings for the quarter were the largest in Company history, and all our businesses had excellent momentum as we entered 2018. We are working hard to build on that momentum during the rest of the year."

Return on Equity and Core Return on Equity

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

($ in thousands)   Three Months Ended   Year Ended
December 31, December 31,
2017   2016 2017   2016
Net income (loss) $ 27,001 $ (10,517 ) $ 10,145 $ 5,698
Return on equity based on GAAP net income (loss) (1) 23.9 % (16.8 )% 2.2 % 2.4 %
 
Core income (loss) $ 32,992 $ (8,503 ) $ 34,869 $ 12,562
Core return on equity (1) 29.2 % (13.6 )% 7.7 % 5.0 %
(1)   Return on equity for the three months ended December 31, 2017 is calculated on an annualized basis.

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

($ in thousands)   Three Months Ended   Year Ended
December 31, December 31,
2017   2016   Change 2017   2016   Change
Loss ratio, net(1) 43.4 % 81.5 % (38.1 ) pts 62.4 % 65.3 % (2.9 ) pts
Expense ratio, net(2) 49.2 % 41.2 % 8.0 pts 48.7 % 39.6 % 9.1 pts
Combined ratio (CR)(3) 92.6 % 122.7 % (30.1 ) pts 111.1 % 104.9 % 6.2 pts

Effect of current year catastrophe
losses on CR

0.8 % 26.4 % (25.6 ) pts 19.8 % 12.2 % 7.6 pts

Effect of prior year unfavorable
(favorable) development on CR

0.1 % 6.1 % (6.0 ) pts (0.4 )% 3.7 % (4.1 ) pts

Effect of ceding commission income on
CR

4.2 % 3.4 % 0.8 pts 6.3 % 1.5 % 4.8 pts
Underlying combined ratio(4)(5) 87.5 % 86.8 % 0.7 pts 85.4 % 87.5 % (2.1 ) pts
(1)   Loss ratio, net is calculated as losses and loss adjustment expenses (LAE) relative to net premiums earned.
(2) Expense ratio, net is calculated as the sum of all operating expenses less interest expense relative to net premiums earned.
(3) Combined ratio is the sum of the loss ratio, net and expense ratio, net.
(4)

Underlying combined ratio, a measure that is not based on GAAP, is reconciled above to the combined ratio, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this press release can be found in "Definitions of Non-GAAP Measures" section, below.

(5) Included in both the expense ratio and the combined ratio are $9.8 million and $38.1 million for the three and twelve months ended December 31, 2017, respectively, and $3.2 million and $11.1 million for the three and twelve months ended December 31, 2016, respectively, of merger professional fees and amortization expense predominately associated with the AmCo Holding Company (AmCo) and Interboro Insurance Company mergers. Excluding these additional expenses, the Company would have reported underlying combined ratios of 81.6% and 78.9% for the three and twelve months ended December 31, 2017, respectively, and 84.2% and 85.1% for the three and twelve months ended December 31, 2016, respectively.

Quarterly Financial Results

Net income for the fourth quarter of 2017 was $27.0 million, or $0.63 per diluted share, compared to net loss of $10.5 million, or a $0.49 loss per diluted share for the fourth quarter of 2016. The increase in net income was primarily due to the increase in gross premiums earned and improvement in the Company's underlying loss ratio for the fourth quarter of 2017 compared to the fourth quarter of 2016.

The Company's total gross written premium increased by $85.3 million, or 51.1%, to $252.4 million for the fourth quarter of 2017 from $167.1 million for the fourth quarter of 2016, primarily reflecting the Company's merger with AmCo on April 3, 2017, as well as organic growth in new and renewal business generated in all regions. The breakdown of the quarter-over-quarter changes in both direct written and assumed premiums by region and gross written premium by line of business are shown in the table below.

($ in thousands)  

Three Months Ended
December 31,

   
2017   2016 Change $ Change %
Direct Written and Assumed Premium by Region (1)
Florida $ 135,388 $ 68,697 $ 66,691 97.1 %
Gulf 45,835 40,582 5,253 12.9
Northeast 38,871 35,351 3,520 10.0
Southeast 22,042   20,231   1,811   9.0  
Total direct written premium by region 242,136 164,861 77,275 46.9 %
Assumed premium (2) 10,304   2,242   8,062   359.6  
Total gross written premium by region $ 252,440   $ 167,103   $ 85,337   51.1 %
 
Gross Written Premium by Line of Business
Personal property $ 181,123 $ 160,399 $ 20,724 12.9 %
Commercial property 71,317   6,704   64,613   963.8  
Total gross written premium by line of business $ 252,440   $ 167,103   $ 85,337   51.1 %
(1)   "Gulf" is comprised of Hawaii, Louisiana and Texas; "Northeast" is comprised of Connecticut, Massachusetts, New Jersey, New York and Rhode Island; and "Southeast" is comprised of Georgia, North Carolina and South Carolina.
(2) Assumed premium written for 2017 includes commercial property business assumed from an unaffiliated insurer and the Texas Windstorm Insurance Association (TWIA) and 2016 premium assumed includes homeowners' business from Citizens Property Insurance Corporation (Citizens) and TWIA.

Loss and LAE decreased by $26.6 million, or 26.9%, to $72.1 million for the fourth quarter of 2017 from $98.7 million for the fourth quarter of 2016. Loss and LAE expense as a percentage of net earned premiums decreased 38.1 points to 43.4% for the quarter, compared to 81.5% for the same period last year. Excluding catastrophe losses and reserve development, the Company's gross underlying loss and LAE ratio for the fourth quarter of 2017 would have been 25.7%, a decrease of 6.9 points from 32.6% during the fourth quarter of 2016.

Policy acquisition costs increased by $16.6 million, or 49.4%, to $50.1 million for the fourth quarter of 2017 from $33.6 million for the fourth quarter of 2016. The primary driver of the increase in costs was the result of the managing general agent fees related to AmCo commercial premiums. The remaining change was the result of policy acquisition costs varying directly with changes in gross premiums earned and were generally consistent with the Company's growth in premium production and higher average market commission rates outside of Florida.

Operating and underwriting expenses increased by $3.5 million, or 66.5%, to $8.7 million for the fourth quarter of 2017 from $5.2 million for the fourth quarter of 2016, primarily due to increased costs related to the Company's ongoing growth, incurred expenses related to software improvements and costs related to the increase in underwriting reports.

General and administrative expenses increased by $11.7 million, or 104.8%, to $22.9 million for the fourth quarter of 2017 from $11.2 million for the fourth quarter of 2016, primarily due to amortization costs related to the merger with AmCo.

Year to Date Financial Results

Net income for the year ended December 31, 2017 was $10.1 million, or $0.27 per diluted share, compared to net income of $5.7 million, or $0.26 per diluted share for the year ended December 31, 2016. The increase in net income was primarily due to an increase in gross premiums earned and improvement in the Company's underlying loss ratio.

The Company's total gross written premium increased by $332.7 million, or 47.0%, to $1.0 billion for the year ended December 31, 2017 from $708.2 million for the year ended December 31, 2016, primarily reflecting the Company's merger with AmCo on April 3, 2017, as well as organic growth in new and renewal business generated in the Company's Gulf and Northeast regions. The breakdown of the year-over-year changes in both direct written and assumed premiums by region and gross written premium by line of business are shown in the table below.

($ in thousands)   Year Ended
December 31,
   
2017   2016 Change $ Change %
Direct Written and Assumed Premium by Region (1)
Florida $ 540,796 $ 336,591 $ 204,205 60.7 %
Gulf 201,475 160,520 40,955 25.5
Northeast 154,502 123,964 30,538 24.6
Southeast 92,753   87,176   5,577   6.4  
Total direct written premium by region 989,526 708,251 281,275 39.7 %
Assumed premium (2) 51,322   (95 ) 51,417   54,123.2  
Total gross written premium by region $ 1,040,848   $ 708,156   $ 332,692   47.0 %
 
Gross Written Premium by Line of Business
Personal property $ 799,097 $ 685,402 $ 113,695 16.6 %
Commercial property 241,751   22,754   218,997   962.5  
Total gross written premium by line of business $ 1,040,848   $ 708,156   $ 332,692   47.0 %
(1)   "Gulf" is comprised of Hawaii, Louisiana and Texas; "Northeast" is comprised of Connecticut, Massachusetts, New Jersey, New York and Rhode Island; and "Southeast" is comprised of Georgia, North Carolina and South Carolina.
(2) Assumed premium written for 2017 includes commercial property business assumed from an unaffiliated insurer and TWIA and 2016 premium assumed includes homeowners' business from Citizens and TWIA.

Loss and LAE increased by $67.2 million, or 22.5%, to $365.5 million for the year ended December 31, 2017 from $298.4 million for the year ended December 31, 2016. Loss and LAE expense as a percentage of net earned premiums decreased 2.9 points to 62.4% for the year ended December 31, 2017, compared to 65.3% for the year ended December 31, 2016. Excluding catastrophe losses and reserve development, the Company's gross underlying loss and LAE ratio for the year would have been 25.5%, a decrease of 8.3 points from 33.8% during the year ended December 31, 2016.

During the third quarter of 2017, the Company's catastrophe losses included claims from Hurricane Harvey, which made landfall as a category 4 storm in Texas, and Hurricane Irma, which was also a category 4 storm making landfall in Florida. The Company's catastrophe excess of loss and quota share reinsurance limited retained losses to $83.0 million.

Policy acquisition costs increased by $57.8 million, or 49.1%, to $175.4 million for the year ended December 31, 2017 from $117.7 million for the year ended December 31, 2016. The primary driver of the increase in costs was the result of the managing general agent fees paid to AmRisc in relation to AmCo commercial premium. The remaining change was the result of policy acquisition costs varying directly with changes in gross premiums earned and were generally consistent with the Company's growth in premium production and higher average market commission rates outside of Florida.

Operating and underwriting expenses increased by $7.2 million, or 34.8%, to $27.7 million for the year ended December 31, 2017 from $20.5 million for the year ended December 31, 2016, primarily due to increased costs related to the Company's ongoing growth, incurred expenses related to software improvements and costs related to the increase in underwriting reports.

General and administrative expenses increased by $38.8 million, or 90.3%, to $81.8 million for the year ended December 31, 2017 from $43.0 million for the year ended December 31, 2016, primarily due to amortization costs related to the merger with AmCo.

Combined Ratio Analysis

The calculations of the Company's loss ratios and underlying loss ratios are shown below.

($ in thousands)   Three Months Ended   Year Ended
December 31, December 31,
2017   2016   Change 2017   2016   Change
Loss and LAE $ 72,137 $ 98,738 $ (26,601 ) $ 365,535 $ 298,353 $ 67,182
% of Gross earned premiums 26.3 % 54.2 % (27.9 ) pts 37.1 % 44.7 % (7.6 ) pts
% of Net earned premiums 43.4 % 81.5 % (38.1 ) pts 62.4 % 65.3 % (2.9 ) pts
Less:
Current year catastrophe losses $ 1,399 $ 31,957 $ (30,558 ) $ 116,424 $ 55,842 $ 60,582
Prior year reserve unfavorable (favorable) development 206   7,403   (7,197 ) (2,613 ) 16,988   (19,601 )
Underlying Loss and LAE (1) $ 70,532 $ 59,378 $ 11,154 $ 251,724 $ 225,523 $ 26,201
% of Gross earned premiums 25.7 % 32.6 % (6.9 ) pts 25.5 % 33.8 % (8.3 ) pts
% of Net earned premiums 42.4 % 49.0 % (6.6 ) pts 43.0 % 49.4 % (6.4 ) pts
(1)  

Underlying Loss and LAE is a non-GAAP financial measure and is reconciled above to Net Loss and LAE, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this press release can be found is in the "Definitions of Non-GAAP Measures" section, below.

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

($ in thousands)   Three Months Ended   Year Ended
December 31, December 31,
2017   2016   Change 2017   2016   Change
Policy acquisition costs $ 50,142 $ 33,572 $ 16,570 $ 175,444 $ 117,658 $ 57,786
Operating and underwriting 8,655 5,198 3,457 27,675 20,524 7,151
General and administrative 22,937   11,197   11,740   81,762   42,956   38,806  
Total Operating Expenses $ 81,734 $ 49,967 $ 31,767 $ 284,881 $ 181,138 $ 103,743
% of Gross earned premiums 29.8 % 27.4 % 2.4 pts 28.9 % 27.2 % 1.7 pts
% of Net earned premiums 49.2 % 41.2 % 8.0 pts 48.7 % 39.6 % 9.1 pts
Less:
Ceding commission income $ 6,990 $ 4,086 $ 2,904 $ 37,175 $ 6,882 $ 30,293
Merger expenses and amortization 9,839   3,167   6,672   38,104   11,108   26,996  
Underlying Expense (1) $ 64,905 $ 42,714 $ 22,191 $ 209,602 $ 163,148 $ 46,454
% of Gross earned premiums 23.7 % 23.4 % 0.3 pts 21.3 % 24.5 % (3.2 ) pts
% of Net earned premiums 39.1 % 35.3 % 3.8 pts 35.8 % 35.7 % 0.1 pts
(1)  

Underlying Expense is a non-GAAP financial measure and is reconciled above to total operating expenses, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this press release can be found in the "Definitions of Non-GAAP Measures" section, below.

UPC Insurance experienced favorable reserve development in the current year and its historical impact on the Company's net loss and net underlying loss ratios is outlined in the following table.

  Historical Reserve Development
($ in thousands, except ratios) 2013   2014   2015   2016   2017
Prior year reserve development (unfavorable) $ (4,078 ) $ 4,037 $ 2,368 $ (16,988 ) $ 2,613
Development as a % of earnings before interest and taxes 11.7 % 6.2 % 5.7 % 219.9 % 62.9 %
Consolidated net loss ratio (LR) 50.0 % 44.6 % 54.5 % 65.3 % 62.4 %
Prior year reserve unfavorable (favorable) development on LR 2.1 % (1.5 )% (0.7 )% 3.7 % (0.4 )%
Current year catastrophe losses on LR 1.8 % 0.3 % 8.5 % 12.2 % 19.8 %
Underlying net loss ratio(1) 46.1 % 45.8 % 46.7 % 49.4 % 43.0 %
(1)  

Underlying Net Loss Ratio is a non-GAAP measure and is reconciled above to the Consolidated Net Loss Ratio, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this press release can be found in the "Definitions of Non-GAAP Measures" section, below.

Reinsurance Costs as a % of Earned Premium

Excluding the Company's flood business, for which it cedes 100% of the risk of loss, reinsurance costs in the fourth quarter of 2017 were 37.6% of gross premiums earned, compared to 30.8% of gross premiums earned for the fourth quarter of 2016. The increase in this ratio was driven primarily by the Company's quota share reinsurance program, which was in effect for two months in the fourth quarter of 2017 but for only one month during the fourth quarter of 2016. If not for the effects of the quota share reinsurance program, the Company's reinsurance costs as a percent of earned premium would have decreased by 4.1 points during the quarter.

Investment Portfolio Highlights

The Company's cash and investment holdings totaled $1.1 billion at December 31, 2017 compared to $679.3 million at December 31, 2016. UPC Insurance's cash and investment holdings consist of investments in U.S. Government and agency securities, corporate debt and 100% investment grade money market instruments. Fixed maturities represented approximately 76.9% of total investments at December 31, 2017 with a modified duration of 3.9 years compared to 85.3% at December 31, 2016 with a modified duration of 3.7 years.

Book Value Analysis

Book value per share increased 12.6% from $11.15 at December 31, 2016, to $12.56 at December 31, 2017, and underlying book value per share increased 11.2% from $11.11 at December 31, 2016 to $12.35 at December 31, 2017. An increase in the Company's retained earnings, along with an increase in paid in capital as a result of the AmCo merger, drove the increase in our book value per share and underlying book value per share. The increase in accumulated other comprehensive income, as shown in the table below, also impacted our underlying book value per share.

($ in thousands, except for per share data)   December 31,   December 31,
2017 2016
Book Value per Share
Numerator:
Common stockholders' equity $ 537,125   $ 241,327
Denominator:
Total Shares Outstanding 42,753,054   21,646,614
Book Value Per Common Share $ 12.56   $ 11.15
 

Book Value per Share, Excluding the Impact of Accumulated Other
Comprehensive Income (AOCI)

Numerator:
Common stockholders' equity $ 537,125 $ 241,327
Accumulated other comprehensive income 9,221   822
Stockholders' Equity, excluding AOCI $ 527,904   $ 240,505
Denominator:
Total Shares Outstanding 42,753,054   21,646,614
Underlying Book Value Per Common Share(1) $ 12.35   $ 11.11
(1)  

Underlying book value per common share is a non-GAAP financial measure and is reconciled above to book value per common share, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this press release can be found in the "Definitions of Non-GAAP Measures" section, below.

Definitions of Non-GAAP Measures

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

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

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

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

Net Income excluding the effects of merger expenses, non-cash amortization of intangible assets and realized gains (losses), net of tax (core income) is a non-GAAP measure which is computed by adding merger expenses, net of tax, and amortization, net of tax, to net income and subtracting realized gains (losses) on our investment portfolio net of tax, from net income. Merger expenses are directly related to past mergers and are not reflective of current period operating performance. Similarly, amortization expense is related to the amortization of intangible assets acquired through merger and therefore the expense does not arise through normal operations. Investment portfolio gains (losses) vary independent of the Company's operations. The Company believes it is useful for investors to evaluate these components separately and in the aggregate when reviewing the Company's performance. The most direct comparable GAAP measure is net income. The core income measure should not be considered a substitute for net income and does not reflect the overall profitability of the Company's business.

Conference Call Details

Date and Time:

  February 21, 2018 - 4:30 P.M. ET

Participant Dial-In:

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

Webcast:

To listen to the live webcast, please go to www.upcinsurance.com (Investor Relations) and click on the conference call link, or go to: http://upcinsurance.equisolvewebcast.com/q4-2017

About UPC Insurance

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

Forward-Looking Statements

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

Consolidated Statements of Comprehensive Income

In thousands, except share and per share amounts

   
Three Months Ended Year Ended
December 31, December 31,
2017   2016 2017   2016
REVENUE:

 

Gross premiums written $ 252,440 $ 167,103 $ 1,040,848 $ 708,156
Decrease (increase) in gross unearned premiums 21,933   15,119   (54,825 ) (41,327 )
Gross premiums earned 274,373 182,222 986,023 666,829
Ceded premiums earned (108,178 ) (61,061 ) (400,533 ) (209,898 )
Net premiums earned 166,195 121,161 585,490 456,931
Investment income 5,323 2,893 17,812 10,679
Net realized gains 621 69 67 547
Other revenue 10,447   7,310   51,051   18,960  

Total revenues

$ 182,586 $ 131,433 $ 654,420 $ 487,117
EXPENSES:
Losses and loss adjustment expenses 72,137 98,738 365,535 298,353
Policy acquisition costs 50,142 33,572 175,444 117,658
Operating expenses 8,655 5,198 27,675 20,524
General and administrative expenses 22,937 11,197 81,762 42,956
Interest expense 965   326   3,247   723  

Total expenses

154,836 149,031 653,663 480,214
Income (loss) before other income 27,750 (17,598 ) 757 6,903
Other income 59   20   153   100  
Income (loss) before income taxes 27,809 (17,578 ) 910 7,003
Provision (benefit) for income taxes 808   (7,061 ) (9,235 ) 1,305  
Net income (loss) $ 27,001   $ (10,517 ) $ 10,145   $ 5,698  
OTHER COMPREHENSIVE INCOME:
Change in net unrealized gains (losses) on investments 138 (10,934 ) 10,647 (629 )

Reclassification adjustment for net realized investment
gains

(621 ) (69 ) (67 ) (547 )

Income tax benefit (expense) related to items of other
comprehensive income

2,026   4,154   (2,181 ) 378  
Total comprehensive income (loss) $ 28,544   $ (17,366 ) $ 18,544   $ 4,900  
 
Weighted average shares outstanding
Basic 42,526,045   21,449,910   37,152,768   21,417,486  
Diluted 42,753,303   21,645,141   37,375,340   21,614,443  
 
Earnings per share
Basic $ 0.63   $ (0.49 ) $ 0.27   $ 0.27  
Diluted $ 0.63   $ (0.49 ) $ 0.27   $ 0.26  
 
Dividends declared per share $ 0.06   $ 0.06   $ 0.24   $ 0.23  

Consolidated Balance Sheets

In thousands, except share amounts

   

December 31,
2017

December 31,
2016

ASSETS
Investments available for sale, at fair value:
Fixed maturities $ 762,855 $ 494,516
Equity securities 63,295 28,398
Other investments 28,381 5,733
Short-term investments 137,115   50,785  
Total investments $ 991,646   $ 579,432  
Cash 139,160 99,903
Accrued investment income 5,577 3,735
Property and equipment, net 17,291 17,860
Premiums receivable, net 75,275 38,883
Reinsurance recoverable on paid and unpaid losses 395,774 24,028
Prepaid reinsurance premiums 201,904 132,564
Goodwill 73,045 14,254
Deferred policy acquisition costs 103,882 65,473
Intangible assets 45,271 12,371
Other assets 11,096   11,183  
Total Assets $ 2,059,921   $ 999,686  
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses $ 482,232 $ 140,855
Unearned premiums 555,873 372,223
Reinsurance payable 149,117 99,891
Payments outstanding 41,786 21,933
Accounts payable and accrued expenses 46,594 26,124
Other liabilities 85,830 43,158
Notes payable 161,364   54,175  
Total Liabilities $ 1,522,796   $ 758,359  
Commitments and contingencies
Stockholders' Equity:

Preferred stock, $0.0001 par value; 1,000,000 authorized; none issued or
outstanding

Common stock, $0.0001 par value; 50,000,000 shares authorized; 42,965,137 and
21,858,697 issued; 42,753,054 and 21,646,614 outstanding, respectively

4 2
Additional paid-in capital 387,145 99,353
Treasury shares, at cost; 212,083 shares (431 ) (431 )
Accumulated other comprehensive income 9,221 822
Retained earnings 141,186   141,581  
Total Stockholders' Equity $ 537,125   $ 241,327  
Total Liabilities and Stockholders' Equity $ 2,059,921   $ 999,686  

Contacts

United Insurance Holdings Corp.
Jessica Strathman
SEC Reporting Manager
727-895-7737
jstrathman@upcinsurance.com
OR
INVESTOR RELATIONS:
The Equity Group
Adam Prior
Senior Vice-President
212-836-9606
aprior@equityny.com

Contacts

United Insurance Holdings Corp.
Jessica Strathman
SEC Reporting Manager
727-895-7737
jstrathman@upcinsurance.com
OR
INVESTOR RELATIONS:
The Equity Group
Adam Prior
Senior Vice-President
212-836-9606
aprior@equityny.com