UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________

FORM ~~10-Q~~10-Q/A

_______________________

(Amendment No. 1)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2022~~

March 31, 2023

☐ 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 001-35761

____________________

~~United~~American Coastal Insurance ~~Holdings Corp.~~Corporation

(Exact Name of Registrant as Specified in its Charter)

Delaware

75-3241967

(State or Other Jurisdiction of
Incorporation or Organization)

(IRS Employer Identification Number)

800 2nd Avenue S.

33701

St. Petersburg,

Florida

(Address of Principle Executive Offices)

(Zip Code)

727-895-7737

(Registrant's telephone number, including area code)

United Insurance Holdings Corp.

(Former name, former address and former fiscal year, if changed since last report)

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, $0.0001 par value per share	~~UIHC~~ACIC	Nasdaq Stock Market LLC

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

☐

Non-accelerated filer

☑

Smaller reporting company

☑

If an emerging growth company, indicate by check mark if the registrant has elected 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 R

As of ~~August 4, 2022, 43,313,166~~May 15, 2023, 43,287,573 shares of common stock, par value $0.0001 per share, were outstanding.

EXPLANATORY NOTE

American Coastal Insurance Corporation (formerly known as United Insurance Holdings Corp.) (the “Company”) is filing this amendment to its Quarterly Report on Form 10-Q (the “Amended Report”) for the three months ended March 31, 2023 originally filed with the Securities and Exchange Commission (“SEC”) on May 19, 2023 (the “Original Report”). The purpose of this Amended Report is to restate the Company’s unaudited condensed consolidated financial statements for the three months ended March 31, 2023 (the “First Quarter 2023 10-Q”). Except as described below, no other information included in the Original Report is being amended or updated by this Amendment and this Amendment does not purport to reflect any information or events subsequent to the Original Form 10-Q.

Restatement Background

The Company has identified certain errors related to the reporting of the discontinued operations for the previously issued unaudited condensed consolidated financial statements for the three months ended March 31, 2023, as included in the Original Report, which errors had the effect of understating the net income for the three months ended March 31, 2023 by approximately $6.4 million. These errors were discovered in the course of preparing the Company’s interim financial statements for the fiscal quarter ended June 30, 2023, and included errors in the Company’s accounting for income tax expense primarily relating to the deconsolidation of the Company’s former subsidiary, United Property & Casualty Insurance Company.

As a result, on August 17, 2023, the Company’s management determined that the Company’s previously issued unaudited condensed financial statements as of and for the quarterly periods ended March 31, 2023, should no longer be relied upon solely as a result of the above-described errors.

Restatement

This Amended Report includes restated unaudited interim financial information for the quarterly period ended March 31, 2023.

This Amended Report also amends and restates the following items included in the Original Report as appropriate to reflect the restatement and revision of the relevant periods: Part I — Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation; Part I — Item 4. Controls and Procedures; Part II — Item 1A. Risk Factors and Part II — Item 6. Exhibits.

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is also including with this Amended Report currently dated certifications of the Company’s Chief Executive Officer and Chief Financial Officer (attached as Exhibits 31.1, 31.2, 32.1, and 32.2).

Except as discussed above and as further described in the Notes to the unaudited condensed consolidated financial statements, the Company has not modified or updated the disclosures presented in this Amended Report. Accordingly, this Amended Report does not reflect events occurring after the Original Report or modify or update those disclosures affected by subsequent events. Information not affected by the restatement is unchanged and reflects disclosures made at the time of the filing of the Original Report.

Control Considerations

In connection with the restatement, management has reassessed the effectiveness of the Company’s internal control over financial reporting. Based on this assessment, the Company identified a material weakness in its internal control over financial reporting due to a design deficiency in controls related to the review of significant unusual transactions, including the impact to income tax expense from those transactions, resulting in the conclusion by our principal executive officer and principal financial officer, that the internal control over financial reporting and disclosure controls and procedures were not effective as of March 31, 2023. Management has begun to take steps towards remediating the material weakness in the Company’s internal control over financial reporting. For additional information related to the material weakness in internal control over financial reporting and the related remedial measures, see “Part II – Item 4. Controls and Procedures.”

UNITED INSURANCE HOLDINGS CORP.


PART I. FINANCIAL INFORMATION
	Item 1. Restated Financial Statements	4
	Restated Condensed Consolidated Balance Sheets (Unaudited)	4
	Restated Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) (Unaudited)	5
	Restated Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited)	6
	Restated Condensed Consolidated Statements of Cash Flows (Unaudited)	7
	~~Condensed Consolidated Statements of Cash Flows (Unaudited)~~	8
	Notes to Restated Unaudited Condensed Consolidated Financial Statements	98
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	3740
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	6459
	Item 4. Controls and Procedures	6459
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings	6460
	Item 1A. Risk Factors	6560
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	6561
	Item 3. Defaults Upon Senior Securities	6561
	Item 4. Mine Safety Disclosures	6561
	Item 5. Other Information	6561
	Item 6. Exhibits	6561
Signatures		6662

Throughout this Quarterly Report on Form 10-Q (Form 10-Q), we present amounts in all tables in thousands, except for share amounts, per share amounts, policy counts or where more specific language or context indicates a different presentation. In the narrative sections of this Form 10-Q, we show full values rounded to the nearest thousand.

UNITED INSURANCE HOLDINGS CORP.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about anticipated growth in revenues, gross written premium, earnings per share, estimated unpaid losses on insurance policies, investment returns, and diversification and expectations about our liquidity, our ability to meet our investment objectives, ~~and~~ our ability to manage and mitigate market risk with respect to our ~~investments.~~investments and our ability to continue as a going concern. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “endeavor,” “project,” “believe,” “plan,” “anticipate,” “intend,” “could,” “would,” “estimate,” or “continue” or the negative variations thereof or comparable terminology are intended to identify forward-looking statements. These statements are based on current expectations, estimates and projections about the industry and market in which we operate, and management's beliefs and assumptions. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. The risks and uncertainties include, without limitation:

•our exposure to catastrophic events and severe weather conditions;

•the regulatory, economic and weather conditions present in Florida ~~Texas,~~ and ~~Louisiana,~~New York the states in which we are most concentrated;

•our ability to cultivate and maintain agent relationships, particularly our relationship with AmRisc, LLC;

•~~our reliance on certain agencies that account for a substantial portion of our policies-in-force;~~

•the possibility that actual claims incurred may exceed our loss reserves for claims;

•assessments charged by various governmental agencies;

•our ability to implement and maintain adequate internal controls over financial reporting;

•our ability to maintain information technology and data security systems, and to outsource relationships;

•our reliance on key vendor relationships, and the ability of our vendors to protect the personally identifiable information of our customers, claimants or employees;

•our ability to attract and retain the services of senior management;

•risks and uncertainties relating to our acquisitions, mergers, dispositions and other strategic transactions;

•risks associated with ~~joint ventures and~~ investments in which we share ownership or management with third parties;

•our ability to generate sufficient cash to service all of our indebtedness and comply with covenants and other requirements related to our indebtedness;

•our ability to maintain our market share;

•changes in the regulatory environment present in the states in which we operate;

•the impact of new federal or state regulations that affect the insurance industry;

•the cost, viability and availability of reinsurance;

•our ability to collect from our reinsurers or others on our reinsurance claims;

•dependence on investment income and the composition of our investment portfolio and related market risks;

•the possibility of the pricing and terms for our products to decline due to the historically cyclical nature of the property and casualty insurance and reinsurance industry;

•the outcome of litigation pending against us, including the terms of any settlements;

•downgrades in our financial strength or stability ratings;

•the impact of future transactions of substantial amounts of our common stock by us or our significant stockholders on our stock price;

•our ability to meet the standards for continued listing on Nasdaq;

•substantial doubt about our ability to continue as a going concern, including the impact on future financing and reinsurance coverage;

•our ability to pay dividends in the future, which may be constrained by our holding company structure;

•the ability of our subsidiaries to pay dividends in the future, which may affect our liquidity and our ability to meet our obligations;

•the ability of R. Daniel Peed and his affiliates to exert significant control over us due to substantial ownership of our common stock, subject to certain restrictive covenants that may restrict our ability to pursue certain opportunities;

•the impact of transactions by R. Daniel Peed and his affiliates on the price of our common stock;

•provisions in our charter documents that may make it harder for others to obtain control of us;

•~~the impact of the novel strain of coronavirus (COVID-19) and related business disruption and economic uncertainty on our business, results of operations and financial condition;~~ and

•other risks and uncertainties described in the section entitled "Risk Factors" in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and in Part II, Item 1A of this Form 10-Q.

We caution you not to rely on these forward-looking statements, which are valid only as of the date they were made. Except as may be required by applicable law, we undertake no obligation to update or revise any forward-looking statements to reflect new information, the occurrence of unanticipated events or otherwise.

UNITED INSURANCE HOLDINGS CORP.

PART I. FINANCIAL INFORMATION

Item 1. Restated Financial Statements

Restated Condensed Consolidated Balance Sheets (Unaudited)


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Investments, at fair value:	Investments, at fair value:					Investments, at fair value:
Fixed maturities, available-for-sale (amortized cost of $578,059 and $672,139, respectively)		$	527,091	$	663,602
Fixed maturities, available-for-sale (amortized cost of $239,473 and $237,735, respectively)						Fixed maturities, available-for-sale (amortized cost of $239,473 and $237,735, respectively)	$	210,733	$	204,682
Equity securities	Equity securities	37,552		37,958		Equity securities	16,181		15,657
Other investments (amortized cost of $16,506 and $17,131, respectively)		16,590		18,006
Other investments (amortized cost of $2,917 and $3,072, respectively)						Other investments (amortized cost of $2,917 and $3,072, respectively)	3,550		3,675

Total investments	Total investments	$	581,233	$	719,566	Total investments	$	230,464	$	224,014
Cash and cash equivalents	Cash and cash equivalents	283,785		212,024		Cash and cash equivalents	92,586		70,903
Restricted cash	Restricted cash	33,361		33,254		Restricted cash	49,671		45,988
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	317,146	$	245,278	Total cash, cash equivalents and restricted cash	$	142,257	$	116,891
Accrued investment income	Accrued investment income	3,096		3,296		Accrued investment income	1,818		1,605
Property and equipment, net	Property and equipment, net	27,890		31,561		Property and equipment, net	4,723		5,293
Premiums receivable, net (credit allowance of $26 and $32, respectively)		101,546		79,166
Reinsurance recoverable on paid and unpaid losses, net (credit allowance of $340 and $563, respectively)		757,511		997,120
Premiums receivable, net (credit allowance of $27 and $32, respectively)						Premiums receivable, net (credit allowance of $27 and $32, respectively)	48,120		39,301
Reinsurance recoverable on paid and unpaid losses, net (credit allowance of $150 and $333, respectively)						Reinsurance recoverable on paid and unpaid losses, net (credit allowance of $150 and $333, respectively)	792,350		796,546
Ceded unearned premiums	Ceded unearned premiums	502,664		430,631		Ceded unearned premiums	65,702		90,496
Goodwill	Goodwill	73,045		73,045		Goodwill	59,476		59,476
Deferred policy acquisition costs, net	Deferred policy acquisition costs, net	77,191		38,520		Deferred policy acquisition costs, net	59,897		52,369
Intangible assets, net	Intangible assets, net	16,751		18,375		Intangible assets, net	11,758		12,770
Other assets	Other assets	35,981		62,015		Other assets	17,476		3,920
Assets held for disposal						Assets held for disposal	13,395		1,434,815
Total Assets	Total Assets	$	2,494,054	$	2,698,573	Total Assets	$	1,447,436	$	2,837,496
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:	Liabilities:					Liabilities:
Unpaid losses and loss adjustment expenses	Unpaid losses and loss adjustment expenses	$	849,994	$	1,084,450	Unpaid losses and loss adjustment expenses	$	748,365	$	842,958
Unearned premiums	Unearned premiums	659,597		644,940		Unearned premiums	301,625		258,978
Reinsurance payable on premiums	Reinsurance payable on premiums	437,684		248,625		Reinsurance payable on premiums	33,908		30,503
Payments outstanding	Payments outstanding	108,963		114,524		Payments outstanding	2,326		2,000
Accounts payable and accrued expenses	Accounts payable and accrued expenses	68,565		76,258		Accounts payable and accrued expenses	89,582		74,386
Operating lease liability	Operating lease liability	1,600		1,934		Operating lease liability	1,412		1,689
Other liabilities	Other liabilities	44,711		39,324		Other liabilities	30,073		5,849
Notes payable, net	Notes payable, net	155,968		156,561		Notes payable, net	148,438		148,355
Liabilities held for disposal						Liabilities held for disposal	1,817		1,654,817
Total Liabilities	Total Liabilities	$	2,327,082	$	2,366,616	Total Liabilities	$	1,357,546	$	3,019,535
Commitments and contingencies (Note 11)		0		0
Commitments and contingencies (Note 13)						Commitments and contingencies (Note 13)
Stockholders' Equity:	Stockholders' Equity:					Stockholders' Equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding	Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding	$	—	$	—	Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding	$	—	$	—
Common stock, $0.0001 par value; 100,000,000 shares authorized; 43,525,249 and 43,360,429 issued, respectively; 43,313,166 and 43,370,442 outstanding, respectively		4		4
Common stock, $0.0001 par value; 100,000,000 shares authorized; 43,486,442 and 43,492,256 issued, respectively; 43,274,359 and 43,280,173 outstanding, respectively						Common stock, $0.0001 par value; 100,000,000 shares authorized; 43,486,442 and 43,492,256 issued, respectively; 43,274,359 and 43,280,173 outstanding, respectively	4		4
Additional paid-in capital	Additional paid-in capital	394,902		394,268		Additional paid-in capital	395,966		395,631
Treasury shares, at cost: 212,083 shares	Treasury shares, at cost: 212,083 shares	(431)		(431)		Treasury shares, at cost: 212,083 shares	(431)		(431)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(48,861)		(6,531)		Accumulated other comprehensive loss	(25,629)		(30,947)
Retained earnings (deficit)	Retained earnings (deficit)	(178,642)		(74,904)		Retained earnings (deficit)	(280,020)		(546,296)
Total stockholders' equity attributable to United Insurance Holdings Corp. (UIHC) stockholders		$	166,972	$	312,406
Noncontrolling interests (NCI)		—		19,551
Total Stockholders' Equity		$	166,972	$	331,957

Total Stockholders' Equity (Deficit)						Total Stockholders' Equity (Deficit)	$	89,890	$	(182,039)
Total Liabilities and Stockholders' Equity	Total Liabilities and Stockholders' Equity	$	2,494,054	$	2,698,573	Total Liabilities and Stockholders' Equity	$	1,447,436	$	2,837,496

See accompanying Notes to Restated Unaudited Condensed Consolidated Financial Statements.

UNITED INSURANCE HOLDINGS CORP.

Restated Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) (Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
		2022		2021		2022		2021				2023		2022
REVENUE:	REVENUE:									REVENUE:
Gross premiums written	Gross premiums written	$	360,146	$	426,424	$	639,621	$	738,062	Gross premiums written		$	187,123	$	142,414
Change in gross unearned premiums	Change in gross unearned premiums	(54,388)		(69,991)		(14,657)		(24,966)		Change in gross unearned premiums		(42,647)		(19,681)
Gross premiums earned	Gross premiums earned	305,758		356,433		624,964		713,096		Gross premiums earned		144,476		122,733
Ceded premiums earned	Ceded premiums earned	(194,353)		(210,973)		(412,702)		(421,687)		Ceded premiums earned		(57,152)		(64,987)
Net premiums earned	Net premiums earned	111,405		145,460		212,262		291,409		Net premiums earned		87,324		57,746
Net investment income	Net investment income	3,140		3,683		5,618		7,266		Net investment income		2,589		1,404
Net realized investment gains (losses)	Net realized investment gains (losses)	(78)		(124)		(1,847)		379		Net realized investment gains (losses)		(83)		37
Net unrealized gains (losses) on equity securities	Net unrealized gains (losses) on equity securities	(5,084)		2,438		(7,352)		5,002		Net unrealized gains (losses) on equity securities		474		(770)

Other revenue	Other revenue	6,410		3,997		9,478		13,187		Other revenue		16		15
Total revenue	Total revenue	115,793		155,454		218,159		317,243		Total revenue		90,320		58,432
EXPENSES:	EXPENSES:									EXPENSES:
Losses and loss adjustment expenses	Losses and loss adjustment expenses	90,074		118,064		181,442		233,845		Losses and loss adjustment expenses		16,412		26,315
Policy acquisition costs	Policy acquisition costs	28,988		41,327		55,004		82,148		Policy acquisition costs		26,972		20,308
Operating expenses	Operating expenses	13,019		13,482		25,267		26,704		Operating expenses		2,168		3,707
General and administrative expenses	General and administrative expenses	14,494		13,112		30,499		28,994		General and administrative expenses		8,793		8,064
Interest expense	Interest expense	2,394		2,257		4,773		4,632		Interest expense		2,719		2,359
Total expenses	Total expenses	148,969		188,242		296,985		376,323		Total expenses		57,064		60,753
Loss before other income		(33,176)		(32,788)		(78,826)		(59,080)
Income before other income										Income before other income		33,256		(2,321)
Other income	Other income	271		15		1,614		25		Other income		588		1,333
Loss before income taxes		(32,905)		(32,773)		(77,212)		(59,055)
Provision (benefit) for income taxes		36,150		(9,352)		25,100		(17,174)
Net Loss		$	(69,055)	$	(23,421)	$	(102,312)	$	(41,881)
Less: Net income (loss) attributable to NCI		(26)		89		(111)		(600)
Net loss attributable to UIHC		$	(69,029)	$	(23,510)	$	(102,201)	$	(41,281)
Income before income taxes										Income before income taxes		33,844		(988)
Provision for income taxes										Provision for income taxes		3,477		(715)
Income from continuing operations, net of tax										Income from continuing operations, net of tax		$	30,367	$	(273)
Income (loss) from discontinued operations, net of tax										Income (loss) from discontinued operations, net of tax		236,913		(32,984)
Net income (loss)										Net income (loss)		$	267,280	$	(33,257)
Less: Net loss attributable to NCI										Less: Net loss attributable to NCI		—		(85)
Net income (loss) attributable to UIHC										Net income (loss) attributable to UIHC		$	267,280	$	(33,172)
OTHER COMPREHENSIVE INCOME (LOSS):	OTHER COMPREHENSIVE INCOME (LOSS):									OTHER COMPREHENSIVE INCOME (LOSS):
Change in net unrealized gains (losses) on investments	Change in net unrealized gains (losses) on investments	(16,590)		8,242		(44,279)		(13,497)		Change in net unrealized gains (losses) on investments		4,231		(27,689)
Reclassification adjustment for net realized investment losses (gains)		78		124		1,847		(379)
Reclassification adjustment for net realized investment losses										Reclassification adjustment for net realized investment losses		83		1,769

Income tax benefit (expense) related to items of other comprehensive income (loss)		(6,187)		(2,012)		49		3,364
Total comprehensive loss		$	(91,754)	$	(17,067)	$	(144,695)	$	(52,393)
Less: Comprehensive income (loss) attributable to NCI		479		160		(164)		(757)
Comprehensive loss attributable to UIHC		$	(92,233)	$	(17,227)	$	(144,531)	$	(51,636)
Income tax benefit related to items of other comprehensive income (loss)										Income tax benefit related to items of other comprehensive income (loss)		—		6,236
Total comprehensive income (loss)										Total comprehensive income (loss)		$	271,594	$	(52,941)
Less: Comprehensive loss attributable to NCI										Less: Comprehensive loss attributable to NCI		—		(643)
Comprehensive income (loss) attributable to UIHC										Comprehensive income (loss) attributable to UIHC		$	271,594	$	(52,298)

Weighted average shares outstanding	Weighted average shares outstanding									Weighted average shares outstanding
Basic	Basic	43,049,227		42,950,666		43,015,114		42,924,662		Basic		43,124,825		42,980,691
Diluted	Diluted	43,049,227		42,950,666		43,015,114		42,924,662		Diluted		43,574,840		42,980,691

Earnings available to UIHC common stockholders per share	Earnings available to UIHC common stockholders per share									Earnings available to UIHC common stockholders per share
Basic	Basic	$	(1.60)	$	(0.55)	$	(2.38)	$	(0.96)	Basic
Continuing operations										Continuing operations		$	0.70	$	—
Discontinued operations										Discontinued operations		5.49		(0.77)
Total										Total		$	6.19	$	(0.77)
Diluted	Diluted	$	(1.60)	$	(0.55)	$	(2.38)	$	(0.96)	Diluted
Continuing operations										Continuing operations		$	0.70	$	—
Discontinued operations										Discontinued operations		5.44		(0.77)
Total										Total		$	6.14	$	(0.77)

See accompanying Notes to Restated Unaudited Condensed Consolidated Financial Statements.

UNITED INSURANCE HOLDINGS CORP.

Restated Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended

(Unaudited)

Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings (Deficit) Stockholders' Equity Attributable to UIHC NCI Total Stockholders’ Equity
Number of Shares Dollars
March 31, 2021 43,147,180 $ 4 $ 393,382 $ (431) $ (6,945) $ (27,001) $ 359,009 $ 20,929 $ 379,938
Net income (loss) — — — — — (23,510) (23,510) 89 (23,421)
Other comprehensive income, net — — — — 6,283 — 6,283 71 6,354
Stock Compensation 80,777 — 142 — — — 142 — 142
Cash dividends on common stock ($0.06 per common share) — — — — — (2,591) (2,591) — (2,591)
June 30, 2021 43,227,957 $ 4 $ 393,524 $ (431) $ (662) $ (53,102) $ 339,333 $ 21,089 $ 360,422


	Common Stock			Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Deficit		Stockholders' Equity Attributable to UIHC		NCI		Total Stockholders’ Equity
	Number of Shares	Dollars

December 31, 2021	43,370,442	$	4	$	394,268	$	(431)	$	(6,531)	$	(74,904)	$	312,406	$	19,551	$	331,957
Net loss	—	—		—		—		—		(33,172)		(33,172)		(85)		(33,257)
Other comprehensive loss, net	—	—		—		—		(19,126)		—		(19,126)		(558)		(19,684)
Stock Compensation	(112,847)	—		452		—		—		—		452		—		452

Cash dividends on common stock ($0.06 per common share)	—	—		—		—		—		(2,589)		(2,589)		—		(2,589)


March 31, 2022	43,257,595	$	4	$	394,720	$	(431)	$	(25,657)	$	(110,665)	$	257,971	$	18,908	$	276,879

Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Loss Retained Earnings (Deficit) Stockholders' Equity Attributable to UIHC NCI Total Stockholders’ Equity
Number of Shares Dollars
March 31, 2022 43,257,595 $ 4 $ 394,720 $ (431) $ (25,657) $ (110,665) $ 257,971 $ 18,908 $ 276,879
Net loss — — — — — (69,029) (69,029) (26) (69,055)
Other comprehensive income (loss), net — — — — (23,204) — (23,204) 505 (22,699)
Return of Capital to NCI — — — — — 1,052 1,052 (19,387) (18,335)
Stock Compensation 55,571 — 182 — — — 182 — 182
June 30, 2022 43,313,166 $ 4 $ 394,902 $ (431) $ (48,861) $ (178,642) $ 166,972 $ — $ 166,972


	Common Stock			Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings (Deficit)		Stockholders' Equity (Deficit) Attributable to UIHC		NCI		Total Stockholders’ Equity (Deficit)
	Number of Shares	Dollars

December 31, 2022	43,280,173	$	4	$	395,631	$	(431)	$	(30,947)	$	(546,296)	$	(182,039)	$	—	$	(182,039)
Net Income	—	—		—		—		—		267,280		267,280		—		267,280
Other comprehensive income, net	—	—		—		—		4,314		—		4,314		—		4,314
Impact of Deconsolidation of Discontinued Operations	—	—		—		—		1,004		(1,004)		—		—		—
Stock Compensation	(5,814)	—		335		—		—		—		335		—		335





March 31, 2023	43,274,359	$	4	$	395,966	$	(431)	$	(25,629)	$	(280,020)	$	89,890	$	—	$	89,890

See accompanying Notes to Restated Unaudited Condensed Consolidated Financial Statements.

UNITED INSURANCE HOLDINGS CORP.

Restated Condensed Consolidated Statements of ~~Stockholders’ Equity for the Six Months Ended~~

Cash Flows (Unaudited)

Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings (Deficit) Stockholders' Equity Attributable to UIHC NCI Total Stockholders’ Equity
Number of Shares Dollars
December 31, 2020 43,075,877 $ 4 $ 393,122 $ (431) $ 9,693 $ (6,635) $ 395,753 $ 21,846 $ 417,599
Net loss — — — — — (41,281) (41,281) (600) (41,881)
Other comprehensive loss, net — — — — (10,355) — (10,355) (157) (10,512)
Stock Compensation 152,080 — 402 — — — 402 — 402
Cash dividends on common stock ($0.12 per common share) — — — — — (5,186) (5,186) — (5,186)
June 30, 2021 43,227,957 $ 4 $ 393,524 $ (431) $ (662) $ (53,102) $ 339,333 $ 21,089 $ 360,422

Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Loss Retained Earnings (Deficit) Stockholders' Equity Attributable to UIHC NCI Total Stockholders’ Equity
Number of Shares Dollars
December 31, 2021 43,370,442 $ 4 $ 394,268 $ (431) $ (6,531) $ (74,904) $ 312,406 $ 19,551 $ 331,957
Net loss — — — — — (102,201) (102,201) (111) (102,312)
Other comprehensive loss, net — — — — (42,330) — (42,330) (53) (42,383)
Return of Capital to NCI — — — — — 1,052 1,052 (19,387) (18,335)
Stock Compensation (57,276) — 634 — — — 634 — 634
Cash dividends on common stock ($0.06 per common share) — — — — — (2,589) (2,589) — (2,589)
June 30, 2022 43,313,166 $ 4 $ 394,902 $ (431) $ (48,861) $ (178,642) $ 166,972 $ — $ 166,972


	Three Months Ended March 31,
	2023		2022
OPERATING ACTIVITIES
Net income (loss)	$	267,280	$	(33,257)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	2,155		2,606
Bond amortization and accretion	160		1,634
Net realized losses (gains) on investments	(1,260)		1,769
Net unrealized losses (gains) on equity securities	(2,554)		2,268
Provision for uncollectable premiums	5		12
Provision for uncollectable reinsurance recoverables	183		168

Deferred income taxes, net	15,767		(11,351)
Stock based compensation	335		452

Settlement of receivable owed by HCI in connection with purchase agreement	—		3,800
Gain on sale of property and equipment	(422)		(1,528)
Fixed asset disposal	524		343
Disposition of former subsidiary	(238,440)		—
Changes in operating assets and liabilities:
Accrued investment income	369		437
Premiums receivable	15,178		2,265
Reinsurance recoverable on paid and unpaid losses	289,946		85,140
Ceded unearned premiums	72,064		146,667
Deferred policy acquisition costs, net	(875)		(7,193)
Other assets	(31,630)		(4,618)
Receivable from sale of building	—		3,236
Unpaid losses and loss adjustment expenses	(278,142)		(117,236)
Unearned premiums	(145,540)		(39,731)
Reinsurance payable on premiums	(13,376)		(51,714)
Payments outstanding	(68,493)		(10,246)
Accounts payable and accrued expenses	16,440		(2,924)
Operating lease liability	(277)		(183)
Other liabilities	(3,561)		8,291
Net cash provided by (used in) operating activities	$	(104,164)	$	(20,893)
INVESTING ACTIVITIES
Proceeds from sales, maturities and repayments of:
Fixed maturities	178,211		85,978
Equity securities	24,163		88
Other investments	227		1,063

Purchases of:
Fixed maturities	(7,439)		(13,415)
Equity securities	(80)		(3,121)
Other investments	—		(459)
Proceeds from sale of property and equipment	464		730
Cost of property, equipment and capitalized software acquired	(154)		(1,406)
Disposition of cash on divestiture of subsidiary	(232,582)		—
Net cash provided by (used in) investing activities	$	(37,190)	$	69,458
FINANCING ACTIVITIES

Repayments of borrowings	—		(381)
Dividends	—		(2,589)


Net cash used in financing activities	$	—	$	(2,970)
Increase in cash, cash equivalents and restricted cash, including cash classified as assets held for disposal	(141,354)		45,595
Cash, cash equivalents and restricted cash at beginning of period	283,611		245,278


Cash, cash equivalents and restricted at end of period	$	142,257	$	290,873
Supplemental Cash Flows Information
Interest paid	$	—	$	35
Income taxes paid	$	5,325	$	77

See accompanying Notes to Restated Unaudited Condensed Consolidated Financial Statements.

UNITED INSURANCE HOLDINGS CORP.

~~Condensed Consolidated Statements of Cash Flows (Unaudited)~~
Six Months Ended June 30,
2022 2021
OPERATING ACTIVITIES
Net loss $ (102,312) $ (41,881)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 5,042 6,255
Bond amortization and accretion 3,041 4,555
Net realized losses (gains) on investments 1,847 (379)
Net unrealized losses (gains) on equity securities 7,352 (5,002)
Provision for uncollectable premiums 6 77
Provision for uncollectable reinsurance recoverables 223 (110)
Provision for uncollectable notes receivable — (546)
Deferred income taxes, net 24,764 (17,112)
Stock based compensation 634 402
Stock received as consideration for renewal rights agreement — (5,007)
Settlement of receivable owed by HCI in connection with purchase agreement 3,800 —
Gain on sale of building (1,528) —
Fixed asset disposal 343 15
Changes in operating assets and liabilities:
Accrued investment income 200 352
Premiums receivable (22,386) (9,403)
Reinsurance recoverable on paid and unpaid losses 239,386 (106,161)
Ceded unearned premiums (72,033) (208,386)
Deferred policy acquisition costs, net (38,671) (12,444)
Other assets (1,728) 8,719
Unpaid losses and loss adjustment expenses (234,456) 46,409
Unearned premiums 14,657 24,966
Reinsurance payable on premiums 189,059 296,581
Payments outstanding (5,561) (5,703)
Accounts payable and accrued expenses (7,693) (20,525)
Operating lease liability (334) (152)
Other liabilities 4,634 16,219
Net cash provided by (used in) operating activities $ 8,286 $ (28,261)
INVESTING ACTIVITIES
Proceeds from sales, maturities and repayments of:
Fixed maturities 107,536 142,823
Equity securities 88 542
Other investments 1,464 23,455
Purchases of:
Fixed maturities (18,334) (61,921)
Equity securities (6,253) (14,987)
Other investments (840) (35,263)
Proceeds from sale of building 3,966 —
Cost of property, equipment and capitalized software acquired (2,360) (2,471)
Net cash provided by investing activities $ 85,267 $ 52,178
FINANCING ACTIVITIES
Repayments of borrowings (761) (1,056)
Dividends (2,589) (5,186)
Return of capital in connection with termination of noncontrolling interest (18,335) —
Net cash used in financing activities $ (21,685) $ (6,242)
Increase in cash, cash equivalents and restricted cash 71,868 17,675
Cash, cash equivalents and restricted cash at beginning of period 245,278 301,498
Cash, cash equivalents and restricted cash at end of period $ 317,146 $ 319,173
Supplemental Cash Flows Information
Interest paid $ 4,771 $ 4,773
Income taxes paid (refunded) $ 644 $ (5,315)

~~See accompanying~~ Notes to ~~Unaudited Condensed Consolidated Financial Statements.~~

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to~~Restated Unaudited Condensed Consolidated Financial Statements

~~June 30, 2022~~March 31, 2023

1) ORGANIZATION, CONSOLIDATION AND PRESENTATION

(a)Business

United Insurance Holdings Corp. (referred to in this document as we, our, us, the Company or ~~UPC Insurance)~~UIHC) is a property and casualty insurance holding company that sources, writes and services residential ~~personal~~commercial and ~~commercial~~personal property and casualty insurance policies using a network of agents and 3two wholly-owned insurance subsidiaries. Our ~~original insurance subsidiary is United Property & Casualty Insurance Company (UPC), which was formed in Florida in 1999 and has operated continuously since that time. Our~~ two ~~other~~ insurance subsidiaries are Interboro Insurance Company (IIC), acquired via merger on April 29, 2016; and American Coastal Insurance Company (ACIC), acquired via merger on April 3, 2017.

Our other subsidiaries include United Insurance Management, L.C. (UIM), a managing general ~~agent that manages substantially all aspects of UPC's business;~~agent; Skyway Claims Services, LLC, which provides claims adjusting services to ~~UPC and~~ ACIC; AmCo Holding Company, LLC (AmCo) which is a holding company subsidiary that consolidates its respective insurance company; BlueLine Cayman Holdings (BlueLine), which reinsures portfolios of excess and surplus policies; UPC Re, which provides a portion of the reinsurance protection purchased by our insurance subsidiaries when needed; Skyway Reinsurance Services, LLC, which provides reinsurance brokerage services for our insurance companies; Skyway Legal Services, LLC, which provides claims litigation services to our insurance companies; and Skyway Technologies, LLC, a managing general agent that provides technological and distribution services to our insurance companies.

Our primary products are ~~homeowners'~~commercial and ~~commercial~~homeowners' residential property insurance. We currently offer ~~personal residential insurance in 7 states, under authorization from the insurance regulatory authorities in each state. In addition, we write~~ commercial residential insurance in ~~three states: Florida,~~Florida. During 2022, we also wrote commercial residential insurance in South Carolina and ~~Texas. We are also licensed to~~Texas, however, effective May 1, 2022, we no longer write in these states. In addition, we write personal residential insurance in ~~an additional 11~~New York. During 2022, we wrote personal residential business in six other states; however on February 27, 2023, our former insurance subsidiary, United Property & Casualty Insurance Company (UPC) was placed into receivership with the Florida Department of Financial Services (DFS), which divested our ownership of UPC. The events leading to receivership and results of this subsidiary, now included within discontinued operations, are discussed in Note 4 below.

On August 25, 2022, we ~~have not commenced writing or no longer write~~announced that our former subsidiary UPC had filed plans for withdrawal in the states of Florida, Louisiana, and Texas and intended to file a plan for withdrawal in the state of New York. All filed plans entail non-renewing personal lines policies in these states. Additionally, we announced that Demotech, Inc. (Demotech), an insurance rating agency, notified UPC of its intent to withdraw UPC's Financial Stability Rating. On December 5, 2022, the Florida Office of Insurance Regulation ("FLOIR") issued Consent Order No. 303643-22- CO that provided for the administrative supervision and approval of the plan of run-off for UPC (the "Consent Order"). The Consent Order provided formal approval of UPC's Plan of Run-Off (the "Plan") to facilitate a solvent wind down of its affairs in an orderly fashion. Additionally, in connection with the Plan, IIC agreed to not pay ordinary dividends without the prior approval of the New York Department of Financial Services until January 1, 2025. On February 10, 2023, we announced that a solvent run-off of UPC was unlikely and on February 27, 2023, UPC was placed into receivership with the Florida Department of Financial Services (the "DFS") which divested our ownership of UPC.

Effective June 1, 2022, we merged our majority-owned insurance subsidiary, Journey Insurance Company (JIC) into ACIC, with ACIC being the surviving entity. JIC was formed in strategic partnership with a subsidiary of Tokio Marine Kiln Group Limited (Kiln) on August 30, 2018 and operated independently from ACIC prior to the merging of the entities. The Kiln subsidiary held a noncontrolling interest in JIC, which was terminated prior to the merger.

Effective June 1, 2022, we entered into a quota share reinsurance agreement with TypTap Insurance Company (Typtap). Under the terms of this agreement, we ~~cede~~ceded 100% of our former subsidiary UPC's in-force, new, and renewal policies in the states of Georgia, North Carolina and South Carolina. Effective June 1, 2022, we began the transition of South Carolina policies to Homeowners Choice Property and Casualty ~~Inc~~Insurance Company, Inc. (HCPCI) in connection with our renewal rights agreement. Effective October 1, 2022, we transitioned Georgia policies to HCPCI in connection with our renewal rights agreement. Effective December 1, 2022, we began the transition of North Carolina policies to HCPCI in connection with our renewal rights agreement. As a result, these policies will no longer be covered under this ~~agreement.~~agreement upon their renewal. This agreement replaces the 85% quota share agreement with HCPCI effective December 31, 2021.

Effective May 31, 2022, we merged Family Security Insurance Company, Inc. (FSIC) into our former subsidiary UPC, with UPC being the surviving entity. FSIC was acquired via merger on February 3, 2015, and operated independently from

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

UPC prior to the merging of the entities. In conjunction with the merger, we dissolved Family Security Holdings (FSH), a holding company subsidiary that consolidated its respective insurance company, FSIC.

Effective June 1, 2021, we entered into a quota share reinsurance agreement with HCPCI and TypTap. Under the terms of this agreement, we ceded 100% of our former subsidiary UPC's in-force, new, and renewal policies in the states of Connecticut, New Jersey, Massachusetts, and Rhode Island. The cession of these policies was 50% to HCPCI and 50% to TypTap. HCPCI is responsible for processing all claims as a part of this agreement. As of April 1, 2022, we completed the transition of all policies in these four states to HCPCI in connection with our renewal rights agreement (Northeast Renewal Agreement) to sell UPC's personal lines homeowners business in these states.

We conduct our operations under two reportable segments, personal residential property and casualty insurance policies (personal lines) and commercial residential property and casualty insurance policies (commercial lines). Our chief operating decision maker is our President, who makes decisions to allocate resources and assesses performance at both segment levels, as well as at the corporate level.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

(b)Consolidation and Presentation

We prepare our unaudited condensed consolidated interim financial statements in conformity with U.S. generally accepted accounting principles (GAAP). We have condensed or omitted certain information and footnote disclosures normally included in the annual consolidated financial statements presented in accordance with GAAP. In management's opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of interim periods. We include all of our subsidiaries in our consolidated financial statements, eliminating intercompany balances and transactions during consolidation. As described in Note 2, our former subsidiary, UPC, qualifies as a discontinued operation. Our unaudited condensed consolidated interim financial statements and footnotes should be read in conjunction with our consolidated financial statements and footnotes in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

While preparing our unaudited condensed consolidated financial statements, we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Reported amounts that require us to make extensive use of estimates include our reserves for unpaid losses and loss adjustment expenses, investments and goodwill. Except for the captions on our Unaudited Condensed Consolidated Balance Sheets and Unaudited Condensed Consolidated Statements of Comprehensive Loss, we generally use the term loss(es) to collectively refer to both loss and loss adjustment expenses.

Our results of operations and our cash flows as of the end of the interim periods reported herein do not necessarily indicate our results for the remainder of the year or for any other future period.

~~(c)~~

Our unaudited condensed consolidated interim financial statements have been prepared in accordance with GAAP assuming the Company will continue as a going concern. As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, our subsidiary ACIC is a part of a combined reinsurance program with our former subsidiary, UPC.

To properly allocate the reinsurance recoverables under the shared catastrophe treaties, UPC and ACIC entered into a reinsurance allocation agreement that became effective on June 1, 2022 (the "Allocation Agreement"). The Allocation Agreement was filed with and approved by the FLOIR on December 5, 2022. On February 10, 2023, we announced that a solvent run-off of UPC was unlikely, driven by Hurrican Ian losses which exhausted UPC's reinsurance coverage. On February 27, 2023, UPC was placed into receivership with the DFS which divested our ownership of UPC. As of the date of filing our Annual Report, the DFS had not recognized the Allocation Agreement, leaving uncertainty regarding the timing of both recoveries currently held by UPC that are allocated to ACIC and future recoverables. Management also believed that the ability for ACIC to obtain adequate reinsurance to meet its needs for the June 1, 2023 to May 31, 2024 catastrophe cover could only be accomplished assuming that recoveries due to ACIC pursuant to the Allocation Agreement could be resolved in short order.

However, on April 19, 2023, ACIC entered into a Memorandum of Understanding with the DFS. Under the terms of the Memorandum, ACIC and the DFS as receiver of UPC have reached the following agreement:

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

1.~~Impact of COVID-19~~The DFS adopts, ratifies and ~~Financial Status~~affirms the Allocation Agreement.

2.All future reinsurance recoverable under reinsurance agreements applicable to the Allocation Agreement for Hurricane Ian losses shall be paid, either directly from the reinsurers or directly from the reinsurance intermediary responsible therefor, to ACIC. If a true up adjustment demonstrates that any future reinsurance recoveries were over-collected by ACIC, ACIC will remit any over-payment to UPC.

~~We did not experience~~While the execution of the MOU does alleviate the uncertainty regarding future recoverables, uncertainty does still exist regarding recoveries currently held by UPC. The Company intends to continue to work towards a ~~material impact from COVID-19 on our business operations, financial position, liquidity or our ability to service our policyholders during the three~~fair and ~~six months ended June 30, 2022.~~equitable solution regarding these held recoveries (See Note 19). In addition, the ~~COVID-19 pandemic and resulting global disruptions did~~Company has not ~~have~~finalized its catastrophe cover for June 1, 2023 to May 31, 2024. While continued progress is being made, uncertainty does still exist regarding placement of this cover. As a ~~material impact on our access~~result, the Company has concluded substantial doubt continues to ~~credit and capital markets needed~~exist regarding its ability to ~~maintain sufficient liquidity for our continued operating needs during the quarter ended June 30, 2022.~~

Additionally, during the fourth quarter of 2021 we implemented our new flexible work policy. This policy allows all employees to work remotely permanently, with the return to our offices being completely voluntary at this time. We will continue ~~to respond to the COVID-19 pandemic and take reasonable measures to make sure customers continue to be served without interruption.~~as a going concern.

2) SIGNIFICANT ACCOUNTING POLICIES

(a) ~~Income Taxes~~

In June 2022, we assessed our deferred tax position and believe it is more likely than not that the benefit from certain net operating loss (NOL) carryforwards will not be realized. In recognition of this risk, we have recorded a valuation allowance of $58,326,000 against our deferred tax assets as of June 30, 2022. If our assumptions change and we determine that we will be able to realize these NOLs, we will reverse the valuation allowance accordingly.

~~(b)~~ Changes to Significant Accounting Policies

During the three months ended March 31, 2023, our former subsidiary, UPC, was placed into receivership with the DFS. As described in Note 1, effective February 27, 2023, this receivership divested our ownership of UPC. This disposal was evaluated for qualification as a discontinued operation. The results of operations of business are reported as discontinued operations when the disposal represents a strategic shift that will have a major effect on the entity's operations and financial results. When a business is identified for discontinued operations reporting:

•Results for prior periods are retroactively reclassified as discontinued operations;

•Results of operations are reported in a single line, net of tax, in the Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss); and

•Assets and liabilities are reported as held for disposal in the Unaudited Condensed Consolidated Balance Sheets

•Premiums directly assumed from UPC by another entity of the consolidated group are now captured as assumed.

Additional details by major classification of operating results and financial position are included in Note 4.

There have been no other changes to our significant accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

~~(c)~~

(b) Pending Accounting Pronouncements

We have evaluated pending accounting pronouncements and do not believe any would have an impact on the operations or financial reporting of our company.

3) RESTATEMENT OF PREVIOUSLY REPORTED FINANCIAL STATEMENTS

Subsequent to the issuance of the Form 10-Q as of and for the three months ended March 31, 2023, the Company concluded it should restate its previously issued financial statements for both 2023 and 2022 to accurately present discontinued operations, including activities that directly support its former subsidiary, UPC, in accordance with ASC 205-20. The Company had previously excluded these supporting activities, assets, and liabilities, presenting only the results, assets and liabilities of UPC as discontinued operations.

In addition, the Company concluded it should restate its previously issued financial statements to accurately present its tax provision (benefit) related to both continuing and discontinued operations. Previously, the calculation of this provision (benefit) incorrectly included the benefit of the use of certain deferred tax assets held by UPC after the disposition of UPC occurred and incorrectly allocated this provision between continuing and discontinued operations.

In accordance with SEC Staff Accounting Bulletin No. 99, the Company evaluated the errors and has determined that the related impact was material to the previously filed financial statements that contained the error, reported in the Company’s Form 10-Q for the quarterly period ended March 31, 2023. Therefore, the Company concluded that the affected quarterly periods should be restated to present continuing and discontinued operations appropriately and recognize the additional

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

~~June 30,~~March 31, 2023

provision for income taxes for the period and allocate appropriately to continuing and discontinued operations. As such, the Company is reporting these restated financial statements in this amended quarterly report. The previously filed Form 10-Q should no longer be relied upon.

The impact of the restatement on the financial statements for the affected quarterly periods are presented below.

Restated Condensed Consolidated Balance Sheets (Unaudited)


	As of March 31, 2023
	As Previously Reported		Adjustment	As Restated
ASSETS
Property and equipment, net	18,118		(13,395)	4,723
Other Assets	15,426		2,050	17,476
Assets held for disposal	—		13,395	13,395
Total Assets	$	1,445,386	2,050	$	1,447,436
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Other liabilities	36,242		(6,169)	30,073
Liabilities held for disposal	—		1,817	1,817
Total Liabilities	$	1,361,898	(4,352)	$	1,357,546
Stockholders' Equity:
Retained earnings (deficit)	$	(286,422)	6,402	$	(280,020)
Total Stockholders' Equity (Deficit)	$	83,488	6,402	$	89,890


	As of December 31, 2022
	As Previously Reported	Adjustment	As Restated
ASSETS
Property and equipment, net	19,591	(14,298)	5,293
Deferred policy acquisition costs, net	60,979	(8,610)	52,369
Assets held for disposal	1,411,907	22,908	1,434,815
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses	75,374	(988)	74,386
Other liabilities	17,466	(11,617)	5,849
Liabilities held for disposal	1,642,212	12,605	1,654,817

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

Restated Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)


	Three Months Ended March 31, 2023
REVENUE:	As Previously Reported		Adjustment		As Restated
Management fee income	9,668		(9,668)		—
Other revenue	4,075		(4,059)		16
Total revenue	104,047		(13,727)		90,320
EXPENSES:
Losses and loss adjustment expenses	19,073		(2,661)		16,412
Policy acquisition costs	26,927		45		26,972
Operating expenses	5,651		(3,483)		2,168
General and administrative expenses	9,837		(1,044)		8,793
Total expenses	61,488		(7,143)		54,345
Income before other income	39,840		(6,584)		33,256

Income before income taxes	40,428		(6,584)		33,844
Provision for income taxes	9,855		(6,378)		3,477
Income from continuing operations, net of tax	$	30,573	$	(206)	$	30,367
Income from discontinued operations, net of tax	230,305		6,608		236,913
Net income	$	260,878	$	6,402	$	267,280

Earnings available to UIHC common stockholders per share
Basic
Continuing operations	$	0.71	$	(0.01)	$	0.70
Discontinued operations	5.34		0.15		5.49
Total	$	6.05	$	0.14	$	6.19
Diluted
Continuing operations	$	0.70	$	—	$	0.70
Discontinued operations	5.29		0.15		5.44
Total	$	5.99	$	0.15	$	6.14

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023


	Three Months Ended March 31, 2022
REVENUE:	As Previously Reported		Adjustment		As Restated
Management fee income	50,206		(50,206)		—
Other revenue	8,738		(8,723)		15
Total revenue	117,361		(58,929)		58,432
EXPENSES:
Losses and loss adjustment expenses	32,518		(6,203)		26,315
Policy acquisition costs	52,152		(31,844)		20,308
Operating expenses	10,603		(6,896)		3,707
General and administrative expenses	15,435		(7,371)		8,064
Total expenses	113,067		(52,314)		60,753
Income (loss) before other income	4,294		(6,615)		(2,321)

Income (loss) before income taxes	5,627		(6,615)		(988)
Provision (benefit) for income taxes	980		(1,695)		(715)
Income (loss) from continuing operations, net of tax	$	4,647	$	(4,920)	$	(273)
Loss from discontinued operations, net of tax	(37,904)		4,920		(32,984)
Net loss	$	(33,257)	$	—	$	(33,257)

Restated Condensed Consolidated Statements of Cash Flows (Unaudited)


	Three Months Ended March 31, 2023
	As Previously Reported		Adjustment		As Restated
OPERATING ACTIVITIES
Net income (loss)	$	260,878	$	6,402	$	267,280
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Disposition of former subsidiary	(229,183)		(9,257)		(238,440)
Changes in operating assets and liabilities:
Other liabilities	(6,416)		2,855		(3,561)

Restated Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended

(Unaudited)


	Three Months Ended March 31, 2023
	As Previously Reported		Adjustment		As Restated

Net Income for the three months ended March 31, 2023	$	260,878	$	6,402	$	267,280
Retained Earnings (Deficit) as of March 31, 2023	(286,422)		6,402		(280,020)
Stockholders Equity (Deficit) attributable to UIHC at March 31, 2023	83,488		6,402		89,890
Total Stockholders' Equity (Deficit)	83,488		6,402		89,890

In connection with these changes, our Notes to Unaudited Condensed Consolidated Financial Statements have also been restated where applicable.

4) DISCONTINUED OPERATIONS

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

In the first quarter of 2023, the assets and liabilities of UPC were divested. In addition, activities provided by our entities, SCS, SLS and UIM, related directly to supporting the business conducted by UPC have been included. The assets and liabilities for the balance sheet as of December 31, 2022 are reclassified as held for disposal retrospectively, and the results of UPC and activities related directly to supporting the business conducted by UPC are presented as discontinued operations for all periods presented.

The results from discontinued operations for the three months ended March 31, 2023 and 2022 are presented below.


Results From Discontinued Operations
	Three Months Ended March 31,
	2023		2022
REVENUE:
Gross premiums written	$	(120,608)	$	146,828
Change in gross unearned premiums	198,154		59,726
Gross premiums earned	77,546		206,554
Ceded premiums earned	(48,203)		(163,443)
Net premiums earned	29,343		43,111
Net investment income	2,182		1,075
Net realized investment gains (losses)	1,343		(1,806)
Net unrealized gains (losses) on equity securities	2,080		(1,498)
Other revenue	2,717		3,063
Total revenue	37,665		43,945
EXPENSES:
Losses and loss adjustment expenses	35,226		65,064
Policy acquisition costs	(1,352)		5,708
Operating expenses	3,996		8,541
General and administrative expenses	1,284		7,941
Interest expense	22		20
Total expenses	39,176		87,274
Loss before other income	(1,511)		(43,329)
Other income (loss)	—		9
Loss before income taxes	(1,511)		(43,320)
Provision (benefit) for income taxes	16		(10,336)
Income (loss) from discontinued operations, net of tax	$	(1,527)	$	(32,984)

As of February 28, 2023, the Company completed the disposal of its former subsidiary, UPC. This divestiture resulted in a gain of $238,440,000 for the period. This gain was driven by the negative equity position of UPC.

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

The major classes of assets and liabilities transferred as a result of the transaction as of the date of transfer and December 31, 2022 are presented below.


Major Classes of Assets and Liabilities Disposed
	Closing (1)		December 31, 2022
ASSETS
Fixed maturities, available-for-sale	1,380		171,781
Equity securities	272		23,363
Other investments	12,882		12,952
Cash and cash equivalents	224,824		158,990
Restricted cash	7,758		7,730
Accrued investment income	875		1,457
Premiums receivable, net	22,733		46,736
Reinsurance recoverable on paid and unpaid losses, net	548,929		834,863
Ceded unearned premiums	75,262		122,533
Deferred policy acquisition costs, net	(89)		(2,046)
Other assets	51,625		33,548
Total assets	$	946,451	$	1,411,907

LIABILITIES
Unpaid losses and loss adjustment expenses	920,431		1,103,980
Unearned premiums	98,655		286,842
Reinsurance payable on premiums	12,612		29,394
Payments outstanding	144,238		213,058
Accounts payable and accrued expenses	1,361		(872)
Other liabilities	3,476		14,658
Notes payable, net	4,118		4,118
Total Liabilities	$	1,184,891	$	1,651,178

(1) The Company divested its ownership on February 27, 2023, the date the DFS was appointed as receiver of the entity.

In addition, the major classes of assets and liabilities remaining related to activities directly supporting the business conducted by UPC are outlined in the table below as of March 31, 2023 and December 31, 2022.

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023


Major Classes of Assets and Liabilities Held for Disposal
	March 31, 2023		December 31, 2022
ASSETS
Property and equipment, net	13,395		14,299
Deferred policy acquisition costs	—		8,609
Total assets	$	13,395	$	22,908

LIABILITIES
Commissions Payable	1,817		987
Unearned Policy Fees	—		2,652
Total Liabilities	$	1,817	$	3,639

The discontinued operations of the Company incurred $252,000 and $438,000 of amortization expense during the three months ended March 31, 2023 and 2022, respectively. There were no other noncash transactions for either period.

3)5) SEGMENT REPORTING

Personal Lines Business

Our personal lines business provides structure, content and liability coverage for standard single-family homeowners, renters and condominium unit owners, through our ~~subsidiaries UPC and~~subsidiary IIC. Personal residential products are offered in ~~all states in which we write business.~~New York. We include coverage to policyholders for loss or damage to dwellings, detached structures or equipment caused by covered causes of loss such as fire, wind, hail, water, theft and vandalism.

We have developed a unique and proprietary homeowners’ product. This product uses a granular approach to pricing for catastrophe perils. We have focused on using independent agencies as a channel of distribution for our personal lines business. All of our personal lines business is managed internally.

Commercial Lines Business

Our commercial lines business primarily provides commercial multi-peril property insurance for residential condominium associations and apartments in Florida, through our subsidiary ACIC. We include coverage to policyholders for loss or damage to buildings, inventory or equipment caused by covered causes of loss such as fire, wind, hail, water, theft and vandalism. We also wrote commercial residential coverage through our subsidiary JIC, in South Carolina and Texas. Effective June 1, 2022 JIC was merged into ACIC, with ACIC being the surviving entity. As a result, the commercial residential policies originally written by JIC ~~will~~were not be renewed effective May 31, 2022.

All of our commercial lines business is administered by an outside managing general underwriter, AmRisc, LLC (AmRisc). This includes handling the underwriting, claims processing and premium collection related to our commercial business. In return, AmRisc is reimbursed through monthly management fees. International Catastrophe Insurance Managers (ICAT) ~~handles~~handled the underwriting and premium collection for JIC’s commercial business written in South Carolina and Texas and iswas also reimbursed through monthly management fees. InEffective May 31, 2022, the Company terminated its agreement with ICAT. ~~Termination of this agreement is effective May 31, 2022.~~

Please note the following similarities pertaining to the accounting and transactions of our operating segments for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:

•Both operating segments follow the accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, ~~2021;~~2022;

•Neither operating segment experienced significant noncash transactions outside of depreciation and amortization for the three ~~and six months ended June 30, 2022 and 2021, and the receipt of HCI common stock during the three~~ months ended March 31, ~~2021, in connection with our Northeast Renewal Agreement.~~2023 and 2022.

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

The tables below present the information for each of the reportable segment's profit or loss, as well as segment assets for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. We have restated our segments to reflect the divestiture of UPC during the first quarter of 2023, excluding the result of the entity for all periods presented.

1117

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

~~June 30, 2022~~March 31, 2023


		Three Months Ended June 30, 2022												Three Months Ended March 31, 2023
		Commercial			Personal (1)			Adjustments		Consolidated				Commercial			Personal (1)			Adjustments		Consolidated
REVENUE:	REVENUE:												REVENUE:
Gross premiums written	Gross premiums written	$	181,067		$	179,079		$	—	$	360,146		Gross premiums written	$	176,641		$	10,482		$	—	$	187,123
Change in gross unearned premiums	Change in gross unearned premiums	(67,849)			13,461			—		(54,388)			Change in gross unearned premiums	(44,607)			1,960			—		(42,647)
Gross premiums earned	Gross premiums earned	113,218			192,540			—		305,758			Gross premiums earned	132,034			12,442			—		144,476
Ceded premiums earned	Ceded premiums earned	(61,771)			(132,582)			—		(194,353)			Ceded premiums earned	(53,374)			(3,778)			—		(57,152)
Net premiums earned	Net premiums earned	51,447			59,958			—		111,405			Net premiums earned	78,660			8,664			—		87,324
Net investment income	Net investment income	1,476			1,654			10		3,140			Net investment income	1,786			782			21		2,589
Net realized gains (losses)	Net realized gains (losses)	(79)			1			—		(78)			Net realized gains (losses)	(83)			—			—		(83)
Net unrealized losses on equity securities	Net unrealized losses on equity securities	(2,390)			(2,693)			(1)		(5,084)			Net unrealized losses on equity securities	473			—			1		474

Other revenue	Other revenue	—			6,410			—		6,410			Other revenue	—			16			—		16
Total revenues	Total revenues	50,454			65,330			9		115,793			Total revenues	80,836			9,462			22		90,320
EXPENSES:	EXPENSES:												EXPENSES:
Losses and loss adjustment expenses	Losses and loss adjustment expenses	8,194			81,880			—		90,074			Losses and loss adjustment expenses	13,901			2,511			—		16,412
Policy acquisition costs	Policy acquisition costs	19,928			9,060			—		28,988			Policy acquisition costs	25,166			1,806			—		26,972
Operating expenses	Operating expenses	1,127			11,805			87		13,019			Operating expenses	96			1,948			124		2,168
General and administrative expenses (2)	General and administrative expenses (2)	2,421			11,571			502		14,494			General and administrative expenses (2)	2,754			5,907			132		8,793
Interest expense	Interest expense	—			31			2,363		2,394			Interest expense	—			—			2,719		2,719
Total expenses	Total expenses	31,670			114,347			2,952		148,969			Total expenses	41,917			12,172			2,975		57,064
Income (loss) before other income	Income (loss) before other income	18,784			(49,017)			(2,943)		(33,176)			Income (loss) before other income	38,919			(2,710)			(2,953)		33,256
Other income (loss)	Other income (loss)	2			212			57		271			Other income (loss)	—			803			(215)		588
Income (loss) before income taxes	Income (loss) before income taxes	$	18,786		$	(48,805)		(2,886)		(32,905)			Income (loss) before income taxes	$	38,919		$	(1,907)		(3,168)		33,844
Benefit for income taxes								36,150		36,150
Provision for income taxes													Provision for income taxes							3,477		3,477
Net income (loss)	Net income (loss)							$	(39,036)	$	(69,055)		Net income (loss)							$	(6,645)	$	30,367
Less: Net loss attributable to noncontrolling interests	Less: Net loss attributable to noncontrolling interests							(26)		(26)			Less: Net loss attributable to noncontrolling interests							—		—
Net income (loss) attributable to UIHC	Net income (loss) attributable to UIHC							$	(39,010)	$	(69,029)		Net income (loss) attributable to UIHC							$	(6,645)	$	30,367

Loss ratio, net (3) (4)	Loss ratio, net (3) (4)	15.9		%	136.6		%			80.9		%	Loss ratio, net (3) (4)	17.7		%	29.0		%			18.9		%
Expense ratio (3) (5)	Expense ratio (3) (5)	45.6		%	54.1		%			50.7		%	Expense ratio (3) (5)	35.6		%	111.5		%			43.4		%
Combined ratio (3) (6)	Combined ratio (3) (6)	61.5		%	190.7		%			131.6		%	Combined ratio (3) (6)	53.3		%	140.5		%			62.3		%

Total segment assets	Total segment assets	$	1,352,713		$	836,517		$	304,824	$	2,494,054		Total segment assets	$	1,304,499		$	118,700		$	10,842	$	1,434,041

(1) Our personal lines income statement also includes amounts related to subsidiaries outside of our insurance companies. We have included these items as these subsidiaries directly support our personal lines operations.

(2) Included in our General and Administrative expenses is ~~$1,357,000~~$1,007,000 and ~~$877,000~~$812,000 of depreciation and amortization expense related to our personal and commercial lines assets, respectively.

(3) As these are calculated ratios, the addition of the ratios will not result in the same value as the consolidated ratio. To calculate the consolidated ratio please see the corresponding footnote below.

(4) Loss ratio, net is calculated as losses and LAE net of losses ceded to reinsurers, relative to net premiums earned. Management uses this operating metric to analyze our loss trends and believes it is useful for investors to evaluate this component separately from our other operating expenses.

(5) Expense ratio is calculated as the sum of all operating expenses less interest expense relative to net premiums earned. Management uses this operating metric to analyze our expense trends and believes it is useful for investors to evaluate these components separately from our loss expenses.

(6) Combined ratio is the sum of the loss ratio, net and expense ratio. Management uses this operating metric to analyze our total expense trends and believes it is a key indicator for investors when evaluating the overall profitability of our business.

1218

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

~~June 30, 2022~~March 31, 2023

Three Months Ended June 30, 2021
Commercial
Personal (1)
Adjustments Consolidated
REVENUE:
Gross premiums written $ 155,982 $ 270,442 $ — $ 426,424
Change in gross unearned premiums (54,424) (15,567) — (69,991)
Gross premiums earned 101,558 254,875 — 356,433
Ceded premiums earned (58,729) (152,244) — (210,973)
Net premiums earned 42,829 102,631 — 145,460
Net investment income 1,150 2,521 12 3,683
Net realized gains (losses) (41) (83) — (124)
Net unrealized losses on equity securities 242 2,196 — 2,438
Other revenue — 3,997 — 3,997
Total revenues 44,180 111,262 12 155,454
EXPENSES:
Losses and loss adjustment expenses 18,368 99,696 — 118,064
Policy acquisition costs 17,591 23,736 — 41,327
Operating expenses 932 12,533 17 13,482
General and administrative expenses (2)
1,738 10,952 422 13,112
Interest expense — 32 2,225 2,257
Total expenses 38,629 146,949 2,664 188,242
Income (loss) before other income 5,551 (35,687) (2,652) (32,788)
Other income (loss) — 15 — 15
Income (loss) before income taxes $ 5,551 $ (35,672) (2,652) (32,773)
Benefit for income taxes (9,352) (9,352)
Net income (loss) $ 6,700 $ (23,421)
Less: Net loss attributable to noncontrolling interests 89 89
Net income (loss) attributable to UIHC $ 6,611 $ (23,510)
Loss ratio, net (3) (4)
42.9 % 97.1 % 81.2 %
Expense ratio (3) (5)
47.3 % 46.0 % 46.7 %
Combined ratio (3) (6)
90.2 % 143.1 % 127.9 %
Total segment assets $ 1,087,909 $ 1,569,041 $ 491,722 $ 3,148,672

~~(1)~~ Our personal lines income statement also includes amounts related to subsidiaries outside of our insurance companies. We have included these items as these subsidiaries directly support our personal lines operations.

~~(2)~~ ~~Included in our General and Administrative expenses is $2,003,000 and $816,000 of depreciation and amortization expense related to our personal and commercial lines assets, respectively.~~

~~(3)~~ ~~As these are calculated ratios, the addition of the ratios will not result in the same value as the consolidated ratio. To calculate the consolidated ratio please see the corresponding footnote below.~~

~~(4)~~ Loss ratio, net is calculated as losses and LAE net of losses ceded to reinsurers, relative to net premiums earned. Management uses this operating metric to analyze our loss trends and believes it is useful for investors to evaluate this component separately from our other operating expenses.

~~(5)~~ Expense ratio is calculated as the sum of all operating expenses less interest expense relative to net premiums earned. Management uses this operating metric to analyze our expense trends and believes it is useful for investors to evaluate these components separately from our loss expenses.

~~(6)~~ Combined ratio is the sum of the loss ratio, net and expense ratio. Management uses this operating metric to analyze our total expense trends and believes it is a key indicator for investors when evaluating the overall profitability of our business.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

Six Months Ended June 30, 2022
Commercial
Personal (1)
Adjustments Consolidated
REVENUE:
Gross premiums written $ 309,031 $ 330,590 $ — $ 639,621
Change in gross unearned premiums (88,348) 73,691 — (14,657)
Gross premiums earned 220,683 404,281 — 624,964
Ceded premiums earned (123,793) (288,909) — (412,702)
Net premiums earned 96,890 115,372 — 212,262
Net investment income 2,603 2,996 19 5,618
Net realized gains (losses) (77) (1,770) — (1,847)
Net unrealized losses on equity securities (3,159) (4,191) (2) (7,352)
Other revenue — 9,478 — 9,478
Total revenues 96,257 121,885 17 218,159
EXPENSES:
Losses and loss adjustment expenses 22,308 159,134 — 181,442
Policy acquisition costs 36,606 18,398 — 55,004
Operating expenses 2,236 22,853 178 25,267
General and administrative expenses (2)
4,741 24,875 883 30,499
Interest expense — 51 4,722 4,773
Total expenses 65,891 225,311 5,783 296,985
Income (loss) before other income 30,366 (103,426) (5,766) (78,826)
Other income (loss) 2 (55) 1,667 1,614
Income (loss) before income taxes $ 30,368 $ (103,481) (4,099) (77,212)
Benefit for income taxes 25,100 25,100
Net income (loss) $ (29,199) $ (102,312)
Less: Net loss attributable to noncontrolling interests (111) (111)
Net income (loss) attributable to UIHC $ (29,088) $ (102,201)
Loss ratio, net (3) (4)
23.0 % 137.9 % 85.5 %
Expense ratio (3) (5)
45.0 % 57.3 % 52.2 %
Combined ratio (3) (6)
68.0 % 195.2 % 137.7 %
Total segment assets $ 1,352,713 $ 836,517 $ 304,824 $ 2,494,054

~~(2)~~ ~~Included in our General and Administrative expenses is $2,869,000 and $1,762,000 of depreciation and amortization expense related to our personal and commercial lines assets, respectively.~~

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~


		Six Months Ended June 30, 2021													Three Months Ended March 31, 2022
		Commercial			Personal (1)			Adjustments			Consolidated				Commercial			Personal (1)			Adjustments		Consolidated
REVENUE:	REVENUE:													REVENUE:
Gross premiums written	Gross premiums written	$	264,022		$	474,040		$	—		$	738,062		Gross premiums written	$	127,964		$	14,450		$	—	$	142,414
Change in gross unearned premiums	Change in gross unearned premiums	(64,246)			39,280			—			(24,966)			Change in gross unearned premiums	(20,499)			818			—		(19,681)
Gross premiums earned	Gross premiums earned	199,776			513,320			—			713,096			Gross premiums earned	107,465			15,268			—		122,733
Ceded premiums earned	Ceded premiums earned	(115,095)			(306,592)			—			(421,687)			Ceded premiums earned	(62,022)			(2,965)			—		(64,987)
Net premiums earned	Net premiums earned	84,681			206,728			—			291,409			Net premiums earned	45,443			12,303			—		57,746
Net investment income	Net investment income	2,372			4,871			23			7,266			Net investment income	1,127			268			9		1,404
Net realized gains	Net realized gains	(32)			411			—			379			Net realized gains	2			35			—		37
Net unrealized losses on equity securities	Net unrealized losses on equity securities	356			4,646			—			5,002			Net unrealized losses on equity securities	(769)			—			(1)		(770)

Other revenue	Other revenue	—			13,187			—			13,187			Other revenue	—			15			—		15
Total revenues	Total revenues	87,377			229,843			23			317,243			Total revenues	45,803			12,621			8		58,432
EXPENSES:	EXPENSES:													EXPENSES:
Losses and loss adjustment expenses	Losses and loss adjustment expenses	32,174			201,671			—			233,845			Losses and loss adjustment expenses	14,114			12,201			—		26,315
Policy acquisition costs	Policy acquisition costs	35,854			46,294			—			82,148			Policy acquisition costs	16,678			3,630			—		20,308
Operating expenses	Operating expenses	2,201			24,463			40			26,704			Operating expenses	1,109			2,507			91		3,707
General and administrative expenses (2)	General and administrative expenses (2)	3,642			24,295			1,057		1057	28,994			General and administrative expenses (2)	2,320			5,363			381		8,064
Interest expense	Interest expense	—			47			4,585			4,632			Interest expense	—			—			2,359		2,359
Total expenses	Total expenses	73,871			296,770			5,682			376,323			Total expenses	34,221			23,701			2,831		60,753
Income (loss) before other income	Income (loss) before other income	13,506			(66,927)			(5,659)			(59,080)			Income (loss) before other income	11,582			(11,080)			(2,823)		(2,321)
Other income	Other income	—			25			—			25			Other income	—			(277)			1,610		1,333
Income (loss) before income taxes	Income (loss) before income taxes	$	13,506		$	(66,902)		(5,659)			(59,055)			Income (loss) before income taxes	$	11,582		$	(11,357)		(1,213)		(988)
Benefit for income taxes								(17,174)			(17,174)
Provision for income taxes														Provision for income taxes							(715)		(715)
Net income (loss)	Net income (loss)							$	11,515		$	(41,881)		Net income (loss)							$	(498)	$	(273)
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests							(600)			(600)			Less: Net income attributable to noncontrolling interests							(85)		(85)
Net income (loss) attributable to UIHC	Net income (loss) attributable to UIHC							$	12,115		$	(41,281)		Net income (loss) attributable to UIHC							$	(413)	$	(188)

Loss ratio, net (3) (4)		38.0		%	97.6		%				80.2		%
Expense ratio (3) (5)		49.2		%	46.0		%				47.3		%
Combined ratio (3) (6)		87.2		%	143.6		%				127.5		%
Loss ratio, net (3) (4) (7)														Loss ratio, net (3) (4) (7)	31.1		%	99.2		%			45.6		%
Expense ratio (3) (5) (7)														Expense ratio (3) (5) (7)	44.2		%	93.5		%			55.6		%
Combined ratio (3) (6) (7)														Combined ratio (3) (6) (7)	75.3		%	192.7		%			101.1		%

Total segment assets	Total segment assets	$	1,087,909		$	1,569,041		$	491,722		$	3,148,672		Total segment assets	$	949,359		$	156,443		$	17,507	$	1,123,309

(2) Included in our General and Administrative expenses is ~~$4,165,000~~$1,074,000 and ~~$1,633,000~~$885,000 of depreciation and amortization expense related to our personal and commercial lines assets, respectively.

6) INVESTMENTS

1519

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

~~June 30, 2022~~March 31, 2023

~~4) INVESTMENTS~~

The following table details fixed-maturity available-for-sale securities, by major investment category, at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		Cost or Adjusted/Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Cost or Adjusted/Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2022
March 31, 2023										March 31, 2023
U.S. government and agency securities	U.S. government and agency securities	$	39,608	$	1	$	3,044	$	36,565	U.S. government and agency securities	$	3,491	$	—	$	82	$	3,409
Foreign government	Foreign government	3,376		5		19		3,362		Foreign government	1,000		—		9		991
States, municipalities and political subdivisions	States, municipalities and political subdivisions	70,260		10		5,606		64,664		States, municipalities and political subdivisions	31,924		15		3,357		28,582
Public utilities	Public utilities	19,626		—		1,796		17,830		Public utilities	8,913		—		1,093		7,820
Corporate securities	Corporate securities	213,904		13		21,472		192,445		Corporate securities	99,324		58		13,659		85,723
Mortgage-backed securities	Mortgage-backed securities	161,457		13		15,474		145,996		Mortgage-backed securities	64,285		—		8,283		56,002
Asset-backed securities	Asset-backed securities	65,833		—		3,421		62,412		Asset-backed securities	30,536		36		2,366		28,206
Redeemable preferred stocks		3,995		—		178		3,817

Total fixed maturities	Total fixed maturities	$	578,059	$	42	$	51,010	$	527,091	Total fixed maturities	$	239,473	$	109	$	28,849	$	210,733

December 31, 2021
December 31, 2022										December 31, 2022
U.S. government and agency securities	U.S. government and agency securities	$	50,373	$	293	$	1,326	$	49,340	U.S. government and agency securities	$	2,490	$	—	$	105	$	2,385
Foreign government	Foreign government	3,383		84		8		3,459		Foreign government	1,000		—		9		991
States, municipalities and political subdivisions	States, municipalities and political subdivisions	80,385		592		1,081		79,896		States, municipalities and political subdivisions	30,958		2		4,065		26,895
Public utilities	Public utilities	26,103		164		810		25,457		Public utilities	8,936		—		1,242		7,694
Corporate securities	Corporate securities	246,933		2,303		4,793		244,443		Corporate securities	99,062		20		15,739		83,343
Mortgage-backed securities	Mortgage-backed securities	190,383		554		4,197		186,740		Mortgage-backed securities	65,251		—		9,136		56,115
Asset-backed securities	Asset-backed securities	70,569		116		523		70,162		Asset-backed securities	30,038		9		2,788		27,259
Redeemable preferred stocks		4,010		106		11		4,105

Total fixed maturities	Total fixed maturities	$	672,139	$	4,212	$	12,749	$	663,602	Total fixed maturities	$	237,735	$	31	$	33,084	$	204,682

Equity securities are summarized as follows:

June 30, 2022 December 31, 2021
Estimated Fair Value Percent of Total Estimated Fair Value Percent of Total
Mutual funds $ 33,027 88.0 % $ 33,064 87.1 %
Nonredeemable preferred stocks 4,525 12.0 4,894 12.9
Total equity securities $ 37,552 100.0 % $ 37,958 100.0 %


	March 31, 2023				December 31, 2022
	Estimated Fair Value		Percent of Total		Estimated Fair Value		Percent of Total

Mutual funds	$	16,181	100.0	%	$	15,657	100.0	%

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

When we sell investments, we calculate the gain or loss realized on the sale by comparing the sales price (fair value) to the cost or adjusted/amortized cost of the security sold. We determine the cost or adjusted/amortized cost of the security sold using

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

the specific-identification method. The following table details our realized gains (losses) by major investment category for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively:


		2022				2021					2023				2022
		Gains (Losses)		Fair Value at Sale		Gains (Losses)		Fair Value at Sale			Gains (Losses)		Fair Value at Sale		Gains (Losses)		Fair Value at Sale
Three Months Ended June 30,
Fixed maturities		$	23	$	20,423	$	107	$	55,065
Equity securities		—		—		—		—
Short-term investments		—		—		—		7,774
Total realized gains		23		20,423		107		62,839
Fixed maturities		(101)		1,135		(212)		7,195
Equity securities		—		—		(16)		425
Short-term investments		—		—		(3)		1,998
Total realized losses		(101)		1,135		(231)		9,618
Net realized investment losses		$	(78)	$	21,558	$	(124)	$	72,457
Six Months Ended June 30,

Three Months Ended March 31,										Three Months Ended March 31,
Fixed maturities	Fixed maturities	$	654	$	61,841	$	719	$	111,202	Fixed maturities	$	4	$	5,292	$	41	$	12,192
Equity securities	Equity securities	—		—		2		23		Equity securities	—		—		—		—
Short-term investments	Short-term investments	—		33		—		14,830		Short-term investments	—		126		—		—
Total realized gains	Total realized gains	654		61,874		721		126,055		Total realized gains	4		5,418		41		12,192
Fixed maturities	Fixed maturities	(2,490)		45,695		(308)		31,621		Fixed maturities	(87)		(41)		(4)		251
Equity securities	Equity securities	(11)		88		(18)		519		Equity securities	—		—		—		—
Short-term investments	Short-term investments	—		—		(16)		7,984		Short-term investments	—		—		—		—
Total realized losses	Total realized losses	(2,501)		45,783		(342)		40,124		Total realized losses	(87)		(41)		(4)		251
Net realized investment gains (losses)	Net realized investment gains (losses)	$	(1,847)	$	107,657	$	379	$	166,179	Net realized investment gains (losses)	$	(83)	$	5,377	$	37	$	12,443

The table below summarizes our fixed maturities at ~~June 30, 2022~~March 31, 2023 by contractual maturity periods. Actual results may differ as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturities of those obligations.


		June 30, 2022									March 31, 2023
		Cost or Amortized Cost		Percent of Total		Fair Value		Percent of Total			Cost or Amortized Cost		Percent of Total		Fair Value		Percent of Total
Due in one year or less	Due in one year or less	$	24,437	4.2	%	$	24,347	4.6	%	Due in one year or less	$	7,097	3.0	%	$	7,016	3.3	%
Due after one year through five years	Due after one year through five years	188,439		32.6		177,045		33.6		Due after one year through five years	50,754		21.2		46,402		22.0
Due after five years through ten years	Due after five years through ten years	125,905		21.8		107,120		20.3		Due after five years through ten years	82,508		34.5		69,386		32.9
Due after ten years	Due after ten years	11,988		2.1		10,171		1.9		Due after ten years	4,293		1.8		3,721		1.8
Asset and mortgage-backed securities	Asset and mortgage-backed securities	227,290		39.3		208,408		39.6		Asset and mortgage-backed securities	94,821		39.5		84,208		40.0
Total	Total	$	578,059	100.0	%	$	527,091	100.0	%	Total	$	239,473	100.0	%	$	210,733	100.0	%

The following table summarizes our net investment income by major investment category:


	Three Months Ended March 31,
		2023		2022
Fixed maturities		$	1,272	$	1,431
Equity securities		81		66
Cash and cash equivalents		1,304		22
Other investments		6		55
Other assets		—		—
Investment income		2,663		1,574
Investment expenses		(74)		(170)
Net investment income		$	2,589	$	1,404

Portfolio monitoring

1721

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

~~June 30, 2022~~March 31, 2023

~~The following table summarizes our net investment income by major investment category:~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Fixed maturities $ 2,345 $ 3,333 $ 4,576 $ 7,022
Equity securities 196 199 390 328
Cash and cash equivalents 468 39 617 97
Other investments 330 295 475 285
Other assets 5 71 9 112
Investment income 3,344 3,937 6,067 7,844
Investment expenses (204) (254) (449) (578)
Net investment income $ 3,140 $ 3,683 $ 5,618 $ 7,266

~~Portfolio monitoring~~

We have a quarterly portfolio monitoring process to identify and evaluate each fixed-income security whose carrying value may be impaired as the result of a credit loss. For each fixed-income security in an unrealized loss position, if we determine that we intend to sell the security or that it is more likely than not that we will be required to sell the security before recovery of the cost or amortized cost basis for reasons such as liquidity needs, contractual or regulatory requirements, the security's entire decline in fair value is recorded in earnings.

If our management decides not to sell the fixed-income security and it is more likely than not that we will not be required to sell the fixed-income security before recovery of its amortized cost basis, we evaluate whether the decline in fair value has resulted from credit losses or other factors. This is typically indicated by a change in the rating of the security assigned by a rating agency, and any adverse conditions specifically related to the security or industry, among other factors. If the assessment indicates that a credit loss may exist, the present value 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 will be recorded in earnings. Credit loss is limited to the difference between a security's amortized cost basis and its fair value. Any additional impairment not recorded through an allowance for credit losses is recognized in other comprehensive loss.

During the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, we determined that none of our fixed-income securities shown in the table below that are in an unrealized loss position have declines in fair value that are reflected as a result of credit losses. Therefore, no credit loss allowance was recorded at ~~June 30, 2022.~~March 31, 2023. The issuers of our debt security investments continue to make interest payments on a timely basis. We do not intend to sell, nor is it likely that we would be required to sell the debt securities before we recover our amortized cost basis. Equity securities are reported at fair value with changes in fair value recognized in the valuation of equity investments.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

The following table presents an aging of our unrealized investment losses by investment class:


		Less Than Twelve Months					Twelve Months or More						Less Than Twelve Months					Twelve Months or More
		Number of Securities(1)	Gross Unrealized Losses		Fair Value		Number of Securities(1)	Gross Unrealized Losses		Fair Value			Number of Securities(1)	Gross Unrealized Losses		Fair Value		Number of Securities(1)	Gross Unrealized Losses		Fair Value
June 30, 2022
March 31, 2023												March 31, 2023
U.S. government and agency securities	U.S. government and agency securities	62	$	199	$	6,918	30	$	2,845	$	28,633	U.S. government and agency securities	1	$	9	$	990	2	$	73	$	1,421
Foreign governments	Foreign governments	3	19		2,358		—	—		—		Foreign governments	1	9		991		—	—		—
States, municipalities and political subdivisions	States, municipalities and political subdivisions	100	3,809		44,934		12	1,797		13,302		States, municipalities and political subdivisions	8	49		3,732		45	3,308		23,324
Public utilities	Public utilities	21	505		9,892		9	1,291		7,939		Public utilities	—	—		—		12	1,093		7,819
Corporate securities	Corporate securities	246	6,139		97,252		105	15,333		87,762		Corporate securities	35	547		10,964		115	13,112		71,582
Mortgage-backed securities	Mortgage-backed securities	177	4,823		74,066		80	10,651		70,979		Mortgage-backed securities	12	248		3,749		116	8,035		52,254
Asset-backed securities	Asset-backed securities	118	3,160		53,077		14	261		8,486		Asset-backed securities	7	36		3,013		54	2,330		22,632
Redeemable preferred stocks		34	167		3,729		1	11		88

Total fixed maturities	Total fixed maturities	761	$	18,821	$	292,226	251	$	32,189	$	217,189	Total fixed maturities	64	$	898	$	23,439	344	$	27,951	$	179,032

December 31, 2021
December 31, 2022												December 31, 2022
U.S. government and agency securities	U.S. government and agency securities	39	$	971	$	32,167	15	$	355	$	8,126	U.S. government and agency securities	3	$	105	$	2,385	—	$	—	$	—
Foreign governments	Foreign governments	1	8		2,010		—	—		—		Foreign governments	1	9		991		—	—		—
States, municipalities and political subdivisions	States, municipalities and political subdivisions	63	761		41,670		8	320		11,423		States, municipalities and political subdivisions	21	540		7,306		31	3,525		18,853
Public utilities	Public utilities	14	346		12,719		7	464		7,708		Public utilities	8	193		2,286		4	1,049		5,408
Corporate securities	Corporate securities	205	4,589		158,959		12	204		7,896		Corporate securities	78	2,279		24,594		77	13,460		57,765
Mortgage-backed securities	Mortgage-backed securities	138	2,638		111,636		37	1,559		41,786		Mortgage-backed securities	48	1,282		15,259		80	7,854		40,856
Asset-backed securities	Asset-backed securities	111	493		60,566		2	30		1,596		Asset-backed securities	16	795		6,397		46	1,993		19,028
Redeemable preferred stocks		1	2		90		1	9		91

Total fixed maturities	Total fixed maturities	572	$	9,808	$	419,817	82	$	2,941	$	78,626	Total fixed maturities	175	$	5,203	$	59,218	238	$	27,881	$	141,910

(1) This amount represents the actual number of discrete securities, not the number of shares or units of those securities. The numbers are not presented in thousands.

Fair value measurement

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The hierarchy for inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Assets and liabilities recorded on our Unaudited Condensed Consolidated Balance Sheets at fair value are categorized in the fair value hierarchy based on the observability of inputs to the valuation techniques as follows:

Level 1: Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we can access.

Level 2: Assets and liabilities whose values are based on the following:

(a) Quoted prices for similar assets or liabilities in active markets;

(b) Quoted prices for identical or similar assets or liabilities in markets that are not active; or

(c) Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Unobservable inputs reflect our estimates of the assumptions that market participants would use in valuing the assets and liabilities.

We estimate the fair value of our investments using the closing prices on the last business day of the reporting period, obtained from active markets such as the NYSE, Nasdaq and NYSE American. For securities for which quoted prices in active

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

markets are unavailable, we use a third-party pricing service that utilizes quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs to estimate the fair value of those securities for which quoted prices are unavailable. Our estimates of fair value reflect the interest rate environment that existed as of the close of business on ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. Changes in interest rates subsequent to ~~June 30, 2022~~March 31, 2023 may affect the fair value of our investments.

The fair value of our fixed maturities is initially calculated by a third-party pricing service. Valuation service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of proprietary models, produce valuation information in the form of a single fair value for individual fixed-income and other securities for which a fair value has been requested. The inputs used by the valuation service providers include, but are not limited to, market prices from recently completed transactions and transactions of comparable securities, interest rate yield curves, credit spreads, liquidity spreads, currency rates and other information, as applicable. Credit and liquidity spreads are typically implied from completed transactions and transactions of comparable securities. Valuation service providers also use proprietary discounted cash flow models that are widely accepted in the financial services industry and similar to those used by other market participants to value the same financial information. The valuation models take into account, among other things, market observable information as of the measurement date, as described above, as well as the specific attributes of the security being valued, including its term, interest rate, credit rating, industry sector and, where applicable, collateral quality and other issue or issuer specific information. Executing valuation models effectively requires seasoned professional judgment and experience.

Any change in the estimated fair value of our fixed-income securities would impact the amount of unrealized gain or loss we have recorded, which could change the amount we have recorded for our investments and other comprehensive loss on our Unaudited Condensed Consolidated Balance Sheet as of ~~June 30, 2022.~~March 31, 2023.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

The following table presents the fair value of our financial instruments measured on a recurring basis by level at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:

Total Level 1 Level 2 Level 3
June 30, 2022
U.S. government and agency securities $ 36,565 $ — $ 36,565 $ —
Foreign government 3,362 — 3,362 —
States, municipalities and political subdivisions 64,664 — 64,664 —
Public utilities 17,830 — 17,830 —
Corporate securities 192,445 — 192,445 —
Mortgage-backed securities 145,996 — 145,996 —
Asset-backed securities 62,412 — 62,412 —
Redeemable preferred stocks 3,817 481 3,336 —
Total fixed maturities 527,091 481 526,610 —
Mutual funds 33,027 22,369 10,658 —
Non-redeemable preferred stocks 4,525 4,525 — —
Total equity securities 37,552 26,894 10,658 —
Other investments (1)
481 300 181 —
Total investments $ 565,124 $ 27,675 $ 537,449 $ —
December 31, 2021
U.S. government and agency securities $ 49,340 $ — $ 49,340 $ —
Foreign government 3,459 — 3,459 —
States, municipalities and political subdivisions 79,896 — 79,896 —
Public utilities 25,457 — 25,457 —
Corporate securities 244,443 — 244,443 —
Mortgage-backed securities 186,740 — 186,740 —
Asset-backed securities 70,162 — 70,162 —
Redeemable preferred stocks 4,105 535 3,570 —
Total fixed maturities 663,602 535 663,067 —
Mutual Funds 33,064 24,652 8,412 —
Non-redeemable preferred stocks 4,894 4,894 — —
Total equity securities 37,958 29,546 8,412 —
Other investments (1)
381 300 81 —
Total investments $ 701,941 $ 30,381 $ 671,560 $ —

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023


	Total		Level 1		Level 2		Level 3
March 31, 2023
U.S. government and agency securities	$	3,409	$	—	$	3,409	$	—
Foreign government	991		—		991		—
States, municipalities and political subdivisions	28,582		—		28,582		—
Public utilities	7,820		—		7,820		—
Corporate securities	85,723		—		85,723		—
Mortgage-backed securities	56,002		—		56,002		—
Asset-backed securities	28,206		—		28,206		—

Total fixed maturities	210,733		—		210,733		—
Mutual funds	16,181		16,181		—		—





Total investments	$	226,914	$	16,181	$	210,733	$	—

December 31, 2022
U.S. government and agency securities	$	2,385	$	—	$	2,385	$	—
Foreign government	991		—		991		—
States, municipalities and political subdivisions	26,895		—		26,895		—
Public utilities	7,694		—		7,694		—
Corporate securities	83,343		—		83,343		—
Mortgage-backed securities	56,115		—		56,115		—
Asset-backed securities	27,259		—		27,259		—

Total fixed maturities	204,682		—		204,682		—
Mutual Funds	15,657		15,657		—		—



Total equity securities	15,657		15,657		—		—
Other investments (1)	125		—		125		—
Total investments	$	220,464	$	15,657	$	204,807	$	—

(1) Other investments included in the fair value hierarchy exclude these limited partnership interests that are measured at estimated fair value using the net asset value per share (or its equivalent) practical expedient.

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; this is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). There were no financial instruments measured on a non-recurring basis at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

The carrying amounts for the following financial instrument categories approximate their fair values at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, because of their short-term nature: cash and cash equivalents, accrued investment income, premiums receivable, reinsurance recoverable, reinsurance payable, other assets, and other liabilities. The carrying amount of ~~the notes payable to the Florida State Board of Administration, Truist Financial Corporation (Truist), and~~ our senior notes approximate fair value as the interest rates and terms are variable.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

We are responsible for the determination of fair value and the supporting assumptions and methodologies. We have implemented a system of processes and controls designed to provide assurance that our assets and liabilities are appropriately valued. For fair values received from third parties, our processes are designed to provide assurance that the valuation methodologies and inputs are appropriate and consistently applied, the assumptions are reasonable and consistent with the objective of determining fair value, and the fair values are accurately recorded.

At the end of each quarter, we determine whether we need to transfer the fair values of any securities between levels of the fair value hierarchy and, if so, we report the transfer as of the end of the quarter. During the quarter ended ~~June 30, 2022,~~March 31, 2023, we transferred no investments between levels.

For our investments in U.S. government securities that do not have prices in active markets, agency securities, state and municipal governments, and corporate bonds, we obtain the fair values from our investment custodians, which use a third-party valuation service. The valuation service calculates prices for our investments in the aforementioned security types on a ~~month-end~~month-

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

end basis by using several matrix-pricing methodologies that incorporate inputs from various sources. The model the valuation service uses to price U.S. government securities and securities of states and municipalities incorporates inputs from active market makers and inter-dealer brokers. To price corporate bonds and agency securities, the valuation service calculates non-call yield spreads on all issuers, uses option-adjusted yield spreads to account for any early redemption features, and adds final spreads to the U.S. Treasury curve at 3 p.m. (ET) as of quarter end. Since the inputs the valuation service uses in its calculations are not quoted prices in active markets, but are observable inputs, they represent Level 2 inputs.

Other investments

We acquired investments in limited partnerships, recorded in the other investments line of our Unaudited Condensed Consolidated Balance Sheets, and these investments are currently being measured at estimated fair value utilizing a net asset value per share (or its equivalent) practical expedient.

The information presented in the table below is as of ~~June 30, 2022:~~March 31, 2023:

Book Value Unrealized Gain Unrealized Loss Fair Value
June 30, 2022
Limited partnership investments (1)
$ 16,024 $ 936 $ 851 $ 16,109
Certificates of deposit 300 — — 300
Short-term investments 182 — 1 181
Total other investments $ 16,506 $ 936 $ 852 $ 16,590


	Book Value		Unrealized Gain		Unrealized Loss		Fair Value
March 31, 2023
Limited partnership investments (1)	$	2,917	$	633	$	—	$	3,550

(1) Distributions will be generated from investment gains, from operating income, from underlying investments of funds, and from liquidation of the underlying assets of the funds. We estimate that the underlying assets of the funds will be liquidated over the next few months to ~~six~~five years.

Restricted Cash

We are required to maintain assets on deposit with various regulatory authorities to support our insurance operations. The cash on deposit with state regulators is available to settle insurance liabilities. We also use trust funds in certain reinsurance transactions.

The following table presents the components of restricted assets:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Trust funds	Trust funds	$	32,314	$	32,211	Trust funds	$	49,046	$	45,364
Cash on deposit (regulatory deposits)	Cash on deposit (regulatory deposits)	1,047		1,043		Cash on deposit (regulatory deposits)	625		624
Total restricted cash	Total restricted cash	$	33,361	$	33,254	Total restricted cash	$	49,671	$	45,988

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

In addition to the cash held on deposit described above, we also have securities on deposit with regulators, which are presented within our Fixed Maturities or Other Investments lines on the Unaudited Condensed Balance Sheets, dependent upon if they are short-term or long-term in nature. The table below shows the carrying value of those securities held on deposit with regulators.

June 30, 2022 December 31, 2021
Invested assets on deposit (regulatory deposits) $ 3,012 $ 2,885


	March 31, 2023		December 31, 2022
Invested assets on deposit (regulatory deposits)	$	2,491	$	2,616

5)7) EARNINGS PER SHARE (EPS)

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

Basic EPS is 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 the vesting of outstanding restricted stock awards, restricted stock units, performance stock units and stock options. The following table shows the computation of basic and diluted EPS for the three ~~and six~~ month periods ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Numerator:	Numerator:									Numerator:
Net loss attributable to UIHC common stockholders		$	(69,029)	$	(23,510)	$	(102,201)	$	(41,281)
Net income (loss) attributable to UIHC common stockholders										Net income (loss) attributable to UIHC common stockholders		$	267,280	$	(33,172)

Denominator:	Denominator:									Denominator:
Weighted-average shares outstanding	Weighted-average shares outstanding	43,049,227		42,950,666		43,015,114		42,924,662		Weighted-average shares outstanding		43,124,825		42,980,691
Effect of dilutive securities	Effect of dilutive securities	—		—		—		—		Effect of dilutive securities		450,015		—
Weighted-average diluted shares	Weighted-average diluted shares	43,049,227		42,950,666		43,015,114		42,924,662		Weighted-average diluted shares		43,574,840		42,980,691

Earnings available to UIHC common stockholders per share	Earnings available to UIHC common stockholders per share									Earnings available to UIHC common stockholders per share
Basic	Basic	$	(1.60)	$	(0.55)	$	(2.38)	$	(0.96)	Basic		$	6.19	$	(0.77)
Diluted	Diluted	$	(1.60)	$	(0.55)	$	(2.38)	$	(0.96)	Diluted		$	6.14	$	(0.77)

See Note 1618 of these Notes to Unaudited Condensed Consolidated Financial Statements for additional information on the stock grants related to dilutive securities.

6)8) PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Land		$	2,114	$	2,114
Building and building improvements		6,726		9,211

Computer hardware and software (software in progress of $94 and $990, respectively)		42,103		40,358

Computer hardware and software (software in progress of $76 and $82, respectively)						Computer hardware and software (software in progress of $76 and $82, respectively)	$	8,134	$	8,164
Office furniture and equipment	Office furniture and equipment	3,032		3,067		Office furniture and equipment	798		1,414
Leasehold improvements	Leasehold improvements	753		753		Leasehold improvements	316		753
Leased vehicles(1)	Leased vehicles(1)	2,110		2,308		Leased vehicles(1)	11		1,080
Total, at cost	Total, at cost	56,838		57,811		Total, at cost	9,259		11,411
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(28,948)		(26,250)		Less: accumulated depreciation and amortization	(4,536)		(6,118)
Property and equipment, net	Property and equipment, net	$	27,890	$	31,561	Property and equipment, net	$	4,723	$	5,293

(1) Includes vehicles under ~~capital~~financing leases. See Note 1113 of these Notes to Unaudited Condensed Consolidated Financial Statements for further information on leases.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

Depreciation and amortization expense under property and equipment was ~~$1,540,000~~$1,008,000 and ~~$2,074,000~~$1,272,000 for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. Depreciation and amortization expense under property and equipment was $3,250,000 and $4,154,000 for the six months ended June 30, 2022 and 2021,~~ respectively. During the ~~six~~three months ended ~~June 30,~~March 31, 2023, we sold or disposed of leased vehicles totaling $1,069,000. The depreciation on these vehicles totaled $1,037,000 at the time of disposal. We realized a net gain on this disposal of $422,000. In addition, we disposed of office furniture totaling $616,000 during the period. Accumulated depreciation at the time of this disposal totaled $603,000, respectively. During the year ended December 31, 2022, we disposed of computer hardware and software totaling ~~$358,000,~~$13,202,000, primarily related to the retirement of one of our policy ~~system costs~~systems for states in which we no longer write policies. The depreciation on these systems totaled ~~$26,000~~$12,691,000 at the time of disposal. We also sold or disposed of leased vehicles totaling ~~$192,000.~~$1,222,000. The depreciation on these vehicles totaled ~~$180,000~~$1,114,000 prior to disposal. ~~In addition,~~The net gain on sale of these vehicles totaled $738,000. Finally, we sold ~~one of our~~three buildings ~~resulting in a disposal~~and their related assets totaling ~~$2,727,000~~$13,369,000. The depreciation on these buildings and arelated assets totaled $5,129,000 prior to disposal. The net realized gain ~~of $1,529,000. The depreciation~~ on ~~the building~~these sales totaled $290,000. During the year ended December 31, 2021, we disposed of computer hardware and software totaling $1,961,000, primarily related to the retirement of one of our claims systems. This system was fully depreciated prior to disposal.$12,164,000.

7)9) GOODWILL AND INTANGIBLE ASSETS

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

Goodwill

The carrying amount of goodwill ~~both~~ at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022 was ~~$73,045,000.~~ $59,476,000.

No impairment in the value of goodwill was recognized during the three month period ended March 31, 2023. As a result of the strategic decision to place our former subsidiary UPC into an orderly runoff, we recognized an impairment of our personal lines reporting unit's goodwill totaling $13,569,000 during the third quarter of 2022. The goodwill attributable to our commercial lines reporting unit was most recently tested for impairment during the fourth quarter of 2022. It was determined that there was no additional impairment in the value of the asset as of December 31, 2022.

Goodwill allocated to our commercial lines reporting unit was $59,476,000 atMarch 31, 2023 and December 31, 2022. There was no goodwill allocated to our personal lines reporting unit at March 31, 2023 and December 31, 2022.

There was no goodwill acquired or disposed of during the ~~three or~~ ~~six~~three month periods ended ~~June 30, 2022~~March 31, 2023 and ~~2021~~.

~~As a result of the merging of FSIC into UPC and JIC into ACIC, we completed our most recent goodwill impairment testing during the second quarter of~~ 2022 ~~and determined that there was no impairment in the value of the asset as of June 30, 2022.~~ As of this testing, the carrying value of our personal lines reporting unit was negative. Goodwill allocated to our personal lines and commercial lines reporting units was $13,570,000 and $59,475,000, respectively, at both ~~June 30, 2022 and December 31, 2021~~.

~~No impairment loss in the value of goodwill was recognized during the three or~~ ~~six~~ ~~month periods ended June 30, 2022 and~~ ~~2021~~. ~~Additionally, there was no accumulated~~Accumulated impairment related to goodwill was $13,569,000 at ~~June 30, 2022 or~~March 31, 2023 and December 31, ~~2021.~~2022.

Intangible Assets

The following is a summary of intangible assets excluding goodwill recorded as intangible assets on our Unaudited Condensed Consolidated Balance Sheets:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Intangible assets subject to amortization	Intangible assets subject to amortization	$	12,994	$	14,618	Intangible assets subject to amortization	$	10,560	$	11,372
Indefinite-lived intangible assets(1)	Indefinite-lived intangible assets(1)	3,757		3,757		Indefinite-lived intangible assets(1)	1,198		1,398
Total	Total	$	16,751	$	18,375	Total	$	11,758	$	12,770

(1) Indefinite-lived intangible assets are comprised of state insurance and agent licenses, as well as perpetual software licenses.

Intangible assets subject to amortization consisted of the following:

Weighted-average remaining amortization period (in years) Gross carrying amount Accumulated amortization Net carrying amount
June 30, 2022
Value of business acquired — $ 42,788 $ (42,788) $ —
Agency agreements acquired 4.8 34,661 (23,082) 11,579
Trade names acquired 1.8 6,381 (4,966) 1,415
Total $ 83,830 $ (70,836) $ 12,994
December 31, 2021
Value of business acquired — $ 42,788 $ (42,788) $ —
Agency agreements acquired 5.3 34,661 (21,863) 12,798
Trade names acquired 2.3 6,381 (4,561) 1,820
Total $ 83,830 $ (69,212) $ 14,618

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~


	Weighted-average remaining amortization period (in years)	Gross carrying amount		Accumulated amortization		Net carrying amount
March 31, 2023
Value of business acquired	—	$	42,788	$	(42,788)	$	—
Agency agreements acquired	4.0	34,661		(24,910)		9,751
Trade names acquired	1.0	6,381		(5,572)		809
Total		$	83,830	$	(73,270)	$	10,560

December 31, 2022
Value of business acquired	—	$	42,788	$	(42,788)	$	—
Agency agreements acquired	4.3	34,661		(24,300)		10,361
Trade names acquired	1.3	6,381		(5,370)		1,011
Total		$	83,830	$	(72,458)	$	11,372

No impairment in the value of amortizing or non-amortizing intangible assets was recognized during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. However during the three months ended March 31, 2023 and year ended December 31, 2022, we disposed of intangible assets totaling $200,000 and $2,359,000, respectively.

Amortization expense of our intangible assets was $812,000 and ~~$889,000~~$812,000 for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. Amortization expense of our intangible assets was $1,624,000 and $1,932,000 for the six months ended June 30, 2022 and 2021,~~ respectively.

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

Estimated amortization expense of our intangible assets to be recognized by the Company during the remainder of ~~2022~~2023 and over the next five years is as follows:


Year ending December 31,	Year ending December 31,	Estimated Amortization Expense		Year ending December 31,	Estimated Amortization Expense
Remaining in 2022		$	1,623
2023		3,246
Remaining in 2023				Remaining in 2023	$	2,435
2024	2024	2,640		2024	2,640
2025	2025	2,438		2025	2,438
2026	2026	2,438		2026	2,438
2027	2027	609		2027	609
2028				2028	—

8)10) REINSURANCE

Our reinsurance program is designed, utilizing our risk management methodology, to address our exposure to catastrophes. Our program provides reinsurance protection for catastrophes, including hurricanes and tropical storms. These reinsurance agreements are part of our catastrophe management strategy, which is intended to provide our stockholders an acceptable return on the risks assumed in our property business, and to reduce variability of earnings, while providing protection to our policyholders. Although reinsurance agreements contractually obligate our reinsurers to reimburse us for the agreed-upon portion of our gross paid losses, they do not discharge our primary liability.

Our program includes excess of loss and quota share treaties. Our catastrophe reinsurance program, in effect from June 1, 2022 through May 31, 2023, provides coverage for catastrophe losses from named or numbered windstorms and earthquakes up to an exhaustion point of approximately ~~$2,500,000,000.~~$2,500,000,000 in the aggregate, including coverage related to our former insurance subsidiary, UPC. Under our core catastrophe excess of loss treaty, retention on a first and second event is $16,400,000 each. During the third quarter, one of the our reinsurers participating on the $25,000,000 excess of $20,000,000 layer of the core catastrophe program exercised a contractual right to terminate their participation due to Demotech's downgrade of UPC's Financial Stability Rating. We were unsuccessful in replacing this coverage in the open market so our captive reinsurer, UPC Re, stepped into the $25,000,000 excess of $20,000,000 layer which was subsequently impacted by Hurricane Ian resulting in an additional retained loss of $20,100,000. The exhaustion point of IIC's catastrophe reinsurance program is approximately $200,000,000 in the aggregate, with a retention of $3,000,000 per occurrence, covering all perils.

During the third quarter of 2022, the Company's core catastrophe reinsurance program was impacted by Hurricane Ian. As a result, the Company has approximately $508 million of occurrence limit remaining for Ian all of which is attributable to ACIC only. After reinstatement premiums of approximately $15.4 million, the Company, with its former subsidiary UPC has approximately $993 million of aggregate limit remaining after Ian, based on our estimated ultimate net loss subject to the core catastrophe reinsurance program.

Effective ~~December 13, 2021,~~January 1, 2023, we renewed our all other perils catastrophe excess of loss agreement. The agreement provides protection from catastrophe loss events other than named windstorms and earthquakes up to ~~$110,000,000.~~$101,000,000.

During the third quarter of 2022, one of our private reinsurers who held a 100% share of the $15,000,000 in excess of $15,000,000 layer on our all other perils catastrophe excess of loss agreement notified us of their intent to terminate the agreement due to the contractual provision regarding the change in our former subsidiary UPC's statutory surplus being greater than 25%. We agreed to a termination and commutation date of September 30, 2022 for this contract. This change resulted in approximately $1,300,000 of ceded premium savings that would have otherwise been due in the fourth quarter of 2022 and the Company retaining all the risk for any non-hurricane catastrophe losses up to $30,000,000, excluding any quota share recoveries.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

The table below outlines our quota share agreements in effect for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. The impacts of these quota share agreements on our former subsidiay, UPC's financial statements are included in discontinued operations.

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

Reinsurer

Companies in Scope (1)

Effective Dates

Cession Rate

States in Scope

External third-party

UPC, FSIC & ACIC

06/01/2022 - 06/01/2023

10% (2)

Florida, Louisiana, Texas

TypTap

UPC

06/01/2022 - 06/01/2023

100% (3)

Georgia, North Carolina, South Carolina

External third-party

UPC, FSIC & ACIC

12/31/2021 - 12/31/2022

8% (2)

Florida, Louisiana, Texas

HCPCI

UPC

12/31/2021 - 06/01/2022

85%

Georgia, North Carolina, South Carolina

External third-party

UPC & FSIC

12/31/2021 - 12/31/2022

25% (4)

Florida, Louisiana, Texas

HCPCI / TypTap (5)

UPC

06/01/2021 - 06/01/2022

100% (3)

Connecticut, New Jersey, Massachusetts, Rhode Island

External third-party

UPC, FSIC & ACIC (6)

06/01/2021 - 06/01/2022

15% (2)

Florida, Georgia, Louisiana, North Carolina, South Carolina, Texas

IIC

UPC

12/31/2020 - 12/31/2022

100%

New York

~~HCPCI~~

~~UPC~~

~~12/31/2020 - 06/01/2021~~

~~69.5%~~

~~Connecticut, New Jersey, Massachusetts, Rhode Island~~

~~External third-party~~

~~UPC, FSIC & ACIC~~

~~12/30/2020 - 12/31/2021~~

8% ~~(2)~~

~~Connecticut, Florida, Georgia, Louisiana, Massachusetts, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas~~

~~External third-party~~

~~UPC, FSIC & ACIC~~ ~~(6)~~

~~06/01/2020 - 06/01/2021~~

~~15%~~ ~~(2)~~

~~Connecticut, Florida, Georgia, Louisiana, Massachusetts, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas~~

~~External third-party~~

~~UPC & FSIC~~

~~06/01/2020 - 06/01/2021~~

~~7.5%~~ ~~(2)~~

~~Connecticut, Florida, Georgia, Louisiana, Massachusetts, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas~~

(1) Effective May 31, 2022, FSIC was merged into UPC, with UPC being the surviving entity.

(2) This treaty provides coverage for all catastrophe perils and attritional losses incurred. For all catastrophe perils, the quota share agreement provides ground- up protection effectively reducing our retention for catastrophe losses.

(3) This treaty provides coverage on our in-force, new and renewal policies until these states are transitioned to HCPCI or TypTap upon renewal.

(4) This treaty provides coverage on non-catastrophe losses on policies in-force on the effective date of the agreement.

(5) Cessions are split 50% to HCPCI and 50% to TypTap.

(6) This treaty was amended effective December 31, 2020 to include ACIC.

Reinsurance recoverable at the balance sheet dates consists of the following:


		June 30,		December 31,			March 31,		December 31,
		2022		2021			2023		2022
Reinsurance recoverable on unpaid losses and loss adjustment expenses	Reinsurance recoverable on unpaid losses and loss adjustment expenses	$	561,591	$	749,600	Reinsurance recoverable on unpaid losses and loss adjustment expenses	$	646,011	$	732,254
Reinsurance recoverable on paid losses and loss adjustment expenses	Reinsurance recoverable on paid losses and loss adjustment expenses	195,920		247,520		Reinsurance recoverable on paid losses and loss adjustment expenses	146,339		64,292
Reinsurance recoverable (1)	Reinsurance recoverable (1)	$	757,511	$	997,120	Reinsurance recoverable (1)	$	792,350	$	796,546

(1) Our reinsurance recoverable balance is net of our allowance for expected credit losses. More information related to this allowance can

be found in Note 1214.

We write the majority of our flood insurance policies under an agreement with the National Flood Insurance Program (NFIP). We cede 100% of the premiums written and the related risk of loss to the federal government. We earn commissions for the issuance of flood policies based upon a fixed percentage of net written premiums and the processing of flood claims based upon a fixed percentage of incurred losses, and we can earn additional commissions by meeting certain growth targets for the number of in-force policies. We recognized commission revenue from our flood program of $407,000 and $608,000 for the three month periods ended June 30, 2022 and 2021, respectively and $617,000 and $890,000 for the six month periods ended

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

June 30, 2022 and 2021, respectively. On June 9, 2022, we entered into a renewal rights agreement with Wright National Flood Insurance Company to sell our entire NFIP Write Your Own flood insurance business.

9)11) LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSE (LAE)

We determine the reserve for unpaid losses on an individual case basis for all incidents reported. The liability also includes amounts for incurred but not reported (IBNR) claims as of the balance sheet date.

The table below shows the analysis of our reserve for unpaid losses for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ on a GAAP basis:

June 30,
2022 2021
Balance at January 1 $ 1,084,450 $ 1,089,966
Less: reinsurance recoverable on unpaid losses 749,600 674,746
Net balance at January 1 $ 334,850 $ 415,220
Incurred related to:
Current year 172,243 204,448
Prior years 9,199 29,397
Total incurred $ 181,442 $ 233,845
Paid related to:
Current year 70,971 83,188
Prior years 156,918 180,594
Total paid $ 227,889 $ 263,782
Net balance at June 30 $ 288,403 $ 385,283
Plus: reinsurance recoverable on unpaid losses 561,591 751,092
Balance at June 30 $ 849,994 $ 1,136,375
Composition of reserve for unpaid losses and LAE:
Case reserves $ 357,647 $ 417,163
IBNR reserves 492,347 719,212
Balance at June 30 $ 849,994 $ 1,136,375

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023


	March 31,
	2023		2022
Balance at January 1	$	842,958	$	250,642
Less: reinsurance recoverable on unpaid losses	732,254		176,096
Net balance at January 1	$	110,704	$	74,546

Incurred related to:
Current year	19,577		29,379
Prior years	(3,165)		(3,064)
Total incurred	$	16,412	$	26,315
Paid related to:
Current year	10,654		11,219
Prior years	14,108		18,358
Total paid	$	24,762	$	29,577

Net balance at March 31	$	102,354	$	71,284
Plus: reinsurance recoverable on unpaid losses	646,011		168,289
Balance at March 31	$	748,365	$	239,573

Composition of reserve for unpaid losses and LAE:
Case reserves	$	284,679	$	119,969
IBNR reserves	463,686		119,604
Balance at March 31	$	748,365	$	239,573

Based upon our internal analysis and our review of the annual statement of actuarial opinion provided by our actuarial consultants at December 31, ~~2021,~~2022, we believe that the reserve for unpaid losses reasonably represents the amount necessary to pay all claims and related expenses which may arise from incidents that have occurred as of the balance sheet date.

As reflected in the table above, we had ~~adverse~~favorable development in both 2023 and 2022 related to prior year losses. This ~~adverse~~favorable development came as a result of ~~the strengthening of our catastrophe reserves~~re-estimating ultimate losses in ~~2022~~2023 based on historical loss trends. The loss payments made by the Company during the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, were lower than the loss payments made during the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, due to the settling of claims related to ~~the unprecedented number of catastrophic events that took place in 2020.~~non-tropical storm catastrophe events. Case and IBNR reserves ~~decreased~~and reinsurance recoverable on unpaid losses increased when compared to the prior period as a result of ~~decreased catastrophe losses and our reduced exposure base in~~Hurricane Ian, which made landfall during the third quarter of 2022. Reinsurance recoverable on unpaid losses decreased as a result of the higher frequency of 2020 catastrophe activity coupled with increases in our ceded losses related to Hurricane Irma and Winter Storm Uri in the first half of 2021.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

~~10)~~12) LONG-TERM DEBT

Long-Term Debt

The table below presents all long-term debt outstanding as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


			Effective Interest Rate		Carrying Value at												Effective Interest Rate		Carrying Value at
		Maturity		June 30, 2022			December 31, 2021				Maturity							March 31, 2023			December 31, 2022
Senior Notes	Senior Notes	December 15, 2027		6.25%			$	150,000				$	150,000		Senior Notes	December 15, 2027		7.25%			$	150,000			$	150,000
Florida State Board of Administration Note(1)	Florida State Board of Administration Note(1)	July 1, 2026	2.35%		4,707				5,294			Florida State Board of Administration Note(1)		July 1, 2026			N/A		—				—
Truist Term Note Payable(2)	Truist Term Note Payable(2)	May 26, 2031	2.69%		3,091				3,265			Truist Term Note Payable(2)		May 26, 2031			N/A		—				—
Total long-term debt	Total long-term debt				$	157,798			$	158,559		Total long-term debt							$	150,000			$	150,000

(1) Our Florida State Board of Administration Note was held by our former subsidiary, UPC.

(2) Our Truist Term Note Payable was repaid in full on August 12, 2022.

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

Senior Notes Payable

On December 13, 2017, we issued $150,000,000 of 10-year senior notes (the Senior Notes) that will mature on December 15, 2027 and bear interest at a rate equal to 6.25% per annum payable semi-annually on each June 15 and December 15, commencing June 15, 2018. The Senior Notes are senior unsecured obligations of the Company. We may redeem the Senior Notes at our option, at any time and from time to time in whole or in part, prior to September 15, 2027, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon from the date of redemption to the date that is three months prior to ~~maturity.~~maturity, plus accrued and unpaid interest thereon. On or after that date, we may redeem the Senior Notes at ~~par.~~par, plus accrued and unpaid interest thereon. On December 8, 2022, the Kroll Bond Rating Agency, LLC announced a downgrade of our issuer and debt ratings from BBB- to BB+. As a result, pursuant to our agreement, the interest rate of our Senior Notes increased from 6.25% to 7.25% effective on the next interest payment date of June 15, 2023.

Florida State Board of Administration Note Payable

On September 22, 2006, we issued a $20,000,000, 20-year note payable to the Florida State Board of Administration (the SBA Note). For the first three years of the SBA Note we were required to pay interest only. On October 1, 2009, we began to repay the principal in addition to interest. The SBA Note bears an annual interest rate equivalent to the 10-year Constant Maturity Treasury rate (as defined in the SBA Note agreement), which resets quarterly. This note was held by our former insurance subsidiary, UPC. On February 27, 2023, UPC was placed into receivership with the Florida Department of Financial Services, divesting our ownership of UPC.

Truist Term Note Payable

On May 26, 2016, we issued a $5,200,000, 15-year term note payable to Truist (the Truist Note), with the intent to use the funds to purchase, renovate, furnish and equip our principal executive office. The Truist Note bears interest at 1.65% in excess of the one-month LIBOR, which resets monthly. LIBOR was phased out at the end of 2021, however, the Intercontinental Exchange will continue to publish one-month LIBOR settings through 2023. ~~In the event of default,~~The outstanding Truist ~~may, among other things, declare its loan immediately due and~~Note payable ~~require us to pledge additional collateral to the bank, and take possession of and foreclose upon~~balance, including applicable interest, was repaid in full on August 12, 2022. Therefore, effective August 12, 2022, Truist no longer holds our principal executive office ~~which has been pledged to~~as collateral and may not take possession of or foreclose upon the ~~bank as security for the loan.~~office.

Financial Covenants

Senior Notes - Our Senior Notes provide that the Company and its subsidiaries shall not incur any indebtedness unless no default exists and the Company’s leverage ratio as of the last day of any annual or quarterly period (the balance sheet date) immediately preceding the date on which such additional indebtedness is incurred would have been no greater than 0.3:1, determined on a pro forma basis as if the additional indebtedness and all other indebtedness incurred since the immediately preceding balance sheet date had been incurred and the proceeds therefrom applied as of such day. The Company and its subsidiaries also may not create, assume, incur or permit to exist any indebtedness for borrowed money that is secured by a lien on the voting stock of any significant subsidiary without securing the Senior Notes equally. The Company may not issue, sell, assign, transfer or otherwise dispose of, directly or indirectly, any of the capital stock of the Company’s significant subsidiaries as of the issue date of the Senior Notes (except to the Company or to one or more of the Company’s other subsidiaries, or for the purpose of qualifying directors or as may be required by law or regulation), subject to certain exceptions. At December 31, ~~2021,~~2022, while our leverage ratio was greater than the allowed ratio above, we did not incur any additional debt during the period and as a result, we were in compliance with the covenants in the Senior Notes.

SBA Note - Our SBA Note ~~requires~~required that UPC ~~maintain~~maintained either a 2:1 ratio of net written premium to surplus, or net writing ratio, or a 6:1 ratio of gross written premium to surplus, or gross writing ratio, to avoid additional interest penalties. The SBA

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

Note agreement ~~defines~~defined surplus for the purpose of calculating the required ratios as the $20,000,000 of capital contributed to UPC under the agreement plus the outstanding balance of the note. Should UPC ~~fail~~have failed to exceed either a net writing ratio of 1.5:1 or a gross writing ratio of 4.5:1, UPC's interest rate ~~will increase~~would have increased by 450 basis points above the 10-year Constant Maturity Treasury rate, which was ~~2.35%~~3.76% at the end of ~~June 2022.~~March 2023. Any other writing ratio deficiencies ~~result~~resulted in an interest rate penalty of 25 basis points above the stated rate of the note. Our SBA Note further ~~provides~~provided that the Florida State Board of Administration may, among other things, declare its loan immediately due and payable upon any default existing

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

under the SBA Note; however, any payment is subject to approval by the insurance regulatory authority. At ~~June 30, 2022,~~March 31, 2023, we ~~were in compliance with the covenants in the SBA Note.~~

~~Truist Note -~~ ~~Effective June 2, 2021, our Truist Note Agreement was amended to remove all financial covenants, therefore, at June 30, 2022, the financial covenants~~ were no longer ~~in effect.~~the holders of the SBA Note.

Debt Issuance Costs

The table below presents the rollforward of our debt issuance costs paid, in conjunction with the debt instruments described above, during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		2022		2021			2023		2022
Balance at January 1,	Balance at January 1,	$	1,998	$	2,335	Balance at January 1,	$	1,645	$	1,998
Additions	Additions	—		—		Additions	—		—
Amortization	Amortization	(168)		(169)		Amortization	(83)		(84)
Balance at June 30,		$	1,830	$	2,166
Balance at March 31,						Balance at March 31,	$	1,562	$	1,914

~~11)~~13) COMMITMENTS AND CONTINGENCIES

Litigation

We are involved in claims-related legal actions arising in the ordinary course of business. We accrue amounts resulting from claims-related legal actions in unpaid losses and LAE during the period that we determine an unfavorable outcome becomes probable and we can estimate the amounts. Management makes revisions to our estimates based on its analysis of subsequent information that we receive regarding various factors, including: (i) per claim information; (ii) company and industry historical loss experience; (iii) judicial decisions and legal developments in the awarding of damages; and (iv) trends in general economic conditions, including the effects of inflation.

At ~~June 30, 2022,~~March 31, 2023, the Company is involved in legal proceedings whereby on August 18, 2021, a former employee of Skyway Legal Services, LLC, filed a complaint against the Company in the United States District Court for the District of Delaware. The lawsuit alleges violations of and damages arising under Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967, and seeks damages in an unspecified amount. The Company, a named party to the lawsuit, denies that it employed the plaintiff and disputes the claims set forth in the lawsuit. On September 27, 2022, venue was transferred to the United States District Court for the Middle District of Florida, Tampa Division. The Company believes that an unfavorable outcome is neither probable nor estimable.

~~In addition, on January 13, 2022,~~ ~~Southern Florida Restoration (SFR) Services, LLC v. United Property and Casualty Insurance Company, et al.~~ was filed in the United States District Court for the Middle District of Florida. The District Court dismissed the lawsuit on its own accord on January 14, 2022. SFR Services then filed an amended complaint on January 26, 2022. The complaint alleges four causes of action: (i) violation of the Federal Civil Racketeer Influenced and Corrupt Organizations statute (18 U.S.C. § 1962(c)), (ii) breach of contract, (iii) fraud, and (iv) violation of the Florida Unfair Insurance Trade Practices Act (Fla. Stat. Chpt. 626). The plaintiff seeks unspecified damages. The Company believes that an unfavorable outcome is neither probable nor estimable. The defendants moved to dismiss the lawsuit on March 25, 2022 and their motion remains pending.

Commitments to fund partnership investments

We have fully funded ~~three~~one limited partnership investments and have committed to fund our remaining ~~six~~ limited partnership ~~investments.~~investment. The amount of unfunded commitments was ~~$6,785,000~~$4,242,000 and ~~$1,969,000~~$4,238,000 at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

Leases

We, as lessee, have entered into leases of commercial office space of various term lengths. In addition to office space, we lease office equipment and a parking lot under operating leases and vehicles under finance leases.

~~The classification of operating and finance lease asset and liability balances within the Unaudited Condensed Consolidated Balance Sheets was as follows:~~

Financial Statement Line June 30, 2022 December 31, 2021
Assets
Operating lease assets Other assets $ 1,398 $ 1,689
Financing lease assets Property and equipment, net 264 477
Total lease assets $ 1,662 $ 2,166
Liabilities
Operating lease liabilities Operating lease liability $ 1,600 $ 1,934
Financing lease liabilities Other liabilities 8 16
Total lease liabilities $ 1,608 $ 1,950

~~The components of lease expenses were as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Operating lease expense $ 160 $ 166 $ 320 $ 331
Financing lease expense:
Amortization of leased assets 113 196 242 391
Interest on lease liabilities 1 — 1 —
Net lease expense $ 274 $ 362 $ 563 $ 722

~~At June 30, 2022, future minimum gross lease payments relating to these non-cancellable operating and finance lease agreements were as follows:~~

Operating Leases Finance Leases Total
Remaining in 2022 $ 319 $ 6 $ 325
2023 619 4 623
2024 602 — 602
2025 257 — 257
2026 32 — 32
Thereafter 1,160 — 1,160
Total undiscounted future minimum lease payments 2,989 10 2,999
Less: Imputed interest (1,389) (2) (1,391)
Present value of lease liabilities $ 1,600 $ 8 $ 1,608

3032

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

~~June 30, 2022~~March 31, 2023

The classification of operating and finance lease asset and liability balances within the Unaudited Condensed Consolidated Balance Sheets was as follows:


	Financial Statement Line	March 31, 2023		December 31, 2022
Assets
Operating lease assets	Other assets	$	1,096	$	1,278
Financing lease assets	Property and equipment, net	2		51
Total lease assets		$	1,098	$	1,329

Liabilities
Operating lease liabilities	Operating lease liability	$	1,412	$	1,689
Financing lease liabilities	Other liabilities	—		2
Total lease liabilities		$	1,412	$	1,691

The components of lease expenses were as follows:


	Three Months Ended March 31,
		2023		2022
Operating lease expense		$	222	$	160
Financing lease expense:
Amortization of leased assets		7		129


Net lease expense		$	229	$	289

At March 31, 2023, future minimum gross lease payments relating to these non-cancellable operating and finance lease agreements were as follows:


	Operating Leases		Finance Leases		Total
Remaining in 2023	$	682	$	—	$	682
2024	593		—		593
2025	222		—		222
2026	11		—		11
2027	—		—		—
Thereafter	—		—		—
Total undiscounted future minimum lease payments	1,508		—		1,508
Less: Imputed interest	(96)		—		(96)
Present value of lease liabilities	$	1,412	$	—	$	1,412

Weighted average remaining lease term and discount rate related to operating and finance leases were as follows:

June 30, 2022 December 31, 2021
Weighted average remaining lease term (months)
Operating leases 43 51
Financing leases 14 17
Weighted average discount rate
Operating leases 3.64 % 3.61 %
Financing leases 3.27 % 3.27 %


	March 31, 2023		December 31, 2022
Weighted average remaining lease term (months)
Operating leases	23		25
Financing leases	—		9

Weighted average discount rate
Operating leases	3.70	%	3.79	%
Financing leases	—	%	3.27	%

~~Other~~

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

There were no other cash ~~and~~or non-cash related activities ~~were as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Cash paid for amounts included in the measurement of lease liabilities
Investing cash flows from financing leases $ — $ 33 $ — $ 33
Right-of-use assets obtained in exchange for new financing lease liabilities — 33 — 33
during the three months ended March 31, 2023 and 2022.

Capital lease amortization expenses are included in depreciation expense in our Unaudited Condensed Consolidated Statements of Comprehensive Loss. See Note 68 of these Notes to Unaudited Condensed Consolidated Financial Statements for more information regarding depreciation expense, Note 1012 for information regarding commitments related to long-term debt, and Note 1315 for information regarding commitments related to regulatory actions.

Subleases

We previously leased and occupied office space in which we no longer operate. Effective October 1, 2022, this office space is now subleased to a third-party. This sublease is effective from October 1, 2022 through July 31, 2025, with no option to extend. During the three months ended March 31, 2023, we recognized $33,000 of income related to this sublease, exclusive of the lease expense associated with the original lease. During the year ended December 31, 2022, we recognized $297,000 of income related to this sublease, exclusive of the lease expense associated with the original lease.

Additionally, as a result of the sublease, we evaluated our right-of-use asset associated with the original lease for impairment, using the undiscounted cash flows from the sublease. During the year ended December 31, 2022, we recognized impairment of $175,000, which was recognized in the results of our personal lines operating segment.

Employee Retention Credit

A series of legislation was enacted in the United States during 2020 and 2021 in response to the COVID-19 pandemic that provided financial relief for businesses impacted by government-mandated shutdowns, work stoppages, or other losses suffered by employers. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided an employee retention credit, which is a refundable tax credit against certain employment taxes of up to $5,000 per employee for eligible employers. The tax credit is equal to 50% of qualified wages paid to employees during a quarter, capped at $10,000 of qualified wages per employee. During the second quarter of 2022, we evaluated our eligibility and filed for a $10,161,000 refund in connection with our Employee Retention Tax Credit for the tax year ended December 31, 2021. As of ~~June 30,~~March 31, 2022, we have ~~not~~ received ~~a refund or response~~$5,718,000 from the Internal Revenue Service ~~regarding~~related to this refund. A gain contingency is an uncertain situation that will be resolved in the future, possibly resulting in a gain. We have not recorded the recognition of this gain contingency, except for what has already been received and what was received after the balance sheet date prior to finalizing our results for the quarter, prior to settlement of the underlying event.

While we believe the likelihood of the refund approval being reversed is low, a loss contingency to the extent of the refunds received and recognized is present. We will continue to monitor the matter for further developments that could affect the outcome of these contingencies and will make any appropriate adjustments each quarter.

~~12)~~

14) ALLOWANCE FOR EXPECTED CREDIT LOSSES

We are exposed to credit losses primarily through ~~three~~four different pools of assets based on similar risk characteristics: premiums receivable for direct written business; reinsurance recoverables from ceded losses to our reinsurers; our investment holdings; and our notes receivable. We estimate the expected credit losses based on historical trends, credit ratings assigned to reinsurers by rating agencies, average default rates, current economic conditions, and reasonable and supportable forecasts of future economic conditions that affect the collectability of the reported amounts over its expected life. Changes in the relevant information may significantly affect the estimates of expected credit losses.

The allowance for credit losses is deducted from the amortized cost basis of the assets to present their net carrying value at the amount expected to be collected. Each period, the allowance for credit losses is adjusted through earnings to reflect expected credit losses over the remaining lives of the assets.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

The following tables summarize our allowance for expected credit losses by pooled asset for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:

June 30, 2022 December 31, 2021 Provision for expected credit losses Write-offs June 30, 2022
Premiums Receivable $ 32 $ (68) $ 62 $ 26
Reinsurance Recoverables 563 (223) — 340
Total $ 595 $ (291) $ 62 $ 366
June 30, 2021 December 31, 2020 Provision for expected credit losses Write-offs June 30, 2021
Premiums Receivable $ 140 $ (124) $ 47 $ 63
Reinsurance Recoverables 386 110 — 496
Note Receivable 20 546 — 566
Total $ 546 $ 532 $ 47 $ 1,125

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023


March 31, 2023	December 31, 2022		Provision for expected credit losses		Write-offs		March 31, 2023
Premiums Receivable	$	32	$	(34)	$	29	$	27
Reinsurance Recoverables	333		(183)		—		150

Total	$	365	$	(217)	$	29	$	177

March 31, 2022	December 31, 2021		Provision for expected credit losses		Write-offs		March 31, 2022
Premiums Receivable	$	16	$	(14)	$	10	$	12
Reinsurance Recoverables	58		22		—		80

Total	$	74	$	8	$	10	$	92

~~13)~~15) STATUTORY ACCOUNTING AND REGULATION

The insurance industry is heavily regulated. State laws and regulations, as well as national regulatory agency requirements, govern the operations of all insurers such as our insurance subsidiaries. The various laws and regulations require that insurers maintain minimum amounts of statutory surplus and risk-based capital, restrict insurers' ability to pay dividends, specify allowable investment types and investment mixes, and subject insurers to assessments. Effective June 1, 2022, our insurance subsidiaries JIC and ACIC were merged, with ACIC being the surviving entity. Effective May 31, 2022, our former insurance subsidiaries UPC and FSIC were merged, with UPC being the surviving entity. Both UPC and ACIC are domiciled in Florida, while IIC is domiciled in New York. At ~~June 30, 2022,~~March 31, 2023, and during the three ~~and six~~ months then ended, ~~our insurance subsidiaries~~ACIC and IIC met all regulatory requirements of the states in which they operate. As of December 31, 2022, UPC was determined to be insolvent and effective February 27, 2023 was placed into receivership by the DFS.

During ~~2022,~~2023, we received an assessment notice from the Florida Insurance Guaranty Association (FIGA). This assessment will be ~~1.3%~~0.7% on direct written premium of all covered lines of business in Florida to cover the cost of an insurance company facing insolvency. This assessment is in addition to ~~FIGA's 0.7%~~the 1.3% assessment, described below, and is recoupable from policyholders. During ~~2021,~~2022, we received an assessment notice from ~~FIGA of 0.7%~~FIGA. This assessment will be 1.3% on ~~all~~ direct written premium of ~~Florida~~all covered lines of business ~~during 2022. In addition, during 2021, we received an assessment notice from the Louisiana Insurance Guarantee Association (LIGA). LIGA is assessing property and casualty insurers $100,000,000~~ in ~~the aggregate~~Florida to cover the cost of ~~two regional~~an insurance ~~companies~~company facing insolvency.

The National Association of Insurance Commissioners (NAIC) has Risk-Based Capital (RBC) guidelines for insurance companies that are designed to assess capital adequacy and to raise the level of protection that statutory surplus provides for policyholders. Most states, including Florida and New York, have enacted statutory requirements adopting the NAIC RBC guidelines, and insurers having less statutory surplus than required will be subject to varying degrees of regulatory action, depending on the level of capital inadequacy. State insurance regulatory authorities could require an insurer to cease operations in the event the insurer fails to maintain the required statutory capital.

The state laws of Florida and New York permit an insurer to pay dividends or make distributions out of that part of statutory surplus derived from net operating profit and net realized capital gains. The state laws further provide calculations to determine the amount of dividends or distributions that can be made without the prior approval of the insurance regulatory authorities in those states and the amount of dividends or distributions that would require prior approval of the insurance regulatory authorities in those states. Statutory RBC requirements may further restrict our insurance subsidiaries' ability to pay

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

dividends or make distributions if the amount of the intended dividend or distribution would cause statutory surplus to fall below minimum RBC requirements.

~~The SBA Note is considered a surplus note pursuant~~ Additionally, in connection with our former subsidiary UPC's plan for run off, IIC has agreed to ~~statutory accounting principles. As a result, UPC is subject to the authority~~not pay ordinary dividends without prior approval of the ~~Insurance Commissioner~~New York Department of ~~the State of Florida with regard to its ability to repay principal and interest on the SBA Note. Any payment of principal or interest requires permission from the insurance regulatory authority.~~Financial Services until January 1, 2025.

Our insurance subsidiaries must each file with the various insurance regulatory authorities an “Annual Statement” which reports, among other items, statutory net income (loss) and surplus as regards policyholders, which is called stockholders' equity under GAAP. ~~For~~The table below details the statutory net income (loss) for each of our regulated entities for the three ~~and six~~ months ended March 31, 2023 and 2022.

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023


	Three Months Ended March 31,
		2023		2022
ACIC(1)		18,230		6,110
IIC		(2,203)		(3,985)
Total		$	16,027	$	2,125

(1) ACIC results are inclusive of JIC as these entities were merged effective June 30, 2022, our combined recorded statutory net loss was $59,207,000 and $118,743,000, respectively. For the three and six months ended June 30, 2021, our combined recorded statutory net loss was $54,777,000 and $98,777,000, respectively.1, 2022.

Our insurance subsidiaries must maintain capital and surplus ratios or balances as determined by the regulatory authority of the states in which they are domiciled. At ~~June 30, 2022,~~March 31, 2023, we met these requirements. The table below details the amount of surplus as regards policyholders for each of our regulated entities at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021 was $210,481,000 and $341,630,000, respectively.~~2022.


	March 31, 2023		December 31, 2022
ACIC(1)	101,811		77,511
IIC	23,966		26,152
Total	$	125,777	$	103,663

(1) ACIC results are inclusive of JIC as these entities were merged effective June 1, 2022.

~~14)~~16) ACCUMULATED OTHER COMPREHENSIVE LOSS

We report changes in other comprehensive ~~loss~~income (loss) items within comprehensive ~~loss~~income (loss) on the Unaudited Condensed Consolidated Statements of Comprehensive ~~Loss,~~Income (Loss), and we include accumulated other comprehensive ~~loss~~income (loss) as a component of stockholders' equity on our Unaudited Condensed Consolidated Balance Sheets.

The table below details the components of accumulated other comprehensive loss at period end:


		Pre-Tax Amount		Tax (Expense) Benefit		Net-of-Tax Amount			Pre-Tax Amount		Tax (Expense) Benefit		Net-of-Tax Amount
December 31, 2021		$	(8,593)	$	2,062	$	(6,531)
December 31, 2022								December 31, 2022	$	(33,041)	$	2,094	$	(30,947)
Changes in net unrealized losses on investments	Changes in net unrealized losses on investments	(44,209)		494		(43,715)		Changes in net unrealized losses on investments	5,574		(315)		5,259
Reclassification adjustment for realized losses	Reclassification adjustment for realized losses	1,847		(462)		1,385		Reclassification adjustment for realized losses	(1,260)		315		(945)
June 30, 2022		$	(50,955)	$	2,094	$	(48,861)
Impact of deconsolidation of discontinued operations								Impact of deconsolidation of discontinued operations	$	(3)	$	1,007	$	1,004
March 31, 2023								March 31, 2023	$	(28,730)	$	3,101	$	(25,629)

~~15)~~17) STOCKHOLDERS' EQUITY

Our Board of Directors declared dividends on our outstanding shares of common stock to stockholders of record as follows for the periods presented (in thousands, except per share amounts):

Six Months Ended June 30,
2022 2021
Per Share Amount Aggregate Amount Per Share Amount Aggregate Amount
First Quarter $ 0.06 $ 2,589 $ 0.06 $ 2,582
Second Quarter — — 0.06 2,591


	Three Months Ended March 31,
	2023				2022
	Per Share Amount		Aggregate Amount		Per Share Amount		Aggregate Amount
First Quarter	$	—	$	—	$	0.06	$	2,589

In July 2019, our Board of Directors authorized a stock repurchase plan of up to $25,000,000 of our common stock. As of ~~June 30, 2022,~~March 31, 2023, we had not yet repurchased any shares under this stock repurchase plan. The timing and volume of repurchases are at the discretion of management, based on the capital needs of the business, the market price of UIHC common stock, and general market conditions. The plan has no expiration date, and the plan may be suspended or discontinued at any time.

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

March 31, 2023

See Note 1618 in these Notes to Unaudited Condensed Consolidated Financial Statements for information regarding stock-based compensation activity.

~~16)~~18) STOCK-BASED COMPENSATION

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~June 30, 2022~~

We account for stock-based compensation under the fair value recognition provisions of ASC Topic 718 - Compensation - Stock Compensation. We recognize stock-based compensation cost over the award’s requisite service period on a straight-line basis for time-based restricted stock grants and performance-based restricted stock grants. We record forfeitures as they occur for all stock-based compensation.

The following table presents our total stock-based compensation expense:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Employee stock-based compensation expense	Employee stock-based compensation expense									Employee stock-based compensation expense
Pre-tax	Pre-tax	$	141	$	62	$	531	$	225	Pre-tax		$	309	$	390
Post-tax (1)	Post-tax (1)	111		49		419		178		Post-tax (1)		244		308
Director stock-based compensation expense	Director stock-based compensation expense									Director stock-based compensation expense
Pre-tax	Pre-tax	41		80		103		177		Pre-tax		26		62
Post-tax (1)	Post-tax (1)	32		63		81		140		Post-tax (1)		21		49

(1) The after tax amounts are determined using the 21% corporate federal tax rate.

We had approximately ~~$4,162,000~~$1,709,000 of unrecognized stock compensation expense at ~~June 30, 2022~~March 31, 2023 related to non-vested stock-based compensation granted, which we expect to recognize over a weighted-average period of approximately ~~2.4~~1.8 years. We had approximately ~~$88,000~~$10,000 of unrecognized director stock-based compensation expense at ~~June 30, 2022~~March 31, 2023 related to non-vested director stock-based compensation granted, which we expect to recognize over a weighted-average period of approximately ~~0.8~~0.1 years.

Restricted stock, restricted stock units and performance stock units

Stock-based compensation cost for restricted stock awards, restricted stock units and performance stock units is measured based on the closing fair market value of our common stock on the date of grant, which vest in equal installments over the requisite service period of typically three years. Restricted stock awards granted to non-employee directors vest over a one-year period. Each restricted stock unit and performance stock unit represents our obligation to deliver to the holder one share of common stock upon vesting.

Performance stock units vest based on the Company's return on average equity compared to a defined group of peer companies. On the grant date, we issue the target number of performance stock units. They are subject to forfeitures if performance goals are not met. The actual number of performance stock units earned can vary from zero to 150 percent of the target for the 2023, 2022, ~~2021,~~ and ~~2020~~2021 awards.

We ~~granted 793,041 and 208,812~~did not grant any shares of restricted common stock during the three month ~~periods~~period ended ~~June 30,~~March 31, 2023. We granted 114,866 shares of restricted common stock during the three month period ended March 31, 2022, ~~and 2021, respectively,~~ which had a weighted-average grant date fair value of ~~$1.74 and $6.07~~$3.59 per share, respectively. We granted 907,907 and 288,026 shares of restricted common stock during the six month periods ended June 30, 2022 and 2021, respectively, which had a weighted-average grant date fair value of $1.97 and $6.04 per share, respectively.share.

The following table presents certain information related to the activity of our non-vested common stock grants:


		Number of Restricted Shares	Weighted Average Grant Date Fair Value			Number of Restricted Shares	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2021		336,596	$	6.99
Outstanding as of December 31, 2022					Outstanding as of December 31, 2022	714,239	$	2.73
Granted	Granted	907,907	1.97		Granted	—	—
Less: Forfeited	Less: Forfeited	57,786	7.56		Less: Forfeited	856	3.59
Less: Vested	Less: Vested	108,722	7.08		Less: Vested	44,457	4.40
Outstanding as of June 30, 2022		1,077,995	$	2.72
Outstanding as of March 31, 2023					Outstanding as of March 31, 2023	668,926	$	2.62

3437

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

~~June 30, 2022~~March 31, 2023

Stock options

Stock option fair value was estimated on the grant date using the Black-Scholes-Merton formula. Stock options vest in equal installments over the requisite service period of typically three years. The following weighted-average assumptions were used to value the stock options granted:


		2022		2021			2023		2022
Expected annual dividend yield	Expected annual dividend yield	—	%	3.90	%	Expected annual dividend yield	—	%	—	%
Expected volatility	Expected volatility	49.66	%	45.79	%	Expected volatility	—	%	49.66	%
Risk-free interest rate	Risk-free interest rate	2.92	%	1.08	%	Risk-free interest rate	—	%	2.92	%
Expected term	Expected term	6 years		6 years		Expected term	N/A		6 years

~~Expected annual dividend yield for our options granted prior to the third quarter of 2021 is based on a quarterly dividend of $0.06 per share and the stock price on the grant date.~~ The expected annual dividend yield for our options granted during ~~and after the third quarter of 2021~~2022 is based on no dividends being paid in future quarters. The expected volatility is a historical volatility calculated based on the daily closing prices over a period equal to the expected term. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the grant date. Expected term takes into account the three-year graded vesting term and the 10-year contractual term of the option.

We ~~granted 635,643 and 154,707~~did not grant any stock options during the three ~~months~~month periods ended ~~June 30, 2022~~March 31, 2023 and 2021, respectively, which had a weighted average grant date fair value of $0.86 and $1.84, per share, respectively. We granted 635,643 and 154,707 stock options during the six months ended June 30, 2022 and 2021, respectively, which had a weighted average grant date fair value of $0.86 and $1.84, per share, respectively.2022.

The following table presents certain information related to the activity of our non-vested stock option grants:


		Number of Stock Options	Weighted Average Exercise Prices		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value			Number of Stock Options	Weighted Average Exercise Prices		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2021		1,147,215	$	4.80	9.49	$	792,000
Outstanding as of December 31, 2022								Outstanding as of December 31, 2022	1,250,685	$	3.71	7.66	$	—
Granted	Granted	635,643	1.70		—	—		Granted	—	—		—	—
Less: Forfeited	Less: Forfeited	—	—		—	—		Less: Forfeited	—	—		—	—
Less: Expired	Less: Expired	—	—		—	—		Less: Expired	161,925	3.05		—	—
Less: Exercised	Less: Exercised	—	—		—	—		Less: Exercised	—	—		—	—
Outstanding as of June 30, 2022		1,782,858	$	3.69	9.32	$	—
Outstanding as of March 31, 2023								Outstanding as of March 31, 2023	1,088,760	$	3.81	8.55	$	451

Vested as of June 30, 2022(1)		193,724	$	11.90	7.61	$	—
Exercisable as of June 30, 2022		141,090	$	11.90	7.61	$	—
Vested as of March 31, 2023(1)								Vested as of March 31, 2023(1)	532,797	$	7.26	7.79	$	112
Exercisable as of March 31, 2023								Exercisable as of March 31, 2023	270,861	$	6.57	7.89	$	112

(1) The vested shares are calculated based on all vested shares at ~~June 30, 2022,~~March 31, 2023, inclusive of those that have since expired. The weighted average exercise prices, ~~and~~ weighted-average remaining contractual term and aggregate intrinsic value is calculated based on only vested shares that are outstanding and exercisable at ~~June 30, 2022.~~March 31, 2023.

~~17)~~19) SUBSEQUENT EVENTS

We evaluate all subsequent events and transactions for potential recognition or disclosure in our financial statements.

On ~~August 1, 2022, Demotech, Inc. downgraded~~April 5, 2023, the ~~Financial Stability Rating (FSR)~~Company filed a Motion for Release of ~~UPC from "A" or "Exceptional" to "M" or "Moderate". The FSR~~Property of ACIC in the Circuit Court of the Second Judicial

Circuit for Leon County, Florida, requesting that UPC immediately remit to ACIC reinsurance recoveries currently held by UPC and ~~IIC remained at "A". The Federal National Mortgage Association (“Fannie Mae”~~reinsurance recoveries recovered by UPC in the future in accordance with the Company’s Allocation Agreement. Alternatively, ACIC requested future reinsurance recoveries remitted to UPC be placed into a segregated account for future reconciliation and remittance to ACIC. On April 13, 2023, the DFS filed a response to the Company’s motion, objecting to ACIC’s position. On April 14, 2023, the Court denied ACIC’s motion without prejudice.

On April 19, 2023, United Insurance Holding Corp.'s (the "Company") subsidiary, American Coastal Insurance Company ("ACIC") entered into a Memorandum of Understanding (the "Memorandum") with the Florida Department of Financial Services, Division of Rehabilitation and Liquidation (the "DFS") as receiver of the Company's former subsidiary, United Property & Casualty Insurance Company ("UPC") related to the Reinsurance Allocation Agreement (the "Allocation Agreement") by and between ACIC and UPC.

3538

UNITED INSURANCE HOLDINGS CORP.

Notes to Restated Unaudited Condensed Consolidated Financial Statements

~~June 30, 2022~~March 31, 2023

The Allocation Agreement, effective on June 1, 2022, and ~~the Federal Home Loan Mortgage Corporation (“Freddie Mac”) require that property insurance policies for properties with a mortgage backed~~approved by Fannie Mae or Freddie Mac must be written by a property insurance carrier meeting certain financial rating requirements, and an FSR of "M" or "Moderate" does not qualify. However, Fannie Mae and Freddie Mac each provide an exception to the financial rating requirements if an insurer is covered by a reinsurer who assumes by endorsement 100% of the insurer’s liability for any covered loss payable but unpaid by the insurer for reason of insolvency.

~~As a result of the Fannie Mae and Freddie Mac financial rating requirements and the FSR downgrades, on August 2, 2022,~~ the Florida Office of Insurance Regulation ~~("FLOIR"~~(the "FLOIR")~~, approved a~~ on December 5, 2022, describes the manner in which reinsurance ~~arrangement whereby Citizens Property Insurance Corporation ("Citizens") will offer a~~recoveries under shared reinsurance ~~arrangement effective through June 1, 2023~~agreements are allocated between ACIC and UPC. Under the terms of the Memorandum, ACIC and the DFS as receiver of UPC have reached the following agreement:

1.The DFS adopts, ratifies and affirms the Allocation Agreement.

2.All future reinsurance recoverable under reinsurance agreements applicable to ~~insurers that do not have an acceptable FSR as required~~the Allocation Agreement for Hurricane Ian losses shall be paid, either directly from the ~~secondary mortgage market. The Citizens reinsurance arrangement only covers Florida policies. As of August 2, 2022, UPC has been approved by the FLOIR as eligible to participate in~~reinsurers, or directly from the reinsurance ~~program.~~intermediary responsible therefor, to ACIC. If a true up adjustment demonstrates that any future reinsurance recoveries were over-collected by ACIC, ACIC will remit any over-payment to UPC.

On ~~August 2, 2022,~~May 15, 2023, the Company, ~~requested approval~~together with it's subsidiary, ACIC, entered into a Tax Memorandum of Understanding (the "Tax Memorandum") with the DFS as receiver of the Company's former subsidiary, UPC. On February 27, 2023, UPC entered into receivership with the DFS as receiver. As of March 31, 2023, in accordance with the various reinsurance allocation agreements including the Allocation Agreement described above, the Company is due approximately $38,352,000 of net reinsurance recoveries received by UPC on behalf of the Company but not settled prior to receivership. In addition, in April ACIC paid reinsurance premiums on behalf of UPC totaling $12,929,000. The Company and the DFS believe that an opportunity exists to settle these balances via the realization of certain deferred tax assets of the Company's consolidated Federal and Florida tax returns to which ACIC and UPC belong. UPC holds certain deferred tax assets that are believed to be on no value to UPC on a stand-alone basis. However, ACIC and the Company have the opportunity, subject to certain conditions such as continuing and adequate profitability, to realize these assets. Under the terms of the Tax Memorandum, the Company, ACIC and the DFS as receiver of UPC have reached the following agreement:

1.The parties agree to cooperate with one another to achieve realization of the deferred tax assets;

2.The parties agree to deposit the funds that are or may be due to UPC pursuant to the Tax Allocation Agreement into a segregated account held by ACIC that will serve as collateral for any amount payable from or to UPC;

3.The parties agree that the Federal Income Tax Allocation Agreement entered into prior to UPC’s receivership is ratified and accepted by all parties;

4.The parties agree to an annual “true up” of the allocation of the disputed recoveries to the extent that such recoveries were not allocated correctly according to the Reinsurance Allocation Agreement;

5.In the event that ACIC, UIHC, or any of their affiliates make a claim or file a proof of claim in the UPC estate, the reviewed, approved, and/or adjudicated claim shall be reduced by the amount of (a) any tax benefit collectively received by ACIC, UIHC, or any of their affiliates as well as (b) any money withdrawn from the ~~FLOIR~~DTA Account for the benefit of any entity other than UPC; and

6.In the event that the benefit received by the Company is greater than the disputed recoveries, the difference shall be paid to ~~make a capital contribution valued at $12,000,000~~DFS as receiver of UPC.

The Tax Memorandum allows the Company to ~~our insurance subsidiary UPC. We are awaiting approval~~secure amounts due from UPC to ACIC provided the ~~FLOIR and will make this contribution upon approval.~~Internal Revenue Service does not object to the Company utilizing UPC's net operating loss carry-forward against its future taxable income.

3639

UNITED INSURANCE HOLDINGS CORP.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and related notes appearing elsewhere in this Form 10-Q, as well as with the Consolidated Financial Statements and related footnotes under Part II. Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed or implied in these forward-looking statements as a result of certain known and unknown risks and uncertainties. See "Forward-Looking Statements."

EXECUTIVE SUMMARY

Overview

United Insurance Holdings Corp. (referred to in this document as we, our, us, the Company or ~~UPC Insurance)~~UIHC) is a holding company primarily engaged in ~~personal~~commercial and ~~commercial~~personal property and casualty insurance business with investments in the United States. We conduct our business principally through our ~~three~~two wholly-owned insurance subsidiaries: ~~United Property & Casualty Insurance Company (UPC);~~ American Coastal Insurance Company (ACIC); and Interboro Insurance Company (IIC). Collectively, we refer to the holding company and all our subsidiaries, including non-insurance subsidiaries, as ~~“UPC~~“United Insurance Holdings,” which is the preferred brand identification for our Company.

Our Company’s primary source of revenue is generated from writing insurance in Florida ~~Louisiana,~~and New ~~York and Texas. The Company~~York. Our target market in such areas consists of states where the perceived threat of natural catastrophe has caused large national insurance carriers to reduce their concentration of policies. We believe an opportunity exists for UIHC to write profitable business in such areas. During 2022, we also ~~writes policies~~wrote commercial residential insurance in ~~Georgia, North~~South Carolina and ~~South Carolina where renewal rights have been sold and all premiums and losses are ceded. Effective April~~Texas, however, effective May 1, 2022, we no longer write in ~~the state of Massachusetts, and effective January 15,~~these states. In addition, during 2022 we ~~no longer write~~wrote personal residential business in six other states, however on February 27, 2023, our former insurance subsidiary, United Property & Casualty Insurance Company (UPC) was placed into receivership with the Florida Department of Financial Services, which divested our ownership of UPC. The events leading to receivership and results of this subsidiary, now included within discontinued operations, can be seen in Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements above.

On August 25, 2022, we announced that our former subsidiary UPC had filed plans for withdrawal in the states of Florida, Louisiana, and Texas and intended to file a plan for withdrawal in the state of New ~~Jersey. Effective~~York. All filed plans entail non-renewing personal lines policies in these states. Additionally, we announced that Demotech, Inc. (Demotech), an insurance rating agency, notified UPC of its intent to withdraw UPC's Financial Stability Rating. On December 5, 2022, the Florida Office of Insurance Regulation ("FLOIR") issued Consent Order No. 303643-22- CO that provided for the administrative supervision and approval of the plan of run-off for UPC (the "Consent Order"). The Consent Order provided formal approval of UPC's Plan of Run-Off (the "Plan") to facilitate a solvent wind down of its affairs in an orderly fashion. Additionally, in connection with the Plan, IIC agreed to not pay ordinary dividends without the prior approval of the New York Department of Financial Services until January 1, ~~2021,~~2025. On February 10, 2023, we ~~no longer write in~~announced that a solvent run-off of UPC was unlikely and on February 27, 2023, UPC was placed into receivership with the ~~state~~Florida Department of ~~Hawaii, and effective December 1, 2021, we no longer write in the states~~Financial Services (the "DFS") which divested our ownership of Connecticut or Rhode Island, though we are still licensed to write in all five states. We are also licensed to write property and casualty insurance in an additional six states; however, we have not commenced writing or no longer write in these states.UPC.

Our Company, together with ~~wholly-owned subsidiaries~~its former subsidiary, UPC and wholly-owned subsidiary United Insurance Management, L.C. (UIM), entered into a Renewal Rights Agreement (Southeast Renewal Agreement), dated as of December 30, 2021 with Homeowners Choice Property and Casualty Insurance Company, Inc. (HCPCI), pursuant to which our Company, UPC and UIM agreed to sell, and HCPCI agreed to purchase, the renewal rights to UPC’s personal lines homeowners business in Georgia, South Carolina and North Carolina. The transfer of policies is subject to regulatory approval. Effective June 1, 2022, we began transitioning South Carolina policies to HCPCI. The sale was consummated on December 30, 2021.

Effective June 1, 2022, we entered into a quota share reinsurance agreement with TypTap Insurance Company (Typtap) in connection with the Southeast Renewal Agreement. Under the terms of this agreement, we ~~cede~~ceded 100% of our former subsidiary UPC's in-force, new, and renewal policies in the states of Georgia, North Carolina, and South Carolina. This agreement replaces the 85% quota share agreement with HCPCI effective December 31, 2021. Also effective June 1, our third-party quota share reinsurance agreements were renewed to exclude these states. We will no longer retain any risk associated with these states.

Our Company, together with ~~wholly-owned subsidiaries~~its former subsidiary UPC and wholly-owned subsidiary UIM, entered into a Renewal Rights Agreement (Northeast Renewal Agreement), dated as of January 18, 2021 with HCPCI and HCI Group, Inc. (HCI), pursuant to

UNITED INSURANCE HOLDINGS CORP.

which our Company, UPC and UIM agreed to sell, and HCPCI agreed to purchase, the renewal rights to UPC’s personal lines homeowners business in Connecticut, Massachusetts, New Jersey and Rhode Island. The transfer of all states was completed as of June 30, 2022.

Effective June 1, 2021, we entered into a quota share reinsurance agreement with HCPCI and TypTap in connection with the Northeast Renewal Agreement. Under the terms of this agreement, we ~~cede~~ceded 100% of our former subsidiary UPC's in-force, new, and renewal policies in the states of Connecticut, New Jersey, Massachusetts, and Rhode Island. The cession of these policies is 50% to HCPCI and 50% to TypTap.

We have historically grown our business through strong organic growth, complemented by strategic acquisitions and partnerships, including our acquisitions of AmCo Holding Company, LLC (AmCo) and its subsidiaries, including ACIC, in April 2017, IIC in April 2016, and Family Security Holdings, LLC (FSH), including its subsidiary Family Security Insurance Company, Inc. (FSIC), in February 2015, and our strategic partnership with a subsidiary of Tokio Marine Kiln Group Limited (Tokio Marine), which formed Journey Insurance Company (JIC) in August 2018. Effective June 1, 2022, we merged JIC into

~~UNITED INSURANCE HOLDINGS CORP.~~

ACIC, with ACIC being the surviving entity. Effective May 31, 2022, we merged FSIC into UPC, with UPC being the surviving entity.

As a result of ~~underwriting actions implemented during~~ the ~~fourth quarter~~receivership of ~~2020 and throughout 2021, as well as~~our former subsidiary UPC by the ~~transfer of Rhode Island, Connecticut, New Jersey, Massachusetts and South Carolina policies to HCPCI,~~DFS effective February 27, 2022, our policies in-force decreased by ~~39.4%~~51.3% from ~~568,732~~48,152 policies in-force at ~~June 30, 2021~~March 31, 2022 to ~~344,522~~23,473 policies in-force at ~~June 30, 2022.~~March 31, 2023.

The following discussion highlights significant factors influencing the consolidated financial position and results of operations of ~~UPC Insurance.~~United Insurance Holdings. In evaluating our results of operations, we use premiums written and earned, policies in-force and new and renewal policies by geographic concentration. We also consider the impact of catastrophe losses and prior year development on our loss ratios, expense ratios and combined ratios. In monitoring our investments, we use credit quality, investment income, cash flows, realized gains and losses, unrealized gains and losses, asset diversification and portfolio duration. To evaluate our financial condition, we consider our liquidity, financial strength, ratings, book value per share and return on equity.

~~Impact of COVID-19~~

We did not experience a material impact from COVID-19 on our business operations, financial position, liquidity or our ability to service our policyholders during the three and six months ended June 30, 2022. In addition, the COVID-19 pandemic and resulting global disruptions did not have a material impact on our access to credit and capital markets needed to maintain sufficient liquidity for our continued operating needs during the quarter ended June 30, 2022.

Additionally, during the fourth quarter of 2021 we implemented our new flexible work policy. This policy allows all employees to work remotely permanently, with the return to our offices being completely voluntary at this time. We will continue to respond to the COVID-19 pandemic and take reasonable measures to make sure customers continue to be served without interruption.

3841

UNITED INSURANCE HOLDINGS CORP.

~~2022~~2023 Highlights


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022

Gross premiums written	Gross premiums written	$	360,146	$	426,424	$	639,621	$	738,062	Gross premiums written		$	187,123	$	142,414
Gross premiums earned	Gross premiums earned	305,758		356,433		624,964		713,096		Gross premiums earned		144,476		122,733
Net premiums earned	Net premiums earned	111,405		145,460		212,262		291,409		Net premiums earned		87,324		57,746
Total revenues	Total revenues	115,793		155,454		218,159		317,243		Total revenues		90,320		58,432
Earnings before income tax		(32,905)		(32,773)		(77,212)		(59,055)
Consolidated net loss attributable to UIHC		(69,029)		(23,510)		(102,201)		(41,281)
Net loss available to UIHC stockholders per diluted share		$	(1.60)	$	(0.55)	$	(2.38)	$	(0.96)
Earnings from continuing operations, before income tax										Earnings from continuing operations, before income tax		33,844		(988)
Income (loss) from discontinued operations, net of tax										Income (loss) from discontinued operations, net of tax		236,913		(32,984)
Consolidated net income (loss) attributable to UIHC										Consolidated net income (loss) attributable to UIHC		267,280		(33,172)
Net income (loss) available to UIHC stockholders per diluted share										Net income (loss) available to UIHC stockholders per diluted share
Continuing Operations										Continuing Operations		$	0.70	$	—
Discontinued Operations										Discontinued Operations		5.44		(0.77)
Total										Total		$	6.14	$	(0.77)

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

Plus: Non-cash amortization of intangible assets	Plus: Non-cash amortization of intangible assets	$	812	$	889	$	1,624	$	1,932	Plus: Non-cash amortization of intangible assets		$	812	$	812
Less: Realized gains (losses) on investment portfolio		(78)		(124)		(1,847)		379
Less: Income (loss) from discontinued operations, net of tax										Less: Income (loss) from discontinued operations, net of tax		236,913		(32,984)
Less: Realized losses on investment portfolio										Less: Realized losses on investment portfolio		(83)		37
Less: Unrealized gains (losses) on equity securities	Less: Unrealized gains (losses) on equity securities	(5,084)		2,438		(7,352)		5,002		Less: Unrealized gains (losses) on equity securities		474		(770)
Less: Net tax impact (1)	Less: Net tax impact (1)	1,255		(299)		2,273		(724)		Less: Net tax impact (1)		88		324
Core loss (2) (3)		(64,310)		(24,636)		(93,651)		(44,006)
Core loss per diluted share(2) (3)		$	(1.49)	$	(0.57)	$	(2.18)	$	(1.03)
Core income (loss) (2)										Core income (loss) (2)		30,700		1,033
Core income (loss) per diluted share(2)										Core income (loss) per diluted share(2)		$	0.70	$	0.02

Book value per share	Book value per share					$	3.85	$	7.85	Book value per share		$	2.08	$	(4.21)

(1) In order to reconcile the net loss to the core loss measure, we included the tax impact of all adjustments using the 21% corporate federal tax rate.

(2)~~For both the three and six months ended June 30, 2022, core loss includes $43,660,000 in tax expense related to the Company's recognition of a valuation allowance.~~

~~(3)~~ Core ~~loss,~~income (loss), a measure that is not based on U.S. generally accepted accounting principles (GAAP), is reconciled above to net ~~loss,~~income (loss), the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this Form 10-Q is in "Definitions of Non-GAAP Measures" below.

3942

UNITED INSURANCE HOLDINGS CORP.

Restated Consolidated Net ~~Loss~~Income (Loss)


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2022			2021			2022			2021					2023			2022
REVENUE:	REVENUE:													REVENUE:
Gross premiums written	Gross premiums written	$	360,146		$	426,424		$	639,621		$	738,062		Gross premiums written		$	187,123		$	142,414
Change in gross unearned premiums	Change in gross unearned premiums	(54,388)			(69,991)			(14,657)			(24,966)			Change in gross unearned premiums		(42,647)			(19,681)
Gross premiums earned	Gross premiums earned	305,758			356,433			624,964			713,096			Gross premiums earned		144,476			122,733
Ceded premiums earned	Ceded premiums earned	(194,353)			(210,973)			(412,702)			(421,687)			Ceded premiums earned		(57,152)			(64,987)
Net premiums earned	Net premiums earned	111,405			145,460			212,262			291,409			Net premiums earned		87,324			57,746
Net investment income	Net investment income	3,140			3,683			5,618			7,266			Net investment income		2,589			1,404
Net realized investment gains (losses)	Net realized investment gains (losses)	(78)			(124)			(1,847)			379			Net realized investment gains (losses)		(83)			37
Net unrealized gains (losses) on equity securities	Net unrealized gains (losses) on equity securities	(5,084)			2,438			(7,352)			5,002			Net unrealized gains (losses) on equity securities		474			(770)

Management fee income														Management fee income		—			—
Other revenue	Other revenue	6,410			3,997			9,478			13,187			Other revenue		16			15
Total revenue	Total revenue	115,793			155,454			218,159			317,243			Total revenue		90,320			58,432
EXPENSES:	EXPENSES:													EXPENSES:
Losses and loss adjustment expenses	Losses and loss adjustment expenses	90,074			118,064			181,442			233,845			Losses and loss adjustment expenses		16,412			26,315
Policy acquisition costs	Policy acquisition costs	28,988			41,327			55,004			82,148			Policy acquisition costs		26,972			20,308
Operating expenses	Operating expenses	13,019			13,482			25,267			26,704			Operating expenses		2,168			3,707
General and administrative expenses	General and administrative expenses	14,494			13,112			30,499			28,994			General and administrative expenses		8,793			8,064
Interest expense	Interest expense	2,394			2,257			4,773			4,632			Interest expense		2,719			2,359
Total expenses	Total expenses	148,969			188,242			296,985			376,323			Total expenses		57,064			60,753
Loss before other income		(33,176)			(32,788)			(78,826)			(59,080)
Income before other income														Income before other income		33,256			(2,321)
Other income	Other income	271			15			1,614			25			Other income		588			1,333
Loss before income taxes		(32,905)			(32,773)			(77,212)			(59,055)
Provision (benefit) for income taxes		36,150			(9,352)			25,100			(17,174)
Net loss		$	(69,055)		$	(23,421)		$	(102,312)		$	(41,881)
Less: Net income (loss) attributable to noncontrolling interests		(26)			89			(111)			(600)
Net loss attributable to UIHC		$	(69,029)		$	(23,510)		$	(102,201)		$	(41,281)
Income before income taxes														Income before income taxes		33,844			(988)
Provision for income taxes														Provision for income taxes		3,477			(715)
Net income from continuing operations, net of tax														Net income from continuing operations, net of tax		$	30,367		$	(273)
Income (loss) from discontinued operations, net of tax														Income (loss) from discontinued operations, net of tax		236,913			(32,984)
Net income (loss)														Net income (loss)		$	267,280		$	(33,257)
Less: Net loss attributable to noncontrolling interests														Less: Net loss attributable to noncontrolling interests		—			(85)
Net income (loss) attributable to UIHC														Net income (loss) attributable to UIHC		$	267,280		$	(33,172)
Earnings available to UIHC common stockholders per diluted share	Earnings available to UIHC common stockholders per diluted share	$	(1.60)		$	(0.55)		$	(2.38)		$	(0.96)		Earnings available to UIHC common stockholders per diluted share		$	6.14		$	(0.77)
Book value per share	Book value per share							$	3.85		$	7.85		Book value per share		$	2.08		$	(4.21)
Return on equity based on GAAP net loss								(72.2)		%	(20.5)		%
Return on equity based on GAAP net income (loss)														Return on equity based on GAAP net income (loss)		NM			(41.7)		%
Loss ratio, net (1)	Loss ratio, net (1)	80.9		%	81.2		%	85.5		%	80.2		%	Loss ratio, net (1)		18.9		%	45.6		%
Expense ratio (2)	Expense ratio (2)	50.7		%	46.7		%	52.2		%	47.3		%	Expense ratio (2)		43.4		%	55.6		%
Combined ratio (3)	Combined ratio (3)	131.6		%	127.9		%	137.7		%	127.5		%	Combined ratio (3)		62.3		%	101.1		%
Effect of current year catastrophe losses on combined ratio	Effect of current year catastrophe losses on combined ratio	18.4		%	27.7		%	23.2		%	22.0		%	Effect of current year catastrophe losses on combined ratio		3.0		%	9.6		%
Effect of prior year development on combined ratio	Effect of prior year development on combined ratio	7.0		%	(0.3)		%	4.3		%	10.1		%	Effect of prior year development on combined ratio		(3.6)		%	(5.3)		%

Underlying combined ratio (4)	Underlying combined ratio (4)	106.2		%	100.5		%	110.2		%	95.4		%	Underlying combined ratio (4)		63.0		%	96.8		%

(1) Loss ratio, net is calculated as losses and LAE net of losses ceded to reinsurers, relative to net premiums earned. Management uses this operating metric to analyze our loss trends and believes it is useful for investors to evaluate this component separately from our other operating expenses.

(2) Expense ratio is calculated as the sum of all operating expenses less interest expense relative to net premiums earned. Management uses this operating metric to analyze our expense trends and believes it is useful for investors to evaluate this component separately from our loss expenses.

(3) Combined ratio is the sum of the loss ratio, net and the expense ratio, net. Management uses this operating metric to analyze our total expense trends and believes it is a key indicator for investors when evaluating the overall profitability of our business.

(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 Form 10-Q is in "Definitions of Non-GAAP Measures" below.

4043

UNITED INSURANCE HOLDINGS CORP.

Definitions of Non-GAAP Measures

We believe that investors' understanding of ~~UPC Insurance's~~UIHC'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 and prior year reserve development (underlying combined ratio) is a non-GAAP measure, that is computed by subtracting the effect of current year catastrophe losses and prior year development from the combined ratio. We believe that this ratio is useful to investors and it is used by management to highlight the trends in our business that may be obscured by current year catastrophe losses and prior year development. Current year catastrophe losses cause our loss trends to vary significantly between periods as a result of their frequency 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. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance. The most directly comparable GAAP measure is 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 our 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, that is computed by subtracting the effect of current year catastrophe losses and prior year reserve development from net loss and LAE. We use underlying loss and LAE figures to analyze our loss trends that may be impacted by current year catastrophe losses and prior year development on our reserves. As discussed previously, these two items can have a significant impact on our loss trends in a given period. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance. The most directly comparable GAAP measure is net loss and LAE. The underlying loss and LAE measure should not be considered a substitute for net loss and LAE and does not reflect the overall profitability of our business.

Net ~~loss~~income (loss) excluding the effects of amortization of intangible assets, income (loss) from discontinued operations, realized gains (losses) and unrealized gains (losses) on equity securities, net of tax (core ~~loss)~~income (loss)) is a non-GAAP measure, which is computed by adding amortization, net of tax, to net ~~loss~~income (loss) and subtracting income (loss) from discontinued operations, net of tax, realized gains (losses) on our investment portfolio, net of tax, and unrealized gains (losses) on our equity securities, net of tax, from net ~~loss.~~income (loss). Amortization expense is related to the amortization of intangible assets acquired, including goodwill, through mergers and therefore the expense does not arise through normal operations. Investment portfolio gains (losses) and unrealized equity security gains (losses) vary independent of our operations. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance. The most directly comparable GAAP measure is net ~~loss.~~income (loss). The core ~~loss~~income (loss) measure should not be considered a substitute for net loss and does not reflect the overall profitability of our business.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

When we prepare our consolidated financial statements and accompanying notes in conformity with GAAP, we must make estimates and assumptions about future events that affect the amounts we report. Certain of these estimates result from judgments that can be subjective and complex. As a result of that subjectivity and complexity, and because we continuously evaluate these estimates and assumptions based on a variety of factors, actual results could materially differ from our estimates and assumptions if changes in one or more factors require us to make accounting adjustments. During the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, we reassessed our critical accounting policies and estimates as disclosed in Note 2 to the Notes to Unaudited Condensed Consolidated Financial Statements and our Annual Report on Form 10-K for the year ended December 31, ~~2021. In June 2022, we assessed our deferred tax position and recorded a valuation allowance against all of our deferred tax assets as of June 30,~~ 2022. ~~We intend to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance.~~ We have made no ~~other~~ material changes or additions with regard to those policies and estimates.

RECENT ACCOUNTING STANDARDS

Please refer to Note 2 in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of recent accounting standards that may affect us.

4144

UNITED INSURANCE HOLDINGS CORP.

ANALYSIS OF FINANCIAL CONDITION - ~~JUNE 30, 2022~~MARCH 31, 2023 COMPARED TO DECEMBER 31, ~~2021~~2022

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our accompanying unaudited condensed consolidated interim financial statements and related notes, and in conjunction with the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Investments

The primary goals of our investment strategy are to preserve capital, maximize after-tax investment income, maintain liquidity and minimize risk. To accomplish our goals, we purchase debt securities in sectors that represent the most attractive relative value, and we maintain a moderate equity exposure. Limiting equity exposure manages risks and helps to preserve capital for two reasons: first, bond market returns are less volatile than stock market returns, and second, should the bond issuer enter bankruptcy liquidation, bondholders generally have a higher priority than equity holders in a bankruptcy proceeding. Our investment strategy is the same for both our personal lines and commercial lines operating segments.

We must comply with applicable state insurance regulations that prescribe the type, quality and concentrations of investments our insurance subsidiaries can make; therefore, our current investment policy limits investment in non-investment-grade fixed maturities and limits total investment amounts in preferred stock, common stock and mortgage notes receivable. We do not invest in derivative securities.

Two outside asset management companies, which have authority and discretion to buy and sell securities for us, manage our investments subject to (i) the guidelines established by our Board of Directors and (ii) the direction of management. The Investment Committee of our Board of Directors reviews and approves our investment policy on a regular basis.

Our cash, cash equivalents, restricted cash and investment portfolio totaled ~~$898,379,000~~$372,721,000 at ~~June 30, 2022,~~March 31, 2023, compared to ~~$964,844,000~~$340,905,000 at December 31, ~~2021.~~2022.

The following table summarizes our investments, by type:


		June 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Estimated Fair Value		Percent of Total		Estimated Fair Value		Percent of Total			Estimated Fair Value		Percent of Total		Estimated Fair Value		Percent of Total
U.S. government and agency securities	U.S. government and agency securities	$	36,565	4.1%		$	49,340	5.1%		U.S. government and agency securities	$	3,409	0.9%		$	2,385	0.7%
Foreign government	Foreign government	3,362		0.4%		3,459		0.4%		Foreign government	991		0.3%		991		0.3%
States, municipalities and political subdivisions	States, municipalities and political subdivisions	64,664		7.2%		79,896		8.3%		States, municipalities and political subdivisions	28,582		7.7%		26,895		7.9%
Public utilities	Public utilities	17,830		2.0%		25,457		2.6%		Public utilities	7,820		2.1%		7,694		2.3%
Corporate securities	Corporate securities	192,445		21.4%		244,443		25.3%		Corporate securities	85,723		23.0%		83,343		24.3%
Mortgage-backed securities	Mortgage-backed securities	145,996		16.3%		186,740		19.4%		Mortgage-backed securities	56,002		15.0%		56,115		16.5%
Asset-backed securities	Asset-backed securities	62,412		6.9%		70,162		7.3%		Asset-backed securities	28,206		7.6%		27,259		8.0%
Redeemable preferred stocks		3,817		0.4%		4,105		0.4%

Total fixed maturities	Total fixed maturities	527,091		58.7	%	663,602		68.8	%	Total fixed maturities	210,733		56.6	%	204,682		60.0	%
Mutual funds	Mutual funds	33,027		3.7%		33,064		3.4%		Mutual funds	16,181		4.3%		15,657		4.6%

Non-redeemable preferred stocks		4,525		0.5%		4,894		0.5%

Total equity securities	Total equity securities	37,552		4.2	%	37,958		3.9	%	Total equity securities	16,181		4.3	%	15,657		4.6	%
Other investments	Other investments	16,590		1.8	%	18,006		1.9	%	Other investments	3,550		1.0	%	3,675		1.1	%
Total investments	Total investments	581,233		64.7%		719,566		74.6%		Total investments	230,464		61.9%		224,014		65.7%
Cash and cash equivalents	Cash and cash equivalents	283,785		31.6	%	212,024		22.0	%	Cash and cash equivalents	92,586		24.8	%	70,903		20.8	%
Restricted cash	Restricted cash	33,361		3.7%		33,254		3.4%		Restricted cash	49,671		13.3%		45,988		13.5%
Total cash, cash equivalents, restricted cash and investments	Total cash, cash equivalents, restricted cash and investments	$	898,379	100.0	%	$	964,844	100.0	%	Total cash, cash equivalents, restricted cash and investments	$	372,721	100.0	%	$	340,905	100.0	%

4245

UNITED INSURANCE HOLDINGS CORP.

We classify all of our fixed-maturity investments as available-for-sale. Our investments at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 consisted mainly of U.S. government and agency securities, states, municipalities and political subdivisions, mortgage-backed securities and securities of investment-grade corporate issuers. Our equity holdings consisted mainly of securities issued by companies in the financial, utilities and industrial sectors or mutual funds. At ~~June 30, 2022,~~March 31, 2023, approximately ~~84.5%~~79.6% of our fixed maturities were U.S. Treasuries or corporate bonds rated “A” or better, and ~~15.5%~~20.4% were corporate bonds rated “BBB” or "BB".

Reinsurance

We follow the industry practice of reinsuring a portion of our risks. Reinsurance involves transferring, or "ceding", all or a portion of the risk exposure on policies we write to another insurer, known as a reinsurer. To the extent that our reinsurers are unable to meet the obligations they assume under our reinsurance agreements, we remain primarily liable for the entire insured loss under the policies we write.

Our reinsurance program is designed, utilizing our risk management methodology, to address our exposure to catastrophe losses. According to the Insurance Service Office (ISO), a catastrophe loss is defined as a single unpredictable incident or series of closely related incidents that result in $25,000,000 or more in U.S. industry-wide direct insured losses to property and that affect a significant number of policyholders and insurers (ISO catastrophes). In addition to ISO catastrophes, we also include as catastrophes those events (non-ISO catastrophes), which may include losses, that we believe are, or will be, material to our operations which we define as incidents that result in $1,000,000 or more in losses for multiple policyholders.

During the second quarter of 2022, we placed our reinsurance program for the 2022 hurricane season. We purchased catastrophe excess of loss reinsurance protection up to an exhaustion point of approximately ~~$2,500,000,000.~~$2,500,000,000 in the aggregate, including coverage related to our former insurance subsidiary, UPC. The treaties reinsure for personal and commercial lines property excess catastrophe losses caused by multiple perils including hurricanes and tropical storms. The agreements became effective as of June 1, 2022, for a one-year term, and incorporate the mandatory coverage required by and placed with the Florida Hurricane Catastrophe Fund (FHCF) and coverage required under the Reinsurance to Assist Policyholders Program (RAP Program). The FHCF and RAP Program covers Florida risks only and we participate at 90%. Under our core catastrophe excess of loss treaty, retention on a first and second event is ~~$16,400,000 each.~~$16,400,000. During the third quarter, one of our reinsurers participating on the $25,000,000 excess of $20,000,000 layer of the core catastrophe program exercised a contractual right to terminate their participation due to Demotech's downgrade of UPC's Financial Stability Rating. We were unsuccessful in replacing this coverage in the open market so our captive reinsurer, UPC Re, stepped into the $25,000,000 excess of $20,000,000 layer which was subsequently impacted by Hurricane Ian resulting in an additional retained loss of $20,100,000 million. The exhaustion point of IIC's catastrophe reinsurance program is approximately $200,000,000 in the aggregate, with a retention of $3,000,000 per occurrence, covering all perils.

During the third quarter of 2022, the Company's core catastrophe reinsurance program was impacted by Hurricane Ian. As a result, the Company has approximately $508 million of occurrence limit remaining for Ian, all of which is attributable to ACIC only. After reinstatement premiums of approximately $15.4 million, the Company, with its former subsidiary UPC has approximately $993 million of aggregate limit remaining after Ian, based on our estimated ultimate net loss subject to the core catastrophe reinsurance program.

Effective ~~December 13, 2021,~~January 1, 2023, we renewed our all other perils (AOP) catastrophe excess of loss agreement. The agreement

provides protection from catastrophe loss events other than named windstorms and earthquakes up to ~~$110,000,000.~~$101,000,000.

During the third quarter of 2022, one of our private reinsurers who held a 100% share of the $15,000,000 in excess of $15,000,000 layer on our all other perils catastrophe excess of loss agreement notified us of their intent to terminate the agreement due to the contractual provision regarding the change in UPC's statutory surplus being greater than 25%. We agreed to a termination and commutation date of September 30, 2022 for this contract. This change will result in approximately $1,300,000 of ceded premium savings that would have otherwise been due in the fourth quarter of 2022 and the Company retaining all the risk for any non-hurricane catastrophe losses up to $30,000,000, excluding any quota share recoveries.

4346

UNITED INSURANCE HOLDINGS CORP.

The table below outlines our quota share agreements in effect for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Reinsurer

Companies in Scope (1)

Effective Dates

Cession Rate

States in Scope

External third-party

UPC, FSIC & ACIC

06/01/2022 - 06/01/2023

10% (2)

Florida, Louisiana, Texas

TypTap

UPC

06/01/2022 - 06/01/2023

100% (3)

Georgia, North Carolina, South Carolina

External third-party

UPC, FSIC & ACIC

12/31/2021 - 12/31/2022

8% (2)

Florida, Louisiana, Texas

HCPCI

UPC

12/31/2021 - 06/01/2022

85%

Georgia, North Carolina, South Carolina

External third-party

UPC & FSIC

12/31/2021 - 12/31/2022

25% (4)

Florida, Louisiana, Texas

HCPCI / TypTap (5)

UPC

06/01/2021 - 06/01/2022

100% (3)

Connecticut, New Jersey, Massachusetts, Rhode Island

External third-party

UPC, FSIC & ACIC (6)

06/01/2021 - 06/01/2022

15% (2)

Florida, Georgia, Louisiana, North Carolina, South Carolina, Texas

IIC

UPC

12/31/2020 - 12/31/2022

100%

New York

~~HCPCI~~

~~UPC~~

~~12/31/2020 - 06/01/2021~~

~~69.5%~~

~~Connecticut, New Jersey, Massachusetts, Rhode Island~~

~~External third-party~~

~~UPC, FSIC & ACIC~~

~~12/30/2020 - 12/31/2021~~

8% ~~(2)~~

~~Connecticut, Florida, Georgia, Louisiana, Massachusetts, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas~~

~~External third-party~~

~~UPC, FSIC & ACIC~~ ~~(6)~~

~~06/01/2020 - 06/01/2021~~

~~15%~~ ~~(2)~~

~~Connecticut, Florida, Georgia, Louisiana, Massachusetts, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas~~

~~External third-party~~

~~UPC & FSIC~~

~~06/01/2020 - 06/01/2021~~

~~7.5%~~ ~~(2)~~

~~Connecticut, Florida, Georgia, Louisiana, Massachusetts, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas~~

(1) Effective May 31, 2022, FSIC was merged into UPC, with UPC being the surviving entity.

(3) This treaty provides coverage on our in-force, new and renewal policies until these states are transitioned to HCPCI or TypTap upon renewal.

(4) This treaty provides coverage on non-catastrophe losses on policies in-force on the effective date of the agreement.

(5) Cessions are split 50% to HCPCI and 50% to TypTap.

~~(6)~~ ~~This treaty was amended effective December 31, 2020 to include ACIC.~~

Reinsurance costs as a percentage of gross earned premium during the three ~~and six~~ month periods ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ were as follows:

2022 2021
Three Months Ended June 30,
Non-at-Risk (2.3) % (2.0) %
Quota Share (25.7) % (25.6) %
All Other (35.6) % (31.6) %
Total Ceding Ratio (63.6) % (59.2) %
Six Months Ended June 30,
Non-at-Risk (2.3) % (2.2) %
Quota Share (28.9) % (25.9) %
All Other (34.8) % (31.0) %
Total Ceding Ratio (66.0) % (59.1) %


	2023		2022






Three Months Ended March 31,
Non-at-Risk	(0.5)	%	(0.6)	%
Quota Share	(6.1)	%	(15.6)	%
All Other	(33.0)	%	(36.8)	%
Total Ceding Ratio	(39.6)	%	(53.0)	%

~~UNITED INSURANCE HOLDINGS CORP.~~

Reinsurance costs as a percent of gross earned premium for our personal residential property and casualty insurance policies (personal lines) and commercial residential property and casualty insurance policies (commercial lines) operating segments during the three ~~and six~~ month periods ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ were as follows:


		Personal				Commercial					Personal				Commercial
		2022		2021		2022		2021			2023		2022		2023		2022
Three Months Ended June 30,

Three Months Ended March 31,										Three Months Ended March 31,
Non-at-Risk	Non-at-Risk	(3.4)	%	(2.6)	%	(0.5)	%	(0.5)	%	Non-at-Risk	(1.6)	%	(1.2)	%	(0.4)	%	(0.5)	%
Quota Share	Quota Share	(31.2)	%	(30.4)	%	(16.3)	%	(13.5)	%	Quota Share	—	%	—	%	(6.7)	%	(17.8)	%
All Other	All Other	(34.3)	%	(26.7)	%	(37.8)	%	(43.8)	%	All Other	(28.8)	%	(18.2)	%	(33.3)	%	(39.4)	%
Total Ceding Ratio	Total Ceding Ratio	(68.9)	%	(59.7)	%	(54.6)	%	(57.8)	%	Total Ceding Ratio	(30.4)	%	(19.4)	%	(40.4)	%	(57.7)	%

Six Months Ended June 30,
Non-at-Risk		(3.3)	%	(2.8)	%	(0.5)	%	(0.5)	%
Quota Share		(35.4)	%	(31.1)	%	(17.0)	%	(12.7)	%
All Other		(32.8)	%	(25.8)	%	(38.6)	%	(44.4)	%
Total Ceding Ratio		(71.5)	%	(59.7)	%	(56.1)	%	(57.6)	%

Please note that the sum of the percentages above will not reconcile to the consolidated percentages as they are calculated using each operating segments’ gross earned premium rather than our consolidated gross earned premium.

We amortize our ceded unearned premiums over the annual agreement period, and we record that amortization in ceded premiums earned on our Unaudited Condensed Consolidated Statements of Comprehensive Loss. The table below summarizes

UNITED INSURANCE HOLDINGS CORP.

the amounts of our ceded premiums written under the various types of agreements, as well as the amortization of ceded unearned premiums:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Quota Share~~(1)~~	Quota Share~~(1)~~	$	(28,097)	$	(84,836)	$	(78,215)	$	(165,035)	Quota Share~~(1)~~		$	(12,243)	$	(23,128)
Excess-of-loss	Excess-of-loss	(377,218)		(412,337)		(393,555)		(447,448)		Excess-of-loss		(19,295)		(5,507)
Equipment, identity theft, and cyber security	Equipment, identity theft, and cyber security	(1,301)		(3,262)		(2,225)		(5,630)		Equipment, identity theft, and cyber security		(820)		(746)
Flood and inland flood		(6,437)		(7,395)		(10,740)		(11,961)

Ceded premiums written	Ceded premiums written	$	(413,053)	$	(507,830)	$	(484,735)	$	(630,074)	Ceded premiums written		$	(32,358)	$	(29,381)
Change in ceded unearned premiums	Change in ceded unearned premiums	218,700		296,857		72,033		208,387		Change in ceded unearned premiums		(24,794)		(35,606)
Ceded premiums earned	Ceded premiums earned	$	(194,353)	$	(210,973)	$	(412,702)	$	(421,687)	Ceded premiums earned		$	(57,152)	$	(64,987)

~~(1)~~ ~~2022 and 2021 quota share ceded written premium includes our quota share agreements with HCPCI and Typtap.~~

The breakdown of our ceded premiums written under the various types of agreements, as well as the amortization of ceded unearned premiums for our personal lines and commercial lines operating segments can be seen in the tables below. These values can be reconciled to the table above.

~~UNITED INSURANCE HOLDINGS CORP.~~

Personal Lines Operating Segment

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Quota Share $ (10,153) $ (51,959) $ (37,143) $ (118,206)
Excess-of-loss (218,883) (248,730) (229,366) (278,926)
Equipment, identity theft, and cyber security (443) (2,431) (789) (4,419)
Flood and inland flood (1)
(6,437) (7,395) (10,740) (11,961)
Ceded premiums written $ (235,916) $ (310,515) $ (278,038) $ (413,512)
Change in ceded unearned premiums 103,334 158,271 (10,871) 106,920
Ceded premiums earned $ (132,582) $ (152,244) $ (288,909) $ (306,592)

~~(1)~~ ~~2022 and 2021 quota share ceded written premium includes our quota share agreements with HCPCI and Typtap.~~


	Three Months Ended March 31,
		2023		2022

Excess-of-loss		(995)		353
Equipment, identity theft, and cyber security		(290)		(168)


Ceded premiums written		$	(1,285)	$	185
Change in ceded unearned premiums		(2,493)		(3,150)
Ceded premiums earned		$	(3,778)	$	(2,965)

Commercial Lines Operating Segment Impact


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Quota Share	Quota Share	$	(17,944)	$	(32,878)	$	(41,072)	$	(46,830)	Quota Share		$	(12,243)	$	(23,128)
Excess-of-loss	Excess-of-loss	(158,335)		(163,606)		(164,189)		(168,521)		Excess-of-loss		(18,300)		(5,860)
Equipment, identity theft, and cyber security	Equipment, identity theft, and cyber security	(858)		(831)		(1,436)		(1,211)		Equipment, identity theft, and cyber security		(530)		(578)

Ceded premiums written	Ceded premiums written	$	(177,137)	$	(197,315)	$	(206,697)	$	(216,562)	Ceded premiums written		$	(31,073)	$	(29,566)
Change in ceded unearned premiums	Change in ceded unearned premiums	115,366		138,586		82,904		101,467		Change in ceded unearned premiums		(22,301)		(32,456)
Ceded premiums earned	Ceded premiums earned	$	(61,771)	$	(58,729)	$	(123,793)	$	(115,095)	Ceded premiums earned		$	(53,374)	$	(62,022)

Current year catastrophe losses disaggregated between name and numbered storms and all other catastrophe loss events are shown in the following table.

2022 2021
Number of Events
Incurred Loss and LAE (1)
Combined Ratio Impact Number of Events
Incurred Loss and LAE (1)
Combined Ratio Impact
Three Months Ended June 30,
Current period catastrophe losses incurred
Named and numbered storms — $ — — % 2 $ 4,012 2.8 %
All other catastrophe loss events 16 20,553 18.4 % 15 36,245 24.9 %
Total 16 $ 20,553 18.4 % 17 $ 40,257 27.7 %
Six Months Ended June 30,
Current period catastrophe losses incurred
Named and numbered storms — $ — — % 2 $ 4,012 1.4 %
All other catastrophe loss events 26 49,169 23.2 % 25 60,210 20.6 %
Total 26 $ 49,169 23.2 % 27 $ 64,222 22.0 %


	2023					2022
	Number of Events	Incurred Loss and LAE (1)		Combined Ratio Impact		Number of Events	Incurred Loss and LAE (1)		Combined Ratio Impact






Three Months Ended March 31,
Current period catastrophe losses incurred
Named and numbered storms	—	$	—	—	%	—	$	—	—	%
All other catastrophe loss events	3	2,615		3.0	%	3	5,528		9.6	%
Total	3	$	2,615	3.0	%	3	$	5,528	9.6	%

(1) Incurred loss and LAE is equal to losses and LAE paid plus the change in case and incurred but not reported reserves. Shown net of losses ceded to reinsurers. Incurred loss and LAE and number of events includes the development on storms during the year in which it occurred.

UNITED INSURANCE HOLDINGS CORP.

The impact of the current year catastrophes to our personal lines and commercial lines operating segments can be seen in the tables below. Please note that the catastrophe events may have impacted both operating segments. As a result, the sum of the number of events in the tables below will not reconcile to the consolidated number of events above. In addition, the combined ratio impact is calculated using each segment's net premiums earned and sum of the ratios in the tables below will not reconcile to the ratios above.

~~UNITED INSURANCE HOLDINGS CORP.~~

Personal Lines Operating Segment


		2022					2021						2023					2022
		Number of Events	Incurred Loss and LAE (1)		Combined Ratio Impact		Number of Events	Incurred Loss and LAE (1)		Combined Ratio Impact			Number of Events	Incurred Loss and LAE (1)		Combined Ratio Impact		Number of Events	Incurred Loss and LAE (1)		Combined Ratio Impact
Three Months Ended June 30,

Three Months Ended March 31,												Three Months Ended March 31,
Current period catastrophe losses incurred	Current period catastrophe losses incurred											Current period catastrophe losses incurred
Named and numbered storms	Named and numbered storms	—	$	—	—	%	2	$	3,926	3.8	%	Named and numbered storms	—	$	—	—	%	—	$	—	—	%
All other catastrophe loss events	All other catastrophe loss events	16	23,140		38.6	%	15	33,893		33.0	%	All other catastrophe loss events	3	518		6.0	%	3	2,423		19.7	%
Total	Total	16	$	23,140	38.6	%	17	$	37,819	36.8	%	Total	3	$	518	6.0	%	3	$	2,423	19.7	%

Six Months Ended June 30,
Current period catastrophe losses incurred
Named and numbered storms		—	$	—	—	%	2	$	3,926	1.9	%
All other catastrophe loss events		26	48,651		42.2	%	25	53,499		25.9	%
Total		26	$	48,651	42.2	%	27	$	57,425	27.8	%

Commercial Lines Operating Segment


		2022					2021						2023					2022
		Number of Events	Incurred Loss and LAE (1)		Combined Ratio Impact		Number of Events	Incurred Loss and LAE (1)		Combined Ratio Impact			Number of Events	Incurred Loss and LAE (1)		Combined Ratio Impact		Number of Events	Incurred Loss and LAE (1)		Combined Ratio Impact
Three Months Ended June 30,

Three Months Ended March 31,												Three Months Ended March 31,
Current period catastrophe losses incurred	Current period catastrophe losses incurred											Current period catastrophe losses incurred
Named and numbered storms	Named and numbered storms	—	$	—	—	%	1	$	86	0.2	%	Named and numbered storms	—	$	—	—	%	—	$	—	—	%
All other catastrophe loss events	All other catastrophe loss events	3	(2,587)		(5.0)	%	1	2,352		5.5	%	All other catastrophe loss events	1	2,097		2.7	%	3	3,105		6.8	%
Total	Total	3	$	(2,587)	(5.0)	%	2	$	2,438	5.7	%	Total	1	$	2,097	2.7	%	3	$	3,105	6.8	%

Six Months Ended June 30,
Current period catastrophe losses incurred
Named and numbered storms		—	$	—	—	%	1	$	86	0.1	%
All other catastrophe loss events		6	518		0.5	%	3	6,711		7.9	%
Total		6	$	518	0.5	%	4	$	6,797	8.0	%

See Note 810 in our Notes to Unaudited Condensed Consolidated Financial Statements for additional information regarding our reinsurance program.

Unpaid Losses and Loss Adjustments

We generally use the term “loss(es)” to collectively refer to both loss and LAE. We establish reserves for both reported and unreported unpaid losses that have occurred at or before the balance sheet date for amounts we estimate we will be required to pay in the future, including provisions for claims that have been reported but are unpaid at the balance sheet date and for obligations on claims that have been incurred but not reported at the balance sheet date. Our policy is to establish these loss reserves after considering all information known to us at each reporting period. At any given point in time, our loss reserve represents our best estimate of the ultimate settlement and administration costs of our insured claims incurred and unpaid.

Unpaid losses and LAE totaled ~~$849,994,000~~$748,365,000 and ~~$1,084,450,000~~$842,958,000 as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Of this total, ~~$648,022,000~~$727,320,000 and ~~$854,073,000,~~$816,489,000, respectively, is related to our commercial lines operating segment. The remaining $21,045,000 and $26,469,000, respectively, is related to our personal lines operating segment. ~~The remaining $201,972,000 and $230,377,000, respectively, is related to our commercial lines operating segment.~~ On a

~~UNITED INSURANCE HOLDINGS CORP.~~

consolidated basis, this balance has decreased from year end as ~~a result of the continued settlement of catastrophe~~we continue to settle claims related to ~~prior years.~~Hurricane Ian which made landfall in the third quarter of 2022.

Since the process of estimating loss reserves requires significant judgment due to a number of variables, such as fluctuations in inflation, judicial decisions, legislative changes and changes in claims handling procedures, our ultimate liability

UNITED INSURANCE HOLDINGS CORP.

will likely differ from these estimates. We revise our reserve for unpaid losses as additional information becomes available, and reflect adjustments, if any, in our earnings in the periods in which we determine the adjustments as necessary.

See Note 911 in our Notes to Unaudited Condensed Consolidated Financial Statements for additional information regarding our losses and loss adjustments.

Inflation

During the fourth quarter of 2021, the United States began experiencing an increase in the rate of inflation. During the first half of 2022, inflation hit 8.6%, its highest level since 1981, impacting all industries. Premium rates charged to policyholders are typically developed several months prior to implementation, using market information available at the time of the filing. While we attempt to charge adequate premium rates to combat increased costs, during periods of high inflation, we may not have included the negative impact to loss and loss adjustment expenses into our projections, resulting in premium rates that may not be sufficient. In addition, we may be limited in our ability to raise premium rates due to regulatory restrictions. As a result of the inflation during ~~the first half of 2022,~~2023, higher loss and loss adjustment expenses have had a negative impact on our results of operations during the three ~~and six~~ months ended ~~June 30, 2022.~~March 31, 2023.

In response to inflation, the Federal Reserve has also increased interest rates which may negatively affect the market value of our investment portfolio and our rate of return on investments. Management monitors and responds to the inflationary pressure and changing interest rate environment for potential long-term material impacts to our investment portfolio and results of operations.

4850

UNITED INSURANCE HOLDINGS CORP.

RESULTS OF OPERATIONS - COMPARISON OF THE THREE MONTH PERIODS ENDED ~~JUNE 30,~~MARCH 31, 2023 AND 2022 ~~AND 2021~~

Net ~~losses~~income attributable to UIHC for the three months ended ~~June 30, 2022~~March 31, 2023 increased ~~$45,519,000,~~$300,452,000, or ~~193.6%~~905.7%, to net income of $267,280,000 for the first quarter of 2023 from a net loss of ~~$69,029,000 for the second quarter of 2022 from $23,510,000~~$33,172,000 for the same period in ~~2021. The increase in~~2022. Drivers of net ~~loss was primarily due to an increase in our provision for~~ income ~~taxes~~ from ~~the recognition of a valuation allowance against our deferred tax asset~~continuing operations during the ~~quarter of $43,660,000. Total revenue also decreased as a result of decreased~~three months ended March 31, 2023 include increased gross ~~written premiums, partially offset by decreased ceded premiums earned. Ceded~~ premiums earned, decreased ~~as the result of a reduction in our geographic footprint and exposure driving decreased costs associated with our quota share and catastrophe reinsurance program. On the expense side,~~ loss and LAE ~~incurred decreased for the period,~~ driven by ~~lower current year catastrophe~~decreased non-catastrophe losses, ~~in 2022. In addition,~~and decreases across policy acquisition costs, ~~also decreased quarter-over-quarter. The~~operating and underwriting expenses and general and administrative expenses, the details of ~~the change in gross written premiums and policy acquisition costs~~which are described below. In addition to continuing operations, we recognized income from discontinued operations of $236,913,000, driven by the deconsolidation of UPC.

Revenue

Our gross written premiums ~~decreased $66,278,000,~~increased $44,709,000, or ~~15.5%~~31.4%, to ~~$360,146,000~~$187,123,000 for the ~~second~~first quarter ended ~~June 30, 2022~~March 31, 2023 from ~~$426,424,000~~$142,414,000 for the same period in ~~2021.~~2022. This ~~decrease~~increase was driven primarily by ~~the transition of the Northeast business to HCPCI~~an increase in ~~the fourth quarter of 2021 and the first half of 2022. In addition, the Company experienced~~our commercial premiums written, as we focus on transitioning towards a ~~decline in written premiums across the personal~~specialty commercial lines ~~business, due to underwriting actions taken by the Company throughout 2021 and in the first half of 2022.~~underwriter. The breakdown of the quarter-over-quarter changes in both direct written and assumed premiums by ~~region~~state and gross written premium by line of business are shown in the table below.

($ in thousands) Three Months Ended June 30,
2022 2021 Change
Direct Written and Assumed Premium by Region (1)
Florida $ 289,551 $ 281,728 $ 7,823
Gulf 56,739 67,290 (10,551)
Southeast 16,719 27,483 (10,764)
Northeast (3,018) 49,879 (52,897)
Total direct written premium by region 359,991 426,380 (66,389)
Assumed premium (2)
155 44 111
Total gross written premium by region $ 360,146 $ 426,424 $ (66,278)
Gross Written Premium by Line of Business
Commercial property $ 181,067 $ 155,982 $ 25,085
Personal property (3)
$ 179,079 $ 270,442 $ (91,363)
Total gross written premium by line of business $ 360,146 $ 426,424 $ (66,278)


($ in thousands)	Three Months Ended March 31,
	2023		2022		Change
Direct Written and Assumed Premium by State (1)
Florida	$	176,611	$	125,764	$	50,847
Texas	(9)		1,986		(1,995)
New York	10,482		4,683		5,799
South Carolina	—		93		(93)
Total direct written premium by state	187,084		132,526		54,558
Assumed premium (2)	39		9,888		(9,849)
Total gross written premium by state	$	187,123	$	142,414	$	44,709

Gross Written Premium by Line of Business
Personal property	$	10,482	$	14,450	$	(3,968)
Commercial property	176,641		127,964		48,677
Total gross written premium by line of business	$	187,123	$	142,414	$	44,709

(1) "Gulf" is comprised of Louisiana and Texas; "Northeast" is comprised of Massachusetts, New Jersey and New York in 2022 and Connecticut, Massachusetts, New Jersey, New York and Rhode Island in 2021; and "Southeast" is comprised of Georgia, North Carolina and South Carolina. We are no longer writing in ~~New Jersey as of January 15, 2022, Massachusetts as of April 1, 2022, and~~Texas or South Carolina as of ~~June 1, 2022 as the policies have transitioned to HCPCI.~~May 31, 2022.

(2) Assumed premium written for ~~2022 and 2021 is~~2023 primarily included commercial property business assumed from unaffiliated insurers.

~~(3)~~ ~~Includes gross~~ Assumed premium written ~~premium~~for 2022 includes New York property business assumed from ~~flood policies.~~our former subsidiary, UPC totaling $9,767,000.

~~UNITED INSURANCE HOLDINGS CORP.~~

Three Months Ended June 30,
New and Renewal Policies(1) by Region (2)
2022 2021 Change
Florida 43,752 63,389 (19,637)
Gulf 21,827 33,372 (11,545)
Northeast 10,991 34,866 (23,875)
Southeast 9,377 17,942 (8,565)
Total 85,947 149,569 (63,622)


	Three Months Ended March 31,
New and Renewal Policies(1) by State (2)	2023	2022	Change
Florida	1,157	1,472	(315)
Texas	—	18	(18)
New York	6,137	9,952	(3,815)
South Carolina	—	1	(1)
Total	7,294	11,443	(4,149)

(1) Only includes new and renewal homeowner, commercial and dwelling fire policies written during the quarter.

(2) "Gulf" is comprised of Louisiana and Texas; "Northeast" is comprised of Massachusetts, New Jersey and New York in 2022 and Connecticut, Massachusetts, New Jersey, New York and Rhode Island in 2021; and "Southeast" is comprised of Georgia, North Carolina and South Carolina. We are no longer writing in ~~New Jersey as of January 15, 2022, Massachusetts as of April 1, 2022, and~~Texas or South Carolina as of ~~June 1, 2022 as the policies have transitioned to HCPCI.~~May 31, 2022.

UNITED INSURANCE HOLDINGS CORP.

Expenses

Expenses for the three months ended ~~June 30, 2022~~March 31, 2023 decreased ~~$39,273,000,~~$3,689,000, or ~~20.9%~~6.1%, to ~~$148,969,000~~$57,064,000 from ~~$188,242,000~~$60,753,000 for the same period in ~~2021.~~2022. The decrease in expenses was primarily due to a decrease in loss and LAE of $9,903,000. Operating and underwriting expenses ~~of $27,990,000~~also decreased $1,539,000 in the ~~second~~first quarter of ~~2022~~2023 compared to the ~~second~~first quarter of ~~2021. Additionally,~~2022. This was partially offset by increased policy acquisition costs ~~decreased by $12,339,000 in the second quarter~~ of ~~2022 compared to the second quarter~~$6,664,000 and general and administrative costs of ~~2021.~~$729,000.

The calculations of our loss ratios and underlying loss ratios are shown below.


		Three Months Ended June 30,									Three Months Ended March 31,
		2022			2021			Change			2023			2022			Change
Net loss and LAE	Net loss and LAE	$	90,074		$	118,064		$	(27,990)	Net loss and LAE	$	16,412		$	26,315		$	(9,903)
% of Gross earned premiums	% of Gross earned premiums	29.5		%	33.1		%	(3.6) pts		% of Gross earned premiums	11.5		%	21.4		%	(9.9) pts
% of Net earned premiums	% of Net earned premiums	80.9		%	81.2		%	(0.3) pts		% of Net earned premiums	18.9		%	45.6		%	(26.7) pts
Less:	Less:									Less:
Current year catastrophe losses	Current year catastrophe losses	$	20,553		$	40,257		$	(19,704)	Current year catastrophe losses	$	2,615		$	5,528		$	(2,913)
Prior year reserve unfavorable development	Prior year reserve unfavorable development	7,766			(372)			8,138		Prior year reserve unfavorable development	(3,165)			(3,064)			(101)
Underlying loss and LAE (1)	Underlying loss and LAE (1)	$	61,755		$	78,179		$	(16,424)	Underlying loss and LAE (1)	$	16,962		$	23,851		$	(6,889)
% of Gross earned premiums	% of Gross earned premiums	20.2		%	21.9		%	(1.7) pts		% of Gross earned premiums	11.7		%	19.4		%	(7.7) pts
% of Net earned premiums	% of Net earned premiums	55.5		%	53.7		%	1.8 pts		% of Net earned premiums	19.4		%	41.3		%	(21.9) pts

(1) Underlying loss and LAE is a non-GAAP 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 document is in the "Definitions of Non-GAAP Measures" section of this Form 10-Q.

The calculations of our expense ratios are shown below.


		Three Months Ended June 30,									Three Months Ended March 31,
		2022			2021			Change			2023			2022			Change
Policy acquisition costs	Policy acquisition costs	$	28,988		$	41,327		$	(12,339)	Policy acquisition costs	$	26,972		$	20,308		$	6,664
Operating and underwriting	Operating and underwriting	13,019			13,482			(463)		Operating and underwriting	2,168			3,707			(1,539)
General and administrative	General and administrative	14,494			13,112			1,382		General and administrative	8,793			8,064			729
Total Operating Expenses	Total Operating Expenses	$	56,501		$	67,921		$	(11,420)	Total Operating Expenses	$	37,933		$	32,079		$	5,854
% of Gross earned premiums	% of Gross earned premiums	18.5		%	19.1		%	(0.6) pts		% of Gross earned premiums	26.3		%	26.1		%	0.2 pts
% of Net earned premiums	% of Net earned premiums	50.7		%	46.7		%	4.0 pts		% of Net earned premiums	43.4		%	55.6		%	(12.2) pts

Loss and LAE decreased by ~~$27,990,000,~~$9,903,000, or ~~23.7%~~37.6%, to ~~$90,074,000~~$16,412,000 for the ~~second~~first quarter of ~~2022~~2023 from ~~$118,064,000~~$26,315,000 for the ~~second~~first quarter of ~~2021.~~2022. Loss and LAE expense as a percentage of net earned premiums decreased ~~0.3~~26.7 points to ~~80.9%~~18.9% for the ~~second~~first quarter of ~~2022,~~2023, compared to ~~81.2%~~45.6% for the ~~second~~first quarter of ~~2021.~~2022. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the ~~second~~first quarter of ~~2022~~2023 would have been ~~20.2%~~11.7%, a decrease of ~~1.7~~7.7 points from ~~21.9%~~19.4% during the ~~second~~first quarter of ~~2021.~~2022.

Policy acquisition costs increased by $6,664,000, or 32.8%, to $26,972,000 for the first quarter of 2023 from $20,308,000 for the first quarter of 2022, primarily due to a $7,537,000 increase in external management fees incurred related to our commercial lines gross written premium during the first quarter of 2023, driven by increased written premium quarter-over-quarter.

Operating and underwriting expenses decreased by $1,539,000, or 41.5%, to $2,168,000 for the first quarter of 2023 from $3,707,000 for the first quarter of 2022, driven by a decrease in investments in technology of $506,000 and a decrease in underwriting expenses of $698,000 year-over-year. Both of these decreases are driven by the change to our personal lines operating segment in 2023.

General and administrative expenses increased by $729,000, or 9.0%, to $8,793,000 for the first quarter of 2023 from $8,064,000 for the first quarter of 2022, driven by the an increase in salary related expenses of $861,000 year-over-year.

5052

UNITED INSURANCE HOLDINGS CORP.

Policy acquisition costs decreased by $12,339,000, or 29.9%, to $28,988,000 for the second quarter of 2022 from $41,327,000 for the second quarter of 2021, primarily due to decreases in agent commissions, premium taxes, and policy administration fees of $16,015,000, $2,148,000 and $978,000, respectively, which fluctuate in conjunction with the quarter-over-quarter decrease in personal lines gross written premium. This was partially offset by an increase in ceding commission income of $1,766,000 related to changes in terms of our quota share reinsurance agreements and a $5,159,000 increase in external management fees incurred during the second quarter of 2022, as a result of an increased volume of commercial lines gross written premium.

~~Operating and underwriting expenses remained relatively flat, decreasing by $463,000, or 3.4%, to $13,019,000 for the second quarter of 2022 from $13,482,000 for the second quarter of 2021.~~

General and administrative expenses increased by $1,382,000, or 10.5%, to $14,494,000 for the second quarter of 2022 from $13,112,000 for the second quarter of 2021, driven by a $1,343,000 increase in external fees related to legal, audit, actuarial and tax services provided during the quarter.

Personal Lines Operating Segment Results

Pretax earnings attributable to our personal lines operating segment for the three months ended ~~June 30, 2022 decreased $13,133,000,~~March 31, 2023 increased $9,450,000, or ~~36.8%~~83.2%, to a pre-tax loss of ~~$48,805,000~~$1,907,000 for the ~~second~~first quarter of ~~2022~~2023 from a pre-tax loss of ~~$35,672,000~~$11,357,000 for the same period in ~~2021.~~2022. The change in pretax earnings was primarily driven by a decrease in gross written premiums quarter-over-quarter as described below. ~~The decrease in revenues was~~Expenses decreased quarter-over-quarter, driven by decreased loss & LAE, policy acquisition costs, and operating expenses. These decreases were partially offset by ~~a decrease~~an increase in ~~loss~~general and ~~LAE incurred as~~administrative expenses quarter-over-quarter. The details of the ~~result of lower current year catastrophe losses. Policy acquisition costs also decreased quarter-over-quarter as~~change in these expenses are described below.

Revenue

Our gross written premiums attributable to our personal lines operating segment decreased ~~$91,363,000,~~$3,968,000, or ~~33.8%~~27.5%, to ~~$179,079,000~~$10,482,000 for the ~~second~~first quarter ended ~~June 30, 2022~~March 31, 2023 from ~~$270,442,000~~$14,450,000 for the same period in ~~2021.~~2022. This decrease was driven primarily by a decreae in assumed premiums, driven by the ~~transition~~termination of ~~the Northeast business to HCPCI~~our quota share agreement between our former subsidiary, UPC and IIC effective December 31, 2022. The change in ~~the fourth quarter of 2021 and first half of 2022. In addition, gross written premiums have declined across our~~ personal lines ~~business, due to underwriting actions taken throughout 2021~~direct written and ~~in the first half of 2022. The breakdown~~assumed premiums and new and renewal premiums of the personal lines operating segment quarter-over-quarter ~~changes in direct written premiums by region is shown in the table~~can be seen below.

($ in thousands) Three Months Ended June 30,
2022 2021 Change
Direct Written and Assumed Premium by Region (1)
Florida $ 110,364 $ 129,288 $ (18,924)
Gulf 54,936 64,369 (9,433)
Southeast 16,797 26,906 (10,109)
Northeast (3,018) 49,879 (52,897)
Total gross written premium by region $ 179,079 $ 270,442 $ (91,363)

~~(1)~~ "Gulf" is comprised of Louisiana and Texas; "Northeast" is comprised of Massachusetts, New Jersey and New York in 2022 and Connecticut, Massachusetts, New Jersey, New York and Rhode Island in 2021; and "Southeast" is comprised of Georgia, North Carolina and South Carolina. We are no longer writing in New Jersey as of January 15, 2022, Massachusetts as of April 1, 2022, and South Carolina as of June 1, 2022 as the policies have transitioned to HCPCI.

~~UNITED INSURANCE HOLDINGS CORP.~~

Three Months Ended June 30,
New and Renewal Policies(1) by Region (2)
2022 2021 Change
Florida 41,796 61,243 (19,447)
Gulf 21,813 33,331 (11,518)
Northeast 10,991 34,866 (23,875)
Southeast 9,376 17,930 (8,554)
Total 83,976 147,370 (63,394)


($ in thousands, policies in ones)	Three Months Ended March 31,
	2023		2022		Change



Direct Written Premium	$	10,482	$	4,684	$	5,798
Assumed Premiums	—		9,766		(9,766)
Total gross written premium	$	10,482	$	14,450	$	(3,968)

New and Renewal Policies (1)	6,137		9,952		(3,815)

(1) Only includes new and renewal homeowner and dwelling fire policies written during the quarter.

~~(2)~~

"Gulf" is comprised of Louisiana and Texas; "Northeast" is comprised of Massachusetts, New Jersey and New York in 2022 and Connecticut, Massachusetts, New Jersey, New York and Rhode Island in 2021; and "Southeast" is comprised of Georgia, North Carolina and South Carolina. We are no longer writing in New Jersey as of January 15, 2022, Massachusetts as of April 1, 2022, and South Carolina as of June 1, 2022 as the policies have transitioned to HCPCI.

5253

UNITED INSURANCE HOLDINGS CORP.

Expenses

Expenses attributable to our personal lines operating segment for the three months ended ~~June 30, 2022~~March 31, 2023 decreased ~~$32,602,000,~~$11,529,000, or ~~22.2%~~48.6%, to ~~$114,347,000~~$12,172,000 from ~~$146,949,000~~$23,701,000 for the same period in ~~2021.~~2022. The decrease in expenses ~~was primarily due~~is attributable to decreased loss and LAE driven by decreased non-catastrophe losses, as well as a decrease in ~~loss and LAE expenses of $17,816,000 in the second quarter of 2022 compared to the second quarter of 2021. Additionally,~~ policy acquisition costs ~~decreased by $14,676,000 in the second quarter~~and operating expenses. The details of ~~2022 compared to the second quarter of 2021.~~these changes are described below.

The calculations of our personal lines operating segment loss ratios and underlying loss ratios are shown below.


		Three Months Ended June 30,									Three Months Ended March 31,
		2022			2021			Change			2023			2022			Change
Net loss and LAE	Net loss and LAE	$	81,880		$	99,696		$	(17,816)	Net loss and LAE	$	2,511		$	12,201		$	(9,690)
% of Gross earned premiums	% of Gross earned premiums	42.5		%	39.1		%	3.4 pts		% of Gross earned premiums	20.2		%	79.9		%	(59.7) pts
% of Net earned premiums	% of Net earned premiums	136.6		%	97.1		%	39.5 pts		% of Net earned premiums	29.0		%	99.2		%	(70.2) pts
Less:	Less:									Less:
Current year catastrophe losses	Current year catastrophe losses	$	23,140		$	37,819		$	(14,679)	Current year catastrophe losses	$	518		$	2,423		$	(1,905)
Prior year reserve (favorable) development	Prior year reserve (favorable) development	9,652			223			9,429		Prior year reserve (favorable) development	(395)			(1,261)			866
Underlying loss and LAE (1)	Underlying loss and LAE (1)	$	49,088		$	61,654		$	(12,566)	Underlying loss and LAE (1)	$	2,388		$	11,039		$	(8,651)
% of Gross earned premiums	% of Gross earned premiums	25.5		%	24.2		%	1.3 pts		% of Gross earned premiums	19.2		%	72.3		%	(53.1) pts
% of Net earned premiums	% of Net earned premiums	81.9		%	60.1		%	21.8 pts		% of Net earned premiums	27.5		%	89.7		%	(62.2) pts

The calculations of our personal lines operating segment expense ratios are shown below.


		Three Months Ended June 30,									Three Months Ended March 31,
		2022			2021			Change			2023			2022			Change
Policy acquisition costs	Policy acquisition costs	$	9,060		$	23,736		$	(14,676)	Policy acquisition costs	$	1,806		$	3,630		$	(1,824)
Operating and underwriting	Operating and underwriting	11,805			12,533			(728)		Operating and underwriting	1,948			2,507			(559)
General and administrative	General and administrative	11,571			10,952			619		General and administrative	5,907			5,363			544
Total Operating Expenses	Total Operating Expenses	$	32,436		$	47,221		$	(14,785)	Total Operating Expenses	$	9,661		$	11,500		$	(1,839)
% of Gross earned premiums	% of Gross earned premiums	16.8		%	18.5		%	(1.7) pts		% of Gross earned premiums	77.6		%	75.3		%	2.3 pts
% of Net earned premiums	% of Net earned premiums	54.1		%	46.0		%	8.1 pts		% of Net earned premiums	111.5		%	93.5		%	18.0 pts

Loss and LAE attributable to our personal lines operating segment decreased by ~~$17,816,000,~~$9,690,000, or ~~17.9%~~79.4%, to ~~$81,880,000~~$2,511,000 for the ~~second~~first quarter of ~~2022~~2023 from ~~$99,696,000~~$12,201,000 for the ~~second~~first quarter of ~~2021.~~2022. Loss and LAE expense as a percentage of net earned premiums ~~increased 39.5~~decreased 70.2 points to ~~136.6%~~29.0% for the ~~second~~first quarter of ~~2022,~~2023, compared to ~~97.1%~~99.2% for the ~~second~~first quarter of ~~2021.~~2022. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the ~~second~~first quarter of ~~2022~~2023 would have been ~~25.5%~~19.2%, ~~an increase~~a decrease of ~~1.3~~53.1 points from ~~24.2%~~72.3% during the ~~second~~first quarter of ~~2021.~~2022.

Policy acquisition costs attributable to our personal lines operating segment decreased by ~~$14,676,000,~~$1,824,000, or ~~61.8%~~50.2%, to ~~$9,060,000~~$1,806,000 for the ~~second~~first quarter of 2023 from $3,630,000 for the first quarter of 2022, ~~from $23,736,000 for the second quarter of 2021,~~ primarily due to a decrease in ~~agent~~reinsurance commissions premium taxes, and policy administration fees of $14,597,000, $2,562,000 and $979,000, respectively, which fluctuate in conjunction with the quarter-over-quarter decrease in personal lines gross written premium. In addition, reinsurance commission income decreased ~~by $3,588,000,~~$2,530,000, driven by ~~changes in~~ the ~~terms~~termination of ~~our~~the quota share ~~reinsurance agreements.~~agreement between our former subsidiary UPC and IIC.

Operating and underwriting expenses attributable to our personal lines operating segment decreased by ~~$728,000,~~$559,000, or ~~5.8%~~22.3%, to ~~$11,805,000~~$1,948,000 for the ~~second~~first quarter of 2023 from $2,507,000 for the first quarter of 2022, ~~from $12,533,000 for the second quarter of 2021,~~ due to decreased ~~investment~~investments in technology of ~~$929,000~~$251,000 in ~~2022.~~2023 and decreased underwriting expenses of $105,000 as the result of the decrease in premiums written described above.

General and administrative expenses attributable to our personal lines operating segment ~~remained relatively flat, increasing~~increased by ~~$619,000,~~$544,000, or ~~5.7%~~10.1%, to ~~$11,571,000~~$5,907,000 for the ~~second~~first quarter of 2023 from $5,363,000 for the first quarter of 2022, ~~from $10,952,000 for the second quarter~~driven by a $889,000 increase in salary related expenses as a result of ~~2021.~~lower headcount quarter-over-quarter. This was partially offset by lower costs associated with professional services provided by external vendors such as tax and legal services.

5354

UNITED INSURANCE HOLDINGS CORP.

Commercial Lines Operating Segment Results

Pretax earnings attributable to our commercial lines operating segment for the three months ended ~~June 30, 2022~~March 31, 2023 increased ~~$13,235,000,~~$27,337,000, or ~~238.4%~~236.0%, to pre-tax income of ~~$18,786,000~~$38,919,000 for the ~~second~~first quarter of ~~2022~~2023 from pre-tax income of ~~$5,551,000~~$11,582,000 for the same period in ~~2021.~~2022. The change in earnings was primarily driven by increased gross written premiums quarter-over-quarter, and decreased ~~loss~~operating and ~~LAE incurred,~~underwriting expenses. This was partially offset by increased policy acquisition ~~costs. The decrease in loss and LAE incurred can be attributed to decreased catastrophe losses quarter-over-quarter. In addition, gross written premiums increased~~costs quarter-over-quarter. The details of ~~the change in gross written premiums and policy acquisitions costs~~these changes are described below.

Revenue

Our gross written premiums attributable to our commercial lines operating segment increased ~~$25,085,000,~~$48,677,000, or ~~16.1%~~38.0%, to ~~$181,067,000~~$176,641,000 for the ~~second~~first quarter ended ~~June 30, 2022~~March 31, 2023 from ~~$155,982,000~~$127,964,000 for the same period in ~~2021.~~2022. This increase was driven primarily by an increase in written premiums in the state of Florida, as we focus on increasing commercial written premiums and ~~balancing our overall book of business to achieve~~transitioning towards a ~~more even split between personal lines and~~specialty commercial lines ~~business.~~underwriter. The breakdown of the commercial lines operating segment quarter-over-quarter changes in both direct written and assumed premiums by state are shown in the table below.


($ in thousands)	($ in thousands)	Three Months Ended June 30,						($ in thousands)	Three Months Ended March 31,
		2022		2021		Change			2023		2022		Change
Direct Written and Assumed Premium by State (1)	Direct Written and Assumed Premium by State (1)							Direct Written and Assumed Premium by State (1)
Florida	Florida	$	179,187	$	152,440	$	26,747	Florida	$	176,611	$	125,764	$	50,847
Texas	Texas	1,803		2,921		(1,118)		Texas	(9)		1,986		(1,995)
South Carolina	South Carolina	(78)		577		(655)		South Carolina	—		93		(93)
Total direct written premium by region		180,912		155,938		24,974
Total direct written premium by state								Total direct written premium by state	176,602		127,843		48,759
Assumed premium (2)	Assumed premium (2)	155		44		111		Assumed premium (2)	39		121		(82)
Total gross written premium by region		$	181,067	$	155,982	$	25,085
Total gross written premium by state								Total gross written premium by state	$	176,641	$	127,964	$	48,677

(1) We are no longer writing in Texas or South Carolina as of May 31, 2022.

(2) Assumed premium written for 2022 and 2021 is primarily commercial property business assumed from unaffiliated insurers.


		Three Months Ended June 30,				Three Months Ended March 31,
New and Renewal Policies(1) by State (2)	New and Renewal Policies(1) by State (2)	2022	2021	Change	New and Renewal Policies(1) by State (2)	2023	2022	Change
Florida	Florida	1,956	2,146	(190)	Florida	1,157	1,472	(315)
Texas	Texas	14	41	(27)	Texas	—	18	(18)
South Carolina	South Carolina	1	12	(11)	South Carolina	—	1	(1)
Total	Total	1,971	2,199	(228)	Total	1,157	1,491	(334)

(1) Only includes new and renewal commercial policies written during the year.

(2) We are no longer writing in Texas or South Carolina as of May 31, 2022.

5455

UNITED INSURANCE HOLDINGS CORP.

Expenses

Expenses attributable to our commercial lines operating segment for the three months ended ~~June 30, 2022 decreased $6,959,000,~~March 31, 2023 increased $7,696,000, or ~~18.0%~~22.5%, to ~~$31,670,000~~$41,917,000 from ~~$38,629,000~~$34,221,000 for the same period in ~~2021.~~2022. The ~~decrease~~increase in expenses was primarily due to ~~a decrease~~an increase in ~~loss and LAE~~policy acquisition costs of ~~$10,174,000~~$8,488,000 in the ~~second~~first quarter of ~~2022~~2023 compared to the ~~second~~first quarter of ~~2021.~~2022. This was partially offset by a ~~$2,337,000 increase~~$1,012,000 decrease in policy acquisition ~~costs in the second quarter of 2022 compared to the second quarter of 2021, the~~costs. The details of ~~which~~these changes can be seen below.

The calculations of our commercial lines operating segment loss ratios and underlying loss ratios are shown below.


		Three Months Ended June 30,									Three Months Ended March 31,
		2022			2021			Change			2023			2022			Change
Net loss and LAE	Net loss and LAE	$	8,194		$	18,368		$	(10,174)	Net loss and LAE	$	13,901		$	14,114		$	(213)
% of Gross earned premiums	% of Gross earned premiums	7.2		%	18.1		%	(10.9) pts		% of Gross earned premiums	10.5		%	13.1		%	(2.6) pts
% of Net earned premiums	% of Net earned premiums	15.9		%	42.9		%	(27.0) pts		% of Net earned premiums	17.7		%	31.1		%	(13.4) pts
Less:	Less:									Less:
Current year catastrophe losses	Current year catastrophe losses	$	(2,587)		$	2,438		$	(5,025)	Current year catastrophe losses	$	2,097		$	3,105		$	(1,008)
Prior year reserve (favorable) development	Prior year reserve (favorable) development	(1,886)			(595)			(1,291)		Prior year reserve (favorable) development	(2,770)			(1,803)			(967)
Underlying loss and LAE (1)	Underlying loss and LAE (1)	$	12,667		$	16,525		$	(3,858)	Underlying loss and LAE (1)	$	14,574		$	12,812		$	1,762
% of Gross earned premiums	% of Gross earned premiums	11.2		%	16.3		%	(5.1) pts		% of Gross earned premiums	11.0		%	11.9		%	(0.9) pts
% of Net earned premiums	% of Net earned premiums	24.5		%	38.6		%	(14.1) pts		% of Net earned premiums	18.5		%	28.2		%	(9.7) pts

The calculations of our commercial lines operating segment expense ratios are shown below.


		Three Months Ended June 30,									Three Months Ended March 31,
		2022			2021			Change			2023			2022			Change
Policy acquisition costs	Policy acquisition costs	$	19,928		$	17,591		$	2,337	Policy acquisition costs	$	25,166		$	16,678		$	8,488
Operating and underwriting	Operating and underwriting	1,127			932			195		Operating and underwriting	96			1,109			(1,013)
General and administrative	General and administrative	2,421			1,738			683		General and administrative	2,754			2,320			434
Total Operating Expenses	Total Operating Expenses	$	23,476		$	20,261		$	3,215	Total Operating Expenses	$	28,016		$	20,107		$	7,909
% of Gross earned premiums	% of Gross earned premiums	20.7		%	20.0		%	0.7 pts		% of Gross earned premiums	21.2		%	18.7		%	2.5 pts
% of Net earned premiums	% of Net earned premiums	45.6		%	47.3		%	(1.7) pts		% of Net earned premiums	35.6		%	44.2		%	(8.6) pts

Loss and LAE attributable to our commercial lines operating segment decreased by ~~$10,174,000,~~$213,000, or ~~55.4%~~1.5%, to ~~$8,194,000~~$13,901,000 for the ~~second~~first quarter of ~~2022~~2023 from ~~$18,368,000~~$14,114,000 for the ~~second~~first quarter of ~~2021.~~2022. Loss and LAE expense as a percentage of net earned premiums decreased ~~27.0~~13.4 points to ~~15.9%~~17.7% for the ~~second~~first quarter of 2022, compared to ~~42.9%~~31.1% for the ~~second~~first quarter of 2021. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the ~~second~~first quarter of 2022 would have been ~~11.2%~~11.0%, a decrease of ~~5.1~~0.9 points from ~~16.3%~~11.9% during the ~~second~~first quarter of ~~2021.~~2022.

Policy acquisition costs attributable to our commercial lines operating segment increased by ~~$2,337,000,~~$8,488,000, or ~~13.3%~~50.9%, to ~~$19,928,000~~$25,166,000 for the ~~second~~first quarter of 2023 from $16,678,000 for the first quarter of 2022, ~~from $17,591,000 for the second quarter of 2021,~~ driven by increases toin external management fees ~~and premium taxes~~ of ~~$3,742,000 and $414,000, respectively, both~~$7,537,000, as a result of ~~which fluctuate in conjunction with the quarter-over-quarter increase in commercial lines~~increased gross written ~~premium. This was partially offset by an increase to our~~premiums quarter-over-quarter. In addition ceding commission income related to ~~changes in~~ our quota share reinsurance agreements decreasing $3,506,000, driven by the non-renewal of ~~$1,822,000.~~agreements at the end of 2022. These increases were partially offset by decreased agent commission expenses of $2,363,000.

Operating and underwriting expenses attributable to our commercial lines operating segment ~~increased~~decreased by ~~$195,000,~~$1,013,000, or ~~20.9%~~91.3%, to ~~$1,127,000~~$96,000 for the ~~second~~first quarter of 2023 from $1,109,000 for the first quarter of 2022, ~~from $932,000 for the second quarter of 2021,~~ driven by ~~increased~~a $591,000 decrease in underwriting expenses quarter-over-quarter, decreased allocations of expenses for investments in technology of ~~$99,000.~~$196,000, and a decrease in expense related to our credit allowance reserve of $208,000.

General and administrative expenses attributable to our commercial lines operating segment increased by ~~$683,000,~~$434,000, or ~~39.3%~~18.7%, to ~~$2,421,000~~$2,754,000 for the ~~second~~first quarter of 2023 from $2,320,000 for the first quarter of 2022, ~~from $1,738,000 for the second quarter of 2021,~~ driven by a ~~$430,000~~$433,000 increase in allocated external ~~fees related to legal, audit, actuarial and tax~~professional services ~~provided during the quarter. In addition, allocated salary related expenses increased $99,000~~costs for the ~~second~~first quarter of ~~2022~~2023 compared to the same period in ~~2021.~~

~~UNITED INSURANCE HOLDINGS CORP.~~

~~RESULTS OF OPERATIONS - COMPARISON OF THE SIX MONTH PERIODS ENDED JUNE 30, 2022 AND 2021~~

Net losses attributable to UIHC for the six months ended June 30, 2022 increased $60,920,000, or 147.6%, to a net loss of $102,201,000 from $41,281,000 for the same period in 2021. The change in earnings was primarily due to an increase in our provision for income taxes from the recognition of a valuation allowance against our deferred tax asset during the year of $43,660,000. Total revenue also decreased as a result of decreased gross written premiums year-over-year as described below. This decrease in revenues was partially offset by decreased expenses for the quarter, driven by a decrease in loss and LAE incurred driven lower current year catastrophe and non-catastrophe losses as a result of our reduced exposure in 2022 and lower prior year loss development. Policy acquisition costs also decreased year over year, as described below.

~~Revenue~~

Our gross written premiums decreased $98,441,000, or 13.3%, to $639,621,000 for the six months ended June 30, 2022 from $738,062,000 for the same period in 2021. This decrease was driven primarily by the transition of the Northeast business to HCPCI in the fourth quarter of 2021 and the first half of 2022. In addition, we experienced a decline in written premiums across our personal lines business, due to underwriting actions taken throughout 2021 and during the first half of 2022. Our commercial written premiums have increased year over year, offsetting the personal lines decrease in Florida, resulting in a net increase for the region. The breakdown of the year-over-year changes in both direct and assumed written premiums by region and gross written premium by line of business are shown in the table below.

($ in thousands) Six Months Ended June 30,
2022 2021 Change
Direct Written and Assumed Premium by Region (1)
Florida $ 504,678 $ 477,313 $ 27,365
Gulf 98,345 120,273 (21,928)
Southeast 31,885 51,890 (20,005)
Northeast 4,437 88,494 (84,057)
Total direct written premium by region 639,345 737,970 (98,625)
Assumed premium (2)
276 92 184
Total gross written premium by region $ 639,621 $ 738,062 $ (98,441)
Gross Written Premium by Line of Business
Personal property (3)
$ 330,590 $ 474,040 $ (143,450)
Commercial property 309,031 264,022 45,009
Total gross written premium by line of business $ 639,621 $ 738,062 $ (98,441)

~~(2)~~ ~~Assumed premium written for 2022 and 2021 is primarily commercial property business assumed from unaffiliated insurers.~~

~~(3)~~ ~~Includes gross written premium from flood policies.~~

~~UNITED INSURANCE HOLDINGS CORP.~~

Six Months Ended June 30,
New and Renewal Policies (1) By Region (2)
2022 2021 Change
Florida 80,849 113,395 (32,546)
Gulf 40,927 60,544 (19,617)
Northeast 20,943 63,099 (42,156)
Southeast 17,805 35,393 (17,588)
Total 160,524 272,431 (111,907)

~~(1)~~ ~~Only includes new and renewal homeowner, commercial and dwelling fire policies written during the quarter.~~

~~(2)~~ "Gulf" is comprised of Louisiana and Texas; "Northeast" is comprised of Massachusetts, New Jersey and New York in 2022 and Connecticut, Massachusetts, New Jersey, New York and Rhode Island in 2021; and "Southeast" is comprised of Georgia, North Carolina and South Carolina. We are no longer writing in New Jersey as of January 15, 2022, Massachusetts as of April 1, 2022, and South Carolina as of June 1, 2022 as the policies have transitioned to HCPCI.

~~Expenses~~

Expenses for the six months ended June 30, 2022 decreased $79,338,000, or 21.1%, to $296,985,000 from $376,323,000 for the same period in 2021. The decrease in expenses was primarily due to an $52,403,000 decrease in our loss and LAE and a $27,144,000 decrease in our policy acquisition costs. We also experienced a $1,437,000 decrease in our operating expenses year-over-year. These decreases were partially offset by a $1,505,000 increase in our administrative expenses year-over-year.

Six Months Ended June 30,
2022 2021 Change
Net loss and LAE $ 181,442 $ 233,845 $ (52,403)
% of Gross earned premiums 29.0 % 32.8 % (3.8) pts
% of Net earned premiums 85.5 % 80.2 % 5.3 pts
Less:
Current year catastrophe losses $ 49,169 $ 64,222 $ (15,053)
Prior year reserve (favorable) development 9,199 29,397 (20,198)
Underlying loss and LAE (1)
$ 123,074 $ 140,226 $ (17,152)
% of Gross earned premiums 19.7 % 19.7 % — pts
% of Net earned premiums 58.0 % 48.1 % 9.9 pts

~~(1)~~ Underlying loss and LAE is a non-GAAP 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 document is in the "~~Definitions of Non-GAAP Measures" section of this Form 10-Q.~~

~~The calculations of our expense ratios are shown below.~~
Six Months Ended June 30,
2022 2021 Change
Policy acquisition costs $ 55,004 $ 82,148 $ (27,144)
Operating and underwriting 25,267 26,704 (1,437)
General and administrative 30,499 28,994 1,505
Total operating expenses $ 110,770 $ 137,846 $ (27,076)
% of Gross earned premiums 17.7 % 19.3 % (1.6) pts
% of Net earned premiums 52.2 % 47.3 % 4.9 pts

Loss and LAE decreased $52,403,000, or 22.4%, to $181,442,000 for the six months ended June 30, 2022 from $233,845,000 for the same period in 2021. Loss and LAE expense as a percentage of net earned premiums increased 5.3 points to 85.5% for the six months ended June 30, 2022, compared to 80.2% for the same period in 2021. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the six months ended June 30, 2022 was 19.7%, unchanged from the six months ended June 30, 2021.

Policy acquisition costs decreased $27,144,000, or 33.0%, to $55,004,000 for the six months ended June 30, 2022 from $82,148,000 for the same period in 2021. The primary driver of the decrease was a decrease in the Company's agent

~~UNITED INSURANCE HOLDINGS CORP.~~

commissions, premium taxes, and policy administration fees of $23,952,000, $3,600,000 and $1,574,000, respectively, which fluctuate in conjunction with the year-over-year decrease in personal lines gross written premium. In addition, there was an increase of $3,612,000 in ceding commission income as a result of changes made to the terms of our quota share agreements. This was partially offset by a $5,965,000 increase in external management fees incurred during 2022 as a result of an increased volume of commercial written premium.

Operating expenses decreased $1,437,000, or 5.4%, to $25,267,000 for the six months ended June 30, 2022 from $26,704,000 for the same period in 2021, primarily due to decreased investments in technology of $1,318,000.

General and administrative expenses increased $1,505,000, or 5.2%, to $30,499,000 for the six months ended June 30, 2022 from $28,994,000 for the same period in 2021 primarily due to a $1,607,000 increase in external fees related to legal, audit, actuarial and tax services provided during the year.

~~Personal Lines Operating Segment Results~~

Pretax earnings attributable to our personal lines operating segment for the six months ended June 30, 2022 decreased $36,579,000, or 54.7%, to a pre-tax loss of $103,481,000 from a pre-tax loss of $66,902,000 for the same period in 2021. The change in pretax earnings was primarily driven by a decrease in revenues during 2022 compared to the same period in 2021. This change was driven by decreased gross written premiums, the details of which are described below. The decrease in revenues was partially offset by lower loss and LAE incurred, driven by decreased unfavorable development on prior year catastrophe and non-catastrophe losses. Policy acquisition costs also decreased for the period, the details of which are described below.

~~Revenue~~

Our gross written premiums attributable to our personal lines operating segment decreased $143,450,000 or 30.3%, to $330,590,000 for the six months ended June 30, 2022 from $474,040,000 for the same period in 2021. This decrease was driven primarily by the transition of our Northeast business to HCPCI in the fourth quarter of 2021 and first half of 2022. In addition, direct written premiums have declined across our personal lines business, due to underwriting actions taken throughout 2021 and in the first half of 2022. The breakdown of the personal lines operating segment year-over-year changes in direct written premiums by region is shown in the table below.

($ in thousands) Six Months Ended June 30,
2022 2021 Change
Direct Written and Assumed Premium by Region (1)
Florida $ 199,727 $ 222,186 $ (22,459)
Gulf 94,556 112,810 (18,254)
Southeast 31,870 50,550 (18,680)
Northeast 4,437 88,494 (84,057)
Total gross written premium by region $ 330,590 $ 474,040 $ (143,450)

~~UNITED INSURANCE HOLDINGS CORP.~~

Six Months Ended June 30,
New and Renewal Policies(1) by Region (2)
2022 2021 Change
Florida 77,421 109,735 (32,314)
Gulf 40,895 60,448 (19,553)
Northeast 20,943 63,099 (42,156)
Southeast 17,803 35,367 (17,564)
Total 157,062 268,649 (111,587)

~~(1)~~ ~~Only includes new and renewal homeowner and dwelling fire policies written during the quarter.~~

~~Expenses~~

Expenses attributable to our personal lines operating segment for the six months ended June 30, 2022 decreased $71,459,000, or 24.1%, to $225,311,000 from $296,770,000 for the same period in 2021. The decrease in expenses was primarily due to a decrease in loss and LAE expenses of $42,537,000 during 2022 compared to the same period in 2021. In addition, policy acquisition costs decreased by $27,896,000 and our operating costs decreased $1,610,000 during 2022 compared to the same period in 2021.

~~The calculations of our personal lines operating segment loss ratios and underlying loss ratios are shown below.~~

Six Months Ended June 30,
2022 2021 Change
Net loss and LAE $ 159,134 $ 201,671 $ (42,537)
% of Gross earned premiums 39.4 % 39.3 % 0.1 pts
% of Net earned premiums 137.9 % 97.6 % 40.3 pts
Less:
Current year catastrophe losses $ 48,651 $ 57,425 $ (8,774)
Prior year reserve (favorable) development 12,888 30,225 (17,337)
Underlying loss and LAE (1)
$ 97,595 $ 114,021 $ (16,426)
% of Gross earned premiums 24.1 % 22.2 % 1.9 pts
% of Net earned premiums 84.6 % 55.2 % 29.4 pts

~~(1)~~ Underlying loss and LAE is a non-GAAP 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 document is in the "~~Definitions of Non-GAAP Measures" section of this Form 10-Q.~~

~~The calculations of our personal lines operating segment expense ratios are shown below.~~
Six Months Ended June 30,
2022 2021 Change
Policy acquisition costs $ 18,398 $ 46,294 $ (27,896)
Operating and underwriting 22,853 24,463 (1,610)
General and administrative 24,875 24,295 580
Total Operating Expenses $ 66,126 $ 95,052 $ (28,926)
% of Gross earned premiums 16.4 % 18.5 % (2.1) pts
% of Net earned premiums 57.3 % 46.0 % 0.46 11.3 pts

Loss and LAE attributable to our personal lines operating segment decreased by $42,537,000, or 21.1%, to $159,134,000 for the six months ended June 30, 2022 from $201,671,000 for the same period in 2021. Loss and LAE expense as a percentage of net earned premiums increased 40.3 points to 137.9% for the six months ended June 30, 2022, compared to 97.6% for the same period in 2021. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the six months ended June 30, 2022 would have been 24.1%, an increase of 1.9 points from 22.2% for the same period in 2021.

~~UNITED INSURANCE HOLDINGS CORP.~~

Policy acquisition costs attributable to our personal lines operating segment decreased by $27,896,000, or 60.3%, to $18,398,000 for the six months ended June 30, 2022 from $46,294,000 for the same period in 2021, primarily due to a decrease in agent commissions, premium taxes, and policy administration fees of $22,673,000, $4,876,000 and $1,557,000, respectively, which fluctuate in conjunction with the year-over-year decrease in personal lines gross written premium. This was partially offset by reinsurance commission income decreasing by $1,683,000, driven by changes in the terms of our quota share agreements.

Operating and underwriting expenses attributable to our personal lines operating segment decreased by $1,610,000, or 6.6%, to $22,853,000 for the six months ended June 30, 2022 from $24,463,000 for the same period in 2021, due to decreased investments in technology of $1,496,000.

General and administrative expenses attributable to our personal lines operating segment remained relatively flat, increasing by $580,000, or 2.4%, to $24,875,000 for the six months ended June 30, 2022 from $24,295,000 for the same period in 2021.

~~Commercial Lines Operating Segment Results~~

Pretax earnings attributable to our commercial lines operating segment for the six months ended June 30, 2022 increased $16,862,000, or 124.8%, to pre-tax income of $30,368,000 from pre-tax income of $13,506,000 for the same period in 2021. The change in earnings was primarily driven by increased gross written premiums, the details of which are described below. In addition, loss and LAE incurred decreased during 2022 compared to the same period in 2021, driven by decreased catastrophe losses year-over-year.

~~Revenue~~

Our gross written premiums attributable to our commercial lines operating segment increased $45,009,000, or 17.0%, to $309,031,000 for the six months ended June 30, 2022 from $264,022,000 for the same period in 2021. This increase was driven primarily by an increase in written premiums in the state of Florida, as we focus on increasing commercial written premiums and balancing our overall book of business to achieve a more even split between personal lines and commercial lines business. The breakdown of the commercial lines operating segment year-over-year changes in both direct written and assumed premiums by state are shown in the table below.

($ in thousands) Six Months Ended June 30,
2022 2021 Change
Direct Written and Assumed Premium by State (1)
Florida $ 304,951 $ 255,127 $ 49,824
Texas 3,789 7,463 (3,674)
South Carolina 15 1,340 (1,325)
Total direct written premium by region 308,755 263,930 44,825
Assumed premium (2)
276 92 184
Total gross written premium by region $ 309,031 $ 264,022 $ 45,009

~~(1)~~ ~~We are no longer writing in Texas or South Carolina as of May 31, 2022.~~

~~(2)~~ ~~Assumed premium written for 2022 and 2021 is primarily commercial property business assumed from unaffiliated insurers.~~

Six Months Ended June 30,
New and Renewal Policies(1) by State (2)
2022 2021 Change
Florida 3,428 3,660 (232)
Texas 32 96 (64)
South Carolina 2 26 (24)
Total 3,462 3,782 (320)

~~(1)~~ ~~Only includes new and renewal commercial policies written during the year.~~

~~(2)~~ ~~We are no longer writing in Texas or South Carolina as of May 31, 2022.~~

UNITED INSURANCE HOLDINGS CORP.

~~Expenses~~

Expenses attributable to our commercial lines operating segment for the six months ended June 30, 2022 decreased $7,980,000, or 10.8%, to $65,891,000 from $73,871,000 for the same period in 2021. The decrease in expenses was primarily due to a decrease in loss and LAE of $9,866,000 during 2022 compared to the same period in 2021. This was partially offset by a $1,099,000 increase in administrative expenses and a $752,000 increase in policy acquisition costs in 2022 compared to the same period in 2021.

~~The calculations of our commercial lines operating segment loss ratios and underlying loss ratios are shown below.~~

Six Months Ended June 30,
2022 2021 Change
Net loss and LAE $ 22,308 $ 32,174 $ (9,866)
% of Gross earned premiums 10.1 % 16.1 % (6.0) pts
% of Net earned premiums 23.0 % 38.0 % (15.0) pts
Less:
Current year catastrophe losses $ 518 $ 6,797 $ (6,279)
Prior year reserve (favorable) development (3,689) (828) (2,861)
Underlying loss and LAE (1)
$ 25,479 $ 26,205 $ (726)
% of Gross earned premiums 11.5 % 13.1 % (1.6) pts
% of Net earned premiums 26.3 % 30.9 % (4.6) pts

~~The calculations of our commercial lines operating segment expense ratios are shown below.~~
Six Months Ended June 30,
2022 2021 Change
Policy acquisition costs $ 36,606 $ 35,854 $ 752
Operating and underwriting 2,236 2,201 35
General and administrative 4,741 3,642 1,099
Total Operating Expenses $ 43,583 $ 41,697 $ 1,886
% of Gross earned premiums 19.7 % 20.9 % (1.2) pts
% of Net earned premiums 45.0 % 49.2 % (4.2) pts

Loss and LAE attributable to our commercial lines operating segment decreased by $9,866,000, or 30.7%, to $22,308,000 for the six months ended June 30, 2022 from $32,174,000 for the same period in 2021. Loss and LAE expense as a percentage of net earned premiums decreased 15.0 points to 23.0% for the six months ended June 30, 2022 compared to 38.0% for the same period in 2021. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the six months ended June 30, 2022 would have been 11.5%, a decrease of 1.6 points from 13.1% during the same period in 2021.

Policy acquisition costs attributable to our commercial lines operating segment remained relatively flat, increasing by $752,000, or 2.1%, to $36,606,000 for the six months ended June 30, 2022 from $35,854,000 for the same period in 2021.

Operating and underwriting expenses attributable to our commercial lines operating segment remained relatively flat, increasing by $35,000, or 1.6%, to $2,236,000 for the six months ended June 30, 2022 from $2,201,000 for the same period in 2021.

General and administrative expenses attributable to our commercial lines operating segment increased by $1,099,000, or 30.2%, to $4,741,000 for the six months ended 2022 from $3,642,000 for the same period in 2021, driven by a $682,000 increase in allocated external fees related to legal, audit, actuarial and tax services provided during the quarter. In addition, we incurred $183,000 in additional allocated salary expenses in 2022 compared to the same period in 2021.

~~UNITED INSURANCE HOLDINGS CORP.~~

LIQUIDITY AND CAPITAL RESOURCES

We generate cash through premium collections, reinsurance recoveries, investment income, the sale or maturity of invested assets, the incurrence of debt and the issuance of additional shares of our stock. We use our cash to pay reinsurance premiums, claims and related costs, policy acquisition costs, salaries and employee benefits, other expenses and stockholder dividends, acquire subsidiaries and pay associated costs, as well as to repay debts, repurchase stock and purchase investments.

As a holding company, we do not conduct any business operations of our own and, as a result, we rely on cash dividends or intercompany loans from our management subsidiaries to pay our general and administrative expenses. Insurance regulatory authorities heavily regulate our insurance subsidiaries, including restricting any dividends paid by our insurance subsidiaries and requiring approval of any management fees our insurance subsidiaries pay to our management subsidiaries for services rendered; however, nothing restricts our non-insurance company subsidiaries from paying us dividends other than state corporate laws regarding solvency. Our management subsidiaries pay us dividends primarily using cash from the collection of management fees from our insurance subsidiaries, pursuant to the management agreements in effect between those entities. In accordance with state laws, our insurance subsidiaries may pay dividends or make distributions out of that part of their statutory surplus derived from their net operating profit and their net realized capital gains. The Risk-Based Capital (RBC) guidelines published by the National Association of Insurance Commissioners may further restrict our insurance subsidiaries’ ability to pay dividends or make distributions if the amount of the intended dividend or distribution would cause their respective surplus as it regards policyholders to fall below minimum RBC guidelines. See Note 1315 in our Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

During the three months ended ~~June 30,~~March 31, 2023, the Company made no capital contributions to its subsidiaries. During the three months ended March 31, 2022, the Company made capital contributions of ~~$31,000,000 and $3,200,000~~$8,000,000 each to our former insurance subsidiaries, UPC and FSIC. The contribution made to FSIC was made prior to the merging of FSIC into UPC. During the six months ended June 30, 2022, the Company made capital contributions of $39,000,000 and $11,200,000 each to our insurance subsidiaries, UPC and FSIC. During the three months ended June 30, 2021, the Company made a capital contribution of $10,000,000 to our insurance subsidiary, ACIC. During the six months ended June 30, 2021, IIC paid a dividend of $3,500,000 to the Company. In addition, the Company made capital contributions of $3,500,000 and $10,000,000 to our insurance subsidiaries, FSIC and ACIC, respectively. We may make future contributions of capital to our insurance subsidiaries as circumstances require.

~~The COVID-19 pandemic and resulting global disruptions have caused significant volatility~~As described in ~~financial markets. However, during~~Note 1 in the ~~three and six month periods ended June 30, 2022,~~Notes to Unaudited Condensed Consolidated Financial Statements above, substantial doubt exists about the ~~disruptions did not have an impact on our access to credit and capital markets needed to maintain sufficient liquidity for our continued operating needs. We expect~~Company’s ability to continue as a going concern within the twelve-month period subsequent to ~~maintain financing flexibility~~the date that these unaudited condensed consolidated interim financial statements are issued. No adjustments have been made that might be necessary if the Company is unable to continue as a going concern. Accordingly, the unaudited condensed consolidated interim financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ~~current market conditions.~~ordinary course of business.

Management’s strategic plans include the following:

•Working with the DFS to achieve a fair and equitable solution regarding reinsurance recoverables held by UPC that management believes are due to ACIC;

•Providing additional information to our rating agencies for the affirmation of the Company’s current financial ratings;

•Successfully renewing our catastrophe reinsurance programs for ACIC and IIC effective June 1, 2023; and

•Exploring raising additional capital for UIHC and ACIC, including in the form of surplus note contributions, to strengthen its statutory risk-based capital if necessary.

If the Company is unable to implement these actions, there is no assurance that the Company will be able to obtain the necessary amounts of additional capital to continue as a going concern. As of the date of this report we do not have any commitments from any source to provide such additional capital. Even if we are able to secure debt or equity financing, it may be unavailable in the amounts or time when we require. Furthermore, such financing would likely take the form of bank loans, surplus notes, private placement or public offering of debt or equity securities or some combination of these. The issuance of additional equity securities would dilute the stock ownership of current investors while incurring loans, surplus notes or other debt would increase our capital requirements and a possible loss of valuable assets if such obligations were not repaid in accordance with their terms.

6257

UNITED INSURANCE HOLDINGS CORP.

Cash Flows for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in millions)

Operating Activities

The principal cash inflows from our operating activities come from premium collections, reinsurance recoveries and investment income. The principal cash outflows from our operating activities are the result of claims and related costs, reinsurance premiums, policy acquisition costs and salaries and employee benefits. A primary liquidity concern with respect to these cash flows is the risk of large magnitude catastrophe events.

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, we experienced cash ~~inflows~~outflows of ~~$8,286,000~~$104,164,000 compared to cash outflows of ~~$28,261,000~~$20,893,000 during the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. Net income for the period increased $62,012,000, exclusive of the impact of the disposition of UPC, driving these inflows. This ~~change can be attributed primarily to a $136,353,000 decrease~~is offset by the deconsolidation of UPC in ~~our ceded unearned premiums as~~ the ~~result~~first quarter of ~~our reinsurance~~2023. This resulted in changes ~~effective December 2021 and June 30, 2022. Details of these changes are disclosed in Part I,~~ ~~"Reinsurance"~~ ~~above. In addition, during the six months ended June 30, 2022, the change~~ in our unpaid loss and loss adjustment expenses, net of reinsurance recoverables on paid and unpaid losses, ~~increased by $64,682,000, driven by an increase~~ in ~~recoveries on prior year catastrophe events.~~2022, as we no longer hold the UPC portion of this liability.

Investing Activities

The principal cash inflows from our investing activities come from repayments of principal, proceeds from maturities and sales of investments. We closely monitor and manage these risks through our comprehensive investment risk management process. The principal cash outflows relate to sales of investments. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption. During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, net ~~sales~~purchases of investments totaled ~~$83,661,000~~$195,082,000 compared to net sales of investments of ~~$54,649,000~~$70,134,000 during the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. This was partially offset by the disposition of $232,582,000 of cash held by UPC at the time of receivership.

Financing Activities

The principal cash outflows from our financing activities come from repayments of debt and payments of dividends. The primary liquidity concern with respect to these cash flows is market disruption in the cost and availability of credit. We believe our current capital resources, together with cash provided from our operations, are sufficient to meet currently anticipated working capital requirements. During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, no cash was used in financing activities ~~increased $15,443,000~~compared to ~~$21,685,000~~$2,970,000 for the ~~six~~three months ended ~~June 30, 2022 from $6,242,000 for the six months ended June 30, 2021.~~March 31, 2022. The ~~increase~~decrease in outflow in ~~2022~~2023 can be attributed to the return of capital to Kiln of $18,335,000 as a result of the stock re-purchase agreement and termination agreements effective June 30, 2022. This was partially offset by a decrease in dividend payments in 2022 of $2,597,000, since no dividend ~~was declared~~payment being made in the ~~second~~first quarter of ~~2022.~~2023. In addition, no repayments of borrowings were made in 2023 as we no longer hold the debt associated with our former subsidiary, UPC.

6358

UNITED INSURANCE HOLDINGS CORP.

OFF-BALANCE SHEET ARRANGEMENTS

At ~~June 30, 2022,~~March 31, 2023, we did not have any off-balance sheet arrangements or material changes to our contractual obligations during the quarter.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks, including interest rate risk related to changes in interest rates in our fixed-maturity securities, credit risk related to changes in the financial condition of the issuers of our fixed-maturities and equity price risk related to changes in equity security prices. These risks are disclosed in Part II, Item 7A. "Quantitative and Qualitative Disclosures about Market Risk" of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. We had no material changes in our market risk during the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023.

Item 4. Controls and Procedures

We maintain a set of disclosure controls and procedures designed to ensure that the information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. We designed our disclosure controls with the objective of ensuring we accumulate and communicate this information to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Based on our evaluation, our principal executive officer and principal financial officer concluded that, at the time the original report was filed with the SEC, our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.

Subsequent to that evaluation, our management, including our principal executive officer and principal financial officer, concluded that, as of March 31, 2023, our disclosure controls and procedures were not effective due to the material weakness in our internal control over financial reporting described below.

Existence of Material Weakness as of March 31, 2023

The Company identified a material weakness in its internal control over financial reporting related to the reporting of the discontinued operations. Specifically, the Company’s controls over the review of significant unusual transactions, including the effects of the transactions on the preparation of the Company's tax provision were not designed effectively. The Company did not have sufficient, experienced accounting resources to effectively review the accounting for and reporting of significant, unusual transactions. As a result of the material weakness, management’s review control did not detect an error in the accounting related to the recording of the discontinued operations and as a result, net income was understated by $6.4 million. The Company restated its consolidated financial statements as of and for the three months ended March 31, 2023 to reflect the correction of this error in this Amended Report.

Remediation Plan

Since identifying the material weakness related to management’s review controls related to significant, unusual and complex transactions in the preparation of the Company's financial statements, management has begun remediation of the process and controls in place to measure and record transactions and their related effects to income tax accounting to enhance the effectiveness of the design and operation of those controls. The Company will focus on the accounting and disclosure for unusual and complex transactions such as discontinued operations and will continue to augment existing staff with additional skilled accounting resources and strengthen the review process to improve the design and operation of financial reporting and corresponding internal controls.

These remediation measures require validation and testing of the design and operating effectiveness of internal control over a sustained period of financial reporting to reaching a determination that the material weakness has been remediated. As we continue to validate and test our internal control over financial reporting, we may determine that additional measures or modifications to the remediation plan are necessary or appropriate.

UNITED INSURANCE HOLDINGS CORP.

Changes in Internal Control over Financial Reporting

During the quarter ended ~~June 30, 2022,~~March 31, 2023, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control performed during the fiscal year ended December 31, ~~2021,~~2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial ~~reporting.~~reporting, except as noted above with respect to the identification of the material weakness.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in routine claims-related legal actions arising in the ordinary course of business. We accrue amounts resulting from claims-related legal actions in unpaid losses and loss adjustment expenses during the period that we determine an unfavorable outcome becomes probable and we can estimate the amounts. Management makes revisions to our estimates based on its analysis of subsequent information that we receive regarding various factors, including: (i) per claim information; (ii) company and industry historical loss experience; (iii) judicial decisions and legal developments in the awarding of damages; and (iv) trends in general economic conditions, including the effects of inflation.

At ~~June 30, 2022,~~March 31, 2023, the Company is involved in legal proceedings whereby on August 18, 2021, ~~a former employee of Skyway Legal Services, LLC,~~Jacqueline A. Miraglia v. United Insurance Holdings Corp., and United Property & Casualty Insurance Company was filed ~~a complaint against the Company~~ in the United States District Court for the District of ~~Delaware. The lawsuit alleges~~Delaware alleging violations of and damages arising under Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967, and seeks damages in an unspecified amount. On September 27, 2022, venue was transferred to the United States District Court for the Middle District of Florida, Tampa Division. In November, 2022, the plaintiff filed an Amended Complaint styled Jacqueline A. Miraglia vs. United Insurance Holdings Corp., United Property & Casualty Insurance Company, and Skyway Claims Services, LLC, alleging violations arising under Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967. The Company ~~a named party to the lawsuit,~~ denies ~~that it employed the plaintiff~~wrongdoing and ~~disputes the claims set forth in the lawsuit. The Company~~ believes that an unfavorable outcome is neither probable nor estimable.

~~In addition, on January 13, 2022~~ ~~Southern Florida Restoration (SFR) Services, LLC v. United Property and Casualty Insurance Company, et al.~~ was filed in the United States District Court for the Middle District of Florida. The District Court dismissed the lawsuit on its own accord on January 14, 2022. SFR Services then filed an amended complaint on January 26, 2022. The complaint alleges four causes of action: (i) violation of the Federal Civil Racketeer Influenced and Corrupt

~~UNITED INSURANCE HOLDINGS CORP.~~

Organizations statute (18 U.S.C. § 1962(c)), (ii) breach of contract, (iii) fraud, and (iv) violation of the Florida Unfair Insurance Trade Practices Act (Fla. Stat. Chpt. 626). The plaintiff seeks unspecified damages. The Company believes that an unfavorable outcome is neither probable nor estimable. The defendants moved to dismiss the lawsuit on March 25, 2022 and their motion remains pending.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in Part I. Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022, except as set forth below.

We have identified a material weakness in our internal control over financial reporting, and our management has concluded that our internal control over financial reporting and disclosure controls and procedures were not effective as of the end of the period covered by this report. While we are working to remediate the identified material weakness, we cannot assure you that additional material weaknesses or significant deficiencies will not occur in the future. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, our stockholders could lose confidence in our financial reporting, which could harm our business and the trading price of our common stock.

The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. As disclosed in this Amended Report, in the course of preparing our interim financial statements for the fiscal quarter ended June 30, 2023, we identified a material weakness in our internal control over financial reporting, which existed as of March 31, 2023. The material weakness was caused by inadequate controls over our tax processes, described in more detail under the heading Part I — Item 4. Controls and Procedures in this Amended Report. We have commenced efforts to remediate the material weakness as described in more detail under the heading Part I — Item 4. Controls and Procedures in this Amended Report. The material weakness in our internal control over financial reporting will not be considered remediated until the controls operate for a sufficient period of time and management has concluded, through testing, that these controls operate effectively. If we do not successfully remediate the material weakness, or if other material weaknesses or other deficiencies arise in the future, we may be unable to accurately report our financial results, which could cause our financial results to be materially misstated and require restatement. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial

UNITED INSURANCE HOLDINGS CORP.

reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the control deficiencies that led to a material weakness in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses.

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

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, we did not sell any unregistered equity securities or repurchase any of our equity securities.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are filed or furnished herewith or are incorporated herein by reference:


Exhibit						Description

10.1						~~Stock Re-purchase~~Renewal Rights Agreement, dated as of ~~June 30, 2022,~~February 1, 2023, by and among ~~Journey~~United Property and Casualty Insurance Company and ~~RJ Kiln & Co. (No. 3) Limited.~~Slide Insurance Company. (included as Exhibit 10.1 to the Form 8-K filed on ~~June 7, 2022,~~February 6, 2023, and incorporated herein by ~~reference).~~reference.)

10.2						~~Termination~~Asset Purchase and Services Agreement, dated as of ~~June 30, 2022,~~February 1, 2023, by and among ~~Journey~~United Insurance ~~Company~~Management, L.C. and ~~RJ Kiln & Co. (No. 3) Limited.~~Slide Insurance Company. (included as Exhibit 10.2 to the Form 8-K filed on ~~June 7, 2022,~~February 6, 2023, and incorporated herein by ~~reference).~~reference.)

10.3						~~Renewal Rights Agreement,~~Consent Order Appointing the Florida Department of Financial Services as Receiver of United Property & Casualty Insurance Company for Purposes of Liquidation, Injunction and Notice of Automatic Stay, dated as of ~~June 9, 2022, by and among United Property and Casualty Insurance Company and Wright National Flood Insurance Company.~~February 27, 2023. (included as Exhibit 10.1 to the Form 8-K filed on ~~June 14, 2022,~~February 28, 2023, and incorporated herein by ~~reference).~~reference.)



31.1						Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2						Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

32.1						Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.

32.2						Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH						Inline XBRL Taxonomy Extension Schema

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase

104						Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).

6561

UNITED INSURANCE HOLDINGS CORP.

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.


		UNITED INSURANCE HOLDINGS CORP.

August ~~8, 2022~~21, 2023	By:	/s/ R. Daniel Peed
		R. Daniel Peed, Chief Executive Officer (principal executive officer and duly authorized officer)


August ~~8, 2022~~21, 2023	By:	/s/ B. Bradford Martz
		B. Bradford Martz, Chief Financial Officer and President (principal financial officer and principal accounting officer)

6662


	Three Months Ended June 30, 2021
	Commercial			Personal (1)			Adjustments		Consolidated
REVENUE:
Gross premiums written	$	155,982		$	270,442		$	—	$	426,424
Change in gross unearned premiums	(54,424)			(15,567)			—		(69,991)
Gross premiums earned	101,558			254,875			—		356,433
Ceded premiums earned	(58,729)			(152,244)			—		(210,973)
Net premiums earned	42,829			102,631			—		145,460
Net investment income	1,150			2,521			12		3,683
Net realized gains (losses)	(41)			(83)			—		(124)
Net unrealized losses on equity securities	242			2,196			—		2,438
Other revenue	—			3,997			—		3,997
Total revenues	44,180			111,262			12		155,454
EXPENSES:
Losses and loss adjustment expenses	18,368			99,696			—		118,064
Policy acquisition costs	17,591			23,736			—		41,327
Operating expenses	932			12,533			17		13,482
General and administrative expenses (2)	1,738			10,952			422		13,112
Interest expense	—			32			2,225		2,257
Total expenses	38,629			146,949			2,664		188,242
Income (loss) before other income	5,551			(35,687)			(2,652)		(32,788)
Other income (loss)	—			15			—		15
Income (loss) before income taxes	$	5,551		$	(35,672)		(2,652)		(32,773)
Benefit for income taxes							(9,352)		(9,352)
Net income (loss)							$	6,700	$	(23,421)
Less: Net loss attributable to noncontrolling interests							89		89
Net income (loss) attributable to UIHC							$	6,611	$	(23,510)

Loss ratio, net (3) (4)	42.9		%	97.1		%			81.2		%
Expense ratio (3) (5)	47.3		%	46.0		%			46.7		%
Combined ratio (3) (6)	90.2		%	143.1		%			127.9		%

Total segment assets	$	1,087,909		$	1,569,041		$	491,722	$	3,148,672


	Six Months Ended June 30, 2022
	Commercial			Personal (1)			Adjustments		Consolidated
REVENUE:
Gross premiums written	$	309,031		$	330,590		$	—	$	639,621
Change in gross unearned premiums	(88,348)			73,691			—		(14,657)
Gross premiums earned	220,683			404,281			—		624,964
Ceded premiums earned	(123,793)			(288,909)			—		(412,702)
Net premiums earned	96,890			115,372			—		212,262
Net investment income	2,603			2,996			19		5,618
Net realized gains (losses)	(77)			(1,770)			—		(1,847)
Net unrealized losses on equity securities	(3,159)			(4,191)			(2)		(7,352)
Other revenue	—			9,478			—		9,478
Total revenues	96,257			121,885			17		218,159
EXPENSES:
Losses and loss adjustment expenses	22,308			159,134			—		181,442
Policy acquisition costs	36,606			18,398			—		55,004
Operating expenses	2,236			22,853			178		25,267
General and administrative expenses (2)	4,741			24,875			883		30,499
Interest expense	—			51			4,722		4,773
Total expenses	65,891			225,311			5,783		296,985
Income (loss) before other income	30,366			(103,426)			(5,766)		(78,826)
Other income (loss)	2			(55)			1,667		1,614
Income (loss) before income taxes	$	30,368		$	(103,481)		(4,099)		(77,212)
Benefit for income taxes							25,100		25,100
Net income (loss)							$	(29,199)	$	(102,312)
Less: Net loss attributable to noncontrolling interests							(111)		(111)
Net income (loss) attributable to UIHC							$	(29,088)	$	(102,201)

Loss ratio, net (3) (4)	23.0		%	137.9		%			85.5		%
Expense ratio (3) (5)	45.0		%	57.3		%			52.2		%
Combined ratio (3) (6)	68.0		%	195.2		%			137.7		%

Total segment assets	$	1,352,713		$	836,517		$	304,824	$	2,494,054


	Three Months Ended June 30,
New and Renewal Policies(1) by Region (2)	2022	2021	Change
Florida	43,752	63,389	(19,637)
Gulf	21,827	33,372	(11,545)
Northeast	10,991	34,866	(23,875)
Southeast	9,377	17,942	(8,565)
Total	85,947	149,569	(63,622)


	Six Months Ended June 30,
New and Renewal Policies (1) By Region (2)	2022	2021	Change
Florida	80,849	113,395	(32,546)
Gulf	40,927	60,544	(19,617)
Northeast	20,943	63,099	(42,156)
Southeast	17,805	35,393	(17,588)
Total	160,524	272,431	(111,907)