UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________

FORM 10-Q

_______________________

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

For the quarterly period ended ~~September 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 Insurance Holdings Corp.

(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)

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	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

☐

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 ~~November 4, 2022, 43,308,091~~May 15, 2023, 43,287,573 shares of common stock, par value $0.0001 per share, were outstanding.

UNITED INSURANCE HOLDINGS CORP.


PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements	4
	Condensed Consolidated Balance Sheets (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) (Unaudited)	5
	Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited)	76
	Condensed Consolidated Statements of Cash Flows (Unaudited)	87
	Notes to Unaudited Condensed Consolidated Financial Statements	98
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	3836
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	6555
	Item 4. Controls and Procedures	6555
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings	6655
	Item 1A. Risk Factors	6656
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	6656
	Item 3. Defaults Upon Senior Securities	6656
	Item 4. Mine Safety Disclosures	6656
	Item 5. Other Information	6656
	Item 6. Exhibits	6656
Signatures		6857

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. Financial Statements

Condensed Consolidated Balance Sheets (Unaudited)


		September 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 $559,163 and $672,139, respectively)		$	492,251	$	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	36,495		37,958		Equity securities	16,181		15,657
Other investments (amortized cost of $16,780 and $17,131, respectively)		16,609		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	$	545,355	$	719,566	Total investments	$	230,464	$	224,014
Cash and cash equivalents	Cash and cash equivalents	180,947		212,024		Cash and cash equivalents	92,586		70,903
Restricted cash	Restricted cash	42,300		33,254		Restricted cash	49,671		45,988
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	223,247	$	245,278	Total cash, cash equivalents and restricted cash	$	142,257	$	116,891
Accrued investment income	Accrued investment income	3,203		3,296		Accrued investment income	1,818		1,605
Property and equipment, net	Property and equipment, net	26,709		31,561		Property and equipment, net	18,118		19,591
Premiums receivable, net (credit allowance of $28 and $32, respectively)		45,214		79,166
Reinsurance recoverable on paid and unpaid losses, net (credit allowance of $552 and $563, respectively)		1,547,282		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	373,558		430,631		Ceded unearned premiums	65,702		90,496
Goodwill	Goodwill	59,476		73,045		Goodwill	59,476		59,476
Deferred policy acquisition costs, net	Deferred policy acquisition costs, net	71,204		38,520		Deferred policy acquisition costs, net	59,897		60,979
Intangible assets, net	Intangible assets, net	15,940		18,375		Intangible assets, net	11,758		12,770
Other assets	Other assets	30,939		62,015		Other assets	15,426		3,920
Assets held for disposal						Assets held for disposal	—		1,411,907
Total Assets	Total Assets	$	2,942,127	$	2,698,573	Total Assets	$	1,445,386	$	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	$	1,679,567	$	1,084,450	Unpaid losses and loss adjustment expenses	$	748,365	$	842,958
Unearned premiums	Unearned premiums	612,904		644,940		Unearned premiums	301,625		258,978
Reinsurance payable on premiums	Reinsurance payable on premiums	200,568		248,625		Reinsurance payable on premiums	33,908		30,503
Payments outstanding	Payments outstanding	105,200		114,524		Payments outstanding	2,326		2,000
Accounts payable and accrued expenses	Accounts payable and accrued expenses	76,358		76,258		Accounts payable and accrued expenses	89,582		75,374
Operating lease liability	Operating lease liability	1,416		1,934		Operating lease liability	1,412		1,689
Other liabilities	Other liabilities	32,996		39,324		Other liabilities	36,242		17,466
Notes payable, net	Notes payable, net	152,684		156,561		Notes payable, net	148,438		148,355
Liabilities held for disposal						Liabilities held for disposal	—		1,642,212
Total Liabilities	Total Liabilities	$	2,861,693	$	2,366,616	Total Liabilities	$	1,361,898	$	3,019,535
Commitments and contingencies (Note 11)	Commitments and contingencies (Note 11)					Commitments and contingencies (Note 11)
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; 43,497,890 and 43,360,429 issued, respectively; 43,285,807 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	395,192		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	(64,805)		(6,531)		Accumulated other comprehensive loss	(25,629)		(30,947)
Retained earnings (deficit)	Retained earnings (deficit)	(249,526)		(74,904)		Retained earnings (deficit)	(286,422)		(546,296)
Total stockholders' equity attributable to United Insurance Holdings Corp. (UIHC) stockholders		$	80,434	$	312,406
Noncontrolling interests (NCI)		—		19,551
Total Stockholders' Equity		$	80,434	$	331,957

Total Stockholders' Equity (Deficit)						Total Stockholders' Equity (Deficit)	$	83,488	$	(182,039)
Total Liabilities and Stockholders' Equity	Total Liabilities and Stockholders' Equity	$	2,942,127	$	2,698,573	Total Liabilities and Stockholders' Equity	$	1,445,386	$	2,837,496

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

UNITED INSURANCE HOLDINGS CORP.

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


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2022		2021		2022		2021				2023		2022
REVENUE:	REVENUE:									REVENUE:
Gross premiums written	Gross premiums written	$	255,203	$	322,493	$	894,824	$	1,060,555	Gross premiums written		$	187,123	$	142,414
Change in gross unearned premiums	Change in gross unearned premiums	46,693		30,968		32,036		6,002		Change in gross unearned premiums		(42,647)		(19,681)
Gross premiums earned	Gross premiums earned	301,896		353,461		926,860		1,066,557		Gross premiums earned		144,476		122,733
Ceded premiums earned	Ceded premiums earned	(185,709)		(200,190)		(598,411)		(621,877)		Ceded premiums earned		(57,152)		(64,987)
Net premiums earned	Net premiums earned	116,187		153,271		328,449		444,680		Net premiums earned		87,324		57,746
Net investment income	Net investment income	4,269		3,471		9,887		10,737		Net investment income		2,589		1,404
Net realized investment gains (losses)	Net realized investment gains (losses)	(9)		5,537		(1,856)		5,916		Net realized investment gains (losses)		(83)		37
Net unrealized gains (losses) on equity securities	Net unrealized gains (losses) on equity securities	(2,518)		(3,293)		(9,870)		1,709		Net unrealized gains (losses) on equity securities		474		(770)
Management fee income										Management fee income		9,668		50,206
Other revenue	Other revenue	5,859		3,754		15,337		16,941		Other revenue		4,075		8,738
Total revenue	Total revenue	123,788		162,740		341,947		479,983		Total revenue		104,047		117,361
EXPENSES:	EXPENSES:									EXPENSES:
Losses and loss adjustment expenses	Losses and loss adjustment expenses	117,228		102,769		298,670		336,614		Losses and loss adjustment expenses		19,073		32,518
Policy acquisition costs	Policy acquisition costs	38,944		46,925		93,948		129,073		Policy acquisition costs		26,927		52,152
Operating expenses	Operating expenses	9,615		15,429		34,882		42,133		Operating expenses		5,651		10,603
General and administrative expenses	General and administrative expenses	26,391		13,940		56,890		42,934		General and administrative expenses		9,837		15,435
Interest expense	Interest expense	2,392		2,378		7,165		7,010		Interest expense		2,719		2,359
Total expenses	Total expenses	194,570		181,441		491,555		557,764		Total expenses		64,207		113,067
Loss before other income		(70,782)		(18,701)		(149,608)		(77,781)
Other income (loss)		(15)		101		1,599		126
Loss before income taxes		(70,797)		(18,600)		(148,009)		(77,655)
Provision (benefit) for income taxes		87		(3,482)		25,187		(20,656)
Net Loss		$	(70,884)	$	(15,118)	$	(173,196)	$	(56,999)
Income before other income										Income before other income		39,840		4,294
Other income										Other income		588		1,333
Income before income taxes										Income before income taxes		40,428		5,627
Provision for income taxes										Provision for income taxes		9,855		980
Income from continuing operations, net of tax										Income from continuing operations, net of tax		$	30,573	$	4,647
Income (loss) from discontinued operations, net of tax										Income (loss) from discontinued operations, net of tax		230,305		(37,904)
Net income (loss)										Net income (loss)		$	260,878	$	(33,257)
Less: Net loss attributable to NCI	Less: Net loss attributable to NCI	—		(796)		(111)		(1,396)		Less: Net loss attributable to NCI		—		(85)
Net loss attributable to UIHC		$	(70,884)	$	(14,322)	$	(173,085)	$	(55,603)
OTHER COMPREHENSIVE LOSS:
Net income (loss) attributable to UIHC										Net income (loss) attributable to UIHC		$	260,878	$	(33,172)
OTHER COMPREHENSIVE INCOME (LOSS):										OTHER COMPREHENSIVE INCOME (LOSS):
Change in net unrealized gains (losses) on investments	Change in net unrealized gains (losses) on investments	(15,953)		2,401		(60,232)		(11,096)		Change in net unrealized gains (losses) on investments		4,231		(27,689)
Reclassification adjustment for net realized investment losses (gains)		9		(5,537)		1,856		(5,916)
Reclassification adjustment for net realized investment losses										Reclassification adjustment for net realized investment losses		83		1,769

Income tax benefit related to items of other comprehensive loss		—		744		49		4,108
Total comprehensive loss		$	(86,828)	$	(17,510)	$	(231,523)	$	(69,903)
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)		$	265,192	$	(52,941)
Less: Comprehensive loss attributable to NCI	Less: Comprehensive loss attributable to NCI	—		(844)		(164)		(1,601)		Less: Comprehensive loss attributable to NCI		—		(643)
Comprehensive loss attributable to UIHC		$	(86,828)	$	(16,666)	$	(231,359)	$	(68,302)
Comprehensive income (loss) attributable to UIHC										Comprehensive income (loss) attributable to UIHC		$	265,192	$	(52,298)

Weighted average shares outstanding	Weighted average shares outstanding									Weighted average shares outstanding
Basic	Basic	43,075,234		42,971,535		43,035,374		42,940,458		Basic		43,124,825		42,980,691
Diluted	Diluted	43,075,234		42,971,535		43,035,374		42,940,458		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	$	(1.65)	$	(0.33)	$	(4.02)	$	(1.29)	Basic
Continuing operations										Continuing operations		$	0.71	$	0.11
Discontinued operations										Discontinued operations		5.34		(0.88)
Total										Total		$	6.05	$	(0.77)
Diluted	Diluted	$	(1.65)	$	(0.33)	$	(4.02)	$	(1.29)	Diluted
Continuing operations										Continuing operations		$	0.70	$	0.11
Discontinued operations										Discontinued operations		5.29		(0.88)
Total										Total		$	5.99	$	(0.77)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

UNITED INSURANCE HOLDINGS CORP.

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

(Unaudited)


		Common Stock				Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Loss				Retained Earnings (Deficit)				Stockholders' Equity Attributable to UIHC					NCI					Total Stockholders’ Equity				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												Number of Shares							Dollars
					Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Stockholders' Equity Attributable to UIHC																									Additional Paid-in Capital		Treasury Stock				Accumulated Other Comprehensive Loss			Stockholders' Equity Attributable to UIHC
June 30, 2021			43,227,957															$	4			$	393,524				$	(431)		$	(662)	$	(53,102)		$	339,333	$	21,089											$	360,422
December 31, 2021																						December 31, 2021		43,370,442					$	4				$	394,268								$	(431)		$	(6,531)		$	(74,904)	$	312,406	$	19,551	$	331,957
Net loss	Net loss	—	—						—							—				—					(14,322)					(14,322)					(796)					(15,118)		Net loss	—			—				—				—		—		(33,172)		(33,172)	(85)	(33,257)
Other comprehensive loss, net	Other comprehensive loss, net	—	—			—			—			(2,344)				—				(2,344)					(48)					(2,392)		Other comprehensive loss, net		—					—				—			—			(19,126)				—		(19,126)		(558)		(19,684)

Stock Compensation	Stock Compensation	(20,567)	—			320			—			—				—				320					—					320		Stock Compensation		(112,847)					—				452			—			—				—		452		—		452

Cash dividends on common stock ($0.06 per common share)	Cash dividends on common stock ($0.06 per common share)	—	—			—			—			—				(2,576)				(2,576)					—					(2,576)		Cash dividends on common stock ($0.06 per common share)		—					—				—			—			—				(2,589)		(2,589)		—		(2,589)

September 30, 2021		43,207,390	$	4		$	393,844		$	(431)		$	(3,006)			$	(70,000)			$	320,411				$	20,245				$	340,656
March 31, 2022																																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
June 30, 2022 43,313,166 $ 4 $ 394,902 $ (431) $ (48,861) $ (178,642) $ 166,972 $ — $ 166,972
Net loss — — — — — (70,884) (70,884) — (70,884)
Other comprehensive loss, net — — — — (15,944) — (15,944) — (15,944)
Stock Compensation (27,359) — 290 — — — 290 — 290
September 30, 2022 43,285,807 $ 4 $ 395,192 $ (431) $ (64,805) $ (249,526) $ 80,434 $ — $ 80,434

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

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Condensed Consolidated Statements of Stockholders’ Equity for the Nine 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
December 31, 2020 43,075,877 $ 4 $ 393,122 $ (431) $ 9,693 $ (6,635) $ 395,753 $ 21,846 $ 417,599
Net loss — — — — — (55,603) (55,603) (1,396) (56,999)
Other comprehensive loss, net — — — — (12,699) — (12,699) (205) (12,904)
Stock Compensation 131,513 — 722 — — — 722 — 722
Cash dividends on common stock ($0.18 per common share) — — — — — (7,762) (7,762) — (7,762)
September 30, 2021 43,207,390 $ 4 $ 393,844 $ (431) $ (3,006) $ (70,000) $ 320,411 $ 20,245 $ 340,656

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 — — — — — (173,085) (173,085) (111) (173,196)
Other comprehensive loss, net — — — — (58,274) — (58,274) (53) (58,327)
Return of Capital to NCI — — — — — 1,052 1,052 (19,387) (18,335)
Stock Compensation (84,635) — 924 — — — 924 — 924
Cash dividends on common stock ($0.06 per common share) — — — — — (2,589) (2,589) — (2,589)
September 30, 2022 43,285,807 $ 4 $ 395,192 $ (431) $ (64,805) $ (249,526) $ 80,434 $ — $ 80,434


	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	—	—		—		—		—		260,878		260,878		—		260,878
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)	$	(286,422)	$	83,488	$	—	$	83,488

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

UNITED INSURANCE HOLDINGS CORP.

Condensed Consolidated Statements of Cash Flows (Unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net loss		$	(173,196)	$	(56,999)
Adjustments to reconcile net loss to net cash provided used in operating activities:
Depreciation and amortization, including goodwill impairment		21,071		9,045
Net income (loss)						Net income (loss)	$	260,878	$	(33,257)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:						Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization						Depreciation and amortization	2,155		2,606
Bond amortization and accretion	Bond amortization and accretion	4,408		6,831		Bond amortization and accretion	160		1,634
Net realized losses (gains) on investments	Net realized losses (gains) on investments	1,856		(5,916)		Net realized losses (gains) on investments	(1,260)		1,769
Net unrealized losses (gains) on equity securities	Net unrealized losses (gains) on equity securities	9,870		(1,709)		Net unrealized losses (gains) on equity securities	(2,554)		2,268
Provision for uncollectable premiums	Provision for uncollectable premiums	4		115		Provision for uncollectable premiums	5		12
Provision for uncollectable reinsurance recoverables	Provision for uncollectable reinsurance recoverables	11		(382)		Provision for uncollectable reinsurance recoverables	183		168
Provision for uncollectable notes receivable		—		20

Deferred income taxes, net	Deferred income taxes, net	24,620		(20,535)		Deferred income taxes, net	15,767		(11,351)
Stock based compensation	Stock based compensation	924		738		Stock based compensation	335		452
Stock received as consideration for renewal rights agreement		—		(5,007)

Settlement of receivable owed by HCI in connection with purchase agreement	Settlement of receivable owed by HCI in connection with purchase agreement	3,800		—		Settlement of receivable owed by HCI in connection with purchase agreement	—		3,800
Gain on sale of property and equipment	Gain on sale of property and equipment	(1,688)				Gain on sale of property and equipment	(422)		(1,528)
Fixed asset disposal	Fixed asset disposal	473		18		Fixed asset disposal	524		343
Disposition of former subsidiary						Disposition of former subsidiary	(229,183)		—
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accrued investment income	Accrued investment income	93		697		Accrued investment income	369		437
Premiums receivable	Premiums receivable	33,948		24,025		Premiums receivable	15,178		2,265
Reinsurance recoverable on paid and unpaid losses	Reinsurance recoverable on paid and unpaid losses	(550,173)		(530,193)		Reinsurance recoverable on paid and unpaid losses	289,946		85,140
Ceded unearned premiums	Ceded unearned premiums	57,073		(88,894)		Ceded unearned premiums	72,064		146,667
Deferred policy acquisition costs, net	Deferred policy acquisition costs, net	(32,684)		(3,265)		Deferred policy acquisition costs, net	(875)		(7,193)
Other assets	Other assets	3,313		4,389		Other assets	(31,630)		(4,618)

Receivable from sale of building						Receivable from sale of building	—		3,236
Unpaid losses and loss adjustment expenses	Unpaid losses and loss adjustment expenses	595,117		419,511		Unpaid losses and loss adjustment expenses	(278,142)		(117,236)
Unearned premiums	Unearned premiums	(32,036)		(6,002)		Unearned premiums	(145,540)		(39,731)
Reinsurance payable on premiums	Reinsurance payable on premiums	(48,057)		94,477		Reinsurance payable on premiums	(13,376)		(51,714)
Payments outstanding	Payments outstanding	(9,324)		57,848		Payments outstanding	(68,493)		(10,246)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	100		(18,610)		Accounts payable and accrued expenses	16,440		(2,924)
Operating lease liability	Operating lease liability	(518)		(273)		Operating lease liability	(277)		(183)
Other liabilities	Other liabilities	(6,937)		10,527		Other liabilities	(6,416)		8,291
Net cash used in operating activities		$	(97,932)	$	(109,544)
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	$	(104,164)	$	(20,893)
INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Proceeds from sales, maturities and repayments of:	Proceeds from sales, maturities and repayments of:					Proceeds from sales, maturities and repayments of:
Fixed maturities	Fixed maturities	128,315		209,021		Fixed maturities	178,211		85,978
Equity securities	Equity securities	88		11,121		Equity securities	24,163		88
Other investments	Other investments	2,261		64,097		Other investments	227		1,063

Purchases of:	Purchases of:					Purchases of:
Fixed maturities	Fixed maturities	(21,592)		(177,301)		Fixed maturities	(7,439)		(13,415)
Equity securities	Equity securities	(7,459)		(22,575)		Equity securities	(80)		(3,121)
Other investments	Other investments	(1,911)		(42,521)		Other investments	—		(459)
Proceeds from sale of property and equipment	Proceeds from sale of property and equipment	4,196		—		Proceeds from sale of property and equipment	464		730
Cost of property, equipment and capitalized software acquired	Cost of property, equipment and capitalized software acquired	(2,926)		(3,818)		Cost of property, equipment and capitalized software acquired	(154)		(1,406)

Net cash provided by investing activities		$	100,972	$	38,024
Disposition of cash on divestiture of subsidiary						Disposition of cash on divestiture of subsidiary	(232,582)		—
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	$	(37,190)	$	69,458
FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES

Repayments of borrowings	Repayments of borrowings	(4,147)		(1,143)		Repayments of borrowings	—		(381)
Dividends	Dividends	(2,589)		(7,762)		Dividends	—		(2,589)
Tax withholding payment related to net settlement of equity awards		—		(16)
Return of capital in connection with termination of noncontrolling interest		(18,335)		—

Net cash used in financing activities	Net cash used in financing activities	$	(25,071)	$	(8,921)	Net cash used in financing activities	$	—	$	(2,970)
Increase in cash, cash equivalents and restricted cash		(22,031)		(80,441)
Increase in cash, cash equivalents and restricted cash, including cash classified as assets held for disposal						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	Cash, cash equivalents and restricted cash at beginning of period	245,278		301,498		Cash, cash equivalents and restricted cash at beginning of period	283,611		245,278
Cash, cash equivalents and restricted cash at end of period		$	223,247	$	221,057

Cash, cash equivalents and restricted at end of period						Cash, cash equivalents and restricted at end of period	$	142,257	$	290,873
Supplemental Cash Flows Information	Supplemental Cash Flows Information					Supplemental Cash Flows Information
Interest paid	Interest paid	$	4,823	$	4,809	Interest paid	$	—	$	35
Income taxes paid (refunded)		$	1,444	$	(5,119)
Income taxes paid						Income taxes paid	$	5,325	$	77

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~September 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 ~~three~~two wholly-owned insurance subsidiaries. Our ~~original insurance subsidiary is United Property & Casualty Insurance Company (UPC), which was formed in Florida in 1999. 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 seven states, under authorization from the insurance regulatory authorities in each state. In addition, we write~~ commercial residential insurance in Florida. During 2022, we also wrote commercial residential insurance in South Carolina and Texas, however, effective May 1, 2022, we no longer write in these states. ~~We are also licensed to~~In addition, we write personal residential insurance in ~~an additional eleven~~New York. During 2022, we wrote personal residential business in six other states; however ~~we have not commenced writing or no longer write~~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 ~~these states.~~Note 3 below.

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 York. All filed plans entail non-renewing personal lines policies in these states. ~~With this action, UPC will effectively be placed into an orderly run-off so long as UPC remains in compliance with the rules and regulations of each state.~~ 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 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 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.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2022~~

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.

(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 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 ~~nine months ended September 30, 2022.~~equitable solution regarding these held recoveries (See Note 18). 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 September 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 $57,511,000 against our deferred tax assets as of September 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

Additional details by major classification of operating results and financial position are included in Note 3.

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) DISCONTINUED OPERATIONS

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 York. All filed plans entailed non-renewing personal lines policies in these states. Additionally, we announced that Demotech, an insurance rating agency, notified UPC of its intent to withdraw UPC's Financial Stability Rating. On December 5, 2022, the 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. On February 10, 2023, we announced that a solvent run-off of UPC was unlikely, driven by Hurricane 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.

In the first quarter of 2023, the assets and liabilities of UPC were divested of. 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 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.

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~September 30,~~March 31, 2023


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	71		170
Total revenue	35,019		41,052
EXPENSES:
Losses and loss adjustment expenses	33,978		64,691
Policy acquisition costs	8,361		24,070
Operating expenses	513		1,645
General and administrative expenses	240		570
Interest expense	22		20
Total expenses	43,114		90,996
Loss before other income	(8,095)		(49,944)
Other income (loss)	—		9
Loss before income taxes	(8,095)		(49,935)
Provision (benefit) for income taxes	(9,217)		(12,031)
Income (loss) from discontinued operations, net of tax	$	1,122	$	(37,904)

As of February 28, 2023, the Company completed the disposal of its former subsidiary, UPC. This divestiture resulted in a gain of $229,183,000 for the period. This gain was driven by the negative equity position of UPC.

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.

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2023


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	53,675		33,548
Total assets	$	948,501	$	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	(3,731)		5,692
Notes payable, net	4,118		4,118
Total Liabilities	$	1,177,684	$	1,642,212

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

The discontinued operations of the Company does not have any depreciation, amortization, capital expenditures or other noncash items for the periods in which the results of discontinued operations are presented.

3)4) 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

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2023

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 nine~~ months ended ~~September 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 nine months ended September 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.

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 nine~~ months ended ~~September 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.

1113

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~September 30, 2022~~March 31, 2023


		Three Months Ended September 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	$	76,867		$	178,336		$	—	$	255,203		Gross premiums written	$	176,641		$	10,482		$	—	$	187,123
Change in gross unearned premiums	Change in gross unearned premiums	42,953			3,740			—		46,693			Change in gross unearned premiums	(44,607)			1,960			—		(42,647)
Gross premiums earned	Gross premiums earned	119,820			182,076			—		301,896			Gross premiums earned	132,034			12,442			—		144,476
Ceded premiums earned	Ceded premiums earned	(60,301)			(125,408)			—		(185,709)			Ceded premiums earned	(53,374)			(3,778)			—		(57,152)
Net premiums earned	Net premiums earned	59,519			56,668			—		116,187			Net premiums earned	78,660			8,664			—		87,324
Net investment income	Net investment income	1,756			2,498			15		4,269			Net investment income	1,786			782			21		2,589
Net realized gains (losses)	Net realized gains (losses)	—			(9)			—		(9)			Net realized gains (losses)	(83)			—			—		(83)
Net unrealized losses on equity securities	Net unrealized losses on equity securities	(897)			(1,621)			—		(2,518)			Net unrealized losses on equity securities	473			—			1		474
Management fee income													Management fee income	—			9,668			—		9,668
Other revenue	Other revenue	1,178			4,678			3		5,859			Other revenue	—			4,075			—		4,075
Total revenues	Total revenues	61,556			62,214			18		123,788			Total revenues	80,836			23,189			22		104,047
EXPENSES:	EXPENSES:												EXPENSES:
Losses and loss adjustment expenses	Losses and loss adjustment expenses	34,229			82,999			—		117,228			Losses and loss adjustment expenses	13,901			5,172			—		19,073
Policy acquisition costs	Policy acquisition costs	22,430			16,514			—		38,944			Policy acquisition costs	25,166			1,761			—		26,927
Operating expenses	Operating expenses	717			8,788			110		9,615			Operating expenses	96			5,431			124		5,651
General and administrative expenses (2)	General and administrative expenses (2)	2,428			23,643			320		26,391			General and administrative expenses (2)	2,754			6,951			132		9,837
Interest expense	Interest expense	—			34			2,358		2,392			Interest expense	—			—			2,719		2,719
Total expenses	Total expenses	59,804			131,978			2,788		194,570			Total expenses	41,917			19,315			2,975		64,207
Income (loss) before other income	Income (loss) before other income	1,752			(69,764)			(2,770)		(70,782)			Income (loss) before other income	38,919			3,874			(2,953)		39,840
Other income (loss)	Other income (loss)	10			(25)			—		(15)			Other income (loss)	—			803			(215)		588
Income (loss) before income taxes	Income (loss) before income taxes	$	1,762		$	(69,789)		(2,770)		(70,797)			Income (loss) before income taxes	$	38,919		$	4,677		(3,168)		40,428
Benefit for income taxes								87		87
Provision for income taxes													Provision for income taxes							9,855		9,855
Net income (loss)	Net income (loss)							$	(2,857)	$	(70,884)		Net income (loss)							$	(13,023)	$	30,573
Less: Net loss attributable to noncontrolling interests	Less: Net loss attributable to noncontrolling interests							—		—			Less: Net loss attributable to noncontrolling interests							—		—
Net income (loss) attributable to UIHC	Net income (loss) attributable to UIHC							$	(2,857)	$	(70,884)		Net income (loss) attributable to UIHC							$	(13,023)	$	30,573

Loss ratio, net (3) (4)	Loss ratio, net (3) (4)	57.5		%	146.5		%			100.9		%	Loss ratio, net (3) (4)	17.7		%	59.7		%			21.9		%
Expense ratio (3) (5)	Expense ratio (3) (5)	43.0		%	86.4		%			64.5		%	Expense ratio (3) (5)	35.6		%	163.2		%			48.6		%
Combined ratio (3) (6)	Combined ratio (3) (6)	100.5		%	232.9		%			165.4		%	Combined ratio (3) (6)	53.3		%	222.9		%			70.5		%

Total segment assets	Total segment assets	$	1,354,893		$	1,357,892		$	229,342	$	2,942,127		Total segment assets	$	1,304,499		$	130,045		$	10,842	$	1,445,386

(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 ~~$15,136,000~~$1,260,000 and ~~$673,000~~$812,000 of depreciation and amortization expense related to our personal and commercial lines assets, respectively. ~~Personal lines depreciation and amortization expenses includes $13,569,000 related to the impairment of goodwill.~~

~~(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~~

~~September 30, 2022~~

Three Months Ended September 30, 2021
Commercial
Personal (1)
Adjustments Consolidated
REVENUE:
Gross premiums written $ 64,384 $ 258,109 $ — $ 322,493
Change in gross unearned premiums 40,607 (9,639) — 30,968
Gross premiums earned 104,991 248,470 — 353,461
Ceded premiums earned (61,583) (138,607) — (200,190)
Net premiums earned 43,408 109,863 — 153,271
Net investment income 1,166 2,294 11 3,471
Net realized gains (losses) (2) 5,539 — 5,537
Net unrealized losses on equity securities 271 (3,564) — (3,293)
Other revenue — 3,754 — 3,754
Total revenues 44,843 117,886 11 162,740
EXPENSES:
Losses and loss adjustment expenses 8,156 94,613 — 102,769
Policy acquisition costs 23,384 23,541 — 46,925
Operating expenses 1,422 13,777 230 15,429
General and administrative expenses (2)
1,685 11,895 360 13,940
Interest expense — 19 2,359 2,378
Total expenses 34,647 143,845 2,949 181,441
Income (loss) before other income 10,196 (25,959) (2,938) (18,701)
Other income (loss) — 101 — 101
Income (loss) before income taxes $ 10,196 $ (25,858) (2,938) (18,600)
Benefit for income taxes (3,482) (3,482)
Net income (loss) $ 544 $ (15,118)
Less: Net loss attributable to noncontrolling interests (796) (796)
Net income (loss) attributable to UIHC $ 1,340 $ (14,322)
Loss ratio, net (3) (4)
18.8 % 86.1 % 67.1 %
Expense ratio (3) (5)
61.0 % 44.8 % 49.8 %
Combined ratio (3) (6)
79.8 % 130.9 % 116.9 %
Total segment assets $ 1,298,042 $ 1,567,412 $ 463,132 $ 3,328,586

~~(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 $1,372,000 and $876,000 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~~

~~September 30, 2022~~

Nine Months Ended September 30, 2022
Commercial
Personal (1)
Adjustments Consolidated
REVENUE:
Gross premiums written $ 385,898 $ 508,926 $ — $ 894,824
Change in gross unearned premiums (45,395) 77,431 — 32,036
Gross premiums earned 340,503 586,357 — 926,860
Ceded premiums earned (184,094) (414,317) — (598,411)
Net premiums earned 156,409 172,040 — 328,449
Net investment income 4,359 5,494 34 9,887
Net realized gains (losses) (77) (1,779) — (1,856)
Net unrealized losses on equity securities (4,056) (5,812) (2) (9,870)
Other revenue 1,178 14,156 3 15,337
Total revenues 157,813 184,099 35 341,947
EXPENSES:
Losses and loss adjustment expenses 56,537 242,133 — 298,670
Policy acquisition costs 59,036 34,912 — 93,948
Operating expenses 2,953 31,641 288 34,882
General and administrative expenses (2)
7,169 48,518 1,203 56,890
Interest expense — 85 7,080 7,165
Total expenses 125,695 357,289 8,571 491,555
Income (loss) before other income 32,118 (173,190) (8,536) (149,608)
Other income (loss) 12 (80) 1,667 1,599
Income (loss) before income taxes $ 32,130 $ (173,270) (6,869) (148,009)
Benefit for income taxes 25,187 25,187
Net income (loss) $ (32,056) $ (173,196)
Less: Net loss attributable to noncontrolling interests (111) (111)
Net income (loss) attributable to UIHC $ (31,945) $ (173,085)
Loss ratio, net (3) (4)
36.1 % 140.7 % 90.9 %
Expense ratio (3) (5)
44.2 % 66.9 % 56.5 %
Combined ratio (3) (6)
80.3 % 207.6 % 147.4 %
Total segment assets $ 1,354,893 $ 1,357,892 $ 229,342 $ 2,942,127

~~(2)~~ Included in our General and Administrative expenses is $18,005,000 and $2,435,000 of depreciation and amortization expense related to our personal and commercial lines assets, respectively. Personal lines depreciation and amortization expenses includes $13,569,000 related to the impairment of goodwill.

(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

~~September 30, 2022~~March 31, 2023


		Nine Months Ended September 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	$	328,406		$	732,149		$	—		$	1,060,555		Gross premiums written	$	127,964		$	14,450		$	—	$	142,414
Change in gross unearned premiums	Change in gross unearned premiums	(23,639)			29,641			—			6,002			Change in gross unearned premiums	(20,499)			818			—		(19,681)
Gross premiums earned	Gross premiums earned	304,767			761,790			—			1,066,557			Gross premiums earned	107,465			15,268			—		122,733
Ceded premiums earned	Ceded premiums earned	(176,678)			(445,199)			—			(621,877)			Ceded premiums earned	(62,022)			(2,965)			—		(64,987)
Net premiums earned	Net premiums earned	128,089			316,591			—			444,680			Net premiums earned	45,443			12,303			—		57,746
Net investment income	Net investment income	3,538			7,165			34			10,737			Net investment income	1,127			268			9		1,404
Net realized gains	Net realized gains	(34)			5,950			—			5,916			Net realized gains	2			35			—		37
Net unrealized losses on equity securities	Net unrealized losses on equity securities	627			1,082			—			1,709			Net unrealized losses on equity securities	(769)			—			(1)		(770)

Management fee income														Management fee income	—			50,206			—		50,206
Other revenue	Other revenue	—			16,941			—			16,941			Other revenue	—			8,738			—		8,738
Total revenues	Total revenues	132,220			347,729			34			479,983			Total revenues	45,803			71,550			8		117,361
EXPENSES:	EXPENSES:													EXPENSES:
Losses and loss adjustment expenses	Losses and loss adjustment expenses	40,330			296,284			—			336,614			Losses and loss adjustment expenses	14,114			18,404			—		32,518
Policy acquisition costs	Policy acquisition costs	59,238			69,835			—			129,073			Policy acquisition costs	16,678			35,474			—		52,152
Operating expenses	Operating expenses	3,623			38,240			270			42,133			Operating expenses	1,109			9,403			91		10,603
General and administrative expenses (2)	General and administrative expenses (2)	5,327			36,190			1,417		1417	42,934			General and administrative expenses (2)	2,320			12,734			381		15,435
Interest expense	Interest expense	—			66			6,944			7,010			Interest expense	—			—			2,359		2,359
Total expenses	Total expenses	108,518			440,615			8,631			557,764			Total expenses	34,221			76,015			2,831		113,067
Income (loss) before other income	Income (loss) before other income	23,702			(92,886)			(8,597)			(77,781)			Income (loss) before other income	11,582			(4,465)			(2,823)		4,294
Other income	Other income	—			126			—			126			Other income	—			(277)			1,610		1,333
Income (loss) before income taxes	Income (loss) before income taxes	$	23,702		$	(92,760)		(8,597)			(77,655)			Income (loss) before income taxes	$	11,582		$	(4,742)		(1,213)		5,627
Benefit for income taxes								(20,656)			(20,656)
Provision for income taxes														Provision for income taxes							980		980
Net income (loss)	Net income (loss)							$	12,059		$	(56,999)		Net income (loss)							$	(2,193)	$	4,647
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests							(1,396)			(1,396)			Less: Net income attributable to noncontrolling interests							(85)		(85)
Net income (loss) attributable to UIHC	Net income (loss) attributable to UIHC							$	13,455		$	(55,603)		Net income (loss) attributable to UIHC							$	(2,108)	$	4,732

Loss ratio, net (3) (4)		31.5		%	93.6		%				75.7		%
Expense ratio (3) (5)		53.2		%	45.6		%				48.2		%
Combined ratio (3) (6)		84.7		%	139.2		%				123.9		%
Loss ratio, net (3) (4) (7)														Loss ratio, net (3) (4) (7)	31.1		%	149.6		%			56.3		%
Expense ratio (3) (5) (7)														Expense ratio (3) (5) (7)	44.2		%	468.3		%			135.4		%
Combined ratio (3) (6) (7)														Combined ratio (3) (6) (7)	75.3		%	617.9		%			191.7		%

Total segment assets	Total segment assets	$	1,298,042		$	1,567,412		$	463,132		$	3,328,586		Total segment assets	$	949,359		$	179,208		$	17,507	$	1,146,074

(2) Included in our General and Administrative expenses is ~~$5,537,000~~$1,512,000 and ~~$2,509,000~~$885,000 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

~~September 30, 2022~~March 31, 2023

4)5) INVESTMENTS

The following table details fixed-maturity available-for-sale securities, by major investment category, at ~~September 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
September 30, 2022
March 31, 2023										March 31, 2023
U.S. government and agency securities	U.S. government and agency securities	$	39,516	$	—	$	4,078	$	35,438	U.S. government and agency securities	$	3,491	$	—	$	82	$	3,409
Foreign government	Foreign government	3,373		—		44		3,329		Foreign government	1,000		—		9		991
States, municipalities and political subdivisions	States, municipalities and political subdivisions	65,759		1		7,594		58,166		States, municipalities and political subdivisions	31,924		15		3,357		28,582
Public utilities	Public utilities	21,467		—		2,459		19,008		Public utilities	8,913		—		1,093		7,820
Corporate securities	Corporate securities	211,277		—		27,496		183,781		Corporate securities	99,324		58		13,659		85,723
Mortgage-backed securities	Mortgage-backed securities	153,223		14		20,653		132,584		Mortgage-backed securities	64,285		—		8,283		56,002
Asset-backed securities	Asset-backed securities	62,447		—		4,500		57,947		Asset-backed securities	30,536		36		2,366		28,206
Redeemable preferred stocks		2,101		—		103		1,998

Total fixed maturities	Total fixed maturities	$	559,163	$	15	$	66,927	$	492,251	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:

September 30, 2022 December 31, 2021
Estimated Fair Value Percent of Total Estimated Fair Value Percent of Total
Mutual funds $ 32,137 88.0 % $ 33,064 87.1 %
Public utilities 901 2.5 — —
Nonredeemable preferred stocks 3,457 9.5 4,894 12.9
Total equity securities $ 36,495 100.0 % $ 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

~~September 30, 2022~~March 31, 2023

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 the specific-identification method. The following table details our realized gains (losses) by major investment category for the three ~~and nine~~ months ended ~~September 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 September 30,

Three Months Ended March 31,										Three Months Ended March 31,
Fixed maturities	Fixed maturities	$	—	$	20,507	$	293	$	50,112	Fixed maturities	$	4	$	5,292	$	41	$	12,192
Equity securities	Equity securities	—		—		5,505		10,512		Equity securities	—		—		—		—
Short-term investments	Short-term investments	—		57		—		14,655		Short-term investments	—		126		—		—
Total realized gains	Total realized gains	—		20,564		5,798		75,279		Total realized gains	4		5,418		41		12,192
Fixed maturities	Fixed maturities	(9)		245		(236)		16,086		Fixed maturities	(87)		(41)		(4)		251
Equity securities	Equity securities	—		—		—		56		Equity securities	—		—		—		—
Short-term investments	Short-term investments	—		—		(25)		23,974		Short-term investments	—		—		—		—
Total realized losses	Total realized losses	(9)		245		(261)		40,116		Total realized losses	(87)		(41)		(4)		251
Net realized investment gains (losses)	Net realized investment gains (losses)	$	(9)	$	20,809	$	5,537	$	115,395	Net realized investment gains (losses)	$	(83)	$	5,377	$	37	$	12,443
Nine Months Ended September 30,
Fixed maturities		$	654	$	82,348	$	1,012	$	161,314
Equity securities		—		—		5,507		10,535
Short-term investments		—		90		—		29,485
Total realized gains		654		82,438		6,519		201,334
Fixed maturities		(2,499)		45,940		(544)		47,707
Equity securities		(11)		88		(18)		575
Short-term investments		—		—		(41)		31,958
Total realized losses		(2,510)		46,028		(603)		80,240
Net realized investment gains (losses)		$	(1,856)	$	128,466	$	5,916	$	281,574

The table below summarizes our fixed maturities at ~~September 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.


		September 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	$	25,360	4.5	%	$	25,200	5.1	%	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	184,937		33.1		169,320		34.5		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	121,858		21.8		98,100		19.9		Due after five years through ten years	82,508		34.5		69,386		32.9
Due after ten years	Due after ten years	11,338		2.0		9,100		1.8		Due after ten years	4,293		1.8		3,721		1.8
Asset and mortgage-backed securities	Asset and mortgage-backed securities	215,670		38.6		190,531		38.7		Asset and mortgage-backed securities	94,821		39.5		84,208		40.0
Total	Total	$	559,163	100.0	%	$	492,251	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

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~September 30, 2022~~March 31, 2023

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Fixed maturities $ 2,487 $ 3,091 $ 7,063 $ 10,113
Equity securities 268 184 658 512
Cash and cash equivalents 1,174 2 1,791 99
Other investments 496 558 971 843
Other assets 7 (92) 16 20
Investment income 4,432 3,743 10,499 11,587
Investment expenses (163) (272) (612) (850)
Net investment income $ 4,269 $ 3,471 $ 9,887 $ 10,737

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 nine~~ months ended ~~September 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 ~~September 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~~

~~September 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
September 30, 2022
March 31, 2023												March 31, 2023
U.S. government and agency securities	U.S. government and agency securities	55	$	331	$	7,699	41	$	3,747	$	27,739	U.S. government and agency securities	1	$	9	$	990	2	$	73	$	1,421
Foreign governments	Foreign governments	3	37		1,322		1	7		2,007		Foreign governments	1	9		991		—	—		—
States, municipalities and political subdivisions	States, municipalities and political subdivisions	66	2,303		25,930		49	5,291		31,260		States, municipalities and political subdivisions	8	49		3,732		45	3,308		23,324
Public utilities	Public utilities	33	510		5,737		18	1,949		13,271		Public utilities	—	—		—		12	1,093		7,819
Corporate securities	Corporate securities	209	5,020		60,556		152	22,476		122,619		Corporate securities	35	547		10,964		115	13,112		71,582
Mortgage-backed securities	Mortgage-backed securities	122	2,912		38,867		128	17,741		93,152		Mortgage-backed securities	12	248		3,749		116	8,035		52,254
Asset-backed securities	Asset-backed securities	96	3,225		35,232		37	1,275		21,890		Asset-backed securities	7	36		3,013		54	2,330		22,632
Redeemable preferred stocks		13	92		1,910		1	11		88

Total fixed maturities	Total fixed maturities	597	$	14,430	$	177,253	427	$	52,497	$	312,026	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.

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2023

Fair value measurement

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~~

~~September 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. Changes in interest rates subsequent to ~~September 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 ~~September 30, 2022.~~

March 31, 2023.

2019

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~September 30, 2022~~March 31, 2023

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


		Total		Level 1		Level 2		Level 3			Total		Level 1		Level 2		Level 3
September 30, 2022
March 31, 2023										March 31, 2023
U.S. government and agency securities	U.S. government and agency securities	$	35,438	$	—	$	35,438	$	—	U.S. government and agency securities	$	3,409	$	—	$	3,409	$	—
Foreign government	Foreign government	3,329		—		3,329		—		Foreign government	991		—		991		—
States, municipalities and political subdivisions	States, municipalities and political subdivisions	58,166		—		58,166		—		States, municipalities and political subdivisions	28,582		—		28,582		—
Public utilities	Public utilities	19,008		—		19,008		—		Public utilities	7,820		—		7,820		—
Corporate securities	Corporate securities	183,781		—		183,781		—		Corporate securities	85,723		—		85,723		—
Mortgage-backed securities	Mortgage-backed securities	132,584		—		132,584		—		Mortgage-backed securities	56,002		—		56,002		—
Asset-backed securities	Asset-backed securities	57,947		—		57,947		—		Asset-backed securities	28,206		—		28,206		—
Redeemable preferred stocks		1,998		468		1,530		—

Total fixed maturities	Total fixed maturities	492,251		468		491,783		—		Total fixed maturities	210,733		—		210,733		—
Mutual funds	Mutual funds	32,137		18,785		13,352		—		Mutual funds	16,181		16,181		—		—
Public utilities		901		901		—		—

Non-redeemable preferred stocks		3,457		3,457		—		—
Total equity securities		36,495		23,143		13,352		—
Other investments (1)		454		300		154		—

Total investments	Total investments	$	529,200	$	23,911	$	505,289	$	—	Total investments	$	226,914	$	16,181	$	210,733	$	—

December 31, 2021
December 31, 2022										December 31, 2022
U.S. government and agency securities	U.S. government and agency securities	$	49,340	$	—	$	49,340	$	—	U.S. government and agency securities	$	2,385	$	—	$	2,385	$	—
Foreign government	Foreign government	3,459		—		3,459		—		Foreign government	991		—		991		—
States, municipalities and political subdivisions	States, municipalities and political subdivisions	79,896		—		79,896		—		States, municipalities and political subdivisions	26,895		—		26,895		—
Public utilities	Public utilities	25,457		—		25,457		—		Public utilities	7,694		—		7,694		—
Corporate securities	Corporate securities	244,443		—		244,443		—		Corporate securities	83,343		—		83,343		—
Mortgage-backed securities	Mortgage-backed securities	186,740		—		186,740		—		Mortgage-backed securities	56,115		—		56,115		—
Asset-backed securities	Asset-backed securities	70,162		—		70,162		—		Asset-backed securities	27,259		—		27,259		—
Redeemable preferred stocks		4,105		535		3,570		—

Total fixed maturities	Total fixed maturities	663,602		535		663,067		—		Total fixed maturities	204,682		—		204,682		—
Mutual Funds	Mutual Funds	33,064		24,652		8,412		—		Mutual Funds	15,657		15,657		—		—

Non-redeemable preferred stocks		4,894		4,894		—		—

Total equity securities	Total equity securities	37,958		29,546		8,412		—		Total equity securities	15,657		15,657		—		—
Other investments (1)	Other investments (1)	381		300		81		—		Other investments (1)	125		—		125		—
Total investments	Total investments	$	701,941	$	30,381	$	671,560	$	—	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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

The carrying amounts for the following financial instrument categories approximate their fair values at ~~September 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 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~~

~~September 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 ~~September 30, 2022,~~March 31, 2023, we transferred no investments between levels.

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2023

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 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 ~~September 30, 2022:~~March 31, 2023:

Book Value Unrealized Gain Unrealized Loss Fair Value
September 30, 2022
Limited partnership investments (1)
$ 16,325 $ 1,496 $ 1,666 $ 16,155
Certificates of deposit 300 — — 300
Short-term investments 155 — 1 154
Total other investments $ 16,780 $ 1,496 $ 1,667 $ 16,609


	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:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Trust funds	Trust funds	$	36,954	$	32,211	Trust funds	$	49,046	$	45,364
Cash on deposit (regulatory deposits)	Cash on deposit (regulatory deposits)	5,346		1,043		Cash on deposit (regulatory deposits)	625		624
Total restricted cash	Total restricted cash	$	42,300	$	33,254	Total restricted cash	$	49,671	$	45,988

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 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.

September 30, 2022 December 31, 2021
Invested assets on deposit (regulatory deposits) $ 4,012 $ 2,885


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

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2023

6) EARNINGS PER SHARE (EPS)

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 nine~~ month periods ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Numerator:	Numerator:									Numerator:
Net loss attributable to UIHC common stockholders		$	(70,884)	$	(14,322)	$	(173,085)	$	(55,603)
Net income (loss) attributable to UIHC common stockholders										Net income (loss) attributable to UIHC common stockholders		$	260,878	$	(33,172)

Denominator:	Denominator:									Denominator:
Weighted-average shares outstanding	Weighted-average shares outstanding	43,075,234		42,971,535		43,035,374		42,940,458		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	43,075,234		42,971,535		43,035,374		42,940,458		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	$	(1.65)	$	(0.33)	$	(4.02)	$	(1.29)	Basic		$	6.05	$	(0.77)
Diluted	Diluted	$	(1.65)	$	(0.33)	$	(4.02)	$	(1.29)	Diluted		$	5.99	$	(0.77)

See Note 1617 of these Notes to Unaudited Condensed Consolidated Financial Statements for additional information on the stock grants related to dilutive securities.

6)7) PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:


		September 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 $85 and $990, respectively)		42,229		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)	$	29,746	$	29,760
Office furniture and equipment	Office furniture and equipment	3,216		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)	1,746		2,308		Leased vehicles(1)	11		1,080
Total, at cost	Total, at cost	56,784		57,811		Total, at cost	30,871		33,007
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(30,075)		(26,250)		Less: accumulated depreciation and amortization	(12,753)		(13,416)
Property and equipment, net	Property and equipment, net	$	26,709	$	31,561	Property and equipment, net	$	18,118	$	19,591

(1) Includes vehicles under ~~capital~~financing leases. See Note 1112 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~~

~~September 30, 2022~~

Depreciation and amortization expense under property and equipment was ~~$1,547,000~~$1,260,000 and ~~$1,893,000~~$1,710,000 for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. Depreciation and amortization expense under property and equipment was $4,797,000 and $6,047,000 for the nine months ended September 30, 2022 and 2021,~~ respectively. During the ~~nine~~three months ended ~~September 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 ~~$596,000,~~$13,202,000, primarily related to the retirement of one of our policy systems ~~costs~~ for states in which we no longer write policies. The depreciation on these systems totaled ~~$123,000~~$12,691,000 at the time of disposal. We also sold or disposed of leased vehicles totaling ~~$557,000.~~$1,222,000. The depreciation on these vehicles totaled ~~$486,000~~$1,114,000 prior to disposal. The net gain on sale of these vehicles totaled ~~$159,000. In addition,~~$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.

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2023

8) GOODWILL AND INTANGIBLE ASSETS

Goodwill

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

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 ~~three months and nine months ended September 30,~~third quarter of 2022. ~~No impairment in the value of goodwill was recognized during the three or nine month periods ended September 30, 2021.~~ The goodwill attributable to our commercial lines reporting unit was most recently tested for impairment during the ~~second~~fourth quarter of ~~2022, as a result~~2022. It was determined that there was no additional impairment in the value of the ~~merging~~asset as of ~~JIC into ACIC and no impairment was recognized.~~December 31, 2022.

Goodwill allocated to our commercial lines reporting unit was $59,476,000 at ~~September 30,~~March 31, 2023 and December 31, 2022. There was no goodwill allocated to our personal lines reporting unit at ~~September 30, 2022.~~ ~~Goodwill allocated to our personal lines~~March 31, 2023 and ~~commercial lines reporting units was $13,569,000 and $59,476,000, respectively, at~~ December 31, ~~2021~~.2022.

There was no ~~additional~~ goodwill acquired or disposed of during the ~~three or~~ ~~nine~~three month periods ended ~~September 30, 2022~~March 31, 2023 and ~~2021~~2022. Accumulated impairment related to goodwill was $13,569,000 at ~~September 30, 2022. There was no accumulated impairment related to goodwill at~~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:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Intangible assets subject to amortization	Intangible assets subject to amortization	$	12,183	$	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	$	15,940	$	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.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2022~~

Intangible assets subject to amortization consisted of the following:


		Weighted-average remaining amortization period (in years)	Gross carrying amount		Accumulated amortization		Net carrying amount			Weighted-average remaining amortization period (in years)	Gross carrying amount		Accumulated amortization		Net carrying amount
September 30, 2022
March 31, 2023									March 31, 2023
Value of business acquired	Value of business acquired	—	$	42,788	$	(42,788)	$	—	Value of business acquired	—	$	42,788	$	(42,788)	$	—
Agency agreements acquired	Agency agreements acquired	4.5	34,661		(23,691)		10,970		Agency agreements acquired	4.0	34,661		(24,910)		9,751
Trade names acquired	Trade names acquired	1.5	6,381		(5,168)		1,213		Trade names acquired	1.0	6,381		(5,572)		809
Total	Total		$	83,830	$	(71,647)	$	12,183	Total		$	83,830	$	(73,270)	$	10,560

December 31, 2021
December 31, 2022									December 31, 2022
Value of business acquired	Value of business acquired	—	$	42,788	$	(42,788)	$	—	Value of business acquired	—	$	42,788	$	(42,788)	$	—
Agency agreements acquired	Agency agreements acquired	5.3	34,661		(21,863)		12,798		Agency agreements acquired	4.3	34,661		(24,300)		10,361
Trade names acquired	Trade names acquired	2.3	6,381		(4,561)		1,820		Trade names acquired	1.3	6,381		(5,370)		1,011
Total	Total		$	83,830	$	(69,212)	$	14,618	Total		$	83,830	$	(72,458)	$	11,372

No impairment in the value of amortizing or non-amortizing intangible assets was recognized during the ~~nine~~three months ended ~~September 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 ~~$811,000~~$812,000 and $812,000 for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. ~~Amortization expense of our intangible assets was $2,435,000 and $2,744,000 for the nine months ended September 30, 2022 and 2021, respectively.~~

UNITED INSURANCE HOLDINGS CORP.

Notes to 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		$	812
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)9) 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 in the ~~aggregate.~~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 ~~reinsurer's~~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~~$20,100,000. The exhaustion point of

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2022~~

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 ~~$891~~$508 million of occurrence limit remaining for Ian ~~with $818 million specific~~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 ~~$1.396 billion~~$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 ~~will result~~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.

The table below outlines our quota share agreements in effect for the three ~~and nine~~ months ended ~~September 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 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.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2022~~

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


		September 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	$	1,374,917	$	749,600	Reinsurance recoverable on unpaid losses and loss adjustment expenses	$	646,003	$	732,254
Reinsurance recoverable on paid losses and loss adjustment expenses	Reinsurance recoverable on paid losses and loss adjustment expenses	172,365		247,520		Reinsurance recoverable on paid losses and loss adjustment expenses	146,347		64,292
Reinsurance recoverable (1)	Reinsurance recoverable (1)	$	1,547,282	$	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 1213.

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 $236,000 and $380,000 for the three month periods ended September 30, 2022 and 2021, respectively and $853,000 and $1,270,000 for the nine month periods ended September 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)10) 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 ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ on a GAAP basis:

September 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 244,910 305,270
Prior years 53,760 31,344
Total incurred $ 298,670 $ 336,614
Paid related to:
Current year 106,865 152,415
Prior years 222,005 243,741
Total paid $ 328,870 $ 396,156
Net balance at September 30 $ 304,650 $ 355,678
Plus: reinsurance recoverable on unpaid losses 1,374,917 1,153,799
Balance at September 30 $ 1,679,567 $ 1,509,477
Composition of reserve for unpaid losses and LAE:
Case reserves $ 331,825 $ 499,311
IBNR reserves 1,347,742 1,010,166
Balance at September 30 $ 1,679,567 $ 1,509,477

2725

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~September 30, 2022~~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	22,238		35,582
Prior years	(3,165)		(3,064)
Total incurred	$	19,073	$	32,518
Paid related to:
Current year	13,303		17,236
Prior years	14,112		18,429
Total paid	$	27,415	$	35,665

Net balance at March 31	$	102,362	$	71,399
Plus: reinsurance recoverable on unpaid losses	646,003		168,174
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 ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, were lower than the loss payments made during the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, due to the settling of claims ~~during 2021~~ related to ~~the unprecedented number of catastrophic events that took place in 2020.~~non-tropical storm catastrophe events. Case and IBNR reserves and reinsurance recoverable on unpaid losses increased when compared to the prior period as a result of Hurricane Ian, which made landfall during the third quarter of 2022.

~~10)~~11) LONG-TERM DEBT

Long-Term Debt

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


			Effective Interest Rate		Carrying Value at												Effective Interest Rate		Carrying Value at
		Maturity		September 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	3.10%		4,413				5,294			Florida State Board of Administration Note(1)		July 1, 2026			N/A		—				—
Truist Term Note Payable ~~(1)~~(2)	Truist Term Note Payable ~~(1)~~(2)	May 26, 2031	N/A		—				3,265			Truist Term Note Payable ~~(1)~~(2)		May 26, 2031			N/A		—				—
Total long-term debt	Total long-term debt				$	154,413			$	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 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, plus accrued and unpaid interest thereon. On or after that date, we may redeem the Senior Notes at 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. The outstanding Truist Note payable 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 as collateral and may not take possession of or foreclose upon the office.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2022~~

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 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 ~~3.10%~~3.76% at the end of ~~September 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 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 ~~September 30, 2022,~~March 31, 2023, we were ~~in compliance with~~no longer the ~~covenants in~~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 ~~nine~~three months ended ~~September 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	(269)		(254)		Amortization	(83)		(84)
Balance at September 30,		$	1,729	$	2,081
Balance at March 31,						Balance at March 31,	$	1,562	$	1,914

~~11)~~12) 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 ~~September 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.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2022~~

~~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 was granted October 12, 2022.

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 ~~$6,152,000~~$4,242,000 and ~~$1,969,000~~$4,238,000 at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

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 September 30, 2022 December 31, 2021
Assets
Operating lease assets Other assets $ 1,210 $ 1,689
Financing lease assets Property and equipment, net 126 477
Total lease assets $ 1,336 $ 2,166
Liabilities
Operating lease liabilities Operating lease liability $ 1,416 $ 1,934
Financing lease liabilities Other liabilities 4 16
Total lease liabilities $ 1,420 $ 1,950

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Operating lease expense $ 267 $ 161 $ 587 $ 492
Financing lease expense:
Amortization of leased assets 78 207 320 598
Interest on lease liabilities — — 1 1
Net lease expense $ 345 $ 368 $ 908 $ 1,091

3028

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~September 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 ~~September 30, 2022,~~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			Operating Leases		Finance Leases		Total
Remaining in 2022		$	154	$	2	$	156
2023		601		3		604
Remaining in 2023								Remaining in 2023	$	682	$	—	$	682
2024	2024	585		—		585		2024	593		—		593
2025	2025	240		—		240		2025	222		—		222
2026	2026	32		—		32		2026	11		—		11
2027								2027	—		—		—
Thereafter	Thereafter	1,341		—		1,341		Thereafter	—		—		—
Total undiscounted future minimum lease payments	Total undiscounted future minimum lease payments	2,953		5		2,958		Total undiscounted future minimum lease payments	1,508		—		1,508
Less: Imputed interest	Less: Imputed interest	(1,537)		(1)		(1,538)		Less: Imputed interest	(96)		—		(96)
Present value of lease liabilities	Present value of lease liabilities	$	1,416	$	4	$	1,420	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:

September 30, 2022 December 31, 2021
Weighted average remaining lease term (months)
Operating leases 38 51
Financing leases 11 17
Weighted average discount rate
Operating leases 3.70 % 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 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 September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Cash paid for amounts included in the measurement of lease liabilities
Investing cash flows from financing leases $ — $ 35 $ — $ 68
Right-of-use assets obtained in exchange for new operating lease liabilities — 14 — —
Right-of-use assets obtained in exchange for new financing lease liabilities — 37 — 70
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 67 of these Notes to Unaudited Condensed Consolidated Financial Statements for more information regarding depreciation expense, Note 1011 for information regarding commitments related to long-term debt, and Note 1314 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 ~~September 30,~~March 31, 2022, we have received

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2022~~

~~$254,000~~ $5,718,000 from the Internal Revenue Service 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.

~~UPC Run-off Plan~~

During the third quarter of 2022, UPC received approval from regulatory authorities in Florida, Louisiana and Texas to withdraw from these markets. However, there is a high degree of uncertainty regarding the viability of the run-off plan ultimately being successful. Underwriting losses, weak risk-adjusted capitalization, projected insufficient liquidity absent additional capital contributions, and the potential inability of UPC to obtain future reinsurance protection has led to increased concerns and monitoring by the Florida Office of Insurance Regulation.

~~12)~~13) 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.

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

September 30, 2022 December 31, 2021 Provision for expected credit losses Write-offs September 30, 2022
Premiums Receivable $ 32 $ (156) $ 152 $ 28
Reinsurance Recoverables 563 (11) — 552
Total $ 595 $ (167) $ 152 $ 580
September 30, 2021 December 31, 2020 Provision for expected credit losses Write-offs September 30, 2021
Premiums Receivable $ 140 $ (176) $ 61 $ 25
Reinsurance Recoverables 386 382 — 768
Note Receivable 20 (20) — —
Total $ 546 $ 186 $ 61 $ 793

UNITED INSURANCE HOLDINGS CORP.

Notes to 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)~~14) 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 ~~September 30, 2022,~~March 31, 2023, and during the three ~~and nine~~ 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 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 the 1.3% assessment, described below, and is recoupable from policyholders. During 2022, we received an assessment notice from FIGA. This assessment will be 1.3% on direct written premium of all covered lines of business in Florida to cover the cost of an insurance company

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2022~~

facing insolvency. This assessment is in addition to FIGA's 0.7% assessment, described below, and is recoupable from policyholders. During 2021, we received an assessment notice from FIGA of 0.7% on all direct written premium of Florida 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 to cover the cost of two regional insurance companies 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 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. The table below details the statutory net income (loss) for each of our regulated entities for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
UPC(2)
$ (42,257) $ 1,607 $ (169,090) $ (59,314)
ACIC(3)
14,314 (3,484) 25,000 (39,882)
IIC (1,833) (4,037) (4,429) (5,488)
Total $ (29,776) $ (5,914) $ (148,519) $ (104,684)

UNITED INSURANCE HOLDINGS CORP.

Notes to 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) ~~All values included in the table are estimated as of November 9, 2022.~~

~~(2)~~ ~~UPC results are inclusive of FSIC as these entities were merged effective May 31, 2022.~~

~~(3)~~ ACIC results are inclusive of JIC as these entities were merged effective June 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 ~~September 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2022~~


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
UPC(2)		$	50,880	$	169,244
ACIC(3)		90,604		142,138
ACIC(1)						ACIC(1)	101,811		77,511
IIC	IIC	25,422		30,248		IIC	23,966		26,152
Total	Total	$	166,906	$	341,630	Total	$	125,777	$	103,663

(1) ~~All values included in the table are estimated as of November 9, 2022.~~

~~(2)~~ ~~UPC results are inclusive of FSIC as these entities were merged effective May 31, 2022.~~

~~(3)~~ ACIC results are inclusive of JIC as these entities were merged effective June 1, 2022.

~~14)~~

15) 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	(60,162)		496		(59,666)		Changes in net unrealized losses on investments	5,574		(315)		5,259
Reclassification adjustment for realized losses	Reclassification adjustment for realized losses	1,856		(464)		1,392		Reclassification adjustment for realized losses	(1,260)		315		(945)
September 30, 2022		$	(66,899)	$	2,094	$	(64,805)
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)~~16) 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):

Nine Months Ended September 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
Third Quarter — — 0.06 2,589


	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 ~~September 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 Unaudited Condensed Consolidated Financial Statements

March 31, 2023

See Note 1617 in these Notes to Unaudited Condensed Consolidated Financial Statements for information regarding stock-based compensation activity.

~~16)~~17) STOCK-BASED COMPENSATION

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.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2022~~

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


		Three Months Ended September 30,				Nine Months Ended September 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	$	261	$	270	$	792	$	495	Pre-tax		$	309	$	390
Post-tax (1)	Post-tax (1)	206		213		626		391		Post-tax (1)		244		308
Director stock-based compensation expense	Director stock-based compensation expense									Director stock-based compensation expense
Pre-tax	Pre-tax	29		66		132		243		Pre-tax		26		62
Post-tax (1)	Post-tax (1)	23		52		104		192		Post-tax (1)		21		49

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

We had approximately ~~$3,174,000~~$1,709,000 of unrecognized stock compensation expense at ~~September 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 ~~2.2~~1.8 years. We had approximately ~~$62,000~~$10,000 of unrecognized director stock-based compensation expense at ~~September 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 ~~0.6~~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 did not grant ~~shares of restricted common stock during the three months ended September 30, 2022. We granted 2,551~~any shares of restricted common stock during the three month period ended ~~September 30, 2021,~~March 31, 2023. We granted 114,866 shares of restricted common stock during the three month period ended March 31, 2022, which had a weighted-average grant date fair value of ~~$3.76~~$3.59 per share. We granted 907,907 and 290,577 shares of restricted common stock during the nine month periods ended September 30, 2022 and 2021, respectively, which had a weighted-average grant date fair value of $1.97 and $6.02 per share, respectively.

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
Outstanding as of December 31, 2021 336,596 $ 6.99
Granted 907,907 1.97
Less: Forfeited 208,075 4.31
Less: Vested 112,722 7.09
Outstanding as of September 30, 2022 923,706 $ 2.65


	Number of Restricted Shares	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2022	714,239	$	2.73
Granted	—	—
Less: Forfeited	856	3.59
Less: Vested	44,457	4.40
Outstanding as of March 31, 2023	668,926	$	2.62

3533

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~September 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	—	%	0.65	%	Expected annual dividend yield	—	%	—	%
Expected volatility	Expected volatility	49.66	%	46.63	%	Expected volatility	—	%	49.66	%
Risk-free interest rate	Risk-free interest rate	2.92	%	1.16	%	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 did not grant any stock options during the three ~~months~~month periods ended ~~September 30,~~March 31, 2023 and 2022. We granted 900,000 stock options during the three months ended September 30, 2021, which had a weighted average grant date fair value of $1.57 per share. We granted 635,643 and 1,054,707 stock options during the nine months ended September 30, 2022 and 2021, respectively, which had a weighted average grant date fair value of $0.86 and $1.61, per share, respectively.

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	199,006	3.05		—	—		Less: Forfeited	—	—		—	—
Less: Expired	Less: Expired	—	—		—	—		Less: Expired	161,925	3.05		—	—
Less: Exercised	Less: Exercised	—	—		—	—		Less: Exercised	—	—		—	—
Outstanding as of September 30, 2022		1,583,852	$	3.77	9.05	$	—
Outstanding as of March 31, 2023								Outstanding as of March 31, 2023	1,088,760	$	3.81	8.55	$	451

Vested as of September 30, 2022(1)		463,724	$	7.77	8.19	$	—
Exercisable as of September 30, 2022		411,090	$	6.36	8.44	$	—
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 ~~September 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 ~~September 30, 2022.~~March 31, 2023.

~~UNITED INSURANCE HOLDINGS CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2022~~

~~17)~~18) SUBSEQUENT EVENTS

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

On ~~October 1, 2022, we transitioned our Georgia business~~April 5, 2023, the Company filed a Motion for Release of Property of ACIC in the Circuit Court of the Second Judicial

Circuit for Leon County, Florida, requesting that UPC immediately remit to ~~TypTap~~ACIC reinsurance recoveries currently held by UPC and reinsurance recoveries recovered by UPC in ~~connection~~the future in accordance with ~~our southeast renewal rights agreement.~~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 ~~October 17, 2022,~~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 ~~Company received written notice from the Listing Qualifications~~Florida Department of ~~The Nasdaq Stock Market notifying the Company that, based on the closing bid price~~Financial Services, Division of Rehabilitation and Liquidation (the "DFS") as receiver of the Company's ~~stock for the last 30 consecutive business days, the~~former subsidiary, United Property & Casualty Insurance Company no longer complies with the minimum bid price requirement for continued listing on The Nasdaq Global Market. The Company has been provided an initial compliance period of 180 calendar days to regain compliance with this requirement.

~~In November, ACIC declared a dividend of $26,000,000 payable~~("UPC") related to the ~~Company. The Company intends to make a capital contribution of $26,000,000 to UPC utilizing these funds.~~Reinsurance Allocation Agreement (the "Allocation Agreement") by and between ACIC and UPC.

3734

UNITED INSURANCE HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2023

The Allocation Agreement, effective on June 1, 2022, and approved by the Florida Office of Insurance Regulation (the "FLOIR") on December 5, 2022, describes the manner in which reinsurance recoveries under shared reinsurance 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 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.

On May 15, 2023, the Company, 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 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 DFS as receiver of UPC.

The Tax Memorandum allows the Company to secure amounts due from UPC to ACIC provided the Internal Revenue Service does not object to the Company utilizing UPC's net operating loss carry-forward against its future taxable income.

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 ~~state~~Florida Department of ~~New Jersey. Effective January 1, 2021, we no longer write~~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 3 of the ~~state of Hawaii, and effective December 1, 2021, we no longer write in the states of Connecticut or Rhode Island, though we are still licensed~~Notes 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.~~Unaudited Condensed Consolidated Financial Statements above.

On August 25, 2022, we announced that our ~~that~~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. ~~With this action, UPC will effectively be placed into an orderly run-off so long as UPC remains in compliance with the rules and regulations of each state.~~ 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.

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.

~~UNITED INSURANCE HOLDINGS CORP.~~

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 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 ~~42.5%~~51.3% from ~~525,969~~48,152 policies in-force at ~~September 30, 2021~~March 31, 2022 to ~~302,296~~23,473 policies in-force at ~~September 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 nine months ended September 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 September 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.

3937

UNITED INSURANCE HOLDINGS CORP.

~~2022~~2023 Highlights

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Gross premiums written $ 255,203 $ 322,493 $ 894,824 $ 1,060,555
Gross premiums earned 301,896 353,461 926,860 1,066,557
Net premiums earned 116,187 153,271 328,449 444,680
Total revenues 123,788 162,740 341,947 479,983
Earnings before income tax (70,797) (18,600) (148,009) (77,655)
Consolidated net loss attributable to UIHC (70,884) (14,322) (173,085) (55,603)
Net loss available to UIHC stockholders per diluted share $ (1.65) $ (0.33) $ (4.02) $ (1.29)
Reconciliation of net loss to core loss:
Plus: Non-cash amortization of intangible assets and goodwill impairment (1)
$ 14,381 $ 812 $ 16,005 $ 2,744
Less: Realized gains on investment portfolio (9) 5,537 (1,856) 5,916
Less: Unrealized gains (losses) on equity securities (2,518) (3,293) (9,870) 1,709
Less: Net tax impact (2)
3,551 (301) 5,824 (1,025)
Core loss (3) (4)
(57,527) (15,453) (151,178) (59,459)
Core loss per diluted share(3) (4)
$ (1.34) $ (0.36) $ (3.51) $ (1.38)
Book value per share $ 1.86 $ 7.42


	Three Months Ended March 31,
		2023		2022

Gross premiums written		$	187,123	$	142,414
Gross premiums earned		144,476		122,733
Net premiums earned		87,324		57,746
Total revenues		104,047		117,361
Earnings from continuing operations, before income tax		40,428		5,627
Income (loss) from discontinued operations, net of tax		230,305		(37,904)
Consolidated net income (loss) attributable to UIHC		260,878		(33,172)
Net income (loss) available to UIHC stockholders per diluted share
Continuing Operations		$	0.70	$	0.11
Discontinued Operations		5.29		(0.88)
Total		$	5.99	$	(0.77)

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

Plus: Non-cash amortization of intangible assets		$	812	$	812
Less: Income (loss) from discontinued operations, net of tax		230,305		(37,904)
Less: Realized losses on investment portfolio		(83)		37
Less: Unrealized gains (losses) on equity securities		474		(770)
Less: Net tax impact (1)		88		324
Core income (loss) (2)		30,906		5,953
Core income (loss) per diluted share(2)		$	0.71	$	0.14

Book value per share		$	1.93	$	(4.21)

(1) For both the three and nine months ended September 30, 2022, non-cash amortization of intangible assets includes $13,570,000 related to the impairment of goodwill attributable to our personal lines operating segment.

~~(2)~~ 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.

~~(3)~~ ~~For the three and nine months ended September 30, 2022, core loss includes $13,851,000 and $57,511,000, respectively, in tax expense related to the Company's recognition of a valuation allowance.~~

~~(4)~~(2) 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.

4038

UNITED INSURANCE HOLDINGS CORP.

Consolidated Net ~~Loss~~Income (Loss)


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2022			2021			2022			2021					2023			2022
REVENUE:	REVENUE:													REVENUE:
Gross premiums written	Gross premiums written	$	255,203		$	322,493		$	894,824		$	1,060,555		Gross premiums written		$	187,123		$	142,414
Change in gross unearned premiums	Change in gross unearned premiums	46,693			30,968			32,036			6,002			Change in gross unearned premiums		(42,647)			(19,681)
Gross premiums earned	Gross premiums earned	301,896			353,461			926,860			1,066,557			Gross premiums earned		144,476			122,733
Ceded premiums earned	Ceded premiums earned	(185,709)			(200,190)			(598,411)			(621,877)			Ceded premiums earned		(57,152)			(64,987)
Net premiums earned	Net premiums earned	116,187			153,271			328,449			444,680			Net premiums earned		87,324			57,746
Net investment income	Net investment income	4,269			3,471			9,887			10,737			Net investment income		2,589			1,404
Net realized investment gains (losses)	Net realized investment gains (losses)	(9)			5,537			(1,856)			5,916			Net realized investment gains (losses)		(83)			37
Net unrealized gains (losses) on equity securities	Net unrealized gains (losses) on equity securities	(2,518)			(3,293)			(9,870)			1,709			Net unrealized gains (losses) on equity securities		474			(770)

Management fee income														Management fee income		9,668			50,206
Other revenue	Other revenue	5,859			3,754			15,337			16,941			Other revenue		4,075			8,738
Total revenue	Total revenue	123,788			162,740			341,947			479,983			Total revenue		104,047			117,361
EXPENSES:	EXPENSES:													EXPENSES:
Losses and loss adjustment expenses	Losses and loss adjustment expenses	117,228			102,769			298,670			336,614			Losses and loss adjustment expenses		19,073			32,518
Policy acquisition costs	Policy acquisition costs	38,944			46,925			93,948			129,073			Policy acquisition costs		26,927			52,152
Operating expenses	Operating expenses	9,615			15,429			34,882			42,133			Operating expenses		5,651			10,603
General and administrative expenses	General and administrative expenses	26,391			13,940			56,890			42,934			General and administrative expenses		9,837			15,435
Interest expense	Interest expense	2,392			2,378			7,165			7,010			Interest expense		2,719			2,359
Total expenses	Total expenses	194,570			181,441			491,555			557,764			Total expenses		64,207			113,067
Loss before other income		(70,782)			(18,701)			(149,608)			(77,781)
Income before other income														Income before other income		39,840			4,294
Other income	Other income	(15)			101			1,599			126			Other income		588			1,333
Loss before income taxes		(70,797)			(18,600)			(148,009)			(77,655)
Provision (benefit) for income taxes		87			(3,482)			25,187			(20,656)
Net loss		$	(70,884)		$	(15,118)		$	(173,196)		$	(56,999)
Less: Net income (loss) attributable to noncontrolling interests		—			(796)			(111)			(1,396)
Net loss attributable to UIHC		$	(70,884)		$	(14,322)		$	(173,085)		$	(55,603)
Income before income taxes														Income before income taxes		40,428			5,627
Provision for income taxes														Provision for income taxes		9,855			980
Net income from continuing operations, net of tax														Net income from continuing operations, net of tax		$	30,573		$	4,647
Income (loss) from discontinued operations, net of tax														Income (loss) from discontinued operations, net of tax		230,305			(37,904)
Net income (loss)														Net income (loss)		$	260,878		$	(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		$	260,878		$	(33,172)
Earnings available to UIHC common stockholders per diluted share	Earnings available to UIHC common stockholders per diluted share	$	(1.65)		$	(0.33)		$	(4.02)		$	(1.29)		Earnings available to UIHC common stockholders per diluted share		$	5.99		$	(0.77)
Book value per share	Book value per share							$	1.86		$	7.42		Book value per share		$	1.93		$	(4.21)
Return on equity based on GAAP net loss								(99.1)		%	(20.4)		%
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)	100.9		%	67.1		%	90.9		%	75.7		%	Loss ratio, net (1)		21.9		%	56.3		%
Expense ratio (2)(3)		64.5		%	49.8		%	56.5		%	48.2		%
Combined ratio (4)		165.4		%	116.9		%	147.4		%	123.9		%
Expense ratio (2)														Expense ratio (2)		48.6		%	135.4		%
Combined ratio (3)														Combined ratio (3)		70.5		%	191.7		%
Effect of current year catastrophe losses on combined ratio	Effect of current year catastrophe losses on combined ratio	32.2		%	24.1		%	26.4		%	22.8		%	Effect of current year catastrophe losses on combined ratio		3.5		%	11.4		%
Effect of prior year development on combined ratio	Effect of prior year development on combined ratio	38.4		%	1.3		%	16.4		%	7.0		%	Effect of prior year development on combined ratio		(3.6)		%	(5.3)		%

Underlying combined ratio (5)		94.8		%	91.5		%	104.6		%	94.1		%
Underlying combined ratio (4)														Underlying combined ratio (4)		70.6		%	185.6		%

(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)~~Includes the impairment of goodwill, which had an impact of 11.7% and 4.1% on our expense ratios during the three and nine month periods ended September 30, 2022, respectively.~~

~~(4)~~ 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.

~~(5)~~(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.

4139

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 nine~~ months ended ~~September 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.~~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. In addition, in September 2022, as a result of the decision to place UPC into an orderly runoff, we impaired the full balance of goodwill attributable to our personal lines operating segment.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.

4240

UNITED INSURANCE HOLDINGS CORP.

ANALYSIS OF FINANCIAL CONDITION - ~~SEPTEMBER 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 ~~$768,602,000~~$372,721,000 at ~~September 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:


		September 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	$	35,438	4.6%		$	49,340	5.1%		U.S. government and agency securities	$	3,409	0.9%		$	2,385	0.7%
Foreign government	Foreign government	3,329		0.4%		3,459		0.4%		Foreign government	991		0.3%		991		0.3%
States, municipalities and political subdivisions	States, municipalities and political subdivisions	58,166		7.6%		79,896		8.3%		States, municipalities and political subdivisions	28,582		7.7%		26,895		7.9%
Public utilities	Public utilities	19,008		2.5%		25,457		2.6%		Public utilities	7,820		2.1%		7,694		2.3%
Corporate securities	Corporate securities	183,781		23.9%		244,443		25.3%		Corporate securities	85,723		23.0%		83,343		24.3%
Mortgage-backed securities	Mortgage-backed securities	132,584		17.3%		186,740		19.4%		Mortgage-backed securities	56,002		15.0%		56,115		16.5%
Asset-backed securities	Asset-backed securities	57,947		7.5%		70,162		7.3%		Asset-backed securities	28,206		7.6%		27,259		8.0%
Redeemable preferred stocks		1,998		0.3%		4,105		0.4%

Total fixed maturities	Total fixed maturities	492,251		64.1	%	663,602		68.8	%	Total fixed maturities	210,733		56.6	%	204,682		60.0	%
Mutual funds	Mutual funds	32,137		4.2%		33,064		3.4%		Mutual funds	16,181		4.3%		15,657		4.6%
Public utilities		901		0.1%		—		—%

Non-redeemable preferred stocks		3,457		0.4%		4,894		0.5%

Total equity securities	Total equity securities	36,495		4.7	%	37,958		3.9	%	Total equity securities	16,181		4.3	%	15,657		4.6	%
Other investments	Other investments	16,609		2.2	%	18,006		1.9	%	Other investments	3,550		1.0	%	3,675		1.1	%
Total investments	Total investments	545,355		71.0%		719,566		74.6%		Total investments	230,464		61.9%		224,014		65.7%
Cash and cash equivalents	Cash and cash equivalents	180,947		23.5	%	212,024		22.0	%	Cash and cash equivalents	92,586		24.8	%	70,903		20.8	%
Restricted cash	Restricted cash	42,300		5.5%		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	$	768,602	100.0	%	$	964,844	100.0	%	Total cash, cash equivalents, restricted cash and investments	$	372,721	100.0	%	$	340,905	100.0	%

4341

UNITED INSURANCE HOLDINGS CORP.

We classify all of our fixed-maturity investments as available-for-sale. Our investments at ~~September 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 ~~September 30, 2022,~~March 31, 2023, approximately ~~83.8%~~79.6% of our fixed maturities were U.S. Treasuries or corporate bonds rated “A” or better, and ~~16.2%~~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 in the ~~aggregate.~~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. During the third quarter, one of our ~~reinsurer's~~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 ~~$891~~$508 million of occurrence limit remaining for Ian, ~~with $818 million specific~~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 ~~$1.396 billion~~$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.

UNITED INSURANCE HOLDINGS CORP.

The table below outlines our quota share agreements in effect for the three ~~and nine~~ months ended ~~September 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.~~

~~UNITED INSURANCE HOLDINGS CORP.~~

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

2022 2021
Three Months Ended September 30,
Non-at-Risk (2.0) % (0.8) %
Quota Share (20.1) % (23.9) %
All Other (39.4) % (31.9) %
Total Ceding Ratio (61.5) % (56.6) %
Nine Months Ended September 30,
Non-at-Risk (2.2) % (2.0) %
Quota Share (26.0) % (25.3) %
All Other (36.4) % (31.0) %
Total Ceding Ratio (64.6) % (58.3) %


	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)	%

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 nine~~ month periods ended ~~September 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 September 30,

Three Months Ended March 31,										Three Months Ended March 31,
Non-at-Risk	Non-at-Risk	(3.1)	%	(1.4)	%	(0.5)	%	0.5	%	Non-at-Risk	(1.6)	%	(1.2)	%	(0.4)	%	(0.5)	%
Quota Share	Quota Share	(24.4)	%	(26.7)	%	(13.4)	%	(17.4)	%	Quota Share	—	%	—	%	(6.7)	%	(17.8)	%
All Other	All Other	(41.4)	%	(27.7)	%	(36.4)	%	(41.8)	%	All Other	(28.8)	%	(18.2)	%	(33.3)	%	(39.4)	%
Total Ceding Ratio	Total Ceding Ratio	(68.9)	%	(55.8)	%	(50.3)	%	(58.7)	%	Total Ceding Ratio	(30.4)	%	(19.4)	%	(40.4)	%	(57.7)	%

Nine Months Ended September 30,
Non-at-Risk		(3.3)	%	(2.8)	%	(0.5)	%	(0.2)	%
Quota Share		(32.0)	%	(29.6)	%	(15.9)	%	(14.3)	%
All Other		(35.4)	%	(26.0)	%	(37.7)	%	(43.5)	%
Total Ceding Ratio		(70.7)	%	(58.4)	%	(54.1)	%	(58.0)	%

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.

~~UNITED INSURANCE HOLDINGS CORP.~~

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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Quota Share~~(1)~~	Quota Share~~(1)~~	$	(40,167)	$	(80,941)	$	(118,382)	$	(245,976)	Quota Share~~(1)~~		$	(12,243)	$	(23,128)
Excess-of-loss	Excess-of-loss	(10,416)		1,751		(403,971)		(445,697)		Excess-of-loss		(19,295)		(5,507)
Equipment, identity theft, and cyber security	Equipment, identity theft, and cyber security	(849)		5,353		(3,074)		(277)		Equipment, identity theft, and cyber security		(820)		(746)
Flood and inland flood		(5,171)		(6,860)		(15,911)		(18,821)

Ceded premiums written	Ceded premiums written	$	(56,603)	$	(80,697)	$	(541,338)	$	(710,771)	Ceded premiums written		$	(32,358)	$	(29,381)
Change in ceded unearned premiums	Change in ceded unearned premiums	(129,106)		(119,493)		(57,073)		88,894		Change in ceded unearned premiums		(24,794)		(35,606)
Ceded premiums earned	Ceded premiums earned	$	(185,709)	$	(200,190)	$	(598,411)	$	(621,877)	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.

Personal Lines Operating Segment

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Quota Share $ (29,506) $ (69,315) $ (66,649) $ (187,521)
Excess-of-loss (8,614) 3,443 (237,980) (275,483)
Equipment, identity theft, and cyber security (635) 4,410 (1,424) (9)
Flood and inland flood (1)
(5,171) (6,860) (15,911) (18,821)
Ceded premiums written $ (43,926) $ (68,322) $ (321,964) $ (481,834)
Change in ceded unearned premiums (81,482) (70,285) (92,353) 36,635
Ceded premiums earned $ (125,408) $ (138,607) $ (414,317) $ (445,199)

~~(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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Quota Share	Quota Share	$	(10,661)	$	(11,626)	$	(51,733)	$	(58,455)	Quota Share		$	(12,243)	$	(23,128)
Excess-of-loss	Excess-of-loss	(1,802)		(1,692)		(165,991)		(170,214)		Excess-of-loss		(18,300)		(5,860)
Equipment, identity theft, and cyber security	Equipment, identity theft, and cyber security	(214)		943		(1,650)		(268)		Equipment, identity theft, and cyber security		(530)		(578)

Ceded premiums written	Ceded premiums written	$	(12,677)	$	(12,375)	$	(219,374)	$	(228,937)	Ceded premiums written		$	(31,073)	$	(29,566)
Change in ceded unearned premiums	Change in ceded unearned premiums	(47,624)		(49,208)		35,280		52,259		Change in ceded unearned premiums		(22,301)		(32,456)
Ceded premiums earned	Ceded premiums earned	$	(60,301)	$	(61,583)	$	(184,094)	$	(176,678)	Ceded premiums earned		$	(53,374)	$	(62,022)

~~UNITED INSURANCE HOLDINGS CORP.~~

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 September 30,
Current period catastrophe losses incurred
Named and numbered storms 1 $ 36,525 31.4 % 5 $ 30,925 20.1 %
All other catastrophe loss events 4 915 0.8 % 6 6,078 4.0 %
Total 5 $ 37,440 32.2 % 11 $ 37,003 24.1 %
Nine Months Ended September 30,
Current period catastrophe losses incurred
Named and numbered storms 1 $ 36,525 11.1 % 7 $ 34,937 7.9 %
All other catastrophe loss events 30 50,084 15.3 % 31 66,288 14.9 %
Total 31 $ 86,609 26.4 % 38 $ 101,225 22.8 %


	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	3,071		3.5	%	3	6,555		11.4	%
Total	3	$	3,071	3.5	%	3	$	6,555	11.4	%

(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.

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 September 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	$	16,073	28.4	%	5	$	30,855	28.1	%	Named and numbered storms	—	$	—	—	%	—	$	—	—	%
All other catastrophe loss events	All other catastrophe loss events	4	(5,868)		(10.4)	%	6	4,410		4.0	%	All other catastrophe loss events	3	974		11.2	%	3	3,450		28.0	%
Total	Total	5	$	10,205	18.0	%	11	$	35,265	32.1	%	Total	3	$	974	11.2	%	3	$	3,450	28.0	%

Nine Months Ended September 30,
Current period catastrophe losses incurred
Named and numbered storms		1	$	16,073	9.3	%	7	$	34,781	11.0	%
All other catastrophe loss events		30	42,783		24.9	%	31	57,909		18.3	%
Total		31	$	58,856	34.2	%	38	$	92,690	29.3	%

~~UNITED INSURANCE HOLDINGS CORP.~~

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 September 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	$	20,451	34.3	%	3	$	70	0.2	%	Named and numbered storms	—	$	—	—	%	—	$	—	—	%
All other catastrophe loss events	All other catastrophe loss events	—	6,784		11.4	%	4	1,668		3.8	%	All other catastrophe loss events	1	2,097		2.7	%	3	3,105		6.8	%
Total	Total	1	$	27,235	45.7	%	7	$	1,738	4.0	%	Total	1	$	2,097	2.7	%	3	$	3,105	6.8	%

Nine Months Ended September 30,
Current period catastrophe losses incurred
Named and numbered storms		1	$	20,451	13.0	%	4	$	156	0.1	%
All other catastrophe loss events		6	7,302		4.7	%	7	8,379		6.6	%
Total		7	$	27,753	17.7	%	11	$	8,535	6.7	%

See Note 89 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 ~~$1,679,567,000~~$748,365,000 and ~~$1,084,450,000~~$842,958,000 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Of this total, ~~$1,170,278,000~~$727,320,000 and ~~$854,073,000,~~$816,489,000, respectively, is related to our ~~personal~~commercial lines operating segment. The remaining ~~$509,289,000~~$21,045,000 and ~~$230,377,000,~~$26,469,000, respectively, is related to our ~~commercial~~personal lines operating segment. On a consolidated basis, this balance has ~~increased~~decreased from year end as ~~a result of~~we continue to settle claims related to 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 910 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 ~~2022,~~2023, higher loss and loss adjustment expenses have had a negative impact on our results of operations during the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023.

~~UNITED INSURANCE HOLDINGS CORP.~~

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.

5046

UNITED INSURANCE HOLDINGS CORP.

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

Net ~~losses~~income attributable to UIHC for the three months ended ~~September 30, 2022~~March 31, 2023 increased ~~$56,562,000,~~$294,050,000, or ~~394.9%~~886.4%, to net income of $260,878,000 for the first quarter of 2023 from a net loss of ~~$70,884,000 for the third quarter of 2022 from $14,322,000~~$33,172,000 for the same period in ~~2021.~~2022. Drivers of ~~the~~ net ~~loss~~income from continuing operations during the three months ended ~~September 30, 2022 include: decreased~~March 31, 2023 include increased gross ~~written premiums which were partially offset by a decline in ceded~~ premiums earned, ~~unfavorable prior year~~decreased loss ~~development during~~and LAE driven by decreased non-catastrophe losses, and decreases across policy acquisition costs, operating and underwriting expenses and general and administrative expenses, the ~~quarter,~~details of which are described below. In addition to continuing operations, we recognized income from discontinued operations of $230,305,000, driven by the ~~impact~~deconsolidation of ~~Hurricane Ian making landfall in Florida as a category four hurricane, and impairment of goodwill attributable to our personal lines operating segment.~~UPC.

Revenue

Our gross written premiums ~~decreased $67,290,000,~~increased $44,709,000, or ~~20.9%~~31.4%, to ~~$255,203,000~~$187,123,000 for the ~~third~~first quarter ended ~~September 30, 2022~~March 31, 2023 from ~~$322,493,000~~$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)	($ in thousands)	Three Months Ended September 30,						($ in thousands)	Three Months Ended March 31,
		2022		2021		Change			2023		2022		Change
Direct Written and Assumed Premium by Region (1)
Direct Written and Assumed Premium by State (1)								Direct Written and Assumed Premium by State (1)
Florida	Florida	$	178,313	$	185,178	$	(6,865)	Florida	$	176,611	$	125,764	$	50,847
Gulf		49,961		62,757		(12,796)
Northeast		16,627		49,982		(33,355)
Southeast		10,155		24,464		(14,309)
Total direct written premium by region		255,056		322,381		(67,325)
Texas								Texas	(9)		1,986		(1,995)
New York								New York	10,482		14,450		(3,968)
South Carolina								South Carolina	—		93		(93)
Total direct written premium by state								Total direct written premium by state	187,084		142,293		44,791
Assumed premium (2)	Assumed premium (2)	147		112		35		Assumed premium (2)	39		121		(82)
Total gross written premium by region		$	255,203	$	322,493	$	(67,290)
Total gross written premium by state								Total gross written premium by state	$	187,123	$	142,414	$	44,709

Gross Written Premium by Line of Business	Gross Written Premium by Line of Business							Gross Written Premium by Line of Business
Personal property ~~(3)~~	Personal property ~~(3)~~	$	178,335	$	258,109	$	(79,774)	Personal property ~~(3)~~	$	10,482	$	14,450	$	(3,968)
Commercial property	Commercial property	76,868		64,384		12,484		Commercial property	176,641		127,964		48,677
Total gross written premium by line of business	Total gross written premium by line of business	$	255,203	$	322,493	$	(67,290)	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~~2023 and ~~2021~~2022 is primarily commercial property business assumed from unaffiliated insurers.

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

Three Months Ended September 30,
New and Renewal Policies(1) by Region (2)
2022 2021 Change
Florida 35,310 54,924 (19,614)
Gulf 20,087 32,256 (12,169)
Northeast 8,761 34,050 (25,289)
Southeast 5,518 14,970 (9,452)
Total 69,676 136,200 (66,524)


	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.

effective February 27, 2023, compared to normal operation for the three months ended March 31, 2022. This income previously eliminated on a consolidated basis.

Expenses

Expenses for the three months ended ~~September 30, 2022 increased $13,129,000,~~March 31, 2023 decreased $48,860,000, or ~~7.2%~~43.2%, to ~~$194,570,000~~$64,207,000 from ~~$181,441,000~~$113,067,000 for the same period in ~~2021.~~2022. The ~~increase~~decrease in expenses was primarily due to ~~an increase~~a decrease in policy acquisition costs of $25,225,000 and decrease in loss and LAE of $13,445,000. Operating and underwriting expenses and general and administrative expenses ~~of $14,459,000~~also decreased $4,952,000 and ~~$12,451,000~~$5,598,000 in the ~~third~~first quarter of ~~2022~~2023 compared to the ~~third~~first quarter of ~~2021. These increases were partially offset by decreased policy acquisition costs and operating costs in the third quarter of 2022 compared to the third quarter of 2021.~~2022.

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


		Three Months Ended September 30,									Three Months Ended March 31,
		2022			2021			Change			2023			2022			Change
Net loss and LAE	Net loss and LAE	$	117,228		$	102,769		$	14,459	Net loss and LAE	$	19,073		$	32,518		$	(13,445)
% of Gross earned premiums	% of Gross earned premiums	38.8		%	29.1		%	9.7 pts		% of Gross earned premiums	13.3		%	26.5		%	(13.2) pts
% of Net earned premiums	% of Net earned premiums	100.9		%	67.1		%	33.8 pts		% of Net earned premiums	21.9		%	56.3		%	(34.4) pts
Less:	Less:									Less:
Current year catastrophe losses	Current year catastrophe losses	$	37,440		$	37,003		$	437	Current year catastrophe losses	$	3,071		$	6,555		$	(3,484)
Prior year reserve unfavorable development	Prior year reserve unfavorable development	44,561			1,947			42,614		Prior year reserve unfavorable development	(3,165)			(3,064)			(101)
Underlying loss and LAE (1)	Underlying loss and LAE (1)	$	35,227		$	63,819		$	(28,592)	Underlying loss and LAE (1)	$	19,167		$	29,027		$	(9,860)
% of Gross earned premiums	% of Gross earned premiums	11.7		%	18.1		%	(6.4) pts		% of Gross earned premiums	13.3		%	23.7		%	(10.4) pts
% of Net earned premiums	% of Net earned premiums	30.3		%	41.6		%	(11.3) pts		% of Net earned premiums	21.9		%	50.3		%	(28.4) 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 expense ratios are shown below.


		Three Months Ended September 30,									Three Months Ended March 31,
		2022			2021			Change			2023			2022			Change
Policy acquisition costs	Policy acquisition costs	$	38,944		$	46,925		$	(7,981)	Policy acquisition costs	$	26,927		$	52,152		$	(25,225)
Operating and underwriting	Operating and underwriting	9,615			15,429			(5,814)		Operating and underwriting	5,651			10,603			(4,952)
General and administrative	General and administrative	26,391			13,940			12,451		General and administrative	9,837			15,435			(5,598)
Total Operating Expenses	Total Operating Expenses	$	74,950		$	76,294		$	(1,344)	Total Operating Expenses	$	42,415		$	78,190		$	(35,775)
% of Gross earned premiums	% of Gross earned premiums	24.8		%	21.6		%	3.2 pts		% of Gross earned premiums	29.4		%	63.7		%	(34.3) pts
% of Net earned premiums	% of Net earned premiums	64.5		%	49.8		%	14.7 pts		% of Net earned premiums	48.6		%	135.4		%	(86.8) pts

Loss and LAE ~~increased~~decreased by ~~$14,459,000,~~$13,445,000, or ~~14.1%~~41.3%, to ~~$117,228,000~~$19,073,000 for the ~~third~~first quarter of ~~2022~~2023 from ~~$102,769,000~~$32,518,000 for the ~~third~~first quarter of ~~2021.~~2022. Loss and LAE expense as a percentage of net earned premiums ~~increased 33.8~~decreased 34.4 points to ~~100.9%~~21.9% for the ~~third~~first quarter of ~~2022,~~2023, compared to ~~67.1%~~56.3% for the ~~third~~first quarter of ~~2021.~~2022. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the ~~third~~first quarter of ~~2022~~2023 would have been ~~11.7%~~13.3%, a decrease of ~~6.4~~10.4 points from ~~18.1%~~23.7% during the ~~third~~first quarter of ~~2021.~~2022.

Policy acquisition costs decreased by ~~$7,981,000,~~$25,225,000, or ~~17.0%~~48.4%, to ~~$38,944,000~~$26,927,000 for the ~~third~~first quarter of 2023 from $52,152,000 for the first quarter of 2022, ~~from $46,925,000 for the third quarter of 2021,~~ primarily due to decreases in agent commissions and policy administration fees, ~~and premium taxes~~ of ~~$8,591,000, $1,256,000 and $420,000,~~$30,127,000, $2,836,000 respectively, which fluctuate in conjunction with the quarter-over-quarter decrease in personal lines gross written premium. ~~In addition,~~This was partially offset by a $7,537,000 increase in external management fees incurred related to our commercial lines gross written premium ~~decreased $1,256,000~~ during the ~~third~~first quarter of ~~2022,~~2023, driven by the termination of the profit share component of our external commercial management agreement.. This was partially offset by a decrease in ceding commission income of $4,653,000 related to changes in terms of our quota share reinsurance agreements.

Operating and underwriting expenses decreased by $5,814,000, or 37.7%, to $9,615,000 for the third quarter of 2022 from $15,429,000 for the third quarter of 2021, driven by a decrease in investments in technology of $4,505,000 and decreased underwriting expenses of $1,850,000 as a result of the decrease in personal lines premiums described above.increased written premium quarter-over-quarter.

5248

UNITED INSURANCE HOLDINGS CORP.

Operating and underwriting expenses decreased by $4,952,000, or 4.7%, to $5,651,000 for the first quarter of 2023 from $10,603,000 for the first quarter of 2022, driven by a decrease in investments in technology of $2,244,000 and decreased underwriting expenses of $2,179,000 as a result of the decrease in personal lines premiums shown in the table above.

General and administrative expenses ~~increased~~decreased by ~~$12,451,000,~~$5,598,000, or ~~89.3%~~36.3%, to ~~$26,391,000~~$9,837,000 for the ~~third~~first quarter of 2023 from $15,435,000 for the first quarter of 2022, ~~from $13,940,000 for the third quarter of 2021,~~ driven by the ~~impairment~~a decrease in salary related expenses of ~~goodwill attributable to our personal lines operating segment, totaling $13,569,000.~~$5,667,000, driven by decreased headcount quarter-over-quarter.

Personal Lines Operating Segment Results

Pretax earnings attributable to our personal lines operating segment for the three months ended ~~September 30, 2022 decreased $43,931,000,~~March 31, 2023 increased $9,419,000, or ~~169.9%~~198.6%, to a pre-tax ~~loss~~income of ~~$69,789,000~~$4,677,000 for the ~~third~~first quarter of ~~2022~~2023 from a pre-tax loss of ~~$25,858,000~~$4,742,000 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. Expenses decreased quarter-over-quarter, driven by decreased loss & LAE, policy acquisition costs, and operating expenses. These decreases were partially offset by an increase in general and administrative expenses quarter-over-quarter. The details of the change in these expenses are described below.

Revenue

Our gross written premiums attributable to our personal lines operating segment decreased ~~$79,773,000,~~$3,968,000, or ~~30.9%~~27.5%, to ~~$178,336,000~~$10,482,000 for the ~~third~~first quarter ended ~~September 30, 2022~~March 31, 2023 from ~~$258,109,000~~$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 ~~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 September 30,
2022 2021 Change
Direct Written and Assumed Premium by Region (1)
Florida $ 101,707 $ 120,821 $ (19,114)
Gulf 49,847 62,804 (12,957)
Northeast 16,627 49,982 (33,355)
Southeast 10,155 24,502 (14,347)
Total gross written premium by region $ 178,336 $ 258,109 $ (79,773)

~~(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.

Three Months Ended September 30,
New and Renewal Policies(1) by Region (2)
2022 2021 Change
Florida 34,492 53,920 (19,428)
Gulf 20,087 32,255 (12,168)
Northeast 8,761 34,050 (25,289)
Southeast 5,518 14,970 (9,452)
Total 68,858 135,195 (66,337)


($ 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"~~

In connection with the divestiture of our former subsidiary, UPC, our income statement was recast to present our results from continuing operations separately from the results of UPC. As a result, we have presented management fee income of $9,668,000 for the three months ended March 31, 2023, compared to $50,206,000 for the three months ended March 31, 2022. This decrease is ~~comprised~~attributable directly to the divestiture of ~~Louisiana and Texas; "Northeast" is comprised~~UPC, as management fee income was earned by our subsidiary, United Insurance Management for the servicing 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 asUPC policies. In 2023, UPC operated until receivership effective February 27, 2023, compared to normal operation for the ~~policies have transitioned to HCPCI.~~three months ended March 31, 2022. This income previously eliminated on a consolidated basis.

5349

UNITED INSURANCE HOLDINGS CORP.

Expenses

Expenses attributable to our personal lines operating segment for the three months ended ~~September 30, 2022~~March 31, 2023 decreased ~~$11,867,000,~~$56,700,000, or ~~8.2%~~74.6%, to ~~$131,978,000~~$19,315,000 from ~~$143,845,000~~$76,015,000 for the same period in ~~2021.~~2022. The decrease in expenses is attributable to a decrease in policy acquisition costs, as well as decreased loss &and LAE driven by decreased ~~current year catastrophe~~non-catastrophe losses, ~~as well as decreased policy acquisition costs~~operating expenses and ~~administrative costs, partially offset by increased~~ general and administrative ~~costs.~~expenses. The details of 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 September 30,									Three Months Ended March 31,
		2022			2021			Change			2023			2022			Change
Net loss and LAE	Net loss and LAE	$	82,999		$	94,613		$	(11,614)	Net loss and LAE	$	5,172		$	18,404		$	(13,232)
% of Gross earned premiums	% of Gross earned premiums	45.6		%	38.1		%	7.5 pts		% of Gross earned premiums	41.6		%	120.5		%	(78.9) pts
% of Net earned premiums	% of Net earned premiums	146.5		%	86.1		%	60.4 pts		% of Net earned premiums	59.7		%	149.6		%	(89.9) pts
Less:	Less:									Less:
Current year catastrophe losses	Current year catastrophe losses	$	10,205		$	35,265		$	(25,060)	Current year catastrophe losses	$	974		$	3,450		$	(2,476)
Prior year reserve (favorable) development	Prior year reserve (favorable) development	46,356			3,268			43,088		Prior year reserve (favorable) development	(395)			(1,261)			866
Underlying loss and LAE (1)	Underlying loss and LAE (1)	$	26,438		$	56,080		$	(29,642)	Underlying loss and LAE (1)	$	4,593		$	16,215		$	(11,622)
% of Gross earned premiums	% of Gross earned premiums	14.5		%	22.6		%	(8.1) pts		% of Gross earned premiums	36.9		%	106.2		%	(69.3) pts
% of Net earned premiums	% of Net earned premiums	46.7		%	51.0		%	(4.3) pts		% of Net earned premiums	52.9		%	131.8		%	(78.9) pts

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


		Three Months Ended September 30,									Three Months Ended March 31,
		2022			2021			Change			2023			2022			Change
Policy acquisition costs	Policy acquisition costs	$	16,514		$	23,541		$	(7,027)	Policy acquisition costs	$	1,761		$	35,474		$	(33,713)
Operating and underwriting	Operating and underwriting	8,788			13,777			(4,989)		Operating and underwriting	5,431			9,403			(3,972)
General and administrative	General and administrative	23,643			11,895			11,748		General and administrative	6,951			12,734			(5,783)
Total Operating Expenses	Total Operating Expenses	$	48,945		$	49,213		$	(268)	Total Operating Expenses	$	14,143		$	57,611		$	(43,468)
% of Gross earned premiums	% of Gross earned premiums	26.9		%	19.8		%	7.1 pts		% of Gross earned premiums	113.7		%	377.3		%	(263.6) pts
% of Net earned premiums	% of Net earned premiums	86.4		%	44.8		%	41.6 pts		% of Net earned premiums	163.2		%	468.3		%	(305.1) pts

Loss and LAE attributable to our personal lines operating segment decreased by ~~$11,614,000,~~$13,232,000, or ~~12.3%~~71.9%, to ~~$82,999,000~~$5,172,000 for the ~~third~~first quarter of ~~2022~~2023 from ~~$94,613,000~~$18,404,000 for the ~~third~~first quarter of ~~2021.~~2022. Loss and LAE expense as a percentage of net earned premiums ~~increased 60.4~~decreased 89.9 points to ~~146.5%~~59.7% for the ~~third~~first quarter of ~~2022,~~2023, compared to ~~86.1%~~149.6% for the ~~third~~first quarter of ~~2021.~~2022. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the ~~third~~first quarter of ~~2022~~2023 would have been ~~14.5%~~36.9%, a decrease of ~~8.1~~69.3 points from ~~22.6%~~106.2% during the ~~third~~first quarter of ~~2021.~~2022.

Policy acquisition costs attributable to our personal lines operating segment decreased by ~~$7,027,000,~~$33,713,000, or ~~29.9%~~95.0%, to ~~$16,514,000~~$1,761,000 for the ~~third~~first quarter of 2023 from $35,474,000 for the first quarter of 2022, ~~from $23,541,000 for the third quarter of 2021,~~ primarily due to a decrease in agent commissions ~~premium taxes,~~ and policy administration fees of ~~$9,450,000, $797,000 and $1,369,000,~~$27,763,000, $2,848,000, respectively, which fluctuate in conjunction with the quarter-over-quarter decrease in personal lines gross written premium. ~~This was partially offset by a $5,576,000 decrease in ceding commission income,~~In addition reinsurance commissions decreased $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 ~~$4,989,000,~~$3,972,000, or ~~36.2%~~42.2%, to ~~$8,788,000~~$5,431,000 for the ~~third~~first quarter of 2023 from $9,403,000 for the first quarter of 2022, ~~from $13,777,000 for the third quarter of 2021,~~ due to decreased investments in technology of ~~$3,736,000~~$2,041,000 in ~~2022~~2023 and decreased underwriting expenses of ~~$1,694,000~~$1,588,000 as the result of the decrease in premiums written described above.

General and administrative expenses attributable to our personal lines operating segment decreased by $5,783,000, or 45.4%, to $6,951,000 for the first quarter of 2023 from $12,734,000 for the first quarter of 2022, driven by a $5,640,000 decrease in salary related expenses as a result of lower headcount quarter-over-quarter.

UNITED INSURANCE HOLDINGS CORP.

General and administrative expenses attributable to our personal lines operating segment increased by $11,748,000, or 98.8%, to $23,643,000 for the third quarter of 2022 from $11,895,000 for the third quarter of 2021, driven by the impairment of goodwill attributable to the segment totaling $13,569,000.

Commercial Lines Operating Segment Results

Pretax earnings attributable to our commercial lines operating segment for the three months ended ~~September 30, 2022 decreased $8,434,000,~~March 31, 2023 increased $27,337,000, or ~~82.7%~~236.0%, to pre-tax income of ~~$1,762,000~~$38,919,000 for the ~~third~~first quarter of ~~2022~~2023 from pre-tax income of ~~$10,196,000~~$11,582,000 for the same period in ~~2021.~~2022. The change in earnings was primarily driven by increased ~~loss~~gross written premiums quarter-over-quarter, and ~~LAE incurred, driven by increased catastrophe losses primarily as the result of Hurricane Ian making landfall in 2022.~~decreased operating and underwriting expenses. This ~~increase~~ was partially offset by increased ~~gross written premiums quarter-over-quarter, the~~policy acquisition costs quarter-over-quarter. The details of ~~which~~these changes are described below.

Revenue

Our gross written premiums attributable to our commercial lines operating segment increased ~~$12,483,000,~~$48,677,000, or ~~19.4%~~38.0%, to ~~$76,867,000~~$176,641,000 for the ~~third~~first quarter ended ~~September 30, 2022~~March 31, 2023 from ~~$64,384,000~~$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 transitioning towards a specialty commercial lines 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 September 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	$	76,606	$	64,357	$	12,249	Florida	$	176,611	$	125,764	$	50,847
Texas	Texas	114		(47)		161		Texas	(9)		1,986		(1,995)
South Carolina	South Carolina	—		(38)		38		South Carolina	—		93		(93)
Total direct written premium by region		76,720		64,272		12,448
Total direct written premium by state								Total direct written premium by state	176,602		127,843		48,759
Assumed premium (2)	Assumed premium (2)	147		112		35		Assumed premium (2)	39		121		(82)
Total gross written premium by region		$	76,867	$	64,384	$	12,483
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 September 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	818	1,004	(186)	Florida	1,157	1,472	(315)
Texas	Texas	—	1	(1)	Texas	—	18	(18)

South Carolina					South Carolina	—	1	(1)
Total	Total	818	1,005	(187)	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.

5551

UNITED INSURANCE HOLDINGS CORP.

Expenses

Expenses attributable to our commercial lines operating segment for the three months ended ~~September 30, 2022~~March 31, 2023 increased ~~$25,157,000,~~$7,696,000, or ~~72.6%~~22.5%, to ~~$59,804,000~~$41,917,000 from ~~$34,647,000~~$34,221,000 for the same period in ~~2021.~~2022. The increase in expenses was primarily due to an increase in ~~loss and LAE~~policy acquisition costs of ~~$26,073,000~~$8,488,000 in the ~~third~~first quarter of ~~2022~~2023 compared to the ~~third~~first quarter of ~~2021.~~2022. This was partially offset by a ~~$954,000~~$1,012,000 decrease in policy acquisition ~~costs and a $705,000 decrease in operating and underwriting expenses in the third quarter of 2022 compared to the third 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 September 30,									Three Months Ended March 31,
		2022			2021			Change			2023			2022			Change
Net loss and LAE	Net loss and LAE	$	34,229		$	8,156		$	26,073	Net loss and LAE	$	13,901		$	14,114		$	(213)
% of Gross earned premiums	% of Gross earned premiums	28.6		%	7.8		%	20.8 pts		% of Gross earned premiums	10.5		%	13.1		%	(2.6) pts
% of Net earned premiums	% of Net earned premiums	57.5		%	18.8		%	38.7 pts		% of Net earned premiums	17.7		%	31.1		%	(13.4) pts
Less:	Less:									Less:
Current year catastrophe losses	Current year catastrophe losses	$	27,235		$	1,738		$	25,497	Current year catastrophe losses	$	2,097		$	3,105		$	(1,008)
Prior year reserve (favorable) development	Prior year reserve (favorable) development	(1,795)			(1,321)			(474)		Prior year reserve (favorable) development	(2,770)			(1,803)			(967)
Underlying loss and LAE (1)	Underlying loss and LAE (1)	$	8,789		$	7,739		$	1,050	Underlying loss and LAE (1)	$	14,574		$	12,812		$	1,762
% of Gross earned premiums	% of Gross earned premiums	7.3		%	7.4		%	(0.1) pts		% of Gross earned premiums	11.0		%	11.9		%	(0.9) pts
% of Net earned premiums	% of Net earned premiums	14.8		%	17.8		%	(3.0) 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 September 30,									Three Months Ended March 31,
		2022			2021			Change			2023			2022			Change
Policy acquisition costs	Policy acquisition costs	$	22,430		$	23,384		$	(954)	Policy acquisition costs	$	25,166		$	16,678		$	8,488
Operating and underwriting	Operating and underwriting	717			1,422			(705)		Operating and underwriting	96			1,109			(1,013)
General and administrative	General and administrative	2,428			1,685			743		General and administrative	2,754			2,320			434
Total Operating Expenses	Total Operating Expenses	$	25,575		$	26,491		$	(916)	Total Operating Expenses	$	28,016		$	20,107		$	7,909
% of Gross earned premiums	% of Gross earned premiums	21.3		%	25.2		%	(3.9) pts		% of Gross earned premiums	21.2		%	18.7		%	2.5 pts
% of Net earned premiums	% of Net earned premiums	43.0		%	61.0		%	(18.0) pts		% of Net earned premiums	35.6		%	44.2		%	(8.6) pts

Loss and LAE attributable to our commercial lines operating segment ~~increased~~decreased by ~~$26,073,000,~~$213,000, or ~~319.7%~~1.5%, to ~~$34,229,000~~$13,901,000 for the ~~third~~first quarter of ~~2022~~2023 from ~~$8,156,000~~$14,114,000 for the ~~third~~first quarter of ~~2021.~~2022. Loss and LAE expense as a percentage of net earned premiums ~~increased 38.7~~decreased 13.4 points to ~~57.5%~~17.7% for the ~~third~~first quarter of 2022, compared to ~~18.8%~~31.1% for the ~~third~~first quarter of 2021. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the ~~third~~first quarter of 2022 would have been ~~7.3%~~11.0%, a decrease of ~~0.1~~0.9 points from ~~7.4%~~11.9% during the ~~third~~first quarter of ~~2021.~~2022.

Policy acquisition costs attributable to our commercial lines operating segment ~~decreased~~increased by ~~$954,000,~~$8,488,000, or ~~4.1%~~50.9%, to ~~$22,430,000~~$25,166,000 for the ~~third~~first quarter of 2023 from $16,678,000 for the first quarter of 2022, ~~from $23,384,000 for the third quarter of 2021,~~ driven by ~~decreases~~increases in external management fees of ~~$1,256,000,~~$7,537,000, as a result of ~~the termination of the profit share component of our external commercial management agreement.~~increased gross written premiums quarter-over-quarter. In addition ceding commission income related to our quota share reinsurance agreements ~~increased $923,000,~~decreasing $3,506,000, driven by the ~~changes in terms made to these agreements.~~non-renewal of agreements at the end of 2022. These ~~decreases~~increases were partially offset by ~~increases to~~decreased agent commission expenses ~~and premium taxes~~ of ~~$858,000 and $377,000, respectively, both of which fluctuate in conjunction with the quarter-over-quarter increase in commercial lines gross written premium.~~$2,363,000.

Operating and underwriting expenses attributable to our commercial lines operating segment decreased by ~~$705,000,~~$1,013,000, or ~~49.6%~~91.3%, to ~~$717,000~~$96,000 for the ~~third~~first quarter of 2023 from $1,109,000 for the first quarter of 2022, ~~from $1,422,000 for the third quarter of 2021,~~ driven by a $591,000 decrease in underwriting expenses quarter-over-quarter, decreased allocations of expenses for investments in technology of ~~$768,000.~~

~~UNITED INSURANCE HOLDINGS CORP.~~

~~General~~$196,000, and administrative expenses attributable to our commercial lines operating segment increased by $743,000, or 44.1%, to $2,428,000 for the third quarter of 2022 from $1,685,000 for the third quarter of 2021, driven by a $667,000 increase in allocated salary related expenses for the third quarter of 2022 compared to the same period in 2021.

~~RESULTS OF OPERATIONS - COMPARISON OF THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2022 AND 2021~~

Net losses attributable to UIHC for the nine months ended September 30, 2022 increased $117,482,000, or 211.3%, to a net loss of $173,085,000 from $55,603,000 for the same period in 2021. The change in earnings was primarily due to a decrease in total revenue as a result of the decline in gross written premiums year-over-year as described below. This decrease in revenues was partially offset by lower expenses for the quarter. Loss and LAE incurred decreased from reduced geographic exposure to current year catastrophe and non-catastrophe losses during 2022. Policy acquisition costs decreased year-over-year, as described below. Our provision for income taxes increased year-over-year due to the recognition of a valuation allowance against our deferred tax assets beginning in the second quarter of 2022.

~~Revenue~~

Our gross written premiums decreased $165,731,000, or 15.6%, to $894,824,000 for the nine months ended September 30, 2022 from $1,060,555,000 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) Nine Months Ended September 30,
2022 2021 Change
Direct Written and Assumed Premium by Region (1)
Florida $ 682,991 $ 662,491 $ 20,500
Gulf 148,306 183,030 (34,724)
Southeast 42,040 76,354 (34,314)
Northeast 21,064 138,476 (117,412)
Total direct written premium by region 894,401 1,060,351 (165,950)
Assumed premium (2)
423 204 219
Total gross written premium by region $ 894,824 $ 1,060,555 $ (165,731)
Gross Written Premium by Line of Business
Personal property (3)
$ 508,925 $ 732,149 $ (223,224)
Commercial property 385,899 328,406 57,493
Total gross written premium by line of business $ 894,824 $ 1,060,555 $ (165,731)

~~(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.~~

Nine Months Ended September 30,
New and Renewal Policies (1) By Region (2)
2022 2021 Change
Florida 116,159 168,319 (52,160)
Gulf 61,014 92,800 (31,786)
Northeast 29,704 97,149 (67,445)
Southeast 23,323 50,363 (27,040)
Total 230,200 408,631 (178,431)

~~(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 nine months ended September 30, 2022 decreased $66,209,000, or 11.9%, to $491,555,000 from $557,764,000 for the same period in 2021. The decrease in expenses was primarily due to a $37,944,000 decrease in our loss and LAE and a $35,125,000 decrease in our policy acquisition costs. Operating expenses also decreased $7,251,000 year-over-year. These decreases were partially offset by a $13,956,000 increase in our general and administrative expenses year-over-year.

Nine Months Ended September 30,
2022 2021 Change
Net loss and LAE $ 298,670 $ 336,614 $ (37,944)
% of Gross earned premiums 32.2 % 31.6 % 0.6 pts
% of Net earned premiums 90.9 % 75.7 % 15.2 pts
Less:
Current year catastrophe losses $ 86,609 $ 101,225 $ (14,616)
Prior year reserve (favorable) development 53,760 31,344 22,416
Underlying loss and LAE (1)
$ 158,301 $ 204,045 $ (45,744)
% of Gross earned premiums 17.1 % 19.1 % (2.0) pts
% of Net earned premiums 48.1 % 45.9 % 2.2 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.~~
Nine Months Ended September 30,
2022 2021 Change
Policy acquisition costs $ 93,948 $ 129,073 $ (35,125)
Operating and underwriting 34,882 42,133 (7,251)
General and administrative 56,890 42,934 13,956
Total operating expenses $ 185,720 $ 214,140 $ (28,420)
% of Gross earned premiums 20.0 % 20.1 % (0.1) pts
% of Net earned premiums 56.5 % 48.2 % 8.3 pts

Loss and LAE decreased $37,944,000, or 11.3%, to $298,670,000 for the nine months ended September 30, 2022 from $336,614,000 for the same period in 2021. Loss and LAE expense as a percentage of net earned premiums increased 15.2 points to 90.9% for the nine months ended September 30, 2022, compared to 75.7% for the same period in 2021. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the nine months ended September 30, 2022 was 17.1%, a decrease of 2.0 points from 19.1% during the nine months ended September 30, 2021.

~~UNITED INSURANCE HOLDINGS CORP.~~

Policy acquisition costs decreased $35,125,000, or 27.2%, to $93,948,000 for the nine months ended September 30, 2022 from $129,073,000 for the same period in 2021. The primary driver of the decrease was a decrease in the Company's agent commissions, premium taxes, and policy administration fees of $32,543,000, $3,920,000 and $2,952,000, respectively, which fluctuate in conjunction with the year-over-year decrease in personal lines gross written premium. This was partially offset by a $4,709,000 increase in external management fees incurred during 2022 as a result of an increased volume of commercial written premium and a decrease of $1,041,000 in ceding commission income as a result of changes made to the terms of our quota share agreements.

Operating expenses decreased $7,251,000, or 17.2%, to $34,882,000 for the nine months ended September 30, 2022 from $42,133,000 for the same period in 2021, primarily due to decreased investments in technology of $5,971,000 and decreased underwriting expenses of $1,422,000 driven by the decrease in personal lines premiums described above.

General and administrative expenses increased $13,956,000, or 32.5%, to $56,890,000 for the nine months ended September 30, 2022 from $42,934,000 for the same period in 2021 primarily due to the impairment of goodwill attributablerelated to our ~~personal lines operating segment totaling $13,569,000.~~

~~Personal Lines Operating Segment Results~~

~~Pretax earnings attributable to our personal lines operating segment for the nine months ended September 30, 2022 decreased $80,510,000, or 86.8%, to a pre-tax loss~~credit allowance reserve of $173,270,000 from a pre-tax loss of $92,760,000 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 as a result of decreased gross written premiums, the details of which are described below. The decrease in revenues was partially offset by lower loss and LAE incurred. Policy acquisition and operating 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 $223,223,000 or 30.5%, to $508,926,000 for the nine months ended September 30, 2022 from $732,149,000 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) Nine Months Ended September 30,
2022 2021 Change
Direct Written and Assumed Premium by Region (1)
Florida $ 301,434 $ 343,007 $ (41,573)
Gulf 144,403 175,614 (31,211)
Southeast 42,025 75,052 (33,027)
Northeast 21,064 138,476 (117,412)
Total gross written premium by region $ 508,926 $ 732,149 $ (223,223)

~~UNITED INSURANCE HOLDINGS CORP.~~

Nine Months Ended September 30,
New and Renewal Policies(1) by Region (2)
2022 2021 Change
Florida 111,913 163,655 (51,742)
Gulf 60,982 92,703 (31,721)
Northeast 29,704 97,149 (67,445)
Southeast 23,321 50,337 (27,016)
Total 225,920 403,844 (177,924)

~~(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 nine months ended September 30, 2022 decreased $83,326,000, or 18.9%, to $357,289,000 from $440,615,000 for the same period in 2021. The decrease in expenses was primarily due to a decrease in loss and LAE expenses of $54,151,000 during 2022 compared to the same period in 2021. In addition, policy acquisition costs decreased by $34,923,000 and our operating costs decreased $6,599,000 during 2022 compared to the same period in 2021. These decreases were partially offset by an increase in administrative costs of $12,328,000 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.~~

Nine Months Ended September 30,
2022 2021 Change
Net loss and LAE $ 242,133 $ 296,284 $ (54,151)
% of Gross earned premiums 41.3 % 38.9 % 2.4 pts
% of Net earned premiums 140.7 % 93.6 % 47.1 pts
Less:
Current year catastrophe losses $ 58,856 $ 92,690 $ (33,834)
Prior year reserve (favorable) development 59,244 33,493 25,751
Underlying loss and LAE (1)
$ 124,033 $ 170,101 $ (46,068)
% of Gross earned premiums 21.2 % 22.3 % (1.1) pts
% of Net earned premiums 72.1 % 53.7 % 18.4 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.~~
Nine Months Ended September 30,
2022 2021 Change
Policy acquisition costs $ 34,912 $ 69,835 $ (34,923)
Operating and underwriting 31,641 38,240 (6,599)
General and administrative 48,518 36,190 12,328
Total Operating Expenses $ 115,071 $ 144,265 $ (29,194)
% of Gross earned premiums 19.6 % 18.9 % 0.7 pts
% of Net earned premiums 66.9 % 45.6 % 21.3 pts

Loss and LAE attributable to our personal lines operating segment decreased by $54,151,000, or 18.3%, to $242,133,000 for the nine months ended September 30, 2022 from $296,284,000 for the same period in 2021. Loss and LAE expense as a percentage of net earned premiums increased 47.1 points to 140.7% for the nine months ended September 30, 2022, compared to 93.6% for the same period in 2021. Excluding catastrophe losses and reserve development, our gross underlying loss and

~~UNITED INSURANCE HOLDINGS CORP.~~

~~LAE ratio for the nine months ended September 30, 2022 would have been 21.2%, a decrease of 1.1 points from 22.3% for the same period in 2021.~~

Policy acquisition costs attributable to our personal lines operating segment decreased by $34,923,000, or 50.0%, to $34,912,000 for the nine months ended September 30, 2022 from $69,835,000 for the same period in 2021, primarily due to a decrease in agent commissions, premium taxes, and policy administration fees of $32,123,000, $5,673,000 and $2,926,000, respectively, which fluctuate in conjunction with the year-over-year decrease in personal lines gross written premium. This was partially offset by ceding commission income decreasing by $7,258,000, driven by changes in the terms of our quota share agreements.

Operating and underwriting expenses attributable to our personal lines operating segment decreased by $6,599,000, or 17.3%, to $31,641,000 for the nine months ended September 30, 2022 from $38,240,000 for the same period in 2021, due to decreased investments in technology of $5,232,000 and decreased underwriting expenses as a result of decreased personal lines written premiums described above.

General and administrative expenses attributable to our personal lines operating segment increased $12,328,000, or 34.1%, to $48,518,000 for the nine months ended September 30, 2022 from $36,190,000 for the same period in 2021, driven by the impairment of goodwill attributable to the segment totaling $13,569,000.

~~Commercial Lines Operating Segment Results~~

Pretax earnings attributable to our commercial lines operating segment for the nine months ended September 30, 2022 increased $8,428,000, or 35.6%, to pre-tax income of $32,130,000 from pre-tax income of $23,702,000 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. This increase was partially offset by increased loss and LAE incurred during 2022 compared to the same period in 2021, driven by increased catastrophe losses year-over-year.

~~Revenue~~

Our gross written premiums attributable to our commercial lines operating segment increased $57,492,000, or 17.5%, to $385,898,000 for the nine months ended September 30, 2022 from $328,406,000 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 transitioning to a specialty commercial lines underwriter. 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) Nine Months Ended September 30,
2022 2021 Change
Direct Written and Assumed Premium by State (1)
Florida $ 381,557 $ 319,484 $ 62,073
Texas 3,903 7,416 (3,513)
South Carolina 15 1,302 (1,287)
Total direct written premium by region 385,475 328,202 57,273
Assumed premium (2)
423 204 219
Total gross written premium by region $ 385,898 $ 328,406 $ 57,492

~~(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.~~

Nine Months Ended September 30,
New and Renewal Policies(1) by State (2)
2022 2021 Change
Florida 4,246 4,664 (418)
Texas 32 97 (65)
South Carolina 2 26 (24)
Total 4,280 4,787 (507)

~~(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 nine months ended September 30, 2022 increased $17,177,000, or 15.8%, to $125,695,000 from $108,518,000 for the same period in 2021. The increase in expenses was primarily due to an increase in loss and LAE of $16,207,000 during 2022 compared to the same period in 2021. In addition, administrative expenses increased $1,842,000 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.~~

Nine Months Ended September 30,
2022 2021 Change
Net loss and LAE $ 56,537 $ 40,330 $ 16,207
% of Gross earned premiums 16.6 % 13.2 % 3.4 pts
% of Net earned premiums 36.1 % 31.5 % 4.6 pts
Less:
Current year catastrophe losses $ 27,753 $ 8,535 $ 19,218
Prior year reserve (favorable) development (5,484) (2,149) (3,335)
Underlying loss and LAE (1)
$ 34,268 $ 33,944 $ 324
% of Gross earned premiums 10.1 % 11.1 % (1.0) pts
% of Net earned premiums 21.9 % 26.5 % (4.6) pts

~~The calculations of our commercial lines operating segment expense ratios are shown below.~~
Nine Months Ended September 30,
2022 2021 Change
Policy acquisition costs $ 59,036 $ 59,238 $ (202)
Operating and underwriting 2,953 3,623 (670)
General and administrative 7,169 5,327 1,842
Total Operating Expenses $ 69,158 $ 68,188 $ 970
% of Gross earned premiums 20.3 % 22.4 % (2.1) pts
% of Net earned premiums 44.2 % 53.2 % (9.0) pts

Loss and LAE attributable to our commercial lines operating segment increased by $16,207,000, or 40.2%, to $56,537,000 for the nine months ended September 30, 2022 from $40,330,000 for the same period in 2021. Loss and LAE expense as a percentage of net earned premiums increased 4.6 points to 36.1% for the nine months ended September 30, 2022 compared to 31.5% for the same period in 2021. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the nine months ended September 30, 2022 would have been 10.1%, a decrease of 1.0 points from 11.1% during the same period in 2021.

Policy acquisition costs attributable to our commercial lines operating segment remained relatively flat, decreasing by $202,000, or 0.3%, to $59,036,000 for the nine months ended September 30, 2022 from $59,238,000 for the same period in 2021.

Operating and underwriting expenses attributable to our commercial lines operating segment decreased by $670,000, or 18.5%, to $2,953,000 for the nine months ended September 30, 2022 from $3,623,000 for the same period in 2021, driven by a $735,000 decrease in allocations of expenses for investments in technology.$208,000.

General and administrative expenses attributable to our commercial lines operating segment increased by ~~$1,842,000,~~$434,000, or ~~34.6%~~18.7%, to ~~$7,169,000~~$2,754,000 for the ~~nine months ended 2022~~first quarter of 2023 from ~~$5,327,000~~$2,320,000 for the ~~same period in 2021,~~first quarter of 2022, driven by ~~an $863,000~~a $433,000 increase in allocated external ~~fees related to legal, audit, actuarial and tax~~professional services ~~provided during~~costs for the ~~year. In addition, we incurred $851,000 in additional allocated salary expenses in 2022~~first quarter of 2023 compared to the same period in ~~2021.~~

2022.

6252

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 1314 in our Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

During the three months ended ~~September 30, 2022,~~March 31, 2023, the Company made no capital contributions ~~totaling $16,000,000~~ to ~~our insurance subsidiary UPC.~~its subsidiaries. During the ~~nine~~three months ended ~~September 30,~~March 31, 2022, the Company made capital contributions of ~~$55,000,000 and $11,200,000~~$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 three months ended September 30, 2021, the Company made capital contributions of $7,000,000 and $2,000,000 to our insurance subsidiaries, UPC and FSIC, respectively. During the nine months ended September 30, 2021, IIC paid a dividend of $3,500,000 to the Company. In addition, the Company made capital contributions of $5,500,000, $7,000,000 and $10,000,000 to our insurance subsidiaries, FSIC, UPC 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 nine month periods ended September 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.

~~Holding Company Liquidity~~Management’s strategic plans include the following:

~~As of September 30, 2022, we have outstanding debt obligations related~~•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 ~~notes payable of $150,000,000. This is exclusive of interest costs, which we estimate will total $51,563,000 over~~rating agencies for the ~~life~~affirmation of the ~~debt, based on~~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 ~~fixed interest rate~~form of ~~these notes. Our short-term obligation related~~surplus note contributions, to ~~these notes includes only interest payments, totaling $9,375,000, as the notes do not mature until December 15, 2027. For more information regarding this outstanding note, please see~~ ~~Note 10~~.strengthen its statutory risk-based capital if necessary.

AtIf the ~~holding company~~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 ~~several options~~able to ~~satisfy this obligation over~~secure debt or equity financing, it may be unavailable in the ~~next twelve months, including but not limited to, ordinary dividends paid to~~amounts or time when we require. Furthermore, such financing would likely take the ~~holding company by its subsidiaries and cash and cash equivalents~~form of ~~$1,099,000. The shared services companies continue to receive funds from our insurance subsidiaries for management and claims adjusting services, all~~bank loans, surplus notes, private placement or public offering of ~~which can be drawn on by the holding company for use in satisfying~~ debt obligations. Our shared service companies cash and cash equivalent holdings total $15,377,000 as of September 30, 2022. In November ACIC declared a dividend payable to the holding company of $26,000,000. This dividend will then be contributed to UPC. Finally, we have fixed maturity andor equity securities or some combination of ~~$2,552,000, which can be liquidated,~~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 ~~necessary. We anticipate these sources will provide the holding company~~such obligations were not repaid in accordance with ~~the liquidity needed to satisfy its obligations and do not anticipate a need to liquidate securities at this time.~~their terms.

~~Insurance Subsidiaries Liquidity~~

As a result of claim activity from current and prior years, we have an obligation related to the unpaid policyholder losses and unpaid loss adjustment expenses associated with the settling of these claims. As of September 30, 2022, our total obligation related to these payments was $1,679,567,000, of which we estimate $898,315,000 to be short-term in nature (due in less than

6353

UNITED INSURANCE HOLDINGS CORP.

twelve months), based upon our cumulative claims paid over the last 21 years. While we believe that historical performance of loss payment patterns is a reasonable source for projecting future claim payments, there is inherent uncertainty in this estimated projected settlement, and as a result these estimates will differ, perhaps significantly, from actual future payments.

In addition to our unpaid loss and loss adjustment expenses, as of September 30, 2022, we have outstanding debt obligations related to our notes payable totaling $4,413,000. This is exclusive of interest costs, which we estimate will total $275,000 over the life of the debt, based on the current fixed and variable interest rates of these notes. Our short-term obligation related to these notes payable total $1,176,000 in principal payments and $124,000 in estimated interest payments. For more information regarding this outstanding note, please see ~~Note~~ 10.

In connection with entering into contracts with our outside vendors, we have minimum obligations due to our vendors over the life of the contracts. Our main vendor obligations are related to underwriting tools, claims and policy administration systems, and software used by our information technology department in their daily operations. Our total obligation related to these three categories of obligations are $1,427,000, $3,576,000, and $5,313,000, respectively. Of these obligations, $762,000, $2,808,000, and $1,250,000, respectively are short-term in nature.

Our subsidiaries have several options to satisfy their obligations over the next twelve months, including but not limited to, an estimated $847,616,000 in reinsurance recoveries over the next twelve months and $223,247,000 in cash, cash equivalents and restricted cash. In November, 2022, the holding company contributed capital of $26,000,000 to UPC. We also anticipate maturities of fixed maturity securities of $53,973,000 within the next twelve months. Finally, we have $528,746,000 in fixed maturity and equity securities which can be liquidated, if necessary. While we do not anticipate the need to liquidate at this time, this liquidation would result in realized losses of approximately $66,912,000 on our fixed maturities. Absent additional capital contributions, our insurance subsidiary UPC, is projected to have insufficient liquidity. However, we anticipate these sources will provide our insurance subsidiaries ACIC and IIC with the liquidity needed to satisfy their obligations.

Cash Flows for the ~~nine~~three months ended ~~September 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 ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we experienced cash outflows of ~~$97,932,000~~$104,164,000 compared to cash outflows of ~~$109,544,000~~$20,893,000 during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Net income for the period also increased $63,830,000, exclusive of the impact of the disposition of UPC, driving these inflows. This ~~change can be attributed primarily to~~is offset by the ~~change~~deconsolidation of UPC in the first quarter of 2023. This resulted in changes in our unpaid loss and loss adjustment expenses, net of reinsurance recoverables on paid and unpaid losses, in 2022, ~~which increased by $155,626,000, driven by~~as we no longer hold the ~~landfall~~UPC portion of ~~Hurricane Ian in the third quarter of 2022 causing large unpaid and~~

~~UNITED INSURANCE HOLDINGS CORP.~~

~~recoverable balances at September 30, 2022. This was partially offset by a $116,197,000 increase in our net loss for the nine months ended 2022 compared to the same period in 2021.~~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 ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net ~~sales~~purchases of investments totaled ~~$99,702,000~~$195,082,000 compared to net sales of investments of ~~$41,842,000~~$70,134,000 during the ~~nine~~three months ended ~~September 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 ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, no cash was used in financing activities ~~totaled $25,071,000~~ compared to ~~$8,921,000~~$2,970,000 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The ~~increase~~decrease in outflow in ~~2022~~2023 can be attributed to no dividend payment being made in 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. Additionally, during the third~~first quarter of ~~2022~~2023. In addition, no repayments of borrowings were made in 2023 as we ~~repaid~~no longer hold the debt associated with our Truist note in full, resulting in a $3,004,000 increase in repayments for the year. These increases were partially offset by a decrease in dividend payments in 2022 of $5,l73,000 since no dividend was declared in the second or third quarter of 2022.former subsidiary, UPC.

UNITED INSURANCE HOLDINGS CORP.

OFF-BALANCE SHEET ARRANGEMENTS

At ~~September 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 ~~nine~~three months ended ~~September 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 our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

During the quarter ended ~~September 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

~~UNITED INSURANCE HOLDINGS CORP.~~

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.

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 ~~September 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. ~~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. 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 denies wrongdoing and 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 was granted October 12, 2022.

UNITED INSURANCE HOLDINGS CORP.

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.

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

During the ~~nine~~three months ended ~~September 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:

~~UNITED INSURANCE HOLDINGS CORP.~~


Exhibit						Description

10.1						Renewal Rights Agreement, dated as of February 1, 2023, by and among United Property and Casualty Insurance Company and Slide Insurance Company. (included as Exhibit 10.1 to the Form 8-K filed on February 6, 2023, and incorporated herein by reference.)

10.2						Asset Purchase and Services Agreement, dated as of February 1, 2023, by and among United Insurance Management, L.C. and Slide Insurance Company. (included as Exhibit 10.2 to the Form 8-K filed on February 6, 2023, and incorporated herein by reference.)

10.3						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 February 27, 2023. (included as Exhibit 10.1 to the Form 8-K filed on February 28, 2023, and incorporated herein by 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

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101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase

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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).

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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.

~~November 9, 2022~~May 19, 2023	By:	/s/ R. Daniel Peed
		R. Daniel Peed, Chief Executive Officer (principal executive officer and duly authorized officer)


~~November 9, 2022~~May 19, 2023	By:	/s/ B. Bradford Martz
		B. Bradford Martz, Chief Financial Officer and President (principal financial officer and principal accounting officer)

6857


	Three Months Ended September 30, 2021
	Commercial			Personal (1)			Adjustments		Consolidated
REVENUE:
Gross premiums written	$	64,384		$	258,109		$	—	$	322,493
Change in gross unearned premiums	40,607			(9,639)			—		30,968
Gross premiums earned	104,991			248,470			—		353,461
Ceded premiums earned	(61,583)			(138,607)			—		(200,190)
Net premiums earned	43,408			109,863			—		153,271
Net investment income	1,166			2,294			11		3,471
Net realized gains (losses)	(2)			5,539			—		5,537
Net unrealized losses on equity securities	271			(3,564)			—		(3,293)
Other revenue	—			3,754			—		3,754
Total revenues	44,843			117,886			11		162,740
EXPENSES:
Losses and loss adjustment expenses	8,156			94,613			—		102,769
Policy acquisition costs	23,384			23,541			—		46,925
Operating expenses	1,422			13,777			230		15,429
General and administrative expenses (2)	1,685			11,895			360		13,940
Interest expense	—			19			2,359		2,378
Total expenses	34,647			143,845			2,949		181,441
Income (loss) before other income	10,196			(25,959)			(2,938)		(18,701)
Other income (loss)	—			101			—		101
Income (loss) before income taxes	$	10,196		$	(25,858)		(2,938)		(18,600)
Benefit for income taxes							(3,482)		(3,482)
Net income (loss)							$	544	$	(15,118)
Less: Net loss attributable to noncontrolling interests							(796)		(796)
Net income (loss) attributable to UIHC							$	1,340	$	(14,322)

Loss ratio, net (3) (4)	18.8		%	86.1		%			67.1		%
Expense ratio (3) (5)	61.0		%	44.8		%			49.8		%
Combined ratio (3) (6)	79.8		%	130.9		%			116.9		%

Total segment assets	$	1,298,042		$	1,567,412		$	463,132	$	3,328,586


	Nine Months Ended September 30, 2022
	Commercial			Personal (1)			Adjustments		Consolidated
REVENUE:
Gross premiums written	$	385,898		$	508,926		$	—	$	894,824
Change in gross unearned premiums	(45,395)			77,431			—		32,036
Gross premiums earned	340,503			586,357			—		926,860
Ceded premiums earned	(184,094)			(414,317)			—		(598,411)
Net premiums earned	156,409			172,040			—		328,449
Net investment income	4,359			5,494			34		9,887
Net realized gains (losses)	(77)			(1,779)			—		(1,856)
Net unrealized losses on equity securities	(4,056)			(5,812)			(2)		(9,870)
Other revenue	1,178			14,156			3		15,337
Total revenues	157,813			184,099			35		341,947
EXPENSES:
Losses and loss adjustment expenses	56,537			242,133			—		298,670
Policy acquisition costs	59,036			34,912			—		93,948
Operating expenses	2,953			31,641			288		34,882
General and administrative expenses (2)	7,169			48,518			1,203		56,890
Interest expense	—			85			7,080		7,165
Total expenses	125,695			357,289			8,571		491,555
Income (loss) before other income	32,118			(173,190)			(8,536)		(149,608)
Other income (loss)	12			(80)			1,667		1,599
Income (loss) before income taxes	$	32,130		$	(173,270)		(6,869)		(148,009)
Benefit for income taxes							25,187		25,187
Net income (loss)							$	(32,056)	$	(173,196)
Less: Net loss attributable to noncontrolling interests							(111)		(111)
Net income (loss) attributable to UIHC							$	(31,945)	$	(173,085)

Loss ratio, net (3) (4)	36.1		%	140.7		%			90.9		%
Expense ratio (3) (5)	44.2		%	66.9		%			56.5		%
Combined ratio (3) (6)	80.3		%	207.6		%			147.4		%

Total segment assets	$	1,354,893		$	1,357,892		$	229,342	$	2,942,127


	Three Months Ended September 30,
New and Renewal Policies(1) by Region (2)	2022	2021	Change
Florida	35,310	54,924	(19,614)
Gulf	20,087	32,256	(12,169)
Northeast	8,761	34,050	(25,289)
Southeast	5,518	14,970	(9,452)
Total	69,676	136,200	(66,524)


	Nine Months Ended September 30,
New and Renewal Policies (1) By Region (2)	2022	2021	Change
Florida	116,159	168,319	(52,160)
Gulf	61,014	92,800	(31,786)
Northeast	29,704	97,149	(67,445)
Southeast	23,323	50,363	(27,040)
Total	230,200	408,631	(178,431)