FOR IMMEDIATE RELEASE
UNITED INSURANCE HOLDINGS CORP. REPORTS 2010 THIRD QUARTER AND NINE-MONTH FINANCIAL RESULTS
2010 Third Quarter and Year-to-Date Highlights
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| • | The Compan y had 80,400 policies-in-force at September 30, 2010, reflecting a 17% decrease since September 30, 2009, and a 1% decrease since June 30, 2010 |
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| • | Gross premiums written increased 8% since last year's third quarter to $36.0 million |
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| • | Cash and investment holdings decreased to $145.1 million at September 30, 2010, compared to $160.1 million at December 31, 2009 |
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| • | Book value per share decreased 4% to $4.36 at September 30, 2010, compared to $4.55 at December 31, 2009 |
St. Petersburg, FL - November 10, 2010: United Insurance Holdings Corp. (OTCBB: UIHC; UIHCW; UIHCU) (United or the Company), a property and casualty insurance holding company, today reported its financial results for the third quarter and for the nine months ended September 30, 2010.
For the third quarter, United reported net loss of $316,000, or $0.03 per diluted share, compared to a net loss of $734,000, or $0.07 per diluted share, during the same period last year. For the nine months ended September 30, 2010, United reported a net loss of $3.8 million, or $0.36 per diluted share, compared to generating net income of $5.2 million, or $0.50 per diluted share, for the same period last year.
Following significant increases in reinsurance costs,the Company's subsidiary, United Property & Casualty Insurance Company (UPC), implemented rate increases in September 2009 and in March 2010, yet the rate at which its policyholders renew their policies has remained at or above historical levels. On July 1, 2010, UPC assumed a $5.3 million book of business in South Carolina from Sunshine State Insurance Company and began writing new business through approximately 80 agents throughout the state.
"Though the sharp increase in reinsurance costs affected our short-term profitability, we believe that our rate increases will allow us to remain on solid financial footing and adapt to a changing insurance market," said Don Cronin, United's CEO, "and we have continued to redistribute and reduce our risk exposure by writing new policies in less reinsurance sensitive territories of Florida and by expanding into South Carolina. We have limited growth in total insured value through September 30 in order to reduce reinsurance costs.”
The Company will continue its expansion program. United is in varying stages of discussion with state regulatory authorities regarding its desire to write property insurance in Massachusetts, Connecticut, Rhode Island, New York, North Carolina and New Jersey. The Company believes that its products particularly fit the needs of homeowners in these regions of the United States.
Mr. Cronin concluded, “We anticipated a very active hurricane season and purchased reinsurance limiting our retention for multiple loss events. We have built a foundation for long-term growth and profitability for our stockholders and customers. We have already taken appropriate steps to address rate adequacy and risk distribution, so we just need the patience to allow those steps to bear fruit." Rate increases and risk re-distributions take more than a year to filter through a book of business.
2010 Third Quarter Financial Review
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| • | Gross written premiums increased to $36.0 million from $33.4 million in the third q uarter of 2009 primarily due to the assumption of policies from Sunshine State Insurance Company. |
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| • | Net premiums earned decreased to $17.9 million from $18.4 million in the third quarter of 2009 primarily due to a $1.6 million reduction in gross premiums earned, offset by a $1.1 million reduction in ceded premiums earned. Gross premiums earned decreased because the Company terminated its Garage program, and as a result of Company efforts to control risk exposures. Ceded premiums earned decreased because the Company recognized $1.1 million of a $3.4 million reduction in its reinsurance costs in the quarter. The remaining $2.3 million reduction in reinsurance costs will be recognized over the remaining contract period which ends in May 2011. |
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| • | Losses and LAE decreased to $11.5 million from $12.2 million in the third quarter of 2009 primarily due to a decrease in the frequency and severity of water-pipe claims. Additionally, the termination of the Garage program and an improved geographic dispersion of the Company's policies to non-coastal areas of Florida contributed to the decrease. |
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| • | Policy acquisition costs decreased to $5.4 million from $6.1 million in the third quarter of 2009 primarily due to the reduction in earned premiums. |
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| • | Operating expenses increased to $3.5 million from $3.1 million in the third quarter of 2009 primarily due to increases in personnel costs, professional services, and premium taxes. |
2010 Nine-Month Financial Review
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| •&nbs p; | Gross written premiums decreased to $127.3 million from $128.5 million in the prior year period due to a planned reduction in risk exposures in an effort to reduce reinsurance costs. |
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| • | Net premiums earned decreased to $48.9 million from $61.9 million in the prior year primarily due to the increase in reinsurance costs for the June 2009 - May 2010 reinsurance contract period compared to the June 2008 - May 2009 reinsurance contract period. |
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| • | The Company incurred an other-than-temporary impairment charge of $1.9 million in the first quarter of 2009 related to certain equity investments. The Company has not incurred any additional impairment charges since the first quarter of 2009. |
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| • | Losses and LAE increased to $32.5 million from $30.9 million in the prior year primarily due to increases in water-related claims during the first half of 2010. Fire claims also increased, though the Company believes the increase is non-recurring. The increases in water-related and fire claims were partially offset by decreases in losses and LAE resulting from a reduction of in-force policies and the termination of the Garage program, as well as from the redistribution of our polic ies to non-coastal areas of Florida. |
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| • | Policy acquisition costs decreased to $16.4 million from $16.6 million in the prior year primarily due to the reduction in earned premiums. |
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| • | Operating expenses increased to $11.2 million from $11.0 million in the prior year due to a $380,000 increase in operating and underwriting expenses offset by a $140,000 decrease in personnel costs. |
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| • | The Company recognized $726,000 of Other Expense in the third quarter, while it recognized none in the prior year. United recorded a loss on the early extinguishment of its $18.3 million, 11% Merger Notes in May, causing the increase. |
Balance Sheet Highlights
United's cash and investment holdings totaled $145.1 million at September 30, 2010, compared to $160.1 million at December 31, 2009. United's cash and investments decreased because the Company retired its $4.3 million note with CB&T in February and retired its $18.3 million, 11% Merger Notes in May. United's cash and investment holdings consist primarily of investments in high-quality money market instruments, U.S. Government and agency securities and h igh-quality corporate debt. Fixed maturities represented approximately 96% of United's total investments at September 30, 2010, and December 31, 2009, respectively.
Conference Call
The Company will hold its quarterly conference call to disc uss these results on Thursday, November 11, 2010, at 10:00 a.m. Eastern Time.
The dial-in numbers are:
(866) 861-6730 (US)
(706) 679-0882 (International)
A recorded replay of the call will be available until 11:00 p.m. Eastern Time on November 13, 2010. Listeners may dial 800-642-1687 (Domestic) or 706-645-9291 (International) and use the code 16034325 for the replay.
A live webcast of the call can be accessed at www.upcic.com in the “Events & Presentations” section. If you are unable to participate in the live call, the webcast version of the conference call will be available at the same link following the call. Listeners interested in participating in the Q&A session should go to the website at least 15 minutes early to register, dow nload and install any necessary audio software.
About United Insurance Holdings Corp.
Founded in 1999, United Property & Casualty Insurance Company, a subsidiary of United Insurance Holdings Corp., writes and services homeowners insurance in Florida and South Carolina. From its headquarters in St. Petersburg, United's team of dedicated employees manages a completely integrated insurance company, including sales, underwriting, customer service and claims. The Company distributes its homeowners, dwelling fire and flood products through many agency groups and conducts business through four wholly-owned subsidiaries. Homeowners insurance constitutes the majority of United's premiums and policies.
Forward-Looking Statements
Statements in this press release that are not historical facts are forward-looking statements that are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “or “continue” or the other negative variations thereof or comparable terminology are intended to identify forward-looking statements. The forward-looking statements in this press release include statements regarding: the impact of the additional rate increases, the impact of reinsurance costs on our operating results, the expansion into South Carolina and other stat es. The risks and uncertainties that could cause our actual results to differ from those expressed or implied herein include, without limitation, the success of the Company's marketing initiatives, inflation and other changes in economic conditions (including changes in interest rates and financial markets); the impact of new Federal and State regulations that affect the property and casualty insurance market; the costs of reinsurance and the collectibility of reinsurance, assessments charged by various governmental agencies; pricing competition and other initiatives by competitors; our ability to obtain regulatory approval for requested rate changes, and the timing thereof; legislative and regulatory developments; the outcome of litigation pending against us, including the terms of any settlements; risks related to the nature of our business; dependence on investment income and the composition of our investment portfolio; the adequacy of our liability for losses and loss adjustment expense; insurance agents ; claims experience; ratings by industry services; catastrophe losses; reliance on key personnel; weather conditions (including the severity and frequency of storms, hurricanes, tornadoes and hail); changes in loss trends; acts of war and terrorist activities; court decisions and trends in litigation, and health care; and other matters described from time to time by us in our filings with the Securities and Exchange Commission, including, but not limited to, the Company's Annual Report on Form 10-K for the year ended December 31, 2009. In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for a major contingency. Reported results may therefore, appear to be volatile in certain accounting periods. The Company undertakes no obligations to update, change or revise any forwar d-looking statement, whether as a result of new information, additional or subsequent developments or otherwise.
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| CONTACT: | | OR | | INVESTOR RELATIONS: |
| United Insurance Holdings Corp. | | | | The Equity Group |
| Joe Peiso | | | | Adam Prior |
| Chief Financial Officer | | | | Vice President |
| (727) 895-7737 / jpeiso@upcic.com | | | | (212) 836-9606 / aprior@equityny.com |
| | | | | |
| John Rohloff | | | | |
| SEC Reporting Manager | | | | |
| (727) 895-7737 / jrohloff@upcic.com | | | | |
Condensed Consolidated Statements of Income
In thousands, except share and per share amounts
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| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | | 2010 | | 2009 | | 2010 | | 2009 |
| REVENUE: | | | | | | | | |
| Gross premiums written | | $ | 36,017 | | | $ | 33,350 | | | $ | 127,259 | | | $ | 128,528 | |
| Decrease (increase) in gross unearned premiums | | 3,439 | | | 7,671 | | | (11,472 | ) | | (11,810 | ) |
| Gross premiums earned | | 39,456 | | | 41,021 | | | 115,787 | | | 116,718 | |
| Ceded premiums earned | | (21,591 | ) | | (22,599 | ) | | (66,929 | ) | | (54,859 | ) |
| Net premiums earned | | 17,865 | | | 18,422 | | | 48,858 | | | 61,859 | |
| Net investment income, including net realized gains | | 1,243 | | | 1,108 | | | 3,287 | | | 2,618 | |
| Other revenue | | 891 | | | 1,185 | | | 4,171 | | | 4,542 | |
| Total revenue | | 19,999 | | | 20,715 | | | 56,316 | | | 69,019 | |
| EXPENSES: | | | | | | | | |
| Losses and loss adjustment expenses | | 11,451 | | | 12,193 | | | 32,466 | | | 30,932 | |
| Policy acquisition costs | | 5,405 | | | 6,063 | | | 16,384 | | | 16,565 | |
| Operating expenses | | 3,459 | | | 3,063 | | | 11,200 | | | 10,960 | |
| Interest expense | | 155 | | | 823 | | | 1,637 | | | 2,360 | |
| Total expenses | | 20,470 | | | 22,142 | | | 61,687 | | | 60,817 | |
| Income (loss) before other expenses | | (471 | ) | | (1,427 | ) | | (5,371 | ) | | 8,202 | |
| Other expenses | | — | | | — | | | 726 | | | — | |
| Income (loss) before income taxes | | (471 | ) | | (1,427 | ) | | (6,097 | ) | | 8,202 | |
| Provision for (benefit from) income taxes | | (155 | ) | | (693 | ) | | (2,277 | ) | | 2,964 | |
| Net income (loss) | | $ | (316 | ) | | $ | (734 | ) | | $ | (3,820 | ) | | $ | 5,238 | |
| OTHER COMPREHENSIVE INCOME (LOSS): | | | | | | | | |
| Change in net unrealized gain on investments | | 2,362 | | | 2,949 | | | 4,158 | | | 4,220 | |
| Reclassification adjustment for net realized investment gains | | (206 | ) | | (75 | ) | | (234 | ) | | (780 | ) |
| Reclassification adjustment for recognized other-than-temporary impairments | | — | | | — | | | — | | | 1,878 | |
| Income tax expense related to items of other comprehensive income | | (831 | ) | &nb sp; | (1,109 | ) | | (1,513 | ) | | (2,029 | ) |
| Total comprehensive income (loss) | | $ | 1,009 | | | $ | 1,031 | | | $ | (1,409 | ) | | $ | 8,527 | |
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| Weighted average shares outstanding | | | | | | | | |
| Basic and Diluted | | 10,573,932 | | | 10,573,932 | | | 10,573,932 | | | 10,566,331 | |
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| Earnings (loss) per share | | | | | | | | |
| Basic and Diluted | | $ | (0.03 | ) | | $ | (0.07 | ) | | $ | (0.36 | ) | | $ | 0.50 | |
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| Dividends declared per share | | $ | — | | | $ | 0.05 | | | $ | 0.05 | | | $ | 0.10 | |
Condensed Consolidated Balance Sheets
In thousands, except share and par value amounts
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| | | September 30,
2010 | | December 31,
2009 |
| ASSETS | | (Unaudited) | | |
| Investments available for sale, at fair value: | | | | |
| Fixed maturities (amortized cost of $96,662 and $125,920, respectively) | | $ | 102,653 | | | $ | 128,020 | |
| Equity securities (adjusted cost of $4,038 and $5,000, respectively) | | 3,775 | | | 4,704 | |
| Other long-term investments | | 300 | | | 300 | |
| Total investments | | 106,728 | | | 133,024 | |
| Cash and cash equivalents | | 38,323 | | | 27,086 | |
| Accrued investment income | | 1,018 | | | 1,119 | |
| Premiums receivable, net of allowances for credit losses of $392 and $370, respectively | | 8,476 | | | 7,544 | |
| Reinsurance recoverable on paid and unpaid losses | | 31,679 | | | 25,477 | |
| Prepaid reinsurance premiums | | 59,490 | | | 40,285 | |
| Deferred policy acquisition costs | | 10,442 | | | 9,256 | |
| Other assets | | 6,267 | | | 3,967 | |
| Total Assets | | $ | 262,423 | | | $ | 247,758 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
| Liabilities: | | | | |
| Unpaid losses and loss adjustment expenses | | $ | 47,953 | | | $ | 44,112 | |
| Unearned premiums | | 85,303 | | | 73,831 | |
| Reinsurance payable | | 53,454 | | | 28,162 | |
| Other liabilities | | 11,051 | | | 12,154 | |
| Notes payable, net of unamortized debt discount of $0 and $885, respectively | | 18,529 | | | 41,428 | |
| Total Liabilities | | 216,290 | | | 199,687 | |
| Commitments and contingencies | | | | |
| Stockholders' Equity: | | | | |
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding for 2010 and 2009 | | — | | | — | |
| Common stock, $0 .0001 par value; 50,000,000 shares authorized; 10,573,932 issued and outstanding for 2010 and 2009 | | 1 | | | 1 | |
| Additional paid-in capital | | 75 | | | 75 | |
| Accumulated other comprehensive income | | 3,519 | | | 1,108 | |
| Retained earnings | | 42,538 | | | 46,887 | |
| Total Stockholders' Equity | | 46,133 | | | 48,071 | |
| Total Liabilities and Stockholders' Equity | | $ | 262,423 | | | $ | 247,758 | |
