Company Quick10K Filing
United Insurance Holdings
Price13.61 EPS-1
Shares43 P/E-18
MCap588 P/FCF3
Net Debt-183 EBIT-31
TEV405 TEV/EBIT-13
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-03-12
10-Q 2019-09-30 Filed 2019-11-05
10-Q 2019-06-30 Filed 2019-08-02
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-03-18
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-31 Filed 2018-05-09
10-K 2017-12-31 Filed 2018-03-28
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-15
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-04
10-K 2015-12-31 Filed 2016-03-02
10-Q 2015-09-30 Filed 2015-11-05
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-02-25
10-Q 2014-09-30 Filed 2014-11-04
10-Q 2014-06-30 Filed 2014-08-04
10-Q 2014-03-31 Filed 2014-05-01
10-K 2013-12-31 Filed 2014-02-24
10-Q 2013-09-30 Filed 2013-11-07
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-08
10-K 2012-12-31 Filed 2013-03-06
10-Q 2012-09-30 Filed 2012-11-14
10-Q 2012-06-30 Filed 2012-08-08
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-03-14
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-05-11
10-K 2010-12-31 Filed 2011-03-17
10-Q 2010-09-30 Filed 2010-11-10
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-12
10-K 2009-12-31 Filed 2010-03-25
8-K 2020-05-06 Earnings, Regulation FD, Exhibits
8-K 2020-05-06 Officers, Shareholder Vote, Exhibits
8-K 2020-04-23 Amend Bylaw, Exhibits
8-K 2020-02-20 Earnings, Regulation FD, Exhibits
8-K 2020-01-09 Other Events
8-K 2019-10-30 Earnings, Regulation FD, Exhibits
8-K 2019-07-31 Earnings, Regulation FD, Other Events, Exhibits
8-K 2019-06-04 Other Events
8-K 2019-05-07 Earnings, Regulation FD, Exhibits
8-K 2019-05-07 Shareholder Vote
8-K 2019-04-01 Amend Bylaw, Exhibits
8-K 2019-02-19 Earnings, Regulation FD, Exhibits
8-K 2019-01-04 Other Events
8-K 2018-11-01 Earnings, Exhibits
8-K 2018-10-10 Officers, Exhibits
8-K 2018-09-12 Officers
8-K 2018-08-01 Earnings, Exhibits
8-K 2018-06-01 Accountant, Exhibits
8-K 2018-05-10 Other Events
8-K 2018-05-08 Earnings, Exhibits
8-K 2018-05-08 Shareholder Vote
8-K 2018-04-20 Officers
8-K 2018-03-05 Regulation FD, Exhibits
8-K 2018-02-21 Earnings, Exhibits
8-K 2018-01-12 Enter Agreement, Leave Agreement, Shareholder Rights, Amend Bylaw, Exhibits
8-K 2018-01-05 Other Events

UIHC 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 exh31131mar20.htm
EX-31.2 exh31231mar20.htm
EX-32.1 exh32131mar20.htm
EX-32.2 exh32231mar20.htm

United Insurance Holdings Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
2.82.21.71.10.60.02012201420172020
Assets, Equity
0.30.20.10.1-0.0-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.10.0-0.0-0.12012201420172020
Ops, Inv, Fin

10-Q 1 a10-qdocument31mar20.htm 10-Q Document
 
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 March 31, 2020
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
 
(Zip Code)

 
 
(Address of Principal Executive Offices)

 
 
 
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  R    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  R    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
þ
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 May 1, 2020, 42,983,371 shares of common stock, par value $0.0001 per share, were outstanding.
 


UNITED INSURANCE HOLDINGS CORP.



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

2

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. 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, the state in which we are most concentrated;
our ability to cultivate and maintain agent relationships, particularly our relationship with AmRisc, LLC (AmRisc);
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 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 increase or 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, variability and availability of reinsurance;
our ability to collect from our reinsurers 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 legal actions pending against us, including the terms of any settlements;
downgrades in our financial strength or stability ratings;
the impact of future sales of substantial amounts of our common stock by us or our significant stockholders on our stock price;
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, 2019.

We caution you not to place undue reliance 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.

3

UNITED INSURANCE HOLDINGS CORP.


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)


March 31,
2020

December 31, 2019
ASSETS



 
Investments, at fair value:

 

 
Fixed maturities, available-for-sale (amortized cost of $862,565 and $869,598, respectively)

$
873,786


$
884,861

Equity securities

111,915


116,610

Other investments (amortized cost of $9,336 and $8,067, respectively)

9,565


10,252

Total investments

$
995,266


$
1,011,723

  Cash and cash equivalents

218,355


215,469

Restricted cash
 
64,058

 
71,588

Total cash, cash equivalents and restricted cash
 
$
282,413

 
$
287,057

Accrued investment income

5,478


5,901

Property and equipment, net
 
34,955

 
32,728

Premiums receivable, net (credit allowance of $126 and $165, respectively)

90,547


86,568

Reinsurance recoverable on paid and unpaid losses, net (credit allowance of $241 and $256, respectively)

514,485


550,136

Ceded unearned premiums

179,513


270,034

Goodwill
 
73,045

 
73,045

Deferred policy acquisition costs, net

104,882


104,572

Intangible assets, net
 
24,941

 
26,079

Other assets, net (credit allowance of $112 and $141, respectively)

26,234


19,375

Total Assets

$
2,331,759


$
2,467,218

LIABILITIES AND STOCKHOLDERS' EQUITY




Liabilities:




Unpaid losses and loss adjustment expenses

$
711,042


$
760,357

Unearned premiums

664,619


674,055

Reinsurance payable on premiums

112,390


166,131

Payments outstanding
 
45,029

 
57,555

Accounts payable and accrued expenses
 
70,506

 
78,592

Operating lease liability
 
2,421

 
324

Other liabilities

60,959


47,407

Notes payable, net

158,636

 
158,932

Total Liabilities

$
1,825,602


$
1,943,353

Commitments and contingencies (Note 10)






Stockholders' Equity:




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

$


$

Common stock, $0.0001 par value; 50,000,000 shares authorized; 43,053,003 and 43,056,310 issued, respectively; 42,943,447 and 43,028,074 outstanding, respectively

4


4

Additional paid-in capital

392,552


391,852

Treasury shares, at cost: 212,083 shares

(431
)

(431
)
Accumulated other comprehensive income

8,493


11,319

Retained earnings

84,838


100,394

Total stockholders' equity attributable to United Insurance Holdings Corp. (UIHC) stockholders
 
$
485,456

 
$
503,138

Noncontrolling interests (NCI)
 
20,701

 
20,727

Total Stockholders' Equity

$
506,157


$
523,865

Total Liabilities and Stockholders' Equity

$
2,331,759


$
2,467,218

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

4

UNITED INSURANCE HOLDINGS CORP.


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


Three months ended
 
 
March 31,


2020

2019
REVENUE:




Gross premiums written

$
335,183

 
$
318,559

Change in gross unearned premiums

9,436

 
(6,746
)
Gross premiums earned

344,619

 
311,813

Ceded premiums earned

(153,023
)
 
(131,091
)
Net premiums earned

191,596

 
180,722

Net investment income

6,917

 
7,295

Net realized investment gains (losses)

(68
)
 
181

Net unrealized gain (loss) on equity securities

(26,456
)
 
10,173

Other revenue

4,315

 
3,950

Total revenue

176,304

 
202,321

EXPENSES:




Losses and loss adjustment expenses

102,837

 
104,547

Policy acquisition costs

58,875

 
55,246

Operating expenses

9,704

 
10,211

General and administrative expenses

18,301

 
17,581

Interest expense

2,419

 
2,409

Total expenses

192,136

 
189,994

Income (loss) before other income

(15,832
)
 
12,327

Other income

28

 
6

Income (loss) before income taxes

(15,804
)
 
12,333

Provision (benefit) for income taxes

(3,288
)
 
2,755

Net income (loss)

$
(12,516
)
 
$
9,578

Less: Net income attributable to noncontrolling interests
 
207

 
109

Net income (loss) attributable to UIHC
 
$
(12,723
)
 
$
9,469

OTHER COMPREHENSIVE INCOME (LOSS):




Change in net unrealized gains (losses) on investments

(4,110
)
 
14,322

Reclassification adjustment for net realized investment losses (gains)

68

 
(181
)
Income tax benefit (expense) related to items of other comprehensive income (loss)

983

 
(3,459
)
Total comprehensive income (loss)

$
(15,575
)
 
$
20,260

Less: Comprehensive income (loss) attributable to NCI
 
(26
)
 
231

Comprehensive income (loss) attributable to UIHC

$
(15,549
)

$
20,029

 
 
 
 
 
Weighted average shares outstanding




Basic

42,805,527

 
42,696,681

Diluted
 
42,805,527

 
42,986,484






Earnings available to UIHC common stockholders per share




Basic

$
(0.30
)
 
$
0.22

Diluted
 
$
(0.30
)
 
$
0.22

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Statements include related party transactions as detailed in Note 12.

5

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 Income (loss)
 
Retained Earnings
 
Stockholders' Equity Attributable to UIHC
 
NCI
 
Total Stockholders’ Equity
 
Number of Shares
 
Dollars
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
42,984,578

 
$
4

 
$
389,141

 
$
(431
)
 
$
(9,030
)
 
$
140,546

 
$
520,230

 
$
20,139

 
$
540,369

Net income

 

 

 

 

 
9,469

 
9,469

 
109

 
9,578

Other comprehensive income, net


 

 

 

 
10,560

 

 
10,560

 
122

 
10,682

Stock Compensation
24,151

 

 
901

 

 

 

 
901

 

 
901

Cash dividends on common stock ($0.06 per common share)

 

 

 

 

 
(2,569
)
 
(2,569
)
 

 
(2,569
)
March 31, 2019
43,008,729

 
$
4

 
$
390,042

 
$
(431
)
 
$
1,530

 
$
147,446

 
$
538,591

 
$
20,370

 
$
558,961

 
Common Stock
 
Additional Paid-in Capital
 
Treasury Stock
 
Accumulated Other Comprehensive Income (loss)
 
Retained Earnings
 
Stockholders' Equity Attributable to UIHC
 
NCI
 
Total Stockholders’ Equity
 
Number of Shares
 
Dollars
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
43,028,074

 
$
4

 
$
391,852

 
$
(431
)
 
$
11,319

 
$
100,394

 
$
503,138

 
$
20,727

 
$
523,865

Net income (loss)

 

 

 

 

 
(12,723
)
 
(12,723
)
 
207

 
(12,516
)
Other comprehensive loss, net


 

 

 

 
(2,826
)
 

 
(2,826
)
 
(233
)
 
(3,059
)
Reclassification due to adoption of ASU 2016-13

 

 

 

 

 
(262
)
 
(262
)
 

 
(262
)
Stock Compensation
(84,627
)
 

 
700

 

 

 

 
700

 

 
700

Cash dividends on common stock ($0.06 per common share)

 

 

 

 

 
(2,571
)
 
(2,571
)
 

 
(2,571
)
March 31, 2020
42,943,447

 
$
4

 
$
392,552

 
$
(431
)
 
$
8,493

 
$
84,838

 
$
485,456

 
$
20,701

 
$
506,157



See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


6

UNITED INSURANCE HOLDINGS CORP.


Condensed Consolidated Statements of Cash Flows (Unaudited)
 
 
Three Months Ended March 31,
 
 
2020
 
2019
OPERATING ACTIVITIES
 
 
 
 
Net income (loss)
 
$
(12,516
)
 
$
9,578

Adjustments to reconcile net income (loss) to net cash used by operating activities:
 
 
 
 
Depreciation and amortization
 
2,510

 
2,320

Bond amortization and accretion
 
1,564

 
1,186

Net realized losses (gains) on investments
 
68

 
(181
)
Net unrealized losses (gains) on equity securities
 
26,456

 
(10,173
)
Provision for uncollectable premiums
 
10

 
(58
)
Deferred income taxes, net
 
(3,461
)
 
(958
)
Stock based compensation
 
700

 
901

Changes in operating assets and liabilities:
 
 
 
 
Accrued investment income
 
423

 
352

Premiums receivable
 
(3,854
)
 
2,946

Reinsurance recoverable on paid and unpaid losses
 
35,395

 
(28,462
)
Ceded unearned premiums
 
90,521

 
84,581

Deferred policy acquisition costs, net
 
(310
)
 
(3,907
)
Other assets
 
(6,999
)
 
(2,902
)
Unpaid losses and loss adjustment expenses
 
(49,315
)
 
(31,235
)
Unearned premiums
 
(9,436
)
 
6,746

Reinsurance payable on premiums
 
(53,741
)
 
(59,153
)
Payments outstanding
 
(12,526
)
 
9,107

Accounts payable and accrued expenses
 
(8,086
)
 
(6,899
)
Operating lease liability
 
2,097

 
438

Other liabilities
 
17,998

 
23,309

Net cash provided by (used in) operating activities
 
$
17,498

 
$
(2,464
)
INVESTING ACTIVITIES
 
 
 
 
Proceeds from sales, maturities and repayments of:
 
 
 
 
Fixed maturities
 
63,743

 
45,586

Equity securities
 
1,233

 
511

Other investments
 
212

 
2,256

Purchases of:
 
 
 
 
Fixed maturities
 
(58,266
)
 
(23,359
)
Equity securities
 
(21,116
)
 
(862
)
Other investments
 
(1,481
)
 
(5,361
)
Cost of property, equipment and capitalized software acquired
 
(3,515
)
 
(3,297
)
Net cash provided by (used in) investing activities
 
$
(19,190
)
 
$
15,474

FINANCING ACTIVITIES
 
 
 
 
Repayments of borrowings
 
(381
)
 
(382
)
Dividends
 
(2,571
)
 
(2,569
)
Net cash used in financing activities
 
$
(2,952
)
 
$
(2,951
)
Increase (decrease) in cash, cash equivalents and restricted cash
 
(4,644
)
 
10,059

Cash, cash equivalents and restricted cash at beginning of period
 
287,057

 
184,120

Cash, cash equivalents and restricted cash at end of period
 
$
282,413

 
$
194,179

Supplemental Cash Flows Information
 
 
 
 
Interest paid
 
$
70

 
$
105

Income taxes paid
 
$

 
$

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

7

UNITED INSURANCE HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2020


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) is a property and casualty insurance holding company that sources, writes and services residential personal and commercial property and casualty insurance policies using a network of agents, four wholly-owned insurance subsidiaries, and one majority-owned insurance subsidiary. Our largest insurance subsidiary is United Property & Casualty Insurance Company (UPC), which was formed in Florida in 1999 and has operated continuously since that time. Our four other insurance subsidiaries are Family Security Insurance Company, Inc. (FSIC), acquired via merger on February 3, 2015; Interboro Insurance Company (IIC), acquired via merger on April 29, 2016; American Coastal Insurance Company (ACIC), acquired via merger on April 3, 2017; and Journey Insurance Company (JIC). JIC was formed in strategic partnership with a subsidiary of Tokio Marine Kiln Group Limited (Kiln) on August 30, 2018. The Kiln subsidiary holds a noncontrolling interest in JIC.

Our other subsidiaries include United Insurance Management, L.C. (UIM), a managing general agent that manages
substantially all aspects of UPC and FSIC's business; Skyway Claims Services, LLC, which provides claims adjusting services to UPC, FSIC and IIC; AmCo Holding Company, LLC (AmCo) and Family Security Holdings, LLC (FSH), which are holding company subsidiaries that consolidate their respective insurance companies; 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; and Skyway Reinsurance Services, LLC, which provides reinsurance brokerage services for our insurance companies.

Our primary product is homeowners' insurance, which we currently offer in 12 states, under authorization from the insurance regulatory authorities in each state. In addition, we write commercial residential insurance in the state of Florida. We are also licensed to write property and casualty insurance in an additional six states; however, we have not commenced writing in these states.

We conduct our operations under one reportable segment, property and casualty insurance policies. Our chief operating decision maker is our Chief Executive Officer, who makes decisions to allocate resources and assesses performance 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. 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, 2019.

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 Income (Loss), we generally use the term loss(es) to collectively refer to both loss and loss adjustment expenses.

We reclassified certain amounts in the 2019 financial statements to conform to the 2020 presentation, including reclassifying the presentation of "outstanding checks in excess of funds on deposit" in the financing section of the Unaudited Condensed Consolidated Statements of Cash Flows to "changes in payments outstanding" in the operating section, to provide the users of the financial statement with more transparency. These reclassifications had no impact on our results of operations or stockholders' equity, as previously reported.


8

UNITED INSURANCE HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2020

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)Impact of COVID-19, Financial Status and Outlook

In recent months, there has been an outbreak of a novel strain of COVID-19 in many countries in the world, which was declared a pandemic by the World Health Organization in March 2020. This has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans and restrictions, self-imposed quarantine periods, state and local shelter-in-place orders, business and government shutdowns and social distancing, have caused material disruption to businesses and economies globally. In addition, global equity markets have experienced significant volatility and weakness.

We are committed to our employees, agents, customers and shareholders in our resolve to maintain a stable and secure business. We have continued to operate at nearly full capacity while taking the necessary steps to ensure the health and safety of our employees through adherence to CDC and local government work guidelines. In addition, we have converted to virtual sales processes to enable our agents to continue their activities.

We have not seen a material impact from COVID-19 on our business operations, financial position, liquidity or our ability to service our policyholders to date, with the exception of fluctuations in our investment portfolios due to volatility in the equity securities markets, as further described in Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-Q. 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.

The scope, severity and longevity of any business shutdowns and economic disruption as a result of the COVID-19 outbreak is highly uncertain and cannot be predicted at this time, as new information may continue to emerge concerning the actions governments may take to contain or mitigate the spread of the virus or address its impact on individuals, businesses and the economy. We did not incur material claims or significant disruptions to our business for the three months ended March 31, 2020. At this time, it is not possible to reasonably estimate the extent of the impact of the economic uncertainties on our business, results of operations and financial conditions in future periods, but we will continue to respond to the COVID-19 pandemic and take reasonable measures to make sure customers continue to be served without interruption.

2)    SIGNIFICANT ACCOUNTING POLICIES

(a) Changes to Significant Accounting Policies

We have made no changes to our significant accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2019, except for the standards adopted in 2020 as noted below.

(b) Allowance for Expected Credit Losses

We are exposed to credit losses primarily through three different pools of assets based on similar risk characteristics: premiums receivable for direct written business; reinsurance recoverables from ceded losses to our reinsurers; and our note 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.








9

UNITED INSURANCE HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2020

The following table summarizes our allowance for expected credit losses by pooled asset for the three months ended March 31, 2020:
 
 
December 31, 2019
 
Provision for expected credit losses
 
Write-offs
 
March 31, 2020
Premiums Receivable
 
$
165

 
$
(39
)
 
$

 
$
126

Reinsurance Recoverables
 
256

 
(15
)
 

 
241

Note Receivable
 
141

 
(29
)
 

 
112

Total
 
$
562

 
$
(83
)
 
$

 
$
479


(c) Income Taxes

On March 27, 2020, the U.S. enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act to mitigate the economic impacts of the COVID-19 crisis. We are assessing the impact of applying the tax provisions of the CARES Act, and believe it will have a favorable but immaterial impact on our U.S. Federal Tax obligations.

(d) Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). This update modifies the existing disclosure requirements on fair value measurements in Topic 820 by changing requirements regarding Level 1, Level 2 and Level 3 investments. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual periods. Entities are permitted to early adopt any removed or modified disclosures of ASU 2018-13 immediately and delay the adoption of the additional disclosures until their effective date. We early adopted the guidance on removed and modified disclosures and adopted the remainder of the guidance on January 1, 2020, which has not impacted the accompanying unaudited condensed consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). This update simplifies the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. ASU 2017-04 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods, with early adoption permitted for certain requirements. We intend to adopt this new guidance when we perform our annual assessment of goodwill as of September 30, 2020. In the event that a triggering event occurs and requires an earlier interim assessment, we intend to adopt the updated guidance at that time. Any impact of the standard on our consolidated financial statements and related disclosures will be dependent on market conditions of the reporting units at the time of our assessment and subsequent adoption.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). This update is intended to replace the incurred loss impairment methodology in current GAAP with a method that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 will provide users with more useful information regarding the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. In addition, credit losses on available-for-sale debt securities will now have to be presented as an allowance rather than as a write-down. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We adopted this guidance as of January 1, 2020 using a modified retrospective approach, which allowed us to initially apply the new credit loss guidance at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings for 2020, with no adjustment to prior periods presented.The cumulative effect to the opening balance of retained earnings was a decrease of $262,000, net of reversals from allowances recorded under prior guidance.

(e) Pending Accounting Pronouncements

We have evaluated recent accounting pronouncements that have had or may have a significant effect on our financial statements or on our disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes (ASU 2019-12). This update enhances and simplifies various aspects of the income tax guidance, including intra-period

10

UNITED INSURANCE HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2020

tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted. We do not intend to early adopt and are assessing the impact of adopting this new accounting standard on our unaudited condensed consolidated financial statements and related disclosures.

3)    INVESTMENTS

The following table details fixed-maturity available-for-sale securities, by major investment category, at March 31, 2020 and December 31, 2019:
 
Cost or Adjusted/Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
March 31, 2020
 
 
 
 
 
 
 
U.S. government and agency securities
$
104,530

 
$
5,034

 
$
44

 
$
109,520

Foreign government
3,721

 
70

 
1

 
3,790

States, municipalities and political subdivisions
126,962

 
2,885

 
38

 
129,809

Public utilities
27,125

 
479

 
313

 
27,291

Corporate securities
285,633

 
4,087

 
7,025

 
282,695

Mortgage-backed securities
255,523

 
8,872

 
1,541

 
262,854

Asset-backed securities
52,181

 
282

 
849

 
51,614

Redeemable preferred stocks
6,890

 

 
677

 
6,213

Total fixed maturities
$
862,565

 
$
21,709

 
$
10,488

 
$
873,786

 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
U.S. government and agency securities
$
120,260

 
$
749

 
$
193

 
$
120,816

Foreign government
3,975

 
97

 
1

 
4,071

States, municipalities and political subdivisions
131,203

 
2,611

 
63

 
133,751

Public utilities
24,660

 
700

 
26

 
25,334

Corporate securities
281,892

 
7,123

 
143

 
288,872

Mortgage-backed securities
248,206

 
4,174

 
477

 
251,903

Asset-backed securities
56,487

 
683

 
41

 
57,129

Redeemable preferred stocks
2,915

 
72

 
2

 
2,985

Total fixed maturities
$
869,598

 
$
16,209

 
$
946

 
$
884,861


Equity securities are summarized as follows:
 
 
March 31, 2020
 
December 31, 2019
 
 
Estimated Fair Value
 
Percent of Total
 
Estimated Fair Value
 
Percent of Total
 
 
 
 
 
 
 
 
 
Mutual funds
 
$
52,492

 
46.9
%
 
$
65,453

 
56.1
%
Public utilities
 
6,255

 
5.6

 
3,663

 
3.1

Other common stocks
 
45,801

 
40.9

 
44,492

 
38.2

Nonredeemable preferred stocks
 
7,367

 
6.6

 
3,002

 
2.6

Total equity securities
 
$
111,915

 
100.0
%
 
$
116,610

 
100.0
%






11

UNITED INSURANCE HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2020


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 months ended March 31, 2020 and 2019:

 
2020
 
2019
 
Gains
(Losses)
 
Fair Value at Sale
 
Gains
(Losses)
 
Fair Value at Sale
Three Months Ended March 31,
 
 
 
 
 
 
 
Fixed maturities
$
345

 
$
59,225

 
$
248

 
$
6,004

Equity securities
12

 
280

 
6

 
59

Short-term investments

 
35

 

 

Total realized gains
357

 
59,540

 
254

 
6,063

Fixed maturities
(337
)
 
4,518

 
(36
)
 
9,589

Equity securities
(88
)
 
953

 
(37
)
 
383

Short-term investments

 
128

 

 

Total realized losses
(425
)
 
5,599

 
(73
)
 
9,972

Net realized investment gains (losses)
$
(68
)
 
$
65,139

 
$
181

 
$
16,035


The table below summarizes our fixed maturities at March 31, 2020 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.

 
March 31, 2020
 
Cost or Amortized Cost
 
Percent of Total
 
Fair Value
 
Percent of Total
Due in one year or less
$
81,916

 
9.5
%
 
$
81,888

 
9.4
%
Due after one year through five years
266,843

 
30.9

 
269,289

 
30.8

Due after five years through ten years
194,258

 
22.5

 
196,540

 
22.5

Due after ten years
11,844

 
1.4

 
11,601

 
1.3

Asset and mortgage backed securities
307,704

 
35.7

 
314,468

 
36.0

Total
$
862,565

 
100.0
%
 
$
873,786

 
100.0
%

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

 
Three Months Ended March 31,
 
2020
 
2019
Fixed maturities
$
5,470

 
$
6,062

Equity securities
771

 
492

Cash and cash equivalents
671

 
135

Other investments
266

 
768

Other assets
9

 
88

Investment income
7,187

 
7,545

Investment expenses
(270
)
 
(250
)
Net investment income
$
6,917

 
$
7,295





12

UNITED INSURANCE HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2020


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 income (loss).

During the three months ended March 31, 2020, 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 March 31, 2020. 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.


































13

UNITED INSURANCE HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2020


The following table presents an aging of our unrealized investment losses by investment class:
 
 
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
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency securities
3

 
$
2

 
$
2,467

 
22

 
$
42

 
$
13,125

Foreign governments

 

 

 
1

 
1

 
350

States, municipalities and political subdivisions
19

 
38

 
13,084

 

 

 

Public utilities
31

 
313

 
14,960

 

 

 

Corporate securities
300

 
6,948

 
134,296

 
10

 
77

 
2,792

Mortgage-backed securities
93

 
1,304

 
53,126

 
10

 
237

 
3,904

Asset-backed securities
57

 
843

 
23,749

 
1

 
6

 
994

Redeemable preferred stocks
66

 
677

 
6,116

 

 

 

Total fixed maturities
569

 
$
10,125

 
$
247,798

 
44

 
$
363

 
$
21,165

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency securities
37

 
$
89

 
$
26,372

 
39

 
$
104

 
$
31,364

Foreign governments

 

 

 
2

 
1

 
600

States, municipalities and political subdivisions
31

 
61

 
14,508

 
2

 
2

 
1,262

Public utilities
9

 
25

 
4,626

 
2

 
1

 
250

Corporate securities
42

 
124

 
22,435

 
27

 
19

 
9,605

Mortgage-backed securities
89

 
322

 
59,101

 
50

 
155

 
12,738

Asset-backed securities
15

 
34

 
8,447

 
5

 
7

 
1,259

Redeemable preferred stocks

 

 

 
1

 
2

 
97

Total fixed maturities
223

 
$
655

 
$
135,489

 
128

 
$
291

 
$
57,175

(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.



14

UNITED INSURANCE HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2020

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 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 March 31, 2020 and December 31, 2019. Changes in interest rates subsequent to March 31, 2020 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 income (loss) on our Unaudited Condensed Consolidated Balance Sheet as of March 31, 2020.












15

UNITED INSURANCE HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2020

The following table presents the fair value of our financial instruments measured on a recurring basis by level at March 31, 2020 and December 31, 2019:

 
Total
 
Level 1
 
Level 2
 
Level 3
March 31, 2020
 
 
 
 
 
 
 
U.S. government and agency securities
$
109,520

 
$

 
$
109,520

 
$

Foreign government
3,790

 

 
3,790

 

States, municipalities and political subdivisions
129,809

 

 
129,809

 

Public utilities
27,291

 

 
27,291

 

Corporate securities
282,695

 

 
282,695

 

Mortgage-backed securities
262,854

 

 
262,854

 

Asset-backed securities
51,614

 

 
51,614

 

Redeemable preferred stocks
6,213

 
1,815

 
4,398

 

Total fixed maturities
873,786

 
1,815

 
871,971

 

Mutual funds
52,492

 
52,492

 

 

Public utilities
6,255

 
6,255

 

 

Other common stocks
45,801

 
45,801

 

 

Non-redeemable preferred stocks
7,367

 
7,367

 

 

Total equity securities
111,915

 
111,915

 

 

Other investments (1)
1,590

 
300

 
1,290

 

Total investments
$
987,291

 
$
114,030

 
$
873,261

 
$

 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
U.S. government and agency securities
$
120,816

 
$

 
$
120,816

 
$

Foreign government
4,071

 

 
4,071

 

States, municipalities and political subdivisions
133,751

 

 
133,751

 

Public utilities
25,334

 

 
25,334

 

Corporate securities
288,872

 

 
288,872

 

Mortgage-backed securities
251,903

 

 
251,903

 

Asset-backed securities
57,129

 

 
57,129

 

Redeemable preferred stocks
2,985

 
747

 
2,238

 

Total fixed maturities
884,861

 
747

 
884,114

 

Mutual Funds
65,453

 
65,453

 

 

Public utilities
3,663

 
3,663

 

 

Other common stocks
44,492

 
44,492

 

 

Non-redeemable preferred stocks
3,002

 
3,002

 

 

Total equity securities
116,610

 
116,610

 

 

Other investments (1)
499

 
300

 
199

 

Total investments
$
1,001,970

 
$
117,657

 
$
884,313

 
$

(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.

The carrying amounts for the following financial instrument categories approximate their fair values at March 31, 2020 and December 31, 2019, 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, the Branch Banking & Trust Corporation (BB&T) and our senior notes approximate fair value as the interest rates and terms are variable.





16

UNITED INSURANCE HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2020

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 March 31, 2020, we transferred no investments between levels.

For our investments in U.S. government securities that do not have prices in active markets, agency securities, state and municipal governments, and corporate bonds, we obtain the fair values from our investment custodians, which use a third-party valuation service. The valuation service calculates prices for our investments in the aforementioned security types on a month-end 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 we currently account for these investments at fair value utilizing a net asset value per share equivalent methodology.

The information presented in the table below is as of March 31, 2020:

 
 
Book Value
 
Unrealized Gain
 
Unrealized Loss
 
Fair Value
Limited partnership investments (1)
 
$
7,746

 
$
321

 
$
92

 
$
7,975

Certificates of deposit
 
300

 

 

 
300

 Short-term investments
 
1,290

 

 

 
1,290

Total other investments
 
$
9,336

 
$
321

 
$
92

 
$
9,565

(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 two to ten 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:
 
March 31, 2020
 
December 31, 2019
Trust funds
$
63,134

 
$
70,668

Cash on deposit (regulatory deposits)
924

 
920

Total restricted cash
$
64,058

 
$
71,588








17

UNITED INSURANCE HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2020

4)    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-month periods ended March 31, 2020 and 2019, respectively:

 
 
Three Months Ended March 31,
 
 
2020
 
2019
Numerator:
 
 
 
 
Net income (loss) attributable to UIHC common stockholders
 
$
(12,723
)
 
$
9,469

 
 
 
 
 
Denominator:
 
 
 
 
Weighted-average shares outstanding
 
42,805,527

 
42,696,681

Effect of dilutive securities
 

 
289,803

Weighted-average diluted shares
 
42,805,527

 
42,986,484

 
 
 
 
 
Earnings available to UIHC common stockholders per share
 
 
 
 
Basic
 
$
(0.30
)
 
$
0.22

Diluted
 
$
(0.30
)
 
$
0.22


See Note 15 of these Notes to Unaudited Condensed Consolidated Financial Statements for additional information on the stock grants related to dilutive securities.

5)    PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:
 
 
March 31,
2020
 
December 31,
2019
Land
 
$
2,114

 
$
2,114

Building and building improvements (construction in progress of $2,904 and $2,180, respectively)
 
12,040

 
11,315

Computer hardware and software (software in progress of $8,805 and $6,317, respectively)
 
35,722

 
33,219

Office furniture and equipment
 
3,234

 
3,260

Leasehold improvements
 
94

 
20

 Leased vehicles(1)
 
1,898


1,693

Total, at cost
 
55,102

 
51,621

Less: accumulated depreciation and amortization
 
(20,147
)
 
(18,893
)
Property and equipment, net
 
$
34,955

 
$
32,728

(1) Includes vehicles under capital leases. See Note 10 of these Notes to Unaudited Condensed Consolidated Financial Statements for further information on leases.

Depreciation and amortization expense under property and equipment was $1,287,000 and $870,000 for the three months ended March 31, 2020 and 2019, respectively.






18

UNITED INSURANCE HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2020


6) GOODWILL AND INTANGIBLE ASSETS

Goodwill

The carrying amount of goodwill, both at March 31, 2020 and December 31, 2019, was $73,045,000. There was no goodwill acquired or disposed of during the three-month periods ended March 31, 2020 and 2019.

We completed our most recent goodwill impairment testing during the fourth quarter of 2019 and determined that there was no impairment in the value of the asset as of December 31, 2019. The future potential impacts of COVID-19 on the operating results of our reporting units are uncertain, as we continue to monitor the global economic volatility. However, we remain committed to our strategic plan to realize our long-term forecasts. As a result of our analysis, and in consideration of the totality of events and circumstances, we did not identify any triggering events of impairment during the first quarter of 2020.

No impairment loss in the value of goodwill was recognized during the three-month periods ended March 31, 2020 and 2019. Additionally, there was no accumulated impairment related to goodwill at March 31, 2020 or December 31, 2019.

Intangible Assets

The following is a summary of intangible assets excluding goodwill recorded as intangible assets on our Unaudited Condensed Consolidated Balance Sheets:
 
 
March 31, 2020
 
December 31, 2019
Intangible assets subject to amortization
 
$
21,303

 
$
22,440

Indefinite-lived intangible assets(1)
 
3,638

 
3,639

Total
 
$
24,941

 
$
26,079

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

Intangible assets subject to amortization consisted of the following:
 
 
Weighted-average remaining amortization period (in years)
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
March 31, 2020
 
 
 
 
 
 
 
 
Value of business acquired
 
 
$
42,788

 
$
(42,788
)
 
$

Agency agreements acquired
 
6.7
 
34,661