United Insurance Holdings Corp. Reports 2011 Third Quarter and Nine-Month Financial Results; Announces Quarterly Dividend

ST. PETERSBURG, Fla.--(BUSINESS WIRE)--

United Insurance Holdings Corp. UIHC (United or the Company), a property and casualty insurance holding company, today reported its financial results for the third quarter and nine months ended September 30, 2011.

2011 Third Quarter

Net income for the third quarter totaled $3.7 million, or $0.35 per diluted share, compared to a net loss of $316,000 or $0.03 per diluted share, during the same period last year. Net premiums earned increased to $23.9 million from $17.9 million for the third quarter 2010. Net investment income and other revenues decreased to $1.6 million for the quarter from $2.1 million in the prior year quarter.

Losses and loss adjustment expenses decreased to $8.4 million for the quarter from $11.5 million during the same period last year. Policy acquisition costs increased to $7.6 million from $6.2 million for the third quarter 2010. Operating expenses increased to $1.1 million from $769,000 during the same period last year. General and administrative expenses increased to $2.4 million from $1.9 million for the third quarter of last year.

2011 Year-to-Date

For the year-to-date period, net income was $4.9 million, or $0.46 per diluted share, compared to a net loss of $3.8 million, or $0.36 per diluted share for the same period last year. The Company's net premiums earned increased to $65.3 million, from $48.9 million during the same period of last year. Net investment income and other revenues decreased to $4.7 million for the year-to-date period from $7.5 million during the same period of last year.

Losses and loss adjustment expenses decreased to $29.4 million from $32.5 million while policy acquisition costs increased to $21.3 million from $18.8 million for the same period last year. Operating expenses increased to $3.9 million from $3.1 million during the same period of last year. General and administrative expenses increased to $6.8 million from $5.7 million while interest expense decreased to $453,000 from $1.6 million for the nine months ended September 30, 2010.

Balance Sheet Highlights

United's cash and investment holdings totaled $185.6 million at September 30, 2011 compared to $126.2 million at December 31, 2010. United's cash and investment holdings consist primarily of investments in high-quality money market instruments, U.S. Government and agency securities and high-quality corporate debt. Fixed maturities represented approximately 97% and 93% of United's total investments at September 30, 2011, and December 31, 2010, respectively.

“We are pleased to report positive third-quarter results,” said Don Cronin, United's Chief Executive Officer. “Our results continue to be positively impacted by our new business writings while achieving an appropriate rate for risk.” Net premiums earned increased $6 million to $23.9 million for the quarter, or 34% over the same period last year because the Company continues to benefit from an increase in new business, policyholder retention, and three rate increases implemented over the prior two years.

The Company's losses and loss adjustment expenses decreased $3 million to $8.4 million for the quarter from the same period last year. The frequency and severity of current accident year claims has decreased in comparison to the same period of the prior year. Additionally, the Company continues to see improvement in its current year non-catastrophe loss ratios as a result of the rate increases which have been implemented. The decreases in frequency and severity mitigated the impact of the increase in policies written.

United Property and Casualty Insurance Company (UPC), one of the Company's wholly-owned subsidiaries, began writing policies in Massachusetts on November 1, 2011. During the third quarter, the Rhode Island Department of Business Regulation approved UPC to write property and casualty insurance in the state as an admitted carrier and UPC plans to begin writing policies during the first quarter of 2012. UPC currently has applications pending in two additional states.

On November 1, the Company implemented an additional 7.5% average increase for its homeowner product and 14.9% average increase on its dwelling fire product that was approved by the Florida Office of Insurance Regulation.

Conference Call Details

November 10, 2011 - 10:00 A.M. ET

Participant Dial-In Numbers:

(United States): 877-407-0782

(International): 201-689-8567

Webcast

To listen to the live webcast, please go to www.upcic.com (“Events and Presentations”) and click on the conference call link, or go to: http://www.investorcalendar.com/IC/CEPage.asp?ID=166311.

About United Insurance Holdings Corp.

Founded in 1999, United Property and Casualty Insurance Company, a subsidiary of United Insurance Holdings Corp., writes and services property and casualty insurance in Florida, South Carolina and Massachusetts, and was recently licensed to write property and casualty insurance in Rhode Island. 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, and the expansion into other states. 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 collectability 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, 2010. 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 forward-looking statement, whether as a result of new information, additional or subsequent developments or otherwise.

Consolidated Statements of Income
(Unaudited)
			Three Months Ended								Nine Months Ended
			September 30,								September 30,
			2011				2010				2011				2010
REVENUE:
Gross premiums written			$	44,266			$	36,017			$	160,337			$	127,259
Decrease (increase) in gross unearned premiums			2,861				3,440				(28,585		)		(11,472		)
Gross premiums earned			47,127				39,457				131,752				115,787
Ceded premiums earned			(23,267		)		(21,592		)		(66,485		)		(66,929		)
Net premiums earned			23,860				17,865				65,267				48,858
Net investment income			807				1,037				2,041				3,053
Net realized gains			—				206				112				234
Other revenue			826				891				2,536				4,171
Total revenue			25,493				19,999				69,956				56,316
EXPENSES:
Losses and loss adjustment expenses			8,414				11,451				29,399				32,466
Policy acquisition costs			7,568				6,185				21,293				18,801
Operating expenses			1,146				769				3,946				3,114
General and administrative expenses			2,368				1,910				6,785				5,669
Interest expense			142				155				453				1,637
Total expenses			19,638				20,470				61,876				61,687
Income (loss) before other (income) expenses			5,855				(471		)		8,080				(5,371		)
Other (income) expenses			(23		)		—				256				726
Income (loss) before income taxes			5,878				(471		)		7,824				(6,097		)
Provision for (benefit from) income taxes			2,228				(155		)		2,961				(2,277		)
Net income (loss)			$	3,650			$	(316	)		$	4,863			$	(3,820	)
OTHER COMPREHENSIVE INCOME (LOSS):
Change in net unrealized gain on investments			2,441				2,362				3,470				4,158
Reclassification adjustment for net realized investment gains			—				(206		)		(112		)		(234		)
Income tax expense related to items of other
comprehensive income			(941		)		(831		)		(1,295		)		(1,513		)
Total comprehensive income (loss)			$	5,150			$	1,009			$	6,926			$	(1,409	)
Weighted average shares outstanding
Basic and Diluted			10,361,849				10,573,932				10,469,056				10,573,932
Earnings (loss) per share
Basic and Diluted			$	0.35			$	(0.03	)		$	0.46			$	(0.36	)
Dividends declared per share			$	—			$	—			$	—			$	0.05

Consolidated Balance Sheets
			September 30,				December 31,
			2011				2010
ASSETS			(Unaudited)
Investments available for sale, at fair value:
Fixed maturities (amortized cost of $128,995 and $50,984, respectively)			$	132,070			$	50,683
Equity securities (adjusted cost of $3,579 and $3,666, respectively)			3,510				3,615
Other long-term investments			300				300
Total investments			135,880				54,598
Cash and cash equivalents			49,703				71,644
Accrued investment income			904				414
Premiums receivable, net of allowances for credit losses of $72 and
$61, respectively			12,010				7,825
Reinsurance recoverable on paid and unpaid losses			6,643				27,304
Prepaid reinsurance premiums			63,152				38,307
Deferred policy acquisition costs			13,088				9,342
Other assets			4,753				4,187
Total Assets			$	286,133			$	213,621
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses			$	39,857			$	47,414
Unearned premiums			105,746				77,161
Reinsurance payable			55,665				14,982
Other liabilities			15,724				10,536
Notes payable			17,353				18,235
Total Liabilities			234,345				168,328
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none
issued or outstanding for 2011 and 2010			—				—
Common stock, $0.0001 par value; 50,000,000 shares authorized; 10,573,932
issued for 2011 and 2010, respectively; 10,361,849 and 10,573,932
outstanding for 2011 and 2010, respectively			1				1
Additional paid-in capital			75				75
Treasury shares, at cost; 212,083 and 0 shares, respectively			(431		)		—
Accumulated other comprehensive income			1,847				(216		)
Retained earnings			50,296				45,433
Total Stockholders' Equity			51,788				45,293
Total Liabilities and Stockholders' Equity			$	286,133			$	213,621