Friday, August 12, 2022

UNIVERSAL INSURANCE HOLDINGS, INC. – 10-Q

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Until the context in any other case requires, all references to "we," "us," "our," and
"Firm" check with Common Insurance coverage Holdings, Inc. ("UVE") and its
wholly-owned subsidiaries. You need to learn the next dialogue collectively
with our unaudited condensed consolidated monetary statements ("Monetary
Statements") and the associated notes thereto included in "Half I, Merchandise 1-Monetary
Statements," and our audited condensed consolidated monetary statements and the
associated notes thereto included in "Half II, Merchandise 8-Monetary Statements and
Supplementary Information" in our Annual Report on Type 10-Okay for the 12 months ended
December 31, 2021. Working outcomes for anybody quarter will not be essentially
indicative of outcomes to be anticipated for some other quarter or for the 12 months.


Cautionary Notice Concerning Ahead-Trying Statements

Along with historic data, this report could include "forward-looking
statements" inside the that means of Part 27A of the Securities Act of 1933, as
amended, and Part 21E of the Securities Trade Act of 1934, as amended (the
"Trade Act"). The forward-looking statements anticipate outcomes based mostly on our
estimates, assumptions and plans which are topic to uncertainty. These
forward-looking statements could also be recognized by their use of phrases like "plans,"
"seeks," "expects," "will," "ought to," "anticipates," "estimates," "intends,"
"believes," "probably," "targets," and different phrases with related meanings. These
statements could tackle, amongst different issues, our technique for progress, disaster
publicity and different threat administration, product growth, funding outcomes,
regulatory approvals, market place, bills, monetary outcomes, litigation
and reserves. We imagine that these statements are based mostly on cheap
estimates, assumptions and plans. Nevertheless, if the estimates, assumptions or
plans underlying the forward-looking statements show inaccurate or if different
dangers or uncertainties come up, precise outcomes might differ materially from these
communicated in these forward-looking statements because of the dangers set
forth beneath, that are a abstract of these set forth in our Annual Report on Type
10-Okay for the 12 months ended December 31, 2021. We undertake no obligation to replace
or revise publicly any forward-looking statements, whether or not because of new
data, future occasions, or in any other case.

Dangers and uncertainties that will have an effect on, or have affected, our monetary
situation and working outcomes embody, however will not be restricted to, the next:

•Unanticipated will increase within the severity or frequency of claims, together with these
referring to catastrophes, extreme climate occasions and altering local weather circumstances,
which, in some situations, have exceeded, and sooner or later could exceed our
reserves established for claims;

•Failure of our threat mitigation methods, together with failure to precisely and
adequately worth the dangers we underwrite and to incorporate efficient exclusions and
different loss limitation strategies in our insurance coverage insurance policies;

•Lack of impartial insurance coverage brokers and incapacity to draw new impartial
brokers;

•Reliance on fashions, that are inherently unsure, as a software to judge
dangers;

•The continued availability of reinsurance at present ranges and costs, and our
means to gather funds due from our reinsurers;

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•Adjustments in trade traits, together with modifications as a result of cyclical nature of the
trade and elevated competitors;

•Geographic focus of our enterprise in Florida and the effectiveness of
our progress and diversification technique in new markets;

•Lack of key personnel and incapacity to draw and retain gifted workers;

•Failure to adjust to present and future pointers, insurance policies and authorized and
regulatory requirements;

•The power of our claims professionals to successfully handle claims;

•Litigation or regulatory actions that might end in vital damages,
fines or penalties;

•A downgrade in our Monetary Stability Score® and its influence on our
aggressive place, the marketability of our product choices, our liquidity
and profitability;

•The influence on our enterprise and status of information and safety breaches as a consequence of
cyber-attacks or our incapacity to successfully adapt to modifications in expertise;

•Our dependence on the returns of our funding portfolio, that are topic to
market threat;

•Authorized, regulatory or tax modifications that enhance our working prices and reduce
our profitability, akin to limitations on price modifications or necessities to
take part in loss sharing;

•Our dependence on dividends and permissible funds from our subsidiaries;

•The power of our Insurance coverage Entities to adjust to statutory capital and
surplus minimums and different regulatory and licensing necessities; and

•The continued influence of the COVID-19 pandemic on our enterprise and the economic system in
common.

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OVERVIEW

We're a vertically built-in holding firm providing property and casualty
insurance coverage and value-added insurance coverage companies. We develop, market and underwrite
insurance coverage merchandise for customers predominantly within the private residential
householders' line of enterprise and carry out considerably all different
insurance-related companies for our major insurance coverage entities, together with threat
administration, claims administration, and distribution. Our major insurance coverage entities,
Common Property & Casualty Insurance coverage Firm ("UPCIC") and American Platinum
Property and Casualty Insurance coverage Firm ("APPCIC" and along with UPCIC, the
"Insurance coverage Entities"), supply insurance coverage merchandise by each our appointed
impartial agent community and our on-line distribution channels throughout 19 states
(primarily in Florida), with licenses to put in writing insurance coverage in two extra
states. The Insurance coverage Entities search to supply an underwriting revenue (outlined
as earned premium minus losses, loss adjustment expense ("LAE"), coverage
acquisition prices and different working prices) over the long run; keep a
conservative stability sheet to organize for years wherein the Insurance coverage Entities
will not be capable of obtain an underwriting revenue; and generate funding revenue
on belongings.

The next Administration's Dialogue and Evaluation ("MD&A") is meant to
help in an understanding of our monetary situation and outcomes of operations.
This MD&A ought to be learn along side our Monetary Statements and
accompanying Notes showing elsewhere on this Report (the "Notes"). In
addition, reference ought to be made to our audited Consolidated Monetary
Statements and accompanying Notes to Consolidated Monetary Statements and
"Merchandise 7-Administration's Dialogue and Evaluation of Monetary Situation and Outcomes
of Operations" included in our Annual Report on Type 10-Okay for the 12 months ended
December 31, 2021. Aside from the historic data contained herein, the
discussions on this MD&A include forward-looking statements that contain dangers
and uncertainties. Our future outcomes might differ materially from these
mentioned herein. Components that might trigger or contribute to such variations
embody, however will not be restricted to, these mentioned above underneath "Cautionary Notice
Concerning Ahead-Trying Statements."

Tendencies

Florida Tendencies

We're at present working by a cycle to enhance long-term price adequacy and
earnings for the Insurance coverage Entities by growing charges and managing exposures,
whereas profiting from what we imagine to be alternatives in a dislocated
market. The Florida private strains householders' market at present might be
characterised as a "arduous market", the place insurance coverage premium charges are escalating,
insurers are lowering coverages, and underwriting requirements are tightening as
insurers carefully monitor insurance coverage charges and handle protection capability. Attributable to
circumstances within the Florida market and components extra typically affecting the U.S.
and world reinsurance markets, reinsurance capability in recent times has additionally
been topic to much less favorable pricing or phrases. These market forces lower
competitors amongst admitted insurers, and in the end end result within the elevated use
of Residents Property Insurance coverage Company ("Residents"), which was created to be
the State's residual property insurance coverage market. Lately, in response to
adversarial behaviors and circumstances within the Florida residential market, most
admitted market rivals have sought and sometimes obtained approval for
vital price will increase. In the meantime, Residents' price will increase are restricted by
legislation, leading to its insurance policies, in a tough market, turning into priced decrease than
admitted market insurance policies. This causes Residents to turn out to be considered as a fascinating
various to the admitted market as admitted market insurers handle by
the arduous market challenges. Our Insurance coverage Entities likewise have taken and
proceed to take motion to handle by this difficult market by growing charges
and prudently managing exposures whereas additionally sustaining their aggressive
place out there and supporting our present policyholders and brokers.

Whereas addressing price adequacy for the Insurance coverage Entities, we proceed to
expertise inflated prices for losses and LAE within the Florida market, the place an
trade has developed across the solicitation, submitting and litigation of
private residential claims. These dynamics have been made worse by the
litigation financing trade which in some circumstances funds these actions. These
behaviors are a chief contributing issue for the speed will increase on this market.
These behaviors end in a sample of continued will increase in year-over-year
ranges of represented claims, the inflation of purported declare quantities, and
elevated calls for for attorneys' charges. Lively solicitation of private
residential claims in Florida by policyholder representatives, remediation
firms and restore firms has led to a rise within the frequency and
severity of private residential claims in Florida exceeding historic ranges
and ranges seen in different jurisdictions. Info ready by the Florida
Workplace of Insurance coverage Regulation additionally exhibits that claims in Florida are litigated
at a considerably disproportionate price when in comparison with different states. That is
largely as a consequence of a Florida statute offering a one-way proper of attorneys' charges
towards insurers which has, when coupled with sure different statutes and
judicial rulings, produced a authorized setting in Florida that encourages
litigation, in lots of circumstances with out regard to the underlying deserves of the claims.
The one-way proper to attorneys' charges basically signifies that except an insurer's
place is totally upheld in litigation, the insurer should pay the plaintiff's
attorneys' charges along with its personal protection prices. This impacts not solely
claims which are litigated to decision, but additionally the settlement discussions
that happen with practically all litigated claims. This additionally impacts a big
variety of claims from inception or throughout the adjusting course of as a considerable
and rising proportion of policyholders get hold of illustration early within the
course of, and generally even earlier than notifying insurers of their claims. These
market circumstances additionally add, and can proceed so as to add, complexity to efforts to
effectively and expeditiously modify claims. This is because of an growing quantity
of policyholders who've a number of latest prior losses with the Insurance coverage
Entities or with different insurers, which then require analysis throughout subsequent
claims and determinations relating to whether or not property has been repaired
constantly with the scope and quantity of harm beforehand asserted.

The one-way proper to lawyer charges creates a virtually risk-free setting, and
incentive, for attorneys to pursue litigation towards insurers. The end result has
been a considerable enhance in represented and litigated claims in Florida, far
outpacing ranges skilled in different states. In April 2021, the Florida
legislature handed a invoice desiring to curtail the adversarial declare traits
impacting the Florida householders' insurance coverage market. Most provisions of the invoice
went into impact on July 1, 2021. Amongst its provisions, the invoice creates a brand new
pre-suit discover requirement whereby an insured should make a proper financial
demand of a residential property insurer earlier than commencing swimsuit. The Firm has
established an inner staff to evaluation and reply to those pre-suit calls for
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in an extra effort to resolve disputes earlier than litigation ensues. One other
provision of the brand new legislation reduces the time interval wherein to file a brand new or
reopened declare to 2 years following the date of loss. Different modifications embody
trying to curtail the solicitation of sure roof claims and to restrict
referral charges in reference to sure forms of claims. Opponents of the
reforms have challenged sure elements of the brand new legislation, together with acquiring an
injunction towards provisions that restrict the solicitation of roof claims. In
gentle of the latest enactment of those reforms and the litigation that has
ensued, it's untimely to evaluate whether or not the reforms can have their supposed
impact. Whether or not these modifications are helpful to customers, insurers, insurance coverage
firm holding techniques or the residential property insurance coverage market as an entire
will not be absolutely recognized for a while. Even after the 2021 laws, the
Florida property market has been distressed and continues to expertise rising
price ranges coupled with lowered underwriting capability amongst admitted insurers.
Though the Florida legislature thought-about extra potential reforms in its
2022 common session, it didn't go any of these reforms. Florida's Governor
subsequently referred to as a particular legislative session, anticipated to be held in late
Could, throughout which the legislature once more will take into account property insurance coverage
reforms. It's unclear whether or not the legislature will go extra reforms in
the particular session, and if that's the case, whether or not these reforms will likely be efficient. Historical past
has proven that reforms that don't tackle the underlying reason for issues in
the Florida market and as an alternative solely tackle signs such because the proliferation
of mould, sinkhole or roof claims at finest present solely short-term reduction and
ultimately end result within the underlying trigger manifesting by different perils.

Regardless of our initiatives, akin to these talked about above, our prices to settle
claims in Florida have elevated for the explanations talked about above. For instance,
the Firm has beforehand elevated its present 12 months loss estimates and
elevated estimates related to prior years' claims. Over the previous three
years, whilst we've got elevated our estimates of potential losses every year,
we've got recorded adversarial declare growth on prior years' loss reserves and
additional strengthened present 12 months losses throughout the 12 months to handle the
growing influence Florida's market disruptions, in addition to the influence of rising
prices of constructing supplies and labor, have had on the claims course of and the
institution of reserves for losses and LAE. The total extent and period of
these market disruptions and inflationary pressures are unknown and nonetheless
unfolding, and we are going to monitor the influence of such disruptions on the recording
and reporting of declare prices.

The Firm has taken a collection of steps over time to mitigate the monetary
influence of those destructive traits within the Florida market. We even have carefully
monitored price ranges, particularly within the Florida market, and have submitted price
filings based mostly upon evolving knowledge. Nevertheless, as a result of price filings depend on previous
loss and expense knowledge and take time to develop, file and implement, we will
expertise vital delays between figuring out wanted price changes,
gaining approval of price modifications, and in the end amassing and incomes the
ensuing elevated premiums. That is notably the case in an period of rising
prices akin to the present Florida market, wherein the prices of losses and loss
adjustment bills proceed to extend as a consequence of Florida's outsized claims
litigation setting and inflationary stress. As well as, the Firm has
applied a number of initiatives in its claims division in response to the
adversarial market traits. We make the most of our course of referred to as Quick Observe, which is an
initiative to deal with easy, meritorious claims as promptly as doable
to mitigate the adversarial impacts that may be seen with claims that stay open
for longer durations. As well as, we elevated our emphasis on subrogation to
scale back our web losses whereas additionally recovering policyholders' deductibles when
losses are attributable to the actions of others. We have now an inner employees of
skilled water remediation consultants to handle the extraordinary variety of
purported water injury claims filed by policyholders and distributors. We developed a
specialised in-house unit for responding to the distinctive elements of represented
claims, and we've got considerably elevated our in-house authorized employees in an
effort to handle the rise in litigated or represented claims as
cost-effectively as doable.

Moreover, we've got taken steps to implement declare settlement guidelines related
with the Florida laws handed in 2019 designed to scale back the destructive
results of claims involving assignments of advantages ("AOB"). See "Half I- Merchandise
1-Enterprise-Authorities Regulation" in our Annual Report on Type 10-Okay for the 12 months
ended December 31, 2021. An AOB is a doc signed by a policyholder that
permits a 3rd get together to be paid for companies carried out for an insured house owner
who would usually be reimbursed by the insurance coverage firm straight after making
a declare. Previous to the AOB reform laws, the Firm skilled an
enhance in AOB-related litigation initiated by distributors, in lots of circumstances
unbeknownst to policyholders. Claims paid underneath an AOB typically contain pointless
litigation, with the Firm required to pay each its personal protection prices and
these of the plaintiff, and, in consequence, value the Firm considerably extra
than claims settled when an AOB just isn't concerned. In 2019, the Florida
legislature handed laws designed to extend client protections towards
AOB abuses and scale back AOB-related litigation. Whereas the Florida laws
addressing abuses related to AOBs could also be helpful in lowering one side
of the issues affecting the Florida market, the general influence of the
deterioration in claims-related ways and behaviors, together with different
first-party litigation, to this point has continued to outpace advantages arising from
the 2019 AOB reform laws. Extra just lately, following laws adopted in
Florida's 2021 legislative session, we've got established procedures and devoted
personnel to a brand new pre-suit discover and supply course of. The brand new course of requires
policyholders or their attorneys to inform insurers at the least ten days earlier than
commencing litigation and permits insurers a chance to make pre-suit
settlement presents. The policyholders' means to get better attorneys' charges is
decided in accordance with a scale that compares the final word outcomes of the circumstances
to the insurers' pre-suit presents. Though this new course of is meant to
scale back claims litigation and encourage settlements, it's too early to judge
whether or not will probably be profitable in limiting the forms of settlement calls for and
litigation which have plagued the Florida market or in offsetting different components
adversely affecting the market akin to elevated prices of constructing supplies and
labor.

Affect of COVID-19

Subsequent to March 2020, we've got not seen a direct materials influence from
COVID-19 on our enterprise, our monetary place, our liquidity, or our means
to service our policyholders and keep essential operations. Not directly,
inflationary pressures, partly as a consequence of provide chain and labor constraints throughout
the pandemic, have affected and proceed to have an effect on claims prices and, to a lesser
diploma, different bills. As a supplier of companies which have been deemed
important underneath most directives and pointers, we're assured in our means
to keep up constant operations and imagine we will proceed to handle with our
distant workforce because of our catastrophe preparedness planning, with little
influence on our enterprise and repair ranges and our requirements of look after
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each underwriting and claims. We proceed to observe native, state and federal
steerage and can modify workforce actions as applicable. Though we've got
not skilled a direct materials influence from COVID-19 since its onset in 2020,
the final word influence of the COVID-19 pandemic, or future pandemics, on our
enterprise and on the economic system normally can't be predicted.

KEY PERFORMANCE INDICATORS

The Firm considers the measures and ratios within the following dialogue to be
key efficiency indicators for its companies. Administration believes that these
indicators are useful in understanding the underlying traits within the Firm's
companies. A few of these indicators are reported on a quarterly foundation and
others on an annual foundation.

These indicators will not be similar to different efficiency measures utilized by the
Firm's rivals and will solely be evaluated along with our condensed
consolidated monetary statements and accompanying notes.

Definitions of Key Efficiency Indicators

E-book Worth Per Widespread Share - complete stockholders' fairness, adjusted for most well-liked
inventory liquidation, divided by the variety of widespread shares excellent as of a
reporting interval. E-book worth per widespread share is the surplus of belongings over
liabilities at a reporting interval attributed to every share of inventory. Adjustments in
ebook worth per widespread share informs shareholders of retained fairness within the
Firm on a per share foundation which can help in understanding market worth
traits for the Firm's inventory.

Mixed Ratio - the mixed ratio is a measure of underwriting profitability
for a reporting interval and is calculated by dividing complete working prices and
bills (which is made up of losses and LAE and common and administrative
bills) by premiums earned, web, which is web of ceded premiums earned.
Adjustments to the mixed ratio over time present administration with an understanding
of prices to function its enterprise in relation to web premiums it's incomes and
the influence of price, underwriting and different enterprise administration actions on
underwriting profitability. A mixed ratio beneath 100% signifies underwriting
revenue; a mixed ratio above 100% signifies underwriting losses.

Core Loss Ratio - a standard operational metric used within the insurance coverage trade to
describe the ratio of present accident 12 months anticipated losses and LAE to premiums
earned. Core loss ratio is a vital measure figuring out profitability traits
of premiums in drive. Core losses consists of all different losses and LAE,
excluding climate occasions past these anticipated and prior years' reserve
growth. The monetary profit from the administration of claims, together with
declare charges ceded to reinsurers, is recorded within the condensed consolidated
monetary statements as a discount to core losses.

Debt-to-Fairness Ratio – long-term debt divided by stockholders’ fairness. This
ratio helps administration measure the quantity of financing leverage in place in
relation to fairness and future leverage capability.

Debt-to-Complete Capital Ratio – long-term debt divided by the sum of complete
stockholders’ fairness and long-term debt (sometimes called complete capital
assets). This ratio helps administration measure the quantity of financing leverage
in place (long-term debt) in relation to complete capital assets and future
leverage capability.

Direct Premiums Written ("DPW") - displays the whole worth of insurance policies issued
throughout a interval earlier than contemplating premiums ceded to reinsurers. Direct premiums
written, comprised of renewal premiums, endorsements and new enterprise, is
initially recorded as unearned premium within the stability sheet which is then earned
pro-rata over the subsequent 12 months or remaining coverage time period. Direct premiums written
displays present traits within the Firm's sale of property and casualty insurance coverage
merchandise and quantities that will likely be acknowledged as earned premiums sooner or later.

DPW (Florida) – contains solely DPW within the state of Florida. This measure permits
administration to research progress in our major market and can be a measure of
enterprise focus threat.

Expense Ratio (Together with Coverage Acquisition Price Ratio and Different Working Price
Ratio) - calculated as common and administrative bills as a proportion of
premiums earned, web. Basic and administrative bills is comprised of coverage
acquisition prices and different working prices, which incorporates such gadgets as
underwriting prices, amenities and company overhead. The expense ratio,
together with the sub-expense ratios of coverage acquisition value ratio and different
working value ratio, are indicators to administration of the Firm's value
effectivity in buying and servicing its enterprise and the influence of expense
gadgets to general profitability.

Losses and Loss Adjustment Expense Ratio or Loss and LAE Ratio - a measure of
the price of claims and declare settlement bills incurred in a reporting interval
as a proportion of premiums earned in that very same reporting interval. Losses and LAE
incurred in a reporting interval contains each quantities associated to the present
accident 12 months and prior accident years, if any, known as growth.
Final losses and LAE are based mostly on actuarial estimates with modifications in these
estimates acknowledged within the interval the estimates are revised. Losses and LAE
include declare prices arising from claims occurring and settling within the present
interval, an estimate of declare prices for reported however unpaid claims, an estimate
of unpaid declare prices for incurred-but-not-reported claims and an estimate of
declare settlement bills related to reported and unreported claims which
occurred throughout the reporting interval. The loss and LAE ratio might be measured on
a direct foundation, which incorporates losses and LAE divided by direct earned premiums,
or on a web foundation, which incorporates losses and LAE after quantities have been ceded
to reinsurers divided by web earned premiums (i.e., direct premium earned much less
ceded premium earned). The web loss and LAE ratio is a measure of underwriting
profitability after giving consideration to the impact of reinsurance. Tendencies in
the web loss and LAE ratio are a sign to administration of present and future
profitability.

Month-to-month Weighted Common Renewal Retention Fee - measures the month-to-month common
of policyholders that renew their insurance policies over the interval of a calendar 12 months.
This measure permits administration to evaluate buyer retention.
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Premiums Earned, Web - the pro-rata portion of present and beforehand written
premiums that the Firm acknowledges as earned premium throughout the reporting
interval, web of ceded premium earned. Ceded premiums are premiums paid or payable
by the Firm for reinsurance safety. Written premiums are thought-about
earned and are acknowledged pro-rata over the coverage protection interval. Premiums
earned, web is a measure that permits administration to determine income traits.

Insurance policies in Power - represents the variety of energetic insurance policies with protection in
impact as of the top of the reporting interval. The change within the variety of
insurance policies in drive is a progress measure and gives administration with a sign
of progress towards attaining strategic aims. Inherent seasonality in our
enterprise makes this measure extra helpful when evaluating every quarter's stability to
the identical quarter in prior years.

Premium in Power - is the quantity of the annual direct written premiums
beforehand recorded by the Firm for insurance policies that are nonetheless energetic as of the
reporting date. This measure assists administration in measuring the extent of
insured publicity and progress towards assembly income objectives for the present 12 months,
and gives a sign of enterprise accessible for renewal within the subsequent twelve
months. Inherent seasonality in our enterprise makes this measure extra helpful when
evaluating every quarter's stability to the identical quarter in prior years.

Return on Common Fairness ("ROAE") - calculated by dividing earnings (loss) per
widespread share by common ebook worth per widespread share. Common ebook worth per
widespread share is computed because the sum of ebook worth per widespread share on the
starting and the top of a interval, divided by two. ROAE is a capital
profitability measure of how successfully administration creates income per widespread
share.

Complete Insured Worth - represents the quantity of insurance coverage limits accessible on a
coverage for a single loss based mostly on all insurance policies energetic as of the reporting date.
This measure assists administration in measuring the extent of insured publicity.

Unearned Premiums - represents the portion of direct premiums equivalent to
the time interval remaining on an insurance coverage coverage and accessible for future
incomes by the Firm. Tendencies in unearned premiums typically point out
growth, if rising, or contraction, if lowering, that are essential
indicators to administration. Inherent seasonality in our enterprise makes this
measure extra helpful when evaluating every quarter's stability to the identical quarter in
prior years.

Climate occasions - an estimate of losses and LAE from climate occasions occurring
throughout the present accident 12 months that exceed preliminary estimates of anticipated
climate occasions when establishing the core loss ratio for every accident 12 months.
This metric informs administration of things impacting general present 12 months
profitability.

REINSURANCE

Reinsurance permits our Insurance coverage Entities to restrict potential exposures to
catastrophic occasions. Reinsurance contracts are sometimes categorised as treaty or
facultative contracts. Treaty reinsurance gives protection for all or a portion
of a specified group or class of dangers ceded by the first insurer, whereas
facultative reinsurance gives protection for particular particular person dangers. Inside
every classification, reinsurance might be additional categorised as quota share or
extra of loss. Quota-share reinsurance is the place the first insurer and the
reinsurer share proportionally or pro-rata within the direct premiums and losses of
the insurer. Extra-of-loss reinsurance indemnifies the direct insurer or
reinsurer for all or a portion of the loss in extra of an agreed upon quantity or
retention.

Growing and implementing our reinsurance technique to adequately defend our
stability sheet and Insurance coverage Entities within the occasion of a number of catastrophes
whereas sustaining environment friendly reinsurance prices has been a key strategic precedence
for us. With the intention to restrict the Insurance coverage Entities' potential publicity to
catastrophic occasions, we buy vital reinsurance from third-party
reinsurers and the Florida Hurricane Disaster Fund ("FHCF"). The Florida
Workplace of Insurance coverage Regulation ("FLOIR") requires the Insurance coverage Entities, like
all residential property insurance coverage firms doing enterprise in Florida, to have
a specific amount of capital and reinsurance protection to be able to cowl losses
upon the prevalence of a single catastrophic occasion and a collection of catastrophic
occasions occurring in the identical hurricane season. The Insurance coverage Entities'
respective 2021-2022 reinsurance applications meet the FLOIR's necessities, which
are based mostly on, amongst different issues, efficiently demonstrating cohesive and
complete reinsurance applications that defend the policyholders of our
Insurance coverage Entities in addition to satisfying a collection of stress check disaster
loss eventualities based mostly on previous historic occasions. Equally, the Insurance coverage
Entities' respective 2021-2022 reinsurance applications meet the stress check and
evaluation necessities of Demotech, Inc., for sustaining Monetary Stability
Scores® of A (Distinctive).

We imagine the Insurance coverage Entities' retentions underneath their respective reinsurance
applications are applicable and structured to guard policyholders. We check the
sufficiency of the reinsurance applications by subjecting the Insurance coverage Entities'
private residential exposures to statistical testing utilizing a third-party
hurricane mannequin, RMS RiskLink v18.1 (Construct 1945). This mannequin combines
simulations of the pure prevalence patterns and traits of
hurricanes, tornadoes, earthquakes and different catastrophes with data on
property values, development varieties and occupancy lessons. The mannequin outputs
present data regarding the potential for big losses earlier than they happen,
so firms can put together for his or her monetary influence. Moreover, as a part of our
operational excellence initiatives, we frequently look to allow new expertise
to refine our knowledge intelligence on disaster threat modeling.

Efficient June 1, 2021, the Insurance coverage Entities entered into a number of reinsurance
agreements comprising our 2021-2022 reinsurance program.
See “Merchandise 1-Notice 4 (Reinsurance).”

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UPCIC’s 2021-2022 Reinsurance Program

•First occasion All States retention of $45 million throughout the 2021 Atlantic
hurricane season, first occasion Non-Florida retention of $15 million.

•All States first occasion reinsurance safety extends to $3.364 billion with no
co-participation in any of the layers and no limitation on loss adjustment
bills for the non-catastrophe bond Cosaint Re Pte. Ltd. conventional
reinsurance whereas sustaining the identical favorable historic deposit premium
fee schedules.

•Assuming a primary occasion utterly exhausts the $3.364 billion tower, the second
occasion exhaustion level could be $1.101 billion.

•Full reinstatement accessible on $1.06 billion of the $1.356 billion of non-FHCF
first occasion disaster protection for assured second occasion protection. For all
layers bought between $45 million and the projected FHCF retention, to the
extent that each one of our protection or a portion thereof is exhausted in a
catastrophic occasion and reinstatement premium is due, we've got bought sufficient
reinstatement premium safety ("RPP") restrict to pay the premium needed for
the reinstatement of those coverages.

•Particular third and 4th occasion non-public market disaster extra of loss protection
of $86 million in extra of $25 million gives frequency safety for
a number of occasions throughout the treaty interval.

•For the FHCF Reimbursement Contract efficient June 1, 2021, UPCIC has continued
the election of the 90% protection stage. We estimate the FHCF layer will present
roughly $1.963 billion of protection for UPCIC, which inures to the profit
of the open market protection secured from non-public reinsurers.

•Secured $383 million of latest disaster capability with contractually agreed
limits that reach protection to incorporate the 2022 and 2023 wind seasons. This
quantity doesn't embody the one restrict of $150 million of safety for named
windstorm occasions, which now definitively contains the 2022 wind season and
probably might embody the 2023 wind season relying on loss exercise within the
2022 wind season, that UPCIC obtained in March 2021 when it entered right into a
three-year reinsurance settlement with Cosaint Re Pte. Ltd., a reinsurance entity
integrated in Singapore that correspondingly issued notes in a Rule 144A
providing to lift proceeds to collateralize its obligations underneath this
settlement.

The primary occasion All States program described above for UPCIC contains protection
from a captive insurance coverage association that UVE established which inures to the
advantage of UPCIC. This intercompany transaction gives UPCIC roughly
$13.2 million of reinsurance safety on the primary layer of UPCIC's first
occasion All States program. This transaction eliminates in consolidation
successfully growing the primary occasion retention famous above to $58.2 million
for the consolidated group within the occasion this restrict is exhausted.

The captive insurance coverage association efficient June 1, 2021 by Could 31, 2022
was terminated efficient December 1, 2021, pursuant to the phrases of the
settlement. In reference to the termination of the settlement, and in accordance with
its phrases, sure funds held in belief had been launched to the beneficiary (i.e.,
UPCIC) and the stability was remitted to the grantor (i.e., UVE) in December 2021.
The termination of the settlement ends in a first-event All States retention
of $58.2 million for UPCIC for the interval of December 1, 2021 to Could 31, 2022,
which is outdoors of the standard Atlantic hurricane season.

Reinsurers

The desk beneath gives the A.M. Finest and S&P monetary energy rankings for
every of the biggest third-party reinsurers in UPCIC's 2021-2022 reinsurance
program:

Reinsurer                                    A.M. Finest      S&P
Allianz Threat Switch                           A+          AA-
Everest Re                                      A+          A+
Chubb Tempest Reinsurance Ltd.                  A++         AA
Munich Re                                       A+          AA-
Renaissance Re                                  A+          A+
Varied Lloyd's of London Syndicates             A          A+

Florida Hurricane Disaster Fund (1) N/A N/A

(1)No ranking is on the market, as a result of the fund just isn’t rated.

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APPCIC’s 2021-2022 Reinsurance Program

•First occasion All States retention of $2.5 million.

•All States first occasion tower of $38 million with no co-participation in any of
the layers and no limitation on loss adjustment bills whereas sustaining the
identical favorable historic deposit premium fee schedules.

•Full reinstatement accessible for all non-public market first occasion disaster
layers for assured second occasion protection. For the layer bought between
$2.5 million and the projected FHCF retention, to the extent that each one of our
protection or a portion thereof is exhausted in a catastrophic occasion and
reinstatement premium is due, we've got bought sufficient RPP restrict to pay the
premium needed for the reinstatement of this protection.

•APPCIC additionally purchases intensive a number of line extra per threat reinsurance with
numerous reinsurers as a result of high-value dangers it insures in each the private
residential and business a number of peril strains of enterprise. Below this a number of
line extra per threat contract, APPCIC has protection of $8.5 million in extra of
$0.5 million final web loss for every threat and every property loss, and $1
million in extra of $0.3 million for every casualty loss. A $19.5 million
mixture restrict applies to the time period of the contract for property-related losses
and a $2.0 million mixture restrict applies to the time period of the contract for
casualty-related losses. This contract additionally comprises a profit-sharing function if
particular efficiency measures are met.

•For the FHCF Reimbursement Contract efficient June 1, 2021, APPCIC has
continued the election of the 90% protection stage. We estimate the FHCF layer
will present roughly $18.4 million of protection for APPCIC, which inures to
the advantage of the open market protection secured from non-public reinsurers.


Reinsurers

The desk beneath gives the A.M. Finest and S&P monetary energy rankings for
every of the biggest third-party reinsurers in APPCIC's 2021-2022 reinsurance
program:

Reinsurer                                    A.M. Finest      S&P
Chubb Tempest Reinsurance Ltd.                  A++         AA
Lancashire Insurance coverage Firm Restricted             A          A-
Varied Lloyd's of London Syndicates             A          A+

Florida Hurricane Disaster Fund (1) N/A N/A

(1)No ranking is on the market, as a result of the fund just isn’t rated.

The full value of the 2021-2022 reinsurance applications for UPCIC and APPCIC,
excluding inner reinsurance mentioned above, is projected to be $584 million,
representing roughly 35% of estimated direct premium earned for the
12-month treaty interval.

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RESULTS OF OPERATIONS AND ANALYSIS OF FINANCIAL CONDITION

Highlights for the quarter ended March 31, 2022

•Permitted price filings are growing written and earned premium as they take
impact and earn in over the coverage interval

•Fee will increase for Pennsylvania and Indiana had been permitted and applied with
a lot of price filings underway

•Publicity administration efforts designed to enhance underwriting outcomes are
leading to a discount in coverage rely and associated charges

•Web funding revenue elevated as market rates of interest rise, nevertheless the
rising rates of interest have lowered the market worth of our investments ensuing
in unrealized losses

•Losses and LAE, web had been greater this quarter in comparison with the identical interval final
12 months primarily as a consequence of a better price of accrual for the present accident 12 months
reserves to handle traits in Florida

•Expense administration efforts lowered the expense ratio together with decrease fee
charges on renewals and spending self-discipline

•The corporate continued to return shareholder worth with quarterly dividends and
modest share repurchases

•Demotech, Inc. affirmed the Monetary Stability Score® of A, Distinctive for
every of the Insurance coverage Entities

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First quarter of fiscal 2022 outcomes of operations comparisons are
to first quarter of fiscal 2021 (except in any other case specified).

Outcomes of Operations – Three Months Ended March 31, 2022 In comparison with Three
Months Ended March 31, 2021

Web revenue for the three months ended March 31, 2022, was $17.5 million in contrast
to $26.4 million for a similar interval in 2021. Weighted common diluted widespread
shares excellent for the three months ended March 31, 2022 had been decrease by 0.2%
to 31.2 million shares from 31.3 million shares for a similar interval of the prior
12 months. Diluted EPS for the three months ended March 31, 2022 was $0.56 in contrast
to $0.84 for a similar interval in 2021. Benefiting the quarter had been will increase in
premiums earned, web, a rise in fee income, and a rise in web
funding revenue, partially offset by a rise in working prices and
bills, a lower in realized positive factors and a rise in unrealized losses on
fairness securities. Direct premium earned and premiums earned, web had been up 10.4%
and 10.6%, respectively, as a consequence of premium progress in 15 of the 19 states wherein
we're licensed and writing throughout the previous 12 months because of price
will increase applied throughout 2021 and 2022. The web loss and LAE ratio was 68.8%
for the three months ended March 31, 2022, in comparison with 59.2% for a similar interval
in 2021 reflecting greater core losses, a rise in extra climate occasions
past these anticipated, and better prior years' reserve growth. Because of this
of the above and additional defined beneath, the mixed ratio for the three
months ended March 31, 2022 was 97.9% in comparison with 93.1% for the three months
ended March 31, 2021. Additionally see the dialogue above underneath "Overview-Tendencies."

An in depth dialogue of our outcomes of operations follows the desk beneath (in
hundreds, besides per share knowledge).

                                                           Three Months Ended
                                                                March 31,                                Change
                                                         2022               2021                $                    %
PREMIUMS EARNED AND OTHER REVENUES
Direct premiums written                              $ 396,481          $ 365,314          $  31,167                    8.5  %
Change in unearned premium                              18,122             10,292              7,830                   76.1  %
Direct premium earned                                  414,603            375,606             38,997                   10.4  %
Ceded premium earned                                  (145,539)          (132,301)           (13,238)                  10.0  %
Premiums earned, web                                   269,064            243,305             25,759                   10.6  %
Web funding revenue                                    4,042              2,986              1,056                   35.4  %
Web realized positive factors (losses) on investments                  58                542               (484)                 (89.3) %
Web change in unrealized positive factors (losses) of fairness
securities                                              (3,396)              (494)            (2,902)                 587.4  %
Fee income                                      11,161              9,126              2,035                   22.3  %
Coverage charges                                              4,779              5,387               (608)                 (11.3) %
Different income                                            1,774              1,905               (131)                  (6.9) %
Complete premiums earned and different revenues               287,482            262,757             24,725                    9.4  %
OPERATING COSTS AND EXPENSES
Losses and loss adjustment bills                    185,106            143,963             41,143                   28.6  %
Basic and administrative bills                     78,297             82,423             (4,126)                  (5.0) %
Complete working prices and bills                     263,403            226,386             37,017                   16.4  %
Curiosity and amortization of debt issuance prices         1,608                 20              1,588                7,940.0  %

INCOME (LOSS) BEFORE INCOME TAXES                       22,471             36,351            (13,880)                 (38.2) %
Revenue tax expense (profit)                             4,934              9,943             (5,009)                 (50.4) %
NET INCOME (LOSS)                                    $  17,537          $  26,408          $  (8,871)                 (33.6) %

Different complete revenue (loss), web of taxes (42,910) (16,910)

           (26,000)                 153.8  %
COMPREHENSIVE INCOME (LOSS)                          $ (25,373)         $   9,498          $ (34,871)                       NM
DILUTED EARNINGS (LOSS) PER SHARE DATA:
Diluted earnings (loss) per widespread share             $    0.56          $    0.84          $   (0.28)                 (33.3) %
Weighted common diluted widespread shares excellent      31,227             31,277                (50)                  (0.2) %

NM - Not Significant


Direct premiums written elevated by $31.2 million, or 8.5%, for the quarter
ended March 31, 2022, pushed by premium progress inside our Florida enterprise of
$27.4 million, or 8.9%, and premium progress in our different states enterprise of $3.7
million, or 6.4%, as in comparison with the identical interval of the prior 12 months. Fee
will increase permitted in 2020 and 2021 for Florida and for sure different states, as
mentioned beneath, had been the principal driver of upper written premiums. In complete
insurance policies in drive declined 26,848, or
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2.8%, from 943,593 at December 31, 2021 to 916,745 at March 31, 2022. A abstract
of the latest price will increase that are driving will increase in written premium are
as follows:

•In December 2020, the FLOIR permitted an general 7.0% price enhance for UPCIC on
Florida private residential householders' line of enterprise, efficient December
2020 for brand spanking new enterprise and March 2021 for renewals.

•In September 2021, the FLOIR permitted an general 14.9% price enhance for UPCIC
on Florida private residential householders’ line of enterprise, efficient
September 2021 for brand spanking new enterprise and November 2021 for renewals.

•In December 2021, the FLOIR permitted an general 3.9% price enhance for UPCIC on
Florida private residential householders' line of enterprise, efficient January
2022 for brand spanking new enterprise and March 2022 for renewals.

•As well as, throughout the previous 12 months, price will increase for UPCIC had been permitted in
Alabama, Georgia, Indiana, Minnesota, North Carolina, Pennsylvania and Virginia.

These price will increase are utilized on new enterprise submissions and renewals from
the efficient date of their renewal after which are earned subsequently over the
coverage interval. The latest price will increase in Florida are in response to rising
declare prices pushed by greater prices of fabric and labor related to claims,
the price of climate occasions, the rising value of disaster and different reinsurance
defending policyholders and, extra importantly, the influence of "social inflation"
on claims as declare settlements more and more have concerned inflated calls for,
illustration and litigation. As well as, the Insurance coverage Entities' insurance policies
present for protection limits to be adjusted at renewal based mostly on third-party knowledge
sources that monitor components akin to modifications in prices for residential constructing
supplies and labor.

Throughout 2022, administration continued efforts to prudently handle coverage counts and
exposures supposed to sluggish the expansion of written premiums referring to new
enterprise in comparison with prior years whereas the above price will increase are taking
impact. Lowered new enterprise writings, declines in renewal retentions throughout
2022 and the influence of chosen coverage non-renewals, has resulted in a lower
in insurance policies in drive of 26,848, or 2.8%, from 943,593 at December 31, 2021 to
916,745 at March 31, 2022. Direct premiums written proceed to extend throughout
nearly all of states wherein we conduct enterprise. On account of our enterprise
technique, price modifications and disciplined underwriting initiatives, we've got seen a
lower in coverage rely, however a rise in in-force premium and complete insured
worth in a majority of states for the previous three years. In complete, we wrote
insurance policies in 19 states throughout every of the primary quarters of 2022 and 2021. In
addition, we're licensed to do enterprise in Tennessee and Wisconsin and are
continuing with product filings in these states. At March 31, 2022, insurance policies in
drive decreased 59,505 insurance policies, or 6.1%, premium in drive elevated $154.5
million, or 10.0%, and complete insured worth elevated $13.8 billion, or 4.5%,
in comparison with March 31, 2021.

The next desk gives direct premiums written for Florida and Different
States for the three months ended March 31, 2022 and 2021 ({dollars} in
hundreds):

                                   For the Three Months Ended
                                                                                                Development
                         March 31, 2022                     March 31, 2021                  12 months over 12 months
                                                          Direct
                      Direct                             Premiums
State             Premiums Written          %            Written             %               $              %
Florida        $     334,437              84.4  %    $      307,011        84.0  %    $      27,426       8.9  %
Different states          62,044              15.6  %            58,303        16.0  %            3,741       6.4  %
Complete          $     396,481             100.0  %    $      365,314       100.0  %    $      31,167       8.5  %



We search to prudently develop and generate long-term price ample premium in every
state the place we provide insurance policies. Our diversification technique seeks to extend
enterprise outdoors of Florida and to enhance geographical distribution inside
Florida. Premium progress outdoors Florida is a measure monitored by administration in
its efforts to satisfy that goal.

Direct premium earned elevated by $39.0 million, or 10.4%, for the quarter
ended March 31, 2022, reflecting the incomes of premiums written over the previous
12 months together with the advantage of price modifications.

Reinsurance permits our Insurance coverage Entities to restrict potential exposures to
catastrophic occasions and different coated occasions. Ceded premium represents premiums
paid to reinsurers for this safety and is a price which reduces web written
and web earned premiums. Ceded premium earned elevated $13.2 million, or 10.0%,
for the quarter ended March 31, 2022, as in comparison with the identical interval of the
prior 12 months. The rise in reinsurance prices displays a rise within the worth
of exposures we insure; elevated pricing when in comparison with the expired
reinsurance program and variations within the construction and design of the
respective applications. Reinsurance prices, as a proportion of direct premium
earned, decreased from 35.2% for the three months ended March 31, 2021 to 35.1%
for the three months ended March 31, 2022, primarily as a consequence of $2.6 million of
reinstatement premiums associated to Hurricane Sally recorded within the prior 12 months
quarter. Reinsurance prices related to every year's reinsurance program are
earned over the annual coverage interval which generally runs from June 1st to Could
31s.. See the dialogue above for the Insurance coverage Entities' 2021-2022 reinsurance
applications and "Merchandise 1-Notice 4 (Reinsurance)."
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Premiums earned, web of ceded premium earned, grew by 10.6%, or $25.8 million,
to $269.1 million for the three months ended March 31, 2022, reflecting an
enhance in direct premium earned offset by elevated prices for reinsurance.

Web funding revenue was $4.0 million for the three months ended March 31,
2022, in comparison with $3.0 million for a similar interval in 2021, a rise of $1.1
million, or 35.4%. Within the fourth quarter of 2021, we noticed will increase in funding
yields because the Federal Reserve took motion to handle the market issues of
inflation and employment. Because of this, liquidity generated by our portfolio from
curiosity funds, principal repayments and new investments are being invested
at greater charges, leading to general elevated funding returns on our
portfolio.

Complete invested belongings had been $1,085.6 million as of March 31, 2022 in comparison with
$1,093.7 million as of December 31, 2021. The lower is attributable to
unrealized losses, which elevated throughout the three months ended March 31, 2022
and decrease money balances. Money and money equivalents had been $165.4 million at March
31, 2022 in comparison with $250.5 million at December 31, 2021, a lower of 34.0%.
This lower is essentially attributable to modifications in operational money flows since
12 months finish. Money and money equivalents are invested brief time period till wanted to
settle loss and LAE funds, reinsurance premium funds and working money
wants or till they're deployed by our funding advisors.

Yields from money and money equivalents, short-term investments and the
available-for-sale debt portfolio are depending on the composition of the
portfolio, future market forces, financial coverage and rate of interest coverage from
the Federal Reserve. Throughout most of 2021, the Federal Reserve broadly maintained
decrease rates of interest, which impacted the efficient yields on newly bought
available-for-sale debt securities and in a single day money purchases and short-term
investments. This general pattern modified in late 2021 and into 2022 as inflation
worries started to influence the monetary markets, together with the markets' concern
over future Federal Reserve actions of price hikes and different actions to handle
inflation issues. Because of this, we noticed elevated yields on securities bought
in late 2021 and 2022 and elevated unrealized losses on our portfolio,
mirrored after-tax within the fairness part of our stability sheet as elevated
market yields negatively impacted the truthful worth of a lot of our
available-for-sale debt securities.

We promote investments, together with securities, from our funding portfolio from
time to time to satisfy our funding aims or make the most of market
alternatives. Throughout the three months ended March 31, 2022, gross sales of
available-for-sale debt securities resulted in web realized losses of $0.2
million and gross sales of fairness securities resulted in web realized positive factors of $0.3
million, producing complete web realized positive factors of $0.1 million throughout the first
quarter of 2022. Throughout the three months ended March 31, 2021, gross sales of
available-for-sale debt securities resulted in web realized losses of $0.2
million, gross sales of fairness securities resulted in web realized positive factors of $0.3
million and the sale of an funding actual property property resulted in a
realized acquire of $0.4 million, in complete producing web realized positive factors of $0.5
million. See "Merchandise 1-Notice 3 (Investments)."

There was a $3.4 million web unrealized loss in fairness securities throughout the
three months ended March 31, 2022 in comparison with a $0.5 million web unrealized loss
in fairness securities throughout the three months ended March 31, 2021. Web change in
unrealized positive factors or losses mirrored on the revenue assertion are the results of
modifications within the truthful market worth of our fairness securities throughout the interval for
securities nonetheless held on the finish of the reported interval and the reversal of
unrealized positive factors or losses for securities bought throughout the interval. See "Merchandise
1-Notice 3 (Investments)."

Fee income is comprised principally of brokerage commissions we earn
from third-party reinsurers (excluding the FHCF) on reinsurance positioned for the
Insurance coverage Entities. Fee income is earned pro-rata over the reinsurance
coverage interval which runs from June 1st to Could thirty first of the next 12 months. For
the three months ended March 31, 2022, fee income was $11.2 million,
in comparison with $9.1 million for the three months ended March 31, 2021. The rise
in fee income of $2.0 million, or 22.3%, for the three months ended
March 31, 2022 was primarily as a consequence of elevated commissions from third-party
reinsurers earned on elevated reinsurance premiums which is attributable as a consequence of
progress in our insured values for this 12 months's reinsurance program in addition to the
distinction in pricing and construction related to our reinsurance program when
in comparison with the prior 12 months.

Coverage charges had been $4.8 million for the three months ended March 31, 2022 in contrast
to $5.4 million for a similar interval in 2021. The lower of $0.6 million, or
11.3%, was the results of a lower within the mixed complete variety of new and
renewal insurance policies written throughout the three months ended March 31, 2022 in contrast
to the identical interval in 2021 in states the place we're permitted to cost this payment.

Different income, representing income from coverage installment charges, premium
financing and different miscellaneous revenue, was $1.8 million for the three months
ended March 31, 2022 in comparison with $1.9 million for a similar interval in 2021.

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The next desk presents losses and LAE incurred on a direct, ceded and web
foundation expressed in {dollars} and as a p.c of the respective quantities of
premiums earned. These quantities are additional categorized as i) core losses, ii)
climate occasions for the present accident 12 months and iii) prior years' reserve
growth ({dollars} in hundreds):


                                                                                    Three Months Ended March 31, 2022
                                           Direct               Loss Ratio              Ceded              Loss Ratio               Web               Loss Ratio
Premiums earned                       $   414,603                                    $ 145,539                                  $ 269,064

Loss and loss adjustment bills:
Core losses                           $   179,950                      43.4  %       $      44                       -  %       $ 179,906                    66.9  %
Climate occasions*                             4,545                       1.1  %               -                       -  %           4,545                     1.7  %
Prior years' reserve growth           10,660                       2.6  %          10,005                     6.9  %             655                     0.2  %
Complete losses and loss adjustment
bills                              $   195,155                      47.1  %       $  10,049                     6.9  %       $ 185,106               

68.8 %

*Contains solely present 12 months climate occasions past these anticipated.



                                                                                    Three Months Ended March 31, 2021
                                           Direct               Loss Ratio              Ceded              Loss Ratio               Web               Loss Ratio
Premiums earned                       $   375,606                                    $ 132,301                                  $ 243,305

Loss and loss adjustment bills:
Core losses                           $   145,228                      38.7  %       $      28                       -  %       $ 145,200                    59.7  %
Climate occasions*                                 -                         -                  -                       -                  -                       -
Prior years' reserve growth           92,070                      24.5  %          93,307                    70.5  %          (1,237)                   (0.5) %
Complete losses and loss adjustment
bills                              $   237,298                      63.2  %       $  93,335                    70.5  %       $ 143,963               

59.2 %

*Contains solely present 12 months climate occasions past these anticipated.

See “Merchandise 1-Notice 6 (Legal responsibility for Unpaid Losses and Loss Adjustment Bills)”
for change in legal responsibility for unpaid losses and LAE.

Administration appears at losses and LAE in three areas, as described beneath and
represented within the tables above, every of which has completely different drivers that influence
reported outcomes. Because of this, these elements of losses and LAE are described
individually. Total losses and LAE, web of reinsurance recoveries, had been $185.1
million leading to a 68.8% web loss and LAE ratio for the quarter ended March
31, 2022. This compares to $144.0 million leading to a 59.2% web loss and LAE
ratio for the quarter ended March 31, 2021.

The components impacting losses and LAE are as follows:

•Core losses

•Our core losses include all losses and LAE for the present 12 months excluding
each climate occasions for the present 12 months past these anticipated in our common
accrual course of and prior years' reserve growth. Core losses had been 43.4% of
direct premium earned for the quarter ended March 31, 2022 in comparison with 38.7% for
the identical interval in 2021. These losses and loss ratios profit from the potential
income generated by the administration of claims by our claims adjusting
affiliate, together with declare charges ceded to reinsurers, that are described beneath,
lowering core losses. The core loss ratio for 2021 and 2022 displays actions
taken by administration to extend its loss choose to accrue for present accident
12 months reserves. The pattern in core losses and LAE is growing 12 months over 12 months as
the claims setting in Florida continues to deteriorate. Additionally see the
dialogue above underneath "Overview-Tendencies." Core losses additionally enhance as premium
quantity will increase 12 months over 12 months.

•Climate occasions past these anticipated

•There have been $4.5 million of climate occasions past these anticipated and included in
the core losses throughout the quarter ended March 31, 2022.

•There have been no climate occasions past these anticipated throughout the quarter ended
March 31, 2021.

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•Prior years’ reserve growth

•Two drivers affect the quantities recorded as prior years’ reserve growth,
particularly: (i) modifications to prior estimates of direct and web final losses on
prior accident years excluding main hurricanes and (ii) modifications to prior
estimates of direct and web final losses on hurricanes.

?Throughout the quarter ended March 31, 2022, prior years’ reserve growth
totaled $10.7 million of direct losses and $0.7 million of web unfavorable loss
growth after the advantage of reinsurance.

•For hurricanes, prior years' reserve growth for the quarter ended March
31, 2022 was the results of a direct enhance within the final losses of $10.7
million offset by ceded hurricane losses of $10.0 million leading to web
unfavorable growth of $0.7 million. Direct and web losses elevated for
Hurricanes Irma and Matthew. Hurricane Irma direct losses elevated $10.6
million and web losses elevated $0.6 million. Hurricane Matthew direct and web
losses elevated $0.1 million.

•Excluding hurricanes, there was no prior years’ reserve growth for the
quarter ended March 31, 2022.

?For the quarter ended March 31, 2021, direct prior years’ reserve growth
of $92.1 million, much less $93.3 million ceded, resulted in $1.2 million web
growth.


•Prior years' reserve growth for the quarter ended March 31, 2021 was the
results of a gross enhance within the final losses for Hurricane Sally of $92
million. Adjustments to ceded reserves on prior years' hurricanes exceeded gross
growth by $1.2 million, leading to web favorable growth on prior
years' reserve growth. There was a rise in ceded reserves on Hurricane
Sally because of recoveries on losses outdoors of Florida, which have a decrease
attachment level, offset by a discount in Hurricane Irma recoveries
representing beforehand ceded losses not topic to restoration. Because of this, web
prior years' reserve growth was favorable.

•Excluding hurricanes, there was no prior years’ reserve growth for the
quarter ended March 31, 2021.

The monetary profit generated by our claims adjusting affiliate from the
administration of claims, together with declare charges ceded by our Insurance coverage Entities to
reinsurers, was $2.1 million for the three months ended March 31, 2022, in contrast
to $8.1 million throughout the three months ended March 31, 2021, pushed by the
recoveries from reinsurers and inner declare companies. The profit was recorded
within the condensed consolidated monetary statements as a discount to losses and
LAE.

For the three months ended March 31, 2022, common and administrative bills
had been $78.3 million in comparison with $82.4 million throughout the identical interval in 2021, as
follows ({dollars} in hundreds):

                                                                    Three Months Ended
                                                                         March 31,                                                Change
                                                        2022                                  2021                          $                 %
                                                $                Ratio                $                Ratio
Premiums earned, web                       $ 269,064                             $ 243,305                             $ 25,759              10.6  %
Basic and administrative bills:
Coverage acquisition prices                      54,723               20.3  %          56,458               23.2  %         (1,735)             (3.1) %
Different working prices                         23,574                8.8  %          25,965               10.7  %         (2,391)             (9.2) %
Complete common and administrative bills  $  78,297               29.1  %       $  82,423               33.9  %       $ (4,126)             (5.0) %


Basic and administrative bills decreased by $4.1 million, which was the
results of a lower in coverage acquisition prices of $1.7 million and different
working prices of $2.4 million. The full common and administrative expense
ratio was 29.1% for the three months ended March 31, 2022 in comparison with 33.9% for
the identical interval in 2021.

•The lower in coverage acquisition prices of $1.7 million displays a discount
within the fee price paid to brokers on the renewal of Florida insurance policies which
was lowered by 2 proportion factors to 10% efficient April 1, 2021. The
fee price paid to brokers on the renewal of Florida polices will likely be lowered
by an extra 2 proportion factors to eight% efficient Could 1, 2022, which is able to
profit future durations as the brand new price construction applies prospectively. The
lower in coverage acquisition prices as a proportion of premiums earned, web
throughout the quarter is primarily as a result of discount in commissions paid to
brokers.

•The lower in different working prices of $2.4 million primarily displays decrease
worker advantages and efficiency bonus accruals. The opposite working value ratio
was 8.8% for the three months ended March 31, 2022, in comparison with 10.7% for the
identical interval in 2021. This discount displays a number of components together with economies
of scale as we proceed to develop premium, and efficiencies gained from leveraging
expertise and spending self-discipline.
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On account of the above, the mixed ratio for the primary quarter ended March
31, 2022 was 97.9% in comparison with 93.1% for a similar interval in 2021. The rise
was the results of a lower within the common and administrative expense ratio
offset by a rise within the loss and LAE ratio as described above.

Curiosity and amortization of debt issuance prices elevated $1.6 million for the
three months ended March 31, 2022. The rise in curiosity and amortization of
debt issuance prices is the results of a rise within the excellent debt as a
results of our fourth quarter of 2021 borrowing. See "Merchandise 1-Notice 7 (Lengthy-term
debt)" for extra particulars.

Revenue tax expense was $4.9 million for the quarter ended March 31, 2022
in comparison with an revenue tax expense of $9.9 million for the quarter ended
March 31, 2021. Our efficient tax price ("ETR") decreased to 22.0% for the three
months ended March 31, 2022, as in comparison with 27.4% for the three months ended
March 31, 2021. The ETR decreased because of a decrease ratio of everlasting
gadgets relative to the quantity of revenue earlier than taxes, principally non-deductible
compensation, and a better stage of discrete tax advantages primarily due an
enhance within the Florida company revenue tax price enacted on January 1, 2022.

Different complete loss, web of taxes for the three months ended March 31,
2022
, was $42.9 million in comparison with different complete lack of $16.9 million
for a similar interval in 2021, reflecting after-tax modifications in truthful worth of
available-for-sale debt securities held in our funding portfolio and
reclassifications out of gathered different complete revenue for
available-for-sale debt securities bought. See “Merchandise 1-Notice 11 (Different
Complete Revenue (Loss))” for extra details about the quantities
comprising different complete revenue (loss), web of taxes for these durations.

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Evaluation of Monetary Situation-As of March 31, 2022 In comparison with December 31,
2021

We imagine that money flows generated from operations will likely be enough to satisfy
our working capital necessities for at the least the subsequent twelve months. We make investments
quantities thought-about to be in extra of present working capital necessities.

The next desk summarizes, by sort, the carrying values of investments as
of the dates introduced (in hundreds):

                                                  As of
                                       March 31,       December 31,
Kind of Funding                       2022              2021

Obtainable-for-sale debt securities $ 1,014,677 $ 1,040,455

Fairness securities                         65,126            47,334

Funding actual property, web                5,845             5,891
Complete                                $ 1,085,648      $  1,093,680

See “Merchandise 1-Condensed Consolidated Statements of Money Flows” and “Merchandise 1-Notice 3
(Investments)” for explanations on modifications in investments.

Pay as you go reinsurance premiums symbolize the portion of unearned ceded written
premium that will likely be earned pro-rata over the protection interval of our reinsurance
program, which runs from June 1st to Could thirty first of the next 12 months. The
lower of $131.6 million to $109.4 million as of March 31, 2022 was as a result of
amortization of ceded written premium for the reinsurance prices referring to our
2021-2022 disaster reinsurance program earned throughout the interval.

Reinsurance recoverable represents the estimated quantity of paid and unpaid
losses, LAE and different bills which are anticipated to be recovered from
reinsurers. The lower of $80.9 million to $104.7 million as of March 31, 2022
was primarily as a result of collections of quantities recoverable from reinsurers
referring to settled claims from hurricanes and coated by our reinsurance
contracts.

Premiums receivable, web, represents quantities receivable from policyholders. The
lower in premiums receivable, web of $3.3 million to $61.7 million as of
March 31, 2022 pertains to client fee habits of our enterprise. The quantity
of direct premiums written throughout a calendar 12 months tends to extend simply prior
to the second quarter and tends to lower approaching the fourth quarter.

Deferred coverage acquisition prices ("DPAC") decreased by $5.2 million to $103.6
million as of March 31, 2022, which is in step with the seasonal premium
traits of written premium. As well as DPAC was impacted by the discount to
Florida renewal commissions applied throughout 2021 and different modifications to the
Firm's fee construction. See "Merchandise 1-Notice 5 (Insurance coverage Operations)" for a
roll-forward within the stability of our DPAC.

Revenue taxes recoverable represents the distinction between estimated tax
obligations and tax funds made to taxing authorities. As of March 31, 2022,
the stability recoverable was $2.3 million, representing quantities due from taxing
authorities at that date, in comparison with a stability recoverable of $16.9 million as
of December 31, 2021. Revenue taxes recoverable as of March 31, 2022 will both
be refunded or utilized to future durations to offset future federal and state
revenue tax obligations.

Deferred revenue taxes symbolize the estimated tax asset or tax legal responsibility brought on
by short-term variations between the tax return foundation of sure belongings and
liabilities and quantities recorded within the monetary statements. Throughout the three
months ended March 31, 2022, deferred tax belongings elevated by $23.7 million to
$40.1 million primarily as a consequence of a rise in unrealized losses on investments
and a lower in unearned premiums web of pay as you go reinsurance premiums.
Deferred revenue taxes reverse in future years because the short-term variations
between ebook and tax reverse.

See "Merchandise 1-Notice 6 (Legal responsibility for Unpaid Losses and Loss Adjustment Bills)"
for a roll-forward within the stability of our unpaid losses and LAE. Unpaid losses
and LAE decreased by $101.7 million to $244.5 million as of March 31, 2022. The
majority of the lower is from the settlement of losses from prior hurricanes
and prior massive climate occasions. Total, unpaid losses and LAE decreased, as
declare settlements exceeded new rising claims. Unpaid losses and LAE are web of
estimated subrogation recoveries.

Unearned premiums symbolize the portion of direct premiums written that will likely be
earned pro-rata sooner or later. The lower of $18.1 million from December 31,
2021 to $839.6 million as of March 31, 2022 displays the seasonality of our
enterprise, which varies from month to month.

Advance premium represents premium funds made by policyholders forward of the
efficient date of the insurance policies. The rise of $31.4 million to $85.1 million
as of March 31, 2022 displays buyer fee habits and the fee habits
of mortgage escrow service suppliers.
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We keep a short-term money funding technique sweep to maximise funding
returns on money balances. There have been no ebook overdrafts as of March 31, 2022
in comparison with ebook overdrafts totaling $26.8 million as of December 31, 2021. The
lower of $26.8 million is the results of greater money balances accessible for
offset as of March 31, 2022 in comparison with December 31, 2021. See "-Liquidity and
Capital Sources" for extra data.

Reinsurance payable, web, represents the unpaid reinsurance premium installments
owed to reinsurers, unpaid reinstatement premiums as a consequence of reinsurers and money
advances obtained from reinsurers, if any. On June 1st of every 12 months, we renew
our core disaster reinsurance program and file the estimated annual value of
our reinsurance program. These estimated annual prices are elevated or decreased
throughout the 12 months based mostly on premium changes or because of new placements
throughout the 12 months. The annual value initially will increase reinsurance payable, which
is then lowered as installment funds are remodeled the coverage interval of the
reinsurance, which generally runs from June 1st to Could thirty first. The stability
decreased by $175.9 million to $12.7 million as of March 31, 2022 because of
the timing of the above gadgets.

Different liabilities and accrued bills elevated by $16.4 million to $43.8
million
as of March 31, 2022, primarily pushed from a rise in unearned
income and different liabilities as a result of timing of funds.

Capital assets, web, decreased by $33.7 million for the three months ended
March 31, 2022, reflecting a web lower in complete stockholders' fairness and
long-term debt. The change in stockholders' fairness was principally the results of
will increase coming from our 2022 web revenue and share-based compensation, offset
by declines within the after-tax modifications within the truthful worth of our available-for-sale
debt securities, treasury share purchases and dividends to shareholders.
Obtainable-for-sale debt securities decline in truthful worth of $56.9 million
(earlier than tax) within the first quarter of 2022, brought on the web unrealized loss
place of $20.2 million at December 31, 2021 to extend to $77.2 million at
March 31, 2022. Present market outlooks are signaling additional Federal Reserve
tightening which might proceed to have a destructive influence on the valuation of
available-for-sale debt securities. See "Merchandise 1-Condensed Consolidated
Statements of Stockholders' Fairness" and "Merchandise 1-Notice 8 (Stockholders' Fairness)"
for clarification of modifications in treasury inventory.

The discount in debt of $0.4 million was the results of principal funds on
debt throughout 2022. See “-Liquidity and Capital Sources” for extra data.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity is a measure of an organization's means to generate enough money flows
to satisfy its brief and long-term obligations. Funds generated from operations
have been enough and we count on them to be enough to satisfy our present and
long run liquidity necessities.

The stability of money and money equivalents, excluding restricted money, as of March
31, 2022 was $165.4 million, in comparison with $250.5 million at December 31, 2021.
See "Merchandise 1-Condensed Consolidated Statements of Money Flows" for a
reconciliation of the stability of money and money equivalents between March 31,
2022 and December 31, 2021. The lower in money and money equivalents was pushed
by money flows utilized in working actions, investing and financing actions.
Our money funding technique at occasions contains money investments the place the correct
of offset towards different financial institution accounts doesn't exist. A ebook overdraft happens
when aggregating the ebook stability of all accounts at a monetary establishment,
for accounts which have the correct of offset, and if the aggregation ends in a
web destructive ebook stability, that stability is reclassified from money and money
equivalents in our Condensed Consolidated Stability Sheet to ebook overdraft. Money
and money equivalents balances can be found to settle ebook overdrafts, and to
pay reinsurance premiums, bills and claims. Reinsurance premiums are paid in
installments throughout the reinsurance coverage interval, which runs from June 1st to
Could thirty first of the next 12 months. The FHCF reimbursement premiums are paid in
three installments on August 1st, October 1st, and December 1st, and third-party
reinsurance premiums are typically paid in 4 installments on July 1st,
October 1st, January 1st and April 1st, leading to vital funds at
these occasions. See "Merchandise 1-Notice 12 (Commitments and Contingencies)" and extra
dialogue beneath underneath the caption "-Materials Money Necessities" for extra
data.

The stability of restricted money and money equivalents as of March 31, 2022 and
December 31, 2021 represents money equivalents on deposit with sure regulatory
businesses within the numerous states wherein our Insurance coverage Entities do enterprise.

Liquidity is required on the holding firm for us to cowl the fee of
holding firm common working bills and contingencies, dividends to
shareholders (if and when licensed and declared by our Board of Administrators),
fee for the doable repurchase of our widespread inventory (if and when licensed
by our Board of Administrators), fee of our tax obligations to taxing
authorities, settlement of taxes between subsidiaries in accordance with our tax
sharing settlement, capital contributions to subsidiaries, if wanted, and
curiosity and principal funds on excellent debt obligations of the holding
firm. See "Merchandise 1-Notice 5 (Insurance coverage Operations)." The declaration and fee
of future dividends to our shareholders, and any future repurchases of our
widespread inventory, will likely be on the discretion of our Board of Administrators and can
depend on many components, together with our working outcomes, monetary situation,
debt covenants and any regulatory constraints. New laws or modifications to
present laws imposed on the Firm and its associates may influence
the quantity and timing of future dividend funds to the dad or mum. Principal
sources of liquidity for the holding firm embody dividends paid by our
service entities generated from revenue earned on charges paid by the Insurance coverage
Entities to affiliated firms for common company, inspections and claims
adjusting companies. Dividends are additionally paid from revenue earned from brokerage
commissions earned on reinsurance contracts positioned by our wholly-owned
subsidiary, Blue Atlantic Reinsurance Company, and coverage charges. We additionally
keep top quality investments in our portfolio as a supply of liquidity
together with ongoing curiosity and dividend revenue from these
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investments. As mentioned in "Merchandise 1-Notice 5 (Insurance coverage Operations)," there are
limitations on the dividends the Insurance coverage Entities could pay to their instant
dad or mum firm, Safety Options, Inc. ("PSI", previously referred to as Common
Insurance coverage Holding Firm of Florida).

The utmost quantity of dividends that may be paid by Florida insurance coverage firms
with out prior approval of the FLOIR is topic to restrictions as referenced
beneath and in "Merchandise 1-Notice 5 (Insurance coverage Operations)." Dividends from the
Insurance coverage Entities can solely be paid from gathered unassigned funds derived
from web working income and web realized capital positive factors. Topic to such
gathered unassigned funds, the utmost dividend that could be paid by the
Insurance coverage Entities to PSI with out prior approval (an "strange dividend") is
additional restricted to the lesser of statutory web revenue from operations of the
previous calendar 12 months or statutory unassigned surplus as of the previous 12 months
finish. Throughout the three months ended March 31, 2022 and the 12 months ended
December 31, 2021, the Insurance coverage Entities didn't pay dividends to PSI. As of
March 31, 2022, the Insurance coverage Entities didn't have the capability to pay strange
dividends.

On November 23, 2021, we entered into Notice Buy Agreements with sure
institutional accredited buyers and certified institutional patrons pursuant
to which we issued $100 million of 5.625% Senior Unsecured Notes due 2026. We
intend to make use of the web proceeds to assist the Insurance coverage Entities' statutory
capital necessities and for common company functions. If needed, the
Firm additionally has quantities accessible underneath our unsecured revolving mortgage as
mentioned in "Merchandise 1-Notice 7 (Lengthy-term debt)."

Liquidity for the Insurance coverage Entities is primarily required to cowl funds for
reinsurance premiums, claims funds together with potential funds of
disaster losses (offset by restoration of any reimbursement quantities underneath our
reinsurance agreements), charges paid to associates for managing common company
companies, inspections and claims adjusting companies, agent commissions, premium
and revenue taxes, regulatory assessments, common working bills, and
curiosity and principal funds on debt obligations. The principal supply of
liquidity for the Insurance coverage Entities consists of the income generated from the
assortment of premiums earned, web, curiosity and dividend revenue from the
funding portfolio, the gathering of reinsurance recoverable and financing
charges.

Our insurance coverage operations present liquidity as premiums are typically obtained
months and even years earlier than potential losses are paid underneath the insurance policies
written. Within the occasion of catastrophic occasions, a lot of our reinsurance agreements
present for "money advance" whereby reinsurers advance or prepay quantities to us,
thereby offering liquidity, which we make the most of within the declare settlement course of.
As well as, the Insurance coverage Entities keep substantial investments in extremely
liquid, marketable securities, which might generate funds upon sale. The common
credit standing on our available-for-sale securities was A+ as of March 31, 2022
and December 31, 2021. Credit score rankings are a measure of assortment threat on
invested belongings. Credit score rankings are supplied by third get together nationally
acknowledged ranking businesses and are periodically up to date. Administration establishes
pointers for minimal credit standing and general credit standing for all
investments. The period of our available-for-sale securities was 4.5 years at
March 31, 2022 in comparison with 4.4 years at December 31, 2021. Period is a measure
of a bond's sensitivity to rate of interest modifications and is utilized by administration to
restrict the potential influence of longer-term investments.

The Insurance coverage Entities are accountable for losses associated to catastrophic occasions
in extra of protection supplied by the Insurance coverage Entities' reinsurance applications
and retentions earlier than our reinsurance safety commences. Additionally, the Insurance coverage
Entities are accountable for all different losses that in any other case will not be coated
by the reinsurance applications and any quantities arising within the occasion of a reinsurer
default. Losses or a default by reinsurers could have a cloth adversarial impact on
both of the Insurance coverage Entities, on our enterprise, monetary situation, outcomes
of operations and liquidity.

Capital Sources

Capital assets present safety for policyholders, furnish the monetary
energy to assist the enterprise of underwriting insurance coverage dangers and facilitate
continued enterprise progress. The next desk gives our stockholders'
fairness, complete long-term debt, complete capital assets, debt-to-total capital
ratio and debt-to-equity ratio for the durations introduced ({dollars} in hundreds):

                                           As of
                               March 31,       December 31,
                                  2022             2021
Stockholders' fairness          $ 396,341       $    429,702
Complete long-term debt            103,384            103,676
Complete capital assets       $ 499,725       $    533,378

Debt-to-total capital ratio        20.7  %            19.4  %
Debt-to-equity ratio               26.1  %            24.1  %


The debt-to-total capital ratio is complete long-term debt divided by complete capital
assets, whereas the debt-to-equity ratio is complete long-term debt divided by
stockholders' fairness. These ratios assist administration measure the quantity of
financing leverage in place in relation to fairness and future leverage capability.
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As described in our Annual Report on Type 10-Okay for the 12 months ended December 31,
2021, UPCIC entered right into a surplus observe with the State Board of Administration
of Florida underneath Florida's Insurance coverage Capital Construct-Up Incentive Program on
November 9, 2006. The excess observe has a twenty-year time period, with quarterly
funds of principal and curiosity that accrue per the phrases of the observe
settlement. At March 31, 2022, UPCIC was in compliance with the phrases of the
surplus observe. Complete adjusted capital and surplus, which incorporates the excess
observe, was in extra of regulatory necessities for each UPCIC and APPCIC.

As mentioned in "Merchandise 1-Notice 7 (Lengthy-term Debt)," we entered right into a credit score
settlement and associated revolving mortgage with JPMorgan Chase Financial institution, N.A. in August
2021 which makes accessible an unsecured revolving credit score facility with an
mixture dedication to not exceed $35.0 million. Borrowings underneath the Revolving
Mortgage mature 364 days after the date of the mortgage. The Revolving Mortgage comprises
customary monetary covenants. As of March 31, 2022, the Firm was in
compliance with all relevant covenants, together with monetary covenants. We had
not drawn any quantities underneath the Revolving Mortgage as of March 31, 2022.

In November 2021, we accomplished a personal placement providing by which we
issued and bought $100 million of 5.625% Senior Unsecured Notes due 2026 (the
"Notes") to sure institutional accredited buyers and certified
institutional patrons. The Notes mature on November 26, 2026, at which period the
complete $100 million of principal is due and payable. At any time on or after
November 23, 2023, the Firm could redeem all or a part of the Notes. See "Merchandise
1-Notice 7 (Lengthy-term debt)" for extra particulars. As of March 31, 2022, we had been
in compliance with all relevant covenants, together with monetary covenants of
this observe settlement.

We can even proceed to judge alternatives to entry the debt capital
markets to lift extra capital. We anticipate any proceeds could be used
for common company functions, together with investing within the capital and surplus
of the Insurance coverage Entities.

Along with the liquidity typically supplied from operations, we keep a
conservative, well-diversified funding portfolio, predominantly comprised of
fastened revenue securities with a mean credit standing of A+, that focuses on
capital preservation and offering an ample supply of liquidity for potential
declare funds and different money wants. The portfolio's secondary funding
goal is to offer a complete price of return with emphasis on funding
revenue. Traditionally, we've got constantly generated funds from operations,
permitting our money and invested belongings to develop. We have now not needed to liquidate
funding holdings to fund both operations or financing actions.

Affect of the COVID-19 Pandemic

The influence of the COVID-19 pandemic on the credit score markets stays a key threat as
the world continues to navigate its penalties and the efforts taken by
governments to speed up and stimulate a monetary restoration. We stay in
common contact with our advisors to observe the credit score high quality of the issuers
of the securities in our portfolio and talk about applicable responses to credit score
downgrades or modifications in firms' credit score outlook. We imagine these measures,
when mixed with the inherent liquidity generated by our enterprise mannequin and in
our funding portfolio, will permit us to proceed to satisfy our short- and
long-term obligations.

Trying Ahead

We proceed to observe a variety of monetary metrics associated to our enterprise.
Though we've got not but skilled materials adversarial impacts on our enterprise or
liquidity, circumstances are topic to vary relying on the extent of the
financial downturn and the tempo and extent of an financial restoration. Important
uncertainties exist with the potential long-term influence of the COVID-19
pandemic, together with unexpected newly rising dangers that might have an effect on us and
future financial modifications because the Federal Reserve addresses the rising financial
issues of inflation, employment and recession. We'll proceed to observe the
broader financial impacts of the COVID-19 pandemic and its influence on our
operations and monetary situation together with liquidity and capital assets.

Widespread Inventory Repurchases

On November 3, 2020, we introduced that our Board of Administrators licensed a share
repurchase program underneath which we could repurchase within the open market as much as $20
million of excellent shares of our widespread inventory by November 3, 2022. We
could repurchase shares every now and then at our discretion, based mostly on ongoing
assessments of our capital wants, the market worth of our widespread inventory and
common market circumstances. We'll fund the share repurchase program with money
from operations.

Throughout the three months ended March 31, 2022, we repurchased an mixture of
320,528 shares of our widespread inventory within the open market at an mixture buy
worth of $3.9 million. Additionally, see "Half II, Merchandise 2-Unregistered Gross sales of Fairness
Securities and Use of Proceeds" for share repurchase exercise throughout the three
months ended March 31, 2022.

Off-Stability Sheet Preparations

The Firm doesn’t have any off-balance sheet preparations which are fairly
more likely to have a cloth impact on the monetary situation, outcomes of
operations, liquidity, or capital assets of the Firm, aside from
multi-year reinsurance contract commitments for future years that will likely be
recorded on the graduation of the protection interval. See “Merchandise 1-Notice 12
(Commitments and Contingencies)” for extra data.

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Money Dividends

The next desk summarizes the dividends declared by the Firm in 2022:

                                                                                                                            Money Dividend
                                     Dividend                     Shareholders                    Dividend                Per Widespread Share
         2022                      Declared Date                   Report Date                  Payable Date                   Quantity
First Quarter                        February 10, 2022                March 10, 2022                March 17, 2022       $           0.16


MATERIAL CASH REQUIREMENTS

The next desk represents our materials money necessities for which money
flows are fastened or determinable as of March 31, 2022 (in hundreds):

                                                   Complete              Subsequent 12 Months           Past 12 Months
Reinsurance payable and multi-year
commitments (1)                               $    303,658          $        92,893          $         210,765
Unpaid losses and LAE, direct (2)                  244,482                  137,888                    106,594
Lengthy-term debt (3)                                 134,981                    7,188                    127,793
Complete materials money necessities              $    683,121          $       

237,969 $ 445,152

(1)Quantity represents the fee of reinsurance premiums payable underneath
multi-year commitments. See “Merchandise 1-Notice 12 (Commitments and Contingencies).”

(2)There are typically no notional or said quantities associated to unpaid losses
and LAE. Each the quantities and timing of future loss and LAE funds are
estimates and topic to the inherent variability of authorized and market circumstances
affecting the obligations and make the timing of money outflows unsure. The
final quantity and timing of unpaid losses and LAE might differ materially from
the quantities within the desk above. Additional, the unpaid losses and LAE don't
symbolize all of the obligations that can come up underneath the contracts, however quite
solely the estimated legal responsibility incurred by March 31, 2022. Unpaid losses and
LAE are web of estimated subrogation recoveries. As well as, these balances
exclude quantities recoverable from the Firm's reinsurance program.
See "Merchandise 1-Notice 4 (Reinsurance)."

(3)Lengthy-term debt consists of a Surplus observe and 5.625% Senior unsecured notes.
See “Merchandise 1-Notice 7 (Lengthy-term debt).”

Affect of Inflation and Altering Costs

The monetary statements and associated knowledge introduced herein have been ready in
accordance with U.S. GAAP, which require the measurement of monetary place
and working outcomes by way of historic {dollars} with out contemplating modifications
within the relative buying energy of cash over time as a consequence of inflation. Our
major belongings are financial in nature. Because of this, rates of interest have a extra
vital influence on our efficiency than the consequences of the overall ranges of
inflation. Rates of interest don't essentially transfer in the identical route or with
the identical magnitude as the price of paying losses and LAE.

Insurance coverage premiums are established earlier than we all know the quantity of loss and LAE and
the extent to which inflation could have an effect on such bills. Consequently, we try
to anticipate the longer term influence of inflation when establishing price ranges.
Whereas we try to cost ample charges, we could also be restricted in elevating premium
ranges for aggressive and regulatory causes. Inflation additionally impacts the market
worth of our funding portfolio and the funding price of return. Any future
financial modifications which end in extended and growing ranges of inflation
might trigger will increase within the greenback quantity of incurred loss and LAE and thereby
materially adversely have an effect on future legal responsibility necessities.

Preparations with Variable Curiosity Entities

We entered right into a reinsurance captive association with a VIE within the regular
course of enterprise, and consolidated the VIE since we’re the first
beneficiary.

For an extra dialogue of our involvement with the VIE, see “Merchandise 1-Notice 14
(Variable Curiosity Entities).”

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no materials modifications throughout the interval coated by this Quarterly
Report on Type 10-Q to Essential Accounting Insurance policies and Estimates beforehand
disclosed in "Half II, Merchandise 7-Administration's Dialogue and Evaluation of Monetary
Situation and Outcomes of Operations" included in our Annual Report on Type 10-Okay
for the 12 months ended December 31, 2021.





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