United Insurance Holdings Corp. Announces Continued Shift to Commercial Specialty Lines With Sale of Southeast Personal Lines Renewal Rights to HCI Group, Inc.

Rhea-AI Summary

United Insurance Holdings Corp. (UIHC) has reached an agreement to transfer its personal lines business in Georgia, North Carolina, and South Carolina to HCI Group, Inc. (HCI). This transaction allows UIHC to focus capital on its growing commercial specialty property sector. HCI will provide 85% quota share reinsurance for UPC's policies in these states from December 31, 2021, to May 31, 2022, with estimated net ceding commissions of $8.3 million to $10.6 million. The deal also includes an upfront cash payment of $3.8 million from HCI to UIHC, with renewal rights granted until July 1, 2025.

Positive

• Reallocation of capital from personal lines to commercial specialty property.
• Estimated net ceding commissions to UPC between $8.3 million and $10.6 million.
• Upfront cash payment of $3.8 million from HCI enhances liquidity.

Negative

• HCI potentially holds substantial control over UPC's personal lines business until July 2025.

ST. PETERSBURG, Fla.--(BUSINESS WIRE)-- United Insurance Holdings Corp. (Nasdaq: UIHC), a data-driven personal and commercial lines insurance holding company with investments in emerging InsurTech innovations (“UPC Insurance”) and HCI Group, Inc. (NYSE: HCI), an InsurTech company with operations in insurance, software development and real estate (“HCI”), have reached an agreement in principle to transfer UPC Insurance’s personal lines business in the three Southeast states of Georgia, North Carolina and South Carolina to HCI. The transaction will enable UPC Insurance to reallocate capital from its personal lines portfolio to its fast growing commercial specialty property portfolio, which is underwritten by American Coastal Insurance Company.

Under the terms of the transaction, HCI will provide 85% quota share reinsurance on the in-force, new and renewal policies of United Property and Casualty Insurance Company (“UPC”) in Georgia, North Carolina and South Carolina for the period December 31, 2021 through May 31, 2022. UPC’s 15% quota share reinsurance with another reinsurer is expected to remain in place during this time period. Under the quota share arrangement, HCI will pay to UPC a provisional ceding commission of 25% of premium earned during the term of the contract that could increase up to 32% depending on the direct loss ratio results for the reinsured business. The estimated ceded earned premium for the quota share period December 31, 2021 through May 31, 2022 is $33.3 million (85% of $39.2 million). This would result in estimated net ceding commissions to UPC between $8.3 million and $10.6 million. HCI will also pay UPC a catastrophe allowance equal to 9% of premium earned estimated at $3.0 million for the quota share period December 31, 2021 through May 31, 2022.

Also as part of the transaction, UPC will grant HCI renewal rights in respect of its personal lines business in Georgia, North Carolina and South Carolina. Consideration for renewal rights includes an up-front cash payment from HCI to UPC of $3.8 million which will be adjusted based on the amount of premium transitioned to HCI, subject to a maximum of $6 million. In connection with the transaction, UPC Insurance will agree not to compete with HCI for the issuance of personal lines homeowners business in the three Southeast states until July 1, 2025.

The transaction is subject to negotiation of definitive agreements and customary closing conditions, including receipt of all applicable regulatory approvals.

Debevoise & Plimpton LLP is acting as legal advisor to UIHC.

About UPC Insurance

Founded in 1999, UPC Insurance is an insurance holding company that sources, writes and services personal and commercial residential property and casualty insurance policies using a group of wholly owned insurance subsidiaries and one majority owned insurance subsidiary through a variety of distribution channels. The Company currently writes policies in Florida, Georgia, Louisiana, New York, North Carolina, South Carolina and Texas. The Company also writes policies in Connecticut, Massachusetts, and New Jersey, where renewal rights have been sold and all premiums and losses are ceded. From its headquarters in St. Petersburg, UPC Insurance's team of dedicated professionals manages a completely integrated insurance company, including sales, underwriting, customer service and claims.

Forward-Looking Statements

Statements made in this press release may be “forward-looking statements.” These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words such as “may,” “will,” “expect,” “endeavor,” “project,” “believe,” “plan,” “anticipate,” “intend,” “could,” “would,” “estimate” or “continue” or the negative variations thereof or comparable terminology, and include statements regarding signing definitive documentation for the transaction, receipt of regulatory approvals and effectiveness of the quota share reinsurance agreement. We believe these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements may be found in our filings with the U.S. Securities and Exchange Commission, including the “Risk Factors” section in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. Forward-looking statements speak only as of the date on which they are made, and, except as required by applicable law, we undertake no obligation to update or revise any forward-looking statement.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211216006151/en/

United Insurance Holdings Corp.

Jessica Strathman

Deputy Chief Financial Officer

(727) 895-7737 / jstrathman@upcinsurance.com

OR

INVESTOR RELATIONS:

The Equity Group

Adam Prior

Senior Vice-President

(212) 836-9606 / aprior@equityny.com

Source: United Insurance Holdings Corp.

FAQ

What is the recent transaction between United Insurance Holdings Corp. and HCI Group, Inc.?

United Insurance Holdings Corp. has agreed to transfer its personal lines business in Georgia, North Carolina, and South Carolina to HCI Group, enabling UIHC to focus on commercial specialty property.

How much will HCI pay United Insurance Holdings in the recent agreement?

HCI will provide an upfront cash payment of $3.8 million to United Insurance Holdings and potential net ceding commissions estimated between $8.3 million and $10.6 million.

What percentage of reinsurance is HCI providing to UPC Insurance?

HCI will provide 85% quota share reinsurance on UPC's in-force, new, and renewal policies in the specified Southeast states.

When is the quota share reinsurance agreement effective?

The quota share reinsurance agreement is effective from December 31, 2021, through May 31, 2022.

What are the renewal rights granted as part of the transaction?

UPC Insurance grants HCI renewal rights for its personal lines business in Georgia, North Carolina, and South Carolina, with terms extending until July 1, 2025.