Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - UNITED INSURANCE HOLDINGS CORP. | exh992pressrelease-kiliman.htm |
| 8-K - 8-K - UNITED INSURANCE HOLDINGS CORP. | form8-kq22016investorprese.htm |
United Insurance Holdings Corp.
NASDAQ: UIHC
UPC Insurance and American Coastal Insurance Combination
Creating a Leading Specialty Property CAT Underwriter
August 17, 2016
2AUGUST 2016 INVESTOR PRESENTATION: UPC Merger with American Coastal
($000s) Years Ended December 31, YTD
2013 2014 2015 2016 Q2
Balance Sheet
Total Assets 434,013 435,377 436,890 507,967
GAAP Equity 208,791 207,391 195,823 193,949
Statutory Surplus 186,502 189,979 174,749 163,484
Income Statement
Gross Premiums Written 303,367 311,397 308,512 168,940
Net Premiums Written 185,209 184,205 161,216 47,193
Total Revenue 175,555 182,156 178,282 98,384
Net Income 46,205 44,963 36,476 21,686
Key Ratios
NPW / Equity 0.9x 0.9x 0.8x 0.5x
Loss & LAE Ratio 16% 18% 19% 23%
Expense Ratio 40% 41% 43% 42%
Combined Ratio 56% 59% 62% 65%
($000s) Years Ended December 31, YTD
2013 2014 2015 2016 Q2
Balance Sheet
Total Assets 441,230 584,169 740,021 996,760
GAAP Equity 107,587 203,763 239,211 259,156
Statutory Surplus 116,261 166,865 186,922 191,688
Income Statement
Gross Premiums Written 381,352 436,753 569,736 346,712
Net Premiums Written 256,670 292,349 385,928 149,826
Total Revenue 207,875 279,995 357,596 228,551
Net Income 20,342 41,013 27,358 12,792
Key Ratios
NPW / Equity 2.4x 1.4x 1.6x 1.2x
Loss & LAE Ratio 50% 45% 55% 59%
Expense Ratio 38% 37% 39% 38%
Combined Ratio 88% 81% 94% 97%
Overview of UPC and ACIC
American Coastal Insurance Company
ACIC Financial Highlights
UPC Insurance
UPC Financial Highlights
• United Insurance Overview:
− UPC Insurance is a specialized personal and commercial property cat
writer focused on coastal states from Texas to Maine
− Founded in 1999 in Florida; in 2015, UPC was the 25th largest
homeowners insurer in the U.S.
− From 2011 to 2015, UPC has grown from $53 million of equity capital
and $203 million of gross written premium to nearly $260 million of
equity capital and over $570 million of gross written premium
• American Coastal Overview:
− FL commercial residential property underwriter with over $300 million
in premium written in 2015; largest private carrier in market
− Five-year average ROE of 21%
− Founded in 2007 by BB&T and Dan Peed, with production and
underwriting exclusively by AmRisc. Acquired in June 2015 by Dan
Peed and related business partners
2015 DPW by Geography 2015 DPW by Product 2015 DPW by Geography 2015 DPW by Product
FL
51%
TX
9%
NY
9%
SC
8%
MA
6%
LA
6%
NC
5%
RI
4%
Other
2%
HO / Farm
Multi Peril
87%
Fire and
Allied
10%
Other
3%
FL
100%
Comm'l
Multi Peril
100%
$570M in
2015 DPW
$308M in
2015 DPW
3AUGUST 2016 INVESTOR PRESENTATION: UPC Merger with American Coastal
Transaction Highlights
Transaction • Combination of UPC Insurance and American Coastal in an all stock merger meant to qualify as a tax-free reorganization
Consideration Value
• Approximately $330 million, based on non-discounted share value¹
• For purchase accounting, shares have a discounted value of $278 million
(all-in discount of 15.7%) due to voting and transfer restrictions1
• Non-discounted multiple equivalent to 1.70x ACIC GAAP book value as
of June 30, 2016
• Discounted multiple of 1.44x 6/30/16 GAAP book value
Consideration Mix
• 100% stock representing 49% of pro forma UPC shares outstanding
• 20,956,355 common shares of UPC to be issued include:
− 7,297,128 shares with full transferability and voting rights
− 853,701 shares with 1-year lockup and full voting rights
− 6,423,809 shares with 3-year lockup and full voting rights
− 6,381,717 shares with 3-year lockup and 5-year limited voting rights
Approvals and Timing
• Anticipated close Q1 2017
• Subject to certain conditions, including approval by UPC Insurance’s
shareholders of the issuance of shares in the merger and receipt of
required regulatory approvals
Other
• UPC will retain all current Directors and named executive officers
• Dan Peed will become non-executive Vice Chair of the UPC Board and
continue to serve as CEO of AmRisc, LLC (unaffiliated MGA owned by
BB&T and Dan Peed)
• Three new Directors will be nominated by Dan Peed to join UPC Board
¹ Based on 30-day average closing price of UPC shares from July 6th 2016 to August 16th, 2016
4AUGUST 2016 INVESTOR PRESENTATION: UPC Merger with American Coastal
Pro Forma Organizational Chart
Insurance subsidiaries that underwrite policies and bear risk of loss Managing General Agency & Underwriter
Claims subsidiary
that provides field
inspection services
Reinsurance
subsidiary
providing risk
transfer capabilities
Family Security Insurance
Company, Inc.
100% Owned by FSH
Family Security
Underw riters, LLC
100% Ow ned by FSH
American Coastal Insurance
Company
100% owned by AHC
BlueLine Re
100% owned by AHC
100% owned by BCH
UPC Re
100% Ow ned by UIHC
United Insurance Holdings Corp. (NASDAQ: UIHC)
United Property & Casualty
Insurance Company
100% Owned by UIHC
Interboro Insurance
Company
100% Ow ned by UIHC
Family Security Holdings,
LLC (FSH)
100% Ow ned by UIHC
United Insurance
Management, L.C.
100% Ow ned by UIHC
AmCo Holding Company
(AHC)
100% owned by UIHC
BlueLine Cayman Holdings (BCH)
Skyw ay Claims Services,
LLC
100% Ow ned by UIHC
5AUGUST 2016 INVESTOR PRESENTATION: UPC Merger with American Coastal
Transaction Benefits
•Diminished volatility of earnings
•Increased access to capital
•Potential rating agency benefits
Positive effects of increased size, scale, stability and market
presence
•Reduction in aggregate PML
•Expected annual cost savings
•Larger volume means greater market impact
Reinsurance optimization and expense reduction
•Minimal integration risk given ACIC’s infrastructure and limited overlap of resources
•Disciplined, risk-management oriented operating environments
Strategic, Operational & Cultural Fit
•Ability to increase participation in AmRisc E&S book over time
•Sale of admitted commercial policies through UPC agency network outside of Florida
•Opportunity to increase business with other parts of BB&T Insurance
Growth Opportunities
•Personal lines and Commercial lines
•Admitted and E&S
•Independent retail agents, aggregators, wholesale brokers and carrier partnerships
Diversification
1
2
3
4
5
Combined entity creates a leading specialty insurance underwriter
of catastrophe exposed property in the U.S.
6AUGUST 2016 INVESTOR PRESENTATION: UPC Merger with American Coastal
Shareholder Value Creation
Transaction is expected to be immediately accretive to earnings per share
Transaction is expected to be immediately accretive to return on equity
Tangible book value per share expected to return to current level within 1 year
Significant reinsurance synergies expected to drive near-term cost savings
Develop opportunities to expand ACIC’s product offerings to other coastal
states
Ability to grow AmRisc relationship to further drive top line growth
Accretion
Future
Value
Creation
7AUGUST 2016 INVESTOR PRESENTATION: UPC Merger with American Coastal
Daniel Peed, CPCU, ARe
CEO of American Coastal
Background
• Currently serves as CEO of American Coastal and President and CEO of
AmRisc, LLC
• Mr. Peed has over 30 years of experience in the insurance industry
Includes both insurance and reinsurance underwriting focused on commercial property risk
• Mr. Peed previously was a Senior Vice President at Sorema N.A. Reinsurance
Company from 1991 – 2000
• He started his career as a Loss Prevention Consultant at Factory Mutual
Insurance Company (FM Global) from 1985 - 1991
• Mr. Peed received his MBA with insurance focus from University of North
Texas and a B.S. in Petroleum Engineering from Texas A&M University
AmRisc Overview
• AmRisc is a specialty windstorm MGA that has produced and underwritten
over $7 billion of direct written premium at a cumulative combined ratio of
approximately 55% since its founding in 2000
• These results include all the hurricane activity of 2004, 2005, 2008, and
2011
• AmRisc underwrites commercial property risks, including commercial
property construction, catastrophe property, commercial flood, residential
flood, tech property, and county habitational property risks
• The company was founded by Mr. Peed and others in 2000 and is based in
Houston, Texas
8AUGUST 2016 INVESTOR PRESENTATION: UPC Merger with American Coastal
American Coastal – Highlights
American Coastal is the largest writer of commercial residential insurance in Florida
•Attractive platform for expansion and diversification
•Superior underwriting and proven track record
5-year average combined ratio of 63%
5-year average ROE of 21%
5-year cumulative net earnings of $190mm
•Highest market share of private players in Florida Commercial Residential with 30%
•Long standing service to the Florida market and 15+ years since inception of AmRisc
•Exclusively short-tail property business (minimal tail)
•Sophisticated multi-model underwriting approach
•Data capture is best in the industry
•100% Voluntary / No takeout business
•Strong reinsurance program with high quality partners
•Strong relationship / growth opportunity with BB&T (AmRisc/CRC/BB&T/McGriff)
9AUGUST 2016 INVESTOR PRESENTATION: UPC Merger with American Coastal
Highly Complementary Platforms and
Skills
UPC and American Coastal have highly complementary capabilities and skill sets
Commercial lines expertise, portfolio and return on capital optimization very strong
Exclusive relationship with AmRisc in FL on admitted basis – largest windstorm MGA in U.S.
ACIC has a good reputation with incumbent Commercial Residential portfolio; no take-outs
ACIC has delivered high quality, historically consistent earnings
Dan Peed brings strategic vision for growth and opportunities in commercial lines space
Dan Peed desires to leave his investment in UPC and has accepted lock up periods
UPC
ACIC
Personal lines expertise
Geographic diversification well underway – expedites ACIC expansion opportunities
Well developed distribution system
Leadership team brings strong execution skills and developed infrastructure
Greg Branch brings extensive public company leadership experience
Investments in infrastructure provide efficient scalability
10AUGUST 2016 INVESTOR PRESENTATION: UPC Merger with American Coastal
Financially Compelling Transaction
Earnings per
Share
Tangible Book
Value
Improved
Leverage &
Capital Ratios
Improved
Underwriting
Results
• Immediately accretive to
earnings per share
• Combined ratio improvements
between 9-14% from ACIC’s
high margin business
• Manageable tangible book
value dilution, commensurate
with size and strategic value of
combination
• ACIC’s excess capital will
reduce underwriting leverage
and increase capital adequacy
• Enhanced Earnings Profile and Improved
Margins
− Higher margin lines from ACIC enhance
returns and improve the ability of the pro
forma company to fund future growth through
internally generated capital
− Potential to meaningfully increase
participation in E&S business of AmRisc
• Improved Diversification and Volatility of
Earnings
− Predictable source of business through ACIC’s
extension of exclusive MGA contract with
AmRisc for five years from close
− Larger pro forma entity with distinct lines of
business
• Reinsurance Synergies
− Combination of independent risk pools creates
meaningful savings to reinsurance costs
− Aggregate PML reduction will drive synergies
• Additional Benefits of Scale
− Increased access to and decreased cost of
capital, access to talent, potential ratings
attainment, and underwriting and claims
capabilities
Improved
Returns on
Equity
• Over 200bps in ROAE
enhancement in first year
11AUGUST 2016 INVESTOR PRESENTATION: UPC Merger with American Coastal
Illustrative Overview of the
Pro Forma Company
Balance Sheet Income Statement
Pro forma figures are shown as the sum of historical values and do not include any merger adjustments.
(Dollars in millions) YTD Q2 2016
UPC ACIC Pro Forma
Assets
Cash & Invested Assets 639.0$ 297.0$ 936.0$
Deferred Acquisition Costs 58.8 36.9 95.7
Premiums & Consid. Due 44.4 28.9 73.3
Goodwill 15.5 - 15.5
Other Assets 239.0 145.2 384.3
Total Assets 996.8$ 508.0$ 1,504.7$
Liabilities
Loss & LAE Reserves 117.0$ 53.0$ 170.0$
Unearned Premium Reserves 366.5 156.7 523.2
Total Debt 25.5 - 25.5
Other Liabilities 228.6 104.3 332.9
Total Liabilities 737.6$ 314.0$ 1,051.6$
Equity
Total Equity 259.2$ 193.9$ 453.1$
(Dollars in millions) YTD Q2 2016
UPC ACIC Pro Forma
Premiums
Gross Premiums Written 346.7$ 168.9$ 515.7$
Ceded Premiums Written 196.9 121.7 318.6
Net Premiums Written 149.8$ 47.2$ 197.0$
Revenues
Net Premiums Earned 215.5$ 96.4$ 312.0$
Net Investment Income 5.1 2.0 7.1
Net Realized Gains 0.4 - 0.4
Other Income 7.5 - 7.5
Total Revenues 228.6$ 98.4$ 326.9$
Expenses
Loss & LAE 126.9$ 22.6$ 149.5$
Policy Acquisition Costs 52.8 35.2 87.9
Operating and Underwriting 9.8 5.0 14.8
Interest Expense 0.2 - 0.2
General and Administrative 19.4 - 19.4
Total Expenses 209.0$ 62.9$ 271.9$
Net income
Pretax Income 19.5$ 35.5$ 55.0$
Income Tax Expense 6.7 13.8 20.6
Net Income 12.8$ 21.7$ 34.5$
12AUGUST 2016 INVESTOR PRESENTATION: UPC Merger with American Coastal
Pro Forma Capital Structure
Data as of 6.30.16 UPC AHC Pro Forma
($ in thousands)
Annualized Gross Premiums Written (GPW) 693,424$ 337,880$ 1,031,304$
Annualized Net Premiums Earned (NPE) 431,098$ 192,854$ 623,952$
Debt 25,486$ -$ 25,486$
Shareholders' Equity 259,156$ 193,949$ 453,105$
Total Capital 284,642$ 193,949$ 478,591$
Debt / Total Capital 9.0% 0.0% 5.3%
Annualized GPW / Total Capital 243.6% 174.2% 215.5%
Annualized NPE / Total Capital 151.5% 99.4% 130.4%
Pro forma figures are illustrative and not intended to forecast 2H-2016
13AUGUST 2016 INVESTOR PRESENTATION: UPC Merger with American Coastal
Conclusion
UPC’s merger with ACIC creates a very unique catastrophe
property underwriting specialist with over $1 billion of premium
in force
ACIC’s relationship with AmRisc provides unparalleled access to
commercial property expertise and great growth potential
Attractive financial terms provide for substantial upside for
shareholders
Insider ownership and restrictions placed on new shares being
issued create proper alignment of shareholder interests
The growth and stability of future earnings and returns on equity
are enhanced by this transaction
14
Cautionary Statement Regarding
Forward Looking Statements
This communication contains “forward-looking statements” that involve significant risks and uncertainties. All
statements other than statements of historical fact are statements that could be deemed forward-looking
statements, including: any statements regarding the anticipated timing of filings and approvals relating to the
proposed merger; any statements regarding the expected timing of the completion of the proposed merger;
any statements regarding the ability to complete the proposed merger considering the various closing
conditions; any statements of expectation or belief; any statement regarding the future financial performance
of the Company; and any statements of assumptions underlying any of the foregoing. These statements are
made as of the date of this communication and reflect management’s expectations, estimates and
assumptions based on current and available information at the time the document was prepared. Forward-
looking statements often include words such as “anticipate,” “believe,” “estimate,” “target,” “expect,”
“predict,” “plan,” “possible,” “potential,” “project,” “hope,” “intend,” “likely,” “will,” “should,” “could,” “may,”
“foreseeable,” “would” and similar expressions. However, the absence of these words or similar expressions
does not mean that a statement is not forward-looking. Readers are cautioned not to place undue reliance on
forward-looking statements. Forward-looking statements are not guarantees of future performance and
involve risks, uncertainties and other factors that may cause actual performance or achievements to be
materially different from any future results, performance or achievements expressed or implied by those
statements. Risks and uncertainties that could cause results to differ from expectations include, but are not
limited to: uncertainties as to the timing of the proposed merger; the possibility that various closing
conditions for the proposed merger may not be satisfied or waived, including that the stockholders of the
Company may not approve the Company’s issuance of common stock, par value $0.0001 per share, as
consideration for the proposed merger or that a governmental entity may prohibit, delay or refuse to grant
approval for the consummation of the proposed merger; the effects of disruption from the proposed merger
making it more difficult for the Company to maintain relationships with employees (including potential
difficulties in employee retention); the response of customers, vendors, other business partners and
governmental entities to the announcement of the proposed merger; legal proceedings that may be instituted
against the Company, its board of directors, executive officers and others following the announcement of the
definitive agreement entered into in respect of the merger; other business effects, including the effects of
industrial, economic, political or weather conditions outside of the Company’s control; transaction costs;
actual or contingent liabilities, including those related to dependence on key commercial relationships or the
expertise of certain personnel; and other risks and uncertainties discussed in this communication and other
documents filed with the SEC by the Company, as well as the Schedule 14A to be filed with the SEC by the
Company. The Company does not undertake any obligation to update any forward-looking statements as a
result of new information, future developments or otherwise, except as expressly required by law.
15
Additional Information Regarding
the Transaction and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy the
securities of the Company or the solicitation of any vote or approval. This communication is being
made in respect of the proposed merger transaction involving the Company, Kilimanjaro Corp., Kili
LLC, AmCo Holding Company, RDX Holding, LLC and certain members of RDX Holding, LLC. The
proposed issuance by the Company of shares of common stock in connection with such merger will be
submitted to the stockholders of the Company for their consideration. In connection therewith, the
Company intends to file relevant materials with the SEC, including a definitive proxy statement.
However, such documents are not currently available. The definitive proxy statement will be mailed to
the stockholders of the Company. BEFORE MAKING ANY VOTING OR ANY INVESTMENT DECISION,
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT
REGARDING THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE
FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders may obtain free copies of the definitive proxy statement, any
amendments or supplements thereto and other documents containing important information about the
Company, once such documents are filed with the SEC, through the website maintained by the SEC at
www.sec.gov. Copies of the documents filed with the SEC by the Company will be available free of
charge on the Company’s website at www.upcinsurance.com under the heading “Documents” within
the “SEC Filings” section in the “Investors Relations” portion of the Company’s website. Stockholders of
the Company may also obtain a free copy of the definitive proxy statement and any filings with the
SEC that are incorporated by reference in the definitive proxy statement by contacting the Company’s
Investor Relations Department at (727) 895-7737.
16
Participants in the Solicitation
The Company and its directors, executive officers and certain other members of management and
employees may be deemed to be participants in the solicitation of proxies in connection with the
proposed transaction. Information about the directors and executive officers of the Company is set
forth in its proxy statement for its 2016 annual meeting of stockholders, which was filed with the SEC
on April 5, 2016, its annual report on Form 10-K for the fiscal year ended December 31, 2015, which
was filed with the SEC on March 2, 2016, and in subsequent documents filed with the SEC, each of
which can be obtained free of charge from the sources indicated above. Other information regarding
the participants in the proxy solicitation of the stockholders of the Company and a description of their
direct and indirect interests, by security holdings or otherwise, will be contained in the preliminary and
definitive proxy statements and other relevant materials to be filed with the SEC when they become
available.
