UNIVERSAL INSURANCE HOLDINGS, INC. – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, all references to "we," "us," "our," and
"Company" refer to Universal Insurance Holdings, Inc. ("UVE") and its
wholly-owned subsidiaries. You should read the following discussion together
with our unaudited condensed consolidated financial statements ("Financial
Statements") and the related notes thereto included in "Part I, Item 1-Financial
Statements," and our audited condensed consolidated financial statements and the
related notes thereto included in "Part II, Item 8-Financial Statements and
Supplementary Data" in our Annual Report on Form 10-K for the year ended
December 31, 2021. Operating results for any one quarter are not necessarily
indicative of results to be expected for any other quarter or for the year.

Cautionary Note Regarding Forward-Looking Statements

In addition to historical information, this report may contain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The forward-looking statements anticipate results based on our
estimates, assumptions and plans that are subject to uncertainty. These
forward-looking statements may be identified by their use of words like "plans,"
"seeks," "expects," "will," "should," "anticipates," "estimates," "intends,"
"believes," "likely," "targets," and other words with similar meanings. These
statements may address, among other things, our strategy for growth, catastrophe
exposure and other risk management, product development, investment results,
regulatory approvals, market position, expenses, financial results, litigation
and reserves. We believe that 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 as a result of the risks set
forth below, which are a summary of those set forth in our Annual Report on Form
10-K for the year ended December 31, 2021. We undertake no obligation to update
or revise publicly any forward-looking statements, whether as a result of new
information, future events, or otherwise.

Risks and uncertainties that may affect, or have affected, our financial
condition and operating results include, but are not limited to, the following:

•Unanticipated increases in the severity or frequency of claims, including those
relating to catastrophes, severe weather events and changing climate conditions,
which, in some instances, have exceeded, and in the future may exceed our
reserves established for claims;

•Failure of our risk mitigation strategies, including failure to accurately and
adequately price the risks we underwrite and to include effective exclusions and
other loss limitation provisions in our insurance policies;

•Loss of independent insurance agents and inability to attract new independent
agents;

•Reliance on models, which are inherently uncertain, as a tool to evaluate
risks;

•The continued availability of reinsurance at current levels and prices, and our
ability to collect payments due from our reinsurers;

•Changes in industry trends, including changes due to the cyclical nature of the
industry and increased competition;

•Geographic concentration of our business in Florida and the effectiveness of
our growth and diversification strategy in new markets;

•Loss of key personnel and inability to attract and retain talented employees;

•Failure to comply with existing and future guidelines, policies and legal and
regulatory standards;

•The ability of our claims professionals to effectively manage claims;

•Litigation or regulatory actions that could result in significant damages,
fines or penalties;

•A downgrade in our Financial Stability Rating® and its impact on our
competitive position, the marketability of our product offerings, our liquidity
and profitability;

•The impact on our business and reputation of data and security breaches due to
cyber-attacks or our inability to effectively adapt to changes in technology;

•Our dependence on the returns of our investment portfolio, which are subject to
market risk;

•Legal, regulatory or tax changes that increase our operating costs and decrease
our profitability, such as limitations on rate changes or requirements to
participate in loss sharing;

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

•The ability of our Insurance Entities to comply with statutory capital and
surplus minimums and other regulatory and licensing requirements; and

•The ongoing impact of the COVID-19 pandemic on our business and the economy in
general.

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OVERVIEW

We are a vertically integrated holding company offering property and casualty
insurance and value-added insurance services. We develop, market and underwrite
insurance products for consumers predominantly in the personal residential
homeowners' line of business and perform substantially all other
insurance-related services for our primary insurance entities, including risk
management, claims management, and distribution. Our primary insurance entities,
Universal Property & Casualty Insurance Company ("UPCIC") and American Platinum
Property and Casualty Insurance Company ("APPCIC" and together with UPCIC, the
"Insurance Entities"), offer insurance products through both our appointed
independent agent network and our online distribution channels across 19 states
(primarily in Florida), with licenses to write insurance in two additional
states. The Insurance Entities seek to produce an underwriting profit (defined
as earned premium minus losses, loss adjustment expense ("LAE"), policy
acquisition costs and other operating costs) over the long term; maintain a
conservative balance sheet to prepare for years in which the Insurance Entities
are not able to achieve an underwriting profit; and generate investment income
on assets.

The following Management's Discussion and Analysis ("MD&A") is intended to
assist in an understanding of our financial condition and results of operations.
This MD&A should be read in conjunction with our Financial Statements and
accompanying Notes appearing elsewhere in this Report (the "Notes"). In
addition, reference should be made to our audited Consolidated Financial
Statements and accompanying Notes to Consolidated Financial Statements and
"Item 7-Management's Discussion and Analysis of Financial Condition and Results
of Operations" included in our Annual Report on Form 10-K for the year ended
December 31, 2021. Except for the historical information contained herein, the
discussions in this MD&A contain forward-looking statements that involve risks
and uncertainties. Our future results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed above under "Cautionary Note
Regarding Forward-Looking Statements."

Trends

Florida Trends

We are currently working through a cycle to improve long-term rate adequacy and
earnings for the Insurance Entities by increasing rates and managing exposures,
while taking advantage of what we believe to be opportunities in a dislocated
market. The Florida personal lines homeowners' market currently can be
characterized as a "hard market", where insurance premium rates are escalating,
insurers are reducing coverages, and underwriting standards are tightening as
insurers closely monitor insurance rates and manage coverage capacity. Due to
conditions in the Florida market and factors more generally affecting the U.S.
and global reinsurance markets, reinsurance capacity in recent years has also
been subject to less favorable pricing and terms. These market forces decrease
competition among admitted insurers, and ultimately result in the increased use
of Citizens Property Insurance Corporation ("Citizens"), which was created to be
the State's residual property insurance market. In recent years, in response to
adverse behaviors and conditions in the Florida residential market, most
admitted market competitors have sought and often received approval for
significant rate increases. Meanwhile, Citizens' rate increases are limited by
law, resulting in its policies, in a hard market, becoming priced lower than
admitted market policies. This causes Citizens to become viewed as a desirable
alternative to the admitted market as admitted market insurers manage through
the hard market challenges. Our Insurance Entities likewise have taken and
continue to take action to manage through this hard market by increasing rates
and prudently managing exposures while also seeking to maintain their
competitive position in the market and supporting our current policyholders and
agents.

While addressing rate adequacy for the Insurance Entities, we continue to
experience increased costs for losses and LAE in the Florida market, where an
industry has developed around the solicitation, filing and litigation of
personal residential claims. These dynamics have been made worse by the
litigation financing industry, which in some cases, funds these actions. In
addition, rising inflation, as seen in the cost of labor and material supplies,
has further escalated costs associated with the settlement of claims. These
behaviors and related rising repair costs are a chief contributing factor for
the rate increases in this market. These behaviors result in a pattern of
continued increases in year-over-year levels of represented claims, the
increases in purported claim amounts, and increased demands for attorneys' fees.
Active solicitation of personal residential claims in Florida by policyholder
representatives, remediation companies and repair companies has led to an
increase in the frequency and severity of personal residential claims in
Florida, exceeding historical levels and levels seen in other jurisdictions.
Information prepared by the Florida Office of Insurance Regulation also shows
that claims in Florida are litigated at a substantially disproportionate rate
when compared to other states. This is largely due to a Florida statute
providing a one-way right of attorneys' fees against insurers which has, when
coupled with certain other statutes and judicial rulings, produced a legal
environment in Florida that encourages litigation, in many cases without regard
to the underlying merits of the claims. The one-way right to attorneys' fees
essentially means that unless an insurer's position is entirely upheld in
litigation, the insurer must pay the plaintiff's attorneys' fees in addition to
its own defense costs. This affects not only claims that are litigated to
resolution, but also the settlement discussions that take place with nearly all
litigated claims. This also affects a large number of claims from inception or
during the adjusting process as a substantial and growing percentage of
policyholders obtain representation early in the process, and sometimes even
before notifying insurers of their claims. These market conditions also add, and
will continue to add, complexity to efforts to efficiently and expeditiously
adjust claims. This is due to an increasing number of policyholders who have one
or more recent prior losses with the Insurance Entities or with other insurers,
which then require evaluation during subsequent claims and determinations
regarding whether property has been repaired consistently with the scope and
amount of damage previously asserted.

The one-way right to attorney fees creates a nearly risk-free environment, and
incentive, for attorneys to pursue litigation against insurers. The result has
been a substantial increase in represented and litigated claims in Florida, far
outpacing levels experienced in other states. In April 2021, the Florida
legislature passed a bill intending to curtail the adverse claim trends
impacting the Florida homeowners' insurance market. Most provisions of the bill
went into effect on July 1, 2021. Among its provisions, the bill
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creates a new pre-suit notice requirement wherein an insured must make a formal
monetary demand of a residential property insurer before commencing suit. The
Company has established an internal team to review and respond to these pre-suit
demands in a further effort to resolve disputes before litigation ensues.
Another provision of the new law reduces the time period in which to file a new
or reopened claim to two years following the date of loss. In light of the
recent enactment of these reforms, it is premature to assess whether the reforms
will have their intended effect. Whether these changes are beneficial to
consumers, insurers, insurance company holding systems or the residential
property insurance market as a whole may not be fully known for some time.

In a further effort to alleviate concerns in the Florida property insurance
market, Florida's Governor called a special session of the legislature in May
2022. The legislature passed, and the Governor promptly signed into law, several
additional reforms intended to curtail litigation abuses. Among other things,
the new law precludes the assignment of policyholders' rights to attorneys'
fees, allows plaintiffs' attorneys to receive fee multipliers only in rare and
exceptional cases, and requires plaintiffs to establish breaches of the
insurance policy before pursuing related bad faith actions. Because the new law
only recently was adopted, its impact on claims and claims-related costs,
including litigation, will not be fully known for some time.

Despite our initiatives, such as those mentioned above, our costs to settle
claims in Florida have increased for the reasons noted herein. For example, the
Company continues to adjust its estimate of expected losses and has increased
its current year loss estimates and increased estimates associated with prior
years' claims. Over the past three years, even as we have increased our
estimates of prospective losses each year, we have recorded adverse claim
development on prior years' loss reserves and further strengthened current year
losses during the year to address the increasing impact Florida's market
disruptions, as well as the impact of rising costs of building materials and
labor, have had on the claims process and the establishment of reserves for
losses and LAE. The full extent and duration of these market disruptions and
inflationary pressures are unknown and still unfolding, and we will monitor the
impact of such disruptions on the recording and reporting of claim costs.

The Company has taken a series of steps over time to mitigate the financial
impact of these negative trends in the Florida market. We also have closely
monitored rate levels, especially in the Florida market, and have submitted rate
filings based upon evolving data. However, because rate filings rely upon past
loss and expense data and take time to develop, file and implement, we can
experience significant delays between identifying needed rate adjustments,
gaining approval of rate changes, and ultimately collecting and earning the
resulting increased premiums. This is particularly the case in an era of rising
costs such as the current Florida market, in which the costs of losses and loss
adjustment expenses continue to increase due to Florida's outsized claims
litigation environment and inflationary pressure. In addition, the Company has
implemented several initiatives in its claims department in response to the
adverse market trends. We utilize our process called Fast Track, which is an
initiative to handle straightforward, meritorious claims as promptly as possible
to mitigate the adverse impacts that can be seen with claims that remain open
for longer periods. In addition, we increased our emphasis on subrogation to
reduce our net losses while also recovering policyholders' deductibles when
losses are attributable to the actions of others. We have an internal staff of
trained water remediation experts to address the extraordinary number of
purported water damage claims filed by policyholders and vendors. We developed a
specialized in-house unit for responding to the unique aspects of represented
claims, and we have substantially increased our in-house legal staff in an
effort to address the increase in litigated or represented claims as
cost-effectively as possible.

Additionally, we have taken steps to implement claim settlement rules associated
with the Florida legislation passed in 2019 designed to reduce the negative
effects of claims involving assignments of benefits ("AOB"). See "Part I- Item
1-Business-Government Regulation" in our Annual Report on Form 10-K for the year
ended December 31, 2021. An AOB is a document signed by a policyholder that
allows a third party to be paid for services performed for an insured homeowner
who would normally be reimbursed by the insurance company directly after making
a claim. Prior to the AOB reform legislation, the Company experienced an
increase in AOB-related litigation initiated by vendors, in many cases
unbeknownst to policyholders. Claims paid under an AOB often involve unnecessary
litigation, with the Company required to pay both its own defense costs and
those of the plaintiff, and, as a result, cost the Company significantly more
than claims settled when an AOB is not involved. In 2019, the Florida
legislature passed legislation designed to increase consumer protections against
AOB abuses and reduce AOB-related litigation. The legislature added to these
AOB-related reforms in the recently concluded 2022 special legislative session,
during which it passed a new law precluding policyholders' assignments of
attorneys' fees. Prior to the recent 2022 law change, the overall impact of the
deterioration in claims-related tactics and behaviors, including other
first-party litigation, continued to outpace benefits arising from the 2019 AOB
reform legislation. Following recent 2022 special legislative session, the
Company intends to adopt procedures reflecting the new AOB law and monitor its
effects.

Following legislation adopted in Florida's 2021 legislative session, we also
have established procedures and dedicated personnel to a new pre-suit notice and
offer process. The new process requires policyholders or their attorneys to
notify insurers at least ten days before commencing litigation and allows
insurers an opportunity to make pre-suit settlement offers. The policyholders'
ability to recover attorneys' fees is determined according to a scale that
compares the ultimate outcomes of the cases to the insurers' pre-suit offers.
Although this new process is intended to reduce claims litigation and encourage
settlements, it is too early to evaluate whether it will be successful in
limiting the types of settlement demands and litigation that have plagued the
Florida market or in offsetting other factors adversely affecting the market
such as increased costs of building materials and labor.

Impact of COVID-19

Subsequent to March 2020, we have not seen a direct material impact from
COVID-19 on our business, our financial position, our liquidity, or our ability
to service our policyholders and maintain critical operations. Indirectly,
inflationary pressures, in part due to supply chain and labor constraints during
the pandemic, have affected and continue to affect claims costs and, to a lesser
degree, other expenses. As a provider of services that have been deemed
essential under most directives and guidelines, we are confident in our ability
to maintain consistent operations and believe we can continue to manage with our
hybrid work
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arrangement as a result of our disaster preparedness planning, with little
impact on our business and service levels and our standards of care for both
underwriting and claims. We continue to monitor local, state and federal
guidance and will adjust workforce activities as appropriate. Although we have
not experienced a direct material impact from COVID-19 since its onset in 2020,
the ultimate impact of the COVID-19 pandemic, or future pandemics, on our
business and on the economy in general cannot be predicted.

KEY PERFORMANCE INDICATORS

The Company considers the measures and ratios in the following discussion to be
key performance indicators for its businesses. Management believes that these
indicators are helpful in understanding the underlying trends in the Company's
businesses. Some of these indicators are reported on a quarterly basis and
others on an annual basis.

These indicators may not be comparable to other performance measures used by the
Company's competitors and should only be evaluated together with our condensed
consolidated financial statements and accompanying notes.

In addition to our key performance indicators and other financial measures
presented in accordance with United States Generally Accepted Accounting
Principles ("GAAP"). management also uses certain non-GAAP financial measures to
evaluate the Company's financial performance and the overall growth in value
generated for the Company's common shareholders. Management believes that
non-GAAP financial measures, which may be defined differently by other
companies, help to explain the Company's results to investors in a manner that
allows for a more complete understanding of the underlying trends in the
Company's business. The non-GAAP measures should not be viewed as a substitute
for those determined in accordance with GAAP. The calculation of these key
financial measures including the reconciliation of non-GAAP measures to the
nearest GAAP measure are found below under - "Non-GAAP Financial Measures."

Definitions of Key Performance Indicators and GAAP and Non-GAAP Measures

Adjusted book value per common share - is a non-GAAP measure, that is calculated
as adjusted common stockholders' equity divided by common shares outstanding at
the end of the period. Management believes this metric is meaningful, as it
allows investors to evaluate underlying book value growth by excluding the
impact of interest rate volatility.

Adjusted common stockholders' equity - is a non-GAAP measure, that is calculated
by GAAP common stockholders' equity, excluding accumulated other comprehensive
income (loss). Management believes this metric is meaningful, as it allows
investors to evaluate underlying growth in stockholders' equity by excluding the
impact of interest rate volatility.

Adjusted net income attributable to common stockholders - is a non-GAAP measure,
that is calculated by GAAP net income attributable to common stockholders,
excluding net realized gains (losses) on investment and net changes in
unrealized gains (losses) of equity securities, net of tax. Management believes
this metric is meaningful, as it allows investors to evaluate underlying
profitability and enhances comparability across periods, by excluding items that
are heavily impacted by investment market fluctuations and other economic
factors and are not indicative of operating trends.

Adjusted operating income - is a non-GAAP measure, that is computed by GAAP
operating income, excluding net realized gains (losses) on investment and net
changes in unrealized gains (losses) of equity securities. Management believes
this metric is meaningful, as it allows investors to evaluate underlying
profitability and enhances comparability across periods, by excluding items that
are heavily impacted by investment market fluctuations and other economic
factors and are not indicative of operating trends.

Adjusted operating income margin - is a non-GAAP measure, which is computed by
adjusted operating income divided by core revenue. Management believes this
metric is meaningful, as it allows investors to evaluate underlying
profitability and enhances comparability across periods, by excluding items that
are heavily impacted by investment market fluctuations and other economic
factors and are not indicative of operating trends.

Adjusted return on common equity (Adjusted "ROCE") - is a non-GAAP measure, that
is calculated by actual or annualized adjusted net income attributable to common
stockholders divided by average adjusted common stockholders' equity, with the
denominator excluding current period income statement net realized gains
(losses) on investments and net changes in unrealized gains (losses) of equity
securities, net of tax. Management believes this metric is meaningful, as it
allows investors to evaluate underlying profitability and enhances comparability
across periods, by excluding items that are heavily impacted by investment
market fluctuations and other economic factors and are not indicative of
operating trends.

Book Value Per Common Share - total stockholders' equity, adjusted for preferred
stock liquidation, divided by the number of common shares outstanding as of a
reporting period. Book value per common share is the excess of assets over
liabilities at a reporting period attributed to each share of stock. Changes in
book value per common share informs shareholders of retained equity in the
Company on a per share basis which may assist in understanding market value
trends for the Company's stock.

Combined Ratio - the combined ratio is a measure of underwriting profitability
for a reporting period and is calculated by dividing total operating costs and
expenses (which is made up of losses and LAE and general and administrative
expenses) by premiums earned, net, which is net of ceded premiums earned.
Changes to the combined ratio over time provide management with an understanding
of costs to operate its business in relation to net premiums it is earning and
the impact of rate, underwriting and other business management actions on
underwriting profitability. A combined ratio below 100% indicates underwriting
profit; a combined ratio above 100% indicates underwriting losses.
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Core Loss Ratio - a common operational metric used in the insurance industry to
describe the ratio of current accident year expected losses and LAE to premiums
earned. Core loss ratio is an important measure identifying profitability trends
of premiums in force. Core losses consists of all other losses and LAE,
excluding weather events beyond those expected and prior years' reserve
development. The financial benefit from the management of claims, including
claim fees ceded to reinsurers, is recorded in the condensed consolidated
financial statements as a reduction to core losses.

Core revenue - is a non-GAAP measure, that is calculated by total GAAP revenue,
excluding net realized gains (losses) on investments and net changes in
unrealized gains (losses) of equity securities, Management believes this metric
is meaningful, as it allows investors to evaluate underlying revenue trends and
enhances comparability across periods, by excluding items that are heavily
impacted by investment market fluctuations and other economic factors and are
not indicative of operating trends.

Debt-to-Equity Ratio - long-term debt divided by stockholders' equity. This
ratio helps management measure the amount of financing leverage in place in
relation to equity and future leverage capacity.

Debt-to-Total Capital Ratio - long-term debt divided by the sum of total
stockholders' equity and long-term debt (often referred to as total capital
resources). This ratio helps management measure the amount of financing leverage
in place (long-term debt) in relation to total capital resources and future
leverage capacity.

Diluted adjusted earnings per common share - is a non-GAAP measure, which is
calculated by adjusted net income available to common stockholders divided by
weighted average diluted common shares outstanding. Management believes this
metric is meaningful, as it allows investors to evaluate underlying revenue
trends and enhances comparability across periods, by excluding items that are
heavily impacted by investment market fluctuations and other economic factors
and are not indicative of operating trends.

Direct Premiums Written ("DPW") - reflects the total value of policies issued
during a period before considering premiums ceded to reinsurers. Direct premiums
written, comprised of renewal premiums, endorsements and new business, is
initially recorded as unearned premium in the balance sheet which is then earned
pro-rata over the next year or remaining policy term. Direct premiums written
reflects current trends in the Company's sale of property and casualty insurance
products and amounts that will be recognized as earned premiums in the future.

DPW (Florida) - includes only DPW in the state of Florida. This measure allows
management to analyze growth in our primary market and is also a measure of
business concentration risk.

Expense Ratio (Including Policy Acquisition Cost Ratio and Other Operating Cost
Ratio) - calculated as general and administrative expenses as a percentage of
premiums earned, net. General and administrative expenses is comprised of policy
acquisition costs and other operating costs, which includes such items as
underwriting costs, facilities and corporate overhead. The expense ratio,
including the sub-expense ratios of policy acquisition cost ratio and other
operating cost ratio, are indicators to management of the Company's cost
efficiency in acquiring and servicing its business and the impact of expense
items to overall profitability.

Losses and Loss Adjustment Expense Ratio or Loss and LAE Ratio - a measure of
the cost of claims and claim settlement expenses incurred in a reporting period
as a percentage of premiums earned in that same reporting period. Losses and LAE
incurred in a reporting period includes both amounts related to the current
accident year and prior accident years, if any, referred to as development.
Ultimate losses and LAE are based on actuarial estimates with changes in those
estimates recognized in the period the estimates are revised. Losses and LAE
consist of claim costs arising from claims occurring and settling in the current
period, an estimate of claim costs for reported but unpaid claims, an estimate
of unpaid claim costs for incurred-but-not-reported claims and an estimate of
claim settlement expenses associated with reported and unreported claims which
occurred during the reporting period. The loss and LAE ratio can be measured on
a direct basis, which includes losses and LAE divided by direct earned premiums,
or on a net basis, which includes losses and LAE after amounts have been ceded
to reinsurers divided by net earned premiums (i.e., direct premium earned less
ceded premium earned). The net loss and LAE ratio is a measure of underwriting
profitability after giving consideration to the effect of reinsurance. Trends in
the net loss and LAE ratio are an indication to management of current and future
profitability.

Monthly Weighted Average Renewal Retention Rate - measures the monthly average
of policyholders that renew their policies over the period of a calendar year.
This measure allows management to assess customer retention.

Premiums Earned, Net - the pro-rata portion of current and previously written
premiums that the Company recognizes as earned premium during the reporting
period, net of ceded premium earned. Ceded premiums are premiums paid or payable
by the Company for reinsurance protection. Written premiums are considered
earned and are recognized pro-rata over the policy coverage period. Premiums
earned, net is a measure that allows management to identify revenue trends.

Policies in Force - represents the number of active policies with coverage in
effect as of the end of the reporting period. The change in the number of
policies in force is a growth measure and provides management with an indication
of progress toward achieving strategic objectives. Inherent seasonality in our
business makes this measure more useful when comparing each quarter's balance to
the same quarter in prior years.

Premium in Force - is the amount of the annual direct written premiums
previously recorded by the Company for policies which are still active as of the
reporting date. This measure assists management in measuring the level of
insured exposure and progress toward meeting revenue goals for the current year,
and provides an indication of business available for renewal in the next twelve
months. Inherent seasonality in our business makes this measure more useful when
comparing each quarter's balance to the same quarter in prior years.
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Return on Average Common Equity ("ROCE") - calculated by actual or annualized
net income attributable to common stockholders divided by average common
stockholders' equity. ROCE is a capital profitability measure of how efficiently
management creates profits.

Total Insured Value - represents the amount of insurance limits available on a
policy for a single loss based on all policies active as of the reporting date.
This measure assists management in measuring the level of insured exposure.

Unearned Premiums - represents the portion of direct premiums corresponding to
the time period remaining on an insurance policy and available for future
earning by the Company. Trends in unearned premiums generally indicate
expansion, if growing, or contraction, if reducing, which are important
indicators to management. Inherent seasonality in our business makes this
measure more useful when comparing each quarter's balance to the same quarter in
prior years.

Weather events - an estimate of losses and LAE from weather events occurring
during the current accident year that exceed initial estimates of expected
weather events when establishing the core loss ratio for each accident year.
This metric informs management of factors impacting overall current year
profitability.

REINSURANCE

Reinsurance enables our Insurance Entities to limit potential exposures to
catastrophic events. Reinsurance contracts are typically classified as treaty or
facultative contracts. Treaty reinsurance provides coverage for all or a portion
of a specified group or class of risks ceded by the primary insurer, while
facultative reinsurance provides coverage for specific individual risks. Within
each classification, reinsurance can be further classified as quota share or
excess of loss. Quota-share reinsurance is where the primary insurer and the
reinsurer share proportionally or pro-rata in the direct premiums and losses of
the insurer. Excess-of-loss reinsurance indemnifies the direct insurer or
reinsurer for all or a portion of the loss in excess of an agreed upon amount or
retention.

Developing and implementing our reinsurance strategy to adequately protect our
balance sheet and Insurance Entities in the event of one or more catastrophes
while maintaining efficient reinsurance costs has been a key strategic priority
for us. In order to limit the Insurance Entities' potential exposure to
catastrophic events, we purchase significant reinsurance from third-party
reinsurers and the Florida Hurricane Catastrophe Fund ("FHCF"). The Florida
Office of Insurance Regulation ("FLOIR") requires the Insurance Entities, like
all residential property insurance companies doing business in Florida, to have
a certain amount of capital and reinsurance coverage in order to cover losses
upon the occurrence of a single catastrophic event and a series of catastrophic
events occurring in the same hurricane season. The Insurance Entities'
respective 2022-2023 reinsurance programs meet the FLOIR's requirements, which
are based on, among other things, successfully demonstrating cohesive and
comprehensive reinsurance programs that protect the policyholders of our
Insurance Entities as well as satisfying a series of stress test catastrophe
loss scenarios based on past historical events. Similarly, the Insurance
Entities' respective 2022-2023 reinsurance programs meet the stress test and
review requirements of Demotech, Inc., for maintaining Financial Stability
Ratings® of A (Exceptional).

We believe the Insurance Entities' retentions under their respective reinsurance
programs are appropriate and structured to protect policyholders. We test the
sufficiency of the reinsurance programs by subjecting the Insurance Entities'
personal residential exposures to statistical testing using a third-party
hurricane model, RMS RiskLink v18.1 (Build 1945). This model combines
simulations of the natural occurrence patterns and characteristics of
hurricanes, tornadoes, earthquakes and other catastrophes with information on
property values, construction types and occupancy classes. The model outputs
provide information concerning the potential for large losses before they occur,
so companies can prepare for their financial impact. Furthermore, as part of our
operational excellence initiatives, we continually look to enable new technology
to refine our data intelligence on catastrophe risk modeling.

Effective June 1, 2022, the Insurance Entities entered into multiple reinsurance
agreements comprising our 2022-2023 reinsurance program.
See "Item 1-Note 4 (Reinsurance)."

UPCIC's 2022-2023 Reinsurance Program

•First event All States retention of $45 million.

•All States first event tower extends to $3.161 billion with no co-participation
in any of the layers, no limitation on loss adjustment expenses for the
non-catastrophe bond Cosaint Re Pte. Ltd. traditional reinsurance and no
accelerated deposit premiums.

•Assuming a first event completely exhausts the $3.161 billion tower, the second
event exhaustion point would be $1.183 billion.

•Full reinstatement available on $1.138 billion of the $1.288 billion of
non-FHCF first event catastrophe coverage for guaranteed second event coverage.
For all layers purchased between $111 million and the projected FHCF retention,
to the extent that all of our coverage or a portion thereof is exhausted in a
catastrophic event and reinstatement premium is due, we have purchased enough
reinstatement premium protection ("RPP") limit to pay the premium necessary for
the reinstatement of these coverages.

•First event layer of 100% of $66 million in excess of $45 million established
by UIH in captive insurance arrangement. While the Company retains the risk that
otherwise would be transferred to third party-reinsurers for this layer, the

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additional risk is substantially offset by the savings in premiums that would
otherwise have been paid to third-party reinsurers.

•Specific 2nd event private market excess of loss coverage of $66 million in
excess of $45 million sitting behind captive arrangement.

•Specific 3rd and 4th event private market catastrophe excess of loss coverage
of $86 million in excess of $25 million provides frequency protection for
multiple events during the treaty period including a $20 million reduction in
retention for a 3rd and 4th event.

•For the FHCF Reimbursement Contracts effective June 1, 2022, UPCIC has
continued the election of the 90% coverage level. We estimate the total
mandatory FHCF layer will provide approximately $1.827 billion of coverage for
UPCIC, which inures to the benefit of the open market coverage secured from
private reinsurers and Cosaint Re Pte. Ltd.

•To further insulate for future years, UPCIC has secured $383 million of
catastrophe capacity with contractually agreed limits that extend coverage to
include the 2022 and 2023 wind seasons and $277 million of the $383 million
extends through the 2024 wind season and is all capacity which sits below the
Florida Hurricane Catastrophe Fund. UPCIC's catastrophe bond, secured leading up
to the 2021-2022 renewal, Cosaint Re Pte. Ltd, continues to provide one limit of
$150 million in this year's program and it may also include the 2023 wind
season, depending on loss activity in the 2022 wind season.

Reinsurers

The table below provides the A.M. Best and S&P financial strength ratings for
each of the largest rated third-party reinsurers in UPCIC's 2022-2023
reinsurance program:

Reinsurer                                        A.M. Best      S&P
Allianz Risk Transfer AG, Bermuda Branch            A+          AA-
Chubb Tempest Reinsurance Ltd.                      A++         AA
Everest Re                                          A+          A+
Munich Re                                           A+          AA-
Renaissance Re                                      A+          A+
Various Lloyd's of London Syndicates                 A          A+
Florida Hurricane Catastrophe Fund (1)              N/A         N/A

(1)No rating is available, because the fund is not rated.

APPCIC's 2022-2023 Reinsurance Program

•First event All States retention of $3.5 million.

•All States first event tower of $54.85 million with no co-participation in any
of the layers, no limitation on loss adjustment expenses and no accelerated
deposit premiums.

•Full reinstatement available for all private market first event catastrophe
layers for guaranteed second event coverage. For the layer purchased between
$3.5 million and the projected FHCF retention, to the extent that all of our
coverage or a portion thereof is exhausted in a catastrophic event and
reinstatement premium is due, we have purchased enough RPP limit to pay the
premium necessary for the reinstatement of this coverage.

•APPCIC also purchases extensive multiple line excess per risk reinsurance with
various reinsurers due to the high-value risks it insures in both the personal
residential and commercial multiple peril lines of business. Under this multiple
line excess per risk contract, APPCIC has coverage of $8.5 million in excess of
$500 thousand ultimate net loss for each risk and each property loss, and $1
million in excess of $0.3 million for each casualty loss. A $19.5 million
aggregate limit applies to the term of the contract for property-related losses
and a $2.0 million aggregate limit applies to the term of the contract for
casualty-related losses. This contract also contains a profit-sharing feature if
specific performance measures are met.

•For the FHCF Reimbursement Contracts effective June 1, 2022, APPCIC has
continued the election of the 90% coverage level. We estimate the total
mandatory FHCF layer will provide approximately $28.6 million of coverage for
APPCIC, which inures to the benefit of the open market coverage secured from
private reinsurers.

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Reinsurers

The table below provides the A.M. Best and S&P financial strength ratings for
each of the largest rated third-party reinsurers in APPCIC's 2022-2023
reinsurance program:

Reinsurer                                    A.M. Best      S&P
Chubb Tempest Reinsurance Ltd.                  A++         AA
DaVinci Reinsurance Limited                      A          A+
Lancashire Insurance Company Limited             A          A-
Renaissance Reinsurance Ltd.                    A+          A+
Various Lloyd's of London Syndicates             A          A+

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

(1)No rating is available, because the fund is not rated.

The cost of the 2022-2023 reinsurance programs for UPCIC and APPCIC is projected
to be $696 million, representing approximately 37.6% of estimated direct premium
earned for the 12-month treaty period for UPCIC and APPCIC.
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RESULTS OF OPERATIONS AND ANALYSIS OF FINANCIAL CONDITION

Highlights for the quarter ended June 30, 2022

•The Insurance Entities successfully completed their 2022-2023 reinsurance
programs providing a total limit protection of $3.2 billion to the Insurance
Entities. The limits include expanded use of an internal captive insurance
entity. The estimated cost to the Insurance Entities, as a percentage of direct
earned premium, increased from 36.4% of estimated premiums to 37.6% for the
2022-2023 program.

•The Florida legislature, in a special session, enacted a law this quarter
introducing new reforms intended to reduce the level of inflated and litigated
claims and provide relief to consumers. These new reforms are on top of reforms
enacted in 2019 and 2021 which have had some measured benefits. Management is
optimistic these new reforms will be beneficial, but recognizes it will take
time before the reforms are fully realized.

•Previously approved rate filings and inflation adjustments to policy insured
values are increasing written and earned premium as they take effect and earn
prospectively over the policy period.

•Management is continuing its efforts to prudently manage new business risk
selection, improve risk exposure diversification and moderate new business
growth rates, compared to prior years, while the above rate increases are taking
effect to improve profitability. Renewal retention rates have declined year over
year as consumers react to higher renewal premiums. As a result, the number of
total policies in force is lower, notwithstanding increases in written premium.

•Recently approved rate increases for Florida (14.9%), Indiana (19.9%),
Pennsylvania (12.0%), North Carolina (7.9%) and South Carolina (14.6%) went into
effect this quarter.

•Net investment income increased as market interest rates rise, however the
rising interest rates have lowered the market value of our investments resulting
in unrealized losses.

•Losses and LAE, net were higher this quarter compared to the same period last
year primarily due to a higher level of expected losses and LAE for this year
(the 2022 accident year) as a result of increases in loss trends and higher
claim inflation costs in Florida and other markets.

•Other expense and acquisition cost management efforts have lowered the expense
ratio. In April 2021, the commission rate on policy renewals was reduced 2
percentage points and further reduced on May 1, 2022 by 2 percentage points in
response to premium rate increases during the past year. The benefit of lower
commission rates are realized over the next year as policies renew under this
new commission rate structure.

•The company continued to return shareholder value with quarterly dividends and
modest share repurchases.

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Second quarter of fiscal 2022 results of operations comparisons are
to second quarter of fiscal 2021 (unless otherwise specified).

Results of Operations - Three Months Ended June 30, 2022 Compared to Three
Months Ended June 30, 2021

Net income for the three months ended June 30, 2022, was $7.4 million compared
to $21.9 million for the same period in 2021. Weighted average diluted common
shares outstanding for the three months ended June 30, 2022 were lower by 1.4%
to 30.9 million shares from 31.3 million shares for the same period of the prior
year. Diluted earnings per share for the three months ended June 30, 2022 was
$0.24 compared to $0.70 for the same period in 2021. Benefiting the quarter were
increases in premiums earned, net, an increase in commission revenue, and an
increase in net investment income, partially offset by an increase in operating
costs and expenses, and an increase in both realized and unrealized losses.
Direct premium earned and premiums earned, net were up 9.2% and 8.2%,
respectively, due to premium growth in 15 of the 19 states in which we are
licensed and writing during the past 12 months as a result of rate increases
implemented during 2021 and 2022. The net loss and LAE ratio was 72.3% for the
three months ended June 30, 2022, compared to 65.3% for the same period in 2021
reflecting higher core losses partially offset by lower prior years' reserve
development. As a result of the above and further explained below, the combined
ratio for the three months ended June 30, 2022 was 100.9% compared to 97.3% for
the three months ended June 30, 2021. Also see the discussion above under
"Overview-Trends."

A detailed discussion of our results of operations follows the table below (in
thousands, except per share data).

                                                           Three Months Ended
                                                                June 30,                                Change
                                                         2022               2021                $                   %
REVENUES
Direct premiums written                              $ 532,527          $ 473,627          $  58,900                 12.4  %
Change in unearned premium                            (103,722)           (81,053)           (22,669)                28.0  %
Direct premium earned                                  428,805            392,574             36,231                  9.2  %
Ceded premium earned                                  (151,744)          (136,402)           (15,342)                11.2  %
Premiums earned, net                                   277,061            256,172             20,889                  8.2  %
Net investment income                                    5,221              2,858              2,363                 82.7  %
Net realized gains (losses) on investments                (725)               496             (1,221)                     NM
Net change in unrealized gains (losses) of equity
securities                                              (8,884)             1,229            (10,113)                     NM
Commission revenue                                      11,404              9,860              1,544                 15.7  %
Policy fees                                              5,940              6,575               (635)                (9.7) %
Other revenue                                            1,989              1,991                 (2)                (0.1) %
Total revenues                                         292,006            279,181             12,825                  4.6  %
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses                    200,304            167,221             33,083                 19.8  %
General and administrative expenses                     79,291             81,866             (2,575)                (3.1) %
Total operating costs and expenses                     279,595            249,087             30,508                 12.2  %
Interest and amortization of debt issuance costs         1,731                 35              1,696              4,845.7  %

INCOME (LOSS) BEFORE INCOME TAXES                       10,680             30,059            (19,379)               (64.5) %
Income tax expense (benefit)                             3,310              8,118             (4,808)               (59.2) %
NET INCOME (LOSS)                                    $   7,370          $  21,941          $ (14,571)               (66.4) %
Other comprehensive income (loss), net of taxes        (29,656)             7,996            (37,652)                     NM
COMPREHENSIVE INCOME (LOSS)                          $ (22,286)         $  29,937          $ (52,223)                     NM
DILUTED EARNINGS (LOSS) PER SHARE DATA:
Diluted earnings (loss) per common share             $    0.24          $    0.70          $   (0.46)               (65.7) %
Weighted average diluted common shares outstanding      30,883             31,310               (427)                (1.4) %

NM - Not Meaningful


Direct premiums written increased by $58.9 million, or 12.4%, for the quarter
ended June 30, 2022, driven by premium growth within our Florida business of
$52.8 million, or 13.2%, and premium growth in our other states business of $6.1
million, or 8.3%, as compared to the same period of the prior year. Rate
increases approved in 2021 and 2022 for Florida and for certain other states, as
discussed below, were the principal driver of higher written premiums. In total
policies in force declined 48,975, or
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5.2%, from 943,593 at December 31, 2021 to 894,618 at June 30, 2022. A summary
of the recent rate increases which are driving increases in written premium are
as follows:

•In May 2022, the Company filed a rate increase with the FLOIR for an overall
14.9% rate increase for UPCIC on Florida personal residential homeowners' line
of business which became effective June 1, 2022, for new business and November
4, 2022, for renewals. This filing was made on a " Use and File" basis.

•In December 2021, the FLOIR approved an overall 3.9% rate increase for UPCIC on
Florida personal residential homeowners' line of business, effective January
2022 for new business and March 2022 for renewals.

•In September 2021, the FLOIR approved an overall 14.9% rate increase for UPCIC
on Florida personal residential homeowners' line of business, effective
September 2021 for new business and November 2021 for renewals.

•In addition, during the past year, rate increases for UPCIC were approved in
Alabama, Georgia, Indiana, Minnesota, North Carolina, South Carolina,
Pennsylvania and Virginia.

These rate increases are applied on new business submissions and renewals from
the effective date of their renewal and then are earned subsequently over the
policy period. The recent rate increases in Florida are in response to rising
claim costs driven by higher costs of material and labor associated with claims,
the cost of weather events, the rising cost of catastrophe and other reinsurance
protecting policyholders and, more importantly, the impact of "social inflation"
on claims as claim settlements increasingly have involved inflated demands,
representation, and litigation. In addition, the Insurance Entities' policies
provide for coverage limits to be adjusted at renewal based on third-party data
sources that monitor factors such as changes in costs for residential building
materials and labor.

During 2022, management continued efforts to prudently manage policy counts and
exposures intended to slow the growth of written premiums relating to new
business compared to prior years while the above rate increases are taking
effect. Reduced new business writings, declines in renewal retentions during
2022 and the impact of selected policy non-renewals, have resulted in a decrease
in policies in force during the quarter of 22,127, or 2.4%, from 916,745 at
March 31, 2022 to 894,618 at June 30, 2022. Direct premiums written continue to
increase across the majority of states in which we conduct business. As a result
of our business strategy, policy premium rate increases, lower renewal
retention, fewer new business policies written and disciplined underwriting
initiatives, we have seen a decrease in policy count, but an increase in
in-force premium and total insured value in a majority of states for the past
three years. In total, we wrote policies in 19 states during both of the second
quarters of 2022 and 2021. In addition, we are authorized to do business in
Tennessee and Wisconsin and are proceeding with product filings in those states.
At June 30, 2022, policies in force decreased 82,633 policies, or 8.5%; premium
in force increased $148.0 million, or 9.1%; and total insured value increased
$8.2 billion, or 2.6%, compared to June 30, 2021.

The following table provides direct premiums written for Florida and Other
States for the three months ended June 30, 2022 and 2021 (dollars in thousands):

                                   For the Three Months Ended
                                                                                                Growth
                         June 30, 2022                      June 30, 2021                   year over year
                                                         Direct
                      Direct                             Premiums
State             Premiums Written          %            Written            %               $               %
Florida        $     453,168              85.1  %    $     400,370        84.5  %    $      52,798        13.2  %
Other states          79,359              14.9  %           73,257        15.5  %            6,102         8.3  %
Total          $     532,527             100.0  %    $     473,627       100.0  %    $      58,900        12.4  %



We seek to prudently grow and generate long-term rate adequate premium in each
state where we offer policies. Our diversification strategy seeks to increase
business outside of Florida and to improve geographical distribution within
Florida. Premium growth outside Florida is a measure monitored by management in
its efforts to meet that objective.

Direct premium earned increased by $36.2 million, or 9.2%, for the quarter ended
June 30, 2022, reflecting the earning of premiums written over the past 12
months including the benefit of rate changes due to primary rate filings,
filings to cover increased reinsurance costs as well as policy premium
adjustments due to increases in insured values caused by inflation.

Reinsurance enables our Insurance Entities to limit potential exposures to
catastrophic events and other covered events. Ceded premium represents premiums
paid to reinsurers for this protection and is a cost which reduces net written
and net earned premiums. Ceded premium earned increased $15.3 million, or 11.2%,
for the quarter ended June 30, 2022, as compared to the same period of the prior
year. The increase in reinsurance costs reflects an increase in the value of
exposures we insure; increased pricing when compared to the expired reinsurance
program; and differences in the structure and design of the respective programs.
Reinsurance costs, as a percentage of direct premium earned, increased from
34.7% for the three months ended June 30, 2021 to 35.4% for the three months
ended June 30, 2022. Reinsurance costs associated with each year's reinsurance
program are earned over the annual policy period which typically runs from June
1st to May 31st. See the discussion above for the Insurance Entities' 2022-2023
reinsurance programs and "Item 1-Note 4 (Reinsurance)."
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Premiums earned, net of ceded premium earned, grew by 8.2%, or $20.9 million, to
$277.1 million for the three months ended June 30, 2022, reflecting an increase
in direct premium earned partially offset by increased costs for reinsurance.

Net investment income was $5.2 million for the three months ended June 30, 2022,
compared to $2.9 million for the same period in 2021, an increase of $2.4
million, or 82.7%. In the fourth quarter of 2021, we saw increases in investment
yields as the Federal Reserve took action to address the market concerns of
inflation and employment. As a result, liquidity generated by our portfolio from
interest payments, principal repayments and new investments are being invested
at higher rates, resulting in overall increased investment returns on our
portfolio.

Total invested assets were $1,106.6 million as of June 30, 2022 compared to
$1,093.7 million as of December 31, 2021. The increase is attributable to
capital contributions from UIH, excess cash balances invested in the portfolio,
receipt of interest payments partially offset by unrealized losses on
available-for-sale debt securities. Unrealized losses reverse over time as debt
instruments are generally held to maturity. Cash and cash equivalents were
$317.0 million at June 30, 2022 compared to $250.5 million at December 31, 2021,
an increase of 26.5%. This increase is largely attributable to changes in
operational cash flows since year end. Cash and cash equivalents are invested
short term until needed to settle loss and LAE payments, reinsurance premium
payments and operating cash needs or until they are deployed by our investment
advisors.

Yields from cash and cash equivalents, short-term investments and the
available-for-sale debt portfolio are dependent on the composition of the
portfolio, future market forces, monetary policy and interest rate policy from
the Federal Reserve. During most of 2021, the Federal Reserve broadly maintained
lower interest rates, which impacted the effective yields on newly purchased
available-for-sale debt securities and overnight cash purchases and short-term
investments. This overall trend changed in late 2021 and into 2022 as inflation
worries began to impact the financial markets, including the markets' concern
over future Federal Reserve actions of rate hikes and other actions to address
inflation concerns. As a result, we saw increased yields on securities purchased
in late 2021 and 2022 and increased unrealized losses on our portfolio,
reflected after-tax in the equity section of our balance sheet as increased
market yields negatively impacted the fair value of much of our
available-for-sale debt securities.

Although we generally hold the vast majority of debt securities to maturity, we
sell investments, including securities, from our investment portfolio from time
to time to meet our investment objectives or take advantage of market
opportunities. During the three months ended June 30, 2022, sales of
available-for-sale debt securities resulted in net realized losses of $0.9
million and sales of equity securities resulted in net realized gains of $0.2
million, generating total net realized losses of $0.7 million during the second
quarter of 2022. During the three months ended June 30, 2021, sales of
available-for-sale debt securities resulted in net realized losses of $0.2
million and sales of equity securities resulted in net realized gains of $0.7
million, in total generating net realized gains of $0.5 million. See "Item
1-Note 3 (Investments)."

There was an $8.9 million net unrealized loss in equity securities during the
three months ended June 30, 2022, largely driven by macro inflationary pressures
and the uncertain recessionary outlook, which put pressure on domestic equities
broadly, compared to a $1.2 million net unrealized gain in equity securities
during the three months ended June 30, 2021. Net change in unrealized gains or
losses reflected on the income statement are the result of changes in the fair
market value of our equity securities during the period for securities still
held at the end of the reported period and the reversal of unrealized gains or
losses for securities sold during the period. See "Item 1-Note 3 (Investments)."

Commission revenue is comprised principally of brokerage commissions we earn
from third-party reinsurers (excluding the FHCF) on reinsurance placed for the
Insurance Entities. Commission revenue is earned pro-rata over the reinsurance
policy period which runs from June 1st to May 31st of the following year. For
the three months ended June 30, 2022, commission revenue was $11.4 million,
compared to $9.9 million for the three months ended June 30, 2021. The increase
in commission revenue of $1.5 million, or 15.7%, for the three months ended June
30, 2022 was primarily due to increased commissions from third-party reinsurers
earned on increased reinsurance premiums which is attributable to growth in our
insured values for this year's reinsurance program as well as the difference in
pricing and structure associated with our reinsurance program when compared to
the prior year.

Policy fees were $5.9 million for the three months ended June 30, 2022 compared
to $6.6 million for the same period in 2021. The decrease of $0.6 million, or
9.7%, was the result of a decrease in the combined total number of new and
renewal policies written during the three months ended June 30, 2022 compared to
the same period in 2021 in states where we are permitted to charge this fee.

Other revenue, representing revenue from policy installment fees, premium
financing and other miscellaneous income, was $2.0 million for the three months
ended June 30, 2022 compared to $2.0 million for the same period in 2021.

Core revenue, representing total GAAP revenue, excluding net realized gains
(losses) on investments and net changes in unrealized gains (losses) of equity
securities, was $301.6 million for the three months ended June 30, 2022 compared
to $277.5 million for the same period in 2021.


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The following table presents losses and LAE incurred on a direct, ceded and net
basis expressed in dollars and as a percent of the respective amounts of
premiums earned. These amounts are further categorized as i) core losses, ii)
weather events for the current accident year and iii) prior years' reserve
development (dollars in thousands):


                                                                                    Three Months Ended June 30, 2022
                                          Direct              Loss Ratio              Ceded              Loss Ratio               Net               Loss Ratio
Premiums earned                       $   428,805                                  $ 151,744                                  $ 277,061

Loss and loss adjustment expenses:
Core losses                           $   196,630                    45.9  %       $      36                       -  %       $ 196,594                    71.0  %
Weather events*                                 -                       -                  -                       -                  -                       -
Prior years' reserve development           63,600                    14.8  %          59,890                    39.5  %           3,710                     1.3  %
Total losses and loss adjustment
expenses                              $   260,230                    60.7  %       $  59,926                    39.5  %       $ 200,304                

72.3 %

*Includes only current year weather events beyond those expected.

                                                                                    Three Months Ended June 30, 2021
                                          Direct              Loss Ratio              Ceded              Loss Ratio               Net               Loss Ratio
Premiums earned                       $   392,574                                  $ 136,402                                  $ 256,172

Loss and loss adjustment expenses:
Core losses                           $   159,412                    40.6  %       $     (78)                   (0.1) %       $ 159,490                    62.3  %
Weather events*                                 -                       -                  -                       -                  -                       -
Prior years' reserve development          116,890                    29.8  %         109,159                    80.0  %           7,731                     3.0  %
Total losses and loss adjustment
expenses                              $   276,302                    70.4  %       $ 109,081                    80.0  %       $ 167,221                

65.3 %

*Includes only current year weather events beyond those expected.

See "Item 1-Note 6 (Liability for Unpaid Losses and Loss Adjustment Expenses)"
for change in liability for unpaid losses and LAE.

Management looks at losses and LAE in three areas, as described below and
represented in the tables above, each of which has different drivers that impact
reported results. As a result, these components of losses and LAE are described
separately. Overall losses and LAE, net of reinsurance recoveries, were $200.3
million resulting in a 72.3% net loss and LAE ratio for the quarter ended June
30, 2022. This compares to $167.2 million resulting in a 65.3% net loss and LAE
ratio for the quarter ended June 30, 2021.

The Company continues to monitor and adjust its estimate of expected losses and
has increased its current year loss estimates and increased estimates associated
with prior years' claims. Over the past three years, even as we have increased
our estimates of prospective losses each year, we have recorded adverse claim
development on prior years' loss reserves and further strengthened current year
losses during the year to address the increasing impact of Florida's market
disruptions, as well as the impact of inflation from building material costs and
labor costs have on the reserving and claim settlement process. The full extent
and duration of these market disruptions and inflationary pressures are unknown
and still unfolding, and we continue to monitor the impact of such disruptions
on the recording and reporting of claim costs. See the discussion above for the
Insurance Entities' 2022-2023 reinsurance programs and "Item 1 - Note 4
(Reinsurance)." Also see the discussion above under "Overview-Trends."

The factors impacting losses and LAE are as follows:

•Core losses

•Our core losses consist of all losses and LAE for the current accident year
excluding both weather events for the current year beyond those anticipated in
our regular accrual process and prior years' reserve development. Core losses
were 45.9% of direct premium earned for the quarter ended June 30, 2022 compared
to 40.6% for the same period in 2021. During the quarter ended June 30, 2022
management increased the core loss ratio by one loss ratio point retroactive to
January 1, 2022, with the cumulative impact being recorded in the quarter, as a
result of worsening trends in overall weather not associated with named storms
and in response to changes in estimated losses caused by deteriorating loss
trends and higher repair costs as a result of material and labor inflation. The
trend in core losses and LAE is increasing year over year as the claims
environment in Florida continues to deteriorate and inflation continues to drive
repair costs up. Also see the discussion above under "Overview-Trends." Core
losses also increase as premium volume increases year over year.

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•Weather events beyond those expected

•There were no weather events beyond those expected during the quarter ended
June 30, 2022.

•There were no weather events beyond those expected during the quarter ended
June 30, 2021.

•Prior years' reserve development

•Two drivers influence the amounts recorded as prior years' reserve development,
namely: (i) changes to prior estimates of direct and net ultimate losses on
prior accident years excluding major hurricanes and (ii) changes to prior
estimates of direct and net ultimate losses on hurricanes.

?During the quarter ended June 30, 2022, prior years' reserve development
totaled $63.6 million of direct losses and $3.7 million of net unfavorable loss
development after the benefit of reinsurance.

•Prior years' reserve development for the quarter ended June 30, 2022 was $63.6
million offset by ceded losses of $59.9 million resulting in net unfavorable
development of $3.7 million. Prior year adverse development includes gross
reserve development on Hurricane Irma of $39.3 million, of which $35.6 million
was ceded, resulting in net development on Hurricane Irma of $3.7 million in the
quarter. In addition to Hurricane Irma development, the Company concluded a
commutation during the quarter, increasing ceded prior year loss payments which
was offset by a provisory increase in direct prior year incurred but not
reported ("IBNR") amount, resulting in no net effect.

•Excluding hurricanes, there was no prior years' reserve development for the
quarter ended June 30, 2022.

?For the quarter ended June 30, 2021, direct prior years' reserve development of
$116.9 million, less $109.2 million ceded, resulted in $7.7 million net
development.

•For hurricanes, prior years' reserve development for the quarter ended June 30,
2021 was the result of a direct increase in the ultimate losses for hurricanes
of $109.1 million offset by ceded hurricane losses of $109.2 million resulting
in net favorable development of $0.1 million. Direct losses increased for
Hurricanes Irma, Sally, Michael and Matthew. Ceded losses benefited from changes
to estimated non-Florida reinsurance coverage, which has a lower attachment
point. As a result of ceded losses exceeding direct losses, net loss development
on prior hurricanes was favorable during second quarter of 2021.

•Excluding hurricanes, there was $7.8 million of direct and net prior years'
reserve development for the quarter ended June 30, 2021. This development, from
the 2019 and prior accident years, resulted from the settlement on litigated
claims exceeding prior estimated amounts.

The financial impact generated by our claims adjusting affiliate from the
management of claims, including claim fees ceded by our Insurance Entities to
reinsurers, was an increase of $0.2 million for the three months ended June 30,
2022, compared to a benefit of $1.2 million during the three months ended
June 30, 2021, driven by the recoveries from reinsurers and internal claim
services. The impact was recorded in the condensed consolidated financial
statements as a reduction or increase to losses and LAE.

For the three months ended June 30, 2022, general and administrative expenses
were $79.3 million compared to $81.9 million during the same period in 2021, as
follows (dollars in thousands):

                                                                    Three Months Ended
                                                                         June 30,                                                 Change
                                                        2022                                  2021                          $                 %
                                                $                Ratio                $                Ratio
Premiums earned, net                       $ 277,061                             $ 256,172                             $ 20,889               8.2  %
General and administrative expenses:
Policy acquisition costs                      54,100               19.5  %          56,766               22.2  %         (2,666)             (4.7) %
Other operating costs                         25,191                9.1  %          25,100                9.8  %             91               0.4  %
Total general and administrative expenses  $  79,291               28.6  %       $  81,866               32.0  %       $ (2,575)             (3.1) %


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General and administrative expenses decreased by $2.6 million, which was the
result of a decrease in policy acquisition costs of $2.7 million offset by a
slight increase in other operating costs of $0.1 million. The total general and
administrative expense ratio was 28.6% for the three months ended June 30, 2022
compared to 32.0% for the same period in 2021.

•The decrease in policy acquisition costs of $2.7 million reflects a reduction
in the commission rate paid to agents on the renewal of Florida policies which
was reduced by 2 percentage points to 8% effective May 1, 2022, which will
benefit future periods as the new rate structure applies prospectively. The
decrease in policy acquisition costs as a percentage of premiums earned, net
during the quarter is primarily due to the reduction in commissions paid to
agents.

•The increase of other operating costs of $0.1 million was primarily higher
salary and performance bonus expenses, mostly offset by lower stock-based
compensation and policy related expenses. The other operating cost ratio was
9.1% for the three months ended June 30, 2022, compared to 9.8% for the same
period in 2021. This reduction in the operating cost ratio reflects several
factors including economies of scale as we continue to grow premium, and
efficiencies gained from leveraging technology and spending discipline.

As a result of the above, the combined ratio for the second quarter ended June
30, 2022 was 100.9% compared to 97.3% for the same period in 2021. The increase
was the result of a decrease in the general and administrative expense ratio
offset by an increase in the loss and LAE ratio as described above.

Interest and amortization of debt issuance costs increased by $1.7 million for
the three months ended June 30, 2022. The increase in interest and amortization
of debt issuance costs is the result of an increase in the outstanding debt as a
result of our fourth quarter of 2021 borrowing. See "Item 1-Note 7 (Long-term
debt)" for additional details.

Income tax expense was $3.3 million for the quarter ended June 30, 2022 compared
to an income tax expense of $8.1 million for the quarter ended June 30, 2021.
Our effective tax rate ("ETR") increased to 31.0% for the three months ended
June 30, 2022, as compared to 27.0% for the three months ended June 30, 2021.
The ETR increased as a result of a higher ratio of permanent items relative to
the amount of income before taxes, principally non-deductible compensation, and
a lower level of discrete tax benefits primarily due to an increase in stock
forfeitures.

Other comprehensive loss, net of taxes for the three months ended June 30, 2022,
was $29.7 million compared to other comprehensive income of $8.0 million for the
same period in 2021, reflecting after-tax changes in fair value of
available-for-sale debt securities held in our investment portfolio and
reclassifications out of accumulated other comprehensive income for
available-for-sale debt securities sold. See "Item 1-Note 11 (Other
Comprehensive Income (Loss))" for additional information about the amounts
comprising other comprehensive income (loss), net of taxes for these periods.

Adjusted operating income, representing GAAP operating income, excluding net
realized gains (losses) on investment and net changes in unrealized gains
(losses) of equity securities, was $22.0 million for the three months ended June
30, 2022 compared to $28.4 million for the same period in 2021.

Adjusted operating income margin, representing adjusted operating income divided
by core revenue, was 7.3% for the three months ended June 30, 2022 compared to
10.2% for the same period in 2021.

Adjusted net income attributable to common stockholders, representing GAAP net
income attributable to common stockholders, excluding net realized gains
(losses) on investment and net changes in unrealized gains (losses) of equity
securities, net of tax was $14.6 million for the three months ended June 30,
2022 compared to $20.6 million for the same period in 2021.

Diluted adjusted earnings per common share, representing adjusted net income
available to common stockholders divided by weighted average diluted common
shares outstanding, was $0.47 for the three months ended June 30, 2022 compared
to $0.65 for the same period in 2021.


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Results of Operations - Six Months Ended June 30, 2022 Compared to Six Months
Ended June 30, 2021

Net income was $24.9 million for the six months ended June 30, 2022 compared to
$48.3 million for the six months ended June 30, 2021. Weighted average diluted
common shares outstanding for the six months ended June 30, 2022 were lower by
0.7% to 31.1 million shares from 31.3 million shares for the same period of the
prior year. Diluted earnings per share for the six months ended June 30, 2022
was $0.80 compared to $1.54 in 2021. Benefiting the six months ended June 30,
2022 were increases in premiums earned, net, an increase in commission revenue,
and an increase in net investment income partially offset by an increase in
operating costs and expenses, and an increase in both the realized and
unrealized losses and decreased revenue from policy fees and other revenue.
Direct premium earned and premiums earned, net were up 9.8% and 9.3%,
respectively, due to premium growth in 16 of the 19 states in which we are
licensed and writing during the past 12 months as a result of rate increases
implemented during 2021 and 2022, partially offset by higher costs for
reinsurance flowing through to premiums earned, net. The net loss and LAE ratio
was 70.6% for the six months ended June 30, 2022, compared to 62.3% for the same
period in 2021 reflecting higher core net losses and an increase in excess
weather events beyond those expected partially offset by lower prior years'
reserve development. As a result of the above and as further explained below,
the combined ratio for the six months ended June 30, 2022 was 99.4% compared to
95.2% for the six months ended June 30, 2021. See "Overview - Trends."

A detailed discussion of our results of operations follows the table below (in
thousands, except per share data).

                                                       Six Months Ended
                                                           June 30,                                Change
                                                    2022               2021                $                   %
REVENUES
Direct premiums written                         $ 929,008          $ 838,941          $  90,067                 10.7  %
Change in unearned premium                        (85,600)           (70,761)           (14,839)                21.0  %
Direct premium earned                             843,408            768,180             75,228                  9.8  %
Ceded premium earned                             (297,283)          (268,703)           (28,580)                10.6  %
Premiums earned, net                              546,125            499,477             46,648                  9.3  %
Net investment income                               9,263              5,844              3,419                 58.5  %
Net realized gains (losses) on investments           (667)             1,038             (1,705)                     NM
Net change in unrealized gains (losses) of
equity securities                                 (12,280)               735            (13,015)                     NM
Commission revenue                                 22,565             18,986              3,579                 18.9  %
Policy fees                                        10,719             11,962             (1,243)               (10.4) %
Other revenue                                       3,763              3,896               (133)                (3.4) %
Total revenues                                    579,488            541,938             37,550                  6.9  %
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses               385,410            311,184             74,226                 23.9  %
General and administrative expenses               157,588            164,289             (6,701)                (4.1) %
Total operating costs and expenses                542,998            475,473             67,525                 14.2  %
Interest and amortization of debt issuance
costs                                               3,339                 55              3,284               5970.9  %
INCOME BEFORE INCOME TAXES                         33,151             66,410            (33,259)               (50.1) %
Income tax expense                                  8,244             18,061             (9,817)               (54.4) %
NET INCOME                                      $  24,907          $  48,349          $ (23,442)               (48.5) %
Other comprehensive income (loss), net of taxes   (72,566)            (8,914)           (63,652)               714.1  %
COMPREHENSIVE INCOME (LOSS)                     $ (47,659)         $  39,435          $ (87,094)              (220.9) %
DILUTED EARNINGS PER SHARE DATA:
Diluted earnings per common share               $    0.80          $    1.54          $   (0.74)               (48.1) %
Weighted average diluted common shares
outstanding                                        31,060             31,292               (232)                (0.7) %

NM - Not Meaningful


Direct premiums written increased by $90.1 million, or 10.7%, for the six months
ended June 30, 2022, driven by premium growth within our Florida business of
$80.2 million, or 11.3%, and premium growth in our other states business of $9.8
million, or 7.5%, as compared to the same period of the prior year. Rate
increases approved in 2021 and 2022 for Florida and for certain other states, as
discussed below, were the principal driver of higher written premiums. In total,
policies in force declined 48,975,
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or 5.2%, from 943,593 at December 31, 2021 to 894,618 at June 30, 2022. A
summary of the recent rate increases which are driving increases in written
premium are as follows:

•In May 2022, the Company filed a rate increase with the FLOIR for an overall
14.9% rate increase for UPCIC on Florida personal residential homeowners' line
of business, effective June 1, 2022, for new business and November 4, 2022, for
renewals. This filing was made on a "Use and File" basis.

•In December 2021, the FLOIR approved an overall 3.9% rate increase for UPCIC on
Florida personal residential homeowners' line of business, effective January
2022 for new business and March 2022 for renewals.

•In September 2021, the FLOIR approved an overall 14.9% rate increase for UPCIC
on Florida personal residential homeowners' line of business, effective
September 2021 for new business and November 2021 for renewals.

•In December 2020, the FLOIR approved an overall 7.0% rate increase for UPCIC on
Florida personal residential homeowners' line of business, effective December
2020 for new business and March 2021 for renewals.

•In addition, during the past year, rate increases for UPCIC were approved in
Alabama, Georgia, Indiana, Minnesota, North Carolina, South Carolina,
Pennsylvania and Virginia.

These rate increases are applied on new business submissions and renewals from
the effective date of their renewal, and then are earned subsequently over the
policy period. The recent rate increases in Florida are in response to rising
claim costs driven by higher costs of material and labor associated with claims,
the cost of weather events, the rising cost of catastrophe and other reinsurance
protecting policyholders and, more importantly, the impact of "social inflation"
on claims as claim settlements increasingly have involved inflated demands,
representation, and litigation. In addition, the Insurance Entities' policies
provide for coverage limits to be adjusted at renewal based on third-party data
sources that monitor factors such as changes in costs for residential building
materials and labor.

During 2022, management continued efforts to prudently manage policy counts and
exposures intended to slow the growth of written premiums relating to new
business compared to prior years while the above rate increases are taking
effect. Reduced new business writings, declines in renewal retentions in 2022
and the impact of selected policy non-renewals, has resulted in a decrease in
policies in force of 48,975, or 5.2%, during 2022 from 943,593 at December 31,
2021 to 894,618 at June 30, 2022. Direct premiums written continue to increase
across the majority of states in which we conduct business. As a result of our
business strategy, rate changes and disciplined underwriting initiatives, we
have seen a decrease in policy count, but an increase in in-force premium and
total insured value in a majority of states for the past three years. In total,
we wrote policies in 19 states during each of 2022 and 2021. We actively wrote
policies in 19 states during 2021 and 2022. In addition, we are authorized to do
business in Tennessee and Wisconsin and are proceeding with product filings in
those states. At June 30, 2022, policies in force decreased 82,633 policies, or
8.5%, premium in force increased $148.0 million, or 9.1%, and total insured
value increased $8.2 billion, or 2.6%, compared to June 30, 2021.

The following table provides direct premiums written for Florida and Other
States for the six months ended June 30, 2022 and 2021 (dollars in thousands):

                                                       For the Six Months Ended
                                                                                                                                  Growth
                                        June 30, 2022                               June 30, 2021                              year over year
                             Direct Premiums                             Direct Premiums
State                            Written                   %                 Written                 %                     $                     %
Florida                    $   787,605                     84.8  %       $    707,381                84.3  %       $       80,224                11.3  %
Other states                   141,403                     15.2  %            131,560                15.7  %                9,843                 7.5  %
Total                      $   929,008                    100.0  %       $    838,941               100.0  %       $       90,067                10.7  %


We seek to prudently grow and generate long-term rate adequate premium in each
state where we offer policies. Our diversification strategy seeks to increase
business outside of Florida and to improve geographical distribution within
Florida. Premium growth outside Florida is a measure monitored by management in
its efforts to meet that objective.

Direct premium earned increased by $75.2 million, or 9.8%, for the six months
ended June 30, 2022, reflecting the earning of premiums written over the past 12
months including the benefit of rate changes due to primary rate filings,
filings to cover increased reinsurance costs as well as policy premium
adjustments due to increases in insured values caused by inflation.

Reinsurance enables our Insurance Entities to limit potential exposures to
catastrophic events and other covered events. Ceded premium represents premiums
paid to reinsurers for this protection and is a cost which reduces net written
and net earned premiums. Ceded premium earned increased $28.6 million, or 10.6%,
for the six months ended June 30, 2022 as compared to the same period of the
prior year. The increase in reinsurance costs reflects an increase in the value
of exposures we insure; increased pricing when compared to the expired
reinsurance program and differences in the structure and design of the
respective programs. Reinsurance costs, as a percentage of direct premium
earned, increased from 35.0% in 2021 to 35.2% in 2022. Reinsurance costs
associated with each year's reinsurance program are earned over the annual
policy period which typically runs from June 1st to
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May 31st. See the discussion above for the Insurance Entities' 2022-2023
reinsurance programs and "Item 1- Note 4 (Reinsurance)."

Premiums earned, net of ceded premium earned, grew by 9.3%, or $46.6 million, to
$546.1 million for the six months ended June 30, 2022, reflecting an increase in
direct premium earned offset by increased costs for reinsurance.

Net investment income was $9.3 million for the six months ended June 30, 2022,
compared to $5.8 million for the same period in 2021, an increase of $3.4
million, or 58.5%. In the fourth quarter of 2021, we saw increases in investment
yields as the Federal Reserve took action to address the market concerns of
inflation and employment. As a result, liquidity generated by our portfolio from
interest payments, principal repayments and new investments are being invested
at higher rates, resulting in overall increased investment returns on our
portfolio.

Total invested assets were $1,106.6 million as of June 30, 2022 compared to
$1,093.7 million as of December 31, 2021. The increase is attributable to
capital contributions from UIH, excess cash balances invested in the portfolio,
receipt of interest payments partially offset by unrealized losses on
available-for-sale debt securities. Unrealized losses reverse over time as debt
instruments are generally held to maturity. Cash and cash equivalents were
$317.0 million at June 30, 2022 compared to $250.5 million at December 31, 2021,
an increase of 26.5%. This increase is largely attributable to changes in
operational cash flows since year end. Cash and cash equivalents are invested
short term until needed to settle loss and LAE payments, reinsurance premium
payments and operating cash needs or until they are deployed by our investment
advisors.

Yields from cash and cash equivalents, short-term investments and the
available-for-sale debt portfolio are dependent on the composition of the
portfolio, future market forces, monetary policy and interest rate policy from
the Federal Reserve. During most of 2021, the Federal Reserve broadly maintained
lower interest rates, which impacted the effective yields on newly purchased
available-for-sale debt securities and overnight cash purchases and short-term
investments. This overall trend changed in late 2021 and into 2022 as inflation
worries began to impact the financial markets, including the markets' concern
over future Federal Reserve actions of rate hikes and other actions to address
inflation concerns. As a result, we saw increased yields on securities purchased
in late 2021 and 2022 and increased unrealized losses on our portfolio reflected
after-tax in the equity section of our balance sheet as increased market yields
negatively impacted the fair value of much of our available-for-sale debt
securities.

We sell investments, including securities, from our investment portfolio from
time to time to meet our investment objectives or take advantage of market
opportunities. During the six months ended June 30, 2022, sales of
available-for-sale debt securities resulted in a net realized losses of $1.2
million and sales of equity securities resulted in net realized gains of $0.5
million, generating total net realized losses of $0.7 million. During the six
months ended June 30, 2021, sales of available-for-sale debt securities resulted
in net realized losses of $0.5 million, sales of equity securities resulted in
net realized gains of $1.1 million, and the sale of an investment real estate
property resulted in a realized gain of $0.4 million, in total generating net
realized gains of $1.0 million. See "Item 1-Note 3 (Investments)."

There was a $12.3 million net unrealized loss in equity securities during the
six months ended June 30, 2022 compared to a $0.7 million net unrealized loss in
equity securities during the six months ended June 30, 2021. Net change in
unrealized gains or losses reflected on the income statement are the result of
changes in the fair market value of our equity securities during the period for
securities still held at the end of the reported period and the reversal of
unrealized gains or losses for securities sold during the period. See "Item
1-Note 3 (Investments)."

Commission revenue is comprised principally of brokerage commissions we earn
from third-party reinsurers (excluding the FHCF) on reinsurance placed for the
Insurance Entities. Commission revenue is earned pro-rata over the reinsurance
policy period which runs from June 1st to May 31st of the following year. For
the six months ended June 30, 2022, commission revenue was $22.6 million,
compared to $19.0 million for the six months ended June 30, 2021. The increase
in commission revenue of $3.6 million, or 18.9%, for the six months ended June
30, 2022 was primarily due to increased commissions from third-party reinsurers
earned on increased reinsurance premiums which is attributable to growth in our
insured values as well as the difference in pricing and structure associated
with our reinsurance program when compared to the prior year.

Policy fees for the six months ended June 30, 2022 were $10.7 million compared
to $12.0 million for the same period in 2021. The decrease of $1.2 million, or
10.4%, was the result of a decrease in the combined total number of new and
renewal policies written during the six months ended June 30, 2022 compared to
the same period in 2021 in states where we are permitted to charge this fee.

Other revenue, representing revenue from policy installment fees, premium
financing and other miscellaneous income, was $3.8 million for the six months
ended June 30, 2022 compared to $3.9 million for the same period in 2021.

Core revenue, representing total GAAP revenue, excluding net realized gains
(losses) on investments and net changes in unrealized gains (losses) of equity
securities, was $592.4 million for the six months ended June 30, 2022 compared
to $540.2 million for the same period in 2021.


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The following table presents losses and LAE incurred on a direct, ceded and net
basis expressed in dollars and as a percent of the respective amounts of
premiums earned. These amounts are further categorized as i) core losses, ii)
weather events for the current accident year and iii) prior years' reserve
development (dollars in thousands):

                                                                            

Six Months Ended June 30, 2022

                                     Direct             Loss Ratio              Ceded              Loss Ratio               Net               Loss Ratio
Premiums earned                   $ 843,408                                  $ 297,283                                  $ 546,125

Loss and loss adjustment
expenses:
Core losses                       $ 376,580                    44.7  %       $      80                       -  %       $ 376,500                    69.0  %
Weather events*                       4,545                     0.5  %               -                       -  %           4,545                     0.8  %
Prior years' reserve development     74,260                     8.8  %          69,895                    23.5  %           4,365                     0.8  %
Total losses and loss adjustment
expenses                          $ 455,385                    54.0  %       $  69,975                    23.5  %       $ 385,410                    

70.6 %

*Includes only current year weather events beyond those expected.

                                                                                Six Months Ended June 30, 2021
                                     Direct             Loss Ratio              Ceded              Loss Ratio               Net               Loss Ratio
Premiums earned                   $ 768,180                                  $ 268,703                                  $ 499,477

Loss and loss adjustment
expenses:
Core losses                       $ 304,640                    39.7  %       $     (50)                      -  %       $ 304,690                    61.0  %
Weather events*                           -                       -                  -                       -                  -                       -
Prior years' reserve development    208,960                    27.2  %         202,466                    75.3  %           6,494                     1.3  %
Total losses and loss adjustment
expenses                          $ 513,600                    66.9  %       $ 202,416                    75.3  %       $ 311,184                    

62.3 %

*Includes only current year weather events beyond those expected.

See "Item 1-Note 6 (Liability for Unpaid Losses and Loss Adjustment Expenses)"
for change in liability for unpaid losses and LAE.

Management looks at losses and LAE in three areas, as described below and
represented in the tables above, each of which has different drivers that impact
reported results. As a result, these components of losses and LAE are described
separately. Overall losses and LAE, net of reinsurance recoveries, were $385.4
million resulting in a 70.6% net loss and LAE ratio for the six months ended
June 30, 2022. This compares to $311.2 million resulting in a 62.3% net loss and
LAE ratio for the six months ended June 30, 2021.

The Company continues to monitor and adjust its estimate of expected losses and
has increased its current year loss estimates and increased estimates associated
with prior years' claims. Over the past three years, even as we have increased
our estimates of prospective losses each year, we have recorded adverse claim
development on prior years' loss reserves and further strengthened current year
losses during the year to address the increasing impact of Florida's market
disruptions, as well as the impact of inflation from building material costs and
labor costs, have on the reserving and claim settlement process. The full extent
and duration of these market disruptions and inflationary pressures are unknown
and still unfolding, and we continue to monitor the impact of such disruptions
on the recording and reporting of claim costs. See the discussion above for the
Insurance Entities' 2022-2023 reinsurance programs and "Item 1 - Note 4
(Reinsurance)." Also see the discussion above under "Overview-Trends."

The factors impacting losses and LAE are as follows:

•Core losses

•Our core losses consist of all losses and LAE for the current accident year
excluding both weather events for the current year beyond those anticipated in
our regular accrual process and prior years' reserve development. Core losses
were 44.7% of direct premium earned for the six months ended June 30, 2022
compared to 39.7% for the same period in 2021. During the quarter ended June 30,
2022, management increased the core loss ratio by one loss ratio point
retroactive to January 1, 2022, with the cumulative impact being recorded in the
quarter. This was done in response to worsening weather experience during the
quarter. Management elected to address this through an increase in the current
accident year loss pick rather than record specific weather events given the
overall trends in recent years for weather not associated with named storms and
in response to changes in estimated losses caused by deteriorating loss trends
and higher repair costs as a result of material and labor inflation. The trend
in core losses and LAE is increasing year over year as the claims environment in
Florida
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continues to deteriorate and inflation continues to drive repair costs up. Also
see the discussion above under "Overview-Trends." Core losses also increase as
premium volume increases year over year.

•Weather events beyond those expected

•There were $4.5 million of weather events beyond those expected and included in
the core losses during the six months ended June 30, 2022.
•There were no weather events beyond those expected and included in the core
losses during the six months ended June 30, 2021.

•Prior years' reserve development

•Two drivers influence the amounts recorded as prior years' reserve development,
namely: (i) changes to prior estimates of direct and net ultimate losses on
prior accident years excluding major hurricanes and (ii) changes to prior
estimates of direct and net ultimate losses on hurricanes.

?During the six months ended June 30, 2022, prior years' reserve development
totaled $74.3 million of direct losses and $4.4 million of net unfavorable loss
development after the benefit of reinsurance.

•For hurricanes, prior years' reserve development for the six months ended June
30, 2022 was the result of a direct increase in the ultimate losses for several
hurricanes of $74.3 million offset by ceded hurricane losses of $69.9 million
resulting in net unfavorable development of $4.4 million. Direct losses
increased for Hurricanes Irma, Sally, Michael and Matthew. Prior year adverse
development includes gross reserve development on Hurricane Irma of $49.8
million, of which $45.6 million was ceded, resulting in net development on
Hurricane Irma of $4.2 million in the period. Additionally, the Company
concluded a favorable commutation during the quarter, increasing ceded prior
year loss payments which was offset by a provisory increase in direct prior year
IBNR amount, resulting in no net effect. Hurricane Matthew direct and net losses
increased $0.1 million.

•Excluding hurricanes, there was no direct and net prior years' reserve
development for the six months ended June 30, 2022.

?For the six months ended June 30, 2021 prior years' reserve development totaled
$209.0 million of direct losses and $6.5 million of net losses after the benefit
of reinsurance.

•For hurricanes, prior years' reserve development for the six months ended June
30, 2021 was the result of a direct increase in the ultimate losses for
hurricanes of $201.2 million offset by ceded hurricane losses of $202.5 million
resulting in net favorable development of $1.3 million. Direct losses increased
for Hurricanes Irma, Sally, Michael and Matthew. Ceded losses benefited from
changes to estimated non-Florida reinsurance coverage, which has a lower
attachment point. As a result of ceded losses exceeding direct losses, net loss
development on prior hurricanes was favorable during the six months ended June
30, 2021.

•Excluding hurricanes, there was $7.8 million of direct and net prior years'
reserve development for the six months ended June 30, 2021. This development,
from the 2019 and prior accident years, resulted from the settlement on
litigated claims exceeding prior estimated amounts.


The financial benefit generated by our claims adjusting affiliate from the
management of claims, including claim fees ceded by our Insurance Entities to
reinsurers, was $1.9 million for the six months ended June 30, 2022, compared to
$9.3 million during the six months ended June 30, 2021, driven by the recoveries
from reinsurers and internal claim services. The benefit was recorded in the
condensed consolidated financial statements as a reduction to losses and LAE.

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General and administrative expenses were $157.6 million for the six months ended
June 30, 2022, compared to $164.3 million during the same period in 2021, as
follows (dollars in thousands):

                                                                 Six Months Ended
                                                                     June 30,                                                  Change
                                                    2022                                   2021                          $                 %
                                           $                 Ratio                $                 Ratio
Premiums earned, net                  $ 546,125                              $ 499,477                              $ 46,648               9.3  %
General and administrative expenses:
Policy acquisition costs                108,823                19.9  %         113,224                22.7  %         (4,401)             (3.9) %
Other operating costs (1)                48,765                 8.9  %          51,065                10.2  %         (2,300)             (4.5) %

Total general and administrative
expenses                              $ 157,588                28.8  %       $ 164,289                32.9  %       $ (6,701)             (4.1) %


General and administrative expenses decreased by $6.7 million, which was the
result of a decrease in policy acquisition costs of $4.4 million and other
operating costs of $2.3 million. The total general and administrative expense
ratio was 28.8% for the six months ended June 30, 2022 compared to 32.9% for the
six months ended June 30, 2021.

•The decrease in policy acquisition costs of $4.4 million reflects a reduction
in the commission rate paid to agents on the renewal of Florida policies which
was reduced by 2 percentage points to 10% effective April 1, 2021. The
commission rate paid to agents on the renewal of Florida policies was reduced by
an additional 2 percentage points to 8% effective May 1, 2022, which will
benefit future periods as the new rate structure applies prospectively. The
decrease in policy acquisition costs as a percentage of premiums earned, net
during the period is primarily due to the reduction in commissions paid to
agents.

•The decrease in other operating costs of $2.3 million primarily reflects lower
employee benefits, stock-based compensation, and performance bonus accruals. The
other operating cost ratio was 8.9% for the six months ended June 30, 2022
compared to 10.2% in the six months ended June 30, 2021. This reduction reflects
several factors including economies of scale as we continue to grow premium, and
efficiencies gained from leveraging technology, and spending discipline.

As a result of the above, the combined ratio for the six months ended June 30,
2022 was 99.4% compared to 95.2% for the same period in 2021. The increase was
the result of a decrease in the general and administrative expense ratio offset
by an increase in the loss and LAE ratio as described above.

Interest and amortization of debt issuance costs increased by $3.3 million for
the six months ended June 30, 2022. The increase in interest and amortization of
debt issuance costs is the result of an increase in the outstanding debt as a
result of our fourth quarter of 2021 borrowing. See "Item 1-Note 7 (Long-term
debt)" for additional details.

Income tax expense was $8.2 million for the six months ended June 30, 2022,
compared to income tax expense of $18.1 million for the six months ended June
30, 2021. Our ETR decreased to 24.9% for the six months ended June 30, 2022, as
compared to 27.2% for the six months ended June 30, 2021. The ETR decreased as a
result of a lower ratio of permanent items relative to the amount of income
before taxes, principally non-deductible compensation, and a higher level of
discrete tax benefits primarily due to an increase in the Florida corporate
income tax rate enacted on January 1, 2022.

Other comprehensive loss, net of taxes for the six months ended June 30, 2022,
was $72.6 million compared to other comprehensive loss of $8.9 million for the
same period in 2021, reflecting after-tax changes in fair value of
available-for-sale debt securities held in our investment portfolio and
reclassifications out of accumulated other comprehensive income for
available-for-sale debt securities sold. See "Item 1-Note 11 (Other
Comprehensive Income (Loss))" for additional information about the amounts
comprising other comprehensive income (loss), net of taxes for these periods.

Adjusted operating income, representing GAAP operating income, excluding net
realized gains (losses) on investment and net changes in unrealized gains
(losses) of equity securities, was $49.4 million for the six months ended June
30, 2022 compared to $64.7 million for the same period in 2021.

Adjusted operating income margin, representing adjusted operating income divided
by core revenue, was 8.3% for the six months ended June 30, 2022 compared to
12.0% for the same period in 2021.

Adjusted net income attributable to common stockholders, representing GAAP net
income attributable to common stockholders, excluding net realized gains
(losses) on investment and net changes in unrealized gains (losses) of equity
securities, net of tax, was $34.7 million for the six months ended June 30, 2022
compared to $47.0 million for the same period in 2021.

Diluted adjusted earnings per common share, representing adjusted net income
available to common stockholders divided by weighted average diluted common
shares outstanding, was $1.12 for the six months ended June 30, 2022 compared to
$1.50 for the same period in 2021.
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Analysis of Financial Condition-As of June 30, 2022 Compared to December 31,
2021

We believe that cash flows generated from operations will be sufficient to meet
our working capital requirements for at least the next twelve months. We invest
amounts considered to be in excess of current working capital requirements.

The following table summarizes, by type, the carrying values of investments as
of the dates presented (in thousands):

                                                  As of
                                       June 30,        December 31,
Type of Investment                       2022              2021

Available-for-sale debt securities $ 1,021,006 $ 1,040,455

Equity securities                         79,844            47,334

Investment real estate, net                5,798             5,891
Total                                $ 1,106,648      $  1,093,680

See "Item 1-Condensed Consolidated Statements of Cash Flows" and "Item 1-Note 3
(Investments)" for explanations on changes in investments.

Restricted cash and cash equivalents increased by $17.5 million to $20.1 million
as of June 30, 2022 as a result of collateral held by a reinsurance captive
arrangement with one of the Insurance Entities reported as a Variable Interest
Entities ("VIE") in the condensed consolidated financial statements. See "Item
1-Note 14 (Variable Interest Entities)" for more information.

Prepaid reinsurance premiums represent the portion of unearned ceded written
premium that will be earned pro-rata over the coverage period of our reinsurance
program, which runs from June 1st to May 31st of the following year. The
increase of $349.1 million to $590.1 million as of June 30, 2022 was primarily
due to additional ceded written premium of $632.4 million recorded this quarter
for the estimated reinsurance costs relating to our new 2022-2023 catastrophe
reinsurance program beginning June 1, 2022, less amortization of ceded written
premium for the reinsurance costs earned during the period.

Reinsurance recoverable represents the estimated amount of paid and unpaid
losses, LAE and other expenses that are expected to be recovered from
reinsurers. The decrease of $152.2 million to $33.3 million as of June 30, 2022
was primarily due to the collections of amounts recoverable from reinsurers
relating to settled claims from hurricanes and covered by our reinsurance
contracts and amounts received in connection with a commutation received by
UPCIC this quarter.

Premiums receivable, net, represents amounts receivable from policyholders. The
increase in premiums receivable, net of $14.4 million to $79.3 million as of
June 30, 2022 relates to consumer payment behavior of our business. The amount
of direct premiums written during a calendar year tends to increase just prior
to the second quarter and tends to decrease approaching the fourth quarter.

Deferred policy acquisition costs ("DPAC") increased by $2.2 million to $111.0
million as of June 30, 2022, which is consistent with the seasonal premium
trends of written premium. In addition DPAC was impacted by the reduction to
Florida renewal commissions implemented during 2022 and 2021 and other changes
to the Company's commission structure. See "Item 1-Note 5 (Insurance
Operations)" for a roll-forward in the balance of our DPAC.

Income taxes recoverable represents the difference between estimated tax
obligations and tax payments made to taxing authorities. As of June 30, 2022,
the balance recoverable was $22.3 million, representing amounts due from taxing
authorities at that date, compared to a balance recoverable of $16.9 million as
of December 31, 2021. Income taxes recoverable as of June 30, 2022 will either
be refunded or applied to future periods to offset future federal and state
income tax obligations.

Deferred income taxes represent the estimated tax asset or tax liability caused
by temporary differences between the tax return basis of certain assets and
liabilities and amounts recorded in the financial statements. During the six
months ended June 30, 2022, deferred tax assets increased by $13.9 million to
$30.3 million primarily due to an increase in unrealized losses on investments
and an increase in unearned premiums net of prepaid reinsurance premiums.
Deferred income taxes reverse in future years as the temporary differences
between book and tax reverse.

See "Item 1-Note 6 (Liability for Unpaid Losses and Loss Adjustment Expenses)"
for a roll-forward in the balance of our unpaid losses and LAE. Unpaid losses
and LAE decreased by $159.9 million to $186.3 million as of June 30, 2022. The
majority of the decrease is from the settlement of losses from prior hurricanes
and prior large weather events. Overall, unpaid losses and LAE decreased, as
claim settlements exceeded new emerging claims. Unpaid losses and LAE are net of
estimated subrogation recoveries.

Unearned premiums represent the portion of direct premiums written that will be
earned pro-rata in the future. The increase of $85.6 million from December 31,
2021 to $943.4 million as of June 30, 2022 reflects the seasonality of our
business, which varies from month to month.
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Advance premium represents premium payments made by policyholders ahead of the
effective date of the policies. The increase of $32.6 million to $86.3 million
as of June 30, 2022 reflects customer payment behavior and the payment behavior
of mortgage escrow service providers.

We maintain a short-term cash investment strategy sweep to maximize investment
returns on cash balances. There were no book overdrafts as of June 30, 2022
compared to book overdrafts totaling $26.8 million as of December 31, 2021. The
decrease of $26.8 million is the result of higher cash balances available for
offset as of June 30, 2022 compared to December 31, 2021. See "-Liquidity and
Capital Resources" for more information.

Reinsurance payable, net, represents the unpaid reinsurance premium installments
owed to reinsurers, unpaid reinstatement premiums due to reinsurers and cash
advances received from reinsurers, if any. On June 1st of each year, we renew
our core catastrophe reinsurance program and record the estimated annual cost of
our reinsurance program. These estimated annual costs are increased or decreased
during the year based on premium adjustments or as a result of new placements
during the year. The annual cost initially increases reinsurance payable, which
is then reduced as installment payments are made over the policy period of the
reinsurance, which typically runs from June 1st to May 31st. The balance
increased by $449.2 million to $637.8 million as of June 30, 2022 as a result of
the timing of the above items. See "-Liquidity and Capital Resources" for more
information about timing of reinsurance premiums installment payments.

Other liabilities and accrued expenses increased by $5.9 million to $33.3
million as of June 30, 2022, primarily driven from an increase in other
liabilities due to the timing of payments.

Capital resources, net, decreased by $63.7 million for the six months ended June
30, 2022, reflecting a net decrease in total stockholders' equity and long-term
debt. The change in stockholders' equity was principally the result of increases
coming from our 2022 net income and share-based compensation, offset by declines
in the after-tax changes in the fair value of our available-for-sale debt
securities, treasury share purchases and dividends to shareholders.
Available-for-sale debt securities decline in fair value of $96.3 million
(before tax) in the first half of 2022, caused the net unrealized loss position
of $20.2 million at December 31, 2021 to increase to $116.5 million at June 30,
2022. Current market outlooks are signaling further Federal Reserve tightening
which could continue to have a negative impact on the valuation of
available-for-sale debt securities. See "Item 1-Condensed Consolidated
Statements of Stockholders' Equity" and "Item 1-Note 8 (Stockholders' Equity)"
for explanation of changes in treasury stock.

The reduction in debt of $0.7 million was the result of principal payments on
debt during 2022. See "-Liquidity and Capital Resources" for more information.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity is a measure of a company's ability to generate sufficient cash flows
to meet its short and long-term obligations. Funds generated from operations
have been sufficient and we expect them to be sufficient to meet our current and
long term liquidity requirements.

The balance of cash and cash equivalents, excluding restricted cash, as of June
30, 2022 was $317.0 million, compared to $250.5 million at December 31, 2021.
See "Item 1-Condensed Consolidated Statements of Cash Flows" for a
reconciliation of the balance of cash and cash equivalents between June 30, 2022
and December 31, 2021. The increase in cash and cash equivalents was driven by
cash flows generated from operating activities in excess of cash flows used in
investing and financing activities. Our cash investment strategy at times
includes cash investments where the right of offset against other bank accounts
does not exist. A book overdraft occurs when aggregating the book balance of all
accounts at a financial institution, for accounts which have the right of
offset, and if the aggregation results in a net negative book balance, that
balance is reclassified from cash and cash equivalents in our Condensed
Consolidated Balance Sheet to book overdraft. Cash and cash equivalents balances
are available to settle book overdrafts, and to pay reinsurance premiums,
expenses and claims. Reinsurance premiums are paid in installments during the
reinsurance policy period, which runs from June 1st to May 31st of the following
year. The FHCF reimbursement premiums are paid in three installments on August
1st, October 1st, and December 1st, and third-party reinsurance premiums are
generally paid in four installments on July 1st, October 1st, January 1st and
April 1st, resulting in significant payments at those times. See "Item 1-Note 12
(Commitments and Contingencies)" and additional discussion below under the
caption "-Material Cash Requirements" for more information.

The balance of restricted cash and cash equivalents as of June 30, 2022 and
December 31, 2021 represents cash equivalents on deposit with certain regulatory
agencies in the various states in which our Insurance Entities do business and,
in 2022, restricted cash and cash equivalents also includes collateral held by a
third party in a consolidated VIE, in support of the holding company's
reinsurance captive arrangement with UPCIC. The amount of collateral held was
$17.5 million as of June 30, 2022. Previous years' captive arrangements have
included collateral posting by the holding company, which was either returned to
the holding company before year end when there were no claims under the
reinsurance protection with the VIE, or remitted to UPCIC under this arrangement
in the form of VIE reinsurance settlements with UPCIC. See "Item 1-Note 14
(Variable Interest Entities)" for more information.
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Liquidity is required at the holding company for us to cover the payment of
holding company general operating expenses and contingencies, dividends to
shareholders (if and when authorized and declared by our Board of Directors),
payment for the possible repurchase of our common stock (if and when authorized
by our Board of Directors), payment of our tax obligations to taxing
authorities, settlement of taxes between subsidiaries in accordance with our tax
sharing agreement, capital contributions to subsidiaries or surplus note
contributions to the Insurance Entities, if needed, and interest and principal
payments on outstanding debt obligations of the holding company. Effective in
2021 for UPCIC and 2022 for APPCIC, the holding company has put in place an
ongoing surplus note arrangement with the Insurance Entities, which has been
approved by the Florida Office of Insurance Regulation as the Insurance
Entities' domestic regulator. Surplus notes are unsecured debt issued by the
Insurance Entities that is subordinated to all claims by policyholders and
creditors, with interest and principal payments on the surplus notes to the
holding company being made only upon the FLOIR's express approval. Surplus notes
are considered bonds in function and payout structure, but are accounted for as
equity in the statutory reporting of the Insurance Entities. The holding company
has outstanding with the Insurance Entities $134.0 million in surplus notes.
Under the arrangement, interest accrues at a variable rate (currently 8.27%) on
the outstanding surplus note balances and, if approved by the FLOIR is payable
annually to the holding company. In 2022, UPCIC received approval from its
Florida regulator to permit UPCIC to pay interest accruing from surplus notes
outstanding during 2021. The declaration and payment of future dividends to our
shareholders, and any future repurchases of our common stock, will be at the
discretion of our Board of Directors and will depend upon many factors,
including our operating results, financial condition, debt covenants and any
regulatory constraints. New regulations or changes to existing regulations
imposed on the Company and its affiliates may also impact the amount and timing
of future dividend payments to the parent. Principal sources of liquidity for
the holding company include dividends paid by our service entities generated
from income earned on fees paid by the Insurance Entities to affiliated
companies for general agency, inspections and claims adjusting services.
Dividends are also paid from income earned from brokerage commissions earned on
reinsurance contracts placed by our wholly-owned subsidiary, Blue Atlantic
Reinsurance Corporation, and policy fees. We also maintain high quality
investments in our portfolio as a source of liquidity along with ongoing
interest and dividend income from those investments. As discussed in "Item
1-Note 5 (Insurance Operations)," there are limitations on the dividends the
Insurance Entities may pay to their immediate parent company, Protection
Solutions, Inc. ("PSI", formerly known as Universal Insurance Holding Company of
Florida).

The maximum amount of dividends that can be paid by Florida insurance companies
without prior approval of the FLOIR is subject to restrictions as referenced
below and in "Item 1-Note 5 (Insurance Operations)." Dividends from the
Insurance Entities can only be paid from accumulated unassigned funds derived
from net operating profits and net realized capital gains. Subject to such
accumulated unassigned funds, the maximum dividend that may be paid by the
Insurance Entities to PSI without prior approval (an "ordinary dividend") is
further limited to the lesser of statutory net income from operations of the
preceding calendar year or statutory unassigned surplus as of the preceding year
end. During the six months ended June 30, 2022 and the year ended December 31,
2021, the Insurance Entities did not pay dividends to PSI. As of June 30, 2022,
the Insurance Entities did not have the capacity to pay ordinary dividends.

On November 23, 2021, we entered into Note Purchase Agreements with certain
institutional accredited investors and qualified institutional buyers pursuant
to which we issued $100 million of 5.625% Senior Unsecured Notes due 2026. We
intend to use the net proceeds to support the Insurance Entities' statutory
capital requirements and for general corporate purposes. If necessary, the
Company also has amounts available under our unsecured revolving loan as
discussed in "Item 1-Note 7 (Long-term debt)."

Liquidity for the Insurance Entities is primarily required to cover payments for
reinsurance premiums, claims payments including potential payments of
catastrophe losses (offset by recovery of any reimbursement amounts under our
reinsurance agreements), fees paid to affiliates for managing general agency
services, inspections and claims adjusting services, agent commissions, premium
and income taxes, regulatory assessments, general operating expenses, and
interest and principal payments on debt obligations. The principal source of
liquidity for the Insurance Entities consists of the revenue generated from the
collection of premiums earned, net, interest and dividend income from the
investment portfolio, the collection of reinsurance recoverable and financing
fees.

Our insurance operations provide liquidity as premiums are generally received
months or even years before potential losses are paid under the policies
written. In the event of catastrophic events, many of our reinsurance agreements
provide for "cash advance" whereby reinsurers advance or prepay amounts to us,
thereby providing liquidity, which we utilize in the claim settlement process.
In addition, the Insurance Entities maintain substantial investments in highly
liquid, marketable securities, which would generate funds upon sale. The average
credit rating on our available-for-sale securities was A+ as of June 30, 2022
and December 31, 2021. Credit ratings are a measure of collection risk on
invested assets. Credit ratings are provided by third party, nationally
recognized rating agencies and are periodically updated. Management establishes
guidelines for minimum credit rating and overall credit rating for all
investments. The duration of our available-for-sale securities was 4.4 years at
June 30, 2022 compared to 4.4 years at December 31, 2021. Duration is a measure
of a bond's sensitivity to interest rate changes and is used by management to
limit the potential impact of longer-term investments.

The Insurance Entities are responsible for losses related to catastrophic events
in excess of coverage provided by the Insurance Entities' reinsurance programs
and retentions before our reinsurance protection commences. Also, the Insurance
Entities are responsible for all other losses that otherwise may not be covered
by the reinsurance programs and any amounts arising in the event of a reinsurer
default. Losses or a default by reinsurers may have a material adverse effect on
either of the Insurance Entities, on our business, financial condition, results
of operations and liquidity.
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Capital Resources

Capital resources provide protection for policyholders, furnish the financial
strength to support the business of underwriting insurance risks and facilitate
continued business growth. The following table provides our stockholders'
equity, total long-term debt, total capital resources, debt-to-total capital
ratio and debt-to-equity ratio for the periods presented (dollars in thousands):

                                           As of
                                June 30,       December 31,
                                  2022             2021
Stockholders' equity          $ 366,551       $    429,702
Total long-term debt            103,161            103,676
Total capital resources       $ 469,712       $    533,378

Debt-to-total capital ratio        22.0  %            19.4  %
Debt-to-equity ratio               28.1  %            24.1  %


The debt-to-total capital ratio is total long-term debt divided by total capital
resources, whereas the debt-to-equity ratio is total long-term debt divided by
stockholders' equity. These ratios help management measure the amount of
financing leverage in place in relation to equity and future leverage capacity.

Adjusted common stockholders' equity, representing GAAP common stockholders'
equity, excluding accumulated other comprehensive income (loss), was $454.6
million as of June 30, 2022, $486.3 million as of June 30, 2021 and $445.2
million as of December 31, 2021.

Adjusted book value per share common share, representing adjusted common
stockholders' equity divided by outstanding common shares at the end of the
reporting period, was $14.80 as of June 30, 2022, $15.55 as of June 30, 2021 and
$14.26 as of December 31, 2021.

Adjusted return on common equity representing actual or annualized adjusted net
income attributable to common stockholders divided by average adjusted common
stockholders' equity, with the denominator excluding current period income
statement net realized gains (losses) on investments and net changes in
unrealized gains (losses) of equity securities, net of tax, was 15.3% as of June
30, 2022, 20.2% as of June 30, 2021 and 4.3% as of December 31, 2021.

As described in our Annual Report on Form 10-K for the year ended December 31,
2021, UPCIC entered into a surplus note with the State Board of Administration
of Florida under Florida's Insurance Capital Build-Up Incentive Program on
November 9, 2006. The surplus note has a twenty-year term, with quarterly
payments of principal and interest that accrue per the terms of the note
agreement. At June 30, 2022, UPCIC was in compliance with the terms of the
surplus note. Total adjusted capital and surplus, which includes the surplus
note, was in excess of regulatory requirements for both UPCIC and APPCIC.

As discussed in "Item 1-Note 7 (Long-term Debt)," we entered into a credit
agreement and related revolving loan with JPMorgan Chase Bank, N.A. in August
2021 which makes available an unsecured revolving credit facility with an
aggregate commitment not to exceed $35.0 million. Borrowings under the Revolving
Loan mature 364 days after the date of the loan. The Revolving Loan contains
customary financial covenants. As of June 30, 2022, the Company was in
compliance with all applicable covenants, including financial covenants. We had
not drawn any amounts under the Revolving Loan as of June 30, 2022. The
revolving credit facility with JP Morgan Chase Bank, N.A. is subject to annual
renewals each August.

In November 2021, we completed a private placement offering through which we
issued and sold $100 million of 5.625% Senior Unsecured Notes due 2026 (the
"Notes") to certain institutional accredited investors and qualified
institutional buyers. The Notes mature on November 26, 2026, at which time the
entire $100 million of principal is due and payable. At any time on or after
November 23, 2023, the Company may redeem all or part of the Notes. See "Item
1-Note 7 (Long-term debt)" for additional details. As of June 30, 2022, we were
in compliance with all applicable covenants, including financial covenants of
this note agreement.

We will also continue to evaluate opportunities to access the debt capital
markets to raise additional capital. We anticipate any proceeds would be used
for general corporate purposes, including investing in the capital and surplus
of the Insurance Entities.

In addition to the liquidity generally provided from operations, we maintain a
conservative, well-diversified investment portfolio, predominantly comprised of
fixed income securities with an average credit rating of A+, that focuses on
capital preservation and providing an adequate source of liquidity for potential
claim payments and other cash needs. The portfolio's secondary investment
objective is to provide a total rate of return with emphasis on investment
income. Historically, we have consistently generated funds from operations,
allowing our cash and invested assets to grow.
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Impact of the COVID-19 Pandemic

The impact of the COVID-19 pandemic on the economy and credit markets remains a
key risk as the United States and the world continues to navigate its
consequences and the efforts taken by governments to address financial recovery
and economic stability. We remain in regular contact with our advisors to
monitor the credit quality of the issuers of the securities in our portfolio and
discuss appropriate responses to credit downgrades or changes in companies'
credit outlook. We believe these measures, when combined with the inherent
liquidity generated by our business model and in our investment portfolio, will
allow us to continue to meet our short- and long-term obligations.

Looking Forward

We continue to monitor a range of financial metrics related to our business.
Although we have not yet experienced material adverse impacts on our business or
liquidity, conditions are subject to change depending on the extent of the
economic downturn and the pace and extent of an economic recovery. Significant
uncertainties exist with the potential long-term impact of the COVID-19
pandemic, including unforeseen newly emerging risks that could affect us and
future economic changes as the Federal Reserve addresses the emerging economic
concerns of inflation, employment and recession. We will continue to monitor the
broader economic impacts of the COVID-19 pandemic and its impact on our
operations and financial condition including liquidity and capital resources.

Common Stock Repurchases

On November 3, 2020, we announced that our Board of Directors authorized a share
repurchase program under which we may repurchase in the open market up to $20
million of outstanding shares of our common stock through November 3, 2022. We
may repurchase shares from time to time at our discretion, based on ongoing
assessments of our capital needs, the market price of our common stock and
general market conditions. We will fund the share repurchase program with cash
from operations.

During the six months ended June 30, 2022, we repurchased an aggregate of
603,080 shares of our common stock in the open market at an aggregate purchase
price of $7.4 million. Also, see "Part II, Item 2-Unregistered Sales of Equity
Securities and Use of Proceeds" for share repurchase activity during the three
months ended June 30, 2022.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that are reasonably
likely to have a material effect on the financial condition, results of
operations, liquidity, or capital resources of the Company, except for
multi-year reinsurance contract commitments for future years that will be
recorded at the commencement of the coverage period. See "Item 1-Note 12
(Commitments and Contingencies)" for more information.

Cash Dividends

The following table summarizes the dividends declared by the Company in 2022:

                                                                                                                            Cash Dividend
                                     Dividend                     Shareholders                    Dividend                Per Common Share
         2022                      Declared Date                   Record Date                  Payable Date                   Amount
First Quarter                        February 10, 2022                March 10, 2022                March 17, 2022       $           0.16
Second Quarter                          April 20, 2022                  May 13, 2022                  May 20, 2022       $           0.16

MATERIAL CASH REQUIREMENTS

The following table represents our material cash requirements for which cash
flows are fixed or determinable as of June 30, 2022 (in thousands):

                                                   Total              Next 12 Months           Beyond 12 Months
Reinsurance payable and multi-year
commitments (1)                               $    876,113          $       703,841          $         172,272
Unpaid losses and LAE, direct (2)                  186,349                  105,101                     81,248
Long-term debt (3)                                 131,893                    7,230                    124,663
Total material cash requirements              $  1,194,355          $       

816,172 $ 378,183

(1)Amount represents the payment of reinsurance premiums payable under
multi-year commitments. See "Item 1-Note 12 (Commitments and Contingencies)."

(2)There are generally no notional or stated amounts related to unpaid losses
and LAE. Both the amounts and timing of future loss and LAE payments are
estimates and subject to the inherent variability of legal and market conditions
affecting the obligations and make the timing of cash outflows uncertain. The
ultimate amount and timing of unpaid losses and LAE could differ materially from
the amounts in the table above. Further, the unpaid losses and LAE do not
represent all the obligations that will arise under the contracts, but rather
only the estimated liability incurred through June 30, 2022. Unpaid losses and
LAE are net of estimated subrogation recoveries. In addition, these balances
exclude amounts recoverable from the Company's reinsurance program.
See "Item 1-Note 4 (Reinsurance)."

(3)Long-term debt consists of a Surplus note and 5.625% Senior unsecured notes.
See "Item 1-Note 7 (Long-term debt)."

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IMPACT OF INFLATION AND CHANGING PRICES

The financial statements and related data presented herein have been prepared in
accordance with GAAP, which require the measurement of financial position and
operating results in terms of historical dollars without considering changes in
the relative purchasing power of money over time due to inflation. Our primary
assets are monetary in nature. As a result, interest rates have a more
significant impact on our performance than the effects of the general levels of
inflation. Interest rates do not necessarily move in the same direction or with
the same magnitude as the cost of paying losses and LAE.

Insurance premiums are established before we know the amount of loss and LAE and
the extent to which inflation may affect such expenses. Consequently, we attempt
to anticipate the future impact of inflation when establishing rate levels.
While we attempt to charge adequate rates, we may be limited in raising premium
levels for competitive and regulatory reasons. Inflation also affects the market
value of our investment portfolio and the investment rate of return. Any future
economic changes which result in prolonged and increasing levels of inflation
could cause increases in the dollar amount of incurred loss and LAE and thereby
materially adversely affect future liability requirements.

ARRANGEMENTS WITH VARIABLE INTEREST ENTITIES

We entered into a reinsurance captive arrangement with a VIE in the normal
course of business, and consolidated the VIE since we are the primary
beneficiary.

For a further discussion of our involvement with the VIE, see "Item 1-Note 14
(Variable Interest Entities)."

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes during the period covered by this Quarterly
Report on Form 10-Q to Critical Accounting Policies and Estimates previously
disclosed in "Part II, Item 7-Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in our Annual Report on Form 10-K
for the year ended December 31, 2021.
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NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures should be considered in addition to, and not as a
substitute for or superior to, financial measures presented in accordance with
GAAP. For more information regarding our key performance indicators, please
refer to the section titled "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Key Performance Indicators."

The following table presents the reconciliation of GAAP revenue (total premiums
earned and other revenues) to core revenue, which is a non-GAAP measure (in
thousands):

                                                    Three Months Ended                     Six Months Ended
                                                         June 30,                              June 30,
                                                  2022               2021               2022               2021
GAAP revenue                                  $ 292,006          $ 279,181          $ 579,488          $ 541,938
less: Net realized gains (losses) on
investments                                        (725)               496               (667)             1,038
less: Net change in unrealized gains (losses)
of equity securities                             (8,884)             1,229            (12,280)               735
Core Revenue                                  $ 301,615          $ 277,456          $ 592,435          $ 540,165



The following table presents the reconciliation of GAAP income before income
taxes to adjusted operating income, which is a non-GAAP measure (in thousands):


                                                     Three Months Ended                    Six Months Ended
                                                          June 30,                             June 30,
                                                   2022               2021              2022              2021
GAAP income before income taxes                $   10,680          $ 30,059          $ 33,151          $ 66,410
add: Interest and amortization of debt
issuance costs                                      1,731                35             3,339                55
GAAP operating income                              12,411            30,094            36,490            66,465
less: Net realized gains (losses) on
investments                                          (725)              496              (667)            1,038
less: Net changes in unrealized gains (losses)
of equity securities                               (8,884)            1,229           (12,280)              735
Adjusted operating income                      $   22,020          $ 28,369          $ 49,437          $ 64,692



The following table presents the reconciliation of operating income margin to
adjusted operation income margin, which is a non-GAAP measure (in thousands):

                                       Three Months Ended             Six Months Ended
                                            June 30,                      June 30,
                                      2022           2021           2022           2021
GAAP operating income              $ 12,411       $ 30,094       $ 36,490       $ 66,465
GAAP revenue                        292,006        279,181        579,488        541,938
GAAP operating income margin            4.3  %        10.8  %         6.3  %        12.3  %
Adjusted operating income            22,020         28,369         49,437         64,692
Core revenue                        301,615        277,456        592,435        540,165

Adjusted operating income margin 7.3 % 10.2 % 8.3 % 12.0 %

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The following table presents the reconciliation of GAAP net income (loss)
available to common stockholders to adjusted net income available to common
stockholders, which is a non-GAAP measure (in thousands):

                                                     Three Months Ended                    Six Months Ended
                                                          June 30,                             June 30,
                                                   2022               2021              2022              2021
GAAP net income                                $    7,370          $ 21,941          $ 24,907          $ 48,349
less: Preferred dividends                               2                 2                 5                 5
GAAP net income (loss) available to common
stockholders                                        7,368            21,939            24,902            48,344
less: Net realized gains (losses) on
investments                                          (725)              496              (667)            1,038
less: Net changes in unrealized gains (losses)
of equity securities                               (8,884)            1,229           (12,280)              735

add: Income tax effect on above adjustments        (2,329)              413            (3,138)              424

Adjusted net income available to common
stockholders                                   $   14,648          $ 20,627 

$ 34,711 $ 46,995

Weighted average common shares outstanding -
Diluted                                            30,883            31,310            31,060            31,292
Diluted earnings per common share              $     0.24          $   0.70          $   0.80          $   1.54
Diluted adjusted earnings per common share     $     0.47          $   0.65 

$ 1.12 $ 1.50

The following table presents the reconciliation of GAAP stockholders' equity to
adjusted stockholders' equity and book value per common share to adjusted book
value per common share, which is a non-GAAP measure (in thousands):

                                                                      As of
                                                      June 30,            June 30,                        December 31,
                                                        2022                2021                              2021
Stockholders' equity                                $  366,551          $  480,842                      $     429,702
less: Preferred equity                                     100                 100                                100
Common stockholders' equity                            366,451             480,742                            429,602
less: Accumulated other comprehensive income (loss)    (88,134)             (5,571)                           (15,568)
Adjusted common stockholders' equity                $  454,585          $  486,313                      $     445,170

Common shares outstanding                               30,716              31,269                             31,221
Book value per common share                         $    11.93          $    15.37                      $       13.76
Adjusted book value per common share                $    14.80          $    15.55                      $       14.26



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The following table presents the reconciliation of GAAP ROCE to adjusted ROCE,
which is a non-GAAP measure (in thousands):

                                           Three Months Ended                   Six Months Ended                Year Ended
                                                June 30,                            June 30,                   December 31,
                                         2022              2021              2022              2021                2021
Actual or annualized net income
available to
  common stockholders                 $ 29,472          $ 87,756          $ 49,804          $ 96,688          $   20,397
Average common stockholders' equity    381,346           467,654           398,027           464,952             439,382
ROCE                                       7.7  %           18.8  %           12.5  %           20.8  %              4.6    %
Actual or annualized adjusted net
income

available to common stockholders $ 58,592 $ 82,508 $ 69,422 $ 93,990 $ 18,959
Actual or adjusted average common

  stockholders' equity*                458,292           476,567           454,782           465,392             444,775
Adjusted ROCE                             12.8  %           17.3  %           15.3  %           20.2  %              4.3    %

Adjusted average common stockholders' equity excludes current period net realized
* gains (losses) on investments and

net changes in unrealized gains (losses) of equity securities, net of tax.

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