Document

EX-99.1 8 a10-kdocument31dec22recast.htm EX-99.1 Document

EXHIBIT 99.1

Introductory note

American Coastal Insurance Corporation (formerly known as United Insurance Holdings Corp.) (the “Company”) has recast certain information contained in its Annual Report on Form 10-K for the year ended December 31, 2022, originally filed with the Securities and Exchange Commission (the "SEC") on April 17, 2023 (“2022 Form 10-K”), as described in Item 8.01 of this Current Report on Form 8-K, to reflect the Company's reportable discontinued operations. As previously announced, on February 27, 2023, the Company's former insurance subsidiary, United Property & Casualty Insurance Company ("UPC") was placed into liquidation with the Florida Department of Financial appointed as receiver, which divested the Company's ownership of UPC. Therefore, the Company determined that the operations of UPC and operations directly supporting UPC should be reported as discontinued operations in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 205, Presentation of Financial Statements and has recast its previously filed consolidated financial statements.

The sections of the 2022 Form 10-K that have been recast in their entirety are as follows:

a.Part I, Item 1. Business;

b.Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations;

c.Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk; and

d.Part II, Item 8. Financial Statements and Supplementary Data and Reference to Financial Statements and Schedules;

Those sections of the 2022 Form 10-K which have not been recast as set forth herein are not materially impacted by the Company’s reportable discontinued operations described in this Current Report on Form 8-K. Accordingly, the recast information set forth in this Exhibit 99.1 to the Current Report on Form 8-K (the “Recast 2022 Form 10-K”) should be read in conjunction with the 2022 Form 10-K.

This Recast 2022 Form 10-K does not reflect events occurring after the April 17, 2023 filing date of the 2022 Form 10-K and does not modify or update the disclosures therein except to reflect the changes in the Company’s reportable discontinued operations. For developments since the filing of the fiscal year 2022 Form 10-K, refer to the Company’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2023, its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, and its Current Reports on Form 8-K filed subsequent to the 2022 Form 10-K.

AMERICAN COASTAL INSURANCE CORPORATION


Forward-Looking Statements		3
Part I.
	Item 1. Business	5





Part II.

	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 7A. Quantitative and Qualitative Disclosures about Market Risk	41
	Item 8. Financial Statements and Supplementary Data	45
	Auditor’s Report (PCAOB ID 34)	45
	Consolidated Balance Sheets	48
	Consolidated Statements of Comprehensive Loss	49
	Consolidated Statements of Stockholders’ Equity (Deficit)	50
	Consolidated Statements of Cash Flows	51
	Notes to Consolidated Financial Statements	52

Throughout this Recast 2022 Form 10-K, we present amounts in all tables in thousands, except for share amounts, per share amounts, policy and claim counts or where more specific language or context indicates a different presentation. In the narrative sections of this Recast 2022 Form 10-K, we show full values rounded to the nearest thousand.

AMERICAN COASTAL INSURANCE CORPORATION

FORWARD-LOOKING STATEMENTS

This Recast 2022 Form 10-K or in documents incorporated by reference contain or may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about anticipated growth in revenues, gross written premium, earnings per share, estimated unpaid losses on insurance policies, investment returns, and diversification and expectations about our liquidity, our ability to meet our investment objectives, our ability to manage and mitigate market risk with respect to our investments and our ability to continue as a going concern. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “endeavor,” “project,” “believe,” “plan,” “anticipate,” “intend,” “could,” “would,” “estimate,” or “continue” or the negative variations thereof or comparable terminology are intended to identify forward-looking statements. These statements are based on current expectations, estimates and projections about the industry and market in which we operate, and management’s beliefs and assumptions. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. The risks and uncertainties include, without limitation:

•our exposure to catastrophic events and severe weather conditions;

•the regulatory, economic and weather conditions present in Florida, Texas and Louisiana, the states in which we are most concentrated;

•our ability to cultivate and maintain agent relationships, particularly our relationship with AmRisc, LLC (AmRisc);

•the possibility that actual claims incurred may exceed our loss reserves for claims;

•assessments charged by various governmental agencies;

•our ability to implement and maintain adequate internal controls over financial reporting;

•our ability to maintain information technology and data security systems, and to outsource relationships;

•our reliance on key vendor relationships, and the ability of our vendors to protect the personally identifiable information of our customers, claimants or employees;

•our ability to attract and retain the services of senior management;

•risks and uncertainties relating to our mergers, dispositions and other strategic transactions;

•risks associated with investments in which we share ownership or management with third parties;

•our ability to generate sufficient cash to service all of our indebtedness and comply with covenants and other requirements related to our indebtedness;

•our ability to maintain our market share;

•changes in the regulatory environment present in the states in which we operate;

•the impact of new federal or state regulations that affect the insurance industry;

•the cost, viability and availability of reinsurance;

•our ability to collect from our reinsurers on our reinsurance claims;

•dependence on investment income and the composition of our investment portfolio and related market risks;

•the possibility of the pricing and terms for our products to decline due to the historically cyclical nature of the property and casualty insurance and reinsurance industry;

•the outcome of litigation pending against us, including the terms of any settlements;

•downgrades in our financial strength or stability ratings;

•the impact of future transactions of substantial amounts of our common stock by us or our significant stockholders on our stock price;

•our ability to meet the standards for continued listing on Nasdaq;

•substantial doubt about our ability to continue as a going concern, including the impact on future financing and reinsurance coverage;

•our ability to pay dividends in the future, which may be constrained by our holding company structure;

•the ability of our subsidiaries to pay dividends in the future, which may affect our liquidity and our ability to meet our

obligations;

•the ability of R. Daniel Peed and his affiliates to exert significant control over us due to substantial ownership of our common stock, subject to certain restrictive covenants that may restrict our ability to pursue certain opportunities;

•the impact of transactions by R. Daniel Peed and his affiliates on the price of our common stock;

•provisions in our charter documents that may make it harder for others to obtain control of us;

•the impact of the novel strain of coronavirus (COVID-19) and related business disruption and economic uncertainty on our business, results of operations and financial condition; and

•other risks and uncertainties described in this report, including under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K.

AMERICAN COASTAL INSURANCE CORPORATION

Other risks, uncertainties and factors, including those discussed in “Risk Factors” in the 2022 Form 10-K, could cause our actual results to differ materially from those projected in any forward-looking statements we make. We caution you to not place reliance on these forward-looking statements, which are valid only as of the date they were made. Except as may be required by applicable law, we undertake no obligation to update or revise any forward-looking statements to reflect new information, the occurrence of unanticipated events or otherwise.

AMERICAN COASTAL INSURANCE CORPORATION

PART I

Item 1. Business

INTRODUCTION

Company Overview

United Insurance Holdings Corp. (referred to in this Recast 2022 Form 10-K as we, our, us, the Company or UIHC) is a holding company engaged in the personal residential and commercial residential property and casualty insurance business in the United States. At the end of 2022, our insurance subsidiaries included two Florida domiciled carriers, United Property & Casualty Insurance Company (UPC) and American Coastal Insurance Company (ACIC), plus one New York domiciled carrier, Interboro Insurance Company (IIC). At the beginning of 2022, we had two other Florida domiciled insurance subsidiaries, Family Security Insurance Company, which was merged into UPC and Journey Insurance Company, which was merged into ACIC. Our insurance subsidiaries provide personal residential and commercial property and casualty insurance products that protect our policyholders against losses due to damages to structures and their contents. Some of our insurance subsidiaries sell policies that protect against liability for accidents as well as property damage. Our non-insurance subsidiaries support our insurance and investment operations.

As of December 31, 2022, approximately 52.5% of our policies in-force were written in Florida. Our Company’s other primary source of revenue is generated from writing insurance in New York, Louisiana and Texas. Our commercial lines business in-force underwritten by ACIC was 100% in Florida at the end of 2022. During 2022, the Company made the strategic decision to exit the personal lines business underwritten by UPC and accelerated the winding down of its affairs. Effective December 1, 2022, we no longer write in the state of North Carolina, where renewal rights have been sold and all premiums and losses are ceded. Effective October 1, 2022, we no longer write in the state of Georgia. Effective June 1, 2022, we no longer write in the state of South Carolina. Effective April 1, 2022, we no longer write in the state of Massachusetts, and effective January 15, 2022, we no longer write in the state of New Jersey. Effective January 1, 2021, we no longer write in the state of Hawaii. Effective December 1, 2021, we no longer write in the states of Connecticut or Rhode Island.

On August 25, 2022, we announced that UPC had filed plans for withdrawal in the states of Florida, Louisiana, and Texas and intended to file a plan for withdrawal in the state of New York. All filed plans entail non-renewing personal lines policies in these states. Additionally, we announced that Demotech, Inc., an insurance rating agency, notified UPC of its intent to withdraw UPC's Financial Stability Rating. On December 5, 2022, the Florida Office of Insurance Regulation ("FLOIR") issued Consent Order No. 303643-22- CO that provides for the administrative supervision and approval of the plan of run-off for UPC (the "Consent Order"). The Consent Order provides formal approval of UPC's Plan of Run-Off (the "Plan") to facilitate a solvent wind down of its affairs in an orderly fashion. Additionally, in connection with the Plan, IIC has agreed to not pay ordinary dividends without the prior approval of the New York Department of Financial Services until January 1, 2025. On February 10, 2023, we announced that a solvent run-off for UPC was unlikely and on February 27, 2023, UPC was placed into receivership with the Florida Department of Financial Services (DFS) which divested our ownership of UPC.

Our Company, together with wholly-owned subsidiaries UPC and United Insurance Management L.C. (UIM), entered into a Renewal Rights Agreement (Southeast Renewal Agreement), dated as of December 30, 2021 with Homeowners Choice Property and Casualty, Inc. (HCPCI), pursuant to which our Company, UPC and UIM agreed to sell, and HCPCI agreed to purchase, the renewal rights to UPC’s personal lines homeowners business in Georgia, South Carolina and North Carolina. The transfer of policies was subject to regulatory approval. Effective June 1, 2022, we began transitioning South Carolina policies to

HCPCI. The sale was consummated on December 30, 2021.

Effective June 1, 2022, we entered into a quota share reinsurance agreement with TypTap Insurance Company (Typtap) in connection with the Southeast Renewal Agreement. Under the terms of this agreement, we cede 100% of our in-force, new, and renewal policies in the states of Georgia, North Carolina, and South Carolina. This agreement replaces the 85% quota share agreement with HCPCI effective December 31, 2021. Also effective June 1, our third-party quota share reinsurance agreements were renewed to exclude these states. We will no longer retain any risk associated with these states.

Our Company, together with wholly-owned subsidiaries UPC and UIM, entered into a Renewal Rights Agreement (Northeast Renewal Agreement), dated as of January 18, 2021 with HCPCI and HCI Group, Inc. (HCI), pursuant to which our Company, UPC and UIM agreed to sell, and HCPCI agreed to purchase, the renewal rights to UPC’s personal lines homeowners business in Connecticut, Massachusetts, New Jersey and Rhode Island. The transfer of all states was completed as of June 30, 2022.

AMERICAN COASTAL INSURANCE CORPORATION

Effective June 1, 2021, we entered into a quota share reinsurance agreement with HCPCI and TypTap Insurance Company (TypTap) in connection with the Northeast Renewal Agreement. Under the terms of this agreement, we cede 100% of our in-force, new, and renewal policies in the states of Connecticut, New Jersey, Massachusetts, and Rhode Island. The cession of these policies is 50% to HCPCI and 50% to TypTap.

We have historically grown our business through organic growth, complemented by strategic acquisitions and

partnerships, including our acquisitions of AmCo Holding Company, LLC (AmCo) and its subsidiaries, including ACIC, in

April 2017, IIC in April 2016, and Family Security Holdings, LLC (FSH), including its subsidiary Family Security Insurance

Company, Inc. (FSIC), in February 2015, and our strategic partnership with a subsidiary of Tokio Marine Kiln Group Limited

(Tokio Marine), which formed Journey Insurance Company (JIC) in August 2018. Effective June 1, 2022, we acquired all of the minority interest in JIC from Tokio Marine and then merged JIC into ACIC, with ACIC being the surviving entity. Effective May 31, 2022, we merged FSIC into UPC, with UPC being the surviving entity.

Financial strength or stability ratings are important to insurance companies in establishing their competitive position and may impact an insurance company’s ability to write policies. We are rated by Demotech and Kroll Bond Rating Agency (Kroll). Demotech maintains a letter-scale financial stability rating system ranging from A’’ (A double prime) to L (licensed by insurance regulatory authorities). Kroll maintains a letter-scale financial strength rating system for insurance companies ranging from AAA (extremely strong operations and no risk) to R (operating under regulatory supervision). The financial strength or stability ratings of our insurance company subsidiaries as of December 31, 2022 are listed below. As of December 31, 2022, our insurance subsidiary, UPC is no longer rated by Kroll or Demotech. With these ratings, we expect our property insurance policies will be acceptable to the secondary mortgage marketplace and mortgage lenders.

Subsidiary

Demotech Rating

Kroll Rating

ACIC

A-

IIC

A-

UIHC

BB+

Impact of Coronavirus Disease (COVID-19) and Financial Status

We are committed to maintaining a stable and secure business for our employees, agents, customers and stockholders. During the second half of 2020, we were able to resume hiring activities, despite the limits on in-person interviews

and on-boarding procedures resulting from COVID-related protocols. In addition, we have converted to virtual sales processes

to enable our agents to continue their activities, and launched a virtual inspection software for policyholders and claimants to use to provide us with information related to the risk or claim. We believe these activities, collectively, help ensure the health and safety of our employees through adherence to the Centers for Disease Control and Prevention (CDC), state and local government work guidelines.

We have not experienced a material impact from COVID-19 on our business operations, financial position, liquidity or our

ability to service our policyholders to date, with the exceptions of fluctuations in our investment portfolios due to volatility of

the equity securities markets, as further described in Part II, Item 7. "Management's Discussion and Analysis of Financial

Condition and Results of Operations" of this Recast 2022 Form 10-K. We reduced the size of the equity securities portfolio during the second half of 2020, which has reduced the impact of fluctuations in the markets on our financial condition. The COVID-19

pandemic and resulting global disruptions did not have a material impact on our access to credit and capital markets needed to

maintain sufficient liquidity for our continued operating needs during the year ended December 31, 2022.

We did not incur material claims or significant disruptions to our business for the year ended December 31, 2022, as a result of COVID-19. We will continue to respond to the COVID-19 pandemic and take reasonable measures to make sure customers continue to be served without interruption.

AMERICAN COASTAL INSURANCE CORPORATION

Our Strategy

Our vision is to be a top-quartile underwriter of catastrophe exposed property insurance. Our plan is to focus primarily on low-rise commercial property insurance in Florida, through our exclusive managing general agency agreement and long-term partnership with AmRisc, LLC. The Company’s continuous portfolio optimization process strives to balance our risk appetite and underwriting profit opportunities with our available capital and reinsurance capacity to achieve consistent and sustainable underwriting profitability for the Company and its reinsurers over time.

We desire to have the right combination of price, underwriting rules and coverages to earn a return on capital that exceeds our cost of capital throughout the insurance market cycle. The Company also seeks to have risks maintain an appropriate insurance to value through annual re-underwriting and inspection of each property to ensure it meets or exceeds our underwriting guidelines with verified data quality and integrity regarding the key risk characteristics of our covered properties.

With UPC in receivership, the Company’s personal lines business is limited to IIC in New York. As a result of our desire to focus on commercial lines, we expect to divest of IIC leaving us with just ACIC at some point in the future. The Company continues to explore all strategic options for IIC, but remain focused on selling IIC to a third-party.

Our commercial lines portfolio is concentrated in Florida and personal lines portfolio in New York (excluding UPC) with an ongoing threat of natural catastrophes which exposes our company to risk and volatility.

PRODUCTS AND DISTRIBUTION

In July of 2020, we implemented a strategy to de-risk the Company by reducing premiums and exposure from our personal lines segment that was offset with growth in our commercial lines segment. As of December 31, 2022, our insurance subsidiary, UPC was insolvent and held as discontinued operations. As a result we have excluded UPC’s premiums from the graphs below. The graphs below show our product mix distribution based on gross written premium.

AMERICAN COASTAL INSURANCE CORPORATION

Personal Residential Products

Policies we issue under our homeowners’ program provide structure, content and liability coverage for standard single-family homeowners, renters and condominium unit owners through our subsidiary IIC. Personal residential products are offered in New York. We include coverage to policyholders for loss or damage to dwellings, detached structures or equipment caused by covered causes of loss such as fire, wind, hail, water, theft and vandalism.

In 2022, personal residential property policies (by which we mean both standard homeowners’, dwelling fire, renters and condo owners’ policies) produced written premium of $64,100,000 and accounted for 11.2% of our total gross written premium from continuing operations. All of the personal residential gross written premium was written in New York.

Loss and loss adjustment expenses related to our personal residential products tend to be higher during periods of severe or inclement weather, which varies from state to state.

With UPC in receivership, the Company’s personal lines business is limited to IIC in New York. We are actively working to divest of IIC and its exposure to complete our exit from personal lines.

Commercial Residential Products

We primarily provide commercial multi-peril property insurance for residential condominium associations and apartments in Florida. In 2020, we began writing commercial policies in Texas and South Carolina. Effective May 31, 2022, we no longer write commercial policies in Texas and South Carolina. We include coverage to policyholders for loss or damage to buildings, inventory or equipment caused by covered causes of loss such as fire, wind, hail, water, theft and vandalism.

In 2022, commercial policies produced written premium of $508,243,000 and accounted for 88.8% of our total gross written premium from continuing operations.

Not-At-Risk Offerings

On our equipment breakdown, identity theft, cyber security, and flood policies (excluding our inland flood policies) we earn a commission while retaining no risk of loss, since all such risk is ceded to the federal government via the National Flood Insurance Program (flood risk) and other private companies (other risks). We offer flood policies in all states in which we write business. Flood policies produced written premium of $19,446,000 and is all captured within our discontinued operations at December 31, 2022. On June 9, 2022, we entered into a renewal rights agreement with Wright National Flood Insurance Company to sell our entire NFIP Write Your Own flood insurance business.

Other Offerings

In addition to our personal and commercial residential products, in December 2019, we began offering Inland Flood insurance. These products did not comprise a material portion of our written business at December 31, 2022.

Underwriting

AMERICAN COASTAL INSURANCE CORPORATION

We price our products at levels that we project will generate an acceptable underwriting profit. We aim to accurately reflect the risk and profitability of each potential policy. The Company uses pricing algorithms, judgement-based rating and consent to rate methodologies that consider insurance credit scores (where allowable) and historical attritional loss costs for the rating territory in which the risk resides, as well as projected reinsurance costs based on the specific geographic and structural characteristics of the property. We seek to optimize our portfolio by managing our probable maximum loss, total insured value and average annual loss. As part of this optimization process, we use the output from third-party modeling software to analyze our risk exposures, including wind exposures, by zip code or street address.

We measure our underwriting profitability by the combined ratio, which is a sum of the ratios of losses, loss adjustment expenses, and underwriting expenses to either gross or net earned premiums. A combined ratio under 100% indicates an underwriting profit. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of this report for further details on our combined ratio.

Distribution Channels

Our commercial lines policies are marketed and distributed to condominium associations by AmRisc, LLC through a network of independent agencies managed by AmRisc, LLC that specialize in commercial residential insurance. AmRisc, LLC is an unaffiliated third-party owned by Truist Financial Corporation (NYSE: TFC) and represents 100% of our commercial lines revenue based on our exclusive agreement in Florida.

As of December 31, 2022, we marketed and distributed our personal lines policies to consumers through approximately 3,500 independent agencies, with only one agency, Allstate, through their Ivantage program, representing more than 10% of our personal lines revenue.

The Company focused on the independent agency distribution channel since its inception, and we believe independent agents and agencies build relationships in their communities that can lead to profitable business and policyholder satisfaction. We believe we have built significant credibility and loyalty with the independent agent communities in the states in which we operate through (i) our extensive training for full-service insurance agencies that distribute our products and (ii) periodic business reviews using established benchmarks and goals for premium volume and profitability.

Typically, a full-service agency is small to medium in size and represents several insurance companies for both personal and commercial product lines. We depend on our independent agents to produce new business for us. We compensate our independent agents primarily with fixed-rate commissions that we believe are consistent with those generally prevailing in the market.

GEOGRAPHIC MARKETS

The table below shows the geographic distribution of our policies in-force as of December 31, 2022, 2021 and 2020, including our policies attributable to discontinued operations.


Policies In-Force By Region (1)	2022	2021	2020
Florida	133,433	204,747	253,244
Gulf	63,295	109,799	144,121
Northeast	35,868	99,388	140,043
Southeast	21,679	57,790	93,583
Total	254,275	471,724	630,991

(1) "Gulf" is comprised of Louisiana and Texas; "Northeast" is comprised of Massachusetts, New Jersey and New York in 2022 and Connecticut, Massachusetts, New Jersey, New York and Rhode Island in 2021; and "Southeast" is comprised of Georgia, North Carolina and South Carolina. We are no longer writing in New Jersey as of January 15, 2022, Massachusetts as of April 1, 2022, South Carolina as of June 1, 2022, Georgia as of October 1, 2022 and North Carolina as of December 1, 2022 as the policies have transitioned to HCPCI.

AMERICAN COASTAL INSURANCE CORPORATION

The table below shows the geographic distribution of our total insured value (TIV) of all polices in-force as of December 31, 2022, 2021 and 2020, including our policies attributable to discontinued operations.


TIV By Region(1)	2022		2021		2020
Florida	$	131,759,138	$	162,243,360	$	178,268,495
Gulf	31,614,402		48,598,405		60,347,058
Northeast	26,697,590		69,056,858		94,633,077
Southeast	10,829,542		30,283,130		43,790,464
Total	$	200,900,672	$	310,181,753	$	377,039,094

AMERICAN COASTAL INSURANCE CORPORATION

COMPETITION

The property and casualty insurance market in the United States is highly competitive and rapidly changing. Our primary competitors range from large national property and casualty insurance companies that write most classes of business using traditional products and pricing to small and mid-size regional insurance companies who provide specialty coverages.

We compete primarily on the basis of product features, the strength of our distribution network, the quality of our services to our agents and policyholders, and our long-term financial stability. Our long and successful track record writing homeowners’ insurance in catastrophe-exposed areas has enabled us to develop sophisticated pricing techniques that endeavor to accurately reflect the risk of loss while allowing us to be competitive in our target markets. This pricing segmentation approach allows us to offer products in areas that have a high demand for property insurance yet are under-served by the national carriers. However, we face the risk that policyholders may be able to obtain more favorable terms from competitors rather than renewing coverage with us.

Our ability to compete is dependent on a number of factors. One factor is the financial strength or stability ratings assigned to our insurance subsidiaries by independent rating agencies. A downgrade in these ratings could negatively impact our position in the market. Another, is that we must attract and retain key employees and highly skilled people in order to be successful in the market. There is intense competition in our industry which could lead to higher than expected employee turnover or difficulty attracting new employees. Finally, technological advancements and innovation in the insurance industry provide opportunities for a competitive advantage. Advancements and innovation are being used in all aspects of the industry including digital-based distribution methods, underwriting and claims handling. We continue to leverage the technology that we have and have made substantial investments into new technology in an effort to gain an advantage over our competitors.

REGULATION

We are subject to extensive regulation in the jurisdictions in which our insurance company subsidiaries are domiciled and licensed to transact business, primarily at the state level. ACIC is domiciled in Florida, and IIC is domiciled in New York. UIHC is also regulated by the NAIC. In general, these regulations are designed to protect the interests of insurance policyholders.

Such regulations have a substantial effect on certain areas of our business, including:

•insurer solvency,

•reserve adequacy,

•insurance company licensing and examination,

•agent and adjuster licensing,

•rate setting,

•investments,

•assessments or other surcharges for guaranty funds,

•transactions with affiliates,

•the payment of dividends,

•reinsurance,

•protection of personally identifiable information,

•risk solvency assessment and enterprise risk management,

AMERICAN COASTAL INSURANCE CORPORATION

•cybersecurity,

•statutory accounting methods, and

•numerous requirements relating to other areas of insurance operations, including policy forms, underwriting standards and claims practices.

Our insurance subsidiaries provide audited statutory financial statements to the various insurance regulatory authorities. With regard to periodic examinations of an insurance company’s affairs, insurance regulatory authorities, in general, defer to the insurance regulatory authority in the state in which an insurer is domiciled; however, insurance regulatory authorities from any state in which we operate may conduct examinations at their discretion.

In 2021, the Florida Office of Insurance Regulation (FLOIR) began a statutory examination of JIC for the year ended December 31, 2020. This examination concluded in 2022, with no significant findings.

Effective January 1, 2019, three of our insurance subsidiaries, UPC, FSIC and ACIC, entered into an intercompany property and casualty reinsurance pooling arrangement. Pooling arrangements permit the participating companies to rely on the capacity of the entire pool’s statutory capital and surplus rather than just on their own statutory capital and surplus. Under such arrangements, the participating companies share substantially all insurance business that is written and allocate the combined premiums, losses and expenses. Effective January 1, 2022, this arrangement was terminated.

For a discussion of statutory financial information and regulatory contingencies, see Note 16 to our Notes to Consolidated Financial Statements in Part II, Item 8 of this report.

Risk-Based Capital Requirements

To enhance the regulation of insurer solvency, the NAIC has published risk-based capital (RBC) guidelines for insurance companies designed to assess capital adequacy and to raise the level of protection statutory surplus provides for policyholders. The guidelines measure three major areas of risk facing property and casualty insurers: (i) underwriting risks, which encompass the risk of adverse loss developments and inadequate pricing; (ii) declines in asset values arising from credit risk; and (iii) other business risks. Most states, including Florida and New York, have enacted the NAIC guidelines as statutory requirements, and insurers having less statutory surplus than required will be subject to varying degrees of regulatory action, depending on the level of capital inadequacy.

The level of required risk-based capital is calculated and reported annually. The table below outlines each of our subsidiary’s RBC ratios, all of which were in excess of minimum requirements, as of December 31, 2022.


Subsidiary	RBC Ratio
ACIC	504	%
IIC	564	%

Underwriting and Marketing Restrictions

During the past several years, various regulatory and legislative bodies have adopted or proposed new laws or regulations to address the cyclical nature of the insurance industry, catastrophic events and insurance capacity and pricing. These regulations: (i) created “market assistance plans” under which insurers are induced to provide certain coverage; (ii) restrict the ability of insurers to reject insurance coverage applications, to rescind or otherwise cancel certain policies in mid-term, and to terminate agents; (iii) restrict certain policy non-renewals and require advance notice on certain policy non-renewals; and (iv) limit rate increases or decrease rates permitted to be charged.

Most states also have insurance laws requiring that rate schedules and other information be filed with the insurance regulatory authority, either directly or through a rating organization with which the insurer is affiliated. The insurance regulatory authority may disapprove a rate filing if it finds that the rates are inadequate, excessive or unfairly discriminatory.

Most states require licensure or insurance regulatory authority approval prior to the marketing of new insurance products. Typically, licensure review is comprehensive and includes a review of a company’s business plan, solvency, reinsurance, rates, forms and other financial and non-financial aspects of a company, such as the character of its officers and directors. The insurance regulatory authorities may prohibit entry into a new market by not granting a license or by withholding approval.

AMERICAN COASTAL INSURANCE CORPORATION

Limitations on Dividends by Insurance Subsidiaries

As a holding company with no significant business operations of our own, we rely on payments from our insurance subsidiaries as one of the principal sources of cash to pay dividends and meet our obligations. Our insurance affiliates are regulated as property and casualty insurance companies and their ability to pay dividends is restricted by Florida and New York law.

The state laws of Florida and New York permit an insurer to pay dividends or make distributions out of that part of statutory surplus derived from net operating profit and net realized capital gains or adjusted net investment income. The state laws further provide calculations to determine the amount of dividends or distributions that can be made without the prior approval of the insurance regulatory authorities and the amount of dividends or distributions that would require prior approval of the insurance regulatory authorities in those states. Statutory risk-based capital requirements may further restrict our insurance subsidiaries’ ability to pay dividends or make distributions if the amount of the intended dividend or distribution would cause statutory surplus to fall below minimum risk-based capital requirements.

For additional information regarding those restrictions, see Part II, Item 5 and Part I, Item 1A of this report.

Insurance Holding Company Regulation

As a holding company of insurance subsidiaries, we are subject to laws governing insurance holding companies in Florida and New York. These laws, among other things: (i) require us to file periodic information with the insurance regulatory authority, including information concerning our capital structure, ownership, financial condition and general business operations; (ii) regulate certain transactions between our affiliates and us, including the amount of dividends and other distributions and the terms of surplus notes: and (iii) restrict the ability of any one person to acquire certain levels of our voting securities without prior regulatory approval. Any purchaser of 5% or more of the outstanding shares of our common stock could be presumed to have acquired control of us unless the insurance regulatory authority, upon application, determines otherwise.

Insurance holding company regulations also govern the amount any affiliate of the holding company may charge our insurance affiliates for services (i.e., management fees and commissions). We have a long-term management agreement among our managing company, UIM, and UPC which presently provides for monthly management fees. The Florida Office of Insurance Regulation must approve any changes to this agreement. We also have an agreement among our claims adjusting company, Skyway Claims Services, LLC, UPC and ACIC which presently provides for monthly claims adjusting fees.

AmRisc, a managing general underwriter, handles the underwriting, claims processing and premium collection for our ACIC commercial business written in Florida. In return, AmRisc is reimbursed through monthly management fees.

The Company does not utilize a managing general agent structure in New York. Instead, UIHC allocates a portion of relevant expenses to IIC for statutory accounting purposes at cost.

CORPORATE RESPONSIBILITY AND SUSTAINABILITY

As a company with more than 20 years of history and experience, we strive to create and maintain a culture within our business where people are empowered to address risks as they emerge, and where we expect all associates to hold themselves and their teammates accountable for personal integrity and professionalism. To demonstrate this culture our leaders must lead by example and clear standards of behavior should be well understood by the entire company. We maintain six core values; teamwork, trust, accountability, integrity, bias to action, and persistence, to accomplish this goal.

In addition to our cultural goals, we are committed to conducting business in a manner that supports environmental, social, and governance (ESG) matters. UIHC believes that an effective ESG strategy leads to improved decision making, associate engagement, and financial results over time.

To show our commitment to conducting business that supports ESG matters, in the second quarter of 2021 we published our inaugural Sustainability & Responsibility report, which outlines our ESG practices and goals. Highlights from the report can be seen below, and the full report is available on our company website under Environmental, Social and Governance.

Environmental Matters

As a data driven organization some of the facts surrounding climate change have our attention. Several factors, including the rise in carbon dioxide concentration levels in the atmosphere, higher global mean air and water temperatures, and sea and

AMERICAN COASTAL INSURANCE CORPORATION

Arctic ice levels have been identified as potential culprits of the higher frequency and severity of catastrophe losses we have incurred over the past five years.

While the effect of climate change on weather-related catastrophe events remains somewhat limited, we recognize current trends and potential financial impact are not sustainable. As a result, we have taken the following steps to improve our environmental footprint and reduce our contribution to climate change:

•Reducing waste: paperless policy document delivery option and investment in paperless technologies;

•Eco-friendly disposal of retired equipment and electronics;

•Installed filtered water dispensers to promote re-usable bottles over disposables;

•Utilization of recycling bins throughout our offices;

•Implemented a remote work environment to both enhance productivity and curb the impact of daily commuting; and

•Use of energy efficient LED lighting, motion-activated lighting, and programmable thermostats to reduce energy use.

In addition to the steps outlined above, we have committed to increase our capital allocated toward ESG investment vehicles and opportunities. As of December 31, 2022, we have invested $3,280,000 in a BlackRock ESG exchange-traded fund.

UIHC continuously monitors our environmental footprint and will continue to make steps to reduce this footprint where possible. We have committed to achieve net-zero carbon emissions in our operations and through our value chain by no later than 2030.

Social Responsibility

We understand that research shows diverse teams perform better, innovate more, and are more effective at managing risks. As a result, our organization has a vested interest in hiring associates and building teams that reflect the diversity of society and the communities that we seek to serve. Details of our accomplishments creating a diverse and inclusive workplace can be seen in Part I, Item 1., “Human Capital Management”.

In addition to our social responsibility as an employer within the community, UIHC also seeks to support our community through various initiatives intended to give back and promote goodwill. Over the past several years we have provided support to numerous non-for-profit organizations. Some of the causes we have provided support to include, but are not limited to, youth education, work force development, medical care and research, domestic violence shelters and prevention, and child-care services. We are committed to giving back and investing in the communities we serve.

Governance Matters

Our Board of Directors oversee and monitor our management in the interest and for the benefit of our stockholders. Our Board is currently comprised of nine directors, divided into two classes. Each class of directors is elected for a two-year term, in accordance with our Certificate of Incorporation. Eight of our Directors, or 88.9%, are considered to be independent.

Our Board of Directors has several committees, including an Audit Committee, a Compensation and Benefits Committee, a Nominating and Corporate Governance Committee, and an Investment Committee. All members of these committees qualify as independent directors under SEC and Nasdaq standards as well as under the independence standards specific to their committees. UIHC has also committed to adding at least two new Directors to our Board of Directors to improve overall diversity at the highest level of corporate governance.

HUMAN CAPITAL MANAGEMENT

Diversity and Employment Statistics

As of December 31, 2022, we had 269 employees, of which 148, 34, and five worked in Claims, the Client Experience Center, and Underwriting, respectively. These employees have regular direct contact with our vendors, agencies, or customers. We are not party to any collective bargaining agreements and we have not experienced any work stoppages or strikes as a result of labor disputes.

The following table shows the diversity in our workforce population at December 31, 2022 and how this diversity has changed from December 31, 2021.

AMERICAN COASTAL INSURANCE CORPORATION

Gender (1)

Change from

December 31, 2021

Race (1)

Change from

December 31, 2021

Executive Officers

20.0%

(22.9) points

40.0%

11.4 points

Management Team (2)

39.0%

0 points

26.8%

0.2 points

All Other Employees

45.3%

(2.4) points

34.3%

(0.4) points

(1) Information regarding gender and race is based on information provided by employees.

(2) Our management team is comprised of employees in supervisory roles at the manager and director level or above.

As seen in the table above, our commitment to diversity and inclusion can be seen as our gender and racial diversity remains mostly consistent year over year. We believe that inclusion and diversity starts at the top. In 2021, we appointed a female leader within our organization to serve as our General Counsel. With two of the five members of our executive leadership team comprised of underrepresented groups, we believe this is strong evidence of our commitment to our ESG goals.

Oversight and Management

We recognize the diversity of our policyholders, team, and geographic markets, and believe in creating an inclusive environment that represents a variety of backgrounds. Working under these principles, our Employee Success Department is tasked with recruiting and hiring, onboarding, performance management, and managing employee-related matters. In addition, we have developed “UPC University”, a robust training program for our incoming claims adjusters and underwriting advocates. With this development, we have created a full-time Training Department, whose focus is on harboring success in our claims adjusters and underwriting advocates while continuously improving the training curriculum and experience for the company as a whole. Finally, we have created a monthly leadership development series for all staff at the management level or higher.

We believe in transparency at all levels at UIHC. On a monthly basis, an all employee meeting is held where our Executive Officers recognize employees for their continued success, discuss new and ongoing company initiatives, and address any concerns our employees may have. In addition to this, the leaders in each department assist our Executive Officers in maintaining our culture and implementing our core values at all levels of the organization.

Total Rewards

We believe that our future success largely depends upon our ability to attract and retain highly skilled employees. To ensure we are successful in this, we provide our employees with the following:

•Competitive salaries and bonuses;

•Tuition reimbursement;

•Paid parental leave; and

•Robust employee benefit packages that include:

◦Health care;

◦Vision;

◦Dental;

◦Retirement program;

◦Paid time off; and

◦Employee assistance program that provides emotional support, legal services and financial services.

As a part of our retention efforts, we also invest in ongoing development for all employees, and attempt to fill vacant senior or leadership roles through internal promotion when possible. Voluntary attrition was 39.3% for the year ended December 31, 2022.

CORPORATE INFORMATION

United Insurance Holdings Corp. was incorporated in Delaware in 2007. Our principal executive offices are located at 800 2nd Avenue S., St. Petersburg, FL 33701 and our telephone number at that location is (727) 895-7737. We are listed on the Nasdaq stock exchange under ticker symbol “UIHC.”

AMERICAN COASTAL INSURANCE CORPORATION

Segments

We conduct our operations under two reportable segments, personal residential property and casualty insurance policies (personal lines) and commercial residential property and casualty insurance policies (commercial lines). Our chief operating decision maker is our President, who makes decisions to allocate resources and assesses performance at both segment levels.

For more information regarding our personal lines and commercial lines products and distribution, as well as the agreements in place with managing general agents and underwriters for each of our reportable segments, please refer to Part 1 Item 1. “Products and Distribution” as well as Part 1 Item 1. “Insurance Holding Company Regulation”.

Available Information

We make available, free of charge through our website, www.upcinsurance.com, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the Securities and Exchange Commission (SEC).

You may also access this information at the SEC’s website (www.sec.gov). This site contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

AMERICAN COASTAL INSURANCE CORPORATION

PART II

AMERICAN COASTAL INSURANCE CORPORATION

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing in Part II, Item 8 of this Recast 2022 Form 10-K. The following discussion provides an analysis of our results of operations and financial condition for 2022 as compared to 2021. Discussion regarding our results of operations and financial condition for 2021 as compared to 2020 is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed or implied in these forward-looking statements as a result of certain known and unknown risks and uncertainties. See “Forward-Looking Statements.”

The following discussion and analysis of our financial condition and results of operations highlights selected information and may not contain all of the information that is important to current or potential investors in our securities. This Recast 2022 Form 10-K updates certain sections of the 2022 Form 10-K and should be read alongside the 2022 Form 10-K in its entirety for a more detailed description of events, trends, uncertainties, risks, and critical accounting estimates affecting us. This Recast 2022 Form 10-K does not reflect events occurring after the April 17, 2023 filing date of the 2022 Form 10-K and does not modify or update the disclosures therein except to reflect the Company’s reportable discontinued operations. For developments since the filing of the fiscal year 2022 Form 10-K, refer to the Company’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2023, its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, and its Current Reports on Form 8-K filed subsequent to the 2022 Form 10-K.

OVERVIEW

United Insurance Holdings Corp. (referred to in this document as we, our, us, the Company or UIHC) is a holding company

primarily engaged in commercial and personal property and casualty insurance business with investments in the United States.

We conduct our business principally through our two wholly-owned insurance subsidiaries: American Coastal Insurance

Company (ACIC); and Interboro Insurance Company (IIC). Collectively, we refer to the holding company and all our

subsidiaries, including non-insurance subsidiaries, as “United Insurance Holdings,” which is the preferred brand identification

for our Company.

Our Company’s primary source of revenue is generated from writing insurance in Florida and New York. Our target

market in such areas consists of states where the perceived threat of natural catastrophe has caused large national insurance

carriers to reduce their concentration of policies. We believe an opportunity exists for UIHC to write profitable business in such

areas. During 2022, we also wrote commercial residential insurance in South Carolina and Texas, however, effective May 1,

2022, we no longer write in these states. In addition, during 2022 we wrote personal residential business in six other states,

however on February 27, 2023, our former insurance subsidiary, United Property & Casualty Insurance Company (UPC) was

placed into receivership with the Florida Department of Financial Services, which divested our ownership of UPC. The events

leading to receivership and results of this subsidiary, now included within discontinued operations, can be seen in Note 3 of the

Notes to Consolidated Financial Statements below.

On August 25, 2022, we announced that UPC had filed plans for withdrawal in the states of Florida, Louisiana, and Texas and intended to file a plan for withdrawal in the state of New York. All filed plans entail non-renewing personal lines policies in these states. Additionally, we announced that Demotech, Inc. (Demotech), an insurance rating agency, notified UPC of its intent to withdraw UPC's Financial Stability Rating On December 5, 2022, the Florida Office of Insurance Regulation ("FLOIR") issued Consent Order No. 303643-22- CO that provides for the administrative supervision and approval of the plan of run-off for UPC (the "Consent Order"). The Consent Order provides formal approval of UPC's Plan of Run-Off (the "Plan") to facilitate a solvent wind down of its affairs in an orderly fashion. Additionally, in connection with the Plan, IIC has agreed to not pay ordinary dividends without the prior approval of the New York Department of Financial Services until January 1, 2025. On February 10, 2023, we announced that a solvent run-off for UPC was unlikely and on February 27, 2023, UPC was placed into receivership with the Florida Department of Financial Services (DFS) which divested our ownership of UPC.

Our Company, together with wholly-owned subsidiaries UPC and United Insurance Management, L.C. (UIM), entered into a Renewal Rights Agreement (Southeast Renewal Agreement), dated as of December 30, 2021 with HCPCI, pursuant to which our Company, UPC and UIM agreed to sell, and HCPCI agreed to purchase, the renewal rights to UPC’s personal lines homeowners business in Georgia, South Carolina and North Carolina. The transfer of policies is subject to regulatory approval. Effective June 1, 2022, we began the transition of South Carolina policies to HCPCI and effective October 1, 2022, we transitioned Georgia Policies in connection with our renewal rights agreement. The sale was consummated on December 30, 2021.

AMERICAN COASTAL INSURANCE CORPORATION

Our Company, together with wholly-owned subsidiary UIM and our former subsidiary UPC, entered into a Renewal Rights Agreement (Northeast Renewal Agreement), dated as of January 18, 2021 with HCPCI and HCI Group, Inc. (HCI), pursuant to which our Company, UPC and UIM agreed to sell, and HCPCI agreed to purchase, the renewal rights to UPC’s personal lines homeowners business in Connecticut, Massachusetts, New Jersey and Rhode Island. The transfer of all states was completed as

of June 30, 2022.

We have historically grown our business through organic growth complemented by strategic acquisitions and partnerships, including our acquisitions of AmCo Holding Company (AmCo) and its subsidiaries, including ACIC, in April 2017, IIC in April 2016, and Family Security Holdings, LLC (FSH), including its subsidiary FSIC in February 2015, and our strategic partnership with a subsidiary of Tokio Marine Kiln Group Limited (Kiln), which formed JIC in August 2018. Effective June 1, 2022, we merged JIC into ACIC, with ACIC being the surviving entity. Effective May 31, 2022, we merged FSIC into UPC, with UPC being the surviving entity.

As a result of underwriting actions implemented during 2022, as well as the transfer of Rhode Island, Connecticut, New Jersey, Massachusetts, North Carolina, South Carolina and Georgia policies to HCPCI, our policies in-force decreased by 46.1% from 471,724 policies in-force at December 31, 2021 to 254,275 policies in-force at December 31, 2022. These values include policies attributable to our discontinued operations.

Our business is subject to the impact of weather-related catastrophes on our loss and loss adjustment expenses (LAE). Over the last three years, the frequency of these catastrophes has increased. As a result, we have experienced increased catastrophe losses incurred during the prior three years. During the years ended December 31, 2022, 2021 and 2020, two, four, and nine named storms, respectively, made landfall in our geographic footprint, resulting in retained pre-tax catastrophe losses of $57,906,000, $15,696,000, and $38,947,000, respectively, excluding discontinued operations. In addition, during each of the three years we increased our loss and LAE reserves as a result of development trends from 2017’s Hurricane Irma, that indicated our ultimate gross loss estimate should be increased.

The following discussion highlights significant factors influencing the consolidated financial position and results of operations of UIHC excluding discontinued operations. In evaluating our results of operations, we use premiums written and earned, policies in-force and new and renewal policies by geographic concentration. We also consider the impact of catastrophe losses and prior year development on our loss ratios, expense ratios and combined ratios. In monitoring our investments, we use credit quality, investment income, cash flows, realized gains and losses, unrealized gains and losses, asset diversification and portfolio duration. To evaluate our financial condition, we consider our liquidity, financial strength, ratings, book value per share and return on equity.

AMERICAN COASTAL INSURANCE CORPORATION

Consolidated Net Loss

AMERICAN COASTAL INSURANCE CORPORATION


	Year Ended December 31,
	2022			2021			2020
REVENUE:
Gross premiums written	$	572,343		$	484,527		$	399,843
Change in gross unearned premiums	(36,974)			(18,768)			9,863
Gross premiums earned	535,369			465,759			409,706
Ceded premiums earned	(266,023)			(244,630)			(178,534)
Net premiums earned	269,346			221,129			231,172
Net investment income	7,673			5,901			9,680
Net realized gains (losses)	(6,483)			138			28,934
Net unrealized gains (losses) on equity securities	(1,968)			1,471			(12,317)
Management fee income	—			—			—
Other revenue	1,223			46			56
Total revenues	269,791			228,685			257,525
EXPENSES:
Losses and loss adjustment expenses	134,805			89,051			115,059
Policy acquisition costs	95,318			93,199			104,248
Operating expenses	13,729			16,258			14,274
General and administrative expenses	42,281			31,420			29,009
Interest expense	9,483			9,303			9,494
Total expenses	295,616			239,231			272,084
Loss before other income	(25,825)			(10,546)			(14,559)
Other income	10,343			129			27
Loss before income taxes	(15,482)			(10,417)			(14,532)
Provision (benefit) for income taxes	24,522			(6,699)			(8,606)
Loss from continuing operations, net of tax	$	(40,004)		$	(3,718)		$	(5,926)
Loss from discontinued operations, net of tax	(429,962)			(56,150)			(89,572)
Net loss	$	(469,966)		$	(59,868)		$	(95,498)
Less: Net income (loss) attributable to noncontrolling interests	(111)			(1,949)			956
Net loss attributable to UIHC	$	(469,855)		$	(57,919)		$	(96,454)
Net loss per diluted share	$	(10.91)		$	(1.35)		$	(2.25)
Book value per share	$	(4.21)		$	7.20		$	9.19
Return on equity based on GAAP net loss	(307.4)		%	(16.9)		%	(20.2)		%
Loss ratio, net (1)	50.0		%	40.3		%	49.8		%
Expense ratio (2)(5)	56.2		%	63.7		%	63.8		%
Combined ratio (3)(5)	106.2		%	104.0		%	113.5		%
Effect of current year catastrophe losses on combined ratio	21.5		%	7.1		%	16.8		%
Effect of prior year development on combined ratio	(4.1)		%	(2.7)		%	(1.0)		%

Underlying combined ratio(4)(5)	88.8		%	99.6		%	97.7		%

(1) Loss ratio, net is calculated as losses and LAE net of losses ceded to reinsurers, relative to net premiums earned. Management uses this operating metric to analyze our loss trends and believes it is useful for investors to evaluate this component separately from our other operating expenses.

(2) Expense ratio is calculated as the sum of all operating expenses less interest expense relative to net premiums earned. Management uses this operating metric to analyze our expense trends and believes it is useful for investors to evaluate these components separately from our loss expenses.

(3) Combined ratio is the sum of the loss ratio, net and expense ratio. Management uses this operating metric to analyze our total expense trends and believes it is a key indicator for investors when evaluating the overall profitability of our business.

(4) Underlying combined ratio, a measure that is not based on GAAP, is reconciled above to the combined ratio, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this Recast 2022 Form 10-K can be found in “Definitions of Non-GAAP Measures”, below.

(5) Included in both the expense ratio and the combined ratio is amortization expense predominately associated with the AmCo, IIC, and FSH acquisitions, which cause comparative differences among periods.

AMERICAN COASTAL INSURANCE CORPORATION

DEFINITIONS OF NON-GAAP MEASURES

We believe that investors’ understanding of UIHC’s performance is enhanced by our disclosure of the following non-GAAP measures. Our methods for calculating these measures may differ from those used by other companies and therefore comparability may be limited.

Combined ratio excluding the effects of current year catastrophe losses and prior year reserve development (underlying combined ratio) is a non-GAAP measure, that is computed by subtracting the effect of current year catastrophe losses and prior year development from the combined ratio. We believe that this ratio is useful to investors, and it is used by management to highlight the trends in our business that may be obscured by current year catastrophe losses and prior year development. Current year catastrophe losses cause our loss trends to vary significantly between periods as a result of their frequency of occurrence and magnitude, and can have a significant impact on the combined ratio. Prior year development is caused by unexpected loss development on historical reserves. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance. The most directly comparable GAAP measure is the combined ratio. The underlying combined ratio should not be considered as a substitute for the combined ratio and does not reflect the overall profitability of our business.

Net loss and LAE excluding the effects of current year catastrophe losses and prior year reserve development (underlying loss and LAE) is a non-GAAP measure that is computed by subtracting the effect of current year catastrophe losses and prior year reserve development from net loss and LAE. We use underlying loss and LAE figures to analyze our loss trends that may be impacted by current year catastrophe losses and prior year development on our reserves. As discussed previously, these two items can have a significant impact on our loss trends in a given period. We believe it is useful for investors to evaluate these components both separately and in the aggregate when reviewing our performance. The most directly comparable GAAP measure is net loss and LAE. The underlying loss and LAE measure should not be considered a substitute for net loss and LAE and does not reflect the overall profitability of our business.

AMERICAN COASTAL INSURANCE CORPORATION

RESULTS OF OPERATIONS

Consolidated Results

Net loss attributable to UIHC for the year ended December 31, 2022 increased by $411,936,000 to $469,855,000, compared to $57,919,000 for the year ended December 31, 2021. The increase in net losses was primarily driven by an increase in our loss from discontinued operations of $373,812,000. In addition to this increase we experienced an increase in loss & LAE expense for the year, as a result of Hurricane Ian making landfall in Florida as a category four hurricane and exhausting our personal lines reinsurance coverage for the event. In addition, our provision for income taxes increased from the recognition of a valuation allowance against our deferred tax asset in 2022. Total revenues also decreased, driven by decreased gross written premiums and realized losses on investments, as described below. These factors were partially offset by lower policy acquisition costs and decreased ceded premium earned, as described below.

Revenues

Our gross written premiums increased by $87,816,000, or 18.1%, to $572,343,000 for the year ended December 31, 2022, from $484,527,000 for the year ended December 31, 2021, driven primarily by an increase in our commercial premiums written, as we focus on transitioning towards a specialty commercial lines underwriter. The breakdown of the year-over-year changes in both direct and assumed written premiums by region and gross written premium by line of business are shown in the table below.


Direct Written and Assumed Premium By Region (1)	2022		2021		Change
Florida	$	503,815	$	413,066	$	90,749
Gulf	3,887		7,494		(3,607)
Southeast	15		1,447		(1,432)
Northeast	25,101		21,110		3,991
Total direct written premium by region	$	532,818	$	443,117	$	89,701
Assumed premium (2)	39,525		41,410		(1,885)
Total gross written premium by region	$	572,343	$	484,527	$	87,816

Gross Written Premium by Line of Business
Personal property (3)	$	64,100	$	62,289	$	1,811
Commercial property (4)	508,243		422,238		86,005
Total gross written premium by line of business	$	572,343	$	484,527	$	87,816

(1) "Gulf" is comprised of Texas; "Northeast" is comprised of New York in 2022 and 2021; and "Southeast" is comprised of South Carolina.

(2) Assumed premium written for 2022 and 2021 primarily included commercial property business assumed from unaffiliated insurers and assumption of certain UPC policies by IIC.

(3) Includes gross written premium from flood policies.

(4) Commercial written premium for 2022 and 2021 was primarily written in Florida.


New and Renewal Policies(1) By Region(2)	2022	2021	Change
Florida	5,497	6,131	(634)
Gulf	32	101	(69)
Northeast	33,555	45,193	(11,638)
Southeast	2	31	(29)
Total	39,086	51,456	(12,370)

(1) Only includes new and renewal homeowner, commercial and dwelling fire policies written during the year.

(2) "Gulf" is comprised of Texas; "Northeast" is comprised of New York in 2022 and 2021; and "Southeast" is comprised of South Carolina.

Ceded premiums earned increased by $21,393,000, or 8.7%, to $266,023,000 for the year ended December 31, 2022 from $244,630,000 for 2021. The increase is primarily driven by a $13,788,000 increase in ceded premiums earned from our core catastrophe reinsurance program, driven by increased costs in 2022. In addition, we experienced an increase in our quota share

AMERICAN COASTAL INSURANCE CORPORATION

ceded premiums earned of $8,621,000 year-over-year, driven by increased premiums ceded as our book of business continues to grow.

Net investment income increased by $1,772,000, or 30.0%, to $7,673,000 for the year ended December 31, 2022 from $5,901,000 for 2021. This increase was driven by a $1,457,000 increase in investment income from our cash and cash equivalent holdings, driven by having more cash on hand during 2022 than 2021, coupled with higher return rates in 2022.

Net realized investment gains (losses) and net unrealized gains (losses) on equity securities decreased by $10,060,000, or 625.2%, to a net loss of $8,451,000 for the year ended December 31, 2022 from a net gain of $1,609,000 for the year ended December 31, 2021, driven by $6,499,000 in losses realized on the fixed maturity portfolio, as we sold investments in a loss position driven by rising interest rates to meet liquidity needs. The remainder of this change can be attributed to changes in the fair value of our equity securities as a result of unfavorable market conditions.

Expenses

Expenses for the year ended December 31, 2022 increased $56,385,000, or 23.6%, to $295,616,000, from $239,231,000 for 2021. The increase in expenses was primarily due to an increase in loss and LAE as a result of Hurricane Ian making landfall in Florida as a category four hurricane, driving increased loss & LAE expense year-over-year. The calculations of our combined loss ratios and underlying loss ratios are shown below.


($ in thousands)	Year ended
	December 31,
	2022			2021			Change
Net loss and LAE	$	134,805		$	89,051		$	45,754
% of Gross earned premiums	25.2		%	19.1		%	6.1		pts
% of Net earned premiums	50.0		%	40.3		%	9.7		pts
Less:
Current year catastrophe losses	$	57,906		$	15,696		$	42,210
Prior year reserve unfavorable development	(10,869)			(6,132)			(4,737)
Underlying loss and LAE (1)	$	87,768		$	79,487		$	8,281
% of Gross earned premiums	16.4		%	17.1		%	(0.7)		pts
% of Net earned premiums	32.6		%	35.9		%	(3.3)		pts

(1) Underlying loss and LAE is a non-GAAP financial measure and is reconciled above to net loss and LAE, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this Recast 2022 Form 10-K can be found in the “Definitions of Non-GAAP Measures” section, above.

The calculations of the Company’s expense ratios are shown below.


($ in thousands)	Year ended
	December 31,
	2022			2021			Change
Policy acquisition costs	$	95,318		$	93,199		$	2,119
Operating and underwriting	13,729			16,258			(2,529)
General and administrative	42,281			31,420			10,861
Total Operating Expenses	$	151,328		$	140,877		$	10,451
% of Gross earned premiums	28.3		%	30.2		%	(1.9)		pts
% of Net earned premiums	56.2		%	63.7		%	(7.5)		pts

Loss and LAE increased by $45,754,000, or 51.4%, to $134,805,000 for the year ended December 31, 2022, from $89,051,000 for the year ended December 31, 2021. Loss and LAE expense as a percentage of net earned premiums increased 9.7 points to 50.0% for the year ended December 31, 2022, compared to 40.3% for the year ended December 31, 2021. During the year ended December 31, 2022, we experienced increased catastrophe losses as a result of the severity of Hurricane Ian in 2022. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the year ended December 31, 2022 would have been 16.4%, a decrease of 0.7 points from 17.1% during the year ended December 31, 2021.

AMERICAN COASTAL INSURANCE CORPORATION

Policy acquisition costs increased by $2,119,000, or 2.3%, to $95,318,000 for the year ended December 31, 2022, from $93,199,000 for the year ended December 31, 2021. The primary driver of the increase in expense was a $8,071,000 increase in external management fees incurred and $2,475,000 increase in premium tax expense as a result of an increased volume of commercial written premium year-over-year. This was partially offset by a decrease in agent commissions of $2,432,000 which was driven by decreased personal lines written premium. In addition, ceding commission income increased $5,740,000 due to changes in the terms of our quota share reinsurance agreements.

Operating and underwriting expenses decreased by $2,529,000, or 15.6%, to $13,729,000 for the year ended December 31, 2022, from $16,258,000 for the year ended December 31, 2021, primarily due to decreased expenses related to our investment in technology of $3,138,000. The remainder of this decrease can be attributed to decreased underwriting expenses decreased related to our personal lines operating segment as we transition towards a specialty commercial lines underwriter.

General and administrative expenses increased by $10,861,000, or 34.6%, to $42,281,000 for the year ended December 31, 2022, from $31,420,000 for the year ended December 31, 2021, primarily due to the impairment of goodwill attributable to our personal lines operating segment totaling $10,156,000.

We experienced adverse reserve development in the current year and its historical impact on our net loss and net underlying loss ratios is outlined in the following table.


	Historical Reserve Development
($ in thousands, except ratios)	2018		2019		2020			2021			2022
Prior year reserve favorable (unfavorable) development	$	2,524	$	10,267	$	2,602		$	6,132		$	10,787
Development as a % of earnings before interest and taxes	NM		NM		(51.6)		%	(550.4)		%	(179.8)		%
Consolidated net loss and LAE ratio (LR)	NM		NM		49.8		%	40.3		%	50.0		%
Prior year reserve unfavorable (favorable) development on LR	NM		NM		(1.0)		%	(2.7)		%	(4.1)		%
Current year catastrophe losses on LR	NM		NM		16.8		%	7.1		%	21.5		%
Underlying net loss and LAE ratio(1)	NM		NM		34.0		%	35.9		%	32.6		%

(1) Underlying net loss and LAE Ratio is a non-GAAP measure and is reconciled above to the Consolidated net loss and LAE Ratio, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this Recast 2022 Form 10-K can be found in the “Definitions of Non-GAAP Measures” section, above.

Personal Lines Operating Segment Results

Pretax earnings attributable to our personal lines operating segment for the year ended December 31, 2022 decreased by $21,038,000 to a pretax loss of $52,154,000, compared to a pretax loss of $31,116,000 for the year ended December 31, 2021. The increase in pretax net loss was primarily due to a $13,329,000 increase in loss and LAE in 2022, as well as a $9,147,000 increase in general and administrative expenses year-over-year. The details of these changes are described below.

Revenues

Our gross written premiums attributable to our personal lines operating segment increased by $1,811,000, or 2.9%, to $64,100,000 for the year ended December 31, 2022, from $62,289,000 for the year ended December 31, 2021, primarily driven by increased assumed premiums related to our subsidiary IIC’s quota share agreement with UPC. The breakdown of the year-over-year changes in direct written premiums by region are shown in the table below.

AMERICAN COASTAL INSURANCE CORPORATION


Direct and Assumed Written Premium By Region(1)(2)	2022		2021		Change

New York	25,101		21,110		3,991
Gulf	—		85		(85)

Total direct written premium by region	$	25,101	$	21,195	$	3,906
Assumed premium	38,999		41,094		(2,095)
Total gross written premium by region	$	64,100	$	62,289	$	1,811

(1) "Gulf" is comprised of Texas; and "Northeast" is comprised of New York in 2022 and 2021.

(2) Assumed premium written for 2022 and 2021 primarily included the assumption of certain UPC policies by IIC.


New and Renewal Policies(1)	2022	2021	Change


New York	33,555	45,193	(11,638)

(1) Only includes new and renewal homeowner and dwelling fire policies written during the year.

Ceded premiums earned attributable to our personal lines operating segment increased by $13,156,000, or 173.7%, to $20,730,000 for the year ended December 31, 2022 from $7,574,000 for the year ended December 31, 2021. The increase was primarily driven by a $13,010,000 increase in ceded premiums earned related to our core catastrophe program, driven by our subsidiary UPC Re’s participation in 2022.

Net investment income attributable to our personal lines operating segment increased by $668,000, or 61.2%, to $1,759,000 for the year ended December 31, 2022 from $1,091,000 for the year ended December 31, 2021. The increase was driven by a $468,000 increase in income from our cash and cash equivalent portfolio as a result of increased holdings and higher returns in 2022. In addition, income related to our fixed maturity portfolio increased by $133,000.

Net realized investment gains attributable to our personal lines operating segment decreased by $144,000, or 83.7%, to net gains of $28,000 for the year ended December 31, 2022 from net gains of $172,000 for the year ended December 31, 2021, primarily driven by decreased fixed maturity sales in 2022.

Expenses

Expenses attributable to our personal lines operating segment for the year ended December 31, 2022 increased $22,159,000, or 27.5%, to $102,634,000 for the year ended December 31, 2022, from $80,475,000 for the year ended December 31, 2021. The increase in expenses was primarily due to increased loss and LAE as a result of increased current year catastrophe and non-catastrophe losses. The calculations of our combined loss ratios and underlying loss ratios are shown below.


($ in thousands)	Year ended
	December 31,
	2022			2021			Change
Net loss and LAE	$	47,662		$	34,333		$	13,329
% of Gross earned premiums	67.0		%	61.9		%	5.1		pts
% of Net earned premiums	94.5		%	71.6		%	22.9		pts
Less:
Current year catastrophe losses	$	14,521		$	6,166		$	8,355
Prior year reserve unfavorable (favorable) development	(2,970)			(1,779)			(1,191)
Underlying loss and LAE (1)	$	36,111		$	29,946		$	6,165
% of Gross earned premiums	50.7		%	54.0		%	(3.3)		pts
% of Net earned premiums	71.6		%	62.5		%	9.1		pts

The calculations of the Company’s personal lines operating segment expense ratios are shown below.

AMERICAN COASTAL INSURANCE CORPORATION


($ in thousands)	Year ended
	December 31,
	2022			2021			Change
Policy acquisition costs	$	14,322		$	13,001		$	1,321
Operating and underwriting	9,367			11,005			(1,638)
General and administrative	31,282			22,135			9,147
Total Operating Expenses	$	54,971		$	46,141		$	8,830
% of Gross earned premiums	77.3		%	83.1		%	(5.8)		pts
% of Net earned premiums	109.0		%	96.3		%	12.7		pts

Loss and LAE attributable to our personal lines operating segment increased by $13,329,000, or 38.8%, to $47,662,000 for the year ended December 31, 2022, from $34,333,000 for the year ended December 31, 2021. Loss and LAE expense as a percentage of net earned premiums increased 22.9 points to 94.5% for the year ended December 31, 2022, compared to 71.6% for the year ended December 31, 2021. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the year ended December 31, 2022 would have been 50.7%, a decrease of 3.3 points from 54.0% during the year ended December 31, 2021.

Policy acquisition costs attributable to our personal lines operating segment increased by $1,321,000, or 10.2%, to $14,322,000 for the year ended December 31, 2022, from $13,001,000 for the year ended December 31, 2021. The primary driver of the increase was an additional expense of $1,552,000 in reinsurance commissions paid related to our quota share reinsurance contract between IIC and our former subsidiary, UPC.

Operating and underwriting expenses attributable to our personal lines operating segment decreased by $1,638,000, or 14.9%, to $9,367,000 for the year ended December 31, 2022, from $11,005,000 for the year ended December 31, 2021, primarily due to decreased expenses related to our investment in technology, advertising costs and agent related expenses as we transition towards a specialty commercial lines underwriter.

General and administrative expenses attributable to our personal lines operating segment increased by $9,147,000, or 41.3%, to $31,282,000 for the year ended December 31, 2022, from $22,135,000 for the year ended December 31, 2021, as the result of impairment of goodwill attributable to our personal lines operating segment of $10,156,000.

Commercial Lines Operating Segment Results

Pretax earnings attributable to our commercial lines operating segment for the year ended December 31, 2022 increased by $3,820,000 to pretax income of $35,841,000, compared to pretax income of $32,021,000 for the year ended December 31, 2021. The increase in pretax earnings was primarily due to an increase in revenue driven by increased gross written premium described below. This increase was partially offset by increased loss & LAE expense for the year as a result of Hurricane Ian making landfall in Florida as a category four hurricane.

Revenues

Our gross written premiums attributable to our commercial lines operating segment increased by $86,005,000, or 20.4%, to $508,243,000 for the year ended December 31, 2022, from $422,238,000 for the year ended December 31, 2021, primarily reflecting the impact of rate increases on renewal business generated in the state of Florida, as we focus on increasing commercial written premiums and transitioning to a specialty commercial lines underwriter. These increases were partially offset by a decrease in premiums written in Texas and South Carolina as we are no longer writing business in these states. The breakdown of the year-over-year changes in both direct and assumed written premiums by state are shown in the table below.

AMERICAN COASTAL INSURANCE CORPORATION


Direct Written and Assumed Premium By State	2022		2021		Change
Florida	$	503,815	$	413,066	$	90,749
Texas	3,887		7,409		(3,522)
South Carolina	15		1,447		(1,432)
Total direct written premium by region	$	507,717	$	421,922	$	85,795
Assumed premium (1)	526		316		210
Total gross written premium by region	$	508,243	$	422,238	$	86,005

(1) Assumed premium written for 2022 and 2021 primarily included commercial property business assumed from unaffiliated insurers.


New and Renewal Policies(1) By State	2022	2021	Change
Florida	5,497	6,131	(634)
Texas	32	101	(69)
South Carolina	2	31	(29)
Total	5,531	6,263	(732)

(1) Only includes new and renewal commercial policies written during the year.

Ceded premiums earned attributable to our commercial lines operating segment increased by $8,237,000 or 3.5%, to $245,293,000 for the year ended December 31, 2022 from $237,056,000 for the year ended December 31, 2021. The increase is primarily driven by a $8,621,000 increase in ceded premiums earned from our quota share agreements, driven by the increase in gross written premium, described above resulting in increased cessions to these contracts during 2022.

Net investment income attributable to our commercial lines operating segment increased by $1,097,000, or 23.0%, to $5,861,000 for the year ended December 31, 2022 from $4,764,000 for 2021. This increase is driven by a $999,000 increase in income from our cash and cash equivalent holdings, as a result of increased holdings year-over-year.

Net realized investment gains and net unrealized gains (losses) on equity securities attributable to our commercial lines operating segment decreased by $9,914,000, or 689.9%, to a net loss of $8,477,000 for the year ended December 31, 2022 from a net gain of $1,437,000 for 2021, primarily driven by the disposal of fixed maturities to meet liquidity needs during an unfavorable price environment, resulting in realized losses of $6,511,000 in 2022. The remainder of this change can be attributed to unrealized losses as a result of unfavorable market conditions experienced in 2022.

Expenses

Expenses attributable to our commercial lines operating segment for the year ended December 31, 2022 increased $34,256,000, or 23.2%, to $181,644,000 for the year ended December 31, 2022, from $147,388,000 for the year ended December 31, 2021. The increase in expenses was primarily due to an increase in loss and LAE as a result of Hurricane Ian making landfall in Florida as a category four hurricane. In addition, general and administrative costs increased $1,980,000 in 2022, as described below.


($ in thousands)	Year ended
	December 31,
	2022			2021			Change
Net loss and LAE	$	87,143		$	54,718		$	32,425
% of Gross earned premiums	18.8		%	13.3		%	5.5		pts
% of Net earned premiums	39.8		%	31.6		%	8.2		pts
Less:
Current year catastrophe losses	$	43,385		$	9,530		$	33,855
Prior year reserve favorable development	(7,899)			(4,353)			(3,546)
Underlying loss and LAE (1)	$	51,657		$	49,541		$	2,116
% of Gross earned premiums	11.1		%	12.1		%	(1.0)		pts
% of Net earned premiums	23.6		%	28.6		%	(5.0)		pts

AMERICAN COASTAL INSURANCE CORPORATION

The calculations of the Company’s commercial lines operating segment expense ratios are shown below.


($ in thousands)	Year ended
	December 31,
	2022			2021			Change
Policy acquisition costs	$	80,996		$	80,198		$	798
Operating and underwriting	3,926			4,873			(947)
General and administrative	9,579			7,599			1,980
Total Operating Expenses	$	94,501		$	92,670		$	1,831
% of Gross earned premiums	20.4		%	22.6		%	(2.2)		pts
% of Net earned premiums	43.2		%	53.5		%	(10.3)		pts

Loss and LAE attributable to our commercial lines operating segment increased by $32,425,000, or 59.3%, to $87,143,000 for the year ended December 31, 2022, from $54,718,000 for the year ended December 31, 2021. Loss and LAE expense as a percentage of net earned premiums increased 8.2 points to 39.8% for the year ended December 31, 2022, compared to 31.6% for the year ended December 31, 2021. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the year ended December 31, 2022 would have been 11.1%, a decrease of 1.0 point from 12.1% during the year ended December 31, 2021.

Policy acquisition costs attributable to our commercial lines operating segment remained relatively flat, increasing by $798,000, or 1.0%, to $80,996,000 for the year ended December 31, 2022, from $80,198,000 for the year ended December 31, 2021.

Operating and underwriting expenses attributable to our commercial lines operating segment decreased by $947,000, or 19.4%, to $3,926,000 for the year ended December 31, 2022, from $4,873,000 for the year ended December 31, 2021, primarily due to decreased expenses related to our investment in technology of $1,164,000.

General and administrative expenses attributable to our commercial lines operating segment increased by $1,980,000, or 26.1%, to $9,579,000 for the year ended December 31, 2022, from $7,599,000 for the year ended December 31, 2021. This increase was driven by a $1,131,000 increase of allocated external fees related to legal, audit, actuarial and tax services provided during the year. In addition, we incurred an additional $698,000 in allocated salary expenses in 2022 compared to 2021.

AMERICAN COASTAL INSURANCE CORPORATION

ANALYSIS OF FINANCIAL CONDITION

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our accompanying consolidated financial statements and related notes in Part II, Item 8 in this Recast 2022 Form 10-K.

Investments

The primary goals of our investment strategy are to preserve capital, maximize after-tax investment income, maintain liquidity and minimize risk. To accomplish our goals, we purchase debt securities in sectors that represent the most attractive relative value, and we maintain a moderate equity exposure. Limiting equity exposure manages risks and helps to preserve capital for two reasons: first, bond market returns are less volatile than stock market returns, and second, should the bond issuer enter bankruptcy liquidation, bondholders generally have a higher priority than equity holders in a bankruptcy proceeding. Our investment strategy is the same for both our personal lines and commercial lines operating segments.

We must comply with applicable state insurance regulations that prescribe the type, quality and concentrations of investments our insurance subsidiaries can make; therefore, our current investment policy limits investment in non-investment-grade fixed maturities and limits total investment amounts in preferred stock, common stock and mortgage notes receivable. We do not invest in derivative securities. Large catastrophe losses such as Hurricane Ian in 2022 can present significant liquidity demands to the Company stemming from higher than normal frequency and severity of insurance claims. This can lead to the selling of securities that we intended to hold until maturity and realizing untimely gains or losses.

Two outside asset management companies, which have authority and discretion to buy and sell securities for us, manage our investments subject to (i) the guidelines established by our Board of Directors and (ii) the direction of management. The Investment Committee of our Board of Directors reviews and approves our investment policy on a regular basis.

Our cash and investment portfolios totaled $340,905,000 at December 31, 2022 compared to $512,428,000 at December 31, 2021.

The following table summarizes our investments, by type:


	December 31, 2022				December 31, 2021
	Estimated Fair Value		Percent of Total		Estimated Fair Value		Percent of Total
U.S. government and agency securities	$	2,385	0.7	%	$	1,537	0.3	%
Foreign governments	991		0.3	%	1,049		0.2	%
States, municipalities and political subdivisions	26,894		7.9	%	34,271		6.7	%
Public utilities	7,694		2.3	%	10,273		2.0	%
Corporate securities	83,344		24.4	%	125,637		24.6	%
Mortgage-backed securities	56,115		16.5	%	113,249		22.1	%
Asset-backed securities	27,259		8.0	%	59,680		11.6	%
Redeemable preferred stocks	—		—	%	973		0.2	%
Total fixed maturities	204,682		60.1	%	346,669		67.7	%
Mutual fund	15,657		4.6	%	16,382		3.2	%



Total equity securities	15,657		4.6	%	16,382		3.2	%
Other investments	3,675		1.1	%	3,162		0.6	%

Total investments	224,014		65.8	%	366,213		71.5	%
Cash and cash equivalents	70,903		20.7	%	113,382		22.1	%
Restricted cash	45,988		13.5	%	32,833		6.4	%
Total cash, cash equivalents, restricted cash and investments	$	340,905	100.0	%	$	512,428	100.0	%

We classify all of our investments as available-for-sale. Our investments at December 31, 2022 and 2021 consisted mainly of U.S. government and agency securities, states, municipalities and political subdivisions, mortgage-backed securities and securities of investment-grade corporate issuers. Our equity holdings in 2022 and 2021 consisted mainly of securities issued by companies in the financial, utilities and industrial sectors or mutual funds. Most of the corporate bonds we hold reflected a

AMERICAN COASTAL INSURANCE CORPORATION

similar diversification. At December 31, 2022, approximately 79.2% of our fixed maturities were U.S. Treasuries, or corporate bonds rated “A” or better, and 20.8% were corporate bonds rated “BBB” or “BB”.

During the year ended December 31, 2022, as a result of UPC’s plan of run-off, management determined that it was more

likely than not that we would be required to sell a portion or all of our fixed-income securities attributable to the entity before

recovery of their amortized cost basis. These securities were evaluated and none of the unrealized loss position was the result of

a credit loss. As a result, we realized impairment losses of $22,718,000 on these securities. Total shareholders’ equity (deficit)

was not impacted by such charge; however, our net loss for the year ended December 31, 2022 worsened and other

comprehensive income improved by $22,718,000, before tax impacts, in offsetting amounts. The remainder of our fixed-income

securities remain in an unrealized position as of December 31, 2022, with net unrealized losses on the portfolio totaling

$33,054,000 as of December 31, 2022. The impact on our net loss is captured within our discontinued operations.

The most significant impact of COVID-19 on our business occurred during the year ended December 31, 2020, where we saw fluctuations in our investment portfolio due to volatility in the equity securities markets that we were unable to predict. During the second half of the year ended December 31, 2020, we decreased our equity portfolio from 9.1% of our total invested assets (including cash, restricted cash and cash equivalents) at June 30, 2020 to 0.6% of our total invested assets (including cash, restricted cash and cash equivalents) at December 31, 2020, inclusive of holdings from discontinued operations. As a result of this decrease, we experienced a decreased impact from fluctuations in the equity securities markets on our financial statements for the second half of the year ended December 31, 2020. In the first quarter of 2021, we began to increase our investments in the equities market. Management is working closely with our investment managers to monitor the fluctuations in the markets and the corresponding impact to our portfolios.

Reinsurance

We follow industry practice of reinsuring a portion of our risks. Reinsurance involves transferring, or “ceding”, all or a portion of the risk exposure on policies we write to another insurer, known as a reinsurer. To the extent that our reinsurers are unable to meet the obligations they assume under our reinsurance agreements, we remain primarily liable for the entire insured loss under the policies we write.

Our reinsurance program is designed, utilizing our risk management methodology, to address our exposure to catastrophes. According to the Insurance Service Office (ISO), a catastrophe loss is defined as a single unpredictable incident or series of closely related incidents that result in $25,000,000 or more in U.S. industry-wide direct insured losses to property and that affect a significant number of policyholders and insurers (ISO catastrophes). In addition to ISO catastrophes, we also include as catastrophes those events (non-ISO catastrophes), which may include losses, that we believe are, or will be, material to our operations which we define as incidents that result in $1,000,000 or more in losses for multiple policyholders.

During the second quarter of 2022, we placed our reinsurance program for the 2022 hurricane season. We purchased catastrophe excess of loss reinsurance protection of $2,500,000,000 in the aggregate. The treaties reinsure personal and commercial lines property excess catastrophe losses caused by multiple perils including hurricanes and tropical storms. The agreements were effective as of June 1, 2022, for a one-year term and incorporate the mandatory coverage required by and placed with the Florida Hurricane Catastrophe Fund (FHCF) and coverage required under the Reinsurance to Assist Policyholders Program (RAP Program). The FHCF and RAP Program covers Florida risks only and we participate at 90%. Under our core catastrophe excess of loss treaty, retention on a first and second event is $16,400,000. During the third quarter, one of our reinsurer's participating on the $25,000,000 excess of $20,000,000 layer of the core catastrophe program exercised a contractual right to terminate their participation due to Demotech's downgrade of UPC's Financial Stability Rating. We were unsuccessful in replacing this coverage in the open market so our captive reinsurer, UPC Re, stepped into the $25,000,000 excess of $20,000,000 layer which was subsequently impacted by Hurricane Ian resulting in an additional retained loss of $20,100,000 million. The exhaustion point of IIC's catastrophe reinsurance program is approximately $200,000,000 in the aggregate, with a retention of $3,000,000 per occurrence, covering all perils.

During the third quarter of 2022, the Company's core catastrophe reinsurance program was impacted by Hurricane Ian. As a result, the Company has approximately $508 million of occurrence limit remaining for Ian, all of which is attributable to ACIC only. After reinstatement premiums of approximately $15.4 million, the Company has approximately $993 million of aggregate limit remaining after Ian, based on our estimated ultimate net loss subject to the core catastrophe reinsurance program.

Effective December 13, 2021, we renewed our all other perils (AOP) catastrophe excess of loss agreement. The agreement provides protection from catastrophe loss events other than named windstorms and earthquakes up to $110,000,000.

AMERICAN COASTAL INSURANCE CORPORATION

During the third quarter of 2022, one of our private reinsurers who held a 100% share of the $15,000,000 in excess of $15,000,000 layer on our all other perils catastrophe excess of loss agreement notified us of their intent to terminate the agreement due to the contractual provision regarding the change in UPC's statutory surplus being greater than 25%. We agreed to a termination and commutation date of September 30, 2022 for this contract. This change resulted in approximately $1,300,000 of ceded premium savings that would have otherwise been due in the fourth quarter of 2022 and the Company retaining all the risk for any non-hurricane catastrophe losses up to $30,000,000, excluding any quota share recoveries.

The table below outlines our quota share agreements in effect for the years ended December 31, 2022 and 2021.

Reinsurer

Companies in Scope (1)

Effective Dates

Cession Rate

States in Scope

External third-party

UPC, FSIC & ACIC

06/01/2022 - 06/01/2023

10% (2)

Florida, Louisiana, Texas

TypTap

UPC

06/01/2022 - 06/01/2023

100% (3)

Georgia, North Carolina, South Carolina

External third-party

UPC, FSIC & ACIC

12/31/2021 - 12/31/2022

8% (2)

Florida, Louisiana, Texas

HCPCI

UPC

12/31/2021 - 06/01/2022

85%

Georgia, North Carolina, South Carolina

External third-party

UPC & FSIC

12/31/2021 - 12/31/2022

25% (4)

Florida, Louisiana, Texas

HCPCI / TypTap (5)

UPC

06/01/2021 - 06/01/2022

100% (3)

Connecticut, New Jersey, Massachusetts, Rhode Island

External third-party

UPC, FSIC & ACIC (6)

06/01/2021 - 06/01/2022

15% (2)

Florida, Georgia, Louisiana, North Carolina, South Carolina, Texas

IIC

UPC

12/31/2020 - 12/31/2022

100%

New York

HCPCI

UPC

12/31/2020 - 06/01/2021

69.5%

Connecticut, New Jersey, Massachusetts, Rhode Island

External third-party

UPC, FSIC & ACIC

12/30/2020 - 12/31/2021

8% (2)

Connecticut, Florida, Georgia, Louisiana, Massachusetts, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas

External third-party

UPC, FSIC & ACIC (6)

06/01/2020 - 06/01/2021

15% (2)

Connecticut, Florida, Georgia, Louisiana, Massachusetts, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas

External third-party

UPC & FSIC

06/01/2020 - 06/01/2021

7.5% (2)

Connecticut, Florida, Georgia, Louisiana, Massachusetts, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas

(1) Effective May 31, 2022, FSIC was merged into UPC, with UPC being the surviving entity. UPC was placed into receivership effective February 27, 2023.

(2) This treaty provides coverage for all catastrophe perils and attritional losses incurred. For all catastrophe perils, the quota share agreement provides ground-up protection effectively reducing our retention for catastrophe losses.

(3) This treaty provides coverage on our in-force, new and renewal policies until these states are transitioned to HCPCI or TypTap upon renewal.

(4) This treaty provides coverage on non-catastrophe losses on policies in-force on the effective date of the agreement.

(5) Cessions are split 50% to HCPCI and 50% to TypTap.

(6) This treaty was amended effective December 31, 2020 to include ACIC.

Reinsurance costs as a percent of gross earned premium during the years ended December 31, 2022 and 2021 were as follows:


	2022		2021
Non-at-Risk	(0.6)	%	(0.4)	%
Quota Share	(13.2)		(13.3)
All Other	(35.9)		(38.8)
Total Ceding Ratio	(49.7)	%	(52.5)	%

AMERICAN COASTAL INSURANCE CORPORATION

Reinsurance costs as a percent of gross earned premium for our commercial lines and personal lines operating segments during the years ended December 31, 2022 and 2021 were as follows:


	Personal				Commercial
	2022		2021		2022		2021
Non-at-Risk	(1.1)	%	(1.4)	%	(0.5)	%	(0.2)	%
Quota Share	—		—		(15.3)		(15.1)
All Other	(28.0)		(12.2)		(37.2)		(42.5)
Total Ceding Ratio	(29.1)	%	(13.6)	%	(53.0)	%	(57.8)	%

Please note that the sum of the percentages above will not reconcile to the consolidated percentages as they are calculated using each operating segments’ gross earned premium rather than our consolidated gross earned premium.

We amortize our ceded unearned premiums over the annual agreement period, and we record that amortization in ceded premiums earned on our Consolidated Statements of Comprehensive Loss. The table below summarizes the amounts of our ceded premiums written under the various types of agreements, as well as the amortization of ceded unearned premiums:


	Year Ended December 31,
		2022		2021		2020
Quota Share		$	(53,010)	$	(75,277)	$	(21,445)
Excess-of-loss		(188,113)		(181,595)		(162,564)
Equipment, identity theft, and cyber security		(3,067)		(1,499)		(2,907)


Ceded premiums written		$	(244,190)	$	(258,371)	$	(186,916)
Change in ceded unearned premiums		(21,833)		13,741		8,382
Ceded premiums earned		$	(266,023)	$	(244,630)	$	(178,534)

The breakdown of our ceded premiums written under the various types of agreements, as well as the amortization of ceded unearned premiums for our commercial lines and personal lines operating segments can be seen in the tables below. These values can be reconciled to the table above.

Personal Lines Operating Segment


	Year Ended December 31,
		2022		2021		2020

Excess-of-loss		(20,006)		(9,886)		27,549
Equipment, identity theft, and cyber security		(798)		(748)		(830)


Ceded premiums written		$	(20,804)	$	(10,634)	$	26,719
Change in ceded unearned premiums		74		3,060		(10,776)
Ceded premiums earned		$	(20,730)	$	(7,574)	$	15,943

Commercial Lines Operating Segment Impact

AMERICAN COASTAL INSURANCE CORPORATION


	Year Ended December 31,
		2022		2021		2020
Quota Share		(53,010)		(75,277)		(21,445)
Excess-of-loss		(168,107)		(171,709)		(190,113)
Equipment, identity theft, and cyber security		(2,269)		(751)		(2,077)


Ceded premiums written		$	(223,386)	$	(247,737)	$	(213,635)
Change in ceded unearned premiums		(21,907)		10,681		19,158
Ceded premiums earned		$	(245,293)	$	(237,056)	$	(194,477)

Current year catastrophe losses disaggregated between named and numbered storms and all other catastrophe loss events are shown in the following table.



	Number of Events	Incurred Loss and Loss adjustment expense (LAE) (1)		Combined Ratio Impact
December 31, 2022
Current period catastrophe losses incurred
Named and numbered storms	2	$	52,076	19.3	%
All other catastrophe loss events	11	5,830		2.2	%
Total	13	$	57,906	21.5	%

December 31, 2021
Current period catastrophe losses incurred
Named and numbered storms	4	$	4,142	1.9	%
All other catastrophe loss events	10	11,554		5.2	%
Total	14	$	15,696	7.1	%

December 31, 2020
Current period catastrophe losses incurred
Named and numbered storms	9	$	30,331	13.1	%
All other catastrophe loss events	17	8,616		3.7	%
Total	26	$	38,947	16.8	%

(1) Incurred loss and LAE is equal to losses and LAE paid plus the change in case and incurred but not reported reserves. Shown net of losses ceded to reinsurers. Incurred loss and LAE and number of events includes the development on storms during the year in which it occurred.

The impact of the current year catastrophes to our commercial lines and personal lines operating segments can be seen in the table below. Please note that the catastrophe events may have impacted both operating segments. As a result, the sum of the number of events in the tables below will not reconcile to the consolidated number of events above. In addition, the combined ratio impact is calculated and sum of the ratios in the tables below will not reconcile to the ratios above.

Personal Lines Operating Segment Impact

AMERICAN COASTAL INSURANCE CORPORATION



	Number of Events	Incurred Loss and Loss adjustment expense (LAE) (1)		Combined Ratio Impact
December 31, 2022
Current period catastrophe losses incurred
Named and numbered storms	1	$	8,903	17.7	%
All other catastrophe loss events	11	5,618		11.1	%
Total	12	$	14,521	28.8	%

December 31, 2021
Current period catastrophe losses incurred
Named and numbered storms	3	$	3,984	8.3	%
All other catastrophe loss events	7	2,182		4.6	%
Total	10	$	6,166	12.9	%

December 31, 2020
Current period catastrophe losses incurred
Named and numbered storms	2	$	13,647	38.1	%
All other catastrophe loss events	10	638		1.8	%
Total	12	$	14,285	39.9	%

Commercial Lines Operating Segment Impact



	Number of Events	Incurred Loss and Loss adjustment expense (LAE) (1)		Combined Ratio Impact
December 31, 2022
Current period catastrophe losses incurred
Named and numbered storms	2	$	43,173	19.7	%
All other catastrophe loss events	7	212		0.1	%
Total	9	$	43,385	19.8	%

December 31, 2021
Current period catastrophe losses incurred
Named and numbered storms	4	$	158	0.1	%
All other catastrophe loss events	10	9,372		5.4	%
Total	14	$	9,530	5.5	%

December 31, 2020
Current period catastrophe losses incurred
Named and numbered storms	8	$	16,684	8.5	%
All other catastrophe loss events	9	7,978		4.1	%
Total	17	$	24,662	12.6	%

See Note 10 in our Notes to Consolidated Financial Statements for additional information regarding our reinsurance program.

AMERICAN COASTAL INSURANCE CORPORATION

Unpaid Losses and Loss Adjustments

We generally use the term “loss(es)” to collectively refer to both loss and LAE. We establish reserves for both reported and unreported unpaid losses that have occurred at or before the balance sheet date for amounts we estimate we will be required to pay in the future, including provisions for claims that have been reported but are unpaid at the balance sheet date and for obligations on claims that have been incurred but not reported at the balance sheet date. Our policy is to establish these loss reserves after considering all information known to us at each reporting period. At any given point in time, our loss reserve represents our best estimate of the ultimate settlement and administration costs of our insured claims incurred and unpaid.

Unpaid losses and LAE totaled $842,958,000 and $250,642,000 as of December 31, 2022 and 2021, respectively. Of this total, $816,489,000 and $230,377,000 is related to our commercial lines operating segment, respectively. The remaining $26,469,000 and $20,265,000 is related to our personal lines operating segment, respectively. On a consolidated basis, this balance has increased year over year, driven by Hurricane Ian which made landfall in Florida as a category four hurricane during the third quarter of 2022. While we did have a higher frequency of storms in 2021, the severity of Hurricane Ian resulted in a year over year increase. Reinsurance recoverables also increased year over year due to the cession of these Hurricane Ian losses to our core catastrophe reinsurance program.

Since the process of estimating loss reserves requires significant judgment due to a number of variables, such as fluctuations in inflation, judicial decisions, legislative changes and changes in claims handling procedures, our ultimate liability will likely differ from these estimates. We revise our reserve for unpaid losses as additional information becomes available, and reflect adjustments, if any, in our earnings in the periods in which we determine the adjustments as necessary.

See Note 11 in our Notes to Consolidated Financial Statements for additional information regarding our losses and LAE.

Discontinued Operations

On February 10, 2023, we announced that a solvent run-off for UPC was unlikely and on February 27, 2023, UPC was placed into receivership with the Florida Department of Financial Services (DFS) which divested our ownership of UPC. As a result, UPC, as well as the activities related directly to supporting the business conducted by UPC, qualifies as a discontinued operation. We have recast our Consolidated Financial Statements to exclude the results of our discontinued operations, in conformity with U.S. generally accepted accounting principles (GAAP). For more information regarding the result of our discontinued operations, see Note 3 in our Notes to Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

We generate cash through premium collections, reinsurance recoveries, investment income, the sale or maturity of invested assets, the issuance of debt and the issuance of additional shares of our stock. We use our cash to pay reinsurance premiums, claims and related costs, policy acquisition costs, salaries and employee benefits, other expenses and stockholder dividends, acquire subsidiaries and pay associated costs, as well as to repay debts and purchase investments.

As a holding company, we do not conduct any business operations of our own and, as a result, we rely on cash dividends or intercompany loans from our management subsidiaries to pay our general and administrative expenses. Insurance regulatory authorities heavily regulate our insurance subsidiaries, including restricting any dividends paid by our insurance subsidiaries and requiring approval of any management fees our insurance subsidiaries pay to our management subsidiaries for services rendered; however, nothing restricts our non-insurance company subsidiaries from paying us dividends other than state corporate laws regarding solvency. Our management subsidiaries pay us dividends primarily using cash from the collection of management fees from our insurance subsidiaries, pursuant to the management agreements in effect between those entities. In accordance with state laws, our insurance subsidiaries may pay dividends or make distributions out of that part of their statutory surplus derived from their net operating profit and their net realized capital gains. The RBC guidelines published by the NAIC may further restrict our insurance subsidiaries’ ability to pay dividends or make distributions if the amount of the intended dividend or distribution would cause their respective surplus as it regards policyholders to fall below minimum RBC guidelines. See Note 16 in our Notes to Consolidated Financial Statements and Part II, Item 5 for additional information.

During the year ended December 31, 2022, we contributed $81,000,000 and $11,200,000 to our insurance subsidiaries, UPC and FSIC, respectively. The contribution made to FSIC was made prior to the merging of FSIC into UPC. In addition, we contributed $9,574,000 to our reinsurance subsidiary, UPC Re. During the year ended December 31, 2021, we contributed $17,000,000, $8,000,000 and $17,500,000 to our insurance subsidiaries, UPC, FSIC, and ACIC, respectively. We may make future contributions of capital to our insurance subsidiaries as circumstances require.

AMERICAN COASTAL INSURANCE CORPORATION

During 2022, we received a dividend of $26,000,000 from ACIC. During February 2021, we received a dividend of $3,500,000 from IIC. During February 2020, we received a dividend of $12,000,000 from IIC.

On December 13, 2017, we issued $150,000,000 of senior notes (Senior Notes) that will mature on December 15, 2027 and bear interest at a rate equal to 6.25% per annum payable semi-annually on each June 15 and December 15, commencing June 15, 2018. The Senior Notes are senior unsecured obligations of the Company. We may redeem the Senior Notes at our option, at any time and from time to time in whole or in part, at a redemption price equal to the greater of (i) 100% of the principal amount of the Senior Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon from the date of redemption to the date that is three months prior to maturity. On and after that date, we may redeem the Senior Notes at par. On December 8, 2022, the Kroll Bond Rating Agency, LLC announced a downgrade of our issuer and debt ratings BBB- to BB+. As a result, pursuant to our agreement, the interest rate of our Senior notes increased from 6.25% to 7.25% effective on the next Interest Payment date of June 15, 2023.

As a result of claim activity from the current and prior years, we have an obligation related to the unpaid policyholder losses and unpaid loss adjustment expenses associated with the settling of these claims. As of December 31, 2022, our total obligation related to these claim payments was $842,958,000, of which we estimate $383,093,000 to be short-term in nature (due in less than twelve months), based upon our cumulative claims paid over the last 22 years. While we believe that historical performance of loss payment patterns is a reasonable source for projecting future claim payments, there is inherent uncertainty in this estimated projected settlement, and as a result these estimates will differ, perhaps significantly, from actual future payments.

In addition to our unpaid loss and loss adjustment expenses, as of December 31, 2022 we have outstanding debt obligations related to our notes payable totaling $148,355,000. This is exclusive of interest costs, which we estimate will total $54,375,000 over the life of the debt, based on the current fixed interest rate of these notes. Our short-term obligation related to these notes payable total $10,875,000 in estimated interest payments, with no principal payments due. For more information regarding these outstanding notes, please see Note 12.

In connection with entering into contracts with our outside vendors, we have minimum obligations due to our vendors over the life of the contracts. Our main vendor obligations are related to underwriting tools, claims and policy administration systems, and software used by our information technology department in their daily operations. Our total obligation related to these three categories of obligations are $1,285,000, $2,200,000, and $6,250,000, respectively. Of these obligations, $597,000, $1,763,000, and $1,250,000, respectively are short-term in nature.

As described in Note 1 in the Notes to the Consolidated Financial Statements below, substantial doubt exists about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these consolidated financial statements are issued. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liability and commitments in the ordinary course of business.

Management’s strategic plans include the following:

•Working with the DFS to finalize a memorandum of understanding on how to allocate all shared reinsurance recoveries between UPCIC and ACIC;

•Providing additional information to our rating agencies for the affirmation of the Company’s current financial ratings;

•Successfully renewing our catastrophe reinsurance programs for ACIC and IIC effective June 1, 2023; and

•Exploring raising additional capital for ACIC, including in the form of surplus note contributions, to strengthen its statutory risk-based capital if necessary.

If the Company is unable to implement these actions, there is no assurance that the Company will be able to obtain the necessary amounts of additional capital to continue as a going concern. As of the date of this report we do not have any commitments from any source to provide such additional capital. Even if we are able to secure debt or equity financing, it may be unavailable in the amounts or time when we require. Furthermore, such financing would likely take the form of bank loans, surplus notes, private placement of debt or equity securities or some combination of these. The issuance of additional equity securities would dilute the stock ownership of current investors while incurring loans, surplus notes or other debt would increase our capital requirements and a possible loss of valuable assets if such obligations were not repaid in accordance with their terms.

AMERICAN COASTAL INSURANCE CORPORATION

Cash Flows for the Year Ended December 31, (in millions)

Operating Activities

The principal cash inflows from our operating activities come from premium collections, reinsurance recoveries and investment income. The principal cash outflows from our operating activities are the result of claims and related costs, reinsurance premiums, policy acquisition costs and salaries and employee benefits. A primary liquidity concern with respect to these cash flows is the risk of large magnitude catastrophe events.

During the year ended December 31, 2022, several balance sheet items were impacted by Hurricane Ian, which made landfall in the state of Florida as a category four hurricane. Unpaid losses and loss adjustment expense increased during the period, driven by the severity of Hurricane Ian. This was partially offset by increased reinsurance recoverable on paid and unpaid losses during the period, as these losses were ceded to our core catastrophe reinsurance contracts. However, the severity of Hurricane Ian resulted in the exhausting of our personal lines operating segment reinsurance coverage for the event, resulting in a net increase of $228,240,000 year-over-year. In addition to this event, unearned premiums, ceded unearned premiums, and reinsurance payable on premiums all decreased year over year, driven by the transition of our northeast and southeast business in 2022, and continued underwriting actions taken in 2022. These actions resulted in lower gross written premiums and premiums ceded to our quota share contracts.

Investing Activities

The principal cash inflows from our investing activities come from repayments of principal, proceeds from maturities and sales of investments. We closely monitor and manage these risks through our comprehensive investment risk management process. The principal cash outflows relate to purchases of investments and cost of property, equipment and capitalized software acquired. Additional cash outflows relate to the purchase of fixed assets. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption. During the year ended December 31, 2022, cash provided by investing activities decreased $14,542,000 as the result of net sales of investments totaling $218,646,000 in 2022, compared to $256,648,000 in 2021. This was partially offset by $21,236,000 in proceeds from the sale of assets in 2022.

Financing Activities

The principal cash inflows from our financing activities come from issuances of debt and other securities. The principal cash outflows come from repayments of debt and payments of dividends. The primary liquidity concern with respect to these cash flows is market disruption in the cost and availability of credit. We believe our current capital resources, together with cash provided from our operations, are sufficient to meet currently anticipated working capital requirements. During the year ended December 31, 2022, cash used in financing activities increased by $13,184,000 due to a return of capital to Kiln of $18,335,000 as a result of the stock re-purchase agreement and termination agreements effective June 30, 2022. Additionally,

AMERICAN COASTAL INSURANCE CORPORATION

during the third quarter of 2022 we repaid our Truist note in full, resulting in a $2,624,000 increase in repayments for the year. These increases were partially offset by a decrease in dividend payments of $7,761,000 since no dividends were declared in the second, third or fourth quarter of 2022.

RECENT ACCOUNTING STANDARDS

Please refer to Note 2(u) in our Notes to Consolidated Financial Statements for a discussion of recent accounting standards that may affect us.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements. The most critical estimates include those used in determining:

•reserves for unpaid losses,

•fair value of investments,

•investment portfolio credit allowances, and

•goodwill.

In making these determinations, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance industry. It is reasonably likely that changes in these estimates could occur from time to time and result in a material impact on our consolidated financial statements.

In addition, the preparation of our financial statements in accordance with GAAP prescribes when we may reserve for particular risks, including litigation exposures. Accordingly, our results for a given reporting period could be significantly affected if and when we establish a reserve for a major contingency. Therefore, the results we report in certain accounting periods may appear to be volatile and past results may not be indicative of results in future periods.

Reserves for Unpaid Losses and LAE

Reserves for unpaid losses and LAE represent the most significant accounting estimate inherent in the preparation of our financial statements. These reserves represent management’s best estimate of the amount we will ultimately pay for losses and we base the amount upon the application of various actuarial reserve estimation techniques as well as considering other material facts and circumstances known at the balance sheet date.

As discussed in Note 11 in our Notes to Consolidated Financial Statements, we determine our ultimate losses by using multiple actuarial methods to determine an actuarial estimate within a relevant range of indications that we calculate using generally accepted actuarial techniques. Our selection of the actuarial estimate is influenced by the analysis of our historical loss and claims experience since inception. For each accident year, we estimate the ultimate incurred losses for both reported and unreported claims. In establishing this estimate, we reviewed the results of various actuarial methods discussed in Note 11 in our Notes to Consolidated Financial Statements.

As of September 30, 2022, very little paid loss or case loss information was available related to Hurricane Ian. As a result, actuarial methodologies relied upon catastrophe model estimates as provided by catastrophe model vendors. The Company selected within the reasonable range of catastrophe model estimates at September 30, 2022. However, as of December 31, 2022, paid loss and case loss information was sufficient to establish additional methodologies, including paid loss & loss adjustment expense development, reported loss & loss adjustment expense development, case reserve development, claims decay analysis, paid loss and allocated loss adjustment expense B-F method, and reported loss & loss adjustment expense B-F method. These additional methodologies at December 31, 2022 supplemented the original catastrophe model estimates and pointed to a larger range of outcomes than considered at September 30, 2022. The Company adjusted the selection at December 31, 2022 in consideration of the larger range considering all available methodologies.

Fair Value of Investments

AMERICAN COASTAL INSURANCE CORPORATION

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are responsible for the determination of fair value of financial assets and the supporting assumptions and methodologies. We use quoted prices from active markets and we use an independent third-party valuation service to assist us in determining fair value. We obtain only one single quote or price for each financial instrument.

As discussed in Note 5 in our Notes to Consolidated Financial Statements, we value our investments at fair value using quoted prices from active markets, to the extent available. For securities for which quoted prices in active markets are unavailable, we use observable inputs such as quoted prices in inactive markets, quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs. We also have investments in limited partnerships that require us to use the net asset value per share method of valuation to determine fair value.

See “Item 7a. Quantitative and Qualitative Disclosures about Market Risk” for more information regarding the sensitivity of our fixed maturity portfolio to changes in interest rates.

Investment Portfolio Credit Allowances

For investments classified as available for sale, the difference between fair value and cost or amortized cost for fixed income securities is reported as a component of accumulated other comprehensive loss on our Consolidated Balance Sheet and is not reflected in our net loss of any period until reclassified to net loss upon the consummation of a transaction with an unrelated third party. We have a portfolio monitoring process to identify and evaluate each fixed income security whose carrying value may be impaired as the result of a credit loss.

For each fixed-income security in an unrealized loss position, if we determine that we intend to sell the security or that it is more likely than not that we will be required to sell the security before recovery of the cost or amortized cost basis for reasons such as liquidity needs, contractual or regulatory requirements, the security's entire decline in fair value is recorded in earnings.

If our management decides not to sell the fixed-income security and it is more likely than not that we will not be required

to sell the fixed-income security before recovery of its amortized cost basis, we evaluate whether the decline in fair value has

resulted from credit losses or other factors. This is typically indicated by a change in the rating of the security assigned by a

rating agency, and any adverse conditions specifically related to the security or industry, among other factors. If the assessment

indicates that a credit loss may exist, the present value of cash flows expected to be collected from the security are compared to

the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized

cost basis, a credit loss exists and an allowance for credit losses will be recorded in earnings. Credit loss is limited to the

difference between a security's amortized cost basis and its fair value. Any additional impairment not recorded through an

allowance for credit losses is recognized in other comprehensive loss.

If the estimated recovery value is less than the amortized cost of the security, a credit loss exists and an allowance for the difference between the estimated recovery value and amortized cost is recorded in earnings. The portion of the unrealized loss related to factors other than credit remains classified in accumulated other comprehensive loss. If we determine that the fixed income security does not have sufficient cash flow or other information to estimate a recovery value for the security, we may conclude that the entire decline in fair value is deemed to be credit related and the loss is recorded in earnings.

Due to the adoption of Accounting Standards Update (ASU) 2016-01 (ASU 2016-01) as of January 1, 2018, equity securities are reported at fair value with changes in fair value, including impairment write-downs, being recognized in the revenue section of our Consolidated Statements of Comprehensive Loss.

See Note 2(b) in our Notes to Consolidated Financial Statements for further information regarding our credit loss testing.

Measurement of Goodwill and Related Impairment

Goodwill is the excess of cost over the estimated fair value of net assets acquired. Goodwill is not amortized but is tested

for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business climate,

indicate that there may be justification for conducting an interim test. We test goodwill for impairment by performing a

quantitative assessment. Goodwill is impaired when it is determined that the carrying value of a reporting segment is in excess of the fair value of that reporting segment. The valuation methodologies utilized are subject to key judgments and assumptions

AMERICAN COASTAL INSURANCE CORPORATION

that are sensitive to change. Estimates of fair value are inherently uncertain and represent only management’s reasonable expectation regarding future developments.

Please refer to Note 2(k) and Note 9 in our Notes to Consolidated Financial Statements for further information regarding our measurement of Goodwill and Related Impairment.

RELATED PARTY TRANSACTIONS

There were no related party transactions for the years ended December 31, 2022, 2021 and 2020.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our investment objective is to preserve capital, maximize after-tax investment income, maintain liquidity and minimize risk. Our current investment policy limits investment in non-investment grade debt securities, and limits total investments in preferred stock, common stock and mortgage notes receivables. We also comply with applicable laws and regulations that further restrict the type, quality and concentration of our investments. In general, these laws and regulations permit investments, within specified limits and subject to certain qualifications, in federal, state and municipal obligations, corporate bonds, and preferred and common equity securities.

Our investment policy was established by the Investment Committee of our Board of Directors and is reviewed regularly. Pursuant to this investment policy, our fixed-maturity portfolio is classified as available for sale and we report any unrealized gains or losses, net of deferred income taxes, as a component of other comprehensive loss within our stockholders’ equity (deficit). We do not hold any securities that are classified as held to maturity and we do not hold any securities for trading or speculation. We do not utilize any swaps, options, futures or forward contracts to hedge or enhance our investment portfolio. The unrealized gains or losses related to our equity securities are recorded on the income statement per the guidance in ASU 2016-01.

INTEREST RATE RISK

Fixed-income securities are sensitive to potential losses resulting from unfavorable changes in interest rates. We manage the risk by analyzing anticipated movements in interest rates and considering our future capital and liquidity requirements.

The following table illustrates the impact of hypothetical changes in interest rates on the fair value of our fixed-income securities at December 31, 2022 and 2021:

AMERICAN COASTAL INSURANCE CORPORATION


					Percentage
					Increase
			Change in		(Decrease) in
	Estimated		Estimated		Estimated
Hypothetical Change in Interest Rates	Fair Value		Fair Value		Fair Value
2022
300 basis point increase	$	179,372	$	(25,310)	(12.4)	%
200 basis point increase	187,803		(16,879)		(8.2)
100 basis point increase	196,240		(8,442)		(4.1)
Fair value	204,682		—		—
100 basis point decrease	213,131		8,449		4.1
200 basis point decrease	221,586		16,904		8.3
300 basis point decrease	$	230,032	$	25,350	12.4	%


2021
300 basis point increase	$	304,972	$	(41,697)	(12.0)	%
200 basis point increase	318,870		(27,799)		(8.0)
100 basis point increase	332,769		(13,900)		(4.0)
Fair value	346,669		—		—
100 basis point decrease	360,403		13,734		4.0
200 basis point decrease	371,472		24,803		7.2
300 basis point decrease	$	374,404	$	27,735	8.0	%

Our calculations of the potential effects of hypothetical interest rate changes are based on several assumptions, including maintenance of the existing composition of fixed-income investments, and should not be considered indicative of future results. Based on our analysis, a 300-basis point decrease or increase in interest rates from the December 31, 2022 rates would have a material impact on our results of operations and cash flows in the event divesting of these holdings was necessary. However, we do not anticipate the need to sell securities in an unrealized loss position as of December 31, 2022. In line with the anticipated LIBOR phase out, the last one-week and two-month LIBOR settings were published on December 31, 2021. However, the Intercontinental Exchange will continue to publish one-month, three-month, six-month and twelve-month LIBOR settings through 2023. We are unable to predict the use of alternate reference rates and corresponding interest rate risk at this time.

CREDIT RISK

Credit risk can expose us to potential losses arising principally from adverse changes in the financial condition of the issuer of our fixed-maturity securities. We mitigate this risk by generally investing in investment grade securities and by diversifying our investment portfolio to avoid concentrations in any single issuer or market sector.

AMERICAN COASTAL INSURANCE CORPORATION

The following table presents the composition of our fixed-income security portfolio by rating at December 31, 2022 and 2021:


			% of Total
	Amortized		Amortized				% of Total
Comparable Rating	Cost		Cost		Fair Value		Fair Value
2022
AAA	$	60,189	25.3	%	$	52,892	25.8	%
AA+, AA, AA-	39,834		16.8		34,917		17.1
A+, A, A-	86,587		36.4		74,131		36.3
BBB+, BBB, BBB-	50,277		21.1		42,034		20.5
BB+, BB, BB-	848		0.4		708		0.3
Total	$	237,735	100.0	%	$	204,682	100.0	%


2021
AAA	$	92,342	26.3	%	$	91,313	26.3	%
AA+, AA, AA-	71,420		20.4		70,884		20.4
A+, A, A-	123,909		35.4		122,831		35.6
BBB+, BBB, BBB-	62,170		17.7		60,787		17.5
BB+, BB, BB-	848		0.2		854		0.2
Total	$	350,689	100.0	%	$	346,669	100.0	%

In addition, we are exposed to credit risk through our reinsurance program. Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to us. We evaluate the financial condition of our reinsurers and monitor concentrations of credit risk to minimize our exposure to significant losses from reinsurer insolvencies.

We also are exposed to credit risk through our outstanding premiums receivable balances. We evaluate the age of our premium receivables to minimize our exposure to significant losses due to nonpayment.

After our evaluation of all credit risks described above, if we feel it is necessary, we record a credit loss allowance to address these credit risks. For more information regarding our credit loss allowance, please refer to Note 14.

EQUITY PRICE RISK

Our equity investment portfolio at December 31, 2022 consisted of common stocks and non-redeemable preferred stocks. We may incur potential losses due to adverse changes in equity security prices. We manage this risk primarily through industry and issuer diversification and asset allocation techniques.

During 2022, we increased our equity portfolio from 4.5% of our total investments (excluding cash, restricted cash and cash equivalents) at December 31, 2021 to 7.0% of our total investments (excluding cash, restricted cash and cash equivalents) at December 31, 2022.

AMERICAN COASTAL INSURANCE CORPORATION

The following table illustrates the composition of our equity portfolio at December 31, 2022 and 2021:


			% of Total
Stocks by Sector	Fair Value		Fair Value
2022
Funds	$	15,657	100.0	%











2021
Funds	$	16,382	100.0	%

AMERICAN COASTAL INSURANCE CORPORATION

Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of American Coastal Insurance Corporation.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of American Coastal Insurance Corporation and subsidiaries (formerly known as United Insurance Holdings Corp.) (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income (loss), stockholders' equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered significant underwriting losses and no longer controls or consolidates United Property & Casualty Insurance Company (“UPC”) subsequent to February 27, 2023. There is uncertainty regarding the Company’s ability to obtain existing reinsurance recoveries and the subsequent placement of reinsurance contracts. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Emphasis of Matter

As discussed in Note 21 to the financial statements, on February 27, 2023, UPC was ordered into receivership for purposes of liquidation, with the Florida Department of Financial Services appointed as the receiver, which deconsolidated UPC from the group.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSE (LAE)- Refer to Notes 2 and 11 to the Financial Statements

Critical Audit Matter Description

As a provider of both residential and commercial property and casualty insurance, the Company establishes reserves for both reported and unreported unpaid losses that have occurred at or before the balance sheet date for amounts estimated which they will be required to pay in the future, including provisions for claims that have been reported but are unpaid at the balance sheet date and for obligations on claims that have been incurred but not reported at the balance sheet date (herein “loss reserves”). Due to the nature and unpredictability in both the severity and frequency of these events and their related claims, the Company uses a significant amount of judgment in estimating the loss reserves, including analyzing historical and industry loss data, claims frequency and severity, claims processing procedures, legislative enactments, judicial decisions and legal developments in imposition of damages, and general economic conditions, including inflation. Additionally, the Company engages independent actuarial specialists in order to assist management in establishing appropriate loss reserves.

Given the subjectivity of estimating the projected losses to be incurred by the Company as it relates to both reported and unreported claims, performing audit procedures to evaluate whether the Company’s loss reserves were appropriately recorded as of December 31, 2022, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the loss reserves included the following, among others:

•We tested the effectiveness of controls related to loss reserves, including management’s controls over the projection of settlement value of reported and unreported claims.

•We evaluated the methods and assumptions used by management to estimate the loss reserves by:

–Testing the underlying data that served as the basis for the actuarial analysis, including historical claims, to test that the inputs to the actuarial estimate were reasonable.

–Holding discussions with management to discuss the Company’s ultimate recorded reserve actions and understand any trends that have been observed in the Company’s claims data.

–Comparing management’s prior-year assumptions of expected development and ultimate loss to actuals incurred during the current year to identify potential bias in the determination of the loss reserves.

•With the assistance of our actuarial specialists, we developed independent estimates of the loss reserves, including loss data, significant drivers, and claim development factors, and compared our estimates to management’s estimates.

/s/ DELOITTE & TOUCHE LLP

Tampa, Florida

April 17, 2023 (September 19, 2023, as to the effects of the discontinued operations described in Note 3)

We have served as the Company’s auditor since 2018.

AMERICAN COASTAL INSURANCE CORPORATION

Consolidated Balance Sheets


	December 31,
	2022		2021
ASSETS
Investments, at fair value:
Fixed maturities, available-for-sale (amortized cost of $237,735 and $350,690, respectively)	$	204,682	$	346,669
Equity securities	15,657		16,382
Other investments (amortized cost of $3,072 and $3,114, respectively)	3,675		3,162

Total investments	224,014		366,213
Cash and cash equivalents	70,903		113,382
Restricted cash	45,988		32,833
Total cash, cash equivalents and restricted cash	116,891		146,215
Accrued investment income	1,605		1,548
Property and equipment, net	5,293		14,808
Premiums receivable, net (credit allowance of $32 and $16, respectively)	39,301		53,976
Reinsurance recoverable on paid and unpaid losses, net (credit allowance of $333 and $58, respectively)	796,546		191,325
Ceded unearned premiums	90,496		112,329
Goodwill	59,476		69,632
Deferred policy acquisition costs, net	52,369		40,447
Intangible assets, net	12,770		18,375
Other assets, net (1)	3,920		(1,351)
Assets held for disposal	1,434,815		1,685,056
Total Assets	$	2,837,496	$	2,698,573
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Liabilities:
Unpaid losses and loss adjustment expenses	$	842,958	$	250,642
Unearned premiums	258,978		222,004
Reinsurance payable on premiums	30,503		66,163
Payments outstanding	2,000		1,048
Accounts payable and accrued expenses	74,386		75,204
Operating lease liability	1,689		1,934
Other liabilities	5,849		5,070
Notes payable, net	148,355		151,267
Liabilities held for disposal	1,654,817		1,593,284
Total Liabilities	$	3,019,535	$	2,366,616
Commitments and contingencies (Note 13)
Stockholders’ Equity (Deficit):
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding	$	—	$	—
Common stock, $0.0001 par value; 100,000,000 shares authorized; 43,492,256 and 43,360,429 issued, respectively; 43,280,173 and 43,370,442 outstanding, respectively	4		4
Additional paid-in capital	395,631		394,268
Treasury shares, at cost; 212,083 shares	(431)		(431)
Accumulated other comprehensive loss	(30,947)		(6,531)
Retained earnings (deficit)	(546,296)		(74,904)
Total stockholders' equity (deficit) attributable to United Insurance Holdings Corp. (UIHC) stockholders	$	(182,039)	$	312,406
Noncontrolling interests (NCI)	—		19,551
Total Stockholders’ Equity (Deficit)	$	(182,039)	$	331,957
Total Liabilities and Stockholders’ Equity (Deficit)	$	2,837,496	$	2,698,573

(1) Value presented excluding discontinued operations balance, recast to align total assets and liabilities with previously filed Form 10-K.

See accompanying notes to consolidated financial statements.

AMERICAN COASTAL INSURANCE CORPORATION

Consolidated Statements of Comprehensive Loss


	Year Ended December 31,
	2022			2021		2020
REVENUE:
Gross premiums written	$	572,343		$	484,527	$	399,843
Change in gross unearned premiums	(36,974)			(18,768)		9,863
Gross premiums earned	535,369			465,759		409,706
Ceded premiums earned	(266,023)			(244,630)		(178,534)
Net premiums earned	269,346			221,129		231,172
Net investment income	7,673			5,901		9,680
Net realized investment gains (losses)	(6,483)			138		28,934
Net unrealized gains (losses) on equity securities	(1,968)			1,471		(12,317)

Other revenue	1,223			46		56
Total revenues	269,791			228,685		257,525
EXPENSES:
Losses and loss adjustment expenses	134,805			89,051		115,059
Policy acquisition costs	95,318			93,199		104,248
Operating expenses	13,729			16,258		14,274
General and administrative expenses	42,281			31,420		29,009
Interest expense	9,483			9,303		9,494
Total expenses	295,616			239,231		272,084
Income (loss) before other income	(25,825)			(10,546)		(14,559)
Other income	10,343			129		27
Income (loss) before income taxes	(15,482)			(10,417)		(14,532)
Provision (benefit) for income taxes	24,522			(6,699)		(8,606)
Income (loss) from continuing operations, net of tax	$	(40,004)		$	(3,718)	$	(5,926)
Loss from discontinued operations, net of tax	(429,962)			(56,150)		(89,572)
Net loss	$	(469,966)		$	(59,868)	$	(95,498)
Less: Net income (loss) attributable to NCI	(111)			(1,949)		956
Net loss attributable to UIHC	$	(469,855)		$	(57,919)	$	(96,454)
OTHER COMPREHENSIVE LOSS:
Change in net unrealized gains (losses) on investments	(56,600)			(18,267)		64,726
Reclassification adjustment for net realized investment losses (gains)	32,082			(3,567)		(66,691)

Income tax benefit related to items of other comprehensive loss	49			5,264		502
Total comprehensive loss	$	(494,435)		$	(76,438)	$	(96,961)
Less: Comprehensive income (loss) attributable to NCI	(164)			(2,295)		1,119
Comprehensive loss attributable to UIHC	$	(494,271)		$	(74,143)	$	(98,080)

Weighted average shares outstanding
Basic	43,052,070			42,948,850		42,864,166
Diluted	43,052,070			42,948,850		42,864,166

Earnings available to UIHC common stockholders per share
Basic
Continuing operations	$	(0.93)		$	(0.04)	$	(0.16)
Discontinued operations	(9.98)		-9.98	(1.31)		(2.09)
Total	$	(10.91)		$	(1.35)	$	(2.25)
Diluted
Continuing operations	$	(0.93)		$	(0.04)	$	(0.16)
Discontinued operations	(9.98)			(1.31)		(2.09)
Total	$	(10.91)		$	(1.35)	$	(2.25)

See accompanying notes to consolidated financial statements.

AMERICAN COASTAL INSURANCE CORPORATION

Consolidated Statements of Stockholders’ Equity (Deficit)


				Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income (loss)		Retained Earnings (Deficit)		Stockholders’ Equity (Deficit) Attributable to UIHC		NCI		Total Stockholders’ Equity (Deficit)
	Common Stock
	Shares	Amount
December 31, 2019	43,028,074	$	4	$	391,852	$	(431)	$	11,319	$	100,394	$	503,138	$	20,727	$	523,865
Net income (loss)	—	—		—		—		—		(96,454)		(96,454)		956		(95,498)
Other comprehensive income (loss)	—	—		—		—		(1,626)		—		(1,626)		163		(1,463)
Reclassification due to adoption of ASU 2016-13	—	—		—		—		—		(262)		(262)		—		(262)
Stock compensation	47,803	—		1,270		—		—		—		1,270		—		1,270
Cash dividends on common stock ($0.24 per common share)	—	—		—		—		—		(10,313)		(10,313)		—		(10,313)

December 31, 2020	43,075,877	4		393,122		(431)		9,693		(6,635)		395,753		21,846		417,599
Net loss	—	—		—		—		—		(57,919)		(57,919)		(1,949)		(59,868)
Other comprehensive loss	—	—		—		—		(16,224)		—		(16,224)		(346)		(16,570)

Stock compensation	294,565	—		1,146		—		—		—		1,146		—		1,146
Cash dividends on common stock ($0.24 per common share)	—	—		—		—		—		(10,350)		(10,350)				(10,350)

December 31, 2021	43,370,442	4		394,268		(431)		(6,531)		(74,904)		312,406		19,551		331,957
Net loss	—	—		—		—		—		(469,855)		(469,855)		(111)		(469,966)
Other comprehensive loss	—	—		—		—		(24,416)		—		(24,416)		(53)		(24,469)
Return of Capital to NCI	—	—		—		—		—		1,052		1,052		(19,387)		(18,335)
Stock compensation	(90,269)	—		1,363		—		—		—		1,363		—		1,363
Cash dividends on common stock ($0.06 per common share)	—	—		—		—		—		(2,589)		(2,589)		—		(2,589)
December 31, 2022	43,280,173	$	4	$	395,631	$	(431)	$	(30,947)	$	(546,296)	$	(182,039)	$	—	$	(182,039)

See accompanying notes to consolidated financial statements.

AMERICAN COASTAL INSURANCE CORPORATION

Consolidated Statements of Cash Flows


	Year Ended December 31,
	2022		2021		2020
OPERATING ACTIVITIES
Net loss	$	(469,966)	$	(59,868)	$	(95,498)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization, including goodwill impairment	23,312		11,768		11,046
Bond amortization and accretion	5,624		8,814		6,422
Net realized losses (gains) on investments	32,082		(3,567)		(66,691)
Net unrealized losses (gains) on equity securities	6,585		(3,237)		27,562

Provision for uncollectible premiums	(37)		108		(140)
Provision for uncollectible reinsurance recoverables	(40)		(177)		(386)
Provision for uncollectible notes receivable	—		20		(20)
Deferred income taxes, net	24,138		(22,816)		(9,894)
Stock based compensation	1,388		1,185		1,382
Payment receivable in connection with HCI renewal rights agreement	3,800		(3,800)		—
Stock issued in connection with HCI renewal rights agreement	—		(5,007)		—
Gain on sale of property and equipment	(12,888)		—		—
Fixed asset and intangible asset disposals	2,884		21		2,949
Changes in operating assets and liabilities:
Accrued investment income	234		1,384		1,221
Premiums receivable	(6,833)		8,065		(496)
Reinsurance recoverable on paid and unpaid losses	(634,248)		(175,787)		(270,890)
Ceded unearned premiums	217,603		(46,043)		(114,554)
Deferred policy acquisition costs, net	(20,413)		35,894		30,158
Other assets	(3,218)		20,898		(31,917)
Unpaid losses and loss adjustment expenses	862,488		(5,516)		329,609
Unearned premiums	(99,120)		(78,998)		49,883
Reinsurance payable on premiums	(188,729)		6,989		75,505
Payments outstanding	100,533		36,612		20,357
Accounts payable and accrued expenses	(1,755)		(14,915)		12,581
Lease liabilities	(245)		(377)		1,987
Other liabilities	(16,292)		(7,041)		9,353
Net cash used in operating activities	(173,113)		(295,391)		(10,471)
INVESTING ACTIVITIES
Proceeds from sales, maturities and repayments of:
Fixed Maturities	250,536		442,406		695,288
Equity Securities	750		12,691		144,990
Other Investments	2,825		72,462		4,586

Purchases of:
Fixed Maturities	(25,545)		(198,553)		(726,862)
Equity Securities	(7,648)		(30,222)		(26,540)
Other Investments	(2,272)		(42,136)		(44,048)
Proceeds from sale of property and equipment	21,236		—		—
Cost of property, equipment and capitalized software acquired	(3,047)		(5,271)		(10,848)
Net cash provided by investing activities	236,835		251,377		36,566
FINANCING ACTIVITIES
Tax withholding payment related to net settlement of equity awards	(25)		(39)		(112)
Return of capital in connection with termination of noncontrolling interest	(18,335)		—		—
Repayments of borrowings	(4,441)		(1,817)		(1,229)


Dividends	(2,589)		(10,350)		(10,313)
Net cash used in financing activities	(25,390)		(12,206)		(11,654)
Increase (decrease) in cash, cash equivalents and restricted cash	38,332		(56,220)		14,441
Cash, cash equivalents and restricted cash at beginning of period	245,278		301,498		287,057
Cash, cash equivalents and restricted cash at end of period	$	283,610	$	245,278	$	301,498
Supplemental Cash Flows Information
Interest paid	$	9,553	$	9,534	$	9,533
Income taxes paid (refunded)	$	2,487	$	(19,895)	$	1,265

See accompanying notes to consolidated financial statements.

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2022

1) ORGANIZATION, CONSOLIDATION AND PRESENTATION

(a)Business

United Insurance Holdings Corp. (referred to in this document as we, our, us, the Company or UIHC) is a property and casualty insurance holding company that sources, writes and services residential personal and commercial property and casualty insurance policies using a network of agents and wholly-owned insurance subsidiaries. Our original insurance subsidiary is United Property & Casualty Insurance Company (UPC), which was formed in Florida in 1999. Our two other insurance subsidiaries are Interboro Insurance Company (IIC), acquired via merger on April 29, 2016; and American Coastal Insurance Company (ACIC), acquired via merger on April 3, 2017.

Our other subsidiaries include United Insurance Management, L.C. (UIM), a managing general agent that manages

substantially all aspects of UPC's business; Skyway Claims Services, LLC, which provides claims adjusting services to UPC, and ACIC; AmCo Holding Company, LLC (AmCo), which is a holding company subsidiary that consolidates its respective insurance company; BlueLine Cayman Holdings (BlueLine), which reinsures portfolios of excess and surplus policies; UPC Re, which provides a portion of the reinsurance protection purchased by our insurance subsidiaries when needed; Skyway Reinsurance Services, LLC, which provides reinsurance brokerage services for our insurance companies; Skyway Legal Services, LLC, which provides claims litigation services to our insurance companies; and Skyway Technologies, LLC, a managing general agent that provides technological and distribution services to our insurance companies.

Our primary products are homeowners' and commercial residential property insurance. In 2022 we offered personal residential insurance in six states, under authorization from the insurance regulatory authorities in each state. In addition, we write commercial residential insurance in Florida. During 2022, we also wrote commercial residential insurance in South Carolina, and Texas, however, effective May 1, 2022, we no longer write in these states. We are also licensed to write property and casualty insurance in an additional twelve states; however, we have not commenced writing or no longer write in these states.

On August 25, 2022, we announced that UPC had filed plans for withdrawal in the states of Florida, Louisiana, and Texas and intended to file a plan for withdrawal in the state of New York. All filed plans entail non-renewing personal lines policies in these states. Additionally, we announced that Demotech, Inc. (Demotech), an insurance rating agency, notified UPC of its intent to withdraw UPC's Financial Stability Rating. On December 5, 2022, the Florida Office of Insurance Regulation ("FLOIR") issued Consent Order No. 303643-22- CO that provides for the administrative supervision and approval of the plan of run-off for UPC (the "Consent Order"). The Consent Order provides formal approval of UPC's Plan of Run-Off (the "Plan") to facilitate a solvent wind down of its affairs in an orderly fashion. Additionally, in connection with the Plan, IIC has agreed to not pay ordinary dividends without the prior approval of the New York Department of Financial Services until January 1, 2025. On February 10, 2023, we announced that a solvent run-off of UPC was unlikely and on February 27, 2023, UPC was placed into receivership with the Florida Department of Financial Services which divested our ownership of UPC.

Effective June 1, 2022, we merged our majority-owned insurance subsidiary, Journey Insurance Company (JIC) into ACIC, with ACIC being the surviving entity. JIC was formed in strategic partnership with a subsidiary of Tokio Marine Kiln Group Limited (Kiln) on August 30, 2018, and operated independently from ACIC prior to the merging of the entities. The Kiln subsidiary held a noncontrolling interest in JIC, which was terminated prior to the merger.

Effective June 1, 2022, we entered into a quota share reinsurance agreement with TypTap Insurance Company (Typtap). Under the terms of this agreement, we cede 100% of our in-force, new, and renewal policies in the states of Georgia, North Carolina and South Carolina. Effective June 1, 2022, we began the transition of South Carolina policies to Homeowners Choice Property and Casualty, Inc (HCPCI) in connection with our renewal rights agreement. Effective October 1, 2022, transitioned Georgia policies to HCPCI in connection with our renewal rights agreement. Effective December 1, 2022, we began the transition of North Carolina policies to HCPCI in connection with our renewal rights agreement. As a result, these policies will no longer be covered under this agreement upon their renewal. This agreement replaces the 85% quota share agreement with HCPCI effective December 31, 2021.

Effective May 31, 2022, we merged Family Security Insurance Company, Inc. (FSIC) into UPC, with UPC being the surviving entity. FSIC was acquired via merger on February 3, 2015, and operated independently from UPC prior to the merging of the entities. In conjunction with the merger, we dissolved Family Security Holdings (FSH), a holding company subsidiary that consolidated its respective insurance company, FSIC.

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2022

Effective June 1, 2021, we entered into a quota share reinsurance agreement with HCPCI and TypTap. Under the terms of this agreement, we ceded 100% of our in-force, new, and renewal policies in the states of Connecticut, New Jersey, Massachusetts, and Rhode Island. The cession of these policies was 50% to HCPCI and 50% to TypTap. HCPCI is responsible for processing all claims as a part of this agreement. As of April 1, 2022, we completed the transition of all policies in these four states to HCPCI in connection with our renewal rights agreement (Northeast Renewal Agreement) to sell UPC's personal lines homeowners business in these states.

We conduct our operations under two reportable segments, personal residential property and casualty insurance policies and commercial residential property and casualty insurance policies. Our chief operating decision maker is our President, who makes decisions to allocate resources and assesses performance at both segment levels as well as the corporate level.

(b)Consolidation and Presentation

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP). While preparing our consolidated financial statements, we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, as well as reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Reported amounts that require us to make extensive use of estimates include our reserves for unpaid losses and loss adjustment expenses, investments and goodwill. Except for the captions on our Consolidated Balance Sheets and Consolidated Statements of Comprehensive Loss, we generally use the term loss(es) to collectively refer to both loss and loss adjustment expenses.

We include all of our subsidiaries in our consolidated financial statements, eliminating intercompany balances and transactions during consolidation. As described in Note 3, our former subsidiary, UPC, and activities related directly to supporting the business conducted by UPC qualifies as a discontinued operation.

In accordance with ASC Subtopic 205-40, Presentation of Financial Statements—Going Concern (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its obligations as they become due within one year after the date that the financial statements are issued. As required under ASC 205-40, management’s evaluation should initially not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented as of the date the financial statements are issued. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

In performing this evaluation, we concluded that under the standards of ASC 205-40 the following conditions raised substantial doubt about our ability to continue as a going concern:

(1) the ability to obtain reinsurance recoveries allocated to ACIC under the catastrophe treaties covering Hurricane Ian where ACIC’s affiliate, United Property & Casualty Insurance Company (“UPC”) is also a party, and (2) the ability to obtain adequate reinsurance to meet the requirements of the FLOIR and Demotech, the rating agency, for future reinsurance periods.

Upon completion of the Company’s year-end review of unpaid loss and loss adjustment reserves with our independent actuarial firm, our insurance entity, UPC, increased its gross loss estimate related to Hurricane Ian to $864 million. UPC’s loss estimate of $864 million fully exhausts all reinsurance available to UPC for this specific event, based on the reinsurance allocation agreement discussed below. As a result of this development, the Company immediately notified the FLOIR that UPC was expected to be insolvent as of December 31, 2022. On February 27, 2023, UPC was ordered into receivership for purposes of liquidation, with the Florida Department of Financial Services (the “DFS”) appointed as the receiver, which deconsolidated UPC from the group.

The Company’s other insurance subsidiaries are not parties to the receivership and continue to operate. However, ACIC’s catastrophe reinsurance coverage is a part of a combined reinsurance program with UPC.

To properly allocate the reinsurance recoverables under the shared catastrophe treaties, UPC and ACIC entered a reinsurance allocation agreement that became effective on June 1, 2022 (the “Allocation Agreement”). The Allocation Agreement was filed with and approved by the FLOIR on December 5, 2022. However, ACIC now believes there is uncertainty

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2022

regarding the timing of receipt of both recoveries currently held by UPC that are allocated to ACIC and future recoverables now that UPC has been placed into receivership. As of December 31, 2022, UPC held recoveries due to ACIC totaling $31,306,000.

On April 5, 2023, the Company filed a Motion for Release of Property of ACIC in the Circuit Court of the Second Judicial Circuit for Leon County, Florida, requesting that UPC immediately remit to ACIC reinsurance recoveries currently held by UPC and reinsurance recoveries recovered by UPC in the future in accordance with the Company’s Allocation Agreement. Alternatively, ACIC requested reinsurance recoveries remitted to UPC be placed into a segregated account for future reconciliation and remittance to ACIC. On April 13, 2023, the DFS filed a response to the Company’s motion, objecting to ACIC’s position. On April 14, 2023, the Court denied ACIC’s motion without prejudice. As a result of the foregoing, management believes substantial doubt exists regarding the Company’s ability to continue as a going concern.

As of December 31, 2022, ACIC calculates it is due approximately $273 million from the private reinsurance program described above in accordance with the Allocation Agreement approved by the FLOIR, related to its ultimate gross Hurricane Ian loss. To the extent that these reinsurance recoverables are not received timely and treated as a nonadmitted asset of ACIC, which would be excluded from regulatory capital and surplus, the Company may not have sufficient liquidity to continue to operate. Management believes that the ability for ACIC to obtain adequate reinsurance to meet its needs for the June 1, 2023 to May 31, 2024 catastrophe cover can only be accomplished assuming that recoveries due to ACIC pursuant to the Allocation Agreement can be resolved in short order. Such conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for one year following the issuance of the financial statements.

The Company intends to continue to work towards a fair and equitable resolution regarding these recoveries, however no assurance can be given that it will receive all or any portion of the reinsurance recoverables that it believes are due to ACIC.

(d) Impact of COVID-19 and Financial Status

We did not experience a material impact from COVID-19 on our business operations, financial position, liquidity or our ability to service our policyholders during the year ended December 31, 2022. In addition, the COVID-19 pandemic and resulting global disruptions did not have a material impact on our access to credit and capital markets needed to maintain sufficient liquidity for our continued operating needs during the year ended December 31, 2022.

Additionally, during the fourth quarter of 2021 we implemented our new flexible work policy. This policy allows all

employees to work remotely permanently, with the return to our offices being completely voluntary at this time. We will

continue to respond to the COVID-19 pandemic and take reasonable measures to make sure customers continue to be served

without interruption.

2) SIGNIFICANT ACCOUNTING POLICIES

(a)Cash, cash equivalents, and restricted cash

Our cash, cash equivalents, and restricted cash include demand deposits with financial institutions, cash that is held in trust for assumed business, cash held in deposit accounts to satisfy state statutory deposit requirements, and short-term, highly liquid instruments with original maturities of three months or less when purchased.

(b)Investments

We currently classify all of our investments in fixed maturities and short-term investments as available-for-sale, and report them, our equity securities and limited partnership investments at fair value. Subsequent to our acquisition of available-for-sale securities, we record changes in value through the date of disposition as unrealized holding gains and losses, net of tax effects, and include them as a component of comprehensive loss. We include realized gains and losses, which we calculate using the specific-identification method for determining the cost of securities sold, in net loss. We amortize any premium or discount on fixed maturities over the remaining maturity period of the related securities using the effective interest method, and we report the amortization in net investment income. We recognize dividends and interest income when earned.

Quarterly, we perform an assessment of our investments to determine if any are impaired as the result of a credit loss. An investment is impaired when the fair value of the investment declines to an amount less than the cost or amortized cost of that investment. For each fixed-income security in an unrealized loss position, if we determine that we intend to sell the security or that it is more likely than not that we will be required to sell the security before recovery of the cost or amortized cost basis for

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2022

reasons such as liquidity needs, contractual or regulatory requirements, the security’s entire decline in fair value is recorded in earnings.