Edgar Filing: UNITED INSURANCE HOLDINGS CORP.

Free Writing Prospectus

United Insurance Holdings Corp.

NASDAQ: UIHC

Follow-on Offering

February 2014

Filed Pursuant to Rule 433

Issuer Free Writing Prospectus dated

February 26, 2014

Registration No. 333-191472

Presenters

Mr. John Forney, CFA

Chief Executive Officer

(727) 280-4155

jforney@upcinsurance.com

Mr. Brad Martz

Chief Financial Officer

(727) 280-4157

bmartz@upcinsurance.com

INTRODUCTION

Industry

Property/Casualty Insurance

Business

Homeowners Insurance in FL /

SC / MA / RI / NC / NJ / TX

St. Petersburg, FL

Employees

Approximately 90

Policies in Force

202,454 (at 12/31/13)

Cash / Inv.

$323.8M (at 12/31/13)

Dividend

$0.03 MRQ (at 12/31/13)

The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to

which this communication relates. Before you invest, you should read the prospectus in that

registration statement and other documents the issuer has filed with the SEC for more complete

information about the issuer and this offering. You may get these documents for free by visiting

EDGAR on the SEC website at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer

participating in the offering will arrange to send you the prospectus if you request it by calling toll-free

1-800-248-8863. Statements in this presentation that are not historical facts are forward-looking

statements that are subject to certain risks and uncertainties that could cause actual events and results to

differ materially from those discussed herein. Without limiting the generality of the foregoing, words

such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “or

“continue” or the other negative variations thereof or comparable terminology are intended to identify

forward-looking statements. The forward-looking statements in this presentation include statements

regarding the Company’s or management’s plans, objectives, goals, strategies, expectations, estimates,

beliefs or projections, or any other statements concerning future performance or events. The risks and

uncertainties that could cause our actual results to differ from those expressed or implied herein include,

without limitation, the success of the Company’s marketing initiatives, inflation and other changes in

economic conditions (including changes in interest rates and financial markets); the impact of new

regulations adopted which affect the property and casualty insurance market; the costs of reinsurance

and the collectability of reinsurance, assessments charged by various governmental agencies; pricing

competition and other initiatives by competitors; or ability to obtain regulatory approval for requested

rate changes, and the timing thereof; legislative and regulatory developments; the outcome of litigation

pending against us, including the terms of any settlements; risks related to the nature of our business;

dependence on investment income and the composition of our investment portfolio; the adequacy of

our liability for loss and loss adjustment expense; insurance agents; claims experience; ratings by

industry services; catastrophe losses; reliance on key personnel; weather conditions (including the

severity and frequency of storms, hurricanes, tornadoes and hail); changes in loss trends; acts of war

and terrorist activities; court decisions and trends in litigation, and health care; and other matters

described from time to time by us in our filings with the SEC, including, but not limited to, the

Company’s Annual Report on Form 10-K for the year ended December 31, 2013. In addition, investors

should be aware that generally accepted accounting principles prescribe when a company may reserve

for particular risks, including litigation exposures. Accordingly, results for a given reporting period

could be significantly affected if and when a reserve is established for a major contingency. Reported

results may therefore, appear to be volatile in certain accounting periods. The Company undertakes no

obligations to update, change or revise any forward-looking statement, whether as a result of new

information, additional or subsequent developments or otherwise.

Safe Harbor – At a Glance

Offering Summary

Offering Size

$50 million

Last Trade

$14.10

February

2014

Type

Follow-on public offering of common stock

Over-Allotment

15% (Primary)

Exchange and Symbol

NASDAQ Capital Market stock exchange under the ticker symbol “UIHC”

Use of Proceeds

General corporate purposes including statutory capital in support of growth

Expected Pricing Date

February

2014

Business Model

To build a sustainable franchise that delivers quality homeowners

insurance products in select markets in order to produce superior

risk-adjusted returns for investors.

MISSION

To be the premier provider of property insurance in catastrophe

exposed areas.

VISION

To grow selectively in target markets by building a superior team of

insurance professionals that can (i) provide agents and

homeowners quality insurance products with world-class service

and systems; (ii) raise & manage capital to support business growth;

and (iii) build and maintain relationships with external partners.

STRATEGY

Corporate Structure

United Insurance Holdings Corp.

(NASDAQ : UIHC)

Insurance subsidiary that writes

policies and bears risk of loss

Managing general agency that

provides personnel and

management services for the

combined entity

Claims subsidiary that provides

field inspection services for a

portion of the company’s non-

catastrophe claims

Four wholly-owned subsidiaries

Reinsurance subsidiary that

provides fully collateralized risk

transfer for a portion of the

company’s reinsurance program

United Property

& Casualty

Insurance

Company

United Insurance

Management

Skyway Claims

Services

UPC Re

Why UPC Insurance?

•

Significant dislocation and lack of windstorm capacity in most coastal states

•

Only need small market share to generate significant premium growth

•

Top 10 in Florida & 48 nationally, but 3 fastest growing in homeowners

•

Public offering December 2012

•

Raised roughly $28 million to support growth; achieved NASDAQ listing

•

Strong demand from reinsurance partners to help manage risk and volatility

•

Stability and deep experience at the Board level

•

Augmenting strong foundation of tenured associates with new talent

•

Developing new incentive compensation plans to ensure proper alignment

•

Focused on risk selection and spread of risk

•

Run sophisticated catastrophe modeling in house supported by key partners

•

Highly automated and easy to use underwriting and agency technology platforms

Strong Financial

Performance

Compelling Market

Opportunity

Proven Access to

Capital

Exceptional

Management Team

Unique Insurance

Capabilities

•

Profitable in 14 of 15 years since inception in 1999

•

YTD 12/31/13 results: $381.4 million written & $20.3 million of net income

•

TTM ROAE of 20.8% despite nearly $8 million of catastrophe and development expense

Exceptional Management Team

Gregory C. Branch

Chairman

•

Chairman of UPC Insurance since inception in 1999

•

Prior Member of Lloyd’s of London for over 20 years

•

Former Chairman of Summit Holding Southeast, Inc. (acquired by Liberty Mutual)

John L. Forney, CFA

President & CEO

•

25+ year successful career in investment banking, insurance and risk management

•

Former

Managing

Director,

Raymond

James

–

Advised

state

government

agencies

Florida

(Citizens/FHCF/FIGA),

California (CEA), Texas (TWIA), North Carolina (NCJUA) and Louisiana (Citizens) on insuring property catastrophe risks.

•

Advised

major

national

industry

consortium

led

State

Farm

and

Allstate

managing

residential

natural

catastrophe

risk

B. Bradford Martz, CPA

CFO

•

19+ years of progressively responsible experience in the insurance, public accounting, homebuilding and technology sectors

•

Former CFO/CAO, Bankers Insurance Group / Former Managing Partner, Lake, Martz & Co, P.A. / Former CFO, Bonded

Builders Home Warranty

Andrew Swenson, CISS

CIO

•

25+ years of experience leading technology efforts at multiple large publicly traded international service organizations

•

Former CIO at Vology, Tribridge, Sykes Enterprises, ABR Information Services (a/k/a Ceridian) and ServiceMaster, LLP

Deepak Menon, CPCU

VP of Operations

•

18+ years of underwriting, product and distribution strategy experience with a focus on well managed growth

•

Former VP

Marketing

for

American

Strategic

Insurance

Former

Product

Manager

for

ACE

and

One

Beacon

John Langowski, AIC, AIM

VP of Claims

•

22+ years of industry-related experience; 10+ years spent at Fortune 100 companies specializing in P&C insurance

•

Former VP and Chief Claims Officer, Cypress Insurance Group / Former Regional Director of Claims, Farmers Insurance

Group in Texas

Jay Williams, CIC, CRM,

AAI, AIP, ACSR

VP of Marketing

•

33+ years of insurance experience; served in various new business development and marketing roles for insurance entities

•

Former Managing Director, Florida Association of Insurance Agents / Former Marketing VP at Bankers Insurance Group

Historical Highlights

PHASE 1: 1999-2007

UPC Insurance begins

operations in FL in 1999 and

records profits every year, even

in the wake of 8 hurricanes in

2004-2005

PHASE 2: 2008-2011

UPC Insurance becomes a

public company; growth slows

as market changes impact FL,

but underlying operations

remain strong and expansion

outside of FL commences

PHASE 3: 2012 & Beyond

Growth and profitability

resume upward trajectory with

revamped Board and

management team leading

business expansion in FL and

other states

TIMELINE

•

Started operations in 1999;

•

Maintained profitability

despite significant

catastrophic loss activity

•

Paid over 30,000 claims on 8

separate hurricanes with

incurred losses over $521M

•

Avoided sinkhole losses that

plagued most Florida insurers

(1.7% of gross earned

premium ITD)

•

Suffered only unprofitable

year in company history (2010)

as a result of windstorm

mitigation credit actions in FL

•

Became an SEC-reporting

entity in 2008

•

Began expansion outside of

Florida in 2010

•

Completed first public

equity offering and listed on

NASDAQ (UIHC) in 2012

•

Finished 2013 with

approximately $108M of

equity capital and $228M

market capitalization

•

Currently writing in 7 states;

licensed in 2 additional

states; applications pending

in 3 more states

Key Strategies

•

Target mix of 55% FL / 45% Non-FL in 5 years

•

Minimize concentrations and reduce peak exposures

2. Geographic diversification to capitalize on market opportunity

•

Follow-on offering will help maintain risk metrics at target levels

•

Enhance

catastrophe

reinsurance

protection

against

frequency

and

severity

3. Strengthen capital position to enhance anti-fragility

•

Increase in-house claims adjudication capabilities

•

Leverage technology and transition away from BPO model

•

Blue-Label Service, Keep the Promise

4. Differentiate on service to win agent/customer loyalty

•

Proprietary in-house risk scoring and exposure modeling

•

Build out product management model with increased accountability for results

5. Drive Risk Management Culture

•

Top six officers all joined company in last 18 months

•

Diverse group with large company, multi-state experience

1. Build world-class leadership team

(1)

Premium in thousands. Excludes flood line of business. Data as

of December 31, 2013.

(2)

Policy numbers exclude flood line of business. Data as of December 31, 2013

Current Portfolio Composition

Premium In-Force

By Line of Business

Policies In-Force

97%

Homeowners

Fire

80%

Other (NC, NJ & TX)

Total premium in-force: $380,692

Total

Premium

in-force:

$380,692

(1)

Total

policies

in-force:

202,454

(2)

State Expansion Status

Continued Growth in Existing States (FL, MA, NC, NJ, SC, RI, TX)

Future Growth Planned in All Coastal States (TX to ME)

Target Market Competitive Landscape

•

UPC is 32

largest

writer of Home in

our target markets,

but 3

fastest

growing in U.S.

•

Large nationals that

dominate the top 10

show very little

growth in these

coastal markets.

•

8 of top 50

domiciled in FL, but

only ASI and UPC

have a meaningful

presence outside FL.

Source: SNL

Homeowners data for year ended December 31, 2012 for all Gulf and Atlantic states from TX to ME

Company Name

State

SNL Group Name

Total

Mkt Share

State Farm Mutl Automobile Ins (SNL P&C Group)

7,399,552

17.3%

Allstate Corp. (SNL P&C Group)

4,076,862

9.6%

Liberty Mutual (SNL P&C Group)

2,575,611

6.0%

Travelers Companies Inc. (SNL P&C Group)

2,367,721

5.5%

USAA Insurance Group (SNL P&C Group)

2,337,322

5.5%

Nationwide Mutual Group (SNL P&C Group)

1,787,314

4.2%

Citizens Property Ins Corp.

1,637,389

3.8%

Chubb Corp. (SNL P&C Group)

1,396,628

3.3%

Farmers Insurance Group of Cos (SNL P&C Group)

1,337,534

3.1%

Erie Insurance Group (SNL P&C Group)

751,893

1.8%

Universal Insurance Holdings (SNL P&C Group)

726,305

1.7%

ARX Holding Corp. (SNL P&C Group)

559,785

1.3%

Tower Hill Group (SNL P&C Group)

554,607

1.3%

MetLife Inc. (SNL P&C Group)

537,227

1.3%

American International Group (SNL P&C Group)

526,784

1.2%

Hartford Financial Services (SNL P&C Group)

509,321

1.2%

Amica Mutual Insurance Co. (SNL P&C Group)

429,172

1.0%

Tower Group International Ltd. (SNL P&C Group)

335,752

0.8%

Alfa Mutual Group (SNL P&C Group)

315,556

0.7%

Allianz Group (SNL P&C Group)

311,342

0.7%

NC Farm Bureau Mutual Ins Co. (SNL P&C Group)

296,767

0.7%

Texas Farm Bureau (SNL P&C Group)

290,264

0.7%

MAPFRE (SNL P&C Group)

290,006

0.7%

Sthrn Farm Bureau Cas Ins Grp (SNL P&C Group)

284,688

0.7%

St. Johns Insurance Co.

263,551

0.6%

Homesite Group Inc. (SNL P&C Group)

258,587

0.6%

Munich-American Holding Corp. (SNL P&C Group)

256,271

0.6%

Andover Companies (SNL P&C Group)

245,737

0.6%

Florida Peninsula Holdings LLC (SNL P&C Group)

244,288

0.6%

Auto-Owners Insurance Co. (SNL P&C Group)

241,198

0.6%

Assurant Inc. (SNL P&C Group)

239,938

0.6%

United P&C Insurance Co.

233,708

0.5%

Hanover Insurance Group Inc. (SNL P&C Group)

221,081

0.5%

Universal Group Inc. (SNL P&C Group)

211,210

0.5%

Homeowners Choice P&C Ins Co.

208,144

0.5%

GA Farm Bureau Mutual Ins Co. (SNL P&C Group)

205,599

0.5%

Kemper Corp. (SNL P&C Group)

203,780

0.5%

COUNTRY Financial (SNL P&C Group)

199,318

0.5%

Security First Insurance Co.

189,243

0.4%

NJ Manufacturers Ins Co (SNL P&C Group)

187,115

0.4%

ACE Ltd. (SNL P&C Group)

179,249

0.4%

Auto Club Exchange Group (SNL P&C Group)

178,896

0.4%

Plymouth Rock Co. (SNL P&C Group)

171,110

0.4%

NBIC Holdings Inc. (SNL P&C Group)

165,631

0.4%

NYCM Insurance Group (SNL P&C Group)

161,913

0.4%

Arbella Mutual Insurance Co. (SNL P&C Group)

153,076

0.4%

QBE Insurance Group Ltd. (SNL P&C Group)

141,049

0.3%

State Auto Insurance Companies (SNL P&C Group)

132,180

0.3%

GeoVera Insurance Holdings Ltd (SNL P&C Group)

127,850

0.3%

Republic Companies Group (SNL P&C Group)

126,520

0.3%

Huge Super Regional Opportunity

Homeowners Direct Written Premium

2012

0.00 to 0.25

0.25 to 0.50

0.50 to 1

1 to 2

2 to 3

3 to 4

4 to 5

5 to 6

6 to 7

20%

NON-FL

80%

Source: SNL

Scale ($ Bil )

Ideal Mix in 5 Years ~ 55% in Florida / 45% Coastal

Florida = 20% of DWP in UPC Insurance’s Target Markets

Regulatory & Political Environment

•

Favorable Conditions for Homeowners Carriers

•

Continued de-concentration/optimization fueling hard market in many cat-exposed areas.

•

Florida

market

softening

due

lower

reinsurance

and

loss

costs

well

several

years

rate

increases.

•

Market fragmentation supports ability to achieve desired spread of risk.

•

Rate adequacy improving in most states, but affordability constraints remain.

•

CAT claims experience is critical as service standards are increasingly tightened and regulated.

•

Emphasis on Depopulation of Residual Markets

•

Exposure growth is generally viewed as a serious financial threat in many states.

•

The Clearinghouse

concept

good

“keep

out”

strategy

that

could

help

UPC

achieve

balanced

growth

in Florida, Texas, North Carolina and elsewhere.

•

Good risks can inadvertently land in residual markets which allows for opportunistic assumption or takeout

of policies that improve overall portfolio risk metrics.

•

Growing Acceptance of Rate-to-Risk Methods

•

Expanded use of model-based rating for expected losses using distance-to-coast factors.

•

Increased flexibility of coverage and form changes to help control loss costs.

•

Use of credit scoring becoming more prevalent.

Marketing Highlights

PIF

GPE

Y/Y Growth = 46.7%

Y/Y Growth = 49.6%

Q4 GPE:

$91.8M

$47.1

$49.1

$50.7

$54.4

$58.6

$62.6

$69.9

$74.9

$80.1

$91.8

$20

$40

$60

$80

$100

102

108

115

124

135

157

168

179

202

100

150

200

250

Q4 PIF:

202,454

Increasing Geographic Diversification

Policies in-force at 12/31/2013

Policies in-force at 12/31/2012

Total PIF: 135,297

(1)

Total PIF: 202,454

(1)

87%

80%

(1)

Policy numbers exclude flood line of business. Data as of December 31, 2013.

117,233

10,569

4,247

3,248

18,064

163,314

15,186

10,900

9,990

3,064

39,140

Other (NC, NJ & TX)

Strong Retention Rates

Annual Average %

2011

2012

2013

Retained At Renewal

90%

93%

91%

Retained Through Full Policy Term

78%

82%

86%

+15.9%

FL Rate Changes

+7.6%

+9.5%

60%

65%

70%

75%

80%

85%

90%

95%

100%

Retained At Renewal

Retained Through Full Policy Term

Quality Growth Reflected in Portfolio Metrics

Modeled Cat Avg.

Annual Loss to

Premium In-Force

Note: AAL and PML are modeled using AIR assuming long-term and no demand surge. The TIV presented is adjusted for coverage B.

Total Insured Value and

Policies In-Force

100

150

200

250

$20

$40

$60

$80

$100

2010

2011

2012

2013

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

24.0%

26.0%

28.0%

2009

2010

2011

2012

2013

$ in thousands,

except policy data

Years Ended December 31,

2013

2012

2011

2010

Number of Policies In-Force (PIF)

202,454

135,297

101,754

80,514

Growth of PIF

49.6%

33.2%

26.4%

-13.4%

Total Insured Value (TIV)

$89,532,383

$62,094,925

$46,032,280

$36,312,297

Growth of TIV

44.2%

34.9%

26.8%

-17.2%

Probable Maximum Loss (PML)

$757,210

$528,622

$472,620

$500,628

Growth of PML

43.2%

11.8%

-5.6%

-19.0%

Operational Excellence

•

Strong Marketing Presence

•

Growing independent agent distribution channels and aggregator relationships (Allstate, FAIA)

•

State marketing directors with strong agency relationships and extensive local market knowledge

•

Strategic partnerships with established carriers to bundle products

•

Rolling 12-month policy production average was roughly 5,900 policies per month as of 12/31/2013

•

Risk Management

•

Conservative underwriting culture to select the right risks at the right rate

•

Utilize front end portfolio optimization tools to manage concentrations and spread of risk

•

Sophisticated in-house modeling with focus on data quality

•

Evolving enterprise risk management platform and policy profitability analysis

•

Experienced Claims Management

•

Handled roughly 33,000 claims from 16 catastrophes events with over $534 million losses since 1999

•

John

Langowski,

Claims

–

hired

October

2012

(22+

years

industry

experience)

•

All adjusters are UPC Insurance employees

•

Dedicated

CAT

manager

–

years

experience

agency,

claims,

and

CAT

operations

•

UPC Insurance claims adjusters (all in-

house) average 10+ years experience

•

Non-CAT losses have been historically

driven by Florida and are likely to move

upward as UPC expands into other states,

but be offset by lower reinsurance costs

•

Current AY Non-CAT loss ratio: 29.9%

(only 1.5% attributable to sinkhole)

Historical Non-CAT Loss Experience

6 Year

Average

Gross

Earned

Case

Ultimate

Accident

Earned

House

Paid

Loss & LAE

IBNR

Ultimate

Loss & LAE

Year (AY)

Premiums

Years

Loss & LAE

Reserves

Loss & LAE

Loss Ratio

per Exposure

2007

$143,475,314

66,313

$26,307,616

$ 187,440

$ 47,877

$26,542,933

18.5%

$ 400

2008

$129,086,314

71,029

$26,696,816

$ 15,309

$ 8,742

$26,720,867

20.7%

$ 376

2009

$144,145,338

91,302

$42,616,461

$ 308,018

$ 174,977

$43,099,456

29.9%

$ 472

2010

$146,526,000

87,496

$40,232,515

$ 1,011,984

$ 589,578

$41,834,077

28.6%

$ 478

2011

$170,907,656

95,331

$42,033,616

$ 2,360,372

$ 1,070,011

$45,463,999

26.6%

$ 477

2012

$215,657,173

116,482

$49,254,868

$ 2,517,267

$ 2,813,809

$54,585,944

25.3%

$ 469

2013

$304,196,425

170,327

$59,276,905

$19,735,933

$11,878,462

$90,891,300

29.9%

$ 534

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2007

2008

2009

2010

2011

2012

2013

Historical Non CAT Loss Ratio

UPC Insurance’s Reinsurance Philosophy

We try to

balance

vertical

coverage,

horizontal

coverage,

and

reinsurance

spend

Here Today, Here Tomorrow

Consistent risk transfer is an integral part of

our capital strategy

View reinsurers as long-term partners, not

short-term commodity relationships

Oriented toward long-term solvency, even at

the expense of some short-term profitability

2013-14 Catastrophe Reinsurance Program (expires June 1, 2014)

$20.0M

$677.8M

$187.2M

$110.0M

$50.0M

$415.0M

$801.6M

1:100 YR

$611M *

Charley

$221M

Andrew

$65M

LAYER 3

$100.0M xs $20.0M

LAYER 4

$150.0M xs $20.0M

FHCF

90% of

$490.6M xs $187.2M

($441.5M Limit)

LAYER 2

$60.0M xs $20.0M

LAYER 1

$30.0M xs $20.0M

$14.0M RETENTION

30%

$228.2M

Remaining

Limit

after

$202.8M

Loss

(Approx. 20 YR Event)

FHCF

90% of

$474.9M xs $187.2M

($427.4M Limit)

LAYER 4

$150.0M xs $20.0M

LAYER 3

$21.3M xs $20.0M

$7.0M RETENTION

30%

1 EVENT

EVENT

Total Limit = $788M

Cascading Limit = $340M

: 70% $10.0M xs $10.0M

•

Attachment point of Layer 1 is net of a

$20M retention

•

Subsequent layers are excess of loss over

the immediately preceding layer

•

If the aggregate limit of the preceding layer

is exhausted, the next layer drops down in

its place

•

Unused layer protection from first event

drops down in multiple events, net of a

$20M retention

•

Dedicated $10M x $10M (placed 70%) for

second event to protect against surplus

erosion

•

Third and subsequent event coverage of

$10M x $10M (placed 100%), subject to

aggregate limits

* Modeled hypothetical 1:100 year estimate shown using AIR v13 long-term excluding demand surge

1. Represents modeled losses on UPC Insurance’s current book from a repeat of Hurricane Charley in August 2004. Actual UPC Losses from Charley were $33.9M.

2. Represents modeled losses on UPC Insurance’s current book from a repeat of Hurricane Andrew in August 1992. UPC did not exist until 1999.

Cascading

Structure

(Layers

1-4):

Multiple

Events:

UPC Insurance is Well-Positioned Financially

•

Positive Net Income For 14 of Past 15 Years

•

Profitable in both 2004 and 2005, despite paying out over $521

million in claims from 8 separate hurricanes

•

Only unprofitable year was 2010 –

small loss of $925K caused by

wind mitigation credits, not losses

•

Approximately $108M of Group Equity

•

$28M of additional capital raised in Q4 2012

•

Resulted in NASDAQ listing

•

Year end risk based capital ratio at 632%

Group GAAP Equity ($000s)

Book Value Per Share

Earned Premiums ($000s)

In-force premium has grown over

154% in past two years, from

$247M to $381M

$4.07

$6.64

$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

$7.00

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Gross Earned

24,113

46,099

42,927

48,071

45,293

54,989

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

FY'06

FY'07

FY'08

FY'09

FY'10

FY'11

FY'12

FY'13

87,986

107,587

Net Earned

Over 63% Growth in Five Years;

Compounded Annual Growth Rate is 10%,

even with dilutive effects of recent equity offering

December 2013 & 2012 YTD Financial Highlights

2013

2012

2013

2012

2013

2012

Gross Loss Ratio

31.2%

25.8%

Net Loss Ratio

50.0%

47.9%

Gross Expense Ratio

23.5%

25.3%

Net Expense Ratio

37.7%

46.9%

313,614

Ceding Ratio

34.5%

43.5%

Gross Earned Premiums

316,708

226,254

Investments

288,926

152,180

Gross Written Premiums

381,352

254,909

Cash and Equivalents

34,888

71,205

Net Earned Premiums

197,378

121,968

Total Assets

441,230

Net Combined Ratio

87.7%

94.8%

Operating, G&A Expenses

74,764

57,596

Total Liabilities

333,643

225,628

Underlying Combined Ratio

Loss and LAE

98,830

58,409

Loss Reserves

47,451

35,692

83.8%

91.2%

Net Income

20,342

9,705

Shareholders' Equity

107,587

87,986

LAE to Incurred Ratio

8.1%

14.4%

EPS

1.26

0.91

Book Value per Share

6.64

5.70

Return on Average Equity

20.8%

16.1%

Components of Operating Return on Equity

Core UW

Results

Improving

ROAE

8.4%

-2.0%

16.1%

20.8%

-10,000

-5,000

5,000

10,000

15,000

20,000

25,000

2009

2010

2011

2012

2013

Underwriting G/L

Investment Income

Current Year CAT Losses

PY CAT Development

Other PY Development

Investment Portfolio

•

Designed to preserve capital, maximize after-tax

investment income, maintain liquidity and

minimize risk

•

As of December 31, 2013, 100% of the

Company’s fixed maturity portfolio was rated

investment grade

–

Average duration: 3.49 years

–

Composite rating: A

–

Average coupon: 2.56%

(1)

Includes investment income and realized and unrealized gains. Data as of December 31, 2013

Historical Return on Investments ¹

2009

2010

2011

2012

2013

1 Year

4.55%

8.43%

5.92%

5.68%

1.74%

3 Year

6.30%

6.68%

4.45%

5 Year

5.26%

U.S

Government

& Agency

Securities

30.1%

Cash & Cash

Equivalents

10.7%

Public

Utilities,

Corporate

and Foreign

Securities

40.1%

State,

Municipalities

& Political

Subdivisions

14.1%

Common

Stocks

4.8%

Preferred

Stocks

0.1%

Other Long-

Term

Investments

0.1%

Securities Portfolio

Value

($mm)

% of total

Cash and

Investment

U.S Government & agency securities

$ 97.5

30.1%

Cash & cash equivalents

34.8

10.7%

Public utilities and corporate securities

129.8

40.1%

State, municipalities & political subdivisions

45.8

14.1%

Common stocks

15.4

4.8%

Preferred stocks

0.2

0.1%

Other long-term investments

0.3

0.1%

Total cash and investments

$323.8

100%

Company Highlights

Compelling

Market

Opportunity

Strong

Financial

Performance

Excellent Risk

Management

Capabilities

Exceptional

Management

Team

Proven Access to

Capital Markets

Definitions of Non-GAAP Measures

We believe that investors’

understanding of UPC Insurance’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, prior year development from lines in

run-off and prior year development (underlying combined ratio)

is a non-GAAP ratio, which is computed as the

difference between four GAAP operating ratios: the combined ratio, the effect of current year catastrophe losses on

the combined ratio, the effect of development from lines in run-off and prior year development on the combined ratio.

believe

that

this

ratio

useful

investors

and

used

management

reveal

the

trends

our

business

that

may be obscured by current year catastrophe losses, losses from lines in run-off and prior year development. Current

year catastrophe losses cause our loss trends to vary significantly between periods as a result of their incidence of

occurrence and magnitude, and can have a significant impact on the combined ratio. Prior year development from

lines

run-off

caused

unexpected

development

from

our

commercial

auto

product

that

longer

offered

the Company. Prior year development is unexpected loss development on historical reserves. We believe it is useful

for

investors

evaluate

these

components

separately

and

the

aggregate

when

reviewing

our

performance.

The

most direct 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.