United Property & Casualty says it is exploring a potential sale or merger

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United Insurance Holdings Corp., the parent company of one of Florida’s largest property and casualty insurers — and one that has suffered heavy losses over the past two years — said its board of directors is now exploring a range of options to raise capital, including the sale of the company or a merger with another.

Other options include “selling a subsidiary, establishing a new Florida-based mutual exchange, as well as selling equity, excess notes or other financial or strategic transactions,” UPC Insurance said in a news release issued Wednesday.

The company also said it has retained Insurance Advisory Partners, an investment banking and advisory firm, as a financial advisor, and Debevoise & Plimpton, an international law firm, as its legal counsel to assist in the review process.

The announcements fueled speculation that the insurer, which until recently held more than 180,000 policies in Florida, was in worse financial shape than expected, despite significant steps company leaders have taken over the past year. A sale or merger could bring in millions of dollars in fresh capital, similar to the restructuring measures pursued by Florida-based FedNat Insurance Co. In May.

FedNat, after heavy storm losses in Louisiana, agreed to a consent order on restructuring with Florida regulators, moving thousands of policies to a subsidiary, Monarch National Insurance. Hale Partnership Capital Management then took a majority stake in Monarch and invested $15 million in it.

Publicly traded UPC reported a loss of $33 million for the first quarter of 2022, following a $60 million negative net income for 2021 and a $95 million loss for the prior year, thanks in part to extensive weather damage in Louisiana. The combined UPC ratio topped 120 last year, down slightly from the year before but significantly higher than 2017.

Dan Pead, Chairman, UPC (UPC)

Over the past nine months, the St. Petersburg-based insurer has made serious efforts to stem losses. In December, UPC agreed to sell its personal lines in Georgia, North Carolina and South Carolina to HCI Group Inc. In January, UPC stopped generating new business for Florida homeowners while also asking for a rate increase on some types of policies.

In April, the company said it was merging two subsidiaries, Journey Insurance Co. and American Coastal, and will distribute a large portion of Journey’s capital to other subsidiaries.

In June, Wright National Flood Insurance said it would take over UPC’s flood insurance book.

UPC representatives could not be reached for comment Wednesday night and Thursday morning. The company’s news release noted that it was founded in 1999 and continues to write some policies in Florida, Louisiana, New York and Texas. It also writes in Georgia, South Carolina and North Carolina, but renewal rights there have been sold and all premiums and losses have been ceded, the company said.

Thursday’s news release suggests that further details of a potential sale may not be available anytime soon.

“There can be no assurance that this process will result in the completion of a particular transaction by the Company, and the Company does not intend to disclose further developments unless and until it determines that further disclosure is appropriate or necessary,” UPC said .

Shares of United Insurance Holdings were trading at $1.37 a share Thursday morning, up slightly from the previous day but down significantly from a year ago.

Mergers and Acquisitions Property Casualties Property Casualties

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