Insurance Operations

6 Months Ended

Jun. 30, 2011

Reinsurance and Insurance Operation [Abstract]

5. Insurance Operations

The Company’s primary product is homeowners’ insurance currently offered by UPCIC in four states, including Florida, which represented 98% of policies-in-force as of June 30, 2011 and December 31, 2010. As of June 30, 2011 and December 31, 2010, 32% of the policies-in-force are in Miami-Dade, Broward and Palm Beach counties.

Deferred Policy Acquisition Costs

The following table provides the beginning and ending balances and the changes in deferred policy acquisition costs (“DPAC”), net of deferred ceding commission (“DCC”), for the periods presented.


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2011			2010			2011			2010
DPAC, beginning of period	$	51,860		$	49,342		$	50,128		$	43,971

Capitalized costs during the period		30,507			28,912			56,792			53,703
Amortization of DPAC (1) during the period		(23,238	)		(20,103	)		(47,791	)		(39,523	)

DPAC, end of period	$	59,129		$	58,151		$	59,129		$	58,151


DCC, beginning of period	$	(41,721	)	$	(36,906	)	$	(40,682	)	$	(34,506	)

Ceding commissions written during the period		(26,457	)		(25,853	)		(47,888	)		(45,642	)
Earned Ceding Commissions during the period		21,075			18,650			41,467			36,039

DCC, end of period	$	(47,103	)	$	(44,109	)	$	(47,103	)	$	(44,109	)


DPAC (DCC), net, beginning of period	$	10,139		$	12,436		$	9,446		$	9,465

Capitalized costs, net during the period		4,050			3,059			8,904			8,061
Amortization of DPAC (DCC), net during the period (1)		(2,163	)		(1,453	)		(6,324	)		(3,484	)

DPAC (DCC), net, end of period	$	12,026		$	14,042		$	12,026		$	14,042


(1)		Includes amortization of agent commissions of $18.6 million and $16.0 million for the three months ended June 30, 2011 and 2010 and $36.7 million and $30.5 million for the six months ended June 30, 2011 and 2010, respectively.

Liability for Unpaid Losses and Loss Adjustment Expenses

Set forth in the following table is the change in liability for unpaid losses and LAE for the periods presented.


	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2011		2010			2011		2010
Balance at beginning of period	$	158,249	$	131,737		$	158,928	$	127,198
Less reinsurance recoverable		78,611		64,821			79,114		62,901

Net balance at beginning of period		79,638		66,916			79,814		64,297


Incurred related to:
Current year		25,587		25,024			51,923		48,841
Prior years		265		(190	)		114		(355	)

Total incurred		25,852		24,834			52,037		48,486


Paid related to:
Current year		12,817		14,339			14,875		17,523
Prior years		13,606		11,959			37,909		29,808

Total paid		26,423		26,298			52,784		47,331


Net balance at end of period		79,068		65,452			79,068		65,452
Plus reinsurance recoverable		76,307		63,451			76,307		63,451


Balance at end of period	$	155,375	$	128,903		$	155,375	$	128,903

Regulatory Requirements

The Company’s regulated subsidiaries, UPCIC and American Platinum Property and Casualty Insurance Company (“APPCIC”), are subject to regulations and standards of the Florida Office of Insurance Regulation (“OIR”). These standards require the subsidiaries to maintain specified levels of statutory capital and restrict the timing and amount of dividends and other distributions that may be paid to the Company. Except in the case of extraordinary dividends, these standards generally permit dividends to be paid from statutory unassigned surplus of the regulated subsidiary and are limited based on the regulated subsidiary’s level of statutory net income and statutory capital and surplus. These dividends are referred to as “ordinary dividends” and generally can be paid without prior regulatory approval. If the dividend, together with other dividends paid within the preceding twelve months, exceeds a specified statutory limit or is paid from sources other than earned surplus, the entire dividend is generally considered an “extraordinary dividend” and must receive prior regulatory approval.

In 2011, based on the 2010 statutory net income and statutory capital and surplus levels, the maximum amount of ordinary dividends which could be paid is $2.5 million from UPCIC and $1.2 million from APPCIC. For the six months ended June 30, 2011, no dividends were paid from UPCIC or APPCIC to the Company.

The Florida Insurance Code requires companies to maintain capitalization equivalent to the greater of ten percent of the insurer’s total liabilities or $5.0 million. Ten percent of UPCIC’s total liabilities were $42.5 million and $32.9 million at June 30, 2011 and December 31, 2010, respectively. Ten percent of APPCIC’s total liabilities were $84 thousand and $83 thousand at June 30, 2011 and December 31, 2010, respectively. UPCIC’s statutory capital and surplus was $108.6 million and $115.9 million at June 30, 2011 and December 31, 2010, respectively. APPCIC’s statutory capital and surplus was $10.7 million and $11.3 million at June 30, 2011 and December 31, 2010, respectively. At such dates, both UPCIC and APPCIC met the Florida capitalization requirement. UPCIC and APPCIC are also required to adhere to prescribed premium-to-capital surplus ratio and have met those requirements at such dates.