6.	Long-Term Debt

Long-term debt consists of a surplus note with carrying values of $19.5 million and $20.2 million as of June 30, 2013 and December 31, 2012, respectively, a term loan with a carrying value of $18.0 million as of June 30, 2013 and any amounts drawn upon an unsecured line of credit.

On March 29, 2013, UIH entered into a revolving loan agreement and related revolving note (“DB Loan”) with Deutsche Bank Trust Company Americas (“Deutsche Bank”). The DB Loan makes available to UIH an unsecured line of credit in an aggregate amount not to exceed $10.0 million. Draws under the DB Loan have a maturity date of March 27, 2015 and carry an interest rate of LIBOR plus a margin of 5.50% or Deutsche Bank’s prime rate plus a margin of 3.50%. The interest rate is at the election of UIH. The DB loan contains financial covenants. As of June 30, 2013, UIH was in compliance with all such covenants. UIH had not drawn any amounts under the unsecured line of credit as of June 30, 2013.

On May 23, 2013, UIH entered into a $20 million unsecured term loan agreement and related term note (“Term Loan”) with RenaissanceRe Ventures Ltd. (“RenRe Ventures”). See “—Note 9 (Related Party Transactions)” for a discussion of a series of agreements entered into with RenRe Ventures and its affiliate Renaissance Reinsurance Ltd. (“RenRe”), including an assignment of a portion of the Company’s right of first refusal to repurchase shares of the Company’s common stock owned by Bradley I. Meier, the Company’s former Chairman, President and Chief Executive Officer and principal stockholder of UIH. The Term Loan bears interest at the rate of 50 basis points per annum and matures on the earlier of May 23, 2016 or the date that all principal under the Term Loan is pre-paid or deemed paid in full. The Term Loan is amortized over the three-year term and UIH may prepay the loan without penalty. Principal is payable annually on the anniversary of the closing date in three annual installments of $6 million, $7 million and $7 million, respectively, and interest is payable in arrears on the same dates as the principal payments. The Term Loan contains financial covenants and as of June 30, 2013, UIH was in compliance with such covenants.

The stated interest rate of the Term Loan of 0.50% is below the Company’s borrowing rate resulting in imputed interest and an original issue discount computed by calculating the present value of the future principal and interest payments utilizing the Company’s borrowing rate. Concurrent with the establishment of the original issue discount, the Company recorded a deferred credit, a component of other liabilities and accrued expenses, for an equal amount against premium payments the Company will make in connection with a catastrophe risk-linked transaction contract entered into with RenRe on the same date and with the same maturity date as the Term Loan. The original issue discount will be amortized to interest expense over the life of the Term Loan and the deferred credit will be amortized as a reduction in insurance expense, a component of general and administrative expenses, over the life of the covered loss index swap. The following table provides the principal amount and unamortized discount of the Term Loan for the period presented (in thousands):


	As of June 30, 2013
Principal amount	$	20,000
Less: unamortized discount		(2,009	)

Term Loan, net of unamortized discount	$	17,991

The effective interest rate on the Term loan was 5.99% for the three months ended June 30, 2013. Amortization of the discount was $101 thousand and is included in interest expense, a component of general and administrative expenses, in the Condensed Consolidated Statements of Income for the three and six months ended June 30, 2013.

Should either the DB Loan or the Term Loan be in default, no dividends can be paid by UIH to its shareholders.