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Insurance Operations | 9 Months Ended
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Sep. 30, 2014
Insurance [Abstract] |
Insurance Operations | 5. Insurance Operations Deferred Policy Acquisition Costs, net The Company defers certain costs in connection with written policies, called Deferred Policy Acquisition Costs (“DPAC”), net of corresponding amounts of ceded reinsurance commissions, called Deferred Reinsurance Ceding Commissions (“DRCC”). Net DPAC is amortized over the effective period of the related insurance policies. The following table presents the beginning and ending balances and the changes in DPAC, net of DRCC, for the periods presented (in thousands):
| Three Months Ended |  |  | Nine Months Ended |
| September 30, |  |  | September 30, |
| 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
DPAC, beginning of period | $ | 58,149 |  |  | $ | 59,033 |  |  | $ | 54,099 |  |  | $ | 54,431 |
Capitalized Costs |  | 27,579 |  |  |  | 26,382 |  |  |  | 84,354 |  |  |  | 85,315 |
Amortization of DPAC |  | (27,769 | ) |  |  | (27,888 | ) |  |  | (80,494 | ) |  |  | (82,219 | )
DPAC, end of period | $ | 57,959 |  |  | $ | 57,527 |  |  | $ | 57,959 |  |  | $ | 57,527 |
DRCC, beginning of period | $ | 30,072 |  |  | $ | 41,792 |  |  | $ | 38,200 |  |  | $ | 37,149 |
Ceding Commissions Written |  | 17,236 |  |  |  | 21,319 |  |  |  | 49,555 |  |  |  | 69,853 |
Earned Ceding Commissions |  | (17,181 | ) |  |  | (22,537 | ) |  |  | (57,628 | ) |  |  | (66,428 | )
DRCC, end of period | $ | 30,127 |  |  | $ | 40,574 |  |  | $ | 30,127 |  |  | $ | 40,574 |
DPAC (DRCC), net, beginning of period | $ | 28,077 |  |  | $ | 17,241 |  |  | $ | 15,899 |  |  | $ | 17,282 |
Capitalized Costs, net |  | 10,343 |  |  |  | 5,063 |  |  |  | 34,799 |  |  |  | 15,462 |
Amortization of DPAC (DRCC), net |  | (10,588 | ) |  |  | (5,351 | ) |  |  | (22,866 | ) |  |  | (15,791 | )
DPAC (DRCC), net, end of period | $ | 27,832 |  |  | $ | 16,953 |  |  | $ | 27,832 |  |  | $ | 16,953 |
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 (in thousands):
| Three Months Ended |  |  | Nine Months Ended |
| September 30, |  |  | September 30, |
| 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Balance at beginning of period | $ | 144,625 |  |  | $ | 166,260 |  |  | $ | 159,222 |  |  | $ | 193,241 |
Less: Reinsurance recoverable |  | (58,705 | ) |  |  | (67,820 | ) |  |  | (68,584 | ) |  |  | (81,415 | )
Net balance at beginning of period |  | 85,920 |  |  |  | 98,440 |  |  |  | 90,638 |  |  |  | 111,826 |
Incurred (recovered) related to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current year |  | 32,637 |  |  |  | 28,665 |  |  |  | 87,825 |  |  |  | 81,995 |
Prior years |  | 1,544 |  |  |  | (330 | ) |  |  | 860 |  |  |  | (1,977 | )
Total incurred |  | 34,181 |  |  |  | 28,335 |  |  |  | 88,685 |  |  |  | 80,018 |
Paid related to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current year |  | 24,365 |  |  |  | 21,813 |  |  |  | 44,432 |  |  |  | 39,288 |
Prior years |  | 8,160 |  |  |  | 10,789 |  |  |  | 47,315 |  |  |  | 58,383 |
Total paid |  | 32,525 |  |  |  | 32,602 |  |  |  | 91,747 |  |  |  | 97,671 |
Net balance at end of period |  | 87,576 |  |  |  | 94,173 |  |  |  | 87,576 |  |  |  | 94,173 |
Plus: Reinsurance recoverable |  | 49,339 |  |  |  | 63,201 |  |  |  | 49,339 |  |  |  | 63,201 |
Balance at end of period | $ | 136,915 |  |  | $ | 157,374 |  |  | $ | 136,915 |  |  | $ | 157,374 |
The company has adjusted prior year reserves to reflect both positive and negative development trends. The company continues to see an increase in claim settlement rates as a result of ongoing claims department initiatives which were introduced in 2013. This has resulted in favorable development for the majority of claim segments, particularly for the most recent accident years, but is offset by unfavorable development in bringing closure to claims previously in a litigious environment. Regulatory Requirements and Restrictions The Insurance Entities are subject to regulations and standards of the Florida Office of Insurance Regulation. These standards require the Insurance Entities to maintain specified levels of statutory capital and restrict the timing and amount of dividends and other distributions that may be paid to the parent 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. The maximum dividend that may be paid by UPCIC and APPCIC to their immediate parent company, Universal Insurance Holding Company of Florida (“UIHCF”), without prior regulatory approval is limited to the lesser of statutory net income from operations of the preceding calendar year or 10.0% of statutory unassigned surplus as of the preceding year end. These dividends are referred to as “ordinary dividends.” However, if the dividend, together with other dividends paid within the preceding twelve months, exceeds this 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. Based on the 2013 statutory net income and statutory capital and surplus levels, UPCIC has the capacity to pay ordinary dividends of $290 thousand during 2014. APPCIC does not have the capacity to pay ordinary dividends during 2014. For the nine months ended September 30, 2014, no dividends were paid from UPCIC or APPCIC to UIHCF. Dividends paid to the shareholders of UIH are paid from the earnings of UIH and its non-insurance subsidiaries and not from the capital and surplus of the Insurance Entities. The Florida Insurance Code requires insurance companies to maintain capitalization equivalent to the greater of ten percent of the insurer’s total liabilities or $5.0 million. The following table presents the amount of capital and surplus calculated in accordance with statutory accounting principles, which differ from GAAP, and an amount representing ten percent of total liabilities for both UPCIC and APPCIC as of the dates presented (in thousands):
| September 30, |  |  | December 31, |
| 2014 |  |  | 2013 |
Ten percent of total liabilities |  |  |  |  |  |  |
UPCIC | $ | 47,451 |  |  | $ | 39,179 |
APPCIC | $ | 678 |  |  | $ | 625 |
Statutory capital and surplus |  |  |  |  |  |  |
UPCIC | $ | 183,064 |  |  | $ | 161,803 |
APPCIC | $ | 13,528 |  |  | $ | 13,708 |
As of the dates in the table above, both UPCIC and APPCIC met the Florida capitalization requirement. UPCIC and APPCIC are also required to adhere to prescribed premium-to-capital surplus ratios and have met those requirements at such dates. The Insurance Entities are required by various state laws and regulations to maintain certain assets in depository accounts. The following table represents assets held by insurance regulators as of the dates presented (in thousands):
| September 30, |  |  | December 31, |
| 2014 |  |  | 2013 |
Restricted cash and cash equivalents | $ | 2,635 |  |  | $ | 2,600 |
Investments | $ | 3,678 |  |  | $ | 3,707 |

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- Definition The entire disclosure for the types of coverages and products sold, and the assets, obligations, recorded liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6480747&loc=d3e6764-158386 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6480747&loc=d3e6772-158386 + Details
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