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Insurance Operations | 12 Months Ended
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Dec. 31, 2020
Insurance [Abstract] |
Insurance Operations | INSURANCE OPERATIONS Deferred Policy Acquisition Costs The Company defers certain costs in connection with written premium, called Deferred Policy Acquisition Costs (“DPAC”). 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 for the periods presented (in thousands):
|  | Years Ended December 31,
|  | 2020 |  | 2019 |  | 2018
DPAC, beginning of year |  | $ | 91,882 |  |  | $ | 84,686 |  |  | $ | 73,059 |
Capitalized Costs |  | 217,886 |  |  | 184,039 |  |  | 174,814 |
Amortization of DPAC |  | (199,154) |  |  | (176,843) |  |  | (163,187) |
DPAC, end of year |  | $ | 110,614 |  |  | $ | 91,882 |  |  | $ | 84,686 |
Regulatory Requirements and Restrictions The Insurance Entities are subject to regulations and standards of the Florida Office of Insurance Regulation (“FLOIR”). The Insurance Entities are also subject to regulations and standards of regulatory authorities in other states where they are licensed, although as Florida-domiciled insurers, their principal regulatory authority is the FLOIR. These standards and regulations include a requirement that the Insurance Entities maintain specified levels of statutory capital and restrict the timing and amount of dividends and other distributions that may be paid by the Insurance Entities 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 the Insurance Entities to their immediate parent company, Protection Solutions, Inc. (“PSI”, formerly known as Universal Insurance Holding Company of Florida), without prior regulatory approval is limited by the provisions of the Florida Insurance Code. 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. In accordance with Florida Insurance Code, and based on the calculations performed by the Company as of December 31, 2020, UPCIC has the capacity to pay ordinary dividends of $2.1 million during 2021. APPCIC, based on its accumulated earnings history as of December 31, 2020, is unable to pay any ordinary dividends during 2021. For the years ended December 31, 2020 and 2019, no dividends were paid from the Insurance Entities to PSI. The Florida Insurance Code requires an insurance company to maintain capitalization equivalent to the greater of ten percent of the insurer’s total liabilities or $10.0 million. The following table presents the amount of capital and surplus calculated in accordance with statutory accounting principles, which differ from U.S. GAAP, and an amount representing ten percent of total liabilities for the Insurance Entities as of the dates presented (in thousands):
|  | As of December 31,
|  | 2020 (1) |  | 2019 (2)
Statutory capital and surplus |  |  |  |
UPCIC |  | $ | 360,707 |  |  | $ | 301,120 |
APPCIC |  | $ | 12,918 |  |  | $ | 16,433 |
Ten percent of total liabilities |  |  |  |
UPCIC |  | $ | 98,682 |  |  | $ | 99,228 |
APPCIC |  | $ | 1,793 |  |  | $ | 621 |
(1) | Statutory capital and surplus for UPCIC at December 31, 2020 includes a $77 million capital contribution funded in February 2021 by UVE through PSI, the Insurance Entities’ parent company, which the FLOIR permitted to be included in the statutory capital and surplus at December 31, 2020 under statutory accounting principles. This contribution was not recognized on a U.S. GAAP basis at December 31, 2020.
(2) | Statutory capital and surplus for UPCIC at December 31, 2019 includes a $30 million capital contribution funded in February 2020 by UVE through PSI, the Insurance Entities’ parent company, which the FLOIR permitted to be included in the statutory capital and surplus at December 31, 2019 under statutory accounting principles. This contribution was not recognized on a U.S. GAAP basis at December 31, 2019.
As of the dates in the table above, the Insurance Entities each exceeded the minimum statutory capitalization requirement. UPCIC also met the capitalization requirements of the other states in which it is licensed as of December 31, 2020. The Insurance Entities each are also required to adhere to prescribed premium-to-capital surplus ratios and each have met those requirements at such dates. Through PSI, UVE recorded contributions for the periods presented (in thousands):
|  | Years Ended December 31,
|  | 2020 |  | 2019 |  | 2018
Capital Contributions - UPCIC |  | $ | 114,000 |  |  | $ | — |  |  | $ | — |
The following table summarizes combined net income (loss) for the Insurance Entities determined in accordance with statutory accounting practices for the periods presented (in thousands):
|  | Years Ended December 31,
|  | 2020 |  | 2019 |  | 2018
Combined net income (loss) |  | $ | (104,339) |  |  | $ | (49,917) |  |  | $ | 3,118 |
The Insurance Entities each are required annually to comply with the NAIC risk-based capital (“RBC”) requirements. RBC requirements prescribe a method of measuring the amount of capital appropriate for an insurance company to support its overall business operations in light of its size and risk profile. NAIC RBC requirements are used by regulators to determine appropriate regulatory actions relating to insurers who show signs of a weak or deteriorating condition. As of December 31, 2020, based on calculations using the appropriate NAIC RBC formula, the Insurance Entities each reported total adjusted capital in excess of the requirements. 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):
|  | As of December 31,
|  | 2020 |  | 2019
Restricted cash and cash equivalents |  | $ | 2,635 |  |  | $ | 2,635 |
Investments |  | $ | 3,550 |  |  | $ | 3,419 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -URI http://asc.fasb.org/topic&trid=2303980 + Details
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