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Long-Term Debt | 12 Months Ended
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Dec. 31, 2022
Debt Disclosure [Abstract] |
Long-Term Debt | LONG-TERM DEBT Long-term debt consists of the following as of the dates presented (in thousands):
|  | As of December 31,
|  | 2022 |  | 2021
Surplus note |  | $ | 5,515 |  |  | $ | 6,985 |
5.625% Senior unsecured notes |  | 100,000 |  |  | 100,000 |
Total principal amount |  | 105,515 |  |  | 106,985 |
Less: unamortized debt issuance costs |  | (2,746) |  |  | (3,309) |
Total long-term debt, net |  | $ | 102,769 |  |  | $ | 103,676 |
Surplus Note On November 9, 2006, UPCIC entered into a $25.0 million surplus note with the State Board of Administration of Florida (the “SBA”) under Florida’s Insurance Capital Build-Up Incentive Program (the “ICBUI”). The surplus note has a twenty-year term and accrues interest, adjusted quarterly based on the 10-year Constant Maturity Treasury Index. The carrying amount of the surplus note is included in the statutory capital and surplus of UPCIC of approximately $5.5 million as of December 31, 2022. The effective interest rate paid on the surplus note was 2.83%, 1.50% and 1.05% for the years ended December 31, 2022, 2021 and 2020, respectively. Any payment of principal or interest by UPCIC on the surplus note must be approved by the Commissioner of the FLOIR. Quarterly principal payments of $368 thousand are due through 2026. Aggregate principal payments of approximately $1.5 million were made during each of the years ended December 31, 2022, 2021 and 2020. UPCIC is in compliance with each of the loan’s covenants as implemented by rules promulgated by the SBA. An event of default will occur under the surplus note, as amended, if UPCIC: (i) defaults in the payment of the surplus note; (ii) fails to submit quarterly filings to the FLOIR; (iii) fails to maintain at least $50 million of surplus during the term of the surplus note, except for certain situations; (iv) misuses proceeds of the surplus note; (v) makes any misrepresentations in the application for the program; (vi) pays any dividend when principal or interest payments are past due under the surplus note; or (vii) fails to maintain a level of surplus and reinsurance sufficient to cover in excess of UPCIC’s 1-in-100 year probable maximum loss as determined by a hurricane loss model accepted by the Florida Commission on Hurricane Loss Projection Methodology as certified by the FLOIR annually. To avoid a penalty rate, UPCIC must maintain either a ratio of net written premium to surplus of at least 2:1 or a ratio of gross written premiums to surplus of at least 6:1 according to a calculation method set forth in the surplus note. As of December 31, 2022, UPCIC’s net written premium to surplus ratio was in excess of the required minimums and, therefore, UPCIC is not subject to the penalty rate. The surplus note ranks subordinate in right of payment to the Senior Unsecured Notes and Unsecured Revolving Loan described below. Senior Unsecured Notes On November 23, 2021, the Company entered into Note Purchase Agreements with certain institutional accredited investors and qualified institutional buyers pursuant to which the Company issued and sold $100 million of 5.625% Senior Unsecured Notes due 2026 (the “Notes”). The Purchase Agreements contain certain customary representations, warranties and covenants made by the Company. The Notes were offered and sold by the Company in a private placement transaction in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended. On March 24, 2022, the Registration Statement registering the exchange of Notes for registered Notes was declared effective by the Securities and Exchange Commission, and all of the Notes have since been exchanged for registered Notes with identical financial terms. The Notes are senior unsecured debt obligations that bear interest at the rate of 5.625% per annum, payable semi-annually in arrears on May 30 th and November 30 th of each year, beginning on May 30, 2022. The Notes are subject to adjustment from time to time in the event of a downgrade or subsequent upgrade of the rating assigned to the Notes. The Notes mature on November 30, 2026 at which time the entire $100.0 million of principal is due and payable. At any time on or after November 30, 2023, the Company may redeem all or part of the Notes at redemption prices (expressed as percentages of the principal amount) equal to (i) 102.81250% for the twelve-month period beginning on November 30, 2023; (ii) 101.40625% for the twelve-month period beginning on November 30, 2024 and (iii) 100.000% at any time thereafter, plus accrued and unpaid interest up to, but not including the redemption date. On November 23, 2021, the Company entered into an indenture, relating to the issuance of the Notes (the “Indenture”), with UMB Bank National Association, as trustee. The Notes are not subject to any sinking fund and are not convertible into or exchangeable, other than pursuant to the Exchange Offer, for any other securities or assets of the Company or any of its subsidiaries. The Notes are not subject to redemption at the option of the holder. The indenture governing the Notes contains financial covenants, terms, events of default and related cure provisions that are customary in agreements used in connection with similar transactions. As of December 31, 2022, the Company was in compliance with all applicable covenants, including financial covenants. T he Notes are unsecured senior obligations of the Company, are not obligations of, and are not guaranteed by, any subsidiary of the Company. The Notes rank equally in right of payment to the Unsecured Revolving Loan described below. Unsecured Revolving Loan The Company entered into a 364-day credit agreement and related revolving loan (“2021 Revolving Loan”) with JPMorgan Chase Bank, N.A. (“JPMorgan”), in August 2021. The Company and JPMorgan subsequently agreed during the term of the 2021 Revolving Loan to extend its expiration date until October 31, 2022. T he Company renewed this agreement on October 31, 2022, increasing the credit facility to $37.5 million and modifying other terms. The October 31, 2022 Revolving Loan agreement (“2022 Revolving Loan”) makes available to the Company an unsecured revolving credit facility with an aggregate commitment not to exceed $37.5 million (previously $35.0 million) and carries an interest rate of prime rate plus a margin of 2%. The Company must pay an annual commitment of 0.50% of the unused portion of the commitment. Borrowings under the 2022 Revolving Loan mature on October 30, 2023, 364 days after the inception date of the 2022 Revolving Loan. The 2022 Revolving Loan is subject to annual renewals. The 2022 Revolving Loan contains customary financial and other covenants, with which the Company is in compliance. The Company did not borrow any amount under the 2021 Revolving Loan, and as of December 31, 2022, the Company has not borrowed any amount under the 2022 Revolving Loan. Maturities The following table provides an estimate of aggregate principal payments to be made for the amounts due on long-term debt as of December 31, 2022 (in thousands):
2023 | $ | 1,471 |
2024 | 1,471 |
2025 | 1,471 |
2026 | 101,102 |
2027 | — |
Thereafter | — |
Total long-term debt maturities | 105,515 |
Less: unamortized debt issuance costs | (2,746) |
Total long-term debt maturities, net | $ | 102,769 |
Interest Expense The following table provides interest expense related to long-term debt during the periods presented (in thousands):
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
Interest Expense: |  |  |  |  |  |
Surplus notes |  | $ | 172 |  |  | $ | 113 |  |  | $ | 95 |
5.625% Senior unsecured notes |  | 5,734 |  |  | 469 |  |  | — |
Non-cash expense (1) |  | 703 |  |  | 56 |  |  | — |
Total |  | $ | 6,609 |  |  | $ | 638 |  |  | $ | 95 |
(1) Represents amortization of debt issuance costs.

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- Definition The entire disclosure for long-term debt. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI https://asc.fasb.org/topic&trid=2208564 + Details
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