UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 6, 2008
UNITED INSURANCE HOLDINGS CORP.
(Exact Name of Registrant as Specified in Charter)
Delaware | 000-52833 | 75-3241967 | ||
(State or Other Jurisdiction of Incorporation ) |
(Commission File Number) |
(IRS Employer Identification No.) |
360 Central Avenue, Suite 900 St. Petersburg, FL |
33701 | |
(Address of Principal Executive Offices) | (Zip Code) |
(727) 895-7737
(Registrants Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01. | Entry into a Material Definitive Agreement. |
In connection with the passage of a law permitting the renegotiation of the terms of certain surplus notes issued by insurers prior to January 2008, United Property & Casualty Insurance Company (UPCIC), a wholly owned subsidiary of United Insurance Holdings Corp. (the Company), and the State Board of Administration of Florida (the FSBA), on November 7, 2008, entered into Addendum Number One (the Addendum) to the $20,000,000 Insurance Capital Build-Up Incentive Program Surplus Note (the Note), which was originally executed on September 22, 2006. The Addendum is effective retroactive to July 1, 2008.
The Addendum requires UPCIC to meet a Minimum Writing Ratio during the remaining term of the Note beginning on July 1, 2008. UPCIC can meet the Minimum Writing Ratio by maintaining a net written premium to surplus ratio of at least 1:1 from July 1, 2008 through the end of the first calendar year on December 31, 2008, 1.5:1 for the second calendar year from January 1, 2009 through December 31, 2009, and 2:1 for the third calendar year beginning on January 1, 2010 and thereafter for the remaining term of the Note. In the alternative, UPCIC can meet the Minimum Writing Ratio by maintaining a gross written premium to surplus ratio of at least 3:1 from July 1, 2008 through the end of the first calendar year on December 31, 2008, 4.5:1 for the second calendar year from January 1, 2009 through December 31, 2009, and 6:1 for the third calendar year beginning on January 1, 2010 and thereafter for the remaining term of the Note. Under the terms of the Addendum, if (1) UPCICs writing ratio based on net written premium to surplus drops below 1:1 for three consecutive quarters beginning January 1, 2010 and (2) UPCICs writing ratio based on gross written premium to surplus drops below 3:1 for three consecutive quarters beginning January 1, 2010, UPCIC must repay the Note or a portion of the Note such that the Minimum Writing Ratio will be obtained the following quarter, provided that UPCIC is capable of repayment without creating a financially hazardous condition. The FSBA will consult with the Office of Insurance Regulation in order to avoid financially hazardous issues and, as a result, may direct UPCIC to follow an alternative accelerated repayment plan. The Addendum also provides for interest rate increases in the event that UPCIC fails to meet the Minimum Writing Ratio.
Finally, the Addendum provides that any other surplus notes not issued in conjunction with the Insurance Capital Build-Up Incentive Program will be subordinated to the Note.
The description of the terms and conditions of the Addendum and the Note set forth herein does not purport to be complete and is qualified in its entirety by reference to the full text of the Addendum attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by this reference and to the full text of the Note attached as Exhibit 10.31 to Amendment No. 1 to the Form S-4 Registration Statement (No. 333-150327) filed on June 13, 2008 and incorporated herein by this reference. This document is not intended to provide any other factual information about the Company. Such information can be found in other public filings the Company makes with the Securities and Exchange Commission, which are available without charge at www.sec.gov .
Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On November 6, 2008, the Companys Board of Directors increased the number of directors on the Board from six to seven, creating a vacancy on the Board. To fill this vacancy, the Board elected (also on November 6, 2008) Mr. Donald Cronin, the Companys President and Chief Executive Officer, to serve as a Class B director. Mr. Cronin will not receive any compensation in connection with his service as a director.
Item 9.01. | Financial Statements and Exhibits. |
(a) | Financial Statements of Businesses Acquired. |
Not applicable.
(b) | Pro Forma Financial Information. Not applicable. (c) Shell Company Transactions. |
Not applicable.
(d) | Exhibits. |
See the Exhibit Index set forth below for a list of exhibits included with this Current Report on Form 8-K.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
UNITED INSURANCE HOLDINGS CORP. | ||
By: |
/s/ Nicholas W. Griffin |
|
Name: | Nicholas W. Griffin | |
Title: | Chief Financial Officer |
Date: November 12, 2008
EXHIBIT INDEX
Exhibit No. |
Description |
|
10.1 | Addendum Number One to Insurance Capital Build-Up Incentive Program Surplus Note, dated November 7, 2008 and effective July 1, 2008, between the State Board of Administration of Florida and United Property & Casualty Insurance Company |
EXHIBIT 10.1
ADDENDUM NUMBER ONE
to
INSURANCE CAPITAL BUILD-UP INCENTIVE PROGRAM SURPLUS NOTE
BETWEEN THE STATE BOARD OF ADMINISTRATION OF FLORIDA AND
UNITED PROPERTY & CASUALTY INSURANCE COMPANY
Effective: July 1, 2008
During the 2008 legislative session, CS/CS/SB 2860 passed and became law on July 1, 2008. Section 2 of the bill provides for changes to Section 215.5595, F.S. As such, subsection 215.5595(10), F.S., allows the State Board of Administration to renegotiate the terms of any surplus note issued by an insurer prior to January 2008 under this program upon the agreement of the insurer and the board and consistent with the requirements of this section as amended in 2008.
Pursuant to the authorization provided in Section 215.5595, F.S., as amended, the undersigned parties to this Surplus Note executed on September 22, 2006, between United Property & Casualty Insurance Company, (NAIC #10969) and the State Board of Administration of Florida (Board) hereby agree to the following amended terms and conditions.
Addendum Number One is not retroactive and does not change any provision of the Surplus Note as executed on September 22, 2006, except that as of July 1, 2008, the following provisions of the Surplus Note are made effective and will be applied only on a prospective basis. All other provisions of the Surplus Note shall remain in full force and effect.
1. |
Surplus Note page one, third paragraph shall be hereby amended effective prospectively beginning on July 1, 2008 to read as follows: |
For and in consideration of the mutual agreements as set forth, the Insurer hereby makes a contribution to Surplus in New Capital of $20 million and covenants to meet the Minimum Writing Ratio of Premium to Surplus as specified in this Surplus Note Addendum Number One during the remaining term of this Surplus Note beginning on July 1, 2008. All amounts due and invoiced under the requirements of the original Surplus Note, including but not limited to interest, additional interest charges for not meeting Minimum Writing Ratio requirements, and any late fees; remain due until paid and are not affected by this Addendum Number One.
2. |
The following paragraphs in the Definitions section of the Surplus Note shall be hereby amended effective prospectively beginning on July 1, 2008 to read as follows: |
(h) Minimum Required Surplus means that the Insurers Surplus equals at least $50 million or for Insurers writing only manufactured housing policies, at least $14 million.
(i) Minimum Writing Ratio is met by meeting either the Net Written Premium to Surplus writing ratio or the Gross Written Premium to Surplus writing ratio specified below for each quarter as certified quarterly by the Office.
1. |
The Net Written Premium to Surplus writing ratio means a Net Written Premium to Surplus ratio of at least 1:1 from July 1, 2008 through the end of the first calendar year on December 31, 2008, a 1.5:1 ratio for the second calendar year from January 1, 2009 through December 31, 2009, and a 2:1 ratio for the third calendar year beginning on January 1, 2010 and thereafter for the remaining term of the Surplus Note. |
2. |
The Gross Written Premium to Surplus writing ratio means a Gross Written Premium to Surplus ratio of at least 3:1 from July 1, 2008 through the end of the first calendar year on December 31, 2008, a 4.5:1 ratio for the second calendar year from January 1, 2009 through December 31, 2009, and a 6:1 ratio for the third calendar year beginning on January 1, 2010 and thereafter for the remaining term of the Surplus Note. |
(l) Surplus Note means the Surplus Note issued by the Board and Addendum Number One thereto which provisions apply prospectively beginning on July 1, 2008.
(q) Surplus for purposes of determining the Writing Ratio means the Insurers initial New Capital contribution for this Surplus Note and the outstanding principal balance of the Surplus Note. For all other purposes, Surplus means the Insurers admitted assets less the Insurers liabilities and refers to the entire Surplus of the Insurer.
3. |
The Definitions section of the Surplus Note shall be hereby amended as follows to add the following paragraph (r) effective prospectively beginning on July 1, 2008. |
(r) Gross Written Premium means direct Premium plus assumed Premium.
4. |
The following paragraphs in the Surplus Note shall be hereby amended effective prospectively beginning on July 1, 2008 to read as follows: |
(3)(e) Writing Ratio: The Insurer represents that it will meet the Minimum Writing Ratio as defined in Addendum Number One to the Surplus Note effective prospectively from July 1, 2008 as determined by the Office and certified to the Board quarterly, beginning with the Quarterly Written Premium Report for the quarter ending September 30, 2008 due to the Board by November 15, 2008.
(3)(f) The Insurer agrees that it will make all quarterly filings using Form SBA 15-3 as amended to the Office. This Form is available on the Boards website, www.sbafla.com , under Insurance Capital Build-Up Incentive Program then Quarterly Written Premium Report.
(4)(d) Repayment Limitations: Any payment of principal or interest by the Insurer on this Surplus Note must be approved by the Commissioner, who shall approve the payment unless the Commissioner determines that such payment will Substantially Impair the financial condition of the Insurer. If such a determination is made, the Commissioner shall approve such payment that will not Substantially Impair the financial condition of the Insurer. The
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Board will seek approval of payments from the Commissioner and will notify any Insurer if a payment of principal and/or interest has been disapproved or, if a lower amount has been approved, the amount by which the usual payment is to be reduced. Interest shall continue to accrue until paid including during periods when payment approval has not been granted.
5. |
Paragraph (4)(e) in the Surplus Note shall be stricken effective prospectively beginning on July 1, 2008. |
6. |
Paragraph (5)(a)1 in the Surplus Note shall be stricken effective prospectively beginning on July 1, 2008. |
7. |
Paragraphs (5)(a)2 and 3 in the Surplus Note shall be hereby amended effective prospectively beginning on July 1, 2008 to read as follows: |
(5)(a)2. Failure to submit quarterly filings of Form SBA 15-3 as amended to the Office.
(5)(a)3. Failure to maintain the Minimum Required Surplus except for situations involving the payment of losses resulting from a catastrophic event or a series of events resulting in catastrophic losses or where Minimum Required Surplus is reduced as a result of the accounting treatment for deferred acquisition costs or where the Minimum Required Surplus is reduced as a result of repayment of the principal on this Surplus Note.
8. |
Paragraph (5)(a) in the Surplus Note shall be hereby amended as follows to add the following sub-paragraph 9 effective prospectively beginning on July 1, 2008: |
(5)(a)9. Failure to maintain a level of Surplus and reinsurance sufficient to cover in excess of the Insurers 1-in-100 year probable maximum loss as agreed to in paragraph (9) of the Surplus Note as amended.
9. |
Paragraph (6) in the Surplus Note shall be hereby amended effective prospectively beginning on July 1, 2008 to read as follows: |
(6) Reorganization, Dissolution, or Liquidation: In the event of reorganization, dissolution, 100% reinsurance or liquidation of Insurer, pursuant to Section 215.5595(5), F.S., the Board shall be treated as a creditor pursuant to Section 631.271, F.S., for the unpaid principal and interest on this Surplus Note.
10. |
Paragraphs (9)(a), (b), and (c) Supplemental Agreements shall be stricken effective prospectively beginning on July 1, 2008. |
11. |
Paragraph (9)(d) Supplemental Agreements shall be hereby amended effective prospectively beginning on July 1, 2008 to read as follows: |
(9)(d) Increase in interest rate for failure to meet the Minimum Writing Ratio. (See the Minimum Writing Ratio and Interest Rate Charges Table below).
1. |
From July 1, 2008 through December 31, 2008, each quarter the Insurers writing ratio based on Net Written Premium to Surplus drops between .5:1 and 1:1, the Board and the |
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Insurer agree that the interest rate as specified in provision (4)(b) will be increased by 25 basis points until the 1:1 Net Written Premium to Surplus writing ratio is met. From January 1, 2009 through December 31, 2009, the interest rate will be increased by 25 basis points each quarter the Net Written Premium to Surplus writing ratio drops between 1:1 and 1.5:1 until the 1.5:1 ratio is met. Beginning January 1, 2010 and continuing for the term of the Surplus Note, the interest rate will be increased by 25 basis points each quarter the Net Written Premium to Surplus writing ratio drops between 1.5:1 and 2:1 until the 2:1 ratio is met. |
From July 1, 2008 through December 31, 2008, each quarter the Insurers writing ratio based on Net Written Premium to Surplus drops below .5:1, the Board and the Insurer agree that the interest rate as specified in provision (4)(b) will be increased by 450 basis points until the .5:1 Net Written Premium to Surplus writing ratio is met. From January 1, 2009 through December 31, 2009, the interest rate will be increased by 450 basis points each quarter the Net Written Premium to Surplus writing ratio drops below 1:1 until the 1:1 ratio is met. Beginning January 1, 2010 and continuing for the term of the Surplus Note, the interest rate will be increased by 450 basis points each quarter the Net Written Premium to Surplus writing ratio drops below 1.5:1 until the 1.5:1 ratio is met.
2. |
From July 1, 2008 through December 31, 2008, each quarter the Insurers writing ratio based on Gross Written Premium to Surplus drops between 2:1 and 3:1, the Board and the Insurer agree that the interest rate as specified in provision (4)(b) will be increased by 25 basis points until the 3:1 Gross Written Premium to Surplus writing ratio is met. From January 1, 2009 through December 31, 2009, the interest rate will be increased by 25 basis points each quarter the Gross Written Premium to Surplus writing ratio drops between 3:1 and 4.5:1 until the 4.5:1 ratio is met. Beginning January 1, 2010 and continuing for the term of the Surplus Note, the interest rate will be increased by 25 basis points each quarter the Gross Written Premium to Surplus writing ratio drops between 4.5:1 and 6:1 until the 6:1 ratio is met. |
From July 1, 2008 through December 31, 2008, each quarter the Insurers writing ratio based on Gross Written Premium to Surplus drops below 2:1, the Board and the Insurer agree that the interest rate as specified in provision (4)(b) will be increased by 450 basis points until the 2:1 Gross Written Premium to Surplus writing ratio is met. From January 1, 2009 through December 31, 2009, the interest rate will be increased by 450 basis points each quarter the Gross Written Premium to Surplus writing ratio drops below 3:1 until the 3:1 ratio is met. Beginning January 1, 2010 and continuing for the term of the Surplus Note, the interest rate will be increased by 450 basis points each quarter the Gross Written Premium to Surplus writing ratio drops below 4.5:1 until the 4.5:1 ratio is met.
4
bps = basis points
3. |
The Insurer agrees to repay the Surplus Note or that portion of the Surplus Note such that the Minimum Writing Ratio will be obtained the following quarter if conditions a. and b. below exists provided that the Insurer is capable of repayment without creating a financially hazardous condition. The Board will consult with the Office in order to avoid financially hazardous issues and, as a result, may direct the Insurer to follow an alternative accelerated repayment plan acceptable to the Office. |
a. |
The Insurers writing ratio based on Net Written Premium to Surplus drops below 1:1 for three consecutive quarters beginning January 1, 2010. |
b. |
The Insurers writing ratio based on Gross Written Premium to Surplus drops below 3:1 for three consecutive quarters beginning January 1, 2010. |
12. |
Paragraph (9) Supplemental Agreements shall be hereby amended to add the following sub-paragraphs (g), (h), and (i) effective prospectively beginning on July 1, 2008: |
(9)(g) A late fee in the amount of 5% of the invoiced amount will be charged if a payment is received five days after the due date. A late fee will not be charged if it results from a delay beyond the control of the Insurer arising from the Offices disapproval of the payment or delay in issuing approval of the payment of interest or principal. Late fees may be charged for late payments or other late remittances.
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(9)(h) Any other surplus notes not issued in conjunction with the Insurance Capital Build-Up Incentive Program will be subordinated to this Surplus Note.
(9)(i) The Insurer agrees to maintain a level of Surplus and reinsurance sufficient to cover in excess of its 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 Office annually.
13. |
Except as otherwise noted in this Addendum Number One, all the duties, responsibilities, and obligations agreed to in the Surplus Note executed on September 22, 2006 shall continue in full force and effect. |
IN WITNESS WHEREOF , this Addendum Number One to the Surplus Note has been executed as of the dates below.
We are each, respectively, executive officers of the Insurer and are acting
Attested to:
By: | ||||||||||
Name | Print Name & Title | Date |
STATE OF ________________________________ |
} | |||
COUNTY OF ______________________________ |
} |
The foregoing instrument was acknowledged before me by , personally known to me or who presented an identification.
This day of , 2008.
NOTARY PUBLIC |
My Commission Expires: |
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By: | ||||||||||
Name | Print Name & Title | Date |
STATE OF ________________________________ |
} | |||
COUNTY OF ______________________________ |
} |
The foregoing instrument was acknowledged before me by , personally known to me or who presented an identification.
This day of , 2008.
NOTARY PUBLIC |
My Commission Expires: |
The State Board of Administration of Florida | ||||||||||
By: | ||||||||||
Ashbel C. Williams |
Date | |||||||||
Executive Director & CIO |
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