[Filing Information](index=1&type=section&id=Filing%20Information) This section details the Form 10-Q filing for Universal Insurance Holdings, Inc., an accelerated filer, including its common stock listing and outstanding shares [Form 10-Q Details](index=1&type=section&id=Form%2010-Q%20Details) This section identifies the filing as a Quarterly Report on Form 10-Q for the period ended March 31, 2022, for Universal Insurance Holdings, Inc., a Delaware corporation - The document is a Quarterly Report (Form 10-Q) for the period ended March 31, 2022[2](index=2&type=chunk) - The registrant is Universal Insurance Holdings, Inc., a Delaware corporation[2](index=2&type=chunk) [Registrant Information and Securities](index=1&type=section&id=Registrant%20Information%20and%20Securities) Universal Insurance Holdings, Inc. is an accelerated filer with its common stock traded on the New York Stock Exchange under the symbol UVE, with 30,945,861 shares outstanding as of April 26, 2022 - The company is classified as an **'Accelerated filer'**[4](index=4&type=chunk) - Common Stock, $0.01 Par Value, is traded on the New York Stock Exchange under the symbol **UVE**[3](index=3&type=chunk) Common Stock Outstanding | Date | Shares Outstanding | | :------------ | :----------------- | | April 26, 2022 | 30,945,861 | [Report of Independent Registered Public Accounting Firm](index=5&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) This section presents the independent auditor's review of the interim condensed consolidated financial statements, confirming their conformity with U.S. GAAP [Results of Review of Interim Condensed Consolidated Financial Statements](index=5&type=section&id=Results%20of%20Review%20of%20Interim%20Condensed%20Consolidated%20Financial%20Statements) Plante & Moran, PLLC reviewed the interim condensed consolidated financial statements for Universal Insurance Holdings, Inc. for the three-month periods ended March 31, 2022 and 2021, finding no material modifications needed for conformity with U.S. GAAP - The independent registered public accounting firm, Plante & Moran, PLLC, found **no material modifications** needed for the interim financial statements to conform with U.S. GAAP[8](index=8&type=chunk) - The consolidated balance sheet as of December 31, 2021, was deemed **fairly stated** in all material respects[9](index=9&type=chunk) [PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part contains the unaudited condensed consolidated financial statements and management's discussion and analysis of the company's financial condition and results of operations [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, stockholders' equity statements, and cash flow statements, along with detailed notes explaining the company's financial position and performance for the periods presented [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The company's total assets decreased by 15% from **$2,056.1 million** at December 31, 2021, to **$1,749.0 million** at March 31, 2022, primarily due to decreases in available-for-sale debt securities, cash and cash equivalents, and reinsurance-related assets, with total liabilities also decreasing by 16.8% Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2022 | December 31, 2021 | Change ($) | Change (%) | | :------------------------- | :------------- | :---------------- | :--------- | :--------- | | Total assets | $1,748,955 | $2,056,141 | $(307,186) | -14.9% | | Total liabilities | $1,352,614 | $1,626,439 | $(273,825) | -16.8% | | Total stockholders' equity | $396,341 | $429,702 | $(33,361) | -7.8% | - Available-for-sale debt securities decreased from **$1,040,455 thousand** to **$1,014,677 thousand**[15](index=15&type=chunk) - Cash and cash equivalents decreased from **$250,508 thousand** to **$165,398 thousand**[15](index=15&type=chunk) [Condensed Consolidated Statements of Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net income decreased by 33.6% to **$17.5 million** for the three months ended March 31, 2022, compared to **$26.4 million** in the prior year, driven by increased losses and loss adjustment expenses and interest expense Condensed Consolidated Statements of Income Highlights (in thousands, except per share data) | Metric | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :---------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Premiums earned, net | $269,064 | $243,305 | $25,759 | 10.6% | | Net investment income | $4,042 | $2,986 | $1,056 | 35.4% | | Total premiums earned and other revenues | $287,482 | $262,757 | $24,725 | 9.4% | | Losses and loss adjustment expenses | $185,106 | $143,963 | $41,143 | 28.6% | | General and administrative expenses | $78,297 | $82,423 | $(4,126) | -5.0% | | Total operating costs and expenses | $263,403 | $226,386 | $37,017 | 16.4% | | Interest and amortization of debt issuance costs | $1,608 | $20 | $1,588 | 7940.0% | | Income (loss) before income taxes | $22,471 | $36,351 | $(13,880) | -38.2% | | Income tax expense (benefit) | $4,934 | $9,943 | $(5,009) | -50.4% | | Net income (loss) | $17,537 | $26,408 | $(8,871) | -33.6% | | Basic earnings (loss) per common share | $0.56 | $0.85 | $(0.29) | -34.1% | | Diluted earnings (loss) per common share | $0.56 | $0.84 | $(0.28) | -33.3% | [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income shifted from a gain of **$9.5 million** in Q1 2021 to a loss of **$25.4 million** in Q1 2022, primarily due to a significant increase in other comprehensive loss from unrealized losses on available-for-sale securities Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | | :--------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net income (loss) | $17,537 | $26,408 | $(8,871) | | Other comprehensive income (loss), net of taxes | $(42,910) | $(16,910) | $(26,000) | | Comprehensive income (loss) | $(25,373) | $9,498 | $(34,871) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity decreased by 7.8% to **$396.3 million** at March 31, 2022, mainly due to a substantial other comprehensive loss and treasury stock purchases, partially offset by net income Stockholders' Equity Changes (in thousands) | Metric | March 31, 2022 | December 31, 2021 | Change ($) | | :----------------------------------- | :------------- | :---------------- | :--------- | | Total stockholders' equity | $396,341 | $429,702 | $(33,361) | | Accumulated other comprehensive income (loss), net of taxes | $(58,478) | $(15,568) | $(42,910) | | Retained earnings | $576,243 | $563,713 | $12,530 | - Purchases of treasury stock amounted to **$3,879 thousand** during the three months ended March 31, 2022[19](index=19&type=chunk) - Declaration of dividends totaled **$5,007 thousand** for the three months ended March 31, 2022[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$27.1 million** for Q1 2022, a significant shift from **$61.3 million** provided in the prior year, leading to an **$85.1 million** decrease in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | | :---------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $(27,081) | $61,265 | | Net cash provided by (used in) investing activities | $(48,442) | $(131,398) | | Net cash provided by (used in) financing activities | $(9,587) | $(6,194) | | Net increase (decrease) during the period | $(85,110) | $(76,327) | | Balance, beginning of period | $253,143 | $179,871 | | Balance, end of period | $168,033 | $103,544 | - Purchases of available-for-sale debt securities decreased significantly from **$178,828 thousand** in Q1 2021 to **$57,163 thousand** in Q1 2022[25](index=25&type=chunk) - Purchase of treasury stock increased from **$245 thousand** in Q1 2021 to **$3,879 thousand** in Q1 2022[25](index=25&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on the company's operations, accounting policies, investments, reinsurance, insurance operations, liabilities, debt, equity, income taxes, earnings per share, comprehensive income, commitments, fair value measurements, variable interest entities, and subsequent events [1. Nature of Operations and Basis of Presentation](index=11&type=section&id=1.%20Nature%20of%20Operations%20and%20Basis%20of%20Presentation) Universal Insurance Holdings, Inc. is a vertically integrated insurance holding company primarily engaged in property and casualty insurance, with residential homeowners' insurance in Florida being its main product, and financial statements prepared under U.S. GAAP - The Company is a vertically integrated insurance holding company, primarily offering residential homeowners' insurance in 19 states, with **Florida comprising the majority of policies**[28](index=28&type=chunk) - Primary revenue sources include premiums, investment returns, brokerage commissions from reinsurers, and policy fees[29](index=29&type=chunk) - Financial statements are prepared under SEC rules for interim information and U.S. GAAP, with significant estimates in liabilities for unpaid losses and loss adjustment expenses[30](index=30&type=chunk)[33](index=33&type=chunk) [2. Significant Accounting Policies](index=12&type=section&id=2.%20Significant%20Accounting%20Policies) This note refers to the significant accounting policies detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, indicating no new material changes for the interim period - Significant Accounting Policies are **consistent** with those reported in the Annual Report on Form 10-K for the year ended December 31, 2021[34](index=34&type=chunk) [3. Investments](index=13&type=section&id=3.%20Investments) The company's total invested assets decreased slightly to **$1,085.6 million** at March 31, 2022, with available-for-sale debt securities experiencing a significant increase in gross unrealized losses due to rising interest rates Available-for-Sale Debt Securities (in thousands) | Metric | March 31, 2022 | December 31, 2021 | Change ($) | | :------------------------- | :------------- | :---------------- | :--------- | | Amortized Cost | $1,092,438 | $1,061,192 | $31,246 | | Gross Unrealized Gains | $149 | $1,129 | $(980) | | Gross Unrealized Losses | $(77,338) | $(21,377) | $(55,961) | | Fair Value | $1,014,677 | $1,040,455 | $(25,778) | Net Investment Income (in thousands) | Metric | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :---------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total investment income | $4,752 | $3,699 | $1,053 | 28.5% | | Investment expenses | $(710) | $(713) | $3 | -0.4% | | Net investment income | $4,042 | $2,986 | $1,056 | 35.4% | - Unrealized losses on available-for-sale debt securities are primarily due to changes in interest rates, with issuers maintaining **high credit quality**[36](index=36&type=chunk) - A net unrealized loss of **$3,396 thousand** on equity securities was recognized during the three months ended March 31, 2022, compared to $494 thousand in the prior year[17](index=17&type=chunk)[44](index=44&type=chunk) [4. Reinsurance](index=16&type=section&id=4.%20Reinsurance) The Company uses reinsurance to mitigate catastrophic loss risk, with reinsurance recoverable decreasing significantly to **$104.7 million** at March 31, 2022, and ceded premium earned increasing by 10% year-over-year - The Company manages catastrophic loss risk through reinsurance agreements, primarily **catastrophe excess of loss reinsurance**[46](index=46&type=chunk) Reinsurance Impact on Income Statement (in thousands) | Metric | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :---------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Direct premiums written | $396,481 | $365,314 | $31,167 | 8.5% | | Ceded premium earned | $(145,539) | $(132,301) | $(13,238) | 10.0% | | Net premiums earned | $269,064 | $243,305 | $25,759 | 10.6% | | Ceded losses and LAE | $(10,049) | $(93,335) | $83,286 | -89.2% | Reinsurance Recoverable (in thousands) | Metric | March 31, 2022 | December 31, 2021 | Change ($) | Change (%) | | :------------------------- | :------------- | :---------------- | :--------- | :--------- | | Prepaid reinsurance premiums | $109,401 | $240,993 | $(131,592) | -54.6% | | Reinsurance recoverable | $104,660 | $185,589 | $(80,929) | -43.6% | [5. Insurance Operations](index=19&type=section&id=5.%20Insurance%20Operations) Deferred Policy Acquisition Costs (DPAC) decreased to **$103.6 million** at March 31, 2022, due to amortization, and both UPCIC and APPCIC exceeded minimum statutory capital requirements despite dividend restrictions Deferred Policy Acquisition Costs (DPAC) (in thousands) | Metric | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | | :--------------------- | :-------------------------- | :-------------------------- | | DPAC, beginning of period | $108,822 | $110,614 | | Capitalized Costs | $49,199 | $54,722 | | Amortization of DPAC | $(54,399) | $(54,143) | | DPAC, end of period | $103,622 | $111,193 | - UPCIC and APPCIC are **unable to pay ordinary dividends in 2022** due to Florida Insurance Code restrictions[51](index=51&type=chunk) Statutory Capital and Surplus (in thousands) | Entity | March 31, 2022 | December 31, 2021 | | :----- | :------------- | :---------------- | | UPCIC | $389,248 | $378,750 | | APPCIC | $18,539 | $16,104 | - Both Insurance Entities **exceeded the minimum statutory capitalization requirement** of $15.0 million or ten percent of total liabilities[52](index=52&type=chunk)[54](index=54&type=chunk) [6. Liability for Unpaid Losses and Loss Adjustment Expenses](index=21&type=section&id=6.%20Liability%20for%20Unpaid%20Losses%20and%20Loss%20Adjustment%20Expenses) The liability for unpaid losses and LAE decreased to **$244.5 million** at March 31, 2022, with the quarter seeing **$0.7 million** in net unfavorable prior years' reserve development, primarily from Hurricanes Irma and Matthew Change in Liability for Unpaid Losses and LAE (in thousands) | Metric | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Balance at beginning of period | $346,216 | $322,465 | | Total incurred | $185,106 | $143,963 | | Total paid | $236,383 | $149,797 | | Balance at end of period | $244,482 | $315,780 | - Net **unfavorable prior years' reserve development of $0.7 million** in Q1 2022, primarily due to increases in ultimate losses for Hurricanes Irma and Matthew[56](index=56&type=chunk) - Net **favorable prior years' reserve development of $1.2 million** in Q1 2021, mainly from increased ceded reserves for Hurricane Sally[57](index=57&type=chunk) [7. Long-term Debt](index=22&type=section&id=7.%20Long-term%20Debt) Total long-term debt, net, was **$103.4 million** at March 31, 2022, consisting of a surplus note and **$100 million** in 5.625% Senior Unsecured Notes due 2026, with the company in compliance with all debt covenants Long-term Debt (in thousands) | Debt Type | March 31, 2022 | December 31, 2021 | | :---------------------------- | :------------- | :---------------- | | Surplus note | $6,618 | $6,985 | | 5.625% Senior unsecured notes | $100,000 | $100,000 | | Total principal amount | $106,618 | $106,985 | | Less: unamortized debt issuance costs | $(3,234) | $(3,309) | | Total long-term debt, net | $103,384 | $103,676 | - The Company issued **$100 million of 5.625% Senior Unsecured Notes due 2026** in November 2021[60](index=60&type=chunk) - An unsecured revolving credit facility of **$35.0 million** with JPMorgan Chase Bank, N.A. was **undrawn** as of March 31, 2022[64](index=64&type=chunk)[65](index=65&type=chunk) - Interest and amortization of debt issuance costs increased significantly to **$1,608 thousand** in Q1 2022 from $20 thousand in Q1 2021 due to the new senior unsecured notes[66](index=66&type=chunk) [8. Stockholders' Equity](index=24&type=section&id=8.%20Stockholders'%20Equity) The Company repurchased 320,528 shares of common stock for **$3.9 million** during Q1 2022 under a **$20 million** share repurchase program authorized through November 2022 Common Stock Repurchases (in thousands, except shares and per share data) | Date Authorized | Expiration Date | Dollar Amount Authorized | Total Number of Shares Repurchased (Q1 2022) | Aggregate Purchase Price (Q1 2022) | Average Price Per Share (Q1 2022) | | :-------------- | :-------------- | :----------------------- | :------------------------------------------- | :--------------------------------- | :-------------------------------- | | Nov 3, 2020 | Nov 3, 2022 | $20,000 | 320,528 | $3,879 | $12.10 | [9. Income Taxes](index=25&type=section&id=9.%20Income%20Taxes) Income tax expense decreased to **$4.9 million** for Q1 2022 from **$9.9 million** in Q1 2021, resulting in a lower effective tax rate of **22.0%**, influenced by a lower ratio of permanent items to pre-tax income and higher discrete tax benefits Income Tax Expense and Effective Tax Rate (in thousands) | Metric | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | | :----------------- | :-------------------------- | :-------------------------- | | Income tax expense | $4,934 | $9,943 | | Effective tax rate | 22.0% | 27.4% | - The estimated annual ETR for 2022 is **25.8%**, reduced to **22.0%** for the quarter due to discrete items, including a higher Florida corporate income tax rate[72](index=72&type=chunk) - Management concluded that a valuation allowance on deferred tax assets is **not required**, expecting full utilization[73](index=73&type=chunk) [10. Earnings Per Share](index=26&type=section&id=10.%20Earnings%20Per%20Share) Diluted EPS decreased to **$0.56** for Q1 2022 from **$0.84** in Q1 2021, reflecting a decline in net income available to common stockholders despite a slight decrease in weighted average diluted common shares outstanding Earnings Per Share Reconciliation (in thousands, except per share data) | Metric | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | | :---------------------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | $17,537 | $26,408 | | Income (loss) available to common stockholders | $17,534 | $26,405 | | Weighted average common shares outstanding - Basic | 31,147 | 31,208 | | Weighted average common shares outstanding - Diluted | 31,227 | 31,277 | | Basic earnings (loss) per common share | $0.56 | $0.85 | | Diluted earnings (loss) per common share | $0.56 | $0.84 | [11. Other Comprehensive Income (Loss)](index=27&type=section&id=11.%20Other%20Comprehensive%20Income%20(Loss)) Other comprehensive loss, net of taxes, significantly increased to **$42.9 million** in Q1 2022 from **$16.9 million** in Q1 2021, primarily driven by substantial unrealized holding losses on available-for-sale debt securities Components of Other Comprehensive Income (Loss) (in thousands) | Metric | 3 Months Ended Mar 31, 2022 (After-tax) | 3 Months Ended Mar 31, 2021 (After-tax) | | :---------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Unrealized holding gains (losses) arising during the period | $(43,109) | $(17,064) | | Less: Reclassification adjustments for (gains) losses realized in net income (loss) | $199 | $154 | | Other comprehensive income (loss) | $(42,910) | $(16,910) | [12. Commitments and Contingencies](index=28&type=section&id=12.%20Commitments%20and%20Contingencies) The Company has multi-year reinsurance contract commitments totaling **$80.2 million** in 2022, **$152.7 million** in 2023, and **$58.1 million** in 2024, with legal proceedings not expected to materially adversely affect financial condition Multi-Year Reinsurance Contract Commitments (in millions) | Year | Amount Payable | | :--- | :------------- | | 2022 | $80.2 | | 2023 | $152.7 | | 2024 | $58.1 | - Management believes that liabilities from legal matters will **not have a material adverse effect** on the Company's financial condition or results of operations[81](index=81&type=chunk) - Reasonably possible losses for legal proceedings are estimated to be **immaterial**[83](index=83&type=chunk) [13. Fair Value Measurements](index=29&type=section&id=13.%20Fair%20Value%20Measurements) The Company classifies assets measured at fair value into a three-level hierarchy, with most available-for-sale debt securities as Level 2 and equity securities as Level 1, and long-term debt also disclosed at fair value - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable market-based inputs), and Level 3 (unobservable inputs)[91](index=91&type=chunk) Assets Accounted for at Fair Value (in thousands) | Asset Type | March 31, 2022 (Total Fair Value) | December 31, 2021 (Total Fair Value) | | :-------------------------------- | :-------------------------------- | :----------------------------------- | | Available-For-Sale Debt Securities | $1,014,677 | $1,040,455 | | Equity Securities | $65,126 | $47,334 | | Total | $1,079,803 | $1,087,789 | - Available-for-sale debt securities are primarily classified as **Level 2**, while equity securities (common stock and mutual funds) are **Level 1**[92](index=92&type=chunk) [14. Variable Interest Entities](index=32&type=section&id=14.%20Variable%20Interest%20Entities) The Company consolidated Isosceles Insurance Ltd. as a Variable Interest Entity (VIE) due to being the primary beneficiary, though this reinsurance arrangement was terminated effective December 1, 2021 - The Company consolidated a Variable Interest Entity (VIE), Isosceles Insurance Ltd. acting in respect of "Separate Account UVE-01", as it was deemed the **primary beneficiary**[96](index=96&type=chunk) - The reinsurance arrangement with the VIE was **terminated effective December 1, 2021**[97](index=97&type=chunk) [15. Subsequent Events](index=33&type=section&id=15.%20Subsequent%20Events) The Company declared a quarterly cash dividend of **$0.16** per common share on April 20, 2022, and the Exchange Offer for Senior Unsecured Notes closed on April 28, 2022, satisfying registration requirements - A quarterly cash dividend of **$0.16 per common share** was declared on April 20, 2022[100](index=100&type=chunk) - The Exchange Offer for the Senior Unsecured Notes closed on April 28, 2022, fulfilling the Registration Rights Agreements[100](index=100&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and operating results, highlighting key trends in the Florida insurance market, the impact of COVID-19, and detailed analysis of revenues, expenses, and financial position, along with liquidity, capital resources, and market risks [Cautionary Note Regarding Forward-Looking Statements](index=34&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section warns that the report contains forward-looking statements based on estimates and assumptions, subject to uncertainties and risks, and actual results could differ materially due to various factors - Forward-looking statements are based on estimates and assumptions, subject to uncertainty, and actual results may differ materially[102](index=102&type=chunk) - Key risks include unanticipated increases in claims, failure of risk mitigation strategies, reliance on models, reinsurance availability, and regulatory changes[103](index=103&type=chunk) [Overview](index=35&type=section&id=Overview) Universal Insurance Holdings, Inc. is a vertically integrated property and casualty insurer focused on Florida homeowners' insurance, operating in a 'hard market' characterized by escalating rates, tightening underwriting, and increased claims costs - The Company is a vertically integrated holding company offering property and casualty insurance, primarily residential homeowners' insurance in 19 states, with a focus on **Florida**[104](index=104&type=chunk) - The Florida personal lines homeowners' market is characterized as a **'hard market'** with escalating premium rates, reduced coverages, and tightening underwriting standards[106](index=106&type=chunk) - Inflated costs for losses and LAE in Florida are driven by an industry around claim solicitation, filing, and litigation, exacerbated by litigation financing and a one-way right of attorneys' fees against insurers[107](index=107&type=chunk) [Florida Trends](index=35&type=section&id=Florida%20Trends) Florida's insurance market faces significant challenges from 'social inflation,' increased litigation, and rising costs of building materials and labor, leading to higher claim costs, with legislative reforms' effectiveness still uncertain - Florida's market is experiencing increased frequency and severity of personal residential claims due to active solicitation, inflated claim amounts, and increased demands for attorneys' fees[107](index=107&type=chunk) - The 2021 Florida legislation introduced pre-suit notice requirements and reduced claim filing periods, but its impact on litigation and market conditions is still being evaluated[108](index=108&type=chunk)[109](index=109&type=chunk) - The Company has implemented initiatives like 'Fast Track' claims processing, increased subrogation emphasis, and expanded in-house legal staff to mitigate adverse market trends[111](index=111&type=chunk) [Impact of COVID-19](index=36&type=section&id=Impact%20of%20COVID-19) The COVID-19 pandemic has not directly materially impacted the Company's business, but it has indirectly contributed to inflationary pressures on claims costs due to supply chain and labor constraints, with the ultimate long-term impact remaining uncertain - No direct material impact from COVID-19 on business, financial position, or liquidity since March 2020[113](index=113&type=chunk) - Indirectly, inflationary pressures from supply chain and labor constraints due to the pandemic have affected claims costs and other expenses[113](index=113&type=chunk) [Key Performance Indicators](index=37&type=section&id=Key%20Performance%20Indicators) This section defines key performance indicators used by management to understand business trends, including Book Value Per Common Share, Combined Ratio, Core Loss Ratio, Debt-to-Equity Ratio, Direct Premiums Written, Expense Ratio, Loss and LAE Ratio, Monthly Weighted Average Renewal Retention Rate, Premiums Earned, Policies in Force, Premium in Force, Return on Average Equity, Total Insured Value, Unearned Premiums, and Weather events - Key performance indicators include **Book Value Per Common Share, Combined Ratio, Core Loss Ratio, Debt-to-Equity Ratio, Direct Premiums Written (DPW), Expense Ratio, Loss and LAE Ratio, Monthly Weighted Average Renewal Retention Rate, Premiums Earned (Net), Policies in Force, Premium in Force, Return on Average Equity (ROAE), Total Insured Value, Unearned Premiums, and Weather events**[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) [Reinsurance](index=38&type=section&id=Reinsurance) The Company's reinsurance strategy aims to protect its balance sheet from catastrophic events, meeting regulatory and rating agency requirements, with the 2021-2022 programs for UPCIC and APPCIC providing extensive coverage at a projected cost of **$584 million** - Reinsurance programs for UPCIC and APPCIC meet Florida Office of Insurance Regulation (FLOIR) and Demotech, Inc. requirements for financial stability[135](index=135&type=chunk) - UPCIC's 2021-2022 reinsurance program includes a first event All States retention of **$45 million** and protection extending to **$3.364 billion**[138](index=138&type=chunk) - The total cost of the 2021-2022 reinsurance programs for UPCIC and APPCIC is projected to be **$584 million**, representing approximately **35% of estimated direct premium earned**[144](index=144&type=chunk) [UPCIC's 2021-2022 Reinsurance Program](index=39&type=section&id=UPCIC's%202021-2022%20Reinsurance%20Program) UPCIC's 2021-2022 reinsurance program features a **$45 million** first event All States retention, with coverage extending to **$3.364 billion**, including full reinstatement options and specific frequency protection, with the FHCF providing an estimated **$1.963 billion** in coverage - First event All States retention for UPCIC is **$45 million**, with reinsurance protection extending to **$3.364 billion**[138](index=138&type=chunk) - The program includes full reinstatement available on **$1.06 billion** of non-FHCF first event catastrophe coverage for guaranteed second event coverage[138](index=138&type=chunk) - The FHCF layer is estimated to provide approximately **$1.963 billion** of coverage for UPCIC[138](index=138&type=chunk) [APPCIC's 2021-2022 Reinsurance Program](index=40&type=section&id=APPCIC's%202021-2022%20Reinsurance%20Program) APPCIC's 2021-2022 reinsurance program has a **$2.5 million** first event All States retention, with its tower extending to **$38 million**, and includes extensive multiple line excess per risk reinsurance and an estimated **$18.4 million** in FHCF coverage - First event All States retention for APPCIC is **$2.5 million**, with the tower extending to **$38 million**[145](index=145&type=chunk) - APPCIC purchases multiple line excess per risk reinsurance, providing coverage of **$8.5 million** in excess of $0.5 million for property losses[145](index=145&type=chunk) - The FHCF layer is estimated to provide approximately **$18.4 million** of coverage for APPCIC[145](index=145&type=chunk) [Results of Operations and Analysis of Financial Condition](index=41&type=section&id=Results%20of%20Operations%20and%20Analysis%20of%20Financial%20Condition) The Company reported a 33.6% decrease in net income for Q1 2022, primarily due to higher losses and LAE and increased interest expense, despite growth in net premiums earned, with total assets and stockholders' equity also declining [Highlights for the quarter ended March 31, 2022](index=41&type=section&id=Highlights%20for%20the%20quarter%20ended%20March%2031,%202022) Key highlights for Q1 2022 include increasing written and earned premiums, a rise in net investment income, and lower expense ratios, offset by higher losses and LAE and unrealized investment losses - Approved rate filings are **increasing written and earned premiums**[148](index=148&type=chunk) - Net investment income increased, but rising interest rates led to **unrealized losses on investments**[148](index=148&type=chunk) - Losses and LAE, net, were higher due to **increased accrual rates for current accident year reserves**[148](index=148&type=chunk) - Expense management efforts **lowered the expense ratio**[148](index=148&type=chunk) [Results of Operations — Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021](index=42&type=section&id=Results%20of%20Operations%20%E2%80%94%20Three%20Months%20Ended%20March%2031,%202022%20Compared%20to%20Three%20Months%20Ended%20March%2031,%202021) Net income declined by 33.6% to **$17.5 million**, and diluted EPS decreased to **$0.56**, with net premiums earned growing by 10.6%, but the net loss and LAE ratio increased to 68.8% and the combined ratio rose to 97.9% Key Financial Performance Metrics (in thousands, except per share data) | Metric | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :---------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net income (loss) | $17,537 | $26,408 | $(8,871) | -33.6% | | Diluted earnings (loss) per common share | $0.56 | $0.84 | $(0.28) | -33.3% | | Premiums earned, net | $269,064 | $243,305 | $25,759 | 10.6% | | Net loss and LAE ratio | 68.8% | 59.2% | 9.6 pp | 16.2% | | Combined ratio | 97.9% | 93.1% | 4.8 pp | 5.2% | - Direct premiums written increased by **8.5% to $396.5 million**, driven by rate increases in Florida and other states[151](index=151&type=chunk)[152](index=152&type=chunk) - General and administrative expenses decreased by **5.0% to $78.3 million**, primarily due to reduced commission rates and lower employee benefits[171](index=171&type=chunk)[173](index=173&type=chunk) [Analysis of Financial Condition—As of March 31, 2022 Compared to December 31, 2021](index=48&type=section&id=Analysis%20of%20Financial%20Condition%E2%80%94As%20of%20March%2031,%202022%20Compared%20to%20December%2031,%202021) Total invested assets slightly decreased to **$1,085.6 million**, with significant decreases in prepaid reinsurance premiums and reinsurance recoverable, while unpaid losses and LAE decreased by **$101.7 million** and total stockholders' equity declined by **$33.7 million** Key Balance Sheet Changes (in thousands) | Metric | March 31, 2022 | December 31, 2021 | Change ($) | | :------------------------- | :------------- | :---------------- | :--------- | | Total invested assets | $1,085,648 | $1,093,680 | $(8,032) | | Prepaid reinsurance premiums | $109,401 | $240,993 | $(131,592) | | Reinsurance recoverable | $104,660 | $185,589 | $(80,929) | | Unpaid losses and LAE | $244,482 | $346,216 | $(101,734) | | Deferred income tax asset, net | $40,072 | $16,331 | $23,741 | | Total stockholders' equity | $396,341 | $429,702 | $(33,361) | - The decrease in cash and cash equivalents was driven by cash flows used in operating, investing, and financing activities[193](index=193&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) The Company's liquidity is supported by operating cash flows and a conservative investment portfolio, with cash and cash equivalents decreasing to **$165.4 million**, while total capital resources decreased to **$499.7 million**, and the company maintains compliance with debt covenants - Cash flows from operations are expected to be **sufficient to meet short and long-term obligations**[192](index=192&type=chunk) Liquidity and Capital Resources (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $165,398 | $250,508 | | Total capital resources | $499,725 | $533,378 | | Debt-to-total capital ratio | 20.7% | 19.4% | | Debt-to-equity ratio | 26.1% | 24.1% | - The Company maintains a conservative, well-diversified investment portfolio with an average credit rating of **A+** for capital preservation and liquidity[205](index=205&type=chunk) [Liquidity](index=49&type=section&id=Liquidity) The Company's liquidity is primarily derived from operating cash flows, with cash and cash equivalents decreasing to **$165.4 million**, and it has access to an undrawn **$35 million** revolving loan, despite dividend restrictions from insurance entities - Cash and cash equivalents, excluding restricted cash, decreased to **$165.4 million** at March 31, 2022, from $250.5 million at December 31, 2021[193](index=193&type=chunk) - Insurance Entities did not have the capacity to pay ordinary dividends as of March 31, 2022, due to **regulatory restrictions**[196](index=196&type=chunk) - The Company has an **undrawn $35.0 million unsecured revolving credit facility**[197](index=197&type=chunk)[202](index=202&type=chunk) [Capital Resources](index=50&type=section&id=Capital%20Resources) Total capital resources decreased to **$499.7 million**, with the debt-to-total capital ratio increasing to 20.7%, and the Company's long-term debt includes a surplus note and **$100 million** in senior unsecured notes, with all covenants in compliance Capital Resources and Ratios (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :------------------------- | :------------- | :---------------- | | Stockholders' equity | $396,341 | $429,702 | | Total long-term debt | $103,384 | $103,676 | | Total capital resources | $499,725 | $533,378 | | Debt-to-total capital ratio | 20.7% | 19.4% | | Debt-to-equity ratio | 26.1% | 24.1% | - The Company was in compliance with all financial covenants for its surplus note and senior unsecured notes as of March 31, 2022[201](index=201&type=chunk)[203](index=203&type=chunk) - The investment portfolio is predominantly fixed income securities with an average credit rating of **A+**, focusing on capital preservation and liquidity[205](index=205&type=chunk) [Impact of the COVID-19 Pandemic](index=51&type=section&id=Impact%20of%20the%20COVID-19%20Pandemic) The COVID-19 pandemic continues to pose a risk to financial markets, but the Company believes its measures and inherent liquidity will allow it to meet obligations, while monitoring credit quality and economic impacts - The COVID-19 pandemic presents uncertainty to financial markets, with ongoing monitoring of credit quality and economic impacts[206](index=206&type=chunk) - The Company believes its measures and inherent liquidity will allow it to **meet short- and long-term obligations**[206](index=206&type=chunk) [Looking Forward](index=51&type=section&id=Looking%20Forward) The Company continues to monitor financial metrics and potential long-term impacts of the COVID-19 pandemic, including emerging risks and economic changes related to inflation, employment, and recession, while maintaining its operational and financial stability - The Company continues to monitor financial metrics and the broader economic impacts of the COVID-19 pandemic, including potential long-term effects on operations and financial condition[207](index=207&type=chunk) - Significant uncertainties exist regarding inflation, employment, and recession as the Federal Reserve addresses economic concerns[207](index=207&type=chunk) [Common Stock Repurchases](index=51&type=section&id=Common%20Stock%20Repurchases) During Q1 2022, the Company repurchased 320,528 shares of common stock for **$3.9 million** under a **$20 million** program authorized through November 2022, funded by cash from operations - The Company repurchased **320,528 shares of common stock for $3.9 million** during the three months ended March 31, 2022[209](index=209&type=chunk) - The repurchases were part of a **$20 million share repurchase program** authorized through November 3, 2022, funded by cash from operations[208](index=208&type=chunk)[209](index=209&type=chunk) [Off-Balance Sheet Arrangements](index=51&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company has no material off-balance sheet arrangements, except for multi-year reinsurance contract commitments for future years, which will be recorded at the commencement of their coverage periods - The Company does not have any off-balance sheet arrangements that are reasonably likely to have a **material effect** on its financial condition, results of operations, liquidity, or capital resources[210](index=210&type=chunk) - Multi-year reinsurance contract commitments for future years will be recorded at the commencement of the coverage period[210](index=210&type=chunk) [Cash Dividends](index=52&type=section&id=Cash%20Dividends) The Company declared a quarterly cash dividend of **$0.16** per common share on February 10, 2022, payable on March 17, 2022 Cash Dividend Declared in Q1 2022 | Dividend Declared Date | Shareholders Record Date | Dividend Payable Date | Cash Dividend Per Common Share Amount | | :--------------------- | :----------------------- | :-------------------- | :------------------------------------ | | February 10, 2022 | March 10, 2022 | March 17, 2022 | $0.16 | [Material Cash Requirements](index=52&type=section&id=Material%20Cash%20Requirements) The Company's total material cash requirements amount to **$683.1 million**, with **$238.0 million** due in the next 12 months, including significant obligations for reinsurance payable, unpaid losses and LAE, and long-term debt Material Cash Requirements (in thousands) | Category | Total | Next 12 Months | Beyond 12 Months | | :-------------------------------------- | :--------- | :------------- | :--------------- | | Reinsurance payable and multi-year commitments | $303,658 | $92,893 | $210,765 | | Unpaid losses and LAE, direct | $244,482 | $137,888 | $106,594 | | Long-term debt | $134,981 | $7,188 | $127,793 | | Total material cash requirements | $683,121 | $237,969 | $445,152 | - The amounts and timing of future loss and LAE payments are estimates and subject to inherent variability[212](index=212&type=chunk) [Impact of Inflation and Changing Prices](index=52&type=section&id=Impact%20of%20Inflation%20and%20Changing%20Prices) Inflation primarily impacts the Company through interest rates, affecting investment performance, and through increased costs for losses and LAE, with limitations on anticipating inflation in rate setting due to competitive and regulatory reasons - Interest rates have a more significant impact on performance than general inflation levels, as primary assets are monetary[213](index=213&type=chunk) - Inflation affects the cost of paying losses and LAE, and the Company attempts to anticipate this when establishing rate levels, but may be limited by competitive and regulatory factors[214](index=214&type=chunk) [Arrangements with Variable Interest Entities](index=52&type=section&id=Arrangements%20with%20Variable%20Interest%20Entities) The Company consolidated a Variable Interest Entity (VIE) for a reinsurance captive arrangement, having been identified as the primary beneficiary, with further details provided in Note 14 - The Company consolidated a Variable Interest Entity (VIE) due to a reinsurance captive arrangement, as it was determined to be the **primary beneficiary**[215](index=215&type=chunk) [Critical Accounting Policies and Estimates](index=52&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There have been no material changes to the Company's Critical Accounting Policies and Estimates during the period covered by this report, as previously disclosed in its Annual Report on Form 10-K for December 31, 2021 - No material changes to Critical Accounting Policies and Estimates during the period[215](index=215&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Company is exposed to market risk from its investment portfolio, primarily interest rate risk on fixed-income securities and equity price risk on common stock and mutual funds, with primary objectives of capital preservation and liquidity - Market risk arises from potential adverse changes in the fair market value of available-for-sale debt securities, equity securities, and investment real estate[216](index=216&type=chunk) - Primary investment objectives are **capital preservation and adequate liquidity** for claims, with a secondary objective of total rate of return emphasizing investment income[218](index=218&type=chunk) [Interest Rate Risk](index=53&type=section&id=Interest%20Rate%20Risk) The Company's fixed-income financial instruments are sensitive to interest rate changes, with rising rates generally leading to a decline in fair value, and the portfolio's effective maturity was 5.4 years as of March 31, 2022 - Interest rate risk is the sensitivity of fixed-rate financial instruments' fair market value to changes in interest rates[219](index=219&type=chunk) - The effective maturity of available-for-sale debt securities was **5.4 years** at both March 31, 2022, and December 31, 2021[220](index=220&type=chunk) [Equity Price Risk](index=53&type=section&id=Equity%20Price%20Risk) Equity price risk affects the fair value of common stock and mutual funds in the investment portfolio, with a hypothetical 20% decrease in market prices resulting in a **$13.0 million** decrease in fair value at March 31, 2022 Equity Securities Subject to Price Risk (in thousands) | Equity Securities | March 31, 2022 (Fair Value) | December 31, 2021 (Fair Value) | | :---------------- | :-------------------------- | :----------------------------- | | Common stock | $4,617 | $3,683 | | Mutual funds | $60,509 | $43,651 | | Total | $65,126 | $47,334 | - A hypothetical **20% decrease** in equity security market prices would result in a **$13.0 million decrease** in fair value at March 31, 2022[221](index=221&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) The Company's management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal control over financial reporting during the period - Disclosure controls and procedures were **effective** as of March 31, 2022[223](index=223&type=chunk) - No material changes in internal control over financial reporting occurred during the period[224](index=224&type=chunk) [PART II – OTHER INFORMATION](index=52&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part includes information on legal proceedings, risk factors, unregistered sales of equity securities, exhibits, and signatures for the Form 10-Q [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in various legal proceedings, but management believes any resulting liabilities will not have a material adverse effect on its financial condition or results of operations, with reasonably possible losses estimated to be immaterial - The Company is subject to lawsuits and legal proceedings related to policy claims and ordinary business operations[225](index=225&type=chunk) - Management believes that liabilities from these legal matters will **not materially adversely affect** the Company's financial condition or results of operations[225](index=225&type=chunk) - Reasonably possible losses for legal proceedings are estimated to be **immaterial**[227](index=227&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, indicating no new material risk factors for the interim period - Risk factors are **consistent** with those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[228](index=228&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During March 2022, the Company repurchased 320,528 shares of its common stock for **$3.9 million** under the November 2022 Share Repurchase Program, with approximately **$13.9 million** remaining available Common Stock Purchases (Q1 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------- | :------------------------------- | :--------------------------- | | 3/1/2022 - 3/31/2022 | 320,528 | $12.07 | - As of March 31, 2022, approximately **$13.9 million** remained available under the November 2022 Share Repurchase Program[233](index=233&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, employment agreements, certifications, and financial statements in iXBRL format - Exhibits include Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, Employment Agreements, and Certifications of CEO and Principal Accounting Officer[235](index=235&type=chunk) - Financial statements are provided in **iXBRL (Inline eXtensible Business Reporting Language) format**[235](index=235&type=chunk) [Signatures](index=57&type=section&id=Signatures) The report is signed by Stephen J. Donaghy, CEO, and Gary Lloyd Ropiecki, Principal Accounting Officer, on May 2, 2022, certifying its submission - The report is signed by **Stephen J. Donaghy, Chief Executive Officer and Principal Executive Officer**, and **Gary Lloyd Ropiecki, Principal Accounting Officer**[240](index=240&type=chunk) - The signing date for the report is **May 2, 2022**[240](index=240&type=chunk)

Financial Data and Key Metrics Changes - The company reported a 16.9% annualized return on equity, demonstrating resilience despite external challenges [6] - Adjusted EPS was $0.64, down from $0.84 in the prior year quarter, primarily due to a higher net combined ratio [11] - Total revenue reached $287.5 million, up 9.4% year-over-year, driven by higher direct premiums earned, commission revenues, and net investment income [12] Business Line Data and Key Metrics Changes - Direct premiums written increased by 8.5% year-over-year to $396.5 million, with Florida growing by 8.9% and other states by 6.4% [13] - Direct premiums earned rose by 10.4% year-over-year to $414.6 million, with rate increases being the main growth driver [13] - The net combined ratio was 97.9%, up 4.8 points year-over-year, reflecting a higher net loss ratio [14] Market Data and Key Metrics Changes - The company has reduced exposure to less profitable geographies and tightened underwriting criteria, which has positively impacted underwriting profitability [7] - Rising yields are benefiting investment income results, expected to continue as a tailwind moving forward [8] Company Strategy and Development Direction - The company is focused on improving underwriting profitability and prioritizing combined ratio improvement over topline growth [7] - The firm has secured over 85% of its core all states first event catastrophe reinsurance tower, indicating strong capital management [10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding potential tort reform in Florida, highlighting the need for legislative action to address cost and coverage issues [20][21] - The company maintains its guidance for 2022, including a GAAP and non-GAAP adjusted EPS range of $1.80 to $2.20, assuming no extraordinary weather events [16] Other Important Information - The company repurchased approximately 321,000 shares at a cost of $3.9 million, with $13.9 million remaining in the share repurchase authorization program [15] - A quarterly cash dividend of $0.16 per share was declared, payable on May 20, 2022 [15] Q&A Session Summary Question: Thoughts on potential Tort Reform in Florida - Management commended the Governor for taking action and expressed hope for meaningful discussions in the upcoming legislative session [20][21] Question: Concerns about rate adequacy in the Florida market - Management emphasized the focus on rate adequacy and sustainable profitability, despite competitive pressures [23] Question: Update on SB76 and the upcoming special session - Management expressed cautious optimism regarding SB76 and highlighted the importance of addressing legal fees and litigation structures [33][35] Question: Capital management and share repurchases - Management indicated strong capital position and willingness to utilize excess capital for share buybacks when appropriate [37] Question: Expense ratio outlook - Management noted that the current expense ratio is more indicative of future performance, with ongoing efficiencies being realized [38]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 UNIVERSAL INSURANCE HOLDINGS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) ________________________________________________________ FORM 10-K ________________________________________________________ (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or ☐ TRANSITION REPOR ...

Universal Insurance Holdings, Inc. (NYSE:UVE) Q4 2021 Earnings Conference Call February 25, 2022 9:00 AM ET Company Participants Rob Luther - Vice President, Corporate Development and Strategy and Investor Relations Steve Donaghy - Chief Executive Officer Frank Wilcox - Chief Financial Officer Conference Call Participants Tom Shimp - Piper Sandler Operator Good morning, ladies and gentlemen and welcome to the UVE Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-on ...

Universal Insurance Holdings, Inc. (NYSE:UVE) Q3 2021 Earnings Conference Call October 28, 2021 9:00 AM ET Company Participants Rob Luther - VP, Corporate Strategy and IR Steve Donaghy - CEO Frank Wilcox - CFO Conference Call Participants Tom Shimp - Piper Sandler Operator Good morning, ladies and gentlemen, and welcome to the UVE Third Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. ...

Market Conditions - Universal Insurance Holdings, Inc. operates primarily in the Florida homeowners' insurance market, which is currently characterized as a "hard market" with escalating premium rates and tightening underwriting standards [104]. - The company has experienced inflated costs for losses and loss adjustment expenses (LAE) in Florida, leading to significant year-over-year increases in represented claims and litigation rates [105]. - In April 2021, Florida legislation was passed to address adverse claim trends, including a new pre-suit notice requirement and a reduction in the time to file claims to two years [106]. Financial Performance - The company reported that the COVID-19 pandemic has not materially impacted its financial position or operations, although court delays may affect litigation outcomes [107][108]. - Key performance indicators include a combined ratio, which indicates underwriting profitability, and a core loss ratio, which measures expected losses relative to premiums earned [112][113]. - Direct premiums written (DPW) reflect the total value of policies issued, with a focus on growth in the Florida market as a measure of business concentration risk [115][116]. - The monthly weighted average renewal retention rate is used to assess customer retention, indicating the percentage of policyholders renewing their policies [120]. - Premiums earned, net, represent the portion of current and previously written premiums recognized as earned during the reporting period, allowing management to identify revenue trends [121]. - Direct premiums written grew by $23.6 million, or 5.8%, to $433.0 million [143]. - Premiums earned, net, grew by $30.5 million, or 13.0%, to $264.7 million during the third quarter [143]. - Net loss and LAE ratio decreased to 70.9% during the third quarter of 2021 compared to 101.8% during the third quarter of 2020 [144]. - Diluted earnings per common share ("EPS") was $0.64 compared to a loss of $0.10 in the prior period [144]. - Net income for the quarter was $20.2 million, compared to a net loss of $3.2 million in the same period last year [146]. - Net income for the nine months ended September 30, 2021 was $68.5 million, an increase of 86.3% from $36.8 million in the same period of 2020 [172]. - The company reported a diluted EPS of $2.19 for the nine months ended September 30, 2021, compared to $1.14 in 2020, marking an increase of 92.1% [172]. Investment and Capital Management - The company aims to produce an underwriting profit over the long term while maintaining a conservative balance sheet and generating investment income [102]. - Total invested assets increased to $1,112.4 million as of September 30, 2021, compared to $919.9 million as of December 31, 2020 [154]. - Net investment income decreased by $1.8 million, or 38.6%, to $2.8 million compared to the same period in 2020 [152]. - Cash and cash equivalents increased by 34.5% to $224.8 million at September 30, 2021, due to maintaining higher cash balances for upcoming reinsurance premium payments [180]. - Stockholders' equity increased to $494.3 million as of September 30, 2021, up from $449.3 million as of December 31, 2020 [218]. - The company has authorized a share repurchase program of up to $20 million, which is set to run through November 3, 2022 [227]. - During the nine months ended September 30, 2021, the company repurchased 116,886 shares at an aggregate price of $1.6 million [228]. Risk Management - The ongoing impact of the COVID-19 pandemic and changes in regulatory environments are key risks that could affect the company's financial condition and operating results [101]. - The company has not experienced significant adverse impacts on business or liquidity due to the COVID-19 pandemic, but continues to monitor economic conditions [226]. - The company has implemented premium payment grace periods and waived late fees for policyholders affected by the COVID-19 pandemic, though significant use of these measures has not been observed [225]. Regulatory and Compliance - FLOIR approved an overall 14.9% rate increase in September 2021 for UPCIC on Florida personal residential homeowners' line of business [143]. - There have been no material changes in the company's internal controls over financial reporting during the reporting period [240].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________________________________ FORM 10-Q ________________________________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to UNIVERSAL INSURANCE HOLD ...

Universal Insurance Holdings, Inc. (NYSE:UVE) Q2 2021 Results Conference Call July 29, 2021 9:00 AM ET Company Participants Rob Luther - VP, Corporate Strategy and IR Steve Donaghy - CEO Frank Wilcox - CFO Conference Call Participants Tom Shimp - Piper Sandler Nicolas Iacoviello - Dowling & Partners Operator Good morning, ladies and gentlemen, and welcome to the UVE Second Quarter 2021 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, ...

Financial Performance - The company reported strong direct premiums written during Q1 2021, outperforming the same period in the prior year[101]. - Direct premiums written increased by $30.8 million, or 9.2%, to $365.3 million for the quarter ended March 31, 2021, driven by a growth of $28.5 million, or 10.2%, in Florida[134]. - Premiums earned, net, grew by $22.5 million, or 10.2%, to $243.3 million[134]. - Net income for the three months ended March 31, 2021, was $26.4 million, compared to $20.1 million for the same period in 2020, reflecting a 31.6% increase[135]. - Total revenues increased by $27.5 million, or 11.7%, to $262.8 million[134]. - Direct premium earned rose by $49.7 million, or 15.2%, for the quarter ended March 31, 2021, reflecting positive changes in rates and policies in force[140]. - Financial benefits from claims management were $8.1 million for Q1 2021, a significant increase from $0.3 million in Q1 2020, driven by recoveries from reinsurers[155]. Insurance Operations - The company operates primarily in Florida, with licenses to write insurance in 19 states and two additional states[97]. - The combined ratio is a key performance indicator, with a ratio below 100 indicating underwriting profit[105]. - The core loss ratio is used to identify profitability trends of premiums in force, excluding weather events beyond expectations[107]. - The monthly weighted average renewal retention rate measures customer retention over the calendar year[114]. - Policies in force decreased by 0.9% from 984,830 at December 31, 2020, to 976,250 at March 31, 2021[134]. - The company continues to face inflated costs for losses and LAE in the Florida market, driven by increased litigation and claims solicitation[153]. Reinsurance and Risk Management - Reinsurance contracts are utilized to limit potential exposures to catastrophic events, classified as treaty or facultative contracts[123]. - The total cost of the 2020-2021 reinsurance programs for UPCIC and APPCIC is projected to be $499.8 million, representing approximately 34.0% of estimated direct premium earned for the 12-month treaty period[132]. - A.M. Best and S&P ratings for major reinsurers in UPCIC's reinsurance program include Allianz Risk Transfer (A+), Chubb Tempest Reinsurance Ltd. (A++), and Munich Re (A+)[129]. - The Florida Hurricane Catastrophe Fund is estimated to provide approximately $2.008 billion of coverage for UPCIC[127]. - UPCIC completed its first catastrophe bond transaction in March 2021, providing $150 million of collateralized protection for named windstorm events[128]. Expenses and Financial Ratios - General and administrative expenses rose to $82.4 million in Q1 2021, up from $72.6 million in Q1 2020, reflecting a 13.5% increase[156]. - The expense ratio increased from 32.9% in Q1 2020 to 33.9% in Q1 2021, primarily due to higher policy acquisition costs[157]. - Income tax expense for Q1 2021 was $9.9 million, compared to $7.5 million in Q1 2020, with an effective tax rate of 27.4%[158]. - Other comprehensive loss for Q1 2021 was $16.9 million, compared to $8.9 million in Q1 2020, reflecting changes in the fair value of available-for-sale debt securities[159]. Investment and Liquidity - Total investments increased to $1,017.3 million as of March 31, 2021, up from $919.9 million as of December 31, 2020[160]. - Cash and cash equivalents decreased to $90.8 million as of March 31, 2021, from $167.2 million at December 31, 2020, driven by cash flows used in investing and financing activities[173]. - The investment portfolio focuses on capital preservation and adequate liquidity, with a secondary objective of providing a total rate of return emphasizing investment income[181]. - The fair market value of fixed income financial instruments as of March 31, 2021, was $913,131,000, up from $819,961,000 on December 31, 2020, indicating a growth of about 11.4%[196]. COVID-19 Impact - The company has not experienced a material impact from the COVID-19 pandemic on its financial position or operations[99]. - The company continues to monitor local, state, and federal guidance regarding COVID-19 and adjusts workforce activities as necessary[99]. - The company has implemented premium payment grace periods and waived late payment fees for policyholders affected by the COVID-19 pandemic, although significant use of these measures has not been observed[184]. - The company continues to monitor financial metrics and potential impacts of the COVID-19 pandemic on operations and liquidity, with significant uncertainties remaining[185]. Shareholder and Capital Management - As of March 31, 2021, stockholders' equity increased to $454,665 thousand from $449,262 thousand as of December 31, 2020, reflecting a growth of approximately 1.0%[179]. - Total long-term debt decreased to $8,088 thousand as of March 31, 2021, down from $8,456 thousand as of December 31, 2020, indicating a reduction of about 4.4%[179]. - The company declared a cash dividend of $0.16 per common share for both the first and second quarters of 2021[189]. - During the three months ended March 31, 2021, the company repurchased 15,444 shares of common stock at an aggregate purchase price of $0.2 million[187]. Legal and Compliance - Management believes that any liabilities arising from ongoing legal proceedings will not have a material adverse effect on the company's financial condition or results of operations[201]. - The company estimates that reasonably possible losses from legal proceedings are immaterial, based on currently available information[203]. - The company’s internal controls over financial reporting were deemed effective as of March 31, 2021, ensuring compliance with SEC rules and timely decision-making[199]. - There were no changes in the company's internal controls over financial reporting during the reporting period that materially affected their effectiveness[200].

Financial Data and Key Metrics Changes - The company reported a top line growth of close to 12% for Q1 2021, with total revenue increasing by 11.7% to $262.8 million compared to the same period in 2020 [6][9] - Margin expansion exceeded 200 basis points, with a total annualized return on average equity of 23.2% [6][10] - Adjusted EPS for the quarter was $0.84 on both GAAP and non-GAAP adjusted basis [10] Business Line Data and Key Metrics Changes - Direct premiums written increased by 9.2% for the quarter, with Florida experiencing a direct premium growth of 10.2% [10] - The combined ratio improved by 1 point to 93.1%, driven by a 2-point improvement in the loss and LAE ratio [10] - The expense ratio improved on a direct earned basis by 45 basis points, although increased reinsurance costs led to a 1 point increase in the net expense ratio [11] Market Data and Key Metrics Changes - The company actively reduced its policies in force sequentially and saw a decrease in new and renewal policy counts compared to Q1 2020 [7][8] - The investment portfolio's net investment income decreased by 56.3% to $3 million, primarily due to lower yields on reinvested assets [11] Company Strategy and Development Direction - The company is focused on capital management and ensuring that subsidiaries support the parent company effectively [31] - There is an emphasis on rate adequacy over aggressive growth, with management preferring slow growth that ensures profitability [22] - The company is exploring growth opportunities in additional states and focusing on insurance score products [34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the potential benefits of legislative changes in Florida that could improve litigation trends [15] - The company is maintaining its guidance for 2021, expecting GAAP and non-GAAP adjusted EPS to range between $2.75 and $3 [12] - Management is closely monitoring weather-related losses and feels confident about their current claims handling capabilities [28] Other Important Information - The company repurchased approximately 15,000 shares at an aggregate cost of $245,000 during the first quarter [11] - A quarterly cash dividend of $0.16 per share was declared, payable on May 21, 2021 [11] Q&A Session Summary Question: Thoughts on the bills in the state legislature and potential benefits to litigation trends - Management highlighted the favorable aspects of House Bill 76 and expressed hope for positive legislative outcomes that could assist insurers [15] Question: Update on the examination of fees between insurers and corporate affiliates - Management confirmed ongoing discussions with the Department of Insurance and emphasized transparency in their relationships with subsidiaries [18][20] Question: Insights on the decrease in policies in force (PIF) and growth outside Florida - Management acknowledged the nominal decrease in out-of-state policies but expressed optimism for future growth opportunities [21] Question: Clarification on reserve development - Management explained the favorable net development despite gross unfavorable development due to reinsurance program coordination [23][25] Question: Impact of recent severe storms in Florida - Management reported manageable claims from recent storms, indicating no material impact on losses [27][28] Question: Update on loss picks and trends - Management noted that loss picks have been increased and are benefiting from rate increases flowing through their book [29] Question: Strategic updates on partnerships and initiatives - Management provided updates on partnerships with Verisk and Clovered, emphasizing growth in non-home markets and cross-selling opportunities [30][32]