Press Release /
August 10, 2010

Universal Insurance Holdings, Inc. Reports Second-Quarter 2010 Financial Results

Policy Count Increased by Approximately 22,000 in the Second Quarter; Diluted Earnings per Share Improved by 42.1 Percent Compared to the Same Quarter of 2009; Stockholders’ Equity Increased 7.7 Percent in the Second Quarter

FORT LAUDERDALE, CA–(Marketwire – August 10, 2010) –  Universal Insurance Holdings, Inc. (the Company or Universal) (NYSE Amex: UVE), a vertically integrated insurance holding company, announced second-quarter 2010 net income of $10.8 million, or $0.27 per diluted share, compared to $7.6 million, or $0.19 per diluted share, in the second quarter of 2009.

The Company’s net income and diluted earnings per share increased by 41.0 and 42.1 percent, respectively, for the 2010 second quarter compared to the same period last year. The increases were primarily attributable to growth in net premiums earned and higher realized gains on investments, but were mitigated by state-mandated wind mitigation credits and increased general and administrative expenses. The Company’s investment portfolio generated $4.5 million in realized gains on investments in the second quarter of 2010.

The number of homeowners’ and dwelling fire insurance policies serviced by Universal Property & Casualty Insurance Company (UPCIC), the Company’s wholly-owned subsidiary, and the related direct premiums written increased during the second quarter of 2010. UPCIC’s recent premium rate increases, 14.6 percent statewide for its homeowners’ program and 14.8 percent statewide for its dwelling fire policies, positively affected premiums and profitability. UPCIC continued to recoup the mandatory Florida Insurance Guaranty Association (FIGA) assessment of $4.1 million, which contributed to the improved second quarter 2010 results. As 2010 progresses, the Company believes that the premium rate increases and FIGA assessment recovery will continue to have a positive effect on profitability.

UPCIC’s policy count continued to grow, servicing approximately 566,000 homeowners’ and dwelling fire insurance policies as of June 30, 2010, up from 544,000 policies at March 31, 2010, and 520,000 policies at June 30, 2009. The increase in the number of policies in-force is the result of heightened relationships with existing agents, an increase in the number of new agents, and continued expansion within Florida and in South Carolina, North Carolina, and Hawaii. Within South Carolina, North Carolina, and Hawaii, UPCIC had approximately 6,800 policies totaling approximately $9.5 million of in-force premiums at June 30, 2010.

Net premiums earned increased 10.7 percent in the second quarter of 2010 compared to the same quarter in 2009. Meanwhile, second-quarter 2010 general and administrative expenses increased 26.3 percent to $13.4 million from $10.6 million in the 2009 second quarter. The increase in general and administrative expenses was primarily attributable to higher direct and ceded commissions paid, and increased insurance premium taxes, all of which are related to growth in direct written premiums.

At June 30, 2010, stockholders’ equity increased to $123.6 million from $114.8 million at March 31, 2010, representing growth of 7.7 percent. 

Investment Portfolio Update
Realized gains on investments increased to $4.5 million for the three-month period ended June 30, 2010, from $0.3 million for the same period ended June 30, 2009. The increase in realized gains on investments is the result of the expansion of the Company’s investment portfolio into fixed securities and equity securities and the related sales of certain of these securities.

As of June 30, 2010, the Company’s investments in equity securities and fixed maturities totaled $137.9 million, compared to $132.5 million at March 31, 2010. At June 30, 2010, approximately 56.2 percent of the investments were in equity securities considered available for sale and 43.8 percent were in fixed maturities available for sale. As of June 30, 2010, the Company’s investment portfolio contained $0.6 million of pre-tax net unrealized losses.

The Company restated its financial statements for the quarter ended March 31, 2010 to reflect the correction of an error in the accounting for an other-than-temporary impairment of an investment security.

The Company’s results for the second quarter reported herein and in the Form 10-Q for the quarter ended June 30, 2010 are inclusive of the Company’s restatement of its Condensed Consolidated Financial Statements for the three-month period ended March 31, 2010, as filed in the Company’s Form 10-Q/A for the quarter ended March 31, 2010.

Cash Dividend
On May 24, 2010, Universal’s board of directors declared a cash dividend of $0.10 per share payable on July 15, 2010, to shareholders of record as of June 17, 2010.

About Universal Insurance Holdings, Inc.
Universal Insurance Holdings, Inc. is a vertically integrated insurance holding company, which through its subsidiaries, covers substantially all aspects of insurance underwriting, distribution, claims processing and exposure management. Universal Property & Casualty Insurance Company (UPCIC), a wholly owned subsidiary of the Company, is one of the five leading writers of homeowners’ insurance in Florida and is now fully licensed and has commenced its operations in Hawaii, North Carolina and South Carolina. For additional information on the Company, please visit our investor relations website at www.universalinsuranceholdings.com.

Readers should refer generally to reports filed by the Company with the Securities and Exchange Commission (SEC), specifically the Company’s Form 10-K for the year ended December 31, 2009, and the Company’s Form 10-Q/A for the quarterly period ended March 31, 2010 and Form 10-Q for the quarterly period ended June 30, 2010, for a discussion of the risk factors that could affect its operations. Such factors include, without limitation, exposure to catastrophic losses; reliance on the Company’s reinsurance program; underwriting performance on catastrophe and non-catastrophe risks; the ability to maintain relationships with customers, employees or suppliers; competition and its effect on pricing, spending and third-party relationships; the Company’s financial stability rating; product pricing and revenues; and the effect of Federal or state laws and regulations. Additional factors that may affect future results are contained in the Company’s filings with the SEC, which are available on the SEC’s web site at http://www.sec.gov. The Company disclaims any obligation to update and revise statements contained in this press release based on new information or otherwise.

Cautionary Language Concerning Forward-Looking Statements
This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” and “project,” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Such statements may include, but not be limited to, projections of revenues, income or loss, expenses, plans, and assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future results could differ materially from those described in forward-looking statements.

   
   
UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
   
    For the Six     For the Three  
    Months Ended June 30,     Months Ended June 30,  
    2010     2009     2010     2009  
PREMIUMS EARNED AND OTHER REVENUES                                
  Direct premiums written   $ 368,119,332     $ 301,984,289     $ 208,019,687     $ 156,772,144  
  Ceded premiums written     (248,872,199 )     (224,366,164 )     (121,304,233 )     (128,638,307 )
    Net premiums written     119,247,133       77,618,125       86,715,454       28,133,837  
  (Increase) decrease in net unearned premium     (44,572,783 )     (2,483,735 )     (45,354,667 )     9,242,901  
  Premiums earned, net     74,674,350       75,134,390       41,360,787       37,376,738  
  Net investment income     310,571       798,482       117,619       461,774  
  Realized gains on investments     8,152,024       1,452,609       4,457,307       341,276  
  Foreign currency transaction gains     809,050       72,316       124,803       84,435  
  Other-than-temporary impairment of investments     (2,407,680 )                  
  Commission revenue     17,521,299       15,307,618       8,783,428       7,862,769  
  Other revenue     2,020,332       2,901,730       1,016,078       1,422,353  
                                 
Total premiums earned and other revenues     101,079,946       95,667,145       55,860,022       47,549,345  
                                 
OPERATING COSTS AND EXPENSES                                
  Losses and loss adjustment expenses     48,486,605       44,926,823       24,834,893       24,506,159  
  General and administrative expenses     23,577,980       18,114,424       13,389,331       10,599,196  
                                 
    Total operating costs and expenses     72,064,585       63,041,247       38,224,224       35,105,355  
                                 
INCOME BEFORE INCOME TAXES     29,015,361       32,625,898       17,635,798       12,443,990  
                                 
  Income taxes, current     11,656,144       8,949,654       8,171,931       367,037  
  Income taxes, deferred     (351,761 )     3,599,856       (1,302,863 )     4,438,395  
    Income taxes, net     11,304,383       12,549,510       6,869,068       4,805,432  
                                 
NET INCOME   $ 17,710,978     $ 20,076,388     $ 10,766,730     $ 7,638,558  
                                 
Basic net income per common share   $ 0.45     $ 0.53     $ 0.27     $ 0.20  
Weighted average of common shares outstanding – Basic     39,028,976       37,589,412       39,167,241       37,617,174  
                                 
Fully diluted net income per share   $ 0.44     $ 0.50     $ 0.27     $ 0.19  
Weighted average of common shares outstanding – Diluted     40,440,773       40,225,815       40,445,975       40,529,702  
                                 
Cash dividend declared per common share   $ 0.22     $ 0.34     $ 0.10     $ 0.12  
                                 
                                 
    For the Six     For the Three  
    Months Ended June 30,     Months Ended June 30,  
    2010     2009     2010     2009  
Comprehensive Income:                                
  Net income   $ 17,710,978     $ 20,076,388     $ 10,766,730     $ 7,638,558  
  Change in net unrealized gains on investments, net of tax     (966,901 )     8,228,976       790,675       5,672,835  
                                 
Comprehensive Income   $ 16,744,077     $ 28,305,364     $ 11,557,405     $ 13,311,393  
   
   
   
   
   
UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
   
    (Unaudited)        
    June 30,     December 31,  
ASSETS   2010     2009  
Cash and cash equivalents   $ 262,444,768     $ 192,924,291  
Investments                
  Fixed maturities available for sale, at fair value     60,447,710       41,389,008  
  Equity securities available for sale, at fair value     77,477,064       73,408,002  
Real estate, net     4,335,589       3,289,893  
Prepaid reinsurance premiums     233,086,613       200,294,241  
Reinsurance recoverables     63,235,510       91,816,433  
Premiums receivable, net     49,351,405       37,363,110  
Receivable from securities     14,669,988       6,259,973  
Other receivables     2,629,577       5,068,367  
Income taxes recoverable           3,211,874  
Property and equipment, net     1,197,645       1,245,858  
Deferred policy acquisition costs, net     14,041,890       9,464,624  
Deferred income taxes     12,853,266       11,894,289  
Other assets     1,020,164       617,337  
    Total assets   $ 796,791,189     $ 678,247,300  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
LIABILITIES:                
Unpaid losses and loss adjustment expenses   $ 128,903,761     $ 127,197,753  
Unearned premiums     355,735,699       278,370,544  
Advance premium     20,058,953       17,078,558  
Accounts payable     4,822,714       3,172,626  
Bank overdraft     22,573,228       20,297,061  
Reinsurance payable, net     86,815,057       73,104,595  
Income taxes payable     3,786,298       368,968  
Dividend payable to shareholder     3,916,724        
Payable for securities     3,821,527        
Other accrued expenses     18,855,334       20,750,385  
Long-term debt     23,897,059       24,632,353  
    Total liabilities     673,186,354       564,972,843  
                 
STOCKHOLDERS’ EQUITY:                
Cumulative convertible preferred stock, $.01 par value     1,077       1,087  
  Authorized shares – 1,000,000                
  Issued shares – 107,690 and 108,640                
  Outstanding shares – 107,690 and 108,640                
  Minimum liquidation preference – $287,240 and $288,190                
Common stock, $.01 par value     408,772       402,146  
  Authorized shares – 55,000,000                
  Issued shares – 40,877,087 and 40,214,884                
  Outstanding shares – 39,166,033 and 37,774,765                
  Treasury shares, at cost – 1,711,054 and 1,809,119 shares     (7,389,416 )     (7,948,606 )
Common stock held in trust, at cost – 0 and 631,000 shares           (511,110 )
Additional paid-in capital     37,802,927       36,666,914  
Accumulated other comprehensive (loss) income, net of taxes     (403,247 )     563,654  
Retained earnings     93,184,722       84,100,372  
    Total stockholders’ equity     123,604,835       113,274,457  
    Total liabilities and stockholders’ equity   $ 796,791,189     $ 678,247,300  

Investor Contact:
Philip Kranz
Dresner Corporate Services
312-780-7240
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