Press Release /
August 11, 2008

Universal Insurance Holdings, Inc. Reports Second-Quarter and First-Half 2008 Financial Results

Policy Counts Continue to Show Growth; Net Premium Growth Resumes; Continued Profitability Leads to Increased Stockholders’ Equity of $99.3 Million at June 30, 2008, up 36.8 Percent From $72.6 Million at December 31, 2007

FORT LAUDERDALE, FL–(Marketwire – August 11, 2008) – Universal Insurance Holdings, Inc. (“the Company”) (AMEX: UVE), a vertically integrated insurance holding company, announced second-quarter net income of $11.2 million, or $0.28 per diluted share, compared to $17.6 million, or $0.43 per diluted share, in the second quarter of 2007.

UPCIC, the Company’s wholly-owned regulated insurance subsidiary, saw continued growth in its policy count as it was servicing approximately 432,000 homeowners’ and dwelling fire insurance policies as of June 30, 2008, up from 399,000 policies at March 31, 2008. The increase in the number of policies in-force continues to be the result of heightened relationships with existing agents, an increase in new agents, a new web-based policy administration platform, and the disruption in the marketplace following the windstorm catastrophes in 2004 and 2005.

In-force premiums were approximately $513.0 million as of June 30, 2008, versus $504.0 million at March 31, 2008, while gross premiums written increased 8.6 percent to $142.9 million in the second quarter of 2008, as compared to $131.6 million for the same period of 2007. Notably during the second quarter of 2008, both in-force premiums and gross premiums written resumed growth on a year over year basis. As the Company has previously discussed, a rate decrease mandated by the Florida Legislature resulted in rate decreases averaging 11.1 percent statewide on homeowners’ policies and 2.3 percent statewide on dwelling fire policies, and were integrated into UPCIC’s rates on June 1, 2007. The effect of these rate decreases has been flowing through UPCIC’s book of business as it renews policies such that the full impact of the premium decreases on existing policies was completed by May 31, 2008. In addition, UPCIC implemented premium discounts resulting from wind mitigation efforts by policyholders. Such discounts were mandated by the Florida Legislature and became effective on June 1, 2007 for new business, and August 1, 2007 for renewal business. Also, rate decreases of 4.1 percent statewide for homeowners’ policies and 0.2 percent statewide for dwelling fire policies were approved by the Florida Office of Insurance Regulation and implemented with effective dates in January 2008 for the homeowners’ program and March 2008 for the dwelling fire program. The effect of these rate decreases has begun to flow through UPCIC’s book of business such that the full impact of the premium decreases on direct premium written should be realized by January 2009 for the homeowners’ program and March 2009 for the dwelling fire program.

In the second quarter of 2008, net premiums earned decreased 16.3 percent to $36.2 million from $43.2 million in the 2007 second quarter, mainly related to an increase in direct premiums earned (net of previously discussed rate decreases and implementation of wind mitigation credits) and a proportionally higher increase in ceded premiums earned related to changes in the reinsurance program.

The Company’s net investment income decreased 53.5 percent to $1.3 million for the three-month period ended June 30, 2008, from $2.7 million for the same period ended June 30, 2007. The decrease is primarily a result of a lower interest rate environment during the 2008 period.

Comparing the second quarter of 2008 with the same period of 2007, commission revenue decreased 5.9 percent to $7.0 million from $7.4 million.

Other revenue increased to $1.3 million for the three-month period ended June 30, 2008, from $59 thousand for the three-month period ended June 30, 2007. The increase in other revenue is primarily attributable to fees earned on new payment plans offered to policyholders by UPCIC, as such payment plans were not available during the 2007 period.

Net losses and loss adjustment expenses (LAE) increased 40.2 percent to $17.5 million in the 2008 second quarter from $12.5 million in the same period in 2007. The net loss ratio, or net losses and LAE as a percentage of net earned premium, for the three-month period ended June 30, 2008, was 48.4 percent compared to 28.9 percent for the three-month period ended June 30, 2007. The increase in the net loss ratio is primarily attributable to: (1) Greater losses and LAE on a direct basis, in the 2008 period as compared to the 2007 period; and (2) Lower net earned premium, the denominator of the ratio, due to higher reinsurance costs in the 2008 period as compared to the 2007 period and lower per policy premium due to rate decreases and implementation of wind mitigation credits. Although reinsurance rates have decreased, total reinsurance costs are higher as UPCIC purchased additional coverage in the 2008 period as compared to the 2007 period.

Second-quarter 2008 general and administrative expenses decreased 17.9 percent to $9.3 million from $11.3 million in the 2007 second quarter. The decrease in general and administrative expenses was a result of several factors, including an increase in ceding commissions due to greater ceded earned premium, a decrease in insurance expense, and a decrease in assessment expense due to increased collections of assessments from policyholders.

The Company’s income taxes decreased 36.3 percent to $7.7 million for the three-month period ended June 30, 2008 from $12.1 million for the three-month period ended June 30, 2007, while income taxes were 40.8 percent of pre-tax income for the three-month period ended June 30, 2008, and 40.8 percent of pre-tax income for the three-month period ended June 30, 2007. The decrease in income taxes is primarily due to lower pre-tax income for the three-month period ended June 30, 2008 versus the same period in 2007.

For the six-month period ended June 30, 2008, the Company’s stockholders’ equity increased to $99.3 million from $72.6 million at December 31, 2007, representing growth of 36.8 percent. As of June 30, 2008, UPCIC’s statutory capital and surplus was $87.9 million versus $98.7 million at December 31, 2007.

First-Half 2008 Results

First-half 2008 net income was $25.5 million, or $0.62 per diluted share, compared to $29.9 million, or $0.73 per diluted share, in the same period of 2007.

In the first six months of 2008, gross premiums written increased 2.7 percent to $269.6 million from $262.6 million for the same period of 2007, primarily attributable to an increase in new business. In the 2008 six-month period, net premiums earned decreased 13.8 percent to $71.3 million from $82.6 million in the 2007 period, due primarily to the reasons listed above.

Investment income decreased 54.0 percent to $2.5 million for the six-month period ended June 30, 2008, from $5.5 million for the six-month period ended June 30, 2007. The decrease is primarily because of a lower interest rate environment during the 2008 period.

Comparing the first half of 2008 with the same period of 2007, commission revenue increased 41.7 percent to $13.8 million from $9.8 million because of a greater amount of reinsurance commission sharing and an increase in the managing general agent’s policy fee income.

Net losses and LAE increased 21.6 percent to $30.2 million in the 2008 first half compared to $24.9 million in the same period of 2007, while the Company’s net loss ratio for the six-month period ended June 30, 2008, was 42.4 percent compared to 30.1 percent for the same period in 2007. The increase in the net loss ratio is a result of the factors which are described in greater detail above.

First six-month general and administrative expenses decreased 17.9 percent to $17.5 million in the 2008 period from $21.3 million in the 2007 period as a result of the reasons listed above.

As announced on June 25, 2008, the Company’s Board of Directors authorized the Company to repurchase up to $3.0 million of its shares of outstanding common stock. Under the repurchase program, management is authorized to repurchase shares through December 31, 2008, with block trades permitted, in open market purchases or in privately negotiated transactions at prevailing market prices in compliance with applicable securities laws and other legal requirements. To facilitate repurchases, the Company plans to make purchases pursuant to a Rule 10b5-1 plan, which will allow the Company to repurchase its shares during periods when it otherwise might be prevented from doing so under insider trading laws. As of June 30, 2008, the Company had repurchased 19,600 shares at a cost of $71 thousand.

Management Comments

Bradley I. Meier, president and chief executive officer, commented, “Although Universal’s earnings in the current quarter were less than last year’s level, the Company continued to generate profitable results during the second quarter of 2008 despite heightened competition and decreased premium rates. As a result of the continued profitability, the Company strengthened its balance sheet with an increase in stockholders’ equity, and announced a $3.0 million stock buyback plan on June 25.”

Mr. Meier concluded, “The Company remains committed to its growth plan and we are pleased to have been recently admitted to write property and casualty insurance in South Carolina. Furthermore, we are optimistic that we will receive our licenses for Texas, Hawaii, Georgia, and North Carolina over the next six months.”

About Universal Insurance Holdings, Inc.

The Company is a vertically integrated insurance holding company. Through its subsidiaries, the Company is currently engaged in insurance underwriting, distribution and claims. UPCIC, which generates revenue from the collection and investment of premiums, is one of the top five writers of homeowners’ insurance policies in the state of Florida and has aligned itself with well-respected service providers in the industry.

Readers should refer generally to reports filed by the Company with the Securities and Exchange Commission (SEC), specifically the Company’s Form 10-KSB for the year ended December 31, 2007, and the Company’s Form 10-Q for the quarterly period ended June 30, 2008, 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; and competition and its effect on pricing, spending, third-party relationships, the Company’s financial stability rating, product pricing and revenues. 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 https://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 contains “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.

second quarter and first half 2008 financial results


Investor Contact: Philip Kranz Dresner Corporate Services 312-780-7240 pkranz@dresnerco.com