##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 001-33251
 UNIVERSAL INSURANCE HOLDINGS, INC.
  Delaware
(State or other jurisdiction of incorporation or organization)
    
    65-0231984
(I.R.S. Employer Identification No.)
 1110 W. Commercial Blvd., Suite 100, Fort Lauderdale, Florida 33309
 (954) 958-1200
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



UNIVERSAL INSURANCE HOLDINGS, INC.
TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
   
 Page No.Item 1. Financial Statements:Consolidated Balance Sheets as of March 31, 2011 and
December 31, 2010 (unaudited)
    
    
    4Consolidated Statements of Income for the three
months ended March 31, 2011 and 2010 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the three
months ended March 31, 2011 and 2010 (unaudited)
    
    
    6Notes
to Consolidated Financial Statements (unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    20Item 3.
Quantitative and Qualitative Disclosure about Market Risk
    
    
    27Item 4.
Controls and Procedures
    
    
    29PART
II  OTHER INFORMATIONItem 1.
Legal Proceedings
    
    
    30Item 1A.
Risk Factors
    
    
    30Item 6.
Exhibits
    
    
    30Signatures
    
    
    32EX-31.1EX-31.2EX-32EX-99.1
  2




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Universal Insurance
Holdings, Inc. and Subsidiaries
      3




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 Item 1. Financial Statements
 UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except per share data)
 March 31,
    
    
    December 31,2011
    
    
    2010ASSETSCash and cash equivalents
    
    $
    281,113
    
    
    $
    147,585Investment securities, at fair value
    
    
    139,084
    
    
    
    224,532Prepaid reinsurance premiums
    
    
    228,395
    
    
    
    221,086Reinsurance recoverables
    
    
    79,126
    
    
    
    79,552Premiums receivable, net
    
    
    43,417
    
    
    
    43,622Receivable from securities
    
    
    38,056
    
    
    
    17,556Other receivables
    
    
    2,253
    
    
    
    2,864Property and equipment, net
    
    
    5,624
    
    
    
    5,407Deferred policy acquisition costs, net
    
    
    10,139
    
    
    
    9,446Deferred income taxes
    
    
    13,006
    
    
    
    13,448Other assets
    
    
    2,236
    
    
    
    1,132Total assets
    
    $
    842,449
    
    
    $
    766,230LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIES:Unpaid losses and loss adjustment expenses
    
    $
    158,250
    
    
    $
    158,929Unearned premiums
    
    
    336,923
    
    
    
    328,334Advance premium
    
    
    30,058
    
    
    
    19,840Accounts payable
    
    
    5,271
    
    
    
    3,767Bank overdraft
    
    
    26,863
    
    
    
    23,030Reinsurance payable, net
    
    
    73,479
    
    
    
    37,946Income taxes payable
    
    
    10,894
    
    
    
    8,282Dividend payable to shareholders
    
    
    3,939
    
    
    
    Other accrued expenses
    
    
    23,468
    
    
    
    23,150Long-term debt
    
    
    23,162
    
    
    
    23,162Total liabilities
    
    
    692,307
    
    
    
    626,440Commitments and Contingencies (Note 10)STOCKHOLDERS EQUITY:Cumulative convertible preferred stock, $.01 par value
    
    
    1
    
    
    
    1Authorized shares - 1,000Issued shares - 108Outstanding shares - 108Minimum liquidation preference -$288Common stock, $.01 par value
    
    
    404
    
    
    
    404Authorized shares - 55,000Issued shares - 40,407Outstanding shares - 39,388Treasury shares, at cost - 1,019
    
    
    (3,109
    )
    
    
    (3,109
    )Additional paid-in capital
    
    
    34,073
    
    
    
    33,675Retained earnings
    
    
    118,773
    
    
    
    108,819Total stockholders equity
    
    
    150,142
    
    
    
    139,790Total liabilities and stockholders equity
    
    $
    842,449
    
    
    $
    766,230
  4




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##### Table of Contents



UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(in thousands, except per share data)
 For the ThreeMonths Ended March 31,2011
    
    
    2010PREMIUMS EARNED AND OTHER REVENUESDirect premiums written
    
    $
    173,175
    
    
    $
    160,100Ceded premiums written
    
    
    (123,891
    )
    
    
    (127,568
    )Net premiums written
    
    
    49,284
    
    
    
    32,532(Increase) decrease in net unearned premium
    
    
    (1,280
    )
    
    
    782Premiums earned, net
    
    
    48,004
    
    
    
    33,314Net investment income
    
    
    257
    
    
    
    193Net realized gains on investments
    
    
    3,652
    
    
    
    1,287Net unrealized gains on investments
    
    
    2,588
    
    
    
    Net foreign currency gains on investments
    
    
    71
    
    
    
    684Commission revenue
    
    
    4,180
    
    
    
    4,802Policy fees
    
    
    4,173
    
    
    
    3,936Other revenue
    
    
    1,408
    
    
    
    1,004Total premiums earned and other revenues
    
    
    64,333
    
    
    
    45,220OPERATING COSTS AND EXPENSESLosses and loss adjustment expenses
    
    
    26,185
    
    
    
    23,652General and administrative expenses
    
    
    15,072
    
    
    
    10,189Total operating costs and expenses
    
    
    41,257
    
    
    
    33,841INCOME BEFORE INCOME TAXES
    
    
    23,076
    
    
    
    11,379Income taxes, current
    
    
    8,737
    
    
    
    3,484Income taxes, deferred
    
    
    441
    
    
    
    951Income taxes, net
    
    
    9,178
    
    
    
    4,435NET INCOME
    
    $
    13,898
    
    
    $
    6,944Basic net income per common share
    
    $
    0.35
    
    
    $
    0.18Weighted average of common shares
outstanding  Basic
    
    
    39,388
    
    
    
    38,889Fully diluted net income per share
    
    $
    0.34
    
    
    $
    0.17Weighted average of common shares
outstanding  Diluted
    
    
    40,509
    
    
    
    40,434Cash dividend declared per common share
    
    $
    0.10
    
    
    $
    0.12
 For the ThreeMonths Ended March 31,2011
    
    
    2010Comprehensive Income:Net income
    
    $
    13,898
    
    
    $
    6,944Change in net unrealized losses on investments, net of tax
    
    
    
    
    
    
    (1,758
    )Comprehensive Income
    
    $
    13,898
    
    
    $
    5,186
  5




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##### Table of Contents



UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
 Three Months EndedMarch 31, 2011
    
    
    March 31, 2010Cash flows from operating activities:Net income
    
    $
    13,898
    
    
    $
    6,944Adjustments to reconcile net income to net cash provided by operating
activities:Bad debt expense
    
    
    164
    
    
    
    202Depreciation
    
    
    182
    
    
    
    147Amortization of cost of stock options
    
    
    254
    
    
    
    478Amortization of restricted stock grants
    
    
    144
    
    
    
    224Net realized gains on investments
    
    
    (3,652
    )
    
    
    (1,287
    )Net unrealized gains on investments
    
    
    (2,588
    )
    
    
    Net foreign currency gains on investments
    
    
    (71
    )
    
    
    (684
    )Amortization of premium / accretion of discount, net
    
    
    157
    
    
    
    107Deferred income taxes
    
    
    442
    
    
    
    951Other
    
    
    838
    
    
    
    (15
    )Net change in assets and liabilities relating to operating activities:Prepaid reinsurance premiums
    
    
    (7,309
    )
    
    
    (20,728
    )Reinsurance recoverables
    
    
    426
    
    
    
    26,781Premiums receivable, net
    
    
    43
    
    
    
    (1,548
    )Other receivables
    
    
    (228
    )
    
    
    865Income taxes recoverable
    
    
    
    
    
    
    (697
    )Deferred policy acquisition costs, net
    
    
    (694
    )
    
    
    (2,972
    )Proceeds from sales of debt securities, trading
    
    
    73,240
    
    
    
    Purchases of equity securities, trading
    
    
    (48,350
    )
    
    
    Proceeds from sales of equity securities, trading
    
    
    46,342
    
    
    
    Other assets
    
    
    (1,234
    )
    
    
    119Unpaid losses and loss adjustment expenses
    
    
    (679
    )
    
    
    4,539Unearned premiums
    
    
    8,588
    
    
    
    19,946Accounts payable
    
    
    1,504
    
    
    
    801Reinsurance payable
    
    
    35,533
    
    
    
    16,104Income taxes payable
    
    
    2,612
    
    
    
    121Other accrued expenses
    
    
    319
    
    
    
    (1,471
    )Advance premium
    
    
    10,218
    
    
    
    6,279Net cash provided by operating activities
    
    
    130,099
    
    
    
    55,206Cash flows from investing activities:Purchases of fixed maturities
    
    
    
    
    
    
    (50,427
    )Proceeds from sales of fixed maturities
    
    
    
    
    
    
    25,322Purchases of equity securities, available for sale
    
    
    
    
    
    
    (35,880
    )Proceeds from sales of equity securities, available for sale
    
    
    
    
    
    
    36,447Capital expenditures and building improvements
    
    
    (399
    )
    
    
    (146
    )Net cash used in investing activities
    
    
    (399
    )
    
    
    (24,684
    )Cash flows from financing activities:Bank overdraft
    
    
    3,833
    
    
    
    5,163Preferred stock dividend
    
    
    (5
    )
    
    
    (5
    )Issuance of common stock
    
    
    
    
    
    
    7Treasury shares on option exercise
    
    
    
    
    
    
    (3,724
    )Tax benefit on exercise of stock options
    
    
    
    
    
    
    4,021Repayments of loans payable
    
    
    
    
    
    
    (367
    )Net cash provided by financing activities
    
    
    3,828
    
    
    
    5,095Net increase in cash and cash equivalents
    
    
    133,528
    
    
    
    35,617Cash and cash equivalents at beginning of period
    
    
    147,585
    
    
    
    192,924Cash and cash equivalents at end of period
    
    $
    281,113
    
    
    $
    228,541Supplemental cash flow disclosureInterest
    
    $
    
    
    
    $
    234Income taxes
    
    $
    6,050
    
    
    $
    4,699
  6




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##### Table of Contents



UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 1. Nature of Operations and Basis of Presentation
 Nature of Operations
   Basis of Presentation
     7




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2. Significant Accounting Policies
  Concentrations of Credit Risk.
    As of March 31, 2011Institution
    
    Cash
    
    
    Money Market Funds
    
    
    Total
    
    
    %U. S. Bank IT&C
    
    $
    
    
    
    $
    41,453
    
    
    $
    41,453
    
    
    
    14.7
    %SunTrust Bank
    
    
    1,689
    
    
    
    
    
    
    
    1,689
    
    
    
    0.6
    %SunTrust Bank Institutional Asset Services
    
    
     
    
    
    
    214,671
    
    
    
    214,671
    
    
    
    76.4
    %Wachovia Bank a division of Wells Fargo Bank N.A.
    
    
    1,228
    
    
    

    
    
    
    1,228
    
    
    
    0.4
    %Bank of New York Trust Fund
    
    
    
    
    
    
    21,631
    
    
    
    21,631
    
    
    
    7.7
    %All Other Banking Institutions
    
    
    438
    
    
    
    3
    
    
    
    441
    
    
    
    0.2
    %$
    3,355
    
    
    $
    277,758
    
    
    $
    281,113
    
    
    
    100.0
    %
 As of December 31, 2010Institution
    
    Cash
    
    
    Money Market Funds
    
    
    Total
    
    
    %U. S. Bank IT&C
    
    $
        
    
    
    $
    41,454
    
    
    $
    41,454
    
    
    
    28.1
    %SunTrust Bank
    
    
    1,241
    
    
    
    
    
    
    
    1,241
    
    
    
    0.8
    %SunTrust Bank Institutional Asset Services
    
    
     
    
    
    
    92,324
    
    
    
    92,324
    
    
    
    62.6
    %Wachovia Bank a division of Wells Fargo Bank N.A.
    
    
    780
    
    
    
    
    
    
    
    780
    
    
    
    0.5
    %Bank of New York Trust Fund
    
    
    
    
    
    
    11,340
    
    
    
    11,340
    
    
    
    7.7
    %All Other Banking Institutions
    
    
    443
    
    
    
    3
    
    
    
    446
    
    
    
    0.3
    %$
    2,464
    
    
    $
    145,121
    
    
    $
    147,585
    
    
    
    100.0
    %
  8




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##### Table of Contents



As of March 31,
    
    
    As of December 31,Reinsurer
    
    2011
    
    
    2010Everest Reinsurance Company
    
    $
    224,822
    
    
    $
    227,942Florida Hurricane Catastrophe Fund
    
    
    14,339
    
    
    
    32,849Total
    
    $
    239,161
    
    
    $
    260,791
 Recently Adopted Accounting Pronouncements
  3. Investments
   9




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##### Table of Contents



For the Three Months EndedMarch 31,2011
    
    
    2010Cash and cash equivalents
    
    $
    14
    
    
    $
    18Debt securities
    
    
    401
    
    
    
    300Equity securities
    
    
    26
    
    
    
    10Total investment income
    
    
    441
    
    
    
    328Less investment expenses
    
    
    (184
    )
    
    
    (135
    )Net investment income
    
    $
    257
    
    
    $
    193
  For the Three Months Ended
March 31, 2011
    
    
    For the Three Months Ended
March 31, 2010Realized Gains
    
    
    Proceeds (Fair
    
    
    Realized Gains
    
    
    Proceeds (Fair(Losses)
    
    
    Value at Sale)
    
    
    (Losses)
    
    
    Value at Sale)Debt Securities
    
    $
    123
    
    
    $
    8,240
    
    
    $
    61
    
    
    $
    5,962Equity securities
    
    
    14,048
    
    
    
    61,086
    
    
    
    4,110
    
    
    
    36,486Total
    
    
    14,171
    
    
    
    69,326
    
    
    
    4,171
    
    
    
    42,448Debt Securities
    
    
    (4,263
    )
    
    
    65,000
    
    
    
    (200
    )
    
    
    19,360Equity securities
    
    
    (5,863
    )
    
    
    5,756
    
    
    
    (2,632
    )
    
    
    5,849Total
    
    
    (10,126
    )
    
    
    70,756
    
    
    
    (2,832
    )
    
    
    25,209Net
    
    $
    4,045
    
    
    $
    140,082
    
    
    $
    1,339
    
    
    $
    67,657
  10




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##### Table of Contents



As of March 31, 2011
    
    
    As of December 31, 2010Fair Value
    
    
    Percent of Total
    
    
    Fair Value
    
    
    Percent of TotalDebt Securities:US government agency
obligations
    
    $
    58,098
    
    
    
    41.8
    %
    
    $
    130,116
    
    
    
    57.9
    %Equity Securities:Common stockMetals and mining
    
    
    26,975
    
    
    
    19.4
    %
    
    
    25,752
    
    
    
    11.5
    %Other
    
    
    194
    
    
    
    0.1
    %
    
    
    362
    
    
    
    0.2
    %Exchange-traded and mutual fundsMetals and mining
    
    
    34,985
    
    
    
    25.1
    %
    
    
    42,209
    
    
    
    18.8
    %Agriculture
    
    
    13,248
    
    
    
    9.5
    %
    
    
    14,877
    
    
    
    6.6
    %Energy
    
    
    3,995
    
    
    
    2.9
    %
    
    
    5,559
    
    
    
    2.5
    %Indices
    
    
    1,464
    
    
    
    1.1
    %
    
    
    4,613
    
    
    
    2.0
    %Other
    
    
    125
    
    
    
    0.1
    %
    
    
    1,044
    
    
    
    0.5
    %Total equity securities
    
    
    80,986
    
    
    
    58.2
    %
    
    
    94,416
    
    
    
    42.1
    %Total investment securities
    
    $
    139,084
    
    
    
    100.0
    %
    
    $
    224,532
    
    
    
    100.0
    %
    4. Reinsurance
    11




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Three Months Ended March 31, 2011
    
    
    Three Months Ended March 31, 2010Loss and Loss
    
    
    
    
    
    
    
    
    
    
    Loss and LossPremiums
    
    
    Premiums
    
    
    Adjustment
    
    
    Premiums
    
    
    Premiums
    
    
    AdjustmentWritten
    
    
    Earned
    
    
    Expenses
    
    
    Written
    
    
    Earned
    
    
    ExpensesDirect
    
    $
    173,175
    
    
    $
    164,587
    
    
    $
    53,131
    
    
    $
    160,100
    
    
    $
    140,153
    
    
    $
    46,680Ceded
    
    
    (123,891
    )
    
    
    (116,583
    )
    
    
    (26,946
    )
    
    
    (127,568
    )
    
    
    (106,839
    )
    
    
    (23,028
    )Net
    
    $
    49,284
    
    
    $
    48,004
    
    
    $
    26,185
    
    
    $
    32,532
    
    
    $
    33,314
    
    
    $
    23,652
  As of March 31,
    
    
    As of December 31,2011
    
    
    2010Prepaid reinsurance premiums
    
    $
    228,395
    
    
    $
    221,086Reinsurance recoverable on unpaid losses and LAE
    
    $
    78,611
    
    
    $
    79,114Reinsurance recoverable on paid losses
    
    
    515
    
    
    
    438Reinsurance recoverables
    
    $
    79,126
    
    
    $
    79,552
  As of March 31,
    
    
    As of December 31,2011
    
    
    2010Reinsurance payable, net of ceding commissions
due from reinsurers
    
    $
    105,711
    
    
    $
    75,553Inuring premiums receivable
    
    
    (32,232
    )
    
    
    (37,607
    )Reinsurance payable, net
    
    $
    73,479
    
    
    $
    37,946
 12




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##### Table of Contents



5. Stock-Based Compensation and Stockholders Equity
 Stock Options
  Restricted Stock Grants
  Weighted AverageNumber of
    
    
    Grant Date FairShares
    
    
    
    ValueNonvested shares outstanding as of December 31, 2010
    
    
    300
    
    
    $
    5.84Vested
    
    
    (99
    )
    
    $
    5.84Nonvested shares outstanding as of March 31, 2011
    
    
    201
    
    
    $
    5.84
  Dividends
  6. Related Party Transactions
  13




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7. Income Taxes
  Three Months EndedMarch 31,2011
    
    
    2010Statutory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %Increases resulting from:Disallowed meals & entertainment
    
    
    0.1
    %
    
    
    0.4
    %Disallowed compensation
    
    
    0.6
    %
    
    
    0.0
    %State income tax, net of federal tax benefit (1)
    
    
    3.6
    %
    
    
    3.6
    %Other, net
    
    
    0.5
    %
    
    
    0.0
    %Effective tax rate
    
    
    39.8
    %
    
    
    39.0
    %
 
 (1)
    
    Included in income tax is State of Florida income tax at a statutory tax rate of 5.5%. 8. Earnings Per Share
   Three Months Ended
    
    
    Three Months EndedMarch 31, 2011
    
    
    March 31, 2010Income Available to
    
    
    
    
    
    
    
    
    
    
    Income Available toCommon Stockholders
    
    
    Shares
    
    
    Per-Share Amount
    
    
    Common Stockholders
    
    
    Shares
    
    
    Per-Share AmountNet income
    
    $
    13,898
    
    
    
    
    
    
    
    
    
    
    $
    6,944Less: preferred stocks dividends
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (5
    )Income available to common stockholders
    
    $
    13,893
    
    
    
    39,388
    
    
    $
    0.35
    
    
    $
    6,939
    
    
    
    38,889
    
    
    $
    0.18Effect of dilutive securities:Stock options and warrants
    
    
    
    
    
    
    962
    
    
    
    
    
    
    
    
    
    
    
    1,384Preferred stock
    
    
    5
    
    
    
    159
    
    
    
    
    
    
    
    5
    
    
    
    161Income available to common stockholders and assumed
conversion
    
    $
    13,898
    
    
    
    40,509
    
    
    $
    0.34
    
    
    $
    6,944
    
    
    
    40,434
    
    
    $
    0.17
 14




---



##### Table of Contents



9. Other Comprehensive Income
  Three MonthsEnded March 31, 2010Pretax
    
    
    Tax
    
    
    After-taxUnrealized (losses) gains, on investments,
net, arising during the periods
    
    $
    (4,149
    )
    
    $
    1,600
    
    
    $
    (2,549
    )Less: reclassification adjustments of
realized gains on investments
    
    
    1,287
    
    
    
    (496
    )
    
    
    791Other comprehensive (loss) income
    
    $
    (2,862
    )
    
    $
    1,104
    
    
    $
    (1,758
    )
  10. Commitments and Contingencies
 Employment Agreements
  As of March 31, 2011Non-equityincentiveSalaries
    
    
    compensationCommitments
    
    $
    17,851
    
    
    $
    14,476Contingent payments upon certain events:Termination
    
    $
    6,550
    
    
    $
    5,302Change in control
    
    $
    14,575
    
    
    $
    9,354Death
    
    $
    9,174
    
    
    $
    9,333Disability
    
    $
    5,361
    
    
    $
    4,019
 Operating Leases
  Litigation
  15




---



##### Table of Contents



11. Fair Value Measurements
  
    
    Level 1  Observable inputs that reflect unadjusted quoted prices for identical assets or
liabilities in active markets as of the reporting date. Active markets are those in which
transactions for the asset or liability occur in sufficient frequency and volume to provide
pricing information on an ongoing basis.
    
    Level 2  Observable market-based inputs or unobservable inputs that are corroborated by
market data.
    
    Level 3  Unobservable inputs that are not corroborated by market data. These inputs reflect
managements best estimate of fair value using its own assumptions about the assumptions a
market participant would use in pricing the asset or liability.
 Summary of significant valuation techniques for assets measured at fair value on a recurring basis
  U.S. government obligations and agencies:
 Common stock:
 Exchange traded and mutual funds:
  U.S. government obligations and agencies:
 Exchange-traded derivatives
  16




---



##### Table of Contents



As of March 31, 2011Fair Value MeasurementsLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalInvestment securities (trading):Debt securities:US government obligations and agencies
    
    $
    178
    
    
    $
    57,920
    
    
    $
    
    
    
    $
    58,098Equity securities:Common stock:Metals and mining
    
    
    26,975
    
    
    
    
    
    
    
    
    
    
    
    26,975Other
    
    
    194
    
    
    
    
    
    
    
    
    
    
    
    194Exchange-traded and mutual funds:Metals and mining
    
    
    34,985
    
    
    
    
    
    
    
    
    
    
    
    34,985Agriculture
    
    
    13,248
    
    
    
    
    
    
    
    
    
    
    
    13,248Energy
    
    
    3,995
    
    
    
    
    
    
    
    
    
    
    
    3,995Indices
    
    
    1,464
    
    
    
    
    
    
    
    
    
    
    
    1,464Other
    
    
    125
    
    
    
    
    
    
    
    
    
    
    
    125Total equity securities
    
    
    80,986
    
    
    
    
    
    
    
    
    
    
    
    80,986Exchange-traded derivatives (other assets)
    
    
    
    
    
    
    870
    
    
    
    
    
    
    
    870Total
    
    $
    81,164
    
    
    $
    58,790
    
    
    $
    
    
    
    $
    139,954
 17




---



##### Table of Contents



As of December 31, 2010Fair Value MeasurementsLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalInvestment securities (trading):Debt securities:US government obligations and agencies
    
    $
    179
    
    
    $
    129,937
    
    
    $
    
    
    
    $
    130,116Equity securities:Common stock:Metals and mining
    
    
    25,752
    
    
    
    
    
    
    
    
    
    
    
    25,752Other
    
    
    362
    
    
    
    
    
    
    
    
    
    
    
    362Exchange-traded and mutual funds:Metals and mining
    
    
    42,209
    
    
    
    
    
    
    
    
    
    
    
    42,209Agriculture
    
    
    14,877
    
    
    
    
    
    
    
    
    
    
    
    14,877Energy
    
    
    5,559
    
    
    
    
    
    
    
    
    
    
    
    5,559Indices
    
    
    4,613
    
    
    
    
    
    
    
    
    
    
    
    4,613Other
    
    
    1,044
    
    
    
    
    
    
    
    
    
    
    
    1,044Total equity securities
    
    
    94,416
    
    
    
    
    
    
    
    
    
    
    
    94,416Exchange-traded derivatives (other assets)
    
    
    
    
    
    
    182
    
    
    
    
    
    
    
    182Total
    
    $
    94,595
    
    
    $
    130,119
    
    
    $
    
    
    
    $
    224,714
 .
  18




---



##### Table of Contents



As of March 31, 2011Fair Value MeasurementsNet unrealized
    
    
    Estimated FairCarrying value
    
    
    Gains/(Losses)
    
    
    ValueAssets:Cash and cash equivalents
    
    $
    281,113
    
    
    $
    
    
    
    $
    281,113$
    281,113
    
    
    $
    
    
    
    $
    281,113Liabilities:Long-term debt
    
    $
    23,162
    
    
    $
    (5,061
    )
    
    $
    18,101$
    23,162
    
    
    $
    (5,061
    )
    
    $
    18,101
 As of December 31, 2010Fair Value MeasurementsNet unrealized
    
    
    Estimated FairCarrying value
    
    
    Gains/(Losses)
    
    
    ValueAssets:Cash and cash equivalents
    
    $
    147,585
    
    
    $
    
    
    
    $
    147,585$
    147,585
    
    
    $
    
    
    
    $
    147,585Liabilities:Long-term debt
    
    $
    23,162
    
    
    $
    (4,063
    )
    
    $
    19,099$
    23,162
    
    
    $
    (4,063
    )
    
    $
    19,099
   12. Subsequent Events
  19




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Unless the context otherwise requires, all references to we, us, our, and Company refer to
Universal Insurance Holdings, Inc. (UIH) and its subsidiaries. You should read the following
discussion together with our unaudited condensed consolidated financial statements and the related
notes thereto included in Part I, Item 1Financial Statements. Operating results for any one
quarter are not necessarily indicative of results to be expected for any other quarter or for the
year.
 Forward-Looking Statements
 In addition to historical information, the following discussion may contain forward-looking
statements within the meaning of the Private Securities Reform Litigation Act of 1995. The words
expect, estimate, anticipate, believe, intend, project, plan and similar expressions
and variations thereof, speak only as of the date the statement was made and are intended to
identify forward-looking statements. Forward-looking statements are based on various factors and
assumptions that include known and unknown risks and uncertainties. Such statements may include,
but not be limited to, projections of revenues, income or loss, expenses, plans, as well as
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 in the following discussion and those described in forward-looking statements
as a result of the risks set forth in the section below entitled Cautionary Note Regarding
Forward-Looking Statements.
 Overview
   Recent Developments
   20




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##### Table of Contents



Results of Operations  Three Months Ended March 31, 2011 Compared to Three Months Ended March 31,
2010
  Three Months Ended March 31,
    
    
    Change2011
    
    
    2010
    
    
    $
    
    
    %PREMIUMS EARNED AND OTHER REVENUESDirect premiums written
    
    $
    173,175
    
    
    $
    160,100
    
    
    $
    13,075
    
    
    
    8.2
    %Ceded premiums written
    
    
    (123,891
    )
    
    
    (127,568
    )
    
    
    3,677
    
    
    
    -2.9
    %Net premiums written
    
    
    49,284
    
    
    
    32,532
    
    
    
    16,752
    
    
    
    51.5
    %(Increase) decrease in net unearned premium
    
    
    (1,280
    )
    
    
    782
    
    
    
    (2,062
    )
    
    NMPremiums earned, net
    
    
    48,004
    
    
    
    33,314
    
    
    
    14,690
    
    
    
    44.1
    %Net investment income
    
    
    257
    
    
    
    193
    
    
    
    64
    
    
    
    33.2
    %Net realized gains on investments
    
    
    3,652
    
    
    
    1,287
    
    
    
    2,365
    
    
    
    183.8
    %Net unrealized gains on investments
    
    
    2,588
    
    
    
    
    
    
    
    2,588
    
    
    NMNet foreign currency gains (losses) on investments
    
    
    71
    
    
    
    684
    
    
    
    (613
    )
    
    
    -89.6
    %Commission revenue
    
    
    4,180
    
    
    
    4,802
    
    
    
    (622
    )
    
    
    -13.0
    %Policy fees
    
    
    4,173
    
    
    
    3,936
    
    
    
    237
    
    
    
    6.0
    %Other revenue
    
    
    1,408
    
    
    
    1,004
    
    
    
    404
    
    
    
    40.2
    %Total premiums earned and other revenues
    
    
    64,333
    
    
    
    45,220
    
    
    
    19,113
    
    
    
    42.3
    %OPERATING COSTS AND EXPENSESLosses and loss adjustment expenses
    
    
    26,185
    
    
    
    23,652
    
    
    
    2,533
    
    
    
    10.7
    %General and administrative expenses
    
    
    15,072
    
    
    
    10,189
    
    
    
    4,883
    
    
    
    47.9
    %Total operating costs and expenses
    
    
    41,257
    
    
    
    33,841
    
    
    
    7,416
    
    
    
    21.9
    %INCOME BEFORE INCOME TAXES
    
    
    23,076
    
    
    
    11,379
    
    
    
    11,697
    
    
    
    102.8
    %Income taxes, current
    
    
    8,737
    
    
    
    3,484
    
    
    
    5,253
    
    
    
    150.8
    %Income taxes, deferred
    
    
    441
    
    
    
    951
    
    
    
    (510
    )
    
    
    -53.6
    %Income taxes, net
    
    
    9,178
    
    
    
    4,435
    
    
    
    4,743
    
    
    
    106.9
    %NET INCOME
    
    $
    13,898
    
    
    $
    6,944
    
    
    $
    6,954
    
    
    
    100.1
    %
  21




---



##### Table of Contents



Reduction of in-force premium (only policies including wind coverage)Percentage of UPCICpolicyholders
    
    
    
    
    
    
    
    
    
    Percentage reductionDate
    
    receiving credits
    
    Total credits
    
    
    In-force premium
    
    
    of in-force premium6/1/2007
    
    1.9%
    
    $
    6,285
    
    
    $
    487,866
    
    
    1.3%12/31/2007
    
    11.8%
    
    $
    31,952
    
    
    $
    500,136
    
    
    6.0%3/31/2008
    
    16.9%
    
    $
    52,398
    
    
    $
    501,523
    
    
    9.5%6/30/2008
    
    21.3%
    
    $
    74,186
    
    
    $
    508,412
    
    
    12.7%9/30/2008
    
    27.3%
    
    $
    97,802
    
    
    $
    515,560
    
    
    16.0%12/31/2008
    
    31.1%
    
    $
    123,525
    
    
    $
    514,011
    
    
    19.4%3/31/2009
    
    36.3%
    
    $
    158,230
    
    
    $
    530,030
    
    
    23.0%6/30/2009
    
    40.4%
    
    $
    188,053
    
    
    $
    544,646
    
    
    25.7%9/30/2009
    
    43.0%
    
    $
    210,292
    
    
    $
    554,379
    
    
    27.5%12/31/2009
    
    45.2%
    
    $
    219,974
    
    
    $
    556,557
    
    
    28.3%3/31/2010
    
    47.8%
    
    $
    235,718
    
    
    $
    569,870
    
    
    29.3%6/30/2010
    
    50.9%
    
    $
    281,386
    
    
    $
    620,277
    
    
    31.2%9/30/2010
    
    52.4%
    
    $
    291,306
    
    
    $
    634,285
    
    
    31.5%12/31/2010
    
    54.2%
    
    $
    309,858
    
    
    $
    648,408
    
    
    32.3%3/31/2011
    
    55.8%
    
    $
    325,511
    
    
    $
    660,303
    
    
    33.0%
        22




---



##### Table of Contents



Three months ended March 31, 2011Direct
    
    
    Ceded
    
    
    NetLoss and loss adjustment expenses
    
    $
    53,131
    
    
    $
    26,946
    
    
    $
    26,185Premiums earned
    
    $
    164,587
    
    
    $
    116,583
    
    
    $
    48,004Loss & LAE ratios
    
    
    32.3
    %
    
    
    23.1
    %
    
    
    54.5
    %
 Three months ended March 31, 2010Direct
    
    
    Ceded
    
    
    NetLoss and loss adjustment expenses
    
    $
    46,680
    
    
    $
    23,028
    
    
    $
    23,652Premiums earned
    
    $
    140,153
    
    
    $
    106,839
    
    
    $
    33,314Loss & LAE ratios
    
    
    33.3
    %
    
    
    21.6
    %
    
    
    71.0
    %
      23




---



##### Table of Contents



Analysis of Financial Condition  As of March 31, 2011 Compared to December 31, 2010
    As of March 31,
    
    
    As of December 31,Type of Investment
    
    2011
    
    
    2010Cash and cash equivalents
    
    $
    281,113
    
    
    $
    147,585Debt securities
    
    
    58,098
    
    
    
    130,116Equity securities
    
    
    80,986
    
    
    
    94,416Total Investments
    
    $
    420,197
    
    
    $
    372,117
  Liquidity and Capital Resources
      24




---



##### Table of Contents



Cash Dividends
  Contractual Obligations
  Critical Accounting Policies and Estimates
  Related Parties
  25




---



##### Table of Contents



Cautionary Note Regarding Forward- Looking Statements
  
    
    The industry in which we operate subjects us to significant fluctuations in operating
results caused by competition, catastrophe losses, general economic conditions including
interest rate changes, legislative initiatives, the regulatory environment, the frequency
of litigation, the size of judgments, severe weather conditions, climate changes or cycles,
the role of federal or state government in the insurance market, judicial or other
authoritative interpretations of laws and policies, and the availability and cost of
reinsurance.
    
    Our ability to manage our exposure to catastrophic losses.
    
    Risks related to our dependence upon third party developers of models to estimate
hurricane losses and the reasonableness of assumptions or scenarios incorporated into the
models which may be provided by third parties or management.
    
    Risks related to our dependence upon third parties to perform certain functions
including, but not limited to the purchase of reinsurance and risk management analysis. We
also rely on reinsurers to limit the amount of risk retained under our policies and to
increase our ability to write additional risks.
    
    Our ability to obtain reinsurance to the same extent and at the same cost as currently
in place and minimize the loss of potential profits by ceding premiums to reinsurers.
    
    Credit risk, including certain concentrations with respect to our reinsurers, in light
of our primary liability for the full amount of the risk underlying the reinsurance
agreements.
    
    Risks related to the ability of the Florida Hurricane Catastrophe Fund (FHCF) to provide
reimbursements at levels requested and relied upon by us or as timely as required by our
claims payments to policyholders. In addition, the cost of our reinsurance program may
increase should we deem it necessary to purchase additional private market reinsurance due
to reduced estimates of the FHCFs claims-paying capacity.
    
    Risks that laws, contracts or requirements relating to the FHCF may not be interpreted
in a manner consistent with UPCICs understandings or will change in the future.
    
    Our ability to estimate and maintain adequate liabilities to pay claims for losses and
loss adjustment expenses.
 26




---



##### Table of Contents




    
    Adverse regulation or legislation.
    
    Our ability to implement sufficient and timely rate adjustments to provide aggregate
premiums commensurate with expected losses.
    
    Risks related to our dependence upon the efforts of key individuals.
    
    Our ability to compete in a highly competitive industry.
    
    Our ability to maintain our financial stability rating provided by Demotech, Inc.
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
   27




---



##### Table of Contents



Interest Rate Risk
   As of March 31, 2011Total2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Thereafter
    
    
    Amortized Cost
    
    
    Fair ValueUS government and agency obligations
    
    $
    
    
    
    $
    174
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    60,255
    
    
    $
    60,429
    
    
    $
    58,098average interest rate
    
    
    
    
    
    
    2.6
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.4
    %
    
    
    4.0
    %
    
    
    4.0
    %
 As of December 31, 2010Total2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter
    
    
    Amortized Cost
    
    
    Fair ValueUS government and agency obligations
    
    $
    
    
    
    $
    
    
    
    $
    174
    
    
    $
    
    
    
    $
    
    
    
    $
    137,792
    
    
    $
    137,966
    
    
    $
    130,116average interest rate
    
    
    
    
    
    
    
    
    
    
    2.6
    %
    
    
    
    
    
    
    
    
    
    
    1.3
    %
    
    
    3.9
    %
    
    
    3.9
    %
  Equity and Commodity Price Risk
  28




---



##### Table of Contents



As of March 31, 2011
    
    
    As of December 31, 2010Fair Value
    
    
    Percent of Total
    
    
    Fair Value
    
    
    Percent of TotalCommon stock:Metals and mining
    
    $
    26,975
    
    
    
    33.3
    %
    
    $
    25,752
    
    
    
    27.3
    %Other
    
    
    194
    
    
    
    0.2
    %
    
    
    362
    
    
    
    0.4
    %Exchange-traded and mutual funds:Metals and mining
    
    
    34,985
    
    
    
    43.2
    %
    
    
    42,209
    
    
    
    44.7
    %Agriculture
    
    
    13,248
    
    
    
    16.4
    %
    
    
    14,877
    
    
    
    15.7
    %Energy
    
    
    3,995
    
    
    
    4.9
    %
    
    
    5,559
    
    
    
    5.9
    %Indices
    
    
    1,464
    
    
    
    1.8
    %
    
    
    4,613
    
    
    
    4.9
    %Other
    
    
    125
    
    
    
    0.2
    %
    
    
    1,044
    
    
    
    1.1
    %Total
    
    $
    80,986
    
    
    
    100.0
    %
    
    $
    94,416
    
    
    
    100.0
    %
  Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  29




---



##### Table of Contents



PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1A. Risk Factors
  Item 6. Exhibits
 Exhibit No.
    
    Exhibit3.1
    
    Registrants Restated Amended and Restated Certificate of
Incorporation (1)3.2
    
    Certificate of Designation for Series A Convertible Preferred
Stock dated October 11, 1994 (2)3.3
    
    Certificate of Designations, Preferences, and Rights of Series
M Convertible Preferred Stock dated August 13, 1997 (3)3.4
    
    Certificate of Amendment of Amended and Restated Certificate
of Incorporation dated October 19, 1998 (2)3.5
    
    Certificate of Amendment of Amended and Restated Certificate
of Incorporation dated December 18, 2000 (2)3.6
    
    Certificate of Amendment of Certificate of Designations of the
Series A Convertible Preferred Stock dated October 29, 2001
(2)3.7
    
    Certificate of Amendment of Amended and Restated Certificate
of Incorporation dated December 7, 2005 (4)3.8
    
    Certificate of Amendment of Amended and Restated Certificate
of Incorporation dated May 18, 2007 (4)3.9
    
    Amended and Restated Bylaws (5)
 30




---



##### Table of Contents



Exhibit No.
    
    Exhibit31.1
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200232
    
    Certifications of Chief Executive Officer and Chief Financial
Officer Pursuant to Title 18, United States Code, Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 200299.1
    
    Schedule of Investments
 
 (1)
    
    Incorporated by reference to the Registrants Registration Statement on Form S-1 (File
No. 33-51546) declared effective on December 14, 1992(2)
    
    Incorporated by reference to the Registrants Annual Report on Form 10-KSB for the year ended
December 31, 2002(3)
    
    Incorporated by reference to the Registrants Annual Report on Form 10-KSB/A for the year
ended April 30, 1997(4)
    
    Incorporated by reference to the Registrants Quarterly Report on Form 10-QSB for period
ended June 30, 2007(5)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K dated January 8,
2007 31




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##### Table of Contents



SIGNATURES
  UNIVERSAL INSURANCE HOLDINGS, INC.Date: May 6, 2011
    /s/ Bradley I. MeierBradley I. Meier, President and Chief Executive Officer/s/ George R. De HeerGeorge R. De Heer, Chief Financial Officer(Principal Accounting Officer) 32