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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________
FORM 10-Q
________________________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
or
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
________________________________________________________

a01uvelogo.jpg
UNIVERSAL INSURANCE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
________________________________________________________
Delaware
 
65-0231984
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
1110 W. Commercial Blvd., Fort Lauderdale, Florida 33309
(Address of principal executive offices)
(954) 958-1200
(Registrant’s telephone number, including area code)
________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 x
 
Accelerated filer
 
Non-accelerated filer
 ☐
 
Smaller reporting company
 
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes  ☐    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 34,647,850 shares of common stock, par value $0.01 per share, outstanding on April 22, 2019.
 




Table of Contents

UNIVERSAL INSURANCE HOLDINGS, INC.
TABLE OF CONTENTS
 
 
Page No.
 
 
 
 
 
 


2


Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To The Board of Directors and Stockholders of
Universal Insurance Holdings, Inc. and Subsidiaries
Fort Lauderdale, Florida


We have reviewed the accompanying condensed consolidated balance sheet of Universal Insurance Holdings, Inc. and its wholly-owned subsidiaries (the “Company”) as of March 31, 2019 and the related condensed consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the three-month periods ended March 31, 2019 and 2018. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Universal Insurance Holdings, Inc. and Subsidiaries as of December 31, 2018 and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended (not presented herein) and we expressed an unqualified audit opinion on those consolidated financial statements in our report dated March 1, 2019. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Plante & Moran, PLLC
Chicago, Illinois
April 26, 2019


3


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)
 
As of
 
March 31,
2019
 
December 31,
2018
 
(unaudited)
 
 
ASSETS
 
 
 
Available-for-sale debt securities, at fair value (amortized cost: $834,817 and $831,127)
$
840,028

 
$
820,438

Equity securities, at fair value (amortized cost: $58,137 and $86,271)
53,175

 
63,277

Investment real estate, net
25,070

 
24,439

Total invested assets
918,273

 
908,154

 
 
 
 
Cash and cash equivalents
185,061

 
166,428

Restricted cash and cash equivalents
2,635

 
2,635

Prepaid reinsurance premiums
57,100

 
142,750

Reinsurance recoverable
323,294

 
418,603

Premium receivable, net
58,346

 
59,858

Property and equipment, net
40,102

 
34,991

Deferred policy acquisition costs
83,284

 
84,686

Income taxes recoverable

 
11,159

Deferred income tax asset, net
14,417

 
14,586

Other assets
15,357

 
14,540

Total assets
$
1,697,869

 
$
1,858,390

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
LIABILITIES:
 
 
 
Unpaid losses and loss adjustment expenses
$
366,356

 
$
472,829

Unearned premiums
595,536

 
601,679

Advance premium
44,545

 
26,222

Accounts payable
2,692

 
3,059

Book overdraft
43,305

 
102,843

Reinsurance payable, net
48,171

 
93,306

Income taxes payable
6,183

 

Other liabilities and accrued expenses
41,002

 
45,422

Long-term debt
11,029

 
11,397

Total liabilities
1,158,819

 
1,356,757

 
 
 
 
Commitments and Contingencies (Note 12)

 

 
 
 
 
STOCKHOLDERS’ EQUITY:
 
 
 
Cumulative convertible preferred stock, $.01 par value

 

Authorized shares - 1,000
 
 
 
Issued shares - 10 and 10
 
 
 
Outstanding shares - 10 and 10
 
 
 
Minimum liquidation preference, $9.99 and $9.99 per share
 
 
 
Common stock, $.01 par value
467

 
465

Authorized shares - 55,000
 
 
 
Issued shares - 46,674 and 46,514
 
 
 
Outstanding shares - 34,622 and 34,783
 
 
 
Treasury shares, at cost - 12,052 and 11,731
(140,516
)
 
(130,399
)
Additional paid-in capital
87,328

 
86,353

Accumulated other comprehensive income (loss), net of taxes
3,974

 
(8,010
)
Retained earnings
587,797

 
553,224

Total stockholders’ equity
539,050

 
501,633

Total liabilities and stockholders’ equity
$
1,697,869

 
$
1,858,390

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

4


Table of Contents

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(in thousands, except per share data)
 
Three Months Ended
March 31,
 
2019
 
2018
PREMIUMS EARNED AND OTHER REVENUES
 
 
 
Direct premiums written
$
289,234

 
$
269,984

Change in unearned premium
6,143

 
(7,723
)
Direct premium earned
295,377

 
262,261

Ceded premium earned
(85,650
)
 
(79,684
)
Premiums earned, net
209,727

 
182,577

Net investment income
8,142

 
4,785

Net realized gains (losses) on sale of securities
(11,525
)
 
(2,641
)
Net change in unrealized gains (losses) of equity securities
18,032

 
(5,109
)
Commission revenue
5,505

 
5,271

Policy fees
5,021

 
4,775

Other revenue
1,684

 
1,842

Total premiums earned and other revenues
236,586

 
191,500

OPERATING COSTS AND EXPENSES
 
 
 
Losses and loss adjustment expenses
113,094

 
75,926

General and administrative expenses
69,748

 
63,875

Total operating costs and expenses
182,842

 
139,801

INCOME BEFORE INCOME TAXES
53,744

 
51,699

Income tax expense
13,596

 
11,644

NET INCOME
$
40,148

 
$
40,055

Basic earnings per common share
$
1.16

 
$
1.15

Weighted average common shares outstanding - Basic
34,741

 
34,839

Diluted earnings per common share
$
1.14

 
$
1.12

Weighted average common shares outstanding - Diluted
35,206

 
35,660

Cash dividend declared per common share
$
0.16

 
$
0.14

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
 
Three Months Ended
March 31,
 
2019
 
2018
Net income
$
40,148

 
$
40,055

Other comprehensive income (loss), net of taxes
11,984

 
(4,050
)
Comprehensive income
$
52,132

 
$
36,005

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

5


Table of Contents

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018 (unaudited)
(in thousands)  


 
 
Treasury Shares
 
Common
Shares
Issued
 
Preferred
Shares
Issued
 
Common
Stock
Amount
 
Preferred
Stock
Amount
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Shares,
at Cost
 
Total
Stockholders’
Equity
Balance, December 31, 2018
 
(11,731
)
 
46,514

 
10

 
$
465

 
$

 
$
86,353

 
$
553,224

 
$
(8,010
)
 
$
(130,399
)
 
$
501,633

Vesting of performance share units
 
(56
)
(1) 
148

 

 
2

 

 
(2
)
 

 

 
(2,069
)
 
(2,069
)
Grants and vesting of restricted stock
 
(5
)
(1) 
25

 

 

 

 

 

 

 
(166
)
 
(166
)
Stock option exercises
 
(36
)
(1) 
84

 

 
1

 

 
1,438

 

 

 
(1,367
)
 
72

Retirement of treasury shares
 
97

 
(97
)
 

 
(1
)
 

 
(3,601
)
 

 

 
3,602

 

Purchases of treasury stock
 
(321
)
 

 

 

 

 

 

 

 
(10,117
)
 
(10,117
)
Share-based compensation
 

 

 

 

 

 
3,140

 

 

 

 
3,140

Net income
 

 

 

 

 

 

 
40,148

 

 

 
40,148

Change in net unrealized gains (losses) (2)
 

 

 

 

 

 

 

 
11,984

 

 
11,984

Declaration of dividends
($0.16 per common share and
$0.25 per preferred share)
 

 

 

 

 

 

 
(5,575
)
 

 

 
(5,575
)
Balance, March 31, 2019
 
(12,052
)
 
46,674

 
10

 
$
467

 
$

 
$
87,328

 
$
587,797

 
$
3,974

 
$
(140,516
)
 
$
539,050










The accompanying notes to condensed consolidated financial statements are an integral part of these statements.


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Table of Contents

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)
(in thousands)  

 
 
Treasury Shares
 
Common
Shares
Issued
 
Preferred
Shares
Issued
 
Common
Stock
Amount
 
Preferred
Stock
Amount
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Shares,
 at Cost
 
Total
Stockholders’
Equity
Balance, December 31, 2017
 
(11,043
)
 
45,778

 
10

 
$
458

 
$

 
$
86,186

 
$
464,748

 
$
(6,281
)
 
$
(105,123
)
 
$
439,988

Cumulative effect of change in accounting principle
 (ASU 2016-02)
 

 

 

 

 

 

 
(3,601
)
 
3,601

 

 

Balance January 1, 2018
 
(11,043
)
 
45,778

 
10

 
458

 

 
86,186

 
461,147

 
(2,680
)
 
(105,123
)
 
439,988

Vesting of performance share units
 
(43
)
(1) 
127

 

 
1

 

 
(1
)
 

 

 
(1,273
)
 
(1,273
)
Grants and vesting of restricted stock
 

 
50

 

 

 

 

 

 

 

 

Stock option exercises
 
(568
)
(1) 
804

 

 
8

 

 
15,195

 

 

 
(18,723
)
 
(3,520
)
Retirement of treasury shares
 
611

 
(611
)
 

 
(6
)
 

 
(19,990
)
 

 

 
19,996

 

Purchases of treasury stock
 
(93
)
 

 

 

 

 

 

 

 
(2,746
)
 
(2,746
)
Share-based compensation
 

 

 

 

 

 
2,904

 

 

 

 
2,904

Net income
 

 

 

 

 

 

 
40,055

 

 

 
40,055

Change in net unrealized gains (losses) (2)
 

 

 

 

 

 

 

 
(4,050
)
 

 
(4,050
)
Reclassification of income taxes upon adoption of
ASU 2018-02
 

 

 

 

 

 

 
582

 
(582
)
 

 

Balance, Declaration of dividends
($0.14 per common share and
$0.25 per preferred share)
 

 

 

 

 

 

 
(4,906
)
 

 

 
(4,906
)
Balance, March 31, 2018
 
(11,136
)
 
46,148

 
10

 
$
461

 
$

 
$
84,294

 
$
496,878

 
$
(7,312
)
 
$
(107,869
)
 
$
466,452


(1) All shares acquired represent shares tendered to cover the strike price for options and tax withholdings on the intrinsic value of options exercised or performance share units or restricted stock vested. These shares have been cancelled by the Company.
(2) Represents change in fair value of available-for-sale investments, net of income tax provision of $3,916 thousand for the three months ended March 31, 2019 and a change in fair value of available-for-sale investments, net of income tax benefit of $1,219 thousand for the three months ended March 31, 2018.




The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

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UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
 
Three Months Ended March 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net cash provided by (used in) operating activities
$
31,451

 
$
52,326

Cash flows from investing activities:
 
 
 
Proceeds from sale of property and equipment
8

 
12

Purchases of property and equipment
(6,368
)
 
(1,314
)
Purchases of equity securities
(697
)
 
(9,857
)
Purchases of available-for-sale debt securities
(55,102
)
 
(121,996
)
Purchases of investment real estate, net
(734
)
 
(1,034
)
Proceeds from sales of equity securities
17,161

 
1,045

Proceeds from sales of available-for-sale debt securities
14,550

 
99,464

Maturities of available-for-sale debt securities
36,635

 
25,363

Net cash provided by (used in) investing activities
5,453

 
(8,317
)
Cash flows from financing activities:
 
 
 
Preferred stock dividend
(3
)
 
(3
)
Common stock dividend
(5,620
)
 
(4,912
)
Issuance of common stock for stock option exercises
239

 

Purchase of treasury stock
(10,117
)
 
(2,746
)
Payments related to tax withholding for share-based compensation
(2,402
)
 
(4,793
)
Repayment of debt
(368
)
 
(368
)
Net cash provided by (used in) financing activities
(18,271
)
 
(12,822
)
Cash and cash equivalents, and restricted cash and cash equivalents:
 
 
 
Net increase (decrease) during the period
18,633

 
31,187

Balance, beginning of period
169,063

 
216,121

Balance, end of period
$
187,696

 
$
247,308

The following table summarizes our cash and cash equivalents and restricted cash and cash equivalents within the Condensed Consolidated Balance Sheets (in thousands):
 
March 31, 2019
 
December 31, 2018
Cash and cash equivalents
$
185,061

 
$
166,428

Restricted cash and cash equivalents (1)
2,635

 
2,635

Total cash and cash equivalents and restricted cash and cash equivalents
$
187,696

 
$
169,063

(1)
See “—Note 5 (Insurance Operations),” for a discussion of the nature of the restrictions for restricted cash and cash equivalents.
The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

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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
Universal Insurance Holdings, Inc. together with its wholly-owned subsidiaries, (“the Company”) is a Delaware corporation incorporated in 1990. The Company is a vertically integrated insurance holding company performing all aspects of insurance underwriting, distribution and claims. Through its wholly-owned insurance company subsidiaries, Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC”, and together with UPCIC, the “Insurance Entities”), the Company is principally engaged in the property and casualty insurance business offered primarily through its network of independent agents. Risk from catastrophic losses is managed through the use of reinsurance agreements. The Company’s primary product is residential homeowners’ insurance currently offered in 18 states as of March 31, 2019, including Florida, which comprises the vast majority of the Company’s in-force policies. See “—Note 5 (Insurance Operations)” for more information regarding the Company’s insurance operations.
The Company generates revenues primarily from the collection of premiums and invests funds in excess of those retained for claims-paying obligations and insurance operations. Other significant sources of revenue include brokerage commissions collected from reinsurers on certain reinsurance programs placed by the Insurance Entities, policy fees collected from policyholders by our wholly-owned managing general agent subsidiary and payment plan fees charged to policyholders who choose to pay their premiums in installments. Our wholly-owned adjusting company receives claims-handling fees from the Insurance Entities. The Insurance Entities are reimbursed for these fees on claims that are subject to recovery under the Insurance Entities’ respective reinsurance programs. These fees, after expenses, are recorded in the Condensed Consolidated Financial Statements as an adjustment to losses and loss adjustment expense.
Basis of Presentation
The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, the Financial Statements do not include all of the information and footnotes required by United States Generally Accepted Accounting Principles (“U.S. GAAP”) for annual financial statements. Therefore, the Financial Statements should be read in conjunction with the audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 1, 2019. The condensed consolidated balance sheet at December 31, 2018 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included in the Financial Statements. The results for interim periods do not necessarily indicate the results that may be expected for any other interim period or for the full year.
To conform to the current period presentation, certain amounts in the prior periods’ condensed consolidated financial statements and notes have been reclassified. Such reclassifications were of an immaterial amount and had no effect on net income or stockholders’ equity.
The Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.
Management must make estimates and assumptions that affect amounts reported in the Company’s Financial Statements and in disclosures of contingent assets and liabilities. Actual results could differ from those estimates.

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Table of Contents

2. Significant Accounting Policies
The Company reported Significant Accounting Policies in its Annual Report on Form 10-K for the year ended December 31, 2018. There are no new or revised disclosures or disclosures required on a quarterly basis.




10


Table of Contents

3. Investments
Securities Available for Sale
The following table provides the amortized cost and fair value of debt securities available for sale as of the dates presented (in thousands):
 
March 31, 2019
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Debt Securities:
 
 
 
 
 
 
 
  U.S. government obligations and agencies
$
65,888

 
$
408

 
$
(654
)
 
$
65,642

  Corporate bonds
422,426

 
6,650

 
(1,643
)
 
427,433

  Mortgage-backed and asset-backed securities
330,925

 
3,585

 
(2,743
)
 
331,767

  Municipal bonds
3,403

 
25

 
(8
)
 
3,420

  Redeemable preferred stock
12,175

 
255

 
(664
)
 
11,766

Total
$
834,817

 
$
10,923

 
$
(5,712
)
 
$
840,028

 
December 31, 2018
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Debt Securities:
 
 
 
 
 
 
 
  U.S. government obligations and agencies
$
67,435

 
$
241

 
$
(1,039
)
 
$
66,637

  Corporate bonds
434,887

 
714

 
(6,736
)
 
428,865

  Mortgage-backed and asset-backed securities
312,840

 
912

 
(4,155
)
 
309,597

  Municipal bonds
3,405

 

 
(43
)
 
3,362

  Redeemable preferred stock
12,560

 
55

 
(638
)
 
11,977

Total
$
831,127

 
$
1,922

 
$
(12,611
)
 
$
820,438


The following table provides the credit quality of available-for-sale debt securities with contractual maturities as of the dates presented (dollars in thousands):
 
 
March 31, 2019
 
December 31, 2018
Equivalent S&P Credit Ratings
 
Fair Value
 
% of Total Fair Value
 
Fair Value
 
% of Total Fair Value
AAA
 
$
408,487

 
48.6
%
 
$
388,672

 
47.4
%
AA
 
100,592

 
12.0
%
 
100,791

 
12.3
%
A
 
207,422

 
24.7
%
 
214,503

 
26.1
%
BBB
 
119,525

 
14.2
%
 
112,613

 
13.7
%
BB and Below
 
505

 
0.1
%
 
494

 
0.1
%
No Rating Available
 
3,497

 
0.4
%
 
3,365

 
0.4
%
   Total
 
$
840,028

 
100.0
%
 
$
820,438

 
100.0
%

The table above includes credit quality ratings by Standard and Poor’s Rating Services, Inc. (“S&P”), Moody’s Investors Service, Inc. and Fitch Ratings, Inc. The Company has presented the highest rating of the three rating agencies for each investment position.
The following table summarizes the amortized cost and fair value of mortgage-backed and asset-backed securities as of the dates presented (in thousands):

11


Table of Contents

 
March 31, 2019
 
December 31, 2018
 
Amortized
Cost
 
Fair Value
 
Amortized
Cost
 
Fair Value
Mortgage-backed Securities:
 
 
 
 
 
 
 
Agency
$
152,861

 
$
151,214

 
$
139,418

 
$
136,291

Non-agency
71,863

 
74,084

 
61,689

 
61,933

Asset-backed Securities:
 
 
 
 
 
 
 
Auto loan receivables
49,808

 
49,917

 
53,449

 
53,341

Credit card receivables
27,750

 
27,809

 
29,594

 
29,366

Other receivables
28,643

 
28,743

 
28,690

 
28,666

Total
$
330,925

 
$
331,767

 
$
312,840

 
$
309,597


The following table summarizes the fair value and gross unrealized losses on available-for-sale debt securities, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position as of the dates presented (in thousands):
 
March 31, 2019
 
Less Than 12 Months
 
12 Months or Longer
 
Number of
Issues
 
Fair Value
 
Unrealized
Losses
 
Number of
Issues
 
Fair Value
 
Unrealized
Losses
Debt Securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. government obligations and agencies
1

 
$
1,300

 
$
(3
)
 
9

 
$
46,124

 
$
(651
)
Corporate bonds
24

 
11,810

 
(39
)
 
190

 
154,760

 
(1,604
)
Mortgage-backed and asset-backed securities
13

 
13,011

 
(43
)
 
101

 
141,496

 
(2,700
)
Municipal bonds
1

 
272

 
(8
)
 

 

 

Redeemable preferred stock
28

 
2,893

 
(562
)
 
9

 
1,783

 
(102
)
Total
67

 
$
29,286

 
$
(655
)
 
309

 
$
344,163

 
$
(5,057
)

 
December 31, 2018
 
Less Than 12 Months
 
12 Months or Longer
 
Number of
Issues
 
Fair Value
 
Unrealized
Losses
 
Number of
Issues
 
Fair Value
 
Unrealized
Losses
Debt Securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. government obligations and agencies

 
$

 
$

 
13

 
$
56,531

 
$
(1,039
)
Corporate bonds
228

 
210,152

 
(3,318
)
 
160

 
131,225

 
(3,418
)
Mortgage-backed and asset-backed securities
36

 
57,487

 
(196
)
 
103

 
148,436

 
(3,959
)
Municipal bonds
6

 
3,362

 
(43
)
 

 

 

Redeemable preferred stock
61

 
8,092

 
(506
)
 
5

 
1,034

 
(132
)
Total
331

 
$
279,093

 
$
(4,063
)
 
281

 
$
337,226

 
$
(8,548
)

Evaluating Investments for Other Than Temporary Impairment
As of March 31, 2019, the Company held available-for-sale debt securities that were in an unrealized loss position as presented in the table above. For available-for-sale debt securities with significant declines in value, the Company performs quarterly fundamental credit analysis on a security-by-security basis, which includes consideration of credit quality and credit ratings, review of relevant industry analyst reports and other available market data. For available-for-sale debt securities, the Company considers whether it has the intent and ability to hold the available-for-sale debt securities for a period of time sufficient to recover its cost basis. Where the Company lacks the intent and ability to hold to recovery, or believes the recovery period is extended, the security’s decline in fair value is considered other than temporary and is recorded in earnings. Based on our analysis, our fixed income portfolio is of high quality and we believe that we will recover the amortized cost basis of our available-for-sale debt securities. We continually monitor the credit quality of our investments in available-for-sale debt securities to assess if it is probable that we will receive our contractual or estimated cash flows in the form of principal and interest. Additionally, the Company considers management’s intent and ability to hold the available-for-sale debt securities until recovery and its credit analysis of the individual issuers of the securities. Based on this process and analysis, management has no reason to believe the unrealized losses of the available-for-sale debt securities as of March 31, 2019 are other than temporary.

12


Table of Contents

The following table presents the amortized cost and fair value of investments with maturities as of the date presented (in thousands):
 
March 31, 2019
 
Amortized Cost
 
Fair Value
Due in one year or less
$
102,098

 
$
101,753

Due after one year through five years
402,877

 
403,320

Due after five years through ten years
319,707

 
325,217

Due after ten years
8,940

 
8,507

Perpetual maturity securities
1,195

 
1,231

Total
$
834,817

 
$
840,028



All securities, except those with perpetual maturities, were categorized in the table above utilizing years to effective maturity. Effective maturity takes into consideration all forms of potential prepayment, such as call features or prepayment schedules, that shorten the lifespan of contractual maturity dates.
The following table provides certain information related to available-for-sale debt securities and equity securities during the periods presented (in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
Proceeds from sales and maturities (fair value):
 
 
 
  Available-for-sale debt securities
$
51,185

 
$
124,827

  Equity securities
$
17,161

 
$
1,045

Gross realized gains on sale of securities:
 
 
 
  Available-for-sale debt securities
$
187

 
$
307

  Equity securities
$
165

 
$
124

Gross realized losses on sale of securities:
 
 
 
  Available-for-sale debt securities
$
(42
)
 
$
(3,072
)
  Equity securities
$
(11,835
)
 
$


The following table presents the components of net investment income, comprised primarily of interest and dividends, for the periods presented (in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
Available-for-sale debt securities
$
6,151

 
$
3,700

Equity securities
1,042

 
583

Available-for-sale short-term investments

 
89

Cash and cash equivalents
1,300

 
858

Other (1)
259

 
196

  Total investment income
8,752

 
5,426

Less: Investment expenses (2)
(610
)
 
(641
)
  Net investment income
$
8,142

 
$
4,785

(1)
Includes interest earned on restricted cash and cash equivalents. Also includes investment income earned on real estate investments.
(2)
Includes custodial fees, investment accounting and advisory fees, and expenses associated with real estate investments.

13


Table of Contents

Equity Securities
The following table provides the unrealized gains and losses related to equity securities for the periods presented (in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
Unrealized gains and (losses) recognized during the reporting period on
 equity securities still held at the reporting period
$
2,400

 
$
(5,109
)

Investment Real Estate
Investment real estate consisted of the following as of the dates presented (in thousands):
 
March 31,
 2019
 
December 31, 2018
Income Producing:
 
 
 
Investment real estate
$
14,628

 
$
14,619

Less: Accumulated depreciation
(973
)
 
(870
)
 
13,655

 
13,749

Non-Income Producing:
 

 
 

Investment real estate
11,415

 
10,690

Investment real estate, net
$
25,070

 
$
24,439


Depreciation expense related to investment real estate for the periods presented (in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
Depreciation expense on investment real estate
$
103

 
$
103



14


Table of Contents

4. Reinsurance
The Company seeks to reduce its risk of loss by reinsuring certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers, generally as of the beginning of the hurricane season on June 1st of each year. The Company’s current reinsurance programs consist of catastrophe excess of loss reinsurance, subject to the terms and conditions of the applicable agreements. The Company is responsible for certain retained loss amounts before reinsurance attaches and insured losses related to catastrophes and other events that exceed coverage provided by the reinsurance programs. The Company remains responsible for the settlement of insured losses irrespective of whether any of the reinsurers fail to make payments otherwise due.
Amounts recoverable from reinsurers are estimated in a manner consistent with the terms of the reinsurance contracts. Reinsurance premiums, losses and loss adjustment expenses (“LAE”) are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts.
To reduce credit risk for amounts due from reinsurers, the Insurance Entities seek to do business with financially sound reinsurance companies and regularly evaluate the financial strength of all reinsurers used.
The following table presents ratings from rating agencies and the unsecured amounts due from the reinsurers whose aggregate balances exceeded 3% of the Company’s stockholders’ equity as of the dates presented (in thousands):
 
 
Ratings as of March 31, 2019
 
Due from as of
Reinsurer
 
AM Best
Company
 
Standard
and Poor’s
Rating
Services, Inc.
 
Moody’s
Investors Service, Inc.
 
March 31, 2019
 
December 31, 2018
Allianz Risk Transfer
 
A+
 
AA
 
Aa3
 
$
109,183

 
$
139,565

Florida Hurricane Catastrophe Fund (1)
 
n/a
 
n/a
 
n/a
 
107,537

 
165,022

Renaissance Reinsurance Ltd
 
A+
 
A+
 
A1
 
26,299

 
39,459

Chubb Tempest Reinsurance Ltd
 
n/a
 
n/a
 
n/a
 

 
16,208

Total (2)
 
 
 
 
 
 
 
$
243,019

 
$
360,254

(1)
No rating is available, because the fund is not rated.
(2)
Amounts represent prepaid reinsurance premiums, reinsurance receivables and net recoverables for paid and unpaid losses, including incurred but not reported reserves, and loss adjustment expenses.
The Company’s reinsurance arrangements had the following effect on certain items in the Condensed Consolidated Statements of Income for the periods presented (in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
 
Premiums
Written
 
Premiums
Earned
 
Losses and Loss
Adjustment
Expenses
 
Premiums
Written
 
Premiums
Earned
 
Losses and Loss
Adjustment
Expenses
Direct
$
289,234

 
$
295,377

 
$
115,742

 
$
269,984

 
$
262,261

 
$
76,639

Ceded

 
(85,650
)
 
(2,648
)
 

 
(79,684
)
 
(713
)
Net
$
289,234

 
$
209,727

 
$
113,094

 
$
269,984

 
$
182,577

 
$
75,926


The following prepaid reinsurance premiums and reinsurance recoverable and receivable are reflected in the Condensed Consolidated Balance Sheets as of the dates presented (in thousands):
 
March 31, 2019
 
December 31, 2018
Prepaid reinsurance premiums
$
57,100

 
$
142,750

Reinsurance recoverable on paid losses and LAE
$
54,223

 
$
25,238

Reinsurance recoverable on unpaid losses and LAE
269,071

 
393,365

Reinsurance recoverable and receivable
$
323,294

 
$
418,603



15


Table of Contents

5. Insurance Operations
Deferred Policy Acquisition Costs
The Company defers certain costs relating to written premium, called Deferred Policy Acquisition Costs (“DPAC”). DPAC is amortized over the effective period of the related insurance policies.
The following table presents the beginning and ending balances and the changes in DPAC for the periods presented (in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
DPAC, beginning of period
$
84,686

 
$
73,059

Capitalized Costs
41,520

 
41,939

Amortization of DPAC
(42,922
)
 
(36,991
)
DPAC, end of year
$
83,284

 
$
78,007


Regulatory Requirements and Restrictions
The Insurance Entities are subject to regulations and standards of the Florida Office of Insurance Regulation (“FLOIR”). UPCIC also is subject to regulations and standards of regulatory authorities in other states where it is licensed, although as a Florida-domiciled insurer, its principal regulatory authority is the FLOIR. These standards require the Insurance Entities to maintain specified levels of statutory capital and restrict the timing and amount of dividends and other distributions that may be paid by the Insurance Entities to the parent company. Except in the case of extraordinary dividends, these standards generally permit dividends to be paid from statutory unassigned surplus of the regulated subsidiary and are limited based on the regulated subsidiary’s level of statutory net income and statutory capital and surplus. The maximum dividend that may be paid by UPCIC and APPCIC to their immediate parent company, Protection Solutions, Inc. (“PSI”, formerly known as Universal Insurance Holding Company of Florida), without prior regulatory approval is limited by the provisions of the Florida Insurance Code. These dividends are referred to as “ordinary dividends.” However, if the dividend, together with other dividends paid within the preceding twelve months exceeds this statutory limit or is paid from sources other than earned surplus, the entire dividend is generally considered an “extraordinary dividend” and must receive prior regulatory approval.
In accordance with Florida Insurance Code, and based on the calculations performed by the Company as of December 31, 2018, UPCIC has the capacity to pay ordinary dividends of $14.0 million during 2019. APPCIC did not meet the earnings or surplus regulatory requirements as of December 31, 2018 to pay ordinary dividends during 2019. For the three months ended March 31, 2019, no dividends were paid from UPCIC or APPCIC to PSI.
The Florida Insurance Code requires insurance companies to maintain capitalization equivalent to the greater of ten percent of the insurer’s total liabilities but not less than $10.0 million. The following table presents the amount of capital and surplus calculated in accordance with statutory accounting principles, which differ from U.S. GAAP, and an amount representing ten percent of total liabilities for both UPCIC and APPCIC as of the dates presented (in thousands):
 
March 31, 2019
 
December 31, 2018
Ten percent of total liabilities
 
 
 
  UPCIC
$
89,300

 
$
90,610

  APPCIC
$
491

 
$
489

Statutory capital and surplus
 
 
 
  UPCIC
$
325,383

 
$
291,438

  APPCIC
$
15,946

 
$
15,973


As of the dates in the table above, both UPCIC and APPCIC exceeded the minimum statutory capitalization requirement. UPCIC also met the capitalization requirements of the other states in which it is licensed as of March 31, 2019. UPCIC and APPCIC are also required to adhere to prescribed premium-to-capital surplus ratios and have met those requirements at such dates.
The following table summarizes combined net income for UPCIC and APPCIC determined in accordance with statutory accounting practices for the periods presented (in thousands):
 
Three Months Ended
March 31,
 
2019
 
2018
Combined net income
$
7,623

 
$
14,478



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The Insurance Entities are required by various state laws and regulations to maintain certain assets in depository accounts. The following table represents assets held by insurance regulators as of the dates presented (in thousands):
 
March 31, 2019
 
December 31, 2018
Restricted cash and cash equivalents
$
2,635

 
$
2,635

Investments
$
3,913

 
$
3,876




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6. Liability for Unpaid Losses and Loss Adjustment Expenses
Set forth in the following table is the change in liability for unpaid losses and LAE for the periods presented (in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
Balance at beginning of period
$
472,829

 
$
248,425

Less: Reinsurance recoverable
(393,365
)
 
(182,405
)
Net balance at beginning of period
79,464

 
66,020

Incurred (recovered) related to:
 

 
 

Current year
113,279

 
75,970

Prior years
(185
)
 
(44
)
Total incurred
113,094

 
75,926

Paid related to:
 

 
 

Current year
34,549

 
17,407

Prior years
60,724

 
65,253

Total paid
95,273

 
82,660

Net balance at end of period
97,285

 
59,286

Plus: Reinsurance recoverable
269,071

 
70,351

Balance at end of period
$
366,356

 
$
129,637




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7. Long-Term Debt
Long-term debt consists of the following as of the dates presented (in thousands):
 
March 31, 2019
 
December 31, 2018
Surplus note
$
11,029

 
$
11,397


In 2006, UPCIC entered into a $25.0 million surplus note with the State Board of Administration of Florida (the “SBA”) under Florida’s Insurance Capital Build-Up Incentive Program. The surplus note has a twenty-year term and accrues interest, adjusted quarterly based on the 10-year Constant Maturity Treasury Index. Principal and interest are paid periodically pursuant to terms of the surplus note.
UPCIC was in compliance with the terms of the surplus note as of March 31, 2019.

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Table of Contents

8. Stockholders’ Equity

On December 12, 2018, the Company’s Board of Directors authorized a share repurchase program under which the Company may repurchase in the open market up to $20 million of the Company’s outstanding shares of common stock through May 31, 2020. During the three months ended March 31, 2019, the Company repurchased 320,500 shares, at an aggregate purchase price of approximately $10.1 million, pursuant to such repurchase program.

On September 5, 2017, the Company’s Board of Directors authorized a share repurchase program under which the Company may repurchase in the open market up to $20 million of the Company’s outstanding shares of common stock through December 31, 2018. During the three months ended March 31, 2018, the Company repurchased 92,749 shares, at an aggregate price of approximately $2.7 million, pursuant to such repurchase program.




20


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9. Income Taxes
During the three months ended March 31, 2019 and 2018, the Company recorded approximately $13.6 million and $11.6 million of income tax expense, respectively. The effective tax rate (“ETR”) for the three months ended March 31, 2019 was 25.3% compared to a 22.5% ETR for the same period in 2018.
In arriving at these rates, the Company considered a variety of factors including the forecasted full year pre-tax results, the U.S. federal tax rate, expected non-deductible expenses and estimated state income taxes. The Company’s final ETR for the full year will be dependent on the level of pre-tax income, discrete items, the apportionment of taxable income among state tax jurisdictions and the extent of non-deductible expenses in relation to pre-tax income.
Income tax expense for the three months ended March 31, 2019 included a net credit for discrete items of $0.5 million relating to excess tax benefits resulting from stock-based compensation awards that vested and/or were exercised during the first quarter in 2019, which decreased the current quarter’s ETR by 1.0 percent. Income tax expense for the three months ended March 31, 2018 included a credit for discrete items of $1.8 million for excess tax benefits resulting from stock-based compensation awards that vested and/or were exercised during the first quarter in 2018.
The statutory tax rate consists of a federal income tax rate of 21% and a state income tax rate, net of federal benefit, of 3.6%.
The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. As of March 31, 2019, the Company’s 2016 through 2018 tax years are still subject to examination by the Internal Revenue Service and various tax years remain open to examination in certain state jurisdictions.

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10. Earnings Per Share
Basic earnings per share (“EPS”) is computed based on the weighted average number of common shares outstanding for the period, excluding any dilutive common share equivalents. Diluted EPS reflects the potential dilution resulting from the exercises of stock options, vesting of restricted stock, vesting of performance share units and conversion of preferred stock.
The following table reconciles the numerator (i.e., income) and denominator (i.e., shares) of the basic and diluted EPS computations for the periods presented (in thousands, except per share data):
 
Three Months Ended
March 31,
 
2019
 
2018
Numerator for EPS:
 
 
 
Net income
$
40,148

 
$
40,055

Less: Preferred stock dividends
(3
)
 
(3
)
Income available to common stockholders
$
40,145

 
$
40,052

Denominator for EPS:
 

 
 

Weighted average common shares outstanding
34,741

 
34,839

Plus: Assumed conversion of share-based compensation (1)
440

 
796

     Assumed conversion of preferred stock
25

 
25

Weighted average diluted common shares outstanding
35,206

 
35,660

Basic earnings per common share
$
1.16

 
$
1.15

Diluted earnings per common share
$
1.14

 
$
1.12

(1)
Represents the dilutive effect of unvested restricted stock, unvested performance share units
and unexercised stock options.


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11. Other Comprehensive Income (Loss)
The following table provides the components of other comprehensive income (loss) on a pre-tax and after-tax basis for the periods presented (in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
 
Pre-tax
 
Tax
 
After-tax
 
Pre-tax
 
Tax
 
After-tax
Net changes related to available-for-sale securities:
 

 
 

 
 

 
 

 
 

 
 

Unrealized holding gains (losses) arising during the period
$
16,045

 
$
3,953

 
$
12,092

 
$
(8,034
)
 
$
(1,889
)
 
$
(6,145
)
Less: Reclassification adjustments for (gains) losses realized
 in net income
(145
)
 
(37
)
 
(108
)
 
2,765

 
670

 
2,095

Other comprehensive income (loss)
$
15,900

 
$
3,916

 
$
11,984

 
$
(5,269
)
 
$
(1,219
)
 
$
(4,050
)

The following table provides the reclassifications adjustment for gains (losses) out of accumulated other comprehensive income for the periods presented (in thousands):
Details about Accumulated
Other Comprehensive
Income (Loss) Components
 
Amount Reclassified from Accumulated
Other Comprehensive Income (Loss)
 
Affected Line Item in the Statement
Where Net Income is Presented
 
Three Months Ended March 31,
 
 
2019
 
2018
 
Unrealized gains (losses) on
 available-for-sale debt securities
 
 
 
 
 
 
 
 
$
145

 
$
(2,765
)
 
Net realized gains (losses) on sale of securities
 
 
(37
)
 
670

 
Income taxes
Total reclassification for the period
 
$
108

 
$
(2,095
)
 
Net of tax



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Table of Contents

12. Commitments and Contingencies
Obligations under Multi-Year Reinsurance Contracts
We purchase reinsurance coverage to protect our capital and to limit our losses when major events occur. Our reinsurance commitments run from June 1 of the current year to May 31 of the following year. Certain of our reinsurance agreements are for periods longer than one year. Amounts payable for coverage during the current June 1 to May 31 contract period are recorded as “Reinsurance Payable” in the financial statements. Multi-year contract commitments for future years will be recorded at the commencement of the coverage period. Amounts payable for future reinsurance contract years that the Company is obligated to pay are: (1) $82.3 million in 2019 and (2) $33.9 million in 2020.
Litigation
Lawsuits are filed against the Company from time to time. Many of these lawsuits involve claims under policies that we underwrite and reserve for as an insurer. We are also involved in various other legal proceedings and litigation unrelated to claims under our policies that arise in the ordinary course of business operations. Management believes that any liabilities that may arise as a result of these legal matters will not have a material adverse effect on our financial condition or results of operations. The Company contests liability and/or the amount of damages as appropriate in each pending matter.
In accordance with applicable accounting guidance, the Company establishes an accrued liability for legal matters when those matters present loss contingencies that are both probable and estimable.  
Legal proceedings are subject to many uncertain factors that generally cannot be predicted with assurance, and the Company may be exposed to losses in excess of any amounts accrued. The Company currently estimates that the reasonably possible losses for legal proceedings, whether in excess of a related accrued liability or where there is no accrued liability, and for which the Company is able to estimate a possible loss, are immaterial. This represents management’s estimate of possible loss with respect to these matters and is based on currently available information. These estimates of possible loss do not represent our maximum loss exposure, and actual results may vary significantly from current estimates.


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Table of Contents

13. Fair Value Measurements
U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. U.S. GAAP describes three approaches to measuring the fair value of assets and liabilities: the market approach, the income approach and the cost approach. Each approach includes multiple valuation techniques. U.S. GAAP does not prescribe which valuation technique should be used when measuring fair value, but does establish a fair value hierarchy that prioritizes the inputs used in applying the various techniques. Inputs broadly refer to the assumptions that market participants use to make pricing decisions, including assumptions about risk. Level 1 inputs are given the highest priority in the hierarchy while Level 3 inputs are given the lowest priority. Assets and liabilities carried at fair value are classified in one of the following three categories based on the nature of the inputs to the valuation technique used:
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
Level 1
Common stock: Comprise actively traded, exchange-listed U.S. and international equity securities. Valuation is based on unadjusted quoted prices for identical assets in active markets that the Company can access.
Mutual funds: Comprise actively traded funds. Valuation is based on daily quoted net asset values for identical assets in active markets that the Company can access.
Level 2
U.S. government obligations and agencies: Comprise U.S. Treasury Bills or Notes or U.S. Treasury Inflation Protected Securities. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields and credit spreads.
Corporate bonds: Comprise investment-grade fixed income securities. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields and credit spreads.
Mortgage-backed and asset-backed securities: Comprise securities that are collateralized by mortgage obligations and other assets. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields, collateral performance and credit spreads.
Municipal bonds: Comprise fixed income securities issued by a state, municipality or county. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields and credit spreads.
Redeemable preferred stock: Comprise preferred stock securities that are redeemable. The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active.
As required by U.S. GAAP, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the placement of the asset or liability within the fair value hierarchy levels.

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Table of Contents

The following tables set forth by level within the fair value hierarchy the Company’s assets measured at fair value on a recurring basis as of the dates presented (in thousands):
 
Fair Value Measurements
 
March 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
Available-For-Sale Debt Securities
 

 
 

 
 

 
 

  U.S. government obligations and agencies
$

 
$
65,642

 
$

 
$
65,642

  Corporate bonds

 
427,433

 

 
427,433

  Mortgage-backed and asset-backed securities

 
331,767

 

 
331,767

  Municipal bonds

 
3,420

 

 
3,420

  Redeemable preferred stock

 
11,766

 

 
11,766

Equity securities:
 
 
 
 
 
 
 
  Common stock
4,342

 

 

 
4,342

  Mutual funds
48,833

 

 

 
48,833

Total assets accounted for at fair value
$
53,175

 
$
840,028

 
$

 
$
893,203

 
Fair Value Measurements
 
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total
Available-For-Sale Debt Securities
 
 
 
 
 
 
 
  U.S. government obligations and agencies
$

 
$
66,637

 
$

 
$
66,637

  Corporate bonds

 
428,865

 

 
428,865

  Mortgage-backed and asset-backed securities

 
309,597

 

 
309,597

  Municipal bonds

 
3,362

 

 
3,362

  Redeemable preferred stock

 
11,977

 

 
11,977

Equity securities:
 
 
 
 
 
 
 
  Common stock
15,564

 

 

 
15,564

  Mutual funds
47,713

 

 

 
47,713

Total assets accounted for at fair value
$
63,277

 
$
820,438

 
$

 
$
883,715


The Company utilizes third-party independent pricing services that provide a price quote for each available-for-sale debt security and equity security. Management reviews the methodology used by the pricing services. If management believes that the price used by the pricing service does not reflect an orderly transaction between participants, management will use an alternative valuation methodology. There were no adjustments made by the Company to the prices obtained from the independent pricing source for any available-for-sale debt security or equity securities included in the tables above.
The following table summarizes the carrying value and estimated fair values of the Company’s financial instruments not carried at fair value as of the dates presented (in thousands):
 
March 31, 2019
 
December 31, 2018
 
Carrying Value
 
(Level 3) Estimated Fair Value
 
Carrying Value
 
(Level 3) Estimated Fair Value
Liabilities (debt):
 
 
 
 
 
 
 
   Surplus note
$
11,029

 
$
9,955

 
$
11,397

 
$
10,125


Level 3
Long-term debt: The fair value of the surplus note was determined by management from the expected cash flows discounted using the interest rate quoted by the holder. The SBA is the holder of the surplus note and the quoted interest rate is below prevailing rates quoted by private lending institutions. However, as the Company’s use of funds from the surplus note is limited by the terms of the agreement, the Company has determined the interest rate quoted by the SBA to be appropriate for purposes of establishing the fair value of the note.

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Table of Contents

14. Subsequent Events
On April 10, 2019, the Company declared a dividend of $0.16 per share on its outstanding common stock payable on May 10, 2019, to shareholders of record on May 3, 2019.

The Company performed an evaluation of subsequent events through the date the Financial Statements were issued and determined there were no recognized or unrecognized subsequent events that would require an adjustment or additional disclosure in the Financial Statements as of March 31, 2019.



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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. and its wholly-owned subsidiaries. You should read the following discussion together with our unaudited condensed consolidated financial statements (“Financial Statements”) and the related notes thereto included in “Part I, Item 1—Financial Statements”, and our audited condensed consolidated financial statements and the related notes thereto included in “Part II, Item 8—Financial Statements and Supplementary Data” in our Annual Report on Form 10-K for the year ended December 31, 2018. Operating results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for the year.
Cautionary Note Regarding Forward-Looking Statements
In addition to historical information, this report may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These forward-looking statements may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. These statements may address, among other things, our strategy for growth, catastrophe exposure and other risk management, product development, investment results, regulatory approvals, market position, expenses, financial results, litigation and reserves. We believe that these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements as a result of the risks set forth below, which are a summary of those set forth in our Annual Report on Form 10-K for the year ended December 31, 2018. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
Risks and uncertainties that may affect our financial condition and operating results include, but are not limited to, the following:
Unanticipated increases in the severity or frequency of claims, including those relating to catastrophes, severe weather events and changing climate conditions, which may exceed our current reserves established for claims;
Failure of our risk mitigation strategies, including failure to accurately and adequately price the risks we underwrite and to write effective exclusions and other loss limitation methods in our insurance policies;
Loss of independent insurance agents and inability to attract new independent agents;
Reliance on models, which are inherently uncertain, as a tool to evaluate risks;
The continued availability of reinsurance at current levels and prices, and our ability to collect payments from our reinsurers;
Changes in industry trends, including changes due to the cyclical nature of the industry and increased competition;
Geographic concentration of our business in Florida and the effectiveness of our growth and diversification strategy in new markets;
Loss of key personnel and inability to attract and retain talented employees;
Failure to comply with existing and future guidelines, policies and legal and regulatory standards;
The ability of our claims professionals to effectively manage claims;
Litigation or regulatory actions that could result in significant damages, fines or penalties;
A downgrade in our Financial Stability Rating® and its impact on our competitive position, the marketability of our product offerings, our liquidity and profitability;
The impact on our business and reputation of data and security breaches due to cyber-attacks or our inability to effectively adapt to changes in technology;
Our dependence on the returns of our investment portfolio, which are subject to market risk;
Legal, regulatory or tax changes that increase our operating costs and decrease our profitability, such as limitations on rate changes or requirements to participate in loss sharing;
Our dependence on dividends and permissible payments from our subsidiaries; and
The ability of our Insurance Entities to comply with statutory capital and surplus minimums and other regulatory and licensing requirements.

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Table of Contents

OVERVIEW
We are a vertically integrated holding company offering property and casualty (“P&C”) insurance and value-added insurance services. We develop, market and underwrite insurance products for consumers predominantly in the personal residential homeowners line of business and perform substantially all other insurance-related services for our primary insurance entities, including risk management, claims management, and distribution. Our primary insurance entities, Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC” and together with UPCIC, the “Insurance Entities”), offer insurance products through both our appointed independent agent network and our online distribution channels across 18 states (primarily in Florida), with licenses to write insurance in an additional two states. The Insurance Entities seek to produce an underwriting profit over the long term (defined as earned premium less losses, loss adjustment expense (“LAE”), policy acquisition costs and other operating costs); maintain a strong balance sheet to prepare for years in which the Insurance Entities are not able to achieve an underwriting profit; and generate investment income on assets exceeding short-term operating needs.
The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our financial condition and results of operations. This MD&A should be read in conjunction with our Financial Statements and accompanying Notes appearing elsewhere in this Report (the “Notes”). In addition, reference should be made to our audited Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements and “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2018. Except for the historical information contained herein, the discussions in this MD&A contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed above under “Cautionary Note Regarding Forward-Looking Statements.”
RESULTS OF OPERATIONS AND ANALYSIS OF FINANCIAL CONDITION
Highlights
Results of operations for the first quarter of fiscal 2019, in each case compared with the first quarter of fiscal 2018 (unless otherwise specified), include:
Direct premiums written overall grew by $19.3 million, or 7.1%, to $289.2 million.
In Florida, direct premiums written grew by $8.0 million, or 3.4%, and in our other states, direct premiums written grew by $11.3 million, or 31.5%.
Net earned premiums grew by $27.2 million, or 14.9%, to $209.7 million.
Total revenues increased by $45.1 million, or 23.5%, to $236.6 million.
Loss ratio was 53.9% as compared to 41.6%.
Diluted earnings per share (“EPS”) increased by $0.02 to $1.14.
Paid dividends of $0.16 per share in the first quarter in 2019.
Book value per share increased by $1.15, or 8.0%, to $15.57 at March 31, 2019 from $14.42 at December 31, 2018.
Repurchased 320,500 shares during the quarter at an aggregate purchase price of $10.1 million pursuant to our 2019–2020 share repurchase program.
Results of Operations
Net income was $40.1 million for the three months ended March 31, 2019, relatively flat when compared to the three months ended March 31, 2018. Diluted EPS for the current quarter was $1.14 compared to $1.12 in 2018, an increase of $0.02 or 1.8%. Weighted average diluted common shares were lower by 1.3% to 35.2 million shares. Benefiting the quarter were increases in net earned premium, net investment income and unrealized gains from an increase in value of equity securities, offset by realized losses upon the sale of equity securities and increased operating costs for losses and LAE and general and administrative costs. Direct and net earned premium were up 12.6% and 14.9%, respectively due to growth in all states in which we are licensed and writing during the past 12 months and reflects a lower cost of reinsurance as a percentage of direct earned premium. Increases in losses and LAE were the result of premium growth, increased estimated losses for the current year, a hail event in Brevard County, Florida in the first quarter and a lower benefit from claim adjustment fees ceded to reinsurers as more hurricane claims made in prior years concluded during the quarter.

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Table of Contents

A detailed discussion of our results of operations follows the table below (in thousands, except per share data).
 
Three Months Ended
March 31,
 
Change
 
2019
 
2018
 
$
 
%
PREMIUMS EARNED AND OTHER REVENUES
 
 
 
 
 
 
 
Direct premiums written
$
289,234

 
$
269,984

 
$
19,250

 
7.1
 %
Change in unearned premium
6,143

 
(7,723
)
 
13,866

 
NM

Direct premium earned
295,377

 
262,261

 
33,116

 
12.6
 %
Ceded premium earned
(85,650
)
 
(79,684
)
 
(5,966
)
 
7.5
 %
Premiums earned, net
209,727

 
182,577

 
27,150

 
14.9
 %
Net investment income
8,142

 
4,785

 
3,357

 
70.2
 %
Net realized gains (losses) on sale of securities
(11,525
)
 
(2,641
)
 
(8,884
)
 
336.4
 %
Net change in unrealized gains (losses) of equity securities
18,032

 
(5,109
)
 
23,141

 
NM

Commission revenue
5,505

 
5,271

 
234

 
4.4
 %
Policy fees
5,021

 
4,775

 
246

 
5.2
 %
Other revenue
1,684

 
1,842

 
(158
)
 
(8.6
)%
Total premiums earned and other revenues
236,586

 
191,500

 
45,086

 
23.5
 %
OPERATING COSTS AND EXPENSES
 
 
 
 
 

 
 

Losses and loss adjustment expenses
113,094

 
75,926

 
37,168

 
49.0
 %
General and administrative expenses
69,748

 
63,875

 
5,873

 
9.2
 %
Total operating costs and expenses
182,842

 
139,801

 
43,041

 
30.8
 %
INCOME BEFORE INCOME TAXES
53,744

 
51,699

 
2,045

 
4.0
 %
Income tax expense
13,596

 
11,644

 
1,952

 
16.8
 %
NET INCOME
$
40,148

 
$
40,055

 
$
93

 
0.2
 %
Other comprehensive income (loss), net of taxes
11,984

 
(4,050
)
 
16,034

 
NM

COMPREHENSIVE INCOME
$
52,132

 
$
36,005

 
$
16,127

 
44.8
 %
DILUTED EARNINGS PER SHARE DATA:
 
 
 
 
 

 
 

Diluted earnings per common share
$
1.14

 
$
1.12

 
$
0.02

 
1.8
 %
Weighted average diluted common shares outstanding
35,206

 
35,660

 
(454
)
 
(1.3
)%
NM – Not Meaningful
We have seen increases in policy count, in-force premium and total insured value in all states for the past three years. Direct premiums written increased by $19.3 million, or 7.1%, for the quarter ended March 31, 2019, driven by growth within our Florida business of $8.0 million, or 3.4%, and growth in our other states business of $11.3 million, or 31.5%, as compared to the same period of the prior year. Florida growth was driven by growth in policy count as well as the impact of an average statewide rate increase of 3.4% which was approved in early December 2017 and effective for new business beginning on December 7, 2017 and for renewal business beginning on January 26, 2018. As discussed below in losses and LAE, we implemented new binding guidelines during the first quarter on new business to address emerging loss trends. Premiums in force increased in every state in which we are writing compared to the prior year. During the first quarter of 2019, we commenced writing in Illinois and we are now actively writing policies in 17 states outside our home state of Florida.
The following table provides direct premiums written for Florida and Other States for the three months ended March 31, 2019 and 2018 (dollars in thousands):
 
For the Three Months Ended
 
 
 
 
 
March 31, 2019
 
March 31, 2018
 
Growth
year over year
State
Direct Premiums
Written
 
%
 
Direct Premiums
Written
 
%
 
$
 
%
Florida
$
242,148

 
83.7
%
 
$
234,178

 
86.7
%
 
$
7,970

 
3.4
%
Other states
47,086

 
16.3
%
 
35,806

 
13.3
%
 
11,280

 
31.5
%
Total
$
289,234

 
100.0
%
 
$
269,984

 
100.0
%
 
$
19,250

 
7.1
%

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Direct premium earned increased by $33.1 million, or 12.6%, for the quarter ended March 31, 2019, reflecting the earning of premiums written over the past 12 months and changes in rates and policy count during that time.
Reinsurance enables our Insurance Entities to limit potential exposures to catastrophic events. Ceded premium represents amounts paid to reinsurers for this protection. See the reinsurance discussion included in “Contractual Obligations” for additional information. Ceded premium earned increased by $6.0 million, or 7.5%, for the quarter ended March 31, 2019. The increase was the result of increased costs for our 2018 - 2019 reinsurance program, consistent with the growth in our in-force premiums when compared to the expiring program. Ceded premium earned as a percent of direct premiums earned was 29.0% for the three months ended March 31, 2019 compared to 30.4% for the three months ended March 31, 2018.
Premiums earned, net of ceded premium earned, grew by 14.9%, or $27.2 million, to $209.7 million for the three months ended March 31, 2019, reflecting the increase in direct premiums earned and reduction in ceded premium earned as a percentage of direct premiums earned discussed above.
Net investment income was $8.1 million for the three months ended March 31, 2019, compared to $4.8 million for the same period in 2018, an increase of $3.4 million, or 70.2%. The increase is the result of several factors including the growth in cash and invested assets compared to the prior year and an increase in yields from a shift in asset mix and rising interest rates. Total invested assets were $918.3 million with an average Standard & Poor’s equivalent fixed income credit rating of A+ during the three months ended March 31, 2019 compared to $729.7 million with an average Standard & Poor’s equivalent fixed income credit rating of AA- for the same period in 2018. Cash and cash equivalents are invested short term until needed to settle loss and LAE payments, reinsurance premium payments and operating cash needs.
We sell securities from our investment portfolio from time to time when opportunities arise or when circumstances could result in greater losses or lower yields if held. We sold securities during the three months ended March 31, 2019, generating net realized loss of $11.5 million compared to net realized loss of $2.6 million for the three months ended March 31, 2018. The realized losses this quarter resulted primarily from the sale of equity securities, whereas the realized loss for the quarter ended March 31, 2018 resulted primarily from the sale of municipal securities in response to changes in the tax law.
The first quarter of 2019 included a favorable change in unrealized gain from equity securities of $18.0 million, resulting from an increase in the fair market value of our equity securities held in the portfolio during the period. Comparatively, during the first quarter of 2018, the fair market value of equity securities declined resulting in an unrealized loss of $5.1 million.
Commission revenue is comprised principally of brokerage commissions we earn from reinsurers on reinsurance placed for the Insurance Entities. Commission revenue is earned pro-rata over the reinsurance policy period which runs from June 1 to May 31 of the following year. For the three months ended March 31, 2019, commission revenue was $5.5 million, compared to $5.3 million for the three months ended March 31, 2018. The increase in commission revenue of $0.2 million, or 4.4%, for the three months ended March 31, 2019 was primarily from commissions earned on reinsurance premiums associated with the 2018 - 2019 Reinsurance Program.
Policy fees for the three months ended March 31, 2019 were $5.0 million compared to $4.8 million for the same period in 2018. The increase of $0.2 million, or 5.2%, was the result of an increase in the total number of new and renewal policies written during the three months ended March 31, 2019 compared to the same period in 2018.
Losses and LAE, net of reinsurance, were $113.1 million for the three months ended March 31, 2019, compared to $75.9 million during the same period in 2018 as follows (dollars in thousands):
 
Three Months Ended March 31, 2019
 
Direct
 
Loss Ratio
 
Ceded
 
Loss Ratio
 
Net
 
Loss Ratio
Premiums earned
$
295,377

 
 

 
$
85,650

 
 

 
$
209,727

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expenses:
 

 
 

 
 

 
 

 
 

 
 

Weather events*
$
5,000

 
1.7
%
 
$

 
%
 
$
5,000

 
2.4
 %
Prior year adverse/(favorable) reserve development
2,165

 
0.7
%
 
2,350

 
2.7
%
 
(185
)
 
(0.1
)%
All other losses and loss
adjustment expenses
108,577

 
36.8
%
 
298

 
0.3
%
 
108,279

 
51.6
 %
Total losses and loss adjustment expenses
$
115,742

 
39.2
%
 
$
2,648

 
3.1
%
 
$
113,094

 
53.9
 %
*    Includes only weather events beyond those expected.


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Three Months Ended March 31, 2018
 
Direct
 
Loss Ratio
 
Ceded
 
Loss Ratio
 
Net
 
Loss Ratio
Premiums earned
$
262,261

 
 

 
$
79,684

 
 

 
$
182,577

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expenses:
 

 
 

 
 

 
 

 
 

 
 

Weather events*
$

 
%
 
$

 
%
 
$

 
 %
Prior year adverse/(favorable) reserve development
(44
)
 
0.0
%
 

 
%
 
(44
)
 
0.0
 %
All other losses and loss
adjustment expenses
76,683

 
29.2
%
 
713

 
0.9
%
 
75,970

 
41.6
 %
Total losses and loss adjustment expenses
$
76,639

 
29.2
%
 
$
713

 
0.9
%
 
$
75,926

 
41.6
 %
*    Includes only weather events beyond those expected.
See “Item 1—Note 6 (Liability for Unpaid Losses and Loss Adjustment Expenses)” for change in liability for unpaid losses and LAE.

Losses and LAE for the first quarter of 2019 were $113.1 million compared to $75.9 million in the first quarter of 2018, an increase of $37.2 million, or 49.0%. Losses and LAE increased during the first quarter ended March 31, 2019 principally due to three key factors: (1) increased losses in connection with the growth in our underlying business; (2) increased core loss ratio (as defined below) from 33% in 2018 to 37% in 2019; and (3) reduced level of benefits from claim settlement fees ceded to reinsurers as hurricanes claims conclude. To a lesser extent, the quarter included $5.0 million for weather events beyond those expected and prior reserve adverse development (gross and ceded), which had a slight favorable impact on net results. “Core loss ratio” is a common operational metric used in the insurance industry to describe the ratio of current accident year expected losses, other than catastrophe losses, to premiums earned.
We increased our core loss ratio to be in line with recent claim experience, specifically in the Florida market, as we continue to address: (1) the assignment of benefit issue (“AOB”) and increases in the systemic solicitation and representation of claims; and (2) emerging trends impacting the severity and frequency of claims. Claims paid under an AOB often involve unnecessary litigation and as a result cost significantly more than claims settled when an AOB is not involved, with most of the increase going to the attorneys or representatives of policyholders. The increase in the underlying core loss and LAE ratio also reflects continued geographic expansion into states outside of Florida where non-catastrophe loss ratios are generally higher than in Florida.
These market trends in losses and LAE have led us to file for rate increases in Florida (approved April 2019), make changes to certain new business binding requirements and develop specialized claims and litigation management efforts to address market trends driving up claim costs.
The financial benefit from the management of claims ceded to reinsurers was reduced to $0.77 million for the first quarter of 2019 compared to $10.4 million during the first quarter of 2018. The benefit is reflected in our financial statements as a reduction of direct claim costs. This reduction in the first quarter of 2019 reflects a lower volume of hurricane claim costs ceded to reinsurers.
General and administrative expenses were $69.7 million for the three months ended March 31, 2019, compared to $63.9 million during the same period in 2018 as follows (dollars in thousands):
 
Three Months Ended
 
 
 
 
 
March 31,
 
Change
 
2019
 
2018
 
$
 
%
 
$
 
Ratio
 
$
 
Ratio
 
 
 
 
Premiums earned, net
$
209,727

 
 

 
$
182,577

 
 

 
$
27,150

 
14.9
%
General and administrative expenses:
 

 
 

 
 

 
 

 
 

 
 

Policy acquisition costs
43,511

 
20.7
%
 
38,043

 
20.8
%
 
5,468

 
14.4
%
Other operating costs
26,237

 
12.5
%
 
25,832

 
14.1
%
 
405

 
1.6
%
Total general and administrative expenses
$
69,748

 
33.3
%
 
$
63,875

 
35.0
%
 
$
5,873

 
9.2
%

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General and administrative costs increased by $5.9 million, which was primarily the result of increases in policy acquisition costs of $5.5 million due to commissions associated with increased premium volume, and to a lesser extent due to an increase in other operating costs of $0.4 million. As a percentage of earned premiums, however, general and administrative costs decreased from 35.0% of earned premiums for the three months ended March 31, 2018 to 33.3% of earned premiums for the same period in 2019. Other operating costs for the three months ended March 31, 2019 reflected lower amounts recorded for executive compensation. Other operating costs as a percentage of earned premium reduced from 14.1% for the three months ended March 31, 2018 compared to 12.5% of earned premium for the same period in 2019. Overall, the expense ratio (general and administrative expenses as a percentage of net earned premiums) benefited from reduced executive compensation and economies of scale as general and administrative expenses did not increase at the same rate as revenues.
Income tax expense increased by $2.0 million, or 16.8%, for the three months ended March 31, 2019, when compared with the three months ended March 31, 2018. Our effective tax rate (“ETR”) increased to 25.3% for the three months ended March 31, 2019, as compared to 22.5% for the three months ended March 31, 2018. The increase in income tax expense of $2.0 million is primarily the result of an increase in income before income taxes of $2.0 million and a decrease in excess tax benefit of $1.2 million. See “Item 1—Note 9 (Income Taxes)” for an explanation of the change in ETR.
Other comprehensive income, net of taxes for the three months ended March 31, 2019, was $12.0 million compared to other comprehensive loss of $4.1 million for the same period in 2018. See “Item 1—Note 11 (Other Comprehensive Income (Loss))” for additional information about the amounts comprising other comprehensive income and loss for these periods.

Analysis of Financial Condition—As of March 31, 2019 Compared to December 31, 2018
We believe that cash flows generated from operations will be sufficient to meet our working capital requirements for at least the next twelve months. We invest amounts considered to be in excess of current working capital requirements.
The following table summarizes, by type, the carrying values of investments as of the dates presented (in thousands):
 
As of
Type of Investment
March 31, 2019
 
December 31, 2018
Available-for-sale debt securities
$
840,028

 
$
820,438

Equity securities
53,175

 
63,277

Investment real estate, net
25,070

 
24,439

Total
$
918,273

 
$
908,154

See “Item 1—Condensed Consolidated Statements of Cash Flows” for explanations of changes in investments and “Item 1—Note 3 (Investments)”.
Prepaid reinsurance premiums represent the portion of unearned ceded written premium that will be earned pro-rata over the remaining coverage period of our reinsurance program, expiring May 31, 2019. The decrease of $85.7 million to $57.1 million as of March 31, 2019 was to recognize the amortization of ceded written premium for the unamortized reinsurance costs relating to our 2018-2019 catastrophe reinsurance program earned during the period. Our reinsurance program runs from June 1 to May 31 each year.
Reinsurance recoverable represents the estimated amount of paid and unpaid losses, LAE and expenses that are expected to be recoverable from reinsurers. The decrease of $95.3 million during the quarter to $323.3 million as of March 31, 2019 was due to the collection of amounts from reinsurers relating to previous hurricanes and storm events.
Premiums receivable, net represents amounts receivable from policyholders. The decrease in premiums receivable, net of $1.5 million to $58.3 million as of March 31, 2019 relates to the seasonality and consumer behavior of the Company’s business.
Property and equipment, net increased $5.1 million during the quarter primarily as the result of the purchase of a new office building in Fort Lauderdale, Florida which will be used to meet the staffing needs of the company as the business continues to expand.
Deferred policy acquisition costs (“DPAC”) decreased by $1.4 million to $83.3 million as of March 31, 2019, which is consistent with the underlying premium growth and the seasonality of our business. See “Item 1—Note 5 (Insurance Operations)” for a roll-forward in the balance of our DPAC.
Income taxes recoverable or payable represents the difference between estimated tax obligations compared to tax payments made to taxing authorities. At March 31, 2019, the balance payable was $6.2 million, representing amounts due to taxing authorities at that date, compared to a balance recoverable of $11.2 million as of December 31, 2018, representing amounts due from taxing authorities.
Deferred income taxes represent the estimated tax asset or tax liability caused by temporary differences between the tax return basis of certain assets and liabilities and amounts recorded in the financial statements. Deferred income taxes reverse in future years as the temporary differences between book and tax reverse.

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Table of Contents

See “Item 1—Note 6 (Liability for Unpaid Losses and Loss Adjustment Expenses)” for a roll-forward in the balance of our unpaid losses and LAE. Unpaid losses and LAE decreased by $106.5 million to $366.4 million as of March 31, 2019. The reduction during the quarter in unpaid losses and LAE was principally due to the settlement of claims from previous hurricanes and storms as more claims from those events concluded during the quarter. Overall reserves decreased by $106.5 million as claim settlements exceeded new emerging claims. Unpaid losses and LAE are net of estimated subrogation recoveries.
Unearned premiums represent the portion of direct premiums written that will be earned pro rata in the future. The decrease of $6.1 million from December 31, 2018 to $595.5 million as of March 31, 2019 reflects the seasonality of our business, which is the variability of premiums written by month.
Advance premium represents premium payments made by policyholders ahead of the effective date of the policies. The increase of $18.3 million to $44.5 million as of March 31, 2019 reflects both organic growth and the seasonality of our business.
Book overdrafts represent outstanding checks or drafts in excess of cash on deposit with banking institutions and are examined to determine if a legal right of offset exists for accounts within the same banking institution at each balance sheet date. We maintain a short-term cash investment sweep to maximize investment returns on cash balances. Due to sweep activities, certain outstanding items are recorded as book overdrafts, which totaled $43.3 million as of March 31, 2019, compared to $102.8 million as of December 31, 2018. The decrease of $59.5 million is the result of fewer outstanding items as of March 31, 2019 compared to December 31, 2018 as outstanding claims payments for hurricane events are settled and are no longer outstanding.
Reinsurance payable, net, represents the unpaid installments owed to reinsurers in connection with our 2018-2019 catastrophe reinsurance program, which runs from June 1, 2018 to May 31, 2019, and to a lesser extent, unpaid reinstatement premiums due to reinsurers and cash advances received from reinsurers during hurricane or storm events. The balance decreased by $45.1 million to $48.2 million as of March 31, 2019 as a result of installment payments made to reinsurers during the quarter and reductions in cash advances received from reinsurers as ceded claims settle with reinsurers. Ceded written premiums for the 2018-2019 catastrophe reinsurance program are paid in installments over the June 1 to May 31 policy term.
Other liabilities and accrued expenses decreased by $4.4 million to $41.0 million as of March 31, 2019, primarily from the payment of accrued 2018 incentive performance bonuses settled after year end.
Capital resources, net increased by $37.0 million during the quarter reflecting our performance, debt repayment and stock transactions. See “Item 1—Condensed Consolidated Statements of Stockholders’ Equity” and “Item 1—Note 8 (Stockholders’ Equity)”.
The reduction in long-term debt was the result of principal payments on debt during 2019. See “—Liquidity and Capital Resources”.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Liquidity is a measure of a company’s ability to generate sufficient cash flows to meet its short and long-term obligations. Funds generated from operations have been sufficient to meet our liquidity requirements and we expect that, in the future, funds from operations will continue to meet such requirements.
The balance of cash and cash equivalents as of March 31, 2019 was $185.1 million compared to $166.4 million at December 31, 2018. See “Item 1—Condensed Consolidated Statements of Cash Flows” for a reconciliation of the balance of cash and cash equivalents between March 31, 2019 and December 31, 2018. The increase in cash and cash equivalents was driven by cash flows generated from operating and investing activities in excess of those used for financing activities. We maintain a short-term investment cash sweep to maximize investment returns on cash balances. Due to these sweep activities, certain outstanding items are routinely recorded as “Book overdraft” in the Condensed Consolidated Financial Statements. Cash and cash equivalents balances are available to settle book overdrafts, pay reinsurance premiums, pay expenses and pay claims. Reinsurance premiums are paid in installments during the reinsurance policy period, which runs from June 1 to May 31 of the following year. The Florida Hurricane Catastrophe Fund (“FHCF”) is paid in three installments on August 1, October 1, and December 1, and third-party reinsurance is paid in four installments on July 1, October 1, January 1 and April 1, resulting in significant payments at those times. See “Item 1—–Note 12 (Commitments and Contingencies)” and “—Contractual Obligations” for more information.
The balance of restricted cash and cash equivalents as of March 31, 2019 and December 31, 2018 represents cash equivalents on deposit with regulatory agencies in the various states in which our Insurance Entities do business.
Liquidity is required for us to cover the payment of general operating expenses, dividends to shareholders (if and when authorized and declared by our Board of Directors), payment for the possible repurchase of our common stock (if and when authorized by our Board of Directors), payment of income taxes, and interest and principal payments on outstanding debt obligations, if any. The declaration and payment of future dividends to our shareholders, and any future repurchases of our common stock, will be at the discretion of our Board of Directors and will depend upon many factors, including our operating results, financial condition, debt covenants and any regulatory constraints. Principal sources of liquidity for us include revenues generated from fees paid by the Insurance Entities to affiliated companies for general agency, inspections and claims adjusting services. Additional sources of liquidity include brokerage commissions earned on reinsurance contracts, policy fees and remittances from the Insurance Entities for their respective share of income taxes. We also maintain investments, which are a source of ongoing interest and dividend income and would generate funds upon sale.

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Table of Contents

There are limitations on the dividends the Insurance Entities may pay to their immediate parent company, Protection Solutions, Inc. (“PSI”, formerly known as Universal Insurance Holding Company of Florida). The maximum amount of dividends that can be paid by Florida insurance companies without prior approval of the Commissioner of the FLOIR is subject to restrictions as referenced below and in “Item 1—–Note 5 (Insurance Operations).” The maximum dividend that may be paid by the Insurance Entities to PSI without prior approval is limited to the lesser of statutory net income from operations of the preceding calendar year or statutory unassigned surplus as of the preceding year end. During the three months ended March 31, 2019 and the year ended December 31, 2018, the Insurance Entities did not pay dividends to PSI.
Liquidity for the Insurance Entities is primarily required to cover payments for reinsurance premiums, claims payments including potential payments of catastrophe losses (offset by recovery of any reimbursement amounts under our reinsurance agreements), fees paid to affiliates for managing general agency services, inspections and claims adjusting services, agent commissions, premium and income taxes, regulatory assessments, general operating expenses, and interest and principal payments on debt obligations. The principal source of liquidity for the Insurance Entities consists of the revenue generated from the collection of net premiums, interest and dividend income from the investment portfolio, the collection of reinsurance recoverable and financing fees.
Our insurance operations provide liquidity as premiums are generally received months or even years before losses are paid under the policies written. In the event of catastrophic events, many of our reinsurance agreements provide for “cash advance” whereby reinsurers advance or prepay amounts to us, thereby providing liquidity, which we utilize in the claim settlement process. In addition, the Insurance Entities maintain substantial investments in highly liquid, marketable securities, which would generate funds upon sale.
The Insurance Entities are responsible for losses related to catastrophic events in excess of coverage provided by the Insurance Entities’ reinsurance programs or retentions before our reinsurance protection commences. Also, the Insurance Entities are responsible for all other losses that otherwise may not be covered by the reinsurance programs and any amounts arising in the event of a reinsurer default. Losses or a default by reinsurers may have a material adverse effect on either of the Insurance Entities or our business, financial condition, results of operations and liquidity.
Capital Resources
Capital resources provide protection for policyholders, furnish the financial strength to support the business of underwriting insurance risks and facilitate continued business growth. The following table provides our stockholders’ equity, total long-term debt, total capital resources, debt-to-total capital ratio and debt-to-equity ratio for the periods presented (dollars in thousands):
 
As of
 
March 31,
 2019
 
December 31, 2018
Stockholders’ equity
$
539,050

 
$
501,633

Total long-term debt
11,029

 
11,397

Total capital resources
$
550,079

 
$
513,030

 
 
 
 
Debt-to-total capital ratio
2.0
%
 
2.2
%
Debt-to-equity ratio
2.0
%
 
2.3
%
As described in our Annual Report on Form 10-K for the year ended December 31, 2018, UPCIC entered into a surplus note with the State Board of Administration of Florida under Florida’s Insurance Capital Build-Up Incentive Program on November 9, 2006. The surplus note has a twenty-year term, with quarterly payments of principal and interest that accrue per the terms of the note agreement. At March 31, 2019, UPCIC was in compliance with the terms of the surplus note. Total adjusted capital surplus, which includes the surplus note, was in excess of regulatory requirements for both UPCIC and APPCIC.
Common Stock Repurchases
On December 12, 2018, we announced that our Board of Directors authorized a share repurchase program under which we may repurchase shares in the open market up to $20 million of its outstanding shares of common stock through May 31, 2020. We may repurchase shares from time to time at our discretion, based on ongoing assessments of our capital needs, the market price of our common stock and general market conditions. We fund the share repurchase program with cash from operations.
During the three months ended March 31, 2019, we repurchased an aggregate of 320,500 shares of our common stock in the open market at an aggregate purchase price of $10.1 million. Also, see “Part II, Item 2—Unregistered Sales of Equity Securities and Use of Proceeds” for share repurchase activity during the three months ended March 31, 2019.
Cash Dividends
The following table summarizes the dividends declared by us:
2019
 
Dividend
Declared Date
 
Shareholders
Record Date
 
Dividend
Payable Date
 
Cash Dividend
Per Share Amount
First Quarter
 
January 31, 2019
 
March 11, 2019
 
March 25, 2019
 
$
0.16



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Table of Contents

CONTRACTUAL OBLIGATIONS
The following table represents our contractual obligations for which cash flows are fixed or determinable as of March 31, 2019 (in thousands):
 
Total
 
Less than
1 year
 
1-3 years
 
3-5 years
 
Over
5 years
Reinsurance payable and multi-year commitments (1)
$
164,447

 
$
48,171

 
$
116,276

 
$

 
$

Unpaid losses and LAE, direct (2)
366,356

 
226,775

 
102,213

 
28,209

 
9,159

Long-term debt
12,192

 
1,320

 
5,057

 
3,171

 
2,644

Total contractual obligations
$
542,995

 
$
276,266

 
$
223,546

 
$
31,380

 
$
11,803

(1)
The 1-3 years amount represents the payment of reinsurance premiums payable under multi-year commitments. See “Item 1—–Note 12 (Commitments and Contingencies).”
(2)
There are generally no notional or stated amounts related to unpaid losses and LAE. Both the amounts and timing of future loss and LAE payments are estimates and subject to the inherent variability of legal and market conditions affecting the obligations and make the timing of cash outflows uncertain. The ultimate amount and timing of unpaid losses and LAE could differ materially from the amounts in the table above. Further, the unpaid losses and LAE do not represent all the obligations that will arise under the contracts, but rather only the estimated liability incurred through March 31, 2019. Unpaid losses and LAE are net of estimated subrogation recoveries. In addition, these balances exclude amounts recoverable from the Company’s reinsurance program. See “Item 1—Note 4 (Reinsurance).”
2018 - 2019 Reinsurance Program
Reinsurance enables our Insurance Entities to limit potential exposures to catastrophic events. Reinsurance contracts are typically classified as treaty or facultative contracts. Treaty reinsurance provides coverage for all or a portion of a specified group or class of risks ceded by the primary insurer, while facultative reinsurance provides coverage for specific individual risks. Within each classification, reinsurance can be further classified as quota-share or excess. Quota-share reinsurance is where the primary insurer and the reinsurer share proportionally or pro-rata in the direct premiums and losses of the insurer. Excess reinsurance indemnifies the direct insurer or reinsurer for all or a portion of the loss in excess of an agreed upon amount or retention.
Developing and implementing our reinsurance strategy to adequately protect our balance sheet and Insurance Entities in the event of one or more catastrophes while maintaining efficient reinsurance costs has been a key strategic priority for us. For our 2018-2019 reinsurance program, we utilized excess reinsurance. In recent years, the property and casualty insurance market has experienced a substantial increase in the availability of property catastrophe reinsurance resulting from the increased supply of capital from non-traditional reinsurance providers, including private capital and hedge funds. This increased capital supply has helped to mitigate upward pressure on reinsurance pricing following the recent significant catastrophic activity in Florida and elsewhere around the world.
In order to limit our potential exposure to catastrophic events, we purchase significant reinsurance from third-party reinsurers and the FHCF. The FLOIR requires us, like all insurance companies doing business in Florida, to have a certain amount of capital and reinsurance coverage in order to cover losses upon the occurrence of a single catastrophic event and a series of catastrophic events occurring in the same hurricane season. Our 2018-2019 reinsurance program meets and provides reinsurance in excess of the FLOIR’s requirements, which are based on, among other things, the probable maximum loss that we would incur from an individual catastrophic event estimated to occur once in every 100 years based on our portfolio of insured risks and a series of stress test catastrophe loss scenarios based on past historical events. In respect to the single catastrophic event, the nature, severity and location of the event giving rise to such a probable maximum loss differs for each insurer depending on the insurer’s portfolio of insured risks, including, among other things, the geographic concentration of insured value within the insurer’s portfolio. Accordingly, a particular catastrophic event could be a one-in-100 year loss event for one insurance company while having a greater or lesser probability of occurrence for another insurance company.

We believe our retention under the reinsurance program is appropriate and structured to protect our customers. We test the sufficiency of our reinsurance program by subjecting our personal residential exposures to statistical testing using a third-party hurricane model, RMS RiskLink v17.0 (Build 1825). This model combines simulations of the natural occurrence patterns and characteristics of hurricanes, tornadoes, earthquakes and other catastrophes with information on property values, construction types and occupancy classes. The model outputs provide information concerning the potential for large losses before they occur, so companies can prepare for their financial impact. Furthermore, as part of our operational excellence initiatives, we continually look to enable new technology to refine our data intelligence on catastrophe risk modeling.

Effective June 1 2018, we entered into multiple reinsurance agreements comprising our 2018-2019 reinsurance program. See “Item 1—Note 4 (Reinsurance).”

Refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, for discussions surrounding the reinsurance programs of UPCIC and APPCIC.


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Table of Contents

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no material changes during the period covered by this Quarterly Report on Form 10-Q to Critical Accounting Policies and Estimates previously disclosed in “Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2018.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the Financial Accounting Standards Board (“FASB”) revised U.S. GAAP with the issuance of Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326), that introduces a new process for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new ASU will apply to: (1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair value through other comprehensive income and (4) beneficial interests in securitized financial assets. The ASU changes the current practice of recording a permanent write down (other than temporary impairment) for probable credit losses, which is more restrictive than the new ASU requirement that would estimate credit losses, then recorded through a temporary allowance account that can be re-measured as estimated credit losses change. The ASU further limited estimated credit losses relating to available-for-sale securities to the amount which fair value is below amortized cost. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently evaluating the impact that this standard will have on our consolidated financial statements.

In August 2018, the FASB revised U.S. GAAP with the issuance of ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU removes, modifies and adds certain disclosure requirements associated with fair value measurements. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. We are currently evaluating our timeline for the adoption of this ASU, which only affects the presentation of certain disclosures and is not expected to impact our results of operations, financial position or liquidity.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the potential for economic losses due to adverse changes in fair market value of available-for-sale debt securities, equity securities (“Financial Instruments”) and investment real estate. We carry all of our Financial Instruments at fair market value and investment real estate at net book value in our statement of financial condition. Our investment portfolio as of March 31, 2019 is comprised of available-for-sale debt securities and equity securities, carried at fair market value, which expose us to changing market conditions, specifically interest rates and equity price changes.
The primary objectives of the investment portfolio are the preservation of capital and providing adequate liquidity for potential claims payments and other cash needs. The portfolio’s secondary investment objective is to provide a total rate of return with an emphasis on investment income. None of our investments in risk-sensitive Financial Instruments were entered into for trading purposes.
See “Item 1—Note 3 (Investments)” for more information about our Financial Instruments.
Interest Rate Risk
Interest rate risk is the sensitivity of the fair market value of a fixed-rate Financial Instrument to changes in interest rates. Generally, when interest rates rise, the fair value of our fixed-rate Financial Instruments declines over the remaining term of the agreement.
The following tables provide information about our fixed income Financial Instruments as of March 31, 2019 compared to December 31, 2018, which are sensitive to changes in interest rates. The tables present the expected cash flows of Financial Instruments based on years to effective maturity using amortized cost compared to fair market value and the related book yield compared to coupon yield (dollars in thousands):
 
March 31, 2019
 
Amortized Cost
 
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Other
 
Total
Amortized cost
$
102,098

 
$
140,243

 
$
73,041

 
$
70,272

 
$
119,321

 
$
328,647

 
$
1,195

 
$
834,817

Fair market value
$
101,753

 
$
139,498

 
$
72,820

 
$
70,095

 
$
120,907

 
$
333,724

 
$
1,231

 
$
840,028

Coupon rate
2.20
%
 
2.44
%
 
2.91
%
 
2.90
%
 
3.41
%
 
3.90
%
 
5.78
%
 
3.21
%
Book yield
1.95
%
 
2.35
%
 
2.67
%
 
2.86
%
 
3.26
%
 
3.66
%
 
5.81
%
 
3.03
%
* Years to effective yield - 3.5 years
 
 
 
 
 
 
 
 
 
 
 
 

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December 31, 2018
 
Amortized Cost
 
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Other
 
Total
Amortized cost
$
123,110

 
$
109,690

 
$
114,580

 
$
55,542

 
$
121,363

 
$
301,454

 
$
5,388

 
$
831,127

Fair market value
$
122,333

 
$
108,564

 
$
112,917

 
$
54,309

 
$
119,945

 
$
297,214

 
$
5,156

 
$
820,438

Coupon rate
2.04
%
 
2.35
%
 
2.63
%
 
2.99
%
 
3.32
%
 
3.90
%
 
6.15
%
 
3.11
%
Book yield
1.88
%
 
2.24
%
 
2.43
%
 
2.83
%
 
3.18
%
 
3.68
%
 
5.96
%
 
2.94
%
* Years to effective yield - 3.5 years
 
 
 
 
 
 
 
 
 
 
 
 

All securities, except those with perpetual maturities, were categorized in the tables above utilizing years to effective maturity. Effective maturity takes into consideration all forms of potential prepayment, such as call features or prepayment schedules, that shorten the lifespan of contractual maturity dates.
Equity Price Risk
Equity price risk is the potential for loss in fair value of Financial Instruments in common stock and mutual funds from adverse changes in the prices of those Financial Instruments.
The following table provides information about the Financial Instruments in our investment portfolio subject to price risk as of the dates presented (in thousands):
 
March 31, 2019
 
December 31, 2018
 
Fair Value
 
Percent
 
Fair Value
 
Percent
Equity Securities:
 
 
 

 
 

 
 

Common stock
$
4,342

 
8.2
%
 
$
15,564

 
24.6
%
Mutual funds
48,833

 
91.8
%
 
47,713

 
75.4
%
Total equity securities
$
53,175

 
100.0
%
 
$
63,277

 
100.0
%
A hypothetical decrease of 20% in the market prices of each of the equity securities held at March 31, 2019 and December 31, 2018 would have resulted in a decrease of $10.6 million and $12.7 million, respectively, in the fair value of those securities.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that disclosure controls and procedures were effective as of March 31, 2019, to ensure that information required to be disclosed by the Company in its reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There was no change in the Company’s internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION
Item 1. Legal Proceedings
Lawsuits are filed against the Company from time to time. Many of these lawsuits involve claims under policies that we underwrite and reserve for as an insurer. We are also involved in various other legal proceedings and litigation unrelated to claims under our policies that arise in the ordinary course of business operations. Management believes that any liabilities that may arise as a result of these legal matters will not have a material adverse effect on our financial condition or results of operations. The Company contests liability and/or the amount of damages as appropriate in each pending matter.

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In accordance with applicable accounting guidance, the Company establishes an accrued liability for legal matters when those matters present loss contingencies that are both probable and estimable.
Legal proceedings are subject to many uncertain factors that generally cannot be predicted with assurance, and the Company may be exposed to losses in excess of any amounts accrued. The Company currently estimates that the reasonably possible losses for legal proceedings, whether in excess of a related accrued liability or where there is no accrued liability, and for which the Company is able to estimate a possible loss, are immaterial. This represents management’s estimate of possible loss with respect to these matters and is based on currently available information. These estimates of possible loss do not represent our maximum loss exposure, and actual results may vary significantly from current estimates.
Item 1A. Risk Factors
There have been no material changes during the period covered by this Quarterly Report on Form 10-Q to the risk factors previously disclosed in “Part I, Item 1A—Risk Factors,” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The table below presents purchases of our common stock during the three months ended March 31, 2019.
 
 
 
 
 
 
Total Number of
 
Maximum Number
 
 
 
 
 
 
Shares Purchased
 
of Shares That
 
 
 
 
 
 
As Part of
 
May Yet be
 
 
 
 
 
 
Publicly
 
Purchased Under
 
 
Total Number of
 
Average Price
 
Announced
 
the Plans or
 
 
Shares Purchased
 
Paid per Share (1)
 
Plans or Programs
 
Programs (2)
1/1/2019 - 1/31/2019
 

 
$

 

 

2/1/2019 - 2/28/2019
 

 
$

 

 

3/1/2019 - 3/31/2019
 
320,500

 
$
31.54

 
320,500

 
141,958

Total
 
320,500

 
$
31.54

 
320,500

 
141,958

(1)Average price paid per share does not reflect brokerage commissions paid to acquire shares in open market transactions.
(2)Number of shares was calculated based on a closing price at March 29, 2019 of $31.00 per share.
On December 12, 2018, we announced that our Board of Directors authorized the repurchase of up to $20 million of our outstanding common stock in the open market through May 31, 2020. We may repurchase shares from time to time at our discretion, based on ongoing assessments of our capital needs, the market price of our common stock and general market conditions.
Since December 2018 and through the first quarter of 2019, we have repurchased 458,734 shares of our common stock pursuant to this program at an aggregate purchase price of approximately $15.6 million.

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Item 6. Exhibits
Exhibit No.
 
Exhibit
 
 
 
10.1
 
 
 
 
15.1
 
 
 
 
31.1
 
 
 
 
31.2
 
 
 
 
32
 
 
 
 
101.1
 
The following materials from Universal Insurance Holdings, Inc. Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2019, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Statement of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements.
 
 
 


† Indicates management contract or compensatory plan or arrangement.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
UNIVERSAL INSURANCE HOLDINGS, INC.
 
 
 
Date: April 26, 2019
 
/s/ Sean P. Downes
 
 
Sean P. Downes, Chief Executive Officer and Principal Executive Officer
 
 
 
Date: April 26, 2019
 
/s/ Frank C. Wilcox
 
 
Frank C. Wilcox, Chief Financial Officer and Principal Accounting Officer

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