uve-10q_20170930.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

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Smaller reporting company

Emerging growth company

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ 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.

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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 34,443,288 shares of common stock, par value $0.01 per share, outstanding on November 3, 2017.

We have reviewed the accompanying condensed consolidated balance sheet of Universal Insurance Holdings, Inc. and its wholly-owned subsidiaries (the “Company”) as of September 30, 2017 and the related condensed consolidated statements of income, comprehensive income for the three and nine-month periods ended September 30, 2017 and 2016 and related condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2017 and 2016. 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, 2016 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 February 23, 2017. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

	As of
	September 30,			December 31,
	2017			2016
ASSETS
Fixed maturities, at fair value	$	609,179		$	584,361
Equity securities, at fair value		26,075			50,803
Short-term investments, at fair value		—			5,002
Investment real estate, net		16,324			11,435
Total invested assets		651,578			651,601

Cash and cash equivalents		366,176			105,730
Restricted cash and cash equivalents		2,635			2,635
Prepaid reinsurance premiums		212,489			124,385
Reinsurance recoverable		412,697			106
Premiums receivable, net		66,687			53,833
Property and equipment, net		32,959			32,162
Deferred policy acquisition costs		75,934			64,912
Income taxes recoverable		19,174			3,262
Deferred income tax asset, net		5,300			10,674
Other assets		11,432			10,707
Total assets	$	1,857,061		$	1,060,007
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Unpaid losses and loss adjustment expenses	$	440,443		$	58,494
Unearned premiums		556,299			475,756
Advance premium		28,667			17,796
Accounts payable		3,999			3,187
Reinsurance payable, net		341,356			80,891
Dividends payable		4,846			—
Other liabilities and accrued expenses		47,659			37,665
Long-term debt		13,235			15,028
Total liabilities		1,436,504			688,817

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		455			453
Authorized shares - 55,000
Issued shares - 45,473 and 45,324
Outstanding shares - 34,440 and 35,052
Treasury shares, at cost - 11,033 and 10,272		(104,866	)		(86,982	)
Additional paid-in capital		89,429			82,263
Accumulated other comprehensive income (loss), net of taxes		(2,207	)		(6,408	)
Retained earnings		437,746			381,864
Total stockholders' equity		420,557			371,190
Total liabilities and stockholders' equity	$	1,857,061		$	1,060,007

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
PREMIUMS EARNED AND OTHER REVENUES
Direct premiums written	$	274,744		$	241,888		$	816,350		$	741,782
Change in unearned premium		(19,935	)		(7,388	)		(80,543	)		(59,211	)
Direct premium earned		254,809			234,500			735,807			682,571
Ceded premium earned		(80,292	)		(74,966	)		(230,722	)		(214,128	)
Premiums earned, net		174,517			159,534			505,085			468,443
Net investment income (expense)		3,085			2,304			9,012			6,051
Net realized gains (losses) on investments		803			101			2,450			1,344
Commission revenue		5,304			4,603			14,546			12,927
Policy fees		4,861			4,226			14,594			13,093
Other revenue		1,673			1,668			4,917			4,827
Total premiums earned and other revenues		190,243			172,436			550,604			506,685
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses		116,375			73,548			267,129			199,749
General and administrative expenses		57,269			54,725			171,582			166,780
Total operating costs and expenses		173,644			128,273			438,711			366,529
INCOME BEFORE INCOME TAXES		16,599			44,163			111,893			140,156
Income tax expense		6,635			17,281			41,354			54,400
NET INCOME	$	9,964		$	26,882		$	70,539		$	85,756
Basic earnings per common share	$	0.29		$	0.77		$	2.02		$	2.46
Weighted average common shares outstanding - Basic		34,686			35,042			34,927			34,878
Diluted earnings per common share	$	0.28		$	0.75		$	1.96		$	2.41
Weighted average common shares outstanding - Diluted		35,615			35,723			35,917			35,594
Cash dividend declared per common share	$	0.14		$	0.14		$	0.42		$	0.42

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

	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	286,195		$	178,637
Cash flows from investing activities:
Proceeds from sale of property and equipment		17			31
Purchases of property and equipment		(3,655	)		(6,041	)
Purchases of equity securities		(47,070	)		(46,414	)
Purchases of fixed maturities		(114,593	)		(278,961	)
Purchases of investment real estate, net		(5,023	)		(4,400	)
Proceeds from sales of equity securities		75,027			46,819
Proceeds from sales of fixed maturities		19,643			78,966
Maturities of fixed maturities		75,770			38,111
Maturities of short-term investments		5,000			25,000
Net cash provided by (used in) investing activities		5,116			(146,889	)
Cash flows from financing activities:
Preferred stock dividend		(8	)		(7	)
Common stock dividend		(9,803	)		(9,828	)
Purchase of treasury stock		(17,884	)		(8,415	)
Sale of treasury stock		—			2,965
Payments related to tax withholding for share-based compensation		(1,367	)		(4,905	)
Excess tax benefits (shortfall) from share-based compensation		—			(1,563	)
Repayment of debt		(1,803	)		(1,768	)
Net cash provided by (used in) financing activities		(30,865	)		(23,521	)
Net increase (decrease) in cash and cash equivalents		260,446			8,227
Cash and cash equivalents at beginning of period		105,730			197,014
Cash and cash equivalents at end of period	$	366,176		$	205,241

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

Universal Insurance Holdings, Inc. (“UVE”) is a Delaware corporation incorporated in 1990. UVE with its wholly-owned subsidiaries (the “Company”) is a vertically integrated insurance holding company performing all aspects of insurance underwriting, distribution and claims. Through its wholly-owned subsidiaries, Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC”), together referred to as the “Insurance Entities,” the Company is principally engaged in the property and casualty insurance business offered primarily through a network of independent agents. Risk from catastrophic losses is managed through the use of reinsurance agreements. The Company’s primary product is homeowners’ insurance currently offered in fifteen states as of September 30, 2017, 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 reinsurance programs placed by the Insurance Entities, policy fees collected from policyholders by our wholly-owned managing general agency subsidiary and payment plan fees charged to policyholders who choose to pay their premiums in installments.

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 (“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, 2016, filed with the SEC on February 24, 2017. The condensed consolidated balance sheet at December 31, 2016, was derived from audited financial statements, but does not include all disclosures required by 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’ 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 UVE 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.

The Company reported Significant Accounting Policies in its Annual Report on Form 10-K for the year ended December 31, 2016. The following are new or revised disclosures or disclosures required on a quarterly basis.

In March 2016, the Financial Accounting Standards Board (“FASB”) issued guidance which simplifies several aspects of the accounting for share-based payment transactions. The new guidance requires excess income tax benefits (windfalls) and deficiencies (shortfalls) to be recognized in the income statement as income tax benefits or charges when the awards vest or are settled. The former guidance required the recognition of excess tax benefits or deficiencies in stockholders’ equity. In addition, all income tax-related cash flows resulting from share-based payments will be reported as operating activities in the statement of cash flows under the new guidance. The guidance also allows us to repurchase more of an employee's shares for tax withholding purposes without triggering liability accounting; clarifies that all cash payments for tax withholdings made on an employee’s behalf should be presented as a financing activity on the Company’s statement of cash flows; and provides an accounting policy election to account for forfeitures as they occur. The guidance is effective for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted. The Company adopted this guidance effective January 1, 2017.

The adoption of the new standard resulted in the recognition of excess tax benefit of $0.8 million reflected in the Company’s Condensed Consolidated Statements of Income as an income tax benefit for the nine months ended September 30, 2017. Additionally, excess tax benefits on the Company’s Condensed Consolidated Statement of Cash Flows are presented as an operating activity on a prospective basis. The presentation requirement for cash flows related to employee taxes paid for withheld shares did not impact any of the periods presented in the Company’s Condensed Consolidated Statement of Cash Flows since these cash flows have historically been presented as a financing activity. The Company will continue to account for forfeitures as they occur. The standard also modifies the calculation of dilutive earnings per share to no longer use proceeds from tax benefits or deficiencies.

The following table provides the cost or amortized cost and fair value of securities available for sale as of the dates presented (in thousands):

	September 30, 2017
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Fixed Maturities:
U.S. government obligations and agencies	$	55,519	$	21	$	(524	)	$	55,016
Corporate bonds		215,455		883		(507	)		215,831
Mortgage-backed and asset-backed securities		219,321		110		(1,333	)		218,098
Municipal bonds		106,926		706		(1,342	)		106,290
Redeemable preferred stock		13,336		631		(23	)		13,944
Equity Securities:
Common stock		5,992		—		(309	)		5,683
Mutual funds		22,316		143		(2,067	)		20,392
Total	$	638,865	$	2,494	$	(6,105	)	$	635,254

	December 31, 2016
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Fixed Maturities:
U.S. government obligations and agencies	$	74,937	$	—	$	(670	)	$	74,267
Corporate bonds		192,328		402		(1,300	)		191,430
Mortgage-backed and asset-backed securities		216,679		135		(2,038	)		214,776
Municipal bonds		94,794		130		(3,727	)		91,197
Redeemable preferred stock		12,723		125		(157	)		12,691
Equity Securities:
Common stock		214		—		(121	)		93
Mutual funds		53,900		407		(3,597	)		50,710
Short-term investments		5,000		2		—			5,002
Total	$	650,575	$	1,201	$	(11,610	)	$	640,166

The following table provides the credit quality of investment securities with contractual maturities or the issuer of such securities as of the dates presented (in thousands):

	September 30, 2017					December 31, 2016
			% of Total					% of Total
Comparable Ratings	Fair Value		Fair Value			Fair Value		Fair Value
AAA	$	130,119		21.4	%	$	131,260		22.3	%
AA		268,056		44.0	%		275,480		46.7	%
A		122,808		20.2	%		107,418		18.2	%
BBB		79,950		13.1	%		67,263		11.4	%
BB+ and Below		3,738		0.6	%		3,444		0.6	%
No Rating Available		4,508		0.7	%		4,498		0.8	%
Total	$	609,179		100.0	%	$	589,363		100.0	%

The tables above include comparable credit quality ratings by Standard and Poor’s Rating Services, Inc., Moody’s Investors Service, Inc. and Fitch Ratings, Inc.

The following table summarizes the cost or amortized cost and fair value of mortgage-backed and asset-backed securities as of the dates presented (in thousands):

	September 30, 2017				December 31, 2016
	Cost or				Cost or
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value
Mortgage-backed Securities:
Agency	$	119,469	$	118,387	$	110,724	$	109,022
Non-agency		15,418		15,334		19,408		19,265
Asset-backed Securities:
Auto loan receivables		36,989		36,959		37,390		37,429
Credit card receivables		35,869		35,846		38,640		38,568
Other receivables		11,576		11,572		10,517		10,492
Total	$	219,321	$	218,098	$	216,679	$	214,776

The following table summarizes the fair value and gross unrealized losses on securities available for sale, 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 (dollars in thousands):

	September 30, 2017
	Less Than 12 Months							12 Months or Longer
	Number of				Unrealized			Number of				Unrealized
	Issues		Fair Value		Losses			Issues		Fair Value		Losses
Fixed Maturities:
U.S. government obligations and agencies		10	$	47,102	$	(404	)		4	$	4,345	$	(120	)
Corporate bonds		100		76,577		(410	)		11		7,105		(97	)
Mortgage-backed and asset-backed securities		90		146,458		(1,196	)		8		13,063		(137	)
Municipal bonds		43		46,363		(601	)		15		24,714		(741	)
Redeemable preferred stock		13		1,518		(19	)		1		107		(4	)
Equity Securities:
Common stock		2		5,683		(309	)		—		—		—
Mutual funds		5		293		(2	)		2		9,202		(2,065	)
Total		263	$	323,994	$	(2,941	)		41	$	58,536	$	(3,164	)

	December 31, 2016
	Less Than 12 Months							12 Months or Longer
	Number of				Unrealized			Number of				Unrealized
	Issues		Fair Value		Losses			Issues		Fair Value		Losses
Fixed Maturities:
U.S. government obligations and agencies		11	$	70,453	$	(608	)		2	$	3,504	$	(62	)
Corporate bonds		116		96,379		(1,219	)		4		3,250		(80	)
Mortgage-backed and asset-backed securities		73		149,928		(1,923	)		5		9,660		(115	)
Municipal bonds		69		79,402		(3,726	)		—		—		—
Redeemable preferred stock		50		6,340		(158	)		—		—		—
Equity Securities:
Common stock		1		18		(7	)		2		75		(115	)
Mutual funds		3		28,020		(774	)		2		11,529		(2,823	)
Total		323	$	430,540	$	(8,415	)		15	$	28,018	$	(3,195	)

At September 30, 2017, the Company held fixed maturity and equity securities that were in an unrealized loss position as presented in the table above. For fixed maturity 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 fixed maturity and equity securities the Company considers whether it has the intent and ability to hold the 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, we believe that our fixed income portfolio is of high quality and that we

will recover the amortized cost basis of our fixed income securities. We continually monitor the credit quality of our fixed income investments 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 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 for securities available for sale at September 30, 2017 are other than temporary.

As of September 30, 2017, the Company held approximately $9.2 million equity securities that were in an unrealized loss position twelve months or longer. The unrealized loss on these equity securities was $2.1 million. Based on our analysis, the Company believes each equity security will recover in a reasonable period of time and the Company has the intent and ability to hold them until recovery. There were no OTTI losses recognized in the periods presented on the equity portfolio.

The following table presents the amortized cost and fair value of investments with contractual maturities as of the date presented (in thousands):

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay with or without penalty.

The following table provides certain information related to securities available for sale during the periods presented (in thousands):

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						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Fixed maturities	$	2,977		$	2,456		$	8,893		$	6,447
Equity securities		348			223			1,068			666
Short-term investments		—			15			22			60
Other (1)		319			166			651			603
Total investment income		3,644			2,860			10,634			7,776
Less: Investment expenses (2)		(559	)		(556	)		(1,622	)		(1,725	)
Net investment (expense) income	$	3,085		$	2,304		$	9,012		$	6,051

Investment real estate consisted of the following as of the dates presented (in thousands):

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 program consists of catastrophe excess of loss reinsurance, subject to the terms and conditions of the applicable agreements. The Company is responsible for insured losses related to catastrophes and other events in excess of coverage provided by its reinsurance program. The Company remains responsible for the settlement of insured losses irrespective of the ability of any of its reinsurers to make payments otherwise due to the Company.

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.

In order 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 Company’s reinsurers whose aggregate balance exceeded 3% of the Company’s stockholders’ equity as of the dates presented (in thousands):

Ratings as of September 30, 2017

Due from as of

Standard

and Poor's

Moody's

AM Best

Rating

Investors

September 30,

December 31,

Reinsurer

Company

Services

Service, Inc.

2017

2016

Allianz Risk Transfer

A+

AA-

n/a

186,479

—

AXIS Specialty Limited

A+

16,929

—

Everest Reinsurance Company

A+

63,104

—

Florida Hurricane Catastrophe Fund (1)

n/a

—

46,364

Renaissance Reinsurance Ltd

A+

AA-

30,604

—

Total (2)

297,116

46,364

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 September 30,
	2017									2016
							Losses and Loss									Losses and Loss
	Premiums			Premiums			Adjustment			Premiums			Premiums			Adjustment
	Written			Earned			Expenses			Written			Earned			Expenses
Direct	$	274,744		$	254,809		$	531,268		$	241,888		$	234,500		$	73,487
Ceded		(7,303	)		(80,292	)		(414,893	)		(151,432	)		(74,966	)		61
Net	$	267,441		$	174,517		$	116,375		$	90,456		$	159,534		$	73,548

	Nine Months Ended September 30,
	2017									2016
							Losses and Loss									Losses and Loss
	Premiums			Premiums			Adjustment			Premiums			Premiums			Adjustment
	Written			Earned			Expenses			Written			Earned			Expenses
Direct	$	816,350		$	735,807		$	687,707		$	741,782		$	682,571		$	198,069
Ceded		(318,827	)		(230,722	)		(420,578	)		(298,365	)		(214,128	)		1,680
Net	$	497,523		$	505,085		$	267,129		$	443,417		$	468,443		$	199,749

The following prepaid reinsurance premiums and reinsurance recoverable (payable) and receivable are reflected in the Condensed Consolidated Balance Sheets as of the dates presented (in thousands):

The Company defers certain costs in connection with written policies, 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						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
DPAC, beginning of period	$	73,591		$	67,190		$	64,912		$	60,019
Capitalized Costs		36,999			33,227			110,653			100,444
Amortization of DPAC		(34,656	)		(32,117	)		(99,631	)		(92,163	)
DPAC, end of period	$	75,934		$	68,300		$	75,934		$	68,300

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, Universal Insurance Holding Company of Florida (“UVECF”), without prior regulatory approval is limited by the provisions of Florida Statutes. These dividends are referred to as “ordinary dividends.” However, if an ordinary 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 Statutes, UPCIC has the capacity to pay ordinary dividends of $57.7 million during 2017. APPCIC does not have the capacity to pay ordinary dividends during 2017. For the nine months ended September 30, 2017, UPCIC paid dividends of $30.0 million to UVECF. No dividends were paid from APPCIC to UVECF for the nine months ended September 30, 2017. Dividends paid to the shareholders of UVE in 2017 have been paid from the earnings of UVE and its non-insurance subsidiaries.

The Florida Insurance Code requires insurance companies to maintain capitalization equivalent to the greater of ten percent of the insurer’s total liabilities or $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):

As of the dates in the table above, both UPCIC and APPCIC exceeded the minimum capitalization requirement. UPCIC also met the capitalization requirements of the other states in which it is licensed as of September 30, 2017. UPCIC and APPCIC are also required to adhere to prescribed premium-to-capital surplus ratios and have met those requirements at such dates.

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):

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						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Balance at beginning of period	$	22,645		$	60,144		$	58,494		$	98,840
Less: Reinsurance recoverable		(1,393	)		(2,958	)		(106	)		(13,540	)
Net balance at beginning of period		21,252			57,186			58,388			85,300
Incurred (recovered) related to:
Current year		116,262			73,721			265,811			199,907
Prior years		113			(173	)		1,318			(158	)
Total incurred		116,375			73,548			267,129			199,749
Paid related to:
Current year		93,969			73,352			179,000			146,012
Prior years		15,912			5,077			118,771			86,732
Total paid		109,881			78,429			297,771			232,744
Net balance at end of period		27,746			52,305			27,746			52,305
Plus: Reinsurance recoverable		412,697			1,904			412,697			1,904
Balance at end of period	$	440,443		$	54,209		$	440,443		$	54,209

Long-term debt consists of the following as of the dates presented (in thousands):

UPCIC was in compliance with the terms of the surplus note as of September 30, 2017.

The following table summarizes the activity relating to shares of the Company’s common stock during the nine months ended September 30, 2017 (in thousands):

	Issued			Treasury			Outstanding
	Shares			Shares			Shares
Balance, as of December 31, 2016		45,324			(10,272	)		35,052
Shares repurchased		—			(761	)		(761	)
Vesting of performance share units		115			—			115
Stock option exercises		71			—			71
Common stock issued		26			—			26
Shares acquired through cashless exercise (1)		—			(63	)		(63	)
Shares cancelled		(63	)		63			—
Balance, as of September 30, 2017		45,473			(11,033	)		34,440

In June 2016, UVE announced that its Board of Directors authorized a share repurchase program under which UVE may repurchase in the open market in compliance with Exchange Act Rule 10b-18 up to $20 million of its outstanding shares of common stock through December 31, 2017. During the nine months ended September 30, 2017, UVE repurchased 760,559 shares, at an aggregate price of approximately $17.9 million, pursuant to such repurchase program.

In September 2017, the Board of Directors authorized a share repurchase program under which UVE may repurchase in the open market in compliance with Exchange Act Rule 10b-18 up to $20 million of its outstanding shares of common stock through December 31, 2018. There were no shares of common stock repurchased under this program in September 2017.

On January 23, 2017, UVE declared a cash dividend of $0.14 per share on its outstanding common stock paid on March 2, 2017, to the shareholders of record at the close of business on February 17, 2017.

On April 12, 2017, UVE declared a cash dividend of $0.14 per share on its outstanding common stock paid on July 3, 2017, to the shareholders of record at the close of business on June 14, 2017.

On August 31, 2017, UVE declared a cash dividend of $0.14 per share on its outstanding common stock payable on October 24, 2017, to the shareholders of record at the close of business on September 12, 2017.

During the three months ended September 30, 2017 and 2016, the Company recorded approximately $6.6 million and $17.3 million of income tax expense, respectively. The effective tax rate for the three months ended September 30, 2017 was 40.0% compared to a 39.1% effective tax rate for the same period in the prior year.

During the nine months ended September 30, 2017 and 2016, the Company recorded approximately $41.4 million and $54.4 million of income tax expense, respectively. The effective tax rate for the nine months ended September 30, 2017 was 37.0% compared to a 38.8% effective tax rate for the same period in the prior year.

During the nine months ended September 30, 2017, the Company’s excess tax benefit of $0.8 million was reflected as an income tax benefit in the condensed consolidated statements of income as a component of the provision for income taxes as a result of the adoption of the accounting guidance for share-based payment transactions. See “Note 2 – Significant Accounting Policies – Recently Adopted Accounting Pronouncements” for more information. In addition, during the nine months ended September 30, 2017, the Company recorded another discrete item as a credit to income tax expense of $1.2 million resulting from anticipated recoveries of income taxes paid for the 2014-2015 tax years.

In arriving at these rates, the Company considers a variety of factors including the forecasted full year pre-tax results, the U.S. federal tax rate of 35%, expected non-deductible expenses, and estimated state income taxes. The Company’s final effective tax rate 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.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company’s 2014 through 2016 tax years are still subject to examination by the Internal Revenue Service and various tax years remain open to examination in certain state jurisdictions.

Basic earnings per share (“EPS”) is 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 exercise 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 earnings per share computations for the periods presented (in thousands, except per share data):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Numerator for EPS:
Net income	$	9,964		$	26,882		$	70,539		$	85,756
Less: Preferred stock dividends		(3	)		(3	)		(8	)		(8	)
Income available to common stockholders	$	9,961		$	26,879		$	70,531		$	85,748
Denominator for EPS:
Weighted average common shares outstanding		34,686			35,042			34,927			34,878
Plus: Assumed conversion of stock-based compensation (1)		904			656			965			691
Assumed conversion of preferred stock		25			25			25			25
Weighted average diluted common shares outstanding		35,615			35,723			35,917			35,594
Basic earnings per common share	$	0.29		$	0.77		$	2.02		$	2.46
Diluted earnings per common share	$	0.28		$	0.75		$	1.96		$	2.41

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 September 30,
	2017									2016
	Pre-tax			Tax			After-tax			Pre-tax			Tax			After-tax
Net unrealized gains (losses) on investments available for sale arising during the period	$	1,207		$	461		$	746		$	(694	)	$	(265	)	$	(429	)
Less: Amounts reclassified from accumulated other comprehensive income (loss)		(803	)		(308	)		(495	)		(101	)		(39	)		(62	)
Net current period other comprehensive income (loss)	$	404		$	153		$	251		$	(795	)	$	(304	)	$	(491	)

	Nine Months Ended September 30,
	2017									2016
	Pre-tax			Tax			After-tax			Pre-tax			Tax			After-tax
Net unrealized gains (losses) on investments available for sale arising during the period	$	9,248		$	3,535		$	5,713		$	10,460		$	3,998		$	6,462
Less: Amounts reclassified from accumulated other comprehensive income (loss)		(2,450	)		(938	)		(1,512	)		(1,344	)		(513	)		(831	)
Net current period other comprehensive income (loss)	$	6,798		$	2,597		$	4,201		$	9,116		$	3,485		$	5,631

The following table provides the reclassifications out of accumulated other comprehensive income for the periods presented (in thousands):

	Amounts Reclassified from Accumulated
	Other Comprehensive Income (Loss)
Details about Accumulated Other	Three Months Ended September 30,						Nine Months Ended September 30,						Affected Line Item in the Statement
Comprehensive Income (Loss) Components	2017			2016			2017			2016			Where Net Income is Presented
Unrealized gains (losses) on investments available for sale
	$	803		$	101		$	2,450		$	1,344		Net realized gains (losses) on investments
		(308	)		(39	)		(938	)		(513	)	Income taxes
	$	495		$	62		$	1,512		$	831		Net of tax

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 believe that the resolution of these claims will not have a material adverse effect on our financial condition or results of operations. 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.

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. 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. 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:

Summary of significant valuation techniques for assets measured at fair value on a recurring basis

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.

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.

Short-term investments: Comprise investment securities subject to re-measurement with original maturities within one year but more than three months. The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active.

As required by 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.

The following tables set forth by level within the fair value hierarchy the Company’s assets that were measured at fair value including those on a recurring basis as of the dates presented (in thousands):

	Fair Value Measurements
	September 30, 2017
	Level 1		Level 2		Level 3		Total
Fixed Maturities:
U.S. government obligations and agencies	$	—	$	55,016	$	—	$	55,016
Corporate bonds		—		215,831		—		215,831
Mortgage-backed and asset-backed securities		—		218,098		—		218,098
Municipal bonds		—		106,290		—		106,290
Redeemable preferred stock		—		13,944		—		13,944
Equity Securities:
Common stock		5,683		—		—		5,683
Mutual funds		20,392		—		—		20,392
Total assets accounted for at fair value	$	26,075	$	609,179	$	—	$	635,254

	Fair Value Measurements
	December 31, 2016
	Level 1		Level 2		Level 3		Total
Fixed Maturities:
U.S. government obligations and agencies	$	—	$	74,267	$	—	$	74,267
Corporate bonds		—		191,430		—		191,430
Mortgage-backed and asset-backed securities		—		214,776		—		214,776
Municipal bonds		—		91,197		—		91,197
Redeemable preferred stock		—		12,691		—		12,691
Equity Securities:
Common stock		93		—		—		93
Mutual funds		50,710		—		—		50,710
Short-term investments		—		5,002		—		5,002
Total assets accounted for at fair value	$	50,803	$	589,363	$	—	$	640,166

The Company utilizes third-party independent pricing services that provide a price quote for each fixed maturity, equity security and short-term investment. 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 fixed maturities 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 that are not carried at fair value as of the dates presented (in thousands):

	September 30, 2017				December 31, 2016
			(Level 3)				(Level 3)
			Estimated Fair				Estimated Fair
	Carrying Value		Value		Carrying Value		Value
Liabilities (debt):
Surplus note	$	13,235	$	11,949	$	14,338	$	13,282
Promissory note	$	—	$	—	$	690	$	690

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 State Board of Administration of Florida (“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.

The fair value of the promissory note is not materially different than its carrying value.

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 September 30, 2017.

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 condensed consolidated financial statements (“Financial Statements”) and the related notes thereto included in Part I, Item 1 “Financial Statements.” Operating results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for the year.

In addition to historical information, the following discussion may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act. Forward-looking statements are based on various factors and assumptions that include known and unknown risks and uncertainties, some of which are beyond our control and cannot be predicted or quantified. Certain statements made in this report reflect management’s expectations regarding future events, and the words “expect,” “estimate,” “anticipate,” “believe,” “intend,” “project,” “plan” and similar expressions and variations thereof, speak only as of the date the statement was made and are intended to identify forward-looking statements. Such statements may include, but not be limited to, projections of revenues, income or loss, expenses, plans, as well as assumptions relating to the foregoing. Future results could differ materially from those in the following discussion and those described in forward-looking statements as a result of the risks set forth below which are a summary of those set forth in our Annual Report on Form 10-K for the year ended December 31, 2016.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of Universal Insurance Holdings, Inc. and its wholly-owned consolidated subsidiaries. MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and accompanying notes in Item 1 above.

Universal Insurance Holdings, Inc. (“UVE,” and together with its wholly-owned subsidiaries, “we,” “our,” “us,” or “the Company”) is the largest private personal residential insurance company in Florida by direct written premium in-force, with approximately 9.9% market share as of June 30, 2017, according to the most recent data reported by the Florida Office of Insurance Regulation (“FLOIR”). We perform substantially all aspects of insurance underwriting, policy issuance, general administration and claims processing and settlement internally through our vertically integrated operations. Our wholly-owned licensed insurance subsidiaries, Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC”

and together with UPCIC, the “Insurance Entities”), currently write personal residential insurance policies, predominantly in Florida with $718.2 million in direct written premium for the nine months ended September 30, 2017. UPCIC also writes homeowners insurance policies in Alabama, Delaware, Georgia, Hawaii, Indiana, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, South Carolina, and Virginia with $98.2 million in direct written premium for the nine months ended September 30, 2017, generated in those states. UPCIC is also licensed to issue policies in Iowa, New Hampshire, New York, and West Virginia. In October 2017, UPCIC wrote its first homeowners policy in New York. We believe that our longevity in the Florida market and our resulting depth of experience will enable us to continue to successfully grow our business in both hard and soft markets.

We generate revenues primarily from the collection of premiums. The nature of our business tends to be seasonal, reflecting consumer behaviors in connection with the Florida residential real estate market and the hurricane season. The amount of direct written premium tends to increase just prior to the second quarter of our fiscal year and tends to decrease approaching the fourth quarter. Other sources of revenue include: commissions paid by our reinsurers to our reinsurance intermediary subsidiary, Blue Atlantic Reinsurance, on reinsurance it places for the Insurance Entities; policy fees collected from policyholders by our managing general agency subsidiary, Universal Risk Advisors; and financing fees charged to policyholders who choose to defer premium payments. We also generate income by investing our assets.

Over the past several years, we have grown our business both within Florida and elsewhere in the United States through our distribution network of approximately 8,600 licensed independent agents. Our goals are to profitably grow our business, invest in our vertically integrated structure, expand our independent agent network, and return value to shareholders. Some of our key strategies include increasing our policies in force in Florida through continued profitable and organic growth; expanding into other states to diversify our revenue and risk; optimizing our reinsurance program; and continuing to provide high quality service to our policyholders. We believe each of these strategies in recent years has contributed towards earnings and earnings per share as well as an improvement in our overall financial condition. See “—Results of Operations” below for a discussion of our results for the three and nine months ended September 30, 2017 compared to the same periods in 2016.

Our overall organic growth strategy emphasizes taking prudent measures to increase our footprint and increase our policy count and to improve the quality of our business rather than merely increasing our policy count. Our focus on long-term capital strength and organic growth allows us to be selective in the risks we accept. Our goal is to write risks that are priced adequately and meet our underwriting standards. We believe that our strategy of organically expanding our premium growth through our independent agent distribution network, streamlining claims management and balancing appropriate pricing with disciplined underwriting standards will maximize our profitable growth. We also intend to continue our expansion outside of Florida in markets that allow us to write profitable business and to diversify our revenue and risk. Upon entering new markets, we leverage our existing independent agent network to generate new local relationships, and business, and we take the time to learn about each new market and any of its unique risks in order to carefully develop our own policy forms, rates and informed underwriting standards. Our expansion efforts differ from many of our competitors that have grown in recent years primarily through assumption of policies from Citizens Property Insurance Corporation, Florida’s statutory residual property insurance market.

As a result of our organic growth strategy and initiatives, we have seen increases in policy count and insured value in all states for over two years. The percentage of our total insured value for states outside of Florida increased from 19.7% as of September 30, 2016 to 24.9% as of September 30, 2017. The following table provides direct written premium for Florida and other states for the three and nine months ended September 30, 2017 and 2016 (dollars in thousands):

	For the Three Months Ended
	September 30, 2017					September 30, 2016					Growth year over year
State	Direct Written Premium		%			Direct Written Premium		%			$		%
Florida	$	238,309		86.7	%	$	215,634		89.1	%	$	22,675		10.5	%
Other states		36,435		13.3	%		26,254		10.9	%		10,181		38.8	%
Total	$	274,744		100.0	%	$	241,888		100.0	%	$	32,856		13.6	%

	For the Nine Months Ended
	September 30, 2017					September 30, 2016					Growth year over year
State	Direct Written Premium		%			Direct Written Premium		%			$		%
Florida	$	718,177		88.0	%	$	672,477		90.7	%	$	45,700		6.8	%
Other states		98,173		12.0	%		69,305		9.3	%		28,868		41.7	%
Total	$	816,350		100.0	%	$	741,782		100.0	%	$	74,568		10.1	%

Our annual reinsurance program, which is segmented into layers of coverage, as is industry practice, protects us against excess property catastrophe losses. Our 2017-2018 reinsurance program includes the mandatory coverage required by law to be placed with the Florida Hurricane Catastrophe Fund (“FHCF”), in which we have elected to participate at 90%, or the highest level, and also includes private reinsurance below, alongside and above the FHCF layer. In placing our 2017-2018 reinsurance program, we obtained multiple years of coverage for an additional portion of the program. We believe this multi-year arrangement will allow us to capitalize on favorable pricing and contract terms and conditions and allow us to mitigate uncertainty with respect to the price of future reinsurance coverage, our single largest cost.

The total cost of UPCIC’s private catastrophe reinsurance program for all states as described below, effective June 1, 2017 through May 31, 2018, is $155.5 million. In addition, UPCIC has purchased reinstatement premium protection as described below, the cost of which is $25.7 million. The largest private participants in UPCIC’s reinsurance program include leading reinsurance companies and providers such as Nephila Capital, Everest Re, RenaissanceRe, Chubb Tempest Re and Lloyd’s of London syndicates.

UPCIC has a net retention of $35 million per catastrophe event for losses incurred, in all states, up to a first event loss of $2.71 billion. UPCIC also purchases a separate underlying catastrophe program to further reduce its retention for all losses occurring in any state other than Florida (the “Other States Reinsurance Program”). UPCIC retains only $5 million under its Other States Reinsurance Program in the first event and only $1 million under its Other States Reinsurance Program for the second through fourth events. These retention amounts are gross of any potential tax benefit we would receive in paying such losses.

Immediately above UPCIC’s net retention, we have $55 million of reinsurance coverage from third-party reinsurers for up to four separate catastrophic events, for all states. Specifically, we have purchased reinsurance coverage for the first and third catastrophic events, and each such coverage allows for one reinstatement upon the payment of reinstatement premiums, which would cover the second and fourth catastrophic events. This coverage has been obtained from three contracts as follows:

For the first two contracts above, to the extent that all of our coverage or a portion thereof is exhausted in a catastrophic event, we have purchased reinstatement premium protection to pay the required premium necessary for the reinstatement of these coverages.

Above the first layer, for losses exceeding $90 million, we have purchased a second layer of coverage for losses up to $445 million – in other words, for the next $355 million of losses. This coverage has been obtained from two contracts as follows:

In this layer, to the extent that all of our coverage or a portion thereof is exhausted in a catastrophic event, we have purchased reinstatement premium protection insurance to pay the required premium necessary for the reinstatement of these coverages. Both of these contracts extend coverage to all states.

Above the first and second layers, we have purchased a third layer of coverage for losses up to $540 million – in other words, for the next $95 million of losses. This coverage was obtained from two contracts as follows:

In the fourth, fifth and sixth layers, we have purchased reinsurance for $55 million of coverage in excess of $540 million in losses incurred by us (net of the FHCF layer), $193 million of coverage in excess of $595 million in losses incurred by us (net of the FHCF layer), and $125 million of coverage in excess of $788 million, respectively, for a total of $878 million of coverage (net of the FHCF layer) by third-party reinsurers. With respect to the fourth layer, to the extent that all of our coverage or a portion thereof is exhausted in a catastrophic event, we have purchased reinstatement premium protection to pay the required premium necessary for the reinstatement of this coverage. All three layers’ coverage extends to all states.

UPCIC structures its reinsurance coverage into layers and utilizes a cascading feature such that the second, third, fourth, fifth and sixth reinsurance layers all attach at $90 million. Any layers above the $90 million attachment point are excess of loss over the immediately preceding layer. If the aggregate limit of the preceding layer is exhausted, the next layer cascades down in its place for future events. This means that, unless losses exhaust the top layer of our coverage, we are exposed to only $35 million in losses, pre-tax, per catastrophe for each of the first four events. In addition to tax benefits that could reduce our ultimate loss, we anticipate that certain fees paid to our subsidiary service providers by our Insurance Entities and, indirectly, our reinsurers, would also increase during an active hurricane season, which could also offset claim-related losses we would have to pay on our insurance policies.

The total cost of UPCIC’s private catastrophe reinsurance program for other states as described below, effective June 1, 2017 through May 31, 2018, is $8.9 million. In addition, UPCIC has purchased reinstatement premium protection as described below, the cost of which is $1.85 million.

Effective June 1, 2017 through June 1, 2018, under an excess catastrophe contract specifically covering risks located outside the state of Florida and intended to further reduce UPCIC’s $35 million net retention, as noted above, UPCIC has obtained catastrophe coverage of $30 million in excess of $5 million covering certain loss occurrences, including hurricanes, in states outside of Florida. This catastrophe coverage has a second full limit available with additional premium calculated pro rata as to amount and 100% as to time, as applicable. All catastrophe layers are placed with a cascading feature so that all capacity could be made available in excess of $5 million under certain loss scenarios. Further, UPCIC purchased subsequent catastrophe event excess of loss reinsurance specifically covering risks outside of Florida to cover certain levels of loss through four catastrophe events including hurricanes. Specifically, UPCIC obtained catastrophe coverage that covers 100% of $4,000,000 excess of $1,000,000 in excess of $4,000,000 otherwise recoverable. This coverage has two free reinstatements and a total of $12,000,000 of coverage available to UPCIC.

In certain circumstances involving a first catastrophic event impacting both Florida and other states, UPCIC’s retention could result in pre-tax net liability as low as $5,000,000 – the $35 million net retention under the all states reinsurance program could be offset by as much as $30 million in coverage under the Other States Reinsurance Program – or 1.6% of UPCIC’s statutory policyholders’ surplus as of September 30, 2017.

UPCIC’s third-party reinsurance program supplements the FHCF coverage we are required to purchase every year. The limit and retention of the FHCF coverage we receive each year is subject to upward or downward adjustment based on, among other things, submitted exposures to the FHCF by all participants. As of June 1, 2017, we estimate our FHCF coverage includes a maximum provisional limit of 90% of $1,996.5 million, or $1,797 million, in excess of $618 million. The estimated premium that UPCIC plans to cede to the FHCF for the 2017 hurricane season is $124 million.

Coverage purchased from third-party reinsurers, as described above, adjusts to provide coverage for certain losses not otherwise covered by the FHCF. The FHCF coverage cannot be reinstated once exhausted, but it does provide coverage for multiple events. The FHCF coverage extends only to losses to our Florida portfolio due to a declared hurricane that causes storm losses in Florida.

The third-party reinsurance we purchase for UPCIC is therefore net of FHCF recovery. When our FHCF and third-party reinsurance coverages are taken together, UPCIC has reinsurance coverage of up to $2,710 million for the first event, as illustrated by the graphic below. Should a catastrophic event occur, we would retain up to $35 million pre-tax for each catastrophic event, and would also be responsible for any additional losses that exceed our top layer of coverage.

The total cost of APPCIC’s private catastrophe and multiple line excess reinsurance program, effective June 1, 2017 through May 31, 2018, is $1.88 million. In addition, APPCIC has purchased reinstatement premium protection as described below, the cost of which is $59,500. The largest private participants in APPCIC’s reinsurance program include leading reinsurance companies such as Everest Re, Chubb Tempest Re, Hiscox, Hannover Ruck, and Lloyd’s of London syndicates.

APPCIC has a net retention of $2 million for all losses per catastrophe event for losses incurred up to a first event loss of $27.6 million. This retention amount is gross of any potential tax benefit we would receive in paying such losses.

Immediately above APPCIC’s net retention we have $3.2 million of reinsurance coverage from third-party reinsurers. Specifically, we have purchased reinsurance coverage for the first event, and such coverage allows for one reinstatement upon the payment of reinstatement premiums, which would cover the second and potentially more catastrophic events. We have purchased reinstatement premium protection to pay the required premium necessary for the initial reinstatement of this coverage for a second catastrophic event.

In the second and third layers, we have purchased reinsurance for $1.7 million of coverage in excess of $5.2 million in losses incurred by us (net of the FHCF layer) and $7 million of coverage in excess of $6.9 million in losses incurred by us (net of the FHCF layer), respectively.

APPCIC structures its reinsurance coverage into layers and utilizes a cascading feature such that the second and third reinsurance layers all attach at $2 million. Any layers above the $2 million attachment point are excess of loss over the immediately preceding layer. If the aggregate limit of the preceding layer is exhausted, the next layer cascades down in its place for future events. This means that, unless losses exhaust the top layer of our coverage, we are only exposed to $2 million in losses, pre-tax, per catastrophe for each of the first two events. In addition to tax benefits that could reduce our ultimate loss, we anticipate that certain fees paid to our subsidiary service providers by our Insurance Entities and, indirectly, our reinsurers would also increase during an active hurricane season, which could also offset losses we would have to pay on our insurance policies.

APPCIC’s third-party reinsurance program is used to supplement the FHCF reinsurance we are required to purchase every year. The limit and retention of the FHCF coverage we receive each year is subject to upward or downward adjustment based on, among other things, submitted exposures to the FHCF by all participants. As of June 1, 2017, we estimate our FHCF coverage includes a maximum provisional limit of 90% of $15.2 million, or $13.7 million, in excess of $4.7 million. The estimated premium that APPCIC plans to cede to the FHCF for the 2017 hurricane season is $943 thousand. Factoring in our estimated coverage under the FHCF, we purchase coverage alongside our FHCF coverage from third-party reinsurers as described above, which adjusts to provide coverage for certain losses not otherwise covered by the FHCF. The FHCF coverage cannot be reinstated once exhausted, but it does provide coverage for multiple events. The FHCF coverage extends only to losses to our portfolio due to a declared hurricane that causes storm losses in Florida.

The third-party reinsurance we purchase for APPCIC is therefore net of FHCF recovery. When our FHCF and third-party reinsurance coverages are taken together, APPCIC has reinsurance coverage of up to $27.6 million, as illustrated by the graphic below. Should a catastrophic event occur, we would retain $2 million pre-tax for each catastrophic event, and would also be responsible for any additional losses that exceed our top layer of coverage.

APPCIC also purchases extensive multiple line excess per risk reinsurance with various reinsurers due to the high valued risks it insures in both the personal residential and commercial multiple peril lines of business. Under this multiple line excess per risk contract, APPCIC has coverage of $8.5 million in excess of $500 thousand ultimate net loss for each risk and each property loss, and $1 million in excess of $0.3 million for each casualty loss. A $19.5 million aggregate limit applies to the term of the contract for property related losses and a $2.0 million aggregate limit applies to the term of the contract for casualty-related losses. This contract also contains a profit sharing feature available to APPCIC if the contract meets specific performance measures.

Results of Operations — Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

Net income decreased by $16.9 million, or 62.9%, to $10.0 million for the three months ended September 30, 2017, compared to $26.9 million for the three months ended September 30, 2016. The decrease in net income was primarily the result of $37 million of net pre-tax storm losses incurred as a result of Hurricane Irma, a Category 4 storm making landfall in the Florida Keys on September 10, 2017. Total premiums earned and other revenues which increased $17.8 million, or 10.3%, over the same period in 2016, were more than offset by an increase in losses and loss adjustment expenses for the quarter compared to the same period in 2016. General and administrative expenses increased 4.6% over the same quarter in 2016 to $57.3 million as compared to $54.7 million, but as a percentage of earned premium decreased from 34.3% to 32.8% this quarter. Diluted earnings per common share decreased by $0.47 to $0.28 for the three months ended September 30, 2017, compared to $0.75 for the three months ended September 30, 2016, as a result of the decrease in net income. A more detailed discussion of this and other factors follows the table below.

	(in thousands)
	Three Months Ended
	September 30,						Change
	2017			2016			$			%
PREMIUMS EARNED AND OTHER REVENUES
Direct premiums written	$	274,744		$	241,888		$	32,856			13.6	%
Change in unearned premium		(19,935	)		(7,388	)		(12,547	)		169.8	%
Direct premium earned		254,809			234,500			20,309			8.7	%
Ceded premium earned		(80,292	)		(74,966	)		(5,326	)		7.1	%
Premiums earned, net		174,517			159,534			14,983			9.4	%
Net investment income (expense)		3,085			2,304			781			33.9	%
Net realized gains (losses) on investments		803			101			702			695.0	%
Commission revenue		5,304			4,603			701			15.2	%
Policy fees		4,861			4,226			635			15.0	%
Other revenue		1,673			1,668			5			0.3	%
Total premiums earned and other revenues		190,243			172,436			17,807			10.3	%
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses		116,375			73,548			42,827			58.2	%
General and administrative expenses		57,269			54,725			2,544			4.6	%
Total operating costs and expenses		173,644			128,273			45,371			35.4	%
INCOME BEFORE INCOME TAXES		16,599			44,163			(27,564	)		-62.4	%
Income tax expense		6,635			17,281			(10,646	)		-61.6	%
NET INCOME	$	9,964		$	26,882		$	(16,918	)		-62.9	%
Other comprehensive income (loss), net of taxes		251			(491	)		742		NM
COMPREHENSIVE INCOME	$	10,215		$	26,391		$	(16,176	)		-61.3	%

For the three months ended September 30, 2017, our growth in written premium in Florida increased 10.5% to $238.3 million and in states outside Florida increased 38.8% to $36.4 million. Premiums earned, net in the current period reflect premiums written over the past 12 months and any changes in rates or policy count during that time. Premiums earned, net were $174.5 million for the three months ended September 30, 2017, compared to $159.5 million for the three months ended September 30, 2016. The increase in net earned premiums of $15.0 million, or 9.4%, includes an increase in direct earned premiums of $20.3 million offset by an increase in ceded earned premiums of $5.3 million. Direct written premiums increased $32.9 million, or 13.6%, due in part to an increase in Florida business of $22.7 million, or 10.5%, over the prior period and an increase in other states of $10.2 million, or 38.8% over the same period in 2016. In each state the Company writes business, direct premiums increased month over month during 2017 as compared to 2016. At September 30, 2017, direct premium in-force was $1.035 billion versus $945 million at September 30, 2016.

Our reinsurance programs run from June 1 to May 31 of the following year. The net increase in ceded earned premiums of $5.3 million is attributable to increased costs associated with our 2017/2018 reinsurance program. The increase in ceded premiums earned was due to increased ceded exposure from policy growth, which increased total policy insured value, our reinsurance limits and costs associated with lower reinsurance attachment points for our growth. In addition, during the third quarter of 2017 the Company recorded ceded written premium of $7.3 million to adjust the Company’s participation in the Florida Hurricane Catastrophe Fund of which $2.4 million was earned during the quarter as compared to an insignificant adjustment in 2016.

Net investment income was $3.1 million for the three months ended September 30, 2017, compared to $2.3 million for the same three months in 2016. The increase in net investment income of $0.8 million is the result of an increase in fixed maturities, favorable market trends and actions taken to increase yield by investing funds along with maturities in higher yielding securities while maintaining high credit quality. Total average investments were $644.1 million with an average credit rating of AA- during the three months ended September 30, 2017 compared to $634.4 million with an average credit rating of AA- for the same period in 2016.

We sell investment securities from our portfolio of securities available for sale from time to time when opportunities arise or circumstances could result in greater losses if held. We sold investment securities available for sale during the three months ended September 30, 2017, generating net realized gains of $803 thousand compared to net realized gains of $101 thousand for the three months ended September 30, 2016.

Commission revenue is comprised principally of brokerage commissions we earn from reinsurers on reinsurance placed for the Insurance Entities. For the three months ended September 30, 2017, commission revenue was $5.3 million, compared to $4.6 million for the three months ended September 30, 2016. The increase in commission revenue of $701 thousand, or 15.2%, for the three months ended September 30, 2017, compared to the three months ended September 30, 2016 was the result of overall changes in the structure of the reinsurance programs in effect, the amount of premiums paid for reinsurance on our growing exposures and the types of reinsurance contracts used in each program.

Policy fees for the three months ended September 30, 2017, were $4.9 million compared to $4.2 million for the same period in 2016. The increase of $635 thousand, or 15.0%, was the result of an increase in the number of policies written during the three months ended September 30, 2017 compared to the same period in 2016.

Other revenue for each of the three months ended September 30, 2017 and for the same period in 2016 was $1.7 million. Other revenue represents revenue from premium financing and other miscellaneous income.

Losses and LAE, net of reinsurance were $116.4 million for the three months ended September 30, 2017, compared to $73.5 million during the same period in 2016 as follows (dollars in thousands):

	Three Months Ended September 30, 2017
	Direct		Loss Ratio			Ceded			Loss Ratio			Net		Loss Ratio
Premiums earned	$	254,809				$	80,292					$	174,517

Loss and loss adjustment expenses:
Hurricane Irma losses and loss adjustment expenses	$	452,000		177.4	%	$	415,000			516.8	%	$	37,000		21.2	%
All other losses and loss adjustment expenses		79,268		31.1	%		(107	)		(0.1	%)		79,375		45.5	%
Total losses and loss adjustment expenses	$	531,268		208.5	%	$	414,893			516.7	%	$	116,375		66.7	%

	Three Months Ended September 30, 2016
	Direct		Loss Ratio			Ceded			Loss Ratio			Net		Loss Ratio
Premiums earned	$	234,500				$	74,966					$	159,534

Total losses and loss adjustment expenses	$	73,487		31.3	%	$	(61	)		(0.1	%)	$	73,548		46.1	%

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 were significantly affected this quarter by Hurricane Irma. For the third quarter of 2017 the Company recorded gross losses and LAE of $452.0 million resulting from Hurricane Irma. The Company’s reinsurance program limited net losses from Hurricane Irma to $37 million adding 21.2 percentage points to the net losses and LAE ratio for the quarter. Under the Company’s reinsurance program UPCIC cedes losses and LAE greater than $35 million in all states up to a maximum of $2.71 billion and

APPCIC cedes losses and LAE greater than $2 million up to a maximum amount of $27.6 million. The Company’s reinsurance protection performed as expected by reducing the net loss and LAE exposure to the maximum retained limits, as stated above, and will provide full reinsurance capacity of $2.71 billion for UPCIC and $27.6 million for APPCIC for the remainder of the 2017/2018 hurricane season. See UPCIC’s and APPCIC’s 2017-2018 Reinsurance Program for a discussion of the Company’s reinsurance program.

All other net losses and LAE, net was $79.4 million for the three months ended September 30, 2017, compared to $73.5 million during the same period in 2016, which reflects $11 million of incremental losses and LAE recorded for severe weather events occurring during 2016 through September, including Hurricane Hermine. The severe weather events in 2016 added 6.9 percentage points to the net losses and LAE ratio for the three months ended September 30, 2016. Beginning in the second quarter of 2017, the Company added 1.8 percentage points to its underlying quarterly net losses and LAE ratio to account for the increased frequency of severe weather experienced in recent years.

The trend in the Company’s underlying losses and LAE ratio also reflects continued geographic expansion into states outside of Florida where non-catastrophe loss ratios are generally higher than in Florida and the marketplace dynamics inside of Florida including challenges faced by insurers when policyholders assign benefits underlying their policies to third parties.

General and administrative expenses were $57.3 million for the three months ended September 30, 2017, compared to $54.7 million during the same period in 2016 as follows (dollars in thousands):

	Three Months Ended
	September 30,										Change
	2017					2016					$			%
	$		Ratio			$		Ratio
Premiums earned, net	$	174,517				$	159,534				$	14,983			9.4	%
General and administrative expenses:
Policy acquisition costs		35,304		20.2	%		32,216		20.2	%		3,088			9.6	%
Other operating costs		21,965		12.6	%		22,509		14.1	%		(544	)		(2.4	%)
Total general and administrative expenses	$	57,269		32.8	%	$	54,725		34.3	%	$	2,544			4.6	%

For the three months ended September 30, 2017, general and administrative expenses were $57.3 million, compared to $54.7 million for the same period in 2016. The increase in general and administrative costs of $2.6 million was the result of increases in acquisition costs of $3.1 million due to increased premium volume. The increases were, offset by decreases in other operating costs of $0.5 million due to a decrease in performance bonuses, consulting fees and a reduction in amounts spent on insurance swap contracts which was offset by an increase in stock-based compensation. Overall, the expense ratio (general and administrative expenses as a percentage of net earned premiums) benefited from economies of scale as general and administrative expenses did not increase at the same rate as revenues. As a result, the expense ratio as a percentage of net earnings decreased to 32.8% for the three months ended September 30, 2017 compared to 34.3% for the same period in 2016.

Income tax expense decreased by $10.6 million, or 61.6%, for the three months ended September 30, 2017, when compared with the three months ended September 30, 2016. The decrease in income tax is primarily the result of a decrease in income before income taxes. The effective tax rate increased slightly to 40.0% for the three months ended September 30, 2017 as compared to 39.1% for the three months ended September 30, 2016.

Other comprehensive income, net of taxes for the three months ended September 30, 2017 was $0.3 million compared to a loss of $0.5 million for the same period in 2016. Other comprehensive income (loss) represents after tax changes to equity which are not recognized in net income, including changes in the fair value of securities available for sale held in our portfolio and any reclassifications out of cumulative other comprehensive income for securities sold. See “Item 1 — Note 11 (Other Comprehensive Income (Loss)).”

Results of Operations—Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

Net income decreased by $15.2 million, or 17.7%, to $70.5 million for the nine months ended September 30, 2017, compared to $85.7 million for the nine months ended September 30, 2016. The decrease in net income was primarily the result of $37 million of net pre-tax storm losses incurred as a result of Hurricane Irma. Total premiums earned and other revenues increased by $43.9 million or 8.7% over the prior year these revenues were offset by total operating costs and expenses, which increased by $72.2 million, or 19.7% over the prior year. Expenses for the nine months ended September 30, 2017, include losses and LAE of $37 million net for Hurricane Irma and an increase to the Company’s core loss ratio for accident year 2017. Diluted earnings per common share decreased by $0.45 to $1.96 for the nine months ended September 30, 2017, compared to $2.41 for the nine months ended September 30, 2016, as a result of the decrease in net income. A more detailed discussion of this and other factors follows the table below.

	(in thousands)
	Nine Months Ended
	September 30,						Change
	2017			2016			$			%
PREMIUMS EARNED AND OTHER REVENUES
Direct premiums written	$	816,350		$	741,782		$	74,568			10.1	%
Change in unearned premium		(80,543	)		(59,211	)		(21,332	)		36.0	%
Direct premium earned		735,807			682,571			53,236			7.8	%
Ceded premium earned		(230,722	)		(214,128	)		(16,594	)		7.7	%
Premiums earned, net		505,085			468,443			36,642			7.8	%
Net investment income (expense)		9,012			6,051			2,961			48.9	%
Net realized gains (losses) on investments		2,450			1,344			1,106			82.3	%
Commission revenue		14,546			12,927			1,619			12.5	%
Policy fees		14,594			13,093			1,501			11.5	%
Other revenue		4,917			4,827			90			1.9	%
Total premiums earned and other revenues		550,604			506,685			43,919			8.7	%
OPERATING COSTS AND EXPENSES
Losses and loss adjustment expenses		267,129			199,749			67,380			33.7	%
General and administrative expenses		171,582			166,780			4,802			2.9	%
Total operating costs and expenses		438,711			366,529			72,182			19.7	%
INCOME BEFORE INCOME TAXES		111,893			140,156			(28,263	)		-20.2	%
Income tax expense		41,354			54,400			(13,046	)		-24.0	%
NET INCOME	$	70,539		$	85,756		$	(15,217	)		-17.7	%
Other comprehensive income, net of taxes		4,201			5,631			(1,430	)		-25.4	%
COMPREHENSIVE INCOME	$	74,740		$	91,387		$	(16,647	)		-18.2	%

For the nine months ended September 30, 2017, our growth in written premium in both Florida increased 6.8% to $718.2 million and in states outside Florida increased 41.7% to $98.2 million. Premiums earned, net in the current period reflect premiums written over the past 12 months and any changes in rates or policy count during that time. Premiums earned, net were $505.1 million for the nine months ended September 30, 2017, compared to $468.4 million for the nine months ended September 30, 2016. The increase in net earned premiums of $36.6 million, or 7.8%, includes an increase in direct earned premiums of $53.2 million and an increase in ceded earned premiums of $16.6 million. Direct written premiums increased $74.6 million, or 10.1%, which consisted of an increase in Florida business of $45.7 million, or 6.8% over the prior year, and an increase in other states business of $28.9 million, or 41.7%, over the same period in 2016. In each state the Company writes business, direct premiums increased month over month during 2017 as compared to 2016. At September 30, 2017, direct premium in-force was $1.035 billion versus $945 million at September 30, 2016.

Our reinsurance programs run from June 1 to May 31 of the following year. Ceded premium earned was $230.7 million for the nine months ended September 30, 2017, compared to $214.1 million for the nine months ended September 30, 2016. The net increase in ceded earned premiums of $16.6 million is attributable to increased costs associated with our 2017/2018 reinsurance program. The increase in ceded premiums earned was due to increased ceded exposure from policy growth. In addition, during the third quarter of 2017 the Company recorded ceded written premium of $7.3 million to adjust the Company’s participation in the Florida Hurricane Catastrophe Fund of which $2.4 million was earned during the quarter as compared to an insignificant adjustment in 2016.

Net investment income was $9.0 million for the nine months ended September 30, 2017, compared to $6.0 million for the same nine months in 2016. The increase in net investment income of $3.0 million is the result of an increase in fixed maturities, favorable market trends and actions taken to increase yield by investing funds along with maturities in higher yielding securities while maintaining high credit quality. Total average investments were $651.7 million with an average credit rating of AA- during the nine months ended September 30, 2017 compared to $576.1 million with an average credit rating of AA- for the same period in 2016.

We sell investment securities from our portfolio of securities available for sale from time to time when opportunities arise or circumstances could result in greater losses if held. We sold investment securities available for sale during the nine months ended September 30, 2017 generating net realized gains of $2.5 million compared to net realized gains of $1.3 million for the nine months ended September 30, 2016.

Commission revenue is comprised principally of brokerage commissions we earn from reinsurers on reinsurance placed for the Insurance Entities. For the nine months ended September 30, 2017 commission revenue was $14.5 million, compared to $12.9 million for the nine months ended September 30, 2016. The increase in commission revenue of $1.6 million, or 12.5%, for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016 was the result of overall changes in the structure of the reinsurance programs in effect, the amount of premiums paid for reinsurance on our growing exposures and the types of reinsurance contracts used in each program.

Policy fees for the nine months ended September 30, 2017, were $14.6 million as compared to $13.1 million for the same period in 2016. The increase of $1.5 million, or 11.5%, was the result of an increase in the number of policies written during the nine months ended September 30, 2017 compared to the same period in 2016.

Other revenue for the nine months ended September 30, 2017 was $4.9 million and for the same period in 2016 was $4.8 million. Other revenue represents revenue from premium financing and other miscellaneous income. The increase of $90 thousand, or 1.9%, was the result of an increase in the number of financed policies.

Losses and LAE, net of reinsurance were $267.1 million for the nine months ended September 30, 2017, compared to $199.7 million during the same period in 2016 as follows (dollars in thousands):

	Nine Months Ended September 30, 2017
	Direct		Loss Ratio			Ceded		Loss Ratio			Net		Loss Ratio
Premiums earned	$	735,807				$	230,722				$	505,085

Loss and loss adjustment expenses:
Hurricane Irma losses and loss adjustment expenses	$	452,000		61.4	%	$	415,000		179.9	%	$	37,000		7.3	%
All other losses and loss adjustment expenses		235,707		32.0	%		5,578		2.4	%		230,129		45.6	%
Total losses and loss adjustment expenses	$	687,707		93.4	%	$	420,578		182.3	%	$	267,129		52.9	%

	Nine Months Ended September 30, 2016
	Direct		Loss Ratio			Ceded			Loss Ratio			Net		Loss Ratio
Premiums earned	$	682,571				$	214,128					$	468,443

Total losses and loss adjustment expenses	$	198,069		29.0	%	$	(1,680	)		(0.8	%)	$	199,749		42.6	%

See “Item 1 — Note 6 (Liability for Unpaid Losses and Loss Adjustment Expenses)” for change in liability for unpaid losses and LAE.

During the nine months ended September 30, 2017 the Company recorded gross losses and LAE of $452.0 million resulting from Hurricane Irma. The Company’s reinsurance program limited losses from Hurricane Irma to $37 million adding 7.3 percentage points to the net losses and LAE ratio for the nine-month period ended September 30, 2017. Under the Company’s reinsurance program UPCIC cedes losses and LAE greater than $35 million in all states up to a maximum of $2.71 billion and APPCIC cedes all losses and LAE greater than $2 million up to a maximum amount of $27.6 million. The Company’s reinsurance protection performed as expected by reducing the net loss and LAE exposure to the maximum retained limits, as stated above, and will provide full reinsurance capacity of $2.71 billion for UPCIC and $27.6 million for APPCIC for the remainder of the 2017/2018 hurricane season. See UPCIC’s and APPCIC’s 2017-2018 Reinsurance Program for a discussion of the Company’s reinsurance program.

All other net losses and LAE, net was $230.1 million for the nine months ended September 30, 2017, compared to $199.7 million during the same period in 2016. The increase reflects general growth and an increase in the underlying losses and LAE ratio of 3.0 percentage points.

The trend in the Company’s underlying losses and LAE ratio presented in the table above reflects continued geographic expansion into states outside of Florida where non-catastrophe loss ratios are generally higher than in Florida and the marketplace dynamics inside of Florida including challenges faced by insurers when policyholders assign benefits underlying their policies to third parties.

General and administrative expenses were $171.6 million for the nine months ended September 30, 2017, compared to $166.8 million during the same period in 2016 as follows (dollars in thousands):

	Nine Months Ended
	September 30,										Change
	2017					2016					$			%
	$		Ratio			$		Ratio
Premiums earned, net	$	505,085				$	468,443				$	36,642			7.8	%
General and administrative expenses:
Policy acquisition costs		100,754		20.0	%		92,455		19.7	%		8,299			9.0	%
Other operating costs		70,828		14.0	%		74,325		15.9	%		(3,497	)		(4.7	%)
Total general and administrative expenses	$	171,582		34.0	%	$	166,780		35.6	%	$	4,802			2.9	%

For the nine months ended September 30, 2017, general and administrative expenses were $171.6 million, compared to $166.8 million for the same period in 2016. The net increase in total general and administrative expenses of $4.8 million was the result of increases in acquisition costs of $8.3 million, due to increased premium volume, offset by a net decrease in other operating costs of $3.5 million, due to a reduction in stock-based compensation, a reduction in amounts spent on insurance swap contracts and lower consulting and legal fees, partially offset by increases in advertising to promote growth within and outside Florida. Overall, the expense ratio (general and administrative expenses as a percentage of net earned premiums) benefited from economies of scale as general and administrative expenses did not increase at the same rate as revenues. As a result, the expense ratio as a percentage of net earnings decreased to 34.0% for the nine months ended September 30, 2017 compared to 35.6% for the same period in 2016.

Income tax expense for the nine months ended September 30, 2017 decreased by $13.0 million, or 24.0%, when compared to the nine months ended September 30, 2017, primarily as a result of a decrease in income before income taxes, offset by the benefit derived from two discrete items. The first was a credit to income tax expense of $0.8 million for excess tax benefits resulting from stock-based awards that vested and/or were exercised during the nine months ended September 30, 2017. This credit to income tax expense represents the application of a new accounting pronouncement. Prior to 2017, excess benefits were recorded in stockholders’ equity. The other discrete item is a credit to income tax expense of $1.2 million resulting from anticipated recoveries of income taxes paid for the 2014-2015 tax years. Collectively, these discrete items, lowered our effective tax rate to 37.0% for the nine months ended September 30, 2017 as compared to 38.8% for the nine months ended nine months ended September 30, 2016.

Other comprehensive income, net of taxes for the nine months ended September 30, 2017 was $4.2 million compared to $5.6 million for the same period in 2016. Other comprehensive income (loss) represents after tax changes to equity which are not recognized in net income, including changes in the fair value of securities available for sale held in our portfolio and any reclassifications out of cumulative other comprehensive income for securities sold. See “Item 1 — Note 11 (Other Comprehensive Income (Loss)).”

Analysis of Financial Condition—As of September 30, 2017 Compared to December 31, 2016

We believe that cash flows generated from operations will be sufficient to meet our working capital requirements for at least the next twelve months. Our policy is to 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):

See “Item 1 —Condensed Consolidated Statements of Cash Flows” for explanations of changes in investments.

Prepaid reinsurance premiums represent the portion of unearned ceded written premiums that will be earned pro-rata over the coverage period in the future. The increase of $88.1 million to $212.5 million as of September 30, 2017, was due primarily to ceded written premium for reinsurance costs relating to our 2017-2018 catastrophe reinsurance program beginning June 1, 2017.

Reinsurance recoverable represents the estimated amount of losses and LAE that are recoverable from reinsurers. The increase of $412.6 million to $412.7 million as of September 30, 2017 was primarily due to Hurricane Irma.

Premiums receivable, net represents amounts receivable from policyholders. The increase in premiums receivable of $12.9 million to $66.7 million as of September 30, 2017 relates to both the growth in and seasonality of the Company’s business including increased consumer demand during storm periods.

Deferred income tax assets and liabilities represent temporary differences between U.S. GAAP and the tax basis of the Company's assets and liabilities. During the nine months ended September 30, 2017, deferred tax assets decreased by $5.4 million to $5.3 million, primarily due to an increase in deferred policy acquisition costs and decrease in unrealized gains and losses.

Deferred policy acquisition costs increased $11.0 million to $75.9 million as of September 30, 2017, which is in line with the underlying premium growth. See “Item 1 — Note 5 (Insurance Operations)” for a roll-forward in the balance of our deferred policy acquisition costs.

Income taxes recoverable increased $15.9 million to $19.2 million as of September 30, 2017, from $3.3 million as of December 31, 2016. The increase represents amounts due from taxing jurisdictions within one year and arise when income tax payments exceed income tax liabilities. Income taxes recoverable as of September 30, 2017 were $19.2 million, which represents amounts recoverable or to be applied to future periods for federal and state income taxes.

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 increased $381.9 million to $440.4 million as of September 30, 2017. The increase in 2017 was a result of losses recorded in the third quarter of 2017 for Hurricane Irma. Unpaid losses and LAE are net of estimated subrogation recoveries. The Company is continuing its initiatives to expedite claims payments including the ability of our mobile claims teams to rapidly settle certain claims, which we refer to as “Fast Track,” and pursuing the anticipated benefits from subrogation collections.

Unearned premiums represent the portion of direct written premiums that will be earned pro rata in the future. The increase of $80.5 million to $556.3 million as of September 30, 2017 reflects both organic growth and seasonality of our business including increased consumer demand during storm periods as described under “– Overview”.

Advance premium represents premium payments made by policyholders ahead of the effective date of the policies. The increase of $10.9 million to $28.7 million as of September 30, 2017 reflects both organic growth and seasonality of our business including increased consumer demand during storm periods as described under “– Overview”.

Reinsurance payable, net increased $260.5 million to $341.4 million as of September 30, 2017 and is comprised of the unpaid amounts owed to reinsurers in connection with the renewal of the Company’s 2017/2018 catastrophe reinsurance program, which began June 1, 2017. It also includes $114 million in cash advances received from reinsurers in connection with Hurricane Irma’s anticipated recoveries.

Other liabilities and accrued expenses increased $10.0 million as a result of increased expenses that relate to Hurricane Irma and costs, such as commissions and taxes, related to increases in our business.

Dividend payable represents the unpaid dividends liability of $0.14 per share declared on August 31, 2017, based on shareholders of record on September 12, 2017 and payable on October 24, 2017.

Capital Resources increased net $47.6 million and includes increases in stockholders’ equity of $49.4 million offset by reduction in long-term debt of $1.8 million. The increases in stockholders’ equity was principally the result of 2017 net income offset by treasury stock purchases, dividends to shareholders and stock based compensation. The reduction in long-term debt was the result of principal payments on debt during 2017. See “– Liquidity and Capital Resources” and “Item 1 – Note 8 (Stockholders’ Equity)” for explanation of changes in treasury stock.

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 September 30, 2017 was $366.2 million compared to $105.7 million at December 31, 2016. See “Item 1 — Condensed Consolidated Statements of Cash Flows” for a reconciliation of the balance of cash and cash equivalents between September 30, 2017 and December 31, 2016. The increase in cash and cash equivalents was driven by significant cash flows generated from operating and investing activities in excess of those used for financing activities. The increase in cash balances at September 30, 2017 also includes $114.0 million of advance payments received from reinsurers, (“cash calls”) available under the Company’s reinsurance program. Most of the balance of cash and cash equivalents maintained is available for the payment of claims and operation of the Company.

The balance of restricted cash and cash equivalents as of September 30, 2017 and December 31, 2016 includes cash equivalents on deposit with regulatory agencies in the various states in which our Insurance Entities do business.

Liquidity for UVE and its non-insurance subsidiaries is required 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 by UVE to its shareholders, and any future repurchases of UVE 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 UVE and its non-insurance subsidiaries include revenues generated from fees paid by the Insurance Entities to affiliated companies for policy administration, inspections and claims adjusting services. Additional sources of liquidity include brokerage commissions earned on reinsurance contracts, policy fees and any unused credit lines. UVE also maintains investments in equity securities, which are a source of ongoing interest and dividend income and would generate funds upon sale. As discussed in “Item 1 – Note 5 (Insurance Operations),” there are limitations on the dividends the Insurance Entities may pay to their immediate parent company, Universal Insurance Holding Company of Florida (“UVECF”).

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 in “Item I – Note 5 – Insurance Operations.” During the nine months ended September 30, 2017, UPCIC paid $30.0 million in dividends to UVECF. The Insurance Entities did not pay dividends to UVECF during the year ended December 31, 2016.

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, premiums 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, and the collection of reinsurance recoverable.

Our insurance operations provide liquidity in that premiums are generally received months or even years before losses are paid under the policies written. In the event of catastrophic events, many of the Company’s reinsurance agreements provide for “cash calls” whereby reinsurers advance or prepay amounts to the Company, providing liquidity, which the Company utilizes in the claim settlement process. At September 30, 2017 reinsurers advanced $114 million to the Company for Hurricane Irma claims. 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 and for all other losses that otherwise may not be covered by the reinsurance programs. Losses may have a material adverse effect on either the Insurance Entities or our business, financial condition, results of operations and liquidity.

Capital resources provide protection for policyholders, provide for the financial strength to support the business of underwriting insurance risks, and support continued business growth. At September 30, 2017, we had total capital of $433.8 million, comprised of stockholders’ equity of $420.6 million and total long-term debt of $13.2 million. Our debt-to-total-capital ratio and debt-to-equity ratio were 3.0% and 3.1%, respectively, at September 30, 2017. At December 31, 2016, we had total capital of $386.2 million, comprised of stockholders’ equity of $371.2 million and total long-term debt of $15.0 million. Our debt-to-total-capital ratio and debt-to-equity ratio were 3.9% and 4.0%, respectively, at December 31, 2016.

As described in our Form 10-K for the year ended December 31, 2016, 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 accrues per the terms of the note agreement. At September 30, 2017, 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.

The Company may repurchase shares from time to time at its discretion, based on ongoing assessments of the capital needs of the Company, the market price of its common stock and general market conditions. The Company will fund the share repurchase program with cash from operations. At September 30, 2017, there were two authorized repurchase plans in effect:

During the nine months ended September 30, 2017, we repurchased an aggregate of 760,559 shares of UVE’s common stock in the open market at an aggregate cost of $17.9 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 September 30, 2017.

On January 23, 2017, we declared a cash dividend of $0.14 per share on our outstanding common stock, which was paid on March 2, 2017, to the shareholders of record at the close of business on February 17, 2017.

On April 12, 2017, we declared a cash dividend of $0.14 per share on our outstanding common stock, which was paid on July 3, 2017, to the shareholders of record at the close of business on June 14, 2017.

On August 31, 2017, we declared a cash dividend of $0.14 per share on our outstanding common stock, payable on October 24, 2017, to the shareholders of record at the close of business on September 12, 2017.

The following table represents our contractual obligations for which cash flows are fixed or determinable as of September 30, 2017 (in thousands):

			Less than						Over
	Total		1 year		1-3 years		3-5 years		5 years
Unpaid losses and LAE, direct (1)	$	440,443	$	281,884	$	127,288	$	22,903	$	8,368
Long-term debt		14,624		1,322		5,100		3,233		4,969
Total contractual obligations	$	455,067	$	283,206	$	132,388	$	26,136	$	13,337

Other than as disclosed in “Item 1 — Note 2 (Significant Accounting Policies),” 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, 2016.

In March 2017, the Financial Accounting Standards Board (“FASB”) issued guidance to amend the amortization period for certain purchased callable debt securities held at a premium. Current GAAP excludes certain callable debt securities from consideration of early repayment of principal even if the holder is certain that the call will be exercised. Thus, the exercise of a call on a callable debt security held at a premium can result in the unamortized premium recorded at a loss in earnings. The guidance shortens the amortization period of certain purchased callable debt securities to the earliest call date. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Under the current guidance, you could consider the call dates and estimate if you had a large number of similar securities and you were basing your judgment on actual experience. Our service provider (who processes the accounting for our investment transactions) has many similar securities on their system and can make that type of determination. As a result, we currently account for the amortization under the proposed guidance and there will be no impact to our results of operations, financial position or liquidity.

In November 2016, the FASB issued guidance intended to reduce diversity in the classification and presentation of changes in restricted cash in the statement of cash flows. The new standard requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Entities will also be required to reconcile such total to amounts on the balance sheet and disclose the nature of the restrictions. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The balance of restricted cash is currently not material and is not expected to be material and we will comply with the new guidance requirements at the time of adoption. The adoption of this guidance will result in a change in the presentation only in the statement of cash flows and will impact our results of operations, financial position or liquidity.

In August 2016, the FASB issued guidance intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new guidance will apply to: 1) debt prepayment or debt extinguishment costs, 2) settlement of zero-coupon debt instruments, 3) contingent consideration payments made after business combination, 4) proceeds from the settlement of insurance claims, 5) proceeds from the settlement of corporate-owned life insurance policies, 6) distributions received from equity method investments, 7) beneficial interests in securitization transactions, and 8) separately identifiable cash flows and application of the predominance principle. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Historically, the items outlined above have not been applicable to the Company. Should they occur in the future, we will address them in accordance with the new guidance upon and subsequent to adoption.

In June 2016, the FASB issued guidance that introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new guidance 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 guidance 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 January 2016, the FASB issued guidance on recognition and measurement of financial instruments. The new guidance requires certain equity investments to be measured at fair value with changes in fair value reported in earnings and requires changes in instrument-specific credit risk for financial liabilities recorded at fair value under the fair value option to be reported in other comprehensive income (“OCI”). The new guidance is effective for fiscal years beginning after December 15, 2017, with early adoption permitted for the provisions related to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in OCI. The adoption of this guidance will impact how we account for unrealized gains and losses for equity investments and may result in a change of presentation in the statement of cash flows and is expected to impact our results of operations.

Market risk is the potential for economic losses due to adverse changes in fair value of fixed maturities, equity securities and short-term investments (“Financial Instruments”) and investment real estate. We carry all of our Financial Instruments at market value and investment real estate at net book value in our statement of financial condition. Our investment portfolio as of September 30, 2017 is comprised of fixed maturities and equities, which thereby expose us to changes in interest rates and equity prices.

The primary objectives of the portfolio are the preservation of capital and providing adequate liquidity for 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 is the sensitivity of a fixed-rate Financial Instrument to changes in interest rates. When interest rates rise, the fair value of our fixed-rate Financial Instruments declines.

The following table provides information about our fixed income Financial Instruments, which are sensitive to changes in interest rates. The table presents cash flows of principal amounts and related weighted average interest rates by expected maturity dates for fixed income Financial Instruments available for sale as of the dates presented (in thousands):

	September 30, 2017
	Amortized Cost																								Fair Value
	2017			2018			2019			2020			2021			Thereafter			Other (1)			Total			Total
Fixed income Financial Instruments	$	5,063		$	45,502		$	84,654		$	57,499		$	59,236		$	125,946		$	232,657		$	610,557		$	609,179
Weighted average interest rate		2.10	%		2.36	%		1.95	%		2.16	%		2.19	%		4.16	%		3.06	%		2.90	%		2.90	%

	December 31, 2016
	Amortized Cost																								Fair Value
	2017			2018			2019			2020			2021			Thereafter			Other (1)			Total			Total
Fixed income Financial Instruments	$	48,919		$	46,183		$	84,855		$	41,500		$	57,071		$	88,861		$	229,072		$	596,461		$	589,363
Weighted average interest rate		2.03	%		2.41	%		1.87	%		2.15	%		2.26	%		4.53	%		2.96	%		2.79	%		2.78	%

The tables above represent average contract rates that differ from the book yield of the fixed maturities. The fixed income Financial Instruments in our available for sale portfolio are comprised of United States government and agency securities, corporate bonds, redeemable preferred stock, mortgage-backed and asset-backed securities, municipal securities and certificates of deposit. Duration is a measure of interest rate sensitivity expressed as a number of years. The weighted average duration of the fixed maturity Financial Instruments in our available for sale portfolio at September 30, 2017 was 2.9 years.

To a lesser extent, we also have exposure to interest on our debt obligation which is in the form of a surplus note. The surplus note accrues interest at an adjustable rate based on the 10-year Constant Maturity Treasury rate.

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 available for sale portfolio subject to price risk as of the dates presented (in thousands):

A hypothetical decrease of 20% in the market prices of each of the equity securities held at September 30, 2017 and December 31, 2016 would have resulted in a decrease of $5.2 million and $10.2 million, respectively, in the fair value of those securities.

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 Securities Exchange Act of 1934 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 September 30, 2017, to ensure that information required to be disclosed by the Company in its reports that it files or submits under the Securities Exchange Act of 1934 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 Securities Exchange Act of 1934 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.

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.

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.

In the opinion of management, 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, 2016.

A summary of UVE’s repurchases of common stock for the three months ended September 30, 2017 is as follows:

					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)
7/1/17 - 7/31/17		—	$	—		—		—
8/1/17 - 8/31/17		306,091	$	22.91		306,091		—
9/1/17 - 9/30/17		100,175	$	19.32		100,175		873,082
Total		406,266	$	22.03		406,266		873,082

In June 2016, we announced that the Board of Directors authorized a share repurchase program under which the Company may repurchase in the open market in compliance with Exchange Act Rule 10b-18 under the Securities Exchange Act of 1934, as amended, up to $20 million of its outstanding shares of common stock through December 31, 2017. Since June 2016, we have repurchased 859,488 shares of common stock pursuant to this program through September 30, 2017.

In September 2017, our Board of Directors authorized a share repurchase program under which the Company may repurchase in the open market in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, up to $20 million of its outstanding shares of common stock through December 31, 2018. We did not repurchase any of our shares of common stock under this program in September 2017.

(1) Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on June 19, 2017.

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.

		Page No.

Item 1.	Financial Statements:	4

	Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016 (unaudited)	4

	Condensed Consolidated Statements of Income for the three and nine-month periods ended September 30, 2017 and 2016 (unaudited)	5

	Condensed Consolidated Statements of Comprehensive Income for the three and nine-month periods ended September 30, 2017 and 2016 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2017 and 2016 (unaudited)	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	44

Item 4.	Controls and Procedures	45

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 6.	Exhibits	47

Signatures		48

	September 30, 2017
	Cost or
	Amortized Cost		Fair Value
Due in one year or less	$	42,233	$	42,233
Due after one year through five years		229,841		229,898
Due after five years through ten years		47,716		47,879
Due after ten years		58,110		57,127
Mortgage-backed and asset-backed securities		219,321		218,098
Perpetual maturity securities		13,336		13,944
Total	$	610,557	$	609,179

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Proceeds from sales and maturities (fair value)	$	67,818		$	23,744		$	175,440		$	188,896
Gross realized gains	$	849		$	107		$	2,662		$	1,369
Gross realized losses	$	(46	)	$	(6	)	$	(212	)	$	(25	)

	September 30, 2017			December 31, 2016
Income Producing:
Investment real estate	$	6,918		$	6,918
Less: Accumulated depreciation		(415	)		(281	)
		6,503			6,637
Non-Income Producing:
Properties under development		9,821			4,798
Investment real estate, net	$	16,324		$	11,435

	September 30,		December 31,
Type of Investment	2017		2016
Fixed maturities	$	609,179	$	584,361
Equity securities		26,075		50,803
Short-term investments		—		5,002
Investment real estate, net		16,324		11,435
Total	$	651,578	$	651,601

Exhibit No.		Exhibit

3.1		Amended and Restated Bylaws of Universal Insurance Holdings, Inc. (1)

15.1		Accountants’ Acknowledgment

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS-XBRL		Instance Document

101.SCH-XBRL		Taxonomy Extension Schema Document

101.CAL-XBRL		Taxonomy Extension Calculation Linkbase Document

101.DEF-XBRL		Taxonomy Extension Definition Linkbase Document

101.LAB-XBRL		Taxonomy Extension Label Linkbase Document

101.PRE-XBRL		Taxonomy Extension Presentation Linkbase Document

					UNIVERSAL INSURANCE HOLDINGS, INC.

Date: November 9, 2017					/s/ Sean P. Downes
					Sean P. Downes, Chief Executive Officer and Principal Executive Officer

Date: November 9, 2017					/s/ Frank C. Wilcox
					Frank C. Wilcox, Chief Financial Officer and Principal Accounting Officer