Universal Insurance Holdings, Inc. Provides Clarification on Premiums and Associated Reinsurance Costs and the Company's Cash Position
FORT LAUDERDALE, FL--(Marketwire - March 24, 2008) - Universal Insurance Holdings, Inc.
(Company) (AMEX: UVE), a vertically integrated insurance holding company,
issued the following statement to provide additional background regarding
the fourth quarter decline in gross premiums written and premium rates
reported in its year-end release and annual report, and to reconfirm
disclosures regarding the Company's cash position. In earlier disclosures
the Company reported that notwithstanding an increase in the policies in
force, gross premiums written decreased 16.9 percent to $117.4 million in
the fourth quarter of 2007 from $141.3 million in the same period of 2006
primarily because of a decline in premium rates.
In January 2007, the Florida legislature passed a law designed to reduce
residential catastrophe reinsurance costs and requiring insurance companies
to offer corresponding rate reductions to policyholders. The new law
expanded the amount of reinsurance available from the Florida Hurricane
Catastrophe Fund (FHCF), which is a state-run entity providing hurricane
reinsurance to residential insurers at premiums less than the private
reinsurance market. The legislature intended for the new law to reduce
residential insurers' reinsurance costs by allowing them to directly
replace some of their private market reinsurance with less costly FHCF
reinsurance. In addition, prices in the private reinsurance market have
fallen as reinsurers have redeployed capital displaced by the expanded
FHCF.
UPCIC, the Company's wholly-owned regulated insurance subsidiary, purchased
the maximum additional coverage available to the Company under the expanded
FHCF, allowing UPCIC to maximize its cost savings from the new law.
UPCIC's mid-2007 rate reductions therefore reflected actual reductions in
UPCIC's operating costs. In addition, UPCIC's private reinsurance costs in
2007 and its expected costs in 2008 are lower than were included in its
rates prior to the 2007 legislation. Because UPCIC's reduction in rate
levels has been commensurate with reduced expenses, the Company has been
able to continue increasing its in force policies at acceptable profit
margin levels.
The legislature also has implemented strategies to improve the ability of
residential structures to withstand hurricanes. New construction must meet
stronger building codes, and existing homes are eligible for an inspection
program that allows homeowners to determine how their homes may be upgraded
to mitigate storm damage. An increasing number of insureds are likely to
qualify for insurance premium discounts as new homes are built and existing
homes are retrofitted. These premium discounts result from homes' reduced
vulnerability to hurricane losses due to the mitigation efforts, which
UPCIC takes into account in its underwriting and profitability models.
Finally, with concerns about sub-prime related holdings dominating the
market place over the past several months, the Company reconfirmed that it
is not exposed to sub-prime related holdings.
About Universal Insurance Holdings, Inc.
The Company is a vertically integrated insurance holding company. Through
its subsidiaries, the Company is currently engaged in insurance
underwriting, distribution and claims. UPCIC, which generates revenue from
the collection and investment of premiums, is one of the top 5 writers of
homeowners' insurance policies in the state of Florida and has aligned
itself with well-respected service providers in the industry.
Readers should refer generally to reports filed by the Company with the
Securities and Exchange Commission (SEC), and specifically to the Company's
Form 10-KSB for the year ended December 31, 2007 for a discussion of the
risk factors that could affect its operations. Such factors include,
without limitation, exposure to catastrophic losses; reliance on the
Company's reinsurance program; underwriting performance on catastrophe and
non-catastrophe risks; the ability to maintain relationships with
customers, employees or suppliers; and competition and its effect on
pricing, spending, third-party relationships and revenues. Additional
factors that may affect future results are contained in the Company's
filings with the SEC, which are available on the SEC's web site at
http://www.sec.gov. The Company disclaims any obligation to update and
revise statements contained in this press release based on new information
or otherwise.
Cautionary Language Concerning Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. The words
"believe," "expect," "anticipate," and "project," and similar expressions
identify forward-looking statements, which speak only as of the date the
statement was made. Such statements may include, but not be limited to,
projections of revenues, income or loss, expenses, plans, and assumptions
relating to the foregoing. Forward-looking statements are inherently
subject to risks and uncertainties, some of which cannot be predicted or
quantified. Future results could differ materially from those described in
forward-looking statements.