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November 11, 2010

Universal Insurance Holdings, Inc. AMEX:UVE Symbol Exchange AMEX Current Price 52 Week High/ Low Shares Outstanding (in mn) Market Cap (in $ mn) P/E Ratio

UVE 4.82 6.72 – 3.98 39.17 $184.86

7.30

Recommendation:

Key Developments:

Ebeling Heffernan Price Target $8.20 in 2011.

Third quarter earnings per share $0.33 Third quarter earnings per share $0.44 excluding items

Company has a strong dividend history and has an average dividend yield of 8.53% making it a valuable investment in this low interest rate climate. Funds Managers will shift focus to companies with a good history of regular dividends in 2011 which will build value here. Price rally will continue until dividend yield brings UVE in line with current averages.

Universal Property & Casualty Insurance Company (UPCIC) received approval from the Massachusetts Division of Insurance to write property and casualty insurance in the Commonwealth of Massachusetts. UPCIC anticipates writing new business in Massachusetts following approval of its rates and forms by the Massachusetts Division of Insurance. Net premiums earned increased 49.1 percent in the third quarter of 2010 compared to the same quarter in 2009, primarily as a result of greater net premiums written.


About the Company

Universal Insurance Holdings, Inc. (UIH), incorporated on November 13, 1990, is a vertically integrated insurance holding company. The Company, through its subsidiaries, is engaged in insurance underwriting, distribution and claims. UPCIC generates revenue from the collection and investment of premiums. The Company’s agency operations, which include Universal Florida Insurance Agency and Coastal Homeowners Insurance Specialists, Inc., generate income from commissions. Universal Risk Advisors, Inc., the Company’s managing general agent, generates revenue through policy fee income and other administrative fees from the marketing of UPCIC’s insurance products through the Company’s distribution network. The Company’s primary product is homeowners’ insurance. The Company’s criteria for selecting insurance policies includes, but is not limited to, the use of specific policy forms, coverage amounts on buildings and contents and required compliance with local building codes. UPCIC’s portfolio as of December 31, 2009 includes approximately 531,000 policies with coverage for wind risks and 10,000 policies without wind risks. Atlas Premium Finance Company is a wholly owned subsidiary of the Company and offers premium finance services to policyholders of UPCIC. Blue Atlantic Reinsurance Corporation (BARC) is a wholly owned subsidiary of the Company and licensed as a reinsurance intermediary broker. Universal Logistics Corporation (ULC) is a wholly owned subsidiary of the Company that assists with operational duties associated with the day-to-day business of the Company.


Recent News 3rd Quarter Results Policy Count Increased by Approximately 10,000 During the Third Quarter; Diluted Earnings per Share Improved by 28.6 Percent Compared to the Same Quarter of 2009; Stockholders' Equity Increased 12.2 Percent During the Third Quarter Universal Insurance Holdings, Inc. (the Company or Universal) (NYSE Amex: UVE), a vertically integrated insurance holding company, announced third-quarter 2010 net income of $14.4 million, or $0.36 per diluted share, compared to $11.5 million, or $0.28 per diluted share, during the same period of 2009. Net income and diluted earnings per share increased 25.4 and 28.6 percent, respectively, for the 2010 third quarter compared to the same period last year. The improvement in operating results is primarily attributable to an increase in net premiums earned. Realized and unrealized gains on investments also positively impacted overall financial results. The improved profitability was moderated by statemandated wind mitigation credits, lower foreign currency transaction gains, and increased operating costs and expenses. Homeowners' and dwelling fire insurance policies serviced by Universal Property & Casualty Insurance Company (UPCIC), the Company's wholly-owned subsidiary, and the related direct premiums written, increased during the third quarter of 2010 compared to the same period of 2009. Recent rate increases in Florida, 14.6 percent statewide for its homeowners' program and 14.8 percent statewide for its dwelling fire policies, increased premiums and improved profitability. UPCIC also continued to recoup a portion of the $4.1 million Florida Insurance Guaranty Association (FIGA) assessment incurred in 2009. During the 2010 third quarter, UPCIC's policy count continued to grow. At September 30, 2010, UPCIC serviced approximately 576,000 homeowners' and dwelling fire insurance policies, up from 566,000 policies at June 30, 2010, and 536,000 policies at September 30, 2009. The increase in the number of policies in-force is the result of heightened relationships with existing agents, an increase in the number of new agents, as well as continued expansion within Florida, South Carolina, North Carolina, and Hawaii. Within South Carolina, North Carolina, and Hawaii, UPCIC had nearly 8,300 policies totaling approximately $11.6 million of in-force premiums at September 30, 2010. Net premiums earned increased 49.1 percent in the third quarter of 2010 compared to the same quarter in 2009, primarily as a result of greater net premiums written. Meanwhile, third-quarter 2010 operating costs and expenses were higher compared to the third quarter of last year, as losses and loss adjustment expenses increased 23.6 percent and general and administrative expenses increased 8.4 percent. The increase in losses and loss adjustment expenses is related to the servicing of additional policies due to the growth in policy count on a year-over-year basis. The increase in general and administrative expenses was primarily attributable to increases in commissions on direct premiums and insurance premium taxes, which are a result of an increase in direct written premiums from growth in the number of policies in-


force and increases in the average in-force premium per policy. These increased expenses were partially offset by an increase in ceding commissions. At September 30, 2010, stockholders' equity increased to $138.6 million from $123.6 million at June 30, 2010, representing growth of 12.2 percent. Investment Portfolio Update Realized gains on investments were $6.2 million for the third quarter of 2010 and unrealized gains on investments for the third quarter of 2010 were $8.6 million. During the third quarter of 2010, the Company evaluated the trading activity in its investment portfolio and its overall investment program. As a result of this evaluation, the Company reclassified its available-for-sale portfolio as a trading portfolio effective July 1, 2010. Accordingly, unrealized gains on investments were recognized as income during the third quarter of 2010, relating to the reclassification of the Company's investments to a trading portfolio from an available-for-sale portfolio. The Company will continue to record future changes in the market value of its trading portfolio directly to revenues as unrealized gains on investments. The reclassification of the Company's available-for-sale investment portfolio to a trading securities portfolio increased net income and diluted earnings per share by $5.3 million and $0.13, respectively, during the third quarter of 2010. As of September 30, 2010, the Company's investments in trading securities totaled $104.4 million, compared to fixed maturities and equity securities available for sale of $137.9 million at June 30, 2010. At September 30, 2010, approximately 90.8 percent of the investments in trading securities were in equity securities and 9.2 percent were in fixed maturities. On October 6, 2010, Universal's board of directors declared a cash dividend of $0.10 per share, which was paid on November 5, 2010, to shareholders of record as of October 22, 2010. 18th October 2010 Universal Insurance Holdings, Inc. ("Company") (NYSE Amex: UVE) announced that its subsidiary Universal Property & Casualty Insurance Company (UPCIC) received approval from the Massachusetts Division of Insurance to write property and casualty insurance in the Commonwealth of Massachusetts. UPCIC anticipates writing new business in Massachusetts following approval of its rates and forms by the Massachusetts Division of Insurance. The Company also announced that UPCIC withdrew its application to provide property and casualty insurance in the Commonwealth of Virginia. UPCIC may in the future reapply to the Commonwealth of Virginia to provide property and casualty insurance.


Valuation Ratios Company

Industry

Sector

S&P 500

P/E Ratio (TTM)

7.30

10.10

26.94

18.08

P/E High - Last 5 Yrs.

8.53

5.11

1.66

25.27

P/E Low - Last 5 Yrs.

2.23

1.06

0.35

5.52

Beta

0.84

0.66

1.18

1.28

Price to Sales (TTM)

0.86

0.67

6.90

2.13

Price to Book (MRQ)

1.50

0.89

1.58

2.78

Price to Tangible Book (MRQ)

1.50

0.95

1.55

19.62

Price to Cash Flow (TTM)

6.85

7.89

9.66

10.46

Price to Free Cash Flow (TTM)

14.08

4.45

5.29

47.11

% Owned Institutions

--

--

--

--

Company

Industry

Sector

S&P 500

Dividend Yield

8.48

1.53

1.65

1.64

Dividend Yield - 5 Year Avg.

7.06

0.63

1.62

2.48

Dividend 5 Year Growth Rate

--

17.72

8.31

-6.71

Payout Ratio(TTM)

61.28

8.90

20.86

38.07

Dividends


Growth Rates Company

Industry

Sector

S&P 500

Sales (MRQ) vs Qtr. 1 Yr. Ago

17.48

5.67

34.41

9.81

Sales (TTM) vs TTM 1 Yr. Ago

14.71

2.47

115.50

8.67

Sales - 5 Yr. Growth Rate

92.35

10.58

20.68

9.97

EPS (MRQ) vs Qtr. 1 Yr. Ago

41.24

15.41

90.23

6.65

EPS (TTM) vs TTM 1 Yr. Ago

-25.33

--

--

--

EPS - 5 Yr. Growth Rate

--

15.01

12.45

6.97

Capital Spending - 5 Yr. Growth Rate

99.69

7.83

12.07

4.89


Biographies Meier, Bradley Mr. Bradley I.Meier has been President, Chief Executive Officer and Director of Universal Insurance Holdings, Inc since its inception in November 1990. He has served as President of Universal Property and Casualty Insurance Company ("UPCIC"), a wholly owned subsidiary of the Company, since its formation in April 1997. In 1990, Mr. Meier graduated from the Wharton School of Business with a B.S. in Economics. De Heer, George Mr. George R. De Heer is the Chief Financial Officer, Principal Accounting Officer of Universal Insurance Holdings, Inc. effective October 1, 2010. Mr. De Heer has served as the Company’s Vice President – Finance since October 2006 and has almost 19 years of experience in the property and casualty insurance industry. Prior to joining the Company, Mr. De Heer was employed for 15 years by Bristol West Insurance Group, a national property and casualty insurance company. Mr. De Heer held various financial positions with Bristol West Insurance Group, rising to become its Vice President of Finance and Controller. Mr. De Heer graduated from Lewis University with a B.A. in Accounting in 1982. He was licensed as a certified public accountant in the State of Illinois in 1984. Downes, Sean Mr. Sean P. Downes has been Senior Vice President, Chief Operating Officer and Director of Universal Insurance Holdings, Inc since January 2005. He has served as Chief Operating Officer and a Director of UPCIC since July 2003. Mr. Downes was Chief Operating Officer of Universal Adjusting Corporation from July 1999 to July 2003. During that time Mr. Downes created the Company’s claims operation. Before joining the Company in July 1999, Mr. Downes was Vice President of Downes and Associates, a multi-line insurance adjustment corporation. Meier, Norman Mr. Norman M. Meier has been Director of Universal Insurance Holdings, Inc since July 1992 and Secretary of the Company since January 1, 2008. Presently Mr. Meier serves as Executive Chairman of DermWorx Incorporated, a privately held dermatologic specialty pharmaceutical company. From February 2000 until January 2006, Mr. Meier was President and Chief Executive Officer of PharmaMatrix, Inc., a medical marketing and advertising company. From December 1986 until November 1999, Mr. Meier was President, Chief Executive Officer and a Director of Columbia Laboratories, Inc., a publiclytraded corporation in the pharmaceuticals business. From 1977 until 1986, Mr. Meier served as a consultant to Key Pharmaceuticals. From 1971 to 1977, Mr. Meier was Vice President of Sales and Marketing for Key Pharmaceuticals.


Shayne Heffernan Shayne Heffernan of Ebeling Heffernan prepared this report, Mr Heffernan holds a PhD in Economics serves as CEO of Heffernan Holding Inc and Co Founder of Ebeling Heffernan www.ebeling-heffernan.com

CONTACT DETAILS: Bangkok Suite 53 Athenee Tower 63 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 THAILAND Tel: +66 2 126 8000 Fax: +66 2 126 8080 New York 347 5th Avenue, Suite 1402-508 Ny, NY 10016

Tel: +1 646-403-9881 Fax: +1 646-403-8014 Singapore 3 Raffles Place #07-01 Bharat Building Singapore 048617 Tel: +65 6329 6408Fax: +65 6329 9699


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Strong Buy on Universal Insurance Holdings, Inc. AMEX:UVE  

Shayne Heffernan of Ebeling Heffernan has released a strong buy on Universal Insurance Holdings, Inc. AMEX:UVE (UIH) with a price target of...