UNIVERSAL INSURANCE HOLDINGS, INC. – 10-K – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to assist in an understanding of our
financial condition and results of operations and should be read in conjunction
with our consolidated financial statements and accompanying notes in "Item
8-Financial Statements and Supplementary Data" below. Except for the historical
information contained herein, the discussions in this MD&A contain
forward-looking statements that involve risks and uncertainties. Our future
results could differ materially from those discussed herein. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed above under "Cautionary Note Regarding Forward-Looking Statements" and
"Part I, Item 1A-Risk Factors."

Overview

We are a vertically integrated holding company offering property and casualty
insurance and value-added insurance services. We develop, market, and underwrite
insurance products for consumers predominantly in the personal residential
homeowners lines of business and perform substantially all other
insurance-related services for our primary insurance entities, including risk
management, claims management and distribution. Our primary insurance entities,
UPCIC and APPCIC, offer insurance products through both our appointed
independent agent network and our online distribution channels across 19 states
(primarily in Florida), with licenses to write insurance in an additional two
states. The Insurance Entities seek to produce an underwriting profit (defined
as earned premium minus losses, LAE, policy acquisition costs and other
operating costs) over the long term; maintain a conservative balance sheet to
prepare for years in which the Insurance Entities are not able to achieve an
underwriting profit; and generate investment income from invested assets.

Revenues

We generate revenue primarily from the collection of insurance premiums. Other
sources of revenue include: commissions paid by our reinsurers to our
reinsurance intermediary subsidiary BARC on reinsurance it places for the
Insurance Entities; policy fees collected from policyholders by our managing
general agent subsidiary, ERA (formerly Universal Risk Advisors, Inc.); and
financing fees charged to policyholders who choose to defer premium payments. In
addition, our subsidiary Alder receives fees from the Insurance Entities for
claims-handling services. The Insurance Entities are reimbursed for these fees
on claims that are subject to recovery under the Insurance Entities' respective
reinsurance programs. These fees, after expenses, are recorded in the
consolidated financial statements as an adjustment to LAE. We also generate
income by investing our assets.
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The nature of our business tends to be seasonal during the year, reflecting
consumer behaviors in connection with the Florida residential real estate market
and the hurricane season. The amount of direct premiums written tends to
increase just prior to the second quarter and tends to decrease approaching the
fourth quarter.

Trends and Geographical Distribution

Florida Trends

We are currently working through a cycle to improve long-term rate adequacy and
earnings for the Insurance Entities by increasing rates and managing exposures,
while taking advantage of what we believe to be opportunities in a dislocated
market. The Florida personal lines homeowners' market currently can be
characterized as a "hard market", where insurance premium rates are escalating,
insurers are reducing coverages, and underwriting standards are tightening as
insurers closely monitor insurance rates and manage coverage capacity. Due to
conditions in the Florida market and factors more generally affecting the U.S.
and global reinsurance markets, reinsurance capacity in recent years has also
been subject to less favorable pricing or terms. These market forces decrease
competition among admitted insurers, and ultimately result in the increased use
of Citizens, which was created to be the State's residual property insurance
market. In recent years, in response to adverse behaviors and conditions in the
Florida residential market, most admitted market competitors have sought and
often received approval for significant rate increases. Meanwhile, Citizens'
rate increases are limited by law, resulting in its policies, in a hard market,
becoming priced lower than admitted market policies. This causes Citizens to
become viewed as a desirable alternative to the admitted market as admitted
market insurers manage through the hard market challenges. Our Insurance
Entities likewise have taken and continue to take action to manage through this
hard market by increasing rates and prudently managing exposures while also
maintaining their competitive position in the market and supporting our current
policyholders and agents.
While addressing rate adequacy for the Insurance Entities, we continue to
experience inflated costs for losses and LAE in the Florida market, where an
industry has developed around the solicitation, filing and litigation of
personal residential claims. These dynamics have been made worse by the
litigation financing industry which in some cases funds these actions. These
behaviors are a chief contributing factor for the rate increases in this market.
These behaviors result in a pattern of continued increases in year-over-year
levels of represented claims, the inflation of purported claim amounts, and
increased demands for attorneys' fees. Active solicitation of personal
residential claims in Florida by policyholder representatives, remediation
companies and repair companies has led to an increase in the frequency and
severity of personal residential claims in Florida exceeding historical levels
and levels seen in other jurisdictions. Information prepared by the Florida
Office of Insurance Regulation also shows that claims in Florida are litigated
at a substantially disproportionate rate when compared to other states. This is
largely due to a Florida statute providing a one-way right of attorneys' fees
against insurers which has, when coupled with certain other statutes and
judicial rulings, produced a legal environment in Florida that encourages
litigation, in many cases without regard to the underlying merits of the claims.
The one-way right to attorneys' fees essentially means that unless an insurer's
position is entirely upheld in litigation, the insurer must pay the plaintiff's
attorneys' fees in addition to its own defense costs. This affects not only
claims that are litigated to resolution, but also the settlement discussions
that take place with nearly all litigated claims. This one-way right to attorney
fees creates a nearly risk-free environment, and incentive, for attorneys to
pursue litigation against insurers. The result has been a substantial increase
in represented and litigated claims in Florida, far outpacing levels experienced
in other states.

In April 2021, the Florida legislature passed a bill intending to curtail the
adverse claim trends impacting the Florida homeowners' insurance market. Most
provisions of the bill went into effect on July 1, 2021. Among its provisions,
the bill creates a new pre-suit notice requirement wherein an insured must make
a formal monetary demand of a residential property insurer before commencing
suit. The Company has established an internal team to review and respond to
these pre-suit demands in a further effort to resolve disputes before litigation
ensues. Another provision of the new law reduces the time period in which to
file a new or reopened claim to two years following the date of loss. Other
changes include attempting to curtail the solicitation of certain roof claims
and to limit referral fees in connection with certain types of claims. Opponents
of the reforms have challenged certain parts of the new law, including obtaining
an injunction against provisions that limit the solicitation of roof claims. In
light of the recent enactment of these reforms and the litigation that has
ensued, it is premature to assess whether the reforms will have their intended
effect. Whether these changes are beneficial to consumers, insurers, insurance
company holding systems or the residential property insurance market as a whole
may not be fully known for some time.

Despite our initiatives, such as those mentioned above, our costs to settle
claims in Florida have increased for the reasons mentioned above. For example,
the Company has previously increased its current year loss estimates and
increased estimates associated with prior years' claims. Over the past three
years, even as we have increased our estimates of prospective losses each year,
we have recorded adverse claim development on prior years' loss reserves and
further strengthened current year losses during the year to address the
increasing impact Florida's market disruptions, as well as the impact of rising
costs of building materials and labor, have had on the claims process and the
establishment of reserves for losses and LAE. The full extent and duration of
these market disruptions and inflationary pressures are unknown and still
unfolding, and we will monitor the impact of such disruptions on the recording
and reporting of claim costs.

The Company has taken a series of steps over time to mitigate the financial
impact of these negative trends in the Florida market. We also have closely
monitored rate levels, especially in the Florida market, and have submitted rate
filings based upon evolving data. However, because rate filings rely upon past
loss and expense data and take time to develop, file and implement, we can
experience significant delays between identifying needed rate adjustments,
gaining approval of rate changes, and ultimately collecting the resulting
increased premiums. In addition, the Company has implemented several initiatives
in its claims department in response to the adverse market trends. We utilize
our process called Fast Track, which is an initiative to handle straightforward,
meritorious claims as promptly as possible to mitigate the adverse impacts that
can be seen with claims
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that remain open for longer periods. In addition, we increased our emphasis on
subrogation to reduce our net losses while also recovering policyholders'
deductibles when losses are attributable to the actions of others. We have an
internal staff of trained water remediation experts to address the extraordinary
number of purported water damage claims filed by policyholders and vendors. We
developed a specialized in-house unit for responding to the unique aspects of
represented claims, and we have substantially increased our in-house legal staff
in an effort to address the increase in litigated or represented claims as
cost-effectively as possible.

Additionally, we have taken steps to implement claim settlement rules associated
with the Florida legislation passed in 2019 designed to reduce the negative
effects of claims involving assignments of benefits ("AOB"). See "Part I- Item
1-Business-Government Regulation." An AOB is a document signed by a policyholder
that allows a third party to be paid for services performed for an insured
homeowner who would normally be reimbursed by the insurance company directly
after making a claim. Prior to the AOB reform legislation, the Company
experienced an increase in the use of AOBs involving litigation by Florida
policyholders. Claims paid under an AOB often involve unnecessary litigation,
with the Company required to pay both its own defense costs and those of the
plaintiff, and, as a result, cost the Company significantly more than claims
settled when an AOB is not involved. In 2019, the Florida legislature passed
legislation designed to increase consumer protections against AOB abuses and
reduce AOB-related litigation. While the Florida legislation addressing abuses
associated with AOBs may be beneficial in reducing one aspect of the concerns
affecting the Florida market, the overall impact of the deterioration in
claims-related tactics and behaviors, including other first-party litigation,
thus far has continued to outpace benefits arising from the 2019 AOB reform
legislation. More recently, following legislation adopted in Florida's 2021
legislative session, we have established procedures and dedicated personnel to a
new pre-suit notice and offer process. The new process requires policyholders or
their attorneys to notify insurers at least ten days before commencing
litigation and allows insurers an opportunity to make pre-suit settlement
offers. The policyholders' ability to recover attorneys' fees is determined
according to a scale that compares the ultimate outcomes of the cases to the
insurers' pre-suit offers. Although this new process is intended to reduce
claims litigation and encourage settlements, it is too early to evaluate whether
it will be successful in limiting the types of settlement demands and litigation
that have plagued the Florida market or in offsetting other factors adversely
affecting the market such as increased costs of building materials and labor.

Geographical Distribution

Direct premiums written continue to increase across the states in which we
conduct business. As a result of our business strategy, rate changes and
disciplined underwriting initiatives, we have seen a decrease in policy count,
but an increase in in-force premium and total insured value in almost all states
for the past three years. Direct premiums written for states outside of Florida
increased 6.1%, representing a $16.2 million increase during 2021. Direct
premiums written for Florida increased 11.0%, representing a $137.6 million
increase during 2021. The following table provides direct premiums written for
Florida and other states for the years ended December 31, 2021 and 2020 (dollars
in thousands):

                                                                                                                               Growth
                                                        For the Years Ended                                                Year Over Year
                                   December 31, 2021                          December 31, 2020
                          Direct Premiums                            Direct Premiums
State                         Written                  %                 Written                  %                     $                     %
Florida                   $   1,388,318                83.1  %       $   1,250,748                82.4  %       $      137,570                11.0  %
Other states                    282,934                16.9  %             266,731                17.6  %               16,203                 6.1  %
Grand total               $   1,671,252               100.0  %       $   1,517,479               100.0  %       $      153,773                10.1  %

We seek to grow and generate long-term rate adequate premium in each state where
we offer policies. Our diversification strategy seeks to increase business
outside of Florida and to improve geographical distribution within Florida.
Premium growth outside Florida is a measure monitored by management in its
efforts to meet that objective.

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The geographical distribution of our policies in force, premium in force and
total insured value across all states were as follows, as of December 31, 2021,
2020 and 2019 (dollars in thousands, rounded to the nearest thousand):

                                                     As of December 31, 2021
                                                      Premium                     Total Insured
State                Policy Count         %          In Force           %             Value             %
Florida              695,533            73.7  %    $ 1,395,476        83.1  %    $ 203,062,948        63.3  %
North Carolina        58,644             6.2  %         57,534         3.4  %       22,703,801         7.1  %
Georgia               41,097             4.4  %         53,956         3.2  %       19,057,338         5.9  %
Massachusetts         16,793             1.8  %         23,790         1.4  %       11,467,490         3.6  %
Virginia              23,306             2.5  %         21,069         1.3  %       13,854,648         4.3  %
Alabama               14,484             1.5  %         19,966         1.2  %        5,725,381         1.8  %
Indiana               17,744             1.9  %         19,018         1.1  %        6,810,107         2.1  %
Minnesota             11,934             1.2  %         18,216         1.1  %        6,372,221         2.0  %
New Jersey            14,844             1.6  %         18,054         1.1  %        9,523,904         3.0  %
South Carolina        17,563             1.8  %         17,976         1.1  %        6,860,210         2.1  %
Pennsylvania          13,930             1.5  %         14,688         0.9  %        6,528,352         2.0  %
Maryland               6,615             0.7  %          6,003         0.4  %        2,802,756         0.9  %
Michigan               3,476             0.4  %          4,572         0.3  %        1,585,940         0.5  %
New York               2,808             0.3  %          3,814         0.2  %        1,898,297         0.6  %
Delaware               1,819             0.2  %          2,316         0.1  %        1,061,987         0.3  %
Hawaii                 1,773             0.2  %          1,974         0.1  %          903,844         0.3  %
Illinois                 786             0.1  %          1,006           -  %          409,660         0.1  %
New Hampshire            369               -  %            301           -  %          235,154         0.1  %
Iowa                      75               -  %             92           -  %           34,396           -  %
Total                943,593           100.0  %    $ 1,679,821       100.0  %    $ 320,898,434       100.0  %



                                                     As of December 31, 2020
                                                      Premium                     Total Insured
State                Policy Count         %          In Force           %             Value             %
Florida              728,211            73.9  %    $ 1,252,916        82.4  %    $ 192,504,430        63.6  %
Georgia               46,678             4.7  %         57,251         3.8  %       20,141,751         6.7  %
North Carolina        62,849             6.4  %         55,307         3.6  %       21,500,109         7.1  %
Virginia              23,546             2.4  %         20,226         1.3  %       12,959,884         4.3  %
Massachusetts         15,090             1.5  %         20,161         1.3  %        9,507,917         3.1  %
Indiana               19,839             2.0  %         18,328         1.2  %        7,171,623         2.4  %
Minnesota             12,730             1.3  %         17,863         1.2  %        6,252,822         2.1  %
Alabama               13,632             1.4  %         17,409         1.2  %        4,953,449         1.6  %
South Carolina        17,877             1.8  %         16,886         1.1  %        6,297,270         2.1  %
Pennsylvania          17,183             1.7  %         14,540         1.0  %        7,394,773         2.4  %
New Jersey            11,576             1.2  %         12,915         0.9  %        6,684,386         2.2  %
Maryland               5,664             0.6  %          4,816         0.3  %        2,226,324         0.7  %
Michigan               3,494             0.4  %          4,290         0.3  %        1,478,595         0.5  %
New York               1,936             0.2  %          2,251         0.2  %        1,159,105         0.4  %
Hawaii                 2,031             0.2  %          1,983         0.1  %          901,401         0.3  %
Delaware               1,581             0.2  %          1,908         0.1  %          870,728         0.3  %
Illinois                 497             0.1  %            580           -  %          235,593         0.1  %
New Hampshire            409               -  %            312           -  %          238,121         0.1  %
Iowa                       7               -  %              7           -  %            2,774           -  %
Total                984,830           100.0  %    $ 1,519,949       100.0  %    $ 302,481,055       100.0  %



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                                                     As of December 31, 

2019

                                                      Premium                     Total Insured
State                Policy Count         %          In Force           %             Value             %
Florida              662,343            74.6  %    $ 1,070,034        82.5  %    $ 164,654,848        64.3  %
Georgia               42,637             4.8  %         49,615         3.8  %       17,536,031         6.9  %
North Carolina        58,283             6.6  %         49,420         3.8  %       19,150,001         7.5  %
Massachusetts         13,596             1.5  %         17,991         1.4  %        8,312,929         3.2  %
Indiana               18,291             2.1  %         16,643         1.3  %        6,458,310         2.5  %
Minnesota             12,466             1.4  %         16,035         1.2  %        5,881,338         2.3  %
South Carolina        16,682             1.9  %         15,705         1.2  %        5,575,934         2.2  %
Virginia              16,313             1.8  %         14,111         1.1  %        8,415,470         3.3  %
Pennsylvania          16,874             1.9  %         13,726         1.1  %        6,922,815         2.7  %
Alabama               11,186             1.3  %         12,998         1.0  %        3,923,446         1.5  %
New Jersey             7,145             0.8  %          7,554         0.6  %        3,824,506         1.5  %
Michigan               3,417             0.4  %          4,089         0.3  %        1,399,470         0.5  %
Maryland               4,181             0.5  %          3,474         0.3  %        1,600,113         0.6  %
Hawaii                 2,090             0.2  %          1,930         0.2  %          881,476         0.3  %
Delaware               1,273             0.1  %          1,500         0.1  %          673,331         0.3  %
New York               1,183             0.1  %          1,244         0.1  %          646,130         0.3  %
New Hampshire            249               -  %            181           -  %          135,254         0.1  %
Illinois                 152               -  %            166           -  %           65,006           -  %
Total                888,361           100.0  %    $ 1,296,416       100.0  

% $ 256,056,408 100.0 %

Also see "Results of Operations" below and "Part I-Item 1A-Risk Factors-Risks
Relating to Our Business and Operations-Because we conduct the majority of our
business in Florida, our financial results depend on the regulatory, economic
and weather conditions in Florida" for discussion on geographical
diversification.

KEY PERFORMANCE INDICATORS

The Company considers the measures and ratios in the following discussion to be
key performance indicators for its businesses. Management believes that these
indicators are helpful in understanding the underlying trends in the Company's
businesses. Some of these indicators are reported on a quarterly basis and
others on an annual basis. Please also refer to "Item 8-Note 2 (Summary of
Significant Accounting Policies)" for definitions of certain other terms we use
when describing our financial results.

These indicators may not be comparable to other performance measures used by the
Company's competitors and should only be evaluated together with our
consolidated financial statements and accompanying notes.

Definitions of Key Performance Indicators

Book Value Per Common Share - total stockholders' equity, adjusted for preferred
stock liquidation, divided by the number of common shares outstanding as of a
reporting period. Book value per common share is the excess of assets over
liabilities at a reporting period attributed to each share of stock. Changes in
book value per common share informs shareholders of retained equity in the
Company on a per share basis which may assist in understanding market value
trends for the Company's stock.

Combined Ratio - the combined ratio is a measure of underwriting profitability
for a reporting period and is calculated by dividing total operating costs and
expenses (which is made up of losses and LAE and general and administrative
expenses) by premiums earned, net, which is net of ceded premiums earned.
Changes to the combined ratio over time provide management with an understanding
of costs to operate its business in relation to net premiums it is earning and
the impact of rate, underwriting and other business management actions on
underwriting profitability. A combined ratio below 100% indicates underwriting
profit; a combined ratio above 100% indicates underwriting losses.

Core Loss Ratio - a common operational metric used in the insurance industry to
describe the ratio of current accident year expected losses and LAE to premiums
earned. Core loss ratio is an important measure identifying profitability trends
of premiums in force. Core losses consists of all other losses and LAE,
excluding weather events beyond those expected and prior years' reserve
development. The financial benefit from the management of claims, including
claim fees ceded to reinsurers, is recorded in the consolidated financial
statements as a reduction to core losses.

Debt-to-Equity Ratio - long-term debt divided by stockholders' equity. This
ratio helps management measure the amount of financing leverage in place in
relation to equity and future leverage capacity.

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Debt-to-Total Capital Ratio - long-term debt divided by the sum of total
stockholders' equity and long-term debt (often referred to as total capital
resources). This ratio helps management measure the amount of financing leverage
in place (long-term debt) in relation to total capital resources and future
leverage capacity.

Direct Premiums Written ("DPW") - reflects the total value of policies issued
during a period before considering premiums ceded to reinsurers. Direct premiums
written, comprised of renewal premiums, endorsements and new business, is
initially recorded as unearned premium in the balance sheet which is then earned
pro-rata over the next year or remaining policy term. Direct premiums written
reflects current trends in the Company's sale of property and casualty insurance
products and amounts that will be recognized as earned premiums in the future.

DPW (Florida) - includes only DPW in the state of Florida. This measure allows
management to analyze growth in our primary market and is also a measure of
business concentration risk.

Expense Ratio (Including Policy Acquisition Cost Ratio and Other Operating Cost
Ratio) - calculated as general and administrative expenses as a percentage of
premiums earned, net. General and administrative expenses is comprised of policy
acquisition costs and other operating costs, which includes such items as
underwriting costs, facilities and corporate overhead. The expense ratio,
including the sub-expense ratios of policy acquisition cost ratio and other
operating cost ratio, are indicators to management of the Company's cost
efficiency in acquiring and servicing its business and the impact of expense
items to overall profitability.

Losses and Loss Adjustment Expense Ratio or Loss and LAE Ratio - a measure of
the cost of claims and claim settlement expenses incurred in a reporting period
as a percentage of premiums earned in that same reporting period. Losses and LAE
incurred in a reporting period includes both amounts related to the current
accident year and prior accident years, if any, referred to as development.
Ultimate losses and LAE are based on actuarial estimates with changes in those
estimates recognized in the period the estimates are revised. Losses and LAE
consist of claim costs arising from claims occurring and settling in the current
period, an estimate of claim costs for reported but unpaid claims, an estimate
of unpaid claim costs for incurred-but-not-reported claims and an estimate of
claim settlement expenses associated with reported and unreported claims which
occurred during the reporting period. The loss and LAE ratio can be measured on
a direct basis, which includes losses and LAE divided by direct earned premiums,
or on a net basis, which includes losses and LAE after amounts have been ceded
to reinsurers divided by net earned premiums (i.e., direct premium earned less
ceded premium earned). The net loss and LAE ratio is a measure of underwriting
profitability after giving consideration to the effect of reinsurance. Trends in
the net loss and LAE ratio are an indication to management of current and future
profitability.

Monthly Weighted Average Renewal Retention Rate - measures the monthly average
of policyholders that renew their policies over the period of a calendar year.
This measure allows management to assess customer retention.

Premiums Earned, Net - the pro-rata portion of current and previously written
premiums that the Company recognizes as earned premium during the reporting
period, net of ceded premium earned. Ceded premiums are premiums paid or payable
by the Company for reinsurance protection. Written premiums are considered
earned and are recognized pro-rata over the policy coverage period. Premiums
earned, net is a measure that allows management to identify revenue trends.

Policies in Force - represents the number of active policies with coverage in
effect as of the end of the reporting period. The change in the number of
policies in force is a growth measure and provides management with an indication
of progress toward achieving strategic objectives. Inherent seasonality in our
business makes this measure more useful when comparing each quarter's balance to
the same quarter in prior years.

Premium in Force - is the amount of the annual direct written premiums
previously recorded by the Company for policies which are still active as of the
reporting date. This measure assists management in measuring the level of
insured exposure and progress toward meeting revenue goals for the current year,
and provides an indication of business available for renewal in the next twelve
months. Inherent seasonality in our business makes this measure more useful when
comparing each quarter's balance to the same quarter in prior years.

Return on Average Equity ("ROAE") - calculated by dividing earnings (loss) per
common share by average book value per common share. Average book value per
common share is computed as the sum of book value per common share at the
beginning and the end of a period, divided by two. ROAE is a capital
profitability measure of how effectively management creates profits per common
share.

Total Insured Value - represents the amount of insurance limits available on a
policy for a single loss based on all policies active as of the reporting date.
This measure assists management in measuring the level of insured exposure.

Unearned Premiums - represents the portion of direct premiums corresponding to
the time period remaining on an insurance policy and available for future
earning by the Company. Trends in unearned premiums generally indicate
expansion, if growing, or contraction, if reducing, which are important
indicators to management. Inherent seasonality in our business makes this
measure more useful when comparing each quarter's balance to the same quarter in
prior years.

Weather events - an estimate of losses and LAE from weather events occurring
during the current accident year that exceed initial estimates of expected
weather events when establishing the core loss ratio for each accident year.
This metric informs management of factors impacting overall current year
profitability.
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REINSURANCE

Reinsurance enables our Insurance Entities to limit potential exposures to
catastrophic events. Reinsurance contracts are typically classified as treaty or
facultative contracts. Treaty reinsurance provides coverage for all or a portion
of a specified group or class of risks ceded by the primary insurer, while
facultative reinsurance provides coverage for specific individual risks. Within
each classification, reinsurance can be further classified as quota share or
excess of loss. Quota-share reinsurance is where the primary insurer and the
reinsurer share proportionally or pro-rata in the direct premiums and losses of
the insurer. Excess-of-loss reinsurance indemnifies the direct insurer or
reinsurer for all or a portion of the loss in excess of an agreed upon amount or
retention.

Developing and implementing our reinsurance strategy to adequately protect our
balance sheet and Insurance Entities in the event of one or more catastrophes
while maintaining efficient reinsurance costs has been a key strategic priority
for us. In order to limit the Insurance Entities' potential exposure to
catastrophic events, we purchase significant reinsurance from third-party
reinsurers and the Florida Hurricane Catastrophe Fund ("FHCF"). The Florida
Office of Insurance Regulation ("FLOIR") requires the Insurance Entities, like
all residential property insurance companies doing business in Florida, to have
a certain amount of capital and reinsurance coverage in order to cover losses
upon the occurrence of a single catastrophic event and a series of catastrophic
events occurring in the same hurricane season. The Insurance Entities'
respective 2021-2022 reinsurance programs meet the FLOIR's requirements, which
are based on, among other things, successfully demonstrating cohesive and
comprehensive reinsurance programs that protect the policyholders of our
Insurance Entities as well as satisfying a series of stress test catastrophe
loss scenarios based on past historical events. Similarly, the Insurance
Entities' respective 2021-2022 reinsurance programs meet the stress test and
review requirements of Demotech, Inc., for maintaining Financial Stability
Ratings® of A (Exceptional).

We believe the Insurance Entities' retentions under their respective reinsurance
programs are appropriate and structured to protect policyholders. We test the
sufficiency of the reinsurance programs by subjecting the Insurance Entities'
personal residential exposures to statistical testing using a third-party
hurricane model, RMS RiskLink v18.1 (Build 1945). This model combines
simulations of the natural occurrence patterns and characteristics of
hurricanes, tornadoes, earthquakes and other catastrophes with information on
property values, construction types and occupancy classes. The model outputs
provide information concerning the potential for large losses before they occur,
so companies can prepare for their financial impact. Furthermore, as part of our
operational excellence initiatives, we continually look to enable new technology
to refine our data intelligence on catastrophe risk modeling.

Effective June 1, 2021, the Insurance Entities entered into multiple reinsurance
agreements comprising our 2021-2022 reinsurance program. See "Item 1-Note 4
(Reinsurance)."

UPCIC's 2021-2022 Reinsurance Program

•First event All States retention of $45 million during the 2021 Atlantic
hurricane season; first event Non-Florida retention of $15 million.

•All States first event reinsurance protection extends to $3.364 billion with no
co-participation in any of the layers and no limitation on loss adjustment
expenses for the non-catastrophe bond Cosaint Re Pte. Ltd. traditional
reinsurance while maintaining the same favorable historical deposit premium
payment schedules.

•Assuming a first event completely exhausts the $3.364 billion tower, the second
event exhaustion point would be $1.101 billion.

•Full reinstatement available on $1.06 billion of the $1.356 billion of non-FHCF
first event catastrophe coverage for guaranteed second event coverage. For all
layers purchased between $45 million and the projected FHCF retention, to the
extent that all of our coverage or a portion thereof is exhausted in a
catastrophic event and reinstatement premium is due, we have purchased enough
reinstatement premium protection ("RPP") limit to pay the premium necessary for
the reinstatement of these coverages.

•Specific 3rd and 4th event private market catastrophe excess of loss coverage
of $86 million in excess of $25 million provides frequency protection for
multiple events during the treaty period.

•For the FHCF Reimbursement Contract effective June 1, 2021, UPCIC has continued
the election of the 90% coverage level. We estimate the FHCF layer will provide
approximately $1.963 billion of coverage for UPCIC, which inures to the benefit
of the open market coverage secured from private reinsurers.

•Secured $383 million of new catastrophe capacity with contractually agreed
limits that extend coverage to include the 2022 and 2023 wind seasons. This
amount does not include the single limit of $150 million of protection for named
windstorm events, which now definitively includes the 2022 wind season and
potentially could include the 2023 wind season depending on loss activity in the
2022 wind season, that UPCIC obtained in March 2021 when it entered into a
three-year reinsurance agreement with Cosaint Re Pte. Ltd., a reinsurance entity
incorporated in Singapore that correspondingly issued notes in a Rule 144A
offering to raise proceeds to collateralize its obligations under this
agreement.

The first-event All States program described above for UPCIC includes coverage
from a captive insurance arrangement that UVE established which inures to the
benefit of UPCIC. This intercompany transaction provides UPCIC approximately
$13.2 million of reinsurance protection on the first layer of UPCIC's
first-event All States program. This transaction eliminates in consolidation
effectively increasing the first event retention noted above to $58.2 million
for the consolidated group in the event this limit is exhausted.
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The captive insurance arrangement effective June 1, 2021 through May 31, 2022
was terminated effective December 1, 2021, pursuant to the terms of the
agreement. In connection with the termination of the agreement, and according to
its terms, certain funds held in trust were released to the beneficiary (i.e.,
UPCIC) and the balance was remitted to the grantor (i.e., UVE) in December 2021.
The termination of the agreement results in a first-event All States retention
of $58.2 million for UPCIC for the period of December 1, 2021 to May 31, 2022,
which is outside of the traditional Atlantic hurricane season.

Reinsurers

The table below provides the A.M. Best and S&P financial strength ratings for
each of the largest third-party reinsurers in UPCIC's 2021-2022 reinsurance
program:

              Reinsurer                                     A.M. Best       S&P
              Allianz Risk Transfer                            A+           AA
              Everest Re                                       A+           A+
              Chubb Tempest Reinsurance Ltd.                   A++          AA
              Munich Re                                        A+           AA-
              Renaissance Re                                   A+           A+
              Various Lloyd's of London Syndicates              A           A+
              Florida Hurricane Catastrophe Fund (1)           N/A          N/A

(1)No rating is available, because the fund is not rated.

APPCIC's 2021-2022 Reinsurance Program

•First event All States retention of $2.5 million.

•All States first event tower of $38 million with no co-participation in any of
the layers and no limitation on loss adjustment expenses while maintaining the
same favorable historical deposit premium payment schedules.

•Full reinstatement available for all private market first event catastrophe
layers for guaranteed second event coverage. For the layer purchased between
$2.5 million and the projected FHCF retention, to the extent that all of our
coverage or a portion thereof is exhausted in a catastrophic event and
reinstatement premium is due, we have purchased enough RPP limit to pay the
premium necessary for the reinstatement of this coverage.

•APPCIC also purchases extensive multiple line excess per risk reinsurance with
various reinsurers due to the high-value 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
$0.5 million 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 million aggregate limit applies to the term of the contract for
casualty-related losses. This contract also contains a profit-sharing feature if
specific performance measures are met.

•For the FHCF Reimbursement Contract effective June 1, 2021, APPCIC has
continued the election of the 90% coverage level. We estimate the FHCF layer
will provide approximately $18.4 million of coverage for APPCIC, which inures to
the benefit of the open market coverage secured from private reinsurers.

Reinsurers

The table below provides the A.M. Best and S&P financial strength ratings for
each of the largest third-party reinsurers in APPCIC's 2021-2022 reinsurance
program:

              Reinsurer                                     A.M. Best       S&P
              Chubb Tempest Reinsurance Ltd.                   A++          AA
              Lancashire Insurance Company Limited              A           A-
              Various Lloyd's of London Syndicates              A           A+
              Florida Hurricane Catastrophe Fund (1)           N/A          N/A

(1)No rating is available, because the fund is not rated.

The total cost of the 2021-2022 reinsurance programs for UPCIC and APPCIC,
excluding internal reinsurance discussed above, is projected to be $584 million,
representing approximately 35% of estimated direct premium earned for the
12-month treaty period.

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