SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Universal Insurance Holdings, Inc. had no long term obligations, guarantees or material contingencies as of December 31, 2013 and 2012. The following summarizes the major categories of the parent company’s financial statements (in thousands, except per share data):

CONDENSED BALANCE SHEETS


	As of December 31,
	2013			2012
ASSETS
Cash and cash equivalents	$	4,878		$	17,733
Investments in subsidiaries and undistributed earnings		174,068			121,496
Equity securities (available for sale), at fair value		10,474			—
Equity securities (trading), at fair value		—			13,944
Fixed matuties (available for sale), at fair value		750			—
Receivable from securities		—			175
Other receivables		244			8
Income taxes recoverable		8,152			2,594
Deferred income taxes		12,052			19,178
Other assets		346			329

Total assets	$	210,964		$	175,457

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Accounts payable	$	146		$	339
Payable for securities purchased		—			53
Income taxes payable		2,566			699
Long-term debt		18,490			—
Other accrued expenses		14,153			10,852

Total liabilities		35,355			11,943
STOCKHOLDERS’ EQUITY:
Cumulative convertible preferred stock, $.01 par value		—			1
Authorized shares—1,000
Issued shares—30 and 108
Outstanding shares—30 and 108
Minimum liquidation preference—$6.98 and $2.66 per share
Common stock, $.01 par value		436			419
Authorized shares—55,000
Issued shares—43,641 and 41,889
Outstanding shares—35,366 and 40,871
Treasury shares, at cost—8,275 and 1,018		(35,467	)		(3,101	)
Additional paid-in capital		42,282			38,684
Accumulated other comprehensive income, net of taxes		(376	)		—
Retained earnings		168,734			127,511

Total stockholders’ equity		175,609			163,514

Total liabilities and stockholders’ equity	$	210,964		$	175,457

See accompanying notes to condensed financial statements

CONDENSED STATEMENTS OF INCOME


	For the Years Ended December 31,
	2013			2012			2011
PREMIUMS EARNED AND OTHER REVENUES
Assumed premiums written	$	—		$	10,686		$	20,703

Premiums earned		—			10,686			20,703
Net investment income		207			25			54
Net realized gains (losses) on investments		(2,947	)		(1,880	)		(1,186	)
Net change in unrealized gains (losses) on investments		1,625			1,162			(3,009	)
Management fee		134			142			142

Total premiums earned and other revenues		(981	)		10,135			16,704

OPERATING COSTS AND EXPENSES
General and administrative expenses		32,476			25,051			20,830

Total operating cost and expenses		32,476			25,051			20,830

LOSS BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES		(33,457	)		(14,916	)		(4,126	)
Benefit from income taxes		(13,834	)		(6,312	)		(1,667	)

LOSS BEFORE EQUITY IN NET EARNINGS OF SUBSIDIARIES		(19,623	)		(8,604	)		(2,459	)

Equity in net income of subsidiaries		78,600			38,916			22,568

CONSOLIDATED NET INCOME	$	58,977		$	30,312		$	20,109

See accompanying notes to condensed financial statements

CONDENSED STATEMENTS OF CASH FLOWS


	For the Years Ended December 31,
	2013			2012			2011
Cash flows from operating activities
Net Income	$	58,977		$	30,312		$	20,109
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in net income of subsidiaries		(78,600	)		(38,916	)		(22,568	)
Amortization of stock-based compensation		6,417			3,830			2,848
Net realized (gains) losses on investments		2,947			1,880			1,186
Net change in unrealized (gains) losses on investments		(1,625	)		(1,162	)		3,009
Deferred income taxes		7,363			3,813			(9,543	)
Excess tax benefits from stock-based compensation		(359	)		1,760			(195	)
Other		—			—			5
Net changes in assets and liabilities relating to operating activities:
Restricted cash and cash equivalents		—			30,220			(18,880	)
Purchases of equity securities, trading		(3,972	)		(58,836	)		(77,691	)
Proceeds from sale of equity securities, trading		16,712			60,379			66,526
Income taxes recoverable		(5,558	)		(2,594	)		—
Income taxes payable		2,226			(13,801	)		4,653
Other operating assets and liabilities		1,347			2,911			1,405

Net cash provided by (used in) operating activities		5,875			19,796			(29,136	)

Cash flows from investing activities:
Capital contributions to subsidiaries		(1,600	)		(28,555	)		(49,001	)
Distribution of income from subsidiaries		26,898			40,222			89,322
Purchases of equity securities, available for sale		(10,357	)		—			—
Purchase of fixed maturities, available for sale		(750	)		—			—

Net cash provided by (used in) investing activities		14,191			11,667			40,321

Cash flows from financing activities:
Proceeds from borrowings		20,000			—			—
Preferred stock dividend		(29	)		(287	)		(20	)
Common stock dividend		(17,725	)		(18,669	)		(12,750	)
Issuance of common stock		—			207			5
Purchase of treasury stock		(32,365	)		—			—
Payments related to tax withholding for share-based compensation		(3,161	)		(121	)		(172	)
Excess tax benefits (shortfall) from stock-based compensation		359			(1,760	)		195

Net cash provided by (used in) financing activities		(32,921	)		(20,630	)		(12,742	)

Net increase (decrease) in cash and cash equivalents		(12,855	)		10,833			(1,557	)
Cash and cash equivalents at beginning of period		17,733			6,900			8,457

Cash and cash equivalents at end of period	$	4,878		$	17,733		$	6,900

See accompanying notes to condensed financial statements

NOTE 1 – GENERAL

The financial statements of the Registrant should be read in conjunction with the consolidated financial statements in Item 8.

Nature of Operations and Basis of Presentation

Universal Insurance Holdings, Inc. (the “Company”), is a Delaware corporation originally incorporated as Universal Heights, Inc. in November 1990. The Company is an insurance holding company whose wholly-owned subsidiaries perform all aspects of insurance underwriting, distribution and claims. Through its wholly-owned subsidiaries, including Universal Property & Casualty Insurance Company and American Platinum Property and Casualty Insurance Company, collectively 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 generates revenues from premiums earned on reinsurance contracts entered into with the Insurance Entities and earnings on investments. The Company also receives distributions of earnings from its insurance and non-insurance subsidiaries.

Certain amounts in the prior periods’ condensed financial statements have been reclassified in order to conform to current period presentation. Such reclassifications were of immaterial amounts and had no effect on net income or stockholders’ equity.