Universal Insurance (UVE)

Risks

• RISKS RELATING TO OUR BUSINESS AND OPERATIONS
• As a property and casualty insurer, we face significant losses when catastrophes and severe weather events occur.
• Actual claims incurred have exceeded, and in the future may exceed, reserves established for claims, adversely affecting our operating results and financial condition.
• When we fail to accurately and adequately price the risks we underwrite, we may not be able to generate sufficient premiums to pay losses and expenses and we may experience other negative impacts on our profitability and financial condition, including harm to our competitive position.
• Unanticipated increases in the severity or frequency of claims adversely affect our profitability and financial condition.
• The failure of the risk mitigation strategies we utilize could have a material adverse effect on our financial condition or results of operations.
• Because we rely on independent insurance agents, the loss of these independent agent relationships and the business they control or our ability to attract new independent agents could have an adverse impact on our business.
• We rely on models as a tool to evaluate risk, and those models are inherently uncertain and may not accurately predict existing or future losses.
• Reinsurance may be unavailable in the future at reasonable levels and prices or on reasonable terms, which may limit our ability to write new business or to adequately mitigate our exposure to loss.
• Reinsurance subjects us to the credit risk of our reinsurers, which could have a material adverse effect on our operating results and financial condition.
• Our financial condition and operating results are subject to the cyclical nature of the property and casualty insurance business.
• Because we conduct the majority of our business in Florida, our financial results depend on the regulatory, economic and weather conditions in Florida.
• Changing climate conditions may adversely affect our financial condition, profitability or cash flows.
• We have entered new markets and expect that we will continue to do so, but there can be no assurance that our diversification and growth strategy will be effective.
• Our success depends, in part, on our ability to attract and retain talented employees, and the loss of any one of our key personnel could adversely impact our operations.
• We could be adversely affected if our controls designed to ensure compliance with guidelines, policies and legal and regulatory standards are not effective.
• The failure of our claims professionals to effectively manage claims could adversely affect our insurance business and financial results.
• Litigation or regulatory actions could result in material settlements, judgments, fines or penalties and consequently have a material adverse impact on our financial condition and reputation.
• Our future results are dependent in part on our ability to successfully operate in a highly competitive insurance industry.
• A downgrade in our Financial Stability Rating® may have an adverse effect on our competitive position, the marketability of our product offerings, and our liquidity, operating results and financial condition.
• Breaches of our information systems or denial of service on our website could have an adverse impact on our business and reputation.
• We may not be able to effectively implement or adapt to changes in technology, which may result in interruptions to our business or a competitive disadvantage.
• Lack of effectiveness of exclusions and other loss limitation methods in the insurance policies we write or changes in laws and/or potential regulatory approaches relating to them could have a material adverse effect on our financial condition or our results of operations.
• RISKS RELATING TO INVESTMENTS
• We are subject to market risk, which may adversely affect investment income.
• Our overall financial performance depends in part on the returns on our investment portfolio.
• RISKS RELATING TO THE INSURANCE INDUSTRY
• We are subject to extensive regulation and potential further restrictive regulation may increase our operating costs and limit our growth and profitability.
• UVE is a holding company and, consequently, its cash flow is dependent on dividends and other permissible payments from its subsidiaries.
• Regulations limiting rate changes and requiring us to participate in loss sharing or assessments may decrease our profitability.
• The amount of statutory capital and surplus that each of the Insurance Entities has and the amount of statutory capital and surplus it must hold vary and are sensitive to a number of factors outside of our control, including market conditions and the regulatory environment and rules.
• RISKS RELATING TO DEBT OBLIGATIONS
• To service our debt, we will require a significant amount of cash. Our ability to generate cash depends on many factors.
• Our indebtedness could adversely affect our financial results and prevent us from fulfilling our obligations under the Notes.