We generate revenues primarily fromformerly Universal Risk Advisors, Inc.), is the collection of premiums. Other sources of revenue include: commissions paid by our reinsurers to our reinsurance intermediary subsidiary on reinsurance it placesmanaging general agent for the Insurance Entities;Entities. In this capacity, ERA advises on actuarial issues, oversees distribution, administers claims payments, performs policy administration and underwriting, and assists with reinsurance negotiations. ERA’s underwriting service evaluates insurance risk and exposures on an individual and portfolio basis and assists the Insurance Entities with pricing risks. All underwriting is performed utilizing our state-approved rate and rule manuals as the basis of our rate-making and risk assessment. ERA collects fees from the Insurance Entities for the services it provides, as well as certain policy fees collected from policyholders by our managing general agent subsidiary; service revenue from claims handling on ceded claims; and financing fees charged to policyholders who choose to defer premium payments. We also generate income by investing our assets.

Over the past several years, we have grown our business both within Florida and elsewhere in the United States through our distribution network of approximately 8,800 licensed independent agents. In writing business, we adhere to a disciplined underwriting approach – writing risks that are priced adequately and meet our underwriting standards – designed to achieve profitable growth as opposed to merely increasing the total number of policies written. We believe we are better positioned than many of our competitors to expand profitably and service our policyholders due to our established internal capabilities; protection afforded us by our reinsurance program; our experienced management team that successfully navigated prior active hurricane seasons, including 2017, 2016, 2005 and 2004; our strong surplus and capital base; our success in growing organically in Florida without relying on the

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assumption of policies from Citizens Property Insurance Corporation (“Citizens”), the Florida state-sponsored insurer of last resort; and our growing geographic diversification. We also believe that our reinsurance program is structured such that, in the event of an active hurricane season, we are able to pay policyholder claims, maintain sufficient surplus to grow profitably and take advantage of the resulting market dislocation that could potentially follow.

Below is an organization chart that summarizes our corporate structure:

The Insurance Entities are our insurance operating subsidiaries. Most of our policies are written by UPCIC. Universal Risk Advisors (“URA”) is our managing general agent and manages our distribution network and negotiates our reinsurance.insureds. Our subsidiary, Universal Inspection Corporation (“UIC”) conductsd/b/a Wicklow Inspection Corporation, complements ERA and our Insurance Entities by conducting inspections as part of our underwriting process,process.

OUR STRATEGY

Pursue Profitable Growth with a Focus on Organic Development

We continue to pursue profitable growth both within Florida and through expansion into other states, while continuing to expand Universal Direct^SM and adding new products when prudent (such as the Fire, Commercial Multi-Peril, and Other Liability (collectively, “Commercial Residential”) lines of business in Florida that we introduced in late in 2016). Each of these areas is discussed further below.

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Optimize our Reinsurance Program as our Risk Profile Changes

We will continue to obtain what we believe to be appropriate reinsurance limits, coverage and terms so that our policyholders and shareholders are adequately protected in the event of an active hurricane season. Significant additional new capital entering portions of the reinsurance marketplace has afforded us the opportunity to obtain favorable pricing and contract terms in recent years. Our dedicated reinsurance team at BARC includes seasoned industry professionals whom we hired from Willis Re almost 12 years ago, as well as additional key personnel more recently from leading global reinsurance intermediaries. BARC differentiates us from our competitors by enabling us to act as our own reinsurance intermediary, developing a bespoke reinsurance program tailored to our needs in both soft and hard reinsurance markets. This team has developed and enhanced existing strong long-term relationships with world leading reinsurance companies, providing better efficiency in the manner in which we buy reinsurance. We had in excess of 60 reinsurance partners for the 2017-2018 reinsurance year from companies in the United States, Bermuda, London, Continental Europe and Asia. BARC works in conjunction with URA in providing these services. We also receive reinsurance intermediary services from Guy Carpenter and thereby benefit from its depth of experience and knowledge of market standards. Guy Carpenter works closely with our teams at BARC and URA in designing our reinsurance program and allowing us to obtain favorable pricing. Our internal team and Guy Carpenter continually evaluate prevailing costs and the level of coverage that we determine is necessary in order to proactively capitalize on favorable market conditions.

Effective June 1, 2015, we eliminated our quota share reinsurance arrangements; purchased additional excess of loss catastrophe cover; and converted from a two-tower reinsurance program to a single tower reinsurance program covering our nationwide business based on our improving financial condition, our evaluation of market conditions and our changing coverage needs. We also supplemented this nationwide reinsurance program with a stand-alone supplemental non-Florida catastrophe reinsurance program for the 2017-2018 period, which provides coverage for catastrophic events affecting states outside of Florida in which we write policies. We believe that restructuring our reinsurance program in this manner and continuously re-evaluating that structure has allowed us to take advantage of attractive reinsurance pricing and terms and to retain profitable business by eliminating our quota share program, while still maintaining reinsurance coverage that we believe is sufficient to protect our policyholders and shareholders. As an example, our reinsurance program generally performed as designed following Hurricane Irma in 2017, limiting the net loss and loss adjustment expenses (“LAE”) to our net retention levels. Further, fees generated from our service subsidiary companies produced income after Hurricane Irma, and this, combined with other benefits derived from our reinsurance program, helped to offset losses and reduce the overall effect that Hurricane Irma had on our consolidated financial statements. See Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations - “Overview” for further discussion about Hurricane Irma.

Continue to Build and Enhance Our Claims Operations

Over the last decade, we have developed a proprietary claims administration system that allows us to efficiently process nearly all aspectsincrease efficiency and provide a high level of claims resolution for our policyholders. Our technology system has shortened claims handling and processing times, reduced associated claims resolution costs and has generated positive feedback from our policyholders and independent insurance agents. In addition, we launched ourcustomer service. Alder’s Fast Track initiative (“Fast Track”) initiative in 2015, which expediteshas expedited the claims settlement process to close certain types of claims in as little as 24 hours. The initiative sends selecthours through analysis and on-site field adjustersadjusting. In addition to make on-site evaluations, with authorization to make payments to policyholders for certain types of claims. Our internalour in-house claims operation, allowswe assign a small percentage of field inspections to third-party adjusters. Our relationships with these adjusters enable us to identify any trends or problems that may become apparent as claims are processed such that we can revise and bolster our underwriting guidelines as necessary in order to continue adequately pricing risks. Further, we continue to retain select third-party Florida claims administrators and adjusters as well as one national administrator to perform field services for and adjust a portion of our claims in order to maintain our relationships with them so that they can assist us during periods of high claims volume in providingprovide high quality and timely service following a catastrophe, such as a hurricane in coastal states, and during any other period of unusually high claim volume. Through our continuous improvement and operational excellence initiatives, we continue to evaluate ways in which we can improve the customer’s claims experience on a rolling basis. Alder’s data intelligence allows the Insurance Entities, ERA and our reinsurance partners to identify trends and refine the underwriting process and guidelines to adequately price risk. Our claims management operations provide cost-effective solutions in servicing claims for the Insurance Entities and generates additional fee income from adjusting claims ceded to reinsurers.

Maintain an Emphasis on Underwriting Discipline

We seek to generate a consistent underwriting profit on the business we write in hard and soft markets through carefully developed underwriting guidelines informed by our experience in evaluating risks and in handling and processing claims. By focusing on identifying and assessing key risks and exposures in the market, we believe we are able to accurately price eligible risks and generate consistent profits. We assumed only one small group of policies from Citizens’ predecessor in 1998 when we first began our operations. Since then, we have grown our business by leveraging our network of approximately 4,300 independent agents in Florida,on continuous improvement initiatives and by expanding to other geographic areas that present market opportunities. We periodically review the renewal rates and quality of business generated byallows our independent agents to ensure underwriting profitabilityprovide quotes within minutes. Our technology systems have evolved into a highly valued tool that enables agents to quickly understand the status of a policy and workassist their clients with agentspolicy-related questions.

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Provide High Quality Service to our Policyholders

We strive to provide excellent customer service to each of our policyholders throughout every aspect of our business. We believe our vertically integrated business model provides a superior level of customer service for our policyholders, enhancing our reputation and increasing the likelihood that our policyholders will renew their policies with us. We believe that when policyholders have high levels of customer satisfaction with our Company, we are able to strengthen our reputation and relationships with our independent insurance agent network. We are committed to managing our losses, loss adjustment expenses and claims administration procedures through prudent underwriting and the use of internal claims adjustment services. We believe our personnel growth and commitment to an in-house claims handling process has improved the policyholder experience and, therefore, our relationship with the policyholders agents, which we believe increases retention of policies in-force. Our monthly weighted average renewal retention rate for the year ended December 31, 2017 was 88.1%.

OUR COMPETITIVE STRENGTHS

We believe that our success, historical growth and ability to capitalize on our future growth prospects are a result of the following competitive strengths of our business and management team.

Experienced Leadership Team

We have a deep and experienced leadership team with extensive experiencemarket in the Florida personal residential homeowners insurance market. Our Chief Executive Officer, Sean P. Downes, has more than 25 years of experienceUnited States based on direct premium written, due in large part to higher average pricing levels that seek to address the hurricane risk exposure in the insurance industry. Prior to Mr. Downes’ arrival, all of our claims processing was outsourced to third parties. When Mr. Downes joined our company in 1999, he oversaw our claims operations and later oversaw the development of our vertically integrated structure. Mr. Downes has worked in the Florida insurance industry during all of its most recent active hurricane seasons. In particular, Mr. Downes led the claims team of a multi-line insurance claims adjusting corporation following Hurricane Andrew and served as Chief Operating Officer of UPCIC during the 2005 and 2004 active hurricane seasons. Jon W. Springer, our President and Chief Risk Officer, has over 25 years of experience in the insurance industry, including nine years leading a team of reinsurance specialists for Willis Re before joining us to implement and oversee our reinsurance program. Prior to becoming our President and Chief Risk Officer, Mr. Springer was Chief Operating Officer and an Executive Vice President of URA and BARC.

We believe this leadership team has led us in a strategic direction that has realized many benefits for our shareholders and policyholders, evidenced in part by the 155.0% increase in our stockholders’ equity and the 136.1% increase in policyholders’ surplus that we have realized since their tenure began. Further, they are supported by a group of highly qualified individuals with industry expertise and extensive operational experience, which enables us to capitalize on our experience of having emerged from the 2004, 2005, and 2017 active hurricane seasons in sound financial condition, whereas many of our competitors are new to the market and have not experienced the challenges of an active Florida hurricane season.

Vertically Integrated Structure

We are vertically integrated with substantially all aspects of insurance underwriting, policy issuance, general administration and claims processing and settlement performed internally. Our ability to provide these services ourselves allows us to compress the cycle time of claim resolution in order to promptly pay valid claims and to control claims handling costs. In particular, by performing our own claims adjustment processes, we can better expedite meritorious claims as well as devote attention to potentially suspicious or inflated claims. As a result, we are generally able to begin the adjustment and mitigation process much earlier than if we relied more heavily on third parties, thereby reducing LAE and ultimate loss payouts. Our statutory net loss and LAE ratio for the nine months ended September 30, 2017 was 53.0%, lower than most of our peer companies. We are also able to retain a significant portion of the management and service fees that we and, indirectly, our reinsurers would otherwise pay to third parties for rendering such services. We do, however, intend to continue having a small portion of claims handled by select third parties, as we believe that maintaining relationships with third-party service providers will benefit us in the event we need their assistance in handling claims due to a catastrophic event.

In the future, we will continue to capitalize on our vertically integrated structure by retaining certain fees that we pay to our subsidiary service providers for, managing general agent, reinsurance brokerage, adjusting and other services. We currently administer 100% of all claims and outsource 35% of on-site field adjustment assignments, and thereby retain a corresponding portion of fees that would have otherwise been paid to external adjusters. These cost efficiencies will help us better withstand the financial impact of potential catastrophic storms. We also continue to retain select third-party claims adjusters to perform field services and adjust the remaining portion of our claims in order to maintain our relationships with them, so they can assist us during periods of high claims volume in providing high quality and timely service to our policyholders. Accordingly, we believe we are able to reduce expenses during non-catastrophe years while providing a high level of customer service during all years.

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Robust Independent Agent Distribution Network

We have developed long-term relationships with a network of approximately 8,800 licensed independent insurance agents – with approximately 4,300 in Florida and approximately 4,500 outside of Florida. Of our 4,300 independent Florida agents, approximately 1,600 have written business with us for over a decade. Our relationships with our Florida independent agents are critical to our success in growing our business in the future and are key differentiators when compared with competitors that have relied upon assumptions of policies from Citizens for their growth and, as a result, may not have developed the same degree of loyalty with as large a group of independent agents in Florida. We believe we have been able to build this network due to our reputation, commitment to the Florida market, experience, and integrity in the underwriting process, as well as our consistency in offering our products through hard and soft markets. Further, the responsiveness of our operating units due to our vertically integrated structure enhances our relationships with our independent agents. By developing and controlling our proprietary technology system, we can rapidly respond to enhancement requests from our independent agents regarding our policy processing system.

Strong Balance Sheet, with a Proven Capital Return Strategy

We have a strong balance sheet, including a stable investment portfolio, a conservative reserve position, a strong and growing capital base, and a proven capital return strategy. Our investment portfolio is largely fixed maturities with a modest allocation of equities and real estate. Our fixed maturities portfolio is ~99% investment grade securities with a AA- average credit rating. We have a strong and growing capital position that contains minimal goodwill, no intangible assets, and minimal debt. We take a conservative approach to loss reserving, and have made substantial efforts in recent years to improve our claims operation, including the addition of our Fast Track team (which has reduced claim resolution time) and an intensified effort to collect subrogation. Since the Company was formed in 1997, we have posted substantial growth in stockholders’ equity and book value per share. We have demonstrated an ability and willingness to return capital to our shareholders, paying both a regular dividend and, over each of the past six years a special dividend, as well as repurchasing shares of our common stock in the open market and in private transactions.

MARKET

Florida

According to the U.S. Census Bureau, at June 30, 2017, Florida was the third largest state in terms of population, with approximately 21 million people. The University of Florida Bureau of Economic and Business Research estimates that Florida is expected to reach a population of approximately 26 million people by 2040, an increase of 41% from 2010. Property ownership and development represent key drivers of the Florida economy. Because of its location, Florida is exposed to an increased risk of hurricanes during the entire six months of the Atlantic hurricane season, which spans from(from June 1 through November 30. Eight hurricanes30).

The Florida residential insurance market is highly fragmented and dominated by in-state insurance companies,benefits of UVE’s reinsurance strategy in 2019 and the state’s residual insurance market, Citizens. Significant dislocationspecific programs are further discussed below and in the Florida property insurance market began following Hurricane Andrew in 1992“Item 7—Management’s Discussion and accelerated following the 2004Analysis of Financial Condition and 2005 hurricane seasons. National and regional insurers significantly reduced their shareResults of the market in Florida between 1999 and 2012. As national and regional insurance companies reduced their exposure in Florida, Citizens, which was at the time and remains today, by law, an insurer of last resort, increased efforts to provide affordable residential insurance to those residents unable to obtain coverage in the private market. As a result, Citizens’ policy count grew from roughly 800,000 policies in 2005 to a peak level of approximately 1.5 million policies in late 2011. To reduce Citizens’ risk exposure, beginning in 2010, Florida’s elected officials encouraged Citizens to focus on reducing the size of its portfolio by returning policies to the private market. Depopulation efforts have been successful, as Citizens’ policy count at September 30, 2017 was approximately 452,000. To be eligible for a Citizens policy, an applicant must either be denied comparable coverage offers from the private insurance market or have received coverage offerings from the private insurance market requiring premium payments that are more than 15% higher than a comparable Citizens policy.

According to data compiled by the FLOIR, Citizens was the second largest residential insurer in Florida as of September 30, 2017, with a market share of approximately 8.1% based on total direct premiums written in-force for personal residential insurance (excluding mobile homeowners and farmowners). As of December 31, 2017, less than 1,000 of our 618,280 Florida in-force policies, or 0.1%, were assumed from Citizens’ predecessor, as compared to some of our competitors that collectively have assumed more than 785,000 policies from Citizens since January 1, 2014. We believe we have the opportunity to significantly expand the size of our personal residential homeowners insurance business both inside and outside of Florida by pursuing organic growth, and have demonstrated this ability within Florida since 1998 and outside of Florida since 2008.

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All residential insurance companies that write business in Florida, including the Insurance Entities, are required to obtain a form of reinsurance through the Florida Hurricane Catastrophe Fund (the “FHCF”), a state-sponsored entity that provides a layer of reinsurance protection at a price that is typically lower than what would otherwise be available in the general market. The purpose of the FHCF is to protect and advance the state’s interest in maintaining insurance capacity in Florida by providing reimbursements to insurers for a portion of their catastrophe hurricane losses. Currently, the FHCF provides $17 billion of aggregate capacity annually to its participating insurers, which may be adjusted by statute from time to time.

Other States

While we are concentrated in Florida, part of our strategy is to continue our geographic expansion outside of Florida primarily, to take advantage of opportunities to write profitable business as well as to diversify our revenue and risk. We are targeting states with underserved homeowners insurance markets where we believe there is price adequacy for our products and where policyholders would benefit from our market knowledge and integrated service model. We currently write homeowners insurance policies in Alabama, Delaware, Georgia, Hawaii, Indiana, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, and Virginia, and are also licensed to issue policies in Illinois, Iowa, New Hampshire, and West Virginia. We look to expand to markets that have opportunities for reasoned, profitable growth and that allow us to position ourselves to take advantage of market dislocation opportunities similar to what we capitalized on in Florida (e.g. following the 2017, 2005 and 2004 hurricane seasons).

COMPETITION

Operations.”

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We compete primarily on the basis of the strengthexperience of our primary competitors varies across the states in which we do business.

PRODUCTS AND DISTRIBUTION

Products

Our focus and our primary product is personal residential homeowner insurance, which accounts for the vast majority of business that we write. Our homeowners insurance products provide policyholders with the ability to receive homeowners, renters, condominium, dwelling, fire, other structures, personal property, personal liability and personal articles coverages. For the year ended December 31, 2017, we wrote an average of 19,829 new policies per month, an increase of 18.3% as compared to the prior year, and residential

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homeowners policies produced direct written premium of $982.4 million. Homeowners insurance policies accounted for 93.0% of our total direct written premium, with the remaining 7.0% comprised of Commercial Residential and fire and allied lines coverage.

The nature of our business, with respect to both claims and sales, tends to be seasonal over the course of a year, reflecting consumer behaviors in connection with the Florida residential real estate market and the need to be insured before the start of the hurricane season. The amount of written premium tends to increase just prior to the second quarter of our fiscal year and to decrease approaching the fourth quarter. We also face cyclicality resulting from hard and soft market cycles. See “Item 1A—Risk Factors—Risks Relating to Our Business—Our financial condition and operating results and the financial condition and operating results of our Insurance Entities may be adversely affected by the cyclical nature of the property and casualty insurance business.”

The geographical distribution of our policies in-force, in-force premium and total insured value for Florida by county were as follows as of December 31, 2017 (dollars in thousands, rounded to the nearest thousand):

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The geographical distribution of our policies in-force, in-force premium and total insured value across all states were as follows, as of December 31, 2017, 2016 and 2015 (dollars in thousands, rounded to the nearest thousand):

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Also see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 1A—Risk Factors—Risks Relating to Our Business—Because we conduct the substantial majority of our business in Florida, our financial results depend on the regulatory, economic and weather conditions in Florida” for discussion on geographical diversification.

Product Pricing

The premiums we charge are based on rates specific to individual risks and locations and are generally subject to regulatory review and approval before they are implemented. We periodically submit our rate revisions to regulators as required by law or as we deem necessary or appropriate for our business. The premiums we charge to policyholders are affected by legislative enactments and administrative rules, including state-mandated programs in Florida requiring residential property insurance companies like us to provide premium discounts when policyholders verify that insured properties have certain construction features, orsuch as windstorm loss reduction features.

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The following table shows UPCIC’s most recently approved rate changes. All percentage increasesthe customer experience include reliability and decreases are expressed as statewide averages.