Universal Insurance Holdings, Inc. (UVE) 2023年年度報告「AMEX」.pdf

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1、UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549_FORM 10-K_(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2023orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 19

2、34 For the transition period from to Commission File Number 001-33251 UNIVERSAL INSURANCE HOLDINGS,INC.(Exact name of registrant as specified in its charter)Delaware65-0231984(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification No.)1110 W.Commercial Blvd.,Fort L

3、auderdale,Florida 33309(Address of principal executive offices)(Zip Code)Registrants telephone number,including area code:(954)958-1200Securities registered pursuant to Section 12(b)of the Act:Title of each class Trading Symbol(s)Name of each exchange on which registered Common Stock,$0.01 Par Value

4、UVENew York Stock ExchangeSecurities registered pursuant to Section 12(g)of the Act:None.Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes NoIndicate by check mark if the registrant is not required to file reports pursuant to Se

5、ction 13 or Section 15(d)of the Act.Yes NoIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant wasrequired to file such rep

6、orts),and(2)has been subject to such filing requirements for the past 90 days.Yes NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 m

7、onths(or for suchshorter period that the registrant was required to submit such files).Yes NoIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of“large

8、accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the re

9、gistrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of theExchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment o

10、f the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report.If securities are registered pursuant to Section 12(b)of the Act,indicate by check mark

11、 whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation rec

12、eived by any of the Registrants executive officers during the relevant recovery periodpursuant to 240.10D-1(b).Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).Yes NoAggregate market value of the voting and non-voting common equity held by non-aff

13、iliates computed by reference to the price at which the common equity was last sold as of June 30,2023,the last trading day of the registrants mostrecently completed second fiscal quarter:$405,608,782Indicate the number of shares outstanding of Common Stock of Universal Insurance Holdings,Inc.as of

14、February 21,2024:28,965,618.DOCUMENTS INCORPORATED BY REFERENCEThe information required by Part III of this Annual Report on Form 10-K,to the extent not set forth herein,is incorporated herein by reference to the registrants definitive proxy statement relating tothe Annual Meeting of Shareholders to

15、 be held in 2024,which definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year towhich this Annual Report on Form 10-K relates.UNIVERSAL INSURANCE HOLDINGS,INC.TABLE OF CONTENTS Page No.PART I Item 1.Business 5Item 1A.Ris

16、k Factors 13Item 1B.Unresolved Staff Comments 26Item 1C.Cybersecurity26Item 2.Properties 28Item 3.Legal Proceedings 28Item 4.Mine Safety Disclosures 28 PART II Item 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities 29Item 6.Reserved 30Item 7

17、.Managements Discussion and Analysis of Financial Condition and Results of Operations 31Item 7A.Quantitative and Qualitative Disclosures About Market Risk 65Item 8.Financial Statements and Supplementary Data 66Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosur

18、e 108Item 9A.Controls and Procedures 108Item 9B.Other Information 108Item 9C.Disclosure Regarding Foreign Jurisdictions That Prevent Inspections108 PART III Item 10.Directors,Executive Officers and Corporate Governance 109Item 11.Executive Compensation 109Item 12.Security Ownership of Certain Benefi

19、cial Owners and Management and Related Stockholder Matters 109Item 13.Certain Relationships and Related Transactions,and Director Independence 109Item 14.Principal Accountant Fees and Services 109 PART IV Item 15.Exhibits and Financial Statement Schedules 109Item 16.Form 10-K Summary 112Signatures 1

20、13 3CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSIn addition to historical information,this report may contain“forward-looking statements”within the meaning of Section 27A of the Securities Act of 1933,as amended,and Section 21E of theSecurities Exchange Act of 1934,as amended(the“Exchange Ac

21、t”).The forward-looking statements anticipate results based on our estimates,assumptions and plans that are subject to uncertainty.These forward-looking statements may be identified by their use of words like“plans,”“seeks,”“expects,”“will,”“should,”“anticipates,”“estimates,”“intends,”“believes,”“li

22、kely,”“targets,”and other words with similar meanings.These statements may address,among other things,our strategy for growth,catastrophe exposure and other risk management,product development,investment results,regulatory approvals,market position,expenses,financial results,changes in laws,judicial

23、 decisions or regulatory interpretations,litigation and reserves.We believe that thesestatements are based on reasonable estimates,assumptions and plans.However,if the estimates,assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks oruncertainties arise,ac

24、tual results could differ materially from those communicated in these forward-looking statements.A detailed discussion of risks and uncertainties that could cause actual resultsand events to differ materially from such forward-looking statements is included in the section titled“Risk Factors”(Part I

25、,Item 1A of this report).We undertake no obligation to update or revisepublicly any forward-looking statements,whether as a result of new information,future events,or otherwise.4PART IITEM 1.BUSINESSOverviewUniversal Insurance Holdings,Inc.(“UVE,”and together with its wholly-owned subsidiaries,“we,”

26、“our,”“us,”or the“Company”)is a holding company offering property and casualty insurance andvalue-added insurance services.We develop,market,and underwrite insurance products for consumers predominantly in the personal residential homeowners lines of business and performsubstantially all other insur

27、ance-related services for our primary insurance entities,including risk management,claims management,and distribution.Our primary insurance entities,UniversalProperty&Casualty Insurance Company(“UPCIC”)and American Platinum Property and Casualty Insurance Company(“APPCIC”and together with UPCIC,the“

28、Insurance Entities”),offerinsurance products through both our appointed independent agent network and our online distribution channels across our multi-state footprint(primarily in Florida).The Insurance Entities seek toproduce an underwriting profit(defined as earned premium minus losses,loss adjus

29、tment expense(“LAE”),policy acquisition costs and other operating costs)over the long term;maintain aconservative balance sheet to prepare for years in which the Insurance Entities are not able to achieve an underwriting profit;and generate investment income on assets.Business StrategyUVEs strategic

30、 focus is on creating a best-in-class experience for our customers and delivering strong shareholder returns across underwriting cycles.While weather-related volatility is an inherentpart of property insurance,particularly in coastal markets such as Florida,our strategy includes generating non-risk

31、bearing income that enhances returns in profitable underwriting periods,whileserving as a buffer and potentially still allowing for consolidated profitability in challenging underwriting periods.We have more than 20 years of experience providing protection solutions.Wecontinue to focus on discipline

32、d underwriting in opportune markets and maintaining a resilient balance sheet that is enhanced by our reinsurance program.We have made substantial efforts in recentyears to innovate across all of our service businesses,including continued development of our digital agency C,where we have more than 4

33、1 carrier partners,and utilization of digitalapplications where applicable to adjust claims.We continue to evaluate ways in which we can improve the customer experience across all touchpoints of the insurance value chain.Products and ServicesInsurance ProductsUPCIC,our primary risk-bearing insurance

34、 entity,which accounts for the substantial majority of our Insurance Entities business,primarily distributes policies through our independent agency forceand offers the following types of personal residential insurance:homeowners,renters/tenants,condo unit owners,and dwelling/fire.UPCIC also offers

35、allied lines,coverage for other structures,andpersonal property,liability,and personal articles coverages.APPCIC writes similar lines of insurance as UPCIC,but is only licensed in Florida and Georgia and primarily distributes policies throughour digital platforms.Our Insurance Entities,UPCIC and APP

36、CIC,are both currently rated“A”(“Exceptional”)by Demotech,Inc.(“Demotech”)and“A-”by Kroll Bond Rating Agency(“Kroll”),which are ratingagencies specializing in evaluating insurer financial strength and stability.Our combined statutory capital surplus was approximately$376.5 million at December 31,202

37、3.Risk ManagementOur subsidiary,Evolution Risk Advisors,Inc.(“ERA,”formerly Universal Risk Advisors,Inc.),is the managing general agent for the Insurance Entities.In this capacity,ERA advises on actuarialissues,oversees distribution,administers claims payments,performs policy administration and unde

38、rwriting,and assists with reinsurance negotiations.ERAs underwriting service evaluates insurancerisk and exposures on an individual and portfolio basis and assists the Insurance Entities with pricing risks.All underwriting is performed utilizing our state-filed rate and rule manuals as the basis ofo

39、ur rate-making and risk assessment.ERA collects fees from the Insurance Entities for the services it provides,as well as certain policy fees from insureds.Our subsidiary,Universal InspectionCorporation d/b/a Wicklow Inspection Corporation,complements ERA and our Insurance Entities by conducting insp

40、ections as part of our underwriting process.The Insurance Entities rely heavily on reinsurance to limit potential exposure to catastrophic events.In most years,reinsurance coverage is one of the most significant costs we incur.In conjunctionwith ERA,our licensed reinsurance intermediary,Blue Atlanti

41、c Reinsurance Corporation(“BARC”),partners with a third-party reinsurance broker to place and manage our reinsurance programs forthe Insurance Entities.BARC receives commission revenue,net of third-party co-broker fees,from third-party reinsurers in connection with these services,which can serve to

42、mitigate risingreinsurance costs.Due to our exposure to Floridas residential property insurance market,we face risks associated with the adverse conditions that have affected the magnitude of both catastrophe and non-catastrophelosses and loss adjustment expenses in Florida in recent years.Although

43、the Florida legislature passed law changes to address market abuses,including substantial reforms in December 2022,thebenefits of these law changes will not be fully realized for several years.We have sought,and continue to seek,to mitigate these risks through our exposure management initiatives,eff

44、orts to attainrate adequacy,implementing product updates,and tailoring our claims and legal processes to market conditions.5As we are a property and casualty insurance company with a concentration in Florida and other coastal states,natural catastrophes are among the most serious risks facing our cu

45、stomers andcommunities.Changing climate conditions are increasing the unpredictability of natural catastrophes,such as hurricanes,floods,severe convective storms,and wildfires,leading to significant propertylosses.Our responsive claims team helps to restore our customers lives after catastrophic los

46、ses.Our enterprise risk management framework,overseen by senior management and the Board,modelsand assesses loss probabilities.We seek to mitigate catastrophe risk for our customers and shareholders through prudent exposure management,underwriting initiatives,and sensitivity to geographicconcentrati

47、ons as well as through reinsurance as noted above.Claims ManagementOur subsidiary,Universal Adjusting Corporation d/b/a Alder Adjusting(“Alder”),manages our claims processing and adjusting functions from claim inception to conclusion,which we believe allowsus to increase efficiency and provide a hig

48、h level of customer service.Alder updates its claims-handling procedures over time in response to market trends.Through Alder,we have adopted initiativesto adjust and pay straightforward,meritorious claims as promptly as possible through timely analysis and on-site field adjusting.Alder also has inc

49、reased its use of technology to inspect properties andadjust claims.In addition to our in-house claims operation,we assign some field inspections to third-party adjusters.Our relationships with these adjusters enable us to continue to provide high qualityand timely service following a catastrophe,su

50、ch as a hurricane in coastal states,and during any other period of unusually high claim volume.Through our continuous improvement and operationalexcellence initiatives,we continue to evaluate ways in which we can improve the customers claims experience.Alders data intelligence allows the Insurance E

51、ntities,ERA,and our reinsurancepartners to identify trends and refine the underwriting process and guidelines to seek adequate pricing and identify needed adjustments.Our claims management operations provide cost-effectivesolutions in servicing claims for the Insurance Entities and generates additio

52、nal fee income from adjusting claims ceded to reinsurers.Our in-house claims litigation team continues to focus on more effectively and efficiently protecting our rights in litigation,including through subrogation.Subrogation is the act of seekingreimbursement from a third party that caused a covere

53、d event to an insured for the amount we paid on the insureds behalf.Reflecting our efforts to improve and enhance our claims operations and toaddress emerging claims and litigation trends,approximately 66%of our employees work in our claims management operations.Of these employees,58%comprise our in

54、-house claims litigationteam.DistributionWe market and sell our products primarily through our network of over 9,900 licensed independent agents(4,000 in Florida).Our strong relationships with our independent agents and theirrelationships with their customers are critical to our ability to identify,

55、attract,and retain profitable business.We actively participate in the recruitment and training of our independent agents andprovide each agency with training sessions on topics such as underwriting guidelines and submitting claims.We also engage a third-party market representative to assist in ongoi

56、ng training andrecruitment initiatives in all of the states in which we write business.We utilize an attractive commission-based compensation plan as an incentive for independent agents to place business with us.We also strive to provide excellent service to our independent agents andbrokers,which h

57、as yielded long-standing partnerships with our independent agents(a number of which have relationships with us that span more than a decade)that benefit the Company in our targetmarkets through hard and soft market cycles.Our internal staff and specialists support our independent agents by providing

58、 access to our in-house technology systems to assist with the delivery ofservice to our policyholders.This arrangement creates a collaborative environment between the Company and our independent agents on continuous improvement initiatives and allows ourindependent agents to provide quotes within mi

59、nutes.Our technology systems have evolved into a highly valued tool that enables agents to quickly understand the status of a policy and assist theirclients with policy-related questions.In addition to distributing our products through our independent agency network,we offer direct-to-consumer onlin

60、e distribution,including through our wholly-owned digital insurance agency,Clovered,which is operational across our multi-state footprint.As a personal lines property and casualty insurance agency,Clovered also partners with third-party insurance carriers and offers a widesuite of property and casua

61、lty insurance products,allowing us to earn non-risk bearing commission revenue for placing insurance on their behalf.Investments6Funds in excess of operating needs for the Insurance Entities and UVE are invested in accordance with our investment policy guidelines.The Investment Committee of our Boar

62、d of Directors(the“Board of Directors”or the“Board”)oversees the investment portfolio and reports overall investment results to our Board,at least on a quarterly basis.The investment activities of the InsuranceEntities are subject to regulation and supervision by the Florida Office of Insurance Regu

63、lation(“FLOIR”).See below under“Government Regulation.”The Insurance Entities may only makeinvestments that are consistent with regulatory guidelines,and our investment policies for the Insurance Entities accordingly limit the amount of investments in,among other things,non-investmentgrade fixed mat

64、urity securities(including high-yield bonds),preferred stock and common stock,and prohibit purchasing securities on margin.The primary objectives of our investment portfolio arethe preservation of capital and providing adequate liquidity for claims payments and other cash needs.The portfolios second

65、ary investment objective is to generate a stable risk-commensurate returnwith an emphasis on investment income while at the same time maintaining the high-quality standards of the portfolio.Our investment guidelines for fixed-income investments require an averageduration of 5 years or less and a por

66、tfolio average credit rating of A-or better.In addition,our investment guidelines,including single-issue and aggregate limitations,promote diversification to limitexposure to single-sector risks.While the Insurance Entities and UVE seek to promote diversification of investments in their portfolio,UV

67、E is not subject to the statutory investment guidelinesgoverning insurance companies.Therefore,the investments made by UVE may differ from those made by the Insurance Entities.See“Part IIItem 8Note 3(Investments)”for more information about our investments.Markets and CompetitionMarketsWe sell insura

68、nce products in the following 18 states:Alabama,Delaware,Florida,Georgia,Illinois,Indiana,Iowa,Maryland,Massachusetts,Michigan,Minnesota,New Hampshire,New Jersey,New York,North Carolina,Pennsylvania,South Carolina and Virginia.We have additional licenses to write in Tennessee and Wisconsin and are i

69、n the process of withdrawing from Hawaii.During2023,81.4%of our overall direct premiums written were in Florida.The Florida market as a whole tends to consistently be a top-three personal residential homeowners insurance market in the UnitedStates based on direct premiums written,due in large part t

70、o higher average pricing levels that are necessary to address the hurricane risk exposure in the state(from June 1 through November 30),thelitigation environment,and other market conditions.Hurricanes or other catastrophic events can significantly impact earnings for insurance carriers in Florida an

71、d other coastal states,depending on the strength of their reinsurance programs and partnersand the level of net retention to which the carriers subscribe.For example,volatility and market dislocation were evident in Florida following Hurricane Andrew in 1992,the 2004 and 2005 hurricaneseasons(during

72、 which eight hurricanes made landfall in coastal states),as well as following 2017(Hurricane Irma),2018(Hurricanes Michael and Florence),2022(Hurricane Ian)and 2023(Hurricane Idalia).Earnings of insurance carriers can also be affected by years similar to 2020 where there was a heightened frequency o

73、f events(e.g.,Hurricanes Sally,Isaias,Zeta and Eta).Giventhe potential for significant personal property damage,the availability of homeowners insurance and claims servicing are vitally important to coastal states residents.In hard market cycles,such aswhat Florida is currently experiencing,the avai

74、lability of homeowners insurance can be negatively affected by insurers available capacity to absorb risks,their rate levels in relation to anticipatedlosses,loss adjustment expenses and reinsurance costs,and uncertainties regarding the future effectiveness of reforms designed to combat abuses.The b

75、enefits of UVEs reinsurance strategy in 2023and the specific programs are further discussed below and in“Item 7Managements Discussion and Analysis of Financial Condition and Results of Operations.”CompetitionThe market for homeowners insurance typically is highly competitive.In many of the states in

76、 which we write business,we compete with small or regional insurers that might have greater familiaritywith the local markets than we do.We also compete with large national insurers,many of which have substantial brand awareness,experience,and capital resources.Within the Florida marketplace,due to

77、the dislocating weather events of recent years and other market conditions,such as a proliferation of first-party litigation,competition from other admitted market insurers has waned as a resultof some insurers having shown reduced willingness,or in some cases lack of capital,to continue writing bus

78、iness in accordance with state regulations and rating agency requirements.Although thetiming is uncertain,we expect the lull in admitted market competition to be advantageous to companies with sufficient capital,and expect long term competition to normalize as either new capitalexplores opportunitie

79、s that might arise or as premiums and products of existing market participants adjust to the current market dynamics.The personal residential homeowners insurance industry is strictly regulated.As a result,it is difficult for insurance companies to differentiate their products,which creates low barr

80、iers to entry(otherthan regulatory capital and other requirements)and in typical circumstances results in a highly competitive market based largely on price and the customer experience.The nature,size and experienceof our primary competitors varies across the states in which we do business.7Several

81、states,including Florida,have insurance mechanisms that provide insurance to consumers who are not otherwise able to obtain coverage in the private insurance market.The largest suchinsurance mechanism is Floridas Citizens Property Insurance Corporation(“Citizens”).The degree to which these state-aut

82、horized insurance mechanisms compete with private insurers such as theInsurance Entities varies over time depending on market and public policy considerations beyond our control.Currently,due to adverse market conditions,including the proliferation of claims-relatedlitigation in Florida,the Insuranc

83、e Entities and other authorized insurers have implemented rate increases in Florida that in many instances have exceeded and continue to exceed the amount by whichCitizens may increase its rates in any single year.Citizens rate changes are limited by law,and accordingly,in times of rising insurance

84、rates such as in recent years and continuing currently,itspremiums can significantly lag those of the authorized market.This in turn causes Citizens to increasingly become the low-cost option for many policyholders;in essence,Citizens has a statutorily-created,and ultimately consumer-subsidized,pric

85、ing advantage over authorized insurers operating in the state,including the Insurance Entities.This is evidenced by Citizens policy count,whichbegan to grow rapidly in late 2019 and remains elevated in the current market even as some other insurers have showed interest in offering coverage to Citize

86、ns policyholder with attractively-pricedpolicies.PricePricing has generally been defined by“hard”and“soft”cyclical markets.Hard markets are those in which policy premiums are increasing(as a result of periods of capital shortages resulting in a lackof insurance availability,relatively low levels of

87、price competition,and more selective underwriting of risks).Soft markets are those in which pricing has stabilized or is decreasing(as a result ofperiods of greater capital availability,relatively high levels of price competition and less restrictive underwriting standards).Many factors influence th

88、e pricing environment,including,but not limitedto,catastrophic events,loss experience,GDP growth/contraction,inflation,interest rates,legislation,primary insurance and reinsurance capacity and availability,share-of-wallet competition,theprevalence of litigation(including abuses with assignments of b

89、enefits,solicited claims and other first-party litigation),technological advancements in distribution,underwriting,claims managementand overall operational efficiencies,and the risk appetite of competitors.Our successful track record in writing homeowners insurance in catastrophe-exposed areas has e

90、nabled us to develop sophisticated risk selection and pricing techniques that strive to identify desirablerisks and accurately price the risk of loss while allowing us to be competitive in our target markets.This risk selection and pricing approach allows us to offer competitive products in areas th

91、at have ahigh demand for property insurance.The premiums we charge are based on rates specific to individual risks and locations and are generally subject to regulatory review.We periodically submit our rate revisions to regulators as requiredby law or as we deem necessary or appropriate for our bus

92、iness.The premiums we charge to policyholders are affected by legislative enactments and administrative rules,including state-mandatedprograms in Florida requiring residential property insurance companies like us to provide premium discounts when policyholders verify that insured properties have cer

93、tain construction features,suchas windstorm loss reduction techniques or devices.Customer ExperienceDrivers of the customer experience include reliability and value,financial strength,and ease-of-use.We strive to provide excellent reliability and value through the strength of our distributionnetwork

94、s,high-quality service to our policyholders and independent agents,our claims handling ability and product features tailored to our markets.The current trends in the industry in regard to ease-of-use suggest an increased focus on utilizing technology in the distribution channel,enabling technology a

95、nd machine learning in the underwritingdomain,as well as utilizing actionable intelligence in claims management services.We strive to improve the customer experience across all consumer touch points.We are committed to deliveringsolutions that enable the consumer to prepare,protect,and recover from

96、losses as well as to learn about insurance.We believe effective integration and knowledge transfer to the consumer will resultin improved customer satisfaction and encourage consumer retention.In addition,UVEs strong operating teams and streamlined in-house value-added services strive to provide val

97、ue to consumersthrough operating efficiencies across the business.Our monthly weighted average renewal retention rate for the year ended December 31,2023 was 88.6%.ReinsuranceReinsurance enables the Insurance Entities to limit potential exposures to catastrophic events.Reinsurance contracts are typi

98、cally classified as treaty or facultative contracts.Treaty reinsuranceprovides 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 eachclassification,reinsurance can be

99、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 directpremiums and losses of the insurer.Excess-of-loss reinsurance indemnifies the primary insurer for all or a portion of the loss in e

100、xcess 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 reinsurancecosts has been a key strategic priority for UVE.For 2023,the

101、 Insurance Entities utilized excess of loss reinsurance in various forms.The benefits of the reinsurance strategy in 2023 and the specificprograms are further discussed in“Item 7Managements Discussion and Analysis of Financial Condition and Results of Operations.”8In order to limit our potential exp

102、osure to catastrophic events,the Insurance Entities purchase significant reinsurance from a variety of third-party reinsurers,including traditional reinsurers,alternativecapital providers(e.g.,via catastrophe bonds),and government entities such as the Florida Hurricane Catastrophe Fund(the“FHCF”).Th

103、e FLOIR requires the Insurance Entities,like all residentialproperty 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 aseries of catastrophic events occurring in

104、the same hurricane season.The Insurance Entities respective 2023-2024 reinsurance programs meet the FLOIRs requirements,which are based on,amongother things,successfully demonstrating cohesive and comprehensive reinsurance programs that satisfy a series of stress test catastrophe loss scenarios base

105、d on past historical events.Similarly,theInsurance Entities respective 2023-2024 reinsurance programs meet the stress test and review requirements of Demotechs Financial Stability Rating of“A”(Exceptional)and Krolls insurerfinancial strength rating of“A-”.FHCF is a statutorily-created entity in Flor

106、ida that provides a layer of reimbursement(reinsurance)protection at a price that is typically lower than what would otherwise be available in the third-partyreinsurance market.The purpose of the FHCF is to protect and advance the states interest in maintaining residential property insurance capacit

107、y in Florida by providing reimbursements to insurers fora portion of their Florida hurricane losses.Most property and casualty insurers operating in Florida,including the Insurance Entities,are subject to assessment if the FHCF lacks sufficient claims-paying resources to meet its reimbursement oblig

108、ations to insurers.When applicable,FHCF assessments are added to policyholders premiums and are collected and remitted by the insurers,includingthe Insurance Entities.All homeowners insurance companies that write business in Florida,including the Insurance Entities,are required to obtain a specified

109、 minimum level of reimbursementprotection through the FHCF.In addition,the Florida legislature from time to time has adopted programs of limited duration and amount by which insurance companies are able to optionally purchaseadditional coverage administered by the FHCF.The Insurance Entities current

110、ly purchase reimbursement protection at the maximum level of mandatory coverage offered by the FHCF.Currently,theFHCF provides$17 billion of aggregate capacity annually to its participating insurers,which may be adjusted by statute from time to time and which is allocated among participating insurer

111、saccording to factors such as the participating insurers relative hurricane exposures and their respective coverage elections.In 2022,the Florida legislature authorized additional reinsurance supportthrough a no-cost program called Reinsurance to Assist Policyholders(“RAP”),in which the Insurance En

112、tities were required to participate in either 2022 or 2023.The Insurance Entities deferred theirparticipation until the contract year beginning June 1,2023.The RAP program expires on May 31,2024.We believe the Insurance Entities retentions under their respective reinsurance programs are appropriate

113、and structured to protect our customers.We evaluate the sufficiency of our reinsuranceprograms by subjecting the Insurance Entities personal residential exposures to statistical testing using a third-party hurricane model.This model combines simulations of the natural occurrencepatterns and characte

114、ristics of hurricanes,tornadoes,earthquakes,and other catastrophes with information on property values,construction types,and occupancy classes.Simulations are based onhistorical events over both long-term or short-term time periods,which inherently recognize trends caused by climate change.The mode

115、l outputs provide information concerning the potential for largelosses 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 ourdata intelligence on catastrophe risk m

116、odeling.SeasonalityThe 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.We havehistorically experienced higher direct premiums written in the second and third quarters of o

117、ur fiscal year and lower direct premiums written in the first and fourth quarters of our fiscal year.Correspondingly,we have historically experienced a higher volume of claims submitted in the third and fourth quarters of our fiscal year during and immediately subsequent to the peak of hurricaneseas

118、on,and a lower volume of claims submitted in the first and second quarters of our fiscal year.Government RegulationWe are subject to extensive regulation in the markets we serve,primarily at the state level,and will become subject to the regulations of additional states in which we seek to conduct b

119、usiness in thefuture.These regulations cover all aspects of our business and are generally designed to protect the interests of policyholders,as opposed to the interests of shareholders.Such regulations relate toauthorized lines of business,capital and surplus requirements,allowable rates and forms,

120、investment parameters,underwriting limitations,transactions with affiliates,dividend limitations,changes incontrol,market conduct,maximum amount allowable for premium financing service charges,and a variety of other financial and non-financial components of our business.From time to time,statesalso

121、enact legislation designed to increase consumer protections and curtail fraud or abuses in the insurance market.9State insurance laws and regulations affect substantially all aspects of our business.Accordingly,interpretations of those laws and changes to those laws over time have significant impact

122、s on ourbusiness,whether favorable or unfavorable.The Florida residential property insurance market,which comprises the largest portion of our business,has been characterized for many years by increasinglosses and loss adjustment expenses due largely to statutes and judicial interpretations allowing

123、 policyholders to assign post-loss claims benefits to third-party vendors,providing for plaintiffs suinginsurers to recover attorneys fees against insurers without providing a corresponding right to insurers,establishing exceedingly long periods for policyholders to file claims even followingcatastr

124、ophic events,and otherwise fostering a favorable environment for inflated and questionable claims.Although these conditions had persisted for several years and previously had been identifiedas growing concerns,the Florida legislature first attempted to adopt meaningful reforms in 2019.These changes,

125、followed by additional changes in 2021 and early 2022,were intended to addresssymptoms of Floridas deteriorating residential property insurance market.However,in each case,these reforms either were not effective or merely served to slow the pace of the marketsdeterioration but did not address the un

126、derlying causes and therefore did not stem the adverse loss and loss adjustment expense environment that plagued the market.In December 2022,the Florida legislature convened in special session to pass another reform bill,this time purporting to more definitively address the key underlying drivers of

127、 the insurance marketsdeterioration.The December 2022 reforms included eliminating policyholders statutory one-way right to attorneys fees;prohibiting the assignment of post-loss benefits under residential propertyinsurance policies;establishing a clearer standard by which policyholders must substan

128、tiate bad faith actions;and improving the usefulness of Floridas offer of judgment statute in resolving disputes.The long-term effectiveness of these changes will depend on many factors,including,but not limited to,the manner in which the reforms are interpreted by courts and applied by regulatoryau

129、thorities,our effectiveness in implementing operational and procedural changes to account for the reforms,the impact of the changes on policyholders,public adjusters,vendors and attorneys,andthe impact of economic conditions such as inflation on claims costs and related expenses.ExaminationsAs part

130、of their regulatory oversight process,state insurance departments conduct periodic financial examinations of the books,records,accounts and operations of insurance companies that areauthorized to transact business in their states.In general,insurance regulatory authorities defer to the insurance reg

131、ulatory authority in the state in which an insurer is domiciled;however,insuranceregulatory authorities in any state in which we operate may conduct examinations at their discretion.Under Florida law,the periodic financial examinations generally occur every five years,althoughthe FLOIR or other stat

132、es may conduct limited or full scope reviews more frequently.In addition,the state insurance regulatory authorities in states where the Insurance Entities operate from time totime make inquiries,conduct investigations,and administer market conduct examinations with respect to the Insurance Entities

133、compliance with applicable insurance laws and regulations.Theseinquiries or examinations may address,among other things,the form and content of disclosures to consumers,advertising,sales practices,underwriting and claims practices,cancellation andnonrenewal procedures,and complaint handling.The repo

134、rts arising from insurance authorities examination processes typically are available to the public at the conclusion of the examinations.Inaddition,insurance companies and other companies are subject to other types of audits,examinations or other similar inquiries by governmental authorities based o

135、n the nature of the business theyconduct.Insurance Holding Company LawsUVE,as the ultimate parent company of the Insurance Entities,is subject to certain laws of the State of Florida governing insurance holding company systems.These laws,among other things,(i)require us to file periodic information

136、with the FLOIR,including information concerning our capital structure,ownership,financial condition and general business operations,(ii)regulate certaintransactions between our Insurance Entities and affiliates,including the amount of dividends and other distributions the Insurance Entities may pay,

137、the terms of surplus notes and amounts that ouraffiliates can charge the Insurance Entities for services such as policy administration and claims administration,and(iii)restrict the ability of any one person to acquire certain levels of our votingsecurities without prior regulatory approval.The Flor

138、ida Insurance Code prohibits any person from acquiring control of the Insurance Entities or their holding companies unless that person has filed a notification with specified information withthe FLOIR and has obtained the FLOIRs prior approval.Under the Florida Insurance Code,acquiring 10%or more of

139、 the voting securities of an insurance company or its parent company ispresumptively considered an acquisition of control of the insurance company,although such presumption may be rebutted.Some state insurance laws require prior notification to state insuranceregulators of an acquisition of control

140、of a non-domiciliary insurance company doing business in that state.Insurance holding company regulations also govern the amount any affiliate of the holding company may charge the Insurance Entities for services(e.g.,claims adjustment,administration,management fees and commissions).Further,insuranc

141、e holding company regulations may also require prior approval of insurance regulators for amendments to or terminations of certain affiliateagreements.Florida holding company laws also require certain insurers to submit an Own Risk and Solvency Assessment,or ORSA,summary report to the FLOIR each yea

142、r,summarizing the insurers evaluationof the adequacy of its risk management framework.The Company filed its most recent ORSA summary report in May 2023.10Capital RequirementsState insurance authorities monitor insurance companies solvency and capital requirements using various statutory requirements

143、 and industry ratios.Initially,states require minimum capital levelsbased on the lines of business written by a company and set requirements regarding the ongoing amount and composition of capital.Certain state regulators also require state deposits in theirrespective states.See“Part IIItem 8Note 5(

144、Insurance Operations)”for more information about state deposits.As a company grows,additional capital measures and standards may beimplemented by a regulator.Regulatory authorities use a risk-based capital(“RBC”)model published by the National Association of Insurance Commissioners(“NAIC”)to monitor

145、 and regulate thecapital adequacy and solvency of licensed property and casualty insurance companies.These guidelines measure three major areas of risk facing property and casualty insurers:(i)underwriting risks,which encompass the risk of adverse loss developments and inadequate pricing,(ii)decline

146、s in asset values arising from credit risk and(iii)other business risks.Most states,including Florida,haveenacted the NAIC guidelines as statutory requirements,and insurers having less surplus than required by applicable statutes and ratios are subject to varying degrees of regulatory action dependi

147、ng onthe level of capital inadequacy.As of December 31,2023,the Insurance Entities RBC ratios exceed applicable statutory requirements.Restrictions on Dividends and DistributionsAs a holding company with no significant business operations of its own,we rely on dividend payments from our subsidiaries

148、 as our principal source of cash to pay shareholder dividends,purchaseour common shares,support subsidiary operations and development,and meet our short-and long-term obligations.Dividends paid by our subsidiaries other than the Insurance Entities are not subjectto the statutory restrictions set for

149、th in the Florida Insurance Code.Dividends paid by UVE to our shareholders in 2023 were paid from the earnings of UVE and our subsidiaries other than theInsurance Entities.State insurance laws govern the payment of dividends by insurance companies.The maximum amount of dividends that can be paid by

150、Florida insurance companies such as the Insurance Entitieswithout prior approval of the FLOIR is subject to restrictions relating to statutory surplus.The maximum dividend that may be paid by the Insurance Entities to their immediate parent companywithout prior approval is limited to the lesser of s

151、tatutory net income from operations of the preceding calendar year or statutory unassigned surplus as of the preceding year end.Underwriting and Marketing RestrictionsFrom time to time,regulatory and legislative bodies in Florida and in other states have adopted or proposed new laws or regulations t

152、o address the cyclical nature of the insurance industry,catastrophicevents,and insurance capacity and pricing.These regulations(i)restrict certain policy non-renewals or cancellations and require advance notice of certain policy non-renewals and(ii)from a practicalstandpoint,limit or delay rate chan

153、ges for a specified period during or after a catastrophe event.Most states,including Florida,also have insurance laws requiring that rate schedules and otherinformation be filed for review by the insurance regulatory authority.The insurance regulatory authority may disapprove a rate filing if it fin

154、ds that the proposed rates would be inadequate,excessive,or unfairly discriminatory.Rates,which are not necessarily uniform for all insurers,vary by many factors including class of business,hazard covered,risk location and size of risk.Most states,including Florida,require licensure or insurance reg

155、ulatory authority approval prior to the marketing of new insurance products.Typically,licensure review is comprehensive and includesa review of a companys business plan,solvency,reinsurance,character,and experience of its officers and directors,rates,forms,and other financial and non-financial aspec

156、ts of the company.Theinsurance regulatory authorities may prohibit entry into a new market by not granting a license or by withholding approval for an insurer to write new lines of business.The Company is subject tocomprehensive regulatory oversight and regulations,which include periodic reporting t

157、o regulators and regulatory examinations to assure the Company maintains compliance with statutoryrequirements,and the payment of fees,premium taxes,and assessments in order to maintain its licenses.Privacy and Information Security RegulationFederal and state laws and regulations require certain bus

158、iness entities to protect the security and confidentiality of non-public personal information and to notify customers and other individuals abouttheir policies and practices relating to their collection and disclosure of customer information and their practices relating to protecting the security an

159、d confidentiality of that information.The NAICissued a model law on cybersecurity,which is leading to adoption of the same or similar provisions in the states where we do business.In addition,some states have adopted,and others might adopt,cybersecurity regulations that differ from proposed model ac

160、ts or from the laws enacted in other states.Federal and state lawmakers and regulatory bodies may be expected to consider additional ormore detailed regulation regarding these subjects and the privacy and security of non-public personal information.11Statutory Insurance OrganizationsMany states in w

161、hich the Insurance Entities operate have statutorily-mandated insurance organizations or other insurance mechanisms in which the Insurance Entities are required to participate or topotentially pay assessments.Each state has insurance guaranty association laws providing for the payment of policyholde

162、rs claims when insurance companies doing business in that state becomeinsolvent.These guaranty associations typically are funded by assets of the failed insurance companies and by assessments on insurance companies transacting business in the respective states.Whenthe Insurance Entities are subject

163、to assessments,in some instances they must remit the assessed amounts to the guaranty associations.The Insurance Entities subsequently seek to recover the assessedamounts through recoupments from policyholders.In other instances,the Insurance Entities might be directed to collect assessments by addi

164、ng a surcharge to their policies and remitting the collectedamounts to the guaranty associations.This surcharge approach,which is currently in effect in Florida,does not result in out-of-pocket payments by the Insurance Entities that must be recoveredthrough recoupments.However,in the event the Insu

165、rance Entities are required to pay assessments up front and recover those amounts through recoupments,they might not be able to fully recoup theamounts of those assessments.Such unrecovered amounts can be credited against future assessments,or the remaining receivable may be written off.While we can

166、not predict the amount or timing offuture guaranty association assessments,we believe that any such assessments will not have a material effect on our financial position or results of operations.Human Capital ResourcesThe Company is a vertically integrated insurance holding company with its employee

167、s performing substantially all insurance and support related services for our Insurance Entities,including policyunderwriting,marketing,online distribution,risk management and claims management.As of December 31,2023,we had 1,244 full-time employees,of whom 92%are based in Florida.Approximately 66%o

168、f our employees work in our claims management operations.Our in-house claims litigation team represents 39%of our full-time employees.In the event we experience anunusually high volume of claims due to a hurricane or severe weather event,in addition to cross-trained staff,the Company utilizes outsou

169、rced third-party adjusters and outsourced call center supportto maintain regulatory and internal service standards.12Our business is dependent on adequate levels of staff to service our new business and policies in force,process reported claims,and provide support services to the Company.Support ser

170、vices consistof technology,human resources,finance,corporate,and internal audit teams.We anticipate staffing needs and make changes to our staff to assure our regulatory requirements are met and our servicestandards to customers are achieved.Given our focus on operational excellence and continuous i

171、mprovement,our objective is to create a collaborative work environment with many opportunities for advancement in order to attractenergetic and entrepreneurial talent.To that end,we provide extensive training and development sessions,strong benefits,and competitive pay to employees at all levels in

172、the organization,includingequity awards to key contributors.We continue our support of diversity to create an inclusive culture and deliver a sustainable talent model to enhance performance and broaden perspectives.None of our employees are represented by a labor union.Available InformationOur corpo

173、rate headquarters is located in Fort Lauderdale,FL.Our investor website is UniversalInsuranceH.Our annual reports on Form 10-K,quarterly reports on Form 10-Q and currentreports on Form 8-K,and any amendments thereto,are available,free of charge,through our website as soon as reasonably practicable a

174、fter their filing with the Securities and Exchange Commission(“SEC”).These filings are also available on the SECs website at sec.gov.ITEM 1A.RISK FACTORSWe are subject to a variety of material risks,which are described below.Our business,results of operations,liquidity,and financial condition could

175、be adversely affected by any of these risks oradditional risks.RISKS RELATING TO OUR BUSINESS AND OPERATIONSAs a property and casualty insurer,we may face significant losses,and our financial results may vary from period to period,due to exposure to catastrophic events and severe weatherconditions,t

176、he frequency and severity of which could be affected by climate change.Because of the exposure of our property and casualty business to catastrophic events,our operating results and financial condition have varied significantly from one period to the next,and ourhistorical results of operations may

177、not be indicative of future results of operations.Property damage resulting from catastrophes is the greatest risk of loss we face in the ordinary course of ourbusiness.Catastrophes can be caused by various natural disasters,including but not limited to hurricanes,wildfires,tornadoes,tropical storms

178、,sinkholes,windstorms,hailstorms,severe winterweather,and earthquakes.The frequency and severity of property insurance claims generally increase when catastrophic events and severe weather conditions occur.Longer-term weather trends may be changing,and new types of catastrophe losses may be developi

179、ng due to climate change,a phenomenon that has been associated with greenhouse gases andextreme weather events linked to rising temperatures,including effects on global weather patterns,sea,land and air temperature,sea levels,rain,and snow.To the extent the frequency or severity ofweather events is

180、exacerbated due to climate change,we may experience increases in catastrophe losses in both coastal and non-coastal areas.This may cause an increase in claims-related and/orreinsurance costs or may negatively affect our ability to provide homeowners insurance to our policyholders in the future.In ad

181、dition,increased catastrophic events could result in increased creditexposure to the reinsurers with which we transact business.Our actual losses from catastrophic events might exceed levels protected against by the Insurance Entities respective reinsurance programsor might be larger than anticipate

182、d if one or more of our reinsurers fail to meet their obligations.In general,climate change may affect the occurrence of certain natural events,such as increasing thefrequency or severity of wind,tornado,hailstorm,and thunderstorm events due to increased convection in the atmosphere.There could also

183、 be more frequent wildfires in certain geographies,moreflooding,and the potential for increased severity of hurricanes due to higher sea surface temperatures.As a result,incurred losses from such events and the demand,price and availability ofreinsurance coverages for homeowners insurance may be aff

184、ected.13The loss estimates developed by the models we use are dependent upon assumptions or scenarios incorporated by a third-party developer and by us.When these assumptions or scenarios do not reflectthe characteristics of catastrophic events that affect areas covered by our policies or the result

185、ing economic conditions,then we become exposed to losses not covered by our reinsurance program,which could adversely affect our financial condition,profitability,and results of operations.Further,although we use widely recognized and commercially available models to estimate our exposure toloss and

186、 LAE from hurricanes and certain other catastrophes,other models exist that might produce a wider or more narrow range of loss estimates,or loss estimates from perils considered lesssignificant to our insured risks,such as wildfires.See“We rely on models as a tool to evaluate risk,and those models a

187、re inherently uncertain and may not accurately predict existing or futurelosses.”Despite our catastrophe management programs,we retain material exposure to catastrophic events.Additionally,the models themselves produce a range of results and associated probabilitiesof occurrence from which we can as

188、sess risks of exposure to catastrophic loss.Extreme catastrophe scenarios exist within the modeling results that may also have a material adverse effect on ourresults of operations during any reporting period due to increases in our losses and LAE.Our liquidity could also be constrained by a catastr

189、ophe,or multiple catastrophes,which could have a negativeimpact on our business.Catastrophes have eroded and in the future may erode our statutory surplus or ability to obtain adequate reinsurance which could negatively affect our ability to write new orrenewal business.Catastrophic claim severity i

190、s impacted by the effects of inflation and increases in insured value and factors such as the overall claims,legal and litigation environments in affectedareas,in addition to the geographic concentration of insured property.Because we conduct the majority of our business in Florida,our financial res

191、ults are affected by the regulatory,economic,and weather conditions in Florida.Although we are licensed to transact insurance business in other states,we write a majority of our policies in Florida.Because of our concentration in Florida,and in particular in Broward,Palm Beachand Miami-Dade counties

192、,we are exposed to hurricanes,windstorms,and other catastrophes affecting South Florida.We have incurred and may in the future incur catastrophe losses in Florida orelsewhere in excess of those experienced in prior years;those estimated by catastrophe models we use;the average expected level used in

193、 pricing;and our current reinsurance coverage limits.We arealso subject to claims arising from non-catastrophic weather events such as rain,hail,and high winds.Additionally,in Florida,the prevalence of represented and litigated claims has led to an increasein the frequency and severity of costs asso

194、ciated with both catastrophe claims and non-catastrophe claims.The nature and level of future catastrophes,the incidence and severity of weather conditionsin any future period,and the impact of catastrophes on behaviors related to non-catastrophe claims cannot be predicted and could materially and a

195、dversely impact our operations.Therefore,prevailing regulatory,consumer behavior,legal,economic,political,demographic,competitive,weather,and other conditions in Florida disproportionately affect our revenues andprofitability.The Florida legislature amends laws related to property insurance almost a

196、nnually,and more often in recent years.While some of these law changes have been designed to reduce abusesin the Florida market and reinvigorate admitted market interest in expanding writings,other changes in the law have imposed new or increased requirements on insurers that might prove to bedetrim

197、ental to our business.In addition,changes to Floridas insurance laws often are followed by extended implementation periods,ensuing regulatory rule making timelines,and even periods ofuncertainty as opponents of the changes challenge them in court or seek to avoid their effects by revising their busi

198、ness practices.Further,some changes apply only to policies issued after the newlaws effective dates,creating extended periods in which existing and some newly reported claims remain subject to prior adverse conditions.Resulting delays in the effectiveness of new laws,evenwhen intended to be benefici

199、al for the insurance industry,limit or delay their impact on our business.Adverse changes in these conditions have a more pronounced effect on us than they would on other insurance companies that are more geographically diversified throughout the United States.Further,a single catastrophic event,or

200、a series of such events,specifically affecting Florida,particularly in the more densely populated areas of the state,have had and could in the future have adisproportionately adverse impact on our business,financial condition,and results of operations.This is particularly true in certain Florida cou

201、nties where we write a high concentration of policiessuch that a catastrophic event,or series of catastrophic events,in these counties have had and could in the future have a significant impact on our business,financial condition,and results ofoperations.14Actual claims incurred have exceeded,and in

202、 the future may exceed,reserves established for claims,adversely affecting our operating results and financial condition.We maintain loss reserves to cover our estimated ultimate liability for unpaid losses and LAE for reported and unreported claims as of the end of each accounting period.The reserv

203、e for losses andLAE is reported net of receivables for subrogation.Recorded claim reserves in the property and casualty business are based on our best estimates of what the ultimate settlement and administration ofclaims will cost,both reported and incurred but not reported(“IBNR”).These estimates,w

204、hich generally involve actuarial projections,are based on managements assessment of known facts andcircumstances,including our experience with similar cases,actual claims paid,historical trends involving claim payment patterns,pending levels of unpaid claims and contractual terms.Externalfactors are

205、 also considered,which include but are not limited to changes in the law,court decisions,changes to regulatory requirements,economic conditions including inflation as experienced inrecent years,and consumer behavior.Many of these factors are not quantifiable and are subject to change over time.The c

206、urrent Florida homeowners insurance market is adversely impacted bychanges in claimant behaviors resulting in losses and LAE exceeding historical trends,amounts experienced in other states,and amounts we previously estimated.The increases in losses and LAE areattributable to the active solicitation

207、of claims activity by policyholder representatives,high levels of represented claims compared to historical patterns or patterns seen in other states,and aproliferation of inflated claims filed by policyholder representatives and vendors.These trends are facilitated by Floridas legal climate,includi

208、ng the threat of one-way attorneys fees against insurerspursuant to a statute that existed prior to December 16,2022,and the relatively high cost of defending against inflated claims in relation to amounts in dispute.Some of the law changes apply only topolicies with effective dates after December 1

209、6,2022,resulting in an extended period during which our losses and LAE will continue to be influenced by pre-reform laws and market conditions.Additionally,there sometimes is a significant reporting lag between the occurrence of an event and the time it is reported to us.The inherent uncertainties o

210、f estimating reserves are greater for certaintypes of liabilities,particularly those in which the various considerations affecting the type of claim are subject to change and in which long periods of time elapse before a definitive determination ofliability is made.The deterioration in the current F

211、lorida market also has produced an increased number of claims that are filed or re-opened well after the alleged dates of loss.We continually refinereserve estimates as experience develops and as subsequent claims are reported and settled.Adjustments to reserves are reflected in the financial statem

212、ent results of the periods in which suchestimates are changed.The adverse conditions in Florida and inflationary pressure causing increases in the costs of building materials and labor have resulted in our paid losses exceeding prior reserveestimates and in increases in our current estimates of unpa

213、id losses and LAE.Because setting reserves is inherently uncertain and claims conditions change over time,the ultimate cost of losses hasvaried and,in the future,may vary materially from recorded reserves,and such variance may continue to adversely affect our operating results and financial conditio

214、n.The full extent of the ongoingdisruptions and claims behaviors in the Florida market,and the extent to which legislative efforts aimed at mitigating these concerns will be successful,is unknown and still unfolding.Subrogation is a significant component of our total net reserves for losses and LAE.

215、Since 2016,we have significantly increased our efforts to pursue subrogation against third parties responsible forproperty damage losses to our insureds.More recently,changes in Floridas claims environment and legal climate have reduced the effectiveness of our efforts to properly apportion losses t

216、hroughsubrogation.Responsible parties are increasingly using delays and defensive tactics to avoid subrogation and increase its costs,which in turn decreases its effectiveness.Our ability to recover recordedamounts remains subject to significant uncertainty,including risks inherent in litigation,col

217、lectability of the recorded amounts and potential law changes or judicial decisions that can hinder or reducethe effectiveness of subrogation.If we fail to adequately price the risks we underwrite,or if emerging trends outpace our ability to adjust prices timely,or if we lose desirable exposures to

218、competitors by overpricing ourrisks,we may experience underwriting losses depleting surplus at the Insurance Entities and capital at the holding company.Our results of operations and financial condition depend on our ability to underwrite and set premiums adequately for a variety of risks while rema

219、ining competitive.Rate adequacy is necessary togenerate sufficient premiums to pay losses,LAE,reinsurance costs,and underwriting expenses and to earn a reasonable profit.We endeavor to price our products adequately by collecting andanalyzing a substantial amount of data;developing,testing,and applyi

220、ng relevant ratings formulas and methodologies;closely monitoring and seeking to timely recognize changes in cost trends;andprojecting both severity and frequency of losses and other costs including loss adjustment expenses,reinsurance costs and other underwriting costs.We utilize industry insurance

221、 data,internal claimsexperience and both internal and external actuarial experience during the rate making process.During the establishment of underwriting standards and the analogous rate making process,we alsocollect and leverage data points related to age,location,and relevant construction charac

222、teristics of properties and establish insurance-to-value estimates to help ensure adequate pricing.Whileaddressing price adequacy,management also seeks to anticipate and navigate potential impacts to market share and competition.Our ability to adequately price our products,anticipate market response

223、,and generate underwriting profits is subject to a number of risks and uncertainties,some of which are outside our control,including:the availability of sufficient and reliable data;15regulatory review periods or delays in reviewing and approving filed rate changes or our failure to gain regulatory

224、approval;the uncertainties that inherently underlie estimates and assumptions;our ability to timely identify or anticipate unforeseen adverse trends or other emerging costs in the rate making process;our ability to stay competitive as evolving competitive technologies emerge such as artificial intel

225、ligence(“AI”)and machine learning to make pricing,underwriting,or other decisions;inflationary pressures on labor and materials,including supply chain disruptions;the effect of climate change on frequency and severity of insured events from severe weather;uncertainties regarding the impact of law ch

226、anges and their interpretations,including the near-term and long-term effects,if any,of the law changes on claims handling and resolutionpractices,repair and restoration costs,consumer behaviors,activities by public adjusters and policyholders attorneys,and judicial decisions:andadverse changes to s

227、tatutes,rules,or judicial precedent that are not contemplated in existing rate levels and are not addressed or mitigated by current underwriting criteria or policy forms.As a result,we could underprice risks,which,in the past,has,and,in the future,could result in significant underwriting losses nega

228、tively impacting the profitability and financial condition of ourInsurance Entities and the consolidated group.We also could overprice our risks,thereby making our products relatively less attractive than other alternatives,thereby negatively impacting ourcompetitive position and potentially leading

229、 to a reduction in demand for our products and in our market share.In either event,our profitability could be materially and adversely affected.If our policies are overpriced or underpriced by geographic area,policy type,or other characteristics,we may not be able toachieve desirable diversification

230、 of our risks.These concerns are compounded when Floridas statutorily-created residual property insurance market,Citizens,provides insurance based on ratessubstantially below its actuarial indication and at resulting premiums lower than those of admitted insurers such as the Insurance Entities.Unant

231、icipated increases in the severity or frequency of claims adversely affect our profitability and financial condition.Changes in the severity or frequency of claims affect our profitability.Changes in homeowners claim severity can be and have been driven by inflation in the construction industry,in b

232、uildingmaterials,and in home furnishings,as well as by other economic and environmental factors,including increased demand for services and supplies in areas affected by catastrophes,supply chaindisruptions,labor shortages,and prevailing attitudes towards insurers and the claims process,including in

233、creases in the number of litigated claims or claims involving representation as well ascontinuing efforts by policyholder representatives to seek larger settlements on pre-reform claims in recognition that the elimination of the statutory right to attorneys fees and other law changes willapply to fu

234、ture claims.However,changes in the level of the severity of claims are not limited to the effects of inflation and demand surge in these various sectors of the economy or to Floridasdisproportionately high incidence of represented claims.Increases in claim severity can also arise from unexpected eve

235、nts that are inherently difficult to predict.In addition,significant long-termincreases in claim frequency also have an adverse effect on our operating results and financial condition.Further,the level of claim frequency we experience varies from period to period,and fromregion to region.Claim frequ

236、ency can be influenced by natural conditions such as the number and types of severe weather events affecting areas where we write policies as well as by factors such asthe prevalence of solicited and represented claims,including efforts by policyholder representatives to encourage claims activity re

237、lated to policy periods predating law changes.Although we pursuevarious loss management initiatives in order to mitigate future increases in claim severity and frequency,there can be no assurances that these initiatives will successfully identify or reduce the effectof future increases in claim seve

238、rity and frequency.The failure of the risk mitigation strategies we utilize could have a material adverse effect on our financial condition or results of operations.We utilize a number of strategies to mitigate our risk exposure,such as:engaging in rigorous underwriting;carefully evaluating terms an

239、d conditions of our policies and binding guidelines;andceding risk to reinsurers.16However,there are inherent limitations in all of these strategies,and no assurance can be given that an event or series of events will not result in loss levels in excess of our probable maximum lossmodels,or that our

240、 non-catastrophe forecasts or modeling is accurate,which could have a material adverse effect on our financial condition or results of operations.It is also possible that losses couldmanifest themselves in ways that we do not anticipate and that our risk mitigation strategies are not designed to add

241、ress.Such a manifestation of losses could have a material adverse effect on ourfinancial condition and results of operations.Pandemics,including COVID-19 and other outbreaks of disease,could impact our business,financial results,and growth.Pandemics and other outbreaks of disease can have significan

242、t and wide-spread impacts.As we saw with the COVID-19 pandemic,outbreaks of disease can cause governments,public institutions,andother organizations to impose or recommend,and businesses and individuals to implement restrictions on various activities or take other actions to combat the diseases spre

243、ad,such as warnings,restrictions,and bans on travel,transportation,or in-person gatherings;and local or regional closures or lockdowns.Outbreaks of disease,and actions taken in response to the outbreak,could in thefuture materially negatively impact our workforce as well as our business,operations,a

244、nd financial results in many ways,both directly and indirectly.Although we did not experience a direct material impact from COVID-19 on our business,our financial position,our liquidity,or our ability to service our policyholders and maintain criticaloperations,indirectly,inflationary pressures,in p

245、art due to supply chain and labor constraints during the COVID-19 pandemic,have affected and continue to affect claims costs and,to a lesser degree,other expenses.In general,other effects of a pandemic may include significant volatility and disruption of the global financial markets and limitations

246、on access to sources of liquidity,among others.To the extent a pandemic adversely affects our future business and financial results,it may also have the effect of heightening many of the other risks we discuss in this section.Similarly,pandemics orother outbreaks of disease might create conditions a

247、nd cause responses that differ from those experienced with COVID-19 in ways we cannot predict,which also could adversely affect our futurebusiness and financial results and could compound other risks discussed in this section.Because we rely on independent insurance agents,the loss of these independ

248、ent agent relationships and the business they control or our ability to attract new independent agents could havean adverse impact on our business.We currently market our policies to a broad range of prospective policyholders through approximately 4,000 independent insurance agents in Florida as wel

249、l as approximately 5,900 independentinsurance agents outside of Florida.As a result,our business depends on the marketing efforts of these independent agents and on our ability to offer products and services that meet their and theircustomers requirements.These independent insurance agents maintain

250、the primary customer relationship.Independent agents typically represent other insurance companies in addition to representingus,and such agents are not obligated to sell or promote our products.Other insurance companies may pay higher commissions than we do,provide services to the agents that we do

251、 not provide,ormay be more attractive to the agents than we are.In Florida the statutorily-created residual market currently offers policies at premium levels that in many areas and for most coverage types are lowerthan premiums the Insurance Entities charge,which are subject to regulatory review,go

252、verned by actuarial standards,and cannot be inadequate,excessive,or unfairly discriminatory.We cannotprovide assurance that we will retain our current relationships,or be able to establish new relationships,with independent agents.The loss of these marketing relationships could adversely affect oura

253、bility to attract new agents,retain our agency network,or write new or renewal insurance policies,which could materially adversely affect our business,financial condition,and results of operations.We rely on models as a tool to evaluate risk,and those models are inherently uncertain and may not accu

254、rately predict existing or future losses.Along with other insurers in the industry,we use models developed by third-party vendors in assessing our exposure to catastrophe losses,and these models assume various conditions and probabilityscenarios,most of which are not known to us or are not within ou

255、r control.These models may not accurately predict future losses or accurately measure losses incurred.Catastrophe models,whichhave been evolving since the early 1990s,use historical information about various catastrophes,detailed information about our in-force business and certain assumptions or jud

256、gments,that areproprietary to the modeling firms.While we use this information in connection with our pricing and risk management activities,there are limitations with respect to their usefulness in predicting lossesin any reporting period.Examples of these limitations are significant variations in

257、estimates between models and modelers and material increases and decreases in model results due to changes andrefinements of the underlying data elements and assumptions,including with respect to the risks arising from climate change.Such limitations lead to questionable predictive capability and po

258、st-eventmeasurements that have not been well understood or proven to be sufficiently reliable.In addition,the models are not necessarily reflective of company or state-specific policy language,demand surgefor labor and materials,consumer behavior,prevailing or changing claims,legal and litigation en

259、vironments,or loss settlement expenses,all of which are subject to wide variation by catastrophe.Further,in accordance with Florida law and regulatory requirements,we must use a model that has been reviewed and deemed acceptable by a state commission in accordance with standards overwhich we have no

260、 control and that might not align with our business.For these reasons and other factors that might not be known to us,the accuracy of models in estimating insured losses from priorstorms has varied considerably by catastrophe when compared to actual results from those catastrophes.17Reinsurance may

261、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 ourexposure to loss.Our reinsurance program is designed to mitigate our exposure to catastrophes.Market conditions and public policy decisio

262、ns beyond our control determine the availability and cost of the reinsurancewe purchase,the ability of the FHCF to reimburse insurers at levels contemplated by their reimbursement contracts,and the expiration of time-limited governmental programs such as RAP.Noassurances can be made that reinsurance

263、 will remain continuously available to us to the same extent and on the same or similar terms and rates as are currently available.In addition,our ability toafford reinsurance to reduce our catastrophe risk may be dependent upon our ability to adequately and timely adjust premium rates for our costs

264、,and there are no assurances that the terms and rates forour current reinsurance program will continue to be available next year or that we will be able to adjust our premiums.The Insurance Entities are responsible for losses related to catastrophic eventswith incurred losses in excess of coverage p

265、rovided by our reinsurance program and the FHCF,and for losses that otherwise are not covered by the reinsurance program.If we are unable to maintainour current level of reinsurance or purchase new reinsurance protection in amounts that we consider sufficient and at prices and terms that we consider

266、 acceptable,we would have to either accept anincrease in our exposure risk,reduce our insurance writings,seek rate adjustments at levels that might not be approved or might adversely affect policy retention,or develop or seek other alternatives,which could have an adverse effect on our profitability

267、 and results of operations.18Reinsurance subjects us to the credit risk of our reinsurers,which could have a material adverse effect on our operating results and financial condition.Reinsurance does not legally discharge us from our primary liability for the full amount of the risk we insure,althoug

268、h it does make the reinsurer liable to us in the event of a covered claim.As such,we are subject to credit risk with respect to our reinsurers.The collectability of reinsurance recoverables is subject to uncertainty arising from a number of factors,including(i)our reinsurers financialcapacity and wi

269、llingness to make payments under the terms of a reinsurance treaty or contract or(ii)whether insured losses meet the qualifying conditions and are recoverable under our reinsurancecontracts for covered events or are excluded.Further,if a reinsurer fails to pay an amount due to us within 90 days of s

270、uch amount coming due,we are required by certain statutory accounting rules toaccount for a portion of this unpaid amount as a non-admitted asset,which would negatively impact our statutory surplus.Our inability to collect a material recovery from a reinsurer,or to collect suchrecovery in a timely f

271、ashion,could have a material adverse effect on our operating results,financial condition,liquidity and surplus.Our financial condition and operating results are subject to the cyclical nature of the property and casualty insurance business.The property and casualty insurance market is cyclical and h

272、as experienced periods characterized by relatively high levels of price competition,less restrictive underwriting standards and relativelylow premium rates,followed by periods of relatively lower levels of competition,more selective underwriting standards,and relatively high premium rates.As premium

273、 levels increase,andcompetitors perceive an increased opportunity for profitability,new entrants to the market or expansion by existing participants lead to increased competition,a reduction in premium rates,lessfavorable policy terms,and fewer opportunities to underwrite insurance risks.In addition

274、,certain law changes take effect only with respect to new or renewal policies issued after the changes areadopted,which can favor new entrants to the market over insurers like the Insurance Entities that continue to service policies issued before the law changes and claims received under those polic

275、ies.These conditions can have a material adverse effect on our results of operations and cash flows.In addition to these considerations,changes in the frequency and severity of losses suffered by insuredsand insurers,including changes resulting from multiple and/or catastrophic hurricanes and from i

276、ncreases in represented and litigated claims,affect the cycles of the property and casualty insurancebusiness significantly.Negative market conditions can impair our ability to write insurance at rates that we consider adequate and appropriate relative to the risk written.To the extent that we canno

277、twrite insurance at appropriate rates,our business would be materially and adversely affected.We cannot predict whether market conditions will improve,remain constant or deteriorate.An extendedperiod of negative market conditions could have a material adverse effect on our business,financial conditi

278、on and results of operations.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.We seek to take advantage of prudent opportunities to expand our core business into other states where we be

279、lieve the independent agent distribution channel is strong.As a result of a number offactors,including the difficulties of finding appropriate expansion opportunities and the challenges of operating in unfamiliar markets,there can be no assurance that we will be successful in thisdiversification eve

280、n after investing significant time and resources to develop and market products and services in additional states.Initial timetables for expansion may not be achieved,and price andprofitability targets may not be feasible.Because our business and experience are based substantially on the Florida ins

281、urance market,we may not understand all of the risks associated with enteringinto an unfamiliar market.For example,the occurrence of significant winter storms in certain states we have expanded into has in some circumstances limited the effectiveness of our revenue and riskdiversification strategy b

282、y decreasing revenue we expected to receive outside of the Florida hurricane season or increasing our overall risk in ways we had not anticipated when entering those markets.This inexperience in certain new markets could affect our ability to price risks adequately and develop effective underwriting

283、 standards.External factors,such as compliance with state regulations,especially when different than the regulations of other states in which we do business,obtaining new licenses,competitive alternatives,processes,and time periods associated with adjusting productforms and rates,and shifting custom

284、er preferences,may also affect the successful implementation of our geographic growth strategy.Such external factors and requirements may increase our costs andpotentially affect the speed with which we will be able to pursue new market opportunities.There can be no assurance that we will be success

285、ful in expanding into any one state or combination ofstates.Failure to manage these risks successfully could have a material adverse effect on our business,results of operations,and financial condition.Our success depends,in part,on our ability to attract and retain talented employees,and the loss o

286、f any one of our key personnel could adversely impact our operations.The success of our business depends,in part,on the leadership and performance of our executive management team and key employees and on our ability to attract,retain,and motivate talentedemployees.Competition for these individuals

287、is intense and our ability to operate successfully may be impaired if we are not effective in filling critical leadership positions,in developing the talentand skills of our human resources,in assimilating new executive talent into our organization,or in deploying human resource talent consistent wi

288、th our business goals.19We could be adversely affected if our controls designed to ensure compliance with guidelines,policies and legal and regulatory standards are not effective.Our business is highly dependent on the ability to engage on a daily basis in a large number of insurance underwriting,cl

289、aims processing and investment activities,many of which are highly complex,must be performed expeditiously and involve opportunities for human judgment and errors.These activities often are subject to internal guidelines and policies,as well as legal and regulatorystandards.In addition,these legal a

290、nd regulatory standards can be subject to varying interpretations.A control system,no matter how well designed and operated,can provide only reasonableassurance that the control systems objectives will be met.Our failure to comply with these guidelines,policies or standards could lead to financial l

291、oss,unanticipated risk exposure,regulatorysanctions or penalties,civil or administrative litigation,or damage to our reputation.The failure of our claims professionals to effectively manage claims could adversely affect our insurance business and financial results.We rely primarily on our claims pro

292、fessionals to facilitate and oversee the claims adjustment process for our policyholders.Many factors affect the ability of our claims professionals to effectivelymanage claims by our policyholders,including:the accuracy of our adjusters as they make their assessments and submit their estimates of d

293、amages;the training,background,and experience of our claims representatives;the ability of our claims professionals to ensure consistent and timely claims handling;the availability and timing of information from,and the overall degree of cooperation or lack thereof by,policyholders and their represe

294、ntatives;the ability of our claims professionals to translate the information provided by adjusters into acceptable claims resolutions;andthe ability of our claims professionals to maintain and update our claims handling procedures and systems as they evolve over time based on claims and geographica

295、l trends in claims reportingas well as consumer behaviors affecting claims handling.Any failure to effectively manage the claims adjustment process,including failure to pay claims accurately and in a timely manner and failure to oversee third-party claims adjusters,could lead tomaterial litigation,r

296、egulatory penalties or sanctions,undermine our reputation in the marketplace and with our network of independent agents,impair our corporate image,and negatively affect ourfinancial results.Litigation or regulatory actions could result in material settlements,judgments,fines,or penalties and consequ

297、ently have a material adverse impact on our financial condition andreputation.From time to time,we are subject to civil or administrative actions and litigation.This is especially the case in Florida,where insurance companies,including the Insurance Entities,have experiencedhigh rates of first-party

298、 litigation due largely to the states one-way attorneys fee statute and resulting institutionalization of a litigation-oriented climate and to the ability of vendors to takeassignments of policyholders post-loss claims benefits.Although we strive to pay meritorious claims in a fair and prompt manner

299、,civil litigation can result when we do not pay insurance claims in theamounts or at the times demanded by policyholders or their representatives or assignees.We also are subject to litigation or administrative actions arising from the conduct of our business and theregulatory authority of state ins

300、urance departments or other agencies having oversight or enforcement authority over the various aspects of our business.Further,we are subject to other types oflitigation inherent in operating our businesses,employing personnel,contracting with vendors and otherwise carrying out our affairs.As indus

301、try practices and legal,judicial,social,and otherenvironmental conditions change,unexpected and unintended issues related to claims and coverage have arisen and may in the future arise,including judicial expansion of policy coverage and theimpact of new theories of liability,plaintiffs targeting pro

302、perty and casualty insurers in purported class-action litigation or other forms of litigation relating to claims-handling,and other practices,andadverse changes in loss cost trends,including inflationary pressures in home repair costs or other legal or regulatory conditions incentivizing increases i

303、n disputed or litigated claims.Multiparty orclass action claims and similar types of actions,especially when incentivized by potential recoveries by representative plaintiffs and their attorneys,present additional exposure to substantialeconomic,non-economic,or punitive damage awards.This exposure,a

304、nd the costs of protracted litigation,can result in decisions to settle litigation notwithstanding our belief that meritoriousdefenses exist or that we ultimately would prevail at trial or on appeal.Litigation or regulatory matters have negatively affected and may in the future negatively affect us

305、by resulting in the paymentof substantial awards or settlements,increasing legal and compliance costs,requiring us to change certain aspects of our business operations,diverting management attention from other businessissues,harming our reputation with agents,customers,reinsurers,creditors,regulator

306、s or others,or making it more difficult to retain current customers and to recruit and retain employees or agents.20Our future results are dependent in part on our ability to successfully operate in a highly competitive insurance industry.The property and casualty insurance industry is highly compet

307、itive.We compete against large national carriers that have greater capital resources and longer operating histories,regional carriers,andmanaging general agencies,as well as newly formed and less-capitalized companies that might have more aggressive underwriting or pricing strategies.Many of these e

308、ntities may also be affiliatedwith other entities that have greater financial and other resources than we have.When competitors attempt to increase market share by lowering rates,we can experience reductions in our underwritingmargins,or a decline in sales of our insurance policies as customers purc

309、hase lower-priced products from our competitors.Competitors also might adopt more prompt or more effective solutions toadverse market conditions than we are able to implement,providing those competitors with a competitive advantage through lower losses and loss adjustment expenses,more competitive p

310、remiumlevels,or the ability to expand their businesses.Additionally,due to statutorily-imposed limits on rate increases,Floridas residual property insurance market,Citizens,often charges lower premiumsin hard insurance markets than what the Insurance Entities are able to charge in accordance with ap

311、plicable regulatory filings,actuarial standards and prudent financial management.In hard marketssuch as the current Florida market,insurance agents and their customers therefore increasingly choose Citizens over private market insurers like the Insurance Entities for their residential propertyinsura

312、nce coverage.Additionally,some law changes intended to alleviate abuses in the property insurance market are interpreted as applying only prospectively to policies issued or renewed after thenew laws effective dates,potentially creating competitive advantages for insurers that enter markets or expan

313、d writings after the laws effective dates as compared to insurers like the InsuranceEntities,which continue to have certain policy and claims servicing obligations on previously issued policies.Additionally,technological changes also present competitive risks.For example,our competitive position cou

314、ld be impacted if we are unable to deploy,in a cost effective and competitive manner,technology such as AI and machine learning that collects and analyzes a wide variety of data points(so-called“big data”analysis)to make underwriting or other decisions,or if our competitors collectand use data which

315、 we do not have the ability to access or use.In addition,innovations,such as telematics and other usage-based methods of determining premiums,can impact product design andpricing and are becoming an increasingly important competitive factor.Because of the competitive nature of the insurance industry

316、,including competition for producers such as independent agents,there can be no assurance that we will continue to develop and maintainproductive relationships with independent agents,effectively compete with our industry rivals,or that competitive pressures will not have a material adverse effect o

317、n our business,operating results orfinancial condition.21A downgrade in our financial strength or stability ratings may have an adverse effect on our competitive position,the marketability of our product offerings,and our liquidity,operatingresults and financial condition.Residential property insure

318、rs like the Insurance Entities must maintain financial strength or stability ratings from at least one rating organization acceptable to each of the Federal Home LoanMortgage Corporation(“Freddie Mac)and the Federal National Mortgage Association(“Fannie Mae”).Our Insurance Entities maintain Financia

319、l Stability Ratings of“A”(“Exceptional”)byDemotech and insurance financial strength ratings of“A-”by Kroll.These and similar ratings are important factors in establishing the competitive position of insurance companies and generally havean effect on an insurance companys business.On an ongoing basis

320、,rating agencies review the financial performance and condition of insurers and could downgrade or change the outlook on aninsurers ratings due to,for example,a change in an insurers statutory capital;a change in a rating agencys determination of the amount of risk-adjusted capital required to maint

321、ain a particularrating;a change in the perceived adequacy of an insurers reinsurance program;an increase in the perceived risk of an insurers investment portfolio;a reduced confidence in management or a host ofother considerations that may or may not be within an insurers knowledge or control.Becaus

322、e these ratings are subject to continuous review,the retention of these ratings cannot be assured.Adowngrade in or withdrawal of these ratings,or a decision by a rating agency to require us to make a capital infusion into the Insurance Entities or otherwise alter operations to maintain its rating,ma

323、yadversely affect our liquidity,operating results and financial condition.A downgrade to or loss of a rating also might cause reputational damage to us among customers,insurance agents,reinsurers,creditors,regulators or others that could affect our ability to write and retain business.In addition,ou

324、r failure to maintain at least one financial strength or stability rating acceptable in the secondarymortgage market would adversely affect our ability to write new and renewal business.Further,a downgrade to or reduction of our financial strength or stability ratings below acceptable levels couldco

325、nstitute a default under credit obligations of UVE.Financial strength and stability ratings are primarily directed towards policyholders of the Insurance Entities,and are not evaluations directedtoward the protection of our shareholders,and are not recommendations to buy,sell or hold securities.Brea

326、ches of our information systems or denial of service on our website could have an adverse impact on our business and reputation.Our ability to effectively operate our business depends on our ability,and the ability of certain third-party vendors and business partners,to access our computer systems t

327、o perform necessary businessfunctions,such as providing quotes and product pricing,billing and processing premiums,administering claims and reporting our financial results.Our business and operations rely on the secure andefficient processing,storage and transmission of customer and company data,inc

328、luding policyholders nonpublic personal information,including financial information,and proprietary businessinformation,on our computer systems and networks.Unauthorized access to personally identifiable information,even if not financial information,could be damaging to all affected parties.Breaches

329、can involve attacks intended to obtain unauthorized access to nonpublic personal information,destroy data,disrupt or degrade service,sabotage systems or cause other damage,including through theintroduction of computer viruses or malware,cyberattacks and other means;breaches can also involve human er

330、ror,such as employees falling victim to phishing schemes or computer coding errorsthat may inadvertently leave data exposed.Our computer systems are vulnerable to unauthorized access and hackers,computer viruses and other scenarios in which our data may be exposed or compromised.Cyberattacks can ori

331、ginate from avariety of sources,including third parties who are affiliated with foreign governments or employees acting negligently or in a manner adverse to our interests.Third parties may seek to gain access toour systems either directly or using equipment or security passwords belonging to employ

332、ees,customers,third-party service providers,or other users of our systems.Our systems also mayinadvertently expose,through a computer programming error or otherwise,confidential information as well as that of our customers and third parties with whom we interact.Our computer systems have been,and li

333、kely will continue to be,subject to cyber hacking activities,computer viruses,other malicious codes,or other computer-related penetrations.This is especiallythe case as the number of our employees working remotely has increased.We commit significant resources to administrative and technical controls to prevent cyber incidents and protect ourinformation technology,but our preventative actions to re