UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

               [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                         COMMISSION FILE NUMBER 0-20848

                       UNIVERSAL INSURANCE HOLDINGS, INC.
                 (Name of small business issuer in its charter)

            DELAWARE                                     65-0231984
 (State or other jurisdiction of           (I.R.S. Employer Identification No.)
 incorporation or organization)

 1110 WEST COMMERCIAL BOULEVARD, SUITE 100                 33309
         FORT LAUDERDALE, FLORIDA                       (Zip Code)
 (Address of principal executive offices)

         Company's telephone number, including area code: (954) 958-1200

      Securities registered pursuant to Section 12(b) of the Exchange Act:

 (Title of each class)                       (Name of exchange where registered)

 COMMON STOCK, $.01 PAR VALUE                       American Stock Exchange

Check whether the issuer  is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. [ ]

Check whether the issuer (1)  filed  all reports required to be filed by Section
13 or 15(d) of the Exchange Act during  the  preceding  12  months  (or for such
shorter  period  that  the  registrant  was required to file such reports),  and
(2) has been subject to such filing requirements  for the past 90 days:
YES X   NO
   ---    ---
Check if there is no disclosure of delinquent filers  in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will  be contained, to
the   best  of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in  Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [  ]

Indicate by checkmark whether the registrant is  a  shell company (as defined in
Rule 12b-2 of the Exchange Act): YES       NO  X
                                     ---      ---

State issuer's revenues for its most recent fiscal year: $188,514,481

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price  at which the common equity
was sold as of December 31, 2007: $133,558,788

State the number of shares of Common Stock of Universal Insurance Holdings, Inc.
outstanding as of March 1, 2008: 39,891,157

Transitional Small Business Disclosure Format: YES       NO  X
                                                  ---       ---





                                     PART I

ITEM  1.  DESCRIPTION OF BUSINESS

THE COMPANY

      Universal Insurance Holdings, Inc. ("UIH" or the "Company") was originally
organized as Universal Heights, Inc. in 1990.  The Company  changed  its name to
Universal  Insurance  Holdings,  Inc.  on January 12, 2001.  In April 1997,  the
Company organized a subsidiary, Universal  Property & Casualty Insurance Company
("UPCIC"), as part of its strategy to take advantage of what management believed
to be profitable business and growth opportunities in the marketplace. UPCIC was
formed to participate in the transfer of homeowners' insurance policies from the
Florida  Residential  Property  and  Casualty  Joint   Underwriting  Association
("JUA").  The Company has since evolved into a vertically  integrated  insurance
holding company,  which  through  its various subsidiaries, covers substantially
all aspects of insurance underwriting, distribution and claims processing.

      The Company was incorporated  under  the  laws of the State of Delaware on
November 13, 1990 and its principal executive offices  are  located at 1110 West
Commercial  Boulevard,  Suite  100,  Fort  Lauderdale,  Florida 33309,  and  its
telephone number is (954) 958-1200.

INSURANCE BUSINESS

      On  October 29, 1997, the Florida Office of Insurance  Regulation  ("OIR")
approved UPCIC's application for a permit to organize as a domestic property and
casualty insurance  company  in  the State of Florida.  On December 4, 1997, UIH
raised approximately $6.7 million  in  a  private placement of common stock with
various  institutional and other accredited  investors.   The  proceeds  of  the
offering were  used  to  meet the minimum regulatory capitalization requirements
($5.0 million) of the OIR to obtain an insurance company license and for general
working capital purposes.   UPCIC  received  a license to engage in underwriting
homeowners' insurance in the State of Florida  on  December  31, 1997.  In 1998,
UPCIC began operations through the assumption of homeowners' insurance  policies
issued by the JUA.

      The  JUA  was  established  in  1992  as  a  temporary  measure to provide
insurance  coverage for individuals who could not obtain coverage  from  private
carriers because  of  the  impact  on  the private insurance market of Hurricane
Andrew  in  1992.   Rather  than serving as  a  temporary  source  of  emergency
insurance coverage as was originally  intended,  the JUA became a major provider
of original and renewal insurance coverage for Florida residents.  In an attempt
to  reduce  the  number of policies in the JUA, and thus  the  exposure  of  the
program to liability,  the  Florida legislature approved a number of initiatives
to depopulate the JUA. The Florida  legislature  subsequently  approved, and the
JUA  implemented, a Market Challenge/Takeout Bonus Program ("Takeout  Program"),
which  provided  additional incentives to private insurance companies to acquire
policies from the JUA.

      UPCIC's initial  business  and  operations consisted of providing property
and casualty coverage through homeowners'  insurance  policies acquired from the
JUA.  The insurance business acquired from the JUA provided  a  base for renewal
premiums.  The majority of these policies renewed with UPCIC.  In  an  effort to
further  grow  its  insurance  operations,  in 1998, UPCIC also began to solicit
business actively in the open market through independent agents. Through renewal
of  the  JUA business combined with business solicited  in  the  market  through
independent   agents,   UPCIC   is  currently  servicing  approximately  374,000
homeowners' insurance policies covering homes and condominium units.

      The Company's primary product  is  homeowners'  insurance.   The Company's
criteria for selecting insurance policies includes, but is not limited  to,  the
use  of  specific  policy  forms, coverage amounts on buildings and contents and
required compliance with local  building  codes.   Also, to improve underwriting
and manage risk, the Company utilizes standard industry  modeling techniques for
hurricane  and windstorm exposure.  UPCIC's portfolio as of  December  31,  2007
includes approximately  367,000  policies with coverage for wind risks and 7,000
policies  without wind risks.  The  average  premium  for  a  policy  with  wind
coverage is  approximately  $1,358  and the average premium for a policy without
wind coverage is approximately $625.   Approximately  25.3%  of the policies are
located  in  Miami-Dade,  Broward  and Palm Beach counties. UPCIC  had  in-force
premiums of approximately $504.5 million as of December 31, 2007.


                                       2



OPERATIONS

      All underwriting, rating, policy  issuance,  reinsurance  negotiations and
certain  administration  functions  for UPCIC are performed by UPCIC,  Universal
Risk Advisors, Inc., a wholly owned subsidiary  of the Company, and unaffiliated
third  parties.  Universal Adjusting Corporation,  a  wholly  owned  subsidiary,
performs claims adjustment for UPCIC.

      The  earnings  of UPCIC from policy premiums are supplemented to an extent
by the generation of investment  income  from investment policies adopted by the
Board of Directors of UPCIC.  UPCIC's principal investment goals are to maintain
safety and liquidity, enhance equity values  and  achieve  an  increased rate of
return consistent with regulatory requirements.

MANAGEMENT OPERATIONS

      The Company is a vertically  integrated  insurance  holding  company.  The
Company,   through  its   subsidiaries,   is  currently   engaged  in  insurance
underwriting,   distribution  and  claims.  UPCIC  generates  revenue  from  the
collection and investment of premiums.  The Company's agency  operations,  which
include  Universal  Florida  Insurance Agency and Coastal  Homeowners  Insurance
Specialists,  Inc.,  generate income from commissions.  Universal Risk Advisors,
Inc., the Company's managing general agent, generates revenue through policy fee
income and other  administrative  fees from the  marketing of UPCIC's  insurance
products through the Company's  distribution  network and UPCIC.  Universal Risk
Life Advisors,  Inc. was formed to be the Company's  managing  general agent for
life insurance products,  but is not currently conducting business. In addition,
the  Company  has  formed  a  claims  adjusting  company,   Universal  Adjusting
Corporation,  which adjusts UPCIC claims, and an inspection  company,  Universal
Inspection  Corporation,  which performs  property  inspections  for homeowners'
insurance policies underwritten by UPCIC.

      UPCIC has applied  for expansion to write homeowners insurance policies in
five additional states. Those  states are Texas, Hawaii, Georgia, South Carolina
and North Carolina. In addition,  UPCIC  has  filed  to  offer  flood  insurance
through the National Flood Insurance Program ("NFIP").

DIRECT SALES OPERATIONS

      During  2006,  the  Company  decided  to  discontinue its on-line commerce
segment and focus on its core operations.

      In the Consolidated Statements of Operations  and  Consolidated Statements
of  Cash  Flows, the Company has separately disclosed results  relating  to  its
discontinued  operations,  which  in  prior  periods  had  not  been  separately
disclosed.   The disclosure for discontinued operations relates to the operating
segment previously reported as the Company's on-line commerce segment.

AGENCY OPERATIONS

      Universal  Florida Insurance Agency was incorporated in Florida on July 2,
1998 and Coastal Homeowners  Insurance  Specialists,  Inc.  was  incorporated in
Florida  on  July 2, 2001, each as wholly owned subsidiaries of the  Company  to
solicit voluntary  business.   These entities are a part of the Company's agency
operations, which seek to generate  income  from  commissions, premium financing
referral fees and the marketing of ancillary services.

      Blue Atlantic Reinsurance Corporation ("BAR")  was incorporated in Florida
on  November  9,  2007  as  a wholly owned subsidiary of the  Company  to  be  a
reinsurance  intermediary  broker.   BAR   became   licensed  as  a  reinsurance
intermediary broker by the OIR on January 4, 2008.

OTHER OPERATIONS

      Universal Inspection Corporation was incorporated in Florida on January 3,
2000  as  a  wholly  owned  subsidiary  of  the  Company.  Universal  Inspection
Corporation  performs  property inspections for homeowners'  insurance  policies
underwritten by UPCIC.   In September 2006, the Company initiated the process of
acquiring  all  of the outstanding  common  stock  of  Atlas  Florida  Financial
Corporation, which owned all of the outstanding common stock of Sterling Premium


                                       3



Finance Company,  Inc.  ("Sterling").   Sterling  has been renamed Atlas Premium
Finance  Company  and commenced offering premium finance  services  in  November
2007.

FACTORS AFFECTING OPERATION RESULTS AND MARKET PRICE OF STOCK

      The Company and its subsidiaries operate in a rapidly changing environment
that involves a number  of uncertainties, many of which are beyond the Company's
control. This report contains,  in  addition to historical information, forward-
looking statements that involve risks  and  uncertainties.  The  words "expect,"
"estimate,"  "anticipate,"  "believe," "intend," "plan" and similar  expressions
and variations thereof are intended  to identify forward-looking statements. The
Company's actual results could differ  materially  from  those  set  forth in or
implied   by  any  forward-looking  statements.  Factors  that  could  cause  or
contribute   to  such  differences  include,  but  are  not  limited  to,  those
uncertainties  discussed  below  as  well  as  those discussed elsewhere in this
report.

NATURE OF THE COMPANY'S BUSINESS

      Factors  affecting  the sectors of the insurance  industry  in  which  the
Company  operates  may  subject  the  Company  to  significant  fluctuations  in
operating results. These  factors  include  competition,  catastrophe losses and
general  economic  conditions  including  interest  rate  changes,  as  well  as
legislative   initiatives,   the   regulatory  environment,  the  frequency   of
litigation, the size of judgments, severe weather conditions, climate changes or
cycles,  the  role  of federal or state  government  in  the  insurance  market,
judicial or other authoritative  interpretations  of  laws and policies, and the
availability  and cost of reinsurance. Specifically, the  homeowners'  insurance
market, which comprises  the  bulk  of  the  Company's  current  operations,  is
influenced  by many factors, including state and federal laws, market conditions
for homeowners'  insurance  and  residential  plans.  Additionally,  an economic
downturn  could  result  in  fewer home sales and less demand for new homeowners
seeking insurance.

      Historically, the financial  performance  of  the  property  and  casualty
insurance  industry has tended to fluctuate in cyclical patterns of soft markets
followed by  hard  markets. Although an individual insurance company's financial
performance is dependent  on  its  own  specific  business  characteristics, the
profitability of most property and casualty insurance companies  tends to follow
this cyclical market pattern.

      The Company believes that a substantial portion of its future  growth will
depend  on  its  ability,  among  other  things,  to  successfully implement its
business  strategy,  including  expanding  the  Company's  product  offering  by
underwriting  and marketing additional insurance products and  programs  through
its distribution network, further penetrating the Florida market by establishing
relationships  with  additional  independent  agents  in  order  to  expand  its
distribution network  and  to  further disperse its geographic risk by expanding
into other geographical areas outside the state of Florida. Any future growth is
contingent on various factors, including  the  availability of adequate capital,
the  Company's  ability  to  hire  and  train additional  personnel,  regulatory
requirements, the competitive environment,  and  rating  agency  considerations.
There  is  no  assurance  that  the Company will be successful in expanding  its
business, that the Company's existing  infrastructure  will  be  able to support
additional expansion or that any new business will be profitable.  Moreover,  as
the Company expands its insurance products and programs and the Company's mix of
business  changes,  there  can  be no assurance that the Company will be able to
maintain or improve its profit margins or other operating results.  In addition,
Florida is currently experiencing  an  economic  downturn and diminution of real
estate  values  that  could affect the premium rates  the  Company  charges  for
homeowner's insurance.   There can also be no assurance that the Company will be
able to obtain the required  regulatory  approvals to offer additional insurance
products. UPCIC also is required to maintain  minimum  surplus  to  support  its
underwriting  program. The surplus requirement affects UPCIC's potential growth.
In addition, there  can  be  no  assurance  that  current  state or federal laws
applicable  to the Company's business will not be amended in  the  future.   Any
such amendment could have an adverse effect on the Company's financial condition
or operations.

MANAGEMENT OF EXPOSURE TO CATASTROPHIC LOSSES

      UPCIC is  exposed  to  potentially  numerous insured losses arising out of
single  or  multiple occurrences, such as natural  catastrophes.   As  with  all
property and  casualty  insurers,  UPCIC  expects  to and will incur some losses
related  to  catastrophes  and  will  price its policies  accordingly.   UPCIC's
exposure  to  catastrophic  losses arises  principally  out  of  hurricanes  and
windstorms.  Through the use  of  standard industry modeling techniques that are
susceptible to change, UPCIC manages  its  exposure to such losses on an ongoing
basis from an underwriting perspective.  UPCIC  also protects itself against the
risk of catastrophic loss by obtaining reinsurance  coverage as of the beginning
of  hurricane  season on June 1 of each year.  For the  2007  hurricane  season,
UPCIC purchased  reinsurance coverage up to approximately the "150 year Probable
Maximum Loss" ("PML").   UPCIC's reinsurance program consists of excess of loss,


                                       4



quota  share  and  catastrophe  reinsurance  for  multiple  hurricanes.  UPCIC's
catastrophe reinsurance program currently covers three events up to amounts that
will vary depending on the coverage  exhausted in the prior  event(s).  However,
UPCIC may not buy enough  reinsurance to cover multiple  storms going forward or
be able to timely or cost-effectively obtain reinsurance.  In addition, UPCIC is
responsible  for losses related to  catastrophic  events with incurred losses in
excess of coverage provided by UPCIC's reinsurance program such as losses beyond
approximately  the 150 year PML,  which could have a material  adverse effect on
the  business,  financial  condition  and results of operations of UPCIC and the
Company.

RELIANCE ON THIRD PARTIES AND REINSURERS

      UPCIC  is  dependent  upon  third  parties  to perform  certain  functions
including, but not limited to the purchase of reinsurance  and  risk  management
analysis.  UPCIC also relies on reinsurers to limit the amount of risk  retained
under  its  policies  and  to  increase  its  ability to write additional risks.
UPCIC's intention is to limit its exposure and  therefore  protect  its capital,
even  in the event of catastrophic occurrences, through reinsurance agreements.
For the  2007 hurricane season, UPCIC's reinsurance agreements transfer the risk
of loss in  excess of $45,000,000 up to approximately the 150 year PML as of the
beginning of  the  hurricane season on June 1 for the first event and $9,300,000
for each of the second and third events up to an amount that will vary depending
on the coverage exhausted in the prior event(s). These amounts may change in the
future. There is no  assurance UPCIC will be able to obtain reinsurance at these
levels in the future,  which  could  potentially  result  in  a material adverse
effect to the Company should a catastrophic event occur.

REINSURANCE

      The  property  and casualty reinsurance industry is subject  to  the  same
market conditions as the  direct  property  and  casualty  insurance market, and
there can be no assurance that reinsurance will be available  to  UPCIC  to  the
same  extent  and  at  the  same  cost  as currently in place for UPCIC.  Future
increases in catastrophe reinsurance costs  are  possible  and  could  adversely
affect UPCIC's results.  Reinsurance does not legally discharge an insurer  from
its  primary  liability for the full amount of the risks it insures, although it
does make the reinsurer  liable  to  the  primary  insurer.  Therefore, UPCIC is
subject to credit risk with respect to its reinsurers.  Management evaluates the
financial condition of its reinsurers and monitors concentrations of credit risk
arising from similar geographic regions, activities or economic  characteristics
of the reinsurers to minimize its exposure to significant losses from  reinsurer
insolvencies.  A  reinsurer's  insolvency or inability to make payments under  a
reinsurance  treaty  could have a  material  adverse  effect  on  the  financial
condition and profitability of UPCIC and the Company.  In addition, while ceding
premiums to reinsurers  reduces  UPCIC's  risk  of  exposure  in  the  event  of
catastrophic  losses,  it  also  reduces  UPCIC's  potential for greater profits
should  such catastrophic events fail to occur. The Company  believes  that  the
extent of  UPCIC's  reinsurance  is  typical  of  a  company  of its size in the
homeowners' insurance industry.

ADEQUACY OF LIABILITIES FOR LOSSES

      The  liabilities  for losses  and loss  adjustment  expenses  periodically
established  by UPCIC  are  estimates  of  amounts  needed to pay  reported  and
unreported   claims  and  related  loss  adjustment   expenses.   The  estimates
necessarily will be based on certain assumptions related to the ultimate cost to
settle such claims.  There is an inherent degree of uncertainty  involved in the
establishment  of liabilities for losses and loss adjustment  expenses and there
may be substantial  differences  between  actual losses and UPCIC's  liabilities
estimates.  The inherent degree of uncertainty  involved in the establishment of
liabilities  for  losses and loss  adjustment  expenses  can be more  pronounced
during  periods of rapid growth in written  premiums  such as UPCIC  experienced
during 2007 and 2006.  UPCIC relies on industry  data,  as well as the expertise
and  experience  of  independent  actuaries in an effort to  establish  accurate
estimates  and  adequate  liabilities.  Furthermore,  factors such as storms and
weather conditions,  inflation, claim settlement patterns,  legislative activity
and  litigation  trends may have an impact on UPCIC's  future  loss  experience.
Accordingly, there can be no assurance that UPCIC's liabilities will be adequate
to cover ultimate loss developments.  The profitability and financial  condition
of UPCIC and the  Company  could be  adversely  affected  to the extent that its
liabilities are inadequate.

      UPCIC is directly  liable  for  loss  and loss adjustment expenses ("LAE")
payments  under the terms of the insurance policies  that  it  writes.  In  many
cases, several  years  may  elapse between the occurrence of an insured loss and
UPCIC's  payment  of  that  loss.  As  required  by  insurance  regulations  and
accounting rules, UPCIC reflects  its  liability for the ultimate payment of all
incurred losses and LAE by establishing  a liability for those unpaid losses and
LAE for both reported and unreported claims, which represent estimates of future
amounts needed to pay claims and related expenses.


                                       5



      When a claim involving a probable loss  is  reported,  UPCIC establishes a
liability  for the estimated amount of UPCIC's ultimate loss and  LAE  payments.
The estimate  of  the  amount of the ultimate loss is based upon such factors as
the type of loss, jurisdiction of the occurrence, knowledge of the circumstances
surrounding the claim, severity  of  injury  or  damage,  potential for ultimate
exposure, estimate of liability on the part of the insured, past experience with
similar claims and the applicable policy provisions.

      All  newly  reported  claims received are set up with an  initial  average
liability. That claim is then  evaluated and the liability is adjusted upward or
downward according to the facts and damages of that particular claim.

      In addition, management provides  for a liability on an aggregate basis to
provide  for  losses  incurred  but  not  reported   ("IBNR").   UPCIC  utilizes
independent actuaries to help establish its liability for unpaid losses and LAE.
UPCIC  does  not discount the liability for unpaid losses and LAE for  financial
statement purposes.

      The estimates  of  the  liability for unpaid losses and LAE are subject to
the  effect of trends in claims  severity  and  frequency  and  are  continually
reviewed.  As  part of this process, UPCIC reviews historical data and considers
various factors,  including known and anticipated legal developments, changes in
social attitudes, inflation  and economic conditions. As experience develops and
other data become available, these estimates are revised, as required, resulting
in increases or decreases to the  existing  liability for unpaid losses and LAE.
Adjustments are reflected in results of operations  in  the period in which they
are made and the liabilities may deviate substantially from prior estimates.

      Among  the  classes  of insurance underwritten by UPCIC,  the  homeowners'
insurance liability claims historically  tend to have longer time lapses between
the occurrence of the event, the reporting  of  the claim to UPCIC and the final
settlement than do homeowners' insurance property claims. Liability claims often
involve  third parties filing suit and the ensuing  litigation.  By  comparison,
property damage  claims  tend  to  be reported in a relatively shorter period of
time with the vast majority of these  claims  resulting in an adjustment without
litigation.

      There can be no assurance that UPCIC's liability for unpaid losses and LAE
will be adequate to cover actual losses. If UPCIC's  liability for unpaid losses
and  LAE  proves  to  be  inadequate,  UPCIC will be required  to  increase  the
liability with a corresponding reduction  in UPCIC's net income in the period in
which  the deficiency is identified. Future  loss  experience  substantially  in
excess of  established liability for unpaid losses and LAE could have a material
adverse effect  on UPCIC's and the Company's business, results of operations and
financial condition.

      The following  table  sets  forth a reconciliation of beginning and ending
liability for unpaid losses and LAE  as  shown  in  the  Company's  consolidated
financial statements for the periods indicated.


                                       6



                                           Year Ended              Year Ended
                                       December 31, 2007       December 31, 2006
                                       -----------------       -----------------
                                              (Dollars in Thousands)

Balance at beginning of year             $   49,564              $  67,000

Less reinsurance recoverable                (32,369)               (60,859)
                                         -----------             ----------

Net balance at beginning of year             17,195                  6,141
                                         -----------             ----------

Incurred related to:
  Current year                               47,794                  9,247
  Prior years                                12,006                 15,694
                                         -----------             ----------
Total incurred                               59,800                 24,941
                                         -----------             ----------

Paid related to:
  Current year                               25,714                  4,454
  Prior years                                20,053                  9,433
                                         -----------             ----------
Total paid                                   45,767                 13,887
                                         -----------             ----------

Net balance at end of year                   31,228                 17,195
   Plus reinsurance recoverable              37,588                 32,369
                                         -----------             ----------

Balance at end of year                   $   68,816              $  49,564
                                         ===========             ==========


The  Company's liabilities for unpaid losses and LAE, net of related reinsurance
recoverables,  as  of  December  31,  2007 were increased in the current year by
$12,006,332 for claims that had occurred  on  or  before  the prior year balance
sheet  date.  This unfavorable loss emergence resulted principally  from  higher
than  expected hurricane  losses  in  2004  and  as  a  result  of  actual  loss
development  on  prior  year non-catastrophe losses emerging less favorably than
expected. The Company's liabilities  for  unpaid  losses and LAE, net of related
reinsurance recoverables, as of December 31, 2006 were  increased during 2006 by
$15,693,957  for claims that had occurred on or before the  prior  year  balance
sheet date. This  unfavorable  loss  emergence  resulted principally from higher
than  expected hurricane losses in 2004. There can  be  no  assurance  that  the
Company's  unpaid  losses  and LAE will not develop redundancies or deficiencies
and possibly differ materially  from  the  Company's unpaid losses and LAE as of
December  31,  2007.  In  the  future,  if the unpaid  losses  and  LAE  develop
redundancies or deficiencies, such redundancies  or  deficiencies  would  have a
favorable or adverse impact, respectively, on future results of operations.

      Based   upon   consultations  with  the  Company's  independent  actuarial
consultants and their  statement  of  opinion  on  losses  and  LAE, the Company
believes that the liability for unpaid losses and LAE is currently  adequate  to
cover  all  claims  and related expenses which may arise from incidents reported
and IBNR.

      The following table  presents  total  unpaid  loss  and  LAE, net, and the
corresponding  reinsurance  recoverables  shown  in  the  Company's consolidated
financial statements for the periods indicated.

                                                    Years Ended
                                      December 31, 2007        December 31, 2006
                                      -----------------        -----------------
                                               (Dollars in Thousands)

Unpaid Loss and LAE, net                     $  9,595                $  6,814
IBNR loss and LAE, net                         21,633                  10,381
                                      -----------------        -----------------
Total unpaid loss and LAE, net               $ 31,228                $ 17,195
                                      =================        =================

Reinsurance recoverable on unpaid
  loss and LAE                               $ 11,399                $ 15,418
Reinsurance recoverable on IBNR
  loss and LAE                                 26,189                  16,951
                                      -----------------        -----------------
Total reinsurance recoverable on
  unpaid loss and LAE                        $ 37,588                $ 32,369
                                      =================        =================

      The following table presents the liability for unpaid  losses  and LAE for
UPCIC  since  inception.  The  top  line  of  the  table shows the estimated net
liabilities for unpaid losses and LAE at the balance  sheet date for each of the


                                       7


periods indicated. These figures represent the estimated amount of unpaid losses
and LAE for claims arising in all prior years that were  unpaid  at  the balance
sheet  date,  including losses that had been incurred but not yet reported.  The
portion of the  table  labeled  "Cumulative paid as of" shows the net cumulative
payments for losses and LAE made  in  succeeding years for losses incurred prior
to the balance sheet date. The lower portion of the table shows the re-estimated
amount of the previously recorded liability based on experience as of the end of
each succeeding year.




                                                                 Years Ended December 31,
                                    2007     2006     2005     2004    2003   2002   2001    2000   1999   1998
                                                                  (Dollars in Thousands)

                                                                                     
Balance Sheet liability            $31,228   $17,195    $6,141    $1,580  $1,351  $1,591   $2,893  $1,372  $1,532  $1,588

Cumulative paid as of:

One year later                           -    20,052    12,897     1,216     950     667    3,660   1,308     897     939

Two years later                          -         -    23,835    11,514   1,153     992    3,667   1,635   1,081     904

Three years later                        -         -         -    21,778   1,330   1,115    3,899   1,693   1,155   1,010

Four years later                         -         -         -         -   1,468   1,260    3,998   1,811   1,191   1,024

Five years later                         -         -         -         -       -   1,329    4,082   1,833   1,206     999

Six years later                          -         -         -         -       -       -    4,108   1,849   1,212   1,006

Seven years later                        -         -         -         -       -       -        -   1,897   1,223   1,009

Eight years later                        -         -         -         -       -       -        -       -   1,252   1,010

Nine years later                         -         -         -         -       -       -        -       -       -   3,834



Balance Sheet liability             31,229    17,195     6,141     1,580   1,351   1,591    2,893   1,372   1,532   1,588

One year later                           -    29,201    25,312     4,129   1,480   1,249    4,237   1,797   1,344   1,067

Two years later                          -         -    30,988    22,727   1,297   1,369    3,974   1,944   1,269   1,089

Three years later                        -         -         -    28,220   1,482   1,229    4,158   1,926   1,286   1,071

Four years later                         -         -         -         -   1,548   1,377    4,096   1,940   1,270   1,024

Five years later                         -         -         -         -       -   1,395    4,147   1,904   1,229   1,013

Six years later                          -         -         -         -       -       -    4,152   1,904   1,279   1,019

Seven years later                        -         -         -         -       -       -        -   1,916   1,278   1,016

Eight years later                        -         -         -         -       -       -        -       -   1,257   1,015

Nine years later                         -         -         -         -       -       -        -       -       -   1,018

Cumulative redundancy (deficiency)       -  (12,006)  (24,847)  (26,640)   (197)     196  (1,259)   (544)     275     570



      The cumulative redundancy or deficiency represents the aggregate change in
the  estimates  over all prior years. A deficiency  indicates  that  the  latest
estimate of the liability  for  losses and LAE is higher than the liability that
was originally estimated and a redundancy indicates that such estimate is lower.
It should be emphasized that the  table  presents  a  run-off  of  balance sheet
liability  for  the  periods  indicated  rather  than  accident  or  policy loss
development for those periods. Therefore, each amount in the table includes  the
cumulative effects of changes in liability for all prior periods. Conditions and
trends  that  have affected liabilities in the past may not necessarily occur in
the future.

      Underwriting  results  of  insurance  companies are frequently measured by
their  combined ratios. However, investment income,  federal  income  taxes  and
other non-underwriting  income  or  expense  are  not  reflected in the combined
ratio. The profitability of property and casualty insurance companies depends on
income  from  underwriting,  investment  and  service  operations.  Underwriting
results  are considered profitable when the combined ratio  is  under  100%  and
unprofitable when the combined ratio is over 100%.

      The  following  table sets forth the statutory loss ratios, expense ratios
and combined ratios for  the  periods indicated for UPCIC. The ratios are net of
reinsurance,  including  catastrophe   reinsurance  premiums  which  comprise  a
significant cost, and inclusive of loss  adjustment  expenses.  The ratios shown
in the table below and are computed based upon statutory  accounting principles.
The expense ratio includes management fees and commissions  paid  by UPCIC to an
affiliate in the amount of $43,871,705 in 2007 and $16,645,351 in 2006.



                                       8


                                                      Years Ended
                                        December 31, 2007     December 31, 2006
                                        -----------------     ------------------

 Loss Ratio                                    39%                   54%
 Expense Ratio                                 38                    19
                                        -----------------     ------------------
 Combined Ratio                                77%                   73%
                                        =================     ==================


      In  order  to  reduce  losses  and  thereby reduce the loss ratio and  the
combined ratio, the Company has taken several steps. These steps include closely
monitoring  rate  levels  for  new  and  renewal   business,  restructuring  the
homeowners'   insurance   coverage  offered,  restructuring   the   catastrophic
reinsurance  coverage  to  reduce  cost,  and  working  to  reduce  general  and
administrative expenses.

GOVERNMENT REGULATION

      Florida insurance companies  are  subject to regulation and supervision by
the OIR. The OIR has broad regulatory, supervisory  and  administrative  powers.
Such  powers  relate,  among  other  things,  to  the granting and revocation of
licenses  to  transact business; the licensing of agents  (through  the  Florida
Department of Financial  Services);  the  standards  of  solvency  to be met and
maintained;  the  nature  of,  and limitations on, investments; the approval  of
policy  forms  and rates; the review  of  reinsurance  contracts;  the  periodic
examination of the  affairs  of insurance companies; and the form and content of
required financial statements.   Such  regulation  and supervision are primarily
for  the benefit and protection of policyholders and  not  for  the  benefit  of
investors.

      In  addition,  the  Florida  legislature  and  the National Association of
Insurance Commissioners from time to time consider proposals  that  may  affect,
among  other  things,  regulatory  assessments  and  reserve  requirements.  The
Company  cannot  predict  the effect that any proposed or future legislation  or
regulatory or administrative  initiatives may have on the financial condition or
operations of UPCIC or the Company.  Any action by the OIR could have a material
adverse effect on the Company.

      UPCIC will become subject  to  other  states'  laws  and regulations as it
seeks authority to transact business in states other than Florida.  In addition,
UPCIC's participation in the NFIP's Write Your Own ("WYO") Program of  the  NFIP
will be governed by federal laws and regulations.

LEGISLATIVE INITIATIVES

      The  State of Florida operates the Citizens Property Insurance Corporation
("Citizens")  to  provide insurance to Florida homeowners in high-risk areas and
to others without private  insurance options.  In May 2007, the State of Florida
passed legislation that freezes  property insurance rates for Citizens customers
at  December  2006  levels through December  31,  2008,  and  permits  insurance
customers to opt into  Citizens  when the price of a privately-offered insurance
policy is 15% more than the Citizens  rate,  compared  to  the  previous  opt-in
threshold of 25%.  These initiatives, together with any future initiatives  that
seek  to  further  relax  eligibility  requirements  or reduce premium rates for
Citizens customers, could adversely affect the ability  of UPCIC and the Company
to  do  business  profitably.   In  addition,  the Florida legislature  in  2007
expanded the capacity of the Florida Hurricane Catastrophe  Fund  ("FHCF"), with
the  intent  of  reducing  the  cost  of  reinsurance  otherwise  purchased   by
residential  property insurers.  If the expanded FHCF coverage expires or if the
law providing  for  the  expanded  coverage  is  otherwise modified, the cost of
UPCIC's   reinsurance   program  may  increase,  which  could   affect   UPCIC's
profitability until such  time  as UPCIC can obtain approval of appropriate rate
changes.  State and federal legislation  relating  to insurance is affected by a
number of political and economic factors that are beyond  the  control  of UPCIC
and  the  Company.  The  Florida  legislature  and  the  National Association of
Insurance Commissioners from time to time consider proposals  that  may  affect,
among  other  things,  regulatory  assessments  and  reserve  requirements.  The
Company cannot predict the effect that any proposed or future federal  or  state
legislation or initiatives may have on the financial condition or operations  of
the Company or the Company's ability to expand its business.

DEPENDENCE ON KEY INDIVIDUALS

      UPCIC's  operations  depend  in  large  part  on the efforts of Bradley I.
Meier,  who  serves  as  President  of  UPCIC.   Mr. Meier has  also  served  as
President,  Chief  Executive  Officer  and Director of  the  Company  since  its


                                       9


inception  in  November  1990.   In addition,  UPCIC's  operations  have  become
materially dependent on the efforts  of  Sean  P.  Downes,  who  serves as Chief
Operating  Officer  of  UPCIC.  Mr.  Downes  has  also served as Chief Operating
Officer, Senior Vice President and Director of the  Company  since  January 2005
and as a Director of UPCIC since May 2003. The loss of the services provided  by
either  Mr.  Meier or Mr. Downes could have a material adverse effect on UPCIC's
and the Company's financial condition and results of operations.

COMPETITION

      The insurance  industry is highly competitive and many companies currently
write homeowners' property and casualty insurance. Additionally, the Company and
its subsidiaries must compete with companies that have greater capital resources
and  longer  operating  histories.  Increased  competition  from  other  private
insurance companies as well  as  Citizens  could  adversely affect the Company's
ability to do business profitably. Although the Company's  pricing is inevitably
influenced to some degree by that of its competitors, management  of the Company
believes  that  it  is  generally not in the Company's best interest to  compete
solely on price, choosing  instead  to  compete  on  the  basis  of underwriting
criteria,  its distribution network and high quality service to its  agents  and
insureds.  Increased  competition  could  have  a material adverse effect on the
Company.

FINANCIAL STABILITY RATING

      Financial stability ratings are an important  factor  in  establishing the
competitive  position  of  insurance  companies  and  may  impact  an  insurance
company's  sales.   Demotech,  Inc. maintains a letter scale financial stability
rating  system  ranging from A** (A  double  prime)  to  L  (licensed  by  state
regulatory authorities).   In  October  2007,  Demotech,  Inc.  assigned UPCIC a
financial  stability  rating  of  A,  which  is the fourth highest of six rating
levels. According to Demotech, Inc., A ratings  are  assigned  to  insurers that
have  "{ellipsis} exceptional ability to maintain liquidity of invested  assets,
quality  reinsurance,  acceptable financial leverage and realistic pricing while
simultaneously  establishing  loss  and  loss  adjustment  expense  reserves  at
reasonable levels."  With a financial stability rating of A, the Company expects
that UPCIC's property  insurance  policies  will  be acceptable to the secondary
mortgage marketplace and mortgage lenders.  The rating of UPCIC is subject to at
least  annual review by, and may be revised downward  or  revoked  at  the  sole
discretion of, Demotech, Inc.

      UPCIC's  failure to maintain a commercially acceptable financial stability
rating could have  a  material adverse effect on the Company's ability to retain
and attract policyholders  and  agents.  Many  of the Company's competitors have
ratings  higher  than that of UPCIC.  A downgrade  in  the  financial  stability
rating  of UPCIC could  have  a  material  adverse  impact  on  its  ability  to
effectively  compete  with other insurers with higher ratings.   Additionally, a
withdrawal of the rating  could cause UPCIC's insurance policies to no longer be
acceptable to the secondary  marketplace and mortgage lenders, which could cause
a material adverse effect of the  Company's  results of operations and financial
position.

      Demotech, Inc. bases its ratings on factors that concern policyholders and
not upon factors concerning investor protection.   Such  ratings  are subject to
change and are not recommendations to buy, sell or hold securities.

EMPLOYEES

      As of March 1, 2008, the Company had 151 full-time employees.  None of the
Company's  employees  is  represented  by  a  labor  union.  The  Company has an
employment  agreement  with  Bradley  I.  Meier,  President  and Chief Executive
Officer  of  the  Company,  Sean  P.  Downes,  Senior Vice President  and  Chief
Operating Officer of the Company and James M. Lynch,  Executive  Vice  President
and    Chief    Financial    Officer    of    the    Company.   See   "Executive
Compensation--Employment   Agreements."    The  Company  also   has   employment
agreements with certain employees that do not  serve in an executive capacity at
the Company.

ITEM 2.  DESCRIPTION OF PROPERTY

      On  July  31,  2004,  the Company purchased a  building  located  in  Fort
Lauderdale, Florida that after build-out became its home office on July 1, 2005.
The Company believes that the  new building is suitable for its intended use and
adequate to meet the Company's current  needs.  The building is 100% occupied by
the  Company.  There  is  no  mortgage  or lease arrangement.  The  building  is
adequately covered by insurance.


                                       10



ITEM 3.  LEGAL PROCEEDINGS

      The  Company  is  involved  in  certain   lawsuits.   In  the  opinion  of
management, except as described below, none of these lawsuits (1) involve claims
for  damages exceeding 10% of the current assets of  the  Company,  (2)  involve
matters  that  are not routine litigation incidental to the claims aspect of its
business, (3) involve  bankruptcy,  receivership  or  similar  proceedings,  (4)
involve  material  Federal,  state, or local environmental laws, (5) potentially
involve more than $100,000 in sanctions and a governmental authority is a party,
or (6) are material proceedings to which any director, officer, affiliate of the
Company, beneficial owner of more  than  5% of any class of voting securities of
the Company, or security holder is a party  adverse  to  the  Company  or  has a
material interest adverse to the Company.

      On February 7, 2005, Marty Steinberg as a court appointed receiver for the
entities  consisting of Lancer Management Group LLC, Lancer Management Group  II
LLC, Lancer Offshore Inc., Omnifund Ltd., LSPV Inc., LSPV LLC, Alpha Omega Group
Inc. and G.H.  Associates  LLC  (collectively  the "Lancer Entities") filed suit
against  Alfred  Taubman,  Anthony  Cullen, British  American  Racing,  Centrack
International, Inc., Kuwait & Middle  East  Financial  Investment  Co.,  Liberty
International  Asset  Management,  Macroview Investments Limited, Opus Portfolio
Ltd.,  Reva Stocker, Roger Dodger, LLC,  Signet  Management  Limited,  Thornhill
Group  Inc.  Trust,  World  Class  Boxing  and  the  Company  (collectively  the
"Defendants")  in  the United States District Court for the Southern District of
Florida.  The Company  received the notice of suit by mail on September 8, 2005.
The suit alleged that the  Lancer Entities fraudulently transferred funds to the
Defendants and that the transfers  unduly enriched the Defendants.  The receiver
asked the Company to pay $658,108.   The  Company  had  no record of the alleged
transfers  and  vigorously  defended  the suit. The lawsuit was  dismissed  with
prejudice by the receiver in 2006.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      There were no matters submitted to  a  vote  of the Company's shareholders
during the fourth quarter ended December 31, 2007.

                                       PART II

ITEM  5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
         BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

      The  Company's  Common  Stock  is  quoted on the American  Stock  Exchange
("AMEX") under the symbol UVE.  The following  table  sets  forth  prices of the
Common Stock, as reported by the AMEX.

For year ended December 31, 2007             High               Low
--------------------------------             ----               ---

    First Quarter                           $ 4.48             $2.40
    Second Quarter                            7.41              3.15
    Third Quarter                             7.28              4.55
    Fourth Quarter                           10.15              5.93


For year ended December 31, 2006             High               Low
--------------------------------             ----               ---

    First Quarter                           $ 1.40             $0.85
    Second Quarter                            1.65              0.93
    Third Quarter                             2.46              1.12
    Fourth Quarter                            3.97              2.31


      At  March  1,  2008,  transfer  agent records indicate 40 shareholders  of
record of the Company's Common Stock. There  were  approximately  425 beneficial
owners  of  its  Common  Stock.  In addition, there were 3 shareholders  of  the
Company's Series A and Series M Preferred Stock ("Preferred Stock").

      During  2007  and  2006,  respectively,  the  Company  declared  and  paid
aggregate dividends of $49,950  on  the  Company's  Series A Preferred Stock and
Series M Preferred Stock.


                                       11



      Applicable provisions of the Delaware General Corporation  Law  may affect
the ability of the Company to declare and pay dividends on its Common Stock.  In
particular,  pursuant to the Delaware General Corporation Law, a company may pay
dividends out  of  its  surplus,  as defined, or out of its net profits, for the
fiscal year in which the dividend is declared and/or the preceding year. Surplus
is defined in the Delaware General  Corporation  Law  to  be  the  excess of net
assets  of the company over capital. Capital is defined to be the aggregate  par
value of  shares issued.  Moreover, the ability of the Company to pay dividends,
if and when  declared by its Board of Directors, may be restricted by regulatory
limits on the  amount of dividends, which UPCIC is permitted to pay the Company.
Section 628.371  of  the  Florida  Statutes sets forth limitations, based on net
income and statutory capital, on the  amount  of dividends that UPCIC may pay to
the Company without approval from the OIR.

      On October 24, 2006, the Company declared  a dividend of $.05 per share on
its outstanding Common Stock of the Company to be  paid  on April 9, 2007 to the
shareholders  of  record of the Company at the close of business  on  March  19,
2007.  The dividend  payable  amount of $1,902,855 for this dividend was accrued
in the December 31, 2006 balance  sheet.   At  December  31,  2006,  the Company
recorded a dividend payable in the amount of $1,902.855 for this dividend  and a
net   reduction  to  retained  earnings  in  the  amount  of  $1,747,423,  which
represented  the  total  dividend  net  of  the  dividends on the shares held in
treasury  stock  and  in  the  Stock  Grantor  Trust  described  in  Note  11  -
Stockholders' Equity.  During the fourth quarter of 2006,  the  Company  paid  a
dividend  of  $0.05  per  share  that was accrued at the end of third quarter of
2006.  The aggregate amount of the  dividend  was  $1,747,423.  During the third
quarter of 2006, the Company paid a dividend of $0.04  per  share of outstanding
Common  Stock that was accrued at the end of the second quarter  of  2006.   The
aggregate  amount  of the dividend was $1,393,938.  During the second quarter of
2006, the Company paid a dividend of $0.04 per share of outstanding Common Stock
that was accrued at  the  end of first quarter of 2006.  The aggregate amount of
the dividend was $1,364,506.

      On March 15, 2007, the  Company  declared  a dividend of $.07 per share on
its outstanding Common Stock of the Company to be paid on August 10, 2007 to the
shareholders of record of the Company at the close of business on July 20, 2007.
The dividend payable amount was $2,446,392.

      On October 4, 2007, the Company declared a dividend  of  $.09 per share on
its outstanding Common Stock to be paid on April 8, 2008 to the  shareholders of
record  of the Company at the close of business on March 10, 2008.  The  Company
recorded  a dividend payable in the amount of $3,537,639 for this dividend and a
net reduction to retained earnings in the amount of $3,241,145, which represents
the total dividend net of the dividends on the shares held in treasury stock and
in the Stock  Grantor  Trust described in Note 11 - Stockholders' Equity. During
the  fourth  quarter, the  Company  paid  a  dividend  of  $0.08  per  share  of
outstanding Common  Stock  that  was  accrued  at  the end of third quarter. The
aggregate amount of the dividend was $2,861,018.  During  the third quarter, the
Company paid a dividend of $0.07 per share of outstanding Common  Stock that was
accrued  at  the end of the first quarter. The aggregate amount of the  dividend
was $2,503,391.  During the second quarter, the Company paid a dividend of $0.05
per share of outstanding Common Stock that was accrued in December 31, 2006. The
aggregate amount of the dividend was $1,759,922.

      On January 23,  2008, the Company declared a dividend of $.10 per share on
its outstanding Common Stock to be paid on August 7, 2008 to the shareholders of
record of the Company at  the  close  of  business  on July 9, 2008. The Company
expects to pay an aggregate dividend of approximately $3,601,273.

STOCK ISSUANCES

      On March 14, 2007, the Company issued 250,000 shares  of restricted common
stock at a price of $3.70 per share to an employee in consideration for services
rendered pursuant to the terms of an employment agreement. The  shares will vest
over  a three year period. On May 1, 2007, the Company issued 22,143  shares  of
restricted common stock at a price of $1.87 per share, on a "cashless" basis, to
James M.  Lynch,  Executive  Vice  President  and Chief Financial Officer of the
Company, pursuant to Mr. Lynch's exercise of stock options. Also on May 1, 2007,
the Company issued 387,234 shares of restricted common stock at a price of $1.06
per share, on a "cashless" basis, to Norman M. Meier, a director of the Company,
pursuant to Mr. Meier's exercise of stock options.  Also  on  May  1,  2007, the
Company issued 77,447 shares of restricted common stock at a price of $1.06  per
share,  on  a  "cashless"  basis,  to  Joel  Wilentz, a director of the Company,
pursuant to Mr. Wilentz's exercise of stock options.  Also  on  May 1, 2007, the
Company issued 77,447 shares of restricted common stock at a price  of $1.06 per
share,  on  a  "cashless"  basis,  to  Reed  Slogoff, a director of the Company,
pursuant to Mr. Slogoff's exercise of stock options.  On  November 29, 2007, the
Company issued 100,000 and 150,000 shares of restricted common  stock at a price
of $.03 and $.05 respectively to a private investor pursuant to the  exercise of
warrants to purchase restricted common stock.  Unless otherwise specified,  such


                                       12


as  in  the  case  of  the  exercise of stock options or warrants, the per share
prices were determined using  the closing price of the Company's common stock as
quoted on the OTC Bulletin Board  or  the  AMEX  and  the  shares were issued in
private transactions pursuant to Section 4(2) of the Securities  Act of 1933, as
amended.

EQUITY COMPENSATION PLANS

      See  Item  11,  "Security  Ownership  of  Certain  Beneficial  Owners  and
Management   and   Related   Stockholder  Matters  -  Equity  Compensation  Plan
Information," for a discussion  of  shares  of  Common  Stock  issued  under the
Company's equity compensation plans.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS

      A  NUMBER  OF  STATEMENTS  CONTAINED  IN  THIS  REPORT ARE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995  THAT INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE  ACTUAL  RESULTS  TO
DIFFER  MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN THE APPLICABLE STATEMENTS.
THESE RISKS  AND  UNCERTAINTIES INCLUDE BUT ARE NOT LIMITED TO THE COSTS AND THE
UNCERTAINTIES ASSOCIATED  WITH  THE  RISK  FACTORS  SET  FORTH  IN ITEM 1 ABOVE.
INVESTORS ARE CAUTIONED THAT THESE FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES
OF FUTURE PERFORMANCE OR RESULTS.

OVERVIEW

      UPCIC's  application  to  become a Florida licensed property and  casualty
insurance company was filed with the OIR on May 14, 1997 and approved on October
29,  1997.  UPCIC's proposal to begin  operations  through  the  acquisition  of
homeowners'  insurance policies issued by the JUA was approved by the JUA on May
21, 1997, subject to certain minimum capitalization and other requirements.

      The OIR  requires  applicants  to  have  a  minimum capitalization of $5.0
million  to  be  eligible to operate as an insurance company  in  the  State  of
Florida.  Upon being  issued  an  insurance  license,  companies  must  maintain
capitalization   of   at   least   $4.0  million.   If  an  insurance  company's
capitalization falls below $4.0 million,  then the company will be deemed out of
compliance  with  OIR requirements, which could  result  in  revocation  of  the
participant's license  to  operate  as  an  insurance  company  in  the State of
Florida.

      The  Company  has  continued  to  implement its plan to become a financial
services  company  and,  through its wholly-owned  insurance  subsidiaries,  has
sought to position itself  to  take  advantage of what management believes to be
profitable business and growth opportunities in the marketplace.

      The Company entered into an agreement  with  the  JUA whereby during 1998,
UPCIC assumed approximately 30,000 policies from the JUA.   In  addition,  UPCIC
received bonus incentive funds from the JUA for assuming the policies. The bonus
funds were maintained in an escrow account for three years. These bonus payments
were not included in the Company's assets until receipt at the end of the three-
year  period.   UPCIC could not cancel the policies from the JUA for this three-
year period at which  point UPCIC received the bonus funds. The Company will not
be receiving any additional bonus payments.

      The Company expects  that  premiums  from policy renewals and new business
will be sufficient to meet the Company's working capital requirements beyond the
next twelve months.

      The policies  obtained from the JUA provided the  opportunity for UPCIC to
solicit future renewal premiums.  The majority of the policies obtained from the
JUA renewed with UPCIC.  In an effort to further grow its insurance  operations,
in 1998 the  Company  began to solicit  business  actively  in the open  market.
Through renewal of JUA business  combined with business  solicited in the market
through independent agents, UPCIC is currently servicing  approximately  374,000
homeowners'  insurance  policies.  To improve  underwriting and manage risk, the
Company  utilizes  standard  industry  modeling  techniques  for  hurricane  and
windstorm exposure. To diversify UPCIC's product lines, UPCIC underwrites inland
marine policies. In February 2008, UPCIC filed a request with the National Flood
Insurance  Program to become  authorized  to write and service  flood  insurance
policies under the WYO Program. Management may consider underwriting other types
of policies in the future. Any such program will require OIR approval.  See Item
1, Competition  under "Factors  Affecting  Operation Results and Market Price of
Stock" for a discussion of the material  conditions and  uncertainties  that may
affect UPCIC's ability to obtain additional policies.


                                       13



CRITICAL ACCOUNTING POLICIES

USE OF ESTIMATES.   The  preparation  of financial statements in conformity with
accounting  principles  generally accepted  in  the  United  States  of  America
("GAAP") requires management  to  make estimates and assumptions that affect the
reported amounts of assets and liabilities  and  disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods.   The  Company's  primary
areas of estimate are described below.

RECOGNITION OF PREMIUM REVENUES.  Property and liability premiums are recognized
as  revenue  on  a pro rata basis over the policy term.  The portion of premiums
that will be earned  in  the  future  are  deferred  and  reported  as  unearned
premiums.  The Company believes that its revenue recognition policies conform to
Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements.

INSURANCE  LIABILITIES.   Claims and claim adjustment expenses are provided  for
as claims are  incurred.  The  provision  for unpaid claims and claim adjustment
expenses includes: (1) the accumulation of  individual case estimates for claims
and claim adjustment expenses reported prior  to  the  close  of  the accounting
period;  (2)  estimates  for unreported claims based on industry data;  and  (3)
estimates of expenses for  investigating  and  adjusting  claims  based  on  the
experience of the Company and the industry.

Inherent  in  the  estimates  of  ultimate  claims  are expected trends in claim
severity, frequency and other factors that may vary as  claims are settled.  The
amount  of uncertainty in the estimates for casualty coverage  is  significantly
affected  by  such  factors  as  the amount of claims experience relative to the
development period, knowledge of the  actual  facts  and  circumstances  and the
amount  of  insurance risk retained.  In the case of UPCIC, this uncertainty  is
compounded by  UPCIC's  limited  history  of  claims  experience.   In addition,
UPCIC's  policyholders  are  currently  concentrated in South Florida, which  is
periodically  subject  to  adverse weather conditions  such  as  hurricanes  and
tropical storms.  The methods for making such estimates and for establishing the
resulting liability are continually  reviewed, and any adjustments are reflected
in earnings currently.

DEFERRED POLICY ACQUISITION COSTS/DEFERRED  CEDING COMMISSIONS.  Commissions and
other costs of acquiring insurance that vary  with  and are primarily related to
the production of new and renewal business are deferred  and  amortized over the
terms  of  the  policies  or  reinsurance  treaties  to which they are  related.
Determination of costs other than commissions that vary  with  and are primarily
related  to  the  production  of new and renewal business requires estimates  to
allocate certain operating expenses.  As  of  December 31, 2007, deferred policy
acquisition  costs  were  $37,018,747  and  deferred   ceding  commissions  were
$39,141,016.  Deferred  ceding  commissions  were  reduced  by  deferred  policy
acquisition costs and shown net on the Consolidated Balance Sheet  in the amount
of $2,122,269.

PROVISION  FOR  PREMIUM DEFICIENCY.  It is the Company's policy to evaluate  and
recognize losses  on  insurance  contracts  when  estimated  future  claims  and
maintenance  costs  under  a group of existing contracts will exceed anticipated
future premiums and investment  income.   The determination of the provision for
premium  deficiency requires estimation of the  costs  of  losses,  catastrophic
reinsurance  and  policy  maintenance to be incurred and investment income to be
earned over the remaining policy  period.   The  Company  has  determined that a
provision for premium deficiency was not warranted as of December 31, 2007.

REINSURANCE.  In the normal course of business, the Company seeks  to reduce the
risk  of  loss  that  may  arise  from  catastrophes  or other events that cause
unfavorable underwriting results by reinsuring certain levels of risk in various
areas of exposure with other insurance enterprises or reinsurers.   While ceding
premiums  to reinsurers reduces the Company's risk of exposure in the  event  of
catastrophic losses, it also reduces the Company's potential for greater profits
should such  catastrophic  events  fail  to occur. The Company believes that the
extent of its reinsurance is typical of a company of its size in the homeowners'
insurance industry.  Amounts recoverable from  reinsurers  are  estimated  in  a
manner   consistent  with  the  provisions  of  the  reinsurance  agreement  and
consistent with the establishment of the liability of the Company. The Company's
reinsurance  policies  do  not  relieve  the  Company  from  its  obligations to
policyholders. Failure of reinsurers to honor their obligations could  result in
losses  to  the  Company;  consequently,  allowances are established for amounts
deemed uncollectible. No such allowance was  deemed necessary as of December 31,
2007.

OFF-BALANCE SHEET ARRANGEMENTS

The Company had no off-balance sheet arrangements during 2007.


                                       14


RELATED PARTIES

All  underwriting,  rating,  policy  issuance,  reinsurance   negotiations   and
administration  functions  for  UPCIC  are  performed  by  UPCIC, Universal Risk
Advisors, Inc., a wholly owned subsidiary of the Company, and unaffiliated third
parties.  Claims  adjusting  functions  are  performed  by  Universal  Adjusting
Corporation,  a  wholly  owned  subsidiary  of  the Company, and affiliated  and
unaffiliated third parties.

Downes and Associates, a multi-line insurance adjustment  corporation  based  in
Deerfield  Beach,  Florida  performs  certain  claims  adjusting work for UPCIC.
Downes and Associates is owned by Dennis Downes, who is  the  father  of Sean P.
Downes, Chief Operating Officer and Senior Vice President of UPCIC. During  2007
and  2006,  the Company expensed claims adjusting fees of $675,237 and $829,208,
respectively, to Downes and Associates.

In September  2006,  the  Company  initiated the process of acquiring all of the
outstanding common stock of Atlas Florida Financial Corporation, which owned all
of  the  outstanding  common stock of Sterling  Premium  Finance  Company,  Inc.
("Sterling"), from the  Company's  Chief  Executive  Officer and Chief Operating
Officer  for  $50,000,  which approximated Sterling's book  value.  The  Company
received approval of the  acquisition  from  the  OIR. Sterling has been renamed
Atlas Premium Finance Company and commenced offering premium finance services in
November 2007.

RESULTS OF OPERATIONS

FOR YEAR ENDED DECEMBER 31, 2007 AND FOR YEAR ENDED DECEMBER 31, 2006.

      The fiscal year ended December 31, 2007 marked  a  significant improvement
in  the  Company's  operating  results  over  recent  past fiscal  years.   This
improvement   was   primarily   attributable  to  volume  and  rate   increases,
restructuring  the homeowners' insurance  coverage  offered,  restructuring  the
Company's reinsurance coverage and working to control general and administrative
expenses. In addition,  Florida  did  not  experience any windstorm catastrophes
during 2007.

      Gross premiums written  increased 34.2% to $498,748,778 for the year ended
December 31, 2007 from  $371,754,514  for the year ended  December 31, 2006. The
increase in gross premiums  written is primarily  attributable to an increase in
new business as well as premium rate increases which were mitigated by a decline
in premium rates. Although rates have recently decreased, the number of policies
written has  continued  to  increase.  The  increase  in new  business is partly
attributable to the Florida windstorm  catastrophes in 2004 and 2005, which have
provided an  opportunity  in the otherwise  competitive  marketplace  as certain
companies are not accepting new business,  as well as marketing  initiatives the
Company has undertaken.

      Net premiums written  decreased  0.5%  to  $140,343,762 for the year ended
December 31, 2007 from $141,035,805 for the year ended  December  31,  2006. The
decrease  in  net  premiums  written  reflects  the  impact of premiums ceded to
reinsurers during the year ended December 31, 2007 of  $358,405,016, or 71.9% of
premiums written, as compared to $230,718,709, or 62.1% of premiums written, for
the  year  ended  December  31,  2006. The decrease in net premiums  written  is
attributable  to  changes  to  the Company's  reinsurance  program.  Catastrophe
reinsurance costs as a percentage  of  gross  premiums  written  were greater in
2007. Under the Company's quota share reinsurance treaty, the Company elected to
cede  80% of gross written premiums, losses and loss adjustment expenses  during
the first  five  months  of  2006  for  all policies with coverage for wind risk
versus 50% of policies with coverage for  wind  risk during the subsequent seven
months of 2006. The Company continued to cede 50% of its gross written premiums,
losses and loss adjustments expenses for policies  with  coverage  for wind risk
during 2007. The Company believes that the extent of its reinsurance  is typical
of a company of its size in the homeowners' insurance industry.

      Net  premiums  earned increased 185.2% to $154,418,452 for the year  ended
December 31, 2007 from  $54,135,952  for  the  year ended December 31, 2006. The
increase in net premiums earned is attributable  to an increase in new business,
premium rate increases and changes in the reinsurance program noted above.

      Commission  revenue increased 231.0% to $22,222,007  for  the  year  ended
December  31, 2007 from  $6,714,511  for  the  year  ended  December  31,  2006.
Commission  income is comprised mainly of the Company's managing general agent's
policy fee income  on  all  new  and  renewal  insurance  policies,  reinsurance
commission  sharing agreements and commissions generated from agency operations.
The increase  is  primarily due to greater reinsurance commission sharing and an
increase in managing general agent's policy fee income.


                                       15



      Investment income consists of net investment income and net realized gains
(losses). Investment  income  increased 161.2% to $10,410,259 for the year ended
December 31, 2007 from $3,986,414  for  the  year  ended December 31, 2006.  The
increase is primarily due to higher investment balances during 2007.

      Other revenue increased 370.9% to $1,463,763 for  the  year ended December
31,  2007 from $310,873 for the year ended December 31, 2006. Other  revenue  is
comprised  of  fee  revenue  from  direct  sales  and service revenue from other
operations.   The  increase is primarily attributable  to  fees  earned  on  the
Company's new program of offering payments plans to policyholders.

      Losses and LAE  net  incurred increased 139.8% to $59,799,670 for the year
ended December 31, 2007 from $24,940,879 for the year ended December 31, 2006 as
compared to net premiums earned  which  increased 185.2% to $154,418,452 for the
year ended December 31, 2007 from $54,135,952  for  the  year ended December 31,
2006.  Losses and LAE, the Company's most significant expense,  represent actual
payments  made  and  changes in estimated future payments to be made  to  or  on
behalf of its policyholders,  including  expenses  required to settle claims and
losses.  Losses  and  LAE,  net are influenced by loss severity  and  frequency.
Losses and LAE, net increased  due  to  an  increase  in  insured  exposures and
changes  to  the  Company's  reinsurance  program discussed above. The Company's
direct loss ratio for the year ended December  31,  2007  was  23.8% compared to
36.8%  for  the  year ended December 31, 2006. The Company's direct  loss  ratio
decreased principally due to the lower frequency and severity of claims in 2007.
During 2007 and 2006,  the  Company  did not experience any catastrophic events.
Except  for  catastrophe claims, the Company  believes  that  the  severity  and
frequency of claims remained relatively stable for the periods under comparison.
The Company's  net  loss  ratio  for  the year ended December 31, 2007 was 38.7%
compared to 46.1% for the year ended December  31,  2006.   The  net  loss ratio
decreased due to the decrease in net losses incurred and premium rate increases.

      Catastrophes  are  an  inherent  risk  of the property-liability insurance
business, particularly in the geographic area  where  the Company does business,
which may contribute to material year-to-year fluctuations in UPCIC's results of
operations and financial position. The level of catastrophe  loss experienced in
any year cannot be predicted and could be material to the results  of operations
and financial position of the Company. While management believes its catastrophe
management strategies will reduce the severity of future losses, UPCIC continues
to be exposed to similar or greater catastrophes as those experienced  in  prior
years.

      The  reserve  for  direct  unpaid  losses  and LAE at December 31, 2007 is
$68,815,500. Based upon consultations with the Company's  independent  actuarial
consultants  and  their  statement  of  opinion  on  losses and LAE, the Company
believes that the liability for unpaid losses and LAE  is  adequate to cover all
claims and related expenses which may arise from incidents reported.  The  range
of  direct  loss  reserve  estimates  as determined by the Company's independent
actuarial consultants is a low of $49,302,105 and a high of $69,993,764. The key
assumption used to arrive at management's  best  estimate  of  loss  reserves in
relation   to  the  actuary's  range  and  the  specific  factors  that  led  to
management's  best  estimate  is  that  the  liability  is based on management's
estimate  of  the  ultimate cost of settling each loss and an  amount  for  IBNR
losses. However, if losses exceed direct loss reserve estimates there could be a
material adverse effect  on  the  Company's financial statements. Also, if there
are regulatory initiatives, legislative enactments or case law precedents, which
change the basis for policy coverage,  there  could  be an effect on direct loss
reserve estimates having a material adverse effect on  the  Company's  financial
statements.

      As  a result of the Company's review of its liability for losses and  loss
adjustment  expenses,  which includes a re-evaluation of the adequacy of reserve
levels for prior year claims,  the  Company's  liabilities for unpaid losses and
LAE,  net of related reinsurance recoverables, as  of  December  31,  2007  were
increased  in the current year by $12,006,332 for claims that had occurred on or
before the prior  year  balance  sheet  date.  This  unfavorable  loss emergence
resulted principally from higher than expected hurricane losses in 2004 and as a
result of actual loss development on prior year non-catastrophe losses  emerging
less  favorably  than expected. The Company's liabilities for unpaid losses  and
LAE, net of related  reinsurance  recoverables,  as  of  December  31, 2006 were
increased during 2006 by $15,693,957 for claims that had occurred on  or  before
the  previous  year balance sheet date. This unfavorable loss emergence resulted
principally from higher than expected hurricane losses in 2004.  There can be no
assurance concerning  future  adjustments of reserves, positive or negative, for
claims through December 31, 2007.

      General and administrative  expenses  increased  190.4% to $39,165,022 for
the year ended December 31, 2007 from $13,485,562 for the  year  ended  December
31,  2006.  General and administrative expenses have increased primarily due  to
the increase in direct written premium as well as changes in UPCIC's reinsurance
program.


                                       16


LIQUIDITY AND CAPITAL RESOURCES

      The  Company's  primary  sources of cash flow are the receipt of premiums,
commissions, policy fees investment  income, reinsurance recoverables and short-
term loans.

      For the year ended December 31,  2007,  cash  flows  provided by operating
activities were $537,343.  Cash flows from operating activities  are expected to
be  positive  in  both  the  short-term  and  reasonably foreseeable future.  In
addition, the Company's investment portfolio is  highly  liquid  as  it consists
entirely  of cash and cash equivalents of which $1,500,000 is held by the  State
of  Florida  Department  of  Financial  Services  for  the  benefit  of  UPCIC's
policyholders.  Cash  flows used in investing activities are primarily comprised
of purchases of building improvements and other capital expenditures. Cash flows
used in financing activities  primarily relate to Company borrowings and payment
of dividends to shareholders.

      In June 2005, the Company  borrowed  monies from two private investors and
issued  two  promissory  notes for the aggregate  principal  sum  of  $1,000,000
payable in 10 monthly installments  of  $100,000.  Payment on one note commenced
on June 30, 2006 and commenced on the other  note  on  November  30, 2006. As of
March 28, 2007, these loans were fully paid. The loan proceeds were subsequently
contributed  to  UPCIC as additional paid-in-capital.  In conjunction  with  the
notes, the Company granted a warrant to one of the investors to purchase 200,000
shares of restricted  common  stock  at  an  exercise  price  of $.05 per share,
expiring in June 2010.  These transactions were approved by the  Company's Board
of Directors.

      On November 9, 2006, UPCIC entered into a $25.0 million surplus  note with
the  Florida  State  Board  of  Administration under Florida's Insurance Capital
Build-Up Incentive Program. Under  the  program,  which  was  implemented by the
Florida  legislature  to  encourage  insurance  companies  to  write  additional
residential  insurance  coverage  in  Florida, the State Board of Administration
matched UPCIC's funds of $25.0 million  that were earmarked for participation in
the program. The surplus note brings the current capital and surplus of UPCIC to
approximately $98.7 million.  The $25.0 million  is invested in a treasury money
market account.

      The surplus note has a twenty-year term and  accrues  interest  at  a rate
equivalent  to the 10-year U.S. Treasury Bond Rate, adjusted quarterly based  on
the 10-year Constant  Maturity  Treasury rate.  For the first three years of the
term of the surplus note, UPCIC is  required  to  pay  interest  only,  although
principal payments can be made during this period.  Any payment of principal  or
interest  by  UPCIC  on the surplus note must be approved by the Commissioner of
Florida Insurance Regulation.

      An event of default  will  occur  under  the  surplus  note  if UPCIC: (i)
defaults in the payment of the surplus note; (ii) fails to meet at least  a  2:1
ratio of net premium to surplus ("Minimum Writing Ratio") requirement by June 1,
2007; (iii) fails to submit quarterly filings to the OIR; (iv) fails to maintain
at  least $50 million of surplus during the term of the surplus note, except for
certain  situations;  (v)  misuses  proceeds of the surplus note; (vi) makes any
misrepresentations  in the application  for  the  program;  or  (vii)  pays  any
dividend when principal  or  interest  payments  are  past due under the surplus
note.  As of December 31, 2007, the Company is in compliance  with  each  of the
aforementioned loan covenants except for the Minimum Writing Ratio.

       If UPCIC  failed  to  increase  its  writing  ratio  for two  consecutive
quarters prior to June 1, 2007,  failed to obtain the 2:1 Minimum  Writing Ratio
by June 1,  2007,  or drops  below  the 2:1  Minimum  Writing  Ratio  once it is
obtained for two  consecutive  quarters,  the interest  rate on the surplus note
will increase during such deficiency by 25 basis points if the resulting writing
ratio is between  1.5:1 and 2:1 and the interest rate will increase by 450 basis
points if the writing  ratio is below 1.5:1.  If the writing ratio remains below
1.5:1 for three  consecutive  quarters  after June 1,  2007,  UPCIC must repay a
portion of the surplus note so that the Minimum  Writing  Ratio will be obtained
for the following  quarter.  As of September 30, 2007 and December 31, 2007, the
Company's  net  written  premium  to  surplus  ratios  were  1.83:1  and  1.42:1
respectively,  as defined under the terms of the surplus note  agreement.  Under
the terms of the surplus note agreement, at December 31, 2007, the interest rate
on the note was  increased by 450 basis  points.  As of December  31, 2007,  the
Company's  net written  premium to surplus  ratio,  as defined under the surplus
note agreement, was below 1.5:1. If the Company's net written premium to surplus
ratio remains below 1.5:1 for two additional  calendar  quarters (i.e.,  through
June 30, 2008), the Company will be required to repay a portion of the principal
balance under the surplus note agreement.  The Company expects to meet or exceed
a ratio of 1.5:1 by June 30, 2008 and,  therefore,  does not expect to repay any
portion of the $25,000,000 principal balance of the surplus note during 2008.

      To  meet its matching obligation  under  the  Insurance  Capital  Build-Up
Incentive Program,  on  November  3,  2006,  the  Company entered into a Secured
Promissory Note with Benfield Greig (Holdings), Inc.  in the aggregate principal
amount of $12 million.  Interest on the note accrued at  the  rate of 12.75% per
annum.   The outstanding principal was due in six monthly installments  of  $1.5
million and  a  final  seventh monthly installment of the remaining balance plus
all accrued interest under  the  terms  of the note starting on January 31, 2007
and ending on July 31, 2007.  In connection  with  the loan, the Company and its


                                       17



subsidiaries appointed Benfield as their reinsurance  intermediary  for  all  of
their  reinsurance  placements  for the contract year beginning on June 1, 2007.
The Company made all payments under  the  note  in  a timely manner and paid the
final installment on July 18, 2007.  Under the terms of the note, Benfield Greig
(Holdings), Inc. agreed to refund a portion of the interest  paid on the note if
the  Company  fulfilled  all  its material obligations under the related  broker
agreements.  On July 27, 2007,  the  Company  received a refund of interest from
Benfield  Greig  (Holdings), Inc. in the amount of  $280,500  that  reduced  the
effective interest rate on the note to 8.25% per annum.

      The following table represents the Company's total contractual obligations
for which cash flows are fixed or determinable.




                                     Total     2008     2009     2010      2011     2012     Thereafter
                                     -----     ----     ----     ----      ----     ----     ----------
                                                          (Dollars in thousands)
                                                                          
     Contractual obligations
        Long-term debt             $25,000     $ -       $ -      $ -      $992    $1,039      $22,969
         Loans payable                   3        3        -        -       -        -           -
        Operating leases               507      217      142       82        66      -           -
 Total contractual obligations     $25,510     $220     $142      $82    $1,058    $1,039      $22,969
                                   =======     ====     ====      ===    ======    ======      =======



      The balance  of  cash  and  cash  equivalents  as of December 31, 2007 was
$214,745,606. Most of this amount is available to pay  claims  in the event of a
catastrophic event pending reimbursement for any aggregate amount  in  excess of
specific  limits  set  forth  in  UPCIC's  reinsurance  agreements. For the 2007
hurricane season, UPCIC's reinsurance agreements transfer  the  risk  of loss in
excess  of  $45,000,000 up to approximately the 150 year PML as of the beginning
of the hurricane season on June 1 for the first event and $9,300,000 for each of
the second and  third  events  up  to  an amount that will vary depending on the
coverage  exhausted  in  the  prior  event(s).    Catastrophic   reinsurance  is
recoverable upon presentation to the reinsurer of evidence of claim payment.

      GAAP  differs  in  some  respects  from reporting practices prescribed  or
permitted  by  the OIR.  To retain its certificate  of  authority,  the  Florida
insurance laws and  regulations  require that UPCIC maintain capital and surplus
equal to the statutory minimum capital  and  surplus  requirement defined in the
Florida Insurance Code as the greater of 10% of the insurer's  total liabilities
or $4,000,000. UPCIC's statutory capital and surplus was $98,686,993 at December
31,  2007  and exceeded the minimum capital and surplus requirements.  UPCIC  is
also required to adhere to prescribed premium-to-capital surplus ratios.

      The maximum  amount  of  dividends, which can be paid by Florida insurance
companies without prior approval  of  the  Florida  Commissioner,  is subject to
restrictions  relating  to statutory surplus. The maximum dividend that  may  be
paid by UPCIC to the Company  without prior approval is limited to the lesser of
statutory net income from operations of the preceding calendar year or statutory
unassigned surplus as of the preceding year end. During 2007 and 2006, UPCIC did
not pay dividends to the Company.

IMPACT OF INFLATION AND CHANGING PRICES

      The consolidated financial  statements  and  related data presented herein
have been prepared in accordance with generally accepted  accounting  principles
which  require  the  measurement of financial position and operating results  in
terms  of  historical  dollars  without  considering  changes  in  the  relative
purchasing power of money  over time due to inflation. The primary assets of the
Company  are monetary in nature.  As  a  result,  interest  rates  have  a  more
significant  impact on the Company's performance than the effects of the general
levels of inflation.  Interest  rates  do  not  necessarily  move  in  the  same
direction or with the same magnitude as the cost of paying losses and LAE.

      Insurance premiums are established before the Company knows the amount  of
loss  and  LAE  and  the  extent  to  which  inflation may affect such expenses.
Consequently, the Company attempts to anticipate  the future impact of inflation
when  establishing rate levels. While the Company attempts  to  charge  adequate
rates,  the Company may be limited in raising its premium levels for competitive
and regulatory reasons. Inflation also affects the market value of the Company's
investment  portfolio  and  the  investment  rate of return. Any future economic
changes which result in prolonged and increasing levels of inflation could cause
increases in the dollar amount of incurred loss  and  LAE and thereby materially
adversely affect future liability requirements.


                                       18



ITEM 7.  FINANCIAL STATEMENTS

      The financial statements of the Company are annexed to this report and are
referenced as pages F-1 to F-26.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

      None.

ITEM 8A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

      The Company maintains disclosure controls and procedures that are designed
to  ensure that information required to be disclosed in  the  reports  that  the
Company  files  or  submit  under the Securities Exchange Act of 1934 ("Exchange
Act") is recorded, processed,  summarized  and  reported within the time periods
specified in the Security and Exchange Commission's  rules  and  forms, and that
such  information  is accumulated and communicated to the Company's  management,
including  its  Chief   Executive   Officer  and  Chief  Financial  Officer,  as
appropriate, to allow timely decisions regarding required disclosure.

      As of the end of the period covered  by  this  report, the Company carried
out  an  evaluation,  under the supervision and with the  participation  of  its
principal  executive  officer   and   principal   financial   officer,   of  the
effectiveness  of  the design and operation of the Company's disclosure controls
and procedures pursuant  to  Rule 13a-15  under the Exchange Act.  Based on that
evaluation, the Company's Chief Executive Officer  and  Chief  Financial Officer
concluded that disclosure controls and procedures were effective  as of December
31, 2007.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

      The  management  of  the  Company  is  responsible  for  establishing  and
maintaining  adequate internal control over financial reporting.  The  Company's
internal control  system  was  designed  to  provide reasonable assurance to the
Company's management and Board of Directors regarding  the  preparation and fair
presentation of published financial statements.

      All internal control systems, no matter how well designed,  have  inherent
limitations.  Therefore,  even  those  systems  determined  to  be effective can
provide   only   reasonable   assurance  with  respect  to  financial  statement
preparation and presentation.

      Management assessed the effectiveness  of  the  Company's internal control
over  financial  reporting as of December 31, 2007. In making  this  assessment,
management  used the  criteria  set  forth  in  Internal  Control  -  Integrated
Framework issued  by  the  Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on  this  assessment,  management  believes that, as of
December  31, 2007, the Company's internal control over financial  reporting  is
effective based on those criteria.

      This annual report does not include an attestation report of the Company's
registered  public  accounting  firm  regarding  internal control over financial
reporting.  Management's report was not subject to  attestation by the Company's
registered public accounting firm pursuant to temporary  rules of the Securities
and  Exchange  Commission  ("SEC")  that  permit  the  Company to  provide  only
management's report in this annual report.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

      There  were  no changes in the Company's internal control  over  financial
reporting that occurred  during  the  Company's  fourth  fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.


                                       19



ITEM 8B. OTHER INFORMATION

      UPCIC  has  applied  to  write  homeowners'  insurance  policies  in  five
additional states.  Those states are Texas, Hawaii, Georgia, South  Carolina and
North  Carolina.  In  addition,  UPCIC  filed  a request with the NFIP to become
authorized to write and service WYO flood insurance  policies.  The  WYO Program
began in 1983 and is a cooperative undertaking of the insurance industry and the
Federal Emergency Management Agency (FEMA). The WYO Program allows participating
property  and  casualty  insurance  companies  to write and service the Standard
Flood  Insurance  Policy in their own names. The companies  receive  an  expense
allowance for policies written and claims processed while the federal government
retains responsibility for underwriting losses. The WYO Program operates as part
of the NFIP.

                                       PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

      The directors  and  executive  officers  of the Company as of December 31,
2007 are as follows:

Name                  Age   Position
----                  ---   --------

Bradley I. Meier      40    President, Chief Executive Officer and Director
Norman M. Meier       69    Director, Secretary
Reed J. Slogoff       39    Director
Joel M. Wilentz, M.D. 74    Director
James M. Lynch        53    Executive Vice President and Chief Financial Officer
Sean P. Downes        38    Senior Vice President, Chief Operating Officer
                            and Director
Ozzie A. Schindler    39    Director


      BRADLEY  I.  MEIER  has  been President, Chief  Executive  Officer  and  a
Director of the Company since its  inception in November 1990.  He has served as
President  of  UPCIC,  a  wholly-owned subsidiary  of  the  Company,  since  its
formation in April 1997.  In  1990,  Mr. Meier graduated from the Wharton School
of Business with a B.S. in Economics.

      NORMAN  M. MEIER has been a Director  of  the  Company  since  July  1992.
Presently Mr. Meier  serves  as  Executive  Chairman of DermWorx Incorporated, a
privately held dermatologic specialty pharmaceutical company. From February 2000
until  January  2006, Mr. Meier was President and  Chief  Executive  Officer  of
PharmaMatrix, Inc.,  a medical marketing and advertising company.  From December
1986 until November 1999, Mr. Meier was President, Chief Executive Officer and a
Director of Columbia Laboratories,  Inc.,  a  publicly-traded corporation in the
pharmaceuticals  business.   From  1977  until  1986,  Mr.  Meier  served  as  a
consultant  to  Key Pharmaceuticals.  From 1971 to  1977,  Mr.  Meier  was  Vice
President of Sales and Marketing for Key Pharmaceuticals.

      REED J. SLOGOFF  has been a Director of the Company since March 1997.  Mr.
Slogoff is currently a principal  with  Pearl Properties, LLC, a commercial real
estate investment firm based in Philadelphia,  Pennsylvania.   Mr.  Slogoff  was
formerly   with   Entercom   Communications   Corp.,  a  publicly  traded  radio
broadcasting  company and was previously a member  of  the  corporate  and  real
estate group of  the  law firm of Dilworth, Paxson, LLP.  Mr. Slogoff received a
B.A. with Honors from the  University  of  Pennsylvania in 1990, and a J.D. from
the University of Miami School of Law in 1993.

      JOEL M. WILENTZ, M.D. has been a Director of the Company since March 1997.
Dr. Wilentz is one of the founding members of Dermatology Associates in Florida,
founded in 1970.  He is a former member of the boards of the Neurological Injury
Compensation  Association for Florida and the  Broward  County  Florida  Medical
Association. He is a member of the board of directors of the American Arm of the
Israeli Emergency  Medical  Service for the southeastern United States, of which
he is also a past President.   Dr.  Wilentz  is  a  past  member of the Board of
Overseers of the Nova Southeastern University School of Pharmacy.


                                       20


      JAMES  M.  LYNCH  CPA,  CPCU has been Executive Vice President  and  Chief
Financial Officer of the Company  since  August 1998. Before joining the Company
in August 1998, Mr. Lynch was Chief Financial Officer of Florida Administrators,
Inc., an organization specializing in property  and casualty insurance. Prior to
working at Florida Administrators, Inc., Mr. Lynch  held  the position of Senior
Vice  President  of  Finance  and Comptroller of Trust Group, Inc.,  which  also
specialized in property and casualty  insurance.  Before  his  position at Trust
Group, Mr. Lynch was a Manager with the accounting and auditing  firm of Coopers
& Lybrand, which later became PricewaterhouseCoopers LLC.

      SEAN P. DOWNES has been Senior Vice President, Chief Operating Officer and
a  Director of the Company since January 2005. He has served as Chief  Operating
Officer  and a Director of UPCIC since July 2003. Mr. Downes was Chief Operating
Officer of  Universal  Adjusting Corporation from July 1999 to July 2003. During
that time Mr. Downes created  the Company's claims operation. Before joining the
Company in July 1999, Mr. Downes  was Vice President of Downes and Associates, a
multi-line insurance adjustment corporation.

      OZZIE A. SCHINDLER has been a  Director of the Company since January 2007.
Mr. Schindler serves as Chairman of the Company's Audit Committee. Mr. Schindler
is  a  partner  with  the  law  firm of Greenberg  Traurig  and  specializes  in
international tax, trusts and succession  and  planning.  He  has  an  LL.M.  in
Taxation  from  New York University School of Law and graduated with honors from
the University of  Florida  School  of  Law.  Mr.  Schindler graduated with high
honors  from  the  University  of Florida Fisher School  of  Accounting.  He  is
admitted to both the Florida and New York bars.

      Norman M. Meier and Bradley  I.  Meier  are  father and son, respectively.
There are no other family relationships among the Company's  executive  officers
and directors. Eric Meier who is the brother of Bradley I. Meier, also works for
a subsidiary of the Company.

      All  directors  hold  office until the next annual meeting of stockholders
and the election and qualification  of their successors.  Currently, the Company
does not have a procedure by which shareholders  may  recommend  nominees to the
Company's  Board  of Directors.  Officers are elected annually by the  Board  of
Directors and serve at the discretion of the Board.

      The Company has entered into indemnification agreements with its executive
officers and directors  pursuant  to  which  the Company has agreed to indemnify
such  individuals,  to the fullest extent permitted  by  law,  for  claims  made
against them in connection with their positions as officers, directors or agents
of the Company.

AUDIT COMMITTEE

      The Company has  a  separately  designated  Audit Committee, whose members
since January 9, 2007 have been Ozzie A. Schinder,  Reed  J. Slogoff and Joel M.
Wilentz.  In order to have an Audit Committee composed entirely  of  independent
directors, Mr. Meier voluntarily resigned from the Audit Committee on January 9,
2007.   Each  member of the Audit Committee has been determined by the Board  of
Directors to be  independent  under  the  applicable  rules  of  the SEC and the
National  Association  of Securities Dealers.  The Company's Board of  Directors
has determined that Ozzie  A. Schindler is an "audit committee financial expert"
as defined by Item 407(d)(5) of Regulation S-B promulgated by the SEC.

CODE OF BUSINESS CONDUCT AND ETHICS

      The Company adopted a  Code  of  Business Conduct and Ethics on January 9,
2007 that is applicable to all directors, officers and employees of the Company.
The code is publicly available at the Company's headquarters in Fort Lauderdale,
Florida.  Upon completion of the build-out  of  the  Company's website, the code
will  be  posted there.  A copy of the Company's Code of  Business  Conduct  and
Ethics may be obtained free of charge by written request to James M. Lynch, 1110
West Commercial Boulevard, Suite 100, Fort Lauderdale, FL 33309.


                                       21



SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Section  16(a)  of  the  Exchange  Act  requires  the Company's directors,
executive officers, and persons who own more than 10% of  the  Company's  Common
Stock  to  file initial reports of ownership and reports of changes in ownership
with the SEC.   Directors,  executive officers and greater than 10% shareholders
(collectively, "Reporting Persons")  are  required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.

      Based solely on the review of copies  of  Forms 3, 4 and 5 provided to the
Company  and  written  representations  by the Reporting  Persons,  the  Company
believes that, for the year ended December  31,  2007,  all Section 16(a) filing
requirements applicable to the Reporting Persons were met.

ITEM 10. EXECUTIVE COMPENSATION

      The following table sets forth the compensation paid  to  or earned by the
Company's President and Chief Executive Officer and the Company's two other most
highly  compensated  executive  officers  (collectively,  the  "Named  Executive
Officers") during each of the Company's last two fiscal years.




                                            SUMMARY COMPENSATION TABLE

                                                                                             Non-Equity
Name and Principal                                                                         Incentive Plan
    Position          Year       Salary      Bonus      Stock Awards      Option Awards     Compensation         Total
-------------------------------------------------------------------------------------------------------------------------
                                                                                        
Bradley I. Meier,     2007      $977,228         $ -             $ -        $1,920,800        $3,835,271     $6,733,299
President & CEO      ----------------------------------------------------------------------------------------------------
                      2006      $830,324         $ -             $ -               $ -        $1,091,899     $1,922,223
-------------------------------------------------------------------------------------------------------------------------
James M. Lynch,       2007      $349,385    $100,000        $141,500          $145,134               $ -       $736,019
EVP & CFO            ----------------------------------------------------------------------------------------------------
                      2006      $251,250     $90,000         $42,582               $ -               $ -       $383,832
-------------------------------------------------------------------------------------------------------------------------
Sean P. Downes,       2007      $691,500         $ -             $ -        $2,454,445        $2,913,953     $6,059,898
SVP & COO            ----------------------------------------------------------------------------------------------------
                      2006      $537,678         $ -        $418,462               $ -          $856,424     $1,812,564
-------------------------------------------------------------------------------------------------------------------------



EMPLOYMENT AGREEMENTS

      The Company's employment  agreement  with  Bradley  Meier  is  dated as of
August  11,  1999.   The  Company  and  Mr.  Meier  have  amended the employment
agreement,  with the most recent amendment dated July 12, 2007  (the  employment
agreement and  the  amendments  are  collectively  referred  to  as  the  "Meier
Agreement").   Under  the terms of the Meier Agreement, Mr. Meier will serve  as
the Company's President  and Chief Executive Officer.  Mr. Meier received a base
salary of $977,228 in 2007,  and  he  is  entitled  to  a  twenty  percent (20%)
increase  in  base  salary  each  year.   Additionally,  pursuant  to  the Meier
Agreement,  Mr. Meier is entitled to an annual performance bonus equal to  three
percent (3%)  of  the  pretax  income  of the Company up to $5 million, and four
percent  (4%) of the pretax income of the  Company  in  excess  of  $5  million;
provided,  however,  that  any  such  bonus  is  contingent  upon  the Company's
shareholders approving such bonus formula, which they have done.  Mr.  Meier  is
also  eligible  for  other  benefits  customarily provided by the Company to its
executive   employees,  and  the  Meier  Agreement   contains   noncompete   and
nondisclosure  provisions.   In addition, in the event of a Change in Control of
the Company (as defined in the Meier Agreement), the Company shall pay Mr. Meier
an amount equal to 48 months base  salary, plus two times any bonus paid for the
preceding fiscal year.  Further, in  the  event  of  a  Change  in  Control, all
options held by Mr. Meier vest and become immediately exercisable.  Also, in the
event that the Company terminates the Meier Agreement, the Company shall pay Mr.
Meier 24 months total compensation.  The Meier Agreement expires on December 31,
2009;  however,  the  agreement  is  automatically extended each year thereafter
unless the Company or Mr. Meier provides  written  notice  that the agreement is
being  terminated  60  days  in  advance of the anniversary date  of  the  Meier
Agreement.



                                       22


      The Company's employment agreement with Sean Downes is dated as of January
1, 2005 and provides that Mr. Downes  will  serve as Chief Operating Officer and
Senior Vice President of the Company. The Company  and  Mr.  Downes have amended
the  employment agreement, with the most recent amendment dated  July  12,  2007
(the employment agreement and the amendments are collectively referred to as the
"Downes Agreement").  Mr. Downes received a base salary of $691,500 in 2007, and
he is  entitled  to  a  twenty  percent (20%) increase in base salary each year.
Additionally, pursuant to the Downes  Agreement,  Mr.  Downes  is entitled to an
annual performance bonus equal to three percent (3%) of the pre-tax  profits  of
the  Company;  provided,  however,  that  any  such bonus is contingent upon the
Company's  shareholders  approving such bonus formula,  which  they  have  done.
Under the Downes Agreement, the Company may grant Mr. Downes options or warrants
to purchase the Company's  Common  Stock.  Mr. Downes is also eligible for other
benefits customarily provided by the  Company to its executive employees and the
Downes Agreement contains noncompete and nondisclosure provisions.  In addition,
in the event of a Change in Control of  the  Company  (as  defined in the Downes
Agreement), the Company shall pay Mr. Downes an amount equal  to  12 months base
salary,  plus  the  annual  bonus  paid  for  the  preceding  fiscal year. Also,
effective January 1, 2009, if a Change in Control occurs, the Company  shall pay
Mr.  Downes  an amount equal to 2.99 times Mr. Downes' "base amount," as defined
in Section 280G(b)(3)  of the Internal Revenue Code.  Further, in the event of a
Change in Control, all options  held  by  Mr. Downes vest and become immediately
exercisable.  The Downes Agreement expires  on December 31, 2009 unless extended
in writing by the Company.

      On October 11, 2006, the Company entered into an employment agreement (the
"Lynch  Agreement")  with  James  M.  Lynch, who has  served  as  the  Company's
Executive Vice President and Chief Financial  Officer  since August 1998.  Under
the  terms  of the Lynch Agreement, Mr. Lynch will continue  to  serve  in  such
capacity.  Mr.  Lynch  received  a  base  salary  of $349,385 in 2007, and he is
entitled  to  a  twenty  percent  (20%)  increase  in  base  salary  each  year.
Additionally,  pursuant  to the Lynch Agreement, Mr. Lynch  is  entitled  to  an
annual performance bonus determined  at the discretion of the Board of Directors
of  the Company; provided, however, that  such  bonus  shall  be  no  less  than
$50,000.   Mr. Lynch is also eligible for other benefits customarily provided by
the Company to its executive employees.  The Lynch Agreement contains noncompete
and nondisclosure  provisions.   If  Mr. Lynch's employment is terminated (i) by
the  Company or a succeeding entity without  Cause  (as  defined  in  the  Lynch
Agreement)  or  (ii)  by  Mr.  Lynch  for  Good  Reason (as defined in the Lynch
Agreement)  within one year following a Change in Control  of  the  Company  (as
defined in the Lynch Agreement), then the  Company shall pay Mr. Lynch an amount
equal to the greater of Mr. Lynch's current base salary (x) through December 31,
2009 or (y) for  period  of  twelve  (12)  months,  and  Mr.  Lynch will also be
entitled to receive payment for COBRA premiums.  The Lynch Agreement  expires on
December 31, 2009.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

      The  following  table sets forth information regarding outstanding  equity
awards held by each Named  Executive  Officer  at fiscal year ended December 31,
2007.


                                       23



--------------------------------------------------------------------------------
                  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
--------------------------------------------------------------------------------
                                 OPTIONS AWARDS
--------------------------------------------------------------------------------
                    Number of Securities       Option
                   Underlying Unexercised     Exercise      Option Expiration
     Name            Options Exercisable        Price              Date
--------------------------------------------------------------------------------
Bradley Meier                     250,000          $1.63           5/7/08
--------------------------------------------------------------------------------
Bradley Meier                   1,500,000          $1.06          1/15/10(1)
--------------------------------------------------------------------------------
Bradley Meier                    250,000          $1.06           1/15/10(1)
--------------------------------------------------------------------------------
Bradley Meier                    150,000          $1.10           1/26/10
--------------------------------------------------------------------------------
Bradley Meier                      20,000          $0.70         12/12/10
--------------------------------------------------------------------------------
Bradley Meier                     325,000          $0.70         12/12/10
--------------------------------------------------------------------------------
Bradley Meier                     150,000          $0.60         12/21/11
--------------------------------------------------------------------------------
Bradley Meier                     700,000          $6.50          7/12/12
--------------------------------------------------------------------------------
Bradley Meier                   1,000,000          $0.06           3/4/14
--------------------------------------------------------------------------------
James Lynch                        25,000          $1.10          1/26/10
--------------------------------------------------------------------------------
James Lynch                        15,000          $0.70         12/12/10
--------------------------------------------------------------------------------
James Lynch                       100,000          $0.50         12/21/11
--------------------------------------------------------------------------------
James Lynch                        35,000          $6.50          7/12/12
--------------------------------------------------------------------------------
James Lynch                        25,000          $3.80          2/14/12
--------------------------------------------------------------------------------
Sean Downes                        15,000          $1.10          1/26/10
--------------------------------------------------------------------------------
Sean Downes                       100,000          $0.50         12/21/11
--------------------------------------------------------------------------------
Sean Downes                       350,000          $3.80          2/14/12
--------------------------------------------------------------------------------
Sean Downes                       700,000          $6.50          7/12/12
--------------------------------------------------------------------------------

(1) Expires on earlier of January 15, 2010 or is exercisable upon a Change in
   Control of the Company, as defined in the Option Agreement between Mr. Meier
   and the Company.

DIRECTOR COMPENSATION

      The following table sets forth the total compensation paid to non-employee
members  of the Board of Directors during the fiscal  year  ended  December  31,
2007.



--------------------------------------------------------------------------
                        DIRECTOR COMPENSATION
--------------------------------------------------------------------------
       Name          Fees Earned or Paid in    Option Awards      Total
                              Cash
--------------------------------------------------------------------------
Joel M. Wilentz              $80,000             $107,016       $187,016
--------------------------------------------------------------------------
Norman M. Meier              $80,000             $107,016       $187,016
--------------------------------------------------------------------------
Reed J. Slogff               $80,000             $107,016       $187,016
--------------------------------------------------------------------------
Ozzie A. Schindler           $80,000             $142,632       $222,632
--------------------------------------------------------------------------


      In addition,  the Company periodically reimburses the non-employee members
of the Board of Directors for reasonable expenses incurred in attending meetings
of the Board of Directors.


                                       24


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

EQUITY COMPENSATION PLAN INFORMATION

      The following table  sets forth certain information with respect to all of
the Company's equity compensation  plans  in  effect  as  of  fiscal  year ended
December 31, 2007.





------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Number of securities
                                                                                             remaining available for
                             Number of securities to be           Weighted-average           issuance under equity
                             issued upon exercise of              exercise price of          compensation plans
                             outstanding options, warrants        outstanding options,       (excluding securities reflected
Plan Category                and rights                           warrants and rights        in first column)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                           
Equity compensation plans              7,705,000                         $2.22                      N/A
approved by security holders
------------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security                   -                               -                          -
holders
------------------------------------------------------------------------------------------------------------------------------------
Total                                  7,705,000                         $2.22                      N/A
------------------------------------------------------------------------------------------------------------------------------------



Descriptions of the plans are contained in Note 11 to the Consolidated Financial
Statements.

SERIES M PREFERRED STOCK OWNED BY MANAGEMENT

      As  of March 1, 2008, directors and named executive officers, individually
and as a group, beneficially owned Series M Preferred Stock as follows:



Name and Address of        Amount and Nature of          Percent of Class
Beneficial Owner (1)       Beneficial Ownership          ----------------
--------------------       --------------------

Bradley I. Meier*(2)              48,890                        48.0%
Norman M. Meier* (3)              53,000                        52.0%
Officers and directors
  as a group
  (2 persons)(4)                  86,890                        98.0%


*     Director

(1)   Unless otherwise indicated, the Company believes that each person has sole
      voting  and  investment  rights  with  respect  to  the shares of Series M
      Preferred  Stock  of  the  Company  specified opposite his  name.   Unless
      otherwise  indicated,  the mailing address  of  each  shareholder  is  c/o
      Universal Insurance Holdings,  Inc.,  1110 W. Commercial Blvd., Suite 100,
      Fort Lauderdale, FL 33309.

(2)   Consists of (i) 33,890 shares of Series  M Preferred Stock and (ii) 15,000
      shares of Series M Preferred Stock beneficially  owned by Belmer Partners,
      a dissolved Florida General Partnership ("Belmer"), of which Mr. Meier was
      a general partner. (See Item 11, "Security Ownership of Certain Beneficial
      Owners   and   Management  and  Related  Stockholder  Matters   -   Equity
      Compensation  Plan  Information,"  and  the  section  entitled  "Series  M
      Preferred Stock Held By Others" for a discussion of Belmer.)  Excludes all
      shares of Series  M Preferred Stock owned by Norman M. Meier and Phylis R.
      Meier, Mr. Meier's  father and mother, respectively, as to which Mr. Meier
      disclaims beneficial ownership.

(3)   Consists of (i) 38,000  shares of Series M Preferred Stock and (ii) 15,000
      shares of Series M Preferred  Stock beneficially owned by Belmer, of which
      Mr.  Meier  was  a general partner.   Excludes  all  shares  of  Series  M
      Preferred Stock owned by Bradley I. Meier and Phylis R. Meier, Mr. Meier's
      son and former spouse,  respectively,  as  to  which  Mr.  Meier disclaims
      beneficial ownership.

(4)   See footnotes (1) - (3) above.


                                       25



SERIES A PREFERRED STOCK OWNED BY MANAGEMENT

      As of March 1, 2008, directors and named executive officers,  individually
and as a group, beneficially owned Series A Preferred Stock as follows:

Name and Address of        Amount and Nature of          Percent of Class
Beneficial Owner (1)       Beneficial Ownership          ----------------
--------------------       --------------------

Norman M. Meier* (2)               9,975                        20%
Officers and directors             9,975                        20%
  as a group
 (1 person)(3)


*     Director

(1)   Unless otherwise indicated, the Company believes that each person has sole
      voting  and  investment  rights  with  respect  to the shares of Series  M
      Preferred  Stock  of  the  Company specified opposite  his  name.   Unless
      otherwise  indicated, the mailing  address  of  each  shareholder  is  c/o
      Universal Insurance  Holdings, Inc., 1110 W.  Commercial Blvd., Suite 100,
      Fort Lauderdale, FL 33309.

(2)   Consists of 9,975 shares of Series A Preferred Stock beneficially owned by
      Belmer, of which Mr. Meier  was a general partner.  Excludes all shares of
      Series A Preferred Stock owned  by  Phylis  R.  Meier,  Mr. Meier's former
      spouse, as to which Mr. Meier disclaims beneficial ownership.

(3)   See footnotes (1) - (2) above.

COMMON STOCK OWNED BY MANAGEMENT

      As of March 1, 2008, directors and Named Executive Officers,  individually
and as a group, beneficially owned Common Stock as follows:

Name and Address of        Amount and Nature of          Percent of Class
Beneficial Owner (1)       Beneficial Ownership(2)       ----------------
--------------------       -----------------------

Bradley I. Meier (3)              20,781,106                 52.1%
Sean P. Downes (4)                 3,437,490                  8.6%
Norman M. Meier (5)                  443,666                  1.1%
Reed J. Slogoff (6)                  282,447                  0.7%
Joel M. Wilentz (7)                  344,447                  0.9%
James M. Lynch (8)                   232,925                  0.6%
Ozzie A. Schindler (9)                70,000                  0.2%
Officers and directors
   as a group
   (7 people)(10)                 25,247,634                 63.3%


 (1)  Unless otherwise indicated, the Company believes that each person has sole
      voting and investment rights with respect to the shares of Common Stock of
      the Company specified opposite his name.  Unless otherwise indicated,  the
      mailing  address  of each shareholder is c/o Universal Insurance Holdings,
      Inc., 1110 West Commercial  Boulevard, Suite 100, Fort Lauderdale, Florida
      33309.

(2)   A person is deemed to be the  beneficial owner of Common Stock that can be
      acquired by such person within  60  days  of  the  date  hereof  upon  the
      exercise  of warrants or stock options or conversion of Series A Preferred
      Stock, Series  M Preferred Stock or convertible debt.  Except as otherwise
      specified, each  beneficial  owner's percentage ownership is determined by
      assuming that warrants, stock  options, Series A Preferred Stock, Series M
      Preferred Stock and convertible  debt that is held by such person (but not
      those held by any other person) and  that  are  exercisable or convertible
      within 60 days from the date hereof, have been exercised or converted.

(3)   Includes  (i)  options  to purchase an aggregate of  4,345,000  shares  of
      Common Stock; (ii) 169,450 shares of Common Stock issuable upon conversion
      of Series M Preferred Stock;  (iii)  an  aggregate  of  228,728  shares of


                                       26



      Common  Stock  issuable upon conversion of Series A and Series M Preferred
      Stock beneficially  owned  by  Belmer,  of  which  Mr. Meier was a general
      partner; and (iv) the following shares of Common Stock  which  are subject
      to proxies granting voting power to Mr. Meier: (A) 333,792 shares owned by
      Phylis  Meier,  Mr.  Meier's  mother,  (B)  666,540 shares owned by Norman
      Meier, Mr. Meier's father; (C) an additional  17,900 shares over which Mr.
      Meier  has  voting  power;  and (D) options to purchase  an  aggregate  of
      650,000 shares of Common Stock  owned by Norman Meier, Mr. Meier's father,
      which are subject to a proxy granting voting power to Mr. Meier.

(4)   Includes  options to purchase  an  aggregate  of 700,000  shares of Common
      Stock.

(5)   Includes (i) 214,938  shares of Common Stock  issuable upon  conversion of
      Series A and Series M Preferred  Stock,  and (ii) an  aggregate of 228,728
      shares of Common Stock  issuable upon  conversion of Series A and Series M
      Preferred Stock  beneficially owned by Belmer, of which Norman Meier was a
      general partner.  Excludes (i) all securities owned by Bradley I. Meier or
      Phylis Meier,  Norman Meier's son and former spouse,  respectively,  as to
      which Norman Meier disclaims beneficial ownership, and (ii) all securities
      owned by Norman Meier for which  Norman Meier has granted  voting power to
      his son, Bradley Meier.

(6)   Includes  options to purchase  an  aggregate  of 165,000  shares of Common
      Stock, of which 50,000 are held in a custodial  account for Mr.  Slogoff's
      minor son.

(7)   Includes  options to purchase  an  aggregate  of 175,000  shares of Common
      Stock.

(8)   Includes  options to  purchase  an  aggregate  of 35,000  shares of Common
      Stock.

(9)   Consists of an option to purchase 70,000 shares of Common Stock.

(10)  See footnotes (1) - (9) above.

SERIES M PREFERRED STOCK HELD BY OTHERS

      As of March  1, 2008, the following table sets forth information regarding
the number and percentage of Series M Preferred Stock held by all persons, other
than those persons listed  immediately  above,  who  are known by the Company to
beneficially own or exercise voting or dispositive control  over  5%  or more of
the Company's outstanding Series M Preferred Stock:


                                      Amount and Nature of
Name and Address(1)                   Beneficial Ownership      Percent of Class
--------------------                 ---------------------      ----------------

Phylis R. Meier (2)                          16,800                  18.9%
Universal Insurance Holdings, Inc.
1110 West Commercial Boulevard
Fort Lauderdale, Florida 33309

Belmer Partners (3)                          15,000                  16.9%
c/o Phylis R. Meier
Managing General Partner
Universal Insurance Holdings, Inc.
1110 West Commercial Boulevard
Fort Lauderdale, Florida 33309


                                       27



(1)   Unless otherwise indicated, the Company believes that each person has sole
      voting  and  investment  rights  with  respect  to the shares of Series  M
      Preferred Stock specified opposite her or its name.

(2)   Consists of (i) 1,800 shares of Series M Preferred  Stock  and (ii) 15,000
      shares of Series M Preferred Stock beneficially owned by Belmer,  of which
      Ms. Meier is the managing general partner.  Excludes all securities  owned
      by  Bradley  I.  Meier  and  Norman  M.  Meier, the son and former spouse,
      respectively, as to which Ms. Meier disclaims beneficial ownership.

(3)   Belmer was a Florida general partnership that  was  dissolved effective as
      of  May 31, 2007.  Phylis R. Meier was the managing general  partner,  and
      Bradley I. Meier, Norman M. Meier, Eric Meier and Lynda Meier were general
      partners, of Belmer. The 15,000 shares of the Company's Series M Preferred
      Stock  beneficially  owned by Belmer are currently being held by Phylis R.
      Meier in constructive  trust for Phylis R. Meier, Bradley I. Meier, Norman
      M. Meier, Eric Meier and  Lynda  Meier,  the  former  general  partners of
      Belmer, until such shares are distributed to them.

SERIES A PREFERRED STOCK HELD BY OTHERS

      As of March 1, 2008, the following table sets forth information  regarding
the number and percentage of Series A Preferred Stock held by all persons, other
than  those  persons  listed immediately above, who are known by the Company  to
beneficially own or exercise  voting  or  dispositive control over 5% or more of
the Company's outstanding Series A Preferred Stock:

                                      Amount and Nature of
Name and Address(1)                   Beneficial Ownership      Percent of Class
--------------------                 ---------------------      ----------------

Phylis R. Meier (2)                            9,975                 20.0%
Universal Insurance Holdings, Inc.
1110 West Commercial Boulevard
Fort Lauderdale, Florida 33309

Belmer Partners (3)                           30,000                 60.0%
c/o Phylis R. Meier
Managing General Partner
Universal Insurance Holdings, Inc.
1110 West Commercial Boulevard
Fort Lauderdale, Florida 33309


(1)   Unless otherwise indicated, the Company believes that each person has sole
      voting  and investment rights with respect  to  the  shares  of  Series  A
      Preferred Stock specified opposite her or its name.

(2)   Consists  of  9,975 shares of Series A Preferred Stock beneficially owned.
      Excludes all shares  of Series A Preferred Stock owned by Norman M. Meier,
      Ms. Meier's former spouse,  as  to  which  Ms.  Meier disclaims beneficial
      ownership.

(3)   Belmer was a Florida general partnership that was  dissolved  effective as
      of  May  31, 2007.  Phylis R. Meier was the managing general partner,  and
      Bradley I. Meier, Norman M. Meier, Eric Meier and Lynda Meier were general
      partners, of Belmer. The 30,000 shares of the Company's Series A Preferred
      Stock beneficially  owned  by Belmer are currently being held by Phylis R.
      Meier in constructive trust  for Phylis R. Meier, Bradley I. Meier, Norman
      M. Meier, Eric Meier and Lynda  Meier,  the  former  general  partners  of
      Belmer, until such shares are distributed to them.

COMMON STOCK HELD BY OTHERS

      As  of March 1, 2008, the following table sets forth information regarding
the number  and percentage of Common Stock held by all persons, other than those
persons listed  immediately  above, who are known by the Company to beneficially
own or exercise voting or dispositive  control  over 5% or more of the Company's
outstanding Common Stock:


                                       28



                                      Amount and Nature of
Name and Address                      Beneficial Ownership(1)   Percent of Class
----------------                      --------------------      ----------------

Martin Steinberg, Esq., as the
receiver for Lancer Offshore Inc.(2)        3,926,235               9.7 %
c/o David E. Wells, Esq.
Hunton & Williams LLP
1111 Brickell Avenue,  Suite 2500
Miami, FL 33131


Invesco Ltd. (3)                            2,950,555               7.4%
1360 Peachtree Street NE
Atlanta, GA 30309


(1)   A person is deemed to be the beneficial  owner of Common Stock that can be
      acquired  by such  person  within  60 days of the  date  hereof  upon  the
      exercise of warrants or stock options or conversion of Series A and Series
      M Preferred Stock or convertible debt. Except as otherwise specified, each
      beneficial  owner's  percentage  ownership is  determined by assuming that
      warrants,  stock  options,  Series A and  Series  M  Preferred  Stock  and
      convertible debt that are held by such a person (but not those held by any
      other  person)  and  that are  exercisable  within  60 days  from the date
      hereof, have been exercised or converted.

(2)   Consists of 3,926,235  shares of Common Stock as indicated on stockholders
      list as of February 29, 2008 obtained from stock transfer agent.

(3)   Based on  information  contained  in a report on Schedule 13G that Invesco
      Ltd.  filed with the SEC, which  contained  information as of December 31,
      2007.  According to such filing,  Invesco  Ltd.  through its  subsidiaries
      provides  investment  management  services to institutional and individual
      investors.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Downes and Associates,  a  multi-line  insurance adjustment corporation based in
Deerfield  Beach, Florida performs certain  claims  adjusting  work  for  UPCIC.
Downes and Associates  is  owned  by Dennis Downes, who is the father of Sean P.
Downes, COO and Senior Vice President  of the Company. During 2007 and 2006, the
Company expensed claims adjusting fees of  $675,237  and $829,208, respectively,
to Downes and Associates.

Transactions  between  the  Company  and its affiliates are  on  terms  no  less
favorable to the Company than can be obtained  from  third  parties  on an arms'
length  basis.   Transactions  between  the  Company  and  any  of its executive
officers  or  directors  require  the  approval  of  a majority of disinterested
directors.

ITEM 13. EXHIBITS

EXHIBITS

3.1   Registrant's Amended and Restated Certificate of Incorporation, as amended
      (1)

3.2   Registrant's Bylaws (1)

3.3   Certificate of Designation for Series A Convertible  Preferred Stock dated
      October 11, 1994 (4)

3.4   Certificate  of  Designations,   Preferences,   and  Rights  of  Series  M
      Convertible Preferred Stock dated August 13, 1997 (2)

3.5   Certificate   of  Amendment  of  Amended  and  Restated   Certificate   of
      Incorporation dated October 19, 1998 (4)

3.6   Certificate   of  Amendment  of  Amended  and  Restated   Certificate   of
      Incorporation dated December 18, 2000 (4)

3.7   Certificate of Amendment of Certificate  of  Designations  of the Series A
      Convertible Preferred Stock dated October 29, 2001 (4)


                                       29



4.1   Form of Common Stock Certificate (1)

4.2   Form of Warrant Certificate (1)

4.3   Form of Warrant Agency Agreement (1)

4.4   Form of Underwriter Warrant (1)

4.5   Affiliate Warrant (1)

4.6   Form of Warrant to purchase  100,000 shares of Common Stock at an exercise
      price of $2.00 per share  issued to Steven  Guarino  dated as of April 24,
      1997.  (Substantially  similar  in  form  to two  additional  warrants  to
      purchase  100,000 shares of Common Stock issued to Mr. Guarino dated as of
      April 24,  1997,  with  exercise  prices  of $2.75  and  $3.50 per  share,
      respectively) (2)

10.1  Registrant's 1992 Stock Option Plan (1)

10.2  Form of  Indemnification  Agreement between the Registrant and each of its
      directors and executive officers (1)

10.5  Management  Agreements  by  and  between  Universal  Property  &  Casualty
      Insurance  Company and Universal P&C Management,  Inc. dated as of June 2,
      1997 (2)

10.6  Employment  Agreement dated as of May 1, 1997 between  Universal  Heights,
      Inc. and Bradley I. Meier (2)

10.7  Employment  Agreement,  dated October 11, 2006, between James M. Lynch and
      Universal Insurance Holdings, Inc. (8)

10.8  Employment Agreement, dated as of January 1, 2005, between Sean Downes and
      Universal Insurance Holdings, Inc.

11.1  Statement Regarding Computation of Per Share Income

14.1  Code of Business Conduct and Ethics (7)

16.1  Letter on change in certifying accountants from Millward & Co. CPA's dated
      February 12, 1999, and as amended February 26, 1999 (3)

16.2  Letter on change in  certifying  accountants  from  Deloitte  & Touche LLP
      dated October 7, 2002(5)

16.3  Letter on change in  certifying  accountants  from  Deloitte  & Touche LLP
      dated March 27, 2003(6)

21    List of Subsidiaries

31.1  Certification  of Chief Executive  Officer  Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002

31.2  Certification  of Chief Financial  Officer  Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002

32    Certifications  of Chief  Executive  Officer and Chief  Financial  Officer
      Pursuant  to Title 18,  United  States  Code,  Section  1350,  as  Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)   Incorporated by reference to the  Registrant's  Registration  Statement on
      Form S-1 (File No. 33-51546) declared effective on December 14, 1992

(2)   Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
      for the year ended April 30, 1997 filed with the  Securities  and Exchange
      Commission on August 13, 1997, as amended


                                       30



(3)   Incorporated by reference to the  Registrant's  Current Report on Form 8-K
      and Current  Report on Form 8-K/A,  filed with the Securities and Exchange
      Commission on February 12, 1999 and February 26, 1999, respectively

(4)   Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
      for the year  ended  December  31,  2002  filed  with the  Securities  and
      Exchange Commission on April 9, 2003

(5)   Incorporated by reference to the Registrant's  Current Report on Form 8-K,
      filed with the Securities and Exchange Commission on October 7, 2002

(6)   Incorporated by reference to the Registrant's  Current Report on Form 8-K,
      filed with the Securities and Exchange Commission on April 2, 2003

(7)   Incorporated  by  reference  to the  Registrant's  Annual  Report  on Form
      10-KSB,  filed with the  Securities  and Exchange  Commission on March 30,
      2007.

(8)   Incorporated  by  reference  to the  Registrant's  Annual  Report  on Form
      10-KSB/A for the year ended  December  31, 2006 filed with the  Securities
      and Exchange Commission on August 24, 2007





ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

Audit  fees  for  the fiscal years ended December 31, 2007 and December 31, 2006
were $341,000 and $260,000, respectively.

AUDIT RELATED FEES

Audit related fees for the fiscal years ended December 31, 2007 and December 31,
2006 were $28,000 and $0, respectively.

TAX FEES

Tax fees for the fiscal years ended December 31, 2007 and December 31, 2006 were
$37,000 and $33,500, respectively.

ALL OTHER FEES

All other fees for  products  and  services  provided by the Company's principal
accountant for the fiscal years ended December  31,  2007  and December 31, 2006
were $0.

POLICY  ON  AUDIT  COMMITTEE  PRE-APPROVAL  OF  AUDIT AND PERMISSIBLE  NON-AUDIT
SERVICES OF THE INDEPENDENT AUDITOR

All  audit  related  services were pre-approved by the  Audit  Committee,  which
concluded that the provision  of  such  services  by  Blackman  Kallick  LLP was
compatible  with  the maintenance of that firm's independence in the conduct  of
its auditing functions.


                                       31





                                   SIGNATURES

      In accordance  with  Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized.


                       UNIVERSAL INSURANCE HOLDINGS, INC.


Dated: March 14, 2008      By:   /s/ Bradley I. Meier
                                 -------------------------------------------
                                 Bradley I. Meier, President and
                                 Chief Executive Officer

                                 /s/ James M. Lynch
                                 -------------------------------------------
                                 James M. Lynch, Chief Financial Officer


      In accordance with the  Exchange Act, this report has been signed below by
the following persons on behalf  of  the registrant and in the capacities and on
the dates indicated.


/s/ Bradley I. Meier      President, Chief Executive              March 14, 2008
--------------------
Bradley I. Meier          Officer and Director

/s/ Sean P. Downes        Senior Vice President, Chief            March 14, 2008
------------------
Sean P. Downes            Operating Officer and Director

/s/ James M. Lynch        Executive Vice President and            March 14, 2008
------------------
James M. Lynch            Chief Financial Officer

/s/ Norman M. Meier       Director                                March 14, 2008
-------------------
Norman M. Meier

/s/ Ozzie A. Schindler    Director                                March 14, 2008
----------------------
Ozzie A. Schindler

/s/ Reed J. Slogoff       Director                                March 14, 2008
-------------------
Reed J. Slogoff

/s/ Joel M. Wilentz       Director                                March 14, 2008
-------------------
Joel M. Wilentz


                                       32




              UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                            Page
                                                                            ----
Report of Independent Registered Public Accounting Firm......................F-2

Consolidated Balance Sheet - December 31, 2007...............................F-3

Consolidated Statements of Operations for the Years Ended
December 31, 2007 and 2006...................................................F-4

Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 2007 and 2006.............................................F-5

Consolidated Statements of Cash Flows for the Years Ended
December 31, 2007 and 2006...................................................F-6

Notes to Consolidated Financial Statements............................F-7 - F-26


                                      F-1





            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors
Universal Insurance Holdings, Inc.
Fort Lauderdale, Florida


We  have  audited  the  accompanying consolidated  balance  sheet  of  UNIVERSAL
INSURANCE HOLDINGS, INC.  AND  SUBSIDIARIES  (the  "Company") as of December 31,
2007,  and  the  related  consolidated  statements of operations,  stockholders'
equity and cash flows for each of the two years in the period ended December 31,
2007.  These consolidated financial statements  are  the  responsibility  of the
Company's  management.  Our  responsibility  is  to  express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards  of  the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial  statements  are  free  of  material misstatement.   The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit  included  consideration of
internal  control  over  financial  reporting  as  a  basis for designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing  an  opinion on the effectiveness of the Company's  internal  control
over financial reporting.   Accordingly,  we  express no such opinion.  An audit
also includes examining, on a test basis, evidence  supporting  the  amounts and
disclosures  in  the consolidated financial statements, assessing the accounting
principles used and  significant  estimates  made  by  management,  as  well  as
evaluating  the  overall  financial  statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial  statements referred to above present
fairly, in all material respects, the financial  position of UNIVERSAL INSURANCE
HOLDINGS, INC. AND SUBSIDIARIES as of December 31,  2007, and the results of its
operations  and its cash flows for each of the two years  in  the  period  ended
December 31,  2007,  in conformity with accounting principles generally accepted
in the United States of America.

As discussed in Note 2  to  the  consolidated  financial statements, the Company
changed its method of accounting for stock-based  compensation effective January
1, 2006.


/s/ Blackman Kallick LLP

Chicago, Illinois
March 14, 2008



                                      F-2






              UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                               DECEMBER 31, 2007
                                  (Unaudited)

                                     ASSETS
 Cash and cash equivalents                                  $214,745,606
 Real estate, net                                              3,392,827
 Prepaid reinsurance premiums                                172,672,795
 Reinsurance recoverables                                     46,399,265
 Premiums and other receivables, net                          38,045,097
 Property and equipment, net                                     874,430
 Deferred income taxes                                        14,202,956
 Other assets                                                    400,164
                                                            ------------
 Total assets                                               $490,733,140
                                                            ============

                     LIABILITIES AND STOCKHOLDERS'  EQUITY

 LIABILITIES:
 Unpaid losses and loss adjustment expenses                  $68,815,500
 Unearned premiums                                           254,741,198
 Deferred ceding commission, net                               2,122,269
 Accounts payable                                              2,972,147
 Reinsurance payable, net                                     33,888,350
 Dividends payable                                             3,241,145
 Other accrued expenses                                       16,339,082
 Other liabilities                                            11,035,444
 Loans payable                                                     2,820
 Long-term debt                                               25,000,000
                                                            ------------
 Total liabilities                                           418,157,955
                                                            ============

 STOCKHOLDERS' EQUITY:
 Cumulative convertible preferred stock,
   $.01 par value, 1,000,000 shares
   authorized, 138,640 shares issued and
   outstanding, minimum liquidation
   preference of $1,419,700                                       1,387
 Common stock, $.01 par value, 55,000,000
   shares authorized, 39,307,103
   shares issued and 36,012,729
   shares outstanding                                            393,072
 Common stock in treasury, at cost - 394,374 shares             (974,746)
 Common stock held in trust, at cost - 2,900,000 shares       (2,349,000)
 Additional paid-in capital                                   24,779,798
 Retained earnings                                            50,724,674
                                                            ------------
 Total stockholders' equity                                   72,575,185
                                                            ------------
 Total liabilities and stockholders' equity                 $490,733,140
                                                            ============


  The accompanying notes to condensed consolidated financial statements are an
                       integral part of these statements.


                                      F-3





                               UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                                  (Unaudited)


                                                                                 Year Ended

                                                                 December 31, 2007          December 31, 2006
                                                                                      
PREMIUMS EARNED AND OTHER REVENUES
   Direct premiums written                                    $          498,748,778      $        371,754,514
   Ceded premiums written                                               (358,405,016)             (230,718,709)
                                                            --------------------------  ------------------------
   Net premiums written                                                  140,343,762               141,035,805
   Decrease (increase) in net unearned premiums                           14,074,690               (86,899,853)
                                                            --------------------------  ------------------------
   Premiums earned, net                                                  154,418,452                54,135,952
   Net investment income                                                  10,410,259                 3,986,414
   Commission revenue                                                     22,222,007                 6,714,511
   Other revenue                                                           1,463,763                   310,873
                                                            --------------------------  ------------------------
            Total premiums earned and other revenues                     188,514,481                65,147,750
                                                            --------------------------  ------------------------

OPERATING COSTS AND EXPENSES
   Losses and loss adjustment expenses                                    59,799,670                24,940,879
   General and administrative expenses                                    39,165,022                13,485,562
                                                            --------------------------  ------------------------
            Total operating costs and expenses                            98,964,692                38,426,441
                                                            --------------------------  ------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES         $           89,549,789      $         26,721,309
                                                            --------------------------  ------------------------
   Income taxes, current                                                  41,078,701                17,541,697
   Income taxes, deferred                                                 (5,531,200)               (8,064,457)
                                                            --------------------------  ------------------------
            Income taxes, net                                             35,547,501                 9,477,240
                                                            --------------------------  ------------------------

INCOME FROM CONTINUING OPERATIONS                             $           54,002,288      $         17,244,069

DISCONTINUED OPERATIONS:
   Loss from discontinued operations                                               -                   (93,136)
   Provision for income tax expense                                                -                    35,927
            Total loss from discontinued operations                                -                   (57,209)
                                                            --------------------------  ------------------------

NET INCOME                                                    $           54,002,288      $         17,186,860
                                                            ==========================  ========================

INCOME PER COMMON SHARE:
   Basic net income from continuing operations                $                 1.52      $               0.50
   Basic net income from discontinued operations              $                    -      $                  -
                                                            --------------------------  ------------------------
            Basic net income per share                        $                 1.52      $               0.50
                                                            ==========================  ========================

WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING - BASIC                                                     35,550,503                34,409,415
                                                            ==========================  ========================

INCOME PER COMMON SHARE
   Diluted net income from continuing operations              $                 1.31      $               0.44
   Diluted net income from discontinued operations            $                    -      $                  -
                                                            --------------------------  ------------------------
            Diluted net income per share                      $                 1.31      $               0.44
                                                            ==========================  ========================

WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING - DILUTED                                                   41,360,020                 39,078,643
                                                            ==========================  ========================

CASH DIVIDEND DECLARED PER COMMON SHARE                       $                 0.24      $               0.18
                                                            ==========================  ========================

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.


                                                       F-4





                                         UNIVERSAL INSURANCE HOLDINGS, INC.

                                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



                                                 Year Ended December 31, 2007         Year Ended December 31, 2006
                                                 ----------------------------         ----------------------------
                                              Shares              Amount              Shares             Amount
                                              ------              ------              ------             ------
                                                                                      
PREFERRED STOCK
Balance, beginning of period                   138,640       $          1,387          138,640     $       $ 1,387

                                        ---------------      -----------------   --------------   ----------------
Balance, end of period                         138,640                  1,387          138,640               1,387
                                        ===============      -----------------   ==============   ----------------
COMMON STOCK

Balance, beginning of period                38,057,103                380,572       36,463,219             315,037
Issuance of common stock                     1,250,000                 12,500        1,593,884              65,535

                                        ---------------      -----------------   --------------   ----------------
Balance, end of period                      39,307,103                393,072       38,057,103             380,572
                                        ===============      -----------------   ==============   -----------------
TREASURY STOCK
Balance, beginning of period                   208,645               (101,820)         208,645            (101,820)
Acquisition of treasury stock                  185,729               (872,926)               0                   0

                                        ---------------      -----------------   --------------   ----------------
Balance, end of period                         394,374               (974,746)         208,645            (101,820)
                                        ===============      -----------------   ==============   -----------------

STOCK GRANTOR TRUST
Balance, beginning of period                 2,900,000             (2,349,000)       2,900,000          (2,349,000)

                                        ---------------      -----------------   --------------   ----------------
Balance, end of period                       2,900,000             (2,349,000)       2,900,000          (2,349,000)
                                        ===============      =================   ==============   ================

ADDITIONAL PAID-IN CAPITAL
Balance, beginning of period                                       18,726,387                           17,504,331
Issuance of common stock                                            3,922,851                            1,222,056
Tax benefit on exercise of stock options                            2,130,560                                    0
                                                             -----------------                    ----------------
Balance, end of period                                             24,779,798                           18,726,387
                                                             -----------------                    ----------------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance, beginning of period                                        5,390,392                           (5,488,807)

Net income                                                         54,002,288                           17,182,439
Preferred stock dividend                                              (49,950)                             (49,950)
Common stock dividend                                              (8,618,056)                          (6,253,290)

                                                             -----------------                    ----------------
Balance, end of period                                             50,724,674                            5,390,392
                                                             -----------------                    ----------------

Total stockholders' equity                                       $ 72,575,185                          $22,047,918
                                                             =================                    =================


              The accompanying notes are an integral part of the consolided financial statements.


                                                       F-5




                               UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                               Year Ended         Year Ended
                                                                            December 31, 2007  December 31, 2006
                                                                            -----------------  -----------------
                                                                                         
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                 $    54,002,288      $    17,186,860
Adjustments to reconcile net income  to cash provided by operations:
      Allowance for doubful accounts                                               223,681              568,766
      Amortization and depreciation                                                371,663              358,411
      Loss on disposal of assets                                                    37,629               15,122
      Issuance of common stock                                                   3,089,351            1,238,338
      Deferred taxes                                                            (5,531,200)          (8,064,457)
      Tax benefit on exercise of stock options                                  (1,857,907)                   -
Net change in assets and liabilities relating to operating activities:
      Reinsurance recoverables                                                  29,155,464            4,736,379
      Prepaid reinsurance premiums                                             (38,469,621)         (92,556,414)
      Premiums and other receivables                                           (13,974,125)         (19,238,882)
      Deferred acquisition costs, net                                            2,106,116           (2,106,116)
      Other assets                                                                (382,440)             925,946
      Reinsurance payable                                                      (68,968,729)          58,404,726
      Deferred ceding commission, net                                            2,122,269           (1,043,544)
      Other liabilities                                                          6,506,344            3,521,271
      Accounts payable                                                             246,098            1,846,604
      Taxes payable                                                            (13,298,935)          15,285,828
      Other accrued expenses                                                     1,513,479           10,340,148
      Unpaid losses and loss adjustment expenses                                19,250,986          (17,435,442)
      Unearned premiums                                                         24,394,932          179,456,261
                                                                           ----------------    -----------------
Net cash provided by operating activities - continuing operations                  537,343          153,439,805
Net cash used in operating activities - discontinued operations                        -                (55,596)
                                                                           ----------------    -----------------
Net cash provided by operating activities                                          537,343          153,384,209
                                                                           ----------------    -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Capital expenditures                                                        (545,364)             (36,706)
      Building improvements                                                       (259,210)            (230,936)
                                                                           ----------------    -----------------
Net cash used in investing activities - continuing operations                     (804,574)            (267,642)
Net cash provided by investing activities - discontinued operations                -                     51,524
                                                                           ----------------    -----------------
Net cash used in investing activities                                             (804,574)            (216,118)
                                                                           ----------------    -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
      Preferred stock dividend                                                     (49,950)             (49,950)
      Common stock dividend                                                     (7,279,767)          (4,505,867)
      Issuance of common stock                                                     846,000               49,251
      Acquisition of treasury stock                                               (872,926)                 -
      Tax benefit on exercise of stock options                                   1,857,907                  -
      Repayments of loans payable                                              (12,378,724)            (770,543)
      Proceeds from loans payable                                                      -             37,000,000
Minority interest                                                                      -                (39,421)
                                                                           ----------------    -----------------
Net cash (used in) provided by financing activities - continuing operations    (17,877,460)          31,683,470
                                                                           ----------------    -----------------
Net cash (used in) provided by financing activities                            (17,877,460)          31,683,470
                                                                           ----------------    -----------------
NET INCREASE IN CASH AND CASH                                                  (18,144,691)         184,851,561
EQUIVALENTS

CASH AND CASH EQUIVALENTS, Beginning of year                                   232,890,297           48,038,736
                                                                           ----------------    -----------------
CASH AND CASH EQUIVALENTS, End of year                                        $214,745,606         $232,890,297
                                                                           ================    =================
Non-cash items:
      Dividends payable                                                       $  3,241,145           $1,902,855
                                                                           ===============     =================



              The accompanying notes are an integral part of the consolidated financial statements.


                                                      F-6




               UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION

NATURE OF OPERATIONS

Universal Insurance Holdings, Inc. (the "Company")  was  originally incorporated
as Universal Heights, Inc. in Delaware in November 1990. The Company changed its
name  to Universal Insurance Holdings, Inc. on January 12,  2001.  The  Company,
through  its  wholly  owned  subsidiary,  Universal Insurance Holding Company of
Florida, formed Universal Property & Casualty  Insurance  Company  ("UPCIC")  in
1997.

INSURANCE OPERATIONS

UPCIC's application to become a Florida licensed property and casualty insurance
company  was  filed  in May 1997 with the Florida Office of Insurance Regulation
("OIR") and was approved  on  October  29, 1997. In 1998, UPCIC began operations
through the acquisition of homeowner insurance  policies  issued  by the Florida
Residential  Property  and Casualty Joint Underwriting Association ("JUA").  The
JUA was established in 1992 as a temporary measure to provide insurance coverage
for individuals who could  not  obtain coverage from private carriers because of
the impact on the private insurance  market of Hurricane Andrew in 1992.  Rather
than  serving  as a temporary source of  emergency  insurance  coverage  as  was
originally intended,  the  JUA  became  a major provider of original and renewal
insurance coverage for Florida residents.  In an attempt to reduce the number of
policies in the JUA, and thus the exposure  of  the  program  to  liability, the
Florida  legislature  approved  a number of initiatives to depopulate  the  JUA,
which resulted in policies being  acquired  by  private  insurers  and  provided
additional  incentives  to private insurance companies to acquire policies  from
the JUA.

On December 4, 1997, the  Company  raised  approximately $6,700,000 in a private
offering  with  various  institutional  and/or  otherwise  accredited  investors
pursuant to which the Company issued, in the aggregate, 11,208,996 shares of its
common  stock at a price of $.60 per share.  The proceeds  of  this  transaction
were used  partially  for  working  capital  purposes  and  to  meet the minimum
regulatory  capitalization  requirements of $5,000,000 required by  the  Florida
Department of Insurance to engage  in this type of homeowners' insurance company
business.

In February 1998, the Company commenced  its insurance business.  Since then the
Company  has developed into a vertically integrated  insurance  holding  company
performing  all  aspects  of  insurance  underwriting,  distribution and claims.
Universal Risk Advisors, Inc. was incorporated in Florida  on  July 2, 1998, and
became licensed by the Florida Department of Insurance on August  17,  1998  and
contracted  with  UPCIC  on  September  28,  1998  as the Company's wholly owned
managing general agent ("MGA").  Through the MGA, the  Company  has underwriting
and claims authority for UPCIC. The MGA seeks to generate revenue through policy
fee income and other administrative fees from the marketing of UPCIC's  products
through the Company's distribution network and UPCIC.

Universal Florida Insurance Agency was incorporated in Florida on July 2,  1998,
and  Coastal  Homeowners Insurance Specialists, Inc. was incorporated in Florida
on July 2, 2001,  each  as  wholly  owned  subsidiaries  of  Universal Insurance
Holdings, Inc. to solicit voluntary business and to generate commission revenue.
These  entities  are a part of the Company's agency operations,  which  seek  to
generate income from  commissions,  premium  financing  referral  fees  and  the
marketing of ancillary services.  In addition, Capital Resources Group, LTD. was
incorporated  in  the  British Virgin Islands on June 2, 2000 as a subsidiary of
the Company to participate  in contingent capital products. The Company has also
formed a claims adjusting company,  Universal  Adjusting  Corporation, which was
incorporated  in  Delaware  on August 9, 1999.  Universal Adjusting  Corporation
currently has claims authority for UPCIC.

      Blue Atlantic Reinsurance  Corporation ("BAR") was incorporated in Florida
on  November  9, 2007 as a wholly owned  subsidiary  of  the  Company  to  be  a
reinsurance intermediary broker. BAR became licensed by the OIR as a reinsurance
intermediary broker on January 4, 2008.

      In September  2006,  the Company initiated the process of acquiring all of
the outstanding common stock of Atlas Florida Financial Corporation, which owned
all of the outstanding common  stock  of  Sterling Premium Finance Company, Inc.

                                      F-7


("Sterling"), from the Company's Chief Executive  Officer  and  Chief  Operating
Officer  for  $50,000,  which  approximated  Sterling's  book value. The Company
received  approval of the acquisition from the OIR. Sterling  has  been  renamed
Atlas Premium Finance Company and commenced offering premium finance services in
November 2007.

ONLINE COMMERCE OPERATIONS

During 2006,  the  Company decided to discontinue its online commerce operations
and focus on its core operations.

BASIS OF PRESENTATION

The accompanying consolidated  financial  statements  include  the  accounts  of
Universal  Insurance  Holdings,  Inc.,  its  wholly  owned subsidiary, Universal
Property & Casualty Insurance Co. and other wholly owned entities, Atlas Florida
Financial Corporation, parent of Atlas Premium Finance  Company  (formerly known
as  Sterling  Premium  Finance Company), Atlas Premium Finance Company  and  the
Universal  Insurance  Holdings,  Inc.  Stock  Grantor  Trust.  All  intercompany
accounts  and  transactions   have   been   eliminated  in  consolidation.   The
consolidated  financial  statements  have  been  prepared   in  conformity  with
accounting  principles  generally  accepted  in  the  United States  of  America
("GAAP") that differ from statutory accounting practices prescribed or permitted
for  insurance  companies  by  regulatory authorities. Prior  to  the  Company's
decision  to  discontinue  online  commerce  operations,  the  Company  and  its
subsidiaries  operated  principally  in  two  business  segments  consisting  of
insurance and online commerce during each  period  reported  in the accompanying
consolidated financial statements, based upon management reporting.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

The  significant accounting policies followed by the Company are  summarized  as
follows:

USE OF  ESTIMATES.   The  preparation of financial statements in conformity with
GAAP requires management to  make  estimates  and  assumptions  that  affect the
reported  amounts of assets and liabilities and disclosure of contingent  assets
and liabilities  as of the date of the consolidated financial statements and the
reported amounts of  revenues  and  expenses  during the reporting periods.  The
Company's  primary areas of estimate are the recognition  of  premium  revenues,
insurance  liabilities,  deferred  policy  acquisition  costs  and  reinsurance.
Actual results could differ from those estimates.

PRINCIPLES OF  CONSOLIDATION.  The consolidated financial statements include the
accounts, after intercompany eliminations, of the Company and its subsidiaries.

CASH AND CASH EQUIVALENTS.   The Company includes in cash equivalents all short-
term, highly liquid investments that are readily convertible to known amounts of
cash and have an original maturity of three months or less.

PREMIUMS RECEIVABLE.  Written  premiums  are  earned  into  income on a pro rata
basis  over  the  policy  term.   Accordingly,  unearned premiums represent  the
portion  of  written  premiums  that  is  applicable  to   the  unexpired  risk.
Generally,  premiums are collected prior to providing risk coverage,  minimizing
the Company's  exposure  to  credit  risk.   The Company performs a policy level
evaluation to determine the extent the premiums  receivable  balance exceeds the
unearned premiums balance.  The Company then ages this exposure  to establish an
allowance for doubtful accounts based on prior experience.  As of  December  31,
2007,  the Company had recorded an allowance for doubtful accounts in the amount
of $832,660.

INVESTMENTS IN REAL ESTATE.  Investments in real estate are carried at cost less
depreciation.   Real  estate  represents  a building purchased by UPCIC that the
Company uses as its home office. Depreciation  is  provided on the straight-line
basis over twenty-seven-and-one-half years. The Company  reviews its real estate
annually and whenever changes in circumstances indicate that the carrying amount
may not be recoverable.

PROPERTY  AND  EQUIPMENT.    Property  and  equipment  is  recorded   at   cost.
Depreciation  is  provided  on the straight-line basis over the estimated useful
life of the assets.  Estimated  useful life of all property and equipment ranges
from three to five years.  Routine  repairs  and  maintenance  are  expensed  as
incurred.  Website  development  costs  are capitalized and amortized over their
estimated useful life. The Company reviews  its  property and equipment annually
and whenever changes in circumstances indicate that  the carrying amount may not
be recoverable.

                                      F-8


RECOGNITION OF PREMIUM REVENUES.  Property and liability premiums are recognized
as revenue on a pro rata basis over the policy term.   The  portion  of premiums
that will be earned in the future is deferred and reported as unearned premiums.
The  Company  believes  that  its revenue recognition policies conform to  Staff
Accounting Bulletin 101, Revenue  Recognition  in  Financial  Statements. In the
event  policyholders cancel their policies, unearned premiums represent  amounts
that UPCIC  would  refund  policyholders. Accordingly, UPCIC determines unearned
premiums    by calculating the  pro  rata  amount  that  would  be  due  to  the
policyholders  at  a  given  point in time based upon the premiums owed over the
life of each policy. As of December  31,  2007,  the Company has direct unearned
premiums of $254,741,198.

RECOGNITION OF COMMISSION REVENUE.  Commission revenue,  which  is  comprised of
the  MGA's  policy  fee  income  on  all new and renewal insurance policies  and
commissions generated from agency operations is recognized as income upon policy
inception. The Company believes that its revenue recognition policies conform to
Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements.

DEFERRED POLICY ACQUISITION  COSTS/DEFERRED CEDING COMMISSIONS.  Commissions and
other costs of acquiring  insurance that vary with and are primarily  related to
the  production of new and renewal  business are deferred and amortized over the
terms of the policies to which they are related.  Reinsurance ceding commissions
received are deferred and  amortized  over the  effective  period of the related
insurance  policies.  Deferred  policy  acquisition  costs and  deferred  ceding
commissions are netted for balance sheet presentation purposes.

INSURANCE  LIABILITIES.   Unpaid losses and loss adjustment expenses ("LAE") are
provided for as claims are  incurred.  The  provision for unpaid losses and loss
adjustment expenses includes: (1) the accumulation  of individual case estimates
for claims and claim adjustment expenses reported prior  to  the  close  of  the
accounting  period;  (2) estimates for unreported claims based on industry data;
and (3) estimates of expenses  for  investigating  and adjusting claims based on
the experience of the Company and the industry.

Inherent  in  the  estimates  of ultimate claims are expected  trends  in  claim
severity, frequency and other factors  that may vary as claims are settled.  The
amount of uncertainty in the estimates for  casualty  coverage  is significantly
affected  by  such  factors as the amount of claims experience relative  to  the
development period, knowledge  of  the  actual  facts  and circumstances and the
amount of insurance risk retained.  In the case of UPCIC,  this  uncertainty  is
compounded  by  UPCIC's  limited  history  of  claims  experience.  In addition,
UPCIC's  policyholders  are currently concentrated in South  Florida,  which  is
periodically subject to adverse  weather  conditions,  such  as  hurricanes  and
tropical storms.  The methods for making such estimates and for establishing the
resulting  liability are continually reviewed, and any adjustments are reflected
in current earnings.

PROVISION FOR  PREMIUM  DEFICIENCY.   It is the Company's policy to evaluate and
recognize  losses  on  insurance contracts  when  estimated  future  claims  and
maintenance costs under  a  group  of existing contracts will exceed anticipated
future premiums.  No accrual for premium  deficiency was considered necessary as
of December 31, 2007.

REINSURANCE.  In the normal course of business,  the Company seeks to reduce the
risk  of  loss  that  may  arise from catastrophes or other  events  that  cause
unfavorable underwriting results by reinsuring certain levels of risk in various
areas  of exposure with other  insurance  enterprises  or  reinsurers.   Amounts
recoverable  from  reinsurers  are  estimated  in  a  manner consistent with the
provisions of the reinsurance agreement and consistent with the establishment of
the liability of the Company.

INCOME  TAXES.   Income  tax  provisions  are based on the asset  and  liability
method.   Deferred  federal  and  state income  taxes  have  been  provided  for
temporary differences between the tax  basis of assets and liabilities and their
reported  amounts in the consolidated financial  statements,  net  of  valuation
allowance.  The  Company  reviews its deferred tax assets for recoverability. At
December 31, 2007, the Company  determined  that the benefit of its deferred tax
assets was fully realizable and, therefore, no valuation allowance was recorded.

INCOME (LOSS) PER SHARE OF COMMON STOCK. Basic earnings per share is computed by
dividing  the  Company's  net  income  (loss) less  cumulative  Preferred  Stock
dividends by the weighted-average number  of  shares of Common Stock outstanding
during  the  period.  Diluted earnings per share is  computed  by  dividing  the
Company's net income (loss)  minus  Preferred  Stock  dividends  by the weighted
average number of shares of Common Stock outstanding during the period  and  the
impact  of  all  dilutive  potential  common  shares, primarily Preferred Stock,
options  and  warrants. The dilutive impact of stock  options  and  warrants  is
determined by applying  the treasury stock method and the dilutive impact of the
Preferred Stock is determined by applying the "if converted" method.

                                      F-9


FAIR MARKET VALUE OF FINANCIAL  INSTRUMENTS.  Statement  of Financial Accounting
Standards   ("SFAS")   No.  107,  Disclosure  About  Fair  Value  of   Financial
Instruments, requires disclosure  of  the  estimated fair value of all financial
instruments, including both assets and liabilities unless specifically exempted.
The Company uses the following methods and assumptions  in  estimating  the fair
value of financial instruments.

      Cash  and  cash  equivalents:  the  carrying  amount reported in the
      consolidated   balance   sheet   for   cash   and  cash  equivalents
      approximates fair value due to the short-term nature of those items.

      Premiums   and  other  receivables,  reinsurance  recoverables   and
      accounts payable:  the carrying amounts reported in the consolidated
      balance  sheet  for  premiums  and  other  receivables,  reinsurance
      recoverables  and  accounts payable approximate their fair value due
      to their short-term nature.

      Long-term debt and loans  payable  are held at carrying value, which
      approximates fair value as of December 31, 2007.

CONCENTRATIONS OF CREDIT RISK.  Financial instruments, which potentially subject
the Company to concentrations of credit risk,  consist  principally  of cash and
cash    equivalents,   premiums   receivable   and   reinsurance   recoverables.
Concentrations of credit risk with respect to cash on deposit are limited by the
Company's  policy  of  investing  excess  cash  in  a  money  market account and
repurchase agreements of US Government and US Government Agency  securities with
major  national  banks.   These  accounts  are  held by Wachovia Bank, N.A.  and
SunTrust  Banks, Inc. Concentrations of credit risk  with  respect  to  premiums
receivable  are  limited  due  to the large number of individuals comprising the
Company's customer base.  However,  the  majority  of the Company's revenues are
currently derived from products and services offered  to  customers  in Florida,
which  could  be  adversely  affected  by  economic  downturns,  an  increase in
competition or other environmental changes.  In order to reduce credit  risk for
amounts  due  from reinsurers, the Company seeks to do business with financially
sound reinsurance  companies  and  regularly evaluates the financial strength of
all reinsurers used.

STOCK  OPTIONS.  The  Company  grants  options  for a fixed  number of shares to
employees and outside  directors  with an exercise price equal to the fair value
of the shares as of the grant date. Prior to January 1, 2006 the Company elected
to apply Accounting Principles Board ("APB") No. 25, Accounting for Stock Issued
to Employees,  and related  interpretations  in accounting for its stock options
granted to employees and directors,  and SFAS No. 123 Accounting for Stock-Based
Compensation, for its stock options granted to non-employees.  Under APB No. 25,
because the exercise price of the Company's  employee and director stock options
equal  the  market  price  of  underlying  stock on the  date of the  grant,  no
compensation  expense  was  recognized.  The  Company  expensed  the fair  value
(determined  as of the grant  date) of  options  and  warrants  granted  to non-
employees in  accordance  with SFAS No. 123.  SFAS 123 (R) was adopted using the
modified   prospective   transition   method.   Under  this  transition  method,
compensation  cost  recognized  in  the  periods  after  adoption  includes  (i)
compensation  cost for all  share-based  payments  granted prior to, but not yet
vested as of January 1, 2006 based on the  grant-date  fair value  estimated  in
accordance with the original  provision of SFAS 123, and (ii)  compensation cost
for all share-based payments granted subsequent to January 1, 2006, based on the
grant-date  fair value  estimated in accordance  with the provisions of SFAS 123
(R). Results from prior periods have not been restated.  As a result of adopting
SFAS 123 (R), the  Company's  income  before income taxes and net income for the
year ended December 31, 2007 are $2,781,017 and $1,708,240 lower,  respectively,
than if it had continued to account for share-based  compensation  under APB 25.
In  addition,  during the year ended  December  31,  2007,  the  Company  issued
restricted  common  stock  valued at $925,000 as  compensation.  This expense is
being  recognized  over a three-year  vesting period which  commenced  March 14,
2007.

STATUTORY ACCOUNTING.  UPCIC  prepares  its  statutory  financial  statements in
conformity  with accounting practices prescribed or permitted by the  Office  of
Insurance Regulation  of  the  State of Florida.  Effective January 1, 2001, the
Office of Insurance Regulation of  the  State of Florida required that insurance
companies domiciled in the State of Florida  prepare  their  statutory financial
statements   in   accordance   with   the   National  Association  of  Insurance
Commissioners'  ("NAIC")  Accounting  Practices   and   Procedures  Manual  (the
"Manual"), as modified by the Office of Insurance Regulation  of  the  State  of
Florida.   Accordingly, the admitted assets, liabilities and capital and surplus
of UPCIC as of December 31, 2007, and the results of its operations and its cash
flow, for the  year then ended have been determined in accordance with statutory
accounting principles,  but adjusted to accounting principles generally accepted
in  the United States of America  (GAAPUSA)  for  purposes  of  these  financial
statements.  These  principles are designed primarily to demonstrate the ability
to meet obligations to  policyholders and claimants and, consequently, differ in
some respects from GAAPUSA.

                                      F-10


NEW ACCOUNTING PRONOUNCEMENTS. SFAS No.123 (Revised 2004), Share-Based Payments,
issued in December 2004,  is  a  revision  of FASB Statement 123, Accounting for
Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock
Issued  to  Employees, and its related implementation  guidance.  The  Statement
focuses primarily  on  accounting  for  transactions  in which an entity obtains
employee services in share-based payments transactions.  SFAS  No.  123 (Revised
2004) requires a public entity to measure the cost of employee services received
in  exchange  for  an  award of equity instruments based on the grant-date  fair
value of the award (with  limited  exceptions) with the cost recognized over the
period during which an employee is required  to  provide service in exchange for
the award. This statement is effective as of the beginning  of the first interim
or annual reporting period of the company's first fiscal year  that begins on or
after  December  15,  2005  and  the Company adopted the standard in  the  first
quarter of fiscal year 2006.

On March 29, 2005, the Securities  and  Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. (SAB 107) regarding  the  Staff's interpretation of SFAS
123(R).  This  interpretation expresses the views of  the  Staff  regarding  the
interaction between  SFAS  123(R)  and  certain  SEC  rules  and regulations and
provides  the  Staff's  views  regarding  the valuation of share-based  payments
arrangements  by public companies. In particular,  this  SAB  provides  guidance
related to share-based  payments transactions with non-employees, the transition
from nonpublic to public  entity  status,  valuation methods, the accounting for
certain  redeemable  financial instruments issued  under  shared-based  payments
arrangements, the classification  of  compensation  expense,  non-GAAP financial
measures,   first-time   adoption   of   SFAS   123(R)  in  an  interim  period,
capitalization   of   compensation   cost   related   to  share-based   payments
arrangements,  the  accounting  for income tax effects of  share-based  payments
arrangements upon adoption of SFAS  123(R),  the  modification of employee share
options  prior  to  adoption  of  SFAS  123(R) and disclosures  in  Management's
Discussion  and Analysis subsequent to adoption  of  SFAS  123(R).  The  Company
adopted SAB 107 in connection with its adoption of SFAS 123(R).

In May 2005, FASB issued SFAS No. 154, Accounting Changes and Error Corrections,
which  establishes,  unless  impracticable,  retrospective  application  as  the
required  method  for  reporting  a change in accounting principle in absence of
explicit  transition  requirements specific  to  the  newly  adopted  accounting
principle. The statement provides guidance for determining whether retrospective
application of a change  in accounting principle is impracticable. The statement
also addresses the reporting  of  a  correction of error by restating previously
issued financial statements. SFAS No.  154  is  effective for accounting changes
and  corrections  of errors made in fiscal years beginning  after  December  14,
2005. The Company adopted  SFAS No. 154 in the first quarter of 2006. The impact
of such adoption did not have  an effect on the Company's consolidated financial
statements.

In  June 2006,  the  FASB issued FASB  Interpretation  No. 48,  "Accounting  for
Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" ("FIN
48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in an entity's financial  statements  in accordance with FASB Statement No. 109,
"Accounting for Income Taxes."  FIN 48  prescribes  that  a company should use a
more-likely-than-not recognition threshold based on the technical  merits of the
tax  position taken. Tax positions that meet the more-likely-than-not  threshold
should be measured in order to determine the tax benefit to be recognized in the
financial   statements.   This   Interpretation   also   provides   guidance  on
derecognition,  classification,  interest  and penalties, accounting in  interim
periods,  disclosure,  and transition. FIN 48  is  effective  for  fiscal  years
beginning after December  15,  2006. The Company adopted FIN 48 as of January 1,
2007  and the adoption had a negligible  impact  on  the  Company's  results  of
operation and financial position. The Company accrued interest and penalties for
the underpayment  of  estimated  federal and state income tax in accordance with
the provisions of the relevant tax law. Interest and penalties are classified in
the financial statements as income taxes.

In September 2006, the FASB issued  SFAS  No.  157  which  redefines fair value,
establishes  a  framework  for  measuring  fair  value  in  generally   accepted
accounting  principles  ("GAAP"),  and  expands  disclosures  about  fair  value
measurements. SFAS No. 157 applies where other accounting pronouncements require
or  permit  fair  value measurements. SFAS No. 157 is effective for fiscal years
beginning after November 15, 2007. The effects of adoption will be determined by
the types of instruments  carried  at  fair  value  in  the  Company's financial
statements at the time of adoption as well as the method utilized  to  determine
their fair values prior to adoption. Based on the Company's current use  of fair
value  measurements,  SFAS No. 157 is not expected to have a material effect  on
the results of operations or financial position of the Company.

In February 2007, the FASB  issued  SFAS  No. 159,  "The  Fair  Value Option for
Financial Assets and Financial Liabilities" ("SFAS 159") which permits  entities
to choose to measure many financial instruments and certain other items at  fair
value  that  are  not  currently required to be measured at fair value. SFAS 159
will become effective for  the  Company  on  January 1,  2008.  The  Company  is

                                      F-11


currently  evaluating the impact of adopting SFAS 159 on its financial position,
cash flows and results of operations.

NOTE 3 - REINSURANCE

UPCIC's in-force  policyholder  coverage  for windstorm exposures as of December
31, 2007 was approximately $75.3 billion. In  the  normal  course  of  business,
UPCIC also seeks to reduce the risk of loss that may arise from catastrophes  or
other  events  that cause unfavorable underwriting results by reinsuring certain
levels of risk in  various areas of exposure with other insurance enterprises or
reinsurers.

Amounts recoverable  from  reinsurers  are estimated in a manner consistent with
the  reinsurance  policy.   Reinsurance premiums,  losses  and  loss  adjustment
expenses are accounted for on  a  basis consistent with those used in accounting
for the original policies issued and  the  terms  of  the reinsurance contracts.
Reinsurance  ceding  commissions received are deferred and  amortized  over  the
effective period of the related insurance policies.

UPCIC limits the maximum  net  loss  that can arise from large risks or risks in
concentrated areas of exposure by reinsuring  (ceding)  certain  levels of risks
with  other  insurers or reinsurers, either on an automatic basis under  general
reinsurance contracts  known  as  "treaties"  or  by  negotiation on substantial
individual risks.  The reinsurance arrangements are intended  to  provide  UPCIC
with  the ability to maintain its exposure to loss within its capital resources.
Such reinsurance  includes  quota share, excess of loss and catastrophe forms of
reinsurance.

QUOTA SHARE

Effective June 1, 2006, UPCIC entered into a quota share reinsurance treaty with
Everest Re. Under the quota share  treaty, through May 31, 2007, UPCIC cedes 50%
of its gross written premiums, losses  and  LAE  for  policies with coverage for
wind risk with a ceding commission equal to 28% of ceded gross written premiums.
In addition, the quota share treaty has a limitation for  any  one occurrence of
$25,000,000  and  a limitation of $55,000,000 for losses arising out  of  events
that are assigned a  catastrophe  serial  number by the Property Claims Services
("PCS").

Effective June 1, 2007, UPCIC entered into  a  quota  share  reinsurance  treaty
agreement  with  Everest Re. Under the quota share treaty, through May 31, 2008,
UPCIC cedes 50% of  its gross written premiums, losses and LAE for policies with
coverage for wind risk  with  a  ceding  commission  equal to 31% of ceded gross
written premiums.  In addition, the quota share treaty  has a limitation for any
one occurrence of 40% of Gross Premiums Earned, not to exceed  $100,000,000, and
a  limitation of 112% of Gross Premiums Earned, not to exceed $280,000,000,  for
losses  arising  out  of events that are assigned a catastrophe serial number by
the PCS.

EXCESS PER RISK

Effective June 1, 2007  through  May  31,  2008 and June 1, 2006 through May 31,
2007, UPCIC entered into a multiple line excess  per risk agreement with various
reinsurers.  Under the multiple line excess per risk  agreement,  UPCIC obtained
coverage of $1,300,000 in excess of $500,000 ultimate net loss for each risk and
each property loss, and $1,000,000 in excess of $300,000 for each casualty loss.
A $5,200,000 aggregate limit applies to the term of the contract.

Effective  June  1, 2007 through May 31, 2008 and June 1, 2006 through  May  31,
2007, UPCIC entered  into  a property per risk excess agreement covering ex-wind
only policies. Under the property  per  risk  excess  agreement,  UPCIC obtained
coverage of $300,000 in excess of $200,000 for each property loss.  A $2,100,000
aggregate limit applies to the term of the contract.

EXCESS CATASTROPHE

Effective  June  1,  2006  through  May  31,  2007,  UPCIC's  excess catastrophe
reinsurance  agreement provides three layers of excess catastrophe  coverage  of
$76,000,000 in excess of $25,000,000 as follows:


                                      F-12





         First Layer                              Second Layer                             Third Layer
         -----------                              ------------                             -----------
                                                                                  
Coverage $32,000,000 in excess of $25,000,000     $18,000,000 in excess of $57,000,000     $26,000,000 in excess of $75,000,000
         each loss occurrence (placed 100%)       each loss occurrence (placed 100%)       each loss occurrence (placed 100%)

Deposit  $14,720,000                              $6,210,000                               $6,240,000
premium
(100%)

Minimum  $13,248,000                              $5,589,000                               $5,616,000
premium
(100%)

Premium  0.074%                                   0.031%                                   0.031%
rate -%
of
total
insured
value



Effective June 1, 2007 through May 31, 2008, UPCIC's excess catastrophe
reinsurance program provide five layers of excess catastrophe coverage of
$576,000,000 in excess of $100,000,000 as follows:



           First Layer                Second Layer              Third Layer   Fourth Layer               Fifth Layer
           -----------                ------------              -----------   ------------               -----------
                                                                                          
Coverage   $102,300,000 in excess of  $58,800,000 in excess of  $44,500,000   $220,400,000 in excess of  $150,000,000 in excess of
           $100,000,000 each loss     $202,300,000 each loss    in excess of  $305,600,000 each loss     $526,000,000 each loss
           occurrence                 occurrence                $261,100,000  occurrence                 occurrence
           (placed 100%)              (placed 100%)             each loss     (placed 100%)              (placed 100%)
                                                                occurrence
                                                                (placed 100%)
Deposit    $40,920,000                $14,994,000               $6,675,000    $29,754,000                $20,833,332
premium

Minimum    $36,828,000                $13,494,600               $6,007,500    $26,778,600                $20,833,332
premium

Premium    0.054891%                  0.020113%                 0.008954%     0.039913%                  0.027946%
rate -% of
total
insurance
value



Loss occurrence  is  defined as all individual losses directly occasioned by any
one disaster, accident  or  loss  or  series  of  disasters, accidents or losses
arising out of one event, which occurs in the State  of  Florida.   The contract
contains  a  provision for one reinstatement in the event coverage is exhausted.
An additional  premium  will  be calculated pro rata as to amount and 100% as to
time.

Effective June 1, 2006 through  May  31,  2007,  UPCIC purchased a reinstatement
premium  protection  contract  which  reimburses the Company  for  its  cost  to
reinstate the catastrophe coverage of $76,000,000 in excess of $25,000,000.

Effective June 1, 2007 through May 31,  2008,  UPCIC  purchased  a reinstatement
premium  protection  contract  which  reimburses  the  Company  for its cost  to
reinstate the first $426,000,000 (part of $576,000,000) of catastrophe  coverage
in excess of $100,000,000.

Effective  June  1, 2006, UPCIC obtained subsequent catastrophe event excess  of
loss reinsurance to  cover certain levels of the Company's net retention through
three catastrophe events, including hurricanes, as follows:


                                      F-13





         2[nd] Event                     2[nd]/3[rd] Event               3[rd] Event                 2[nd] Layer 3[rd]
         -----------                     -----------------               -----------                 -----------------
                                                                                                     Event
                                                                                                     -----
                                                                                         
Coverage $11,250,000 in excess of        $11,250,000 in excess of        $6,750,000 in excess of     $11,250,000 in excess of
         $13,750,000 each loss           $13,750,000 each loss           $7,000,000 each loss        $13,750,000 each loss
         occurrence subject to an        occurrence subject to an        occurrence subject to an    occurrence subject to an
         otherwise recoverable amount of otherwise recoverable amount of otherwise recoverable       otherwise recoverable amount of
         $11,250,000 (placed 17.5%)      $11,250,000 (placed 12.5%)      amount of $13,500,000       $22,500,000 (placed 37.5%)
                                                                         (placed 50%)

Deposit  $1,800,000                      $3,037,500                      $1,012,500                  $1,518,750
premium
(100%)

Minimum  $1,620,000                      $2,733,750                      $911,250                    $1,366,875
premium
(100%)

Premium  0.009%                          0.015%                          0.005%                      0.00759%
rate -%
of total
insured
value



Also, effective June 1, 2007, UPCIC also obtained subsequent catastrophe event
excess of loss reinsurance to cover certain levels of the Company's net
retention through three catastrophe events including hurricanes, in three
separate contracts, as follows:



           2[nd] Event                                     3[rd] Event - Contract #1           3[rd] Event - Contract #2
           -----------                                     -------------------------           -------------------------
                                                                                      
Coverage   $71,400,000 in excess of $28,600,000 each loss  $81,400,000 in excess of            $81,400,000 in excess of
           occurrence subject to an otherwise recoverable  $18,600,000 each loss occurrence    $18,600,000 each loss occurrence
           amount of $71,400,000 (placed 50%)              subject to an otherwise recoverable subject to an otherwise recoverable
                                                           amount of $162,800,000              amount of $162,800,000
                                                           (placed 25%)                        (placed 25%)

Deposit    $13,923,000                                     $7,936,500                          $8,954,000
premium
(100%)

Minimum    $12,530,000                                     $7,142,850                          $8,058,600
premium
(100%)

Premium    0.018677%                                       0.010646%                           0.012011%
rate -% of
total
insurance
value



UPCIC  also  obtained coverage  from  the  Florida  Hurricane  Catastrophe  Fund
("FHCF"), which  is  administered  by  the Florida State Board of Administration
(SBA).  Under the reimbursement agreement,  FHCF  would  reimburse  the Company,
with  respect  to each loss occurrence during the contract year for 90%  of  the
ultimate loss paid  by  the Company in excess of the Company's retention plus 5%
of the reimbursed losses  to  cover  loss  adjustment expenses.  A covered event
means any one storm declared to be a hurricane  by the National Hurricane Center
for  losses  incurred  in  Florida, both while it is  a  hurricane  and  through
subsequent downgrades. For the  contract  year June 1, 2006 to May 31, 2007, the
Fund has provided coverage of 90% of $241,644,867 in excess of $81,363,626.  The
premium for this coverage was $15,432,459.   For  the contract year June 1, 2007
to May 31, 2008, the SBA made available through the  2007  passage of House Bill
1A an additional $12 billion (Temporary Increase in Coverage  Limit  -  TICL) of
Florida  Hurricane  Catastrophe  Fund  coverage  for the 2007 wind season. UPCIC
purchased both the traditional FHCF coverage as well  as  the TICL FHCF coverage
for  the contract year June 1, 2007 to May 31, 2008 which provided  coverage  of
90% of  $1,065,387,373 in excess of $208,693,813.  The premium for this coverage
was $42,838,076.

                                      F-14


Also at June  1, 2006 and June 1, 2007, the FHCF made available, and the Company
obtained, $10,000,000 of additional catastrophe excess of loss coverage with one
free reinstatement  of  coverage  to carriers qualified as Limited Apportionment
Companies  or companies that participated  in  the  Insurance  Capital  Build-Up
Incentive Program,  such  as UPCIC. This particular layer of coverage at June 1,
2006 was $10,000,000 in excess  of $3,750,000. The premium for this coverage was
$5,000,000. This particular layer of coverage at June 1, 2007 was $10,000,000 in
excess of $18,600,000. The premium for this coverage was $5,000,000.

In  2007,  UPCIC  also purchased Florida  Hurricane  Catastrophe  Fund  Recovery
Shortfall Reinsurance in the event the Florida Hurricane Catastrophe Fund cannot
fulfill its payment obligations for the 2007-2008 Hurricane Season.

Amounts recoverable  from  reinsurers  are  estimated  in  accordance  with  the
reinsurance contract.  Reinsurance premiums, losses and LAE are accounted for on
bases  consistent with those used in accounting for the original policies issued
and the terms of the reinsurance contracts.

The preceding reinsurance arrangements had the following effect on certain items
in the accompanying consolidated financial statements:





                   Year Ended December 31, 2007                                     Year Ended December 31, 2006
                   ----------------------------                                     ----------------------------

          Premiums      Premiums             Loss and Loss             Premiums      Premiums             Loss and Loss
          Written        Earned               Adjustment               Written        Earned               Adjustment
          -------        ------               ----------               -------        ------               ----------
                                               Expenses                                                     Expenses
                                               --------                                                     --------
                                                                                         
Direct   $498,748,778  $474,353,847          $112,937,522           $371,754,514     $192,298,253           $70,704,156
Ceded   (358,405,016) (319,935,395)           (53,137,852)         (230,718,709)    (138,162,301)          (45,763,277)
        ------------- -------------          ------------          -------------    -------------          ------------
Net      $140,343,762  $154,418,452           $59,799,670           $141,035,805      $54,135,952           $24,940,879
        ============= =============          ============          =============    =============          ============





Other amounts:

                                                                              December 31, 2007
                                                                              -----------------
                                                                                
Reinsurance recoverable on unpaid losses and loss adjustment expenses               $37,587,445
Reinsurance recoverable on paid losses                                                8,811,820
                                                                          ---------------------
Reinsurance recoverables                                                            $46,399,265
                                                                          =====================


Prepaid reinsurance premiums                                                       $172,672,795
                                                                          =====================
Reinsurance payable, net                                                            $33,888,350
                                                                          =====================



Reinsurance  payable,  as  of  December 31, 2007, has been reduced by $5,602,526
which represents ceding commissions  due  from  reinsurers and $42,290,644 which
represents inuring premiums receivable. The Company  has determined that a right
of  offset,  as  defined in FASB Interpretation No. 39, "Offsetting  of  Amounts
Related to Certain  Contracts,"  exists  between the Company and its reinsurers,
under its quota share reinsurance treaties.

UPCIC's  reinsurance contracts do not relieve  UPCIC  from  its  obligations  to
policyholders.  Failure of reinsurers to honor their obligations could result in
losses to  UPCIC;  consequently,  allowances  are established for amounts deemed
uncollectible.  UPCIC evaluates the similar geographic  regions,  activities, or
economic  characteristics  of  the  reinsurers  to  minimize  its  exposure   to
significant  losses from reinsurer insolvencies. UPCIC currently has reinsurance
contracts with  various  reinsurers  located  throughout  the  United States and
internationally.   UPCIC  believes  that  ceding  risks  to reinsurers  whom  it
considers to be financially sound combined with the distribution  of reinsurance
contracts to an array of reinsurers adequately minimizes UPCIC's risk  from  any
potential operating difficulties of its reinsurers.

The  Company  may  also be subject to assessments by Citizens Property Insurance
Corporation ("Citizens"), the state-run insurer of last resort and the FHCF as a
result of operating deficiencies related to windstorm catastrophes. In addition,

                                      F-15


the  Company  is subject  to  assessments  by  the  Florida  Insurance  Guaranty
Association,  as   a   result  of  other  company  insolvencies.  Under  current
regulations,  insurers  may   recoup   the  amount  of  their  assessments  from
policyholders, or in some cases collect  the  amount  of  the  assessments  from
policyholders as surcharges for the benefit of the assessing entity.

On August 17, 2005 the Board of Governors of Citizens authorized the levying  of
a regular assessment on assessable insurers to recoup the 2004 Plan Year Deficit
incurred  in  the  High Risk Account. The assessment is based upon the Company's
share of direct written  premium  for the subject lines of business in the State
of Florida for the calendar year preceding  the  plan  year in which the deficit
occurred.  UPCIC's participation in this assessment totaled  $203,300.  Pursuant
to Florida statutes, insurers are permitted to recoup the assessment by adding a
surcharge  to policies in an amount not to exceed the amount paid by the insurer
to Citizens. UPCIC completed the recoupment of this assessment in 2006.

On June 12,  2006,  the OIR ordered an emergency FHCF assessment of 1% of direct
premiums written for  policies  with  effective dates beginning January 1, 2007,
which UPCIC is currently collecting from  policyholders, as the assessment is to
policyholders, not UPCIC. This assessment was  a  result  of  catastrophe losses
Florida   experienced  in  2004  and  2005.   The  assessments  collected   from
policyholders are remitted to FHCF quarterly.

On September 14, 2006, the Board of Governors of Citizens authorized the levying
of a regular  assessment  on  assessable  insurers  to recoup the 2005 Plan Year
Deficit incurred in the High Risk Account. The assessment  is based upon UPCIC's
share of direct written premium for the subject lines of business  in  the State
of  Florida  for  the calendar year preceding the plan year in which the deficit
occurred.  UPCIC's  participation  in this assessment totaled $263,650. Pursuant
to Florida statutes, insurers are permitted to recoup the assessment by adding a
surcharge to policies in an amount not  to exceed the amount paid by the insurer
to Citizens. As a result, UPCIC recorded  this  assessment  as an expense during
the  year  ended  December  31,  2006  and began implementing the recoupment  in
connection with this assessment in 2007.

During  its  meeting  on December 14, 2006,  the  Board  of  Directors  of  FIGA
determined the need for  an  emergency assessment upon its member companies. The
Board decided on an emergency  assessment  on  member  companies  of  2%  of the
Florida  net  direct  premiums for the calendar year 2005. Based on the 2005 net
direct  premiums  of $11.2  billion,  this  would  generate  approximately  $225
million. UPCIC's participation  in  this assessment totaled $1,772,861. Pursuant
to Florida statutes, insurers are permitted to recoup the assessment by adding a
surcharge to policies in an amount not  to exceed the amount paid by the insurer
to FIGA. As a result, UPCIC recorded this  assessment  as  an expense during the
year ended December 31, 2006 and began implementing the recoupment in connection
with this assessment in 2007.

During  its meeting on October 11, 2007, the Board of Directors  of  FIGA  again
determined  the  need for an assessment upon its member companies, which the OIR
approved on October  29,  2007.   The  Board  decided on an assessment on member
companies of 2% of the Florida net direct premiums  for  the calendar year 2006.
UPCIC's participation in this assessment totaled $7,435,090. Pursuant to Florida
statutes, insurers are permitted to recoup the assessment  by adding a surcharge
to policies in an amount not to exceed the amount paid by the  insurer  to FIGA.
As  a  result,  UPCIC  recorded this assessment as an expense during the quarter
ended September 30, 2007  and  will  implement the recoupment in connection with
this assessment in 2008, making this, ultimately, a revenue-neutral event.

NOTE 4 - INVESTMENTS

Major categories of net investment income are summarized as follows:



                                                              Year Ended                Year Ended
                                                           December 31, 2007         December 31, 2006
                                                           -----------------         -----------------
                                                                                      
Investment income on cash and cash equivalents                   $10,606,881                $4,259,399
Investment expense                                                   196,622                   272,985
                                                                     -------                   -------
      Net investment income                                      $10,410,259                $3,986,414
                                                                 ===========                ==========



                                      F-16




As of December 31, 2007, the Company's  investments  consisted  entirely of cash
and cash equivalents with a value of $214,745,606. Cash is comprised of accounts
with an aggregate carrying value $176,350,298 as of December 31,  2007, which is
primarily  invested daily in overnight repurchase agreements of U.S.  government
and U.S. government  agency securities. Cash equivalents is comprised of a money
market account with carrying value of $36,895,308 and short-term investment with
a carrying value of $1,500,000 on deposit with regulatory authorities.

As of   December 31, 2007, the Company had no available-for-sale or held-to-
maturity securities.

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment, as of December 31, 2007, consisted of the following:


                Computers                                $22,321
                Furniture                                276,372
                Automobiles                              437,369
                Software                               1,075,922
                                                       ---------
                Total cost                             1,811,984

                Less: accumulated depreciation         (937,554)
                                                       ---------
                Property plant and equipment, net       $874,430
                                                       =========

Depreciation  and amortization  of  property  and  equipment  was  $348,611  and
$373,533 during 2007 and 2006, respectively.

Real estate, as of December 31, 2007, consisted of the following:

                Land                                    $270,000
                Building                               1,410,000
                Capital improvements                   2,004,373
                                                       ---------
                Total cost                             3,684,373

                Less: accumulated depreciation         (291,546)
                                                       ---------
                Property plant and equipment, net     $3,392,827
                                                       =========


Depreciation of real estate was $119,446 and $118,932 during 2007 and 2006,
respectively.

NOTE 6 - LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

As described in Note 2, UPCIC establishes liabilities for unpaid losses and loss
adjustment expenses  on  reported and unreported claims of insured losses. These
liability estimates are based  on known facts and interpretation of factors such
as claim payment patterns, loss  payments,  pending  levels  of  unpaid  claims,
product   mix   and   industry  experience.  The  establishment  of  appropriate
liabilities, including  liabilities for catastrophes, is an inherently uncertain
process. This uncertainty  is  compounded  by  UPCIC's limited history of claims
experience.  UPCIC regularly updates its estimates as new facts become known and
further events occur which may impact the resolution of unsettled claims.

The level of catastrophe loss experienced in any  year  cannot  be predicted and
could  be  material  to  results  of operations and financial position.  UPCIC's
policyholders are concentrated in South  Florida,  which is periodically subject
to adverse weather conditions, such as hurricanes and  tropical  storms.  During
2007  and  2006, the Company did not experience any catastrophic events. UPCIC's
in-force policyholder  coverage  for windstorm exposures as of December 31, 2007
was  approximately  $75.3 billion.   UPCIC  continuously  evaluates  alternative
business strategies to  more  effectively  manage  its  exposure  to catastrophe
losses,  including  the  maintenance  of  catastrophic  reinsurance coverage  as
discussed in Note 3.

Management  believes that the liabilities for claims and claims  expense  as  of
December 31, 2007 are appropriately established in the aggregate and adequate to
cover the ultimate  cost  of  reported and unreported claims arising from losses
which had occurred by that date. However, if losses exceeded direct loss reserve
estimates there could be a material  adverse  effect  on the Company's financial


                                      F-17



statements. Also, if there are regulatory initiatives, legislative enactments or
case law precedents which change the basis for policy coverage,  in any of these
events,  there  could  be  an effect on direct loss reserve estimates  having  a
material adverse effect on the Company's financial statements.

Activity in the liability for  unpaid  losses  and  loss  adjustment expenses is
summarized as follows:

                                         Year Ended            Year Ended
                                      December 31, 2007     December 31, 2006
                                      -----------------     -----------------

  Balance at beginning of year             $49,564,514           $66,999,956

  Less reinsurance recoverable             (32,369,504)          (60,859,231)

  Net balance at beginning of year          17,195,010             6,140,725
                                       ---------------       ---------------

  Incurred related to:
  Current year                              47,793,338             9,246,922
  Prior years                               12,006,332            15,693,957
                                       ---------------       ---------------
  Total incurred                            59,799,670            24,940,879
                                       ---------------       ---------------

  Paid related to:
  Current year                              25,713,314             4,453,684
  Prior years                               20,053,311             9,432,910
                                       ---------------       ---------------
  Total paid                                45,766,625            13,886,594

  Net balance at end of year                31,228,055            17,195,010
  Plus reinsurance recoverable              37,587,445            32,369,504

  Balance at end of year                   $68,815,500           $49,564,514
                                       ===============       ===============


The Company's liabilities for unpaid losses and LAE, net of  related reinsurance
recoverables,  as  of  December 31, 2007 were increased in the current  year  by
$12,006,332 for claims that  had  occurred  on  or before the prior year balance
sheet  date. This unfavorable loss emergence resulted  principally  from  higher
than expected  hurricane  losses  in  2004  and  as  a  result  of  actual  loss
development  on  prior  year non-catastrophe losses emerging less favorably than
expected. The Company's liabilities  for  unpaid  losses and LAE, net of related
reinsurance recoverables, as of December 31, 2006 were  increased during 2006 by
$15,693,957 for claims that had occurred on or before the  previous year balance
sheet  date.  This unfavorable loss emergence resulted principally  from  higher
than expected hurricane  losses  in  2004.  There  can  be no assurance that the
Company's  unpaid losses and LAE will not develop redundancies  or  deficiencies
and possibly  differ  materially  from the Company's unpaid losses and LAE as of
December  31,  2007.  In  the future, if  the  unpaid  losses  and  LAE  develop
redundancies  or deficiencies,  such  redundancy  or  deficiency  would  have  a
positive or adverse impact, respectively, on future results of operations.

NOTE 7 - LOANS PAYABLE

On November 9,  2006,  UPCIC  entered into a $25.0 million surplus note with the
Florida State Board of Administration under Florida's Insurance Capital Build-Up
Incentive Program. Given the proximity  of  the  loan  origination  date  to the
balance sheet date, the carrying value of the note was deemed to approximate its
fair value as of December 31, 2007. Under the program, which was implemented  by
the  Florida  legislature  to  encourage insurance companies to write additional
residential insurance coverage in  Florida,  the  State  Board of Administration
matched UPCIC's funds of $25.0 million that were earmarked  for participation in
the program. The surplus note brings the current capital and surplus of UPCIC to
approximately $98.7 million.  The $25.0 million is invested in  a treasury money
market account.

The  surplus  note  has  a  twenty-year  term  and  accrues  interest at a  rate
equivalent to the 10-year U.S. Treasury Bond Rate, adjusted quarterly  based  on
the  10-year  Constant Maturity Treasury rate.  For the first three years of the
term of the surplus  note,  UPCIC  is  required  to  pay interest only, although
principal payments can be made during this period.  Any  payment of principal or


                                      F-18


interest by UPCIC on the surplus note must be approved by  the  Commissioner  of
Florida Insurance Regulation.

An  event of default will occur under the surplus note if UPCIC: (i) defaults in
the payment  of the surplus note; (ii) fails to meet at least a 2:1 ratio of net
premium to surplus  ("Minimum Writing Ratio") requirement by June 1, 2007; (iii)
fails to submit quarterly  filings  to  the OIR; (iv) fails to maintain at least
$50 million of surplus during the term of  the  surplus note, except for certain
situations;  (v)  misuses  proceeds  of  the  surplus  note;   (vi)   makes  any
misrepresentations  in  the  application  for  the  program;  or  (vii) pays any
dividend  when  principal  or  interest payments are past due under the  surplus
note.  As of December 31, 2007,  the  Company  is in compliance with each of the
aforementioned loan covenants except for the Minimum Writing Ratio.

       If UPCIC  failed  to  increase  its  writing  ratio  for two  consecutive
quarters prior to June 1, 2007,  failed to obtain the 2:1 Minimum  Writing Ratio
by June 1,  2007,  or drops  below  the 2:1  Minimum  Writing  Ratio  once it is
obtained for two  consecutive  quarters,  the interest  rate on the surplus note
will increase during such deficiency by 25 basis points if the resulting writing
ratio is between  1.5:1 and 2:1 and the interest rate will increase by 450 basis
points if the writing  ratio is below 1.5:1.  If the writing ratio remains below
1.5:1 for three  consecutive  quarters  after June 1,  2007,  UPCIC must repay a
portion of the surplus note so that the Minimum  Writing  Ratio will be obtained
for the following  quarter.  As of September 30, 2007 and December 31, 2007, the
Company's  net  written  premium  to  surplus  ratios  were  1.83:1  and  1.42:1
respectively,  as defined under the terms of the surplus note  agreement.  Under
the terms of the surplus note agreement, at December 31, 2007, the interest rate
on the note was  increased by 450 basis  points.  As of December  31, 2007,  the
Company's  net written  premium to surplus  ratio,  as defined under the surplus
note agreement, was below 1.5:1. If the Company's net written premium to surplus
ratio remains below 1.5:1 for two additional  calendar  quarters (i.e.,  through
June 30, 2008), the Company will be required to repay a portion of the principal
balance under the surplus note agreement.  The Company expects to meet or exceed
a ratio of 1.5:1 by June 30, 2008 and,  therefore,  does not expect to repay any
portion of the $25,000,000 principal balance of the surplus note during 2008.

To  meet  its matching obligation under the Insurance Capital Build-Up Incentive
Program, on November 3, 2006, the Company entered into a Secured Promissory Note
with Benfield  Greig  (Holdings),  Inc. in the aggregate principal amount of $12
million.  Interest on the note accrued  at  the  rate  of 12.75% per annum.  The
outstanding principal was due in six monthly installments  of $1.5 million and a
final  seventh  monthly  installment of the remaining balance plus  all  accrued
interest under the terms of  the note starting on January 31, 2007 and ending on
July 31, 2007.  In connection  with  the  loan, the Company and its subsidiaries
appointed  Benfield  as  their  reinsurance  intermediary   for   all  of  their
reinsurance  placements  for  the  contract year beginning on June 1, 2007.  The
Company made all payments under the  note  in a timely manner and paid the final
installment  on July 18, 2007.  Under the terms  of  the  note,  Benfield  Greig
(Holdings), Inc.  agreed to refund a portion of the interest paid on the note if
the Company fulfilled  all  its  material  obligations  under the related broker
agreements.  On July 27, 2007, the Company received a refund  of  interest  from
Benfield  Greig  (Holdings),  Inc.  in  the  amount of $280,500 that reduced the
effective interest rate on the note to 8.25% per annum.

In  November  2007,  the  Company commenced offering  premium  finance  services
through Atlas Premium Finance  Company.  To fund its operations, Atlas agreed to
an  initial  finance facility of $12 million  with  Flatiron  Capital  Corp.,  a
premier funding  partner  to  the  commercial  property  and  casualty insurance
industry owned by TD Banknorth, N.A.  The interest rate is equal  to  the  prime
rate  ("Money  Rate"  section of The Wall Street Journal) plus twenty-five basis
points (0.25%).

The following table represents  the  Company's total contractual obligations for
which cash flows are fixed or determinable.

Loan repayments are due as follows as of December 31, 2007:

      2008                  $         0
      2009                            0
      2010                            0
      2011                      992,121
      2012                    1,038,859
      Thereafter             22,969,020
                             ----------
      Total                 $25,000,000
                            ===========

Interest  expense  was  $1,525,814 and $412,729  for  the  twelve  months  ended
December 31, 2007 and 2006, respectively.


                                      F-19


NOTE 8 - REGULATORY REQUIREMENTS AND RESTRICTIONS

UPCIC is subject to comprehensive  regulation  by the OIR. The Florida Insurance
Code  (the  "Code") requires that UPCIC maintain minimum  statutory  surplus  of
$4,000,000.   UPCIC  is also required to adhere to prescribed premium-to-surplus
ratios under the Code  and  to  maintain approved securities on deposit with the
state  of  Florida.  UPCIC's statutory  surplus  as  of  December  31,  2007  is
$98,686,993.

The maximum amount of dividends which can be paid by Florida insurance companies
without prior  approval  of  the Florida Commissioner is subject to restrictions
relating to statutory surplus. The maximum dividend that may be paid by UPCIC to
the Company without prior approval  is  limited  to  the lesser of statutory net
income  from operations of the preceding calendar year  or  10.0%  of  statutory
unassigned  capital  surplus as of the preceding year end. During 2007 and 2006,
UPCIC did not pay dividends to the Company.

NOTE 9 - RELATED PARTY TRANSACTIONS

All  underwriting,  rating,   policy   issuance,  reinsurance  negotiations  and
administration  functions  for  UPCIC are performed  by  UPCIC,  Universal  Risk
Advisors, Inc., a wholly owned subsidiary of the Company, and unaffiliated third
parties.  Claims  adjusting  functions  are  performed  by  Universal  Adjusting
Corporation, a wholly owned subsidiary  of  the  Company  and unaffiliated third
parties.

Downes  and Associates, a multi-line insurance adjustment corporation  based  in
Deerfield  Beach,  Florida  performs  certain  claims  adjusting work for UPCIC.
Downes and Associates is owned by Dennis Downes, who is  the  father  of Sean P.
Downes, Chief Operating Officer and Senior Vice President of UPCIC. During  2007
and  2006,  the Company expensed claims adjusting fees of $675,237 and $829,208,
respectively, to Downes and Associates.

In September  2006,  the  Company  initiated the process of acquiring all of the
outstanding common stock of Atlas Florida Financial Corporation, which owned all
of  the  outstanding  common stock of Sterling  Premium  Finance  Company,  Inc.
("Sterling"), from the  Company's  Chief  Executive  Officer and Chief Operating
Officer  for  $50,000,  which approximated Sterling's book  value.  The  Company
received approval of the  acquisition  from  the  OIR. Sterling has been renamed
Atlas Premium Finance Company and commenced offering premium finance services in
November 2007.

NOTE 10- INCOME TAX PROVISION

The following table reconciles the statutory federal  income  tax  rate  to  the
Company's effective tax rate for the years ended December 31, 2007 and 2006:

                                                  2007         2006
 Statutory federal income tax rate                  35.0%       35.0%
 Increases (decreases) resulting from:
 Change in valuation allowance                       0.0%      (6.5%)
 Disallowed executive compensation                   0.0%        2.9%
 Disallowed meals & entertainment                    0.0%         .7%
 State income tax, net of federal tax benefit        3.6%        6.1%
 Other, net                                          1.1%      (2.7%)
                                             ------------    ---------
 Effective tax rate                                 39.7%       35.5%
                                             ============    =========


Deferred  income  taxes  as  of December 31, 2007 are provided for the temporary
differences between financial reporting basis and the tax basis of the Company's
assets and liabilities under SFAS 109.  The tax effects of temporary differences
are as follows:


                                      F-20



            Deferred income tax assets:
                 Unearned premiums                        $6,331,577
                 Advanced premiums                           792,319
                 Unpaid losses                               851,138
                 Regulatory assessments                    3,423,250
                 Executive compensation                    1,652,458
                 Allowance for uncollectible receivables     321,199
                 Property and equipment                       12,350
                 Deferred ceding commission, net             818,665
                                                        --------------
            Deferred income taxes                        $14,202,956
                                                        ==============


A valuation allowance is deemed unnecessary as of December 31, 2007 and December
31, 2006, respectively because  management  believes  it  is  probable  that the
Company  will generate substantial taxable income sufficient to realize the  tax
benefits associated  with  the  net deferred income tax asset shown above in the
near future.

Included in income tax is State of Florida income tax at a statutory tax rate of
5.5%.

NOTE 11 - STOCKHOLDERS' EQUITY

CUMULATIVE PREFERRED STOCK

Each share of Series A and M Preferred  Stock is convertible by the Company into
2.5 shares of Common Stock and 5 shares of  Common  Stock, respectively, into an
aggregate  of  568,326  common  shares.   The Series A Preferred  Stock  pays  a
cumulative dividend of $.25 per share per quarter.

STOCK OPTIONS

The Company adopted a 1992 Stock Option Plan (the "Plan") under which new shares
of Common Stock are reserved for issuance upon  the exercise of the options. The
Plan is designed to serve as an incentive for attracting and retaining qualified
and competent employees, officers, directors and  consultants  of  the  Company.
All  employees,  officers,  directors  and  consultants  of  the  Company or any
subsidiary  are  eligible to participate in the Plan. The Plan does not  specify
the number of shares  for  which  options  are  available  for  grant. The stock
options  may be granted over a period not to exceed 10 years and generally  vest
as of the  date  of  grant  or  upon  certain  goals  attained.  The Plan has no
provisions  for  the  exercising of options other than paying the cash  exercise
price.

A summary of the option activity for the years ended December 31, 2007 and 2006
is presented below:




                                                     Options Exercisable                     Weighted     Weighted
                                                     -------------------                     Average      Aggregate
                                    Number          Option Price Per Share       Number      Exercise     Intrinsic
                                   of Shares      Low      High     Weighted    of Shares     Price         Value
                                   ---------      ---      ----     --------    ---------     -----         -----

                                                                                     
Outstanding January 1, 2006        7,515,000     $0.04     $1.87      $0.95     7,515,000      $0.95
Exercised                           (220,000)    $0.04     $0.50      $0.08
Cancelled                           (850,000)    $1.00     $1.25      $1.24
                                ------------
Outstanding December 31, 2006      6,445,000     $0.04     $1.87      $0.91     6,445,000      $0.91      $4,517,644
Granted                            2,010,000     $2.60     $6.50      $5.89
Exercised                           (750,000)    $1.06     $1.87      $1.11
Expired                             (600,000)    $0.63     $1.06      $0.70
                                ------------
Outstanding December 31, 2007      7,105,000     $0.06     $6.50      $2.32     7,105,000      $2.32     $36,172,050
                                ============



The total intrinsic value  of  options  exercised  in  2007  was $666,058, which
options were exercised on a cashless basis. A total of 185,729  shares of Common
Stock were issued in 2007 for the cashless exercise of stock options,  valued at
$872,926.


                                      F-21



The  weighted average remaining contractual life on the options outstanding  and
exercisable as of December 31, 2007 was 3.22 years.  All options are exercisable
and fully vested.

Options to purchase 2,010,000 shares of Common Stock were granted during 2007 at
a weighted  average exercise price of $5.89.  Options to purchase 750,000 shares
of Common Stock  were exercised during 2007 at a weighted average exercise price
of $1.11. On July 12, 2007, the Company granted options to purchase an aggregate
of 1,575,000 shares  of  common  stock  to the Company's directors and executive
officers.  All of the options granted on  July  12,  2007 vest on July 12, 2008,
have an exercise price of $6.50 per share, and expire  on  July  12,  2012.  The
options granted to Bradley I. Meier, the Company's President and Chief Executive
Officer, and to Sean P. Downes, the Company's Chief Operating Officer and Senior
Vice  President,  are  only exercisable on such date or dates as the fair market
value (as defined in their respective option agreements) of the Company's common
stock is and has been at  least one hundred fifty percent (150%) of the exercise
price for the previous twenty (20) consecutive trading days.

The Company estimated the fair value of all stock options awards as of the grant
date by applying the Black-Scholes-Merton option pricing model.  The use of this
valuation model involves assumptions that are judgmental and highly sensitive in
the determination of compensation  expense  and include the expected life of the
option,  stock  price  volatility,  risk-free  interest  rate,  dividend  yield,
exercise  price,  and  forfeiture  rate.   Under SFAS  123(R),  forfeitures  are
estimated at the time of valuation and reduce  expense  ratably over the vesting
period.  The forfeiture rate is adjusted periodically based  on  the  extent  to
which  actual  forfeitures  differ, or are expected to differ, from the previous
estimate.  Under SFAS 123 and  APB  25,  the  Company  elected  to  account  for
forfeitures when awards were actually forfeited and reflect the forfeitures as a
cumulative adjustment to the pro forma expense.

The fair value  of options granted in 2007 was estimated assuming the following:
weighted average  expected  life  of  2.45 years, dividend yield of 4.0 percent,
risk-free  interest  rate  of 4.86 percent,  and  expected  volatility  of  70.0
percent. In accordance with SFAS 123(R), fair values of options granted prior to
adoption and determined for  purposes of disclosure under SFAS 123 have not been
changed.  The fair value of options granted prior to adoption of SFAS 123(R) was
estimated assuming the following:  weighted average expected life of five years,
dividend yield of 0.0 percent, risk-free  interest  rate  of  6.5  percent,  and
expected volatility of 154.5 percent and 126.3 percent for grants issued in 2004
and 2002, respectively.

WARRANTS

A summary of the warrant activity for the years ended December 31, 2007 and 2006
is presented below:



                                                  Warrants Exercisable
                                                  --------------------        Weighted     Weighted
                                                                               Average     Average     Aggregate
                                   Number       Warrant   Price per Share      Number      Exercise    Intrinsic
                                  of Shares       Low      High   Weighted    of Shares     Price        Value
                                  ---------       ---      ----   --------    ---------     -----        -----
                                                                                    
Outstanding January 1, 2006       1,932,006      $0.03     $4.25    $1.27     1,932,006      $1.27       $482,870
Exercised                          (625,000)     $0.05     $0.05    $0.05
Cancelled                          (457,006)     $0.75     $3.00    $1.20
                                -----------
Outstanding December 31, 2006       850,000      $0.03     $1.00    $0.72       850,000      $0.72
Exercised                          (250,000)     $0.03     $0.05    $0.04
                                -----------
Outstanding December 31, 2007       600,000      $1.00     $1.00    $1.00       600,000      $1.00     $3,846,000
                                ===========





                                      F-22


The  total  intrinsic value of warrants exercised in 2007 was $4,552.  The total
cash received  in  2007  and 2006 for the exercise of stock warrants was $10,500
and $31,250 respectively.

The weighted average remaining  contractual  life on the options outstanding and
exercisable as of December 31, 2007 was .96 years.  All warrants are exercisable
and fully vested.

The actual tax benefit realized for the tax deductions  from  option and warrant
exercise of the share-based payment arrangements totaled $1,753,812 for the year
ended December 31, 2007 and $376,747 for the year ended December 31, 2006.

OTHER STOCK ISSUANCES

On March 14, 2007, the Company issued 250,000 shares of restricted  common stock
at  a  price  of  $3.70  per  share to an employee in consideration for services
rendered pursuant to the terms  of  an  employee agreement. The shares will vest
over a three year period. On May 1, 2007,  the  Company  issued 22,143 shares of
restricted common stock at a price of $1.87 per share, on a "cashless" basis, to
James  M.  Lynch, Executive Vice President and Chief Financial  Officer  of  the
Company, pursuant to Mr. Lynch's exercise of stock options. Also on May 1, 2007,
the Company issued 387,234 shares of restricted common stock at a price of $1.06
per share, on a "cashless" basis, to Norman M. Meier, a director of the Company,
pursuant to  Mr.  Meier's  exercise  of  stock options. Also on May 1, 2007, the
Company issued 77,447 shares of restricted  common stock at a price of $1.06 per
share,  on  a "cashless" basis, to Joel Wilentz,  a  director  of  the  Company,
pursuant to Mr.  Wilentz's  exercise  of stock options. Also on May 1, 2007, the
Company issued 77,447 shares of restricted  common stock at a price of $1.06 per
share,  on  a "cashless" basis, to Reed Slogoff,  a  director  of  the  Company,
pursuant to Mr.  Slogoff's  exercise of stock options. On November 29, 2007, the
Company issued 100,000 and 150,000  shares of restricted common stock at a price
of $.03 and $.05 respectively to a private  investor pursuant to the exercise of
warrants to purchase restricted common stock.   Unless otherwise specified, such
as  in  the case of the exercise of stock options or  warrants,  the  per  share
prices were  determined using the closing price of the Company's common stock as
quoted on the  OTC  Bulletin  Board  or  the  AMEX and the shares were issued in
private transactions pursuant to Section 4(2) of  the Securities Act of 1933, as
amended.

On October 4, 2007, the Company declared a dividend  of  $.09  per  share on its
outstanding  Common  Stock  to  be paid on April 8, 2008 to the shareholders  of
record of the Company at the close  of  business  on March 10, 2008. At December
31, 2007, the Company recorded a dividend payable in  the  amount  of $3,537,639
for  this  dividend  and  a net reduction to retained earnings in the amount  of
$3,241,145, which represents  the  total  dividend  net  of the dividends on the
shares held in treasury stock and in the Stock Grantor Trust  described  in Note
11  -  Stockholders'  Equity.  During  the  fourth  quarter,  the Company paid a
dividend of $0.08 per share of outstanding Common Stock that was  accrued at the
end  of  third  quarter.  The  aggregate  amount of the dividend was $2,861,018.
During the third quarter, the Company paid  a  dividend  of  $0.07  per share of
outstanding  Common Stock that was accrued at the end of the first quarter.  The
aggregate amount  of the dividend was $2,503,391. During the second quarter, the
Company paid a dividend  of $0.05 per share of outstanding Common Stock that was
accrued  in  December  31, 2006.  The  aggregate  amount  of  the  dividend  was
$1,759,922.

STOCK GRANTOR TRUST

On April 3, 2000, the Company established the Universal Insurance Holdings, Inc.
Stock Grantor Trust ("SGT")  to  fund  its  obligations arising from its various
stock option agreements.  The Company funded  the  SGT  with 2,900,000 shares of
Company Common Stock.  In exchange, the SGT delivered $29,000  and  a promissory
note  to the Company for approximately $2,320,000 which together represents  the
purchase  price  of  the shares.  Amounts owed by the SGT to the Company will be
repaid by cash received  by  the  SGT,  which  will  result in the SGT releasing
shares to satisfy Company obligations for stock options.  The  assets of the SGT
are subject to the claims of the Company's general creditors under  federal  and
state  law.    The consolidated financial statements include the accounts of the
SGT. Dividends paid  by  the Company and received by the SGT on shares of Common
Stock  held in trust are eliminated  in  consolidation  and  shown  net  in  the
Consolidated Financial Statements.


                                      F-23



NOTE 12 - COMMITMENTS AND CONTINGENCIES

EMPLOYMENT AGREEMENTS

The Company's  employment agreement with Bradley Meier is dated as of August 11,
1999.  The Company and Mr. Meier have amended the employment agreement, with the
most recent amendment  dated  March  21,  2007 (the employment agreement and the
amendments are collectively referred to as  the  "Meier  Agreement").  Under the
terms  of the Meier Agreement, Mr. Meier will serve as the  Company's  President
and Chief  Executive  Officer.   Mr. Meier received a base salary of $830,324 in
2006, and he is entitled to a twenty  percent (20%) increase in base salary each
year.  Additionally, pursuant to the Meier  Agreement,  Mr. Meier is entitled to
an annual performance bonus equal to three percent (3%) of  the pretax income of
the Company up to $5 million, and four percent (4%) of the pretax  income of the
Company  in  excess  of  $5  million; provided, however, that any such bonus  is
contingent upon the Company's  shareholders  approving such bonus formula, which
they  have  done.   Mr. Meier is also eligible for  other  benefits  customarily
provided by the Company  to  its  executive  employees,  and the Meier Agreement
contains noncompete and nondisclosure provisions.  In addition,  in the event of
a  Change  in  Control  of the Company (as defined in the Meier Agreement),  the
Company shall pay Mr. Meier  an  amount equal to 48 months base salary, plus two
times any bonus paid for the preceding  fiscal year.  Further, in the event of a
Change in Control, all options held by Mr.  Meier  vest  and  become immediately
exercisable.   Also,  in  the  event  that  the  Company  terminates  the  Meier
Agreement,  the  Company shall pay Mr. Meier 24 months total compensation.   The
Meier  Agreement expires  on  December  31,  2009;  however,  the  agreement  is
automatically  extended  each  year  thereafter  unless the Company or Mr. Meier
provides  written  notice  that the agreement is being  terminated  60  days  in
advance of the anniversary date of the Meier Agreement.

The Company's employment agreement  with  Sean  Downes is dated as of January 1,
2005  and  provides that Mr. Downes will serve as Chief  Operating  Officer  and
Senior Vice  President  of  the Company. The Company and Mr. Downes have amended
the employment agreement, with  the  most  recent  amendment dated July 12, 2007
(the employment agreement and the amendments are collectively referred to as the
"Downes Agreement").  Mr. Downes received a base salary of $691,500 in 2007, and
he  is entitled to a twenty percent (20%) increase in  base  salary  each  year.
Additionally,  pursuant  to  the  Downes Agreement, Mr. Downes is entitled to an
annual performance bonus equal to three  percent  (3%) of the pre-tax profits of
the  Company;  provided, however, that any such bonus  is  contingent  upon  the
Company's shareholders  approving  such  bonus  formula,  which  they have done.
Under the Downes Agreement, the Company may grant Mr. Downes options or warrants
to purchase the Company's Common Stock.  Mr. Downes is also eligible  for  other
benefits customarily provided by the Company to its executive employees and  the
Downes Agreement contains noncompete and nondisclosure provisions.  In addition,
in  the  event  of  a Change in Control of the Company (as defined in the Downes
Agreement), the Company  shall  pay Mr. Downes an amount equal to 12 months base
salary,  plus  the annual bonus paid  for  the  preceding  fiscal  year.   Also,
effective January 1,  2009, if a Change of Control occurs, the Company shall pay
Mr. Downes an amount equal to 2.99 times Mr. Downes' "base amount" as defined in
Section 280G of the Internal Revenue Code.  Further, in the event of a Change in
Control, all options held by Mr. Downes vest and become immediately exercisable.
The Downes Agreement expires  on December 31, 2009 unless extended in writing by
the Company.

On October 11, 2006, the Company  entered  into  an  employment  agreement  (the
"Lynch  Agreement")  with  James  M.  Lynch,  who  has  served  as the Company's
Executive Vice President and Chief Financial Officer since August  1998.   Under
the  terms  of  the  Lynch  Agreement,  Mr. Lynch will continue to serve in such
capacity.  Mr. Lynch received a base salary  of  $349,385  in  2007,  and  he is
entitled  to  a  twenty  percent  (20%)  increase  in  base  salary  each  year.
Additionally,  pursuant  to  the  Lynch  Agreement,  Mr. Lynch is entitled to an
annual performance bonus determined at the discretion  of the Board of Directors
of  the  Company;  provided,  however, that such bonus shall  be  no  less  than
$50,000.  Mr. Lynch is also eligible  for other benefits customarily provided by
the Company to its executive employees.  The Lynch Agreement contains noncompete
and nondisclosure provisions.  If Mr. Lynch's  employment  is  terminated (i) by
the  Company  or  a  succeeding  entity without Cause (as defined in  the  Lynch
Agreement)  or (ii) by Mr. Lynch for  Good  Reason  (as  defined  in  the  Lynch
Agreement) within  one  year  following  a  Change in Control of the Company (as
defined in the Lynch Agreement), then the  Company shall pay Mr. Lynch an amount
equal to the greater of Mr. Lynch's current base salary (x) through December 31,
2009  or  (y) for period of twelve (12) months,  and  Mr.  Lynch  will  also  be
entitled to  receive payment for COBRA premiums.  The Lynch Agreement expires on
December 31, 2009.


                                      F-24



OPERATING LEASE

The Company has  leased  certain  computer equipment and software under a master
equipment  lease  agreement  with Relational  Funding,  Inc.  with  an  original
equipment cost of $1,019,295.  The  following  is  a  schedule of future minimum
rental payments required under the non-cancelable operating lease as of December
31, 2007:

      2008      $ 216,692
      2009        141,820
      2010         82,298
      2011         65,695
               ----------
                $ 506,505
                  =======


NOTE 13 - LITIGATION

Certain  lawsuits  have  been  filed  against  the Company. In  the  opinion  of
management, none of these lawsuits are material  and  they  are  all  adequately
reserved for or covered by insurance or, if not so covered, are without merit or
involve  such  amounts that if disposed of unfavorably would not have a material
adverse effect on the Company's financial position or results of operations.

On February 7, 2005,  Marty  Steinberg  as  a  court  appointed receiver for the
entities consisting of Lancer Management Group LLC, Lancer  Management  Group II
LLC, Lancer Offshore Inc., Omnifund Ltd., LSPV Inc., LSPV LLC, Alpha Omega Group
Inc.  and  G.H.  Associates  LLC (collectively the "Lancer Entities") filed suit
against  Alfred  Taubman, Anthony  Cullen,  British  American  Racing,  Centrack
International, Inc.,  Kuwait  &  Middle  East  Financial Investment Co., Liberty
International Asset Management, Macroview Investments  Limited,  Opus  Portfolio
Ltd.,  Reva  Stocker,  Roger  Dodger,  LLC, Signet Management Limited, Thornhill
Group  Inc.  Trust,  World  Class  Boxing  and  the  Company  (collectively  the
"Defendants") in the United States District  Court  for the Southern District of
Florida.  The Company received the notice of suit by  mail on September 8, 2005.
The suit alleged that the Lancer Entities fraudulently  transferred funds to the
Defendants and that the transfers unduly enriched the Defendants.   The receiver
asked  the  Company  to pay $658,108.  The Company had no record of the  alleged
transfers and vigorously  defended  the  suit.  The  lawsuit  was dismissed with
prejudice by the receiver in 2006.

NOTE 14 - EARNINGS PER SHARE

The following table reconciles the numerator (earnings) and denominator (shares)
of the basic and diluted earnings per share computations for net  income for the
years ended December 31, 2007 and 2006.



                                                  For year ended                            For year ended
                                                December 31, 2007                         December 31, 2006
                                                -----------------                         -----------------
                                          Income                                  Income
                                       Available to                            Available to
                                          Common                                  Common
                                       Stockholders               Per Share    Stockholders                 Per Share
                                          Amount        Shares     Amount         Amount          Shares     Amount
                                          ------        ------     ------         ------          ------     ------
                                                                                          
Net  income (loss)                      $54,002,288                             $17,186,860
Less: Preferred stock dividends             (49,950)                                (49,950)
                                         ----------                              ----------

Income (loss) available
  to common stockholders                 53,952,338   35,550,503     $1.52       17,136,910     34,409,415     $0.50
                                                                   -------                                  --------

Effect of dilutive securities:
  Stock options and warrants                    -      5,241,192     (0.02)             -        4,100,903     (0.06)
  Preferred stock                            49,950      568,325       -             49,950        568,325       -
                                        -----------   ----------   -------      -----------     ----------  --------

Income (loss) available to common
  stockholders and assumed
  conversion                            $54,002,288   41,360,020     $1.31      $17,186,860     39,078,643     $0.44
                                        -----------   ----------   -------      -----------     ----------  --------



                                      F-25


NOTE 15 - SUPLEMENTAL CASH FLOW INFORMATION

Cash payments for interest and income taxes during the years ended December 31,
2007 and 2006 were as follows:

                                       For the years ended
                                       -------------------
                           December 31, 2007          December 31, 2006
                           -----------------          -----------------
 Interest                     $1,524,223                  $178,529
 Income Taxes                 $54,200,673               $2,696,500


NOTE 16 - SUBSEQUENT EVENTS

On  January 23, 2008, the Company declared a dividend of $.10 per share  on  its
outstanding  Common  Stock  of  the  Company to be paid on August 7, 2008 to the
shareholders of record of the Company  at the close of business on July 9, 2008.
The Company expects to pay an aggregate dividend of approximately $3,601,273.


                                      F-26