FedNat Holding Company

Thank you. Good morning.

And thanks everyone for joining FedNAT's fourth quarter 2021 conference call. Our earnings release and prepared remarks include references to non-GAAP measures, such as adjusted operating income. We use these non-GAAP measures to provide greater transparency and a more meaningful, efficient comparison to prior year's results. Our non-GAAP and reconciliations from the GAAP measures to the non-GAAP measures are available in our earnings release. Statements in this conference call that are not historical facts are forward-looking statements. Words such as anticipate, estimate, expect, predict, project, and other similar words or phrases are intended to identify forward-looking statements. The matters discussed on this call that are forward-looking statements are based on current management expectations involving risks and uncertainties that may result in these expectations not being realized. Actual events, outcomes, and results may differ materially from what is expressed or forecasted in forward-looking statements made on this call due to numerous risks and uncertainties including, but not limited to, the risks and uncertainties described in this conference call, our earnings release issued yesterday, and other filings made by the company with the SEC from time to time. Forward-looking statements made during this conference call speak only as of today's date, and FEDMAT specifically disclaims any obligation to update or revise any forward-looking statements to reflect new information, future events, or circumstances or otherwise. Now I will turn the call over to FedNet's Chief Executive Officer, Mike Braun.

Thank you. Good morning and welcome to our fourth quarter 2021 conference call. Ron Jordan, our Chief Financial Officer, and Eric Fernandez, our Chief Accounting Officer, are on the call with me today. After my remarks, Ron will go into more detail on the financial results of the quarter, and then we will be glad to take questions. Before I review our fourth quarter results, I want to give an update on the shift in FedNet strategy that we announced in November. As we announced then, we are exiting non-Florida markets and refocusing our efforts on the improving homeowners market in Florida, where FedNet was established 30 years ago, and where we continue to have a significant market share, strong underwriting and claims processing capabilities, and strong agent relationships. As part of the exit from our non-Florida markets, we have begun an orderly runoff of Mason's insurance operations. Mason has filed appropriate documentation with its insurance regulators in Louisiana, Florida, and Texas. In January, we began non-renewing Mason's policies in Louisiana on the expiration dates of each appropriate policy. And in March, we are beginning to non-renew Mason's Texas policies. The non-renewal of Mason's Florida policies is expected to begin in July 2022. At that time, we expect the runoff of Mason's business to be substantially completed by the end of 2022. FNIC's non-Florida book was written through our third party managing general underwriter, Sadeshore, and Sadeshore owns the renewal rights to those policies. Last December, Sadeshore began making offers of coverage to FNIC policyholders in Texas and Louisiana to renew policies onto alternative insurance carrier partners of Sateshore that were not affiliated with FedNAP. Up through the first quarter of 2022, Sateshore policies in all states have continued to be renewed by FNIC to the extent the policyholder did not accept the alternative offer of coverage. However, beginning in the second quarter, most notably with Texas and Louisiana, beginning May 1, 2022, we will begin non-renewing all Sage Shore policies that do not accept the alternative offer of coverage. In addition, we will begin non-renewing all policies in Alabama on May 1, 2022, and in South Carolina on July 1, 2022. As such, the pace of the runoff will accelerate substantially in the second quarter. We expect the process of transferring and or non-renewing the Sage Shore policies to be substantially complete by June 30, 2023. Our commitment to honoring all existing policies remains the same, and all policyholders and agents will receive the same professional service that they always have received from FedMAT. Upon completion of this transition, we expect FedMAT to be a financially stronger company that will be right-sized to our current capital and surplus position. We anticipate we will have approximately $450 million of in-force premium exclusively in Florida, with approximately $113 million surplus within our three carriers based on year-end 2021. We will have substantially less exposure to weather frequency and therefore less volatility in our underwriting results. The benefits of the transition have already begun to materialize in the form of lower CAT exposure and capital requirements. We have maintained appropriate capital positions at FNIC and Monarch with a capital infusion into FNIC of $17 million as of December 31. After year-end infusions, we have $40 million of liquidity at the holding company heading into the first quarter. As you know, in November 2020, our board of directors formed a special board committee to oversee a review of strategic alternatives, including exploring options to strengthen the company's capital position. The work of the committee is ongoing, and the committee continues to work with Piper Sandler as its financial advisor. Turning now to the fourth quarter results, we reported a net loss of 8.6 million or 49 cents per share in the fourth quarter of 2021, compared to a net loss of 38.1 million or 277 per share in the fourth quarter of the prior year. This year's fourth quarter results were impacted by approximately 8.4 million of weather from seven storms that impacted Florida, Texas, and Louisiana. It is important to note that 3 million of the 8.4 million in CAT losses were from the books of business that we are running off, as previously announced. Our fourth quarter 2021 results were also impacted by 4.4 million of reserve strengthening related to the third quarter 2021 and prior accident quarters. This strengthening was primarily due to the multiple hurricanes that occurred in the second half of 2020. Well, we had some gaps in our reinsurance program. Ron will provide more details on the impact of the CAAT events and the reserve strengthening in his remarks. Looking at the Florida homeowners market, the environment continues to have its challenges, but we are seeing positive trends in our attritional loss ratios in both new and renewal business as each policy renews at the increased rates. We are seeing the benefits of the dramatic action we've taken over the past five years to shrink our Florida homeowners book until rates more adequately reflect the increased cost of doing business, including attritional losses, weather events, and higher reinsurance costs. Our Florida book has declined by over 40% from 272,000 policies enforced in 2017 to 160,000 at the end of 2021. At the same time, we have increased FNIC's rates by approximately 70 percent cumulatively over that same timeframe, restoring rate adequacy in our book. Insurance reform legislation in recent years, including AOB reform legislation passed in 2019 and SB 76 that went into effect in July of 21, have also provided some help improving our traditional loss ratios. Our rate increases in FNIC's book during 2021 included a 6.7% increase that took effect in March, a 9% increase in April, and a 5.7% increase in November. As a result of these increases, FNIC's average premium per policy in Florida increased by $64 in the fourth quarter compared to the third quarter of 2021 and $541 higher than the fourth quarter of 2020. increase translates into approximately $80 million more in premiums on the 146,000 policies that were enforced at year-end 2021 compared to last year, with decreased exposure. Most importantly, these rate increases helped improve traditional loss ratio in FNIC's Florida book, which dropped to approximately 36% for the fourth quarter of 2021 as compared to 42% a year ago. And there are still substantial rate increase benefits out in front of us for 2022 that are not yet captured in these results. This clearly demonstrates why we are much more comfortable with the Florida market now than we were just a few quarters ago. We continue to be cautiously optimistic about potential benefits from portions of SB 76 reform legislation that became effective last July. We are pleased with portions of the legislation, such as measures to reduce the time limits for filing claims from three years to two years and to better control plaintiff attorney fees, which are significant drivers of increased costs. At this time, we will continue to monitor our results and implement additional rate increases as warranted to ensure that our rates are adequate so we can continue to achieve an improved attritional loss ratio. These rate increases include a 6% that is taking effect in March of 2022 for renewals. Now I'll turn the call over to Ron for more details on our fourth quarter financial results.