United Insurance Holdings Corp.

Greetings and welcome to the United Insurance Holding Corp. Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during this conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to our host, Adam Pryor of the Equity Group. Thank you. You may begin.

Thanks so much, and good afternoon, everyone. Thank you for joining us. You can find copies of UPC's earnings release today at www.upcinsurance.com in the investor relations section. In addition, the company has made an accompanying presentation available on its website. You're also welcome to contact our office at 212-836-9606, and we would be happy to send you a copy. In addition, UPC Insurance has made this broadcast available on its website as well. Before we get started, I'd like to read the following statement on behalf of the company. Except with respect to historical information, statements made in this conference call constitute full-looking statements within the meaning of the federal securities laws, including statements relating to trends and the company's operations and financial results, and the business and the products of the company and its subsidiaries. Actual results from UPC may differ materially from those results anticipated in these full-looking statements. As a result of risks and uncertainties, including those described from time to time in UPC's filings with the U.S. Securities and Exchange Commission, UPC specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise. With that, I'd now like to turn the call over to Mr. Dan Peed, UPC's Chief Executive Officer. Please go ahead, Dan.

Thanks, Adam. Hello and thanks for joining us on our third quarter earnings call. I'm Dan Peay, Chairman and CEO of UPC Insurance. I'm planning to offer an overview and discussion of some of our activities and then Brad Marks will provide more specific numbers and then we'll take questions. The third quarter results are in line with expectations and reflect continued execution of our 2021 transition plan. This plan is to reduce our growth in that hurricane exposure through increased reinsurance, exposure management, and reduced catastrophe retention levels, knowing that this is going to drive an increased reinsurance spend. In 3Q, we see the increase in net seeded earned premium, which impacts our core earnings, ex-hurricane, down about $6 million year over year. But we also see significantly reduced hurricane retention with approximately $30 million this year versus $125 million in 2020. As we go forward, we can capture the increased reinsurance spend in our rate filings which will continue to earn through the portfolio in 2022 and 2023. On the gross exposure reduction, our TIV in continuing personal lines is down year-to-date by 13.4%. We expect about another 5% in Q4 for an annual reduction near 20%. We expect to continue exposure reduction through at least September 30th of next year, 2022, and anticipate at least a 10% decline in TIV for personal lines next year. On the front end, we continue to drive compounding rate increases in nearly all states, with a third quarter record average of a 13.8% across the entire personal lines renewal business portfolio. Over the last four quarters, we have increased premiums on like-for-like renewal business of approximately $100 million, with a record $31.7 million in 3Q. Rate increases are expected to continue compounding in the low to mid-double-digit range through at least the end of 2022. Despite these rate increases, our renewal retention, excluding the non-renewed accounts, remains over 89%. Commercial lines continue to perform well, with premium year-to-date up nearly 19%, while PML exposure is down. In American Coastal, we have a market leader in Florida Commercial Residential with a dozen years of expertise underwriting that portfolio. American Coastal is positioned extremely well to grow profitably in one of the hardest Florida markets since 2006. Our plan is to continue moving the book towards a 50-50 balance between commercial and personal lines over the next three years. And for 2022, we plan to maintain our exposure levels in commercial lines approximately flat Then we anticipate an average 15% to 20% rate increase and, therefore, a 15% to 20% premium increase. Profitable underwriting doesn't just include rate increases and exposure management. It also includes risk selection. We have implemented many underwriting changes, including the development of mosaics. a technologically advanced risk measurement algorithm that will be applied to new and renewal business to identify lost drivers. We are supplementing these types of underwriting tools with increasing physical inspections and underwriting actions for unacceptable or increased risk levels. Differentiating between risk levels can drive a significant decrease in combined risk as a key component of our long-term formula for success as we drive toward becoming a top quartile underwriting company. Brad's going to comment on Florida Senate Bill 76, which was effective July 1st of 21, but I'll offer that at least initially we've seen a drop from a peak in June of 840 lawsuits to approximately 400 per month in September and October. While it remains too early to quantify the impact on reserves and rates, it does appear to have at least stopped the runaway escalation. The pre-suit notification provisions enable a settlement in many cases, and should be good for both insurers and insureds. There is significant cost savings in the reduction of litigated claims. As statistics suggest, in Florida, 91% of payments made in litigated claims were made to plaintiffs and defense attorneys. The current insurance market continues to be as firm as it has in years, and the Florida market is expected to remain hard for an extended period of time, especially for personal lines and commercial residential. UPC, we continue working through our 2021 transition year, again, with third quarter results in line with expectations. We expect to return to profitability in the fourth quarter of this year and continue to move towards a strong underwriting profit in 2022 and achieving targeted ROEs in 2023. With that, I'll turn it over to Brad Martz.