United Insurance Holdings Corp.

Greetings and welcome to United Insurance Holding Corp. 4th Quarter 2021 Earnings Conference 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 the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Karen Daly, Vice President at the Equity Group.

Thank you, and good afternoon, everyone. UPC Insurance has also made this broadcast available on its website at upcinsurance.com. A replay will be available for approximately 30 days following the call. Additionally, you can find copies of UPC's earning release and presentation in the investor section of the company's website. Speaking today will be Chairman of the Board and Chief Executive Officer, R. Daniel Pede, and President and Chief Financial Officer, Bennett Bradford Marth. On behalf of the company, I'd like to note that statements made during this call that are not historical facts are forward-looking statements. The company believes these statements are based on reasonable estimates, assumptions, and plans. If these estimates, assumptions, or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those expressed in or implied by the forward-looking statement. Factors that could cause actual results to differ materially may be found in our filings with the U.S. Securities and Exchange Commission in the risk factor section of our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. forward-looking statements speak only as of the date on which they are made and except as required by applicable law, we undertake no obligation to update or revise any forward-looking statements. Now, I'd like to turn the call over to Dan Pede. Dan?

Thanks, Karen. Hello and thanks for joining us on our fourth quarter earnings call. I'm Dan Pede, Chairman and CEO of UPC Insurance. I'm planning to offer an overview and discussion of some of our results and activities, and then Brad Martz will provide more specific numbers. And then we'll take questions. Results for Q4 demonstrate that we are making good progress through our 2021 transition year plan. Core income improved on both a quarter-over-quarter and a year-over-year basis. Year-over-year, it improved from a loss of $58 million in Q4 of 2020 to a loss of $1 million in Q4 of 2021. Quarter over quarter, it improved from a loss of $15.5 million in Q3 2021 to a loss of $1 million in Q4 2021. Core income, excluding named windstorms, was down slightly from a profit of $3.3 million in Q4 2020 to a loss of $1 million in Q4 2021. This is due mostly to our de-risking plan with higher reinsurance costs associated with a significantly reduced hurricane retention. These additional costs are expected to be offset through 2022 as significant and compounding rate increases earn their way through the portfolio. As such, as we exit our transition year of 21, we expect a growing underlying profitability margin leading to an underwriting profit in 22 and achievement of our targeted ROEs in 23. We continue to execute on our strategic plan to bring personal lines and commercial lines to a 50-50 balance. We ended 2021 with a premium mix of 63% to 37% personal to commercial, down from 75-25 at the end of 2020. At this rate, we are ahead of pace to achieve 50-50 in three years. On the personal line side, at the end of Q4, we sold renewal rights to our portfolios in Georgia, North Carolina, and South Carolina. When combined with last year's renewal rights sale of our four northeast states, we've reduced personal lines TIV by 44%. In our continuing portfolio through exposure management and risk selection, we've reduced TIV exposure by 15.8% in 2021, and currently have a run rate over 4% per quarter through at least third quarter 2022. While decreasing exposure, we've increased rates in average across the personal lines portfolio of 11.3% in Q4, and 11.5% for the year of 2021. Rates are compounding and accelerating, and we expect to continue to achieve significant rate increases throughout 22. Compounding rate increases are beginning to earn their way through the portfolio, which will accelerate through 22 and into 23. The commercial lines portfolio continues to perform well, with premium ending the year up nearly 20%, and exposure approximately flat. In American Coastal, we have a market leader in Florida commercial residential risks, which is positioned extremely well to grow profitably in one of the hardest Florida markets in 15 years. For 2022, we anticipate additional rate increases consistent with the 20% in 2021. In summary, the fourth quarter results reflect our continuation of our plan for a return to underwriting profitability in 22 and target ROEs in 23. We are ahead of our three-year schedule in achieving the 50-50 balance between commercial lines and personal lines. We're trimming our personal lines portfolio both by selling renewal rights as well as ongoing exposure management and risk selection. Our commercial lines business is performing well and positioned to grow into the hard market anticipated in Florida for at least the next two to three years. With that, I'll turn it over to Brad Martz.