United Insurance Holdings Corp.

Hello, and welcome to the United Insurance Holdings Corp. First Quarter 2022 Financial Results Conference Call and Webcast. 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 zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Karen Daly, Vice President with the Equity Group. Please go ahead.

Thank you, Kevin, and good morning, good afternoon, everyone. UPC Insurance has also made this broadcast available on its website at www.upcinsurance.com. A replay will be available for approximately 30 days following the call. Additionally, you can find copies of UPC's earnings 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 Martz. 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. However, if the 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 statements. 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 or 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. With that, it's my pleasure to turn the call over to Mr. Daniel Pede. Dan?

Thanks, Karen. Hello, and thanks for joining us on our first quarter earnings call. I'm Dan Pede, Chairman and CEO of UPC Insurance. I'm planning to offer an overview of some of our activities, and then Brad Marks will provide some more specific numbers. The first quarter had a core loss of $29.3 million, which reflects a reduced net earned premium combined with elevated catastrophe losses from 10 PCS events and higher loss severity on both attritional and CAT claims. Revenues for the first quarter reflect our aggressive de-risking and de-leveraging activities over the last 18 months. Gross earned premium on a year-over-year basis is down by approximately 10%. due in part to the sale of our Northeast renewal rights. Also, we continue with exposure management activities in our remaining core portfolio, which decreased TAV by nearly 14% on a year-over-year basis. But exposure management reductions were generally offset by rate increases on both our personal lines and commercial lines portfolios. Our net earned premium is down just over 30%, again due in part to the 100% quota share treaties associated with the sale of the Northeast and Southeast renewal rights, as well as increased reinsurance spend to enhance our hurricane protection through reduced retention levels on both a per-occurrence basis as well as an aggregate basis. As such, seeding ratios are up from 59% to 68%, with quota share up 5.8 points and other, which is mostly CAD excess or loss, up 3.5 points. While losses are down 21.4 million or 21% year over year, the net loss ratio is up significantly due to the 30% reduction in net earned premium. Losses were impacted by modestly elevated catastrophe events in the first quarter, as well as increased severity due to litigation and inflation on both CAD and non-CAD losses. If we look at our performance on a direct written premium basis, The non-cat loss ratio was down slightly from 32.4% to 32.3%, while lower frequency offset by increased severity. The cat loss ratio was down significantly from 29% to 13%, due in part to Winterstone URI last year, but still elevated over long-term averages. Expenses were reduced in line with direct rate and premium reductions, and the direct expense ratio was up only slightly, from 27.9% to 28.0%. On the underwriting activity side, we continue to achieve compounding rate increases. In personal lines, we achieved average rate increases across our core portfolio of 17.9% in the first quarter, on top of the 11.5% achieved in 2021. Combined with our insurance to value initiative, average renewal premium across the portfolio increased 26.6% and is expected to continue to accelerate throughout the remainder of this year. The commercial lines portfolio continues to perform well, with an 11.6 million pre-tax income for the quarter. For commercial lines, our premium is up by 22.7% year to date, while TAV is just under a 4% increase. We announced in April that we have filed an application with the Florida OIR to merge Journey Insurance Company into American Coastal Insurance Company to support the growth in ACIC and to better allocate capital between the statutory companies. This is progressing according to plan. The application is pending and we expect to close subject to regulatory approval in the second quarter. We continue to make progress towards our goal of a 50-50 balance between personal lines and commercial lines. moving from 63-37 at the end of last year to 61-39 at the end of the first quarter. Brad will discuss further, but our 6-1-CAT treaty renewal is progressing on track with most of the lower layers committed and total capacity needed down dramatically due to the portfolio de-risking discussed earlier. For Florida litigation, We continue to see the number of initial lawsuits down significantly from the peak rates of June 2021. However, with escalating pre-suit notification of intent to litigate, it is less certain the excessive litigation in Florida will continue to decelerate due to SB 76. There is now a planned special session of the legislature scheduled to convene on May 23rd to address property insurance issues. In summary, first quarter results reflect the transition to de-risk and de-leverage our portfolio, resulting in significantly decreased gross and net earned premiums, which combined with elevated catastrophe losses and increased severity. We are continuing to take compounding rate actions, as well as risk selection and exposure management actions. The increased rates are earning their way through the portfolio, and we expect to continue with rate increases through at least the middle of 2023. Our commercial lines business is positioned for profitable growth with a market-leading position in a specialty commercial niche in one of the hardest markets of the last 20 years. With that, I'll turn it over to Brad Martz to discuss more specific numbers.