United Insurance Holdings Corp.

Hello, and welcome to the United Insurance Holding Corp. First Quarter 2023 Financial Results Conference Call and Webcast. If anyone should require operator assistance, 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 your host, Karen Daly, Investor Relations with the Equity Group. Please go ahead, Karen.

Thank you, Kevin, and good afternoon, everyone. United Insurance Holdings Corp. 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 UIHC'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 Mark. 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 the company's filings with the U.S. Securities and Exchange Commission in the risk factor section in their 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, the company undertakes 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, you may begin.

Thanks, Karen. Hello, and thanks for joining us on our first quarter earnings call. I'm Dan Pede, Chairman and CEO of United Insurance Holding Corp. I plan to overview the activities from the first quarter, including touching on the operating results in our continuing operations and specifically our commercial line segments. I'll also comment on our reinsurance placement, and then Brad Martz will expand on the financial results for the first quarter. Over the last two years, we've been exiting our personal lines business written by UPC Insurance Company. This eventually culminated in receivership of United PNC Insurance Company on February 27th. We are working diligently with the Department of Financial Services to support policyholders and complete the separation of UPC Insurance Company. The deconsolidation of UPC as of the effective date of February 27th drives some extreme numbers, such as the net income of $260 million in our first quarter financial results. However, if you focus on the results of continuing operations, as well as the results of our commercial lines portfolio, you'll get a better picture of our current and future business. First, it's worth noting that we do believe the legislative changes made in May and December of last year will prove to be an effective mitigation of some of the excessive litigation issues in Florida over the last half dozen years. The pre-suit notification of intent to litigate, the time to report reduced to one year, the elimination of the one-way attorney fees and the assignment of benefits, as well as other changes, will work their way through the system to reduce loss costs and subsequently insurance premium rates over time. Industry estimates seem to suggest that these reductions will be approximately a 25% reduction in loss rates. However, it will take some time for these changes to work their way through the system, but they do appear to have mitigated some of the investor and reinsurer negative sentiment surrounding the future Florida exposure. Back to our first quarter results. As mentioned, the most useful numbers reported in the first quarter are our results of continuing operations and specifically the commercial line segment. For the first quarter, continuing operations pre-tax income was approximately $40 million with gross written premium up 31% year-over-year and net earned premium up 51% year-over-year. For the commercial line segment, pre-tax income was approximately $39 million driven by gross written premiums up 38% year-over-year a net loss ratio of 22%, and favorable development of 3.5%. The commercial lines combined ratio was 53%, with an underlying combined ratio of 54%, demonstrating the strong underlying profitability produced by the commercial lines portfolio. On the underwriting side, our first quarter retention rate was 83%. Our probable maximum loss exposure is down 6% year-to-date, Valuations are improving materially with the portfolio average valuation up 21% year-over-year. Turning to our June 1st CoreCat Reinsurance Program, the market has been supportive with capacity, although risk-adjusted rate increases are up as expected. For American Coastal, we are effectively done with over 100% of the limit authorized and the structure outlined in our investor supplements. This creates first-event hurricane protection exceeding the 160-year return period on a first-event basis. Also, with our American coastal footprint limited to Florida, we will have significantly reduced frequency exposure. Reinsurance includes two cornerstone quota share partners. It is important to point out that our FHCF and our fora capacity sits much higher in the structure than typical Florida residential books. and provides greater than 60% of the Marin Coastal's first event limits, which dilutes the impact of private market rate increases. Our ACIC occurrence retention is expected to be 10 million, although we expect to modestly expand the group retention through use of our captive. In conclusion, the Florida residential cat market remains extremely hard. It will take some time for reinsurers and investors to get comfortable with the exposures and challenges that Florida offers. While this creates challenges in our reinsurance placement, it also creates an excellent opportunity for both our reinsurers and American Coastal with the number one market share for admitted commercial residential exposure in Florida. I expect the market to remain hard for both the near and the intermediate terms. With that, I'll turn it over to Brad Martz.