United Insurance Holdings Corp.

Hello and welcome to the American Coastal Insurance Corporation second quarter 2023 financial results conference call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may press star one at any time to be placed in question queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Karen Daly, Vice President, Investor Relations with the Equity Group. Please go ahead, Karen.

Thank you, Kevin, and good afternoon, everyone. American Coastal Insurance Corporation has also made this broadcast available on its website at www.amcoastal.com. A replay will be available for approximately 30 days following the call. Additionally, you can find copies of the latest earnings release and presentation at 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 Marks. On behalf of the company, I'd like to note 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 risk or uncertainties arise, actual results could differ materially from those expressed in or implied by these forward-looking statements. Factors that could cause actual results to differ materially may be found in a 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 10Q. Forward-looking statements speak only as of the day on which they are made and, except as required by applicable law, the company undertakes no obligation to update or revise any forward-looking statement. With that, it's my pleasure to turn the call over to Mr. Daniel Pieth. Dan, you may begin.

Thanks, Karen. Hello, and thanks for joining us on our second quarter earnings call. I'm Dan P., Chairman and CEO of American Coastal Insurance Corporation. I'm planning to overview the activities of the second quarter and the year-to-date numbers, including touching on the operating results of our continuing operations and specifically our commercial line segment. I'll then turn it over to Brad Marks, who will expand on the financial results for continuing operations. We've nearly completed our transition to a commercial specialty insurance business underwritten through American Coastal Insurance Company. The commercial line segment now comprises over 97% of the second quarter gross written premium and 92% of the gross earned premium. In light of this transition to a predominantly commercial specialty business, we announced July 27th that we have changed the holding company name from United Insurance Holding Corporation to American Coastal Insurance Corporation. And effective August 15th, we will begin trading with the new ticker ACIC. We believe this better reflects the future direction of our company as American Coastal Insurance Company has a 15-year track record of consistent product and financial performance in Florida. Back to the numbers. Given the extreme variances introduced by the accounting for discontinued operations, I consider the most applicable numbers to be quarterly and year-to-date results from continuing operations in the commercial line segment. As such, I'm going to highlight the results from the commercial line segment, and then Brad's going to focus mostly on continuing operations, which includes our continuing personal lines operations through Interboral. For the commercial line segment, the pre-tax income was $25.4 million in the second quarter and $64.3 million year-to-date. The net loss ratio was 22.0% in the second quarter and 19.7% year-to-date in line with expectations. The net expense ratio was 37.4% in the second quarter and 36.5% year-to-date both down about eight points from 45% last year. The net combined ratio in the commercial line segment was 59.4% in the second quarter and 56.2% year-to-date, down from 61.5% and 68.0% year-over-year, respectively. Still addressing the commercial line segment, prior year development continued to be favorable at 7.2%, in the second quarter and 5.3% year-to-date. The cat loss ratio was 8.4% in the second quarter and 5.4% year-to-date, which is in line with expectations despite the very active cat season this spring. The underlying combined ratio was 58.2% in the second quarter and 56.1% year-to-date, down from 70.2% and 71.3% year over year, demonstrating the improvement in the underlying profitability produced by the commercial lines portfolio. To highlight a few underwriting metrics on the commercial lines portfolio, the total insured value exposure is down 12.8%, while the probable maximum loss at the 100-year return period is down 21%, as modeled using AIR, both on a year-over-year basis. In contrast, the gross written premium was up 31% in the second quarter and 33.8% year-to-date. Valuation is up an average of 8%. Submissions were up 8.2%. And the hit ratio for quoted renewal business decreased from 85% to 81%. Looking forward, we continue to believe the legislative changes made in Florida will prove to be an effective mitigation of some of the excessive litigation issues over the last half-dozen years. The pre-suit notification of intent to litigate, the reduced time to report, the elimination of one-way attorney fees, and assignment of benefits, as well as other changes, will work their way through the system to reduce loss costs and subsequently insurance rates. However, it will take some time for these changes to work their way through the system, but in the near term, it does appear to have mitigated some of the reinsurers' negative sentiment surrounding the Florida exposure. In conclusion, the Florida residential cap market remains hard. It will take some time for reinsurers and investors to get comfortable with the exposures and challenges that Florida offers. While the hard market creates challenges, it also creates an excellent opportunity for American Coastal having the number one market share for admitted commercial residential exposure in Florida. I expect the market to remain hard for at least the near and intermediate terms.