HCI Group, Inc.

Good afternoon and welcome to the HCI Group Investor Call. My name is John and I will be your conference operator. At this time, all participants will be in a listen-only mode. Before we begin today's call, I would like to remind everyone that this conference is being recorded and will be available for replay through February 21st, 2024, starting later today. The call is also being broadcast live via webcast and available via webcast replay until January 22nd, 2025. on the investor information section of HCI Group's website at www.hcigroup.com. I would now like to turn the call over to Matt Glover, Gateway Investor Relations. Matt, please proceed.

Thank you, John, and good afternoon, everyone. Welcome to HCI Group's investor call. On today's call is Mark Harmsworth, HCI's Chief Financial Officer, and Parish Patel, HCI's Chairman and Chief Executive Officer. To access today's webcast, please visit the investor information section of our corporate website at www.hcigroup.com. Before we begin, I'd like to take the opportunity to remind our listeners that today's presentation and responses to questions may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as anticipate, estimate, expect, intend, plan, and project, and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the company's business, financial conditions, and results of operations. HCI Group disclaims all the obligations to update any forward-looking statements. Now with that, I'd like to turn the call over to Mark Harmsworth, Chief Financial Officer. Mark.

Thanks. Good afternoon everyone and thank you for your time. We've made a couple of announcements recently and wanted to take a few minutes to explain them in a little more detail. Earlier this month we sent out a press release explaining that we'd notified the remaining holders of our 4.25% convertible notes of our intention to redeem them. The holders have already begun the process of electing to convert them into common shares and we expect that to be completed before the end of the first quarter. As a result of these conversions, consolidated total liabilities will decrease by $23.9 million, stockholder equity will go up by the same amount, the debt-to-cap ratio will decline by about 4.5%, interest expense will decrease by just over $1 million a year, and book value per share will go up by about $1. There will be some dilution, of course, but the 397,000 shares issued will not affect the fully diluted share count because in this calculation, these shares are already accounted for as if they have been converted. Today, we issued a press release stating that we'd extended the term of some of the warrants held by Centerbridge. 450,000 of the warrants had their expiration dates extended. We will book a small one-time non-cash charge to stockholder equity in the first quarter for this. Today's press release also announced that our subsidiary TipTap Insurance Group repaid the $100 million invested by Centerbridge back in February of 2021, fully redeeming the preferred shares that had been issued to them. We've been preparing for the potential of this repayment for a while now. As mentioned on the last earnings call, we had $167 million of cash and financial investments at the holding company level as of September 30th. We earmarked $50 million of that for this purpose, and the balance of the payment came from our credit facility with Fifth Third Bank. You may recall that we recently renegotiated that facility, and it was with the potential of this repayment that we did that. $50 million is specifically spelled out in that agreement for this purpose, and its repayment to the bank is termed out over a five-year period. The interest rate on that is floating and is currently about 7%. There are a number of significant positive impacts from redeeming the preferred shares. First, our debt-to-cap ratio will drop a further 3%, even though we financed half of the repayment. Second, our earnings per share will go up because the dividends paid to CenterBridge were a reduction of earnings available to shareholders in the earnings per share calculation. Third, HCI's ownership of TTIG is now well over 90%. Lastly, the facility we used to finance half of the repayment is a much more flexible financial instrument. Because it's within the envelope of the credit facility, we can pay it off at any time or even borrow back some of the principal payments made, and so it is fully flexible. In terms of timing, the potential center bridge redemption was about a year away, but in February, the dividend rate on the preferred shares would have gone up from 7.5 to 9.5%. We had the money set aside and so it made sense to do it now and avoid the most expensive year on that contract. The money for this repayment is coming from capital that we already had at the holding company and our credit facility. The new capital that we raised back in December was raised for growth and that money is still there after this transaction. Also today, we filed a new S3 registration statement We needed to file that in order to register the Centerbridge warrants and the shares underlying the warrants have exercised. As part of that new registration statement, we included the capacity for an ATM. We do not have any immediate plans to use this. And with that, I'll turn it over to Parish.