Heritage Insurance Holdings, Inc.

Good morning and welcome to the Heritage Insurance Holdings second quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Kirk Lusk. Please go ahead.

Good morning, and thank you for joining us today. We invite you to visit the Investors section of our website, investors.heritagepci.com, where the earnings release and our earnings call will be archived. These materials are available for replay or review at your convenience. Today's call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon management's current expectations and subject to uncertainty and changes in circumstances. In our earnings press release and our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, and we have no obligation to update any forward-looking statements we may make. For a description of the forward-looking statements and the risks that could cause our results to differ materially from those described in the forward-looking statements, please refer to our annual report on Form 10-K, earnings release, and other SEC filings. Our comments today will also include non-GAAP financial measures. The reconciliations of and other information regarding these measures can be found in our press release. With me on the call today is Ernie Garite, our Chief Executive Officer. I will now turn the call over to Ernie.

Thank you, Kirk, and thank you all for joining the call today. To start, I would like to express my appreciation for our team at Heritage and for their hard work and dedication to the company. The commitment of our employees, policyholders, and valued partners continues to drive growth across our 16-state footprint. We especially appreciate the solid relationships we have built with our reinsurance partners. During the call today, I will provide a brief overview of our second quarter 2022 performance. Kirk will then provide an update on our key financial performance metrics, and then we'll open up the call for Q&A. First of all, I'd like to highlight the positive underwriting income for the quarter. Despite the many challenges we face in our markets, our rate, underwriting, and exposure management initiatives are having the desired impact on our results. are strategic initiatives which resulted in underwriting income for the quarter. Overall, I'm very pleased with our second quarter results. Excluding the impact of a goodwill write-down, second quarter net income was $2.9 million, or 11 cents per diluted share, up from a net loss of $4 million in the prior year quarter. This improvement was primarily driven by higher net earned premium, which outpaced the increase in losses. Net current accident year weather losses increased to 38.1 million, up 7.34% from the prior year quarter. However, our net loss ratio of 64.1% was down nearly five points from the prior year amount. The rate and form changes strategically implemented throughout the book of business over the last year and a half, along with our geographic diversification, intentional exposure management, and selective underwriting for new and renewal business has begun to positively impact our portfolio. These initiatives resulted in improved average premium per policy by 11.5% from the second quarter of 2021. Our continued selective underwriting efforts today were on display this quarter as we experienced a nearly six point reduction in our combined ratio. Rate increases continue to meaningfully benefit written premiums throughout the book of business. We remain committed to proactively and appropriately raising rates to offset higher loss costs and taking underwriting actions to continue to improve our profitability. During the second quarter, we completed our catastrophe reinsurance program, integrating traditional reinsurance and insurance link securities without the use of parametric covers. The success of our program and level of maturity made the new Florida RAP program unnecessary to complete the risk transfer. Our program includes deployment of Citrus Re, which brings additional collateralized reinsurance through capital markets. Lastly, we did suspend offering new personal residential policies in the more highly populated counties in Florida during the quarter. Efforts to increasingly diversify business outside Florida remain successful. as we experience an 18.9% reduction in policies enforced and a 14.9% reduction of total insured value for the state of Florida. We also continue to evaluate the impacts of legislation on the homeowner's insurance marketplace. The litigious practices in Florida are not only causing companies to go out of business, be downgraded, reduce their writings in the state, but also are driving up costs to every single property insurance buyer in the state of Florida. We appreciate the action taken by the Florida legislature and are cautiously optimistic that actions we'll take have a positive impact on our results and challenging claim environment, but also believe that more needs to be done. This concludes my remarks. Let me now turn things over to Kirk for a review of the results in the quarter and key financial performance metrics.