Heritage Insurance Holdings, Inc.

Good day and welcome to the Heritage Third Quarter 2022 Earnings 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. 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 investor 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 for joining our call today. We'll discuss our third quarter 2022 results during this call. I will provide overview of our strategic initiatives Kirk will provide an update on key financial performance metrics, and then we will open the call for Q&A. Our thoughts continue to be with all those impacted by Hurricane Ian, which made landfall in Florida on September 28. We remain committed to assisting our policyholders, and I'm proud of the hundreds of employees we've mobilized and deployed to respond to this event. Our customers have been loyal to us based on a promise to deliver service in their time of need. We are committed to fulfilling that commitment by providing timely payment of valid and covered claims. Our experienced claims team has deep catastrophe handling experience, which includes distinguishing causes of loss from wind versus flood. We continue to execute strategic initiatives that will enable Heritage to achieve consistent long-term quarterly earnings and drive shareholder value. Our initiatives which are described in our earnings release include rate adequacy and selective underwriting, product selection and capital allocation, and diversification of our portfolio policies throughout 16 states. Getting appropriate rates for our coverage offer is paramount. We continue to take rate in all our markets to keep up with the cost of reinsurance, higher frequency of weather events, and higher repair and replacement costs driven by inflation of products and services. These higher rates are the primary driver of our 13.6% increase in the average premium per policy throughout the book, and we expect this trend to continue. We continue to de-risk and diversify our policy mix outside of Florida. These efforts have led to the growth of premiums in force in all states outside of Florida. In addition, total insured values outside of Florida represents approximately 75% of our portfolio, up from 71% at this time last year. Our underwriting continues to be more selective, and we continuously evaluate coverage changes so our product serves our markets but also produces margin. The considerable market disruption has caused us to tighten our underwriting criteria while also restricting new business in our over-concentrated markets. Even with the tightening of our criteria and limiting new business, our premiums in force are at a historic high of $1.24 billion at the end of the quarter. We seek to align our capital with our products and geographies that maximize long-term returns. Correspondingly, we will exit products and states that we don't believe can generate long-term returns or have limited upside potential. I am pleased with our progress in this area. However, we continue to evaluate our portfolio and expect to make more changes going forward as we focus on both short and long-term returns. Reinsurance capacity and pricing is a factor in how we allocate capital by product and state. The cost of reinsurance is expected to increase and capacity constraints are on the horizon. We appreciate our reinsurance trading partners with whom we have developed a long-term consistent relationship. Given the expecting pricing and capacity for catastrophe reinsurance going forward, we will continue to evaluate and adjust our portfolio to manage exposure concentration. This includes the amount of new business we expect to write, and the amount of existing business we may renew while maintaining compliance with individual state regulations. Product selection is also key to our long-term success. As we reduce business in products or geographies that don't provide sufficient margin, we are entering markets we believe offer opportunity for our company and our customers. For example, we entered the California and Florida markets on an excess and surplus lines basis which allows us to be nimble and responsive to pricing and product offerings. We continue to analyze and evaluate the challenging markets in which we operate, and we'll look to expand our access and surplus line capabilities in other states and markets. Despite the negative impact Hurricane Ian had on our third quarter 2022 results, we are pleased with the progress we continue to make towards sustainable profitability. Rate increases continue to meaningfully benefit written premiums throughout the book of business, and we remain committed to proactively and appropriately raising rates to offset higher costs for reinsurance as well as higher loss costs. We are taking underwriting actions to improve profitability. This concludes my remarks. Let me now turn things over to Kirk Luss for a review of the results in the quarter and key financial performance metrics.