Heritage Insurance Holdings, Inc.

Good morning, everyone, and welcome to the Heritage Insurance Holdings second quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please say no to 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 and then one on your touchtone telephones. To withdraw your questions, you may press star and two. We also note today's event is being recorded. At this time, I'd like to turn the floor over to Kirk Lusk, Chief Financial Officer for the company. Please go ahead, sir.

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 us today. I will provide some highlights of our second quarter performance, discuss our progress in achieving key objectives, and offer insights into our strategic initiatives. Following my remarks, Kirk will provide details on key financial performance metrics, after which we will open the call for Q&A. I am pleased to report another consecutive quarter of solid financial results, with net income for the second quarter of $7.8 million. The improvement from last year reflects the progress we are making with our strategic profitability initiatives as well as the benefit of favorable weather this quarter. As I described last quarter, our strategic profitability initiatives include rate adequacy, selective underwriting, capital allocation, providing the appropriate coverage for the market and a balanced and diversified portfolio. We believe that the combination of these initiatives will enable Heritage to achieve consistent long-term quarterly earnings and shareholder value. Our continued rating actions throughout our book resulted in achieving our highest in-force premium while decreasing policy count by 11.1% as compared to the second quarter of last year. We are also maintaining our underwriting discipline, including tightening underwriting criteria within regulatory guidelines and restricting new business for policies written in over-concentrated markets or products. We are allocating capital to products and geographies that maximize long-term returns. During the quarter, we selectively grew our Florida Commercial Residential Imports Premium by 75.5% over the prior year quarter, while total insured value, or TIB, for that product increased 35.3%, and policies in force increased by only 12.7%. We intentionally reduced the policy count for our Florida Personal Lines product by 15.8% from Q2 2022 and 3.9% from the first quarter of 2023. Reducing Florida personal line exposure remains a key focus, and we will continue until the positive impact of recent legislation to reduce abusive claim practices is realized. Our disciplined underwriting approach and focus on rate adequacy resulted in a policy count reduction of 8.7% in other states, while generating a 4.2% increase in premiums in force. Efforts to maintain a balanced and diversified portfolio continue, with no state representing more than 26.2% of the company's TIB, despite the substantial increase in commercial business. The top four states within our portfolio grew TIB by an average of 2.6%, while the smallest five states grew by 27.3%. As a result of the diversification efforts, the top five personal line states represented 71.6% of all TIV in the second quarter of 2023, compared to 72.5% of all TIV at second quarter of 2022. We will continue to seek profitable opportunities while maintaining a balanced portfolio. We are pleased to have completed and fully placed our 2023 Catastrophe Excessive Loss Reinsurance Program, We appreciate our reinsurance partners' continued support and the recognition of our efforts to provide the appropriate coverage for the market. We expected rates to increase from last year and have taken and will continue to take underwriting actions within statutory guidelines to ensure long-term profitability in the markets we serve. Our catastrophe reinsurance program this year includes coverage by the RAP program, created by the Florida legislature last year, which will provide reinsurance below the FHCF layer at no cost to the company. This year's catastrophe reinsurance program and costs will also include the remaining limit of $100 million from catastrophe bonds issued in 2022 by Citrus Re, which provides multi-year reinsurance protection as well as a $235 million of multi-year fully collateralized catastrophe bonds issued by Citrus Street earlier this year. We look forward to seeing favorable impacts of the new legislation aimed at curtailing litigated claims and other abuses in the Florida property market. We are closely observing post-litigation claim activity and will take new trends into consideration in our strategic plan going forward. As we wait for favorable impacts of the legislation to work through the book of business, we selectively grew our commercial residential business. Continued efforts to shift Florida personal line business away from Florida have led to a 15.4% reduction in Florida personal lines policy count as compared to the second quarter of last year. To improve systems and process efficiencies, We're investing in a systems transformation which includes billing, policy, and claims modules. The claims component has been implemented and the billing and policy system components is expected to roll out in early 2024. We anticipate the new system will improve process efficiencies as well as enhance data collection and analytics with a focus on scalability and speed to market. In addition, the new system is better geared for customer self-service and to improve the policyholder experience. Our second quarter results underscore the effectiveness of our targeted strategies. We anticipate the rate increases and underwriting changes made in 2022 and planned for 2023 will continue to have a favorable impact on our financial position throughout the year. We are focused on achieving consistent long-term quarterly earnings and a sustainable shareholder value. Let me now turn things over to Kirk for a review of the results in the quarter and key financial performance metrics.