Heritage Insurance Holdings, Inc.

Good morning, and welcome to the Heritage Insurance Holdings Fourth Quarter 2024 Earnings Conference Call. Please note, today's event is being recorded. I would now like to turn the conference 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. Good morning, everyone, and thank you for joining us today. Over the course of 2024, we experienced numerous destructive hurricanes that impacted communities across the southeastern United States, and in 2025, we've seen devastating wildfires affecting residents of California and now New York. Our thoughts continue to be with those impacted by these devastating catastrophes that have left millions with significant damage and loss. In this time of crisis, our employees have worked tirelessly to provide support for our policyholders as they recover from these catastrophic events. I am proud and appreciate our talented and dedicated employees and the resilience that our company has demonstrated after these catastrophic events. The company is performing well. which is not only evident in our support of our customers and communities, but also our financial performance. Our fourth quarter results clearly demonstrate the results of our strategic efforts over the last several years to attain rate adequacy, manage exposures, and enhance our underwriting discipline. Our ability to generate profits in each of the last two quarters, where we encourage significant losses associated with three hurricanes, demonstrates the transformation that has occurred at Heritage. For the full year 2024, we achieved net income of $61.5 million, or $2.01 per share, representing a strong increase from the full year 2023's net income of $45.3 million, or $1.73 per share. Additionally, we grew our tangible book value per share 30%, to $9.50 at December 31, 2024, as compared to year-end 2023, while achieving an ROE of 24.1%. These are notable results, given that we were impacted by $105 million pre-tax from 2024 hurricanes. Our ability to not only maintain our profitability, but also deliver healthy earnings and returns in the face of significant catastrophic losses is a result of a multi-year effort where we have focused on executing our underwriting and rate adequacy initiatives. From an underwriting perspective, we continue to strategically reduce our exposures in over-concentrated and unprofitable areas while increasing our presence in profitable geographies and products. As we have discussed in prior earnings calls, We expect a declining policy count to moderate over the next few quarters as we open territories for new business, given the improvements in the quality of our BOCA business. We have also maintained a stable indemnity-based reinsurance program at manageable cost through our policy count and exposure management initiatives, while also proactively engaging with our reinsurance partners. In fact, I was in Bermuda, Europe, and the US in February meeting with many of our reinsurance partners who all expressed their support for Heritage and were encouraged by our improved performance. I would like to thank our dedicated reinsurance partners who have supported our business throughout multiple catastrophic events over the last several years and look forward to their continued partnership as we work to further expand the company. Our rate adequacy initiative has resulted in significant and appropriate rate increases which are earning through our portfolio in 2024. Looking to 2025, we anticipate an even more meaningful amount of rate to earn through our portfolio, which we expect will provide a healthy tailwind to our financial results. Additionally, we have selectively started writing new personal lines business anchored by a continued focus on risk management and stringent underwriting. Our expectation is that our new business growth will be controlled but will begin to accelerate through 2025. As we discussed last quarter, recent legislative changes in Florida are having a positive impact on the economics of writing new, profitable business in the state of Florida. In fact, we have seen a market decline in frivolous lawsuits. We believe that the impact of this necessary legislation will be favorable to the consumer We expect the reinsurance market will see the tangible benefits of the legislation as Hurricane Milton claims mature through this year and into next year, which may reduce reinsurance pricing. Our ENS business continues to write options for our product offerings as we continue to write this business in California, Florida, and South Carolina. We also plan to continue to evaluate more states for E&S opportunities as we focus on our controlled growth strategy. What makes this business so attractive is that we can adjust our rates and coverages to the changing dynamics state by state to ensure we continue to earn appropriate risk adjusted returns for providing consumers in those states with needed insurance protection. Looking forward, we remain resolute in maintaining a balanced and diversified portfolio, as no single state represents over 30% of our total insured value. We believe this selective diversification will help reduce performance volatility and ensure our long-term stability, which we believe will be reflected in the value of our company over time. We believe we have the foundation in place to deliver solid, profitable growth in 2025 as we continue to execute our strategy aimed at fostering shareholder value. To conclude, I would like to reiterate our dedication to navigating the complexities of our market with a strategic focus that prioritizes long-term profitability and shareholder value, driven by our dedicated workforce. Kirk, I will now turn the call over to you.