Heritage Insurance Holdings, Inc.

Good morning and welcome to the Heritage Insurance Holdings second quarter 2025 earnings conference call. Please note, today's event is being recorded. All participants will be in a 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 touchtone phone. And at this time, I would like to turn the conference over to Kirk Lusk, Chief Financial Officer for the company. 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. 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. We delivered strong second quarter results, having achieved net income of $48 million, up from $18.9 million second quarter a year ago, and maintain the positive trajectory of our earnings. As we have been discussing on our earning calls over the last year, we continue to see the tangible results from the successful implementation of our strategic initiatives designed to generate positive and consistent shareholder returns by attaining rate adequacy, managing exposure, and enhancing our underwriting discipline. This has created a significant level of earnings power within Heritage, which has fully shown through this quarter. As part of that strategy, we re-underwrote our Personal Minds book while taking needed rate increases to achieve adequate rates. This led to a steady contraction in our policies in force over the last four years of over 200,000 policies. During the same timeframe, our in-force premium has increased from approximately $1.1 billion to $1.4 billion, and the diversity of our book has improved. In the second quarter, our policies in force decreased by just over 7,700 policies. which was the smallest decrease since we started the initiative in June of 2021. As previously mentioned, we are at an inflection point in our business where we expect our personal lines policies enforced to slowly increase through the second half of this year as our new business production continues to ramp up. New business is up 46% over the second quarter of 2024 and is at the highest level since the second quarter of 2022. Looking to 2026, we expect growth to accelerate as our new business production is fully ramped up across all of our geographies and our exposure management initiatives are fully behind us. The catalyst has been achieving rate adequacy across the majority of our markets and correspondingly opening those areas up for new business. There are a few select areas that are still closed, but nearly all of our producing capacity is open for new business. While it takes time to open our territories and onboard agents, we are seeing good new business momentum across our regions in the Northeast, particularly in New York, as well as the Mid-Atlantic, where Virginia is seeing strong new business trends. Florida is also a standout market for heritage. given the recent legislative reforms which are having a positive impact on the economics of writing new profitable business and where we have seen a marked decline in frivolous lawsuits. Looking forward, we see significant room for growth and expansions as we continue to build our market share across the Northeast, Mid-Atlantic, Southeast, West, and Pacific regions. Additionally, we see opportunities to expand in new regions of the country as we deliver new products to our insurers over time. Taken together, this presents an open-ended growth opportunity to heritage in our shareholders. All that said, we will maintain our disciplined underwriting processes as we open new territories and embark on managed growth strategy, which also resulted in a lower net loss ratio this quarter. As we grow, we're also continuing to invest in and enhance customer service claims and claims quality management, as well as technology resources. We are in our third year of an IT conversion to a Guidewire platform. Our conversion has been going well and is expected to be completed next year. Once we are fully on the Guidewire platform, we will be able to scale the business more efficiently, as well as increase our speed of execution. Turning to reinsurance, we have maintained a stable, indemnity-based reinsurance program at manageable cost, with an excellent panel of highly rated and collateralized reinsurers. Overall, we increased the amount of limit that we purchased by $285 million, while our overall costs increased by less than $8 million. Looking forward, we expect the reinsurance market to see the positive impact of the legislative changes in Florida as Hurricane Milton's claims mature through this year and into next year. This could have a favorable impact on reinsurance pricing in 2026. We also believe that the impact of this necessary legislation will be favorable to the consumer in terms of the cost of insurance. The strength of our results and momentum in our business can also be seen in our recent refinancing of our senior credit facilities, which Kurt will comment on. We had strong support from our banking partners and upsized our facility while simultaneously achieving more attractive terms, given the demand, which exceeded our expectations. As we look to the second half of the year, we also expect to build capital, which will not only position us for accelerating organic growth, but also to consider our capital allocation strategy. To conclude, our business is at an inflection point. as we pivot to manage growth strategy, which will return our policies in force to moderate growth through the back half of this year before accelerating in 2026. We are excited with the many opportunities that we see to grow the value of our business. I would also like to reiterate our dedication to navigating the complexities of our market with a strategic focus that prioritizes long-term profitability, shareholder value, and customer service all driven by our dedicated workforce. Kirk, over to you.