Good afternoon, welcome to HCI Group's fourth quarter and full year 2020 earnings call. My name is John, I will be your conference operator this afternoon. At this time, all participants will be in a listen-only mode. Before we begin today's call, I would like to remind everyone that this conference call is being recorded, we will be available for replay through April 11th, 2021, starting later this evening. The call is also being broadcast live via webcast and available via webcast replay until March 11th, 2022 on the investor information section of HCI Group's website at www.hcigroup.com. I would now like to turn the call over to Rachel Swansiger, investor relations for HCI. Rachel, please go ahead. Thank you, good afternoon. Welcome to HCI Group's fourth quarter and full year 2020 earnings call. With me on today's call is Paresh Patel, our Chairman and Chief Executive Officer, Mark Harmsworth, our Chief Financial Officer. Following Paresh's opening remarks, Mark will review our financial performance for the fourth quarter and full year of 2020, then turn the call back to Paresh for a look ahead. Finally, we will take your questions. To access today's webcast, please visit the investor information section of our corporate website at www.hcigroup.com. Before we begin, I would like to take the opportunity to remind our listeners that today's presentation and responses to questions may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as anticipate, estimate, expect, intend, plan, project, and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the company's business, financial conditions, and results of operations. HCI Group disclaims all the obligations to update any forward-looking statements. With that, I would like to turn the call over to Paresh Patel, our Chairman and CEO. Paresh? Thank you, Rachel, welcome everyone. As you can imagine, we have a lot to discuss today. I'm going to turn it right over to Mark to discuss our financial results for the quarter and for the year. Afterwards, I will discuss two major transactions, how they benefit HCI in the future, obviously discuss TypTap further. Mark? Thanks, Paresh. 2020 was a very active hurricane season with a record-breaking 30 named storms, 12 of which made landfall in the U.S. Despite this level of activity, HCI made money in every quarter and delivered a superior rate of return for our shareholders. In the fourth quarter, after-tax net income was $2.7 million, and diluted earnings per share were $0.35. For the full year, after-tax net income was $27.6 million, and diluted earnings per share were $3.49. We started talking about growth a couple of years ago, in 2020, that growth accelerated. In Q4, gross written premiums were up 43% from the fourth quarter of last year. This does not include $44 million of premium from the UPC quota share agreement booked in the quarter. Homeowners Choice and TypTap are both growing. In Q4, gross written premiums for Homeowners Choice were up 24% over the same quarter last year, again, before taking into account the UPC deal. In TypTap, gross written premiums were up 75%, driven of course by the tremendous success of our homeowners business. For the full year, consolidated gross written premiums were up 26%, and gross earned premiums were up 22%. Consolidated premiums in force at the end of the year are up 20% from the end of last year. I've mentioned the UPC deal a couple of times, let me quickly clarify. As announced, we signed a quota share deal that runs from December 31st, 2020 to May 31st, 2021. We recorded about $44 million of gross written premiums in 2020, which is all unearned. I did not include this in the growth numbers that I mentioned earlier. Our real estate division had a strong year in 2020. Our real estate subsidiary, Greenleaf, has been building a diverse real estate portfolio, which has grown to 10 properties. While our operating properties have positive cash flow and strong returns, the long-term strategy has always been capital appreciation. This year, we realized a gain of $37 million when we sold our Cypress Commons property, even after selling it, our portfolio in Greenleaf still has a difference between appraised value and book value of over $30 million, that unrealized gain is not included in book value. Just a few comments about surplus, reserves, and capital. As we've mentioned many times, we have two well-capitalized insurance companies owned by a holding company with additional resources if needed. In 2020, Homeowners Choice capitalized on its own strong financial position by taking on two new books of business, the four states in New England from UPC, as well as the policies assumed from Anchor back in April. The strong surplus position of Homeowners Choice has been a real strategic advantage because it has allowed us to capitalize on growth opportunities without capital from the holding company. TypTap ended 2020 in a strong surplus position, we have taken steps to accelerate its growth trajectory. The growth capital from Centerbridge sets TypTap on its mission of being a separately funded company that will drive profitable growth and share appreciation for HCI. Our focus in the future will be the realization of that plan. At the holding company level in 2020, we renewed our credit facility with Fifth Third Bank. This is a tremendous vehicle for the company as it gives us access to an inexpensive source of capital that we can deploy at any time. We have $65 million available, and as we speak, there is nothing drawn on this facility. As you know, stock buybacks have always been an important part of our capital plan. We've bought back more than 5 million shares at an average price of $35 since the plan began. With the stock price where it is now, this has been a tremendous use of capital. Just one final comment, which will be on reserves. It's great to say that we have strong surplus and liquidity positions, but because two of our businesses are insurance companies, it's important to know where reserves stand. At the end of 2020, our premiums in force are 20% higher than at the end of last year, but our non-CAT reserves are 35% higher, reflecting a continued conservative approach to reserving. In summary, 2020 was another good year for us. We made money in a difficult environment. We are 20% bigger than a year ago. We've proven our ability to grow organically and through opportunistic acquisition, and we have the capital to continue on both fronts. With that, I'll turn it back to Paresh. Thanks, Mark. Obviously, 2020 was a very challenging year for most people. However, as Mark indicated, despite an active hurricane season and a year marked by COVID, we delivered profitable results in all four quarters. We've begun 2021 with two important transactions. First, as Mark mentioned earlier, we reached an agreement with UPC, better known as United Property & Casualty Insurance Company, to transition to us its personal lines business in four New England states. The business in these states represents approximately $125 million of annual premiums. Our plan is to transition approximately $100 million of that business to TypTap, with Homeowners Choice taking the rest. Second, as many of you know, two weeks ago, we announced that TypTap received a $100 million investment from Centerbridge Partners. Centerbridge acquired approximately 11.75% of TypTap Insurance Group, Inc., which comprises of our TypTap Insurance operations and our Exzeo software development operations. Centerbridge's investment implies a post-money valuation for TypTap of approximately $850 million. For reference, that's greater than the market capitalization of all of HCI today. Remember that HCI still owns over 80% of TypTap. If you bring out a calculator based on this valuation, you might think that HCI shares are undervalued. We would agree. Since the Centerbridge announcement, TypTap has seen its share of press coverage, with TypTap being compared to other insurtechs. Now is a good time to talk about the TypTap business opportunity. Historically, the insurance business has operated on very thin margins. Coupled with that, there is a lack of innovation and ongoing market consolidation in the industry. TypTap recognized the opportunity to drive a more profitable outcome for the insurance company by leveraging big data analytics and technology. Our solution to the problem has been quite straightforward. We pre-gather almost all of the data needed to furnish a quote. We use automation that allows us to evaluate risk on a per house level. Finally, we have developed algorithms to help us price each risk adequately while allowing us to capture enough margin in each policy for the occasional claims expense that is inevitably going to follow. To drive this point home, let's look at what happened yesterday. Yesterday, with fewer than 250 active agents, TypTap averaged a quote every 64 seconds and sold a policy every six minutes, generating over $1 million of gross written premium in a single day. It proves that our automated underwriting technology can scale to large numbers with little incremental overhead. Let's talk about performance. TypTap's gross loss ratio in 2020, given a stat basis, was about 20% below that of the Florida industry on average. Other companies struggle with much higher gross loss ratios and attempt to improve them to reach the industry average. TypTap is already running materially below the industry average. Add all of those things together. We have 7x organic growth over the last two years, proven scalability, low customer acquisition costs, and we are looking at a total U.S. homeowners' addressable market of approximately $105 billion, with a B. The TypTap model has already been proven successful in Florida, which is one of the toughest markets in the nation. We have a very high level of confidence that we'll be successful in other markets as well as we expand nationally. Finally, on that note, as we have stated before, we are exploring strategic opportunities for TypTap, which could include an initial public offering or even a SPAC merger. We will have more on that soon as things progress. With that, we're ready to open the call to your questions. Operator, please provide the appropriate instructions. Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please indicate so now by pressing star one on your touch-tone phone. Pressing star two will remove you from the queue, should your question be answered. Lastly, while posing your question, please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Once again, that's star one if you have a question or comment. Your first question is coming from Matt Carletti from JMP. Matt, your line's live. Hey, thanks. Good afternoon, good evening. Paresh, I wanted to ask, I guess, a high-level question to start. Really, I'm just kind of asking you to put yourself in Centerbridge Partners' shoes a little bit. The cusp of the question is, why did they bet $100 million on TypTap? As you get into the valuation and so forth, can you peel back the onion a little bit on kind of the discussions you had with them around how you guys got to that number? What I mean by that is in terms of the horizon by which they're looking, if that's more of a near term into 2021, maybe 2022 number, or kind of how your sense is of at least how they're thinking of it, and obviously you were on the other side of that table. Yeah. Matt, for reference, I think Centerbridge Partners is a very large organization. I think they're like $28 billion under management. I don't want to speak for them, but my sense is $100 million might be their minimum investment. Fair enough. The other side of that, I think in our conversations, I think they would tell you that why TypTap, why now? It's because of the numbers I just said, right? Right. We're growing 7x. In a world where everybody struggles to reduce their loss ratio and maybe get it to the industry average, you have a company here that's growing rapidly, and the technology is obviously scalable. The results, both in 2019 and in 2020, are something like 20 points below the peer group, right? When you are doing that, you are onto something, and I think that's fundamentally what they were grasping. Yeah? Very good. Thank you. I got a couple other much more boring questions. Probably more so for Mark, just where you guys peg book value per share at the end of the quarter, as well as the TypTap surplus at 12/31 before the Centerbridge investment? Hey, Matt, it's Mark. First question, I think, was book value per share. $25.83- Okay At the end of December. Your other question was it TypTap surplus? TypTap surplus December 31st, that wouldn't include Centerbridge, right? That was after that. $38.5 million at the end of the year. Okay, wonderful. Thank you very much, congrats again on a really nice deal with Centerbridge. Thank you. Thanks, Matt. Okay, your next question is coming from Mark Hughes from Truist. Mark, your line is live. Yeah, thank you. Good afternoon. Good afternoon, Mark. Hello, Paresh. Hello, Mark. In thinking about the $850 million value for TypTap, how should we think about the value of the warrants? It's Mark. Obviously, we've got an idea of what we think those warrants are worth. For accounting and auditing purposes, we've got to get those valued by a professional, then we have to get that audited as well. Sometimes those things don't work as quickly as you'd want. I have to be a little careful what I say because we're in that process now. I think a value in the sort of $10-15 per warrant is about the right range. If you pick the midpoint there, that's about $10 million for all the warrants together. Just to add a little bit of color to that, though, that's as of February 26th, which is the closing date of the deal. Obviously, we entered into an LOI earlier than that in January sometime. The stock was a little bit lower, so the value of the warrants at that point would've been less than that. The other thing too is in order for them to execute on those warrants, they've got to write a check for $40 million, which will come in as equity into the company. If we were to go out and raise that kind of money, it would probably cost us $2 million or $3 million. When you put it all together, the value of those warrants, somewhere between 5%-10% of the total package, the total amount of the investment. Does that help? It does. Thank you. What was the surplus at Homeowners Choice at year-end? Just give me one second. It was $120 million. Then your gross loss ratio of 20 points better than the industry, what would you suggest is the industry loss ratio for 2020? Yeah. Mark, the way we calculate this, just so that everybody does the same thing. Most of the industries, all the industries file Yellow Book, which is a stat accounting for each insurance company, private or public, at the end of February. When you sort of get that across the industry, then in there, everybody sort of puts down their gross losses. They can very easily figure out a gross loss ratio. We got through third parties, basically, the gross loss ratios across the whole industry, and it comes out to be about 68% for 2020. TypTap's number is something like 47%, I believe. On a stat basis. On a stat basis. Again, this is a TypTap insurance company on a stat basis, that, as you know, there's multiple ways of measuring this, but that's the measure we're talking about. Yeah. You may not want to share this level of detail, out of that 47 points, how much is CAT losses? In 2020? Yeah. It would've been about maybe 7% of that. Yeah, not a big number. Yeah. Go ahead Mark, we included that and did it on a gross basis because one presumes the 68% has some CAT losses in it as well, right? To make it a fair comparison, yeah, we did them all in. That, it would've been about 42% if you take out the CAT. 47 versus 42, I think I said, about 5% of it. Yeah. Okay. Again, stat. Understood. The earnings pattern for the UPC, you've got the unearned premium. Does that change the earnings pattern, or do we just use the, call it, $125 million, and you presumably earn that ratably over the quarters? Yeah. The way you would do it for the quota share, if you're looking at the quota share or if you're looking at the renewal rights. The better way to look at it is that, I think we said in the 8-K, $130 million. I think it's about 100, Paresh mentioned 125. I think that's about the right number. You would just look at that ratably over the period. That's the best way to look at it. To be pedantic about it, the quota share that's in force right now is 69.5% of the $125 million. That's what you- For five months for five months. Yeah. That's what you would do from January through May. Starting in June, you'll be amortizing $125 million on an annualized basis, yeah? Okay, good. That's helpful. Again, to be clear, the quota share is 69.5% of $125 million, January through May, and then in June it goes to 100% of $125 million. Is that right? Yes. Okay. Your thought on margin, I know with Anchor, there was anticipation of some initial dilution. I don't know with UPC what your thoughts are, when you take those two books of business combined, what does that do to the loss ratio, and then what's the trajectory from here as presumably you refine those books? A couple questions in there. If you think about the Anchor book, just as an example, we had talked about that when we did that deal. Obviously the premiums were lower. There wasn't as much margin there. If you look at it at the end of the year, we've got about 66% of the policies, but about 83% of the premium. Over time, that margin, that's starting to improve. In the initial stages of the Anchor deal, the loss ratios were obviously a little bit higher. We talked about that, I think, in earlier calls. As those policies are starting to renew onto Homeowners Choice paper, you're getting to similar loss ratios as Homeowners Choice has. If you look forward and you blend those things together, and I'll take UPC out just for a second. If you look at Anchor and Homeowners Choice together, that blended loss ratio looking forward is probably still in that 25%-27% range, maybe a little bit towards the high end of that when you include Anchor. Does that help? It does. Then when you include UPC in that? Yeah, the UPC loss ratio is going to be a little bit higher. It's only about 25% of the, if you look at the overall impact on the book, I don't think it's going to have a material impact on it. It might get us closer to 29% on a consolidated basis, somewhere in that range. Yeah. That's very helpful. You mentioned IPO or SPAC merger with this process, you were certainly good to your word of saying you were exploring your options and have come up with a pretty striking transaction here. You mentioned the IPO or SPAC merger. Is that something you're working on in the near term? Is that something that is conceivably in process, or is that aspirational, more in the 2022, 2023 time frame? Simple way to answer that is, we receive a lot of inbound phone calls since the Centerbridge announcement. One thing that you've known about us over the years is we have always been opportunistic, and when we're offered an appropriately or a fairly priced deal that makes sense for us, we don't say no. Right? We wait such an opportunity, and when that occurs, we will do that. Clearly, the markets are looking to these kinds of businesses at the moment. When you sort of see the numbers that TypTap is putting up, it has to be a very desirable partner for any number of SPACs, yeah? Understood. I'll ask, in the quarter, this is a small matter, but the G&A looked lower this quarter than we might have expected. I can't remember whether there's a seasonality that might influence that. Was anything unusual there? Yeah, it's Mark. Throughout the year, we make assumptions about what bonus expense will be, then the actual bonus expense gets trued up in Q4. The bonus expense was less than what we've been accruing to, so there's a reversal there in Q4. That's a little bit unusual. Very good. Thank you. Thank you. Okay, your next question is coming from Bill Broomall from Dowling & Partners. Bill, your line's live. Great. Thank you. My first question is on TypTap and how you think about that business. When we compare to what we hear from a lot of other insurtechs, a lot of discussion is centered around contribution margin, which is pretty favorable. Once you get down to the bottom line, a lot of companies do report a big loss coming through. It sounds like you're thinking about your model a little differently in terms of matching, trying to write in a profit. Can you maybe talk about how you're thinking about running TypTap versus what we might expect from other insurtechs that are out there from a profitability standpoint? Sure, Bill. The best way of thinking about this is look at the U.S. homeowners business that's there totally on a national basis. It's $105 billion with a B, as I said earlier. If you look at the collective profit margins on that $105 billion, it's basically a break even or a very slight 1% or 2% profitability kind of business. If you just end up with 10% market share of that, you're not going to get very far. That's just the nature of that business. If you're going to take on a big chunk of that business, you should figure out a way that you can say, "I have a material different outcome than what the current players are having." Basically you come down to two numbers that make all the difference in an insurance company, loss ratio and expense ratio. Expense ratio is corporate overhead and commissions and all those kinds of things. That, obviously, the company controls. The much tougher one is the loss ratio. What you sort of talked about contribution margin and everything else is people generally sort of not paying a whole lot of attention to the loss ratio. Anybody who's run an insurance company for any length of time will tell you that is the toughest thing to improve over time. The amazing thing about what TypTap is doing is book is underwritten by computers, and the loss ratio isn't industry average. It's 20 points below industry average. If you imagine that the industry is breaking even, what TypTap can do is compete in the same space and have a 20-point advantage. Most businesses, if you're given a 20-point advantage over most of your competition, it leads to some very favorable outcomes. There are a lot of other people talking about disrupting the insurance business, but nobody's articulated or shown, to your question, that they can actually outperform on the loss ratio side, which is really the key thing you have to do. TypTap has done this not only in 2019, but in 2020, and done it at scale. That's the wow. It's what everybody else is trying to get to, TypTap already has. Or as my general counsel tends to tell me, "Everybody else is talking about sending a man to the moon." We have sent a man to the moon and brought him back safely, and here's a picture. Perfect. Thank you. No, that's helpful. Maybe this is my last one. I think in your prepared remarks, you talked about customer acquisition costs and where you think that stands. Can you give us a sense of where your advantage might be on that side of the business? Yeah. Again, we've taken things, and we can explain in very simple terms. If I've got a 20% advantage in the loss ratio category, what we do is we take some of those savings. Some of that we share with the policyholder by charging rates that are lower than the competition's, which is good. We take some of the other savings, and we share it with our agency partners, the people who place the business with us, our agents. We pay them materially above market commissions for placing that business with us. At the end of this, because of this technology, obviously TypTap is winning because we have better numbers. We share the wealth with our agents, who get better commissions, and our policyholders, who get lower rates. Right? We make it very simple that it's a win for all people involved with TypTap. I'll build on that one other item. There is also talk about being asset light or asset heavy as an insurance company. We buy reinsurance because we are in a state, Florida, which has to do that. But I will tell you that TypTap is five years old at this point. If TypTap had never bought any reinsurance, TypTap would actually have made more profit. Putting it differently, we don't offset losses to our reinsurers. We actually send them premiums, a fraction of which we get back to cover any CAT losses. Even our reinsurers benefit from being associated with TypTap. That's what you call revolutionary. Great. Thank you. That's helpful. My last question, just for Mark. Was there any reserve development in Q4? No. Great. Thank you very much. Okay, the next question is coming from Ron Bobman from Capital Returns. Ron, please go ahead. Thanks. Congrats again on a tremendous milestone with TypTap's progress. Thank you The financing. Paresh, I think you've mentioned in the past a 90% target combined for TypTap. Is my recollection right, and is that a reasonable target and expectation, whether complying for the next 12 months, or should I think of it as aspirational? Hey, Ron, it's Mark. Hi. I think 90% is probably about right. The issue is just sort of where exactly we are in the growth, because the policy acquisition expense or the customer acquisition is a little bit higher in the first year of a policy. If you're in a year where that is higher, then the combined ratio is likely to be a little bit less than that. As that normalizes out, 90% and possibly lower than that. Ron, let me give you that same answer in a slightly different fashion. From what we're seeing in the business, we can already achieve 90% combined very easily. What we are doing is saying that's what we have and given the numbers we're putting up. We've basically made a calculated decision to reinvest that additional 10% back into the business to grow more rapidly. We are trying to maximize the rate of growth of TypTap while keeping it at a break-even basis. We are reinvesting that 10% to accelerate growth. Whenever we take our foot off the gas, that 90% will pop right out. Okay, gotcha. TypTap did $42 million in top-line premiums in Q4. I would think that there's not real seasonality to it and that we should just keep seeing, hopefully, sequential growth. That's a good assumption, isn't it? It is, except we live in Florida, and hurricane season is from June to November. Yeah? We are aware of that, and we add some seasonality to the book as to when we take on more business, when we take on less business. Right? Because ultimately, we do have to make good underwriting decisions, yeah? It sounds like the UPC assumption deal, the quota share and how it runs off and how you mentioned in the prepared remarks, Paresh, that I think $100 million of the $120 million is really earmarked for TypTap, that it seems to me that you're going to meaningfully surpass a $200 million premium number at TypTap this calendar year when you incorporate organic growth plus those premiums that come over from those policies. Am I right about that? Absolutely. Yes. We continue to get opportunities and advantages. We have always sort of tried to double TypTap's size every year, and I'd like to think that the 2021 target is easily not only attainable, but surpassable by a meaningful way just because of the UPC transaction, yeah? It's a giant step forward. Okay. Yeah. Lastly, could you just talk a little bit about the operational state of TypTap? I know you've mentioned, I think, on the deal call a couple of weeks ago, about how you've done everything to sort of set it up separate. Could you describe a little bit more about that? That's it for me as far as questions. Thanks. Yeah, sure. Absolutely. Look, Mark alluded earlier in his comments about TypTap being separately capitalized and almost running independently. Really what we've done as part of the Centerbridge transaction is, and people have probably seen a lot of the 8-K filings we've done in the last two weeks. Effectively, every person employed by the HCI Group was either made a member of the TypTap Insurance Group or stayed with the HCI Group. The only person who spans both groups is myself. Everybody else is on one side or the other. Really the reason for that is the TypTap Insurance Group is now being built up to run, operate, and be managed like a separate public credit independent company with its own audited financials, its own balance sheet and everything else. We are actively walking down that path. We're doing that because, having already come from a public company background, we know it's good governance. TypTap Insurance Group already has all wonderful things like Sarbanes-Oxley, financial controls, quarterly and month-end closings all built into it. We are trying to make sure we not only continue that, we actually enhance it on that. That's fundamentally what's going on. We've taken it to the extreme of even separating boards. The TypTap Insurance Group has its own board, and HCI Group has its own board. In doing so, the only common board members across the two companies are myself as the HCI and TypTap chairman, and a gentleman by the name of Eric Hoffman, who represents Centerbridge on both boards. Right. Okay, thanks. Again, congrats. Tremendous. Thank you. At this time, this concludes our question- and- answer session. I would now like to turn the call back over to Rachel Swansiger, who has a few closing remarks. On behalf of the entire management team, I would like to thank our shareholders, employees, agents, and most importantly, our policyholders, for their continued support. We look forward to updating you on our progress in the near future. Thank you for joining us today for our presentation. This concludes today's call. You may now disconnect.