Good morning, and welcome to the Heritage Insurance Holdings First Quarter 2022 Earnings Conference 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. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Kirk Lusk, Chief Financial Officer. 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. 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 Garateix, our Chief Executive Officer. I will now turn the call over to Ernie. Thank you. Kirk and I would like to thank everyone for joining the call today. I would like to thank our Heritage employees for their dedication to the company as well as our policyholders. I also would like to thank our valued reinsurance partners for their commitment to our program. On this call, we will begin with an overview of our performance for the quarter ending March 31st, 2022, provide updates on key financial performance metrics, and then open the call for Q&A. The first quarter of 2022 marked another quarter impacted by severe weather losses. These higher weather losses resulted in a net loss of $30.7 million or $1.15 per diluted share. Despite the substantial increase in net current accident year weather losses during the quarter, we remain encouraged by the rate and form changes implemented throughout the book of business over the last 18 months. These changes, coupled with additional geographic diversification and more restrictive underwriting for new and renewal business, will continue to positively impact our portfolio. These changes are highlighted by the improvement in our attritional loss ratio for new business quarter over quarter. The initiatives to tighten underwriting and increase rates have improved our average premium per policy by 10.7% from the first quarter of 2021. The impact of existing rate increases has not worked its way through our entire book of business. Therefore, this amount does not include rate changes on policies which have not yet renewed. For perspective, our 2022 voluntary homeowners renewals for all states are averaging a 21% rate increase over the prior year with our existing rate changes. We will continue to seek rate changes commensurate with our cost of doing business. Rate changes are implemented at policy renewal and are earned throughout one-year policy period. We are committed to proactively and appropriately raising rates to offset higher loss costs and taking underwriting actions to improve our profitability throughout the year. We look forward to finalizing our Cat XOL reinsurance program, which should be completed by the end of this month. We used our SPV Citrus Re again this year for a portion of our Cat XOL program specific to the Northeast. We were pleased with the pricing of this $100 million reinsurance Cat bond as we continue to successfully access the capital markets as part of our risk transfer program. This concludes my remarks. Let me now turn things over to Kirk Lusk for a review of the key metrics and numbers. Thank you, Ernie. Good morning. In force premiums grew by 4.7% during the quarter to $1.2 billion, primarily due to rate increases, while policies in force for the same time frame were down 5.5%. We believe the rate and underwriting changes being implemented will have an impact later this year as volatility of loss costs are reduced and produce meaningful improvements in the bottom line. We recognize the litigated claims environment has made the Florida market very difficult, and we're taking rating and underwriting actions that we believe will position the company well in the future. This could dampen our future growth in the Florida market. Efforts to shift business from Florida has resulted in a 19.1% reduction in personal lines policies in force in the state. As a result of the continued execution of our diversification strategy, 74% of our TIV was outside of Florida, up from 69% as of the first quarter of 2021. We think it is important that the TIV increase outside of Florida was distributed among nearly each state which we conduct business, which improves our overall diversification of risk. The ceded premium ratio was 46.8% in the first quarter, down 60 basis points from 47.4% in the first quarter of 2021. The decrease primarily stems from gross premiums earned growth outpacing ceded premiums growth. The first quarter weather losses were up substantially to $63.8 million. Current accident year weather losses include $45 million of net current accident year Cat losses, which were up from $15.4 million in the prior year quarter. This year-over-year increase also includes $18.8 million of weather losses, up from $16.1 million in the prior year quarter. First quarter 2022 weather losses are primarily attributed to events in Florida, particularly severe storms in mid-January and mid-March. Our pre-announcement of weather losses last week reflects our commitment to transparency with our shareholders, as well as an appropriate approach to estimating losses. Our net loss ratio of 91.6% ended the quarter 22.8 points higher from the prior period due to the higher weather losses outlined. We believe the social inflation affecting Florida claims is driven largely by litigated claims practices, which drives up the loss costs associated with each weather event. The Florida legislation has taken up some actions to address this issue via Senate Bill 76, and we are interested in seeing the outcome of the special session later this month. Our net expense ratio decreased by 90 basis points to 37.9%, driven by our continued drive to manage G&A expenses. Policy acquisition costs are relatively flat as a percentage of net earned premiums. The net combined ratio for the quarter of 2022 was 129.5%, which is up from 107.7% in the prior year period, reflecting a higher net loss ratio, partially offset by a lower net expense ratio. Total capital return to shareholders during the first quarter of 2022 was $6.7 million, reflecting a $0.06 per share regular quarterly dividend and repurchase of shares. During the quarter, we repurchased 721,118 shares at an average price of $6.93 per share, totaling approximately $5 million. Many of our markets, and especially Florida, are challenged by social and economic inflation, continued litigation, and increasingly severe weather. We have taken considerable actions to mitigate their effects and improve our underwriting results, including taking rate, increasing our inflation guard factor, tightening underwriting standards and managing exposures. Our actions have improved our portfolio, while claims inflation and litigation associated with continued severe weather continue to dampen the impact of those improvements. As such, you can expect the management to accelerate our initiatives. The management team is focused on improving margins and returns to shareholders. We are committed to taking rate where it is needed, tightening our underwriting standards even further while remaining compliant with state regulatory requirements and changing our products, coverage, and exposures, all in an effort to accelerate the changes we believe are necessary until we achieve our target returns. We will consider all options to realize the value of our entities, and we will also take the actions necessary to improve margins. That concludes our prepared remarks. Operator, we are ready to begin the question-and-answer portion of the call. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Marla Backer with Sidoti. Please go ahead. Thank you. Stepping back and looking at some of the initiatives that you have, you know, done and accomplished over the past several quarters, do you see any areas perhaps where some of the diversity and you know that you hoped to inject into the underwriting book you know might not have lived up to your expectations? Are there any areas in addition to Florida where you think you know perhaps you should pull back now as well? Hey, Marla, that's a good question. We continue to look at the book, and we're pleased with the actions that are taking. I think to understand that some of those actions, whether they're non-renewals, increasing rates, take 12-18 months to flow through the book. We on a monthly and quarterly basis are constantly looking at those actions and seeing where it's appropriate to take. To understand the full effect of those, it does take 12-18 months. We continue to look, and there's areas outside of Florida that we are constantly looking at, but we're overall pleased, you know, with the direction in which we're heading on with the underwriting performance. Yeah. In addition to that, I'd say we're also much more surgical. For example, you know, we will look at each individual state and our distribution within that state by county between coastal and inland and adjust the, you know, the portfolio, you know, where we aren't seeing the returns we want to. Yeah, it's not a carte blanche, I think view of the different diversification because it's much more surgical than that. Mm-hmm. Once you take a decision to either, you know, as you say, surgically, you know, shift a little bit, tweak the portfolio, is it still the same 12-month process before you see, you know, that shift actually happen? Yeah, it will take a bit of time to roll through the book because you do have to give a non-renewal notice, right? For example, in some areas where we've terminated agents, that takes some time for those policies to roll off. Those things unfortunately do not happen overnight. It takes a little bit of time for that. You've got to give proper notice, you know, if it's a non-renewal. Some of the rates that we take on are on a renewal basis. By the time you get those approved, it does take a bit of time. Mm-hmm. Okay. Excuse me. Last question for me is, can you give us a little bit more color on some of the partnerships that you've formed and that, you know, where you see those, that part of the business going? Yes. We do have some large partnerships with Liberty Mutual, GEICO, Safeco and NatGen. We're constantly in communication with them regarding the business that we're looking to target. They have been very cooperative, very good about looking at those pieces. Obviously, in a true partnership, there are times where we have to, you know, pull back in certain areas, and they understand, but then we refocus in other areas where it's more profitable for us, and they have been very good partners with respect to that. Thank you. The next question is from Paul Newsome with Piper Sandler. Please go ahead. Mr. Newsome, your line is open on our end. Perhaps it's muted on yours. I'm sorry. Hope you can hear me now. Yes, I can. I want to home in on just the Cat losses to start with. They were unusually large by your standards as well as really anybody else in the industry. Was there anything that would lead us to suggest that this was just a particular concentration of an area? Or, maybe you know, maybe you could talk about how you define your Cat losses. Maybe you're having a different definition than the standard industry. Anything that would give us some insights into why Heritage's Cat losses were an anomaly in the quarter versus their peers. Yeah, correct. Okay. First of all, you know, there were six PCS events that we categorize into that. You know, PCS 2211, 2212, 2218, 2219, 2220, and 2221. The largest one of those is 2212. When you look at the states that that impacted, you know, it was Alabama, Georgia, Florida, and North Carolina, predominantly. You know, the bulk of those losses are in Florida. You know, and also, you know, when you look at, you know, I think our reserving practices, you know, we do have, like when you look at our reserving practices since third quarter of 2018, we've had favorable developments up till this quarter. This quarter we did have slight unfavorable development of, like, $2.4 million. Prior to that, we've had, from third quarter 2018 until now, favorable development to the tune of about $30 million. We think our reserving is prudent and accurate. I can't speak for, you know, anybody else's losses or their reserving, but you know, that's how we look at it. Yeah, your reserving certainly has been a relative strength versus your peers. That was gonna be my second question, whether you had reserve development or not. Could you maybe focus on that, given that it's an unusual development for you? We did have the, you know, $2.4 million worth of development. You know, and again, first quarter in a long time. There was really nothing, you know, in particular about that as far as, you know, where it was coming from. You know, it was just like a myriad of things. There's a couple of the storms, Elsa, Fred, and Ida, which are all retained for us. They are not into our Cat layer. So, you know, those did deteriorate slightly, and so therefore, those are fully retained. That makes sense. A different topic. Could you talk a little bit about, and it doesn't have to be precise, but the profitability of the Florida book versus the non-Florida book. Was it that much different than the rest of the book this quarter or not? Just some initial details would be great. Yeah. Well, with the weather losses obviously, you know, the Florida book did not perform well. When we look at going forward, because of the rate increases that we are taking in the Florida market and also due to the tightening of the underwriting standards, you know, we are looking at that as seeing, you know, quarter-over-quarter improvement in that. Again, it's the weather that is driving it obviously this quarter. Right. The big topic, well, really the last year or so has been underlying claims inflation versus rate. If we could look back a year ago and then look at sort of the next 12 months rolling, where do you think you stood from a rate versus claims inflation perspective? It would seem if you sort of add up the year on a rolling basis that you might have lost some traction. Is that fair to say that or not? Maybe you could just let us know how you think about that. Okay. Well, I think we look at, you know, claims inflation probably running around, you know, 12%, you know, overall. That's kind of, you know, how we look at the portfolio. That's what we look at, you know, building into our pricing, and I think it's consistent with what we've seen over the past year. From that standpoint, I think we're building that appropriately. You know, we have increased our inflation guard factors, you know, throughout our geography to also contemplate that. That would be over and on top of the rate increases that we're getting. I do think that there's probably, you know, the inflation currently pegged, although that, you know, as everyone knows, can move up and down, and it has some volatility to it. I think, you know, the social inflation and probably the weather that are the ones that are probably even a little bit more difficult to predict. Yeah. Great. Well, I'll let some other folks ask questions, but, appreciate the help as always. Thank you, Paul. Again, if you have a question, please press star then one. The next question is from Matt Carletti with JMP. Please go ahead. Hey, good morning. Morning. Just want to go back to try to better understand the Cat/weather losses in the quarter. Just again, some of your peers that have similar kind of footprints, you know, your guys' number is magnitudes of what they've reported. Can you define for us what is a Cat for Heritage and what is weather for Heritage? 'Cause it seems that the weather bucket is the majority of it and the Cat's bucket isn't necessarily so sizable. Well, the Cat bucket was $44 million-$45 million, and the other weather was the, you know, $18.7 million number. It is, you know, predominantly the Cat number and that is defined by the PCS events. That is what we put into that bucket is PCS events. I'm sorry. PCS events are defined Cats? Yes. Property Cats Yeah, yeah. Catastrophes. Yeah. Yes. We're putting the PCS events into the Cat bucket. Correct. It's a non-hurricane Cat. Do you have handy like, you know, how many the claim counts that came off of those events that relate to that $64 million of Cats and weather? As far as, you know, reported claims, as of 3/31, there was 876. Okay. All right. Okay, thanks. Then just separate question, particularly as a backdrop of obviously a lot of your peers in the market are struggling quite a bit. Can you just update us on how you view your capital position, you know, as you sit here today? Yeah, I think we look for you know our capital position as good. I think that you know we've got Osprey that we're able to utilize also. You know we also have you know our service companies you know MGAs. Then in addition to that you know we do have our syndicated banks. We do have a you know revolver available to us. So from that standpoint you know we do think that we're okay from a capital position and you know continuing to look at that going forward. All right. Great. Thank you for the answers. Yeah. In addition to that, I would mention the fact, you know, from a cash position, you know, our non-regulated cash is $35 million. Okay. Thank you. The next question is from Nicholas Iacoviello with Dowling & Partners. Please go ahead. Hi. Good morning. Morning, Nick. First, the first question, it was on HoldCo with equity, but that's at $35 million, correct? Then can you just update us- That's correct. Where was group stat surplus as of quarter end, and was anything downstreamed at this point in time? Let's see here. Let me pull that up real quick. Yeah. Yeah, total stat surplus is $294 across the entities. Okay. Thank you. Then I guess just on the G&A expense, just looking forward, right? It was relatively in line with the year-over-year, but it was up versus the prior three quarters. Is there something or can you just help me think about that going forward on an annual basis, and then quarterly cadence would be helpful. Yeah. I think you're going to see it a little bit higher in the first quarter of each year and then drop slightly, you know, throughout the year. I know last year it probably dropped, first quarter was higher, and then it dropped, you know, a fair amount in the second quarter. I would expect, you know, it to drop some into the second through the fourth quarter, but probably not to the extent it did last year. Good. Thank you. I guess on the renewals, I don't know how much you can talk about now, but have you guys gone through the proposal, I guess, or the first time that the capacity has been secured at this point in time or no? Are you talking about reinsurance renewals? The reinsurance placement? Correct. I'm sorry, you broke up there. You're referring to the reinsurance placement? That is correct. The reinsurance placement. Yes. Yeah. We did go out to the market early. We've met with all our large reinsurance partners. We're very pleased about what we're seeing and, we're in the process of that being placed. We're very optimistic. Again, we've got a lot of commitments, and we're in the process and expect that to be fully placed by the end of the month. Then obviously, you know in the announcement, we did go out early and make the Cat bond placement as well. Got it. Thank you. That's all I had. All right. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Ernie Garateix for any closing remarks. We thank everyone for joining the call today and wish everyone a great weekend. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.