Hello and welcome to the United Insurance Holdings Corp. First Quarter 2022 financial results conference call and webcast. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require Operator assistance during the conference, . As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Karin Daly, Vice President with the Equity Group. Please go ahead.

Thank you, Kevin. And good morning -- good afternoon, everyone. UPC Insurance has also made this broadcast available on its website at www.upcinsurance.com. A replay will be available for approximately 30 days following the call. Additionally, you can find copies of UPC's earnings release and presentation in the Investors section of the company's website. Speaking today will be Chairman of the Board and Chief Executive Officer R. Daniel Peed, and President and Chief Financial Officer Bennett Bradford Martz. On behalf of the company, I'd like to note that statements made during this call that are not historical facts are forward-looking statements. The company believes these statements are based on reasonable estimates, assumptions, and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate, or if other risks or uncertainties arise, actual results could differ materially from those expressed in or implied by the forward-looking statements. Factors that could cause actual results to differ materially may be found in our filings with the U.S. Securities and Exchange Commission in the Risk Factors section of our most recent annual report on Form 10-K or subsequent quarterly reports on Form 10-Q. Forward-looking statements speak only as of the date on which they are made, and except as required by applicable law, we undertake no obligation to update or revise any forward-looking statements. With that, it's my pleasure to turn the call over to Mr. Daniel Peed. Dan.

Thanks, Karin. Hello and thanks for joining us on our first quarter earnings call. I'm Dan Peed, Chairman and CEO of UPC Insurance. I'm planning to offer an overview of some of our activities and then Brad Martz will provide some more specific numbers. The first quarter had a core loss of $29.3 million, which reflects a reduced net earned premium combined with elevated catastrophe losses from 10 PCS events and higher loss severity on both attritional and CAT claims. Revenues for the first quarter reflect our aggressive de -risking and de -leveraging activities over the last 18 months. Gross earned premium on a year-over-year basis is down by approximately 10% due in part to the sale of our Northeast renewal rights. Also, we continue with exposure management activities in our remaining core portfolio, which decreased TAV by nearly 14% on a year-over-year basis. But exposure management reductions were generally offset by rate increases on both our personal lines and commercial lines portfolios. Our net earned premium is down just over 30% again due in part to the 100% quota share treaties associated with the sale of the Northeast and Southeast renewal rights. As well as increased reinsurance spend to enhance our hurricane protection through reduced retention levels on both the quota occurrence basis, as well as an aggregate basis. As such, ceding ratios are up from 59% to 68% with quota share up 5.8 points. And other, which is mostly cut excessive loss up 3.5 points. While losses are down $21.4 million or 21% year-over-year, the net loss ratio is up significantly due to the 30% reduction in net earned premium. Losses were impacted by modestly elevated catastrophe events in the first quarter, as well as increased severity due to litigation and inflation on both CAT and non-CAT losses.…

Thank you, Dan and hello. This is Brad Martz, President and CFO, UPC Insurance. I'm pleased to review UPC's financial results, but encourage everyone to review our press release, investor presentation, and Form 10-Q for more information regarding the company's performance. Highlights for the quarter, ending March 31st, 2022, included a GAAP net loss of $33.2 million or $0.77 a share compared to a net loss of $17.8 million or $0.41 a share last year. And a core loss of $29.3 million or $0.68 a share, compared to a total loss of $19.4 million or $0.45 a share a year ago. On page four of our investor presentation, highlights that our core loss included $28.6 million of current accident year net retained CAT losses and $1.4 million of prior year reserved development driven primarily by CAT events. CAT losses in the current quarter stem from ten new PCS events with estimated gross losses of approximately $43 million that were all within our $15 million retention but subject to recovery from our quota share reinsurance, reducing the net amount retained. Gross premiums written for the quarter of $279.5 million declined $32.2 million or approximately 10% and gross premiums earned a $319.2 million decreased 11%, due to the continued exposure management in our personal lines portfolio, as well as the cancellation of all policies in New Jersey, consistent with our plan to transfer that business to HCI Group. Pages six and seven of our investor presentations continue to demonstrate that we're getting significantly more rate both in Commercial Lines and personal lines while keeping the risk we want. Page eight of our investor presentation provides a summary of our business in force at March 31st. Within without the states, we've exited to demonstrate continued progress toward a more balanced risk portfolio. Ceded…

Thank you. We'll now be conducting a question-and-answer session, . One moment please, while we poll for questions. Our first question today is coming from Greg Peters, from Raymond James. Your line is now live.

Great. Good afternoon. I guess I'm going to have two questions and the first question will focus on Slide 8, which is your reduction in your policies, in your premium, in your TIV. The second question will be on reinsurance costs. So, in looking over Slide 8, if we take the states that you're no longer in, we're still seeing pretty rapid sequential decline in policies for the, for example, down much 6.9% from end-of-year to March 31st. Is this sort of rate of change in the shrinkage of your policy count? Is that sort of a good run rate to think about for the balance of the year as you continue your derisking efforts?

I can take that. This is Dan. Yes, so you have a personal line adjusted there 6.6% on a fifth count that is probably in line with the run rate. But notice that the premium is not dropping at the same rate because of the rate increases. So, our premium wouldn't be going down at that rate. The premium will be going down at a lesser rate.

That makes sense. And then it also makes sense that the TIV isn't going down at the same rate because you're readjusting your TIV. Is there any hope that you in some of the smaller states can more rapidly exit or is that as a regulatory consideration that are holding you back?

Remember that we have 100% quota share behind those smaller states. So, what you see written there is basically past directly through to HCI and renewal rights sale.

Got it. Okay. And then -- thanks for the color in your -- on Slide 12 about your reinsurance program. And then I was looking in the press release when you talk about reinsurance costs as a percentage of gross earned premium. I know the final details aren't available for the program yet, but directionally, can you give us a sense of how the cost -- how those ratios might look in the back half of the year? Or any color on what's going on there would be helpful.

Hi, Greg. This is Brad. That's a great question. I -- we have some visibility into that, but I don't think it would be appropriate to the comment at this time, given all the uncertainty around those special session in Florida that could potentially change our outlook. So, I would -- I appreciate the inquiries, but my guidance would be we will attempt to provide as much color as we can as early as we can once we've got -- we're close to -- closer to fully bound on the program, we know with certainty what those costs are. But right now, we're still in the middle of the market placement and negotiations with with the market, so I don't think it'd be appropriate to comment on the expectation of price direction.

I guess that makes sense. I didn't even touch the Florida special session, but given the staff you throw on page nine, I think provides some compelling evidence that maybe we'll do some. Thank you.

Thank you. Next question is coming from Bill from Teton Capital. Your line is now live.

Thank you. I'd like to pick up on the special session. Would you please discuss the items that are on the agenda and what potentially you're hearing that legislators would like to come out of that session?

Okay, Bill. Thanks. This is Dan. I'm not exactly sure what specific items are on the agenda. I know there are several things that have been kicked around, either in the past or associated with this and it includes, potentially a change in the Florida Hurricane Catastrophe plan to attachment point is one of them. One of the things that is specifically needed is some weighted deal with the roof covering issues, and so -- so they

You'd mentioned the roof covering issues in addition to --

Thanks. Yes. So, roof covering just dealing with the actual cash value versus the replacement cost value, there's potentially a group deductible type of provision that would apply a roof deductible to non-hurricane wind. And then of course, if they were to get in and try to work a little bit more with the litigation from the perspective of the SB 76 and how that impacted the litigation, when it would apply and how it applies. I'm sorry, that's not a great answer, but we do expect that they're going to have some negotiations going into that session, but we are completely uncertain of what comes out of it.

No, that's fair, Dan. Thank you. Do you have a sense whether there is a consensus in the legislature that they want to limit the litigation? Particularly the frivolous litigation or at this point, there's just an awareness that the industry is overburdened and they're going to explore options to assist from multiple angles.

Again, Bill, I think a hard question to answer because certainly, the commissioner of Insurance has suggested that there is excessive or frivolous litigation. But having said that, the legislature has worked for years trying to find solutions to that, but they've not seemed to be able to come to conclusion. However, I think there is a growing consensus that something needs to be done. Otherwise, the Florida insurance space is becoming very hospital to the insurance.

Great. Thank you.

Thank you.

Thank you. We reached end of our Question-and-Answer Session. I'd like to turn the floor back over for any further closing comments.

Okay. Thanks for joining us on our call and that will wrap up our call for today. I want to thank our entire team for their tireless efforts and thanks to all of you for joining our call today. Thanks again.

Thank you. That does conclude today's teleconference or webcast, you may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.