Greetings, and welcome to the Homeowners Choice First Quarter 2012 Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Jay Madhu, Vice President of Investor Relations from Homeowners Choice.

Welcome to Homeowners Choice first quarter 2012 earnings conference call. Joining in the discussion for the first quarter results are Homeowners Choice Chairman and Chief Executive Officer, Paresh Patel; Scott Wallace, President of our Property & Casualty Insurance Division; and Chief Financial Officer, Richard Allen. First, Paresh Patel will review the quarter, followed by Richard Allen's financial comments, followed again by Mr. Patel, who will review our outlook, direction and strategy. Before I hand over the call to Paresh, I wanted 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 and 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 but 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 condition and results of operations. Homeowners Choice, Inc. disclaims all the obligations to update any forward-looking statements. Earlier today, we released our financial results of our first quarter 2012. The press release and other materials are available on our website. We encourage investors to review those materials. This call is being recorded and will be available for replay for a period of 30 days via the Investor Event section of the company's website. With that, I'll turn over the call to Mr. Paresh Patel, our Chairman and CEO.

Thanks, Jay. Welcome to our first quarter 2012 conference call. We appreciate your interest in Homeowners Choice. First, I'll review our accomplishments during the last quarter and then go over a couple of significant events that have occurred since the end of the quarter. We ended the first quarter of 2012 with approximately 118,000 policyholders and annualized premiums of about $230 million. During the first quarter, the Board of Directors raised the quarterly dividend of common stock up 33% from $0.15 a share to $0.20 a share. While we continue to grow the company, both organically and through acquisition, we are also mindful of returning cash to our shareholders and providing a yield on the investment in Homeowners Choice. Looking forward, in April, Scott Wallace, the former Chief Executive Officer of Citizen Property Insurance Corporation, joined us as President of the Property & Casualty Insurance Division. For those of you who do not know, Citizen's is Florida's largest property insurance company, with approximately 1.5 million policies in force and about $3 billion in annual revenue. Scott brings to us over 30 years of extensive and wide ranging experience in the short industry to Homeowners Choice. Welcome aboard, Scott. Finally, we completed a $20 million follow-on offering in April. As a result, our balance sheet is in great shape and we are very well-positioned to continue growing our market share. Now I'll turn our call over to Richard Allen, our Chief Financial Officer, to run through the financials and then I will back with my closing remarks. Richard?

Thank you, Paresh, and good afternoon, everyone. Diluted earnings per common share increased during the first quarter of 2012 over the first quarter of 2011 from $0.12 to $0.88 diluted earnings per common share. Due to the increase in policies acquired from HomeWise, gross premiums earned during the quarter increased 77% to $54.7 million over the prior year period, of which approximately $21.4 million is attributed to the HomeWise policies. Net premiums earned increased 142% to $40.4 million dollars, primarily due to the HomeWise policies not being subject to full reinsurance cost as the assumption which at the end of the hurricane season. Ceded premiums or reinsurance costs, as a percentage of gross premiums, earned were 26% for the current quarter compared to 46% for the first quarter of 2011. Reinsurance costs as a percentage of gross premiums are expected to return to a more comparable range beginning in June of 2012 with the beginning of the new reinsurance treaty year. Realized investment gains declined to 21,000 from 150,000 in the prior year. For the first quarter, losses and loss adjustment expenses increased to $19.2 million versus $10.4 million last year, primarily as a result of the increased exposures and the strengthening of our reserve curve of not reported claims. Policy acquisition and other underwriting expenses for the 3 months ended March 31, 2012 and 2011 were $6.6 million or 12% of gross premiums earned and $4.3 million or 14% of gross premiums earned, respectively. This increase is primarily due to increased commissions, premium taxes plus a onetime $1.2 million adjustment related to our adoption of the accounting standards update 2010-26 that is related to deferred acquisition cost in January. Other operating expenses, which include a variety of general and administrative costs, for the 3 months ended March 31, 2012 and 2011, were $4.5 million and $2.1 million, respectively. This increase is primarily related to the staffing increase required for the Homeowners' policy assumption and the acquisition of our software development operation. Our employee count at March 31, 2012, was 200 compared to 80 for the same period of 2011. Investments on fixed income and equity securities were approximately $60 million at March 31, 2012, versus approximately $52 million at December 31, 2011. Cash and cash equivalents at March 31, 2012, were approximately $111 million compared to approximately $100 million at December 31, 2011. Unearned premiums were $91 million at March 31, 2012, versus $109 million at December 31, 2011. Loss and loss adjustment expense reserves at March 31, 2012, were $33.5 million compared to $27.5 million at December 31, 2011. Total assets at March 31 were $221 million and stockholder equity was at $69.8 million. With that, I'll turn the call back over to Paresh.

Thank you, Richard. I would like to note that the diluted share count between Q1 2011 and Q1 2012 has increased significantly. This is due to the preferred offering from last year. Starting in Q1, due to the share price, the warrants are also beginning to be included in the diluted share count. Please see our 10-Q for a detailed breakdown. On a different note, we are seeing conversions from warrants and preferred shares into common stock which is increasing our basic share count. Finally, we completed upon offering of common stock in April which increased the basic share count as well. Given the fluid nature of the share count in the upcoming quarters, I just thought I should make everybody aware of this and draw their attention to that fact, as a way of explaining how I look at the company, we basically focus on the pre-tax and asset-tax earnings and make sure that those are in line and they continue to be so. Finally, in closing, we are pleased with our results for the first quarter. Our long-term goals stay the same. We continue to maintain a strong balance sheet, diversifying our portfolio and providing returns to our shareholders while at the same time, we make sure we provide exceptional service to our policy holders, our customers. Thank you and we will now take questions.

[Operator Instructions] Our first question comes from the line of Casey Alexander from Gilford Securities.

I have a few questions, you are down to the point where you should be getting a pretty good look at what your reinsurance contracts are going to look like compared to next year. Can you give us any color on that at this point in time?

The second range of our reinsurance cost for the upcoming year is between $90 million and $100 million.

Secondly, the warrants were quite a ways in the money and they are now fully callable by the company. Has there been any thought given by the management team or the board in terms of potentially calling the warrants and sort of cleaning up the capital structure?

Simple answer is yes. On the one hand, you would call it in, collect the additional capital that would come with it. On the other side of that, is at that point where warrants would also start collecting. They would turn into common stock and would also start collecting dividends. So it's on balance, a situation between bringing capital in and or increasing the dividend payout. So thus far, the Board has chosen not to act on the call the warrants in, even though we know it really can at this point. I just wanted everybody out there to understand the thoughts and ideas behind the warrants at this point, because we've significantly changed it since last quarter.

Lastly, the growth through the acquisition of policies has been terrific. But a couple of quarters ago, you also started some organic growth efforts through writing policies through more traditional channels. Can you give us some update on how that's going and sort of the pace of the organic growth versus the acquired growth?

The organic growth, we know we can dial up and down as we see appropriate, given where we are with the home-wise acquisition et cetera. We had dialed back the organic growth the last few quarters. Clearly, we're now coming up on hurricane season, so it will still dial back a little bit. But the capability is obviously there to turn it back on at anytime we see.

Our next question comes from the line of Howard Halpern from Taglich Brothers.

In terms of the reinsurance, you talked about it being somewhere in the range of $90 million to $100 million, what, in essence, is the savings that you're going to reap from the home-wise acquisitions if there were 2 separate entities?

Very straight forward answer is, obviously there is lot of moving parts in this but on a simplistic view point, Homeowners Choice spent about $60 million on reinsurance last year. Home-wise as apprehended, we had spent about $60 million as well last year. And as I have just previously stated, the combined company is looking to spend between $90 million and $100 million this. There are a few other moving parts that come to that conclusion but those are the numbers.

And have you gotten any feedback at all from the new home-wise policy holders who have gone through the renewal process?

Well, the only feedback I can give you is that 74% plus of them have stayed with us upon renewal.

I'm assuming that's a very high -- relatively high number for the Florida market?

Yes. It's low for normal HCII retention, because we typically tend to retain about 90% of our business upon renewal. But 74%, given the shock the HomeWise policy holders have gone through, is a very good number.

What did you see and what drew you into HCII?

The biggest thing that that drew me into HCII is just the dynamic of the organization, the diversity of the organization and its growth opportunities and desires. And I certainly am proud to be part of this organization and look forward to being part of the continued growth and success of this company.

Our next question comes from the line of Bernie Harris [ph] from BJ Harris Company [ph].

My question to you is, knowing that you're going to have this great report and the effect it had in the past on it, why did you give away the stock at $11.75?

Bernie, I think that's one interpretation of it. We don't quite see it that way. We raise capital at an appropriate time. And we like to make sure all of our shareholders, existing and new, all get to do very well out of this.

But they didn't.

Again, I would disagree. When we did the preferred offering last year, people asked us the same question. When we raised the $12 million there, they said you're diluting the company, et cetera.

Your statement was all shareholders benefited. But no, all shareholders didn't benefit. Only the ones that Sidoti would give stock to. I tried to get stock and they didn't offer me anything. They said they were going to get back to me and so forth and they never did. So all shareholders didn't do it, only the ones controlled by Sidoti. And people got it and half of them did it as a trade.

Again, Bernie, that's an opinion. I can't comment to that. What I do know is what we did as a company and the following offerings has basically put the company in much healthier financial position and has actually led to a much better followed company.

Well, I am not arguing on doing it. I am just saying, the timing could have waited 3 weeks, and you got yourself another million dollars and we'd be better off then.

No. I think the stock price had been at 12 for quite a while. Look, at this point, I'm going to end this conversation. We did what we did. It was done in the appropriate fashion. And the fact you didn't get shares from Sidoti, I sympathizes with your viewpoint. But unfortunately, all we were in charge of was making sure that we got a full on operating completed at a decent price, which we did.

Our next question comes from the line of Steve Rudd [ph] from USIP [ph].

I just want to try to get to the normalized earnings. And I am just taking this off the back of the envelope. You had a $1.2 million adjustment because of the policy acquisition expense. You've got some reinsurance costs which will come on in June. I come out to roughly low 80s going forward. And I am wondering if I got this backed out and added in a few moving parts, or am I completely off base here?

It's difficult to tell you whether the number is correct or not, because right now we are going through a lot of moving parts. And on the down side, you've got some onetime charges that are coming through because of accounting changes plus you have the strength in IBNR, et cetera. Those are the negatives. And the other negative that will come up is the increased reinsurance cost starting in June. On the positive side, you're getting rate increases going through on the book. And just as onetime charges drop off, all the profitability will come in there. So you have that plus you have the EPS. It's difficult to measure as the share count moves around. And are you talking about basic shares or delivered shares, et cetera. So you have a series of different moving parts. And that's why I am trying to say it's better off to look at this stuff in terms of pre-tax earnings expectations. EPS is going to be a little bit difficult to compute.

Well, let's just take it on the fully diluted basis, which is kind of high. With the warrants exercise and all our denominator pull-outs. So that's about where it's coming. I'm still at about low 80s. But I don't know if I dropped something. I have all the pieces that you've just described. I'm assuming we are getting roughly 7% to 15% on renewals.

Yes, that part is correct. This may be a much more involved conversation that maybe we'll take offline.

Great acquisition of Scott Wallace. His background is impeccable. He had talked in the past about a book-to-business coming off of Citizens. I guess we wait for any acquisition there until after the hurricane season? Or do you see something coming sooner potentially?

Our typical mode of operation has been to stay stable and/or shrink through hurricane season and that we tend to grow explosively, shall we say, in the fourth quarter and early part of the first quarter.

I know we did a second marina acquisition. The first one, I think, has been going very well for folks who spotter that and good timing after mentioning that, because it's raising the dividend. Hopefully you'll do a third one and raise the dividend in between again. Tell us how the first one is going, so that people who are looking or looked hard at that realize that this is not just your affinity for boating, which I don't think you have, but rather that makes a sense from an investment point of view. So give us flavor for how the first marina is doing so we know why it made sense for you to go for the second one, if it did.

Let me just back up for a second. When we buy these pieces of real estate, and in reality that's what we are doing, we're buying real estate that are actually wonderful pieces of real estate that, in this distressed part of market for various stress-related reasons, can be had at a bargain price, is what we're doing. And typically what tends to happen is, in buying the real estate, you end up with some business that actually happens to be in the real estate and it refers to the property based on whatever the predominant business is. So the first acquisition from last year, which is often referred to as a marina, in reality, it’s 9 acres of prime waterfront land. It actually also has 26,000 square feet of retail space on it. And we got it because the previous owners had paid huge amounts of money at the top of the real estate bubble. And clearly, they overpaid, but we got a bargain. And we actually had a little markup to put it on books. That was the story behind the first one. And how it's doing a year later is that it's basically cash flowing positively. So as an investment, it's doing fine. It's real value-add is not going to be in an income basis. It's more of a capital appreciation kind of play. And why that is significant, if I can digress for a second, when you look at our earnings per share of this quarter, if you look at the after-tax earnings, go up a couple of lines and look at the pre-tax earnings and look at the amount of money we're paying in taxes. Straight ordinary income is costing us a lot of money in taxes. It would be nice to diversify into some…

It's the $5 million acquisition of 9 acres. And so you're saying that on the $6 million we are cash flowing positively, it sounds like nothing much to write home about that this is positive. And in this one, we're going to put in some money again? And what's your expectation or what's your mandate?

We now have a little bit of a tracker for doing this. The third acquisition that we have done, which is our first acquisition which was the office building which is the oldest acquisition, is already cash flowing very positively. But in each case, what we've done is we tend to buy something highly distressed at very rough bottom prices. We put some capital into turning the property around. And then within about usually year to 18 months after we get it, it tends to stock turning into cash flow positive and at least it carries itself. My expectations for the latest property are it is going to be a similar kind of turnaround. So we bought it for $8.1 million. I suspect we're probably going to spend around number about $1 million turning it around. And sometime in the middle of next year, it should be cash flowing positively and being a wonderful member of the HCI real estate stable, shall we say.

And finally, since you brought up the office building, when you say it's turned out to be a good investment, I know we are excited there. Is it carrying the cost, we are running for free inside there?

We're getting all of that in cash flow positive, but that's the property we've owned the longest. We've had that since June 1 of 2010. Not a lot of properties have been held for almost 2 years. What will you find with that property 2 years later is that, yes, it's cash flowing positive and some income coming in. But the real homerun is, for various reasons, we have to do an appraisal on the property in the recent past. And the appraisal on the property at this point is $5 million or $6 million higher than what we paid for it. Obviously we cannot put that through our earnings statement or any of those kinds of things. It has to be carried in the book, that cost, but I'm just illustrating a point here.

So we'll have to see how the next couple of quarters with all the moving parts play out. I assume and I think I'm right, but I could be wrong, and we'll see what happens with the Citizens, what comes roughly October, November, something like that.

There are no further questions in the queue. I'd like to hand the call back over to management for closing comments.

Thank you, operator, and thank you, everyone, for your questions and time today. This is an exciting time for the company and we are glad to have you be a part of it. We are looking forward to a strong remainder of 2012 and keeping the pace of our progress. Thank you and goodbye.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.