Greetings and welcome to the Homeowners Choice Third Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Jay Madhu, Vice President of Investor Relations for Homeowners Choice. Thank you, Sir. You may begin.

Thank you and good afternoon. Welcome to Homeowners Choice Third Quarter 2012 Earnings Call. With me today are Paresh Patel, our Chairman and Chief Executive Officer; Richard Allen, our Chief Financial Officer and Scott Wallace, the President of our property and causality insurance division. Following Scott’s opening remarks on the operations, Richard will review our financial information for the quarter and then turn the call over to Paresh for an update and outlook. Finally we’ll open up the call to your questions. To access today’s webcast, please go to the investor relations section of our corporate website at www.hcpci.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 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 a material adverse effects on the Company's business, financial conditions and results of operation. Homeowners Choice Inc. disclaims all objections who update any forward-looking statements. Now I'll turn the call over to Scott Wallace, the President of Property and Casualty Insurance Division, Scott.

Thank you, Jay, and good afternoon to all of our listeners. As Richard will expand on later, we had a very successful quarter. However, we did experience an active storm season in which we incurred approximately $3.2 million in losses this quarter, which were related to tropical storms Debbie and Isaac. Additionally, we were quite fortunate that Hurricane Sandy didn’t impact the State of Florida and our thoughts and prayers go out to those up North, who were indeed affected by the storm. We are currently in discussion with the State of Florida Office of Insurance Regulation with respect to implementing a rate increase, which will lightly average approximately 5.9%. We believe this increase is well below the 10.8% increase being implemented by Citizens Property Insurance Corporation. We believe this is quite adequate given our book and our current outlook on our business. We are also encouraged by our third quarter results and remain focused on executing on our long-term goals, which includes diversifying in Alabama, increasing market share, and providing exceptional service to our policyholders. Now, at this point, I would like to turn the call over to our Chief Financial Officer, Richard Allen to walk through the financial results. Richard?

Thank you, Scott. Good afternoon, everyone. Third quarter income available to common stockholders totaled $2.8 million or $0.27 dilute earnings per common share. This compares with $1.9 million or $0.27 diluted earnings per common share for the third quarter of 2011. For the nine-month period ending September 30, 2012, income available to common stockholders were $16.8 million or $1.79 diluted earnings per common share, compared with $4.6 million or $0.70 diluted earnings per common share for the nine months ended September 30, 2011. Gross premiums increased 67% in the quarter ended September 30, to $53.1 million, compared with $31.7 million in this same period last year. For the nine-month period, gross premiums earned increased 72% to $161.6 million versus $93.9 million for the same period of 2011. Reinsurance costs for the quarter were 42.4% of the company’s gross premiums earned compared with 41.6% during the same period in 2011. For the nine-month period ended September 30, 2012, reinsurance costs were 33.1% of gross premiums earned compared with 44.3% in the prior year. Net premiums earned for the quarter increased 65% to $30.6 million from $18.5 million in the third quarter of 2011. Net premiums earned for the nine-month period reflect an increase of 107% to $108.1 million compared with $52.2 million in the prior year. Third quarter 2012 loss and loss adjustment expense totaled $15 million compared with $10.4 million in the same period last year. It’s important to note that third quarter of 2012 includes approximately $3.2 million related to claims from tropical storms Debby and Isaac. Loss and loss expenses for the nine months ended September 30, 2012, totaled $50.4 million compared to a $31.4 million in the same year-ago period. The nine-month period of 2012 includes approximately $5.3 million related to the two tropical storms. Turning to the balance sheet, investments in fixed income and equity securities totaled $50.9 million at September 30, 2012, versus $39.8 million at December 31, 2011. Cash, cash equivalents and time deposits at the end of the third quarter totaled $149.2 million compared with $112.8 million at December 31. Unearned premiums were $120.8 million compared with $108.7 million at December 31, 2011. Loss and loss adjustment expense reserves were $38.7 million compared with $27.4 million at December 31, 2011. The combined loss and loss expense ratio, a key measure of underwriting performance, traditionally used in the Property and Casualty industry, was 86.1% for the third quarter of 2012 compared with 88.5% for the third quarter of 2011. Our combined ratio for the nine month period ending September 30, 2012 was 77.2% compared with 93.5% in the prior year. As you can see, we have had a successful underwriting results for the 3 and the 9 month periods that ended in September 30t. Now I’d like to turn the call over to Paresh Patel, our Chairman and Chief Executive Officer. Thank you.

Thank you, Richard. Good afternoon, everyone, and thank you for joining us in today’ call to discuss our third quarter results. Our third quarter this year marked our 20th consecutive profitable quarter. This despite being an active storm season with tropical storm Debbie and tropical storm Isaac which impacted the learning, we still remain profitable. Recent notable events include the transfer of our common shares to the New York Stock Exchange. We are now listed on the symbol HCI. We also canceled our IPO warrants, which resulted in excess all those nearly all of those ones and the addition of over $4.5 million in equity capital. Also we increased our regular quarterly common dividend by 12.5% to probably $22.5 per share and declared a special common dividend of $0.10 per share for the fourth quarter. In addition, as you’ve seen the fall on press release I’m pleased to announce that we successfully completed our ninth and largest citizen’s function and transaction through we can assumed approximately 50,000 policies effective today. That equates to approximately an additional $150 million, and additional annualized gross premiums. In summary, as we enter the last month of the 2012 hurricane season, a very active season, we believe that we are well positioned from a leadership, infrastructure, and financial perspective to maintain momentum for the remainder of 2012 and beyond. Before we open the call to your questions, on behalf of the entire management team, I would like to express our appreciation for the continuous support we received from our policy holders, employees and shareholders. With that we’re ready to open the call to your questions. Operator, please provide the preferred instructions.

[Operator Instructions] Our first question comes from the line of Robert Paun with Sidoti & Company.

First is about the storm losses, the $3.2 million was relate to both Debby and Isaac, is that correct?

Correct.

Yes.

And so the losses from Debby on top of the $2 million recorded in the second quarter and you are adding to that total, is that the right way to look at it?

Let me see if I can clarify for you Robert, if you remember, we put that about $2 million for Debby in the second quarter because it was right at the end of the quarter. As we now combine the effect of Isaac, which was obviously an entirely a third quarter event, but you are probably adjusting on Debby as it rolls into the third quarter. So overall, you could say, across the two storms, and I think, we said so in the press release that the combined cost of the two storms is, I think, $5.3 million, there was $2 million in the second quarter for Debby and another $3.2 million for Isaac in the third quarter. You’re getting adjusting going on for both storms, but we were trying to clarify as to what the cost of the two storms were individually and combined.

Okay. And were there any other loss reserve adjustments from prior periods made in the quarter?

No.

Okay. Also a question on the new assumption of policies, can you talk a little bit more on maybe the policy size in terms of average premiums. It looks a little higher than your current book of business. Maybe the geographic regions where these policies are located and maybe just overall comments and what made these specific policies attractive to you guys?

Okay. In terms of the overall average premium, clearly - yes, this seems to be higher than our adjusting book. And the mode of, the very simple explanation for it is, the assumption is very heavily focused on Homeowners policies and as opposed to HO4s, which are renters policies, or condo insurance policies, hO6s. So the overall mix of the portfolio in type of policy that was geographical disclosure, the type of policy resulted in the higher average premium. So that’s where the why the number is higher, I think it’s averaging around $2,500 of policy as opposed to a normal average, which is just over $2,000. What was your second part of the question by the way?

Maybe just a overall comment on what made these policies attractive to you guys?

The simple answer and it’s unfortunately too complicated to go into here. We always have a guideline just to what policies we will accept and what we won’t. And basically what made these policies attractive was that they passed our underwriting filters to make them an appropriate risk that we would consider taking off.

Okay, that’s helpful. And just maybe one last question. Following the most recent Hurricane Sandy that came up in the Northeast. There has been some talk possibly some new regulatory changes maybe some changes to the terms and conditions of Homeowners policies and potential for rate increases. Can you talk about any new updates in Florida on regulatory issues coming up or any changes to underwriting standards?

I don’t think there is any things of unusual or different occurring because of Sandy to that effect. I think the stuff you’re mentioning is occurring because I think New York, New Jersey and Connecticut are getting used to what happens in the case of a hurricane or I mean, I know that they aren’t calling it hurricane, they are calling it super storm, but it’s a wave of water -- a huge wave of water washing ashore. I think down here we went through those soul-searching days probably in the four or five season when we were hit by eight hurricanes over two years.

Our next question comes from the line of Casey Alexander with Gilford Securities.

First of all, congratulations on your inclusion to the New York stock exchange, I think that’s a great milestone for you.

Thank you.

First of all, can you give me some color on the rate increase, assuming it’s approved when will it start to take effect and strategically how you position this, is this a strategic maneuver versus the most recent takeouts or could you just give me some colors to strategically how you’re fitting this into the program.

Okay. So first of all, the question is very easy to answer. Just currently stated to go into effect on February 1, but we haven’t got the final paper work yet and that date could slip back further. But right now, it’s slated to be February 1 of next year obviously. As far as the strategy and thinking, clearly, we are a regulated insurance subsidiary and we did the rate filing, actually we decide what number should be appropriate as the range of it. I think we always try to stay at the low end of the range, because generally speaking, we like our policyholder base and we’re trying in this troubled time to ensure that rate increases tend to be hopefully as small as possible because we will not keep our customer base steady. And I think we’ve talked about them in previous calls.

In terms of your retention of the new policies that you’ve just taken down. Do you communicate any of that strategy of your rate increase versus the Citizens rate increase as a lever to try to get people to stay with you or what other methods are you using to try to make sure that as many of those policies stick with you as possible?

Casey, look, this is our ninth takeout, so we’ve done this eight times before, so we do have talking points and stuff that we talk to policyholders for. But one other things that we are making sure, we are very balanced about is that we don’t over promise and under deliver. So we tell them the facts as they are and where we don’t have an exact number, we tell them we don’t have an exact number, we tell them we don’t have an exact number. So we try to make sure that the way we approach this is that the customers we get, are the people who want to be with us and have basically made an informed decision to come with Homeowners Choice. So that’s rather sort of -- make sure we get this right up front as opposed to have - how shall I put this, angst by the policyholder later on. Now we try to do that to the best of our abilities, there will always be a few people who will unfortunately be unhappy later on, et cetera, but we try to minimize that by trying to be as forthright and balanced in our communications as possible.

Okay. It sounds like that’s fair. So secondly, this new stack of policies and your new size, how do you expect that to affect your reinsurance negotiations for next year? I’m sure you already have an eye on that because that’s one of the biggest variables that you’re in. And well, I think, I already know the answer, you know how does a super storm such as Sandy factor into that as well?

By the way, Casey, just you know the reason I am talking about the assumption et cetera is obviously because of Scott’s former involvement with Citizens. We have clearly made sure that Scott was not involved in any of the assumptions, et cetera. Hence all of the details on this unfortunately rest with me. Scott is going to take over the operations of the policies once, now that we assume them, but all this information about taking them and getting them and how we pick them was basically my remit because we have to give Scott away from that. Yes, in terms of reinsurance, et cetera, it will be the usual annual dance, we feel that reinsurance rates should go down, because we’ve gone six hurricane seasons without a claim so far. So one would think that there should be a reduced rate, I’m sure there are reinsurers who would explain to us how dangerous the world is and look at the losses and that’s where the rate has to go up and we will have our usual negotiated answer somewhere in between.

Okay. This is a question for Scott, if we ex-out these storm losses that you had, that fell into your loss and loss adjustment expense of the quarter, you actually if you take those unusual losses out, you actually had a very, very low run rate of losses versus your gross premiums earned. Is that a reasonable sort of base run rate or things actually especially good this quarter because even when you factor in the unusual losses that you had, your loss and loss adjustment expenses were not a very high percentage of your gross premiums earned?

That’s correct. And I think that’s a reflection of our additional efforts and activities in properly dealing with these type of activities and especially those are associated with loss adjustment expense and our efforts to keep that within a reasonable expenditure which will help the entire ratio overall.

Okay. There is one entry here on the income statement that I don’t quite - I can’t quite grab my arms around and that is - last quarter the company had $300,000 of net investment income and this quarter was $47,000 and yet when I looked at the fixed income portion of investments on the balance sheet, it’s pretty much the same. So I don’t quite understand how the net investment income could have dropped quite that much?

Casey, let me answer that as the manager of investment portfolio. Some of the stuff you’re seeing in that line item if I’m correct and I am looking at Richard who is nodding his head hopefully. Is that when we bought all the real estate in the south end of Johns Pass, obviously, having just acquired it’s basically still losing money. And so those losses are offsetting the bond portfolio income shall we say. Well, let’s call that number is moving down. Yes.

All right. Well, that answers for me, and actually you land me right into my next question.

Casey, hold up a second.

Without debt, without the property investment income would have been almost flat with prior year.

Okay, got it. Flat with prior year, okay. So that would lead to my next question which is, can you give us some color on how things are progressing with the isolated real estate opportunities that you’ve taken advantage off, the Marina Johns Pass and, if worthwhile, the headquarters building?

Okay. Very simple answer. Head quarters building which is the oldest piece of property is cash flowing positively and has been for quite a while at this point. If you remember what you thought it was negative cash flow, it started turning around and now is positive. The Marina is basically breakeven, slightly positive at this point and that’s been 18 months or so and then the Johns Pass properties, which we just acquired six months ago they haven’t got to that point yet, because they are the ones losing money. Having said that, as you also recall, all of these properties are less about cash flow income, as they are more about capital appreciation. I mean we carry them on our books at quite this cost, but the real value is somewhere down the road, you are going to have a capital appreciation out of them somewhere.

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

With the assumption of the 60,000 policies, how many polices do you currently have in force?

I believe the number right now is 160,000. Now it will drop from here because in these assumptions there is still an opportunity for people to catch on the upside on that kind of stuff. But at this moment in time, I would say it’s 160,000.

Okay. And with that current base of customers, which is over that 160,000 more, is 2013 year were you’re going to - I know you probably already started looking at it, but is that going to be the year where maybe you start expanding into different verticals to leverage that customer base that you currently have?

I think, Howard, one of these days we will do that, right? Whether it’s next year or whether it is 2014, I don’t know, but obviously the size is enabling that to become easier and easier every day.

Our next question comes from the line of Gregory Macosko with Lord, Abbett.

Yes, could you talk to me just about the turn over that you’ve had over the, maybe the last year or so in terms of the - or might be as policies are turning over of the Citizens policy scheme and give us any color on that.

You mean like in terms for retention, that kind of thing?

Right, exactly that’s right, retention.

Yes okay, roughly speaking now all this has got new assumption kind of going forward, but looking back, if you sort of look over the last year you‘ve had two book-to-business, you had the Homeowners ATI book and then you had obviously the book we just acquired from HomeWise. And roughly speaking, the ATI book had a retention rate in the high 80’s. The HomeWise book was probably I’d say in the low 70’s, maybe even the high 60’s. That’s usually what we see, typically in the first round of renewals, specifically how the business tends to work is, you assume a group of policies, you have some concern about losing some of those customers at the first renewal, but usually if the stay with you past the renewal, they tend to be pretty loyal, that’s just been our historical track record. Do we still lose customers? Yes we do. Because there will always be people who are selling their homes or changing agents or company or the other but generally speaking people tend to stick with us after that first renewal cycle.

But you’re suggesting that what might apply to the new 60,000 would be something along the line of 85%, am I understanding that correctly?

No, I am not implying - no, I’m implying that the Citizens policy the 60,000 that we assumed, right? They will suffer a higher accretion rate; it has a higher - a lower retention rate than our existing book for the upcoming year because as we renew them from the assumed policies onto ACI paper, there will be a higher drop off.

And of course there will be a higher drop off and adjustment as these policies are assumed. But as the book or the majority of the book does renew the policies, it does tend to be far more stable and have less turn over in the years, subsequent to that.

Is the objective of the lower increase relative to the Citizens increase, is the idea to reduce that reduction or increase that retention of those 60,000?

Quite partly that - but partly, we also did worry about the other 100,000 people who are already customers. One of the things you want to do in terms of retention, if you don’t want those 100,000 people shopping around either.

Yes. And just compared to years passed, is that differential between - how does that differential compare to earlier or previous increases by Citizens?

I think Citizens is in the glide path, and I think this will be third year where they’ve had a basically about a 10% increase every year. In the same time, clearly, we are going for lower rate increase.

Okay, so you - but this seems like perhaps a lesser than the current one planned. Am I right on that or?

Assuming that we are taking a lower rate increase?

Perhaps lower than you have in years past?

Yes, we are, but equally - well, yeah, don’t forget we are regulated and the numbers basically suggest that we should take a lower increase, because we are clearly having a better performance outcome than Citizens is.

Okay. And the point being that, that’s part of the filing and important to being approved?

Yes, exactly. I mean we are a regulated company and the OIR does a very good job, both are making sure that we charge adequate rates, but not excessively high rates either.

Right. I saw in the balance sheet, the cash has risen quite a bit. Is that a normal cash level that you expect to keep?

No, part of the - there is two aspects to the cash side. One is, cash does grow because we tend to keep 50% of unearned premiums because we paid the premiums upfront. So on the balance sheet basis, the assets do growth. The reason why it’s such a high number of - high portion of it is in cash is because of the low interest environment we find ourselves in. It doesn’t necessarily make sense as to invest cash to make 1% or 1.5% on the ten year treasury. We haven’t take that chance; we tend to leave it in cash.

All right. Should we expect the cash to build a bit going forward then?

Yeah, I mean the asset will build themselves, just what portion of that are in cash versus let’s say bonds is really a function as much as the interest environment that’s out there. If we could suddenly be able to buy ten year treasury with a 5% yield, I think you’d find a lot of that cash that turn into ten year treasuries?

Okay. And then finally, with regard to the other investments, that includes a real estate on the balance sheet?

Yes, it does.

[Operator Instructions] Our next question comes from the line Ron Bobman with Capital Return.

I had a couple of - I know the first one is a simple question, I’m sorry I don’t know it. On the 60,000 takeout from Citizens that’s effective today, you receive the unearned premium that Citizens was holding and you are on risk today, sort of coincident with that, is that how it works?

Yes, that is correct.

And then as those policies come to maturity, tomorrow, the next day, a month from now et cetera, you present a new Homeowners Choice policy, and obviously a corresponding rate, a premium for that, how does that your premium level basically, and I know we are talking about average this year or sort of generality, but how does you rate level compare to the rate level that these homeowners are sort of coming off of in effect or had in force most recently by way of Citizens?

Well, Ron, that last part of the question gets to be very difficult to answer to, but as far as, when it occurred over the - in the old days it was much easier to answer what has happened over the last 12 to 18 months. Citizens has started changing its policy function, so it’s not only just a question of price, you also are into questions of coverage as to what you provide and what they provide et cetera. I will give you a couple of examples. We provide liability up to $300,000, Citizens only provide to $100,000; we cover full stages, Citizens does not; and there is a few other coverages like that that we get into these questions. So you can’t really - even if you get premiums, then only apples-to-apples comparisons. These are the kinds of things we try to educate the policy holders who are assuming as to what the differences are but….

I am sorry. Are the nominal dollars a sticker shock, so they say I was paying X and now it’s just an enormous increase, I know it’s not apples-to-apples but is there a sticker shock going into rate case.

No we try to avoid this sticker shock element, but the part that we can’t do is give you a - you know your premium was this with Citizen and its Y with us right? Because amongst other things we’ve got that rate increase going through as well, so I’d tell you, today’s prices or the rate increase price, you see the number of moving parts yes?

Right.

And that compared to Citizens today’s price or Citizens premium that would be there at renewal yes?

There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Thank you very much. Thank you for attending the call today. It’s been again an exciting quarter. We appreciate everybody calling in. Thank you.

Thank you.

Thank you.

Thank you.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.