Good morning, and welcome to Heritage Insurance Holdings Second Quarter 2015 Financial Results Conference Call. My name is Alison and I will be the operator today. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator instructions]. As a reminder, this event is being recorded. The matters discussed on this call that are forward-looking statements are based on current management expectations involving risks and uncertainties that may result in these expectations not being realized. Actual events, outcomes, and results may differ materially from what is expressed or forecasted in forward-looking statements made on this call due to numerous risks and uncertainties, including but not limited to the risks and uncertainties described in this conference call or press release issued yesterday and other filings made by the company with the Securities and Exchange Commission from time-to-time. Forward-looking statements made during this presentation speak only as of the date on which they are made and Heritage Insurance Holdings specifically disclaims any obligation to update or revise any forward-looking statements to reflect new information, future events, or circumstances or otherwise. Now at this time, I would now like to turn the conference over to Mr. Bruce Lucas, Chairman and Chief Executive Officer of Heritage Insurance Holdings. Please go ahead, sir.

Thank you. Good morning to everyone joining us for the call. This is Bruce Lucas, Chairman and CEO of Heritage Insurance, and with me is Steve Rohde, our CFO. I would like to welcome all of you to our second quarter earnings call. Before we begin the discussion of our quarter, I would like to take a moment to thank all of our employees for their commitment to our company. We had a great quarter in which we earned net operating income of $25.4 million. We have a strong business plan and our quarterly earnings results reflect our ability to execute on that plan and once again outperform expectations. From a financial perspective, the quarter was solid. Our gross premiums written were strong, our voluntary personal lines premium in force grew by 57% year-over-year, and our voluntary commercial residential production outpaced our expectations. While we continue to assume policies and citizens, our outcome rates have been much higher when compared to the historical take out and we believe that future takeouts in citizens will be more challenging and smaller in scale. Citizens recently filed for a rate increase which will likely make more policies eligible under our underwriting guidelines but this is too early to determine the impact this proposed rate increase will have on our policy selection process. Regardless of dynamics within Citizens, we continue to have tremendous success in growing the company as revenue by [Technical Difficulty] gross premiums written as compared to the second quarter of 2014, a 114% increase in net premiums earned as compared to the second quarter of 2014. A 30% increase in policy count compared to the second quarter of 2014. Net income of $25.4 million which is an increase of 156% compared to the second quarter of 2014. Our combined ratio was…

Thank you, Bruce, and good morning. Gross premium driven for the second quarter were $135.6 million, up 37% year-over-year, resulting from $134.8 million of direct premium driven and $0.8 million of assumed premium driven. There are few factors that impacted premiums written for the quarter. First, the opt out rate for a personal residential assumptions for the citizens in April and May were higher than we have historically seen. We've experienced recently, again February, it appeared more reflective of the current environment. This translated into an 80% opt out rate in the second quarter compared to an average of approximately 46% in 2014. A second contributing factor was our choice not to do a June take out due to the economics of how the FHCF premium is calculated. As a result of these first two factors, personal residential policies assumed in the second quarter were approximately 3,400 policies. Also playing a role was our commercial business where we choose to not swipe any commercial policies during the second quarter while receiving notification from Citizens that we had some mid-term cancellation of policies assumed during the first quarter of 2015 and the fourth quarter of 2014. The resulted in $2.3 million of underwritten premium that we returned and accounted for in our financials as negative premiums written in the second quarter. Finally, our non-renewal activity and commercial take out policy during the quarter was higher than normal due to the exposure management that we did, as well as competitive pressures in the commercial marketplace. The market has soften since we slept our commercial policies in the fourth quarter of 2014 and the first quarter of 2015. As a result we identified caution type business that were no longer attractive at ways being offered by our competitors to our long term profitability…

[Operator Instructions] Our first question comes from John Barnidge from Sandler O’Neill. Please go ahead.

I had quick question now that we’re later at in famous take out, how should we think about geography expansion for the economy, does that seem to be the next leg for growth?

I don’t know later in the ending of the takeout, all we can say is that lately the opt out ratio has been normal than normal. Don’t know if that’s a trend that is going to continue or not. We did not do a take out in the June because we wanted to handle our insurance cost likewise but we don’t have plan for August again because we’re watching our drug mechanism under our reinsurance program. We still think that there are good opportunities we are getting good production out of the take out process and we have been focused ongoing multi-state now for about a year, we did our due diligence recently that is something that we will do more in 2016. So don’t worry about the timing, we got a lot of things to get our systems up and running on those two new states. We’re looking at filing and do more additional states and we’re looking at M&A opportunities that are outside for us. We do things probably growing portion of our especially as we enter 2016.

And a follow-up to that and one other question if I may, you mentioned M&A, how large transaction do you anticipate that you could currently handle ways, your current capitals?

I would say that pop-in current capitalize we can do a transaction that is 125 million to a 150 million.

And your -- recent acquisitions further integrates you know the vertical integration that you guys have, [Technical Difficulty] loss ratio business. I mean how much did you do like you’re paying out in profit the contractor versus the cost on an annual basis?

Our 10 operations has been improving our loss ratio by about 1.5 points loss ratio. We anticipate the BRC acquisition that will pitch in above the 2% loss ratio. And the frequent leverage BRC will obviously improve a lot and that’s just on the saving side, we also have the opportunity to reduce, we call it loss ratio [indiscernible] stay smaller and more penetration you can get further in avoiding the public adjusters and the lawyers and such [Technical Difficulty] as an example right now when our people get in the camp on the loses, the average loss is about 6000 and when someone else can get first the average loss is about 12,000. So that’s in addition to 0.5 to maybe upto 2.5 points integration with BRC.

I think that the addition of BRC is going to be meaningful, we’re adding about 50 to 60 people that are essentially on our department, it is currently service for the capital reinsurance companies now. So they really understand the business, they have policy forms. They know the importance of getting upto the scene quickly, they are license bonded they can do all abstracts of the repair work. We’re sending millions of dollars a year through our contractors alliance network and it works through those profits and we’re currently seeing upto third parties and additionally having another 30 to 60 people in the field of being to work with policy holders at the time of loss to capture that work should improve the penetration ratio that we’re getting on our claims which organic will help to lower our gross losses. So this is a home run for us on the AOB [ph] side, on the catastrophe side this is a hedge that we don’t think anyone else in the business has maybe to a certain extent but we’re able to now distract our professionals out of the field immediately [indiscernible] to do repair work etcetera, that keeps the dollar in the door it's in a good hedge on our reinsurance protection and it should help to control our catastrophe losses which would be a positive message for our reinsurance pricing our program going forward.

We have next Mark Hughes from SunTrust. Please go ahead.

This is actually [indiscernible] on for Mark, you mentioned your [indiscernible] you mentioned that you’re not going to take data in July in or August, just give us [Technical Difficulty].

We’re actually are doing one in July, this is in process right now we opted out, this is in last two weeks. We had selected 18,000 policies and at this point, 8000 policies remain that had not yet opted out so we still have two weeks on that and approve for September take out we’re upto 40,000 policies and we’re not subsequent process on that. We do anticipate selecting 40,000 policies. Again we don’t -- we are just going to be on those--

Susan, we’re not really sure what the opt out rates are going to be like Florida has moved on smaller scale to take up for smaller population sizes and so we don’t know that’s sort of fraction policies that we happen to take it's one and [indiscernible] future.

And then particular one on competition in commercial.

Yes so commercial residential, take the personal side -- the rates have been little softer in Florida. What we have really seen more than anything are the access of sort carriers coming into this play and trying to take really high TIB [ph] policies. Now we have some of that business from our citizens assumption I don’t think we have a lot of that business now which is fine with us and there is a lot of additional reinsurance cost associated with those policies but the EMF carriers came in and were looking for large TIB because they are spread at risk throughout the U.S. exactly different than ours which is more for the centric, so they were able to take some of the large TIB structure at a lower premium than we were willing to go take it. So we want to keep that business at a really a combined ratio that did not make sense to us or do we want to let that business go their -- we don’t have to buy the reinsurance on it and focus really more on the core aspects of the related asset program which are profitable to us. So Ian [ph] is really working on the higher TIB is what we have noticed and I think that’s been the lion share of putting net additions.

I will add something to that. Policies came up for renewal [Technical Difficulty] we did renew and that’s between about 32,000. And then we had significant cancellations and this again was policies -- carriers mid-term and those were the really -- and had between $173,000. So going back what's remaining is kind of our bread and butter was again and what it's more in-line with our monetary policies.

Our next question comes from Matt Carletti from JMP Securities. Please go ahead.

Just wanted to ask a question following up on some of the discussion about the you decoupling it's like management and just given your -- in late July, leaves us a lot of rain particularly in Florida and I'm just curious what you guys have seen has there been in uptick claims and you could be able to address mostly with your analysts and adjusters [ph] how do you feel about the result?

Yes our loss ratio has picked up a bit, a little bit of in June as well as July, it's weather related and still a lot of water claims as well as water losses. And penetration we are about 35% of our claims are being handled by in-house people. We would like that to be higher, it's still a challenge quickly done in South Florida to get the penetration because of culture of PAAs and the layers and so forth but loss ratio is not gotten out of hand, it's just picked up a bit.

We always see that in some of our funds, it's same every [Technical Difficulty] so you always see a uptick in loss ratio to those three months. We also get a lot of claims that are reported and they are collaborated which we all cover and so we’re at that those plans and make sure that while total claims come in higher through those months a lot of those claims won't be covered so we won't cover those in personal in payroll [ph].

And you said [indiscernible] looking year-over-year as opposed to sequentially it's more normal?

Yes I think so, we’re probably couple higher than what we had earlier in the year and I guess it's not significantly higher.

The next question comes from Arash Soleimani from KBW. Please go ahead.

I got a couple of questions, so premium this quarter were 510 [ph], so it looks like they declined sequentially from last quarter is that correct?

1Q were 533 million now we’re 510 and the drop off we’re calling in commercial personal lines is basically they are same at $423 million.

So the drop in the commercial is that all within the assumed commercial?

Yes voluntary actually increased by 7 million so sales were strong in the second quarter for commercial volume. Total voluntary sold fourth quarter 2014 was $6 million, first quarter $6 million and then second quarter $7 million so it's continued strong pace following the exposure management took place in the commercial take up business getting due to the softening of prices and that’s just not willing to go down, the prices of these carriers were up.

And I guess the other question is, in terms of your sale participation is there anything to read into that in terms of needing capital for [indiscernible] something over a $100 million of M&A without raising capital. So I just wanted to get a sense of you know how necessary the capital has actually being to fund your growth?

I think there is maybe some perception out there that we’re about to do and we’re offering that was not the case [Technical Difficulty] filing is just a corporate house you can file that you put in place we have no intention of losing any securities pursuant to that registration statement anytime soon. We do not need to raise equity at this point in time, that’s just something that we had to get in place following our one year IPO anniversary. So I really would read anything into that, it's just general housekeeping that we have to do doing that registration in place.

Should we still take a commercial residential a few times growing part of your [indiscernible] and is that something that you don’t likely in the near term because of some of the admissions [ph], what's the right way to think that makes this business?

It's programming of every mind, in fact it's from outpatient our models and we’re doing pretty well in the voluntary side and we’re doing roughly two million a month in the business and we have been a little [Technical Difficulty] underwriting front up until recently be we really wanted to watch the reinsurance cost going to win seasons, it's still growing component of our company and we have got the in my opinion and I'm pretty sure this is accurate we have got the deepest commercial residential department take a floor. So we have resources there, we have the got the system rolled out, good relationship with the agents, we’re working great premium the loss ratio is there, it's just phenomenal. So it's growing part of the company and we will continue to being growing part of the company.

We have about 1000 policies that have not come up for renewal on take out policies so there might be some continued pressure there, you know what's remaining at an average group of $30,000 so again really have the large hours that they were attractive to the ENS market. So we can see a better renewal rate on that. I did some calculating they are testing for -- we will -- it's been running about 75% on the take out business again in fact we have some of these policies we basically know we were going to use. Our model had anticipated by 80% renewal rate so again the large policies are gone we would anticipate we will be close to 80% renewal on a takeout business and then Bruce mentioned close to $20 million on the voluntary side.

So should we for the third quarter a little bit by force premiums is that going to be up in the third quarter or is that will be in pressure again sequentially?

There aren't as many renewals in the take out business in the third quarter, but in July we did have since I would suggest that there will be -- I don’t think there will up or down.

I think the big move in that we had on the commercial residential that took place really in the second quarter, and we had to make the call on this huge GID brochures, obviously there is some risk on those, we have got back on reinsurance but risk reinsurance and then very, very assessable loss reinsurance and you have looked at that risk profile and said [indiscernible] certain profit margin here. You’re very comfortable with that line of business and suddenly we just have simply too low for us and we had to make the call either we handed that business, and by the reinsurance on it and going forward it's really not a great policy to have. Or we essentially let that go by the end -- as taken and that’s the decision we made most of the powers are through our portfolio but we think that was kind of think, erosion that you had so to speak that took place coming forward it's more commercial residential structures that we have and so like Steve mentioned that’s our bread and butter.

All right can you remind me what was the enforced premium for commercial residential 1Q versus 2Q?

1Q was a $110 million and 2Q is 87.3 million.

And on the reinsurance you said that 177 that includes the [indiscernible] rate.

Yes it does.

It does, okay. As you mentioned 34,700 premium ratio so is that something that -- do you guys also see the floods [ph]?

No we’re not offer any flood coverage rest so ever.

Basically the run-rate for this year? You guys are able to get on growth with respect to 347 [indiscernible] the next few quarters?

That is our desire.

And just to make sure I'm clear, the retention as you say the total retention is 35 million and how much of that is out of the theory?

Yes $15 million is statuary in terms of subsidiary and 20 million from last year capital.

And will decisions increase the overall retention for last year. I guess [Technical Difficulty] was there anything else that drove the?

We’re $200 million of substantially from one last year as well as their capital position is the only company.

This is 100 PML would that be roughly than the 35 million?

35 million was the total retention that we have on the program, when you look at both HPCICs [ph] primary retention and then the lower level risk that is shared with [indiscernible] insured.

We’re about 1.8 million in 108 -- it's about still over 125 million.

And what was the capital out ratio on commercial residential just the calendar year got?

It was about 3% - 4%.

So that sounds much lower than I guess what you had anticipated in the past, I thought before that it was 10% range so is that?

Yes it's performing extremely well. Our reported lost ratio was less than 1% and very few claims reported nothing of severity so it's much better than anticipated.

That’s why we want to make sure that we’re protecting the really good policies in some of the ones large TIVs where the premium isn't there. We just don’t want an appetizer there when there is plenty of business out there meets the current underwriting criteria that we have in place now.

So is 3% I mean the right run rate just to think about on calendar year GAAP to loss ratio on IBNR is that?

It maybe a little lower than I think, I find 6% is not unreasonable.

And do the loss ratios there change once the policies renew I mean is there a change in coverage for more specific policies renew in terms of having to provide more cover like impact that loss ratio?

Nothing significant.

And as 30% still kind of the right run-rate for the residential policies?

Yes.

And from the recent acquisition do you guys have any amortization right there to hit the expense ratio?

No we got good will on it and the earnings will support the mid-well that we towards this acquisition.

Our next question comes from Casey Alexander from Gilford Securities. Please go ahead.

Do you tend to put out an 8K on the reinsurance program, sometimes I read better than I hear?

I don’t think so, we were planning on it, it's no more close to big ones.

The reinsurance program -- did you say exactly what based upon the approved OIR models your reinsurance program is good for a one in how many year store?

Approximately 150.

And it also depends which OIR model you look at the result is probably lower if you look at MRS and it's used for public model, it could be massively higher than that. You have to ask what model are you using, the models are back with different--

We use the OIR [ph] model for modeling and [indiscernible].

Yes. And I think the lot of companies that report they you know why you see such a high return period let's just say they had a 200 plus year return period for using the floor to public model as a standard for putting that information out there but when they actually buy the reinsurance they are probably using our RMS and so the results are not even close to using the [indiscernible] model.

And if I understood it correctly we should be allocating about 44 million per quarter to seeded reinsurance premiums?

If I do the math, that’s 177 divided 4 that sounds like 44.

This concludes our question and answer session. I would now like to turn the conference back over to Mr. Bruce Lucas for any closing remarks.

I would like to thank everyone for their participation in our second quarter call.