Good morning, and thanks 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 on management's current expectations and are subject to uncertainty and changes in circumstances. In our earnings press release and in our SEC filings, we detailed 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 risks that could cause the 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. With us on the call today are Bruce Lucas, our Chairman and Chief Executive Officer; and Kirk Lusk, our Chief Financial Officer. I will now turn the call over to Bruce.

Thank you, Arash. I would like to welcome all of you to our fourth quarter 2019 earnings call. Before we begin the call, I'd like to thank all of our employees for their dedication to our company. The fourth quarter was another very strong quarter in all fronts including solid organic growth and underwriting margins and another consecutive quarter of favorable prior-year reserve development. Gross premiums written grew 6.2% year-over-year to $235.4 million including 9.4% growth outside of Florida and acceleration from 7.9% in the third quarter of 2019. I believe, organic growth will continue to be strong for the foreseeable future as we benefit from our independent agency relationships, our auto carrier partnerships and a favorable rate environment. Our higher growth rate outside Florida reflects our continued shift to more stable and diversified markets. Heritage is a superregional insurer that is headquartered in Florida, but that does not mean we are a Florida carrier or heavily concentrated in Florida. It is easy to paint all Florida based carriers with a broad brush, but we look nothing like Florida companies that are extremely concentrated in Florida and in Florida’s Tri-County. At year-end 2019, approximately 30% of our consolidated TIV is in Florida with only 6.4% of consolidated TIV in the border of Tri-County region and I'm unaware of any pure carrier that has this advantage. I’ve received a number of inquiries about macro conditions in the Florida market and where we sit against this backdrop. First, the primary market in Florida is hardening at the fastest pace have ever seen. Over the years, I've watched countless competitors suppress pricing to grow market share and many of these same companies have been understating loss reserves to support the growth. That certainly makes them look good in the short-term, but it is…

Thank you, Bruce. Good morning. Net income for the quarter was $12.8 million or $0.44 per diluted share and it was up from $3.9 million or $0.15 per diluted share reported during the fourth quarter of 2018. As Bruce mentioned, we've had strong organic growth in the fourth quarter of 2019 and for the full year of 2019 gross written premiums increased by $14.6 million or 1.6% year-over-year. The growth includes 8.1% growth outside Florida, partially offset by 3.9% decrease in Florida from planned de-risking in the second and third quarters. We indicated during the third quarter call that we expect the amount of de-risking to diminish in future quarters. This can be seen by the growth in all states experienced during the fourth quarter and with $13.7 million of our full year growth of $14.6 million being achieved in the fourth quarter. We continue to prudently evaluate our exposures in all geographies and take the necessary pricing and underwriting actions to ensure long-term rate adequacy and strong underwriting margins. We continue to get rate increases in excess of expected claims trend. The ceded premium ratio was down from the fourth quarter of 2018 by 5.3 points and down 2.5 points from the third quarter of 2019. The decrease reflects reinsurance synergies and the elimination of the gross quarter share of our Northeast business, which was partially offset by the purchase of more cat XOL to replace gross quota share. 2019 Q4 net earned premiums were up 2.7% from the fourth quarter of 2018 reflecting the changes just mentioned. Losses and LAE were up $7.1 million or 3% from the prior year quarter. The net loss ratio was 51% for the fourth quarter of 2019 compared to 50.3% for the fourth quarter of 2018. The increase relates to lower income…

Before we begin the question-and-answer session, I'd like to turn the conference back over to Bruce Lucas for closing comments.

Thank you. Before we move to the Q&A, I'd like to comment on recent market activity. Over the past week, global markets have experienced significant declines based on coronavirus fears. Whether the fear of SARS, coronavirus or other catalyst panic tends to wash over markets on a macro level and everything moves lower. This is certainly been the case for Heritage and other stocks in our sector. Once the panic subsides and it always does, investor focus returns to fundamentals. One excellent reason to own our stock in the long-term is that our fundamentals are not impacted by events like coronavirus. We are not in the travel and hospitality sectors or other sectors that feel an impact from these types of events. We are a homeowners insurance company and if you own a home, you're going to buy homeowners insurance regardless of macro events like coronavirus. I'm confident that when the fear trade subsides, fundamentals will be given fair value by investors. In the interim, we intend to use this opportunity to repurchase our shares at these levels because it will generate an outsize return for our shareholders. Kirk and I are now available to take analyst questions.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Matt Carletti of JMP. Please go ahead.

Hey, thanks. Good morning.

Good morning.

Hey, Bruce I was hoping you could update us a little bit just on, you have three partnerships; Liberty Mutual Safeco, National General and GEICO. Just kind of where each of those standing and how they're progressing?

Yes, that's a great question. And I do get that question a lot from various shareholders and analysts. And what I can tell you is, I can't comment on specifics per my agreement with all three of those partners. So I can't get into production levels or states where we're partnering in. I can tell you that these relationships are material. They are a large driver of our growth, especially ex-Florida. We do value these relationships. We've worked hard to earn them. And other than that I really can't comment on specifics.

Okay. One other question for you, just brought broadly on capital. Can you just talk a little bit about you’re returning to growth, so maybe what sort of growth you think you could support on your current capital base? And then alongside that to the extent there's excess capital, you have been buying back stock, but how would you think about M&A in this environment? Whether that be kind of a whole companies or if books become available or otherwise?

Yes. Our capital position, another great question. Our capital position is pretty strong. We've got the lowest underwriting leverage of any of the so-called Florida peer companies. We're about on a net seat basis. We're about one times GAAP equity, which is by far the lowest. So we've got a lot of room in the capital stack for growth. We do not think that we need any capital for the foreseeable future to sustain that growth. And our target internally is to reach upper single digits, low-double digits growth at this point in time. The sales numbers are just massively accelerating. We saw that trend in third quarter. It went up 300% or so, fourth quarter. It's up again in the first quarter. We'd like where we stand in terms of the growth and we know that we have enough capital to sustain that growth. With respect to M&A, which was the second part of your question?

Yes.

I never say never, I mean, we've definitely led the Florida market in terms of our M&A activity and we've done several of them Zephyr, Narragansett Bay, Sawgrass, Sunshine State and others. I can say this with respect to Florida, we are going to be very conservative and we worked incredibly hard over the last four years to change the mix of our portfolio to be more diversified and less dependent on the volatility in the tri-county region in Florida market in total. That doesn't mean that we have no room for growth in Florida. In fact, we are anticipating growth in Florida in 2020 is just that it needs to be the right type of growth. And I've seen several opportunities recently companies that are looking to sell or divest or portfolios. I can tell you, we haven't seen one acquisition prospect in the Florida market that looked appealing to us. So we'll keep our powder dry, we'll be opportunistic of the right transaction comes our way, until then we're going to keep going with the organic growth because it's accelerating and it's far cheaper versus an acquisition.

All right. Thanks. Appreciate the answers and best of luck in 2020.

Thank you, Matt.

Our next question comes from Mark Hughes of SunTrust. Please go ahead.

Yes. Thank you, good morning.

Good morning, Mark.

What do you think about the loss ratio in 2020? Could you give us some sense of; one, what you feel like a good underlying loss ratio is? Obviously it's going to be dependent on weather, et cetera, but kind of where should this business be operating? And then how is that influenced by the Florida – outside of Florida mix, is the loss ratio appreciably different one or the other?

Okay. Yes, I mean as far as like the overall loss ratio, I think in the low-50s is kind of where we look at where we want to operate. When you look at 2019, even though there really wasn't a lot of hurricane activity, the other weather activity we had on the full year basis was much more severe than we've experienced in the last several years. We have an estimate of what we think the quote the non-hurricane cat should be in any given year and 2019 definitely exceeded all those expectations. So it actually even kind of made-up for the difference of not having a cat this year. So really when we look at it going forward I think that's probably where we should be taking it.

And I'll comment due to ex-Florida loss ratios tend to run higher and that's because reinsurance costs are lower. And so I've had questions in the past where people saying, no, your loss ratio or gross reserves are up. Yes, well of course they are. Our book is expanding outside of Florida and the loss ratios there tend to be higher because the cap costs are so much lower.

Understood. How about you – I think you talked about the percentage of litigated non-hurricane claims in tri-county down. How about when you look at your litigated claims count overall? What do you see there?

It's also down. You just get less litigation frequency when you move away from the Tri-County. So where do you tend to see it, is this throughout the state of Florida and then ex-Florida, you just don't see it. It's the exception to have a lawsuit outside of Florida, usually those get resolved pretty easily. It doesn't mean we don't have a handful of them we do, but nothing that even remotely approaches the stratospheric numbers you see in Florida, which is why we like to continue diversification trend to our 15 other states of operation.

And then your latest thought on the AOB reform, how meaningful that is as you sit here today?

Yes, we've actually seen a big reduction. We're down over 70% year-over-year on AOBs. That is pretty material, some of that I'm sure is driven from the fact that we've had an increase in non-Florida business and a reduction in a lot of areas within Florida, particularly the Tri-County where you see a lot of these AOBs, but even assuming those factors into the equation, we have seen a very, very large reduction in AOBs coming in the front door. That is really, really good for us and the rest of the market. The main reason for that mark is, when you have a direct lawsuit with an insured on a loss, it's one lawsuit. When you have an AOB, usually there's four or five, six, sometimes 10 AOBs on one particular claim and so you end up with four or five, six, 10 lawsuits and so having a big reduction in AOBs on the front-end means that you're going to have a big reduction in the litigation expenses and litigation activity on the tail end.

Thank you.

Thank you, Mark.

[Operator Instructions] And our next question will come from Paul Newsome of Piper Sandler, please go ahead.

Good morning. Thanks for the call. Could you touch a little bit upon what you think of claim inflation on an underlying basis is outside of Florida. Often you see lots of concern in the market in general about things like social inflation and other impacts that seem to be hitting everyone.

Yes, that's a really interesting question. We don't really see it. I mean, it's there, there is insurance fraud everywhere, you can't escape it, but we do not see it hitting our numbers in a big enough way where we can actually quantify it. It tends to be a one-off issue, whereas in Florida it's just more commonplace to have, AOBs and claim inflations and you get the so called storm chasers that go and knock on your door and give you a free roof and that's a big scam heading central Florida right now, by the way. We don't really see it by comparison, it pales to the extent that it's so small, but we really can't even quantify it. But I'd say within Florida it's probably responsible for tens and tens of millions of dollars of losses on an annual basis.

And then maybe probably more of a review, can you walk us through how we should think about the impacts of rate tooling through with the possible offset of reinsurance costs? I would assume, please correct me if I'm wrong, you've got a fair amount of rate coming through as we speak right now, that would affect second quarter? And then maybe there's a change because the reinsurance and then there's an offset, how is that, – I sort of envisioned sort of sine wave here in terms of impact there, is that the right way to think about it or how should we think about it from an income statement perspective as opposed to actual rate case at the moment?

Right. Yes, you are correct in that we do have some pretty decent size rate increases coming through the system, over the years and you could go back and look what year it is, we have always tried to grab double-digit rate, especially starting kind of 2015 to 2016, we saw the problems the market is choking on today, we saw them then and we've been taking 14% plus rate increases virtually every single year across the line. And we've been hitting Tri-County for the last three years with 25% rate increases across the board. And so we do have a lot of rate coming through, that means our rate need is now lower than what it has been in the past as the rate has floated through the book and the portfolio has shifted. That brings us then to what happens with reinsurance pricing now, we don't know where pricing is going to end up. It was not some doomsday event for us in last year. We actually saved 10 million last year over the prior year and bought a bigger tower. Not saying it’s going to happen this year, but it is a hard market out there, but our diversification is a big factor for us and hedging against those rate increases and to the extent we get at the process works as follows, we lock-in our pricing; we then file for a limited reinsurance rate filing by statute in Florida; the regulators have 45 days to get that rate approved and then it's about 45 days thereafter, we're charging the higher rate to our customers on a per policy basis. So the lag roughly is about three months before you start recouping those additional dollars, but the other rate increases that we have in the system are still playing their way through and so that helps to blur the impact during that three month gap.

Great. Thank you very much.

Thank you, Paul.

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

I want to thank everyone for joining our fourth quarter 2019 earnings call.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.