Good morning, and welcome to the Heritage Insurance Holdings Fourth Quarter 2024 Earnings Conference Call. Please note today's event is being recorded. I would now like to turn the conference over to Kirk Lusk, Chief Financial Officer for the company. Please go ahead, sir. Good morning, and thank you 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. 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 upon management's current expectations and subject to uncertainty changes in circumstances. We, in our earnings press release and our SEC filings, detail 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 the risks that could cause our results to differ materially from those described in the forward-looking statements, please refer to our annual report on Form 10-Ks, earnings release, and other SEC filings. Our comments today will also include non-GAAP financial measures. The reconciliations of and other information regarding these measures can be found in our press release. With me on the call today is Ernie Garateix, our Chief Executive Officer. I will now turn the call over to Ernie.

Thank you, Kirk. Good morning, everyone, and thank you for joining us today. Over the course of 2024, we experienced numerous destructive hurricanes that impacted communities across the southeastern United States. And in 2025, we've seen devastating wildfires affecting residents of California, and now New York. Our thoughts continue to be with those impacted by these devastating catastrophes that have left millions with significant damage and loss. In this time of crisis, our employees have worked tirelessly to provide support for our policyholders as they recover from these catastrophic events. I am proud and appreciate our talented and dedicated employees and the resilience that our company has demonstrated after these catastrophic events. The company is performing well, which is not only evident in our support of our customers and communities but also our financial performance. Our fourth-quarter results clearly demonstrate the results of our strategic efforts over the last several years to attain rate adequacy, manage exposures, and enhance our underwriting discipline. Our ability to generate profits in each of the last two quarters where we incurred significant losses associated with three hurricanes demonstrates the transformation that has occurred at Heritage. For the full year 2024, we achieved net income of $61.5 million or $2.01 per share, representing a strong increase from the full year 2023 net income of $45.3 million or $1.73 per share. Additionally, we grew our tangible book value per share by 30% to $9.50 at December 31, 2024, as compared to year-end 2023, while achieving an ROE of 24.1%. These are notable results given that we were impacted by $105 million pretax from 2024 hurricanes. Our ability to not only maintain our profitability but also deliver healthy earnings and returns in the face of significant catastrophic losses is a result of a multiyear effort where we…

To conclude, I would like to reiterate our dedication to navigating the complexities of our market with a strategic focus that prioritizes long-term profitability and shareholder value driven by our dedicated workforce. Kirk, I will now turn the call over to you.

Thank you, Ernie, and good morning, everyone. Starting with our financial highlights, we reported net income of $20.3 million or $0.66 per diluted share in the fourth quarter compared to $30.9 million or $1.15 per diluted share in the prior year quarter. The decrease in net income was primarily driven by higher catastrophe losses in the quarter. Additionally, a higher effective tax rate caused the provision for income tax in the current year quarter to be proportionally higher compared to the prior year quarter. Our fourth-quarter results continue to demonstrate our successful efforts to improve our portfolio as we remain profitable despite having incurred $57 million pretax of catastrophe losses, which includes reinstatement premiums. One objective of our strategic initiatives has been to remain profitable in a quarter with a significant catastrophe. We have now delivered on that goal two quarters in a row, which is a real validation of the successful execution of our plan and provides optimism for the earnings power of the company moving forward. Gross premiums earned rose to $360.5 million, up 6.1% from $339.6 million in the prior year quarter, reflecting our strategic focus on rate adequacy and organic growth in our commercial residential and surplus lines business. Net premiums earned increased to $199.3 million, up 12.2% from $177.7 million in the prior year quarter, reflecting growth in gross premiums, while ceded premiums were relatively flat. Our strategic focus on expanding profitable products and markets includes the organic growth of our commercial residential business for which we selectively increased the premiums in force by 13% compared to the fourth quarter of 2023 while total insured value only increased by 8.7%. The commercial residential business tends to have a lower attritional loss ratio while generating materially higher average premiums. This segment now accounts for 20% of…

We will now begin the question and answer session. At any time your question has been addressed and you would like to withdraw your question, the first question comes from Karol Chmiel with Citizens. Please go ahead.

Yeah. Hi. Good morning. I just have a question regarding your LA Fire claims. Can you describe the profile of the claims? Are they mostly straightforward total loss claims, or are there more complex smoke damage claims? And then also if you can maybe give a mix of the percentage of claims out of the EIN fire versus the Palisades fire.

So for total claims, we have fifteen that are total, and then the remaining twenty or so have some kind of smoke damage to that event. And most of those claims we have, a couple in the Eton Fire and then the remaining being in Mount Sage.

Okay. Great. Thank you. And then just one follow-up. Regarding the prior period development for the quarter. Can you just provide more detail as to that?

Yeah. The bulk of that has to do with, you know, Hurricane Irma, where we're actually getting towards the tail out of it and, you know, have, you know, what really wound that down and have a few claims remain.

Got it. Thank you very much.

Alright. Thank you.

The next question comes from Maxwell Fritscher with Truist. Please go ahead.

Hey. Good morning. I'm on for Mark Hughes. As you continue to achieve rate adequacy in most of your markets, in the admitted market, how are you looking at growth in E and S? Do you continue to see the same momentum there as previously?

So we do, but I think with the E and S, we're using that in various distinct markets. That gives us the ability to adapt to those market dynamics state by state. So, obviously, we look at what's going on in those markets, the regulatory environment, the ability to get ready, the ability to change coverages. I think we look at each of those markets and the ability to make a decision whether the automated product or the E and S product is the best fit for that market.

And on top of that, I mean, all the business we write in California is E and S, and really that's been the bulk of the growth in the E and S product.

Got it. Thank you. And then you had noted how you plan to reopen profitable territories. Does this just include Florida, or which geographies are you finding most attractive at this point?

No. This is including our entire footprint northeast, southeast, you know, so it's everywhere.

Got it. Thank you.

Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Ernie Garateix, CEO, for any closing remarks.

Yeah. We would like to thank everybody for joining the call today and wish everyone a great day.

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