Thank you for joining us today.

The new production kind of starting to grow again in new states, is that going to have a meaningful impact on the loss pick? Presumably that business is being written at a higher combined ratio. How should we think about that?

Yeah, no, we're actually sticking to our underwriting guidelines and margins. I mean, I don't think it's going to have much detrimental impact to the loss ratios.

Yeah, okay. The cash from operations, the 166.5, if there's some quarterly dynamic that I'm not familiar with, let me know, but that seems like a really strong number. What's driving that?

Basically, you know, a lot of it is just the net income that we've had, you know, over the last year, that type of stuff. I mean, so that's one of the big factors there.

Yeah. The 166.5 is 2Q alone. Is that correct, or is that first half? It's 2Q. Okay. Seems a lot stronger than your net income. Yeah. But just good financials or is there some working cap or is something else going on in the cash flow?

Well, you know, we're working on our balance sheet, you know, have over the last, you know, several years as far as, you know, what our expenses, what our debt is, you know, the investment income. So it's just a myriad of things we've been kind of working on on the overall, you know, balance sheet also, which is starting to translate a little bit more into, you know, free cash flows.

Yeah, and then the $23.4 million, the favorable development, could you talk about that? Was that 2025 stuff, even older? What seems like a nice number?

Yeah, it spread throughout a number of years. It also is spread through, you know, it's predominantly with HPCIC, but also Narragansett Bay. and really what it reflects, it's several positive trends that basically have come evident even more over the last several quarters. Key drivers are the stabilization of frequency, severity, also being within a manageable range. I would say the late reported claims have leveled off and have really lowered than what they have historically been. and that's just related to us closing claims lower than what we had expected. So it's accumulation and what we did is we kind of held on to those for a while just to make sure that those trends were consistent and were stabilizing before we realized the development on it.

Okay. I might ask another one. The commercial residential You talked about prices under pressure there. It's more competitive. Where do you think that stands in the cycle here? How close are we to the bottom? Is there any sign that those are stabilizing at all? How do you think about that?

As we look at that, Mark, we know there's more competition out there. We're sticking to our underwriting guidelines. We know there's new entrants into the market. There have been a number of accounts, just to be frank, that we've walked away from because it's priced inadequate, but we've seen that leveling off. The good news is commercial has also expanded into other areas, including Hawaii, New York, and New Jersey have increased for us as well. So that's kind of lessening it in Florida. And again, we will be competitive, but we'll be responsibly competitive. Okay.

So maybe some signs of leveling off in Florida?

And, Mark, also, by the way, one thing is that a cash flow operation is for the first six months.

For the six months, okay. For six months, yes. So it's still quite a strong thing. Yes. Okay. Thank you very much.

Thank you. Thank you. Thanks, Mark.

The next question comes from Carol Jamil of Citizens. Please go ahead.

Hi, yeah, Mark just went into the prior period development that I was going to ask about, so that was great. I'll just follow up with just one other question. It's regarding your debt level, the fact that you're paying it off. Is it something you want to continue to pay off throughout the year and into next year? No, not necessarily.

You were pretty happy with the rate we had there. And what we did is we had, you know, a couple other, you know, smaller loans. For example, we had a mortgage on a building, you know, last year that we sold. This year we actually did have a little bit of loan at Federal Home Loan Bank in Des Moines for Zephyr, which we paid off simply from the standpoint the rate on that was higher than what we were getting from a return standpoint. So we'll prudently look at paying down this stuff. But right now, we're pretty happy with the debt facility. And so therefore, we'll probably kind of maintain that. We also, at this point, still have $75 million left as a deferred term loan on that facility in the event we wanted to use it.

OK. And then just the last one here, since I'm on the call already. You said the loss ratios should be stable. but if you were just to break it apart into the components, accident year versus prior period, are you thinking that on a net basis it will be stable but accident year might rise over time with the lower rates in Florida but then your prior period development would be favorable and as a net it would just be more of a flat loss ratio?

Yeah, I'm saying, you know, flat excluding the development. You know, we do think that we're, you know, definitely adequately reserved. But again, it's like, you know, that is more of a one-time item. So therefore, you know, backing that out would be the stabilization of the loss ratio.

Gotcha. Thank you very much.

Thank you, Kirk.

The next question comes from Kim Bianchi with Piper Sandler. Please go ahead.

Hi, good morning. This is Cameron for Paul. My first question is on commercial residential. This grew 4.9%, but commercial premiums and force fell 12.7%. I was just wondering if you could unpack the gap between policy count growth and premium contraction. Is this more pure rate or pricing pressure, or is it also a mixed shift towards maybe smaller accounts? Thanks.

Yeah, it is competitive pressure on those accounts. You know, what we had to do is, you know, we are walking away from, you know, some accounts simply due to the extent of the rate decreases. We are able to write some even with the rate decreases. New Business, you know, the policy count is up because, you know, we are writing some smaller commercial accounts from a new business perspective. So, therefore, that is increasing our policy count. And again, that has a lot to do with where we see the pricing favorability on those accounts. We also have, you know, our dedicated commercial agents, which do an absolutely great job of evaluating the risks. And so, therefore, from an underwriting standpoint, and from a pricing standpoint, you know, we're very comfortable writing, you know, that new business that we've been getting.

Awesome. Got it. And then just one more from me. You started writing in Texas, you mentioned. What's the underwriting appetite there and how quickly could we see that scale relative to maybe like the Florida commercial book? Yeah. Yeah.

Yes, so we're really excited about Texas. Just launched it in July, so early stages, but very well receptive. We've got a couple policies already and meeting with several agents out there, so there is, you know, appetite for us, but as we said, it'll be small contribution this year, and we expect it to grow over the next two to three years.

Thank you. Yep, appreciate 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 for any final remarks.

We'd like to thank everybody for joining the call and especially thank our employees for all their hard work.

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