Second quarter net income of $7.8 million or $0.30 per diluted share, up from a net loss of $87.9 million or ($3.32) per diluted share in the prior year quarter primarily driven by growth in net premiums earned, and higher investment income, which resulted in an improved net combined ratio. The net loss in the prior year quarter was due to a $90.8 million, net of tax, or $3.43 per diluted share non-cash goodwill impairment charge, resulting in no remaining goodwill on the Company’s balance sheet as of June 30, 2022.

Second quarter adjusted net income of $8.3 million or $0.32 per diluted share, up from adjusted net income of $2.9 million, or $0.11 per diluted share in the prior year quarter driven by an improvement in the net combined ratio and higher net investment income.

Gross premiums written of $396.6 million, up 8.6% from $365.3 million in the prior year quarter.

Gross premiums earned of $330.0 million, up 11.4% from $296.2 million in the prior year quarter.

Net loss ratio of 60.3%, an improvement of 3.8 points from 64.1% in the prior year quarter.

Net expense ratio of 34.8%, an improvement of 0.5 points from 35.3% in the prior year quarter.

Net combined ratio of 95.1%, an improvement of 4.3 points from 99.4% in the prior year quarter.

Continued successful exposure management with Florida personal lines policies-in-force intentionally declining by 15.8%, as compared to the prior year period.

Generate underwriting profit though rate adequacy and more selective underwriting.

Continued significant rating actions throughout the book of business resulting in an increase in average premium per policy throughout the book of 24.3% compared to the second quarter of 2022 and 6.8% from the first quarter of 2023.

Premiums-in-force of $1.3 billion were up 10.5% from the prior year quarter, while policy count is down 11.1%, resulting from continued underwriting efforts to manage exposure for personal residential business while selectively growing the Company’s commercial residential business.

Continued focus on tightening underwriting criteria while also restricting new business for policies written in over-concentrated markets or products.

Allocate capital to products and geographies that maximize long-term returns.

Strategically increased Florida commercial residential premiums-in-force by 75.5% over the prior year quarter while total insured value (“TIV”) for that product increased 35.3% and policies in force increased by only 12.7%.

Reduction of policy count for the Florida personal lines product remains a key focus and will continue until the positive impact of recent legislation to reduce abusive claims practices is realized. Policies in force for Florida personal lines business intentionally declined by 15.8% as compared to the prior year period and 3.9% from the first quarter of 2023.

This disciplined underwriting approach resulted in a policy count reduction from the prior year quarter of 11.1% in other states while generating a 10.5% increase in premiums-in-force.

Maintain a balanced and diversified portfolio.

Even with the substantial increase in commercial business, no state represents over 26.2% of the Company’s TIV.

The top four states grew TIV by an average of 2.6% while the smallest five states grew TIV by 27.3%.

As a result of diversification efforts, the top five personal lines states represented 71.6% of all TIV at second quarter 2023 compared to 72.5% of all TIV at second quarter 2022.

Florida TIV increased 2.5% related to intentional growth of the Company’s commercial residential product and the use of inflation guard which ensures appropriate replacement cost values for all business, partly offset by the decrease in Florida personal lines policies over the prior year quarter.

TIV outside of Florida represented 73.8% of the entire portfolio, compared to 74.4% as of the second quarter of 2022, driven by exposure management of personal lines business throughout the book and selective growth of Florida commercial lines business.

Provide coverage suitable to the market and return targets.

Selective expansion of Excess & Surplus lines (“E&S”) premium-in-force in California and Florida.

Introduce E&S products in South Carolina in the third quarter of 2023.

Continue to evaluate other strategic states for E&S products.

Total Revenue

Net income (loss)

Adjusted net income (loss) ^[1]

Earnings (loss) per share

Adjusted net income (loss) per share ^[1]

Book value per share

Adjusted book value per share ^[1]

Return on equity ^[2]

Adjusted return on equity ^[1][2]

Underwriting summary

Gross premiums written

Gross premiums earned

Ceded premiums earned

Net premiums earned

Ceded premium ratio

Ratios to Net Premiums Earned:

Loss ratio

Expense ratio

Combined ratio

Adjusted net income (loss), Adjusted net income (loss) per share, Adjusted book value per share, and Adjusted return on equity are non-GAAP financial measures. Information regarding these non-GAAP financial measures, including required reconciliations, is set forth below under the “Non-GAAP Financial Measures” section of this release.

Return on equity represents annualized net income for the period divided by average stockholders’ equity during the period.

Second quarter net income of $7.8 million or $0.30 per diluted share, compared to a net loss of $87.9 million or ($3.32) per diluted share in the prior year quarter. The improvement from the prior year quarter is due to growth in net premiums earned and net investment income partly offset by higher losses and operating expenses, primarily associated with the increase in gross premiums written over the prior year quarter, which resulted in a lower combined ratio than the prior year quarter. The second quarter of 2022 included a net $90.8 million, non-cash goodwill impairment charge, which amounted to a $3.43 loss per diluted share, resulting in no remaining goodwill on the balance sheet.

Adjusted net income was $8.3 million or $0.32 per diluted share, up from adjusted net income of $2.9 million or $0.11 per diluted share in the prior year quarter. Adjusted net income growth primarily stemmed a lower combined ratio from the prior year quarter as described above.

Premiums-in-force of $1.3 billion, represented a 10.5% increase from second quarter 2022 due to continued proactive underwriting actions and rate increases across the entire portfolio, despite an intentional policy count reduction of approximately 61,000 policies. Premiums-in-force were also favorably impacted by strategic growth of the Company’s commercial product and use of inflation guard across all books of business.

Gross premiums written were $396.6 million, up 8.6% from $365.3 million in the prior year quarter, reflecting a strategic and substantial increase in Florida commercial lines business and a higher average premium per policy throughout the book of business, partly offset by intentional exposure management resulting in premium reductions on business outside of Florida. Gross premiums written for Florida personal lines business increased 3.0% due to rate increases, despite a 16.6% reduction in policy count from the prior year quarter.

Gross premiums earned of $330.0 million, up 11.4% from $296.2 million in the prior year quarter, reflecting higher gross premiums written over the last twelve months driven by a higher average premium per policy and organic growth of the commercial residential business.

Net premiums earned of $176.8 million, up 11.7% from $158.3 million in the prior year quarter, reflecting higher gross premium earned outpacing the increase in ceded premiums for the quarter.

Ceded premium ratio of 46.4%, down 0.2 points from 46.6% in the prior year quarter driven by higher gross premiums earned, partly offset by the higher cost each year of the catastrophe excess of loss program, which incepts in June.

Net loss ratio of 60.3%, down 3.8 points from 64.1% in the prior year quarter, driven by higher net premiums earned, partly offset by higher net losses and LAE driven by higher attritional losses, net of lower weather losses. Net current accident year weather losses of $33.8 million, down from $38.1 million in the prior year quarter. There were no catastrophe losses in the quarter compared to catastrophe weather losses of $32.1 million in the prior year quarter. Other weather losses were $33.8 million, up from $6.0 million in the prior year quarter. The net loss ratio also benefited from favorable loss development of $2.7 million compared to unfavorable development in the second quarter of 2022 of $82,000.

Net expense ratio was 34.8% in second quarter 2023, down 0.5 points from the prior year quarter amount of 35.3%, as the benefit of higher net premiums earned over the prior year quarter more than offset higher policy acquisition costs and general and administrative costs.

Net combined ratio of 95.1%, improved 4.3 points from 99.4% in the prior year quarter, driven by lower net loss and net expense ratios as described above.

Effective tax rate was 43.0% compared to (0.6%) in the prior year quarter, driven by the impact of permanent differences in relation to the pre-tax income or loss each quarter. The effective tax rate in second quarter 2023 was impacted by a valuation allowance related to certain tax elections made by Osprey Re, the Company’s captive reinsurer domiciled in Bermuda. The Company increased its valuation allowance from first quarter 2023 by $2.5 million, adversely impacting the effective tax rate for the quarter. The effective tax rate in second quarter 2022 was impacted by the mostly non-deductible goodwill impairment charge described above.

Florida

Other States

Total

Premiums-in-force:

Florida

Other States

Total

Total Insured Value:

Florida

Other States

Total

Numerator:

Common stockholders’ equity

Denominator:

Total Shares Outstanding

Book Value Per Common Share

Adjusted Book Value Per Common Share

Fixed maturities, available-for-sale, at fair value

Equity securities, at fair value

Other investments, net

Total investments

Cash and cash equivalents

Restricted cash

Accrued investment income

Premiums receivable, net

Reinsurance recoverable on paid and unpaid claims, net

Prepaid reinsurance premiums

Income tax receivable

Deferred income tax asset, net

Deferred policy acquisition costs, net

Property and equipment, net

Right-of-use lease asset, finance

Right-of-use lease asset, operating

Intangibles, net

Other assets

Total Assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Unpaid losses and loss adjustment expenses

Unearned premiums

Reinsurance payable

Long-term debt, net

Advance premiums

Accrued compensation

Lease liability, finance

Lease liability, operating

Accounts payable and other liabilities

Total Liabilities

Stockholders’ Equity:

Common stock, $0.0001 par value

Additional paid-in capital

Accumulated other comprehensive loss, net of taxes

Treasury stock, at cost

Retained earnings (deficit)

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Gross premiums written

Change in gross unearned premiums

Gross premiums earned

Ceded premiums

Net premiums earned

Net investment income

Net realized (losses) gains and impairment losses

Other revenue

Total revenues

EXPENSES:

Losses and loss adjustment expenses

Policy acquisition costs, net

General and administrative expenses, net

Goodwill and intangible asset impairment

Total expenses

Operating income (loss)

Interest expense, net

Income (loss) before income taxes

Provision (benefit) for income taxes

Net income (loss)

OTHER COMPREHENSIVE INCOME (LOSS)

Change in net unrealized (losses) gains on investments

Reclassification adjustment for net realized investment losses

Income tax benefit (expense) related to items of other comprehensive income (loss)

Total comprehensive income (loss)

Weighted average shares outstanding

Basic

Diluted

Earnings (loss) per share

Basic

Diluted

Income Statement Data

Net income (loss)

Less: Goodwill and intangible impairment, net of tax

Non-GAAP adjusted net income (loss)

Diluted Earnings Per Share Data

Net income (loss)

Less: Goodwill and intangible impairment, net of tax

Non-GAAP adjusted net income (loss)

Return on Equity Data

Return on Equity

Less: Goodwill and intangible impairment, net of tax

Non-GAAP adjusted return on equity

Income Statement Data

Annualized net income (loss)

Annualized adjusted net income (loss)

Divided by Average Equity:

Shareholders’ equity at the beginning of period

Shareholders’ equity at the end of period

Average Shareholders’ Equity

Return on Equity

Adjusted return on equity

Add: Accumulated other comprehensive loss, net of tax

Weighted shares outstanding

Non-GAAP adjusted book value per common share