Heritage Insurance Holdings Reports Financial Results for Fourth Quarter and Full Year 2014

Mar 4, 2015

CLEARWATER, Fla., March 4, 2015 /PRNewswire/ — Heritage Insurance Holdings, Inc. (NYSE: HRTG) (“Heritage” or the “Company”), a property and casualty insurance holding company, today reported its financial results for the quarter and year ended December 31, 2014.

Highlights

  • 116% increase in gross premiums written for Q4 2014 as compared with Q4 2013
  • 157% increase in net premiums earned for Q4 2014 as compared with Q4 2013
  • 64% increase in policy count compared to end of Q4 2013
  • Assumed approximately $ 85 million in annualized commercial residential premium from Citizens Insurance during the fourth quarter
  • Assumed approximately $ 84 million in annualized personal lines premium from Citizens Insurance during the fourth quarter
  • NOI increased 1,220% increase compared to Q4 of 2013
  • Shareholder’s equity increased 152% compared to Q4 of 2013

Bruce Lucas, the Company’s Chairman and CEO, said, “The fourth quarter was another excellent quarter for us.  It was our best fourth quarter in the Company’s history. Our year over year growth has been strong as evidenced by triple digit increases in gross premiums written and net premiums earned.  Our fourth quarter net income of $ 19.7 million significantly exceeded expectations. I am particularly pleased with our introduction into the  commercial residential line of business with three Citizens depopulations totaling $ 85.4 million of inforce premiums and $ 5.8 million of voluntary business written during the quarter. The launch of the commercial residential business coupled with our successful  transition of Sunshine State Insurance Company’s (SSIC) policies to Heritage fueled our strong growth over the prior year. Additionally, we believe the growth in the fourth quarter positions us very well for the future.” 

Results of Operations

The following table summarizes our results of operations for the quarters and years ended December 31, 2014 and 2013, respectively (in thousands, except percentages and per share amounts):

Three Months Ended

 Years Ended

December 31,

December 31,

2014

2013

Change

2014

2013

Change

Revenue

Gross premiums written

$     181,464

$        83,963

116%

$        436,407

$      218,537

100%

Gross premiums earned

$     106,654

$        50,089

113%

$        311,514

$      139,959

123%

Ceded premiums

$     (25,102)

$      (18,325)

37%

$        (87,902)

$      (44,800)

96%

Net premiums earned

$       81,552

$        31,764

157%

$        223,612

$        95,159

135%

Retroactive reinsurance

$                 –

$              (26)

(100)%

$                    –

$        26,046

(100)%

Total operating revenue

$       85,386

$        33,109

158%

$        233,820

$      124,832

87%

Income before taxes

$       31,211

$          2,560

1119%

$          74,252

$        55,461

34%

Net income

$       19,676

$             814

2317%

$          47,097

$        34,213

38%

Per Share Data:

Book value per share

$            8.56

$            7.20

19%

$              8.56

$            7.20

19%

Earnings per diluted share

 

$            0.66

$            0.05

1,220%

$              1.82

$            2.36

(23)%

Return on average equity

32.4%

6.0%

26.4

pts

26.5%

45.0%

(18.5)

pts

Ratios to Gross Premiums Earned:

Ceded premium ratio

23.5%

36.6%

(13.1)

pts

28.2%

32.0%

(3.8)

pts

Loss ratio

25.7%

30.7%

(5.0)

pts

28.7%

27.5%

1.2

pts

Expense ratio

25.1%

30.3%

(5.2)

pts

22.5%

22.0%

0.5

pts

Combined ratio

74.3%

97.6%

(23.3)

pts

79.4%

81.5%

(2.1)

pts

Ratios to Net Premiums Earned:

Loss ratio

33.6%

48.3%

(14.7)

pts

40.1%

40.5%

(0.4)

pts

Expense ratio

32.8%

47.8%

(15.0)

pts

31.3%

32.4%

(1.1)

pts

Combined ratio

66.4%

96.1%

(29.7)

pts

71.4%

72.9%

(1.5)

pts

 

Quarterly Financial Results

Net income for the quarter ended December 31, 2014 was $ 19.7 million compared to $ 0.8 million for the quarter ended December 31, 2013. The increase is primarily due to the significant growth in gross premiums earned and the improvement in the ceded premium ratio. 

Gross premiums earned were $ 106.7 million for the fourth quarter of 2014 compared to $ 50.1 million for the fourth quarter of 2013. Of the increase in gross premiums earned, approximately $ 17.9 million was related to our commercial residential line of business  and approximately $ 13.8 million from SSIC personal lines policies.  Personal lines policy count at December 31, 2014 was approximately 207,000 policies, representing $ 400.0 million of in force premiums.  The policy count for commercial residential was approximately 2,400 policies, representing $ 94.6 million of in force premiums.  Total in force premiums at December 31, 2014 were $ 494.6 million compared to $ 236.4 million at December 31, 2013.

Ceded premiums as a percentage of gross premiums earned were 23.5% for the fourth quarter of 2014 compared to 36.6% for the fourth quarter of 2013.  This decrease is primarily due to favorable reinsurance market conditions and the lower cost of reinsurance associated with the issuance of $ 200 million of catastrophe bonds by Citrus Re, as well as improved geographic spread of risk, resulting from the SSIC policy acquisition. Additionally, the significant increase in gross earned premium from our fourth quarter Citizens depopulation activity had a positive impact.  The ceded premium ratio for the third quarter of 2014 was 30.5%.  The decrease from 30.5% to 23.5% quarter over quarter was entirely the result of growth in gross premiums earned  in the fourth quarter. There was no corresponding increase in ceded premiums.  An increase in ceded premiums will not occur until June 1, 2015, when our reinsurance contracts renew.

The loss ratio on a gross basis decreased to 25.7% in the fourth quarter of 2014 from 30.7% in the fourth quarter of 2013, partially a result of the lower loss ratio for commercial residential business, as well as the impact in the changes in IBNR.  The reported loss ratio, which excludes the impact of changes in IBNR, was 19.8% for the fourth quarter of 2014 compared to 21.6% for the fourth quarter of 2013.

The Company’s expense ratio on a gross basis was 25.1% for the fourth quarter of 2014 compared to 30.3% for the fourth quarter of 2013.  Stock based compensation accounted for 3.0 points of the expense ratio in the fourth quarter of 2014 compared to 11.0 points in the fourth quarter of 2013.  In addition, the amortization of the SSIC policy acquisition cost increased the gross expense ratio by approximately 2.8 points during the fourth quarter of 2014.

Overall, Heritage’s combined ratio on a gross basis was 74.3% for the fourth quarter of 2014 compared to 97.6% for the fourth quarter of 2013.

Full Year Financial Results

Net income for the year ended December 31, 2014 was $ 47.1 million compared to $ 34.2 million for the prior year.  Gross earned premiums were $ 311.5 million in 2014 compared to $ 140.0 million in 2013.  The combined ratio on a gross basis was 79.4% compared to 81.5% for the prior year, primarily as a result of an improved ceded premium ratio.  Our results for the year ended December 31, 2013 included $ 26.0 million  of retroactive reinsurance income that did not reoccur in 2014, nor is expected to in future years.

Book Value Analysis

Book value per share increased 49.4% at December 31, 2014  compared to the prior year.  In May 2014, the Company completed its initial public offering, a concurrent private placement and the issuance of common stock associated with the exercise of warrants. The net proceeds from these activities totaled approximately $ 101.1 million in exchange for 13,431,610 shares of common stock issued.

Book Value Per Share

December 31, 2014

December 31, 2013

Numerator:

Common stockholders’ equity

$                             255,089

 $                                100,905 (1)

Denominator:

Total Shares Outstanding

29,794,960

14,007,150

Book Value Per Common Share

$                                   8.56

7.20

(1)  Includes redeemable shares of $ 20,921

Conference Call Details:

Thursday, March 5, 2015 – 10:00 a.m. ET

Participant Dial-in Numbers Toll Free: 

1-888-346-3095

Participant International Dial In:

1-412-902-4258

Canada Toll Free:  

1-855-669-9657

Website:  To listen to the live webcast, please go to http://www.videonewswire.com/event.asp?id=101619. This webcast will be archived and accessible on the Company’s website for approximately 30 days following the call.

About Heritage

Heritage Insurance Holdings, Inc. is a property and casualty insurance holding company headquartered in Clearwater, Florida that began operations in August 2012. Through its subsidiary, Heritage Property & Casualty Insurance Company, it provides personal residential insurance for single-family homeowners and condominium owners and commercial residential insurance in Florida through a large network of experienced agents. Heritage is led by an experienced senior management team with an average of 28 years of insurance industry experience.

Forward-Looking Statements

Statements in this press release that are not historical facts are forward-looking statements that are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “or “continue” or the other negative variations thereof or comparable terminology are intended to identify forward-looking statements. The risks and uncertainties that could cause our actual results to differ from those expressed or implied herein include, without limitation: the success of the Company’s marketing initiatives, inflation and other changes in economic conditions (including changes in interest rates and financial markets); the impact of new federal and state regulations that affect the property and casualty insurance market; the costs of reinsurance and the collectability of reinsurance; assessments charged by various governmental agencies; pricing competition and other initiatives by competitors; our ability to obtain regulatory approval for requested rate changes, and the timing thereof; legislative and regulatory developments; the outcome of litigation pending against us, including the terms of any settlements; risks related to the nature of our business; dependence on investment income and the composition of our investment portfolio; the adequacy of our liability for losses and loss adjustment expense; insurance agents; claims experience; ratings by industry services; catastrophe losses; reliance on key personnel; weather conditions (including the severity and frequency of storms, hurricanes, tornadoes and hail); changes in loss trends; acts of war and terrorist activities; court decisions and trends in litigation; and other matters described from time to time by us in our filings with the Securities and Exchange Commission, including, but not limited to, the Company’s Prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, with the Securities and Exchange Commission on May 27, 2014. In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for a major contingency. Reported results may therefore appear to be volatile in certain accounting periods. The Company undertakes no obligations to update, change or revise any forward-looking statement, whether as a result of new information, additional or subsequent developments or otherwise.

 

HERITAGE INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

December 31, 2014

December 31, 2013

ASSETS

Fixed maturity securities, available for sale, at fair value (amortized
cost of $ 290,951 and $ 105,955 in 2014 and 2013, respectively)

$                      293,085

$                      104,668

Equity securities, available for sale, at fair value (cost of $ 30,555
and $ 25,446 in 2014 and 2013, respectively)

31,225

25,446

Mortgage loan, held to maturity, at amortized cost

6,849

6,063

Total investments

331,159

136,177

Cash and cash equivalents

173,825

65,059

Restricted cash

4,339

Accrued investment income

2,617

971

Premiums receivable, net

7,589

10,347

Prepaid reinsurance premiums

43,148

31,252

Reinsurance premiums receivable

5,337

Income taxes receivable

964

5,073

Deferred income taxes

6,622

4,436

Deferred policy acquisition costs, net

24,370

9,765

Property and equipment, net

17,087

10,935

Other assets

4,275

2,626

Total Assets

$                      615,995

$                      281,978

LIABILITIES AND STOCKHOLDERS’ EQUITY

Unpaid losses and loss adjustment expenses

$                        51,469

$                        19,344

Unearned premiums

241,136

116,243

Reinsurance payable

38,227

29,591

Income taxes payable

12,808

2,805

Advance premiums

5,143

3,829

Accrued compensation

442

505

Other liabilities

11,681

8,756

Total Liabilities

$                      360,906

$                      181,073

Commitments and contingencies

Redeemable shares

20,921

Stockholders’ Equity:

Common stock, $ 0.0001 par value, 50,000,000 shares authorized,
29,794,960 and 14,007,150 shares issued  and outstanding at
December 31, 2014 and December 31, 2013, respectively

3

1

Additional paid-in capital

188,342

62,849

Accumulated other comprehensive income (loss)

1,723

(790)

Retained earnings

65,021

17,924

Total Stockholders’ Equity

255,089

79,984

Total Liabilities and Stockholders’ Equity

$                      615,995

$                      281,978

 

 

HERITAGE INSURANCE HOLDINGS, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except share data and per share)

Three Months Ended December 31,

Years Ended December 31,

2014

2013

2014

2013

REVENUE:

Gross premiums written

$         181,464

$           83,963

$   436,407

$   218,537

Increase in gross unearned
premiums

(74,810)

(33,874)

(124,893)

(78,578)

Gross premiums earned

106,654

50,089

311,514

139,959

Ceded premiums

(25,102)

(18,325)

(87,902)

(44,800)

Net premiums earned

81,552

31,764

223,612

95,159

Retroactive reinsurance

(26)

26,046

Net investment income

1,386

410

3,849

1,049

Net realized gains (losses)

241

(152)

304

(323)

Other revenue

2,207

1,113

6,055

2,901

Total revenue

85,386

33,109

233,820

124,832

EXPENSES:

Losses and loss adjustment expenses

27,414

15,355

89,560

38,501

Policy acquisition costs

13,185

3,430

36,510

6,150

General and administrative expenses

13,576

11,764

33,498

24,704

Interest expense

16

Total expenses

54,175

30,549

159,568

69,371

Income before income taxes

31,211

2,560

74,252

55,461

Provision for income taxes

11,535

1,746

27,155

21,248

Net income

$         19,676

$               814

$   47,097

$   34,213

OTHER COMPREHENSIVE INCOME:

Change in net unrealized gains (losses) on investments

(385)

(1,610)

4,395

(1,610)

Reclassification adjustment for net realized investment (gains) losses

(241)

323

(304)

323

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

243

497

(1,578)

497

Total comprehensive income

$         19,293

$                 24

$   49,610

$   33,423

Weighted average shares outstanding

Basic

29,794,980

15,955,350

24,568,876

14,313,150

Diluted

29,915,744

16,592,850

25,816,590

14,473,800

Earnings per share

Basic

$               0.66

$            0.05

$         1.92

$         2.39

Diluted

$               0.66

$            0.05

$         1.82

$         2.36

 

Heritage Insurance Holdings Inc.
Stephen Rohde
Chief Financial Officer
727-727-7200 ext. 7204

investors@heritagepci.com
www.heritagepci.com

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/heritage-insurance-holdings-reports-financial-results-for-fourth-quarter-and-full-year-2014-300045493.html

SOURCE Heritage Insurance Holdings, Inc.

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