Heritage Reports First Quarter 2021 Results

CLEARWATER, Fla., May 5, 2021 /PRNewswire/ – Heritage Insurance Holdings, Inc. (NYSE: HRTG) (“Heritage” or the “Company”), a super-regional property and casualty insurance holding company, today reported first quarter 2021 financial results.

Heritage Insurance (PRNewsFoto/Heritage Insurance Holdings, Inc) (PRNewsfoto/Heritage Insurance Holdings, In)

First Quarter 2021 Highlights

  • Net loss of $5.1 million, or ($0.19) per diluted share.
  • Book value per share of $15.32, down 3.9% from year-end 2020.
  • Gross premiums written of $274.2 million, up 19.7% year-over-year.
  • Favorable prior year reserve development of $1.6 million.
  • Net current accident year weather losses of $31.4 million, up substantially from $21.2 million in the prior year quarter. Current accident year weather losses include $15.4 million of net current accident quarter catastrophe losses, down from $17.0 million in the prior year quarter, and $16.1 million of other weather losses, up from $4.1 million in the prior year quarter.
  • Total capital returned to shareholders of $1.7 million, reflecting $0.06 per share regular quarterly dividend.

Ernie Garateix, the Company’s CEO, said, “We are committed to improving bottom-line results and have implemented meaningful rate increases and underwriting changes that we expect to bear fruit in future periods.”

Quarterly Dividend
Heritage’s Board of Directors declared a quarterly cash dividend of $0.06 per share on the Company’s common stock. The dividend will be paid on July 6, 2021 to shareholders of record as of June 15, 2021.

COVID-19 Update
We continue to monitor the short- and long-term impacts of COVID-19 and through March 31, 2021, we saw virtually no impact to our business. As a residential property insurer, we view our business as relatively insulated from a short-term economic slowdown, as property owners and renters generally view our products as a necessity.

While we acknowledge uncertainties associated with future economic conditions, we do not expect a material impact to our business going forward. We will continue to monitor economic conditions and, in the case of a prolonged economic slowdown as a result of COVID-19 or its variants, will take necessary actions to mitigate any negative impacts to our business, operations or financial results.

Results of Operations
The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020 (amounts in thousands, except percentages and per share amounts):

Three Months Ended March 31,

2021

2020

Change

Revenue

$

147,243

$

132,706

11.0%

Net (loss) income

$

(5,148)

$

7,620

(167.6)%

Per Share

$

(0.19)

$

0.27

(170.4)%

Book value per share

$

15.32

$

16.11

(4.9)%

Return on equity

(4.7)%

6.8%

(11.5)

pts

Underwriting summary

Gross premiums written

$

274,181

$

229,102

19.7%

Gross premiums earned

$

270,411

$

234,716

15.2%

Ceded premiums earned

$

(128,212)

$

(108,710)

17.9%

Net premiums earned

$

142,199

$

126,006

12.9%

Ceded premium ratio

47.4%

46.3%

1.1

pt

Ratios to Net Premiums Earned:

Loss ratio

68.9%

54.1%

14.7

pts

Expense ratio

38.8%

41.1%

(2.3)

pts

Combined ratio

107.7%

95.2%

12.5

pts

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

Note: Percentages and sums in the table may not recalculate precisely due to rounding.

Ratios
Ceded premium ratio represents ceded premiums as a percentage of gross premiums earned.

Net loss ratio represents net losses and loss adjustment expenses (“LAE”) as a percentage of net premiums earned.

Net expense ratio represents policy acquisition costs (“PAC”) and general and administrative (“G&A”) expenses as a percentage of net premiums earned. Ceding commission income is reported as a reduction of PAC and G&A expenses.

Net combined ratio represents the sum of net losses and LAE, PAC and G&A expenses as a percentage of net premiums earned.   The net combined ratio is a key measure of underwriting performance traditionally used in the property and casualty industry. A combined ratio under 100% generally reflects profitable underwriting results.

Quarterly Financial Results
First quarter 2021 net loss was $5.1 million, down from net income of $7.6 million in the prior year quarter. The decrease primarily stems from elevated weather losses, partly offset by higher net premiums earned.

Gross premiums written were $274.2 million, up 19.7% year-over-year, including 21.9% growth outside Florida and 17.7% growth in Florida. Growth was partly attributable to rate increases, particularly in Florida

Premiums-in-force were $1.1 billion in first quarter 2021, representing a 16.0% annualized growth rate from fourth quarter 2020. The increase stems from the same items impacting gross premiums written.

Gross premiums earned were $270.4 million in first quarter 2021, up 15.2% from $234.7 million in the prior year quarter. The increase reflects higher gross premiums written over the last twelve months.

The ceded premium ratio was 47.4% in first quarter 2021, up 1.1 points from 46.3% in the prior year quarter. The increase is primarily attributable to higher costs associated with excess-of-loss reinsurance coverage, partly offset by higher gross premiums earned.

The net loss ratio was 68.9% in first quarter 2021, up 14.7 points from 54.1% in the prior year quarter. The increase primarily stems from higher current accident year weather and attritional net loss ratios.

The net expense ratio was 38.8% in first quarter 2021, down 2.3 points from 41.1% in the prior year quarter. The decrease primarily stems from a lower G&A expense ratio.

The net combined ratio was 107.7% in first quarter 2021, up 12.5 points from 95.2% in the prior year quarter. The increase stems from a higher net loss ratio, partly offset by a lower net expense ratio, as described above.

Book Value Analysis
Book value per share decreased to $15.32 at March 31, 2021, down 3.9% from December 31, 2020.

As Of

Book Value Per Share

March 31, 2021

December 31, 2020

March 31, 2020

Numerator:

Common stockholders’ equity

$

427,448

$

442,344

$

449,297

Denominator:

Total Shares Outstanding

27,904,923

27,748,606

27,891,518

Book Value Per Common Share

$

15.32

$

15.94

$

16.11

Conference Call Details:
Thursday, May 6, 2021 – 9:30 a.m. ET
Participant Dial-in Numbers Toll Free: 1-888-437-3179
Participant International Dial In: 1-862-298-0702

Webcast:
To listen to the live webcast, please go to http://investors.heritagepci.com/. This webcast will be archived and accessible on the Company’s website.

 

HERITAGE INSURANCE HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share amounts)

March 31, 2021

December 31, 2020

ASSETS

(unaudited)

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

$

622,923

$

561,011

Equity securities, at fair value

1,415

1,599

Other investments

26,409

26,409

Total investments

650,747

589,019

Cash and cash equivalents

402,770

440,956

Restricted cash

5,427

5,427

Accrued investment income

2,872

2,737

Premiums receivable, net

84,336

77,471

Reinsurance recoverable on paid and unpaid claims, net

326,276

355,037

Prepaid reinsurance premiums

172,223

245,818

Income taxes receivable

29,896

32,224

Deferred policy acquisition costs, net

88,876

89,265

Property and equipment, net

18,674

18,685

Intangibles, net

60,689

62,277

Goodwill

152,459

152,459

Other assets

19,549

18,004

Total Assets

$

2,014,794

$

2,089,379

LIABILITIES AND STOCKHOLDERS’ EQUITY

Unpaid losses and loss adjustment expenses

$

637,882

$

659,341

Unearned premiums

573,411

569,618

Reinsurance payable

144,206

161,918

Long-term debt, net

119,501

120,998

Deferred income tax, net

11,109

18,477

Advance premiums

21,497

18,268

Accrued compensation

8,112

9,325

Accounts payable and other liabilities

71,628

89,090

Total Liabilities

$

1,587,346

$

1,647,035

Commitments and contingencies

Stockholders’ Equity:

Common stock

3

3

Additional paid-in capital

332,000

331,867

Accumulated other comprehensive (loss) income

(2,145)

6,057

Treasury stock

(115,365)

(115,365)

Retained earnings

212,955

219,782

Total Stockholders’ Equity

427,448

442,344

Total Liabilities and Stockholders’ Equity

$

2,014,794

$

2,089,379

 

HERITAGE INSURANCE HOLDINGS, INC.

Condensed Consolidated Statements of Operations and Other Comprehensive Income

(Amounts in thousands, except share amounts)

(Unaudited)

For the Three Months Ended

March 31,

2021

2020

REVENUES:

Gross premiums written

$

274,181

$

229,102

Change in gross unearned premiums

(3,770)

5,614

Gross premiums earned

270,411

234,716

Ceded premiums

(128,212)

(108,710)

Net premiums earned

142,199

126,006

Net investment income

1,293

3,670

Net realized and unrealized gains

80

59

Other revenue

3,671

2,971

Total revenues

147,243

132,706

EXPENSES:

Losses and loss adjustment expenses

97,909

68,181

Policy acquisition costs

35,366

30,047

General and administrative expenses

19,800

21,718

Total expenses

153,075

119,946

Operating (loss) income

(5,832)

12,760

Interest expense, net

1,878

1,966

(Loss) income before income taxes

(7,710)

10,794

(Benefit) provision for income taxes

(2,562)

3,174

Net (loss) income

$

(5,148)

$

7,620

OTHER COMPREHENSIVE INCOME

Change in net unrealized (losses) gains on investments

(10,597)

2,027

Reclassification adjustment for net realized investment gains

(80)

(59)

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

2,475

(456)

Total comprehensive (loss) income

$

(13,350)

$

9,132

Weighted average shares outstanding

Basic

27,827,804

28,548,830

Diluted

27,827,804

28,549,012

(Loss) earnings per share

Basic

$

(0.19)

$

0.27

Diluted

$

(0.19)

$

0.27

About Heritage
Heritage Insurance Holdings, Inc. is a super-regional property and casualty insurance holding company headquartered in Clearwater, Florida. Through its insurance subsidiaries and a large network of experienced agents, the Company writes over $1.1 billion of gross personal and commercial residential premium across its multi-state footprint.

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. This release includes forward-looking statements relating to (i) the impact of the COVID-19 pandemic on our business, results of operations and financial condition and our ability to navigate the uncertainty and mitigate the impact and (ii) our ability to continue to grow profitably and improve bottom-line results. The risks and uncertainties that could cause our actual results to differ from those expressed or implied herein include, without limitation: our ability to comply with our obligations under the new credit facilities, including the financial and other covenants contained therein; the success of the Company’s marketing initiatives; the continued and potentially prolonged impact of the COVID-19 pandemic on the economy, demand for our products and our operations, including measures taken by the governmental authorities to address COVID-19, which may precipitate or exacerbate other risks and/or uncertainties; inflation and other changes in economic conditions (including changes in interest rates and financial markets), including as a result of the COVID-19 pandemic; the impact of new federal and state regulations that affect the property and casualty insurance market; the costs of reinsurance, the collectability of reinsurance and our ability to obtain reinsurance coverage on terms and at a cost acceptable to us; 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; our ability to build and maintain relationships with 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 Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on March 9, 2021. 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.

Investor Contact:
Arash Soleimani, CFA, CPA
Executive Vice President 
727.871.0206
Email: asoleimani@heritagepci.com

 

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SOURCE Heritage Insurance Holdings, Inc.

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