Heritage Reports Fourth Quarter 2020 Results

CLEARWATER, Fla., March 3, 2021 /PRNewswire/ – Heritage Insurance Holdings, Inc. (NYSE: HRTG) (“Heritage” or the “Company”), a super-regional property and casualty insurance holding company, today reported fourth quarter 2020 financial results.

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

Fourth Quarter 2020 Highlights

  • Net income of $2.8 million, or $0.10 per diluted share.
  • Book value per share of $15.94, up 1.8% year-over-year.
  • Gross premiums written of $282.3 million, up 19.9% year-over-year.
  • Launched partnership with The Hartford to offer bundled home and auto policies.
  • Favorable prior year reserve development of $4.7 million.
  • Net current accident quarter weather losses of $38.9 million, up substantially from $15.3 million in the prior year quarter. Current accident quarter weather losses include $24.4 million of catastrophe losses and $14.5 million of other weather losses.
  • Total capital returned to shareholders of $1.7 million, reflecting $0.06 per share regular quarterly dividend.
  • Began writing homeowners insurance in Maryland, representing sixteenth active state.

Ernie Garateix, the Company’s CEO, said, “We were able to generate positive net income in the fourth quarter and full year and grow book value per share year-over-year despite experiencing unprecedented weather losses. I believe our solid organic growth platform and heightened focus on underwriting profitability position us well for 2021 and beyond.”

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 April 6, 2021 to shareholders of record as of March 15, 2021.

COVID-19 Update
We continue to monitor the short- and long-term impacts of COVID-19 and through December 31, 2020, 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, 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 and twelve months ended December 31, 2020 and 2019 (amounts in thousands, except percentages and per share amounts):

Three Months Ended December 31,

Year Ended December 31,

2020

2019

Change

2020

2019

Change

Revenue

$

159,548

$

138,502

15.2%

$

593,385

$

511,304

16.1%

Net income

$

2,808

$

12,818

(78.1)%

$

9,326

$

28,636

(67.4)%

Per share

$

0.10

$

0.44

(77.3)%

$

0.33

$

0.98

(66.3)%

Book value per share

$

15.94

$

15.66

1.8%

$

15.94

$

15.66

1.8%

Return on equity

2.5%

11.5%

(9.0)

pts

2.1%

6.6%

(4.5)

pts

Underwriting summary

Gross premiums written

$

282,324

$

235,446

19.9%

$

1,080,100

$

937,937

15.2%

Gross premiums earned

$

265,353

$

234,082

13.4%

$

996,842

$

924,247

7.9%

Ceded premiums earned

$

(113,923)

$

(103,005)

10.6%

$

(452,120)

$

(445,534)

1.5%

Net premiums earned

$

151,430

$

131,077

15.5%

$

544,722

$

478,713

13.8%

Ceded premium ratio

42.9%

44.0%

(1.1)

pts

45.4%

48.2%

(2.8)

pts

Ratios to Net Premiums Earned:

Loss ratio

70.4%

51.0%

19.4

pts

68.5%

57.1%

11.4

pts

Expense ratio

38.3%

38.3%

0.0

pts

38.5%

39.4%

(0.9)

pts

Combined ratio

108.7%

89.3%

19.4

pts

107.0%

96.5%

10.5

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
Fourth quarter 2020 net income was $2.8 million, down from net income of $12.8 million in the prior year quarter. The decrease primarily stems from elevated weather losses, partly offset by a tax benefit in the current year quarter.  

Gross premiums written were $282.3 million, up 19.9% year-over-year, including growth in all states and product lines. Growth was partly attributable to rate increases, particularly in Florida

Premiums-in-force were $1.1 billion in fourth quarter 2020, representing a 17.6% annualized growth rate from third quarter 2020. The sequential increase stems from the same items impacting gross premiums written.

Gross premiums earned were $265.4 million in fourth quarter 2020, up 13.4% from $234.1 million in the prior year quarter. The increase reflects higher gross premiums written over the last twelve months.

The ceded premium ratio was 42.9% in fourth quarter 2020, down 1.1 points from 44.0% in the prior year quarter. The decrease primarily stems from gross premiums earned growth that modestly outpaced ceded premium growth and from year-end true-ups that benefited the current year quarter.

The net loss ratio was 70.4% in fourth quarter 2020, up 19.4 points from 51.0% in the prior year quarter. The increase primarily stems from higher current accident year weather losses.

The net expense ratio was 38.3% in fourth quarter 2020, unchanged from the prior year quarter.

The net combined ratio was 108.7% in fourth quarter 2020, up 19.4 points from 89.3% in the prior year quarter. The increase stems from a higher net loss ratio, as described above.

Book Value Analysis
Book value per share increased to $15.94 at December 31, 2020, up 1.8% year-over-year.

As Of

Book Value Per Share

December 31, 2020

December 31, 2019

December 31, 2018

Numerator:

Common stockholders’ equity

$

442,344

$

448,799

$

425,333

Denominator:

Total Shares Outstanding

27,748,606

28,650,918

29,477,756

Book Value Per Common Share

$

15.94

$

15.66

$

14.43

Conference Call Details:
Wednesday, March 3, 2020 – 9:30 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

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)

(Unaudited)

December 31,

2020

2019

ASSETS

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

$

561,011

$

587,256

Equity securities, at fair value

1,599

1,618

Other investments

26,409

6,375

Total investments

589,019

595,249

Cash and cash equivalents

440,956

268,351

Restricted cash

5,427

14,657

Accrued investment income

2,737

4,377

Premiums receivable, net

77,471

63,685

Reinsurance recoverable on paid and unpaid claims, net

355,037

428,903

Prepaid reinsurance premiums

245,818

224,102

Income taxes receivable

32,224

3,171

Deferred policy acquisition costs, net

89,265

77,211

Property and equipment, net

18,685

20,753

Intangibles, net

62,277

68,642

Goodwill

152,459

152,459

Other assets

18,004

18,110

Total Assets

$

2,089,379

$

1,939,670

LIABILITIES AND STOCKHOLDERS’ EQUITY

Unpaid losses and loss adjustment expenses

$

659,341

$

613,533

Unearned premiums

569,618

486,220

Reinsurance payable

161,918

156,351

Long-term debt, net

120,998

129,248

Deferred income tax, net

18,477

12,623

Advance premiums

18,268

16,504

Accrued compensation

9,325

5,347

Accounts payable and other liabilities

89,090

71,045

Total Liabilities

$

1,647,035

$

1,490,871

Commitments and contingencies

Stockholders’ Equity:

Common stock

3

3

Additional paid-in capital

331,867

329,568

Accumulated other comprehensive income, net of taxes

6,057

7,330

Treasury stock

(115,365)

(105,368)

Retained earnings

219,782

217,266

Total Stockholders’ Equity

442,344

448,799

Total Liabilities and Stockholders’ Equity

$

2,089,379

$

1,939,670

 

HERITAGE INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Other Comprehensive Income

(Amounts in thousands, except per share and share amounts)

(Unaudited)

Three Months Ended
December 31,

Year Ended December 31,

2020

2019

2020

2019

REVENUE:

Gross premiums written

$

282,324

$

235,446

$

1,080,100

$

937,937

Change in gross unearned premiums

(16,971)

(1,364)

(83,258)

(13,690)

Gross premiums earned

265,353

234,082

996,842

924,247

Ceded premiums

(113,923)

(103,005)

(452,120)

(445,534)

Net premiums earned

151,430

131,077

544,722

478,713

Net investment income

2,519

3,275

12,302

14,432

Net realized and unrealized gains

2,018

1,031

22,395

4,163

Other revenue

3,581

3,119

13,966

13,997

Total revenue

159,548

138,502

593,385

511,305

EXPENSES:

Losses and loss adjustment expenses

106,618

66,798

373,387

273,288

Policy acquisition costs

36,032

28,113

128,276

107,906

General and administrative expenses

21,954

22,079

81,537

80,544

Total expenses

164,604

116,990

583,200

461,738

Operating (loss) income

$

(5,056)

$

21,512

$

10,185

$

49,567

Interest expense, net

2,033

2,021

7,972

8,523

Other non-operating loss, net

0

0

0

48

(Loss) Income before taxes

$

(7,089)

$

19,491

$

2,213

$

40,996

(Benefit) Provision for income taxes

(9,897)

6,673

(7,113)

12,360

Net income

$

2,808

$

12,818

$

9,326

$

28,636

OTHER COMPREHENSIVE INCOME:

      Change in net unrealized gains on investments

1,408

232

20,738

19,765

      Reclassification adjustment for net realized investment gains

(2,018)

(2,025)

(22,395)

(1,734)

      Income tax benefit (expense) related to items of other

      comprehensive income

142

573

384

(4,174)

Total comprehensive income

$

2,340

$

11,598

$

8,053

$

42,493

Weighted average shares outstanding

Basic

27,748,606

28,871,197

27,978,519

29,213,910

Diluted

27,753,317

28,878,440

27,988,966

29,232,981

Earnings per share

Basic

$

0.10

$

0.44

$

0.33

$

0.98

Diluted

$

0.10

$

0.44

$

0.33

$

0.98

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 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 profitability position for 2021 and beyond given our solid organic growth platform and heightened focus on underwriting. 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 underwriting and profitability initiatives; the continued and potentially prolonged impact of the COVID-19 pandemic on the economy, demand for our products and our operations; inflation and other changes in economic conditions (including changes in interest rates and financial and real estate 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, 2019 filed with the Securities and Exchange Commission on March 10, 2020 and subsequent filings. 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: [email protected]

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SOURCE Heritage Insurance Holdings, Inc.

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