PR Newswire | Mar 3, 2021 04:06PM EST

03/03 15:05 CST

Heritage Reports Fourth Quarter 2020 Results CLEARWATER, Fla., March 3, 2021

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.

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 DividendHeritage'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 UpdateWe 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 OperationsThe 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 byaverage stockholders' equity during the period.

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

RatiosCeded 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 ResultsFourth 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 AnalysisBook 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. ETParticipant Dial-in Numbers Toll Free: 1-888-346-3095Participant International Dial In: 1-412-902-4258Canada 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 Year Ended December 31, 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 HeritageHeritage 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 StatementsStatements 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, CPAExecutive Vice President 727.871.0206Email: asoleimani@heritagepci.com

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SOURCE Heritage Insurance Holdings, Inc.