Heritage Reports First Quarter 2022 Results
Heritage Insurance Holdings (HRTG) reported a significant net loss of $30.8 million or $1.15 per diluted share for Q1 2022, compared to a net loss of $5.1 million or $0.19 in Q1 2021. The increase in losses is attributed to higher weather-related damages, with a net combined ratio of 129.5%, up from 107.7% year-over-year. Despite these challenges, premiums-in-force rose to $1.2 billion, a 4.7% increase, primarily due to rate hikes. The company is diversifying beyond Florida, with 74% of total insured value now outside the state.
- Premiums-in-force increased to $1.2 billion, up 4.7% year-over-year.
- Gross premiums earned rose to $287.4 million, a 6.3% increase from the previous year.
- Successful rate increases contributed to growth in gross premiums written, which reached $283.2 million, a 3.3% increase.
- Diversification strategy shows promise, with 74% of total insured value now outside Florida.
- Net loss of $30.8 million, significantly higher than $5.1 million loss in Q1 2021.
- Net combined ratio deteriorated to 129.5%, indicating underwriting losses.
- Net loss ratio increased to 91.6%, a rise of 22.7 percentage points year-over-year.
- Book value per share decreased to $10.65, down 16.9% from the previous quarter.
CLEARWATER, Fla., May 5, 2022 /PRNewswire/ -- Heritage Insurance Holdings, Inc. (NYSE: HRTG) ("Heritage" or the "Company"), a super-regional property and casualty insurance holding company, today reported first quarter of 2022 financial results.
- First quarter net loss of
$30.8 million or$1.15 per diluted share, up from a net loss of$5.1 million or$0.19 per diluted share in the prior year quarter due to higher weather losses. - Net combined ratio of
129.5% , up from107.7% in the prior year quarter. - Net loss ratio of
91.6% , 22.7 points higher from the prior year quarter, driven by higher weather losses. - Net current accident year weather losses of
$63.8 million , up substantially from$31.4 million in the prior year quarter. Current accident year weather losses include$45.0 million of net current accident quarter catastrophe losses, up from$15.4 million in the prior year quarter, and$18.8 million of other weather losses, up from$16.1 million in the prior year quarter. - Net expense ratio of
37.9% , down 0.9 points from the prior year quarter. - Premiums-in-force of
$1.2 billion , up4.7% year-over-year, with the increase primarily stemming from rate increases, which exceeds our increase in total insured value ("TIV") of only1.0% and a5.5% decline in policies-in-force over the same period reflecting selective underwriting. - Our efforts to increasingly diversify business outside Florida and into markets in the Northeast, Mid-Atlantic, West and Pacific regions have resulted in the following reductions in Florida: a
17.8% reduction in policies in force, a15.4% reduction of TIV and a4.9% reduction in premiums in force year-over-year. - Gross premiums earned of
$287.4 million , up6.3% from$270.4 million in the prior year quarter, reflecting higher gross premiums written over the last twelve months. - Gross premiums written of
$283.2 million , up3.3% from the prior year quarter, with intentional exposure-management and re-underwriting efforts resulting in a4.0% reduction in Florida, offset by growth of11.4% in other regions. - Total capital returned to shareholders of
$6.7 million , reflecting$0.06 per share regular quarterly dividend and repurchase of shares. - Continued execution of Heritage's diversification strategy, with
74.0% of TIV outside of Florida, up from69.0% as of first quarter 2021.
"Rate and form changes implemented throughout the book of business over the last 18 months, coupled with geographic diversification, as well as more restrictive underwriting for new and renewal business, have positively impacted our portfolio by improving the quality of our book of business," said Heritage CEO Ernie Garateix. "Our 2022 renewals for homeowners' policies written in the voluntary market are averaging a
Heritage's Board of Directors declared a quarterly cash dividend of
In first quarter 2022, the Company, repurchased 721,118 shares for
The following table summarizes results of operations for the three months ended March 31, 2022 and 2021 (amounts in thousands, except percentages and per share amounts):
Three Months Ended March 31, | |||||||||||||
2022 | 2021 | Change | |||||||||||
Total revenues | $ | 158,608 | $ | 147,243 | 7.7 | % | |||||||
Net loss | $ | (30,759) | $ | (5,148) | 497.5 | % | |||||||
Per Share | $ | (1.15) | $ | (0.19) | NM | ||||||||
Book value per share | $ | 10.7 | $ | 15.3 | (30.4) | % | |||||||
Return on equity | (39.4) | % | (4.7) | % | (34.6) | pts | |||||||
Underwriting summary | |||||||||||||
Gross premiums written | $ | 283,196 | $ | 274,181 | 3.3 | % | |||||||
Gross premiums earned | $ | 287,368 | $ | 270,411 | 6.3 | % | |||||||
Ceded premiums | $ | (134,439) | $ | (128,212) | 4.9 | % | |||||||
Net premiums earned | $ | 152,929 | $ | 142,199 | 7.5 | % | |||||||
Ceded premium ratio | 46.8 | % | 47.4 | % | (0.6) | pts | |||||||
Ratios to Net Premiums Earned: | |||||||||||||
Loss ratio | 91.6 | % | 68.9 | % | 22.7 | pts | |||||||
Expense ratio | 37.9 | % | 38.8 | % | (0.9) | pts | |||||||
Combined ratio | 129.5 | % | 107.7 | % | 21.8 | 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. |
NM – not meaningful |
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 net combined ratio under
First quarter 2022 net loss was
Gross premiums written were
Premiums-in-force were
Gross premiums earned were
The ceded premium ratio was
The net loss ratio was
The net expense ratio was
The net combined ratio was
Book value per share decreased to
Book Value Per Share | As Of | ||||||||||
March 31, 2022 | December 31, 2021 | March 31, 2021 | |||||||||
Numerator: | |||||||||||
Common stockholders' equity | $ | 281,766 | $ | 343,051 | $ | 427,448 | |||||
Denominator: | |||||||||||
Total Shares Outstanding | $ | 26,444,720 | $ | 26,753,511 | $ | 27,904,923 | |||||
Book Value Per Common Share | $ | 10.65 | $ | 12.82 | $ | 15.32 | |||||
Conference Call Details:
Friday, May 6, 2022– 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
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, 2022 | December 31, 2021 | |||||||
ASSETS | (unaudited) | |||||||
Fixed maturities, available-for-sale, at fair value | $ | 673,511 | $ | 669,354 | ||||
Equity securities, at fair value | 1,417 | 1,415 | ||||||
Other investments, net | 14,561 | 23,929 | ||||||
Total investments | 689,489 | 694,698 | ||||||
Cash and cash equivalents | 286,170 | 359,337 | ||||||
Restricted cash | 7,416 | 5,415 | ||||||
Accrued investment income | 3,290 | 3,167 | ||||||
Premiums receivable, net | 74,512 | 71,925 | ||||||
Reinsurance recoverable on paid and unpaid claims, net | 288,779 | 269,391 | ||||||
Prepaid reinsurance premiums | 178,565 | 265,873 | ||||||
Income tax receivable | 1,365 | 11,739 | ||||||
Deferred income tax asset, net | 12,451 | — | ||||||
Deferred policy acquisition costs, net | 90,641 | 93,881 | ||||||
Property and equipment, net | 17,144 | 17,426 | ||||||
Right-of-use lease asset, net | 26,963 | 27,753 | ||||||
Intangibles, net | 54,338 | 55,926 | ||||||
Goodwill | 91,959 | 91,959 | ||||||
Other assets | 13,314 | 12,272 | ||||||
Total Assets | $ | 1,836,396 | $ | 1,980,762 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Unpaid losses and loss adjustment expenses | $ | 588,420 | $ | 590,166 | ||||
Unearned premiums | 586,236 | 590,419 | ||||||
Reinsurance payable | 116,218 | 191,728 | ||||||
Long-term debt, net | 123,689 | 120,757 | ||||||
Deferred income tax liability, net | — | 9,426 | ||||||
Advance premiums | 39,167 | 24,504 | ||||||
Accrued compensation | 5,770 | 8,014 | ||||||
Lease liability | 30,475 | 31,172 | ||||||
Accounts payable and other liabilities | 64,655 | 71,525 | ||||||
Total Liabilities | $ | 1,554,630 | $ | 1,637,711 | ||||
Stockholders' Equity: | ||||||||
Common stock, | 3 | 3 | ||||||
Additional paid-in capital | 333,213 | 332,797 | ||||||
Accumulated other comprehensive income, net of taxes | (28,894) | (4,573) | ||||||
Treasury stock, at cost | (128,557) | (123,557) | ||||||
Retained earnings | 106,001 | 138,381 | ||||||
Total Stockholders' Equity | 281,766 | 343,051 | ||||||
Total Liabilities and Stockholders' Equity | $ | 1,836,396 | $ | 1,980,762 | ||||
HERITAGE INSURANCE HOLDINGS, INC. | ||||||||
Condensed Consolidated Statements of Operations and Other Comprehensive Loss | ||||||||
(Amounts in thousands, except share amounts) | ||||||||
(Unaudited) | ||||||||
For the Three Months Ended | ||||||||
2022 | 2021 | |||||||
REVENUES: | ||||||||
Gross premiums written | $ | 283,196 | $ | 274,181 | ||||
Change in gross unearned premiums | 4,172 | (3,770) | ||||||
Gross premiums earned | 287,368 | 270,411 | ||||||
Ceded premiums | (134,439) | (128,212) | ||||||
Net premiums earned | 152,929 | 142,199 | ||||||
Net investment income | 2,000 | 1,293 | ||||||
Net realized (losses) gains | (16) | 80 | ||||||
Other revenue | 3,695 | 3,671 | ||||||
Total revenues | 158,608 | 147,243 | ||||||
EXPENSES: | ||||||||
Losses and loss adjustment expenses | 140,038 | 97,909 | ||||||
Policy acquisition costs, net | 38,257 | 35,366 | ||||||
General and administrative expenses, net | 19,724 | 19,800 | ||||||
Total expenses | 198,019 | 153,075 | ||||||
Operating Loss | (39,411) | (5,832) | ||||||
Interest expense, net | 1,972 | 1,878 | ||||||
Loss before income taxes | (41,383) | (7,710) | ||||||
Benefit for income taxes | (10,624) | (2,562) | ||||||
Net loss | $ | (30,759) | $ | (5,148) | ||||
OTHER COMPREHENSIVE LOSS | ||||||||
Change in net unrealized losses on investments | (31,770) | (10,597) | ||||||
Reclassification adjustment for net realized investment losses (gains) | 16 | (80) | ||||||
Income tax benefit related to items of other comprehensive loss | 7,433 | 2,475 | ||||||
Total comprehensive loss | $ | (55,080) | $ | (13,350) | ||||
Weighted average shares outstanding | ||||||||
Basic | 26,787,379 | 27,827,804 | ||||||
Diluted | 26,787,379 | 27,827,804 | ||||||
Loss per share | ||||||||
Basic | $ | (1.15) | $ | (0.19) | ||||
Diluted | $ | (1.15) | $ | (0.19) | ||||
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 the impact of our strategic initiatives on our future financial results, including our risk diversification and selective underwriting strategies. 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 macroeconomic and geopolitical conditions, including the impact of supply chain constraints, inflationary pressures, labor availability and the conflict between Russia and Ukraine; 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, 2021 filed with the Securities and Exchange Commission on March 14, 2022 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:
Kirk Lusk
Chief Financial Officer
klusk@heritagepci.com
investors@heritagepci.com
Mike Houston and Jeff Schoenborn
Lambert
HRTG@lambert.com
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SOURCE Heritage Insurance Holdings, Inc.
FAQ
What was Heritage Insurance's net loss for Q1 2022?
How much did gross premiums earned increase in Q1 2022 for HRTG?
What is the combined ratio reported by HRTG for Q1 2022?
How has Heritage Insurance diversified its business outside Florida?
