Heritage Reports Second Quarter 2020 Results
Heritage Insurance Holdings (HRTG) reported strong second quarter 2020 results, posting a net income of $4.1 million ($0.15 per diluted share), up 473.1% from $0.7 million a year ago. Gross premiums written increased by 14.0% year-over-year to $290.4 million, driving book value per share up 11.2% to $16.67. The combined ratio improved to 100.0%, reflecting enhanced underwriting discipline. Despite the ongoing COVID-19 pandemic, the company remains optimistic about its insulated position within the residential property insurance market.
- Net income increased 473.1% YoY to $4.1 million.
- Gross premiums written grew 14.0% YoY to $290.4 million.
- Book value per share rose 11.2% YoY to $16.67.
- Combined ratio improved to 100.0%, signaling better underwriting performance.
- Net investment income decreased compared to the prior year.
- Current accident quarter weather losses totaled $26.8 million, up from $21.5 million in the previous year.
CLEARWATER, Fla., Aug. 3, 2020 /PRNewswire/ -- Heritage Insurance Holdings, Inc. (NYSE: HRTG) ("Heritage" or the "Company"), a property and casualty insurance holding company, today reported second quarter 2020 financial results.
Second Quarter 2020 Highlights
- Net income for the quarter was
$4.1 million , or$0.15 per diluted share. - Book value per share increased to
$16.67 , up11.2% from June 30, 2019 and6.4% (12.9% annualized growth rate) from year-end 2019. - Gross premiums written of
$290.4 million , up14.0% year-over-year. - Favorable prior year reserve development of
$5.0 million , representing the eighth consecutive quarter of favorable prior year reserve development. - Net current accident quarter weather losses of
$26.8 million , including$17.6 million of net current accident quarter catastrophe losses. In the prior year quarter, net current accident quarter weather losses were$21.5 million , including catastrophe losses of$13.4 million . - Repurchased 163,456 shares for
$2.0 million at an average price of$12.31 per share,26.2% below second quarter 2020 book value per share. Total capital returned to shareholders of$3.7 million , including$0.06 per share regular quarterly dividend. - Began writing homeowners insurance in Mississippi.
Bruce Lucas, the Company's Chairman and CEO, said, "The growth in our organic gross premiums written has accelerated every quarter since returning to positive growth in the third quarter of 2019 and we achieved double digit organic growth in the second quarter of 2020. Our strong agent relationships and auto carrier partnerships are paying off, as demonstrated in our numbers this quarter. More importantly, given our de-risking efforts in prior years, we're able to grow profitably, a testament to our underwriting discipline.
COVID-19 Update
We are currently monitoring the short- and long-term impacts of COVID-19. During the first half of 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 six months ended June 30, 2020 and 2019 (amounts | ||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||
Total revenues | $ 136,012 | $ 122,843 | 10.7 % | $ 268,719 | $ 241,104 | 11.5 % | ||||||||||||||||||||
Net Income | $ 4,132 | $ 721 | 473.1 % | $ 11,752 | $ 7,685 | 52.9 % | ||||||||||||||||||||
Per Share | $ 0.15 | $ 0.02 | 650.0 % | $ 0.42 | $ 0.26 | 61.5 % | ||||||||||||||||||||
Book value per share | $ 16.67 | $ 14.99 | 11.2 % | $ 16.67 | $ 14.99 | 11.2 % | ||||||||||||||||||||
Return on equity* | 3.6 % | 0.7 % | 2.9 pts | 5.2 % | 3.6 % | 1.6 pts | ||||||||||||||||||||
Underwriting summary | ||||||||||||||||||||||||||
Gross premiums written | $ 290,432 | $ 254,840 | 14.0 % | $ 519,534 | $ 465,188 | 11.7 % | ||||||||||||||||||||
Gross premiums earned | $ 241,792 | $ 229,958 | 5.1 % | $ 476,508 | $ 458,548 | 3.9 % | ||||||||||||||||||||
Ceded premiums | $ (112,735) | $ (115,875) | (2.7) % | $ (221,445) | $ (234,774) | (5.7) % | ||||||||||||||||||||
Net premiums earned | $ 129,057 | $ 114,083 | 13.1 % | $ 255,063 | $ 223,774 | 14.0 % | ||||||||||||||||||||
Ceded premium ratio | 46.6 % | 50.4 % | (3.8) pts | 46.5 % | 51.2 % | (4.7) pts | ||||||||||||||||||||
Ratios to Net Premiums Earned: | ||||||||||||||||||||||||||
Loss ratio | 61.1 % | 65.1 % | (4.0) pts | 57.7 % | 61.0 % | (3.3) pts | ||||||||||||||||||||
Expense ratio | 38.9 % | 39.9 % | (1.0) pts | 40.0 % | 40.3 % | (0.3) pts | ||||||||||||||||||||
Combined ratio | 100.0 % | 105.0 % | (5.0) pts | 97.6 % | 101.3 % | (3.7) 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
Quarterly Financial Results
Second quarter 2020 net income was
Gross premiums written of
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 Analysis | |||||||||||
Book value per share increased to | |||||||||||
As Of | |||||||||||
Book Value Per Share | June 30, 2020 | December 31, 2019 | June 30, 2019 | ||||||||
Numerator: | |||||||||||
Common stockholders' equity | $ | 462,499 | $ | 448,799 | $ | 438,850 | |||||
Denominator: | |||||||||||
Total Shares Outstanding | 27,738,062 | 28,650,918 | 29,274,577 | ||||||||
Book Value Per Common Share | $ | 16.67 | $ | 15.66 | $ | 14.99 | |||||
Conference Call Details:
Tuesday, August 4, 2020 – 8:30 a.m. EDT
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. | ||||||||
June 30, 2020 | December 31, 2019 | |||||||
ASSETS | (unaudited) | |||||||
Fixed maturities, available-for-sale, at fair value | $ | 698,277 | $ | 587,256 | ||||
Equity securities, at fair value | 1,599 | 1,618 | ||||||
Other investments | 6,374 | 6,375 | ||||||
Total investments | 706,250 | 595,249 | ||||||
Cash and cash equivalents | 288,342 | 268,351 | ||||||
Restricted cash | 11,849 | 14,657 | ||||||
Accrued investment income | 4,833 | 4,377 | ||||||
Premiums receivable, net | 66,188 | 63,685 | ||||||
Reinsurance recoverable on paid and unpaid claims | 374,709 | 428,903 | ||||||
Prepaid reinsurance premiums | 361,256 | 224,102 | ||||||
Income taxes receivable | 4,651 | 3,171 | ||||||
Deferred policy acquisition costs, net | 81,590 | 77,211 | ||||||
Property and equipment, net | 19,998 | 20,753 | ||||||
Intangibles, net | 65,461 | 68,642 | ||||||
Goodwill | 152,459 | 152,459 | ||||||
Other assets | 28,804 | 18,110 | ||||||
Total Assets | $ | 2,166,390 | $ | 1,939,670 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Unpaid losses and loss adjustment expenses | $ | 620,718 | $ | 613,533 | ||||
Unearned premiums | 529,321 | 486,220 | ||||||
Reinsurance payable | 296,606 | 156,351 | ||||||
Long-term debt, net | 126,056 | 129,248 | ||||||
Deferred income tax, net | 20,957 | 12,623 | ||||||
Advance premiums | 30,870 | 16,504 | ||||||
Accrued compensation | 11,250 | 5,347 | ||||||
Accounts payable and other liabilities | 68,113 | 71,045 | ||||||
Total Liabilities | $ | 1,703,891 | $ | 1,490,871 | ||||
Commitments and contingencies | ||||||||
Stockholders' Equity: | ||||||||
Common stock | 3 | 3 | ||||||
Additional paid-in capital | 332,037 | 329,568 | ||||||
Accumulated other comprehensive income | 20,263 | 7,330 | ||||||
Treasury stock | (115,365) | (105,368) | ||||||
Retained earnings | 225,561 | 217,266 | ||||||
Total Stockholders' Equity | 462,499 | 448,799 | ||||||
Total Liabilities and Stockholders' Equity | $ | 2,166,390 | $ | 1,939,670 | ||||
HERITAGE INSURANCE HOLDINGS, INC. | ||||||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
REVENUES: | ||||||||||||||||
Gross premiums written | $ | 290,432 | $ | 254,840 | $ | 519,534 | $ | 465,188 | ||||||||
Change in gross unearned premiums | (48,640) | (24,882) | (43,026) | (6,640) | ||||||||||||
Gross premiums earned | 241,792 | 229,958 | 476,508 | 458,548 | ||||||||||||
Ceded premiums | (112,735) | (115,875) | (221,445) | (234,774) | ||||||||||||
Net premiums earned | 129,057 | 114,083 | 255,063 | 223,774 | ||||||||||||
Net investment income | 3,296 | 3,830 | 6,966 | 7,502 | ||||||||||||
Net realized and unrealized gains (losses) | (38) | 1,303 | 22 | 2,327 | ||||||||||||
Other revenue | 3,697 | 3,627 | 6,668 | 7,501 | ||||||||||||
Total revenues | 136,012 | 122,843 | 268,719 | 241,104 | ||||||||||||
EXPENSES: | ||||||||||||||||
Losses and loss adjustment expenses | 78,869 | 74,299 | 147,050 | 136,438 | ||||||||||||
Policy acquisition costs | 30,237 | 27,087 | 60,284 | 53,107 | ||||||||||||
General and administrative expenses | 19,943 | 18,384 | 41,661 | 36,988 | ||||||||||||
Total expenses | 129,049 | 119,770 | 248,995 | 226,533 | ||||||||||||
Operating income | 6,963 | 3,073 | 19,724 | 14,571 | ||||||||||||
Interest expense, net | 1,721 | 1,984 | 3,688 | 4,101 | ||||||||||||
Other non-operating loss, net | — | — | — | 48 | ||||||||||||
Income before income taxes | 5,242 | 1,089 | 16,036 | 10,422 | ||||||||||||
Provision for income taxes | 1,110 | 368 | 4,284 | 2,737 | ||||||||||||
Net income | $ | 4,132 | $ | 721 | $ | 11,752 | $ | 7,685 | ||||||||
OTHER COMPREHENSIVE INCOME | ||||||||||||||||
Change in net unrealized gains on investments | 14,823 | 7,068 | 16,850 | 15,104 | ||||||||||||
Reclassification adjustment for net realized investment | 38 | 59 | (22) | 394 | ||||||||||||
Income tax expense related to items of other | (3,440) | (1,304) | (3,895) | (3,712) | ||||||||||||
Total comprehensive income | $ | 15,553 | $ | 6,544 | $ | 24,685 | $ | 19,471 | ||||||||
Weighted average shares outstanding | ||||||||||||||||
Basic | 27,876,801 | 29,346,234 | 28,212,735 | 29,442,363 | ||||||||||||
Diluted | 27,913,696 | 29,352,796 | 28,231,273 | 29,447,668 | ||||||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.15 | $ | 0.02 | $ | 0.42 | $ | 0.26 | ||||||||
Diluted | $ | 0.15 | $ | 0.02 | $ | 0.42 | $ | 0.26 | ||||||||
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 approximately
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. 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, 2019 filed with the Securities and Exchange Commission on March 10, 2020. 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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