Heritage Reports Second Quarter 2021 Results
Heritage Insurance Holdings, Inc. (NYSE: HRTG) reported a net loss of $4.0 million in Q2 2021, equating to $0.14 per share, a significant decline from a net income of $4.1 million in Q2 2020. Despite this, gross premiums written rose by 16.3% year-over-year to $337.7 million. The book value per share decreased by 0.8% to $15.20. Weather losses increased to $35.5 million, contributing to the higher net loss ratio of 68.8%. The company declared a quarterly dividend of $0.06 per share, payable on October 6, 2021. CEO Ernie Garateix emphasized improvements in underwriting and pricing actions.
- Gross premiums written increased by 16.3% to $337.7 million year-over-year.
- Net premiums earned rose 13.5% to $146.5 million compared to the prior year.
- The net expense ratio decreased to 36.4%, down 2.5 points from the previous year.
- Net loss of $4.0 million, a decline from net income of $4.1 million in Q2 2020.
- Weather losses increased to $35.5 million from $26.8 million in the prior year quarter.
- Net loss ratio rose to 68.8%, up from 61.1% in the prior year.
CLEARWATER, Fla., Aug. 5, 2021 /PRNewswire/ -- Heritage Insurance Holdings, Inc. (NYSE: HRTG) ("Heritage" or the "Company"), a super-regional property and casualty insurance holding company, today reported second quarter 2021 financial results.
Second Quarter 2021 Highlights
- Net loss of
$4.0 million , or$0.14 per share. - Book value per share of
$15.20 , down0.8% from first quarter 2021. - Gross premiums written of
$337.7 million , up16.3% year-over-year. - Favorable prior year reserve development of
$0.6 million . - Net current accident quarter weather losses of
$35.5 million , up from$26.8 million in the prior year quarter. Current accident quarter weather losses include$24.5 million of net catastrophe losses, up from$17.6 million in the prior year quarter, and$11.0 million of other weather losses, up from$9.2 million in the prior year quarter. - Additional ceded premium of
$9.4 million , reflecting reinstatement of severe convective storm reinsurance coverage, which contributed 6.3 points to the net combined ratio. - Total capital returned to shareholders of
$1.7 million , reflecting$0.06 per share regular quarterly dividend.
Ernie Garateix, the Company's CEO, said, "I'm encouraged that despite a
Quarterly Dividend
Heritage's Board of Directors declared a quarterly cash dividend of
COVID-19 Update
We continue to monitor the short- and long-term impacts of COVID-19, and through June 30, 2021, we continue to see 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 and six months ended June 30, 2021 and 2020 (amounts in thousands, except percentages and per share amounts):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
2021 | 2020 | Change | 2021 | 2020 | Change | |||||||||||||||||||||
Total revenues | $ | 150,197 | $ | 136,012 | 10.4 | % | $ | 297,441 | $ | 268,719 | 10.7 | % | ||||||||||||||
Net (loss) income | $ | (3,950) | $ | 4,132 | (195.6) | % | $ | (9,097) | $ | 11,752 | (177.4) | % | ||||||||||||||
Per Share | $ | (0.14) | $ | 0.15 | (193.3) | % | $ | (0.33) | $ | 0.42 | (178.6) | % | ||||||||||||||
Book value per share | $ | 15.20 | $ | 16.67 | (8.8) | % | $ | 15.20 | $ | 16.67 | (8.8) | % | ||||||||||||||
Return on equity | (3.7) | % | 3.6 | % | (7.3) | pts | (4.2) | % | 5.2 | % | (9.4) | pts | ||||||||||||||
Underwriting summary | ||||||||||||||||||||||||||
Gross premiums written | $ | 337,700 | $ | 290,432 | 16.3 | % | $ | 611,881 | $ | 519,534 | 17.8 | % | ||||||||||||||
Gross premiums earned | $ | 285,646 | $ | 241,792 | 18.1 | % | $ | 556,057 | $ | 476,508 | 16.7 | % | ||||||||||||||
Ceded premiums | $ | (139,147) | $ | (112,735) | 23.4 | % | $ | (267,359) | $ | (221,445) | 20.7 | % | ||||||||||||||
Net premiums earned | $ | 146,499 | $ | 129,057 | 13.5 | % | $ | 288,698 | $ | 255,063 | 13.2 | % | ||||||||||||||
Ceded premium ratio | 48.7 | % | 46.6 | % | 2.1 | pts | 48.1 | % | 46.5 | % | 1.6 | pts | ||||||||||||||
Ratios to Net Premiums Earned: | ||||||||||||||||||||||||||
Loss ratio | 68.8 | % | 61.1 | % | 7.7 | pts | 68.8 | % | 57.7 | % | 11.1 | pts | ||||||||||||||
Expense ratio | 36.4 | % | 38.9 | % | (2.5) | pts | 37.6 | % | 40.0 | % | (2.4) | pts | ||||||||||||||
Combined ratio | 105.2 | % | 100.0 | % | 5.2 | pts | 106.4 | % | 97.7 | % | 8.7 | 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 2021 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 Analysis
Book value per share decreased to
As Of | |||||||||||
Book Value Per Share | June 30, 2021 | December 31, 2020 | June 30, 2020 | ||||||||
Numerator: | |||||||||||
Common stockholders' equity | $ | 424,873 | $ | 442,344 | $ | 462,499 | |||||
Denominator: | |||||||||||
Total Shares Outstanding | 27,946,941 | 27,748,606 | 27,738,062 | ||||||||
Book Value Per Common Share | $ | 15.20 | $ | 15.94 | $ | 16.67 | |||||
Conference Call Details:
Friday, August 6, 2021 – 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) | ||||||||
June 30, 2021 | December 31, 2020 | |||||||
ASSETS | (unaudited) | |||||||
Fixed maturities, available-for-sale, at fair value | $ | 643,559 | $ | 561,011 | ||||
Equity securities, at cost | 1,415 | 1,599 | ||||||
Other investments | 24,786 | 26,409 | ||||||
Total investments | 669,760 | 589,019 | ||||||
Cash and cash equivalents | 446,956 | 440,956 | ||||||
Restricted cash | 5,414 | 5,427 | ||||||
Accrued investment income | 3,002 | 2,737 | ||||||
Premiums receivable, net | 83,648 | 77,471 | ||||||
Reinsurance recoverable on paid and unpaid claims, net | 314,918 | 355,037 | ||||||
Prepaid reinsurance premiums | 416,630 | 245,818 | ||||||
Income taxes receivable | 40,000 | 32,224 | ||||||
Deferred policy acquisition costs, net | 95,967 | 89,265 | ||||||
Property and equipment, net | 18,565 | 18,685 | ||||||
Right of use lease asset, net | 29,349 | 6,461 | ||||||
Intangibles, net | 59,102 | 62,277 | ||||||
Goodwill | 152,459 | 152,459 | ||||||
Other assets | 15,856 | 11,544 | ||||||
Total Assets | $ | 2,351,626 | $ | 2,089,379 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Unpaid losses and loss adjustment expenses | $ | 625,979 | $ | 659,341 | ||||
Unearned premiums | 625,512 | 569,618 | ||||||
Reinsurance payable | 392,783 | 161,918 | ||||||
Long-term debt, net | 119,801 | 120,998 | ||||||
Deferred income tax, net | 19,617 | 18,477 | ||||||
Advance premiums | 36,625 | 18,268 | ||||||
Accrued compensation | 8,740 | 9,325 | ||||||
Lease liability | 31,840 | 8,155 | ||||||
Accounts payable and other liabilities | 65,856 | 80,935 | ||||||
Total Liabilities | $ | 1,926,753 | $ | 1,647,035 | ||||
Commitments and contingencies | ||||||||
Stockholders' Equity: | ||||||||
Common stock | 3 | 3 | ||||||
Additional paid-in capital | 332,287 | 331,867 | ||||||
Accumulated other comprehensive income | 623 | 6,057 | ||||||
Treasury stock | (115,365) | (115,365) | ||||||
Retained earnings | 207,325 | 219,782 | ||||||
Total Stockholders' Equity | 424,873 | 442,344 | ||||||
Total Liabilities and Stockholders' Equity | $ | 2,351,626 | $ | 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 | For the Six Months Ended | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
REVENUES: | ||||||||||||||||
Gross premiums written | $ | 337,700 | $ | 290,432 | $ | 611,881 | $ | 519,534 | ||||||||
Change in gross unearned premiums | (52,054) | (48,640) | (55,824) | (43,026) | ||||||||||||
Gross premiums earned | 285,646 | 241,792 | 556,057 | 476,508 | ||||||||||||
Ceded premiums | (139,147) | (112,735) | (267,359) | (221,445) | ||||||||||||
Net premiums earned | 146,499 | 129,057 | 288,698 | 255,063 | ||||||||||||
Net investment income | 956 | 3,296 | 2,249 | 6,966 | ||||||||||||
Net realized and unrealized (losses) gains | (1,000) | (38) | (920) | 22 | ||||||||||||
Other revenue | 3,742 | 3,697 | 7,414 | 6,668 | ||||||||||||
Total revenues | 150,197 | 136,012 | 297,441 | 268,719 | ||||||||||||
EXPENSES: | ||||||||||||||||
Losses and loss adjustment expenses | 100,834 | 78,869 | 198,743 | 147,050 | ||||||||||||
Policy acquisition costs | 37,833 | 30,237 | 73,199 | 60,284 | ||||||||||||
General and administrative expenses | 15,520 | 19,943 | 35,320 | 41,661 | ||||||||||||
Total expenses | 154,187 | 129,049 | 307,262 | 248,995 | ||||||||||||
Operating (loss) income | (3,990) | 6,963 | (9,821) | 19,724 | ||||||||||||
Interest expense, net | 1,925 | 1,721 | 3,803 | 3,688 | ||||||||||||
(Loss) income before income taxes | (5,915) | 5,242 | (13,624) | 16,036 | ||||||||||||
(Benefit) provision for income taxes | (1,965) | 1,110 | (4,527) | 4,284 | ||||||||||||
Net (loss) income | $ | (3,950) | $ | 4,132 | $ | (9,097) | $ | 11,752 | ||||||||
OTHER COMPREHENSIVE INCOME | ||||||||||||||||
Change in net unrealized (losses) gains on investments | 3,625 | 14,823 | (6,972) | 16,850 | ||||||||||||
Reclassification adjustment for net realized investment (gains) losses | (22) | 38 | (102) | (22) | ||||||||||||
Income tax (expense) benefit related to items of other comprehensive income | (835) | (3,440) | 1,640 | (3,895) | ||||||||||||
Total comprehensive (loss) income | $ | (1,182) | $ | 15,553 | $ | (14,531) | $ | 24,685 | ||||||||
Weighted average shares outstanding | ||||||||||||||||
Basic | 27,904,923 | 27,876,801 | 27,866,364 | 28,212,735 | ||||||||||||
Diluted | 27,904,923 | 27,913,696 | 27,866,364 | 28,231,273 | ||||||||||||
(Loss) earnings per share | ||||||||||||||||
Basic | $ | (0.14) | $ | 0.15 | $ | (0.33) | $ | 0.42 | ||||||||
Diluted | $ | (0.14) | $ | 0.15 | $ | (0.33) | $ | 0.42 | ||||||||
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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