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 2022
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 from 107.7% 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, up 4.7% year-over-year, with the increase primarily
stemming from rate increases, which exceeds our increase in total
insured value ("TIV") of only 1.0% and a 5.5% 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, a 15.4% reduction of TIV and a 4.9% reduction in premiums in
force year-over-year.
- Gross premiums earned of $287.4
million, up 6.3% 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, up 3.3% from the prior year quarter, with
intentional exposure-management and re-underwriting efforts
resulting in a 4.0% reduction in Florida, offset by growth of 11.4% 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 from 69.0% 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 21% higher premium over the prior year, while our
Florida TIV is down by 15% as we shift more personal lines business
from the state to Heritage's other growth markets. Our commercial
residential program continues to be profitable. We continue to
deselect business that is not performing and to seek rate increases
to address higher loss costs. While we are pleased with this
progress, work remains to be done and we are committed to
accelerating the changes we believe are necessary to achieve our
target returns."
Capital Management
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 July 5, 2022 to shareholders of record as of
June 14, 2022.
In first quarter 2022, the Company, repurchased 721,118 shares
for $5.0 million at an average price
of $6.93 per share.
Results of Operations
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
|
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 net combined ratio under 100% generally reflects
profitable underwriting results.
Quarterly Financial
Results
First quarter 2022 net loss was $30.8
million, versus a net loss of $5.1
million in the prior year quarter. The year-over-year change
stems from a larger underwriting loss driven by higher
weather-related losses, partly offset by an increase in total
revenue of $11.4 million over the
prior year quarter.
Gross premiums written were $283.2
million, up 3.3% year-over-year, reflecting a 4.0% exposure
management related reduction in Florida that was offset by 11.4% growth in
other states. Rate increases meaningfully benefited written
premiums throughout the book of business.
Premiums-in-force were $1.2
billion in first quarter 2022, up 4.7% from first quarter
2021, while policies-in-force were down 5.5%, with the delta
largely stemming from rate increases.
Gross premiums earned were $287.4
million in first quarter 2022, up 6.3% from $270.4 million in the prior year quarter. The
increase reflects higher gross premiums written over the last
twelve months.
The ceded premium ratio was 46.8% in first quarter 2022, down
0.6 points from 47.4% in the prior year quarter. The decrease
primarily stems from gross premiums earned growth outpacing ceded
premium growth.
The net loss ratio was 91.6% in first quarter 2022, up 22.7
points from 68.9% in the prior year quarter. The increase primarily
stems from a higher current accident year weather net loss ratio
and the impact of loss development, partly offset by a lower
attritional loss ratio on new business.
The net expense ratio was 37.9% in first quarter 2022, down 0.9
points from 38.8% in the prior year quarter. The decrease primarily
stems from a lower G&A expense ratio.
The net combined ratio was 129.5% in first quarter 2022, up 21.8
points from 107.7% in the prior year quarter. The increase stems
from a higher net loss ratio, partly offset by a slightly lower
expense ratios, as described above.
Book Value Analysis
Book value per share decreased to $10.65 at March 31,
2022, down 16.9% from fourth quarter 2021. The decrease from
December 31, 2021 is attributable to
both underwriting losses in the first quarter 2022 coupled with
unrealized losses on the Company's available-for-sale fixed income
securities portfolio. The unrealized losses were unrelated to
credit risk but were primarily due to the sharp first-quarter
decline in bond prices in a higher interest rate environment.
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
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)
|
|
|
|
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, $0.0001 par value
|
|
|
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
March 31,
|
|
|
|
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)
|
|
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 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.