CLEARWATER, Fla., May 3, 2017 /PRNewswire/ -- Heritage
Insurance Holdings, Inc. (NYSE:HRTG) ("Heritage" or the "Company"),
a property and casualty insurance holding company, today reported
its financial results for the fiscal quarter ended March 31, 2017.
First Quarter Highlights
- Gross premiums earned increased 2% for Q1 2017 as compared to
Q1 2016
- Loss ratio improved by 13.9 points in Q1 2017 as compared to Q1
2016
- Net income of $6.0 million for Q1
2017
- Book value per share increased 6% as compared to Q1 2016 to
$12.67
- Stockholders' equity of $360.8
million at March 31, 2017
- Repurchased 361,211 shares for a total of $4.5 million in Q1 2017
Bruce Lucas, the Company's
Chairman and CEO, said, "The first quarter is marked by some very
favorable developments. Year over year, our loss ratio
improved 13.9 points. We ended the quarter with a 30.2% loss ratio,
which was better than our previous forecast. Tri-County continues
to lead Florida in assignment of
benefits and other abusive claims practices. However, as a result
of underwriting actions that we initiated a year ago, our
Tri-County claims were down approximately 30% compared to the first
quarter of 2016. This trend is encouraging and helps to improve our
underwriting profit while decreasing costly AOB claims. We have
initiated two rate increases that are targeted to the Tri-County
and results have been positive thus far as there has been a slight
decrease in our policy retention rate countered by an increase in
average premium per policy. This approach should benefit the
Company as we move forward. We have almost completed our 2017
reinsurance program and we are anticipating meaningful savings
compared to the 2016 treaty. Our voluntary production continues to
grow and is further diversifying our risk profile. We are off to a
great start in 2017."
Results of Operations
The following table summarizes our results of operations for the
three months ended March 31, 2017 and
2016 (in thousands, except percentages and per share amounts):
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
Revenue
|
|
|
|
|
|
Gross premiums
written
|
|
$
142,235
|
|
$
147,266
|
|
(3)%
|
|
Gross premiums
earned
|
|
$
154,608
|
|
$
151,943
|
|
2%
|
|
Ceded
premiums
|
|
$
(62,432)
|
|
$
(45,601)
|
|
37%
|
|
Net premiums
earned
|
|
$
92,176
|
|
$
106,342
|
|
(13)%
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
$
99,293
|
|
$
111,565
|
|
(11)%
|
|
Operating
income
|
|
$
11,890
|
|
$
12,040
|
|
(1)%
|
|
Income before
taxes
|
|
$
9,709
|
|
$
12,040
|
|
(19)%
|
|
Net income
|
|
$
5,983
|
|
$
7,423
|
|
(19)%
|
|
|
|
|
|
|
|
|
|
Per Share
Data:
|
|
|
|
|
|
|
|
Book value per
share
|
|
$
12.67
|
|
$
11.94
|
|
6%
|
|
Earnings per diluted
share
|
|
$
0.21
|
|
$
0.24
|
|
(13)%
|
|
|
|
|
|
|
|
|
|
Return on average
equity
|
|
6.7%
|
|
8.3%
|
|
(1.6)
|
pts
|
|
|
|
|
|
|
|
|
Ratios to Gross
Premiums Earned:
|
|
|
|
|
|
|
|
Ceded premium
ratio
|
|
40.3%
|
|
30.0%
|
|
10.3
|
pts
|
Loss ratio
|
|
30.2%
|
|
44.1%
|
|
(13.9)
|
pts
|
Operating expense
ratio
|
|
26.4%
|
|
21.4%
|
|
5.0
|
pts
|
Combined
ratio
|
|
96.9%
|
|
95.5%
|
|
1.4
|
pts
|
|
|
|
|
|
|
|
|
Ratios to Net
Premiums Earned:
|
|
|
|
|
|
|
|
Loss ratio
|
|
50.6%
|
|
63.0%
|
|
(12.4)
|
pts
|
Operating expense
ratio
|
|
44.2%
|
|
30.6%
|
|
13.6
|
pts
|
Combined
ratio
|
|
94.8%
|
|
93.6%
|
|
1.2
|
pts
|
Quarterly Financial Results
Net income for the first quarter of 2017 was $6.0 million compared to $7.4 million for the first quarter of 2016. The
increase in gross earned premium and reduction of loss related
expenses was offset by an increase in ceded premium. Operating
income was relatively flat between periods. Interest and
amortization expense of $2.2 million
recorded this quarter on our senior secured notes issued in
December 2016 contributed to the
decrease in pretax income.
Gross premiums earned increased to $154.6
million for the first quarter of 2017 compared to
$151.9 million for the first quarter
of 2016. First quarter 2017 gross premiums earned included a full
quarter for the Zephyr business, which was approximately
$12.8 million higher than a year ago.
The first quarter 2016 gross premiums earned included only 10 days
of the Zephyr business due to the closing of the Zephyr acquisition
on March 21, 2016. Offsetting this
increase was a reduction in gross premium earned in Florida, as we have not participated in
assumptions from Citizens or written new personal residential
business in the Tri-County area for nearly 12 months.
Ceded premiums as a percentage of gross premiums earned were
40.3% for the first quarter of 2017 compared to 30.0% for the first
quarter of 2016. Approximately 2.5 percentage points of the
increase in the ceded premium ratio was due to a change in the
business mix to include more wind-only and commercial residential
business, which has a higher catastrophe reinsurance cost. The
first quarter 2016 ratio was approximately 5.8 percentage points
lower due to the benefits of assuming policies from Citizens during
the fourth quarter of 2015 and the first quarter of 2016. The ceded
premium ratio for the first quarter of 2017 was approximately 2
percentage points higher due to the reduction in gross premiums
earned.
The loss ratio as measured against gross premiums earned
improved to 30.2% for the first quarter of 2017 as compared to
44.1% for the first quarter of 2016. The loss ratio for the first
quarter of 2016 included approximately 9.5 percentage points of
adverse prior year loss development compared to virtually no
comparable development for the first quarter of 2017. In addition,
weather related claims were 4.4 percentage points lower this
quarter compared to a year ago.
The Company's operating expense ratio on a gross basis was 26.4%
for the first quarter of 2017 compared to 21.4% for the first
quarter of 2016. The first quarter of 2016 expense ratio benefited
from the Citizens assumption activity by 2.3 percentage points, due
to the lack of acquisition expenses associated with the
assumptions. In addition, the expense ratio for the first quarter
of 2017 included 1.6 percentage points for the amortization of
intangible assets associated with our acquisition of Zephyr.
Overall, Heritage's combined ratio on a gross basis was 96.9%
for the first quarter of 2017 compared to 95.5% for the first
quarter of 2016. The combined ratio for the first quarter of
2017 included the higher ceded premium and expense ratios offset
partially by the improved loss ratio.
Book Value Analysis
Book value per share increased by 2% from $12.41 at December 31,
2016 to $12.67 at March 31, 2017. The increase in the Company's
book value reflects the repurchase of 361,211 shares of common
stock in the first quarter pursuant to the Company's repurchase
program.
|
As
of
|
Book Value Per
Share
|
March 31,
2017
|
|
December 31,
2016
|
|
March 31,
2016
|
Numerator:
|
|
|
|
|
|
Common stockholders'
equity
|
$
360,831
|
|
$
357,959
|
|
$
356,245
|
Denominator:
|
|
|
|
|
|
Total shares
outstanding
|
28,479,232
|
|
28,840,443
|
|
29,829,110
|
Book value per common
share
|
$
12.67
|
|
$
12.41
|
|
$
11.94
|
Conference Call Details:
Thursday, May 4, 2017 –
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.
Consolidated Statements of
Income and Other Comprehensive Income
(In thousands,
except share and per share amounts)
(unaudited)
|
|
|
|
For the Three
Months Ended March 31,
|
|
|
2017
|
|
2016
|
REVENUE:
|
|
|
|
|
Gross premiums
written
|
|
$
142,235
|
|
$
147,266
|
Change in gross
unearned premiums
|
|
12,373
|
|
4,677
|
Gross premiums
earned
|
|
154,608
|
|
151,943
|
Ceded
premiums
|
|
(62,432)
|
|
(45,601)
|
Net premiums
earned
|
|
92,176
|
|
106,342
|
Net investment
income
|
|
2,502
|
|
2,037
|
Net realized
gains
|
|
771
|
|
381
|
Other
revenue
|
|
3,844
|
|
2,805
|
Total
revenue
|
|
99,293
|
|
111,565
|
OPERATING
EXPENSES:
|
|
|
|
|
Losses and loss
adjustment expenses
|
|
46,647
|
|
66,963
|
Policy acquisition
costs
|
|
23,442
|
|
18,128
|
General and
administrative expenses
|
|
17,314
|
|
14,434
|
Total operating
expenses
|
|
87,403
|
|
99,525
|
Operating
income
|
|
$
11,890
|
|
$
12,040
|
Interest expense,
net
|
|
1,944
|
|
—
|
Amortization of debt
issuance costs
|
|
237
|
|
—
|
Income before
income taxes
|
|
9,709
|
|
12,040
|
Provision for income
taxes
|
|
3,726
|
|
4,617
|
Net
income
|
|
$
5,983
|
|
$
7,423
|
OTHER
COMPREHENSIVE INCOME:
|
|
|
|
|
Change in net
unrealized gains on investments
|
|
3,981
|
|
4,082
|
Reclassification
adjustment for net realized investment gains
|
|
(771)
|
|
(381)
|
Income tax expense
related to items of other comprehensive
income
|
|
(1,236)
|
|
(1,422)
|
Total
comprehensive income
|
|
$
7,957
|
|
$
9,702
|
Weighted average
shares outstanding
|
|
|
|
|
Basic
|
|
28,806,709
|
|
30,367,884
|
Diluted
|
|
28,806,709
|
|
30,491,579
|
Earnings per
share
|
|
|
|
|
Basic
|
|
$
0.21
|
|
$
0.24
|
Diluted
|
|
$
0.21
|
|
$
0.24
|
Consolidated Balance Sheets
(In thousands,
except share and per share amounts)
|
|
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
ASSETS
|
|
(unaudited)
|
|
|
|
|
|
Fixed maturity
securities, available for sale, at fair value (amortized
cost of $576,097 and $576,911 in 2017 and
2016 respectively)
|
|
$
|
572,904
|
|
|
$
|
571,011
|
|
Equity securities,
available for sale, at fair value (cost of $34,634 and
$34,190 in 2017 and 2016
respectively)
|
|
|
32,934
|
|
|
|
31,971
|
|
Total
investments
|
|
|
605,838
|
|
|
|
602,982
|
|
Cash and cash
equivalents
|
|
|
104,735
|
|
|
|
105,817
|
|
Restricted
cash
|
|
|
18,440
|
|
|
|
20,910
|
|
Accrued investment
income
|
|
|
5,009
|
|
|
|
4,764
|
|
Premiums receivable,
net
|
|
|
34,580
|
|
|
|
42,720
|
|
Prepaid reinsurance
premiums
|
|
|
46,058
|
|
|
|
106,609
|
|
Income taxes
receivable
|
|
|
6,424
|
|
|
|
10,713
|
|
Deferred policy
acquisition costs, net
|
|
|
41,215
|
|
|
|
42,779
|
|
Property and
equipment, net
|
|
|
16,944
|
|
|
|
17,179
|
|
Intangibles,
net
|
|
|
24,084
|
|
|
|
26,542
|
|
Goodwill
|
|
|
46,454
|
|
|
|
46,454
|
|
Other
assets
|
|
|
5,623
|
|
|
|
5,775
|
|
Total
Assets
|
|
$
|
955,404
|
|
|
$
|
1,033,244
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Unpaid losses and loss
adjustment expenses
|
|
$
|
131,572
|
|
|
$
|
140,137
|
|
Unearned
premiums
|
|
|
305,650
|
|
|
|
318,024
|
|
Reinsurance
payable
|
|
|
40,924
|
|
|
|
96,667
|
|
Note payable, net of
issuance costs
|
|
|
73,040
|
|
|
|
72,905
|
|
Deferred income
taxes
|
|
|
3,817
|
|
|
|
3,003
|
|
Advance
premiums
|
|
|
22,081
|
|
|
|
18,565
|
|
Accrued
compensation
|
|
|
3,469
|
|
|
|
4,303
|
|
Other
liabilities
|
|
|
14,020
|
|
|
|
21,681
|
|
Total
Liabilities
|
|
$
|
594,573
|
|
|
$
|
675,285
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.0001
par value, 50,000,000 shares authorized, 29,379,232 shares issued
and 28,479,232 outstanding at March 31, 2017 and 29,740,441 shares
issued and 28,840,443 outstanding at December 31, 2016
|
|
|
3
|
|
|
|
3
|
|
Additional paid-in
capital
|
|
|
206,931
|
|
|
|
205,727
|
|
Accumulated other
comprehensive loss
|
|
|
(3,044)
|
|
|
|
(5,018)
|
|
Treasury stock, at
cost, (2,120,541) shares at March 31, 2017 and (1,759,330) shares
at December 31, 2016
|
|
|
(30,068)
|
|
|
|
(25,562)
|
|
Retained
earnings
|
|
|
187,009
|
|
|
|
182,809
|
|
Total
Stockholders' Equity
|
|
|
360,831
|
|
|
|
357,959
|
|
Total Liabilities
and Stockholders' Equity
|
|
$
|
955,404
|
|
|
$
|
1,033,244
|
|
About Heritage
Heritage Insurance Holdings, Inc. is a property and casualty
insurance holding company headquartered in Clearwater, Florida. Its subsidiaries,
Heritage Property & Casualty Insurance Company and Zephyr
Insurance Company, write approximately $565
million and $58 million,
respectively, of personal and commercial residential premium
through a large network of experienced agents. The Company is
currently writing property and casualty insurance policies in
Florida, Hawaii, North
Carolina, South Carolina
and Georgia. Heritage Insurance
Holdings, Inc. is led by a seasoned senior management team with an
average of 30 years of insurance
industry experience.
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. 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 marketing
initiatives; inflation and other changes in economic conditions
(including changes in interest rates and financial markets); the
impact of new federal and state regulations that affect the
property and casualty insurance market; the costs of reinsurance
and the collectability of reinsurance; 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, 2016 filed with the
Securities and Exchange Commission on March
15, 2017. 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.
Heritage Insurance Holdings Inc.
Investor
Contact:
Steve Martindale,
CFO
727-362-7203
smartindale@heritagepci.com
or
Melanie Skijus, Investor Relations
Director
727-362-7262
mskijus@heritagepci.com
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/heritage-insurance-holdings-inc-reports-financial-results-for-first-quarter-of-2017-300450958.html
SOURCE Heritage Insurance Holdings, Inc.