TAMPA,
Fla., Aug. 8, 2023 /PRNewswire/ -- Heritage
Insurance Holdings, Inc. (NYSE: HRTG) ("Heritage" or the
"Company"), a super-regional property and casualty insurance
holding company, today reported second quarter of 2023 financial
results.
Second Quarter 2023 Result Highlights
- Second quarter net income of $7.8
million or $0.30 per diluted
share, up from a net loss of $87.9
million or ($3.32) per diluted
share in the prior year quarter primarily driven by growth in net
premiums earned, and higher investment income, which resulted in an
improved net combined ratio. The net loss in the prior year quarter
was due to a $90.8 million, net of
tax, or $3.43 per diluted share
non-cash goodwill impairment charge, resulting in no remaining
goodwill on the Company's balance sheet as of June 30, 2022.
- Second quarter adjusted net income of $8.3 million or $0.32 per diluted share, up from adjusted net
income of $2.9 million, or
$0.11 per diluted share in the prior
year quarter driven by an improvement in the net combined ratio and
higher net investment income.
- Gross premiums written of $396.6
million, up 8.6% from $365.3
million in the prior year quarter.
- Gross premiums earned of $330.0
million, up 11.4% from $296.2
million in the prior year quarter.
- Net loss ratio of 60.3%, an improvement of 3.8 points from
64.1% in the prior year quarter.
- Net expense ratio of 34.8%, an improvement of 0.5 points from
35.3% in the prior year quarter.
- Net combined ratio of 95.1%, an improvement of 4.3 points from
99.4% in the prior year quarter.
- Continued successful exposure management with Florida personal lines policies-in-force
intentionally declining by 15.8%, as compared to the prior year
period.
"This quarter marks the third consecutive quarter of
profitability and a net combined ratio below 100%," said Heritage
CEO Ernie Garateix. "The continued
successful implementation of our strategic profitability
initiatives across the organization, which includes significant
rating actions, improved underwriting, and selective organic growth
of our commercial residential business has improved the quality of
our book of business and increased our average premium by 24.3%
over the prior year quarter. Investment income continues to climb
from higher interest rates and our investment strategy. I'm also
pleased with the terms of our catastrophe excess-of-loss
reinsurance placement, which included many long-term partners as
well as new trading partners. Our continued focus on underwriting
profits, adequate pricing and thorough underwriting has yielded
these positive results while also positioning us for long-term
sustainable profitability."
Strategic Profitability Initiatives
The following provides an update to the Company's strategic
initiatives that are expected to enable Heritage to achieve
consistent long-term quarterly earnings and drive shareholder
value. The Supplemental Information table included in this earnings
release demonstrates progress made compared to the second quarter
2022.
- Generate underwriting profit though rate adequacy and more
selective underwriting.
-
- Continued significant rating actions throughout the book of
business resulting in an increase in average premium per policy
throughout the book of 24.3% compared to the second quarter of 2022
and 6.8% from the first quarter of 2023.
- Premiums-in-force of $1.3 billion
were up 10.5% from the prior year quarter, while policy count is
down 11.1%, resulting from continued underwriting efforts to manage
exposure for personal residential business while selectively
growing the Company's commercial residential business.
- Continued focus on tightening underwriting criteria while also
restricting new business for policies written in over-concentrated
markets or products.
- Allocate capital to products and geographies that maximize
long-term returns.
-
- Strategically increased Florida commercial residential
premiums-in-force by 75.5% over the prior year quarter while total
insured value ("TIV") for that product increased 35.3% and policies
in force increased by only 12.7%.
- Reduction of policy count for the Florida personal lines product remains a key
focus and will continue until the positive impact of recent
legislation to reduce abusive claims practices is realized.
Policies in force for Florida
personal lines business intentionally declined by 15.8% as compared
to the prior year period and 3.9% from the first quarter of
2023.
- This disciplined underwriting approach resulted in a policy
count reduction from the prior year quarter of 11.1% in other
states while generating a 10.5% increase in premiums-in-force.
- Maintain a balanced and diversified portfolio.
-
- Even with the substantial increase in commercial business, no
state represents over 26.2% of the Company's TIV.
- The top four states grew TIV by an average of 2.6% while
the smallest five states grew TIV by 27.3%.
- As a result of diversification efforts, the top five personal
lines states represented 71.6% of all TIV at second quarter
2023 compared to 72.5% of all TIV at second quarter 2022.
- Florida TIV increased 2.5% related to intentional growth
of the Company's commercial residential product and the use of
inflation guard which ensures appropriate replacement cost values
for all business, partly offset by the decrease in Florida personal lines policies over the prior
year quarter.
- TIV outside of Florida
represented 73.8% of the entire portfolio, compared to 74.4% as of
the second quarter of 2022, driven by exposure management of
personal lines business throughout the book and selective growth of
Florida commercial lines
business.
- Provide coverage suitable to the market and return
targets.
-
- Selective expansion of Excess & Surplus lines ("E&S")
premium-in-force in California and
Florida.
- Introduce E&S products in South Carolina in the third quarter of
2023.
- Continue to evaluate other strategic states for E&S
products.
Capital Management
Heritage's Board of Directors has decided to continue its
temporary suspension of the quarterly dividend to shareholders. The
Board of Directors will continue to evaluate dividend distribution
and stock repurchases on a quarterly basis. No shares of common
stock were repurchased during the quarter.
Results of Operations
The following table summarizes results of operations for the
three and six months ended June 30,
2023 and 2022 (amounts in thousands, except percentages and
per share amounts):
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
2023
|
|
|
2022
|
|
|
Change
|
|
|
|
2023
|
|
|
2022
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue
|
$
|
|
185,313
|
|
$
|
|
163,770
|
|
|
|
13.2
|
|
%
|
$
|
|
362,234
|
|
$
|
|
322,378
|
|
|
|
12.4
|
|
%
|
Net income
(loss)
|
$
|
|
7,779
|
|
$
|
|
(87,866)
|
|
|
|
(108.9)
|
|
%
|
$
|
|
21,787
|
|
$
|
|
(118,625)
|
|
|
|
(118.4)
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
(loss) [1]
|
$
|
|
8,320
|
|
$
|
|
2,908
|
|
|
|
186.1
|
|
%
|
$
|
|
22,328
|
|
$
|
|
(27,851)
|
|
|
|
(180.2)
|
|
%
|
Earnings (loss) per
share
|
$
|
|
0.30
|
|
$
|
|
(3.32)
|
|
|
|
(109.1)
|
|
%
|
$
|
|
0.85
|
|
$
|
|
(4.46)
|
|
|
|
(119.1)
|
|
%
|
Adjusted net income
(loss) per share [1]
|
$
|
|
0.32
|
|
$
|
|
0.11
|
|
|
|
190.9
|
|
%
|
$
|
|
0.87
|
|
$
|
|
(1.05)
|
|
|
|
(182.9)
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per
share
|
$
|
|
6.27
|
|
$
|
|
6.80
|
|
|
|
(7.8)
|
|
%
|
$
|
|
6.27
|
|
$
|
|
6.80
|
|
|
|
(7.8)
|
|
%
|
Adjusted book value
per share [1]
|
$
|
|
8.09
|
|
$
|
|
8.35
|
|
|
|
(3.1)
|
|
%
|
$
|
|
8.09
|
|
$
|
|
8.35
|
|
|
|
(3.1)
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on equity
[2]
|
|
|
19.7
|
|
%
|
|
(152.0)
|
|
%
|
|
171.7
|
|
pts
|
|
|
29.9
|
|
%
|
|
(90.6)
|
|
%
|
|
120.5
|
|
pts
|
Adjusted return on
equity [1][2]
|
|
|
21.1
|
|
%
|
|
5.0
|
|
%
|
|
16.1
|
|
pts
|
|
|
30.6
|
|
%
|
|
(21.3)
|
|
%
|
|
51.9
|
|
pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting
summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums
written
|
$
|
|
396,559
|
|
$
|
|
365,284
|
|
|
|
8.6
|
|
%
|
$
|
|
706,868
|
|
$
|
|
648,480
|
|
|
|
9.0
|
|
%
|
Gross premiums
earned
|
$
|
|
330,015
|
|
$
|
|
296,211
|
|
|
|
11.4
|
|
%
|
$
|
|
647,037
|
|
$
|
|
583,579
|
|
|
|
10.9
|
|
%
|
Ceded premiums
earned
|
$
|
|
(153,211)
|
|
$
|
|
(137,940)
|
|
|
|
11.1
|
|
%
|
$
|
|
(304,204)
|
|
$
|
|
(272,379)
|
|
|
|
11.7
|
|
%
|
Net premiums
earned
|
$
|
|
176,804
|
|
$
|
|
158,271
|
|
|
|
11.7
|
|
%
|
$
|
|
342,833
|
|
$
|
|
311,200
|
|
|
|
10.2
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceded premium
ratio
|
|
|
46.4
|
|
%
|
|
46.6
|
|
%
|
|
(0.2)
|
|
pts
|
|
|
47.0
|
|
%
|
|
46.7
|
|
%
|
|
0.3
|
|
pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Net Premiums
Earned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
60.3
|
|
%
|
|
64.1
|
|
%
|
|
(3.8)
|
|
pts
|
|
|
59.5
|
|
%
|
|
77.6
|
|
%
|
|
(18.1)
|
|
pts
|
Expense
ratio
|
|
|
34.8
|
|
%
|
|
35.3
|
|
%
|
|
(0.5)
|
|
pts
|
|
|
35.3
|
|
%
|
|
36.6
|
|
%
|
|
(1.3)
|
|
pts
|
Combined
ratio
|
|
|
95.1
|
|
%
|
|
99.4
|
|
%
|
|
(4.3)
|
|
pts
|
|
|
94.8
|
|
%
|
|
114.2
|
|
%
|
|
(19.4)
|
|
pts
|
|
[1]
Adjusted net income (loss), Adjusted net income (loss) per
share, Adjusted book value per share, and Adjusted return on equity
are non-GAAP financial measures. Information regarding these
non-GAAP financial measures, including required reconciliations, is
set forth below under the "Non-GAAP Financial Measures" section of
this release.
|
|
[2]
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 100% generally reflects profitable
underwriting results.
Second Quarter 2023 Results
- Second quarter net income of $7.8
million or $0.30 per diluted
share, compared to a net loss of $87.9
million or ($3.32) per diluted
share in the prior year quarter. The improvement from the prior
year quarter is due to growth in net premiums earned and net
investment income partly offset by higher losses and operating
expenses, primarily associated with the increase in gross premiums
written over the prior year quarter, which resulted in a lower
combined ratio than the prior year quarter. The second quarter of
2022 included a net $90.8 million,
non-cash goodwill impairment charge, which amounted to a
$3.43 loss per diluted share,
resulting in no remaining goodwill on the balance sheet.
- Adjusted net income was $8.3
million or $0.32 per diluted
share, up from adjusted net income of $2.9
million or $0.11 per diluted
share in the prior year quarter. Adjusted net income growth
primarily stemmed a lower combined ratio from the prior year
quarter as described above.
- Premiums-in-force of $1.3
billion, represented a 10.5% increase from second quarter
2022 due to continued proactive underwriting actions and rate
increases across the entire portfolio, despite an intentional
policy count reduction of approximately 61,000 policies.
Premiums-in-force were also favorably impacted by strategic growth
of the Company's commercial product and use of inflation guard
across all books of business.
- Gross premiums written were $396.6
million, up 8.6% from $365.3
million in the prior year quarter, reflecting a strategic
and substantial increase in Florida commercial lines business and a higher
average premium per policy throughout the book of business, partly
offset by intentional exposure management resulting in premium
reductions on business outside of Florida. Gross premiums written for
Florida personal lines business
increased 3.0% due to rate increases, despite a 16.6% reduction in
policy count from the prior year quarter.
- Gross premiums earned of $330.0
million, up 11.4% from $296.2
million in the prior year quarter, reflecting higher gross
premiums written over the last twelve months driven by a higher
average premium per policy and organic growth of the commercial
residential business.
- Net premiums earned of $176.8
million, up 11.7% from $158.3
million in the prior year quarter, reflecting higher gross
premium earned outpacing the increase in ceded premiums for the
quarter.
- Ceded premium ratio of 46.4%, down 0.2 points from 46.6% in the
prior year quarter driven by higher gross premiums earned, partly
offset by the higher cost each year of the catastrophe excess of
loss program, which incepts in June.
- Net loss ratio of 60.3%, down 3.8 points from 64.1% in the
prior year quarter, driven by higher net premiums earned, partly
offset by higher net losses and LAE driven by higher attritional
losses, net of lower weather losses. Net current accident year
weather losses of $33.8 million, down
from $38.1 million in the prior year
quarter. There were no catastrophe losses in the quarter compared
to catastrophe weather losses of $32.1
million in the prior year quarter. Other weather losses were
$33.8 million, up from $6.0 million in the prior year quarter. The net
loss ratio also benefited from favorable loss development of
$2.7 million compared to unfavorable
development in the second quarter of 2022 of $82,000.
- Net expense ratio was 34.8% in second quarter 2023, down 0.5
points from the prior year quarter amount of 35.3%, as the benefit
of higher net premiums earned over the prior year quarter more than
offset higher policy acquisition costs and general and
administrative costs.
- Net combined ratio of 95.1%, improved 4.3 points from 99.4% in
the prior year quarter, driven by lower net loss and net expense
ratios as described above.
- Effective tax rate was 43.0% compared to (0.6%) in the prior
year quarter, driven by the impact of permanent differences in
relation to the pre-tax income or loss each quarter. The effective
tax rate in second quarter 2023 was impacted by a valuation
allowance related to certain tax elections made by Osprey Re, the
Company's captive reinsurer domiciled in Bermuda. The Company increased its valuation
allowance from first quarter 2023 by $2.5
million, adversely impacting the effective tax rate for the
quarter. The effective tax rate in second quarter 2022 was impacted
by the mostly non-deductible goodwill impairment charge described
above.
Supplemental Information:
Policies-in-force:
|
|
Q2
2023
|
|
|
Q2
2022
|
|
|
%
Change
|
|
|
Florida
|
|
|
165,761
|
|
|
|
195,987
|
|
|
|
(15.4)
|
|
%
|
Other States
|
|
|
323,629
|
|
|
|
354,534
|
|
|
|
(8.7)
|
|
%
|
Total
|
|
|
489,390
|
|
|
|
550,521
|
|
|
|
(11.1)
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Premiums-in-force:
|
|
|
|
|
|
|
|
|
|
|
Florida
|
$
|
|
665,169,364
|
|
$
|
|
564,814,121
|
|
|
|
17.8
|
|
%
|
Other States
|
|
|
675,983,599
|
|
|
|
648,621,713
|
|
|
|
4.2
|
|
%
|
Total
|
$
|
|
1,341,152,963
|
|
$
|
|
1,213,435,834
|
|
|
|
10.5
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total Insured
Value:
|
|
|
|
|
|
|
|
|
|
|
Florida
|
$
|
|
105,826,117,271
|
|
$
|
|
103,200,520,845
|
|
|
|
2.5
|
|
%
|
Other States
|
|
|
297,901,382,470
|
|
|
|
299,177,714,835
|
|
|
|
(0.4)
|
|
%
|
Total
|
$
|
|
403,727,499,741
|
|
$
|
|
402,378,235,680
|
|
|
|
0.3
|
|
%
|
Book Value Analysis
Book value per share of $6.27 at
June 30, 2023, was up 22.2% from
fourth quarter 2022 and down 7.8% from second quarter 2022. The
decrease from the comparable quarter of 2022 is primarily
attributable to underwriting losses during the third quarter of
2022. The increase from fourth quarter 2022 is driven by net income
generated in the first and second quarters of 2023 as well as the
benefit of lower unrealized losses on the Company's fixed income
securities portfolio during 2023. The unrealized losses are
unrelated to credit risk but due to the rising interest rate
environment.
Book Value Per
Share
|
|
As Of
|
|
|
|
June 30,
2023
|
|
|
December 31,
2022
|
|
|
June 30,
2022
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Common stockholders'
equity
|
$
|
|
160,627
|
|
$
|
|
131,039
|
|
$
|
|
180,546
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Total Shares
Outstanding
|
$
|
|
25,622,495
|
|
$
|
|
25,539,433
|
|
$
|
|
26,544,096
|
|
Book Value Per Common
Share
|
|
|
6.27
|
|
|
|
5.13
|
|
|
|
6.80
|
|
Adjusted Book
Value Per Common Share
|
$
|
|
8.09
|
|
$
|
|
7.23
|
|
$
|
|
8.35
|
|
Conference Call Details:
Wednesday August 9, 2023 –
9:00 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)
|
|
|
|
June 30,
2023
|
|
|
December 31,
2022
|
|
ASSETS
|
|
(unaudited)
|
|
|
|
|
Fixed maturities,
available-for-sale, at fair value
|
|
$
|
695,062
|
|
|
$
|
635,572
|
|
Equity securities, at
fair value
|
|
|
1,499
|
|
|
|
1,514
|
|
Other investments,
net
|
|
|
11,777
|
|
|
|
16,484
|
|
Total
investments
|
|
|
708,338
|
|
|
|
653,570
|
|
Cash and cash
equivalents
|
|
|
247,092
|
|
|
|
280,881
|
|
Restricted
cash
|
|
|
9,678
|
|
|
|
6,691
|
|
Accrued investment
income
|
|
|
3,572
|
|
|
|
3,817
|
|
Premiums receivable,
net
|
|
|
86,601
|
|
|
|
92,749
|
|
Reinsurance
recoverable on paid and unpaid claims, net
|
|
|
543,996
|
|
|
|
805,059
|
|
Prepaid reinsurance
premiums
|
|
|
509,206
|
|
|
|
306,977
|
|
Income tax
receivable
|
|
|
13,261
|
|
|
|
12,118
|
|
Deferred income tax
asset, net
|
|
|
10,912
|
|
|
|
16,841
|
|
Deferred policy
acquisition costs, net
|
|
|
106,736
|
|
|
|
99,617
|
|
Property and
equipment, net
|
|
|
30,716
|
|
|
|
25,729
|
|
Right-of-use lease
asset, finance
|
|
|
18,849
|
|
|
|
20,132
|
|
Right-of-use lease
asset, operating
|
|
|
7,390
|
|
|
|
7,335
|
|
Intangibles,
net
|
|
|
45,647
|
|
|
|
49,575
|
|
Other
assets
|
|
|
15,022
|
|
|
|
11,509
|
|
Total
Assets
|
|
$
|
2,357,016
|
|
|
$
|
2,392,600
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Unpaid losses and loss
adjustment expenses
|
|
$
|
817,859
|
|
|
$
|
1,131,807
|
|
Unearned
premiums
|
|
|
716,378
|
|
|
|
656,641
|
|
Reinsurance
payable
|
|
|
387,598
|
|
|
|
199,803
|
|
Long-term debt,
net
|
|
|
124,376
|
|
|
|
128,943
|
|
Advance
premiums
|
|
|
38,939
|
|
|
|
26,516
|
|
Accrued
compensation
|
|
|
8,129
|
|
|
|
6,594
|
|
Lease liability,
finance
|
|
|
21,457
|
|
|
|
22,557
|
|
Lease liability,
operating
|
|
|
8,690
|
|
|
|
8,690
|
|
Accounts payable and
other liabilities
|
|
|
72,963
|
|
|
|
80,010
|
|
Total
Liabilities
|
|
$
|
2,196,389
|
|
|
$
|
2,261,561
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Common stock, $0.0001
par value
|
|
|
3
|
|
|
|
3
|
|
Additional paid-in
capital
|
|
|
335,501
|
|
|
|
334,711
|
|
Accumulated other
comprehensive loss, net of taxes
|
|
|
(46,574)
|
|
|
|
(53,585)
|
|
Treasury stock, at
cost
|
|
|
(130,900)
|
|
|
|
(130,900)
|
|
Retained earnings
(deficit)
|
|
|
2,597
|
|
|
|
(19,190)
|
|
Total Stockholders'
Equity
|
|
|
160,627
|
|
|
|
131,039
|
|
Total Liabilities
and Stockholders' Equity
|
|
$
|
2,357,016
|
|
|
$
|
2,392,600
|
|
HERITAGE INSURANCE
HOLDINGS, INC.
Condensed
Consolidated Statements of Operations and Other Comprehensive
Income (Loss)
(Amounts in
thousands, except share amounts)
(Unaudited)
|
|
|
|
For the Three
Months Ended
June 30,
|
|
|
For the Six
Months Ended
June 30,
|
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums
written
|
|
$
|
396,559
|
|
|
$
|
365,284
|
|
|
$
|
706,868
|
|
|
$
|
648,480
|
|
Change in gross
unearned premiums
|
|
|
(66,544)
|
|
|
|
(69,073)
|
|
|
|
(59,831)
|
|
|
|
(64,901)
|
|
Gross premiums
earned
|
|
|
330,015
|
|
|
|
296,211
|
|
|
|
647,037
|
|
|
|
583,579
|
|
Ceded
premiums
|
|
|
(153,211)
|
|
|
|
(137,940)
|
|
|
|
(304,204)
|
|
|
|
(272,379)
|
|
Net premiums
earned
|
|
|
176,804
|
|
|
|
158,271
|
|
|
|
342,833
|
|
|
|
311,200
|
|
Net investment
income
|
|
|
6,599
|
|
|
|
2,163
|
|
|
|
12,181
|
|
|
|
4,163
|
|
Net realized (losses)
gains and impairment losses
|
|
|
(1,568)
|
|
|
|
(102)
|
|
|
|
330
|
|
|
|
(118)
|
|
Other
revenue
|
|
|
3,478
|
|
|
|
3,438
|
|
|
|
6,890
|
|
|
|
7,133
|
|
Total
revenues
|
|
|
185,313
|
|
|
|
163,770
|
|
|
|
362,234
|
|
|
|
322,378
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss
adjustment expenses
|
|
|
106,646
|
|
|
|
101,522
|
|
|
|
204,098
|
|
|
|
241,560
|
|
Policy acquisition
costs, net
|
|
|
41,451
|
|
|
|
38,375
|
|
|
|
81,776
|
|
|
|
76,632
|
|
General and
administrative expenses, net
|
|
|
20,058
|
|
|
|
17,466
|
|
|
|
39,111
|
|
|
|
37,190
|
|
Goodwill and
intangible asset impairment
|
|
|
767
|
|
|
|
91,959
|
|
|
|
767
|
|
|
|
91,959
|
|
Total
expenses
|
|
|
168,922
|
|
|
|
249,322
|
|
|
|
325,752
|
|
|
|
447,341
|
|
Operating income
(loss)
|
|
|
16,391
|
|
|
|
(85,552)
|
|
|
|
36,482
|
|
|
|
(124,963)
|
|
Interest expense,
net
|
|
|
2,740
|
|
|
|
1,751
|
|
|
|
5,621
|
|
|
|
3,723
|
|
Income (loss) before
income taxes
|
|
|
13,651
|
|
|
|
(87,303)
|
|
|
|
30,861
|
|
|
|
(128,686)
|
|
Provision (benefit)
for income taxes
|
|
|
5,872
|
|
|
|
563
|
|
|
|
9,074
|
|
|
|
(10,061)
|
|
Net income
(loss)
|
|
$
|
7,779
|
|
|
$
|
(87,866)
|
|
|
$
|
21,787
|
|
|
$
|
(118,625)
|
|
OTHER COMPREHENSIVE
INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net
unrealized (losses) gains on investments
|
|
|
(2,986)
|
|
|
|
(16,161)
|
|
|
|
9,158
|
|
|
|
(47,932)
|
|
Reclassification
adjustment for net realized investment
losses
|
|
|
9
|
|
|
|
102
|
|
|
|
11
|
|
|
|
118
|
|
Income tax benefit
(expense) related to items of other
comprehensive income (loss)
|
|
|
698
|
|
|
|
3,759
|
|
|
|
(2,158)
|
|
|
|
11,193
|
|
Total comprehensive
income (loss)
|
|
$
|
5,500
|
|
|
$
|
(100,166)
|
|
|
$
|
28,798
|
|
|
$
|
(155,246)
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
25,567,157
|
|
|
|
26,453,456
|
|
|
|
25,562,731
|
|
|
|
26,620,418
|
|
Diluted
|
|
|
25,626,420
|
|
|
|
26,453,456
|
|
|
|
25,621,994
|
|
|
|
26,620,418
|
|
Earnings (loss) per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.30
|
|
|
$
|
(3.32)
|
|
|
$
|
0.85
|
|
|
$
|
(4.46)
|
|
Diluted
|
|
$
|
0.30
|
|
|
$
|
(3.32)
|
|
|
$
|
0.85
|
|
|
$
|
(4.46)
|
|
About Heritage
Heritage Insurance Holdings, Inc. is a super-regional property
and casualty insurance holding company. Through its insurance
subsidiaries and a large network of experienced agents, the Company
writes approximately $1.3 billion of
gross personal and commercial residential premium across its
multi-state footprint.
Non-GAAP Financial Measures
We measure our performance with several financial and operating
metrics. We use these metrics to assess the progress of our
business, make decisions on where to allocate capital, time and
investments and assess the long-term performance of our company.
Certain of these financial metrics are reported in accordance with
U.S. GAAP and certain of these metrics are considered non-GAAP
financial measures. As our business evolves, we may make changes to
our key financial and operating metrics used to measure our
performance. For further information and a reconciliation to the
most applicable financial measures under U.S. GAAP, refer to our
reconciliations below.
Non-GAAP adjusted net income is a non-GAAP financial measure and
the most directly comparable GAAP financial measure is net income.
Non-GAAP adjusted net income is calculated by adding back the
non-recurring, non-cash charges of $541,000 and $90.8
million, net of taxes related to impairment of intangible
assets and goodwill for the three months and six months ended
June 30, 2023, and June 30, 2022, respectively.
Non-GAAP adjusted earnings per share (EPS) is a non-GAAP measure
and is calculated by dividing the non-GAAP adjusted net income by
the number of fully diluted shares at the end of the
period.
Non-GAAP adjusted return on equity is a non-GAAP measure and is
calculated by using non-GAAP adjusted net income as the base for
the calculation.
Non-GAAP adjusted book value per share is a non-GAAP measure and
is calculated by dividing total stockholders' equity excluding
accumulated other comprehensive loss, net of tax, by the total
common shares outstanding.
We use these non-GAAP financial measures internally as
performance measures and believe that these measures reflect the
financial performance of the Company's ongoing business and core
operations. As a supplement to the primary GAAP presentations,
non-GAAP financial measures provide meaningful supplemental
information about our operating performance. We believe that these
non-GAAP financial measures facilitate comparisons with our
historical results and with the results of peer companies who
present similar measures (although other companies may define
non-GAAP measures differently than we define them, even when
similar terms are used to identify such measures). These metrics
should only be considered as supplemental to net income, earnings
per share and return on equity as measures of our performance.
These measures should also not be used as a supplement to, or
substitute for, cash flow from operating activities (computed in
accordance with U.S. GAAP).
The following tables are reconciliations of adjusted net income,
adjusted earnings per share and adjusted return on equity to the
most directly comparable U.S. GAAP financial measures for the three
and six months ended June 30, 2023,
and June 30, 2022, respectively:
Statement of
Operations Non-GAAP Reconciliation
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
2023
|
|
|
2022
|
|
|
Change
|
|
|
|
2023
|
|
|
2022
|
|
|
Change
|
|
|
Income Statement
Data
|
|
(In thousands except
per share data)
|
|
|
|
Net income
(loss)
|
$
|
|
7,779
|
|
$
|
|
(87,866)
|
|
|
|
(108.9)
|
|
%
|
$
|
|
21,787
|
|
$
|
|
(118,625)
|
|
$
|
|
(118.4)
|
|
%
|
|
Less: Goodwill and
intangible impairment, net of tax
|
|
|
(541)
|
|
|
|
(90,774)
|
|
|
|
(99.4)
|
|
|
|
|
(541)
|
|
|
|
(90,774)
|
|
|
|
(99.4)
|
|
|
|
Non-GAAP adjusted net
income (loss)
|
$
|
|
8,320
|
|
$
|
|
2,908
|
|
|
|
186.1
|
|
%
|
$
|
|
22,328
|
|
$
|
|
(27,851)
|
|
$
|
|
(180.2)
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per
Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
|
0.30
|
|
$
|
|
(3.32)
|
|
|
|
(109.0)
|
|
%
|
$
|
|
0.85
|
|
$
|
|
(4.46)
|
|
|
|
(119.1)
|
|
%
|
|
Less: Goodwill and
intangible impairment, net of tax
|
|
|
(0.02)
|
|
|
|
(3.43)
|
|
|
|
(99.4)
|
|
|
|
|
(0.02)
|
|
|
|
(3.41)
|
|
|
|
(99.4)
|
|
|
|
Non-GAAP adjusted net
income (loss)
|
$
|
|
0.32
|
|
$
|
|
0.11
|
|
|
|
190.9
|
|
%
|
$
|
|
0.87
|
|
$
|
|
(1.05)
|
|
|
|
(182.9)
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Equity
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on
Equity
|
|
|
19.7
|
|
%
|
|
(152.0)
|
|
%
|
|
171.7
|
|
pts
|
|
|
29.9
|
|
%
|
|
(90.6)
|
|
%
|
|
120.5
|
|
pts
|
|
Less: Goodwill and
intangible impairment, net of tax
|
|
|
(1.4)
|
|
%
|
|
(157.1)
|
|
%
|
|
155.7
|
|
pts
|
|
|
(0.7)
|
|
%
|
|
(69.3)
|
|
%
|
|
68.6
|
|
pts
|
|
Non-GAAP adjusted
return on equity
|
|
|
21.1
|
|
%
|
|
5.0
|
|
%
|
|
16.0
|
|
pts
|
|
|
30.6
|
|
%
|
|
(21.3)
|
|
%
|
|
51.9
|
|
pts
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
Return on Equity
Non-GAAP Reconciliation
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
|
|
|
(In thousands except
per share data)
|
|
|
Income Statement
Data
|
|
|
Annualized net income
(loss)
|
$
|
|
31,115
|
|
$
|
|
(351,464)
|
|
$
|
|
43,573
|
|
$
|
|
(237,250)
|
|
|
Annualized adjusted net
income (loss)
|
$
|
|
33,281
|
|
$
|
|
11,634
|
|
$
|
|
44,656
|
|
$
|
|
(55,702)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Divided by Average
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity at
the beginning of period
|
$
|
|
154,724
|
|
$
|
|
281,766
|
|
$
|
|
131,039
|
|
$
|
|
343,051
|
|
|
Shareholders' equity at
the end of period
|
|
|
160,627
|
|
|
|
180,546
|
|
|
|
160,627
|
|
|
|
180,546
|
|
|
Average
Shareholders' Equity
|
$
|
|
157,675
|
|
$
|
|
231,156
|
|
$
|
|
145,833
|
|
$
|
|
261,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on
Equity
|
|
|
19.7
|
|
%
|
|
(152.0)
|
|
%
|
|
29.9
|
|
%
|
|
(90.6)
|
|
%
|
Adjusted return on
equity
|
|
|
21.1
|
|
%
|
|
5.0
|
|
%
|
|
30.6
|
|
%
|
|
(21.3)
|
|
%
|
|
|
As Of
|
|
Stockholders' Equity
to Adjusted Stockholders'
Equity Reconciliation
|
|
Jun
30,
|
|
|
Mar
31,
|
|
|
Dec
31,
|
|
|
Jun
30,
|
|
|
|
2023
|
|
|
2023
|
|
|
2022
|
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stockholders'
equity
|
$
|
|
160,627
|
|
|
|
154,724
|
|
|
|
131,039
|
|
$
|
|
180,546
|
|
Add: Accumulated other
comprehensive loss, net of tax
|
|
|
46,574
|
|
|
|
44,295
|
|
|
|
53,585
|
|
|
|
41,194
|
|
Non-GAAP adjusted
common stockholders' equity
|
$
|
|
207,201
|
|
$
|
|
199,019
|
|
$
|
|
184,624
|
|
$
|
|
221,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares
outstanding
|
|
|
25,622
|
|
|
|
25,559
|
|
|
|
25,539
|
|
|
|
26,544
|
|
Book value per common
share
|
$
|
|
6.27
|
|
$
|
|
6.05
|
|
$
|
|
5.13
|
|
$
|
|
6.80
|
|
Non-GAAP adjusted book
value per common share
|
$
|
|
8.09
|
|
$
|
|
7.79
|
|
$
|
|
7.23
|
|
$
|
|
8.35
|
|
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 expected positive impact of our strategic
initiatives on our future financial results, including focus on
profitability, improved underwriting, exposure management and
strategic reduction of policy count in certain geographies, rating
actions and our selective growth of our commercial residential
business; impact of rate increases, including the ability to
mitigate the expected impact of increased reinsurance costs through
rate adjustments; ability to achieve consistent long-term
sustainable growth and long-term quarterly earnings and drive
shareholder value; continued increase in average premium per
policy; future dividend payments and stock repurchases; the impact
of recent legislation to reduce abusive claims practices in
Florida; our ability to maintain a
balanced and diversified portfolio; and expectations regarding our
fixed income investment portfolio. 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; inflation and
other changes in economic conditions (including changes in interest
rates and financial and real estate markets), including changes
that may impact demand for our products and our operations; 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 cost 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, 2022 filed with the Securities and
Exchange Commission on March 13,
2023, 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
Investor Contact:
Kirk
Lusk
Chief Financial Officer
klusk@heritagepci.com
investors@heritagepci.com
Mike Houston and Zack Mukewa
Lambert
HRTG@lambert.com
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SOURCE Heritage Insurance Holdings, Inc.