Heritage Insurance Holdings Reports Financial Results for Fourth Quarter and Full Year 2015; Declares Quarterly Dividend of $0.05 Per Share

Mar 02, 2016, 16:30 ET from Heritage Insurance Holdings, Inc.

CLEARWATER, Fla., March 2, 2016 /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 quarter and year ended December 31, 2015.

Highlights

  • 34% increase in gross premiums earned for Q4 2015 as compared with Q4 2014
  • 23% increase in policy count in Q4 2015 as compared with Q4 2014
  • 253% increase in voluntary commercial residential premium to $20.4 million in Q4 2015 as compared with Q4 2014
  • Declared company's first quarterly dividend of $0.05 per share in Q4 2015
  • For the year 2015, gross premiums written increased 34% and net premiums earned increased 68% from 2014
  • 2015 net income was $92.5 million, a 96% increase as compared with 2014
  • Combined ratio on a gross basis was 74.9% in 2015 as compared with 79.4% in 2014
  • Stockholder's equity was $357 million at December 31, 2015, an increase of 40% from December 31, 2014

Bruce Lucas, the Company's Chairman and CEO, said, "2015 was a record year for Heritage. We grew net income 96% and delivered a return on average equity of 30.2%. Results for the year were driven by our continued market share expansion in the state of Florida. As we progress into 2016, we expect to capitalize on opportunities to serve customers in new key states. Heritage is now licensed to write new business in North and South Carolina, we have been approved in Alabama and Mississippi, and we have applications pending in Massachusetts and Georgia. The Form A acquisition filing with the State of Hawaii Insurance Division has been approved, and we expect to close the previously announced Zephyr Insurance Company transaction during the first quarter of 2016. We remain focused on executing our expansion plans while delivering solid returns to our investors."

Declaration of Quarterly Dividend

The Company also announced today the Board of Directors has declared a first quarter dividend of $0.05 per share to stockholders of record as of March 15, 2016. The dividend is payable on April 5, 2016. The declaration and payment of any future dividend will be subject to the discretion of the Board of Directors and will depend on a variety of factors including the Company's financial condition and results of operations.

Results of Operations

The following table summarizes our results of operations for the three months and years ended December 31, 2015 and 2014, respectively (in thousands, except percentages and per share amounts):

Three Months Ended December 31,

 Year Ended December 31,

2015

2014

Change

2015

2014

Change

Revenue

Gross premiums written

$ 167,540

$ 181,464

(8)%

$  586,098

$ 436,407

34%

Gross premiums earned

$ 143,404

$ 106,654

34%

$  524,740

$ 311,514

68%

Ceded premiums

$ (45,832)

$ (25,102)

83%

$ (148,472)

$ (87,902)

69%

Net premiums earned

$   97,572

$   81,552

20%

$  376,268

$ 223,612

68%

Total operating revenue

$ 101,332

$   85,386

19%

$  394,792

$ 233,820

69%

Income before taxes

$   33,293

$   31,211

7%

$  150,290

$   74,252

102%

Net income

$   20,243

$   19,676

3%

$    92,512

$   47,097

96%

Per Share Data:

Book value per share

$     11.71

$       8.56

37%

$      11.71

$       8.56

37%

Earnings per diluted share

$       0.66

$       0.66

-

$        3.05

$       1.82

67%

Return on average equity

23.5%

32.4%

(8.9)

pts

30.2%

26.5%

3.7

pts

Ratios to Gross Premiums Earned:

Ceded premium ratio

32.0%

23.5%

8.5

pts

28.3%

28.2%

0.1

pts

Loss ratio

27.2%

25.7%

1.5

pts

26.9%

28.7%

(1.8)

pts

Expense ratio

20.3%

25.1%

(4.8)

pts

19.7%

22.5%

(2.8)

pts

Combined ratio

79.5%

74.3%

5.2

pts

74.9%

79.4%

(4.5)

pts

Ratios to Net Premiums Earned:

Loss ratio

39.9%

33.6%

6.3

pts

37.5%

40.1%

(2.6)

pts

Expense ratio

29.8%

32.8%

(3.0)

pts

27.5%

31.3%

(3.8)

pts

Combined ratio

69.7%

66.4%

3.3

pts

65.0%

71.4%

(6.4)

pts

 

Quarterly Financial Results

Net income for the quarter ended December 31, 2015 was $20.2 million compared to $19.7 million for the quarter ended December 31, 2014.

Gross premiums written were $167.5 million for the fourth quarter of 2015 compared to $181.5 million for the fourth quarter of 2014. The decrease in gross premiums written is a result of a decrease in the amount of business taken from Citizens during the fourth quarter of 2015 compared to the fourth quarter of 2014, as assumed premiums written were $32.1 million in the fourth quarter of 2015 compared to $102.8 million in the fourth quarter of 2014. We book the unearned premium that is transferred to us from Citizens at the time of the assumption as assumed written premium. The assumed premiums written of $32.1 million in the fourth quarter of 2015 represented approximately $50 million of annualized premium, as compared to approximately $169 million of annualized premium from the $102.8 million of assumed premium written during the fourth quarter of 2014. Partially offsetting the reduction in assumed premiums written was an increase in direct premiums written, which were $135.4 million in the fourth quarter of 2015 compared to $78.7 million in the fourth quarter of 2014, a year over year improvement of 72%

In the fourth quarter of 2015, commercial residential annualized premium from Citizens assumptions was $7.5 million versus approximately $85 million in the fourth quarter of 2014. This decrease was consistent with our previous expectations that there would not be a significant number of commercial residential policies left in Citizens that would be attractive to us after our large assumption during the fourth quarter of 2014. Regarding personal residential, for the full year 2015, we assumed approximately 68,200 policies from Citizens representing $139 million of annualized premium from 10 assumption transactions throughout the year.  In 2014, we assumed approximately 57,600 policies representing $120 million of annualized premium from 7 assumption transactions throughout the year.  However, in 2014, approximately 71% of the policies were assumed in the fourth quarter, while the assumption transactions were spread out more evenly throughout 2015, with only 32% assumed during the fourth quarter.

Gross premiums earned were $143.4 million for the fourth quarter of 2015 compared to $106.7 million for the fourth quarter of 2014. Total in force premiums at December 31, 2015 were $591.5 million compared to $494.6 million at December 31, 2014.  Personal lines policy count at December 31, 2015 was approximately 253,700 policies, representing $478.0 million of in force premiums.  The policy count for commercial residential was approximately 3,400 policies, representing $113.5 million of in force premiums.

Ceded premiums as a percentage of gross premiums earned were 32.0% for the fourth quarter of 2015 compared to 23.5% for the fourth quarter of 2014. This increase is primarily due to the inclusion of commercial residential in our 2015 reinsurance program which has a higher reinsurance cost associated with it than personal residential, and the growth in gross premiums earned in the fourth quarter of 2014 from the large fourth quarter Citizens assumptions discussed above for which there was no corresponding increase in ceded premiums. An increase in ceded premiums did not occur until June 1, 2015, when our reinsurance contracts renewed. Because our Citizens assumptions in 2015 were more evenly spread throughout the year, we did not achieve the same significant reduction in the ceded premium ratio in the fourth quarter of 2015 compared to the fourth quarter of 2014.

The loss ratio on a gross basis increased to 27.2% in the fourth quarter of 2015 from 25.7% in the fourth quarter of 2014, primarily as a result of increased frequency of personal residential claims. The reported loss ratio, which excludes the impact of changes in IBNR, was 22.8% for the fourth quarter of 2015 compared to 19.8% for the fourth quarter of 2014.

The Company's expense ratio on a gross basis was 20.3% for the fourth quarter of 2015 compared to 25.1% for the fourth quarter of 2014. Stock-based compensation accounted for 0.5 points of the expense ratio in the fourth quarter of 2015 compared to 3.0 points in the fourth quarter of 2014. In addition, the amortization of the Sunshine State Insurance Company policy acquisition cost increased the gross expense ratio by approximately 2.8 points during the fourth quarter of 2014, while having no impact in the fourth quarter of 2015.

Overall, Heritage's combined ratio on a gross basis was 79.5% for the fourth quarter of 2015 compared to 74.3% for the fourth quarter of 2014.

Full Year Financial Results

Net income for the year ended December 31, 2015 was $92.5 million compared to $47.1 million for the prior year, a 96.4% increase. Gross premiums written were $586.1 million in 2015 compared to $436.4 million in 2014, a 34.3% increase. Gross premiums earned were $524.7 million in 2015 compared to $311.5 million in 2014, a 68.4% increase.  The combined ratio on a gross basis was 74.9% compared to 81.5% for the prior year, primarily as a result of improved ceded premium and expense ratios. 

Book Value Analysis

Book value per share increased 36.8% to $11.71 at December 31, 2015 compared to the prior year.  In May 2014, the Company completed its initial public offering, a concurrent private placement and the issuance of common stock associated with the exercise of warrants. The net proceeds from these activities totaled approximately $101.1 million in exchange for 13,431,610 shares of common stock issued.

As of

Book Value Per Share

December 31,  2015 

December 31,  2014

December 31, 2013 1

Numerator:

Common stockholders' equity (in 000s)

$                          356,553

$                 255,089

$                  100,905

Denominator:

Total Shares Outstanding

30,441,410

29,794,960

14,007,150

Book Value Per Common Share

$                              11.71

$                       8.56

$                        7.20

(1)     Includes redeemable shares of $20,921

 

 

Conference Call Details:

Thursday, March 3, 2016 – 10:00 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 the investor section of the company's website. This webcast will be archived and available for replay.

 

HERITAGE INSURANCE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data and per share)

December 31,

2015

2014

ASSETS

   Fixed maturity securities, available for sale, at fair value

   (amortized cost of $370,967 and $290,951 in 2015 and

   2014, respectively)

$               371,783

$               293,085

   Equity securities, available for sale, at fair value

   (cost of $32,439 and $30,555 in 2015 and 2014, respectively)

28,313

31,225

   Mortgage loan, held to maturity, at amortized cost

-

6,849

Total investments

400,096

331,159

  Cash and cash equivalents

236,277

160,481

  Restricted cash

13,085

4,339

  Accrued investment income

3,409

2,617

  Premiums receivable, net

30,565

20,028

  Prepaid reinsurance premiums

78,517

43,148

  Deferred income taxes

7,964

6,622

  Deferred policy acquisition costs, net

34,800

24,370

  Property and equipment, net

17,111

17,087

  Other assets

15,574

5,180

Total Assets

$               837,398

$               615,031

LIABILITIES AND STOCKHOLDERS' EQUITY

  Unpaid losses and loss adjustment expenses

$                 83,722

$                 51,469

  Unearned premiums

302,493

241,136

  Reinsurance payable

60,210

17,113

  Income taxes payable

2,092

12,808

  Advance premiums

12,138

5,143

  Accrued compensation

2,305

442

  Other liabilities

17,885

31,831

Total Liabilities

$               480,845

$               359,942

Commitments and contingencies

Stockholders' Equity:

  Common stock, $0.0001 par value, 50,000,000 shares authorized, 30,441,410

  and 29,794,960 shares issued and outstanding at December 31, 2015

  and December 31, 2014, respectively

3

3

  Additional paid-in capital

202,628

188,342

  Accumulated other comprehensive (loss) income

(2,033)

1,723

  Retained earnings

155,955

65,021

Total Stockholders' Equity

356,553

255,089

Total Liabilities and Stockholders' Equity

$               837,398

$               615,031

 

 

HERITAGE INSURANCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except share data and per share)

Three Months Ended December 31,

Year Ended December 31,

2015

2014

2015

2014

REVENUE:

Gross premiums written

$           167,540

$           181,464

$      586,098

$      436,407

Increase in gross unearned premiums

(24,136)

(74,810)

(61,358)

(124,893)

Gross premiums earned

143,404

106,654

524,740

311,514

Ceded premiums

(45,832)

(25,102)

(148,472)

(87,902)

Net premiums earned

97,572

81,552

376,268

223,612

Net investment income

1,725

1,386

7,421

3,849

Net realized gains (loss)

(319)

241

1,508

304

Other revenue

2,354

2,207

9,595

6,055

Total revenue

101,332

85,386

394,792

233,820

EXPENSES:

Losses and loss adjustment expenses

38,952

27,414

141,191

89,560

Policy acquisition costs

16,328

13,185

57,186

36,510

General and administrative expenses

12,759

13,576

46,125

33,498

Total expenses

68,039

54,175

244,502

159,568

Income before income taxes

33,293

31,211

150,290

74,252

Provision for income taxes

13,050

11,535

57,778

27,155

Net income

$             20,243

$             19,676

$        92,512

$        47,097

OTHER COMPREHENSIVE INCOME:

Change in net unrealized gains (losses) on    investments

(5,202)

(385)

(4,606)

4,395

Reclassification adjustment for net realized    investment losses

319

(241)

(1,508)

(304)

Income tax (expense) benefit related to items of    other comprehensive income

1,881

243

2,358

(1,578)

Total comprehensive income

$             17,242

$             19,293

$        88,757

$        49,610

Weighted average shares outstanding

Basic

30,364,573

29,794,980

30,056,491

24,568,876

Diluted

30,503,040

29,915,744

30,326,468

25,816,590

Earnings per share

Basic

$                 0.67

$                 0.66

$            3.08

$            1.92

Diluted

$                 0.66

$                 0.66

$            3.05

$            1.82

 

About Heritage

Heritage Insurance Holdings, Inc. (NYSE: HRTG) is a property and casualty insurance holding company headquartered in Clearwater, Florida. Its subsidiary, Heritage Property & Casualty Insurance Company, writes over $590 million of personal and commercial residential premium through a large network of experienced agents. Heritage is led by a seasoned senior management team with an average of 31 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; 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, 2014 and the Annual Report on Form 10-K for the year ended December 31, 2015 which we expect to be filed with the Securities and Exchange Commission on March 8, 2016. In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for a major contingency. Reported results may therefore appear to be volatile in certain accounting periods. 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: Stephen Rohde, CFO 727-362-7204 srohde@heritagepci.com or Melanie Skijus, Investor Relations Director 727-362-7262 mskijus@heritagepci.com

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SOURCE Heritage Insurance Holdings, Inc.



RELATED LINKS

http://www.heritagepci.com