Heritage Insurance Holdings, Inc. · NYSE:HRTG
Heritage Insurance — Investor Presentation (May 2020)
26 slides from Heritage Insurance's investor presentation, May 2020
Slide 1: Investor Presentation
Investor Presentation (NYSE: HRTG) May 2020
Slide 2: Safe Harbor
SAFE HARBOR Statements in this presentation 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,
Slide 3: Table of Contents
TABLE OF CONTENTS COMPANY OVERVIEW Company snapshot………………………………………………………………………………………………………………………………………………………………………. 5 Timeline of events..……………………………………………………………………………………………………………………..………………………………………………. 6 Management team.……………………………………………………………………………………………………………………………………………………………………… 7 Corporate st
Slide 4: Company overview
Company overview Heritage Insurance
Slide 5: Company Snapshot
COMPANY SNAPSHOT What we do: Heritage Insurance Holdings, Inc. is a super‐regional property and casualty insurance holding company with over $950 million of gross personal and commercial residential premium across it’s multi‐state footprint. QUICK FACTS MARKET/FINANCIAL DATA Personal residential i
Slide 6: The Heritage Story
THE HERITAGE STORY Founded in 2012, Heritage has quickly grown into a leading coastal US P&C insurer. 2012 2014 2016 2018 Company inception HRTG IPO (NYSE): Began writing PRES in NC & SC, Received KBRA financial Started writing $11/share beginning of multi‐state expansion strength and inve
Slide 7: Experienced Management Team
EXPERIENCED MANAGEMENT TEAM Bruce Lucas: Chairman & CEO Richard Widdicombe: President Ernie Garateix: Chief Operating Officer Co‐founded Heritage in 2012 and Co‐founded Heritage in 2012 and has Has been in his current role since has been with the company since been with the company since incep
Slide 8: Vertically Integrated Structure
VERTICALLY INTEGRATED STRUCTURE Unique, vertically integrated structure reduces our reliance on third parties, benefiting our loss, LAE and operating expenses, while also serving as a hedge during catastrophe years. Vertically integrated structure reduces our earnings volatility, supporting P/E‐
Slide 9: Book of Business
BOOK OF BUSINESS Heritage has $958.1 million of gross premiums in‐force across three statutory insurance entities (Heritage/NBIC/Zephyr) and primarily writes personal residential (PRES) insurance. Heritage also writes commercial residential (CRES) insurance and a small amount of commercial general l
Slide 10: In-Force Metrics
IN‐FORCE METRICS Florida property insurance only accounts for 30% of Heritage’s property total insured value (TIV), but reflects 51% of gross premiums in‐force – the $500 Florida personal residential (PRES) insurance average premium per $100,000 of TIV is almost triple the $194 non‐Florida average (
Slide 11: Distribution
DISTRIBUTION Overview • Robust organic growth engine via independent agency relationships and auto carrier partnerships across our multi‐state platform • Over 2,400 actively writing independent agents • 27% of voluntary premium is written by agents affiliated with eight large agency networks that HP
Slide 12: Catastrophe Reinsurance Program
CATASTROPHE REINSURANCE PROGRAM Heritage has a conservative 2019‐2020 catastrophe reinsurance program, protecting the Company against hurricanes and severe weather events and reducing earnings volatility. Substantial severity and frequency protection. Significantly increased return period to the
Slide 13: Conservative Reinsurance Retention
CONSERVATIVE REINSURANCE RETENTION AFTER‐TAX FIRST EVENT FLORIDA RETENTION AS % OF 1Q2020 GAAP EQUITY 10% 9% 8.8% 8% 7.3% 6.7% 6.8% 6.9% 7% 6% 5% 4% 3.3% 3% 2% 1% 0% HRTG FL peer median HCI UVE FNHC UIHC Note 1: Based on 2019‐2020 catastrophe reinsurance programs. Note 2: Assumes a modeled 1‐in‐50‐y
Slide 14: Investment Portfolio
INVESTMENT PORTFOLIO Heritage has a very conservative investment portfolio, consisting predominantly of low duration, fixed income securities. As of 1Q2020, duration was 3.3 years, 0.1 years below 4Q2019 and 0.2 years below 1Q2019. INVESTMENT PORTFOLIO BREAKDOWN (1Q2020) NET INVESTMENT INCOME PERFOR
Slide 15: Investment considerations
Investment considerations Heritage Insurance
Slide 16: Value Proposition
VALUE PROPOSITION Compelling • Currently trading at significant discount to peers, despite attractive relative ROE and income metrics financial metrics • Consistent track record of double‐digit book value growth • Vertically integrated structure provides a hedge in catastrophe years, reducing loss r
Slide 17: Premium Growth
PREMIUM GROWTH Heritage has experienced significant premium growth since inception, stemming primarily from Citizens depopulation transactions through 2015 and from M&A and organic growth in subsequent years. Heritage’s premium growth is unprecedented, reaching almost $1 billion of gross in‐force pr
Slide 18: Underwriting Performance (Continued)
UNDERWRITING PERFORMANCE (CONTINUED) Heritage’s underwriting operation has outperformed peers every year since inception. SOLID UNDERWRITING MARGINS 120% 115% 105.3% 98.5% 96.5% 95.7% 93.3% 96.5% 100% 94.1% 95.2% 95% 92.8% 90.4% 80.8% 78.4% 74.8% 80% 72.9% 75% 71.4% 34.8% 39.4% 41.1% 41.0% 38.1% 65.
Slide 19: Capital Management & Operating Leverage
CAPITAL MANAGEMENT & OPERATING LEVERAGE Heritage has been a responsible steward of shareholder capital and currently has $25.8 million remaining on its share repurchase authorization. Since 2016, the Company has returned $102.0 million to shareholders through common share repurchases and dividends.
Slide 20: Diversification Strategy Underway
DIVERSIFICATION STRATEGY UNDERWAY % OF CONSOLIDATED PROPERTY TOTAL INSURED VALUE (TIV) IN FLORIDA 100.0% 100.0% 100.0% 100.0% Through a combination of M&A and organic growth, 100% Heritage has been diversifying its book of business to new states, resulting in a better spread of risk and 90% lower re
Slide 21: Favorable Claims Trends
FAVORABLE CLAIMS TRENDS Heritage’s Tri‐County, FL (TC) exposure reduction efforts have benefited claims trends, as the region’s contribution to open non‐hurricane claim counts has declined for both litigated and non‐litigated claims. This is benefiting overall claims trends – beginning with 1Q18, li
Slide 22: Solid Book Value Per Share Growth
SOLID BOOK VALUE PER SHARE GROWTH Since inception, Heritage has provided investors with solid book value per share growth. Including cumulative dividends declared, Heritage’s book value per share compound annual growth rate (CAGR) is 26% since the Company’s 2012 inception. SOLID GROWTH IN BOOK VALUE
Slide 23: Above-Peer ROE, But Below-Peer Valuation
ABOVE‐PEER ROE, BUT BELOW‐PEER VALUATION SOLID ROE PERFORMANCE, EVEN IN HURRICANE YEARS TRADING AT A MEANINGFUL DISCOUNT TO PEERS RETURN ON EQUITY (ROE) PRICE/BOOK VALUE Citizens depopulation transactions benefit ROEs Active northeast US weather & 35% Hurricanes Lane, 2.0x 30.3% 1.7x 28.1% Florence
Slide 24: Highly Attractive Valuation Relative to Peers
HIGHLY ATTRACTIVE VALUATION RELATIVE TO PEERS P/E P/BV Return on Equity Return on Tangible Equity Ticker Company 2020E 2021E Current 2020E 2021E 2016 2017* 2018 2019 2020E 2016 2017* 2018 2019 1Q2020 HRTG Heritage Insurance Holdings, Inc. 6.9 6.2 0.7 0.6 0.6 9.5% 11.1% 6.7% 6.6% 9.8% 10.7% 20.0% 16.
Slide 25: Appendix: Non-GAAP Reconciliations
APPENDIX: NON‐GAAP RECONCILIATIONS RECONCILIATION OF GAAP AND NON‐GAAP MEASURES $ in millions 2017 GAAP Net income (loss) $ (1.1) Conversion option liability fair value 42.2 Non‐recurring business acquisition related expenses ‐ Tax impact ‐ Adjusted net income $ 41.1 2017 GAAP ROE ‐0.3% Conversion o
Slide 26: Additional Information
ADDITIONAL INFORMATION Arash Soleimani, CFA, CPA Executive Vice President asoleimani@heritagepci.com 727.871.0206 Website: investors.heritagepci.com
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