Heritage Insurance Holdings, Inc. · NYSE:HRTG
Heritage Insurance — Investor Presentation (June 2019)
26 slides from Heritage Insurance's investor presentation, June 2019
Slide 1: Investor Presentation
Investor Presentation (NYSE: HRTG) June 2019
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 Florida‐based holding company that primarily provides personal and commercial residential insurance in coastal US states. QUICK FACTS MARKET/FINANCIAL DATA Active personal residential insurer in 12 coastal US NYSE: HRTG states &
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): Acquired Zephyr, a wind‐only HO Received KBRA financial Started writing $11/share insurer in HI strength and investment grade volunta
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. CAN, our water mitigation and construction subsidiary, benefits our loss ratio i
Slide 9: Book of Business
BOOK OF BUSINESS As of 1Q2019, we have $930.1 million of gross premiums in‐force across three statutory insurance entities (Heritage/NBIC/Zephyr) and write two main lines of business, including personal residential (PRES) and commercial residential (CRES). We also write some commercial general liabi
Slide 10: In-Force Metrics
IN‐FORCE METRICS Florida property insurance accounts for 53.8% of Heritage’s consolidated gross premiums in‐force, but it only reflects 31.4% of property insurance total insured value (TIV) – the $5.35 Florida PRES average premium per $1,000 of TIV is almost triple the $1.92 non‐Florida average (Flo
Slide 11: Distribution
DISTRIBUTION • Over 6,000 appointed producers across our multi‐state platform • The CEO of SIAA, one of the largest independent agency networks in the US, is a member Overview of Heritage’s Board of Directors, providing us with a strong growth platform in both new and existing states. • Relationship
Slide 12: Reinsurance Program
REINSURANCE PROGRAM Heritage has a conservative 2019‐2020 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 highest level in the Co
Slide 13: Investment Portfolio
INVESTMENT PORTFOLIO Heritage has a very conservative investment portfolio, consisting predominantly of low duration, fixed income securities. As of 1Q2019, duration was 3.5, consistent with 4Q2018 and down from 4.0 as of 1Q2018. INVESTMENT PORTFOLIO BREAKDOWN (1Q2019) NET INVESTMENT INCOME PERFORMA
Slide 14: Investment considerations
Investment considerations Heritage Insurance
Slide 15: 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 16: Underwriting Performance
UNDERWRITING PERFORMANCE 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 i
Slide 17: Underwriting Performance (Continued)
UNDERWRITING PERFORMANCE (CONTINUED) Heritage’s underwriting operation has been profitable and has outperformed peers every full calendar year since inception. SOLID UNDERWRITING MARGINS 106.8% 120% 110% 98.5% 95.7% 93.3% 100% 97.3% 90% 80.8% 92.8% 94.1% 78.4% 90.4% 74.8% 80% 72.9% 70% 71.4% 34.8% 4
Slide 18: Capital Management & Operating Leverage
CAPITAL MANAGEMENT & OPERATING LEVERAGE Heritage has been a responsible steward of shareholder capital and currently has $45 million remaining on its share repurchase authorization. Since 2016, the Company has returned over $75 million to shareholders through common share repurchases and dividends.
Slide 19: Conservative Reinsurance Retention
CONSERVATIVE REINSURANCE RETENTION AFTER‐TAX FIRST EVENT FLORIDA RETENTION AS % OF 1Q2019 GAAP EQUITY 9% Heritage has the lowest reinsurance retention as a % of 1Q2019 GAAP shareholders’ equity, suggesting the smallest hit to book value from a 7.9% 7.9% 8% hurricane. 7.1% 7% 6.2% 6.4% 6% 5% 4% 3.4%
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 are bearing fruit, as the region’s contribution to open non‐hurricane claim counts continues to decline for both litigated and non‐litigated claims. This is benefiting overall claims trends – beginning with 1Q18, litig
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 28% 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 AVERAGE EQUITY PRICE/BOOK VALUE Citizens depopulation transactions benefit ROEs Active northeast US weather & Hurricanes Lane, 2.0x 1.9x 1.9x 35% 3.9x 30.3% Flo
Slide 24: Highly Attractive Valuation Relative to Peers
HIGHLY ATTRACTIVE VALUATION RELATIVE TO PEERS P/E P/BV Return on Average Equity Return on Tangible Equity Ticker Company 2019E 2020E Current 2019E 2020E 2016 2017 2018 2019E 2020E 2016 2017 2018 HRTG Heritage Insurance Holdings, Inc. 10.2 8.0 1.06 0.97 0.87 9.5% 11.1% 6.7% 10.1% 11.5% 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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