Heritage Insurance Holdings, Inc. · NYSE:HRTG
Heritage Insurance — Merger or Acquisition (August 2017)
18 slides from Heritage Insurance's merger presentation, August 2017
Slide 1: Creating a Super Regional Personal Lines Carrier – Acquisition of Narragansett Bay Insurance
Creating a Super Regional Personal Lines Carrier – Acquisition of Narragansett Bay Insurance August 2017
Slide 2: Disclaimer
Disclaimer Safe Harbor Statement 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 generali
Slide 3: Transaction Summary
Transaction Summary Transaction Structure Acquisition of NBIC Holdings, Inc. (“NBIC”) by Heritage NBIC shareholders will receive total consideration of approximately $250 million in cash and Heritage common stock, subject to certain book-value related closing adjustments Transaction Value – ~2.1
Slide 4: Expanding Leadership in Coastal Markets
Expanding Leadership in Coastal Markets Strategic Rationale Diversified Super Regional Carrier • Acquire a market leader in coastal homeowners Approximately insurance in the Northeast with approximately $300 55% of revenue million of GWP in NY, NJ, CT, RI, and MA from FL and ME 45% from other • Heri
Slide 5: Overview of NBIC
Overview of NBIC NBIC is a leading specialty underwriter of personal residential and Personal Residential Market Share in commercial insurance products and services in states along the Northeastern States(2) Eastern seaboard Direct Market ‒ Established in 2006 with headquarters in Pawtucket, Rhode
Slide 6: NBIC’s Capital Efficient Business Model
NBIC’s Capital Efficient Business Model Innovative reinsurance program minimizes risk retention and capital requirements which has allowed NBIC to generate superior returns Written Premiums Return on Average Equity $307 24% (1) $278 23% $240 18% 200 255 170 11% 70 78 51 2014 2015 2016 2014 2015 2016
Slide 7: Diversified Super Regional Business Mix
Diversified Super Regional Business Mix Heritage will become the most diversified of the FL Super Regional Carriers with significant diversification benefits. Expect to reduce reliance on FL to 55% of revenue following closing Heritage NBIC Pro Forma Other(1) Other Commercial Commercial 6% 2% Reside
Slide 8: Attractive Shareholder Returns
Attractive Shareholder Returns Value Creation Reinsurance Synergies • Expected to increase GWP by ~50% and NWP by • Heritage reinsurance program is well suited to ~14% with ability to further increase net retention absorb risk from NBIC with minimal incremental through combined reinsurance program c
Slide 9: Pro Forma Capital Structure
Pro Forma Capital Structure Conservative and Well Capitalized Balance Sheet Conservative capital structure to promote sustainability and growth Well capitalized with $363mm in surplus ($195mm HPIC, $72mm Zephyr, $96mm NBIC)(1) Low risk investment portfolio: minimum weighted average credit qual
Slide 10: Investment Story
Investment Story Heritage’s Investment Story NBIC Opportunity Executing Multiple Business Diversification On 8/8/17, announced definitive & Expansion Initiatives agreement to acquire for $250 million leading Northeast homeowners insurance company Seasoned Management Team Attuned to Demands of an Evo
Slide 11: Overview of Heritage
Overview of Heritage
Slide 12: Company Overview
Company Overview Business Overview Business Mix(1) • Founded in 2012, provides primarily personal and commercial By Line of Business By Geography residential insurance in coastal markets Other NC Commercial MA RI 2% 2% 1% Other • Seasoned management team averages over 30 years of Residential HI 6% <
Slide 13: Review of Q2 2017 Performance
Review of Q2 2017 Performance Heritage continued to grow its book value per share in the second quarter of 2017, increasing it by 4.5% from $12.41 at YE 2016 to $12.97 at June 30, 2017, while achieving a new record in new voluntary production Overview Financial Highlights Execution of Diversificatio
Slide 14: Strategic Approach to New Market Opportunities
Strategic Approach to New Market Opportunities 2012 2013 2014 2015 2016 2017 • Initial $23 • Formed the CAN • IPO: NYSE “HRTG” • Acquired BRC • Approved to write • Began writing million equity Managed Repair Restoration P&C in Alabama, P&C policies in raise Vendor Program • Acquired the assets Speci
Slide 15: Strong Diverse Distribution Relationships
Strong Diverse Distribution Relationships Independent Agent Networks – Expansion in New States • Florida: ~1,500 independent agents actively writing policies Partnership with FAIA Member Services (“FMS”) expands agent relationships • Hawaii: ~80 appointed agents writing polices • North Carolina: ~
Slide 16: Deep Claims Department
Deep Claims Department 24/7 first notice of loss (FNOL) • FNOL dispatches mitigation teams to policyholder home • In-house claims adjusters and examiners • In-house legal reduces losses Vertically integrated water division • Typical response time is less than 2 hours from FNOL • Prevents AOB contrac
Slide 17: Robust Reinsurance Program
Robust Reinsurance Program 2017-18 Reinsurance Program Millions $1,752 Conservatism & Strength of All Regions Program $1,629 Florida 116.3 Yr 2015 Citrus A All Regions Ex Hawaii $1,493 $150M xs $40M 100.0 Yr 1st Event HI/ Subsequent • Over $2.6 billion in coverage $1,356 2017 Citrus Event All Region
Slide 18: Modeled Results Represent Program Strength
Modeled Results Represent Program Strength Worst Individual Storm – Hurricane Description Andrew After “Andrew storm”, $1.8 billion of reinsurance Probability 1:48 years limit remaining for the same hurricane season % of Coverage Exhausted 30.9% Worst Calendar Year – Description 2004 Hurricane Sea
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