Heritage Insurance Holdings, Inc. · NYSE:HRTG
Heritage Insurance — Investor Presentation (January 2019)
25 slides from Heritage Insurance's investor presentation, January 2019
Slide 1: Investor Presentation
Investor Presentation (NYSE: HRTG) January 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 INVESTMENT CONSIDERATIONS Company snapshot…………………………………………………………………………………………………………………………………………………………………………Slide 5 Timeline of events………………………………………………………………………………………………………………………………………………………………………….Slide 6 Management team……………………………………………………………………………………………………………………..…………………………………………
Slide 4: Investment considerations
Investment considerations 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 11 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): $11/share Closed Zephyr acquisition Received KBRA Started writing Sunshine State policy assumption Began writing business in NC,
Slide 7: Experienced Management Team
EXPERIENCED MANAGEMENT TEAM Bruce Lucas: Chairman & CEO Richard Widdicombe: President Co‐founded Heritage in 2012 and has Co‐founded Heritage in 2012 and has been with the company since inception been with the company since inception Prior to Heritage, Mr. Lucas was CEO of Prior to Heritage,
Slide 8: 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 9: 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 31% since the Company’s 2012 inception. SOLID GROWTH IN BOOK VALUE
Slide 10: Highly Attractive Valuation Relative to Peers
HIGHLY ATTRACTIVE VALUATION RELATIVE TO PEERS P/E P/BV ROAE ROATE Ticker Company 2019E 2020E FQ0 2018E 2019E 2020E 2015 2016 2017 2018E 2019E FY3E 2015 2016 2017 HRTG* Heritage Insurance Holdings, Inc. 6.8 5.9 0.98 0.98 0.90 0.76 30.3% 9.5% 11.1% 8.0% 13.8% 14.1% 30.3% 10.6% 20.0% FNHC FedNat Holdin
Slide 11: 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 50.7% Citizens depopulation 50% transactions benefit ROEs 3.5x HRTG’s P/BV multiple is at a 45% 3.0x 40% Severe 1Q16 FL tornadoe
Slide 12: Diversification Strategy Underway
DIVERSIFICATION STRATEGY UNDERWAY % OF CONSOLIDATED TIV IN FL 100.0% Through a combination of M&A and organic growth, Heritage has been diversifying its book of business to new 100% states, resulting in a better spread of risk and lower reinsurance costs. Diversification has been occurring within th
Slide 13: Favorable Claims Trends
FAVORABLE CLAIMS TRENDS Heritage’s Tri‐County FL exposure reduction efforts are bearing fruit, as the region’s contribution to open non‐ catastrophe claim counts continues to decline for both litigated and non‐litigated claims. This is benefiting overall claims trends – beginning with 1Q18, litigate
Slide 14: 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 15: Conservative Reinsurance Retention
CONSERVATIVE REINSURANCE RETENTION AFTER‐TAX FIRST EVENT FLORIDA RETENTION AS % OF 3Q18 GAAP EQUITY 9% Heritage has the lowest reinsurance retention as a % of 3Q18 GAAP shareholders’ equity, suggesting 8.5% the smallest hit to book value from a hurricane 8% (excluding storm‐related ancillary income
Slide 16: Underwriting Performance
UNDERWRITING PERFORMANCE Heritage has experienced significant premiums growth since inception, stemming primarily from Citizens depopulation transactions through 2015 and from M&A and organic growth in subsequent years. Importantly, Heritage’s core underwriting operation has been profitable every fu
Slide 17: Capital Management & Operating Leverage
CAPITAL MANAGEMENT & OPERATING LEVERAGE Heritage has been a responsible steward of shareholder capital and currently has a $50 million share repurchase authorization in place. Since 2016, the Company has returned over $50 million to shareholders through common share repurchases and dividends. Herita
Slide 18: Company overview
Company overview Heritage Insurance
Slide 19: Book of Business
BOOK OF BUSINESS As of 3Q18, we have $929.8 million of gross premiums in‐force (estimated net = $470.5 million) across 3 statutory insurance entities (Heritage/NBIC/Zephyr) and write 2 main lines of business, including personal residential (PRES) and commercial residential (CRES). We also write some
Slide 20: Total Insured Value Snapshot
TOTAL INSURED VALUE SNAPSHOT Florida accounts for 55% of Heritage’s consolidated gross premiums in force, but it only reflects 32% of total insured value (TIV) – the $4.91 average premium per $1,000 of TIV in Florida ($5.41 for Florida PRES policies) is almost triple the $1.91 non‐Florida average (F
Slide 21: Reinsurance Program
REINSURANCE PROGRAM Heritage has a conservative 2018‐2019 reinsurance program, protecting the Company Millions $1,592 against hurricanes and severe weather events and reducing earnings volatility. $1,400 $1,392 2016 Citrus E 100% of Substantial severity and $44.1M xs $40M $1,320 2017 Citrus 100% o
Slide 22: 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 23: Investment Portfolio
INVESTMENT PORTFOLIO Heritage has a very conservative investment portfolio, consisting predominantly of low duration, fixed income securities. As yields increase, investment income should benefit. INVESTMENT PORTFOLIO BREAKDOWN NET INVESTMENT INCOME PERFORMANCE Equities, 0.5% US Preferred government
Slide 24: Appendix: Non-GAAP Reconciliations
APPENDIX: NON‐GAAP RECONCILIATIONS RECONCILIATION OF GAAP AND NON‐GAAP MEASURES $ in millions 2017 3Q18 YTD GAAP Net income (loss) $ (1.1) $ 23.2 Conversion option liability fair value 42.2 ‐ Non‐recurring business acquisition related expenses ‐ 7.1 Tax impact ‐ 1.8 Adjusted net income $ 41.1 $ 28.5
Slide 25: Additional Information
ADDITIONAL INFORMATION Arash Soleimani, CFA, CPA Executive Vice President & Director of Investor Relations asoleimani@heritagepci.com 727.871.0206 Website: investors.heritagepci.com
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