Heritage Insurance Holdings, Inc. · NYSE:HRTG
Heritage Insurance — KBW 2015 Insurance Conference
18 slides from Heritage Insurance's conference presentation, Sep 9, 2015
Slide 1: KBW 2015 Insurance Conference
KBW 2015 Insurance Conference September 9, 2015 Heritage Insurance Holdings, Inc. (NYSE:HRTG)
Slide 2: Disclaimer
Disclaimer Safe Harbor Statement This presentation contains “forward-looking statements” that are based on management’s beliefs and assumptions and on information currently available to management. Most forward-looking statements contain words that identify them as forward-looking, such as “anticipa
Slide 3: A Unique Growth Opportunity in P&C Insurance
A Unique Growth Opportunity in P&C Insurance Continued Opportunity in Florida and Expansion in New Markets Seasoned Management Team Proven Underwriting and Policy Acquisition Capabilities Unique Claims Servicing Model Deep Relationships with Highly Rated Reinsurers Strong, Conservative Capital Struc
Slide 4: Investment Case
Investment Case • Founded in 2012 to provide personal residential insurance in Florida Business • Business has expanded to include commercial residential; policies in force have grown to ~222K, or ~$510MM in annualized premium as of 6/30/15 • 2013: 45.0% ROAE(1) Demonstrated • 2014: 26.5% ROAE(1) RO
Slide 5: The Market: Attractive Florida Market Dynamics
The Market: Attractive Florida Market Dynamics Population by sq. mile 1-50 50-500 >5000 • Capturing opportunity in Florida Florida is 3rd largest U.S. state and is projected to grow over 36% by 2040(1) Population is skewed toward hurricane-prone coastal areas Market dislocation following Hurri
Slide 6: History: Strategic Approach to Market Opportunities
History: Strategic Approach to Market Opportunities 2012 2013 2014 2015 • Initial $23MM equity • Formed the CAN • IPO: NYSE “HRTG” • Acquired BRC raise Managed Repair • Acquired the assets of Restoration • Began writing Vendor Program SVM (water mitigation Specialists voluntary policies in • Second
Slide 7: Since IPO: Delivering on Growth and Strategic Initiatives
Since IPO: Delivering on Growth and Strategic Initiatives • Opportunistic policy assumptions ~222K policies in force as of 6/30/15, 73% assumed from Citizens ~$60MM in premium acquired from Sunshine State Insurance Company (SSIC) Incremental 2015 Citizens take-outs: July ~6,500 policies; ~40,0
Slide 8: Executing Voluntary Business Strategy
Executing Voluntary Business Strategy Policies Personal Residential(1) Inforce (000) 8,000 $60,000 • Personal Lines Voluntary New policies bound were 7,000 $50,000 polices in 2Q15, +98% from year- 6,000 $40,000 end 4,000 $30,000 Inforce written premium of $49MM in 2Q15, +34% from year-end $20,00
Slide 9: Capturing Share in Commercial Residential
Capturing Share in Commercial Residential Total Premiums Written (9/30/14 in Force) Total Premiums Written (3/31/15 in Force) $(MM) $(MM) $403.3 $304.8 $311.9 $235.7 $86.1 $102.4 American Capital Assurance Co. $71.0 $81.0 $65.6 $71.6 $8.4 American Capital Assurance Co. $66.6 $8.4 $12.5 $6.2 $7.3 $4.
Slide 10: Superior Underwriting + Continual Improvement
Superior Underwriting + Continual Improvement In-house Underwriting Capability • Key underwriting factors: Suitability of risk Adequacy of premium for risk Impact on overall geographic mix • Internally underwritten / supervised by Chief Underwriting Officer & supported by Chief Actuary • Stric
Slide 11: Strong, Diverse Distribution Relationships
Strong, Diverse Distribution Relationships Agency Relationships • Agreements with five large national insurance companies / agencies: • Advance take-out approvals cover more than 5,100 agents (responsible for writing more than 85% of eligible personal residential policies held by Citizens as of Dece
Slide 12: Differentiated Model: Vertically-Integrated Claims Management
Differentiated Model: Vertically-Integrated Claims Management Notice of Seamlessly integrated with Decreased Claims Loss claim system Severity On-site inspection typically Reduced Loss Inspection within hours Experience Adjusting In-house claims adjusters Shortened Claim Tail Repair & Water mitigati
Slide 13: Capitalizing on Favorable Reinsurance Dynamics
Capitalizing on Favorable Reinsurance Dynamics 2015-16 Reinsurance Program(1) $1.8B • Conservatism & Strength of Program Osprey $20mm Top & Drop II Most important part of risk NIL $1.7B management strategy and single Top & Drop I NIL largest cost $1.7B Citrus Re 2015 Class A and 2014 Class 1 Notes
Slide 14: Modeled Results Demonstrate Program Strength
Modeled Results Demonstrate Program Strength Worst Individual Storm – Worst Calendar Year – Description Hurricane Andrew 2004 Hurricane Season Probability 1:31 years 1:181 years % of Coverage Exhausted 40.2% 17.8% • Sufficiency of our reinsurance program is tested in the AIR US Hurricane Model (Touc
Slide 15: Attractive Financial Profile
Attractive Financial Profile Disciplined Model Focused on Profitable Growth Annual Gross Premiums Written Gross Combined Ratio $(MM) 90% $436 80% 70% 22.0% 22.5% 60% 19.0% $270 19.3% 50% $219 32.0% 28.2% 40% 25.4% 19.5% 30% 20% $43 27.5% 28.7% 25.8% 26.7% 10% 0% Gross Loss Ratio Ceded Premium Ratio
Slide 16: Strong Balance Sheet
Strong Balance Sheet Best-In-Class Capital Structure • One of the best capitalized Florida insurers – $200 million in surplus • Additional capital provides further cushion on a consolidated basis • 100% equity capital financed, no reliance on quota share agreements to support underwriting (all reins
Slide 17: A Unique Growth Opportunity in P&C Insurance
A Unique Growth Opportunity in P&C Insurance Multiple Avenues Differentiated Business Model for Profitable Growth • Proprietary underwriting analytics • Favorable Florida demographics • Deep management & technical expertise • Voluntary residential insurance expansion • Vertically integrated claims m
Slide 18: Heritage Insurance
1 HERITAGE Insurance l= BB Pillars of Strength and Character.
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