Heritage Insurance Holdings, Inc. · NYSE:HRTG
Heritage Insurance — Investor Presentation (August 2020)
26 slides from Heritage Insurance's investor presentation, August 2020
Slide 1: Investor Presentation
Investor Presentation (NYSE: HRTG) August 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 roughly $1 billion of personal/commercial residential and commercial general liability premium across its multi‐ state footprint. QUICK FACTS MARKET/FINANCIAL DATA
Slide 6: The Heritage Story
THE HERITAGE STORY Founded in 2012, Heritage has quickly grown into a leading coastal US P&C insurer. 2012 2015 2017 2019 Company inception Initiated Began writing PRES in GA and AL Began writing PRES in VA Started writing voluntary quarterly Sawgrass Mutual policy Began writing CRES i
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 $994.6 million of 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 liabili
Slide 10: In-Force Metrics
IN‐FORCE METRICS Florida property insurance only accounts for 31% of Heritage’s property total insured value (TIV), but reflects 52% of premiums in‐force – the $495 Florida personal residential (PRES) insurance average premium per $100,000 of TIV is almost triple the $195 non‐Florida average (Florid
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 2020‐2021 catastrophe reinsurance program, protecting the Company against hurricanes and severe weather events and reducing earnings volatility. Substantial severity and frequency protection. $1.3 billion first event reinsurance exhaust
Slide 13: Conservative Reinsurance Loss Retention
CONSERVATIVE REINSURANCE LOSS RETENTION AFTER‐TAX FIRST EVENT FLORIDA LOSS RETENTION AS % OF 2Q2020 GAAP EQUITY 18% 16.4% 16% 14% 12% 10.4% 10.8% 9.8% 10% 8% 6.5% 6% 4% 3.2% 2% 0% HRTG UVE UIHC FNHC FL peer median HCI Note 1: Based on 2020‐2021 catastrophe reinsurance programs. Note 2: Assumes a mod
Slide 14: Investment Portfolio
INVESTMENT PORTFOLIO Heritage has a very conservative investment portfolio, consisting predominantly of low duration, fixed income securities. As of 2Q2020, duration was 3.1 years, 0.2 years below 1Q2020 and 2Q2019. INVESTMENT PORTFOLIO BREAKDOWN (2Q2020) NET INVESTMENT INCOME PERFORMANCE US governm
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, most recently stemming from organic growth, while earlier growth stemmed from Citizens depopulation transactions and M&A. Heritage’s premium growth is unprecedented, reaching almost $1 billion of premiums in‐force 5
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% 100.8% 95.7% 93.3% 96.5% 100% 94.1% 97.6% 95% 92.8% 90.4% 80.8% 78.4% 74.8% 80% 72.9% 40.0% 75% 71.4% 34.8% 39.4% 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 $23.8 million remaining on its share repurchase authorization. Since 2016, the Company has returned $105.7 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’S TRI‐COUNTY 100.0% 100.0% 100.0% 100.0% 100% Heritage has been reducing its exposure to Florida’s Tri‐County region and diversifying to new states, resulting in a better spread of risk, better claims 9
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 25% 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 2.5x US weather & 2.5x 35% Hurricanes Lane, 30.3% Florence & Mich
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 2021E Current 2020E 2021E 2016 2017* 2018 2019 2020E 2016 2017* 2018 2019 HRTG Heritage Insurance Holdings, Inc. 7.9 0.8 0.8 0.7 9.5% 11.1% 6.7% 6.6% 6.2% 10.7% 20.0% 16.9% 13.5% FNHC Fed
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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