Heritage Insurance Holdings, Inc. · NYSE:HRTG
Heritage Insurance — Investor Presentation (March 2016)
20 slides from Heritage Insurance's investor presentation, March 2016
Slide 1: Investor Presentation
Investor Presentation March 2016 Heritage Insurance Holdings, Inc. (NYSE:HRTG)
Slide 2: Disclaimer: Safe Harbor Statement
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: Innovative Team Identifying New Opportunities
Innovative Team Identifying New Opportunities Continued Opportunity in Florida & Multi-State Expansion Underway New Product Introductions Seasoned Management Team Proven Underwriting & Unique Claims Servicing Model Deep Relationships with Highly Rated Reinsurers Strong, Conservative Capital Structur
Slide 4: Heritage: Investment Case
Heritage: 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 ~257K, or ~$592MM in annualized premium as of 12/31/15 • 2013: 45.0% ROAE(1) Superior ROE • 2014: 26.5%
Slide 5: Core Market: Attractive Florida Market Dynamics
Core 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 Hurr
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: Overview of Zephyr Transaction
Overview of Zephyr Transaction Zephyr Overview Transaction Highlights • Zephyr Insurance Company (“Zephyr”) is a specialty property insurance company domiciled in Hawaii and • Acquisition of Zephyr by Heritage in an headquartered in Honolulu, HI Transaction all-cash transaction • Founded in 2000, ow
Slide 8: Since IPO: Delivering on Growth and Strategic Initiatives
Since IPO: Delivering on Growth and Strategic Initiatives • Opportunistic policy assumptions ~257K policies in force as of 12/31/15, 75% assumed from Citizens ~$60MM in premium acquired from Sunshine State Insurance Company (SSIC) Citizens take-outs in 2015 were ~68K policies. Incremental 2016
Slide 9: Executing Voluntary Business Strategy
Executing Voluntary Business Strategy Policies Personal Residential(1) Inforce (000) 25,000 $70,000 • Personal Lines Voluntary 2015 new policies bound were $60,000 20,000 approximately 23,000 polices, $50,000 +24% y/y 15,000 $40,000 2015 inforce written premium of 10,000 $30,000 $60MM, +63% y/y
Slide 10: Capturing Share in Commercial Residential
Capturing Share in Commercial Residential Total Premiums Written (9/30/14 in Force) Total Premiums Written (9/30/15 in Force) $(MM) $(MM) $403.3 $320.7 $311.9 $188.1 $86.1 $90.9 American Capital American Capital $71.0 Assurance Co. $62.8 Assurance Co. $65.6 $51.7 $8.4 $36.2 $8.4 $10.7 $6.2 $10.1 $4.
Slide 11: 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 12: 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 Voluntary Business • Network of ~1,400 independent agents actively writing policies – Partnership with FAIA
Slide 13: Differentiated Model: Vertically-Integrated Claims Management
Differentiated Model: Vertically-Integrated Claims Management • Seamlessly • Onsite integrated inspection with claim typically system within hours Notice of Inspection Benefits: Loss • Decreased claims severity • Reduced loss experience • Shortened claim tail • Increased renewal rates Repair & Resto
Slide 14: Capitalizing on Favorable Reinsurance Dynamics
Capitalizing on Favorable Reinsurance Dynamics 2015-16 Reinsurance Program(1) • Conservatism & Strength of Program Osprey $1.8B $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 15: 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 16: Attractive Financial Profile
Attractive Financial Profile Disciplined Expense Model Focused on Profitable Growth Annual Gross Premiums Written Gross Combined Ratio $(MM) Gross Loss Ratio Ceded Premium Ratio Gross Expense Ratio 100% $586 80% $436 22.0% 22.5% 19.7% 60% 32.0% 28.2% 28.3% $219 40% 20% $43 27.5% 28.7% 26.9% 0% 15
Slide 17: Building a Track Record of Consistent Growth
Building a Track Record of Consistent Growth Strengthening Strategic Position Net Income $(MM) $93 $47 $34 ($6) NOTE: Net income figures are rounded 16
Slide 18: Strong Balance Sheet
Strong Balance Sheet Best-In-Class Capital Structure • One of the best capitalized Florida insurers – $216 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 19: A Unique Opportunity in P&C Insurance
A Unique Opportunity in P&C Insurance Executing Multiple Growth Opportunities • Favorable Florida demographics • Voluntary residential insurance expansion • Mix-shift into more commercial residential business • Coastal state expansion • Incremental Citizens take-outs Continued Growth in Policies-in-
Slide 20: Heritage Insurance
1 HERITAGE Insurance l= BB Pillars of Strength and Character.
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