Heritage Insurance Holdings, Inc. Reports Financial Results for First Quarter of 2018
First Quarter Highlights
- Book value per share increased 19.1% quarter-over-quarter to
$15.09 as ofMarch 31, 2018 - Operating income of
$24.8 million $1.6 million of dividends paid in Q1 2018- Q1 2018 net income of
$14.8 million and earnings per share of$0.58 - Net combined ratio declined to 82.2% in Q1 2018 from 94.8% in Q1 2017
- Stockholders' equity of
$388.9 million atMarch 31, 2018 - Premiums in force increased by 48% to
$923.3 million atMarch 31, 2018 compared to$622.4 million atMarch 31, 2017 - Repurchased 115,200 shares of our common stock in Q1 for an aggregate purchase price of
$2 million - Board of Directors declared a first quarter dividend of
$0.06 per share - Hurricane Irma
- Closed 92% of approximately 32,000 Irma Claims
- Vertically integrated repair division continues to perform services related to Hurricane Irma claims
Results of Operations
The following table summarizes our results of operations for the three months ended
Three Months Ended |
|||||||||||||
2018 |
2017 |
Change |
|||||||||||
Revenue |
|||||||||||||
Gross premiums written |
$ |
204,366 |
$ |
142,235 |
44% |
||||||||
Gross premiums earned |
$ |
227,163 |
$ |
154,608 |
47% |
||||||||
Ceded premiums |
$ |
(121,055) |
$ |
(62,432) |
94% |
||||||||
Net premiums earned |
$ |
106,108 |
$ |
92,176 |
15% |
||||||||
Total revenues |
$ |
112,026 |
$ |
99,293 |
13% |
||||||||
Operating income |
$ |
24,817 |
$ |
11,890 |
109% |
||||||||
Income before income taxes |
$ |
19,997 |
$ |
9,709 |
106% |
||||||||
Net income |
$ |
14,829 |
$ |
5,983 |
148% |
||||||||
Per Share Data: |
|||||||||||||
Book value per share |
$ |
15.09 |
$ |
12.67 |
19% |
||||||||
Earnings per diluted share |
$ |
0.55 |
$ |
0.21 |
162% |
||||||||
Return on average equity - Net Income |
15.4% |
6.7% |
8.7 |
pts |
|||||||||
Ratios to Gross Premiums Earned: |
|||||||||||||
Ceded premium ratio |
53.3% |
40.3% |
13.0 |
pts |
|||||||||
Gross loss ratio |
23.4% |
30.2% |
(6.8) |
pts |
|||||||||
Gross expense ratio |
15.0% |
26.4% |
(11.4) |
pts |
|||||||||
Combined expense ratio - Gross |
91.7% |
96.9% |
(5.2) |
pts |
|||||||||
Ratios to Net Premiums Earned: |
|||||||||||||
Net loss ratio |
50.0% |
50.6% |
(0.6) |
pts |
|||||||||
Net expense ratio |
32.2% |
44.2% |
(12.0) |
pts |
|||||||||
Combined expense ratio - Net |
82.2% |
94.8% |
(12.6) |
pts |
Ratios
Ceded premium ratio. Our ceded premium ratio represents ceded premiums as a percentage of gross premiums earned.
Gross loss ratio. Our gross loss ratio represents losses and loss adjustment expenses net of reinsurance recoveries as a percentage of gross premiums earned.
Net loss ratio. Our net loss ratio represents losses and loss adjustment expenses as a percentage of net premiums earned.
Gross expense ratio. Our gross expense ratio represents policy acquisition costs and general and administrative expenses as a percentage of gross premiums earned. Ceding commission income is reported as a reduction of policy acquisition and general and administrative costs.
Net expense ratio. Our net expense ratio represents policy acquisition costs plus general and administrative expenses as a percentage of net premiums earned. Ceding commission income is reported as a reduction of policy acquisition and general and administrative costs.
Combined ratios. Our combined ratio on a gross basis represents the sum of ceded premiums, losses and loss adjustment expenses, policy acquisition costs and general and administrative expenses as a percentage of gross premiums earned. Our combined ratio on a net basis represents the sum of losses and loss adjustment expenses, policy acquisition costs and general and administrative expenses as a percentage of net premiums earned.
The combined ratio is the key measure of underwriting performance traditionally used in the property and casualty industry. A combined ratio under 100% generally reflects profitable underwriting results.
Quarterly Financial Results
Net income for the first quarter of 2018 was
Gross premiums written were
Gross premiums earned were
Ceded premiums as a percentage of gross premiums earned were 53.3% for the first quarter of 2018 compared to 40.3% for the first quarter of 2017. The increase is a result of the quota share reinsurance agreements that
The loss ratio on a net basis was 50.0% for the first quarter of 2018 compared to 50.6% for the first quarter of 2017. While the net loss ratio was relatively consistent, we did experience higher loss ratios at Heritage P&C and
The Company's expense ratio on a net basis was 32.2% for the first quarter of 2018 compared to 44.2% for the first quarter of 2017. The first quarter of 2018 expense ratio benefited from ceding commission income earned by
Our combined ratio on a gross and net basis for the first quarter of 2018 was 91.7% and 82.2%, respectively. Our combined ratio on a gross and net basis for the first quarter of 2017 was 96.9% and 94.8%, respectively. The decrease in the gross and net combined ratios relates primarily to a lower loss ratio and a lower expense ratio driven by the favorable impact of ceding commission income on operating expenses.
Book Value Analysis
Book value per share increased 19.1% to
As of |
|||||||||||
Book Value Per Share |
|
|
|
||||||||
Numerator: |
|||||||||||
Common stockholders' equity |
$ |
388,893 |
$ |
379,816 |
$ |
360,831 |
|||||
Denominator: |
|||||||||||
Total Shares Outstanding |
25,769,806 |
25,885,006 |
28,479,232 |
||||||||
Book Value Per Common Share |
$ |
15.09 |
$ |
14.67 |
$ |
12.67 |
Conference Call Details:
Participant International Dial In: 1-412-902-4258
Canada Toll Free: 1-855-669-9657
Webcast:
To listen to the live webcast, please go to http://investors.heritagepci.com/. This webcast will be archived and accessible on the Company's website.
Consolidated Balance Sheets (In thousands, except share data and per share) |
||||||||
|
|
|||||||
ASSETS |
(unaudited) |
|||||||
Fixed maturity securities, available for sale, at fair value (amortized |
$ |
486,678 |
$ |
549,796 |
||||
Equity securities, available for sale, at fair value (cost of |
16,235 |
17,217 |
||||||
Total investments |
502,913 |
567,013 |
||||||
Cash and cash equivalents |
193,641 |
153,697 |
||||||
Restricted cash and cash equivalents |
20,836 |
20,833 |
||||||
Accrued investment income |
4,241 |
5,057 |
||||||
Premiums receivable, net |
66,734 |
67,757 |
||||||
Reinsurance recoverable on paid and unpaid claims |
553,823 |
357,357 |
||||||
Prepaid reinsurance premiums |
164,061 |
227,764 |
||||||
Income taxes receivable |
17,523 |
37,338 |
||||||
Deferred policy acquisition costs, net |
53,862 |
41,678 |
||||||
Property and equipment, net |
18,417 |
18,748 |
||||||
Intangibles, net |
94,999 |
101,626 |
||||||
|
152,459 |
152,459 |
||||||
Other assets |
22,902 |
19,883 |
||||||
Total Assets |
$ |
1,866,411 |
$ |
1,771,210 |
||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
Unpaid losses and loss adjustment expenses |
$ |
547,735 |
$ |
470,083 |
||||
Unearned premiums |
452,537 |
475,334 |
||||||
Reinsurance payable |
56,008 |
17,577 |
||||||
Long-term debt, net |
185,138 |
184,405 |
||||||
Deferred income tax |
18,280 |
34,333 |
||||||
Advance premiums |
37,738 |
23,648 |
||||||
Accrued compensation |
7,328 |
16,477 |
||||||
Accounts payable and other liabilities |
172,754 |
169,537 |
||||||
Total Liabilities |
$ |
1,477,518 |
$ |
1,391,394 |
||||
Commitments and contingencies |
||||||||
Stockholders' Equity: |
||||||||
Common stock, |
3 |
3 |
||||||
Additional paid-in capital |
297,112 |
294,836 |
||||||
Accumulated other comprehensive loss |
(7,649) |
(3,064) |
||||||
|
(89,184) |
(87,185) |
||||||
Retained earnings |
188,611 |
175,226 |
||||||
Total Stockholders' Equity |
388,893 |
379,816 |
||||||
Total Liabilities and Stockholders' Equity |
$ |
1,866,411 |
$ |
1,771,210 |
Consolidated Statements of Comprehensive Income (In thousands, except share data and per share) (Unaudited) |
||||||||
For the Three Months Ended |
||||||||
2018 |
2017 |
|||||||
REVENUES: |
||||||||
Gross premiums written |
$ |
204,366 |
$ |
142,235 |
||||
Change in gross unearned premiums |
22,797 |
12,373 |
||||||
Gross premiums earned |
227,163 |
154,608 |
||||||
Ceded premiums |
(121,055) |
(62,432) |
||||||
Net premiums earned |
106,108 |
92,176 |
||||||
Net investment income |
3,302 |
2,502 |
||||||
Net realized (losses) gains |
(227) |
771 |
||||||
Other revenue |
2,843 |
3,844 |
||||||
Total revenues |
112,026 |
99,293 |
||||||
EXPENSES: |
||||||||
Losses and loss adjustment expenses |
53,091 |
46,647 |
||||||
Policy acquisition costs, net of ceding commission income of |
12,187 |
23,442 |
||||||
General and administrative expenses, net of ceding commission income |
21,931 |
17,314 |
||||||
Total expenses |
87,209 |
87,403 |
||||||
Operating income |
24,817 |
11,890 |
||||||
Interest expense, net |
4,820 |
2,181 |
||||||
Income before income taxes |
19,997 |
9,709 |
||||||
Provision for income taxes |
5,168 |
3,726 |
||||||
Net income |
$ |
14,829 |
$ |
5,983 |
||||
OTHER COMPREHENSIVE INCOME |
||||||||
Change in net unrealized (losses) gains on investments |
(6,478) |
3,981 |
||||||
Reclassification adjustment for net realized investment losses (gains) |
227 |
(771) |
||||||
Income tax benefit (expense) related to items of other comprehensive |
1,823 |
(1,236) |
||||||
Total comprehensive income |
$ |
10,401 |
$ |
7,957 |
||||
Weighted average shares outstanding |
||||||||
Basic |
25,727,553 |
28,806,709 |
||||||
Diluted |
26,732,019 |
28,806,709 |
||||||
Earnings per share |
||||||||
Basic |
$ |
0.58 |
$ |
0.21 |
||||
Diluted |
$ |
0.55 |
$ |
0.21 |
About Heritage
Forward-Looking Statements
Statements in this press release 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, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," "or "continue" or the other negative variations thereof or comparable terminology are intended to identify forward-looking statements. The risks and uncertainties that could cause our actual results to differ from those expressed or implied herein include, without limitation: the success of the Company's marketing initiatives; inflation and other changes in economic conditions (including changes in interest rates and financial markets); the impact of new federal and state regulations that affect the property and casualty insurance market; the costs of reinsurance and the collectability of reinsurance; assessments charged by various governmental agencies; pricing competition and other initiatives by competitors; our ability to obtain regulatory approval for requested rate changes, and the timing thereof; legislative and regulatory developments; the outcome of litigation pending against us, including the terms of any settlements; risks related to the nature of our business; dependence on investment income and the composition of our investment portfolio; the adequacy of our liability for losses and loss adjustment expense; our ability to build and maintain relationships with insurance agents; claims experience; ratings by industry services; catastrophe losses; reliance on key personnel; weather conditions (including the severity and frequency of storms, hurricanes, tornadoes and hail); changes in loss trends; acts of war and terrorist activities; court decisions and trends in litigation; and other matters described from time to time by us in our filings with the
Investor Contact:
727-362-7211
[email protected]
or
727-362-7261
[email protected]
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