Heritage Insurance Holdings, Inc. Reports Financial Results for Second Quarter of 2017
Second Quarter Highlights
- Non-catastrophe loss ratio improved 1.4 points to 28.4% in Q2 2017 as compared to Q2 2016
- Net income of
$6.6 million for Q2 2017 - Book value per share increased 2% as compared to Q2 2016 to
$12.97 - Stockholders' equity of
$365.3 million atJune 30, 2017 - Repurchased 322,811 shares for a total of
$4.1 million in Q2 2017 - Wrote first policy in
Alabama
Results of Operations
The following table summarizes our results of operations for the three and six months ended
Three Months Ended |
Six Months Ended |
||||||||||||||
2017 |
2016 |
Change |
2017 |
2016 |
Change |
||||||||||
Revenue |
|||||||||||||||
Gross premiums written |
$ |
159,255 |
$ |
177,295 |
(10) |
% |
$ |
301,490 |
$ |
324,561 |
(7) |
% |
|||
Gross premiums earned |
$ |
152,354 |
$ |
163,637 |
(7) |
% |
$ |
306,962 |
$ |
315,580 |
(3) |
% |
|||
Ceded premiums |
$ |
(61,902) |
$ |
(54,719) |
13 |
% |
$ |
(124,334) |
$ |
(100,320) |
24 |
% |
|||
Net premiums earned |
$ |
90,452 |
$ |
108,918 |
(17) |
% |
$ |
182,628 |
$ |
215,260 |
(15) |
% |
|||
Total operating revenue |
$ |
96,938 |
$ |
115,281 |
(16) |
% |
$ |
196,231 |
$ |
226,846 |
(13) |
% |
|||
Operating income |
$ |
13,062 |
$ |
29,757 |
(56) |
% |
$ |
24,952 |
$ |
41,797 |
(40) |
% |
|||
Income before taxes |
$ |
10,831 |
$ |
29,757 |
(64) |
% |
$ |
20,540 |
$ |
41,797 |
(51) |
% |
|||
Net income |
$ |
6,642 |
$ |
18,368 |
(64) |
% |
$ |
12,625 |
$ |
25,791 |
(51) |
% |
|||
Per Share Data: |
|||||||||||||||
Book value per share |
$ |
12.97 |
$ |
12.71 |
2.1 |
% |
$ |
12.97 |
$ |
12.71 |
2.1 |
% |
|||
Earnings per diluted share |
$ |
0.23 |
$ |
0.62 |
(63) |
% |
$ |
0.44 |
$ |
0.86 |
(49) |
% |
|||
Return on average equity |
7.3 |
% |
20.2 |
% |
(12.9) |
pts |
7.0 |
% |
14.2 |
% |
(7.2) |
pts |
|||
Ratios to gross premiums earned: |
|||||||||||||||
Ceded premium ratio |
40.6 |
% |
33.5 |
% |
7.1 |
pts |
40.5 |
% |
31.8 |
% |
8.7 |
pts |
|||
Loss ratio |
30.2 |
% |
29.8 |
% |
0.4 |
pts |
30.2 |
% |
36.7 |
% |
(6.5) |
pts |
|||
Operating expense ratio |
24.9 |
% |
22.4 |
% |
2.5 |
pts |
25.6 |
% |
22.0 |
% |
3.6 |
pts |
|||
Combined ratio |
95.7 |
% |
85.7 |
% |
10.0 |
pts |
96.3 |
% |
90.5 |
% |
5.8 |
pts |
|||
Ratios to net premiums earned: |
|||||||||||||||
Loss ratio |
50.9 |
% |
44.8 |
% |
6.1 |
pts |
50.8 |
% |
53.8 |
% |
(3.0) |
pts |
|||
Operating expense ratio |
41.8 |
% |
33.7 |
% |
8.1 |
pts |
43.0 |
% |
32.2 |
% |
10.8 |
pts |
|||
Combined ratio |
92.7 |
% |
78.5 |
% |
14.2 |
pts |
93.8 |
% |
86.0 |
% |
7.8 |
pts |
Quarterly Financial Results
Net income for the second quarter of 2017 was
Gross premiums earned were
Ceded premiums as a percentage of gross premiums earned were 40.6% for the second quarter of 2017 compared to 33.5% for the second quarter of 2016. Citizens take-outs provided a 3.3 percentage point benefit to the second quarter 2016 ratio. The reduction in gross earned premium in the second quarter of 2017, and a reinstatement premium related to a large loss, increased the ratio by approximately 2.5 percentage points. On
The loss ratio as measured against gross premiums earned was fairly consistent for the second quarters of 2017 and 2016 at 30.2% and 29.8%, respectively. The non-catastrophe loss ratio improved 1.4 points to 28.4% in Q2 2017 as compared to Q2 2016.
The Company's operating expense ratio on a gross basis was 24.9% for the second quarter of 2017 compared to 22.4% for the second quarter of 2016. The second quarter of 2016 expense ratio benefited from the Citizens assumption activity by approximately 1.4 percentage points, due to the lack of acquisition expenses associated with the assumptions.
Heritage's combined ratio on a gross basis was 95.7% for the second quarter of 2017 compared to 85.7% for the second quarter of 2016. The combined ratio increased due to the increases in the ceded premium ratio, loss ratio and the gross operating expense ratio, as described above.
Book Value Analysis
Book value per share increased by 4.5% from
As of |
|||||
Book Value Per Share |
|
|
|
||
Numerator: |
|||||
Common stockholders' equity |
$ 365,267 |
$ 357,959 |
$ 372,367 |
||
Denominator: |
|||||
Total shares outstanding |
28,156,421 |
28,840,443 |
29,301,121 |
||
Book value per common share |
$ 12.97 |
$ 12.41 |
$ 12.71 |
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 Statements of Income and Other Comprehensive Income |
||||||||
Three Months Ended |
Six Months Ended |
|||||||
2017 |
2016 |
2017 |
2016 |
|||||
REVENUE: |
||||||||
Gross premiums written |
$ 159,255 |
$ 177,295 |
$ 301,490 |
$ 324,561 |
||||
Change in gross unearned premiums |
(6,901) |
(13,658) |
5,472 |
(8,981) |
||||
Gross premiums earned |
152,354 |
163,637 |
306,962 |
315,580 |
||||
Ceded premiums |
(61,902) |
(54,719) |
(124,334) |
(100,320) |
||||
Net premiums earned |
90,452 |
108,918 |
182,628 |
215,260 |
||||
Net investment income |
2,973 |
2,223 |
5,475 |
4,260 |
||||
Net realized (losses) gains |
(125) |
263 |
646 |
644 |
||||
Other revenue |
3,638 |
3,877 |
7,482 |
6,682 |
||||
Total revenue |
96,938 |
115,281 |
196,231 |
226,846 |
||||
OPERATING EXPENSES: |
||||||||
Losses and loss adjustment expenses |
46,046 |
48,794 |
92,693 |
115,757 |
||||
Policy acquisition costs |
21,738 |
20,753 |
45,180 |
38,881 |
||||
General and administrative expenses |
16,092 |
15,977 |
33,406 |
30,411 |
||||
Total operating expenses |
83,876 |
85,524 |
171,279 |
185,049 |
||||
Operating income |
13,062 |
29,757 |
24,952 |
41,797 |
||||
Interest expense, net |
1,990 |
— |
3,934 |
— |
||||
Amortization of debt issuance costs |
241 |
— |
478 |
— |
||||
Income before income taxes |
10,831 |
29,757 |
20,540 |
41,797 |
||||
Provision for income taxes |
4,189 |
11,389 |
7,915 |
16,006 |
||||
Net income |
6,642 |
18,368 |
12,625 |
25,791 |
||||
OTHER COMPREHENSIVE INCOME: |
||||||||
Change in net unrealized gains on investments |
3,899 |
8,928 |
7,880 |
13,010 |
||||
Reclassification adjustment for net realized investment losses (gains) |
125 |
(263) |
(646) |
(644) |
||||
Income tax expense related to items of other comprehensive income |
(1,549) |
(3,348) |
(2,785) |
(4,770) |
||||
Total comprehensive income |
$ 9,117 |
$ 23,685 |
$ 17,074 |
$ 33,387 |
||||
Weighted average shares outstanding |
||||||||
Basic |
28,283,587 |
29,653,668 |
28,543,703 |
30,010,776 |
||||
Diluted |
28,283,587 |
29,653,668 |
28,543,703 |
30,072,624 |
||||
Earnings per share |
||||||||
Basic |
$ 0.23 |
$ 0.62 |
$ 0.44 |
$ 0.86 |
||||
Diluted |
$ 0.23 |
$ 0.62 |
$ 0.44 |
$ 0.86 |
Consolidated Balance Sheets |
||||
|
|
|||
ASSETS |
(unaudited) |
|||
Fixed maturity securities, available for sale, at fair value (amortized |
$ 569,052 |
$ 571,011 |
||
Equity securities, available for sale, at fair value (cost of |
32,139 |
31,971 |
||
Total investments |
601,191 |
602,982 |
||
Cash and cash equivalents |
134,176 |
105,817 |
||
Restricted cash |
18,381 |
20,910 |
||
Accrued investment income |
5,105 |
4,764 |
||
Premiums receivable, net |
38,960 |
42,720 |
||
Prepaid reinsurance premiums |
213,009 |
106,609 |
||
Income taxes receivable |
2,297 |
10,713 |
||
Deferred policy acquisition costs, net |
41,792 |
42,779 |
||
Property and equipment, net |
16,547 |
17,179 |
||
Intangibles, net |
23,526 |
26,542 |
||
|
46,454 |
46,454 |
||
Other assets |
7,197 |
5,775 |
||
Total Assets |
$ 1,148,635 |
$ 1,033,244 |
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||
Unpaid losses and loss adjustment expenses |
$ 122,785 |
$ 140,137 |
||
Unearned premiums |
312,552 |
318,024 |
||
Reinsurance payable |
224,807 |
96,667 |
||
Note payable, net of issuance costs |
73,276 |
72,905 |
||
Deferred income taxes |
4,651 |
3,003 |
||
Income tax payable |
— |
|||
Advance premiums |
25,884 |
18,565 |
||
Accrued compensation |
5,479 |
4,303 |
||
Other liabilities |
13,934 |
21,681 |
||
Total Liabilities |
$ 783,368 |
$ 675,285 |
||
Commitments and contingencies |
||||
Stockholders' Equity: |
||||
Common stock, |
3 |
3 |
||
Additional paid-in capital |
208,135 |
205,727 |
||
Accumulated other comprehensive loss |
(569) |
(5,018) |
||
|
(34,169) |
(25,562) |
||
Retained earnings |
191,867 |
182,809 |
||
Total Stockholders' Equity |
365,267 |
357,959 |
||
Total Liabilities and Stockholders' Equity |
$ 1,148,635 |
$ 1,033,244 |
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:
727-362-7203
[email protected]
or
727-362-7261
[email protected]
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