Heritage Reports Third Quarter 2021 Results
Third Quarter 2021 Highlights
- Net loss of
$16.4 million , or$0.59 per diluted share. - Book value per share of
$14.57 , down 4.1% from second quarter 2021 and 8.8% year-over-year. - Gross premiums written of
$274.2 million , down 1.5% year-over-year, reflecting planned exposure management. - Favorable prior year reserve development of
$0.8 million . - Net current accident quarter weather losses of
$51.4 million , up from$47.3 million in the prior year quarter. Current accident quarter weather losses include$16.0 million of net catastrophe losses, down from$24.5 million in the prior year quarter, and$35.5 million of net other weather losses, up from$22.8 million in the prior year quarter. - Repurchased 148,109 shares for
$1.0 million at an average price of$6.78 per share. Total capital returned to shareholders of$2.7 million , including$0.06 per share regularly quarterly dividend.
Quarterly Dividend
Heritage's Board of Directors declared a quarterly cash dividend of
COVID-19 Update
We continue to monitor the short- and long-term impacts of the COVID-19 virus and its variants. For the year ended
While we acknowledge uncertainties associated with future economic conditions, we do not expect a material impact to our business going forward. We will continue to monitor economic conditions and, in the case of a prolonged economic slowdown as a result of COVID-19 or its variants, will take necessary actions to mitigate any negative impacts to our business, operations or financial results.
Results of Operations
The following table summarizes our results of operations for the three and nine months ended
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||||
2021 |
2020 |
Change |
2021 |
2020 |
Change |
|||||||||||||||||||||
Total revenues |
$ |
167,408 |
$ |
165,119 |
1.4% |
$ |
464,849 |
$ |
433,837 |
7.1% |
||||||||||||||||
Net (loss) income |
$ |
(16,410) |
$ |
(5,233) |
(213.6)% |
$ |
(25,509) |
$ |
6,519 |
(491.3)% |
||||||||||||||||
Per Share |
$ |
(0.59) |
$ |
(0.19) |
(210.5)% |
$ |
(0.91) |
$ |
0.23 |
(495.7)% |
||||||||||||||||
Book value per share |
$ |
14.57 |
$ |
15.97 |
(8.8)% |
$ |
14.57 |
$ |
15.97 |
(8.8)% |
||||||||||||||||
Return on equity |
(15.8)% |
(4.6)% |
(11.2) |
pts |
(8.0)% |
1.9% |
(9.9) |
pts |
||||||||||||||||||
Underwriting summary |
||||||||||||||||||||||||||
Gross premiums written |
$ |
274,178 |
$ |
278,242 |
(1.5)% |
$ |
886,059 |
$ |
797,776 |
11.1% |
||||||||||||||||
Gross premiums earned |
$ |
294,409 |
$ |
254,982 |
15.5% |
$ |
850,466 |
$ |
731,489 |
16.3% |
||||||||||||||||
Ceded premiums |
$ |
(131,964) |
$ |
(116,752) |
13.0% |
$ |
(399,323) |
$ |
(338,197) |
18.1% |
||||||||||||||||
Net premiums earned |
$ |
162,445 |
$ |
138,230 |
17.5% |
$ |
451,143 |
$ |
393,292 |
14.7% |
||||||||||||||||
Ceded premium ratio |
44.8% |
45.8% |
(1.0) |
pts |
47.0% |
46.2% |
0.8 |
pts |
||||||||||||||||||
Ratios to Net Premiums Earned: |
||||||||||||||||||||||||||
Loss ratio |
79.8% |
86.6% |
(6.8) |
pts |
72.8% |
67.8% |
5.0 |
pts |
||||||||||||||||||
Expense ratio |
32.7% |
36.1% |
(3.4) |
pts |
35.8% |
38.6% |
(2.8) |
pts |
||||||||||||||||||
Combined ratio |
112.5% |
122.7% |
(10.2) |
pts |
108.6% |
106.4% |
2.2 |
pts |
*Return on equity represents annualized net income for the period divided by average stockholders' equity during the period.
Note: Percentages and sums in the table may not recalculate precisely due to rounding.
Ratios
Ceded premium ratio represents ceded premiums as a percentage of gross premiums earned.
Net loss ratio represents net losses and loss adjustment expenses ("LAE") as a percentage of net premiums earned.
Net expense ratio represents policy acquisition costs ("PAC") and general and administrative ("G&A") expenses as a percentage of net premiums earned. Ceding commission income is reported as a reduction of PAC and G&A expenses.
Net combined ratio represents the sum of net losses and LAE, PAC and G&A expenses as a percentage of net premiums earned. The net combined ratio is a 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
Third quarter 2021 net loss was
Gross premiums written were
Premiums-in-force were
Gross premiums earned were
The ceded premium ratio was 44.8%, down 1.0 points from 45.8% in the prior year quarter. The decrease primarily stems from gross premiums earned growth outpacing ceded premium growth.
The net loss ratio was 79.8%, down 6.8 points from 86.6% in the prior year quarter. The decrease primarily stems from a lower current accident year attritional net loss ratio, partly offset by a lower favorable prior year development ratio.
The net expense ratio was 32.7%, down 3.4 points from 36.1% in the prior year quarter. The decrease primarily stems from a lower G&A expense ratio.
The net combined ratio was 112.5%, down 10.2 points from 122.7% in the prior year quarter. The decrease stems from lower net loss and expense ratios, as described above.
Book Value Analysis
Book value per share decreased to
As Of |
|||||||||||
Book Value Per Share |
|
|
|
||||||||
Numerator: |
|||||||||||
Common stockholders' equity |
$ |
405,025 |
$ |
442,344 |
$ |
443,140 |
|||||
Denominator: |
|||||||||||
Total Shares Outstanding |
27,802,626 |
27,748,606 |
27,748,606 |
||||||||
Book Value Per Common Share |
$ |
14.57 |
$ |
15.94 |
$ |
15.97 |
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.
|
||||||||
Condensed Consolidated Balance Sheets |
||||||||
(Amounts in thousands, except share amounts) |
||||||||
(Unaudited) |
||||||||
|
|
|||||||
ASSETS |
(unaudited) |
|||||||
Fixed maturities, available-for-sale, at fair value |
$ |
660,819 |
$ |
561,011 |
||||
Equity securities, at cost |
1,415 |
1,599 |
||||||
Other investments |
23,887 |
26,409 |
||||||
Total investments |
686,121 |
589,019 |
||||||
Cash and cash equivalents |
393,411 |
440,956 |
||||||
Restricted cash |
5,415 |
5,427 |
||||||
Accrued investment income |
3,042 |
2,737 |
||||||
Premiums receivable, net |
74,877 |
77,471 |
||||||
Reinsurance recoverable on paid and unpaid claims, net |
346,374 |
355,037 |
||||||
Prepaid reinsurance premiums |
338,172 |
245,818 |
||||||
Income taxes receivable |
35,490 |
32,224 |
||||||
Deferred policy acquisition costs, net |
95,425 |
89,265 |
||||||
Property and equipment, net |
17,950 |
18,685 |
||||||
Right-of-use lease asset, net |
28,652 |
6,461 |
||||||
Intangibles, net |
57,514 |
62,277 |
||||||
|
152,459 |
152,459 |
||||||
Other assets |
13,220 |
11,544 |
||||||
Total Assets |
$ |
2,248,122 |
$ |
2,089,379 |
||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
Unpaid losses and loss adjustment expenses |
$ |
636,146 |
$ |
659,341 |
||||
Unearned premiums |
605,304 |
569,618 |
||||||
Reinsurance payable |
324,730 |
161,918 |
||||||
Long-term debt, net |
121,481 |
120,998 |
||||||
Deferred income tax liability, net |
13,665 |
18,477 |
||||||
Advance premiums |
33,341 |
18,268 |
||||||
Accrued compensation |
9,430 |
9,325 |
||||||
Lease liability |
31,964 |
8,155 |
||||||
Accounts payable and other liabilities |
67,036 |
80,935 |
||||||
Total Liabilities |
$ |
1,843,097 |
$ |
1,647,035 |
||||
Stockholders' Equity: |
||||||||
Common stock, |
3 |
3 |
||||||
Additional paid-in capital |
332,562 |
331,867 |
||||||
Accumulated other comprehensive income |
(405) |
6,057 |
||||||
|
(116,370) |
(115,365) |
||||||
Retained earnings |
189,235 |
219,782 |
||||||
Total Stockholders' Equity |
405,025 |
442,344 |
||||||
Total Liabilities and Stockholders' Equity |
$ |
2,248,122 |
$ |
2,089,379 |
|
||||||||||||||||
Consolidated Statements of Income and Other Comprehensive Income |
||||||||||||||||
(Amounts in thousands, except per share and share amounts) |
||||||||||||||||
(Unaudited) |
||||||||||||||||
For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
REVENUES: |
||||||||||||||||
Gross premiums written |
$ |
274,178 |
$ |
278,242 |
$ |
886,059 |
$ |
797,776 |
||||||||
Change in gross unearned premiums |
20,231 |
(23,260) |
(35,593) |
(66,287) |
||||||||||||
Gross premiums earned |
294,409 |
254,982 |
850,466 |
731,489 |
||||||||||||
Ceded premiums |
(131,964) |
(116,752) |
(399,323) |
(338,197) |
||||||||||||
Net premiums earned |
162,445 |
138,230 |
451,143 |
393,292 |
||||||||||||
Net investment income |
1,548 |
2,817 |
3,797 |
9,783 |
||||||||||||
Net realized and unrealized (losses) gains |
(6) |
20,355 |
(926) |
20,377 |
||||||||||||
Other revenue |
3,421 |
3,717 |
10,835 |
10,385 |
||||||||||||
Total revenues |
167,408 |
165,119 |
464,849 |
433,837 |
||||||||||||
EXPENSES: |
||||||||||||||||
Losses and loss adjustment expenses |
129,632 |
119,718 |
328,376 |
266,769 |
||||||||||||
Policy acquisition costs, net of ceding commission income |
35,984 |
31,960 |
109,183 |
92,243 |
||||||||||||
General and administrative expenses, net of ceding commission income |
17,169 |
17,923 |
52,490 |
59,583 |
||||||||||||
Total expenses |
182,785 |
169,601 |
490,049 |
418,595 |
||||||||||||
Operating (loss) income |
(15,377) |
(4,482) |
(25,200) |
15,242 |
||||||||||||
Interest expense, net |
2,150 |
2,251 |
5,953 |
5,939 |
||||||||||||
(Loss) income before income taxes |
(17,527) |
(6,733) |
(31,153) |
9,303 |
||||||||||||
(Benefit) provision for income taxes |
(1,117) |
(1,500) |
(5,644) |
2,784 |
||||||||||||
Net (loss) income |
$ |
(16,410) |
$ |
(5,233) |
$ |
(25,509) |
$ |
6,519 |
||||||||
OTHER COMPREHENSIVE (LOSS) INCOME |
||||||||||||||||
Change in net unrealized (losses) gains on investments |
(1,344) |
2,480 |
(8,316) |
19,330 |
||||||||||||
Reclassification adjustment for net realized investment losses (gains) |
6 |
(20,355) |
(96) |
(20,377) |
||||||||||||
Income tax benefit related to items of other comprehensive income |
310 |
4,137 |
1,950 |
242 |
||||||||||||
Total comprehensive (loss) income |
$ |
(17,438) |
$ |
(18,971) |
$ |
(31,971) |
$ |
5,714 |
||||||||
Weighted average shares outstanding |
||||||||||||||||
Basic |
27,938,028 |
27,739,839 |
27,902,814 |
28,053,959 |
||||||||||||
Diluted |
27,938,028 |
27,739,839 |
27,902,814 |
28,073,570 |
||||||||||||
(Loss) earnings per share |
||||||||||||||||
Basic |
$ |
(0.59) |
$ |
(0.19) |
$ |
(0.91) |
$ |
0.23 |
||||||||
Diluted |
$ |
(0.59) |
$ |
(0.19) |
$ |
(0.91) |
$ |
0.23 |
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. This release includes forward-looking statements relating to (i) the impact of the COVID-19 pandemic on our business, results of operations and financial condition and our ability to navigate the uncertainty and mitigate the impact and (ii) the trend of premiums-in-force growth outpacing policies-in-force growth and its impact on our future results. The risks and uncertainties that could cause our actual results to differ from those expressed or implied herein include, without limitation: our ability to comply with our obligations under the new credit facilities, including the financial and other covenants contained therein; the success of the Company's marketing initiatives; the continued and potentially prolonged impact of the COVID-19 pandemic on the economy, demand for our products and our operations, including measures taken by the governmental authorities to address COVID-19, which may precipitate or exacerbate other risks and/or uncertainties; inflation and other changes in economic conditions (including changes in interest rates and financial markets), including as a result of the COVID-19 pandemic; the impact of new federal and state regulations that affect the property and casualty insurance market; the costs of reinsurance, the collectability of reinsurance and our ability to obtain reinsurance coverage on terms and at a cost acceptable to us; 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:
Executive Vice President
727.871.0206
Email: [email protected]
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