Investors

CLEARWATER, Fla., Nov. 5, 2014 /PRNewswire/ -- Heritage Insurance Holdings, Inc. (NYSE:HRTG) ("Heritage" or the "Company"), a property and casualty insurance holding company, today reported its financial results for the third quarter ended September 30, 2014.

Third Quarter Highlights

• 133% increase in gross premiums written for Q3 2014 as compared with Q3 2013
• 155% increase in net premiums earned for Q3 2014 as compared with Q3 2013
• 102% increase in policy count compared to Q3 2013
• Year-to-date net income of $27.4 million
• Combined ratio of 82.9% for the quarter and 82.1% year-to-date
• Successfully assimilated the acquisition of policies from Sunshine State Insurance Company

Bruce Lucas, the Company's Chairman and CEO, said, "The third quarter was another excellent quarter for us.  Our year over year growth has been strong as evidenced by triple digit increases in gross premiums written, net premiums earned, and policy count.  Our third quarter net operating income increased 87% over the third quarter of last year, which significantly exceeded expectations. I am particularly pleased with our successful  transition of Sunshine State Insurance Company's (SSIC) policies to Heritage. The cancellation and non-renewal rates have been much better than expected.  I feel we have provided a great solution for SSIC policyholders, agents, and the State of Florida. It's another example of how well we have been able to execute on our business plan.  Additionally, everything is in place for us to have an excellent fourth quarter, particularly as it relates to the execution of our commercial residential business plan." 

Results of Operations

The following table summarizes our results of operations for three and nine-month periods ended September 30, 2014 and 2013, respectively (in thousands, except percentages and per share amounts):

Quarterly Financial Results

Net income for the quarter ended September 30, 2014 was $10.0 million compared to $5.3 million for the quarter ended September 30, 2013. The increase is primarily due to continued growth in policies renewed and written during 2014. 

Gross premiums earned were $79.9 million for the third quarter of 2014 compared to $41.5 million for the third quarter of 2013. Gross premiums earned from SSIC policies were $14.3 million for the quarter.

Ceded premiums as a percentage of gross premiums earned were 30.5% for the third quarter of 2014 compared to 47.5% for the third  quarter of 2013.  This decrease is primarily due to favorable reinsurance market conditions and the lower cost of reinsurance associated with the issuance of $200 million of CAT bonds by Citrus Re, as well as improved geographic spread of risk, resulting from the SSIC policy acquisition.

The loss ratio on a gross basis increased to 27.9% in the third quarter of 2014 from 24.1% in the prior year's third quarter, due to an increase in IBNR.  The reported loss ratio, which excludes the impact of changes in IBNR, was 23.1% for the third quarter 2014 compared to 24.8% for the prior year.

The Company's expense ratio on a gross basis was 24.5% for the third quarter of 2014 compared to 12.3% for the third quarter of 2013. The increase is primarily attributable to the significant increase in new and renewal policies, which have associated commissions and policy administration fees paid to outside agents and administrators at the time of policy issuance, premium taxes and inspection fees, none of which are associated with policies assumed from Citizens prior to their renewal. In addition, the amortization of the SSIC policy acquisition cost increased the gross expense ratio by approximately 5.6 percentage points.

Overall, Heritage's combined ratio on a gross basis was 82.9% for the third quarter of 2014 compared to 83.9% for the third quarter of 2013, with a year-to-date combined ratio of 82.1%.

Year-to-Date Financial Results

Year-to-date income as of September 30, 2014 was $27.4 million versus $33.4 million for the prior year comparable period. The 2013 year-to-date results and combined ratio were favorably impacted by the start-up nature of Heritage in early 2013, when it did not have to purchase reinsurance coverage to protect against hurricanes until June 1, 2013, and the unusually low expense ratio described above.

Book Value Analysis

Book value per share increased 4.4% during the third quarter of 2014.  In May 2014, the Company completed its initial public offering, a concurrent private placement and the issuance of common stock associated with the exercise of warrants. The net proceeds from these activities totaled approximately $101.1 million in exchange for 13,431,610 shares of common stock issued.

Conference Call Details:

Thursday, November 6, 2014 – 10:00 a.m. ET

Website:  To listen to the live webcast, please go to http://www.videonewswire.com/event.asp?id=100812. This webcast will be archived and accessible on the Company's website for approximately 30 days following the call.

About Heritage

Heritage Insurance Holdings, Inc. is a property and casualty insurance holding company headquartered in Clearwater, Florida that began operations in August 2012. Through its subsidiary, Heritage Property & Casualty Insurance Company, it provides personal residential insurance for single-family homeowners and condominium owners and commercial residential insurance in Florida through a large network of experienced agents. Heritage is led by an experienced senior management team with an average of 26 years of insurance industry experience.

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; 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 Securities and Exchange Commission, including, but not limited to, the Company's Prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, with the Securities and Exchange Commission on May 27, 2014. In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for a major contingency. Reported results may therefore appear to be volatile in certain accounting periods. The Company undertakes no obligations to update, change or revise any forward-looking statement, whether as a result of new information, additional or subsequent developments or otherwise.

Heritage Insurance Holdings Inc.
Stephen Rohde
Chief Financial Officer
727-727-7200 ext. 7204

investors@heritagepci.com
www.heritagepci.com

SOURCE Heritage Insurance Holdings, Inc.