Heritage Insurance (HRTG) 8-K Heritage Insurance Holdings, Inc. Announces Offering of $125,000,000 of Convertible Senior Notes Due 2037

EXHIBIT 99.4

HERITAGE INSURANCE HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On August 8, 2017, Heritage Insurance Holdings, Inc. (the “Company” or “Heritage”) entered into an agreement to acquire NBIC Holdings, Inc. (“NBIC”), the parent company of Narragansett Bay Insurance Company, for approximately $250 million, including approximately $210 million in cash and shares of our common stock with an aggregate value of approximately $40 million, subject to a post-closing book value adjustment (the “Proposed Acquisition”). The Company expects to finance the cash consideration for the Proposed Acquisition through a combination of available cash, and the issuance of $125 million aggregate principal amount of unsecured senior convertible notes (the “Convertible Notes”). In connection with the issuance of the Convertible Notes, the Company anticipates repurchasing up to $40 million of its common stock. The Proposed Acquisition is expected to close as early as the fourth quarter of 2017 and is subject to customary closing conditions, including regulatory approvals.

The underlying historical financial information of Heritage and NBIC presented below was derived from the Company’s historical financial statements and NBIC’s historical financial statements filed herewith on this Form8-K, as well as adjustments which management believes are reasonable to account for the Proposed Acquisition and the issuance of the Convertible Notes as described above (collectively, the “Proposed Transactions”).

The pro forma condensed combined statements of income for the six months ended June 30, 2017 and for the year ended December 31, 2016 assume that the Proposed Transactions had occurred on January 1, 2016. The unaudited pro forma condensed combined balance sheet as of June 30, 2017 assumes that the Proposed Transactions occurred on June 30, 2017. The Company presents these pro forma condensed combined financial results for informational purposes only, and the pro forma financial statements are not necessarily indicative of what the combined company’s results of operations or financial position would actually have been had the Proposed Transactions been completed on the dates indicated. In addition, the pro forma condensed combined statements of income do not purport to project the future operating results of the combined company.

The tax rate used for these pro forma combined condensed financial statements is an estimated statutory tax rate. As a result, it will likely vary from the actual effective rate in periods subsequent to the completion of the Proposed Transactions.

The assumptions and estimates underlying the unaudited adjustments to the pro forma condensed combined financial statements are described in the accompanying notes, which should be read together with the pro forma condensed combined statements of income and balance sheet for the periods presented, the Company’s historical financial statements and NBIC’s historical financial statements filed herewith on this Form8-K.

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HERITAGE INSURANCE HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

SIX MONTHS ENDED JUNE 30, 2017

(Amounts in thousands, except per share and share amounts)

	Heritage As Reported			NBIC			Pro Forma Adjustments			Notes	Heritage Pro Forma
Revenues:
Gross premiums written		301,490			159,071			—				460,561
Change in gross unearned premiums		5,472			(3,936	)		—				1,536
Gross premiums earned		306,962			155,135			—				462,097
Ceded premiums		(124,334	)		(90,663	)		—				(214,997	)
Net premiums earned		182,628			64,472			—				247,100
Net investment income		5,475			1,303			—				6,778
Net realized gains		646			5			—				651
Other revenue		7,482			2,331			—				9,813
Total revenue		196,231			68,111			—				264,342
Operating Expenses:
Loss and loss adjustment expenses		92,693			11,659			—				104,352
Policy acquisition costs		45,180			29,380			—				74,560
General and administrative expenses		33,406			11,188			3,153		(a)		47,747
Total operating expenses		171,279			52,227			3,153				226,659
Operating income (expense)		24,952			15,884			(3,153	)			37,683
Interest expense, net		3,934			—			5,456		(b)		9,390
Amortization of debt issuance costs		478			—			94		(b)		572
Income before income taxes		20,540			15,884			(8,703	)			27,721
Provision for income taxes		7,915			5,586			(3,150	)	(c)		10,351
Net income		12,625			10,298			(5,553	)			17,370
Weighted average shares outstanding
Basic		28,543,703								(d)		29,944,261
Diluted		28,543,703								(d)		29,944,261
Earnings per share:
Basic		0.44								(d)		0.58
Diluted		0.44								(d)		0.58

See notes to unaudited condensed consolidated financial statements

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HERITAGE INSURANCE HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 2016

(Amounts in thousands, except per share and share amounts)

	Heritage As Reported			NBIC			Pro Forma Adjustments			Notes		Heritage Pro Forma
Revenues:
Gross premiums written		626,704			306,622			—					933,326
Change in gross unearned premiums		13,814			(13,899	)		—					(85	)
Gross premiums earned		640,518			292,723			—					933,241
Ceded premiums		(228,797	)		(157,179	)		—					(385,976	)
Net premiums earned		411,721			135,544			—					547,265
Net investment income		9,181			2,195			—					11,376
Net realized gains		1,733			14			—					1,747
Other revenue		16,323			4,874			—					21,197
Total revenue		438,958			142,627			—					581,585
Operating Expenses:
Loss and loss adjustment expenses		238,862			35,944			—					274,806
Policy acquisition costs		84,421			56,048			—					140,469
General and administrative expenses		58,910			19,561			6,306			(a)		84,777
Total operating expenses		382,193			111,553			6,306					500,052
Operating income (expense)		56,765			31,074			(6,306	)				81,533
Interest expense, net		321			—			10,607			(b)		10,928
Amortization of debt issuance costs		41			—			188			(b)		229
Income before income taxes		56,403			31,074			(17,101	)				70,376
Provision for income taxes		22,538			10,887			(6,170	)		(c)		27,255
Net income		33,865			20,187			(10,931	)				43,121
Weighted average shares outstanding
Basic		29,632,171									(d)		31,032,729
Diluted		29,634,349									(d)		31,034,907
Earnings per share
Basic		1.14									(d)		1.39
Diluted		1.14									(d)		1.39

See notes to unaudited condensed consolidated financial statements

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HERITAGE INSURANCE HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF JUNE 30, 2017

(Amounts in thousands)

	Heritage As Reported			NBIC			Pro Forma Adjustments			Notes		Heritage Pro Forma
ASSETS
Fixed maturity securities, available for sale, at fair value		569,052			100,462			—					669,514
Equity securities, available for sale, at fair value		32,139			—			—					32,139
Total investments		601,191			100,462			—					701,653
Cash and cash equivalents		134,176			72,465			(88,750	)		(b)		117,891
Restricted cash		18,381			—			—					18,381
Accrued Investment income		5,105			607			—					5,712
Premiums receivable, net		38,960			28,857			—					67,817
Prepaid reinsurance premiums		213,009			236,295			—					449,304
Income taxes receivable		2,297			—			—					2,297
Deferred income taxes		—			13,629			(13,629	)		(e)		—
Deferred policy acquisition costs, net		41,792			31,146			(31,146	)		(f)		41,792
Property and equipment, net		16,547			2,928			—					19,475
Intangibles, net		23,526			438			92,332			(a)		116,296
Goodwill		46,454			—			84,073			(g)		130,527
Other assets		7,197			6,407								13,604
Total Assets		1,148,635			493,234			42,880					1,684,749
LIABILITIES AND STOCKHOLDERS’ EQUITY
Unpaid losses and loss adjustment expenses		122,785			84,486			—					207,271
Unearned premiums		312,552			164,416			—					476,968
Reinsurance payable		224,807			60,809			—					285,616
Note payable, net of issuance costs		73,276			—			97,250			(b)		170,526
Deferred income taxes		4,651			—			17,132			(e)		21,783
Advance premiums		25,884			7,757			—					33,641
Accrued compensation		5,479			—			—					5,479
Other liabilities		13,934			71,592			4,685			(h)		90,211
Total Liabilities		783,368			389,060			119,067					1,291,495
Stockholders’ Equity
Common stock		3			—			1			(i)		4
Additionalpaid-in capital		208,135			122,843			(90,172	)		(i)		240,806
Accumulated other comprehensive loss		(569	)		(2,534	)		2,534			(i)		(569	)
Treasury stock		(34,169	)		—			—					(34,169	)
Retained earnings		191,867			(16,135	)		11,450			(i)		187,182
Total Stockholders’ Equity		365,267			104,174			(76,187	)				393,254
Total Liabilities and Stockholders’ Equity		1,148,635			493,234			42,880					1,684,749

See notes to unaudited condensed consolidated financial statements

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NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 1 – Basis of Preparation

The historical consolidated financial statements have been adjusted in the pro forma condensed combined financial information to give effect to pro forma events that are (1) directly attributable to the Proposed Transactions, (2) factually supportable and (3) expected to have a continuing impact on the combined results.

The Company prepared the pro forma condensed combined statements of income under the acquisition method of accounting in accordance with existing U.S. generally accepted accounting principles (“U.S. GAAP”) – Accounting Standard Codification (“ASC”) 805,Business Combinations. Under the acquisition method of accounting, the Company measured the total purchase price (consideration transferred) as described in Note 2, “Consideration Transferred,” using the market price of the Company’s common stock as of August 7, 2017. The Company based the value of the underlying tangible and intangible assets acquired and liabilities assumed on their respective estimated fair market values as of the balance sheet date, with any excess purchase price allocated to goodwill. The determination of the fair value of the NBIC’s assets and liabilities requires extensive use of estimates and management’s judgment. The Company will continue to evaluate information obtained up to and following the closing of the Proposed Acquisition, including during the measurement period, to update the fair value of assets acquired and liabilities assumed, which may differ materially from these preliminary estimates.

The pro forma condensed combined statements of income are preliminary and have been prepared solely for the purpose of providing pro forma financial information prepared in accordance with the rules and regulations prescribed by the U.S. Securities and Exchange Commission (“SEC”). Differences between these preliminary estimates and the final acquisition accounting will occur and these differences could have a material impact on the pro forma condensed combined financial information and the Company’s future consolidated results of operations.

Acquisition-related transaction costs (e.g., investment banking, advisory, legal, valuation, and other professional fees) and certain merger-related costs and charges have not been included as a component of consideration transferred as they must be expensed as incurred. Total transaction costs incurred for the year ended December 31, 2016 and the six months ended June 30, 2017 are approximately $0 and $0, respectively. The Company estimates that it will incur transaction costs totaling approximately $4.7 million in connection with the Proposed Acquisition. The costs that the Company may ultimately incur could differ materially from this amount.

In order to prepare the pro forma condensed combined statements of income, the Company performed a preliminary review of NBIC’s accounting policies to identify significant differences. During the preparation of the unaudited pro forma condensed combined financial statements, the Company did not become aware of any material differences, other than presentation of certain line items in the condensed combined statements of income and balance sheet, between the accounting policies of the Company and NBIC. The Company is currently conducting a detailed review of NBIC’s accounting policies to determine if differences in accounting policies require further adjustment or reclassification of NBIC’s presented results of operations, assets or liabilities to conform to the Company’s accounting policies and classifications. As a result of that review, the Company may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the pro forma condensed combined financial statements. For the purpose of aligning NBIC’s presentation of certain line items in the pro forma condensed combined statements of income and balance sheet to Heritage’s presentation, reclassification adjustments have been made to NBIC’s historical financial statements, as detailed below.

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Reclassifications for the unaudited pro forma condensed combined statements of income:

			For the Six Months Ended June 30, 2017
(in thousands)			Gross premiums written		Change in gross unearned premiums			Ceded premiums			Net investment income		Net realized gains		Other revenue
Net premiums earned	$	25,061	$	159,071	$	(3,936	)	$	(130,075	)	$	—	$	—	$	—
Net investment income		1,308		—		—			—			1,303		5
-Ceding commission earned		39,412		—		—			39,412			—		—		—
Other income		2,331		—		—			—			—		—		—
Total revenues	$	68,111	$	159,071	$	(3,936	)	$	(90,663	)	$	1,303	$	5	$	2,331
			For the Year Ended December 31, 2016
(in thousands)			Gross premiums written		Change in gross unearned premiums			Ceded premiums			Net investment income		Net realized gains		Other revenue
Net premiums earned	$	65,622	$	306,622	$	(13,899	)	$	(227,100	)	$	—	$	—	$	—
Net investment income		2,209		—		—						2,195		14		—
Ceding commission earned		69,921		—		—			69,921					—		—
Other income		4,874		—		—			—			—		—		4,874
Total revenues	$	142,626	$	306,622	$	(13,899	)	$	(157,179	)	$	2,195	$	14	$	4,874

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Reclassifications for the unaudited pro forma condensed combined balance sheet:

			As of June 30, 2017
(in thousands)			Prepaid reinsurance premiums		Property and equipment, net		Intangibles, net		Other assets
Land and buildings	$	1,870	$	—	$	—	$	—	$	1,870
Reinsurance recoverable on paid losses		42,358		42,358				—		—
Reinsurance recoverable on unpaid losses		65,365		65,365		—		—		—
Ceded unearned premium reserves		128,572		128,572		—		—		—
Furniture, equipment and software, net		1,058		—		1,058		—		—
Equity from pools and associations		3,872		—		—		—		3,872
Other assets		2,974		—		1,870		438		665
Net total	$	246,069	$	236,295	$	2,928	$	438	$	6,407

			As of June 30, 2017
(in thousands)			Advance premiums		Other liabilities
Unearned ceding commission	$	53,913	$	—	$	53,913
Commission payable		8,179		—		8,179
Advance premiums		7,757		7,757		—
Funds held		55		—		55
Accrued expenses and accounts payable		5,160		—		5,160
Accrued retirement plan		3,460		—		3,460
Payable for securities		825				825
Net total	$	79,348	$	7,757	$	71,591

The pro forma condensed combined statements of income do not reflect the realization of any expected reinsurance or operational synergies from the acquisition of NBIC following the completion of the business combination. The pro forma condensed combined statements of income also do not include any adjustment for costs that may result from integration activities, since management has not completed its assessment of the costs, if any, associated with such activities. Significant costs may ultimately be recorded for other exit and integration activities.

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Note 2 – Consideration Transferred

The total consideration of $250 million set forth in the acquisition agreement is subject to post-closing adjustments based on the book value of NBIC at the time of closing, subject to specified caps and collars. Based on the book value of NBIC as of June 30, 2017, the total consideration under the acquisition agreement would have been adjusted to $227.6 million, which is the amount used for purposes of preparing these pro forma financial statements.

The following table summarizes the components of the estimated consideration:

(in thousands, except per share)	Amount
Shares of Heritage common stock issued(1)		1,400,558
Heritage stock price at August 7, 2017	$	12.54
Stock consideration to NBIC stakeholders		17,563
Cash consideration to NBIC stakeholders		210,000
Total purchase price	$	227,563

(1) Changes to the purchase price consideration, including the anticipated purchase price at closing of $250 million, as well as the market price of our common stock at the time of the closing of the Proposed Acquisition will impact the number of shares issued in connection with the Proposed Acquisition.

Note 3 – Preliminary Purchase Price Allocation

The total purchase price as summarized above was allocated to NBIC’s tangible and intangible assets acquired and liabilities assumed for purposes of the pro forma condensed combined financial information, based on their estimated relative fair values assuming the acquisition was completed as of the pro forma balance sheet date presented.

The following table presents the Company’s preliminary estimates of the fair values of NBIC’s tangible and intangible assets acquired and liabilities assumed. Our preliminary estimates are based on the information available as of the balance sheet date and have been made solely for the purpose of providing the pro forma condensed combined financial statements.

We are continuing to evaluate the underlying inputs and assumptions used in our valuations. Accordingly, these preliminary estimates are subject to change up to the closing date of the Proposed Acquisition.

The following table summarizes the allocation of the preliminary purchase price as of the balance sheet date:

(in thousands, except per share)	Amount
Cash and cash equivalents	$	72,465
Investments		100,462
Premiums receivable		28,856
Prepaid reinsurance premiums		236,295
Intangible assets		92,770
Other assets		9,943
Total assets acquired	$	540,791
Total liabilities assumed		397,300
Total net assets acquired	$	143,490
Goodwill		84,073
Total purchase price	$	227,563

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Note 4 – Pro Forma Adjustments

a) Reflects an adjustment to the NBIC’s amortization expense of $3.2 million and $6.3 million for the six months ended June 30, 2017 and the year ended December 31, 2016, respectively, related to acquired intangible assets. In addition, included in the adjustment is the reversal of amortization expense for the six months ended June 30, 2017 and the year ended December 31, 2016 related to NBIC’s historical intangible assets eliminated for the purpose of the pro forma condensed combined financial statements.

The following table presents the preliminary fair values that we have assigned to the identifiable intangible assets, the average estimated useful lives, and the estimated amortization expense related to these identifiable intangible assets:

	Estimated Fair Value (in thousands)		Average Estimated Useful Life (in years)		Amortization for the Six Months Ended June 30, 2017 (in thousands)		Amortization for the Year Ended December 31, 2016 (in thousands)
Agent Relationships		13,200		10	$	660	$	1,320
Trade Name		10,600		Indefinite		—		—
Insurance Licenses		950		Indefinite		—		—
Non-Compete Agreements		3,720		2		930		1,860
Renewal Rights		47,100		15		1,570		3,140
Business Acquired “VOBA”(1)		17,200		1		—		—
Total	$	92,770			$	3,160	$	6,320

(1) NBIC’s historical amortization of deferred policy acquisition costs reflects the estimated continuing impact on the statements of income of the combined entity. As such, a pro forma adjustment for the amortization of VOBA over an estimated 12 month period has not been reflected in the unaudited pro forma condensed combined statements of income presented.

In addition, reflected in this adjustment is the derecognition of NBIC’s intangible assets of $0.4 million, which have been revalued to reflect the assets’ estimated fair values as of June 30, 2017 for the purpose of the pro forma condensed combined financial information.

b) In connection with the Proposed Acquisition, the Company expects to issue $125 million aggregate principal amount of Convertible Notes to finance a portion of the cash component of the consideration expected to be paid to NBIC stakeholders.

The table below summarizes the adjustment to reflect the Company’s pro forma cash and cash equivalents:

	Amount (in thousands)
Issuance of Convertible Notes(1)	$	121,250
Cash purchase price of NBIC		(210,000	)
Net pro forma adjustment to Heritage’s cash	$	(88,750	)

(1) Net of unamortized debt issuance costs of $3.7 million associated with the Convertible Notes

The adjustments toNote payable, net of issuance costsof$97.3 million, and Additionalpaid-in capitalof $24 million, are to reflect the liability component of the convertible debt issuance at fair value, net of unamortized debt issuance costs of $3.7 million and debt discount of $24 million, with the residual amount recorded as the equity component.

The interest expense adjustment is to reflect interest expense of $5.4 million and $10.6 million for the six months ended June 30, 2017 and the year ended December 31, 2016, respectively, related to the Convertible Notes expected to be issued in connection with the Proposed Transaction.

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The amortization adjustment of $0.09 million and $0.2 million for the six months ended June 30, 2017 and for the year ended December 31, 2016, respectively, is to reflect amortization of estimated capitalized costs to be incurred in connection with the issuance of the Convertible Notes.

c) Reflects the federal and state tax impact for combination income adjustments and the impact of recording state taxes on historical results for the business combination.

d) The following table shows the Company’s calculation of pro forma combined basic and diluted earnings per share for the six months ended June 30, 2017 and the year ended December 31, 2016:

Earnings per share

(in thousands, except per share data)	Six Months Ended June 30, 2017		Year Ended December 31, 2016
Pro forma net income from continuing operations	$	17,370	$	43,121
Basic weighted average Heritage shares outstanding		28,543,703		29,632,171
Heritage shares issued as part of NBIC acquisition		1,400,558		1,400,558
Pro forma basic weighted average shares outstanding		29,944,261		31,032,729
Heritage historical dilutive shares outstanding		—		2,178
Pro forma dilutive weighted average shares outstanding		29,944,261		31,034,907
Pro forma basic earnings per share from continuing operations	$	0.58	$	1.39
Pro forma diluted earnings per share from continuing operations	$	0.58	$	1.39

As described in Note 2, total estimated purchase price consideration is subject to change based on the book value of NBIC on the closing date of the Proposed Acquisition. Changes to the purchase price consideration, including the anticipated purchase price at closing of $250 million, as well as the market price of our common stock at the time of the closing of the Proposed Acquisition will impact the number of shares issued in connection with the Proposed Acquisition

In connection with the issuance of the Convertible Notes, the Company anticipates repurchasing up to $40 million of its common stock. However, because such repurchase is not a condition to the Proposed Acquisition or the issuance of the Convertible Notes, no pro forma adjustment has been made in these pro forma condensed combined financial statements to reflect such repurchase.

e) Reflects the federal and state impact for combination balance sheet adjustments. Furthermore, reflects the impact of recording state taxes on historical results for the business combination. In addition, adjustment to reclassify deferred income taxes in order to present a net deferred taxes asset or liability on the balance sheet in accordance with U.S. GAAP.

Deferred income taxes

(in thousands)	Heritage Pro Forma
Adjustment to reclassify NBIC’s deferred income taxes asset position	$	(13,629	)
Net deferred income taxes liability adjustments resulting from the Proposed Acquisition		30,761
Net deferred income taxes adjustments	$	17,132

f) Reflects elimination of NBIC’s historical deferred policy acquisition costs asset of $31.1 million for the six months ended June 30, 2017 as a result of the Proposed Acquisition.

g) Reflects recognition of goodwill of $84.0 million resulting from the Proposed Acquisition, as further detailed in Note 3.

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h) Reflects estimated transaction costs of $4.7 million in connection with the Proposed Acquisition.

i) Reflect adjustments to eliminate NBIC’s historical equity and impacts of other adjustments resulting from the Proposed Acquisition.

Adjustments toAdditionalpaid-in capital reflects (1) elimination of NBIC’s historical additionalpaid-in capital balance, (2) issuance of Heritage’s stock to NBIC stockholders as part of total consideration and (3) equity classification of the conversion option related to the Convertible Notes.

(in thousands)	Heritage Pro Forma
Elimination of NBIC’s historical additionalpaid-in capital as of June 30, 2017	$	(122,843	)
Issuance of common stock (consideration transferred)		17,562
Conversion option equity component, net of tax		15,109
Net additionalpaid-in capital adjustments	$	(90,172	)

Adjustments toAccumulated other comprehensive loss reflect the elimination of NBIC’s historical accumulated other comprehensive loss balance.

Adjustments toRetained earnings reflect (1) elimination of NBIC’s historical retained earnings balance $16.1 million and (2) transaction costs of $4.7 million resulting from the Proposed Acquisition.

Note 5 – Debt Financing Considerations

Pursuant to the rules of The New York Stock Exchange, before a company may issue convertible securities in anon-public offering that (i) are convertible into shares of common stock representing 20% or more of the shares of the Company’s common stock outstanding at such time and (ii) have a conversion price (after taking into account the maximum possible increase to the conversion rate for conversions of notes in connection with a make-whole adjustment event) that is less than either the market value or book value of the Company’s common stock at the time such securities are priced, the Company must first obtain shareholder approval prior to the issuance of such securities. If the Convertible Notes to be issued by the Company meet the conditions of the preceding clauses (i) and (ii), in order to comply with the rules of The New York Stock Exchange, the Convertible Notes will provide that until the Company has obtained the requisite shareholder approval the Convertible Notes may only be settled in cash upon conversion and, in such case, until such shareholder approval is obtained, the conversion option of the Convertible Notes will be accounted for as a separate derivative instrument liability in accordance with applicable U.S. GAAP guidance. In such case, the Company would fair value the conversion option liability on a quarterly basis and any changes to the fair value would be recorded in the statement of income as a financial gain or loss.

Once shareholder approval is obtained, the terms of the Convertible Notes will provide that the Company will have the option to settle the conversion option in shares of common stock, cash or a combination thereof, and at such time the conversion option of the Convertible Notes will qualify for equity classification and will no longer be accounted for as a separate derivative instrument liability in accordance with applicable U.S. GAAP guidance. These pro forma condensed combined financial statements have been prepared assuming the conversion option of the Convertible Notes will qualify for equity classification, and therefore will not be accounted for as a separate derivative instrument liability.

Upon conversion of the Convertible Notes, following the receipt of shareholder approval (if required), the Company intends to pay cash in respect of only the principal amount of the Convertible Notes being converted or (if lower) the conversion value thereof, and to settle any amounts in excess thereof in cash, shares of our common stock or a combination thereof, at our election.

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The following table reflects the impact on the pro forma condensed combined balance sheet as of June 30, 2017 if at the time of issuance the Convertible Notes may only be settled in cash upon conversion prior to obtaining shareholder approval, and therefore the conversion option will be accounted for as a separate derivative instrument liability.

	Heritage Pro Forma (as stated)			Note 5 Adjustments			Heritage Adjusted Pro Forma
ASSETS
Fixed maturity securities, available for sale, at fair value		669,514						669,514
Equity securities, available for sale, at fair value		32,139						32,139
Total investments		701,653			—			701,653
Cash and cash equivalents		117,891						117,891
Restricted cash		18,381						18,381
Accrued Investment income		5,712						5,712
Premiums receivable, net		67,817						67,817
Prepaid reinsurance premiums		449,304						449,304
Income taxes receivable		2,297						2,297
Deferred income taxes		—						—
Deferred policy acquisition costs, net		41,792						41,792
Property and equipment, net		19,475						19,475
Intangibles, net		116,296						116,296
Goodwill		130,527						130,527
Other assets		13,604						13,604
Total Assets		1,684,749			—			1,684,749
LIABILITIES AND STOCKHOLDERS’ EQUITY
Unpaid losses and loss adjustment expenses		207,271						207,271
Unearned premiums		476,968						476,968
Reinsurance payable		285,616						285,616
Note payable, net of issuance costs		170,526						170,526
Deferred income taxes		21,783			(8,891	)		12,892
Advance premiums		33,641						33,641
Accrued compensation		5,479						5,479
Other liabilities		90,211			24,000			114,211
Total Liabilities		1,291,495			15,109			1,306,604
Stockholders’ Equity
Common stock		4						4
Additionalpaid-in capital		240,806			(15,109	)		225,697
Accumulated other comprehensive loss		(569	)					(569	)
Treasury stock		(34,169	)					(34,169	)
Retained earnings		187,182						187,182
Total Stockholders’ Equity		393,254			(15,109	)		378,145
Total Liabilities and Stockholders’ Equity		1,684,749			—			1,684,749

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