Heritage Insurance (HRTG) 8-K Heritage Reports Fourth Quarter and Full-Year 2019 Results

Exhibit 99.1

Heritage Reports Fourth Quarter and Full-Year 2019 Results

Clearwater, FL – February 27, 2020: Heritage Insurance Holdings, Inc. (NYSE: HRTG) (“Heritage” or the “Company”), a super-regional property and casualty insurance holding company, today reported fourth quarter 2019 financial results.

Fourth Quarter 2019 Highlights

• Net income for the quarter was $12.8 million, or $0.44 per diluted share.

• Book value per share increased to $15.66, up 8.5% fromyear-end 2018.

• Gross premiums written were $235.4 million, up 6.2% year-over-year, including 9.4% growth outside Florida and 3.5% growth in Florida, reflecting positive organic growth across all states and lines of business.

• Favorable prior year reserve development of $1.4 million, representing the sixth consecutive quarter of favorable prior year reserve development.

• Net current accident quarter weather losses of $15.3 million, including $5.1 million of net current accident quarter catastrophe losses. In the prior year quarter, net current accident quarter weather and catastrophe losses were $23.3 million and $16.8 million, respectively.

• Repurchased 312,923 shares for $4.3 million at an average price of $13.71 per share, 12.5% below fourth quarter 2019 book value per share. Total capital returned to shareholders was $6.0 million, including $0.06 per share regular quarterly dividend.

• Percentage of litigatednon-hurricane claims stemming fromTri-County, Florida declined by 830 basis points year-over-year.

Bruce Lucas, the Company’s Chairman and CEO, said, “I’m really proud of our fourth quarter results, which included an acceleration to 6.2% organic gross premiums written growth, as ourde-risking efforts are basically complete, while our new business generation and retention remain strong. Underwriting performance was solid and we reported our sixth consecutive quarter of favorable reserve development. I believe we are well positioned for 2020 and look forward to the year ahead.”

Results of Operations

The following table summarizes our results of operations for the three and twelve months ended December 31, 2019 and 2018 (amounts in thousands, except percentages and per share amounts):

	Three Months Ended December 31,									Year Ended December 31,
	2019			2018			Change			2019			2018			Change
Revenue	$	138,502		$	124,878			11	%	$	511,304		$	480,171			6	%
Net income	$	12,818		$	3,928			226	%	$	28,636		$	27,155			5	%
Per share	$	0.44		$	0.15			193	%	$	0.98		$	1.04			(6	)%
Book value per share	$	15.66		$	14.43			9	%	$	15.66		$	14.43			9	%
Return on equity*		11.5	%		3.9	%		7.6	pts		6.6	%		6.7	%		(0.1	)pts
Underwriting summary
Gross premiums written	$	235,446		$	221,706			6	%	$	937,937		$	923,349			2	%
Gross premiums earned	$	234,082		$	234,028			0	%	$	924,247		$	926,326			(0	)%
Ceded premiums earned	$	(103,005	)	$	(115,396	)		(11	)%	$	(445,534	)	$	(472,144	)		(6	)%
Net premiums earned	$	131,077		$	118,632			10	%	$	478,713		$	454,182			5	%
Ceded premium ratio		44.0	%		49.3	%		(5.3	)pts		48.2	%		51.0	%		(2.8	)pts
Ratios to Net Premiums Earned:
Loss ratio		51.0	%		50.3	%		0.7	pts		57.1	%		52.3	%		4.8	pts
Expense ratio		38.3	%		36.1	%		2.2	pts		39.4	%		38.1	%		1.3	pts
Combined ratio		89.3	%		86.4	%		2.9	pts		96.5	%		90.4	%		6.1	pts

* Return on equity represents annualized net income for the period divided by average stockholders’ equity during the period.

Ratios

Ceded premium ratio represents ceded premiums earned 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 expenses (G&A) as a percentage of net premiums earned. Ceding commission income is reported as a reduction of policy acquisition costs 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 insurance industry. A net combined ratio under 100% generally reflects profitable underwriting results.

Quarterly Financial Results

Fourth quarter 2019 net income was $12.8 million, up from $3.9 million in the prior year quarter. The increase primarily reflects $11.3 million ofnon-corepre-tax charges in the prior year quarter associated with debt refinancing.

Gross premiums written were $235.4 million in fourth quarter 2019, up 6.2% from $221.7 million in the prior year quarter. The increase reflects 9.4% growth outside Florida and 3.5% growth in Florida, reflecting positive organic growth across all states and lines of business.

Premiums-in-force were $940.6 million, representing a 6.1% compound annual growth rate from third quarter 2019. The increase stems from the same items impacting gross premiums written.

Gross premiums earned were $234.1 million in fourth quarter 2019, basically in line with $234.0 million in the prior year quarter.

The ceded premium ratio was 44.0% in fourth quarter 2019, down 5.3 points from 49.3% in the prior year quarter. The decrease is primarily attributable to a reduction in overall quota share reinsurance coverage and reinsurance synergies, partly offset by additional catastropheexcess-of-loss reinsurance coverage. Effective December 31, 2019, net quota share reinsurance coverage, which only applies to a portion of the Company’s business, increased from 52.0% to 56.0%.

The net loss ratio was 51.0% in fourth quarter 2019, up 70 basis points from 50.3% in the prior year quarter. The increase primarily reflects higher attritional current accident year losses and lower income from vertically integrated operations, partly offset by lower weather-related losses.

The net expense ratio was 38.3% in fourth quarter 2019, up 2.2 points from 36.1% in the prior year quarter. The increase primarily stems from the timing of variable compensation accruals and higher expenses associated with insurance licenses and fees, partly offset by a lower ceded premium ratio.

The net combined ratio was 89.3% in fourth quarter 2019, up 2.9 points from 86.4% in the prior year quarter. The increase primarily stems from a higher net expense ratio, as described above.

Full Year Financial Results

Full-year 2019 net income was $28.6 million, compared to $27.2 million for the prior year. The increase primarily reflects highernon-corepre-tax charges in the prior year and lower interest expense in the current year, mostly associated with debt refinancing, partly offset by higher net loss and expense ratios in the current year.

Book Value Analysis

Book value per share increased to $15.66 at December 31, 2019, up 8.5% fromyear-end 2018.

	As Of
Book Value Per Share	December 31, 2019		December 31, 2018		December 31, 2017
Numerator:
Common stockholders’ equity	$	448,799	$	425,333	$	379,816
Denominator:
Total Shares Outstanding		28,650,918		29,477,756		25,885,004
Book Value Per Common Share	$	15.66	$	14.43	$	14.67

Conference Call Details:

Friday, February 28, 2020 – 8:30 a.m. ET

ParticipantDial-in Numbers Toll Free:1-888-346-3095

Participant International Dial In:1-412-902-4258

Canada Toll Free:1-855-669-9657

Webcast:

To listen to the live webcast, please go tohttp://investors.heritagepci.com/. This webcast will be archived and accessible on the Company’s website.

HERITAGE INSURANCE HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share amounts)

(Unaudited)

	December 31,
	2019			2018
ASSETS
Fixed maturities,available-for-sale, at fair value	$	587,256		$	509,649
Equity securities, at fair value		—			15,034
Other investments		7,993			3,910
Total investments		595,249			528,593
Cash and cash equivalents		268,351			250,117
Restricted cash		14,657			12,253
Accrued investment income		4,377			4,468
Premiums receivable, net		63,685			57,000
Reinsurance recoverable on paid and unpaid claims		428,903			317,930
Prepaid reinsurance premiums		224,102			233,071
Income taxes receivable		3,171			35,586
Deferred policy acquisition costs, net		77,211			73,055
Property and equipment, net		20,753			17,998
Intangibles, net		68,642			76,850
Goodwill		152,459			152,459
Other assets		18,110			9,333
Total Assets	$	1,939,670		$	1,768,713
LIABILITIES AND STOCKHOLDERS’ EQUITY
Unpaid losses and loss adjustment expenses	$	613,533		$	432,359
Unearned premiums		486,220			472,357
Reinsurance payable		156,351			166,975
Long-term debt, net		129,248			148,794
Deferred income tax		12,623			7,705
Advance premiums		16,504			20,000
Accrued compensation		5,347			9,226
Accounts payable and other liabilities		71,045			85,964
Total Liabilities	$	1,490,871		$	1,343,380
Commitments and contingencies
Stockholders’ Equity:
Common stock, $0.0001 par value, 50,000,000 shares authorized, 28,996,452 shares issued and 28,650,918 outstanding at December 31, 2019 and 30,083,559 shares issued and 29,477,756 outstanding at December 31, 2018		3			3
Additionalpaid-in capital		329,568			325,292
Accumulated other comprehensive loss		7,330			(6,527	)
Treasury stock, at cost, 8,349,483 shares and 7,214,797 shares		(105,368	)		(89,185	)
Retained earnings		217,266			195,750
Total Stockholders’ Equity		448,799			425,333
Total Liabilities and Stockholders’ Equity	$	1,939,670		$	1,768,713

HERITAGE INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Other Comprehensive Income

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

(Unaudited)

	Three Months Ended December 31,						Year Ended December 31,
	2019			2018			2019			2018
REVENUE:
Gross premiums written	$	235,446		$	221,706		$	937,937		$	923,349
Change in gross unearned premiums		(1,364	)		12,322			(13,690	)		2,977
Gross premiums earned		234,082			234,028			924,247			926,326
Ceded premiums		(103,005	)		(115,396	)		(445,534	)		(472,144	)
Net premiums earned		131,077			118,632			478,713			454,182
Net investment income		3,275			3,576			14,432			13,280
Net realized and unrealized gains (losses)		1,031			(1,242	)		4,163			(2,477	)
Other revenue		3,119			3,912			13,997			15,186
Total revenue		138,502			124,878			511,305			480,171
EXPENSES:
Losses and loss adjustment expenses		66,798			59,650			273,288			237,425
Policy acquisition costs		28,113			26,499			107,906			84,666
General and administrative expenses		22,079			16,377			80,544			88,544
Total expenses		116,990			102,526			461,738			410,636
Operating income	$	21,512		$	22,352		$	49,567		$	69,536
Interest expense, net		2,021			4,584			8,523			20,015
Othernon-operating loss, net		—			11,069			48			10,527
Income before taxes	$	19,491		$	6,699		$	40,996		$	38,994
Provision for income taxes		6,673			2,771			12,360			11,839
Net income	$	12,818		$	3,928		$	28,636		$	27,155
OTHER COMPREHENSIVE INCOME:
Change in net unrealized (losses) gains on investments		232			1,904			19,765			(5,700	)
Reclassification adjustment for net realized investment losses (gains)		(2,025	)		2,170			(1,734	)		163
Income tax benefit (expense) related to items of other comprehensive income		573			(1,017	)		(4,174	)		2,232
Total comprehensive income	$	11,598		$	6,985		$	42,493		$	23,850
Weighted average shares outstanding
Basic		28,871,197			26,350,098			29,213,910			25,941,253
Diluted		28,878,440			26,363,457			29,232,981			26,095,874
Earnings per share
Basic	$	0.44		$	0.15		$	0.98		$	1.05
Diluted	$	0.44		$	0.15		$	0.98		$	1.04

About Heritage

Heritage Insurance Holdings, Inc. is a super-regional property and casualty insurance holding company headquartered in Clearwater, Florida. Through its insurance subsidiaries and a large network of experienced agents, the Company writes over $900 million of gross personal and commercial residential premium across its multi-state footprint.

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) being well-positioned for solid organic growth in 2020, (ii) the level ofde-risking in future quarters, (iii) impact of steps taken regarding pricing and underwriting, (iv) ourgo-forward ceded premium run rate (v) expected positive impact of rates on the P&L, (vi) trends with respect to growth, pricing and reserves, (vii) the potential reinsurance rate increase and (viii) our share repurchase program. 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; 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 Securities and Exchange Commission, including, but not limited to, the Company’s Annual Report on Form10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission on March 12, 2019. 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.

Investor Contact:

Arash Soleimani, CFA, CPA

Executive Vice President

727.871.0206

Email:asoleimani@heritagepci.com