Investor Presentation - Investors – Heritage Insurance/media/Files/H/... · January2020 Investor Presentation. FL PRES, 43.9% FL CRES, 7.6% NY, 19.8% NJ, 7.7% MA, 6.7% HI, 5.8%

Investor Presentation(NYSE: HRTG)

January 2020

SAFE HARBORStatements in this presentation that are not historical facts are forward‐looking statements that are subject to certain risks and uncertainties that couldcause 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,” “approximate,” “plan,” “intend,” “could,” “would,” “estimate,” or similar expressions are intended to identifyforward‐looking statements. Forward looking statements include, but are not limited to, statements about the Company’s expectations with regard tonet investment income, underwriting margins and capital to support future premium growth and expansion initiatives. These statements are notguarantees of future performance and involve risks, uncertainties and assumptions that could cause the Company’s actual results to differ materiallyfrom those expressed or implied by such forward‐looking statements. Such risks and uncertainties include, among other things, risks related to thepossibility that actual losses may exceed reserves; the concentration of the Company’s business in coastal states, which could be impacted by hurricanelosses or other significant weather‐related events such as northeastern winter storms; the Company’s exposure to catastrophic weather events;increased costs of reinsurance, non‐availability of reinsurance, and non‐collectability of reinsurance; the Company’s failure to effectively manage itsgrowth and integrate acquired companies; increased competition, competitive pressures, and market conditions; the Company’s failure to accuratelyprice the risks it underwrites; the inherent uncertainty of the Company’s models and reliance on such models as a tool to evaluate risk; the failure of theCompany’s claims department to effectively manage or remediate claims; low renewal rates and failure of such renewals to meet the Company’sexpectations; the Company’s failure to execute its diversification strategy; failure of the Company’s information technology systems and unsuccessfuldevelopment and implementation of new technologies; a lack of redundancy in the Company’s operations; the Company’s failure to attract and retainqualified employees and independent agents or loss of key personnel; the Company’s inability to generate investment income; the Company’s inability tomaintain its financial stability rating; effects of emerging claim and coverage issues relating to legal, judicial, environmental and social conditions; thefailure of the Company’s risk mitigation strategies or loss limitation methods; changes in regulations and the Company’s failure to meet increasedregulatory requirements; and other matters described from time to time by the Company in its filings with the Securities and Exchange Commission,including, but not limited to, those set forth in its Annual Report on Form 10‐K for the year ended December 31, 2017 and subsequent Quarterly Reportson Form 10‐Q (or such other reports that may be filed with the SEC). 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, except as required by law.Non‐GAAP Financial Information: This presentation includes financial measures that are not presented in accordance with generally acceptedaccounting principles in the U.S. (GAAP). A reconciliation of these non‐GAAP financial measures to the most directly comparable GAAP financial measurecan be found in the Appendix to this presentation on slide 25.Note: This presentation also contains information regarding securities analyst consensus and other financial professionals’ estimates of certain financialitems for Heritage and other industry participants derived from reports of FactSet Research Systems (“FactSet”). These estimates are projections madeby securities analysts and other financial professionals who cover Heritage and other industry participants. Any opinions, forecasts, estimates,projections or predictions regarding Heritage’s performance made by such third parties (and, therefore, such estimates) are theirs alone and do notrepresent the opinions, forecasts, estimates, projections or predictions of Heritage or its management. By providing these estimates, Heritage does notimply its adoption of, endorsement of or concurrence with such information, conclusions or recommendations. Heritage assumes no liability for theaccuracy of such estimates and undertakes no liability to update or revise such estimates based on new information or otherwise.

2January 2020 Investor Presentation

TABLE OF CONTENTS

Company snapshot……………………………………………………………………………………………………………………………………………………………………….Timeline of events..……………………………………………………………………………………………………………………..……………………………………………….Management team.………………………………………………………………………………………………………………………………………………………………………Corporate structure..………………………………………………………………………………………………………………………………………………….……………......Book of business……………………………………………………………………………………………………………………………………..……………………………………In‐force metrics…………………………………………………………………………………………………………………………………………………………………………….Distribution…………………………………………………………………………………………………………………………………………………………………………..........Reinsurance program……………………………………………………………………………………………………………………………………………………………………Investments……………………………………………………………………………………………………………………………………………………………………….……..….

3

INVESTMENT CONSIDERATIONS

COMPANY OVERVIEW

Note 1: all market data as of the close on 1/17/2020 unless otherwise notedNote 2: all non‐market data as of 9/30/2019 unless otherwise noted

January 2020 Investor Presentation

Value proposition………………………………………………………………………………………………………………………………………………………………….........Underwriting performance, capital management and underwriting leverage…………………………….………………………………………………...Diversification strategy…………………………....…………………………………………………………………………………………………………………………...……..Book value per share growth, ROEs and valuation………………………………………………………………………………………………………………………..

Appendix: Reconciliation of GAAP and non‐GAAP measures………………………………………………………………………………………………….……..Investor relations contact details………………..……………………………………………………………………………………………………..………………….………

567891011

12‐1314

1617‐1920‐2122‐24

2526

Company overviewHeritage Insurance

COMPANY SNAPSHOT

Active personal residential insurer in 12 coastal USstates & licensed in 4 additional states 6th largest homeowners insurer in FL and 22nd

nationwide (as of 12/31/2018)

Active commercial residential insurer in FL & NJ 2nd largest admitted commercial residential insurer in FL

and 7th largest commercial multiple peril (CMP) insurerin the state (as of 12/31/2018)

Vertically integrated structure with in‐houseunderwriting, actuarial, customer service, claimsprocessing and adjusting functions (3rd parties used asneeded)

489 employees (481 full‐time)

Founded in 2012, followed by IPO in 2014

Headquartered in Clearwater, FL

What we do: Heritage Insurance Holdings, Inc. is a specialty super‐regional property and casualty insurance holding company with over $900 million of gross personal and commercial residential premium across it’s multi‐state footprint.

NYSE: HRTG

Market Cap/Stock Price: $384 million/$12.99

Annual Dividend/Yield Per Share: $0.24/1.8%

Remaining share repurchase authorization: $38.1 million

Total Equity/BVPS: $445.2 million/$15.37

Total Assets: $1.8 billion

In‐Force Gross Premiums: $926.8 million

Financial Strength Ratings:Demotech: HPCIC (A), NBIC (A), ZIC (A Prime)Kroll: HPCIC (BBB+), NBIC (A‐), ZIC (BBB+)

Investment grade issuer rating (Kroll: “BBB‐”)

5

QUICK FACTS MARKET/FINANCIAL DATA


THE HERITAGE STORYFounded in 2012, Heritage has quickly grown into a leading coastal US P&C insurer.

6

2012 Company inception Started writing

voluntary personal residential (PRES) business in FL

Participated in first personal residential assumption from FL Citizens

2013 Formed Contractors’ Alliance

Network (CAN) in FL, Heritage’s vendor managed repair program

Formed Osprey, a captive reinsurer.

Retroactive quota share reinsurance agreement with Citizens

2014 HRTG IPO (NYSE):

$11/share Sunshine State policy

assumption Launched commercial

residential (CRES) division and participated in first commercial residential assumption from FL Citizens

2016

2015 2017

2018

Initiated quarterly cash dividend

Began writing PRES in NC & SC, beginning of multi‐state expansion

Acquired Zephyr, a wind‐only HO insurer in HI

Launched GL insurance in FL Commenced Nat Gen partnership AoB begins to meaningfully impact

results Final year Heritage participated in

Citizens assumptions

Began writing PRES in GA and AL

Sawgrass Mutual policy assumption

Acquired NBIC, a coastal HO insurer in NY, NJ, CT, RI & MA

Received KBRA financial strength and investment grade issuer ratings

CAN expansion to non‐FL states GEICO relationship expands Commenced Safeco (Liberty

Mutual) partnership Eliminated majority of

convertible debt used to acquire NBIC


2019 Began writing PRES in VA Began writing CRES in NJ

(first CRES expansion outside FL)

Expanded product offering in Hawaii

EXPERIENCED MANAGEMENT TEAMBruce Lucas: Chairman & CEO

Co‐founded Heritage in 2012 andhas been with the company sinceinception

Prior to Heritage, Mr. Lucas wasCEO of Infinity Investment Funds,a value‐oriented hedge fund

Before that, Mr. Lucas was anattorney with Weil, Gotshal &Manges where he representedlarge institutional clients such asEnron and GE

7

Richard Widdicombe: President

Co‐founded Heritage in 2012 and hasbeen with the company since inception

Prior to Heritage, Mr. Widdicombeserved as Risk Manager of HomeownersChoice Property & Casualty InsuranceCompany

Before that, Mr. Widdicombe wasPresident of People’s Trust InsuranceCompany and previously served aspresident of FedNat, both of which areFlorida‐based property insurers

Ernie Garateix: Chief Operating Officer

Has been in his current role since2014, prior to which he served asExecutive Vice President since thecompany’s 2012 founding

Prior to Heritage, Mr. Garateixserved as Vice President ofOperations at American IntegrityInsurance Group

Before that, Mr. Garateix wasAssociate Vice President of IT atFCCI Insurance Group

Kirk Lusk: Chief Financial Officer

Has been in his current rolesince 2018

Joined Heritage in 2017 via theacquisition of NBIC Holdings,Inc., where Mr. Lusk was alsoChief Financial Officer.

Before that, Mr. Lusk wasInternational Chief FinancialOfficer of Aetna, Inc., ChiefFinancial Officer of Alea GroupHoldings Bermuda Ltd. andChief Financial Officer of GEERC Global Casualty and GECapital Auto Warranty Services

Arash Soleimani: Executive Vice President

Has been in his current role since 2018

Prior to Heritage, Mr. Soleimani was asell‐side equity research analystcovering the P&C insurance sector atKeefe, Bruyette & Woods (KBW) andStifel Financial

Before that, Mr. Soleimani worked inDeloitte’s Audit & Enterprise RiskServices division

Mr. Soleimani is a CFA charterholderand a licensed CPA

Randy Jones: President, Commercial Division Has been in his current role since 2014

Prior to Heritage, Mr. Jones was SVP ofAmerican Strategic Insurance’s (ASI)commercial division

Before that, Mr. Jones served inmanagement at other insuranceenterprises including Marsh &McLennan Companies

Mr. Jones holds the American RiskManager (ARM) and Certified PropertyInsurance Adviser (CPIA) designations


VERTICALLY INTEGRATED STRUCTUREUnique, vertically integrated structure reduces our reliance on third parties, benefiting our loss, LAE and operating expenses, while also serving as a hedge during catastrophe years.

Vertically integrated structure reduces our earnings volatility, supporting P/E‐based valuation for HRTG.

MGA structure allows us to meet holding company capital needs (e.g., debt servicing, share repurchases, M&A, etc.)

8

Heritage Insurance Holdings, Inc. (NYSE: HRTG)

Heritage Property & Casualty Insurance Company (HPCIC)

NBIC Holdings, Inc

NBIC Financial Holdings, Inc.

Narragansett Bay Insurance

Company (NBIC)

NBIC Service Company

Westwind Underwriters, Inc.

Zephyr Acquisition Company

HI Holdings, Inc.

Zephyr Insurance Company, Inc. (ZIC)

Heritage MGA, LLC Heritage Insurance Claims, LLC

Contractors’ Alliance Network

(CAN)Osprey Re Ltd.

First Access Insurance Group,

LLC

Skye Lane Properties, LLC

Risk bearing entity (AL, GA, FL, MS, NC, SC)

Risk bearing entity (CT, RI, MA, MD, PA, NY, NJ, VA)

Risk bearing entity (HI)

Captive reinsurerProvides HPCIC & ZIC with underwriting, personnel and other services

Provides NBIC with underwriting, personnel and other services

Subsidiary that owns Heritage’s corporate headquarters

Mitigation and construction division, serves as a hedge in catastrophe years

ORGANIZATIONAL STRUCTURE


FL PRES, 43.9%

FL CRES, 7.6%

NY, 19.8%

NJ, 7.7%

MA, 6.7%

HI, 5.8%Other, 8.6%

PREMIUM SPREAD

BOOK OF BUSINESSAs of 3Q2019, we have $926.8 million of gross premiums in‐force across three statutory insurance entities (Heritage/NBIC/Zephyr) and write two mainlines of business, including personal residential (PRES) and commercial residential (CRES). We also write some commercial general liability (CGL)insurance. We’re actively writing in twelve states, but have licenses in sixteen.

9

PRES = personal residential • CRES = commercial residential • CGL = commercial general liability • TIV = total insured value

3 Statutory Insurance Entities:

HIAL, FL, GA, MS, NC, SC

CT, DE, MA, MD, PA, NJ, NY, RI, VA

Includes: PRES in AL, CT, GA, NC, RI, SC & NJ CRES


= actively writing= licensed

FL PRES23.9%

FL CRES6.1%

NY28.3%

NJ11.7%

HI10.4%

MA8.7%

Other11.0%

TIV SPREADIncludes: PRES in AL, CT, GA, NC, RI, SC, VA, FL CGL & NJ CRES

IN‐FORCE METRICSFlorida property insurance accounts for 51.5% of Heritage’s consolidated gross premiums in‐force, but it only reflects 30.0% of property insurance total insured value (TIV) – the $5.16 Florida PRES average premium per $1,000 of TIV is almost triple the $1.92 non‐Florida average (Florida’s more expensive policies reflect its higher hurricane risk), while the $364,805 Florida PRES average insured value is well below the $770,874 average for non‐Florida states (property values in Florida trail those in Heritage’s northeast US states).

10

$364,805

$374,860

$328,068

$7,952,364

$450,486

$770,874

$5.16

$4.04

$9.85

$3.53 $4

.88

$1.92

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

FL PRE

S

FL PRE

S ex‐TC

FL PRE

S TC

CRES

FL PRE

S & CRE

S

Non

‐FL PR

ES

Prem

ium/$1K

TIV

Average insured value pe

r policy

TIV Metrics (Property)

Average insured value (left axis) Premium/$1K TIV (right axis)


PRES = personal residentialCRES = commercial residentialTC = Tri‐County (FL)

YE2015 YE2016 YE2017 YE2018 3Q2019PRES $478 $516 $850 $837 $851CRES $113 $119 $90 $83 $70CGL $0 $1 $2 $4 $6Total $592 $635 $942 $924 $927

YE2015 YE2016 YE2017 YE2018 3Q2019PRES 253,726 318,824 518,957 508,424 515,258CRES 3,405 3,625 3,100 2,973 2,509CGL 0 852 2,393 4,289 6,507Total 257,131 323,301 524,450 515,686 524,274

YE2015 YE2016 YE2017 YE2018 3Q2019PRES $72,102 $109,888 $289,974 $296,432 $309,498CRES $22,764 $26,367 $22,832 $23,038 $19,952Total $94,866 $136,256 $312,806 $319,470 $329,451

IN‐FORCE METRICS ($ in millions )Gross Premiums In‐Force

Policies In‐Force

Total Insured Value (Property)

DISTRIBUTION• Over 6,000 appointed producers across our multi‐state platform

• Relationships with multiple auto carriers, whereby the policyholder receives a bundled product discount.

11

Overview

NBIC

• Over 2,300 actively writing independent agents

• 35% of voluntary premium is written by agents affiliated with eight large agency networks that have master agency agreements with HPCIC

• CRES policies are written through roughly 400 independent agents in FL

• Relationships with multiple auto carriers

HPCIC

• Roughly 175 retail independent agents representing approximately 500 agency locations

• 8 wholesale relationships that have access to 1,500 retail locations

Zephyr• Relationships with 70 actively writing independent agencies

• 52% of voluntary premium is written by agents affiliated with three large agency networks


CATASTROPHE REINSURANCE PROGRAMHeritage has a conservative 2019‐2020 catastrophe reinsurance program, protecting the Company against hurricanes and severe weather events and reducing earnings volatility.

12

Substantial severity and frequency protection.

Significantly increased return period to the highest level in the Company’s history.

$1.5 billion first event reinsurance exhaustion point in the southeast.

Heritage's first event retentions in the southeast and Hawaii remain at $20 million, accounting for 4.6% of second quarter 2019 GAAP equity (pre‐tax), down from 5.2% in the prior year. First event retention increases slightly in the northeast to $13.8 million from $12.8 million in the prior year, but accounts for just 3.1% of second quarter 2019 GAAP equity (pre‐tax), down 20 basis points year‐over‐year.

Reduced catastrophe reinsurance spend by $10 million vs. prior year. Total cost to Heritage of $249.2 million (27.0% of second quarter 2019 premiums‐in‐force), down from $259.5 million (27.9% of second quarter 2018 premiums‐in‐force) last year.

Heritage’s third‐party reinsurers are rated “A‐” or higher by A.M. Best or S&P or are fully collateralized.


Note 1: 2019‐2020 catastrophe reinsurance program commentary based on 8/31/2019 projections (AIR v6, hurricane only, long term view with demand surge).

CONSERVATIVE REINSURANCE RETENTION

13

Note 1: Based on 2019‐2020 catastrophe reinsurance programs.Note 2: Assumes a modeled 1‐in‐50‐year first event for HPCIC based on 8/31/2019 projections (AIR v6, hurricane only, long term view with demand surge).Note 3: Excludes reinsurance reinstatement premiums and income from vertically integrated operations.Note 4: UVE retention includes both UPCIC & APPCIC and FNHC retention includes both FNIC and MNIC, but excludes PIH. Note 5: Calculation based on 21.0% and 5.5% US federal and Florida statutory corporate income tax rates, respectively.Source: Peer company reports.

3.4%

6.9%

5.9%

6.5%6.9%

8.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

HRTG FL peer median UVE HCI FNHC UIHC

AFTER‐TAX FIRST EVENT FLORIDA RETENTION AS % OF 3Q2019 GAAP EQUITY


INVESTMENT PORTFOLIOHeritage has a very conservative investment portfolio, consisting predominantly of low duration, fixed income securities. As of 3Q2019, duration was 3.5 years, 0.2 years above 2Q2019 and 0.1 years below 3Q2018.

14January 2020 Investor Presentation$136.2

$331.2

$400.1

$603.0

$567.0

$528.6

$645.1

1.4%

1.6%

2.0%1.8%

1.9%

2.4% 2.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

$0

$100

$200

$300

$400

$500

$600

$700

2013 2014 2015 2016 2017 2018 3Q2019 YTD

Net investmen

t incom

e yield

Investmen

ts ($

in m

illions)

NET INVESTMENT INCOME PERFORMANCE

Investments (left axis) Net investment income yield (right axis)

US government, 9.8%

Munis, 12.6%

Special revenue bonds, 41.8%

Industrial & misc. bonds, 31.4%

Other, 4.5%

INVESTMENT PORTFOLIO BREAKDOWN (3Q2019)

Investment considerationsHeritage Insurance

VALUE PROPOSITION• Currently trading at significant discount to peers, despite attractive relative ROE and income metrics• Consistent track record of double‐digit book value growth• Vertically integrated structure provides a hedge in catastrophe years, reducing loss retention and further reducing earnings volatility, supporting use of P/E‐based valuation for HRTG

• Solid reinsurance program, including lowest reinsurance retention in FL peer group as a % of equity; protects against hurricanes and other severe events, reducing earnings volatility

• Organic premium growth, fueled by relationships with independent agents and auto carriers • Diversification initiatives and re‐underwriting efforts in Florida’s Tri‐County – including rate increases, policy form enhancements and conservative policy selection – should benefit underwriting margins

• Commercial residential business serves as an AoB‐hedge in Florida and provides us with additional growth opportunities

• Investment grade debt rating provides easy access to capital, allowing nimble response to market opportunities as they arise

• Below‐peer operating leverage = ample capital to fuel our growth• Track record of capital return via share repurchases and regular dividend• Successful M&A execution provides synergies and access to new markets• Significant insider ownership aligns management’s interest with shareholders

• CEO owns 2.7% of outstanding shares• President owns 2.3% of outstanding shares• Total insider ownership = 12.6% of outstanding shares

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Compelling financial metrics

Management has significant skin in the game

Growth & underwriting outlooks improving

Prudent capital management

Business model designed to reduce earnings volatility


UNDERWRITING PERFORMANCEHeritage has experienced significant premium growth since inception, stemming primarily from Citizensdepopulation transactions through 2015 and from M&A and organic growth in subsequent years.

17

200.1 367.2 478.1 458.6 465.4 450.2 451.9

0.0

94.1

113.5 118.6 90.1 82.7 70.4

331.5 337.2 351.0

58.1

55.4 53.5 53.4

$51.6

$200.1

$461.3

$591.5$635.3

$942.4 $923.7 $926.8

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2012 2013 2014 2015 2016 2017 2018 3Q19

IN‐FORCE PREMIUM

HPCIC ex CRES FL CRES NBIC Zephyr


Heritage’s premium growth is unprecedented, reaching almost $1 billion of gross in‐force premiums 5 years after the company’s founding. The modestpremium decline in 2018 stemmed from Tri‐County FL exposure reduction efforts in response to litigation abuse and FL CRES de‐risking.

UNDERWRITING PERFORMANCE (CONTINUED)Heritage’s underwriting operation has outperformed peers almost every year since inception.

18

Note 1: Peers include FNHC, HCI, KINS, UIHC & UVESource: FactSet and peer company reports

40.5% 40.1% 37.5%

58.0% 53.1% 52.3%59.4%

32.4% 31.3%27.5%

34.8% 41.0% 38.1%

39.8%72.9% 71.4%65.0%

92.8%94.1%

90.4%99.2%

87.8%

77.1% 79.9%84.6%

104.7%

94.8%

107.0%

‐5%

15%

35%

55%

75%

95%

115%

0%

20%

40%

60%

80%

100%

120%

2013 2014 2015 2016 2017 2018 3Q2019 YTD

SOLID UNDERWRITING MARGINS

Loss ratio (left axis) Expense ratio (left axis) Peer median (right axis)

Citizens takeouts benefit HRTG’s margins

Tornadoes, Hurricanes Hermine & Matthew, AOB

Hurricane Irma & AoB

Hurricanes Lane, Florence & Michael, AoB

Southeast hail and wind storms


CAPITAL MANAGEMENT & OPERATING LEVERAGEHeritage has been a responsible steward of shareholder capital and currently has $38.1 million remaining on its share repurchase authorization. Since 2016, the Company has returned $80 million to shareholders through common share repurchases and dividends.

Heritage’s ratio of trailing‐twelve‐month (TTM) net premiums written to 3Q2019 equity is only 1.0x , among the lowest in its peer group, which is indicative of its conservative balance sheet. Looking ahead, Heritage has adequate capital to fuel its premium growth and multi‐state expansion initiatives.

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0.6

1.0

1.2

1.4 1.5 1.5 1.51.6

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

PLMR HRTG HCI FNHC Peermedian

UVE UIHC KINS

Net ope

ratin

g leverage (N

PW/Equ

ity)

CONSERVATIVE NET OPERATING LEVERAGE


Note 1: Based on trailing‐twelve‐month (TTM) net premiums written as of 3Q2019Source: Peer company reports.

7.0 6.5 6.4 5.4

25.621.6

2.011.9

$32.6$28.1

$8.4

$17.2

18%

35%

27%

23%21%

16%

24%

34%

0%

5%

10%

15%

20%

25%

30%

35%

40%

$0

$10

$20

$30

$40

$50

$60

2016 2017 2018 3Q2019 YTD

$ in m

illions

DISCIPLINED CAPITAL MANAGEMENT

Dividends Share repurchasesDebt‐to‐capital ratio (right axis) Dividend payout ratio (right axis)

Note: Debt‐to‐capital calculated as debt principal divided by the sum of debt principal and stockholders’ equity

41.1%32.4%

40.3%

27.5%17.8%

6.6% 5.5% 4.6%

25.7%

15.4%

11.5%

3.8% 2.9% 2.2%

58.9%67.6%

34.0%

57.1%

41.3%

21.7% 23.3% 23.2%

100.0% 100.0% 100.0% 100.0%

70.6%

32.1% 31.6% 30.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 3Q19

% OF CONSOLIDATED PROPERTY TOTAL INSURED VALUE (TIV) IN FLORIDA

Personal Residential: Tri‐County, FL Commercial Residential: Tri‐County, FL Other FL

DIVERSIFICATION STRATEGY UNDERWAY

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Through a combination of M&A and organic growth,Heritage has been diversifying its book of business tonew states, resulting in a better spread of risk andlower reinsurance costs. Diversification has beenoccurring within the FL book too, as Heritage hassteadily been reducing its personal residential (PRES)& commercial residential (CRES) exposure to Tri‐County, FL (TC). PRES exposure reduction in TC isintended to limit exposure to litigation abuse, whileCRES reduction in TC is intended to reduceconcentration risk in the event of a storm.


35%38% 37%

41%46% 45% 45%

49%52%

49%52%

54%

44%

39%

33%31%

34%31% 31%

0%

10%

20%

30%

40%

50%

60%

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

LITIGATED NON‐HURRICANE CLAIMS AS % OF TOTAL CLAIMS

FAVORABLE CLAIMS TRENDSHeritage’s Tri‐County, FL (TC) exposure reduction efforts are bearing fruit, as the region’s contribution to opennon‐hurricane claim counts continues to decline for both litigated and non‐litigated claims. This is benefitingoverall claims trends – beginning with 1Q18, litigated claims have generally been accounting for a smallerpercentage of Heritage’s non‐hurricane open claims inventory.

21

A decline in litigated claims should benefit underwriting margins, given that litigated claims are typically more expensive to resolve

Tri‐County, FL (TC) claims are typically more expensive given the prevalence of assignment of benefits and litigation abuse in the region

Note: Excludes NBIC.


31% consists of 55% in TC and 19% elsewhere, illustrating rationale behind TC de‐risking

84%

82%

81%

82%

82%

79%

80%

79%

79%

79%

79%

78%

77%

73%

67%

66%

63%

61%

59%

51%

47%

46%

58%

55%

52% 54%

56%

55%

55%

55%

51%

49%

44%

41%

39%

38%

27%

21%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

TRI‐COUNTY FL NON‐HURRICANE CLAIMS TRENDS

Tri‐County, FL open litigated claims as % of total open litigated claims (non‐hurricane)

Tri‐County, FL open non‐litigated claims as % of total open non‐litigated claims (non‐hurricane)

SOLID BOOK VALUE PER SHARE GROWTH

22

Since inception, Heritage has provided investors with solid book value per share growth. Including cumulative dividends declared, Heritage’s book value per share compound annual growth rate (CAGR) is 26% since the Company’s 2012 inception.

$3.38

$7.20

$8.56

$11.71

$12.41

$14.67

$14.43

$15.37

$0.05

$0.29

$0.53 $0.77

$0.95

$3.38

$7.20

$8.56

$11.76$12.70

$15.20 $15.20

$16.32

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

2012 2013 2014 2015 2016 2017 2018 3Q2019

SOLID GROWTH IN BOOK VALUE AND CUMULATIVE DIVIDENDS PER SHARE

Book Value Per Share Cumulative Dividends Per Share


ABOVE‐PEER ROE, BUT BELOW‐PEER VALUATION

23

TRADING AT A MEANINGFUL DISCOUNT TO PEERSSOLID ROE PERFORMANCE, EVEN IN HURRICANE YEARS

*HRTG’s 2017 return on equity (ROE) and return on tangible equity (ROTE) metrics are non‐GAAP and adjusted to exclude a $42.2 million non‐cash, non‐tax deductible charge related to the mark‐to‐market of a derivative liability associated with the Company’s convertible debt. The derivative liability was reclassified to equity in 4Q17. Note: ROE represents net income for the period (annualized for 3Q2019 YTD) divided by average stockholders’ equity during the period. The ROTE calculation excludes goodwill and other intangible assets from equity.Source: FactSet and peer company reports

8.1%

14.4%

7.0% 7.1%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Average Return on Equity Average Return on Tangible Equity

2016‐2018 AVERAGE RETURN ON EQUITY VS. PEERS

HRTG*

Peer Median

HRTG’s average ROE from 2016‐3Q19 YTD has outperformed by 110 bps.

HRTG’s average ROTE over the last 3 years has outperformed by 730 bps.

0.8x

1.3x

0.9x 0.9x1.0x

1.5x

2.0x

5.5x0.0x

0.5x

1.0x

1.5x

2.0x

HRTG Peer median FNHC UIHC KINS UVE HCI PLMR

PRICE/BOOK VALUE

8.2x

11.6x

7.4x 7.8x

11.5x 11.7x12.6x

23.6x

0x

2x

4x

6x

8x

10x

12x

14x

16x

HRTG Peer median FNHC UVE UIHC KINS HCI PLMR

PRICE/2020E EPSHRTG’s P/E multiple is at a 29% discount to peers

28.1%30.3%

9.5% 11.1%6.7%

4.8%

0%

5%

10%

15%

20%

25%

30%

35%

2014 2015 2016 2017* 2018 3Q2019 YTD

RETURN ON EQUITY (ROE)Citizens depopulation transactions benefit ROEs

Severe 1Q16 FL tornadoes, Hurricanes Hermine & Matthew

Hurricane Irma

Active northeast US weather & Hurricanes Lane, Florence & Michael

Assignment of benefits (AoB) abuse

Southeast hail and wind storms, Hurricane Dorian


$384

$466

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

HRTG UIHC

MARKET CAP ($ in millions)

HIGHLY ATTRACTIVE VALUATION RELATIVE TO PEERS

24

*HRTG’s 2017 net income and ROE are non‐GAAP and adjusted to exclude a $42.2 million non‐cash, non‐deductible charge related to the mark‐to‐market of a derivative liability associated with the Company’s convertible debt. The derivative liability was reclassified to equity in 4Q17. Please see slide 24 for a reconciliation of HRTG’s non‐GAAP measures to their comparable GAAP measures.

Despite consistently generating more net income, HRTG* has a lower market capitalization than UIHC.

Note: Year‐to‐date (YTD) return on equity (ROE) and return on tangible equity (ROTE) metrics are annualized.Source: FactSet and peer company reports

$47.1

$92.5

$33.9$41.1

$27.2

$15.8

$41.0

$27.4

$5.7 $10.1$0.3

‐$21.7‐$40

‐$20

$0

$20

$40

$60

$80

$100

2014 2015 2016 2017* 2018 3Q2019 YTD

NET INCOME ($ in millions)

HRTG* UIHC

Impact of net unrealized equity losses on 2018 net income (NI) assuming a 25% tax rate:UIHC: $(9.3) million PT, $(7.0) million ATHRTG: $(2.1) million PT; $(1.6) million AT

Impact of net unrealized equity gains on YTD 3Q2019 NI assuming a 25% tax rate:UIHC: $15.5 million PT, $11.6 million ATHRTG: $3.4 million PT; $2.6 million AT

Source: FactSet and peer company reportsNote: PT = pre‐tax; AT = after‐taxSource: FactSet and peer company reports


Ticker Company 2020E Current 2019E 2020E 2016 2017* 2018 3Q19 YTD 2020E 2016 2017* 2018 3Q19 YTDHRTG Heritage Insurance Holdings, Inc. 8.2 0.85 0.84 0.76 9.5% 11.1% 6.7% 4.8% 9.7% 10.7% 20.0% 16.9% 10.1%FNHC FedNat Holding Company 7.4 0.88 0.87 0.80 0.5% 3.7% 7.0% 4.7% 11.3% 0.5% 3.7% 7.0% 4.7%HCI HCI Group, Inc. 12.6 1.97 2.04 1.95 12.1% -3.1% 9.4% 14.7% 15.8% 12.2% -3.2% 9.7% 15.1%UIHC United Insurance Holdings Corp. 11.5 0.90 0.89 0.85 2.4% 2.6% 0.1% -5.6% 7.6% 2.5% 3.2% 0.1% -7.0%UVE Universal Insurance Holdings, Inc. 7.8 1.52 1.52 1.58 29.9% 26.4% 24.9% 24.3% 19.8% 30.0% 26.5% 25.0% 24.4%KINS Kingstone Companies, Inc. 11.7 1.02 1.02 0.98 17.5% 13.2% 3.4% -11.3% 8.5% 18.0% 13.4% 3.4% -11.4%PLMR Palomar Holdings, Inc. 23.6 5.47 5.09 4.11 9.0% 5.0% 20.9% -0.2% 19.2% 9.1% 5.0% 21.0% -0.2%

P/E P/BV Return on Equity Return on Tangible Equity

APPENDIX: NON‐GAAP RECONCILIATIONS

25

RECONCILIATION OF GAAP AND NON‐GAAP MEASURES$ in millions

2017GAAP Net income (loss) (1.1)$ Conversion option liability fair value 42.2 Non‐recurring business acquisition related expenses ‐ Tax impact ‐ Adjusted net income 41.1$

2017GAAP ROE ‐0.3%Conversion option liability fair value 11.4%Non‐recurring business acquisition related expenses 0.0%Tax impact 0.0%Adjusted ROE (non‐GAAP) 11.1%


Arash Soleimani, CFA, CPAExecutive Vice [email protected]

Website: investors.heritagepci.com

ADDITIONAL INFORMATION

Documents

Investor Presentation - Investors – Heritage Insurance/media/Files/H/... · January2020 Investor Presentation. FL PRES, 43.9% FL CRES, 7.6% NY, 19.8% NJ, 7.7% MA, 6.7% HI, 5.8%