Heritage Insurance Holdings, Inc. has reported its results for the first-quarter of 2019, which reveals continued expansion outside of Florida, a lower net income and catastrophe losses of $15 million.
Property and casualty insurer Heritage has reported net income of $7 million for the first-quarter of 2019, down roughly 53% on the $14.8 million reported a year earlier.
Gross premiums written and gross premiums earned both increased in the quarter, to $210.4 million and $228.6 million, respectively. Net earned premiums increased slightly to $109.6 million, while the ceded premium ratio fell slightly to 52%, from 53.3% in Q1 2018.
Heritage saw its loss ratio weaken in the period, year-on-year, by more than 6% to 56.6%. At the same time, its expense ratio came in higher in Q1 2019 at 40.7%, up from 32.2%. The insurer reported a combined ratio for the first-quarter of 2019 of 97.3%, compared with 82.2% a year earlier.
The firm continued to diversify its footprint outside of Florida in the first-quarter, with the higher gross written premiums reflecting improved diversification. According to Heritage, premiums grew 6.6% outside of Florida and by just 0.1% in Florida.
Premiums in-force increased by 0.7% year-on-year to $930.1 million, which includes 4.7% growth outside of Florida and a 2.4% decline in Florida. Sequentially, explains the firm, premiums-in-force increased 0.7%, including 1.8% growth outside Florida and a 0.3% decline in the region.
Discussing its performance ratios, and Heritage states that a decline in the ceded premium ratio is a result of NBIC-related reinsurance synergies as well as a decline in NBIC’s gross quota share reinsurance program to 8%. However, this was somewhat offset by an increase in NBIC’s net quota share program to 52%.
Heritage acquired NBIC, the parent company of Narragansett Bay Insurance Company, in 2017.
The higher loss ratio was driven by higher current accident quarter net losses and LAE, which was somewhat offset by improved reserve development and the lower ceded premium ratio.
Regarding expenses, Heritage says that the increase is mostly a result of “favorable impact of NBIC-related purchase accounting on the prior year quarter and reduced ceding commission income in the current year quarter associated with a reduction to NBIC’s overall quota share reinsurance programs, partly offset by a lower ceded premium ratio.”
Heritage Chairman and Chief Executive Officer (CEO), Bruce Lucas, commented on the firm’s first-quarter results: “In the first quarter, we continued to diversify our footprint outside Florida, with personal residential Tri-County, Florida TIV now representing just 5.2% of consolidated property TIV, a 1.2-point year-over-year reduction. We applaud the Florida legislature for passing much-needed reforms, which should help reduce abusive practices in the state.
“The first quarter represents our third consecutive quarter of favorable prior year reserve development, demonstrating that our thorough reserving review in the second quarter of 2018 is bearing fruit.
“We’re off to a solid start in 2019 – our organic growth turned positive, as we continue to gain traction across our fifteen-state footprint despite our exposure reduction actions in southeast Florida, and, our core underwriting operation remained profitable even though we sustained $15.0 million of retained catastrophe losses.”
Heritage has been de-risking from Florida for some time now, in an effort to lower claims volatility and increase its diversification outside of a very competitive segment of the market.
