Investor Presentation (NYSE: HRTG) January 2019

Transcription

1 Investor Presentation (NYSE: HRTG) January 2019

2 SAFE HARBOR Statements in this presentation 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, approximate, plan, intend, could, would, estimate, or similar expressions are intended toidentify forward looking statements. Forward looking statements include, but are not limited to, statements about the Company s expectations with regard to net investment income, underwriting margins and capital to support future premium growth and expansion initiatives. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that could cause the Company s actual results to differ materially from those expressed or implied by such forward looking statements. Such risks and uncertainties include, among other things, risks related to the possibility that actual losses may exceed reserves; the concentration of the Company s business in coastal states, which could be impacted by hurricane losses 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 its growth and integrate acquired companies; increased competition, competitive pressures, and market conditions; the Company s failure to accurately price 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 the Company s claims department to effectively manage or remediate claims; low renewal rates and failure of such renewals to meet the Company s expectations; the Company s failure to execute its diversification strategy; failure of H the Company s information technology systems and unsuccessful development and implementation of new technologies; a lack of redundancy in the Company s operations; the Company s failure to attract and retain qualified employees and independent agents or loss of key personnel; the Company s inability to generate investment income; the Company s inability to maintain its financial stability rating; effects of emerging claim and coverage issues relating to legal, judicial, environmental and social conditions; the failure of the Company s risk mitigation strategies or loss limitation methods; changes in regulations and the Company s failure to meet increased regulatory 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 Reports on 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 forwardlooking 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 accepted accounting principles in the U.S. (GAAP). A reconciliation of these non GAAP financial measures to the most directly comparable GAAP financial measure can be found in the Appendix to this presentation on slide 24. Note: This presentation also contains information regarding securities analyst consensus and other financial professionals estimates of certain financial items for Heritage and other industry participants derived from reports of FactSet Research Systems ( FactSet ). These estimates are projections made by 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 not represent the opinions, forecasts, estimates, projections or predictions of Heritage or its management. By providing these estimates, Heritage does not imply its adoption of, endorsement of or concurrence with such information, conclusions or recommendations. Heritage assumes no liability for the accuracy of such estimates and undertakes no liability to update or revise such estimates based on new information or otherwise. January 2019 Investor Presentation 2

3 TABLE OF CONTENTS Company snapshot Slide 5 Timeline of events.slide 6 Management team.. Slide 7 Value proposition.. Slide 8 Valuation Slides 9 11 Key themes...slides Book of business...slides Reinsurance program.. Slide 21 Distribution Slide 22 Investments.. Slide 23 Appendix: Reconciliation of GAAP and non GAAP measures..slide 24 Investor relations contact details......slide 25 Note 1: all pricing data as of the close on 1/7/2019 unless otherwise noted Note 2: all non market data as of 9/30/2018 unless otherwise noted INVESTMENT CONSIDERATIONS COMPANY OVERVIEW January 2019 Investor Presentation 3

4 Investment considerations Heritage Insurance

5 COMPANY SNAPSHOT What we do: Heritage Insurance Holdings, Inc. is a Florida based holding company that primarily provides personal and commercial residential insurance in coastal US states. QUICK FACTS Active personal residential insurer in 11 coastal US states & licensed in 4 additional states 6 th largest homeowners insurer in FL and 21 st nationwide Actively write commercial residential insurance in FL 2 nd largest admitted commercial residential in FL and 7 th largest commercial multiple peril (CMP) insurer in the state Vertically integrated structure with in house underwriting, actuarial, customer service, claims processing and adjusting functions (3 rd parties used as needed) 468 employees (462 full time) Founded in 2012, followed by IPO in 2014 Headquartered in Clearwater, FL January 2019 Investor Presentation 5 NYSE: HRTG Market Cap/Stock Price: $396 million/$14.87* Annual Dividend/Yield Per Share: $0.24/1.6%* Remaining share repurchase authorization: $50 million Total Equity/BVPS: $390.6 million/$15.16 Total Assets: $1.8 billion MARKET/FINANCIAL DATA In Force Gross Premiums: $929.8 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 ) * Source = FactSet

6 THE HERITAGE STORY Founded in 2012, Heritage has quickly grown into a leading coastal US P&C insurer Company inception Started writing voluntary personal residential business in FL Participated in first personal residential assumption from FL Citizens 2014 HRTG IPO (NYSE): $11/share Sunshine State policy assumption Launched commercial residential division and participated in first commercial residential assumption from FL Citizens Acquired SVM Restoration Services (largest CAN vendor; provides water mitigation and repair services) 2016 Closed Zephyr acquisition Began writing business in NC, SC Launched GL insurance Commenced National General partnership FL tornado activity & Hurricanes Hermine & Matthew AoB begins to impact results Final year Heritage participated in Citizens assumptions 2018 Received KBRA financial strength and investment grade issuer ratings Hurricanes Lane, Florence and Michael CAN expansion to non FL states GEICO relationship expands 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 Acquired BRC Restoration Specialists, a FL based provider of restoration (e.g., construction) services and emergency and recovery assistance Approved to write P&C insurance in NC, marking beginning of multi state expansion initiative (began writing NC business in 2016) Announces acquisition of Zephyr, a wind only Hawaiian homeowners insurer Initiated quarterly cash dividend Began writing business in GA and AL Sawgrass Mutual policy assumption Hurricane Irma Acquired NBIC, a coastal homeowners insurer in NY, NJ, CT, RI & MA January 2019 Investor Presentation 6

7 EXPERIENCED MANAGEMENT TEAM Bruce Lucas: Chairman & CEO Co founded Heritage in 2012 and has been with the company since inception Prior to Heritage, Mr. Lucas was CEO of Infinity Investment Funds, a valueoriented hedge fund Before that, Mr. Lucas was an attorney with Weil, Gotshal & Manges where he represented large institutional clients such as Enron and GE Kirk Lusk: Chief Financial Officer Has been in his current role since 2018 Joined Heritage in 2017 via the acquisition of NBIC Holdings, Inc., where Mr. Lusk was also Chief Financial Officer. Before that, Mr. Lusk was International Chief Financial Officer of Aetna, Inc., Chief Financial Officer of Alea Group Holdings Bermuda Ltd. and Chief Financial Officer of GE ERC Global Casualty and GE Capital Auto Warranty Services Richard Widdicombe: President Co founded Heritage in 2012 and has been with the company since inception Prior to Heritage, Mr. Widdicombe served as Risk Manager of Homeowners Choice Property & Casualty Insurance Company Before that, Mr. Widdicombe was President of People s Trust Insurance Company and previously served as president of FedNat, both of which are Florida based property insurers Ernie Garateix: Chief Operating Officer Hasbeeninhiscurrentrolesince2014, prior to which he served as Executive Vice President since the company s 2012 founding Prior to Heritage, Mr. Garateix served as Vice President of Operations at American Integrity Insurance Group Before that, Mr. Garateix was Associate Vice President of IT at FCCI Insurance Group January 2019 Investor Presentation 7

8 Compelling financial metrics Business model designed to reduce earnings volatility Growth & underwriting outlooks improving Prudent capital management Management has significant skin in the game 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 our FL peer group as a % of equity, protects against hurricanes and other severe events, reducing earnings volatility Substantial 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 4.6% of outstanding shares* President owns 2.8% of outstanding shares* Total insider ownership = 13.5% of outstanding shares* January 2019 Investor Presentation * As of 1/7/2019, source = FactSet 8

9 SOLID BOOK VALUE PER SHARE GROWTH 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 31% since the Company s 2012 inception. $18 SOLID GROWTH IN BOOK VALUE & CUMULATIVE DIVIDENDS PER SHARE $16 $15.20 $15.87 $14 $12 $11.76 $12.70 $10 $8 $7.20 $8.56 $6 $4 $3.38 $2 $0 $3.38 $7.20 $8.56 $11.71 $12.41 $14.67 $ Q18 Book Value Per Share Cumulative Dividends Per Share Note: 1 year book value and cumulative dividend per share CAGR shown above excludes a $6.9 million non cash, non tax deductible liability associated with Heritage s convertible debt. This liability was reclassified to shareholders equity in 4Q17. Including this liability in 3Q17, consistent with GAAP reporting, results in a 19% book value and cumulative dividend per share CAGR (vs. the 17% shown in the chart above). January 2019 Investor Presentation 9

10 HIGHLY ATTRACTIVE VALUATION RELATIVE TO PEERS P/E P/BV ROAE ROATE Ticker Company 2019E 2020E FQ0 2018E 2019E 2020E E 2019E FY3E HRTG* Heritage Insurance Holdings, Inc % 9.5% 11.1% 8.0% 13.8% 14.1% 30.3% 10.6% 20.0% FNHC FedNat Holding Company % 0.5% 3.7% 8.9% 15.5% 15.2% 19.3% 0.4% 3.7% HCI HCI Group, Inc % 11.4% -2.9% 14.2% 19.2% 19.7% 29.7% 11.5% -3.0% UIHC United Insurance Holdings Corp % 2.4% 2.6% 3.0% 13.5% 13.9% 12.4% 2.5% 3.1% UVE Universal Insurance Holdings, Inc % 29.9% 26.4% 29.6% 28.6% 23.7% 43.2% 29.9% 26.4% KINS Kingstone Companies, Inc % 17.5% 13.2% 7.9% 15.6% 16.2% 17.0% 18.0% 13.4% Ex-HRTG coastal property avg % 12.3% 8.6% 12.7% 18.5% 17.8% 24.3% 12.5% 8.7% HRTG vs. ex-hrtg coastal property avg -27.4% -29.9% -45.7% -46.7% -43.7% -45.7% 6.1% -2.8% 2.5% -4.8% -4.7% -3.7% 5.9% -1.9% 11.3% Source: FactSet HRTG s large valuation discount doesn t correspond to HRTG s returns relative to peers NET INCOME ($ in millions) MARKET CAP ($ in millions) $100 $93 $80 $62 $60 $41 $40 $34 $27 $27 $29 $26 $20 $6 $10 $11 $0 $20 $ * 3Q18 YTD* Source: FactSet and peer company reports HRTG* HCI UIHC $900 $803 $800 $700 $600 $500 $471 $419 $400 $300 $200 $100 $0 HRTG HCI UIHC Source: FactSet and peer company reports HRTG* had higher net income than HCI and UIHC in 2015, 2016, 2017 and YTD in 3Q18. In 2016 and 2017, HRTG* had higher net income than HCI and UIHC combined. Despite consistently generating more net income, HRTG has a lower market capitalization than both HCI and UIHC. * HRTG s 2017 net income and ROE 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. HRTG s 3Q18 YTD net income is non GAAP and adjusted to exclude $5 million of after tax non recurring business acquisition related costs ($7.1 million pre tax). Please see slide 24 for a reconciliation of non GAAP measures to their comparable GAAP measures. January 2019 Investor Presentation 10

11 ABOVE PEER ROE, BUT BELOW PEER VALUATION SOLID ROE PERFORMANCE, EVEN IN HURRICANE YEARS TRADING AT A MEANINGFUL DISCOUNT TO PEERS 50% 40% 30% 20% 10% 50.7% 28.1% RETURN ON AVERAGE EQUITY Citizens depopulation transactions benefit ROEs 30.3% Severe 1Q16 FL tornadoes, Hurricanes Hermine & Matthew 9.5% Hurricane Irma 11.1% 9.9% HRTG* Avg 3.5x 3.0x 2.5x 2.0x 1.5x 1.0x HRTG s P/BV multiple is at a 45% discount to peers 1.1x 2.0x PRICE/BOOK VALUE 1.3x 1.5x 2.0x 2.4x 3.0x 25% 20% 15% 10% 5% 0% 0% Q18 YTD 11.1% January 2019 Investor Presentation 2017 RETURN ON EQUITY VS. PEERS ROE Assignment of benefits (AoB) abuse 20.0% 8.6% 8.7% ROTE HRTG* Peer Avg Note: Peers include FNHC, HCI, KINS, UIHC & UVE x 0.0x HRTG Peer average FNHC UIHC KINS HCI UVE Source: FactSet 12x 10x 8x 6x 4x 2x PRICE/2019E EPS HRTG s P/E multiple is at a 25% discount to peers 7.1x 10.2x 8.0x 10.1x 10.2x 0x HRTG Peer average FNHC UIHC UVE KINS Source: FactSet * HRTG s 2017 ROE is 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. HRTG s 3Q18 YTD ROE is annualized; it is also non GAAP and adjusted to exclude $5 million of after tax non recurring business acquisition related costs ($7.1 million pretax). Please see slide 24 for a reconciliation of non GAAP measures to their comparable GAAP measures. 10.9x

12 DIVERSIFICATION STRATEGY UNDERWAY % OF CONSOLIDATED TIV IN FL 100% 90% 80% 70% 60% 100.0% 56.4% Through a combination of M&A and organic growth, Heritage has been diversifying its book of business to new states, resulting in a better spread of risk and lower reinsurance costs. Diversification has been occurring within the FL book too, as Heritage has steadily been reducing its personal residential (PRES) & commercial residential (CRES) exposure to Tri County (TC). PRES exposure reduction in Tri County is intended to limit exposure to AoB abuse, while CRES exposure reduction in Tri County is intended to reduce concentration risk in the event of a storm. 70.6% 70.8% 50% 41.3% 46.3% 40% 30% 20% 10% 0% 14.9% 32.1% 31.8% 11.5% 9.6% 21.7% 23.0% 28.7% 17.8% 14.9% 3.8% 3.1% 6.6% 5.7% 4Q15 4Q16 3Q17 4Q17 3Q18 Note: PRES = personal residential, CRES = commercial residential & TC = tri county (FL) PRES TC CRES TC Other FL January 2019 Investor Presentation 12

13 FAVORABLE CLAIMS TRENDS Heritage s Tri County FL exposure reduction efforts are bearing fruit, as the region s contribution to open noncatastrophe claim counts continues to decline for both litigated and non litigated claims. This is benefiting overall claims trends beginning with 1Q18, litigated claims have been accounting for an increasingly smaller percentage of Heritage s non catastrophe open claims inventory. Tri County FL claims are typically more expensive given the prevalence of assignment of benefits abuse in the region TRI COUNTY FL NON CAT CLAIMS TRENDS A decline in litigated claims should benefit underwriting margins, given that litigated claims are typically more expensive to resolve LITIGATED NON CAT CLAIMS AS % OF TOTAL CLAIMS 90% 80% 70% 84% 82% 81% 82% 82% 79% 80% 79% 79% 79% 79% 78% 76% 73% 67% 60% 50% 40% 35% 38% 37% 41% 45% 45% 45% 49% 52% 49% 51% 53% 43% 35% 60% 50% 51% 47% 46% 58% 55% 52% 54% 56% 56% 56% 55% 52% 50% 46% 41% 30% 20% 31% 40% 10% 30% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 0% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Tri County open litigated claims as % of total open litigated claims Tri County non litigated open claims as % of total open non litigated claims Note: Excludes NBIC and 3,135 Sawgrass policies (excluded Sawgrass policies represent roughly $5.7 million of gross premiums in force). January 2019 Investor Presentation 13

14 VERTICALLY INTEGRATED STRUCTURE Unique, 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. CAN, our water mitigation and construction subsidiary, benefits our loss ratio in non catastrophe years via in sourcing work that would otherwise go to third parties. In hurricane years, CAN serves as a catastrophe hedge, reducing our earnings volatility and 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.) Not currently using Osprey, our captive reinsurer, due to attractive market rates for third party reinsurance Risk bearing entity (AL, GA, FL, MS, NC, SC) ORGANIZATIONAL STRUCTURE Heritage Insurance Holdings, Inc. (NYSE: HRTG) Heritage Property & Casualty Insurance Company (HPCIC) NBIC Holdings, Inc Zephyr Acquisition Company Heritage MGA, LLC Heritage Insurance Claims, LLC Contractors Alliance Network (CAN) Osprey Re Ltd. First Access Insurance Group, LLC Skye Lane Properties, LLC NBIC Financial Holdings, Inc. Narragansett Bay Insurance Company (NBIC) NBIC Service Company Provides NBIC with underwriting, personnel and other services Westwind Underwriters, Inc. HI Holdings, Inc. Zephyr Insurance Company, Inc. (ZIC) Provides HPCIC & ZIC with underwriting, personnel and other services Risk bearing entity (HI) Mitigation and construction division, serves as a hedge in catastrophe years Captive reinsurer Subsidiary that owns Heritage s corporate headquarters Risk bearing entity (CT, RI, MA, MD, PA, NY, NJ, VA) January 2019 Investor Presentation 14

15 CONSERVATIVE REINSURANCE RETENTION AFTER TAX FIRST EVENT FLORIDA RETENTION AS % OF 3Q18 GAAP EQUITY 9% 8% Heritage has the lowest reinsurance retention as a % of 3Q18 GAAP shareholders equity, suggesting the smallest hit to book value from a hurricane (excluding storm related ancillary income streams). 7.7% 8.5% 7% 6.9% 6.2% 6% 5.2% 5% 4% 3.8% 3% 2% 1% 0% HRTG FL peer avg UVE HCI FNHC UIHC Note 1: UVE retention includes both UPCIC & APPCIC and FNHC retention includes both FNIC and MNIC. Note 2: Calculation based on 21% and 5.5% US federal and Florida statutory corporate income tax rates, respectively. Source: Peer company reports January 2019 Investor Presentation 15

16 UNDERWRITING PERFORMANCE Heritage has experienced significant premiums growth since inception, stemming primarily from Citizens depopulation transactions through 2015 and from M&A and organic growth in subsequent years. Importantly, Heritage s core underwriting operation has been profitable every full calendar year since inception. Heritage s premium growth is unprecedented, reaching almost $1 billion of gross in force premiums 5 years after the company s founding. The modest premium decline as of 3Q18 stemmed from Tri County FL exposure reduction efforts in response to assignment of benefits (AoB) claims abuse. IN FORCE PREMIUM Heritage s combined ratios have outperformed peers every full calendar year it has been inexistence SOLID UNDERWRITING MARGINS $1,000 $942.4 $929.8 $ $800 $700 $ $591.5 $ $ $ $400 $300 $200.1 $200 $100 $51.6 $ Q18 HPCIC FL CRES NBIC Zephyr January 2019 Investor Presentation % 90% 70% 50% 30% 10% 10% 80.8% 72.9% 74.8% 71.4% 32.4% 31.3% 78.4% 65.0% 27.5% 40.5% 40.1% 37.5% 93.3% 92.8% 98.5% 94.1% 90.3% 89.7% 34.8% 41.0% 36.7% 58.0% 53.1% 53.0% Q18 YTD Tornadoes, Irma, AoB Florence, Citizens takeouts benefit HRTG s Hermine, AoB margins Matthew, AOB Loss ratio Expense ratio Peers Note 1: HRTG s 3Q18 YTD expense and combined ratios are non GAAP and adjusted to exclude $7.1 million of pre tax non recurring business acquisition related costs. Please see slide 24 for a reconciliation of non GAAP measures to their comparable GAAP measures. Note 2: Peers include FNHC, HCI, KINS, UIHC & UVE Source: FactSet and peer company reports

17 CAPITAL MANAGEMENT & OPERATING LEVERAGE Heritage has been a responsible steward of shareholder capital and currently has a $50 million share repurchase authorization in place. Since 2016, the Company has returned over $50 million to shareholders through common share repurchases and dividends. Heritage s ratio of TTM net premiums written to 3Q18 equity is only 1.1x, tied for lowest in its FL homeowners insurance 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. DISCIPLINED CAPITAL MANAGEMENT CONSERVATIVE NET OPERATING LEVERAGE $ in millions $60 25% $ % $50 20% 16.8% $ % $ % $ $ % $ % $ $0 0% Q18 YTD Dividends Share repo Debt repo Div payout ratio (right axis) Dividend payout ratio Net operating leverage (NPW/Equity) 1.8x 1.6x 1.4x 1.2x 1.0x 0.8x 0.6x 0.4x 0.2x 0.0x 1.5x 1.5x 1.3x 1.4x 1.1x 1.1x HCI HRTG UIHC Peer avg UVE FNHC HCI HRTG UIHC Peer avg UVE FNHC January 2019 Investor Presentation 17

18 Company overview Heritage Insurance

19 BOOK OF BUSINESS As of 3Q18, we have $929.8 million of gross premiums in force (estimated net = $470.5 million) across 3 statutory insurance entities (Heritage/NBIC/Zephyr) and write 2 main lines of business, including personal residential (PRES) and commercial residential (CRES). We also write some commercial general liability (CGL) insurance. We re actively writing in 11 states (CRES and CGL are only written in Florida), but have licenses in 15 states. GEOGRAPHIC FOOTPRINT PREMIUM SPREAD BY GEOGRAPHY PREMIUM SPREAD BY PRODUCT NJ, 7.7% Other, 5.6% HI, 5.8% MA, 6.4% CRES, 9.4% CGL, 0.4% FL, 55.1% NY, 19.5% CT, MA, MD, PA, NJ, NY, RI, VA = actively writing = licensed 3 Statutory Insurance Entities January 2019 Investor Presentation 19 HI AL, FL, GA, MS, NC, SC PRES, 90.2% PRES = personal residential CRES = commercial residential CGL = commercial general liability $ in millions Gross Premiums Policies Avg Premium/ Products In Force In Force Policy PRES (multiple states) $ ,086 $1,635.7 Homeowners (multiple states) ,252 1,907.3 Hurricane only (HI only) , Dwelling/landlord (multiple states) ,521 1,772.6 Condo owners (multiple states) , Mobile homeowners (FL only) 7.1 6,593 1,075.5 Renters (multiple states) 1.1 3, CRES (FL only) ,132 27,827.6 CGL (FL only) 3.4 3, Total $ ,014 $1,788.1 Note: assumes 19% of Sawgrass policies ($5.7 million of gross premiums in force as of 9/30/2018) that are not yet on Heritage s main policy system, all fall into the Homeowners line of business.

20 TOTAL INSURED VALUE SNAPSHOT Florida accounts for 55% of Heritage s consolidated gross premiums in force, but it only reflects 32% of total insured value (TIV) the $4.91 average premium per $1,000 of TIV in Florida ($5.41 for Florida PRES policies) is almost triple the $1.91 non Florida average (Florida s more expensive policies reflect its higher hurricane risk), while the $445,989 average insured value in Florida ($342,957 for Florida PRES policies) is well below the $763,966 average for non Florida states (property values in Florida trail those in Heritage s Northeast US states). Includes FL CGL, which accounts for 1.0% of Heritage s TIV. The remaining 7.3% comes from PRES in: AL, CT, GA, NC, RI, SC HI 10.7% NJ 12.3% MA 8.6% Other 8.3% TIV SPREAD NY 28.8% FL PRES 24.1% FL CRES 7.2% January 2019 Investor Presentation 20 Average insured value per policy $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 $5.41 $342,957 FL PRES In addition to PRES, FL (all lines) includes: CRES, which has a $7,416,827 average insured value and $3.73 of average premium per $1K of TIV CGL, which has a $821,863 average insured value and $1.10 of average premium per $1K of TIV $4.91 $445,989 FL (all lines) $1.91 $763,966 Non FL (100% PRES) $2.46 $425,239 AL $2.38 $454,048 GA TIV Metrics $1.57 $505,802 HI $2.06 $513,543 NC $2.36 $632,601 SC $2.41 $649,053 RI $1.81 $749,826 NJ $2.13 $844,576 MA Avg insured value (left axis) Premium/$1K TIV (right axis) $1.72 $899,222 CT $1.95 $990,591 NY $5.50 $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Premium/$1K TIV

21 REINSURANCE PROGRAM Millions $1,592 Heritage has a conservative reinsurance program, protecting the Company against hurricanes and severe weather events and reducing earnings volatility. $1,400 $1,392 $1,320 $1,107 $997 $568 $498 $378.6 $215 $121 $90 $58 $40 $15 Stub Layer 2 Cat43 7.9% of $63.4M xs $57.9M ($5M) Stub Layer 1 20% Co Par FHCF Layer 45% of $1.213B xs $378.6M ($546.0M) 2016 Citrus E 100% of $44.1M xs $40M 2016 Citrus D 35% of $428.6M xs $568M ($150M) Layer 3 100% of $229M xs $40M 100% w/ RPP Layer % of $125M xs $40M 100% w/ RPP 2017 Citrus 100% of $117.2M xs $40M Layer 4 100% of $185M xs $40M Layer % of $50M xs $40M 100% w/ RPP Top/Agg 80% of $25M xs $10M Retention Millions $1,000 $905 $867 $818 $550 $368 $183 $140 $122 $60 $59 $40 $20 $ Citrus E 100% of $44.1M xs $40M Layer 3 100% of $229M xs $40M 100% w/ RPP Stub Layer 2 Cat43 7.9% of $63.4M xs $57.9M ($5M) Stub Layer 1 20% Co Par Retention Layer % of $125M xs $40M 100% w/ RPP Layer % of $50M xs $40M 100% w/ RPP NBIC Multi Year Layer % of $450M xs $550M (~$185M) NBIC Multi Year Layer % of $410M xs $140M (~$169M) NBIC Multi Year Layer % of $80M xs $60M (~$33M) 80% of $25M xs $10M Top/Agg Net Quota Share Gross Quota Share 2017 MY 8.0% of $1,000M xs $0M ($80M) Millions $801 $757 $683 $444 $215 Stub Layer 2 $121 Cat43 $90 7.9% of $63.4M xs $57.9M ($5M) $58 Stub Layer 1 $40 20% Co Par $ Citrus E 100% of $44.1M xs $40M Multi-Zonal 84.7% of $313M xs $40M ($265M) Layer 3 100% of $229M xs $40M 100% w/ RPP Layer % of $125M xs $40M 100% w/ RPP Layer % of $50M xs $40M 100% w/ RPP Retention Top/Agg 15.3% of $313M xs $40M ($48M) Top/Agg 80% of $25M xs $10M Substantial severity and frequency protection Roughly $2.5 billion of total catastrophe reinsurance coverage across multiple events ($1.4 billion available for a single event) $20 million first event retention and $16 million 2 nd event retention Heritage s third party reinsurers are rated A or higher by A.M. Best or S&P or are fully collateralized FL 1 st Event NE 1 st Event HI 1 st Event January 2019 Investor Presentation 21

22 DISTRIBUTION Overview HPCIC NBIC Over 6,000 appointed producers across our multi state platform The CEO of SIAA, one of the largest independent agency networks in the US, is a member of Heritage s Board of Directors, providing us with a strong growth platform in both new and existing states. Relationships with multiple auto carriers, whereby the policyholder receives a bundled product discount. Over 2,500 actively writing independent agents 25% 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 Roughly 200 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 Over 50% of voluntary premium is written by agents affiliated with three large agency networks January 2019 Investor Presentation 22

23 INVESTMENT PORTFOLIO Heritage has a very conservative investment portfolio, consisting predominantly of low duration, fixed income securities. As yields increase, investment income should benefit. INVESTMENT PORTFOLIO BREAKDOWN Industrial bonds, 28.1% Equities, 0.5% US Preferred government, stock, 3.4% 8.6% Munis, 11.3% $ in millions $700 $600 $500 $400 $300 NET INVESTMENT INCOME PERFORMANCE 2.4% 2.5% 2.0% 1.9% 1.8% 2.0% 1.6% 1.4% 1.5% 1.0% Special revenue bonds, 48.1% $200 $100 $0 $136.2 $331.2 $400.1 $603.0 $567.0 $ Q18 YTD Investments (left axis) Net Investment Income yield (right axis) 0.5% 0.0% January 2019 Investor Presentation 23

24 APPENDIX: NON GAAP RECONCILIATIONS January 2019 Investor Presentation 24 RECONCILIATION OF GAAP AND NON GAAP MEASURES $ in millions Q18 YTD GAAP Net income (loss) $ (1.1) $ 23.2 Conversion option liability fair value 42.2 Non recurring business acquisition related expenses 7.1 Tax impact 1.8 Adjusted net income $ 41.1 $ Q18 YTD* GAAP ROE 0.3% 8.0% Conversion option liability fair value 11.4% 0.0% Non recurring business acquisition related expenses 0.0% 2.5% Tax impact 0.0% 0.6% Adjusted ROE (non GAAP) 11.1% 9.9% *annualized 3Q18 YTD GAAP expense ratio 38.8% Non recurring business acquisition related expenses 2.1% Adjusted expense ratio (Non GAAP) 36.7% GAAP combined ratio 91.8% Non recurring business acquisition related expenses 2.1% Adjusted combined ratio (Non GAAP) 89.7% 3Q17 GAAP book value per share $ Conversion option liability fair value 0.29 Tax impact Adjusted book value per share (non GAAP) $ 13.13

25 ADDITIONAL INFORMATION Arash Soleimani, CFA, CPA Executive Vice President & Director of Investor Relations Website: investors.heritagepci.com