Heritage Insurance (HRTG) - 2023 Q1 - Quarterly Report

Financial Performance - Gross premiums written increased by 9.6% from $283,196 thousand in Q1 2022 to $310,309 thousand in Q1 2023[17] - Net premiums earned rose to $166,029 thousand in Q1 2023, up 8.5% from $152,929 thousand in Q1 2022[17] - Operating income improved significantly to $20,091 thousand in Q1 2023, compared to an operating loss of $39,411 thousand in Q1 2022[17] - Net income for Q1 2023 was $14,008 thousand, a turnaround from a net loss of $30,759 thousand in Q1 2022[17] - The company reported a total comprehensive income of $23,298 thousand for Q1 2023, compared to a comprehensive loss of $55,080 thousand in Q1 2022[17] - Earnings per share for Q1 2023 were $0.55, compared to a loss per share of $(1.15) in Q1 2022[17] - Net income for the three months ended March 31, 2023, was $14,008, compared to a net loss of $30,759 in the same period of 2022, representing a significant turnaround[26] - Net cash provided by operating activities was $14,946 for Q1 2023, a recovery from a cash used of $39,206 in Q1 2022[26] - The net combined ratio improved to 94.5%, down 35.0 points from 129.5% in the prior year quarter, driven by lower net loss and expense ratios[135] - The net loss and LAE ratio improved to 58.7% in Q1 2023, down 32.9 points from 91.6% in the prior year quarter, due to significantly lower weather losses[156] Assets and Liabilities - Total assets decreased from $2,392,600 thousand as of December 31, 2022, to $2,158,781 thousand as of March 31, 2023, a decline of approximately 9.8%[14] - Total liabilities decreased from $2,261,561 thousand as of December 31, 2022, to $2,004,057 thousand as of March 31, 2023, a reduction of approximately 11.4%[14] - Cash and cash equivalents increased from $280,881 thousand at the end of 2022 to $329,965 thousand by March 31, 2023, reflecting a growth of 17.5%[14] - Total cash, cash equivalents, and restricted cash increased to $336,664 as of March 31, 2023, up from $287,572 at the end of 2022, reflecting a rise of 17.0%[28] - The carrying value of the Company's investments in non-consolidated Variable Interest Entities (VIEs) was $14,283 million as of March 31, 2023, down from $16,484 million as of December 31, 2022[45] - The total investments measured at fair value on a recurring basis were $613,176 million as of March 31, 2023, compared to $635,572 million as of December 31, 2022[51] Investment Performance - Net investment income for Q1 2023 was $5,990, a substantial increase of 137.7% from $2,521 in Q1 2022[41] - The company reported net realized investment gains of $1,898 for Q1 2023, compared to a net loss of $16 in Q1 2022[38] - Fixed maturity securities sales, maturities, and paydowns totaled $145,070 in Q1 2023, significantly higher than $22,132 in Q1 2022[26] - The estimated weighted-average credit quality rating of the fixed maturity securities portfolio was A+ as of March 31, 2023[194] Debt and Financing - The Company had $885,000 of Convertible Senior Notes outstanding as of March 31, 2023, with interest payments of approximately $26,000 made during the quarter[87] - The Term Loan Facility had an outstanding principal of $86.8 million as of March 31, 2023, with quarterly principal payments of $2.4 million starting from December 2022[91] - The effective interest rates for the Term Loan Facility and Revolving Credit Facility were 7.884% and 7.661%, respectively, as of March 31, 2023[95] - The total long-term debt as of March 31, 2023, was $126.7 million, a decrease from $128.9 million at the end of 2022[98] - The Company made principal and interest payments of approximately $4.1 million on the Term Loan Facility for the three months ended March 31, 2023[92] Regulatory and Compliance - The Company’s insurance subsidiaries are in compliance with financial and regulatory requirements across the states in which they operate as of March 31, 2023[103] - The Company does not believe that any currently pending legal proceedings will have a material adverse effect on its financial position[199] Operational Metrics - The Company incurred $97.5 million in losses and loss adjustment expenses for the three months ended March 31, 2023, down from $140.0 million in 2022, a decrease of 30.3%[80] - As of March 31, 2023, the reserve for unpaid losses was $360.8 million, with $284.0 million attributable to incurred but not reported (IBNR) claims, accounting for 78.7% of net reserves[83] - Florida policies-in-force decreased by 15.6% year-over-year, while premiums-in-force increased by 13.2% to $624.9 million as of March 31, 2023[127] - Total premiums-in-force reached $1.3 billion, reflecting a 10.9% increase from the prior year, despite a policy count reduction of approximately 50,000 policies[138] Future Outlook - The Company plans to introduce Excess & Surplus lines products in South Carolina during Q2 2023, expanding its market presence[133] - The commutation process for the 2017 reinsurance agreement with the FHCF is expected to begin in June 2023, with uncertainty regarding the final amount payable by FHCF for Hurricane Irma losses[105] - The Company continues to face inflationary pressures, leading to increased costs of materials and labor for claims remediation, which may impact future financial performance[125]