Heritage Insurance (US:HRTG)2023-03-13 20:07Financial Performance - For the year ended December 31, 2022, the company reported gross premiums written of $1.3 billion and an operating loss of $157.4 million, which included a non-cash goodwill impairment charge of $92.0 million[21]. - The company's total assets as of December 31, 2022, were $2.4 billion, with total stockholders' equity of $131.0 million[21]. - As of December 31, 2022, the company held $280.9 million in cash and cash equivalents and $653.6 million in investments, including $635.6 million in fixed maturities[62]. - The company’s investment policy limits investments in any one issuer to no more than 2% of admitted assets[61]. - The company is subject to risk-based capital standards requiring it to report risk-based capital calculations to state regulators[67]. Underwriting and Risk Management - The company aims to improve profitability through disciplined underwriting and diversification, leading to a decline in policy count while achieving a higher average premium per policy[22]. - The underwriting team leverages proprietary data analytics to analyze various risk evaluation factors, including premiums to be received and geographic concentrations of policies[42]. - The liability for losses and loss adjustment expenses includes claims incurred but not yet reported (IBNR) and is continually reviewed and adjusted based on industry trends[48][49]. - The company purchased reinsurance from over 50 third-party private reinsurers, all rated "A-" or higher, to limit exposure to individual risks and catastrophic events[54]. - The reinsurance program provides coverage in excess of state regulator requirements, based on the probable maximum loss estimated to occur once in every 100 years[56]. Reinsurance Strategy - The reinsurance program includes various coverage types, and the company is exploring cost-efficient alternatives such as catastrophe bonds to manage reinsurance expenses[23]. - The company has established relationships with highly rated reinsurers, which help improve the cost-effectiveness of its reinsurance program[32]. - The company has a 45% participation in the Florida Hurricane Catastrophe Fund limit remaining for Hurricane Irma losses[57]. - Florida personal lines in-force premium has declined as part of the strategy to re-allocate capital to products and geographies that maximize long-term returns[40]. Technology and Efficiency - The company is focused on enhancing technology resources to streamline processes and improve efficiency for agents and policyholders[26]. - The technology platform supports integrated systems for underwriting, claims processing, and customer service, leading to improved efficiency and reduced errors[51]. Employee and Agency Relations - The company employs 612 full-time and part-time employees and is committed to providing a diverse and inclusive work environment[70]. - NBIC maintains master agency agreements with approximately 500 retail independent agents, representing over 800 agency locations, with the three largest independent agency relationships accounting for 15.6% of annualized premiums[38]. - Approximately 28% of the company's voluntary personal lines policies are written by agents affiliated with eight large agency networks[37]. - Zephyr writes approximately 50.6% of its premium through agents affiliated with three large agency networks[39]. Investment Portfolio - The fixed income securities portfolio had a weighted-average credit quality rating of A+ as of December 31, 2022, consistent with the previous year[289]. - The duration of financial instruments subject to interest rate risk was 3.179 years at December 31, 2022, down from 3.903 years at December 31, 2021[289]. - A hypothetical 300 basis point increase in interest rates would decrease the estimated fair value of fixed-maturity securities by approximately 10%[290]. - The fixed-maturity portfolio composition included 18% rated AAA, 49% rated AA, and 14% rated BBB as of December 31, 2022[291]. - Investments in commercial mortgages cannot exceed 10% of admitted assets, and prohibited investments include short sales and margin purchases[61]. Market and Economic Conditions - The insurance business is seasonal, with hurricanes typically occurring from June 1 to November 30, impacting reinsurance costs[63]. - The company reported no material exposure to foreign currency exchange risk as of December 31, 2022[294].