# EDGAR Filing Document

**Accession Number:** 0001598665
**File Stem:** 0001193125-23-058565
**Filing Date:** 2023-3
**Character Count:** 45737
**Document Hash:** 50b104589de19b8a51340652bba83612
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001193125-23-058565.hdr.sgml**: 20230303

**ACCESSION NUMBER**: 0001193125-23-058565

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 13

**CONFORMED PERIOD OF REPORT**: 20230302

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230303

**DATE AS OF CHANGE**: 20230302

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Heritage Insurance Holdings, Inc.
- **CENTRAL INDEX KEY:** 0001598665
- **STANDARD INDUSTRIAL CLASSIFICATION:** FIRE, MARINE & CASUALTY INSURANCE [6331]
- **IRS NUMBER:** 455338504
- **STATE OF INCORPORATION:** DE

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-36462
- **FILM NUMBER:** 23701310

**BUSINESS ADDRESS:**
- **STREET 1:** 1401 N WESTSHORE BLVD
- **CITY:** TAMPA
- **STATE:** FL
- **ZIP:** 33607
- **BUSINESS PHONE:** 7273627202

**MAIL ADDRESS:**
- **STREET 1:** 1401 N WESTSHORE BLVD
- **CITY:** TAMPA
- **STATE:** FL
- **ZIP:** 33607

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Heritage Insurance Holdings, LLC
- **DATE OF NAME CHANGE:** 20140130

?xml version="1.0" encoding="utf-8" ? Form 8-K

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### UNITED STATES

### SECURITIES AND EXCHANGE COMMISSION

#### Washington, D.C. 20549

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### FORM 8-K

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#### CURRENT REPORT

#### Pursuant to Section 13 or 15(d)

#### of the Securities Exchange Act of 1934

#### Date of Report (Date of earliest event reported): March 2, 2023

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## HERITAGE INSURANCE HOLDINGS, INC.

#### (Exact name of registrant as specified in its charter)

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---

| | | |
|:---|:---|:---|
| **Delaware** | **001-36462** | **45-5338504** |
| **(State or other jurisdiction**<br> **of incorporation)** | **(Commission**<br> **File Number)** | **(I.R.S. Employer**<br> **Identification No.)** |

---

---

| | |
|:---|:---|
| **1401 N. Westshore Blvd**<br> **Tampa, Florida** | **33607** |
| **(Address of principal executive offices)** | **(Zip Code)** |

---

#### Registrant's telephone number, including area code: (727) 362-7200

#### (Former name or former address, if changed since last report)

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading**<br> **Symbol(s)** | **Name of each exchange**<br> **on which registered** |
| Common Stock, par value $0.0001 per share | HRTG | New York Stock Exchange |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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---

| | |
|:---|:---|
| **Item 2.02** | **Results of Operations and Financial Conditions.**  |

---

On March 2, 2023, Heritage Insurance Holdings, Inc. (the "Company") issued a press release announcing financial results for its fiscal quarter and year ended December 31, 2022. A copy of the press release is attached hereto as Exhibit 99.1.

The information furnished under this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

---

| | |
|:---|:---|
| **Item 9.01** | **Financial Statements and Exhibits.**  |

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(d) Exhibits. The following exhibits are being filed as part of this Current Report on Form 8-K.

---

| | |
|:---|:---|
| **&nbsp;&nbsp;&nbsp;&nbsp;No.**  | **Exhibit** |
| 99.1 | [Press Release dated March 2, 2023](d428354dex991.htm) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |

---

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#### SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | **HERITAGE INSURANCE HOLDINGS, INC.** | **HERITAGE INSURANCE HOLDINGS, INC.** |
| Date: March 2, 2023 | By: | /s/ Kirk Lusk |
|  |  | Kirk Lusk<br> Chief Financial Officer |

---

## Exhibit 99.1

**Exhibit 99.1** 

**Heritage Reports Fourth Quarter 2022 Results** 

**Tampa, FL – March 2, 2023**: Heritage Insurance Holdings, Inc. (NYSE: HRTG) ("Heritage" or the "Company"), a super-regional property and casualty insurance holding company, today reported fourth quarter of 2022 financial results.

**Fourth Quarter 2022 Highlights** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Fourth quarter net income of $12.5 million or $0.48 per diluted share, compared to a net loss of
$49.2 million or ($1.79) per diluted share in the prior year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Fourth quarter non-GAAP adjusted net income\*\* of $12.5 million or
$0.48 per diluted share, up from adjusted net income of $11.3 million or $0.41 per diluted share in the prior year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Premiums-in-force of
$1.3 billion, up 9.6% year-over-year driven by rate increases while policies in-force are down 7.2%, resulting in average premium increasing 18.1%.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Gross premiums written of $322.1 million, up 15.5% from $278.8 million in the prior year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Gross premiums earned of $317.3 million, up 8.0% from $293.7 million in the prior year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net loss ratio of 62.4% up 0.5 points from 61.9% in fourth quarter 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net expense ratio of 33.7% up 2.4 points from 31.3% in the prior year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net combined ratio of 96.1%, up 2.9 points from 93.2% in fourth quarter 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Repurchased 341,075 shares of common stock under the stock repurchase program at an average price of $1.78 per
share for an aggregate purchase price of approximately $625,000.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Continued successful exposure management with Florida admitted market personal line policies-in-force and total insured value ("TIV") intentionally declining by 16.7% and 12.0%, respectively, as compared to the prior year period, while in-force premium declined only 2.2%.

"Our fourth quarter metrics continue to demonstrate our focus on strategic profitability initiatives." said Heritage CEO Ernie Garateix. "The strategy we've been executing includes tightening underwriting, constraining new business in certain geographies, maintaining a balanced portfolio, optimizing our allocation of capital, and ensuring rate adequacy. We are encouraged by our improving metrics and the long-term positive impact we believe they will have on our underwriting income. We believe this discipline also better positions Heritage for the renewal of its reinsurance program in June. Additionally, I am encouraged by the recently passed Florida Senate Bill 2A, during the December special session of the Florida legislature. I am cautiously optimistic that it will accomplish the goals of the legislature, our Governor, and State CFO to stabilize the Florida property insurance market and curtail abusive claims practices. Our strategy will remain unchanged until we see the impacts of the legislative changes in our results."

**Strategic Profitability Initiatives** 

The following provides an update to the Company's strategic initiatives that are expected for Heritage to achieve consistent long-term quarterly earnings and drive shareholder value. The Supplemental Information table included in this earnings release demonstrates progress made since fourth quarter 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** **Generate underwriting profit though rate adequacy and more selective underwriting.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Significant rating actions throughout the book of business resulting in an increase in average premium per policy
of 18.1% over the prior year quarter and 5.6% over third quarter 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Premiums-in-force of
$1.3 billion are up 9.6% from the prior year while policy count is down 7.2% due to prior underwriting efforts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Continued focus on timely rate actions, tightening underwriting criteria, and expanding restrictions on new
business written in over-concentrated markets or products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** **Allocate capital to products and geographies that maximize long-term returns.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Increased commercial residential premium by 41.1% year over year while TIV only increased 21.5% and policies in
force increased by only 0.4% .

**<sup>\*\*</sup> Represents a non-GAAP financial measure. Information regarding non-GAAP financial measures, including required reconciliations, are set forth below under the *"Non-GAAP Financial Measures"* section of this release.** 

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Reduced policy count for Florida personal lines business by 16.2% as compared to the prior year period. The
disciplined underwriting and rating actions have reduced Florida personal lines TIV by 11.1% while reducing premiums in force by only 1.9%.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• This disciplined underwriting approach resulted in a policy count reduction of 2.5% in other states while
generating a 11.9% increase in premiums in force.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** **Maintain a balanced and diversified portfolio.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• No state represents over 26% of the Company's TIV.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The top four states grew TIV by an average 2.2% while the smallest five states grew by 56.7%.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• As a result of diversification efforts, the top five personal lines states represented 79.2% of all TIV at fourth
quarter 2022 compared to 79.8% of all TIV at fourth quarter 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** **Provide coverages suitable to the market and return targets.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Offering Excess & Surplus lines ("E&S") policies in California and Florida.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Expanding E&S to South Carolina during second quarter of 2023.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Continue to evaluate other states for E&S and other products.

**Capital Management** 

Heritage's Board of Directors has decided to continue its temporary suspension of the quarterly dividend to shareholders. The Board of Directors will continue to evaluate dividend distribution and stock repurchases on a quarterly basis. In the fourth quarter of 2022, the Company repurchased 341,075 shares of common stock under the stock repurchase program at an average price of $1.78 per share for an aggregate purchase price approximately $625,000.

**Results of Operations** 

The following table summarizes results of operations for the for the three months and year ended December 31, 2022 and 2021 (amounts in thousands, except percentages and per share amounts):

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | ***Three Months Ended December 31,*** | ***Three Months Ended December 31,*** | ***Three Months Ended December 31,*** | ***Year Ended December 31,*** | ***Year Ended December 31,*** | ***Year Ended December 31,*** |
|  | ***2022*** | ***2021*** | ***Change*** | ***2022*** | ***2021*** | ***Change*** |
|  Revenue | $174588 | $166712 | 4.7 | $662460 | $631561 | 4.9 |
|  **Net income (loss)** | $**12501** | $**(49218)** | **(125.4** | $**(154363)** | $**(74727)** | **106.6** |
|  Adjusted net income (loss)\*\* | $12501 | $11282 | 10.8 | $(63589) | $(14227) | 347.0 |
|  **Net income (loss) per share** | $**0.48** | $**(1.79)** | **(127.0** | $**(5.86)** | $**(2.69)** | **118.0** |
|  *Adjusted net income (loss) per share\*\** | $0.48 | $0.41 | 17.1 | $(2.41) | $(0.51) | 372.5 |
|  Book value per share | $5.13 | $12.82 | (60.0) | $5.13 | $12.82 | (60.0) |
|  *Adjusted book value per share\*\** | $7.23 | $12.99 | (44.3) | $7.23 | $12.99 | (44.3) |
|  Return on equity\* | 40.2% | (52.6)% | 92.8 | (65.1)% | (19.0)% | (46.1) |
|  *Adjusted return on equity\*\** | 40.2% | 12.1% | 28.1 | (26.8)% | (3.6)% | (23.2) |
|  Underwriting summary |  |  |  |  |  |  |
|  Gross premiums written | $322050 | $278820 | 15.5 | $1275031 | $1164879 | 9.5 |
|  Gross premiums earned | $317285 | $293696 | 8.0 | $1208824 | $1144162 | 5.7 |
|  Ceded premiums earned | $(151114) | $(133768) | 13.0 | $(571759) | $(533091) | 7.3 |
|  Net premiums earned | $166171 | $159928 | 3.9 | $637065 | $611071 | 4.3 |
|  Ceded premium ratio | 47.6% | 45.5% | 2.1 | 47.3% | 46.6% | 0.7 |
|  Ratios to Net Premiums Earned: | Ratios to Net Premiums Earned: |  |  |  |  |  |
|  Loss ratio | 62.4% | 61.9% | 0.5 | 78.7% | 69.9% | 8.8 |
|  Expense ratio | 33.7% | 31.3% | 2.4 | 35.6% | 34.7% | 0.9 |
|  Combined ratio | 96.1% | 93.2% | 2.9 | 114.3% | 104.6% | 9.7 |

---

NM—Not Meaningful

<sup>\*</sup> Return on equity represents annualized net income for the period divided by average stockholders' equity during the period.

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| | |
|:---|:---|
| **Note**: | Percentages and sums in the table may not recalculate precisely due to rounding.  |

---

**<sup>\*\*</sup> Represents a non-GAAP financial measure. Information regarding non-GAAP financial measures, including required reconciliations, are set forth below under the *"Non-GAAP Financial Measures"* section of this release.** 

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**Ratios** 

*Ceded premium ratio* represents ceded premiums as a percentage of gross premiums earned.

*Net loss ratio* represents net losses and loss adjustment expenses ("LAE") as a percentage of net premiums earned.

*Net expense ratio* represents policy acquisition costs ("PAC") and general and administrative ("G&A") expenses as a percentage of net premiums earned. Ceding commission income is reported as a reduction of PAC and G&A expenses.

*Net combined ratio* represents the sum of net losses and LAE, PAC and G&A expenses as a percentage of net premiums earned. The net combined ratio is a key measure of underwriting performance traditionally used in the property and casualty industry. A net combined ratio under 100% generally reflects profitable underwriting results.

**Fourth Quarter 2022 Results** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Fourth quarter 2022 net income of $12.5 million or $0.48 per diluted share, compared to a net loss of
$49.2 million or ($1.79) per diluted share in the prior year quarter was primarily driven by a $60.5 million ($2.20 per share) non-cash, substantially non-deductible, goodwill impairment charge taken in the fourth quarter of 2021. The goodwill impairment charge was recorded following the Company's annual valuation review and principally stemmed from its
common stock valuation and prevailing valuation multiples in the property insurance market. In addition, the Company reduced its valuation allowance between the third and fourth quarter by $4.3 million, favorably impacting the effective tax
rate for the quarter. The valuation allowance relates to certain tax elections made by Osprey Re, the Company's captive reinsurer domiciled in Bermuda. The favorable impact on income taxes offset the higher combined ratio driven by a higher
ceded premium ratio.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Fourth quarter 2022 non-GAAP adjusted net income\*\* of $12.5 million
or $0.48 per diluted share, increased from adjusted net income of $11.3 million or $0.41 per share in the prior year quarter. The improved results were primarily driven by the favorable impact of income taxes for the current year quarter partly
offset by a higher combined ratio which are both explained above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Gross premiums written of $322.1 million were up 15.5% from $278.8 million in the prior year quarter as
intentional exposure-management and rate adequacy efforts improved the average premium across the book of business. This amount reflects a 26.4% increase in Florida premium driven by higher rates for all business, organic growth in the CRES product,
and expansion of the Company's surplus lines product as well as a 7.2% rate-related increase in other states with a policy count reduction of 7.2% across the book. Rate increases continued to meaningfully benefit written premiums throughout the
book of business and diversification of Florida products by increasing the Florida CRES and Florida E&S business is allowing Heritage to optimize Florida business written. Premiums from our Florida commercial general liability ("CGL")
program remained fairly steady quarter over quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Premiums-in-force were
$1.3 billion as of fourth quarter 2022, representing a 9.6% increase from fourth quarter 2021 due to continued proactive underwriting and rate actions, despite a policy count reduction of approximately 40,000.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Gross premiums earned of $317.3 million were up 8.0% from $293.7 million in the prior year quarter,
reflecting higher gross premiums written over the last twelve months driven by higher average premium per policy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net earned premiums of $166.2 million increased 3.9% from $159.9 million in the prior year quarter
despite a 13.0% increase in ceded premium, driven by the increase in gross premium earned.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Ceded premium ratio of 47.6% was up 2.1 points from 45.5% in the prior year quarter driven by a higher cost of
the 2022-2023 catastrophe excess of loss program partly offset by the increase in gross earned premium. Ceded premium includes catastrophe excess of loss reinsurance contracts, quota share contracts for the Northeast business, and other contracts as
described in the Company's financial reports.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net loss ratio of 62.4% for the quarter increased 0.5 points from 61.9% in the prior year quarter. The increase
primarily stems from higher ceded premium over the prior year quarter, higher attritional losses over the prior year quarter, and $2.2 million of adverse prior year development compared to $0.5 million of favorable prior year development
in the prior year quarter, which was partly offset by lower weather losses and higher loss mitigation income in the quarter. Net current accident year weather losses of $27.5 million, down 8.0% from $29.8 million in the prior year quarter.
Current accident year catastrophe weather losses of $15.3 million increased 30.5% from $11.7 million in the prior year quarter. Current accident year other weather losses were $12.2 million, down 32.7% from $18.1 million in the
prior year quarter.

**<sup>\*\*</sup> Represents a non-GAAP financial measure. Information regarding non-GAAP financial measures, including required reconciliations, are set forth below under the *"Non-GAAP Financial Measures"* section of this release.** 

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net expense ratio of 33.7%, up 2.4 points from the prior year quarter amount of 31.3%, primarily driven by the
higher ceded premium ratio as well as higher policy acquisition costs associated with the increase in gross premiums written and higher general and administrative expenses primarily associated with IT and employee benefits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net combined ratio of 96.1%, up 2.9 points from 93.2% in the prior year quarter, primarily driven by the higher
ceded premium ratio.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Effective tax rate was (5.5%) compared to (9.7%) in the prior year quarter. The effective tax rate for the fourth
quarter of 2022 benefitted from a reduction in the valuation allowance for a deferred tax asset from $10.7 million in the third quarter of 2022 to $6.4 million in the fourth quarter. The $4.3 million valuation allowance stems from
favorable fourth quarter Osprey Re results, which allowed for recognition of deferred tax assets during the current quarter. The effective tax rate for the fourth quarter of 2021 was impacted by a substantially non-deductible non-cash goodwill impairment of $60.5 million which resulted in a negative effective tax rate in a quarter with a pre-tax loss. There were no impairments recorded during the fourth quarter of 2022. The effective tax rate can vary driven by the impact of permanent differences in relation to the pre-tax income or loss each quarter.

**Supplemental Information:** 

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| | | | |
|:---|:---|:---|:---|
|  | | ***At December 31,*** | |
| **Policies in force:** | ***2022*** | ***2021*** | ***% Change*** |
|  Florida | 182673 | 215074 | (15.1)% |
|  Other States | 347234 | 356242 | (2.5)% |
|  **Total** | **529907** | **571318** | (7.2)% |
|  **Premiums in force:** |  |  |  |
|  Florida | $599596526 | $560431244 | 7% |
|  Other States | 684469189 | 611972698 | 11.8% |
|  **Total** | $**1284065715** | $**1172103942** | 9.6% |
|  **Total Insured Value:** |  |  |  |
|  Florida | $103752777168 | $107144880580 | (3.2)% |
|  Other States | 306070446229 | 290830572887 | 5.2% |
|  **Total** | $**409823223397** | $**397975453467** | 3.0% |

---

**Book Value Analysis** 

Book value per share decreased to $5.13 at December 31, 2022, down 60.0% from fourth quarter 2021. The decrease from December 31, 2021 is attributable to a year-to-date net loss, driven primarily by a non-cash goodwill impairment charge of $90.8 million, net of taxes, made in the second quarter of 2022, and higher weather losses, driven primarily by Hurricanes Ian and Nicole, as well as an increase of $49.0 million of net unrealized losses on the Company's available-for-sale fixed income securities portfolio. The unrealized losses were due to the sharp decline in bond prices during 2022 as a result of the higher interest rate environment. The Company's fixed income portfolio average credit rating is A+ with a duration of 3.2 years at December 31, 2022. We do not anticipate a need to sell the investments in advance of maturity. As such, we do expect the unrealized losses to roll as investments mature.

---

| | | | |
|:---|:---|:---|:---|
|  | | ***As Of*** | |
| **Book Value Per Share** |<br>***Dec 31, 2022*** | ***Dec 31, 2021*** |<br>***Dec 31, 2020*** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Numerator: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stockholders' equity | 131039 | $343051 | $442344 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Denominator: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Shares Outstanding | 25539433 | 26753511 | 27748606 |
|  ***Book Value Per Common Share*** | 5.13 | $12.82 | $15.94 |
|  ***Adjusted Book Value Per Common Share\*\**** | 7.23 | $12.99 | $15.94 |

---

**<sup>\*\*</sup> Represents a non-GAAP financial measure. Information regarding non-GAAP financial measures, including required reconciliations, are set forth below under the *"Non-GAAP Financial Measures"* section of this release.** 

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***Conference Call Details:***

Friday, March 3, 2023 – 9:00 a.m. ET

Participant Dial-in Numbers Toll Free: 1-888-346-3095

Participant International Dial In: 1-412-902-4258

Canada Toll Free: 1-855-669-9657

***Webcast:***

To listen to the live webcast, please go to <u>http://investors.heritagepci.com/</u>. This webcast will be archived and accessible on the Company's website.

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**HERITAGE INSURANCE HOLDINGS, INC.** 

**Condensed Consolidated Balance Sheets** 

**(Unaudited)** 

**(Amounts in thousands)** 

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| | | |
|:---|:---|:---|
|  | ***December 31,*** | ***December 31,*** |
|  | ***2022*** | ***2021*** |
|  **ASSETS** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fixed maturities, available-for-sale, at fair value | $635572 | $669354 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity securities, at fair value, | 1514 | 1415 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other investments, net | 16484 | 23929 |
|  Total investments | 653570 | 694698 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents | 280881 | 359337 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Restricted cash | 6691 | 5415 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued investment income | 3817 | 3167 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Premiums receivable, net | 92749 | 71925 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reinsurance recoverable on paid and unpaid claims, net | 805059 | 269391 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid reinsurance premiums | 306977 | 265873 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income taxes receivable | 12118 | 11739 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred income tax asset, net | 16841 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred policy acquisition costs, net | 99617 | 93881 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Property and equipment, net | 25729 | 17426 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Right-of-use lease asset, net | 27467 | 27753 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Intangibles, net | 49575 | 55926 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Goodwill |  | 91959 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other assets | 11509 | 12272 |
|  **Total Assets** | $2392600 | $1980762 |
|  **LIABILITIES AND STOCKHOLDERS' EQUITY** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unpaid losses and loss adjustment expenses | $1131807 | $590166 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unearned premiums | 656641 | 590419 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reinsurance payable | 199803 | 191728 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Long-term debt, net | 128943 | 120757 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred income tax liability, net |  | 9426 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Advance premiums | 26516 | 24504 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued compensation | 6594 | 8014 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Lease liability | 31247 | 31172 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable and other liabilities | 80010 | 71525 |
|  **Total Liabilities** | $2261561 | $1637711 |
|  **Stockholders' Equity:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock, $0.0001 par value | 3 | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Additional paid-in capital | 334711 | 332797 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accumulated other comprehensive income, net of taxes | (53585) | (4573) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Treasury stock, at cost | (130900) | (123557) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Retained (deficit) earnings | (19190) | 138381 |
|  **Total Stockholders' Equity** | 131039 | 343051 |
|  **Total Liabilities and Stockholders' Equity** | $2392600 | $1980762 |

---

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**HERITAGE INSURANCE HOLDINGS, INC. AND SUBSIDIARIES** 

**Consolidated Statements of Income and Other Comprehensive Income (Loss)** 

**(Amounts in thousands, except per share and share amounts)** 

**(Unaudited)** 

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended December<br>31,*** | ***Three Months Ended December<br>31,*** | ***Year Ended December 31,*** | ***Year Ended December 31,*** |
|  | ***2022*** | ***2021*** | ***2022*** | ***2021*** |
|  **REVENUE:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gross premiums written | $322050 | $278820 | $1275031 | $1164879 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in gross unearned premiums | (4765) | 14876 | (66207) | (20717) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gross premiums earned | 317285 | 293696 | 1208824 | 1144162 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ceded premiums | (151114) | (133768) | (571759) | (533091) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net premiums earned | 166171 | 159928 | 637065 | 611071 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net investment income | 4927 | 1855 | 11977 | 5652 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net realized and unrealized (losses) gains | (137) | 910 | (258) | (16) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other revenue | 3627 | 4019 | 13676 | 14854 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total revenue** | 174588 | 166712 | 662460 | 631561 |
|  **EXPENSES:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Losses and loss adjustment expenses | 103753 | 98994 | 501162 | 427370 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Policy acquisition costs | 40478 | 36785 | 156304 | 145968 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; General and administrative expenses | 15449 | 13297 | 70396 | 65787 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Goodwill impairment |  | 60500 | 91959 | 60500 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total expenses** | 159680 | 209576 | 819821 | 699625 |
|  **Operating income (loss)** | $14908 | $(42864) | $(157361) | $(68064) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest expense, net | 3059 | 2017 | 8809 | 7970 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Income (loss) before taxes** | $11849 | $(44881) | $(166170) | $(76034) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(Benefit) provision for income taxes** | (652) | 4337 | (11807) | (1307) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Net income (loss)** | $12501 | $(49218) | $(154363) | $(74727) |
|  **OTHER COMPREHENSIVE INCOME (LOSS) :** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in net unrealized gains on investments | 1068 | (5345) | (64335) | (13661) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reclassification adjustment for net realized investment losses (gains) | 137 | 32 | 258 | (64) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income tax benefit related to items of other comprehensive income (loss) | (217) | 1145 | 15065 | 3095 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total comprehensive income (loss)** | $13489 | $(53386) | $(203375) | $(85357) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Weighted average shares outstanding** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basic | 25765204 | 27546664 | 26343826 | 27804355 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Diluted | 25849467 | 27546664 | 26343826 | 27804355 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Earnings (loss) per share** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basic | $0.49 | $(1.79) | $(5.86) | $(2.69) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Diluted | $0.48 | $(1.79) | $(5.86) | $(2.69) |

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***About Heritage***

Heritage Insurance Holdings, Inc. is a super-regional property and casualty insurance holding company. Through its insurance subsidiaries and a large network of experienced agents, the Company writes approximately $1.23 billion of gross personal and commercial residential premium across its multi-state footprint.

**Non-GAAP Financial Measurements** 

We measure our performance with several financial and operating metrics. We use these metrics to assess the progress of our business, make decisions on where to allocate capital, time and investments and assess the long-term performance of our company. Certain of these financial metrics are reported in accordance with U.S. GAAP and certain of these metrics are considered non-GAAP financial measures. As our business evolves, we may make changes to our key financial and operating metrics used to measure our performance in future periods. For further information and a reconciliation to the most applicable financial measures under U.S. GAAP, refer to our reconciliation below.

Non-GAAP adjusted net income is a non-GAAP financial measure and the most directly comparable GAAP financial measure is net income. Non-GAAP adjusted net income is calculated by adding back the non-recurring, non-cash charges of $90.8 million and $60.5 million, net of taxes, related to impairment of goodwill for the years ended December 31, 2022 and 2021, respectively.

Non-GAAP adjusted earnings per share (EPS) is a non-GAAP measure and is calculated by dividing the non-GAAP adjusted net income by the number of fully diluted shares at the end the of period.

Non-GAAP adjusted return on equity is a non-GAAP measure and is calculated by using non-GAAP adjusted net income as the base for the calculation.

Non-GAAP adjusted book value per share is a non-GAAP measure and is calculated by dividing total stockholders' equity excluding accumulated other comprehensive loss, net of tax, by the total common shares outstanding.

We use these non-GAAP financial measures internally as performance measures and believe that these measures reflect the financial performance of the Company's ongoing business and core operations. As a supplement to the primary GAAP presentations, Non-GAAP financial measures provide meaningful supplemental information about our operating performance. We believe that these non-GAAP financial measures facilitate comparisons with our historical results and with the results of peer companies who present similar measures (although other companies may define non-GAAP measures differently than we define them, even when similar terms are used to identify such measures). These metrics should only be considered as supplemental to net income, earnings per share and return on equity as measures of our performance. These measures should also not be used as a supplement to, or substitute for, cash flow from operating activities (computed in accordance with U.S. GAAP).

The following tables are reconciliations of adjusted net income, adjusted earnings per share and adjusted return on equity to the most directly comparable U.S. GAAP financial measures for the quarters and years ended December 31, 2022 and 2021, respectively:

**Statement of Operations Non-GAAP Reconciliation** 

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | ***Three Months Ended December 31,*** | ***Three Months Ended December 31,*** | ***Three Months Ended December 31,*** | ***Year Ended December 31,*** | ***Year Ended December 31,*** | ***Year Ended December 31,*** |  |
|  | ***2022*** | ***2021*** | ***Change*** | ***2022*** | ***2021*** | ***Change*** |  |
| **Income Statement Data** | *(in thousands except per share data)* | *(in thousands except per share data)* | *(in thousands except per share data)* | *(in thousands except per share data)* | *(in thousands except per share data)* | *(in thousands except per share data)* |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income (loss) | $12501 | $(49218) | (125.4) | $(154363) | $(74727) | 106.6 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: Goodwill impairment |  | (60500) | NM | (90774) | (60500) | 50.0 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-GAAP adjusted net income (loss) | $12501 | $11282 | 10.8 | $(63589) | $(14227) | 347.0 | % |
|  **Diluted Earnings Per Share Data** | **Diluted Earnings Per Share Data** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income (loss) | $0.48 | $(1.79) | (127.0) | $(5.86) | $(2.69) | 118.0 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: Goodwill impairment, net of tax |  | (2.20) | NM | (3.45) | (2.18) | 58.3 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-GAAP adjusted net income (loss) | $0.48 | $0.41 | 18.1 | $(2.41) | $(0.51) | 372.5 | % |
|  **Return on Equity Data** | **Return on Equity Data** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Return on Equity | 40.2% | (52.6)% | 92.8 | (65.1)% | (19.0)% | (46.1) |)pts |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: Goodwill impairment, net of tax | —% | (64.7)% | 64.7 | (38.3)% | (15.4)% | (22.9) |)pts |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-GAAP adjusted return on equity | 40.2% | 12.1% | 28.1 | (26.8)% | (3.6)% | (23.2) |)pts |

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------

**Return on Equity Non-GAAP Reconciliation** 

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | ***2022*** | ***2021*** | ***2022*** | ***2021*** |
|  | *(in thousands except per share data)* | *(in thousands except per share data)* | *(in thousands except per share data)* | *(in thousands except per share data)* |
|  **Income Statement Data** | (annualized) | (annualized) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income (loss) | $50004 | $(196874) | $(154363) | $(74727) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-GAAP adjusted net income (loss) | $50004 | $45126 | $(63589) | $(14227) |
|  Divided by Average Equity: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Shareholders' equity, at the beginning period | $117697 | $405025 | $343051 | $442344 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Shareholders' equity, at end of period | 131039 | 343051 | 131039 | 343051 |
|  Average Shareholders' Equity | $124368 | $374038 | $237045 | $392697 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Return on Equity | 40.2% | (52.6)% | (65.1)% | (19.0)% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-GAAP adjusted return on equity | 40.2% | 12.1% | (26.8)% | (3.6)% |

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**Return on Common Equity to Adjusted Book Value** 

---

| | | | |
|:---|:---|:---|:---|
|  | ***As Of*** | ***As Of*** | ***As Of*** |
|  | ***Dec 31, 2022*** | ***Dec 31, 2021*** | ***Dec 31, 2020*** |
| **Stockholders' Equity Reconciliation** | *(in thousands except per share data)* | *(in thousands except per share data)* | *(in thousands except per share data)* |
|  Common stockholders' equity | $131039 | $343051 | $442344 |
|  Add: Accumulated other comprehensive loss, net of tax | 53585 | 4573 |  |
|  Non-GAAP adjusted common stockholders' equity | $184624 | $347624 | $442344 |
|  Number of shares outstanding | 25539 | 26754 | 27749 |
|  Book value per common share | $5.13 | $12.82 | $15.94 |
|  Non-GAAP adjusted book value per common share | $7.23 | $12.99 | $15.94 |

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***Note:*** *Percentages and sums in the tables may not recalculate precisely due to rounding* 

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***Forward-Looking Statements***

Statements in this press release 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," "intend," "could," "would," "estimate," "or "continue" or the other negative variations thereof or comparable terminology are intended to identify forward-looking statements. This release includes forward-looking statements relating to the expected positive impact of our strategic initiatives on our future financial results, including focus on profitability, exposure management, rate adequacy and our ability to create value for our shareholders; ability to achieve consistent long-term quarterly earnings and drive shareholder value; continued increase in average premium per policy; expected continued changes in our portfolio to reduce exposure and generate long term returns; the expected benefits of excess and surplus insurance products; expected losses from Hurricane Ian; future dividend payments; the impact of legislation on the homeowner's insurance marketplace and litigious practices in Florida; our ability to successfully manage inflationary pressures; expectations regarding our fixed income investment portfolio; and our ability to successfully regain value in the Company and achieve our target return on equity. The risks and uncertainties that could cause our actual results to differ from those expressed or implied herein include, without limitation: the success of the Company's underwriting and profitability initiatives; the continued and potentially prolonged impact of the COVID-19 pandemic on the economy, demand for our products and our operations; inflation and other changes in economic conditions (including changes in interest rates and financial and real estate markets), including as a result of the COVID-19 pandemic; the impact of macroeconomic and geopolitical conditions, including the impact of supply chain constraints, inflationary pressures, labor availability and the conflict between Russia and Ukraine; the impact of new federal and state regulations that affect the property and casualty insurance market; the cost of reinsurance, the collectability of reinsurance and our ability to obtain reinsurance coverage on terms and at a cost acceptable to us; assessments charged by various governmental agencies; pricing competition and other initiatives by competitors; our ability to obtain regulatory approval for requested rate changes, and the timing thereof; legislative and regulatory developments; the outcome of litigation pending against us, including the terms of any settlements; risks related to the nature of our business; dependence on investment income and the composition of our investment portfolio; the adequacy of our liability for losses and loss adjustment expense; our ability to build and maintain relationships with insurance agents; claims experience; ratings by industry services; catastrophe losses; reliance on key personnel; weather conditions (including the severity and frequency of storms, hurricanes, tornadoes and hail); changes in loss trends; acts of war and terrorist activities; court decisions and trends in litigation; and other matters described from time to time by us in our filings with the Securities and Exchange Commission, including, but not limited to, the Company's Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on March 14, 2022 and subsequent filings. 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.

**Investor Contact:** 

Kirk Lusk

Chief Financial Officer<u> </u>

<u>klusk@heritagepci.com</u>

<u>investors@heritagepci.com</u>

Mike Houston and Julia Ward

Lambert

<u>HRTG@lambert.com</u>