Investor Presentation - (NYSE: HRTG) January 2020 - Heritage Insurance

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Investor Presentation - (NYSE: HRTG) January 2020 - Heritage Insurance
Investor Presentation
                (NYSE: HRTG)
                 January 2020
Investor Presentation - (NYSE: HRTG) January 2020 - Heritage Insurance
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 to identify
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 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 forward‐
looking 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 25.
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 2020 Investor Presentation                                           2
Investor Presentation - (NYSE: HRTG) January 2020 - Heritage Insurance
TABLE OF CONTENTS
                                                                       COMPANY OVERVIEW
Company snapshot……………………………………………………………………………………………………………………………………………………………………….          5
Timeline of events..……………………………………………………………………………………………………………………..……………………………………………….     6
Management team.………………………………………………………………………………………………………………………………………………………………………           7
Corporate structure..………………………………………………………………………………………………………………………………………………….……………......  8
Book of business……………………………………………………………………………………………………………………………………..……………………………………        9
In‐force metrics……………………………………………………………………………………………………………………………………………………………………………. 10
Distribution…………………………………………………………………………………………………………………………………………………………………………..........   11
Reinsurance program…………………………………………………………………………………………………………………………………………………………………… 12‐13
Investments……………………………………………………………………………………………………………………………………………………………………….……..…. 14

                                                              INVESTMENT CONSIDERATIONS
Value proposition…………………………………………………………………………………………………………………………………………………………………......... 16
Underwriting performance, capital management and underwriting leverage…………………………….………………………………………………... 17‐19
Diversification strategy…………………………....…………………………………………………………………………………………………………………………...…….. 20‐21
Book value per share growth, ROEs and valuation……………………………………………………………………………………………………………………….. 22‐24

Appendix: Reconciliation of GAAP and non‐GAAP measures………………………………………………………………………………………………….……..          25
Investor relations contact details………………..……………………………………………………………………………………………………..………………….………             26

Note 1: all market data as of the close on 1/17/2020 unless otherwise noted
Note 2: all non‐market data as of 9/30/2019 unless otherwise noted
January 2020 Investor Presentation                                            3
Investor Presentation - (NYSE: HRTG) January 2020 - Heritage Insurance
Company overview
          Heritage Insurance
Investor Presentation - (NYSE: HRTG) January 2020 - Heritage Insurance
COMPANY SNAPSHOT
What we do: Heritage Insurance Holdings, Inc. is a specialty super‐regional property and casualty insurance holding
company with over $900 million of gross personal and commercial residential premium across it’s multi‐state footprint.

                                     QUICK FACTS                                          MARKET/FINANCIAL DATA
 Active personal residential insurer in 12 coastal US                   NYSE: HRTG
  states & licensed in 4 additional states
                                                                         Market Cap/Stock Price: $384 million/$12.99
         6th  largest homeowners insurer in FL and         22nd
          nationwide (as of 12/31/2018)                                  Annual Dividend/Yield Per Share: $0.24/1.8%
 Active commercial residential insurer in FL & NJ                       Remaining share repurchase authorization: $38.1 million
       2nd largest admitted commercial residential insurer in FL        Total Equity/BVPS: $445.2 million/$15.37
        and 7th largest commercial multiple peril (CMP) insurer
        in the state (as of 12/31/2018)                                  Total Assets: $1.8 billion
 Vertically integrated structure with in‐house                          In‐Force Gross Premiums: $926.8 million
  underwriting, actuarial, customer service, claims
                                                                         Financial Strength Ratings:
  processing and adjusting functions (3rd parties used as
  needed)                                                                    Demotech: HPCIC (A), NBIC (A), ZIC (A Prime)
                                                                             Kroll: HPCIC (BBB+), NBIC (A‐), ZIC (BBB+)
 489 employees (481 full‐time)
                                                                         Investment grade issuer rating (Kroll: “BBB‐”)
 Founded in 2012, followed by IPO in 2014
 Headquartered in Clearwater, FL
January 2020 Investor Presentation                                  5
Investor Presentation - (NYSE: HRTG) January 2020 - Heritage Insurance
THE HERITAGE STORY
Founded in 2012, Heritage has quickly grown into a leading coastal US P&C insurer.

      2012                           2014                          2016                                    2018
    Company inception                HRTG IPO (NYSE):             Began writing PRES in NC & SC,         Received KBRA financial
    Started writing                   $11/share                     beginning of multi‐state expansion      strength and investment grade
     voluntary personal               Sunshine State policy        Acquired Zephyr, a wind‐only HO         issuer ratings
     residential (PRES)                assumption                    insurer in HI                          CAN expansion to non‐FL states
     business in FL                   Launched commercial          Launched GL insurance in FL            GEICO relationship expands
    Participated in first             residential (CRES)           Commenced Nat Gen partnership          Commenced Safeco (Liberty
     personal                          division and participated    AoB begins to meaningfully impact       Mutual) partnership
     residential                       in first commercial           results                                Eliminated majority of
     assumption from                   residential assumption       Final year Heritage participated in     convertible debt used to
     FL Citizens                       from FL Citizens              Citizens assumptions                    acquire NBIC

2013                                 2015                          2017                                                   2019
 Formed Contractors’ Alliance     Initiated quarterly             Began writing PRES in                   Began writing PRES in VA
  Network (CAN) in FL, Heritage’s   cash dividend                    GA and AL                               Began writing CRES in NJ
  vendor managed repair program                                     Sawgrass Mutual policy                   (first CRES expansion
 Formed Osprey, a captive                                           assumption                               outside FL)
  reinsurer.                                                        Acquired NBIC, a coastal                Expanded product
 Retroactive quota share                                            HO insurer in NY, NJ, CT,                offering in Hawaii
  reinsurance agreement with                                         RI & MA
  Citizens
January 2020 Investor Presentation                                       6
Investor Presentation - (NYSE: HRTG) January 2020 - Heritage Insurance
EXPERIENCED MANAGEMENT TEAM
                  Bruce Lucas: Chairman & CEO             Richard Widdicombe: President               Ernie Garateix: Chief Operating Officer
                   Co‐founded Heritage in 2012 and        Co‐founded Heritage in 2012 and has        Has been in his current role since
                    has been with the company since         been with the company since inception       2014, prior to which he served as
                    inception                                                                           Executive Vice President since the
                                                           Prior to Heritage, Mr. Widdicombe           company’s 2012 founding
                   Prior to Heritage, Mr. Lucas was        served as Risk Manager of Homeowners
                    CEO of Infinity Investment Funds,       Choice Property & Casualty Insurance       Prior to Heritage, Mr. Garateix
                    a value‐oriented hedge fund             Company                                     served as Vice President of
                                                                                                        Operations at American Integrity
                   Before that, Mr. Lucas was an          Before that, Mr. Widdicombe was             Insurance Group
                    attorney with Weil, Gotshal &           President of People’s Trust Insurance
                    Manges where he represented             Company and previously served as           Before that, Mr. Garateix was
                    large institutional clients such as     president of FedNat, both of which are      Associate Vice President of IT at
                    Enron and GE                            Florida‐based property insurers             FCCI Insurance Group

                   Kirk Lusk: Chief Financial Officer     Arash Soleimani: Executive Vice President   Randy Jones: President, Commercial Division
                    Has been in his current role          Has been in his current role since 2018    Has been in his current role since 2014
                     since 2018                                                                        Prior to Heritage, Mr. Jones was SVP of
                                                           Prior to Heritage, Mr. Soleimani was a
                    Joined Heritage in 2017 via the        sell‐side equity research analyst           American Strategic Insurance’s (ASI)
                     acquisition of NBIC Holdings,          covering the P&C insurance sector at        commercial division
                     Inc., where Mr. Lusk was also          Keefe, Bruyette & Woods (KBW) and          Before that, Mr. Jones served in
                     Chief Financial Officer.               Stifel Financial                            management at other insurance
                    Before that, Mr. Lusk was             Before that, Mr. Soleimani worked in        enterprises including Marsh &
                     International Chief Financial          Deloitte’s Audit & Enterprise Risk          McLennan Companies
                     Officer of Aetna, Inc., Chief          Services division                          Mr. Jones holds the American Risk
                     Financial Officer of Alea Group                                                    Manager (ARM) and Certified Property
                     Holdings Bermuda Ltd. and             Mr. Soleimani is a CFA charterholder
                                                            and a licensed CPA                          Insurance Adviser (CPIA) designations
                     Chief Financial Officer of GE
                     ERC Global Casualty and GE
                     Capital Auto Warranty Services

January 2020 Investor Presentation                                      7
Investor Presentation - (NYSE: HRTG) January 2020 - Heritage Insurance
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.
   Vertically integrated structure reduces our earnings volatility, 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.)

                                                                                            ORGANIZATIONAL STRUCTURE
  Risk bearing entity                                                                                     Heritage Insurance
  (AL, GA, FL, MS, NC, SC)                                                                                  Holdings, Inc.
                                                                                                             (NYSE: HRTG)

Heritage Property &                                                                                                                              Contractors’                             First Access
                                                                       Zephyr Acquisition                               Heritage Insurance                                                                     Skye Lane
Casualty Insurance           NBIC Holdings, Inc                                                 Heritage MGA, LLC                             Alliance Network     Osprey Re Ltd.      Insurance Group,
                                                                           Company                                         Claims, LLC                                                                       Properties, LLC
 Company (HPCIC)                                                                                                                                    (CAN)                                      LLC

                                                                                                     Provides HPCIC & ZIC with               Mitigation and        Captive reinsurer                      Subsidiary that owns
     NBIC Financial            NBIC Service          Westwind
                                                                            HI Holdings, Inc.        underwriting, personnel                 construction                                                 Heritage’s corporate
     Holdings, Inc.             Company           Underwriters, Inc.
                                                                                                     and other services                      division, serves as                                          headquarters
                                                                                                                                             a hedge in
                                Provides NBIC with                                                                                           catastrophe years
        Narragansett Bay
                                underwriting, personnel                     Zephyr Insurance
           Insurance                                                                                  Risk bearing entity (HI)
                                and other services                         Company, Inc. (ZIC)
        Company (NBIC)

   Risk bearing entity (CT, RI, MA, MD, PA, NY, NJ, VA)

January 2020 Investor Presentation                                                                                  8
Investor Presentation - (NYSE: HRTG) January 2020 - Heritage Insurance
BOOK OF BUSINESS
As of 3Q2019, we have $926.8 million of gross premiums in‐force across three statutory insurance entities (Heritage/NBIC/Zephyr) and write two 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 twelve states, but have licenses in sixteen.
                                                                               PREMIUM SPREAD                                                                         TIV SPREAD
                                                                                                    Includes: PRES in AL, CT, GA, NC,                         Other       Includes: PRES in AL, CT,
                                                                                  Other, 8.6%       RI, SC, VA, FL CGL & NJ CRES                              11.0%       GA, NC, RI, SC & NJ CRES
                                                                           HI, 5.8%                                                               MA
                                                              MA, 6.7%                                                                           8.7%                             FL PRES
                                                                                                                                                                                   23.9%
                                                                                                        FL PRES, 43.9%

                                                                                                                                           HI
                                                            NJ, 7.7%                                                                                                                                    FL CRES
                                                                                                                                         10.4%
                                                                                                                                                                                                         6.1%

                                                                                                                                            NJ
                                                                NY, 19.8%                                                                 11.7%

                                                                                                       FL CRES, 7.6%                                                                         NY
                                                                                                                                                                                            28.3%
                                     = actively writing                  PRES = personal residential • CRES = commercial residential • CGL = commercial general liability • TIV = total insured value
                                     = licensed

                                                                                                                   CT, DE, MA, MD, PA,
                                                                       AL, FL, GA,
                                                                                                                   NJ, NY, RI, VA                               HI
                                                                       MS, NC, SC

                     3 Statutory Insurance Entities:

January 2020 Investor Presentation                                                       9
IN‐FORCE METRICS
Florida property insurance accounts for 51.5% of Heritage’s consolidated gross premiums in‐force, but it only reflects 30.0% of property
insurance total insured value (TIV) – the $5.16 Florida PRES average premium per $1,000 of TIV is almost triple the $1.92 non‐Florida average
(Florida’s more expensive policies reflect its higher hurricane risk), while the $364,805 Florida PRES average insured value is well below the
$770,874 average for non‐Florida states (property values in Florida trail those in Heritage’s northeast US states).

                                                                            TIV Metrics (Property)                                                                                                 IN‐FORCE METRICS ($ in millions )
                                                                                                                                                                                                         Gross Premiums In‐Force
                                     $1,000,000                                                                                                        $12.0                             YE2015       YE2016     YE2017       YE2018      3Q2019

                                                                                            $9.85
  Average insured value per policy

                                      $900,000                                                                                                                                   PRES     $478          $516       $850         $837        $851
                                                                                                                                                       $10.0
                                      $800,000

                                                                                                                                                               Premium/$1K TIV
                                                                                                                                                                                 CRES     $113          $119        $90          $83         $70

                                                                                                                                         $770,874
                                      $700,000                                                                                                                                   CGL        $0            $1         $2            $4         $6
                                                                                                                                                       $8.0
                                      $600,000                                                                                                                                   Total    $592          $635       $942         $924        $927
                                                       $5.16

                                                                                                                        $4.88
                                      $500,000                                                                                                         $6.0
                                                                            $4.04

                                                                                                           $3.53
                                      $400,000                                                                                                                                                                 Policies In‐Force
                                                                                                                                                       $4.0
                                                                                                                                                                                        YE2015       YE2016        YE2017        YE2018   3Q2019

                                                                                                                                         $1.92
                                      $300,000                                                           $7,952,364

                                                                                                                                                                                 PRES 253,726        318,824       518,957      508,424   515,258
                                                        $364,805

                                                                            $374,860

                                                                                            $328,068

                                                                                                                        $450,486
                                      $200,000
                                                                                                                                                       $2.0
                                      $100,000                                                                                                                                   CRES    3,405         3,625         3,100        2,973     2,509
                                            $0                                                                                                         $0.0                      CGL         0           852         2,393        4,289     6,507
                                                        FL PRES

                                                                                                                                         Non‐FL PRES
                                                                            FL PRES ex‐TC

                                                                                                         CRES
                                                                                            FL PRES TC

                                                                                                                        FL PRES & CRES
                                                                                                                                                                                 Total 257,131       323,301       524,450      515,686   524,274

                                                                                                                                                                                                       Total Insured Value (Property)
                                                                                                                                                                                         YE2015       YE2016      YE2017      YE2018      3Q2019
                                                               Average insured value (left axis)          Premium/$1K TIV (right axis)                                           PRES    $72,102      $109,888 $289,974 $296,432          $309,498
                                                                                                                                                                                 CRES    $22,764       $26,367     $22,832     $23,038     $19,952
                                                  PRES = personal residential                                                                                                    Total   $94,866      $136,256 $312,806 $319,470          $329,451
                                                  CRES = commercial residential
                                                  TC = Tri‐County (FL)

January 2020 Investor Presentation                                                                                                                       10
DISTRIBUTION
                                     • Over 6,000 appointed producers across our multi‐state platform
        Overview
                                     • Relationships with multiple auto carriers, whereby the policyholder receives a bundled
                                       product discount.

                                     • Over 2,300 actively writing independent agents
                                     • 35% of voluntary premium is written by agents affiliated with eight large agency networks that
        HPCIC                          have master agency agreements with HPCIC
                                     • CRES policies are written through roughly 400 independent agents in FL
                                     • Relationships with multiple auto carriers

                                     • Roughly 175 retail independent agents representing approximately 500 agency locations
        NBIC
                                     • 8 wholesale relationships that have access to 1,500 retail locations

                                     • Relationships with 70 actively writing independent agencies
        Zephyr
                                     • 52% of voluntary premium is written by agents affiliated with three large agency networks

January 2020 Investor Presentation                                        11
CATASTROPHE REINSURANCE PROGRAM
            Heritage has a conservative 2019‐2020 catastrophe reinsurance program, protecting the
            Company against hurricanes and severe weather events and reducing earnings volatility.

             Substantial severity and frequency protection.
             Significantly increased return period to the highest level in the Company’s history.
             $1.5 billion first event reinsurance exhaustion point in the southeast.
             Heritage's first event retentions in the southeast and Hawaii remain at $20 million, accounting for
              4.6% of second quarter 2019 GAAP equity (pre‐tax), down from 5.2% in the prior year. First event
              retention increases slightly in the northeast to $13.8 million from $12.8 million in the prior year,
              but accounts for just 3.1% of second quarter 2019 GAAP equity (pre‐tax), down 20 basis points
              year‐over‐year.
             Reduced catastrophe reinsurance spend by $10 million vs. prior year. Total cost to Heritage of
              $249.2 million (27.0% of second quarter 2019 premiums‐in‐force), down from $259.5 million
              (27.9% of second quarter 2018 premiums‐in‐force) last year.
             Heritage’s third‐party reinsurers are rated “A‐” or higher by A.M. Best or S&P or are fully
              collateralized.
            Note 1: 2019‐2020 catastrophe reinsurance program commentary based on 8/31/2019 projections (AIR v6, hurricane only, long term view with demand surge).

January 2020 Investor Presentation                                                             12
CONSERVATIVE REINSURANCE RETENTION
                                             AFTER‐TAX FIRST EVENT FLORIDA RETENTION AS % OF 3Q2019 GAAP EQUITY
9%
                                                                                                                                                             8.2%
8%

                                                   6.9%                                                                                               6.9%
7%
                                                                                                                     6.5%
                                                                                    5.9%
6%

5%

4%
                  3.4%
3%

2%

1%

0%
                  HRTG                       FL peer median                          UVE                              HCI                             FNHC   UIHC
  Note 1: Based on 2019‐2020 catastrophe reinsurance programs.
  Note 2: Assumes a modeled 1‐in‐50‐year first event for HPCIC based on 8/31/2019 projections (AIR v6, hurricane only, long term view with demand surge).
  Note 3: Excludes reinsurance reinstatement premiums and income from vertically integrated operations.
  Note 4: UVE retention includes both UPCIC & APPCIC and FNHC retention includes both FNIC and MNIC, but excludes PIH.
  Note 5: Calculation based on 21.0% and 5.5% US federal and Florida statutory corporate income tax rates, respectively.
  Source: Peer company reports.

January 2020 Investor Presentation                                                                  13
INVESTMENT PORTFOLIO
Heritage has a very conservative investment portfolio, consisting predominantly of low duration, fixed income
securities. As of 3Q2019, duration was 3.5 years, 0.2 years above 2Q2019 and 0.1 years below 3Q2018.

              INVESTMENT PORTFOLIO BREAKDOWN (3Q2019)                                                                          NET INVESTMENT INCOME PERFORMANCE
                                                   US government,                                             $700                                                                                           3.0%
                                     Other, 4.5%
                                                        9.8%
                                                                                                                                                                                                   2.5%

                                                                                                                                                                                                                    Net investment income yield
                                                                                                              $600                                                                    2.4%

                                                                                Investments ($ in millions)
                                                                                                                                                                                                             2.5%
                                                                 Munis, 12.6%
 Industrial & misc.                                                                                           $500
                                                                                                                                                 2.0%
                                                                                                                                                                        1.9%
   bonds, 31.4%                                                                                                                                            1.8%                                              2.0%
                                                                                                                                   1.6%
                                                                                                              $400
                                                                                                                     1.4%
                                                                                                                                                                                                             1.5%
                                                                                                              $300

                                                                                                                                                                                                             1.0%
                                                                                                              $200

                                                                                                                                                                                                             0.5%
                                                                                                              $100

                                                                                                                                    $331.2

                                                                                                                                                  $400.1

                                                                                                                                                            $603.0

                                                                                                                                                                         $567.0

                                                                                                                                                                                       $528.6

                                                                                                                                                                                                    $645.1
                                                                                                                      $136.2
                                                                                                                $0                                                                                           0.0%
                                                      Special revenue                                                2013          2014          2015      2016         2017          2018      3Q2019 YTD
                                                       bonds, 41.8%
                                                                                                                               Investments (left axis)       Net investment income yield (right axis)

January 2020 Investor Presentation                                                                        14
Investment considerations
                  Heritage Insurance
VALUE PROPOSITION
   Compelling              • Currently trading at significant discount to peers, despite attractive relative ROE and income metrics
   financial metrics       • Consistent track record of double‐digit book value growth
                           • Vertically integrated structure provides a hedge in catastrophe years, reducing loss retention and
   Business model designed   further reducing earnings volatility, supporting use of P/E‐based valuation for HRTG
   to reduce earnings
   volatility              • Solid reinsurance program, including lowest reinsurance retention in FL peer group as a % of equity;
                             protects against hurricanes and other severe events, reducing earnings volatility
                           • Organic premium growth, fueled by relationships with independent agents and auto carriers
   Growth &                • Diversification initiatives and re‐underwriting efforts in Florida’s Tri‐County – including rate
   underwriting              increases, policy form enhancements and conservative policy selection – should benefit
   outlooks                  underwriting margins
   improving               • 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
   Prudent capital
   management                        • 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
   Management has                    • Significant insider ownership aligns management’s interest with shareholders
   significant skin in the                • CEO owns 2.7% of outstanding shares
   game                                   • President owns 2.3% of outstanding shares
                                          • Total insider ownership = 12.6% of outstanding shares
January 2020 Investor Presentation                                        16
UNDERWRITING PERFORMANCE
Heritage has experienced significant premium growth since inception, stemming primarily from Citizens
depopulation transactions through 2015 and from M&A and organic growth in subsequent years.
    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 in 2018 stemmed from Tri‐County FL exposure reduction efforts in response to litigation abuse and FL CRES de‐risking.
                                                         IN‐FORCE PREMIUM
                  $1,000                                                                                   $942.4   $923.7   $926.8
                    $900                                                                                    55.4     53.5     53.4

                    $800
                                                                                                           331.5
                    $700                                                                                            337.2    351.0
                                                                                         $635.3
                                                                       $591.5
                    $600                                                                  58.1
                                                                       113.5             118.6
                    $500                              $461.3                                                90.1
                                                                                                                     82.7     70.4

                    $400                               94.1

                    $300
                                         $200.1
                    $200                   0.0

                    $100        $51.6
                                         200.1         367.2           478.1             458.6             465.4    450.2    451.9
                      $0
                                2012     2013          2014            2015              2016              2017     2018     3Q19
                                                       HPCIC ex CRES      FL CRES        NBIC     Zephyr

January 2020 Investor Presentation                                                  17
UNDERWRITING PERFORMANCE (CONTINUED)
Heritage’s underwriting operation has outperformed peers almost every year since inception.
                                                                                 SOLID UNDERWRITING MARGINS
                 120%                                                                                                                                                  107.0%          115%
                                                                                                                            104.7%

                                                                                                                                                     94.8%
                 100%                                                                                                                                                   99.2%          95%
                                87.8%                                                                                        94.1%
                                                                                                   92.8%                                             90.4%
                                                                                 79.9%
                                                         77.1%                                        84.6%
                  80%           72.9%                                                                                                                                  39.8%           75%
                                                         71.4%                                     34.8%                     41.0%                   38.1%
                                                                                 65.0%

                  60%                                                                                                                                                                  55%
                                32.4%                    31.3%
                                                                                 27.5%

                  40%                                                                                                                                                                  35%
                                                                                                   58.0%                                                               59.4%
                                                                                                                             53.1%                   52.3%
                  20%           40.5%                    40.1%                   37.5%                                                                                                 15%

                    0%                                                                                                                                                                 ‐5%
                                2013                     2014                    2015              2016                      2017                    2018          3Q2019 YTD
                                                                                          Tornadoes, Hurricanes          Hurricane Irma &    Hurricanes Lane,     Southeast hail and
                                                                                          Hermine & Matthew, AOB         AoB                 Florence &           wind storms
                                     Citizens takeouts benefit HRTG’s margins                                                                Michael, AoB

                                                                 Loss ratio (left axis)    Expense ratio (left axis)            Peer median (right axis)
                                                                                                              Note 1: Peers include FNHC, HCI, KINS, UIHC & UVE
                                                                                                              Source: FactSet and peer company reports

January 2020 Investor Presentation                                                               18
CAPITAL MANAGEMENT & OPERATING LEVERAGE
Heritage has been a responsible steward of shareholder capital and currently has $38.1 million remaining on its
share repurchase authorization. Since 2016, the Company has returned $80 million to shareholders through
common share repurchases and dividends.
Heritage’s ratio of trailing‐twelve‐month (TTM) net premiums written to 3Q2019 equity is only 1.0x , among the
lowest in its 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
                     $60                                                                               40%                                          1.8

                                                                                                              Net operating leverage (NPW/Equity)
                                                          35%                                                                                                                                                               1.6
                                                                                            34%        35%                                          1.6                                                               1.5
                     $50                                                                                                                                                              1.4       1.5        1.5
                                                                                                       30%                                          1.4
     $ in millions

                                                                      27%
                     $40                                                                                                                                                   1.2
                                 $32.6                            24%                                  25%                                          1.2
                                                                                                23%                                                                 1.0
                     $30       21%                        $28.1                                        20%                                          1.0
                               18%                        16%
                                                                                           $17.2       15%                                          0.8
                     $20          25.6
                                                           21.6                                                                                           0.6
                                                                                                       10%                                          0.6
                                                                    $8.4                    11.9
                     $10
                                                                     2.0                               5%                                           0.4
                                   7.0                      6.5      6.4                    5.4
                      $0                                                                               0%                                           0.2
                                 2016                      2017     2018                3Q2019 YTD
                                                                                                                                                    0.0
                           Dividends                              Share repurchases
                                                                                                                                                          PLMR     HRTG    HCI      FNHC       Peer        UVE       UIHC   KINS
                           Debt‐to‐capital ratio (right axis)     Dividend payout ratio (right axis)                                                                                          median
       Note: Debt‐to‐capital calculated as debt principal divided by the sum of debt principal and                                       Note 1: Based on trailing‐twelve‐month (TTM) net premiums written as of 3Q2019
       stockholders’ equity                                                                                                              Source: Peer company reports.

January 2020 Investor Presentation                                                                           19
DIVERSIFICATION STRATEGY UNDERWAY
                                                    % OF CONSOLIDATED PROPERTY TOTAL INSURED VALUE (TIV) IN FLORIDA

              100.0%                 100.0%               100.0%                 100.0%                                          Through a combination of M&A and organic growth,
100%                                                                                                                             Heritage has been diversifying its book of business to
                                                                                                                                 new states, resulting in a better spread of risk and
90%                                                                                                                              lower reinsurance costs. Diversification has been
                                                                                                                                 occurring within the FL book too, as Heritage has
                                                           34.0%                                                                 steadily been reducing its personal residential (PRES)
80%
                                                                                                                                 & commercial residential (CRES) exposure to Tri‐
                                                                                                            70.6%                County, FL (TC). PRES exposure reduction in TC is
70%            58.9%                                                                 57.1%
                                                                                                                                 intended to limit exposure to litigation abuse, while
                                     67.6%                                                                                       CRES reduction in TC is intended to reduce
60%                                                                                                                              concentration risk in the event of a storm.

                                                           25.7%
50%                                                                                                         41.3%

40%
                                                                                     15.4%                                        32.1%                  31.6%               30.0%
30%
                                                                                                            11.5%
20%            41.1%                                       40.3%                                                                      21.7%              23.3%                23.2%
                                     32.4%
                                                                                     27.5%
10%                                                                                                         17.8%                     3.8%               2.9%                 2.2%
                                                                                                                                      6.6%               5.5%                 4.6%
  0%
               4Q12                  4Q13                  4Q14                      4Q15                    4Q16                     4Q17               4Q18                 3Q19
                                              Personal Residential: Tri‐County, FL           Commercial Residential: Tri‐County, FL           Other FL
January 2020 Investor Presentation                                                              20
FAVORABLE CLAIMS TRENDS
Heritage’s Tri‐County, FL (TC) exposure reduction efforts are bearing fruit, as the region’s contribution to open
non‐hurricane claim counts continues to decline for both litigated and non‐litigated claims. This is benefiting
overall claims trends – beginning with 1Q18, litigated claims have generally been accounting for a smaller
percentage of Heritage’s non‐hurricane open claims inventory.
                       Tri‐County, FL (TC) claims are typically more expensive                                                                                      A decline in litigated claims should benefit
                       given the prevalence of assignment of benefits and                                                                                           underwriting margins, given that litigated claims are
                       litigation abuse in the region                                                                                                               typically more expensive to resolve

                       TRI‐COUNTY FL NON‐HURRICANE CLAIMS TRENDS                                                                                        LITIGATED NON‐HURRICANE CLAIMS AS % OF TOTAL CLAIMS
                                                                                                                                                                                                                                                                     31% consists of 55% in
        84%

                               82%
                82%

                                      82%

  90%
                        81%

                                                    80%

                                                                                                                                               60%
                                                                         79%
                                                           79%

                                                                  79%
                                             79%

                                                                                79%

                                                                                       78%
                                                                                                                                                                                                                                                                     TC and 19% elsewhere,

                                                                                              77%
                                                                                                                                                                                                                                  54%

                                                                                                     73%
  80%                                                                                                                                                                                                        52%           52%
                                                                                                                                                                                                      49%           49%                                              illustrating rationale

                                                                                                            67%

                                                                                                                   66%
                                                                                                                                               50%                               46% 45% 45%                                                                         behind TC de‐risking

                                                                                                                          63%
  70%                                                                                                                                                                                                                                    44%

                                                                                                                                 61%
                               58%

                                                                                                                                        59%
                                                           56%

                                                                                                                                                                          41%
                                                                  55%

                                                                         55%
                                      55%

                                                                                55%
                                                    54%

                                                                                                                                                                                                                                                39%
                                             52%

                                                                                       51%
        51%

  60%                                                                                                                                                       38% 37%
                                                                                              49%
                                                                                                                                               40%   35%
                47%

                        46%

                                                                                                                                                                                                                                                                      34%

                                                                                                     44%
                                                                                                                                                                                                                                                       33%
                                                                                                                                                                                                                                                                             31% 31%

                                                                                                            41%
  50%                                                                                                                                                                                                                                                         31%

                                                                                                                   39%

                                                                                                                          38%
                                                                                                                                               30%
  40%

                                                                                                                                 27%

                                                                                                                                        21%
  30%                                                                                                                                          20%

  20%
                                                                                                                                               10%
  10%

   0%                                                                                                                                          0%

                                                                                                                                                     1Q15

                                                                                                                                                            2Q15

                                                                                                                                                                   3Q15

                                                                                                                                                                          4Q15

                                                                                                                                                                                 1Q16

                                                                                                                                                                                        2Q16

                                                                                                                                                                                               3Q16

                                                                                                                                                                                                      4Q16

                                                                                                                                                                                                             1Q17

                                                                                                                                                                                                                    2Q17

                                                                                                                                                                                                                           3Q17

                                                                                                                                                                                                                                  4Q17

                                                                                                                                                                                                                                         1Q18

                                                                                                                                                                                                                                                2Q18

                                                                                                                                                                                                                                                       3Q18

                                                                                                                                                                                                                                                              4Q18

                                                                                                                                                                                                                                                                      1Q19

                                                                                                                                                                                                                                                                             2Q19

                                                                                                                                                                                                                                                                                    3Q19
        1Q15

                2Q15

                        3Q15

                               4Q15

                                      1Q16

                                             2Q16

                                                    3Q16

                                                           4Q16

                                                                  1Q17

                                                                         2Q17

                                                                                3Q17

                                                                                       4Q17

                                                                                              1Q18

                                                                                                     2Q18

                                                                                                            3Q18

                                                                                                                   4Q18

                                                                                                                          1Q19

                                                                                                                                 2Q19

                                                                                                                                        3Q19

               Tri‐County, FL open litigated claims as % of total open litigated claims (non‐hurricane)
               Tri‐County, FL open non‐litigated claims as % of total open non‐litigated claims (non‐hurricane)

   Note: Excludes NBIC.
January 2020 Investor Presentation                                                                                                              21
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 26% since the Company’s 2012 inception.
                                              SOLID GROWTH IN BOOK VALUE AND CUMULATIVE DIVIDENDS PER SHARE
            $18
                                                                                                                                     $16.32
            $16                                                                                               $15.20      $15.20      $0.95
                                                                                                               $0.53      $0.77
            $14
                                                                                            $12.70
                                                                        $11.76               $0.29
            $12
                                                                         $0.05

            $10
                                                        $8.56
              $8                     $7.20

              $6

              $4         $3.38

              $2
                                                                           $11.71

                                                                                               $12.41

                                                                                                                 $14.67

                                                                                                                            $14.43

                                                                                                                                       $15.37
                           $3.38

                                      $7.20

                                                         $8.56

              $0
                         2012        2013               2014             2015                2016              2017       2018       3Q2019
                                                        Book Value Per Share        Cumulative Dividends Per Share

January 2020 Investor Presentation                                                  22
ABOVE‐PEER ROE, BUT BELOW‐PEER VALUATION
    SOLID ROE PERFORMANCE, EVEN IN HURRICANE YEARS                                                                              TRADING AT A MEANINGFUL DISCOUNT TO PEERS
                                           RETURN ON EQUITY (ROE)                                                                                              PRICE/BOOK VALUE
          Citizens depopulation transactions benefit ROEs                    Active northeast
                                                                             US weather &
                                                                                                                                                                                                         2.0x
       35%                                                                   Hurricanes Lane,                         2.0x
                                  30.3%                                      Florence & Michael
       30%        28.1%                                                                                                                                                                      1.5x
                                           Severe 1Q16 FL tornadoes,
                                           Hurricanes Hermine & Matthew                                               1.5x                  1.3x
       25%
                                                                                              Southeast hail
       20%                                                                                                                                                                       1.0x
                                                               Hurricane Irma                 and wind                          0.8x                    0.9x        0.9x
                                                                                                                      1.0x
       15%                                                         11.1%                      storms,
                                                   9.5%                                       Hurricane Dorian
       10%                                                                             6.7%
                                                                                                      4.8%            0.5x
        5%
                                                                                                                                                                                                                     5.5x
        0%                                                                                                            0.0x
                  2014             2015            2016            2017*               2018       3Q2019 YTD                   HRTG     Peer median     FNHC        UIHC        KINS         UVE         HCI         PLMR
                                                             Assignment of benefits (AoB) abuse
                                                                                                                                                                PRICE/2020E EPS
                     2016‐2018 AVERAGE RETURN ON EQUITY VS. PEERS                                                             HRTG’s P/E multiple is
                                                                                                                      16x
      16%                                                                         HRTG’s average ROTE over                    at a 29% discount to                                                                   23.6x
                                                               14.4%                                                  14x
                    HRTG’s average ROE from 2016‐3Q19                             the last 3 years has                        peers                                                                     12.6x
      14%                                                                                                                                  11.6x                                11.5x       11.7x
                    YTD has outperformed by 110 bps.                              outperformed by 730 bps.            12x
      12%
                                                                                                                      10x
      10%                                                                                     HRTG*                            8.2x                                 7.8x
                          8.1%                                                                                                                          7.4x
                                   7.0%                                    7.1%                                        8x
        8%                                                                                    Peer Median
        6%                                                                                                             6x

        4%                                                                                                             4x

        2%                                                                                                             2x

        0%                                                                                                             0x
                    Average Return on Equity           Average Return on Tangible Equity                                      HRTG      Peer median    FNHC         UVE         UIHC         KINS        HCI         PLMR
 *HRTG’s 2017 return on equity (ROE) and return on tangible equity (ROTE) metrics 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.
 Note: ROE represents net income for the period (annualized for 3Q2019 YTD) divided by average stockholders’ equity during the period. The ROTE calculation excludes goodwill and other intangible assets from equity.
 Source: FactSet and peer company reports
January 2020 Investor Presentation                                                                               23
HIGHLY ATTRACTIVE VALUATION RELATIVE TO PEERS
                                                                   P/E          P/BV                                        Return on Equity                             Return on Tangible Equity
            Ticker Company                                        2020E Current 2019E            2020E 2016              2017*  2018 3Q19 YTD 2020E                   2016    2017*   2018 3Q19 YTD
            HRTG Heritage Insurance Holdings, Inc.                 8.2   0.85   0.84             0.76   9.5%            11.1%   6.7%       4.8%  9.7%                10.7% 20.0% 16.9%         10.1%
            FNHC FedNat Holding Company                            7.4   0.88   0.87             0.80   0.5%             3.7%   7.0%       4.7% 11.3%                 0.5%    3.7%    7.0%      4.7%
            HCI    HCI Group, Inc.                                12.6   1.97   2.04             1.95  12.1%            -3.1%   9.4%     14.7% 15.8%                 12.2% -3.2%      9.7%     15.1%
            UIHC United Insurance Holdings Corp.                  11.5   0.90   0.89             0.85   2.4%             2.6%   0.1%      -5.6%  7.6%                 2.5%    3.2%    0.1%     -7.0%
            UVE Universal Insurance Holdings, Inc.                 7.8   1.52   1.52             1.58  29.9%            26.4% 24.9%      24.3% 19.8%                 30.0% 26.5% 25.0%         24.4%
            KINS Kingstone Companies, Inc.                        11.7   1.02   1.02             0.98  17.5%            13.2%   3.4%    -11.3%   8.5%                18.0% 13.4%      3.4%    -11.4%
            PLMR Palomar Holdings, Inc.                           23.6   5.47   5.09             4.11   9.0%             5.0% 20.9%       -0.2% 19.2%                 9.1%    5.0% 21.0%       -0.2%
            Note: Year‐to‐date (YTD) return on equity (ROE) and
            return on tangible equity (ROTE) metrics are annualized.
            Source: FactSet and peer company reports

                                           NET INCOME ($ in millions)                              Impact of net                                         MARKET CAP ($ in millions)
                                                                                                   unrealized equity                     $500                                        $466
 $100                           $92.5               Impact of net unrealized equity losses on 2018 gains on YTD 3Q2019                   $450
                                                    net income (NI) assuming a 25% tax rate:       NI assuming a 25%
                                                                                                                                         $400             $384
  $80                                               UIHC: $(9.3) million PT, $(7.0) million AT     tax rate:                                                                                  Despite consistently
                                                    HRTG: $(2.1) million PT; $(1.6) million AT     UIHC: $15.5 million                   $350                                                 generating more net
  $60                                                                                              PT, $11.6 million AT
            $47.1                                                                                                                        $300                                                 income, HRTG* has a
                    $41.0                                               $41.1                      HRTG: $3.4 million                                                                         lower market
  $40                                                $33.9                                                                               $250
                                        $27.4                                               $27.2  PT; $2.6 million AT                                                                        capitalization than UIHC.
                                                                                                                $15.8                    $200
  $20                                                                           $10.1
                                                           $5.7                                                                          $150
                                                                                                   $0.3
   $0
                                                                                                                                         $100

 ‐$20                                                                                                                                     $50
                                                                                                                        ‐$21.7             $0
 ‐$40                                                                                                                                                     HRTG                       UIHC
               2014                2015                 2016                  2017*            2018             3Q2019 YTD
 Note: PT = pre‐tax; AT = after‐tax                                                                                                       Source: FactSet and peer company reports
                                                               HRTG*   UIHC
 Source: FactSet and peer company reports
*HRTG’s 2017 net income and ROE are non‐GAAP and adjusted to exclude a $42.2 million non‐cash, non‐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. Please see slide 24 for a reconciliation of HRTG’s non‐GAAP measures to their comparable GAAP measures.
January 2020 Investor Presentation                                                                            24
APPENDIX: NON‐GAAP RECONCILIATIONS
                                     RECONCILIATION OF GAAP AND NON‐GAAP MEASURES
                                     $ in millions
                                                                                               2017
                                     GAAP Net income (loss)                                $   (1.1)
                                     Conversion option liability fair value                    42.2
                                     Non‐recurring business acquisition related expenses         ‐
                                     Tax impact                                                  ‐
                                     Adjusted net income                                   $   41.1

                                                                                                2017
                                     GAAP ROE                                                  ‐0.3%
                                     Conversion option liability fair value                    11.4%
                                     Non‐recurring business acquisition related expenses        0.0%
                                     Tax impact                                                 0.0%
                                     Adjusted ROE (non‐GAAP)                                   11.1%

January 2020 Investor Presentation                                     25
ADDITIONAL INFORMATION
Arash Soleimani, CFA, CPA
Executive Vice President
asoleimani@heritagepci.com
727.871.0206

Website: investors.heritagepci.com
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