Heritage Insurance Holdings, Inc. (NYSE:HRTG) (“Heritage” or the “Company”), a super-regional property and casualty insurance holding company, today reported second quarter of 2025 financial results.
Second Quarter 2025 Result Highlights
— Net income of $48.0 million or $1.55 per diluted share, improved from net income of $18.9 million or $0.61 per diluted share in the prior year quarter.
— Gross premiums earned of $353.6 million, up 1.0% from $350.1 million in the prior year quarter.
— Net premiums earned of $196.3 million, up 3.2% from $190.3 million in the prior year quarter.
— Net loss ratio of 38.5%, an improvement of 17.2 points from 55.7% in the prior year quarter.
— Net expense ratio of 34.4%, an improvement of 2.4 points from 36.8% in the prior year quarter.
— Net combined ratio of 72.9%, an improvement of 19.6 points from 92.5% in the prior year quarter.
— Return on average equity of 53.9% up from 30.8% in the prior year quarter.
“Our second quarter results have further demonstrated the successful execution of our strategic initiatives and the corresponding increase in the Company's earnings trajectory which started at the end of 2023. Over the last several years we have focused on disciplined underwriting, driving rate adequacy, and refining customer service. Taken together, these actions have created significant earnings power within our Company,” remarked Ernie Garateix, Heritage's CEO. “We have also continued to provide our insureds with quality customer service and an efficient and thorough claims handling experience to ensure they receive the support and service that they expect especially in times of crisis.”
Mr. Garateix continued, “As I noted last quarter, we are now positioned to return the Company to growth given favorable market conditions combined with a majority of our markets having achieved rate adequacy. As a result, nearly all of our capacity is now open, compared to only about 30% of our capacity being open last year at this time. This can be seen in our new business premium written for the second quarter, which was 46.3% higher than new business written for the year ago second quarter when we only had 30% of our territories open. Our new business growth this quarter was accomplished while continuing to maintain our disciplined underwriting process which resulted in a lower net loss ratio.”
Strategic Profitability Initiatives
The Company has focused on three main strategic initiatives over the past few years aimed at achieving consistent, long-term quarterly earnings and driving shareholder value, which include:
— Generating underwriting profit through rate adequacy and more selective underwriting.
— Allocating capital to products and geographies that maximize long-term returns.
— Maintaining a balanced and diversified portfolio.
These three initiatives will remain in place while we also expand our strategy to include our 2025 initiatives.
Strategic Initiatives for 2025
— Re-opening profitable geographies and allocating capital to sustain profits and margins on a measured basis.
— Persistent underwriting discipline and focus on rate adequacy.
— Continued data driven analytics.
— Enhancing customer service and claims capabilities.
— Leveraging infrastructure and capabilities to foster future growth.
2025 Update
— As of the beginning of the 3rd quarter, nearly all capacity is now open for new business.
— No change to existing robust underwriting standards.
— Received 14 rate approvals, 9 rate filings are pending approval.
— Adjusted inflation guard to 5% which reflects current trend.
— Expect more rate to earn through the portfolio in 2025 than in any prior year.
Capital Management
Heritage's Board of Directors has decided to continue its suspension of the quarterly shareholder dividend to prioritize strategic growth. The Board of Directors will continue to evaluate dividend distribution and stock repurchases on a quarterly basis. No shares of common stock were repurchased during the quarter.
Results of Operations
The following table summarizes results of operations for the three and six months ended June 30, 2025, and 2024 (amounts in thousands, except percentages and per share amounts):
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 combined ratio under 100% generally reflects profitable underwriting results.
Second Quarter 2025 Results:
Second quarter 2025 net income was $48.0 million or $1.55 per diluted share, compared to net income of $18.9 million or $0.61 per diluted share in the prior year quarter, primarily driven by a reduction in losses and loss adjustment expenses and a reduction in other operating expenses, with an increase in net premiums earned. The improvement in net income is attributable to the positive impact of rate actions, underwriting actions, and targeted exposure management taken over the last several years, which continue to favorably impact results. These and other actions resulted in growth of 3.2% in net premiums earned while investment income was down due to a lower interest rate environment. Losses and LAE decreased by 28.6% while policy acquisition costs decreased 8.6%, driven by an increase in ceding commission on the net quota share reinsurance contract. General and administrative costs increased 7.1% driven primarily by human capital costs, with the net general and administrative expense ratio one-half point higher than the prior year quarter.
Premiums-in-force were $1.43 billion, an increase of 0.5% compared to $1.42 billion as of the second quarter 2024.
Gross premiums written of $411.0 million were down 3.2% from $424.5 million in the prior year quarter, reflecting exposure management trends over the last several years for personal lines business, for which the trend is anticipated to reverse by the end of 2025 based on new business written trends and expectations. Additionally, in-force premium for our commercial residential business was down 8.2%, driven mostly by competitive market conditions.
Gross premiums earned were $353.6 million, up 1.0% from $350.1 million in the prior year quarter, reflecting higher gross premiums written over the last twelve months primarily from rating actions.
Net premiums earned were $196.3 million, up 3.2% from $190.3 million in the prior year quarter, reflecting higher gross premium earned, as well as a reduction in ceded premiums from the prior year quarter. The reduction in ceded premiums is driven primarily by a $10.0 million reinstatement premium for Hurricane Ian which increased the reinsurance cost for the prior year quarter, which was partly offset by higher ceded premiums in 2025 on our net quota share reinsurance program. Ceded premiums on the net quota share reinsurance program were higher than the prior year quarter driven by a higher ceding rate than the prior year as well as higher premium subject to that contract than the prior year quarter.
Ceded premium ratio was 44.5%, down 1.1 points from 45.6% in the prior year quarter driven by growth in gross premiums earned and less ceded premium as described above.
Net loss ratio decreased to 38.5%, a 17.2 point improvement from 55.7% in the same quarter last year, reflecting significantly lower net losses and LAE coupled with higher net premiums earned. Net weather losses for the current year quarter were $12.5 million, a decrease of $7.2 million from $19.7 million in the prior year quarter. There were no catastrophe losses in the current or prior year quarters. The reduction in weather losses was coupled with a reduction in attritional losses and favorable reserve development compared to the prior year quarter. Favorable net loss development was $2.3 million in the current year quarter compared to adverse development of $8.7 million in the prior year quarter.
The net expense ratio was 34.4%, a 2.4 point improvement from the prior year quarter amount of 36.8%, driven primarily by growth in net premiums earned and lower policy acquisition costs (“PAC”) compared to the prior year quarter. The reduction in PAC was driven primarily by higher ceding commission income associated with both a larger amount of premium ceded under the net quota share program and a higher ceding commission rate driven by favorable loss experience for that program. This offset a one-half point increase in the net general and administrative expense ratio.
Net combined ratio of 72.9% improved by 19.6 points from 92.5% in the prior year quarter, driven primarily by a lower net loss ratio as well as a lower net expense ratio as described above.
Net investment income was $9.0 million, a $0.8 million decrease from $9.8 million in the prior year quarter, primarily driven by a lower interest rate environment for our sweep accounts and money market funds. We continue to manage our investment portfolio, while maintaining a conservative portfolio with high quality investments and duration liability matched.
The effective tax rate was 23.8% compared to 24.1% in the prior year quarter. We calculate the provision for income taxes during interim reporting periods by applying an estimate of the effective tax rate for the full year. The effective tax rate is lower than the prior year quarter due to higher projected pre-tax income for the year 2025 compared to the projected pre-tax income for the year 2024. This had a dilutive effect on the rate impacts of permanent tax differences compared to the prior year quarter income tax provision. The effective tax rate can fluctuate throughout the year as estimates used in each quarterly tax provision are updated with additional information.
Supplemental Information:
Book Value Analysis:
Book value per share of $12.36 at June 30, 2025, was up 30.1% from December 31, 2024 and up 48.6% from June 30, 2024. The increase from December 31, 2024 is primarily attributable to net income for the year to date as well as a $11.1 million net-of-tax benefit associated with a $14.6 million reduction in unrealized losses on the Company's fixed income securities portfolio. The unrealized losses are unrelated to credit risk but are instead attributable to changing interest rates, with the reduction in unrealized losses driven by lower interest rates during the year 2025. Heritage does not anticipate a need to sell investments in advance of maturity. As such, the Company expects unrealized losses to roll off the portfolio as investments mature. The average duration of the fixed income portfolio is3.04 years as the Company has extended duration from the prior year quarter to take advantage of higher yields further out on the yield curve, while still maintaining a short duration high credit quality portfolio.
Conference Call Details: Wednesday, August 6, 2025 at 9:00 am 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 http://investors.heritagepci.com. This webcast will be archived and accessible on the Company's website.
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 $1.4 billion of gross personal and commercial residential premium across its multi-state footprint covering the northeast, southeast, Hawaii and California excess and surplus lines.
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 including statements relating to our strategy to continue allocating capital to profitable geographies and products, applying our underwriting and pricing discipline, pursuing controlled growth and maintaining a balanced and diversified portfolio, and the results of our strategy; our initiatives and strategies relating to re-opening profitable geographies; our expectations that more rates will earn through the portfolio in 2025 than any prior year; our expectation that our personal lines policies in-force will slowly increase throughout the second half of 2025; our plans to allocate capital to sustain profits and margin; our focus on persistent underwriting discipline and on rate adequacy and continued data driven analytics to drive exposure management; our other strategic priorities for 2025; potential room for growth and expansion in certain geographies; and our expectations regarding profit and growth in 2025and beyond . 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; inflation and other changes in economic conditions (including changes in interest rates and financial and real estate markets), including changes that may impact demand for our products and our operations; lack of effectiveness of exclusions and loss limitation methods in the insurance policies we assume or write; inherent uncertainty of our models and our reliance on such models as a tool to evaluate risk; the impact of macroeconomic and geopolitical conditions, including the impact of supply chain constraints, inflationary pressures, tariffs, labor availability and geopolitical conflicts; the impact of new federal and state regulations that affect the property and casualty insurance market and our failure to meet increased regulatory requirements, including minimum capital and surplus requirements; continued and increased impact of abusive and unwarranted claims; 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, wildfires 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, 2024 filed with the Securities and Exchange Commission on March 13, 2025, 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 LuskChief Financial Officerklusk@heritagepci.cominvestors@heritagepci.comjlillis@soleburystrat.com
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SOURCE Heritage Insurance Holdings, Inc.
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