Heritage Insurance Q4 Earnings Call Highlights

Heritage Insurance (NYSE:HRTG) executives told investors the company finished 2025 with what management described as measurable progress executing a multi-year strategy aimed at producing consistent underwriting profits, allocating capital selectively, and building a more diversified book of business.

On the company’s fourth-quarter and full-year 2025 earnings call, Chief Executive Officer Ernie Garateix said Heritage has been “intentional and disciplined in reshaping the foundation” of the business through rate adequacy, more selective underwriting, and a focus on profitable distribution relationships. Chief Financial Officer Kirk Lusk added that fourth-quarter results benefited from higher net premiums earned and investment income as well as markedly lower losses and policy acquisition costs.

Strategic priorities and portfolio positioning

Garateix framed Heritage’s progress around three initiatives the company has emphasized for several years:

• Generating “true underwriting profit” through rate adequacy and disciplined underwriting rather than relying on market cycles.
• Strategic capital allocation toward products and geographies with the strongest returns, with a deliberate approach to where the company pauses, reinvests, or expands.
• Balancing and diversifying the portfolio by expanding across states and product lines to reduce exposure to regional volatility.

Garateix said 2025 execution included reopening “profitable geographies,” maintaining underwriting discipline supported by an ongoing push for rate adequacy, expanding the use of analytics, enhancing customer service and claims capabilities, and leveraging infrastructure to support scalable growth.

Looking to 2026, he said the company has achieved rate adequacy in more than 90% of its operating geographies, which are currently open for new business. Management also pointed to a notable increase in new business activity, with new business premium production up more than 60% in the fourth quarter compared with the same period a year earlier.

Texas entry and technology initiatives

As part of continued diversification efforts, Garateix said Heritage plans to enter Texas later in 2026 on an excess and surplus (E&S) lines basis. He said production will focus “predominantly on Tier 1 and some Tier 2 geographies” and will use existing relationships and new distribution partners. Heritage also plans to have underwriting and marketing employees in Texas, similar to its approach in California, which the company also writes on an E&S basis, to remain close to market conditions.

Garateix also said a major emphasis in 2026 will be enhancing data-driven analytics, including deeper integration of AI and advanced technology tools, with a stated focus on using AI in a manner compliant with regulatory requirements. He said these efforts are intended to sharpen risk selection and improve operational efficiency, while the company continues to refine customer service and claims processes.

Full-year 2025 profitability and wildfire impact

For full-year 2025, management reported net income of $195.6 million, or $6.32 per share, compared with net income of $61.5 million, or $2.01 per share, in 2024. Garateix noted the year’s results included $31.8 million of net pre-tax losses and loss adjustment expenses related to California wildfires in the first quarter of 2025.

The company also reported tangible book value per share of $16.39 at December 31, 2025, up 72.5% from $9.50 at the end of 2024. Management said return on equity for the year ended December 31, 2025 was 49%.

Fourth-quarter results driven by lower losses and improved combined ratio

Lusk said fourth-quarter 2025 net income was $66.7 million, or $2.15 per diluted share, compared with $20.3 million, or $0.66 per diluted share, in the prior-year quarter. He attributed the increase primarily to higher net premiums earned and net investment income, lower losses and loss adjustment expense, and lower policy acquisition costs.

In-force premiums were $1.432 billion, essentially flat versus $1.433 billion in the prior-year quarter. Lusk said results reflected competitive market conditions, including a reduction in commercial residential business, while personal lines increased. He emphasized the company’s stance that it will not write policies it believes are underpriced or that do not meet underwriting standards.

Key quarterly figures discussed on the call included:

• Gross premiums earned of $361.7 million, up 0.4% year over year.
• Ceded premiums down $2.1 million, reflecting a catastrophe excess-of-loss premium reduction true-up and the absence of reinstatement premium incurred in 2024.
• Net premiums earned of $202.7 million, up 1.7% year over year.
• Net investment income of $9.8 million, up 15.9% year over year, aided by higher invested asset balances and portfolio positioning.
• Total revenues of $215.3 million, up 2.4% year over year.

The company’s net loss ratio improved to 31.3 from 54.7 in the prior-year quarter. Lusk said both attritional and weather-related losses were lower. Net weather-related losses were $7.7 million versus $45.6 million a year earlier, and there were no catastrophe losses in the quarter compared with $40 million in the prior-year period. Lusk also said attritional losses have been trending favorably, which he associated with the underwriting strategy implemented over the last several years.

The net expense ratio was 30.7, down from 35 in the prior-year quarter, which Lusk said reflected higher ceding commission income, relatively flat general and administrative expenses, and higher net premiums earned. He said policy acquisition costs declined primarily due to higher ceding commission income tied to both the amount of premiums ceded under a net quota share program and a higher ceding commission rate due to favorable loss experience within that program.

Combined, those factors drove a net combined ratio of 62, improving by 27.7 points from 89.7 in the prior-year quarter.

Capital position, reinsurance outlook, and share repurchases

On the balance sheet, Lusk said Heritage ended the quarter with total assets of $2.2 billion and shareholders’ equity of $505.3 million. Book value per share was $16.39 at December 31, 2025, which management said was up 72% from the fourth quarter of 2024 and up 125% from the fourth quarter of 2023. Lusk attributed the year-over-year increase primarily to net income and an $18 million net-of-tax reduction in unrealized losses on the fixed income portfolio, while noting unrealized losses were related to a decline in interest rates during the year.

Non-regulated cash at quarter end was $57.9 million. Combined statutory surplus of the insurance company affiliates was $392.6 million, an increase of $106.9 million from year-end 2024, which Lusk said provides additional growth capacity.

The company reiterated its focus on organic growth and opportunistic share repurchases when management believes the shares are undervalued. Under a $10 million authorization, Heritage repurchased 106,135 shares in 2025 for $2.3 million. In November 2025, the board established a new $25 million repurchase plan expiring December 31, 2026. Lusk said the company repurchased an additional 112,858 shares for $3 million during the first quarter of 2026.

On reinsurance, Garateix said the company has maintained a stable indemnity-based reinsurance program “at manageable costs” with a panel of highly rated and collateralized reinsurers. He said management expects incremental capacity as the company approaches its June 1 renewal. Garateix also pointed to what he described as benefits from tort reform, saying industry loss expectations for Hurricane Milton have been steadily coming down, “largely due to reduced litigation.” Given the Florida litigation environment, lack of catastrophe losses, and reinsurance capacity entering both traditional and insurance-linked securities markets, he said management is optimistic reinsurance pricing will continue to improve in 2026 and could benefit consumers through lower insurance costs.

During Q&A, management said it believed most of the competitive pressure in commercial residential was seen in 2025, and reiterated that the line remains profitable even as the company has chosen to walk away from business where pricing did not meet standards. Executives also indicated policy acquisition costs could move “up slightly” as a net quota share program at NBIC was reduced at year-end, which would lower ceding commissions while increasing net earned premium.

About Heritage Insurance (NYSE:HRTG)

Heritage Insurance Holdings, Inc (NYSE: HRTG) is a property and casualty insurance holding company that offers homeowners insurance and related coverage products in the United States. Through its primary subsidiary, Heritage Property & Casualty Insurance Company, the firm underwrites standard and non-standard personal lines insurance, including homeowners, dwelling fire, flood, and condominium policies. Heritage leverages a network of independent insurance agents to distribute its products across select regional markets, with an emphasis on serving property owners in areas prone to severe weather events.

Founded in 2011 and headquartered in Jupiter, Florida, Heritage Insurance has grown to become one of the leading providers of residential property insurance in the state.