Core Insights - The Excess and Surplus (E&S) segment is a significant growth driver for Heritage Insurance Holdings (HRTG), providing diversification to its revenue streams from the admitted insurance market [1][3] - HRTG has strategically expanded its E&S operations through its subsidiary, Heritage E&S Insurance Services, focusing on niche markets such as coastal properties and high-value homes, resulting in over $46 million of in-force premium [2][8] - The E&S segment enhances Heritage's business resilience by offering a buffer against volatility in admitted markets, particularly in catastrophe-prone regions [3][4] Competitive Landscape - HRTG competes closely with Universal Insurance Holdings (UVE) and HCI Group (HCI), both of which have a strong presence in Florida [5] - HCI Group's growth is driven by proactive policy assumptions and tech-driven underwriting capabilities [5] - Universal Insurance Holdings has benefited from effective pricing strategies and AI-enabled claims handling, contributing to improved profitability [6] Financial Performance - HRTG's shares have gained 93.5% year to date, although this is below industry performance [7] - The company trades at a price-to-book value ratio of 2.17, higher than the industry average of 1.56, but maintains a Value Score of B [9] - Consensus estimates for HRTG's 2025 and 2026 revenues and EPS indicate expected year-over-year growth, with no recent revisions [10][11] Strategic Initiatives - HRTG is expanding its E&S segment to target niche, catastrophe-exposed markets with tailored policies, which helps offset rate pressures in admitted markets [8] - The company has launched Strategic Profitability Initiatives to enhance underwriting profitability through precise risk selection and pricing [2][3] Market Position - HRTG currently holds a Zacks Rank 1 (Strong Buy), indicating strong market confidence in its performance [12]

Core Insights - Heritage Insurance Holdings, Inc. (HRTG) shares have surged 96.1% in the past three months, significantly outperforming the industry growth of 0.3%, sector increase of 6.3%, and the Zacks S&P 500 composite rise of 7.1% [1][9] - The company is focusing on profitability through rate adequacy, profit-driven underwriting, and limiting new business in saturated markets [2][3] Company Strategy - HRTG has halted the issuance of new personal lines policies in Florida and the Northeast since December 2022 due to declining returns and a tightening reinsurance market, but has resumed writing new personal lines business with a controlled growth strategy following legislative changes and stabilization in reinsurance pricing [4] - The company's 2025 strategy includes selectively re-entering profitable markets, disciplined capital allocation, and maintaining rate adequacy while leveraging data-driven analytics for effective exposure management [5] Growth Drivers - The excess and surplus (E&S) segment is a key growth driver, with HRTG actively expanding into additional states and enhancing its reinsurance strategy to mitigate hurricane and severe weather risks [6] - HRTG is investing in technology, particularly in the InsurTech space, to improve underwriting expertise and claims processing [7][10] Financial Performance - The Zacks Consensus Estimate for HRTG's earnings in 2025 and 2026 has increased by 33.7% and 17.6%, respectively, over the past 60 days, indicating optimistic growth expectations [11] - HRTG's return on equity in the trailing 12 months was 28.7%, significantly higher than the industry average of 8.3%, reflecting effective utilization of shareholders' equity [14] - The return on invested capital (ROIC) was 19.4%, also above the industry average of 6%, showcasing the company's efficiency in generating income [15] Valuation and Market Position - HRTG's stock is currently trading at a price-to-book multiple of 2.22, which is higher than the industry average of 1.57, indicating it may be overvalued [17] - Despite its premium valuation, the company is considered a strong buy due to its growth potential and strategic focus [20]

Heritage Insurance (HRTG) Conference Summary Company Overview - **Company Name**: Heritage Insurance (Ticker: HRTG) - **CEO**: Ernie Guerte, with the company since its founding in 2012 and CEO since 2021 - **CFO**: Kirk Lusk, joined through the acquisition of Narragansett Bay Insurance Company in 2017 - **Market Cap**: $752 million - **Total Equity**: $2.2 billion - **Premiums in Force**: $1.43 billion - **Operational States**: 16 states, primarily in Florida, New York, California, Virginia, and others [1][2][4][3] Core Business Strategies - **Diversification**: Shifted from being a single-state carrier in Florida to a more diversified approach across multiple states, viewing this as a competitive advantage [5][6] - **Profitability Initiatives**: Focused on generating underwriting profit, optimizing capital allocation, and managing portfolio diversification [16][17] - **Controlled Growth**: Transitioning to a managed growth phase after rightsizing the company and improving profitability [6][23] Financial Performance - **Premiums and Policies**: Policies in force decreased by 32% while premiums in force increased by 34% from 2020, indicating higher premium per policy [19] - **Earnings Trajectory**: Despite losses from natural disasters, the company generated profits in 2023 and 2024, with a notable income of $61 million in 2024 [20][22] - **Equity Growth**: Shareholders' equity increased by 49% from 2022 to 2024, with a book value of $10.62 per share [27][28] Reinsurance and Risk Management - **Reinsurance Program**: Successfully placed an oversubscribed reinsurance program with major reinsurers like Swiss Re and Munich Re [8][25] - **Stabilization of Pricing**: Reinsurance pricing has stabilized, which is favorable for the company moving forward [24][57] Market Insights - **Regulatory Environment**: Changes in legislation in states like Florida and California have allowed for higher rates, which is seen as a positive development for the insurance market [45][52] - **Growth Opportunities**: Anticipated growth in California and the Northeast, with slower growth expected in Alabama, Mississippi, and Georgia [35][36] Distribution Strategy - **Agent Relationships**: Focused on maintaining strong relationships with independent agents, optimizing agent count to align with company goals [37][38] - **Distribution Channels**: Utilizes independent agents, wholesalers, and direct partnerships with companies like GEICO and Allstate [39][41] Technology and Innovation - **Technology Implementation**: Implemented Guidewire software to enhance efficiency in claims and policy management, providing a competitive edge [60] Future Outlook - **Hurricane Season Preparedness**: The company is prepared for the upcoming hurricane season, with a focus on risk management and claims handling [64] - **Capital Allocation**: Plans to utilize capital for organic growth opportunities while considering strategic acquisitions [62] Additional Insights - **Underwriting Strategy**: Emphasizes detailed risk assessment, including home maintenance and compliance with building codes [68][70] - **Impact of FEMA Changes**: Minimal expected impact from potential changes to FEMA, primarily affecting flood insurance [66] This summary encapsulates the key points discussed during the Heritage Insurance conference, highlighting the company's strategic direction, financial performance, market insights, and future outlook.

Core Insights - Heritage Insurance Holdings, Inc. (HRTG) has significantly improved its net margin, showing an increase of 3080 basis points over the last two years, with a further improvement of 320 basis points in the first quarter of 2025 [1] Group 1: Profitability and Strategy - Heritage Insurance is focusing on profitability by ensuring rate adequacy, implementing profit-focused underwriting criteria, and limiting new business in saturated or low-performing markets [2] - The company is shifting its focus towards the Excess and Surplus (E&S) segment due to dislocation in California's homeowner's business, which presents new growth opportunities [3] - HRTG is investing in technology, including data analytics and predictive modeling, to enhance operational efficiency and sustain margin growth [4] Group 2: Financial Performance - Despite margin improvements, cash and cash equivalents decreased by 5.9% at the end of the first quarter, although the debt balance improved by 52% [5] - HRTG's shares have gained 98.8% year-to-date, outperforming the industry [11] - The company trades at a price-to-book value ratio of 2.27, above the industry average of 1.61, but has a Value Score of B [13] Group 3: Earnings Estimates - The Zacks Consensus Estimate for HRTG's first-quarter and second-quarter 2025 EPS has increased by 30% and 4%, respectively, with estimates for 2025 and 2026 rising by 33.7% and 17.5% [14] - Current EPS estimates for 2025 and 2026 are projected at 3.25 and 3.68, respectively [15] Group 4: Competitive Landscape - HRTG competes closely with Universal Insurance Holdings (UVE) and HCI Group (HCI), both of which have shown margin improvements [6] - HCI Group has enhanced its margins through operational streamlining and disciplined cost control [7] - Universal Insurance is also investing in technology to improve underwriting and claims processes, contributing to continuous margin expansion [8]

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Industry Overview - The property and casualty insurance industry is expected to grow despite an increase in catastrophic events, focusing on personalized offerings and digitalization to enhance customer experience [1] - Solid retention, exposure growth across business lines, and improved pricing are driving higher premiums and maintaining profitability for insurers [1] Company Analysis: Heritage Insurance Holdings, Inc. (HRTG) - HRTG is focusing on profitability by ensuring adequate rates, enforcing profit-centered underwriting standards, and limiting new business in saturated regions [4] - The company plans to re-enter profitable markets in 2025 and is prioritizing rate adequacy and data-driven analytics for exposure management [5] - HRTG's excess and surplus (E&S) lines segment is a key driver for future expansion, with plans to broaden its presence in additional states [6] - The company has secured full coverage for its 2025–2026 catastrophe excess-of-loss reinsurance program, anticipating a decline in its ceded premium ratio [6] - HRTG is investing in technology and high-margin business segments, with a $10 million share buyback program approved [7] - The net margin improved to 9.3% in Q1, up from negative 16.1% two years ago, and the return on equity is 33.5%, significantly above the industry average of 7.8% [7] Company Analysis: Universal Insurance Holdings, Inc. (UVE) - UVE operates primarily in Florida and has a diversified portfolio that includes renters, flood, and commercial insurance, which helps mitigate risks during challenging underwriting periods [8] - The company has secured $352 million in additional multi-year coverage for the 2026-2027 hurricane season to safeguard its balance sheet [8] - UVE is also investing in technology, utilizing advanced data analytics and AI to enhance underwriting and claims processes [9] - The return on equity for UVE is 16.8%, which is better than the industry average [9] Financial Estimates - The Zacks Consensus Estimate for HRTG's 2025 revenues and EPS indicates a year-over-year increase of 4.6% and 61.7%, respectively [10] - For UVE, the 2025 revenue estimate implies a year-over-year decrease of 2.1%, while EPS is expected to increase by 48% [11] Valuation Metrics - HRTG is trading at a price-to-book multiple of 2.16, above its five-year median of 0.68, while UVE's price-to-book multiple is at 1.76, also above its median of 1.22 [12] Conclusion - HRTG is well-positioned for growth due to a growing commercial residential business, improving E&S business, better pricing, and solid earnings [13] - UVE's solid market presence, technological advancements, and diversified portfolio also indicate potential for growth [15] - HRTG has outperformed UVE in terms of return on equity and stock performance, gaining 91% year-to-date compared to UVE's 25% [16]

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Group 1 - The article evaluates Heritage Insurance's Q1 2025 earnings report, providing insights into the company's strategies and future outlook [1] - The author emphasizes a focus on growth and momentum stocks that are reasonably priced and likely to outperform the market over the long term [1] - The historical performance of the S&P 500 and Nasdaq from 2009 to 2019 is highlighted, with increases of 367% and 685% respectively, indicating a strong market recovery [1]

Core Insights - Heritage Insurance Holdings, Inc. (HRTG) reported mixed first-quarter 2025 results, with earnings per share of 99 cents beating the Zacks Consensus Estimate by 115.2%, while operating revenues of $212 million missed the consensus estimate by 1.1% [1][3] - The company experienced a significant improvement in net premiums earned, which rose by 11.5%, and a combined ratio that improved by 950 basis points to 84.5 [1][4] - HRTG shares have shown strong year-to-date momentum, rallying 112.1%, outperforming the industry growth of 12.2% and the S&P 500's decline of 4.3% [5][6] Financial Performance - First-quarter 2025 earnings per share surged 110% year over year, while premiums-in-force increased by 3.3% to $1.43 billion [3] - Gross premiums written decreased slightly by 0.2% year over year, reflecting exposure management trends [3] - Return on equity expanded significantly by 1430 basis points to 39.3%, indicating strong profitability [4][21] Strategic Initiatives - The company is focusing on profitability through rate adequacy and profit-focused underwriting criteria, limiting new business in saturated markets [17] - Strategic initiatives for 2025 include re-opening profitable geographies and leveraging data-driven analytics for exposure management [18] - HRTG is exploring expansion in the excess and surplus (E&S) segment and has secured its 2025-2026 reinsurance program to mitigate risks [19] Market Position and Valuation - HRTG's stock is currently trading above its 50-day moving average, indicating a short-term bullish trend [12] - The average target price for HRTG suggests a potential upside of 24% from the last closing price [14] - Despite a favorable growth outlook, the stock is considered overvalued with a price-to-book multiple of 3.78 compared to the industry average of 1.61 [24] Growth Prospects - The Zacks Consensus Estimate indicates a year-over-year increase of 20.9% and 28.6% for 2025 and 2026, respectively, reflecting optimistic growth expectations [16] - HRTG's return on invested capital (ROIC) stands at 16.6%, significantly higher than the industry average of 6.4%, showcasing effective capital utilization [22] - The company has approved a $10 million share buyback program to enhance shareholder value [20]

[PART I – FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the unaudited financial information, including statements, management's discussion, market risk disclosures, and controls and procedures [Item 1. Unaudited Financial Statements](index=6&type=section&id=Item%201%20Unaudited%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with explanatory notes - Net income for Q1 2025 was **$30.5 million**, up **114.2%** from **$14.2 million** in Q1 2024[16](index=16&type=chunk) - Diluted EPS for Q1 2025 was **$0.99**, up from **$0.47** in Q1 2024[16](index=16&type=chunk) Key Financial Position Changes (March 31, 2025 vs. December 31, 2024) (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Total Assets | $2,213,097 | $2,468,924 | | Total Liabilities | $1,884,094 | $2,178,124 | | Total Stockholders' Equity | $329,003 | $290,799 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the Company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | ASSETS | March 31, 2025 | December 31, 2024 | | :------------------------------------------ | :------------- | :---------------- | | Fixed maturities, available-for-sale, at fair value | $667,390 | $655,555 | | Equity securities, at fair value | $1,064 | $1,936 | | Other investments, net | $4,930 | $5,952 | | Total investments | $673,384 | $663,443 | | Cash and cash equivalents | $425,908 | $452,666 | | Restricted cash | $13,454 | $10,979 | | Accrued investment income | $5,230 | $5,592 | | Premiums receivable, net | $109,336 | $102,134 | | Reinsurance recoverable on paid and unpaid claims, net | $593,083 | $740,204 | | Prepaid reinsurance premiums | $196,228 | $309,802 | | Deferred income tax asset, net | $22,055 | $13,876 | | Deferred policy acquisition costs, net | $63,906 | $63,204 | | Property and equipment, net | $38,843 | $38,080 | | Right-of-use lease asset, finance | $14,459 | $15,082 | | Right-of-use lease asset, operating | $5,540 | $5,850 | | Intangibles, net | $34,826 | $36,372 | | Other assets | $16,845 | $11,640 | | **Total Assets** | **$2,213,097** | **$2,468,924** | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Unpaid losses and loss adjustment expenses | $848,928 | $1,042,687 | | Unearned premiums | $704,857 | $702,707 | | Reinsurance payable | $123,065 | $227,060 | | Long-term debt, net | $94,808 | $116,319 | | Advance premiums | $21,635 | $15,186 | | Income taxes payable, net | $20,577 | $846 | | Accrued compensation | $10,436 | $8,926 | | Lease liability, finance | $17,481 | $18,071 | | Lease liability, operating | $6,595 | $6,945 | | Accounts payable and other liabilities | $35,712 | $39,378 | | **Total Liabilities** | **$1,884,094** | **$2,178,124** | | Stockholders' Equity: | | | | Common stock | $3 | $3 | | Additional paid-in capital | $363,909 | $362,644 | | Accumulated other comprehensive income, net of taxes | $(22,139) | $(28,604) | | Treasury stock, at cost | $(130,900) | $(130,900) | | Retained earnings | $118,130 | $87,656 | | **Total Stockholders' Equity** | **$329,003** | **$290,799** | | **Total Liabilities and Stockholders' Equity** | **$2,213,097** | **$2,468,924** | [Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Other%20Comprehensive%20Income%20(Loss)) This section details the Company's revenues, expenses, net income, and other comprehensive income for the reported periods Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) (in thousands, except per share amounts) | REVENUES: | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Gross premiums written | $355,997 | $356,684 | | Change in gross unearned premiums | $(2,169) | $(15,295) | | Gross premiums earned | $353,828 | $341,389 | | Ceded premiums | $(153,794) | $(161,963) | | Net premiums earned | $200,034 | $179,426 | | Net investment income | $8,575 | $8,551 | | Net realized losses | $(4) | $(1) | | Other revenue | $2,915 | $3,326 | | **Total revenues** | **$211,520** | **$191,302** | | EXPENSES: | | | | Losses and loss adjustment expenses | $99,407 | $102,035 | | Policy acquisition costs, net of ceding commission income | $45,815 | $46,929 | | General and administrative expenses, net of ceding commission income | $23,862 | $19,634 | | **Total expenses** | **$169,084** | **$168,598** | | Operating income | $42,436 | $22,704 | | Interest expense, net | $2,426 | $2,830 | | Income before income taxes | $40,010 | $19,874 | | Income tax expense | $9,536 | $5,649 | | **Net income** | **$30,474** | **$14,225** | | OTHER COMPREHENSIVE INCOME (LOSS) | | | | Change in net unrealized gains (losses) on investments | $8,477 | $(284) | | Reclassification adjustment for net realized investment losses | $4 | $1 | | Income tax (expense) benefit related to items of other comprehensive income | $(2,016) | $67 | | **Total comprehensive income** | **$36,939** | **$14,009** | | Weighted average shares outstanding - Basic | 30,697,826 | 30,376,682 | | Weighted average shares outstanding - Diluted | 30,757,089 | 30,435,945 | | Earnings per share - Basic | $0.99 | $0.47 | | Earnings per share - Diluted | $0.99 | $0.47 | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in the Company's equity, including common stock, retained earnings, and comprehensive income components Condensed Consolidated Statements of Stockholders' Equity (in thousands) | | Common Shares | Par Value | Additional Paid-In Capital | Retained Earnings | Treasury Shares | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | | :------------------------------------------ | :------------ | :-------- | :------------------------- | :---------------- | :-------------- | :----------------------------------- | :------------------------- | | Balance at December 31, 2024 | 30,607,039 | $3 | $362,644 | $87,656 | $(130,900) | $(28,604) | $290,799 | | Net unrealized change in investments, net of tax | — | — | — | — | — | $6,465 | $6,465 | | Issuance of restricted stock | 386,231 | — | — | — | — | — | — | | Stock-based compensation on restricted stock | — | — | $1,265 | — | — | — | $1,265 | | Net Income | — | — | — | $30,474 | — | — | $30,474 | | Balance at March 31, 2025 | 30,993,270 | $3 | $363,909 | $118,130 | $(130,900) | $(22,139) | $329,003 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section reports cash inflows and outflows from operating, investing, and financing activities over the reporting periods Condensed Consolidated Statements of Cash Flows (in thousands) | OPERATING ACTIVITIES | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net income | $30,474 | $14,225 | | Net cash provided by operating activities | $837 | $4,308 | | INVESTING ACTIVITIES | | | | Net cash used in investing activities | $(3,469) | $(83,295) | | FINANCING ACTIVITIES | | | | Net cash (used in) provided by financing activities | $(21,651) | $3,113 | | Decrease in cash, cash equivalents, and restricted cash | $(24,283) | $(75,874) | | Cash, cash equivalents and restricted cash, beginning of period | $463,645 | $473,339 | | Cash, cash equivalents and restricted cash, end of period | $439,362 | $397,465 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements - The Company's results are reported as a single operating and reportable segment: residential property insurance[31](index=31&type=chunk) - The Company's unrealized losses on debt securities are primarily due to rising interest rates, with no credit loss allowance recorded as of March 31, 2025, as the Company intends to hold these investments to recovery or maturity[40](index=40&type=chunk) - The Company purchases significant reinsurance from third-party reinsurers (rated 'A-' or higher by A.M. Best or S&P, or fully collateralized) and its wholly-owned subsidiary, Osprey Re Ltd., to limit exposure to individual risks and catastrophic events[73](index=73&type=chunk)[74](index=74&type=chunk) - As of March 31, 2025, the Company's insurance subsidiaries met all financial and regulatory capital and surplus requirements in each of the states in which they conduct business[102](index=102&type=chunk) - On March 11, 2025, the Company awarded **99,246 shares** of time-based restricted stock and **285,985 shares** of performance-based restricted stock, with a fair value of **$11.88 per share**, to certain employees under the 2023 Omnibus Incentive Plan[116](index=116&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Company's financial condition and operational results, highlighting key performance indicators, strategic initiatives, and market impacts - The Company is a super-regional property and casualty insurance holding company providing personal and commercial residential insurance across multiple states, with a vertically integrated operational model[134](index=134&type=chunk) - Strategic initiatives for 2025 include re-opening profitable geographies, persistent underwriting discipline, continued data-driven analytics for exposure management, enhancing customer service and claims capabilities, and leveraging infrastructure for future growth[144](index=144&type=chunk) - The net combined ratio improved by **9.5 points** to **84.5%** in Q1 2025 from **94.0%** in Q1 2024, driven by a lower net loss and LAE ratio and lower net expense ratio[165](index=165&type=chunk) [Overview](index=35&type=section&id=Overview) This section provides a high-level introduction to the Company's business model and operational structure - Heritage Insurance Holdings, Inc. is a super-regional property and casualty insurance holding company primarily offering personal and commercial residential insurance products across a multi-state footprint[134](index=134&type=chunk) - The Company operates as a vertically integrated insurer, managing risk management, underwriting, claims processing, actuarial rate making, customer service, and distribution[134](index=134&type=chunk) [Recent Developments](index=35&type=section&id=Recent%20Developments) This section highlights recent market trends, legislative changes, and operational adjustments impacting the Company - The Company mitigates increased material and labor costs due to inflationary pressures through rate increases and the use of inflation guard[135](index=135&type=chunk) - Legislative changes since 2022 have positively impacted the Florida property insurance market by curtailing claims abuses, leading the Company to anticipate writing more organic personal lines business in Florida[136](index=136&type=chunk)[142](index=142&type=chunk) Policies-in-force, Premiums-in-force, and Total Insured Value (TIV) Trends | Metric | Q1 2025 | Q1 2024 | % Change | | :----- | :------ | :------ | :------- | | **Policies-in-force:** | | | | | Florida | 130,003 | 147,954 | (12.1)% | | Other States | 247,818 | 289,001 | (14.3)% | | Total | 377,821 | 436,955 | (13.5)% | | **Premiums-in-force (in thousands):** | | | | | Florida | $695,091 | $716,868 | (3.0)% | | Other States | $737,561 | $670,195 | 10.1% | | Total | $1,432,653 | $1,387,063 | 3.3% | | **Total Insured Value (in thousands):** | | | | | Florida | $102,648,934 | $103,796,187 | (1.1)% | | Other States | $260,995,659 | $284,663,196 | (8.3)% | | Total | $363,644,593 | $388,459,383 | (6.4)% | - The average premium per policy increased by **19.5%** for Q1 2025 compared to the prior year, driven by rate changes, inflation guard, and the mix of business written[140](index=140&type=chunk) - For the 2025 hurricane season, the Company is observing an increase in reinsurance supply at improved risk-adjusted costs, following moderating pricing in 2024[143](index=143&type=chunk) [Overview of Financial Results](index=37&type=section&id=Overview%20of%20Financial%20Results) This section summarizes the Company's financial performance, including net income, premiums earned, and key profitability ratios - Net income for Q1 2025 was **$30.5 million** (**$0.99** diluted EPS), a significant increase from **$14.2 million** (**$0.47** diluted EPS) in Q1 2024, primarily due to positive impacts from rate actions, underwriting, and exposure management[146](index=146&type=chunk) - Net premiums earned grew **11.5%** to **$200.0 million**, while total expenses remained relatively flat, contributing to the improved net income[146](index=146&type=chunk) - The net combined ratio improved by **9.5 points** to **84.5%** in Q1 2025, driven by a lower net loss ratio (**49.7%**, down **7.2 points**) and a lower net expense ratio (**34.8%**, down **2.3 points**)[146](index=146&type=chunk) - Net weather and catastrophe losses increased to **$43.5 million** in Q1 2025 from **$18.4 million** in Q1 2024, but this was more than offset by significantly lower attritional losses and favorable reserve development[146](index=146&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the Company's revenues, expenses, and profitability for the reported periods Revenue Comparison (Q1 2025 vs. Q1 2024) (in thousands) | REVENUE | 2025 | 2024 | $ Change | % Change | | :--------------------- | :--- | :--- | :------- | :------- | | Gross premiums written | $355,997 | $356,684 | $(687) | (0.2)% | | Gross premiums earned | $353,828 | $341,389 | $12,439 | 3.6% | | Ceded premiums | $(153,794) | $(161,963) | $8,169 | (5.0)% | | Net premiums earned | $200,034 | $179,426 | $20,608 | 11.5% | | Net investment income | $8,575 | $8,551 | $24 | 0.3% | | Total revenue | $211,520 | $191,302 | $20,218 | 10.6% | Expense Comparison (Q1 2025 vs. Q1 2024) (in thousands) | EXPENSES | 2025 | 2024 | $ Change | % Change | | :---------------------- | :--- | :--- | :------- | :------- | | Losses and loss adjustment expenses | $99,407 | $102,035 | $(2,628) | (2.6)% | | Policy acquisition costs | $45,815 | $46,929 | $(1,114) | (2.4)% | | General and administrative expenses | $23,862 | $19,634 | $4,228 | 21.5% | | Total expenses | $169,084 | $168,598 | $486 | 0.3% | Net Income and EPS Comparison (Q1 2025 vs. Q1 2024) (in thousands, except per share amounts) | Metric | 2025 | 2024 | $ Change | % Change | | :----- | :--- | :--- | :------- | :------- | | Net income | $30,474 | $14,225 | $16,249 | 114.2% | | Basic earnings per share | $0.99 | $0.47 | $0.52 | 110.6% | | Diluted earnings per share | $0.99 | $0.47 | $0.52 | 110.6% | Key Ratios (Q1 2025 vs. Q1 2024) | Ratio | 2025 | 2024 | Change (points) | | :---- | :--- | :--- | :-------------- | | Ceded premium ratio | 43.5% | 47.4% | (3.9) | | Net loss and LAE ratio | 49.7% | 56.9% | (7.2) | | Net expense ratio | 34.8% | 37.1% | (2.3) | | Net combined ratio | 84.5% | 94.0% | (9.5) | [Financial Condition – March 31, 2025 compared to December 31, 2024](index=42&type=section&id=Financial%20Condition%20%E2%80%93%20March%2031%2C%202025%20compared%20to%20December%2031%2C%202024) This section analyzes changes in the Company's balance sheet items between the current and prior fiscal year-end - Cash and cash equivalents decreased by **$26.8 million** to **$425.9 million**, primarily due to the payoff of a **$19.2 million** FHLB-ATL loan and purchases of fixed income securities[169](index=169&type=chunk) - Reinsurance recoverable on paid and unpaid claims decreased by **$147.1 million** to **$593.1 million**, driven by reinsurance reimbursements for Hurricanes Ian and Milton and favorable development of ultimate losses[171](index=171&type=chunk) - Unpaid losses and loss adjustment expenses decreased by **$193.8 million** to **$848.9 million**, mainly due to claim payments for Hurricanes Milton and Ian and a reduction in ultimate losses[173](index=173&type=chunk) - Total shareholders' equity increased by **$38.2 million** to **$329.0 million**, primarily due to net income and an **$8.5 million** reduction in unrealized losses in accumulated other comprehensive loss[176](index=176&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's sources and uses of cash, capital structure, and compliance with debt covenants - Principal liquidity sources include cash flows generated from operations, existing cash and cash equivalents, marketable securities balances, and borrowings available under Credit Facilities[177](index=177&type=chunk) - Net cash provided by operating activities decreased to **$837,000** in Q1 2025 from **$4.3 million** in Q1 2024, primarily due to timing of cash flows associated with claim and reinsurance payments and reimbursements[181](index=181&type=chunk) - Net cash used in financing activities was **$21.7 million** in Q1 2025, compared to cash provided of **$3.1 million** in Q1 2024, mainly due to the repayment of a **$19.2 million** FHLB-ATL loan and **$5.5 million** in proceeds from a FHLB Des Moines loan in the prior year[183](index=183&type=chunk) - The Company maintains a **$100 million** Term Loan Facility and a **$50 million** Revolving Credit Facility, with **$67.8 million** and **$10.0 million** outstanding respectively as of March 31, 2025[186](index=186&type=chunk)[187](index=187&type=chunk) - The Company was in compliance with all applicable terms of its covenants and other requirements under the Credit Agreement, Convertible Notes, cash borrowings, and other loans as of the report date[98](index=98&type=chunk) [Critical Accounting Policies and Estimates](index=47&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines the significant accounting policies and estimates that require management's judgment and could impact financial results - The Company's financial statements rely on estimates and assumptions about future events, which could materially differ from actual results if underlying factors change[207](index=207&type=chunk) - No material changes or additions have been made to the critical accounting policies and estimates as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[207](index=207&type=chunk) [Recent Accounting Pronouncements](index=47&type=section&id=Recent%20Accounting%20Pronouncements) This section addresses the impact of newly issued accounting pronouncements on the Company's financial reporting - No new accounting pronouncements issued but not yet adopted are expected to have a material impact on the Company's results of operations or financial position[32](index=32&type=chunk)[208](index=208&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=47&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the Company's exposure to market risks, primarily interest rate and credit risk, and their management - The duration of financial instruments subject to interest rate risk was **3.0 years** at March 31, 2025 and 2024, and **3.1 years** at December 31, 2024[209](index=209&type=chunk) - Credit risk is managed by maintaining a high credit quality fixed maturity securities portfolio, with an estimated weighted-average credit quality rating of **A** at March 31, 2025[209](index=209&type=chunk) - The Company has not experienced a material impact when compared to the tabular presentations of its interest rate and market risk sensitive instruments in its Annual Report on Form 10-K for the year ended December 31, 2024[210](index=210&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204%20Controls%20and%20Procedures) This section details the Company's evaluation of disclosure controls and procedures and reports on changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[212](index=212&type=chunk) - There have been no material changes in internal control over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[213](index=213&type=chunk) [PART II – OTHER INFORMATION](index=48&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section includes disclosures on legal proceedings, risk factors, equity sales, other information, and exhibits [Item 1. Legal Proceedings](index=48&type=section&id=Item%201%20Legal%20Proceedings) This section addresses the Company's involvement in legal actions arising in the ordinary course of business - The Company is subject to routine legal proceedings in the ordinary course of business[214](index=214&type=chunk) - Management believes that the ultimate resolution of these matters will not have a material adverse effect on the Company's business, financial condition, or results of operations[214](index=214&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A%20Risk%20Factors) This section refers to the Company's previously disclosed risk factors and notes any material changes - The Company's risk factors are documented in Item 1A of Part I of its Annual Report on Form 10-K for the year ended December 31, 2024[215](index=215&type=chunk) - There have been no material changes to the Company's risk factors since the filing of the 2024 Form 10-K[215](index=215&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section indicates no disclosures are required regarding unregistered sales of equity securities or use of proceeds - This item is not applicable for the reporting period[216](index=216&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205%20Other%20Information) This section provides details on executive officer equity awards and amendments to prior award agreements - On March 10, 2025, the Compensation Committee approved new time-based and performance-based restricted stock awards (Equity Awards) for named executive officers and other executive officers under the 2023 Omnibus Incentive Plan[216](index=216&type=chunk) - The new award agreements include a provision for accelerated vesting of certain Equity Awards upon a participant's Retirement, with pro-rated vesting for time-based stock and eligibility for performance-based stock from prior years, while current year performance-based stock is forfeited[217](index=217&type=chunk) - Amendments were also approved on March 10, 2025, to prior equity awards from 2023 and 2024, providing the same acceleration of vesting upon Retirement as in the new agreements, effective April 30, 2025[219](index=219&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q - The report includes various exhibits such as the Certificate of Incorporation, By-laws, Form of Stock Certificate, Restricted Stock Award Agreements, and certifications from the Principal Executive and Financial Officers[223](index=223&type=chunk) [Signatures](index=50&type=section&id=Signatures) This section contains the required signatures for the Quarterly Report on Form 10-Q - The report is signed by Ernesto Garateix, Chief Executive Officer, and Kirk Lusk, Chief Financial Officer, on May 9, 2025[227](index=227&type=chunk)