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]

Market Overview - Wall Street experienced a slight recovery after a red start, closing slightly green despite Moody's U.S. credit rating downgrade and warnings from JPMorgan's CEO about tariff complacency [1] - Factors such as tariff negotiations, trade deals, lower inflation, and strong earnings have contributed to the recent stock market rally, with expectations for continued strength into 2025 [1] Stock Performance and Strategy - Following a 26% rally in the Nasdaq since April, a period of calm and sideways trading may be beneficial, prompting investors to consider taking profits [2] - Investors are encouraged to search for strong stocks that are not overheated, focusing on those with great value and improving earnings outlooks [2] Value Stock Screening - The value stock screen utilizes Zacks Rank 1 (Strong Buys) or 2 (Buys) and targets stocks with price-to-earnings (P/E) ratios below the industry median [3] - The screening process also includes price-to-sales (P/S) ratios under the industry median and quarterly earnings rates above the industry median [4] Featured Stock: Heritage Insurance Holdings, Inc. (HRTG) - HRTG is a property and casualty insurance holding company with approximately $1.4 billion in gross premiums, experiencing a 670% stock price increase over the past three years, significantly outperforming its industry's 62% growth [5][7] - The stock is currently trading 14% below its average Zacks price target and at a 75% discount to its highly-ranked industry, aligning with its 10-year median at 7.4X forward 12-month earnings [7] - HRTG reported a substantial earnings beat in Q1, exceeding EPS estimates by an average of 363% over the past four months, with projected adjusted earnings growth of 61% in 2025 and an additional 13% the following year [8]

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)

Have you been paying attention to shares of Heritage Insurance (HRTG) ? Shares have been on the move with the stock up 60.3% over the past month. The stock hit a new 52-week high of $24.44 in the previous session. Heritage Insurance has gained 100.8% since the start of the year compared to the 1.9% move for the Zacks Finance sector and the 13.2% return for the Zacks Insurance - Property and Casualty industry.What's Driving the Outperformance?The stock has a great record of positive earnings surprises, as it ...

Financial Data and Key Metrics Changes - The company reported a net income of $30,500,000 or $0.99 per diluted share for Q1 2025, compared to $14,200,000 or $0.47 per diluted share in Q1 2024, reflecting a significant increase in profitability despite $31,800,000 in losses related to California wildfires [5][14] - Gross premiums earned rose to $353,800,000, up 3.6% from $341,400,000 in the prior year quarter, driven by business growth and rating actions [15] - Net premiums earned increased to $200,000,000, up 11.5% from $179,400,000 in the prior year quarter, reflecting growth in gross premiums earned and a reduction in ceded premiums [16] - The loss ratio improved to 49.7%, down from 56.9% in the same quarter last year, indicating better underwriting performance [17] - The net combined ratio for the quarter was 84.5%, down 9.5 points from 94% in the prior year quarter, driven by lower net loss and expense ratios [19] Business Line Data and Key Metrics Changes - The policy count decreased by 3% from Q4 2024, primarily due to normal attrition and seasonality, but was partially offset by new personal lines business production [6][8] - The company is selectively writing new personal lines business while maintaining a focus on risk management and stringent underwriting [10] Market Data and Key Metrics Changes - The company has achieved rate adequacy in over 90% of its operating regions, positioning it to grow personal lines policies in force [6] - The competitive landscape in the commercial residential market is intensifying, but the company remains committed to ensuring rate adequacy [8] Company Strategy and Development Direction - The company is pivoting its strategy towards managed growth, with plans to open more territories for new personal lines business [9] - Legislative changes in Florida are expected to positively impact the economics of writing new business and reduce frivolous lawsuits [10][11] - The company is focusing on enhancing its E and S business to adapt to changing market dynamics and provide necessary insurance protection [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to maintain profitability despite catastrophe losses, attributing this to strategic initiatives implemented over several years [6][14] - The company anticipates an increase in premiums in force in the second half of the year as it continues to open production capacity [9] - Management expects growth to accelerate in 2026 as new business production ramps up and the impact of exposure management initiatives diminishes [10] Other Important Information - The company ended the quarter with total assets of $2,200,000,000 and shareholders' equity of $329,000,000, with book value per share increasing to $10.62 [20] - The average duration of the fixed income core portfolio was 3.1 years, reflecting a strategy to take advantage of higher yields [20] Q&A Session Summary Question: Guidance on ceded premium dollars for Q2 and Q3 - Management indicated that ceded premium dollars are expected to be slightly up for the remainder of the year, but not significantly [23][24][25] Question: Outlook on rates over the next two years - Management stated that they will maintain rate adequacy and adjust rates as necessary, with a focus on maintaining margins [26][28] Question: Competition in personal lines and new distribution - Management noted that they are gradually reopening with existing agents and are prepared to compete with new entrants in the market [29][30] Question: Sustainability of underlying loss levels - Management expressed confidence that current loss trends are favorable and sustainable barring major storms [31][32] Question: Competitive environment by state - Management highlighted differences in competitive dynamics across states, with Florida experiencing new entrants while California presents opportunities due to admitted carriers leaving [47][48]

Financial Data and Key Metrics Changes - The company reported a net income of $30,500,000 or $0.99 per diluted share for Q1 2025, compared to $14,200,000 or $0.47 per diluted share in the same quarter last year, reflecting a significant increase in profitability despite $31,800,000 in losses related to California wildfires [5][14] - Gross premiums earned rose to $353,800,000, up 3.6% from $341,400,000 in the prior year quarter, driven by higher gross premiums written [15] - Net premiums earned increased to $200,000,000, up 11.5% from $179,400,000 in the prior year quarter, reflecting growth in gross premiums earned and a reduction in ceded premiums [15] - The loss ratio improved to 49.7%, down from 56.9% in the same quarter last year, indicating better underwriting performance [17] - The net combined ratio for the quarter was 84.5%, down 9.5 points from 94% in the prior year quarter, driven by lower net loss and expense ratios [19] Business Line Data and Key Metrics Changes - The policy count decreased by 3% from Q4 2024, primarily due to normal attrition and seasonality, although there was early ramp-up in new personal lines business production [6] - The company is selectively writing new personal lines business while maintaining a focus on risk management and stringent underwriting [10] Market Data and Key Metrics Changes - The company has achieved rate adequacy in over 90% of its operating regions, positioning it to grow personal lines policies in force [6] - The competitive landscape in the commercial residential market is intensifying, but the company remains committed to ensuring rate adequacy without sacrificing profitability [7] Company Strategy and Development Direction - The company is pivoting its strategy towards managed growth by opening new territories for personal lines business, with nearly 75% of production capacity open as of April 2025 [9][10] - Legislative changes in Florida are expected to positively impact the economics of writing new profitable business, potentially reducing reinsurance pricing in 2026 [10][11] - The company is focusing on enhancing rate adequacy, managing exposure, and investing in technology and infrastructure to drive long-term shareholder value [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining profitability despite catastrophe losses, attributing this to strategic initiatives implemented over the years [6][14] - The company anticipates an increase in premiums in force in the second half of the year, with expectations for growth to accelerate in 2026 as new business production ramps up [8][10] - Management noted that favorable legislative impacts are contributing to improved loss trends, which are expected to remain stable [31] Other Important Information - The company ended the quarter with total assets of $2,200,000,000 and shareholders' equity of $329,000,000, with book value per share increasing to $10.62 [20] Q&A Session Summary Question: Guidance on ceded premium dollars for Q2 and Q3 - Management indicated that ceded premium dollars are expected to increase slightly for the remainder of the year, but not significantly [23][25] Question: Outlook on rates over the next few years - Management stated that they are focused on maintaining rate adequacy and will adjust rates as necessary based on the regulatory environment [26] Question: Competition in personal lines and new distribution - Management clarified that they are gradually reopening existing distribution channels and are prepared to compete with new entrants in the market [29] Question: Understanding the dynamics of PIFs and premiums in Florida - Management explained that the decrease in premiums is due to less substantial rate increases and increased competition in the commercial markets [36][37] Question: Competitive environment by state - Management noted that Florida is seeing new entrants, while other states remain stable, with California experiencing more opportunities due to admitted carriers leaving the state [44][46]

Core Insights - Heritage Insurance (HRTG) reported a revenue of $211.52 million for the quarter ended March 2025, reflecting a year-over-year increase of 10.6% [1] - The earnings per share (EPS) for the quarter was $0.99, significantly higher than the $0.47 reported in the same quarter last year, resulting in an EPS surprise of +115.22% against the consensus estimate of $0.46 [1] - The reported revenue was slightly below the Zacks Consensus Estimate of $213.69 million, showing a surprise of -1.01% [1] Financial Metrics - Ceded Premium Ratio stood at 43.5%, better than the average estimate of 44.1% based on two analysts [4] - Combined Ratio was reported at 84.5%, significantly lower than the estimated average of 96.9% by two analysts [4] - Expense Ratio was 34.8%, closely aligning with the average estimate of 34.9% [4] - Net investment income was $8.58 million, slightly below the estimated $8.85 million, representing a year-over-year change of +0.3% [4] - Net premiums earned were reported at $200.03 million, compared to the average estimate of $201.50 million, indicating a year-over-year increase of +11.5% [4] - Other revenue was $2.92 million, lower than the estimated $3.34 million, reflecting a year-over-year decrease of -12.4% [4] Stock Performance - Heritage Insurance shares have returned +40% over the past month, outperforming the Zacks S&P 500 composite's +11.5% change [3] - The stock currently holds a Zacks Rank 1 (Strong Buy), suggesting potential for continued outperformance in the near term [3]

Core Viewpoint - Heritage Insurance (HRTG) reported quarterly earnings of $0.99 per share, significantly exceeding the Zacks Consensus Estimate of $0.46 per share, and up from $0.47 per share a year ago [1][2] Earnings Performance - The earnings surprise for the quarter was 115.22%, following a previous surprise of 26.92% when actual earnings were $0.66 per share against an expectation of $0.52 [2] - Over the last four quarters, Heritage Insurance has consistently surpassed consensus EPS estimates [2] Revenue Performance - The company reported revenues of $211.52 million for the quarter, which was 1.01% below the Zacks Consensus Estimate, but an increase from $191.3 million year-over-year [3] - Heritage Insurance has exceeded consensus revenue estimates three times in the last four quarters [3] Stock Performance - Since the beginning of the year, Heritage Insurance shares have increased by approximately 65.3%, contrasting with a decline of 3.9% in the S&P 500 [4] Future Outlook - The company's earnings outlook is crucial for investors, with current consensus EPS estimates at $0.79 for the upcoming quarter and $2.43 for the current fiscal year [5][8] - The Zacks Rank for Heritage Insurance is currently 1 (Strong Buy), indicating expectations for the stock to outperform the market in the near future [7] Industry Context - The Insurance - Property and Casualty industry is ranked in the top 17% of over 250 Zacks industries, suggesting a favorable environment for stock performance [9]