HRTG Boosts Premiums-in-Force With Mix Shift: Will it Aid Growth?

Core Viewpoint - Heritage Insurance Holdings Inc. (HRTG) presents a strong long-term investment opportunity, supported by consistent growth in premiums-in-force, driven by strategic underwriting, changing market conditions, and a deliberate shift in business mix [1] Group 1: Premiums and Growth Strategy - HRTG has prioritized profitability over volume by exiting less profitable personal lines in high-risk areas and focusing on higher-margin commercial, residential, and Excess & Surplus (E&S) segments, leading to growth in premiums-in-force despite a slight decline in policy count [2][4] - As of March 31, 2025, premiums-in-force reached $1.4 billion, reflecting a 3.3% year-over-year increase, primarily due to rate actions; Florida premiums-in-force decreased by 3%, while non-Florida markets increased by 10.1%, showcasing the effectiveness of HRTG's geographic diversification strategy [3][9] - The company has resumed personal lines growth following favorable legislative changes in Florida and improved reinsurance pricing, indicating a disciplined approach to growth [4][9] Group 2: Competitive Landscape - HRTG competes closely with Universal Insurance Holdings (UVE) and HCI Group (HCI), both of which have a significant presence in Florida [5] - Universal Insurance's growth is supported by a steady rise in premiums-in-force through strategic rate increases and prudent underwriting, enhancing overall profitability [6] - HCI Group's growth is driven by disciplined pricing and strategic acquisitions, resulting in a notable increase in gross premiums earned and improved underwriting revenues [7] Group 3: Financial Performance and Valuation - HRTG's shares have gained 84.6% year-to-date, although this performance is below the industry average [8] - The company trades at a price-to-book value ratio of 2.1, exceeding the industry average of 1.55, but holds a Value Score of B [11] - Consensus estimates for HRTG's EPS for the second and third quarters of 2025 have remained unchanged, with projections indicating year-over-year increases for 2025 and 2026 [12][13]