Summary of Heritage Insurance Conference Call Company Overview - **Company Name**: Heritage Insurance - **Ticker**: HRTG - **Headquarters**: Tampa, Florida - **Markets Served**: 16 markets including Southeast (Florida, Carolinas, Mississippi) and Northeast (under Narragansett Bay Insurance Company) [2][4] Core Points and Arguments - **Profitability Focus**: The company has shifted its focus towards profitability, emphasizing disciplined underwriting and proper pricing strategies. The goal is to achieve an underwriting profit [3][4] - **Controlled Growth Strategy**: Heritage Insurance is implementing a controlled growth strategy, having achieved rate adequacy in 95% of its territories. The remaining 5% will remain closed due to unfavorable risks [4][12] - **Financial Performance**: - In 2023, the company reported a net income of approximately $129 million year-to-date, despite facing $33 million in losses from California wildfires [10][12] - The company experienced a goodwill write-off of $94 million in 2022 but has shown improvement in profitability since then [9][10] - **Rate Increases**: The company has successfully implemented rate increases, with claims inflation running between 4%-8% across most geographies. Florida has seen negative loss trends, allowing for a -3% rate increase [15][16] - **Reinsurance Pricing**: The company anticipates a decrease in reinsurance pricing by 5%-10% due to increased capital in the market and favorable loss trends [22][24] Important but Overlooked Content - **Market Dynamics**: The company is witnessing some consolidation in the industry but remains selective in pursuing opportunities that align with its strategic objectives. The focus is on organic growth rather than top-line expansion for its own sake [19][20] - **Geographic Performance**: Florida currently has the highest return on equity (ROE) for the company, while Georgia is underperforming and may require legislative reforms to improve conditions [26][27] - **Policy Retention**: The company has maintained policy retention levels in the mid- to upper 80s, with expectations to improve as rates stabilize [30] - **Capital Allocation**: The company prioritizes capital for growth, followed by stock buybacks and dividends. It believes its stock is undervalued and will consider buybacks when excess capital is available [31][32] Conclusion Heritage Insurance is strategically positioning itself for controlled growth while focusing on profitability through disciplined underwriting and effective capital allocation. The company is optimistic about its future performance, particularly in Florida, and is adapting to market dynamics and regulatory changes.

Financial Performance - Premiums-in-force increased by 0.5% year-over-year, reaching $1.43 billion in Q2 2025[49] - Total insured value decreased by 4.7% compared to Q2 2024[50] - Policy count decreased by 11.9% compared to Q2 2024, reflecting selective underwriting[50] - Net combined ratio improved significantly, decreasing by 19.6 points to 72.9%[66] - Net loss ratio decreased by 17.2 points to 38.5%, driven by lower net losses and LAE[66] - Earnings before taxes increased by $38.1 million year-over-year to $63.0 million in Q2 2025[64] Strategic Initiatives - The company is shifting towards a controlled growth strategy, leveraging existing infrastructure while focusing on risk management and underwriting[35] - Diversification efforts have resulted in 71.1% of total insured value positioned outside of Florida as of Q2 2025[23] - A new share repurchase plan authorized $10.0 million through December 31, 2025[68] Reinsurance Program - The 2025 CAT XOL limit includes $1.1 billion in the Northeast, $1.6 billion in the Southeast, and $865 million in Hawaii[38]