Heritage Insurance Holdings, Inc. Q3 FY2024 earnings call

• Expressed support for policyholders impacted by hurricanes, noting quick claim response with average wait time under a minute for Hurricane Milton claims. Over 230 employees took first notice of lost calls and over 200 vendors responded to emergency services.
• Highlighted financial results improvement with net income of $8.2 million ($0.27 per share) in Q3 2024, vs. net loss of $7.4 million ($0.28 per share) in Q3 2023. Year-to-date net income is $41.2 million ($1.35 per share).
• Discussed strategic initiatives focused on rate adequacy, enhancing underwriting discipline, and allocating capital. These initiatives have positioned Heritage to absorb retention losses while maintaining profitability.
• Underwriting efforts reduced policy count by over 66,000 (14.2%) while premium in force increased 6%. Rate adequacy initiatives led to significant rate increases earning through the portfolio, with more rate expected in 2025.
• Selectively entering personal lines business while maintaining underwriting discipline, and E&S business growth. Maintained a diversified portfolio with no single state over 30% of insured value.

In the third quarter, the commercial residential business saw a premium in force increase of 23.6% compared to Q3 2023, now accounting for 21.4% of total in-force premium. The E&S (Excess & Surplus) business had in-course premiums grow nearly $25 million, or 116%, year-over-year as it continued to write business in California, Florida, and South Carolina.

• Anticipates more rate to earn through the portfolio in 2025 than in 2024.
• Pivoting to a controlled growth strategy, including selectively writing personal lines in the southeast and northeast.
• Expecting positive impact on earnings from the controlled growth strategy.
• Maintaining reinsurance coverage through year-end 2024 and having a robust reinsurance tower to mitigate losses from significant events.

• Potential impact of legislative changes on rate adequacy and underwriting results.
• Volatility in weather losses and loss development.
• Exposure to specific hurricane layers affecting reinsurance coverage and losses.

Q: Mark Hughes asked about the sustainability of the loss ratio, the rate tailwind, and attractive geographies.

A: Kirk Lusk responded that there's a mix of third quarter favorability and a new normal due to underwriting and rating actions; more rate will earn through in 2025; Florida and Northeast are attractive with ongoing rate adequacy efforts.

Q: Paul Newsome inquired about reserve development, restatement premiums, and claim management fees.

A: Kirk Lusk explained reserve development is mainly from Hurricane Irma remaining claims; restatement premiums already included in estimates; claim management fees in Q4 not material.