Heritage Insurance Holdings, Inc. Q1 FY2025 earnings call

• Achieved net income of $30.5 million ($0.99 per diluted share) in Q1 2025, including $31.8 million in pre-tax losses from California wildfires. Compared to Q1 2024 ($14.2 million net income, $0.47 per diluted share with no major weather events). • Third consecutive quarter impacted by catastrophe losses but maintained profitability due to strategic initiatives for rate adequacy, exposure management, and underwriting discipline. 90% of regions have rate adequacy, positioning for growth in personal lines. • Employees provided strong support in customer service and claims handling during events like hurricanes and wildfires. Policy count down 3% in Q1 2025 due to seasonality and early ramping of new personal lines business. • E&S business offers options, with potential for homeowner's business moving to E&S in California. Reinsurance program maintained with stable indemnity-based program, 6-1 renewal completed earlier than expected, increasing limit by $285 million with cost increase <$8 million.

• Q2 and Q3 seeded premium expected to be slightly up with ratio up a bit but not significantly. • Expect premiums in force to increase in H2 2025. New business production to slowly accelerate in 2025, with acceleration in 2026 as fully ramped up across geographies and exposure management headwinds behind. • Legislative changes in Florida positive for writing profitable business and consumer insurance costs; reinsurance market may see lower pricing in 2026 due to Hurricane Milton claims.

• Catastrophe losses remain a risk, though strategy is in place to manage exposure. • Competition in personal lines, with new companies entering, though Heritage is prepared to compete responsibly. • Fluctuations in reinsurance pricing and market dynamics.

Q: Thoughts on seeded premium dollars in Q2 and Q3?

A: Slightly up, ratio up a bit but not significantly.

Q: Trajectory of rates over next 6 months, year, two years?

A: Continue to maintain rate adequacy, 90% of geography is rate adequate, regulatory environment supports keeping up with rate.

Q: Risk of rates going down?

A: Okay if losses go down correspondingly, e.g., Florida 3% rate decrease with losses down.

Q: Competition in personal lines new distribution?

A: Existing distribution reopened with agents, new companies entering, but Heritage ready to compete responsibly.

Q: Underlying loss excluding weather and cat, sustainable?

A: Loss trends favorable, legislative impacts positive, trends expected to be flat even with claims inflation.

Q: Florida market PIFs down, different dynamics?

A: Premium rate increases not as substantial, competition in commercial markets, reopening territories to accelerate in H2 2025.

Q: Competitive environment by state?

A: Florida has new entrants, California has more homeowner's business moving to E&S, remaining states stable with existing agent distribution.

Q: Admitted vs not admitted in states?

A: Not admitted/EMS more in states with dislocation, allowing quicker rate adjustments; admitted fine in stable environments, EMS growing in larger states.