Heritage Insurance Holdings, Inc. Q2 FY2025 earnings call

• Implemented strategic initiatives to achieve rate adequacy, manage exposure, and enhance underwriting discipline, leading to strong second - quarter results. - Re - underwrote the personal lines book, resulting in a contraction of policies in - force over 4 years by over 200,000 policies while in - force premium increased from approximately $1.1 billion to $1.4 billion. - New business was up 46% over the second quarter of 2024 and at the highest level since the second quarter of 2022; expecting growth to accelerate in 2026 as new business production ramps up across all geographies. - In the third year of an IT conversion to a Guidewire platform, expected to be completed next year, enabling more efficient business scaling and faster execution. - Maintained a stable indemnity - based reinsurance program with an increase in the amount of limit purchased by $285 million while overall costs increased by less than $8 million. - Refinanced senior credit facilities, upsizing the facility to $200 million from $150 million, extending the maturity to July 2030, and obtaining more favorable terms.

Heritage Insurance Holdings reported a net income of $48 million in the second quarter of 2025, up from $18.9 million in the same quarter the previous year. Gross premiums earned reached $353.6 million, a 1% increase from the prior year quarter. Net premiums earned rose to $196.3 million, a 3.2% increase from the prior year quarter. The net loss ratio improved to 38.5% from 55.7% in the prior year quarter. The net combined ratio was 72.9%, an improvement of 19.6 points from the prior year quarter. Total assets stood at $2.5 billion, and shareholders' equity was $383.3 million at the end of the quarter.

• Expect personal lines policies in - force to slowly increase through the second half of 2025 as new business production continues to ramp up. - Anticipate growth to accelerate in 2026 as new business production is fully ramped up across all geographies and exposure management initiatives are complete. - The reinsurance market is expected to be positively impacted by Florida legislative reforms and the maturation of Hurricane Milton's claims, potentially favorable for reinsurance pricing in 2026.

• Uncertainty in market conditions and regulatory changes that could affect future results. - Potential fluctuations in investment income due to the interest rate environment.

Q: Could you talk about the attritional loss trajectory?

A: It's somewhat stabilizing now. Frequency has continued to be down, severity is at a relatively modest rate, and it's likely to start leveling off.

Q: How do you see competition in Florida and agent enthusiasm?

A: Agents are enthusiastic as Heritage is about 90 - 95% open in its geographic areas. Welcome responsible competition, and most new carriers are focusing on the Citizens Take - out and depopulation program.

Q: How do rates trend?

A: Rates are trending up in most geographies but moderating as rate adequacy is achieved. Regulators have been good in getting adequate rates, and rate increases are moderating.

Q: Loss experience in Northeast markets?

A: Northeast is an area where they're still getting a bit more rate. Recently, some rates were approved in the Northeast which will help accelerate the process and be positive for the loss ratio.

Q: Comparison of catastrophe and weather losses?

A: Year - over - year, non - cat weather losses for the quarter were down about $7 million. This is due to better underwriting of the portfolio, which makes it less susceptible to severe convective storms.

Q: Prior period development of reserves?

A: Some of it is from strengthening reserves last year. There is favorable development now, which is positive, and we're also favorable for the full year to date.

Q: Expected PIF growth by region?

A: Mid - Atlantic (Virginia) and Northeast (New York) will see growth. In Florida, the policy count decline is leveling off and expected to be positive. California and Hawaii are also growing in terms of PIF count.

Q: Underlying property claim trends?

A: The 3 - year frequency trend is down about 0.9%, and the severity on a 3 - year basis is up about 5.4%, which are manageable numbers and have started to moderate