Heritage Insurance Q1 Earnings Call Highlights

Key Points

• Heritage Insurance posted its most profitable first quarter as a public company, with Q1 2026 net income rising to $36.5 million, or $1.19 per share, helped by better underwriting, prior rate increases and lower weather-related losses. The company’s combined ratio improved to 81.0% from 84.5% a year earlier.
• Management is prioritizing disciplined growth rather than chasing underpriced business, saying Heritage has achieved rate adequacy in most geographies and is reopening for new business with a focus on margins. New business written jumped 62.7% year over year, and the company expects written premium growth to turn positive later in 2026.
• The balance sheet strengthened and shareholder returns increased, with book value per share up 61.5% year over year, debt-to-capital falling to 13%, and operating cash flow reaching $24.9 million. Heritage also approved a new $50 million share repurchase plan after buying back $12 million of stock year to date.

Heritage Insurance NYSE: HRTG reported what management described as the most profitable first quarter in the company’s history as a public company, citing improved underwriting performance, prior rate actions and disciplined expense management.

The property and casualty insurer posted first-quarter 2026 net income of $36.5 million, or $1.19 per diluted share, compared with $30.5 million, or $0.99 per diluted share, in the prior-year quarter. Chief Financial Officer Kirk Lusk said the quarter marked “the highest first-quarter earnings in our history,” despite weather losses in the Northeast and normal seasonality.

Chief Executive Officer Ernie Garateix said the quarter reflected a strategy the company has been executing for several years, focused on rate adequacy, tighter underwriting, reduced volatility and balance sheet protection. He said Heritage is now entering a new phase centered on reopening for new business, prudent growth and further diversification while maintaining acceptable margins.

Underwriting Results Improve

Heritage’s net loss ratio improved to 45.9% from 49.7% a year earlier. Lusk said the 3.8-point improvement was driven by lower net losses and loss adjustment expenses, lower weather losses, favorable attritional loss performance and higher favorable prior-year loss development.

The company’s net combined ratio improved to 81.0% from 84.5% in the first quarter of 2025. The improvement reflected the lower loss ratio, partially offset by a modest increase in the net expense ratio to 35.2% from 34.8%, which Lusk attributed primarily to higher human capital-related costs while net premiums earned remained relatively flat.

Gross premiums earned were $353.6 million, essentially unchanged from $353.8 million a year earlier. Net premiums earned totaled $199.7 million, also consistent with the prior-year quarter. Gross premiums written declined 2.6% to $346.7 million, mainly due to reduced Florida commercial residential business.

Garateix said the improved net loss ratio was supported by favorable attritional loss performance, lower weather-related losses and the ongoing effect of underwriting and pricing actions taken in recent years.

Growth Plans Focus on Discipline

Garateix said personal residential in-force premium increased 1.4% from the prior-year quarter, while commercial residential in-force premium declined 7.8% as the company continued to face competitive pricing pressure in the Florida commercial market.

“We will not waver from our commitment to achieve adequate margins,” Garateix said, adding that Heritage will not follow competitors into commercial residential products it views as inadequately priced. Instead, he said the company is using its commercial residential expertise to expand into other states, including Hawaii.

Management said Heritage has achieved rate adequacy across 90% of its geographies and is working to ramp up new business while maintaining underwriting discipline. Garateix said new business written rose 62.7% from the first quarter of 2025 and more than 30% from the fourth quarter of 2025. Retention remained strong at approximately 88%.

During the question-and-answer session, Lusk said the company expects written premium growth to turn positive, likely in the second or third quarter, and anticipates positive written premium growth for the full year.

Florida Competition and New Markets

In response to a question from Piper Sandler analyst Paul Newsome, Lusk said competition in Florida is currently concentrated more in commercial residential business. He noted that new entrants have appeared in personal lines, but many are currently focused on takeout policies rather than the broader voluntary market.

Garateix also discussed Heritage’s planned entry into Texas on an excess and surplus lines basis. He said the company expects the initiative to be modest in its first year and focused primarily on tier one and select tier two geographies that fit within Heritage’s risk tolerance. The company plans to use existing agent relationships and new distribution partners, while placing underwriting, claims and marketing professionals in Texas.

Garateix said any new business opportunity must meet the company’s financial and risk-based criteria, including an understanding of loss history, the regulatory environment, reinsurance implications and key risk drivers. He also said Heritage would only pursue opportunities expected to generate returns above its cost of capital.

Balance Sheet and Share Repurchases

Lusk said Heritage ended the quarter with total assets of $2.0 billion, cash and invested assets of $1.27 billion and stockholders’ equity of $520.4 million. Book value per share rose to $17.15 as of March 31, 2026, up 4.6% from Dec. 31, 2025, and 61.5% from the first quarter of 2025.

Net investment income increased 15.1% to $9.9 million from $8.6 million a year earlier, driven by higher invested assets and relatively stable returns. Lusk said the company continues to maintain a conservative investment portfolio matched to its liabilities.

Cash flow from operations was $24.9 million, and combined statutory surplus increased by $15.1 million from year-end 2025 to $407.6 million. Lusk said Heritage’s debt-to-capital ratio declined to 13% at the end of the quarter, reflecting improved earnings power and cash generation.

The company repurchased 446,884 shares for $12 million year to date through the call date under its prior $25 million repurchase authorization. Lusk said the board approved a new $50 million share repurchase plan, effective immediately through Dec. 31, 2026, replacing the prior plan. He clarified during the Q&A that the $12 million already repurchased is separate from the new $50 million authorization.

Reinsurance, Weather and Technology

Garateix said Heritage continues to see benefits from tort reform, including reduced litigation tied to Hurricane Ian industry loss expectations. He said the improved litigation environment in Florida, the absence of catastrophe losses in Heritage’s markets during 2025 and additional reinsurance capacity support management’s optimism that reinsurance pricing will continue to improve in 2026.

Asked about weather losses in the quarter, management said the catastrophe losses were related to Northeast winter storms, primarily affecting New York and New Jersey, with some impact in Rhode Island and Connecticut. Lusk said the first quarter generally tends to be the company’s weakest earnings quarter because of winter storms, while the fourth quarter has historically been its best.

Garateix also said Heritage is deploying artificial intelligence tools across the organization to improve efficiency, customer service, quality control and analytics, while maintaining appropriate oversight. He said the company expects these tools to help align staffing needs with customer demand.

Management said Heritage remains focused on underwriting discipline, capital allocation, data-driven analytics and exposure management as it pursues controlled growth in 2026.

About Heritage Insurance NYSE: HRTG

Heritage Insurance Holdings, Inc NYSE: HRTG is a property and casualty insurance holding company that offers homeowners insurance and related coverage products in the United States. Through its primary subsidiary, Heritage Property & Casualty Insurance Company, the firm underwrites standard and non-standard personal lines insurance, including homeowners, dwelling fire, flood, and condominium policies. Heritage leverages a network of independent insurance agents to distribute its products across select regional markets, with an emphasis on serving property owners in areas prone to severe weather events.

Founded in 2011 and headquartered in Jupiter, Florida, Heritage Insurance has grown to become one of the leading providers of residential property insurance in the state.

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