Heritage Insurance (NYSE:HRTG) outlined a controlled-growth strategy after reporting improved second-quarter profitability, citing rate adequacy, lower reinsurance costs, geographic diversification and a strengthened balance sheet.
Kirk Lusk, the company’s chief financial officer, said Heritage is a super-regional property and casualty insurer with $1.4 billion of premium in force across approximately 351,000 policies. Nearly half of its exposure is in the Northeast, while about 30% is in the Southeast, and more than 70% of insured value is outside Florida, according to Lusk.
Second-Quarter Results Reflect Improved Margins
The company’s net combined ratio improved to 64.8% from 72.9% a year earlier. The improvement was driven by an 8.1-point decline in the loss ratio to 30.4%, while the expense ratio remained flat at 34%.
Gross premiums written fell 5.5% to $388 million, while gross premiums earned declined modestly to $351 million. However, net premiums earned increased 2.4% to $201 million as Heritage retained more premium after reinsurance costs.
Premium in force declined 1.4% year over year and policy count fell 5%. Lusk said the reduction was concentrated in commercial residential business, where premium in force fell 12.7% to $237 million amid competitive pricing. Personal residential premium was stable to modestly higher at $1.16 billion.
“We would rather shrink that book than write underwriting at a loss,” Lusk said of the commercial residential business.
Turnaround Efforts and Catastrophe Performance
Lusk said the company’s current performance follows a multiyear turnaround that began after Heritage posted a $154 million loss in 2022. That result included a $94 million goodwill write-off and $40 million of retained losses from Hurricane Ian.
Since then, Heritage has repriced its portfolio, non-renewed business that did not meet underwriting standards, curtailed new personal-lines writing in many markets and invested in analytics, according to Lusk. The company reported net income of $45 million in 2023, $61.5 million in 2024 and $195 million in 2025. Through the first half of the current year, net income was $98.2 million, including $61.7 million in the second quarter.
Lusk emphasized that Heritage has remained profitable while absorbing catastrophe losses. The company retained $40 million of losses from Hurricane Idalia and the Maui wildfires in 2023, $105 million from Hurricanes Milton, Debby and Helene in 2024, and $24 million related to Northeast winter storms in the first quarter of the current year.
New Business Openings and Texas Expansion
After largely ceasing new personal-lines business in the Northeast and Florida in December 2022, Heritage has reopened most markets for new business. Lusk said the company began reopening territories in 2024 after achieving what it viewed as adequate pricing, with the final territory opened during the first quarter of the current year.
He said policy-count growth could begin in the fourth quarter or early next year as the openings gain traction.
The insurer also plans to enter Texas on an excess-and-surplus-lines basis. Heritage expects the Texas effort to be gradual and limited initially to coastal tier-one and tier-two areas, rather than moving inland into regions exposed to severe convective storms, winter weather and hail.
“It is going to be slow growth,” Lusk said, comparing the prospective Texas ramp to California, where he said it took four years to reach $40 million in premium.
Lusk said Florida, California, Connecticut, New York, Virginia and North Carolina are among the markets producing attractive returns on equity. He also described Hawaii as a relatively stable market with limited competition, where Heritage recently expanded commercial offerings on both an admitted and excess-and-surplus basis.
Reinsurance Savings and Capital Priorities
Heritage completed placement of its 2026 catastrophe excess-of-loss reinsurance program in May. Lusk said the placement generated more than $60 million in adjusted reinsurance savings.
- The program includes shared limits of $1.2 billion in the Northeast, $1.8 billion in the Southeast and $1 billion in Hawaii.
- First-event retention is $50 million in the Southeast, Mid-Atlantic and Hawaii, and $38 million in the Northeast.
- $55 million of limit comes from catastrophe bonds issued through Heritage’s Citrus Re special-purpose vehicle.
Lusk said reinsurance pricing could continue to decline next year, barring a major global event, although he said market participants expect reductions to be more moderate than the 15% to 20% declines seen this year.
Heritage ended the second quarter with $2.5 billion in total assets, $567 million in total equity and book value of $19.09 per share. Combined statutory surplus was $439 million. Cash and invested assets were just under $1.4 billion, while debt to capital declined to roughly 11% from about 50% at the end of 2022.
The company has a $50 million share-repurchase authorization through the end of 2026. Through June, Heritage had repurchased slightly more than 1 million shares for $24.6 million, with more than $37 million remaining under the current authorization, Lusk said.
On capital allocation, he said Heritage’s priority is to fund profitable organic growth, followed by share repurchases when management considers the stock undervalued. The board continues to evaluate reinstating a dividend quarterly, though Lusk said growth and buybacks remain ahead of dividends in the company’s stated priorities.
About Heritage Insurance (NYSE:HRTG)
Heritage Insurance Holdings, Inc is a property and casualty insurance company that provides residential property coverage through its insurance subsidiaries. Its products primarily include homeowners insurance and related coverage for personal and commercial residential properties, including protection against risks such as wind, fire and other property damage.
The company focuses on serving customers in catastrophe-exposed coastal markets, particularly in the Southeastern United States.
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