Heritage Insurance (NYSE:HRTG) reported record second-quarter net income of $61.7 million, or $2.05 per diluted share, as lower weather-related losses, favorable reserve development, higher net premiums earned and increased investment income supported results.
The insurer’s net income increased from $48 million, or $1.55 per diluted share, in the prior-year quarter. For the first six months of 2026, net income rose 25% year over year to $98.2 million. Chief Financial Officer Kirk Lusk said the company generated an annualized return on average equity of 45.4% in the quarter.
“We continue to believe long-term shareholder value is created through profitable underwriting and disciplined capital allocation, not by pursuing premium growth at any cost,” Garateix said.
Underwriting Results Improve
Heritage’s net loss ratio improved to 30.4% in the second quarter from 38.5% a year earlier, while its combined ratio improved to 64.9% from 72.9%. Lusk attributed the improvement to favorable prior-year reserve development, lower weather losses and continued claims performance.
The company recognized $23.4 million of favorable prior-year reserve development, compared with $2.3 million in the prior-year period. Lusk said the development was spread across multiple accident years and was concentrated primarily at Heritage’s HBCIC unit, with contributions from Narragansett Bay. He cited stabilized claim frequency, manageable severity, lower late-reported claims and claims closing at amounts below expectations.
Lusk told analysts that the company expects underlying loss ratios to remain stable excluding reserve development, which he described as more of a one-time benefit. He also said new business production is being written within Heritage’s existing underwriting guidelines and margin standards.
Net premiums earned rose 2.4% to $201.1 million, while gross premiums earned declined slightly to $351.2 million from $353.6 million. Gross premiums written fell 5.5% to $380.4 million, primarily due to reductions in Florida commercial residential business.
Premiums in force totaled $1.41 billion at quarter-end, down 1.4% from a year earlier. Commercial residential premiums faced pricing pressure, particularly in Florida, while personal residential premiums in force increased 1.2% year over year.
Growth Efforts and Florida Pricing
Garateix said Heritage now operates as a “super-regional” insurer across multiple geographies, products and distribution channels, rather than solely as a Florida-focused property insurer. The company said it can direct capital toward markets and products offering stronger risk-adjusted returns and reduce exposure where competition or pricing is less favorable.
Nearly all of the company’s territories are open to new business, management said, and the pace of policy-count declines has continued to moderate. Heritage expects its personal residential business to approach an inflection point as new-business production improves and reopened territories mature.
The rollout of Guidewire has temporarily slowed production in some markets because agents need time to adapt to the new platform, Garateix said. However, he said agent feedback has been positive and activity has historically improved after agents become familiar with the system.
Heritage also wrote its first Texas policy through its excess and surplus lines platform in July. Garateix said the contribution will be small this year but that the company expects the operation to grow over the next two to three years.
In Florida commercial residential, management said it has walked away from accounts where rate cuts would make pricing inadequate. Lusk said that while policy counts increased through new business, the company has been writing smaller commercial accounts, contributing to a gap between policy count growth and declining premiums. Garateix said the company has seen signs that competitive pressure may be leveling off, while commercial business in Hawaii, New York and New Jersey has increased.
Regarding pricing, Lusk said lower reinsurance costs are expected to translate into Florida rate reductions. He indicated those reductions could be in a range similar to the 3% to 5% decreases taken last year, though the company was still finalizing its plans. Outside Florida, management expects modest rate increases broadly in line with claims inflation.
Reinsurance, Capital and Buybacks
Heritage completed its 2026-2027 catastrophe excess-of-loss reinsurance program during the second quarter. The company placed more than $2.2 billion of limit, expanded its use of multiyear coverage and catastrophe bonds, and expects approximately $63 million in annualized savings compared with the prior-year program.
Lusk said the new program could reduce the ceded-premium ratio by roughly one to two percentage points beginning in the third quarter. Management linked the reinsurance outcome to improved company fundamentals and the impact of Florida legislative reforms, including lower litigation activity and claims experience following Hurricane Milton.
Net investment income increased 17.3% to $10.6 million, driven by growth in invested assets. The company said its investment portfolio remains focused on high-quality fixed-income securities with durations closely aligned to liabilities.
At June 30, Heritage reported total assets of $2.45 billion, including $1.39 billion of cash and invested assets, and shareholders’ equity of $567.7 million. Book value per share reached $19.09, up 16.5% from year-end 2025 and 54.5% from a year earlier. Its debt-to-capital ratio declined to 11%.
The company repurchased more than 1 million shares for $24.6 million during the first half. Of that total, $12.6 million was repurchased under its board-authorized $50 million program, leaving $37.4 million available through Dec. 31, 2026.
Heritage initially described operating cash flow as $166.5 million during the quarter in prepared remarks, but Garateix clarified during the analyst question-and-answer session that the figure represented cash flow from operations for the first six months of 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.
