Heritage Insurance Holdings, Inc. Q4 FY2024 earnings call

• Impact of hurricanes and wildfires: 2024 had destructive hurricanes, 2025 had wildfires in California and New York. Employees supported policyholders through catastrophes.
• Financial performance: Full year 2024 net income $61.5 million or $2.01 per share, up from 2023. Tangible book value per share up 30% to $9.50, ROE 24.1%.
• Underwriting: Strategically reduce exposures in unprofitable areas, increase in profitable geographies. Declining policy count expected to moderate. Stable reinsurance program.
• Rate adequacy: Significant rate increases earning to portfolio in 2024, expecting more in 2025. Selectively writing new personal lines business with focus on risk management.
• E and S business: Writing in California, Florida, South Carolina; plan to evaluate more states. Diversified portfolio with no single state over 30% of insured value.

The commercial residential business accounts for 20% of in-force premiums. Gross premiums earned rose to $360.5 million, up 6.1% from the prior year quarter. Net premiums earned increased to $199.3 million, up 12.2%. Net investment income for the quarter was $8.5 million, an increase of 27% from the prior year quarter. Total revenues for the quarter were $210.3 million, up 12.5% from the prior year quarter. Net loss ratio increased to 54.7%, net expense ratio was 35%, and net combined ratio was 89.7%.

• Anticipates approximately $35 million to $40 million of pretax net current accident quarter catastrophe losses in Q1 2025 due to California wildfires.
• Rate increases to continue earning through the book of business, providing tailwind for growth.
• Focus on executing strategic initiatives aimed at driving shareholder value, including managing exposures, enhancing rate adequacy, and investing in technology infrastructure.

Q: Can you describe the profile of the LA Fire claims? Are they mostly straightforward total loss claims, or are there more complex smoke damage claims? And then also if you can maybe give a mix of the percentage of claims out of the EIN fire versus the Palisades fire?

A: So for total claims, we have fifteen that are total, and then the remaining twenty or so have some kind of smoke damage to that event. And most of those claims we have, a couple in the Eton Fire and then the remaining being in Mount Sage.

Q: Regarding the prior period development for the quarter. Can you just provide more detail as to that?

A: The bulk of that has to do with, you know, Hurricane Irma, where we're actually getting towards the tail out of it and, you know, have, you know, what really wound that down and have a few claims remain.

Q: As you continue to achieve rate adequacy in most of your markets, in the admitted market, how are you looking at growth in E and S? Do you continue to see the same momentum there as previously?

A: So we do, but I think with the E and S, we're using that in various distinct markets. That gives us the ability to adapt to those market dynamics state by state. So, obviously, we look at what's going on in those markets, the regulatory environment, the ability to get ready, the ability to change coverages. I think we look at each of those markets and the ability to make a decision whether the automated product or the E and S product is the best fit for that market Q: You had noted how you plan to reopen profitable territories. Does this just include Florida, or which geographies are you finding most attractive at this point?

A: No. This is including our entire footprint northeast, southeast, you know, so it's everywhere.