• Net Income: $18.9 million, up from $7.8 million in the prior year quarter.
• Earnings Per Share (EPS): $0.61 per diluted share, compared to $0.3 per diluted share in the prior year quarter.
• Total Revenue: $203.6 million, an increase of 9.9% from $185.3 million in the prior year quarter.
• Gross Premiums Earned: $350 million, up 6.1% from $330 million in the prior year quarter.
• Net Premiums Earned: $190.3 million, up 7.6% from $176.8 million in the prior year quarter.
• Net Investment Income: $9.8 million, an increase of $3.2 million from $6.6 million in the prior year quarter.
• Net Loss Ratio: Improved to 55.7%, down from 60.3% in the prior year quarter.
• Net Weather Losses: $19.7 million, a decrease from $33.8 million in the prior year quarter.
• Net Expense Ratio: Increased to 36.8%, up from 34.8% in the prior year quarter.
• Net Combined Ratio: Improved to 92.5%, down from 95.1% in the prior year quarter.
• Book Value Per Share: $8.32, up 32.7% from $6.27 in the prior year quarter.
• Return on Equity: 30.8%, an improvement from 19.7% in the prior year quarter.

• Warning! GuruFocus has detected 3 Warning Sign with HRTG.

Release Date: August 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Heritage Insurance Holdings Inc (NYSE:HRTG) reported a substantial increase in net income, growing by $11 million or 143% compared to the second quarter of 2023.
• The company achieved a 7.1% growth in gross written premium, amounting to an increase of $28 million.
• Heritage's E&S business experienced significant growth, with premiums increasing by nearly $30 million or 177% compared to the previous year.
• The company's commercial residential business saw a 29.4% growth in in-force premium, contributing positively to overall profitability.
• Heritage Insurance Holdings Inc (NYSE:HRTG) reported a 32.7% increase in book value per share, reflecting strong net income and reduced unrealized losses on fixed income securities.

Negative Points

• The company experienced a net unfavorable loss development of $8.7 million during the second quarter of 2024.
• Heritage Insurance Holdings Inc (NYSE:HRTG) faced higher operating expenses, which partially offset the increase in net income.
• The net expense ratio increased to 36.8%, up from 34.8% in the prior year quarter, due to higher acquisition costs and general administrative expenses.
• The company incurred reinstatement premiums from Hurricane Ian, totaling $18.7 million for the first half of the year.
• Heritage Insurance Holdings Inc (NYSE:HRTG) continues to face challenges with reserve development, particularly related to outstanding claims from Hurricane Irma.

Q & A Highlights

Q: Can you elaborate on the new growth effort and whether you are fully resuming new business writing? A: Ernie Garateix, CEO: We are selectively writing new business in profitable geographic areas, anchored by our underwriting criteria. We are not fully turning on the spigot but are focused on strategic and profitable growth.

Q: Could you explain the reserve development in the quarter and its sources? A: Kirk Lusk, CFO: The reserve development was primarily due to Hurricane Irma. We are about 99.2% closed on claims, but a few outstanding claims required adjustments.

Q: How does Hurricane Debbie compare to past events, and what impact do you expect? A: Ernie Garateix, CEO: Hurricane Debbie is similar to Hurricane Idalia in path but is larger and slower with more rain, leading to more flooding claims. Our exposure in the affected area is limited.

Q: What is driving the growth in the E&S market, and how does it compare to the admitted market? A: Ernie Garateix, CEO: The E&S market continues to grow, particularly in California, Florida, and South Carolina. It allows us to address rate and coverage issues more flexibly compared to the admitted market.

Q: What are the anticipated trends for rate increases over the next 12 months? A: Kirk Lusk, CFO: In the Northeast, we expect substantial rate increases due to loss trends and reinsurance costs. In Florida, rate increases are moderating due to legislative changes and reduced loss costs.

Q: How has your view on legislative changes in Florida evolved? A: Ernie Garateix, CEO: Initially, we were cautiously optimistic, but now we see positive impacts from legislative reforms in the data, making us more optimistic about future trends.

Q: Is the current net investment income a sustainable run rate? A: Kirk Lusk, CFO: Yes, we anticipate net investment income of $9 million to $10 million per quarter as a good run rate, with plans to extend duration in anticipation of interest rate drops.

Q: Are you considering expanding in Florida's Tri-County area given the changing dynamics? A: Ernie Garateix, CEO: We are open to selective growth in Tri-County, maintaining a comfortable concentration level without broadly expanding.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.