Heritage posts solid $8.2m net income in Q3, despite $48m of retained hurricane losses

Heritage Insurance Holdings has released its financial results for the third quarter of 2024, which includes a net income of $8.2 million, a solid improvement compared to the $7.4 million net loss that the firm posted in the prior year period.

According to the firm, this improved figure was primarily driven by the increase in net premiums earned and higher net investment income outpacing the increase in higher acquisition costs, with lower losses and loss adjustment expenses and general expenses.

Meanwhile, Heritage’s net loss ratio came in at 65.4% for the quarter, representing a 9.0-point improvement from 74.4% in the same quarter last year reflecting higher net premiums earned, coupled with slightly lower net losses and LAE.

Net weather losses for the current accident quarter were $63.0 million, an increase of $11.4 million from $51.6 million in the prior year quarter.

As well as this, catastrophe losses in the quarter were $48.7 million compared to $40.1 million in the prior year quarter. While other weather losses totaled $14.3 million, compared to the prior year quarter’s $11.5 million.

The company also posted a net combined ratio of 100.6%, a solid improvement from last year’s 110.8%, driven by a lower net loss ratio and lower net expense ratio.

Moreover, Heritage’s net premiums earned sat at $198.8 million for Q3’24, an increase of 12.6% from $176.6 million in the prior year quarter.

At the same time, Heritage posted a 1.1% increase in gross premiums written in the quarter, climbing to $313.0 million from $309.5 million in the prior year quarter. 

Premiums-in-force were $1.4 billion as of Q3’24, an increase of 6.0% compared to $1.3 billion as of Q3’23.

“The third quarter 2024 represents our eleventh consecutive quarter of driving higher in-force premium despite reductions in policy count,” Heritage noted.

In terms of investment, Heritage’s net investment income for the quarter was $9.8 million, up $2.9 million from the $6.9 million figure the firm posted in the prior year quarter.

Ernie Garateix, Heritage CEO, commented: “Our thoughts go out to the many people that were impacted by the devastating hurricanes that affected so many communities across the Southeastern United States. Our focus has been on providing our policyholders with the support and response that they expect and need as we assist them with their recovery.  To accomplish this, we have deployed our resources as well as those of our outsourced providers throughout the affected areas and have participated in numerous insurance hurricane villages, where we meet personally with policyholders to assist with their claims. While the recovery will take time, I am very proud of our employees and their commitment to our policyholders to help them through this challenging time.”

He continued: “While I am proud of the support that we have provided to our policyholders, I am also very proud of our third quarter financial results which clearly demonstrate the successful execution of our strategic initiatives focused on attaining rate adequacy and improving our underlying portfolio. A core objective of our strategy has been to position Heritage to sustain a hurricane loss while maintaining our profitability. I am pleased to note that even with $48.0 million of retained hurricane losses in the quarter, we have achieved this goal, reporting net income of $8.2 million in the third quarter.  That said, we have much more to accomplish as we now pivot our strategy to one of controlled growth. I remain very optimistic about the opportunities that lie ahead for our company, employees and shareholders.”

Concluding: “Given the improved rate adequacy across our footprint, we organically wrote more new admitted policies in the Southeast and the Northeast compared to the second quarter of 2024 as well as the prior year period as we pursue a controlled growth strategy designed to accelerate our revenue and earnings growth. Importantly, we believe we have the infrastructure in place today to support this expansion which should provide scale benefits over time. We have also seen a reduction in abusive claims practices, which had been driving up insurance premiums in Florida, following the recent enactment of legislative reforms. We believe that the benefits of this legislation will be further demonstrated by the ultimate catastrophe losses from this quarter’s hurricanes with insureds receiving fair settlements and with limited claims abuse, which we expect will have a favorable impact on reinsurance rates.”

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