Heritage Insurance reported second-quarter 2025 financial results, reflecting significant improvements across key metrics.
Net income reached $48 million, up from $18.9 million in the prior-year quarter. The company cited declining losses and loss adjustment expenses, reduced operating costs, and rising net premiums earned as primary contributors.
Gross premiums earned were $353.6 million, a 1% increase over the prior-year quarter’s $350.1 million, while net premiums earned grew 3.2% to $196.3 million from $190.3 million, driven by higher gross premiums and a reduction in ceded premiums that previously included a $10 million Hurricane Ian reinstatement premium. The ceded premium ratio narrowed to 44.5% from 45.6%.
In the first quarter of 2025, Heritage posted net income of $30.5 million, more than double the $14.2 million earned in the prior year period. That performance came despite net pre‑tax wildfire losses in California totaling $31.8 million.
Gross premiums earned rose 3.6% to $353.8 million, and net premiums earned climbed 11.5% to $200 million. The combined ratio improved to 84.5% from 94.0%, and return on equity increased to 39.3% from 25%, demonstrating early signs of underwriting recovery before the Q2 results.
Chief executive officer Ernie Garateix (pictured above) said the Q2 results reflect years of targeted initiatives which have elevated earnings capacity while maintaining support to policyholders.
“Over the last several years we have focused on disciplined underwriting, driving rate adequacy, and refining customer service. Taken together, these actions have created significant earnings power within our company," he said.
The net loss ratio in Q2 improved to 38.5%, down 17.2 points from 55.7%, supported by lower weather losses – $12.5 million versus $19.7 million – a decrease in attritional losses, and favorable reserve development.
It is also worth noting that the company had largely ceased writing new personal lines policies in Florida and the Northeast in late 2022 due to profitability concerns and market conditions.
By mid-2024, Heritage reached what Garateix described as an inflection point, and began selectively re-entering those markets under a strategy of controlled growth grounded in risk management and disciplined underwriting. The firm now plans to expand offerings selectively across those regions as underwriting and rate environments stabilize.
Net loss reserve development for the quarter contributed $2.3 million this quarter, compared with adverse development of $8.7 million in the prior year. Net expense ratio fell to 34.4%, and the combined ratio improved to 72.9% from 92.5%. Return on average equity increased to 53.9% from 30.8%.
Gross premiums written slipped 3.2% to $411 million from $424.5 million, reflecting ongoing exposure management in personal lines, a trend the company expects to reverse by year‑end. In-force premium for commercial residential lines declined 8.2%, while total premiums-in-force rose modestly to $1.43 billion from $1.42 billion.
Losses and loss adjustment expenses decreased 28.6%, and policy acquisition costs declined 8.6%, supported by higher ceding commissions under the quota share reinsurance program. General and administrative costs rose 7.1%, driven mainly by personnel expenses, with the net G&A ratio roughly half a percentage point higher than in the comparable period.
Heritage also finalized its 2025–2026 catastrophe excess‑of‑loss reinsurance program, securing approximately $2.479 billion in coverage – an increase of $285 million over the prior cycle – at a total cost of around $430.9 million, roughly $7.8 million more.
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