Heritage Insurance Holdings, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Third quarter net income was $51.1 million, a 1.4% increase from $50.4 million in the prior-year quarter; year-to-date net income reached $149.3 million, up 15.8% from $128.9 million.
• Diluted earnings per share (EPS) increased 5.5% to $1.72 in Q3 2026 from $1.63 in Q3 2025; year-to-date diluted EPS rose 18.5% to $4.94 from $4.17.
• Total revenue increased 3.2% to $219.2 million in Q3 2026 from $212.5 million in Q3 2025; year-to-date revenue grew 2.2% to $646.1 million from $632.0 million.
• Net premiums earned increased 5.4% to $205.6 million in Q3 2026 from $195.1 million in Q3 2025; year-to-date net premiums earned rose 2.5% to $606.4 million from $591.5 million.
• Net investment income increased 17.3% to $11.4 million in Q3 2026 from $9.7 million in Q3 2025; year-to-date net investment income was $31.8 million.
• Net loss ratio increased 1.3 percentage points to 39.6% in Q3 2026 from 38.3% in Q3 2025; year-to-date net loss ratio improved 3.6 percentage points to 38.6% from 42.2%.
• Net expense ratio improved 1.2 percentage points to 33.4% in Q3 2026 from 34.6% in Q3 2025; year-to-date net expense ratio improved 0.3 percentage points to 34.3% from 34.6%.
• Net combined ratio was relatively flat at 73.0% in Q3 2026 compared to 72.9% in Q3 2025; year-to-date net combined ratio improved 3.9 percentage points to 72.9% from 76.8%.
• Annualized return on equity was 35.1% for Q3 2026 and 36.1% year-to-date.
• Stockholders' equity increased 37.0% to $599.1 million at September 30, 2026, from $437.3 million at September 30, 2025.
• Book value per share was $20.22 at September 30, 2026, up 23.4% from year-end 2025 and 42.9% from the prior-year quarter.
• Debt-to-capital ratio improved to 10.5% in Q3 2026 from 15.3% in the prior-year quarter.
• Gross premiums written decreased 3.1% to $322.8 million in Q3 2026 from $333.2 million in Q3 2025; year-to-date gross premiums written fell 3.8% to $1,058.0 million from $1,100.1 million.
• Ceded premiums decreased 11.8% to $147.2 million in Q3 2026 from $166.8 million in Q3 2025; year-to-date ceded premiums fell 5.6% to $451.1 million from $477.9 million.
• Net losses and loss adjustment expenses were $81.4 million in Q3 2026, up $6.6 million from $74.8 million in Q3 2025.
• Net weather and catastrophe losses were $33.6 million in Q3 2026 compared to $13.8 million in Q3 2025.
• Net favorable prior-year loss development was $14.0 million in Q3 2026 compared to $5.0 million in Q3 2025.
• Cash and invested assets totaled $1.4 billion at September 30, 2026, up 8.8% from December 31, 2025.

Guidance and Future Outlook:

• Management expects unrealized losses on the fixed income portfolio to continue rolling off as investments mature, with no anticipated need to sell investments prior to maturity.
• The Company plans to leverage its entry into the State of Texas on an excess and surplus lines basis to foster future growth.
• Management intends to continue diversifying and expanding over the next several years through opportunistic capital deployment across geographies, products, and distribution channels.
• The Company aims to maintain underwriting discipline and rate adequacy while driving prudent top-line growth.

Business Segments and Product Lines:

• Premiums-in-force were $1.40 billion at September 30, 2026, down 2.8% from $1.44 billion in Q3 2025, primarily due to commercial residential premium reductions from competitive pricing pressure.
• Personal lines growth in states other than Florida more than offset the reduction in Florida personal lines premiums-in-force.
• Gross premiums earned decreased 2.5% to $352.8 million in Q3 2026 from $362.0 million in Q3 2025, reflecting a decline in commercial residential business.
• The Company continues to emphasize underwriting discipline and adequate profitability for commercial residential business in Florida, requiring it to meet pricing and risk standards.
• The Company expanded its geographic reach with entry into Texas on an excess and surplus lines basis.

Market and Competitive Landscape:

• The Florida commercial residential market remains highly competitive, contributing to premium reductions in that segment.
• Management noted that competition has intensified in certain areas, leading to selective growth opportunities while remaining disciplined in other markets.
• The Company is leveraging data-driven analytics using AI and other technology tools to enhance underwriting and claims capabilities.

Risks and Challenges:

• The Company absorbed $15.8 million of pre-tax catastrophe losses in Q3 2026, including $9.1 million from Hurricanes Lala and Lowell and $6.7 million from other weather events like a late September Nor'easter.
• Commercial residential premium reductions were driven by competitive pricing pressure.
• General and administrative expenses increased 5.2% due to higher employee compensation, partially offset by a decrease in corporate insurance expense from a non-recurring premium refund.
• The effective tax rate was 24.5% in Q3 2026 compared to 26.2% in Q3 2025, with variances driven by permanent items.
• Accumulated other comprehensive loss was $33.2 million, net of tax, attributable to unrealized losses on the investment portfolio due to rising interest rates.

Management Commentary and Tone:

• CEO Ernie Garateix stated the Company is generating record earnings and producing substantial capital, positioning it well to continue momentum.
• Management described the business as stronger, better diversified, and more resilient, operating as a super-regional insurance carrier.
• Garateix noted that despite absorbing higher weather losses, the Company still modestly grew earnings per share, demonstrating earnings resilience.
• Management believes the Company's full value has yet to be realized and plans to opportunistically deploy capital across multiple geographies and products.
• The Company aims to capitalize on selective growth opportunities while maintaining underwriting discipline.

Other Key Points:

• The Company repurchased 1,101,508 shares of common stock for $27.9 million year-to-date in 2026.
• In Q3 2026, the Company repurchased 100,000 shares for approximately $3.3 million under the existing program.
• As of September 30, 2026, $34.1 million remained available under the existing share repurchase authorization.
• On October 28, 2026, the Board of Directors established a new share repurchase program to commence upon the expiration of the existing program on December 31, 2026, authorizing up to $50.0 million of common stock through December 31, 2027.
• The Company's June 2026 catastrophe excess of loss reinsurance program generated treaty-year expense savings of $63.2 million, with seven-twelfths recognized in calendar year 2026.
• The northeast net quota share program was reduced, effective December 31, 2025.
• The Company has extended the average duration of its fixed income portfolio to 3.3 years to take advantage of higher yields further out on the yield curve.
• The Company writes approximately $1.4 billion of personal and commercial residential premium across a multi-state footprint covering the northeast, southeast, and Hawaii on an admitted basis, with additional excess and surplus lines premium in California, Florida, Hawaii, South Carolina, and Texas.