Heritage Insurance (NYSE: HRTG) 2025 profit jumps to $195.6M with stronger equity
Rhea-AI Filing Summary
Heritage Insurance Holdings filed an amended annual report mainly to add the signing date of its independent auditor’s opinion, with 2025 financial statements otherwise unchanged. The auditor issued unqualified opinions on both the financial statements and internal control over financial reporting.
For 2025, Heritage generated net income of $195.6 million on total revenues of $847.3 million, up from net income of $61.5 million in 2024. Net premiums earned reached $794.2 million, while losses and loss adjustment expenses fell to $313.2 million. Earnings per diluted share rose to $6.32. Cash, cash equivalents and restricted cash increased to $572.6 million, and stockholders’ equity grew to $505.3 million as of December 31, 2025.
Positive
- Strong earnings growth: Net income increased to $195.6 million in 2025 from $61.5 million in 2024, with diluted EPS rising to $6.32, reflecting materially improved profitability.
- Stronger balance sheet: Stockholders’ equity grew to $505.3 million and cash, cash equivalents and restricted cash reached $572.6 million as of December 31, 2025, enhancing capital and liquidity.
- Clean audit and controls: The independent auditor issued unqualified opinions on both the 2025 financial statements and internal control over financial reporting, supporting confidence in reported results.
Negative
- None.
Insights
Heritage posts sharply higher 2025 profits with stronger capital.
Heritage Insurance Holdings shows a substantial earnings rebound in 2025. Net income rose to $195.6 million from $61.5 million, driven by lower losses and loss adjustment expenses of $313.2 million versus $447.0 million in 2024 and stable net premiums earned.
Underwriting performance improved as policy acquisition and general and administrative costs remained controlled relative to premium volume. The company’s auditor issued clean opinions on both the financial statements and internal controls, and identified unpaid losses and LAE of $579 million as the key judgmental reserve area.
Capital and liquidity also strengthened. Stockholders’ equity increased to $505.3 million, while cash, cash equivalents and restricted cash reached $572.6 million. Future results will depend on how actual claim development compares with the $579 million reserve estimate for unpaid losses and loss adjustment expenses at December 31, 2025.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Year Ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
(STATE OF INCORPORATION) |
(I.R.S. ID) |
(
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Trading Symbol(s) |
Name of Each Exchange on Which Registered |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
o |
x |
|
Non-accelerated filer |
o |
Smaller reporting company |
|
Emerging growth company |
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No
The aggregate market value of the Registrant’s common stock held by non-affiliates was $
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement for its Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K, provided that if such Proxy Statement is not filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K, an amendment to this Form 10-K shall be filed no later than the end of such 120-day period.
EXPLANATORY NOTE
PART II
Item 8. Financial Statements and Supplementary Data
HERITAGE INSURANCE HOLDINGS, INC.
INDEX OF CONSOLIDATED FINANCIAL STATEMENTS
|
Page |
|
|
Report of Independent Registered Public Accounting Firm ( |
2 |
|
|
Consolidated Balance Sheets as of December 31, 2025 and December 31, 2024 |
4 |
|
|
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2025, 2024 and 2023 |
5 |
|
|
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2025, 2024 and 2023 |
6 |
|
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, 2024 and 2023 |
7 |
|
|
Notes to Consolidated Financial Statements |
9 |
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Heritage Insurance Holdings, Inc.
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Heritage Insurance Holdings, Inc. (the “Company”) as of December 31, 2025 and 2024; the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2025; and the related notes and schedules (collectively referred to as the “financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2025 based on criteria established in Internal Control - Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO framework”).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in the COSO framework.
Basis for Opinion
The Company's management is responsible for these financial statements; maintaining effective internal control over financial reporting; and its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management's Report on Internal Control over Financial Reporting.” Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Liability for Unpaid Losses and Loss Adjustment Expenses - Refer to Notes 1 and 13 to the Financial Statements
Critical Audit Matter Description
The Company’s estimated liability for unpaid losses and loss adjustment expense (LAE) totaled $579 million at December 31, 2025. The Company’s reserve for unpaid losses and LAE represents the estimated ultimate cost of settling all claims incurred related to insured events that have occurred as of the reporting date. The Company determines the reserve for unpaid losses and LAE on an individual-case basis for those claims reported as of December 31, 2025, with bulk reserves for additional development, if any, on the reported claims and an estimate for unpaid losses and LAE for all claims incurred related to insured events that have occurred as of December 31, 2025 but have not yet been reported by the policyholders to the Company (collectively referred to as incurred but not reported or IBNR). Management estimates IBNR reserves by projecting ultimate losses using industry-accepted actuarial methods. Management also engages independent actuarial firms to prepare an actuarial analysis of unpaid losses and LAE and provides statements of actuarial opinion on management’s estimate of unpaid losses and LAE.
Estimating the liability for unpaid losses and LAE requires significant judgment including the selection of loss ratios, projection of loss development patterns, and use of and weighting of actuarial methods. Estimating the liability for unpaid losses and LAE is inherently uncertain, dependent on management’s judgment, and significantly impacted by claim and actuarial factors and conditions that may change over time. The ultimate settlement of unpaid losses and LAE may vary materially from the recorded liability, and such variance may adversely affect the Company’s financial results. For these reasons, we identified the estimate of unpaid losses and LAE as a critical audit matter, as it involved especially subjective auditor judgment.
How the Critical Audit Matter was Addressed in the Audit
Our audit procedures related to the unpaid losses and LAE reserve included the following, among others:
/s/ Plante & Moran, PLLC
We have served as the Company’s auditor since 2018.
Chicago, Illinois
March 12, 2026
HERITAGE INSURANCE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
ASSETS |
|
|
|
|
|
|
||
Fixed maturities, available-for-sale, at fair value (amortized cost of $ |
|
$ |
|
|
$ |
|
||
Equity securities, at fair value, (cost $ |
|
|
|
|
|
|
||
Other investments, net |
|
|
|
|
|
|
||
Total investments |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
|
|
|
|
|
||
Restricted cash |
|
|
|
|
|
|
||
Accrued investment income |
|
|
|
|
|
|
||
Premiums receivable, net |
|
|
|
|
|
|
||
Reinsurance recoverable on paid and unpaid claims, net of allowance for credit losses of $ |
|
|
|
|
|
|
||
Prepaid reinsurance premiums |
|
|
|
|
|
|
||
Deferred income tax asset, net |
|
|
|
|
|
|
||
Deferred policy acquisition costs, net |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Right-of-use lease asset, finance |
|
|
|
|
|
|
||
Right-of-use lease asset, operating |
|
|
|
|
|
|
||
Intangibles, net |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total Assets |
|
$ |
|
|
$ |
|
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
||
Unpaid losses and loss adjustment expenses |
|
$ |
|
|
$ |
|
||
Unearned premiums |
|
|
|
|
|
|
||
Reinsurance payable |
|
|
|
|
|
|
||
Long-term debt, net |
|
|
|
|
|
|
||
Advance premiums |
|
|
|
|
|
|
||
Income taxes payable, net |
|
|
|
|
|
|
||
Accrued compensation |
|
|
|
|
|
|
||
Lease liability, finance |
|
|
|
|
|
|
||
Lease liability, operating |
|
|
|
|
|
|
||
Accounts payable and other liabilities |
|
|
|
|
|
|
||
Total Liabilities |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|||
Stockholders’ Equity: |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated other comprehensive income, net of taxes |
|
|
( |
) |
|
|
( |
) |
Treasury stock, at cost, |
|
|
( |
) |
|
|
( |
) |
Retained earnings |
|
|
|
|
|
|
||
Total Stockholders' Equity |
|
|
|
|
|
|
||
Total Liabilities and Stockholders' Equity |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these consolidated financial statements.
4
HERITAGE INSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except share and per share data)
|
|
For the Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
REVENUES: |
|
|
|
|
|
|
|
|
|
|||
Gross premiums written |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Change in gross unearned premiums |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gross premiums earned |
|
|
|
|
|
|
|
|
|
|||
Ceded premiums earned |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net premiums earned |
|
|
|
|
|
|
|
|
|
|||
Net investment income |
|
|
|
|
|
|
|
|
|
|||
Net realized gains (losses) on debt securities and other investments |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other revenue |
|
|
|
|
|
|
|
|
|
|||
Total revenues |
|
|
|
|
|
|
|
|
|
|||
EXPENSES: |
|
|
|
|
|
|
|
|
|
|||
Losses and loss adjustment expenses |
|
|
|
|
|
|
|
|
|
|||
Policy acquisition costs, net of ceding commission income (1) |
|
|
|
|
|
|
|
|
|
|||
General and administrative expenses, net of ceding commission income (2) |
|
|
|
|
|
|
|
|
|
|||
Intangible asset impairment |
|
|
|
|
|
|
|
|
|
|||
Total expenses |
|
|
|
|
|
|
|
|
|
|||
Operating income |
|
|
|
|
|
|
|
|
|
|||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|||
Income tax expense |
|
|
|
|
|
|
|
|
|
|||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
OTHER COMPREHENSIVE INCOME |
|
|
|
|
|
|
|
|
|
|||
Change in net unrealized gains on investments |
|
|
|
|
|
|
|
|
|
|||
Reclassification adjustment for net realized investment losses (gains) |
|
|
|
|
|
( |
) |
|
|
|
||
Income tax expense related to items of other comprehensive income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total comprehensive income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
|
|
|
|
|
|
|
|
|||
Diluted |
|
|
|
|
|
|
|
|
|
|||
Earnings per share |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The accompanying notes are an integral part of these consolidated financial statements.
5
HERITAGE INSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except share and per share data)
|
|
Common |
|
|
Common |
|
|
Additional |
|
|
Retained |
|
|
Treasury |
|
|
Accumulated |
|
|
Total |
|
|||||||
Balance at December 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Net unrealized change in investments, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Surrendered shares for tax withholding |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Restricted stock vested |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issued restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Forfeiture on restricted stock |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Stock-based compensation on restricted stock |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Issuance of common stock through public and private offering, net |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance at December 31, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
Net unrealized change in investments, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Surrendered shares for tax withholding |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Issued restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation on restricted stock |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Additional costs associated to public offering |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Unallocated dividends on restricted stock forfeitures |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance at December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
Net unrealized change in investments, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Surrendered shares for tax withholding |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Issued restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation on restricted stock |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Stock buyback |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance at December 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
The accompanying notes are an integral part of these consolidated financial statements.
6
HERITAGE INSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
|
|
For the Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Adjustments to reconcile net income to net cash provided by operating |
|
|
|
|
|
|
|
|
|
|||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|||
Bond amortization and accretion |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of original issuance discount on debt |
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|||
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|||
Net realized (gains) losses |
|
|
( |
) |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
( |
) |
|
|
|
||
Goodwill or intangible asset impairment |
|
|
|
|
|
|
|
|
|
|||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
Accrued investment income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Premiums receivable, net |
|
|
|
|
|
( |
) |
|
|
|
||
Prepaid reinsurance premiums |
|
|
|
|
|
( |
) |
|
|
|
||
Reinsurance recoverable on paid and unpaid claims |
|
|
|
|
|
( |
) |
|
|
|
||
Income taxes receivable |
|
|
|
|
|
|
|
|
( |
) |
||
Deferred policy acquisition costs, net |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Right-of-use asset, net |
|
|
|
|
|
|
|
|
|
|||
Other assets |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Unpaid losses and loss adjustment expenses |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Unearned premiums |
|
|
|
|
|
|
|
|
|
|||
Reinsurance payable |
|
|
|
|
|
|
|
|
( |
) |
||
Income taxes payable |
|
|
|
|
|
|
|
|
|
|||
Debt issuance costs |
|
|
( |
) |
|
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Advance premiums |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Accrued compensation |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Lease liability, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other liabilities |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|||
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
Fixed maturity securities sales, maturities and paydowns |
|
|
|
|
|
|
|
|
|
|||
Fixed maturity securities purchases |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Redemption of equity securities |
|
|
|
|
|
|
|
|
|
|||
Return on other investments |
|
|
|
|
|
|
|
|
|
|||
Other investment sales |
|
|
|
|
|
|
|
|
|
|||
Equity securities reinvestments of dividends |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from the sale of property |
|
|
|
|
|
|
|
|
|
|||
Cost of property and equipment acquired |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net cash (used in) provided by investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
Proceeds from loan agreement |
|
|
|
|
|
|
|
|
|
|||
Issuance of common stock, net of offering costs |
|
|
|
|
|
( |
) |
|
|
|
||
Mortgage loan payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Principal payments on term loan facility |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Repayment of loan agreement |
|
|
( |
) |
|
|
|
|
|
|
||
Tax withholding on share-based compensation awards |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchase of treasury stock |
|
|
( |
) |
|
|
|
|
|
|
||
Dividends forfeited (paid) |
|
|
|
|
|
|
|
|
( |
) |
||
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Increase (decrease) in cash, cash equivalents, and restricted cash |
|
|
|
|
|
( |
) |
|
|
|
||
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
|
|
|
|||
Cash, cash equivalents and restricted cash, end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|||
7
|
|
For the Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Supplemental Cash Flows Information: |
|
(in thousands) |
|
|||||||||
Non-cash promissory note received in connection with the sale of property |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Interest paid |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Cash paid for income taxes consisted of the following as of December 31:
|
|
For the Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Income taxes paid, net of refunds |
|
(in thousands) |
|
|||||||||
Federal |
|
$ |
|
|
$ |
|
|
$ |
|
|||
State |
|
|
|
|
|
|
|
|
|
|||
Total income taxes paid, net of refunds |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Income taxes paid, net of refunds exceeded 5% of total income taxes paid, net of refunds in the following state and local jurisdictions:
State |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Florida |
|
$ |
|
|
$ |
|
|
$ |
|
|||
New York |
|
* |
|
|
* |
|
|
$ |
|
|||
* Jurisdiction below the threshold for the period presented
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets:
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||
|
|
(in thousands) |
|
|||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these consolidated financial statements.
8
HERITAGE INSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation, Nature of Business and Significant Accounting Policies and Practices
Business Description
Heritage Insurance Holdings, Inc. (the “Company”) is an insurance holding company. The Company’s insurance subsidiaries are Heritage Property & Casualty Insurance Company (“Heritage P&C”), Zephyr Insurance Company (“Zephyr”), and Narragansett Bay Insurance Company (“NBIC”). The Company’s other subsidiaries include: Heritage MGA, LLC (“MGA”), the managing general agent that manages substantially all aspects of Heritage P&C; Contractors’ Alliance Network, LLC, the Company’s vendor network manager; Osprey Re Ltd., the Company’s reinsurance subsidiary that may provide a portion of the reinsurance protection purchased by the Company’s insurance subsidiaries; Heritage Insurance Claims, LLC, an inactive subsidiary reserved for future development; Zephyr Acquisition Company (“ZAC”), a holding company; NBIC Holdings, Inc., and NBIC Service Company, which provides services to NBIC.
The Company’s primary products are personal and commercial residential insurance, which the Company currently offers in Alabama, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, and Virginia. The Company conducts its operations under a single reporting and operating segment.
Basis of Presentation
The consolidated financial statements include the accounts of Heritage Insurance Holdings, Inc. and its wholly-owned subsidiaries. The accompanying consolidated financial statements include the accounts of the Company and all other entities in which the Company has a controlling financial interest (none of which are variable interest entities). All intercompany accounts and transactions have been eliminated in consolidation.
Business Segment
Pursuant to FASB Accounting Standards Codification (“ASC”) 280, Segment Reporting, operating segments represent components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision maker in determining how to allocate resources and in assessing performance. The Company’s operations consist of a single operating and reportable segment: residential property insurance. The Company conducts its business as a property and casualty insurer, which is based upon the Company's business organizational and management structure, as well as information used by the Company's Chief Executive Officer and Board of Directors, who are collectively the chief operating decision maker ("CODM") to allocate the Company's resources. The CODM makes decisions, allocates resources, and assesses corporate performance using consolidated financial information. The CODM receives consolidated financial statements to evaluate the performance of the Company and to make decisions that affect the Company's prospects for future cash flows and profitability.
Reclassification
The Company did not have any reclassifications for the years ended December 31, 2025 and 2024.
Use of Estimates
The preparation of consolidated financial statements in conformity with United States Generally Accepted Accounting Principles (“U.S. GAAP”) requires the Company to make estimates and assumptions about future events that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. The Company evaluates its estimates on an ongoing basis when updated information related to such estimates becomes available. The Company bases its estimates on historical experience and information available to it at the time these estimates are made. Actual results could differ materially from these estimates.
9
Cash and Cash Equivalents
The Company’s cash and cash equivalents include demand deposits with financial institutions and short-term, highly-liquid financial instruments with original maturities of three months or less when purchased. The carrying amounts reported in the consolidated balance sheets for interest bearing deposits approximate their fair value because of the short maturity of these financial instruments.
To the extent there are negative cash balances with any individual financial institution, the Company excludes the negative amount from cash and cash equivalents negative cash balances and reports as accounts payable and other liabilities.
Restricted Cash
Restricted cash related to individual state regulatory deposits of $
Investments
Securities Available for sale
The Company investments in debt securities and short-term investments are classified as available-for-sale with maturities of greater than three months and reported at fair value in the consolidated balance sheet. Subsequent to its acquisition of debt securities and short-term available-for-sale, the Company records changes in value through the date of disposition as unrealized holding gains and losses, net of tax effects, and includes them as a component of other comprehensive income. Premium and discount on investment securities are amortized and accreted using the interest method and charged or credited to investment income. Refer to Note 2 “Investments” to these consolidated financial statements for further information.
Accumulated Other Comprehensive Income
Accumulated other comprehensive income consists solely of unrealized gains and losses on debt securities available-for-sale, net of tax.
Investment Gains and Losses
Net realized investment gains and losses are included as a component of pre-tax revenues based upon specific identification of the investments sold on the trade date. Included in net realized and unrealized gains (losses) are credit impairment losses on invested assets other than those investments accounted for using the equity method of accounting described in the “Allowance for Credit Losses” and “Impairment of Other Investments” section discussed below.
Allowance for Credit Losses (Available-for-Sale-Debt Securities)
The impairment model for available-for-sale (“AFS”) debt securities differs from the current expected credit loss (“CECL”) methodology applied for held to maturity debt securities because AFS debt securities are measured at fair value rather than amortized cost. For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criterion is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities where neither of the criteria are met, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the credit rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited to the amount that the fair value is less than the amortized cost basis. Under the guidance, an entity may no longer consider the length of time fair value has been less than amortized cost. As of December 31, 2025 and 2024, management evaluated and determined a credit allowance was not significant to the financial statements.
10
Other Investments
Non-Consolidating Variable Interest Entities (“VIEs”)
The Company holds certain passive investments as described in Note 2 "Investments" to these financial statements. The Company determines at the inception of each arrangement whether an entity in which it has made an investment or in which it has other variable interests is considered a variable interest entity ("VIE"). The Company consolidates VIEs when it is determined to be the primary beneficiary. The Company is the primary beneficiary of a VIE when it has the power to direct activities that most significantly affect the economic performance of the VIE and has the obligation to absorb the majority of their losses or entitled to benefits. If the Company is not the primary beneficiary in a VIE, it will account for the investment or other variable interests in a VIE in accordance with applicable GAAP. For the year ended December 31, 2025 and 2024, the Company was not the primary beneficiary to any of its other investments and therefore considered the other investments as non-consolidated VIEs.
Equity securities that do not result in consolidation and are not accounted for under the equity method, are measured at fair value. Equity securities without a readily determinable fair value are reported at cost, less impairment, unless the Company identifies observable price changes in orderly transactions for the identical or a similar investment of the same issuer (measurement alternative). Changes in fair value are reflected in the Company’s consolidated statements of operations. Certain other investments provide the Company with monthly or quarterly return on capital on a regular schedule.
Impairment of Other Investments
The Company maintains various interests in other investments without a readily determinable fair value that are evaluated for impairment at each reporting period. When such events or changes occur, the Company evaluates the estimated present value of future cash flows compared to its cost basis in the investment to evaluate whether there may be an impairment. The Company had
Fair Value
Major categories of financial assets and liabilities are measured at fair value on a recurring basis. Certain assets and liabilities are measured at fair value on a nonrecurring basis when impaired, which include long-lived assets, and other investments that the Company cannot significantly influence.
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the principal or most advantageous market in which the Company would transact is analyzed. Assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance, are considered.
The Company estimates the fair value of its investments using the closing prices on the last business day of the reporting period, obtained from active markets such as the NYSE and NASDAQ. For securities for which quoted prices in active markets are unavailable, the Company uses observable inputs such as quoted prices in inactive markets, quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs. The Company does not have any investments in its portfolio which require the use of unobservable inputs. The Company’s estimate of fair value reflects the interest rate environment that existed as of the close of business on December 31, 2025. Changes in interest rates after December 31, 2025 may affect the fair value of the Company’s investments.
The Company’s non-financial assets, such as intangible assets, are carried at cost until there are indicators of impairment and are recorded at fair value only when an impairment charge is recognized. Refer to Note 3 “Intangible Assets, net” to these consolidated financial statements for further information on the Company's 2023 goodwill impairment charges. Long term debt is recorded at carrying value, Refer to Note 14 “Long-Term Debt” to these consolidated financial statements for further information.
11
Premiums
The Company records direct and assumed premiums written as revenue, which are earned on a daily pro rata basis over the contract period of the related in force policies or reinsurance contract. For any portion of premiums not earned at the end of the reporting period, the Company records an unearned premium liability.
Premiums receivable represents amounts due from the Company's policyholders for billed premiums and related policy fees. The Company's current policy system cancels policies for non-payment in compliance with state insurance regulations, and thereby ensures that premium is not earned if the premium payment is not current. Balances in premiums receivable are removed upon cancellation of the policy due to non-payment. The Company's allowance for credit losses, which relates to premium balances from a previous billing system as well as uncollectible agent commission due back to the Company for cancelled policies, was $
When the Company receives premium payments from policyholders prior to the effective date of the related policy, the Company records an advance premiums liability. On the policy effective date, the Company reduces the advance premium liability and records the premiums as described above.
Policy Acquisition Costs
The Company incurs policy acquisition costs that vary with, and are directly related to, the production of new business. Policy acquisition costs consist of the following four items: (i) commissions paid to outside agents at the time of policy issuance; (ii) policy administration fees paid to a third-party administrator at the time of policy issuance; (iii) premium taxes; and (iv) inspection fees. The Company capitalizes policy acquisition costs to the extent recoverable, then the Company amortizes those costs over the contract period of the related policy. The deferred reinsurance ceding commission income is amortized over the effective period of the related insurance policies and is offset to deferred policy acquisition costs in the Company's Consolidated Balance Sheet.
The Company earns ceding commission on its quota share reinsurance contracts. The Company's accounting policy is to allocate ceding commission between policy acquisition costs and general and administrative expenses for financial reporting purposes. Ceding commission is allocated between policy acquisition costs and general and administrative expenses based upon the proportion these costs bear to production of new business. Ceding commissions received on ceded reinsurance contracts are netted against acquisition costs and are recognized ratably over the life of the assumed underlying contract. For the years ended December 31, 2025, 2024, and 2023, the Company earned ceding commission income of $
Ceding commission income is deferred and recognized over the quota share contract period. The amount and rate of ceding reinsurance commissions earned on the net quota share contract can slide within a prescribed minimum and maximum, depending on loss performance and how future losses develop.
Premium Deficiency Reserve
At each reporting date, the Company determines whether it has a premium deficiency. A premium deficiency would result if the sum of the Company’s expected losses, deferred policy acquisition costs, and policy maintenance costs (such as costs to store records and costs incurred to collect premiums and pay commissions) exceeded the Company’s related unearned premiums plus investment income. Should the Company determine that a premium deficiency exists, the Company would record a reserve for the unrecoverable portion of deferred policy acquisition cost. At December 31, 2025 and 2024, the Company has recorded
12
Reinsurance
The Company follows industry practice of reinsuring a portion of its risks. Reinsurance involves transferring, or “ceding”, all or a portion of the risk exposure on policies the Company writes to another insurer, known as a reinsurer. To the extent that the Company’s reinsurers are unable to meet the obligations they assume under the Company’s reinsurance agreements, the Company remains liable for the entire insured loss. As a result, a reasonable possibility exists that an estimated recovery may change significantly in the near term from the amounts included in the Company’s consolidated financial statements.
The Company’s reinsurance agreements are generally short-term, prospective contracts. The Company records an asset, prepaid reinsurance premiums, and a liability, reinsurance payable, for the entire contract amount upon commencement of new reinsurance agreements. The Company amortizes its prepaid reinsurance premiums over the 12-month contract period.
The Company's provisional ceding commissions that it receives in connection with its reinsurance contracts are recorded as an offset to deferred acquisition costs.
When the Company incurs losses recoverable under its reinsurance program, the Company records amounts recoverable from its reinsurers on paid losses plus an estimate of amounts recoverable on unpaid losses. The estimate of amounts recoverable on unpaid losses is a function of the Company’s liability for unpaid losses associated with the reinsured policies; therefore, the amount changes in conjunction with any changes to the estimate of unpaid losses. Given that an estimate of amounts recoverable from reinsurers on unpaid losses may change at any point in the future because of its relation to the Company’s reserves for unpaid losses, a reasonable possibility exists that an estimated recovery may change significantly from initial estimates.
The Company remains liable for claims payments if any reinsurer is unable to meet its obligations under the reinsurance agreements. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from similar geographic regions, activities or economics characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. The Company contracts with a diverse population of reinsurers to secure its annual reinsurance coverage, for which the excess of loss treaties generally become effective June 1st each year.
Allowance for Credit Losses for Reinsurance Recoverables
The allowance for credit losses for reinsurance recoverable is evaluated based on historical loss experience adjusted for current events and reasonable and supportable forecasts from both internal and external sources.
The Company monitors the credit quality of its reinsurance recoverables through the use of A.M. Best’s Financial Strength rating ("FSR"), or in the absence of an FSR consideration of credit ratings issued by approved rating agencies such as S&P, Moody’s, or Fitch. At December 31, 2025, the determination of the allowance for credit losses on reinsurance recoverables included analysis of (i) reinsurance recoverable balances by reinsurer FSR, (ii) estimated payment patterns associated with the claims underlying the reinsurance balances and (iii) historical default rates by reinsurer FSR as published by A.M. Best. In addition to the quantitative analysis, qualitative factors considered include but are not limited to (i) global reinsurer capital level, (ii) reinsurance market trends, (iii) the interest rate environment and (iv) the stressed global economy. Reinsurance recoverables are reported on the consolidated balance sheets net of the CECL allowance, if any.
Long-Lived Assets—Property and Equipment
Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis over the estimated useful lives as follows: building—
13
Capitalized Software
Costs associated with the implementation of certain internal systems are capitalized and carried at the amount capitalized less accumulated amortization once placed in service and are included as a component of fixed assets on the Company’s consolidated balance sheet. Costs capitalized include internal personnel costs, external developer costs, and interest. The implementation costs relate to systems built on software which the Company purchased or licensed and developed both internally and with third party vendors. As such, capitalized costs will be amortized over the term of the useful life of the software.
Leases
The Company leases office space under finance and operating leases with expiration dates through 2031. The Company determines whether an arrangement constitutes a lease and record lease liabilities and right-of-use assets on its consolidated balance sheets at lease commencement. The Company primarily uses its incremental borrowing rates for its operating leases (rates are not readily determinable) and implicit rates for its financing leases in determining the present value of lease payments. The Company measures right-of-use assets based on the corresponding lease liability adjusted for (i) payments made to the lessor at or before the commencement date, (ii) initial direct costs the Company incurs and (iii) tenant incentives under the lease. The Company begins recognizing rent expense when the lessor makes the underlying asset available to the Company, the Company does not assume renewals or early terminations unless the Company is reasonably certain to exercise these options at commencement, and it does not allocate consideration between lease and non-lease components.
For short-term leases, the Company records rent expense in its consolidated statements of operations on a straight-line basis over the lease term and record variable lease payments as incurred.
Goodwill and Intangible Assets
When the Company acquires a subsidiary or other business where it exerts significant influence, the fair value of the net tangible and intangible assets acquired is determined and compared to the amount paid for the subsidiary or business acquired. Any excess of the amount paid over the fair value of those net assets is considered to be goodwill. Any excess of carrying value over fair value is written down as an impairment. This evaluation is performed annually, during the fourth quarter or more frequently if facts and circumstances warrant. An impairment loss would be recognized if, and to the extent that, the carrying value of goodwill exceeded the implied value.
Acquired intangible assets are amortized over their useful lives on a straight-line basis over the period of expected benefit, generally up to
Unpaid Losses and Loss Adjustment Expenses
The Company’s reserves for unpaid losses and loss adjustment expenses represent the estimated ultimate cost of settling all reported claims plus all claims the Company incurred related to insured events that have occurred as of the reporting date, but that policyholders have not yet reported to the Company (incurred but not reported, or “IBNR”).
The reserve for unpaid losses is the estimate of amounts necessary to settle all reported and unreported incurred claims for the ultimate cost of insured losses, based upon the facts of each case and the Company’s experience with similar cases. Salvage and subrogation are deducted from the reserve for claims and claims expense on a cash basis. The establishment of appropriate reserves, including reserves for catastrophe losses, is an inherently uncertain and complex process. Reserve estimates are primarily derived using an actuarial estimation process in which historical loss patterns are applied to actual paid losses and reported losses (paid losses plus individual case reserves established by claim adjusters) for an accident or report year to create an estimate of how losses are likely to develop over time. Development factors are calculated quarterly and periodically throughout the year for data elements such as claims reported and settled, paid losses, and paid losses combined with case reserves. The historical development patterns for these data elements are used as the assumptions to calculate reserve estimates,
14
including the reserves for reported and unreported claims. Reserve estimates are regularly reviewed and updated, using the most current information available. Any resulting re-estimates are reflected in current results of operations.
The Company reports its reserves for unpaid losses and loss adjustment expenses gross of the amounts related to unpaid losses recoverable from reinsurers and reports loss and loss adjustment expenses net of amounts ceded to reinsurers. The Company does not discount its loss reserves for financial statement purposes.
Other Revenue
Our insurance affiliates may charge policyholders a policy fee on each policy written. The Company recognizes the income immediately when collected, which coincide with related service obligations. The Company also charges pay-plan fees to policyholders that pay its premiums in more than one installment and records the fees as income when collected. Other income also includes rental income due under non-cancelable leases for space at the Company’s commercial property.
Assessments
Guaranty fund and other insurance-related assessments imposed upon the Company’s insurance company affiliates are recorded as policy acquisition costs in the period the regulatory agency imposes the assessment. To recover assessments which are paid in advance to the guaranty fund or other insurance-related entity, the Company recoups such assessments from the Company's policyholders in the form of a policy surcharge. Once the recoupment period begins, the entire recoupment amount is recorded as an asset on the Company's balance sheet. There were no such assessments during the periods presented.
The Company collects pass through assessments imposed upon policyholders as a policy surcharge and records the amounts collected as a liability until the Company remits the amounts to the regulatory agency that imposed the assessment.
Convertible Notes
In August 2017 and September 2017, the Company issued collectively $
Stock-Based Compensation
The Company measures stock-based compensation at the grant date based on the fair value of the award and recognizes stock-based compensation expense over the requisite vesting period in accordance with ASC Topic 718, Compensation—Stock Compensation. For awards with performance-based vesting conditions expense is not recognized until it is determined that it is probable the performance-based conditions will be met. When achievement of a performance-based condition is probable, a catch-up of expense will be recorded as if the award had been vesting on a straight line basis from the award date. The award will continue to be expensed on a straight-line basis until probability of achieving the performance-based conditions changes, if applicable.
Earnings Per Share
Basic net earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted net earnings per share is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding during the reported period. Common equivalent shares include incremental shares from diluted vested and unvested shares of restricted common stock and convertible notes outstanding during the period based on the "if converted" method under the guidance of ASU 2020-06.
15
Income tax
Income taxes are accounted for under the asset and liability method, that recognizes the amount of income taxes payable or refundable for the current year and recognizes deferred tax assets and liabilities based on the tax rates expected to be in effect during the periods in which the temporary differences reverse. Temporary differences arise when income or expenses are recognized in different periods in the consolidated financial statements than on the tax returns. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that all, or some portion, of the benefits related to deferred tax assets will not be realized. Income taxes includes both estimated federal and state income taxes.
Recently adopted accounting guidance
Accounting Standards Update No. ASU 2023-09. In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-09 (“ASU 2023-09”) Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update enhances income tax disclosures by requiring public entities to report income tax expense disaggregated by federal, state, and foreign taxes, with further detail on specific jurisdictions over a quantitative threshold. In addition, public entities must also separately disclose reconciling items equal to or greater than five percent of pretax income from operations by the applicable federal statutory rate. The Company has adopted this guidance on a prospective basis for the fiscal year beginning on January 1, 2025 and resulting in enhanced income tax disclosures beginning with the Company's consolidated financial statements for the year ending December 31, 2025.
Recent accounting guidance not adopted
Accounting Standards Update No. ASU 2025-06. On September 18, 2025, the FASB issued updated guidance under ASC 350-40 on the accounting for internal-use software costs. The updated guidance removes all references to software development project stages so that the guidance is neutral to different software development methods and allows for the application of iterative software development methods such as agile. The updated guidance requires that an entity capitalize software costs when both: 1) management has authorized and committed to the funding of the software project, and 2) it is probable that the project will be completed, and the software will be used to perform its intended function. Additionally, the updated guidance clarifies that internal and external training costs and maintenance costs must be expensed as incurred.
The updated guidance is effective for the quarter ended March 31, 2028, and can be applied on a prospective, modified, or retrospective transition approach. Early adoption is permitted. The adoption of this guidance is not expected to have a material effect on the Company’s results of operations, financial position, or liquidity.
ASU 2025-01 and 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). This ASU requires disaggregated disclosure of certain income statement expenses, such as employee compensation and depreciation, for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The ASU also requires disclosure of a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2025-01 amends the effective date of ASU 2024-03, clarifying that "public business entities are required to adopt the guidance in annual reporting beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027." In addition, early adoption of the ASU is permitted. The Company is evaluating the guidance impact on the current presentation of the Company's income statement and expects the adoption to result in additional disclosures for certain expenses.
There are other new accounting pronouncements issued by the FASB that the Company has adopted or will adopt, as applicable. The Company does not believe any of these new accounting pronouncements have had, or will have, a material impact on its consolidated financial statements or disclosures.
16
Note 2. Investments
The amortized cost, gross unrealized gains and losses, and fair value of the Company’s debt securities available-for-sale are as follows:
December 31, 2025 |
|
Cost or Adjusted / |
|
|
Gross Unrealized |
|
|
Gross Unrealized |
|
|
Fair Value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Debt Securities Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
States, municipalities and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
December 31, 2024 |
|
Cost or Adjusted / |
|
|
Gross Unrealized |
|
|
Gross Unrealized |
|
|
Fair Value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Debt Securities Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency securities (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
States, municipalities and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The table below summarizes the Company’s fixed maturity securities at December 31, 2025 and 2024 by contractual maturity periods. Actual results may differ as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturity of those obligations.
|
|
December 31, 2025 |
|
|||||||||||||
|
|
Cost or Amortized Cost |
|
|
Percent of Total |
|
|
Fair Value |
|
|
Percent of Total |
|
||||
Debt Securities Available-for-sale |
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||
Due in one year or less |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Due after one year through five years |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Due after five years through ten years |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Due after ten years |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
|
|
December 31, 2024 |
|
|||||||||||||
|
|
Cost or Amortized Cost |
|
|
Percent of Total |
|
|
Fair Value |
|
|
Percent of Total |
|
||||
Debt Securities Available-for-sale |
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||
Due in one year or less |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Due after one year through five years |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Due after five years through ten years |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Due after ten years |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
17
Net Realized Gains on Debt Securities and Other Investments
The proceeds from the sale of debt securities were $
The following table presents net realized gains (losses) on the Company’s debt securities available-for-sale for the years ended December 31, 2025, 2024 and 2023, respectively:
|
|
For the Years ended December 31, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
|
|
Realized Gains (Losses) |
|
|
Fair Value at Sale |
|
|
Realized Gains (Losses) |
|
|
Fair Value at Sale |
|
|
Realized Gains (Losses) |
|
|
Fair Value at Sale |
|
||||||
|
(in thousands) |
|
||||||||||||||||||||||
Debt Securities Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Realized gains |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Realized losses |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||
Net realized (losses) gains |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
The following table presents the reconciliation of net realized gains on debt securities and other investments on the Company’s investments reported for the years ended December 31, 2025, 2024 and 2023, respectively:
|
|
For the Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
|
(in thousands) |
|
|||||||||
Gross realized gains on sales of available-for-sale securities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Gross realized losses on sales of available-for-sale securities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gross realized gains on sales of other investments |
|
|
|
|
|
|
|
|
|
|||
Impairment recovery from other investments |
|
|
|
|
|
|
|
|
|
|||
Impairment charge in other investments |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net realized gains on debt securities and other investments |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Equity Investments
For the years ended December 31, 2025, 2024 and 2023, the Company had no net realized and unrealized gains or (losses) reported.
The following table presents the Company's equity investments as of December 31, 2025 and 2024, respectively.
For the Year Ended December 31, |
|
2025 |
|
|
2024 |
|
||
Common stock |
|
$ |
|
|
$ |
|
||
Membership Shares |
|
|
|
|
|
|
||
Total equity investments |
|
$ |
|
|
$ |
|
||
Net Investment Income
The following table summarizes the Company’s net investment income by major investment category for the years ended December 31, 2025, 2024 and 2023, respectively:
|
|
For the Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
|
(in thousands) |
|
|||||||||
Debt securities available-for-sale |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Equity securities |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|||
Other investments |
|
|
|
|
|
|
|
|
|
|||
Net investment income |
|
|
|
|
|
|
|
|
|
|||
Investment expenses |
|
|
|
|
|
|
|
|
|
|||
Net investment income, less investment expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|||
18
Unrealized Losses on Debt Securities
The following tables present, for all debt securities available-for-sale in an unrealized loss position, for which no allowance for credit loss is established (including securities pledged), the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
|
|
Less Than Twelve Months |
|
|
Twelve Months or More |
|
||||||||||||||||||
December 31, 2025 |
|
Number of |
|
|
Gross |
|
|
Fair Value |
|
|
Number of |
|
|
Gross |
|
|
Fair Value |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Debt Securities Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government and agency securities |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
||||||
States, municipalities and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
||||||
|
|
Less Than Twelve Months |
|
|
Twelve Months or More |
|
||||||||||||||||||
December 31, 2024 |
|
Number of |
|
|
Gross |
|
|
Fair Value |
|
|
Number of |
|
|
Gross |
|
|
Fair Value |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Debt Securities Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government and agency securities |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
||||||
States, municipalities and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
||||||
The Company’s unrealized losses on debt securities have not been recognized because the securities are of a high credit quality with investment grade ratings. After reviewing the Company's portfolio, if (i) the Company does not have the intent to sell, or (ii) it is more likely than not it will not be required to sell the security before its anticipated recovery, then the Company's intent is to hold the investment securities to recovery, or maturity if necessary to recover the decline in valuation as prices accrete to par. However, the Company's intent may change prior to maturity due to certain types of events, which include, but are not limited to, changes in the financial markets, the Company's analysis of an issuer’s credit metrics and prospects, changes in tax laws or the regulatory environment, or as a result of significant unforeseen changes in liquidity needs. As such, the Company may, from time to time, sell invested assets subsequent to the balance sheet date that it did not intend to sell at the balance sheet date. Conversely, the Company may not sell invested assets that the Company asserted it intended to sell at the balance sheet date. Such changes in intent are due to unforeseen events occurring subsequent to the balance sheet date.
The Company evaluated the available for sale investments that were in an unrealized loss position for the years ended December 31, 2025 and 2024 and determined that the decline in fair value was caused by rising interest rates, resulting in no credit loss allowance recorded as of December 31, 2025 or December 31, 2024.
19
Other Investments
Non-Consolidated Variable Interest Entities (“VIEs”)
The Company makes passive investments in limited partnerships (“LPs”), which is accounted for using the equity method, with income reported in net realized and unrealized gains and losses. The Company also makes passive investments in a Real Estate Investment Trust (“REIT”), which are accounted for using the measurement alternative method, which is reported at cost less impairment (if any), plus or minus changes from observable price changes, as described in the table below.
The following table summarizes the Company’s non-consolidated VIEs by category at December 31, 2025 and 2024 (in thousands):
|
|
|
|
Carrying Value |
|
|||||||
For the Year Ended December 31, |
|
Balance Sheet |
|
Method |
|
2025 |
|
|
2024 |
|
||
Other Real Estate LLC(1) |
|
Other Investments |
|
Equity Method |
|
$ |
|
|
$ |
|
||
Real Estate Corporation(2) |
|
Other Investments |
|
Measure Alternative |
|
|
|
|
|
|
||
Preferred Membership/Interest (3) |
|
Other Investments |
|
Measure Alternative |
|
|
|
|
|
|
||
Non-real estate related (4) |
|
Other Investments |
|
Equity Method |
|
|
|
|
|
|
||
Total non-consolidated VIEs |
|
|
|
|
|
$ |
|
|
$ |
|
||
The following table summarizes the carrying value and maximum loss exposure of the Company’s non-consolidated VIEs at December 31, 2025 and 2024:
|
|
As of December 31, 2025 |
|
|
As of December 31, 2024 |
|
||||||||||
|
|
Carrying Value |
|
|
Maximum Loss Exposure |
|
|
Carrying Value |
|
|
Maximum Loss Exposure |
|
||||
Investments in non-consolidated VIEs - Equity method |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Investments in non-consolidated VIEs - Measurement alternative |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total non-consolidated VIEs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported as “other investments” in the Company’s consolidated balance sheet. No agreements exist requiring the Company to provide additional funding to any of the non-consolidated VIEs in excess of the Company’s initial investment.
Note 3. Intangible Assets, net
For the years ended December 31, 2025 and 2024, other intangible assets, net were $
Management reviewed intangibles and concluded no circumstances or events occurred that would indicate the carrying value of the intangible assets may not be recoverable other than what was recorded during the second quarter of 2023. During the second quarter of 2023, management impaired certain named intangible assets with a carrying value of $
20
Intangible Assets, net
Our intangible assets resulted primarily from the acquisitions of Zephyr Acquisition Company and NBIC Holdings, Inc. and consist of brand, agent relationships, renewal rights, customer relations, trade names, non-competes and insurance licenses. Finite-lived intangibles assets are amortized over their useful lives from to .
The tables below detail the finite-lived intangible assets, net as of December 31, 2025 and 2024, respectively (amounts in thousands):
|
For the Year Ended December 31, |
|
|||||
|
2025 |
|
|
2024 |
|
||
Amortizing intangible assets |
(in thousands) |
|
|||||
Agent relationships |
$ |
|
|
$ |
|
||
Renewal rights |
|
|
|
|
|
||
Trade names |
|
|
|
|
|
||
Non-compete |
|
|
|
|
|
||
Total |
|
|
|
|
|
||
Accumulated amortization |
|
( |
) |
|
|
( |
) |
Total infinite-lived intangible assets, net |
|
|
|
|
|
||
Indefinite-lived intangible assets: |
|
|
|
|
|
||
License acquired |
|
|
|
|
|
||
Total intangible assets, net |
$ |
|
|
$ |
|
||
Estimated annual pretax amortization of intangible assets for each of the next five years and thereafter is as follows (in thousands):
Year |
Amount |
|
|
2026 |
$ |
|
|
2027 |
|
|
|
2028 |
|
|
|
2029 |
|
|
|
2030 |
|
|
|
Thereafter |
|
|
|
|
$ |
|
|
Amortization expense of intangible assets was $
Note 4. Earnings Per Share
The following table sets forth the computation of basic and diluted net income per share for the periods indicated:
|
|
For the Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
|||
Net income attributable to common stockholders (000's) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|||
Basic earnings per share: |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|||
Net income attributable to common stockholders (000's) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|||
Add: Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
||||
Diluted weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|||
Diluted earnings per share: |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Basic earnings per share is computed by dividing net income by the weighted-average number of common stock outstanding during the reporting period. Diluted earnings per share gives effect to all dilutive common stock outstanding during
21
the reporting period. The dilutive shares the Company considers in its diluted earnings per share calculation relate to its outstanding
Note 5. Fair Value Measurements
Certain of the Company’s assets are carried at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Company employs a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Accordingly, when market observable data are not readily available, the Company’s own assumptions are set to reflect those that market participants would be presumed to use in pricing the asset or liability at the measurement date. Assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the level of judgment associated with inputs used to measure their fair value and the level of market price observability, as follows:
Level 1 – Unadjusted quoted prices are available in active markets for identical assets/liabilities as of the reporting date.
Level 2 – Valuations based on observable inputs, such as quoted prices similar assets or liabilities at the measurement date; quoted prices in the markets that are not active; or other inputs that are observable, either directly or indirectly.
Level 3 – Pricing inputs are unobservable and significant to the overall fair value measurement, and the determination of fair value requires significant management judgment or estimation.
For the Company’s investments in U.S. government securities that do not have prices in active markets, agency securities, state and municipal governments, and corporate bonds, the Company obtains the fair values from its third-party valuation service and evaluates the relevant inputs, assumptions, methodologies and conclusions associated with such valuations. The valuation service calculates prices for the Company’s investments in the aforementioned security types on a month-end basis by using several matrix-pricing methodologies that incorporate inputs from various sources. The model the valuation service uses to price U.S. government securities and securities of states and municipalities incorporates inputs from active market makers and inter-dealer brokers. To price corporate bonds and agency securities, the valuation service calculates non-call yield spreads on all issuers, uses option-adjusted yield spreads to account for any early redemption features, then adds final spreads to the U.S. Treasury curve as of quarter end. The inputs the valuation service uses in their calculations are not quoted prices in active markets, but are observable inputs, and therefore represent Level 2 inputs.
The following table presents information about the Company’s assets measured at fair value on a recurring basis. The Company assesses the levels for the investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with the Company’s accounting policy regarding the recognitions of transfers between levels of the fair value hierarchy.
For the years ended December 31, 2025 and 2024, there were
December 31, 2025 |
|
Total |
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
||||
Financial assets: |
|
(in thousands) |
|
|||||||||||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Restricted cash |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Debt Securities Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
States, municipalities and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total debt securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total debt securities and equity securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
22
December 31, 2024 |
|
Total |
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
||||
Financial assets: |
|
(in thousands) |
|
|||||||||||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Restricted cash |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Debt Securities Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
States, municipalities and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total debt securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total debt securities and equity securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Non-recurring fair value measurements
Assets and liabilities that are measured at fair value on a non-recurring basis include intangible assets which are recognized at fair value during the period in which an acquisition is completed, from updated estimates and assumptions during the measurement period, or when they are considered to be impaired. To evaluate such assets for a potential impairment, the Company determines the fair value of the intangible assets using a combination of a discounted cash flow approach and market approaches, which contain significant unobservable inputs and therefore are considered a Level 3 fair value measurement. The unobservable inputs in the analysis generally include future cash flow projections and a discount rate.
During the second quarter of 2023, the Company recorded an of $
Note 6. Other Comprehensive Income
The following table is a summary of other comprehensive income and discloses the tax impact of each component of other comprehensive income for the years ended December 31, 2025, 2024 and 2023, respectively:
|
|
For the Year Ended December 31, |
|
|||||||||||||||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||||||||||||||
|
|
Pre-tax |
|
|
Tax |
|
|
After- |
|
|
Pre- |
|
|
Tax |
|
|
After- |
|
|
Pre-tax |
|
|
Tax |
|
|
After- |
|
|||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Change in unrealized gains on investments, net |
|
$ |
|
|
|
( |
) |
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
|
||||||
Reclassification adjustment of realized losses (gains) included in net income |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||||
Effect on other comprehensive income |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
Note 7. Other Assets
The following table summarizes the Company’s other assets as of December 31, 2025 and 2024:
Description |
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||
|
|
(in thousands) |
|
|||||
Other amounts receivable |
|
$ |
|
|
$ |
|
||
State underwriting pooling & assoc. |
|
|
|
|
|
|
||
Other prepaid expenses |
|
|
|
|
|
|
||
Prepaid Premium taxes |
|
|
|
|
|
|
||
Unallocated Remittances |
|
|
|
|
|
|
||
Total other assets |
|
$ |
|
|
$ |
|
||
23
Prepaid premium taxes relates to amounts associated under the Florida Department of Revenue premium tax credit program, which the Company provided to its policyholders as required by Florida law. Included in other amounts receivable is a promissory note issued in connection with the sale of the Company’s real estate to a non‑affiliated party in July 2025. The note bears interest at
Note 8. Leases
The Company has entered into operating and financing leases primarily for real estate and vehicles. The Company will determine whether an arrangement is a lease at inception of the agreement. The operating leases have terms of to
Because the rate implicit in each operating lease is not readily determinable, the Company uses its incremental borrowing rate to determine present value of the lease payments. The Company used the implicit rates within the finance leases.
The components of lease costs were as follows (in thousands) for the respective years:
|
|
December 31, 2025 |
|
|
|
December 31, 2024 |
|
||
Operating lease cost, included in General & Administrative expenses on the Consolidated Statements of Operations |
|
$ |
|
|
|
$ |
|
||
Finance lease cost: |
|
|
|
|
|
|
|
||
Amortization of assets, included in General & Administrative expenses on the Consolidated Statements of Operations |
|
|
|
|
|
|
|
||
Interest on lease liabilities, included in Interest expense on the Consolidated Statements of Operations |
|
|
|
|
|
|
|
||
Total finance lease cost |
|
$ |
|
|
|
$ |
|
||
Variable lease cost, included in General & Administrative expenses on the Consolidated Statements of Operations |
|
$ |
|
|
|
$ |
|
||
Short-term lease cost, included in General & Administrative expenses on the Consolidated Statements of Operations |
|
$ |
|
|
|
$ |
|
||
Right-of-use lease asset and lease liability was as follows (in thousands):
Operating Leases |
|
December 31, 2025 |
|
|
|
December 31, 2024 |
|
||
Right of use assets |
|
$ |
|
|
|
$ |
|
||
Lease liability |
|
$ |
|
|
|
$ |
|
||
Finance Leases |
|
|
|
|
|
|
|
||
Right of use assets |
|
$ |
|
|
|
$ |
|
||
Lease liability |
|
$ |
|
|
|
$ |
|
||
Supplemental cash flow information related to the Company's operating and financial leases as follows (in thousands):
Operating Leases |
|
December 31, 2025 |
|
|
|
December 31, 2024 |
|
||
Lease liability payment |
|
$ |
( |
) |
|
|
$ |
( |
) |
Finance Leases |
|
|
|
|
|
|
|
||
Lease liability payment |
|
$ |
( |
) |
|
|
$ |
( |
) |
24
Weighted-average remaining lease term and discount rate for the Company's operating and financing leases was as follows:
Weighted-average remaining lease term |
|
December 31, 2025 |
|
|
|
December 31, 2024 |
|
|
||
Operating lease |
|
|
|
yrs. |
|
|
|
yrs. |
||
Finance lease |
|
|
|
yrs. |
|
|
|
yrs. |
||
Weighted-average discount rate |
|
|
|
|
|
|
|
|
||
Operating lease |
|
|
|
% |
|
|
|
% |
||
Finance lease |
|
|
|
% |
|
|
|
% |
||
Maturities of lease liabilities for financing and operating leases were as follows as of December 31, 2025 (in thousands):
|
|
Financing Lease |
|
|
|
Operating Lease |
|
||
2026 |
|
$ |
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
|
||
2029 |
|
|
|
|
|
|
|
||
2030 |
|
|
|
|
|
|
|
||
2031and thereafter |
|
|
|
|
|
|
|
||
Total lease payments |
|
|
|
|
|
|
|
||
Less: imputed interest |
|
|
|
|
|
|
|
||
Present value of lease liabilities |
|
$ |
|
|
|
$ |
|
||
Note 9. Property and Equipment
Property and equipment, net consists of the following at December 31, 2025 and 2024:
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||
|
|
(in thousands) |
|
|||||
Land |
|
$ |
|
|
$ |
|
||
Building |
|
|
|
|
|
|
||
Computer hardware and software |
|
|
|
|
|
|
||
Office furniture and equipment |
|
|
|
|
|
|
||
Tenant and leasehold improvements |
|
|
|
|
|
|
||
Vehicle fleet |
|
|
|
|
|
|
||
Total, at cost |
|
|
|
|
|
|
||
Less: accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
For the year ended December 31, 2025, the Company capitalized an additional $
Depreciation and amortization expense for property and equipment was approximately $
25
Note 10. Deferred Reinsurance Ceding Commission
The Company defers certain income in connection with its quota share reinsurance contracts. The deferred reinsurance ceding commission (“DRCC”) is deferred and earned subject to the terms of the reinsurance agreements. Ceding commission on quota share agreements generally includes a provisional ceding rate, subject to sliding scale adjustments based on the loss experience of the reinsurers. Adjustments are reflected in current operations. The Company allocates
The deferred reinsurance ceding commission income is amortized over the effective period of the related insurance policies. For the year ended December 31, 2025, 2024 and 2023 the Company allocated ceding commission income of $
The table below depicts the activity with regard to deferred reinsurance ceding commission during the years ended December 31, 2025, 2024 and 2023.
|
For the Year Ended December 31, |
|
|||||||||
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
(in thousands) |
|
|||||||||
Beginning balance of deferred ceding commission income |
$ |
|
|
$ |
|
|
$ |
|
|||
Ceding commission deferred |
$ |
|
|
|
|
|
|
|
|||
Less: ceding commission earned |
$ |
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending balance of deferred ceding commission income |
$ |
|
|
$ |
|
|
$ |
|
|||
Deferred ceding commission income is recorded as an offset to deferred policy acquisition costs in the Company's Consolidated Balance Sheet.
Note 11. Deferred Policy Acquisition Costs, net
The Company defers certain costs in connection with written policies, called deferred policy acquisition costs (“DPAC”), which are amortized over the effective period of the related insurance policies. As described in Note 10. Deferred Reinsurance Ceding Commission, the Company records provisional ceding commission that it receives in connection with the Company's reinsurance contracts as an offset to deferred policy acquisition costs. Therefore, deferred policy acquisition costs are presented net of deferred reinsurance ceding commission.
The Company anticipates that its DPAC, net will be fully recoverable in the near term. The table below depicts the activity with regard to DPAC, net for the years ended December 31, 2025 and 2024:
|
For the Year Ended December 31, |
|
|||||||||
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
(in thousands) |
|
|||||||||
Beginning Balance |
$ |
|
|
$ |
|
|
$ |
|
|||
Policy acquisition costs deferred |
$ |
|
|
|
|
|
|
|
|||
Amortization |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Unearned ceding commission |
$ |
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending Balance |
$ |
|
|
$ |
|
|
$ |
|
|||
Note 12. Reinsurance
Overview
Reinsurance
In order to limit the Company’s potential exposure to individual risks and catastrophic events, the Company purchases significant reinsurance from third party reinsurers. Purchasing reinsurance is an important part of the Company’s risk strategy, and premiums ceded to reinsurers is one of the Company’s largest costs. The Company has strong relationships with reinsurers, which it attributes to its management’s industry experience, disciplined underwriting, and claims management capabilities. For each of the twelve months beginning June 1, 2025 and 2024, the Company purchased catastrophe excess of loss reinsurance from
26
the following sources: (i) the Florida Hurricane Catastrophe Fund, a state-mandated catastrophe fund (“FHCF”) which provides reinsurance for Florida personal residential and commercial residential admitted policies only, (ii) private reinsurers, all of which were rated “A-” or higher by A.M. Best Company, Inc. (“A.M. Best”) or Standard & Poor’s Financial Services LLC (“S&P”) or were fully collateralized, (iii) the Company’s wholly-owned reinsurance subsidiary, Osprey Re Ltd. (“Osprey”), and (iv) Citrus Re Ltd (“Citrus Re”) a special purpose vehicle through which the Company sponsors catastrophe bonds. In addition to purchasing excess of loss catastrophe reinsurance, the Company also purchases quota share, property per risk and facultative reinsurance from reinsurers who are either rated “A-” or higher by A.M. Best or were fully collateralized. The Company’s quota share program limits its exposure on catastrophe and non-catastrophe losses and provides ceding commission income. The Company’s per risk programs limit its net exposure in the event of a severe non-catastrophe loss impacting a single location or risk. The Company also utilizes facultative reinsurance to supplement its per risk reinsurance program where the Company’s capacity needs dictate.
Purchasing a sufficient amount of reinsurance to cover catastrophic losses from single or multiple events or significant non-catastrophe losses is an important part of the Company’s risk strategy. Reinsurance involves transferring, or “ceding”, a portion of the risk exposure on policies the Company writes to another insurer, known as a reinsurer. To the extent that the Company’s reinsurers are unable to meet the obligations they assume under the Company’s reinsurance agreements, the Company remains liable for the entire insured loss.
The Company’s state insurance regulators require the Company, like all insurance companies, to have a certain amount of capital and reinsurance coverage in order to cover losses and loss adjustment expenses upon the occurrence of a catastrophic event. The Company’s reinsurance program provides reinsurance which complies with state regulator requirements, which are generally based on the probable maximum loss that it would incur from an individual catastrophic event estimated to occur once in every 100 years based on its portfolio of insured risks. The nature, severity and location of the event giving rise to such a probable maximum loss differs for each insurer depending on the insurer’s portfolio of insured risks, including, among other things, the geographic concentration of insured value within such portfolio. As a result, a particular catastrophic event could be a one-in-100-year loss event for one insurance company while having a greater or lesser probability of occurrence for another insurance company. The Company also purchases reinsurance coverage to protect against the potential for multiple catastrophic events occurring in the same year. The Company shares portions of its reinsurance program coverage among its insurance company affiliates.
2025-2026 Reinsurance Towers by Region
The following graphics depict the Company's reinsurance program structure for the 2025-2026 hurricane season for a first event by region. Reinsurance coverage provided by Osprey to the Company's insurance company affiliates is not included below as these reinsurance towers only reflect third party reinsurance coverage.
27
Millions |
|
|
|
|
|
$ |
Layer 6 FL/SE |
||||
|
|
||||
$ |
|
||||
$ |
Layer 5 FL/SE |
||||
|
|
||||
$ |
|
|
|
|
|
|
Citrus Re 2025 FL/SE Bond |
|
|
||
$ |
|
Citrus Re 2024 FL/SE Bond |
|||
$ |
Citrus Re 2024 FL/SE Bond |
|
|||
|
|
|
|||
$ |
|
|
|
||
|
Layer 4 FL/SE |
||||
$ |
Layer 3 Ex- HI |
||||
|
|
||||
|
FHCF Layer |
|
|||
|
|
|
|||
$ |
|
|
|||
|
|
|
|||
$ |
Layer 2 |
||||
$ |
Layer 1 |
||||
$ |
Retention |
||||
|
|
||||
|
|
||||
|
FL 1st Event |
||||
28
Millions |
|
|
|
|
|
|
$ |
Citrus Re 2023-1 Northeast/ Hawaii Only Bond |
|||||
|
|
|||||
$ |
Northeast Only |
Citrus Re 2023-1 Northeast Only Bond |
||||
|
|
|
||||
$ |
NE/HI |
|||||
|
|
|||||
$ |
Layer 3 Ex- HI |
|||||
$ |
Layer 2 |
|||||
$ |
|
|||||
|
Layer 1 |
|||||
$ |
Retention |
|
|
|
|
|
|
|
Net Quota Share |
||||
|
|
|
||||
|
|
|
|
|
|
|
|
NE 1st Event |
|||||
Millions |
|
|
|
|
|
|
|
$ |
Citrus Re 2023-1 Northeast/ Hawaii Only Bond |
||
|
|
||
$ |
HI Only |
Citrus Re 2025 Hawaii Only Bond |
|
|
|
|
|
$ |
NE/HI |
||
$ |
Layer 2 |
||
$ |
|
||
|
Layer 1 |
||
|
|
||
$ |
Retention |
||
|
|
||
|
HI 1st Event |
||
* xs = in excess
29
2025 - 2026 Reinsurance Program
Catastrophe Excess of Loss Reinsurance
Effective June 1, 2025, the Company entered into catastrophe excess of loss reinsurance agreements for 2025-2026 covering Heritage Property & Casualty Insurance Company (“Heritage P&C”), Zephyr Insurance Company (“Zephyr”) and Narragansett Bay Insurance Company (“NBIC”). As described above, the catastrophe reinsurance programs are allocated among traditional reinsurers, Citrus Re and Osprey Re. The FHCF covers Florida admitted market risks only and the Company elected to participate at
The reinsurance program, which is segmented into layers of coverage, protects the Company for excess property catastrophe losses and loss adjustment expenses. The 2025-2026 reinsurance program provides first event coverage up to $
The Company is responsible for all losses and loss adjustment expenses in excess of the Company's reinsurance program. For second or subsequent catastrophic events, the Company’s total available coverage depends on the magnitude of the first event, as the Company may have coverage remaining from layers that were not previously fully exhausted. An aggregate of $
The Company placed occurrence contracts for business underwritten by NBIC which covers all catastrophe losses excluding named storms which contracts expire December 31, 2026. One contract which is 70% placed has a $
Net Quota Share Reinsurance
The Company’s Net Quota Share coverage is proportional reinsurance, which applies to most business underwritten by NBIC, for which certain of the Company’s other reinsurance programs (property catastrophe excess of loss and general excess of loss) inures to the quota share program. The amount and rate of ceding commissions slide, within a prescribed minimum and maximum, depending on loss performance. The Net Quota program has a term of one year. The Net Quota Share program which renewed on December 31, 2025 ceded
30
Per Risk Coverage
For losses arising from business underwritten by Heritage P&C, losses arising from commercial residential business underwritten by NBIC and Zephyr, and southeastern U.S. surplus lines business underwritten by NBIC, excluding losses from named storms, the Company purchased property per risk coverage. The contracts period for this program is one year. For the contract period of July 1, 2025 through June 30, 2026, the program was
For losses arising from commercial residential business underwritten by NBIC, the Company also purchased property per risk coverage for losses and loss adjustments expenses in excess of $
In addition, the Company purchased facultative reinsurance for losses in excess of $
General Excess of Loss
The Company’s general excess of loss reinsurance protects personal residential multi-peril business underwritten by Narragansett and Zephyr from single risk losses. For the contract period of July 1, 2025 through June 30, 2026, the coverage is $
For a detailed discussion of the Company’s 2024-2025 Reinsurance Program refer to Part II, Item 8, “Financial Statements and Supplementary Data” and “Note 12. Reinsurance” in the Company’s 2024 Form 10-K.
Effect of Reinsurance
The Company’s reinsurance arrangements had the following effect on certain items in the Consolidated Statement of Income for the year ended December 31, 2025, 2024 and 2023:
|
|
For the Year Ended December 31, 2025 |
|
|||||||||
|
|
Premiums Written |
|
|
Premiums Earned |
|
|
Losses and Loss |
|
|||
|
|
(in thousands) |
|
|||||||||
Direct |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Ceded |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
For the Year Ended December 31, 2024 |
|
|||||||||
|
|
Premiums Written |
|
|
Premiums Earned |
|
|
Losses and Loss |
|
|||
|
|
(in thousands) |
|
|||||||||
Direct |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Ceded |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
31
|
|
For the Year Ended December 31, 2023 |
|
|||||||||
|
|
Premiums Written |
|
|
Premiums Earned |
|
|
Losses and Loss |
|
|||
|
|
(in thousands) |
|
|||||||||
Direct |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Ceded |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Note 13. Reserve For Unpaid Losses
The Company determines the reserve for unpaid losses on an individual-case basis for all incidents reported. The liability also includes amounts which are commonly referred to as incurred but not reported, or “IBNR”, claims as of the balance sheet date. The Company estimates its IBNR reserves by projecting its ultimate losses using industry accepted actuarial methods and then deducting actual loss payments and case reserves from the projected ultimate losses.
The table below summarizes the activity related to the Company’s reserve for unpaid losses:
|
|
For the Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
(in thousands) |
|
||||||||||
Balance, beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Less: reinsurance recoverable on unpaid losses |
|
|
|
|
|
|
|
|
|
|||
Net balance, beginning of period |
|
|
|
|
|
|
|
|
|
|||
Incurred related to: |
|
|
|
|
|
|
|
|
|
|||
Current year |
|
|
|
|
|
|
|
|
|
|||
Prior years |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Total incurred |
|
|
|
|
|
|
|
|
|
|||
Paid related to: |
|
|
|
|
|
|
|
|
|
|||
Current year |
|
|
|
|
|
|
|
|
|
|||
Prior years |
|
|
|
|
|
|
|
|
|
|||
Total paid |
|
|
|
|
|
|
|
|
|
|||
Net balance, end of period |
|
|
|
|
|
|
|
|
|
|||
Plus: reinsurance recoverable on unpaid losses |
|
|
|
|
|
|
|
|
|
|||
Balance, end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The Company believes that the reserve for unpaid losses reasonably estimates the amount necessary to pay all claims and related expenses which may arise from incidents that have occurred as of the balance sheet date.
As of December 31, 2025, the Company reported $
Reinsurance recoverable on unpaid losses includes expected reinsurance recoveries associated with reinsurance contracts the Company has in place. The amount may include recoveries from catastrophe excess of loss reinsurance, net quota share reinsurance, per risk reinsurance, and facultative reinsurance contracts.
In the fourth quarter of 2022 we re-estimated our ultimate losses for Hurricane Irma, which struck Florida in 2017. As a result of that re-estimation, Heritage exhausted the private layers of reinsurance specific to Hurricane Irma but had a 45% participation in the FHCF limit remaining. As further described in Note 17, Commitments and Contingencies, to these consolidated financial statements, the Company's 2017 reinsurance agreement with the FHCF required a commutation no later than 60 months after the end of the contract year. As part of this process, Heritage and the FHCF terminated the 2017 reinsurance agreement and agreed on the amount that the FHCF would pay to the Company to settle all outstanding losses owed under the
32
agreement related to losses from Hurricane Irma. As such, this commutation process resulted in a final determination of and payment for known, unknown or unreported claims relating to Hurricane Irma. Social inflation and the litigated claims environment in the State of Florida, which affected Hurricane Irma claims, could result in future adverse development of these claims, which creates uncertainty as to the ultimate cost to settle all of the remaining Hurricane Irma claims. Accordingly, should future re-estimations to Hurricane Irma losses increase the Company’s expected loss reserves, all of the increase will be retained by the Company. The net unfavorable loss development described above stemmed primarily from losses associated with Hurricane Irma, for which the losses were fully retained.
The following is information about incurred and paid claims development as of December 31, 2025, net of reinsurance, as well as cumulative claim payments and the total of incurred-but-not-reported liabilities plus expected development on reported claims included within the net incurred claims amounts.
The information by accident year for years prior to 2025 is presented as required supplementary information and is unaudited.
Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
(in thousands, except number of claims)
Unaudited |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
Accident year |
2016 & prior |
|
2017 |
|
2018 |
|
2019 |
|
2020 |
|
2021 |
|
2022 |
|
2023 |
|
2024 |
|
2025 |
|
Net IBNR |
|
Reported |
|
||||||||||||
2016 & prior |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
$ |
|
|
|
||||||||||||
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
Unaudited |
|
|
|
|||||||||||||||||||||||||||
Accident year |
2016 & prior |
|
2017 |
|
2018 |
|
2019 |
|
2020 |
|
2021 |
|
2022 |
|
2023 |
|
2024 |
|
2025 |
|
||||||||||
2016 & prior |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
||||||||||
Reconciliation of Reserve Balances to Liability for Unpaid Loss and Loss Adjustment Expenses
Unpaid Loss and Allocated Loss Adjustment Expense, Net of Reinsurance |
$ |
|
|
Reinsurance recoverable on unpaid losses |
|
|
|
Unpaid Unallocated Loss Adjustment Expense |
|
|
|
Unpaid losses and loss adjustment expenses |
$ |
|
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance as of December 31, 2025 (Unaudited)
|
Year - 1 |
Year - 2 |
Year - 3 |
Year - 4 |
Year - 5 |
Thereafter |
Percentage |
33
Note 14. Long-Term Debt
Convertible Senior Notes
In August 2017 and September 2017, the Company issued in aggregate $
As of December 31, 2025 and 2024, the Company had approximately $
Senior Secured Credit Facility
On July 22, 2025, the Company and its subsidiary guarantors entered into the Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) with lenders from time to time party thereto and Regions Bank, as administrative agent and collateral agent. The Amended and Restated Credit Agreement amended and restated in its entirety the Credit Agreement dated as of December 14, 2018 (as amended to date, the “Prior Credit Agreement”).
The Amended and Restated Credit Agreement, among other things, (i) increased the overall size of the senior secured credit facilities to an aggregate principal amount of up to $
The net proceeds from the advance, along with cash on hand, were used to repay approximately $
As of December 31, 2025, the Amended and Restated Credit Agreement provided senior secured credit facilities in the aggregate principal amount of up to $
34
Term Loan Facility. The principal amount of the term loan facility under the Prior Credit Agreement amortized in quarterly installments, beginning with the close of the fiscal quarter ending March 31, 2019 and was amortizing in an amount equal to $
For the years ended December 31, 2025 and 2024, the Company made principal payments of approximately $
Revolving Credit Facility. The Revolving Credit Facility allows for borrowings of up to $
At the Company’s option, borrowings under the Credit Facilities bear interest at rates equal to either (1) a rate determined by reference to SOFR, plus an applicable margin or (2) a base rate determined by reference to the highest of (a) the “prime rate” of Regions Bank, (b) the federal funds rate plus
At December 31,2025, the effective interest rate for the Term Loan Facility was
Mortgage Loan
In October 2017, the Company and its subsidiary, Skye Lane Properties LLC, jointly obtained a commercial real estate mortgage loan in the amount of $
35
respectively. On July 23, 2025, the Company paid the mortgage loan principal and accrued interest balance in full in the amount of $
FHLB Loan Agreements
In December 2018, a subsidiary of the Company received a
As of December 31, 2025 and at December 31, 2024, the Company also held other common stock from FHLB Boston for a value of $
In December 2018, a subsidiary of the Company became a member of the FHLB Des Moines (“FHLB-DM”). Membership in the FHLB-DM required an investment in FHLB-DM’s common stock which was purchased in December 2018 and valued at $
For the years ended December 31, 2025 and 2024, the Company made monthly interest payments as per the terms of the loan agreement in aggregate of $
The following table summarizes the Company’s long-term debt:
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||
|
|
(in thousands) |
|
|||||
Convertible debt |
|
$ |
|
|
$ |
|
||
Mortgage loan |
|
|
|
|
|
|
||
Credit loan facility |
|
|
|
|
|
|
||
Revolving credit facility |
|
|
|
|
|
|
||
FHLB loan agreement |
|
|
|
|
|
|
||
Total principal amount |
|
$ |
|
|
$ |
|
||
Deferred finance costs |
|
$ |
|
|
$ |
|
||
Total long-term debt |
|
$ |
|
|
$ |
|
||
As of the date of this report, the Company was in compliance with the applicable terms of all its covenants and other requirements under the Credit Agreement, Convertible Notes, cash borrowings and other loans. The Company's ability to secure future debt financing depend, in part, on its ability to remain in such compliance. The covenants in the Credit Agreement may limit the Company’s flexibility in connection with future financing transactions and in the allocation of capital in the future, including the Company’s ability to pay dividends and make stock repurchases, and contribute capital to its insurance subsidiaries that are not parties to the Credit Agreement.
The covenants and other requirements under the revolving agreement represent the most restrictive provisions that we are subject to with respect to the Company's long-term debt.
36
The schedule of principal payments on long-term debt is as follows:
December 31, |
|
Amount |
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total principal payments |
|
$ |
|
|
Note 15. Income Taxes
|
|
For the Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
|
(in thousands) |
|
|||||||||
Federal: |
|
|
|
|
|
|
|
|
|
|||
Current |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Deferred |
|
|
|
|
|
( |
) |
|
|
|
||
Provision for Federal income tax |
|
|
|
|
|
|
|
|
|
|||
State: |
|
|
|
|
|
|
|
|
|
|||
Current |
|
|
|
|
|
|
|
|
|
|||
Deferred |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Provision for State income tax expense |
|
|
|
|
|
|
|
|
|
|||
Provision for income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The income tax expense differs from the amounts computed by applying the U.S. federal income tax rate of as indicated below to pretax income as a result of the following (in thousands):
|
|
For the Year Ended December 31, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
||||||
United States |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
|
|
|||||
Foreign |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||||
Income from continuing operations before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. federal statutory tax rate |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
State and local income taxes, net of federal income tax effect |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Foreign tax effects |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Bermuda |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign Tax Statutory Exemption |
|
|
( |
) |
|
|
- |
% |
|
|
|
|
|
% |
|
|
( |
) |
|
|
% |
|||
Effect of cross-border tax laws |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
US tax on foreign insurance income |
|
|
|
|
|
% |
|
|
( |
) |
|
|
- |
% |
|
|
|
|
|
- |
% |
|||
Changes in valuation allowances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
% |
|||||
Nontaxable or nondeductible items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Executive Compensation 162(m) |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Others |
|
|
( |
) |
|
|
- |
% |
|
|
( |
) |
|
|
- |
% |
|
|
|
|
|
% |
||
Other Adjustments |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Total tax expense |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
The provision for income taxes was $
37
The significant components of deferred tax assets and liabilities included in the consolidated balance sheets as of December 31, 2025 and 2024 were as follows:
|
|
For the Year Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
(in thousands) |
|
|||||
Unearned premiums |
|
$ |
|
|
$ |
|
||
Net operating loss |
|
|
|
|
|
|
||
Tax-related discount on loss reserve |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Property and equipment |
|
|
|
|
|
|
||
Accrued expenses |
|
|
|
|
|
|
||
Note discount |
|
|
|
|
|
|
||
Leases |
|
|
|
|
|
|
||
Unrealized losses |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total deferred tax asset |
|
|
|
|
|
|
||
Valuation allowance |
|
|
|
|
|
|
||
Adjusted deferred tax asset |
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
||
Deferred acquisition costs |
|
$ |
|
|
$ |
|
||
Prepaid expenses |
|
|
|
|
|
|
||
Property and equipment |
|
|
|
|
|
|
||
Note discount |
|
|
|
|
|
|
||
Basis in purchased investments |
|
|
|
|
|
|
||
Basis in purchased intangibles |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total deferred tax liabilities |
|
|
|
|
|
|
||
Net deferred tax assets |
|
$ |
|
|
$ |
|
||
The Company had
In assessing the net carrying amount of deferred tax assets, the Company considers whether it is more likely than not that the Company will not realize some portion or all of the deferred tax assets. The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
As of December 31, 2025 and 2024, the Company has a gross operating loss carryforward for state income tax purposes (FL State only) of $
The Company's reinsurance affiliate, Osprey, which is based in Bermuda, made an irrevocable election under section 953(d) of the U.S. Internal Revenue Code of 1986, as amended, to be treated as a domestic insurance company for U.S. Federal income tax purposes. As a result of this election, the Company's reinsurance subsidiary is subject to United States income tax as if it were a U.S. corporation.
On December 31, 2023, the Government of Bermuda enacted the Corporate Income Tax Act 2023 (Bermuda CIT), which will apply a
38
The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of
On July 4, 2025, the "One Big Beautiful Bill Act" ("OBBBA") was signed into law in the United States. The Act makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. In addition, the OBBBA makes changes to certain U.S. corporate tax provisions, but many are generally not effective until 2026. Certain changes include the immediate expensing of acquired business assets and a temporary suspension of the requirement to capitalize and amortize U.S. R&D expenditures. The tax effects of the enacted legislation are reflected in the 2025 financials and there was no material impact to the effective tax rate. The Company will continue to monitor the impact of the OBBBA on future financial statements.
Note 16. Statutory Accounting and Regulations
State laws and regulations, as well as national regulatory agency requirements, govern the operations of all insurers such as the Company's insurance subsidiaries. The various laws and regulations require that insurers maintain minimum amounts of statutory surplus and risk-based capital; restrict insurers’ ability to pay dividends; restrict the allowable investment types and investment mixes and subject the Company’s insurers to assessments.
The Company’s insurance subsidiaries are required to file with state insurance regulatory authorities an “Annual Statement” which report under the statutory-basis of accounting which differs from GAAP, among other items, net income and surplus as regards policyholders, which is called stockholder’s equity under GAAP. The combined results of the Company’s insurance subsidiaries' reported statutory-basis results included net income of $
The legislatures of the states of domicile of the Company's insurance affiliates have adopted the National Association of Insurance Commissioners (“NAIC”) recommendations with regard to expansion of the regulation of insurers to include non-insurance entity affiliates. Specifically, the law permits the state insurance regulators to examine affiliated entities within an insurance holding company system in order to ascertain the financial condition of the insurer. The law also provides for certain disclosures regarding enterprise risk, which are satisfied by the provision of related information filed with the SEC.
The NAIC published risk-based capital guidelines for insurance companies that are designed to assess capital adequacy and to raise the level of protection that statutory-basis surplus provides for policy holders. Most states, including Florida, Hawaii, and Rhode Island, have enacted the NAIC guidelines as statutory requirements, and insurers having less statutory-basis surplus than required will be subject to varying degrees of regulatory action, depending on the level of capital inadequacy. State insurance regulatory authorities could require an insurer to cease operations in the event the insurer fails to maintain the required statutory capital.
39
State laws for Florida, Hawaii, and Rhode Island permit an insurer to pay dividends or make distributions out of that part of statutory surplus derived from net operating profit and net realized capital gains. The applicable laws pertain to the state of domicile of each insurance company affiliate and provide calculations to determine the amount of dividends or distributions that can be made without the prior approval of the insurance regulatory authority and the amount of dividends or distributions that would require prior approval of the insurance regulatory authority. In the state of Florida, a dividend may be taken without regulatory approval if the dividend is equal to or less than the greater of
Statutory risk-based capital requirements may further restrict the Company's insurance subsidiaries ability to pay dividends or make distributions if the amount of the intended dividend or distribution would cause statutory-basis surplus to fall below minimum risk-based capital requirements.
State insurance laws limits an insurer’s investment in equity instruments and also restricts investments in medium to low quality debt instruments. The Company’s insurance affiliates were in compliance with all investment restrictions at December 31, 2025 and 2024.
Governmental agencies or certain quasi-governmental entities can levy assessments upon the Company in the states in which the Company writes policies. Refer to Note 1 “Basis of Presentation, Nature of Business and Significant Accounting Policies and Practices” to these consolidated financial statements for further information for a description of how the Company recovers assessments imposed upon it. Governmental agencies or certain quasi-governmental entities can also levy assessments upon policyholders, and the Company collects the amount of the assessments from policyholders as surcharges for the benefit of the assessing agency. There are currently assessments being collected from policyholders and remitted to governmental or quasi-governmental entities. If an assessment becomes levied the Company would multiply the premium written on each policy by these assessment percentages to determine the additional amount that it will collect from the policyholder and remit to the assessing agencies.
The Company reported its insurance subsidiaries’ assets, liabilities and results of operations in accordance with GAAP, which varies from statutory-basis accounting principles prescribed or permitted by state laws and regulations, as well as by general industry practices.
The Company’s reinsurance subsidiary, Osprey, which was incorporated on April 23, 2013, is licensed as a Class 3A Insurer under The Bermuda Insurance Act 1978 and related regulations. Osprey is required to meet and maintain certain minimum levels of solvency and liquidity. Each year Osprey is required to file with the Bermuda Monetary Authority (the “Authority”) a Capital and Solvency Return, Statutory Financial Return and Audited Financial Statements within four months of its relevant financial year end. Osprey maintains sufficient collateral to comply with regulatory requirements as of December 31, 2025. Bermuda’s standard for financial statement reporting is U.S. GAAP.
Note 17. Commitments and Contingencies
The Company is involved in claims-related legal actions arising in the ordinary course of business. The Company accrues amounts resulting from claims-related legal actions in unpaid losses and loss adjustment expenses during the period that it determines an unfavorable outcome becomes probable and it can estimate the amounts. Management makes revisions to its estimates based on its analysis of subsequent information that the Company receives regarding various factors, including: (i) per claim information; (ii) company and industry historical loss experience; (iii) judicial decisions and legal developments in the awarding of damages; and (iv) trends in general economic conditions, including the effects of inflation.
The Company’s Florida insurance company affiliate is required to enter into a reinsurance contract with the FHCF for a portion of its catastrophe risk transfer each year. Since the Company’s inception in 2012, certain catastrophic events have resulted in losses which pierced the FHCF layer and resulted in reimbursements from the FHCF. To date, losses from Hurricane
40
Irma, which struck in 2017, Hurricane Ian, which struck in 2023, and Hurricane Milton, which struck in 2024, have triggered the Company’s FHCF coverage.
The Company’s 2017 reinsurance agreement with the FHCF is consistent among Florida insurance companies and required a commutation no later than 60 months after the end of the contract year, for which the commutation process began in June 2023. This commutation represents an agreement between Heritage and the FHCF to terminate the 2017 reinsurance agreement and agree on the conditions under which all obligations for both parties are discharged and therefore a final determination of and payment for any claims related to Hurricane Irma. The terms of the 2017 reinsurance agreement with the FHCF provide for the commutation process as well as the process to settle any disagreements as to the present value of outstanding losses that served as the basis for determining the amount payable by FHCF upon termination of the reinsurance agreement. During the third quarter of 2023, the commutation process was completed and a final payment by the FHCF was received by the Company. Social inflation and the litigated claims environment in the State of Florida, which affected Hurricane Irma claims could result in adverse development of these claims, which creates uncertainty as to the ultimate cost to settle the remaining Hurricane Irma claims. Accordingly, the final amount paid by the FHCF could vary from the Company’s current or future estimation of losses to be recovered from the FHCF.
Further, as described in Note 13. Reserve for Unpaid Losses, in the fourth quarter of 2022 the Company re-estimated its ultimate losses for Hurricane Irma and as a result of that re-estimation, the private layers of reinsurance specific to Hurricane Irma were exhausted. Accordingly, any subsequent adverse development on Hurricane Irma are retained by the Company.
Note 18. Accounts Payable and Other Liabilities
Other liabilities consist of the following as of December 31, 2025 and 2024:
Description |
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||
|
|
(in thousands) |
|
|||||
Accounts payable and other payables |
|
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Premium tax |
|
|
|
|
|
|
||
Commission payables |
|
|
|
|
|
|
||
Total other liabilities |
|
$ |
|
|
$ |
|
||
Note 19. Accrued Bonus Compensation
For the year ended December 31, 2025, the Company recognized employee bonus compensation expense of $
Note 20. Related Party Transactions
In July 2020, the Board of Directors appointed Mark Berset to the Board of Directors of the Company. Mr. Berset is also the Chief Executive Officer of Comegys Insurance Agency, Inc. (“Comegys”), an independent insurance agency that writes policies for the Company. The Company pays commission to Comegys based upon standard industry rates consistent with those provided to the Company’s other insurance agencies. There have been no arrangements or understandings between Mr. Berset and any other persons with respect to his appointment as a director. Effective September 23, 2025, Mr. Berset retired from the Board of Directors of the Company to pursue other opportunities. For the years ended December 31, 2025, 2024 and 2023, the Company paid agency commission to Comegys of approximately $
On September 2, 2025, the Audit Committee of the Board of Directors of the Company approved the repurchase of
41
Note 21. Employee Benefit Plan.
The Company provides a 401(k) plan for substantially all employees. The Company provides a matching contribution of
Since September 1, 2021, the Company has been enrolled in a flex healthcare plan which allows employees the choice of three medical plans with a range of coverage levels and costs. For the years ended December 31, 2025, 2024 and 2023, the Company's medical costs were $
Note 22. Equity
The total amount of authorized capital stock consists of
Common Stock
Holders of common stock are entitled to
Stock Repurchase Program
On December 15, 2022, the Board of Directors established a new share repurchase program plan to commence upon December 31, 2022, for the purpose of repurchasing up to an aggregate of $
On March 11, 2024, the Board of Directors established a new share repurchase program plan which commenced upon the expiration of the 2023 Share Repurchase Plan on December 31, 2023, for the purpose of repurchasing up to an aggregate of $
On December 9, 2024, the Board of Directors established a new share repurchase program plan which commenced upon the expiration of the 2024 Share Repurchase Plan on December 31, 2024, for the purpose of repurchasing up to an aggregate of $
42
On November 5, 2025, the Board of Directors established a new share repurchase plan to commence upon the expiration of the previously authorized share repurchase plan on December 31, 2025, for the purpose of repurchasing up to an aggregate of $
Public and Private Offering of shares of Common Stock
On December 14, 2023, the Company completed a primary offering of
The gross proceeds to Heritage from the public offering and private placement, before deducting underwriting discounts, commissions and other offering expenses, were approximately $
Dividends
The declaration and payment of any future dividends will be subject to the discretion of the Board of Directors and will depend on a variety of factors including the Company’s financial condition and results of operations.
The Board of Directors elected
Note 23. Stock-Based Compensation
Restricted Stock
The Company adopted the Heritage Insurance Holdings, Inc., 2023 Omnibus Incentive Plan (the “2023 Plan”), which became effective on June 7, 2023 upon approval by the Company's stockholders. The 2023 Plan authorized
At December 31, 2025, there were
On June 10, 2025, the date of the annual meeting of the Company's stockholders, the Company awarded to non-employee directors an aggregate of
On April 15, 2025, the Company awarded
On March 11, 2025, the Company awarded an aggregate of
On January 10, 2025, the Company awarded
43
In January 2025, the Company evaluated the restricted stock performance criteria and determined that based on the Company’s results measured against the performance conditions under the awards, the maximum percentage would most likely be met by each of the recipients at the end of the vesting period for the 2024 awards, which were issued at target. Therefore, additional shares of restricted stock are expected to be earned upon vesting and beginning the first quarter of 2025, the Company began to recognize stock-based compensation on the additional
In June 2024, the Company awarded to non-employee directors an aggregate of
In March 2024, the Company awarded an aggregate of
On February 26, 2024, the Company awarded an aggregate of
In November 2023, the Compensation Committee approved the cancellation of
On July 11, 2023, the Company awarded
In June 2023, the Company awarded to non-employee directors in aggregate
For the shares of performance-based restricted stock that are issued at target, the number of shares that will be earned at the end of the performance period is subject to increase or decrease based on the results of the performance condition. However, for those issued at the maximum, the number of shares that will be earned at the end of the performance period is subject to decrease based on the results of the performance condition under the awards.
The 2023 Plan authorizes the Company to grant stock options at exercise prices equal to the fair market value of the Company’s stock on the dates the options are granted. The Company has not granted any stock options since 2015 and all unexercised stock options have since been forfeited.
44
Restricted stock activity for the three years ended December 31, 2025, 2024 and 2023 is as follows:
|
|
|
|
|
Weighted-Average |
|
||
|
|
|
|
|
Grant-Date Fair |
|
||
|
|
Number of shares |
|
|
Value per Share |
|
||
Non-vested, at December 31, 2022 |
|
|
|
|
$ |
|
||
Granted - Performance-based restricted stock |
|
|
|
|
|
|
||
Granted - Time-based restricted stock |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Canceled and surrendered |
|
|
( |
) |
|
|
|
|
Non-vested, at December 31, 2023 |
|
|
|
|
$ |
|
||
Granted - Performance-based restricted stock |
|
|
|
|
|
|
||
Granted - Time-based restricted stock |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Canceled and surrendered |
|
|
( |
) |
|
|
|
|
Non-vested, at December 31, 2024 |
|
|
|
|
$ |
|
||
Granted - Performance-based restricted stock |
|
|
|
|
|
|
||
Granted - Time-based restricted stock |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Canceled and surrendered |
|
|
( |
) |
|
|
|
|
Non-vested, at December 31, 2025 |
|
|
|
|
$ |
|
||
Awards are being amortized to expense over a to
During the year ended December 31, 2025, the Company granted in aggregate
During the year ended December 31, 2024, the Company granted in aggregate
During the year ended December 31, 2023, the Company granted in aggregate
At December 31, 2025, there was approximately $
Additional information regarding the Company’s outstanding non-vested time-based restricted stock and performance-based restricted stock at December 31, 2025 is as follows:
Grant date |
|
Restricted shares unvested |
|
|
Share Value at Grant Date Per Share |
|
|
Remaining Restriction Period (Years) |
|
|||
July 11, 2023 |
|
|
|
|
|
|
|
|
|
|||
February 27, 2024 |
|
|
|
|
|
|
|
|
|
|||
February 27, 2024 |
|
|
|
|
|
|
|
|
|
|||
March 11, 2025 |
|
|
|
|
|
|
|
|
|
|||
March 11, 2025 |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
45
Note 24. Selected Quarterly Financial Data (unaudited)
The following table provides a summary of unaudited quarterly results for the periods presented (in thousands, except per share data):
For the year ended December 31, 2025 |
|
First Quarter |
|
|
Second Quarter |
|
|
Third Quarter |
|
|
Fourth Quarter |
|
||||
Net premiums earned |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Investment income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total operating expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Basic net income per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted net income per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
For the year ended December 31, 2024 |
|
First Quarter |
|
|
Second Quarter |
|
|
Third Quarter |
|
|
Fourth Quarter |
|
||||
Net premiums earned |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Investment income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total operating expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Basic net income per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted net income per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The sum of quarterly amounts, including per share amounts, may not equal amounts reported for year-to-date periods. This is due to the effects of rounding and changes in the number of weighted-average shares outstanding for each period.
Note. 25. Segment Reporting
The Company conducts its business as a residential property insurer, which is based upon the Company's business organizational and management structure, as well as information used to allocate the Company’s resources and assess performance by the Company's and Board of Directors, who are collectively the chief operating decision maker ("CODM").
The Company's business is reported as
As the Company operates as one reportable segment, all significant expenses presented to the CODM are presented on the face of the Consolidated Statements of Income and Comprehensive Income.
The residential property insurance business products have similar economic characteristics and use a similar marketing and distribution strategy with the Company's independent agents. The Company's property insurance business is comprised of commercial lines insurance and personal lines insurance and is evaluated on a consolidated basis.
Certain members of the Board of Directors also serve on the Audit Committee and, in that capacity, review selected statutory financial information separate from the consolidated GAAP financial information provided to the CODM. This statutory information is reviewed for regulatory and oversight purposes and does not affect the Company’s conclusion that it has one operating and reportable segment.
The accounting policies applied in measuring segment results are the same as those described in Note 1, “Summary of Significant Accounting Policies,” to the consolidated financial statements..
46
The following table summarizes the components of the Company's segments revenue and expenses for the following years:
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Revenues: |
|
(in thousands) |
|
|||||||||
Earned premium, net of ceded premium |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net investment income |
|
|
|
|
|
|
|
|
|
|||
Net realized gains (losses) on debt securities and other investments |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other revenue |
|
|
|
|
|
|
|
|
|
|||
Total revenues |
|
|
|
|
|
|
|
|
|
|||
Expenses: |
|
|
|
|
|
|
|
|
|
|||
Losses and loss adjustment expense - current year |
|
|
|
|
|
|
|
|
|
|||
Losses and loss adjustment expense - prior year |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Policy acquisition costs |
|
|
|
|
|
|
|
|
|
|||
General and administration costs (1)(2) |
|
|
|
|
|
|
|
|
|
|||
Depreciation & amortization |
|
|
|
|
|
|
|
|
|
|||
Interest expense |
|
|
|
|
|
|
|
|
|
|||
Income tax expense |
|
|
|
|
|
|
|
|
|
|||
Segment net income |
|
|
|
|
|
|
|
|
|
|||
Reconciliation of profit or loss: |
|
|
|
|
|
|
|
|
|
|||
Adjustment and reconciling items: |
|
|
|
|
|
|
|
|
|
|||
Consolidated net income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Note 26. Subsequent Events
The Company performed an evaluation of subsequent events through the date the condensed consolidated financial statements were issued and determined there were no recognized or unrecognized subsequent events that would require an adjustment or additional disclosure in the consolidated financial statements as of December 31, 2025.
In January 2026, the Company repurchased an aggregate of
On January 23, 2026, the Company received full payment on the $
The Company experienced losses from three winter storms that occurred in January and February of 2026 and expects to incur approximately $
47
PART IV
Item 15. Exhibits, Financial Statements Schedules
The following consolidated financial statements of the Company and the reports of independent auditors thereon are filed with this report:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
The following additional financial schedules are furnished herewith pursuant to requirements of Form 10-K.
Schedules required to be filed under the provisions of Regulations S-X Article 7:
|
Page |
Schedule II Condensed Financial Information of Registrant |
52 |
Schedule V Valuation Allowance and Qualifying Accounts |
55 |
Schedule VI Supplemental Information Concerning Consolidated Property-Casualty Insurance Operations |
56 |
The following is a list of exhibits filed or incorporated by reference as part of this Annual Report on Form 10-K
Exhibit Number |
|
Description (File No. 001-36462) |
|
|
|
3.1 |
|
Certificate of Incorporation of Heritage Insurance Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on August 6, 2014) |
|
|
|
3.2 |
|
By-laws of Heritage Insurance Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed on August 6, 2014) |
|
|
|
4.1 |
|
Form of Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1/A (File No. 333-195409) filed on May 13, 2014) |
|
|
|
4.2 |
|
Form of 5.875% Convertible Senior Notes due 2037 (included in Exhibit 4.1), incorporated by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed on August 16, 2017) |
|
|
|
4.3 |
|
Indenture, date as of August 16, 2017, by and among the Company. Heritage MGA, LLC as guarantor, and Wilmington Trust, National Association, as trustee, (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on August 16, 2017) |
|
|
|
4.4 |
|
Description of Capital Stock dated December 31, 2019 (incorporated by reference to Exhibit 4.5 to the Company’s Annual Report on Form 10-K filed on March 10, 2020) |
|
|
|
10.1 |
|
Amended and Restated Credit Agreement, dated July 22, 2025 among Heritage Insurance Holdings, Inc., certain subsidiaries of Heritage Insurance Holdings, Inc. from time to time party as guarantors, the lenders from time to |
48
|
|
time party and Regions Bank, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.30 to the Company's Current Report on Form 8-K filed on July 24, 2025 |
10.2† |
|
Heritage Insurance Holdings, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.28 to the Company's Registration Statement filed on Form S-1 (File No. 333-195409) filed on April 21, 2014) |
|
|
|
10.3† |
|
Heritage Insurance Holdings, Inc. 2023 Omnibus Incentive Plan (incorporated by reference to Exhibit 99.1 to the Company's Registration Statement filed on Form S-8 (File No. 333-272474) on June 7, 2023). |
|
|
|
10.4† |
|
Form of Restricted Stock Award Agreement (Time-based and Performance-Based Vesting, as of March 2025) (incorporated by reference to Exhibit 10.30 to the Company's Quarterly Report on Form 10-Q filed on May 9, 2025) |
|
|
|
10.5† |
|
Form of Amendment to Restricted Stock Award Agreements (incorporated by reference to Exhibit 10.31 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2025) |
|
|
|
10.6† |
|
Form of Stock Award Agreement (Non-employee directors, as of June 2025) (incorporated by reference to Exhibit 10.32 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2025) |
|
|
|
10.7† |
|
Employment Agreement dated January 1, 2024 between Heritage Insurance Holdings, Inc., and Kirk Lusk (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed on January 11, 2024) |
|
|
|
10.8† |
|
Employee Agreement dated January 1, 2024 between Heritage Insurance Holdings, Inc. and Sharon Binnun (incorporated by reference to Exhibit 10.4 to the Company's Form 8-K filed on January 11, 2024) |
|
|
|
10.9† |
|
Employment Agreement dated April 2, 2018 between Zephyr Insurance Company, Inc., and Tim Johns (incorporated by reference to Exhibit 10.21 to the Company's Form 10-Q filed on May 7, 2021) |
|
|
|
10.10† |
|
Employment Agreement dated January 1, 2024 between Heritage Insurance Holdings, Inc., and Ernie Garateix (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on January 11, 2024) |
|
|
|
10.11† |
|
Employment Agreement dated January 1, 2024 between Heritage Insurance Holdings, Inc., and Tim Moura (incorporated by reference to Exhibit 10.3 to the Company's Form 8-K filed on January 11, 2024) |
|
|
|
19.1 |
|
Heritage Insurance Holdings, Inc. |
|
|
|
21* |
|
Subsidiaries of the Registrant |
|
|
|
23.1* |
|
Consent of Plante Moran, PLLC |
|
|
|
31.1* |
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2* |
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.3** |
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.SC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.4** |
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.SC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
49
32.1***
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.SC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.2****
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.SC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
97.1 |
|
Heritage Insurance Holdings, Inc. Executive Officers Clawback Policy (incorporated by reference to Exhibit 97.1 to the Company's Annual Report on Form 10-K filed on March 13, 2024) |
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
|
104 |
|
The cover page from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, formatted in Inline XBRL (included in Exhibit 101) |
* Previously filed with the Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the SEC on March 12, 2026
** Filed herewith
*** Previously furnished with the Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the SEC on March 12, 2026
**** Furnished herewith
† Management contract or compensatory plan or arrangement
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
HERITAGE INSURANCE HOLDINGS, INC. |
|
|
|
|
|
Date: |
March 19, 2026 |
By: |
/s/ ERNESTO GARATEIX |
|
|
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer and Duly Authorized Officer) |
51
SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Condensed Balance Sheet
The following summarizes the major categories of Heritage Insurance Holdings, Inc.’s financial statements (in thousands):
|
|
As of December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
(in thousands) |
|
|||||
ASSETS |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Investment in and advances to subsidiaries |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total Assets |
|
$ |
|
|
$ |
|
||
LIABILITIES |
|
|
|
|
|
|
||
Other liabilities |
|
$ |
|
|
$ |
|
||
Total Liabilities |
|
$ |
|
|
$ |
|
||
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
||
Common stock |
|
$ |
|
|
$ |
|
||
Paid-in-capital |
|
|
|
|
|
|
||
Treasury |
|
|
( |
) |
|
|
( |
) |
Accumulated other comprehensive income |
|
|
( |
) |
|
|
( |
) |
Retained earnings |
|
|
|
|
|
|
||
Total Stockholders' Equity |
|
$ |
|
|
$ |
|
||
Total Liabilities and Stockholders' Equity |
|
$ |
|
|
$ |
|
||
52
Condensed Statement of Operations
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
|
(In thousands, except share and per share amounts) |
|
|||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|||
Other revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Total revenue |
|
|
|
|
|
|
|
|
|
|||
Expenses: |
|
|
|
|
|
|
|
|
|
|||
General and administrative expense |
|
|
|
|
|
|
|
|
|
|||
Amortization of debt issuance cost |
|
|
|
|
|
|
|
|
|
|||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|||
Total expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Income before income taxes and equity in net income of subsidiaries |
|
|
|
|
|
|
|
|
|
|||
Income tax expense |
|
|
|
|
|
|
|
|
|
|||
Income (loss) before equity in net income of subsidiaries |
|
|
|
|
|
( |
) |
|
|
|
||
Equity in net income of subsidiaries |
|
|
|
|
|
|
|
|
|
|||
Consolidated net income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
See notes to condensed financial statements.
53
SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Condensed Statement of Cash Flows
|
|
For the Years Ended December 31, |
|
|||||||||
Cash flows from operating activities: |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
|
(in thousands) |
|
|||||||||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|||
Amortization of debt issuance cost |
|
|
|
|
|
|
|
|
|
|||
Impairment on other investments |
|
|
|
|
|
|
|
|
|
|||
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
|
|||
Prepaid |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Income taxes payable |
|
|
( |
) |
|
|
|
|
|
|
||
Accrued interest on debt |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other assets |
|
|
|
|
|
|
|
|
|
|||
Debt issuance costs |
|
|
( |
) |
|
|
|
|
|
|
||
Dividends payable |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other liabilities |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net cash (used in) provided by operating activities |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||
Investing Activities: |
|
|
|
|
|
|
|
|
|
|||
Dividends received from subsidiaries |
|
|
|
|
|
|
|
|
|
|||
Investments and advances to subsidiaries |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Financing Activities: |
|
|
|
|
|
|
|
|
|
|||
Mortgage loan payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Payment on 7% loan |
|
|
( |
) |
|
|
|
|
|
|
||
Issuance of common stock, net |
|
|
|
|
|
( |
) |
|
|
|
||
Repayment of long-term debt |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Shares tendered for income tax withholdings |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchase of treasury stock |
|
|
( |
) |
|
|
|
|
|
|
||
Dividends forfeited |
|
|
|
|
|
|
|
|
|
|||
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
|
|
||
Increase (decrease) in cash and cash equivalents |
|
|
|
|
|
( |
) |
|
|
|
||
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents, end of year |
|
$ |
|
|
$ |
|
|
$ |
|
|||
See notes to condensed financial statements.
54
SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Notes to Condensed Financial Statements
Heritage Insurance Holdings, Inc., (“we”, “our”, “us” and “Heritage”), established in 2012 and incorporated in the state of Delaware in 2014, is a property and casualty insurance holding company that provides personal and commercial residential property insurance. We are headquartered in Tampa, Florida and, through our insurance company subsidiaries, Heritage Property & Casualty Insurance Company (“Heritage P&C”), Narragansett Bay Insurance Company (“NBIC”) and Zephyr Insurance Company (“Zephyr”), we write personal residential property insurance in the states of Alabama, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, and Virginia. We also provide commercial residential insurance for properties in Florida, New Jersey, and New York and are also licensed in the state of Pennsylvania, but have not written business in that state. In order to limit our potential exposure to catastrophic events, we purchase significant reinsurance from third party reinsurers and may sponsor catastrophe bonds issued by Citrus Re Ltd.
The accompanying condensed financial statements included the activity of Heritage and the equity basis of its consolidated subsidiaries. Accordingly, these condensed financial statements have been presented for the parent company only. These condensed financial statements should be read in conjunction with the consolidated financial statements and related notes of Heritage Insurance and subsidiaries set forth in Part II, Item 8 Financial Statements and Supplemental Data of this Annual Report.
In applying the equity method to our consolidated subsidiaries, we record the investment at cost and subsequently adjust for additional capital contributions, distributions and proportionate share of earnings or losses.
SCHEDULE V – VALUATION ALLOWANCES AND QUALIFYING ACCOUNTS
The following table summarizes activity in the Company’s allowance for doubtful accounts for the year ended December 31, 2025 and 2024.
Description |
|
Beginning balance |
|
|
Charges in earnings |
|
|
Charges to other accounts |
|
|
Deductions |
|
|
Ending balance |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Year ended December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for doubtful accounts |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||
Year ended December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for doubtful accounts |
|
$ |
|
|
|
|
|
|
( |
) |
|
|
|
|
$ |
|
||||
55
SCHEDULE VI – SUPPLEMENTAL INFORMATION CONCERNING CONSOLIDATED PROPERTY AND CASUALTY INSURANCE OPERATIONS
The following table provides certain information related to the Company’s property and casualty operations as of, and for the periods presented (in thousands):
|
|
As of |
|
|
For the Year Ended December 31, |
|
||||||||||||||
Year |
|
Reserves for |
|
|
Incurred |
|
|
Incurred |
|
|
Paid losses |
|
|
Net |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
2025 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
2023 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
|
|
As of |
|
|
For the Year Ended December 31, |
|
||||||||||||||
Year |
|
Deferred |
|
|
Amortization |
|
|
Net Premiums |
|
|
Net Premiums |
|
|
Unearned |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
56
FAQ
How did Heritage Insurance Holdings (HRTG) perform financially in 2025?
What were Heritage Insurance Holdings’ key revenue and earnings metrics for 2025?
How strong is Heritage Insurance Holdings’ balance sheet at year-end 2025?
What did the auditor conclude about Heritage Insurance Holdings’ 2025 financials and controls?
What is the critical audit matter identified for Heritage Insurance Holdings (HRTG)?
How did cash flows from operations trend for Heritage Insurance Holdings in 2025?
