Heritage Insurance (NYSE: HRTG) lifts Q2 2026 EPS to $2.06 on higher profit
Heritage Insurance Holdings, Inc. reports stronger profitability for the quarter and six months ended June 30, 2026. For the quarter, total revenues were $214,195 (in thousands) and net income was $61,710 (in thousands), up from $48,024 (in thousands) a year earlier, as losses and loss adjustment expenses declined.
Net premiums earned were $201,124 (in thousands) for the quarter and $400,817 (in thousands) year to date, while investment income also increased. Basic earnings per share were $2.06 for the quarter and $3.24 for the first half. Operating cash flow strengthened to $166,553 (in thousands) for the six months, supporting a cash and restricted cash balance of $601,379 (in thousands) and total stockholders’ equity of $567,728 (in thousands) as of June 30, 2026. The company continues to rely on extensive catastrophe excess of loss and quota share reinsurance programs to manage its concentrated coastal property risk.
Positive
- None.
Negative
- None.
Filing Explained
Reinsurance was effective June 1, while quarter-end outstanding shares reflected completed treasury purchases and tax withholding.
The Form 10-Q is an unaudited quarterly report for the period ended
Reinsurance transfers part of the insurance risk to reinsurers, but the company remains responsible for insured losses if a reinsurer cannot meet its obligations. The stated first-event maximum retentions are
The equity statement shows 43,071,733 shares issued, 29,732,416 outstanding, and 13,339,317 held as treasury shares at
For later catastrophe events, the filing states that available coverage depends on how much of the first-event layers is used; losses above the reinsurance program remain the company’s responsibility.
Key Figures
Key Terms
catastrophe excess of loss reinsurance financial
Florida Hurricane Catastrophe Fund financial
quota share reinsurance financial
deferred policy acquisition costs financial
ceding commission income financial
non-consolidated variable interest entities financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did Heritage Insurance (HRTG) perform financially in Q2 2026?
What were Heritage Insurance (HRTG) earnings per share for Q2 and the first half of 2026?
How strong was Heritage Insurance (HRTG) cash flow in the first half of 2026?
What does the Q2 2026 balance sheet show for Heritage Insurance (HRTG)?
How much premium did Heritage Insurance (HRTG) earn in Q2 2026?
What reinsurance protection does Heritage Insurance (HRTG) carry for 2026-2027?
What are key risk factors highlighted by Heritage Insurance (HRTG)?
|
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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Form
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For the quarterly period ended
OR
Commission File Number
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(Exact name of Registrant as specified in its charter)
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(State of Incorporation) |
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(IRS Employer Identification No.) |
(Address, including zip code, of principal executive offices)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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, a 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.
Large accelerated filer |
☐ |
☒ |
Emerging growth company |
||
Non-accelerated filer |
☐ |
Smaller reporting 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The aggregate number of shares of the Registrant’s Common Stock outstanding on August 2, 2026 was
|
HERITAGE INSURANCE HOLDINGS, INC.
Table of Contents
|
|
Page |
PART I – FINANCIAL INFORMATION |
|
|
Item 1 Unaudited Financial Statements |
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|
Condensed Consolidated Balance Sheets: June 30, 2026 (unaudited) and December 31, 2025 |
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2 |
Condensed Consolidated Statements of Operations and Other Comprehensive Income: Three and Six Months Ended June 30, 2026 and 2025 (unaudited) |
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3 |
Condensed Consolidated Statements of Stockholders’ Equity: Three and Six Months Ended June 30, 2026 and 2025 (unaudited) |
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4 |
Condensed Consolidated Statements of Cash Flows: Six Months Ended June 30, 2026 and 2025 (unaudited) |
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5 |
Notes to Unaudited Condensed Consolidated Financial Statements |
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7 |
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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29 |
Item 3 Quantitative and Qualitative Disclosures about Market Risk |
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43 |
Item 4 Controls and Procedures |
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43 |
PART II – OTHER INFORMATION |
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Item 1 Legal Proceedings |
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44 |
Item 1A Risk Factors |
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44 |
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds |
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44 |
Item 5 Other Information |
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44 |
Item 6 Exhibits |
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45 |
Signatures |
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46 |
FORWARD-LOOKING STATEMENTS
Statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) or in documents incorporated by reference that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements, expectations or beliefs regarding: (i) our core strategy and ability to fully execute our business plan; (ii) our growth, including by geographic expansion, new lines of business, additional policies and new products and services, competitive strengths, proprietary capabilities, processes and new technology, results of operations and liquidity; (iii) strategic initiatives and their impact on shareholder value; (iv) projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance; (v) management’s goals and objectives, including intentions to pursue certain business and the handling of certain claims; (vi) projections of revenue, earnings, capital structure, reserves, liquidity and other financial items; (vii) potential for rising costs of materials and labor; (viii) the supply of catastrophe reinsurance and its costs; (ix) assumptions underlying our critical accounting policies and estimates; (x) assumptions underlying statements regarding us and our business; (xi) the impact of legislation; (xii) claims and related expenses, and our reinsurers’ obligations; (xiii) pending legal proceedings and their effect on our financial position; (xiv) effects of updated claims, policy, and billing systems; and (xv) other similar expressions concerning matters that are not historical facts. These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included throughout this filing and particularly in Item 1A: "Risk Factors" set forth in our 2025 Annual Report on Form 10-K and Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in this quarterly report on Form 10-Q. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to revise or publicly release any revision to any such forward-looking statement, except as may otherwise be required by law.
These statements are based on current expectations, estimates and projections about the industry and market in which we operate, and management’s beliefs and assumptions. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” or “continue” or the negative variations thereof or comparable terminology are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. The risks and uncertainties include, without limitation:
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrences of anticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in the forward-looking statements. Consequently, you should not place undue reliance on forward-looking statements.
PART I – FINANCIAL INFORMATION
Item 1 – Financial Statements
HERITAGE INSURANCE HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(Amounts in thousands, except per share and share amounts)
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June 30, 2026 |
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December 31, 2025 |
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ASSETS |
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(unaudited) |
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Fixed maturities, available-for-sale, at fair value (amortized cost of $ |
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$ |
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$ |
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||
Equity securities, at fair value, (cost $ |
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Other investments, net |
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Total investments |
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Cash and cash equivalents |
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Restricted cash |
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Accrued investment income |
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Premiums receivable, net |
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Reinsurance recoverable on paid and unpaid claims, net of allowance for credit losses of $ |
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Prepaid reinsurance premiums |
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Deferred income tax asset, net |
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Deferred policy acquisition costs, net |
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Property and equipment, net |
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Right-of-use lease asset, finance |
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Right-of-use lease asset, operating |
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Intangibles, net |
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Other assets |
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Total Assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Unpaid losses and loss adjustment expenses |
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$ |
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$ |
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||
Unearned premiums |
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Reinsurance payable |
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Long-term debt, net |
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Advance premiums |
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Income taxes payable, net |
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Accrued compensation |
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Lease liability, finance |
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Lease liability, operating |
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Accounts payable and other liabilities |
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Total Liabilities |
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$ |
|
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$ |
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||
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Commitments and contingencies (Note 17) |
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Stockholders’ Equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss, net of taxes |
|
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( |
) |
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( |
) |
Treasury stock, at cost, |
|
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( |
) |
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( |
) |
Retained earnings |
|
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||
Total Stockholders' Equity |
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|
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Total Liabilities and Stockholders' Equity |
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$ |
|
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$ |
|
||
See accompanying notes to unaudited condensed consolidated financial statements.
2
HERITAGE INSURANCE HOLDINGS, INC.
Condensed Consolidated Statements of Operations and Other Comprehensive Income
(Amounts in thousands, except per share and share amounts)
(Unaudited)
|
|
For The Three Months Ended June 30, |
|
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For The Six Months Ended June 30, |
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||||||||||
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2026 |
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2025 |
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2026 |
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2025 |
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||||
REVENUES: |
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||||
Gross premiums written |
|
$ |
|
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$ |
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$ |
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$ |
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||||
Change in gross unearned premiums |
|
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Gross premiums earned |
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Ceded premiums |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Net premiums earned |
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||||
Net investment income |
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Net realized (losses) gains on debt securities and other investments |
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( |
) |
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( |
) |
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Other revenue |
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||||
Total revenues |
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EXPENSES: |
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||||
Losses and loss adjustment expenses |
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Policy acquisition costs, net of ceding commission income (1) |
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||||
General and administrative expenses, net of ceding commission income(2) |
|
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||||
Total expenses |
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||||
Operating income |
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||||
Interest expense, net |
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Income before income taxes |
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||||
Income tax expense |
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||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
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$ |
|
||||
OTHER COMPREHENSIVE INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in net unrealized (losses) gains on investments |
|
|
( |
) |
|
|
|
|
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( |
) |
|
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||
Reclassification adjustment for net realized investment losses |
|
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( |
) |
|
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|
|
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|
|||
Income tax benefits (expense) related to items of other comprehensive income |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Total comprehensive income |
|
$ |
|
|
$ |
|
|
$ |
|
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$ |
|
||||
Weighted average shares outstanding |
|
|
|
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|
|
|
|
|
|
|
|
||||
Basic |
|
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|
|
|
|
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|
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||||
Diluted |
|
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|
||||
Earnings per share |
|
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|
|
|
|
|
|
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|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
HERITAGE INSURANCE HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(Amounts in thousands, except share amounts)
|
|
Common Shares |
|
|
Par Value |
|
|
Additional Paid-In Capital |
|
|
Retained |
|
|
Treasury Shares |
|
|
Accumulated Other Comprehensive Loss |
|
|
Total |
|
|||||||
Balance at December 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
Net unrealized change in investments, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issuance of restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Surrendered shares for tax withholdings |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Stock-based compensation on restricted stock |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Purchase of treasury stock |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net Income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance at March 31, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
Net unrealized change in investments, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issuance of restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation on restricted stock |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Purchase of treasury stock |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance at June 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
|
|
Common Shares |
|
|
Par Value |
|
|
Additional Paid-In Capital |
|
|
Retained |
|
|
Treasury Shares |
|
|
Accumulated Other Comprehensive Loss |
|
|
Total |
|
|||||||
Balance at December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
Net unrealized change in investments, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Issuance of restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation on restricted stock |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net Income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance at March 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
Net unrealized change in investments, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Issuance of restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation on restricted stock |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net Income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance at June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
HERITAGE INSURANCE HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
|
|
For The Six Months Ended June 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
OPERATING ACTIVITIES |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Bond amortization and accretion |
|
|
( |
) |
|
|
( |
) |
Expected credit allowance on reinsurance |
|
|
|
|
|
|
||
Amortization of original issuance discount on debt |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Provision for credit losses |
|
|
( |
) |
|
|
|
|
Net realized losses |
|
|
( |
) |
|
|
|
|
Deferred income taxes |
|
|
|
|
|
( |
) |
|
Gain on sale of fixed assets, net |
|
|
|
|
|
( |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accrued investment income |
|
|
( |
) |
|
|
|
|
Premiums receivable, net |
|
|
|
|
|
|
||
Prepaid reinsurance premiums |
|
|
( |
) |
|
|
( |
) |
Reinsurance recoverable on paid and unpaid claims |
|
|
|
|
|
|
||
Income tax receivable |
|
|
|
|
|
( |
) |
|
Deferred policy acquisition costs |
|
|
( |
) |
|
|
( |
) |
Right of use leased asset, net |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
( |
) |
|
Unpaid losses and loss adjustment expenses |
|
|
( |
) |
|
|
( |
) |
Unearned premiums |
|
|
|
|
|
|
||
Reinsurance payable |
|
|
|
|
|
|
||
Accrued interest |
|
|
( |
) |
|
|
( |
) |
Accrued compensation |
|
|
( |
) |
|
|
( |
) |
Advance premiums |
|
|
|
|
|
|
||
Leased liabilities, net |
|
|
( |
) |
|
|
( |
) |
Income tax payable |
|
|
|
|
|
( |
) |
|
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 |
|
|
|
|
|
|
||
Proceeds from sale of assets |
|
|
|
|
|
|
||
Return on other investments |
|
|
|
|
|
|
||
Equity securities reinvestments of dividends |
|
|
|
|
|
( |
) |
|
Cost of property and equipment acquired, net of disposals |
|
|
( |
) |
|
|
( |
) |
Net cash used in (provided by) investing activities |
|
|
( |
) |
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Principal payments on term loan facility |
|
|
( |
) |
|
|
( |
) |
Purchase of treasury stock |
|
|
( |
) |
|
|
|
|
Repayment of loan agreement |
|
|
( |
) |
|
|
( |
) |
Tax withholding on share-based compensation awards |
|
|
( |
) |
|
|
|
|
Mortgage loan payments |
|
|
|
|
|
( |
) |
|
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Increase 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 |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
||
Interest paid |
|
$ |
|
|
$ |
|
||
4
Reconciliation of cash, cash equivalents, and restricted cash to condensed consolidated balance sheets.
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(In thousands) |
|
|||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows |
|
$ |
|
|
$ |
|
||
Restricted cash represents funds held to meet regulatory requirements in certain states in which the Company operates as well as deposits related to reinsurance transactions using catastrophe bonds.
Cash paid for income taxes consisted of the following as of June 30, 2026 and 2025, respectively.
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||
|
|
(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 |
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||
Florida |
|
$ |
|
|
$ |
|
||
New York |
|
* |
|
|
* |
|
||
See accompanying notes to unaudited condensed consolidated financial statements.
5
HERITAGE INSURANCE HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The condensed consolidated financial statements include the accounts of Heritage Insurance Holdings, Inc. (together with its subsidiaries, the “Company”). These statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain financial information that is normally included in annual consolidated financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted. In the opinion of the Company’s management, all material intercompany transactions and balances have been eliminated and all adjustments consisting of normal recurring accruals which are necessary for a fair statement of the financial condition and results of operations for the interim periods have been reflected. The accompanying interim condensed consolidated financial statements and related footnotes should be read in conjunction with the Company’s audited consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed on March 12, 2026 (as amended, the “2025 Form 10-K”).
Significant accounting policies
The accounting policies of the Company are set forth in Note 1 to the condensed consolidated financial statements contained in the Company’s 2025 Form 10-K.
Segment Information
Nature of Operations
The Company's results are reported as a single operating and reportable segment - residential property insurance. 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. For more information regarding the Company's nature of operations, see the "Business Segment" section of Note 1 to the consolidated financial statements in the 2025 Form 10-K.
Accounting Pronouncements not yet adopted
The Company has documented the summary of its significant accounting policies in its Notes to the Audited Consolidated Financial Statements contained in the Company’s 2025 Form 10-K. There have been no material changes to the Company’s accounting policies since the filing of that report.
The Company continually monitors new accounting pronouncements issued by the FASB and other standard-setting bodies. Management has evaluated accounting standards issued but not yet adopted as of June 30, 2026, including Accounting Standards Updates issued during 2026. Based on the nature of the Company's operations and investment activities, management does not currently expect any recently issued accounting standards to have a material effect on the Company's consolidated financial statements or related disclosures.
6
NOTE 2. INVESTMENTS
Securities Available-for-Sale
The amortized cost, gross unrealized gains and losses, and fair value of the Company’s debt securities available-for-sale are as follows for the periods presented:
June 30, 2026 |
|
Cost or Adjusted / |
|
|
Gross Unrealized |
|
|
Gross Unrealized |
|
|
Fair Value |
|
||||
Debt Securities Available-for-sale |
|
(In thousands) |
|
|||||||||||||
U.S. government and agency securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
States, municipalities and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
During June 2026, the Company repaid in full the borrowings collateralized by investment securities under advance agreements entered into in 2024. As a result, debt securities with a carrying amount of $
December 31, 2025 |
|
Cost or Adjusted / |
|
|
Gross Unrealized |
|
|
Gross Unrealized |
|
|
Fair Value |
|
||||
Debt Securities Available-for-sale |
|
(In thousands) |
|
|||||||||||||
U.S. government and agency securities (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
States, municipalities and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net Realized Gains (Losses) on Debt Securities
|
|
Three Months Ended June 30, 2026 |
|
|
Three Months Ended June 30, 2025 |
|
||||||||||
|
|
Gains |
|
|
Fair Value at Sale |
|
|
Gains |
|
|
Fair Value at Sale |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Debt Securities Available-for-Sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total realized gains |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total realized losses |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Net realized (losses) gains on debt securities available-for-sale |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
7
|
|
Six Months Ended June 30, 2026 |
|
|
Six Months Ended June 30, 2025 |
|
||||||||||
|
|
Gains |
|
|
Fair Value at Sale |
|
|
Gains |
|
|
Fair Value at Sale |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Debt Securities Available-for-Sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total realized gains |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total realized losses |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Net realized (losses) gains on debt securities available-for-sale |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The following table presents the reconciliation of net realized gains (losses) from debt securities and other investments on the Company’s investments reported for the three and six months ended June 30, 2026 and 2025, respectively:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Gross realized gains on sales of available-for-sale securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Gross realized losses on sales of available-for-sale securities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gross realized losses on other investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross realized gains on other investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net realized (losses) gains on investments |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
The table below summarizes the Company’s debt securities at June 30, 2026 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.
|
|
June 30, 2026 |
|
|||||||||||||
|
|
Cost or Amortized Cost |
|
|
Percent of Total |
|
|
Fair Value |
|
|
Percent of Total |
|
||||
Maturity dates: |
|
(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 |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Net Investment Income
The following table summarizes the Company’s net investment income by major investment category for the three and six months ended June 30, 2026 and 2025, respectively:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(In thousands) |
|
|
(In thousands) |
|
||||||||||
Debt securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: Investment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net investment income, less investment expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following tables present, for all debt securities available-for-sale in an unrealized loss position (including securities pledged) and for which no credit loss allowance has been established to date, the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position at June 30, 2026 and December 31, 2025, respectively (in thousands):
8
|
|
Less Than Twelve Months |
|
|
Twelve Months or More |
|
||||||||||||||||||
June 30, 2026 |
|
Number of |
|
|
Gross |
|
|
Fair Value |
|
|
Number of |
|
|
Gross |
|
|
Fair Value |
|
||||||
Debt Securities Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government and agency securities |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
||||||
States, municipalities and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Less Than Twelve Months |
|
|
Twelve Months or More |
|
||||||||||||||||||
December 31, 2025 |
|
Number of |
|
|
Gross |
|
|
Fair Value |
|
|
Number of |
|
|
Gross |
|
|
Fair Value |
|
||||||
Debt Securities Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government and agency securities |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
||||||
States, municipalities and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
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 available‑for‑sale debt securities in unrealized loss positions at June 30, 2026 and determined that the losses were driven by interest rate movements, changes in yield curve dynamics, market liquidity conditions, and broader fixed‑income market volatility, none of which indicated credit deterioration; accordingly, no allowance for credit losses was recorded for the three or six months ended June 30, 2026.
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.
9
The following table summarizes the carrying value and maximum loss exposure of the Company’s non-consolidated VIEs at June 30, 2026 and December 31, 2025, respectively:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||
|
|
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. FAIR VALUE OF FINANCIAL MEASUREMENTS
Fair value is determined based on the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.
The Company is required to use an established hierarchy for fair value measurements based upon the inputs to the valuation and degree to which they are observable or not observable in the market. The three levels in the hierarchy are as follows:
The highest priority is assigned to Level 1 inputs and the lowest priority to Level 3 inputs. At June 30, 2026 and December 31, 2025, there were
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.
10
The tables below present the balances of the Company’s invested assets measured at fair value on a recurring basis:
June 30, 2026 |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets: |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets: |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Financial Instruments excluded from the fair value hierarchy
The carrying value of premium receivables, accounts payable, accrued expense, revolving loans and borrowings under the Company’s senior secured credit facility approximate their fair value. The rate at which revolving loans and borrowings under the Company’s senior secured credit facility bear interest resets periodically at market interest rates.
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. For the three and six months ended June 30, 2026, there were no assets or liabilities that were measured at fair value on a non-recurring basis.
Certain of the Company's investments, in accordance with GAAP for the type of investment, are measured using methodologies other than fair value.
11
NOTE 4. OTHER COMPREHENSIVE (LOSS) INCOME
The following table summarizes other comprehensive (loss) income and discloses the tax impact of each component of other comprehensive income for the three and six months ended June 30, 2026 and 2025, respectively:
|
|
For The Three Months Ended June 30, |
|
|||||||||||||||||||||
|
|
2026 |
|
|
2025 |
|
||||||||||||||||||
|
|
Pre-tax |
|
|
Tax |
|
|
After-tax |
|
|
Pre-tax |
|
|
Tax |
|
|
After-tax |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Other comprehensive (loss) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Change in unrealized (losses) gains on investments, net |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Reclassification adjustment of realized losses included in net income |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Effect on other comprehensive (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
For The Six Months Ended June 30, |
|
|||||||||||||||||||||
|
|
2026 |
|
|
2025 |
|
||||||||||||||||||
|
|
Pre-tax |
|
|
Tax |
|
|
After-tax |
|
|
Pre-tax |
|
|
Tax |
|
|
After-tax |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Other comprehensive (loss) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Change in unrealized (losses) gains on investments, net |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Reclassification adjustment of realized losses included in net income |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Effect on other comprehensive (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
NOTE 5. 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 one 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.
Components of the Company’s lease costs were as follows (in thousands):
|
|
For The Six Months Ended June 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
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 |
|
$ |
|
|
$ |
|
||
12
Supplemental balance sheet information related to the Company’s operating and financing leases were as follows (in thousands):
|
|
|
|
|||||
Operating Leases |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Right of use assets |
|
$ |
|
|
$ |
|
||
Lease liability |
|
$ |
|
|
$ |
|
||
Finance Leases |
|
|
|
|
|
|
||
Right of use assets |
|
$ |
|
|
$ |
|
||
Lease liability |
|
$ |
|
|
$ |
|
||
Weighted-average remaining lease term and discount rate for the Company’s operating and financing leases for the periods presented below were as follows:
Weighted-average remaining lease term |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
|
||
Operating lease |
|
|
|
yrs. |
|
|
yrs. |
||
Finance lease |
|
|
|
yrs. |
|
|
yrs. |
||
Weighted-average discount rate |
|
|
|
|
|
|
|
||
Operating lease |
|
|
|
% |
|
|
% |
||
Finance lease |
|
|
|
% |
|
|
% |
||
Maturities of lease liabilities by fiscal year for the Company’s operating and financing leases were as follows (in thousands):
|
|
Financing Lease |
|
|
Operating Lease |
|
||
2026 - remaining |
|
$ |
|
|
$ |
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
2029 |
|
|
|
|
|
|
||
2030 |
|
|
|
|
|
|
||
2031 and thereafter |
|
|
|
|
|
|
||
Total lease payments |
|
|
|
|
|
|
||
Less: imputed interest |
|
|
|
|
|
|
||
Present value of lease liabilities |
|
$ |
|
|
$ |
|
||
NOTE 6. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following at June 30, 2026 and December 31, 2025:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(In thousands) |
|
|||||
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 six months ended June 30, 2026, the Company capitalized an additional $
Depreciation and amortization expense for property and equipment was approximately $
13
During the first quarter of 2026, the Company recorded a charge for the write‑off of the remaining net book value of leasehold improvements related to an operating lease that was early terminated effective January 31, 2026. In connection with the early termination, the Company reduced its occupied square footage and entered into a new lease with the existing landlord. Fully depreciated leasehold improvements totaling $
NOTE 7. INTANGIBLE ASSETS, NET
At June 30, 2026 and December 31, 2025, intangible assets were $
The Company’s intangible assets consist of brand, agent relationships, renewal rights, customer relations, trade names and insurance licenses.
Amortization expense of the Company’s intangible assets for the three month periods ended June 30, 2026 and 2025 was $
Estimated annual pretax amortization of intangible assets for each of the next five years and thereafter is as follows (in thousands):
Year |
|
Amount |
|
|
2026 − remaining |
|
$ |
|
|
2027 |
|
$ |
|
|
2028 |
|
$ |
|
|
2029 |
|
$ |
|
|
2030 |
|
$ |
|
|
Thereafter |
|
$ |
|
|
Total |
|
$ |
|
|
NOTE 8. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share (“EPS”) for the periods indicated (amounts in thousands, except share and per share amounts).
|
|
For The Three Months Ended June 30, |
|
|
For The Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
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: |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
14
NOTE 9. DEFERRED REINSURANCE CEDING COMMISSION
The Company defers ceding commission earned in connection with its quota share reinsurance contracts, which is 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 to estimated ceding commission income are reflected in current operations. The Company allocates
The table below depicts the activity regarding deferred reinsurance ceding commission during the three and six months ended June 30, 2026 and 2025:
|
|
For The Three Months Ended June 30, |
|
|
For The Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(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 10. DEFERRED POLICY ACQUISITION COSTS
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 9. 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 will be fully recoverable in the near term. The table below depicts the activity regarding DPAC for the three and six months ended June 30, 2026 and 2025.
|
|
For The Three Months Ended June 30, |
|
|
For The Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Beginning Balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Policy acquisition costs deferred, net of ceding commission |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending Balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
15
NOTE 11. INCOME TAXES
The following table summarizes the provision for income taxes for the six months ended June 30, 2026 and 2025:
|
|
Six Months Ended June 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
|
|
(in thousands) |
|
|||||
Federal: |
|
|
|
|
|
|
||
Current |
|
$ |
|
|
$ |
|
||
Deferred |
|
|
|
|
|
( |
) |
|
Provision for Federal income tax |
|
|
|
|
|
|
||
State: |
|
|
|
|
|
|
||
Current |
|
$ |
|
|
$ |
|
||
Deferred |
|
|
|
|
|
( |
) |
|
Provision for State income tax expense |
|
|
|
|
|
|
||
Provision for income taxes |
|
$ |
|
|
$ |
|
||
For the three months ended June 30, 2026 and 2025, the Company recorded income tax expense of $
The below table summarizes the significant components of the Company's net deferred tax assets:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Deferred tax assets: |
|
(in thousands) |
|
|||||
Unearned premiums |
|
$ |
|
|
$ |
|
||
Tax-related discount on loss reserve |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Accrued expenses |
|
|
|
|
|
|
||
Leases |
|
|
|
|
|
|
||
Unrealized losses |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total deferred tax asset |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
||
Deferred acquisition costs |
|
|
|
|
|
|
||
Prepaid expenses |
|
|
|
|
|
|
||
Property and equipment |
|
|
|
|
|
|
||
Basis in purchased investments |
|
|
|
|
|
|
||
Basis in purchased intangibles |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total deferred tax liabilities |
|
|
|
|
|
|
||
Net deferred tax assets |
|
$ |
|
|
$ |
|
||
On July 4, 2025, the "One Big Beautiful Bill Act" ("OBBBA") was signed into law in the United States. The OBBBA 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, including 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.
16
The statute of limitations related to the Company’s federal and state income tax returns remains open from the Company’s filings for 2022 through 2025. There are currently no tax years under examination.
At June 30, 2026 and December 31, 2025, the Company had
NOTE 12. REINSURANCE
Overview
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 management 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, 2026 and 2025, the Company purchased catastrophe excess of loss reinsurance from 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 are 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 are 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 generally limit its net exposure in the event of a severe non-hurricane 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 management 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.
2026 - 2027 Reinsurance Program
Catastrophe Excess of Loss Reinsurance
Effective June 1, 2026, the Company entered into catastrophe excess of loss reinsurance agreements for 2026-2027 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, the Florida Hurricane Catastrophe Fund (“FHCF”), Citrus Re and Osprey Re. The FHCF covers Florida admitted market personal residential and commercial residential property risks only and the Company elected to participate at
17
risk. Osprey Re and Citrus Re are fully collateralized programs.
The reinsurance program, which is segmented into layers of coverage, protects the Company for excess property catastrophe losses and loss adjustment expenses. The 2026-2027 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 $
Additionally, on December 31, 2025, 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 business underwritten by NBIC, for which certain of the Company’s other reinsurance (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
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 residential U.S. surplus lines business underwritten by NBIC, excluding losses from named storms, the Company purchases property per risk coverage which has a one year contract period. For the contract period July 1, 2026 through June 30, 2027, 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 $
18
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 NBIC and Zephyr from single risk losses. For the contract period of July 1, 2026 through June 30, 2027, the coverage is $
For a detailed discussion of the Company’s 2025-2026 Reinsurance Program refer to Part II, Item 8, “Financial Statements and Supplementary Data” and “Note 12. Reinsurance” in the Company’s 2025 Form 10-K.
Effect of Reinsurance
The Company’s reinsurance arrangements had the following effect on certain items in the condensed consolidated statement of income for the three and six months ended June 30, 2025 and 2026:
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For The Three Months Ended June 30, |
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For The Six Months Ended June 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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(In thousands) |
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(In thousands) |
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Premium written: |
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Direct |
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$ |
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$ |
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$ |
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$ |
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Ceded |
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( |
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( |
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( |
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( |
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Net |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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Premiums earned: |
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Direct |
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$ |
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$ |
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$ |
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$ |
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Ceded |
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( |
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( |
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( |
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( |
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Net |
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$ |
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$ |
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$ |
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$ |
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Loss and Loss Adjustment Expenses |
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Direct |
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$ |
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$ |
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$ |
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$ |
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Ceded |
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( |
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( |
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Net |
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$ |
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$ |
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$ |
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$ |
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During the Company's June 30, 2026 and March 31, 2026 quarterly assessments of loss reserves, the ultimate catastrophe losses for Hurricane Milton were adjusted downward based on loss development. This had a dampening effect on the ceded losses for the calendar quarter and year ended June 30, 2026. During each of the Company's June 30, 2025 and March 31, 2025 quarterly assessment of losses reserves, the ultimate catastrophe loss estimates for certain hurricane events were adjusted downward based upon loss development. The reduction in ultimate catastrophe losses reduced both the reserve for unpaid losses and the amount of reinsurance recoverable on unpaid claims by the same amount. The resultant change on a net basis was neutral because the losses were fully ceded under the Company's catastrophe excess of loss reinsurance coverage. This caused the ceded losses during the first and second quarters of 2025 to be positive in the table above.
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:
19
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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(In thousands) |
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Balance, beginning of period |
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$ |
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$ |
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$ |
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$ |
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Less: reinsurance recoverable on unpaid losses |
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Net balance, beginning of period |
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Incurred related to: |
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Current year |
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Prior years |
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( |
) |
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( |
) |
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( |
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( |
) |
Total incurred |
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Paid related to: |
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Current year |
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Prior years |
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Total paid |
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Net balance, end of period |
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Plus: reinsurance recoverable on unpaid losses |
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Balance, end of period |
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$ |
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$ |
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$ |
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$ |
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The Company believes that the reserve for unpaid losses reasonably represents 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 June 30, 2026, 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.
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 June 30, 2026, 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 provides for senior secured credit facilities in the aggregate principal amount of up to $
20
ratio, in up to five separate installments during the two year period following the effective date of the Amended and Restated Credit Agreement with a maturity of July 2030 (the “Delayed Draw Term Loan Facility”) (collectively, the “Credit Facilities”).
Term Loan Facility. The principal amount of the term loan facility under the Prior Credit Agreement amortized in quarterly installments, which began with the close of the fiscal quarter ending March 31, 2019 and was amortizing in an amount equal to $
For the six months ended June 30, 2026, the Company made principal payments of $
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 June 30, 2026, 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 $
FHLB Loan Agreements
In December 2018, a subsidiary of the Company received a
21
FHLB-ATL required an investment in FHLB-ATL’s common stock which was purchased in December 2018 and valued at $
In December 2018, a subsidiary of the Company became a member of the FHLB Boston. As of June 30, 2026 and at December 31, 2025, the Company also holds 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 three months ended June 30, 2026 and 2025, 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 and credit facilities as of June 30, 2026 and December 31, 2025:
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June 30, 2026 |
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December 31, 2025 |
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(in thousands) |
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Convertible debt |
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$ |
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$ |
|
||
Term loan facility |
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FHLB loan agreements |
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Total principal amount |
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$ |
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$ |
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Deferred finance costs |
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$ |
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$ |
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Total long-term debt |
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$ |
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$ |
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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 depends, 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 the Company is subject to with respect to the Company's long-term debt.
The schedule of principal payments on long-term debt as of June 30, 2026 is as follows:
Year |
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Amount |
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(In thousands) |
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2026 remaining |
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$ |
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2027 |
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2028 |
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2029 |
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2030 |
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Thereafter |
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Total |
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$ |
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|
22
NOTE 15. ACCOUNTS PAYABLE AND OTHER LIABILITIES
Accounts payable and other liabilities consist of the following:
Description |
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June 30, 2026 |
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|
December 31, 2025 |
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(In thousands) |
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|||||
Accounts payable and other payables |
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$ |
|
||
Accrued interest and issuance costs |
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Other liabilities |
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Commission payables |
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Total other liabilities |
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$ |
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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 Heritage Property & Casualty Insurance Company (“Heritage P&C)”, Narragansett Bay Insurance Company (“NBIC”), Zephyr Insurance Company (“Zephyr”), and Pawtucket Insurance Company (“PIC”) must maintain capital and surplus ratios or balances as determined by the regulatory authority of the states in which they are domiciled. Heritage P&C is required to maintain capital and surplus equal to the greater of $
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 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.
NOTE 18. RELATED PARTY TRANSACTIONS
From time to time the Company has been party to various related party transactions involving certain of its officers, directors and significant stockholders, including as set forth below. The Company has entered into each of these arrangements without obligation to continue its effect in the future and the associated expense was immaterial to its results of operations or financial position as of June 30, 2026 and 2025.
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. For the three and six months ended June 30, 2025, the Company paid agency commission to
23
Comegys of $
NOTE 19. EMPLOYEE BENEFIT PLANS
The Company provides a 401(k) plan for all qualifying employees. The Company provides a matching contribution of
The Company offers employees a flex healthcare plan which allows employees the choice of three medical plans with a range of coverage levels and costs. For the three months ended June 30, 2026 and 2025, the Company incurred medical premium costs including healthcare premiums of $
NOTE 20. EQUITY
The total amount of authorized capital stock consists of
As of December 31, 2025, the Company had
Common Stock
Holders of common stock are entitled to
Stock Repurchase Program
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 $
24
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 $
On May 7, 2026, the Board of Directors established a new share repurchase plan, replacing the prior share repurchase plan, for the purpose of repurchasing up to an aggregate of $
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 21. 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 June 30, 2026, there were
On June 10, 2026, the date of the 2026 annual meeting of the Company's stockholders, the Company awarded to non-employee directors an aggregate of
On April 1, 2026, the Company awarded an aggregate of
On March 5, 2026, the Company awarded an aggregate of
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
25
On March 11, 2025, the Company awarded an aggregate of
On January 10, 2025, the Company awarded
On February 26, 2024, the Company awarded an aggregate of
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
For the 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 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.
Restricted stock activity for the six months ended June 30, 2026 is as follows:
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Weighted-Average |
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Grant-Date Fair |
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Number of shares |
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Value per Share |
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Non-vested, at December 31, 2025 |
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$ |
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Granted - Performance-based restricted stock |
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$ |
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Granted - Time-based restricted stock |
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$ |
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Vested |
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( |
) |
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$ |
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Canceled and surrendered |
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( |
) |
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$ |
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Non-vested, at June 30, 2026 |
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$ |
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Awards are being amortized to expense over the one - to
At June 30, 2026, there was approximately $
Additional information regarding the Company’s outstanding non-vested time-based restricted stock and performance-based restricted stock at June 30, 2026 is as follows:
26
Grant date |
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Restricted shares unvested |
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Share Value at Grant Date Per Share |
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Remaining Restriction Period (Years) |
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February 27, 2024 |
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February 27, 2024 |
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March 11, 2025 |
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March 11, 2025 |
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March 5, 2026 |
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March 5, 2026 |
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April 1, 2026 |
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Total non-vested shares |
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NOTE 22. SEGMENT INFORMATION
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.
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For The Three Months Ended June 30, |
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For The Six Months Ended June 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Revenues: |
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Net earned premiums |
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$ |
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$ |
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$ |
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$ |
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Net investment income |
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Net realized (losses) gains on debt securities and other investments |
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( |
) |
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( |
) |
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Other revenue |
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||||
Total revenues |
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$ |
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|
$ |
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|
$ |
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$ |
|
||||
Expenses: |
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||||
Losses and loss adjustment expense - current year |
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||||
Losses and loss adjustment expense - prior year |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Policy acquisition costs |
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||||
General and administration costs (1) |
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Depreciation & amortization |
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Interest expenses |
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||||
Income tax expense |
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||||
Segment net income |
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$ |
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|
$ |
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|
$ |
|
|
$ |
|
||||
Reconciliation of profit or loss: |
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|
||||
Adjustment and reconciling items: |
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|
||||
Consolidated net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(1) Excludes depreciation and amortization expense
NOTE 23. 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 condensed consolidated financial statements as of June 30, 2026.
27
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with our condensed consolidated financial statements and related notes and other information included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2025 (as amended“2025 Form 10-K”). Unless the context requires otherwise, as used in this Form 10-Q, the terms “we”, “us”, “our”, “the Company”, “our Company”, and similar references refer to Heritage Insurance Holdings, Inc., a Delaware corporation, and its subsidiaries.
Overview
We are a super-regional property and casualty insurance holding company that primarily provides personal and commercial residential insurance products across our multi-state footprint. We provide personal residential insurance in Alabama, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas, and Virginia and commercial residential insurance in Florida, Hawaii, New Jersey, and New York. We provide personal residential insurance in Florida, Hawaii, and South Carolina on both an admitted and non-admitted basis and in California on a non-admitted basis only. We also provide commercial insurance in the State of Texas on an excess and surplus lines basis. As a vertically integrated insurer, we control or manage substantially all aspects of risk management, underwriting, claims processing and adjusting, actuarial rate making and reserving, customer service, and distribution. Our financial strength ratings are important to us in establishing our competitive position and can impact our ability to write policies.
Recent Developments
Economic and Market Factors
We continue to monitor the effects of general changes in economic and market conditions on our business. As a result of general inflationary pressures, we have experienced, and may continue to experience, increased cost of materials and labor needed for repairs and to otherwise remediate claims throughout all states in which we conduct business. We mitigate the impact of inflation by implementation of rate increases and through the use of inflation guard, which ensures appropriate replacement cost values for our business to reflect the inflationary impact on costs to repair properties. Use of inflation guard impacts both premium and total insured value ("TIV"). Rising reinsurance costs may be mitigated through exposure management as well as recouping the cost of reinsurance in future rate filings.
Supplemental Information
The Supplemental Information table below provides insight on our personal lines, commercial lines, and other business by providing policy count, premiums-in-force and total insured value for those product lines.
Policies-in-force: |
Q2 2026 |
|
|
Q2 2025 |
|
|
% Change |
|
|
|||
Personal Residential |
|
338,817 |
|
|
|
357,294 |
|
|
|
(5.2 |
) |
% |
Commercial Residential |
|
3,140 |
|
|
|
2,992 |
|
|
|
4.9 |
|
% |
Other |
|
8,930 |
|
|
|
9,823 |
|
|
|
(9.1 |
) |
% |
Total |
|
350,887 |
|
|
|
370,109 |
|
|
|
(5.2 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|||
Premiums-in-force: |
|
|
|
|
|
|
|
|
|
|||
Personal Residential |
|
1,162,853,241 |
|
|
|
1,148,876,238 |
|
|
|
1.2 |
|
% |
Commercial Residential |
|
236,726,188 |
|
|
|
271,156,884 |
|
|
|
(12.7 |
) |
% |
Other |
|
10,010,765 |
|
|
|
9,458,112 |
|
|
|
5.8 |
|
% |
Total |
|
1,409,590,194 |
|
|
|
1,429,491,234 |
|
|
|
(1.4 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|||
Total Insured Value: |
|
|
|
|
|
|
|
|
|
|||
Personal Residential |
|
318,809,611,090 |
|
|
|
319,578,562,554 |
|
|
|
(0.2 |
) |
% |
Commercial Residential |
|
49,442,769,123 |
|
|
|
45,455,781,220 |
|
|
|
8.8 |
|
% |
Total |
|
368,252,380,213 |
|
|
|
365,034,343,774 |
|
|
|
0.9 |
|
% |
28
Strategic Profitability Initiatives
The Company has focused on three main strategic initiatives aimed at achieving consistent long-term quarterly earnings and driving shareholder value, which initiatives will remain in place while the Company also expands its strategy to include its 2026 initiatives:
To continue its progress, the Company expects to also focus on the following profitability initiatives in 2026:
Trends
Inflation, Underwriting and Pricing
We address reinsurance and loss cost trends in the property insurance sector through rates and inflation guard factors. Over the last several years, we have filed and been approved by state regulators for rate increases to achieve rate adequacy. Our rates are now adequate in over 90% of our territories, which are currently open for new business. We experienced intentional growth of our commercial residential business during 2025, with in-force premium in that line of business decreasing in 2026, driven primarily by competitive market conditions. To the extent that reinsurance and loss cost trends decline, our rates may be adjusted downward in the future. New rates, which are subject to approval by our regulators, become effective when a policy is written or renewed, and the premium is earned pro rata over the policy period of one year. As a result of this timing, it can take up to twenty-four months for the complete impact of a rate change to be fully earned and impact our financial statements.
We invest in data analytics, using software and experienced personnel, to continuously evaluate our underwriting criteria and manage exposure to catastrophe and other losses. Our policy retention has remained consistent in the upper 80’s to low 90’s. While we believe our rates are generally competitive with private market insurers operating in our space, we are focused on prudent growth in 2026 while managing exposure and ensuring rate adequacy throughout our book of business as well as providing high levels of customer service to our agents and policyholders.
We may experience rising inflation in the form of increased labor and material costs, which drive up claim costs throughout all states in which we conduct business. However, inflation is increasing at a lower rate than what we have experienced in the last several years. We adjust for changes in inflation by increasing or decreasing the inflation factor used in our pricing. Florida personal lines claim costs associated with litigated claims have decreased over the last several years due to favorable legislation aimed to curtail claims abuse and stabilize the Florida property insurance market. This has had the intended impact and has resulted in better margins for the Company and better rates for Florida policyholders. Accordingly, we have a positive outlook for Florida and the other rate adequate states.
We have a solid, consistent panel of reinsurance partners that provide reinsurance capacity at competitive pricing and sufficient levels to support our growth objectives. Additionally, we may leverage our captive reinsurer to assume risks from our insurance company affiliates.
29
We successfully completed the placement of our catastrophe excess of loss reinsurance program with higher coverage levels than the prior-year while achieving a lower total and risk-adjusted cost. As operating and reinsurance costs improve, we expect policyholders to benefit through more competitive pricing while we continue to maintain appropriate underwriting margins. This should also favorably impact the ceded premium over the next four quarters.
Overview of Financial Results
In the following section, we discuss our financial condition and results of operations for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.
The discussion of our financial condition and results of operations that follows provides information that will assist the reader in understanding our consolidated financial statements, the changes in certain key items in those financial statements from quarter to quarter, including certain key performance indicators such as net combined ratio, ceded premium ratio, net expense ratio and net loss ratio, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our consolidated financial statements. This discussion should be read in conjunction with our consolidated financial statements and the related notes included under Item 1 of this Quarterly Report on Form 10-Q.
30
Results of Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
Revenue
|
|
For The Three Months Ended June 30, |
|
|||||||||||||
(Unaudited) |
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(in thousands) |
|
|||||||||||||
REVENUE: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross premiums written |
|
$ |
388,441 |
|
|
$ |
410,968 |
|
|
$ |
(22,527 |
) |
|
|
(5.5 |
)% |
Change in gross unearned premiums |
|
|
(37,288 |
) |
|
|
(57,374 |
) |
|
|
20,086 |
|
|
|
(35.0 |
)% |
Gross premiums earned |
|
|
351,153 |
|
|
|
353,594 |
|
|
|
(2,441 |
) |
|
|
(0.7 |
)% |
Ceded premiums |
|
|
(150,029 |
) |
|
|
(157,278 |
) |
|
|
7,249 |
|
|
|
(4.6 |
)% |
Net premiums earned |
|
|
201,124 |
|
|
|
196,316 |
|
|
|
4,808 |
|
|
|
2.4 |
% |
Net investment income |
|
|
10,595 |
|
|
|
9,034 |
|
|
|
1,561 |
|
|
|
17.3 |
% |
Net realized (losses) gains on debt securities and other investments |
|
|
(37 |
) |
|
|
4 |
|
|
|
(41 |
) |
|
NM |
|
|
Other revenue |
|
|
2,513 |
|
|
|
2,681 |
|
|
|
(168 |
) |
|
|
(6.3 |
)% |
Total revenue |
|
$ |
214,195 |
|
|
$ |
208,035 |
|
|
$ |
6,160 |
|
|
|
3.0 |
% |
*NM - Not Meaningful
Total revenue
Total revenue increased 3.0% to $214.2 million, reflecting higher net premiums earned and increased investment income. Net premiums earned increased as a result of the reduction of the ceded premium due to the reduction of the northeast net quota-share program effective December 31, 2025 and due to savings in the recently placed catastrophe XOL program. Net investment income rose 17.3% to $10.6 million in the second quarter of 2026 from $9.0 million in the prior-year quarter, driven by growth in invested assets. The investment portfolio remains conservatively positioned, emphasizing high-quality fixed-income investments with asset durations closely matched to liabilities.
Gross premiums written
Gross premiums written were $388.4 million, down 5.5% from $411.0 million in the prior-year quarter, primarily reflecting lower commercial residential premiums, partially offset by growth in personal lines business. The Florida commercial residential market remains highly competitive, and management continues to prioritize underwriting discipline and adequate profitability, writing
31
only business that meets Heritage's pricing and risk standards. We expect commercial production to flatten during the second half of the year as we continue to make progress growing this business outside of Florida and with our strong agency network within Florida.
Premiums-in-force were $1.41 billion as of second quarter 2026, a decrease of 1.4% compared to $1.43 billion as of second quarter 2025, driven mostly by a reduction of commercial residential in-force premium driven by competitive pressures as described above.
Gross premiums earned
Gross premiums earned of $351.2 million were down 0.7% from $353.6 million in the prior year quarter, reflecting a reduction in commercial residential business driven by competitive pressures as described above, which was mostly offset by higher gross premiums earned for the personal residential business.
Ceded premiums
Ceded premiums were $150.0 million in the second quarter of 2026, a decrease of $7.3 million, or 4.6%, from $157.3 million in the prior-year quarter, primarily driven by the decrease in the northeast net quota share program at year-end 2025 as well as the benefit from one month of the improved pricing of the June 2026 CAT XOL program.
Net premiums earned
Net premiums earned were $201.1 million in the second quarter of 2026, an increase of $4.8 million, or 2.4%, from $196.3 million in the prior-year quarter. Net premiums earned benefited from the decrease in ceded premiums, which more than offset the impact of lower gross premiums earned.
Net investment income
Net investment income was $10.6 million in the second quarter of 2026, an increase of $1.6 million, or 17.3%, from $9.0 million in the prior-year quarter. The increase was primarily attributable to higher average cash and invested asset balances and the reinvestment of maturing assets at higher yields, partially offset by lower yields on money market funds and bank sweep accounts resulting from the current interest rate environment.
|
|
For The Three Months Ended June 30, |
|
|||||||||||||
(Unaudited) |
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
OPERATING EXPENSES: |
|
(in thousands) |
|
|||||||||||||
Losses and loss adjustment expenses |
|
|
61,057 |
|
|
|
75,620 |
|
|
|
(14,563 |
) |
|
|
(19.3 |
)% |
Policy acquisition costs |
|
|
45,510 |
|
|
|
43,146 |
|
|
|
2,364 |
|
|
|
5.5 |
% |
General and administrative expenses |
|
|
23,778 |
|
|
|
24,399 |
|
|
|
(621 |
) |
|
|
(2.5 |
)% |
Total operating expenses |
|
|
130,345 |
|
|
|
143,165 |
|
|
|
(12,820 |
) |
|
|
(9.0 |
)% |
Total expenses
Total expenses decreased to $130.3 million in the second quarter of 2026 from $143.2 million in the prior-year quarter, an improvement of 9.0%. As discussed below, the decrease was primarily attributable to lower losses and loss adjustment expenses (LAE) and, to a lesser extent, lower general and administrative expenses, partially offset by higher policy acquisition costs.
Losses and loss adjustment expenses ("LAE")
Losses and LAE incurred were $61.1 million in the second quarter of 2026, a decrease of $14.6 million, or 19.3%, from $75.6 million in the prior-year quarter. The net loss ratio decreased 8.1 points to 30.4% from 38.5% in the prior-year quarter, primarily driven by increased favorable prior-year loss reserve development. Net favorable prior-year loss reserve development was $23.4 million, compared to $2.3 million in the prior-year quarter. Net weather losses for the current accident quarter were $11.5 million, compared to $12.5 million in the prior-year quarter.
Policy acquisition costs
Policy acquisition costs were $45.5 million in the second quarter of 2026, an increase of 5.5% from $43.1 million in the prior-year quarter. The increase was primarily driven by a reduction in ceding commissions and higher policy related costs.
32
General and administrative expenses
General and administrative expenses were $23.8 million in second quarter 2026, an improvement of 2.5% compared to $24.4 million in the prior year quarter. The decrease was primarily attributable to lower municipal tax expense and regulatory compliance costs.
|
|
For The Three Months Ended June 30, |
|
|||||||||||||
(Unaudited) |
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(in thousands, except per share amounts) |
|
|||||||||||||
Operating income |
|
|
83,850 |
|
|
|
64,870 |
|
|
|
18,980 |
|
|
|
29.3 |
% |
Interest expense, net |
|
|
1,690 |
|
|
|
1,880 |
|
|
|
(190 |
) |
|
|
(10.1 |
)% |
Income before income taxes |
|
|
82,160 |
|
|
|
62,990 |
|
|
|
19,170 |
|
|
|
30.4 |
% |
Provision for income taxes |
|
|
20,450 |
|
|
|
14,966 |
|
|
|
5,484 |
|
|
|
36.6 |
% |
Net income |
|
$ |
61,710 |
|
|
$ |
48,024 |
|
|
$ |
13,686 |
|
|
|
28.5 |
% |
Basic earnings per share |
|
$ |
2.06 |
|
|
$ |
1.55 |
|
|
$ |
0.51 |
|
|
|
32.9 |
% |
Diluted earnings per share |
|
$ |
2.05 |
|
|
$ |
1.55 |
|
|
$ |
0.50 |
|
|
|
32.3 |
% |
Net income
Net income increased to $61.7 million, or $2.05 per diluted share, compared with $48.0 million, or $1.55 per diluted share, in the prior-year quarter. The increase was primarily driven by higher revenue and lower losses. Revenue growth reflected lower ceded premiums, which increased net premiums earned, as well as higher investment income from a larger invested asset base. Losses decreased primarily due to favorable prior-year loss development and lower weather-related losses.
Interest expense, net
Interest expense, net was $1.7 million in the second quarter of 2026, slightly lower than $1.8 million for the prior year quarter, primarily due to lower debt balances outstanding.
Income tax expense
The income tax expense was $20.5 million in second quarter 2026 compared to $15.0 million in the prior year quarter, with the higher provision in the current quarter driven by higher pre-tax earnings compared to the prior year quarter. The effective tax rate for the current year quarter was 24.9% compared to 23.8% in the prior year quarter, an increase of 1.1 point. We calculate the provision for income taxes during interim reporting periods by applying an estimate of the effective tax rate for the full year. The variance is driven by pre-tax income and permanent items. The effective tax rate can fluctuate throughout the year as income changes and estimates used in each quarterly tax provision are updated with additional information.
The effective tax rate can fluctuate throughout the year as estimates used in the quarterly tax provision are updated with additional information.
Ratios
|
|
For The Three Months Ended June 30, |
|
|||||
(Unaudited) |
|
2026 |
|
|
2025 |
|
||
Ceded premium ratio |
|
|
42.7 |
% |
|
|
44.5 |
% |
|
|
|
|
|
|
|
||
Net loss and LAE ratio |
|
|
30.4 |
% |
|
|
38.5 |
% |
Net expense ratio |
|
|
34.5 |
% |
|
|
34.4 |
% |
Net combined ratio |
|
|
64.9 |
% |
|
|
72.9 |
% |
Net combined ratio
The net combined ratio was 64.9% in second quarter 2026, a 8.0 point improvement from 72.9% in the prior year quarter. The decrease primarily stems from a lower net loss and LAE ratio as described below.
33
Ceded premium ratio
The ceded premium ratio was 42.7% in the second quarter of 2026, representing a modest improvement of 1.8 points from 44.5% in the prior-year quarter.
Net loss and LAE ratio
The net loss and LAE ratio was 30.4% in second quarter 2026, a 8.1 point improvement from 38.5% in the prior year quarter. The reduction was driven by both a reduction in losses and LAE and higher net earned premium as described above.
Net expense ratio
The net expense ratio was 34.5%, essentially flat compared with 34.4% in the prior-year quarter. Policy acquisition costs increased 5.5% year over year, primarily due to lower ceding commissions following the December 31, 2025, reduction in the net quota share reinsurance program. General and administrative expenses decreased 2.5%, reflecting lower regulatory costs and municipality tax expenses.
Comparison of the Six Months Ended June 30, 2026 and 2025
|
|
For The Six Months Ended June 30, |
|
|||||||||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
(Unaudited) |
|
(in thousands) |
|
|||||||||||||
REVENUE: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross premiums written |
|
$ |
735,187 |
|
|
$ |
766,965 |
|
|
$ |
(31,778 |
) |
|
|
(4.1 |
)% |
Change in gross unearned premiums |
|
|
(30,471 |
) |
|
|
(59,543 |
) |
|
|
29,072 |
|
|
|
(48.8 |
)% |
Gross premiums earned |
|
|
704,716 |
|
|
|
707,422 |
|
|
|
(2,706 |
) |
|
|
(0.4 |
)% |
Ceded premiums |
|
|
(303,899 |
) |
|
|
(311,072 |
) |
|
|
7,173 |
|
|
|
(2.3 |
)% |
Net premiums earned |
|
|
400,817 |
|
|
|
396,350 |
|
|
|
4,467 |
|
|
|
1.1 |
% |
Net investment income |
|
|
20,462 |
|
|
|
17,609 |
|
|
|
2,853 |
|
|
|
16.2 |
% |
Net realized (losses) gains on debt securities and other investments |
|
|
(21 |
) |
|
|
— |
|
|
|
(21 |
) |
|
NM |
|
|
Other revenue |
|
|
5,596 |
|
|
|
5,595 |
|
|
|
1 |
|
|
|
0.0 |
% |
Total revenue |
|
$ |
426,854 |
|
|
$ |
419,554 |
|
|
$ |
7,300 |
|
|
|
1.7 |
% |
Total Revenue
Total revenue increased 1.7% to $426.9 million for the six month period ended June 30, 2026, compared to $419.6 million for the corresponding period in 2025, primarily reflecting higher net premiums earned and increased investment income. Net investment income increased 16.2% to $20.5 million for the first six months of 2026, compared to $17.6 million in the prior-year period, driven principally by growth in invested assets. Our investment portfolio remains conservatively positioned, with an emphasis on high-quality fixed-income securities and asset durations that are closely matched to our liability profile.
Gross premiums written
Gross premiums written were $735.2 million for the six month period ended June 30, 2026, down 4.1% from $767.0 million. The decrease primarily relates to a reduction of written premium for commercial residential business, driven by competitive market conditions.
Premiums-in-force were $1.41 billion as of second quarter 2026, a decrease of 1.4% compared to $1.43 billion as of second quarter 2025, driven by the reduction on commercial residential business.
Gross premiums earned
Gross premiums earned were $704.7 million for the six month period ended June 30, 2026, a decrease of 0.4% from $707.4 million in the prior year period, reflecting a reduction in commercial residential business driven by competitive pressures as described above, which was mostly offset by higher gross premiums earned for the personal residential business.
34
Ceded premiums
Ceded premiums were $303.9 million for the six month period ended June 30, 2026, down 2.3% from $311.1 million in the prior year period. The decrease relates primarily to the reduction in the northeast net quota share and the reduction in cost of the June 2026 CAT XOL program.
Net premiums earned
Net premiums earned increased 1.1% to $400.8 million for the six month period ended June 30, 2026, compared to $396.4 million for the prior-year period. The increase was primarily attributable to lower ceded premiums, which more than offset a modest decline in gross premiums earned, as discussed above.
Net investment income
Net investment income was $20.5 million for the six month period ended June 30, 2026, up 16.2% from $17.6 million in the prior year period, driven primarily to higher average cash and invested asset balances and the reinvestment of maturing assets at higher yields, partially offset by lower yields on money market funds and bank sweep accounts resulting from the current interest rate environment.
|
|
For The Six Months Ended June 30, |
|
|||||||||||||
(Unaudited) |
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
OPERATING EXPENSES: |
|
(in thousands) |
|
|||||||||||||
Losses and loss adjustment expenses |
|
|
152,654 |
|
|
|
175,027 |
|
|
|
(22,373 |
) |
|
|
(12.8 |
)% |
Policy acquisition costs |
|
|
90,845 |
|
|
|
88,961 |
|
|
|
1,884 |
|
|
|
2.1 |
% |
General and administrative expenses |
|
|
48,687 |
|
|
|
48,260 |
|
|
|
427 |
|
|
|
0.9 |
% |
Total operating expenses |
|
|
292,186 |
|
|
|
312,248 |
|
|
|
(20,062 |
) |
|
|
(6.4 |
)% |
Total expenses
Total expenses were $292.2 million for the six month period ended June 30, 2026, down 6.4% compared to $312.2 million in the prior year period. As described below, losses and LAE declined significantly, policy acquisition costs declined, and general and administrative expenses increased.
Losses and loss adjustment expenses
Losses and LAE incurred were $152.7 million for the six month period ended June 30, 2026, down 12.8% from $175.0 million in the prior year period. The decrease primarily stems from favorable net loss development and lower catastrophe losses, as winter storms in 2026 were lower than the California wildfire losses of during the first quarter of 2025. Net weather and catastrophe losses for the first six months of 2026 were $48.2 million, a decrease of $7.9 million from $56.1 million in the prior year period. Catastrophe losses were $24.4 million compared to $31.8 million in the prior-year period. Other weather losses totaled $23.8 million, a decrease from the prior year period amount of $24.3 million. Net favorable prior year loss development was $31.6 million for the six months of 2026 compared to net favorable loss development of $10.0 million for the prior year period, reflecting more favorable loss emergence and corresponding reserve releases on prior accident years than were recognized in the comparable 2025 period. The favorable reserve development recorded in the second quarter of 2026 reflects several positive trends that have become increasingly evident over the past several quarters. Key drivers include the stabilization of claims closure timelines, a sustained reduction and subsequent stabilization in claim frequency, severity trending within normal ranges and fewer late reported claims all combining to result in claims closing below expectations.
Policy acquisition costs
Policy acquisition costs increased 2.1% to $90.8 million for the six months ended June 30, 2026, compared to $89.0 million for the comparable 2025 period. The increase was primarily attributable to lower ceding commission resultant from the reduction of the northeast net quota share program.
General and administrative expenses
General and administrative expenses were $48.7 million for the six months ended June 30, 2026, compared with $48.3 million for the comparable period in 2025. The modest increase of 0.8% reflects stable operating expenses and was generally consistent with the prior-year period.
35
|
|
For The Six Months Ended June 30, |
|
|||||||||||||
(Unaudited) |
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(in thousands, except per share amounts) |
|
|||||||||||||
Operating income |
|
|
134,668 |
|
|
|
107,306 |
|
|
|
27,362 |
|
|
|
25.5 |
% |
Interest expense, net |
|
|
3,468 |
|
|
|
4,306 |
|
|
|
(838 |
) |
|
|
(19.5 |
)% |
Income before income taxes |
|
|
131,200 |
|
|
|
103,000 |
|
|
|
28,200 |
|
|
|
27.4 |
% |
Provision for income taxes |
|
|
33,006 |
|
|
|
24,502 |
|
|
|
8,504 |
|
|
|
34.7 |
% |
Net income |
|
$ |
98,194 |
|
|
$ |
78,498 |
|
|
$ |
19,696 |
|
|
|
25.1 |
% |
Basic earnings per share |
|
$ |
3.24 |
|
|
$ |
2.54 |
|
|
$ |
0.69 |
|
|
|
27.6 |
% |
Diluted earnings per share |
|
$ |
3.23 |
|
|
$ |
2.54 |
|
|
$ |
0.69 |
|
|
|
27.2 |
% |
Net income
Net income for the six months ended June 30, 2026 was $98.2 million, or $3.23 per diluted share, compared to net income of $78.5 million, or $2.54 per diluted share, for the corresponding period in 2025. The increase was primarily driven by a significant decrease in losses and loss adjustment expenses (LAE), higher net premiums earned, and relatively stable operating expenses. The improvement in results reflects the favorable impact of rate increases, underwriting actions, and exposure management initiatives implemented over the past several years, which continued to benefit operating performance during the first half of 2026. These actions contributed to a 1.1% increase in net premiums earned and a 12.8% decrease in net losses and LAE, as discussed above. Policy acquisition costs increased 2.1%, primarily due to lower ceding commission income. General and administrative expenses increased 0.8% and remained relatively consistent with the prior-year period.
Interest expense, net
Interest expense, net was $3.5 million for the six month period ended June 30, 2026 , a decrease of 19.5% compared to $4.3 million for the prior year period, The decrease was attributed to the impact from the reduction of debt obligations.
Income tax expense
The income tax expense was $33.0 million for the six month period ended June 30, 2026 compared to $24.5 million in the prior year period, with the higher income tax provision in the current period driven by higher pre-tax earnings compared to the prior year period. The effective tax rate for the current year period was 25.2% compared to 23.8% in the prior year period. We calculate the provision for income taxes during interim reporting periods by applying an estimate of the effective tax rate for the full year. The variance is driven by pre-tax income and permanent items. The effective tax rate can fluctuate throughout the year as income changes and estimates used in each quarterly tax provision are updated with additional information.
Ratios
|
|
For The Six Months Ended June 30, |
|
|||||
(Unaudited) |
|
2026 |
|
|
2025 |
|
||
Ceded premium ratio |
|
|
43.1 |
% |
|
|
44.0 |
% |
|
|
|
|
|
|
|
||
Net loss and LAE ratio |
|
|
38.1 |
% |
|
|
44.2 |
% |
Net expense ratio |
|
|
34.8 |
% |
|
|
34.6 |
% |
Net combined ratio |
|
|
72.9 |
% |
|
|
78.8 |
% |
Net combined ratio
The net combined ratio was 72.9% for the six month period ended June 30, 2026, compared to 78.8% for the comparable period in 2025, representing an improvement of 5.9 points. The improvement primarily reflects a lower net loss and LAE ratio, driven by primarily by favorable loss development and lower weather losses, partially offset by a modest increase in the net expense ratio, as described below.
Ceded premium ratio
The ceded premium ratio was 43.1% for the six months ended June 30, 2026, compared to 44.0% for the comparable period in 2025. The 0.8 point improvement was primarily attributable to a decrease in ceded premiums related to a reduction of the northeast net quota share program.
36
Net loss and LAE ratio
The net loss and LAE ratio was 38.1% for the six month period ended June 30, 2026, a 6.1 point improvement from 44.2% in the prior year period, reflecting higher net premiums earned, coupled with a decrease in net losses and LAE as described above.
Net expense ratio
The net expense ratio was 34.8% for the six months ended June 30, 2026, compared with 34.6% for the corresponding period in 2025, and remained generally consistent with the prior-year period.
Financial Condition – June 30, 2026 compared to December 31, 2025
Cash and Cash Equivalents
Cash and cash equivalents were $587.6 million at June 30, 2026, compared with $559.3 million at December 31, 2025, an increase of $28.3 million. The increase was primarily attributable to cash received from premium collections and investment income , partially offset by cash used for claim payment, reinsurance costs, debt paydowns, and stock purchases.
Fixed Maturity Securities
Fixed maturity securities increased by $88.7 million to $801.9 million at June 30, 2026, from $713.2 million at December 31, 2025, primarily reflecting the reinvestment of operating cash flows and excess cash into the investment portfolio.
Reinsurance Recoverable on Paid and Unpaid Claims
At June 30, 2026, reinsurance recoverable on paid and unpaid claims totaled $305.2 million, a decrease of $13.4 million from $318.6 million at December 31, 2025. The decrease was primarily driven by claim payments, a reduction in ultimate losses for certain catastrophic events, and collections of reinsurance recoveries.
Prepaid Reinsurance Premiums
At June 30, 2026, prepaid reinsurance premium increased by $153.7 million to $460.7 million from $307.0 million at December 31, 2025. This balance represents unearned ceded premium and the increase is primarily attributable to the execution of new reinsurance treaties.
Unpaid Losses and Loss Adjustment Expenses
At June 30, 2026, unpaid losses and loss adjustment expenses decreased by $97.5 million to $482.0 million from $579.5 million at December 31, 2025. The decrease primarily reflects claims payments during the period, lower losses during the quarter and a reduction of ultimate losses for certain catastrophic events.
Reinsurance Payable
At June 30, 2026, reinsurance payable increased by $268.2 million to $501.0 million from $232.8 million at December 31, 2025. The increase was primarily driven by the June 1, 2026 renewal of the Company's annual reinsurance programs.
Total Shareholders’ Equity
Total shareholders’ equity increased $62.5 million to $567.7 million at June 30, 2026 from $505.3 million at December 31, 2025, primarily reflecting net income for the quarter. This increase was partially offset by treasury stock repurchases of approximately $24.6 million, representing the repurchase of 1,001,508 shares during the first six months of 2026, as well as an increase in accumulated other comprehensive loss due to higher unrealized losses and a reduction in additional paid-in capital related to surrendered restricted stock for tax withholdings.
Liquidity and Capital Resources
Our principal sources of liquidity include cash flows generated from operations, existing cash and cash equivalents, our marketable securities balances and borrowings available under our Credit Facilities. As of June 30, 2026, we had $587.6 million of cash and cash equivalents and $804.0 million in investments, compared to $559.3 million and $715.6 million, respectively, as of
37
December 31, 2025. As described above, the increase was primarily attributable to cash received from premium collections and investment income earned on sweep accounts, partially offset by cash used to pay off existing debt and make stock repurchases.
We generally hold substantial cash balances to meet seasonal liquidity needs including amounts to pay quarterly reinsurance installments as well as meet the collateral requirements of Osprey Re, our captive reinsurance company, which is required to maintain a collateral trust account equal to the risk that it assumes from our insurance company affiliates.
We believe that our sources of liquidity are adequate to meet our cash requirements for at least the next twelve months.
We may increase capital expenditures consistent with our investment plans and anticipated business strategies. Cash and cash equivalents may not be sufficient to fund such expenditures. As such, in addition to the use of our existing Credit Facilities, we may need to utilize additional debt to secure funds for such purposes.
Cash Flows
|
|
For The Six Months Ended June 30, |
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Net cash (used in) provided by: |
|
|
|
|
|
|
|
|
|
|||
Operating activities |
|
$ |
166,553 |
|
|
$ |
44,129 |
|
|
$ |
122,424 |
|
Investing activities |
|
|
(96,880 |
) |
|
|
3,256 |
|
|
|
(100,136 |
) |
Financing activities |
|
|
(40,875 |
) |
|
|
(24,098 |
) |
|
|
(16,777 |
) |
Net (decrease) increase in cash and cash equivalents |
|
$ |
28,798 |
|
|
$ |
23,287 |
|
|
$ |
5,511 |
|
Operating Activities
Net cash provided by operating activities was $166.6 million for the six months ended June 30, 2026 compared to net cash provided by operating activities of $44.1 million for the comparable period in 2025. The increase in cash provided by operating activities relates primarily to timing of cash flows associated with premium collection, claim and reinsurance payments as well as reinsurance reimbursements during the six months ended June 30, 2026 compared to the six months ended June 30, 2025.
Investing Activities
Net cash used in investing activities for the six months ended June 30, 2026 was $96.9 million as compared to net cash provided by investing activities of $3.2 million for the comparable period in 2025. The change in cash used in investing activities relates primarily to timing of investment maturities and re-investment of proceeds as well as availability of existing cash to invest in longer duration fixed income securities to lock in current interest rates.
Financing Activities
Net cash used in financing activities was $40.9 million for the six months ended June 30, 2026, compared to $24.1 million for the comparable period in 2025. The change was primarily driven by the repurchase of common stock of $24.6 million, the surrender of restricted stock to satisfy tax withholding obligations of $8.9 million, and the payoff of a $5.5 million FHLB loan. By comparison, cash used in financing activities during the 2025 period primarily reflected repayments of the $19.2 million FHLB‑ATL loan and $4.8 million payment on the term note agreement.
Credit Facilities
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 provides for senior secured credit facilities in the aggregate principal amount of up to $200.0 million, consisting of (1) a five-year senior secured term loan facility in an aggregate principal amount of $75 million with a maturity of July 2030 (the “Term Loan Facility”), (2) a $75 million committed delayed draw term loan that may be advanced to finance specified permitted acquisitions and investments with a maturity of July 2030 (the “Delayed Draw Term Loan Facility”) and (3) a senior secured revolving credit facility in an aggregate principal amount of $50 million with a maturity of July 2030 (inclusive of
38
a sublimit for the issuance of letters of credit equal to the unused amount of the revolving credit facility and a sublimit for swingline loans equal to the lesser of $25 million and the unused amount of the revolving credit facility) (the “Revolving Credit Facility” and together with the Term Loan Facility and the Delayed Draw Term Loan Facility, the “Credit Facilities”).
Term Loan Facility. The principal amount of the Term Loan Facility under the Amended and Restated Credit Facility amortizes in quarterly installments beginning with the close of the fiscal quarter ending December 31, 2025, in an amount equal to $937,500 per quarter, payable quarterly, and increasing to approximately $1.4 million per quarter commencing with the quarter ending September 30, 2028, with the remaining balance payable at maturity in July 2030. As of June 30, 2026, there was $72.2 million in aggregate principal amount outstanding under the Term Loan Facility and as of December 31, 2025, there was $74.1 million in aggregate principal outstanding under the term loan facility under the Prior Credit Agreement.
Revolving Credit Facility. The Revolving Credit Facility allows for borrowings of up to $50 million inclusive of a sublimit for the issuance of letters of credit equal to the unused amount of the Revolving Credit Facility and a sublimit for swingline loans equal to the lesser of $25.0 million and the unused amount of the Revolving Credit Facility. Immediately prior to entering into the Amended and Restated Credit Agreement the outstanding balance under the revolving credit facility under the Prior Credit Agreement was $10.0 million, which amount was repaid in connection with the Amended and Restated Credit Agreement. During 2024, the Company secured letters of credit in aggregate of $24.4 million with a maturity date of March 16, 2025. There were no draws on the letters of credit during 2025, which were cancelled effective on their maturity date of March 16, 2025. On December 3, 2025, the Company secured letters of credit in aggregate of $32.0 million with a maturity date of December 31, 2026, with no draws as of December 31, 2025. In June 2026, the Company cancelled all outstanding letters of credit issued under the Revolving Credit Facility and paid $331,767 of letter of credit issuance fees. As of June 30, 2026, the Company had no outstanding letters of credit issued under the Revolving Credit Facility.
At our 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 (described below) 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 0.50%, and (c) the adjusted term SOFR in effect on such day for an interest period of one month plus 1.00%, plus an applicable margin (described below).
The applicable margin for loans under the Credit Facilities varies from 2.50% per annum to 3.00% per annum (for SOFR loans) and 1.50% to 2.00% per annum (for base rate loans) based on our consolidated leverage ratio ranging from less than or equal to 1-to-1 to greater than 1.5-to-1. Interest payments with respect to the Credit Facilities are required either on a quarterly basis (for base rate loans) or at the end of each interest period (for SOFR loans) or, if the duration of the applicable interest period exceeds three months, then every three months. As of June 30, 2026, the borrowings under the Term Loan Facility were accruing interest at a rate of 6.370% per annum.
In addition to paying interest on outstanding borrowings under the Revolving Credit Facility, we are required to pay a quarterly commitment fee based on the unused portion of the Revolving Credit Facility, which is determined by our consolidated leverage ratio. As of June 30, 2026, the Company paid in commitment fees in aggregate of $166,641 as it relates to the unused portion of the Revolving Credit Facility.
The Company may prepay the loans under the Credit Facilities, in whole or in part, at any time without premium or penalty, subject to certain conditions including minimum amounts and reimbursement of certain costs in the case of prepayments of SOFR loans. In addition, we are required to prepay the loan under the Term Loan Facility with the proceeds from certain financing transactions, involuntary dispositions or asset sales (subject, in the case of asset sales, to reinvestment rights).
All obligations under the Credit Facilities are or will be guaranteed by each existing and future direct and indirect wholly owned domestic subsidiary of the Company, other than all of the Company’s current and future regulated insurance subsidiaries (collectively, the “Guarantors”).
The Company and the Guarantors are party to a Pledge and Security Agreement, (as amended from time to time the “Security Agreement”), in favor of a collateral agent. Pursuant to the Security Agreement, amounts borrowed under the Credit Facilities are secured on a first priority basis by a perfected security interest in substantially all of the present and future assets of the Company and each Guarantor (subject to certain exceptions), including all of the capital stock of the Company’s domestic subsidiaries, other than its regulated insurance subsidiaries.
39
The Amended and Restated Credit Agreement contains, among other things, covenants, representations and warranties and events of default customary for facilities of this type. The Amended and Restated Credit Agreement requires the Company to maintain, as of each fiscal quarter (1) a maximum consolidated leverage ratio of 2.00 to 1.00, (2) a minimum consolidated fixed charge coverage ratio of 1.20 to 1.00 and (3) a minimum consolidated tangible net worth for the Company and its subsidiaries, which is required to be not less than the sum of 75% of consolidated tangible net worth measured as of the fiscal quarter ended September 30, 2025 plus 25% of positive consolidated net income (including its subsidiaries and regulated subsidiaries) plus the net cash proceeds of any equity transactions. Events of default include, among other events, (i) nonpayment of principal, interest, fees or other amounts; (ii) failure to perform or observe certain covenants set forth in the Credit Agreement; (iii) breach of any representation or warranty; (iv) cross-default to other indebtedness; (v) bankruptcy and insolvency defaults; (vi) monetary judgment defaults and material nonmonetary judgment defaults; (vii) customary ERISA defaults; (viii) a change of control of the Company; and (ix) failure to maintain specified catastrophe retentions in each of the Company’s regulated insurance subsidiaries or observe specified reinsurer concentration limits.
Convertible Notes
On August 10, 2017, the Company and Heritage MGA, LLC (the “Notes Guarantor”) entered into a purchase agreement (the “Purchase Agreement”) with the initial purchaser party thereto (the “Initial Purchaser”), pursuant to which the Company agreed to issue and sell, and the Initial Purchaser agreed to purchase, $136.8 million aggregate principal amount of the Company’s 5.875% Convertible Senior Notes due 2037 (the “Convertible Notes”) in a private placement transaction pursuant to Rule 144A under the Securities Act, as amended (the “Securities Act”). The net proceeds from the offering of the Convertible Notes, after deducting discounts and commissions and estimated offering expenses payable by the Company, were approximately $120.5 million. The offering of the Convertible Notes was completed on August 16, 2017.
The Company issued the Convertible Notes under an Indenture (the “Convertible Note Indenture”), dated August 16, 2017, by and among the Company, as issuer, the Notes Guarantor, as guarantor, and the trustee party thereto (the “Trustee”).
The Convertible Notes bear interest at a rate of 5.875% per year. Interest is payable semi-annually in arrears, on February 1 and August 1 of each year. The Convertible Notes are senior unsecured obligations of the Company that rank senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the Convertible Notes; equal in right of payment to the Company’s unsecured indebtedness that is not so subordinated; effectively junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness or other liabilities incurred by the Company’s subsidiaries other than the Notes Guarantor, which fully and unconditionally guarantee the Convertible Notes on a senior unsecured basis.
The Convertible Notes mature on August 1, 2037, unless earlier repurchased, redeemed or converted.
Holders may convert their Convertible Notes at any time prior to the close of business on the business day immediately preceding February 1, 2037, under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2017, if the closing sale price of the Company’s common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the Convertible Notes in effect on each applicable trading day; (2) during the ten consecutive business-day period following any five consecutive trading-day period in which the trading price for the Convertible Notes for each such trading day was less than 98% of the closing sale price of the Company’s common stock on such date multiplied by the then-current conversion rate; (3) if the Company calls any or all of the Convertible Notes for redemption, at any time prior to the close of business on the third business day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. Based on the closing sale price of the Company’s common stock during the 20 trading days leading up to June 30, 2026, the Convertible Notes are convertible for the calendar quarter commencing July 1, 2026 and ending on September 30, 2026.
On or after February 1, 2037 until the close of business on the second business day immediately preceding August 1, 2037, holders may surrender their Convertible Notes for conversion at any time, regardless of the foregoing circumstances.
40
Upon the occurrence of a fundamental change (as defined in the Convertible Note Indenture) (but not, at the Company’s election, a public acquirer change of control (as defined in the Convertible Note Indenture)), holders of the Convertible Notes may require the Company to repurchase for cash all or a portion of their Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
At any time prior to February 1, 2037, the Company may redeem for cash all or any portion of the Convertible Notes, at the Company’s option, at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Convertible Notes, which means that the Company is not required to redeem or retire the Convertible Notes periodically. Holders of the Convertible Notes are able to cause the Company to repurchase their Convertible Notes for cash on any of August 1, 2022, August 1, 2027 and August 1, 2032, in each case at 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the relevant repurchase date.
The Convertible Note Indenture contains customary terms and covenants and events of default. If an Event of Default (as defined in the Convertible Note Indenture) occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in aggregate principal amount of the Convertible Notes then outstanding by notice to the Company and the Trustee, may declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the Convertible Notes to be immediately due and payable. In the case of certain events of bankruptcy, insolvency or reorganization (as set forth in the Convertible Note Indenture) with respect to the Company, 100% of the principal of, and accrued and unpaid interest, if any, on, the Convertible Notes automatically become immediately due and payable.
As of June 30, 2026 and December 31, 2025, there was $885,000 principal amount of outstanding Convertible Notes, net of $21.1 million of Convertible Notes held by an insurance company subsidiary.
FHLB Loan Agreements
In December 2018, a subsidiary of the Company received a 3.094% fixed interest rate cash loan of $19.2 million from the Federal Home Loan Bank Atlanta (“FHLB-ATL”). On September 29, 2023, the Company restructured the December 2018 agreement to extend the maturity date to March 28, 2025, with a 5.109% fixed interest rate payable quarterly commencing on December 28, 2023. Membership in the FHLB-ATL required an investment in FHLB-ATL’s common stock which was purchased in December 2018 and valued at $1.4 million. In March 2025, the FHLB-ATL agreement was repaid and the securities were released from pledged collateral. As of June 30, 2026, the subsidiary continues to be a member in FHLB-ATL with its common stock valued at $561,416.
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 $133,200. In January 2024, the insurance subsidiary of the Company received a 4.23% fixed interest rate cash loan of $5.5 million from the FHLB-DM. Additionally, the transaction required the acquired FHLB-DM common stock and certain other investments to be pledged as collateral. In June 2026, the Company repaid the loan and released the investments from pledged collateral. As of June 30, 2026, the equity investment in FHLB-DM common stock was $77,200.
Critical Accounting Policies and Estimates
When we prepare our condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles (GAAP), we must make estimates and assumptions about future events that affect the amounts we report. Certain of these estimates result from judgments that can be subjective and complex. As a result of that subjectivity and complexity, and because we continuously evaluate these estimates and assumptions based on a variety of factors, actual results could materially differ from our estimates and assumptions if changes in one or more factors require us to make accounting adjustments. We have made no material changes or additions with regard to those policies and estimates as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
Recent Accounting Pronouncements
The information set forth under Note 1 to the condensed consolidated financial statements under the caption “Basis of Presentation and Significant Accounting Policies” is incorporated herein by reference. We do not expect any recently issued accounting pronouncements to have a material effect on our condensed consolidated financial statements.
41
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The duration of the financial instruments held in our portfolio that are subject to interest rate risk was 3.4 years and 3.0 years at June 30, 2026 and 2025, respectively, and 3.1 years at December 31, 2025. To the extent interest rates decrease during 2026, we anticipate the fair value of our fixed rate debt securities to be subject to increase. Credit risk results from uncertainty in a counterparty’s ability to meet its obligations. Credit risk is managed by maintaining a high credit quality fixed maturity securities portfolio. As of June 30, 2026, the estimated weighted-average credit quality rating of the fixed maturity securities portfolio was A+, at fair value, consistent with the average rating at June 30, 2025.
We have not experienced a material impact when compared to the tabular presentations of our interest rate and market risk sensitive instruments in our Annual Report on Form 10-K for the year ended December 31, 2025.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) that are designed to assure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
As required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this Quarterly Report, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2026.
Changes in Internal Control over Financial Reporting
There has been no change in our internal controls over financial reporting during the quarter ended June 20, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
42
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to routine legal proceedings in the ordinary course of business. We believe that the ultimate resolution of these matters will not have a material adverse effect on our business, financial condition or results of operations.
Item 1A. Risk Factors
The Company documented its risk factors in Item 1A of Part I of its Annual Report on Form 10-K for the year ended December 31, 2025 filed on March 12, 2026. There have been no material changes to the Company’s risk factors since the filing of that report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended June 30, 2026, the Company repurchased 554,624 shares of common stock under the New Share Repurchase Plan and 76,400 shares of common stock under the prior share repurchase plan. The average cost per share repurchased was $22.69 and $26.15, respectively. As of June 30, 2026, the Company had $37.4 million of capacity remaining under the New Share Repurchase Plan.
A summary of the Company’s common stock repurchases during the quarter ended June 30, 2026, is set forth in the table below (in thousands, except shares and price per share):
|
|
Total Number of Shares Purchased |
|
|
Average Price Paid per Share (1) |
|
|
Total Number of Shares Purchased As Part of Publicly Plans or Programs |
|
|
Dollar Value of Shares that May yet be Purchased under the Plans or Programs (2) |
|
||||
April 1, 2026 - April 30, 2026 |
|
|
76,400 |
|
|
$ |
26.15 |
|
|
|
76,400 |
|
|
$ |
12,994 |
|
May 1, 2026 - May 31, 2026 |
|
|
435,924 |
|
|
|
22.97 |
|
|
|
435,924 |
|
|
|
39,992 |
|
June 1, 2026 - June 30, 2026 |
|
|
118,700 |
|
|
|
21.66 |
|
|
|
118,700 |
|
|
|
37,416 |
|
Total for the three months ended June 30, 2026 |
|
|
631,024 |
|
|
$ |
23.59 |
|
|
|
631,024 |
|
|
$ |
37,416 |
|
Item 5. Other Information
Rule 10b5-1 Trading Plans
On
No other officers or directors, as defined in Rule 16a-1(f),
43
Item 6. Exhibits
The information required by this Item 6 is set forth in the Index to Exhibits accompanying this Quarterly Report on Form 10-Q.
Index to Exhibits
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 |
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) |
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 |
32.1** |
Certification of Chief Executive 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 Financial Officer pursuant to 18 U.SC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, formatted in Inline XBRL (included in Exhibit 101) |
* Filed herewith
** Furnished herewith
† Management contract or compensatory plan or arrangement
44
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
HERITAGE INSURANCE HOLDINGS, INC. |
||
|
|
|
|
Date: August 7, 2026 |
By: |
|
/s/ ERNESTO GARATEIX |
|
|
|
Ernesto Garateix |
|
|
|
Chief Executive Officer (Principal Executive Officer and Duly Authorized Officer) |
|
|
|
|
Date: August 7, 2026 |
By: |
|
/s/ KIRK LUSK |
|
|
|
Kirk Lusk |
|
|
|
Chief Financial Officer (Principal Financial Officer) |
45