Heritage Insurance estimates $35 million to $40 million in pretax net catastrophe losses from the January wildfires in California, where it provides only excess and surplus (E&S) coverage, executives said.
Chief financial officer Kirk Lusk said that 35 claims have been filed in connection with the wildfires, with 15 classified as total losses and the remainder involving smoke damage. Most claims resulted from the Palisades Fire in Los Angeles.
Heritage currently writes E&S business in California, Florida, and South Carolina and is evaluating expansion into additional states. Chief executive officer Ernie Garateix (pictured above) said the controlled growth strategy allows the company to adjust rates and coverage based on individual state dynamics to maintain risk-adjusted returns.
The company reported a decline in fourth-quarter net income, which fell to $20.3 million, down from $30.9 million in the prior-year quarter. Catastrophe losses rose to $40 million, compared to $3.1 million in the same period last year.
Lusk attributed the increase to Hurricane Milton, which made landfall on Florida’s central west coast before moving across the state in early October.
Earlier this year, Heritage said that it anticipates its strongest earnings quarter of the year in the fourth quarter of 2024, exceeding the $18.9 million in after-tax net income reported in the second quarter.
This performance includes an estimated $57 million impact from Hurricane Milton, which consists of $40 million in retained catastrophe losses and a $17 million net reinstatement premium.
Heritage reported $360.4 million in gross premiums earned for the fourth quarter, a 6.1% increase from $339.6 million a year earlier. Net premiums earned grew 12.1% to $199.3 million, up from $177.7 million.
The company’s net loss ratio increased to 54.7%, up 3.7 points from the previous year’s 51.0%, primarily due to catastrophic weather events. The net expense ratio rose 1.1 points to 35.0%, contributing to a net combined ratio of 89.7%, up 4.8 points from 84.9% in the fourth quarter of 2023.
Heritage’s book value per share reached $9.50 as of Dec. 31, 2024, reflecting a 30.3% increase from year-end 2023 and an 85.2% increase from year-end 2022.
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