Is Heritage Insurance's Profitability Anchored to Its Combined Ratio?

Heritage Insurance Holdings’ HRTG profitability is underpinned by its combined ratio, a key measure of underwriting performance in the property and casualty (P&C) insurance industry. A combined ratio — defined as loss ratio plus expense ratio — below 100% signals underwriting profitability.

For Heritage, operating in catastrophe-prone markets such as Florida and the Northeast, maintaining a disciplined combined ratio is crucial to long-term profitability. The super-regional U.S. P&C insurance holding company has historically faced challenges from elevated catastrophe losses, adverse claims severity and rising reinsurance costs, all of which have weighed on underwriting results and earnings stability. In response, management has pursued prudent measures, including premium increases, tighter underwriting standards and greater geographic diversification to strengthen margins and reduce reliance on high-risk markets.

Investment income cannot adequately compensate for underwriting shortfalls—and with the Federal Reserve’s recent rate cut and anticipated further easing putting additional pressure on yields—sustained profitability depends on keeping the combined ratio below 100%. Encouragingly, Heritage has shown progress. Its net combined ratio improved to 94.2% in 2024, reflecting a 210-basis-point year-over-year gain, and strengthened further in the first half of 2025 with a significant 1,430-basis-point improvement.

Heritage is selectively re-entering profitable markets while preserving capital discipline. Priorities include maintaining rate adequacy, applying advanced analytics to refine risk management, and leveraging strategic technology investments. Initiatives such as Guidewire Cloud adoption, predictive modeling, pricing analytics, and its Slide partnership are enhancing underwriting capabilities and positioning Heritage for more sustainable and competitive growth.

What About HRTG’s Peers?

HCI Group HCI and Universal Insurance Holdings UVE have been continuously focusing on improving their combined ratios and strengthening underwriting profitability. 

Both HCI Group and Universal Insurance ensure better pricing, stricter underwriting standards, geographic diversification (including expanding into less catastrophe-prone markets to reduce concentration risk), proper reinsurance, technological upgrades and digitalization (use of AI, predictive modeling, pricing analytics) and control operating costs.

These measures collectively help HCI Group and Universal Insurance deliver a lower combined ratio, thus reducing earnings volatility and supporting sustainable long-term growth.  

HRTG’s Price Performance

Shares of HRTG have gained 124% year to date, outperforming the industry.

HRTG’s Expensive Valuation

HRTG trades at a price-to-book value ratio of 2.3, above the industry average of 1.54. But it carries a Value Score of A.

Estimate Movement for HRTG

The Zacks Consensus Estimate for HRTG’s third-quarter and fourth-quarter 2025 EPS witnessed 103.8% and 6.1% northward movement, respectively, in the past 60 days. The same for full-year 2025 and 2026 has increased 26.2% and 12.8%, respectively.
 

The consensus estimates for HRTG’s 2025 and 2026 revenues and EPS indicate year-over-year increases. 
 
HRTG currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.




 

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This article originally published on Zacks Investment Research (zacks.com).

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