Heritage Insurance stock soars as profits double, Florida market recovers

Heritage Insurance Holdings Inc.'s stock price has surged since the start of the second quarter, riding the momentum from a strong first quarter and the improvement of Florida's insurance market.

The Tampa, Fla.-based property insurer saw its stock rise 68.52% to $24.30 from $14.42 between March 31 and market close on June 5. The stock rose as high as $26.02 on May 9, its highest close since an all-time high of $27.11 on July 12, 2015.

Heritage's first-quarter results sparked the upturn. Net income more than doubled year over year to $30.5 million from $14.2 million, despite logging pre-tax losses of $31.8 million related to the California wildfires. Heritage offers homeowners, condo, dwelling and commercial residential insurance.

Piper Sandler analyst Paul Newsome said Heritage and fellow Florida-domiciled rivals, such as property insurer Universal Insurance Holdings Inc., have seen significant improvement in profitability. He credits a stronger pricing environment and tort reforms among the catalysts for the turnaround.

"If you look back three or four years ago, everything was going in the wrong direction — pricing, weather, reinsurance pricing, litigation environment, everything," Newsome said in an interview with S&P Global Market Intelligence. "[With] a combination of pricing and tort reform, and reinsurance pricing falling a little bit, ... a lot of things are going in the right direction for companies like Heritage."

Heritage did not respond to a request for comment.

Universal Insurance Holdings has also seen its stock price improve, rising 15.7% to $27.43 from $23.70 at the start of the quarter. In contrast, the S&P 500 Insurance Index has dipped 3.67%, while the S&P 500 has risen 5.83%.

Braced for the storms

Unlike in other years, the Florida insurance market is in markedly better shape to withstand the Atlantic hurricane season, which began June 1 and runs through to Nov. 30.

The 2025 season is expected to be similar to last year in terms of storm activity, with the National Oceanic and Atmospheric Administration forecasting 13 to 19 total named storms for the season, with six to 10 expected to become hurricanes, defined by winds of 74 mph or higher. Three to five are expected to evolve into major hurricanes, or Category 3/4/5, with winds of 111 mph or higher.

The Sunshine State's insurers are taking steps to improve their resilience, Josie Novak, a senior financial analyst for AM Best, said during a presentation on the state of the Florida market. She said they are investing in more sophisticated modeling for both catastrophes and secondary perils to refine their underwriting practices, while stronger capital management strategies are helping companies build a financial buffer to absorb future shocks.

"While no model can eliminate the risk posed by severe weather, the industry's ability to proactively adapt, both operationally and financially, suggests that the current profitability trend has the potential to be sustained, even in the face of increasingly volatile climate patterns," Novak said.

Newsome said pricing for insurers is adequate for them to withstand "several very large hurricanes and still be profitable," while allowing them to increase the amount of reinsurance they buy. He added that the legislated tort reforms enacted in March 2023 have an effect as far as reducing losses.

"There's some thought that 25%, or even as much as 50%, of the losses related to some of these big events would go away if you didn't have this difficult legal environment," Newsome said. "So the tort reform solves a lot of problems from that perspective."