HRTG

Heritage just printed the cleanest year in its history: FY2025 net income of $196M (+218% YoY) on $847M revenue, with diluted EPS of $6.32 versus $2.01 prior. The MD&A is explicit about why — net combined ratio collapsed 21.1 points to 73.1% (loss ratio 39.4% vs 58.2%, expense ratio 33.6% vs 36.0%), catastrophe losses fell to $33.2M from $104.6M, and the company booked $13.5M of favorable prior-year development versus $25.4M unfavorable last year. Management states they have achieved rate adequacy in >90% of territories and reopened them for new business, which means the multi-year repricing / exposure-management program has done its job and personal-lines gross premiums are growing again.

The balance sheet matches the income statement. Equity jumped 73.7% to $505M, retained earnings tripled to $283M, long-term debt fell 33% to $78.4M, and cash sits at $559M against a $767M market cap — roughly 73% of the entire enterprise value is cash. Operating cash flow doubled to $182M. ROE of 38.7% is partly a recovery artifact (equity base was depressed by prior losses), but even normalized this is a high-teens ROE business at 1.5x book. The 28.3% drop in share count (likely a reverse split rather than buybacks — cash paid for repurchases was $0 in FY2024) means EPS is reported on a much smaller base, but the absolute earnings dollars are real.