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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
________________________________________________________
Form 10-Q
________________________________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number
001-36462
________________________________________________________
Heritage Insurance Holdings, Inc.
(Exact name of Registrant as specified in its charter)
________________________________________________________
Delaware45-5338504
(State of Incorporation)
(IRS Employer
Identification No.)
1401 N. Westshore Blvd
Tampa, FL 33607
(Address, including zip code, of principal executive offices)
(727) 362-7200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareHRTGNew York Stock Exchange
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. Yes x No o
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). Yes x No o
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 fileroAccelerated filerxEmerging growth company o
Non-accelerated fileroSmaller reporting companyx
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The aggregate number of shares of the Registrant’s Common Stock outstanding on August 1, 2024 was 30,684,198.


HERITAGE INSURANCE HOLDINGS, INC.
Table of Contents
Page
 


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 strategic initiatives, including our controlled growth strategy and focus on rate adequacy and selective underwriting, and their impact on shareholder value; (iii) projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance; (iv) management’s goals and objectives, including intentions to pursue certain business and the handling of certain claims; (v) projections of financial items; (vi) the supply of catastrophe reinsurance and its costs; (vii) assumptions underlying statements regarding us and our business; (viii) claims and related expenses, and our reinsurers’ obligations; (ix) pending legal proceedings and their effect on our financial position; (x) future impact of prior strategic policy count reductions; and (xi) 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 2023 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:
•the possibility that actual losses may exceed reserves, which are based on estimates;
•the concentration of our business in coastal states, which could be impacted by hurricane losses or other significant weather-related events such as northeastern winter storms;
•our exposure to catastrophic weather events;
•our failure to adequately assess and price the risks we underwrite;
•the fluctuation in our results of operations, including as a result of factors outside of our control;
•increased costs of reinsurance, non-availability of reinsurance, non-collectability of reinsurance and our ability to obtain reinsurance on terms and at a cost acceptable to us;
•inherent uncertainty of our models and our reliance on such models as a tool to evaluate risk;
•increased competition, competitive pressures, industry developments and market conditions;
•continued and increased impact of abusive and unwarranted claims;
•our inability to effectively manage our growth and integrate acquired companies;
•our failure to execute our diversification strategy;
•our reliance on independent agents to write insurance policies for us on a voluntary basis and our ability to attract and retain agents;
•the failure of our claims department to effectively manage or remediate claims;
•the failure of policy renewals to meet our expectations;
•our inability to maintain our financial stability rating;
•our ability to access sufficient liquidity or obtain additional financing to fund our operations and expand our business;
•our inability to generate investment income;
•effects of emerging claim and coverage issues relating to legal, judicial, environmental and social conditions;
•the failure of our risk mitigation strategies or loss limitation methods;
•lack of effectiveness of exclusions and loss limitation methods in the insurance policies we assume or write;
•the regulation of our insurance operations;
•changes in regulations and our failure to meet increased regulatory requirements, including minimum capital and surplus requirements;
•climate change, health crisis, severe weather conditions and other catastrophe events;
•litigation or regulatory actions;
•regulation limiting rate increases or that require us to participate in loss sharing or assessments;
•the terms of our indebtedness, including restrictions that limit our flexibility in operating our business, and our inability to comply with the financial and other covenants of our debt facilities;
•our ability to maintain effective internal controls over financial reporting;
•certain characteristics of our common stock;


•failure of our information technology systems or those of our key service providers and unsuccessful development and implementation of new technologies;
•a lack of redundancy in our operations; and
•our failure to attract and retain qualified employees and independent agents or our loss of key personnel.
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)
June 30, 2024December 31, 2023
ASSETS
(unaudited)
Fixed maturities, available-for-sale, at fair value (amortized cost of $744,173 and $606,646)
$698,853 $560,682 
Equity securities, at fair value, (cost $1,936 and $1,666)
1,936 1,666 
Other investments, net6,790 7,067 
Total investments707,579 569,415 
Cash and cash equivalents480,930 463,640 
Restricted cash10,956 9,699 
Accrued investment income5,148 4,068 
Premiums receivable, net100,832 89,490 
Reinsurance recoverable on paid and unpaid claims, net of allowance for credit losses of $197
536,888 482,429 
Prepaid reinsurance premiums505,180 294,222 
Income tax receivable12,066 13,354 
Deferred income tax asset, net12,694 11,111 
Deferred policy acquisition costs, net114,818 102,884 
Property and equipment, net34,510 33,218 
Right-of-use lease asset, finance16,337 17,606 
Right-of-use lease asset, operating6,357 6,835 
Intangibles, net39,464 42,555 
Other assets15,590 12,674 
Total Assets$2,599,349 $2,153,200 
LIABILITIES AND STOCKHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses$822,271 $845,955 
Unearned premiums765,632 675,921 
Reinsurance payable504,291 159,823 
Long-term debt, net120,780 119,732 
Advance premiums26,262 23,900 
Accrued compensation6,278 9,461 
Lease liability, finance19,250 20,386 
Lease liability, operating7,528 8,076 
Accounts payable and other liabilities71,724 69,666 
Total Liabilities$2,344,016 $1,932,920 
Commitments and contingencies (Note 17)
Stockholders’ Equity:
Common stock, $0.0001 par value, 50,000,000 shares authorized, 42,915,872 shares issued and 30,684,198 outstanding at June 30, 2024 and 42,450,612 shares issued and 30,218,938 outstanding at December 31, 2023
3 3 
Additional paid-in capital361,789 360,310 
Accumulated other comprehensive loss, net of taxes(34,770)(35,250)
Treasury stock, at cost, 12,231,674 shares at each June 30, 2024 and December 31, 2023
(130,900)(130,900)
Retained earnings59,211 26,117 
Total Stockholders' Equity255,333 220,280 
Total Liabilities and Stockholders' Equity$2,599,349 $2,153,200 
See accompanying notes to unaudited condensed consolidated financial statements.
2

HERITAGE INSURANCE HOLDINGS, INC.
Condensed Consolidated Statements of Operations and Other Comprehensive Income
(Unaudited)
(Amounts in thousands, except per share and share amounts)
For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,
2024202320242023
REVENUES:
Gross premiums written$424,530 $396,559 $781,214 $706,868 
Change in gross unearned premiums(74,457)(66,544)(89,752)(59,831)
Gross premiums earned350,073 330,015 691,462 647,037 
Ceded premiums(159,757)(153,211)(321,720)(304,204)
Net premiums earned190,316 176,804 369,742 342,833 
Net investment income9,769 6,599 18,320 12,181 
Net realized gains (losses) and impairment12 (1,568)11 330 
Other revenue3,474 3,478 6,800 6,890 
Total revenues203,571 185,313 394,873 362,234 
EXPENSES:
Losses and loss adjustment expenses105,928 106,646 207,963 204,098 
Policy acquisition costs, net of ceding commission income(1)
47,224 41,451 94,153 81,776 
General and administrative expenses, net of ceding commission income(2)
22,780 20,058 42,414 39,111 
Intangible asset impairment— 767 — 767 
Total expenses175,932 168,922 344,530 325,752 
Operating income27,639 16,391 50,343 36,482 
Interest expense, net2,780 2,740 5,610 5,621 
Income before income taxes24,859 13,651 44,733 30,861 
Provision for income taxes5,990 5,872 11,639 9,074 
Net income$18,869 $7,779 $33,094 $21,787 
OTHER COMPREHENSIVE INCOME
Change in net unrealized gains (losses) on investments924 (2,986)641 9,158 
Reclassification adjustment for net realized investment (gains) losses(12)9 (11)11 
Income tax (expense) benefit related to items of other comprehensive income(216)698 (150)(2,158)
Total comprehensive income$19,565 $5,500 $33,574 $28,798 
Weighted average shares outstanding
Basic30,649,73225,567,15730,513,20725,562,731
Diluted30,708,99525,626,42030,572,47025,621,994
Earnings per share
Basic$0.62 $0.30 $1.08 $0.85 
Diluted$0.61 $0.30 $1.08 $0.85 
(1)Policy acquisition costs includes $9.4 million and $18.7 million of ceding commission income for the three and six months ended June 30, 2024 and $12.8 million and $25.3 million of ceding commission income for the three and six months ended June 30, 2023, respectively.
(2)General and administration includes $3.1 million and $6.1 million of ceding commission income for the three and six months ended June 30, 2024 and $4.1 million and $8.3 million of ceding commission income for the three and six months ended June 30, 2023, respectively.
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 Earnings
Treasury Shares
Accumulated Other
Comprehensive Loss
Total
Stockholders'
Equity
Balance at December 31, 202330,218,938$3 $360,310 $26,117 $(130,900)$(35,250)$220,280 
Net unrealized change in investments, net of tax—— — — — (216)(216)
Issuance of restricted stock417,558— — — — — — 
Additional costs associated to public offering—— (3)— — — (3)
Unallocated dividends on restricted stock forfeitures—— 54 — — — 54 
Stock-based compensation on restricted stock—— 595 — — — 595 
Net income—— — 14,225 — — 14,225 
Balance at March 31, 202430,636,496$3 $360,956 $40,342 $(130,900)$(35,466)$234,935 
Net unrealized change in investments, net of tax—— — — — 696 696 
Issued restricted stock47,702— — — — — — 
Stock-based compensation on restricted stock—— 833 — — — 833 
Net income—— — 18,869 — — 18,869 
Balance at June 30, 202430,684,198$3 $361,789 $59,211 $(130,900)$(34,770)$255,333 

Common Shares
Par Value
Additional Paid-In Capital
Retained
Earnings (Deficit)
Treasury Shares
Accumulated Other
Comprehensive Loss
Total
Stockholders'
Equity
Balance at December 31, 202225,539,433$3 $334,711 $(19,190)$(130,900)$(53,585)$131,039 
Net unrealized change in investments, net of tax—— — — — 9,290 9,290 
Shares tendered for income taxes withholding(4,200)— (8)— — — (8)
Restricted stock vested25,000— — — — — — 
Forfeiture on restricted stock(1,482)— — — — — — 
Stock-based compensation on restricted stock—— 395 — — — 395 
Net income—— — 14,008 — — 14,008 
Balance at March 31, 202325,558,751$3 $335,098 $(5,182)$(130,900)$(44,295)$154,724 
Net unrealized change in investments, net of tax—— — — — (2,279)(2,279)
Issued restricted stock63,744— — — — — — 
Stock-based compensation on restricted stock—— 403 — — — 403 
Net income—— — 7,779 — — 7,779 
Balance at June 30, 202325,622,495$3 $335,501 $2,597 $(130,900)$(46,574)$160,627 


See accompanying notes to unaudited condensed consolidated financial statements.
4

HERITAGE INSURANCE HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
For the Six Months Ended June 30,
20242023
OPERATING ACTIVITIES
Net income$33,094 $21,787 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation1,428 798 
Bond amortization and accretion(1,552)(1,261)
Amortization of original issuance discount on debt428 235 
Goodwill or intangible asset impairment— 767 
Depreciation and amortization4,491 4,266 
Allowance for (recovery) bad debt(703)87 
Expected credit allowance on reinsurance— 152 
Net realized gains(11)(330)
Deferred income taxes, net(1,733)3,771 
Changes in operating assets and liabilities:
Accrued investment income(1,080)245 
Premiums receivable, net(10,639)6,061 
Prepaid reinsurance premiums(210,958)(202,229)
Reinsurance recoverable on paid and unpaid claims(54,459)260,911 
Income taxes receivable1,288 (1,143)
Deferred policy acquisition costs, net(11,934)(7,119)
Right of use leased asset1,747 1,228 
Other assets(2,916)(3,513)
Unpaid losses and loss adjustment expenses(23,684)(313,948)
Unearned premiums89,711 59,737 
Reinsurance payable344,468 187,795 
Accrued interest(474)(122)
Accrued compensation(3,183)1,535 
Advance premiums2,362 12,423 
Operating lease liabilities(1,684)(1,100)
Other liabilities2,531 (6,914)
Net cash provided by operating activities156,538 24,119 
INVESTING ACTIVITIES
Fixed maturity securities sales, maturities and pay downs70,287 479,396 
Fixed maturity securities purchases(206,264)(528,466)
Equity securities reinvestment of dividends
(270)— 
Return on other investments277 5,062 
Cost of property and equipment acquired(2,692)(6,092)
Net cash used in investing activities(138,662)(50,100)
FINANCING ACTIVITIES
Repayment of term note(4,750)(4,750)
Mortgage loan payments(130)(52)
Proceeds from loan agreement5,500 — 
Additional costs associated with public offering(3)— 
Tax withholding on share-based compensation awards— (8)
Dividends forfeited (paid)54 (11)
Net cash provided by (used in) financing activities671 (4,821)
Increase (decrease) in cash, cash equivalents, and restricted cash18,547 (30,802)
Cash, cash equivalents and restricted cash, beginning of period473,339 287,572 
Cash, cash equivalents and restricted cash, end of period$491,886 $256,770 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid$12,181 $6,446 
Interest paid$4,552 $4,757 
5

Reconciliation of cash, cash equivalents, and restricted cash to condensed consolidated balance sheets.
June 30, 2024December 31, 2023
(In thousands)
Cash and cash equivalents$480,930 $463,640 
Restricted cash10,956 9,699 
Total$491,886 $473,339 
Restricted cash primarily represents funds held to meet regulatory requirements in certain states in which the Company operates.
See accompanying notes to unaudited condensed consolidated financial statements.
6

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, 2023 filed on March 13, 2024 (the “2023 Form 10-K”).
Significant accounting policies
The accounting policies of the Company are set forth in Note 1 to the consolidated financial statements contained in the Company’s 2023 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 2023 Form 10-K. There have been no material changes to the Company’s accounting policies since the filing of that report.
On March 6, 2024, the SEC adopted new rules designed to enhance public company disclosures related to the risks and impacts of climate-related matters. The rules amend the provisions of both Regulation S-K and Regulation S-X to require disclosure of climate-related risks, transition plans, targets and goals, risk management and governance as well as require disclosure of the financial effects of severe weather events and other natural conditions as well as the use of carbon offsets or renewable energy credits. Disclosure requirements will begin phasing in for fiscal years beginning on or after January 1, 2025, subject to legal challenges and the SEC's voluntary stay of the disclosure requirements. The Company will continue to assess the impact of these new rules on its financial statements while the stay is in place.
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, 2024
Cost or Adjusted /
Amortized Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair Value
Debt Securities Available-for-sale(In thousands)
U.S. government and agency securities (1)
$168,760 $68 $1,178 $167,650 
States, municipalities and political subdivisions322,003 93 30,256 291,840 
Corporate bonds227,867 379 11,402 216,844 
Mortgage-backed securities (1)
18,646 — 2,881 15,765 
Asset-backed securities
2,892 — 143 2,749 
Other
4,005 — — 4,005 
Total$744,173 $540 $45,860 $698,853 
(1)Includes securities at June 30, 2024 with a carrying amount of $23.6 million and $8.0 million that were pledged as collateral for the advance agreement entered into with a financial institution in 2018 and 2024. The Company is
7

permitted to withdraw or exchange any portion of the pledged collateral over the minimum requirement at any time.
December 31, 2023
Cost or Adjusted /
Amortized Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
 Fair Value
Debt Securities Available-for-sale(In thousands)
U.S. government and agency securities (1)
$81,540 $417 $1,295 $80,662 
States, municipalities and political subdivisions319,896 104 31,018 288,982 
Corporate bonds178,213 475 11,858 166,830 
Mortgage-backed securities22,695 — 2,769 19,926 
Asset-backed securities
247 — 20 227 
Other
4,055 — — 4,055 
Total$606,646 $996 $46,960 $560,682 
(1)Includes securities at December 31, 2023 with a carrying amount of $24.3 million that were pledged as collateral for the advance agreement entered into with a financial institution in 2018. The Company is permitted to withdraw or exchange any portion of the pledged collateral over the minimum requirement at any time.
Net Realized Gains (Losses) and Impairment
The following tables present net realized gains (losses) on the Company’s debt securities available-for-sale for the three and six months ended June 30, 2024 and 2023, respectively:
20242023
Three Months Ended June 30,
Gains
(Losses)
Fair Value at Sale
Gains
(Losses)
Fair Value at Sale
(In thousands)
Debt Securities Available-for-Sale
Total realized gains$13 $907 $— $— 
Total realized losses(1)117 (9)308 
Net realized gains (losses)$12 $1,024 $(9)$308 
20242023
Six Months Ended June 30,
Gains
(Losses)
Fair Value at Sale
Gains
(Losses)
Fair Value at Sale
(In thousands)
Debt Securities Available-for-Sale
Total realized gains$13 $2,644 $— $— 
Total realized losses(2)308 (11)598 
Net realized gains (losses)$11 $2,952 $(11)$598 
8

The following table presents the reconciliation of net realized (losses) gains and impairment of the Company’s investments reported for the three and six months ended June 30, 2024 and 2023, respectively:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands)
Gross realized gains on sales of available-for-sale securities
$13 $— $13 $— 
Impairments on other investments
— (1,559)— (1,559)
Realized losses on sales of available-for-sale securities
(1)(9)(2)(11)
Gross realized gains on sale of other investments
— — — 1,900 
Net realized (losses) gains and impairments
$12 $(1,568)$11 $330 
The table below summarizes the Company’s debt securities at June 30, 2024 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.
At June 30, 2024
Cost or Amortized Cost
Percent of Total
Fair Value
Percent of Total
Maturity dates:(In thousands)(In thousands)
Due in one year or less$169,107 22.7 %$167,795 24.0 %
Due after one year through five years383,997 51.6 %362,032 51.8 %
Due after five years through ten years163,398 22.0 %144,765 20.7 %
Due after ten years27,671 3.7 %24,261 3.5 %
Total$744,173 100.0 %$698,853 100.0 %
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, 2024 and 2023, respectively:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands)
Debt securities$6,502 $5,015 $11,057 $8,038 
Equity securities361 57 657 90 
Cash and cash equivalents3,595 2,246 7,814 4,449 
Other investments173 108 324 839 
Net investment income10,631 7,426 19,852 13,416 
Less: Investment expenses862 827 1,532 1,235 
Net investment income, less investment expenses$9,769 $6,599 $18,320 $12,181 
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, 2024 and December 31, 2023, respectively (in thousands):
9

Less Than Twelve Months
Twelve Months or More
June 30, 2024
Number of
Securities
Gross
Unrealized
Losses
Fair Value
Number of
Securities
Gross
Unrealized
Losses
Fair Value
Debt Securities Available-for-sale
U.S. government and agency securities21$128 $101,610 26$1,050 $27,065 
States, municipalities and political subdivisions1139 9,368 37230,217 265,588 
Corporate bonds3464 26,901 18511,338 124,847 
Mortgage-backed securities6— 3 1212,881 15,763 
Asset-backed securities— — — 35143 525 
Other— — — — — — 
Total fixed maturity securities72$231 $137,882 739$45,629 $433,788 
Less Than Twelve MonthsTwelve Months or More
December 31, 2023
Number of
Securities
Gross
Unrealized
Losses
Fair Value
Number of
Securities
Gross
Unrealized
Losses
Fair Value
Debt Securities Available-for-sale
U.S. government and agency securities3$14 $2,962 32$1,281 $42,305 
States, municipalities and political subdivisions
521 3,875 38230,997 274,876 
Corporate bonds1024 6,398 18811,834 128,771 
Mortgage-backed securities
10— 7 1382,769 19,810 
Asset-backed securities
0— — 2420 373 
Other
0— — 0— — 
Total fixed maturity securities28$59 $13,242 764$46,901 $466,135 
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.
No credit loss allowance was recorded as of June 30, 2024 or for the year ended December 31, 2023.
Other Investments
Non-Consolidating Variable Interest Entities (“VIEs”)
The Company makes passive investments in limited partnerships (“LPs”), which are accounted for using the equity method, with income reported in earnings through net realized and unrealized gains and losses. The Company also holds a passive investment in a Real Estate Investment Trust (“REIT”), which is accounted for using the measurement alternative method, and reported at cost less impairment (if any), plus or minus changes from observable price changes.
10

The following table summarizes the carrying value and maximum loss exposure of the Company’s non-consolidated VIEs at June 30, 2024 and December 31, 2023, respectively (in thousands):
As of June 30, 2024As of December 31, 2023
Carrying ValueMaximum Loss ExposureCarrying ValueMaximum Loss Exposure
Investments in non-consolidated VIEs - Equity method$1,682 $1,682 $1,819 $1,819 
Investments in non-consolidated VIEs - Measurement alternative$5,108 $5,108 $5,248 $5,248 
Total non-consolidated VIEs$6,790 $6,790 $7,067 $7,067 
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:
•Level 1 – Unadjusted quoted prices are available in active markets for identical assets/liabilities as of the reporting date.
•Level 2 – Valuations based on observable inputs, such as quoted prices for similar assets or liabilities at the measurement date; quoted prices in the markets that are not active; or other inputs that are observable, either directly or indirectly.
•Level 3 – Pricing inputs are unobservable and significant to the overall fair value measurement, and the determination of fair value requires significant management judgment or estimation.
The highest priority is assigned to Level 1 inputs and the lowest priority to Level 3 inputs. At June 30, 2024 and December 31, 2023, there were no transfers in or out of Level 1, 2, and 3.
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.
11

The tables below present the balances of the Company’s invested assets measured at fair value on a recurring basis:
June 30, 2024TotalQuoted 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$480,930 $480,930 $— $— 
Restricted cash$10,956 $10,956 $— $— 
Debt Securities Available-for-sale
U.S. government and agency securities$167,650 $— $167,650 $— 
States, municipalities and political subdivisions291,840 — 291,840 — 
Corporate bonds
216,844 — 216,844 — 
Mortgage-backed securities
15,765 — 15,765 — 
Asset-backed securities
2,749 — 2,749 — 
Other
4,005 — 4,005 — 
Total debt securities
$698,853 $— $698,853 $— 
Equity Securities
Common stock
$1,936 $1,936 $— $— 
Total debt securities and equity securities
$700,789 $1,936 $698,853 $— 

December 31, 2023TotalQuoted 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$463,640 $463,640 $— 
Restricted cash$9,699 $9,699 $— 
Debt Securities Available-for-sale
U.S. government and agency securities$80,662 $— $80,662 $— 
States, municipalities and political subdivisions288,982 — 288,982 — 
Corporate bonds
166,830 — 166,830 — 
Mortgage-backed securities
19,926 — 19,926 — 
Asset-backed securities
227 — 227 — 
Other
4,055 — 4,055 — 
Total debt securities
$560,682 $— $560,682 $— 
Equity Securities
Common stock
$1,666 $1,666 $— $— 
Total debt securities and equity securities
$562,348 $1,666 $560,682 $— 
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.
12

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 six months ended June 30, 2024, there were no assets or liabilities that were measured at fair value on a non-recurring basis.
Certain of the Company’s investments are measured in accordance with GAAP for the type of investment, using methodologies other than fair value.
NOTE 4. OTHER COMPREHENSIVE INCOME
The following tables summarize other comprehensive income and disclose the tax impact of each component of other comprehensive income for the three and six months ended June 30, 2024 and 2023, respectively:
For the Three Months Ended June 30,
20242023
Pre-tax
Tax
After-tax
Pre-tax
Tax
After-tax
(In thousands)
Other comprehensive income
Change in unrealized gains (losses) on investments, net$924 $(219)$705 $(2,986)$700 $(2,286)
Reclassification adjustment of realized (gains) losses included in net income(12)3 (9)9 (2)7 
Effect on other comprehensive income$912 $(216)$696 $(2,977)$698 $(2,279)
For the Six Months Ended June 30,
20242023
Pre-tax
Tax
After-tax
Pre-tax
Tax
After-tax
(In thousands)
Other comprehensive income
Change in unrealized gains (losses) on investments, net$641 $(152)$489 $9,158 $(2,155)$7,003 
Reclassification adjustment of realized losses included in net income(11)2 (9)11 (3)8 
Effect on other comprehensive income $630 $(150)$480 $9,169 $(2,158)$7,011 
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 ten years, and often include one or more options to renew. These renewal terms can extend the lease term from two to ten years and are included in the lease term when it is reasonably certain that the Company will exercise the option. The Company considers these options in determining the lease term used in establishing the Company’s right-of-use assets and lease obligations. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
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.
13

Components of the Company’s lease costs were as follows (in thousands):
For The Six Months Ended June 30,
20242023
Operating lease cost, included in General & Administrative expenses on the Consolidated Statements of Operations$810 $787 
Finance lease cost:
Amortization of assets, included in General & Administrative expenses on the Consolidated Statements of Operations1,269 1,285 
Interest on lease liabilities, included in Interest expense on the Consolidated Statements of Operations407 451 
Total finance lease cost$1,676 $1,736 
Variable lease cost, included in General & Administrative expenses on the Consolidated Statements of Operations$744 $796 
Short-term lease cost, included in General & Administrative expenses on the Consolidated Statements of Operations$42 $80 
Supplemental balance sheet information related to the Company’s operating and financing leases were as follows (in thousands):
Operating LeasesJune 30, 2024December 31, 2023
Right of use assets$6,357