HCI(HCI) - 2025 Q2 - Quarterly Results

Executive Summary & Management Commentary HCI Group's Q2 2025 results show strong financial performance and management's strategic focus on unlocking shareholder value Second Quarter 2025 Performance Overview HCI Group reported strong Q2 2025 results with significant increases in pre-tax income, net income, and diluted EPS, alongside a notable improvement in the gross loss ratio and book value per share Second Quarter 2025 Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | Change | Source | | :-------------------------------- | :------ | :------ | :----- | :----- | | Pre-Tax Income | $94.4 million | - | - | [1] | | Net Income | $70.3 million | - | - | [1] | | Net Income after Noncontrolling Interests | $66.2 million | $54.1 million | +22.4% | [1] | | Diluted EPS | $5.18 | $4.24 | +22.2% | [1, 19] | | Book Value Per Share (end of period) | $58.55 | $42.72 | +37.0% | [1, 19] | | Gross Loss Ratio | 21.3% | 29.7% | -8.4 pts | [1, 19] | Management Outlook Management highlighted solid profitability, industry-leading net combined ratios, and growth in book value per share, while also progressing initiatives to unlock shareholder value, specifically establishing Exzeo as an independent public entity - HCI Group delivered another strong quarter, marked by solid profitability, industry-leading net combined ratios, and meaningful growth in book value per share[2] - The company continues to make progress on initiatives to unlock shareholder value and establish Exzeo as an independent, publicly traded entity[2] Second Quarter 2025 Financial Review This section details HCI Group's second quarter 2025 financial performance, including revenue, underwriting results, and operating expenses Revenue and Premiums Consolidated gross premiums earned increased significantly in Q2 2025 due to a higher volume of policies in force, while premiums ceded for reinsurance also saw a slight increase compared to the previous quarter Q2 2025 Premiums Performance | Metric | Q2 2025 | Q2 2024 | Change (YoY) | Source | | :-------------------------- | :---------- | :---------- | :----------- | :----- | | Consolidated Gross Premiums Earned | $302.6 million | $263.6 million | +14.8% | [2, 19] | | Premiums Ceded for Reinsurance | $102.5 million | $76.7 million | +33.6% | [3, 23] | - The increase in consolidated gross premiums earned was a result of a higher volume of policies in force over the comparative period[2] Underwriting Performance and Expenses Losses and loss adjustment expenses decreased substantially in Q2 2025, leading to a significantly improved gross loss ratio, primarily due to a decline in claims and litigation frequency. Policy acquisition and other underwriting expenses increased due to higher gross premiums Q2 2025 Underwriting Expenses | Expense Category | Q2 2025 | Q2 2024 | Change (YoY) | Source | | :-------------------------------- | :---------- | :---------- | :----------- | :----- | | Losses and Loss Adjustment Expenses | $64.5 million | $78.3 million | -17.6% | [3, 23] | | Gross Loss Ratio | 21.3% | 29.7% | -8.4 pts | [3, 19] | | Policy Acquisition and Other Underwriting Expenses | $30.6 million | $23.5 million | +30.2% | [4, 23] | - The decrease in losses and loss adjustment expenses was primarily driven by a decline in claims and litigation frequency[3] - The increase in policy acquisition and other underwriting expenses was driven by higher gross premiums[4] Profitability Expenses General and administrative personnel expenses increased due to higher stock-based compensation, employee health benefits, and merit increases. Other operating expenses also rose, partly due to a debt conversion charge Q2 2025 Operating Expenses | Expense Category | Q2 2025 | Q2 2024 | Change (YoY) | Source | | :-------------------------------- | :---------- | :---------- | :----------- | :----- | | General and Administrative Personnel Expenses | $20.0 million | $17.5 million | +14.3% | [4, 23] | | Other Operating Expenses | $8.8 million | $7.5 million | +17.3% | [5, 23] | - The increase in general and administrative personnel expenses was primarily attributable to higher stock-based compensation, employee health benefits, and merit increases[4] - Other operating expenses included a $1.1 million debt conversion charge in connection with the conversion of 4.75% Convertible Senior Notes[5] Year-to-Date 2025 Financial Review This section provides a year-to-date financial review for 2025, detailing revenue, underwriting performance, and profitability metrics Revenue and Premiums (YTD) For the first six months of 2025, consolidated gross premiums earned increased significantly, driven by a higher volume of policies in force, while premiums ceded for reinsurance also rose considerably compared to the prior year period YTD 2025 Premiums Performance | Metric | YTD 2025 | YTD 2024 | Change (YoY) | Source | | :-------------------------- | :--------- | :--------- | :----------- | :----- | | Consolidated Gross Premiums Earned | $603.0 million | $520.2 million | +15.9% | [7, 23] | | Premiums Ceded for Reinsurance | $202.2 million | $144.8 million | +39.6% | [7, 23] | - The increase in consolidated gross premiums earned was a result of a higher volume of policies in force over the comparative period[7] Underwriting Performance and Expenses (YTD) Year-to-date losses and loss adjustment expenses decreased, resulting in a lower gross loss ratio, primarily due to reduced claims and litigation frequency. Policy acquisition and other underwriting expenses increased, consistent with higher gross premiums YTD 2025 Underwriting Expenses | Expense Category | YTD 2025 | YTD 2024 | Change (YoY) | Source | | :-------------------------------- | :--------- | :--------- | :----------- | :----- | | Losses and Loss Adjustment Expenses | $123.7 million | $158.2 million | -21.8% | [8, 23] | | Gross Loss Ratio | 20.5% | 30.4% | -9.9 pts | [8] | | Policy Acquisition and Other Underwriting Expenses | $57.8 million | $45.6 million | +26.8% | [9, 23] | - The decrease in losses and loss adjustment expenses was primarily driven by a decline in claims and litigation frequency[8] - The increase in policy acquisition and other underwriting expenses was driven by higher gross premiums[9] Profitability Metrics (YTD) Year-to-date pre-tax income, net income, and diluted EPS all showed substantial increases. General and administrative personnel expenses rose due to increased stock-based compensation, employee health benefits, and merit increases, while other operating expenses saw a slight decrease, partially offset by a debt conversion charge YTD 2025 Profitability and Operating Expenses | Metric/Expense Category | YTD 2025 | YTD 2024 | Change (YoY) | Source | | :-------------------------------- | :--------- | :--------- | :----------- | :----- | | Pre-Tax Income | $194.7 million | $153.5 million | +27.0% | [6, 23] | | Net Income | $144.5 million | $114.1 million | +26.6% | [6, 23] | | Net Income after Noncontrolling Interests | $135.8 million | $101.7 million | +33.5% | [6, 23] | | Diluted EPS | $10.57 | $8.04 | +31.5% | [6, 23] | | General and Administrative Personnel Expenses | $40.5 million | $33.7 million | +20.2% | [9, 23] | | Other Operating Expenses | $14.4 million | $15.2 million | -5.3% | [10, 23] | - The increase in general and administrative personnel expenses was primarily attributable to higher stock-based compensation, employee health benefits, and merit increases[9] - The decrease in other operating expenses was partially offset by a $1.1 million debt conversion charge in connection with the conversion of 4.75% Convertible Senior Notes[10] Financial Position and Key Metrics This section outlines HCI Group's financial position, including balance sheet highlights and key per share metrics as of June 30, 2025 Balance Sheet Highlights As of June 30, 2025, total assets increased, primarily driven by a significant rise in cash and cash equivalents. Total liabilities decreased, notably due to a substantial reduction in long-term debt and losses and loss adjustment expenses, leading to a significant increase in total equity Balance Sheet Summary (June 30, 2025 vs Dec 31, 2024) | Metric (in thousands) | June 30, 2025 | Dec 31, 2024 | Change | Source | | :-------------------------------- | :------------ | :----------- | :----- | :----- | | Total Assets | $2,353,106 | $2,230,213 | +$122,893 | [21] | | Cash and Cash Equivalents | $947,166 | $532,471 | +$414,695 | [21] | | Total Liabilities | $1,566,017 | $1,761,172 | -$195,155 | [21] | | Long-Term Debt | $15,602 | $185,254 | -$169,652 | [21] | | Losses and Loss Adjustment Expenses (Liability) | $696,892 | $845,900 | -$149,008 | [21] | | Total Equity | $784,684 | $467,350 | +$317,334 | [21] | Per Share Metrics HCI Group reported increased diluted EPS and book value per share for Q2 2025 and year-to-date 2025, while dividends per share remained constant Per Share Metrics | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | Source | | :-------------------------- | :------ | :------ | :------- | :------- | :----- | | Diluted EPS | $5.18 | $4.24 | $10.57 | $8.04 | [19, 23] | | Dividends per share | $0.40 | $0.40 | $0.80 | $0.80 | [19, 23] | | Book value per share (end of period) | $58.55 | $42.72 | - | - | [19] | | Shares outstanding (end of period) | 12,956,884 | 10,472,741 | - | - | [19] | Company Information This section provides an overview of HCI Group, details for the upcoming conference call, important forward-looking statements, and investor relations contacts About HCI Group, Inc. HCI Group, Inc. is a holding company with two main operating units: an insurance unit comprising four insurance companies, a captive reinsurance company, and claims/real estate operations; and Exzeo Group, an insurance technology innovator focused on advanced underwriting algorithms and data analytics - HCI Group, Inc. is a holding company with two distinct operating units[13] - The first unit includes four top-performing insurance companies, a captive reinsurance company, and operations in claims management and real estate[13] - The second unit, Exzeo Group, is a leading innovator of insurance technology that utilizes advanced underwriting algorithms and data analytics to empower property and casualty insurers[13] - The company's common shares trade on the New York Stock Exchange under the ticker symbol "HCI" and are included in the Russell 2000 and S&P SmallCap 600 Index[14] Conference Call Information HCI Group will host a conference call on August 7, 2025, at 4:45 p.m. Eastern time to discuss the financial results, with replay options available - HCI Group will hold a conference call on August 7, 2025, at 4:45 p.m. Eastern time to discuss these financial results[11] - The call will be hosted by Chairman and Chief Executive Officer Paresh Patel, Chief Operating Officer Karin Coleman, and Chief Financial Officer Mark Harmsworth[11] - A replay of the call will be available by telephone and via the Investor Information section of the HCI Group website through August 7, 2026[13] Forward-Looking Statements The news release contains forward-looking statements subject to various risks and uncertainties, particularly regarding the estimation of reserves for losses and loss adjustment expenses. The company disclaims any obligation to update these statements - This news release may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995[15] - Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties, such as the inherently imprecise process of estimating reserves for losses and loss adjustment expenses[15] - HCI Group, Inc. disclaims all obligations to update any forward-looking statements[15] Investor Relations Contacts Contact information for HCI Group's Investor Relations and Gateway Investor Relations is provided for inquiries - Company Contact: Bill Broomall, CFA, HCI Group, Inc. (Tel: 813-776-1012, wbroomall@exzeo.com)[16][17] - Investor Relations Contact: Matt Glover, Gateway Group, Inc. (Tel: 949-574-3860, HCI@gateway-grp.com)[17] Detailed Financial Statements This section provides comprehensive financial statements, including selected metrics, consolidated balance sheets, income statements, and earnings per share reconciliation Selected Financial Metrics (Table) This section presents key selected financial metrics for Q2 2025 and Q2 2024, including gross written premiums by segment, gross premiums earned, gross loss ratio, and per share metrics like diluted EPS, dividends, and book value Selected Financial Metrics (Unaudited) (In thousands, except share and per share amounts) | | Q2 2025 | | | Q2 2024 | | --- | --- | --- | --- | --- | | Gross Written Premiums: | | | | | | Homeowners Choice | $ | 227,090 | $ | 191,775 | | TypTap Insurance Company | | 110,412 | | 79,093 | | Condo Owners Reciprocal Exchange | | 13,830 | | 36,034 | | Tailrow Reciprocal Exchange | | 5,213 | | - | | Total Gross Written Premiums | | 356,545 | | 306,902 | | Gross Premiums Earned: | | | | | | Homeowners Choice | | 156,552 | | 143,703 | | TypTap Insurance Company | | 124,437 | | 107,055 | | Condo Owners Reciprocal Exchange | | 12,811 | | 12,803 | | Tailrow Reciprocal Exchange | | 8,828 | | - | | Total Gross Premiums Earned | | 302,628 | | 263,561 | | Gross Premiums Earned Loss Ratio | | 21.3% | | 29.7% | | Per Share Metrics | | | | | | Diluted EPS | $ | 5.18 | $ | 4.24 | | Dividends per share | $ | 0.40 | $ | 0.40 | | Book value per share at the end of period | $ | 58.55 | $ | 42.72 | | Shares outstanding at the end of period | | 12,956,884 | | 10,472,741 | Consolidated Balance Sheets (Table) This table provides a detailed breakdown of HCI Group's consolidated assets, liabilities, redeemable noncontrolling interests, and equity as of June 30, 2025, compared to December 31, 2024 Consolidated Balance Sheets (In thousands, except share amounts) | | | June 30, 2025 | | December 31, 2024 | | --- | --- | --- | --- | --- | | | | (Unaudited) | | | | Assets | | | | | | Fixed-maturity securities, available for sale, at fair value (amortized cost: $590,666 and $719,536, | | | | | | respectively and allowance for credit losses: $0 and $0, respectively) | $ | 592,210 | $ | 718,537 | | Equity securities, at fair value (cost: $55,174 and $52,030, respectively) | | 58,618 | | 56,200 | | Limited partnership investments | | 19,770 | | 20,802 | | Real estate investments | | 85,578 | | 79,120 | | Total investments | | 756,176 | | 874,659 | | Cash and cash equivalents | | 947,166 | | 532,471 | | Restricted cash | | 3,730 | | 3,714 | | Accrued interest and dividends receivable | | 6,308 | | 6,008 | | Income taxes receivable | | 3,130 | | 463 | | Deferred income tax assets, net | | 361 | | 72 | | Premiums receivable, net (allowance: $8,180 and $5,891, respectively) | | 65,826 | | 50,582 | | Prepaid reinsurance premiums | | — | | 92,060 | | Reinsurance recoverable, net of allowance for credit losses: | | | | | | Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively) | | 62,727 | | 36,062 | | Unpaid losses and loss adjustment expenses (allowance: $137 and $186, respectively) | | 375,198 | | 522,379 | | Deferred policy acquisition costs | | 65,138 | | 54,303 | | Property and equipment, net | | 29,695 | | 29,544 | | Right-of-use-assets - operating leases | | 1,065 | | 1,182 | | Intangible assets, net | | 3,927 | | 5,206 | | Funds withheld for assumed business | | 8,538 | | 11,690 | | Other assets | | 24,121 | | 9,818 | | Total assets | $ | 2,353,106 | $ | 2,230,213 | | Liabilities, Redeemable Noncontrolling Interests and Equity | | | | | | Losses and loss adjustment expenses | $ | 696,892 | $ | 845,900 | | Unearned premiums | | 627,484 | | 584,703 | | Advance premiums | | 43,677 | | 18,867 | | Reinsurance payable on paid losses and loss adjustment expenses | | 127 | | 2,496 | | Ceded reinsurance premiums payable | | 38,121 | | 18,313 | | Assumed premiums payable | | 375 | | 2,176 | | Accrued expenses | | 42,033 | | 17,677 | | Income taxes payable | | 24,294 | | 5,451 | | Deferred income tax liabilities, net | | 2,402 | | 2,830 | | Revolving credit facility | | 40,000 | | 44,000 | | Long-term debt | | 15,602 | | 185,254 | | Lease liabilities - operating leases | | 1,072 | | 1,185 | | Other liabilities | | 33,938 | | 32,320 | | Total liabilities | | 1,566,017 | | 1,761,172 | | Commitments and contingencies | | | | | | Redeemable noncontrolling interests | | 2,405 | | 1,691 | | Equity: | | | | | | Common stock, (no par value, 40,000,000 shares authorized, 12,956,884 and 10,767,184 | | | | | | shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively) | | — | | — | | Additional paid-in capital | | 298,706 | | 122,289 | | Retained earnings | | 458,713 | | 331,793 | | Accumulated other comprehensive income (loss) | | 1,158 | | (749) | | Total stockholders' equity | | 758,577 | | 453,333 | | Noncontrolling interests | | 26,107 | | 14,017 | | Total equity | | 784,684 | | 467,350 | | Total liabilities, redeemable noncontrolling interest and equity | $ | 2,353,106 | $ | 2,230,213 | Consolidated Statements of Income (Table) This table presents the consolidated statements of income for the three months and six months ended June 30, 2025, and 2024, detailing revenue, expenses, and net income Consolidated Statements of Income (Unaudited) (In thousands, except per share data) | | | | Three Months Ended | | | | Six Months Ended | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2025 | | June 30, | 2024 | | 2025 | June 30, | 2024 | | Revenue | | | | | | | | | | Gross premiums earned | $ | 302,628 | $ | 263,561 | $ | 603,011 | $ | 520,205 | | Premiums ceded | | (102,522) | | (76,713) | | (202,157) | | (144,819) | | Net premiums earned | | 200,106 | | 186,848 | | 400,854 | | 375,386 | | Net investment income | | 16,445 | | 16,881 | | 30,196 | | 30,948 | | Net realized investment gains | | 155 | | 212 | | 1,322 | | 212 | | Net unrealized investment gains (losses) | | 1,180 | | 533 | | (726) | | 3,168 | | Policy fee income | | 1,467 | | 1,089 | | 3,696 | | 2,108 | | Other | | 2,567 | | 682 | | 3,011 | | 1,037 | | Total revenue | | 221,920 | | 206,245 | | 438,353 | | 412,859 | | Expenses | | | | | | | | | | Losses and loss adjustment expenses | | 64,457 | | 78,324 | | 123,748 | | 158,246 | | Policy acquisition and other underwriting expenses | | 30,551 | | 23,452 | | 57,838 | | 45,591 | | General and administrative personnel expenses | | 19,985 | | 17,471 | | 40,468 | | 33,745 | | Interest expense | | 3,744 | | 3,452 | | 7,128 | | 6,601 | | Other operating expenses | | 8,791 | | 7,520 | | 14,440 | | 15,220 | | Total expenses | | 127,528 | | 130,219 | | 243,622 | | 259,403 | | Income before income taxes | | 94,392 | | 76,026 | | 194,731 | | 153,456 | | Income tax expense | | 24,113 | | 18,927 | | 50,222 | | 39,401 | | Net income | $ | 70,279 | $ | 57,099 | $ | 144,509 | $ | 114,055 | | Net income attributable to redeemable noncontrolling | | | | | | | | | | interests | | — | | — | | — | | (10,149) | | Net income attributable to noncontrolling interests | | (4,119) | | (3,023) | | (8,665) | | (2,219) | | Net income after noncontrolling interests | $ | 66,160 | $ | 54,076 | $ | 135,844 | $ | 101,687 | | Basic earnings per share | $ | 5.57 | $ | 5.18 | $ | 12.00 | $ | 9.95 | | Diluted earnings per share | $ | 5.18 | $ | 4.24 | $ | 10.57 | $ | 8.04 | | Dividends per share | $ | 0.40 | $ | 0.40 | $ | 0.80 | $ | 0.80 | Earnings Per Share Reconciliation (Table) This table provides a summary of the numerator and denominator used to calculate basic and diluted earnings per common share for the three and six months ended June 30, 2025 Basic and Diluted Earnings Per Common Share Reconciliation (Unaudited) (In thousands, except per share amount) | | Three Months Ended | | | Six Months Ended | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | June 30, 2025 | | | June 30, 2025 | | | | | | | | Per | | | | Per | | | Income | Shares | Share | | Income | Shares | Share | | | (Numerato | (Denominato | Amoun | | (Numerat | (Denominato | | | | r) | r) | t | | or) | r) | Amount | | Net income | $ 70,279 | | | $ | 144,509 | | | | Less: Net income attributable to | | | | | | | | | noncontrolling interests | (4,119) | | | | (8,665) | | | | Net income attributable to HCI | 66,160 | | | | 135,844 | | | | Less: Income attributable to participating | | | | | | | | | securities | (2,616) | | | | (5,691) | | | | Basic Earnings Per Share: | | | | | | | | | Income attributable to common stockholders | 63,544 | 11,400 | $ 5.57 | | 130,153 | 10,846 | $ 12.00 | | Effect of Dilutive Securities: | | | | | | | | | Stock options | — | 392 | | | — | 373 | | | Convertible senior notes | 3,170 | 1,084 | | | 5,500 | 1,611 | | | Warrants | — | 7 | | | — | 7 | | | Diluted Earnings Per Share: | | | | | | | | | Income attributable to common stockholders | $ 66,714 | 12,883 | $ 5.18 | $ | 135,653 | 12,837 | $ 10.57 |