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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-34126
HCI Group, Inc.
(Exact name of Registrant as specified in its charter)
Florida
20-5961396
(State or other jurisdiction of incorporation or organization)
(IRS Employer
Identification No.)
3802 Coconut Palm Drive
Tampa, FL 33619
(Address, including zip code, of principal executive offices)
(813) 849-9500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Shares, no par value
HCI
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 ☒ No ☐
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 ☒ No ☐
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 filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
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. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an
error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2025, computed by reference to the price at which the common stock was last sold
on June 30, 2025, was $1,691,271,339.
The number of shares outstanding of the registrant’s common stock, no par value, on February 20, 2026 was 12,991,955.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Form 10-K is incorporated by reference from the registrant’s definitive proxy statement which will be filed not later than 120 days after the
end of the fiscal year covered by this Form 10-K.
HCI GROUP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
PART I:
Item 1
Business
3-9
Item 1A
Risk Factors
9-20
Item 1B
Unresolved Staff Comments
20
Item 1C
Cybersecurity
21
Item 2
Properties
23
Item 3
Legal Proceedings
24
Item 4
Mine Safety Disclosures
24
PART II:
Item 5
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
25-26
Item 6
Reserved
27
Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations
28-37
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
39-40
Item 8
Financial Statements and Supplementary Data
41-112
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
113
Item 9A
Controls and Procedures
113
Item 9B
Other Information
113
Item 9C
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
113
PART III:
Item 10
Directors, Executive Officers and Corporate Governance
114
Item 11
Executive Compensation
114
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
114
Item 13
Certain Relationships and Related Transactions, and Director Independence
114
Item 14
Principal Accountant Fees and Services
114
PART IV:
Item 15
Exhibits and Financial Statement Schedules
115-120
Signatures
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements intended to qualify for the safe harbor from
liability established by the Private Securities Litigation Reform Act of 1995. Such statements, including statements about our plans, objectives,
expectations, assumptions or future events, involve risks and uncertainties. These statements involve estimates, assumptions, known and unknown risks,
uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or
implied by the forward-looking statements. Typically, forward-looking statements can be identified by terminology such as “anticipate,” “estimate,”
“plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions. The important factors
that could cause actual results to differ materially from those indicated by such forward-looking statements include but are not limited to the effects of
governmental regulation; changes in insurance regulations; the frequency and extent of claims; uncertainties inherent in reserve estimates; catastrophic
events; changes in the demand for, pricing of, availability of or collectability of reinsurance; restrictions on our ability to change premium rates; increased
rate pressure on premiums; the severity and impact of cybersecurity incidents; and other risks and uncertainties and other factors listed under Item 1A –
“Risk Factors” and elsewhere in this Annual Report on Form 10-K and in our other Securities and Exchange Commission filings. You are cautioned not to
place undue reliance on forward-looking statements, which speak only as of the date they are made and are not guarantees of future performance. Except as
required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
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PART I
ITEM 1 – Business
Our Business
HCI Group, Inc., together with its subsidiaries (collectively, “we,” “our,” “us,” the “Company,” or “HCI”), is primarily engaged in the property and
casualty insurance business. We provide various homeowners’ property and casualty insurance products for properties located in the State of Florida, which
is our primary market, as well as in other states in the northeast and southeast regions of the United States (“U.S.”).
Our insurance operations are supported by other insurance-related subsidiaries within the consolidated group. Exzeo Group, Inc. (formerly known as
TypTap Insurance Group, Inc.) (“Exzeo”), a majority-owned subsidiary, provides turn-key insurance technology and operations solutions based on a
proprietary platform of purpose-built software and data analytics applications that are specifically designed for the property and casualty insurance
ecosystem. We utilize Exzeo's internally developed software technologies to identify profitable underwriting opportunities, drive efficiency in claim
processing and settlements, and streamline operations across our insurance operations and other insurance-related businesses.
We also provide attorney-in-fact (“AIF”) services for reciprocal insurance exchanges owned by their policyholders. Although we do not have any equity
interest in the reciprocal insurance exchanges, we are required to consolidate them as their primary beneficiary. In addition, we have a commercial real
estate group that is primarily engaged in the business of developing and operating commercial properties for investment purposes or for our own use.
Formation and Key Business Developments
HCI Group, Inc. was incorporated in the State of Florida in 2006 and our common stock is currently listed on the New York Stock Exchange (“NYSE”)
under the symbol “HCI.”
The following highlights key updates to our business over the past three years:
•
February 2024 – Condo Owners Reciprocal Exchange (“CORE”), a consolidated reciprocal insurance exchange which provides commercial
residential multiple peril insurance, commenced business operations.
•
July 2024 – TypTap Insurance Company (“TTIC”), a property and casualty insurance carrier subsidiary, was transferred from Exzeo to HCI
Group, Inc. This organizational change was implemented to align all insurance operations under a single operating structure within HCI
Group, Inc., allowing Exzeo to primarily focus on its industry-leading technology and insurance management activities as an insurance
solutions provider.
•
February 2025 – Tailrow Insurance Exchange (“Tailrow”), a consolidated reciprocal insurance exchange which specializes in fire and
homeowners multiple peril insurance, commenced business operations.
•
November 2025 – Exzeo completed its initial public offering and its common stock is currently listed on the NYSE under the symbol
“XZO.” The initial public offering was completed to position Exzeo for future growth and to provide technology-based services and solutions
to unaffiliated insurance carriers. As of December 31, 2025, we owned approximately 82.5% of Exzeo's outstanding shares of common stock,
inclusive of unvested restricted stock. Accordingly, Exzeo remains a consolidated, majority-owned, subsidiary of HCI Group, Inc.
Segment and Geographic Information
We identify our segments based on the manner in which our Chief Executive Officer, who is the chief operating decision maker, evaluates performance and
makes decisions regarding the allocation of resources. The determination of segments may change over time due to changes in operational emphasis,
revenue, and results of operations. Where applicable, prior periods have been retrospectively adjusted to reflect our current operating and reportable
segment structure. The entirety of our revenue is generated in the U.S. and predominately in the State of Florida.
We have five reportable segments:
a)
Insurance Operations
b)
Exzeo
c)
Reciprocal Exchange Operations
d)
Real Estate
e)
Corporate and Other
Refer to Note 15 “Segment Information” to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
4
Insurance Operations
We currently have two operating property and casualty insurance subsidiaries: Homeowners Choice Property & Casualty Insurance Company, Inc.
(“HCPCI”) and TTIC. We provide various homeowners’ property and casualty insurance products for properties located in the State of Florida, which is
our primary market, as well as in other states in the northeast and southeast regions of the U.S. A third insurance subsidiary, perRisk Insurance Company,
has not yet commenced its surplus lines insurance business. We utilize Exzeo's internally developed software technologies to identify profitable
underwriting opportunities, drive efficiency in claim processing and settlements, and streamline operations across our insurance operations and other
insurance-related businesses. Additionally, we have a wholly-owned Bermuda domiciled captive reinsurance subsidiary which allows us to selectively
retain risk and reduce the cost of third party reinsurance. Currently, we do not provide reinsurance to non-affiliates. Other auxiliary insurance-related
operations include claim adjusting and processing services.
Property and Casualty Insurance
The property and casualty insurance industry is large, fragmented, highly regulated, and complex. Property and casualty insurance protects policyholders
against a range of losses on items of value, including homes and commercial property, as well as from unforeseen events including natural disaster,
litigation, and bodily injury. Property and casualty insurance is pervasive and purchased by nearly all businesses and individuals. While some types of
property and casualty insurance are optional, others such as homeowners’ insurance, are often obligatory (e.g. required by mortgage financing). The
property and casualty insurance industry is highly competitive and carriers compete primarily on (i) product differentiation, (ii) pricing, (iii) customer
service and experience, (iv) marketing and advertising, and (v) affiliate programs and channel strategies. We face competition from national, regional and
residual market insurance companies. We may also face competition from new entrants in our markets, and such entrants may create pricing pressure that
could lead to overall premium reductions.
Our general operating and growth strategies are to continually optimize our existing book of insurance business, organically expand our insurance business,
manage our costs and expenses, diversify our business operations, develop and deploy new technologies to streamline operational processes, and maintain a
strong balance sheet so we can quickly pursue accretive opportunities when they arise. Our growth strategies also include policy assumption from third-
party insurance companies with the intention of renewing and/or replacing them with our policies.
Our insurance business has grown both organically and through strategic policy assumptions, which have been a key driver of our expansion. We have
participated in legislatively mandated take-out programs, designed to reduce the state’s risk exposure by transitioning policies from Citizens Property
Insurance Corporation (“Citizens”), a Florida state supported insurer, to private insurers. We selectively pursue additional assumption opportunities with
Citizens when they align with our risk appetite and growth strategy. We also assume policies from other insurance companies in Florida and/or any other
state in which we operate.
Our competitive strategies focus on the following key areas:
•
Exceptional service – We are committed to maintaining superior service to our policyholders and agents. We leverage technology for
process improvements, including enabling faster onboarding, quoting, and service capabilities.
•
Claims settlement practices – We focus on fair and timely settlement of policyholder claims.
•
Disciplined underwriting – We analyze exposures and utilize available underwriting data to ensure policies meet our selective criteria. We
incorporate tools and processes that help streamline underwriting workflows, supporting more consistent risk evaluation and contributing
to stronger underwriting performance.
•
New product offerings – We may cross-sell additional insurance products to our existing policyholders in order to broaden our lines of
business and product mix or identify other lines of insurance to offer.
•
Effective and efficient use of technology – We strive to add or improve technology that can effectively and efficiently enhance service to
our policyholders and agents. Our primary technology applications are internally developed by Exzeo as described in further detail below.
•
Geographical expansion – We continue to pursue opportunities to further expand our business within the state of Florida and in other
states to increase overall geographic diversification.
•
Distribution channel – We continue to improve our relationship with independent agents through collaboration and implementation of
technologies that facilitate independent agents in finding the right insurance policies for their clients.
Losses and Loss Adjustment Expenses
The nature of our business is to cover losses that may arise from, among other things, hurricanes and other catastrophic events such as tornadoes, floods
and winter storms. The occurrence of any such catastrophes could have a significant adverse effect on our business, results of operations, and financial
condition. To mitigate the risk associated with catastrophic events, we purchase reinsurance from other large insurance companies. Even without
catastrophic events, we may incur losses and loss adjustment expenses that deviate substantially from our estimates and that may exceed our reserves, in
which case our net income and capital would decrease. Our
5
operating and growth strategies may also be impacted by regulation of our business by the State of Florida and other states in which we operate. For
example, insurance regulators must approve our policy forms and premium rates as well as monitor our compliance with financial and regulatory
requirements. See Item 1A, “Risk Factors,” below.
Our liability for losses and loss adjustment expenses represents our estimate of the total cost of (i) claims that have been reported, but not yet paid (“case
reserves”), (ii) losses that have been incurred but not yet reported (“IBNR”), and (iii) loss adjustment expenses (“LAE”) which are intended to cover the
ultimate cost of adjusting, investigating and settling claims, including investigation and defense of any litigation arising from such claims. We base our
estimates on various assumptions and actuarial data we believe to be reasonable under the circumstances. The process of estimating the liability is
inherently subjective and is influenced by many variables such as past loss experience, current claim trends and the prevailing social, economic and legal
environments.
Significant time can elapse between the occurrence of an insured loss, the reporting of the loss to us and our payment of that loss. Our liability for losses
and LAE, which we believe represents the best estimate at a given point in time based on facts, circumstances and historical trends then known, may
necessarily be adjusted to reflect additional facts that become available during the loss settlement period.
For a discussion and summary of the activity in the liability for losses and LAE for the years ended December 31, 2025, 2024 and 2023, see Note 13
“Losses and Loss Adjustment Expenses” to our consolidated financial statements under Item 8 of this Annual Report on Form 10-K.
Seasonality of Our Insurance Business
Our insurance business is seasonal. Hurricanes and tropical storms affecting Florida, our primary market, and other southeastern states typically occur
during the period from June 1st through November 30th of each year. Winter storms in the northeast usually occur during the period between December 1st
and March 31st of each year. In addition, our reinsurance contracts are generally effective June 1st of each year, and any variation in the cost of our
reinsurance, whether due to changes in reinsurance rates, coverage levels or changes in the total insured value of our policy base, will be reflected in our
financial results beginning June 1st of each year.
Government Regulation over Insurance Business
We are subject to the laws and regulations in any state in which we conduct our insurance business, including those applicable to managing general agent
(“MGA”) activities, as well as data privacy, cybersecurity and claims administration. The regulations cover all aspects of our business and are generally
designed to protect the interests of insurance policyholders as opposed to the interests of shareholders. Such regulations relate to a wide variety of financial
and non-financial matters including:
•
authorized lines of business;
•
capital and surplus requirements;
•
approval of allowable rates and forms;
•
approval of reinsurance contracts;
•
investment parameters;
•
underwriting limitations;
•
transactions with affiliates;
•
dividend limitations;
•
changes in control; and
•
market conduct.
Our failure to comply with certain provisions of applicable insurance laws and regulations could have a material, adverse effect on our business, results of
operations or financial condition.
6
State Licensure and Approval
All states require licensure and regulatory approval prior to the marketing of insurance products. Typically, licensure review is comprehensive and includes
a review of a company’s business plan, solvency, reinsurance, rates, and forms, the character of its officers and directors and other of its financial and non-
financial aspects. The regulatory authorities may prevent entry into a new market by not granting a license. In addition, regulatory authorities may preclude
or delay our entry into markets by disapproving or withholding approval of our product filings.
Statutory Reporting and Examination
All insurance companies must file quarterly and annual statements with certain regulatory agencies in any state in which they are licensed to transact
business and are subject to regular and special examinations by those agencies. The National Association of Insurance Commissioners mandates that all
insurance companies be examined a minimum of once every five years. However, the Florida Department of Financial Services, Office of Insurance
Regulation (“FLOIR”) has the authority to conduct an examination whenever it is deemed appropriate.
Exzeo
Exzeo provides turnkey insurance technology and operations solutions to property and casualty insurance carriers and their agents through a proprietary
platform of purpose‑built software and data analytics applications (“Exzeo Platform”). The Exzeo Platform consists of a suite of configurable applications
designed to support the core operational and administrative functions required by property and casualty insurance carriers, including quoting and
underwriting, policy administration, claims management, data reporting, and financial reporting. The Exzeo Platform enables us to deliver technology
based solutions that streamline and automate the interaction between carriers, agents, and policyholders. These applications are designed to improve
workflow efficiency, support underwriting discipline, enhance operational visibility, and enable customers to scale their businesses without significant
upfront technology investment. Exzeo currently holds insurance agency or MGA licenses in the states necessary to support their customer base as well as in
certain additional states where we maintain licenses in anticipation of future customer needs. In addition, Exzeo provides expert reinsurance placement
services to help insurance companies manage risk by acting as an intermediary between the insurance carrier and reinsurers.
The Exzeo Platform includes, but is not limited to, the following:
•
SAMSTM – Web-based system designed to automate and streamline the process of managing insurance policies
•
HarmonyTM – Next-generation policy administration platform that easily supports multiple companies and their products.
•
ClaimColonyTM – End-to-end claims management platform used by insurance companies, third-party administrators, independent adjusters
and insurance litigation services. Comprehensive policy administration platform that streamlines the entire policy lifecycle, from quoting to
binding, while offering advanced underwriting capabilities. Its intuitive design enhances user experiences, ensuring a seamless and efficient
workflow.
•
AtlasViewer® – A mapping and data visualization platform that integrates location-based data from multiple sources, providing users with a
comprehensive and tailored view of risk. By transforming data into actionable insights, AtlasViewer helps drive smarter business decisions.
In addition, AtlasViewer provides a unique, visual way to look at claims and manage the claims lifecycle, driving better efficiency and
improving operational outcomes.
Intellectual Property
The insurance technology and software industry is characterized by the existence of a large number of patents and frequent claims and related litigation
regarding patent and other intellectual property rights. Our success and ability to compete depends in part upon our ability to protect our proprietary
technology, to establish and adequately protect our intellectual property rights, and to protect against third-party claims and litigation related to intellectual
property.
To accomplish these objectives, we rely on a combination of trademark, copyright, and trade secret laws in the U.S., as well as contractual protections.
We also rely on several registered and unregistered trademarks, as well as pending applications for such registrations, in order to protect our brand in the
U.S.
7
We also seek to protect our intellectual property rights by entering into confidentiality and invention assignment agreements with our employees and
contractors, as well as confidentiality agreements with third parties.
Reciprocal Exchange Operations
Our reciprocal exchange operations relate to the insurance operations of consolidated reciprocal insurance exchanges that are owned by their policyholders.
A reciprocal insurance exchange is a policyholder-owned entity where members, known as subscribers, gain ownership by purchasing an insurance policy.
These subscribers collectively assume one another’s risks by exchanging insurance contracts, effectively acting as both insurers and insureds. The
exchanges’ operations are managed by us as part of our AIF services.
Real Estate
The Real Estate segment relates to our commercial real estate group that is primarily engaged in the business of developing and operating commercial
properties for investment purposes or for our own use.
Properties Used in Operations
Our real estate used in operations consists of an office building located in Tampa, Florida with gross area of 64,850 square feet, an office building in
Tampa, Florida with a gross area of 68,908 square feet, and an office building with gross area of approximately 12,896 square feet in Ocala, Florida.
Investment Properties
Our portfolio of investment properties includes two marinas with accompanying rental space, three retail shopping centers, two corporate office parks, and
undeveloped land which we are holding for future development opportunities. Except for the undeveloped land, we generate income from our investment
properties by leasing vacancies to unaffiliated tenants. While we intend to hold our investment properties, we would consider reasonable offers that align
with our valuation expectations.
The table below sets forth information concerning our investment properties:
Year
Property Name
Description/Location
Acquired
Tierra Verde
Specialty/marina property
Tierra Verde, Florida
2011
Treasure Island
Specialty/marina property
Treasure Island, Florida
2012
Riverview Station
Retail property
Riverview, Florida
2018
Clearwater Market
Retail property
Clearwater, Florida
2018
Westview
Development opportunity
Tampa, Florida
2019
Shops at the Grove
Retail property
Haines City, Florida
2023
Corporate Oaks
Corporate property
Tampa, Florida
2023
Carillon Park
Corporate property
St. Petersburg, Florida
2025
Corporate and Other
Corporate and Other is comprised of our holding company, HCI Group, Inc., plus other operations that do not meet the quantitative and qualitative
thresholds for a reportable segment.
We currently provide AIF services to reciprocal insurance exchange operations. Our AIF services relate to services in which we oversee the general
administration, marketing, underwriting, accounting, policy administration, claims adjusting, and information technology for the reciprocal insurance
exchanges.
8
Human Capital Management
As of December 31, 2025, we employed 594 full-time employees and 12 employees through a professional employer organization, the majority of whom
are based in Florida. None of our employees are subject to any collective bargaining agreement. We believe our relations with our employees have
generally been positive.
Work Environment
Our success depends on our ability to attract, develop, and retain talented employees across the organization. In order to attract and retain top talent, we
focus on having a diverse, inclusive, and safe work environment. We offer competitive compensation and a benefits program intended to support employee
health and financial security, including health coverage options, a 401(k) plan that includes a company match, and employer-paid short-term and long-term
disability insurance. We offer flexible work arrangements where appropriate, including remote or hybrid work options, which enable us to attract and retain
talent across multiple geographies while maintaining service quality and operational effectiveness. Most employees are shareholders of the Company and
have an equity ownership stake that is intended to align employee retention and value creation. Additionally, our Bravo program allows employees to earn
paid time off as well as cash bonuses for engaging in charitable causes, continued education and professional development activities.
We are committed to the highest standards of ethics and compliance and making sure every team member understands and embraces our core values of
ethics, integrity, and respect for others. Our code of ethics provides a framework of what is expected of our employees and fosters a culture of high
integrity and compliance. Our code of ethics is supplemented by a variety of additional policies applicable to all team members which are designed to
further foster ethical and sound business practices.
We maintain policies and procedures intended to promote a respectful workplace, including a harassment prevention policy that outlines reporting
mechanisms, investigation processes, and prohibitions against retaliation. Harassment prevention training is required for all employees.
Diversity and Inclusion
We are committed to building and sustaining a culture of inclusive diversity. Our culture aims to recognize and embrace all forms of diversity in order to
drive innovation and growth. Talent diversity starts with the recruitment and hiring process and continues through the learning, development, advancement,
and retention of employees with wide-ranging backgrounds and experiences. We believe that a workforce with varied backgrounds and experiences
contributes to organizational effectiveness. Our workforce reflects a range of backgrounds, experiences, and professional expertise. We prohibit
discrimination based on legally protected characteristics and seek to maintain an environment that supports respectful communication and collaboration.
Health, Wellness, and Engagement
We consider employee health, safety, and engagement to be important to our operations. We periodically review our policies and programs related to
employee wellness, safety, and professional development. These programs include benefits and wellness offerings intended to support employee
engagement and retention.
We support professional development through training opportunities, including virtual skill-building workshops and growth opportunities for employees in
remote or hybrid roles. We utilize a structured in-person collaboration model, under which employees are expected to work onsite on designated
collaboration days to support teamwork, communication, and operational effectiveness.
Environmental, Social and Governance Considerations
Environmental and social considerations are integrated into our long-term strategy and our enterprise risk management processes. Our Sustainability
Committee, established by the Board of Directors (the “Board”) and operating under a written charter, provides oversight of material environmental, social,
and other sustainability matters. Management regularly reports to the Committee on initiatives, key metrics, and developments affecting the Company.
During the year, we continue evaluating potential impacts of environmental regulations, climate-related risks, workforce dynamics, and community
engagement efforts on our operations and financial performance. These activities are intended to support operational efficiency, risk mitigation, and long-
term value creation. Additional details regarding the Sustainability Committee and its charter are available on our website at www.hcigroup.com under
“Investors” and “Governance.” Forward‑looking statements about our sustainability efforts are subject to the cautionary factors described under “Risk
Factors.”
As a property owner, we are subject to regulations under various federal, state, and local laws concerning the environment, including laws addressing the
discharge of pollutants into the air and water and the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites.
9
Available Information
Availability of SEC Reports
Our website is located at https://www.hcigroup.com. Our investor relations website is located at https://investors.hcigroup.com. We make available free of
charge on our investor relations website under “Financials” our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K, reports filed pursuant to Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”), other Securities and Exchange Commission
(“SEC”) filings, and any amendments to those reports that are filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file or furnish such materials to the SEC. The SEC maintains a website that contains reports, proxy and
information statements, and other information regarding our filings at https://www.sec.gov.
Use of Website to Provide Information
From time to time, we have used, and expect in the future to use, our website as a means of disclosing material information to the public in a broad, non-
exclusionary manner, including for purposes of the SEC’s Regulation Fair Disclosure (Reg FD). Financial and other material information regarding the
Company is routinely posted on our website and accessible at https://investors.hcigroup.com. In order to receive notifications regarding new postings to our
website, investors are encouraged to enroll on our website to receive automatic email alerts. None of the information on our website is incorporated into
this Annual Report.
Refer to Exzeo's website at www.exzeo.com and its filings with the SEC for additional information and reporting for Exzeo.
ITEM 1A – Risk Factors
Our business is subject to a number of risks, including those described below, which could have a material effect on our results of operations, financial
condition or liquidity and could cause our operating results to vary significantly from period to period.
Business and operational risks
Our historical revenue growth was derived primarily through policy assumptions and acquisitions. We cannot guarantee that future policy assumptions
and acquisitions will be available to the extent they have in the past.
A substantial portion of our historical revenue has been generated from policies assumed from Citizens and other insurance companies, our acquisition of
policies from several Florida insurance companies, and subsequent renewals of these policies. Our ability to grow our premium base may depend upon the
availability of future policy assumptions and acquisitions upon acceptable terms. We cannot provide assurance that such opportunities will arise in the
future.
Although we have begun providing insurance services in other states, our insurance business is primarily in Florida. Thus, any catastrophic event or
other condition affecting losses in Florida could adversely affect our financial condition and results of operations.
Any catastrophic event, a destructive weather pattern, a general economic trend, regulatory developments or other conditions specifically affecting the state
of Florida could have a disproportionately adverse impact on our business, financial condition, and results of operations. While we actively manage our
exposure to catastrophic events through our underwriting process and the purchase of reinsurance, the fact that our business is concentrated in the state of
Florida subjects it to increased exposure to certain catastrophic events and destructive weather patterns such as hurricanes, tropical storms, and tornadoes.
Changes in the prevailing regulatory, legal, economic, political, demographic and competitive environment, and other conditions in the state of Florida
could also make it less attractive for us to do business in Florida and would have a more pronounced effect on our business than it would on other insurance
companies that are more geographically diversified. Since our business is concentrated in this manner, the occurrence of one or more catastrophic events or
other conditions affecting losses in the state of Florida could have an adverse effect on our business, financial condition, and/or results of operations.
Our results may fluctuate based on many factors including cyclical changes in the insurance industry.
The insurance industry historically has been cyclical, characterized by periods of intense price competition due to excessive underwriting capacity, as well
as periods when shortages of capacity permitted an increase in pricing and, thus, more favorable underwriting profits. As premium levels increase, there
may be new entrants to the market, which could subsequently lead to a decrease in premium levels. Any of these factors could lead to a significant
reduction in premium rates in future periods, less favorable policy terms and fewer opportunities to underwrite insurance risks, which could have a
material, adverse effect on our results of operations and cash flows. In addition to these considerations, changes in the frequency and severity of losses
suffered by insureds and insurers may affect the cycles of the insurance business significantly.
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We cannot predict whether market conditions will improve, remain constant or deteriorate. Negative market conditions may impair our ability to write
insurance at rates that we consider appropriate relative to the risk assumed. If we cannot write insurance at appropriate rates, our business would be
materially and adversely affected.
We rely on highly skilled and experienced personnel and if we are unable to attract, retain or motivate key personnel or hire qualified personnel, our
business may be seriously harmed. In addition, the loss of our Chief Executive Officer or other key senior management personnel could harm our
business and future prospects.
Our performance largely depends on the talents and efforts of highly-skilled and experienced individuals. Our future success depends on our continuing
ability to identify, hire, develop, motivate and retain highly skilled and experienced personnel and, if we are unable to hire and train a sufficient number of
qualified employees for any reason, we may not be able to maintain or implement our current initiatives or grow, or our business may contract and we may
lose market share. Moreover, certain of our competitors or other insurance or technology businesses may seek to hire our employees. We cannot assure you
that we will provide adequate incentives to attract, retain and motivate employees in the future. If we do not succeed in attracting, retaining and motivating
highly qualified personnel, our business may be seriously harmed.
Our operations are highly dependent on the efforts of our senior executive officers, particularly our Chief Executive Officer, Paresh Patel, as well as our
Chief Operating Officer, Karin Coleman, our Chief Financial Officer, Mark Harmsworth, and the president of our real estate division, Anthony Saravanos.
The loss of their leadership, industry knowledge and experience could negatively impact our operations. However, we have management succession plans
to lessen any such negative impact. We maintain key-man life insurance on Mr. Patel although such policy may be insufficient to cover the damage
resulting from the loss of Mr. Patel’s services.
Our information technology systems may fail or be disrupted, which could adversely affect our business.
Our insurance business is highly dependent upon the successful and uninterrupted functioning of our computer and data processing systems. We rely on
these systems to perform underwriting and other modeling functions necessary for writing business, as well as to handle our policy administration process
(i.e., the printing and mailing of our policies, endorsements, renewal notices, etc.). The failure or disruption of these systems could interrupt our operations
and result in a material, adverse effect on our business.
The growth of our insurance business is dependent upon the successful development and implementation of advanced computer and data processing
systems as well as the development and deployment of new information technologies to streamline our operations, including policy underwriting,
production and administration and claim processing. The failure of these systems to function as planned could slow our growth and adversely affect our
future business volume and results of operations. Additionally, our computer and data processing systems could become obsolete or could cease to provide
a competitive advantage in policy underwriting, production and administration and claim processing which could negatively affect our future results of
operations.
We conduct our business primarily from offices located in Tampa, Florida where tropical storms could damage our facilities or interrupt our power supply.
We currently provide a hybrid work from home strategy for a majority of our workforce. This availability is provided through our highly available
redundant cloud infrastructure. The loss or significant impairment of functionality in these facilities for any reason could have a material, adverse effect on
our business. We believe this hybrid work strategy and redundant cloud infrastructure provides sufficient redundancies to replace our facilities if
functionality is impaired. We contract with a third-party vendor to maintain complete daily backups of our systems, which are stored at the vendor’s facility
in Atlanta, Georgia. We additionally use industry leading internet cloud infrastructure providers to host some of our data processing systems. These cloud
providers ensure redundancy across geographic regions with additional daily system backups. Access to these databases and hosted environments is strictly
controlled and limited to authorized personnel. In the event of a disaster causing a complete loss of functionality at our Tampa locations, we plan to use our
alternative office in Ocala, Florida temporarily to continue our operations.
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Increased competition, competitive pressures, industry developments, and market conditions could affect the growth of our business and adversely
impact our financial results.
The property and casualty insurance industry is cyclical and highly competitive. We compete not only with other stock companies but also with mutual
companies, other underwriting organizations and alternative risk-sharing mechanisms. Our principal lines of business are written by numerous other
insurance companies. Competition for any one account may come from very large, well-established national companies, smaller regional companies, other
specialty insurers in our field, and new entrants to the market. Many of these competitors have greater financial resources, larger agency networks and
greater name recognition than our company. Additionally, our competitors may merge or acquire one another and further increase their combined financial
resources and agency networks. We compete for business not only on the basis of price, but also on the basis of financial strength, types of coverage
offered, availability of coverage desired by customers, commission structure, and quality of service. We may have difficulty continuing to compete
successfully on any of these bases in the future. Competitive pressures coupled with market conditions may affect our rate of premium growth and financial
results.
HCPCI and TTIC have each obtained a Demotech rating of “A Exceptional,” which is accepted by major mortgage companies operating in the state of
Florida and many other states. Mortgage companies may require homeowners to obtain property insurance from an insurance company with an acceptable
A.M. Best rating, which none of our insurance subsidiaries currently have. Such a requirement could prevent us from expanding our business unless we
obtain such rating, which may in turn limit our ability to compete with large, national insurance companies and certain regional insurance companies. A
downgrade or loss of our Demotech rating could result in a substantial loss of business in the event insureds move their business to insurers with a
sufficient financial strength rating. A credit rating downgrade could also result in a significant reduction in the number of policies that our agency networks
can sell.
There are inherent limitations and risks related to our projections and our estimates of claims and loss reserves. If our actual losses exceed our loss reserves,
our financial results, our ability to expand our business, and our ability to compete in the property and casualty insurance industry may be negatively
affected. In addition, industry developments could further increase competition in our industry. These developments could include:
•
an influx of new capital in the marketplace as existing companies attempt to expand their businesses and new companies attempt to enter
the insurance business because of better pricing and/or terms;
•
new programs or changes to existing programs in which federally or state-sponsored entities provide property insurance in catastrophe-
prone areas or other alternative markets;
•
changes in Florida’s or any other states’ regulatory climate; and
•
the enactment of federal proposals for an optional federal charter that would allow some competing insurers to operate under regulations
different or less stringent than those applicable to our insurance subsidiaries.
These developments and others could make the property and casualty insurance marketplace more competitive by increasing the supply of insurance
available.
If competition limits our ability to write new business at adequate rates, our future results of operations would be adversely affected.
Our interests may conflict with the interests of Exzeo and the interests of Exzeo’s other stockholders. Certain conflicts of interest between Exzeo and us
could be resolved in a manner unfavorable to us.
Various conflicts of interest between us and Exzeo could arise. Our interests as Exzeo’s controlling stockholder may differ from Exzeo’s interests or those
of its other stockholders. Additionally, ownership interests of our CEO and chairman of our board of directors, Paresh Patel, in our common stock and in
the stock of Exzeo, or his service as a director and officer of both companies, could create or appear to create potential conflicts of interest when he is faced
with decisions relating to us or business. These decisions could include:
•
corporate opportunities;
•
the impact that operating decisions for our business may have on Exzeo’s Consolidated Financial Statements;
•
differences in tax positions between Exzeo and us;
•
future, potential commercial arrangements between Exzeo and us (or our affiliates) or between Exzeo and third parties;
•
business combinations involving Exzeo;
•
our dividend policy;
•
management stock ownership; and
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•
the intercompany agreements between Exzeo and us (or our affiliates).
Furthermore, disputes may arise between Exzeo and us (or our affiliates) relating to our past, ongoing or future relationships and commercial arrangements
and these potential conflicts of interest may make it more difficult for us to favorably resolve such disputes, including those related to:
•
the nature, quality, and pricing of services Exzeo agrees to provide to us (and/or our affiliates);
•
the nature, quality, and pricing of services we agree to provide to Exzeo;
•
sales or other disposals by us of all or a portion of our ownership interest in Exzeo; and
•
business combinations involving Exzeo.
We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable to us than if we were dealing with an
unaffiliated party.
We may not achieve some or all of the anticipated benefits of Exzeo being a standalone public company, which could negatively impact our business,
financial condition and results of operation.
•
We may not be able to achieve all of the anticipated strategic and financial benefits expected as a result of Exzeo being a standalone public
company, or such benefits may be delayed or not occur at all. These anticipated benefits include the following:
•
allowing investors to evaluate the distinct merits, performance and future prospects of the Exzeo business, independent of our other
businesses;
•
enhancing Exzeo’s ability to focus on its own operating priorities, strategies and specific market dynamics;
•
improving Exzeo’s strategic and operational flexibility, allowing Exzeo to better target innovation and respond more effectively to
different customer needs and the competitive environment for its business;
•
allowing Exzeo to adopt a capital structure better suited to its financial profile and business needs, without competing for capital with our
other businesses;
•
creating an independent equity structure that will facilitate Exzeo’s ability to effect future acquisitions utilizing its capital stock;
•
articulating a clear investment proposition and capital allocation policy to attract a long-term investor base aligned with Exzeo’s strategic
goals; and
•
enhancing employee hiring and retention by, among other things, improving the alignment of management and employee incentives with
performance and growth objectives of Exzeo.
We may not be able to achieve some or all of the anticipated benefits of Exzeo being a standalone public company in the time we expect, if at all, for a
variety of reasons, including management distractions and potential operational disruptions during the transition; increased exposure to market volatility,
and any such failure to achieve the anticipated benefits could adversely affect our future financial condition, results of operations and cash flows.
The consummation of the Exzeo initial public offering in November 2025 also resulted in a dilution of our economic interest in Exzeo, and as a result we
will only benefit from a portion of any profits and growth of that business, and from any dividends and other distributions from that business, if any. We
currently do not expect Exzeo to declare or pay any cash dividends, other than tax distributions and certain cash distributions related to the impact of taxes
pursuant to our tax allocation agreement among us and our subsidiaries, including Exzeo. If Exzeo discontinues the payment of, or is unable to pay, such
distributions to us, this will reduce our available liquidity. Furthermore, the terms of any indebtedness incurred by Exzeo may limit the ability of Exzeo to
pay dividends or make other distributions to us, or to amend the agreements between Exzeo and us and our other subsidiaries.
If our actual losses from claims exceed our loss reserves, our financial results would be adversely affected.
Our objective is to establish loss reserves that are adequate and represent management’s best estimate of the ultimate cost to investigate and settle each
specific claim. However, the process of establishing adequate reserves is complex and inherently uncertain, and the ultimate cost of a claim may vary
materially from the amounts reserved. We regularly monitor and evaluate loss and loss adjustment expense reserve development to determine reserve
adequacy.
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Due to these uncertainties, the ultimate losses may vary materially from current loss reserves which could have a material, adverse effect on our future
financial condition, results of operations and cash flows.
Our failure to pay claims accurately could adversely affect our insurance business, financial results and capital requirements.
We rely on our claims personnel to accurately evaluate and pay the claims made under our policies. Many factors could affect our ability to accurately
evaluate and pay claims, including the accuracy of our independent adjusters as they make their assessments and submit their estimates of damages; the
training, background, and experience of our claims representatives; the ability of our claims personnel to ensure consistent claims processing given the
input by our independent adjusters; the ability of our claims department to translate the information provided by our independent adjusters into acceptable
claims settlements; and the ability of our claims personnel to maintain and update our claims processing procedures and systems as they evolve over time
based on claims and geographical trends in claims reporting. Any failure to pay claims accurately could lead to material litigation, undermine our
reputation in the marketplace, impair our corporate image and negatively affect our financial results.
The effects of emerging claim and coverage issues on our business are uncertain.
As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and
coverage may emerge. These issues may adversely affect our business by either extending coverage beyond our underwriting intent or by increasing the
number or size of claims. In some instances, these changes may not become apparent until sometime after we have issued insurance contracts that are
affected by the changes. As a result, the full extent of liability under our insurance contracts may not be known for many years after a contract is issued and
renewed, and our financial position and results of operations may be adversely affected as a result of any such unforeseen changes.
Failure to maintain our risk-based capital at the required levels could adversely affect our ability to maintain regulatory authority to conduct our
business.
Our insurance subsidiaries are required to have sufficient capital and surplus in order to comply with insurance regulatory requirements, support our
business operations and minimize our risk of insolvency. Failure to maintain adequate risk-based capital at the required levels could result in increasingly
onerous reporting and examination requirements and could adversely affect our ability to maintain regulatory authority to conduct our business.
If we are unable to expand our business because our capital must be used to pay greater than anticipated claims, our financial results may suffer.
Our future growth will depend on our ability to expand the number of insurance policies we write, to expand the kinds of insurance products we offer, and
to expand the geographic markets in which we do business, all balanced by the insurance risks we choose to write and cede. Our existing sources of funds
include operations, investment holdings, and a bank credit facility. Unexpected catastrophic events in our market areas, such as hurricanes, may result in
greater claims losses than anticipated, which could require us to limit or halt our growth while we redeploy our capital to pay these unanticipated claims
unless we can raise additional capital.
Reinsurance coverage may not be available to us in the future at commercially reasonable rates or at all and we risk non-collectability of reinsurance
amounts due us from reinsurers with which we have contracted.
Reinsurance is a method of transferring part of an insurance company’s liability under an insurance policy to another insurance company, or reinsurer. We
use reinsurance arrangements to limit and manage the amount of risk we retain, to stabilize our underwriting results and to increase our underwriting
capacity. The cost of such reinsurance is subject to prevailing market conditions beyond our control, such as the amount of capital in the reinsurance market
and the occurrence of natural and man-made catastrophes. We cannot be assured that reinsurance will remain continuously available to us in the amounts
we consider sufficient and at prices acceptable to us. As a result, we may determine to increase the amount of risk we retain or look for other alternatives to
reinsurance, which could in turn have a material, adverse effect on our financial position, results of operations and cash flows.
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With respect to the reinsurance contracts we currently have in effect, our ability to recover amounts due from reinsurers is subject to such reinsurers’ ability
and willingness to pay and to meet their obligations to us. We attempt to select financially strong reinsurers with an A.M. Best rating of “A-” or better or
we require the reinsurer to fully collateralize its exposure. While we monitor from time to time the financial condition of our reinsurers, we rely principally
on A.M. Best, our reinsurance broker, and other rating agencies in determining their ability to meet their obligations to us. Any failure on the part of any
one reinsurance company to meet its obligations to us could have a material, adverse effect on our financial condition or results of operations.
The failure of the risk mitigation strategies we utilize could have a material, adverse effect on our financial condition or results of operations.
We utilize a number of strategies to mitigate risk exposure within our insurance business, which include:
•
engaging in vigorous underwriting;
•
carefully evaluating terms and conditions of our policies;
•
focusing on our risk aggregations by geographic zones and other bases; and
•
ceding insurance risk to reinsurance companies.
However, there are inherent limitations in these strategies. We cannot provide assurance that an unanticipated event or series of events will not result in loss
levels which could have a material, adverse effect on our financial condition or results of operations.
The failure of any of the loss limitation methods we employ could have a material, adverse effect on our financial condition or our results of
operations.
Our insurance underwriting process is generally designed to limit our exposure to known and manageable risks. Various provisions of our policies, such as
limitations or exclusions from coverage, which have been negotiated to limit our risks, may not be enforceable in the manner we intend.
In addition, the policies we issue contain conditions requiring the prompt reporting of claims to us and our right to decline coverage in the event of a
violation of that condition. While our insurance product exclusions and limitations reduce the loss exposure to us and help eliminate known exposures to
certain risks, it is possible that a court or regulatory authority could nullify or void an exclusion or legislation could be enacted modifying or barring the use
of such endorsements and limitations in a way that would adversely affect our loss experience, which changes could have a material, adverse effect on our
financial condition or results of operations.
If our customers were to claim that the policies they purchased failed to provide adequate or appropriate coverage, we could face claims that could
harm our business, results of operations and financial condition.
Although we aim to provide adequate and appropriate coverage under each of our policies, customers could purchase policies that prove to be inadequate or
inappropriate. If such customers were to bring a claim or claims alleging that we failed in our responsibilities to provide them with the type or amount of
coverage that they sought to purchase, we could be found liable for amounts significantly in excess of the policy limit, resulting in an adverse effect on our
business, results of operations and financial condition. While we maintain errors and omissions insurance coverage to protect us against such liability, such
coverage may be insufficient or inadequate.
Now and in the future, we may rely on independent agents to write our insurance policies, and if we are not able to contract with and retain
independent agents, our revenues would be negatively affected.
We must compete with other insurers for independent agents’ business. Our competitors may offer a greater variety of insurance products, lower premiums
for insurance coverage, or higher commissions to their agents. If our products, pricing and commissions do not remain competitive, we may find it more
difficult to attract business from independent agents to sell our products. A material reduction in the amount of our products that independent agents sell
could negatively affect our revenues.
Our success depends on our ability to accurately price the risks we underwrite.
The results of our operations and our financial condition depend on our ability to underwrite and set premium rates accurately for a wide variety of risks
and other new product offerings. Rate adequacy is necessary to generate sufficient premiums to pay losses, loss adjustment expenses, and underwriting
expenses and to earn a profit. To price our products accurately, we must collect and properly analyze a substantial amount of data; develop, test and apply
appropriate rating formulas; closely monitor and timely recognize changes in trends; and project both severity and frequency of losses with reasonable
accuracy. Our ability to undertake these efforts successfully, and thus, price our products accurately, is subject to several risks and uncertainties, some of
which are outside of our control, including:
•
the availability of sufficient reliable data;
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•
the uncertainties that inherently characterize estimates and assumptions;
•
our selection and application of appropriate rating and pricing techniques;
•
changes in legal standards, claim settlement practices, and restoration costs; and
•
legislatively imposed consumer initiatives.
In addition, we could underprice risks, which would negatively affect our profit margins. We could also overprice risks, which could reduce our retention,
sales volume and competitiveness. The foregoing factors could materially and adversely affect our profitability.
Our foreign operations expose us to additional risks, which could negatively impact our business, operating results, and financial condition.
Our foreign operations, in countries such as India and Bermuda, expose us to additional risks including income tax risks, currency exchange rate
fluctuations and risks related to other challenges caused by distance, language, and compliance with foreign labor laws and other complex foreign and U.S.
laws and regulations that apply to our foreign operations. These numerous and sometimes conflicting laws and regulations include anti-corruption laws,
such as the Foreign Corrupt Practices Act, and other local laws prohibiting corrupt payments to governmental officials, among others. Violations of these
laws and regulations could result in fines and penalties, or criminal sanctions against us, our officers, or our employees. Although policies and procedures
are designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, or agents will not violate our
policies.
Our acquired renewal rights intangible assets can be subject to impairment charges which can adversely affect our financial results.
We evaluate our renewal rights intangible assets when impairment indicators are present to determine if there has been any impairment in their carrying
value. If we determine an impairment has occurred, we are required to record an impairment charge equal to the excess of the asset’s carrying value over its
estimated fair value. The assumptions underlying our fair value estimates are subject to uncertainties including, but not limited to, policy attrition rates,
changes in premium rates, marketplace competition, policyholder behavior, and regulatory changes. As these factors are difficult to predict and are subject
to future events that may alter our assumptions, the future cash flows estimated in our impairment analysis may materially differ from our actual results.
The insolvency and receivership of United Property & Casualty Insurance Company could adversely affect our financial results.
In 2023, United Property & Casualty Insurance Company (“United”), an insurer for which we provided reinsurance, was placed into receivership by the
State of Florida due to its financial insolvency. As a result, our agreements with United were terminated. Although there have been withdrawals from funds
held in trust in settlement for claims and claims processing services, we cannot predict the actions a receiver might take with regards to restrictions on, or
use of, funds held in trust. Any such actions could have a material adverse effect on our financial position and results of operations.
Any lack of business or financial success by a reciprocal insurance exchange we manage could diminish our expected management fee revenue and
damage our business reputation.
The reciprocal insurance exchanges, which we manage, may enter into the business of providing certain insurance coverage, a product and market which is
new to us and for which we have limited experience. In managing this business, we could encounter unexpected challenges, including, for example,
challenges in accurately assessing risk, determining appropriate pricing, and establishing adequate reserves. Although our risk of loss in connection with
the reciprocal insurance exchanges is currently limited to the surplus notes, any lack of business or financial success could not only diminish the
management fee revenue we expect to generate from that enterprise, but also damage our insurance management reputation and consequently diminish
opportunities to generate management fee revenue from future similar enterprises as well as diminish the value of the overall HCI enterprise.
Financial risks
HCI Group, Inc. depends on the ability of its subsidiaries to generate and transfer funds to meet its debt obligations.
HCI Group, Inc. does not have significant revenue-generating operations of its own. Our ability to make scheduled payments on our debt obligations
depends on the financial condition and operating performance of our subsidiaries. If the funds we receive from our subsidiaries, some of which are subject
to regulatory restrictions on the payment of distributions, are insufficient to meet our debt obligations, we may be required to raise funds through the
issuance of additional debt or equity securities, reduce or suspend dividend payments, or sell assets.
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We may require additional capital in the future which may not be available or may only be available on unfavorable terms.
Our future capital requirements depend on many factors, including our ability to write new business successfully and to establish premium rates and
reserves at levels sufficient to cover losses. To the extent that our present capital is insufficient to meet future operating requirements or to cover losses, we
may need to raise additional funds through financings or curtail our growth. Based on our current operating plan, we believe current capital together with
our anticipated retained income will support our operations. However, we cannot provide any assurance in that regard, since many factors will affect our
capital needs and their amount and timing, including our growth and profitability, and the availability of reinsurance, as well as possible acquisition
opportunities, market disruptions and other unforeseeable developments. If we require additional capital, it is possible that equity or debt financing may not
be available at all or may be available only on terms unfavorable to us. Equity financings could result in dilution to our shareholders, and in any case such
securities may have rights, preferences and privileges that are senior to those of existing shareholders. If we cannot obtain adequate capital on favorable
terms or at all, our business, financial condition or results of operations could be materially affected.
Our credit agreement contains restrictions that can limit our flexibility in operating our business.
The agreement governing our revolving credit facility contains various covenants that limit our ability to engage in certain transactions. These covenants
limit our and our subsidiaries’ ability to, among other things:
•
incur additional indebtedness;
•
declare or make any restricted payments;
•
create liens on any of our assets now owned or hereafter acquired;
•
consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets now owned or hereafter acquired; and
•
enter into certain transactions with our affiliates.
An increase in interest rates may negatively impact our operating results and financial condition.
Borrowings under our revolving credit facility have a variable rate of interest. An increase in interest rate would have a negative impact on our results of
operations attributable to increased interest expense.
Investment risks
There may be limited markets for and restrictions on certain holdings in our investment portfolio.
Certain holdings in our investment portfolio include limited partnership interests and commercial real estate. We may increase our holdings in these types
of investments as we pursue further diversification. These investments may be illiquid in the near term as they are privately placed and are subject to
certain restrictions or conditions that may limit our ability to immediately dispose of the investments. If it becomes necessary to sell any of these
investments at a time when the fair market value is below our carrying value, we may incur significant losses which could have a material adverse effect on
our net income and financial position.
Our financial results may be negatively affected by the fact that a portion of our income is generated by the investment of our available cash.
A portion of our income is, and likely will continue to be, generated by the investment of our available cash. The amount of income so generated is a
function of our investment policy, available investment opportunities, and the amount of available cash invested. Fluctuating interest rates and other
economic factors make it difficult to estimate accurately the amount of investment income that will be realized. In fact, we have realized and may in the
future realize losses on sales of our investments as well as credit losses on our investment holdings. Any unfavorable change to the fair value of our equity
securities will also impact our financial results.
Our revenue from real estate investments may be affected by the success and economic viability of our anchor retail tenants. Our reliance on a single
or significant tenant at certain properties may impact our ability to lease vacated space and adversely affect returns on the specific property.
At certain retail centers, we may have tenants, commonly referred to as anchor tenants, occupying all or a large portion of the gross leasable space. In the
event an anchor tenant becomes insolvent, suffers a downturn in business, ceases its operations at the retail center, or otherwise determines not to renew its
lease, any reduction or cessation of rental payments to us could adversely affect the returns on our real estate investments. A lease termination or cessation
of operations by an anchor tenant could also lead to the loss of other tenants at the specific retail location. We may then incur additional expenses to make
improvements and prepare the vacated space to be leased to one or more new tenants.
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Similarly, the leases of some anchor tenants may permit the anchor tenant to transfer its lease to another retailer. The transfer to a new anchor tenant could
cause customer traffic in the retail center to decrease and thereby reduce the income generated by that retail center. A lease transfer to a new anchor tenant
could also allow other tenants to make reduced rental payments or to terminate their leases.
Our retail and other real estate properties may be subject to impairment charges which can adversely affect our financial results.
We periodically evaluate our long-lived assets and related intangible assets to determine if there has been any impairment in their carrying values. If we
determine an impairment has occurred, we are required to record an impairment charge equal to the excess of the asset’s carrying value over its estimated
fair value. As our real estate operations grow, there is an increased potential that the impairment of an asset could have a material adverse effect on our
financial results. In addition, our fair value estimates are based on several assumptions that are subject to economic and market uncertainties including, but
not limited to, demand for space, competition for tenants, changes in market rental rates and costs to operate each property. As these factors are difficult to
predict and are subject to future events that may alter our assumptions, the future cash flows estimated in our impairment analysis may not be achieved.
Our ongoing investments in real estate and information technology businesses have inherent risks and could burden our financial and human
resources.
We have invested and expect to continue to invest in real estate and information technology. Despite our due diligence, these investments may still involve
significant risks and uncertainties, including distraction of management and employees from current operations, insufficient revenues to offset liabilities
assumed and incurred expenses, inadequate return of capital, and failure to realize the anticipated benefits. There can be no assurance that such investments
will be successful and will not adversely affect our financial condition and operating results.
Legal and regulatory risks
Industry trends, such as litigation against the insurance industry and individual insurers, the willingness of courts to expand covered causes of loss,
rising jury awards, and the escalation of loss severity may contribute to increased costs and to the deterioration of the reserves of our insurance
subsidiaries.
Loss severity in the property and casualty insurance industry may increase and may be driven by larger court judgments. In the event legal actions and
proceedings are brought on behalf of classes of complainants, this may increase the size of judgments. The propensity of policyholders and third party
claimants to litigate and the willingness of courts to expand causes of loss and the size of awards may render our loss reserves inadequate for current and
future losses.
As an insurance holding company, we are currently subject to state regulation and in the future may become subject to federal regulation.
All states regulate insurance holding company systems. State statutes and administrative rules generally require each insurance company in the holding
company group to register with the department of insurance in its state of domicile and to furnish information concerning the operations of the companies
within the holding company system that may materially affect the operations, management or financial condition of the insurers within the group. As part
of its registration, each insurance company must identify material agreements, relationships and transactions with affiliates, including without limitation,
loans, investments, asset transfers, transactions outside of the ordinary course of business, certain management, service, and cost sharing agreements,
reinsurance transactions, dividends, and consolidated tax allocation agreements.
Insurance holding company regulations generally provide that transactions between an insurance company and its affiliates must be fair and equitable,
allocated between the parties in accordance with customary accounting practices, and fully disclosed in the records of the respective parties. Many types of
transactions between an insurance company and its affiliates, such as transfers of assets among such affiliated companies, certain dividend payments from
insurance subsidiaries and certain material transactions between companies within the system may be subject to prior approval by, or prior notice to, state
regulatory authorities. If we are unable to obtain the requisite prior approval for a specific transaction, we would be precluded from taking the action, which
could adversely affect our operations. In addition, state insurance regulations also frequently impose notice or approval requirements for the acquisition of
specified levels of ownership in the insurance company or insurance holding company.
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Regulations may vary from state to state, and states occasionally may have conflicting regulations. Currently, the federal government’s role in regulating or
dictating the policies of insurance companies is limited. However, Congress, from time to time, considers proposals that would increase the role of the
federal government in insurance regulation, either in addition to or in lieu of state regulation. The impact of any future federal insurance regulation on our
insurance operations is unclear and may adversely impact our business or competitive position.
Our insurance subsidiaries are subject to extensive regulation, which may reduce our profitability or limit our growth. Moreover, if we fail to comply
with these regulations, we may be subject to penalties, including fines and suspensions, which may adversely affect our financial condition and results
of operations.
The insurance industry is highly regulated and supervised. Our insurance subsidiaries are subject to the supervision and regulation of the states in which
they are domiciled and the states in which they transact insurance business. Such supervision and regulation is primarily designed to protect our
policyholders rather than our shareholders. These regulations are generally administered by a department of insurance in each state and relate to, among
other things:
•
the content and timing of required notices and other policyholder information;
•
the amount of premiums the insurer may write in relation to its surplus;
•
the amount and nature of reinsurance a company is required to purchase;
•
participation in guaranty funds and other statutorily created markets or organizations;
•
business operations and claims practices;
•
approval of policy forms and premium rates;
•
standards of solvency, including risk-based capital measurements;
•
licensing of insurers and their products;
•
restrictions on the nature, quality and concentration of investments;
•
restrictions on the ability of insurance company subsidiaries to pay dividends to their holding companies;
•
restrictions on transactions between insurance companies and their affiliates;
•
restrictions on the size of risks insurable under a single policy;
•
requiring deposits for the benefit of policyholders;
•
requiring certain methods of accounting;
•
periodic examinations of our operations and finances;
•
the form and content of records of financial condition required to be filed; and
•
the level of reserves.
The FLOIR and regulators in other jurisdictions where we may become licensed and offer insurance products conduct periodic examinations of the affairs
of insurance companies and require the filing of annual and other reports relating to financial condition, holding company issues and other matters. These
regulatory requirements may adversely affect or inhibit our ability to achieve some or all of our business objectives. These regulatory authorities also
conduct periodic examinations into insurers’ business practices. These reviews may reveal deficiencies in our insurance operations or non-compliance with
regulatory requirements.
In certain states, including Florida, insurance companies are subject to assessments levied by the states where they conduct their business. While we can
recover these assessments from Florida policyholders through policy surcharges, our payment of the assessments and our recoveries may not offset each
other in the same reporting period in our consolidated financial statements and may cause a material, adverse effect on our cash flows and results of
operations in a particular reporting period.
In addition, regulatory authorities have relatively broad discretion to deny or revoke licenses for various reasons, including the violation of regulations. In
some instances, we follow practices based on our interpretations of regulations or practices that we believe may be generally followed by the industry.
These practices may turn out to be different from the interpretations of regulatory authorities. If we do not have the requisite licenses and approvals or do
not comply with applicable regulatory requirements, insurance regulatory authorities could preclude or temporarily suspend us from carrying on some or all
of our activities or otherwise penalize us. This could adversely affect our ability to operate our business.
19
Finally, changes in the level of regulation of the insurance industry or changes in laws or regulations themselves or interpretations by regulatory authorities
could adversely affect our ability to operate our business, reduce our profitability and limit our growth.
A regulatory environment that requires approval of rate increases and that can dictate underwriting practices and mandate participation in loss
sharing arrangements may adversely affect our results of operations and financial condition.
From time to time, political events and positions affect the insurance market, including efforts to suppress rates to a level that may not allow us to reach
targeted levels of profitability. For example, if our loss ratio compares favorably to that of the industry, state regulatory authorities may impose rate
rollbacks, require us to pay premium refunds to policyholders, or challenge or otherwise delay our efforts to raise rates even if the homeowners industry
generally is not experiencing regulatory challenges to rate increases.
In addition, certain states have enacted laws that require an insurer conducting business in that state to participate in assigned risk plans, reinsurance
facilities and joint underwriting associations. Certain states also require insurers to offer coverage to all consumers, often restricting an insurer’s ability to
charge the price it might otherwise charge. In these markets, we may be compelled to underwrite significant amounts of business at lower-than-desired
rates, possibly leading to an unacceptable return on equity. Our results of operations and financial condition could be adversely affected by any of these
factors.
Our real estate operations are subject to regulation under various federal, state, and local laws concerning the environment.
Our real estate operations own various properties including marina facilities, and commercial buildings. As a result, we are subject to regulation under
various federal, state, and local laws concerning the environment, including laws addressing the discharge of pollutants into the air and water and the
management and disposal of hazardous substances and waste and the cleanup of contaminated sites. We could incur substantial costs, including
remediation costs, fines and civil or criminal sanctions and third-party damage or personal injury claims, if in the future we were to violate or become liable
under environmental laws relating to our real estate operations.
Security and fraud risks
An unauthorized disclosure or loss of policyholder or employee information or other sensitive or confidential information, including by cyber-attack or
other security breach, could cause a loss of data, give rise to remediation or other expenses, expose us to liability under federal and state laws, and
subject us to litigation and investigations, which could have an adverse effect on our business, cash flows, financial condition and results of operations.
As part of our normal operations, we collect, process and retain certain sensitive and confidential information. We are subject to various federal and state
privacy laws and rules regarding the use and disclosure of certain sensitive or confidential information. Despite the security measures we have implemented
to help ensure data security and compliance with applicable laws and rules, which include firewalls, regular penetration testing and other measures, our
facilities and systems, and those of our third-party service providers and vendors, may be vulnerable to cyber-attacks, security breaches, acts of vandalism,
computer viruses, theft of data, misplaced or lost data, programming and human errors, physical break-ins, or other disruptions. In addition, we cannot
ensure that we will be able to identify, prevent or contain the effects of possible cyber-attacks or other cybersecurity risks in the future that may bypass our
security measures or disrupt our information technology systems or business.
Noncompliance with any privacy or security laws and regulations, or any security breach, cyber-attack or cybersecurity breach, and any incident involving
the misappropriation, loss or other unauthorized disclosure or use of, or access to, sensitive or confidential member information, could require us to expend
significant capital and other resources to continue to modify or enhance our protective measures and to remediate any damage caused by such breaches. In
addition, this could result in interruptions to our operations and damage to our reputation, and misappropriation of confidential information could also
result in regulatory enforcement actions, material fines and penalties, litigation or other liability or actions which could have a material adverse effect on
our business, cash flows, financial condition and results of operations. As the regulatory environment related to information security, data collection and
use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those
requirements could also result in additional costs.
We rely on service providers and vendors to provide certain technology, systems and services that we use in connection with various functions of our
business, including PCI DSS (Payment Card Industry Data Security Standard) compliant credit card processing, and we may entrust them with confidential
information. The information systems of our third-party service providers and vendors are also vulnerable to an increasing threat of continually evolving
cybersecurity risks. Unauthorized parties may attempt to gain access to these systems or our information through fraud or other means of deceiving our
associates, third-party service providers or vendors. Hardware, software or applications we obtain from third parties may contain defects in design or
manufacture or other problems that could unexpectedly compromise information security. The methods used to obtain unauthorized access, disable or
degrade service or sabotage systems are also constantly changing and evolving and may be difficult to anticipate or detect for long periods of time. Ever-
evolving threats mean our third-party service providers and vendors must continually evaluate and adapt their own respective systems and
20
processes, and there is no assurance that they will be adequate to safeguard against all data security breaches or misuses of data. Any future significant
compromise or breach of our data security via a third-party service provider or vendor could result in additional significant costs, lost revenues, fines,
lawsuits, and damage to our reputation. We have acquired a cybersecurity insurance policy to help mitigate any financial impact that may incur with a
breach along with the assistance for legal and/or media requirements during that time.
General risks
An overall decline in economic activity could have a material adverse effect on the financial condition and results of operations of our business.
The demand for homeowners insurance generally rises as the overall level of household income increases and generally falls as household income
decreases, affecting premiums, commissions and fees generated by our business. Some new policies may be sourced by referral sources tied to home
closing transactions, and major slowdowns in the various housing markets we serve could impact our ability to generate new business. The economic
activity that impacts homeowners insurance is most closely correlated with employment levels, corporate revenue and asset values.
Changing climate conditions could have an adverse impact on our business, results of operations or financial condition.
There is constant emerging science on climate change. Climate change may affect the frequency and severity of storms, and other weather events, and
negatively affect our business, results of operations, and/or financial condition.
We have exposure to unpredictable catastrophes, which can materially and adversely affect our financial results.
We write insurance policies that cover homeowners, condominium owners, and tenants for losses that result from, among other things, catastrophes. We are
therefore subject to losses, including claims under policies we have written, arising out of catastrophes that may have a significant effect on our business,
results of operations, and financial condition. A significant catastrophe could also have an adverse effect on our reinsurers. Catastrophes can be caused by
various events, including hurricanes, tropical storms, tornadoes, windstorms, earthquakes, hailstorms, explosions, power outages, fires, winter storms and
man-made events. The incidence and severity of catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the
total amount of insured exposure in the area affected by the event and the severity of the event. Our policyholders are currently concentrated in Florida and
the northeast and southeast regions, which are subject to adverse weather conditions such as hurricanes, tropical storms and winter storms. Therefore,
although we attempt to manage our exposure to catastrophes through our underwriting process and the purchase of reinsurance protection, an especially
severe catastrophe or series of catastrophes could exceed our reinsurance protection and may have a material, adverse impact on our results of operations
and financial condition.
ITEM 1B – Unresolved Staff Comments
Not applicable.
21
ITEM 1C – Cybersecurity
We rely on digital technology to conduct our businesses and interact with customers, policyholders, agents, and vendors. With this reliance on technology
comes the associated security risks from the use of communication technology and networks.
Risk Management and Strategy
The goal of our cybersecurity risk management strategy is to protect the privacy, integrity, and availability of our critical systems and information. Our
processes are designed to identify, assess, and manage material risks from cybersecurity threats as part of our entity-wide risk management efforts. To
safeguard our data and the data of our customers, management utilizes a multi-layered approach including the use of an external security operations center
that specializes in the detection and containment of cyber-attacks. For protection of endpoint devices connected to our network, we use third-party managed
detection and response security software. Perimeter defense technology is used to filter e-mail for threats from malware, viruses, phishing attempts, and
network firewalls are used to monitor incoming and outgoing network traffic.
Tools utilized to prevent threats include multifactor authentication, e-mail security services, mobile e-mail security policies, virtual private networks, third-
party security experts, and timely applications of software patches, among others. We conduct annual penetration testing, disaster recovery testing, internal
and external audits of our cybersecurity controls, as well as simulated cyberattack scenarios to evaluate our preparedness for these situations. Employees
are required to complete mandatory semiannual cybersecurity training and participate in periodic phishing simulations. We also maintain cyber insurance
coverage, which includes access to a cyber incident response team in the event of a cybersecurity incident.
Management of cybersecurity risks also extends to third-party service providers engaged for specialized functions. Oversight of these providers is
maintained through a third-party risk management process which includes obtaining and reviewing independent service organization audit reports on
Service Organization Controls (“SOC”) to evaluate the design and operating effectiveness of relevant controls. Certain third-party providers are monitored
and reviewed through oversight procedures performed by external service providers to assess controls related to data protection, system security, and access
management.
We respond to cybersecurity events in accordance with our Cyber Security Incident Response Plan (“CSIRP”), which follows the guidance of the National
Institute of Standards and Technology Cybersecurity Framework and provides for assessment, mitigation, and if necessary, remediation of any effects of a
system breach. We also conduct annual breach simulations with internal information technology teams to test each step of our CSIRP.
There have been no cybersecurity events in the past that have materially affected or are reasonably likely to materially affect the Company’s business
strategy, results of operations, or financial condition. Although we believe our defenses against cyber-intrusions are sufficient, we continue to update our
prevention programs to respond to sophisticated and rapidly evolving attempts to overcome our security measures. Such continuing threats could have a
variety of adverse business impacts. See Item 1A – “Risk Factors” under the heading “Security and fraud risks” above for additional information on risks
to our business from cybersecurity incidents and related matters.
Governance
Cybersecurity is a critical component of our overall risk management process. Our Board of Directors oversees our cybersecurity risk management,
including oversight of policies, processes, and material risks related to cyber security.
Responsibility for the assessment and management of cybersecurity risks resides with senior management. The members of management responsible for
managing cybersecurity threats are HCI Group’s Vice President of Information Technology and the Chief Technology Officer of Exzeo. Both the Vice
President of Information Technology and the Chief Technology Officer have extensive experience in information technology, operations, network security,
and cybersecurity risk management, including the implementation and monitoring of security controls, coordination with third-party security service
providers, and defense of computer networks against cyber intrusions. In addition, HCI Group's Director of Cybersecurity is dedicated to overseeing our
multi-layered cybersecurity defenses and leads monthly security meetings attended by information technology managers.
Day to day cybersecurity operations are supported by internal information technology personnel with experience in system security, threat monitoring,
incident detection, and response, who are responsible for implementing cyber security controls, monitoring threats and coordinating response activities.
22
Our Board receives periodic updates from management regarding cybersecurity risks, controls, and any material cybersecurity incidents. At least one
member of the Board has information technology and cybersecurity-related experience, which supports the Board's oversight of cybersecurity risk
management.
23
ITEM 2 – Properties
Real Estate Owned and Used in Operations
Tampa, Florida. Coconut Palm. The real estate consists of 10.4 acres of land and a two-story office building with gross area of approximately 64,850
square feet and currently serves as HCI Group, Inc.’s corporate headquarters.
Tampa, Florida. Century Park. The real estate consists of 6.2 acres of land and a four-story office building with gross area of approximately 68,908 square
feet and currently serves as Exzeo’s corporate headquarters. As of December 31, 2025, this property serves as collateral to a 4.55% promissory note of $4.1
million which matures in August 2036.
Ocala, Florida. Silver Springs. The real estate consists of 1.5 acres of land and a two-story office building with gross area of approximately 12,896 square
feet. The facility is 100% designated as an auxiliary office for Exzeo.
Real Estate Investments
Tierra Verde, Florida. Tierra Verde. The real estate consists of 7.1 acres of waterfront property, a dry rack storage building with gross area of 57,500
square feet, and two buildings with retail space having an aggregate gross area of approximately 23,912 square feet. This marina facility is owned and
operated by us. Approximately 6% of the available retail space is occupied as our marina office and 33% of the retail space is leased to non-affiliates. We
are currently assessing redevelopment opportunities for this property.
Treasure Island, Florida. Treasure Island. The real estate consists of approximately 9.1 acres of waterfront property, a restaurant, and a marina facility.
The marina facility is currently owned and operated by us. The restaurant facility is leased to an unrelated party that operates several restaurants in the area.
Riverview, Florida. Riverview Station. The real estate consists of 2.3 acres of land with a gas station and a retail shopping center with 12,945 of rentable
space. The entirety of this property is leased to non-affiliates.
Clearwater, Florida. Clearwater Market. The real estate consists of 6.1 acres of land and a retail shopping center with 58,692 square feet of rentable space.
The shopping center is anchored by an ALDI supermarket. Approximately 94% of the rentable space is leased to non-affiliates and the remaining space is
available for lease. As of December 31, 2025, this property serves as collateral to a 5.50% promissory note of $11.4 million which matures in July 2033.
Tampa, Florida. Westview. We own approximately 8.6 acres of undeveloped land that we acquired in February 2019.
Haines City, Florida. Shops at the Grove. The real estate consists of approximately 15.5 acres of land and a retail shopping center with 60,748 square feet
of rentable space. The shopping center is anchored by a Publix supermarket. Approximately 94% of the rentable space is leased to non-affiliates and the
remaining space is available for lease. As of December 31, 2025, this property serves as collateral to a 5.65% promissory note of $16.9 million which
matures in August 2035.
Tampa, Florida. Corporate Oaks. The real estate consists of 10.4 acres of land and three three-story office buildings with gross area of approximately
189,147 square feet. The entirety of this property is leased to the Government Employee Insurance Company (“GEICO”).
St. Petersburg, Florida. Carillon Park. The real estate consists of 12.4 acres of land and two two-story office buildings with gross area of approximately
179,723 square feet. The rentable space is unoccupied and is currently being marketed for lease to non-affiliated tenants.
Leased Property
Noida, India. We lease 15,000 square feet of office space for our information technology operations for Exzeo. The lease is scheduled to expire on January
31, 2031.
Plantation, Florida. We lease approximately 5,700 square feet of office space for our claims related administration. The lease is scheduled to expire on
May 31, 2028.
We believe all of our properties are adequate and suitable for our business and are adequately maintained.
24
ITEM 3 – Legal Proceedings
We are a party to litigation and other legal matters arising in the ordinary course of our business. From time to time, we are also subject to regulatory and
governmental examinations, information requests and subpoenas, inquiries, investigations, and threatened legal actions and proceedings. Although we
cannot predict with certainty the ultimate resolution of the litigation and other legal matters we are a party to, we do not believe that any known or potential
litigation and other legal matters will have a material, adverse effect on our consolidated financial position, results of operations, or cash flows. See Note 21
“Commitments and Contingencies” to our consolidated financial statements under Item 8 of this Annual Report on Form 10-K for additional information.
ITEM 4 – Mine Safety Disclosures
Not applicable.
25
PART II
ITEM 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock trades on the NYSE under the symbol “HCI.”
Holders
As of February 20, 2026, there were 253 holders of record of our common stock, which does not include the number of stockholders who hold our common
stock through banks, brokers, and other financial institutions.
Dividends
The declaration and payment of dividends is at the discretion of our Board. Our ability to pay dividends depends on many factors, including the Company’s
operating results, financial condition, capital requirements, the availability of cash from our subsidiaries and legal and regulatory constraints and
requirements on the payment of dividends and other factors that our Board deems relevant.
Our insurance subsidiaries are subject to restrictions on the dividends they may pay. Those restrictions could impact our ability to pay dividends in the
future.
Under Florida law, a domestic insurer may not pay any dividend or distribute cash or other property to its stockholders except out of that part of its
available and accumulated capital and surplus funds which is derived from realized net operating profits on its business and net realized capital gains.
Additionally, a Florida domestic insurer may not make dividend payments or distributions to its stockholders without prior approval of the FLOIR if the
dividend or distribution would exceed the larger of (1) the lesser of (a) 10.0% of its capital surplus or (b) net income, not including realized capital gains,
plus a two year carry forward, (2) 10.0% of capital surplus with dividends payable constrained to unassigned funds minus 25% of unrealized capital gains
or (3) the lesser of (a) 10.0% of capital surplus or (b) net investment income plus a three year carry forward with dividends payable constrained to
unassigned funds minus 25% of unrealized capital gains.
Alternatively, a Florida domestic insurer may pay a dividend or distribution without the prior written approval of the FLOIR if (1) the dividend is equal to
or less than the greater of (a) 10.0% of the insurer’s capital surplus as regards to policyholders derived from realized net operating profits on its business
and net realized capital gains or (b) the insurer’s entire net operating profits and realized net capital gains derived during the immediately preceding
calendar year, (2) the insurer will have policy holder capital surplus equal to or exceeding 115.0% of the minimum required statutory capital surplus after
the dividend or distribution, (3) the insurer files a notice of the dividend or distribution with the FLOIR at least ten business days prior to the dividend
payment or distribution and (4) the notice includes a certification by an officer of the insurer attesting that, after the payment of the dividend or distribution,
the insurer will have at least 115% of required statutory capital surplus as to policyholders. Except as provided above, a Florida domiciled insurer may only
pay a dividend or make a distribution (1) subject to prior approval by the FLOIR or (2) 30 days after the FLOIR has received notice of such dividend or
distribution and has not disapproved it within such time.
During 2025, our insurance subsidiaries paid dividends of $14.0 million to HCI.
26
Performance Graph
The following graph compares the 5-year cumulative total dollar return to shareholders on our common stock relative to the cumulative total returns of the
Russell 2000 Index and the NASDAQ Insurance Index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our
common stock and in each index on December 31, 2020 and its relative performance is tracked through December 31, 2025. The returns shown are based
on historical results and are not intended to suggest future performance.
Recent Sales of Unregistered Securities
None.
Use of Proceeds from Registered Equity Securities
None.
Issuer Purchase of Equity Securities
The number of common shares surrendered by employees to satisfy payroll tax liabilities associated with the vesting of restricted stock awards issued under
our stock-based compensation plan is summarized below:
For the Month Ended
Total Number
of Shares
Purchased
Average
Price Paid
Per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs (a)
Maximum Dollar
Value of Shares That
May Yet Be Purchased
Under The Plans
or Programs (b)
October 31, 2025
3,880 $
206.37
— $
—
November 30, 2025
— $
—
— $
—
December 31, 2025
— $
—
— $
—
3,880 $
206.37
—
27
ITEM 6 – Reserved
Not applicable.
28
ITEM 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included
elsewhere in this Annual Report on Form 10-K. This section is intended to (i) provide material information relevant to the assessment of our results of
operations and cash flows; (ii) enhance the understanding of our financial condition, changes in financial condition, and results of operations; and (iii)
discuss material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily
indicative of future performance or of future financial condition.
Included below are year-over-year comparisons between 2025 and 2024. For information on year-over-year comparisons between 2024 and 2023, refer to
Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2024 Annual Report on Form 10-K, which was
filed with the SEC on February 28, 2025.
The following discussion and analysis contains forward-looking statements about our business, operations, and financial performance based on current
plans and estimates involving risks, uncertainties, and assumptions, which could differ materially from actual results. Factors that could cause such
differences are discussed in the sections of this Annual Report titled Item 1A “Risk Factors” and “Cautionary Note Regarding Forward-Looking
Statements.”
BUSINESS AND BASIS OF PRESENTATION
We are primarily engaged in the property and casualty insurance business. We provide various homeowners’ property and casualty insurance products for
properties located in the State of Florida, which is our primary market, as well as in other states in the northeast and southeast regions of the U.S.
Our insurance operations are supported by other insurance-related subsidiaries within the consolidated group. Exzeo provides turn-key insurance
technology and operations solutions based on a proprietary platform of purpose-built software and data analytics applications that are specifically designed
for the property and casualty insurance ecosystem. We utilize Exzeo's internally developed software technologies to identify profitable underwriting
opportunities, drive efficiency in claim processing and settlements, and streamline operations across our insurance operations and other insurance-related
businesses.
We also provide AIF services for reciprocal insurance exchanges owned by their policyholders. Although we do not have any equity interest in the
reciprocal insurance exchanges, we are required to consolidate them as their primary beneficiary. In addition, we have a commercial real estate group that
is primarily engaged in the business of developing and operating commercial properties for investment purposes or for our own use.
We identify our segments based on the manner in which our Chief Executive Officer, who is the chief operating decision maker, evaluates performance and
makes decisions regarding the allocation of resources. We have five reportable segments: Insurance Operations, Exzeo, Reciprocal Exchange Operations,
Real Estate, and Corporate and Other. Due to their economic characteristics, our property and casualty insurance division and reinsurance operations,
excluding the insurance operations under Reciprocal Exchange Operations, are grouped together into one reportable segment under Insurance Operations.
The Exzeo segment includes insurance technology and operations solutions for property and casualty insurance carriers. The Reciprocal Exchange
Operations segment represents the insurance operations of consolidated reciprocal insurance exchanges that are owned by their policyholders. The Real
Estate segment relates to our commercial real estate group that is primarily engaged in the business of developing and operating commercial properties for
investment purposes or for our own use. The Corporate and Other segment represents the activities of the holding companies and any other operations that
do not meet the quantitative and qualitative thresholds for a reportable segment. The determination of segments may change over time due to changes in
operational emphasis, revenue, and results of operations. Refer to Note 15 “Segment Information” to the consolidated financial statements included in this
Annual Report on Form 10-K for additional information.
All financial information presented in this section has been prepared in U.S. dollars in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”) and includes the accounts of HCI Group, Inc. and its subsidiaries and consolidated VIEs. All intercompany
transactions have been eliminated.
FACTORS AFFECTING OPERATING RESULTS
Our general operating and growth strategies are to continually optimize our existing book of insurance business, organically expand our insurance business,
manage our costs and expenses, diversify our business operations, develop and deploy new technologies to streamline operational processes, and maintain a
strong balance sheet so we can quickly pursue accretive opportunities when they arise. Our growth strategies also include policy assumption from third-
party insurance companies with the intention of renewing and/or replacing them with our policies.
29
Our insurance business has grown both organically and through strategic policy assumptions, which have been a key driver of our expansion. We have
participated in legislatively mandated take-out programs, designed to reduce the state’s risk exposure by transitioning policies from Citizens, a Florida state
supported insurer, to private insurers. We selectively pursue additional assumption opportunities with Citizens when they align with our risk appetite and
growth strategy. We also assume policies from other insurance companies in Florida and/or any other state in which we operate.
The nature of our business is to cover losses that may arise from, among other things, hurricanes and other catastrophic events such as tornadoes, floods
and winter storms. The occurrence of any such catastrophes could have a significant adverse effect on our business, results of operations, and financial
condition. To mitigate the risk associated with catastrophic events, we purchase reinsurance from other large insurance companies. Even without
catastrophic events, we may incur losses and loss adjustment expenses that deviate substantially from our estimates and that may exceed our reserves, in
which case our net income and capital would decrease. Our operating and growth strategies may also be impacted by regulation of our business by the State
of Florida and other states in which we operate. For example, insurance regulators must approve our policy forms and premium rates as well as monitor our
compliance with financial and regulatory requirements.
Recent Events
The table below shows the number of policies and annualized gross premiums assumed from Citizens during the periods presented:
Years Ended December 31,
Policies Assumed
Annualized Gross Premiums ('000)
2025
60,820
$
216,728
2024
52,805
315,062
2023
59,860
224,789
Total
173,485
$
756,579
During 2025, approximately 33,000 policies with annualized premiums of $115.9 million assumed relate to Tailrow, which commenced operations during
2025. During 2024, approximately 700 policies with annualized premiums of $81.7 million assumed relate to CORE, which commenced operations during
2024. Both CORE and Tailrow represent consolidated reciprocal insurance exchanges that are ultimately owned by their policyholders. Accordingly, all of
the net income associated with CORE and Tailrow is included in net income attributable to noncontrolling interests.
On November 6, 2025, Exzeo closed its initial public offering, issuing 8,000,000 shares of common stock at a price of $21.00 per share for gross proceeds
of $168.0 million. Underwriting and offering costs totaled $13.2 million and were recorded as a reduction of the proceeds received. The net proceeds were
allocated as $129.2 million to additional paid-in capital and $25.5 million to noncontrolling interest on the consolidated balance sheet with no recognition
of a gain or loss on the consolidated statements of income. As of December 31, 2025, we owned approximately 82.5% of Exzeo's outstanding shares of
common stock, inclusive of unvested restricted stock. Accordingly, Exzeo remains a consolidated, majority-owned, subsidiary of HCI Group, Inc. As the
initial public offering diluted HCI's ownership of Exzeo, the amount of Exzeo's net income included in net income attributable to noncontrolling interests
will increase in subsequent periods.
On January 22, 2024, Exzeo entered into a Stock Redemption Agreement with Centerbridge which allowed Exzeo to redeem all of the Exzeo Series A
Preferred Stock held by Centerbridge. The redemption occurred prior to an optional February 26, 2025 redemption right held by Centerbridge. The
redemption totaled $100.0 million plus accrued and unpaid dividends of approximately $2.9 million. At redemption, the difference between the
consideration transferred of $102.9 million and the redemption date carrying value of $96.7 million was recorded as a deemed dividend and included in net
income attributable to redeemable noncontrolling interests. Subsequent to the redemption, there are no other transactions impacting net income attributable
to redeemable noncontrolling interests.
KEY PERFORMANCE INDICATORS
We make strategic decisions, measure our performance, evaluate our business, and identify trends in our business using certain key performance indicators,
including the operating metrics gross loss ratio, net expense ratio, and net combined ratio. Computations of our key performance indicators may not be
comparable to other similarly titled measures reported by other companies. Additionally, we compute and disclose other ratios for informational purposes
only.
Gross Loss Ratio
Gross loss ratio is defined as losses and loss adjustment expenses in relation to gross premiums earned. The gross loss ratio represents the percentage of our
premiums used to cover our losses. We use the gross loss ratio as a metric to measure and monitor our underwriting and pricing practices.
30
Gross Expense Ratio
Gross expense ratio is defined as total expenses excluding losses and loss adjustment expenses and interest expense in relation to gross premiums earned.
The gross expense ratio represents the percentage of our gross premiums used on operating expenses. We use the gross expense ratio as a metric to measure
and monitor the efficiency of our operating and overhead costs.
Net Combined Ratio
Net combined ratio is defined as total expenses excluding interest expense in relation to net premiums earned. The net combined ratio represents the
combination of the net loss ratio and net expense ratio. We use the net combined ratio as a metric to measure and monitor our overall profitability.
31
RESULTS OF OPERATIONS
The following table summarizes our results of operations for the years ended December 31, 2025, 2024 and 2023 (in thousands, except per share amounts
or as otherwise indicated):
Years Ended December 31,
2025 vs. 2024
2024 vs.
2023
2025
2024
2023
Change
Change
Revenue
Gross premiums earned
$
1,236,145 $
1,083,220 $
765,512 $
152,925
$
317,708
Premiums ceded
(414,479)
(405,659)
(269,627)
(8,820)
(136,032)
Net premiums earned
821,666
677,561
495,885
144,105
181,676
Net investment income
65,411
59,148
46,234
6,263
12,914
Net realized investment gains (losses)
2,753
3,384
(1,996)
(631)
5,380
Net unrealized investment gains
123
2,644
3,215
(2,521)
(571)
Policy fee income
6,858
4,639
4,704
2,219
(65)
Other income
4,135
2,675
2,628
1,460
47
Total revenue
900,946
750,051
550,670
150,895
199,381
Expenses
Losses and loss adjustment expenses
241,827
374,708
254,579
(132,881)
120,129
Policy acquisition and other underwriting expenses
122,426
99,402
90,822
23,024
8,580
General and administrative personnel expenses
72,125
63,152
53,868
8,973
9,284
Interest expense
9,156
13,344
11,117
(4,188)
2,227
Other operating expenses
26,082
26,018
22,634
64
3,384
Total expenses
471,616
576,624
433,020
(105,008)
143,604
Income before income taxes
429,330
173,427
117,650
255,903
55,777
Income tax expense
108,935
45,846
28,393
63,089
17,453
Net income
320,395
127,581
89,257
192,814
38,324
Net income attributable to redeemable noncontrolling
interests
—
(10,149)
(9,370)
10,149
(779)
Net income attributable to noncontrolling interests
(21,390)
(7,479)
(853)
(13,911)
(6,626)
Net income after noncontrolling interests
$
299,005 $
109,953 $
79,034 $
189,052
$
30,919
Ratios to Net Premiums Earned:
Loss Ratio
29.4%
55.3%
51.3%
(25.9)%
4.0%
Expense Ratio (excluding interest expense)
26.9%
27.8%
33.7%
(0.9)%
(5.9)%
Combined Ratio (excluding interest expense)
56.3%
83.1%
85.0%
(26.8)%
(1.9)%
Ratios to Gross Premiums Earned:
Loss Ratio
19.6%
34.6%
33.3%
(15.0)%
1.3%
Expense Ratio (excluding interest expense)
17.8%
17.4%
21.9%
0.4%
(4.5)%
Combined Ratio (excluding interest expense)
37.4%
52.0%
55.2%
(14.6)%
(3.2)%
Earnings Per Share:
Basic
$
24.58 $
10.59 $
9.13 $
13.99
$
1.46
Diluted
$
22.72 $
8.89 $
7.62 $
13.83
$
1.27
32
Comparison of the Year Ended December 31, 2025 with the Year Ended December 31, 2024
Revenue
Gross Premiums Earned increased primarily due to a higher volume of policies in force as a result of the addition of policies assumed from Citizens during
the fourth quarter of 2024, the first quarter of 2025, and the fourth quarter of 2025. During 2025, gross premiums earned were $1,145.8 million from
Insurance Operations and $95.6 million from Reciprocal Exchange Operations. During 2024, gross premiums earned were $1,036.1 million from Insurance
Operations and $51.2 million from Reciprocal Exchange Operations.
Premiums Ceded increased primarily due to growth in the volume of policies in force and total insured value, partially offset by a $62.9 million non-
recurring amount included in 2024 as a result of unfavorable adjustments related to retrospective provisions due to the effects of Hurricane Milton and
Hurricane Helene. Premiums ceded represented 33.5% and 37.5% of gross premiums earned during 2025 and 2024, respectively.
Our premiums ceded represent costs of reinsurance (i) to cover losses from catastrophes that exceed the retention levels defined by our catastrophe excess
of loss reinsurance contracts, (ii) to provide additional loss coverage on a high-value individual risk basis through facultative reinsurance, or (iii) to assume
a proportional share of losses as defined in a quota share agreement. The rates we pay for reinsurance are based primarily on policy exposures reflected in
gross premiums earned. Under contracts in effect prior to June 1, 2025, reinsurance costs could be adjusted by retrospective provisions under reinsurance
contracts. There were no adjustments to premiums ceded related to retrospective provisions during 2025 as opposed to an increase of $44.3 million during
2024.
Net Premiums Earned represent gross premiums earned less premiums ceded.
Net Premiums Written represent premiums charged on policies issued during the period less any applicable reinsurance costs.
The following is a reconciliation of our Net Premiums Written to Net Premiums Earned for 2025 and 2024 (in thousands):
Years Ended December 31,
2025
2024
Net Premiums Written
$
880,291
$
761,108
Increase in Unearned Premiums
(58,625)
(83,547)
Net Premiums Earned
$
821,666
$
677,561
The increase in net premiums written is primarily due to a higher volume of policies in force as described above. We had approximately 313,400 policies in
force as of December 31, 2025 compared to approximately 271,300 policies in force as of December 31, 2024.
Expenses
Losses and Loss Adjustment Expenses decreased as 2025 did not have any losses from catastrophic events while 2024 included net losses of $78.2 million
from Hurricane Milton, $43.0 million from Hurricane Helene, and $6.5 million from Hurricane Debby. In addition, while we have a higher volume of
policies in force, we have experienced a reduction in claim and litigation frequency over the comparative periods during 2025. The gross loss ratio for 2025
was 19.6% compared to 34.6% for 2024. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”
Policy Acquisition and Other Underwriting Expenses primarily reflect the amortization of deferred acquisition costs such as commissions payable to agents
for production and renewal of policies and premium taxes. The overall increase was primarily due to a higher volume of premiums in force in the
comparative periods.
General and Administrative Personnel Expenses include salaries, wages, payroll taxes, stock-based and other incentive compensation expenses, and
employee benefit costs. Factors such as merit increases, changes in headcount, and periodic restricted stock grants, among others, cause fluctuations in this
expense. In addition, our personnel expenses are decreased by the capitalization of payroll costs related to projects to develop software for internal use and
the payroll costs associated with the processing and settlement of certain catastrophe claims which are recoverable from reinsurers under reinsurance
contracts. The year-over-year increase was primarily attributable to an increase in stock-based and other incentive compensation as well as an increase in
salaries and wages.
Interest Expense decreased primarily as a result of the conversion of $172.5 million of 4.75% convertible senior notes during 2025, which also resulted in a
$1.1 million debt conversion expense included in other operating expenses.
33
Income Tax Expense increased primarily as a result of an increase in income before taxes. The effective tax rate for 2025 and 2024 was 25.4% and 26.4%,
respectively. Incorporated within each rate is the federal statutory tax rate of 21.0%, state taxes (net of federal benefits), and unfavorable non-deductible
compensation expenses.
Ratios
The gross loss ratio decreased due to the decrease in losses and loss adjustment expenses and the increase in gross premiums earned.
The net expense ratio decreased primarily due to the increase in net premiums earned, partially offset by the increase in policy acquisition and other
underwriting expenses and the increase in general and administrative personnel expenses.
Our net combined ratio decreased due to the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
Throughout our history, our liquidity requirements have been met through issuances of our common and preferred stock, debt offerings, and funds from
operations. We expect our future liquidity requirements will be met by funds from operations, primarily the cash received by our insurance subsidiaries
from premiums written and investment income. We may consider raising additional capital through debt and/or equity offerings to support our growth and
future investment opportunities.
Our insurance subsidiaries require liquidity and adequate capital to meet ongoing obligations to policyholders and claimants and to fund operating
expenses. In addition, we attempt to maintain adequate levels of liquidity and surplus to manage any differences between the duration of our liabilities and
invested assets. In the insurance industry, cash collected for premiums from policies written is invested, interest and dividends are earned thereon, and
losses and loss adjustment expenses are paid out over a period of years. This period of time varies by the circumstances surrounding each claim. With the
exception of litigated claims, substantially all of our losses and loss adjustment expenses are fully settled and paid within approximately 100 days of the
claim receipt date. Additional cash outflow occurs through payments of underwriting costs such as commissions, taxes, payroll, and general overhead
expenses.
As of December 31, 2025, we have $1.2 billion of cash and cash equivalents. We believe that we maintain sufficient liquidity to pay claims and expenses,
as well as to satisfy commitments in the event of unforeseen events such as reinsurer insolvencies, inadequate premium rates, or reserve deficiencies. We
maintain a comprehensive reinsurance program at levels management considers adequate to diversify risk and safeguard our financial position.
In the future, we anticipate our primary use of funds will be to pay claims, reinsurance premiums, interest and principal on our debt, dividends, and to fund
operating expenses and real estate acquisitions.
Revolving Credit Facility
As of December 31, 2025, we are party to a senior secured revolving credit facility with Fifth Third Bank (“Revolving Credit Facility”). The Revolving
Credit Facility currently provides borrowing capacity of up to $150.0 million and expires on November 5, 2030. Borrowings under the Revolving Credit
Facility bear interest at an annual rate equal to the one or three month SOFR plus a ten basis points adjustment plus a margin based on the debt-to-capital
ratio, with interest payments due in arrears on January 1, April 1, July 1, and October 1.
As of December 31, 2025, we had an outstanding balance of $36.0 million and had an available borrowing capacity of $114.0 million under the Revolving
Credit Facility. As of December 31, 2025, we were in compliance with all required covenants. Refer to Note 10 “Revolving Credit Facility” to our
consolidated financial statements under Item 8 of this Annual Report on Form 10-K.
Long-Term Debt
The following table summarizes the principal and interest payment obligations for our long-term debt as of December 31, 2025 (principal in thousands):
December 31,
Debt Description
Issued
Maturity
Interest Rate
Payment Date
2025
4.55% Promissory Note
7/6/2018
8/1/2036
4.55%
Monthly
$
4,125
5.50% Promissory Note
6/26/2023
7/1/2033
5.50%
Monthly
11,422
5.65% Promissory Note
7/24/2025
8/1/2035
5.65%
Monthly
16,896
Total principal amount
$
32,443
34
Refer to Note 11 “Long-Term Debt” to our consolidated financial statements under Item 8 of this Annual Report on Form 10-K.
At-The-Market Facility
On January 22, 2024, we implemented an “at-the-market” facility (the “ATM Facility”) which gives us the ability to raise up to $75.0 million through the
issuance of new shares of common stock through a sales agent (the “Sales Agent”). We have no obligation to sell, and the Sales Agent has no obligation to
buy or sell, any shares of common stock under the ATM Facility. As of December 31, 2025, the remaining availability under the ATM Facility was $75.0
million.
Investments
The main objective of our investment policy is to maximize our after-tax investment income with a reasonable level of risk given the current financial
market. Our excess cash is invested primarily in money market accounts, certificates of deposit, and available-for-sale fixed-maturity and equity securities.
As of December 31, 2025, we had $663.2 million of available-for-sale fixed-maturity and equity investments, which are carried at fair value. Changes in
the general interest rate environment affect the returns available on new available-for-sale fixed-maturity investments. While a rising interest rate
environment enhances the returns available on new investments, it reduces the market value of existing available-for-sale fixed-maturity investments and
thus the availability of gains on disposition. A decline in interest rates reduces the returns available on new available-for-sale fixed-maturity investments
but increases the market value of existing available-for-sale fixed-maturity investments, creating the opportunity for realized investment gains on
disposition.
In the future, we may alter our investment policy with regard to investments in federal, state and municipal obligations, preferred and common equity
securities and real estate mortgages, as permitted by applicable law, including insurance regulations.
Limited Partnership Investments
Our limited partnership investments consist of six private equity funds managed by their general partners. Withdrawals from limited partnership
investments are generally not permitted and distributions occur when the underlying investments of the limited partnership investments are liquidated.
Additionally, two of these funds have unexpired capital commitments which are callable at the discretion of the fund’s general partner for funding new
investments or expenses of the fund. Although capital commitments for the four remaining funds have expired, the general partners may request additional
funds under certain circumstances. As of December 31, 2025, there were unexpired capital commitments of $3.7 million. Refer to Note 5 “Investments” of
our consolidated financial statements under Item 8 of this Annual Report on Form 10-K.
Real Estate Investments
Real estate investments have long been a significant component of our overall investment portfolio. It diversifies our portfolio and helps offset the volatility
of other higher-risk assets. Thus, we may consider expanding our real estate investments portfolio should an opportunity arise.
Dividends
On January 14, 2026, our Board declared a quarterly dividend of $0.40 per common share. The dividends will be paid on March 20, 2026 to stockholders
of record on February 20, 2026.
Sources and Uses of Cash
The following table is a summary of our cash flow activity for the periods presented (in thousands):
Years Ended December 31,
2025 vs 2024 2024 vs 2023
2025
2024
2023
Change
Change
Net cash provided by operating activities
$
444,449 $
331,816 $
230,658 $
112,633 $
101,158
Net cash provided by (used in) investing activities
87,272
(260,110)
4,269
347,382
(264,379)
Net cash provided by (used in) financing activities
146,197
(75,174)
67,117
221,371
(142,291)
Effect of exchange rate changes on cash
(229)
(112)
(42)
(117)
(70)
Net increase (decrease) in cash and cash
equivalents and restricted cash
$
677,689 $
(3,580) $
302,002 $
681,269 $
(305,582)
35
Cash Flows for the Year Ended December 31, 2025
Net cash provided by operating activities during 2025 was approximately $444.4 million, which consisted primarily of cash received from net premiums
written, and reinsurance recoveries of approximately $146.1 million less cash disbursed for operating expenses, losses and loss adjustment expenses and
interest payments. Net cash provided by investing activities of $87.3 million was primarily due to the proceeds from calls, repayments and maturities of
available-for-sale fixed-maturity securities of $627.6 million, the proceeds from sales of available-for-sale fixed-maturity and equity securities of $42.7
million, distributions of return of capital from limited partnership investments of $2.3 million, and proceeds from sales of real estate investments of $2.0
million, offset by purchases of available-for-sale fixed-maturity, equity securities, and other investments of $555.3 million, purchases of real estate
investments of $28.4 million, and purchases of property and equipment of $3.6 million. Net cash provided by financing activities totaled $146.2 million,
which was primarily due to proceeds from the issuance of noncontrolling interests of $156.2 million, proceeds from the issuance of long-term debt of $17.0
million, and net surplus contribution from subscribers of $6.7 million, offset by $19.3 million of cash dividend payments, net repayment of the line of
credit agreement of $8.0 million, net share settlements of $1.5 million, and net share settlements of noncontrolling interests of $1.5 million.
Cash Flows for the Year Ended December 31, 2024
Net cash provided by operating activities during 2024 was approximately $331.8 million, which consisted primarily of cash received from net premiums
written, and reinsurance recoveries of approximately $131.6 million less cash disbursed for operating expenses, losses and loss adjustment expenses and
interest payments. Net cash used in investing activities of $260.1 million was primarily due to the purchases of available-for-sale fixed-maturity and equity
securities of $836.6 million, the purchases of real estate investments of $16.1 million, the purchases of property and equipment of $4.1 million, and
additional investments in limited partnership interests of $1.2 million, offset by the proceeds from calls, repayments and maturities of available-for-sale
fixed-maturity securities of $457.1 million, the proceeds from sales of available-for-sale fixed-maturity and equity securities of $137.2 million, and
distributions received from limited partnership investments of $3.6 million. Net cash used in financing activities totaled $75.2 million, which was primarily
due to the redemption of redeemable noncontrolling interests of $100.0 million, $16.6 million of cash dividend payments, cash dividends paid to
redeemable noncontrolling interests of $2.9 million, $1.0 million of net share settlements, and repayments of long-term debt of $0.5 million, offset by net
borrowing under the line of credit agreement of $44.0 million and net surplus contribution from noncontrolling interests of $2.9 million.
OFF-BALANCE SHEET ARRANGEMENTS
As of December 31, 2025, we had unexpired capital commitments for limited partnerships investments of $3.7 million as described above. We do not have
any other arrangements giving rise to material obligations that are not reported in our consolidated balance sheets as described in Item 303 of SEC
Regulation S-K.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The accompanying consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to select accounting policies and make
estimates that affect amounts reported in the consolidated financial statements and the accompanying notes. Management’s estimates are based on the
relevant information available at the end of each period. Actual results could differ materially from these estimates under different assumptions or market
conditions.
The following discussion includes estimates prepared in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had
or are reasonably likely to have a material impact on the financial condition or results of operations, and are based on, among other things, estimates,
assumptions, and judgments made by management that include inherent risks and uncertainties. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the circumstances.
We believe our accounting policies and estimates specific to losses and loss adjustment expenses, reinsurance recoverable, income taxes, stock-based
compensation expense, and limited partnership investments involve our most significant judgments and estimates material to our consolidated financial
statements.
Refer to the notes to the consolidated financial statements included in this Annual Report on Form 10-K for further discussion of our significant accounting
policies and the effect on our consolidated financial statements.
Reserves for Losses and Loss Adjustment Expenses. We establish reserves for the estimated total unpaid costs of losses including loss adjustment
expenses (LAE). LAE are costs associated with the investigation, evaluation, adjustment, and settlement of insurance claims and can be either allocated,
costs directly attributable to a specific claim, or unallocated, costs that cannot be directly attributed to a specific claim. Loss and LAE reserves reflect
management’s best estimate of the total cost of (i) claims that have been reported, but not yet paid in full, and (ii) claims that have been incurred but not yet
reported to us (“IBNR”). Reserves established by us represent an estimate of the outcome of future events and, as such, cannot be considered an exact
calculation of our liability. Rather, loss and LAE reserves represent management’s best estimate of our company’s liability based on the application of
actuarial techniques and other
36
projection methodologies and taking into consideration other facts and circumstances known at the balance sheet date. The process of establishing loss and
LAE reserves is complex and inherently imprecise, as it involves the estimation of the outcome of future uncertain events. The impact of both internal and
external variables on ultimate losses and LAE costs is difficult to estimate. In determining loss and LAE reserves, we give careful consideration to all
available data and actuarial analyses.
Currently, our estimated ultimate liability is calculated using the principles and procedures described in Note 13 “Losses and Loss Adjustment Expenses”
to our consolidated financial statements under Item 8 of this Annual Report on Form 10-K, which are applied to the lines of business written. However,
because the establishment of loss and LAE reserves is an inherently uncertain process, we cannot be certain that ultimate losses will not exceed the
established loss and LAE reserves and have a material, adverse effect on our results of operations and financial condition. Changes in estimates, or
differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such adjustments are made.
Our reported results, financial position and liquidity would be affected by likely changes in key assumptions that determine our net loss reserves.
Management does not believe that any reasonably likely changes in the frequency of claims would affect our loss and LAE reserves. However,
management believes that a reasonably likely increase or decrease in the severity of claims could impact our net loss and LAE reserves. The table below
summarizes the effect on net loss and LAE reserves and equity in the event of reasonably likely changes in the severity of claims considered in establishing
loss and LAE reserves. The range of reasonably likely changes in the severity of our claims was established based on a review of changes in loss year
development and applied to loss and LAE reserves as a whole. The selected range of changes does not indicate what could be the potential best or worst
case or likely scenarios:
Year Ended December 31, 2025
Change in Reserves
Reserves
Percentage
Change in
Equity,
Net of Tax
-20.0%
461,196
7.78%
-15.0%
490,021
5.83%
-10.0%
518,846
3.89%
-5.0%
547,670
1.94%
Base
576,495
—
5.0%
605,320
(1.94)%
10.0%
634,145
(3.89)%
15.0%
662,969
(5.83)%
20.0%
691,794
(7.78)%
Reinsurance Recoverable. In the normal course of business, we seek to reduce the loss that may arise from catastrophes or other events by reinsuring
certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers. Our reinsurance recoverable balance represents an estimate
of the amount of paid and unpaid losses and loss adjustment expenses that is recoverable from reinsurers. This estimate is determined in a manner
consistent with the terms of the applicable reinsurance contracts and based on the ultimate losses and loss adjustment expenses we expect to incur. Given
the uncertainty of the ultimate amounts of losses and loss adjustment expenses, the estimate may vary significantly from the eventual outcome.
From time to time, our reinsurance contracts may include retrospective provisions that adjust premiums based on the loss experience under the contract. In
accordance with U.S. GAAP, we will recognize an asset in the period in which the absence of loss experience obligates the reinsurer to pay cash or other
consideration under the contract. In the event that a loss arises, we will derecognize such asset in the period in which a loss arises. In such cases, a with-
and-without method is used to estimate the asset or liability amount to be recognized at each reporting date. The amount of the estimate is the difference
between the net contract costs before and after the loss experience under the contract. Estimates related to premium adjustments are recognized in ceded
premiums earned. These estimates are reviewed monthly based on the loss experience to date and as adjustments become necessary. Such adjustments to
the asset or liability, which accrue throughout the contract term, will negatively impact our operating results when a catastrophic loss event occurs during
the contract term.
Income Taxes. We file consolidated federal and state income tax returns and allocate taxes among our subsidiaries in accordance with a written tax-
allocation agreement.
We account for income taxes using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are
recognized for the temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
The effect on deferred income tax assets and liabilities of a change in tax laws is recognized in the results of operations in the period the new laws are
enacted. A valuation allowance is recorded to reduce the carrying amount of deferred income tax assets to the estimated realization amount.
37
The valuation allowance for deferred income tax assets relates to the uncertainty of the utilization of U.S. federal, state and foreign deferred income tax
assets. In evaluating our ability to recover our deferred income tax assets, we consider all available positive and negative evidence, which include our past
operating results, the existence of cumulative losses in the most recent years, and our forecast of future taxable income. In estimating future taxable
income, we develop assumptions related to the amount of future pre-tax operating income, the reversal of temporary differences, and the implementation of
feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent
with the plans and estimates we are using to manage our underlying businesses.
We recognize positions taken or expected to be taken in a tax return in the consolidated financial statements when it is more-likely-than-not (i.e., a
likelihood of more than 50%) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the
largest amount of benefit with greater than 50% likelihood of being realized upon ultimate settlement. We record liabilities for positions that have been
taken but do not meet the more-likely-than-not recognition threshold. We include interest and penalties associated with unrecognized tax benefits as
income tax expense and as a component of the recorded balance of unrecognized tax benefits.
Stock-Based Compensation. We issue stock-based compensation awards to employees and non-employee directors on a periodic basis in the form of stock
options and restricted stock awards. The fair value of a stock-based award is determined on the date of grant and recognized over a period of time,
depending on the type and conditions underlying the award.
For stock-based awards that contain only a service-based vesting condition, the grant date fair value of the award is recognized as compensation expense on
a straight-line basis over the requisite service period. The fair value of a stock option is determined using the Black-Scholes option-pricing model, which
uses the following significant inputs and assumptions: (i) the price per share of common stock, (ii) the exercise price, (iii) the risk-free interest rate, (iv) the
dividend yield, (v) the contractual term, and (vi) the estimated volatility. These inputs are developed based on historical data and market information. The
fair value of a restricted stock award is determined by the market price of the stock on the date of grant.
For restricted stock awards that contain a market-based vesting condition, fair value is determined using a Monte Carlo simulation model with the
assistance of a third-party valuation specialist. Additionally, the grant date fair value of the award is recognized as compensation expense on a straight-line
basis over the derived service period, which is also determined using a Monte Carlo simulation. The recognition of expense may be accelerated if the
market conditions are met sooner than estimated.
For stock-based awards granted by a non-public subsidiary, an independent valuation specialist will assist in determining the fair value of the underlying
stock price of the subsidiary using different valuation methods such as a Monte Carlo simulation model and a binomial distribution model. Inputs such as
an estimated stock price of our private subsidiary and expected price volatility used in these valuation methods are derived mathematically from a data
analysis of many public peer companies with similar characteristics.
Our stock-based compensation awards are equity-classified with the associated compensation expense included in general and administrative personnel
expenses in the consolidated statements of income. Stock-based compensation for awards granted under a subsidiary's stock-based compensation plan are
included in noncontrolling interests in the consolidated balance sheets. Forfeitures are accounted for as they occur.
Limited Partnership Investments. We have interests in limited partnerships that are not registered under the U.S., the securities laws of any state or the
securities laws of any other jurisdictions. The partnership interests cannot be resold in the public market and any withdrawal is subject to the terms and
conditions of the partnership agreements. We have no influence over partnership operating and financial policies. We use the equity method to account for
the investments with ownership interest greater than five percent. For the investments with ownership interest at five percent or less, we use the net asset
value method to estimate the fair value of these investments. We generally recognize our share of the limited partnerships’ earnings or losses on a three-
month lag. Due to the lag, we may record an adjustment to our most recent share of net asset value when the amount can be reasonably estimated and a
significant adverse impact on the net asset value is expected as a result of a major economic event.
Net investment income or loss from limited partnerships represents a net aggregate amount of operating results allocated to us based on the percentage of
ownership interest in each limited partnership. These limited partnerships measure their investments at fair value and reflect the related unrealized gains
and losses in their statements of income. Accordingly, the application of the equity method and the net asset value method result in the carrying value of
limited partnership investments to approximate their estimated fair value as of each reporting date.
RECENT ACCOUNTING PRONOUNCEMENTS
Refer to Note 3 “Recent Accounting Pronouncements” to the consolidated financial statements included in this Annual Report on Form
38
10-K for further information about recent accounting pronouncements and adoptions.
39
ITEM 7A – Quantitative and Qualitative Disclosures About Market Risk
Our investment portfolio as of December 31, 2025 included available-for-sale fixed-maturity and equity securities, the purposes of which are not for
speculation. Our main objective is to maximize after-tax investment income and maintain sufficient liquidity to meet our obligations while minimizing
market risk, which is the potential economic loss from adverse fluctuations in securities prices. We consider many factors including credit ratings,
investment concentrations, regulatory requirements, anticipated fluctuation of interest rates, durations and market conditions in developing investment
strategies. Our investment securities are managed primarily by an investment committee appointed by our Board of Directors. From time to time, our
investment committee may decide to invest in low-risk assets such as U.S. government bonds.
Our investment portfolio is exposed to interest rate risk, credit risk, and equity price risk. Fiscal and economic uncertainties caused by any government
action or inaction may exacerbate these risks and potentially have adverse impacts on the value of our investment portfolio.
We classify our fixed-maturity securities as available-for-sale and report any unrealized gains or losses, net of deferred income taxes, as a component of
other comprehensive income within our stockholders’ equity. As such, any material temporary changes in their fair value can adversely impact our
stockholders’ equity. In addition, we recognize any unrealized gains or losses related to our equity securities in our statement of income. As a result, our
results of operations can be materially affected by the volatility in the equity market.
Interest Rate Risk
Our available-for-sale fixed-maturity securities are sensitive to potential losses resulting from unfavorable changes in interest rates. We manage the risk by
analyzing anticipated movement in interest rates and considering our future capital needs.
The following table illustrates the impact of hypothetical changes in interest rates to the fair value of our available-for-sale fixed-maturity securities as of
December 31, 2025 (dollar amounts in thousands):
Hypothetical Change in Interest Rates
Estimated
Fair Value
Change in
Estimated
Fair Value
Percentage
Increase
(Decrease)
in Estimated
Fair Value
300 basis point increase
$
525,268 $
(72,061)
-12%
200 basis point increase
548,398
(48,931)
-8%
100 basis point increase
572,418
(24,911)
-4%
100 basis point decrease
623,129
25,800
4%
200 basis point decrease
649,820
52,491
9%
300 basis point decrease
677,401
80,072
13%
Credit Risk
Credit risk can expose us to potential losses arising principally from adverse changes in the financial condition of the issuers of our available-for-sale fixed-
maturity securities. We mitigate the risk by investing in available-for-sale fixed-maturity securities that are generally investment grade, by diversifying our
investment portfolio to avoid concentrations in any single issuer or business sector, and by continually monitoring each individual security for declines in
credit quality. While we emphasize credit quality in our investment selection process, significant downturns in the markets or general economy may impact
the credit quality of our portfolio.
40
The following table presents the composition of our available-for-sale fixed-maturity securities, by rating, as of December 31, 2025 (dollar amounts in
thousands):
Comparable Rating
Cost or
Amortized
Cost
% of Total
Amortized
Cost
Estimated
Fair Value
% of Total
Estimated
Fair Value
AAA
$
4,787
1% $
4,774
1%
AA+, AA, AA-
337,239
57%
338,316
57%
A+, A, A-
67,103
11%
67,435
11%
BBB+, BBB, BBB-
178,677
30%
179,332
30%
B+,B,B-
2,174
0%
2,082
0%
Not Rated
5,403
1%
5,390
1%
Available-for-sale fixed-maturity securities
$
595,383
100% $
597,329
100%
Equity Price Risk
Our equity investment portfolio as of December 31, 2025 included common stocks, perpetual preferred stocks, mutual funds, and exchange-traded funds.
We may incur potential losses due to adverse changes in equity security prices. We manage the risk primarily through industry and issuer diversification
and asset mix.
The following table illustrates the composition of our equity securities as of December 31, 2025 (dollar amounts in thousands):
Estimated
Fair Value
% of Total
Estimated
Fair Value
Stocks by sector:
Consumer
$
5,748
9%
Financial
6,200
9%
Communications
4,596
7%
Other (1)
5,146
8%
21,690
33%
Mutual funds and exchange-traded funds by type:
Debt
34,772
53%
Equity
1,940
3%
Alternative
7,488
11%
44,200
67%
Equity Securities
$
65,890
100%
(1) Represents an aggregate of less than 5% sectors.
Foreign Currency Exchange Risk
As of December 31, 2025, we did not have any material exposure to foreign currency related risk.
41
ITEM 8 – Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID 686)
42-44
Consolidated Balance Sheets as of December 31, 2025 and 2024
45-46
Consolidated Statements of Income for the years ended December 31, 2025, 2024 and 2023
47
Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024 and 2023
48
Consolidated Statements of Equity for the years ended December 31, 2025, 2024 and 2023
49-51
Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023
52-54
Notes to Consolidated Financial Statements
55-112
42
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of HCI Group, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of HCI Group, Inc. and Subsidiaries (the “Company”) as of December 31, 2025 and 2024,
the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended
December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of
America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s
internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2026 expressed an unqualified opinion
thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our
opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.
Reserves for Losses and Loss Adjustment Expenses
As described in Note 2 “Summary of Significant Accounting Policies” and Note 13 “Losses and Loss Adjustment Expenses” to the financial statements,
the Company’s reserves for losses and loss adjustment expenses (“LAE”) reported in the consolidated balance sheet were $576.5 million as of December
31, 2025. Reserves for losses and LAE reflect management’s best estimate regarding the Company’s ultimate losses, resulting in a liability for claims that
have been reported, but not yet paid, and claims that have been incurred but not yet reported. The reserves are based on the application of actuarial
techniques and other projection methodologies, taking into consideration other facts and circumstances known at the balance sheet date. The methods used
by management in determining the reserves for losses and LAE are complex and subjective with various key inputs and assumptions. Judgement is required
to determine the inputs and assumptions used and these can significantly impact the reserves recognized. The most significant judgments include the choice
of the appropriate standard actuarial reserving methods, the selection of loss development factors that place reliance on actual historical loss experience,
current claim trends, and the prevailing social, economic and legal environments, and reserves derived specific to catastrophe events.
The principal considerations for our determination of the reserves for losses and LAE as a critical audit matter are the complexity and subjectivity of the
judgments, estimates and assumptions that management utilized in determining their ultimate loss estimates. This
43
required a high degree of effort and judgment in selecting the audit procedures to evaluate management’s estimates and assumptions as it relates to the
reserves for losses and LAE, including the use of an auditor’s specialist.
The primary procedures we performed to address this critical audit matter included:
•
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls related to management’s determination of
the reserves for losses and LAE, including controls over the actuarial methods and assumptions utilized to support the reserve calculations, and
controls over the completeness and accuracy of historical loss data utilized in the reserves calculations.
•
We tested the completeness and accuracy of the historical loss data used in the development of the reserves.
•
We performed analytical procedures over the Company’s recorded reserves in relation to the Company’s appointed actuary’s range of reserve
estimates.
•
We engaged an actuary as an auditor’s specialist to independently assess the Company’s appointed actuary’s selection of actuarial methods and
assumptions and the resulting reserve ranges and point estimates.
/s/ Forvis Mazars, LLP
We have served as the Company’s auditor since 2013.
Charlotte, North Carolina
February 26, 2026
44
Report of Independent Registered Public Accounting Firm on Internal Control
To the Stockholders and Board of Directors of HCI Group, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited HCI Group, Inc. and Subsidiaries' (the “Company”) internal control over financial reporting as of December 31, 2025, based on criteria
established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025,
based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated
financial statements of the Company for each of the three years in the period ended December 31, 2025, and our report dated February 26, 2026, expressed
an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Forvis Mazars, LLP
Charlotte, North Carolina
February 26, 2026
45
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share amounts)
December 31,
2025
2024
Assets
Fixed-maturity securities, available-for-sale, at fair value (amortized cost: $595,383
and $719,536, respectively and allowance for credit losses: $0 and $0, respectively)
$
597,329 $
718,537
Equity securities, at fair value (cost: $61,597 and $52,030, respectively)
65,890
56,200
Limited partnership investments
17,690
20,802
Real estate investments
103,746
79,120
Other investments
5,000
—
Total investments
789,655
874,659
Cash and cash equivalents (a)
1,210,126
532,471
Restricted cash (a)
3,748
3,714
Income taxes receivable (a)
1,332
463
Deferred income tax assets, net (a)
2,237
72
Premiums receivable, net (allowance: $4,469 and $5,891, respectively) (a)
57,494
50,582
Prepaid reinsurance premiums (a)
50,127
92,060
Reinsurance recoverable, net of allowance for credit losses (a):
Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)
27,855
36,062
Unpaid losses and loss adjustment expenses (allowance: $97 and $186, respectively)
262,041
522,379
Deferred policy acquisition costs (a)
59,722
54,303
Property and equipment, net
28,939
29,544
Intangible assets, net
2,683
5,206
Funds withheld for assumed business
5,254
11,690
Other assets (a)
27,715
17,008
Total assets
$
2,528,928 $
2,230,213
(a)
See Note 14 for details of balances associated with variable interest entities.
(continued)
46
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets – (Continued)
(In thousands, except share amounts)
December 31,
2025
2024
Liabilities, Redeemable Noncontrolling Interests and Equity
Losses and loss adjustment expenses (a)
$
576,495
$
845,900
Unearned premiums (a)
643,328
584,703
Advance premiums (a)
19,302
18,867
Reinsurance payable on paid losses and loss adjustment expenses
—
2,496
Ceded reinsurance premiums payable (a)
27,591
18,313
Assumed premiums payable (a)
1,744
2,176
Income taxes payable (a)
12,782
5,451
Deferred income tax liabilities, net (a)
3,814
2,830
Revolving credit facility
36,000
44,000
Long-term debt
31,877
185,254
Accrued expenses and other liabilities (a)
61,351
51,182
Total liabilities
1,414,284
1,761,172
Commitments and contingencies (Note 21)
Redeemable noncontrolling interests (Note 18)
3,359
1,691
Equity:
Common stock (no par value, 40,000,000 shares authorized, 12,992,147 and
10,767,184 shares issued and outstanding, respectively)
—
—
Additional paid-in capital
428,109
122,289
Retained earnings
611,509
331,793
Accumulated other comprehensive income (loss)
1,459
(749)
Total stockholders’ equity
1,041,077
453,333
Noncontrolling interests
70,208
14,017
Total equity
1,111,285
467,350
Total liabilities, redeemable noncontrolling interests and equity
$
2,528,928
$
2,230,213
(a)
See Note 14 for details of balances associated with variable interest entities.
See accompanying Notes to Consolidated Financial Statements.
47
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share amounts)
Years Ended December 31,
2025
2024
2023
Revenue
Gross premiums earned
$
1,236,145 $
1,083,220 $
765,512
Premiums ceded
(414,479)
(405,659)
(269,627)
Net premiums earned
821,666
677,561
495,885
Net investment income
65,411
59,148
46,234
Net realized investment gains (losses)
2,753
3,384
(1,996)
Net unrealized investment gains
123
2,644
3,215
Policy fee income
6,858
4,639
4,704
Other
4,135
2,675
2,628
Total revenue
900,946
750,051
550,670
Expenses
Losses and loss adjustment expenses
241,827
374,708
254,579
Policy acquisition and other underwriting expenses
122,426
99,402
90,822
General and administrative personnel expenses
72,125
63,152
53,868
Interest expense
9,156
13,344
11,117
Other operating expenses
26,082
26,018
22,634
Total expenses
471,616
576,624
433,020
Income before income taxes
429,330
173,427
117,650
Income tax expense
108,935
45,846
28,393
Net income
320,395
127,581
89,257
Net income attributable to redeemable noncontrolling
interests (Note 18)
—
(10,149)
(9,370)
Net income attributable to noncontrolling interests
(21,390)
(7,479)
(853)
Net income after noncontrolling interests
$
299,005 $
109,953 $
79,034
Basic earnings per share
$
24.58 $
10.59 $
9.13
Diluted earnings per share
$
22.72 $
8.89 $
7.62
See accompanying Notes to Consolidated Financial Statements.
48
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In thousands)
Years Ended December 31,
2025
2024
2023
Net income
$
320,395 $
127,581 $
89,257
Other comprehensive income, net of income taxes:
Available-for-sale fixed-maturity securities
2,208
2,586
6,961
Other comprehensive income, net of income taxes
2,208
2,586
6,961
Comprehensive income
322,603
130,167
96,218
Comprehensive income attributable to noncontrolling interests
(21,390)
(7,652)
(1,091)
Comprehensive income after noncontrolling interests
$
301,213 $
122,515 $
95,127
See accompanying Notes to Consolidated Financial Statements.
49
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Equity
For the Year Ended December 31, 2025
(In thousands, except per share amount)
Common Stock
Additional
Paid-In
Retained
Accumulated
Other
Comprehensiv
e
Total
Stockholders’
Noncontrollin
g
Total
Shares
Amount
Capital
Earnings
(Loss) Income
Equity
Interests
Equity
Balance as of December 31,
2024
10,767,18
4 $
— $
122,289 $
331,793 $
(749) $
453,333 $
14,017 $
467,350
Net income
—
—
—
299,005
—
299,005
21,390
320,395
Other comprehensive
income, net of income taxes
—
—
—
—
2,208
2,208
—
2,208
Issuance of restricted stock
51,330
—
—
—
—
—
—
—
Forfeiture of restricted stock
(3,785)
—
—
—
—
—
—
—
Net share settlements on
vesting of restricted stock
(9,645)
—
(1,516)
—
—
(1,516)
—
(1,516)
Conversion of senior notes to
common stock
2,187,063
—
172,898
—
—
172,898
—
172,898
Issuance of noncontrolling
interests, net of issuance costs
—
—
129,209
—
—
129,209
25,545
154,754
Dilution from subsidiary
stock-based compensation
—
—
(3,139)
—
—
(3,139)
1,650
(1,489)
Common stock dividends
—
—
—
(19,289)
—
(19,289)
—
(19,289)
Stock-based compensation
—
—
8,368
—
—
8,368
2,602
10,970
Reclassification of
nonrefundable
subscriber surplus
contributions
—
—
—
—
—
—
5,004
5,004
Balance as of December 31,
2025
12,992,14
7 $
— $
428,109 $
611,509 $
1,459 $
1,041,077 $
70,208 $ 1,111,285
See accompanying Notes to Consolidated Financial Statements.
50
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Equity – (Continued)
For the Year Ended December 31, 2024
(In thousands, except per share amount)
Common Stock
Additional
Paid-In
Retained
Accumulated
Other
Comprehensi
ve
Total
Stockholders’
Noncontrollin
g
Total
Shares
Amount
Capital
Earnings
Loss
Equity
Interests
Equity
Balance as of December 31,
2023
9,738,183 $
— $
89,568 $
238,438 $
(3,163) $
324,843 $
2,322 $
327,165
Net income
—
—
—
119,427
—
119,427
8,154
127,581
Net income attributable to
redeemable noncontrolling
interests
—
—
—
(9,474)
—
(9,474)
(675)
(10,149)
Other comprehensive
income, net of income taxes
—
—
—
—
2,414
2,414
172
2,586
Cashless exercise of common
stock warrants
386,267
—
—
—
—
—
—
—
Issuance of restricted stock
269,200
—
—
—
—
—
—
—
Forfeiture of restricted stock
(5,175)
—
—
—
—
—
—
—
Net share settlements on
vesting of restricted stock
(10,378)
—
(1,036)
—
—
(1,036)
—
(1,036)
Conversion of senior notes to
common stock
389,087
—
23,449
—
—
23,449
—
23,449
Dilution from subsidiary
stock-based compensation
—
—
—
—
—
—
(481)
(481)
Common stock dividends
—
—
—
(16,598)
—
(16,598)
—
(16,598)
Stock-based compensation
—
—
6,922
—
—
6,922
3,267
10,189
Deemed dividend on warrant
modification
—
—
3,386
—
—
3,386
—
3,386
Reclassification of
nonrefundable
subscriber surplus
contributions
—
—
—
—
—
—
1,258
1,258
Balance as of December 31,
2024
10,767,184 $
— $
122,289 $
331,793 $
(749) $
453,333 $
14,017 $
467,350
See accompanying Notes to Consolidated Financial Statements.
51
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Equity – (Continued)
For the Year Ended December 31, 2023
(In thousands, except per share amount)
Common Stock
Additional
Paid-In
Retained
Accumulated
Other
Comprehensi
ve
Total
Stockholders’
Noncontrollin
g
Total
Shares
Amount
Capital
Earnings
Loss
Equity
Interests
Equity
Balance as of December 31,
2022
8,598,682 $
— $
— $
172,482 $
(9,886) $
162,596 $
(1,342) $
161,254
Net income
—
—
—
87,743
—
87,743
1,514
89,257
Net income attributable to
redeemable noncontrolling
interest
—
—
—
(8,709)
—
(8,709)
(661)
(9,370)
Other comprehensive income,
net of income taxes
—
—
—
—
6,723
6,723
238
6,961
Issuance of restricted stock
13,000
—
—
—
—
—
—
—
Forfeiture of restricted stock
(9,001)
—
—
—
—
—
—
—
Net share settlements on
vesting of restricted stock
(14,498)
—
(784)
—
—
(784)
—
(784)
Issuance of common stock in
public offering
1,150,000
—
84,572
—
—
84,572
—
84,572
Dilution from subsidiary
stock-based compensation
—
—
—
—
—
—
(354)
(354)
Common stock dividends
—
—
—
(13,719)
—
(13,719)
—
(13,719)
Stock-based compensation
—
—
6,421
—
—
6,421
2,927
9,348
Additional paid-in capital
shortfall adjustment
allocated to retained income
—
—
(641)
641
—
—
—
—
Balance as of December 31,
2023
9,738,183 $
— $
89,568 $
238,438 $
(3,163) $
324,843
$
2,322 $
327,165
See accompanying Notes to Consolidated Financial Statements.
52
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Years Ended December 31,
2025
2024
2023
Cash flows from operating activities:
Net income after noncontrolling interests
$
299,005
$
109,953
$
79,034
Net income attributable to noncontrolling interests
21,390
17,628
10,223
Net income
320,395
127,581
89,257
Adjustments to reconcile net income to net cash provided
by operating activities:
Stock-based compensation expense
10,970
10,189
9,348
Net accretion of discount on investments in
available-for-sale fixed-maturity securities
(2,461)
(3,414)
(4,497)
Depreciation and amortization
11,217
4,299
8,184
Deferred income tax (benefit) expense
(1,918)
2,406
(1,102)
Net realized investment (gains) losses
(2,753)
(3,384)
1,996
Net unrealized investment gains
(123)
(2,644)
(3,215)
Net loss (income) from limited partnership investments
820
(597)
(661)
Distributions of return on investment from limited
partnership investments
1
1,020
1,148
Loss on extinguishment of debt
—
—
177
Debt conversion expense
1,125
—
—
Gain on sale of real estate investments
(440)
—
(8,811)
Foreign currency remeasurement loss
172
133
60
Other non-cash items
301
376
(178)
Changes in operating assets and liabilities:
Income taxes
6,462
(2,714)
10,509
Premiums receivable, net
(6,912)
(12,545)
(3,039)
Assumed premiums receivable
—
19,954
(19,954)
Prepaid reinsurance premiums
41,933
(5,828)
(19,605)
Reinsurance recoverable
268,634
(208,215)
338,401
Deferred policy acquisition costs
(5,419)
(11,393)
2,612
Funds withheld for assumed business
6,436
18,397
18,685
Other assets
(10,887)
37,987
(21,448)
Losses and loss adjustment expenses
(269,405)
260,827
(278,692)
Unearned premiums
58,625
83,546
133,110
Advance premiums
435
2,972
(2,692)
Reinsurance payable on paid losses and loss adjustment
expenses
(2,496)
(649)
(5,461)
Ceded reinsurance premiums payable
9,278
9,392
(8,725)
Assumed premiums payable
(432)
1,326
850
Reinsurance recovered in advance on unpaid losses
—
—
(19,863)
Accrued expenses and other liabilities
10,891
2,794
14,264
Net cash provided by operating activities
444,449
331,816
230,658
(continued)
53
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows – (Continued)
(In thousands)
Years Ended December 31,
2025
2024
2023
Cash flows from investing activities:
Investments in limited partnerships
—
(1,233)
(1,483)
Distributions of return of capital from limited partnership investments
2,291
3,591
3,115
Distributions received from unconsolidated joint venture
—
—
18
Purchase of property and equipment
(3,633)
(4,052)
(6,502)
Purchase of real estate investments
(28,386)
(16,066)
(21,405)
Purchase of intangible assets
—
—
(1,786)
Purchase of available-for-sale fixed-maturity securities
(508,530)
(804,037)
(332,152)
Purchase of equity securities
(41,739)
(32,599)
(20,501)
Purchase of other investments
(5,000)
—
—
Purchase of short-term and other investments
—
—
(81)
Proceeds from sales of property and equipment
—
14
—
Proceeds from sales of real estate investments
2,013
—
21,746
Proceeds from sales of available-for-sale fixed-maturity securities
7,655
111,374
22,326
Proceeds from calls, repayments and maturities of
available-for-sale fixed-maturity securities
627,578
457,102
328,719
Proceeds from sales of equity securities
35,023
25,796
12,202
Proceeds from sales, redemptions and maturities of short-term and
other investments
—
—
53
Net cash provided by (used in) investing activities
87,272
(260,110)
4,269
Cash flows from financing activities:
Common stock dividends
(19,289)
(16,598)
(13,719)
(Repayment) borrowing under revolving credit facility, net
(8,000)
44,000
—
Proceeds from issuance of common stock, net of issuance costs
—
—
84,572
Proceeds from issuance of noncontrolling interests, net of issuance costs
156,205
—
—
Payment of other noncontrolling interests issuance costs
(1,069)
—
—
Dividends paid to redeemable noncontrolling interests
—
(2,923)
(6,763)
Proceeds from issuance of long-term debt
17,000
—
12,000
Subscriber surplus contributions, net
6,672
2,949
—
Repayment of long-term debt
(646)
(519)
(562)
Redemption of long-term debt
—
(466)
(6,895)
Debt conversion costs paid
(1,125)
—
—
Payment of net share settlements and other
(1,524)
(1,037)
(784)
Redemption of redeemable noncontrolling interests
—
(100,000)
—
Payment of net share settlements of noncontrolling interests and other
(1,489)
(481)
(354)
Debt issuance costs paid
(538)
(99)
(378)
Net cash provided by (used in) financing activities
146,197
(75,174)
67,117
Effect of exchange rate changes on cash
(229)
(112)
(42)
Net increase (decrease) in cash and cash equivalents and restricted cash
677,689
(3,580)
302,002
Cash and cash equivalents and restricted cash at beginning of year
536,185
539,765
237,763
Cash and cash equivalents and restricted cash at end of year
$
1,213,874 $
536,185 $
539,765
(continued)
54
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows – (Continued)
(In thousands)
Years Ended December 31,
2025
2024
2023
Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds
$
104,389 $
46,154 $
18,987
Interest paid
$
5,684 $
12,666 $
9,248
Non-cash investing and financing activities:
Unrealized gain on investments in available-for-sale
fixed-maturity securities, net of income taxes
$
2,208 $
2,586 $
6,961
Payable on purchases of equity securities
$
187 $
— $
379
Receivable from maturities of available-for-sale
fixed-maturity securities
$
— $
— $
91,085
Conversion of 4.25% Convertible Senior Notes
$
— $
23,450 $
—
Conversion of 4.75% Convertible Senior Notes
$
172,500 $
— $
—
Purchase of real estate investments and intangible assets:
Assumed liability
$
— $
— $
4
See accompanying Notes to Consolidated Financial Statements.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
55
Note 1 -- Nature of Operations
HCI Group, Inc., together with its subsidiaries (“HCI” or the “Company”), is primarily engaged in the property and casualty insurance business through
two insurance companies, Homeowners Choice Property & Casualty Insurance Company, Inc. (“HCPCI”) and TypTap Insurance Company (“TTIC”). The
Company provides various homeowners’ property and casualty insurance products for properties located in the State of Florida, which is the Company's
primary market, as well as in other states in the northeast and southeast regions of the United States (“U.S.”). A third insurance subsidiary, perRisk
Insurance Company (“perRisk”), is domiciled in Arizona and has not yet commenced its surplus lines insurance business.
The Company's insurance operations are supported by other insurance-related subsidiaries within the consolidated group. Exzeo Group, Inc. (formerly
known as TypTap Insurance Group, Inc.) (“Exzeo”), a majority-owned subsidiary, provides turn-key insurance technology and operations solutions based
on a proprietary platform of purpose-built software and data analytics applications that are specifically designed for the property and casualty insurance
ecosystem. The Company utilizes Exzeo's internally developed software technologies to identify profitable underwriting opportunities, drive efficiency in
claim processing and settlements, and streamline operations across our insurance operations and other insurance-related businesses.
The Company also provides attorney-in-fact (“AIF”) services for Condo Owners Reciprocal Exchange (“CORE”) and Tailrow Insurance Exchange
(“Tailrow”), both of which represent reciprocal insurance exchanges owned by their policyholders. Although the Company does not have any equity
interest in CORE and Tailrow, the Company is required to consolidate them as their primary beneficiary. Refer to Note 14 “Variable Interest Entities” for
additional information. In addition, the Company's commercial real estate subsidiary is primarily engaged in the business of developing and operating
commercial properties for investment purposes or for internal use.
HCI Group, Inc. was incorporated in the State of Florida in 2006 and its common stock is currently listed on the New York Stock Exchange “NYSE” under
the symbol “HCI.”
Note 2 -- Summary of Significant Accounting Policies
Basis of Presentation. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America (“U.S. GAAP”).
Principles of Consolidation. The accompanying consolidated financial statements include the accounts of HCI Group, Inc. and its subsidiaries. All
intercompany balances and transactions have been eliminated in consolidation. In addition, the Company evaluates its relationships or investments for
consolidation pursuant to authoritative accounting guidance related to the consolidation of variable interest entities (“VIE”) under the Variable Interest
Model prescribed by the Financial Accounting Standards Board (“FASB”). A VIE is consolidated when the Company has the power to direct activities that
most significantly impact the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits from the VIE that
could potentially be significant to the VIE.
Use of Estimates. The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and
assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. The Company's estimates are based on the
relevant information available at the end of each period. Actual results could differ materially from these estimates under different assumptions or market
conditions. The Company's estimates specific to losses and loss adjustment expenses, reinsurance recoverable, income taxes, stock-based compensation
expense, and limited partnership investments involve the most significant judgments and estimates related to the consolidated financial statements.
Cash and Cash Equivalents. The Company considers all highly liquid investments with original maturities of less than three months from the time of
purchase to be cash and cash equivalents.
Restricted Cash. Restricted cash represents funds in the Company’s sole ownership held by certain states in which the Company’s insurance subsidiaries
conduct business to meet the states' regulatory requirements, and are not available for immediate business use. Funds withheld in an account for which the
Company is a co-owner but not the named beneficiary are not considered restricted cash and are included in funds withheld for assumed business on the
consolidated balance sheets.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
56
Available-for-Sale Fixed-Maturity Securities. Fixed-maturity securities that are available-for-sale primarily relate to debt securities. The Company’s
available-for-sale fixed-maturity securities are carried at fair value. Changes in the fair value of available-for-sale fixed-maturity securities representing
unrealized gains or losses, other than credit losses, are excluded from the consolidated statements of income and are reported in the consolidated balance
sheets as a component of accumulated other comprehensive income (loss), net of deferred income taxes. Realized investment gains and losses from sales
are reported in the consolidated statements of income as net realized investment gains or losses and are recorded on the trade date and are determined using
the first-in first-out (“FIFO”) method. Investment income is recognized as earned and discounts or premiums arising from the purchase of debt securities
are recognized in net investment income using the interest method over the estimated remaining term of the security. Gains and losses from call
redemptions and repayments are recorded to net investment income.
The Company reviews available-for-sale fixed-maturity securities for impairment on a quarterly basis. When reviewing impaired securities, the Company
considers its ability and intent to hold these securities and whether it is probable that the Company will be required to sell these securities prior to their
anticipated recovery or maturity. For the available-for-sale fixed-maturity securities that the Company intends to sell or it is probable that the Company will
have to sell before recovery or maturity, the unrealized losses are recognized as impairment losses in income.
Impaired securities where the Company has the ability and intent to hold until recovery and believes it is not probable that the Company will be required to
sell these securities prior to their anticipated recovery or maturity, are evaluated for the existence of credit-related losses. When determining impairment
due to a credit-related loss, the Company carefully considers factors such as the issuer’s financial ratios and condition, the security’s current ratings and
maturity date, the failure of the issuer to make a scheduled payment, and overall market conditions in estimating the cash flows expected to be collected.
The expected cash flows discounted at the effective interest rate of the security implicit at the date of acquisition are then compared with the security’s
amortized cost at the measurement date. A credit loss is incurred when the present value of the expected cash flows is less than the security’s amortized
cost. If such credit-related losses exist, an allowance for credit losses is established with a charge in the consolidated statements of income. Subsequent
changes in the allowance, whether favorable or unfavorable, are recorded on the consolidated statements of income. Any remaining impairment loss related
to other non-credit factors such as changes in interest rates or market conditions is reflected as a component of accumulated other comprehensive income
(loss).
Allowance for Credit Losses. Allowance for credit losses represents an estimation of potential losses that the Company may experience due to credit risk.
The allowance for credit losses account is a contra account of a financial asset to reflect the net amount expected to be collected. Any increase or decrease
in the allowance for credit losses related to investments is recognized and reflected as credit losses on investments in the Company’s consolidated
statements of income. For all other financial assets, credit loss expense is included in other operating expenses. When the risk of credit loss becomes
certain, the allowance for credit losses account will be written off against the financial asset. Under the Current Expected Credit Loss (“CECL”) model, the
Company measures all expected credit losses related to relevant financial assets based on historical experience, current conditions, and reasonable and
supportable forecasts which incorporate forward-looking information. The Company primarily uses a discounted cash flow method and a rating-based
method in estimating credit losses at a reporting date for financial assets under the scope of the CECL model. The discounted cash flow method is a
valuation method used to estimate the value of a financial asset based on its future cash flows. The Company uses this method to determine the expected
credit losses for available-for-sale fixed-maturity securities. In addition, the Company elected not to measure an allowance for credit losses for accrued
interest receivable as any uncollectible amount is adjusted to interest income on a monthly basis. The exposure to credit losses for certain financial assets
related to non-insurance business is considered immaterial to the Company’s financial position.
For certain financial assets related to insurance business such as reinsurance recoverable and reinsurance receivable for premium refund, the Company uses
a rating-based method, which is a modified version of the probability of default method. It requires two key inputs: a) the liquidation rate and b) the amount
of loss exposure. The liquidation rate, which is published annually, is the ratio of impaired insurance companies that were eventually liquidated to the
group of insurance companies considered by A.M. Best in its study. The amount of loss exposure represents the future billing balance, net of any collateral,
spread over the projected periods that are based on the Company’s historical claim payment pattern. The rating-based method measures credit losses by
multiplying the future billings grouped by insurance rating over the projected periods by their corresponding liquidation rates by insurance rating.
For paid reinsurance recoverable which is due within 90 days after billing, the Company will rely heavily on each reinsurer’s credit rating, recent financial
condition, and historical collection problems, if any, in determining the expected credit loss. For risk attributable to disagreements between an insurer and
reinsurer regarding a difference in interpretation of provisions in a reinsurance agreement (“dispute risk”), the Company will continue to use an incurred
loss method to estimate losses. As of December 31, 2025 and 2024, there were no dispute risks associated with the reinsurance recoverable balance.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
57
Equity Securities. Equity securities represent ownership interests held by the Company in entities for investment purposes. Unrealized holding gains and
losses related to equity securities are reported in the consolidated statements of income as net unrealized investment gains and losses. Realized investment
gains and losses from sales are reported in the consolidated statements of income as net realized investment gains or losses and are recorded on the trade
date and are determined using the FIFO method.
Limited Partnership Investments. The Company has interests in limited partnerships that are not registered under the United States Securities Act of 1933,
as amended, the securities laws of any state or the securities laws of any other jurisdictions. The partnership interests cannot be resold in the public market
and any withdrawal is subject to the terms and conditions of the partnership agreements. The Company has no influence over partnership operating and
financial policies. The Company uses the equity method to account for the investments with ownership interest greater than five percent. For the
investments with ownership interest at five percent or less, the Company uses the net asset value method to estimate the fair value of these investments.
The Company generally recognizes its share of the limited partnerships’ earnings or losses on a three-month lag. Due to the lag, the Company may record
an adjustment to the Company’s most recent share of net asset value when the amount can be reasonably estimated and a significant adverse impact on the
net asset value is expected as a result of a major economic event.
Net investment income or loss from limited partnerships represents a net aggregate amount of operating results allocated to the Company based on the
percentage of ownership interest in each limited partnership. These limited partnerships measure their investments at fair value and reflect the related
unrealized gains and losses in their statements of income. Accordingly, the application of the equity method and the net asset value method result in the
carrying value of limited partnership investments to approximate their estimated fair value as of each reporting date.
Distributions from limited partnership investments that represent a return on investment are classified as operating cash flows in the consolidated
statements of cash flows while distributions from limited partnership investments that represent a return of capital are classified as investing cash flows in
the consolidated statements of cash flows.
Real Estate Investments. Real estate investments include real estate and the related assets purchased for investment purposes. Real estate and the related
depreciable assets are stated at historical cost less accumulated depreciation. Depreciation expense for real estate investments is included in net investment
income in the consolidated statements of income and is calculated on a straight-line basis over the estimated useful lives. Real estate investments are
evaluated for impairment when events or circumstances indicate the carrying value of the real estate may not be recoverable.
Deferred Policy Acquisition Costs. Deferred policy acquisition costs (“DAC”) represent direct costs to acquire insurance contracts and consist of premium
taxes, inspection fees, and commissions paid to outside agents at the time of collection of the policy premium. DAC may also include expenses associated
with the transition of policies from other insurers for replacement policies and the issuance of renewal policies under the Company’s own rates and terms.
DAC is amortized over the life of the related policy in relation to the amount of gross premiums earned. Ceding commission and related costs paid
associated with assumed business are also deferred and amortized over the life of the reinsurance agreement. The amortization of DAC is included in policy
acquisition and other underwriting expenses in the consolidated statements of income.
DAC is reviewed to determine if it is recoverable based on future premium income, investment income, unpaid losses and loss adjustment expenses, and
certain other costs expected to be incurred as premiums are earned. If DAC is determined to be unrecoverable, it is expensed at the time of determination.
The amount of DAC considered recoverable could be reduced in the near term if the estimates of total gross premium earned are reduced or permanently
impaired as a result of the disposition of a line of business. The amount of amortization of DAC could be revised in the near term if any of the gross
premium earned estimates discussed above are revised.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
58
Property and Equipment. Property and equipment is stated at historical cost less accumulated depreciation. Depreciation expense is included in other
operating expenses in the consolidated statements of income and is calculated on a straight-line basis over the estimated useful lives as follows:
Asset Category
Estimated Useful Life
Land improvements
5 - 15 years
Buildings
39 years
Building improvements
3 - 10 years
Computer hardware and purchased software
3 years
Internally developed software
7 years
Office furniture and equipment
3 - 7 years
Tenant and leasehold improvements
Shorter of lease term or useful life
Expenditures for improvements are capitalized to the property accounts. Replacements and maintenance and repairs that do not improve or extend the life
of the respective assets are expensed as incurred. The Company capitalizes both internal and external costs for internally developed software during the
application development stage. During the preliminary project and post-implementation stage, internal-use software development costs are expensed as
incurred. Capitalized software costs are depreciated on a straight-line basis over the estimated useful life of seven years.
Impairment of Long-Lived Assets. Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be recoverable. The Company groups assets at the lowest level for which cash flows
are separately identified. The Company assesses the recoverability of an asset group by determining whether the assets can be recovered from undiscounted
future cash flows. If the expected undiscounted future cash flows of an asset group are less than its carrying amount, an impairment loss is recognized
based on the amount by which the carrying amount exceeds the fair value less costs to sell. The calculation of the fair value less costs to sell of an asset
group is based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of
perceived risk. There were no material impairments of long-lived assets during the periods presented.
Leases. The Company leases office equipment, storage units, and office space from non-affiliates. In assessing whether a contract is or contains a lease, the
Company first determines whether there is an identified asset in the contract. The Company then determines whether the contract conveys the right to
obtain substantially all of the economic benefits from use of the identified asset or the right to direct the use of the identified asset. The Company elects not
to record any lease with a term of 12 months or less on the consolidated balance sheet. For such short-term leases, the Company recognizes the lease
payments in expense on a straight-line basis over the lease term.
If the contract is or contains a lease and the Company has the right to control the use of the identified asset, the right-of-use (“ROU”) asset and the lease
liability is measured from the lease component of the contract and recognized on the consolidated balance sheet. In measuring the lease liability, the
Company uses its incremental borrowing rate for a loan secured by a similar asset that has a term similar to the lease term to discount the lease payments.
The contract is further evaluated to determine the classification of the lease as to whether it is finance or operating. If the lease is a finance lease, the ROU
asset is depreciated to depreciation expense over the shorter of the useful life of the asset or the lease term. Interest expense is recorded in connection with
the lease liability using the effective interest method. If the lease is an operating lease, the ROU asset is amortized to lease expense on a straight-line basis
over the lease term. For the presentation of finance leases on the Company’s consolidated balance sheets, ROU assets and corresponding lease liabilities are
included with property and equipment, net, and long-term debt, respectively. For the presentation of operating leases on the Company’s consolidated
balance sheets, ROU assets and corresponding lease liabilities are included in other assets and accrued expenses and other liabilities, respectively. The
Company does not have any material operating or financing lease arrangements in which it is the lessee.
The Company as a lessor leases its commercial and retail properties, boat slips, and docks to non-affiliates at various terms. If the contract gives the
Company’s customer the right to control the use of the identified asset, revenue is recognized on a straight-line basis over the lease term. Initial direct costs
incurred by the Company are deferred and amortized on a straight-line basis over the lease term. The Company also records an unbilled receivable, which
is the amount by which straight-line revenue exceeds the amount billed in accordance with the lease. The underlying assets are presented as real estate
investments in the consolidated balance sheets.
Intangible Assets. Intangible assets related to real estate investments consist of the value attributable to the acquired in-place leases and the anchor tenant
relationships. The value attributable to the anchor tenant relationship represents the economic benefits of having a
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
59
nationally recognized retailer as the lead tenant, which draws consumer traffic and other tenants to the retail center. These intangibles are amortized on a
straight-line basis over the related lease term. Amortization of the intangible assets related to real estate investments is reflected in net investment income in
the consolidated statements of income.
Intangible assets also include the fair value of consideration the Company paid and is estimated to pay in exchange for the renewal rights and non-compete
intangible assets acquired from the seller. In the renewal rights transactions, the Company purchased the right, but not the obligation, to offer homeowners
insurance coverage to all policyholders of the seller in certain states on the agreed-upon policy replacement date. The renewal rights agreements also
contain a non-compete clause whereby the seller agrees not to offer homeowners insurance policies in these states through a specified date. These
intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization of the renewal rights and non-compete intangible
assets is reflected in other operating expenses in the consolidated statements of income.
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be
recoverable. In the event the Company determines the carrying value is not recoverable, an impairment loss is recorded in the Company’s consolidated
statements of income. There were no material impairments of intangible assets during the periods presented.
Funds Withheld for Assumed Business. Pursuant to the Company’s quota share reinsurance agreements with United Property & Casualty Insurance
Company (“United”), trust accounts were established for the benefit of United as beneficiary. The trust balances represent the net amount owed to the
Company under the reinsurance agreements. The trusts consist of a) funds deposited to establish the accounts and b) premiums, including any subsequent
premium adjustment, and are reduced by commissions and paid losses and loss adjustment expenses. The assets within the trust accounts consist primarily
of cash. Funds remaining at the completion of the quota share agreements are to be distributed according to the trust agreements. Prior to United being
placed into receivership by the State of Florida on February 27, 2023, United had the exclusive and unconditional right to withdraw funds from the trust
accounts on demand with written notice in compliance with the quota share reinsurance agreements. The funds are now under the control of the receiver.
Lease Acquisition Costs. Lease acquisition costs represent capitalized costs of finding and acquiring tenants such as leasing commissions, legal, and
marketing expenses. The costs are included in other assets on the consolidated balance sheets. The Company amortizes these costs in other operating
expenses on a straight-line basis over the term of a lease.
Long-Term Debt. Long-term debt includes debt instruments and finance lease liabilities. A debt instrument is generally classified as a liability and carried
at amortized cost, net of any issuance costs. Debt issuance costs are capitalized and amortized to interest expense over the expected life of the debt
instrument using the effective interest method. At issuance, a debt instrument with embedded features such as conversion and redemption options is
evaluated to determine whether bifurcation and derivative accounting is applicable. Any embedded feature other than the conversion option is evaluated at
issuance to determine if it is probable that such embedded feature will be exercised. If the Company concludes that the exercisability of that embedded
feature is not probable, the embedded feature is considered to be non-substantive and would not impact the initial measurement and expected life of the
debt instrument.
Redeemable Noncontrolling Interests. A redeemable noncontrolling interest relates to the portion of the economic interest of a subsidiary or consolidated
VIE that is not owned by the Company and for which the redemption of the interest is outside the control of the Company. Redeemable noncontrolling
interests are presented in temporary equity (mezzanine) section of the consolidated balance sheets.
CORE and Tailrow are each considered to be a consolidated VIE. The redeemable noncontrolling interests in CORE and Tailrow represent a refundable
portion of subscriber surplus contributions. In general, a reciprocal insurance exchange collects surplus contributions in addition to policy premiums from
its policyholders referred to as subscribers. The purpose of the surplus contribution is to support the reciprocal insurance exchange's financial strength and
lower their cost of capital. The surplus contribution made during a policy term may be returned on a pro-rata basis to a subscriber in the event of policy
cancellation. As the term of an insurance policy progresses, a portion of the surplus contribution is reclassified from redeemable noncontrolling interest to
the noncontrolling interest as the surplus contributions become non-refundable.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
60
Prior to redemption in the first quarter of 2024, Exzeo issued Series A preferred stock to an investor (“Exzeo Series A Preferred Stock”), which contained
rights in dividends, voting, conversion, participation, liquidation preference and redemption. The Exzeo Series A Preferred Stock was classified as
temporary equity (mezzanine) on the consolidated balance sheets as the redemption features were not solely within the Company's control. At issuance, the
Series A Preferred Stock was recorded at fair value, net of issuance costs, applying a residual fair value method. Subsequent to issuance, the carrying
amount was adjusted each reporting period for (i) accrued dividends (ii) dividend payments, and (iii) accretion required to reflect the increasing contractual
dividend rate over the life of the instrument. Dividends were contractually payable in cash or in kind and were accrued monthly based on the assumption of
cash settlement. In periods when redemption became probable or determinable, the carrying amount was adjusted to the greater of (i) the contractual
redemption amount or (ii) fair value at the reporting date. Such adjustments were treated as deemed dividends when calculating net income attributable to
common stockholders. The effect of dividends and increasing dividend rates were recorded to net income or loss attributable to redeemable noncontrolling
interests in the consolidated statements of income.
Noncontrolling Interests. A noncontrolling interest relates to the portion of the economic interest of a subsidiary or consolidated VIE that is not owned by
the Company. Accordingly, the Company has noncontrolling interests attributable to Exzeo, CORE, and Tailrow. Noncontrolling interests are adjusted for
the net income or loss of the subsidiary or consolidated VIE that is not owned by the Company, which is reflected as income or loss attributable to
noncontrolling interests in the consolidated statements of income, as well as any associated changes in accumulated other comprehensive income or loss.
Additionally, noncontrolling interests are periodically adjusted for transactions which change the Company's economic interest of a subsidiary or
consolidated VIE. The Company includes stock-compensation associated with stock-based awards granted by a subsidiary or consolidated VIE in
noncontrolling interests.
Losses and Loss Adjustment Expenses. The Company accrues for losses and loss adjustment expenses (“LAE”) in the period in which the underlying loss
event occurred. LAE are costs associated with the investigation, evaluation, adjustment, and settlement of insurance claims and can be either allocated,
costs directly attributable to a specific claim, or unallocated, costs that cannot be directly attributed to a specific claim. Reserves for losses and LAE are
determined by establishing liabilities in amounts estimated to cover incurred losses and LAE. Such reserves are determined based on the assessment of
claims reported and the development of pending claims. These reserves are based on individual case estimates for the reported losses and LAE and
estimates of such amounts that are incurred but not reported.
The estimates of unpaid losses and LAE are subject to trends in claim severity and frequency and are continually reviewed. As part of the process, the
Company reviews historical data and considers various factors, including known and anticipated regulatory and legal developments, changes in social
attitudes, inflation and economic conditions. As experience develops and other data becomes available, these estimates are revised, as required, resulting in
increases or decreases to the existing unpaid losses and LAE. Adjustments are reflected in the results of operations in the period in which they are made
and the liabilities may deviate substantially from prior estimates. Losses and LAE ceded to or recovered from reinsurers are recorded as a reduction to
losses and LAE on the consolidated statements of income. Accordingly, losses and LAE in the consolidated statements of income are net of reinsurance.
Advance Premiums. Premium payments received prior to the policy effective date are recorded as advance premiums. Once the policy is in force, the
premiums are recorded as described under “Premium Revenue” below.
Premiums Receivable. Premiums receivable represent the amount of premiums due from policyholders for insurance coverage. Premiums are recorded as
receivable in the Company’s general ledger on the effective date of the policy. Premiums are billed to the policyholder 45-60 days in advance of the
effective date. The policyholder is given a 30-day grace period after the effective date to pay the premium before the insurance coverage is cancelled. If the
policyholder does not pay the premium, the Company can cancel the policy and has no obligation to provide insurance coverage. Unpaid renewal policies
are cancelled at midnight on the last day of the period for which the policyholder has paid. The unearned premium liability for the cancelled policy is
reversed along with the premium receivable balance. Therefore, there is no unpaid earned premium and credit loss associated with the cancelled policy.
However, when the 30-day grace period falls between two reporting periods, the premium receivable balance at the end of the first reporting period may
potentially be overstated for not considering the policy that is subsequently cancelled during the following reporting period. To mitigate the overstatement
issue, the Company estimates the monetary impact from the subsequent policy cancellation by multiplying the historical cancellation rate to the premiums
receivable balance at the reporting date. An allowance for uncollectible premiums, which offsets the balance of premiums receivable, is established by
reducing the unearned premiums liability and earned revenues.
As of December 31, 2025 and 2024, allowances for uncollectible premiums were $4,469 and $5,891 respectively.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
61
Reinsurance Ceded. In the normal course of business, the Company seeks to reduce the loss that may arise from catastrophes or other events by reinsuring
certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers. The Company contracts with a number of reinsurers to
secure its annual reinsurance coverage, which generally becomes effective June 1st of each year. The Company purchases reinsurance each year taking into
consideration probable maximum losses and reinsurance market conditions. Amounts recoverable from reinsurers are estimated in a manner consistent with
the applicable reinsurance contract or contracts. Premiums ceded to other companies have been reported as a reduction of gross premiums earned to arrive
at net premiums earned. Prepaid reinsurance premiums represent the unexpired portion of premiums ceded to reinsurers.
From time to time, the Company may elect to pay a reinstatement premium to a reinsurer in order to restore an amount of reinsurance coverage limit
exhausted by a loss event. When that occurs, the unamortized portion of the existing prepaid reinsurance premium associated with the first coverage limit
will be immediately expensed. The reinstatement premium will be recognized as prepaid reinsurance premium which will be amortized to premiums ceded
over the remaining coverage period of a contract.
One of the Company’s reinsurance contracts contained retrospective provisions including terms and conditions that adjust premiums based on the loss
experience under the contract. In such cases, a with-and-without method is used to estimate the asset or liability amount to be recognized at each reporting
date. The amount of the estimate is the difference between the net contract costs before and after the loss experience under the contract. Estimates related to
premium adjustments are recognized in ceded premiums earned. These estimates are reviewed monthly based on the loss experience to date and as
adjustments become necessary. Such adjustments in premiums ceded are reflected in the Company’s current operations and recorded in other assets until
received upon the expiration of the contract.
The Company may receive ceding commissions from ceding gross written premiums to a third-party reinsurer under a reinsurance contract. The ceding
commissions represent the reimbursement of the Company’s policy acquisition, underwriting and other operating expenses. Ceding commissions received
cover a portion of premium taxes and agent commissions deferred by the Company and a portion of non-deferred acquisition costs and other underwriting
expenses. Ceding commissions are recognized as income on a pro-rata basis over the terms of the policies reinsured, the amount of which is included in
policy acquisition and other underwriting expenses in the consolidated statements of income. The unearned portion of ceding commissions that represents
recovery of DAC is classified as a reduction of DAC whereas the remaining unearned balance is classified as deferred revenue in accrued expenses and
other liabilities.
Reinsurance Assumed. From time to time, the Company agrees to assume risk from another insurance company. Reinsurance premiums, commission, cost
allowance, and reserves related to reinsured business are accounted for on a basis consistent with those used in accounting for the original policies issued
and the terms of the reinsurance contracts. Premiums assumed from other insurance companies are included in gross premiums earned. Ceding
commissions on assumed gross written premiums and related costs paid are reflected as DAC which is amortized as expense on a pro-rata basis over the
life of the reinsurance agreement. This amortized expense is included in policy acquisition and other underwriting expenses in the consolidated statements
of income.
Premium Revenue. Premium revenue includes premium from the direct issuance of policies to insureds or the renewal or replacement of insureds’ policies
and assumed premium for providing coverage under reinsurance agreements. Premium revenue is earned on a daily pro-rata basis over the term of the
policies and is included in gross premiums earned. Unearned premiums represent the portion of the premiums attributable to the unexpired policy term. The
Company reviews its policy detail and establishes an allowance for any amount outstanding for more than 90 days.
Policy Fees. Policy fees represent nonrefundable fees for insurance coverage, which are intended to reimburse a portion of the costs incurred to underwrite
the policy. Policy fees are recognized ratably over the policy coverage period.
Insurance Guaranty Association Assessments. The Company’s insurance subsidiaries may be assessed by state associations such as the Florida Insurance
Guaranty Association (“FIGA”). The assessments are intended to be used for the payment of covered claims of insolvent insurance entities. The
assessments are generally based on a percentage of premiums written during or following the year of insolvency. Liabilities are recognized when the
assessments are probable to be imposed on the premiums on which they are expected to be based and the amounts can be reasonably estimated and are
included in accrued expenses and other liabilities on the consolidated balance sheets. An insurer is generally permitted to recover the entire amount of
assessments from in-force and future policyholders through policy surcharges. U.S. GAAP provides that the Company should record an asset based on the
amount of written or obligated-to-write premiums and limited to the amounts recoverable over the life of the in-force policies.
Foreign Currency. The functional currency of the Company’s Indian subsidiary is the U.S. dollar. As such, the monetary assets and liabilities of this
subsidiary are remeasured into U.S. dollars at the exchange rate in effect on the balance sheet date. Non-monetary
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
62
assets and liabilities are remeasured using historical rates. Expenses recorded in the local currency are remeasured at the prevailing exchange rate.
Exchange gains and losses resulting from these remeasurements are included in other operating expenses.
Income Taxes. The Company files consolidated federal and state income tax returns and allocate taxes among its subsidiaries in accordance with a written
tax-allocation agreement.
The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred income tax assets and
liabilities are recognized for the temporary differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax basis. The effect on deferred income tax assets and liabilities of a change in tax laws is recognized in the results of operations in the period
the new laws are enacted. A valuation allowance is recorded to reduce the carrying amount of deferred income tax assets to the estimated realization
amount.
The valuation allowance for deferred income tax assets relates to the uncertainty of the utilization of U.S. federal, state and foreign deferred income tax
assets. In evaluating the Company's ability to recover its deferred income tax assets, the Company considers all available positive and negative evidence,
which include its past operating results, the existence of cumulative losses in the most recent years, and its forecast of future taxable income. In estimating
future taxable income, the Company develops assumptions related to the amount of future pre-tax operating income, the reversal of temporary differences,
and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable
income and are consistent with the plans and estimates the Company uses to manage its underlying businesses.
The Company recognizes positions taken or expected to be taken in a tax return in the consolidated financial statements when it is more-likely-than-not
(i.e., a likelihood of more than 50%) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured
at the largest amount of benefit with greater than 50% likelihood of being realized upon ultimate settlement. The Company records liabilities for positions
that have been taken but do not meet the more-likely-than-not recognition threshold. The Company includes interest and penalties associated with
unrecognized tax benefits as income tax expense and as a component of the recorded balance of unrecognized tax benefits.
Stock-Based Compensation. The Company issues stock-based compensation awards to employees and non-employee directors on a periodic basis in the
form of stock options and restricted stock awards. The fair value of a stock-based award is determined on the date of grant and recognized over a period of
time, depending on the type and conditions underlying the award.
For stock-based awards that contain only a service-based vesting condition, the grant date fair value of the award is recognized as compensation expense on
a straight-line basis over the requisite service period. The fair value of a stock option is determined using the Black-Scholes option-pricing model, which
uses the following significant inputs and assumptions: (i) the price per share of common stock, (ii) the exercise price, (iii) the risk-free interest rate, (iv) the
dividend yield, (v) the contractual term, and (vi) the estimated volatility. These inputs are developed based on historical data and market information. The
fair value of a restricted stock award is determined by the market price of the stock on the date of grant.
For restricted stock awards that contain a market-based vesting condition, fair value is determined using a Monte Carlo simulation model with the
assistance of a third-party valuation specialist. Additionally, the grant date fair value of the award is recognized as compensation expense on a straight-line
basis over the derived service period, which is also determined using a Monte Carlo simulation. The recognition of expense may be accelerated if the
market conditions are met sooner than estimated.
For stock-based awards granted by a non-public subsidiary, an independent valuation specialist will assist in determining the fair value of the underlying
stock price of the subsidiary using different valuation methods such as a Monte Carlo simulation model and a binomial distribution model. Inputs such as
an estimated stock price of the Company's private subsidiary and expected price volatility used in these valuation methods are derived mathematically from
a data analysis of many public peer companies with similar characteristics.
The Company's stock-based compensation awards are equity-classified with the associated compensation expense included in general and administrative
personnel expenses in the consolidated statements of income. Stock-based compensation for awards granted under a subsidiary's stock-based compensation
plan are included in noncontrolling interests in the consolidated balance sheets. The Company recognizes forfeitures as they occur and does not estimate
forfeiture rates at grant date. Previously recognized compensation expense is reversed in the period an award is forfeited. Tax windfalls or tax shortfalls
related to stock-based awards are recognized in the consolidated statements of income in the period the awards vest or are exercised.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
63
Basic and Diluted Earnings Per Share. The Company applies the two-class method for computing and presenting earnings per share since the Company’s
unvested restricted stock awards represent participating securities due to the right to share in dividends, if declared, equally with common stockholders. The
two-class method allocates current period net income to common stock and participating securities based on (i) dividends declared and (ii) participation
rights in the remaining undistributed income. For a majority-owned subsidiary, the Company’s proportionate share in that majority-owned subsidiary’s
earnings per share is added to the computation of earnings per share on a consolidated basis.
Basic earnings per share is computed by dividing income attributable to common stockholders using the two-class method by the weighted-average number
of shares of common stock outstanding during the period.
Diluted earnings per share gives effect to all securities having a dilutive effect on income attributable to common stockholders, weighted-average shares of
common stock outstanding, or both. The effect from potential dilutive securities included, but was not limited to: (i) incremental shares of common stock
calculated using the if-converted method for convertible debt instruments; (ii) incremental shares of common stock calculated using the treasury stock
method for warrants and share-based compensation awards; (iii) adjustments to a majority-owned subsidiary's earnings per share due to its potentially
dilutive securities; and (iv) the corresponding impact to income attributable to common stockholders associated with the preceding considerations. Net
losses are not allocated to participating securities as the participating securities do not have a contractual obligation to share in losses.
Statutory Accounting Practices. The Company’s U.S. insurance subsidiaries comply with statutory accounting practices prescribed by the National
Association of Insurance Commissioners (“NAIC”) and as adopted or permitted by the Florida Department of Financial Services, Office of Insurance
Regulation (“FLOIR”). There are no state prescribed or permitted practices that have been adopted by the Company’s U.S. subsidiaries. In addition,
Claddaugh Casualty Insurance Company, Ltd. (“Claddaugh”), the Company’s wholly-owned Bermuda domiciled captive reinsurance subsidiary, prepares
and files financial statements in accordance with the prescribed regulatory accounting practices of the Bermuda Monetary Authority.
Reclassification. Certain reclassifications of prior year amounts have been made to conform to the current year presentation.
Note 3 -- Recent Accounting Pronouncements
Adopted
Accounting Standards Update No. 2023-09. In December 2023, the FASB issued Accounting Standards Update No. 2023-09 (“ASU 2023-09”) Income
Taxes (Topic 740): Improvements to Income Tax Disclosures. This update enhances income tax disclosures by requiring public entities to report income tax
expense disaggregated by federal, state, and foreign taxes, with further detail on specific jurisdictions over a quantitative threshold. In addition, public
entities must also separately disclose reconciling items equal to or greater than five percent of pretax income from operations by the applicable federal
statutory rate. ASU 2023-09 is effective for public entities for annual periods beginning after December 15, 2024. The adoption of this update resulted in
additional income tax disclosures.
Accounting Standards Update No. 2024-04. In November 2024, the FASB issued Accounting Standards Update No. 2024-04 (“ASU 2024-04”) Debt–
Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. This update clarifies whether entities
should apply extinguishment accounting or induced conversion accounting when recording the settlement of convertible debt instruments due to an induced
conversion. ASU 2024-04 is effective for all entities for fiscal years beginning after December 15, 2025. Early adoption is permitted. The Company elected
to early adopt this update effective January 1, 2025. The adoption of this update had no impact on the Company’s financial position or results of operation
upon adoption as the new guidance applies prospectively from January 1, 2025.
Pending Adoption
Accounting Standards Update No. 2025-01 and 2024-03. In January 2025, the FASB issued Accounting Standards Update No. 2025-01 (“ASU 2025-01”)
Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This update
clarifies the effective date of Accounting Standards Update No. 2024-03 (“ASU 2024-03”) Income Statement–Reporting Comprehensive Income–Expense
Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which was issued by the FASB in November 2024. For
public business entities, ASU 2024-03 enhances disclosures by requiring the disaggregation of certain expense captions presented within the income
statement, such as employee
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
64
compensation and intangible asset amortization. In addition, the total relevant expense caption on the income statement must be reconciled to the aggregate
of the separately disclosed expense categories with the difference represented by an “other items” amount which is qualitatively described. ASU 2024-03 is
effective for all public business entities for annual reporting periods beginning after December 15, 2026 and interim periods within annual reporting periods
beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating its impact.
Accounting Standards Update No. 2025-05. In July 2025, the FASB issued Accounting Standards Update No. 2025-05 (“ASU 2025-05”) Financial
Instruments–Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This update simplifies the estimation
of current expected credit losses on current accounts receivable and current contract assets related to revenue from contracts with customers by allowing all
entities to assume that current conditions as of the balance sheet date will not change for the remaining life of the current accounts receivable and current
contract assets. ASU 2025-05 is effective for all entities for fiscal years and interim periods beginning after December 15, 2025. Early adoption is
permitted. The Company is evaluating its impact.
Accounting Standards Update No. 2025-06. In September 2025, the FASB issued Accounting Standards Update No. 2025-06 (“ASU 2025-06”)
Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This
update enhances guidance on the capitalization of software development costs by eliminating project phase based criteria and clarifying the conditions
signifying significant development uncertainty used by entities to evaluate when the probable-to-complete recognition threshold is met. ASU 2025-06 is
effective for all entities for fiscal years and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating its
impact.
Note 4 -- Cash and Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Company’s consolidated balance sheets
that sum to the total of the same such amounts shown in the consolidated statements of cash flows:
December 31,
2025
2024
Cash and cash equivalents
$
1,210,126 $
532,471
Restricted cash
3,748
3,714
Cash and cash equivalents and restricted cash
$
1,213,874 $
536,185
The majority of the Company’s cash and cash equivalents are held at major financial institutions. Certain account balances exceed the Federal Deposit
Insurance Corporation insurance limits of $250 per account. As a result, there is a concentration of credit risk related to amounts in excess of the insurance
limits. The Company regularly monitors the financial stability of these financial institutions and believes that there is no exposure to any significant credit
risk in cash and cash equivalents.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
65
Note 5 -- Investments
Available-for-Sale Fixed-Maturity Securities
The Company holds investments in fixed-maturity securities that are classified as available-for-sale. As of December 31, 2025 and 2024, the cost or
amortized cost, allowance for credit loss, gross unrealized gains and losses, and estimated fair value of the Company’s available-for-sale fixed-maturity
securities by security type were as follows:
Cost or
Amortized
Allowance
for
Gross
Unrealized
Gross
Unrealized
Estimated
Fair
Cost
Credit Loss
Gain
Loss
Value
As of December 31, 2025
U.S. Treasury and U.S. government
agencies
$
332,284 $
— $
1,785 $
(717) $
333,352
Corporate bonds
241,843
—
1,463
(384)
242,922
Commercial mortgage-backed securities
21,256
—
74
(275)
21,055
Available-for-sale fixed-maturity
securities
$
595,383 $
— $
3,322 $
(1,376) $
597,329
As of December 31, 2024
U.S. Treasury and U.S. government
agencies
$
688,123 $
— $
2,019 $
(2,726) $
687,416
Corporate bonds
31,413
—
79
(371)
31,121
Available-for-sale fixed-maturity
securities
$
719,536 $
— $
2,098 $
(3,097) $
718,537
Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties. The
scheduled contractual maturities of available-for-sale fixed-maturity securities as of December 31, 2025 and 2024 are as follows, with securities not due at
a single maturity date shown separately:
December 31,
2025
2024
Cost or
Estimated
Cost or
Estimated
Amortized
Fair
Amortized
Fair
Cost
Value
Cost
Value
Due in one year or less
$
10,202 $
10,214 $
520,005 $
521,301
Due after one year through five years
353,454
354,648
98,831
98,808
Due after five years through ten years
209,970
210,963
100,206
97,932
Due after ten years
501
449
494
496
Commercial mortgage-backed securities
21,256
21,055
—
—
Available-for-sale
fixed-maturity securities
$
595,383 $
597,329 $
719,536 $
718,537
Securities on Deposit
The fair value of available-for-sale fixed-maturity securities on deposit with various regulatory authorities as of December 31, 2025 and 2024 was $1,807
and $1,794, respectively.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
66
Sales of Available-for-Sale Fixed-Maturity Securities
Proceeds received, and the gross realized gains and losses from sales of available-for-sale fixed-maturity securities, during 2025, 2024, and 2023 were as
follows:
Gross
Gross
Realized
Realized
Proceeds
Gains
Losses
Year ended December 31, 2025
$
7,655
$
104
$
(15)
Year ended December 31, 2024
$
111,374
$
1,845
$
(56)
Year ended December 31, 2023
$
22,326
$
7
$
(1,036)
Gross Unrealized Losses for Available-for-Sale Fixed-Maturity Securities
Available-for-sale fixed maturity securities with gross unrealized loss positions as of December 31, 2025 and 2024, aggregated by investment category and
length of time the individual securities have been in a continuous loss position, were as follows:
Less Than Twelve Months
Twelve Months or Longer
Total
As of December 31, 2025
Gross
Unrealized
Loss
Estimated
Fair
Value
Gross
Unrealized
Loss
Estimated
Fair
Value
Gross
Unrealized
Loss
Estimated
Fair
Value
U.S. Treasury and U.S.
government agencies
$
(553) $
208,273 $
(164) $
2,918 $
(717) $
211,191
Corporate bonds
(289)
28,303
(95)
1,187
(384)
29,490
Commercial mortgage-backed
securities
(275)
16,749
—
—
(275)
16,749
Total
$
(1,117) $
253,325 $
(259) $
4,105 $
(1,376) $
257,430
Less Than Twelve Months
Twelve Months or Longer
Total
As of December 31, 2024
Gross
Unrealized
Loss
Estimated
Fair
Value
Gross
Unrealized
Loss
Estimated
Fair
Value
Gross
Unrealized
Loss
Estimated
Fair
Value
U.S. Treasury and U.S.
government agencies
$
(2,063) $
97,771 $
(663) $
104,872 $
(2,726) $
202,643
Corporate bonds
(53)
6,296
(318)
15,255
(371)
21,551
Total
$
(2,116) $
104,067 $
(981) $
120,127 $
(3,097) $
224,194
As of December 31, 2025 and 2024, there were 47 and 56 available-for-sale fixed-maturity securities, respectively, in an unrealized loss position.
Allowance for Credit Losses of Available-for-Sale Fixed-Maturity Securities
The Company regularly reviews its individual available-for-sale fixed-maturity securities for credit impairment. The Company considers various factors in
determining whether a credit loss exists for each individual security, including:
•
the financial condition and near-term prospects of the issuer, including any specific events that may affect its operations or earnings;
•
the extent to which the market value of the security has been below its cost or amortized cost;
•
general market conditions and industry or sector specific factors and other qualitative factors;
•
nonpayment by the issuer of its contractually obligated interest and principal payments; and
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
67
•
the Company’s intent and ability to hold the investment for a period of time sufficient to allow for the recovery of costs.
There was no balance or activity in the allowance for credit losses of available-for-sale fixed maturity securities during 2025, 2024, and 2023.
Equity Securities
The Company holds investments in equity securities measured at fair values which are readily determinable. As of December 31, 2025 and 2024, the cost,
gross unrealized gains and losses, and estimated fair value of the Company’s equity securities were as follows:
Gross
Unrealized
Gross
Unrealized
Estimated
Fair
Cost
Gain
Loss
Value
December 31, 2025
$
61,597 $
6,204 $
(1,911) $
65,890
December 31, 2024
$
52,030 $
6,427 $
(2,257) $
56,200
The table below presents the portion of unrealized gains and losses in the Company’s consolidated statements of income related to equity securities still
held:
Years Ended December 31,
2025
2024
2023
Net gains recognized
$
2,787 $
4,239 $
2,282
Exclude: Net realized gains (losses) recognized for
securities sold
2,664
1,595
(933)
Net unrealized investment gains
$
123 $
2,644 $
3,215
Sales of Equity Securities
Proceeds received, and the gross realized gains and losses from sales of equity securities, during 2025, 2024, and 2023 were as follows:
Gross
Realized
Gross
Realized
Proceeds
Gains
Losses
Year ended December 31, 2025
$
35,023 $
3,432 $
(768)
Year ended December 31, 2024
$
25,796 $
2,229 $
(634)
Year ended December 31, 2023
$
12,202 $
500 $
(1,433)
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
68
Limited Partnership Investments
The Company has interests in limited partnerships that are not registered or readily tradeable on a securities exchange. These partnerships are private equity
funds managed by general partners who make decisions with regard to financial policies and operations. As such, the Company is not the primary
beneficiary and does not consolidate these partnerships. The following table provides information related to the Company’s investments in limited
partnerships:
December 31, 2025
December 31, 2024
Carrying
Unfunded
Carrying
Unfunded
Investment Strategy
Value
Balance
(%) (a)
Value
Balance
(%) (a)
Primarily in senior secured loans and, to
a limited extent, in other debt and
equity securities of private U.S. lower-
middle-market companies. (b)(c)(e)
$
1,877 $
—
12.31 $
2,400 $
—
15.37
Value creation through active distressed
debt investing primarily in bank loans,
public and private corporate bonds,
asset-backed securities, and equity
securities received in connection with
debt restructuring. (b)(d)(e)
587
—
1.27
1,082
—
1.13
High returns and long-term capital
appreciation through investments in
the power, utility and energy industries,
and in the infrastructure sector. (b)(f)(g)
2,769
—
0.18
3,407
—
0.18
Value-oriented investments in less liquid
and mispriced senior and junior debts
of private equity-backed companies.
(b)(h)(i)
1,333
—
0.53
2,053
—
0.52
Value-oriented investments in mature real
estate private equity funds and portfolios
globally. (b)(j)
6,182
2,042
1.32
6,781
2,445
1.31
Risk-adjusted returns on credit and equity
investments, primarily in private
equity-owned companies. (b)(k)
4,942
1,610
0.54
5,079
810
0.55
Limited partnership investments
$
17,690 $
3,652
$
20,802 $
3,255
(a)
Represents the Company’s percentage investment in the fund at each balance sheet date.
(b)
Except under certain circumstances, withdrawals from the funds or any assignments are not permitted. Distributions, except income from late admission of a new
limited partner, will be received when underlying investments of the funds are liquidated.
(c)
The term is expected to be two years following the maturity of the fund’s outstanding leverage. Although the capital commitment period has expired, follow-on
investments and pending commitments may require additional fundings.
(d)
Effective July 1, 2023, this investment is in the process of winding down. Although the capital commitment period has ended, the general partner could still request
an additional funding under certain circumstances.
(e)
At the fund manager’s discretion, the term of the fund may be extended for up to two additional one-year periods.
(f)
Expected to have a ten-year term. The capital commitment period has expired but the general partner may request additional funding for follow-on investment.
(g)
With the consent of a supermajority of partners, the term of the fund may be extended for up to three additional one-year periods.
(h)
Expected to have an eight-year term from the commencement date, which can be extended for up to two additional one-year periods with the consent of either the
advisory committee or a majority of limited partners.
(i)
The capital commitment period has ended but an additional funding may be requested.
(j)
The term is expected to end November 27, 2027. The term may be extended for up to four additional one-year periods at the general partner’s discretion, and up to
two additional one-year periods with the consent of the advisory committee.
(k)
Expected to have an eight-year term after the final admission date. The term may be extended for an additional one-year period at the general partner’s discretion,
and up to two additional one-year periods with the consent of either the advisory committee or a majority of limited partners.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
69
The following is the summary of aggregated unaudited financial information of limited partnerships included in the investment strategy table above, which
in certain cases is presented on a three-month lag due to the unavailability of information at the Company’s respective balance sheet dates. The financial
statements of these limited partnerships are audited annually.
Years Ended December 31,
2025
2024
2023
Operating results:
Total income*
$
147,324 $
320,367 $
1,606
Total expenses
(65,489)
(75,566)
(71,256)
Net income (loss)
$
81,835 $
244,801 $
(69,650)
* Includes net change in unrealized gains or losses on investments.
December 31,
2025
2024
Balance sheet:
Total assets
$
3,603,165 $
4,118,765
Total liabilities
$
124,673 $
157,420
During 2025, the Company recognized net investment loss of $820. During 2024 and 2023, the Company recognized net investment income of $597 and
$661, respectively.
During 2025, 2024, and 2023, distributions of return on investment from limited partnership investments totaled $1, $1,020, and $1,148, respectively, and
distributions of return of capital from limited partnership investments totaled $2,291, $3,591, and $3,115, respectively.
As of December 31, 2025 and 2024, the Company’s net cumulative contributed capital to the limited partnership investments totaled $18,697 and $20,987,
respectively, and the Company’s maximum exposure to loss aggregated $17,690 and $20,801, respectively.
Real Estate Investments
Real estate investments consist of the following as of December 31, 2025 and 2024:
December 31,
2025
2024
Land
$
50,052
$
42,272
Land improvements
14,760
4,843
Buildings and building improvements
44,019
18,772
Tenant and leasehold improvements
2,265
2,265
Construction in progress
89
17,623
Other
2,001
856
Total, at cost
113,186
86,631
Less: accumulated depreciation
(9,440)
(7,511)
Real estate investments
$
103,746
$
79,120
During 2025, the Company purchased commercial property in St. Petersburg, Florida for approximately $19,000. There were no newly acquired properties
during 2024. During 2023, the Company purchased vacant land, which was developed into a retail shopping center and placed into service during 2025 in
Haines City, Florida for $3,393, of which $1,582 was recognized as real estate investments and $1,811 was recognized as intangible assets, as well as
commercial real estate in Tampa, Florida for $17,270, of which $4,446 was related to below market rent that was primarily recognized in net investment
income during 2024.
During 2025, proceeds from sales of real estate investments were $2,013 and resulted in gains of $440 related to the sale of land. There were no sales of
real estate investments during 2024. During 2023, proceeds from sales of real estate investments were $21,746 and resulted in gains of $8,811 as well as
the derecognition of long-term debt due to assumption of $8,979 and the derecognition of intangible assets of $2,200 related to the sales of the retail
shopping centers in Melbourne, Florida and Sorrento, Florida.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
70
Depreciation expense related to real estate investments was $2,032, $1,113, and $1,147 during 2025, 2024, and 2023, respectively.
Net Investment Income
Net investment income, by source, is summarized as follows:
Years Ended December 31,
2025
2024
2023
Available-for-sale fixed-maturity securities
$
27,587 $
26,423 $
17,626
Equity securities
2,704
2,329
1,551
Investment expense
(694)
(523)
(557)
Limited partnership investments
(820)
597
661
Real estate investments
1,450
4,615
10,207
Cash and cash equivalents
35,030
25,707
16,746
Other
154
—
—
Net investment income
$
65,411 $
59,148 $
46,234
Note 6 -- Fair Value Measurements
The Company records and discloses certain financial assets at their estimated fair values. The fair value hierarchy prioritizes the inputs to valuation
techniques used to measure fair value into three broad levels as follows:
Level 1 – Unadjusted quoted prices in active markets for identical assets.
Level 2 – Other inputs that are observable for the asset, either directly or indirectly such as quoted prices for identical assets
that are not
observable throughout the full term of the asset.
Level 3 – Inputs that are unobservable.
Valuation Methodology
Cash and Cash Equivalents
Cash and cash equivalents primarily consist of money-market funds and certificates of deposit maturing within three months from the time of purchase.
Their carrying value approximates fair value due to the short maturity and high liquidity of these funds.
Restricted Cash
Restricted cash represents cash held by state authorities and the carrying value approximates fair value.
Available-for-Sale Fixed-Maturity and Equity Securities
Estimated fair values of the Company’s available-for-sale fixed-maturity and equity securities are determined in accordance with U.S. GAAP, using
valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair values are generally measured using
quoted prices in active markets for identical securities or other inputs that are observable either directly or indirectly, such as quoted prices for similar
securities. In those instances where observable inputs are not available, fair values are measured using unobservable inputs. Unobservable inputs reflect the
Company’s own assumptions about the assumptions that market participants would use in pricing the security and are developed based on the best
information available in the circumstances. Fair value estimates derived from unobservable inputs are significantly affected by the assumptions used,
including the discount rates and the estimated amounts and timing of future cash flows. The derived fair value estimates cannot be substantiated by
comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange.
The estimated fair values for securities are determined by management, utilizing prices obtained from an independent pricing service and information
provided by brokers, which are level 1 or level 2 inputs depending on the asset class. Management reviews the assumptions and methods utilized by the
pricing service and then compares the relevant data and pricing to broker-provided data. The
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
71
Company gains assurance of the overall reasonableness and consistent application of the assumptions and methodologies, and compliance with accounting
standards for fair value determination through ongoing monitoring of the reported fair values.
Other Investments
The following table summarizes other investments held by the Company and the method used in estimating the fair value:
Maturity
Date
Valuation Methodology
10.50% Surplus Note
2026
Discounted cash flow method/Level 3 inputs
Revolving Credit Facility
From time to time, the Company has an amount outstanding under a revolving credit facility. The interest rate is variable and is periodically adjusted based
on the Secured Overnight Financing Right (“SOFR”) plus a ten basis points adjustment plus a margin based on the debt-to-capital ratio. As a result,
carrying value approximates fair value.
Long-Term Debt
The following table summarizes components of the Company’s long-term debt and methods used in estimating their fair values:
Maturity
Date
Valuation Methodology
4.75% Convertible Senior Notes
*
Quoted price
4.55% Promissory Note
2036
Discounted cash flow method/Level 3 inputs
5.50% Promissory Note
2033
Discounted cash flow method/Level 3 inputs
5.65% Promissory Note
2035
Discounted cash flow method/Level 3 inputs
* Converted during 2025. See Note 11 “Long-Term Debt” for additional information.
Assets Measured at Estimated Fair Value on a Recurring Basis
The following tables present information about the Company’s financial assets measured at estimated fair value on a recurring basis. The tables indicate the
fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of December 31, 2025 and 2024:
Fair Value Measurements Using
(Level 1)
(Level 2)
(Level 3)
Total
As of December 31, 2025
Cash and cash equivalents
$
1,210,126 $
— $
— $
1,210,126
Restricted cash
$
3,748 $
— $
— $
3,748
Available-for-sale fixed-maturity securities:
U.S. Treasury and U.S. government agencies
$
313,420 $
19,932 $
— $
333,352
Corporate bonds
—
242,922
—
242,922
Commercial mortgage-backed securities
—
21,055
—
21,055
Available-for-sale fixed-maturity securities
$
313,420 $
283,909 $
— $
597,329
Equity securities
$
64,545 $
1,345 $
— $
65,890
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
72
Fair Value Measurements Using
(Level 1)
(Level 2)
(Level 3)
Total
As of December 31, 2024
Cash and cash equivalents
$
532,471 $
— $
— $
532,471
Restricted cash
$
3,714 $
— $
— $
3,714
Available-for-sale fixed-maturity securities:
U.S. Treasury and U.S. government agencies
$
686,929 $
487 $
— $
687,416
Corporate bonds
21,854
9,267
—
31,121
Available-for-sale fixed-maturity securities
$
708,783 $
9,754 $
— $
718,537
Equity securities
$
56,200 $
— $
— $
56,200
Assets and Liabilities Carried at Other Than Fair Value
The following tables present fair value information for assets and liabilities that are carried on the consolidated balance sheets at amounts other than fair
value as of December 31, 2025 and 2024:
Carrying
Fair Value Measurements Using
Estimated
Value
(Level 1)
(Level 2)
(Level 3)
Fair Value
As of December 31, 2025
Other investments
$
5,000 $
— $
— $
5,223 $
5,223
Revolving credit facility
$
36,000 $
— $
36,000 $
— $
36,000
Long-term debt:
4.55% Promissory Note
4,080
—
—
3,863
3,863
5.50% Promissory Note
11,262
—
—
11,313
11,313
5.65% Promissory Note
16,535
—
—
16,615
16,615
Long-term debt
$
31,877 $
— $
— $
31,791 $
31,791
Carrying
Fair Value Measurements Using
Estimated
Value
(Level 1)
(Level 2)
(Level 3)
Fair Value
As of December 31, 2024
Revolving credit facility
$
44,000 $
— $
44,000 $
— $
44,000
Long-term debt:
4.75% Convertible Senior Notes
$
169,397 $
— $
266,989 $
— $
266,989
4.55% Promissory Note
4,366
—
—
4,043
4,043
5.50% Promissory Note
11,491
—
—
11,307
11,307
Long-term debt
$
185,254 $
— $
266,989 $
15,350 $
282,339
Note 7 -- Deferred Policy Acquisition Costs
The following table summarizes the activity with respect to DAC:
Years Ended December 31,
2025
2024
2023
Beginning balance
$
54,303 $
42,910 $
45,522
Policy acquisition costs deferred
120,740
105,890
83,602
Amortization
(115,321)
(94,497)
(86,214)
Ending balance
$
59,722 $
54,303 $
42,910
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
73
Note 8 -- Property and Equipment, Net
Property and equipment, net consists of the following:
December 31,
2025
2024
Land
$
6,930
$
6,930
Buildings and building improvements
13,547
13,103
Software
20,352
18,269
Computer hardware
6,041
5,275
Office furniture and equipment
4,062
3,352
Construction in progress
711
1,226
Other
1,865
1,831
Total, at cost
53,508
49,986
Less: accumulated depreciation
(24,569)
(20,442)
Property and equipment, net
$
28,939
$
29,544
Depreciation expense for property and equipment was $4,238, $3,759 and $3,296 during 2025, 2024, and 2023, respectively.
Note 9 -- Intangible Assets, Net
Intangible assets, net consist of the following:
December 31,
2025
2024
In-place leases
$
2,221
$
2,221
Policy renewal rights - United
10,100
10,100
Non-compete agreements - United (a)
314
314
Total, at cost
12,635
12,635
Less: accumulated amortization
(9,952)
(7,429)
Intangible assets, net
$
2,683
$
5,206
(a) Fully amortized.
During the periods presented, the recognition and derecognition of intangible assets have occurred in connection with real estate investment transactions.
See Real Estate Investments under Note 5 -- “Investments” for further discussion.
Amortization expense for intangible assets was $2,523, $2,453 and $2,530 during 2025, 2024, and 2023, respectively.
The remaining weighted-average amortization periods for the intangible assets as of December 31, 2025 are summarized in the table below:
In-place leases
17.2 years
Policy renewal rights - United
0.5 years
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
74
Amortization expense for intangible assets after December 31, 2025 is as follows:
Year
Amount
2026
$
851
2027
124
2028
124
2029
124
2030
119
Thereafter
1,341
Total
$
2,683
Note 10 -- Revolving Credit Facility
The Company had a $36,000 and $44,000 outstanding balance under a senior secured revolving credit facility with Fifth Third Bank (“Revolving Credit
Facility”) as of December 31, 2025 and 2024, respectively. The Revolving Credit Facility, as amended on November 5, 2025, currently provides borrowing
capacity of up to $150,000 and expires on November 5, 2030. Borrowings under the Revolving Credit Facility bear interest at an annual rate equal to the
one or three month SOFR plus a ten basis points adjustment plus a margin based on the debt-to-capital ratio, with interest payments due in arrears on
January 1, April 1, July 1, and October 1. In addition, the Company is subject to an unused commitment fee.
Interest expense associated with the Revolving Credit Facility was $2,483, $3,247 and $82 during 2025, 2024, and 2023, respectively.
The Revolving Credit Facility is secured by the Company’s business assets, excluding Exzeo. Under the current terms of the agreement, the Company is
subject to certain financial statement covenants as follows: (1) Minimum Tangible Net Worth (as defined in the underlying credit agreement) shall not be
below $300,000 plus 50% of aggregate quarterly net income on a consolidated basis beginning September 30, 2025, (2) the maximum debt-to-capital ratio
shall not exceed 40.0%, and (3) the Authorized Control Level Risk Based Capital Ratio of HCPCI and TTIC (as defined in the underlying credit
agreement) shall not be less than 300% as of each year end.
As of December 31, 2025, the Company was in compliance with all required covenants and had an available borrowing capacity of $114,000.
Note 11 -- Long-Term Debt
The following table summarizes the Company’s long-term debt:
December 31,
Debt Description
Issued
Maturity
Interest
Rate
Payment Date
2025
2024
4.75% Convertible Senior Notes
5/23/2022
6/1/2042
4.75%
June 1 and
December 1
$
— $ 172,500
4.55% Promissory Note
7/6/2018
8/1/2036
4.55%
Monthly
4,125
4,419
5.50% Promissory Note
6/26/2023
7/1/2033
5.50%
Monthly
11,422
11,670
5.65% Promissory Note
7/24/2025
8/1/2035
5.65%
Monthly
16,896
—
Total principal amount
32,443
188,589
Less: unamortized issuance costs
(566)
(3,335)
Long-term debt
$
31,877 $ 185,254
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
75
The following table summarizes future maturities of long-term debt as of December 31, 2025:
Year
Amount
2025
$
895
2026
943
2027
993
2028
1,047
2029
1,103
Thereafter
27,462
Total principal amount
$
32,443
The following table summarizes interest expense related to long-term debt:
Years Ended December 31,
2025
2024
2023
Interest Expense:
Contractual interest
$
4,310 $
8,903 $
9,906
Amortization of issuance costs
2,363
1,194
1,129
Total
$
6,673 $
10,097 $
11,035
Convertible Senior Notes
During the first quarter of 2025, the Company notified the holders of its outstanding 4.75% Convertible Senior Notes due 2042 (the “Notes”) that the
Company had elected to redeem the remaining $172,500 principal balance of the Notes. As a result, the Notes became immediately convertible into the
Company’s common shares, with a redemption date of June 5, 2025. The conversion rate of the Notes was 12.6789 shares of common stock per $1 of
principal. The Company converted $172,500 in aggregate principal into consideration of 2,187,063 shares of the Company’s common stock and $1,133 in
cash. The cash consideration included an inducement payment of $1,125 and $8 paid in lieu of fractional shares. The Company recognized an expense
related to the inducement payment of $1,125 in other operating expenses on the consolidated statements of income and as financing cash flows on the
consolidated statements of cash flows.
During the first quarter of 2024, the Company notified the holders of its outstanding 4.25% Convertible Senior Notes due 2037 that the Company had
elected to redeem the remaining $23,916 principal balance of the 4.25% Convertible Senior Notes. As a result of this notice, the 4.25% Convertible Senior
Notes became immediately convertible into the Company’s common shares, with a redemption date of March 15, 2024. The conversion rate of the
Company’s 4.25% Convertible Senior Notes was 16.5892 shares of common stock for each $1 in principal amount, which was the equivalent of
approximately $60.25 per share. The Company converted $23,450 in aggregate principal of 4.25% Convertible Senior Notes for aggregate consideration of
389,087 shares of the Company’s common stock plus $1 cash consideration in lieu of fractional shares. The remaining 4.25% Convertible Senior Notes
were redeemed for $466 on March 15, 2024.
Promissory Notes
4.55% Promissory Note
The loan is secured by commercial real estate in Tampa, Florida and an associated lease agreement. Approximately $41 of principal and interest is payable
in 216 monthly installments. The promissory note may be repaid in full or in part after September 1, 2020 as long as the Company provides at least 30
days’ written notice and pays a prepayment consideration as specified in the loan agreement.
5.50% Promissory Note
On June 26, 2023, the Company entered into a ten-year secured loan agreement for proceeds of $12,000. The loan is secured by commercial real estate in
Clearwater, Florida and the associated lease agreements. Approximately $74 of principal and interest is payable in 120 monthly installments. The
promissory note may be repaid in full or in part after August 1, 2025 as long as the Company provides at least 30 days’ written notice and pays a
prepayment consideration as specified in the loan agreement.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
76
5.65% Promissory Note
On July 24, 2025, the Company entered into a $17,000 loan agreement. The loan is secured by commercial real estate in Haines City, Florida.
Approximately $106 of principal and interest is payable in 119 monthly installments. The promissory note may be repaid in full as long as the Company
provides at least 30 days’ written notice and pays a prepayment consideration as specified in the loan agreement.
Note 12 -- Reinsurance
Reinsurance obtained from other insurance companies
The Company cedes a portion of its homeowners’ insurance exposure to other entities under catastrophe excess of loss reinsurance contracts and a portion
of its flood insurance exposure under one quota share reinsurance agreement. To mitigate exposure in its commercial residential insurance business, the
Company utilizes both facultative reinsurance and catastrophe excess of loss reinsurance contracts. Ceded premiums under most catastrophe excess of loss
reinsurance contracts are subject to revision resulting from subsequent adjustments in total insured value. Under the terms of the quota share reinsurance
agreement, the Company is entitled to a 30% ceding commission on net ceded premiums written and a profit commission equal to 10% of net profit.
After receiving approval from the FLOIR in January 2023, the Company discontinued underwriting flood insurance policies in Florida. Since the approval,
the Company has cancelled or not renewed the majority of its flood insurance policies. However, the Company is required to continue providing flood
insurance coverage to policyholders with open claims until criteria set by the FLOIR for cancellation and non-renewal are met. The reason for
discontinuation was primarily attributable to the increased costs and reduced availability of flood reinsurance. The discontinuation did not have a material
impact to the Company’s results of operations.
The Company remains liable for claims payments in the event that any reinsurer is unable to meet its obligations under the reinsurance agreements. Failure
of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors
concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers to minimize its exposure to
significant losses from reinsurer insolvencies. The Company contracts with a number of reinsurers to secure its annual reinsurance coverage, which
generally becomes effective June 1st of each year. The Company purchases reinsurance each year taking into consideration its overall insurance exposure,
modeled probable maximum losses, risk tolerance and retention levels, mandatory reinsurance coverage provided by the Florida Hurricane Catastrophe
Fund (a tax-exempt state trust fund), and overall reinsurance market conditions.
The impact of the reinsurance contracts on premiums written and earned is as follows:
Years Ended December 31,
2025
2024
2023
Premiums Written:
Direct
$
1,160,382 $
991,709 $
762,806
Assumed
134,388
175,058
135,816
Gross written
1,294,770
1,166,767
898,622
Ceded
(414,479)
(405,659)
(269,627)
Net premiums written
$
880,291 $
761,108 $
628,995
Premiums Earned:
Direct
$
1,102,436 $
866,957 $
734,891
Assumed
133,709
216,263
30,621
Gross earned
1,236,145
1,083,220
765,512
Ceded
(414,479)
(405,659)
(269,627)
Net premiums earned
$
821,666 $
677,561 $
495,885
As of December 31, 2025 and 2024, total net amounts recoverable and receivable from reinsurers were $289,896 and $558,441, respectively. During 2025,
the Company derecognized ceded losses of $122,525, primarily attributable to a favorable change in estimated losses from Hurricane Milton and Hurricane
Helene, partially offset by an unfavorable change in estimated losses from Hurricane Ian. This resulted in a significant decrease in reinsurance recoverable
for unpaid losses and loss adjustment expenses.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
77
During 2024, ceded losses of $340,329 were recognized as a reduction in losses and loss adjustment expenses. Ceded losses for 2024 comprised $383,843
for Hurricane Milton, $18,000 for Hurricane Helene, $3,207 for Hurricane Sally, $446 for Tropical Storm Eta, and a $65,167 reduction in ceded losses for
Hurricane Ian.
During 2023, the Company derecognized ceded losses of $94,863. This included a $104,614 reduction in ceded losses related to Hurricane Ian, partially
offset by additional ceded losses of $5,416 for Hurricane Sally, $4,301 for Tropical Storm Eta, and $34 for other catastrophe and non-catastrophe claims.
As of December 31, 2025 and 2024, there were 48 and 44 reinsurers participating in the Company's reinsurance program, respectively. Approximately
65.3% of the reinsurance recoverable balance as of December 31, 2025 was receivable from four reinsurers, one of which was the Florida Hurricane
Catastrophe Fund. The allowance for credit losses related to reinsurance recoverable was not material to the consolidated balance sheets or consolidated
statements of income for the periods presented.
Prior to June 1, 2025, the Company had one multi-year reinsurance contract containing retrospective provisions, which adjusted premiums in the event of
minimal or no losses. Due to the losses from Hurricane Helene and Hurricane Milton, the balance of previously accrued benefits under the multi-year
reinsurance contract with retrospective provisions, amounting to $62,937, was reversed during 2024 with no further benefits to be accrued under the
contract. As these retrospective provisions were fully exhausted, no benefits were accrued during 2025. During 2024, premiums ceded were increased by
$44,289, resulting from the reversal of benefits accrued in prior years. During 2023, Company recognized reductions in premiums ceded of $27,972.
There were no benefits accrued under a multi-year reinsurance contract with retrospective provisions as of December 31, 2025 and 2024.
Reinsurance provided to other insurance companies
United Property & Casualty Insurance Company
The Company formerly provided quota share reinsurance to United on its policies in the northeast and southeast regions of the U.S. United was placed into
receivership by the State of Florida due to its financial insolvency. As a result, the Company ceased providing quota share reinsurance on United policies,
together with other administrative services in March 2023.
Effective October 2, 2025, the Company entered into a commutation and release agreement related to one of its northeast quota share reinsurance contracts,
with the Florida Department of Financial Services, acting as the receiver for United. Under the terms of the agreement, all liabilities and obligations under
this quota-share reinsurance agreement for policies in the northeast region were fully settled. As part of the commutation, the Company made a payment of
$1,200 to the receiver. The funds were drawn from the trust account for assumed business. As of December 31, 2025 and 2024, the Company had a net
balance of $0 and $831, respectively, due to United related to the northeast region.
As of December 31, 2025 and 2024, the Company had a net balance of $1,438 for both periods due to United related to the southeast region. During 2023,
$7,271 of assumed premiums written related to the southeast region’s insurance policies were derecognized, which primarily resulted from the return of the
unearned portion of assumed written premiums subsequent to the Company’s renewal and/or replacement of insurance policies in the southeast region. In
addition, the receiver of United had requested a withdrawal of $13,482 from a trust account holding funds withheld for assumed business for the southeast
region during 2023. The withdrawal was in settlement of unearned premiums of $7,496, losses and LAE of $2,310, claims handling fees of $4,875, less
ceding commission of $1,199. Of the total withdrawal, the Company received $4,875 in payment for reimbursement and fees receivable on October 26,
2023.
As of December 31, 2025 and 2024, the balance of funds withheld for assumed business related to the Company’s quota share reinsurance agreements with
United was $5,254 and $11,690, respectively. The Company cannot predict the actions a receiver might take, which may include restrictions on, or use of,
funds held in trust. Any such actions could have a material adverse effect on the Company’s financial position and results of operations.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
78
Citizens Property Insurance Corporation
From time to time, the Company may participate in a “take-out program” through which the Company assumes insurance policies held by Citizens
Property Insurance Corporation (“Citizens”), a Florida state-supported insurer. The take-out program is a legislatively mandated program designed to
reduce the state’s risk exposure by encouraging private companies to assume policies from Citizens. The table below shows the number of policies and
annualized gross premiums assumed from Citizens during the periods presented:
Years Ended December 31,
Policies Assumed
Annualized Gross Premiums
2025
60,820
$
216,728
2024
52,805
315,062
2023
59,860
224,789
Total
173,485
$
756,579
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
79
Note 13 -- Losses and Loss Adjustment Expenses
The Company establishes reserves for the estimated total unpaid costs of losses including LAE. Loss and LAE reserves reflect management’s best estimate
of the total cost of (i) claims that have been reported, but not yet paid in full, and (ii) claims that have been incurred but not yet reported to the Company
(“IBNR”). Reserves established by management represent an estimate of the outcome of future events and, as such, cannot be considered an exact
calculation of our liability. Rather, loss and LAE reserves represent management’s best estimate of the Company’s liability based on the application of
actuarial techniques and other projection methodologies and taking into consideration other facts and circumstances known at the balance sheet date. The
process of establishing loss and LAE reserves is complex and inherently imprecise, as it involves the estimation of the outcome of future uncertain events.
The impact of both internal and external variables on ultimate losses and LAE costs is difficult to estimate. In determining loss and LAE reserves, the
Company gives careful consideration to all available data and actuarial analyses.
When a claim is reported to the Company, the claims personnel establish a “case reserve” for the estimated amount of the ultimate amount payable to settle
the claim. This estimate reflects an informed judgment based upon general insurance reserving practices and on the experience and knowledge of the
claims adjuster. The individual estimating the reserve considers the nature and value of the specific claim, the severity of injury or damage, location, and
the policy provisions relating to the type of loss. Case reserves are adjusted as more information becomes available. It is the Company’s policy to settle
each claim as expeditiously as possible.
Reserves are closely monitored and are recalculated periodically using the most recent information on reported claims and a variety of actuarial techniques.
Specifically, claims management personnel complete weekly and ongoing reviews of existing case reserves, new claims, changes to existing case reserves,
and paid losses with respect to the current and prior years. As the Company continues to expand historical data regarding paid and incurred losses, the data
is used to develop expected ultimate loss and LAE ratios, then these expected loss and LAE ratios are applied to earned premium to derive a reserve level
for each line of business. In connection with the determination of these reserves, other specific factors such as recent weather-related losses, trends in
historical reported and paid losses, and litigation and judicial trends regarding liability will also be considered. Therefore, the loss ratio method, among
other methods, is used to project an ultimate loss expectation, and then the related loss history must be regularly evaluated and loss expectations updated,
with the possibility of variability from the initial estimate of ultimate losses.
The Company maintains IBNR reserves to provide for claims that have been incurred but have not been reported and subsequent development on reported
claims. The IBNR reserve is determined by estimating the Company’s ultimate net liability for both reported and unreported claims and then subtracting
the case reserves and payments made to date for reported claims.
Loss and LAE Reserve Estimation Methods. The Company applies the following general methods in projecting reserves for losses and LAE:
•
Reported loss development;
•
Paid loss development;
•
Paid Bornhuetter-Ferguson method;
•
Reported Experience-Modified Bornhuetter-Ferguson method;
•
Paid Experience-Modified Bornhuetter-Ferguson method;
•
Loss ratio method;
•
Several variations of the Frequency-Severity method, depending on exposure; and
•
A factor load to loss and allocated LAE reserves for the unallocated LAE.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
80
Selected reserves are based on a review of the indications from these methods as well as other considerations such as emergence since the most recent
evaluation and number of open claims for a given accident period.
Currently, the estimated ultimate liability is calculated using the principles and procedures described above, which are applied to the lines of business
written. However, because the establishment of loss and LAE reserves is an inherently uncertain process, ultimate losses and LAE may exceed the
established loss and LAE reserves and have a material, adverse effect on our results of operations and financial condition. Changes in estimates, or
differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such adjustments are made.
The Company’s reported results, financial position and liquidity would be affected by likely changes in key assumptions that determine the net loss
reserves. However, it is believed that a reasonably likely increase or decrease in the severity of claims could impact our net loss reserves.
Activity in the liability for losses and LAE is summarized as follows:
Years Ended December 31,
2025
2024
2023
Net balance, beginning of year*
$
323,335 $
254,351 $
246,546
Incurred, net of reinsurance, related to:
Current year
249,342
380,203
235,725
Prior years
(7,515)
(5,495)
18,854
Total incurred, net of reinsurance
241,827
374,708
254,579
Paid, net of reinsurance, related to:
Current year
(114,770)
(188,169)
(107,204)
Prior years
(136,035)
(117,555)
(139,570)
Total paid, net of reinsurance
(250,805)
(305,724)
(246,774)
Net balance, end of year
314,357
323,335
254,351
Add: reinsurance recoverable before allowance for credit losses
262,138
522,565
330,722
Gross balance, end of year
$
576,495 $
845,900 $
585,073
* Net balance represents beginning-of-year liability for unpaid losses and LAE less beginning-of-year reinsurance recoverable for unpaid losses and
LAE.
The establishment of loss and LAE reserves is an inherently uncertain process and changes in loss and LAE reserve estimates are expected as these
estimates are subject to the outcome of future events. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in
the operating results of the period during which such adjustments are made. During 2025, the Company decreased losses and LAE related to prior years by
$7,515 primarily due to favorable development for non-catastrophe claims, partially offset by an increase in retention for catastrophic events. During 2024,
the Company decreased losses and LAE related to prior years by $5,495 primarily due to favorable development for non-catastrophe claims. During 2023,
the Company increased losses and LAE related to prior years by $18,854 primarily due to unfavorable development for catastrophic events in response to
increased litigation.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
81
During 2025, the Company did not experience any losses from catastrophic events and experienced an improvement in claim and litigation frequency as
compared to prior periods. During 2024, losses and LAE included net estimated losses of $78,157, $43,000 and $6,500 due to Hurricane Milton, Hurricane
Helene, and Hurricane Debby, respectively. During 2023, losses and LAE included net estimated losses of approximately $68,339 attributable to United-
related policies and $7,875 related to policies assumed from Citizens.
The following is information about incurred and paid claims development as of December 31, 2025, net of reinsurance, as well as cumulative claim
frequency and the total of incurred-but-not-reported liabilities plus expected development on reported claims included within the net incurred claims
amounts. The information about incurred and paid claims development for the years ended December 31, 2024 to 2016 is presented as supplementary
information and is unaudited.
Homeowners Multi-peril and Dwelling Fire Insurance (a)
As of December 31, 2025
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,
Total of
IBNR Plus
Expected
Development
Reported
Cumulative
Number of
Reported
Claims
(Not in
Dollar
Year
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Claims
Amounts) (b)
2016
$ 81,446
$ 90,879
$ 92,684
$ 92,986
$ 92,752
$ 92,333
$ 92,738
$ 92,779
$ 92,899
$
92,937 $
191
6,937
2017
— 91,443 88,937 89,652 90,958 90,877 90,652 91,132 91,685
91,679
743
5,777
2018
—
— 79,436 83,976 83,123 83,234 82,816 83,126 83,566
84,258
1,898
4,771
2019
—
—
— 95,467 94,018 96,821 99,754
101,08
1
100,55
8
101,353
3,461
5,404
2020
—
—
—
—
126,08
6
133,34
9
159,75
8
170,17
5
172,94
6
176,295
4,171
8,266
2021
—
—
—
—
—
187,16
4
186,60
6
186,05
9
187,91
8
193,858
9,491
11,871
2022
—
—
—
—
—
—
263,62
6
257,68
3
264,93
9
269,325
12,972
13,514
2023
—
—
—
—
—
—
—
232,81
9
209,24
8
201,709
27,024
8,535
2024
—
—
—
—
—
—
—
—
249,88
5
214,610
59,355
4,728
2025
—
—
—
—
—
—
—
—
—
244,767
130,655
8,483
Total
$
1,670,79
1
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
82
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,
Year
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2016
$
51,663
$
73,037
$
83,311
$
89,144
$
90,989
$
92,001
$
92,367
$
92,605
$
92,698
$
92,746
2017
—
43,039
66,996
78,808
83,383
86,364
89,387
90,492
90,935
90,936
2018
—
—
41,014
63,958
71,809
76,311
79,247
80,796
81,392
82,360
2019
—
—
—
47,471
70,182
81,941
91,839
95,293
96,832
97,892
2020
—
—
—
—
56,173 108,388 144,298
161,961 168,586
172,124
2021
—
—
—
—
—
85,895 142,054
164,138 177,445
184,367
2022
—
—
—
—
—
— 135,793
204,788 237,938
256,353
2023
—
—
—
—
—
—
—
106,167 156,962
174,685
2024
—
—
—
—
—
—
—
— 109,089
155,255
2025
—
—
—
—
—
—
—
—
—
114,112
Total
$
1,420,830
All outstanding liabilities before 2016, net of reinsurance
333
Liabilities for loss and LAE, net of reinsurance
$
250,294
(a)
Excludes losses from Wind-only insurance (2016 through 2025) and any hurricane and storm events prior to 2025.
(b)
The cumulative number of reported claims is measured as the number of per-policyholder, per-event claims for all coverages regardless of whether the claim results
in loss or expense to the Company.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
83
Homeowners Wind-only Insurance (a)
As of December 31, 2025
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,
Total of
IBNR Plus
Expected
Development
Reported
Cumulative
Number of
Reported
Claims
(Not in Dollar
Year
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Claims
Amounts) (b)
2016
$ 1,005 $ 1,314 $ 1,814 $ 1,853 $
1,837 $
2,255 $
1,948 $
1,957 $
1,961 $
1,958 $
—
228
2017
—
1,529
1,119
815
792
923
991
807
802
812
20
157
2018
—
—
798
708
1,061
1,109
1,226
1,037
1,029
1,235
50
137
2019
—
—
—
1,132
1,501
1,833
2,359
1,909
1,822
1,878
84
154
2020
—
—
—
—
1,621
1,970
3,386
3,036
3,025
3,069
74
193
2021
—
—
—
—
—
682
1,257
1,556
1,419
1,502
154
114
2022
—
—
—
—
—
—
1,284
1,943
1,600
1,667
217
150
2023
—
—
—
—
—
—
—
2,193
953
1,515
473
108
2024
—
—
—
—
—
—
—
—
997
1,198
793
765
2025
—
—
—
—
—
—
—
—
—
1,469
1,374
25
Total
$ 16,303
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,
Year
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2016
689
1,155
1,405
1,772
1,821
1,843
1,944
1,952
1,957 $
1,958
2017
—
484
786
789
792
792
792
792
792
792
2018
—
—
216
607
745
899
925
967
997
1,184
2019
—
—
—
828
1,290
1,451
1,770
1,794
1,794
1,794
2020
—
—
—
—
567
1,461
2,435
2,756
2,993
2,995
2021
—
—
—
—
—
415
799
1,161
1,307
1,349
2022
—
—
—
—
—
—
704
1,113
1,354
1,450
2023
—
—
—
—
—
—
—
330
608
1,042
2024
—
—
—
—
—
—
—
—
232
404
2025
—
—
—
—
—
—
—
—
—
95
Total
$
13,063
Liabilities for loss and LAE, net of reinsurance
$
3,240
(a)
Excludes losses from multi-peril and dwelling fire insurance (2016 through 2025) and any hurricane and storm events prior to 2025.
(b)
The cumulative number of reported claims is measured as the number of per-policyholder, per-event claims for all coverages regardless of whether the claim results
in loss or expense to the Company.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
84
Losses Specific to Any Hurricane and Storm Events prior to 2025
As of December 31, 2025
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,
Total of
IBNR Plus
Expected
Development
Reported
Cumulative
Number of
Reported
Claims
(Not in
Dollar
Year
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Claims
Amounts)
(b)
2016
$ 21,414 $ 24,126 $ 26,211 $ 28,133 $ 27,634 $ 27,634 $ 27,634 $ 27,634 $
27,63
4 $ 27,246 $
—
2,420
2017
— 53,602 54,080 53,557
53,624
53,628
53,636 53,649
53,65
3 53,650
122
21,777
2018
—
— 16,543 16,532
16,532
16,532
16,476 16,466
16,46
6 16,467
—
1,719
2019
—
—
—
—
—
—
—
—
—
—
—
144
2020
—
—
—
—
30,264
46,284
55,235 61,847
64,33
3 64,339
4,475
3,294
2021
—
—
—
—
—
11,689
13,000 13,000
13,00
7 12,857
131
2,597
2022
—
—
—
—
—
—
65,325 71,860
75,71
8 76,249
18,307
14,194
2023
—
—
—
—
—
—
—
—
—
—
—
300
2024
—
—
—
—
—
—
—
—
121,2
22
142,18
2
32,187
12,828
2025
—
—
—
—
—
—
—
—
—
565
6
359
Total
$
393,55
5
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,
Year
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2016
$
12,227 $
20,025 $
23,316 $
25,849 $
26,098 $
26,807 $
27,146 $
27,169 $
27,240 $
27,245
2017
—
43,905
47,514
47,524
49,425
53,216
53,634
53,413
53,428
53,528
2018
—
—
13,391
15,992
16,436
16,477
16,476
16,466
16,466
16,467
2019
—
—
—
—
—
—
—
—
—
—
2020
—
—
—
—
14,964
34,771
47,056
54,356
58,374
59,865
2021
—
—
—
—
—
9,323
12,616
12,652
12,667
12,726
2022
—
—
—
—
—
—
32,998
48,627
53,458
57,943
2023
—
—
—
—
—
—
—
—
—
—
2024
—
—
—
—
—
—
—
—
76,773
109,995
2025
—
—
—
—
—
—
—
—
—
558
Total
$
338,327
Liabilities for loss and LAE, net of reinsurance
$
55,228
(a)
The cumulative number of reported claims is measured as the number of per-policyholder, per-event claims for all coverages regardless of whether the claim results
in loss or expense to the Company.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
85
The reconciliation of the net incurred and paid loss development tables to the liability for losses and loss adjustment expenses is as follows:
December 31,
2025
2024
Net outstanding liabilities
Homeowners multi-peril and dwelling fire insurance
$
250,294
$
242,103
Homeowners wind-only insurance
3,240
1,574
Losses specific to any hurricane and storm events prior to 2025
55,228
73,627
Other short-duration insurance lines
5,595
6,031
Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance
314,357
323,335
Reinsurance recoverables
262,138
522,565
Losses and loss adjustment expenses
$
576,495
$
845,900
The following is supplementary and unaudited information about average historical claims duration as of December 31, 2025:
Average Annual Percentage Payout of
Incurred
Losses by Age, Net of Reinsurance
Years
1
2
3
4
5
6
7
8
9
10
Homeowners multi-peril and dwelling fire
insurance
47.3%
21.9%
9.0%
4.4%
1.5%
0.6%
0.2%
0.1%
—
—
Homeowners wind-only insurance
28.0%
23.0%
15.7%
8.6%
2.3%
0.4%
0.8%
1.2%
—
—
Other short-duration insurance lines
37.2%
8.6%
0.8%
0.4%
—
—
—
—
—
—
Losses specific to any hurricane and storm
events prior to 2025
51.9%
22.5%
5.3%
3.7%
2.4%
0.6%
—
—
—
—
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
86
Note 14 -- Variable Interest Entities
The Company includes two consolidated VIEs related to reciprocal insurance exchanges, CORE and Tailrow. The reciprocal insurance exchanges are
owned by their policyholders, referred to as subscribers, who gain ownership by buying an insurance policy and making a surplus contribution. Each
subscriber has certain interests in the insurance exchanges which include the right to appoint an AIF, to vote for the subscribers’ advisory committees and
to receive dividends or premium credits if the reciprocal insurance exchanges generate a surplus. At least two-thirds of the membership of the advisory
committees must be subscribers who are independent of the AIF. The advisory committees are charged with overseeing the financial affairs of the
reciprocal insurance exchanges.
Both CORE and Tailrow each received initial funding through the issuance of a subordinated surplus note to wholly-owned subsidiaries of HCI Group, Inc.
as neither had any subscribers or sufficient surplus to fund their insurance operations at the time of formation. In addition, CORE and Tailrow each entered
into an AIF agreement with Core Risk Managers, LLC (“CRM”) and Tailrow Risk Managers, LLC (“TRM”), respectively. Both CRM and TRM are
wholly-owned subsidiaries of HCI Group, Inc. The AIF agreements, which were approved by the FLOIR, can be terminated at any time by mutual
agreement of both parties or with cause, if the FLOIR or a court of competent jurisdiction determines that a material breach of the agreement has occurred.
Under the AIF agreements, CRM and TRM have the power of attorney to directly or indirectly conduct the daily operations of CORE and Tailrow,
respectively, by underwriting insurance policies, collecting premiums, investing funds, and processing claims. As such, subscribers do not possess the
power to directly manage the operations of CORE and Tailrow. The AIF agreements also permit CRM and TRM to contract with service providers
including other HCI Group, Inc. subsidiaries to perform certain functions.
The AIF agreements, together with the subordinated surplus notes, result in both CORE and Tailrow to be consolidated VIEs. As CORE and Tailrow are
owned by their underlying policyholders, their net assets and results of operations are included in noncontrolling interests.
CORE
CORE was formed and issued a $25,000 subordinated surplus note with an annual interest rate of 9% during 2023. CORE commenced business operations
during 2024.
As of December 31, 2025 and 2024, the Company’s maximum exposure to loss relating to CORE was $25,000. CORE’s assets are legally restricted for the
purpose of fulfilling obligations specific to CORE and its creditors have no legal right to pursue additional sources of payment from the Company.
Tailrow
Tailrow was formed and issued a $25,000 subordinated surplus note with an annual interest rate of 9% during 2024. Tailrow commenced business
operations during 2025.
As of December 31, 2025 and 2024, the Company’s maximum exposure to loss relating to Tailrow was $25,000. Tailrow’s assets are legally restricted for
the purpose of fulfilling obligations specific to Tailrow and its creditors have no legal right to pursue additional sources of payment from the Company.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
87
The following table summarizes the assets and liabilities related to the Company’s variable interests in consolidated VIEs which are included in the
accompanying consolidated balance sheets:
December 31,
2025
2024
Assets
Cash and cash equivalents
$
154,156
$
74,886
Restricted cash
636
611
Income taxes receivable
1,332
463
Deferred income tax assets, net
2,237
72
Premiums receivable, net
(allowance: $1,406 and $1,085, respectively)
4,549
4,230
Prepaid reinsurance premiums
2,499
13,886
Reinsurance recoverable, net of allowance for credit losses:
Paid losses and loss adjustment expenses
(allowance: $0 and $0, respectively)
26
—
Unpaid losses and loss adjustment expenses
(allowance: $1 and $4, respectively)
1,573
3,596
Deferred policy acquisition costs
4,464
2,709
Other assets
539
891
Total assets
$
172,011
$
101,344
Liabilities
Losses and loss adjustment expenses
$
24,810
$
17,415
Unearned premiums
73,086
30,204
Advance premiums
1,817
—
Ceded reinsurance premiums payable
933
—
Assumed premiums payable
837
656
Income taxes payable
2,857
19
Deferred income tax liabilities, net
127
261
Accrued expenses and other liabilities
2,162
2,046
Total liabilities
$
106,629
$
50,601
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
88
Note 15 -- Segment Information
The Company has five reportable segments: Insurance Operations, Exzeo, Reciprocal Exchange Operations, Real Estate, and Corporate and Other. Due to
their economic characteristics, the Company’s property and casualty insurance division and reinsurance operations, excluding the insurance operations
under Reciprocal Exchange Operations, are grouped together into one reportable segment under Insurance Operations. The Exzeo segment includes
insurance technology and operations solutions for property and casualty insurance carriers. The Reciprocal Exchange Operations segment represents the
insurance operations of consolidated reciprocal insurance exchanges that are owned by their policyholders. The Real Estate segment relates to the
commercial real estate group that is primarily engaged in the business of developing and operating commercial properties for investment purposes or for
internal use. The Corporate and Other segment represents the activities of the holding companies and any other operations that do not meet the quantitative
and qualitative thresholds for a reportable segment.
The Company’s segments are based on the manner in which the Company’s Chief Executive Officer, who is the chief operating decision maker (the
“CODM”), evaluates performance and makes decisions regarding the allocation of resources. The CODM evaluates performance and allocates resources
using various measures primarily through reviews of various operational performance packages, investor presentations, and the Company’s SEC filings, as
well as through the approval of the Company’s annual budget and forecast. The Company’s reported segment profit measure is income (loss) before
income taxes as this measure is most consistent with the amounts included in the consolidated statements of income. Intersegment transactions are not
eliminated from segment results while intrasegment transactions are eliminated from segment results. The accounting policies of the Company’s reportable
segments are the same as those of the Company, except as otherwise noted. The determination of segments may change over time due to changes in
operational emphasis, revenue, and results of operations.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
89
The following tables present segment information reconciled to the Company’s consolidated statements of income for the periods presented:
For the Year Ended December 31,
2025
Insurance
Operations
Exzeo
Reciprocal
Exchange
Operations
Real
Estate (a)
Corporate/
Other (b)
Reclassificati
on/
Elimination Consolidated
Revenue
Gross premiums earned (c)
$
1,145,843 $
—
$
95,648 $
— $
— $
(5,346) $
1,236,145
Premiums ceded
(385,801)
—
(34,024)
—
—
5,346
(414,479)
Net premiums earned
760,042
—
61,624
—
—
—
821,666
Net income from investment portfolio
55,180
4,302
3,899
—
7,956
(3,050)
68,287
Policy fee income
6,747
—
—
—
111
—
6,858
Other
12,461
216,980
26
14,823
15,500
(255,655)
4,135
Total revenue
834,430
221,282
65,549
14,823
23,567
(258,705)
900,946
Expenses
Losses and loss adjustment expenses
298,818
—
22,393
—
—
(79,384)
241,827
Amortization of deferred policy
acquisition costs
109,548
—
5,773
—
—
—
115,321
Other policy acquisition expenses
67,135
43,725
12,651
—
9,050
(125,456)
7,105
Stock-based compensation expense
1,469
2,635
—
—
6,866
—
10,970
Interest expense
—
—
4,500
1,290
7,866
(4,500)
9,156
Depreciation and amortization
2,413
2,934
—
2,741
743
(2,198)
6,633
Personnel and other operating expenses
41,231
61,696
1,601
9,164
13,505
(46,593)
80,604
Total expenses
520,614
110,990
46,918
13,195
38,030
(258,131)
471,616
Income (loss) before income taxes (d)
$
313,816 $
110,292
$
18,631 $
1,628 $
(14,463) $
(574) $
429,330
Total revenue from non-affiliates (e)
$
818,364 $
6,671
$
70,895 $
11,364 $
4,607
Gross premiums written
$
1,156,241 $
—
$
138,529
(a)
Other revenue under real estate primarily consisted of rental income from investment properties.
(b)
Other revenue under corporate and other primarily consisted of management fees for attorney-in-fact services.
(c)
Gross premiums earned under insurance operations include $5,346 earned from the reciprocal exchange operations.
(d)
The income (loss) before income taxes in the reclassification/elimination column is attributable to intercompany transactions among operating segments. The
insurance operations and the reciprocal exchange operations record service fee expenses based on earned premiums or other appropriate measures, while
Exzeo and the AIF operations recognize service fee revenues according to revenue recognition standards. Although both service fee expenses and revenues
are fully eliminated on consolidation, they do not completely offset each other in this presentation due to the different methods of recognition.
(e)
Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
90
For the Year Ended December 31,
2024
Insurance
Operations
Exzeo
Reciprocal
Exchange
Operations
Real
Estate (a)
Corporate/
Other (b)
Reclassificati
on/
Elimination Consolidated
Revenue
Gross premiums earned (c)
$
1,036,129 $
—
$
51,207 $
— $
— $
(4,116) $
1,083,220
Premiums ceded
(387,814)
—
(21,961)
—
—
4,116
(405,659)
Net premiums earned
648,315
—
29,246
—
—
—
677,561
Net income from investment portfolio
49,218
548
1,509
—
15,467
(1,566)
65,176
Policy fee income
2,502
—
—
—
—
2,137
4,639
Other
17,223
133,948
9
14,067
10,821
(173,393)
2,675
Total revenue
717,258
134,496
30,764
14,067
26,288
(172,822)
750,051
Expenses
Losses and loss adjustment expenses
405,280
—
13,318
—
—
(43,890)
374,708
Amortization of deferred policy
acquisition costs
91,718
—
2,779
—
—
—
94,497
Other policy acquisition expenses
56,471
39,013
5,753
—
—
(96,332)
4,905
Stock-based compensation expense
1,345
3,380
—
—
5,464
—
10,189
Interest expense
—
3,329
2,853
882
12,462
(6,182)
13,344
Depreciation and amortization
2,447
2,596
—
1,641
641
(1,140)
6,185
Personnel and other operating expenses
48,519
50,942
293
6,771
16,049
(49,778)
72,796
Total expenses
605,780
99,260
24,996
9,294
34,616
(197,322)
576,624
Income (loss) before income taxes (d)
$
111,478 $
35,236
$
5,768 $
4,773 $
(8,328) $
24,500 $
173,427
Total revenue from non-affiliates (e)
$
697,404 $
1,048
$
34,880 $
10,654 $
10,818
Gross premiums written
$
1,085,355 $
—
$
81,412
(a)
Other revenue under real estate primarily consisted of rental income from investment properties.
(b)
Other revenue under corporate and other primarily consisted of management fees for attorney-in-fact services.
(c)
Gross premiums earned under insurance operations include $4,116 earned from the reciprocal exchange operations.
(d)
The income (loss) before income taxes in the reclassification/elimination column is attributable to intercompany transactions among operating segments. The
insurance operations and the reciprocal exchange operations record service fee expenses based on earned premiums or other appropriate measures, while
Exzeo and the AIF operations recognize service fee revenues according to revenue recognition standards. Although both service fee expenses and revenues
are fully eliminated on consolidation, they do not completely offset each other in this presentation due to the different methods of recognition.
(e)
Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
91
For the Year Ended December 31,
2023
Insurance
Operations
Exzeo
Reciprocal
Exchange
Operations
(a)
Real
Estate (b)
Corporate/
Other
Reclassificati
on/
Elimination Consolidated
Revenue
Gross premiums earned
$
765,512 $
— $
— $
— $
— $
— $
765,512
Premiums ceded
(269,627)
—
—
—
—
—
(269,627)
Net premiums earned
495,885
—
—
—
—
—
495,885
Net income from investment portfolio
30,803
52
—
1
8,112
8,485
47,453
Gain on sale
—
—
—
8,811
—
(8,811)
—
Policy fee income
2,163
—
—
—
—
2,541
4,704
Other
15,791
88,333
—
9,897
2,250
(113,643)
2,628
Total revenue
544,642
88,385
—
18,709
10,362
(111,428)
550,670
Expenses
Losses and loss adjustment expenses
271,222
—
—
—
—
(16,643)
254,579
Amortization of deferred policy
acquisition costs
86,214
—
—
—
—
—
86,214
Other policy acquisition expenses
27,852
36,837
—
—
—
(60,081)
4,608
Stock-based compensation expense
1,718
2,927
—
—
4,703
—
9,348
Interest expense
—
1,722
—
720
10,397
(1,722)
11,117
Depreciation and amortization
2,454
2,202
—
1,610
707
(1,251)
5,722
Loss on extinguishment of debt
—
—
—
177
—
(177)
—
Personnel and other operating expenses
39,616
43,813
—
6,054
6,061
(34,112)
61,432
Total expenses
429,076
87,501
—
8,561
21,868
(113,986)
433,020
Income (loss) before income taxes (c)
$
115,566 $
884 $
— $
10,148 $
(11,506) $
2,558 $
117,650
Total revenue from non-affiliates (d)
$
531,495 $
52 $
— $
15,416 $
8,087
Gross premiums written
$
898,622 $
— $
—
(a)
No operation during 2023.
(b)
Other revenue under real estate primarily consisted of rental income from investment properties.
(c)
The income (loss) before income taxes in the reclassification/elimination column results from the recast of segment information.
(d)
Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
92
The following table presents gross premium earned by geographic location:
Years Ended December 31,
2025
2024
2023
Florida
$
1,115,905
$
964,659
$
642,544
Non-Florida
120,240
118,561
122,968
Gross premiums earned
$
1,236,145
$
1,083,220
$
765,512
The following table presents segment assets reconciled to the Company’s total assets on the consolidated balance sheets:
December 31,
2025
2024
Segments
Insurance Operations
$
1,895,081
$
1,905,878
Exzeo
347,734
89,441
Reciprocal Exchange Operations
184,453
105,556
Real Estate
130,971
96,795
Corporate and Other
120,686
175,282
Consolidation and Elimination
(149,997)
(142,739)
Total assets
$
2,528,928
$
2,230,213
As of December 31, 2025 and 2024, substantially all of the Company’s assets were located in Florida.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
93
Note 16 -- Income Taxes
The Company is subject to U.S. federal, various states, and foreign income tax jurisdictions. State income taxes are primarily related to the State of Florida
while foreign income taxes are related to the Company's subsidiary in India. Additionally, CORE and Tailrow are each subject to their own U.S. federal
and state income tax jurisdictions.
Significant components of income tax expense for the periods presented were as follows:
Years Ended December 31,
2025
2024
2023
Current:
Federal
$
88,410 $
34,507 $
23,997
State
22,234
8,849
5,431
Foreign
209
84
67
Current income tax expense
110,853
43,440
29,495
Deferred:
Federal
(1,512)
1,915
(738)
State
(416)
494
(365)
Foreign
10
(3)
1
Deferred income tax (benefit) expense
(1,918)
2,406
(1,102)
Income tax expense
$
108,935 $
45,846 $
28,393
Significant components of income taxes paid, net of refunds, for the periods presented were as follows:
Years Ended December 31,
2025
2024
2023
Federal
$
83,954
$
34,344
$
16,092
State
20,237
11,681
2,750
Foreign
198
129
145
Income taxes paid, net of refunds
$
104,389
$
46,154
$
18,987
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
94
The reconciliation between the income tax expense and the amount computed at the statutory U.S. federal income tax rate for the periods presented was as
follows:
Years Ended December 31,
2025
2024
2023
Amount
%
Amount
%
Amount
%
Income taxes at statutory rate
$
90,160
21.0 $
36,420
21.0 $
24,706
21.0
Increase in income taxes
resulting from:
State income taxes, net of federal
tax effect
17,600
4.1
7,387
4.3
4,951
4.2
Foreign tax effect
India - statutory tax rate
195
—
35
—
62
—
Effect of tax rate changes
—
—
—
—
(155)
(0.1)
Change in valuation allowances
—
—
—
—
(2,549)
(2.2)
Nontaxable or nondeductible items:
Non-deductible executive
compensation
2,688
0.7
2,336
1.3
1,035
0.9
Stock-based compensation
(1,860)
(0.4)
(506)
(0.3)
(49)
0.0
Other
152
—
174
0.1
392
0.3
Income tax expense
$
108,935
25.4 $
45,846
26.4 $
28,393
24.1
Significant components of the Company’s net deferred income tax liabilities were as follows:
December 31,
2025
2024
Deferred income tax assets:
Unearned premiums
$
23,580
$
21,310
Losses and loss adjustment expenses
3,981
3,896
Stock-based compensation
1,633
1,593
Unearned revenue
3,104
209
Intercompany deferred loss
1,208
544
Other
899
1,194
Total deferred income tax assets
34,405
28,746
Valuation allowance
(1,208)
(544)
Deferred income tax assets, net of valuation allowance
33,197
28,202
Deferred income tax liabilities:
Gain on involuntary conversion
(3,975)
(11,753)
Deferred policy acquisition costs
(15,574)
(15,285)
Property and equipment
(10,700)
—
Other
(4,525)
(3,817)
Total deferred income tax liabilities
(34,774)
(30,855)
Net deferred income tax liabilities
$
(1,577)
$
(2,653)
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
95
The reconciliation of net deferred income tax liabilities shown in the preceding table to the amounts reported within the consolidated balance sheets for the
periods presented was as follows:
December 31,
2025
2024
Deferred income tax assets, net
$
2,237
$
72
Deferred income tax liabilities, net
(3,814)
(2,830)
Net deferred income tax liabilities
$
(1,577)
$
(2,758)
As of December 31, 2025, it is more likely than not that the Company's deferred income tax assets will be realized, other than the deferred income tax asset
related to the intercompany deferred loss that was recognized as a result of the sale of TTIC from Exzeo to HCI during 2024. As of December 31, 2025 and
2024, the intercompany deferred loss was $1,208 and $544, respectively, and had a full valuation allowance associated with it.
There were no federal or state net operating loss carryforwards as of December 31, 2025 and 2024.
There were no unrecognized tax benefits and the amount of any interest and penalties included in income tax expense was not material for the periods
presented.
The Company's income tax filings are subject to audit by the relevant taxing authorities. These audits may culminate in proposed assessments which may
ultimately result in a change to the estimated income taxes. The following is a summary of open tax years by jurisdiction:
Jurisdiction
Years Open to Audit
Federal
2022 - 2024
State
2022 - 2024
India
2022 - 2024
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA includes various provisions, such as the permanent
extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax
treatment for certain business provisions. The OBBBA has multiple effective dates, with certain provisions effective in 2025 and others implemented
through 2027. The OBBBA resulted in additional tax depreciation for 2025, resulting in a tax benefit of approximately $1,853 and additional deductible
research and development costs for 2025, resulting in a tax benefit of approximately $386.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
96
Note 17 -- Earnings Per Share
The computations of basic and diluted earnings per share for the periods presented were as follows:
Income
(Numerator)
Shares (a)
(Denominator)
Per Share
Amount
Year Ended December 31, 2025
Net income
$
320,395
Less: Net income attributable to noncontrolling
interests
(21,390)
Net income after noncontrolling interests
299,005
Less: Income attributable to participating securities
(12,041)
Basic Earnings Per Share:
Income allocated to common stockholders
286,964
11,675 $
24.58
Effect of Dilutive Securities:
Stock options
—
397
Convertible senior notes
4,879
799
Warrants
—
7
Net impact from reallocation of
undistributed earnings to
participating securities
803
—
Diluted Earnings Per Share:
Income available to common stockholders
$
292,646
12,878 $
22.72
(a)
Shares in thousands.
Income
(Numerator)
Shares (a)
(Denominator)
Per Share
Amount
Year Ended December 31, 2024
Net income
$
127,581
Less: Net income attributable to redeemable
noncontrolling interests
(10,149)
Less: Net income attributable to noncontrolling
interests
(7,479)
Net income after noncontrolling interests
109,953
Less: Income attributable to participating securities
(4,110)
Basic Earnings Per Share:
Income allocated to common stockholders
105,843
9,997 $
10.59
Effect of Dilutive Securities:
Stock options
—
294
Convertible senior notes
6,908
2,177
Warrants
—
218
Diluted Earnings Per Share:
Income available to common stockholders
$
112,751
12,686 $
8.89
(a)
Shares in thousands.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
97
Income
(Numerator)
Shares (a)
(Denominator)
Per Share
Amount
Year Ended December 31, 2023
Net income
$
89,257
Less: Net income attributable to redeemable
noncontrolling interests
(9,370)
Less: Net income attributable to noncontrolling
interests
(853)
Net income after noncontrolling interests
79,034
Less: Income attributable to participating securities
(2,625)
Basic Earnings Per Share:
Income allocated to common stockholders
76,409
8,367 $
9.13
Effect of Dilutive Securities:
Stock options
—
83
Convertible senior notes
7,732
2,538
Warrants
—
56
Diluted Earnings Per Share:
Income available to common stockholders
$
84,141
11,044 $
7.62
(a)
Shares in thousands.
For the periods presented, all potentially dilutive securities for Exzeo were excluded from Exzeo's diluted earnings per share computation because their (i)
effect would be anti-dilutive, (ii) exercise price was “out-of-the-money,” or (iii) contingent exercise conditions were unsatisfied.
Note 18 -- Redeemable Noncontrolling Interests
Exzeo Series A Preferred Stock
On January 22, 2024, Exzeo entered into a Stock Redemption Agreement with Centerbridge Partners, L.P. (“Centerbridge”) which allowed Exzeo to
redeem all of the Exzeo Series A Preferred Stock held by Centerbridge. The redemption totaled $100,000 plus accrued and unpaid dividends of
approximately $2,923. At redemption, the difference between the consideration transferred of $102,923 and the redemption date carrying value of $96,695
was recorded as a deemed dividend and was included in net income attributable to redeemable noncontrolling interest. In connection with this redemption,
the warrants held by Centerbridge were also modified. See Note 19 “Equity” for additional information.
During 2024, net income attributable to redeemable noncontrolling interests was $10,149, consisting of accrued cash dividends of $424, accretion related to
increasing dividend rates of $111, an adjustment to maximum redemption value of $6,228, and a deemed dividend resulting from warrant modifications of
$3,386. During 2023, net income attributable to redeemable noncontrolling interests was $9,370, consisting of accrued cash dividends of $7,263 and
accretion related to increasing dividend rates of $2,107.
Subscriber Surplus Contributions
Subscriber surplus contributions in redeemable noncontrolling interests represent a refundable portion of the surplus contributions received from
policyholders of CORE and Tailrow. The surplus contributions are reclassified to noncontrolling interest once they are no longer refundable.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
98
The following table summarizes the activity of subscriber surplus contributions:
Years Ended December 31,
2025
2024
Beginning balance
$
1,691 $
—
Cash contributions
6,827
2,953
Return of contributions
(155)
(4)
Reclassification of nonrefundable
subscriber surplus contributions
(5,004)
(1,258)
Ending balance
$
3,359 $
1,691
Note 19 -- Equity
Stockholders’ Equity
Common Stock
Each share of common stock entitles the stockholder to one vote.
In December 2023, the Company sold an aggregate of 1,150,000 shares of the Company’s common stock at a price of $78 per share to the public, pursuant
to an underwriting agreement between the Company and Citizens JMP Securities, LLC, the representative of several underwriters participating in the
underwriting agreement. After issuance costs, the Company received net proceeds of $84,572.
Dividends
Stockholders are entitled to receive dividends when, as, and if declared by the Company’s Board of Directors out of funds legally available for that
purpose. Unvested restricted stock awards have the right to share in dividends, if declared, equally with common stockholders on a nonforfeitable basis.
The following table represents the frequency and amount of all cash dividends declared on common stock for the periods presented:
Declaration Date
Date of Record
Payment Date
Per Share Amount
Year Ended December 31, 2025
10/21/2025
11/21/2025
12/19/2025
$
0.40
7/1/2025
8/15/2025
9/19/2025
0.40
4/23/2025
5/16/2025
6/20/2025
0.40
1/14/2025
2/21/2025
3/21/2025
0.40
Total
$
1.60
Year Ended December 31, 2024
10/24/2024
11/15/2024
12/20/2024
$
0.40
7/3/2024
8/16/2024
9/20/2024
0.40
4/24/2024
5/17/2024
6/21/2024
0.40
1/24/2024
2/16/2024
3/15/2024
0.40
Total
$
1.60
Year Ended December 31, 2023
10/13/2023
11/17/2023
12/15/2023
$
0.40
7/3/2023
8/18/2023
9/15/2023
0.40
4/14/2023
5/19/2023
6/16/2023
0.40
1/11/2023
2/17/2023
3/17/2023
0.40
Total
$
1.60
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
99
Preferred Stock
As of December 31, 2025 and 2024, the Company had 20,000,000 preferred shares authorized, none of which were issued and outstanding.
Warrants
In connection with the redemption of the Exzeo Series A Preferred Stock held by Centerbridge in January 2024, the Company extended the expiration dates
of 450,000 warrants to expire in 150,000 share increments on December 31, 2026, December 31, 2027, and December 31, 2028. The remaining 300,000
warrants retained their original expiration date of February 26, 2025 and were exercised in March 2024 through a cashless transaction, resulting in the
issuance of 155,049 shares of common stock. The warrant modifications resulted in a $3,386 increase in the fair value of the warrants, which was recorded
as a deemed dividend by decreasing retained income and increasing additional paid-in capital. The amount of deemed dividend was included in net income
attributable to redeemable noncontrolling interest which was subtracted from net income when calculating net income available to common stockholders.
In November 2024, the 150,000 warrants with an expiration date of December 31, 2026 were exercised through a cashless transaction, resulting in the
issuance of 79,460 shares of common stock. In November 2024, the 150,000 warrants with an expiration date of December 31, 2027 were exercised
through a cashless transaction, resulting in the issuance of 77,787 shares of common stock. In December 2024, 138,750 warrants with an expiration date of
December 31, 2028 were exercised through a cashless transaction, resulting in the issuance of 73,971 shares of common stock.
As of December 31, 2025, there were 11,250 warrants outstanding and exercisable at an exercise price of $54.40 with an expiration date of December 31,
2028.
At-The-Market Facility
On January 22, 2024, the Company implemented an “at-the-market” facility (the “ATM Facility”) which gives the Company the ability to raise up to
$75,000 through the issuance of new shares of common stock through a sales agent (the “Sales Agent”). The Company has no obligation to sell, and the
Sales Agent has no obligation to buy or sell, any shares of common stock under the ATM Facility. As of December 31, 2025, the remaining availability
under the ATM Facility was $75,000.
Noncontrolling Interests
Exzeo
On November 6, 2025, Exzeo closed its initial public offering, issuing 8,000,000 shares of common stock at a price of $21.00 per share for gross proceeds
of $168,000. Underwriting and offering costs totaled $13,246 and were recorded as a reduction of the proceeds received. The net proceeds were allocated
as $129,209 to additional paid-in capital and $25,545 to noncontrolling interest on the consolidated balance sheet with no recognition of a gain or loss on
the consolidated statements of income. Underwriting and offering costs were reflected as cash flows from financing activities in the consolidated
statements of cash flows. Offering costs related to third-parties were reflected separately from proceeds received in the consolidated statements of cash
flows.
On July 1, 2024, HCI Group, Inc. entered into a Stock Purchase Agreement (“Purchase Agreement”) with Exzeo. Pursuant to the Purchase Agreement,
Exzeo transferred all outstanding shares of TTIC to HCI Group, Inc. in exchange for the settlement of promissory notes. Because the transaction occurred
between entities under common control and did not result in a change of control of TTIC, the transaction was accounted for as a common control
transaction. The net assets of TTIC were derecognized by Exzeo and recognized by HCI Group, Inc. at their carrying amounts on the date of the
transaction. The difference between the consideration transferred and the carrying amounts of the net assets was recognized in equity. As there was no
change in HCI Group, Inc.’s ownership percentage in Exzeo, the change in noncontrolling interests in Exzeo was charged to noncontrolling interest
expense and was not material. This organizational change was implemented to align all insurance operations under a single operating segment under the
Company’s direct control, allowing Exzeo to primarily focus on its industry-leading technology and insurance management activities as an insurance
solutions provider.
Dilution from subsidiary stock-based compensation in the consolidated statements of equity primarily relates to (i) the net settlement of Exzeo common
shares surrendered by employees to satisfy payroll tax liabilities associated with the vesting of restricted stock
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
100
awards issued under Exzeo's stock-based compensation plan and (ii) the change in ownership of Exzeo as a result of the vesting of restricted stock awards
issued under Exzeo's stock-based compensation plan.
As of December 31, 2025, there were 90,926,720 shares of Exzeo’s common stock outstanding, of which 15,926,720 shares were not owned by HCI
Group, Inc. Of the shares not owned by HCI Group, Inc., 2,541,593 represent unvested restricted stock awards granted to Exzeo's employees.
Subscriber Surplus Contributions
Subscriber surplus contributions in noncontrolling interests represent the non-refundable portion of the surplus contributions received from policyholders of
CORE and Tailrow. The surplus contributions are reclassified from redeemable noncontrolling interest once they are no longer refundable. As CORE and
Tailrow are owned by their underlying policyholders, their net assets are included in noncontrolling interests.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) relates to the unrealized gains or losses of available-for-sale fixed-maturity securities carried at fair value,
net of tax. Accumulated other comprehensive income (loss) is reclassified to either net investment income or net realized investment gains (losses) in the
consolidated statements of income as payments or sales occur related to available-for-sale fixed-maturity securities, respectively. Other comprehensive
income (loss) represents the net change in accumulated other comprehensive income (loss).
Prior to the transfer of TTIC from Exzeo to HCI Group, Inc. during 2024, a portion of accumulated other comprehensive income (loss) was attributable to
noncontrolling interests. Subsequent to the transfer, there was no accumulated other comprehensive income (loss) attributable to noncontrolling interests.
The following table summarizes the activity with respect to accumulated other comprehensive income (loss) during 2025:
Before Tax
Income Tax Effect
Net of Tax
December 31, 2024
(999)
(250)
(749)
Net unrealized gains
3,238
810
2,428
Reclassification to net investment income
(204)
(51)
(153)
Reclassification to net realized investment
gains
(89)
(22)
(67)
December 31, 2025
$
1,946
$
487
$
1,459
The components of other comprehensive income, inclusive of the related tax effects, during 2024 and 2023 were as follows:
Year Ended December 31, 2024
Income Tax
Before Tax
Effect
Net of Tax
Net unrealized gains
$
5,241 $
1,312 $
3,929
Reclassification to net investment income
(2)
—
(2)
Reclassification to net realized investment gains
$
(1,789) $
(448) $
(1,341)
Other comprehensive income
$
3,450 $
864 $
2,586
Year Ended December 31, 2023
Income Tax
Before Tax
Effect
Net of Tax
Net unrealized gains
$
4,818 $
(1,372) $
6,190
Reclassification to net realized investment losses
1,029
258
771
Other comprehensive income
$
5,847 $
(1,114) $
6,961
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
101
Note 20 -- Stock-Based Compensation
The Company grants stock-based awards to participants under HCI Group, Inc.'s 2012 Omnibus Incentive Plan (“HCI Plan”) and Exzeo Group, Inc.'s 2025
Omnibus Incentive Plan (“Exzeo Plan”). Stock-based compensation expense is included in general and administrative personnel expense in the
consolidated statements of income and consisted of the following for the periods presented:
Years Ended December 31,
2025
2024
2023
Stock options
$
— $
14 $
2,197
Restricted stock awards
8,368
6,909
4,224
Exzeo stock options
1,040
2,045
1,767
Exzeo restricted stock awards
1,562
1,221
1,160
Stock-based compensation expense
$
10,970 $
10,189 $
9,348
Stock-based compensation awards are classified as equity and awards related to the Exzeo Plan are included as a component of noncontrolling interest.
HCI Plan
As of December 31, 2025, there were 644,301 shares available for issuance under the HCI Plan to employees, directors, consultants, and advisors of the
Company.
Stock Options
Stock options granted under the HCI Plan generally vest over a period of four years and are exercisable over the contractual term of ten years.
The following table summarizes activity related to stock options granted under the HCI Plan during 2025:
Number of
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Outstanding as of December 31, 2024
590,000 $
51.54
4.9 years $
37,523
Outstanding as of December 31, 2025
590,000 $
51.54
3.9 years $
82,687
Exercisable as of December 31, 2025
590,000 $
51.54
3.9 years $
82,687
In September 2023, the Company awarded its Chief Executive Officer stock options under the HCI Plan with market-based vesting conditions to purchase
150,000 shares of its common stock, which had a grant date fair value of $12.50. In December 2023, the award met the conditions for vesting and as a
result, the unrecognized compensation balance related to the award was fully recognized. There were no stock options granted under the HCI Plan during
2025 and 2024.
There were no stock options under the HCI Plan that were exercised during 2025, 2024, and 2023.
There were no deferred tax benefits related to stock options under the HCI Plan during 2025, 2024, and 2023.
As of December 31, 2025, there was no unrecognized compensation expense related to stock options under the HCI Plan.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
102
The following table provides assumptions used in the pricing model to estimate the fair value of the stock options granted under the HCI Plan during 2023:
2023
Expected dividend yield (%)
3.05
Expected volatility (%)
44.63 - 46.55
Risk-free interest rate (%)
4.49 - 5.49
Expected life (in years)
4.8
Restricted Stock Awards
Restricted stock awards granted under the HCI Plan may include service, performance, and market-based conditions. The requisite service period for
restricted stock awards granted under the HCI Plan is generally three or four years.
The following table summarizes activity related to restricted stock awards under the HCI Plan during 2025, 2024, and 2023:
Number of
Restricted
Stock
Awards
Weighted
Average
Grant Date
Fair Value
Unvested as of December 31, 2022
342,459
$
39.86
Granted
13,000
$
55.40
Vested
(75,041)
$
50.55
Forfeited
(9,001)
$
55.68
Unvested as of December 31, 2023
271,417
$
37.12
Granted
269,200
$
87.06
Vested
(49,327)
$
52.92
Forfeited
(5,175)
$
53.07
Unvested as of December 31, 2024
486,115
$
63.00
Granted
51,330
$
182.51
Vested
(39,025)
$
84.71
Forfeited
(3,785)
$
112.67
Unvested as of December 31, 2025
494,635
$
73.31
In April 2024, the Company granted its Chief Executive Officer 200,000 restricted stock awards under the HCI Plan. These restricted stock awards will
vest equally over a period of four years, with vesting dates of March 15, 2025, 2026, 2027, and 2028, under the condition that the price per share reaches
$200 for a period of 30 consecutive trading days. There were no restricted stock awards granted under the HCI Plan with market-based vesting conditions
during 2025 or 2023.
In May 2025, 193,500 restricted stock awards under the HCI Plan satisfied the required market condition for vesting as the price per share exceeded $140
for a period of 30 consecutive trading days. Consequently, the remaining unrecognized compensation cost is being recognized on a straight‑line basis over
the twelve‑month period beginning on the date the market condition was achieved.
As of December 31, 2025, there were 393,500 unvested restricted stock awards under the HCI Plan with market conditions, of which 200,000 did not meet
the requisite market conditions.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
103
As of December 31, 2025, there was approximately $20,870 of total unrecognized compensation expense related to unvested restricted stock awards under
the HCI Plan. The Company expects to recognize the remaining compensation expense over a weighted-average period of 2.5 years.
The following table summarizes information about deferred tax benefits recognized and tax benefits realized related to restricted stock awards and paid
dividends, and the fair value of vested restricted stock awards under the HCI Plan during 2025, 2024, and 2023:
2025
2024
2023
Deferred tax benefits recognized
$
735 $
386 $
921
Tax benefits realized for restricted stock and paid dividends
$
1,660 $
1,145 $
866
Fair value of vested restricted stock
$
3,306 $
2,610 $
3,793
The following table provides assumptions used in the pricing model to estimate the fair value of restricted stock awards granted under the HCI Plan with
market-based vesting conditions granted during 2024:
2024
Beginning price per share
$
109.91
Expected volatility (%)
42.50%
Risk-free interest rate (%)
4.61%
Term (in years)
0.004
Exzeo Plan
Prior to Exzeo's initial public offering, Exzeo maintained its 2021 Omnibus Plan under which shares of Exzeo common stock were authorized for issuance
as stock-based compensation awards to employees, directors, consultants, and advisors of Exzeo. In connection with Exzeo's initial public offering, Exzeo
terminated its 2021 Omnibus Plan and adopted the Exzeo Plan, which authorizes the issuance of up to 10,000,0000 shares of Exzeo's common stock.
Awards outstanding under the Exzeo 2021 Omnibus Plan continue to be governed by the terms of that plan and are incremental to, and do not count
against, the authorized share pool of the Exzeo Plan. As of December 31, 2025, there were 9,768,530 shares available for issuance under the Exzeo plan.
Exzeo Stock Options
As of December 31, 2025, there were 6,350,000 Exzeo stock options outstanding with a weighted-average exercise price of $23.00. All of the Exzeo stock
options were fully vested, however, 6,000,000 were non-exercisable without approval from HCI Group, Inc.'s board of directors.
Exzeo Restricted Stock Awards
As of December 31, 2025, there were 2,541,593 unvested Exzeo restricted stock awards outstanding with a weighted average grant date fair value of $4.68.
There was approximately $11,747 of total unrecognized compensation expense related to unvested Exzeo restricted stock awards, which is expected to be
recognized over a weighted-average period of 4.6 years.
Note 21 -- Commitments and Contingencies
Litigation and Other Legal Matters
The Company is party to litigation and other legal matters arising in the ordinary course of business. From time to time, the Company is also subject to
regulatory and governmental examinations, information requests and subpoenas, inquiries, investigations, and threatened legal actions and proceedings.
The Company records accruals for losses that are probable and reasonably estimable. These accruals are based on a variety of factors such as judgment,
probability of loss, and opinions of internal and external legal counsel. Legal costs in connection with litigation and other legal matters arising in the
ordinary course of business are expensed as incurred.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
104
Although the Company cannot predict with certainty the ultimate resolution of the litigation and other legal matters it is party to, the Company does not
believe that any known or potential litigation and other legal matters will have a material effect on the Company’s consolidated financial position, results of
operations, or cash flows.
Rental Income
The Company as a lessor leases its commercial and retail properties, boat slips, and docks to non-affiliates at various term. Minimum rental payments,
excluding lease incentives, to be received under operating leases for all properties owned as of December 31, 2025 were as follows:
Year
Amount
2026
$
7,160
2027
9,553
2028
9,574
2029
9,608
2030
9,761
Thereafter
64,136
Total
$
109,792
In March 2025, the Company entered into an operating lease agreement for its 189,147-square-foot commercial property in Tampa, Florida. The lease
commenced in June 2025 and has an initial term of 130 months, with options to renew for two additional 60-month periods. Total lease payments, net of
lease incentives, over the initial term is expected to be $56,866.
Capital Commitments
As described in Note 5 “Investments” under Limited Partnership Investments, the Company is contractually committed to capital contributions for limited
partnership interests. As of December 31, 2025, there was an aggregate unfunded balance of $3,652.
FIGA Assessments
In March 2022, the FLOIR approved an assessment for the FIGA which is necessary to secure funds for the payment of covered claims relating to the
liquidation of one insurance company. The FIGA assessment is levied at 1.3% on collected premiums of all covered lines of business except auto
insurance. The surcharge, which is collectible from a policyholder, was assessed on new and renewal policies with effective dates beginning July 1, 2022
through June 30, 2023.
In August 2022, the FLOIR approved a 2023 assessment for FIGA which is necessary to secure funds for the payment of covered claims relating to the
liquidation of two insurance companies. The 2023 FIGA assessment is levied at 0.70% on collected premiums of all covered lines of business except auto
insurance. The surcharge, which is collectible from a policyholder, was assessed on new and renewal policies with effective dates beginning January 1,
2023 through December 31, 2023.
In April 2023, the FLOIR approved an assessment for FIGA which is necessary to secure funds for the payment of covered claims relating to the
liquidation of one insurance company. The FIGA assessment is levied at 1% on collected premiums of all covered lines of business except auto insurance.
The surcharge, which is collectible from a policyholder, was assessed initially on new and renewal policies with effective dates beginning October 1, 2023
through September 30, 2024 and will continue annually until the end of the assessment year in which the Series 2023A Bonds issued by the Florida
Insurance Assistance Interlocal Agency have been paid in full.
The Company’s insurance subsidiaries, as member insurers, are required to collect and remit the pass-through assessments to FIGA on a quarterly basis. As
of December 31, 2025 and 2024, the FIGA assessments payable by the Company were $2,034 and $1,793, respectively.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
105
Note 22 -- Quarterly Results of Operations (Unaudited)
The tables below summarize unaudited quarterly results of operations for 2025, 2024 and 2023.
Three Months Ended
03/31/2025
06/30/2025
09/30/2025
12/31/2025
Net premiums earned
$
200,748 $
200,106 $
194,991 $
225,821
Total revenue
216,433
221,920
216,350
246,243
Losses and loss adjustment expenses
59,291
64,457
66,153
51,926
Policy acquisition and other underwriting expenses
27,287
30,551
31,652
32,936
Interest expense
3,384
3,744
1,019
1,009
Total expenses
116,094
127,528
125,751
102,243
Income before income taxes
100,339
94,392
90,599
144,000
Net income
74,230
70,279
67,888
107,998
Comprehensive income
76,321
70,095
68,766
107,421
Earnings per share:
Basic
$
6.47 $
5.57 $
5.05 $
7.50
Diluted
$
5.35 $
5.18 $
4.90 $
7.25
Three Months Ended
03/31/2024
06/30/2024
09/30/2024
12/31/2024
Net premiums earned
$
188,538 $
186,848 $
155,824 $
146,351
Total revenue
206,614
206,245
175,317
161,875
Losses and loss adjustment expenses
79,922
78,324
105,736
110,726
Policy acquisition and other underwriting expenses
22,139
23,452
26,104
27,707
Interest expense
3,149
3,452
3,421
3,322
Total expenses
129,184
130,219
161,237
155,984
Income before income taxes
77,430
76,026
14,080
5,891
Net income
56,956
57,099
9,392
4,134
Comprehensive income
57,019
57,635
14,048
1,465
Earnings per share:
Basic
$
4.76 $
5.18 $
0.54 $
0.24
Diluted
$
3.81 $
4.24 $
0.52 $
0.23
Three Months Ended
03/31/23
06/30/23
09/30/23
12/31/23
Net premiums earned
$
109,559 $
115,556 $
122,156 $
148,614
Total revenue
129,029
127,327
131,644
162,670
Losses and loss adjustment expenses
60,565
61,890
66,726
65,398
Policy acquisition and other underwriting expenses
22,720
22,618
22,768
22,716
Interest expense
2,801
2,667
2,827
2,822
Total expenses
105,893
107,061
111,556
108,510
Income before income taxes
23,136
20,266
20,088
54,160
Net income
17,793
14,882
15,669
40,913
Comprehensive income
22,756
13,202
16,421
43,839
Earnings per share:
Basic
$
1.78 $
1.45 $
1.53 $
4.31
Diluted
$
1.54 $
1.28 $
1.34 $
3.40
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
106
Note 23 -- Regulatory Requirements and Restrictions
The Company has no restrictions on the ability to pay dividends to its stockholders. However, there are legal and regulatory constraints and requirements
applicable to the Company's insurance subsidiaries that may restrict the availability of net assets for dividend distributions to the Company's stockholders.
As of December 31, 2025 and 2024, restricted net assets amounted to $516,547 and $340,083, respectively.
As CORE and Tailrow are owned by their underlying policyholders, their net assets are included in noncontrolling interests and are excluded from
stockholders' equity in the consolidated balance sheets. Accordingly, statutory capital and surplus, statutory net income or loss, and other insurance
regulatory information related to CORE and Tailrow are not presented.
U.S.-based
The Company’s U.S.-based insurance subsidiaries prepare their statutory financial statements in accordance with accounting principles prescribed or
permitted by insurance regulatory authorities. Prescribed statutory accounting practices are those practices that are incorporated directly or by reference in
state laws, regulations, and general administrative rules applicable to all insurance enterprises where they are domiciled. Permitted statutory accounting
practices encompass all accounting practices that are not prescribed; such practices differ from state to state, may differ from entity to entity within a state,
and may change in the future. Some states have adopted laws, regulations, accounting practices and procedures issued by the NAIC.
U.S. GAAP differs in certain respects from the accounting practices prescribed or permitted by insurance regulatory authorities (“statutory-basis”).
Statutory-basis surplus differs from stockholders’ equity reported in accordance with U.S. GAAP primarily because policy acquisition costs are expensed
when incurred and reinsurance brokerage income is recognized when received. In addition, the recognition of deferred income tax assets is based on
different recoverability assumptions and material differences may also arise from the differing treatment of non-admitted assets and unrealized gains and
losses from investments.
State statutes in the domiciliary states of the Company’s U.S.-based subsidiaries typically restrict annual dividend payments without prior regulatory
approval.
The following tables present statutory-basis financial information determined in accordance with statutory accounting principles:
December 31,
2025
2024
Statutory capital and surplus:
HCPCI
$
200,336
$
147,682
TTIC
246,345
156,008
perRisk
21,609
21,052
Total
$
468,290
$
324,742
Minimum capital and surplus:
HCPCI
$
44,314
$
40,313
TTIC
39,387
39,847
perRisk
900
900
Total
$
84,601
$
81,060
Dividend allowed without approval:
HCPCI
$
20,034
$
14,768
TTIC
24,634
—
perRisk
557
682
Total
$
45,225
$
15,450
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
107
Years Ended December 31,
2025
2024
2023
Statutory net income:
HCPCI
$
64,237
$
38,830
$
12,930
TTIC
$
78,917
$
24,864
$
14,418
perRisk
$
557
$
682
$
371
The Company’s U.S.-based insurance subsidiaries are subject to risk-based capital (“RBC”) requirements as specified by the NAIC or other regulatory
authorities. Under those requirements, the amount of minimum capital and surplus maintained by a property and casualty insurance company is to be
determined based on the various risks related to it. Pursuant to the RBC requirements, insurers having less statutory capital than required by the RBC
calculation will be subject to varying degrees of regulatory action, depending on the level of capital inadequacy. As of December 31, 2025 and 2024, the
Company’s U.S.-based insurance subsidiaries individually exceeded any applicable minimum RBC requirements and no corrective actions have been
required.
In addition, Florida property and casualty insurance companies are required to adhere to prescribed premium-to-capital surplus ratios. Florida state law
requires that the ratio of 90% of written premiums divided by surplus as to policyholders does not exceed 10 to 1 for gross written premiums or 4 to 1 for
net written premiums. The ratios of gross and net written premiums to surplus, which the Company’s insurance subsidiaries have met the requirements for,
are summarized below:
Years Ended December 31,
2025
2024
2023
HCPCI:
Gross
2.95 to 1
3.64 to 1
4.14 to 1
Net
1.54 to 1
1.66 to 1
2.69 to 1
TTIC:
Gross
1.85 to 1
2.85 to 1
3.56 to 1
Net
1.10 to 1
1.90 to 1
2.26 to 1
Bermuda
As of December 31, 2025, Claddaugh's minimum capital and surplus was $14,465, statutory capital and surplus was $127,663, and distribution allowed
without approval was $34,181.
Claddaugh reported a statutory net income of $56,830, statutory net loss of $9,642, and statutory net income of $21,044 during 2025, 2024, and 2023,
respectively.
Note 24 -- Related Party Transactions
HCPCI, TTIC, CORE, and Tailrow have reinstatement premium protection reinsurance contracts (“RPP”) with various reinsurers for the 2025-2026 treaty
year. The purpose of the RPP contracts is to indemnify HCPCI, TTIC, CORE, and Tailrow for the reinstatement premium which HCPCI, TTIC, CORE,
and Tailrow pay or become liable to pay under the reinstatement provisions of the respective excess of loss reinsurance contracts. For one of the RPP
contracts, Oxbridge Reinsurance Limited (“Oxbridge”) participates as a subscribing reinsurer with HCPCI and Tailrow as collective reinsureds. One of the
Company’s non-employee directors, Jay Madhu, serves as Oxbridge’s Chairman of its Board of Directors and Chief Executive Officer and is an investor in
that company. For its participation on the RPP contract, Oxbridge’s annual premium is $1,033 and is paid by HCPCI and Tailrow over four installments.
Management believes the premium rate is competitive with market rates. A trust account has been established with HCPCI and Tailrow as collective
beneficiaries and Oxbridge as grantor. Each of the four premium installments is deposited into the trust account in order to fully collateralize Oxbridge’s
obligations under the RPP contract. Trust assets may be withdrawn by HCPCI and Tailrow to indemnify HCPCI and Tailrow for Oxbridge’s obligations
under the provisions of the RPP contract. Total premiums to Oxbridge were $1,099 for both the 2023-2024 and 2024-2025 treaty years.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
108
Note 25 -- Condensed Financial Information of HCI Group, Inc.
The condensed financial statements of HCI Group, Inc. have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X, as the restricted
net assets of subsidiaries of HCI Group, Inc. exceeds 25% of the Company's consolidated net assets. The ability of HCI Group, Inc.'s insurance subsidiaries
to pay dividends may be restricted due to restrictions imposed by insurance statutes and regulations.
The condensed financial statements of HCI Group, Inc. have been prepared using the same accounting principles and policies described in the other notes
to the consolidated financial statements with the only exception being that the parent company accounts for its subsidiaries using the equity method of
accounting. These condensed financial statements should be read in conjunction with the Company's consolidated financial statements and related notes
thereto.
Condensed financial information of HCI Group, Inc. is as follows:
Balance Sheets
December 31,
2025
2024
Assets
Cash and cash equivalents
$
38,420
$
97,747
Equity securities, at fair value
10,399
10,077
Limited partnership investments
14,012
16,329
Note receivable from subsidiaries
25,000
25,000
Investment in subsidiaries
1,043,424
591,742
Property and equipment, net
701
699
Other assets
9,750
12,610
Total assets
$
1,141,706
$
754,204
Liabilities and Stockholders’ Equity
Income taxes payable
$
2,337
$
10,010
Deferred income tax liabilities, net
1,153
375
Revolving credit facility
36,000
44,000
Long-term debt
—
169,397
Payables to subsidiaries, net
49,801
77,739
Accrued expenses and other liabilities
11,338
13,025
Total liabilities
100,629
314,546
Total stockholders’ equity
1,041,077
439,658
Total liabilities and stockholders’ equity
$
1,141,706
$
754,204
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
109
Statements of Income
Years Ended December 31,
2025
2024
2023
Revenue
Net investment income
$
4,987 $
13,318 $
7,607
Net realized investment gains (losses)
599
1,150
(554)
Net unrealized investment (losses) gains
(101)
639
1,060
Other income
—
—
2
Total revenue
5,485
15,107
8,115
Expenses
Interest expense
7,866
12,463
10,397
General and administrative personnel and other operating expenses
12,279
9,451
6,398
Total expenses
20,145
21,914
16,795
Loss before income tax and equity in net income of subsidiaries
(14,660)
(6,807)
(8,680)
Income tax (benefit) expense
(2,271)
105
(2,336)
Net loss before equity in net income of subsidiaries
(12,389)
(6,912)
(6,344)
Equity in net income of subsidiaries
311,394
117,736
70,832
Net income
$
299,005 $
110,824 $
64,488
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
110
Statements of Cash Flows
Years Ended December 31,
2025
2024
2023
Cash flows from operating activities:
Net income
$
299,005 $
110,824 $
64,488
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Stock-based compensation expense
6,699
5,150
4,323
Net realized investment (gains) losses
(599)
(1,150)
554
Net unrealized investment losses (gains)
101
(639)
(1,060)
Net accretion of discount on investments in available-for-sale
fixed-maturity securities
—
(71)
(41)
Depreciation and amortization
2,832
1,606
1,633
Net loss (income) from limited partnership investments
176
(1,202)
(737)
Distributions of return on investment from limited partnership
investments
1
841
833
Debt conversion expense
1,125
—
—
Equity in net income of subsidiaries
(311,394)
(117,736)
(70,832)
Deferred income tax expense (benefit)
778
(276)
649
Changes in operating assets and liabilities:
Income taxes
(12,895)
2,830
(1,247)
Other assets
2,962
562
383
Accrued expenses and other liabilities
(500)
(1,539)
1,165
Payables to subsidiaries, net
(27,938)
(5,544)
8,340
Net cash (used in) provided by operating activities
(39,647)
(6,344)
8,451
Cash flows from investing activities:
Investments in limited partnerships
—
(1,184)
(1,192)
Investment in note receivable from subsidiaries
—
(100,000)
(25,000)
Purchase of available-for-sale fixed-maturity securities
—
(49,683)
(26,585)
Purchase of equity securities
(6,492)
(5,999)
(4,904)
Purchase of short-term and other investments
—
—
(81)
Purchase of property and equipment
(795)
(242)
(478)
Proceeds from sales of available-for-sale fixed-maturity securities
—
50,672
33
Proceeds from calls, repayments and maturities of available-for-sale
fixed-maturity securities
—
—
26,626
Proceeds from sales of equity securities
6,668
6,238
4,660
Proceeds from sales, redemptions and maturities of short-term and other
investments
—
—
53
Proceeds from sales of property and equipment
344
—
—
Collection of note receivable from subsidiaries
—
2,994
—
Distributions of return of capital from limited partnership investments
2,140
2,733
3,025
Distributions from subsidiaries
22,000
33,000
40,500
Contributions to subsidiaries
(13,444)
(36,000)
(22,000)
Net cash provided by (used in) investing activities
10,421
(97,471)
(5,343)
(continued)
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
111
Statements of Cash Flows – (Continued)
Years Ended December 31,
2025
2024
2023
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs
—
—
84,572
Payment of net share settlements and other
(1,524)
(1,037)
(784)
Redemption of long-term debt
—
(466)
—
Debt issuance costs paid
(163)
(99)
(170)
Common stock dividends
(19,289)
(16,598)
(13,719)
(Repayment) borrowing under revolving credit facility, net
(8,000)
44,000
—
Debt conversion costs paid
(1,125)
—
—
Net cash (used in) provided by financing activities
(30,101)
25,800
69,899
Net (decrease) increase in cash and cash equivalents
(59,327)
(78,015)
73,007
Cash and cash equivalents at beginning of year
97,747
175,762
102,755
Cash and cash equivalents at end of year
$
38,420 $
97,747 $
175,762
Notes to Condensed Financial Statements (Parent Company Only)
During 2025, there was a non-cash increase in investment in subsidiaries of $126,070 primarily due to Exzeo's initial public offering in November 2025.
See Note 11 “Long-Term Debt” for additional information on the conversion of the Notes.
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts, unless otherwise stated)
112
Note 26 -- Subsequent Events
On January 14, 2026, the Company’s Board of Directors declared a quarterly dividend of $0.40 per common share. The dividends are payable on March
20, 2026 to stockholders of record on February 20, 2026.
In February 2026, the FLOIR approved to terminate the 1% FIGA assessment levied beginning October 1, 2023. The 1% FIGA assessment will still be
charged on policies renewing through September 30, 2026, but will terminate on October 1, 2026.
113
ITEM 9 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A – Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the
period covered by this Annual Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of
December 31, 2025, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the
reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms and (ii) accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosures.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over our financial reporting (as defined in Rule 13a-15(f) and 15d-
15(f) of the Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our management performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2025 based on the
framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). Based on our assessment, we determined that our internal control over financial reporting was effective as of December 31, 2025.
The effectiveness of our internal control over financial reporting as of December 31, 2025 has been audited by Forvis Mazars, LLP, an independent
registered public accounting firm, as stated in their report which appears in Part II of this Annual Report.
Changes in Internal Control Over Financial Reporting
During the three months ended December 31, 2025, there were no changes in our internal control over financial reporting that materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B – Other Information
During the three months ended December 31, 2025, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-
Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408 of Regulation S-K).
ITEM 9C – Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
114
PART III
ITEM 10 – Directors, Executive Officers and Corporate Governance
Code of Ethics
We have adopted a code of ethics applicable to all of our employees and directors, including our Chief Executive Officer (principal executive officer) and
Chief Financial Officer (principal financial officer). We have posted the text of our code of ethics to our website: www.hcigroup.com. Select “Investors” at
the top and then select “Governance” and then “Code of Conduct.” We intend to disclose any change to or waiver from our code of ethics by posting such
change or waiver to our website within the same section as described above.
The other information required under this item is incorporated by reference from our definitive proxy statement relating to our annual meeting of
shareholders, which will be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, 2025.
ITEM 11 – Executive Compensation
The information required under this item is incorporated by reference from our definitive proxy statement relating to our annual meeting of shareholders,
which will be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, 2025.
ITEM 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required under this item, other than as set forth below as required by Item 201(d) of Regulation S-K, is incorporated by reference from our
definitive proxy statement relating to our annual meeting of shareholders, which will be filed with the Securities and Exchange Commission within 120
days after the end of our fiscal year ended December 31, 2025.
Securities Authorized for Issuance Under Equity Compensation Plans
We grant stock-based awards to participants under HCI Group, Inc.'s 2012 Omnibus Incentive Plan (“HCI Plan”). The HCI Plan authorizes for the issuance
of common stock as stock-based compensation awards to employees, directors, consultants, and advisors.
The following table summarizes our equity compensation plans as of December 31, 2025. We currently have no equity compensation plans not approved
by our stockholders.
Plan Category
(a)
Number of Securities
To be Issued Upon
Exercise of
Outstanding Options
(b)
Weighted-Average
Exercise Price of
Outstanding Options
(c)
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (Excluding Securities
Reflected in Column (a))
Equity Compensation Plans Approved by Stockholders:
HCI Plan (1)
590,000 $
51.54
644,301
(1) Column (a) excludes (i) 101,135 shares of unvested service-based restricted stock awards and (ii) 393,500 shares of unvested market-based restricted stock awards.
ITEM 13 – Certain Relationships and Related Transactions, and Director Independence
The information required under this item is incorporated by reference from our definitive proxy statement relating to our annual meeting of shareholders,
which will be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, 2025.
ITEM 14 – Principal Accountant Fees and Services
The information required under this item is incorporated by reference from our definitive proxy statement relating to our annual meeting of shareholders,
which will be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, 2025.
115
PART IV
ITEM 15 – Exhibits and Financial Statement Schedules
1. Financial Statements
See Index to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
2. Financial Statement Schedules
All financial statement schedules are omitted because either they are not required, are included in the consolidated financial statements or notes thereto
included elsewhere in this Annual Report on Form 10‑K, or are not material.
3. Exhibits
The exhibits listed on the accompanying Index to Exhibits are filed, furnished, or incorporated by reference as part of this Annual Report on Form 10-K.
Index to Exhibits
The information required by this Item is set for on the index to exhibits below.
Exhibit
Number
Exhibit Description
Form
Exhibit
Filing Date
3.1
Articles of Incorporation, with amendments.
10-Q
3.1
8/7/2013
3.1.1
Articles of Amendment to Articles of Incorporation designating the rights, preferences and limitations
of Series B Junior Participating Preferred Stock.
8-K
3.1
10/18/2013
3.1.2
Articles of Amendment to Articles of Incorporation canceling the rights, preferences and limitations of
Series B Junior Participating Preferred Stock.
8-K
3.1
5/15/2020
3.2
Bylaws, with amendments.
8-K
3.2
9/13/2019
4.1
Form of common stock certificate.
10-Q
4.1
11/7/2013
4.2
Common Stock Purchase Warrant, dated February 26, 2021, issued by HCI Group, Inc. to CB
Snowbird Holdings, L.P.
8-K
4.1
3/1/2021
4.3
Indenture, dated May 23, 2022, by and between HCI Group, Inc. and The Bank of New York Mellon
Trust Company, N.A.
10-Q
4.3
8/9/2022
4.6
Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as
amended.
10-K
4.6
3/12/2021
4.9
See Exhibits 3.1, 3.1.1, 3.1.2 and 3.2 of this report for provisions of the Articles of Incorporation, as
amended, and our Bylaws, as amended, defining certain rights of security holders.
4.10
Indenture, dated March 3, 2017, between HCI Group, Inc. and The Bank of New York Mellon Trust
Company, N.A.
8-K
4.1
3/3/2017
4.11
Form of Global 4.25% Convertible Senior Note due 2037.
8-K
4.1
3/3/2017
10.1^
HCI Group, Inc. 2012 Omnibus Incentive Plan as revised April 26, 2022.
10-Q
10.5
5/6/2022
10.2^
Executive Employment Agreement dated November 23, 2016 between Mark Harmsworth and HCI
Group, Inc.
10-Q
10.7
8/3/2017
10.3
Reimbursement Contract effective June 1, 2024 between Homeowners Choice Property & Casualty
Insurance Company, Inc. and the State Board of Administration of the State of Florida which
administers the Florida Hurricane Catastrophe Fund.
10-Q
10.8
8/9/2024
116
10.4
Reimbursement Contract effective June 1, 2024 between TypTap Insurance Company and the State
Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe
Fund.
10-Q
10.9
8/9/2024
10.5
Underlying Second Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1,
2024 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing
reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).
10-Q
10.10
8/9/2024
10.6
Second Layer Reinstatement Premium Protection Reinsurance Contract effective June 1, 2024 issued
to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers.
Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).
10-Q
10.11
8/9/2024
10.7
Third Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2024 issued
to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers.
Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).
10-Q
10.12
8/9/2024
10.8
Third Layer Reinstatement Premium Protection Reinsurance Contract effective June 1, 2024 issued to
Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers.
Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).
10-Q
10.13
8/9/2024
10.9
Catastrophe County Weighted Industry Loss Reinsurance Contract effective July 9, 2024 issued to
Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers.
Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).
10-Q
10.14
8/9/2024
10.10
Panhandle Named Storm Property Catastrophe Excess of Loss Reinsurance Contract effective July 1,
2024 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing
reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).
10-Q
10.15
8/9/2024
10.11
Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2024 issued to
Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers.
Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).
10-Q
10.16
8/9/2024
10.12
Reinstatement Premium Protection Reinsurance Contract effective June 1, 2024 issued to
Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers.
Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).
10-Q
10.17
8/9/2024
10.13
Layer 3B Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2024 issued to
TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc.
by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item
601(b)(10)(iv).
10-Q
10.18
8/9/2024
10.14
Layer 3B Reinstatement Premium Protection Reinsurance Contract effective June 1, 2024 issued to
TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc.
by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item
601(b)(10)(iv).
10-Q
10.19
8/9/2024
10.15
Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2024 issued to TypTap
Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by
subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item
601(b)(10)(iv).
10-Q
10.20
8/9/2024
10.16
Reinstatement Premium Protection Reinsurance Contract effective June 1, 2024 issued to TypTap
Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by
subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item
601(b)(10)(iv).
10-Q
10.21
8/9/2024
117
10.17
First and Second Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1,
2024 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance
Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to
Regulation S-K Item 601(b)(10)(iv).
10-Q
10.22
8/9/2024
10.18
Layer 3C Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2024 issued to
TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc.
by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item
601(b)(10)(iv).
10-Q
10.23
8/9/2024
10.19
First Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to
Homeowners Choice Property & Casualty Insurance Company, Inc. and Tailrow Insurance Exchange
by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item
601(b)(10)(iv).
10-Q
10.25
8/8/2025
10.20
Second Layer Reinstatement Premium Protection Reinsurance Contract effective June 1, 2025 issued
to Homeowners Choice Property & Casualty Company, Inc. and Tailrow Insurance Exchange by
Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K item
601(b)(10)(iv).
10-Q
10.26
8/8/2025
10.21
Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to
Homeowners Choice Property & Casualty Insurance Company, Inc. and Tailrow Insurance Exchange
by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item
601(b)(10)(iv).
10-Q
10.27
8/8/2025
10.22
Second Layer Reinstatement Premium Protection Reinsurance Contract effective June 1, 2025 issued
to Homeowners Choice Property & Casualty Insurance Company, Inc. and Tailrow Insurance
Exchange by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to
Regulation S-K Item 601(b)(10)(iv).
10-Q
10.28
8/8/2025
10.23
Second Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025
issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and Tailrow Insurance
Exchange by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to
Regulation S-K Item 601(b)(10)(iv).
10-Q
10.29
8/8/2025
10.24
Reinstatement Premium Protection Reinsurance Contract effective June 1, 2025 issued to
Homeowners Property & Casualty Insurance Company, Inc. and Tailrow Insurance Exchange by
Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item
601(b)(10)(iv).
10-Q
10.30
8/8/2025
10.25
First Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to
TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc.
by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item
601(b)(10)(iv).
10-Q
10.31
8/8/2025
10.26
Second Layer Reinstatement Premium Protection Reinsurance Contract effective June 1, 2025 issued
to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company,
Inc. by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K
Item 601(b)(10)(iv).
10-Q
10.32
8/8/2025
10.27
Second Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025
issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance
Company, Inc. by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to
Regulation S-K Item 601(b)(10)(iv).
10-Q
10.33
8/8/2025
10.28
Second Layer Reinstatement Premium Protection Reinsurance Contract effective June 1, 2025 issued
to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company,
Inc. by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K
Item 601(b)(10)(iv).
10-Q
10.34
8/8/2025
10.29
Sixth Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued
to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance
10-Q
10.35
8/8/2025
118
Company, Inc. by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to
Regulation S-K Item 601(b)(10)(iv).
10.30
Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to TypTap
Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by
Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item
601(b)(10)(iv).
10-Q
10.36
8/8/2025
10.31
Reinstatement Premium Protection Reinsurance Contract effective June 1, 2025 issued to TypTap
Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by
Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item
601(b)(10)(iv).
10-Q
10.37
8/8/2025
10.32
Reinstatement Premium Protection Contract effective June 1, 2025 issued to Condo Owners
Reciprocal Exchange by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant
to Regulation S-K Item 601(b)(10) (iv).
10-Q
10.38
8/8/2025
10.33
Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to Condo
Owners Reciprocal Exchange by Subscribing Reinsurers. Portions of this exhibit have been omitted
pursuant to Regulation S-K Item 601(b)(10)(iv).
10-Q
10.39
8/8/2025
10.34
Equity Distribution Agreement between HCI Group, Inc., Truist Securities, Inc. and Citizens JMP
Securities, LLC.
S-3
1.2
1/22/2024
10.35
Amended and Restated Common Stock Purchase Warrant between HCI Group, Inc. and CB Snowbird
Holdings, L.P.
S-3
4.17
1/22/2024
10.36
Registration Rights Agreement between HCI Group, Inc. and CB Snowbird Holdings, L.P.
S-3
4.18
1/22/2024
10.37
Stock Redemption Agreement between TypTap Insurance Group, Inc. and CB Snowbird Holdings,
L.P.
S-3
4.19
1/22/2024
10.38
Assumption Agreement between Homeowners Choice Property & Casualty Insurance Company, Inc.
and Citizens Property Insurance Corporation.
8-K
99.1
10/2/2023
10.39
Assumption Agreement between TypTap Insurance Company and Citizens Property Insurance
Corporation.
8-K
99.1
11/6/2023
10.40
Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to Condo
Owners Reciprocal Exchange by Subscribing Reinsurers. Portions of this exhibit have been omitted
pursuant to Regulation S-K Item 601(b)(10)(iv).
10-Q
10.46
8/8/2025
10.41
Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to Condo
Owners Reciprocal Exchange by Subscribing Reinsurers. Portions of this exhibit have been omitted
pursuant to Regulation S-K Item 601(b)(10)(iv).
10-Q
10.47
8/8/2025
10.42^
Exzeo Group, Inc. 2021 Equity Incentive Plan.
8-K
10.5
3/1/2021
10.43^
Form of Restricted Stock Award Agreement of TypTap Insurance Group, Inc.
8-K
10.6
3/1/2021
10.44^
Stock Option Agreement between Paresh Patel and TypTap Insurance Group, Inc. dated October 1,
2021.
8-K
99.1
10/7/2021
10.45^
Exzeo Group, Inc. 2021 Omnibus Incentive Plan.
8-K
99.2
10/7/2021
10.46^
Form of Stock Option Award under the Exzeo Group, Inc. 2021 Omnibus Plan.
S-1
10.17
9/25/2025
10.47^
Form of Restricted Stock Award Agreement under the Exzeo Group, Inc. 2021 Omnibus Plan.
S-1
10.18
9/25/2025
10.48^
Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated September 15, 2023.
10-Q
10.54
11/8/2023
10.49^
Form of executive restricted stock award contract.
10-Q
10.57
5/1/2014
10.50
Facultative Excess of Loss Reinsurance Contract effective June 1, 2025 issued to Condo Owners
Reciprocal Exchange by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant
to Regulation S-K Item 601(b)(10)(iv).
10-Q
10.59
8/8/2025
119
10.51
Amended and Restated Credit Agreement, dated June 2, 2023, between HCI Group, Inc. and Fifth
Third Bank.
8-K
99.1
6/8/2023
10.52
Security and Pledge Agreement, dated June 2, 2023, between HCI Group, Inc. and Fifth Third Bank.
8-K
99.2
6/8/2023
10.53
Revolving Credit Promissory Note, dated June 2, 2023, between HCI Group, Inc. and Fifth Third
Bank.
8-K
99.3
6/8/2023
10.54
Second Amended and Restated Credit Agreement, dated November 3, 2023, between HCI Group, Inc.
and Fifth Third Bank.
8-K
99.1
11/9/2023
10.55
Second Amended and Restated Security and Pledge Agreement, dated November 3, 2023, between
HCI Group, Inc. and Fifth Third Bank.
8-K
99.2
11/9/2023
10.56
Renewed, Amended and Restated Revolving Credit Promissory Note, dated November 3, 2023,
between HCI Group, Inc. and Fifth Third Bank.
8-K
99.3
11/9/2023
10.57^
Executive Employment Agreement between Paresh Patel and HCI Group, Inc. dated April 17, 2024.
8-K
99.1
4/23/2024
10.58^
Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated April 17, 2024.
8-K
99.2
4/23/2024
10.59^
Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated January 16, 2020.
8-K
99.1
1/23/2020
10.60^
Nonqualified Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated January 16,
2020.
8-K
99.2
1/23/2020
10.61
Reimbursement Contract effective June 1, 2025 between Condo Owners Reciprocal Exchange and the
State Board of Administration of the State of Florida which administers the Florida Hurricane
Catastrophe Fund.
10-Q
10.107
8/8/2025
10.62
Reimbursement Contract effective June 1, 2025 between Homeowners Choice Property & Casualty
Insurance Company, Inc. and the State Board of Administration of the State of Florida which
administers the Florida Hurricane Catastrophe Fund.
10-Q
10.108
8/8/2025
10.63
Reimbursement Contract effective June 1, 2025 between Tailrow Insurance Exchange and the State
Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe
Fund.
10-Q
10.109
8/8/2025
10.64
Reimbursement Contract effective June 1, 2025 between TypTap Insurance Company and the State
Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe
Fund.
10-Q
10.110
8/8/2025
10.65
Property Quota Share Reinsurance Contract effective December 31, 2020 issued to United Property
and Casualty Insurance Company by Homeowners Choice Property & Casualty Insurance Company.
10-K
10.124
3/10/2022
10.66
Renewal Rights Agreement effective January 18, 2021 by and among United Property and Casualty
Insurance Company, United Insurance Holdings Corp., United Insurance Management, L.C. and
Homeowners Choice Property & Casualty Insurance Company.
10-K
10.125
3/10/2022
10.67
Property Quota Share Reinsurance Contract effective June 1, 2021 issued to United Property and
Casualty Insurance Company by Homeowners Choice Property & Casualty Insurance Company and
TypTap Insurance Company.
10-K
10.126
3/10/2022
10.68
Renewal Rights Agreement effective December 30, 2021 by and among United Property and Casualty
Insurance Company, United Insurance Holdings Corp., United Insurance Management, L.C. and
Homeowners Choice Property & Casualty Insurance Company.
10-K
10.127
3/10/2022
10.69
Property Quota Share Reinsurance Contract effective December 31, 2021 issued to United Property
and Casualty Insurance Company by Homeowners Choice Property & Casualty Insurance Company.
10-K
10.128
3/10/2022
120
10.70
Property Quota Share Reinsurance Contract effective June 1, 2022 issued to United Property and
Casualty Insurance Company by TypTap Insurance Company.
10-Q
10.129
8/9/2022
10.71^
Exzeo Group Inc. 2025 Omnibus Incentive Plan.
S-1/A
10.19
10/16/2025
10.72^
Form of Stock Option Award under the 2025 Omnibus Plan.
S-1/A
10.20
10/16/2025
10.73^
Form of Restricted Stock Award Agreement under the 2025 Omnibus Plan.
S-1/A
10.21
10/16/2025
10.74^
Employment Agreement, dated December 9, 2025, by and between Exzeo Group, Inc. and Paresh S.
Patel.
8-K
99.1
12/23/2025
14
Code of Conduct of HCI Group, Inc.
10-Q
14
8/7/2013
19.1
HCI Group, Inc. Insider Trading Policy.
10-K
19.1
2/28/2025
21*
Subsidiaries of HCI Group, Inc.
23.1*
Consent of Forvis Mazars, LLP.
31.1*
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
31.2*
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
97^
HCI Group, Inc. Clawback Policy.
10-K
97
3/8/2024
101*
XBRL Instant Document - the instance document does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL document.
104*
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL
document.
*
Filed herewith.
**
Furnished herewith.
^
Management contract or compensatory plan.
121
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
HCI GROUP, INC.
February 26, 2026
By
/s/ Paresh Patel
Paresh Patel, Chief Executive Officer and
Chairman of The Board of Directors
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
February 26, 2026
By
/s/ Paresh Patel
Paresh Patel, Chief Executive Officer and
Chairman of The Board of Directors
(Principal Executive Officer)
February 26, 2026
By
/s/ James Mark Harmsworth
James Mark Harmsworth,
Chief Financial Officer
(Principal Financial and Accounting Officer)
February 26, 2026
By
/s/ Karin Coleman
Karin Coleman, Chief Operating Officer and
Director
February 26, 2026
By
/s/ Wayne Burks
Wayne Burks, Director
February 26, 2026
By
/s/ Sanjay Madhu
Sanjay Madhu, Director
February 26, 2026
By
/s/ Gregory Politis
Gregory Politis, Director
February 26, 2026
By
/s/ Peter Politis
Peter Politis, Director
February 26, 2026
By
/s/ Anthony Saravanos
Anthony Saravanos, Director
February 26, 2026
By
/s/ Susan Watts
Susan Watts, Director
Exhibit 21
HCI GROUP, INC.
Subsidiaries
As of December 31, 2025, the Company had the following active subsidiaries:
State or Sovereign Power
Wholly-owned subsidiaries of HCI Group, Inc.
of Incorporation
Homeowners Choice Property & Casualty Insurance Company, Inc.
Florida
Homeowners Choice Managers, Inc.
Florida
Claddaugh Casualty Insurance Company Ltd.
Bermuda
Cypress Property Management Services, Inc.
Florida
Cypress Claims Services, Inc.
Florida
Greenleaf Capital LLC
Florida
Omega Insurance Agency, Inc.
Florida
Southern Administration, Inc.
Florida
Enclave Services, Inc.
Florida
HCI Insurance Administration Services, Inc.
Florida
TypTap Insurance Company
Florida
perRisk Insurance Company
Arizona
Core Risk Managers, LLC
Florida
Tailrow Funding, LLC
Florida
Tailrow Risk Managers, LLC
Florida
Surplus Note 25, LLC
Florida
Lamba Insurance Group, Inc.
Florida
Fortex Reinsurance SPC, Ltd.
Cayman Islands
State or Sovereign Power
Majority-owned subsidiary of HCI Group, Inc.
of Incorporation
Exzeo Group, Inc.
Florida
State or Sovereign Power
Wholly-owned subsidiaries of Exzeo Group, Inc.
of Incorporation
Exzeo Insurance Services, Inc.
Florida
Cypress Tech Development Company, Inc.
Florida
Exzeo USA, Inc.
Florida
Dark Horse Re, LLC
Florida
State or Sovereign Power
Wholly-owned subsidiaries of Greenleaf Capital LLC
of Incorporation
Gators on the Pass Holdings, LLC
Florida
John’s Pass Marina Investment Holdings, LLC
Florida
JP Beach Holdings, LLC
Florida
Pass Investment Holdings, LLC
Florida
TI Marina Company, Inc.
Florida
Treasure Island Restaurant Company, Inc.
Florida
TV Investment Holdings, LLC
Florida
Silver Springs Property Investments, LLC
Florida
Melbourne FMA, LLC
Florida
HCPCI Holdings, LLC
Florida
Sorrento PBX, LLC
Florida
Greenleaf Essence, LLC
Florida
Century Park Holdings, LLC
Florida
Gulf To Bay LM, LLC
Florida
Westview Holdings, LLC
Florida
Corporate Oaks Property Holdings, LLC
Florida
Grove Haines City, LLC
Florida
Carillon Property Holdings, LLC
Florida
Coconut Palm Property Holdings, LLC
Florida
Sage Property Advisors, LLC
Florida
State or Sovereign Power
Wholly-owned subsidiary of Melbourne FMA, LLC
of Incorporation
FMKT MEL OWNER, LLC
Florida
State or Sovereign Power
Wholly-owned subsidiary of Greenleaf Essence, LLC
of Incorporation
Green Street JV, LLC
Florida
State or Sovereign Power
Wholly-owned subsidiary of Green Street JV, LLC
of Incorporation
Big Bend Lincoln SWC, LLC
Florida
State or Sovereign Power
Wholly-owned subsidiaries of HCI Insurance Administration Services, Inc.
of Incorporation
Griston Claim Services, Inc.
Florida
Griston Claim Management, Inc.
Florida
State or Sovereign Power
Wholly-owned subsidiary of Cypress Tech Development Company, Inc.
of Incorporation
Exzeo Software Private Limited
India
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-276643) and Form S-8 (No. 333-184227) of HCI
Group, Inc. of our reports dated February 26, 2026, with respect to the consolidated financial statements of HCI Group, Inc. and Subsidiaries and the
effectiveness of internal control over financial reporting of HCI Group, Inc. and Subsidiaries, included in this Annual Report on Form 10-K for the year
ended December 31, 2025.
/s/ Forvis Mazars, LLP
Charlotte, North Carolina
February 26, 2026
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Paresh Patel, certify that:
1. I have reviewed this annual report on Form 10-K of HCI Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
/s/ PARESH PATEL
February 26, 2026
Paresh Patel
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, James Mark Harmsworth, certify that:
1. I have reviewed this annual report on Form 10-K of HCI Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
/s/ JAMES MARK HARMSWORTH
February 26, 2026
James Mark Harmsworth
Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2022
In connection with the Annual Report on Form 10-K of HCI Group, Inc. (the “Company”) for the year ended December 31, 2025 as filed with
the Securities and Exchange Commission on the date hereof (the “Report”), I, Paresh Patel, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2022, that to the best of my knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated: February 26, 2026
/s/ Paresh Patel
Paresh Patel
Chief Executive Officer
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2022
In connection with the Annual Report on Form 10-K of HCI Group, Inc. (the “Company”) for the year ended December 31, 2025 as filed with
the Securities and Exchange Commission on the date hereof (the “Report”), I, James Mark Harmsworth, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2022, that to the best of my knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated: February 26, 2026
/s/ James Mark Harmsworth
James Mark Harmsworth
Chief Financial Officer