HCI Group Q2 Earnings Call Highlights

Key Points

• Strong second-quarter results: HCI Group’s pre-tax income rose 18% year over year to more than $110 million, while diluted EPS increased to $5.60. Revenue grew 11%, supported by policy growth and higher Exzeo services revenue.
• Solid underwriting and financial position: The company reported a 22% loss ratio and a 61% combined ratio, both within its target ranges. HCI ended the quarter with more than $2 billion in cash and investments, equity above $1 billion, and debt-to-capital below 6%.
• Growth initiatives are expanding: HCI completed an $80 million share repurchase, shifted CORE toward residential policies, and secured reinsurance savings of more than $10 million per quarter. A new GEICO distribution relationship is expected to contribute beginning in the third quarter.

HCI Group NYSE: HCI reported higher second-quarter earnings and revenue as policy growth, service revenue and underwriting performance supported results despite what management described as a softening insurance market.

Chief Financial Officer Mark Harmsworth said pre-tax income exceeded $110 million in the second quarter, up 18% from the prior-year period. Diluted earnings per share rose to $5.60 from $5.18 a year earlier. For the first six months of 2026, pre-tax income reached $226 million, a 16% increase from the first half of 2025, while year-to-date diluted EPS was $11.05.

Gross premiums earned increased 6% from the second quarter of 2025, driven by policy growth, while average premium per policy was flat, Harmsworth said. Total revenue rose 11%, reflecting premium growth and increased services revenue from new clients at Exzeo.

Underwriting Results and Balance Sheet

HCI recorded a 22% loss ratio during the quarter, slightly above the first-quarter level but within the company’s stated 20% to 25% target range. Its combined ratio was 61%, within management’s 60% to 65% range absent catastrophe activity.

Harmsworth said the company ended the quarter with more than $2 billion in cash and investments, stockholders’ equity above $1 billion, and a debt-to-capital ratio below 6%. Book value per share was $86.60.

Management also said that book value does not include unrealized gains associated with its Exzeo ownership or real estate portfolio. Adding the fair value of those assets would put pro forma book value per share above $150, according to Harmsworth.

Over the past 36 months, HCI generated an after-tax return on equity of 35%, a period that included Hurricanes Milton and Helene, Harmsworth said.

Buyback Program Completed

The company completed the $80 million share repurchase plan it announced in March. HCI repurchased 504,000 shares, representing about 4% of its outstanding shares, management said.

Harmsworth said approximately $75 million of the authorization had been used by the end of the second quarter, with the remainder completed during the first week of July. HCI does not currently have an active repurchase authorization, though Harmsworth said management continues to view the stock as an attractive investment.

Holding-company liquidity stood at just over $160 million, excluding the company’s 75 million shares of publicly traded Exzeo, Harmsworth said.

Focus on Retention, Residential Growth

Chief Operating Officer Karin Coleman said HCI has maintained retention rates above 90% by prioritizing its existing policyholders and maintaining consistency in pricing and coverage. She said the company does not sharply raise rates during harder market conditions and then seek to reduce them during softer periods.

Coleman also pointed to HCI’s continued broad water-damage coverage, contrasting the company’s approach with insurers that cap each water-damage event at $10,000. Management said such restrictions may support near-term profitability but could hinder long-term customer retention.

During the second quarter, HCI shifted its Condo Owners Reciprocal Exchange, or CORE, from commercial business toward the residential market. Coleman said CORE’s new HO-3 residential product generated about $6 million in voluntary new business per month over the past several months.

CEO and Chairman Paresh Patel said the commercial business at CORE had been shrinking as that market softened, and the company chose not to pursue market share by reducing rates. He described CORE’s move into residential business as a successful pivot, noting that the insurer had not written an HO-3 policy before March.

Management said it remains focused on Florida and is also interested in California, although Patel said timing and the longer-term rate environment will be important to any decision to enter that market.

Reinsurance Savings and New Distribution Relationship

HCI completed its catastrophe reinsurance programs for the 2026-2027 treaty year, purchasing more and better coverage while reducing ceded premiums by more than 10%, Coleman said. Management said the reduction equates to savings of more than $10 million per quarter.

Harmsworth told analysts that ceded premiums are expected to be about $96 million in the third quarter. Patel said the company expects the impact of the new reinsurance program to be incorporated into a future rate filing, likely late this year, following actuarial review.

The company also established Fortex Re, its second reinsurer, and used it in the new reinsurance programs. In June, HCI completed three digital token offerings designed to mirror portions of Fortex Re’s excess-of-loss programs.

Patel said the tokenized reinsurance effort is currently immaterial to HCI’s financial results, but management sees potential for it to create another avenue for obtaining catastrophe reinsurance alongside traditional reinsurance markets and catastrophe bonds.

Separately, Patel said GEICO began distributing HCI’s new product in July. The relationship was not reflected in second-quarter results and is expected to begin contributing in the third quarter. Management said the new distribution arrangement, CORE’s residential growth and internal technology capabilities could support organic policy growth by the end of 2026, without relying on Citizens assumptions, acquisitions or entry into new markets.

About HCI Group (NYSE:HCI)

HCI Group, Inc NYSE: HCI is a holding company whose principal business is the underwriting and issuance of property and casualty insurance through its insurance subsidiaries. Headquartered in Jacksonville, Florida, the company focuses primarily on personal-line insurance products, writing homeowners, condominium, renters and mobile home policies. HCI Group also offers wind-only and flood coverage in coastal regions across the state, providing tailored solutions to both coastal and non-coastal communities.

The company distributes its insurance products through a network of independent agents and brokers, leveraging local market expertise to assess risk and deliver personalized service.

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