Sign in
HG

HCI Group, Inc. (HCI)·Q2 2025 Earnings Summary

Executive Summary

  • Strong Q2: EPS $5.18 and total revenue $221.9M, with gross loss ratio at 21.3% and book value per share up to $58.55 . EPS rose 22% YoY from $4.24 and revenue increased 7.6% YoY from $206.2M .
  • Beat vs consensus: EPS $5.18 vs $4.50*; revenue $221.9M vs $219.0M*; management highlighted combined ratio “just under 62%” and expects normalized net combined ≈70% once reinsurance fully loaded .
  • Capital and liquidity improved: redeemed 4.75% converts; debt-to-cap ratio well under 10%; interest expense guided to ~<$1.0M per quarter; holding company liquidity just over $250M .
  • Strategic catalysts: Exzeo confidentially submitted S-1 for an IPO; three carriers approved for October depopulation (25k each); 2025–26 reinsurance program completed with >$3.5B in aggregate cover and expected net ceded premiums ≈$422M for the treaty year .

Values marked with * are retrieved from S&P Global.

What Went Well and What Went Wrong

  • What Went Well

    • Profitability and underwriting: Gross loss ratio improved YoY to 21.3% (from 29.7%); CEO: “industry‑leading net combined ratios” .
    • Operating leverage and balance sheet strength: Combined ratio “just under 62%”; BVPS rose >$16 YTD to $58.55; liquidity >$250M; debt-to-cap <10% after redeeming converts .
    • Strategic progress: Exzeo filed confidential S-1 for IPO; management sees technology as key edge in underwriting and retention (≈90% retention cited) .

  • What Went Wrong

    • Sequential loss ratio uptick vs Q1 as weather increased: gross loss ratio 21.3% vs 19.7% in Q1; CFO noted more weather in Q2 vs Q1, though frequency still down .
    • Expense drift: Policy acquisition costs rose to $30.6M (from $23.5M YoY); G&A personnel expenses increased to $20.0M (from $17.5M YoY) on SBC/benefits/merit .
    • Ceded premiums edging higher: Reinsurance premiums ceded $102.5M vs $99.6M in Q1; full load expected to be ~$106M per quarter going forward, compressing net combined toward ~70% normalized .

Financial Results

Headline results and estimate comparison

MetricQ2 2024Q1 2025Q2 2025
Total Revenue ($M)$206.2 $216.4 $221.9
Diluted EPS ($)$4.24 $5.35 $5.18
Gross Loss Ratio (%)29.7% 19.7% 21.3%

Consensus vs actuals (S&P Global)

MetricQ2 2025 ActualQ2 2025 Consensus*Surprise*# Est. (Q2 2025)*
Diluted EPS ($)$5.18 $4.50*+$0.68*4*
Revenue ($M)$221.9 $219.0*+$2.9*4*

Values marked with * are retrieved from S&P Global.

Segment mix (insurance operations)

MetricQ2 2024Q2 2025
Gross Written Premiums – Homeowners Choice ($000s)$191,775 $227,090
Gross Written Premiums – TypTap ($000s)$79,093 $110,412
Gross Written Premiums – CORE ($000s)$36,034 $13,830
Gross Written Premiums – Tailrow ($000s)—$5,213
Total Gross Written Premiums ($000s)$306,902 $356,545
Gross Premiums Earned – Homeowners Choice ($000s)$143,703 $156,552
Gross Premiums Earned – TypTap ($000s)$107,055 $124,437
Gross Premiums Earned – CORE ($000s)$12,803 $12,811
Gross Premiums Earned – Tailrow ($000s)—$8,828
Total Gross Premiums Earned ($000s)$263,561 $302,628

KPIs and balance sheet

KPIMar 31, 2025Jun 30, 2025
Cash & Cash Equivalents ($000s)$754,481 $947,166
Long-Term Debt ($000s)$185,332 $15,602
Revolving Credit Facility ($000s)$42,000 $40,000
Book Value per Share ($)$48.55 $58.55
Shares Outstanding (period-end)10,765,336 12,956,884
Dividend per Share ($, declared in Q2)$0.40 $0.40

Additional operating metrics: Q2 net combined ratio “just under 62%” and normalized net combined expected ≈70% post full reinsurance load; holding company liquidity just over $250M; debt-to-cap <10% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Combined RatioForward (post full ceded load)—≈70% normalized (non‑cat) New framework
Reinsurance Premiums Ceded per QuarterStarting Q3 2025—≈$106M per quarter New disclosure
Cat Reinsurance Program – Net Ceded PremiumsTreaty Year Jun 1, 2025–May 31, 2026—≈$422M expected (to third parties) New disclosure
Interest Expense per QuarterForward—≈$0.95M/quarter (after converts redeemed) Improved
DividendOngoing$0.40/qtr $0.40/qtr declared July 2, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Exzeo separationQ4’24: exploring tech monetization amid higher nat-cat; keep FL rates flat . Q1’25: Board targeted a potential tax‑free spin by year‑end .Confidential S‑1 filed to pursue an IPO; timeline subject to SEC review/market .Evolved from spin target to IPO path.
Florida market/depopsQ4’24: growth via Citizens assumptions . Q1’25: GPE +17% YoY on Citizens policies .Three carriers approved for Oct depop (25k each); competitive market but technology-driven selection supports low loss ratio and ~90% retention .Continued selective growth; depop pipeline intact.
ReinsuranceQ4’24: higher ceded costs; treaty dynamics impacted cessions .2025–26 program completed; >$3.5B aggregate limit; expected net ceded ≈$422M; full quarterly ceded ~$106M .Capacity secured; higher steady-state cessions guide.
Loss ratio/frequencyQ4’24: cat losses (Milton) but favorable development . Q1’25: gross LR 19.7% (vs 31.1% ly) .Gross LR 21.3% with more weather than Q1; frequency down materially YoY .Underlying improvement continues.
Capital & interest expenseQ4’24: converts outstanding; interest higher . Q1’25: interest expense $3.38M .Converts redeemed; debt-to-cap <10%; forward quarterly interest ≈$0.95M; BVPS up $16+ YTD to $58.55 .Balance sheet strengthened; lower run‑rate interest.
Investment incomeQ4’24–Q1’25: higher rates boosted NII .NII level seen as sustainable with higher cash/invested balances .Stable-to-up baseline.
Condo/CRE pricing—Market remains soft; small exposure for HCI .Monitored, not material.

Management Commentary

  • CEO Paresh Patel (press release): “HCI Group delivered another strong quarter, marked by solid profitability, industry‑leading net combined ratios, and meaningful growth in book value per share.”
  • CFO Mark Harmsworth: “Combined ratio [was] just under 62%… once the full effect of the new [reinsurance] program is reflected, we expect the net combined ratio to be about 70%.” He added that converts were redeemed, debt‑to‑cap is well under 10%, forward interest expense ≈$0.95M per quarter, BVPS $58.55, and holding company liquidity just over $250M .
  • COO Karin Coleman: Florida environment “is a healthy one… loss ratio has been lower than we thought,” and HCI is positioned with multiple underwriters, strong capital, and technology advantage .
  • Exzeo President Kevin Mitchell: Exzeo confidentially submitted a draft S‑1 to pursue an IPO; no assurance of completion; Rule 135 disclosure .

Q&A Highlights

  • Florida market and depopulation: Three carriers (Homeowners Choice, TypTap, Tailrow) approved for 25k policies each in October; HCI will leverage tech to target “green houses” (attractive risks) .
  • Loss ratio dynamics: Despite more weather in Q2 vs Q1 and vs last year, claim frequency declined materially; supports continued loss ratio improvement .
  • Reinsurance cadence and normalized profitability: Full impact in Q3; ceded premiums ≈$106M per quarter; normalized net combined ≈70% includes full expenses and allowance for modest loss ratio drift .
  • Capital and interest expense: Post-convert redemption, quarterly interest guided to ~<$1.0M (about a third of prior run-rate) .
  • Exzeo separation strategy: Management cannot discuss details beyond S‑1 submission; structure under HCI not ideal for valuation/competitive reasons .

Estimates Context

  • Q2 2025 EPS beat: $5.18 vs $4.50* consensus; Revenue beat: $221.9M vs $219.0M*; 4 estimates for both EPS and revenue* . Values retrieved from S&P Global.
  • With higher steady-state reinsurance cessions (~$106M per quarter) and normalized combined ratio ≈70%, Street models may lift near-term EPS given frequency improvements, while moderating out-year margin assumptions for higher ceded load .

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat with underwriting outperformance: EPS and revenue topped consensus; gross loss ratio remains low (21.3%) despite more weather, underscoring frequency improvements .
  • Normalization ahead: Expect reported net combined to drift toward ~70% as full reinsurance costs and policy acquisition amortization roll in; model Q3 as first full quarter with the new ceded load .
  • Balance sheet derisking: Converts redeemed, debt-to-cap <10%, interest expense run-rate ~<$1.0M/quarter, BVPS up to $58.55; stronger equity base supports growth and volatility absorption .
  • Growth pipeline intact: 75k policy depop approval across three carriers for October with selective, tech-driven underwriting; supports premium scale while protecting loss ratio .
  • Reinsurance visibility: 2025–26 program in place with >$3.5B limit and expected ~$422M net ceded premiums; capacity and pricing clarity reduce risk to forward estimates .
  • Exzeo optionality: S‑1 filed for potential IPO; could unlock value and sharpen strategic focus, though timing/outcome are market-dependent .
  • Dividend maintained at $0.40/share; combined with improving profitability and capital position, provides a balanced return profile .

Appendix: Additional Data

  • Q2 2025 income statement highlights: Net premiums earned $200.1M; NII $16.4M; net income $70.3M; diluted shares ~12.883M .
  • Sequential ceded premiums: $99.6M in Q1 vs $102.5M in Q2; full impact of new treaty to show in Q3 (~$106M per quarter) .
  • Reinsurance program parameters: Three towers; statutory retention $18M for Towers 1 & 2 and $3M for Tower 3; Claddaugh participates; reinsurers rated A‑ or better/fully collateralized .

Citations: