Sign in
HG

HCI Group, Inc. (HCI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 EPS compressed on hurricane impacts despite strong topline growth: GAAP diluted EPS $0.23 vs $3.40 YoY; adjusted diluted EPS $0.31 vs $3.22 YoY; gross premiums earned up 38.0% YoY to $297.5M, but losses and reinsurance reversals tied to Hurricane Milton drove margin pressure .
  • Management reiterated intent to keep Florida rates flat and highlighted plans to commercialize HCI’s proven underwriting/claims technology via Exzeo/Axio, evaluating strategic alternatives to unlock value; Exzeo generated ~$35M pretax in 2024, expected to grow in 2025 .
  • Underlying loss trends remain favorable (lower frequency and litigation); normalized combined ratio guided ~mid-60s in 1H25, ~75% from Q3 onward (vs 72.5–73% in FY24), with book value rising to $42.10 (+$9 YoY) and debt-to-cap improving to 34% by year-end 2024 .
  • Citizens depopulation continues as a growth lever: ~53k policy conversions in 2024 and Tailrow launched with 14k policies ($35M in-force premium) at 76% acceptance; tech-enabled selection driving retention ~90% and improving combined ratios .

What Went Well and What Went Wrong

What Went Well

  • Strong topline growth and investment income: Gross premiums earned +38.0% YoY to $297.5M; net investment income up to $14.5M (from $10.3M YoY) on higher balances and rates .
  • Favorable reserving development and improving claims dynamics: ~$24.5M favorable development in Q4 (mostly 2024 accident year) and ongoing declines in claim frequency and litigation propensity supporting lower normalized loss ratios .
  • Technology commercialization and organizational streamlining: New two-unit structure (insurance + Exzeo/Axio tech) to scale beyond Florida; management: “make our best-in-class technology available to other carriers and in additional geographies” .

What Went Wrong

  • Hurricane-driven margin compression: Q4 included net Milton loss of $78.0M and reversal of $50.6M of previously accrued retrospective reinsurance benefits; GAAP EPS fell to $0.23 from $3.40 YoY .
  • Elevated losses and reinsurance costs: Losses and LAE rose to $110.7M (vs $65.4M YoY); premiums ceded increased to $151.1M (vs $66.6M YoY), reflecting storm impacts and growth .
  • Limited visibility on near-term reinsurance benefit reversals and cat volatility: Multiyear reinsurance arrangements can unwind in active cat years, adding earnings noise; management noted variability based on event size/underwriter .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Total Revenue ($USD Millions)$162.7 $206.3 $175.3 $161.9
Gross Premiums Earned ($USD Millions)$215.2 $263.6 $265.5 $297.5
Net Premiums Earned ($USD Millions)$148.6 $186.8 $155.8 $146.4
GAAP Diluted EPS ($)$3.40 $4.24 $0.52 $0.23
Adjusted Diluted EPS ($)$3.22 $4.21 $0.47 $0.31
Gross Premiums Earned Loss Ratio (%)30.4% 29.7% 39.8% 37.2%

Segment breakdown (Q4 2024):

SegmentGross Written Premiums ($USD Thousands)Gross Premiums Earned ($USD Thousands)
Homeowners Choice$145,085 $156,342
TypTap Insurance Company$174,980 $123,807
Condo Owners Reciprocal Exchange (CORE)$14,435 $17,348
Total$334,500 $297,497

KPIs and capital:

KPIQ4 2023Q2 2024Q3 2024Q4 2024
Book Value per Share ($)$33.36 $42.72 $43.45 $42.10
Dividends per Share ($)$0.40 $0.40 $0.40 $0.40
Shares Outstanding (period-end)9,738,183 10,472,741 10,479,076 10,767,184

Operating factors and Q4 components:

  • Losses and LAE ($M): $110.7 (incl. Milton net loss $78.0; $24.5 favorable development) .
  • Premiums ceded ($M): $151.1; reversal of $50.6 previously accrued benefits due to Milton .
  • Net investment income ($M): $14.5 .
  • Pre-tax income ($M): $5.9; Net income $4.1; Net income after noncontrolling interests $2.6 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Florida homeowners rates2025Not previously guided“Plan to keep rates flat for the foreseeable future” Maintained/flat
Normalized combined ratio1H 2025; from Q3 2025 onwardFY24 normalized ~72.5–73% Mid-60s in 1H25; ~75% from Q3 2025 onward New detail (mix shift with reinsurance/commissions)
Technology unit (Exzeo/Axio) earnings2025Not formally guidedExzeo/Axio pretax ~$35M in 2024; “expect that number to grow significantly in 2025” Introduced growth expectation
Citizens depopulation activity2025Ongoing approvals (Q4 2024 activity noted) Tailrow operational; 14k policies assumed ($35M premium), 76% acceptance Expanded capacity/platform
Dividend policyQuarterly$0.40/share quarterly dividend Continued $0.40 in Q4; 57th consecutive quarterly dividend Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Technology-led underwriting efficiencyQ2: Combined ratio improved; tech enables growth w/ low OpEx . Q3: Continued operational leverage .Formal split into Insurance unit + Exzeo/Axio; plan to offer platform to other carriers/geographies .Scaling and monetization beyond HCI; potential value unlock.
Citizens depopulation + retentionQ2: Retention closer to 85% vs 65% plan; approvals for additional takeouts . Q3: Assumed ~42k policies in October .2024: ~53k moved to HCI; Tailrow assumed ~14k policies at 76% acceptance .Sustained growth lever; improving selection and retention.
Loss ratio/claims trendsQ2: Gross loss ratio ~29.7%; litigation frequency down 35–40% . Q3: Loss ratio 39.8% incl. Helene/Debby .Q4: 37.2% loss ratio; favorable development ~$24.5M; normalized consolidated loss ratio ~23.7% FY; Q4 normalized ~19.5% .Structurally improving absent cats; favorable litigation dynamics.
Catastrophe exposure and reinsuranceQ2: Statutory retentions HCI ~$14M, TypTap ~$9M; clarity on potential layer use/benefit reversals . Q3: Helene/Debby loss details; premiums ceded higher .Q4: Milton net loss $78M; reversal $50.6M of retrospective reinsurance benefits .Cat volatility remains key swing factor; reinsurance structures create earnings noise in active years.
Capital and book valueQ2: Debt-to-cap down from 62% to 34%; BVPS ~$43 . Q3: Continued equity growth .Year-end BVPS $42.10; debt-to-cap ~34%; debt reduced $80M; liquidity >$200M .Strengthening capital base; supports growth and tech investments.
TAM expansion beyond FloridaQ2: Conceptual expansion leverage . Q3: —Q4: Axio stand-alone strategy; opportunities in CA/LA/TX; not entertaining platform sale .Strategic alternatives under evaluation; potential catalysts.

Management Commentary

  • “Even with the hurricanes in 2024, HCI Group is unwavering in its commitment to Florida… we plan to keep rates flat for the foreseeable future.” — Paresh Patel, CEO .
  • “Our normalized combined ratio is now about 75%… we expect the combined ratio to be about 75% once reinsurance and commissions kick in for the recent Citizens assumptions.” — Mark Harmsworth, CFO .
  • “Investment income has doubled over the last couple of years… book value increased by almost $9 per share… debt-to-cap ratio… ended the year at 34%.” — Mark Harmsworth, CFO .
  • “We want to make Axio Group a stand-alone entity… evaluate a range of strategic alternatives… will not be entertaining a sale of the platform.” — Paresh Patel, CEO .

Q&A Highlights

  • Axio/Exzeo commercialization and TAM: Management sees opportunity to deploy tech to other carriers, citing ~$140B US homeowners premium and HCI’s ~1% share; potential to scale to $2.5–$5B premium on platform over time .
  • Citizens takeout dynamics: Technology-enabled selection improves acceptance and retention; Tailrow reciprocal structure complements TypTap; continued ability to find 50k–100k policies for assumption .
  • Favorable development drivers: ~$24.5M Q4 favorable development from lower lawsuits, reduced severity, shorter claims tail relative to initial selections; Q4 normalized gross loss ratio ~19.5%; FY normalized ~23.7% .
  • Combined ratio cadence: Mid-60s in 1H25 given temporary lack of reinsurance/commissions on renewals; ~75% normalized from Q3 onward; FY24 normalized ~72.5–73% .
  • Reinsurance outlook: Multiyear benefit reversals possible depending on event size/underwriter mix; statutory retentions HCI ~$14M, TypTap ~$9M .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable due to a data access limit during retrieval, so we cannot quantify a beat/miss versus consensus at this time. We attempted to fetch “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for Q4 2024 but received a rate-limit error. As a result, estimate comparisons are omitted for Q4 2024 in this recap.
MetricQ4 2023 ActualQ4 2024 ActualQ4 2024 Consensus
GAAP Diluted EPS ($)$3.40 $0.23 N/A (S&P Global unavailable)
Total Revenue ($USD Millions)$162.7 $161.9 N/A (S&P Global unavailable)

Key Takeaways for Investors

  • Q4 softness was event-driven: Hurricane Milton drove $78M net loss and reinsurance benefit reversal ($50.6M), compressing EPS; underlying loss trends remain strong with favorable development and declining litigation frequency — positioning for margin recovery absent cats .
  • Topline momentum intact: Gross premiums earned +38% YoY; Citizens depopulation and Tailrow launch provide continued policy flow and acceptance rates near mid-70s, supporting revenue growth and operating leverage .
  • Structural margin improvement: Normalized combined ratio trajectory mid-60s in 1H25, ~75% thereafter, driven by lower loss ratios and tech-enabled efficiency; watch reinsurance/commissions normalization in H2 .
  • Capital strengthening: BVPS up to $42.10; debt-to-cap ~34%; consolidated debt reduced by $80M in 2024; holding company liquidity >$200M — provides optionality for tech scaling and growth initiatives .
  • Strategic catalyst: Exzeo/Axio stand-alone tech unit evaluating strategic alternatives to scale beyond Florida and into catastrophe-prone states; not considering a sale — potential for value unlock via partnerships/structuring .
  • Near-term trading lens: Event-related EPS volatility likely to fade; focus on Citizens assumptions cadence, claim frequency/litigation trends, and any updates on Axio strategic process as stock catalysts .
  • Medium-term thesis: Technology differentiation + disciplined underwriting under supportive Florida reforms enables sustained ROE/combined ratio improvement; scaling tech externally could open new profit pools with lower cat volatility .

Appendix: Additional Data Points

  • Q4 components: Losses/LAE $110.7M; premiums ceded $151.1M; net investment income $14.5M; pre-tax income $5.9M; net income after NCI $2.6M .
  • FY 2024 highlights: Pre-tax $173.4M; diluted EPS $8.89; adjusted diluted EPS $8.75; gross premiums earned $1,083.2M; loss expense included Milton $78.0M, Helene $43.0M, Debby $6.5M .
  • Q3 2024 overview: Pre-tax $14.1M; GAAP EPS $0.52; gross premiums earned $265.5M; premiums ceded $109.7M; loss ratio 39.8% .
  • Q2 2024 overview: Pre-tax $76.0M; GAAP EPS $4.24; gross premiums earned $263.6M; loss ratio 29.7%; clear improvement in combined ratio and investment income .