HCI Group, Inc. Q4 FY2024 earnings call

• Karin Coleman highlighted that HCI handled over 22,600 claims in 2024, with over half from Hurricanes Debby, Helen, and Milton, expecting to pay over $0.5 billion to help Florida rebuild. Rates were held steady in Florida, retention rate of existing customers was strong at ~90%, and nearly 53,000 Citizens policyholders moved to HCI. - Mark Harmsworth discussed the net impact of Hurricane Milton was $128 million, but underlying earnings mitigated much of it. The underlying net combined ratio was reduced by 10 percentage points, debt-to-cap improved from 50% to 34%, and book value increased. - Paresh Patel mentioned HCI grew gross premiums earned by over 40% in 2024, started Tailrow Reciprocal Insurance Company, renamed TypTap to Exzeo Group Inc., which is an independently viable entity with solid profitability, and is evaluating strategic alternatives for Exzeo to unlock additional value for shareholders.

In 2024, HCI Group saw significant growth in its insurance operations. Policies in-force increased from 247,000 to more than 272,000, and in-force premium grew 22% to over $1.2 billion. The company started a new insurance company, Condo Owners Reciprocal Exchange, which grew to approximately $70 million of in-force premium. Exzeo Group Inc., previously TypTap Insurance Group, earned approximately $35 million of pretax income in 2024. The product segments contributed to overall growth with the insurance operations driving the top-line and bottom-line growth, while Exzeo Group's technology platform supported the insurance companies within the HCI umbrella.

• Exzeo Group's pretax income is expected to grow significantly in 2025. - Tailrow Reciprocal Insurance Company became operational and is expected to be a driver of growth. - HCI is evaluating strategic alternatives for Exzeo Group to expand its market opportunity beyond the current 1% share in the homeowners insurance market.

• Hurricane impacts such as those from Milton can have significant financial implications. - Legislative changes and potential adverse effects from forward-looking statements. - Uncertainties in the strategic alternatives process for Exzeo Group could impact future growth and value unlock.

Q: Matthew Carletti asked about the pool of Citizens policies left and the expansion of the reciprocal structure for takeouts.

A: Paresh Patel stated the Citizens opportunity is still there, with the business growing by about $200 million by taking on ~50,000 policies in the fourth quarter, and Tailrow Reciprocal's takeout is complementary to TypTap, showing the efficiency of HCI's technology in attracting policyholders.

Q: Michael Phillips followed up on PYD and the TAM for Exzeo Group.

A: Mark Harmsworth explained the favorable development impact on loss numbers, and Paresh Patel discussed the homeowners insurance market size ($140 billion annualized) with HCI Group having ~1% share, and Exzeo's technology having potential to help other carriers in catastrophe-prone areas.

Q: Mark Hughes asked about Exzeo's early customers and reinsurance market outlook.

A: Paresh Patel mentioned Exzeo is solidly profitable with no immediate capital needs, and discussed the reinsurance market outlook noting HCI's experience in Florida and the need for technology to help carriers in other catastrophe-prone states like California.