HCI Group, Inc. Q2 FY2025 earnings call

• Financial achievements: Reported earnings of $5.18 per share, improved net combined ratio to 62%, and total shareholders' equity grew to $759 million. - Developments: Reduced debt-to-cap ratio to less than 10%, 3 carriers approved for depopulation from Citizens, reinsurance program placed for 2025-2026. - Exzeo role: Technology enabled early market shift detection, in-force premium grew over $460 million since end-2022, retention ratio ~90%, gross loss ratio below 25%. - Reinsurance: Completed 2025 reinsurance program, premium ceded to reinsurance $106 million per quarter, full effect expected to net combined ratio ~70%. - Balance sheet: Redeemed 4.75% convertible notes, interest expense <$1 million per quarter, shareholder equity grew over $300 million YTD. - Exzeo: Confidentially submitted S-1 for IPO, no near-term Exzeo results commentary.

Pretax income for the second quarter was just over $94 million, with diluted earnings per share of $5.18. Year-to-date, pretax income is $195 million and diluted earnings per share are $10.57. The gross loss ratio this quarter was 21.3%, and the net combined ratio was just under 62% for the second quarter. Shareholders' equity grew to $759 million, up 65% year-to-date. The debt-to-cap ratio was reduced to less than 10%, and book value per share grew to $58.55 at the end of June.

• Net combined ratio expected to be about 70% once full effect of new reinsurance program is reflected. - Confident in experienced team and technology to identify attractive policies for compelling returns on shareholder capital.

Forward-looking statements are subject to various risks and uncertainties, detailed in the company's filings with the Securities and Exchange Commission. Should risks/uncertainties develop into actual events, they could materially affect business, financials, and operations.

Q: Update on Florida market conditions, competitive landscape.

A: Environment healthy, competitive market already here, HCI well positioned with multiple underwriters, strong capital, people, and technology.

Q: Outlook for depopulation of HCI entities.

A: 3 carriers approved for 25,000 policies in October, will leverage technology to select greenhouses.

Q: Exzeo IPO vs spin.

A: Can't get into details, Exzeo is a great asset, not ideal being tucked under HCI for valuation and competitive reasons.

Q: Condo business pricing environment.

A: Market soft, small part of business, not a significant issue.

Q: Weather impact on loss ratio.

A: More weather in Q2 2025 vs Q2 2024, but more policies and fewer claims, frequency down.

Q: Exzeo financials disclosure.

A: Disclosed in segmented information, will be available tomorrow.

Q: Interest expense post convertible notes redemption.

A: Interest expense ~$950k per quarter, 1/3 of previous.

Q: Remaining policies for takeout.

A: 25,000 per carrier, ratio of red to green houses shifted, software helps find greenhouses.

Q: Gross premiums written growth.

A: Largely renewal of existing book and takeouts.

Q: 70% net combined ratio normalization.

A: Normalized for reinsurance load, policy acquisition expenses, and loss ratio wiggle room.

Q: Depopulation per carrier and opportunities outside FL.

A: 25,000 per carrier, HCI ex Exzeo excited about opportunities with Exzeo technology outside Florida with a multiyear horizon.