3802 Coconut Palm Drive
Tampa, FL 33619
(Address, including zip code, of principal executive offices)

Indicate by check mark whether the ~~Registrant~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the ~~Registrant~~registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the ~~Registrant~~registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the ~~Registrant~~registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the ~~Registrant~~registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The aggregate number of shares of the ~~Registrant’s Common Stock,~~registrant’s common stock, no par value, outstanding on ~~November 3, 2021~~April 29, 2022 was ~~10,250,656~~10,119,663.

Consolidated ~~Statement~~Statements of ~~Stockholders’~~ Equity – (Continued)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

~~The Company elected to early adopt this update on January 1, 2021 using the modified retrospective method. The adoption of this update increased long-term debt by $3,999~~ ~~and simultaneously decreased beginning retained income and deferred income tax liabilities by $3,018~~ ~~and $981~~, respectively. The if-converted method will be the only permissible method for computing the dilutive effect of a convertible debt instrument. Interest expense no longer includes amortization of debt discount.

~~Funds Held in Trust for Assumed Business~~

The Company accounts for trust account deposits with regards to the quota share reinsurance agreements between the Company's insurance subsidiaries and United as funds held in trust for assumed business. This balance consists of funds deposited to establish the trust accounts and assumed premiums written net of provisional commission, any catastrophe cost allowance applicable, and paid losses and loss adjustment expenses.

~~Redeemable Noncontrolling Interest~~

Redeemable noncontrolling interest represents an economic interest in TTIG and is presented in the temporary equity (mezzanine) section of the consolidated balance sheet. The interest contains rights in dividends, voting, conversion, participation, liquidation preference and redemption. The redemption feature is not solely within the control of TTIG (See Note 18 -- “Redeemable Noncontrolling Interest”).

The redeemable noncontrolling interest is initially recorded at fair value and is decreased by related issuance costs. The fair value is estimated using a residual fair value approach. The effect of increasing dividend rates is accreted to the redeemable noncontrolling interest with a corresponding debit to retained income. The effective interest method is used for accretion over the period of the increasing dividend rates. The carrying value of the interest is also subsequently adjusted for accrued dividends and dividend payments. The Company has an option to pay the dividends in cash or make a payment in kind. The dividends are accrued monthly assuming that they will be settled in cash.

When the redemption is probable, the Company elects to recognize changes in the redemption value immediately as it occurs and adjust the carrying value of the interest to the maximum redemption value which is the higher of the redemption price or fair market value at the reporting date. Such changes in the redemption value are treated as dividends when calculating income available to common stockholders.

~~Noncontrolling Interests~~

~~The Company has noncontrolling interests attributable to TTIG. A noncontrolling interest arises when the Company has less than~~ ~~100~~% of the voting rights and economic interests in a subsidiary. The noncontrolling interest is periodically adjusted for the expensing of TTIG’s restricted stock awards granted to its employees, the interest’s share of TTIG’s net income or loss to common stockholders and change in other comprehensive income or loss.

~~Revenue from Claims Handling Services~~

The Company provides a claims handling service to a third-party insurance company. The service includes investigation, evaluation, adjustment and settlement of a claim. These highly interrelated activities are combined to fulfill the Company’s obligation to provide the claims handling service under a contract. As such, they are considered a single performance obligation for revenue recognition purposes. Fees are established on a per-claim basis by type of claim. For each type of claim, the per-claim fee revenue is recognized over an average claim processing period.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

The Company may incur additional costs for outsourced services in connection with the investigation, coverage analysis, adjustment, negotiation, settlement, defense or general handling of a claim. These costs are reimbursable from the customer. The Company has control over how an outsourced service is performed on its behalf. Thus, these pass-through costs are recognized as revenue in the gross amount to which the Company expects to be entitled and when the outsourced service is completed and paid or accrued by the Company.

For a certain type of claim and in addition to the per-claim service fee, the Company is entitled to additional revenue which is determined based on a fixed percent of the paid indemnification of the loss per claim. The revenue is recognized when the indemnification is paid by the Company.

Revenue related to claims handling services is included in other revenue in the consolidated statement of income. For the three and nine months ended September 30, 2021, revenues from claims handling services were $~~1,709~~ ~~and $1,916, respectively. At September 30, 2021, other assets included $768~~ ~~of amounts receivable attributable to this service.~~

~~Stock-Based Compensation~~

The Company accounts for stock-based compensation under the fair value recognition provisions of U.S. GAAP which requires the measurement and recognition of compensation for all stock-based awards made to employees and directors based on estimated fair values. In accordance with U.S. GAAP, the fair value of stock-based awards is generally recognized as compensation expense over the requisite service period, which is defined as the period during which a recipient is required to provide service in exchange for an award. Forfeitures of the Company’s stock-based awards are accounted for as they occur. The Company uses a straight-line attribution method for all grants that include only a service condition. Restricted stock grants with market conditions are expensed over the derived service period. Expensing market-based awards may be expedited if the conditions are met sooner than anticipated. The Company’s outstanding stock-based awards include stock options, warrants and restricted stock awards with service and market conditions. Compensation expense related to all awards is included in general and administrative personnel expenses. The Company receives a windfall tax benefit for certain stock option exercises and for restricted stock awards if these awards vest at a higher value than the value used to recognize compensation expense. In the event the restricted stock awards vest at a lower value than the value used to recognize compensation expense, the Company experiences a tax shortfall. The Company recognizes tax windfalls and shortfalls in the consolidated statements of income.

~~Reclassification~~

In response to the new reporting segment described in Note 1 -- “Nature of Operations,” the prior period segment information has been reclassified to conform with the current period presentation. TypTap and TypTap Management Company were removed from the segment previously referred to as Insurance Operations to form the new TypTap Group segment. The information technology companies which had previously been presented in the Corporate and Other segment were also added to the TypTap Group segment.

~~Note 4~~ -- Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Company’s consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows.


	September 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
Cash and cash equivalents	$	569,134	$	431,341	$	569,040	$	628,943
Restricted cash		2,400		2,400		2,400		2,400
Total	$	571,534	$	433,741	$	571,440	$	631,343

Restricted cash ~~primarily~~ represents funds in the Company’s sole ownership held by certain states in which the Company’s insurance subsidiaries conduct business to meet regulatory ~~requirements.~~requirements and not available for immediate business use. Funds withheld in an account for which the Company is a co-owner but not the named beneficiary are not considered restricted cash.

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

Note 54 -- Investments

a) Available-for-Sale Fixed-Maturity Securities

The Company holds investments in fixed-maturity securities that are classified as available-for-sale. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the cost or amortized cost, allowance for credit loss, gross unrealized gains and losses, and estimated fair value of the Company’s available-for-sale securities by security type were as follows:


	Cost or Amortized		Allowance for Credit			Gross Unrealized		Gross Unrealized			Estimated Fair		Cost or Amortized		Allowance for Credit		Gross Unrealized		Gross Unrealized			Estimated Fair
	Cost		Loss			Gain		Loss			Value		Cost		Loss		Gain		Loss			Value
As of September 30, 2021
As of March 31, 2022
U.S. Treasury and U.S. government agencies	$	12,870	$	—		$	103	$	(20	)	$	12,953	$	130,261	$	—	$	4	$	(3,048	)	$	127,217
Corporate bonds		27,736		—			851		(62	)		28,525		20,947		—		161		(247	)		20,861
States, municipalities, and political subdivisions		1,757		—			60		—			1,817		1,760		—		16		—			1,776
Exchange-traded debt		2,185		—			104		—			2,289		701		—		24		(1	)		724
Redeemable preferred stock		468		—			2		(1	)		469		107		—		0		(1	)		106
Total	$	45,016	$	—		$	1,120	$	(83	)	$	46,053	$	153,776	$	—	$	205	$	(3,297	)	$	150,684
As of December 31, 2020
As of December 31, 2021
U.S. Treasury and U.S. government agencies	$	13,759	$	—		$	210	$	(1	)	$	13,968	$	17,046	$	—	$	64	$	(86	)	$	17,024
Corporate bonds		49,957		(579	)		1,570		(17	)		50,931		21,913		—		632		(53	)		22,492
States, municipalities, and political subdivisions		3,023		—			60		(2	)		3,081		1,759		—		49		—			1,808
Exchange-traded debt		3,491		(9	)		230		(5	)		3,707		767		—		44		—			811
Redeemable preferred stock		35		—			—		—			35		468		—		0		(20	)		448
Total	$	70,265	$	(588	)	$	2,070	$	(25	)	$	71,722	$	41,953	$	—	$	789	$	(159	)	$	42,583

~~Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties.~~ ~~The scheduled contractual maturities of fixed-maturity securities as of September 30, 2021 and December 31, 2020 are as follows:~~

September 30, 2021

December 31, 2020

Cost or

Estimated

Cost or

Estimated

Amortized Cost

Fair Value

Amortized Cost

Fair Value

Available-for-sale

Due in one year or less

$
12,413

$
12,497

$
21,122

$
21,258

Due after one year through five years

23,548

24,209

43,561

44,339

Due after five years through ten years

7,250

7,444

2,731

3,060

Due after ten years

1,805

1,903

2,851

3,065

$
45,016

$
46,053

$
70,265

$
71,722

1712

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties. The scheduled contractual maturities of fixed-maturity securities as of March 31, 2022 and December 31, 2021 are as follows:


	March 31, 2022				December 31, 2021
	Cost or		Estimated		Cost or		Estimated
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale
Due in one year or less	$	10,232	$	10,259	$	10,734	$	10,826
Due after one year through five years		139,407		136,546		19,222		19,820
Due after five years through ten years		3,643		3,365		11,503		11,403
Due after ten years		494		514		494		534
	$	153,776	$	150,684	$	41,953	$	42,583

Sales of Available-for-Sale Fixed-Maturity Securities

Proceeds received, and the gross realized gains and losses from sales of available-for-sale fixed-maturity securities, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:

Gross
Realized

Gross
Realized

Proceeds

Gains

Losses

Three months ended September 30, 2021

$
4,158

$
94

$
(6
)
Three months ended September 30, 2020

$
1,098

$
13

$
(34
)
Nine months ended September 30, 2021

$
18,838

$
671

$
(6
)
Nine months ended September 30, 2020

$
79,284

$
1,743

$
(610
)


			Gross Realized		Gross Realized
	Proceeds		Gains		Losses
Three months ended March 31, 2022	$	9,058	$	2	$	(431	)
Three months ended March 31, 2021	$	36	$	1	$	0

Gross Unrealized Losses for Available-for-Sale Fixed-Maturity Securities

Securities with gross unrealized loss positions at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:


	Less Than Twelve Months					Twelve Months or Longer					Total					Less Than Twelve Months					Twelve Months or Longer					Total
	Gross			Estimated		Gross			Estimated		Gross			Estimated		Gross			Estimated		Gross			Estimated		Gross			Estimated
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
As of September 30, 2021	Loss			Value		Loss			Value		Loss			Value
As of March 31, 2022																Loss			Value		Loss			Value		Loss			Value
U.S. Treasury and U.S. government agencies	$	(20	)	$	4,634	$	—		$	—	$	(20	)	$	4,634	$	(2,964	)	$	123,394	$	(84	)	$	2,062	$	(3,048	)	$	125,456
Corporate bonds		(42	)		5,129		(20	)		331		(62	)		5,460		(247	)		6,945		0			0		(247	)		6,945
Exchange-traded debt																	(1	)		25		0			0		(1	)		25
Redeemable preferred stock		(1	)		424		—			—		(1	)		424		(1	)		106		0			0		(1	)		106
Total available-for-sale securities	$	(63	)	$	10,187	$	(20	)	$	331	$	(83	)	$	10,518	$	(3,213	)	$	130,470	$	(84	)	$	2,062	$	(3,297	)	$	132,532

Less Than Twelve Months

Twelve Months or Longer

Total

Gross

Estimated

Gross

Estimated

Gross

Estimated

Unrealized

Fair

Unrealized

Fair

Unrealized

Fair

As of December 31, 2020

Loss

Value

Loss

Value

Loss

Value

U.S. Treasury and U.S. government
agencies

$
(1
)

$
1,337

$
—

$
—

$
(1
)

$
1,337

Corporate bonds

(17
)

3,085

0

0

(17
)

3,085

States, municipalities, and political
subdivisions

(2
)

1,268

0

0

(2
)

1,268

Exchange-traded debt

(5
)

336

0

0

(5
)

336

Total available-for-sale securities

$
(25
)

$
6,026

$
—

$
—

$
(25
)

$
6,026

~~At September 30, 2021 and December 31, 2020, there were~~ 32 ~~and~~ 12 ~~securities, respectively, in an unrealized loss position.~~

1813

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)


	Less Than Twelve Months					Twelve Months or Longer					Total
	Gross			Estimated		Gross			Estimated		Gross			Estimated
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
As of December 31, 2021	Loss			Value		Loss			Value		Loss			Value
U.S. Treasury and U.S. government agencies	$	(73	)	$	9,809	$	(13	)	$	616	$	(86	)	$	10,425
Corporate bonds		(53	)		4,452		0			0		(53	)		4,452
Redeemable preferred stock		(20	)		442		0			0		(20	)		442
Total available-for-sale securities	$	(146	)	$	14,703	$	(13	)	$	616	$	(159	)	$	15,319

At March 31, 2022 and December 31, 2021, there were 46 and 23 securities, respectively, in an unrealized loss position.

The Company regularly reviews its individual investment securities for credit impairment. The Company considers various factors in determining whether a credit loss exists for each individual security, including-

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The Company has interests in limited partnerships that are not registered or readily tradeable on a securities exchange. These partnerships are private equity funds managed by general partners who make decisions with regard to financial policies and operations. As such, the Company is not the primary beneficiary and does not consolidate these partnerships. The following table provides information related to the Company’s investments in limited partnerships:

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, the Company recognized net investment income of $~~1,132~~1,780 and $~~3,491~~787, respectively. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, the Company received total cash distributions of $~~1,535~~1,596 and $~~5,980~~2,024, respectively, including returns on investment of $~~553~~811 and $~~2,345, respectively.~~

~~For the three and nine months ended September 30, 2020, the Company recognized net investment income of $689~~ ~~and net investment loss of $2,058, respectively. During the three and nine months ended September 30, 2020, the Company received total cash distributions of $850~~ ~~and $1,742, respectively, including returns on investment of $~~72 ~~and $650~~478, respectively.

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company’s net cumulative contributed capital to the partnerships at each respective balance sheet date totaled $~~26,474~~27,435 and $~~29,272~~28,371, respectively, and the Company’s maximum exposure to loss aggregated $~~26,039~~28,166 and $~~27,691~~28,133, respectively.

Melbourne FMA, LLC, a wholly owned subsidiary, currently has an equity investment in FMKT Mel JV, a Florida limited liability company treated as a joint venture under U.S. GAAP. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company’s maximum exposure to loss relating to the variable interest entity was $~~370~~350 and $~~705~~363, respectively, representing the carrying value of the investment. ~~In September 2021, FMKT Mel JV sold one of its remaining outparcels and recognized a gain on sale of $540. During the three months ended September 30, 2021, the Company received a cash distribution of $737, including return on investment of $114~~. There were 0 cash distributions during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2022 and 2021. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, there was 0 undistributed income from this equity method investment. The following tables provide FMJV’s summarized unaudited financial results and the unaudited financial positions:

~~For the nine months ended September 30, 2021, the Company incurred a $~~21 ~~loss on disposal of assets related to a closure of a restaurant.~~ Depreciation and amortization expense related to real estate investments was $~~475~~506 and $~~431~~491 for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $1,445~~ ~~and $1,318~~ ~~for the nine months ended September 30, 2021 and 2020,~~ respectively.

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

For the ~~nine~~three months ended ~~September 30,~~March 31, 2021, income from real estate investments included a net gain of $2,790 resulting from a legal settlement with The Kroger Co. in a lawsuit filed by a real estate subsidiary of the Company to enforce a guaranty of a commercial lease.

From time to time, the Company may invest in financial assets other than stocks, mutual funds and bonds. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, net realized gains related to other investments were

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

$~~191~~81 and $~~1,018~~375, respectively. ~~There were net realized gains of $~~17 ~~related to other investments for the three and nine months ended September 30, 2020.~~

Note 76 -- Fair Value Measurements

The Company records and discloses certain financial assets at their estimated fair values. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:


Level 1	-–	Unadjusted quoted prices in active markets for identical assets.
Level 2	-–	Other inputs that are observable for the asset, either directly or indirectly such as quoted prices for identical assets that are not observable throughout the full term of the asset.
Level 3	-–	Inputs that are unobservable.

2419

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Valuation Methodology

Cash and Cash Equivalents

Cash and cash equivalents primarily consist of money-market funds and certificates of deposit maturing within 90 days. Their carrying value approximates fair value due to the short maturity and high liquidity of these funds.

Restricted Cash

Restricted cash represents cash held by state authorities and the carrying value approximates fair value.

Fixed-Maturity and Equity Securities

Estimated fair values of the Company’s fixed-maturity and equity securities are determined in accordance with U.S. GAAP, using valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair values are generally measured using quoted prices in active markets for identical securities or other inputs that are observable either directly or indirectly, such as quoted prices for similar securities. In those instances where observable inputs are not available, fair values are measured using unobservable inputs. Unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the security and are developed based on the best information available in the circumstances. Fair value estimates derived from unobservable inputs are significantly affected by the assumptions used, including the discount rates and the estimated amounts and timing of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange.

The estimated fair values for securities that do not trade on a daily basis are determined by management, utilizing prices obtained from an independent pricing service and information provided by brokers, which are level 2 inputs. Management reviews the assumptions and methods utilized by the pricing service and then compares the relevant data and pricing to broker-provided data. The Company gains assurance of the overall reasonableness and consistent application of the assumptions and methodologies, and compliance with accounting standards for fair value determination through ongoing monitoring of the reported fair values.

Revolving Credit Facility

The Company’s revolving credit facility is a variable-rate loan. The interest rate is periodically adjusted based on the London Interbank Offered Rate plus a spread. As a result, its carrying value approximates fair value.

Long-Term Debt

The following table summarizes components of the Company’s long-term debt and methods used in estimating their fair values:


	Maturity Date	Valuation Methodology
4.25% Convertible ~~senior notes~~Senior Notes	2037	Quoted price
3.90% Promissory ~~note~~Note	2032	Discounted cash flow method/Level 3 inputs
3.75% Callable ~~promissory note~~Promissory Note	2036	Discounted cash flow method/Level 3 inputs
4.55% Promissory ~~note~~Note	2036	Discounted cash flow method/Level 3 inputs

2520

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Assets Measured at Estimated Fair Value on a Recurring Basis

The following ~~table presents~~tables present information about the Company’s financial assets measured at estimated fair value on a recurring basis. The ~~table indicates~~tables indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


	Fair Value Measurements Using								Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)		Total
As of September 30, 2021
As of March 31, 2022
Financial Assets:
Cash and cash equivalents	$	569,134	$	—	$	—	$	569,134	$	569,040	$	—	$	—	$	569,040
Restricted cash	$	2,400	$	—	$	—	$	2,400	$	2,400	$	—	$	—	$	2,400
Fixed-maturity securities:
U.S. Treasury and U.S. government agencies	$	10,253	$	2,700	$	—	$	12,953	$	125,775	$	1,442	$	—	$	127,217
Corporate bonds		28,525		—		—		28,525		20,861		—		—		20,861
State, municipalities, and political subdivisions		—		1,817		—		1,817		—		1,776		—		1,776
Exchange-traded debt		2,289		—		—		2,289		724		—		—		724
Redeemable preferred stock		469		—		—		469		106		—		—		106
Total available-for-sale securities	$	41,536	$	4,517	$	—	$	46,053	$	147,466	$	3,218	$	—	$	150,684
Equity securities	$	50,223	$	—	$	—	$	50,223	$	41,204	$	—	$	—	$	41,204


	Fair Value Measurements Using								Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)		Total
As of December 31, 2020
As of December 31, 2021
Financial Assets:
Cash and cash equivalents	$	431,341	$	—	$	—	$	431,341	$	628,943	$	—	$	—	$	628,943
Restricted cash	$	2,400	$	—	$	—	$	2,400	$	2,400	$	—	$	—	$	2,400
Fixed-maturity securities:
U.S. Treasury and U.S. government agencies	$	11,236	$	2,732	$	—	$	13,968	$	15,536	$	1,488	$	—	$	17,024
Corporate bonds		50,931		—		—		50,931		22,492		—		—		22,492
State, municipalities, and political subdivisions		—		3,081		—		3,081		—		1,808		—		1,808
Exchange-traded debt		3,707		—		—		3,707		811		—		—		811
Redeemable preferred stock		35		—		—		35		448		—		—		448
Total available-for-sale securities	$	65,909	$	5,813	$	—	$	71,722	$	39,287	$	3,296	$	—	$	42,583
Equity securities	$	51,130	$	—	$	—	$	51,130	$	51,740	$	—	$	—	$	51,740

~~Assets and~~ Liabilities Carried at Other Than ~~Estimated~~ Fair Value

The following tables present fair value information for ~~assets and~~ liabilities that are carried on the consolidated balance sheets at amounts other than fair value as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:

Carrying

Fair Value Measurements Using

Estimated

Value

(Level 1)

(Level 2)

(Level 3)

Fair Value

As of September 30, 2021

Financial Liabilities:

Long-term debt:

4.25% Convertible senior notes

$
56,227

$
—

$
103,490

$
—

$
103,490

3.90% Promissory note

9,371

—

—

10,598

10,598

3.75% Callable promissory note

7,241

—

—

7,986

7,986

4.55% Promissory note

5,208

—

—

6,159

6,159

Total long-term debt

$
78,047

$
—

$
103,490

$
24,743

$
128,233


	Carrying		Fair Value Measurements Using						Estimated
	Value		(Level 1)		(Level 2)		(Level 3)		Fair Value
As of March 31, 2022
Financial Liabilities:
Revolving credit facility	$	15,000	$	—	$	15,000	$	—	$	15,000
Long-term debt:
4.25% Convertible Senior Notes	$	23,916	$	—	$	27,111	$	—	$	27,111
3.90% Promissory Note		9,203		—		—		9,455		9,455
3.75% Callable Promissory Note		7,063		—		—		7,132		7,132
4.55% Promissory Note		5,087		—		—		5,387		5,387
Total long-term debt	$	45,269	$	—	$	27,111	$	21,974	$	49,085

2621

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Carrying

Fair Value Measurements Using

Estimated

Value

(Level 1)

(Level 2)

(Level 3)

Fair Value

As of December 31, 2020

Financial Liabilities:

Revolving credit facility

$
23,750

$
—

$
23,750

$
—

$
23,750

Long-term debt:

4.25% Convertible senior notes

$
133,964

$
—

$
147,236

$
—

$
147,236

3.90% Promissory note

9,617

—

—

10,044

10,044

3.75% Callable promissory note

7,502

—

—

7,747

7,747

4.55% Promissory note

5,385

—

—

5,809

5,809

Total long-term debt

$
156,468

$
—

$
147,236

$
23,600

$
170,836


	Carrying		Fair Value Measurements Using						Estimated
	Value		(Level 1)		(Level 2)		(Level 3)		Fair Value
As of December 31, 2021
Financial Liabilities:
Revolving credit facility	$	15,000	$	—	$	15,000	$	—	$	15,000
Long-term debt:
4.25% Convertible Senior Notes	$	23,885	$	—	$	33,248	$	—	$	33,248
3.90% Promissory Note		9,287		—		—		10,488		10,488
3.75% Callable Promissory Note		7,153		—		—		7,852		7,852
4.55% Promissory Note		5,148		—		—		6,051		6,051
Total long-term debt	$	45,473	$	—	$	33,248	$	24,391	$	57,639

~~Note 9 -- Other Assets~~

~~The following table summarizes the Company’s other assets:~~

September 30,

December 31,

2021

2020

Benefits receivable related to retrospective reinsurance contracts

$
1,819

$
10,920

Prepaid expenses

3,493

2,365

Deposits

969

445

Lease acquisition costs, net

521

453

Other

6,372

8,428

Total other assets

$
13,174

$
22,611

~~Note 10 -- Revolving Credit Facility~~

~~In March 2021, the Company repaid the entire credit facility balance of $23,750. For the three months ended September 30, 2021 and 2020, interest expense was $~~24 ~~and $108, respectively, including $~~25 ~~and $~~39 ~~of amortization of issuance costs, respectively. For the nine months ended September 30, 2021 and 2020, interest expense was $153~~ ~~and $423, respectively, including $~~74 ~~and $118~~ ~~of amortization of issuance costs, respectively. At September 30, 2021, the Company was in compliance with all required covenants with~~ 0 ~~borrowings outstanding. The borrowing capacity of the facility is now $65,000~~.

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

~~Note 11 -- Long-Term Debt~~

~~The following table summarizes the Company’s long-term debt:~~

September 30,

December 31,

2021

2020

4.25% Convertible senior notes, due March 1, 2037

$
56,409

$
139,200

3.90% Promissory note, due through April 1, 2032

9,519

9,777

3.75% Callable promissory note, due through
September 1, 2036

7,337

7,607

4.55% Promissory note, due through August 1, 2036

5,287

5,470

Finance lease liabilities, due through October 15, 2024

36

43

Total principal amount

78,588

162,097

Less: unamortized discount and issuance costs*

(505
)

(5,586
)
Total long-term debt

$
78,083

$
156,511

* Effective January 1, 2021, the balance includes only unamortized issuance costs. See ~~Adoption of New Accounting Standards~~ ~~in Note 2 -- “Summary of Significant Accounting Policies.”~~

~~The following table summarizes future maturities of long-term debt as of September 30, 2021, which takes into consideration the assumption that the~~ ~~4.25% Convertible Senior Notes are repurchased at the earliest call date.~~

Due in 12 months following September 30,

2021

$
57,409

2022

1,036

2023

1,065

2024

1,106

2025

1,151

Thereafter

16,821

Total

$
78,588

~~Information with respect to interest expense related to long-term debt is as follows:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Interest Expense:

Contractual interest

$
1,421

$
1,736

$
4,832

$
5,374

Non-cash expense (a)

219

1,053

758

3,174

Capitalized interest (b)

—

(41
)

—

(125
)

$
1,640

$
2,748

$
5,590

$
8,423

~~(a)~~

~~Includes amortization of debt discount and issuance costs. Amortization of debt discount discontinued effective January 1, 2021. See~~ ~~Adoption of New Accounting Standards~~ ~~in Note 2 -- “Summary of Significant Accounting Policies” for additional information.~~

~~(b)~~

~~Interest was capitalized for a construction project.~~

2922

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 8 -- Other Assets

The following table summarizes the Company’s other assets:


	March 31,		December 31,
	2022		2021
Benefits receivable related to retrospective reinsurance contracts	$	4,548	$	3,064
Reimbursement receivable under TPA service		4,651		3,525
Prepaid expenses		2,734		2,853
Deposits		482		406
Lease acquisition costs, net		557		505
Other		4,341		4,364
Total other assets	$	17,313	$	14,717

Note 9 -- Revolving Credit Facility

For the three months ended March 31, 2022 and 2021, interest expense was $89 and $104, respectively, including $25 and $25 of amortization of issuance costs, respectively. At March 31, 2022, the Company was in compliance with all required covenants, and there were $15,000 of borrowings outstanding.

Note 10 -- Long-Term Debt

The following table summarizes the Company’s long-term debt:


	March 31,			December 31,
	2022			2021
4.25% Convertible Senior Notes, due March 1, 2037	$	23,916		$	23,916
3.90% Promissory Note, due through April 1, 2032		9,343			9,431
3.75% Callable Promissory Note, due through September 1, 2036		7,153			7,246
4.55% Promissory Note, due through August 1, 2036		5,162			5,225
Finance lease liabilities, due through October 15, 2024		26			31
Total principal amount		45,600			45,849
Less: unamortized issuance costs		(305	)		(345	)
Total long-term debt	$	45,295		$	45,504

The following table summarizes future maturities of long-term debt as of March 31, 2022, which takes into consideration the assumption that the 4.25% Convertible Senior Notes are repurchased at the next earliest call date:


Due in 12 months following March 31,
2022	$	1,017
2023		1,050
2024		1,086
2025		1,129
2026		25,091
Thereafter		16,227
Total	$	45,600

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Information with respect to interest expense related to long-term debt is as follows:


	Three Months Ended
	March 31,
	2022		2021
Interest Expense:
Contractual interest	$	472	$	1,707
Non-cash expense (a)		40		268
	$	512	$	1,975

(a)

Includes amortization of debt issuance costs.

Convertible Senior Notes

4.25% Convertible Senior Notes. On March 1, 2022, none of the holders of the 4.25% Convertible Senior Notes exercised the put option, which would have required the Company to repurchase for cash all or any portion of the notes at par. The Company’s recent cash dividends on common stock have exceeded $0.35 per share, resulting in adjustments to the conversion rate of the 4.25% Convertible Senior Notes. Accordingly, as of ~~September 30, 2021,~~March 31, 2022, the conversion rate of the Company’s 4.25% Convertible Senior Notes was ~~16.4668~~16.4853 shares of common stock for each $1 in principal amount, which was the equivalent of approximately $~~60.73~~60.66 per share.

As ~~the Company’s common shares traded above~~ ~~130~~% of ~~the conversion price for at least~~ 20 ~~trading days during the final~~ 30 ~~trading days of both the second and third quarters of 2021, the 4.25% Convertible Notes are convertible by all holders beginning July 1 through December~~March 31, ~~2021 in accordance with the terms specified in the indenture.~~

~~During the third quarter of 2021, the Company entered into various agreements with certain holders of the 4.25% Convertible Notes whereby the holders converted $82,480~~ ~~in aggregate principal of 4.25% Convertible Notes for aggregate consideration of~~ ~~1,356,835~~ ~~shares of HCI’s common stock and $1,414~~ of cash consideration. These transactions were accounted for as induced conversions based on the limited period of time the offers were open and the inclusion of cash consideration being one of the conversion options specified in the indenture. As such, the Company recognized debt conversion expense of $~~1,273~~ ~~during the three months ended September 30, 2021 consisting of the difference between the fair value of all consideration transferred and the fair value of common stock issued.~~

~~An additional $311~~ ~~in aggregate principal of 4.25% Convertible Notes were converted by election from holders of 4.25% Convertible Notes for aggregate consideration of~~ ~~5,119~~ ~~shares of HCI’s common stock during the three months ended September 30, 2021.~~

~~As of September 30, 2021, the remaining amortization period of~~2022, the debt issuance costs for the 4.25% Convertible Senior Notes ~~was expected to be~~ ~~5 months~~.had been fully amortized.

Note 1211 -- Reinsurance

Reinsurance obtained from other insurance companies

The Company cedes a portion of its homeowners’ insurance exposure to other entities under catastrophe excess of loss reinsurance contracts and a portion of its flood insurance exposure under one quota share reinsurance agreement. Ceded premiums under most catastrophe excess of loss reinsurance contracts are subject to revision resulting from subsequent adjustments in total insured value. Under the terms of the quota share reinsurance agreement, the Company is entitled to a 30% ceding commission on ceded premiums ~~written. The reinsurance premiums under one flood catastrophe excess~~written and a profit commission equal to 10% of loss reinsurance contract are generally determined on a quarterly basis based on the premiums associated with the applicable flood total insured value in force on the last day of the preceding quarter.net profit.

3024

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The Company remains liable for claims payments in the event that any reinsurer is unable to meet its obligations under the reinsurance agreements. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. The Company contracts with a number of reinsurers to secure its annual reinsurance coverage, which generally becomes effective June 1st of each year. The Company purchases reinsurance each year taking into consideration probable maximum losses and reinsurance market conditions.

The impact of the reinsurance contracts on premiums written and earned is as follows:


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2021			2020			2021			2020			2022			2021
Premiums Written:
Direct	$	143,426		$	116,464		$	396,781		$	364,942		$	171,981		$	110,131
Assumed		30,840			(13	)		88,311			(92	)		5,313			15,717
Gross written		174,266			116,451			485,092			364,850			177,294			125,848
Ceded		(55,577	)		(44,231	)		(145,112	)		(109,304	)		(53,162	)		(43,099	)
Net premiums written	$	118,689		$	72,220		$	339,980		$	255,546		$	124,132		$	82,749
Premiums Earned:
Direct	$	120,763		$	106,337		$	346,788		$	303,956		$	148,846		$	110,292
Assumed		29,046			357			73,403			2,906			30,079			20,650
Gross earned		149,809			106,694			420,191			306,862			178,925			130,942
Ceded		(55,577	)		(44,231	)		(145,112	)		(109,304	)		(53,162	)		(43,099	)
Net premiums earned	$	94,232		$	62,463		$	275,079		$	197,558		$	125,763		$	87,843

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, the Company recognized ceded losses of $~~1,830~~870 and $~~2,424~~107, respectively, as ~~a reduction in losses and loss adjustment expenses. During the three and nine months ended September 30, 2020, the Company recognized ceded losses of $1,871~~ ~~and $2,220, respectively, as a reduction~~reductions in losses and loss adjustment expenses. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, there were 54 ~~and~~ 3855 reinsurers ~~respectively,~~ participating in the Company’s reinsurance program. Total net amounts recoverable and receivable from reinsurers at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 were $~~49,126~~69,596 and $~~85,146~~76,650, respectively. Approximately ~~66.4~~66.1% of the ~~gross~~ reinsurance recoverable balance at ~~September 30, 2021~~March 31, 2022 was receivable from 3 reinsurers, ~~including~~one of which was the Florida Hurricane Catastrophe Fund, a tax-exempt state trust fund. Based on all available information considered in the rating-based method, the Company recognized decreases in credit loss expense of $1311 and $4112 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~respectively. For the three and nine months ended September 30, 2020, the Company derecognized credit loss expenses of $~~14 ~~and $363~~, respectively. Allowances for credit losses related to the reinsurance recoverable balance were $4479 and $8590 at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

The Company has reinsurance contracts that include retrospective provisions that adjust premiums in the event losses are minimal or zero. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, the Company recognized reductions in premiums ceded of $~~1,364~~1,484 and $~~9,619~~4,680, respectively, related to these adjustments in the consolidated statements of income. ~~For the three and nine months ended September 30, 2020, the Company recognized reductions in premiums ceded of $4,680~~ ~~and $10,440, respectively.~~

3125

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Amounts receivable pursuant to retrospective provisions are reflected in other assets. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, other assets included $~~1,819~~4,548 and $~~10,920~~3,064, respectively. ~~In June 2021, the Company received $18,720~~ ~~of premium refund under the retrospective reinsurance contract that ended May 31, 2021.~~ Management believes the credit risk associated with the collectability of accrued benefits is minimal as the amount receivable is concentrated with two reinsurers and the Company monitors the creditworthiness of these reinsurers based on available information about each reinsurer’s financial condition.

Reinsurance provided to other insurance companies

Effective January 2021, the Company began providing quota share reinsurance on all in-force, new and renewal policies issued by United. The policies were issued in the states of Connecticut, New Jersey, Massachusetts and Rhode Island.

For the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, $6,849 of assumed premiums written related to ~~United~~the Northeast Region’s insurance policies was derecognized, which primarily resulted from the return of the unearned portion of assumed written premiums subsequent to the Company's renewal and/or replacement of insurance policies in the State of New Jersey. For the three months ended March 31, 2021, assumed premiums written were $~~30,840~~15,717 ~~and $88,311, respectively.~~. At ~~September 30, 2021,~~March 31, 2022, the Company had a net balance of $~~6,636~~4,305 due ~~from~~to United related to the Northeast Region, consisting of ~~premiums receivable of $14,951~~ ~~offset by~~ ceding commission payable of $~~3,588~~1,418 and payable on paid losses and loss adjustment expenses of $~~4,727~~5,190, offset by premiums receivable of $2,303. At December 31, 2021, the Company had a net balance of $4,486 due to United related to the Northeast Region, consisting of ceding commission payable of $535 and payable on paid losses and loss adjustment expenses of $4,017, offset by premiums receivable of $66.

Effective December 31, 2021, the Company entered into a separate agreement to provide 85% quota share reinsurance on United’s personal lines insurance policies in the states of Georgia, South Carolina and North Carolina. For the three months ended March 31, 2022, assumed premiums written related to the Southeast Region’s insurance policies were $12,162. At March 31, 2022, the Company had a net balance of $1,178 receivable from United, consisting of premiums receivable of $4,792 offset by ceding commission payable of $1,198, a catastrophe cost allowance of $949 and payable on paid losses and loss adjustment expenses of $1,467. At December 31, 2021, there was an amount receivable from United of $23,325, net of a ceding commission of $8,835 and a catastrophe cost allowance of $3,181.

At March 31, 2022 and December 31, 2021, the balance of funds withheld for assumed business related to the Company’s quota share reinsurance agreements with United was $84,068 and $73,716, respectively.

Note 1312 -- Losses and Loss Adjustment Expenses

The liability for losses and loss adjustment expenses (“LAE”) is determined on an individual case basis for all claims reported. The liability also includes amounts for unallocated expenses, anticipated future claim development and losses incurred but not reported.

The Company primarily writes insurance in ~~the~~ states which could be exposed to hurricanes or other natural catastrophes. The occurrence of a major catastrophe could have a significant effect on the Company’s quarterly results and cause a temporary disruption of the normal operations of the Company. However, the Company is unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

~~Activity in the liability for losses and LAE is summarized as follows:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Net balance, beginning of period*

$
154,901

$
123,129

$
141,065

$
98,174

Incurred, net of reinsurance, related to:

Current period

53,834

50,543

147,064

116,839

Prior period

8,830

1,200

17,268

2,825

Total incurred, net of reinsurance

62,664

51,743

164,332

119,664

Paid, net of reinsurance, related to:

Current period

(31,663
)

(21,175
)

(59,265
)

(36,988
)
Prior period

(22,237
)

(9,386
)

(82,467
)

(36,539
)
Total paid, net of reinsurance

(53,900
)

(30,561
)

(141,732
)

(73,527
)
Net balance, end of period

163,665

144,311

163,665

144,311

Add: reinsurance recoverable before allowance for
credit losses

39,512

75,034

39,512

75,034

Gross balance, end of period

$
203,177

$
219,345

$
203,177

$
219,345

*~~Net balance represents beginning-of-period liability for unpaid losses and LAE less beginning-of-period reinsurance recoverable for unpaid losses and LAE.~~

3226

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Activity in the liability for losses and LAE is summarized as follows:


	Three Months Ended
	March 31,
	2022			2021
Net balance, beginning of period*	$	172,410		$	141,065
Incurred, net of reinsurance, related to:
Current period		70,076			41,920
Prior period		2,628			3,831
Total incurred, net of reinsurance		72,704			45,751
Paid, net of reinsurance, related to:
Current period		(18,796	)		(7,596	)
Prior period		(46,481	)		(34,590	)
Total paid, net of reinsurance		(65,277	)		(42,186	)
Net balance, end of period		179,837			144,630
Add: reinsurance recoverable before allowance for credit losses		54,955			61,143
Gross balance, end of period	$	234,792		$	205,773

*Net balance represents beginning-of-period liability for unpaid losses and LAE less beginning-of-period reinsurance recoverable for unpaid losses and LAE.

The establishment of loss and LAE reserves is an inherently uncertain process and changes in loss and LAE reserve estimates are expected as these estimates are subject to the outcome of future events. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such estimates are adjusted. During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, the Company recognized losses related to prior periods of $~~8,830~~2,628 ~~and $17,268, respectively,~~ primarily to increase the reserve ~~for the 2020 loss year~~ resulting from increased ~~litigation with regards to Hurricane Sally and Tropical Storm Eta.~~litigation. Losses ~~and LAE~~ for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 included estimated losses, net of reinsurance, of approximately $~~19,830~~12,961 ~~and $43,330, respectively,~~ related to policies assumed from United, approximately $~~9,767~~2,055 ~~and $12,367, respectively,~~ of which pertained to TypTap. In addition, the Company recognized $6,121 of losses related to weather events in Florida during the three months ended March 31, 2022.

3327

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 1413 -- Segment Information

The Company identifies its operating divisions or segments based on managerial emphasis, organizational structure and revenue source. In the first quarter of 2021, the Company reorganized its operations to focus on specific business segments, resulting in the creation of TTIG with a separate workforce, board of directors and financial reporting structure. Companies under TTIG include TypTap, TypTap Management Company, Exzeo USA, Inc., and Cypress Tech Development Company, Inc., the parent company of an India company, Exzeo Software Private Limited. TTIG and its subsidiaries are considered a new reporting segment known as TypTap Group. The Company ~~now~~ has 4 reportable segments: HCPCI insurance operations, TypTap Group, real estate operations, and corporate and other. Due to their economic characteristics, the Company’s property and casualty insurance division and reinsurance operations, excluding the insurance operations under TypTap Group, are grouped together into one reportable segment under HCPCI insurance operations. The TypTap Group segment includes its property and casualty insurance operations, information technology operations and its management company’s activities. The real estate operations segment includes companies engaged in operating commercial properties the Company owns for investment purposes or for use in its own operations. The corporate and other segment represents the activities of the holding companies and any other companies that do not meet the quantitative and qualitative thresholds for a reportable segment. The determination of segments may change over time due to changes in operational emphasis, revenues, and results of operations. The Company’s chief executive officer, who serves as the Company’s chief operating decision maker, evaluates each division’s financial and operating performance based on revenue and operating income.

For the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ revenues from the HCPCI insurance operations segment before intracompany elimination represented ~~73.9~~69.8% and ~~59.1~~77.7%, respectively, and revenues from the TypTap Group segment represented ~~24.0~~28.3% and ~~12.6~~%, respectively, of total revenues of all operating segments. For the nine months ended September 30, 2021 and 2020, revenues from the HCPCI insurance operations segment before intracompany elimination represented ~~76.4% and~~ ~~73.8%, respectively, and revenues from the TypTap Group segment represented~~ ~~20.7% and~~ ~~12.7~~17.2%, respectively, of total revenues of all operating segments. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, HCPCI insurance operations’ total assets represented ~~60.2~~55.6% and ~~68.9~~58.7%, respectively, and TypTap Group’s total assets represented ~~26.3~~32.3% and ~~16.7~~29.3%, respectively, of the combined assets of all operating segments.

3428

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The following tables present segment information reconciled to the Company’s consolidated statements of income. Intersegment transactions are not eliminated from segment results. However, intracompany transactions are eliminated in segment results below.


	HCPCI																	HCPCI
	Insurance			TypTap			Real		Corporate/			Reclassification/						Insurance			TypTap			Real		Corporate/			Reclassification/
For Three Months Ended September 30, 2021	Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
For Three Months Ended March 31, 2022																		Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
Revenue:
Gross premiums earned(c)	$	98,256		$	51,553		$	—	$	—		$	—		$	149,809		$	119,305		$	60,622		$	—	$	—		$	(1,002	)	$	178,925
Premiums ceded		(36,955	)		(20,135	)		—		—			1,513			(55,577	)		(36,953	)		(16,933	)		—		—			724			(53,162	)
Net premiums earned		61,301			31,418			—		—			1,513			94,232			82,352			43,689			—		—			(278	)		125,763
Net income from investment portfolio		831			102			—		172			778			1,883
Net (loss) income from investment portfolio																			(1,457	)		(16	)		—		316			135			(1,022	)
Policy fee income		693			307			—		—			—			1,000			654			403			—		—			—			1,057
Other		2,087			480			2,336		489			(3,290	)		2,102			1,247			469			2,403		836			(3,713	)		1,242
Total revenue		64,912			32,307			2,336		661			(999	)		99,217			82,796			44,545			2,403		1,152			(3,856	)		127,040
Expenses:
Losses and loss adjustment expenses		36,928			24,224			—		—			1,512			62,664			43,995			28,988			—		—			(279	)		72,704
Amortization of deferred policy acquisition costs		12,402			9,250			—		—			—			21,652			19,102			9,422			—		—			—			28,524
Other policy acquisition expenses		633			1,110			—		—			(55	)		1,688			663			283			—		—			—			946
Stock-based compensation expense																			1,144			885			—		2,308			—			4,337
Interest expense		—			1			231		1,432			—			1,664			—			200			227		374			(200	)		601
Depreciation and amortization		18			342			576		171			(603	)		504			114			561			605		172			(623	)		829
Debt conversion expense		—			—			—		1,273			—			1,273
Personnel and other operating expenses		5,896			7,685			814		3,734			(1,853	)		16,276			7,318			7,493			1,307		1,734			(2,754	)		15,098
Total expenses		55,877			42,612			1,621		6,610			(999	)		105,721			72,336			47,832			2,139		4,588			(3,856	)		123,039
Income (loss) before income taxes	$	9,035		$	(10,305	)	$	715	$	(5,949	)	$	—		$	(6,504	)	$	10,460		$	(3,287	)	$	264	$	(3,436	)	$	—		$	4,001
Total revenue from non-affiliates ~~(c)~~(d)	$	65,629		$	32,701		$	1,997	$	402								$	81,733		$	44,823		$	2,064	$	449
Gross premiums written	$	118,280		$	55,987													$	91,141		$	86,153

(a)

Other revenue under real estate primarily consisted of rental income from investment properties.

(b)

Other revenue under corporate and other primarily consisted of revenue from marina business.

(c)

Gross premiums earned consist of $118,303 from HCPCI and $1,002 from a reinsurance company.

(d)

Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.

3529

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

HCPCI

Insurance

TypTap

Real

Corporate/

Reclassification/

For Three Months Ended September 30, 2020

Operations

Group

Estate (a)

Other (b)

Elimination

Consolidated

Revenue:

Gross premiums earned (c)

$
89,283

$
19,854

$
—

$
—

$
(2,443
)

$
106,694

Premiums ceded

(36,503
)

(10,171
)

—

—

2,443

(44,231
)
Net premiums earned

52,780

9,683

—

—

—

62,463

Net income from investment portfolio

1,866

363

—

1,340

(290
)

3,279

Policy fee income

684

211

—

—

—

895

Other

759

24

39,353

290

(3,036
)

37,390

Total revenue

56,089

10,281

39,353

1,630

(3,326
)

104,027

Expenses:

Losses and loss adjustment expenses

44,338

7,405

—

—

—

51,743

Amortization of deferred policy acquisition costs

10,433

3,536

—

—

—

13,969

Other policy acquisition expenses

160

531

—

—

56

747

Interest expense

—

—

463

2,631

(238
)

2,856

Depreciation and amortization

21

279

567

179

(585
)

461

Loss on repurchases of convertible senior notes

—

—

—

—

—

—

Loss on extinguishment of debt

—

—

98

—

—

98

Personnel and other operating expenses

5,896

4,527

1,325

3,428

(2,559
)

12,617

Total expenses

60,848

16,278

2,453

6,238

(3,326
)

82,491

(Loss) income before income taxes

$
(4,759
)

$
(5,997
)

$
36,900

$
(4,608
)

$
—

$
21,536

Total revenue from non-affiliates (d)

$
55,227

$
10,778

$
38,859

$
1,208

Gross premiums written

$
89,102

$
27,349

~~(a)~~

~~Other revenue under real estate primarily consisted of rental income from investment properties.~~

~~(b)~~

~~Other revenue under corporate and other primarily consisted of revenue from restaurant and marina businesses.~~

~~(c)~~

~~Gross premiums earned consist of $86,840~~ ~~from HCPCI and $2,443~~ ~~from a reinsurance company.~~

~~(d)~~

~~Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.~~

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~


	HCPCI																	HCPCI
	Insurance			TypTap			Real		Corporate/			Reclassification/						Insurance			TypTap			Real		Corporate/			Reclassification/
For Nine Months Ended September 30, 2021	Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
For Three Months Ended March 31, 2021																		Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
Revenue:
Gross premiums earned(c)	$	300,827		$	119,364		$	—	$	—		$	—		$	420,191		$	104,521		$	28,811		$	—	$	—		$	(2,390	)	$	130,942
Premiums ceded		(104,236	)		(42,229	)		—		—			1,353			(145,112	)		(35,980	)		(9,509	)		—		—			2,390			(43,099	)
Net premiums earned		196,591			77,135			—		—			1,353			275,079			68,541			19,302			—		—			—			87,843
Net income from investment portfolio		5,261			933			—		4,059			3,799			14,052			880			336			—		1,495			2,727			5,438
Policy fee income		2,106			856			—		—			—			2,962			712			258			—		—			—			970
Other		3,420			1,130			9,849		1,316			(12,213	)		3,502			521			175			5,134		560			(5,767	)		623
Total revenue		207,378			80,054			9,849		5,375			(7,061	)		295,595			70,654			20,071			5,134		2,055			(3,040	)		94,874
Expenses:
Losses and loss adjustment expenses		110,008			52,976			—		—			1,348			164,332			33,439			12,312			—		—			—			45,751
Amortization of deferred policy acquisition costs		43,906			20,541			—		—			—			64,447			12,747			4,637			—		—			—			17,384
Other policy acquisition expenses		2,170			3,071			—		—			(114	)		5,127			4,824			1,041			—		—			(184	)		5,681
Stock-based compensation expense																			761			367			—		1,214			—			2,342
Interest expense		—			91			972		4,950			(270	)		5,743			—			90			482		1,752			(245	)		2,079
Depreciation and amortization		56			942			1,737		711			(1,841	)		1,605			20			288			587		176			(633	)		438
Debt conversion expense		—			—			—		1,273			—			1,273
Personnel and other operating expenses		17,317			21,007			3,332		8,901			(6,184	)		44,373			5,058			5,122			1,201		1,694			(1,978	)		11,097
Total expenses		173,457			98,628			6,041		15,835			(7,061	)		286,900			56,849			23,857			2,270		4,836			(3,040	)		84,772
Income (loss) before income taxes	$	33,921		$	(18,574	)	$	3,808	$	(10,460	)	$	—		$	8,695		$	13,805		$	(3,786	)	$	2,864	$	(2,781	)	$	—		$	10,102
Total revenue from non-affiliates ~~(c)~~(d)	$	206,743		$	80,893		$	8,833	$	4,641								$	70,200		$	20,379		$	4,795	$	1,524
Gross premiums written	$	323,490		$	161,602													$	80,988		$	44,890

(a)

Other revenue under real estate primarily consisted of rental income from investment properties.

(b)

Other revenue under corporate and other primarily consisted of revenue from marina business.

(c)

~~Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.~~

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

HCPCI

Insurance

TypTap

Real

Corporate/

Reclassification/

For Nine Months Ended September 30, 2020

Operations

Group

Estate (a)

Other (b)

Elimination

Consolidated

Revenue:

Gross premiums earned (c)

$
255,273

$
54,829

$
—

$
—

$
(3,240
)

$
306,862

Premiums ceded

(93,466
)

(19,078
)

—

—

3,240

(109,304
)
Net premiums earned

161,807

35,751

—

—

—

197,558

Net income (loss) from investment portfolio

3,787

383

3

(1,714
)

(1,024
)

1,435

Policy fee income

1,987

584

—

—

—

2,571

Other

1,431

87

44,331

1,695

(8,984
)

38,560

Total revenue

169,012

36,805

44,334

(19
)

(10,008
)

240,124

Expenses:

Losses and loss adjustment expenses

97,621

22,043

—

—

—

119,664

Amortization of deferred policy acquisition costs

27,103

9,222

—

—

—

36,325

Other policy acquisition expenses

1,789

1,419

—

—

—

3,208

Interest expense

—

1

1,434

8,090

(679
)

8,846

Depreciation and amortization

63

820

1,862

466

(1,793
)

1,418

Loss on repurchases of convertible senior notes

—

—

—

150

—

150

Loss on extinguishment of debt

—

—

98

—

—

98

Personnel and other operating expenses

16,161

13,244

3,982

10,548

(7,536
)

36,399

Total expenses

142,737

46,749

7,376

19,254

(10,008
)

206,108

Income (loss) before income taxes

$
26,275

$
(9,944
)

$
36,958

$
(19,273
)

$
—

$
34,016

Total revenue from non-affiliates (d)

$
167,891

$
37,421

$
42,907

$
(996
)

Gross premiums written

$
302,142

$
62,708

~~(a)~~

~~Other revenue under real estate primarily consisted of rental income from investment properties.~~

~~(b)~~

~~Other revenue under corporate and other primarily consisted of revenue from restaurant and marina businesses.~~

~~(c)~~

Gross premiums earned consist of $~~252,033~~102,131 from HCPCI and $~~3,240~~2,390 from a reinsurance company.

(d)

Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.

The following table presents segment assets reconciled to the Company’s total assets inon the consolidated balance sheets:


	September 30,			December 31,			March 31,			December 31,
	2021			2020			2022			2021
Segments:
HCPCI Insurance Operations	$	616,948		$	648,600		$	637,294		$	676,509
TypTap Group		294,931			157,581			403,557			369,600
Real Estate Operations		129,198			128,383			128,067			127,651
Corporate and Other		61,629			29,022			74,145			65,349
Consolidation and Elimination		(26,592	)		(22,273	)		(67,813	)		(62,252	)
Total assets	$	1,076,114		$	941,313		$	1,175,250		$	1,176,857

3830

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 1514 -- Leases

The table below summarizes the Company’s right-of-use (“ROU”) assets and corresponding liabilities for operating and finance leases:


	September 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
Operating leases:
ROU Assets	$	2,576	$	4,002	$	2,673	$	2,204
Liabilities	$	2,578	$	4,014	$	2,662	$	2,203
Finance leases:
ROU Assets	$	86	$	79	$	86	$	86
Liabilities	$	36	$	43	$	26	$	31

The Company’s lease of office space in India for its information technology operations expired in January 2022 and a new lease agreement was entered into effective February 2022 with an initial term of nine years.

The following table summarizes the Company’s operating and finance leases in which the Company is a lessee:


		Renewal	Other Terms and
Class of Assets	Initial Term	Option	Conditions
Operating lease:
Office equipment	1 to 6351 months	Yes	(a), (b)
Office space	3 to 109 years	Yes	(b), (c)
Finance lease:
Office equipment	3 to 5 years	Not applicable	(d)

(a)

At the end of the lease term, the Company can purchase the equipment at fair market value.

(b)

There are no variable lease payments.

(c)

Rent escalation provisions exist.

(d)

There is a bargain purchase option.

As of ~~September 30, 2021,~~March 31, 2022, maturities of lease liabilities were as follows:


	Leases				Leases
	Operating		Finance		Operating		Finance
Due in 12 months following September 30,
2021	$	1,464	$	20
Due in 12 months following March 31,
2022		1,188		15	$	1,509	$	17
2023		0		2		565		9
2024						101		1
2025						106		0
2026						112		0
Thereafter						481		0
Total lease payments		2,652		37		2,874		27
Less: interest and foreign taxes		74		1
Less: interest						212		1
Total lease obligations	$	2,578	$	36	$	2,662	$	26

3931

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The following table provides quantitative information with regards to the Company’s operating and finance ~~leases.~~leases:


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2021		2020		2021		2020		2022			2021
Lease costs:
Finance lease costs:
Amortization – ROU assets*	$	4	$	4	$	13	$	13	$	5		$	4
Interest expense		0		1		1		2		—			1
Operating lease costs*		386		404		1,231		560		374			454
Short-term lease costs*		100		44		250		135		110			37
Total lease costs	$	490	$	453	$	1,495	$	710	$	489		$	496
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – finance leases					$	1	$	1	$	—		$	1
Operating cash flows – operating leases					$	1,237	$	566	$	372		$	458
Financing cash flows – finance leases					$	14	$	13	$	5		$	4

	September 30,								March 31,
	2021								2022
Weighted-average remaining lease term:
Finance leases (in years)		3.0								2.8
Operating leases (in years)		2.6								4.4
Weighted-average discount rate:
Finance leases (%)		3.5								3.5	%
Operating leases (%)		2.8								3.1	%

* Included in other operating expenses ofon the consolidated statements of income.

The following table summarizes the Company’s operating leases in which the Company is a lessor:


		Renewal	Other Terms and
Class of Assets	Initial Term	Option	Conditions
Operating lease:
Office space	1 to3 years	Yes	(e)
Retail space	3 to 20 years	Yes	(e)
Boat docks/wet slips	1 to 12 months	Yes	(e)

(e)

There are no purchase options.

Note 1615 -- Income Taxes

During the three months ended ~~September 30,~~March 31, 2022 and 2021, the Company recorded approximately $~~1,636~~1,210 ~~of income tax benefit, which resulted in an effective tax rate of~~ ~~25.2%. During the three months ended September 30, 2020, the Company recorded approximately~~and $~~6,146~~3,257, respectively, of income taxes, which resulted in an effective tax ~~rate~~rates of ~~28.5~~30.2%. and 32.2%, respectively. The decrease in the effective tax rate as compared with the corresponding period in the prior year was primarily attributable to the ~~non-deductibility~~recognition of ~~certain executive compensation during~~tax benefits attributable to restricted stock that vested in February 2022, offset by the ~~three months ended September 30, 2020. During the nine months ended September 30, 2021 and 2020, the Company recorded approximately $2,888~~ ~~and $9,143, respectively, of income taxes, which resulted in effective tax rates of~~ ~~33.2% and~~ ~~26.9%, respectively. The increase in the effective~~increased Florida corporate tax rate ~~in 2021 as compared with the corresponding period in the prior year was primarily attributable to an increase in non-deductible compensation expense related to~~

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

~~restricted stock granted to certain executives.~~effective January 1, 2022. The Company’s estimated annual effective tax rate differs from the statutory federal tax rate due to state and foreign income taxes as well as certain nondeductible and tax-exempt items.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 1716 -- Earnings Per Share

U.S. GAAP requires the Company to use the two-class method in computing basic earnings per share since holders of the Company’s restricted stock have the right to share in dividends, if declared, equally with common stockholders. These participating securities affect the computation of both basic and diluted earnings per share during periods of net income or loss. For a majority-owned subsidiary, its basic and diluted earnings per share are first computed separately. Then, the Company’s proportionate share in that majority-owned subsidiary’s earnings is added to the computation of both basic and diluted earnings per share at a consolidated level.

A summary of the numerator and denominator of the basic and diluted earnings per common share is presented ~~below.~~below:

Three Months Ended

Three Months Ended

September 30, 2021

September 30, 2020

Loss

Shares (a)

Per Share

Income

Shares (a)

Per Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

Net (loss) income

$
(4,868
)

$
15,390

Less: Net income attributable to
   redeemable noncontrolling interest

(2,202
)

—

Less: TypTap Group's net loss attributable
   to non-HCI common stockholders and
   TypTap Group's participating securities

774

—

Net (loss) income attributable to HCI

(6,296
)

15,390

Less: Loss (income) attributable to
   participating securities

537

(865
)

Basic (Loss) Earnings Per Share:

(Loss) income allocated to common
   stockholders

(5,759
)

8,023

$
(0.72
)

14,525

7,356

$
1.97

Effect of Dilutive Securities:

Stock options*

0

0

—

37

Convertible senior notes* (b)

0

0

1,903

2,284

Diluted (Loss) Earnings Per Share:

(Loss) income available to common
   stockholders and assumed conversions

$
(5,759
)

8,023

$
(0.72
)

$
16,428

9,677

$
1.70


	Three Months Ended							Three Months Ended
	March 31, 2022							March 31, 2021
	Income			Shares (a)		Per Share		Income			Shares (a)		Per Share
	(Numerator)			(Denominator)		Amount		(Numerator)			(Denominator)		Amount
Net income	$	2,791						$	6,845
Less: Net income attributable to redeemable noncontrolling interest		(2,248	)						(794	)
Less: TypTap Group’s net loss attributable to non-HCI common stockholders and TypTap Group’s participating securities		360							97
Net income attributable to HCI		903							6,148
Less: Income attributable to participating securities		(52	)						(18	)
Basic Earnings Per Share:
Income allocated to common stockholders		851			9,479	$	0.09		6,130			7,474	$	0.82
Effect of Dilutive Securities:
Stock options		—			135				—			96
Convertible senior notes*		—			—				1,312			2,288
Warrants		—			153				—			72
Diluted Earnings Per Share:
Income available to common stockholders and assumed conversions	$	851			9,767	$	0.09	$	7,442			9,930	$	0.75


(a)	Shares in thousands.
~~(b)~~	~~See~~ ~~Adoption of New Accounting Standards~~ ~~under Note 2 -- “Summary of Significant Accounting Policies” for additional information.~~
*	For the three months ended ~~September 30, 2021, stock options and~~March 31, 2022, convertible senior notes were excluded due to anti-dilutive effect.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Nine Months Ended

Nine Months Ended

September 30, 2021

September 30, 2020

Income

Shares (a)

Per Share

Income

Shares (a)

Per Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

Net income

$
5,807

$
24,873

Less: Net income attributable to redeemable
   noncontrolling interest

(5,175
)

—

Less: TypTap Group's net loss attributable to
   non-HCI common stockholders and
   TypTap Group's participating securities

1,191

—

Net income attributable to HCI

1,823

24,873

Less: Income attributable to participating
   securities

(37
)

(1,309
)

Basic Earnings Per Share:

Income allocated to common stockholders

1,786

7,676

$
0.23

23,564

7,350

$
3.21

Effect of Dilutive Securities:

Stock options

0

182

—

17

Convertible senior notes* (b)

0

0

5,787

2,330

Warrants

0

234

—

—

Diluted Earnings Per Share:

Income available to common stockholders
   and assumed conversions

$
1,786

8,092

$
0.22

$
29,351

9,697

$
3.03

Note 17 -- Redeemable Noncontrolling Interest

The following table summarizes the activity of redeemable noncontrolling interest during the three months ended March 31, 2022 and 2021:


	2022			2021
Balance at January 1	$	89,955		$	0
Initial proceeds from Centerbridge		0			100,000
Increase (decrease):
Proceeds allocated to warrants*		0			(9,217	)
Issuance costs		0			(6,262	)
Issuance costs allocated to warrants*		0			577
Accrued cash dividends		1,342			458
Accretion - increasing dividend rates		906			336
Dividends paid		(2,508	)		0
Balance at March 31	$	89,695		$	85,892

*Net decrease related to warrants of $


~~(a)~~8,640.	~~Shares in thousands.~~
~~(b)~~	~~See~~ ~~Adoption of New Accounting Standards~~ ~~under Note 2 -- “Summary of Significant Accounting Policies” for additional information.~~
*	~~For the nine months ended September 30, 2021, convertible senior notes were excluded due to anti-dilutive effect.~~

For the three months ended March 31, 2022 and 2021, net income attributable to redeemable noncontrolling interest was $2,248 and $794, respectively, consisting of accrued cash dividends of $1,342 and $458, respectively, and accretion related to increasing dividend rates of $906 and $336, respectively.

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

~~Note 19 -- Equity~~

~~Stockholders’ Equity~~

~~Common Stock~~

~~The Company’s 2020 stock repurchase plan was considered to be expired and there was no new stock repurchase plan approved by the Board of Directors during 2021.~~

~~On December 19, 2019, the Board of Directors decided to extend the term~~2017 issuance of the ~~2019 stock repurchase plan to March 15, 2020. On March 13, 2020,~~4.25% Convertible Senior Notes, was physically settled with the ~~Board approved a new stock repurchase plan for 2020 to repurchase up to $20,000~~ ~~of the Company’s common shares before commissions and fees. During the three months ended September 30, 2020, the Company repurchased and retired a total~~delivery from Societe Generale of ~~457~~ ~~shares at a weighted average price per share of $43.76~~ ~~under this authorized repurchase plan. The total cost of shares repurchased, inclusive of fees and commissions, during the three months ended September 30, 2020 was $~~20 ~~or $43.79~~ ~~per share. During the nine months ended September 30, 2020, the Company repurchased and retired a total of~~ ~~129,142~~ ~~shares at a weighted average price per share of $39.93~~ ~~under this authorized repurchase plan. The total cost of shares repurchased, inclusive of fees and commissions, during the nine months ended September 30, 2020 was $5,161~~ ~~or $39.96~~ ~~per share.~~

On ~~July 7, 2021, the Company’s Board of Directors declared a quarterly dividend of $0.40~~ ~~per common share. The dividends were paid on~~ ~~September 17, 2021~~ ~~to stockholders of record on~~ ~~August 20, 2021~~.

~~Warrants~~

~~At September 30, 2021, there were warrants outstanding and exercisable to purchase~~ ~~750,000~~191,100 shares of ~~HCI~~HCI’s common ~~stock. These warrants were issued by HCI~~stock to the ~~Lead Investor described in Note 18 -- “Redeemable Noncontrolling Interest.”~~Company.

Noncontrolling Interests

~~According to its amended Articles of Incorporation, TTIG is authorized to issue~~ ~~183~~ ~~million shares of common stock with a par value of $0.001~~ ~~per share, and~~ ~~37,502,000~~ ~~shares of preferred stock. In February 2021, TTIG issued~~ 10 ~~million shares of Series A Preferred Stock (see Note 18 -- “Redeemable Noncontrolling Interest”).~~ At ~~September 30, 2021,~~March 31, 2022, there were ~~81,278,175~~81,132,790 shares of TTIG’s common stock outstanding, of which ~~6,278,175~~6,132,790 shares were not owned by HCI.

In ~~May 2021,~~February 2022, TTIG repurchased and retired a total of ~~52,015~~21,744 shares of its common stock surrendered by its employees to satisfy payroll tax liabilities associated with the vesting of restricted shares. The total cost of purchasing noncontrolling interests was $58127.

Note 2019 -- Stock-Based Compensation

2012 Omnibus Incentive Plan

The Company currently has outstanding stock-based awards granted under the Plan which is currently active and available for future grants. At ~~September 30, 2021,~~March 31, 2022, there were ~~1,117,275~~1,111,240 shares available for grant.

45Stock Options

Stock options granted and outstanding under the incentive plan vest over a period of four years and are exercisable over the contractual term of ten years.

A summary of the stock option activity for the three months ended March 31, 2022 and 2021 is as follows (option amounts not in thousands):


					Weighted
			Weighted		Average
			Average		Remaining	Aggregate
	Number of		Exercise		Contractual	Intrinsic
	Options		Price		Term	Value
Outstanding at January 1, 2022		440,000	$	45.25	6.6 years	$	18,119
Outstanding at March 31, 2022		440,000	$	45.25	6.3 years	$	10,494
Exercisable at March 31, 2022		357,500	$	44.23	6.0 years	$	8,891

Outstanding at January 1, 2021		440,000	$	45.25	7.6 years	$	3,113
Outstanding at March 31, 2021		440,000	$	45.25	7.3 years	$	13,464
Exercisable at March 31, 2021		275,000	$	43.40	6.8 years	$	8,924

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

~~Stock Options~~There were

~~Stock~~0 options ~~granted and outstanding under the incentive plans vest over periods ranging from immediately vested to~~ ~~five years~~ ~~and are exercisable over the contractual term of~~ ~~ten years~~.

~~A summary of the stock option activity for~~exercised during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020 is as follows (option amounts not in thousands):~~

Weighted

Weighted

Average

Average

Remaining

Aggregate

Number of

Exercise

Contractual

Intrinsic

Options

Price

Term

Value

Outstanding at January 1, 2021

440,000

$
45.25

7.6 years

$
3,113

Outstanding at March 31, 2021

440,000

$
45.25

7.3 years

$
13,464

Outstanding at June 30, 2021

440,000

$
45.25

7.1 years

$
23,883

Outstanding at September 30, 2021

440,000

$
45.25

6.8 years

$
29,238

Exercisable at September 30, 2021

275,000

$
43.40

6.3 years

$
18,782

Outstanding at January 1, 2020

340,000

$
43.21

7.9 years

$
1,657

Granted

110,000

$
48.00

Exercised

(10,000
)

$
6.30

Outstanding at March 31, 2020

440,000

$
45.25

8.3 years

$
—

Outstanding at June 30, 2020

440,000

$
45.25

8.1 years

$
1,184

Outstanding at September 30, 2020

440,000

$
45.25

7.8 years

$
2,321

Exercisable at September 30, 2020

165,000

$
42.17

7.0 years

$
1,334

~~The following table summarizes information about options exercised for the three and nine months ended September 30, 2021 and 2020 (option amounts not in thousands):~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Options exercised

—

—

—

10,000

Total intrinsic value of exercised options

$
—

$
—

$
—

$
288

Tax benefits realized

$
—

$
—

$
—

$
71

2021. For the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company recognized $~~221~~184 and $~~300~~223, respectively, of compensation expense which was included in general and administrative personnel expenses. ~~For the nine months ended September 30, 2021 and 2020, the Company recognized $663~~ ~~and $880, respectively, of compensation expense.~~ Deferred tax benefits related to stock options were $30 and $191 for the three months ended ~~September 30,~~March 31, 2022 and 2021, respectively. At March 31, 2022 and ~~2020, respectively, and~~December 31, 2021, there was $4821 and $57 ~~for the nine months ended September 30, 2021 and 2020, respectively. At September 30, 2021 and December 31, 2020, there was $1,226~~ ~~and $1,889~~1,005, respectively, of unrecognized compensation expense related to nonvested stock options. The Company expects to recognize the remaining compensation expense over a weighted-average period of ~~1.8~~1.5 years.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

~~The following table provides assumptions used in the Black-Scholes option-pricing model to estimate the fair value of the stock options granted during the nine months ended September 30, 2020:~~


	~~2020~~
~~Expected dividend yield~~		~~3.48~~	%
~~Expected volatility~~		~~38.68~~	%
~~Risk-free interest rate~~		~~1.63~~	%
~~Expected life (in years)~~		5

Restricted Stock Awards

From time to time, the Company has granted and may grant restricted stock awards to ~~its~~certain executive officers, other employees and nonemployee directors in connection with their service to the Company. The terms of the Company’s outstanding restricted stock grants may include service, performance and market-based conditions. The determination of fair value with respect to the awards containing only service-based conditions is based on the market value of the Company’s common stock on the grant date. For awards with market-based conditions, the fair value is determined using a Monte Carlo simulation method, which calculates many potential outcomes for an award and then establishes fair value based on the most likely outcome.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

Information with respect to the activity of unvested restricted stock awards during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ is as follows:


	Number of			Weighted		Number of			Weighted
	Restricted			Average		Restricted			Average
	Stock			Grant Date		Stock			Grant Date
						Awards			Fair Value
Nonvested at January 1, 2022							679,997		$	39.72
Granted							4,000		$	70.58
Vested							(50,667	)	$	50.68
Forfeited							(3,265	)	$	45.85
Nonvested at March 31, 2022							630,065		$	39.00
	Awards			Fair Value
Nonvested at January 1, 2021		423,787		$	43.79		423,787		$	43.79
Granted		548,086		$	36.95		548,086		$	36.95
Vested		(41,250	)	$	42.18		(41,250	)	$	42.18
Cancelled		(141,600	)	$	43.76		(141,600	)	$	43.76
Forfeited		(2,050	)	$	45.67		(2,050	)	$	45.67
Nonvested at March 31, 2021		786,973		$	39.11		786,973		$	39.11
Granted		3,000		$	76.00
Vested		(68,541	)	$	43.80
Cancelled		(1,160	)	$	45.96
Forfeited		(9,060	)	$	46.44
Nonvested at June 30, 2021		711,212		$	38.71
Granted		2,340		$	96.60
Forfeited		(38,855	)	$	38.05
Nonvested at September 30, 2021		674,697		$	38.95

Nonvested at January 1, 2020		396,760		$	41.71
Granted		45,000		$	44.97
Vested		(31,250	)	$	40.97
Forfeited		(7,138	)	$	42.60
Nonvested at March 31, 2020		403,372		$	42.12
Granted		145,000		$	45.59
Vested		(104,926	)	$	41.16
Forfeited		(5,220	)	$	43.75
Nonvested at June 30, 2020		438,226		$	43.48
Granted		2,680		$	54.36
Vested		(625	)	$	41.02
Forfeited		(2,369	)	$	45.60
Nonvested at September 30, 2020		437,912		$	43.54

4836

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The Company recognized compensation expense related to restricted stock, which is included in general and administrative personnel expenses, of $~~2,039~~3,268 and $~~1,862~~1,905 for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $6,280~~ ~~and $5,142~~ ~~for the nine months ended September 30, 2021 and 2020,~~ respectively. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, there was approximately $~~21,628~~15,859 and $~~13,666~~18,995, respectively, of total unrecognized compensation expense related to nonvested restricted stock arrangements. The Company expects to recognize the remaining compensation expense over a weighted-average period of ~~2.9~~2.2 years. The following table summarizes information about deferred tax benefits recognized and tax benefits realized related to restricted stock awards and paid dividends, and the fair value of vested restricted stock for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Deferred tax benefits recognized

$
420

$
353

$
879

$
956

Tax benefits realized for restricted stock
and paid dividends

$
70

$
47

$
1,482

$
1,286

Fair value of vested restricted stock

$
—

$
26

$
4,742

$
5,625


	Three Months Ended
	March 31,
	2022		2021
Deferred tax benefits recognized (derecognized)	$	652	$	(36	)
Tax benefits realized for restricted stock and paid dividends	$	402	$	55
Fair value of vested restricted stock	$	2,568	$	1,740

In February 2021, the Company cancelled 141,600 shares of restricted stock for employees who transitioned to TypTap ~~Group (See Note 1 -- “Nature of Operations”).~~Group. In exchange, these employees received replacement restricted stock issued under TTIG’s equity incentive plan.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

Subsidiary Equity Plan

On February 26, 2021, TTIG’s Board of Directors approved the 2021 Equity Incentive Plan (the “2021 Plan”) which is an incentive plan denominated in TTIG’s common shares. The 2021 Plan provides for broad-based equity awards to employees and nonemployee directors of TypTap Group. The maximum number of shares that may be issued under the 2021 Plan is ~~7,000,000~~ ~~shares. In February 2021, TTIG issued a total of~~ ~~5,749,300~~ ~~shares of restricted stock to the employees who transitioned to TypTap Group.~~ For the three months ended ~~September 30,~~March 31, 2022 and 2021, TypTap Group recognized compensation expense related to ~~restricted stock~~its stock-based awards of $~~472~~885 and $215, respectively. At March 31, 2022 and ~~for the nine months ended September 30, 2021, TypTap Group recognized compensation expense related to restricted stock of $2,286~~.

On September 27, 2021, TTIG’s Board of Directors terminated the 2021 Plan and replaced it with the 2021 Omnibus Incentive Plan (the “2021 Omnibus Plan”). The initial maximum number of shares that may be issued under the 2021 Omnibus Plan is ~~7,700,000~~ ~~shares. At September 30,~~December 31, 2021, there was ~~approximately~~ $~~4,846~~10,189 and $11,230, respectively, of ~~total~~ unrecognized compensation expense related to nonvested restricted ~~stock.~~stock and stock options.

As described in Note 54 -- “Investments” under Limited Partnership Investments, the Company is contractually committed to capital contributions for limited partnership interests. At ~~September 30, 2021,~~March 31, 2022, there was an aggregate unfunded balance of $~~13,980~~7,750.

~~Note 22 -- Related Party Transactions~~

~~On February 12, 2021, the Company committed to provide a revolving line of credit with borrowing capacity of up to $60,000~~ to TTIG and the credit line would be available until the earlier of June 30, 2022 and the securing of alternative financing. This commitment has ended on February 26, 2021 after the investment transaction described in Note 18 -- “Redeemable Noncontrolling Interest.”

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

~~Note 23 -- Subsequent Events~~

~~On October 1, 2021, TTIG granted options to purchase an aggregate of~~ ~~6,450,000~~ ~~shares of its common stock at an exercise price of $~~23 ~~per share to its chief executive officer, Paresh Patel, and certain other executives. The options will have a~~ ~~10-year~~ ~~term and were granted pursuant to TTIG's 2021 Omnibus Plan. The options will vest over a~~ ~~four-year~~ ~~period, so long as the optionees remain employed by TTIG. TTIG is currently in the process of determining the grant date fair value of the options.~~

On October 5, 2021, a significant portion of market-based restricted stock awards that were granted in February 2021 met the condition for vesting. As a result, the expensing of an unrecognized balance of $~~7,130~~ ~~will be accelerated and the expense related to these awards will be recognized over the next~~ ~~twelve months~~.

On ~~October 15, 2021, the Company’s Board of Directors declared a quarterly dividend of $0.40~~ ~~per common share. The dividends are payable on~~ ~~December 17, 2021~~ ~~to stockholders of record on~~ ~~November 19, 2021.~~

~~During the months of October and November 2021, an additional $27,846~~ ~~and $4,340, respectively, of aggregate principal amount of the~~ ~~4.25% Convertible Notes was converted for~~ ~~458,533~~ ~~and~~ ~~71,464~~ ~~shares, respectively, of HCI's common stock and aggregate cash consideration of $481. The Company recognized debt conversion expense of $481~~ ~~for certain of the conversions.~~FIGA Assessments

In October 2021, the Florida Office of Insurance Regulation approved a 2022 assessment for the Florida Insurance Guaranty Association (“FIGA”) which is necessary to secure funds for the payment of covered claims of insolvent insurance companies. The 2022 FIGA assessment ~~will be~~is levied at 0.70% on collected premiums of all

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

covered lines of business except auto insurance. The surcharge, which is collectible from a policyholder, will be assessed on new and renewal policies with effective dates beginning January 1, 2022 through December 31, 2022.

In March 2022, the Florida Office of Insurance Regulation approved an assessment for FIGA which is necessary to secure funds for the payment of covered claims relating to the liquidation of one insurance company. The FIGA assessment is levied at 1.3% on collected premiums of all covered lines of business except auto insurance. The surcharge, which is collectible from a policyholder, will be assessed on new and renewal policies with effective dates beginning ~~January~~July 1, 2022 through ~~December 31, 2022.~~ June 30, 2023.

The Company’s insurance subsidiaries, as member insurers, ~~will be~~are required to collect and remit the pass-through assessments to FIGA on a quarterly basis. As of March 31, 2022, the FIGA assessments payable by the Company were $983.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion under this Item 2 in conjunction with our consolidated financial statements and related notes and information included elsewhere in this quarterly report on Form 10-Q and in our Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March ~~12, 2021.~~10, 2022. Unless the context requires otherwise, as used in this Form 10-Q, the terms “HCI,” “we,” “us,” “our,” “the Company,” “our company,” and similar references refer to HCI Group, Inc., a Florida corporation incorporated in 2006, and its subsidiaries. All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in whole dollars unless specified otherwise.

In addition to historical information, this quarterly report contains forward-looking statements as defined under federal securities laws. Such statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements. Typically, forward-looking statements can be identified by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions. The important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include but are not limited to the effects of governmental regulation; changes in insurance regulations; the frequency and extent of claims; uncertainties inherent in reserve estimates; catastrophic events; changes in the demand for, pricing of, availability of or collectability of reinsurance; restrictions on our ability to change premium rates; increased rate pressure on premiums; the severity and impact of the novel coronavirus (“COVID-19”) pandemic; and other risks and uncertainties detailed herein and from time to time in our SEC reports.

HCI Group, Inc. is a Florida-based InsurTech company with operations in property and casualty insurance, reinsurance, real estate and information technology. After the reorganization of our business in the first quarter of 2021, we now manage our operations in the following organizational segments, based on managerial emphasis and evaluation of financial and operating performances:

For the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ revenues from HCPCI insurance operations before intracompany elimination represented ~~73.9%~~69.8% and ~~59.1%~~77.7%, respectively, and revenues from TypTap Group represented ~~24.0%~~28.3% and ~~12.6%, respectively, of total revenues of all operating segments. For the nine months ended September 30, 2021 and 2020, revenues from HCPCI insurance operations before intracompany~~

~~elimination represented 76.4% and 73.8%, respectively, and revenues from TypTap Group represented 20.7% and 12.7%~~17.2%, respectively, of total revenues of all operating segments. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, HCPCI insurance operations’ total assets represented ~~60.2%~~55.6% and ~~68.9%~~58.7%, respectively, and

TypTap Group’s total assets represented ~~26.3%~~32.3% and ~~16.7%~~29.3%, respectively, of the combined assets of all operating segments. See Note 1413 -- “Segment Information” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

HCPCI provides various forms of residential insurance products such as homeowners insurance, fire insurance, flood insurance and wind-only insurance. HCPCI is authorized to write residential property and casualty insurance in the states of Arkansas, California, Connecticut, Florida, Maryland, Massachusetts, New Jersey, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina and Texas. Currently, Florida is HCPCI’s primary market.

~~Effective January~~In 2021, HCPCI began providing ~~69.5%~~ quota share reinsurance on all in-force, new and renewal policies issued by United ~~Property & Casualty Insurance Company,~~in the Northeast Region. HCPCI began renewing and/or replacing United policies in two states in December 2021 and a ~~subsidiary~~third state in January 2022.

In February 2022, HCPCI entered into another reinsurance agreement with United where HCPCI provides 85% quota share reinsurance on all of ~~United Insurance Holdings Corporation (“United”)~~United’s personal lines insurance business in the states of ~~Connecticut, New Jersey, Massachusetts~~Georgia, North Carolina, and ~~Rhode Island. In exchange,~~South Carolina (collectively “Southeast Region”) from December 31, 2021 through May 31, 2022. Under this agreement, HCPCI paid United ana catastrophe allowance of ~~$4,400,000 towards previously purchased catastrophe reinsurance~~9% of premium and a provisional ceding commission of 25% of premium. That percentage ~~can~~could increase up to ~~31.5%~~32% depending on the direct loss ratio results from the reinsured business.

We and United agreed to postpone the policy replacement date under the renewal rights agreement to a later date and we, through HCPCI and TypTap, entered into a new quota share reinsurance agreement in June 2021 to provide 100% reinsurance on all of United’s in-force, new and renewal policies in those states from June 1, 2021 through May 31, 2022. Under the new agreement, HCPCI assumes 50% of the business and pays United a ceding commission of 24% of premium. Annual premiums from the total assumed business approximate $120,000,000. HCPCI will receive 50% of the total premiums.

We have a Bermuda domiciled wholly-owned reinsurance subsidiary, Claddaugh Casualty Insurance Company Ltd. We selectively retain risk in Claddaugh, reducing the cost of third-party reinsurance. Claddaugh fully collateralizes its exposure to HCPCI and TypTap by depositing funds into a trust account. Claddaugh may mitigate a portion of its risk through retrocession contracts. Currently, Claddaugh does not provide reinsurance to non-affiliates. Other auxiliary operations also include claim adjusting and processing services.

TypTap Insurance Group, Inc. ~~("TTIG"~~(“TTIG”), our majority-owned subsidiary, currently has four subsidiaries: TypTap Insurance Company (“TypTap”), TypTap Management Company, Exzeo USA, Inc., and Cypress Tech Development Company which also owns Exzeo Software Private Limited, a subsidiary domiciled in India. TTIG is primarily engaged in the property and casualty insurance business and is currently using in-house developed technology to collect and analyze claims and other supplemental data to generate savings and efficiency for its insurance operations.

TypTap, TTIG’s insurance subsidiary, has been the primary source of our organic growth in gross written premium since 2016. TypTap’s policies in force have increased from 6,721 in January 2018 to ~~48,897~~68,748 at ~~September 30, 2021.~~March 31, 2022. TypTap has been successful in using internally developed proprietary technology to underwrite, select and write policies ~~efficiently in Florida.~~efficiently. As of ~~October 26, 2021,~~April 20, 2022, TypTap has been approved to offer homeowners coverage in 1718 states outside of Florida. TypTap is currently operating in twelve states. In addition to the expansion in TypTap business, we also expect ~~future~~continued growth from the United policies assigned to TypTap through the renewal rights ~~agreement~~agreements acquired by HCI.

In ~~connection with the aforementioned new~~2021, TypTap began providing quota share ~~agreement with~~reinsurance on all in-force, new and renewal policies issued by United in the Northeast Region. TypTap ~~assumes 50% of the business. TypTap will receive approximately $60,000,000 of annual premiums~~began renewing and/or replacing United policies in two states in December 2021 and ~~pays~~ a ~~ceding commission of 24% of premium.~~third state in January 2022.

Our information technology operations include a team of experienced software developers with extensive knowledge in developing web-based products and applications for mobile ~~device.~~devices. The operations, which are in Tampa, Florida and Noida, India, are focused on developing cloud-based, innovative products orand services that support in-house operations as well as our third-party relationships with our agency partners and claim vendors. These products include SAMSTM, HarmonyTM, AtlasViewer® and ClaimColony®TM.

Our real estate operations consist of properties we own and use for our own operations and multiple properties we own and operate for investment purposes. Properties used in operations consist of one Tampa office building and ~~a secondary~~an insurance operations site in Ocala, Florida. Our investment properties include retail shopping centers, one office building, two marinas, and undeveloped land near TTIG’s headquarters in Tampa, Florida.

Activities of our holding company, HCI Group, Inc., plus other companies that do not meet the quantitative and qualitative thresholds for a reportable segment comprise the operations of this segment.

On October 1, 2021, TTIG granted options to purchase an aggregate of 6,450,000 shares of its common stock at an exercise price of $23 per share to its chief executive officer, Paresh Patel, and certain other executives. The options will have a 10-year term and were granted pursuant to TTIG's 2021 Omnibus Incentive Plan. The options will vest over a four-year period, so long as the optionees remain employed by TTIG. TTIG is currently in the process of determining the grant date fair value of the options.

~~On October 15, 2021,~~April 26, 2022, our Board of Directors declared a quarterly dividend of $0.40 per common share. The dividends are payable on ~~December~~June 17, ~~2021~~2022 to stockholders of record on ~~November 19, 2021.~~

During the months of October and November 2021, an additional $27,846,000 and $4,340,000, respectively, of aggregate principal amount of the 4.25% Convertible Notes was converted for 458,533 and 71,464 shares, respectively, of HCI's common stock and aggregate cash consideration of approximately $481,000. We recognized debt conversion expense of $481,000 for certain of the conversions.May 17, 2022.

The following table summarizes our results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (dollar amounts in thousands, except per share amounts):

Comparison of the Three Months Ended ~~September 30, 2021~~March 31, 2022 to the Three Months Ended ~~September 30, 2020~~March 31, 2021

Our results of operations for the three months ended ~~September 30, 2021~~March 31, 2022 reflect a net ~~loss~~income of approximately ~~$4,868,000~~$2,791,000 or ~~$0.72~~$0.09 diluted ~~loss~~earnings per share, compared with ~~a net income of~~ approximately ~~$15,390,000~~$6,845,000 or ~~$1.70~~$0.75 diluted earnings per share, for the three months ended ~~September 30, 2020.~~March 31, 2021. The quarter-over-quarter decrease was primarily due to a ~~one-time gain on involuntary conversion of $36,969,000 included in our 2020 results, a $10,921,000~~$26,953,000 increase in losses and loss adjustment expenses, a ~~$9,130,000~~net decrease in income from our investment portfolio (consisting of net investment income and net realized and unrealized gains or losses) of $6,460,000, a $6,449,000 increase in personnel and other operating expenses, and a $6,343,000 increase in policy acquisition and other underwriting ~~expenses, and a $1,530,000 increase in other operating~~ expenses, offset by an increase in net premiums earned of ~~$31,769,000, a $1,681,000 increase in other income,~~$37,920,000 and a ~~$1,192,000~~$1,478,000 decrease in interest expense.

Gross Premiums Earned on a consolidated basis for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were approximately ~~$149,809,000~~$178,925,000 and ~~$106,694,000,~~$130,942,000, respectively. HCPCI gross premiums earned were ~~$98,256,000~~$118,303,000 for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$86,840,000~~$102,131,000 for the three months ended ~~September 30, 2020. The increase included $29,046,000 of gross~~March 31, 2021. Gross premiums earned from the United insurance policies ~~assumed.~~assumed were $30,079,000 for the three months ended March 31, 2022 compared to $20,650,000 for the three months ended March 31, 2021. TypTap’s gross premiums earned were ~~$51,553,000~~$60,622,000 versus ~~$19,854,000~~$28,811,000 for the same comparative period with the increase due to a greater number of policies in force from the organic growth in TypTap’s business and from the business assumed from United beginning June 1, 2021.

Premiums Ceded for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were approximately ~~$55,577,000~~$53,162,000 and ~~$44,231,000,~~$43,099,000, respectively, representing ~~37.1%~~29.7% and ~~41.5%~~32.9%, respectively, of gross premiums earned. The ~~$11,346,000~~$10,063,000 increase was primarily attributable to higher reinsurance costs ~~for the~~effective June 1, 2021 ~~contract year~~ due to an increased overall reinsurance coverage amount as a result of premium growth and expansion. ~~Reinsurance costs were offset by a reduction in premiums ceded attributable to retrospective provisions under multi-year reinsurance agreements.~~

Our premiums ceded represent costs of reinsurance to cover losses from catastrophes that exceed the retention levels defined by our catastrophe excess of loss reinsurance contracts or to assume a proportional share of losses as defined in a quota share agreement. The rates we pay for reinsurance are based primarily on policy exposures reflected in gross premiums earned. Reinsurance costs can be decreased by a reduction in premiums ceded attributable to retrospective provisions under multi-year reinsurance contracts. For the three months ended ~~September 30, 2021,~~March 31, 2022, premiums ceded included a decrease of ~~$1,364,000~~$1,484,000 related to retrospective provisions compared with a decrease of $4,680,000 for the three months ended ~~September 30, 2020.~~March 31, 2021. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.”

Net Premiums Written for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ totaled approximately ~~$118,689,000~~$124,132,000 and ~~$72,220,000,~~$82,749,000, respectively. Net premiums written represent the premiums charged on policies issued during a fiscal period less any applicable reinsurance costs. The increase in ~~2021~~2022 resulted from an increase in gross premiums written from the United insurance policies assumed and the growth of TypTap business. We had approximately ~~156,000~~211,800 policies in force at ~~September 30, 2021~~March 31, 2022 (excluding policies assumed from United) as compared with approximately ~~157,000~~154,000 policies in force at ~~September 30, 2020.~~March 31, 2021.

Net Premiums Earned for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were approximately ~~$94,232,000~~$125,763,000 and ~~$62,463,000,~~$87,843,000, respectively, and reflect the gross premiums earned less reinsurance costs as described above.

The following is a reconciliation of our total Net Premiums Written to Net Premiums Earned for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (amounts in thousands):

Net Investment Income for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was approximately ~~$2,520,000~~$2,868,000 and ~~$1,832,000,~~$4,594,000, respectively. The ~~$688,000 increase~~$1,726,000 decrease was primarily attributable to a ~~$782,000~~$2,650,000 decrease in income from real estate investments, offset by a $993,000 increase in income from limited partnership ~~and real estate investments and a $491,000 increase in income from our investment in an unconsolidated joint venture, offset by a $505,000 decrease in interest income from fixed-maturity security~~ investments. See Net Investment Income (loss) under Note 54 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

Net Realized Investment ~~Gains~~Losses for the three months ended ~~September 30, 2021 and 2020~~March 31, 2022 were approximately ~~$1,232,000 and $177,000, respectively.~~$314,000 versus $1,113,000 of net realized investment gains for the three months ended March 31, 2021. The ~~$1,055,000 increase~~$1,427,000 decrease was primarily attributable to net gains from selling equity ~~securities.~~securities and other investments during 2021.

Net Unrealized Investment Losses for the three months ended ~~September 30,~~March 31, 2022 and 2021 were approximately ~~$1,869,000 versus~~$3,576,000 and $269,000, respectively. The net unrealized investment ~~gains of approximately $1,340,000~~loss for the three months ended ~~September 30, 2020. The decrease~~March 31, 2022 was primarily ~~due~~attributable to an overall decline in the ~~sales of~~ equity ~~securities~~market compared with ~~aggregate net gains during~~ the ~~quarter.~~three months ended March 31, 2021.

Our consolidated Losses and Loss Adjustment Expenses amounted to approximately ~~$62,664,000~~$72,704,000 and ~~$51,743,000~~$45,751,000 for the three months ended ~~September 30,~~March 31, 2022 and 2021, respectively. HCPCI losses and ~~2020, respectively.~~loss adjustment expenses were $43,995,000 for the three months ended March 31, 2022 compared to $33,439,000 for the three months ended March 31, 2021. The increase was primarily attributable to $4,197,000 of losses associated with growth in HCPCI’s Florida portfolio, a $6,070,000 net increase in losses attributable to the United policies assumed due to an increase in the number of policies assumed from United and weather-related losses incurred during the first quarter of 2022. Losses and loss adjustment expenses for TypTap were $28,988,000 versus $12,312,000 for the same comparative period. The increase was attributable to ~~additional losses associated with~~ the ~~growth~~greater number of TypTap policies in TypTap’s business during 2021 and was offset by lower third quarter 2021 losses at HCPCI when compared with 2020. TypTap experienced an additional $5,150,000 of losses related to growth in its homeowners business, $6,535,000 of losses from policies assumed from United, and $2,887,000 in combined losses from hurricanes Henri and Ida. HCPCI third quarter 2021 losses were comparatively lower due to 2020 losses of $17,679,000 from Hurricane Sally, $4,850,000 of losses from policies acquired from Anchor Property & Casualty Insurance Company, offset by third quarter 2021 losses of $6,535,000 from policies assumed from United, and $2,305,000 resulting from re-estimation of losses from Hurricane Sally. Both companies recorded additional losses during the quarter totaling a combined $4,165,000 from re-assessing losses from Tropical Storm Eta, a fourth quarter 2020 event.force. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”

Policy Acquisition and Other Underwriting Expenses for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were approximately ~~$23,340,000~~$29,408,000 and ~~$14,210,000~~$23,065,000 on a consolidated basis, respectively, and primarily reflect the amortization of deferred acquisition costs such as commissions payable to agents for production and renewal of policies, catastrophe allowance payable to United, and premium taxes. Policy acquisition expenses for HCPCI insurance operations were ~~$13,035,000~~$19,765,000 for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$10,593,000~~$17,571,000 for the three months ended ~~September 30, 2020.~~March 31, 2021. The increase was due to amortization of increased costs associated with the increase in the number of policies assumed from United. TypTap Group policy acquisition expenses were ~~$10,360,000~~$9,705,000 versus ~~$4,067,000~~$5,678,000 for the same comparative period, with the increase attributable to amortization of increased commission costs related to the growth of TypTap’s policies in force over the past 12 months and the policies assumed from United.

~~Debt Conversion Expense~~ ~~for the three months ended September 30, 2021 was approximately $1,273,000, representing costs associated with certain of the conversions of our 4.25% convertible senior notes.~~

General and Administrative Personnel Expenses for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were approximately ~~$11,537,000~~$14,034,000 and ~~$9,871,000,~~$9,650,000, respectively. Our general and administrative personnel expenses include salaries, wages, payroll taxes, stock-based compensation expenses, and employee benefit costs. Factors such as merit increases, changes in headcount, and periodic restricted stock grants, among others, cause fluctuations in this expense. In addition, our personnel expenses are decreased by the capitalization of payroll costs related to a project to develop software for internal use and the payroll costs associated with the processing and settlement of certain catastrophe claims which are recoverable from reinsurers under reinsurance contracts. The period-over-period increase of ~~$1,666,000~~$4,384,000 was primarily attributable to ~~higher~~increased stock-based compensation expense, an increase in the headcount of temporary and full-time employees, and merit increases for non-executive employees effective in late February ~~2021.~~2022.

~~Income Tax Benefit~~Interest Expense for the three months ended ~~September 30,~~March 31, 2022 and 2021 was approximately ~~$1,636,000~~$601,000 and $2,079,000, respectively. The decrease primarily resulted from conversions of our 4.25% convertible senior notes during the second half of 2021.

Income Tax Expense for the three months ended March 31, 2022 and 2021 was approximately $1,210,000 and $3,257,000, respectively, for state, federal, and foreign income taxes resulting in an effective tax rate of ~~25.2%. This compared with approximately $6,146,000 of income tax expense~~30.2% for ~~the three months ended September 30, 2020, resulting in an effective tax rate of 28.5%.~~2022 and 32.2% for 2021. The decrease in the effective tax rate ~~as compared with the corresponding period in the prior year~~ was primarily due to the recognition of tax benefits attributable to restricted stock that vested in February 2022, offset by the ~~non-deductibility of certain executive compensation during the three months ended September 30, 2020.~~increased Florida corporate tax rate effective January 1, 2022.

The loss ratio applicable to the three months ended ~~September 30, 2021~~March 31, 2022 (losses and loss adjustment expenses incurred related to net premiums earned) was ~~66.5%~~57.8% compared with ~~82.8%~~52.1% for the three months ended ~~September 30, 2020.~~March 31, 2021. The ~~decrease~~increase was primarily due to anthe increase in losses and loss adjustment expenses as further described above, offset in part by the increase in net premiums earned.

The expense ratio applicable to the three months ended ~~September 30, 2021~~March 31, 2022 (defined as ~~underwriting~~total expenses ~~general~~excluding losses and ~~administrative personnel expenses, interest and other operating~~loss adjustment expenses related to net premiums earned) was ~~45.7%~~40.0% compared with ~~49.2%~~44.9% for the three months ended ~~September 30, 2020.~~March 31, 2021. The decrease in our expense ratio was primarily attributable to the increase in net premiums earned and the decrease in interest expense, offset by ~~the increase in losses and loss adjustment expenses and~~ the increase in policy acquisition, underwriting and personnel expenses.

The combined ratio (total of all expenses in relation to net premiums earned) is the measure of overall underwriting profitability before other income. Our combined ratio for the three months ended ~~September 30, 2021~~March 31, 2022 was ~~112.2%~~97.8% compared with ~~132.0%~~97.0% for the three months ended ~~September 30, 2020.~~March 31, 2021. The ~~decrease~~slight increase in ~~2021~~2022 was attributable to the factors described above.

Due to the impact our reinsurance costs have on net premiums earned from period to period, our management believes the combined ratio measured to gross premiums earned is more relevant in assessing overall performance. The combined ratio to gross premiums earned for the three months ended ~~September 30, 2021~~March 31, 2022 was ~~70.6%~~68.8% compared with ~~77.3%~~65.1% for the three months ended ~~September 30, 2020. The decrease in 2021 was attributable to the factors described above.~~

~~Comparison of the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020~~

Our results of operations for the nine months ended September 30, 2021 reflect net income of approximately $5,807,000 or $0.22 diluted earnings per share, compared with approximately $24,873,000 or $3.03 diluted earnings per share, for the nine months ended September 30, 2020. The period-over-period decrease in net income was primarily due to a $44,668,000 increase in losses and loss adjustment expenses, a one-time gain on involuntary conversion of $36,969,000 included in our 2020 results, and a $30,547,000 increase in policy acquisition and other underwriting expenses, offset by an increase in net premiums earned of $77,521,000, a $12,617,000 increase in income from our investment portfolio (consisting of net investment income/loss and net realized and unrealized gains/losses), and a $3,103,000 decrease in interest expense.

~~Gross Premiums Earned~~ on a consolidated basis for the nine months ended September 30, 2021 and 2020 were approximately $420,191,000 and $306,862,000, respectively. HCPCI gross premiums earned were $300,827,000 for the nine months ended September 30, 2021 compared to $252,033,000 for the nine months ended September 30, 2020. The increase included $73,403,000 of gross premiums earned from the United insurance policies assumed. TypTap’s gross premiums earned were $119,364,000 versus $54,829,000 for the same comparative period with the increase due to a greater number of policies in force from the growth in TypTap’s business.

~~Premiums Ceded~~ for the nine months ended September 30, 2021 and 2020 were approximately $145,112,000 and $109,304,000, respectively, representing 34.5% and 35.6%, respectively, of gross premiums earned. The $35,808,000 increase was primarily attributable to higher reinsurance costs for the 2021 contract year due to an increased overall reinsurance coverage amount as a result of premium growth and expansion. Reinsurance costs were offset by a reduction in premiums ceded attributable to retrospective provisions under multi-year reinsurance agreements.

For the nine months ended September 30, 2021, premiums ceded included a decrease of $4,680,000 related to retrospective provisions compared with a net reduction of $10,440,000 for the nine months ended September 30, 2020. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.”

~~Net Premiums Written~~ for the nine months ended September 30, 2021 and 2020 totaled approximately $339,980,000 and $255,546,000, respectively. The $84,434,000 increase in 2021 resulted primarily from the factors described earlier.

~~Net Premiums Earned~~ ~~for the nine months ended September 30, 2021 and 2020 were approximately $275,079,000 and $197,558,000, respectively, and reflect the gross premiums earned less reinsurance costs as described above.~~

~~The following is a reconciliation of our total Net Premiums Written to Net Premiums Earned for the nine months ended September 30, 2021 and 2020 (amounts in thousands):~~

~~Net Investment Income~~ for the nine months ended September 30, 2021 and 2020 was approximately $9,749,000 and $3,244,000, respectively. The $6,505,000 increase was primarily attributable to losses from limited partnership investments in 2020 due to the economic effects of the COVID-19 pandemic and a net gain of $2,790,000 recognized in 2021 for a legal settlement received from The Kroger Co. See ~~Net Investment Income (loss)~~ ~~under Note 5 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.~~

~~Net Unrealized Investment Losses~~ for the nine months ended September 30, 2021 and 2020 were approximately $649,000 and $581,000, respectively. The decrease was primarily due to the sales of equity securities with aggregate net gains during the nine months ended September 30,March 31, 2021.

~~Our consolidated~~ ~~Losses and Loss Adjustment Expenses~~ amounted to approximately $164,332,000 and $119,664,000 for the nine months ended September 30, 2021 and 2020, respectively. The increase was attributable to additional losses associated with the growth in TypTap’s business during 2021 and was offset by lower 2021 losses at HCPCI when compared with 2020. TypTap experienced an additional $13,985,000 of losses related to growth in its homeowners business, $9,116,000 of losses from policies assumed from United, and $2,887,000 in combined losses from hurricanes Henri and Ida. HCPCI 2021 losses for the nine months were comparatively lower due to 2020 losses of $17,679,000 from Hurricane Sally, $13,000,000 of losses from policies acquired from Anchor Property & Casualty Insurance Company, offset by 2021 losses of $27,712,000 from policies assumed from United, and $2,812,000 resulting from re-estimation of losses from Hurricane Sally. Both companies recorded additional losses during the nine months totaling a combined $8,000,000 from re-assessing losses from Tropical Storm Eta, a fourth quarter 2020 event. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”

~~Policy Acquisition and Other Underwriting Expenses~~ for the nine months ended September 30, 2021 and 2020 were approximately $69,574,000 and $39,027,000 on a consolidated basis, respectively. Policy acquisition expenses for HCPCI insurance operations were $46,076,000 for the nine months ended September 30, 2021 compared to $28,892,000 for the nine months ended September 30, 2020. The increase was due to amortization of increased costs associated with the policies assumed from United. TypTap Group policy acquisition expenses were $23,612,000 versus $10,641,000 for the same comparative period, with the increase attributable to amortization of increased commission costs related to the growth of TypTap’s policies in force over the past 12 months and the policies assumed from United.

~~General and Administrative Personnel Expenses~~ for the nine months ended September 30, 2021 and 2020 were approximately $31,733,000 and $27,969,000, respectively. The period-over-period increase of $3,764,000 was primarily attributable to higher stock-based compensation expense, an increase in the headcount of temporary and full-time employees, and merit increases for non-executive employees effective in late February 2021.

~~Interest Expense~~ for the nine months ended September 30, 2021 and 2020 was approximately $5,743,000 and $8,846,000, respectively. The decrease resulted from the early adoption of ASC 2020-06 “Debt - Debt with Conversion and Other Options and Derivatives and Hedging – Contracts in Entity’s own Equity.” As described in Note 2 -- “Summary of Significant Accounting Policies” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q, ASU 2020-06 allows the reversal of discounts previously recorded to account for the cash conversion feature of convertible debt instruments. Our 4.25% convertible senior notes contain such a cash conversion feature and accordingly the discount was reversed January 1, 2021. As a result, interest expense no longer includes amounts representing the amortization of the discount.

~~Income Tax Expense~~ for the nine months ended September 30, 2021 and 2020 was approximately $2,888,000 and $9,143,000, respectively, for state, federal, and foreign income taxes resulting in an effective tax rate of 33.2% for 2021 and 26.9% for 2020. The increase in ~~the effective tax rate was primarily due to the non-deductibility of certain executive compensation.~~

The loss ratio applicable to the nine months ended September 30, 2021 (losses and loss adjustment expenses incurred related to net premiums earned) was 59.7% compared with 60.6% for the nine months ended September 30, 2020. The decrease was primarily due to an increase in net premiums earned.

The expense ratio applicable to the nine months ended September 30, 2021 was 44.6% compared with 43.7% for the nine months ended September 30, 2020. The increase in our expense ratio was primarily attributable to the increase in policy acquisition, underwriting and personnel expenses, offset by the increase in net premiums earned and the decrease in interest expense.

The combined ratio is the measure of overall underwriting profitability before other income. Our combined ratio for the nine months ended September 30, 2021 was 104.3% compared with 104.3% for the nine months ended September 30, 2020.

Due to the impact our reinsurance costs have on net premiums earned from period to period, our management believes the combined ratio measured to gross premiums earned is more relevant in assessing overall performance. The combined ratio to gross premiums earned for the nine months ended September 30, 2021 was 68.3% compared with 67.2% for the nine months ended September 30, 2020. The increase in 20212022 was primarily attributable to the increase in losses and loss adjustment expenses, offset by the increase in gross premiums earned.

Our insurance business is seasonal as hurricanes and tropical storms affecting Florida, our primary market, and other southeastern states typically occur during the period from June 1st through November 30th of each year. Winter storms in the northeast usually occur during the period between December 1st and March 31st of each year. Also, with our reinsurance treaty year typically effective June 1st of each year, any variation in the cost of our reinsurance, whether due to changes in reinsurance rates, coverage levels or changes in the total insured value of our policy base, will occur and be reflected in our financial results beginning June 1st of each year.

Throughout our history, our liquidity requirements have been met through issuances of our common and preferred stock, debt offerings and funds from operations. We expect our future liquidity requirements will be met by funds from operations, primarily the cash received by our insurance subsidiaries from premiums written and investment income. We may consider raising additional capital through debt and equity offerings to support our growth and future investment opportunities.

Our insurance subsidiaries require liquidity and adequate capital to meet ongoing obligations to policyholders and claimants and to fund operating expenses. In addition, we attempt to maintain adequate levels of liquidity and surplus to manage any differences between the duration of our liabilities and invested assets. In

the insurance industry, cash collected for premiums from policies written is invested, interest and dividends are earned thereon, and losses and loss adjustment expenses are paid out over a period of years. This period of time varies by the circumstances surrounding each claim. With the exception of litigated claims, substantially all of our losses and loss adjustment expenses are fully settled and paid within 100 days of the claim receipt date. Additional cash outflow occurs through payments of underwriting costs such as commissions, taxes, payroll, and general overhead expenses.

We believe that we maintain sufficient liquidity to pay claims and expenses, as well as to satisfy commitments in the event of unforeseen events such as reinsurer insolvencies, inadequate premium rates, or reserve deficiencies. We maintain a comprehensive reinsurance program at levels management considers adequate to diversify risk and safeguard our financial position.

In the future, we anticipate our primary use of funds will be to pay claims, reinsurance premiums, interest, and dividends and to fund operating expenses and real estate acquisitions.

Revolving Credit Facility, Convertible Senior Notes, Promissory Notes, and Finance Leases

The following table summarizes the principal and interest payment obligations of our indebtedness at ~~September 30, 2021:~~March 31, 2022:

See Note 1110 -- “Long-Term Debt” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

In March 2022, the Board approved a plan to repurchase up to $20,000,000 of common shares during 2022 under which we may purchase shares of common stock in open market purchases, block transactions and privately negotiated transactions in accordance with applicable federal securities laws. See Note 18 -- “Equity” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for more information.

Our limited partnership investments consist of six private equity funds managed by their general partners. Four of these funds have unexpired capital commitments which are callable at the discretion of the fund’s general partner for funding new investments or expenses of the fund. Although capital commitments for two of the remaining funds have expired, the general partners may request additional funds under certain circumstances. At ~~September 30, 2021,~~March 31, 2022, there was an aggregate unfunded capital balance of ~~$13,980,000.~~$7,750,000. See Limited Partnership Investments under Note 54 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

Real estate has long been a significant component of our overall investment portfolio. It diversifies our portfolio and helps offset the volatility of other higher-risk investments. Thus, we may consider increasing our real estate investment portfolio should an opportunity arise.

We currently have a 90% equity interest in FMKT Mel JV, LLC, a Florida limited liability company for which we are not the primary beneficiary. FMKT Mel JV’s real estate portfolio consists of ~~outparcels~~an outparcel for ground lease or sale. We have the option to take full ownership of ~~these outparcels~~this outparcel by acquiring the remaining 10% interest. Alternatively, we may sell ~~these outparcels~~this outparcel and allocate the profits from the sale before liquidating FMKT Mel JV.

Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022

Net cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was approximately ~~$48,671,000,~~$57,349,000, which consisted primarily of cash received from net premiums written, reinsurance recoveries (of approximately ~~$38,484,000)~~$7,936,000) less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Net cash used in investing activities of $109,899,000 was primarily due to the purchases of fixed-maturity and equity securities of $134,043,000, the purchase of intangible assets from United of $3,800,000, and the purchases of property and equipment of $1,861,000, offset by the proceeds from sales of fixed-maturity and equity securities of $27,427,000, the proceeds from calls, repayments and maturities of fixed-maturity securities of $1,250,000, and distributions received from limited partnership investments of $785,000. Net cash used in financing activities totaled $7,328,000, which was primarily due to $4,046,000 of net cash dividend payments, cash dividends paid to redeemable noncontrolling interest of $2,508,000, $398,000 of share repurchases, and repayments of long-term debt of $249,000.

Net cash provided by operating activities for the three months ended March 31, 2021 was approximately $36,140,000, which consisted primarily of cash received from net premiums written, reinsurance recoveries (of approximately $13,543,000) less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Net cash provided by investing activities of ~~$35,087,000~~$19,141,000 was primarily due to the proceeds from sales of fixed-maturity and equity securities of ~~$100,130,000,~~$34,378,000, the proceeds from ~~redemptions~~calls, repayments and maturities of fixed-maturity securities of ~~$16,734,000,~~$12,486,000, and distributions received from limited partnership investments of ~~$3,635,000,~~$1,546,000, offset by the purchases of fixed-maturity and equity securities of ~~$83,211,000,~~$28,391,000, and the purchases of property and equipment of ~~$2,583,000.~~$697,000. Net cash provided by financing activities totaled ~~$54,077,000,~~$66,784,000, which consisted of net proceeds of $93,738,000 from Centerbridge for investment in TTIG, offset by ~~$9,713,000~~$2,793,000 of net cash dividend payments, ~~net repayment of our revolving credit facility of $23,750,000, and $1,308,000 used in share repurchases.~~

Net cash provided by operating activities for the nine months ended September 30, 2020 was approximately $77,530,000, which consisted primarily of cash received from net premiums written, reinsurance recoveries (of approximately $39,624,000) and $27,092,000 of net cash receipts from Anchor less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Due to the inclusion of the cash receipt from Anchor, net cash provided by operating activities was higher than usual. Net cash provided by investing activities of $133,800,000 was primarily due to the proceeds from sales of fixed-maturity and equity securities of $96,669,000, the proceeds from redemptions and maturities of fixed-maturity securities of $60,870,000, and $44,000,000 of compensation received for the property taken by the power of eminent domain, offset by the purchases of fixed-maturity and equity securities of $57,375,000, the purchase of real estate investments of $3,052,000, limited partnership investments of $2,951,000, and the purchases of property and equipment of $5,928,000. Net cash used in financing activities totaled $28,151,000, which consisted of $16,533,000 used to repay 3.95% and 4% promissory notes, $9,279,000 of net cash dividend payments, $4,459,000 used to repurchase our 4.25% convertible senior notes, and $6,499,000 used in our share repurchases, and net repayment of our revolving credit facility of ~~$1,000,000, offset by the proceeds from issuance of a 3.90% promissory note of $10,000,000.~~$23,750,000.

The main objective of our investment policy is to maximize our after-tax investment income with a reasonable level of risk given the current financial market. Our excess cash is invested primarily in money market accounts, certificates of deposit, and fixed-maturity and equity securities.

At ~~September 30, 2021,~~March 31, 2022, we had ~~$96,276,000~~$191,888,000 of fixed-maturity and equity investments, which are carried at fair value. Changes in the general interest rate environment affect the returns available on new fixed-maturity investments. While a rising interest rate environment enhances the returns available on new investments, it reduces the market value of existing fixed-maturity investments and thus the availability of gains on disposition. A decline in interest rates reduces the returns available on new fixed-maturity investments but increases the

market value of existing fixed-maturity investments, creating the opportunity for realized investment gains on disposition. ~~To maximize the gains from fixed-maturity investments in a low interest rate environment, we have decreased our holdings in fixed-maturity securities since the beginning of 2020.~~

In the future, we may alter our investment policy as to investments in federal, state and municipal obligations, preferred and common equity securities and real estate mortgages, as permitted by applicable law, including insurance regulations.

As of ~~September 30, 2021,~~March 31, 2022, we had unexpired capital commitments for limited partnerships in which we hold interests. Such commitments are not recognized in the financial statements but are required to be disclosed in the notes to the financial statements. See Note 2120 -- “Commitments and Contingencies” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q ~~and~~ ~~Contractual Obligations and Commitment~~ ~~below~~ for additional information.

We have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments to develop amounts reflected and disclosed in our financial statements. Material estimates that are particularly susceptible to significant change in the near term are related to our losses and loss adjustment expenses, which include amounts estimated for claims incurred but not yet reported. We base our estimates on various assumptions and actuarial data we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates.

We believe our accounting policies specific to losses and loss adjustment expenses, reinsurance recoverable, reinsurance with retrospective provisions, deferred income taxes, stock-based compensation expense, limited partnership investments, acquired intangible assets, warrants, and redeemable noncontrolling interest involve our most significant judgments and estimates material to our consolidated financial statements.

Our liability for losses and loss adjustment expense (“Reserves”) is specific to property insurance, which is our insurance ~~division’s~~subsidiaries’ only line of business. The Reserves include both case reserves on reported claims and our reserves for incurred but not reported (“IBNR”) losses. At each period end date, the balance of our Reserves is based on our best estimate of the ultimate cost of each claim for those known cases and the IBNR loss reserves are estimated based primarily on our historical experience. Changes in the estimated liability are charged or credited to operations as the losses and loss adjustment expenses are adjusted.

The IBNR represents our estimate of the ultimate cost of all claims that have occurred but have not been reported to us, and in some cases may not yet be known to the insured, and future development of reported claims. Estimating the IBNR component of our Reserves involves considerable judgment on the part of management. At ~~September 30, 2021, $151,669,000~~March 31, 2022, $172,959,000 of the total ~~$203,177,000~~$234,792,000 we have reserved for losses and loss adjustment expenses is attributable to our estimate of IBNR. The remaining ~~$51,508,000~~$61,833,000 relates to known cases which have been reported but not yet fully settled in which case we have established a reserve based on currently available information and our best estimate of the cost to settle each claim. At ~~September 30, 2021, $33,889,000~~March 31, 2022, $49,063,000 of the ~~$51,508,000~~$61,833,000 in reserves for known cases relates to claims incurred during prior years.

Our Reserves decreased from ~~$212,169,000~~$237,165,000 at December 31, ~~2020~~2021 to ~~$203,177,000~~$234,792,000 at ~~September 30, 2021.~~March 31, 2022. The ~~$8,992,000~~$2,373,000 decrease is comprised of reductions in our Reserves of ~~$30,790,000~~$9,193,000 specific to Hurricane Irma, ~~and~~ Hurricane Michael, Hurricane Sally and Tropical Storm Eta, and reductions in our non-catastrophe Reserves of ~~$43,738,000~~$33,673,000 for ~~2020~~2021 and ~~$17,895,000~~$10,787,000 for ~~2019~~2020 and prior loss years, offset by ~~$76,228,000~~$51,280,000 in reserves established for the ~~2021~~2022 loss ~~year and additional reserves of $7,203,000 for Hurricane Sally and Tropical Storm Eta.~~year. The Reserves established for ~~2021~~2022 claims is primarily driven by an allowance for those claims that have been incurred but not reported to the company as of ~~September 30, 2021.~~March 31, 2022. The decrease of ~~$61,633,000~~$53,653,000 specific to our ~~2020~~2021 and prior loss-year reserves is due to settlement of claims related to those loss years.

Based on all information known to us, we consider our Reserves at ~~September 30, 2021~~March 31, 2022 to be adequate to cover our claims for losses that have occurred as of that date including losses yet to be reported to us. However, these estimates are continually reviewed by management as they are subject to significant variability and may be impacted by trends in claim severity and frequency or unusual exposures that have not yet been identified. As part of the process, we review historical data and consider various factors, including known and anticipated regulatory and legal developments, changes in social attitudes, inflation and economic conditions. As experience develops and other data becomes available, these estimates are revised, as required, resulting in increases or decreases to the existing unpaid losses and loss adjustment expenses. Adjustments are reflected in the results of operations in the period in which they are made, and the liabilities may deviate substantially from prior estimates.

Two of our reinsurance contracts include retrospective provisions that adjust premiums in the event losses are minimal or zero. In accordance with accounting principles generally accepted in the United States of America, we will recognize an asset in the period in which the absence of loss experience obligates the reinsurer to pay cash or other consideration under the contract. In the event that a loss arises, we will derecognize such asset in the period in which a loss arises. Such adjustments to the asset, which accrue throughout the contract term, will negatively impact our operating results when a catastrophic loss event occurs during the contract term.

For the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we accrued benefits of ~~$1,364,000~~$1,484,000 and $4,680,000, ~~respectively. For the nine months ended September 30, 2021 and 2020, we accrued benefits of $9,619,000 and $10,440,000,~~ respectively. The accrual of benefits was recognized as a reduction in ceded premiums.

As of ~~September 30, 2021,~~March 31, 2022, we had ~~$1,819,000~~$4,548,000 of accrued benefits, the amount that would be charged to earnings in the event we experience a catastrophic loss that exceeds the coverage limit provided under such agreement. ~~In June 2021, we collected $18,720,000 of premium refund from a reinsurer for the reinsurance contract that ended May 31, 2021.~~

We believe the credit risk associated with the collectability of accrued benefits is minimal based on available information about the reinsurer’s financial position and the reinsurer’s demonstrated ability to comply with contract terms.

We account for stock-based compensation using a recognition method based on fair value. For restricted stock with service based vesting conditions, fair value is determined by the market price of the stock on the grant date. Compensation expense is then recognized ratably over the requisite or derived service period of the award. Restricted stock awards with market based vesting conditions require the use of a Monte Carlo simulation model with the assistance of a third-party valuation specialist to estimate the fair value and derived service period of the award. We then recognize the compensation expense ratably over this derived service period. Determining the appropriate fair value model and calculating the fair value of stock-based awards at the grant date requires considerable judgment, including estimating stock price volatility or derived service periods. We develop our estimates based on historical data and market information.

Acquired intangible assets represent the fair value of consideration we paid and are estimated to pay in exchange for the renewal rights and non-compete intangible assets acquired from the seller. In the renewal rights transaction, we purchased the right, but not the obligation, to offer homeowners insurance coverage to all current policyholders of the seller in certain states on the agreed-upon policy replacement date. The renewal rights agreement also contains a non-compete clause whereby the seller agrees not to offer homeowners insurance policies in these states through a specified date. We record intangible assets based on the fair value of the consideration we paid and are estimated to pay to the seller as provided in the renewal rights agreement with the seller. We engaged a third-party valuation specialist to assist with the allocation of the renewal rights and non-compete intangible assets acquired. Intangible assets are amortized over their estimated useful lives. Intangible assets are evaluated periodically to ensure that there is no impairment to carrying value and no change required in the amortization period.

In the capital investment transaction completed by TTIG with a fund associated with Centerbridge Partners, L.P., TTIG issued 10,000,000 total shares of Series A Preferred Stock and HCI issued warrants to purchase 750,000 shares of HCI common stock, in exchange for proceeds of $100,000,000. Both the fair value and expected term of the warrants were estimated with assistance from a third-party valuation specialist using a Monte Carlo simulation model. Total proceeds from the capital investment transaction were allocated using the residual fair value method, first to the warrants issued based on their estimated fair value, with the residual proceeds being allocated to the fair value of Series A Preferred Stock. See ~~Note 18 -- “Redeemable Noncontrolling Interest” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.~~

The above and other accounting estimates and their related risks that we consider to be our critical accounting estimates are more fully described in our Annual Report on Form 10-K, which we filed with the SEC on March ~~12, 2021.~~10, 2022. For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, there have been no other material changes with respect to any of our critical accounting policies.

~~For information with respect to~~There have been no recent accounting pronouncements ~~and~~or changes in recent accounting pronouncements during the ~~impact~~three months ended March 31, 2022, as compared to those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, that are of ~~these pronouncements on our consolidated financial statements, see Note 3~~significance, or potential significance, to ~~our Notes to Unaudited Consolidated Financial Statements.~~the Company.

Our investment portfolios at ~~September 30, 2021~~March 31, 2022 included fixed-maturity and equity securities, the purposes of which are not for speculation. Our main objective is to maximize after-tax investment income and maintain sufficient liquidity to meet our obligations while minimizing market risk, which is the potential economic loss from adverse fluctuations in securities prices. We consider many factors including credit ratings, investment concentrations, regulatory requirements, anticipated fluctuation of interest rates, durations and market conditions in developing investment strategies. Our investment securities are managed primarily by outside investment advisors and are overseen by the investment committee appointed by our Board of Directors. From time to time, our investment committee may decide to invest in low risk assets such as U.S. government bonds.

Our investment portfolios are exposed to interest rate risk, credit risk and equity price risk. Fiscal and economic uncertainties caused by any government action or inaction may exacerbate these risks and potentially have adverse impacts on the value of our investment portfolios.

We classify our fixed-maturity securities as available-for-sale and report any unrealized gains or losses, net of deferred income taxes, as a component of other comprehensive income within our stockholders’ equity. As such, any material temporary changes in their fair value can adversely impact the carrying value of our stockholders’ equity. In addition, we recognize any unrealized gains or losses related to our equity securities in our statement of income. As a result, our results of operations can be materially affected by the volatility in the equity market.

Our fixed-maturity securities are sensitive to potential losses resulting from unfavorable changes in interest rates. We manage the risk by analyzing anticipated movement in interest rates and considering our future capital needs.

The following table illustrates the impact of hypothetical changes in interest rates to the fair value of our fixed-maturity securities at ~~September 30, 2021~~March 31, 2022 (amounts in thousands):

Credit risk can expose us to potential losses arising principally from adverse changes in the financial condition of the issuers of our fixed-maturity securities. We mitigate the risk by investing in fixed-maturity securities that are generally investment grade, by diversifying our investment portfolio to avoid concentrations in any single issuer or business sector, and by continually monitoring each individual security for declines in credit quality. While we emphasize credit quality in our investment selection process, significant downturns in the markets or general economy may impact the credit quality of our portfolio.

The following table presents the composition of our fixed-maturity securities, by rating, at ~~September 30, 2021~~March 31, 2022 (amounts in thousands):

Our equity investment portfolio at ~~September 30, 2021~~March 31, 2022 included common stocks, perpetual preferred stocks, mutual funds and ~~exchange traded~~exchange-traded funds. We may incur losses due to adverse changes in equity security prices. We manage the risk primarily through industry and issuer diversification and asset mix.

The following table illustrates the composition of our equity securities at ~~September 30, 2021~~March 31, 2022 (amounts in thousands):

At ~~September 30, 2021,~~March 31, 2022, we did not have any material exposure to foreign currency related risk.

Under the supervision and with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial and accounting officer), we have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, and, based on this evaluation, our chief executive officer and our chief financial officer have concluded that these disclosure controls and procedures are effective.

There have been no changes in our internal controls over financial reporting during the quarter ended ~~September 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, implementation of possible controls and procedures depends on management’s judgment in evaluating their benefits relative to costs.

The Company is a party to claims and legal actions arising routinely in the ordinary course of our business. Although we cannot predict with certainty the ultimate resolution of the claims and lawsuits asserted against us, we do not believe that any currently pending legal proceedings to which we are a party will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

~~With the exception of the item described below, there~~There have been no material changes from the risk factors previously disclosed in the section entitled “Risk Factors” in our Form 10-K, which was filed with the SEC on March ~~12, 2021.~~10, 2022.

~~On January 18, 2021, we issued 100,000 shares of our common stock to United in exchange for the renewal rights and non-compete agreement.~~

~~On February 26, 2021, warrants to purchase 750,000 shares of our common stock were issued to the lead investor in our subsidiary’s capital investment transaction.~~None.

~~None~~The table below summarizes the number of common shares surrendered by employees to satisfy payroll tax liabilities associated with the vesting of restricted shares (dollar amounts in thousands, except share and per share amounts):

We are not subject to working capital restrictions or other limitations on the payment of dividends. Our insurance subsidiaries, however, are subject to restrictions on the dividends they may pay. Those restrictions could impact HCI’s ability to pay future dividends.

Under Florida law, a domestic insurer may not pay any dividend or distribute cash or other property to its stockholder except out of that part of its available and accumulated capital and surplus funds which is derived from realized net operating profits on its business and net realized capital gains. Additionally, a Florida domestic insurer may not make dividend payments or distributions to its stockholder without prior approval of the Florida Office of Insurance Regulation if the dividend or distribution would exceed the larger of (1) the lesser of (a) 10.0% of its capital surplus or (b) net income, not including realized capital gains, plus a two year carry forward, (2) 10.0% of capital surplus with dividends payable constrained to unassigned funds minus 25% of unrealized capital gains or (3) the lesser of (a) 10.0% of capital surplus or (b) net investment income plus a three year carry forward with dividends payable constrained to unassigned funds minus 25% of unrealized capital gains.

Alternatively, a Florida domestic insurer may pay a dividend or distribution without the prior written approval of the Florida Office of Insurance Regulation (1) if the dividend is equal to or less than the greater of (a) 10.0% of the insurer’s capital surplus as regards policyholders derived from realized net operating profits on its business and net realized capital gains or (b) the insurer’s entire net operating profits and realized net capital gains derived during the immediately preceding calendar year, (2) the insurer will have policy holder capital surplus equal to or exceeding 115.0% of the minimum required statutory capital surplus after the dividend or distribution, (3) the insurer files a notice of the dividend or distribution with the Florida Office of Insurance Regulation at least ten business days prior to the dividend payment or distribution and (4) the notice includes a certification by an officer of the insurer attesting that, after the payment of the dividend or distribution, the insurer will have at least 115% of required statutory capital surplus as to policyholders. Except as provided above, a Florida domiciled insurer may only pay a dividend or make a distribution (1) subject to prior approval by the Florida Office of Insurance Regulation or (2) 30 days after the Florida Office of Insurance Regulation has received notice of such dividend or distribution and has not disapproved it within such time.

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, our insurance subsidiaries paid dividends of ~~$11,900,000~~$12,000,000 to HCI.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, who has signed this report on behalf of the Company.

A signed original of this document has been provided to HCI Group, Inc. and will be retained by HCI Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.


Florida		20-5961396
(State of Incorporation)		(IRS Employer Identification No.)


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Shares, no par value	HCI	New York Stock Exchange


Large accelerated filer ☐	Accelerated filer ☑	Non-accelerated filer ☐	Smaller reporting company ☐
			Emerging growth company ☐


		Page

	PART I – FINANCIAL INFORMATION

Item 1	Financial Statements
	Consolidated Balance Sheets:
	~~September 30, 2021~~March 31, 2022 (unaudited) and December 31, ~~2020~~2021	1-2
	Consolidated Statements of Income:
	Three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (unaudited)	3
	Consolidated Statements of Comprehensive Income:
	Three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (unaudited)	4
	Consolidated ~~Statement~~Statements of Equity:
	Three months ended ~~September 30,~~March 31, 2022 and 2021 (unaudited)	5
	~~Consolidated Statement of Stockholders’ Equity:~~
	~~Three months ended September 30, 2020 (unaudited)~~	6
	~~Consolidated Statement of Equity:~~
	~~Nine months ended September 30, 2021 (unaudited)~~	7
	~~Consolidated Statement of Stockholders’ Equity:~~
	~~Nine months ended September 30, 2020 (unaudited)~~	85-6
	Consolidated Statements of Cash Flows:
	~~Nine~~Three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (unaudited)	~~9-11~~7-9
	Notes to Consolidated Financial Statements (unaudited)	~~12-52~~10-38

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~52-67~~39-49

Item 3	Quantitative and Qualitative Disclosures about Market Risk	~~67-69~~50-51

Item 4	Controls and Procedures	6952


	PART II – OTHER INFORMATION

Item 1	Legal Proceedings	7053

Item 1A	Risk Factors	7053

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	7053-54

Item 3	Defaults ~~upon~~Upon Senior Securities	7154

Item 4	Mine Safety Disclosures	7154

Item 5	Other Information	7154

Item 6	Exhibits	~~72-81~~55-60

Signatures		8161

Certifications


	September 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
	(Unaudited)				(Unaudited)
Assets
Fixed-maturity securities, available for sale, at fair value (amortized cost: $45,016 and $70,265, respectively and allowance for credit losses: $0 and $588, respectively)	$	46,053	$	71,722
Equity securities, at fair value (cost: $46,771 and $47,029, respectively)		50,223		51,130
Fixed-maturity securities, available for sale, at fair value (amortized cost: $153,776 and $41,953, respectively and allowance for credit losses: $0 and $0, respectively)					$	150,684	$	42,583
Equity securities, at fair value (cost: $39,316 and $46,276, respectively)						41,204		51,740
Limited partnership investments		26,039		27,691		28,166		28,133
Investment in unconsolidated joint venture, at equity		370		705		350		363
Real estate investments		73,663		74,472		73,387		73,896
Total investments		196,348		225,720		293,791		196,715
Cash and cash equivalents		569,134		431,341		569,040		628,943
Restricted cash		2,400		2,400		2,400		2,400
Accrued interest and dividends receivable		463		588		674		353
Income taxes receivable		0		4,554		0		4,084
Premiums receivable, net (allowance: $3,756 and $2,053, respectively)		43,078		68,382
Premiums receivable, net (allowance: $2,459 and $1,750, respectively)						39,890		68,157
Prepaid reinsurance premiums		47,968		36,376		11,561		26,355
Reinsurance recoverable, net of allowance for credit losses:
Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)		9,658		14,127
Unpaid losses and loss adjustment expenses (allowance: $44 and $85, respectively)		39,468		71,019
Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)						14,720		11,985
Unpaid losses and loss adjustment expenses (allowance: $79 and $90, respectively)						54,876		64,665
Deferred policy acquisition costs		47,129		43,858		53,670		57,695
Property and equipment, net		13,946		12,767		15,469		14,232
Right-of-use assets - operating leases		2,576		4,002		2,673		2,204
Intangible assets, net		10,807		3,568		15,105		10,636
Funds held in trust for assumed business		79,965		0
Funds withheld for assumed business						84,068		73,716
Other assets		13,174		22,611		17,313		14,717
Total assets	$	1,076,114	$	941,313	$	1,175,250	$	1,176,857


☑		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Income,			Total Stockholders’			Noncontrolling			Total			Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Income (Loss),			Total Stockholders’			Noncontrolling			Total
	Shares			Amount		Capital			Income			Net of Tax			Equity			Interests			Equity			Shares			Amount		Capital			Income			Net of Tax			Equity			Interests			Equity
Balance at June 30, 2021		8,265,640		$	—	$	—		$	215,612		$	1,054		$	216,666		$	1,383		$	218,049
Net loss		—			—		—			(4,346	)		—			(4,346	)		(522	)		(4,868	)
Balance at December 31, 2021																									10,131,399		$	—	$	76,077		$	246,790		$	498		$	323,365		$	1,138		$	324,503
Net income (loss)																									—			—		—			2,978			—			2,978			(187	)		2,791
Net income attributable to redeemable noncontrolling interest		—			—		—			(1,891	)		—			(1,891	)		(311	)		(2,202	)		—			—		—			(2,075	)		—			(2,075	)		(173	)		(2,248	)
Total other comprehensive loss, net of income taxes		—			—		—			—			(255	)		(255	)		(6	)		(261	)		—			—		—			—			(2,683	)		(2,683	)		(101	)		(2,784	)
Issuance of restricted stock		2,340			0		0			0			0			0			0			0			4,000			0		0			0			0			0			0			0
Forfeiture of restricted stock		(38,855	)		0		0			0			0			0			0			0			(3,265	)		0		0			0			0			0			0			0
Common stock issued on conversions of 4.25% senior notes		1,361,954			—		82,339			—			—			82,339			—			82,339
Repurchase and retirement of common stock																									(6,207	)		—		(398	)		—			—			(398	)		—			(398	)
Dilution from subsidiary stock-based compensation		—			—		—			—			—			—			472			472			—			—		—			—			—			—			758			758
Common stock dividends ($0.40 per share)		—			—		—			(3,261	)		—			(3,261	)		—			(3,261	)		—			—		—			(4,046	)		—			(4,046	)		—			(4,046	)
Stock-based compensation		—			—		2,260			—			—			2,260			—			2,260			—			—		3,452			—			—			3,452			—			3,452
Additional paid-in capital shortfall adjustment allocated to retained income		—			—		(44,694	)		44,694			—			—			—			—
Balance at September 30, 2021		9,591,079		$	—	$	39,905		$	250,808		$	799		$	291,512		$	1,016		$	292,528
Balance at March 31, 2022																									10,125,927		$	—	$	79,131		$	243,647		$	(2,185	)	$	320,593		$	1,435		$	322,028


	September 30, 2021				December 31, 2020
	Cost or		Estimated		Cost or		Estimated
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale
Due in one year or less	$	12,413	$	12,497	$	21,122	$	21,258
Due after one year through five years		23,548		24,209		43,561		44,339
Due after five years through ten years		7,250		7,444		2,731		3,060
Due after ten years		1,805		1,903		2,851		3,065
	$	45,016	$	46,053	$	70,265	$	71,722


Value-oriented investments in mature real estate private equity funds and portfolio globally. (b)(j)		5,224		5,494	2.24		3,273		6,818	2.24
											March 31, 2022						December 31, 2021
											Carrying		Unfunded				Carrying		Unfunded
Investment Strategy											Value		Balance		(%) (a)		Value		Balance		(%) (a)
Primarily in senior secured loans and, to a limited extent, in other debt and equity securities of private U.S. lower-middle-market companies. (b)(c)(e)											$	5,335	$	0		15.37	$	6,076	$	2,085		15.37
Value creation through active distressed debt investing primarily in bank loans, public and private corporate bonds, asset-backed securities, and equity securities received in connection with debt restructuring. (b)(d)(e)												3,410		0		1.67		3,423		0		1.69
High returns and long-term capital appreciation through investments in the power, utility and energy industries, and in the infrastructure sector. (b)(f)(g)												6,704		0		0.18		6,270		1,401		0.18
Value-oriented investments in less liquid and mispriced senior and junior debts of private equity-backed companies. (b)(h)(i)												4,030		0		0.57		4,437		0		0.57
Value-oriented investments in mature real estate private equity funds and portfolios globally. (b)(j)												6,719		4,548		1.34		5,977		4,537		1.36
Risk-adjusted returns on credit and equity investments, primarily in private equity-owned companies. (b)(k)		0		5,000	0		—		—	—		1,968		3,202		0.47		1,950		3,050		0.47
Total	$	26,039	$	13,980		$	27,691	$	10,304		$	28,166	$	7,750			$	28,133	$	11,073


Anchor tenant relationships*relationships		~~12.6~~12.2 years
In-place leases		9.9 years
Policy renewal rights - United		~~(c)~~3.9 years
Non-compete agreements - United		1.1 years


Due in 12 months following September 30,
2021	$	57,409
2022		1,036
2023		1,065
2024		1,106
2025		1,151
Thereafter		16,821
Total	$	78,588



Balance at January 1, 2021	$	0
Initial proceeds from Centerbridge		100,000
Increase (decrease):
Proceeds allocated to warrants*		(9,217	)
Issuance costs		(6,262	)
Issuance costs allocated to warrants*		577
Accrued cash dividends		458
Accretion - increasing dividend rates		336
Balance at March 31, 2021	$	85,892
Increase (decrease):
Accrued cash dividends		1,250
Accretion - increasing dividend rates		929
Balance at June 30, 2021	$	88,071
Increase (decrease):
Dividends paid		(2,542	)
Accrued cash dividends		1,250
Accretion - increasing dividend rates		952
Balance at September 30, 2021	$	87,731


Due in 12 months following September 30,
2021	$	9,095
2022*		9,095
2023*		4,093
Total	$	22,283


	Maturity Date	~~Interest~~ Payment Due Date
4.25% Convertible ~~senior notes~~Senior Notes	March 2037	March 1 and September 1
3.75% Callable ~~promissory note~~Promissory Note	Through September 2036	1st day of each month
4.55% Promissory ~~note~~Note	Through August 2036	1st day of each month
3.90% Promissory ~~note~~Note	Through April 2032	1st day of each month
Finance leases	Through October 2024	Various
Revolving credit facility	Through December 2023	January 1, April 1, July 1, October 1


Hypothetical Change in Interest Rates	Estimated Fair Value		Change in Estimated Fair Value			Percentage Increase (Decrease) in Estimated Fair Value			Estimated Fair Value		Change in Estimated Fair Value			Percentage Increase (Decrease) in Estimated Fair Value
300 basis point increase	$	43,019	$	(3,034	)		-6.59	%	$	140,613	$	(10,071	)		-6.68	%
200 basis point increase		44,030		(2,023	)		-4.39	%		143,969		(6,715	)		-4.46	%
100 basis point increase		45,042		(1,011	)		-2.20	%		147,326		(3,358	)		-2.23	%
100 basis point decrease		46,867		814			1.77	%		154,040		3,356			2.23	%
200 basis point decrease		47,320		1,267			2.75	%		157,375		6,691			4.44	%
300 basis point decrease		47,365		1,312			2.85	%		158,815		8,131			5.40	%


			% of Total				% of Total				% of Total				% of Total
	Amortized		Amortized		Estimated		Estimated		Amortized		Amortized		Estimated		Estimated
Comparable Rating	Cost		Cost		Fair Value		Fair Value		Cost		Cost		Fair Value		Fair Value
AAA	$	678		2.0	$	692		2.0	$	601		1	$	588		1
AA+, AA, AA-		14,379		32.0		14,465		31.0		131,844		86		128,763		85
A+, A, A-		13,934		31.0		14,080		31.0		6,908		4		6,803		5
BBB+, BBB, BBB-		13,688		30.0		14,477		31.0		12,615		8		12,714		8
BB+, BB, BB-		468		1.0		469		1.0
CCC+, CC and Not rated		1,869		4.0		1,870		4.0		1,808		1		1,816		1
Total	$	45,016		100.0	$	46,053		100.0	$	153,776		100	$	150,684		100


	Total Number of Shares		Average Price Paid		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Dollar Value of Shares That May Yet Be Purchased Under The Plans
For the Month Ended	Purchased		Per Share		or Programs		or Programs (a)
January 31, 2022		—	$	—		—	$	—
February 28, 2022		6,207	$	64.17		—	$	—
March 31, 2022		—	$	—		—	$	20,000
		6,207	$	64.17		—


EXHIBIT
NUMBER		DESCRIPTION

3.1		Articles of Incorporation, with amendments. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 7, 2013.

3.1.1		Articles of Amendment to Articles of Incorporation designating the rights, preferences and limitations of Series B Junior Participating Preferred Stock. Incorporated by reference to Exhibit 3.1 to our Form 8-K filed October 18, 2013.

3.1.2		Articles of Amendment to Articles of Incorporation cancelling the rights, preferences and limitations of Series B Junior Participating Preferred Stock. Incorporated by reference to Exhibit 3.1 to our Form 8-K filed May 15, 2020.

3.2		Bylaws, with amendments. Incorporated by reference to the correspondingly numbered exhibit to our Form ~~8-Q~~8-K filed September 13, 2019.

4.1		Form of common stock certificate. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed November 7, 2013.

4.2		Common Stock Purchase Warrant, dated February 26, 2021, issued by HCI Group, Inc. to CB Snowbird Holdings, L.P. Incorporated by reference to Exhibit 4.1 of our Form 8-K filed March 1, 2021.

4.6		Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as amended. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 12, 2021.

~~4.8~~		Indenture, dated December 11, 2013, between HCI Group, Inc. and The Bank of New York Mellon Trust Company, N.A. (including Global Note). Incorporated by reference to Exhibit 4.1 to our Form 8-K filed December 12, 2013.

4.9		See Exhibits 3.1, 3.1.1, 3.1.2 and 3.2 of this report for provisions of the Articles of Incorporation, as amended, and our Bylaws, as amended, defining certain rights of security holders.

4.10		Indenture, dated March 3, 2017, between HCI Group, Inc. and The Bank of New York Mellon Trust Company, N.A. Incorporated by reference to Exhibit 4.1 of our Form 8-K filed March 3, 2017.

4.11		Form of Global 4.25% Convertible Senior Note due 2037 (included in Exhibit 4.1). Incorporated by reference to Exhibit 4.1 of our Form 8-K filed March 3, 2017.

10.1		Preferred Stock Purchase Agreement, dated February 26, 2021, among TypTap Insurance Group, Inc., HCI Group, Inc., and CB Snowbird Holdings, L.P. Incorporated by reference to the corresponding numbered exhibit to our Form 8-K filed March 1, 2021.

10.2		Amended and Restated Articles of Incorporation of TypTap Insurance Group, Inc. filed February 26, 2021. Incorporated by reference to the corresponding numbered exhibit to our Form 8-K filed March 1, 2021.

10.3		Shareholders Agreement, dated February 26, 2021, among TypTap Insurance Group, Inc., CB Snowbird Holdings, L.P., HCI Group, Inc., and the other shareholders party thereto. Incorporated by reference to the corresponding numbered exhibit to our Form 8-K filed March 1, 2021.

10.4		Parent Guaranty Agreement, dated February 26, 2021, between HCI Group, Inc. and CB Snowbird Holdings, L.P. Incorporated by reference to the corresponding numbered exhibit to our Form 8-K filed March 1, 2021.


10.5**		~~Restated~~ HCI Group, Inc. 2012 Omnibus Incentive ~~Plan. Incorporated by reference to Exhibit 99.1 of our Form 8-K filed March 23, 2017.~~Plan as revised April 26, 2022.

10.6**		HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) 2007 Stock Option and Incentive Plan. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 29, 2008.

10.7**		Executive Employment Agreement dated November 23, 2016 between Mark Harmsworth and HCI Group, Inc. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 3, 2017.

~~10.8~~		Working Layer Catastrophe Excess of Loss Reinsurance Contract, effective: June 1, 2016, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers (National Fire). Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 3, 2016.

~~10.9~~		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat) (Arch), effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.10~~		Reinstatement Premium Protection Reinsurance Contract (Chubb), effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.11~~		Property Catastrophe First Excess of Loss Reinsurance Contract, effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.12~~		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat), effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.13~~		Reinstatement Premium Protection Reinsurance Contract (For Working Layer Cat), effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.14~~		Property Catastrophe Excess of Loss Reinsurance Contract, effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.


~~10.15~~		Property Catastrophe First Excess of Loss Reinsurance Contract (Endurance), effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.16~~		Reinstatement Premium Protection Reinsurance Contract (Fidelis), effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.17~~		Property Catastrophe First Excess of Loss Reinsurance Contract, effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.18~~		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat) (Hiscox), effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.19~~		Reinstatement Premium Protection Reinsurance Contract (For Cat Excess) (Hiscox), effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.20~~		Reinstatement Premium Protection Reinsurance Contract (For Working Layer Cat) (Hiscox), effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.21~~		Reinstatement Premium Protection Reinsurance Contract (Horseshoe), effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.22~~		Property Catastrophe Excess of Loss Reinsurance Contract (Munich), effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.23~~		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat), effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.


~~10.24~~		Reinstatement Premium Protection Reinsurance Contract, effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.25~~		Top Layer Property Catastrophe Excess of Loss Reinsurance Contract, effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.26~~		Reinstatement Premium Protection Reinsurance Contract (Transatlantic), effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.27~~		Endorsement No. 1 to the Flood Catastrophe Excess of Loss Reinsurance Contract, effective: July 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by National Liability and Fire Insurance Company. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.28~~		Working Layer Catastrophe Excess of Loss Reinsurance Contract, effective: June 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.29~~		Reimbursement Contract effective June 1, 2020 between Homeowners Choice Property & Casualty Insurance Company and the State Board of Administration which administers the Florida Hurricane Catastrophe Fund. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

~~10.30~~		Reimbursement Contract effective June 1, 2020 between TypTap Insurance Company and the State Board of Administration which administers the Florida Hurricane Catastrophe Fund. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

10.31		Property Catastrophe First Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.32		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.33		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment.


		Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.34		Joinder, Second Amendment to Credit Agreement and Modification of Other Loan Documents. Incorporated by reference to the corresponding numbered exhibit to our Form 8-K filed January 28, 2021.

10.40		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat) effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.41		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.42		Property Catastrophe First Excess of Loss Reinsurance Contract effective June 1, 2021 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.43		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat) effective June 1, 2021 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.


10.44		7th Layer Non-Florida Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.45		Flood Property Catastrophe Excess of Loss Reinsurance Contract effective ~~June~~July 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.46**		Written Description of Non-Employee Director Compensation Arrangement adopted September 9, 2019 establishing compensation of our non-employee directors. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed November 6, 2019.

~~10.47~~		Policy Replacement Agreement, dated February 12, 2020, by and between Homeowners Choice Property & Casualty Insurance Company, Inc. and Anchor Property & Casualty Insurance Company together with Anchor Insurance Managers, Inc. Incorporated by reference to Exhibit 99.1 of our Form 8-K filed February 14, 2020.

10.48**		TypTap Insurance Group, Inc. 2021 Equity Incentive Plan. Incorporated by reference to Exhibit 10.5 of our Form 8-K filed March 1, 2021.

10.49**		Form of Restricted Stock Award Agreement of TypTap Insurance Group, Inc. Incorporated by reference to Exhibit 10.6 of our Form 8-K filed March 1, 2021.



10.50		Exchange Agreement, dated August 26, 2021, by and between HCI Group, Inc. and Citadel Equity Fund Ltd. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed November 9, 2021.

10.51**		Stock Option Agreement between Paresh Patel and TypTap Insurance Group, Inc. dated October 1, 2021. Incorporated by reference to Exhibit 99.1 to our Form 8-K filed October 7, 2021.

10.52**		TypTap Insurance Group, Inc. 2021 Omnibus Incentive Plan. Incorporated by reference to Exhibit 99.2 of our Form 8-K filed October 7, 2021.

10.57		Form of executive restricted stock award contract. Incorporated by reference to Exhibit 10.57 ofto our Form 10-Q ~~for the quarter ended March 31, 2014~~ filed May 1, 2014.

10.58		Purchase Agreement, dated February 28, 2017, by and between HCI Group, Inc. and JMP Securities LLC and SunTrust Robinson Humphrey, Inc., as representatives of the several initial purchasers named therein. Incorporated by reference to Exhibit 10.1 of our Form 8-K filed February 28, 2017.

10.59		Prepaid Forward Contract, dated February 28, 2017 and effective as of March 3, 2017, between HCI Group, Inc. and Societe Generale. Incorporated by reference to Exhibit 10.1 of our Form 8-K filed March 3, 2017.

10.60		Credit Agreement, Promissory Note, Security and Pledge Agreement, dated December 5, 2018, between HCI Group, Inc. and Fifth Third Bank. Incorporated by reference to Exhibits 99.1, 99.2, and 99.3 of our Form 8-K filed December 6, 2018.

10.88**		Nonqualified Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated January 7, 2017. Incorporated by reference to ~~exhibit~~Exhibit 99.2 to our Form 8-K filed January 11, 2017.

10.89**		~~Employment Agreement between Paresh Patel and HCI Group, Inc. dated December 30, 2016. Incorporated by reference to the exhibit numbered 99.1 to our Form 8-K filed December 30, 2016.~~

10.99**		Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated January 7, 2017. Incorporated by reference to ~~exhibit~~Exhibit 99.1 to our Form 8-K filed January 11, ~~2017.~~

10.100**		~~Restricted Stock Award Contract between Mark Harmsworth and HCI Group, Inc. dated December 5, 2016. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 3,~~ 2017.

10.101**		Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated February 8, 2018. Incorporated by reference to ~~exhibit~~Exhibit 99.1 to our Form 8-K filed February 14, 2018.

10.102**		Nonqualified Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated February 8, 2018. Incorporated by reference to ~~exhibit~~Exhibit 99.2 to our Form 8-K filed February 14, 2018.

10.103**		Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated January 15, 2019. Incorporated by reference to ~~exhibit~~Exhibit 99.1 to our Form 8-K filed January 22, 2019.



10.104**		Nonqualified Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated January 15, 2019. Incorporated by reference to ~~exhibit~~Exhibit 99.2 to our Form 8-K filed January 22, 2019.


10.105**		Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated January 16, 2020. Incorporated by reference to Exhibit 99.1 to our Form 8-K filed January 23, 2020.

10.106**		Nonqualified Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated January 16, 2020. Incorporated by reference to Exhibit 99.2 to our Form 8-K filed January 23, 2020.

10.107		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2021 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.108		Non-Florida Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.109		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2021 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.110		Non-Florida Reinstatement Premium Protection Reinsurance Contract effective June 1, 2021, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.111		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2021, issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.112		Top Layer Flood/Wind Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.113		Property Catastrophe First Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.114		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat) effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.


10.115		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.116		Property Catastrophe First Excess of Loss Reinsurance Contract effective June 1, 2021 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.117		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat) effective June 1, 2021 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.118		Non-Florida Property Catastrophe $6MXS$4M Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.119		Non-Florida Reinstatement Premium Protection Reinsurance Contract (For $6MXS$4m4M Excess Cat) effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.120		Reimbursement Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by the State Board of Administration of the State of Florida. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.121		Reimbursement Contract effective June 1, 2021 issued to TypTap Insurance Company by the State Board of Administration of the State of Florida. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.122		Multi-Year Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.123		Multi-Year Non-Florida Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.124		Property Quota Share Reinsurance Contract effective December 31, 2020 issued to United Property and Casualty Insurance Company by Homeowners Choice Property & Casualty Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.


10.125		Renewal Rights Agreement effective January 18, 2021 by and among United Property and Casualty Insurance Company, Inc., United Insurance Holdings Corp., United Insurance Management, L.C. and Homeowners Choice Property & Casualty Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

10.126		Property Quota Share Reinsurance Contract effective June 1, 2021 issued to United Property and Casualty Insurance Company by Homeowners Choice Property & Casualty Insurance Company and TypTap Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

10.127		Renewal Rights Agreement effective December 30, 2021 by and among United Property and Casualty Insurance Company, Inc., United Insurance Holdings Corp., United Insurance Management, L.C. and Homeowners Choice Property & Casualty Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

10.128		Property Quota Share Reinsurance Contract effective December 31, 2021 issued to United Property and Casualty Insurance Company, by Homeowners Choice Property & Casualty Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

31.1		Certification of the Chief Executive Officer

31.2		Certification of the Chief Financial Officer

32.1		Written Statement of the Chief Executive Officer Pursuant to 18 U.S.C.ss.1350

32.2		Written Statement of the Chief Financial Officer Pursuant to 18 U.S.C.ss.1350


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	HCI GROUP, INC.

~~November 9, 2021~~May 6, 2022	By:	/s/ Paresh Patel
		Paresh Patel
		Chief Executive Officer
		(Principal Executive Officer)

~~November 9, 2021~~May 6, 2022	By:	/s/ James Mark Harmsworth
		James Mark Harmsworth
		Chief Financial Officer
		(Principal Financial and Accounting Officer)