UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-Q


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

For the quarterly period ended ~~June~~September 30, 2023


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

Commission File Number

001-34126

HCI Group, Inc.

(Exact name of registrant as specified in its charter)


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

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

(813) 849-9500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the 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 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 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.


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

If an emerging growth company, indicate by check mark if the 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 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, no par value, outstanding on ~~August~~November 1, 2023 was ~~8,594,764~~8,588,183.

HCI GROUP, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


		Page

PART I – FINANCIAL INFORMATION

Item 1	Financial Statements
	Consolidated Balance Sheets:
	~~June~~September 30, 2023 (unaudited) and December 31, 2022	1-2
	Consolidated Statements of Income:
	Three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 (unaudited)	3
	Consolidated Statements of Comprehensive Income:
	Three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 (unaudited)	4
	Consolidated Statements of Equity:
	Three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 (unaudited)	5-8
	Consolidated Statements of Cash Flows:
	~~Three and six~~Nine months ended ~~June~~September 30, 2023 and 2022 (unaudited)	9-11
	Notes to Consolidated Financial Statements (unaudited)	~~12-44~~12-46

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~45-59~~47-61

Item 3	Quantitative and Qualitative Disclosures About Market Risk	~~60-61~~62-63

Item 4	Controls and Procedures	6264


PART II – OTHER INFORMATION

Item 1	Legal Proceedings	6365

Item 1A	Risk Factors	6365

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	~~63-64~~65-66

Item 3	Defaults Upon Senior Securities	6466

Item 4	Mine Safety Disclosures	6466

Item 5	Other Information	6466

Item 6	Exhibits	~~65-70~~67-72

Signatures		7173

Certifications

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollar amounts in thousands)


	June 30,		December 31,		September 30,		December 31,
	2023		2022		2023		2022
	(Unaudited)				(Unaudited)
Assets
Fixed-maturity securities, available for sale, at fair value (amortized cost: $452,368 and $494,197, respectively and allowance for credit losses: $0 and $0, respectively)	$	442,974	$	483,901
Equity securities, at fair value (cost: $39,953 and $36,272, respectively)		39,690		34,583
Fixed-maturity securities, available-for-sale, at fair value (amortized cost: $427,063 and $494,197, respectively and allowance for credit losses: $0 and $0, respectively)					$	418,676	$	483,901
Equity securities, at fair value (cost: $41,244 and $36,272, respectively)						39,940		34,583
Limited partnership investments		23,115		25,702		23,174		25,702
Investment in unconsolidated joint venture, at equity		—		18		—		18
Real estate investments		43,903		71,388		45,269		71,388
Total investments		549,682		615,592		527,059		615,592
Cash and cash equivalents		293,991		234,863		324,019		234,863
Restricted cash		2,987		2,900		2,987		2,900
Receivable from maturities of fixed-maturity securities						53,000		—
Accrued interest and dividends receivable		2,290		1,952		3,891		1,952
Income taxes receivable		—		2,807		4,375		2,807
Premiums receivable, net (allowance: $4,204 and $5,362, respectively)		40,306		34,998
Premiums receivable, net (allowance: $3,581 and $5,362, respectively)						42,121		34,998
Prepaid reinsurance premiums		114,662		66,627		97,225		66,627
Reinsurance recoverable, net of allowance for credit losses:
Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)		45,674		71,594		29,425		71,594
Unpaid losses and loss adjustment expenses (allowance: $352 and $454, respectively)		505,017		616,765
Unpaid losses and loss adjustment expenses (allowance: $319 and $454, respectively)						462,539		616,765
Deferred policy acquisition costs		45,107		45,522		45,032		45,522
Property and equipment, net		27,168		17,910		28,768		17,910
Right-of-use assets - operating leases		1,368		777		1,460		777
Intangible assets, net		7,073		10,578		8,272		10,578
Funds withheld for assumed business		45,767		48,772		44,761		48,772
Other assets		45,745		31,671		48,698		31,671
Total assets	$	1,726,837	$	1,803,328	$	1,723,632	$	1,803,328

(continued)

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets – (Continued)

(Dollar amounts in thousands)


	June 30,			December 31,			September 30,			December 31,
	2023			2022			2023			2022
	(Unaudited)						(Unaudited)
Liabilities and Equity
Losses and loss adjustment expenses	$	748,955		$	863,765		$	709,089		$	863,765
Unearned premiums		385,870			368,047			395,827			368,047
Advance premiums		26,837			18,587			32,250			18,587
Reinsurance payable on paid losses and loss adjustment expenses		7,043			8,606			7,043			8,606
Ceded reinsurance premiums payable		5,391			17,646			3			17,646
Accrued expenses		19,224			14,534			25,934			14,534
Reinsurance recovered in advance on unpaid losses		—			19,863			—			19,863
Income tax payable		210			—
Deferred income taxes, net		3,133			1,704			4,945			1,704
Long-term debt		208,156			211,687			208,331			211,687
Lease liabilities - operating leases		1,372			721			1,457			721
Other liabilities		36,810			23,361			43,895			23,361
Total liabilities		1,443,001			1,548,521			1,428,774			1,548,521
Commitments and contingencies (Note 21)
Redeemable noncontrolling interest (Note 18)		95,202			93,553			93,801			93,553
Equity:
Common stock (no par value, 40,000,000 shares authorized, 8,594,764 and 8,598,682 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively)		—			—
Common stock (no par value, 40,000,000 shares authorized, 8,590,824 and 8,598,682 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively)								—			—
Additional paid-in capital		1,062			—			2,171			—
Retained income		194,034			172,482			203,766			172,482
Accumulated other comprehensive loss, net of taxes		(6,718	)		(9,886	)		(5,997	)		(9,886	)
Total stockholders’ equity		188,378			162,596			199,940			162,596
Noncontrolling interests		256			(1,342	)		1,117			(1,342	)
Total equity		188,634			161,254			201,057			161,254
Total liabilities, redeemable noncontrolling interest and equity	$	1,726,837		$	1,803,328		$	1,723,632		$	1,803,328

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(Dollar amounts in thousands, except per share amounts)


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30,						June 30,						September 30,						September 30,
	2023			2022			2023			2022			2023			2022			2023			2022
Revenue
Gross premiums earned	$	181,946		$	181,124		$	362,014		$	360,049		$	188,308		$	181,713		$	550,322		$	541,762
Premiums ceded		(66,390	)		(56,205	)		(136,899	)		(109,367	)		(66,152	)		(74,741	)		(203,051	)		(184,108	)
Net premiums earned		115,556			124,919			225,115			250,682			122,156			106,972			347,271			357,654
Net investment income		8,794			3,684			26,509			6,552			9,384			18,530			35,893			25,082
Net realized investment losses		(230	)		(6	)		(1,379	)		(320	)		(207	)		(884	)		(1,586	)		(1,204	)
Net unrealized investment gains (losses)		897			(4,234	)		1,426			(7,810	)
Net unrealized investment (losses) gains														(1,041	)		(347	)		385			(8,157	)
Policy fee income		1,469			1,052			2,559			2,109			1,092			1,071			3,651			3,180
Other		841			511			2,126			1,753			260			1,312			2,386			3,065
Total revenue		127,327			125,926			256,356			252,966			131,644			126,654			388,000			379,620
Expenses
Losses and loss adjustment expenses		61,890			86,830			122,455			159,534			66,726			139,794			189,181			299,328
Policy acquisition and other underwriting expenses		22,618			26,863			45,338			56,271			22,768			24,678			68,106			80,949
General and administrative personnel expenses		14,272			15,301			27,774			29,335			13,864			15,848			41,638			45,183
Interest expense		2,667			1,515			5,468			2,116			2,827			2,813			8,295			4,929
Other operating expenses		5,614			6,977			11,919			13,269			5,371			7,123			17,290			20,392
Total expenses		107,061			137,486			212,954			260,525			111,556			190,256			324,510			450,781
Income (loss) before income taxes		20,266			(11,560	)		43,402			(7,559	)		20,088			(63,602	)		63,490			(71,161	)
Income tax expense (benefit)		5,384			(3,018	)		10,727			(1,808	)		4,419			(12,099	)		15,146			(13,907	)
Net income (loss)		14,882			(8,542	)		32,675			(5,751	)		15,669			(51,503	)		48,344			(57,254	)
Net income attributable to redeemable noncontrolling interest (Note 18)		(2,337	)		(2,268	)		(4,661	)		(4,516	)		(2,349	)		(2,285	)		(7,010	)		(6,801	)
Net (income) loss attributable to noncontrolling interests		(102	)		829			(233	)		1,189			(163	)		2,829			(396	)		4,018
Net income (loss) after noncontrolling interests	$	12,443		$	(9,981	)	$	27,781		$	(9,078	)	$	13,157		$	(50,959	)	$	40,938		$	(60,037	)
Basic earnings (loss) per share	$	1.45		$	(1.04	)	$	3.23		$	(0.92	)	$	1.53		$	(5.66	)	$	4.76		$	(6.26	)
Diluted earnings (loss) per share	$	1.28		$	(1.04	)	$	2.81		$	(0.92	)	$	1.34		$	(5.66	)	$	4.16		$	(6.26	)

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

(Amounts in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2023

2022

2023

2022

Net income (loss)

$
14,882

$
(8,542
)

$
32,675

$
(5,751
)
Other comprehensive (loss) income:

Change in unrealized (loss) gain on investments:

Net unrealized (losses) gains arising during the period

(2,263
)

(2,174
)

152

(6,325
)
Reclassification adjustment for net realized losses (gains)

12

(8
)

750

421

Net change in unrealized (losses) gains

(2,251
)

(2,182
)

902

(5,904
)
Deferred income taxes on above change

571

553

2,381

1,491

Total other comprehensive (loss) income, net of income taxes

(1,680
)

(1,629
)

3,283

(4,413
)
Comprehensive income (loss)

13,202

(10,171
)

35,958

(10,164
)
Comprehensive (income) loss attributable to noncontrolling
interests

(42
)

883

(348
)

1,344

Comprehensive income (loss) after noncontrolling interests

$
13,160

$
(9,288
)

$
35,610

$
(8,820
)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Net income (loss)	$	15,669		$	(51,503	)	$	48,344		$	(57,254	)
Other comprehensive income (loss):
Change in unrealized gain (loss) on investments:
Net unrealized gains (losses) arising during the period		850			(5,969	)		1,002			(12,294	)
Reclassification adjustment for net realized losses		157			5			907			426
Net change in unrealized gains (losses)		1,007			(5,964	)		1,909			(11,868	)
Deferred income taxes on above change		(255	)		(1,337	)		2,126			154
Total other comprehensive income (loss), net of income taxes		752			(7,301	)		4,035			(11,714	)
Comprehensive income (loss)		16,421			(58,804	)		52,379			(68,968	)
Comprehensive (income) loss attributable to noncontrolling interests		(194	)		3,095			(542	)		4,439
Comprehensive income (loss) after noncontrolling interests	$	16,227		$	(55,709	)	$	51,837		$	(64,529	)

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Equity

For the Three Months Ended ~~June~~September 30, 2023

(Unaudited)

(Dollar amounts in thousands, except per share amount)


	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Loss,			Total Stockholders’			Noncontrolling			Total			Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive 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 March 31, 2023		8,596,673		$	—	$	332		$	185,028		$	(5,098	)	$	180,262		$	(405	)	$	179,857
Balance at June 30, 2023																									8,594,764		$	—	$	1,062		$	194,034		$	(6,718	)	$	188,378		$	256		$	188,634
Net income		—			—		—			14,613			—			14,613			269			14,882			—			—		—			15,345			—			15,345			324			15,669
Net income attributable to redeemable noncontrolling interest		—			—		—			(2,170	)		—			(2,170	)		(167	)		(2,337	)		—			—		—			(2,188	)		—			(2,188	)		(161	)		(2,349	)
Total other comprehensive loss, net of income taxes		—			—		—			—			(1,620	)		(1,620	)		(60	)		(1,680	)
Issuance of restricted stock		7,000			—		—			—			—			—			—			—
Total other comprehensive income, net of income taxes																									—			—		—			—			721			721			31			752
Forfeiture of restricted stock		(295	)		—		—			—			—			—			—			—			(3,940	)		—		—			—			—			—			—			—
Repurchase and retirement of common stock		(8,614	)		—		(479	)		—			—			(479	)		—			(479	)
Dilution from subsidiary stock-based compensation		—			—		—			—			—			—			619			619			—			—		—			—			—			—			667			667
Common stock dividends ($0.40 per share)		—			—		—			(3,437	)		—			(3,437	)		—			(3,437	)		—			—		—			(3,426	)		—			(3,426	)		—			(3,426	)
Stock-based compensation		—			—		1,209			—			—			1,209			—			1,209			—			—		1,110			—			—			1,110			—			1,110
Balance at June 30, 2023		8,594,764		$	—	$	1,062		$	194,034		$	(6,718	)	$	188,378		$	256		$	188,634
Additional paid-in capital shortfall adjustment allocated to retained income																									—			—		(1	)		1			—			—			—			—
Balance at September 30, 2023																									8,590,824		$	—	$	2,171		$	203,766		$	(5,997	)	$	199,940		$	1,117		$	201,057

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Equity – (Continued)

For the Three Months Ended ~~June~~September 30, 2022

(Unaudited)

(Dollar amounts in thousands, except per share amount)


	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Loss,			Total Stockholders’			Noncontrolling			Total			Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive 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 March 31, 2022		10,125,927		$	—	$	79,131		$	243,647		$	(2,185	)	$	320,593		$	1,435		$	322,028
Balance at June 30, 2022																									9,047,972		$	—	$	12,887		$	229,621		$	(3,760	)	$	238,748		$	1,187		$	239,935
Net loss		—			—		—			(7,885	)		—			(7,885	)		(657	)		(8,542	)		—			—		—			(48,846	)		—			(48,846	)		(2,657	)		(51,503	)
Net income attributable to redeemable noncontrolling interest		—			—		—			(2,096	)		—			(2,096	)		(172	)		(2,268	)		—			—		—			(2,113	)		—			(2,113	)		(172	)		(2,285	)
Total other comprehensive loss, net of income taxes		—			—		—			—			(1,575	)		(1,575	)		(54	)		(1,629	)		—			—		—			—			(7,035	)		(7,035	)		(266	)		(7,301	)
Issuance of restricted stock		3,000			—		—			—			—			—			—			—
Forfeiture of restricted stock		(700	)		—		—			—			—			—			—			—			(1,665	)		—		—			—			—			—			—			—
Repurchase and retirement of common stock		(1,050,790	)		—		(67,705	)		—			—			(67,705	)		—			(67,705	)
Repurchase and retirement of common stock under share repurchase plan		(29,465	)		—		(1,884	)		—			—			(1,884	)		—			(1,884	)		(119,462	)		—		(6,179	)		—			—			(6,179	)		—			(6,179	)
Dilution from subsidiary stock-based compensation		—			—		—			—			—			—			635			635			—			—		—			—			—			—			852			852
Common stock dividends ($0.40 per share)		—			—		—			(4,045	)		—			(4,045	)		—			(4,045	)		—			—		—			(3,606	)		—			(3,606	)		—			(3,606	)
Stock-based compensation		—			—		3,345			—			—			3,345			—			3,345			—			—		3,261			—			—			3,261			—			3,261
Balance at June 30, 2022		9,047,972		$	—	$	12,887		$	229,621		$	(3,760	)	$	238,748		$	1,187		$	239,935
Balance at September 30, 2022																									8,926,845		$	—	$	9,969		$	175,056		$	(10,795	)	$	174,230		$	(1,056	)	$	173,174

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Equity – (Continued)

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2023

(Unaudited)

(Dollar amounts in thousands, except per share amount)


	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Loss,			Total Stockholders’			Noncontrolling			Total			Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive 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 December 31, 2022		8,598,682		$	—	$	—		$	172,482		$	(9,886	)	$	162,596		$	(1,342	)	$	161,254			8,598,682		$	—	$	—		$	172,482		$	(9,886	)	$	162,596		$	(1,342	)	$	161,254
Net income		—			—		—			32,101			—			32,101			574			32,675			—			—		—			47,446			—			47,446			898			48,344
Net income attributable to redeemable noncontrolling interest		—			—		—			(4,320	)		—			(4,320	)		(341	)		(4,661	)		—			—		—			(6,508	)		—			(6,508	)		(502	)		(7,010	)
Total other comprehensive income, net of income taxes		—			—		—			—			3,168			3,168			115			3,283			—			—		—			—			3,889			3,889			146			4,035
Issuance of restricted stock		13,000			—		—			—			—			—			—			—			13,000			—		—			—			—			—			—			—
Forfeiture of restricted stock		(2,420	)		—		—			—			—			—			—			—			(6,360	)		—		—			—			—			—			—			—
Repurchase and retirement of common stock		(14,498	)		—		(784	)		—			—			(784	)		—			(784	)		(14,498	)		—		(784	)		—			—			(784	)		—			(784	)
Dilution from subsidiary stock-based compensation		—			—		—			—			—			—			1,250			1,250			—			—		—			—			—			—			1,917			1,917
Common stock dividends ($0.80 per share)		—			—		—			(6,869	)		—			(6,869	)		—			(6,869	)
Common stock dividends ($1.20 per share)																									—			—		—			(10,295	)		—			(10,295	)		—			(10,295	)
Stock-based compensation		—			—		2,486			—			—			2,486			—			2,486			—			—		3,596			—			—			3,596			—			3,596
Additional paid-in capital shortfall adjustment allocated to retained income		—			—		(640	)		640			—			—			—			—			—			—		(641	)		641			—			—			—			—
Balance at June 30, 2023		8,594,764		$	—	$	1,062		$	194,034		$	(6,718	)	$	188,378		$	256		$	188,634
Balance at September 30, 2023																									8,590,824		$	—	$	2,171		$	203,766		$	(5,997	)	$	199,940		$	1,117		$	201,057

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Equity – (Continued)

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2022

(Unaudited)

(Dollar amounts in thousands, except per share amount)


	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Income (Loss),			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 December 31, 2021		10,131,399		$	—	$	76,077		$	246,790		$	498		$	323,365		$	1,138		$	324,503			10,131,399		$	—	$	76,077		$	246,790		$	498		$	323,365		$	1,138		$	324,503
Net loss		—			—		—			(4,907	)		—			(4,907	)		(844	)		(5,751	)		—			—		—			(53,753	)		—			(53,753	)		(3,501	)		(57,254	)
Net income attributable to redeemable noncontrolling interest		—			—		—			(4,171	)		—			(4,171	)		(345	)		(4,516	)		—			—		—			(6,284	)		—			(6,284	)		(517	)		(6,801	)
Total other comprehensive loss, net of income taxes		—			—		—			—			(4,258	)		(4,258	)		(155	)		(4,413	)		—			—		—			—			(11,293	)		(11,293	)		(421	)		(11,714	)
Issuance of restricted stock		7,000			—		—			—			—			—			—			—			7,000			—		—			—			—			—			—			—
Forfeiture of restricted stock		(3,965	)		—		—			—			—			—			—			—			(5,630	)		—		—			—			—			—			—			—
Repurchase and retirement of common stock		(1,056,997	)		—		(68,103	)		—			—			(68,103	)		—			(68,103	)		(1,056,997	)		—		(68,103	)		—			—			(68,103	)		—			(68,103	)
Repurchase and retirement of common stock under share repurchase plan		(29,465	)		—		(1,884	)		—			—			(1,884	)		—			(1,884	)		(148,927	)		—		(8,063	)		—			—			(8,063	)		—			(8,063	)
Dilution from subsidiary stock-based compensation		—			—		—			—			—			—			1,393			1,393			—			—		—			—			—			—			2,245			2,245
Common stock dividends ($0.80 per share)		—			—		—			(8,091	)		—			(8,091	)		—			(8,091	)
Common stock dividends ($1.20 per share)																									—			—		—			(11,697	)		—			(11,697	)		—			(11,697	)
Stock-based compensation		—			—		6,797			—			—			6,797			—			6,797			—			—		10,058			—			—			10,058			—			10,058
Balance at June 30, 2022		9,047,972		$	—	$	12,887		$	229,621		$	(3,760	)	$	238,748		$	1,187		$	239,935
Balance at September 30, 2022																									8,926,845		$	—	$	9,969		$	175,056		$	(10,795	)	$	174,230		$	(1,056	)	$	173,174

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)


	Six Months Ended						Nine Months Ended
	June 30,						September 30,
	2023			2022			2023			2022
Cash flows from operating activities:
Net income (loss) after noncontrolling interests	$	27,781		$	(9,078	)	$	40,938		$	(60,037	)
Net income attributable to noncontrolling interests		4,894			3,327			7,406			2,783
Net income (loss)		32,675			(5,751	)		48,344			(57,254	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation expense		3,973			8,579			5,813			12,709
Net accretion of discount on investments in fixed-maturity securities		(1,671	)		(189	)		(3,332	)		(922	)
Depreciation and amortization		4,229			3,495			6,201			5,659
Deferred income tax expense (benefit)		3,810			(4,080	)		5,367			(9,880	)
Net realized investment losses		1,379			320			1,586			1,204
Net unrealized investment (gains) losses		(1,426	)		7,810			(385	)		8,157
Credit loss expense - reinsurance recoverable		(102	)		(28	)
Credit loss (recovery) expense - reinsurance recoverable								(135	)		361
Net income from unconsolidated joint venture		—			(495	)		—			(495	)
Distribution received from unconsolidated joint venture								—			489
Net income from limited partnership interests		(542	)		(1,799	)		(648	)		(3,064	)
Distributions received from limited partnership interests		421			2,046			844			2,417
Loss on extinguishment of debt		177			—			177			—
Gain on involuntary conversion								—			(13,402	)
Gain on sales of real estate investments		(8,936	)		—			(8,936	)		(376	)
Foreign currency remeasurement (gain) loss		(1	)		50
Foreign currency remeasurement loss								49			91
Other non-cash items		87			(405	)		72			(38	)
Changes in operating assets and liabilities:
Accrued interest and dividends receivable		(338	)		(1,068	)		(1,939	)		(1,679	)
Income taxes		3,017			2,295			(1,568	)		(4,050	)
Premiums receivable, net		(5,308	)		15,855			(7,123	)		16,395
Prepaid reinsurance premiums		(48,035	)		(54,668	)		(30,598	)		(78,184	)
Reinsurance recoverable		137,770			23,196			196,530			(876,707	)
Deferred policy acquisition costs		415			9,390			490			9,437
Funds withheld for assumed business		3,005			(8,752	)		4,011			6,403
Other assets		(14,614	)		(12,707	)		(18,153	)		(11,317	)
Losses and loss adjustment expenses		(114,810	)		1,659			(154,676	)		964,677
Unearned premiums		17,823			3,396			27,780			12,865
Advance premiums		8,250			11,657			13,663			14,901
Reinsurance payable on paid losses and loss adjustment expenses		(1,563	)		285			(1,563	)		(971	)
Reinsurance recovered in advance on unpaid losses		(19,863	)		—			(19,863	)		—
Ceded reinsurance premiums payable		(12,255	)		5,323			(17,643	)		(19,318	)
Accrued expenses and other liabilities		18,377			16,215			32,956			3,631
Net cash provided by operating activities		5,944			21,629
Net cash provided by (used in) operating activities								77,321			(18,261	)

(continued)

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows – (Continued)

(Unaudited)

(Amounts in thousands)


	Six Months Ended						Nine Months Ended
	June 30,						September 30,
	2023			2022			2023			2022
Cash flows from investing activities:
Investments in limited partnership interests		—			(1,144	)		(756	)		(1,357	)
Return of excess investments in limited partnership interests		112			—
Distributions received from limited partnership interests		2,596			2,335			3,088			4,732
Distribution received from unconsolidated joint venture		18			—			18			351
Purchase of property and equipment		(2,762	)		(4,229	)		(5,184	)		(5,431	)
Purchase of real estate investments		(744	)		(111	)		(2,320	)		(445	)
Purchase of intangible assets		—			(3,800	)		(1,786	)		(3,800	)
Purchase of fixed-maturity securities		(227,540	)		(377,638	)		(264,504	)		(393,145	)
Purchase of equity securities		(10,271	)		(16,383	)		(15,989	)		(20,921	)
Purchase of short-term and other investments		(81	)		—			(81	)		(32	)
Compensation received for property relinquished through eminent domain								—			14,500
Proceeds from sales of real estate investments		21,746			667			21,746			667
Proceeds from sales of fixed-maturity securities		12,083			11,494			17,409			11,694
Proceeds from calls, repayments and maturities of fixed-maturity securities		258,207			4,020			263,654			52,023
Proceeds from sales of equity securities		6,277			24,427			10,385			29,316
Proceeds from sales, redemptions and maturities of short-term and other investments		34			267			34			496
Net cash provided by (used in) investing activities		59,675			(360,095	)		25,714			(311,352	)
Cash flows from financing activities:
Cash dividends paid		(6,869	)		(8,168	)		(10,295	)		(11,774	)
Cash dividends received under share repurchase forward contract		—			77			—			77
Net repayment under revolving credit facility		—			(15,000	)		—			(15,000	)
Cash dividends paid to redeemable noncontrolling interest		(3,012	)		(2,508	)		(6,762	)		(5,508	)
Proceeds from issuance of long-term debt		12,000			172,500			12,000			172,500
Repayment of long-term debt		(328	)		(501	)		(437	)		(754	)
Redemption of long-term debt		(6,895	)		—			(6,895	)		—
Repurchases of common stock		(784	)		(68,103	)		(784	)		(68,103	)
Repurchases of common stock under share repurchase plan		—			(1,884	)		—			(8,063	)
Purchase of noncontrolling interests		(237	)		(389	)		(300	)		(406	)
Debt issuance costs		(277	)		(5,757	)		(279	)		(6,014	)
Net cash (used in) provided by financing activities		(6,402	)		70,267			(13,752	)		56,955
Effect of exchange rate changes on cash		(2	)		(56	)		(40	)		(86	)
Net increase (decrease) in cash, cash equivalents, and restricted cash		59,215			(268,255	)		89,243			(272,744	)
Cash, cash equivalents, and restricted cash at beginning of period		237,763			631,343			237,763			631,343
Cash, cash equivalents, and restricted cash at end of period	$	296,978		$	363,088		$	327,006		$	358,599

(continued)

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows – (Continued)

(Unaudited)

(Amounts in thousands)


	Six Months Ended					Nine Months Ended
	June 30,					September 30,
	2023		2022			2023		2022
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	3,958	$	55		$	11,405	$	100
Cash paid for interest	$	4,370	$	943		$	4,933	$	1,665
Non-cash investing and financing activities:
Unrealized gain (loss) on investments in available-for-sale securities, net of tax	$	3,283	$	(4,413	)	$	4,035	$	(11,714	)
Sale of real estate investments:
Contingent consideration receivable	$	125	$	—		$	125	$	—
Long-term debt obligations assumed by the buyer	$	8,995	$	—		$	8,995	$	—
Receivable from sales of equity securities	$	488	$	1,051
Payable on purchases of equity securities	$	757	$	1,050
Receivable from maturities of fixed-maturity securities						$	53,000	$	—
Purchase of real estate investments and intangible assets:
Assumed liability						$	4	$	—
Acquisition of intangibles:
Contingent consideration payable	$	—	$	1,069		$	—	$	1,069

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Note 1 -- Nature of Operations

HCI Group, Inc., together with its subsidiaries (“HCI” or the “Company”), is primarily engaged in the property and casualty insurance business through two Florida domiciled insurance companies, Homeowners Choice Property & Casualty Insurance Company, Inc. (“HCPCI”) and TypTap Insurance Company (“TypTap”). Both HCPCI and TypTap are authorized to underwrite various homeowners’ property and casualty insurance products and allied lines business in the state of Florida and in other states. The operations of each insurance subsidiary are supported by HCI Group, Inc. and certain HCI subsidiaries. The operations of TypTap are also supported by TypTap Insurance Group, Inc. (“TTIG”), the Company’s majority-owned subsidiary, and certain TTIG subsidiaries. The Company emphasizes the use of internally developed technologies to collect and analyze claims and other supplemental data to assist in the underwriting process and generate savings as well as efficiency for the operations of the insurance subsidiaries. In addition, Greenleaf Capital, LLC, the Company’s real estate subsidiary, is primarily engaged in the business of owning and leasing real estate and operating marina facilities.

On April 19, 2023, the Company incorporated a new property and casualty insurance subsidiary, Tailrow Insurance Company (“Tailrow”), in the State of Florida. Tailrow currently has no operations.

Note 2 -- Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of HCI Group, Inc. and its majority-owned and controlled subsidiaries (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and the Securities and Exchange Commission (“SEC”) rules for interim financial reporting. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. However, in the opinion of management, the accompanying consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the Company’s financial position as of ~~June~~September 30, 2023 and the results of operations and cash flows for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results of operations to be expected for any subsequent interim period or for the fiscal year ending December 31, 2023. The accompanying unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022 included in the Company’s Form 10-K, which was filed with the SEC on March 10, 2023.

In preparing the interim unaudited consolidated financial statements, management was required to make certain judgments, assumptions, and estimates that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the financial reporting date and throughout the periods being reported upon. Certain of the estimates result from judgments that can be subjective and complex, and consequently actual results may differ from these estimates.

Material estimates that are particularly susceptible to significant change in the near term are related to the Company’s losses and loss adjustment expenses, which include amounts estimated for claims incurred but not yet reported. The Company uses various assumptions and actuarial data it believes to be reasonable under the circumstances to make these estimates. In addition, accounting policies specific to reinsurance with retrospective provisions, reinsurance recoverable, deferred income taxes, limited partnership investments, allowance for credit

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

losses, and stock-based compensation expense involve significant judgments and estimates material to the Company’s consolidated financial statements.

In the case of assumed business, the Company relies entirely on the ceding insurance company to provide information about premiums, losses, and loss adjustment expenses. When the information is not available at the reporting date, the Company will make estimates based on all recent available data. Accordingly, the actual results could differ significantly from those estimates.

All significant intercompany balances and transactions have been eliminated.

Revenue from Claims Processing Services

Revenue related to claims processing services is included in other revenue in the consolidated statements of income. For the three and ~~six~~nine months ended ~~June~~September 30, 2023, revenues from claims processing services were $~~177~~4 and $~~704~~708, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2022, revenues from claims processing services were $~~372~~903 and $~~1,379~~2,282, respectively.

Note 3 -- Recent Accounting Pronouncements

Accounting Standards Update No. 2023-01. In March 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-01 (“ASU 2023-01”) Leases (Topic 842): Common Control Arrangements. For public entities, this update amends the required amortization period for leasehold improvements associated with common control leases to be over the useful life of the leasehold improvements to the common control group, regardless of the lease term, as long as the lessee controls the use of the asset through a lease. In addition, if the lessor is sub-leasing the asset while simultaneously leasing the asset from an entity not within the same common control group, the amortization period may not exceed the amortization period of the common control group. Once the lessee no longer controls the use of the asset, the asset will be accounted for as a transfer between entities under common control through an adjustment to equity. ASU 2023-01 is effective for the Company beginning with the first quarter of 2024. The Company ~~is evaluating the impact of~~does not expect this update will have a material impact on its future financial position.

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.


	June 30,		December 31,		September 30,		December 31,
	2023		2022		2023		2022
Cash and cash equivalents	$	293,991	$	234,863	$	324,019	$	234,863
Restricted cash		2,987		2,900		2,987		2,900
Total	$	296,978	$	237,763	$	327,006	$	237,763

Restricted cash represents funds in the Company’s sole ownership primarily held by certain states to meet regulatory requirements in which the Company’s insurance subsidiaries conduct business 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 and are included in funds withheld for assumed business on the consolidated balance sheets.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

In connection with the sale of the retail shopping center investment property in Melbourne, Florida as described in Note 5 -- “Investments” under Real Estate Investments, $87 of restricted cash was deposited in escrow in March 2023 with its release contingent on certain post-sale conditions being met.

Note 5 -- Investments

a) Available-for-Sale Fixed-Maturity Securities

The Company holds investments in fixed-maturity securities that are classified as available-for-sale. At ~~June~~September 30, 2023 and December 31, 2022, 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 June 30, 2023
As of September 30, 2023
U.S. Treasury and U.S. government agencies	$	423,301	$	—	$	9	$	(8,115	)	$	415,195	$	398,492	$	—	$	2	$	(6,923	)	$	391,571
Corporate bonds		27,674		—		6		(1,290	)		26,390		27,672		—		1		(1,425	)		26,248
States, municipalities, and political subdivisions		899		—		—		(2	)		897		405		—		—		—			405
Exchange-traded debt		494		—		—		(2	)		492		494		—		—		(42	)		452
Total	$	452,368	$	—	$	15	$	(9,409	)	$	442,974	$	427,063	$	—	$	3	$	(8,390	)	$	418,676
As of December 31, 2022
U.S. Treasury and U.S. government agencies	$	463,648	$	—	$	59	$	(9,105	)	$	454,602	$	463,648	$	—	$	59	$	(9,105	)	$	454,602
Corporate bonds		28,378		—		20		(1,205	)		27,193		28,378		—		20		(1,205	)		27,193
States, municipalities, and political subdivisions		1,389		—		—		(6	)		1,383		1,389		—		—		(6	)		1,383
Exchange-traded debt		683		—		2		(52	)		633		683		—		2		(52	)		633
Redeemable preferred stock		99		—		—		(9	)		90		99		—		—		(9	)		90
Total	$	494,197	$	—	$	81	$	(10,377	)	$	483,901	$	494,197	$	—	$	81	$	(10,377	)	$	483,901

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 ~~June~~September 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023				December 31, 2022				September 30, 2023				December 31, 2022
	Cost or		Estimated		Cost or		Estimated		Cost or		Estimated		Cost or		Estimated
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale
Due in one year or less	$	281,316	$	279,166	$	266,170	$	265,353	$	251,810	$	250,533	$	266,170	$	265,353
Due after one year through five years		167,454		160,590		223,153		214,307		171,795		165,188		223,153		214,307
Due after five years through ten years		3,104		2,726		4,380		3,797		2,964		2,504		4,380		3,797
Due after ten years		494		492		494		444		494		451		494		444
	$	452,368	$	442,974	$	494,197	$	483,901	$	427,063	$	418,676	$	494,197	$	483,901

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Securities on Deposit

The fair value of fixed-maturity securities on deposit with various regulatory authorities at ~~June~~September 30, 2023 and December 31, 2022 was $~~1,756~~1,760 and $1,100, respectively.

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 ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 were as follows:

Gross
Realized

Gross
Realized

Proceeds

Gains

Losses

Three months ended June 30, 2023

$
1,023

$
—

$
(12
)
Three months ended June 30, 2022

$
2,436

$
11

$
(3
)
Six months ended June 30, 2023

$
12,083

$
—

$
(750
)
Six months ended June 30, 2022

$
11,494

$
13

$
(434
)


			Gross Realized		Gross Realized
	Proceeds		Gains		Losses
Three months ended September 30, 2023	$	5,326	$	—	$	(157	)
Three months ended September 30, 2022	$	200	$	—	$	(5	)
Nine months ended September 30, 2023	$	17,409	$	—	$	(907	)
Nine months ended September 30, 2022	$	11,694	$	13	$	(439	)

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

Securities with gross unrealized loss positions at ~~June~~September 30, 2023 and December 31, 2022, 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 June 30, 2023	Loss			Value		Loss			Value		Loss			Value
As of September 30, 2023																Loss			Value		Loss			Value		Loss			Value
U.S. Treasury and U.S. government agencies	$	(3,466	)	$	294,688	$	(4,649	)	$	116,487	$	(8,115	)	$	411,175	$	(387	)	$	188,662	$	(6,536	)	$	200,913	$	(6,923	)	$	389,575
Corporate bonds		(477	)		15,101		(813	)		10,483		(1,290	)		25,584		(120	)		5,835		(1,305	)		20,278		(1,425	)		26,113
States, municipalities, and political subdivisions		(2	)		897		—			—		(2	)		897
Exchange-traded debt		(2	)		492		—			—		(2	)		492		(42	)		452		—			—		(42	)		452
Total available-for-sale securities	$	(3,947	)	$	311,178	$	(5,462	)	$	126,970	$	(9,409	)	$	438,148	$	(549	)	$	194,949	$	(7,841	)	$	221,191	$	(8,390	)	$	416,140


	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, 2022	Loss			Value		Loss			Value		Loss			Value
U.S. Treasury and U.S. government agencies	$	(8,701	)	$	269,116	$	(404	)	$	4,644	$	(9,105	)	$	273,760
Corporate bonds		(909	)		23,028		(296	)		2,541		(1,205	)		25,569
States, municipalities, and political subdivisions		(6	)		1,383		—			—		(6	)		1,383
Exchange-traded debt		(52	)		463		—			—		(52	)		463
Redeemable preferred stock		(9	)		90		—			—		(9	)		90
Total available-for-sale securities	$	(9,677	)	$	294,080	$	(700	)	$	7,185	$	(10,377	)	$	301,265

At September 30, 2023 and December 31, 2022, there were 100 and 84 securities, respectively, in an unrealized loss position.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

~~At June 30, 2023 and December 31, 2022, there were~~ 95 ~~and~~ 84 ~~securities, respectively, in an unrealized loss position.~~

Allowance for Credit Losses of Available-for-Sale Fixed-Maturity Securities

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-

•

the financial condition and near-term prospects of the issuer, including any specific events that may affect its operations or earnings;

•

the extent to which the market value of the security has been below its cost or amortized cost;

•

general market conditions and industry or sector specific factors and other qualitative factors;

•

nonpayment by the issuer of its contractually obligated interest and principal payments; and

•

the Company’s intent and ability to hold the investment for a period of time sufficient to allow for the recovery of costs.

There was no balance or activity in the allowance for credit losses of available-for-sale fixed-maturity securities during the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022.

b) Equity Securities

The Company holds investments in equity securities measured at fair values which are readily determinable. At ~~June~~September 30, 2023 and December 31, 2022, the cost, gross unrealized gains and losses, and estimated fair value of the Company’s equity securities were as follows:


			Gross Unrealized		Gross Unrealized			Estimated Fair				Gross Unrealized		Gross Unrealized			Estimated Fair
	Cost		Gain		Loss			Value		Cost		Gain		Loss			Value
June 30, 2023	$	39,953	$	3,177	$	(3,440	)	$	39,690
September 30, 2023										$	41,244	$	2,538	$	(3,842	)	$	39,940
December 31, 2022	$	36,272	$	2,078	$	(3,767	)	$	34,583	$	36,272	$	2,078	$	(3,767	)	$	34,583

The table below presents the portion of unrealized gains and losses in the Company’s consolidated statements of income related to equity securities still held.

Three Months Ended

Six Months Ended

June 30,

June 30,

2023

2022

2023

2022

Net gains (losses) recognized

$
730

$
(4,323
)

$
844

$
(7,865
)
Exclude: Net realized gains (losses)
recognized for securities sold

(167
)

(89
)

(582
)

(55
)
Net unrealized gains (losses) recognized

$
897

$
(4,234
)

$
1,426

$
(7,810
)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Net losses recognized	$	(1,091	)	$	(1,279	)	$	(247	)	$	(9,144	)
Exclude: Net realized losses recognized for securities sold		(50	)		(932	)		(632	)		(987	)
Net unrealized (losses) gains recognized	$	(1,041	)	$	(347	)	$	385		$	(8,157	)

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Sales of Equity Securities

Proceeds received, and the gross realized gains and losses from sales of equity securities, for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 were as follows:

Gross
Realized

Gross
Realized

Proceeds

Gains

Losses

Three months ended June 30, 2023

$
2,523

$
85

$
(252
)
Three months ended June 30, 2022

$
6,058

$
433

$
(522
)
Six months ended June 30, 2023

$
6,277

$
102

$
(684
)
Six months ended June 30, 2022

$
24,427

$
1,853

$
(1,908
)


			Gross Realized		Gross Realized
	Proceeds		Gains		Losses
Three months ended September 30, 2023	$	4,108	$	215	$	(265	)
Three months ended September 30, 2022	$	4,889	$	135	$	(1,067	)
Nine months ended September 30, 2023	$	10,385	$	317	$	(949	)
Nine months ended September 30, 2022	$	29,316	$	1,988	$	(2,975	)

c) Limited Partnership Investments

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:


	June 30, 2023						December 31, 2022						September 30, 2023						December 31, 2022
	Carrying		Unfunded				Carrying		Unfunded				Carrying		Unfunded				Carrying		Unfunded
Investment Strategy	Value		Balance		(%) (a)		Value		Balance		(%) (a)		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)	$	3,255	$	—		15.37	$	4,146	$	—		15.37	$	3,385	$	—		15.37	$	4,146	$	—		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)		2,320		—		1.25		2,528		—		1.66		2,312		—		1.25		2,528		—		1.66
High returns and long-term capital appreciation through investments in the power, utility and energy industries, and in the infrastructure sector. (b)(f)(g)		4,099		—		0.17		5,319		—		0.18		3,541		—		0.18		5,319		—		0.18
Value-oriented investments in less liquid and mispriced senior and junior debts of private equity-backed companies. (b)(h)(i)		3,240		—		0.55		3,470		—		0.56		3,269		—		0.55		3,470		—		0.56
Value-oriented investments in mature real estate private equity funds and portfolios globally. (b)(j)		7,751		2,891		1.32		7,457		3,125		1.32		7,678		2,543		1.32		7,457		3,125		1.32
Risk-adjusted returns on credit and equity investments, primarily in private equity-owned companies. (b)(k)		2,450		2,900		0.60		2,782		2,536		0.98		2,989		2,388		0.55		2,782		2,536		0.98
Total	$	23,115	$	5,791			$	25,702	$	5,661			$	23,174	$	4,931			$	25,702	$	5,661

(a)

Represents the Company’s percentage investment in the fund at each balance sheet date.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

(b)

Except under certain circumstances, withdrawals from the funds or any assignments are not permitted. Distributions, except income from late admission of a new limited partner, will be received when underlying investments of the funds are liquidated.

(c)

The term is expected to be two years following the maturity of the fund’s outstanding leverage. Although the capital commitment period has expired, follow-on investments and pending commitments may require additional fundings.

(d)

Effective July 1, 2023, this investment is in the process of winding down. Although the capital commitment period has ended, the general partner could still request an additional funding under certain circumstances.

(e)

At the fund manager’s discretion, the term of the fund may be extended for up to two additional one-year periods.

(f)

Expected to have a ten-year term. The capital commitment period has expired but the general partner may request additional funding for follow-on investment.

(g)

With the consent of a supermajority of partners, the term of the fund may be extended for up to three additional one-year periods.

(h)

Expected to have an eight-year term from the commencement date, which can be extended for up to two additional one-year periods with the consent of either the advisory committee or a majority of limited partners.

(i)

The capital commitment period has ended but an additional funding may be requested.

(j)

The term is expected to end November 27, 2027. The term may be extended for up to four additional one-year periods at the general partner’s discretion, and up to two additional one-year periods with the consent of the advisory committee.

(k)

Expected to have an eight-year term after the final admission date. The term may be extended for an additional one-year period at the general partner’s discretion, and up to two additional one-year periods with the consent of either the advisory committee or a majority of limited partners.

The following is the summary of aggregated unaudited financial information of limited partnerships included in the investment strategy table above, which in certain cases is presented on a three-month lag due to the unavailability of information at the Company’s respective balance sheet dates. The financial statements of these limited partnerships are audited annually.


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30,						June 30,						September 30,						September 30,
	2023			2022			2023			2022			2023			2022			2023			2022
Operating results:
Total income	$	(144,193	)	$	179,117		$	38,167		$	515,945		$	4,028		$	208,468		$	42,195		$	724,413
Total expenses		(24,840	)		(23,023	)		(27,097	)		(72,340	)		(24,066	)		(45,537	)		(51,163	)		(117,877	)
Net (loss) income	$	(169,033	)	$	156,094		$	11,070		$	443,605		$	(20,038	)	$	162,931		$	(8,968	)	$	606,536


	June 30,		December 31,		September 30,		December 31,
	2023		2022		2023		2022
Balance sheet:
Total assets	$	4,617,455	$	5,119,695	$	4,360,676	$	5,119,695
Total liabilities	$	442,233	$	430,354	$	255,622	$	430,354

For the three and nine months ended ~~June 30, 2023, the Company recognized net investment loss from limited partnerships of $~~11~~. For the six months ended June~~September 30, 2023, the Company recognized net investment income from limited partnerships of $~~542~~106. and $648, respectively. During the three and ~~six~~nine months ended ~~June~~September 30, 2023, the Company received total cash distributions of $~~1,112~~915 and $~~3,017~~3,932, respectively, including returns on investment of $~~118~~423 and $~~421~~844, respectively.

For the three and ~~six~~nine months ended ~~June~~September 30, 2022, the Company recognized net investment income of $191,265 and $~~1,799~~3,064, respectively. ~~Included in net investment income for~~During the three and ~~six~~nine months ended ~~June~~September 30, 2022, the Company

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

~~was an estimated unfavorable change in net asset value of $516. During the three and six months ended June 30, 2022, the Company~~ received total cash distributions of $~~2,785~~2,768 and $~~4,381~~7,149, respectively, including returns on investment of $~~1,235~~371 and $~~2,046~~2,417, respectively.

At ~~June~~September 30, 2023 and December 31, 2022, the Company’s net cumulative contributed capital to the partnerships at each respective balance sheet date totaled $~~22,271~~22,646 and $24,978, respectively, and the Company’s maximum exposure to loss aggregated $~~23,115~~23,174 and $25,702, respectively.

d) Investment in Unconsolidated Joint Venture

Melbourne FMA, LLC, a wholly owned subsidiary, had an equity investment in FMKT Mel JV, a Florida limited liability company treated as a joint venture under U.S. GAAP. In January 2023, the Company received the final distribution of $18 from FMKT Mel JV, the unconsolidated joint venture that the Company had a 90% equity interest in, which was liquidated on December 31, 2022. In June 2022, the joint venture sold its last remaining outparcel and recognized a gain on sale of $572.

e) Real Estate Investments

Real estate investments consist of the following as of ~~June~~September 30, 2023 and December 31, 2022:


	June 30,			December 31,			September 30,			December 31,
	2023			2022			2023			2022
Land	$	29,471		$	38,327		$	31,052		$	38,327
Land improvements		4,387			12,138			4,388			12,138
Buildings and building improvements		12,544			29,410			12,544			29,410
Tenant and leasehold improvements		1,839			1,742			1,846			1,742
Other		1,593			1,649			1,603			1,649
Total, at cost		49,834			83,266			51,433			83,266
Less: accumulated depreciation and amortization		(5,931	)		(11,878	)		(6,164	)		(11,878	)
Real estate investments	$	43,903		$	71,388		$	45,269		$	71,388

Since January 1, 2023, a Tampa office building property that was previously leased to an unaffiliated company has been used in operations by the Company and serves as TTIG’s corporate headquarters. As a result, in January 2023, $8,135 was reclassified out of real estate investments to property and equipment, net on the consolidated balance sheet.

On March 31, 2023, the Company closed on its agreement to sell the retail shopping center investment property in Melbourne, Florida for a price of $18,500, and also closed on its agreement to sell the retail shopping center investment property in Sorrento, Florida for a price of $13,418. ~~In May 2022, the Company sold one outparcel~~

On September 19, 2023, Grove Haines City, LLC, a real estate subsidiary of Greenleaf Capital, LLC, acquired vacant land in ~~Sorrento,~~Haines City, Florida and its associated leases for ~~net proceeds~~$3,393, including acquisition costs of $~~667~~100, and assumed a liability of $4. ~~See additional information under~~ Of the total costs, $~~f) Net Investment Income~~1,582 ~~below.~~was recognized as real estate investments. See Note 8 -- “Intangible Assets, Net” for information about the acquired leases. The land will be developed into a retail shopping center to be anchored by a well-known grocery store chain. The transaction was determined to be an asset acquisition. Thus, acquisition-related costs were capitalized and allocated among the assets acquired.

Depreciation and amortization expense related to real estate investments was $~~228~~233 and $~~483~~480 for the three months ended ~~June~~September 30, 2023 and 2022, respectively, and $~~681~~914 and $~~989~~1,469 for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

f) Net Investment Income

Net investment income (loss), by source, is summarized as follows:


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30,						June 30,						September 30,						September 30,
	2023			2022			2023			2022			2023			2022			2023			2022
Available-for-sale fixed-maturity securities	$	5,120		$	1,137		$	9,155		$	1,585		$	4,076		$	2,125		$	13,231		$	3,710
Equity securities		378			300			674			587			397			288			1,071			875
Investment expense		(125	)		(116	)		(254	)		(250	)		(126	)		(117	)		(380	)		(367	)
Limited partnership investments		(11	)		19			542			1,799			106			1,265			648			3,064
Real estate investments		270			1,538			9,563			1,885			248			13,897			9,811			15,782
Net income from unconsolidated joint venture		—			508			—			495			—			—			—			495
Cash and cash equivalents		3,162			298			6,829			451			4,683			1,072			11,512			1,523
Net investment income	$	8,794		$	3,684		$	26,509		$	6,552		$	9,384		$	18,530		$	35,893		$	25,082

For the ~~six~~nine months ended ~~June~~September 30, 2023, income from real estate investments included a net ~~realized~~ gain of $6,476 resulting from the sale of the retail shopping center investment property in Melbourne, Florida in March 2023 for a price of $18,500, and also included a net ~~realized~~ gain of $2,460 resulting from the sale of the retail shopping center investment property in Sorrento, Florida in March 2023 for a price of $13,418.

For the three ~~and six~~ months ended ~~June~~September 30, 2022, income from real estate investments included a net gain of $13,402 resulting from the sale of 1.5 acres of land in Tampa, Florida in July 2022 for net proceeds of $14,500 to the Florida Department of Transportation in connection with an eminent domain proceeding for a planned road improvement project. For the nine months ended September 30, 2022, in addition to the aforementioned sale of land, income from real estate investments included a net gain of $376 resulting from the sale of the outparcel ~~described under~~ ~~e) Real Estate Investments~~and $451 of income from selling the liquor license previously owned by the Company’s discontinued restaurant ~~business which was discontinued in 2020.~~business.

g) Other Investments

From time to time, the Company may invest in financial assets other than stocks, mutual funds, and bonds. For the three and ~~six~~nine months ended ~~June~~September 30, 2023, net realized losses related to other investments were $510 and $47, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2022, net realized gains were $7553 and $~~156~~209, respectively.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Note 6 -- Comprehensive Income (Loss)

Comprehensive income (loss) includes net income and other comprehensive income or loss, which for the Company includes changes in unrealized gains or losses of available-for-sale fixed-maturity securities carried at fair value and changes to any credit losses related to these investments. Reclassification adjustments for realized (gains) losses are reflected in net realized investment gains (losses) on the consolidated statements of income. The components of other comprehensive income or loss and the related tax effects allocated to each component were as follows:

Three Months Ended

Three Months Ended

June 30, 2023

June 30, 2022

Before

Income

Net of

Before

Income

Net of

Tax

Tax Effect

Tax

Tax

Tax Effect

Tax

Net unrealized losses

$
(2,263
)

$
(574
)

$
(1,689
)

$
(2,174
)

$
(551
)

$
(1,623
)
Reclassification adjustment for net
realized losses (gains)

12

3

9

(8
)

(2
)

(6
)
Total other comprehensive loss

$
(2,251
)

$
(571
)

$
(1,680
)

$
(2,182
)

$
(553
)

$
(1,629
)


	Three Months Ended						Three Months Ended
	September 30, 2023						September 30, 2022
	Before		Income		Net of		Before			Income		Net of
	Tax		Tax Effect		Tax		Tax			Tax Effect		Tax
Net unrealized gains (losses)	$	850	$	215	$	635	$	(5,969	)	$	1,336	$	(7,305	)
Reclassification adjustment for net realized losses		157		40		117		5			1		4
Total other comprehensive income (loss)	$	1,007	$	255	$	752	$	(5,964	)	$	1,337	$	(7,301	)


	Six Months Ended							Six Months Ended									Nine Months Ended							Nine Months Ended
	June 30, 2023							June 30, 2022									September 30, 2023							September 30, 2022
	Before		Income			Net of		Before			Income			Net of			Before		Income			Net of		Before			Income			Net of
	Tax		Tax Effect			Tax		Tax			Tax Effect			Tax			Tax		Tax Effect			Tax		Tax			Tax Effect			Tax
Net unrealized gains (losses)	$	152	$	(2,571	)	$	2,723	$	(6,325	)	$	(1,598	)	$	(4,727	)	$	1,002	$	(2,356	)	$	3,358	$	(12,294	)	$	(262	)	$	(12,032	)
Reclassification adjustment for net realized losses		750		190			560		421			107			314			907		230			677		426			108			318
Total other comprehensive income (loss)	$	902	$	(2,381	)	$	3,283	$	(5,904	)	$	(1,491	)	$	(4,413	)	$	1,909	$	(2,126	)	$	4,035	$	(11,868	)	$	(154	)	$	(11,714	)

Note 7 -- 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.

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.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Restricted Cash

Restricted cash represents cash held by state authorities or deposited in escrow. Its 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

From time to time, the Company has an amount outstanding under a revolving credit facility. The interest rate is variable and is periodically adjusted based on the Secured Overnight Financing Rate (“SOFR”) plus a ten basis points adjustment plus a margin based on the debt-to-capital ratio. As a result, carrying value, when outstanding, 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
4.75% Convertible Senior Notes	2042	Quoted price
4.25% Convertible Senior Notes	2037	Quoted price
3.90% Promissory Note	*	Discounted cash flow method/Level 3 inputs
3.75% Callable Promissory Note	*	Discounted cash flow method/Level 3 inputs
4.55% Promissory Note	2036	Discounted cash flow method/Level 3 inputs
5.50% Promissory Note	2033	Discounted cash flow method/Level 3 inputs


*	Debt derecognized in March 2023. See Note 11 -- “Long-Term Debt” for additional information.

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 tables present information about the Company’s financial assets measured at estimated fair value on a recurring basis. The tables indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of ~~June~~September 30, 2023 and December 31, 2022:


	Fair Value Measurements Using								Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)		Total
As of June 30, 2023
As of September 30, 2023
Financial Assets:
Cash and cash equivalents	$	293,991	$	—	$	—	$	293,991	$	324,019	$	—	$	—	$	324,019
Restricted cash	$	2,987	$	—	$	—	$	2,987	$	2,987	$	—	$	—	$	2,987
Fixed-maturity securities:
U.S. Treasury and U.S. government agencies	$	407,370	$	7,825	$	—	$	415,195	$	383,780	$	7,791	$	—	$	391,571
Corporate bonds		26,390		—		—		26,390		26,248		—		—		26,248
State, municipalities, and political subdivisions		—		897		—		897		—		405		—		405
Exchange-traded debt		492		—		—		492		452		—		—		452
Total available-for-sale securities	$	434,252	$	8,722	$	—	$	442,974	$	410,480	$	8,196	$	—	$	418,676
Equity securities	$	39,690	$	—	$	—	$	39,690	$	39,940	$	—	$	—	$	39,940


	Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total
As of December 31, 2022
Financial Assets:
Cash and cash equivalents	$	234,863	$	—	$	—	$	234,863
Restricted cash	$	2,900	$	—	$	—	$	2,900
Fixed-maturity securities:
U.S. Treasury and U.S. government agencies	$	446,233	$	8,369	$	—	$	454,602
Corporate bonds		27,193		—		—		27,193
State, municipalities, and political subdivisions		—		1,383		—		1,383
Exchange-traded debt		633		—		—		633
Redeemable preferred stock		90		—		—		90
Total available-for-sale securities	$	474,149	$	9,752	$	—	$	483,901
Equity securities	$	34,583	$	—	$	—	$	34,583

Liabilities Carried at Other Than Fair Value

The following tables present fair value information for liabilities that are carried on the consolidated balance sheets at amounts other than fair value as of ~~June~~September 30, 2023 and December 31, 2022:


	Carrying		Fair Value Measurements Using						Estimated		Carrying		Fair Value Measurements Using						Estimated
	Value		(Level 1)		(Level 2)		(Level 3)		Fair Value		Value		(Level 1)		(Level 2)		(Level 3)		Fair Value
As of June 30, 2023
As of September 30, 2023
Financial Liabilities:
Long-term debt:
4.75% Convertible Senior Notes	$	167,671	$	—	$	172,205	$	—	$	172,205	$	167,948	$	—	$	162,630	$	—	$	162,630
4.25% Convertible Senior Notes		23,916		—		25,596		—		25,596		23,916		—		24,405		—		24,405
5.50% Promissory Note		11,792		—		—		11,242		11,242		11,759		—		—		10,955		10,955
4.55% Promissory Note		4,771		—		—		4,354		4,354		4,706		—		—		4,220		4,220
Total long-term debt	$	208,150	$	—	$	197,801	$	15,596	$	213,397	$	208,329	$	—	$	187,035	$	15,175	$	202,210

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, 2022
Financial Liabilities:
Long-term debt:
4.75% Convertible Senior Notes	$	167,126	$	—	$	133,167	$	—	$	133,167
4.25% Convertible Senior Notes		23,916		—		19,473		—		19,473
3.90% Promissory Note		8,943		—		—		8,152		8,152
3.75% Callable Promissory Note		6,789		—		—		6,171		6,171
4.55% Promissory Note		4,900		—		—		4,642		4,642
Total long-term debt	$	211,674	$	—	$	152,640	$	18,965	$	171,605

Note 8 -- Intangible Assets, Net

The Company’s intangible assets, net consist of the following:


	June 30,			December 31,			September 30,			December 31,
	2023			2022			2023			2022
Anchor tenant relationships (a)	$	—		$	1,761		$	—		$	1,761
In-place leases		409			3,579			2,221			3,579
Policy renewal rights		10,100			10,100			10,100			10,100
Non-compete agreements (b)		314			314			314			314
Total, at cost		10,823			15,754			12,635			15,754
Less: accumulated amortization		(3,750	)		(5,176	)		(4,363	)		(5,176	)
Intangible assets, net	$	7,073		$	10,578		$	8,272		$	10,578

(a)

An anchor tenant is a tenant that attracts more customers than other tenants.

(b)

Fully amortized.

The remaining weighted-average amortization periods for the intangible assets as of ~~June~~September 30, 2023 are summarized in the table below:


In-place leases		~~11.8~~11.6 years
Policy renewal rights		~~2.8~~2.6 years

In connection with the sales of the retail shopping center investment properties in Melbourne, Florida and Sorrento, Florida as described in Note 5 -- “Investments” under Real Estate Investments, the Company derecognized $2,200 of intangible assets, net on March 31, 2023.

In connection with the purchase of the investment property in Haines City, Florida as described in Note 5 -- “Investments” under Real Estate Investments, the Company recognized $1,811 of in-place lease intangible assets on September 19, 2023.

At ~~June~~September 30, 2023 and December 31, 2022, contingent liabilities related to renewal rights intangible assets were $371 and are included in other liabilities on the consolidated balance sheets.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Note 9 -- Other Assets

The following table summarizes the Company’s other assets:


	June 30,		December 31,		September 30,		December 31,
	2023		2022		2023		2022
Benefits receivable related to retrospective reinsurance contracts	$	30,303	$	16,317	$	37,296	$	16,317
Reimbursement and fees receivable under TPA service		5,337		7,303		5,335		7,303
Prepaid expenses		3,529		2,826		3,376		2,826
Reinsurance premium adjustment receivable		3,457		—
Deposits		466		491		448		491
Lease acquisition costs, net		683		832		671		832
Other		1,970		3,902		1,572		3,902
Total other assets	$	45,745	$	31,671	$	48,698	$	31,671

Management reviewed the collectability of the reimbursement and fees receivable under third-party administrator (“TPA”) service as of ~~June~~September 30, 2023 and, considering the net balance due to the counterparty as well as the balance of funds withheld for assumed business as of ~~June~~September 30, 2023, determined that an allowance for credit losses is not necessary for the reimbursement and fees receivable under TPA service. See Note 23 -- “Subsequent Events” for additional information.

Note 10 -- Revolving Credit Facility

At ~~June~~September 30, 2023, the Company had no borrowings outstanding under the credit facility. For the three months ended ~~June~~September 30, 2023 and 2022, interest expense was $2321 and $6225, respectively, including $2221 and $2425 of amortization of issuance costs, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, interest expense was $4869 and $~~151~~176, respectively, including $4768 and $4974 of amortization of issuance costs, respectively. At ~~June~~September 30, 2023, the Company was in compliance with all required covenants and had available borrowing capacity of $50,000.

On June 2, 2023, the Company executed ~~the~~an Amended Credit Agreement. Under the terms of this agreement, the expiry date of the revolving commitment was extended to December 31, 2024 and the maximum debt-to-capital ratio as defined in the Amended Credit Agreement is set at 65% beginning with the first quarter of 2024.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(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:


	June 30,			December 31,			September 30,			December 31,
	2023			2022			2023			2022
4.75% Convertible Senior Notes, due June 1, 2042	$	172,500		$	172,500		$	172,500		$	172,500
4.25% Convertible Senior Notes, due March 1, 2037		23,916			23,916			23,916			23,916
3.90% Promissory Note, due through April 1, 2032		—			9,072			—			9,072
3.75% Callable Promissory Note, due through September 1, 2036		—			6,871			—			6,871
4.55% Promissory Note, due through August 1, 2036		4,836			4,968			4,768			4,968
5.50% Promissory Note, due through July 1, 2033		12,000			—			11,963			—
Finance lease liabilities, due through October 15, 2024		6			13			2			13
Total principal amount		213,258			217,340			213,149			217,340
Less: unamortized issuance costs		(5,102	)		(5,653	)		(4,818	)		(5,653	)
Total long-term debt	$	208,156		$	211,687		$	208,331		$	211,687

The following table summarizes future maturities of long-term debt as of ~~June~~September 30, 2023, which takes into consideration the assumption that the 4.75% Convertible Senior Notes and 4.25% Convertible Senior Notes are repurchased at their respective next earliest call dates:


Due in 12 months following June 30,
Due in 12 months following September 30,
2023	$	490	$	512
2024		530		536
2025		556		563
2026		197,001		197,008
2027		614		622
Thereafter		14,067		13,908
Total	$	213,258	$	213,149

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2023

2022

2023

2022

Interest Expense:

Contractual interest

$
2,367

$
1,334

$
4,864

$
1,806

Non-cash expense (a)

277

119

556

159

Total

$
2,644

$
1,453

$
5,420

$
1,965


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Interest Expense:
Contractual interest	$	2,522	$	2,516	$	7,386	$	4,322
Non-cash expense (a)		284		272		840		431
Total	$	2,806	$	2,788	$	8,226	$	4,753

(a)

Includes amortization of debt issuance costs.

4.25% Convertible Senior Notes

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 ~~June~~September 30, 2023, the conversion rate of the Company’s 4.25% Convertible Senior Notes was ~~16.5639~~16.578 shares of common stock for each $1 in principal amount, which was the equivalent of approximately $~~60.37~~60.32 per share.

~~There were~~ no ~~unamortized debt issuance costs for the 4.25% Convertible Senior Notes at June 30, 2023.~~

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

There were no unamortized debt issuance costs for the 4.25% Convertible Senior Notes at September 30, 2023.

4.75% Convertible Senior Notes

The conversion rate of the 4.75% Convertible Senior Notes issued in May 2022 is currently 12.4166 shares of common stock for each $1 in principal amount, which is the equivalent of approximately $80.54 per share.

The effective interest rate for the 4.75% Convertible Senior Notes, taking into account both cash and non-cash components, approximates 5.6%. Had a 20-year term been used for the amortization of the issuance costs of the 4.75% Convertible Senior Notes, the annual effective interest rate charged to earnings would have decreased to approximately 5.0%. As of ~~June~~September 30, 2023, the remaining amortization period of the debt issuance costs was expected to be ~~3.9~~3.7 years for the 4.75% Convertible Senior Notes.

3.90% Promissory Note

On March 31, 2023, in conjunction with the sale of the retail shopping center investment property in Melbourne, Florida for a price of $18,500, the buyer assumed the 3.90% Promissory Note from the Company which consisted of the $8,979 principal balance plus $16 of accrued interest at March 31, 2023.

3.75% Callable Promissory Note

On March 31, 2023, the Company made an early repayment of the entirety of its 3.75% Callable Promissory Note which included $6,775 of principal balance plus $22 of accrued interest. As a result, the Company incurred a $177 loss on extinguishment of debt. The note was collateralized by the retail shopping center investment property in Sorrento, Florida which was sold as described in Note 5 -- “Investments” under Real Estate Investments.

5.50% Promissory Note

On June 26, 2023, Gulf to Bay LM, LLC, a subsidiary of the Company, entered into a ten-year secured loan agreement for proceeds of $12,000. The loan is collateralized by the Company’s Clearwater, Florida real estate, which is owned by Gulf to Bay LM, LLC, and the lease agreements associated with this property. The loan bears a fixed annual interest rate of 5.50%. Approximately $74 of principal and interest is payable in 120 monthly installments. The promissory note may be repaid in full or in part after August 1, 2025 as long as the Company provides at least 30 days’ written notice and pays a prepayment consideration as specified in the loan agreement. The proceeds ~~will be~~are used for real estate development projects or other general business purposes.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Note 14 -- Segment Information

The Company identifies its operating divisions or segments based on managerial emphasis, organizational structure and revenue source. The Company has four 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 ~~June~~September 30, 2023 and 2022, revenues from the HCPCI insurance operations segment before intracompany elimination represented ~~65.1~~64.4% and ~~69.8~~60.5%, respectively, and revenues from the TypTap Group segment represented ~~33.4~~34.1% and ~~27.9~~29.9%, respectively, of total revenues of all operating segments. For the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, revenues from the HCPCI insurance operations segment before intracompany elimination represented ~~63.3~~63.7% and ~~69.8~~66.6%, respectively, and revenues from the TypTap Group segment represented ~~34.9~~34.6% and ~~28.1~~28.7%, respectively, of total revenues of all operating segments. At ~~June~~September 30, 2023 and December 31, 2022, HCPCI insurance operations’ total assets represented ~~56.3~~56.6% and 53.4%, respectively, and TypTap Group’s total assets represented ~~35.3~~34.6% and 37.9%, respectively, of the combined assets of all operating segments.

3132

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 June 30, 2023	Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
For Three Months Ended September 30, 2023																		Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
Revenue:
Gross premiums earned (c)	$	101,790		$	85,071		$	—	$	—		$	(4,915	)	$	181,946		$	107,890		$	86,233		$	—	$	—		$	(5,815	)	$	188,308
Premiums ceded		(40,453	)		(30,848	)		—		—			4,911			(66,390	)		(43,751	)		(28,216	)		—		—			5,815			(66,152	)
Net premiums earned		61,337			54,223			—		—			(4	)		115,556			64,139			58,017			—		—			—			122,156
Net income from investment portfolio		4,393			3,602			—		1,627			(161	)		9,461			3,373			3,210			—		1,735			(182	)		8,136
Policy fee income		551			918			—		—			—			1,469			533			559			—		—			—			1,092
Other		3,717			1,190			2,132		677			(6,875	)		841			3,949			1,184			2,355		526			(7,754	)		260
Total revenue		69,998			59,933			2,132		2,304			(7,040	)		127,327			71,994			62,970			2,355		2,261			(7,936	)		131,644
Expenses:
Losses and loss adjustment expenses		27,653			34,937			—		—			(700	)		61,890			29,819			37,324			—		—			(417	)		66,726
Amortization of deferred policy acquisition costs		10,000			11,422			—		—			—			21,422			10,313			11,373			—		—			—			21,686
Other policy acquisition expenses		617			597			—		—			(18	)		1,196			581			527			—		—			(26	)		1,082
Stock-based compensation expense		498			658			—		711			—			1,867			419			730			—		691			—			1,840
Interest expense		—			430			67		2,600			(430	)		2,667			—			431			226		2,601			(431	)		2,827
Depreciation and amortization		141			1,030			326		204			(236	)		1,465			141			1,036			329		160			(238	)		1,428
Personnel and other operating expenses		8,916			9,938			1,501		1,855			(5,656	)		16,554			10,137			9,317			1,486		1,851			(6,824	)		15,967
Total expenses		47,825			59,012			1,894		5,370			(7,040	)		107,061			51,410			60,738			2,041		5,303			(7,936	)		111,556
Income (loss) before income taxes	$	22,173		$	921		$	238	$	(3,066	)	$	—		$	20,266		$	20,584		$	2,232		$	314	$	(3,042	)	$	—		$	20,088
Total revenue from non-affiliates (d)	$	62,240		$	67,411		$	1,325	$	1,735								$	62,418		$	63,957		$	1,519	$	1,692
Gross premiums written	$	140,545		$	39,438													$	127,334		$	70,931

(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 under HCPCI Insurance Operations consist of $~~96,875~~102,075 from HCPCI and $~~4,915~~ ~~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

Insurance

TypTap

Real

Corporate/

Reclassification/

For Three Months Ended June 30, 2022

Operations

Group

Estate (a)

Other (b)

Elimination

Consolidated

Revenue:

Gross premiums earned (c)

$
115,636

$
67,443

$
—

$
—

$
(1,955
)

$
181,124

Premiums ceded

(36,979
)

(20,629
)

—

—

1,403

(56,205
)
Net premiums earned

78,657

46,814

—

—

(552
)

124,919

Net (loss) income from investment portfolio

(1,446
)

283

—

(1,228
)

1,835

(556
)
Policy fee income

628

424

—

—

—

1,052

Other

414

532

2,765

1,472

(4,672
)

511

Total revenue

78,253

48,053

2,765

244

(3,389
)

125,926

Expenses:

Losses and loss adjustment expenses

48,692

38,692

—

—

(554
)

86,830

Amortization of deferred policy acquisition costs

15,904

7,167

—

—

—

23,071

Other policy acquisition expenses

657

3,135

—

—

—

3,792

Stock-based compensation expense

1,187

897

—

2,158

—

4,242

Interest expense

—

211

224

1,291

(211
)

1,515

Depreciation and amortization

153

774

606

302

(600
)

1,235

Personnel and other operating expenses

7,760

8,526

626

1,913

(2,024
)

16,801

Total expenses

74,353

59,402

1,456

5,664

(3,389
)

137,486

Income (loss) before income taxes

$
3,900

$
(11,349
)

$
1,309

$
(5,420
)

$
—

$
(11,560
)
Total revenue from non-affiliates (d)

$
76,276

$
49,009

$
2,427

$
(359
)

Gross premiums written

$
113,139

$
73,013

~~(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 under HCPCI Insurance Operations consist of $113,681~~ ~~from HCPCI and $1,955~~5,815 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 Six Months Ended June 30, 2023	Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
For Three Months Ended September 30, 2022																		Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
Revenue:
Gross premiums earned (c)	$	198,781		$	172,683		$	—	$	—		$	(9,450	)	$	362,014		$	104,671		$	82,728		$	—	$	—		$	(5,686	)	$	181,713
Premiums ceded		(80,648	)		(65,671	)		—		—			9,420			(136,899	)		(46,157	)		(33,236	)		—		—			4,652			(74,741	)
Net premiums earned		118,133			107,012			—		—			(30	)		225,115			58,514			49,492			—		—			(1,034	)		106,972
Net income from investment portfolio		7,347			6,981			—		3,527			8,701			26,556			1,143			1,144			—		1,338			13,674			17,299
Gain from sales of real estate investments		—			—			8,936		—			(8,936	)		—
Gain on involuntary conversion																			—			—			13,402		—			(13,402	)		—
Policy fee income		1,114			1,445			—		—			—			2,559			613			458			—		—			—			1,071
Other		8,370			2,833			5,055		1,272			(15,404	)		2,126			1,246			512			2,785		717			(3,948	)		1,312
Total revenue		134,964			118,271			13,991		4,799			(15,669	)		256,356			61,516			51,606			16,187		2,055			(4,710	)		126,654
Expenses:
Losses and loss adjustment expenses		56,435			67,993			—		—			(1,973	)		122,455			73,228			62,153			—		—			4,413			139,794
Amortization of deferred policy acquisition costs		19,621			23,285			—		—			—			42,906			11,333			12,176			—		—			—			23,509
Other policy acquisition expenses		1,272			1,208			—		—			(48	)		2,432			748			450			—		—			(29	)		1,169
Stock-based compensation expense		994			1,487			—		1,492			—			3,973			1,049			869			—		2,212			—			4,130
Interest expense		—			861			270		5,198			(861	)		5,468			—			222			221		2,591			(221	)		2,813
Depreciation and amortization		280			1,986			953		406			(773	)		2,852			166			865			651		186			(596	)		1,272
Loss on extinguishment of debt		—			—			177		—			(177	)		—
Personnel and other operating expenses		18,835			19,371			3,055		3,444			(11,837	)		32,868			14,240			8,497			1,583		1,526			(8,277	)		17,569
Total expenses		97,437			116,191			4,455		10,540			(15,669	)		212,954			100,764			85,232			2,455		6,515			(4,710	)		190,256
Income (loss) before income taxes	$	37,527		$	2,080		$	9,536	$	(5,741	)	$	—		$	43,402
(Loss) income before income taxes																		$	(39,248	)	$	(33,626	)	$	13,732	$	(4,460	)	$	—		$	(63,602	)
Total revenue from non-affiliates (d)	$	119,169		$	128,697		$	12,376	$	3,661								$	55,801		$	55,803		$	15,848	$	1,440
Gross premiums written	$	225,698		$	154,139													$	119,400		$	71,781

(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 under HCPCI Insurance Operations consist of $~~189,331~~98,985 from HCPCI and $~~9,450~~5,686 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 Six Months Ended June 30, 2022	Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
For Nine Months Ended September 30, 2023																		Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
Revenue:
Gross premiums earned (c)	$	234,941		$	128,065		$	—	$	—		$	(2,957	)	$	360,049		$	306,671		$	258,916		$	—	$	—		$	(15,265	)	$	550,322
Premiums ceded		(73,932	)		(37,562	)		—		—			2,127			(109,367	)		(124,399	)		(93,887	)		—		—			15,235			(203,051	)
Net premiums earned		161,009			90,503			—		—			(830	)		250,682			182,272			165,029			—		—			(30	)		347,271
Net (loss) income from investment portfolio		(2,903	)		267			—		(912	)		1,970			(1,578	)
Net income from investment portfolio																			10,720			10,191			—		5,262			8,519			34,692
Gain from sales of real estate investments																			—			—			8,936		—			(8,936	)		—
Policy fee income		1,282			827			—		—			—			2,109			1,647			2,004			—		—			—			3,651
Other		1,661			1,001			5,168		2,308			(8,385	)		1,753			12,319			4,017			7,410		1,798			(23,158	)		2,386
Total revenue		161,049			92,598			5,168		1,396			(7,245	)		252,966			206,958			181,241			16,346		7,060			(23,605	)		388,000
Expenses:
Losses and loss adjustment expenses		92,687			67,680			—		—			(833	)		159,534			86,254			105,317			—		—			(2,390	)		189,181
Amortization of deferred policy acquisition costs		35,006			16,589			—		—			—			51,595			29,934			34,658			—		—			—			64,592
Other policy acquisition expenses		1,258			3,418			—		—			—			4,676			1,853			1,735			—		—			(74	)		3,514
Stock-based compensation expense		2,331			1,782			—		4,466			—			8,579			1,413			2,217			—		2,183			—			5,813
Interest expense		—			411			451		1,665			(411	)		2,116			—			1,292			496		7,799			(1,292	)		8,295
Depreciation and amortization		267			1,335			1,211		474			(1,223	)		2,064			421			3,022			1,282		566			(1,011	)		4,280
Loss on extinguishment of debt																			—			—			177		—			(177	)		—
Personnel and other operating expenses		15,140			16,019			1,933		3,647			(4,778	)		31,961			28,972			28,688			4,541		5,295			(18,661	)		48,835
Total expenses		146,689			107,234			3,595		10,252			(7,245	)		260,525			148,847			176,929			6,496		15,843			(23,605	)		324,510
Income (loss) before income taxes	$	14,360		$	(14,636	)	$	1,573	$	(8,856	)	$	—		$	(7,559	)	$	58,111		$	4,312		$	9,850	$	(8,783	)	$	—		$	63,490
Total revenue from non-affiliates (d)	$	158,009		$	93,832		$	4,491	$	90								$	181,587		$	192,654		$	13,895	$	5,353
Gross premiums written	$	204,280		$	159,166													$	353,032		$	225,070

(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 under HCPCI Insurance Operations consist of $~~231,984~~291,406 from HCPCI and $~~2,957~~15,265 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
	Insurance			TypTap			Real		Corporate/			Reclassification/
For Nine Months Ended September 30, 2022	Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
Revenue:
Gross premiums earned (c)	$	339,612		$	210,793		$	—	$	—		$	(8,643	)	$	541,762
Premiums ceded		(120,089	)		(70,798	)		—		—			6,779			(184,108	)
Net premiums earned		219,523			139,995			—		—			(1,864	)		357,654
Net (loss) income from investment portfolio		(1,760	)		1,411			—		426			15,644			15,721
Gain on involuntary conversion		—			—			13,402		—			(13,402	)		—
Policy fee income		1,895			1,285			—		—			—			3,180
Other		2,907			1,513			7,953		3,025			(12,333	)		3,065
Total revenue		222,565			144,204			21,355		3,451			(11,955	)		379,620
Expenses:
Losses and loss adjustment expenses		165,915			129,833			—		—			3,580			299,328
Amortization of deferred policy acquisition costs		46,339			31,403			—		—			—			77,742
Other policy acquisition expenses		2,090			1,230			—		—			(113	)		3,207
Stock-based compensation expense		3,380			2,651			—		6,678			—			12,709
Interest expense		—			633			672		4,256			(632	)		4,929
Depreciation and amortization		433			2,200			1,862		660			(1,819	)		3,336
Personnel and other operating expenses		29,296			24,516			3,516		5,173			(12,971	)		49,530
Total expenses		247,453			192,466			6,050		16,767			(11,955	)		450,781
Income (loss) before income taxes	$	(24,888	)	$	(48,262	)	$	15,305	$	(13,316	)	$	—		$	(71,161	)
Total revenue from non-affiliates (d)	$	213,810		$	149,635		$	20,339	$	1,530
Gross premiums written	$	323,680		$	230,947

(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 under HCPCI Insurance Operations consist of $330,969 from HCPCI and $8,643 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 on the consolidated balance sheets:


	June 30,			December 31,			September 30,			December 31,
	2023			2022			2023			2022
Segments:
HCPCI Insurance Operations	$	949,461		$	912,233		$	935,294		$	912,233
TypTap Group		652,306			704,429			632,103			704,429
Real Estate Operations		105,149			126,001			109,246			126,001
Corporate and Other		184,839			159,378			191,084			159,378
Consolidation and Elimination		(164,918	)		(98,713	)		(144,095	)		(98,713	)
Total assets	$	1,726,837		$	1,803,328		$	1,723,632		$	1,803,328

3536

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Note 15 -- Leases

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


	June 30,		December 31,		September 30,		December 31,
	2023		2022		2023		2022
Operating leases:
ROU assets	$	1,368	$	777	$	1,460	$	777
Liabilities	$	1,372	$	721	$	1,457	$	721
Finance leases:
ROU assets	$	68	$	80	$	6	$	80
Liabilities	$	6	$	13	$	2	$	13

The Company entered into a new lease effective March 2023 for its office space in Plantation, Florida which relates to its claims related administration. The lease has an initial term of 5.25 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	36 to 63 months	Yes	(a)
Office space	35 to 9 years	Yes	(a), (b)
Finance lease:
Office equipment	3 to 5 years	Not applicable	(c)

(a)

There are no variable lease payments.

(b)

Rent escalation provisions exist.

(c)

There is a bargain purchase option.

As of ~~June~~September 30, 2023, maturities of lease liabilities were as follows:


	Leases				Leases
	Operating		Finance		Operating		Finance
Due in 12 months following June 30,
Due in 12 months following September 30,
2023	$	251	$	5	$	283	$	2
2024		257		1		292		—
2025		267		—		302		—
2026		277		—		311		—
2027		272		—		246		—
Thereafter		308		—		278		—
Total lease payments		1,632		6		1,712		2
Less: interest		260		—		255		—
Total lease obligations	$	1,372	$	6	$	1,457	$	2

3637

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:


	Three Months Ended					Six Months Ended				Three Months Ended					Nine Months Ended
	June 30,					June 30,				September 30,					September 30,
	2023			2022		2023		2022		2023			2022		2023		2022
Lease costs:
Finance lease costs:
Amortization – ROU assets*	$	4		$	5	$	8	$	10	$	6		$	4	$	14	$	14
Operating lease costs*		77			282		129		656		74			281		203		937
Short-term lease costs*		74			91		167		201		94			105		261		306
Total lease costs	$	155		$	378	$	304	$	867	$	174		$	390	$	478	$	1,257
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – operating leases						$	73	$	648						$	144	$	924
Financing cash flows – finance leases						$	7	$	10						$	11	$	14

	June 30,									September 30,
	2023									2023
Weighted-average remaining lease term:
Finance leases (in years)		0.9									1.0
Operating leases (in years)		6.2									5.9
Weighted-average discount rate:
Finance leases (%)		3.2	%								2.4	%
Operating leases (%)		5.9	%								6.1	%

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

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


		Renewal	Other Terms
Class of Assets	Initial Term	Option	and Conditions
Operating lease:
Retail space	3 to 15 years	Yes	(d)
Boat docks/wet slips	1 to 12 months	Yes	(d)

(d)

There are no purchase options.

Note 16 -- Income Taxes

A valuation allowance must be established for deferred tax assets when it is more likely than not that the deferred tax assets will not be realized based on available evidence both positive and negative, including recent operating results, available tax planning strategies, and projected future taxable income. As of December 31, 2022, management concluded that it was more likely than not that the deferred tax assets would not be realized and therefore recorded a valuation allowance. The Company evaluates the realizability of its deferred tax assets each quarter, and during the first quarter of 2023, based on all of the available evidence, management concluded that it is more likely than not that the deferred tax assets will be realized and therefore is releasing the entire valuation allowance in 2023, as a part of the effective tax rate. During the three and ~~six~~nine months ended ~~June~~September 30, 2023, approximately $~~294~~657 and $~~1,184~~1,841, respectively, of valuation allowance was released through income tax expense.

3738

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

During the three months ended ~~June~~September 30, 2023, the Company recorded approximately $~~5,384~~4,419 of income tax expense, which resulted in an effective tax rate of ~~26.6~~22.0%. During the three months ended ~~June~~September 30, 2022, the Company recorded approximately $~~3,018~~12,099 of income tax benefit, which resulted in an effective tax rate of ~~26.1~~19.0%. The increase in the effective tax rate as compared with the corresponding period in the prior year was primarily attributable to the increase in non-deductible compensation, partially offset by the release of the valuation allowance established in 2022 during the ~~second~~third quarter of ~~2023 and the recognition of tax benefits attributable to restricted stock that vested in May~~ 2023.

During the ~~six~~nine months ended ~~June~~September 30, 2023, the Company recorded approximately $~~10,727~~15,146 of income tax expense, which resulted in an effective tax rate of ~~24.7~~23.9%. During the ~~six~~nine months ended ~~June~~September 30, 2022, the Company recorded approximately $~~1,808~~13,907 of income tax benefit, which resulted in an effective tax rate of ~~23.9~~19.5%. The increase in the effective tax rate in 2023 as compared with the corresponding period in the prior year was primarily attributable to the increase in non-deductible compensation, partially offset by the release of ~~the~~ valuation allowance established in 2022 during the ~~first half~~nine months of 2023 and the recognition of tax benefits attributable to restricted stock that vested in February and May 2023. 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 non-deductible and tax-exempt items.

Note 17 -- Earnings Per Share

U.S. GAAP requires the Company to use the two-class method in computing basic earnings (loss) 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 (loss) per share during periods of net income or loss. For a majority-owned subsidiary, its basic and diluted earnings (loss) 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 (loss) per share at a consolidated level.

3839

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

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


	Three Months Ended							Three Months Ended								Three Months Ended							Three Months Ended
	June 30, 2023							June 30, 2022								September 30, 2023							September 30, 2022
	Income			Shares (a)		Per Share		Loss			Shares (a)		Per Share			Income			Shares (a)		Per Share		Loss			Shares (a)		Per Share
	(Numerator)			(Denominator)		Amount		(Numerator)			(Denominator)		Amount			(Numerator)			(Denominator)		Amount		(Numerator)			(Denominator)		Amount
Net income (loss)	$	14,882						$	(8,542	)						$	15,669						$	(51,503	)
Less: Net income attributable to redeemable noncontrolling interest		(2,337	)						(2,268	)							(2,349	)						(2,285	)
Less: TypTap Group’s net (income) loss attributable to non-HCI common stockholders and TypTap Group’s participating securities		(102	)						829								(163	)						2,829
Net income (loss) attributable to HCI		12,443							(9,981	)							13,157							(50,959	)
Less: (Income) loss attributable to participating securities		(427	)						635								(411	)						3,289
Basic Earnings (Loss) Per Share:
Income (loss) allocated to common stockholders		12,016			8,302	$	1.45		(9,346	)		9,022	$	(1.04	)		12,746			8,317	$	1.53		(47,670	)		8,427	$	(5.66	)
Effect of Dilutive Securities: *
Stock options		—			74				—			—					—			88				—			—
Convertible senior notes		1,924			2,538				—			—					1,927			2,538				—			—
Warrants		—			7				—			—					—			32				—			—
Diluted Earnings (Loss) Per Share:
Income (loss) available to common stockholders and assumed conversions	$	13,940			10,921	$	1.28	$	(9,346	)		9,022	$	(1.04	)	$	14,673			10,975	$	1.34	$	(47,670	)		8,427	$	(5.66	)

(a)

Shares in thousands.

* For the three months ended ~~June~~September 30, 2022, convertible senior notes, stock options, and warrants were excluded due to anti-dilutive effect.


	Six Months Ended							Six Months Ended								Nine Months Ended							Nine Months Ended
	June 30, 2023							June 30, 2022								September 30, 2023							September 30, 2022
	Income			Shares (a)		Per Share		Loss			Shares (a)		Per Share			Income			Shares (a)		Per Share		Loss			Shares (a)		Per Share
	(Numerator)			(Denominator)		Amount		(Numerator)			(Denominator)		Amount			(Numerator)			(Denominator)		Amount		(Numerator)			(Denominator)		Amount
Net income (loss)	$	32,675						$	(5,751	)						$	48,344						$	(57,254	)
Less: Net income attributable to redeemable noncontrolling interest		(4,661	)						(4,516	)							(7,010	)						(6,801	)
Less: TypTap Group’s net (income) loss attributable to non-HCI common stockholders and TypTap Group’s participating securities		(233	)						1,189								(396	)						4,018
Net income (loss) attributable to HCI		27,781							(9,078	)							40,938							(60,037	)
Less: (Income) loss attributable to participating securities		(985	)						590								(1,395	)						3,855
Basic Earnings (Loss) Per Share:
Income (loss) allocated to common stockholders		26,796			8,290	$	3.23		(8,488	)		9,249	$	(0.92	)		39,543			8,299	$	4.76		(56,182	)		8,972	$	(6.26	)
Effect of Dilutive Securities: *
Stock options		—			58				—			—					—			68				—			—
Convertible senior notes		3,844			2,538				—			—					5,771			2,538				—			—
Diluted Earnings (Loss) Per Share:
Income (loss) available to common stockholders and assumed conversions	$	30,640			10,886	$	2.81	$	(8,488	)		9,249	$	(0.92	)	$	45,314			10,905	$	4.16	$	(56,182	)		8,972	$	(6.26	)

(a)

Shares in thousands.

* For the ~~six~~nine months ended ~~June~~September 30, 2023, warrants were excluded due to anti-dilutive effect. For the ~~six~~nine months ended ~~June 30, 2022,~~

3940

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

September 30, 2022, convertible senior notes, stock options, and warrants were excluded due to anti-dilutive effect.

Note 18 -- Redeemable Noncontrolling Interest

The following table summarizes the activity of redeemable noncontrolling interest during the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


	2023			2022			2023			2022
Balance at January 1	$	93,553		$	89,955		$	93,553		$	89,955
Increase (decrease):
Accrued cash dividends		1,637			1,342			1,637			1,342
Accretion - increasing dividend rates		687			906			687			906
Dividends paid		(3,012	)		(2,508	)		(3,012	)		(2,508	)
Balance at March 31	$	92,865		$	89,695		$	92,865		$	89,695
Increase (decrease):
Accrued cash dividends		1,875			1,500			1,875			1,500
Accretion - increasing dividend rates		462			768			462			768
Balance at June 30	$	95,202		$	91,963		$	95,202		$	91,963
Increase (decrease):
Accrued cash dividends								1,876			1,499
Accretion - increasing dividend rates								473			786
Dividends paid								(3,750	)		(3,000	)
Balance at September 30							$	93,801		$	91,248

On July 3, 2023, 1,000,000 voting shares of TTIG's Series A-1 Preferred Stock were exchanged for 1,000,000 non-voting shares of TTIG's Series A-2 Preferred Stock. The exchange did not change the number of shares of TTIG capital stock issued and outstanding.

For the three months ended ~~June~~September 30, 2023 and 2022, net income attributable to redeemable noncontrolling interest was $~~2,337~~2,349 and $~~2,268~~2,285, respectively, consisting of accrued cash dividends of $~~1,875~~1,876 and $~~1,500~~1,499, respectively, and accretion related to increasing dividend rates of $~~462~~473 and $~~768~~786, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, net income attributable to redeemable noncontrolling interest was $~~4,661~~7,010 and $~~4,516~~6,801, respectively, consisting of accrued cash dividends of $~~3,512~~5,388 and $~~2,842~~4,341, respectively, and accretion related to increasing dividend rates of $~~1,149~~1,622 and $~~1,674~~2,460, respectively.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Note 19 -- Equity

Stockholders’ Equity

Common Stock

The Company’s 2022 stock repurchase plan was completed and no new stock repurchase plan has been approved by the Board of Directors.

In March 2022, the Company’s Board of Directors authorized a plan to repurchase up to $20,000 of the Company’s common shares before commissions and fees during 2022. During the three ~~and six~~ months ended ~~June~~September 30, 2022, the Company repurchased and retired a total of ~~29,465~~119,462 shares at a weighted average price per share of $~~63.92~~51.69 under this authorized repurchase plan. The total cost of shares repurchased, ~~under this plan,~~ inclusive of fees and commissions, during the three ~~and six~~ months ended ~~June~~September 30, 2022 was $~~1,884~~6,179 or $~~63.95~~51.72 per share. During the nine months ended September 30, 2022, the Company repurchased and retired a total of 148,927 shares at a weighted average price per share of $54.11 under this authorized repurchase plan. The total cost of shares repurchased, inclusive of fees and commissions, during the nine months ended September 30, 2022 was $8,063 or $54.14 per share.

On ~~April 14,~~July 3, 2023, the Company’s Board of Directors declared a quarterly dividend of $0.40 per common share. The dividends were paid on~~June 16,~~ September 15, 2023 to stockholders of record on~~May 19,~~ August 18, 2023.

Warrants

At ~~June~~September 30, 2023, there were warrants outstanding and exercisable to purchase 750,000 shares of HCI common stock at an exercise price of $54.40. The warrants expire on February 26, 2025.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

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

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

Share Repurchase Agreement

In conjunction with the issuance of the 4.75% Convertible Senior Notes in May 2022, the Company used $66,853 of the net proceeds to repurchase and retire an aggregate of 1,037,600 shares of its common stock from institutional investors at a price of $64.43 per share.

Noncontrolling Interests

At ~~June~~September 30, 2023, there were ~~80,525,545~~80,471,174 shares of TTIG’s common stock outstanding, of which ~~5,525,545~~5,471,174 shares were not owned by HCI.

During the three and ~~six~~nine months ended ~~June~~September 30, 2023, TTIG repurchased and retired a total of ~~28,700~~2,343 and ~~62,808~~65,151 shares, respectively, 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 during the three and ~~six~~nine months ended ~~June~~September 30, 2023 was $393 and $~~237~~240, respectively. During the three and ~~six~~nine months ended ~~June~~September 30, 2022, TTIG repurchased and retired a total of ~~45,239~~2,893 and ~~66,983~~69,876 shares, respectively, of its common stock. The total cost of purchasing noncontrolling interests during the three and ~~six~~nine months ended ~~June~~September 30, 2022 was $~~262~~17 and $~~389~~406, respectively.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Furthermore, TTIG repurchased and retired a total of 43,511 shares of its common stock from former TTIG employees for a total cost of $85 during the three months ended September 30, 2023. The total cost included the fair value of TTIG common stock and the $26 inducement cost aiming to curtail the spread of share ownership.

Note 20 -- 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 ~~June~~September 30, 2023, there were ~~1,105,625~~959,565 shares available for grant.

Stock 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 and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 is as follows (option amounts not in thousands):


					Weighted							Weighted
			Weighted		Average					Weighted		Average
			Average		Remaining	Aggregate				Average		Remaining	Aggregate
	Number of		Exercise		Contractual	Intrinsic		Number of		Exercise		Contractual	Intrinsic
	Options		Price		Term	Value		Options		Price		Term	Value
Outstanding at January 1, 2023		440,000	$	45.25	5.6 years	$	—		440,000	$	45.25	5.6 years	$	—
Outstanding at March 31, 2023		440,000	$	45.25	5.3 years	$	3,146		440,000	$	45.25	5.3 years	$	3,146
Outstanding at June 30, 2023		440,000	$	45.25	5.1 years	$	7,863		440,000	$	45.25	5.1 years	$	7,863
Exercisable at June 30, 2023		412,500	$	45.07	5.0 years	$	7,447
Grant									150,000	$	70.00
Outstanding at September 30, 2023									590,000	$	51.54	6.1 years	$	3,978
Exercisable at September 30, 2023									412,500	$	45.07	4.7 years	$	3,805

Outstanding at January 1, 2022		440,000	$	45.25	6.6 years	$	18,119		440,000	$	45.25	6.6 years	$	18,119
Outstanding at March 31, 2022		440,000	$	45.25	6.3 years	$	10,494		440,000	$	45.25	6.3 years	$	10,494
Outstanding at June 30, 2022		440,000	$	45.25	6.1 years	$	9,354		440,000	$	45.25	6.1 years	$	9,354
Exercisable at June 30, 2022		357,500	$	44.23	5.8 years	$	7,965
Outstanding at September 30, 2022									440,000	$	45.25	5.8 years	$	117
Exercisable at September 30, 2022									357,500	$	44.23	5.5 years	$	117

41On September 15, 2023, the Company awarded its chief executive officer, Paresh Patel, an option with market-based vesting conditions to purchase 150,000 shares of its common stock.

There were no options exercised during the three and nine months ended September 30, 2023 and 2022. For the three months ended September 30, 2023 and 2022, the Company recognized $133 and $162, respectively, of compensation expense related to stock options which is included in general and administrative personnel expenses. For the nine months ended September 30, 2023 and 2022, the Company recognized $299 and $507, respectively, of compensation expense. Deferred tax benefits related to stock options were $0 for the three and nine months ended September 30, 2023 and 2022. At September 30, 2023 and December 31, 2022, there was $1,911 and $336, 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 1.4 years.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

~~There were~~

noThe following table provides assumptions used in the pricing model to estimate the fair value of the stock options ~~exercised~~granted during the three and ~~six~~nine months ended ~~June~~September 30, ~~2023 and 2022. For the three months ended June 30, 2023 and 2022, the Company recognized $~~2023:76

~~and $161~~, respectively, of compensation expense related to stock options which is included in general and administrative personnel expenses. For the six months ended June 30, 2023 and 2022, the Company recognized $~~166~~ ~~and $345, respectively, of compensation expense. Deferred tax benefits related to stock options were $~~0 ~~for the three and six months ended June 30, 2023 and 2022. At June 30, 2023 and December 31, 2022, there was $169~~ ~~and $336, 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~~ 7 ~~months.~~


	2023
Expected dividend yield (%)		3.05
Expected volatility (%)	44.63 - 46.55
Risk-free interest rate (%)	4.49 - 5.49
Expected life (in years)		5

Restricted Stock Awards

From time to time, the Company has granted and may grant restricted stock awards to certain executive officers, other employees, and non-employee 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.

Information with respect to the activity of unvested restricted stock awards during the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 is as follows:


	Number of			Weighted		Number of			Weighted
	Restricted			Average		Restricted			Average
	Stock			Grant Date		Stock			Grant Date
	Awards			Fair Value		Awards			Fair Value
Nonvested at January 1, 2023		342,459		$	39.86		342,459		$	39.86
Granted		6,000		$	51.76		6,000		$	51.76
Vested		(40,352	)	$	54.83		(40,352	)	$	54.83
Forfeited		(2,125	)	$	40.33		(2,125	)	$	40.33
Nonvested at March 31, 2023		305,982		$	38.11		305,982		$	38.11
Granted		7,000		$	58.52		7,000		$	58.52
Vested		(34,689	)	$	45.56		(34,689	)	$	45.56
Forfeited		(295	)	$	55.41		(295	)	$	55.41
Nonvested at June 30, 2023		277,998		$	37.68		277,998		$	37.68
Forfeited							(3,940	)	$	66.73
Nonvested at September 30, 2023							274,058		$	37.26

Nonvested at January 1, 2022		679,997		$	39.72		679,997		$	39.72
Granted		4,000		$	70.58		4,000		$	70.58
Vested		(50,667	)	$	50.68		(50,667	)	$	50.68
Forfeited		(3,265	)	$	45.85		(3,265	)	$	45.85
Nonvested at March 31, 2022		630,065		$	39.00		630,065		$	39.00
Granted		3,000		$	67.30		3,000		$	67.30
Vested		(51,125	)	$	45.04		(51,125	)	$	45.04
Forfeited		(700	)	$	45.61		(700	)	$	45.61
Nonvested at June 30, 2022		581,240		$	38.61		581,240		$	38.61
Forfeited							(1,665	)	$	45.56
Nonvested at September 30, 2022							579,575		$	38.59

~~The Company recognized compensation expense related to restricted stock, which is included in general and administrative personnel expenses, of $1,133~~ ~~and $3,184~~ ~~for the three months ended June 30, 2023 and 2022, respectively, and $2,320~~ ~~and $6,452~~ ~~for the six months ended June 30, 2023 and 2022, respectively. At June 30, 2023 and December 31, 2022, there was approximately $6,346~~ ~~and $8,048, respectively, of total unrecognized~~

4244

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 $977 and $3,099 for the three months ended September 30, 2023 and 2022, respectively, and $3,297 and $9,551 for the nine months ended September 30, 2023 and 2022, respectively. At September 30, 2023 and December 31, 2022, there was approximately $5,106 and $8,048, 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 ~~1.9~~1.7 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 ~~six~~nine months ended ~~June~~September 30, 2023 and 2022.


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30,				June 30,				September 30,				September 30,
	2023		2022		2023		2022		2023		2022		2023		2022
Deferred tax benefits recognized	$	254	$	639	$	517	$	1,291	$	214	$	230	$	731	$	1,521
Tax benefits realized for restricted stock and paid dividends	$	521	$	902	$	820	$	1,304	$	28	$	56	$	848	$	1,360
Fair value of vested restricted stock	$	1,580	$	2,303	$	3,793	$	4,871	$	—	$	—	$	3,793	$	4,871

Subsidiary Equity Plan

For the three months ended ~~June~~September 30, 2023 and 2022, TypTap Group recognized compensation expense related to its stock-based awards of $~~658~~730 and $~~897~~869, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, TypTap Group recognized compensation expense related to its stock-based awards of $~~1,487~~2,217 and $~~1,782~~2,651, respectively. At ~~June~~September 30, 2023 and December 31, 2022, there was $~~5,940~~5,206 and $7,876, respectively, of unrecognized compensation expense related to nonvested subsidiary restricted stock and stock options.

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 10, 2023. 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 a 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, information technology services, insurance management, real estate and reinsurance. We manage our operations in the following organizational segments, based on managerial emphasis and evaluation of financial and operating performances:

For the three months ended ~~June~~September 30, 2023 and 2022, revenues from HCPCI insurance operations before intracompany elimination represented ~~65.1%~~64.4% and ~~69.8%~~60.5%, respectively, and revenues from TypTap Group

represented ~~33.4%~~34.1% and ~~27.9%~~29.9%, respectively, of total revenues of all operating segments. For the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, revenues from HCPCI insurance operations before intracompany elimination represented ~~63.3%~~63.7% and ~~69.8%~~66.6%, respectively, and revenues from TypTap Group represented ~~34.9%~~34.6% and ~~28.1%~~28.7%, respectively, of total revenues of all operating segments. At ~~June~~September 30, 2023 and December 31, 2022, HCPCI insurance operations’ total assets represented ~~56.3%~~56.6% and 53.4%, respectively, and TypTap Group’s total assets represented ~~35.3%~~34.6% and 37.9%, respectively, of the combined assets of all operating segments. See Note 14 -- “Segment Information” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

HCPCI has historically provided 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.

Due to the reduced availability and affordability of flood reinsurance coverage, HCPCI will cease to offer flood insurance policies in 2023. The discontinuation does not have a material impact to HCPCI’s results of operations as the gross premiums earned from such policies comprised less than 1% of total HCPCI gross premiums earned during 2022.

We have a Bermuda domiciled wholly-owned reinsurance subsidiary, Claddaugh Casualty Insurance Company Ltd (“Claddaugh”). 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, however Claddaugh did not enter into any retrocession contracts for the 2023-2024 treaty year. Currently, Claddaugh does not provide reinsurance to non-affiliates. Other auxiliary operations also include claim adjusting and processing services.

TypTap Insurance Group, Inc. (“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 internally 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 ~~91,931~~89,831 at ~~June~~September 30, 2023. TypTap has been successful in using internally developed proprietary technology to underwrite, select and write policies efficiently. As of ~~July 28,~~November 1, 2023, TypTap has been approved to offer homeowners coverage in 30 states outside of Florida.

TypTap is also phasing out its flood insurance products during 2023 due to the reduced availability and affordability of flood reinsurance coverage. The discontinuation does not have a material impact to TypTap’s results of operations as the gross premiums earned from such policies comprised less than 5% of total TypTap gross premiums earned during 2022.

Our information technology operations include a team of experienced software developers with extensive knowledge in designing and creating web-based applications. The operations, which are located in Tampa, Florida and Noida, India, are focused on developing cloud-based, innovative products and 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 ClaimColonyTM.

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

In March 2023, we finalized the sales of two retail shopping center investment properties in Melbourne and Sorrento, Florida. In September 2023, we purchased vacant land in Haines City, Florida which will be developed into a retail shopping center to be anchored by a well-known grocery store chain. See Real Estate Investments under Note 5 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

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 ~~July 3,~~October 13, 2023, our Board of Directors declared a quarterly dividend of $0.40 per common share. The dividends are payable on ~~September~~December 15, 2023 to stockholders of record on ~~August 18,~~November 17, 2023.

On ~~July 11,~~November 3, 2023, ~~Greenleaf Capital, LLC,~~we executed a Second Amended and Restated Credit Agreement with Fifth Third Bank, National Association. The amendment extends the term of the line of credit until November 3, 2028 and increases the borrowing capacity to $75,000,000, $50,000,000 of which may be used to refinance our ~~real estate subsidiary, entered into an agreement~~redeemable noncontrolling interest on or prior to ~~purchase vacant land in Haines City, Florida for the purpose of constructing a retail shopping center to be anchored by a well-known grocery store chain.~~March 31, 2025. The ~~purchase~~maximum debt-to-capital ratio is ~~expected to be completed in August 2023. The final price will be determined in accordance with terms specified in the agreement.~~set at 67.5%.

The following table summarizes our results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 (dollar amounts in thousands, except per share amounts):

Comparison of the Three Months Ended ~~June~~September 30, 2023 to the Three Months Ended ~~June~~September 30, 2022

Our results of operations for the three months ended ~~June~~September 30, 2023 reflect net income of approximately ~~$14,882,000~~$15,669,000 or ~~$1.28~~$1.34 diluted earnings per share, compared with net loss of approximately ~~$8,542,000~~$51,503,000 or ~~$1.04~~$5.66 loss per share, for the three months ended ~~June~~September 30, 2022. The quarter-over-quarter increase was primarily due to a ~~$24,940,000~~$73,068,000 decrease in losses and loss adjustment expenses, a ~~$10,017,000~~$8,589,000 decrease in premiums ceded, a $6,595,000 increase in gross premiums earned, a $1,984,000 decrease in general and administrative personnel expenses, and a $5,646,000 decrease in policy acquisition, underwriting, personnel, and other operating expenses, offset by a $9,162,000 net ~~increase~~decrease in income from our investment portfolio (consisting of net investment income and net realized and unrealized gains or losses), a $4,245,000 decrease in policy acquisition and other underwriting expenses, and a $1,029,000 decrease in general and administrative personnel expenses, offset by a $10,185,000 increase in premiums ceded and a $1,152,000 increase in interest expense..

Gross Premiums Earned on a consolidated basis for the three months ended ~~June~~September 30, 2023 and 2022 were approximately ~~$181,946,000~~$188,308,000 and ~~$181,124,000,~~$181,713,000, respectively. The ~~$822,000~~$6,595,000 increase was primarily attributable to the effect of premium rate increases, offset in part by a reduction in the number of policies in force. ~~Gross~~HCPCI gross premiums earned ~~from the United insurance policies assumed~~ were $0$102,075,000 for the three months ended ~~June~~September 30, 2023 compared with ~~$16,237,000~~$98,985,000 for the three months ended ~~June 30, 2022. HCPCI gross premiums earned were $96,875,000 for the three months ended June 30, 2023 compared with $113,681,000 for the three months ended June~~September 30, 2022. TypTap’s gross premiums earned were ~~$85,071,000~~$86,233,000 for the three months ended September 30, 2023 compared with ~~$67,443,000~~$82,728,000 for the same comparative period in 2022.

Premiums Ceded for the three months ended ~~June~~September 30, 2023 and 2022 were approximately ~~$66,390,000~~$66,152,000 and ~~$56,205,000,~~$74,741,000, respectively, representing ~~36.5%~~35.1% and ~~31.0%~~41.1%, respectively, of gross premiums earned. The ~~$10,185,000 increase~~$8,589,000 decrease was primarily attributable to a $12,600,000 reversal in September 2022 of previously accrued benefits attributable to retrospective provisions under multi-year reinsurance contracts due to the effects of Hurricane Ian, offset by higher reinsurance costs for the 2023-2024 contract year and an increased overall reinsurance coverage amount for ~~Florida, offset by a reduction in premiums ceded attributable to retrospective provisions under reinsurance contracts.~~Florida.

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 reinsurance contracts. For the three months ended ~~June~~September 30, 2023, premiums ceded included a decrease of $6,993,000 related to retrospective provisions compared with a decrease of ~~$6,390,000~~$3,843,000 for the three months ended ~~June~~September 30, 2022. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.”

Net Premiums Written for the three months ended ~~June~~September 30, 2023 and 2022 totaled approximately ~~$113,593,000~~$132,113,000 and ~~$129,947,000,~~$116,440,000, respectively. Net premiums written represent the premiums charged on policies issued during a fiscal period less any applicable reinsurance costs. The ~~decrease~~increase in 2023 primarily resulted from ~~an increase~~a decrease in premiums ceded to reinsurers and a reduction in the number of policies in force as described above. We had approximately ~~200,000~~194,000 policies in force at ~~June~~September 30, 2023 as compared with approximately ~~261,700~~246,000 policies in force at ~~June~~September 30, 2022.

Net Premiums Earned for the three months ended ~~June~~September 30, 2023 and 2022 were approximately ~~$115,556,000~~$122,156,000 and ~~$124,919,000,~~$106,972,000, 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 ~~June~~September 30, 2023 and 2022 (amounts in thousands):

Net Investment Income for the three months ended ~~June~~September 30, 2023 and 2022 was approximately ~~$8,794,000~~$9,384,000 and ~~$3,684,000,~~$18,530,000, respectively. The ~~$5,110,000~~third quarter of 2022 included a $13,402,000 gain from the sale of real estate investment property. Excluding the gain in the prior year quarter, net investment income increased by approximately $4,256,000. The increase was attributable to a ~~$2,864,000~~$5,562,000 increase in interest income from cash, ~~and~~ cash equivalents and ~~a $3,983,000 increase in income from available-for-sale~~ fixed-maturity securities, offset by a ~~$1,776,000~~$1,159,000 decrease in income from ~~real estate investments and unconsolidated joint venture.~~limited partnership investments. See Net Investment Income under Note 5 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

Net Unrealized Investment ~~Gains~~Losses for the three months ended ~~June~~September 30, 2023 and 2022 were approximately ~~$897,000 compared with approximately $4,234,000 of net unrealized investment losses for the three months ended June 30, 2022.~~$1,041,000 and $347,000, respectively. The increase was primarily attributable to an overall ~~improvement~~deterioration in the equity market compared with the three months ended ~~June~~September 30, 2022.

Our consolidated Losses and Loss Adjustment Expenses amounted to approximately ~~$61,890,000~~$66,726,000 and ~~$86,830,000~~$139,794,000 for the three months ended ~~June~~September 30, 2023 and 2022, respectively. The losses and loss adjustment expenses of HCPCI Insurance Operations were ~~$27,653,000~~$29,819,000 and ~~$48,692,000~~$73,228,000 for the three months ended ~~June~~September 30, 2023 and 2022, respectively. The decrease was primarily attributable to ~~the~~a reduction in losses related to catastrophic events furthered by a lower number of policies in force ~~as well as fewer~~and lower claims and ~~less~~ litigation frequency. In addition, the third quarter of 2022 which included $42,346,000 of losses related to ~~Florida policies as compared with the second quarter of 2022.~~Hurricane Ian. Losses and loss adjustment expenses for TypTap were ~~$34,937,000~~$37,324,000 compared with ~~$38,692,000~~$62,153,000 for the same comparative period. The decrease was primarily attributable to ~~a reduction~~lower incurred losses recorded for Hurricane Ian during the third quarter of 2023. Such losses were $3,850,000 compared with $22,251,000 during the corresponding period of 2022. Reductions in the amount of claims and litigation related to Florida policies ~~when compared with~~also accounted for a portion of the ~~second quarter of 2022.~~decrease in loss and loss adjustment expenses. 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 ~~June~~September 30, 2023 and 2022 were approximately ~~$22,618,000~~$22,768,000 and ~~$26,863,000~~$24,678,000 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, commission and catastrophe allowance paid to United, and premium taxes. Policy acquisition expenses for HCPCI Insurance Operations were ~~$10,617,000~~$10,894,000 for the three months ended ~~June~~September 30, 2023 compared with ~~$16,561,000~~$12,081,000 for the three months ended ~~June~~September 30, 2022. The decrease in amortized costs was primarily due to a reduction of policies in force. TypTap Group policy acquisition expenses were ~~$12,019,000~~$11,900,000 compared with ~~$10,302,000~~$12,626,000 for the same comparative period, with the increase due to higher amortized costs attributable to the accelerated transition of United policies, offset by lower policy acquisition costs in Florida resulting from lower commissions.

General and Administrative Personnel Expenses for the three months ended ~~June~~September 30, 2023 and 2022 were approximately ~~$14,272,000~~$13,864,000 and ~~$15,301,000,~~$15,848,000, 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 projects 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 quarter-over-quarter decrease of ~~$1,029,000~~$1,984,000 was primarily attributable to a decrease in stock-based compensation expense and an increase in recovered and capitalized payroll costs, offset by an adjustment to increase employee incentive bonuses, an increase in the headcount of temporary and full-time employees and merit increases for non-executive employees effective in late February 2023.

~~Interest Expense~~ for the three months ended June 30, 2023 and 2022 was approximately $2,667,000 and $1,515,000, respectively. The increase primarily resulted from interest expense related to our 4.75% Convertible Senior Notes issued in May 2022, partially offset by decreased interest expense from a reduction in promissory notes on our real estate investments.

Income Tax Expense for the three months ended ~~June~~September 30, 2023 was approximately ~~$5,384,000~~$4,419,000 for state, federal, and foreign income taxes compared with ~~$3,018,000~~$12,099,000 of income tax benefit for the three months ended ~~June~~September 30, 2022, resulting in effective tax rates of ~~26.6%~~22.0% and ~~26.1%~~19.0%, respectively. The increase in the effective tax rate was primarily attributable to the increase in non-deductible compensation, partially offset by the release of valuation allowance established in 2022 during the ~~second~~third quarter of ~~2023 and the recognition of tax benefits attributable to restricted stock that vested in May~~ 2023.

The loss ratio applicable to the three months ended ~~June~~September 30, 2023 (losses and loss adjustment expenses incurred related to net premiums earned) was ~~53.6%~~54.6% compared with ~~69.5%~~130.7% for the three months ended ~~June~~September 30, 2022. The decrease was primarily attributable to the decrease in losses and loss adjustment expenses due to fewer claims and less litigation related to Florida policies, and higher average premium per policy as compared with the ~~second~~third quarter of ~~2022.~~2022 which was affected by Hurricane Ian.

The expense ratio applicable to the three months ended ~~June~~September 30, 2023 (defined as total expenses excluding losses and loss adjustment expenses related to net premiums earned) was ~~38.8%~~36.7% compared with ~~40.6%~~47.2% for the three months ended ~~June~~September 30, 2022. The decrease in our expense ratio was primarily attributable to the increase in net premiums earned, the decrease in policy acquisition, underwriting, personnel, and other operating ~~expenses, offset in part by an increase in reinsurance costs and the increase in interest expense.~~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 ~~June~~September 30, 2023 was ~~92.4%~~91.3% compared with ~~110.1%~~177.9% for the three months ended ~~June~~September 30, 2022. The decrease in 2023 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 ~~June~~September 30, 2023 was ~~58.7%~~59.2% compared with ~~75.9%~~104.7% for the three months ended ~~June~~September 30, 2022. The decrease in 2023 was primarily attributable to the increase in gross premiums earned, the decrease in losses and loss adjustment expenses, and the decrease in policy acquisition, underwriting, personnel, and other operating ~~expenses, offset in part by the increase in interest expense.~~expenses.

Comparison of the ~~Six~~Nine Months Ended ~~June~~September 30, 2023 to the ~~Six~~Nine Months Ended ~~June~~September 30, 2022

Our results of operations for the ~~six~~nine months ended ~~June~~September 30, 2023 reflect net income of approximately ~~$32,675,000~~$48,344,000 or ~~$2.81~~$4.16 diluted earnings per share, compared with net loss of approximately ~~$5,751,000~~$57,254,000 or ~~$0.92~~$6.26 loss per share, for the ~~six~~nine months ended ~~June~~September 30, 2022. The period-over-period increase was primarily due to a ~~$37,079,000~~$110,147,000 decrease in losses and loss adjustment expenses, a ~~$28,134,000~~$18,972,000 net increase in income from our investment portfolio (consisting of net investment income and net realized and unrealized gains or losses), a ~~$10,933,000~~$12,843,000 decrease in policy acquisition and other underwriting expenses, and a ~~$1,561,000~~$6,647,000 decrease in ~~general~~personnel and ~~administrative personnel~~other operating expenses, offset by a ~~$27,532,000~~$18,943,000 increase in premiums ceded and a ~~$3,352,000~~$3,366,000 increase in interest expense.

Gross Premiums Earned on a consolidated basis for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 were approximately ~~$362,014,000~~$550,322,000 and ~~$360,049,000,~~$541,762,000, respectively. The ~~$1,965,000~~$8,560,000 increase was primarily attributable to the effect of premium rate increases, offset by a reduction in the number of policies in force. Gross premiums earned from the United insurance policies assumed were $7,163,000 for the ~~six~~nine months ended ~~June~~September 30, 2023 compared with ~~$46,316,000~~$61,913,000 for the ~~six~~nine months ended ~~June~~September 30, 2022. HCPCI gross

premiums earned were ~~$189,331,000~~$291,406,000 for the ~~six~~nine months ended ~~June~~September 30, 2023 compared with ~~$231,984,000~~$330,969,000 for the ~~six~~nine months ended ~~June~~September 30, 2022. TypTap’s gross premiums earned were ~~$172,683,000~~$258,916,000 compared with ~~$128,065,000~~$210,793,000 for the same comparative period in 2022.

Premiums Ceded for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 were approximately ~~$136,899,000~~$203,051,000 and ~~$109,367,000,~~$184,108,000, respectively, representing ~~37.8%~~36.9% and ~~30.4%~~34.0%, respectively, of gross premiums earned. The ~~$27,532,000~~$18,943,000 increase was primarily attributable to higher reinsurance costs for the 2023-2024 contract year and an increased overall reinsurance coverage amount for Florida, offset by a higher reduction in premiums ceded attributable to retrospective provisions under reinsurance contracts.

For the ~~six~~nine months ended ~~June~~September 30, 2023, premiums ceded included a decrease of ~~$13,986,000~~$20,979,000 related to retrospective provisions compared with a decrease of ~~$7,874,000~~$11,717,000 for the ~~six~~nine months ended ~~June~~September 30, 2022. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.”

Net Premiums Written for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 totaled approximately ~~$242,938,000~~$375,051,000 and ~~$254,079,000,~~$370,519,000, respectively. The ~~decrease~~increase in 2023 primarily resulted from the factors described earlier.

Net Premiums Earned for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 were approximately ~~$225,115,000~~$347,271,000 and ~~$250,682,000,~~$357,654,000, 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 ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 (amounts in thousands):

Net Investment Income for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 was approximately ~~$26,509,000~~$35,893,000 and ~~$6,552,000,~~$25,082,000, respectively. The ~~$19,957,000~~$10,811,000 increase was attributable to a ~~$7,678,000 increase in income from real estate investments, a $7,570,000 increase in income from available-for-sale fixed-maturity securities, and a $6,378,000~~$9,989,000 increase in interest income from cash and cash ~~equivalents.~~equivalents, a $9,521,000 increase in income from available-for-sale fixed-maturity securities, offset by a $5,971,000 decrease in income from real estate investments and a $2,416,000 decrease in income from limited partnership investments. See Net Investment Income under Note 5 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

Net Realized Investment Losses for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 were approximately ~~$1,379,000~~$1,586,000 and ~~$320,000,~~$1,204,000, respectively. The increase was primarily attributable to net realized losses of approximately ~~$1,333,000~~$1,539,000 from sales of fixed-maturity and equity securities during the ~~six~~nine months ended ~~June~~September 30, 2023 compared with net realized losses of approximately ~~$476,000~~$1,413,000 from sales of these securities during the corresponding period in 2022.

In addition, there was a net realized gain of approximately $209,000 from sales of other investments during the corresponding period in 2022.

Net Unrealized Investment Gains for the ~~six~~nine months ended ~~June~~September 30, 2023 were approximately ~~$1,426,000~~$385,000 compared with approximately ~~$7,810,000~~$8,157,000 of net unrealized investment losses for the ~~six~~nine months ended ~~June~~

September 30, 2022. The increase was primarily attributable to an overall improvement in the equity market compared with the ~~six~~nine months ended ~~June~~September 30, 2022.

Our consolidated Losses and Loss Adjustment Expenses amounted to approximately ~~$122,455,000~~$189,181,000 and ~~$159,534,000~~$299,328,000 for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively. The losses and loss adjustment expenses of HCPCI Insurance Operations were ~~$56,435,000~~$86,254,000 and ~~$92,687,000~~$165,915,000 for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively. The decrease was primarily attributable to the lower number of policies in force as well as fewer claims and less litigation related to Florida policies as compared with the ~~first half~~corresponding period of ~~2022.~~2022 which included $42,346,000 of losses from Hurricane Ian. Furthermore, losses related to United policies assumed, renewed and/or replaced were lower by $28,565,000. Losses and loss adjustment expenses for TypTap were ~~$67,993,000~~$105,317,000 compared with ~~$67,680,000~~$129,833,000 for the same comparative period. The decrease was primarily attributable to lower incurred losses recorded for Hurricane Ian during the nine months ended September 30, 2023. Such losses were $4,980,000 compared with $22,251,000 for the corresponding period in 2022. In addition, losses from United-related po1icies were $10,102,000 lower. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”

Policy Acquisition and Other Underwriting Expenses for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 were approximately ~~$45,338,000~~$68,106,000 and ~~$56,271,000~~$80,949,000 on a consolidated basis, respectively. Policy acquisition expenses for HCPCI Insurance Operations were ~~$20,893,000~~$31,787,000 for the ~~six~~nine months ended ~~June~~September 30, 2023 compared with ~~$36,264,000~~$48,429,000 for the ~~six~~nine months ended ~~June~~September 30, 2022. The decrease in amortized costs was primarily due to a reduction of policies in force. TypTap Group policy acquisition expenses were ~~$24,493,000~~$36,393,000 compared with ~~$20,007,000~~$32,633,000 for the same comparative period, with the increase due to higher amortized costs attributable to the accelerated transition of United policies, offset by lower policy acquisition costs in Florida resulting from lower commissions.

General and Administrative Personnel Expenses for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 were approximately ~~$27,774,000~~$41,638,000 and ~~$29,335,000,~~$45,183,000, respectively. The period-over-period decrease of ~~$1,561,000~~$3,545,000 was primarily attributable to a decrease in stock-based compensation expense and an increase in recovered and capitalized payroll costs, offset by an adjustment to increase employee incentive bonuses, an increase in the headcount of temporary and full-time employees and merit increases for non-executive employees effective in late February 2023.

Interest Expense for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 was approximately ~~$5,468,000~~$8,295,000 and ~~$2,116,000,~~$4,929,000, respectively. The increase primarily resulted from interest expense related to our 4.75% Convertible Senior Notes issued in May 2022, partially offset by decreased interest expense from a reduction in promissory notes on our real estate investments.

Income Tax Expense for the ~~six~~nine months ended ~~June~~September 30, 2023 was approximately ~~$10,727,000~~$15,146,000 for state, federal, and foreign income taxes compared with ~~$1,808,000~~$13,907,000 of income tax benefit for the ~~six~~nine months ended ~~June~~September 30, 2022, resulting in effective tax rates of ~~24.7%~~23.9% and ~~23.9%~~19.5%, respectively. The increase in the effective tax rate was primarily attributable to the increase in non-deductible compensation, partially offset by the release of valuation allowance established in 2022 during the ~~first half~~nine months of 2023 and the recognition of tax benefits attributable to restricted stock that vested in February and May 2023.

The loss ratio applicable to the ~~six~~nine months ended ~~June~~September 30, 2023 (losses and loss adjustment expenses incurred related to net premiums earned) was ~~54.4%~~54.5% compared with ~~63.6%~~83.7% for the ~~six~~nine months ended ~~June~~September 30, 2022. The decrease was primarily attributable to the decrease in losses and loss adjustment expenses due to fewer claims and less litigation related to Florida policies, and higher average premium per policy as compared with the ~~first half of~~corresponding period in 2022.

The expense ratio applicable to the ~~six~~nine months ended ~~June~~September 30, 2023 was ~~40.1%~~39.0% compared with ~~40.3%~~42.3% for the ~~six~~nine months ended ~~June~~September 30, 2022. The decrease in our expense ratio was primarily attributable to the increase in reinsurance costs and the increase in interest expense, offset by the decrease in policy acquisition, underwriting, personnel, and other operating expenses.

The combined ratio is the measure of overall underwriting profitability before other income. Our combined ratio for the ~~six~~nine months ended ~~June~~September 30, 2023 was ~~94.5%~~93.5% compared with ~~103.9%~~126.0% for the ~~six~~nine months ended ~~June~~September 30, 2022. The decrease in 2023 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 ~~six~~nine months ended ~~June~~September 30, 2023 was ~~58.7%~~59.0% compared with ~~72.4%~~83.2% for the ~~six~~nine months ended ~~June~~September 30, 2022. The decrease in 2023 was primarily attributable to the decrease in losses and loss adjustment expenses and the decrease in policy acquisition, underwriting, personnel, and other operating expenses, offset in part by the increase in interest expense.

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 on 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 on 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/or 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 approximately 90 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 ~~June~~September 30, 2023:

See Note 11 -- “Long-Term Debt” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

Our limited partnership investments consist of six private equity funds managed by their general partners. Two 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 the four remaining funds have expired, the general partners may request additional funds under certain circumstances. At ~~June~~September 30, 2023, there was an aggregate unfunded capital balance of ~~$5,791,000.~~$4,931,000. See Limited Partnership Investments under Note 5 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

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 assets. Thus, we may consider expanding our real estate investment portfolio should an opportunity arise.

We had a 90% equity interest in FMKT Mel JV, LLC, a Florida limited liability company for which we were not the primary beneficiary. Following the sale of its last remaining outparcel in June 2022, FMKT Mel JV distributed its earnings during the third quarter of 2022 and the subsidiary was liquidated in December 2022. In January 2023, we received the final distribution of $18,000 from FMKT Mel JV.

Net cash provided by operating activities for the ~~six~~nine months ended ~~June~~September 30, 2023 was approximately ~~$5,944,000,~~$77,321,000, which consisted primarily of cash received from net premiums written, and reinsurance recoveries of approximately ~~$141,630,000~~$206,901,000 less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Net cash provided by investing activities of ~~$59,675,000~~$25,714,000 was primarily due to the proceeds from calls, repayments and maturities of fixed-maturity securities of ~~$258,207,000,~~$263,654,000, the proceeds from sales of fixed-maturity and equity securities of $27,794,000, the proceeds from sales of real estate investments of $21,746,000, ~~the proceeds from sales of fixed-maturity and equity securities of $18,360,000,~~ and distributions received from limited partnership investments of ~~$2,596,000,~~$3,088,000, offset by the purchases of fixed-maturity and equity securities of ~~$237,811,000,~~$280,493,000, the purchases of property and equipment of ~~$2,762,000, and~~$5,184,000, the purchases of real estate investments of ~~$744,000.~~$2,296,000, and the purchase of intangible assets of $1,810,000. Net cash used in financing activities totaled ~~$6,402,000,~~$13,752,000, which was primarily due to $10,295,000 of cash dividend payments, the redemption of long-term debt of $6,895,000, ~~$6,869,000 of cash dividend payments,~~ cash dividends paid to redeemable noncontrolling interest of ~~$3,012,000,~~$6,762,000, $784,000 of share repurchases, and repayments of long-term debt of ~~$328,000,~~$437,000, offset by the proceeds from issuance of long-term debt of $12,000,000.

Net cash ~~provided by~~used in operating activities for the ~~six~~nine months ended ~~June~~September 30, 2022 was approximately ~~$21,629,000,~~$18,261,000, which consisted primarily of ~~cash received from net premiums written, and reinsurance recoveries of approximately $26,584,000 less~~ cash disbursed for operating expenses, losses and loss adjustment expenses and interest ~~payments.~~payments less cash received from net premiums written and reinsurance recoveries (of approximately $34,222,000). Net cash used in investing activities of ~~$360,095,000~~$311,352,000 was primarily due to the purchases of fixed-maturity and equity securities of ~~$394,021,000,~~$414,066,000, the purchases of property and equipment of ~~$4,229,000,~~$5,431,000, and the purchase of intangible assets from United of $3,800,000, offset by the proceeds from ~~sales of fixed-maturity and equity securities of $35,921,000, the proceeds from~~ calls, repayments and maturities of fixed-maturity securities of ~~$4,020,000,~~$52,023,000, the proceeds from sales of fixed-maturity and equity securities of $41,010,000, $14,500,000 of compensation received for the property relinquished through eminent domain, and distributions received from limited partnership investments of ~~$2,335,000.~~$4,732,000. Net cash provided by financing activities totaled ~~$70,267,000,~~$56,955,000, which was primarily due to the proceeds from issuance of 4.75% Convertible Senior Notes of $172,500,000, offset by ~~$69,987,000~~$76,166,000 of share repurchases, net repayment of our revolving credit facility of $15,000,000, ~~$8,091,000~~$11,697,000 of net cash dividend payments, debt issuance costs paid of ~~$5,757,000,~~$6,014,000, cash dividends paid to redeemable noncontrolling interest of ~~$2,508,000,~~$5,508,000, and repayments of long-term debt of ~~$501,000.~~$754,000.

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 ~~June~~September 30, 2023, we had ~~$482,664,000~~$458,616,000 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.

In the future, we may alter our investment policy with regard 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 ~~June~~September 30, 2023, we had unexpired capital commitments for limited partnerships in which we hold interests. Such commitments are not recognized in the consolidated financial statements but are required to be disclosed in the notes to the consolidated financial statements. See Note 21 -- “Commitments and Contingencies” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q 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 consolidated 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 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 ~~June~~September 30, 2023, ~~$675,488,000~~$645,523,000 of the total ~~$748,955,000~~$709,089,000 we have reserved for losses and loss adjustment expenses is attributable to our estimate of IBNR. The remaining ~~$73,467,000~~$63,566,000 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 ~~June~~September 30, 2023, ~~$62,087,000~~$54,457,000 of the ~~$73,467,000~~$63,566,000 in reserves for known cases relates to claims incurred during prior years.

Our Reserves decreased from $863,765,000 at December 31, 2022 to ~~$748,955,000~~$709,089,000 at ~~June~~September 30, 2023. The ~~$114,810,000~~$154,676,000 decrease is comprised of reductions in our catastrophe Reserves of ~~$112,592,000~~$151,242,000 primarily specific to Hurricane Ian and Hurricane Irma, and reductions in our non-catastrophe Reserves of ~~$64,612,000~~$77,742,000 for 2022 and ~~$17,057,000~~$27,465,000 for 2021 and prior loss years, offset by ~~$79,451,000~~$101,773,000 in reserves established for the 2023 loss year. The Reserves established for 2023 claims are primarily driven by an allowance for those claims that have been incurred but not reported to the company as of ~~June~~September 30, 2023. The decrease of ~~$194,261,000~~$256,449,000 specific to our 2022 and prior loss-years reserves is due to settlement of claims related to those loss years.

Based on all information known to us, we consider our Reserves at ~~June~~September 30, 2023 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.

From time to time, our reinsurance contracts may 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 ~~June~~September 30, 2023 and 2022, we accrued benefits of $6,993,000 and ~~$6,390,000,~~$3,843,000, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, we accrued benefits of ~~$13,986,000~~$20,979,000 and ~~$7,874,000,~~$11,717,000, respectively. The accrual of benefits was recognized as a reduction in ceded premiums.

As of ~~June~~September 30, 2023, we had ~~$30,303,000~~$37,296,000 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 agreements.

We believe the credit risk associated with the collectability of these 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.

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 10, 2023. For the ~~six~~nine months ended ~~June~~September 30, 2023, there have been no other material changes with respect to any of our critical accounting policies.

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our unaudited consolidated financial statements, see Note 3 -- “Recent Accounting Pronouncements” to our consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

Our investment portfolio at ~~June~~September 30, 2023 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 portfolio is 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 portfolio.

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 ~~June~~September 30, 2023 (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 ~~June~~September 30, 2023 (amounts in thousands):

Our equity investment portfolio at ~~June~~September 30, 2023 included common stocks, perpetual preferred stocks, mutual funds and exchange-traded funds. We may incur potential 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 ~~June~~September 30, 2023 (amounts in thousands):

At ~~June~~September 30, 2023, 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 ~~June~~September 30, 2023 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.

We are 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.

There have been no material changes in the risk factors previously disclosed in the section entitled “Risk Factors” in our Form 10-K, which was filed with the SEC on March 10, 2023.

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):None.

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 stockholders 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 stockholders without prior approval of the Florida Office of Insurance Regulation (“FLOIR”) 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 FLOIR if (1) the dividend is equal to or less than the greater of (a) 10.0% of the insurer’s capital surplus as regards to 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 FLOIR 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 FLOIR or (2) 30 days after the FLOIR has received notice of such dividend or distribution and has not disapproved it within such time.

During the ~~six~~nine months ended ~~June~~September 30, 2023, our insurance subsidiaries paid dividends of $10,000,000 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 have 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.


	Maturity Date	Payment Due Date
4.75% Convertible Senior Notes*	June 2042	June 1 and December 1
4.25% Convertible Senior Notes**	March 2037	March 1 and September 1
4.55% Promissory Note	Through August 2036	1st day of each month
5.50% Promissory Note***Note	Through July 2033	1st day of each month
Finance leases	Through October 2024	Various
Revolving credit ~~facility~~facility***	Through December 2024	January 1, April 1, July 1, October 1


*	At the option of the noteholders, we may be required to repurchase for cash all or any portion of the notes on June 1, 2027, June 1, 2032 or June 1, 2037.
**	At the option of the noteholders, we may be required to repurchase for cash all or any portion of the notes on March 1, 2027 or March 1, 2032.
***	~~First payment began August 1,~~There was no borrowing outstanding at September 30, 2023.


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	$	428,912	$	(14,062	)		-3.17	%	$	406,801	$	(11,875	)		-2.84	%
200 basis point increase		433,599		(9,375	)		-2.12	%		410,759		(7,917	)		-1.89	%
100 basis point increase		438,286		(4,688	)		-1.06	%		414,717		(3,959	)		-0.95	%
100 basis point decrease		447,662		4,688			1.06	%		422,634		3,958			0.95	%
200 basis point decrease		452,350		(9,375	)		2.12	%		426,593		7,917			1.89	%
300 basis point decrease		457,039		(14,065	)		3.18	%		430,553		11,877			2.84	%


	Cost or		% of Total				% of Total		Cost or		% 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	$	13,367		3	$	13,326		3	$	40,592		10	$	40,566		10
AA+, AA, AA-		412,410		91		404,268		91		360,750		84		353,762		84
A+, A, A-		13,479		3		12,907		3		12,615		3		12,032		3
BBB+, BBB, BBB-		11,117		2		10,743		2		11,110		3		10,676		3
BB+, BB, BB-		1,995		1		1,730		1
B+, B, B-										1,996		—		1,640		—
Total	$	452,368		100	$	442,974		100	$	427,063		100	$	418,676		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
April 30, 2023		—	$	—		—	$	—
May 31, 2023		8,614	$	55.66		—	$	—
June 30, 2023		—	$	—		—	$	—
		8,614	$	55.66		—


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-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.

4.3		Indenture, dated May 23, 2022, by and between HCI Group, Inc. and The Bank of New York Mellon Trust Company, N.A. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2022.

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.

4.9		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**		HCI Group, Inc. 2012 Omnibus Incentive Plan as revised April 26, 2022. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed May 6, 2022.

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		Multi-Year Working Layer Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.131 to our Form 10-Q filed August 9, 2022.

10.9		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.132 to our Form 10-Q filed August 9, 2022.

10.10		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.133 to our Form 10-Q filed August 9, 2022.

10.11		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.134 to our Form 10-Q filed August 9, 2022.

10.12		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.135 to our Form 10-Q filed August 9, 2022.

10.13		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2022 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.136 to our Form 10-Q filed August 9, 2022.

10.14		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2022 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.137 to our Form 10-Q filed August 9, 2022.

10.15		Non-Florida Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 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 Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.138 to our Form 10-Q filed August 9, 2022.


10.16		Non-Florida Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 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 Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.139 to our Form 10-Q filed August 9, 2022.

10.17		Sixth Layer Non-Florida Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 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 Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.140 to our Form 10-Q filed August 9, 2022.

10.18		Non-Florida Reinstatement Premium Protection Reinsurance Contract effective June 1, 2022 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 Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.141 to our Form 10-Q filed August 9, 2022.

10.19		Non-Florida Reinstatement Premium Protection Reinsurance Contract effective June 1, 2022 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 Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.142 to our Form 10-Q filed August 9, 2022.

10.20		Flood Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 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 Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.143 to our Form 10-Q filed August 9, 2022.

10.21		Property Catastrophe Shared Multi-Region Excess of Loss Reinsurance Contract effective June 1, 2022 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 Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.144 to our Form 10-Q filed August 9, 2022.

10.22		Top Layer Flood/Wind Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 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 Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to Exhibit 10.145 to our Form 10-Q filed August 9, 2022.

10.23		Reimbursement Contract effective June 1, 2022 between TypTap Insurance Company and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. Incorporated by reference to Exhibit 10.146 to our Form 10-Q filed August 9, 2022.

10.24		Reimbursement Contract effective June 1, 2022 between Homeowners Choice Property & Casualty Insurance Company, Inc. and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. Incorporated by reference to Exhibit 10.147 to our Form 10-Q filed August 9, 2022.

10.25		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company by Subscribing Reinsurers. Portions


		of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.



10.26		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.27		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.28		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.29		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to TypTap Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.30		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to TypTap Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.31		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2023 issued to TypTap Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.32		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2023 issued to TypTap Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.33		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.34		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company and TypTap Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.35		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company and TypTap Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.


10.36		Reimbursement Contract effective June 1, 2023 between Homeowners Choice Property & Casualty Insurance Company, Inc. and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.37		Reimbursement Contract effective June 1, 2023 between TypTap Insurance Company, Inc. and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.38		RAP Reimbursement Contract effective June 1, 2023 between Homeowners Choice Property & Casualty Insurance Company, Inc. and the State Board of Administration of the State of Florida which administers the Reinsurance to Assist Policyholders Program (“RAP Program”). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.


10.39		RAP Reimbursement Contract effective June 1, 2023 between TypTap Insurance Company, Inc. and the State Board of Administration of the State of Florida which administers the Reinsurance to Assist Policyholders Program (“RAP Program”). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

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.

10.51**		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.

10.53		Purchase Agreement, dated May 18, 2022, by and among HCI Group, Inc., JMP Securities LLC and Truist Securities, Inc., as representatives of the several purchasers named therein. Incorporated by reference to Exhibit 10.1 of our Form 8-K filed May 23, 2022.

10.54**		Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated September 15, 2023.

10.57**		Form of executive restricted stock award contract. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q 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.

10.62		Amended and Restated Credit Agreement, dated June 2, 2023, between HCI Group, Inc. and Fifth Third Bank. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.63		Security and Pledge Agreement and Revolving Credit Promissory Note, dated June 2, 2023, between HCI Group, Inc. and Fifth Third Bank. Incorporated by reference to Exhibits 99.2, and 99.3 to our Form 8-K filed June 8, 2023.

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.

10.124		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, 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, 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.

10.129		Property Quota Share Reinsurance Contract effective June 1, 2022 issued to United Property and Casualty Insurance Company by TypTap Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 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

101.INS		Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL documents.

101.SCH		Inline XBRL Taxonomy Extension Schema.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase.

101.DEF		Inline XBRL Definition Linkbase.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


	HCI GROUP, INC.

~~August 9,~~November 8, 2023	By:	/s/ Paresh Patel
		Paresh Patel
		Chief Executive Officer
		(Principal Executive Officer)

~~August 9,~~November 8, 2023	By:	/s/ James Mark Harmsworth
		James Mark Harmsworth
		Chief Financial Officer
		(Principal Financial and Accounting Officer)