HCI Group Inc
For the period ended Sep 30, 2024. Filed Nov 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 8, 2024
HCI$186.03-3.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0000950170-24-094718
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0000950170-24-124033
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 128 previous paragraphs and 136 current paragraphs.
67 unchanged; 50 reworded; 18 added; 11 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (18)
Current report
Insurance Operations
Current report
Insurance management services
Current report
Reinsurance brokerage services
Current report
Reciprocal Exchange Operations d)
Current report
Insurance Operations
Current report
Insurance Management Services
Current report
TTIG’s insurance management services focus on optimizing the insurer client's operational efficiency, risk management, and regulatory compliance. These services include assisting with reinsurance arrangements, managing claims processes, and overseeing underwriting practices to ensure profitability and risk control. Additionally, they involve analyzing claims data and market trends to improve pricing models, advising on insurance policy design, and ensuring adherence to regulatory requirements.
Current report
Reinsurance Brokerage Services
Current report
Through our recently formed subsidiary Dark Horse, we provide expert reinsurance brokerage services to help insurance companies manage risk by acting as an intermediary between the insurer client and reinsurers. We design tailored reinsurance solutions by assessing our insurer client’s risk portfolio.
Current report
On September 26, 2024, Hurricane Helene made landfall in the Big Bend area of Florida as a powerful Category 4 storm. The storm continued inland impacting Georgia, South Carolina, and North Carolina, among other states. We estimated our consolidated gross losses, including loss adjustment expenses, at $61,000,000. After anticipated reinsurance recoveries, net losses are estimated to be $40,000,000. Due to Hurricane Helene, the balance of previously accrued benefits under the multi-year reinsurance contract with retrospective provisions was decreased by $12,369,000 during the third quarter of 2024. In addition, certain of our real estate properties held for operational and investment purposes sustained minor damage from the effects of Hurricane Helene. We maintain property insurance through third parties and expect losses from the storm to be limited to policy deductibles.
Current report
On October 10, 2024, Hurricane Milton made landfall in Florida near Siesta Key in Sarasota County as a Category 3 storm and continued across central Florida. The net loss estimate on a consolidated pre-tax basis, including loss adjustment expenses and expected reinsurance recoveries, is approximately $78,000,000. In addition, the entire balance of accrued benefits under the multi-year reinsurance contract with retrospective provisions, amounting to $50,568,000 at September 30, 2024, will be reversed with no further benefits to be accrued under the contract. The reversal will increase ceded premiums in the fourth quarter of 2024 by $50,568,000. Total impact to operating results of the fourth quarter of 2024 will be approximately $128,568,000.
Current report
On October 22, 2024, our insurance subsidiaries assumed approximately 42,000 policies from Citizens, representing approximately $200 million in annualized premiums written.
Current report
On October 23, 2024, we granted 58,300 restricted shares of common stock to our employees. The shares will vest equally over a service period of four years from the grant date. The grant date fair value per share was $113.40.
Current report
On November 8, 2024, Tailrow Funding, LLC, a wholly owned subsidiary of HCI, acquired a $25,000,000 surplus note issued by Tailrow Insurance Exchange, a Florida-domiciled reciprocal insurance exchange awaiting approval to offer residential insurance coverage.
Current report
Net Realized Investment Gains for the three months ended September 30, 2024 were approximately $2,846,000 as opposed to net realized investment losses of approximately $207,000 for the three months ended September 30, 2023. The increase was primarily attributable to net realized gains of approximately $2,843,000 from sales of fixed-maturity and equity securities during the three months ended September 30, 2024 as opposed to net realized losses of approximately $207,000 from sales of these securities during the corresponding period in 2023.
Current report
Our consolidated Losses and Loss Adjustment Expenses amounted to approximately $105,736,000 and $66,726,000 for the three months ended September 30, 2024 and 2023, respectively. The increase is due to net losses of $40,000,000 from Hurricane Helene, $6,500,000 from Hurricane Debby, and losses attributable to a greater number of policies in force. The increase was offset by favorable prior period development in 2024 of $4,774,000 as opposed to $8,105,000 in upward adjustments to prior period loss reserves in 2023. In addition, the third quarter of 2023 included $6,500,000 of losses from Hurricane Idalia. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”
Current report
Net Realized Investment Gains for the nine months ended September 30, 2024 were approximately $3,058,000 as opposed to net realized investment losses of approximately $1,586,000 for the nine months ended September 30, 2023. The increase was primarily attributable to net realized gains of approximately $3,055,000 from sales of fixed-maturity and equity securities during the nine months ended September 30, 2024 as opposed to net realized losses of approximately $1,539,000 from sales of these securities during the corresponding period in 2023.
Current report
Our consolidated Losses and Loss Adjustment Expenses amounted to approximately $263,982,000 and $189,181,000 for the nine months ended September 30, 2024 and 2023, respectively. The increase is due to net losses of $40,000,000 from Hurricane Helene, $6,500,000 from Hurricane Debby, and losses attributable to a greater number of policies in force. The increase was offset by less prior period development in 2024 compared to 2023 by $12,850,000. In addition, the nine months ended September 30, 2023 included $6,500,000 of losses from Hurricane Idalia. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”
Removed paragraphs (11)
Previous report
HCPCI Insurance Operations
Previous report
d)
Previous report
HCPCI Insurance Operations
Previous report
Property and Casualty Insurance
Previous report
Property and Casualty Insurance
Previous report
TypTap, TTIG’s insurance subsidiary, has been the primary source of our organic growth in gross written premium. TypTap’s policies in force have increased from 6,721 in January 2018 to 97,004 at June 30, 2024. TypTap has been successful in using internally developed proprietary technology to underwrite, select and write policies efficiently. Since TypTap began applying for approval to offer homeowners coverage in states outside of Florida in October 2020, TypTap has received approvals from 31 states.
Previous report
Reciprocal Exchange Operations
Previous report
On July 1, 2024, HCI entered into a Stock Purchase Agreement (“Purchase Agreement”) with TTIG, its majority-owned subsidiary. Pursuant to the Purchase Agreement, TTIG transferred to HCI 2,500,000 shares of TypTap Insurance Company (“TTIC”)’s $1.00 par value common stock which represented all of the issued and outstanding capital stock of TTIC. In exchange, HCI agreed to consider three promissory notes issued by TTIG, totaling $117,994,000 in principal, as fully repaid with the exception of a 2.00% promissory note due June 1, 2025. This promissory note will remain in effect with its principal balance reduced from $40,000,000 to $2,994,000. As there was no change in control, the purchase was accounted for as a common control transaction. The net assets of TTIC were derecognized by TTIG and recognized by HCI at their carrying amounts on the date of the purchase. The difference between the consideration transferred and the carrying amounts of the net assets was recognized in equity. Further, the sale triggers a change in control clause within TTIG’s equity incentive plan, causing all unvested stock-based awards to vest immediately except for TTIG restricted stock and stock options issued to Paresh Patel who is also the Chief Executive Officer of HCI. The expense from immediate vesting approximated $1,087,000.
Previous report
Our consolidated Losses and Loss Adjustment Expenses amounted to approximately $78,324,000 and $61,890,000 for the three months ended June 30, 2024 and 2023, respectively. The losses and loss adjustment expenses of HCPCI Insurance Operations were $37,856,000 and $27,653,000 for the three months ended June 30, 2024 and 2023, respectively. The increase was attributable to a higher number of policies in force, offset by lower claims and litigation frequency related to Florida policies. Losses and loss adjustment expenses for TypTap Group were $38,790,000 compared with $34,937,000 for the same comparative period. The increase was attributable to higher number of policies in force, offset by lower claims and litigation frequency related to Florida policies. Losses and loss adjustment expenses for reciprocal exchange operations were $1,605,000 for the three months ended June 30, 2024, resulting from the policies assumed from Citizens during 2024. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”
Previous report
Net Realized Investment Gains for the six months ended June 30, 2024 were approximately $212,000 compared with net realized investment losses of approximately $1,379,000 for the six months ended June 30, 2023. The increase was attributable to a $836,000 increase in realized gains from the sale of equity securities and a $708,000 decrease in realized losses from the sale of available-for-sale fixed-maturity securities.
Previous report
Our consolidated Losses and Loss Adjustment Expenses amounted to approximately $158,246,000 and $122,455,000 for the six months ended June 30, 2024 and 2023, respectively. The increase was attributable to a greater number of policies in force, offset by lower claims and litigation frequency related to Florida policies. The losses and loss adjustment expenses of HCPCI Insurance Operations were $76,870,000 and $56,435,000 for the six months ended June 30, 2024 and 2023, respectively. Losses and loss adjustment expenses for TypTap Group were $79,343,000 compared with $67,993,000 for the same comparative period. Losses and loss adjustment expenses for reciprocal exchange operations were $2,873,000 for the six months ended June 30, 2024. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”
Reworded paragraphs (50)
Previous wording
HCI Group, Inc. is a Florida-based insurance company with operations in property and casualty insurance, information technology services, insurance management, real estate and reinsurance. We utilize innovative technology to promote efficiency, refine risk assessment and enhance experiences for clients throughout the insurance process. We manage our operations in the following organizational segments, based on managerial emphasis and evaluation of financial and operating performances:
Current wording
HCI Group, Inc. is a Florida-based company with operations in property and casualty insurance, information technology services, insurance management, real estate and reinsurance. We utilize innovative technology to promote efficiency, refine risk assessment and enhance experiences for clients throughout the insurance process. As described in Change in Segment Information under Note 1 -- “Nature of Operations” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q, our recent organizational change has moved two insurance subsidiaries into one single operating segment to enhance operational efficiency and simplify financial reporting. Accordingly, we manage our operations in the following organizational segments, based on managerial emphasis and evaluation of financial and operating performances:
Previous wording
For the three months ended June 30, 2024 and 2023, revenues from HCPCI insurance operations before intracompany elimination represented 57.3% and 65.1%, respectively, and revenues from TypTap Group represented 37.2% and 33.4%, respectively, of total revenues of all operating segments. For the six months ended June 30, 2024 and 2023, revenues from HCPCI insurance operations before intracompany elimination represented 60.2% and 63.3%, respectively, and revenues from TypTap Group represented 35.7% and 34.9%, respectively, of total revenues of all operating segments. At June 30, 2024 and December 31, 2023, HCPCI insurance operations’ total assets represented 54.9% and 55.3%, respectively, and TypTap Group’s total assets represented 32.0% and 33.6%, 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.
Current wording
For the three months ended September 30, 2024 and 2023, revenues from insurance operations before intracompany elimination represented 82.7% and 87.6%, respectively, and revenues from TypTap Group represented 11.0% and 11.0%, respectively, of total revenues of all operating segments. For the nine months ended September 30, 2024 and 2023, revenues from insurance operations before intracompany elimination represented 84.5% and 86.9%, respectively, and revenues from TypTap Group represented 10.8% and 11.6%, respectively, of total revenues of all operating segments. At September 30, 2024 and December 31, 2023, insurance operations’ total assets represented 84.2% and 87.0%, respectively, and TypTap Group’s total assets represented 2.9% and 1.9%, 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.
Previous wording
HCPCI provides various forms of residential insurance products such as homeowners insurance, fire 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.
Current wording
We currently have two insurance subsidiaries: Homeowners Choice Property & Casualty Insurance Company, Inc. (“HCPCI”) and TypTap Insurance Company (“TypTap”). We provide various forms of residential insurance products such as homeowners insurance, fire insurance, and wind-only insurance. We are authorized to write residential property and casualty insurance in the states of Alaska, Arizona, Arkansas, California, Connecticut, Florida, Georgia, Kansas, Kentucky, Maryland, Massachusetts, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Utah, and Washington. Currently, our primary market is Florida. We utilize internally developed software technologies to drive efficiency in claim processing and claims settlements, identify profitable underwriting opportunities, generate savings and streamline operations across its insurance operations.
Previous wording
TypTap Insurance Group, Inc. (“TTIG”), our majority-owned subsidiary, currently has five subsidiaries: TypTap Insurance Company (“TypTap”), TypTap Management Company, Exzeo USA, Inc., Dark Horse Re, LLC (“Dark Horse”), 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 uses internally developed software technologies to drive efficiency in claim processing and claims settlements, identify profitable underwriting opportunities, generate savings and streamline operations across its insurance operations. In addition, software is also used to analyze potential and current properties based on statistical models for catastrophic events, allowing us to pursue the optimal candidates for insurance coverage. Dark Horse is a recently formed subsidiary that specializes in providing expert reinsurance brokerage services.
Current wording
TypTap Insurance Group, Inc. (“TTIG”), our majority-owned subsidiary, currently has four subsidiaries: TypTap Management Company (“TTM”), Exzeo USA, Inc., Dark Horse Re, LLC (“Dark Horse”), and Cypress Tech Development Company which also owns Exzeo Software Private Limited, a subsidiary domiciled in India. TTM is responsible for managing activities such as claims processing, policyholder service/support, marketing, premium payment collection, underwriting and insurance application processing. TTM uses internally developed software technologies to drive efficiency in claim processing and claims settlements, identify profitable underwriting opportunities, generate savings and streamline operations. In addition, software is also used to analyze potential and current properties based on statistical models for catastrophic events, allowing us to pursue the optimal candidates for insurance coverage.
Previous wording
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, Harmony TM, AtlasViewer® and ClaimColony TM.
Current wording
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 insurance operations as well as our third-party relationships with our insurer clients, agency partners and claim vendors. These products include SAMSTM, Harmony TM, AtlasViewer® and ClaimColony TM.
Previous wording
The following table summarizes our results of operations for the three and six months ended June 30, 2024 and 2023 (dollar amounts in thousands, except per share amounts):
Current wording
The following table summarizes our results of operations for the three and nine months ended September 30, 2024 and 2023 (dollar amounts in thousands, except per share amounts):
Previous wording
Our results of operations for the three months ended June 30, 2024 reflect net income of approximately $57,099,000 or $4.24 diluted earnings per share, compared with net income of approximately $14,882,000 or $1.28 diluted earnings per share, for the three months ended June 30, 2023. The quarter-over-quarter increase was primarily due to a $71,292,0000 increase in net premiums earned and a $8,165,000 net increase in income from our investment portfolio (consisting of net investment income and net realized and unrealized gains or losses), offset by a $16,434,000 increase in losses and loss adjustment expenses and a $3,199,000 increase in general and administrative personnel expenses.
Current wording
Our results of operations for the three months ended September 30, 2024 reflect net income of approximately $9,392,000 or $0.52 diluted earnings per share, compared with net income of approximately $15,669,000 or $1.34 diluted earnings per share, for the three months ended September 30, 2023. The quarter-over-quarter decrease was primarily due to a $39,010,000 increase in losses and loss adjustment expenses, a $5,311,000 increase in general and administrative personnel expenses, and a $4,766,000 increase in policy acquisition, underwriting, and other operating expenses, offset by a $33,668,000 increase in net premiums earned and a $9,081,000 net increase in income from our investment portfolio (consisting of net investment income and net realized and unrealized gains or losses).
Previous wording
Gross Premiums Earned on a consolidated basis for the three months ended June 30, 2024 and 2023 were approximately $263,561,000 and $181,946,000, respectively. The $81,615,000 increase was primarily attributable to the policies assumed from Citizens and some impact from premium rate increases. Gross premiums earned from policies assumed were $61,770,000 for the three months ended June 30, 2024 compared with $0 for the three months ended June 30, 2023. HCPCI gross premiums earned were $150,357,000 for the three months ended June 30, 2024 compared with $96,875,000 for the three months ended June 30, 2023. TypTap Group’s gross premiums earned were $107,055,000 compared with $85,071,000 for the same comparative period in 2023. Gross premiums earned from reciprocal exchange operations were $12,804,000 for the three months ended June 30, 2024 as opposed to $0 for the three months ended June 30, 2023.
Current wording
Gross Premiums Earned on a consolidated basis for the three months ended September 30, 2024 and 2023 were approximately $265,518,000 and $188,308,000, respectively. The $77,210,000 increase was primarily attributable to the policies assumed from Citizens and premium rate increases. HCPCI gross premiums earned were $139,822,000 for the three months ended September 30, 2024 compared with $102,075,000 for the three months ended September 30, 2023. TypTap gross premiums earned were $108,266,000 for the three months ended September 30, 2024 compared with $86,233,000 for the same comparative period in 2023. Gross premiums earned from reciprocal exchange operations were $17,430,000 for the three months ended September 30, 2024 as opposed to $0 for the three months ended September 30, 2023.
Previous wording
Premiums Ceded for the six months ended June 30, 2024 and 2023 were approximately $144,819,000 and $136,899,000, respectively, representing 27.8% and 37.8%, respectively, of gross premiums earned. The $7,920,000 increase was primarily attributable to increased reinsurance coverage due to growth in the number of policies in force and total insured value.
Current wording
Premiums Ceded for the three months ended September 30, 2024 and 2023 were approximately $109,694,000 and $66,152,000, respectively, representing 41.3% and 35.1%, respectively, of gross premiums earned. The $43,542,000 increase was primarily attributable to increased reinsurance coverage due to growth in the number of policies in force and total insured value, together with the reversal of $12,369,000 of previously accrued benefits related to retrospective provisions due to the effects of Hurricane Helene. See Note 11 -- “Reinsurance” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information on the benefit adjustment.
Previous wording
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 each of the three months ended June 30, 2024 and 2023, premiums ceded included a decrease of $6,993,000 related to retrospective provisions. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.”
Current wording
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 September 30, 2024, premiums ceded included an increase of $7,707,000 related to retrospective provisions as opposed to a decrease of $6,993,000 for the three months ended September 30, 2023. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.”
Previous wording
Net Premiums Written for the three months ended June 30, 2024 and 2023 totaled approximately $230,189,000 and $113,593,000, respectively. Net premiums written represent the premiums charged on policies issued during a fiscal period less any applicable reinsurance costs. The increase in 2024 primarily resulted from an increase in premiums written resulting from increased policies in force, offset by increased premiums ceded to reinsurers as described above. We had approximately 242,500 policies in force at June 30, 2024 as compared with approximately 200,000 policies in force at June 30, 2023.
Current wording
Net Premiums Written for the three months ended September 30, 2024 and 2023 totaled approximately $160,685,000 and $132,113,000, respectively. Net premiums written represent the premiums charged on policies issued during a fiscal period less any applicable reinsurance costs. The increase in 2024 primarily resulted from an increase in premiums written resulting from increased policies in force, offset by increased premiums ceded to reinsurers as described above. We had approximately 235,000 policies in force at September 30, 2024 as compared with approximately 194,000 policies in force at September 30, 2023.
Previous wording
Net Premiums Earned for the three months ended June 30, 2024 and 2023 were approximately $186,848,000 and $115,556,000, respectively, and reflect the gross premiums earned less reinsurance costs as described above.
Current wording
Net Premiums Earned for the three months ended September 30, 2024 and 2023 were approximately $155,824,000 and $122,156,000, respectively, and reflect the gross premiums earned less reinsurance costs as described above.
Previous wording
Net Investment Incomefor the three months ended June 30, 2024 and 2023 was approximately $16,881,000 and $8,794,000, respectively. The $8,087,000 increase was attributable to a $4,556,000 increase in interest income from cash, cash equivalents, and available-for-sale fixed-maturity securities and a $3,513,000 increase in income from real estate investments, offset by a $98,000 decrease in income from limited partnership investments. See Net Investment Income under Note 4 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.
Current wording
Net Investment Incomefor the three months ended September 30, 2024 and 2023 was approximately $13,714,000 and $9,384,000, respectively. The $4,330,000 increase was primarily attributable to a $4,405,000 increase in interest income from cash, cash equivalents and available-for-sale fixed-maturity securities. See Net Investment Income under Note 4 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.
Previous wording
Policy Acquisition and Other Underwriting Expenses for the three months ended June 30, 2024 and 2023 were approximately $23,452,000 and $22,618,000 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 and premium taxes. Policy acquisition and other underwriting expenses for HCPCI Insurance Operations were $11,626,000 for the three months ended June 30, 2024 compared with $10,617,000 for the three months ended June 30, 2023. The increase in amortized costs was primarily due to an increase in premiums in force. TypTap Group’s policy acquisition and other underwriting expenses were $11,360,000 compared with $12,019,000 for the same comparative period, with the decrease due to higher amortized costs attributable to the accelerated transition of United policies during 2023, and lower policy acquisition costs in Florida resulting from lower commissions. Policy acquisition and other underwriting expenses, net of intercompany transactions, for reciprocal exchange operations were $484,000 for the three months ended June 30, 2024, primarily resulting from the policies assumed from Citizens during 2024
Current wording
Policy Acquisition and Other Underwriting Expenses for the three months ended September 30, 2024 and 2023 were approximately $26,104,000 and $22,768,000 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 and premium taxes. The increase in amortized costs was primarily due to increased premiums in force from the insurance and reciprocal exchange operations.
Previous wording
General and Administrative Personnel Expenses for the three months ended June 30, 2024 and 2023 were approximately $17,471,000 and $14,272,000, 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 increase of $3,199,000 was primarily attributable to lower payroll costs recoverable from reinsurers, decreased capitalized payroll costs for software development, and an increase in stock-based compensation expense related to the restricted stock awarded in April 2024.
Current wording
General and Administrative Personnel Expenses for the three months ended September 30, 2024 and 2023 were approximately $19,175,000 and $13,864,000, 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 increase of $5,311,000 was primarily attributable to a decrease in recovered payroll costs, an increase in stock-based compensation expense, an increase in employee incentive bonuses, and an increase in employee health benefits, offset by an increase in capitalized payroll costs.
Previous wording
Interest Expense for the three months ended June 30, 2024 and 2023 was approximately $3,452,000 and $2,667,000, respectively. The increase was primarily attributable to interest expense related to the revolving credit facility, partially offset by decreased interest expense resulting from the conversion and redemption of the 4.25% Convertible Senior Notes in March 2024.
Current wording
Interest Expense for the three months ended September 30, 2024 and 2023 was approximately $3,421,000 and $2,827,000, respectively. The increase was primarily attributable to interest expense related to the revolving credit facility, partially offset by decreased interest expense resulting from the conversion and redemption of the 4.25% Convertible Senior Notes in March 2024.
Previous wording
Income Tax Expensefor the six months ended June 30, 2024 and 2023 was approximately $39,401,000 and $10,727,000, respectively, for state, federal, and foreign income taxes, resulting in effective tax rates of 25.7% and 24.7%, respectively. The increase in the effective tax rate was primarily attributable to a lower prior year effective tax rate resulting from the release of valuation allowance during 2023.
Current wording
Income Tax Expensefor the three months ended September 30, 2024 and 2023 was approximately $4,688,000 and $4,419,000, respectively, for state, federal, and foreign income taxes, resulting in effective tax rates of 33.3% and 22.0%, respectively. The increase in the effective tax rate was primarily attributable to a lower prior year effective tax rate resulting from the release of valuation allowance during 2023 and a higher effective tax rate resulting from certain non-deductible compensation expense for the third quarter of 2024.
Previous wording
The loss ratio applicable to the six months ended June 30, 2024 (losses and loss adjustment expenses incurred related to net premiums earned) was 42.2% compared with 54.4% for the six months ended June 30, 2023. The decrease was primarily attributable to the increase in net premiums earned, offset in part by the increase in losses and loss adjustment expenses.
Current wording
The loss ratio applicable to the three months ended September 30, 2024 (losses and loss adjustment expenses incurred related to net premiums earned) was 67.9% compared with 54.6% for the three months ended September 30, 2023. The increase was primarily attributable to the increase in losses and loss adjustment expenses due to Hurricane Helene and Hurricane Debby.
Previous wording
The expense ratio applicable to the three months ended June 30, 2024 (defined as total expenses excluding losses and loss adjustment expenses and interest expense related to net premiums earned) was 25.9% compared with 36.8% for the three months ended June 30, 2023. The decrease in our expense ratio was primarily attributable to the increase in net premiums earned, offset in part by the increase in general and administrative personnel expenses and the increase in other operating expenses.
Current wording
The expense ratio applicable to the three months ended September 30, 2024 (defined as total expenses excluding losses and loss adjustment expenses and interest expense related to net premiums earned) was 33.4% compared with 34.4% for the three months ended September 30, 2023. The decrease in our expense ratio was primarily attributable to the increase in net premiums earned.
Previous wording
The combined ratio (total of all expenses excluding interest expense 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 30, 2024 was 67.8% compared with 90.3% for the three months ended June 30, 2023. The decrease in 2024 was attributable to the factors described above.
Current wording
The combined ratio (total of all expenses excluding interest expense in relation to net premiums earned) is the measure of overall underwriting profitability before other income. Our combined ratio for the three months ended September 30, 2024 was 101.3% compared with 89.0% for the three months ended September 30, 2023. The increase in 2024 was attributable to the factors described above.
Previous wording
Comparison of the Six Months Ended June 30, 2024 to the Six Months Ended June 30, 2023
Current wording
Comparison of the Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023
Previous wording
Our results of operations for the six months ended June 30, 2024 reflect net income of approximately $114,055,000 or $8.04 diluted earnings per share, compared with net income of approximately $32,675,000 or $2.81 diluted earnings per share, for the six months ended June 30, 2023. The period-over-period increase was primarily due to a $150,271,000 increase in net premiums earned and a $7,772,000 increase in income from our investment portfolio, offset by a $35,791,000 increase in losses and loss adjustment expense, a $5,971,000 increase in general and administrative personnel expenses, and a $3,301,000 increase in other operating expenses.
Current wording
Our results of operations for the nine months ended September 30, 2024 reflect net income of approximately $123,447,000 or $8.59 diluted earnings per share, compared with net income of approximately $48,344,000 or $4.16 diluted earnings per share, for the nine months ended September 30, 2023. The period-over-period increase was primarily due to a $183,939,000 increase in net premiums earned and a $16,853,000 net increase in income from our investment portfolio (consisting of net investment income and net realized and unrealized gains or losses), offset by a $74,801,000 increase in losses and loss adjustment expenses, a $11,282,000 increase in general and administrative personnel expenses, and a $8,320,000 increase in policy acquisition, underwriting, and other operating expenses.
Previous wording
Gross Premiums Earned on a consolidated basis for the six months ended June 30, 2024 and 2023 were approximately $520,205,000 and $362,014,000, respectively. The $158,191,000 increase was primarily attributable to the policies assumed from Citizens and some impact from premium rate increases. Gross premiums earned from insurance policies assumed were $128,739,000 for the six months ended June 30, 2024 compared with $7,163,000 for the six months ended June 30, 2023. HCPCI gross premiums earned were $305,739,000 for the six months ended June 30, 2024 compared with $189,331,000 for the six months ended June 30, 2023. TypTap Group’s gross premiums earned were $210,803,000 compared with $172,683,000 for the same comparative period in 2023. Gross premiums earned from reciprocal exchange operations were $16,429,000 for the six months ended June 30, 2024 as opposed to $0 for the six months ended June 30, 2023.
Current wording
Gross Premiums Earned on a consolidated basis for the nine months ended September 30, 2024 and 2023 were approximately $785,723,000 and $550,322,000, respectively. The $235,401,000 increase was primarily attributable to the policies assumed from Citizens and premium rate increases. Gross premiums earned from insurance policies assumed were $164,381,000 for the nine months ended September 30, 2024 compared with $7,163,000 for the nine months ended September 30, 2023. HCPCI gross premiums earned were $432,795,000 for the nine months ended September 30, 2024 compared with $291,406,000 for the nine months ended September 30, 2023. TypTap’s gross premiums earned were $319,069,000 compared with $258,916,000 for the same comparative period in 2023. Gross premiums earned from reciprocal exchange operations were $33,859,000 for the nine months ended September 30, 2024 as opposed to $0 for the nine months ended September 30, 2023.
Previous wording
Premiums Ceded for the three months ended June 30, 2024 and 2023 were approximately $76,713,000 and $66,390,000, respectively, representing 29.1% and 36.5%, respectively, of gross premiums earned. The $10,323,000 increase was primarily attributable to increased reinsurance coverage due to growth in the number of policies in force and total insured value.
Current wording
Premiums Ceded for the nine months ended September 30, 2024 and 2023 were approximately $254,513,000 and $203,051,000, respectively, representing 32.4% and 36.9%, respectively, of gross premiums earned. The $51,462,000 increase was primarily attributable to increased reinsurance coverage due to growth in the number of policies in force and total insured value and the reversal of previously accrued benefits as described earlier.
Previous wording
For each of the six months ended June 30, 2024 and 2023, premiums ceded included a decrease of $13,986,000 related to retrospective provisions. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.”
Current wording
For the nine months ended September 30, 2024, premiums ceded included a decrease of $6,279,000 related to retrospective provisions compared with a decrease of $20,979,000 for the nine months ended September 30, 2023. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.”
Previous wording
Net Premiums Written for the six months ended June 30, 2024 and 2023 totaled approximately $417,069,000 and $242,938,000, respectively. The increase in 2024 primarily resulted from the factors described earlier.
Current wording
Net Premiums Written for the nine months ended September 30, 2024 and 2023 totaled approximately $577,754,000 and $375,051,000, respectively. The increase in 2024 primarily resulted from the factors described earlier.
Previous wording
Net Premiums Earned for the six months ended June 30, 2024 and 2023 were approximately $375,386,000 and $225,115,000, respectively, and reflect the gross premiums earned less reinsurance costs as described above.
Current wording
Net Premiums Earned for the nine months ended September 30, 2024 and 2023 were approximately $531,210,000 and $347,271,000, respectively, and reflect the gross premiums earned less reinsurance costs as described above.
Previous wording
The following is a reconciliation of our total Net Premiums Written to Net Premiums Earned for the six months ended June 30, 2024 and 2023 (amounts in thousands):
Current wording
The following is a reconciliation of our total Net Premiums Written to Net Premiums Earned for the nine months ended September 30, 2024 and 2023 (amounts in thousands):
Previous wording
Net Investment Incomefor the six months ended June 30, 2024 and 2023 was approximately $30,948,000 and $26,509,000, respectively. The $4,439,000 increase was primarily attributable to a $8,871,000 increase in interest income from cash, cash equivalents, and available-for-sale fixed-maturity securities, offset by a $4,287,000 decrease in income from real estate investments. See Net Investment Income under Note 4 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.
Current wording
Net Investment Incomefor the nine months ended September 30, 2024 and 2023 was approximately $44,662,000 and $35,893,000, respectively. The $8,769,000 increase was attributable to a $13,276,000 increase in interest income from cash, cash equivalents, and available-for-sale fixed-maturity securities, offset by a $4,518,000 decrease in income from real estate investments. See Net Investment Income under Note 4 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.
Previous wording
Net Unrealized Investment Gainsfor the six months ended June 30, 2024 and 2023 were approximately $3,168,000 and $1,426,000, respectively. The increase was primarily attributable to an overall improvement in the equity market compared with the six months ended June 30, 2023.
Current wording
Net Unrealized Investment Gains for the nine months ended September 30, 2024 and 2023 were approximately $3,825,000 and $385,000, respectively. The increase was primarily attributable to an overall improvement in the equity market compared with the nine months ended September 30, 2023.
Previous wording
Policy Acquisition and Other Underwriting Expenses for the six months ended June 30, 2024 and 2023 were approximately $45,591,000 and $45,338,000, respectively. Policy acquisition and other underwriting expenses for HCPCI Insurance Operations were $22,341,000 for the six months ended June 30, 2024 compared with $20,893,000 for the six months ended June 30, 2023. The increase in amortized costs was primarily due to increased premiums in force. TypTap Group’s policy acquisition and other underwriting expenses were $22,674,000 compared with $24,493,000 for the same comparative period, with the decrease due to higher amortized costs attributable to the accelerated transition of United policies during 2023, offset by lower policy acquisition costs in Florida resulting from lower commissions. Policy acquisition and other underwriting expenses, net of intercompany transactions, for reciprocal exchange operations were approximately $632,000 for the six months ended June 30, 2024, primarily resulting from policy assumptions from Citizens during 2024.
Current wording
Policy Acquisition and Other Underwriting Expenses for the nine months ended September 30, 2024 and 2023 were approximately $71,695,000 and $68,106,000 on a consolidated basis, respectively. The increase in amortized costs was primarily due to increased premiums in force and higher amortized costs attributable to the accelerated transition of United policies during 2023, offset by lower policy acquisition costs in Florida resulting from lower commissions.
Previous wording
General and Administrative Personnel Expenses for the six months ended June 30, 2024 and 2023 were approximately $33,745,000 and $27,774,000, respectively. The period-over-period increase of $5,971,000 was primarily attributable to an increase in employee incentive bonuses, lower payroll costs recoverable from reinsurers, and a decrease in capitalized payroll costs for software development.
Current wording
General and Administrative Personnel Expenses for the nine months ended September 30, 2024 and 2023 were approximately $52,920,000 and $41,638,000, respectively. The period-over-period increase of $11,282,000 was primarily attributable to lower payroll costs recoverable from reinsurers, an increase in employee incentive bonuses, an increase in stock-based compensation expense, and an increase in employee health benefits.
Previous wording
Interest Expense for the six months ended June 30, 2024 and 2023 was approximately $6,601,000 and $5,468,000, respectively. The increase was primarily attributable to an increase in interest expense related to the revolving credit facility, partially offset by decreased interest expense resulting from the conversion and redemption of the 4.25% Convertible Senior Notes in March 2024.
Current wording
Interest Expense for the nine months ended September 30, 2024 and 2023 was approximately $10,022,000 and $8,295,000, respectively. The increase was primarily attributable to an increase in interest expense related to the revolving credit facility, partially offset by decreased interest expense resulting from the conversion and redemption of the 4.25% Convertible Senior Notes in March 2024.
Previous wording
Income Tax Expensefor the three months ended June 30, 2024 and 2023 was approximately $18,927,000 and $5,384,000, respectively, for state, federal, and foreign income taxes, resulting in effective tax rates of 24.9% and 26.6%, respectively. The decrease in the effective tax rate was primarily attributable to the recognition of tax benefits related to restricted stock that vested in February and May 2024.
Current wording
Income Tax Expensefor the nine months ended September 30, 2024 and 2023 was approximately $44,089,000 and $15,146,000, respectively, for state, federal, and foreign income taxes, resulting in effective tax rates of 26.3% and 23.9%, respectively. The increase in the effective tax rate was primarily attributable to a lower prior year effective tax rate resulting from the release of valuation allowance during 2023 and a higher effective tax rate resulting from certain non-deductible compensation expense for the third quarter of 2024.
Previous wording
The loss ratio applicable to the three months ended June 30, 2024 (losses and loss adjustment expenses incurred related to net premiums earned) was 41.9% compared with 53.5% for the three months ended June 30, 2023. The decrease was primarily attributable to the increase in net premiums earned, offset in part by the increase in losses and loss adjustment expenses.
Current wording
The loss ratio applicable to the nine months ended September 30, 2024 (losses and loss adjustment expenses incurred related to net premiums earned) was 49.7% compared with 54.5% for the nine months ended September 30, 2023. The decrease was primarily attributable to the increase in net premiums earned, offset in part by the increase in losses and loss adjustment expenses.
Previous wording
The expense ratio applicable to the six months ended June 30, 2024 (defined as total expenses excluding losses and loss adjustment expenses and interest expense related to net premiums earned) was 25.2% compared with 37.8% for the six months ended June 30, 2023. The decrease in our expense ratio was primarily attributable to the increase in net premiums earned, offset by the increase in general and administrative personnel expenses and the increase in other operating expenses.
Current wording
The expense ratio applicable to the nine months ended September 30, 2024 (defined as total expenses excluding losses and loss adjustment expenses and interest expense related to net premiums earned) was 27.6% compared with 36.6% for the nine months ended September 30, 2023. The decrease in our expense ratio was primarily attributable to the increase in net premiums earned, offset by the increase in general and administrative personnel expenses and the increase in other operating expenses.
Previous wording
The combined ratio (total of all expenses excluding interest expense in relation to net premiums earned) is the measure of overall underwriting profitability before other income. Our combined ratio for the six months ended June 30, 2024 was 67.4% compared with 92.2% for the six months ended June 30, 2023. The decrease in 2024 was attributable to the factors described above.
Current wording
The combined ratio (total of all expenses excluding interest expense in relation to net premiums earned) is the measure of overall underwriting profitability before other income. Our combined ratio for the nine months ended September 30, 2024 was 77.3% compared with 91.1% for the nine months ended September 30, 2023. The decrease in 2024 was attributable to the factors described above.
Previous wording
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 100 days of the claim receipt date. Additional cash outflow occurs through payments of underwriting costs such as commissions, taxes, payroll, and general overhead expenses.
Current wording
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.
Previous wording
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 30, 2024, there was an aggregate unfunded capital balance of $3,353,000. See Limited Partnership Investments under Note 4 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.
Current wording
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 September 30, 2024, there was an aggregate unfunded capital balance of $3,255,000. See Limited Partnership Investments under Note 4 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.
Previous wording
Cash Flows for the Six Months Ended June 30, 2024
Current wording
Cash Flows for the Nine Months Ended September 30, 2024
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Current report — wording carried from elsewhere
Net Unrealized Investment Incomefor the three months ended September 30, 2024 was approximately $657,000 as opposed to net unrealized investment losses of approximately $1,041,000 for the three months ended September 30, 2023. The increase was primarily attributable to an overall improvement in the equity market compared with the three months ended September 30, 2023.