HCI Group Inc

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 (“TTIC”). Both HCPCI and TTIC are authorized to underwrite various homeowners’ property and casualty insurance products and allied lines business in the state of Florida and in other states. A third insurance subsidiary, perRisk Insurance Company (“perRisk”), is domiciled in Arizona and has not yet commenced its surplus lines insurance business. The operations of insurance subsidiaries are supported by HCI Group, Inc. and certain entities within the consolidated group. 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 and other insurance-related businesses. 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.

In October 2023, the Company incorporated a new subsidiary, Core Risk Managers, LLC (“CRM”), in the state of Florida. Its sole purpose is to conduct daily operations on behalf of Condo Owners Reciprocal Exchange (“CORE”) under an attorney-in-fact agreement. CORE, a reciprocal insurance exchange, was organized in November 2023 to offer commercial residential multiple peril insurance products. In November 2024, the Company's newly incorporated subsidiary Tailrow Risk Managers, LLC (“TRM”), entered into an attorney-in-fact agreement with Tailrow Insurance Exchange (“Tailrow”), a Florida domiciled reciprocal insurance exchange, to provide policy management and administrative services. Tailrow was authorized to write fire and homeowners multiple peril lines of insurance. At the reporting date, Tailrow had not commenced insurance operations. Although the Company does not have any equity interest in CORE and Tailrow, the Company is required to consolidate both reciprocal insurance exchanges as their primary beneficiary. See Note 16 -- “Variable Interest Entities” for additional information.

Insurance Business Outside Florida

The Company currently provides property insurance in the northeast and southeast regions of the United States. Northeast states include Connecticut, New Jersey, Massachusetts, and Rhode Island (collectively “Northeast Region”). Southeast states include Georgia, North Carolina, and South Carolina (collectively "Southeast Region”). Business in these regions was initially assumed under the quota share reinsurance agreements from United Property & Casualty Insurance Company, an insurance subsidiary of United Insurance Holdings Corporation (“United”). In February 2023, United’s Florida-domiciled residential insurance subsidiary was placed into receivership by the State of Florida due to its financial insolvency. Under the renewal rights agreements in connection with the assumed business, these United policies were renewed and/or replaced by the Company between December 2021 and March 2023.

Citizens Assumption

From time to time, the Company may participate in a “take-out program” through which the Company assumes insurance policies held by Citizens Property Insurance Corporation (“Citizens”), a Florida state-supported insurer. The take-out program is a legislatively mandated program designed to reduce the state’s risk exposure by encouraging private companies to assume policies from Citizens. During the year ended December 31, 2024, approximately 52,800 policies were assumed, representing approximately $315,100 in annualized gross written premiums, whereas for the year ended December 31, 2023, approximately 60,000 policies were assumed, representing approximately $224,800 in annualized gross written premiums.

Change in Segment Information

On July 1, 2024, HCI entered into a Stock Purchase Agreement (“Purchase Agreement”) with TypTap Insurance Group, Inc. (“TTIG”), its majority-owned subsidiary. Pursuant to the Purchase Agreement, TTIG transferred to HCI 2,500,000 shares of 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 in principal, as fully repaid with the exception of a 2.00% promissory note due June 1, 2025. This promissory note remained in effect with its principal balance reduced from $40,000 to $2,994 until it was repaid in November 2024. As this was a transaction between entities under common control with no ultimate change in control of TTIC, 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. As there was no change in HCI’s ownership percentage in TTIG, the change in noncontrolling interests in TTIG was charged to noncontrolling interest expense. This organizational change was implemented to align all insurance operations under a single operating segment under the Company’s direct control, allowing TTIG to primarily focus on its industry-leading technology and insurance management activities as an insurance solutions provider.

As a result of this transaction, the former HCPCI Insurance Operations segment is changed to the Insurance Operations segment. TTIC’s financial information is now included in this segment, allowing for the presentation of all insurance operations under a single segment. With this change, the Company now conducts its operations through five reportable segments: 1) insurance operations, 2) TypTap Group, 3) reciprocal exchange operations, 4) real estate operations, and 5) corporate and other. See Note 17 -- “Segment Information” for additional information.

Note 2 -- Summary of Significant Accounting Policies

Basis of Presentation. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Principles of Consolidation. The accompanying consolidated financial statements include the accounts of HCI Group, Inc. and its majority-owned and controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In addition, the Company evaluates its relationships or investments for consolidation pursuant to authoritative accounting guidance related to the consolidation of variable interest entities under the Variable Interest Model prescribed by the Financial Accounting Standards Board (“FASB”). A variable interest entity is consolidated when the Company has the power to direct activities that most significantly impact the economic performance of the variable interest entity and has the obligation to absorb losses or the right to receive benefits from the variable interest entity that could potentially be significant to the variable interest entity. When a variable interest entity is not consolidated, the Company uses the equity method to account for the investment. Under this method, the carrying value is generally the Company’s share of the net asset value of the unconsolidated entity, and changes in the Company’s share of the net asset value are recorded in net investment income.

Use of Estimates. The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ materially from these estimates. Material estimates that are particularly susceptible to significant change in the near term are primarily related to losses and loss adjustment expenses, reinsurance with retrospective provisions, reinsurance recoverable, deferred income taxes, limited partnership investments, intangible assets acquired from United, allowance for credit losses, and stock-based compensation expense.

Cash and Cash Equivalents. The Company considers all short-term highly liquid investments with original maturities of less than three months to be cash and cash equivalents. At December 31, 2024 and 2023, cash and cash equivalents consisted of cash on deposit with financial institutions and securities brokerage firms, and certificates of deposit.

Restricted Cash. Restricted cash represents funds in the Company’s sole ownership held by certain states in which the Company’s insurance subsidiaries conduct business to meet regulatory requirements 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.

Available-for-Sale Fixed-Maturity Securities. Fixed-maturity securities that are available for sale include debt securities and redeemable preferred stock. The Company’s available-for-sale securities are carried at fair value. Changes in the fair value of available-for-sale securities representing unrealized gains or losses, other than credit losses, are excluded from net investment income and reported in stockholders’ equity as a component of accumulated other comprehensive income (loss), net of deferred income taxes. Realized investment gains and losses from sales are recorded on the trade date and are determined using the first-in first-out (“FIFO”) method. Investment income is recognized as earned and discounts or premiums arising from the purchase of debt securities are recognized in investment income using the interest method over the estimated remaining term of the security. Gains and losses from call redemptions and repayments are charged to investment income.

The Company reviews fixed-maturity securities for impairment on a monthly basis. When reviewing impaired securities, the Company considers its ability and intent to hold these securities and whether it is probable that the Company will be required to sell these securities prior to their anticipated recovery or maturity. For the fixed-maturity securities that the Company intends to sell or it is probable that the Company will have to sell before recovery or maturity, the unrealized losses are recognized as impairment losses in income.

Impaired securities where the Company has the ability and intent to hold until recovery and believes it is not probable that the Company will be required to sell these securities prior to their anticipated recovery or maturity, are evaluated for the existence of credit-related losses. When determining impairment due to a credit-related loss, the Company carefully considers factors such as the issuer’s financial ratios and condition, the security’s current ratings and maturity date, the failure of the issuer to make a scheduled payment, and overall market conditions in estimating the cash flows expected to be collected. The expected cash flows discounted at the effective interest rate of the security implicit at the date of acquisition are then compared with the security’s amortized cost at the measurement date. A credit loss is incurred when the present value of the expected cash flows is less than the security’s amortized cost. If such credit-related losses exist, an allowance for credit losses is established with a charge in the consolidated statement of income. Subsequent changes in the allowance, whether favorable or unfavorable, are recorded on the consolidated statement of income. See additional information in the Allowance for Credit Losses section within this note. Any remaining impairment loss related to other non-credit factors such as changes in interest rates or market conditions is reflected as a component of accumulated other comprehensive income (loss).

Allowance for Credit Losses. Allowance for credit losses represents an estimation of potential losses that the Company may experience due to credit risk. The allowance for credit losses account is a contra account of a financial asset to reflect the net amount expected to be collected. Any increase or decrease in the allowance for credit losses related to investments is recognized and reflected as credit losses on investments in the Company’s consolidated statement of income. For all other financial assets, credit loss expense is included in other operating expenses. When the risk of credit loss becomes certain, the allowance for credit losses account will be written off against the financial asset. Under the Current Expected Credit Loss (“CECL”) model, the Company measures all expected credit losses related to relevant financial assets based on historical experience, current conditions, and reasonable and supportable forecasts which incorporate forward-looking information. The Company primarily uses a discounted cash flow method and a rating-based method in estimating credit losses at a reporting date for financial assets under the scope of the CECL model. The discounted cash flow method is a valuation method used to estimate the value of a financial asset based on its future cash flows. The Company uses this method to determine the expected credit losses for available-for-sale fixed-maturity securities. In addition, the Company elected not to measure an allowance for credit losses for accrued interest receivable as any uncollectible amount is adjusted to interest income on a monthly basis. At present, the exposure to credit losses for certain financial assets related to non-insurance business is considered immaterial to the Company’s financial position.

For certain financial assets related to insurance business such as reinsurance recoverable and reinsurance receivable for premium refund, the Company uses a rating-based method, which is a modified version of the probability of default method. It requires two key inputs: a) the liquidation rate and b) the amount of loss exposure. The liquidation rate, which is published annually, is the ratio of impaired insurance companies that were eventually liquidated to the group of insurance companies considered by A.M. Best in its study. The amount of loss exposure represents the future billing balance, net of any collateral, spread over the projected periods that are based on the Company’s historical claim payment pattern. The rating-based method measures credit losses by multiplying the future billings grouped by insurance rating over the projected periods by their corresponding liquidation rates by insurance rating.

For paid reinsurance recoverable which is due within 90 days after billing, the Company will rely heavily on each reinsurer’s credit rating, recent financial condition, and historical collection problems, if any, in determining the expected credit loss. For risk attributable to disagreements between an insurer and reinsurer regarding a difference in interpretation of provisions in a reinsurance agreement (“dispute risk”), the Company will continue to use an incurred loss method to estimate losses. At December 31, 2024, there was no dispute risk associated with the reinsurance recoverable balance.

Equity Securities. Equity securities represent ownership interests held by the Company in entities for investment purposes. Unrealized holding gains and losses related to equity securities are reported in the consolidated statements of income as net unrealized investment gains and losses. Realized investment gains and losses from sales are recorded on the trade date and are determined using the FIFO method (seeb) Equity Securities in Note 5 -- “Investments”).

Limited Partnership Investments. The Company has interests in limited partnerships that are not registered under the United States Securities Act of 1933, as amended, the securities laws of any state or the securities laws of any other jurisdictions. The partnership interests cannot be resold in the public market and any withdrawal is subject to the terms and conditions of the partnership agreements. The Company has no influence over partnership operating and financial policies. The Company uses the equity method to account for the investments with ownership interest greater than five percent. For the investments with ownership interest atfive percent or less, the Company uses the net asset value method to estimate the fair value of these investments. The Company generally recognizes its share of the limited partnerships’ earnings or losses on a three-month lag. Due to the lag, the Company may record an adjustment to the Company’s most recent share of net asset value when the amount can be reasonably estimated and a significant adverse impact on the net asset value is expected as a result of a major economic event.

Net investment income or loss from limited partnerships represents a net aggregate amount of operating results allocated to the Company based on the percentage of ownership interest in each limited partnership.

Pursuant to U.S. GAAP, these limited partnerships which are private equity funds must measure their investments at fair value and reflect the unrealized gains and losses in the fair value of their investments on their statements of income. As a result, the carrying value of limited partnership investments at each reporting date approximates their estimated fair value.

Real Estate Investments. Real estate investments include real estate and the related assets purchased for investment purposes (see Note 5 -- “Investments”). Real estate and the related depreciable assets are carried at cost, net of accumulated depreciation, which is included in net investment income and allocated over the estimated useful life of the asset using the straight-line method of depreciation. Land is not depreciated. Real estate is evaluated for impairment when events or circumstances indicate the carrying value of the real estate may not be recoverable.

Deferred Policy Acquisition Costs. Deferred policy acquisition costs (“DAC”) represent direct costs to acquire insurance contracts and consist of premium taxes, inspection fees and commissions paid to outside agents at the time of collection of the policy premium. DAC may also include expenses associated with the transition of policies from other insurers for replacement policies and the issuance of renewal policies under the Company’s own rates and terms. DAC is amortized over the life of the related policy in relation to the amount of gross premiums earned. Ceding commission and related costs paid associated with assumed business are also deferred and amortized over the life of the reinsurance agreement.

The method followed in computing DAC limits the amount of such deferred costs to their estimated realizable value, which gives effect to the gross premium earned, related investment income, unpaid losses and loss adjustment expenses and certain other costs expected to be incurred as the premium is earned.

DAC is reviewed to determine if it is recoverable from future premium income, including investment income. If such costs are determined to be unrecoverable, they are expensed at the time of determination. The amount of DAC considered recoverable could be reduced in the near term if the estimates of total gross premium earned are reduced or permanently impaired as a result of the disposition of a line of business. The amount of amortization of DAC could be revised in the near term if any of the gross premium earned estimates discussed above are revised.

Property and Equipment. Property and equipment is stated at cost less accumulated depreciation and amortization, which is included in other operating expenses. Depreciation is calculated on a straight-line basis over the estimated useful lives as follows: land improvements, five years; building,39 years; building improvements, three toten years; computer hardware and software, three years; and furniture and office equipment, three toseven years. Leasehold improvements are amortized over the shorter of the lease term or the asset’s useful life. Land is not depreciated. Expenditures for improvements are capitalized to the property accounts. Replacements and maintenance and repairs that do not improve or extend the life of the respective assets are expensed as incurred. The Company capitalizes both internal and external costs for internally developed software during the application development stage. During the preliminary project and post-implementation stage, internal-use software development costs are expensed as incurred. Capitalized software costs are depreciated on a straight-line basis over the estimated useful life ofseven years.

Impairment of Long-Lived Assets. Long-lived assets, such as property and equipment, are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company assesses the recoverability of long-lived assets by determining whether the assets can be recovered from undiscounted future cash flows. Recoverability of long-lived assets is dependent upon, among other things, the Company’s ability to maintain profitability so as to be able to meet its obligations when they become due. In our opinion, based upon current information and projections, tangible long-lived assets will be recovered over the period of benefit.

Leases. The Company leases office equipment, storage units, and office space from non-affiliates under terms ranging fromone month up tonine years. In assessing whether a contract is or contains a lease, the Company first determines whether there is an identified asset in the contract. The Company then determines whether the contract conveys the right to obtain substantially all of the economic benefits from use of the identified asset or the right to direct the use of the identified asset. The Company elects not to record any lease with a term of 12 months or less on the consolidated balance sheet. For such short-term leases, the Company recognizes the lease payments in expense on a straight-line basis over the lease term.

Ifthe contract is or contains a lease and the Company has the right to control the use of the identified asset, the right-of-use (“ROU”) asset and the lease liability is measured from the lease component of the contract and recognized on the consolidated balance sheet. In measuring the lease liability, the Company uses its incremental borrowing rate for a loan secured by a similar asset that has a term similar to the lease term to discount the lease payments. The contract is further evaluated to determine the classification of the lease as to whether it is finance or operating. If the lease is a finance lease, the ROU asset is depreciated to depreciation expense over the shorterof the useful life of the asset or the lease term. Interest expense is recorded in connection with the lease liability using the effective interest method. If the lease is an operating lease, the ROU asset is amortized to lease expense on a straight-line basis over the lease term. For the presentation of finance leases on the Company’s consolidated balance sheets, ROU assets and corresponding lease liabilities are included with property and equipment, net, and long-term debt, respectively. For the presentation of operating leases on the Company’s consolidated balance sheets, ROU assets are presented as right-of-use assets – operating leases and corresponding lease liabilities are reflected as lease liabilities – operating leases.

The Company as a lessor leases its commercial and retail properties, boat slips, and docks to non-affiliates at various terms. If the contract gives the Company’s customer the right to control the use of the identified asset, revenue is recognized on a straight-line basis over the lease term. Initial direct costs incurred by the Company are deferred and amortized on a straight-line basis over the lease term. The Company also records an unbilled receivable, which is the amount by which straight-line revenue exceeds the amount billed in accordance with the lease.

Intangible Assets. Intangibles related to real estate investments consist of the value attributable to the acquired in-place leases and the primary, or anchor tenant relationships. The value attributable to the anchor tenant relationship represents the economic benefits of having a nationally recognized retailer as the lead tenant, which draws consumer traffic and other tenants to the retail center. These intangibles are amortized to expense over the related lease term. Amortization of the intangibles related to real estate investments is reflected in net investment income in the consolidated statements of income. The Company reviews these intangible assets for impairment annually or when events or changes in circumstances indicate the carrying value may not be recoverable. In the event the Company determines the carrying value is not recoverable, an impairment loss is recorded in the Company’s consolidated statements of income.

Acquired intangible assets represent the fair value of consideration the Company paid and is estimated to pay in exchange for the renewal rights and non-compete intangible assets acquired from the seller. In the renewal rights transactions, the Company purchased the right, but not the obligation, to offer homeowners insurance coverage to all policyholders of the seller in certain states on the agreed-upon policy replacement date. The renewal rights agreements also contain a non-compete clause whereby the seller agrees not to offer homeowners insurance policies in these states through a specified date. The Company records these intangible assets based on the fair value of the consideration it paid and is estimated to pay to the seller as provided in the renewal rights agreements with the seller. The Company engaged a third-party valuation specialist to assist with the allocation of the renewal rights and non-compete intangible assets acquired. Intangible assets are amortized over their estimated useful lives. Amortization of the renewal rights and non-compete intangible assets is reflected in other operating expenses in the consolidated statements of income. Intangible assets are evaluated to ensure that there is no impairment to carrying value and no change required in the amortization period. See Note 10 -- “Intangible Assets, Net” for additional information.

Funds Withheld for Assumed Business. Pursuant to the Company’s quota share reinsurance agreements with United, trust accounts were established for the benefit of United as beneficiary. The trust balances represent the net amount owed to the Company under the reinsurance agreements. The trusts consist of a) funds deposited to establish the accounts and b) premiums, including any subsequent premium adjustment, and are reduced by commissions and paid losses and loss adjustment expenses. The assets within the trust accounts consist primarily of cash. Funds remaining at the completion of the quota share agreements are to be distributed according to the trust agreements. Prior to United being placed into receivership by the State of Florida on February 27, 2023, United had the exclusive and unconditional right to withdraw funds from the trust accounts on demand with written notice in compliance with the quota share reinsurance agreements. The funds are now under the control of the receiver.

Lease Acquisition Costs. Lease acquisition costs represent capitalized costs of finding and acquiring tenants such as leasing commissions, legal, and marketing expenses. The costs are included in other assets on the consolidated balance sheets. The Company amortizes these costs in other operating expenses on a straight-line basis over the term of a lease.

Long-Term Debt. Long-term debt includes debt instruments and finance lease obligations. A debt instrument is generally classified as a liability and carried at amortized cost, net of any issuance costs. Debt issuance costs are capitalized and amortized to interest expense over the expected life of the debt instrument using the effective interest method. At issuance, a debt instrument with embedded features such as conversion and redemption options is evaluated to determine whether bifurcation and derivative accounting is applicable. Any embedded feature other than the conversion option is evaluated at issuance to determine if it is probable that such embedded feature will be exercised. If the Company concludes that the exercisability of that embedded feature is not probable, the embedded feature is considered to be non-substantive and would not impact the initial measurement and expected life of the debt instrument.

Redeemable Noncontrolling Interests. Redeemable noncontrolling interests represent economic interests in TTIG and CORE not held by HCI. They are presented in the temporary equity (mezzanine) section of the consolidated balance sheets.

TTIG

The interest in TTIG, present at December 31, 2023 but redeemed during the first quarter of 2024, contained rights in dividends, voting, conversion, participation, liquidation preference and redemption. The redemption feature was not solely within the control of TTIG. The interest was initially recorded at fair value and was decreased by related issuance costs. The fair value was initially estimated using a residual fair value approach. The effect of increasing dividend rates was accreted to the redeemable noncontrolling interest with a corresponding reduction in retained income. The effective interest method was used for accretion over the period of the increasing dividend rates. The carrying value of the interest was also subsequently adjusted for accrued dividends and dividend payments. The Company had the option to pay the dividends in cash or make a payment-in-kind. See Note 21 -- “Redeemable Noncontrolling Interests” for additional information on the redemption.

Consolidated Variable Interest Entities

Consolidated variable interests (“VIEs”) include CORE and Tailrow. At the reporting date, Tailrow had yet to commence its insurance operations. The interest in VIEs represents a refundable portion of subscriber surplus contributions. In general, a reciprocal insurance exchange collects surplus contributions in addition to policy premiums from its policyholders referred to as subscribers. The purpose of the surplus contribution is to support the reciprocal insurance exchange's financial strength and lower their cost of capital. The surplus contribution made during a policy term may be returned on a pro-rata basis to a subscriber in the event of policy cancellation. As the term of an insurance policy progresses, a portion of the surplus contribution is reclassified from the redeemable noncontrolling interest to the noncontrolling interest.

Noncontrolling Interests. The Company has noncontrolling interests attributable to TTIG, CORE, and Tailrow. A noncontrolling interest arises when the Company has less than 100% of the voting rights and economic interests in a subsidiary or a consolidated variable interest entity. The noncontrolling interest in TTIG is periodically adjusted for the expensing of TTIG’s stock-based awards granted to its employees, the interest’s share of TTIG’s net income or loss attributable to common stockholders and the change in other comprehensive income or loss. The noncontrolling interest in CORE and Tailrow is periodically adjusted for the interest’s share of each reciprocal insurance exchange's net income or loss attributable to common stockholders and the reclassification of surplus contributions from refundable to nonrefundable amount.

Losses and Loss Adjustment Expenses. Reserves for losses and loss adjustment expenses (“LAE”) are determined by establishing liabilities in amounts estimated to cover incurred losses and LAE. Such reserves are determined based on the assessment of claims reported and the development of pending claims. These reserves are based on individual case estimates for the reported losses and LAE and estimates of such amounts that are incurred but not reported. Changes in the estimated liability are charged or credited to income as the losses and LAE are settled.

The estimates of unpaid losses and LAE are subject to trends in claim severity and frequency and are continually reviewed. As part of the process, the Company reviews historical data and considers 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 LAE. 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. Losses and LAE ceded to or recovered from reinsurers are recorded as a reduction to losses and LAE on the consolidated statements of income.

Advance Premiums. Premium payments received prior to the policy effective date are recorded as advance premiums. Once the policy is in force, the premiums are recorded as described under “Premium Revenue” below.

Premiums Receivable. Premiums receivable represent the amount of premiums due from policyholders for insurance coverage. Premiums are recorded as receivable in the Company’s general ledger on the effective date of the policy. Premiums are billed to the policyholder 45-60 days in advance of the effective date. The policyholder is given a 30-day grace period after the effective date to pay the premium before the insurance coverage is cancelled. If the policyholder does not pay the premium, the Company can cancel the policy and has no obligation to provide insurance coverage. Unpaid renewal policies are cancelled at midnight on the last day of the period for which the policyholder has paid. The unearned premium liability for the cancelled policy is reversed along with the premium receivable balance. Therefore, there isno unpaid earned premium and credit loss associated with the cancelled policy.

However, when the 30-day grace period falls between two reporting periods, the premium receivable balance at the end of the first reporting period may potentially be overstated for not considering the policy that is subsequently cancelled during the following reporting period. To mitigate the overstatement issue, the Company estimates the monetary impact from the subsequent policy cancellation by multiplying the historical cancellation rate to the premiums receivable balance at the reporting date. An allowance for uncollectible premiums, which offsets the balance of premiums receivable, is established by reducing the unearned premiums liability and earned revenues.

At December 31, 2024 and 2023, allowances for uncollectible premiums were $5,891 and $3,152, respectively. The increase in allowances for uncollectible premiums during 2024 resulted in a $2,329 decrease in unearned premiums during the year ended December 31, 2024. The decrease in allowances for uncollectible premiums during 2023 resulted in a $2,113 increase in unearned premiums during the year ended December 31, 2023. For the year ended December 31, 2024, a decrease in earned revenues was $410 as opposed to an increase in earned revenues of $97 and a decrease in earned revenues of $180 for the years ended December 31, 2023 and 2022, respectively.

Reinsurance Ceded. In the normal course of business, the Company seeks to reduce the loss that may arise from catastrophes or other events by reinsuring certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers. The Company contracts with a number of reinsurers to secure its annual reinsurance coverage, which generally becomes effective June 1st of each year. The Company purchases reinsurance each year taking into consideration probable maximum losses and reinsurance market conditions. Amounts recoverable from reinsurers are estimated in a manner consistent with the applicable reinsurance contract or contracts. Premiums ceded to other companies have been reported as a reduction of gross premiums earned to arrive at net premiums earned. Prepaid reinsurance premiums represent the unexpired portion of premiums ceded to reinsurers.

From time to time, the Company may elect to pay a reinstatement premium to a reinsurer in order to restore an amount of reinsurance coverage limit exhausted by a loss event. When that occurs, the unamortized portion of the existing prepaid reinsurance premium associated with the first coverage limit will be immediately expensed. The reinstatement premium will be recognized as prepaid reinsurance premium which will be amortized to premiums ceded over the remaining coverage period of a contract.

One of the Company’s current reinsurance contracts contains retrospective provisions including terms and conditions that adjust premiums based on the loss experience under the contract. In such cases, a with-and-without method is used to estimate the asset or liability amount to be recognized at each reporting date. The amount of the estimate is the difference between the net contract costs before and after the loss experience under the contract. Estimates related to premium adjustments are recognized in ceded premiums earned. These estimates are reviewed monthly based on the loss experience to date and as adjustments become necessary. Such adjustments in premiums ceded are reflected in the Company’s current operations and recorded in other assets until received upon the expiration of the contract. See Note 14 -- “Reinsurance” for additional information.

The Company receives ceding commissions from ceding gross written premiums to a third-party reinsurer under one flood quota share reinsurance contract. The ceding commissions represent the reimbursement of the Company’s policy acquisition, underwriting and other operating expenses. Ceding commissions received cover a portion of premium taxes and agent commissions capitalized by the Company and a portion of non-capitalized acquisition costs and other underwriting expenses. Ceding commissions are recognized as income on a pro-rata basis over the terms of the policies reinsured, the amount of which is included in policy acquisition and other underwriting expenses in the consolidated statement of income. The unearned portion of ceding commissions that represents recovery of capitalized acquisition costs is classified as a reduction of DAC whereas the remaining unearned balance is classified as deferred revenue in other liabilities.

Reinsurance Assumed. From time to time, the Company agrees to assume risk from another insurance company. Reinsurance premiums, commission, cost allowance, and reserves related to reinsured business are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums assumed from other insurance companies are included in gross premiums earned. Ceding commissions on assumed gross written premiums and related costs paid are reflectedas DAC which is amortized as expense on a pro-rata basis over the life of the reinsurance agreement. This amortized expense is included in policy acquisition and other underwriting expenses in the consolidated statements of income.

Premium Revenue. Premium revenue includes premium from the direct issuance of policies to insureds or the renewal or replacement of insureds’ policies and assumed premium for providing coverage under reinsurance agreements. Premium revenue is earned on a daily pro-rata basis over the term of the policies and is included in gross premiums earned. Unearned premiums represent the portion of the premiums attributable to the unexpired policy term. The Company reviews its policy detail and establishes an allowance for any amount outstanding for more than 90 days.

Policy Fees. Policy fees represent nonrefundable fees for insurance coverage, which are intended to reimburse a portion of the costs incurred to underwrite the policy. Policy fees are recognized ratably over the policy coverage period.

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

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

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

Revenue related to claims processing services is included in other revenue in the consolidated statements of income. For the years ended December 31, 2024, 2023 and 2022, revenues from claims processing services were $0, $766 and $3,425, respectively. Amounts receivable attributable to this service were $0 for the years ended December 31, 2024 and December 31, 2023.

Insurance Guaranty Association Assessments. The Company’s insurance subsidiaries may be assessed by state associations such as the Florida Insurance Guaranty Association. The assessments are intended to be used for the payment of covered claims of insolvent insurance entities. The assessments are generally based on a percentage of premiums written during or following the year of insolvency. Liabilities are recognized when the assessments are probable to be imposed on the premiums on which they are expected to be based and the amounts can be reasonably estimated. An insurer is generally permitted to recover the entire amount of assessments from in-force and future policyholders through policy surcharges. U.S. GAAP provides that the Company should record an asset based on the amount of written or obligated-to-write premiums and limited to the amounts recoverable over the life of the in-force policies.

Foreign Currency. The functional currency of the Company’s Indian subsidiary is the U.S. dollar. As such, the monetary assets and liabilities of this subsidiary are remeasured into U.S. dollars at the exchange rate in effect on the balance sheet date. Non-monetary assets and liabilities are remeasured using historical rates. Expenses recorded in the local currency are remeasured at the prevailing exchange rate. Exchange gains and losses resulting from these remeasurements are included in other operating expenses.

Income Taxes. The Company files consolidated federal and state income tax returns and allocates taxes among its subsidiaries in accordance with a written tax-allocation agreement.

The Company accounts for income taxes in accordance with U.S. GAAP, resulting in two components of income tax expense and benefit: current and deferred. Current income tax expense and benefit reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense and benefit results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term “more likely than not” means a likelihood of more than fifty percent; the terms “examined” and “upon examination” also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of both positive and negative evidence available including recent operating results, available tax planning strategies, and projected future taxable income, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Fair Value of Financial Instruments. The carrying amounts for the Company’s cash and cash equivalents approximate their fair values at December 31, 2024 and 2023. Fair values for securities or financial instruments are based on the framework for measuring fair value established by U.S. GAAP (see Note 7 -- “Fair Value Measurements”).

Stock-Based Compensation. The Company accounts for stock-based compensation under the fair value recognition provisions of U.S. GAAP which require the measurement and recognition of compensation for all stock-based awards made to employees, non-employee directors (see Note 23 -- “Stock-Based Compensation”), and third-party award recipients based on estimated fair values. In accordance with U.S. GAAP, the fair value of stock-based awards granted to employees and non-employee directors is generally recognized as compensation expense over the requisite service period, which is defined as the period during which a recipient is required to provide service in exchange for an award. Forfeitures of the Company’s stock-based awards are accounted for as they occur. The Company uses a straight-line attribution method for all grants that include only a service-based vesting condition. Restricted stock grants with market-based vesting conditions are expensed over the derived service period. Expensing market-based awards may be expedited if the conditions are met sooner than anticipated. Restricted stock granted by a subsidiary to an employee of the parent company is accounted for as a dividend to the parent, which recognizes the compensation expense. For awards granted to third-party recipients, the cost of the grant is recognized in the same period(s) and in the same manner as if the Company had paid cash. The Company’s outstanding stock-based awards include stock options, warrants, and restricted stock awards with service and market-based vesting conditions. Compensation expense related to all awards granted to employees and non-employee directors is included in general and administrative personnel expenses. The Company receives a windfall tax benefit for certain stock option exercises and for restricted stock awards if these awards vest at a higher value than the value used to recognize compensation expense. In the event the restricted stock awards vest at a lower value than the value used to recognize compensation expense, the Company experiences a tax shortfall. The Company recognizes tax windfalls and shortfalls in the consolidated statement of income.

Basic and Diluted Earnings Per Common Share. Basic earnings or loss per common share is computed by dividing net income or loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. U.S. GAAP requires the inclusion of restricted stock as participating securities since holders of the Company’s restricted stock have the right to share in dividends, if declared, equally with common stockholders. In addition, the intrinsic value of restricted stock declines when the Company experiences operating losses. As a result, holders of the Company’s restricted stock are allocated a proportional share of net income and loss determined by dividing total weighted-average shares of restricted stock by the sum of total weighted-average common shares and shares of restricted stock (the “two-class method”). Diluted earnings per common share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted as well as participating equities. During loss periods, common stock equivalents such as stock options and convertible debt are excluded from the calculation of diluted loss per share, as the inclusion would have an anti-dilutive effect. See Note 20 -- “Earnings Per Share” for potentially dilutive securities at December 31, 2024, 2023 and 2022.

Statutory Accounting Practices. The Company’s U.S. insurance subsidiaries comply with statutory accounting practices prescribed by the National Association of Insurance Commissioners and as adopted or permitted by the FLOIR. There are no state prescribed or permitted practices that have been adopted by the Company’s U.S. subsidiaries. In addition, the Company’s Bermuda insurance subsidiary prepares and files financial statements in accordance with the prescribed regulatory accounting practices of the Bermuda Monetary Authority.

Reclassification. As a result of the transaction described in Change in Segment Information under Note 1 -- “Nature of Operations,” the Company’s previously reported segment information has been recast to conform with the current presentation. See Note 17 -- “Segment Information.”

Note 3 -- Recent Accounting Pronouncements

Adopted

Accounting Standards Update No. 2023-07. In November 2023, the FASB issued Accounting Standards Update No. 2023-07 (“ASU 2023-07”)Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily by enhancing disclosures related to significant segment expenses. The Company has assessed the updated requirements and determined that its existing segmental disclosures already comply with ASU 2023-07.

Pending Adoption

Accounting Standards Update No. 2023-09. In December 2023, the FASB issued Accounting Standards Update No. 2023-09 (“ASU 2023-09”)Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update enhances income tax disclosures by requiring public entities to report income tax expense disaggregated by federal, state, and foreign taxes, with further detail on specific jurisdictions over a quantitative threshold. In addition, public entities must also separately disclose reconciling items equal to or greater than five percent of pretax income from operations by the applicable federal statutory rate. ASU 2023-09 is effective for all public entities for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is evaluating its impact on income tax disclosure.

Accounting Standards Update No. 2024-03. In November 2024, the FASB issued Accounting Standards Update No. 2024-03 (“ASU 2024-03”)Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. For public business entities, this update enhances disclosures by requiring the disaggregation of certain expense captions presented within the income statement, such as employee compensation and intangible asset amortization. In addition, the total relevant expense caption on the income statement must be reconciled to the aggregate of the separately disclosed expense categories with the difference represented by an "other items" amount which is qualitatively described. ASU 2024-03 is effective for all public business entities for fiscal years beginning after December 15, 2026. Early adoption is permitted. The Company is evaluating its impact on certain expense disclosures.

Accounting Standards Update No. 2024-04. In November 2024, the FASB issued Accounting Standards Update No. 2024-04 (“ASU 2024-04”)Debt–Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. This update clarifies whether entities should apply extinguishment accounting or induced conversion accounting when recording the settlement of convertible debt instruments due to an induced conversion. ASU 2024-04 is effective for all entities for fiscal years beginning after December 15, 2025. Early adoption is permitted as of the beginning of a reporting period if the entity has also adopted ASU 2020-06 for that same period.

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.

At December 31, 2024, $438,415 or 82.3% of the Company’s cash and cash equivalents were deposited atfour national banks and included $110,324 with two custodians. At December 31, 2023, $420,848 or 78.5% of the Company’s cash and cash equivalents were deposited atfour national banks and included $62,086 withtwo custodians. At December 31, 2024 and 2023, the Company’s cash deposits at any one bank generally exceed the Federal Deposit Insurance Corporation’s $250 coverage limit for insured deposit accounts.

In connection with the sale of the retail shopping center investment property in Melbourne, Florida as described in Note 5 -- “Investments” underd) Real Estate Investments, $87 of restricted cash was deposited in escrow in March 2023 and released in February 2024 as post-sale conditions were 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 December 31, 2024 and 2023, 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:

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 at December 31, 2024 and 2023 are as follows:

Securities on Deposit

The fair value of fixed-maturity securities on deposit with various regulatory authorities at December 31, 2024 and 2023 was $1,794 and $1,660, 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 years ended December 31, 2024, 2023 and 2022 were as follows:

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

Securities with gross unrealized loss positions at December 31, 2024 and 2023, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:

At December 31, 2024 and 2023, there were 56 and 65 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.

For the years ended December 31, 2024, 2023 and 2022, the Company recognized$0 credit loss expense related to fixed-maturity securities in the consolidated statements of income.

b) Equity Securities

The Company holds investments in equity securities measured at fair values which are readily determinable. At December 31, 2024 and 2023, the cost, gross unrealized gains and losses, and estimated fair value of the Company’s equity securities were as follows:

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.

Sales of Equity Securities

Proceeds received, and the gross realized gains and losses from sales of equity securities, for the years ended December 31, 2024, 2023 and 2022 were as follows:

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:

(a)

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

(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 totwo additionalone-year periods.

(f)

Expected to have aten-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 tothree additionalone-year periods.

(h)

Expected to have aneight-year term from the commencement date, which can be extended for up totwo additionalone-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 tofour additionalone-year periods at the general partner’s discretion, and up totwo additionalone-year periods with the consent of the advisory committee.

(k)

Expected to have aneight-year term after the final admission date. The term may be extended for an additionalone-year period at the general partner’s discretion, and up totwo additionalone-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.

*Includes net change in unrealized gains or losses on investments.

For the years ended December 31, 2024, 2023 and 2022, the Company recognized net investment income of $597, $661 and $3,963, respectively. At December 31, 2024 and 2023, the Company’s net cumulative contributed capital to the partnerships existing at each respective balance sheet date totaled $20,987 and $23,346, respectively, and the Company’s maximum exposure to loss aggregated $20,801 and $23,583, respectively.

During the year ended December 31, 2024, the Company received in cash returns on investment of $1,020 and returns of capital of $3,591 compared with returns on investment of $1,148 and returns of capital of $3,115 during the year ended December 31, 2023. During the year ended December 31, 2022, the Company received total cash distributions of $8,361, representing $3,001 of returns on investment and $5,360 of returned capital.

d) Real Estate Investments

Real estate investments include land, buildings with office and retail space for lease, outparcels, and marinas. Real estate investments consist of the following as of December 31, 2024 and 2023:

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. See additional information undere) Net Investment Income below.

On September 19, 2023, Grove Haines City, LLC, a real estate subsidiary of Greenleaf Capital, LLC, acquired vacant land in Haines City, Florida and its associated leases for $3,393, including acquisition costs of $100, and assumed a liability of $4. Of the total costs, $1,582 was recognized as real estate investments. See Note 10 -- “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.

On December 18, 2023, the Company entered into an agreement to purchase commercial real estate in Tampa, Florida for a price of $12,824 and, contemporaneously, the seller entered into a second contract to lease the property back from the Company at a below market rate. As a result, the below market value of $4,446 was added to the purchase price for a total cost of $17,270 before being allocated among the assets acquired under asset acquisition guidance. See Note 18 -- “Leases” for additional information.

Depreciation and amortization expense related to real estate investments was $1,113, $1,147 and $1,956, respectively, for the years ended December 31, 2024, 2023 and 2022 and was included in net investment income on the consolidated statements of income.

e) Net Investment Income

Net investment income, by source, is summarized as follows:

In connection with the aforementioned purchase of commercial real estate in Tampa, Florida in December 2023, the Company leased the property back to the seller for a lease term expiring on December 31, 2024. The lease was considered to be at a below market rate. The value of the below market lease was recognized as deferred rent and amortized to rental income over the lease term. In June 2024, the tenant occupying the property under a sublease agreement with the seller vacated the property. As a result, the Company derecognized the remaining deferred rent to rental income. During the year ended December 31, 2024, income from real estate investments included rental income of $2,497 resulting from such derecognition of deferred rent.

During the year ended December 31, 2023, income from real estate investments included a net gain of $6,351 from the sale of the retail shopping center investment property in Melbourne, Florida and a net gain of $2,460 from the sale of the retail shopping center investment property in Sorrento, Florida.

During the year ended December 31, 2022, income from real estate investments included a net gain of $376 resulting from the sale of one outparcel in Sorrento, Florida, $451 of income from selling the liquor license previously owned by the Company’s restaurant business which was discontinued in 2020, and a net realized gain of $13,402 resulting from the sale of 1.5 acres of land in Tampa, Florida to the Florida Department of Transportation for net proceeds of $14,500.

f) Other Investments

From time to time, the Company may invest in financial assets other than stocks, mutual funds, and bonds. For the year ended December 31, 2024, net realized gains related to other investments was $0, compared with a net realized loss of $34 and a net realized gain of $238 for the years ended December 31,2023 and 2022, respectively.

Note 6 -- Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss) and other comprehensive income or loss, which for the Company includes changes in unrealized gains or losses of investments 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:

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.

Restricted Cash

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

Fixed-Maturity and Equity Securities

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

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

Revolving credit facility

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 Right (“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:

• Debt derecognized in March 2024. See Note 13 -- “Long-Term Debt” for additional information.

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 December 31, 2024 and 2023:

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 December 31, 2024 and 2023:

Note 8 -- Deferred Policy Acquisition Costs

The following table summarizes the activity with respect to deferred policy acquisition costs:

The amount of policy acquisition costs amortized and included in policy acquisition and other underwriting expenses for the years ended December 31, 2024, 2023 and 2022 was $94,497, $86,214 and $100,669, respectively.

Note 9 -- Property and Equipment, Net

Property and equipment, net consists of the following:

Depreciation and amortization expense for property and equipment was $3,759, $3,296 and $2,580 for the years ended December 31, 2024, 2023 and 2022, respectively.

Note 10 -- Intangible Assets, Net

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

(a)

Amortization related to the Haines City property is expected to start in March 2025.

(b)

Fully amortized.

The remaining weighted-average amortization periods for the intangible assets as of December 31, 2024 are summarized in the table below:

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

During the fourth quarter of 2022, management reviewed all available information pertaining to the Northeast and Southeast Regions' policies in-force to assess for possible impairment of the renewal rights intangible assets. Based on the review, the Company recognized an impairment loss of $2,284. Management conducted annual reviews of the Company's intangible assets as of December 31, 2023 and December 31, 2024 and determined thatno indicators of impairment were present.

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

For the years ended December 31, 2024, 2023 and 2022, amortization expense associated with intangible assets was $2,453, $2,530 and $2,643, respectively. Amortization expense for intangible assets after December 31, 2024 is as follows:

Note 11 -- Other Assets

The following table summarizes the Company’s other assets:

Due to the impact of Hurricane Helene and Hurricane Milton, the balance of accrued benefits under the multi-year reinsurance contract was adjusted. See Note 14 -- “Reinsurance” for a description of the adjustment to the benefits receivable related to retroactive reinsurance contracts.

Note 12 -- Revolving Credit Facility

The Company has a secured revolving credit agreement (“Credit Agreement”) with Fifth Third Bank that currently provides borrowing capacity of up to $75,000 and expires on November 3, 2028. The Credit Agreement secured by the Company’s properties was first executed in 2018 and has been amended several times thereafter. Under the current terms of the agreement, the maximum debt-to-capital ratio is set at 67.5%.

Under the terms of the Credit Agreement, borrowings bear interest at an annual rate equal to the one or three month Secured Overnight Financing Rate (“SOFR”) plus a ten basis points adjustment plus a margin based on the debt-to-capital ratio. The interest payment is due quarterly in arrears on January 1, April 1, July 1, and October 1. The Credit Agreement contains affirmative and negative covenants as well as customary events of default. In addition, the Company must comply with certain financial and non-financial covenants and agree to pay a fee equal to the product of the unused line fee rate and the average of the daily unused available credit balances. The unused line fee rate is determined based on the debt-to-capital ratio.

At December 31, 2024, the Company had $44,000 outstanding under the credit facility, which was used to partially fund the redemption of the TTIG Series A Preferred Stock held by Centerbridge Partners, L.P. (“Centerbridge”) on January 22, 2024. See Note 21 -- “Redeemable Noncontrolling Interests” for additional information. For the years ended December 31, 2024, 2023 and 2022, interest expense was $3,247, $82 and $227, respectively, including $59, $82 and $125 of amortization of issuance costs, respectively. At December 31, 2024, the Company was in compliance with all required covenants and had available borrowing capacity of $31,000.

Note 13 -- Long-Term Debt

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

(a)

Notes converted or redeemed during the first quarter of 2024.

The following table summarizes future maturities of long-term debt as of December 31, 2024, which takes into consideration the assumption that the 4.75% Convertible Senior Notes are repurchased at their next earliest call date:

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

(b)

Includes amortization of debt issuance costs.

Convertible Senior Notes

The Company’s Convertible Senior Notes consist of 4.75% Convertible Senior Notes that mature June 1, 2042. In May 2022, the Company issued 4.75% Convertible Senior Notes in a private offering for an aggregate principal amount of $172,500. The net proceeds of the 4.75% Convertible Senior Notes were $166,486 after $6,014 in related issuance and transaction costs. The cash interest for the 4.75% Convertible Senior Notes is payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2022. In conjunction with the issuance of the 4.75% Convertible Senior Notes, the Company entered into a share repurchase agreement providing for the repurchase of shares of the Company’s common stock. See Note 22 -- “Equity” under Share Repurchase Agreement for additional information.

The 4.25% Convertible Senior Notes were issued in March 2017 with cash interest payable semiannually in arrears on March 1 and September 1 of each year. During the first quarter of 2024, the Company notified the holders of its outstanding 4.25% Convertible Senior Notes due 2037 that the Company had elected to redeem the remaining $23,916 principal balance of the 4.25% Convertible Senior Notes. As a result of this notice, the 4.25%Convertible Senior Notes became immediately convertible into the Company’s common shares, with a redemption date of March 15, 2024. The conversion rate of the Company’s 4.25% Convertible Senior Notes was 16.5892 shares of common stock for each $1 in principal amount, which was the equivalent of approximately $60.25 per share. The Company converted $23,450 in aggregate principal of 4.25% Convertible Senior Notes for aggregate consideration of 389,087 shares of HCI’s common stock plus $1 cash consideration in lieu of fractional shares. The remaining 4.25% Convertible Senior Notes were redeemed for $466 on March 15, 2024.

The Convertible Senior Notes rank equally in right of payment to the Company’s existing and future unsecured and unsubordinated obligations. The Convertible Senior Notes do not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Company or any of its subsidiaries. The Convertible Senior Notes provide no protection to the note holders in the event of a fundamental change or other corporate transaction involving the Company except those described in each respective indenture. The Convertible Senior Notes do not require a sinking fund to be established for the purpose of redemption.

Embedded Conversion Feature

The conversion feature of these Convertible Senior Notes is subject to conversion rate adjustments upon the occurrence of specified events (including payment of dividends above a specified amount) but will not be adjusted for any accrued and unpaid interest.

The conversion rate of the 4.75% Convertible Senior Notes 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 holders of the Convertible Senior Notes may convert all or a portion of their convertible senior notes during specified periods prior to each respective maturity date as follows: (1) during any calendar quarter commencing after the calendar quarter ending on the dates specified in each respective indenture, if the last reported sale price of the Company’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on each applicable trading day; (2) during thefive business-day period after any ten consecutive trading-day period in which the trading price per $1 principal amount of the Convertible Senior Notes is less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (3) if specified corporate events, including a change in control, occur; (4) if the respective Convertible Senior Notes are called for redemption, at any time prior to the dates specified in each respective indenture; or (5) at any time on the dates or during the periods specified in each respective indenture.

The note holders who elect to convert their Convertible Senior Notes in connection with a fundamental change as described in the indentures will be entitled to a “make-whole” adjustment in the form of an increase in the conversion rate. Upon conversion, the Company has options to satisfy its conversion obligation by paying or delivering cash, shares of its common stock or a combination of cash and shares of its common stock. As of December 31, 2024, none of the conditions allowing the holders of either class of Convertible Senior Notes to convert had been met. See Note 30 -- “Subsequent Events” for additional information.

Embedded Redemption Feature – Fundamental Change

The note holders have the right to require the Company to repurchase for cash all or any portion of the Convertible Senior Notes at par prior to the maturity date should any of the fundamental change events described in the indentures occur. The Company concluded that this embedded redemption feature is not a derivative financial instrument, does not require bifurcation, and that it is not probable at issuance that any of the specified fundamental change events will occur. Therefore, this embedded redemption feature is not substantive and will not affect the expected life of the liability.

Embedded Redemption Feature – Put Option of the Note Holder

At the option of the holders of the 4.75% Convertible Senior Notes, the Company is required to repurchase for cash all or any portion of the 4.75% Convertible Senior Notes at par on June 1, 2027, June 1, 2032 or June 1, 2037. The Company amortizes the issuance costs associated with the 4.75% Convertible Senior Notes over the period from May 23, 2022 to June 1, 2027. As of December 31, 2024, the remaining amortization period of the debt issuance costs was expected to be 2.4 years for the 4.75% Convertible Senior Notes.

The Company concluded that this embedded feature is not a derivative financial instrument and does not require bifurcation. Due to this provision, the Company determined that it is appropriate to amortize the debt issuance costs from the date each debt is issued to the earliest date at which the holders of the respective Convertible Senior Notes can demand payment.

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%.

Promissory Notes

4.55% Promissory Note

The loan agreement is secured by commercial real estate in Tampa, Florida and an associated lease agreement. The loan bears interest at a fixed annual rate of 4.55%. Approximately $41 of principal and interest is payable in 216 monthly installments. The promissory note may be repaid in full or in part after September 1, 2020 as long as the Company provides at least 30 days’ written notice and pays a prepayment consideration as specified in the loan agreement.

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 are used for real estate development projects or other general business purposes.

Note 14 -- Reinsurance

Reinsurance obtained from other insurance companies

The Company cedes a portion of its homeowners’ insurance exposure to other entities under catastrophe excess of loss reinsurance contracts and a portion of its flood insurance exposure under one quota share reinsurance agreement. Ceded premiums under most catastrophe excess of loss reinsurance contracts are subject to revision resulting from subsequent adjustments in total insured value. Under the terms of the quota share reinsurance agreement, the Company is entitled to a 30% ceding commission on ceded premiums written and a profit commission equal to 10% of net profit.

After receiving approval from the FLOIR in January 2023, the Company discontinued underwriting flood insurance policies in Florida. Since the approval, the Company has cancelled or not renewed the majority of its flood insurance policies. However, the Company is required to continue providing flood insurance coverage to policyholders with open claims until criteria set by the FLOIR for cancellation and non-renewal are met. The reason for discontinuation was primarily attributable to the increased costs and reduced availability of flood reinsurance. The discontinuation did not have a material impact to the Company’s results of operations.

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

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

During the year ended December 31, 2024, ceded losses of $340,329 were recognized as a reduction in losses and loss adjustment expenses. Ceded losses for 2024 comprised $383,843 for Hurricane Milton, $18,000 for Hurricane Helene, $3,207 for Hurricane Sally, $446 for Tropical Storm Eta, and a $65,167 reduction in ceded losses for Hurricane Ian.

During the year ended December 31, 2023, the Company derecognized ceded losses of $94,863. This included a $104,614 reduction in ceded losses related to Hurricane Ian, partially offset by additional ceded losses of $5,416 for Hurricane Sally, $4,301 for Tropical Storm Eta, and $34 for other catastrophe and non-catastrophe claims.

During the year ended December 31, 2022, the Company recognized ceded losses of $812,623. For 2022, ceded losses related to Hurricane Ian, Hurricane Irma, Hurricane Sally, and other non-catastrophe claims were $782,071, $20,000, $10,483, and $69, respectively.

At December 31, 2024 and 2023, there were 44 and 33 reinsurers, respectively, participating in the Company’s reinsurance program. Total net amounts recoverable and receivable from reinsurers at December 31, 2024 and 2023 were $558,441 and $350,294, respectively. Approximately 66.0% of the reinsurance recoverable balance at December 31, 2024 was receivable from four reinsurers, one of which was the Florida Hurricane Catastrophe Fund, a tax-exempt state trust fund. Based on all available information considered in the rating-based method described in Note 2 --“Summary of Significant Accounting Policies,” the Company recognized an increase in credit loss expense of $68 for the year ended December 31, 2024 compared with a decrease in credit loss expense of $336 and an increase in credit loss expense of $364 for the years ended December 31,2023 and 2022, respectively. Allowances for credit losses related to the reinsurance recoverable balance were $186 and $118 at December 31, 2024 and 2023, respectively.

Due to Hurricane Ian in 2022, the Company’s first event reinsurance coverage for flood losses was exhausted, and accordingly, the Company could no longer cede additional flood losses from Hurricane Ian to reinsurers. As a result, the Company elected to pay reinstatement premiums of $6,684 to the reinsurers to restore the full amount of coverage. The unamortized first event reinsurance premiums of $3,306 were expensed and charged to premiums ceded during the fourth quarter of 2022. See Note 15 -- “Losses and Loss Adjustment Expenses” for more information about the flood losses attributable to Hurricane Ian.

One of the existing reinsurance contracts includes retrospective provisions that adjust premiums in the event losses are minimal or zero. As a result of Hurricane Helene and Hurricane Milton, the balance of previously accrued benefits under the multi-year reinsurance contract with retrospective provisions, amounting to $62,937, was reversed during 2024 with no further benefits to be accrued under the contract. Prior to June 1, 2022, there were two reinsurance contracts with retrospective provisions. As a result of Hurricane Ian, the balance of previously accrued benefits under the multi-year reinsurance contract with retrospective provisions was decreased by $12,600 in September 2022. For the year ended December 31, 2024, premiums ceded were increased by $44,289, resulting from the reversal of benefits accrued in prior years. For the years ended December 31,2023 and 2022, the Company recognized reductions in premiums ceded of $27,972 and $18,710, respectively.

Amounts receivable pursuant to retrospective provisions are reflected in other assets. At December 31, 2024 and 2023, other assets included $0 and $44,289, respectively. In October 2022, the Company received $5,457 of premium refund under the Company’s previous two multi-year reinsurance contracts which were commuted effective May 31, 2022.

Reinsurance provided to other insurance companies

United

From 2021 to 2023, the Company provided quota share reinsurance to United on its policies in the Northeast and Southeast Regions. Quota share reinsurance provided to the Northeast Region was commuted in December 2022. For the year ended December 31, 2022, $27,488 of assumed premiums written related to the Northeast Region’s insurance policies were derecognized, which primarily resulted from the return of the unearned portion of assumed written premiums subsequent to the Company’s renewal and/or replacement of insurance policies in Massachusetts and New Jersey. At December 31, 2024 and 2023, the Company had a net balance of $831 due to United related to the Northeast Region, representing ceding commission payable.

On February 27, 2023, United’s Florida-domiciled residential insurance subsidiary was placed into receivership by the State of Florida due to its financial insolvency. As a result, the Company ceased providing reinsurance and TPA services to United in March 2023. For the year ended December 31, 2023, $7,271 of assumed premiums written related to the Southeast Region’s insurance policies were derecognized, which primarily resulted from the return of the unearned portion of assumed written premiums subsequent to the Company’s renewal and/or replacement of insurance policies in the Southeast Region. For the year ended December 31, 2022, assumed premiums written related to the Southeast Region's insurance policies were $40,404. At December 31, 2024, the Company had a net balance of $1,438 due to United related to the Southeast Region, consisting of premiums payable of $1,712, offset by ceding commission receivable of $274. At December 31, 2023, there was a net balance of $4,203 due to United related to the Southeast Region, consisting of premiums payable of $1,712 and payable on paid losses and loss adjustment expenses of $2,765, offset by ceding commission receivable of $274.

At December 31, 2024, the Company had a net amount due to United of $2,269 and funds withheld for assumed business in trust accounts totaling $11,690 for the benefit of policies assumed from United. The Company cannot predict the actions a receiver might take, which may include restrictions on, or use of, funds held in trust. Any such actions could have a material adverse effect on the Company’s financial position and results of operations.

In connection with the Southeast Region quota share reinsurance provided to United by the Company, the receiver of United had requested a withdrawal of $13,482 from a trust account holding funds withheld for assumed business. The withdrawal was in settlement of unearned premiums of $7,496, losses and LAE of $2,310, claims handling fees of $4,875, and was less ceding commission of $1,199. Of the total withdrawal, the Company received $4,875 in payment for reimbursement and fees receivable under TPA service on October 26, 2023.

At December 31, 2024 and 2023, the balance of funds withheld for assumed business related to the Company’s quota share reinsurance agreements with United was $11,690 and $30,087, respectively.

Citizens Assumption

As described in Note 1 -- “Nature of Operations” with regards to Citizens assumptions, assumed premiums written related to Citizens policies were approximately $315,100 and $224,800 for the years ended December 31, 2024 and 2023 respectively.

The ratio of assumed premiums earned to net premiums earned for the years ended December 31, 2024, 2023 and 2022 was 31.95%,6.18%, and 15.80%, respectively.

Note 15 -- Losses and Loss Adjustment Expenses

The Company establishes reserves for the estimated total unpaid costs of losses including LAE. Loss and LAE reserves reflect management’s best estimate of the total cost of (i) claims that have been incurred, but not yet paid in full, and (ii) claims that have been incurred but not yet reported to the Company (“IBNR”). Reserves established by management represent an estimate of the outcome of future events and, as such, cannot be considered an exact calculation of our liability. Rather, loss and LAE reserves represent management’s best estimate of the Company’s liability based on the application of actuarial techniques and other projection methodologies and taking into consideration other facts and circumstances known at the balance sheet date. The process of establishing loss and LAE reserves is complex and inherently imprecise, as it involves the estimation of the outcome of future uncertain events. The impact of both internal and external variables on ultimate losses and LAE costs is difficult to estimate. In determining loss and LAE reserves, the Company gives careful consideration to all available data and actuarial analyses.

When a claim is reported to the Company, the claims personnel establish a “case reserve” for the estimated amount of the ultimate amount payable to settle the claim. This estimate reflects an informed judgment based upon general insurance reserving practices and on the experience and knowledge of the claims adjuster. The individual estimating the reserve considers the nature and value of the specific claim, the severity of injury or damage, location, and the policy provisions relating to the type of loss. Case reserves are adjusted as more information becomes available. It is the Company’s policy to settle each claim as expeditiously as possible.

Reserves are closely monitored and are recalculated periodically using the most recent information on reported claims and a variety of actuarial techniques. Specifically, claims management personnel complete weekly and ongoing reviews of existing case reserves, new claims, changes to existing case reserves, and paid losses with respect to the current and prior years. As the Company continues to expand historical data regarding paid and incurred losses, the data is used to develop expected ultimate loss and LAE ratios, then these expected loss and LAE ratios are applied to earned premium to derive a reserve level for each line of business. In connection with the determination of these reserves, other specific factors such as recent weather-related losses, trends in historical reported and paid losses, and litigation and judicial trends regarding liability will also be considered. Therefore, the loss ratio method, among other methods, is used to project an ultimate loss expectation, and then the related loss history must be regularly evaluated and loss expectations updated, with the possibility of variability from the initial estimate of ultimate losses.

The Company maintains IBNR reserves to provide for claims that have been incurred but have not been reported and subsequent development on reported claims. The IBNR reserve is determined by estimating the Company’s ultimate net liability for both reported and unreported claims and then subtracting the case reserves and payments made to date for reported claims.

Loss and LAE Reserve Estimation Methods. The Company applies the following general methods in projecting reserves for losses and LAE:

•

Reported loss development;

•

Paid loss development;

•

Paid Bornhuetter-Ferguson method;

•

Reported Experience-Modified Bornhuetter-Ferguson method;

•

Paid Experience-Modified Bornhuetter-Ferguson method;

•

Loss ratio method;

•

Several variations of the Frequency-Severity method, depending on exposure; and

•

A factor load to loss and allocated LAE reserves for the unallocated LAE.

Selected reserves are based on a review of the indications from these methods as well as other considerations such as emergence since the most recent evaluation and number of open claims for a given accident period.

Currently, the estimated ultimate liability is calculated using the principles and procedures described above, which are applied to the lines of business written. However, because the establishment of loss and LAE reserves is an inherently uncertain process, ultimate losses and LAE may exceed the established loss and LAE reserves and have a material, adverse effect on our results of operations and financial condition. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such adjustments are made.

The Company’s reported results, financial position and liquidity would be affected by likely changes in key assumptions that determine the net loss reserves. However, it is believed that a reasonably likely increase or decrease in the severity of claims could impact our net loss reserves.

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

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

The establishment of loss and LAE reserves is an inherently uncertain process and changes in loss and LAE reserve estimates are expected as these estimates are subject to the outcome of future events. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such adjustments are made. During the year ended December 31, 2024, the Company decreased losses related to prior years by $5,495 primarily due to positive development trends for non-catastrophe claims.

During the year ended December 31, 2024, the Company incurred net estimated losses of approximately $78,157, $43,000 and $6,500 due to Hurricane Milton, Hurricane Helene, and Hurricane Debby, respectively. Losses and LAE for the 2023 loss year included net estimated losses of approximately $68,339 attributable to United-related policies and $7,875 related to policies assumed from Citizens. In 2022, net losses and LAE related to Hurricane Ian were estimated at $65,300 for all insurance lines of business. Of the total losses and LAE retained by the Company, $7,000 was attributable to flood losses exceeding the maximum amount of coverage provided by reinsurers.

The following is information about incurred and paid claims development as of December 31, 2024, net of reinsurance, as well as cumulative claim frequency and the total of incurred-but-not-reported liabilities plus expected development on reported claims included within the net incurred claims amounts. The information about incurred and paid claims development for the years ended December 31, 2023 to 2015 is presented as supplementary information and is unaudited.

Homeowners Multi-peril and Dwelling Fire Insurance (a)

(a)

Excludes losses from Wind-only insurance (2015 through 2024) and any hurricane and storm events prior to 2024.

(b)

Homeowners Wind-only Insurance (a)

(a)

Excludes losses from multi-peril and dwelling fire insurance (2015 through 2024) and any hurricane and storm events prior to 2024.

(b)

Losses Specific to Any Hurricane and Storm Events prior to 2024

(b)

Losses Specific to Hurricane Helene and Hurricane Milton (2024)

The reconciliation of the net incurred and paid loss development tables to the liability for losses and loss adjustment expenses is as follows:

The following is supplementary and unaudited information about average historical claims duration as of December 31, 2024:

Note 16 -- Variable Interest Entities

HCI holds variable interests in two reciprocal insurance exchanges, CORE and Tailrow. The reciprocal insurance exchanges are owned by their policyholders, referred to as subscribers, who gain ownership by buying an insurance policy and making a surplus contribution. Each subscriber has certain interests in the insurance exchanges which include the right to appoint an attorney-in-fact (“AIF”), to vote for the subscribers’ advisory committees and to receive dividends or premium credits if the reciprocal insurance exchanges generate a surplus. At least two-thirds of the membership of the advisory committees must be subscribers who are independent of the AIF. The advisory committees are charged with overseeing the financial affairs of the reciprocal insurance exchanges.

CORE

At inception, CORE had no subscribers nor sufficient surplus to fund its insurance operations without additional financial support. HCI provided CORE with $25,000 in exchange for a 9% subordinated surplus note. As a result, CORE is considered a variable interest entity (“VIE”). In addition, CORE entered into an AIF agreement with CRM, a wholly owned subsidiary of HCI. The AIF agreement, which was approved by the FLOIR, can be terminated at any time by mutual agreement of both parties or with cause, if the FLOIR or a court of competent jurisdiction determines that a material breach of the agreement has occurred. Under the AIF agreement, CRM, with the power of attorney given by the subscribers, will directly or indirectly conduct the daily operations of CORE by underwriting insurance policies, collecting premiums, investing funds, and processing claims. As such, subscribers do not possess the power to directly manage CORE’s operations. The AIF agreement also permits CRM to contract with service providers including other HCI subsidiaries to perform certain functions. The activities which most significantly impact CORE's anticipated economic performance are its underwriting and investment results. The management and service agreements, together with HCI’s subordinated surplus note in CORE, exposes HCI to more than an insignificant amount of CORE’s expected economic performance. As such, HCI has variable interests in CORE.

Since HCI has the power to direct the activities of CORE that most significantly affect CORE’s economic performance and the obligation to absorb losses or the right to receive benefits from CORE that could potentially be significant to CORE via the subordinated surplus note and the management and service agreements, HCI is considered the primary beneficiary of CORE, a VIE.

At December 31, 2024, the Company’s maximum exposure to loss relating to CORE was $25,000. CORE’s assets are legally restricted for the purpose of fulfilling obligations specific to CORE. The creditors of CORE have no legal right to pursue additional sources of payment from the Company.

Tailrow

At the reporting date, Tailrow had no subscribers. It received initial funding through the issuance of a $25,000 subordinated surplus note with an annual interest rate of 9% to Tailrow Funding, a wholly-owned subsidiary of HCI. Since Tailrow initially lacked sufficient funding and was capitalized with cash received from the Company, it is considered to be a VIE. Similar to CORE, Tailrow has an AIF agreement with TRM to perform administrative duties for the overall functioning of Tailrow. Moreover, TRM is allowed to enter into service agreements with other HCI subsidiaries on behalf of Tailrow’s subscribers. With this authority, TRM will be responsible for directly and indirectly managing Tailrow’s operations, including the underwriting and investment activities which have the greatest impact on Tailrow’s financial performance. HCI has variable interests in Tailrow and is considered its primary beneficiary as it is exposed to risk from Tailrow’s economic performance, due to the borrowed funds of the surplus note and TRM’s management and service agreements.

At December 31, 2024, the Company’s maximum exposure to loss relating to Tailrow was $25,000. Tailrow’s assets are legally restricted for the purpose of fulfilling obligations specific to Tailrow and its creditors have no legal right to pursue additional sources of payment from the Company.

As the primary beneficiary, HCI is required to consolidate these variable interest entities. Since HCI has no equity at risk, each variable interest entity’s equity and results of operations are included in noncontrolling interests. In the event of dissolution, subscribers of each variable interest entity will participate in the distribution of any remaining equity after assets have been used to repay outstanding liabilities, including subordinated debts such as HCI’s 9% subordinated surplus notes comprised of unpaid principal and accrued interest. Subscribers will not be liable for any shortfall in equity.

The following table summarizes the assets and liabilities related to the Company’s variable interests in consolidated VIEs which are included in the accompanying consolidated balance sheets:

Note 17 -- Segment Information

The Company identifies its operating divisions based on managerial emphasis, organizational structure and revenue source. With the transaction described in Change in Segment Information under Note 1 -- “Nature of Operations,” the Company now operates under five reportable segments: insurance operations, TypTap Group, reciprocal exchange operations, 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 reciprocal exchange operations, are grouped together into one reportable segment under insurance operations. The TypTap Group segment includes information technology operations, insurance management service operations, and its management company’s activities. The reciprocal exchange segment represents the insurance operations of CORE and Tailrow, consolidated VIEs. 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, such as CRM and TRM, 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 years ended December 31, 2024, 2023 and 2022, revenues from the insurance operations segment before intracompany elimination represented 82.3%,86.9% and 95.4%, respectively, and revenues from the TypTap Group segment represented 12.5%,11.6%, and 0.6%, respectively, of total revenues of all operating segments. At December 31, 2024 and 2023, insurance operations’ total assets represe nted 83.7% and 87.0%, respectively, and TypTap Group’s total assets represented 3.6%and 1.9%, respectively, of the combined assets of all operating segments. See Note 1 -- “Nature of Operations” for a description of the Company’s operations. 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.

(a)

(b)

Other revenue under corporate and other primarily consisted of revenue from marina operations and management fees for attorney-in-fact services.

(c)

Gross premiums earned under insurance operations include $4,116 earned from the reciprocal exchange operations.

(d)

The income (loss) before income taxes in the reclassification/elimination column is attributable to intercompany transactions among operating segments. The insurance operations and the reciprocal exchange operations record service fee expenses based on earned premiums or other appropriate measures, while TypTap Group and the AIF operations recognize service fee revenues according to revenue recognition standards. Although both service fee expenses and revenues are fully eliminated on consolidation, they do not completely offset each other in this presentation due to the different methods of recognition.

(e)

(a)

No operation during 2023.

(b)

(c)

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

(d)

The income (loss) before income taxes in the reclassification/elimination column results from the recast of segment information.

(e)

(a)

(b)

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

(c)

The income (loss) before income taxes in the reclassification/elimination column results from the recast of segment information.

(d)

The following table presents gross premium earned by geographic location:

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

Note 18 -- Leases

The table below summarizes the Company’s ROU assets and corresponding liabilities for operating and finance leases:

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:

(a)

There are no variable lease payments.

(b)

Rent escalation provisions exist.

As of December 31, 2024, maturities of operating lease liabilities were as follows:

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

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

In connection with the purchase of commercial real estate in December 2023 as described ind) Real Estate Investments under Note 5 -- “Investments”, the Company entered into aone-year operating lease with the seller with an effective lease date of December 18, 2023, for the term of the lease which expired on December 31, 2024.

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

(c)

There are no purchase options.

Note 19 -- Income Taxes

A summary of income tax expense (benefit) is as follows:

The reasons for the differences between the statutory federal income tax rate and the effective tax rate are summarized as follows:

The Company hasno uncertain tax positions or unrecognized tax benefits that, if recognized, would impact the effective income tax rates for the years ended December 31, 2024, 2023, and 2022. The tax returns filed for the years ending December 31, 2023, 2022, and 2021 remain subject to examination by the Company’s major taxing jurisdictions. The Company elected to classify interest and penalties, if any, arising from uncertain tax positions as income tax expense as permitted by current accounting standards. For the year ended December 31, 2024, the Company recognized approximately $2 of interest expense on underpayments related to income tax liabilities and classified that interest as income tax expense, compared to approximately $150 for the year ended December 31, 2023. There wereno material amounts of interest or penalties for the year ended December 31,2022.

For the years ended December 31, 2024 and 2023, the Company recorded $45,846 and $28,393 of income tax expense, respectively, resulting in effective tax rates of 26.4% and 24.1%, respectively. For the year ended December 31,2022, the Company recorded income tax benefit of $13,815, resulting in an effective tax rate of 20.2%. The increase in the effective tax rate in 2024 as compared with 2023 was primarily attributable to a lower prior year effective tax rate resulting from the release of the valuation allowance during 2023 and a higher effective tax rate resulting from certain non-deductible compensation expense for 2024.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s net deferred income tax assets (liabilities) are as follows:

The following schedule provides a reconciliation of net deferred tax assets (liabilities) shown in the preceding table to the amounts reported within the Company's consolidated balance sheet.

*Amount related to consolidated variable interest entities that the Company has no right of offset.

The Company haszero federal net operating loss carryforwards available as of December 31,2024. The Company haszero state net operating loss carryforwards available as of December 31,2024.

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. The Company evaluates the realizability of its deferred tax assets each quarter and as of December 31, 2024, based on all available evidence, management concluded that it is more likely than not that the deferred tax assets will be realized, other than a valuation allowance on the sale of TTIC by TTIG to HCI in the amount of $544 related to the deferred intercompany taxable loss that arose during the third quarter of 2024. The Company didnot have a valuation allowance established as of December 31,2023.

Note 20 -- 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.

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

(a)

(a)

(a)

• Convertible senior notes, stock options, and warrants were excluded due to antidilutive effect.

Note 21 -- Redeemable Noncontrolling Interests

The following table summarizes the redeemable noncontrolling interest balances at December 31, 2024 and 2023:

TTIG - Series A Preferred Stock

On January 22, 2024, TTIG entered into a Stock Redemption Agreement with Centerbridge which allowed TTIG to redeem all of the TTIG Series A Preferred Stock held by Centerbridge. The redemption totaled $100,000 plus accrued and unpaid dividends of approximately $2,923. At redemption, the difference between the consideration transferred of $102,923 and the redemption date carrying value of $96,695 is recorded as a deemed dividend and is included in net income attributable to redeemable noncontrolling interest which is subtracted from net income when calculating income available to common stockholders.

The following table summarizes the activity of TTIG Series A Preferred Stock during the years ended December 31, 2024 and 2023:

For the year ended December 31, 2024, net income attributable to redeemable noncontrolling interest was $10,149, consisting of accrued cash dividends of $424, accretion related to increasing dividend rates of $111, an adjustment to maximum redemption value of $6,228, and a deemed dividend resulting from warrant modifications of $3,386. For the years ended December 31, 2023 and 2022, net income attributable to redeemable noncontrolling interest was $9,370 and $9,106, respectively, consisting of accrued cash dividends of$7,263 and $5,842, respectively, and accretion related to increasing dividend rates of $2,107 and $3,264, respectively. In conjunction with this redemption, the warrants held by Centerbridge were also modified. See Note 22 -- “Equity” for additional information.

CORE - Subscriber Surplus Contribution

Subscriber surplus contributions in redeemable noncontrolling interests represent a refundable portion of the surplus contributions received from CORE policyholders.

The following table summarizes the activity of the subscriber surplus contribution during the years ended December 31, 2024 and 2023:

For the year ended December 31, 2024, subscriber surplus contribution was $1,691, consisting of cash contributions of $2,953, returned contributions of $4, and noncash reclassifications of $1,258.

Note 22 -- Equity

Stockholders’ Equity

Common Stock

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 through December 31, 2022. The shares might be purchased for cash in open market purchases, block transactions and privately negotiated transactions in accordance with applicable federal securities laws. There wasno share repurchase plan approved by the Board for 2024 or 2023.

During the year ended December 31, 2022, the Company repurchased and retired 391,151 shares at weighted average price per share of $43.61 under the authorized repurchase plan. The total costs of shares repurchased under these plans, inclusive of fees and commissions, during the year ended December 31, 2022 was $17,070, or $43.64 per share.

On December 11, 2023, the Company sold an aggregate of 1,150,000 shares of the Company’s common stock at a price to the public of $78 per share, pursuant to an underwriting agreement dated as of December 6, 2023 between the Company and Citizens JMP Securities, LLC, the representative of the several underwriters named in the underwriting agreement. The Company received net proceeds of $84,572, including $5,128 issu ance costs. The Company intends to use the funds for general corporate purposes, including the continued assumption of policies from Citizens.

On January 22, 2024, a new shelf registration statement on Form S-3 (the “Shelf Registration”) was filed, replacing the Company’s old universal shelf registration statement filed in September 2023. The new Shelf Registration permits the Company to offer and sell its common stock, preferred stock, debt securities, warrants, and stock purchase contracts and units, from time to time, subject to market conditions and its capital needs. The Shelf Registration also had the effect of enabling Centerbridge to sell all or a portion of the amended and restated warrant or the shares issuable pursuant to the warrant. As a part of the Shelf Registration, the Company also announced the implementation of an “at-the-market” facility (the “ATM facility”) under which the Company would have the ability to raise up to $75,000 through the issuance of new shares of common stock into the market if it were to so choose.

On October 23, 2024, the Company’s Board of Directors declared a quarterly dividend of $0.40 per common share. The dividends were paid on December 20, 2024 to stockholders of record on November 15, 2024.

Warrants

In connection with the redemption of the TTIG Series A Preferred Stock held by Centerbridge in January 2024, HCI, for the benefit of TTIG, extended the expiration dates of 450,000 warrants, which will now expire in 150,000 share increments on December 31, 2026, December 31, 2027, and December 31, 2028. The remaining 300,000 share warrants retained their original expiration date of February 26, 2025 and were exercised on March 11, 2024 through a cashless transaction, resulting in the issuance of 155,049 shares. The warrant modifications resulted in a $3,386 increase in the fair value of the warrants, which is recorded as a deemed dividend by decreasing retained income and increasing additional paid-in capital. The amount of deemed dividend is included in net income attributable to redeemable noncontrolling interest which is subtracted from net income when calculating net income available to common stockholders.

On November 12, 2024, the 150,000 warrants with an expiration date of December 31, 2026 were exercised through a cashless transaction, resulting in the issuance of 79,460 shares. On November 25, 2024, the 150,000 warrants with an expiration date of December 31, 2027 were exercised through a cashless transaction, resulting in the issuance of 77,787 shares. On December 6, 2024,138,750 warrants with an expiration date of December 31, 2028 were exercised through a cashless transaction, resulting in the issuance of 73,971 shares.

At December 31, 2024, there were warrants outstanding and exercisable, held by Centerbridge, to purchase 11,250 shares of HCI common stock at an exercise price of $54.40.

Share Repurchase Agreement

In conjunction with the issuance of the 4.75% Convertible Senior Notes in May 2022 as described in Note 13 -- “Long-Term Debt” under Convertible Senior Notes, the Company used $66,853 of the net proceeds to repurchase and retire an aggregate of 1,037,600 shares of its common stock at a price of $64.43 per share from institutional investors.

Noncontrolling Interests

TTIG

At December 31, 2024, there were 82,810,089 shares of TTIG’s common stock outstanding, of which 7,810,089 shares were not owned by HCI.

During the years ended December 31, 2024 and 2023, TTIG repurchased and retired a total of 322,056 and 65,448 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 years ended December 31, 2024 and 2023 was $470 and $212, respectively.

Furthermore, TTIG repurchased and retired a total of 7,277 shares of its common stock from former TTIG employees for a total cost of $13 for the year ended December 31,2024. The total cost included the fair value of TTIG common stock and a $2 inducement cost for the purpose of curtailing the spread of share ownership.

Consolidated Variable Interest Entities

As described in Note 16-- “Variable Interest Entities,” the Company has no equity interest at risk in consolidated VIEs. An insurance exchange receives surplus contributions from its subscribers in addition to policy premiums. The surplus contribution is payable to an insurance exchange on or prior to the initial effective date of coverage, in installments for certain payment plans, and on or prior to the effective date of all endorsements generating an additional premium.

Note 23 -- 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. With respect to the Plan, the Company may grant stock-based awards to employees, directors, consultants, and advisors of the Company. At December 31, 2024, there were 691,846 shares available for grant.

Stock Options

Stock options granted and outstanding under the incentive plan vest over a period offour years and are exercisable over the contractual term often years.

A summary of the stock option activity for the years ended December 31, 2024, 2023 and 2022 is as follows (option amounts not in thousands):

On 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. In December 2023, the award met the conditions for vesting and as a result, the unrecognized compensation balance related to the award was fully recognized. There wereno options exercised during the years ended December 31, 2024, 2023 and 2022.

For the years ended December 31, 2024, 2023 and 2022, the Company recognized $14, $2,197 and $669, respectively, of compensation expense which was included in general and administrative personnel expenses. There wereno deferred tax benefits related to stock options for the years ended December 31, 2024, 2023 and 2022. At December 31, 2024 and 2023, there was $0 and $14, respectively, of unrecognized compensation expense related to nonvested stock options.

The following table provides assumptions used in the pricing model to estimate the fair value of the stock options granted during the year ended December 31, 2023:

Restricted Stock Awards

From time to time, the Company has granted and may grant restricted stock awards to certain executive officers, other employees and nonemployee directors in connection with their service to the Company. The terms of the Company’s outstanding restricted stock grants may include service, performance, and market-based conditions. The determination of fair value with respect to the awards containing only service-based conditions is based on the market value of the Company’s 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.

On April 17, 2024, the Company awarded its Chief Executive Officer 200,000 restricted shares of common stock. The shares will vest equally over a period of four years, with vesting dates of March 15, 2025, 2026, 2027, and 2028, under the condition that the price per share reaches $200 for a period of 30 consecutive trading days and that Mr. Patel remains employed by the Company.

Information with respect to the activity of unvested restricted stock awards during the years ended December 31, 2024, 2023 and 2022 is as follows:

The Company recognized compensation expense related to restricted stock, which is included in general and administrative personnel expenses, of $6,922, $4,224 and $10,926 for the years ended December 31, 2024, 2023 and 2022, respectively. At December 31, 2024 and 2023, there was approximately $20,296 and $4,043, respectively, of total unrecognized compensation expense related to nonvested restricted stock arrangements. The Company expects to recognize the remaining compensation expense over a weighted-average period of 2.9 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 years ended December 31, 2024, 2023 and 2022.

On October 5, 2022,231,516 shares of restricted stock issued to employees vested one year subsequent to satisfaction of a market-based vesting condition on October 5, 2021. The Company repurchased and retired a total of 80,339 shares surrendered to satisfy payroll tax liabilities associated with the vesting of these restricted shares. The restricted shares were granted in February 2021 with a grant date fair value of $36.57 per share.

During the years ended December 31, 2023 and 2022 no awards were issued with other than service-based vesting conditions. The following table provides assumptions used in the pricing model to estimate the fair value of the restricted stock with market-based vesting conditions granted during the year ended December 31, 2024:

Subsidiary Equity Plan

For the years ended December 31, 2024, 2023 and 2022, TypTap Group recognized compensation expense related to its stock-based awards of $3,267, $2,927 and $3,512, respectively. At December 31, 2024 and 2023, there was $9,495 and $4,438, respectively, of unrecognized compensation expense related to nonvested restricted stock and stock options.

The sale of TTIC, as described in Note 1 -- Nature of Operations, triggered 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 the chief executive officer of HCI. The expense from immediate vesting approximated $1,087.

Note 24 -- Employee Benefit Plans

The Company has a 401(k) Safe Harbor Profit Sharing Plan (“401(k) Plan”) that qualifies as a defined contribution plan under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, participating employees are eligible for company matching and discretionary profit sharing contributions. Plan participants may elect to defer up toone hundred percent of their pre-tax gross wages, subject to annual limitations. The Company’s matching contribution is limited to a maximum offour percent of the employee’s annual salary or wage and is fully vested when contributed. Eligibility and vesting of the Company’s discretionary profit sharing contribution is subject to the plan participant’s years of service. During the years ended December 31, 2024, 2023 and 2022, the Company contributed approximately $1,243, $1,124 and $1,037, respectively, in matching contributions, which are included in general and administrative personnel expenses. There has beenno discretionary profit sharing contribution since the plan’s inception.

The Company also maintains benefit plans for its employees in India including a statutory post-employment benefit plan, or gratuity plan, providing defined, lump-sum benefits. The Company’s liability for the gratuity plan reflects the undiscounted benefit obligation payable as of the balance sheet date, which was based upon the employees’ salary and years of service. At December 31, 2024 and 2023, the amounts accrued under the gratuity plan were $233 and $173, respectively. In addition, the Company provides matching contributions with respect totwo defined contribution plans: the Provident Fund and the Employees’ State Insurance Fund, both of which are available to qualifying employees in India. Expense recognized by the Company for all benefit plans in India was$59 for the year ended December 31, 2024. For the year ended December 31, 2023, $47 of expense was recognized whereas $32 of expense was derecognized for the year ended December 31,2022.

Note 25 -- Commitments and Contingencies

Rental Income

The Company leases available space at the Company’s various investment properties to non-affiliates at various terms. In addition, the Company leases boat slips and docks on a long-term basis. Expected annual rental income due under non-cancellable operating leases for all properties owned at December 31, 2024 is as follows:

Capital Commitments

As described in Note 5 -- “Investments” underc) Limited Partnership Investments, the Company is contractually committed to capital contributions for limited partnership interests. At December 31, 2024, there was an aggregate unfunded balance of $3,255.

FIGA Assessments

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

In August 2022, the Florida Office of Insurance Regulation approved a 2023 assessment for FIGA which is necessary to secure funds for the payment of covered claims relating to the liquidation of two insurance companies. The 2023 FIGA assessment will be levied at 0.70% on collected premiums of all covered lines of business except auto insurance. The surcharge, which is collectible from a policyholder, will be assessed on new and renewal policies with effective dates beginning January 1, 2023 through December 31, 2023.

In April 2023, the FLOIR approved an assessment for FIGA in order to secure funds for the payment of covered claims relating to the liquidation of one insurance company. The FIGA assessment will be levied at 1% on collected premiums of all covered lines of business except auto insurance. The surcharge, which is collectible from a policyholder, will be assessed on new and renewal policies with effective dates beginning October 1, 2023 through September 30, 2024 and continuing until the end of the assessment year in which the Series 2023A Bonds issued by the Florida Insurance Assistance Interlocal Agency have been paid in full.

The Company’s insurance subsidiaries, as member insurers, are required to collect and remit the pass-through assessments to FIGA on a quarterly basis. As of December 31, 2024 and 2023, the FIGA assessments payable by the Company were $1,793 and $2,588, respectively.

Note 26 -- Quarterly Results of Operations (Unaudited)

The tables below summarize unaudited quarterly results of operations for 2024, 2023 and 2022.

• During the quarter ended September 30, 2024, convertible senior notes were antidilutive. During the quarter ended December 31, 2024, the convertible senior notes were antidilutive.

** During the quarter ended March 31, 2023, warrants were antidilutive.

*** During the quarter ended March 31, 2022, the convertible senior notes were antidilutive. During the quarters ended June 30, 2022, September 30, 2022 and December 31, 2022, the convertible senior notes, stock options and warrants were antidilutive.

Note 27 -- Regulatory Requirements and Restrictions

The Company has no restrictions on the payment of dividends to its shareholders except those restrictions imposed by insurance statutes and regulations applicable to the Company’s insurance subsidiaries. As of December 31, 2024, without prior regulatory approval, $276,242 of the Company’s consolidated retained earnings was free from restriction under the insurance statutes and regulations and available for the payment of dividends in 2025.

U.S.-based

The Company’s U.S.-based insurance subsidiaries prepare their statutory financial statements in accordance with accounting principles prescribed or permitted by insurance regulatory authorities. Prescribed statutory accounting practices are those practices that are incorporated directly or by reference in state laws, regulations, and general administrative rules applicable to all insurance enterprises where they are domiciled. Permitted statutory accounting practices encompass all accounting practices that are not prescribed; such practices differ from state to state, may differ from entity to entity within a state, and may change in the future. Some states have adopted laws, regulations, accounting practices and procedures issued by the National Association of Insurance Commissioners (“NAIC”).

U.S. GAAP differs in certain respects from the accounting practices prescribed or permitted by insurance regulatory authorities (statutory-basis). Statutory-basis surplus differs from stockholders’ equity reported in accordance with U.S. GAAP primarily because policy acquisition costs are expensed when incurred, and different timing of recognizing the brokerage income for reinsurance recoverables. In addition, the recognition of deferred tax assets is based on different recoverability assumptions and material differences may also arise from the differing treatment of non-admitted assets and unrealized gains and losses from investments.

The following tables present statutory-basis financial information determined in accordance with statutory accounting principles:

*Incorporated in 2023.

Florida property and casualty insurance companies are required to adhere to prescribed premium-to-capital surplus ratios. Florida state law requires that the ratio of 90% of written premiums divided by surplus as to policyholders does not exceed 10 to 1 for gross written premiums or 4 to 1 for net written premiums. The ratios of gross and net written premiums to surplus, which the Company’s insurance subsidiaries have met the requirements for, are summarized below:

State statutes in the domiciliary states of the Company’s U.S.-based subsidiaries typically restrict annual dividend payments without prior regulatory approval. As a result, HCPCI was qualified to make dividend payments at December 31, 2024, 2023 and 2022. perRisk was qualified to pay dividends at December 31, 2024 and 2023. Without prior written approval, TTIC was not permitted to make any dividend payments.

Bermuda

The Bermuda Monetary Authority requires Claddaugh Casualty Insurance Company, Ltd. (“Claddaugh”), the Company’s Bermuda domiciled reinsurance subsidiary, to maintain minimum capital and surplusof $2,000. At December 31, 2024 and 2023, Claddaugh’s statutory capital and surplus was approxima tely $56,071 and $87,716, respectively. For the year ended December 31, 2024, Claddaugh reported a statutory net loss of approximately $9,642. For the year ended December 31, 2023, Claddaugh reported a statutory net income of approximately $21,044 as opposed to a statutory net loss of approximately $21,575 for the year ended December 31, 2022. There wasno capital contribution to or return of capital from Claddaugh during 2024 and 2023. During 2022, the Company contributed approximately $31,868 of capital to Claddaugh.

The Company’s insurance subsidiaries are subject to risk-based capital (“RBC”) requirements as specified by the NAIC or other regulatory authorities. Under those requirements, the amount of minimum capital and surplus maintained by a property and casualty insurance company is to be determined based on the various risks related to it. Pursuant to the RBC requirements, insurers having less statutory capital than required by the RBC calculation will be subject to varying degrees of regulatory action, depending on the level of capital inadequacy. At December 31, 2024 and 2023, the Company’s insurance subsidiaries individually exceeded any applicable minimum risk-based capital requirements and no corrective actions have been required. As of December 31, 2024, the combined statutory capital and surplus and minimum capital and surplus of the Company’s insurance subsidiaries were approximately $324,742 and $81,060, respectively.

At December 31, 2024 and 2023, restricted net assets represented by the Company’s insurance subsidiaries amounted to$340,083 and $215,495, respectively.

Note 28 -- Related Party Transactions

HCPCI and TTIC have reinstatement premium protection reinsurance contracts (“RPP”) with various reinsurers. For one of the RPP contracts, Oxbridge Reinsurance Limited (“Oxbridge”) participates as a subscribing reinsurer. One of the Company’s non-employee directors, Jay Madhu, serves as Oxbridge’s chairman of its board of directors and chief executive officer and is an investor in that company. Under the contracts, Oxbridge agrees to indemnify HCPCI and TTIC for a portion of reinstatement premium which HCPCI or TTIC pays or becomes liable to pay to reinstate reinsurance protection. The $1,099 premium is paid over four installments, each of which is to be deposited into a trust account in order to fully collateralize Oxbridge’s obligations. Trust assets may be withdrawn by HCPCI and TTIC or the trust beneficiaries in the event amounts are due under the 2024-2025 RPP contracts.

Note 29 -- Condensed Financial Information of HCI Group, Inc.

Condensed financial information of HCI Group, Inc. is as follows:

Balance Sheets

Statements of Income

Statements of Cash Flows

Statements of Cash Flows – (Continued)

Note 30 -- Subsequent Events

On January 1, 2025 the Company’s 4.75% Convertible Senior Notes became convertible by all holders, as the Company’s closing share price of common stock for 20 trading days during the final 30 trading days of the immediately preceding calendar quarter was greater than 130% of the conversion price of $80.54, thus fulfilling the conversion conditions. The notes will remain convertible at least through March 31, 2025. The Company plans to settle all conversions fully in common stock. The current conversion ratio is approximately 12.4166 shares of common stock per $1 principal amount of notes. In addition, the Company has the right to redeem the 4.75% Convertible Notes at any time after June 5, 2025, if the last reported sale price of the common stock has been at least 130% of the conversion price for at least 20 trading days during any 30 day consecutive trading day period.

On January 14, 2025, the Company’s Board of Directors declared a quarterly dividend of $0.40 per common share. The dividends are payable on March 21, 2025 to stockholders of record on February 21, 2025.

On February 18, 2025, Tailrow, a consolidated VIE, assumed polices from Citizens. As outlined in the Consent Order issued by the FLOIR, Tailrow will assume approximately 14,000 policies, representing an estimated $36,000 in annualized premiums written.