HCI Group, Inc.

Previous wording

You should read the following discussion under this Item 2 in conjunction with our consolidated financial statements and related notes and information included elsewhere in this quarterly report on Form 10-Q and in our Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 28, 2025. Unless the context requires otherwise, as used in this Form 10-Q, the terms “HCI,” “we,” “us,” “our,” “the Company,” “our company,” and similar references refer to HCI Group, Inc., a Florida corporation incorporated in 2006, and its subsidiaries. All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in whole dollars unless specified otherwise.

Current wording

You should read the following discussion under this Item 2 in conjunction with our consolidated financial statements and related notes and information included elsewhere in this quarterly report on Form 10-Q and in our Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 28, 2025 (the “2024 Annual Report”). Unless the context requires otherwise, as used in this Form 10-Q, the terms “HCI,” “we,” “us,” “our,” “the Company,” “our company,” and similar references refer to HCI Group, Inc., a Florida corporation incorporated in 2006, and its subsidiaries. All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in whole dollars unless specified otherwise.

Previous wording

For the three months ended March 31, 2025 and 2024, revenues from insurance operations before intracompany elimination represented 77.0% and 85.1%, respectively, and revenues from Exzeo Group represented 16.7% and 12.7%, respectively, of total revenues of all operating segments. At March 31, 2025 and December 31, 2024, insurance operations’ total assets represented 81.1% and 83.6%, respectively, and Exzeo Group’s total assets represented 5.5% and 3.7%, respectively, of the combined assets of all operating segments. See Note 15 -- “Segment Information” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

Current wording

For the three months ended June 30, 2025 and 2024, revenue from Insurance Operations before intracompany elimination represented 77.9% and 85.6%, respectively, and revenue from Exzeo Group represented 16.3% and 8.9%, respectively, of total revenue of all operating segments. For the six months ended June 30, 2025 and 2024, revenue from Insurance Operations before intracompany elimination represented 77.5% and 85.4%, respectively, and revenue from Exzeo Group represented 16.5% and 10.7%, respectively, of total revenue of all operating segments. As of June 30, 2025 and December 31, 2024, Insurance Operations’ total assets represented 81.0% and 83.6%, respectively, and Exzeo Group’s total assets represented 6.0% and 3.7%, respectively, of the combined assets of all operating segments. Refer to Note 15 “Segment Information” to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

Previous wording

We currently have three insurance subsidiaries: Homeowners Choice Property & Casualty Insurance Company, Inc. (“HCPCI”) and TypTap Insurance Company (“TTIC”). A third insurance subsidiary, perRisk Insurance Company, has yet to conduct its surplus lines insurance business. We provide various forms of residential insurance products such as homeowners insurance, fire insurance, and wind-only insurance to homeowners, condominium owners and tenants for properties primarily located in Florida and in various states outside of Florida. Although we conduct insurance business in many states, Florida remains our primary market. We utilize internally developed software technologies to drive efficiency in claim processing and claims settlements, identify profitable underwriting opportunities, generate savings and streamline operations across its insurance operations.

Current wording

We currently have three insurance subsidiaries: Homeowners Choice Property & Casualty Insurance Company, Inc. (“HCPCI”) and TypTap Insurance Company (“TTIC”). A third insurance subsidiary, perRisk Insurance Company, has yet to conduct its surplus lines insurance business. We provide various forms of residential insurance products such as homeowners insurance, fire insurance, and wind-only insurance to homeowners, condominium owners and tenants for properties primarily located in Florida and in various states outside of Florida. Although we conduct insurance business in many states, Florida remains our primary market. We utilize internally developed software technologies to drive efficiency in claim processing and claims settlements, identify profitable underwriting opportunities, generate savings and streamline operations across our insurance operations.

Previous wording

We have a Bermuda domiciled wholly-owned reinsurance subsidiary, Claddaugh Casualty Insurance Company Ltd (“Claddaugh”). We selectively retain risk in Claddaugh, reducing the cost of third-party reinsurance. Claddaugh fully collateralizes its exposure to HCPCI, TypTap, and CORE by depositing funds into a trust account. Claddaugh may mitigate a portion of its risk through retrocession contracts, however Claddaugh did not enter into any retrocession contracts for the 2024-2025 treaty year. Currently, Claddaugh does not provide reinsurance to non-affiliates. Other auxiliary operations also include claim adjusting and processing services.

Current wording

We have a Bermuda domiciled wholly-owned reinsurance subsidiary, Claddaugh Casualty Insurance Company Ltd (“Claddaugh”). We selectively retain risk in Claddaugh, reducing the cost of third-party reinsurance. Claddaugh fully collateralizes its exposure to our insurance operations and reciprocal exchange operations by depositing funds into a trust account. Claddaugh may mitigate a portion of its risk through retrocession contracts, however Claddaugh did not enter into any retrocession contracts for the 2025-2026 treaty year. Currently, Claddaugh does not provide reinsurance to non-affiliates. Other auxiliary operations also include claim adjusting and processing services.

Previous wording

Exzeo Group, Inc. (“Exzeo”), our majority-owned subsidiary, currently has four subsidiaries: Exzeo Insurance Services, Inc (“EIS”) which was formerly known as TypTap Management Company, Exzeo USA, Inc. (“Exzeo USA”), Dark Horse Re, LLC (“Dark Horse”), and Cypress Tech Development Company which also owns Exzeo Software Private Limited (“Exzeo India”), a subsidiary domiciled in India. Exzeo provides a turn-key insurance technology and operations solutions to third-party insurance carriers based on a proprietary platform of purpose-built software and data-analytics applications that are specifically designed for the property and casualty insurance ecosystem. Exzeo's platform of products and services is highly scalable and poised to continue to optimize the performance of insurance markets, to the benefit of policyholders, capital providers, as well as the overall insurance value chain. The advanced data analytics algorithms and software tools enable insurance carriers to maximize efficiency of their systems, optimize underwriting outcomes and ultimately serve their customers more effectively.

Current wording

Exzeo Group, Inc. (“Exzeo”), our majority-owned subsidiary, currently has four subsidiaries: Exzeo Insurance Services, Inc. (“EIS”) which was formerly known as TypTap Management Company, Exzeo USA, Inc. (“Exzeo USA”), Dark Horse Re, LLC (“Dark Horse”), and Cypress Tech Development Company, Inc. which also owns Exzeo Software Private Limited (“Exzeo India”), a subsidiary domiciled in India. Exzeo provides turn-key insurance technology and operations solutions primarily to our insurance operations and reciprocal exchange operations based on a proprietary platform of purpose-built software and data analytics applications that are specifically designed for the property and casualty insurance ecosystem. Exzeo's platform of products and services is highly scalable and poised to continue to optimize the performance of insurance markets, to the benefit of policyholders, capital providers, as well as the overall insurance value chain. The advanced data analytics algorithms and software tools enable insurance carriers to maximize efficiency of their systems, optimize underwriting outcomes and ultimately serve their customers more effectively.

Previous wording

Exzeo provides operational services through EIS, which performs end-to-end services including underwriting support, insurance application processing, policyholder service, premium collection activities and claims administration. Additionally, EIS leverages data analytics to monitor claims and market trends to improve pricing models, advising on insurance policy design, and ensuring compliance with regulatory requirements.

Current wording

Exzeo provides operational services through EIS, which performs end-to-end services including underwriting support, insurance application processing, policyholder service, premium collection activities and claims administration. Additionally, EIS leverages data analytics to monitor claims and market trends to improve pricing models, insurance policy designs, and compliance with regulatory requirements.

Previous wording

Exzeo’s information technology operations are anchored by its software development and data analytics capabilities, primarily supported by Exzeo USA and Exzeo India, which design and maintain components of Exzeo’s technology infrastructure along with research and development. Exzeo's proprietary platform includes configurable applications designed to support the full insurance value chain from quoting and underwriting, policy management, claims management, geolocation visualization tools, as well as financial reporting. Key products currently in use or under development include AtlasViewer®, an online data visualization and geographic tool, SAMSTM, a policy administration platform, Harmony TM, a next generation policy administration platform under development, and ClaimColony TM, an application that provides intelligent automation of insurance claims and other business processes.

Current wording

Exzeo’s information technology operations are anchored by its software development and data analytics capabilities, primarily supported by Exzeo USA and Exzeo India. Exzeo's proprietary platform includes configurable applications designed to support the full insurance value chain including quoting and underwriting, policy management, claims management, geolocation visualization tools, and financial reporting. Exzeo’s key products include AtlasViewer®, an online data visualization and geographic tool, SAMSTM, a policy administration platform, Harmony TM, a next generation policy administration platform, and ClaimColony TM, an application that provides intelligent automation of insurance claims and other business processes.

Previous wording

Reciprocal Exchange Operations refer to the activities of consolidated variable interest entities, Condo Owners Reciprocal Exchange (“CORE”) and Tailrow Insurance Exchange (“Tailrow”). CORE provides commercial residential multiple peril insurance, while Tailrow specializes in fire and homeowners multiple peril insurance.

Current wording

Our reciprocal exchange operations relate to the activities of consolidated variable interest entities, Condo Owners Reciprocal Exchange (“CORE”) and Tailrow Insurance Exchange (“Tailrow”). CORE provides commercial residential multiple peril insurance, while Tailrow specializes in fire and homeowners multiple peril insurance.

Previous wording

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

Current wording

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

Previous wording

The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024 (dollar amounts in thousands, except per share amounts):

Current wording

The following table summarizes our results of operations for the three and six months ended June 30, 2025 and 2024 (in thousands, except per share amounts or as otherwise indicated):

Previous wording

Gross Premiums Earned on a consolidated basis for the three months ended March 31, 2025 and 2024 were approximately $300,383,000 and $256,644,000, respectively. The $43,739,000 increase was primarily attributable to the policies assumed from Citizens. Gross premiums earned from insurance operations were $282,135,000 for the three months ended March 31, 2025 compared with $253,472,000 for the three months ended March 31, 2024. Gross premiums earned from reciprocal exchange operations were $19,447,000 for the three months ended March 31, 2025 compared to $3,625,000 for the three months ended March 31, 2024.

Current wording

Gross Premiums Earned on a consolidated basis for the three months ended June 30, 2025 and 2024 were approximately $302,628,000 and $263,561,000, respectively. The $39,067,000 increase was primarily attributable to a higher volume of policies in force as a result of the addition of policies from Citizens during the fourth quarter of 2024 and first quarter of 2025. Gross premiums earned from Insurance Operations were $282,269,000 for the three months ended June 30, 2025 compared with $251,969,000 for the three months ended June 30, 2024. Gross premiums earned from Reciprocal Exchange Operations were $21,639,000 for the three months ended June 30, 2025 compared to $12,804,000 for the three months ended June 30, 2024.

Previous wording

Premiums Ceded for the three months ended March 31, 2025 and 2024 were approximately $99,635,000 and $68,106,000, respectively, representing 33.2% and 26.5%, respectively, of gross premiums earned. The $31,529,000 increase was primarily attributable to higher reinsurance rates for the 2024-2025 contract year, increased coverage due to growth in the number of policies in force and total insured value.

Current wording

Premiums Ceded for the three months ended June 30, 2025 and 2024 were approximately $102,522,000 and $76,713,000, respectively, representing 33.9% and 29.1%, respectively, of gross premiums earned. The $25,809,000 increase was primarily attributable to higher reinsurance costs due to growth in the number of policies in force and total insured value.

Previous wording

Our premiums ceded represent costs of reinsurance to cover losses from catastrophes that exceed the retention levels defined by our catastrophe excess of loss reinsurance contracts or to assume a proportional share of losses as defined in a quota share agreement. The rates we pay for reinsurance are based primarily on policy exposures reflected in gross premiums earned. Reinsurance costs can be decreased by a reduction in premiums ceded attributable to retrospective provisions under reinsurance contracts. For the three months ended March 31, 2025, there was no adjustment in premiums ceded related to retrospective provisions as opposed to a decrease of $6,993,000 for the three months ended March 31, 2024.

Current wording

Our premiums ceded represent costs of reinsurance (i) to cover losses from catastrophes that exceed the retention levels defined by our catastrophe excess of loss reinsurance contracts, (ii) to provide additional loss coverage on a high-value individual risk basis through facultative reinsurance, or (iii) to assume a proportional share of losses as defined in a quota share agreement. The rates we pay for reinsurance are based primarily on policy exposures reflected in gross premiums earned. Under contracts in effect prior to June 1, 2025, reinsurance costs could be decreased by a reduction in premiums ceded attributable to retrospective provisions under reinsurance contracts. For the three months ended June 30, 2025, there was no adjustment in premiums ceded related to retrospective provisions as opposed to a decrease of $6,993,000 for the three months ended June 30, 2024.

Previous wording

Net Premiums Written for the three months ended March 31, 2025 and 2024 totaled approximately $189,611,000 and $186,880,000, respectively. Net premiums written represent the premiums charged on policies issued during a fiscal period less any applicable reinsurance costs. The increase in 2025 primarily resulted from an increase in gross premiums written from the assumption of Citizens insurance policies, offset by an increase in premiums ceded. We had approximately 278,400 policies in force at March 31, 2025 as compared with approximately 250,500 policies in force at March 31, 2024.

Current wording

Net Premiums Written for the three months ended June 30, 2025 and 2024 totaled approximately $254,023,000 and $230,189,000, respectively. Net premiums written represent the premiums charged on policies issued during a fiscal period less any applicable reinsurance costs. The increase in 2025 primarily resulted from an increase in the volume of premiums in force, offset by an increase in premiums ceded. We had approximately 270,100 policies in force as of June 30, 2025 as compared with approximately 242,500 policies in force at June 30, 2024.

Previous wording

Net Premiums Earned for the three months ended March 31, 2025 and 2024 were approximately $200,748,000 and $188,538,000, respectively, and reflect the gross premiums earned less reinsurance costs as described above.

Current wording

Net Premiums Earned for the three months ended June 30, 2025 and 2024 were approximately $200,106,000 and $186,848,000, respectively, and reflect the gross premiums earned less reinsurance costs as described above.

Previous wording

The following is a reconciliation of our total Net Premiums Written to Net Premiums Earned for the three months ended March 31, 2025 and 2024 (amounts in thousands):

Current wording

The following is a reconciliation of our total Net Premiums Written to Net Premiums Earned for the three months ended June 30, 2025 and 2024 (in thousands):

Previous wording

Policy Acquisition and Other Underwriting Expenses for the three months ended March 31, 2025 and 2024 were approximately $27,287,000 and $22,139,000 on a consolidated basis, respectively, and primarily reflect the amortization of deferred acquisition costs such as commissions payable to agents for production and renewal of policies and premium taxes. The increase in amortized costs was primarily due to an increase in premiums in force associated with policy renewals in the insurance and reciprocal exchange operations.

Current wording

Policy Acquisition and Other Underwriting Expenses for the three months ended June 30, 2025 and 2024 were approximately $30,551,000 and $23,452,000 on a consolidated basis, respectively, and primarily reflect the amortization of deferred acquisition costs such as commissions payable to agents for production and renewal of policies and premium taxes. The increase in amortized costs was primarily due to a higher volume of policies in force in the comparative periods.

Previous wording

General and Administrative Personnel Expenses for the three months ended March 31, 2025 and 2024 were approximately $20,483,000 and $16,274,000, respectively. Our general and administrative personnel expenses include salaries, wages, payroll taxes, stock-based compensation expenses, and employee benefit costs. Factors such as merit increases, changes in headcount, and periodic restricted stock grants, among others, cause fluctuations in this expense. In addition, our personnel expenses are decreased by the capitalization of payroll costs related to projects to develop software for internal use and the payroll costs associated with the processing and settlement of certain catastrophe claims which are recoverable from reinsurers under reinsurance contracts. The quarter-over-quarter increase of $4,209,000 was primarily attributable to an increase in employee incentive bonus, an increase in stock-based compensation expense, an increase in employee health benefits, and merit increases for non-executive employees effective in March 2025, offset by higher payroll costs recoverable from reinsurers

Current wording

General and Administrative Personnel Expenses for the three months ended June 30, 2025 and 2024 were approximately $19,985,000 and $17,471,000, respectively. Our general and administrative personnel expenses include salaries, wages, payroll taxes, stock-based and other incentive compensation expenses, and employee benefit costs. Factors such as merit increases, changes in headcount, and periodic restricted stock grants, among others, cause fluctuations in this expense. In addition, our personnel expenses are decreased by the capitalization of payroll costs related to projects to develop software for internal use and the payroll costs associated with the processing and settlement of certain catastrophe claims which are recoverable from reinsurers under reinsurance contracts. The quarter-over-quarter increase of $2,514,000 was primarily attributable to an increase in stock-based and other incentive compensation, employee health benefits, and merit increases.

Previous wording

The expense ratio applicable to the three months ended March 31, 2025 (defined as total expenses excluding losses and loss adjustment expenses and interest expense related to net premiums earned) was 26.6% compared with 24.5% for the three months ended March 31, 2024. The increase in our expense ratio was primarily attributable to the increase in policy acquisition and other underwriting expense and the increase in general and administrative personnel expenses.

Current wording

The net expense ratio (total expenses excluding losses and loss adjustment expenses and interest expense in relation to net premiums earned) applicable to the three months ended June 30, 2025 was 29.7% compared with 25.9% for the three months ended June 30, 2024. The increase in our expense ratio was primarily attributable to the increase in policy acquisition and other underwriting expenses and the increase in general and administrative personnel expenses, partially offset by the increase in net premiums earned.

Previous wording

The combined ratio (total of all expenses excluding interest expense in relation to net premiums earned) is the measure of overall underwriting profitability before other income. Our combined ratio for the three months ended March 31, 2025 was 56.1% compared with 66.9% for the three months ended March 31, 2024. The decrease in 2025 was attributable to the factors described above.

Current wording

The net combined ratio (total expenses excluding interest expense in relation to net premiums earned) is the measure of overall underwriting profitability before other income. Our combined ratio for the three months ended June 30, 2025 was 61.9% compared with 67.8% for the three months ended June 30, 2024. The decrease in 2025 was attributable to the factors described above.

Previous wording

Our results of operations for the three months ended March 31, 2025 reflect net income of approximately $74,230,000 or $5.35 diluted earnings per share, compared with net income of approximately $56,956,000 or $3.81 diluted earnings per share, for the three months ended March 31, 2024. The quarter-over-quarter increase was primarily due to a $20,631,000 decrease in losses and loss adjustment expenses and a $12,210,000 increase in net premiums earned, offset by a $4,209,000 increase in general and administrative personnel expenses, a $3,690,000 net decrease in income from our investment portfolio (consisting of net investment income and net realized and unrealized gains or losses), and a $3,097,000 increase in policy acquisition, underwriting, and other operating expenses .

Current wording

Our results of operations for the six months ended June 30, 2025 reflect net income of approximately $144,509,000 or $10.57 diluted earnings per share, compared with net income of approximately $114,055,000 or $8.04 diluted earnings per share for the six months ended June 30, 2024. The period-over-period increase was primarily due to a $34,498,000 decrease in losses and loss adjustment expenses and a $25,468,000 increase in net premiums earned; partially offset by a $12,247,000 increase in policy acquisition and other underwriting expenses, a $6,723,000 increase in general and administrative personnel expenses, and a $3,536,000 decrease in income from our investment portfolio (consisting of net investment income and net realized and unrealized gains or losses).

Previous wording

Net Unrealized Investment Lossesfor the three months ended March 31, 2025 was approximately $1,906,000 as opposed to net unrealized investment gains of approximately $2,635,000 for the three months ended March 31, 2024. The decrease was primarily attributable to an unfavorable change in the equity market compared with the three months ended March 31, 2024.

Current wording

Net Unrealized Investment Lossesfor the six months ended June 30, 2025 were approximately $726,000 compared with net unrealized investment gains of approximately $3,168,000 for the six months ended June 30, 2024. The decrease was primarily attributable to an overall decline in the equity markets for the comparative periods.

Previous wording

Our consolidated Losses and Loss Adjustment Expenses amounted to approximately $59,291,000 and $79,922,000 for the three months ended March 31, 2025 and 2024, respectively. The decrease is primarily driven by a decline in claims and litigation frequency. The decrease was offset in part by losses on policies assumed from Citizens by the reciprocal exchange operations during 2025. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”

Current wording

Our consolidated Losses and Loss Adjustment Expenses amounted to approximately $123,748,000 and $158,246,000 for the six months ended June 30, 2025 and 2024, respectively. The decrease is primarily driven by a decline in claims and litigation frequency, partially offset in part by losses on policies assumed from Citizens by the Reciprocal Exchange Operations during 2025. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”

Previous wording

The loss ratio applicable to the three months ended March 31, 2025 (losses and loss adjustment expenses incurred related to net premiums earned) was 29.5% compared with 42.4% for the three months ended March 31, 2024. The decrease was primarily attributable to the decrease in losses and loss adjustment expenses and the increase in net premiums earned.

Current wording

The net loss ratio applicable to the six months ended June 30, 2025 was 30.9% compared with 42.2% for the six months ended June 30, 2024. The decrease was primarily attributable to the decrease in losses and loss adjustment expenses and the increase in net premiums earned.

Previous wording

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

Current wording

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

Previous wording

Our insurance subsidiaries require liquidity and adequate capital to meet ongoing obligations to policyholders and claimants and to fund operating expenses. In addition, we attempt to maintain adequate levels of liquidity and surplus to manage any differences between the duration of our liabilities and invested assets. In the insurance industry, cash collected for premiums from policies written is invested, interest and dividends are earned thereon, and losses and loss adjustment expenses are paid out over a period of years. This period of time varies by the circumstances surrounding each claim. With the exception of litigated claims, substantially all of our losses and loss adjustment expenses are fully settled and paid within approximately 90 days of the claim receipt date. Additional cash outflow occurs through payments of underwriting costs such as commissions, taxes, payroll, and general overhead expenses.

Current wording

Our insurance subsidiaries require liquidity and adequate capital to meet ongoing obligations to policyholders and claimants and to fund operating expenses. In addition, we attempt to maintain adequate levels of liquidity and surplus to manage any differences between the duration of our liabilities and invested assets. In the insurance industry, cash collected for premiums from policies written is invested, interest and dividends are earned thereon, and losses and loss adjustment expenses are paid out over a period of years. This period of time varies by the circumstances surrounding each claim. With the exception of litigated claims, substantially all of our losses and loss adjustment expenses are fully settled and paid within approximately 100 days of the claim receipt date. Additional cash outflow occurs through payments of underwriting costs such as commissions, taxes, payroll, and general overhead expenses.

Previous wording

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

Current wording

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

Previous wording

The following table summarizes the principal and interest payment obligations of our indebtedness at March 31, 2025:

Current wording

The following table summarizes the principal and interest payment obligations of our indebtedness as of June 30, 2025:

Previous wording

Our limited partnership investments consist of six private equity funds managed by their general partners. Two of these funds have unexpired capital commitments which are callable at the discretion of the fund’s general partner for funding new investments or expenses of the fund. Although capital commitments for the four remaining funds have expired, the general partners may request additional funds under certain circumstances. At March 31, 2025, there was an aggregate unfunded capital balance of $3,160,000. See Limited Partnership Investments under Note 5 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Our limited partnership investments consist of six private equity funds managed by their general partners. Withdrawals from limited partnership investments are generally not permitted and distributions occur when the underlying investments of the limited partnership investments are liquidated. Additionally, two of these funds have unexpired capital commitments which are callable at the discretion of the fund’s general partner for funding new investments or expenses of the fund. Although capital commitments for the four remaining funds have expired, the general partners may request additional funds under certain circumstances. As of June 30, 2025, there were unexpired capital commitments of $2,985,000. Refer to Note 5 “Investments” to the consolidated financial statements under “Limited Partnership Investments” included in this Quarterly Report on Form 10-Q for additional information.

Previous wording

Cash Flows for the Three Months Ended March 31, 2025

Current wording

Cash Flows for the Six Months Ended June 30, 2025

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2025 was approximately $162,006,000, which consisted primarily of cash received from net premiums written, and reinsurance recoveries of approximately $30,707,000 less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Net cash provided by investing activities of $66,271,000 was primarily due to the proceeds from calls, repayments and maturities of fixed-maturity securities of $81,211,000, the proceeds from sales of fixed-maturity and equity securities of $12,152,000, and the proceeds from the sale of real estate property of $824,000, offset by the purchases of fixed-maturity and equity securities of $24,327,000, the purchases of real estate investments of $1,857,000, and the purchases of property and equipment of $1,732,000. Net cash used in financing activities totaled $6,248,000, which was primarily due to $4,306,000 of cash dividend payments, net repayment of our revolving credit facility of $2,000,000, $639,000 of share repurchases, and repayments of long-term debt of $133,000, offset by net contribution from noncontrolling interests of $830,000.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2025 was approximately $307,005,000, which consisted primarily of cash received from net premiums written, and reinsurance recoveries of approximately $59,359,000 less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Net cash provided by investing activities of $120,019,000 was primarily due to the proceeds from calls, repayments and maturities of available-for-sale fixed-maturity securities of $263,643,000, the proceeds from sales of available-for-sale fixed-maturity and equity securities of $24,980,000, partially offset by the purchases of available-for-sale fixed-maturity and equity securities of $159,875,000, and purchases of real estate investments of $8,862,000. Net cash used in financing activities totaled $12,268,000, which was primarily due to $8,924,000 of cash dividend payments, net repayment of our revolving credit facility of $4,000,000, an induced debt conversion payment of $1,125,000, and $687,000 of share repurchases, partially offset by net contribution from noncontrolling interests of $2,736,000.

Previous wording

Cash Flows for the Three Months Ended March 31, 2024

Current wording

Cash Flows for the Six Months Ended June 30, 2024

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2024 was approximately $181,989,000, which consisted primarily of cash received from net premiums written, and reinsurance recoveries of approximately $19,151,000 less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Net cash used in investing activities of $4,872,000 was primarily due to the purchases of fixed-maturity and equity securities of $180,015,000 and purchases of real estate investments of $5,244,000, offset by the proceeds from calls, repayments and maturities of fixed-maturity securities of $172,024,000 and the proceeds from sales of fixed-maturity and equity securities of $9,546,000. Net cash used in financing activities totaled $58,199,000, which was primarily due to the redemption of redeemable noncontrolling interests of $100,000,000, $3,993,000 of cash dividend payments, and cash dividends paid to redeemable noncontrolling interest of $2,923,000, offset by $50,000,000 of net borrowing under the line of credit agreement.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2024 was approximately $152,985,000, which consisted primarily of cash received from net premiums written, and reinsurance recoveries of approximately $49,334,000 less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Net cash used in investing activities of $179,433,000 was primarily due to the purchases of available-for-sale fixed-maturity and equity securities of $506,438,000, the purchases of property and equipment of $2,039,000, and the purchases of real estate investments of $9,909,000, offset by the proceeds from calls, repayments and maturities of available-for-sale fixed-maturity securities of $323,568,000, the proceeds from sales of available-for-sale fixed-maturity and equity securities of $14,199,000, and distributions received from limited partnership investments of $2,292,000. Net cash used in financing activities totaled $64,174,000, which was primarily due to the redemption of redeemable noncontrolling interests of $100,000,000, $8,165,000 of cash dividend payments, cash dividends paid to redeemable noncontrolling interests of $2,923,000, $1,037,000 of share repurchases, and redemption of promissory notes of $466,000, offset by the proceeds from borrowing under the line of credit agreement of $48,000,000 and net contribution from noncontrolling interests of $864,000.

Previous wording

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

Current wording

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

Previous wording

At March 31, 2025, we had $708,087,000 of fixed-maturity and equity investments, which are carried at fair value. Changes in the general interest rate environment affect the returns available on new fixed-maturity investments. While a rising interest rate environment enhances the returns available on new investments, it reduces the market value of existing fixed-maturity investments and thus the availability of gains on disposition. A decline in interest rates reduces the returns available on new fixed-maturity investments but increases the market value of existing fixed-maturity investments, creating the opportunity for realized investment gains on disposition.

Current wording

As of June 30, 2025, we had $650,828,000 of available-for-sale fixed-maturity and equity investments, which are carried at fair value. Changes in the general interest rate environment affect the returns available on new available-for-sale fixed-maturity investments. While a rising interest rate environment enhances the returns available on new investments, it reduces the market value of existing available-for-sale fixed-maturity investments and thus the availability of gains on disposition. A decline in interest rates reduces the returns available on new available-for-sale fixed-maturity investments but increases the market value of existing available-for-sale fixed-maturity investments, creating the opportunity for realized investment gains on disposition.

Previous wording

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

Current wording

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

Previous wording

The above and other accounting estimates and their related risks that we consider to be our critical accounting estimates are more fully described in our Annual Report on Form 10-K, which we filed with the SEC on February 28, 2025. For the three months ended March 31, 2025, there have been no other material changes with respect to any of our critical accounting policies.

Current wording

Our accounting policies and estimates and their related risks that we consider to be critical are more fully described in our 2024 Annual Report. During the six months ended June 30, 2025, there were no other material changes with respect to any of our critical accounting policies and estimates.

Previous wording

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

Current wording

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

Previous wording

The IBNR represents our estimate of the ultimate cost of all claims that have occurred but have not been reported to us, and in some cases may not yet be known to the insured, and future development of reported claims. Estimating the IBNR component of our Reserves involves considerable judgment on the part of management. At March 31, 2025, $715,819,000 of the total $798,146,000 we have reserved for losses and loss adjustment expenses is attributable to our estimate of IBNR. The remaining $82,327,000 relates to known cases which have been reported but not yet fully settled in which case we have established a reserve based on currently available information and our best estimate of the cost to settle each claim. At March 31, 2025, $76,962,000 of the $82,327,000 in reserves for known cases relates to claims incurred during prior years.

Current wording

The IBNR represents our estimate of the ultimate cost of all claims that have occurred but have not been reported to us, and in some cases may not yet be known to the insured, and future development of reported claims. Estimating the IBNR component of our Reserves involves considerable judgment on the part of management. As of June 30, 2025, $616,225,000 of the total $696,892,000 of Reserves is attributable to our estimate of IBNR. The remaining $80,667,000 relates to known cases which have been reported but not yet fully settled and represents our best estimate of the cost to settle such claims. As of June 30, 2025, $72,941,000 of the $80,667,000 in reserves for known cases relates to claims incurred during prior years.

Previous wording

Our Reserves decreased from $845,900,000 at December 31, 2024 to $798,146,000 at March 31, 2025. The $47,754,000 decrease is comprised of reductions in our catastrophe Reserves of $56,785,000 primarily specific to Hurricane Ian, Hurricane Helene as well as Hurricane Milton, and reductions in our non-catastrophe Reserves of $23,808,000 for 2024 and $13,357,000 for 2023 and prior loss years, offset by $46,196,000 in reserves established for 2025 loss year. The Reserves established for 2025 claims are primarily driven by an allowance for those claims that have been incurred but not reported to the company as of March 31, 2025. The decrease of $93,950,000 specific to our 2024 and prior loss-years reserves is due to settlement of claims related to those loss years.

Current wording

Our Reserves decreased from $845,900,000 as of December 31, 2024 to $696,892,000 as of June 30, 2025. The $149,008,000 decrease is comprised of (i) reductions in our catastrophe Reserves of $174,210,000 primarily related to Hurricane Ian, Hurricane Helene, and Hurricane Milton; (ii) reductions in our non-catastrophe Reserves of $35,052,000 for 2024 and $27,343,000 for 2023 and prior loss years; and (iii) partially offset by $87,597,000 in reserves established for the 2025 loss year. The Reserves established for 2025 claims are primarily driven by IBNR as of June 30, 2025. The decrease of $236,605,000 related to our 2024 and prior loss-years reserves is due to settlement of such claims as well as a favorable change in estimated losses from Hurricane Milton.