HCI Group signals book value per share target of $80 following Exzeo IPO and Citizens policy assumption

Earnings Call Insights: HCI Group, Inc. (HCI) Q3 2025

MANAGEMENT VIEW

* Karin Coleman, President of Homeowners Choice & TyTap, COO and Director, reported "another quarter of strong financial results, reflecting our continued focus on disciplined execution, profitable growth and delivering value for our shareholders." She highlighted earnings of $4.90 per share, a net combined ratio of 64%, shareholders' equity of $821 million, book value per share up more than 50% year-to-date to $63, and a 22% loss ratio driven by favorable weather in Florida.
* Coleman described the real estate division's full leasing of the Tampa campus and acquisition of a new complex in Pinellas County, as well as Exzeo's addition of a fifth, non-HCI-controlled carrier to its platform.
* She announced the assumption of over 47,000 policies from Citizens in October, representing about $175 million of in-force premium, and noted the company does not plan to participate in the December assumption. Coleman also mentioned a new credit facility with Fifth Third Bank that "will significantly increase the amount of credit available to HCI."
* Mark Harmsworth, Chief Financial Officer, stated: "Pretax income for the third quarter was just over $90 million. And as Karin mentioned, diluted earnings per share were $4.90." He explained the loss ratio was 22%, the combined ratio was 64%, cash and investments are up by around $334 million year-to-date, long-term debt is $32 million, and book value per share is up more than 50% so far this year to more than $63.
* Harmsworth highlighted the new credit facility, which doubled in size from $75 million to $150 million and released all real estate collateral. He summarized, "Our operating ratios are all improving. The balance sheet continues to get stronger. We're generating superior returns, and we're poised for additional profitable growth with the recent Citizens assumptions."
* Paresh Patel, Founder, Chairman, President & CEO, emphasized the Exzeo IPO: "For the last 2 years, we have been choreographing a complicated sequence of steps to begin to unlock the true value of Exzeo, our organically grown internally developed insurance platform...with Exzeo's IPO earlier this week, we have completed the last step in this sequence." He noted HCI did not sell any Exzeo shares and remains a significant shareholder.
* Harmsworth reported on the Exzeo IPO: "Exzeo issued 8 million new shares at a price of $21 per share and the net proceeds were about $155 million...Book value will go up by about $125 million and book value per share will go up by about $10. By the end of this year, we expect HCI's book value to be over $1 billion and book value per share to be close to $80."

OUTLOOK

* Management indicated there are "lots of opportunities for both ahead of us for the year coming up, and we will grow, and we've got the capital to do that. So 2026 is going to be a good year," according to Harmsworth. Coleman stated, "we remain committed to delivering strong earnings compounding book value per share and generating attractive returns for our shareholders."
* The company does not plan to participate in the December Citizens assumption, citing a shift in focus and market dynamics.

FINANCIAL RESULTS

* Diluted earnings per share for Q3 were $4.90. Pretax income for the third quarter was just over $90 million. Year-to-date pretax income is $285 million, compared to $167 million for the first 9 months of last year.
* Loss ratio was 22%, and the combined ratio was 64%. Cash and investments are up by around $334 million year-to-date. Shareholder equity reached $821 million, and book value per share is more than $63.
* The new credit facility doubled to $150 million. The Exzeo IPO netted $155 million in proceeds, with an anticipated $125 million increase in consolidated book value and a $10 rise in book value per share.

Q&A

* Amir (Oppenheimer) asked for details on Citizens takeouts; Coleman responded, "we had a total of 47,000 policies that are in that October takeout," with distribution among subsidiaries clarified by Patel and Coleman.
* Amir (Oppenheimer) inquired about the use of cash and state expansion. Harmsworth answered, "we grew by 15% or so this year. We've got lots of opportunities for both ahead of us for the year coming up, and we will grow, and we've got the capital to do that."
* Mark Hughes (Truist) asked about holding company liquidity; Harmsworth replied, "total holding company liquidity at the end of September, I think, was about, about $285 million total."
* Hughes (Truist) questioned the decision to skip the December Citizens takeout. Patel responded, "I think Citizen is now shrinking...And it just seemed like a little bit of a distraction to still be saying you are -- keep going back to a well that is dried up that much."
* Hughes (Truist) asked about operating expenses; Harmsworth stated there was "nothing unusual in Q3. It's just a continuation...about operational leverage...revenue was up 13%. Operating expenses don't go up that much."
* Hughes (Truist) requested guidance on Exzeo minority interest impact; Harmsworth described the EPS impact as "less than $0.15" if the IPO had occurred at the start of Q3, and provided a rule of thumb for modeling.
* An analyst clarified the $175 million in-force premium from Citizens; Harmsworth confirmed it represents annualized premium, with about 60% as unearned premium in Q4.

SENTIMENT ANALYSIS

* Analysts focused on operational leverage, policy takeouts, Exzeo’s impact, and capital deployment, with a neutral and fact-seeking tone.
* Management conveyed confidence, repeatedly referencing strong capital position, operational leverage, and the significance of the Exzeo IPO, with phrases like "we remain committed" and "we are excited about Exzeo's future prospects."
* Compared to the previous quarter, both analysts and management maintained a confident and constructive tone, with management’s optimism bolstered by the Exzeo IPO and strong financial performance.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted to emphasize expected book value per share growth to $80 and surpassing $1 billion in book value, following the Exzeo IPO.
* Strategic focus moved from anticipated Exzeo IPO to its completion and the resulting financial impact.
* Analysts continued attention on Citizens policy assumptions and Exzeo’s influence, while management shifted emphasis to capital strength and future growth.
* Key metrics showed diluted earnings per share declined from $5.18 in Q2 to $4.90 in Q3, but book value per share increased from $58.55 to more than $63, with projections near $80 by year-end.
* Management’s confidence was reinforced by improved credit facility terms and continued operational leverage.

RISKS AND CONCERNS

* Management acknowledged that Citizens is shrinking and policy takeout opportunities are diminishing, with Patel noting, "Citizen is now shrinking... it just seemed like a little bit of a distraction to still be saying you are -- keep going back to a well that is dried up."
* The impact of Exzeo’s IPO on minority interest and diluted EPS was discussed, with Harmsworth providing modeling guidance for the anticipated slight reduction.
* Analysts probed policy takeout volumes, use of capital, and the sustainability of operating leverage, while management consistently pointed to capital strength and operational discipline as mitigation.

FINAL TAKEAWAY

HCI Group’s third quarter marked a pivotal transition with the Exzeo IPO, the successful assumption of 47,000 Citizens policies, and further strengthening of its balance sheet. Management projects book value per share to approach $80 by year-end, supported by a robust capital position, enhanced credit facility, and continued operational leverage. The company signaled a shift in strategy away from further Citizens takeouts, focusing instead on new opportunities for growth while maintaining strong underwriting discipline and shareholder returns.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/hci/earnings/transcripts]

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