# HCI Group, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [HCI Group, Inc.](/companies/hci.md) (CIK 1400810)
- Form: 10-Q
- Filed: 2023-11-08
- Accepted by EDGAR: Nov 8, 2023, 16:05 ET
- Period: 2023-09-30
- Accession: 0000950170-23-061081
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1400810/000095017023061081/hci-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1400810/000095017023061081/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $131.6m | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $388.0m | us-gaap:Revenues |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $2.8m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $8.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $4.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $15.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $13.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $40.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $1.34 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $4.16 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $1.53 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $4.76 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 10,975,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 10,905,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $77.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $5.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $10.3m | us-gaap:PaymentsOfDividends |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $784.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $324.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-09-30 | $1.72bn | us-gaap:Assets |
| Total liabilities | at 2023-09-30 | $1.43bn | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $199.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 50,043 characters.

*You should read the following discussion under this Item 2 in conjunction with our consolidated financial statements and related notes and information included elsewhere in this quarterly report on Form 10-Q and in our Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 10, 2023. Unless the context requires otherwise, as used in this Form 10-Q, the terms “HCI,” “we,” “us,” “our,” “the Company,” “our company,” and similar references refer to HCI Group, Inc., a Florida corporation incorporated in 2006, and its subsidiaries. All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in whole dollars unless specified otherwise.*

### Forward-Looking Statements

***In addition to historical information, this quarterly report contains forward-looking statements as defined under federal securities laws. Such statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements. Typically, forward-looking statements can be identified by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions. The important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include but are not limited to the effects of governmental regulation; changes in insurance regulations; the frequency and extent of claims; uncertainties inherent in reserve estimates; catastrophic events; changes in the demand for, pricing of, availability of or collectability of reinsurance; restrictions on our ability to change premium rates; increased rate pressure on premiums; the severity and impact of a pandemic; and other risks and uncertainties detailed herein and from time to time in our SEC reports.***

### OVERVIEW – General

HCI Group, Inc. is a Florida-based InsurTech company with operations in property and casualty insurance, information technology services, insurance management, real estate and reinsurance. We manage our operations in the following organizational segments, based on managerial emphasis and evaluation of financial and operating performances:

a) HCPCI Insurance Operations

- *Property and casualty insurance*
- *Reinsurance and other auxiliary operations*

b) TypTap Group

- *Property and casualty insurance*
- *Information technology*

c) Real Estate Operations

d) Other Operations

- *Holding company operations*

For the three months ended September 30, 2023 and 2022, revenues from HCPCI insurance operations before intracompany elimination represented 64.4% and 60.5%, respectively, and revenues from TypTap Group represented 34.1% and 29.9%, respectively, of total revenues of all operating segments. For the nine months ended September 30, 2023 and 2022, revenues from HCPCI insurance operations before intracompany elimination represented 63.7% and 66.6%, respectively, and revenues from TypTap Group represented 34.6% and 28.7%, respectively, of total revenues of all operating segments. At September 30, 2023 and December 31, 2022, HCPCI insurance operations’ total assets represented 56.6% and 53.4%, respectively, and TypTap Group’s total assets represented 34.6% and 37.9%, respectively, of the combined assets of all operating segments. See Note 14 -- “Segment Information” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

### HCPCI Insurance Operations

### Property and Casualty Insurance

HCPCI has historically provided various forms of residential insurance products such as homeowners insurance, fire insurance, flood insurance and wind-only insurance. HCPCI is authorized to write residential property and casualty insurance in the states of Arkansas, California, Connecticut, Florida, Maryland, Massachusetts, New Jersey, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina and Texas. Currently, Florida is HCPCI’s primary market.

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

### Reinsurance and other auxiliary operations

We have a Bermuda domiciled wholly-owned reinsurance subsidiary, Claddaugh Casualty Insurance Company Ltd (“Claddaugh”). We selectively retain risk in Claddaugh, reducing the cost of third-party reinsurance. Claddaugh fully collateralizes its exposure to HCPCI and TypTap by depositing funds into a trust account. Claddaugh may mitigate a portion of its risk through retrocession contracts, however Claddaugh did not enter into any retrocession contracts for the 2023-2024 treaty year. Currently, Claddaugh does not provide reinsurance to non-affiliates. Other auxiliary operations also include claim adjusting and processing services.

### TypTap Group

TypTap Insurance Group, Inc. (“TTIG”), our majority-owned subsidiary, currently has four subsidiaries: TypTap Insurance Company (“TypTap”), TypTap Management Company, Exzeo USA, Inc., and Cypress Tech Development Company which also owns Exzeo Software Private Limited, a subsidiary domiciled in India. TTIG is primarily engaged in the property and casualty insurance business and is currently using internally developed technology to collect and analyze claims and other supplemental data to generate savings and efficiency for its insurance operations.

### Property and Casualty Insurance

TypTap, TTIG’s insurance subsidiary, has been the primary source of our organic growth in gross written premium since 2016. TypTap’s policies in force have increased from 6,721 in January 2018 to 89,831 at September 30, 2023. TypTap has been successful in using internally developed proprietary technology to underwrite, select and write policies efficiently. As of November 1, 2023, TypTap has been approved to offer homeowners coverage in 30 states outside of Florida.

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

### Information Technology

Our information technology operations include a team of experienced software developers with extensive knowledge in designing and creating web-based applications. The operations, which are located in Tampa, Florida and Noida, India, are focused on developing cloud-based, innovative products and services that support in-house operations as well as our third-party relationships with our agency partners and claim vendors. These products include *SAMSTM, HarmonyTM, AtlasViewer® and ClaimColonyTM.*

### Real Estate Operations

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

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

### Other Operations

### Holding company operations

Activities of our holding company, HCI Group, Inc., plus other companies that do not meet the quantitative and qualitative thresholds for a reportable segment comprise the operations of this segment.

### Recent Events

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

On November 3, 2023, we executed a Second Amended and Restated Credit Agreement with Fifth Third Bank, National Association. The amendment extends the term of the line of credit until November 3, 2028 and increases the borrowing capacity to $75,000,000, $50,000,000 of which may be used to refinance our redeemable noncontrolling interest on or prior to March 31, 2025. The maximum debt-to-capital ratio is set at 67.5%.

### RESULTS OF OPERATIONS

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

| Revenue | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Gross premiums earned | $188,308 | $181,713 | $550,322 | $541,762 |
| Premiums ceded | (66,152) | (74,741) | (203,051) | (184,108) |
| Net premiums earned | 122,156 | 106,972 | 347,271 | 357,654 |
| Net investment income | 9,384 | 18,530 | 35,893 | 25,082 |
| Net realized investment losses | (207) | (884) | (1,586) | (1,204) |
| Net unrealized investment gains (losses) | (1,041) | (347) | 385 | (8,157) |
| Policy fee income | 1,092 | 1,071 | 3,651 | 3,180 |
| Other income | 260 | 1,312 | 2,386 | 3,065 |
| Total revenue | 131,644 | 126,654 | 388,000 | 379,620 |
| **Expenses** |  |  |  |  |
| Losses and loss adjustment expenses | 66,726 | 139,794 | 189,181 | 299,328 |
| Policy acquisition and other underwriting expenses | 22,768 | 24,678 | 68,106 | 80,949 |
| General and administrative personnel expenses | 13,864 | 15,848 | 41,638 | 45,183 |
| Interest expense | 2,827 | 2,813 | 8,295 | 4,929 |
| Other operating expenses | 5,371 | 7,123 | 17,290 | 20,392 |
| Total expenses | 111,556 | 190,256 | 324,510 | 450,781 |
| Income (loss) before income taxes | 20,088 | (63,602) | 63,490 | (71,161) |
| Income tax expense (benefit) | 4,419 | (12,099) | 15,146 | (13,907) |
| Net income (loss) | 15,669 | (51,503) | 48,344 | (57,254) |
| Net income attributable to noncontrolling interests | (2,512) | 544 | (7,406) | (2,783) |
| Net income (loss) after noncontrolling interests | $13,157 | $(50,959) | $40,938 | $(60,037) |
| **Ratios to Net Premiums Earned:** |  |  |  |  |
| Loss Ratio | 54.62% | 130.68% | 54.48% | 83.69% |
| Expense Ratio | 36.70% | 47.18% | 38.97% | 42.35% |
| Combined Ratio | 91.32% | 177.86% | 93.45% | 126.04% |
| **Ratios to Gross Premiums Earned:** |  |  |  |  |
| Loss Ratio | 35.43% | 76.93% | 34.38% | 55.25% |
| Expense Ratio | 23.81% | 27.77% | 24.59% | 27.96% |
| Combined Ratio | 59.24% | 104.70% | 58.97% | 83.21% |
| **Earnings (Loss) Per Share Data:** |  |  |  |  |
| Basic | $1.53 | $(5.66) | $4.76 | $(6.26) |
| Diluted | $1.34 | $(5.66) | $4.16 | $(6.26) |

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

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

### Revenue

*Gross Premiums Earned* on a consolidated basis for the three months ended September 30, 2023 and 2022 were approximately $188,308,000 and $181,713,000, respectively. The $6,595,000 increase was primarily attributable to the effect of premium rate increases, offset in part by a reduction in the number of policies in force. HCPCI gross premiums earned were $102,075,000 for the three months ended September 30, 2023 compared with $98,985,000 for the three months ended September 30, 2022. TypTap’s gross premiums earned were $86,233,000 for the three months ended September 30, 2023 compared with $82,728,000 for the same comparative period in 2022.

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

Our premiums ceded represent costs of reinsurance to cover losses from catastrophes that exceed the retention levels defined by our catastrophe excess of loss reinsurance contracts or to assume a proportional share of losses as defined in a quota share agreement. The rates we pay for reinsurance are based primarily on policy exposures reflected in gross premiums earned. Reinsurance costs can be decreased by a reduction in premiums ceded attributable to retrospective provisions under reinsurance contracts. For the three months ended September 30, 2023, premiums ceded included a decrease of $6,993,000 related to retrospective provisions compared with a decrease of $3,843,000 for the three months ended September 30, 2022. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.”

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

*Net Premiums Earned* for the three months ended September 30, 2023 and 2022 were approximately $122,156,000 and $106,972,000, respectively, and reflect the gross premiums earned less reinsurance costs as described above.

The following is a reconciliation of our total Net Premiums Written to Net Premiums Earned for the three months ended September 30, 2023 and 2022 (amounts in thousands):

|  | Three Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net Premiums Written | $132,113 | $116,440 |
| Increase in Unearned Premiums | (9,957) | (9,468) |
| Net Premiums Earned | $122,156 | $106,972 |

51

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

*Net Unrealized Investment Losses* for the three months ended September 30, 2023 and 2022 were approximately $1,041,000 and $347,000, respectively. The increase was primarily attributable to an overall deterioration in the equity market compared with the three months ended September 30, 2022.

### Expenses

Our consolidated *Losses and Loss Adjustment Expenses* amounted to approximately $66,726,000 and $139,794,000 for the three months ended September 30, 2023 and 2022, respectively. The losses and loss adjustment expenses of HCPCI Insurance Operations were $29,819,000 and $73,228,000 for the three months ended September 30, 2023 and 2022, respectively. The decrease was primarily attributable to a reduction in losses related to catastrophic events furthered by a lower number of policies in force and lower claims and litigation frequency. In addition, the third quarter of 2022 which included $42,346,000 of losses related to Hurricane Ian. Losses and loss adjustment expenses for TypTap were $37,324,000 compared with $62,153,000 for the same comparative period. The decrease was primarily attributable to lower incurred losses recorded for Hurricane Ian during the third quarter of 2023. Such losses were $3,850,000 compared with $22,251,000 during the corresponding period of 2022. Reductions in the amount of claims and litigation related to Florida policies also accounted for a portion of the decrease in loss and loss adjustment expenses. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”

*Policy Acquisition and Other Underwriting Expenses* for the three months ended September 30, 2023 and 2022 were approximately $22,768,000 and $24,678,000 on a consolidated basis, respectively, and primarily reflect the amortization of deferred acquisition costs such as commissions payable to agents for production and renewal of policies, commission and catastrophe allowance paid to United, and premium taxes. Policy acquisition expenses for HCPCI Insurance Operations were $10,894,000 for the three months ended September 30, 2023 compared with $12,081,000 for the three months ended September 30, 2022. The decrease in amortized costs was primarily due to a reduction of policies in force. TypTap Group policy acquisition expenses were $11,900,000 compared with $12,626,000 for the same comparative period, with the increase due to higher amortized costs attributable to the accelerated transition of United policies, offset by lower policy acquisition costs in Florida resulting from lower commissions.

*General and Administrative Personnel Expenses* for the three months ended September 30, 2023 and 2022 were approximately $13,864,000 and $15,848,000, respectively. Our general and administrative personnel expenses include salaries, wages, payroll taxes, stock-based compensation expenses, and employee benefit costs. Factors such as merit increases, changes in headcount, and periodic restricted stock grants, among others, cause fluctuations in this expense. In addition, our personnel expenses are decreased by the capitalization of payroll costs related to projects to develop software for internal use and the payroll costs associated with the processing and settlement of certain catastrophe claims which are recoverable from reinsurers under reinsurance contracts. The quarter-over-quarter decrease of $1,984,000 was primarily attributable to a decrease in stock-based compensation expense and an increase in recovered and capitalized payroll costs, offset by an adjustment to increase employee incentive bonuses, an increase in the headcount of temporary and full-time employees and merit increases for non-executive employees effective in late February 2023.

*Income Tax Expense* for the three months ended September 30, 2023 was approximately $4,419,000 for state, federal, and foreign income taxes compared with $12,099,000 of income tax benefit for the three months ended September 30, 2022, resulting in effective tax rates of 22.0% and 19.0%, respectively. The increase in the effective tax rate was primarily attributable to the increase in non-deductible compensation, partially offset by the release of valuation allowance established in 2022 during the third quarter of 2023.

#### Ratios:

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

The expense ratio applicable to the three months ended September 30, 2023 (defined as total expenses excluding losses and loss adjustment expenses related to net premiums earned) was 36.7% compared with 47.2% for the three months ended September 30, 2022. The decrease in our expense ratio was primarily attributable to the increase in net premiums earned, the decrease in policy acquisition, underwriting, personnel, and other operating expenses.

The combined ratio (total of all expenses in relation to net premiums earned) is the measure of overall underwriting profitability before other income. Our combined ratio for the three months ended September 30, 2023 was 91.3% compared with 177.9% for the three months ended September 30, 2022. The decrease in 2023 was attributable to the factors described above.

Due to the impact our reinsurance costs have on net premiums earned from period to period, our management believes the combined ratio measured to gross premiums earned is more relevant in assessing overall performance. The combined ratio to gross premiums earned for the three months ended September 30, 2023 was 59.2% compared with 104.7% for the three months ended September 30, 2022. The decrease in 2023 was primarily attributable to the increase in gross premiums earned, the decrease in losses and loss adjustment expenses, and the decrease in policy acquisition, underwriting, personnel, and other operating expenses.

### Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

Our results of operations for the nine months ended September 30, 2023 reflect net income of approximately $48,344,000 or $4.16 diluted earnings per share, compared with net loss of approximately $57,254,000 or $6.26 loss per share, for the nine months ended September 30, 2022. The period-over-period increase was primarily due to a $110,147,000 decrease in losses and loss adjustment expenses, a $18,972,000 net increase in income from our investment portfolio (consisting of net investment income and net realized and unrealized gains or losses), a $12,843,000 decrease in policy acquisition and other underwriting expenses, and a $6,647,000 decrease in personnel and other operating expenses, offset by a $18,943,000 increase in premiums ceded and a $3,366,000 increase in interest expense.

### Revenue

*Gross Premiums Earned* on a consolidated basis for the nine months ended September 30, 2023 and 2022 were approximately $550,322,000 and $541,762,000, respectively. The $8,560,000 increase was primarily attributable to the effect of premium rate increases, offset by a reduction in the number of policies in force. Gross premiums earned from the United insurance policies assumed were $7,163,000 for the nine months ended September 30, 2023 compared with $61,913,000 for the nine months ended September 30, 2022. HCPCI gross premiums earned were $291,406,000 for the nine months ended September 30, 2023 compared with $330,969,000 for the nine months ended September 30, 2022. TypTap’s gross premiums earned were $258,916,000 compared with $210,793,000 for the same comparative period in 2022.

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

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

*Net Premiums Written* for the nine months ended September 30, 2023 and 2022 totaled approximately $375,051,000 and $370,519,000, respectively. The increase in 2023 primarily resulted from the factors described earlier.

*Net Premiums Earned* for the nine months ended September 30, 2023 and 2022 were approximately $347,271,000 and $357,654,000, respectively, and reflect the gross premiums earned less reinsurance costs as described above.

The following is a reconciliation of our total Net Premiums Written to Net Premiums Earned for the nine months ended September 30, 2023 and 2022 (amounts in thousands):

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net Premiums Written | $375,051 | $370,519 |
| Increase in Unearned Premiums | (27,780) | (12,865) |
| Net Premiums Earned | $347,271 | $357,654 |

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

*Net Realized Investment Losses* for the nine months ended September 30, 2023 and 2022 were approximately $1,586,000 and $1,204,000, respectively. The increase was primarily attributable to net realized losses of approximately $1,539,000 from sales of fixed-maturity and equity securities during the nine months ended September 30, 2023 compared with net realized losses of approximately $1,413,000 from sales of these securities during the corresponding period in 2022. In addition, there was a net realized gain of approximately $209,000 from sales of other investments during the corresponding period in 2022.

*Net Unrealized Investment Gains* for the nine months ended September 30, 2023 were approximately $385,000 compared with approximately $8,157,000 of net unrealized investment losses for the nine months ended

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

### Expenses

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

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

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

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

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

#### Ratios:

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

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

The combined ratio is the measure of overall underwriting profitability before other income. Our combined ratio for the nine months ended September 30, 2023 was 93.5% compared with 126.0% for the nine months ended September 30, 2022. The decrease in 2023 was attributable to the factors described above.

Due to the impact our reinsurance costs have on net premiums earned from period to period, our management believes the combined ratio measured to gross premiums earned is more relevant in assessing overall performance. The combined ratio to gross premiums earned for the nine months ended September 30, 2023 was 59.0% compared with 83.2% for the nine months ended September 30, 2022. The decrease in 2023 was primarily attributable to the decrease in losses and loss adjustment expenses and the decrease in policy acquisition, underwriting, personnel, and other operating expenses, offset in part by the increase in interest expense.

### Seasonality of Our Business

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

### LIQUIDITY AND CAPITAL RESOURCES

Throughout our history, our liquidity requirements have been met through issuances of our common and preferred stock, debt offerings and funds from operations. We expect our future liquidity requirements will be met by funds from operations, primarily the cash received by our insurance subsidiaries from premiums written and investment income. We may consider raising additional capital through debt and/or equity offerings to support our growth and future investment opportunities.

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

We believe that we maintain sufficient liquidity to pay claims and expenses, as well as to satisfy commitments in the event of unforeseen events such as reinsurer insolvencies, inadequate premium rates, or reserve deficiencies. We maintain a comprehensive reinsurance program at levels management considers adequate to diversify risk and safeguard our financial position.

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

### Revolving Credit Facility, Convertible Senior Notes, Promissory Notes, and Finance Leases

The following table summarizes the principal and interest payment obligations of our indebtedness at September 30, 2023:

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

\* At the option of the noteholders, we may be required to repurchase for cash all or any portion of the notes on June 1, 2027, June 1, 2032 or June 1, 2037.

\*\* At the option of the noteholders, we may be required to repurchase for cash all or any portion of the notes on March 1, 2027 or March 1, 2032.

\*\*\* There was no borrowing outstanding at September 30, 2023.

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

### Limited Partnership Investments

Our limited partnership investments consist of six private equity funds managed by their general partners. Two of these funds have unexpired capital commitments which are callable at the discretion of the fund’s general partner for funding new investments or expenses of the fund. Although capital commitments for the four remaining funds have expired, the general partners may request additional funds under certain circumstances. At September 30, 2023, there was an aggregate unfunded capital balance of $4,931,000. See *Limited Partnership Investments* under Note 5 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

### Real Estate Investment

Real estate has long been a significant component of our overall investment portfolio. It diversifies our portfolio and helps offset the volatility of other higher-risk assets. Thus, we may consider expanding our real estate investment portfolio should an opportunity arise.

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

### Sources and Uses of Cash

#### Cash Flows for the Nine Months Ended September 30, 2023

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

#### Cash Flows for the Nine Months Ended September 30, 2022

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

### Investments

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

At September 30, 2023, we had $458,616,000 of fixed-maturity and equity investments, which are carried at fair value. Changes in the general interest rate environment affect the returns available on new fixed-maturity investments. While a rising interest rate environment enhances the returns available on new investments, it reduces the market value of existing fixed-maturity investments and thus the availability of gains on disposition. A decline in interest rates reduces the returns available on new fixed-maturity investments but increases the market value of existing fixed-maturity investments, creating the opportunity for realized investment gains on disposition.

In the future, we may alter our investment policy with regard to investments in federal, state and municipal obligations, preferred and common equity securities and real estate mortgages, as permitted by applicable law, including insurance regulations.

### OFF-BALANCE SHEET ARRANGEMENTS

As of September 30, 2023, we had unexpired capital commitments for limited partnerships in which we hold interests. Such commitments are not recognized in the consolidated financial statements but are required to be disclosed in the notes to the consolidated financial statements. See Note 21 -- “Commitments and Contingencies” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments to develop amounts reflected and disclosed in our consolidated financial statements. Material estimates that are particularly susceptible to significant change in the near term are related to our losses and loss adjustment expenses, which include amounts estimated for claims incurred but not yet reported. We base our estimates on various assumptions and actuarial data we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates.

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

### Reserves for Losses and Loss Adjustment Expenses

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

The IBNR represents our estimate of the ultimate cost of all claims that have occurred but have not been reported to us, and in some cases may not yet be known to the insured, and future development of reported claims. Estimating the IBNR component of our Reserves involves considerable judgment on the part of management. At September 30, 2023, $645,523,000 of the total $709,089,000 we have reserved for losses and loss adjustment expenses is attributable to our estimate of IBNR. The remaining $63,566,000 relates to known cases which have been reported but not yet fully settled in which case we have established a reserve based on currently available information and our best estimate of the cost to settle each claim. At September 30, 2023, $54,457,000 of the $63,566,000 in reserves for known cases relates to claims incurred during prior years.

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

Based on all information known to us, we consider our Reserves at September 30, 2023 to be adequate to cover our claims for losses that have occurred as of that date including losses yet to be reported to us. However, these estimates are continually reviewed by management as they are subject to significant variability and may be impacted by trends in claim severity and frequency or unusual exposures that have not yet been identified. As part of the process, we review historical data and consider various factors, including known and anticipated regulatory and legal developments, changes in social attitudes, inflation and economic conditions. As experience develops and other data becomes available, these estimates are revised, as required, resulting in increases or decreases to the existing unpaid losses and loss adjustment expenses. Adjustments are reflected in the results of operations in the period in which they are made, and the liabilities may deviate substantially from prior estimates.

### Economic Impact of Reinsurance Contracts with Retrospective Provisions

From time to time, our reinsurance contracts may include retrospective provisions that adjust premiums in the event losses are minimal or zero. In accordance with accounting principles generally accepted in the United States of America, we will recognize an asset in the period in which the absence of loss experience obligates the reinsurer to pay cash or other consideration under the contract. In the event that a loss arises, we will derecognize such asset in the period in which a loss arises. Such adjustments to the asset, which accrue throughout the contract term, will negatively impact our operating results when a catastrophic loss event occurs during the contract term.

For the three months ended September 30, 2023 and 2022, we accrued benefits of $6,993,000 and $3,843,000, respectively. For the nine months ended September 30, 2023 and 2022, we accrued benefits of $20,979,000 and $11,717,000, respectively. The accrual of benefits was recognized as a reduction in ceded premiums.

As of September 30, 2023, we had $37,296,000 of accrued benefits, the amount that would be charged to earnings in the event we experience a catastrophic loss that exceeds the coverage limit provided under such agreements.

We believe the credit risk associated with the collectability of these accrued benefits is minimal based on available information about the reinsurer’s financial position and the reinsurer’s demonstrated ability to comply with contract terms.

The above and other accounting estimates and their related risks that we consider to be our critical accounting estimates are more fully described in our Annual Report on Form 10-K, which we filed with the SEC on March 10, 2023. For the nine months ended September 30, 2023, there have been no other material changes with respect to any of our critical accounting policies.

### RECENT ACCOUNTING PRONOUNCEMENTS

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

## Market risk

As filed, 4,933 characters.

Our investment portfolio at September 30, 2023 included fixed-maturity and equity securities, the purposes of which are not for speculation. Our main objective is to maximize after-tax investment income and maintain sufficient liquidity to meet our obligations while minimizing market risk, which is the potential economic loss from adverse fluctuations in securities prices. We consider many factors including credit ratings, investment concentrations, regulatory requirements, anticipated fluctuation of interest rates, durations and market conditions in developing investment strategies. Our investment securities are managed primarily by outside investment advisors and are overseen by the investment committee appointed by our Board of Directors. From time to time, our investment committee may decide to invest in low-risk assets such as U.S. government bonds.

Our investment portfolio is exposed to interest rate risk, credit risk and equity price risk. Fiscal and economic uncertainties caused by any government action or inaction may exacerbate these risks and potentially have adverse impacts on the value of our investment portfolio.

We classify our fixed-maturity securities as available-for-sale and report any unrealized gains or losses, net of deferred income taxes, as a component of other comprehensive income within our stockholders’ equity. As such, any material temporary changes in their fair value can adversely impact the carrying value of our stockholders’ equity. In addition, we recognize any unrealized gains or losses related to our equity securities in our statement of income. As a result, our results of operations can be materially affected by the volatility in the equity market.

#### Interest Rate Risk

Our fixed-maturity securities are sensitive to potential losses resulting from unfavorable changes in interest rates. We manage the risk by analyzing anticipated movement in interest rates and considering our future capital needs.

The following table illustrates the impact of hypothetical changes in interest rates to the fair value of our fixed-maturity securities at September 30, 2023 (amounts in thousands):

| Hypothetical Change in Interest Rates | Estimated Fair Value | Change in Estimated Fair Value | Percentage Increase (Decrease) in Estimated Fair Value |
| --- | ---: | ---: | ---: |
| 300 basis point increase | $406,801 | $(11,875) | -2.84% |
| 200 basis point increase | 410,759 | (7,917) | -1.89% |
| 100 basis point increase | 414,717 | (3,959) | -0.95% |
| 100 basis point decrease | 422,634 | 3,958 | 0.95% |
| 200 basis point decrease | 426,593 | 7,917 | 1.89% |
| 300 basis point decrease | 430,553 | 11,877 | 2.84% |

#### Credit Risk

Credit risk can expose us to potential losses arising principally from adverse changes in the financial condition of the issuers of our fixed-maturity securities. We mitigate the risk by investing in fixed-maturity securities that are generally investment grade, by diversifying our investment portfolio to avoid concentrations in any single issuer or business sector, and by continually monitoring each individual security for declines in credit quality. While we emphasize credit quality in our investment selection process, significant downturns in the markets or general economy may impact the credit quality of our portfolio.

The following table presents the composition of our fixed-maturity securities, by rating, at September 30, 2023 (amounts in thousands):

| Comparable Rating | Cost or Amortized Cost | % of Total Amortized Cost | Estimated Fair Value | % of Total Estimated Fair Value |
| --- | ---: | ---: | ---: | ---: |
| AAA | $40,592 | 10 | $40,566 | 10 |
| AA+, AA, AA- | 360,750 | 84 | 353,762 | 84 |
| A+, A, A- | 12,615 | 3 | 12,032 | 3 |
| BBB+, BBB, BBB- | 11,110 | 3 | 10,676 | 3 |
| B+, B, B- | 1,996 | — | 1,640 | — |
| Total | $427,063 | 100 | $418,676 | 100 |

#### Equity Price Risk

Our equity investment portfolio at September 30, 2023 included common stocks, perpetual preferred stocks, mutual funds and exchange-traded funds. We may incur potential losses due to adverse changes in equity security prices. We manage the risk primarily through industry and issuer diversification and asset mix.

The following table illustrates the composition of our equity securities at September 30, 2023 (amounts in thousands):

| Stocks by sector: | Estimated Fair Value | % of Total Estimated Fair Value |
| --- | ---: | ---: |
| Consumer | $6,462 | 16 |
| Financial | 3,985 | 10 |
| Technology | 2,968 | 7 |
| Other (1) | 2,376 | 7 |
|  | 15,791 | 40 |
| Mutual funds and exchange-traded funds by type: |  |  |
| Debt | 17,891 | 45 |
| Equity | 6,135 | 15 |
| Alternative | 123 | — |
|  | 24,149 | 60 |
| Total | $39,940 | 100 |

(1) Represents an aggregate of less than 5% sectors.

#### Foreign Currency Exchange Risk

At September 30, 2023, we did not have any material exposure to foreign currency related risk.

## Controls and procedures

As filed, 1,295 characters.

#### Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial and accounting officer), we have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, and, based on this evaluation, our chief executive officer and our chief financial officer have concluded that these disclosure controls and procedures are effective.

#### Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

#### Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, implementation of possible controls and procedures depends on management’s judgment in evaluating their benefits relative to costs.

## Risk factors

As filed, 181 characters.

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

Filed Nov 8, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-061081. Last ingested by Listed: Nov 4, 2026, 17:32 ET. No prices; not investment advice.