# HCI Group, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [HCI Group, Inc.](/companies/hci.md) (CIK 1400810)
- Form: 10-Q
- Filed: 2025-05-09
- Accepted by EDGAR: May 9, 2025, 16:00 ET
- Period: 2025-03-31
- Accession: 0000950170-25-067975
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1400810/000095017025067975/hci-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1400810/000095017025067975/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $216.4m | us-gaap:Revenues |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $26.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $69.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $5.35 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $6.47 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 12,785,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $162.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $1.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2025-01-01 to 2025-03-31 | $639.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2025-03-31 | $754.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2025-03-31 | $2.31bn | us-gaap:Assets |
| Total liabilities | at 2025-03-31 | $1.76bn | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $522.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 35,482 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 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.*

### 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 company with operations in property and casualty insurance, information technology services, insurance management, real estate and reinsurance. We utilize innovative technology to promote efficiency, refine risk assessment and enhance experiences for clients throughout the insurance process. We manage our operations in the following organizational segments, based on managerial emphasis and evaluation of financial and operating performances:

a) Insurance Operations

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

b) Exzeo Group

- *Insurance solutions*
- *Information technology*
- *Reinsurance brokerage services*

c) Reciprocal Exchange Operations

d) Real Estate Operations

e) Other Operations

- *Attorney-in-fact services*
- *Holding company operations*

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.

### Insurance Operations

### Property and Casualty Insurance

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.

### 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, 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.

### Exzeo Group

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.

### Insurance Solutions

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.

### Information Technology

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, *HarmonyTM*, a next generation policy administration platform under development, and *ClaimColonyTM*, an application that provides intelligent automation of insurance claims and other business processes.

### Reinsurance Brokerage Services

Through our subsidiary Dark Horse, we provide expert reinsurance brokerage services to help insurance companies manage risk by acting as an intermediary between the insurer client and reinsurers. We design tailored reinsurance solutions by assessing our insurer client’s risk portfolio.

### Reciprocal Exchange Operations

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.

A reciprocal insurance exchange is a policyholder-owned entity where members, known as subscribers, gain ownership by purchasing an insurance policy. These subscribers collectively assume one another’s risks by exchanging insurance contracts, effectively acting as both insurers and insureds. The exchange’s operations are managed by an attorney-in-fact (“AIF”) company, which oversees general administration, marketing, underwriting, accounting, policy administration, claims adjusting, and information technology.

### 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, undeveloped land in Tampa and land under development in Haines City, Florida.

### 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 April 11, 2025, we entered into an agreement with a holder of our 4.75% Convertible Senior Notes, whereby the noteholder converted $61,761,000 in aggregate principal amount in exchange for 783,061 shares of HCI’s common stock and approximately $1,125,000 in cash. The transaction was accounted for as an induced conversion. As such, we recognized induced conversion expense of $1,125,000, representing the excess of the fair value of the total consideration transferred over the fair value of the common stock issued.

On April 23, 2025, our Board of Directors declared a quarterly dividend of $0.40 per common share. The dividends are payable on June 20, 2025 to stockholders of record on May 16, 2025.

### RESULTS OF OPERATIONS

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):

| Revenue | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Gross premiums earned | $300,383 | $256,644 |
| Premiums ceded | (99,635) | (68,106) |
| Net premiums earned | 200,748 | 188,538 |
| Net investment income | 13,751 | 14,067 |
| Net realized investment gains | 1,167 | — |
| Net unrealized investment (losses) gains | (1,906) | 2,635 |
| Policy fee income | 2,229 | 1,019 |
| Other income | 444 | 355 |
| Total revenue | 216,433 | 206,614 |
| **Expenses** |  |  |
| Losses and loss adjustment expenses | 59,291 | 79,922 |
| Policy acquisition and other underwriting expenses | 27,287 | 22,139 |
| General and administrative personnel expenses | 20,483 | 16,274 |
| Interest expense | 3,384 | 3,149 |
| Other operating expenses | 5,649 | 7,700 |
| Total expenses | 116,094 | 129,184 |
| Income before income taxes | 100,339 | 77,430 |
| Income tax expense | 26,109 | 20,474 |
| Net income | 74,230 | 56,956 |
| Net income attributable to noncontrolling interests | (4,546) | (9,345) |
| Net income after noncontrolling interests | $69,684 | $47,611 |
| **Ratios to Net Premiums Earned:** |  |  |
| Loss Ratio | 29.54% | 42.39% |
| Expense Ratio (excluding interest expense) | 26.61% | 24.46% |
| Combined Ratio (excluding interest expense) | 56.15% | 66.85% |
| **Ratios to Gross Premiums Earned:** |  |  |
| Loss Ratio | 19.74% | 31.14% |
| Expense Ratio (excluding interest expense) | 17.78% | 17.97% |
| Combined Ratio (excluding interest expense) | 37.52% | 49.11% |
| **Earnings Per Share Data:** |  |  |
| Basic | $6.47 | $4.76 |
| Diluted | $5.35 | $3.81 |

### Comparison of the Three Months Ended March 31, 2025 to the Three Months Ended March 31, 2024

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 .

### Revenue

*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.

*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.

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.

*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.

*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.

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):

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Net Premiums Written | $189,611 | $186,880 |
| Decrease in Unearned Premiums | 11,137 | 1,658 |
| Net Premiums Earned | $200,748 | $188,538 |

*Net Investment Income* for the three months ended March 31, 2025 and 2024 was approximately $13,751,000 and $14,067,000, respectively. The $316,000 decrease was primarily attributable to a $1,175,000 decrease in income from real estate investments, a $946,000 decrease in interest income from cash and cash equivalents, and a $821,000 decrease in income from limited partnership investments, offset by an increase of $2,687,000 in interest income from available-for-sale fixed-maturity securities. 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 Gains* for the three months ended March 31, 2025 were approximately $1,167,000 as opposed to $0 for the three months ended March 31, 2024. The increase was primarily attributable to net realized gains of approximately $1,115,000 from sales of equity securities during the three months ended March 31, 2025 as opposed to $0 from sales of these securities during the corresponding period in 2024.

*Net Unrealized Investment Losses* for 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.

### Expenses

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.”

*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.

*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

*Interest Expense* for the three months ended March 31, 2025 and 2024 was approximately $3,384,000 and $3,149,000, respectively. The increase was primarily attributable to the accelerated amortization of debt issuance costs in connection with the planned redemption of our 4.75% Convertible Senior Notes on June 5, 2025.

*Income Tax Expense* for the three months ended March 31, 2025 and 2024 was approximately $26,109,000 and $20,474,000, respectively, for state, federal, and foreign income taxes, resulting in effective tax rates of 26.0% and 26.4%, respectively.

#### Ratios:

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.

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.

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.

### 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 March 31, 2025:

|  | Maturity Date | Payment Due Date |
| --- | --- | --- |
| 4.75% Convertible Senior Notes\* | June 2042 | June 1 and December 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 |
| Revolving credit facility | Through November 2028 | January 1, April 1, July 1, October 1 |

\* All of the outstanding Notes are scheduled to be redeemed on June 5, 2025. Noteholders are entitled to convert their notes into common stock until the end of the day on June 4, 2025.

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 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.

### 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.

### Sources and Uses of Cash

#### Cash Flows for the Three Months Ended March 31, 2025

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.

#### Cash Flows for the Three Months Ended March 31, 2024

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.

### 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 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.

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 March 31, 2025, 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 22 -- “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 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.

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.

Based on all information known to us, we consider our Reserves at March 31, 2025 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.

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.

### 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, 4,886 characters.

Our investment portfolio at March 31, 2025 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 March 31, 2025 (dollar 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 | $620,525 | $(32,336) | -4.95% |
| 200 basis point increase | 631,296 | (21,565) | -3.30% |
| 100 basis point increase | 642,074 | (10,787) | -1.65% |
| 100 basis point decrease | 663,655 | 10,794 | 1.65% |
| 200 basis point decrease | 674,457 | 21,596 | 3.31% |
| 300 basis point decrease | 685,266 | 32,405 | 4.96% |

#### 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 March 31, 2025 (dollar amounts in thousands):

| Comparable Rating | Cost or Amortized Cost | % of Total Amortized Cost | Estimated Fair Value | % of Total Estimated Fair Value |
| --- | ---: | ---: | ---: | ---: |
| AA+, AA, AA- | 626,923 | 96 | 628,855 | 96 |
| A+, A, A- | 14,645 | 2 | 14,548 | 2 |
| BBB+, BBB, BBB- | 9,503 | 2 | 9,458 | 2 |
| Total | $651,071 | 100 | $652,861 | 100 |

#### Equity Price Risk

Our equity investment portfolio at March 31, 2025 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 March 31, 2025 (dollar amounts in thousands):

| Stocks by sector: | Estimated Fair Value | % of Total Estimated Fair Value |
| --- | ---: | ---: |
| Financial | $5,546 | 10 |
| Consumer | 6,429 | 12 |
| Communications | 2,922 | 5 |
| Technology | 2,884 | 5 |
| Other (1) | 2,070 | 4 |
|  | 19,851 | 36 |
| Mutual funds and exchange-traded funds by type: |  |  |
| Debt | 28,816 | 52 |
| Equity | 6,513 | 12 |
| Alternative | 46 | — |
|  | 35,375 | 64 |
| Total | $55,226 | 100 |

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

#### Foreign Currency Exchange Risk

At March 31, 2025, we did not have any material exposure to foreign currency related risk.

## Controls and procedures

As filed, 1,291 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 March 31, 2025 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, 184 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 February 28, 2025.

Filed May 9, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-067975. Last ingested by Listed: Oct 27, 2026, 16:12 ET. No prices; not investment advice.