HCI Group (HCI) Q2 FY26 earnings call: guidance and Q&A

What is the expected absolute value of ceded premiums for Q3?

Mark Harmsworth stated that ceded premiums for Q3 should be $96 million.

“Mark, the ceded premiums in the third quarter, what should they be absolute terms or a ratio? Mark Harmsworth: $96 million.”

asked by Mark Hughes · answered by Mark Harmsworth

How will the new reinsurance agreement impact filed rates in Florida, and are there any early estimates on blended pricing impact?

Paresh Patel explained that the impact on rates will take time to be incorporated into rate filings, likely late this year, and declined to provide early estimates. Karin Coleman added that HCI's rates have been stable, unlike some competitors who are reducing rates.

“Mark, that's got to take some time because now that this thing is in here, you go through the process of going through the actuaries, the market all up and then eventually it will go into the next rate filing that we do, which probably is going to be late this year.”

asked by Mark Hughes · answered by Paresh Patel

What drove the significant gross premiums written for Tailrow this quarter?

Mark Harmsworth attributed the increase primarily to renewals from a takeout in Q4 last year, with about $80 million of those policies coming up for renewal in Q2, plus some new business.

“So some of that significant part of that, some of that is new business, Mark, but there's also -- remember, we did the takeout in Q4 last year and about $80 million of that takeout was Tailrow. So they had some significant -- a lot of those policies came up for renewal, and they wrote those in Q2.”

asked by Mark Hughes · answered by Mark Harmsworth

How meaningful is the new GEICO relationship, and can it be sized up?

Paresh Patel stated it's too early to size the relationship but noted it accelerates the possibility of organic policy growth, especially given the potential for bundling home and auto.

“No, it's early days. We'll see how it goes. But I mean I think by Karin's comments, core and a new product we already doing fantastically well. The GEICO relationship accelerates that possibility.”

asked by Mark Hughes · answered by Paresh Patel

What are the financial and operational implications of the tokenized reinsurance pilot project?

Paresh Patel explained that the project is currently non-material financially but could create a new asset class for reinsurance procurement in the long term, complementing traditional and cat bond markets. It's a pioneering effort to open a third avenue for reinsurance.

“But in the short term, it is not material to our numbers. Having said that, in the long term, if this works, it could create a whole new asset class from a tokenization perspective, but from an HCI perspective, it opens up a whole new market through which to secure reinsurance, right?”

asked by Mark Hughes · answered by Paresh Patel

What is Core's strategy regarding the condo market, specifically the pivot from commercial to residential?

Karin Coleman explained that Core pivoted from commercial residential, which was softening, to an HO3 product for voluntary residential business. This new HO3 product is now averaging about $6 million per month in new business.

“So in core, when we entered the market was focused on the commercial residential, and we saw that, that was softening very quickly. And that's when we pivoted to now bring in an HO3 product into core -- and so we've been writing voluntary business there, averaging about per month, the last couple of months, about $6 million a month of new business in that HO3 product.”

asked by Michael Phillips · answered by Karin Coleman

How does management evaluate this quarter's performance and its implications for the next year, considering the good loss ratio and growth?

Paresh Patel emphasized that this is the sixth consecutive quarter with over $100 million in pretax income and strong ROE. He highlighted the strategy of preserving existing business, maneuvering opportunistically (like Core's pivot), and exploring long-term initiatives (tokenized reinsurance, California expansion).

“This is like the sixth quarter in a row that were over $100 million. The ROE is very strong. We are in a position where just keeping this sequence going quarter after quarter after quarter is having a huge impact in a positive way.”

asked by Ryan Tunis · answered by Paresh Patel

The share repurchase authorization has been used up; is there a new authorization planned?

Mark Harmsworth confirmed the $80 million authorization was completed in early July. He reiterated that management views the stock as a great investment but stated there is no new active authorization currently, though they will 'see the way the rest of the year plays out.'

“So my comments on my prepared remarks were that we completed that program was completed, I think, on the sixth or seventh of July. And in terms of where it goes from here... we don't have anything active right now, but we'll see the way the rest of the year plays out.”

asked by Ryan Tunis · answered by Mark Harmsworth