UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form10-Q

☒
☑		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2022

☐
☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number~~001-34126~~

001-34126

HCI Group, Inc.

(Exact name of ~~Registrant~~registrant as specified in its charter)

Florida

20-5961396

(State of

Incorporation)

(IRS Employer

Identification No.)

~~5300 West Cypress Street, Suite 100~~

3802 Coconut Palm Drive
Tampa, FL ~~33607~~

33619
(Address, including zip code, of principal executive offices)

~~(813)849-9500~~

(813) 849-9500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Shares, no par value	HCI	New York Stock Exchange

Indicate by check mark whether the ~~Registrant~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the ~~Registrant~~registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ ☑ No ☐

Indicate by check mark whether the ~~Registrant~~registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the ~~Registrant~~registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the ~~Registrant~~registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒☑

The aggregate number of shares of the ~~Registrant’s Common Stock,~~registrant’s common stock, no par value, outstanding on ~~October 26, 2017~~August 1, 2022 was ~~9,781,952.~~9,044,534.

HCI GROUP, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


			Page
			~~Page~~
	PART I – FINANCIAL INFORMATION
~~Item 1~~	~~Financial Statements~~
Item 1	Financial Statements
	Consolidated Balance Sheets: ~~September~~
	June 30, ~~2017~~2022 (unaudited) and December 31, ~~2016~~2021			1-2
	Consolidated Statements of Income:
	Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 (unaudited)			3
	Consolidated Statements of Comprehensive Income:
	Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 (unaudited)			4
	Consolidated Statements of Equity:
	Three and six months ended June 30, 2022 and 2021 (unaudited)		5-8
	Consolidated Statements of Cash Flows: ~~Nine~~
	Six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 (unaudited)			~~5-6~~	9-11
	~~Consolidated Statements of Stockholders’ Equity:~~ ~~Nine months ended September 30, 2017 and 2016 (unaudited)~~			~~7-8~~
	Notes to Consolidated Financial Statements (unaudited)			~~9-44~~
		12-47

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations			~~45-60~~
		48-61

Item 3	Quantitative and Qualitative Disclosures ~~about~~About Market Risk			~~61-62~~
		62-63

Item 4	Controls and Procedures			63	64


	PART II – OTHER INFORMATION

~~Item 1~~	~~Legal Proceedings~~			63

Item 1A1	~~Risk Factors~~Legal Proceedings			63
		65

Item 1A	Risk Factors		65

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds			~~64-65~~
		65-66
~~Item 3~~	~~Defaults upon Senior Securities~~			65

Item 3	Defaults Upon Senior Securities		66

Item 4	Mine Safety Disclosures			65
		66
~~Item 5~~	~~Other Information~~			65

Item 65	~~Exhibits~~Other Information			66
		67
~~Signatures~~
~~Certifications~~Item 6	Exhibits		68-75

Signatures			76

Certifications

PART I – FINANCIAL INFORMATION

Item 1 –Financial Statements

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollar amounts in thousands)

   September 30,
2017 December 31,
2016
   (Unaudited)
Assets

Fixed-maturity securities, available for sale, at fair value (amortized cost: $253,162 and $167,231, respectively)
   $ 256,102 $ 166,248
Equity securities, available for sale, at fair value (cost: $58,242 and $47,750, respectively)
   63,023 53,035
Equity securities, trading, at fair value (cost: $929 and $0, respectively)
   1,003 —
Limited partnership investments, at equity
   20,998 29,263
Investment in unconsolidated joint venture, at equity
   1,664 2,102
Real estate investments (Note 4 – Consolidated Variable Interest Entity)
   48,961 48,086


Total investments
   391,751 298,734
Cash and cash equivalents (Note 4 – Consolidated Variable Interest Entity)
   292,438 280,531
Accrued interest and dividends receivable
   2,241 1,654
Income taxes receivable
   24,081 2,811
Premiums receivable
   27,179 17,276
Prepaid reinsurance premiums
   28,352 24,554
Reinsurance recoverable:

Paid losses and loss adjustment expenses
   17 —
Unpaid losses and loss adjustment expenses
   213,729 —
Deferred policy acquisition costs
   21,150 16,639
Property and equipment, net
   12,356 11,374
Intangible assets, net
   4,498 4,899
Deferred income taxes, net
   —   250
Other assets (Note 4 – Consolidated Variable Interest Entity)
   11,461 11,342


Total assets
   $ 1,029,253 $ 670,064


   (continued)


	June 30,		December 31,
	2022		2021
	(Unaudited)
Assets
Fixed-maturity securities, available for sale, at fair value (amortized cost: $403,844 and $41,953, respectively and allowance for credit losses: $0 and $0, respectively)	$	398,571	$	42,583
Equity securities, at fair value (cost: $38,065 and $46,276, respectively)		35,719		51,740
Limited partnership investments		26,695		28,133
Investment in unconsolidated joint venture, at equity		858		363
Real estate investments		72,723		73,896
Total investments		534,566		196,715
Cash and cash equivalents		360,488		628,943
Restricted cash		2,600		2,400
Accrued interest and dividends receivable		1,421		353
Income taxes receivable		1,789		4,084
Premiums receivable, net (allowance: $3,935 and $1,750, respectively)		52,302		68,157
Prepaid reinsurance premiums		81,023		26,355
Reinsurance recoverable, net of allowance for credit losses:
Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)		11,134		11,985
Unpaid losses and loss adjustment expenses (allowance: $62 and $90, respectively)		42,348		64,665
Deferred policy acquisition costs		48,305		57,695
Property and equipment, net		17,244		14,232
Right-of-use assets - operating leases		1,861		2,204
Intangible assets, net		14,358		10,636
Funds withheld for assumed business		82,468		73,716
Other assets		28,796		14,717
Total assets	$	1,280,703	$	1,176,857

(continued)

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets ~~- continued~~– (Continued)

(Dollar amounts in thousands)


	June 30,			December 31,
	2022			2021
	(Unaudited)
Liabilities and Equity
Losses and loss adjustment expenses	$	238,824		$	237,165
Unearned premiums		370,140			366,744
Advance premiums		25,428			13,771
Reinsurance payable on paid losses and loss adjustment expenses		4,302			4,017
Ceded reinsurance premiums payable		24,641			19,318
Accrued expenses		17,093			15,453
Deferred income taxes, net		6,168			11,739
Revolving credit facility		0			15,000
Long-term debt		211,648			45,504
Lease liabilities - operating leases		1,824			2,203
Other liabilities		48,737			31,485
Total liabilities		948,805			762,399
Commitments and contingencies (Note 20)
Redeemable noncontrolling interest (Note 17)		91,963			89,955
Equity:
Common stock (0 par value, 40,000,000 shares authorized, 9,047,972 and 10,131,399 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively)		0			0
Additional paid-in capital		12,887			76,077
Retained income		229,621			246,790
Accumulated other comprehensive (loss) income, net of taxes		(3,760	)		498
Total stockholders’ equity		238,748			323,365
Noncontrolling interests		1,187			1,138
Total equity		239,935			324,503
Total liabilities, redeemable noncontrolling interest and equity	$	1,280,703		$	1,176,857

   September 30,
2017    December 31,
2016
   (Unaudited)
Liabilities and Stockholders’ Equity

Losses and loss adjustment expenses
   $ 344,672    $ 70,492
Unearned premiums
   206,174    175,803
Advance premiums
   10,248    4,651
Assumed reinsurance balances payable
   243    3,294
Accrued expenses (Note 4 – Consolidated Variable Interest Entity)
   11,803    6,513
Reinsurance recovered in advance on unpaid losses
   9,882    —
Deferred income taxes, net
   3,092    —
Long-term debt
   236,311    138,863
Other liabilities (Note 4 – Consolidated Variable Interest Entity)
   13,772    26,702




Total liabilities
   836,197    426,318




Commitments and contingencies (Note 16)

Stockholders’ equity:

7% Series A cumulative convertible preferred stock (no par value, 1,500,000 shares authorized, no shares issued and outstanding)
   —      —
Series B junior participating preferred stock (no par value, 400,000 shares authorized, no shares issued or outstanding)
   —      —
Preferred stock (no par value, 18,100,000 shares authorized, no shares issued or outstanding)
   —      —
Common stock (no par value, 40,000,000 shares authorized, 9,035,609 and 9,662,761 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively)
   —      —
Additionalpaid-in capital
   —      8,139
Retained income
   188,313    232,964
Accumulated other comprehensive income, net of taxes
   4,743    2,643




Total stockholders’ equity
   193,056    243,746




Total liabilities and stockholders’ equity
   $ 1,029,253    $ 670,064

See accompanying Notes to Consolidated Financial ~~Statements.~~Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(Dollar amounts in thousands, except per share amounts)


													Three Months Ended						Six Months Ended
	Three Months Ended September 30,						Nine Months Ended September 30,						June 30,						June 30,
	2017			2016			2017			2016			2022			2021			2022			2021
Revenue
Gross premiums earned	$	88,669		$	92,542		$	270,376		$	286,273		$	181,124		$	139,440		$	360,049		$	270,382
Premiums ceded		(44,705	)		(29,242	)		(101,529	)		(105,998	)		(56,205	)		(46,436	)		(109,367	)		(89,535	)

Net premiums earned		43,964			63,300			168,847			180,275			124,919			93,004			250,682			180,847
Net investment income		2,878			2,785			8,522			6,000			3,684			2,635			6,552			7,229
Net realized and unrealized investment (losses) gains		(152	)		583			2,350			899
Net other-than-temporary impairment losses recognized in income:
Total other-than-temporary impairment losses		(474	)		(575	)		(864	)		(1,211	)
Portion of loss recognized in other comprehensive income, before taxes		—			351			—			(230	)

Net other-than-temporary impairment losses		(474	)		(224	)		(864	)		(1,441	)
Net realized investment (losses) gains														(6	)		2,607			(320	)		3,720
Net unrealized investment (losses) gains														(4,234	)		1,489			(7,810	)		1,220
Policy fee income		905			972			2,721			2,967			1,052			992			2,109			1,962
Gain on repurchases of convertible senior notes		—			—			—			153
Gain on bargain purchase		—			2,071			—			2,071
Other		369			321			1,207			1,151			511			777			1,753			1,400

Total revenue		47,490			69,808			182,783			192,075			125,926			101,504			252,966			196,378

Expenses
Losses and loss adjustment expenses		89,231			25,909			142,425			79,261			86,830			55,917			159,534			101,668
Policy acquisition and other underwriting expenses		9,926			10,536			29,645			32,525			26,863			23,169			56,271			46,234
Salaries and wages		4,605			5,945			15,051			17,009
General and administrative personnel expenses														15,301			10,546			29,335			20,196
Interest expense		4,408			2,672			12,328			8,112			1,515			2,000			2,116			4,079
Loss on repurchases of senior notes		—			—			743			—
Other operating expenses		5,338			4,717			15,162			14,213			6,977			4,775			13,269			9,002

Total operating expenses		113,508			49,779			215,354			151,120

Total expenses														137,486			96,407			260,525			181,179
(Loss) income before income taxes		(66,018	)		20,029			(32,571	)		40,955			(11,560	)		5,097			(7,559	)		15,199
Income tax (benefit) expense		(25,472	)		8,696			(13,587	)		16,542			(3,018	)		1,267			(1,808	)		4,524

Net (loss) income	$	(40,546	)	$	11,333		$	(18,984	)	$	24,413			(8,542	)		3,830			(5,751	)		10,675

Net income attributable to redeemable noncontrolling interest (Note 17)														(2,268	)		(2,179	)		(4,516	)		(2,973	)
Net loss attributable to noncontrolling interests														829			266			1,189			363
Net (loss) income after noncontrolling interests													$	(9,981	)	$	1,917		$	(9,078	)	$	8,065
Basic (loss) earnings per share	$	(4.44	)	$	1.17		$	(2.05	)	$	2.48		$	(1.04	)	$	0.25		$	(0.92	)	$	1.02

Diluted (loss) earnings per share	$	(4.44	)	$	1.10		$	(2.05	)	$	2.41		$	(1.04	)	$	0.24		$	(0.92	)	$	0.98

Dividends per share	$	0.35		$	0.30		$	1.05		$	0.90

See accompanying Notes to Consolidated Financial ~~Statements.~~

Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

(Amounts in thousands)

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2017 2016 2017 2016
Net (loss) income
   $ (40,546 ) $ 11,333 $ (18,984 ) $ 24,413


Other comprehensive income:

Change in unrealized gain on investments:

Net unrealized gain arising during the period
   2,155 2,234 4,822 10,290
Other-than-temporary impairment loss charged to income
   474 224 864 1,441
Call and repayment losses charged to investment income
   —   3 9 14
Reclassification adjustment for net realized losses (gains)
   226 (583 ) (2,276 ) (899 )


Net change in unrealized gain
   2,855 1,878 3,419 10,846
Deferred income taxes on above change
   (1,101 ) (724 ) (1,319 ) (4,184 )


Total other comprehensive income, net of income taxes
   1,754 1,154 2,100 6,662


Comprehensive (loss) income
   $ (38,792 ) $ 12,487 $ (16,884 ) $ 31,075


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Net (loss) income	$	(8,542	)	$	3,830		$	(5,751	)	$	10,675
Other comprehensive loss:
Change in unrealized loss on investments:
Net unrealized (losses) gains arising during the period		(2,174	)		99			(6,325	)		(83	)
Call and repayment gains charged to investment income		0			0			0			(2	)
Reclassification adjustment for net realized (gains) losses		(8	)		(576	)		421			(577	)
Net change in unrealized losses		(2,182	)		(477	)		(5,904	)		(662	)
Deferred income taxes on above change		553			117			1,491			162
Total other comprehensive loss, net of income taxes		(1,629	)		(360	)		(4,413	)		(500	)
Comprehensive (loss) income		(10,171	)		3,470			(10,164	)		10,175
Comprehensive loss attributable to noncontrolling interests		883			275			1,344			373
Comprehensive (loss) income after noncontrolling interests	$	(9,288	)	$	3,745		$	(8,820	)	$	10,548

See accompanying Notes to Consolidated Financial ~~Statements.~~

Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of ~~Cash Flows~~Equity

~~(Unaudited)~~For the Three Months Ended June 30, 2022

(Unaudited)

(~~Amounts~~Dollar amounts in ~~thousands)~~thousands, except per share amount)

   Nine Months Ended
September 30,
   2017 2016
Cash flows from operating activities:

Net (loss) income
   $ (18,984 ) $ 24,413
Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Stock-based compensation
   3,362 3,072
Net amortization of premiums on investments in fixed-maturity securities
   884 475
Depreciation and amortization
   6,945 3,968
Deferred income tax benefits
   (3,822 ) (4,967 )
Net realized and unrealized investment gains
   (2,350 ) (899 )
Other-than-temporary impairment losses
   864 1,441
Income from unconsolidated joint venture
   (126 ) (153 )
Distribution received from unconsolidated joint venture
   147 —
Gain on repurchases of convertible senior notes
   —   (153 )
Gain on bargain purchase
   —   (2,071 )
Loss on repurchases of senior notes
   743 —
Net income from limited partnership interests
   (1,724 ) (54 )
Distributions received from limited partnership interests
   854 428
Foreign currency remeasurement (gain) loss
   (31 ) 9
Other
   172 5
Changes in operating assets and liabilities:

Accrued interest and dividends receivable
   (587 ) (305 )
Income taxes
   (21,270 ) 2,510
Premiums receivable
   (9,903 ) (6,495 )
Prepaid reinsurance premiums
   (3,798 ) 11,048
Reinsurance recoverable
   (213,746 ) —
Deferred policy acquisition costs
   (4,511 ) (2,619 )
Other assets
   2,441 32,073
Losses and loss adjustment expenses
   274,180 5,505
Unearned premiums
   30,371 22,032
Advance premiums
   5,597 4,894
Assumed reinsurance balances payable
   (3,051 ) (1,084 )
Reinsurance recovered in advance on unpaid losses
   9,882 —
Accrued expenses and other liabilities
   (1,146 ) (1,180 )


Net cash provided by operating activities
   51,393 91,893


Cash flows from investing activities:

Investments in limited partnership interests
   (2,623 ) (4,670 )
Acquisition of real estate business, net of cash acquired
   —   (12,056 )
Distributions received from limited partnership interests
   11,758 —
Proceeds from investment in real estate under acquisition, development and construction arrangement
   —   10,200
Distribution from unconsolidated joint venture
   417 —
Purchase of property and equipment
   (1,872 ) (543 )
Purchase of real estate investments
   (2,095 ) (1,522 )
Purchase of fixed-maturity securities - available for sale
   (105,258 ) (79,232 )
Purchase of equity securities - available for sale
   (34,512 ) (13,259 )
Purchase of equity securities - trading
   (1,507 ) —
Proceeds from sales of fixed-maturity securities - available for sale
   9,638 37,415
Proceeds from calls, repayments and maturities of fixed-maturity securities - available for sale
   8,786 2,637
Proceeds from sales of equity securities - available for sale
   25,729 14,155
Proceeds from sales of equity securities - trading
   580 —


Net cash used in investing activities
   (90,959 ) (46,875 )


   (continued)


	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Loss,			Total Stockholders’			Noncontrolling			Total
	Shares			Amount		Capital			Income			Net of Tax			Equity			Interests			Equity
Balance at March 31, 2022		10,125,927		$	—	$	79,131		$	243,647		$	(2,185	)	$	320,593		$	1,435		$	322,028
Net loss		—			—		—			(7,885	)		—			(7,885	)		(657	)		(8,542	)
Net income attributable to redeemable noncontrolling interest		—			—		—			(2,096	)		—			(2,096	)		(172	)		(2,268	)
Total other comprehensive loss, net of income taxes		—			—		—			—			(1,575	)		(1,575	)		(54	)		(1,629	)
Issuance of restricted stock		3,000			—		—			—			—			—			—			—
Forfeiture of restricted stock		(700	)		—		—			—			—			—			—			—
Repurchase and retirement of common stock		(1,050,790	)		—		(67,705	)		—			—			(67,705	)		—			(67,705	)
Repurchase and retirement of common stock under share repurchase plan		(29,465	)		—		(1,884	)		—			—			(1,884	)		—			(1,884	)
Dilution from subsidiary stock-based compensation		—			—		—			—			—			—			635			635
Common stock dividends ($0.40 per share)		—			—		—			(4,045	)		—			(4,045	)		—			(4,045	)
Stock-based compensation		—			—		3,345			—			—			3,345			—			3,345
Balance at June 30, 2022		9,047,972		$	—	$	12,887		$	229,621		$	(3,760	)	$	238,748		$	1,187		$	239,935

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Consolidated Statements of Cash Flows - continued~~

~~(Unaudited)~~

~~(Amounts in thousands)~~

   Nine Months Ended
September 30,
   2017 2016
Cash flows from financing activities:

Cash dividends paid
   (10,512 ) (9,368 )
Cash dividends received under share repurchase forward contract
   788 561
Proceeds from exercise of common stock options
   75 —
Proceeds from issuance of long-term debt
   143,859 18,200
Repurchases of convertible senior notes
   —   (11,347 )
Repurchases of senior notes
   (40,250 ) —
Repayment of debt
   (718 ) (264 )
Repurchases of common stock
   (30,636 ) (464 )
Repurchases of common stock under share repurchase plan
   (6,189 ) (18,023 )
Debt issuance costs
   (4,975 ) (339 )
Tax benefits on stock-based compensation
   —   176


Net cash provided by (used in) financing activities
   51,442 (20,868 )


Effect of exchange rate changes on cash
   31 (8 )


Net increase in cash and cash equivalents
   11,907 24,142
Cash and cash equivalents at beginning of period
   280,531 267,738


Cash and cash equivalents at end of period
   $ 292,438 $ 291,880


Supplemental disclosure of cash flow information:

Cash paid for income taxes
   $ 11,506 $ 18,824


Cash paid for interest
   $ 8,647 $ 6,417


Non-cash investing and financing activities:

Unrealized gain on investments inavailable-for-sale securities, net of tax
   $ 2,100 $ 6,662


Details of business acquisition:

Fair value of assets acquired
   $ —   $ 14,677
Less: purchase price
   —   (12,250 )
gain on bargain purchase
   —   (2,071 )


Liabilities assumed
   $ —   $ 356


Conversion of revolving credit facility to long-term debt
   $ 9,441 $ —


Receivable from sales ofavailable-for-sale securities
   $ 3,034 $ 270


Payable on purchases ofavailable-for-sale securities
   $ 3,014 $ 388

See accompanying Notes to Consolidated Financial ~~Statements.~~Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated ~~Statement~~Statements of ~~Stockholders’~~ Equity – (Continued)

~~Nine~~For the Three Months Ended ~~September~~June 30, ~~2017~~2021

(Unaudited)

(Dollar amounts in ~~thousands)~~thousands, except per share amount)

   Common Stock    Additional
Paid-In Retained Accumulated
Other
Comprehensive
Income,    Total
Stockholders’
   Shares Amount    Capital Income Net of Tax    Equity
Balance at December 31, 2016
   9,662,761 $ —      $ 8,139 $ 232,964 $ 2,643    $ 243,746
Net loss
   —   —      —   (18,984 ) —      (18,984 )
Total other comprehensive income, net of income taxes
   —   —      —   —   2,100    2,100
Exercise of common stock options
   30,000 —      75 —   —      75
Issuance of restricted stock
   154,936 —      —   —   —      —
Forfeiture of restricted stock
   (23,218 ) —      —   —   —      —
Repurchase and retirement of common stock
   (434,505 ) —      (21,236 ) —   —      (21,236 )
Repurchase and retirement of common stock under share repurchase plan
   (163,265 ) —      (6,189 ) —   —      (6,189 )
Repurchase of common stock under prepaid forward contract
   (191,100 ) —      (9,400 ) —   —      (9,400 )
Equity component on 4.25% convertible senior notes (net of offering costs of $543)
   —   —      15,151 —   —      15,151
Deferred taxes on debt discount
   —   —      (5,845 ) —   —      (5,845 )
Common stock dividends
   —   —      —   (9,724 ) —      (9,724 )
Stock-based compensation
   —   —      3,362 —   —      3,362
Additionalpaid-in capital shortfall allocated to retained income
   —   —      15,943 (15,943 ) —      —






Balance at September 30, 2017
   9,035,609 $ —      $ —   $ 188,313 $ 4,743    $ 193,056


	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Income,			Total Stockholders’			Noncontrolling			Total
	Shares			Amount		Capital			Income			Net of Tax			Equity			Interests			Equity
Balance at March 31, 2021		8,289,682		$	—	$	—		$	216,086		$	1,405		$	217,491		$	117		$	217,608
Net income (loss)		—			—		—			4,096			—			4,096			(266	)		3,830
Net income attributable to redeemable noncontrolling interest		—			—		—			(2,179	)		—			(2,179	)		—			(2,179	)
Total other comprehensive loss, net of income taxes		—			—		—			—			(351	)		(351	)		(9	)		(360	)
Issuance of restricted stock		3,000			—		—			—			—			—			—			—
Forfeiture of restricted stock		(9,060	)		—		—			—			—			—			—			—
Cancellation of restricted stock		(1,160	)		—		—			—			—			—			—			—
Repurchase and retirement of common stock		(16,822	)		—		(1,288	)		—			—			(1,288	)		—			(1,288	)
Dilution from subsidiary stock-based compensation		—			—		—			—			—			—			1,541			1,541
Common stock dividends ($0.40 per share)		—			—		—			(3,659	)		—			(3,659	)		—			(3,659	)
Stock-based compensation		—			—		2,556			—			—			2,556			—			2,556
Additional paid-in capital shortfall adjustment allocated to retained income		—			—		(1,268	)		1,268			—			—			—			—
Balance at June 30, 2021		8,265,640		$	—	$	—		$	215,612		$	1,054		$	216,666		$	1,383		$	218,049

See accompanying Notes to Consolidated Financial ~~Statements.~~

Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated ~~Statement~~Statements of ~~Stockholders’~~ Equity ~~- continued~~– (Continued)

~~Nine~~For the Six Months Ended ~~September~~June 30, ~~2016~~2022

(Unaudited)

(Dollar amounts in ~~thousands)~~

thousands, except per share amount)

   Common Stock    Additional
Paid-In Retained Accumulated
Other
Comprehensive
(Loss) Income, Total
Stockholders’
   Shares Amount    Capital Income Net of Tax Equity
Balance at December 31, 2015
   10,292,256 $ —      $ 23,879 $ 215,634 $ (1,791 ) $ 237,722
Net income
   —   —      —   24,413 —   24,413
Total other comprehensive income, net of income taxes
   —   —      —   —   6,662 6,662
Issuance of restricted stock
   102,440 —      —   —   —   —
Forfeiture of restricted stock
   (11,787 ) —      —   —   —   —
Cancellation of restricted stock
   (160,000 ) —      —   —   —   —
Repurchase and retirement of common stock
   (14,934 ) —      (464 ) —   —   (464 )
Repurchase and retirement of common stock under share repurchase plan
   (574,851 ) —      (18,023 ) —   —   (18,023 )
Common stock dividends
   —   —      —   (8,807 ) —   (8,807 )
Tax benefits on stock-based compensation
   —   —      176 —   —   176
Tax shortfalls on stock-based compensation
   —   —      (239 ) —   —   (239 )
Stock-based compensation
   —   —      3,072 —   —   3,072




Balance at September 30, 2016
   9,633,124 $ —      $ 8,401 $ 231,240 $ 4,871 $ 244,512


	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Income (Loss),			Total Stockholders’			Noncontrolling			Total
	Shares			Amount		Capital			Income			Net of Tax			Equity			Interests			Equity
Balance at December 31, 2021		10,131,399		$	—	$	76,077		$	246,790		$	498		$	323,365		$	1,138		$	324,503
Net loss		—			—		—			(4,907	)		—			(4,907	)		(844	)		(5,751	)
Net income attributable to redeemable noncontrolling interest		—			—		—			(4,171	)		—			(4,171	)		(345	)		(4,516	)
Total other comprehensive loss, net of income taxes		—			—		—			—			(4,258	)		(4,258	)		(155	)		(4,413	)
Issuance of restricted stock		7,000			—		—			—			—			—			—			—
Forfeiture of restricted stock		(3,965	)		—		—			—			—			—			—			—
Repurchase and retirement of common stock		(1,056,997	)		—		(68,103	)		—			—			(68,103	)		—			(68,103	)
Repurchase and retirement of common stock under share repurchase plan		(29,465	)		—		(1,884	)		—			—			(1,884	)		—			(1,884	)
Dilution from subsidiary stock-based compensation		—			—		—			—			—			—			1,393			1,393
Common stock dividends ($0.80 per share)		—			—		—			(8,091	)		—			(8,091	)		—			(8,091	)
Stock-based compensation		—			—		6,797			—			—			6,797			—			6,797
Balance at June 30, 2022		9,047,972		$	—	$	12,887		$	229,621		$	(3,760	)	$	238,748		$	1,187		$	239,935

See accompanying Notes to Consolidated Financial ~~Statements.~~Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Equity – (Continued)

For the Six Months Ended June 30, 2021

(Unaudited)

(Dollar amounts in thousands, except per share amount)

Common Stock

Additional
Paid-In

Retained

Accumulated
Other
Comprehensive
Income,

Total
Stockholders’

Noncontrolling

Total

Shares

Amount

Capital

Income

Net of Tax

Equity

Interests

Equity

Balance at December 31, 2020

7,785,617

$
—

$
—

$
199,592

$
1,544

$
201,136

$
—

$
201,136

Net income (loss)

—

—

—

11,038

—

11,038

(363
)

10,675

Net income attributable to redeemable
    noncontrolling interest

—

—

—

(2,973
)

—

(2,973
)

—

(2,973
)
Cumulative effect of change in
    accounting principle

—

—

—

(3,018
)

—

(3,018
)

—

(3,018
)
Total other comprehensive loss, net of
    income taxes

—

—

—

—

(490
)

(490
)

(10
)

(500
)
Issuance of restricted stock

551,086

—

—

—

—

—

—

—

Forfeiture of restricted stock

(11,110
)

—

—

—

—

—

—

—

Cancellation of restricted stock

(142,760
)

—

—

—

—

—

—

—

Repurchase and retirement of common
    stock

(17,193
)

—

(1,308
)

—

—

(1,308
)

—

(1,308
)
Issuance of common stock

100,000

—

5,410

—

—

5,410

—

5,410

Dilution from subsidiary stock-based
    compensation

—

—

—

—

—

—

1,756

1,756

Issuance of warrants, net of issuance
    costs (Note 17)

—

—

8,640

—

—

8,640

—

8,640

Common stock dividends ($0.80 per share)

—

—

—

(6,452
)

—

(6,452
)

—

(6,452
)
Stock-based compensation

—

—

4,683

—

—

4,683

—

4,683

Additional paid-in capital shortfall
    adjustment allocated to retained income

—

—

(17,425
)

17,425

—

—

—

—

Balance at June 30, 2021

8,265,640

$
—

$
—

$
215,612

$
1,054

$
216,666

$
1,383

$
218,049

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)

Six Months Ended

June 30,

2022

2021

Cash flows from operating activities:

Net (loss) income after noncontrolling interests

$
(9,078
)

$
8,065

Net income attributable to noncontrolling interests

3,327

2,610

Net (loss) income

(5,751
)

10,675

Adjustments to reconcile net income to net cash provided by operating activities:

Stock-based compensation expense

8,579

6,497

Net (accretion of discount) amortization of premiums on investments in
fixed-maturity securities

(189
)

144

Depreciation and amortization

3,495

2,928

Deferred income tax benefit

(4,080
)

(3,732
)
Net realized investment losses (gains)

320

(3,720
)
Net unrealized investment losses (gains)

7,810

(1,220
)
Credit loss expense - reinsurance recoverable

(28
)

(28
)
Net (income) loss from unconsolidated joint venture

(495
)

50

Net income from limited partnership interests

(1,799
)

(2,359
)
Distributions received from limited partnership interests

2,046

1,792

Foreign currency remeasurement loss

50

75

Other non-cash items

(405
)

21

Changes in operating assets and liabilities:

Accrued interest and dividends receivable

(1,068
)

258

Income taxes

2,295

7,106

Premiums receivable, net

15,855

(739
)
Prepaid reinsurance premiums

(54,668
)

35,614

Reinsurance recoverable

23,196

23,181

Deferred policy acquisition costs

9,390

(569
)
Funds withheld for assumed business

(8,752
)

(43,395
)
Other assets

(12,707
)

9,773

Losses and loss adjustment expenses

1,659

(8,384
)
Unearned premiums

3,396

40,443

Advance premiums

11,657

9,855

Reinsurance payable on paid losses and loss adjustment expenses

285

7,398

Ceded reinsurance premiums payable

5,323

9,206

Accrued expenses and other liabilities

16,215

(5,223
)
Net cash provided by operating activities

21,629

95,647

(continued)
9
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows – (Continued)
(Unaudited)
(Amounts in thousands)

Six Months Ended

June 30,

2022

2021

Cash flows from investing activities:

Investments in limited partnership interests

(1,144
)

(700
)
Distributions received from limited partnership interests

2,335

2,653

Purchase of property and equipment

(4,229
)

(1,275
)
Purchase of real estate investments

(111
)

(331
)
Purchase of intangible assets

(3,800
)

0

Purchase of fixed-maturity securities

(377,638
)

(6,338
)
Purchase of equity securities

(16,383
)

(45,040
)
Purchase of short-term and other investments

0

(1,058
)
Proceeds from sales of real estate investments

667

0

Proceeds from sales of fixed-maturity securities

11,494

14,680

Proceeds from calls, repayments and maturities of fixed-maturity securities

4,020

16,677

Proceeds from sales of equity securities

24,427

56,511

Proceeds from sales, redemptions and maturities of short-term and other investments

267

2,026

Net cash (used in) provided by investing activities

(360,095
)

37,805

Cash flows from financing activities:

Cash dividends paid

(8,168
)

(6,605
)
Cash dividends received under share repurchase forward contract

77

153

Net repayment under revolving credit facility

(15,000
)

(23,750
)
Proceeds from issuance of redeemable noncontrolling interest and warrants

0

100,000

Issuance costs - redeemable noncontrolling interest

0

(6,262
)
Cash dividends paid to redeemable noncontrolling interest

(2,508
)

0

Proceeds from issuance of long-term debt

172,500

0

Repayment of long-term debt

(501
)

(480
)
Repurchases of common stock

(68,103
)

(1,308
)
Repurchases of common stock under share repurchase plan

(1,884
)

0

Purchase of noncontrolling interests

(389
)

(58
)
Debt issuance costs

(5,757
)

(152
)
Net cash provided by financing activities

70,267

61,538

Effect of exchange rate changes on cash

(56
)

(45
)
Net (decrease) increase in cash, cash equivalents, and restricted cash

(268,255
)

194,945

Cash, cash equivalents, and restricted cash at beginning of period

631,343

433,741

Cash, cash equivalents, and restricted cash at end of period

$
363,088

$
628,686

(continued)
10
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows – (Continued)
(Unaudited)
(Amounts in thousands)

Six Months Ended

June 30,

2022

2021

Supplemental disclosure of cash flow information:

Cash paid for income taxes

$
55

$
1,150

Cash paid for interest

$
943

$
3,492

Non-cash investing and financing activities:

Unrealized loss on investments in available-for-sale securities, net of tax

$
(4,413
)

$
(500
)
Receivable from sales of equity securities

$
1,051

$
3,455

Payable on purchases of equity securities

$
1,050

$
32

Warrants issued in Centerbridge transaction

$
0

$
9,217

Acquisition of intangibles:

Common stock issued

$
0

$
5,410

Contingent consideration payable

$
1,069

$
2,419

See accompanying Notes to Consolidated Financial Statements (unaudited).
11
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note~~1--~~ 1 -- Nature of Operations

HCI Group, Inc., together with its ~~majority-owned and controlled~~ subsidiaries ~~(collectively,~~(“HCI” or the “Company”), is primarily engaged in the property and casualty insurance business through two Florida domiciled insurance companies, Homeowners Choice Property & Casualty Insurance Company, Inc. (“HCPCI”)~~, its principal operating subsidiary.~~ and TypTap Insurance Company (“TypTap”). Both HCPCI isand TypTap are authorized to underwrite various homeowners’ property and casualty insurance products and allied lines business in the state of ~~Florida. HCPCI also offers flood-endorsed~~Florida and ~~wind-only policies to new andpre-existing~~ ~~Florida customers. HCPCI’s~~in other states. The operations of both insurance subsidiaries are supported by HCI Group, Inc. and certain HCI subsidiaries. ~~During 2017, HCPCI received regulatory approval~~The Company emphasizes the use of internally developed technologies to ~~write residential property~~collect and ~~casualty~~analyze claims and other supplemental data to generate savings and efficiency for the operations of the insurance subsidiaries. In addition, Greenleaf Capital, LLC, the Company’s real estate subsidiary, is primarily engaged in the business of owning and leasing real estate and operating marina facilities.

Assumed Business

Northeast Region

In 2021, the Company began providing quota share reinsurance on all in-force, new and renewal policies issued by United Property & Casualty Insurance Company, an insurance subsidiary of United Insurance Holdings Corporation (“United”), in the states of ~~Arkansas, Maryland,~~Connecticut, New Jersey, Massachusetts, and Rhode Island (collectively “Northeast Region”). Through its insurance subsidiaries, the Company began renewing and/or replacing United policies in two states in December 2021, a third state in January 2022, and the fourth state in April 2022.

Southeast Region

In February 2022, HCPCI entered into another reinsurance agreement with United where HCPCI provides 85% quota share reinsurance on all of United’s personal lines insurance business in the states of Georgia, North Carolina, ~~New Jersey, Pennsylvania,~~and South Carolina (collectively “Southeast Region”) from December 31, 2021 through May 31, 2022. Under this agreement, HCPCI paid United a catastrophe allowance of 9% of premium and ~~Texas.~~a provisional ceding commission of 25% of premium. That percentage could increase up to 32% depending on the direct loss ratio results from the reinsured business.

The Company also entered into a renewal rights agreement with United in connection with the Southeast Region assumed business. Under the renewal rights agreement, the Company has the right to renew and/or replace United’s insurance policies at the end of their respective policy periods. The ability to replace policies is subject to regulatory approvals in the three states. The policy replacement date was set for June 1, 2022 or such other date as mutually agreed by both parties. In connection with the transaction, United agreed to not compete with the Company for the issuance of personal lines homeowners business in these three states until July 1, 2025. As part of the transaction, United will receive a renewal rights ceding commission of 6%, with a portion of the ceding commission paid up-front, and the aggregate ceding commission amount will not exceed $6,000. See Note 7 -- “Intangible Assets, Net” for additional information.

The Company began renewing United’s policies in South Carolina on June 1, 2022. The policy replacement date for Georgia and North Carolina policies has yet to be determined and the Company, through TypTap, entered into a new quota share reinsurance agreement in June 2022 to provide 100% reinsurance on all of United’s in-force, new and renewal policies in the Southeast Region from June 1, 2022 through May 31, 2023. In exchange, TypTap pays United a ceding commission of 16% of premium.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 2 —-- Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements for HCI Group, Inc. and its majority-owned and controlled subsidiaries (collectively, the ~~Company~~“Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and the Securities and Exchange Commission (“SEC”) rules for interim financial reporting. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. However, in the opinion of management, the accompanying consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the Company’s financial position as of ~~September~~June 30, ~~2017~~2022 and the results of operations and cash flows for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results of operations to be expected for any subsequent interim period or for the fiscal year ending December 31, ~~2017.~~2022. The accompanying unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, ~~2016~~2021 included in the Company’s Form10-K, which was filed with the SEC on ~~February 22, 2017.~~March 10, 2022.

In preparing the interim unaudited consolidated financial statements, management was required to make certain judgments, assumptions, and estimates that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the financial reporting date and throughout the periods being reported upon. Certain of the estimates result from judgments that can be subjective and complex and consequently actual results may differ from these estimates.

Material estimates that are particularly susceptible to significant change in the near term are related to the Company’s losses and loss adjustment expenses, which include amounts estimated for claims incurred but not yet reported. The Company uses various assumptions and actuarial data it believes to be reasonable under the circumstances to make these estimates. In addition, accounting policies ~~for~~specific to reinsurance ~~contracts~~ with retrospective provisions, reinsurance recoverable, deferred income taxes, limited partnership investments, intangible assets acquired from United, and stock-based compensation expense involve significant judgments and estimates material to the Company’s consolidated financial statements.

All significant intercompany balances and transactions have been eliminated.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

~~Adoption of New Accounting Standards~~

~~Effective January 1, 2017, the Company adopted Accounting Standards UpdateNo. 2016-09,~~ Compensation—Stock Compensation (Topic 718), which amends the accounting for share-based payment transactions including the related income taxes, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, and forfeitures, which is applied using a modified retrospective transition method, have no impact on the Company’s comparative consolidated financial statements. In addition, the retrospective application of the amendments related to the presentation of employee taxes paid does not have an impact on the Company’s comparative consolidated statement of cash flows. Upon adoption of this standard, the Company elected to account for forfeitures of share-based awards when they occur and apply the amendments related to the presentation of excess tax benefits on the statement of cash flows prospectively. Under the new standard, the Company is required to recognize any excess tax benefits and tax deficiencies in the Company’s consolidated statement of income.

~~Investments in Trading Securities~~

The Company holds certain equity securities with the intention of selling them in a short period of time to generate profits. As such, these equity securities are classified as trading and carried at fair value. Realized investment gains and losses from sales are recorded on the trade date and are determined using the~~first-infirst-out~~ ~~(FIFO) method. Unrealized holding gains and losses from the changes in the fair value are reported in the consolidated statement of income as net unrealized investment gains or losses.~~

Long-Term Debt

Long-term debt includes debt instruments and finance lease obligations. A debt instrument is generally classified as a liability and carried at amortized cost, net of any ~~discount~~issuance costs. Debt issuance costs are capitalized and ~~issuance costs.~~amortized to interest expense over the expected life of the debt instrument using the effective interest method. At issuance, a debt instrument with embedded features such as conversion and redemption options is evaluated to determine whether bifurcation and derivative accounting is applicable. ~~If such instrument is not subject to derivative accounting, it is further evaluated to determine if the Company is required to separately account for the liability and equity components.~~

To determine the carrying values of the liability and equity components at issuance, the Company measures the fair value of a similar liability, including any embedded features other than the conversion option, and assigns such value to the liability component. The liability component’s fair value is then subtracted from the initial proceeds to determine the carrying value of the debt instrument’s equity component, which is included in additional~~paid-in~~ ~~capital.~~

Any embedded feature other than the conversion option is evaluated at issuance to determine if it is probable that such embedded feature will be exercised. If the Company concludes that the exercisability of that embedded feature is not probable, the embedded feature is considered to benon-substantive and would not impact the initial measurement and expected life of the debt ~~instrument’s liability component.~~instrument.

Revenue from Claims Processing Services

Revenue related to claims processing services is included in other revenue in the consolidated statements of income. For the three and six months ended June 30, 2022, revenues from claims processing services were

1013

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

~~Transaction costs related~~$372 and $1,379, respectively. Revenues from claims processing services were $207 for the three and six months ended June 30, 2021. At June 30, 2022 and December 31, 2021, other assets included $321 and $314, respectively, of amounts receivable attributable to issuing a debt instrument that embodies both liability and equity components are allocated to the liability and equity components in proportion to the allocation of the proceeds and accounted for as debt issuance costs and equity issuance costs, respectively. Debt issuance costs are capitalized and presented as a deduction from the carrying value of the debt. Both debt discount and deferred debt issuance costs are amortized to interest expense over the expected life of the debt instrument using the effective interest method. Equity issuance costs are a reduction to the proceeds allocated to the equity component.this service.

Reclassification

~~Common Share Repurchases~~

The Company primarily repurchases its common stock in the open market through share repurchase programs and from institutional investors in private transactions such as prepaid share repurchase forward contracts and share repurchase agreements.

A prepaid share repurchase forward contract is generally a contract that allows a party to buy from the counterparty a specified number of common shares at a specific time at a given forward price. The Company entered into such a contract and evaluated the characteristics of the forward contract to determine whether it met the definition of a derivative financial instrument pursuant to U.S. GAAP. The Company determined the forward contract is an equity contract on the Company’s common shares requiring physical settlement in common shares of the Company. As such, the transaction is recognized as a component of stockholders’ equity and there will be no recognition in earnings for changes in fair value in subsequent periods.

~~In general, the Company first allocates the purchase price or the prepayment amount to additionalpaid-in~~ ~~capital to the extent available and the remaining balance is allocated to retained income. Due to past and recent share repurchases, the Company’s additionalpaid-in~~ ~~capital has been exhausted and shall remain so until the Company fully recoups the total amount allocated to retained income.~~

~~Reclassifications.~~Certain ~~reclassifications of~~ prior year amounts have been ~~made~~reclassified to conform to the current year presentation. Ceded reinsurance premiums payable were reclassified out of other liabilities and funds withheld for assumed business were reclassified out of other assets for the six months ended June 30, 2021 within the consolidated statement of cash flows to conform with the current year presentation.

Note 3 ~~— Recent Accounting Pronouncements~~-- Cash, Cash Equivalents, and Restricted Cash

~~Accounting Standards Update No.~~ ~~2017-13.~~ ~~In September 2017,~~

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the ~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards UpdateNo. 2017-13~~ ~~(“ASU2017-13”),~~ ~~Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842). ASU2017-13~~ ~~adds SEC paragraphs pursuant~~Company’s consolidated balance sheets that sum to the ~~SEC Staff Announcement at~~total of the ~~July 20, 2017 Emerging Issues Task Force meeting concerning~~same such amounts shown in the ~~transition related~~consolidated statements of cash flows.


	June 30,		December 31,
	2022		2021
Cash and cash equivalents	$	360,488	$	628,943
Restricted cash		2,600		2,400
Total	$	363,088	$	631,343

Restricted cash represents funds in the Company’s sole ownership held by certain states in which the Company’s insurance subsidiaries conduct business to ~~Accounting Standards UpdatesNo. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~meet regulatory requirements and~~No. 2016-02,~~ ~~Leases (Topic 842). ASU2017-13~~ ~~also supersedes SEC paragraphs pursuant to~~ not available for immediate business use. Funds withheld in an account for which the ~~rescission of SEC Staff Announcement, “Accounting for Management Fees Based on~~Company is a ~~Formula,” effective upon~~co-owner but not the ~~initial adoption of Topic 606 and SEC Staff Announcement, “Lessor Consideration of Third-Party Value Guarantees,” effective upon the initial adoption of Topic 842. ASU2017-13~~ ~~also rescinds three SEC Observer Comments effective upon the initial adoption of Topic 842. One SEC Staff Observer comment is being moved to Topic 842. The Company does~~named beneficiary are not ~~anticipate significant impact from this guidance.~~considered restricted cash.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

~~Accounting Standards Update No.~~ ~~2017-09.~~ ~~In May 2017, the FASB issued Accounting Standards UpdateNo. 2017-09~~ ~~(“ASU2017-09”),~~ Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance about which changes to the terms or conditions of a share-based payment award require an application of modification accounting. ASU~~2017-09~~ ~~is effective for the Company beginning with the first quarter of 2018. Early adoption is permitted. This guidance will impact the future modification of the Company’s existing share-based awards.~~

~~Accounting Standards Update No.~~ ~~2017-08.~~ ~~In March 2017, the FASB issued Accounting Standards UpdateNo. 2017-08~~ ~~(“ASU2017-08”),~~ ~~Receivables – Nonrefundable Fees and Other Costs (Subtopic310-20):~~ Premium Amortization on Purchased Callable Debt Securities, which amends guidance on the amortization period of premiums on certain purchased callable debt securities. Specifically, this update shortens the amortization period of certain purchased callable debt securities to the earliest call date. ASU~~2017-08~~ is effective for the Company beginning with the first quarter of 2019. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on the Company’s consolidated financial statements.

~~Accounting Standards Update No.~~ ~~2017-05.~~ ~~In February 2017, the FASB issued Accounting Standards UpdateNo. 2017-05~~ ~~(“ASU2017-05”),~~ ~~Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic610-20),~~ ~~which clarifies the scope of asset derecognition guidance and accounting for partial sales of nonfinancial assets. In addition, ASU2017-15~~ eliminates the exception in the financial asset guidance for transfers of investments including equity method investments in real estate entities and supersedes the guidance in the Exchanges of a Nonfinancial Asset for a Noncontrolling Ownership Interest subsection (Topic 845). ASU~~2017-05~~ ~~is effective for the Company beginning with the first quarter of 2018. The Company is currently evaluating the impact of this guidance on the Company’s consolidated financial statements.~~

~~Accounting Standards Update No.~~ ~~2017-03.~~ ~~In January 2017, the FASB issued Accounting Standards UpdateNo. 2017-03~~ ~~(“ASU2017-03”),~~ Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323), which adds and amends SEC paragraphs pursuant to the SEC Staff Announcements at the September 22, 2016 and November 17, 2016 Emerging Issues Task Force meetings. The announcement made at the September 22, 2016 meeting provides the SEC staff view on the disclosure of the impact that recently issued accounting standards will have on a public entity’s financial statements when the standards are adopted in a future period. This announcement applies to ASU~~2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606); ASU2016-02,~~ ~~Leases (Topic 842); ASU2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326) and any subsequent amendments to guidance in the ASUs that are issued prior to the adoption of the aforementioned ASUs.~~

~~Accounting Standards Update No.~~ ~~2017-01.~~ ~~In January 2017, the FASB issued Accounting Standards UpdateNo. 2017-01~~ ~~(“ASU2017-01”),~~ Business Combinations (Topic 805), which clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. If the screen is not met, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output to be considered a business. ASU~~2017-01~~ is effective for the Company beginning with the first quarter of 2018. Early adoption is permitted under certain circumstances. When adopted, this guidance will impact how the Company determines whether a transaction should be accounted for as a business acquisition or disposal in a future period. The Company elected to adopt this standard in the fourth quarter of 2017.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

~~Accounting Standards to be Adopted in Fiscal Year 2018~~

~~In January 2016, the FASB issued Accounting Standards UpdateNo. 2016-01~~ ~~(“ASU2016-01”),~~ ~~Financial Instruments – Overall (Subtopic825-10),~~ primarily requiring all equity investments other than those accounted for under the equity method of accounting or those that result in consolidation of the investee to be measured at fair value with changes in the fair value recognized through net income. The application of ASU~~2016-01~~ ~~could cause the Company to experience significant volatility in earnings. Under current accounting policy, the Company recognizes unrealized holding gains and losses onavailable-for-sale~~ ~~equity securities in stockholders’ equity as a component of accumulated other comprehensive income. In the year of adoption,available-for-sale~~ equity securities’ unrealized holding gains and losses reported in accumulated other comprehensive income at December 31, 2017 will be reclassified to beginning retained income. Any subsequent changes in fair value will be recognized in the consolidated statement of income. In addition, the classification of the Company’s equity securities with readily determinable fair values as~~“available-for-sale”~~ ~~in the consolidated balance sheet and related disclosures will be eliminated.~~

~~In May 2014, the FASB issued Accounting Standards UpdateNo. 2014-09~~ ~~(“ASU2014-09”),~~ Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU~~2014-09~~ ~~supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. ASU2014-09~~ also amends the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer to be consistent with the guidance in this ASU. ASU~~2014-09~~ permits two methods of adoption: a full retrospective method or a modified retrospective method. This standard could impact the timing and amounts of revenue recognized. The Company has identified and reviewed impacted revenue generating activities in accordance with the five-step revenue recognition model specified by this standard. The Company elects to use a modified retrospective method for transition to the new revenue recognition standard. Based on the Company’s assessment, the impact will be limited to the related disclosures of certain revenue generating activities as its primary source of revenue from insurance premiums is not within the scope of this new standard.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

Note 4 —-- Investments

a)Available-for-Sale Fixed-Maturity Securities

The Company holds investments in fixed-maturity securities ~~and equity securities~~ that are classified asavailable-for-sale. At ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, the cost or amortized cost, allowance for credit loss, gross unrealized gains and losses, and estimated fair value of the Company’savailable-for-sale securities by security type were as follows:


	Cost or Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value		Cost or Amortized		Allowance for Credit		Gross Unrealized		Gross Unrealized			Estimated Fair
*As of September 30, 2017*
Fixed-maturity securities
										Cost		Loss		Gain		Loss			Value
As of June 30, 2022
U.S. Treasury and U.S. government agencies	$	47,348	$	5	$	(112	)	$	47,241	$	372,323	$	—	$	2	$	(4,762	)	$	367,563
Corporate bonds		121,459		1,862		(811	)		122,510		28,953		—		27		(556	)		28,424
State, municipalities, and political subdivisions		74,924		2,099		(83	)		76,940
States, municipalities, and political subdivisions											1,761		—		8		(2	)		1,767
Exchange-traded debt		9,293		194		(211	)		9,276		700		—		14		(1	)		713
Redeemable preferred stock		138		2		(5	)		135		107		—		0		(3	)		104

Total		253,162		4,162		(1,222	)		256,102	$	403,844	$	—	$	51	$	(5,324	)	$	398,571
Equity securities		58,242		5,361		(580	)		63,023

Totalavailable-for-sale securities	$	311,404	$	9,523	$	(1,802	)	$	319,125

*As of December 31, 2016*
Fixed-maturity securities
As of December 31, 2021
U.S. Treasury and U.S. government agencies	$	1,975	$	—	$	(36	)	$	1,939	$	17,046	$	—	$	64	$	(86	)	$	17,024
Corporate bonds		75,538		607		(1,641	)		74,504		21,913		—		632		(53	)		22,492
State, municipalities, and political subdivisions		78,018		776		(488	)		78,306
States, municipalities, and political subdivisions											1,759		—		49		—			1,808
Exchange-traded debt		11,463		36		(237	)		11,262		767		—		44		—			811
Redeemable preferred stock		237		3		(3	)		237		468		—		0		(20	)		448

Total		167,231		1,422		(2,405	)		166,248	$	41,953	$	—	$	789	$	(159	)	$	42,583
Equity securities		47,750		5,769		(484	)		53,035

Totalavailable-for-sale securities	$	214,981	$	7,191	$	(2,889	)	$	219,283

~~At September 30, 2017, fixed-maturity securities included $252 of U.S. Treasury securities related to a statutory deposit held in trust for the South Carolina Director of Insurance.~~

Expected maturities ~~will~~may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties. The scheduled contractual maturities of fixed-maturity securities as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021 are as follows:


	June 30, 2022				December 31, 2021
	Cost or		Estimated		Cost or		Estimated
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale
Due in one year or less	$	167,143	$	167,002	$	10,734	$	10,826
Due after one year through five years		232,353		227,637		19,222		19,820
Due after five years through ten years		3,854		3,427		11,503		11,403
Due after ten years		494		505		494		534
	$	403,844	$	398,571	$	41,953	$	42,583

   Amortized
Cost    Estimated
Fair Value
As of September 30, 2017

Available-for-sale

Due in one year or less
   $ 30,082    $ 30,115
Due after one year through five years
   127,627    127,444
Due after five years through ten years
   66,146    67,853
Due after ten years
   29,307    30,690




   $ 253,162    $ 256,102

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

   Amortized
Cost    Estimated
Fair Value
As of December 31, 2016

Available-for-sale

Due in one year or less
   $ 2,656    $ 2,662
Due after one year through five years
   49,915    50,023
Due after five years through ten years
   90,360    89,332
Due after ten years
   24,300    24,231




   $ 167,231    $ 166,248

Sales ofAvailable-for-Sale Fixed-Maturity Securities

Proceeds received, and the gross realized gains and losses from sales ofavailable-for-sale fixed-maturity securities, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 were as follows:

   Proceeds    Gross
Realized
Gains    Gross
Realized
Losses
Three months ended September 30, 2017

Fixed-maturity securities
   $ 2,765    $ 97    $ (23 )






Equity securities
   $ 4,827    $ 223    $ (525 )






Three months ended September 30, 2016

Fixed-maturity securities
   $ 3,891    $ 196    $ —






Equity securities
   $ 5,000    $ 491    $ (104 )






Nine months ended September 30, 2017

Fixed-maturity securities
   $ 9,638    $ 126    $ (45 )






Equity securities
   $ 25,729    $ 3,058    $ (865 )






Nine months ended September 30, 2016

Fixed-maturity securities
   $ 37,415    $ 579    $ —






Equity securities
   $ 14,155    $ 850    $ (530 )


			Gross Realized		Gross Realized
	Proceeds		Gains		Losses
Three months ended June 30, 2022	$	2,436	$	11	$	(3	)
Three months ended June 30, 2021	$	14,644	$	576	$	0
Six months ended June 30, 2022	$	11,494	$	13	$	(434	)
Six months ended June 30, 2021	$	14,680	$	577	$	—

~~Other-than-temporary Impairment~~

Gross Unrealized Losses for Available-for-Sale Fixed-Maturity Securities

Securities with gross unrealized loss positions at June 30, 2022 and December 31, 2021, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:


	Less Than Twelve Months					Twelve Months or Longer					Total
	Gross			Estimated		Gross			Estimated		Gross			Estimated
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
As of June 30, 2022	Loss			Value		Loss			Value		Loss			Value
U.S. Treasury and U.S. government agencies	$	(4,664	)	$	348,459	$	(98	)	$	2,048	$	(4,762	)	$	350,507
Corporate bonds		(556	)		23,828		0			0		(556	)		23,828
States, municipalities, and political subdivisions		(2	)		387		0			0		(2	)		387
Exchange-traded debt		(1	)		23		0			0		(1	)		23
Redeemable preferred stock		(3	)		104		0			0		(3	)		104
Total available-for-sale securities	$	(5,226	)	$	372,801	$	(98	)	$	2,048	$	(5,324	)	$	374,849


	Less Than Twelve Months					Twelve Months or Longer					Total
	Gross			Estimated		Gross			Estimated		Gross			Estimated
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
As of December 31, 2021	Loss			Value		Loss			Value		Loss			Value
U.S. Treasury and U.S. government agencies	$	(73	)	$	9,809	$	(13	)	$	616	$	(86	)	$	10,425
Corporate bonds		(53	)		4,452		0			0		(53	)		4,452
Redeemable preferred stock		(20	)		442		0			0		(20	)		442
Total available-for-sale securities	$	(146	)	$	14,703	$	(13	)	$	616	$	(159	)	$	15,319

At June 30, 2022 and December 31, 2021, there were 68 and 23 securities, respectively, in an unrealized loss position.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Allowance for Credit Losses of Available-for-Sale Fixed-Maturity Securities

The Company regularly reviews its individual investment securities for ~~other-than-temporary~~credit impairment. The Company considers various factors in determining whether a credit loss exists for each individual security, ~~is other-than-temporarily impaired,~~ including-

•

the financial condition and near-term prospects of the issuer, including any specific events that may affect its operations or earnings;

~~the length of time and~~ •

the extent to which the market value of the security has been below its cost or amortized cost;

•

general market conditions and industry or sector specific factors and other qualitative factors;

•

nonpayment by the issuer of its contractually obligated interest and principal payments; and

•

the Company’s intent and ability to hold the investment for a period of time sufficient to allow for the recovery of costs.

The table below summarizes the activity in the allowance for credit losses of available-for-sale securities for the three and six months ended June 30, 2022 and 2021:



	2022		2021
Balance at January 1	$	0	$	588
Reductions for securities sold		0		(9	)
Balance at March 31	$	0	$	579
Reductions for securities exchanged		0		(579	)
Balance at June 30	$	0	$	0

b) Equity Securities

The Company holds investments in equity securities measured at fair values which are readily determinable. At June 30, 2022 and December 31, 2021, the cost, gross unrealized gains and losses, and estimated fair value of the Company’s equity securities were as follows:


			Gross Unrealized		Gross Unrealized			Estimated Fair
	Cost		Gain		Loss			Value
June 30, 2022	$	38,065	$	2,073	$	(4,419	)	$	35,719
December 31, 2021	$	46,276	$	6,335	$	(871	)	$	51,740

The table below presents the portion of unrealized gains and losses in the Company’s consolidated statements of income related to equity securities still held.


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2022			2021		2022			2021
Net (losses) gains recognized	$	(4,323	)	$	3,069	$	(7,865	)	$	3,536
Exclude: Net realized (losses) gains recognized for securities sold		(89	)		1,580		(55	)		2,316
Net unrealized (losses) gains recognized	$	(4,234	)	$	1,489	$	(7,810	)	$	1,220

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

~~Fixed-maturity Securities~~

There was no impairment loss recognized for the three months ended September 30, 2017. For the nine months ended September 30, 2017, the Company recognized $100 of impairment losses related to the sale of two~~intent-to-sell~~ fixed-maturity securities. At September 30, 2017, two fixed-maturity securities were considered other-than-temporarily impaired due to their credit risk. The Company intends to hold these two fixed-maturity securities until maturity, but does not expect a full recovery of their carrying value.

In June 2016, the Company sold one impaired fixed-maturity security that was previously intended to hold until maturity due to uncertainties surrounding the issuer’s announced restructuring plan. Prior to the sale of this security, the remaining $202 of unrealized impairment loss was reclassified from comprehensive income and recognized in total other-than-temporary impairment losses in the Company’s consolidated statement of income. For the three months ended September 30, 2016, the Company recorded $531 of impairment loss, of which $180 was considered other-than-temporarily impaired due to a credit related loss and recorded in the consolidated statement of income, with the remaining amount of $351 related to~~non-credit~~ factors and recorded in other comprehensive income. For the nine months ended September 30, 2016, the Company recognized $675 of impairment loss in the consolidated statement of income, representing $206 of additional losses recorded during the period and the reclassification of $469 previously recorded in other comprehensive income. At September 30, 2016, one fixed-maturity security the Company intended to hold to maturity had a credit related loss.

~~The following table presents a rollforward of the cumulative credit losses in other-than-temporary impairments recognized in income from available for sale fixed-maturity securities.~~

   2017    2016
Balance at January 1
   $ 475    $ 111
Additional credit impairments on previously impaired securities
   —      293




Balance at March 31
   475    404
Credit impaired security fully disposed of for which there was no prior intent or requirement to sell
   —      (385 )
Reduction due to increase in expected cash flows recognized over the remaining life of the previously impaired security
   —      (19 )




Balance at June 30
   475    —
Credit impairment on impaired securities
   —      180




Balance at September 30
   $ 475    $ 180

~~Equity Securities~~

In determining whether equity securities are other than temporarily impaired, the Company considers its intent and ability to hold a security for a period of time sufficient to allow for the recovery of cost, the length of time each security has been in an unrealized loss position, the extent of the decline and the near-term prospect for recovery. The Company recognized impairment losses of $474 and $44 in the consolidated statement of income for the three months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, the Company recognized impairment losses of $764 and $766, respectively. At September 30, 2017 and 2016, the Company had four and 16 equity securities, respectively, that were other-than-temporarily impaired.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

Securities with gross unrealized loss positions at September 30, 2017 and December 31, 2016, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:

   Less Than Twelve
Months    Twelve Months or Longer    Total
As of September 30, 2017    Gross
Unrealized
Loss Estimated
Fair Value    Gross
Unrealized
Loss Estimated
Fair
Value    Gross
Unrealized
Loss Estimated
Fair Value
Fixed-maturity securities

U.S. Treasury and U.S. government agencies
   $ (112 ) $ 45,344    $ —   $ —      $ (112 ) $ 45,344
Corporate bonds
   (530 ) 49,789    (281 ) 15,346    (811 ) 65,135
State, municipalities, and political subdivisions
   (29 ) 4,332    (54 ) 3,889    (83 ) 8,221
Exchange-traded debt
   (209 ) 3,189    (2 ) 80    (211 ) 3,269
Redeemable preferred stock
   (5 ) 45    —   —      (5 ) 45






Total fixed-maturity securities
   (885 ) 102,699    (337 ) 19,315    (1,222 ) 122,014
Equity securities
   (545 ) 11,154    (35 ) 1,260    (580 ) 12,414






Totalavailable-for-sale securities
   $ (1,430 ) $ 113,853    $ (372 ) $ 20,575    $ (1,802 ) $ 134,428

At September 30, 2017, there were 127 securities in an unrealized loss position. Of these securities, 17 securities had been in an unrealized loss position for 12 months or longer. The gross unrealized loss of corporate bonds in an unrealized loss position for less than twelve months included $133 of other-than-temporary impairment losses related to~~non-credit~~ ~~factors.~~

   Less Than Twelve
Months    Twelve Months or Longer    Total
As of December 31, 2016    Gross
Unrealized
Loss Estimated
Fair
Value    Gross
Unrealized
Loss Estimated
Fair
Value    Gross
Unrealized
Loss Estimated
Fair
Value
Fixed-maturity securities

U.S. Treasury and U.S. government agencies
   $ (36 ) $ 1,939    $ —   $ —      $ (36 ) $ 1,939
Corporate bonds
   (1,546 ) 43,859    (95 ) 2,814    (1,641 ) 46,673
State, municipalities, and political subdivisions
   (441 ) 26,029    (47 ) 3,036    (488 ) 29,065
Exchange-traded debt
   (191 ) 4,980    (46 ) 1,954    (237 ) 6,934
Redeemable preferred stock
   (3 ) 47    —   —      (3 ) 47






Total fixed-maturity securities
   (2,217 ) 76,854    (188 ) 7,804    (2,405 ) 84,658
Equity securities
   (293 ) 10,042    (191 ) 3,209    (484 ) 13,251






Totalavailable-for-sale securities
   $ (2,510 ) $ 86,896    $ (379 ) $ 11,013    $ (2,889 ) $ 97,909

At December 31, 2016, there were 134 securities in an unrealized loss position. Of these securities, 20 securities had been in an unrealized loss position for 12 months or longer. The gross unrealized loss of corporate bonds in an unrealized loss position for twelve months or longer included $76 of other-than-temporary impairment losses related to~~non-credit~~ ~~factors.~~

~~b) Trading Securities~~

At September 30, 2017, the cost, net unrealized gains, and estimated fair value of the Company’s trading equity securities were $929, $74, and $1,003, respectively. There were no investments in trading equity securities at December 31, 2016.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

Sales of ~~Trading~~Equity Securities

Proceeds received, and the gross realized gains and losses from sales of ~~trading~~ equity securities, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and 2021 were as follows:

   Proceeds    Gross
Realized
Gains    Gross
Realized
Losses
Three months ended September 30, 2017

Equity securities
   $ 580    $ 12    $ (10 )






Nine months ended September 30, 2017

Equity securities
   $ 580    $ 12    $ (10 )


			Gross Realized		Gross Realized
	Proceeds		Gains		Losses
Three months ended June 30, 2022	$	6,058	$	433	$	(522	)
Three months ended June 30, 2021	$	22,133	$	1,983	$	(403	)
Six months ended June 30, 2022	$	24,427	$	1,853	$	(1,908	)
Six months ended June 30, 2021	$	56,511	$	3,125	$	(809	)

~~The Company did not hold any trading equity security during 2016.~~

c) Limited Partnership Investments

The Company has interests in limited partnerships that are not registered or readily tradeable on a securities exchange. These partnerships are private equity funds managed by general partners who make ~~all~~ decisions with regard to financial policies and operations. As such, the Company is not the primary beneficiary and does not consolidate these partnerships. ~~In August 2017, the Company entered into a subscription agreement with another limited partnership.~~ The following table provides information related to the Company’s investments in limited ~~partnerships.~~partnerships:


	June 30, 2022						December 31, 2021
	Carrying		Unfunded				Carrying		Unfunded
Investment Strategy	Value		Balance		(%) (a)		Value		Balance		(%) (a)
Primarily in senior secured loans and, to a limited extent, in other debt and equity securities of private U.S. lower-middle-market companies. (b)(c)(e)	$	4,613	$	0		15.37	$	6,076	$	2,085		15.37
Value creation through active distressed debt investing primarily in bank loans, public and private corporate bonds, asset-backed securities, and equity securities received in connection with debt restructuring. (b)(d)(e)		3,347		0		1.67		3,423		0		1.69
High returns and long-term capital appreciation through investments in the power, utility and energy industries, and in the infrastructure sector. (b)(f)(g)		5,723		0		0.18		6,270		1,401		0.18
Value-oriented investments in less liquid and mispriced senior and junior debts of private equity-backed companies. (b)(h)(i)		3,940		0		0.56		4,437		0		0.57
Value-oriented investments in mature real estate private equity funds and portfolios globally. (b)(j)		6,417		3,881		1.34		5,977		4,537		1.36
Risk-adjusted returns on credit and equity investments, primarily in private equity-owned companies. (b)(k)		2,655		2,584		0.39		1,950		3,050		0.47
Total	$	26,695	$	6,465			$	28,133	$	11,073

(a)

Represents the Company’s percentage investment in the fund at each balance sheet date.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

   September 30, 2017    December 31, 2016
Investment Strategy    Carrying
Value    Unfunded
Balance    (%)(a)    Carrying
Value    Unfunded
Balance    (%)(a)
Primarily in senior secured loans and, to a limited extent, in other debt and equity securities of private U.S. lower-middle-market companies. (b)(c)(e)
   $ 7,134    $ 5,505    15.37    $ 6,246    $ 6,428    16.50
Value creation through active distressed debt investing primarily in bank loans, public and private corporate bonds, asset-backed securities, and equity securities received in connection with debt restructuring. (b)(d)(e)
   7,630    1,746    1.76    7,358    1,360    1.76
Maximum long-term capital appreciation through long and short positions in equity and/or debt securities of publicly traded U.S. andnon-U.S. issuers, derivative instruments and certain other financial instruments. (f)
   —      —      —      11,333    —      66.58
High returns and long-term capital appreciation through investments in the power, utility and energy industries, and in the infrastructure sector. (b)(g)(h)
   6,148    3,766    0.18    4,326    5,766    0.18
Value-oriented investments in less liquid and mispriced senior and junior debts of private equity-backed companies. (b)(i)(j)
   86    4,914    0.62    —      —      —









Total
   $ 20,998    $ 15,931       $ 29,263    $ 13,554

(b)

Except under certain circumstances, withdrawals from the funds or any assignments are not permitted. Distributions, except income from late admission of a new limited partner, will be received when underlying investments of the funds are liquidated.

(c)

The term is expected to be the later of ten years or two years following the maturity of the fund’s outstanding leverage. Although the capital commitment period has expired, follow-on investments and pending commitments may require additional fundings.

(d)

The term has been extended for a second additional one-year period to June 30, 2023. Although the capital commitment period has ended, the general partner could still request an additional funding under certain circumstances.

(e)

At the fund manager’s discretion, the term of the fund may be extended for up to two additional one-year periods.

(f)

Expected to have a ten-year term. The capital commitment period has expired but the general partner may request additional funding for follow-on investment.

(g)

With the consent of a supermajority of partners, the term of the fund may be extended for up to three additional one-year periods.

(h)

Expected to have an eight-year term from the commencement date, which can be extended for up to two additional one-year periods with the consent of either the advisory committee or a majority of limited partners.

(i)

The capital commitment period has ended but an additional funding may be requested.

(j)

The term is expected to end November 27, 2027. The term may be extended for up to four additional one-year periods at the general partner’s discretion, and up to two additional one-year periods with the consent of the advisory committee.

(k)

Expected to have an eight-year term after the final admission date. The term may be extended for an additional one-year period at the general partner’s discretion, and up to two additional one-year periods with the consent of either the advisory committee or a majority of limited partners.

~~(a)~~

~~Represents the Company’s percentage investment in the fund at each balance sheet date.~~

~~(b)~~

~~(c)~~

~~Expected to have a10-year~~ ~~term and the capital commitment is expected to expire on September 3, 2019.~~

~~(d)~~

~~Expected to have a three-year term from the end of the capital commitment period, which is March 31, 2018.~~

~~(e)~~

~~At the fund manager’s discretion, the term of the fund may be extended for up to two additionalone-year~~ ~~periods.~~

~~(f)~~

~~The withdrawal was effective on February 15, 2017. As a result, the Company’s investment in this limited partnership was terminated.~~

~~(g)~~

~~Expected to have a10-year~~ ~~term and the capital commitment is expected to expire on June 30, 2020.~~

~~(h)~~

~~With the consent of a super majority of partners, the term of the fund may be extended for up to three additionalone-year~~ ~~periods.~~

~~(i)~~

~~Expected to have asix-year~~ ~~term from the commencement date, which can be extended for up to two additionalone-year~~ ~~periods with the consent of either the advisory committee or a majority of limited partners.~~

~~(j)~~

~~Unless extended or terminated for reasons specified in the agreement, the capital commitment is expected to expire on December 1, 2018.~~

The following is the summary of aggregated ~~summarized~~ unaudited financial information of limited partnerships included in the investment strategy table above, which in certain cases is presented on a three-month lag due to the unavailability of information at the Company’s respective balance sheet dates. ~~In applying the equity method of accounting, the Company uses the most recently available financial information provided by the general partner of each of these partnerships.~~ The financial statements of these limited partnerships are audited annually.


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Operating results:
Total income	$	179,117		$	384,629		$	515,945		$	373,681
Total expenses		(23,023	)		(25,208	)		(72,340	)		(80,720	)
Net income	$	156,094		$	359,421		$	443,605		$	292,961


	June 30,		December 31,
	2022		2021
Balance sheet:
Total assets	$	5,899,813	$	5,855,616
Total liabilities	$	408,725	$	564,732

For the three and six months ended June 30, 2022, the Company recognized net investment income of $19 and $1,799, respectively. Included in the net investment income for the three and six months ended June 30, 2022 was an estimated unfavorable change in net asset value of $516. During the three and six months ended June 30, 2022, the Company received total cash distributions of $2,785 and $4,381, respectively, including returns on investment of $1,235 and $2,046, respectively.

For the three and six months ended June 30, 2021, the Company recognized net investment income of $1,572 and $2,359, respectively. During the three and six months ended June 30, 2021, the Company received

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
Operating results:

Total income
   $ 71,854    $ 166,374    $ 301,604    $ 143,305
Total expenses
   (24,663 )    (54,577 )    (78,482 )    (184,598 )








Net income (loss)
   $ 47,191    $ 111,797    $ 223,122    $ (41,293 )

For the three and nine months ended September 30, 2017, the Company recognized net investment income of $392 and $1,724, respectively, for these investments. During the third quarter of 2017, the Company received in cash a return on investment totaling $428. During the nine-month period ended September 30, 2017, the Company received total cash distributions of ~~$12,612, representing $11,758~~$2,421 and $4,445, respectively, including returns on investment of ~~returned capital~~$1,314 and ~~$854 of return on investment. Included in the return of capital was $11,626 from one limited partnership the Company withdrew from in February 2017.~~$1,792, respectively.

~~For the three and nine months ended September~~At June 30, 2016, the Company recognized net investment income of $1,119 and $54, respectively. During the three and nine months ended September 30, 2016, the Company received cash distributions of $384 and $428, respectively, of return on investment. At September 30, 20172022 and December 31, ~~2016,~~2021, the Company’s net cumulative contributed capital to the partnerships ~~existing~~ at each respective balance sheet date totaled ~~$19,569~~$27,180 and ~~$31,946,~~$28,371, respectively, and the Company’s maximum exposure to loss aggregated ~~$20,998~~$26,695 and ~~$29,263,~~$28,133, respectively.

d) Investment in Unconsolidated Joint Venture

~~The Company~~Melbourne FMA, LLC, a wholly owned subsidiary, currently has an equity investment in FMKT Mel JV, ~~which is~~ a Florida limited liability company treated as a joint venture under U.S. GAAP. In March 2017, FMKT Mel JV sold a portion of its outparcel land for gross proceeds of $825 and recognized a $331 gain on sale of which $199 was allocated to the Company in accordance with the profit allocation specified in the operating agreement.

At ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, the Company’s maximum exposure to loss relating to ~~this~~the variable interest entity was ~~$1,664~~$858 and ~~$2,102,~~$363, respectively, representing the carrying value of the investment. In June 2022, the joint venture sold its last outparcel and recognized a gain of $572. There were 0 cash distributions during the six months ended June 30, 2022 and 2021. At ~~September~~June 30, ~~2017,~~2022, there was $0undistributed income of ~~undistributed income~~$488 as opposed to none at December 31, 2021 from this equity method ~~investment as compared with an undistributed loss, after an equity distribution, of $25 at December 31, 2016, the amounts of which were included in the Company’s consolidated retained income.~~

The limited liability company members received no cash distributions during the three months ended September 30, 2017 and 2016. During the nine months ended September 30, 2017, the Company received a cash distribution of $564, representing a combined distribution of $147 in earnings and $417 in capital as compared with no cash distribution during the nine months ended September 30, 2016. investment. The following tables provide ~~FMKT Mel JV’s~~FMJV’s summarized unaudited financial results and the unaudited financial positions:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Operating results:
Total revenues	$	572		$	—		$	572		$	—
Total expenses		(8	)		(28	)		(22	)		(56	)
Net income (loss)	$	564		$	(28	)	$	550		$	(56	)
The Company’s share of net income (loss)*	$	508		$	(25	)	$	495		$	(50	)

* Included in net investment income in the Company’s consolidated statements of income.


	June 30,		December 31,
	2022		2021
Balance sheet:
Property and equipment, net	$	0	$	357
Cash		953		29
Other		18		18
Total assets	$	971	$	404

Other liabilities	$	17	$	0
Members’ capital		954		404
Total liabilities and members’ capital	$	971	$	404
Investment in unconsolidated joint venture, at equity**	$	858	$	363

** Includes the 90% share of FMKT Mel JV’s operating results.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
Operating results:

Total revenues and gain
   $ —      $ 235    $ 331    $ 949
Total expenses
   (18 )    (318 )    (83 )    (801 )








Net (loss) income
   $ (18 )    $ (83 )    $ 248    $ 148








The Company’s share of net (loss) income*
   $ (16 )    $ (75 )    $ 126    $ 153

*	~~Included in net investment income in the Company’s consolidated statements of income.~~

   September 30,
2017    December 31,
2016
Balance Sheet:

Construction in progress - real estate
   $ 375    $ 334
Property and equipment, net
   1,213    1,654
Cash
   110    179
Other
   180    180




Total assets
   $ 1,878    $ 2,347




Accounts payable
   $ 15    $ 11
Other liabilities
   14    —
Members’ capital
   1,849    2,336




Total liabilities and members’ capital
   $ 1,878    $ 2,347




Investment in unconsolidated joint venture, at equity*
   $ 1,664    $ 2,102

*	~~Included the 90% share of FMKT Mel JV’s operating results.~~

e) Real Estate Investments

~~Real estate investments include office and retail space that is leased to tenants, wet and dry boat storage, one restaurant, and two marinas.~~ Real estate investments consist of the following as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016.~~2021:


							June 30,			December 31,
	September 30, 2017			December 31, 2016			2022			2021
Land	$	20,422		$	17,592		$	39,425		$	39,720
Land improvements		9,904			9,336			11,933			11,917
Buildings		17,742			16,154
Buildings and building improvements								29,410			29,405
Tenant and leasehold improvements		996			872			1,548			1,511
Construction in progress*		—			3,404
Other		2,911			2,683			1,318			1,265

Total, at cost		51,975			50,041			83,634			83,818
Less: accumulated depreciation and amortization		(3,014	)		(1,955	)		(10,911	)		(9,922	)

Real estate investments	$	48,961		$	48,086		$	72,723		$	73,896

*	~~This project, which was developed by the Company’s consolidated variable interest entity, was completed in July 2017. The costs were reclassified to land, land improvement, and building.~~

In May 2022, the Company sold one outparcel in Sorrento, Florida for net proceeds of $667. See additional information under f) Net Investment Income (Loss) below. Depreciation and amortization expense related to real estate investments was ~~$374~~$483 and ~~$126~~$479 for the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively, and ~~$1,062~~$989 and ~~$314~~$970 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively.

f) Net Investment Income (Loss)

Net investment income (loss), by source, is summarized as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Available-for-sale fixed-maturity securities	$	1,137		$	384		$	1,585		$	825
Equity securities		300			340			587			691
Investment expense		(116	)		(129	)		(250	)		(254	)
Limited partnership investments		19			1,572			1,799			2,359
Real estate investments		1,538			344			1,885			3,341
Net income (loss) from unconsolidated joint venture		508			(25	)		495			(50	)
Cash and cash equivalents		298			149			451			317
Net investment income	$	3,684		$	2,635		$	6,552		$	7,229

For the three and six months ended June 30, 2022, income from real estate investments included a net gain of $376 resulting from the sale of the outparcel described in e) Real Estate Investments and $451 of income from selling the liquor license previously owned by the Company’s restaurant business which was discontinued in 2020. For the six months ended June 30, 2021, income from real estate investments included a net gain of $2,790 resulting from a legal settlement with The Kroger Co. in a lawsuit filed by a real estate subsidiary of the Company to enforce a guaranty of a commercial lease.

g) Other Investments

From time to time, the Company may invest in financial assets other than stocks, mutual funds and bonds. For the three months ended June 30, 2022 and 2021, net realized gains related to other investments were $75 and $452, respectively, and $156 and $827 for the six months ended June 30, 2022 and 2021, respectively.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

~~f) Consolidated Variable Interest Entity~~

The Company has a commercial property in Riverview, Florida. The development project of this property was completed in July 2017 through a limited liability company treated under U.S. GAAP as a joint venture in which the Company’s subsidiary has a controlling financial interest and, as a result, it is the primary beneficiary. The following table summarizes the assets and liabilities related to this variable interest entity which are included in the accompanying consolidated balance sheets.

   September 30,
2017    December 31,
2016
Cash and cash equivalents
   $ 90    $ 65
Construction in progress included in real estate investments
   $ —      $ 3,404
Real estate investments
   $ 4,472    $ —
Other assets
   $ 139    $ —
Accrued expenses
   $ 59    $ 68
Other liabilities
   $ 42    $ 11

~~g) Net Investment Income~~

~~Net investment income (loss), by source, is summarized as follows:~~

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
Available-for-sale securities:

Fixed-maturity securities
   $ 1,532    $ 1,164    $ 4,172    $ 3,394
Equity securities
   790    817    2,461    2,552
Investment expense
   (176 )    (165 )    (526 )    (488 )
Limited partnership investments
   392    1,119    1,724    54
Real estate investments
   (292 )    (372 )    (856 )    (455 )
(Loss) income from unconsolidated joint venture
   (16 )    (75 )    126    153
Cash and cash equivalents
   648    285    1,415    755
Other
   —      12    6    35








Net investment income
   $ 2,878    $ 2,785    $ 8,522    $ 6,000

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

Note 5 —-- Comprehensive Income (Loss)

Comprehensive income (loss) includes net income ~~(loss)~~ and other comprehensive income or loss, which for the Company includes changes in unrealized gains or losses of investments carried at fair value and changes into the ~~unrealized other-than-temporary impairment~~credit losses related to these investments. Reclassification adjustments for realized (gains) losses are reflected in net realized investment gains (losses) on the consolidated statements of income. The components of other comprehensive income or loss and the related tax effects allocated to each component were as follows:

   Three Months Ended
September 30, 2017    Three Months Ended
September 30, 2016
   Before
Tax    Income Tax
Expense
(Benefit)    Net of
Tax    Before
Tax Income Tax
Expense
(Benefit) Net of
Tax
Unrealized gain arising during the period
   $ 2,155    $ 831    $ 1,324    $ 2,234 $ 862 $ 1,372
Other-than-temporary impairment loss
   474    183    291    224 86 138
Call and repayment losses charged to investment income
   —      —      —      3 1 2
Reclassification adjustment for realized losses (gains)
   226    87    139    (583 ) (225 ) (358 )








Total other comprehensive income
   $ 2,855    $ 1,101    $ 1,754    $ 1,878 $ 724 $ 1,154


	Three Months Ended									Three Months Ended
	June 30, 2022									June 30, 2021
	Before			Income			Net of			Before			Income			Net of
	Tax			Tax Effect			Tax			Tax			Tax Effect			Tax
Net unrealized (losses) gains	$	(2,174	)	$	(551	)	$	(1,623	)	$	99		$	25		$	74
Call and repayment gains charged to investment income		0			0			0			0			(1	)		1
Reclassification adjustment for realized gains		(8	)		(2	)		(6	)		(576	)		(141	)		(435	)
Total other comprehensive loss	$	(2,182	)	$	(553	)	$	(1,629	)	$	(477	)	$	(117	)	$	(360	)

   Nine Months Ended
September 30, 2017 Nine Months Ended
September 30, 2016
   Before
Tax Income Tax
Expense
(Benefit) Net of
Tax Before
Tax Income Tax
Expense
(Benefit) Net of
Tax
Unrealized gain arising during the period
   $ 4,822 $ 1,860 $ 2,962 $ 10,290 $ 3,970 $ 6,320
Other-than-temporary impairment loss
   864 333 531 1,441 556 885
Call and repayment losses charged to investment income
   9 4 5 14 5 9
Reclassification adjustment for realized gains
   (2,276 ) (878 ) (1,398 ) (899 ) (347 ) (552 )


Total other comprehensive income
   $ 3,419 $ 1,319 $ 2,100 $ 10,846 $ 4,184 $ 6,662


	Six Months Ended									Six Months Ended
	June 30, 2022									June 30, 2021
	Before			Income			Net of			Before			Income			Net of
	Tax			Tax Effect			Tax			Tax			Tax Effect			Tax
Net unrealized losses	$	(6,325	)	$	(1,598	)	$	(4,727	)	$	(83	)	$	(20	)	$	(63	)
Call and repayment gains charged to investment income		0			0			0			(2	)		(1	)		(1	)
Reclassification adjustment for realized losses (gains)		421			107			314			(577	)		(141	)		(436	)
Total other comprehensive loss	$	(5,904	)	$	(1,491	)	$	(4,413	)	$	(662	)	$	(162	)	$	(500	)

Note 6 —-- Fair Value Measurements

The Company records and discloses certain financial assets at their estimated fair ~~value.~~values. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:

HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Valuation Methodology

Cash and ~~cash equivalents~~Cash Equivalents

Cash and cash equivalents primarily consist of money-market funds and certificates of ~~deposit.~~deposit maturing within 90 days. Their carrying value approximates fair value due to the short maturity and high liquidity of these funds.

~~Available-for-sale~~Restricted Cash

Restricted cash represents cash held by state authorities and ~~trading securities~~the carrying value approximates fair value.

Fixed-Maturity and Equity Securities

Estimated fair values of the Company’s~~available-for-sale~~ fixed-maturity and ~~trading~~equity securities are determined in accordance with U.S. GAAP, using valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair values are generally measured using quoted prices in active markets for identical securities or other inputs that are observable either

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

directly or indirectly, such as quoted prices for similar securities. In those instances where observable inputs are not available, fair values are measured using unobservable inputs. Unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the security and are developed based on the best information available in the circumstances. Fair value estimates derived from unobservable inputs are significantly affected by the assumptions used, including the discount rates and the estimated amounts and timing of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange.

The estimated fair values for securities that do not trade on a daily basis are determined by management, utilizing prices obtained from an independent pricing service and information provided by brokers, which are level 2 inputs. Management reviews the assumptions and methods utilized by the pricing service and then compares the relevant data and pricing to broker-provided data. The Company gains assurance of the overall reasonableness and consistent application of the assumptions and methodologies, and compliance with accounting standards for fair value determination through ongoing monitoring of the reported fair values.

~~Limited Partnership Investments~~Revolving Credit Facility

~~As described in Note 4 — “Investments” under~~ ~~Limited Partnership Investments~~,From time to time, the Company has interests in limited partnerships which are private equity funds. Pursuant to U.S. GAAP, these funds are required to use fair value accounting; therefore, the estimated fair value approximates the carrying value of these funds.

~~Revolving Credit Facility~~

an amount outstanding under a revolving credit facility. The interest rate ~~on the Company’s revolving credit facility was~~is variable and is periodically adjusted based on the London Interbank Offered Rate plus a spread. As a result, ~~its~~ carrying value, ~~at December 31, 2016 approximated~~when outstanding, approximates fair value. ~~In February 2017, this credit facility was converted into a 3.95% three-year promissory note. See Note 8 — “Long-Term Debt” under~~~~3.95% Promissory Note.~~

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

~~Long-term debt~~Long-Term Debt

The following table summarizes components of the Company’s long-term debt and methods used in estimating their fair values:


	Maturity Date	~~Maturity~~ ~~Date~~	Valuation Methodology
8%4.75% Convertible Senior Notes	2042	*	~~Closing~~ Quoted price ~~listed on the New York Stock Exchange~~
~~3.875%~~4.25% Convertible Senior Notes	2037	~~2019~~	Quoted price ~~at September 30, 2017;~~
3.90% Promissory Note	2032	Discounted cash flow method/Level 3 inputs ~~at December 31, 2016~~
~~4.25% Convertible Senior Notes~~3.75% Callable Promissory Note		~~2037~~	~~Quoted price~~
~~3.95% Promissory Note~~2036		~~2020~~	Discounted cash flow method/Level 3 inputs
4%4.55% Promissory Note	2036	~~2031~~	Discounted cash flow method/Level 3 inputs
~~3.75% Promissory Note~~		~~2036~~	~~Discounted cash flow method/Level 3 inputs~~

*	~~Redeemed on April 3, 2017.~~

Assets Measured at Estimated Fair Value on a Recurring Basis

The following ~~table presents~~tables present information about the Company’s financial assets measured at estimated fair value on a recurring basis. The ~~table indicates~~tables indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~2021:


	Fair Value Measurements Using									Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		��	Total		(Level 1)		(Level 2)		(Level 3)		Total
*As of September 30, 2017*
As of June 30, 2022
Financial Assets:
Cash and cash equivalents	$	292,438	$	—	$	—		$	292,438	$	360,488	$	—	$	—	$	360,488
Restricted cash										$	2,600	$	—	$	—	$	2,600
Fixed-maturity securities:
U.S. Treasury and U.S. government agencies		45,739		1,502		—			47,241	$	366,134	$	1,429	$	—	$	367,563
Corporate bonds		121,516		994		—			122,510		28,424		—		—		28,424
State, municipalities, and political subdivisions		—		76,940		—			76,940		—		1,767		—		1,767
Exchange-traded debt		9,276		—		—			9,276		713		—		—		713
Redeemable preferred stock		135		—		—			135		104		—		—		104

Total fixed-maturity securities		176,666		79,436		—			256,102
Total available-for-sale securities										$	395,375	$	3,196	$	—	$	398,571
Equity securities		63,023		—		—			63,023	$	35,719	$	—	$	—	$	35,719

Totalavailable-for-sale securities		239,689		79,436		—			319,125

Trading equity securities		1,003		—		—			1,003

Total	$	533,130	$	79,436	$	—		$	612,566


	Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total
As of December 31, 2021
Financial Assets:
Cash and cash equivalents	$	628,943	$	—	$	—	$	628,943
Restricted cash	$	2,400	$	—	$	—	$	2,400
Fixed-maturity securities:
U.S. Treasury and U.S. government agencies	$	15,536	$	1,488	$	—	$	17,024
Corporate bonds		22,492		—		—		22,492
State, municipalities, and political subdivisions		—		1,808		—		1,808
Exchange-traded debt		811		—		—		811
Redeemable preferred stock		448		—		—		448
Total available-for-sale securities	$	39,287	$	3,296	$	—	$	42,583
Equity securities	$	51,740	$	—	$	—	$	51,740

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

   Fair Value Measurements Using
   (Level 1)    (Level 2)    (Level 3)    Total
As of December 31, 2016

Financial Assets:

Cash and cash equivalents
   $ 280,531    $ —      $ —      $ 280,531








Fixed-maturity securities:

U.S. Treasury and U.S. government agencies
   1,939    —      —      1,939
Corporate bonds
   73,519    985    —      74,504
State, municipalities, and political subdivisions
   —      78,306    —      78,306
Exchange-traded debt
   11,262    —      —      11,262
Redeemable preferred stock
   237    —      —      237








Total fixed-maturity securities
   86,957    79,291    —      166,248
Equity securities
   53,035    —      —      53,035








Totalavailable-for-sale securities
   139,992    79,291    —      219,283








Total
   $ 420,523    $ 79,291    $ —      $ 499,814

~~Assets and~~ Liabilities Carried at Other Than Fair Value

The following tables present fair value information for ~~assets and~~ liabilities that are carried on the consolidated balance ~~sheet~~sheets at amounts other than fair value as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016.~~2021:

   Carrying    Fair Value Measurements Using    Estimated
   Value    (Level 1)    (Level 2)    (Level 3)    Fair Value
As of September 30, 2017

Financial Assets:

Limited partnership investments
   $ 20,998    $ —      $ —      $ 20,998    $ 20,998
Financial Liabilities:

Long-term debt:

3.875% Convertible senior notes
   $ 84,547    $ —      $ 88,874    $ —      $ 88,874
4.25% Convertible senior notes
   125,581    —      128,656    —      128,656
3.95% Promissory note
   9,317    —      —      9,361    9,361
4% Promissory note
   8,321    —      —      8,108    8,108
3.75% Promissory note
   8,545    —      —      7,984    7,984










Total long-term debt
   $ 236,311    $ —      $ 217,530    $ 25,453    $ 242,983


	Carrying		Fair Value Measurements Using						Estimated
	Value		(Level 1)		(Level 2)		(Level 3)		Fair Value
As of June 30, 2022
Financial Liabilities:
Long-term debt:
4.75% Convertible Senior Notes	$	166,596	$	—	$	178,522	$	—	$	178,522
4.25% Convertible Senior Notes		23,916		—		27,143		—		27,143
3.90% Promissory Note		9,117		—		—		8,711		8,711
3.75% Callable Promissory Note		6,973		—		—		6,604		6,604
4.55% Promissory Note		5,025		—		—		4,959		4,959
Total long-term debt	$	211,627	$	—	$	205,665	$	20,274	$	225,939

   Carrying    Fair Value Measurements Using    Estimated
   Value    (Level 1)    (Level 2)    (Level 3)    Fair Value
As of December 31, 2016

Financial Assets:

Limited partnership investments
   $ 29,263    $ —      $ —      $ 29,263    $ 29,263
Financial Liabilities:

Revolving credit facility
   $ 9,463    $ —      $ —      $ 9,463    $ 9,463
Long-term debt:

8% Senior notes
   $ 39,448    $ —      $ 41,618    $ —      $ 41,618
3.875% Convertible senior notes
   81,988    —      —      84,696    84,696
4% Promissory note
   8,660    —      —      8,664    8,664
3.75% Promissory note
   8,767    —      —      8,506    8,506










Total long-term debt
   $ 138,863    $ —      $ 41,618    $ 101,866    $ 143,484


	Carrying		Fair Value Measurements Using						Estimated
	Value		(Level 1)		(Level 2)		(Level 3)		Fair Value
As of December 31, 2021
Financial Liabilities:
Revolving credit facility	$	15,000	$	—	$	15,000	$	—	$	15,000
Long-term debt:
4.25% Convertible Senior Notes	$	23,885	$	—	$	33,248	$	—	$	33,248
3.90% Promissory Note		9,287		—		—		10,488		10,488
3.75% Callable Promissory Note		7,153		—		—		7,852		7,852
4.55% Promissory Note		5,148		—		—		6,051		6,051
Total long-term debt	$	45,473	$	—	$	33,248	$	24,391	$	57,639

Note 7 -- Intangible Assets, Net

The Company’s intangible assets, net consist of the following:


	June 30,			December 31,
	2022			2021
Anchor tenant relationships (a)	$	1,761		$	1,761
In-place leases		4,215			4,215
Policy renewal rights - United		12,384			7,634
Non-compete agreements - United (b)		314			195
Total, at cost		18,674			13,805
Less: accumulated amortization		(4,316	)		(3,169	)
Intangible assets, net	$	14,358		$	10,636

(a)

An anchor tenant is a tenant that attracted more customers than other tenants.

(b)

$119 was fully amortized in June 2022 and $195 was fully amortized in June 2021.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The remaining weighted-average amortization periods for the intangible assets at June 30, 2022 are summarized in the table below:


Anchor tenant relationships		11.9 years
In-place leases		9.8 years
Policy renewal rights - United		3.7 years

In connection with the Southeast Region assumed business as described in Note ~~7 —~~1 -- “Nature of Operations” the Company recorded intangible assets of $4,869 representing the renewal rights and non-compete agreement in exchange for consideration consisting of a 6% commission on any replacement premium which includes $3,800 of commission prepaid up-front. The consideration was estimated at $4,869 with a $1,069 contingent liability. At June 30, 2022 and December 31, 2021, contingent liabilities related to renewal rights intangible assets were $3,488 and $2,419, respectively, with the contingent liabilities included in other liabilities on the consolidated balance sheets.

The renewal rights and non-compete intangible assets acquired do not meet the definition of a business as substantially all of the fair value of the intangible assets acquired are concentrated in a group of similar assets. Therefore, the Company accounted for the purchase of the renewal rights and non-compete intangible assets as an asset acquisition.

Note 8 -- Other Assets

The following table summarizes the Company’s other assets:


					June 30,		December 31,
	September 30, 2017		December 31, 2016		2022		2021
Benefits receivable related to retrospective reinsurance contracts	$	1,969	$	5,810	$	10,938	$	3,064
Reimbursement receivable under TPA service						1,519		3,525
Prepaid expenses		2,233		1,581		4,560		2,853
Deposits						2,577		406
Lease acquisition costs, net		580		615		570		505
Restricted cash		709		600
Other		5,970		2,736		8,632		4,364

Total other assets	$	11,461	$	11,342	$	28,796	$	14,717

Note ~~8 — Long-Term Debt~~9 -- Revolving Credit Facility

In May 2022, the Company repaid the entire credit facility balance of $15,000. For the three months ended June 30, 2022 and 2021, interest expense was $62 and $25, respectively, including $24 and $24 of amortization of issuance costs, respectively. For the six months ended June 30, 2022 and 2021, interest expense was $151 and $129, respectively, including $49 and $49 of amortization of issuance costs, respectively. At June 30, 2022, the Company was in compliance with all required covenants with 0 borrowings outstanding. The ~~following table summarizes~~borrowing capacity of the ~~Company’s long-term debt.~~facility is now $65,000.

   September 30,
2017    December 31,
2016
8% Senior Notes, redeemed in April 2017
   $ —      $ 40,250
3.875% Convertible Senior Notes, due March 15, 2019
   89,990    89,990
4.25% Convertible Senior Notes, due March 1, 2037
   143,750    —
3.95% Promissory note, due through February 17, 2020
   9,417    —
4% Promissory note, due through February 1, 2031
   8,468    8,821
3.75% Promissory note, due through September 1, 2036
   8,692    8,924




Total principal amount
   260,317    147,985
Less: unamortized discount and issuance costs
   (24,006 )    (9,122 )




Total long-term debt
   $ 236,311    $ 138,863

The following table summarizes future maturities of long-term debt as of September 30, 2017, which takes into consideration the assumption that the 4.25% Convertible Senior Notes are repurchased at the earliest call date.

Due in 12 months following September 30,

2017
   $ 1,039
2018
   91,070
2019
   9,815
2020
   906
2021
   144,693
Thereafter
   12,794


Total
   $ 260,317

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 10 -- Long-Term Debt

The following table summarizes the Company’s long-term debt:


	June 30,			December 31,
	2022			2021
4.75% Convertible Senior Notes, due June 1, 2042	$	172,500		$	0
4.25% Convertible Senior Notes, due March 1, 2037		23,916			23,916
3.90% Promissory Note, due through April 1, 2032		9,253			9,431
3.75% Callable Promissory Note, due through September 1, 2036		7,060			7,246
4.55% Promissory Note, due through August 1, 2036		5,098			5,225
Finance lease liabilities, due through October 15, 2024		21			31
Total principal amount		217,848			45,849
Less: unamortized issuance costs		(6,200	)		(345	)
Total long-term debt	$	211,648		$	45,504

The following table summarizes future maturities of long-term debt as of June 30, 2022, which takes into consideration the assumption that the 4.75% Convertible Senior Notes and 4.25% Convertible Senior Notes are repurchased at their respective next earliest call dates:


Due in 12 months following June 30,
2022	$	1,026
2023		1,057
2024		1,096
2025		1,140
2026		197,603
Thereafter		15,926
Total	$	217,848

Information with respect to interest expense related to long-term debt is as follows:


										Three Months Ended				Six Months Ended
	Three Months Ended September 30,				Nine Months Ended September 30,					June 30,				June 30,
	2017		2016		2017			2016		2022		2021		2022		2021
Interest Expense:
Contractual interest	$	2,662	$	1,810	$	7,766		$	5,466	$	1,334	$	1,704	$	1,806	$	3,411
Non-cash expense (a)		1,746		862		4,623			2,646		119		271		159		539
Capitalized interest (b)		—		—		(61	)		—

Total	$	4,408	$	2,672	$	12,328		$	8,112	$	1,453	$	1,975	$	1,965	$	3,950

~~(a)~~

~~Represents amortization of debt discount and issuance costs.~~

~~(b)~~

~~Interest was capitalized for a construction project in Riverview, Florida which is intended for lease.~~

(a)

Includes amortization of debt issuance costs.

4.75% Convertible Senior Notes

The Company’s Convertible Senior Notes consist of 3.875% Convertible Senior Notes due 2019 (“3.875% Convertible Notes”) and 4.25% Convertible Senior Notes due 2037 (“4.25% Convertible Notes”). The 3.875% Convertible Notes were issued in late 2013 in a private offering for an aggregate principal amount of $103,000. During the first quarter of 2016, the Company repurchased an aggregate of $13,010 in principal, thereby decreasing the aggregate principal balance of its 3.875% Convertible Notes to $89,990. On March 3, 2017,In May 2022, the Company issued ~~4.25%~~4.75% Convertible Senior Notes in a private offering for an aggregate principal amount of ~~$143,750.~~$172,500. The net proceeds of the ~~4.25%~~4.75% Convertible Senior Notes were ~~$138,775~~$166,486 after ~~$4,975~~$6,014 in related issuance and transaction costs. These notes mature June 1, 2042 and the cash interest is payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2022.

The ~~following table summarizes the principal and interest payment terms of these Convertible Senior Notes:~~


~~Convertible Senior Notes~~		~~Interest Payment Terms~~
~~3.875% Convertible Notes, due March 15, 2019~~		~~Semiannually in arrears: March 15 and September 15~~
~~4.25% Convertible Notes, due March 1, 2037~~		~~Semiannually in arrears: March 1 and September 1~~

~~The~~4.75% Convertible Senior Notes rank equally in right of payment to the Company’s existing and future unsecured and unsubordinated obligations. ~~These~~The 4.75% Convertible Senior Notes do not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness or

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

the issuance or repurchase of securities by the Company or any of its subsidiaries. The 4.75% Convertible Senior Notes provide no protection to the note holders in the event of a fundamental change or other corporate transaction involving the Company except those described in ~~each respective~~the indenture. ~~These~~The 4.75% Convertible Senior Notes do not require a sinking fund to be established for the purpose of redemption. In conjunction with the ~~issuances~~issuance of the 4.75% Convertible Senior Notes, the Company entered into ~~prepaid~~a share repurchase ~~forward contracts and share repurchase agreements~~agreement providing for the repurchase of shares of the Company’s common stock. See Note ~~14 — “Stockholders’ Equity”~~18 -- “Equity” underShare Repurchase ~~Agreements~~ ~~and~~~~Prepaid Share Repurchase Forward Contracts~~Agreement for additional information.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

~~The following table summarizes information regarding the equity and liability components of the Convertible Senior Notes:~~

   September 30,
2017    December 31
2016
Principal amount
   $ 233,740    $ 89,990
Unamortized discount
   (18,790 )    (6,795 )




Liability component – net carrying value before issuance costs
   $ 214,950    $ 83,195




Equity component – conversion, net of offering costs
   $ 31,051    $ 15,900

Embedded Conversion Feature

The conversion feature of ~~these~~the 4.75% Convertible Senior Notes is subject to conversion rate adjustments upon the occurrence of specified events (including payment of dividends above a specified amount) but will not be adjusted for any accrued and unpaid interest.

~~3.875% Convertible Notes~~. Since January 2015, the Company’s cash dividends on common stock have exceeded $0.275 per share, resulting in adjustments to the conversion rate of the 3.875% Convertible Notes. Accordingly, as of September 30, 2017, the conversion rate of the Company’s 3.875% Convertible Notes was 16.1801 shares of common stock for each $1 in principal amount, which was the equivalent of approximately $61.80 per share.

~~4.25% Convertible Notes~~. The conversion rate of the ~~4.25%~~4.75% Convertible Senior Notes is currently ~~16.2635~~12.4166 shares of common stock for each $1 in principal amount, which is the equivalent of approximately ~~$61.49~~$80.54 per share.

The holders of the 4.75% Convertible Senior Notes may convert all or a portion of their ~~Convertible Senior Notes~~convertible senior notes during specified periods prior to the maturity date as follows: (1) during any calendar quarter commencing after the calendar quarter ending on ~~the dates specified in each respective indenture,~~June 30, 2022, if the last reported sale price of the Company’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than ~~130%~~130% of the conversion price on each applicable trading day; (2) during the fivebusiness-day period after any ten consecutivetrading-day period in which the trading price per $1 principal amount of the 4.75% Convertible Senior Notes is less than ~~98%~~98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (3) if specified corporate events, including a change in control, occur; (4) if any or ~~(4)~~all of the 4.75% Convertible Senior Notes are called for redemption, at any time prior to the close of business on the business day prior to the redemption date; or ~~after~~(5) during either the ~~dates specified in each respective indenture.~~period beginning on, and including, March 1, 2027 and ending at the close of business on the business day immediately preceding June 7, 2027, or the period beginning on, and including, March 1, 2042 and ending at the close of business on the business day immediately preceding the maturity date.

The note holders who elect to convert their ~~Convertible Senior Notes~~convertible senior notes in connection with a fundamental change as described in the ~~indentures~~indenture will be entitled to a “make-whole” adjustment in the form of an increase in the conversion rate. Upon conversion, the Company has ~~options~~the option to satisfy its conversion obligation by paying or delivering cash, shares of its common stock or a combination of cash and shares of its common stock. As of ~~September~~June 30, ~~2017,~~2022, none of the conditions allowing the holders of ~~either class of~~ the 4.75% Convertible Senior Notes to convert had been met.

The Company determined that the 4.75% Convertible Senior Notes’ embedded conversion feature is not a derivative financial instrument but rather is required to be separately accounted for in equity because the Company may elect to settle the conversion option entirely or partially in cash. At issuance, the Company accounted for the equity component of the embedded conversion feature as a reduction in the carrying amount of the debt and ~~an increase in additionalpaid-in~~ ~~capital.~~does not require bifurcation.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

Embedded Redemption Feature – Fundamental Change

The note holders have the right to require the Company to repurchase for cash all or any portion of the 4.75% Convertible Senior Notes at par prior to the maturity date should any of the fundamental change events described in the ~~indentures~~indenture occur. The Company concluded that this embedded redemption feature is not a derivative financial instrument, does not require bifurcation, and that it is not probable at issuance that any of the

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

specified fundamental change events will occur. Therefore, this embedded redemption feature is not substantive and will not affect the expected life of the ~~liability component.~~liability.

Embedded Redemption Feature – Put Option of the Note Holder

At the option of the holders of the ~~4.25%~~4.75% Convertible Senior Notes, the Company is required to repurchase for cash all or any portion of the ~~4.25%~~4.75% Convertible Senior Notes at par on ~~March~~June 1, ~~2022, March~~2027, June 1, ~~2027~~2032 or ~~March~~June 1, ~~2032.~~2037. The Company concluded that this embedded feature is not a derivative financial ~~instrument. In addition, based on economic factors at the time when the 4.25% Convertible Notes were issued,~~instrument and does not require bifurcation. Due to this provision, the Company determined that it is ~~probable that~~appropriate to amortize the ~~note~~debt issuance costs from the date the debt is issued to the earliest date at which the holders ~~will exercise this option.~~of the 4.75% Convertible Senior Notes can demand payment. Thus, the Company amortizes the ~~liability component and related~~ issuance costs associated with the ~~4.25%~~4.75% Convertible Senior Notes over the period from ~~March 3, 2017~~May 23, 2022 to ~~March~~June 1, ~~2022.~~2027.

The effective interest ~~rates~~rate for the ~~3.875%~~4.75% Convertible ~~Notes and the 4.25% Convertible~~Senior Notes, taking into account both cash andnon-cash components, ~~approximate 8.3% and 7.6%, respectively.~~approximates 5.6%. Had a20-year term been used for the amortization of the ~~liability component and~~ issuance costs of the ~~4.25%~~4.75% Convertible Senior Notes, the annual effective interest rate charged to earnings would have ~~been~~ decreased to approximately ~~5.4%~~5.0%. As of ~~September~~June 30, ~~2017,~~2022, the remaining amortization ~~periods~~period of the debt ~~discounts were~~issuance costs was expected to be ~~1.5~~4.9 years for the ~~3.875%~~4.75% Convertible ~~Notes and 4.4 years for the~~ Senior Notes.

4.25% Convertible ~~Notes.~~

8% Senior Notes

On ~~April 3, 2017,~~March 1, 2022, none of the Company redeemed its 8% publicly traded, unsecured senior notes which had unamortized debt issuance costs of $743 at par for $40,805, including accrued and unpaid interest of $555. For the nine months ended September 30, 2017, the Company recognized a loss of $743 associated with the early extinguishment of this debt. The redemption was funded by the net proceeds from the issuanceholders of the 4.25% Convertible Senior ~~Notes.~~

~~3.95% Promissory Note~~

~~On February 27, 2017,~~Notes exercised the put option, which would have required the Company ~~converted its outstanding revolving credit facility~~to repurchase for cash all or any portion of ~~$9,441 into a three-year mortgage loan primarily collateralized by a retail shopping center~~the notes at par. The Company’s recent cash dividends on common stock have exceeded $0.35 per share, resulting in ~~Melbourne, Florida. Shortly after~~adjustments to the ~~loan~~ conversion ~~the Company withdrew an additional amount of $109, thereby increasing the loan amount to $9,550. The loan bears a fixed annual interest~~ rate of ~~3.95%. Approximately $50~~the 4.25% Convertible Senior Notes. Accordingly, as of June 30, 2022, the conversion rate of the Company’s 4.25% Convertible Senior Notes was 16.4976 shares of common stock for each $1 in principal ~~and interest is payable in 35 monthly installments beginning March 17, 2017 plus a final balloon payment~~amount, which was the equivalent of ~~$8,891 including principal and unpaid interest payable on~~approximately $60.61 per share.

The debt issuance costs for the 4.25% Convertible Senior Notes had been fully amortized as of February ~~17, 2020. The promissory note may be repaid in part or in full at any time without penalty.~~2022.

Note 11 -- Reinsurance

Reinsurance obtained from other insurance companies

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

~~Note 9 — Reinsurance~~

The Company cedes a portion of its homeowners’ insurance exposure to other entities under catastrophe excess of loss reinsurance ~~treaties~~contracts and a portion of its flood insurance exposure under one quota share reinsurance agreement. Ceded premiums under most catastrophe excess of loss reinsurance contracts are subject to revision resulting from subsequent adjustments in total insured value. Under the terms of the quota share reinsurance agreement, ~~effective January 1, 2017,~~ the Company ~~was~~is entitled to a ~~30%~~30% ceding commission on ceded premiums ~~written. During the third quarter~~written and a profit commission equal to 10% of 2017, the Company entered into a three-year flood catastrophe excess of loss reinsurance contract effective July 1, 2017. The reinsurance premiums under this three-year contract are generally determined on a quarterly basis based on the premiums associated with the applicable flood total insured valuenet profit.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in ~~force on the last day of the preceding quarter. Effective September 1, 2017, the quota~~thousands, except share ~~reinsurance agreement was terminated~~ and ~~replaced with a new quota~~per share ~~agreement with revised terms and conditions. Under the new agreement, the Company is also entitled to a 30% ceding commission on ceded premiums written.~~amounts, unless otherwise stated)

The Company remains liable for claims payments in the event that any reinsurer is unable to meet its obligations under the reinsurance agreements. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. The Company contracts with a number of reinsurers to secure its annual reinsurance coverage, which generally becomes effective June ~~1st~~1st of each year. The Company purchases reinsurance each year taking into consideration probable maximum losses and reinsurance market conditions.

The impact of the reinsurance ~~treaties~~contracts on premiums written and earned is as follows:


													Three Months Ended						Six Months Ended
	Three Months Ended September 30,						Nine Months Ended September 30,						June 30,						June 30,
	2017			2016			2017			2016			2022			2021			2022			2021
Premiums Written:
Direct	$	94,935		$	93,282		$	301,930		$	308,682		$	187,792		$	143,224		$	359,773		$	253,355
Assumed		(63	)		(18	)		(1,184	)		(377	)		(1,640	)		41,754			3,673			57,471

Gross written		94,872			93,264			300,746			308,305			186,152			184,978			363,446			310,826
Ceded		(44,704	)		(29,242	)		(101,528	)		(105,998	)		(56,205	)		(46,436	)		(109,367	)		(89,535	)

Net premiums written	$	50,168		$	64,022		$	199,218		$	202,307		$	129,947		$	138,542		$	254,079		$	221,291

Premiums Earned:
Direct	$	87,118		$	92,112		$	259,698		$	283,011		$	164,887		$	115,733		$	313,733		$	226,025
Assumed		1,551			430			10,678			3,262			16,237			23,707			46,316			44,357

Gross earned		88,669			92,542			270,376			286,273			181,124			139,440			360,049			270,382
Ceded		(44,705	)		(29,242	)		(101,529	)		(105,998	)		(56,205	)		(46,436	)		(109,367	)		(89,535	)

Net premiums earned	$	43,964		$	63,300		$	168,847		$	180,275		$	124,919		$	93,004		$	250,682		$	180,847

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, reinsurance recoveries~~2022, the Company recognized ceded losses of ~~$213,746~~$2,517 and ~~$213,751,~~$3,387, respectively, ~~were deducted from~~as reductions in losses ~~incurred.~~and loss adjustment expenses. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2021, the Company recognized ceded losses of $487 and $594, respectively, as reductions in losses and loss adjustment expenses. At June 30, 2022 and December 31, 2021, there were ~~no recoveries pertaining~~45 and 55 reinsurers, respectively, participating in the Company’s reinsurance program. Total net amounts recoverable and receivable from reinsurers at June 30, 2022 and December 31, 2021 were $53,482 and $76,650, respectively. Approximately 54.9% of the reinsurance recoverable balance at June 30, 2022 was receivable from 3 reinsurers, one of which was the Florida Hurricane Catastrophe Fund, a tax-exempt state trust fund. Based on all available information considered in the rating-based method, the Company recognized decreases in credit loss expense of $17 and $28 for the three and six months ended June 30, 2022, respectively. For the three and six months ended June 30, 2021, the Company derecognized credit loss expenses of $16 and $28, respectively. Allowances for credit losses related to the reinsurance recoverable balance were $62 and $90 at June 30, 2022 and December 31, 2021, respectively.

One of the existing reinsurance contracts includes retrospective provisions that adjust premiums in the event losses are minimal or zero. Prior to June 1, 2022, there were ~~deducted from losses incurred. The recoveries~~two reinsurance contracts with retrospective provisions. For the three and six months ended June 30, 2022, the Company recognized reductions in ~~2017 were~~premiums ceded of $6,390 and $7,874, respectively, related to ~~Hurricane Irma which~~these adjustments in the consolidated statements of income. For the three and six months ended June 30, 2021, the Company recognized reductions in premiums ceded of $3,575 and $8,255, respectively. See Note 20 -- “Commitments and Contingencies” for additional information.

3130

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

made landfall in the Florida Peninsula and caused significant property damages across the region. At September 30, 2017 and December 31, 2016, there were 37 and 35 reinsurers, respectively, participating in the Company’s reinsurance program. Amounts receivable ~~with respect~~pursuant to reinsurers at September 30, 2017 and December 31, 2016 were $213,746 and $0, respectively. Included in the amounts receivable at September 30, 2017 was $7,400 related to the Company’s contract with Oxbridge Reinsurance Limited, a related party. Approximately 31.3% of the reinsurance recoverable balance at September 30, 2017 was concentrated in two reinsurers. Based on the insurance ratings, the payment history and the financial strength of the reinsurers, management believes there was no significant credit risk associated with its reinsurers’ obligations to perform on any prepaid reinsurance contract and to fund any reinsurance recoverable balance as of September 30, 2017.

~~Certain of the reinsurance contracts include~~ retrospective provisions that adjust premiums, increase the amount of future coverage, or result in a profit commission in the event losses are minimal or zero. The Company’s preliminary losses related to Hurricane Irma before reinsurance recoveries are estimated to be in the range of $250,000 to $300,000. As a result, the balances of previously accrued benefits and deferred reinsurance premiums were adjusted with the changes recognized in the consolidated statement of income as additional ceded premiums. For the three and nine months ended September 30, 2017, the Company recognized net ceded premiums of $12,464 and $5,508, respectively, related to these adjustments. Included in these amounts attributable to the Company’s contract with Oxbridge for the three and nine months ended September 30, 2017 were $2,415 and $903, respectively. In contrast, these adjustments were reflected as a net reduction in ceded premiums of $3,428 for the three months ended September 30, 2016, of which $594 related to the Company’s contract with Oxbridge. For the nine months ended September 30, 2016, these adjustments were $9,250, of which $1,334 related to the Company’s contract with Oxbridge. In June 2016, the Company received a total of $37,800 in cash benefits related to two retrospective reinsurance contracts that terminated May 31, 2016 of which $7,560 was received from Oxbridge. In September 2016, the Company received the final cash payment of $5,716 under the terms of the remaining retrospective reinsurance contract which terminated May 31, 2016.

~~In addition, these adjustments~~ are reflected in other ~~assets and prepaid reinsurance premiums.~~assets. At ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, other assets included ~~$1,969~~$10,938 and $5,810, respectively, of which $393 and $1,043 related to the contract with Oxbridge and prepaid reinsurance premiums included $484 and $2,152, respectively, of which $85 and $338 related to the contract with Oxbridge.$3,064, respectively. Management believes the credit risk associated with the collectability of ~~these~~ accrued benefits is minimal as the amount receivable is concentrated with ~~one reinsurer~~reinsurers with good credit ratings and the Company monitors the creditworthiness of ~~this reinsurer~~these reinsurers based on available information about ~~the~~each reinsurer’s financial ~~position.~~condition.

Reinsurance provided to other insurance companies

~~HCI GROUP, INC. AND SUBSIDIARIES~~For the three and six months ended June 30, 2022, $20,639 and $27,488, respectively, of assumed premiums written related to the Northeast Region’s insurance policies were derecognized, which primarily resulted from the return of the unearned portion of assumed written premiums subsequent to the Company’s renewal and/or replacement of insurance policies in Massachusetts. For the three and six months ended June 30, 2021, assumed premiums written were $41,754 and $57,471, respectively. At June 30, 2022, the Company had a net balance of $1,772 due to United related to the Northeast Region, consisting of payable on paid losses and loss adjustment expenses of $1,522 and premiums payable of $329, offset by ceding commission receivable of $79. At December 31, 2021, the Company had a net balance of $4,486 due to United related to the Northeast Region, consisting of ceding commission payable of $535 and payable on paid losses and loss adjustment expenses of $4,017, offset by premiums receivable of $66.

~~Notes~~Effective December 31, 2021, the Company entered into a separate agreement to ~~Consolidated Financial Statements (unaudited)~~provide 85% quota share reinsurance on United’s personal lines insurance policies in the states of Georgia, South Carolina and North Carolina through May 31, 2022. Effective June 1, 2022, the Company entered into a new agreement to provide 100% quota share reinsurance on United’s personal lines insurance policies in the Southeast Region. For the three and six months ended June 30, 2022, assumed premiums written related to the Southeast Region’s insurance policies were $18,999 and $31,161, respectively. At June 30, 2022, the Company had a net balance of $9,329 due to United, consisting of premiums payable of $14,027 and payable on paid losses and loss adjustment expenses of $2,780, offset by ceding commission receivable of $4,861 and a catastrophe cost allowance receivable of $2,617. At December 31, 2021, there was an amount receivable from United of $23,325, net of a ceding commission of $8,835 and a catastrophe cost allowance of $3,181.

~~(Amounts in thousands, except~~At June 30, 2022 and December 31, 2021, the balance of funds withheld for assumed business related to the Company’s quota share reinsurance agreements with United was $82,468and ~~per share amounts, unless otherwise stated)~~$73,716, respectively.

Note ~~10 —~~12 -- Losses and Loss Adjustment Expenses

The liability for losses and loss adjustment expenses (“LAE”) is determined on an individual case basis for all claims reported. The liability also includes amounts for unallocated expenses, anticipated future claim development and losses incurred but not reported.

The Company primarily writes insurance in ~~the state of Florida,~~states which could be exposed to hurricanes or other natural catastrophes. The occurrence of a major catastrophe could have a significant effect on the Company’s quarterly results and cause a temporary disruption of the normal operations of the Company. However, the Company is unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Activity in the liability for ~~unpaid~~ losses and ~~loss adjustment expenses~~LAE is summarized as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended						Six Months Ended
	2017			2016			2017			2016			June 30,						June 30,
Gross balance, beginning of period	$	73,089		$	54,727		$	70,492		$	51,690
Less: reinsurance recoverable		5			—			—			—
													2022			2021			2022			2021
Net balance, beginning of period		73,084			54,727			70,492			51,690
Net balance, beginning of period*													$	179,837		$	144,630		$	172,410		$	141,065
Incurred, net of reinsurance, related to:
Current period		78,337			21,283			123,710			68,703			78,448			51,310			148,524			93,230
Prior period		10,894			4,626			18,715			10,558			8,382			4,607			11,010			8,438

Total incurred, net of reinsurance		89,231			25,909			142,425			79,261			86,830			55,917			159,534			101,668

Paid, net of reinsurance, related to:
Current period		(20,888	)		(16,078	)		(40,392	)		(38,674	)		(37,627	)		(20,006	)		(56,423	)		(27,602	)
Prior period		(10,484	)		(7,363	)		(41,582	)		(35,082	)		(32,626	)		(25,640	)		(79,107	)		(60,230	)

Total paid, net of reinsurance		(31,372	)		(23,441	)		(81,974	)		(73,756	)		(70,253	)		(45,646	)		(135,530	)		(87,832	)

Net balance, end of period		130,943			57,195			130,943			57,195			196,414			154,901			196,414			154,901
Add: reinsurance recoverable		213,729			—			213,729			—

Add: reinsurance recoverable before allowance for credit losses														42,410			48,884			42,410			48,884
Gross balance, end of period	$	344,672		$	57,195		$	344,672		$	57,195		$	238,824		$	203,785		$	238,824		$	203,785

*Net balance represents beginning-of-period liability for unpaid losses and LAE less beginning-of-period reinsurance recoverable for unpaid losses and LAE.

The establishment of loss and LAE reserves is an inherently uncertain process and changes in loss and LAE reserve estimates are expected as these estimates are subject to the outcome of future events. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such estimates are adjusted. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, the Company ~~incurred $267,000 of estimated gross losses or $54,000 of estimated net~~recognized losses related to ~~Hurricane Irma~~prior periods of $8,382 and ~~experienced unfavorable development~~$11,010, respectively, primarily to increase the reserve resulting from increased litigation. Loss and LAE expenses for the three and six months ended June 30, 2022 included estimated losses, net of ~~$10,894~~reinsurance, of approximately $10,438 and ~~$18,715,~~$23,399, respectively, related to policies assumed from United. In addition, the Company recognized $5,811 and $11,932, respectively, of ~~which $9,442~~losses related to weather events in Florida during the three and ~~$17,438, respectively, pertain to claims in the 2015 and 2016 loss years.~~six months ended June 30, 2022.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note ~~11 —~~13 -- Segment Information

The ~~Company’s businesses consist~~Company identifies its operating divisions or segments based on managerial emphasis, organizational structure and revenue source. In the first quarter of ~~four operating divisions:~~2021, the Company reorganized its operations to focus on specific business segments, resulting in the creation of TTIG with a separate workforce, board of directors and financial reporting structure. Companies under TTIG include TypTap, TypTap Management Company, Exzeo USA, Inc., and Cypress Tech Development Company, Inc., the parent company of an India company, Exzeo Software Private Limited. TTIG and its subsidiaries are considered a new reporting segment known as TypTap Group. The Company has 4 reportable segments: HCPCI insurance operations, TypTap Group, real estate operations, and corporate and other. Due to their economic characteristics, the Company’s property and casualty insurance division and reinsurance ~~investment~~operations, excluding the insurance operations under TypTap Group, are grouped together into one reportable segment under HCPCI insurance operations. The TypTap Group segment includes its property and casualty insurance operations, information technology operations and its management company’s activities. The real estate operations segment includes companies engaged in operating commercial properties the Company owns for investment purposes or for use in its own operations. The corporate and ~~information technology.~~other segment represents the activities of the holding companies and any other companies that do not meet the quantitative and qualitative thresholds for a reportable segment. The determination of segments may change over time due to changes in operational emphasis, revenues, and results of operations. The Company’s chief executive officer, who serves as the Company’s chief operating decision maker, evaluates each division’s financial and operating ~~performances~~performance based on revenue and operating income. ~~The Company aggregates its operating divisions into segments based on organizational structure and revenue source.~~

~~Due to their economic characteristics, the Company’s property and casualty insurance division and reinsurance division are grouped together into one reportable segment under insurance operations.~~ For the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, revenues from the ~~Company’s~~HCPCI insurance operations segment before intracompany elimination represented ~~96.1%~~69.8% and ~~94.8%~~77.6%, respectively, and revenues from the TypTap Group segment represented 27.9% and 20.3%, respectively, of total revenues of all operating segments. For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, revenues from the ~~Company’s~~HCPCI insurance operations segment before intracompany elimination represented ~~96.4%~~69.8% and 77.8%, respectively, and revenues from the TypTap Group segment represented 28.1% and 18.9%, respectively, of total revenues of all operating ~~segments in each of the periods.~~segments. At ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, HCPCI insurance operations’ total assets represented ~~90.7%~~55.2% and ~~87.9%~~58.7%, respectively, and TypTap Group’s total assets represented 33.1% and 29.3%, respectively, of the combined assets of all operating segments. There was no other operating division representing ten percent or more of the Company’s total revenues or combined assets. In addition, there was no other operating division representing ten percent or more of the greater,

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in ~~absolute amount, of the combined profits of all operating divisions reporting a profit or the combined losses of all operating divisions reporting a loss.~~ thousands, except share and per share amounts, unless otherwise stated)

The following tables present segment information reconciled to the Company’s consolidated statements of income. ~~Othernon-reportable~~ ~~divisions are combined and disclosed in Corporate and Other.~~ Intersegment transactions are not eliminated from segment results. However, intracompany transactions are eliminated in segment results below.


	HCPCI
	Insurance			TypTap			Real		Corporate/			Reclassification/
For Three Months Ended June 30, 2022	Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
Revenue:
Gross premiums earned (c)	$	115,636		$	67,443		$	—	$	—		$	(1,955	)	$	181,124
Premiums ceded		(36,979	)		(20,629	)		—		—			1,403			(56,205	)
Net premiums earned		78,657			46,814			—		—			(552	)		124,919
Net (loss) income from investment portfolio		(1,446	)		283			—		(1,228	)		1,835			(556	)
Policy fee income		628			424			—		—			—			1,052
Other		414			532			2,765		1,472			(4,672	)		511
Total revenue		78,253			48,053			2,765		244			(3,389	)		125,926
Expenses:
Losses and loss adjustment expenses		48,692			38,692			—		—			(554	)		86,830
Amortization of deferred policy acquisition costs		15,904			7,167			—		—			—			23,071
Other policy acquisition expenses		679			3,135			—		—			—			3,814
Stock-based compensation expense		1,187			897			—		2,158			—			4,242
Interest expense		—			211			224		1,291			(211	)		1,515
Depreciation and amortization		153			774			606		302			(600	)		1,235
Personnel and other operating expenses		7,738			8,526			626		1,913			(2,024	)		16,779
Total expenses		74,353			59,402			1,456		5,664			(3,389	)		137,486
Income (loss) before income taxes	$	3,900		$	(11,349	)	$	1,309	$	(5,420	)	$	—		$	(11,560	)
Total revenue from non-affiliates (d)	$	76,276		$	49,009		$	2,427	$	(359	)
Gross premiums written	$	113,139		$	73,013

(a)

Other revenue under real estate primarily consisted of rental income from investment properties.

(b)

Other revenue under corporate and other primarily consisted of revenue from marina business.

(c)

Gross premiums earned under HCPCI Insurance Operations consist of $113,681 from HCPCI and $1,955 from a reinsurance company.

(d)

Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)


Three Months Ended September 30, 2017	Insurance Operations			Corporate/ Other(a)			Reclassification/ Elimination			Consolidated
													HCPCI
													Insurance			TypTap			Real		Corporate/			Reclassification/
For Three Months Ended June 30, 2021													Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
Revenue:
Gross premiums earned (c)													$	102,850		$	39,000		$	—	$	—		$	(2,410	)	$	139,440
Premiums ceded														(36,101	)		(12,585	)		—		—			2,250			(46,436	)
Net premiums earned	$	43,964		$	—		$	—		$	43,964			66,749			26,415			—		—			(160	)		93,004
Net investment income		2,563			623			(308	)		2,878
Net realized and unrealized investment (losses) gains		(226	)		74			—			(152	)
Net other-than-temporary impairment losses		(464	)		(10	)		—			(474	)
Net income from investment portfolio														3,550			495			—		2,392			294			6,731
Policy fee income		905			—			—			905			701			291			—		—			—			992
Other		85			2,706			(2,422	)		369			812			475			2,379		267			(3,156	)		777

Total revenue		46,827			3,393			(2,730	)		47,490			71,812			27,676			2,379		2,659			(3,022	)		101,504

Expenses:
Losses and loss adjustment expenses		89,231			—			—			89,231			39,641			16,440			—		—			(164	)		55,917
Amortization of deferred policy acquisition costs		9,031			—			—			9,031			20,540			5,553			—		—			—			26,093
Other policy acquisition expenses														(5,070	)		2,021			—		—			125			(2,924	)
Stock-based compensation expense														937			1,600			—		1,618			—			4,155
Interest expense		—			4,408			—			4,408			—			—			259		1,766			(25	)		2,000
Depreciation and amortization		33			785			(494	)		324			18			312			574		364			(605	)		663
Other		7,155			5,595			(2,236	)		10,514

Personnel and other operating expenses														4,665			6,233			1,317		641			(2,353	)		10,503
Total expenses		105,450			10,788			(2,730	)		113,508			60,731			32,159			2,150		4,389			(3,022	)		96,407

Loss before income taxes	$	(58,623	)	$	(7,395	)	$	—		$	(66,018	)

Income (loss) before income taxes													$	11,081		$	(4,483	)	$	229	$	(1,730	)	$	—		$	5,097
Total revenue from non-affiliates (d)													$	70,914		$	27,813		$	2,041	$	2,715
Gross premiums written													$	124,222		$	60,725

Three Months Ended September 30, 2016    Insurance
Operations    Corporate/
Other(a)    Reclassification/
Elimination    Consolidated
Revenue:

Net premiums earned
   $ 63,300    $ —      $ —      $ 63,300
Net investment income
   2,316    989    (520 )    2,785
Net realized investment gains
   532    51    —      583
Net other-than-temporary impairment losses
   (225 )    1    —      (224 )
Policy fee income
   972    —      —      972
Gain on bargain purchase
   —      2,071    —      2,071
Other
   106    2,001    (1,786 )    321








Total revenue
   67,001    5,113    (2,306 )    69,808








Expenses:

Losses and loss adjustment expenses
   25,909    —      —      25,909
Amortization of deferred policy acquisition costs
   9,335    —      —      9,335
Interest expense
   —      2,672    —      2,672
Depreciation and amortization
   31    419    (147 )    303
Other
   8,426    5,293    (2,159 )    11,560








Total expenses
   43,701    8,384    (2,306 )    49,779








Income before income taxes
   $ 23,300    $ (3,271 )    $ —      $ 20,029

(a)

Other revenue under real estate primarily consisted of rental income from investment properties.

(b)

Other revenue under corporate and other primarily consisted of revenue from marina business.

(c)

Gross premiums earned under HCPCI Insurance Operations consist of $100,440 from HCPCI and $2,410 from a reinsurance company.

(d)

Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.

~~(a)~~

~~Other revenue under corporate and other primarily consisted of rental income from investment properties and revenue from restaurant and marina businesses.~~

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)


Nine Months Ended September 30, 2017	Insurance Operations			Corporate/ Other(a)			Reclassification/ Elimination			Consolidated
													HCPCI
													Insurance			TypTap			Real		Corporate/			Reclassification/
For Six Months Ended June 30, 2022													Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
Revenue:
Gross premiums earned (c)													$	234,941		$	128,065		$	—	$	—		$	(2,957	)	$	360,049
Premiums ceded														(73,932	)		(37,562	)		—		—			2,127			(109,367	)
Net premiums earned	$	168,847		$	—		$	—		$	168,847			161,009			90,503			—		—			(830	)		250,682
Net investment income		7,153			2,099			(730	)		8,522
Net realized and unrealized investment gains		2,193			157			—			2,350
Net other-than-temporary impairment losses		(854	)		(10	)		—			(864	)
Net (loss) income from investment portfolio														(2,903	)		267			—		(912	)		1,970			(1,578	)
Policy fee income		2,721			—			—			2,721			1,282			827			—		—			—			2,109
Other		428			8,063			(7,284	)		1,207			1,661			1,001			5,168		2,308			(8,385	)		1,753

Total revenue		180,488			10,309			(8,014	)		182,783			161,049			92,598			5,168		1,396			(7,245	)		252,966

Expenses:
Losses and loss adjustment expenses		142,425			—			—			142,425			92,687			67,680			—		—			(833	)		159,534
Amortization of deferred policy acquisition costs		26,668			—			—			26,668			35,006			16,589			—		—			—			51,595
Other policy acquisition expenses														1,342			3,418			—		—			—			4,760
Stock-based compensation expense														2,331			1,782			—		4,466			—			8,579
Interest expense		—			12,328			—			12,328			—			411			451		1,665			(411	)		2,116
Loss on repurchases of senior notes		—			743			—			743
Depreciation and amortization		94			2,227			(1,425	)		896			267			1,335			1,211		474			(1,223	)		2,064
Other		22,601			16,282			(6,589	)		32,294

Personnel and other operating expenses														15,056			16,019			1,933		3,647			(4,778	)		31,877
Total expenses		191,788			31,580			(8,014	)		215,354			146,689			107,234			3,595		10,252			(7,245	)		260,525

Loss before income taxes	$	(11,300	)	$	(21,271	)	$	—		$	(32,571	)

Income (loss) before income taxes													$	14,360		$	(14,636	)	$	1,573	$	(8,856	)	$	—		$	(7,559	)
Total revenue from non-affiliates (d)													$	158,009		$	93,832		$	4,491	$	90
Gross premiums written													$	204,280		$	159,166

Nine Months Ended September 30, 2016    Insurance
Operations    Corporate/
Other(a)    Reclassification/
Elimination    Consolidated
Revenue:

Net premiums earned
   $ 180,275    $ —      $ —      $ 180,275
Net investment income
   5,802    876    (678 )    6,000
Net realized investment gains
   856    43    —      899
Net other-than-temporary impairment losses
   (1,426 )    (15 )    —      (1,441 )
Policy fee income
   2,967    —      —      2,967
Gain on repurchases of convertible senior notes
   —      153    —      153
Gain on bargain purchase
   —      2,071    —      2,071
Other
   543    5,808    (5,200 )    1,151








Total revenue
   189,017    8,936    (5,878 )    192,075








Expenses:

Losses and loss adjustment expenses
   79,261    —      —      79,261
Amortization of deferred policy acquisition costs
   28,674    —      —      28,674
Interest expense
   —      8,112    —      8,112
Depreciation and amortization
   131    1,191    (335 )    987
Other
   25,159    14,470    (5,543 )    34,086








Total expenses
   133,225    23,773    (5,878 )    151,120








Income before income taxes
   $ 55,792    $ (14,837 )    $ —      $ 40,955

(a)

Other revenue under real estate primarily consisted of rental income from investment properties.

(b)

Other revenue under corporate and other primarily consisted of revenue from marina business.

(c)

Gross premiums earned under HCPCI Insurance Operations consist of $231,984 from HCPCI and $2,957 from a reinsurance company.

(d)

Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.

~~(a)~~

~~Other revenue under corporate and other primarily consisted of rental income from investment properties and revenue from restaurant and marina businesses.~~

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)


	HCPCI
	Insurance			TypTap			Real		Corporate/			Reclassification/
For Six Months Ended June 30, 2021	Operations			Group			Estate (a)		Other (b)			Elimination			Consolidated
Revenue:
Gross premiums earned (c)	$	207,371		$	67,811		$	—	$	—		$	(4,800	)	$	270,382
Premiums ceded		(72,081	)		(22,094	)		—		—			4,640			(89,535	)
Net premiums earned		135,290			45,717			—		—			(160	)		180,847
Net income from investment portfolio		4,430			831			—		3,887			3,021			12,169
Policy fee income		1,413			549			—		—			—			1,962
Other		1,333			650			7,513		827			(8,923	)		1,400
Total revenue		142,466			47,747			7,513		4,714			(6,062	)		196,378
Expenses:
Losses and loss adjustment expenses		73,080			28,752			—		—			(164	)		101,668
Amortization of deferred policy acquisition costs		33,287			10,190			—		—			—			43,477
Other policy acquisition expenses		(246	)		3,062			—		—			(59	)		2,757
Stock-based compensation expense		1,698			1,967			—		2,832			—			6,497
Interest expense		—			90			741		3,518			(270	)		4,079
Depreciation and amortization		38			600			1,161		540			(1,238	)		1,101
Personnel and other operating expenses		9,723			11,355			2,518		2,335			(4,331	)		21,600
Total expenses		117,580			56,016			4,420		9,225			(6,062	)		181,179
Income (loss) before income taxes	$	24,886		$	(8,269	)	$	3,093	$	(4,511	)	$	—		$	15,199
Total revenue from non-affiliates (d)	$	141,114		$	48,192		$	6,836	$	4,239
Gross premiums written	$	205,210		$	105,615

(a)

Other revenue under real estate primarily consisted of rental income from investment properties.

(b)

Other revenue under corporate and other primarily consisted of revenue from marina business.

(c)

Gross premiums earned under HCPCI Insurance Operations consist of $202,571 from HCPCI and $4,800 from a reinsurance company.

(d)

Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.

The following table presents segment assets reconciled to the Company’s total assets inon the consolidated balance ~~sheets.~~sheets:


	September 30, 2017			December 31, 2016			June 30,			December 31,
Segment:
Insurance Operations	$	871,601		$	651,927
							2022			2021
Segments:
HCPCI Insurance Operations							$	635,564		$	676,509
TypTap Group								431,610			369,600
Real Estate Operations								127,953			127,651
Corporate and Other		213,299			116,849			176,474			65,349
Consolidation and Elimination		(55,647	)		(98,712	)		(90,898	)		(62,252	)

Total assets	$	1,029,253		$	670,064		$	1,280,703		$	1,176,857

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note ~~12 —~~14 -- Leases

The table below summarizes the Company’s right-of-use (“ROU”) assets and corresponding liabilities for operating and finance leases:


	June 30,		December 31,
	2022		2021
Operating leases:
ROU assets	$	1,861	$	2,204
Liabilities	$	1,824	$	2,203
Finance leases:
ROU assets	$	80	$	86
Liabilities	$	21	$	31

The Company’s lease of office space in India for its information technology operations expired in January 2022 and a new lease agreement was entered into effective February 2022 with an initial term of nine years.

The following table summarizes the Company’s operating and finance leases in which the Company is a lessee:


		Renewal	Other Terms and
Class of Assets	Initial Term	Option	Conditions
Operating lease:
Office equipment	1 to 51 months	Yes	(a), (b)
Office space	3 to 9 years	Yes	(b), (c)
Finance lease:
Office equipment	3 to 5 years	Not applicable	(d)

(a)

At the end of the lease term, the Company can purchase the equipment at fair market value.

(b)

There are no variable lease payments.

(c)

Rent escalation provisions exist.

(d)

There is a bargain purchase option.

As of June 30, 2022, maturities of lease liabilities were as follows:


	Leases
	Operating		Finance
Due in 12 months following June 30,
2022	$	1,090	$	16
2023		177		5
2024		98		1
2025		103		0
2026		109		0
Thereafter		434		0
Total lease payments		2,011		22
Less: interest		187		1
Total lease obligations	$	1,824	$	21

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The following table provides quantitative information with regards to the Company’s operating and finance leases:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2022			2021		2022		2021
Lease costs:
Finance lease costs:
Amortization – ROU assets*	$	5		$	5	$	10	$	9
Interest expense		—			—		—		1
Operating lease costs*		282			391		656		845
Short-term lease costs*		91			113		201		150
Total lease costs	$	378		$	509	$	867	$	1,005
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – finance leases						$	—	$	1
Operating cash flows – operating leases						$	648	$	848
Financing cash flows – finance leases						$	10	$	9

	June 30,
	2022
Weighted-average remaining lease term:
Finance leases (in years)		1.5
Operating leases (in years)		4.2
Weighted-average discount rate:
Finance leases (%)		3.4	%
Operating leases (%)		3.9	%

* Included in other operating expenses on the consolidated statements of income.

The following table summarizes the Company’s operating leases in which the Company is a lessor:


		Renewal	Other Terms and
Class of Assets	Initial Term	Option	Conditions
Operating lease:
Office space	1 to 3 years	Yes	(e)
Retail space	3 to 20 years	Yes	(e)
Boat docks/wet slips	1 to 12 months	Yes	(e)

(e)

There are no purchase options.

Note 15 -- Income Taxes

During the three months ended ~~September~~June 30, ~~2017,~~2022, the Company recorded approximately ~~$25,472~~$3,018 of income tax ~~benefits,~~benefit, which resulted in an effective tax rate of ~~38.6%~~26.1%. During the three months ended ~~September~~June 30, ~~2016,~~2021, the Company recorded approximately ~~$8,696~~$1,267 of income taxes, which resulted in an effective tax rate of ~~43.4%~~24.9%. The increase in the effective tax rate as compared with the corresponding period in the prior year was primarily attributable to an increase in non-deductible compensation expense related to restricted stock granted to certain executives and the increased Florida corporate tax rate effective January 1, 2022. During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, the Company recorded approximately ~~$13,587~~$1,808 of income tax ~~benefits, resulting~~benefit, which resulted in an effective tax rate of ~~41.7%~~23.9%. During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2021, the Company recorded approximately ~~$16,542~~$4,524 of income taxes, which resulted in an effective tax rate of ~~40.4%~~29.8%. The decrease in the effective tax rate in 2022 as

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

compared with the corresponding period in the prior year was primarily attributable to the recognition of tax benefits attributable to restricted stock that vested in February and May 2022. The Company’s estimated annual effective tax rate differs from the statutory federal tax rate due to state and foreign income taxes as well as certain nondeductible andtax-exempt items.

In July 2017, the Company received notice from the Internal Revenue Service stating the Company’s 2015 federal income tax return would be examined. The examination is currently in the process of gathering information.

Note ~~13 —~~16 -- Earnings Per Share

U.S. GAAP requires the Company to use thetwo-class method in computing basic earnings (loss) per share since holders of the Company’s restricted stock have the right to share in dividends, if declared, equally with common stockholders. These participating securities affect the computation of both basic and diluted earnings (loss) per share during periods of net ~~income.~~income or loss. For a majority-owned subsidiary, its basic and diluted earnings (loss) per share are first computed separately. Then, the Company’s proportionate share in that majority-owned subsidiary’s earnings is added to the computation of both basic and diluted earnings (loss) per share at a consolidated level.

A summary of the numerator and denominator of the basic and diluted earnings per common share is presented below:


	Three Months Ended								Three Months Ended
	June 30, 2022								June 30, 2021
	Loss			Shares (a)		Per Share			Income			Shares (a)		Per Share
	(Numerator)			(Denominator)		Amount			(Numerator)			(Denominator)		Amount
Net (loss) income	$	(8,542	)						$	3,830
Less: Net income attributable to redeemable noncontrolling interest		(2,268	)							(2,179	)
Less: TypTap Group’s net loss attributable to non-HCI common stockholders and TypTap Group’s participating securities		829								429
Net (loss) income attributable to HCI		(9,981	)							2,080
Less: Loss (income) attributable to participating securities		635								(168	)
Basic (Loss) Earnings Per Share:
(Loss) income allocated to common stockholders		(9,346	)		9,022	$	(1.04	)		1,912			7,526	$	0.25
Effect of Dilutive Securities: *
Stock options		—			—					—			175
Warrants		—			—					—			247
Diluted (Loss) Earnings Per Share:
(Loss) income available to common stockholders and assumed conversions	$	(9,346	)		9,022	$	(1.04	)	$	1,912			7,948	$	0.24


(a)	Shares in thousands.
*	For the three months ended June 30, 2022, convertible senior notes, stock options, and warrants were excluded due to anti-dilutive effect. For the three months ended June 30, 2021, convertible senior notes were excluded due to anti-dilutive effect.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

~~A summary of the numerator and denominator of the basic and diluted (loss) earnings per common share is presented below.~~

   Three Months Ended
September 30, 2017 Three Months Ended
September 30, 2016
   Loss
(Numerator) Shares
(Denominator)    Per Share
Amount Income
(Numerator) Shares
(Denominator)    Per Share
Amount
Net (loss) income
   $ (40,546 )    $ 11,333
Less: Loss (income) attributable to participating securities
   2,737    (557 )





Basic (Loss) Earnings Per Share:

(Loss) income allocated to common stockholders
   (37,809 ) 8,519    $ (4.44 ) 10,776 9,209    $ 1.17




Effect of Dilutive Securities:

Stock options*
   —   —      —   62
Convertible senior notes*
   —   —      1,028 1,447





Diluted (Loss) Earnings Per Share:

(Loss) income available to common stockholders and assumed conversions
   $ (37,809 ) 8,519    $ (4.44 ) $ 11,804 10,718    $ 1.10

   Nine Months Ended
September 30, 2017 Nine Months Ended
September 30, 2016
   Loss
(Numerator) Shares
(Denominator)    Per Share
Amount Income
(Numerator) Shares
(Denominator)    Per Share
Amount
Net (loss) income
   $ (18,984 )    $ 24,413
Less: Loss (income) attributable to participating securities
   1,236    (1,158 )





Basic (Loss) Earnings Per Share:

(Loss) income allocated to common stockholders
   (17,748 ) 8,648    $ (2.05 ) 23,255 9,395    $ 2.48




Effect of Dilutive Securities:

Stock options*
   —   —      —   62
Convertible senior notes*
   —   —      3,206 1,507





Diluted (Loss) Earnings Per Share:

(Loss) income available to common stockholders and assumed conversions
   $ (17,748 ) 8,648    $ (2.05 ) $ 26,461 10,964    $ 2.41


	Six Months Ended								Six Months Ended
	June 30, 2022								June 30, 2021
	Loss			Shares (a)		Per Share			Income			Shares (a)		Per Share
	(Numerator)			(Denominator)		Amount			(Numerator)			(Denominator)		Amount
Net (loss) income	$	(5,751	)						$	10,675
Less: Net income attributable to redeemable noncontrolling interest		(4,516	)							(2,973	)
Less: TypTap Group’s net loss attributable to non-HCI common stockholders and TypTap Group’s participating securities		1,189								501
Net (loss) income attributable to HCI		(9,078	)							8,203
Less: Loss (income) attributable to participating securities		590								(569	)
Basic (Loss) Earnings Per Share:
(Loss) income allocated to common stockholders		(8,488	)		9,249	$	(0.92	)		7,634			7,500	$	1.02
Effect of Dilutive Securities: *
Stock options		—			—					—			141
Warrants		—			—					—			161
Diluted (Loss) Earnings Per Share:
(Loss) income available to common stockholders and assumed conversions	$	(8,488	)		9,249	$	(0.92	)	$	7,634			7,802	$	0.98

*	~~Excluded~~
(a)	Shares in ~~2017~~thousands.
*	For the six months ended June 30, 2022, convertible senior notes, stock options, and warrants were excluded due to anti-dilutive effect. For the six months ended June 30, 2021, convertible senior notes were excluded due to anti-dilutive effect.

Note 17 -- Redeemable Noncontrolling Interest

The following table summarizes the activity of redeemable noncontrolling interest during the six months ended June 30, 2022 and 2021:


	2022			2021
Balance at January 1	$	89,955		$	0
Initial proceeds from Centerbridge		0			100,000
Increase (decrease):
Proceeds allocated to warrants*		0			(9,217	)
Issuance costs		0			(6,262	)
Issuance costs allocated to warrants*		0			577
Accrued cash dividends		1,342			458
Accretion - increasing dividend rates		906			336
Dividends paid		(2,508	)		0
Balance at March 31	$	89,695		$	85,892
Increase (decrease):
Accrued cash dividends		1,500			1,250
Accretion - increasing dividend rates		768			929
Balance at June 30	$	91,963		$	88,071

*Net decrease related to warrants of $8,640.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

For the three months ended June 30, 2022 and 2021, net income attributable to redeemable noncontrolling interest was $2,268 and $2,179, respectively, consisting of accrued cash dividends of $1,500 and $1,250, respectively, and accretion related to increasing dividend rates of $768 and $929, respectively. For the six months ended June 30, 2022 and 2021, net income attributable to redeemable noncontrolling interest was $4,516 and $2,973, respectively, consisting of accrued cash dividends of $2,842 and $1,708, respectively, and accretion related to increasing dividend rates of $1,674 and $1,265, respectively.

Note ~~14 —~~ 18 -- Equity

Stockholders’ Equity

Common Stock

In ~~December 2016,~~March 2022, the Company’s Board of Directors authorized a~~one-year~~ plan to repurchase up to ~~$20,000~~$20,000 of the Company’s common shares before commissions and ~~fees.~~fees during 2022. During the three and six months ended ~~September~~June 30, ~~2017,~~2022, the Company repurchased and retired a total of ~~124,849~~29,465 shares at a weighted average price per share of $36.79 under this repurchase plan. The total cost of shares repurchased, inclusive of fees and commissions, during the three months ended September 30, 2017 was $4,599, or $36.83 per share. During the nine months ended September 30, 2017, the Company repurchased and retired a total of 163,265 shares at a weighted average price per share of $37.86$63.92 under this authorized repurchase plan. The total cost of shares repurchased, inclusive of fees and commissions, during the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2022 was ~~$6,189,~~$1,884 or ~~$37.91~~$63.95 per share.

~~In December 2015, the Company’s Board of Directors authorized aone-year~~ plan to repurchase up to $20,000 of the Company’s common shares before commissions and fees. During the three months ended September 30, 2016, the Company repurchased and retired a total of 198,055 shares at a weighted average price per share of $30.29 under this repurchase plan. The total cost of shares repurchased, inclusive of fees and commissions, during the three months ended September 30, 2016 was $6,008, or $30.33 per share. During the nine months ended September 30, 2016, the Company repurchased and retired a total of 574,851 shares at a weighted average price per share of $31.31. The total cost of shares repurchased, inclusive of fees and commissions, during the nine months ended September 30, 2016 was $18,023, or $31.35 per share.

On ~~October 19, 2017,~~April 26, 2022, the Company’s Board of Directors declared a quarterly dividend of ~~$0.35~~$0.40 per common share. The dividends ~~are payable~~were paid on ~~December 15, 2017~~June 17, 2022 to ~~shareholders~~stockholders of record on ~~November~~May 17, ~~2017.~~2022.

Warrants

At June 30, 2022, there were warrants outstanding and exercisable to purchase 750,000 shares of HCI common stock at an exercise price of $54.40. The warrants expire on February 26, 2025.

Share Repurchase ~~Agreements~~Agreement

In conjunction with the issuance of the ~~4.25%~~4.75% Convertible Senior Notes as described in Note ~~8 —~~10 -- “Long-Term Debt” under4.75% Convertible Senior Notes, the Company used ~~$20,345~~$66,853 of the net proceeds to repurchase and retire an aggregate of ~~413,600~~1,037,600 shares of its common stock at a price of ~~$49.19~~$64.43 per share from institutional investors.

Prepaid Share Repurchase Forward ~~Contracts~~Contract

~~The Company has two outstanding prepaid~~In March 2022, the Company’s share repurchase forward ~~contracts, one of which was~~contract with Societe Generale, entered into ~~with Deutsche Bank AG, London Branch~~ in conjunction with the 2017 issuance of the ~~3.875%~~4.25% Convertible ~~Notes. The other~~Senior Notes, was ~~entered into~~physically settled with the delivery from Societe Generale ~~in conjunction with the issuance~~ of ~~the 4.25% Convertible Notes as described in Note 8 — “Long-Term Debt” under~~~~Convertible Senior Notes~~. Both Deutsche Bank AG, London Branch and Societe Generale are considered forward counterparties. Under these forward contracts, the Company made initial upfront payments in exchange for the future deliveries191,100 shares of ~~the Company’s~~HCI’s common stock ~~from the forward counterparties. Pursuant~~ to the ~~forward contract entered into in December 2013 with Deutsche Bank AG, London Branch, the Company prepaid $29,923 to repurchase 622,751~~Company.

Noncontrolling Interests

At June 30, 2022, there were 81,138,380 shares of TTIG’s common stock outstanding, of which 6,138,380 shares were not owned by HCI.

During the ~~Company’s~~three and six months ended June 30, 2022, TTIG repurchased and retired a total of 45,239 and 66,983 shares, respectively, of its common stock surrendered by its employees to satisfy payroll tax liabilities

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

~~common stock, which shares will be delivered over a settlement period in 2019. Pursuant to~~associated with the ~~forward contract entered into in March 2017 with Societe Generale,~~vesting of restricted shares. The total cost of purchasing noncontrolling interests during the ~~Company prepaid $9,400 of the net proceeds of the offering to repurchase 191,100 shares of the Company’s common stock, which shares will be delivered over a settlement period in 2022.~~

Each forward contract is subject to early settlement, in whole or in part, at any time prior to the final settlement date at the option of each forward counterparty, as well as early settlement or settlement with alternative consideration in the event of certain corporate transactions. In the event the Company pays any cash dividends on its common shares, each forward counterparty will pay an equivalent amount to the Company. The shares to be purchased under the forward contracts will be treated as retired for financial statement purposes as of the effective date of each forward contract, but will remain outstanding for corporate law purposes, including for purposes of any future stockholders votes.

~~The Company determined that each forward contract does not meet the characteristics of a derivative instrument~~three and ~~as such, the transaction resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for both basic~~six months ended June 30, 2022 was $262 and ~~diluted earnings per share.~~$389, respectively.

Note ~~15 —~~19 -- Stock-Based Compensation

2012 Omnibus Incentive ~~Plans~~Plan

The Company currently has outstanding stock-based awards granted under the ~~2007 Stock Option and Incentive~~ Plan ~~and the 2012 Omnibus Incentive Plan. Only the 2012 Plan~~which is currently active and available for future grants. ~~On March 17, 2017, the Company’s board of directors amended the 2012 Omnibus Incentive Plan and reduced the number of shares reserved under the plan from 5,000,000 shares to 3,000,000 shares.~~ At ~~September~~June 30, ~~2017,~~2022, there were ~~1,995,107~~1,108,940 shares available for grant.

Stock Options

Stock options granted and outstanding under the incentive ~~plans~~plan vest over ~~periods ranging from immediately vested to five~~a period of four years and are exercisable over the contractual term of ten ~~years.~~years.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

A summary of the stock option activity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 is as follows (option amounts not in thousands):

   Number of
Options    Weighted
Average
Exercise
Price    Weighted
Average
Remaining
Contractual
Term    Aggregate
Intrinsic
Value
Outstanding at January 1, 2017
   50,000    $ 4.02    2.3 years    $ 1,773
Granted
�� 110,000    $ 40.00



Outstanding at March 31, 2017
   160,000    $ 28.76    7.4 years    $ 2,591
Exercised
   (30,000 )    $ 2.50



Outstanding at June 30, 2017
   130,000    $ 34.82    8.7 years    $ 1,675



Outstanding at September 30, 2017
   130,000    $ 34.82    8.5 years    $ 639



Exercisable at September 30, 2017
   20,000    $ 6.30    3.9 years    $ 639



Outstanding at January 1, 2016
   110,000    $ 3.19    2.3 years    $ 3,482
Outstanding at March 31, 2016
   110,000    $ 3.19    2.1 years    $ 3,312



Outstanding at June 30, 2016
   110,000    $ 3.19    1.8 years    $ 2,650



Outstanding at September 30, 2016
   110,000    $ 3.19    1.6 years    $ 2,989



Exercisable at September 30, 2016
   110,000    $ 3.19    1.6 years    $ 2,989


					Weighted
			Weighted		Average
			Average		Remaining	Aggregate
	Number of		Exercise		Contractual	Intrinsic
	Options		Price		Term	Value
Outstanding at January 1, 2022		440,000	$	45.25	6.6 years	$	18,119
Outstanding at March 31, 2022		440,000	$	45.25	6.3 years	$	10,494
Outstanding at June 30, 2022		440,000	$	45.25	6.1 years	$	9,354
Exercisable at June 30, 2022		357,500	$	44.23	5.8 years	$	7,965

Outstanding at January 1, 2021		440,000	$	45.25	7.6 years	$	3,113
Outstanding at March 31, 2021		440,000	$	45.25	7.3 years	$	13,464
Outstanding at June 30, 2021		440,000	$	45.25	7.1 years	$	23,883
Exercisable at June 30, 2021		275,000	$	43.40	6.6 years	$	15,436

~~The aggregate intrinsic value and realized tax benefits of the options exercised during the nine months ended September 30, 2017 were $1,319 and $509.~~

There were no0 options exercised during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2022 and 2021. For the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, the Company recognized ~~$79~~$161 and ~~$0, respectively, of compensation expense. For the nine months ended September 30, 2017 and 2016, the Company recognized $228 and $0,~~$219, respectively, of compensation expense which was included in ~~other operating~~general and administrative personnel expenses. For the six months ended June 30, 2022 and 2021, the Company recognized $345 and $442, respectively, of compensation expense. Deferred tax benefits related to stock options were ~~$30~~$0 and $0$0 for the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively, and ~~$88~~$0 and $0$1 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively. At ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, there was ~~$1,020~~$660 and ~~$0,~~$1,005, respectively, of unrecognized compensation expense related to nonvested stock options. The Company expects to recognize the remaining compensation expense over a weighted-average period of ~~3.3~~1.3 years.

~~The following table provides assumptions used~~

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in ~~the Black-Scholes option-pricing model to estimate the fair value of the stock options granted during the nine months ended September 30, 2017:~~thousands, except share and per share amounts, unless otherwise stated)


~~Expected dividend yield~~	~~3.53~~	%
~~Expected volatility~~	~~42.86~~	%
~~Risk-free interest rate~~	~~1.92~~	%
~~Expected life (in years)~~	5

Restricted Stock Awards

From time to time, the Company has granted and may grant restricted stock awards to ~~its~~certain executive officers, other employees and nonemployee directors in connection with their service to the Company. The terms of the Company’s outstanding restricted stock grants may include service,

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share and per share amounts, unless otherwise stated)~~

performance and market-based conditions. The determination of fair value with respect to the awards containing only service-based conditions is based on the market value of the Company’s common stock on the grant date. For awards with market-based conditions, the fair value is determined using a Monte Carlo simulation method, which calculates many potential outcomes for an award and then establishes fair value based on the most likely outcome. ~~The determination of fair value with respect to the awards concerning only performance or service-based conditions is based on the market value of the Company’s common stock on the grant date.~~

Information with respect to the activity of unvested restricted stock awards during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 is as follows:


	Number of Restricted Stock Awards			Weighted Average Grant Date Fair Value		Number of			Weighted
Nonvested at January 1, 2017		542,503		$	30.81
						Restricted			Average
						Stock			Grant Date
						Awards			Fair Value
Nonvested at January 1, 2022							679,997		$	39.72
Granted		45,000		$	40.15		4,000		$	70.58
Vested		(20,109	)	$	48.42		(50,667	)	$	50.68
Forfeited		(926	)	$	35.52		(3,265	)	$	45.85

Nonvested at March 31, 2017		566,468		$	30.92

Nonvested at March 31, 2022							630,065		$	39.00
Granted		109,936		$	44.05		3,000		$	67.30
Vested		(45,874	)	$	34.51		(51,125	)	$	45.04
Forfeited		(9,948	)	$	40.90		(700	)	$	45.61
Nonvested at June 30, 2022							581,240		$	38.61

Nonvested at June 30, 2017		620,582		$	32.82

Forfeited		(12,344	)	$	32.34

Nonvested at September 30, 2017		608,238		$	32.83

Nonvested at January 1, 2016		620,513		$	30.33
Nonvested at January 1, 2021							423,787		$	43.79
Granted							548,086		$	36.95
Vested		(20,917	)	$	48.42		(41,250	)	$	42.18
Cancelled		(160,000	)	$	26.27		(141,600	)	$	43.76
Forfeited		(750	)	$	45.25		(2,050	)	$	45.67

Nonvested at March 31, 2016		438,846		$	30.93

Nonvested at March 31, 2021							786,973		$	39.11
Granted		102,440		$	32.21		3,000		$	76.00
Vested		(24,235	)	$	37.34		(68,541	)	$	43.80
Cancelled							(1,160	)	$	45.96
Forfeited		(5,147	)	$	42.20		(9,060	)	$	46.44

Nonvested at June 30, 2016		511,904		$	30.77

Vested		(2,000	)	$	37.68
Forfeited		(5,890	)	$	36.67

Nonvested at September 30, 2016		504,014		$	30.67

Nonvested at June 30, 2021							711,212		$	38.71

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The Company recognized compensation expense related to restricted stock, which is included in ~~other operating~~general and administrative personnel expenses, of ~~$1,144~~$3,184 and ~~$1,124~~$2,336 for the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively, and ~~$3,134~~$6,452 and ~~$3,072~~$4,241 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively. At ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, there was approximately ~~$10,208~~$12,845 and ~~$7,531,~~$18,995, respectively, of total unrecognized compensation expense related to nonvested restricted stock arrangements. The Company expects to recognize the remaining compensation expense over a weighted-average period of ~~35 months.~~ 2.1 years. The following table summarizes information about deferred tax benefits recognized and tax benefits realized related to restricted stock awards and paid dividends, and the fair value of vested restricted stock for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016.~~2021.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Deferred tax benefits recognized	$	639	$	495	$	1,291	$	459
Tax benefits realized for restricted stock and paid dividends	$	902	$	1,357	$	1,304	$	1,412
Fair value of vested restricted stock	$	2,303	$	3,002	$	4,871	$	4,742

In February 2021, the Company cancelled 141,600 shares of restricted stock for employees who transitioned to TypTap Group. In exchange, these employees received replacement restricted stock issued under TTIG’s equity incentive plan.

4245

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
Deferred tax benefits recognized
   $ 403    $ 434    $ 1,097    $ 1,185
Tax benefits realized for restricted stock and paid dividends
   $ 49    $ 45    $ 1,232    $ 176
Fair value of vested restricted stock
   $ —      $ 75    $ 2,557    $ 1,993

Subsidiary Equity Plan

For the three months ended June 30, 2022 and 2021, TypTap Group recognized compensation expense related to its stock-based awards of $897 and $1,599, respectively. For the six months ended June 30, 2022 and 2021, TypTap Group recognized compensation expense related to its stock-based awards of $1,782 and $1,814, respectively. At June 30, 2022 and December 31, 2021, there was $9,558 and $11,230, respectively, of unrecognized compensation expense related to nonvested restricted stock and stock options.

Note ~~16 —~~20 -- Commitments and Contingencies

Agreement with Florida Department of Transportation

In May 2022, the Company entered into an agreement to sell 1.5 acres of land in Tampa, Florida for net proceeds of $14,500 to the Florida Department of Transportation (“FDOT”) in connection with an eminent domain proceeding for a planned road improvement project. Upon the sale closing in July 2022, the Company will retain from its investment property an office building on approximately six acres of land. See Note 21 -- “Subsequent Events” for additional information.

Obligations under Multi-Year Reinsurance Contracts

As of ~~September~~June 30, ~~2017,~~2022, the Company has a contractual ~~obligations~~obligation related to ~~three~~one multi-year reinsurance ~~contracts. Two of these contracts have~~contract. The contract was entered into effective ~~dates of~~ June 1, ~~2016~~2022 and the ~~other has an~~Company’s previous two multi-year reinsurance contracts were commuted effective ~~date of July 1, 2017. These contracts~~May 31, 2022. The contract may be cancelled only with the other party’s ~~consent.~~ consent or when its respective experience account is positive at the end of each contract year. The table below ~~presents~~represents the future minimum aggregate ~~premiums amount~~premium amounts payable to the ~~reinsurers.~~reinsurer.


Due in 12 months following June 30,
2022	$	91,350
2023		91,350
Total	$	182,700

Due in 12 months following September 30,

2017*
   $ 21,971
2018*
   2,571
2019*
   1,929


Total
   $ 26,471

*	~~Premiums payable after December 31, 2017 under one contract are estimated. See Note 9 — “Reinsurance” for additional information.~~

Capital ~~Commitment~~Commitments

As described in Note 4 —-- “Investments” underLimited Partnership Investments, the Company is contractually committed to capital contributions for ~~four~~ limited partnership interests. At ~~September~~June 30, ~~2017,~~2022, there was an aggregate unfunded balance of ~~$15,931.~~$6,465.

~~Note 17 — Related Party Transactions~~

~~Claddaugh Casualty~~FIGA Assessments

In October 2021, the Florida Office of Insurance ~~Company, Ltd.,~~Regulation approved a 2022 assessment for the ~~Company’s Bermuda domiciled reinsurance subsidiary, has~~Florida Insurance Guaranty Association (“FIGA”) which is necessary to secure funds for the payment of covered claims of insolvent insurance companies. The 2022 FIGA assessment is levied at 0.70% on collected premiums of all covered lines of business except auto insurance. The surcharge, which is collectible from a ~~reinsurance agreement~~policyholder, will be assessed on new and renewal policies with ~~Oxbridge Reinsurance Limited whereby a portion~~effective dates beginning January 1, 2022 through December 31, 2022.

In March 2022, the Florida Office of Insurance Regulation approved an assessment for FIGA which is necessary to secure funds for the ~~business assumed from the Company’s insurance subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., is ceded by Claddaugh to Oxbridge. With respect~~payment of covered claims relating to the ~~period from June 1, 2016 through May 31, 2017, Oxbridge assumed $6,000~~liquidation of the total covered exposure for approximately $3,400 in premiums. With respect to the period from June 1, 2017 through May 31, 2018, Oxbridge assumed $7,400 of the total covered exposure for approximately $3,400 in premiums. See Note 9 — Reinsurance – which includes the amounts due from and paid by Oxbridge during the nine months ended September 30, 2017 and 2016 with respect to benefits accrued in connection with the Oxbridge agreements. The premiums charged by Oxbridge are at rates which management believes to be competitive with market rates available to Claddaugh. Oxbridge has deposited funds into a trust account to satisfy certain collateral requirements under its reinsurance contract with Claddaugh. Trust assets may be withdrawn by Claddaugh, the trust beneficiary, in theone insurance company.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

~~event amounts~~The FIGA assessment is levied at 1.3% on collected premiums of all covered lines of business except auto insurance. The surcharge, which is collectible from a policyholder, will be assessed on new and renewal policies with effective dates beginning July 1, 2022 through June 30, 2023.

The Company’s insurance subsidiaries, as member insurers, are ~~due under~~required to collect and remit the ~~Oxbridge reinsurance agreements. Among~~pass-through assessments to FIGA on a quarterly basis. As of June 30, 2022, the Oxbridge shareholders are Paresh Patel, the Company’s chief executive officer, who is also chairman of the board of directors for Oxbridge, and members of his immediate family and three of the Company’s~~non-employee~~ ~~directors including Sanjay Madhu who serves as Oxbridge’s president and chief executive officer.~~

~~Note 18 — Subsequent Event~~

~~On October 17, 2017,~~FIGA assessments payable by the Company ~~through a wholly owned subsidiary, acquired commercial real estate~~were $954.

Note 21 -- Subsequent Events

On July 1, 2022, the Company closed on its agreement to sell 1.5 acres of land in Tampa, Florida for net proceeds of $14,500 to the FDOT in connection with the eminent domain proceeding for the planned road improvement project. This sale results in a ~~purchase price~~net realized gain of ~~$9,100. The acquired assets primarily consisted~~$13,402 recognized in July 2022 which will be reflected in net investment income. Upon the close of ~~land, building andin-place~~ ~~lease agreements. The Company incurred approximately $115 of acquisition-related costs and accounted for this transaction as an asset acquisition in accordance with ASU2017-01~~ ~~which~~the sale, the Company ~~early adopted in~~is retaining from its investment property an office building on approximately six acres of land.

On July 14, 2022, the ~~fourth quarter~~Company’s Board of ~~2017. As~~Directors declared a ~~result, all transaction-related costs were allocated among the assets acquired.~~quarterly dividend of $0.40 per common share. The dividends are payable on September 16, 2022 to stockholders of record on August 19, 2022.

ITEM 2 –MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 Form10-Q and in our Form10-K filed with the Securities and Exchange Commission (“SEC”) on ~~February 22, 2017.~~March 10, 2022. Unless the context requires otherwise, as used in this Form10-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 ~~that, through its subsidiaries, is engaged~~with operations in ~~a variety of business activities, including~~ property and casualty insurance, reinsurance, real estate and information technology. ~~Based~~After the reorganization of our business in the first quarter of 2021, we now manage our operations in the following organizational segments, based on ~~our organizational structure, revenue sources,~~managerial emphasis and evaluation of financial and operating ~~performances by management, we manage four operating divisions, which includes the following operations:~~performances:

HCPCI Insurance Operations

▪

Property and casualty insurance

▪

Reinsurance and other auxiliary operations

TypTap Group

▪

Property and casualty insurance

▪

Information technology

Real Estate Operations

Other Operations

▪

Holding company operations

~~Insurance Operations~~

•

~~Property and casualty insurance~~

•

~~Reinsurance~~

~~Other Operations~~

•

~~Real estate~~

•

~~Information technology~~

For the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, revenues from HCPCI insurance operations before intracompany elimination represented ~~96.1%~~69.8% and ~~94.8%~~77.6%, respectively, and revenues from TypTap Group represented 27.9% and 20.3%, respectively, of total revenues of all operating segments. For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, revenues from HCPCI insurance operations before intracompany elimination represented ~~96.4%~~

69.8% and 77.8%, respectively, and revenues from TypTap Group represented 28.1% and 18.9%, respectively, of total

revenues of all operating ~~segments in each of the periods.~~segments. At ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, HCPCI insurance operations’ total assets represented ~~90.7%~~55.2% and ~~89.8%~~58.7%, respectively, and TypTap Group’s total assets represented 33.1% and 29.3%, respectively, of the combined assets of all operating segments. ~~There was no other operating division representing ten percent or more of our total revenues or combined assets.~~ See Note ~~11 —~~13 -- “Segment Information” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form10-Q for additional information.

HCPCI Insurance Operations

Property and Casualty Insurance

~~Homeowners Choice Property & Casualty Insurance Company, Inc.~~

~~Our principal operating subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc. (“HCPCI”), is a leading provider~~HCPCI provides various forms of ~~property and casualty~~residential insurance ~~in the state of Florida. HCPCI along with certain of our other subsidiaries currently provides property and casualty~~products such as homeowners insurance, ~~to homeowners, condominium owners, and tenants in the state of Florida. HCPCI offers flood-endorsed~~fire insurance, flood insurance and wind-only ~~policies to eligible new andpre-existing~~ ~~Florida customers. In addition,~~insurance. HCPCI was approved by the Florida Office of Insurance Regulation to write standalone flood insurance policies for Florida homeowners. HCPCI strives to offer insurance products at competitive rates, while pursuing profitability using selective underwriting criteria.

~~HCPCI began operations in 2007 by participating in a“take-out~~ ~~program,” which~~ is a legislatively mandated program designed to encourage private insurance companies to assume policies from Citizens Property Insurance Corporation, a Florida state-supported insurer. Our growth since inception has resulted primarily from a series of policy assumptions. This growth track has been beneficial to us although there are fewer policies available for assumption today as a result of increased competition in the Florida market. Thus, we plan to seek other opportunities to expand by providing new or additional product offerings in and outside the state of Florida. During 2017, HCPCI received regulatory approvalauthorized 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.

In 2021, HCPCI ~~expects to begin writing flood~~began providing quota share reinsurance on all in-force, new and renewal policies issued by United in the Northeast Region. HCPCI began renewing and/or replacing United policies in ~~those~~two states ~~during 2018.~~

~~TypTap Insurance Company~~

~~TypTap Insurance Company was organized by HCI Group, Inc. and approved by the Florida Office of Insurance Regulation~~in December 2021, a third state in January ~~2016 to transact~~2022, and the fourth state in April 2022.

In February 2022, HCPCI entered into another reinsurance agreement with United where HCPCI provides 85% quota share reinsurance on all of United’s personal lines insurance business in the ~~state~~states of ~~Florida. TypTap began writing standalone flood coverage~~Georgia, North Carolina, and South Carolina (collectively “Southeast Region”) from December 31, 2021 through May 31, 2022. Under this agreement, HCPCI paid United a catastrophe allowance of 9% of premium and a provisional ceding commission of 25% of premium. That percentage could increase up to ~~Florida homeowners in March 2016.~~32% depending on the direct loss ratio results from the reinsured business.

~~We expect the flood insurance products offered by TypTap~~Reinsurance and ~~HCPCI to become significant contributors to future financial results.~~other auxiliary operations

~~Reinsurance~~

We have a Bermuda domiciled wholly-owned reinsurance subsidiary, Claddaugh Casualty Insurance Company Ltd. We selectively retain risk in Claddaugh, ~~displacing~~reducing the ~~need for HCPCI to pay premiums to third party reinsurers.~~cost of third-party reinsurance. Claddaugh fully collateralizes its exposure to HCPCI and TypTap by depositing funds into a trust account. Claddaugh ~~also from time to time mitigates~~may mitigate a portion of its risk through retrocession contracts.

Currently, Claddaugh does not provide reinsurance to non-affiliates. Other auxiliary operations also include claim adjusting and processing services.

TypTap Group

46Property and Casualty Insurance

~~Other Operations~~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.

~~Real Estate~~

~~Our real estate operations consist of multiple properties we own and operate. Properties used in operations consist~~TypTap, TTIG’s insurance subsidiary, has been the primary source of our ~~Tampa headquarters building~~organic growth in gross written premium since 2016. TypTap’s policies in force have increased from 6,721 in January 2018 to 75,421 at June 30, 2022. TypTap has been successful in using internally developed proprietary technology to underwrite, select and write policies efficiently. As of August 2, 2022, TypTap has been approved to offer homeowners coverage in 18

states outside of Florida. TypTap is currently operating in twelve states. In addition to the expansion in TypTap business, we also expect continued growth from the United policies assigned to TypTap through the renewal rights agreements acquired by HCI.

In 2021, TypTap began providing quota share reinsurance on all in-force, new and renewal policies issued by United in the Northeast Region. TypTap began renewing and/or replacing United policies in two states in December 2021, a ~~secondary~~third state in January 2022, and the fourth state in April 2022.

In June 2022, TypTap entered into a new reinsurance agreement with United where TypTap provides 100% quota share reinsurance on all of United’s personal lines insurance ~~operations site~~business in ~~Ocala, Florida. Properties held as investments include two retail shopping centers and~~the Southeast Region from June 1, 2022 through May 31, 2023. In exchange, TypTap pays United a ~~combined 24 acres~~ceding commission of ~~waterfront property where two marinas and one restaurant are located.~~16% of premium.

In July 2017, we completed one real estate development and construction project described as a joint venture arrangement under U.S. GAAP, which we consolidate with our operations. In October 2017, we added commercial real estate in Tampa, Florida to our portfolio of real estate investments. See Note 4 — “Investments” and Note 18 — “Subsequent Event” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form~~10-Q~~ ~~for additional information.~~

Information Technology

Our information technology operations include a team of experienced software developers with extensive knowledge in developingweb-based products and applications for mobile devices. The operations, which are in Tampa, Florida and Noida, India, are focused on developing cloud-based, innovative products orand services that supportin-house operations as well as our ~~third party~~third-party relationships with our agency partners and claim vendors. These products include~~Proplet~~SAMSTM, ~~TypTap~~^HarmonyTM,~~SAMS~~^TM,~~Exzeo~~^®,~~Atlas Viewer~~^TM, AtlasViewer®and ~~CasaClue~~^ClaimColonyTM.

Real Estate Operations

Our real estate operations consist of properties we own and use for our own operations and multiple properties we own and operate for investment purposes. Properties used in operations consist of one Tampa office building and an insurance operations site in Ocala, Florida. Our investment properties include retail shopping centers, one office building, two marinas, and undeveloped land near TTIG’s headquarters in Tampa, 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 ~~October 17, 2017,~~July 1, 2022, we ~~acquired commercial real estate~~closed on our agreement to sell 1.5 acres of land in Tampa, Florida for ~~$9,215,000, including acquisition-related costs. The acquired assets primarily consisted~~net proceeds of ~~land, building andin-place~~ ~~lease agreements.~~$14,500,000 to the Florida Department of Transportation in connection with the eminent domain proceeding for the planned road improvement project. This sale results in a net realized gain of $13,402,000.

On ~~October 19, 2017,~~July 14, 2022, our Board of Directors declared a quarterly dividend of ~~$0.35~~$0.40 per common share. The dividends are payable on ~~December 15, 2017~~September 16, 2022 to stockholders of record on ~~November 17, 2017.~~

August 19, 2022.

4750

RESULTS OF OPERATIONS

The following table summarizes our results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 (dollar amounts in thousands, except per share amounts):


													Three Months Ended						Six Months Ended
	Three Months Ended September 30,						Nine Months Ended September 30,						June 30,						June 30,
	2017			2016			2017			2016			2022			2021			2022			2021
Revenue
Gross premiums earned	$	88,669		$	92,542		$	270,376		$	286,273		$	181,124		$	139,440		$	360,049		$	270,382
Premiums ceded		(44,705	)		(29,242	)		(101,529	)		(105,998	)		(56,205	)		(46,436	)		(109,367	)		(89,535	)

Net premiums earned		43,964			63,300			168,847			180,275		��	124,919			93,004			250,682			180,847
Net investment income		2,878			2,785			8,522			6,000			3,684			2,635			6,552			7,229
Net realized and unrealized investment (losses) gains		(152	)		583			2,350			899
Net other-than-temporary impairment losses recognized in income:
Total other-than-temporary impairment losses		(474	)		(575	)		(864	)		(1,211	)
Portion of loss recognized in other comprehensive income, before taxes		—			351			—			(230	)

Net other-than-temporary impairment losses		(474	)		(224	)		(864	)		(1,441	)
Net realized investment (losses) gains														(6	)		2,607			(320	)		3,720
Net unrealized investment (losses) gains														(4,234	)		1,489			(7,810	)		1,220
Policy fee income		905			972			2,721			2,967			1,052			992			2,109			1,962
Gain on repurchases of convertible senior notes		—			—			—			153
Gain on bargain purchase		—			2,071			—			2,071
Other income		369			321			1,207			1,151			511			777			1,753			1,400

Total revenue		47,490			69,808			182,783			192,075			125,926			101,504			252,966			196,378

Expenses
Losses and loss adjustment expenses		89,231			25,909			142,425			79,261			86,830			55,917			159,534			101,668
Policy acquisition and other underwriting expenses		9,926			10,536			29,645			32,525			26,863			23,169			56,271			46,234
Salaries and wages		4,605			5,945			15,051			17,009
General and administrative personnel expenses														15,301			10,546			29,335			20,196
Interest expense		4,408			2,672			12,328			8,112			1,515			2,000			2,116			4,079
Loss on repurchases of senior notes		—			—			743			—
Other operating expenses		5,338			4,717			15,162			14,213			6,977			4,775			13,269			9,002

Total operating expenses		113,508			49,779			215,354			151,120

Total expenses														137,486			96,407			260,525			181,179
(Loss) income before income taxes		(66,018	)		20,029			(32,571	)		40,955			(11,560	)		5,097			(7,559	)		15,199
Income tax (benefit) expense		(25,472	)		8,696			(13,587	)		16,542			(3,018	)		1,267			(1,808	)		4,524

Net (loss) income	$	(40,546	)	$	11,333		$	(18,984	)	$	24,413			(8,542	)		3,830			(5,751	)		10,675

Net income attributable to noncontrolling interests														(1,439	)		(1,913	)		(3,327	)		(2,610	)
Net (loss) income after noncontrolling interests													$	(9,981	)	$	1,917		$	(9,078	)	$	8,065
Ratios to Net Premiums Earned:
Loss Ratio		202.96	%		40.93	%		84.35	%		43.97	%		69.51	%		60.12	%		63.64	%		56.22	%
Expense Ratio		55.22	%		37.71	%		43.19	%		39.86	%		40.55	%		43.54	%		40.29	%		43.97	%

Combined Ratio		258.18	%		78.64	%		127.54	%		83.83	%		110.06	%		103.66	%		103.93	%		100.19	%

Ratios to Gross Premiums Earned:
Loss Ratio		100.63	%		28.00	%		52.68	%		27.69	%		47.94	%		40.10	%		44.31	%		37.60	%
Expense Ratio		27.38	%		25.79	%		26.97	%		25.10	%		27.97	%		29.04	%		28.05	%		29.41	%

Combined Ratio		128.01	%		53.79	%		79.65	%		52.79	%		75.91	%		69.14	%		72.36	%		67.01	%

(Loss) Earnings Per Share Data:
Basic	$	(4.44	)	$	1.17		$	(2.05	)	$	2.48		$	(1.04	)	$	0.25		$	(0.92	)	$	1.02

Diluted	$	(4.44	)	$	1.10		$	(2.05	)	$	2.41		$	(1.04	)	$	0.24		$	(0.92	)	$	0.98

Comparison of the Three Months ~~ended September~~Ended June 30, ~~2017 with~~2022 to the Three Months ~~ended September~~Ended June 30, ~~2016~~2021

Our results of operations for the three months ended ~~September~~June 30, ~~2017 reflected~~2022 reflect net ~~losses allocable to common stockholders~~loss of approximately ~~$40,546,000,~~$8,542,000 or ~~$4.44~~$1.04 loss per share, compared with net income of approximately ~~$11,333,000,~~$3,830,000 or ~~$1.10~~$0.24 diluted earnings per ~~diluted~~ share, for the three months ended ~~September~~June 30, ~~2016.~~2021. The quarter-over-quarter decrease was ~~primarily~~ due to a ~~$63,322,000~~$30,913,000 increase in losses and loss adjustment expenses, ~~which included $54,000,000~~a net decrease in income from our investment portfolio (consisting of ~~estimated~~ net ~~losses from Hurricane Irma,~~investment income and net realized and unrealized gains or losses) of $7,287,000, a $4,755,000 increase in general and administrative personnel expenses, and a ~~$15,463,000~~$3,694,000 increase in ~~ceded premiums, which included $12,464,000 of adjustments to ceded premiums related to retrospective provisions. The losses in the quarter were~~policy acquisition and other underwriting expenses, offset by ~~$25,472,000~~an increase in net premiums earned of ~~income tax benefits.~~$31,915,000 and a $485,000 decrease in interest expense.

~~Revenue~~51

Revenue

Gross Premiums Earned on a consolidated basis for the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 were approximately ~~$88,669,000~~$181,124,000 and ~~$92,542,000,~~$139,440,000, respectively. ~~The decrease in 2017 was attributable to policy attrition as well as a rate decrease effective on new and renewal policies beginning in January 2016.~~

~~Premiums Ceded~~HCPCI gross premiums earned were $113,681,000 for the three months ended ~~September~~June 30, ~~2017~~2022 compared to $100,440,000 for the three months ended June 30, 2021. Gross premiums earned from the United insurance policies assumed were $16,237,000 for the three months ended June 30, 2022 compared to $23,707,000 for the three months ended June 30, 2021. TypTap’s gross premiums earned were $67,443,000 versus $39,000,000 for the same comparative period with the increase due to a greater number of policies in force from the organic growth in TypTap’s business and ~~2016~~from the business assumed from United beginning June 1, 2021.

Premiums Ceded for the three months ended June 30, 2022 and 2021 were approximately ~~$44,705,000~~$56,205,000 and ~~$29,242,000,~~$46,436,000, respectively, representing ~~50.4%~~31.0% and ~~31.6%~~33.3%, respectively, of gross premiums earned. The ~~$15,463,000~~$9,769,000 increase was primarily attributable to higher reinsurance costs for the ~~adjustment of the previously accrued benefits and deferred reinsurance premiums related to retrospective provisions under certain reinsurance contracts~~2022 contract year due to an increased ~~losses caused by Hurricane Irma.~~overall reinsurance coverage amount as a result of premium growth and expansion.

Our premiums ceded represent ~~amounts paid to reinsurers~~costs of reinsurance to cover losses from catastrophes that exceed the retention levels defined by our catastrophe excess of loss reinsurance ~~treaties~~contracts or to assume a proportional share of losses as defined byin a quota share arrangement. For the three months ended September 30, 2017, premiums ceded included a net increase of approximately $12,465,000 related to the adjustment under the provisions of certain reinsurance contracts. For the three months ended September 30, 2016, premiums ceded reflected a net reduction of approximately $3,428,000 attributable to these reinsurance contract provisions. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.”agreement. The rates we pay for reinsurance are based primarily on policy exposures reflected in gross premiums earned.

~~Net Premiums Written~~ ~~during~~ Reinsurance costs can be decreased by a reduction in premiums ceded attributable to retrospective provisions under multi-year reinsurance contracts. For the three months ended ~~September~~June 30, ~~2017~~2022, premiums ceded included a decrease of $6,390,000 related to retrospective provisions compared with a decrease of $3,575,000 for the three months ended June 30, 2021. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and ~~2016~~Estimates.”

Net Premiums Written for the three months ended June 30, 2022 and 2021 totaled approximately ~~$50,168,000~~$129,947,000 and ~~$64,022,000,~~$138,542,000, respectively. Net premiums written represent the premiums charged on policies issued during a fiscal period less any applicable reinsurance costs. The ~~$13,854,000~~ decrease in ~~2017~~2022 resulted from ~~the~~an increase in premiums ceded ~~during the period~~to reinsurers as described above. We had approximately ~~141,000~~220,600 policies in force at ~~September~~June 30, ~~2017~~2022 (excluding policies assumed from United) as compared with approximately ~~145,000~~150,000 policies in force at ~~September~~June 30, ~~2016.~~2021.

Net Premiums Earned for the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 were approximately ~~$43,964,000~~$124,919,000 and ~~$63,300,000,~~$93,004,000, 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~~June 30, ~~2017~~2022 and ~~2016~~2021 (amounts in thousands):


	Three Months Ended						Three Months Ended
	September 30,						June 30,
	2017			2016			2022			2021
Net Premiums Written	$	50,168		$	64,022		$	129,947		$	138,542
Increase in Unearned Premiums		(6,204	)		(722	)		(5,028	)		(45,538	)

Net Premiums Earned	$	43,964		$	63,300		$	124,919		$	93,004

Net ~~Other-Than-Temporary Impairment Losses~~Investment Income for the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016 were~~2021 was approximately ~~$474,000~~$3,684,000 and ~~$224,000,~~$2,635,000, respectively. ~~During the third quarter~~The $1,049,000 increase was primarily attributable to a $1,194,000 increase in income from real estate investments and a $753,000 increase in income from available-for-sale fixed-maturity securities, offset by a $1,553,000 decrease in income from limited partnership investments. See Net Investment Income (Loss) under Note 4 -- “Investments” to our unaudited consolidated financial statements under Item 1 of 2017, we recognized impairment losses specific to four equity securities. These equity securities were impaired because each security had been in an unrealized loss position for a length of time with no near-term prospect of recovery. During the quarter ended September 30, 2016, we recognized impairment losses specific to one fixed-maturity security and four equity securities.this Quarterly Report on Form 10-Q.

~~Expenses~~

~~Our~~Net Realized Investment Losses ~~and Loss Adjustment Expenses~~~~amounted to approximately $89,231,000 and $25,909,000~~ for the three months ended ~~September~~June 30, ~~2017~~2022 were approximately $6,000 versus $2,607,000 of net realized investment gains for the three months ended June 30, 2021. The $2,613,000 decrease was primarily attributable to net gains from selling equity securities and ~~2016,~~other investments during 2021.

Net Unrealized Investment Losses for the three months ended June 30, 2022 were approximately $4,234,000 versus $1,489,000 of net unrealized investment gains for the three months ended June 30, 2021. The net unrealized investment loss for the three months ended June 30, 2022 was primarily attributable to an overall decline in the equity market compared with the three months ended June 30, 2021.

Expenses

Our consolidated Losses and Loss Adjustment Expenses amounted to approximately $86,830,000 and $55,917,000 for the three months ended June 30, 2022 and 2021, respectively. ~~During the third quarter of 2017, our~~HCPCI losses and loss adjustment expenses ~~included $54,000,000~~were $48,692,000 for the three months ended June 30, 2022 compared to $39,641,000 for the three months ended June 30, 2021. The increase was primarily attributable to a $7,902,000 net increase in losses attributable to the United policies assumed due to an increase in the number of ~~net estimated losses related to Hurricane Irma~~policies assumed from United and ~~approximately $2,500,000~~$1,074,000 of additional losses ~~related to Hurricane Matthew. In addition, we continued to strengthen our loss reserves in response to trends involving assignment~~reported during the second quarter of ~~insurance benefits and related litigation. Our 2016 losses~~2022 from Tropical Storm Eta. Losses and loss adjustment expenses ~~reflected initially estimated~~for TypTap were $38,692,000 versus $16,440,000 for the same comparative period. The increase was attributable to $16,500,000 of losses attributable to the greater number of TypTap policies in force, $2,507,000 of additional losses from ~~Hurricane Hermine~~policies renewed or assumed from United, and $3,445,000 of ~~approximately $2,500,000.~~prior period loss development. 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~~June 30, ~~2017~~2022 and ~~2016 of~~2021 were approximately ~~$9,926,000~~$26,863,000 and ~~$10,536,000,~~$23,169,000 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, catastrophe allowance payable to United, and premium ~~taxes related to the policies that have renewed. The $610,000 decrease~~taxes. An increase in policy acquisition costs primarily results from ~~the corresponding period in 2016 was primarily attributable to a decrease in commissions and~~ premium ~~taxes resulting from policy attrition and the effect of the rate decrease.~~

~~Salaries and Wages~~growth. Policy acquisition expenses for HCPCI insurance operations were $16,583,000 for the three months ended ~~September~~June 30, ~~2017~~2022 compared to $15,470,000 for the three months ended June 30, 2021. The increase was due to amortization of increased costs associated with the increase in the number of policies assumed from United. TypTap Group policy acquisition expenses were $10,302,000 versus $7,574,000 for the same comparative period, with the increase attributable to amortization of increased commission costs related to the growth of TypTap’s policies in force over the past 12 months and ~~2016~~the policies assumed from United.

General and Administrative Personnel Expenses for the three months ended June 30, 2022 and 2021 were approximately ~~$4,605,000~~$15,301,000 and ~~$5,945,000,~~$10,546,000, respectively. ~~The decrease from~~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 ~~corresponding period in 2016 was primarily attributable to the~~ capitalization ~~of approximately $418,000~~ of payroll costs related to a project to develop software ~~development project~~ for internal use and ~~lower bonuses~~the payroll costs associated with the processing and settlement of certain catastrophe claims which are recoverable from reinsurers under reinsurance contracts. The period-over-period increase of $4,755,000 was primarily attributable to an increase in the headcount of temporary and full-time employees and merit increases for ~~senior management. As of September 30, 2017, we had approximately 250~~non-executive employees ~~located at our offices~~effective in ~~Florida compared with 243 employees as of September 30, 2016. We also had 81 employees located in Noida, India at September 30, 2017 versus 80 at September 30, 2016.~~late February 2022.

Interest Expense for the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 was approximately ~~$4,408,000~~$1,515,000 and ~~$2,672,000,~~$2,000,000, respectively. The ~~increase was~~decrease primarily ~~attributable~~resulted from conversions of our 4.25% convertible senior notes during the second half of 2021, offset by interest expense related to ~~the net increase~~our 4.75% convertible senior notes issued in ~~long-term debt resulting from the issuance of 4.25% Convertible Senior Notes in March 2017 and the redemption of 8% Senior Notes in April 2017.~~May 2022.

Income Tax Benefit for the three months ended ~~September~~June 30, ~~2017~~2022 was approximately ~~$25,472,000~~$3,018,000 for state, federal, and foreign income taxes resulting in an effective tax rate of ~~38.6%.~~26.1% for 2022. This compared with approximately ~~$8,696,000~~$1,267,000 of income tax expense for the three months ended ~~September~~June 30, ~~2016,~~2021, resulting in an effective tax rate of ~~43.4%.~~

24.9% for 2021. The increase in the effective tax rate was primarily attributable to an increase in non-deductible compensation expense related to certain executive compensation and the increased Florida corporate tax rate effective January 1, 2022.

Ratios:

~~Ratios:~~

The loss ratio applicable to the three months ended ~~September~~June 30, ~~2017~~2022 (losses and loss adjustment expenses incurred related to net premiums earned) was ~~203.0%~~69.5% compared with ~~40.9%~~60.1% for the three months ended ~~September~~June 30, ~~2016.~~2021. The increase was primarily due to the increase in ~~2017 was attributable to~~ losses ~~related to Hurricane Irma~~ and ~~decreased~~loss adjustment expenses as further described above, offset in part by the increase in net premiums earned.

The expense ratio applicable to the three months ended ~~September~~June 30, ~~2017~~2022 (defined as ~~underwriting~~total expenses ~~salaries~~excluding losses and ~~wages, interest and other operating~~loss adjustment expenses related to net premiums earned) was ~~55.2%~~40.6% compared with ~~37.7%~~43.6% for the three months ended ~~September~~June 30, ~~2016.~~2021. The decrease in our expense ratio was primarily attributable to the increase in net premiums earned and the decrease in interest expense, offset in part by the increase in general and administrative personnel 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~~June 30, ~~2017~~2022 was ~~258.2%~~110.1% compared with ~~78.6%~~103.7% for the three months ended ~~September~~June 30, ~~2016.~~2021. The increase in 2022 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~~June 30, ~~2017~~2022 was ~~128.0%~~75.9% compared with ~~53.8%~~69.1% for the three months ended ~~September~~June 30, ~~2016.~~2021. The increase in 2022 was primarily attributable to the ~~combined impact of decreased~~increase in losses and loss adjustment expenses, offset by the increase in gross premiums ~~earned, increased operating expenses and losses from Hurricane Irma.~~earned.

Comparison of the ~~Nine~~Six Months ~~ended September~~Ended June 30, ~~2017 with~~2022 to the ~~Nine~~Six Months ~~ended September~~Ended June 30, ~~2016~~2021

Our results of operations for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 reflect net ~~losses allocable to common stockholders~~loss of approximately ~~$18,984,000,~~$5,751,000 or ~~$2.05~~$0.92 loss per share, compared with net income of approximately ~~$24,413,000,~~$10,675,000 or ~~$2.41~~$0.98 diluted earnings per ~~diluted~~ share, for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2021. The period-over-period decrease was primarily due to a $57,866,000 increase in losses and loss adjustment expenses, a net ~~estimated losses~~decrease in income from our investment portfolio (consisting of ~~approximately $54,000,000 resulting from Hurricane Irma.~~net investment income/loss and net realized and unrealized gains/losses) of $13,747,000, a $10,037,000 increase in policy acquisition and other underwriting expenses, and a $9,139,000 increase in general and administrative personnel expenses, offset by an increase in net premiums earned of $69,835,000 and a $1,963,000 decrease in interest expense.

Revenue

Gross Premiums Earned on a consolidated basis for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 were approximately ~~$270,376,000~~$360,049,000 and ~~$286,273,000,~~$270,382,000, respectively. ~~The decrease in 2017 was attributable to policy attrition as well as a rate decrease effective on new and renewal policies beginning in January 2016.~~

~~Premiums Ceded~~HCPCI gross premiums earned were $231,984,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 compared to $202,571,000 for the six months ended June 30, 2021. Gross premiums earned from the United insurance policies assumed were $46,316,000 for the six months ended June 30, 2022 compared to $44,357,000 for the six months ended June 30, 2021. TypTap’s gross premiums earned were $128,065,000 versus $67,811,000 for the same comparative period with the increase due to a greater number of policies in force from the organic growth in TypTap’s business and ~~2016~~from the business assumed from United beginning June 1, 2021.

Premiums Ceded for the six months ended June 30, 2022 and 2021 were approximately ~~$101,529,000~~$109,367,000 and ~~$105,998,000,~~$89,535,000, respectively, representing ~~37.6%~~30.4% and ~~37.0%~~33.1%, respectively, of gross premiums earned. The ~~percentage~~$19,832,000 increase ~~from the corresponding period in 2016~~ was primarily attributable to ~~the adjustments related to the retrospective provisions under certain reinsurance contracts offset in part by lower~~higher reinsurance costs for the 2022 contract year due to an increased overall reinsurance coverage amount as ~~described earlier.~~ a result of premium growth and expansion.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, premiums ceded included a ~~net increase~~decrease of ~~approximately $5,509,000~~$7,874,000 related to ~~these provisions. For the nine months ended September 30, 2016, premiums ceded reflected~~retrospective provisions compared with a net reduction of ~~approximately $9,250,000.~~$8,255,000 for the six months ended June 30, 2021. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.”

Net Premiums Written for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 totaled approximately ~~$199,218,000~~$254,079,000 and ~~$202,307,000,~~$221,291,000, respectively. The ~~decrease~~$32,788,000 increase in ~~2017~~2022 resulted primarily from ~~a decrease of approximately $7,600,000 in gross premiums written combined with a decrease of approximately $4,500,000 in premiums ceded during~~ the ~~year.~~factors described earlier.

Net Premiums Earned for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 were approximately ~~$168,847,000~~$250,682,000 and ~~$180,275,000,~~$180,847,000, respectively, and ~~reflected~~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~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 (amounts in thousands):


	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2017			2016			2022			2021
Net Premiums Written	$	199,218		$	202,307		$	254,079		$	221,291
Increase in Unearned Premiums		(30,371	)		(22,032	)		(3,397	)		(40,444	)

Net Premiums Earned	$	168,847		$	180,275		$	250,682		$	180,847

Net Investment Income for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 was approximately ~~$8,522,000~~$6,552,000 and ~~$6,000,000,~~$7,229,000, respectively. The ~~increase in 2017~~$677,000 decrease was primarily ~~due~~attributable to ~~$1,724,000 of~~a $1,456,000 decrease in

income from real estate investments and a $560,000 decrease in income from limited partnership investments, ~~compared with $54,000 of~~offset by a $760,000 increase in income ~~during the corresponding period in 2016.~~from available-for-sale fixed-maturity securities. SeeNet Investment Income (Loss) under Note 4 —-- “Investments” ~~under~~~~Net Investment Income~~ to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form10-Q.

Net ~~Other-Than-Temporary Impairment~~Unrealized Investment Losses for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016~~2022 were approximately ~~$864,000 and $1,441,000, respectively. During~~$7,810,000 versus $1,220,000 of net unrealized investment gains for the ~~nine~~six months ended ~~September~~June 30, ~~2017, we recognized impairment losses specific to two fixed-maturity securities and five equity securities.~~2021. The ~~fixed-maturity securities were subject to impairment resulting from our intention to sell these securities before their recovery. Five equity securities were impaired as a result of~~net unrealized investment loss for the ~~length of time each security had been in an unrealized loss position with no near-term prospect of recovery. During the nine~~six months ended ~~September~~June 30, ~~2016, we recognized impairment losses specific~~2022 was primarily attributable to ~~two fixed-maturity securities and 16~~an overall decline in the equity ~~securities.~~

~~Gain on Repurchases of Convertible Senior Notes~~ ~~for~~market compared with the ~~nine~~six months ended ~~September~~June 30, ~~2016 was approximately $153,000. The gain was attributable to the repurchase of $13,010,000 in principal of our 3.875% Convertible Senior Notes during the first quarter of 2016.~~2021.

~~Gain on bargain purchase~~~~for the nine months ended September 30, 2016 was approximately $2,071,000, resulting from the August 2016 acquisition of one real estate business.~~Expenses

~~Expenses~~

Our consolidated Losses and Loss Adjustment Expensesamounted to approximately ~~$142,425,000~~$159,534,000 and ~~$79,261,000, respectively,~~$101,668,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and 2016. Our 2017 losses and loss adjustment expenses included a net initial estimate of $54,000,000 of losses related to Hurricane Irma and additional losses of approximately $2,500,000 related to Hurricane Matthew. In addition, our losses and loss adjustment expenses reflected the continuation of reserve strengthening

~~in response to trends involving assignment of insurance benefits and related litigation. Compared with the corresponding period in 2016, our~~2021, respectively. HCPCI losses and loss adjustment expenses were ~~impacted by weather-related events including Hurricane Hermine.~~$92,687,000 for the six months ended June 30, 2022 compared to $73,080,000 for the six months ended June 30, 2021. The increase was primarily attributable to $3,000,000 of losses associated with growth in HCPCI’s Florida portfolio, a $13,972,000 net increase in losses attributable to the United policies assumed due to an increase in the number of policies assumed from United and $1,241,000 of additional losses reported during the first half of 2022 from Tropical Storm Eta. Losses and loss adjustment expenses for TypTap were $67,680,000 versus $28,752,000 for the same comparative period. The increase was attributable to $29,750,000 of losses attributable to the greater number of TypTap policies in force, $4,951,000 of additional losses from policies assumed or renewed from United, and $3,990,000 of prior period losses. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”

Policy Acquisition and Other Underwriting Expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 were approximately ~~$29,645,000~~$56,271,000 and ~~$32,525,000,~~$46,234,000 on a consolidated basis, respectively. Policy acquisition expenses for HCPCI insurance operations were $36,348,000 for the six months ended June 30, 2022 compared to $33,041,000 for the six months ended June 30, 2021. The increase was due to amortization of increased costs associated with the increase in the number of policies assumed from United. TypTap Group policy acquisition expenses were $20,007,000 versus $13,252,000 for the same comparative period, with the increase attributable to amortization of increased commission costs related to the growth of TypTap’s policies in force over the past 12 months and the policies assumed from United.

General and Administrative Personnel Expenses for the six months ended June 30, 2022 and 2021 were approximately $29,335,000 and $20,196,000, respectively. The ~~$2,880,000 decrease from the corresponding period in 2016~~period-over-period increase of $9,139,000 was primarily attributable to ~~decreased commissions~~an increase in the headcount of temporary and ~~premium taxes resulting from policy attrition~~full-time employees, merit increases for non-executive employees effective in late February 2022, and ~~the effect of the rate decrease.~~higher stock-based compensation expense.

~~Salaries and Wages~~Interest Expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016 were~~2021 was approximately ~~$15,051,000~~$2,116,000 and ~~$17,009,000,~~$4,079,000, respectively. The ~~$1,958,000~~ decrease primarily resulted from conversions of our 4.25% convertible senior notes during the ~~corresponding period in 2016 was primarily attributable to the capitalization~~second half of ~~approximately $1,360,000 of payroll costs~~2021, offset by interest expense related to ~~a software development project for internal use and lower bonuses for~~our 4.75% convertible senior ~~management.~~notes issued in May 2022.

~~Loss on repurchases of Senior Notes~~Income Tax Benefit for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 was approximately $743,000, resulting from the early extinguishment of our 8% Senior Notes. See Note 8 — “Long-Term Debt” under 8% Senior Notes to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form~~10-Q.~~

~~Income Tax Benefit~~~~for the nine months ended September 30, 2017 was $13,587,000~~$1,808,000 for state, federal, and foreign income taxes ~~compared with income tax expense of $16,542,000 for the nine months ended September 30, 2016,~~ resulting in an effective tax rate of ~~41.7%~~23.9% for ~~2017~~2022. This compared with approximately $4,524,000 of income tax expense for the six months ended June 30, 2021, resulting in an effective tax rate of 29.8% for 2021. The decrease in the effective tax rate was primarily attributable to the recognition of tax benefits attributable to restricted stock that vested in February and ~~40.4% for 2016.~~May 2022.

Ratios:

The loss ratio applicable to the ~~nine months ended September 30, 2017 was 84.3% compared with 44.0% for the nine~~six months ended June 30, ~~2016.~~2022 (losses and loss adjustment expenses incurred related to net premiums earned) was 63.6% compared with 56.2% for the six months ended June 30, 2021. The increase was primarily due to the increase in losses and loss adjustment expenses as further described above, ~~combined with the decrease~~offset in ~~net premiums earned which was driven in large~~ part by the increase in ~~ceded~~net premiums ~~due to the aforementioned adjustments.~~earned.

The expense ratio applicable to the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 was ~~43.2%~~40.3% compared with ~~39.8%~~44.0% for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2021. The ~~increase~~decrease in our expense ratio iswas primarily attributable to the ~~decrease~~increase in net premiums earned ~~as described above.~~and the decrease in interest expense, offset in part by the increase in policy acquisition, underwriting and personnel expenses.

The combined ratio is the measure of overall underwriting profitability before other income. Our combined ratio for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 was ~~127.5%~~103.9% compared with ~~83.8%~~100.2% for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2021. The increase in 2022 was attributable to the factors described above.

2021. The increase in 2022 was primarily attributable to the increase in losses and loss adjustment expenses, offset by the increase in gross premiums earned.

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 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 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 equity offerings to support our growth and future investment opportunities.

Our insurance ~~subsidiary requires~~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. ~~Substantially~~With the exception of litigated claims, substantially all of our losses and loss adjustment expenses are fully settled and paid within 100 days of the claim receipt date. Additional cash outflow occurs through payments of underwriting costs such as commissions, taxes, payroll, and general overhead expenses.

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. In addition, we intend to continue investing in~~expenses and real estate ~~to maximize returns and diversify our sources of income, pursue acquisition opportunities, or consider other strategic opportunities.~~acquisitions.

Revolving Credit Facility, Convertible Senior Notes, Promissory Notes, and ~~Promissory Note~~Finance Leases

The following table summarizes ~~our long-term debt’s~~the principal and interest payment obligations of our indebtedness at ~~September~~June 30, ~~2017:~~2022:


		Maturity Date	~~Interest~~ Payment Due Date
~~3.875%~~ 4.75% Convertible Senior ~~Notes~~Notes*	June 2042	~~March 2019~~	~~March 15~~ June 1 and ~~September 15~~December 1**
4.25% Convertible Senior Notes		March 2037	March 1 and September 1
4% 3.75% Callable Promissory Note	Through September 2036	~~Through February 2031~~	1st day of each month
~~3.75% Callable~~ 4.55% Promissory Note	Through August 2036	~~Through September 2036~~	1st day of each month
~~3.95%~~ 3.90% Promissory Note	Through April 2032	~~Through February 2020~~	17^th 1st day of each month
Finance leases	Through October 2024	Various
Revolving credit facility	Through December 2023	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.
**	The cash interest is payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2022.

See Note ~~8 —~~10 -- “Long-Term Debt” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form~~10-Q~~ ~~for additional information.~~

10-Q.

~~Limited Partnership Investments~~

Our limited partnership investments consist of four private equity funds managed by their general partners. 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. At September 30, 2017, there was an aggregate unfunded capital balance of $15,931,000. See~~Limited Partnership Investments~~ ~~under Note 4 — “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form10-Q~~ ~~for additional information.~~

Share Repurchase Plan

In ~~December 2016, our~~March 2022, the Board ~~of Directors~~ approved a~~one-year~~ plan to repurchase up to $20,000,000 of common shares during 2022 under which we may purchase shares of common stock in open market purchases, block transactions and privately negotiated transactions in accordance with applicable federal securities laws. At ~~September~~June 30, ~~2017,~~2022, there was approximately ~~$13,818,000~~$18,117,000 available under the plan. See Note ~~14 — “Stockholders’ Equity”~~18 -- “Equity” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form~~10-Q.~~ 10-Q for more information.

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 four of the remaining funds have expired, the general partners may request additional funds under certain circumstances. At June 30, 2022, there was an aggregate unfunded capital balance of $6,465,000. See Limited Partnership Investments under Note 4 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

Real Estate ~~Development and Acquisition~~Investment

~~We may contemplate the acquisition of land for future development through one~~Real estate has long been a significant component of our ~~existing joint ventures. Although~~overall investment portfolio. It diversifies our portfolio and helps offset the volatility of other higher-risk investments. Thus, we ~~have no outstanding commitment to fund any future project and we expect to finance future development projects with cash from~~may consider increasing our real estate ~~operations and through property financings, we may be required to make additional capital contributions when warranted.~~investment portfolio should an opportunity arise.

In October 2017, we used approximately $9,215,000, including acquisition-related costs, to purchase commercial real estate in Tampa, Florida. In addition, we completed our development project in Riverview, Florida in July 2017. We currently have ~~the option to acquire the joint venture partner’s~~a 90% equity interest in ~~this project.~~FMKT Mel JV, LLC, a Florida limited liability company for which we are not the primary beneficiary. In June 2022, FMKT Mel JV sold its last outparcel and recognized a net gain of $572,000. We anticipate that the liquidation of FMKT Mel JV and the distribution of its earnings will take place during the third quarter of 2022.

Sources and Uses of Cash

Cash Flows for the ~~Nine months ended September~~Six Months Ended June 30, ~~2017~~2022

Net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 was approximately ~~$51,393,000,~~$21,629,000, which consisted primarily of cash received from net premiums written, reinsurance recoveries (of approximately $26,584,000) less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Net cash used in investing activities of ~~$90,959,000~~$360,095,000 was primarily due to the purchases of~~available-for-sale~~ fixed-maturity and ~~trading~~equity securities of ~~$141,277,000,~~$394,021,000, the ~~limited partnership investments~~purchases of ~~$2,623,000,~~property and equipment of $4,229,000, and the ~~real estate investments~~purchase of ~~$2,095,000,~~intangible assets from United of $3,800,000, offset by the proceeds from sales of~~available-for-sale~~ fixed-maturity and equity securities of ~~$35,367,000,~~$35,921,000, the proceeds from calls, repayments and maturities of fixed-maturity securities of $4,020,000, and distributions ~~of $11,758,000~~received from limited partnership investments ~~and the redemptions and repayments~~ of ~~fixed-maturity securities of $8,786,000.~~$2,335,000. Net cash provided by financing activities totaled ~~$51,442,000,~~$70,267,000, which was primarily due to the proceeds from issuance of ~~4.25%~~4.75% Convertible Senior Notes of ~~$143,750,000,~~$172,500,000, offset by ~~$40,250,000 used in the~~$69,987,000 of share repurchases, net repayment of our ~~8% senior notes, $4,975,000~~revolving credit facility of ~~related underwriting and issuance costs, $36,825,000 used in our share repurchases and $9,724,000~~$15,000,000, $8,091,000 of net cash dividend ~~payments.~~

payments, debt issuance costs paid of $5,757,000, cash dividends paid to redeemable noncontrolling interest of $2,508,000, and repayments of long-term debt of $501,000.

Cash Flows for the ~~Nine months ended September~~Six Months Ended June 30, ~~2016~~2021

Net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2021 was approximately ~~$91,893,000,~~$95,647,000, which consisted primarily of cash received from net premiums written, reinsurance recoveries (of approximately $23,775,000) less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Net cash ~~used in~~provided by investing activities of ~~$46,875,000~~$37,805,000 was primarily due to the ~~purchases~~proceeds from sales of~~available-for-sale~~ fixed-maturity and equity securities of ~~$92,491,000,~~$71,191,000, the proceeds from calls, repayments and ~~the~~maturities of fixed-maturity securities of $16,677,000, and distributions received from limited partnership investments of ~~$4,670,000,~~$2,653,000, offset by the ~~proceeds from sales~~purchases of~~available-for-sale~~ fixed-maturity and equity securities of ~~$51,570,000.~~$51,378,000, and the purchases of property and equipment of $1,275,000. Net cash ~~used in~~provided by financing activities totaled ~~$20,868,000,~~$61,538,000, which ~~was primarily due to $11,347,000 used~~consisted of net proceeds of $93,738,000 from Centerbridge for investment in ~~the repurchases of our convertible senior notes, $18,023,000 used in our share repurchase plan and $8,807,000~~TTIG, offset by $6,452,000 of net cash dividend payments, ~~offset by $18,200,000~~net repayment of our revolving credit facility of $23,750,000, and $1,308,000 used in ~~aggregate proceeds from the issuance of two promissory notes.~~share repurchases.

Investments

The main objective of our investment policy is to maximize ourafter-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 ~~investments that are classified as available for sale or trading.~~fixed-maturity and equity securities.

At ~~September~~June 30, ~~2017,~~2022, we had ~~$320,128,000~~$434,290,000 of~~available-for-sale~~ fixed-maturity and ~~trading~~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.

With the exception of large national banks, it is our current policy not to maintain cash deposits of more than an aggregate of $10,000,000 in any one bank at any time. From time to time, we may have in excess of $10,000,000 of cash designated for investment and on deposit at a single national brokerage firm. In the future, we may alter our investment policy as 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~~June 30, ~~2017,~~2022, we had unexpired capital commitments for ~~four~~ limited partnerships in which we hold interests. Such commitments are not recognized in the financial statements but are required to be disclosed in the notes to the financial statements. See Note ~~16 —~~20 -- “Commitments and Contingencies” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form10-Q ~~and Contractual Obligations and Commitment below~~ for additional information.

~~CONTRACTUAL OBLIGATIONS AND COMMITMENTS~~

~~The following table summarizes our material contractual obligations and commitments as of September 30, 2017 (amounts in thousands):~~

   Payment Due by Period
   Total    Less than
1 Year    1-3 Years    3-5 Years    More than
5 Years
Operating lease (1)
   $ 614    147    279    188    —
Service agreement (1)
   107    23    50    34    —
Reinsurance contracts (2)
   26,471    21,971    2,571    1,929    —
Unfunded capital commitments (3)
   15,931    15,931    —      —      —
Long-term debt obligations (4)
   300,645    12,163    116,816    155,828    15,838










Total
   $ 343,768    50,235    119,716    157,979    15,838

~~(1)~~

Represents the lease for office space in Miami, Florida and the lease and maintenance service agreement for office space in Noida, India. Liabilities related to our India operations were converted from Indian rupees to U.S. dollars using the October 2, 2017 exchange rate.

~~(2)~~

Represents the minimum payment of reinsurance premiums under multi-year reinsurance contracts. Reinsurance premiums payable after December 31, 2017 under one contract are estimated and subject to subsequent revision as the premiums are determined on a quarterly basis based on the premiums associated with the applicable flood total insured value on the last day of the preceding quarter.

~~(3)~~

~~Represents the unfunded balance of capital commitments under the subscription agreements related to four limited partnerships in which we hold an interest.~~

~~(4)~~

Amounts represent principal and interest payments over the lives of various long-term debt obligations. See Note 8 — “Long-Term Debt” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form~~10-Q.~~

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have prepared our consolidated financial statements ~~and related disclosures~~ in accordance with accounting principles generally accepted in the United States of ~~America.~~America (“U.S. GAAP”). The preparation of these consolidated financial statements ~~and related disclosures~~ requires us to make ~~judgments, assumptions~~estimates and ~~estimates~~judgments to develop amounts reflected and disclosed in our ~~consolidated~~ financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances. Actual results may differ from these estimates and such differences may be material.

We believe our critical accounting policies and estimates are those related to losses and loss adjustment expenses, amounts receivable with respect to reinsurers, reinsurance with retrospective provisions, deferred income taxes, and stock-based compensation expense. These policies are critical to the portrayal of our financial condition and operating results. They require management to make judgments and estimates about inherently uncertain matters. Material estimates that are particularly susceptible to significant change in the near term are related to our losses and loss adjustment ~~expense reserves,~~expenses, which include amounts estimated for claims incurred but not yet ~~reported,~~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, ~~balance and~~ reinsurance ~~contracts~~ with retrospective ~~provisions.~~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 ~~gross~~ liability for losses and loss adjustment expense (“Reserves”) is specific to property insurance, which is our insurance ~~division’s~~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~~June 30, ~~2017, $213,825,000~~2022, $177,320,000 of the total ~~$344,672,000~~$238,824,000 we have reserved for losses and loss adjustment expenses is attributable to our estimate of IBNR. The remaining ~~$130,847,000~~$61,504,000 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~~June 30, ~~2017, $16,688,000~~2022, $42,941,000 of the ~~$130,847,000~~$61,504,000 in reserves for known cases relates to claims incurred during prior years.

Our Reserves increased from ~~$70,492,000~~$237,165,000 at December 31, ~~2016~~2021 to ~~$344,672,000~~$238,824,000 at ~~September~~June 30, ~~2017.~~2022. The ~~$274,180,000~~$1,659,000 increase ~~in our Reserves~~ is comprised of ~~$297,047,000~~$92,101,000 in reserves ~~related to claims occurring in~~established for the ~~2017~~2022 loss year, offset by reductions in our Reserves of ~~$13,765,000~~$21,777,000 specific to Hurricane Irma, Hurricane Michael, Hurricane Sally and Tropical Storm Eta, and reductions in our non-catastrophe Reserves of $49,711,000 for ~~2016~~2021 and ~~$9,102,000~~$18,954,000 for ~~2015~~2020 and prior loss years. The ~~$297,047,000 in~~ Reserves established for ~~2017~~2022 claims is primarily driven by ~~losses from Hurricane Irma, an allowance for subsequent development of claims reported for the accident year, and~~ an allowance for those claims that have been incurred but not reported to the company as of ~~September~~June 30, ~~2017.~~2022. The decrease of ~~$22,867,000~~$68,665,000 specific to our ~~2016~~2021 and prior loss-year reserves is ~~primarily~~ due to settlement of claims related to those loss years.

Based on all information known to us, we consider our Reserves at ~~September~~June 30, ~~2017~~2022 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.

~~Reinsurance Recoverable Balance~~

Our reinsurance recoverable balance represents an estimate of the amount of paid and unpaid losses and loss adjustment expenses that is recoverable from reinsurers. These estimates are determined in a manner consistent with the terms of the applicable reinsurance contracts and based on the ultimate losses and loss adjustment expenses we expect to incur. Given the uncertainty of the ultimate amounts of losses and loss adjustment expenses, the estimates may vary significantly from the eventual outcome.

Economic Impact of Reinsurance Contracts with Retrospective Provisions

~~Certain of~~From time to time, our reinsurance contracts may include retrospective provisions that adjust premiums ~~increase the amount of future coverage, or result in a profit commission~~ 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 ~~gives rise to an increase in future coverage or~~ 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.

~~As described in Note 9 — “Reinsurance” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form10-Q,~~ ~~we adjusted the balances of accrued benefits and deferred reinsurance premiums during the third quarter of 2017 due to the impact of Hurricane Irma.~~ For the three months ended ~~September~~June 30, 2017, we derecognized $9,300,000 of net accrued benefits. For the three months ended September 30, 2017, we recognized $3,163,000 in ceded premiums, including the reversal of the majority of reinsurance costs deferred in prior periods. In contrast, for the three months ended September 30, 2016,2022 and 2021, we accrued benefits of ~~$2,490,000.~~$6,390,000 and $3,575,000, respectively. For the ~~three~~six months ended ~~September~~June 30, 2016, we deferred recognition of $937,000 in ceded premiums. In combination, for the three months ended September 30, 2017, we recognized a net increase in ceded premiums of $12,464,000 as opposed to a net reduction in ceded premiums of $3,428,000 for the three months ended September 30, 2016.

For the nine months ended September 30, 2017, we derecognized $3,841,000 of net accrued benefits. For the nine months ended September 30, 2017, we recognized ceded premiums of $1,667,000, including the reversal of the majority of previously deferred reinsurance costs. By comparison,2022 and 2021, we accrued benefits of ~~$11,120,000 for the nine months ended September 30, 2016. For the nine months ended September 30, 2016, we~~$7,874,000 and $8,255,000, respectively. The accrual of benefits was recognized net ceded premiums of $1,871,000, representing amortization of $3,085,000 of previously deferred reinsurance costs for increased coverage offset by $1,214,000 of ceded premiums deferred for the period. In combination, for the nine months ended September 30, 2017, we recognizedas a ~~net increase in ceded premiums of $5,508,000 as opposed to a net~~ reduction in ceded premiums of $9,250,000 for the nine months ended September 30, 2016. In June 2016, we received cash totaling $37,800,000 in connection with the benefits accrued for two retrospective reinsurance contracts that were terminated effective May 31, 2016. In September 2016, we received a cash payment of $5,716,000 under the terms of one retrospective reinsurance contract which terminated May 31, 2016.premiums.

As of ~~September~~June 30, ~~2017,~~2022, we had ~~$1,969,000~~$10,938,000 of accrued benefits, ~~and $484,000 of ceded premiums deferred, amounts~~the amount that would be charged to earnings in the event we experience a catastrophic loss that exceeds the coverage ~~limits~~limit provided under such agreements and in the period that the increased coverage is applicable. At December 31, 2016, we had $5,810,000 of accrued benefits and $2,152,000 of ceded premiums deferred related to these agreements.agreement.

We believe the credit risk associated with the collectability of ~~these~~ accrued benefits is minimal based on available information about ~~the individual~~each reinsurer’s financial position and ~~payment history.~~each 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 Form10-K, which we filed with the SEC on ~~February 22, 2017.~~March 10, 2022. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, there have been no other material changes with respect to any of our critical accounting policies.

RECENT ACCOUNTING PRONOUNCEMENTS

~~For information with respect to~~There have been no recent accounting pronouncements ~~and~~or changes in recent accounting pronouncements during the ~~impact~~six months ended June 30, 2022, as compared to those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, that are of ~~these pronouncements on our consolidated financial statements, see Note 3~~significance, or potential significance, to ~~our Notes to Consolidated Financial Statements.~~

the Company.

ITEM 3 –QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our investment ~~portfolio~~portfolios at ~~September~~June 30, ~~2017~~2022 included fixed-maturity and equity securities, the ~~primary~~ purposes of which are not for ~~value preservation.~~speculation. Our main objective is to maximizeafter-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~~Board of ~~directors.~~Directors. From time to time, our investment committee may decide to invest in low risk assets such as U.S. government bonds.

Our investment portfolios are 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 portfolios.

We classify our fixed-maturity securities ~~and the majority of equity securities~~ asavailable-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~~June 30, ~~2017~~2022 (amounts in thousands):


Hypothetical Change in Interest Rates	Estimated Fair Value		Change in Estimated Fair Value			Percentage Increase (Decrease) in Estimated Fair Value			Estimated Fair Value		Change in Estimated Fair Value			Percentage Increase (Decrease) in Estimated Fair Value
300 basis point increase	$	232,088	$	(24,014	)		(9.38	)%	$	380,227	$	(18,344	)		-4.60	%
200 basis point increase		240,087		(16,015	)		(6.25	)%		386,341		(12,230	)		-3.07	%
100 basis point increase		248,092		(8,010	)		(3.13	)%		392,455		(6,116	)		-1.53	%
100 basis point decrease		264,115		8,013			3.13	%		404,685		6,114			1.53	%
200 basis point decrease		271,506		15,404			6.02	%		410,758		12,187			3.06	%
300 basis point decrease		275,881		19,779			7.72	%		416,417		17,846			4.48	%

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~~June 30, ~~2017~~2022 (amounts in thousands):


											% of Total				% of Total
									Amortized		Amortized		Estimated		Estimated
Comparable Rating	Amortized Cost		% of Total Amortized Cost		Estimated Fair Value		% of Total Estimated Fair Value		Cost		Cost		Fair Value		Fair Value
AAA	$	2,521		1	$	2,527		1	$	93,368		23	$	93,273		23
AA+, AA, AA-		70,830		28		71,256		28		281,539		70		276,805		69
A+, A, A-		93,220		37		93,630		37		12,791		3		12,569		3
BBB+, BBB, BBB-		57,523		23		59,024		23		14,335		3		14,115		4
BB+, BB, BB-		9,446		4		9,647		4
B+, B, B-		6,133		2		6,130		2
CCC+, CC and Not rated		13,489		5		13,888		5		1,811		1		1,809		1

Total	$	253,162		100	$	256,102		100	$	403,844		100	$	398,571		100

Equity Price Risk

Our equity investment portfolio at ~~September~~June 30, ~~2017~~2022 included common stocks, perpetual preferred stocks, mutual funds and ~~exchange traded~~exchange-traded funds. We may incur 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~~June 30, ~~2017~~2022 (amounts in thousands):


							% of Total
					Estimated		Estimated
	Estimated Fair Value		% of Total Estimated Fair Value		Fair Value		Fair Value
Stocks by sector:
Consumer					$	7,360		21
Financial	$	26,121		41		5,747		16
Industrial		5,378		8
Consumer		4,996		8
Energy		3,281		5
Technology						1,903		5
Other (1)		6,467		10		2,570		7
						17,580		49
		46,243		72

Mutual funds and Exchange traded funds by type:
Mutual funds and exchange-traded funds by type:
Debt		16,840		27		15,087		42
Equity		943		1		3,052		9

		17,783		28

Total	$	64,026		100	$	35,719		100

~~(1)~~

~~Represents an aggregate of less than 5% sectors.~~

(1)

Represents an aggregate of less than 5% sectors.

Foreign Currency Exchange Risk

At ~~September~~June 30, ~~2017,~~2022, we did not have any material exposure to foreign currency related risk.

ITEM 4 –CONTROLS AND PROCEDURES

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~~June 30, ~~2017~~2022 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.

PART II – OTHER INFORMATION

ITEM 1 –LEGAL PROCEEDINGS

The Company is a party to claims and legal actions arising routinely in the ordinary course of our business. Although we cannot predict with certainty the ultimate resolution of the claims and lawsuits asserted against us, we do not believe that any currently pending legal proceedings to which we are a party will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

ITEM 1A –RISK FACTORS

There have been no material changes ~~from~~in the risk factors previously disclosed in the section entitled “Risk Factors” in our Form10-K, which was filed with the SEC on ~~February 22, 2017.~~

March 10, 2022.

ITEM 2 –UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

Sales of Unregistered Securities and Use of Proceeds

All information related to sales of unregistered securities ~~had~~have been reported in ~~a current report~~Current Report on Form~~8-K.~~ 8-K filings.

(b)

Repurchases of Securities

The table below summarizes the number of common shares repurchased ~~during~~under the ~~three months ended September 30, 2017 under a~~ share repurchase agreement and the 2022 repurchase plan approved by our Board of Directors, and also the number of common shares surrendered by employees to satisfy payroll tax liabilities associated with the vesting of restricted shares (dollar amounts in thousands, except share and per share amounts):

For the Month Ended
   Total Number
of Shares
Purchased    Average
Price Paid
Per Share    Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs (a)    Maximum Dollar
Value of Shares That
May Yet Be
Purchased Under
The Plans or
Programs (b)
July 31, 2017
   895    $ 44.53    895    $ 18,371
August 31, 2017
   38,530    $ 40.31    38,530    $ 16,818
September 30, 2017
   85,424    $ 35.12    85,424    $ 13,818





   124,849    $ 36.79    124,849


	Total Number of Shares		Average Price Paid		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Dollar Value of Shares That May Yet Be Purchased Under The Plans
For the Month Ended	Purchased		Per Share		or Programs (a)		or Programs (b)
April 30, 2022		6,264	$	64.89		6,264	$	19,594
May 31, 2022 (c)		1,060,074	$	64.43		9,284	$	18,996
June 30, 2022		13,917	$	63.18		13,917	$	18,117
		1,080,255	$	64.42		29,465

~~(a)~~

~~The share repurchase plan approved by our Board of Directors on December 15, 2016 commenced in January 2017.~~

~~(b)~~

~~Represents the balances before commissions and fees at the end of each month.~~

(a)
In March 2022, our Board of Directors authorized a plan announced March 14, 2022 to repurchase up to $20,000 of the Company’s common shares before commissions and fees during 2022.
(b)
Represents the balances before commissions and fees at the end of each month. See Note 18 -- “Equity” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.
(c)
During May 2022, 1,037,600 shares of common stock were repurchased from institutional investors (see Note 18 -- “Equity” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information).

Working Capital Restrictions and Other Limitations on Payment of Dividends

We are not subject to working capital restrictions or other limitations on the payment of dividends. Our insurance subsidiaries, however, are subject to restrictions on the dividends they may pay. Those restrictions could impact HCI’s ability to pay future dividends.

Under Florida law, a domestic insurer may not pay any dividend or distribute cash or other property to its stockholder except out of that part of its available and accumulated capital and surplus funds which is derived from realized net operating profits on its business and net realized capital gains. Additionally, a Florida domestic insurer may not make dividend payments or distributions to its stockholder without prior approval of the Florida Office of Insurance Regulation if the dividend or distribution would exceed the larger of (1) the lesser of (a) 10.0% of its capital surplus or (b) net income, not including realized capital gains, plus a two year carry forward, (2) 10.0% of capital surplus with dividends payable constrained to unassigned funds minus 25% of unrealized capital gains or (3) the lesser of (a) 10.0% of capital surplus or (b) net investment income plus a three year carry forward with dividends payable constrained to unassigned funds minus 25% of unrealized capital gains.

Alternatively, a Florida domestic insurer may pay a dividend or distribution without the prior written approval of the Florida Office of Insurance Regulation (1) if the dividend is equal to or less than the greater of (a) 10.0% of the insurer’s capital surplus as regards policyholders derived from realized net operating profits on its business and net realized capital gains or (b) the insurer’s entire

net operating profits and realized net capital gains derived during the immediately preceding calendar year, (2) the insurer will have policy holder capital surplus equal to or exceeding 115.0% of the minimum required statutory capital surplus after the dividend or distribution, (3) the insurer files a notice of the dividend or distribution with the Florida Office of Insurance Regulation at least ten business days prior to the dividend payment or distribution and (4) the notice includes a certification by an officer of the insurer attesting that, after the payment of the dividend or distribution, the insurer will have at least 115% of required statutory capital surplus as to policyholders. Except as provided above, a Florida domiciled insurer may only pay a dividend or make a distribution (1) subject to prior approval by the Florida Office of Insurance Regulation or (2) 30 days after the Florida Office of Insurance Regulation has received notice of such dividend or distribution and has not disapproved it within such time.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017, HCPCI~~2022, our insurance subsidiaries paid ~~a $18,000,000 dividend~~dividends of $12,000,000 to HCI.

~~ITEM 3~~

–~~DEFAULTS UPON SENIOR SECURITIES~~

~~None.~~ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

~~ITEM 4~~

–~~MINE SAFETY DISCLOSURES~~

None.

ITEM 4 – MINE SAFETY DISCLOSURES

None.

ITEM 5 –OTHER INFORMATION

None.

65ITEM 6 – EXHIBITS

~~ITEM 6~~

–~~EXHIBITS~~

The following documents are filed as part of this report:


EXHIBIT ~~NUMBER~~		~~DESCRIPTION~~
NUMBER		DESCRIPTION
~~3.1~~
3.1		Articles of Incorporation, with amendments. Incorporated by reference to the correspondingly numbered exhibit to our Form10-Q filed August 7, 2013.

3.1.1		Articles of Amendment to Articles of Incorporation designating the rights, preferences and limitations of Series B Junior Participating Preferred Stock. Incorporated by reference to Exhibit 3.1 to our Form8-K filed October 18, 2013.

~~3.2~~ 3.1.2		~~Bylaws.~~Articles of Amendment to Articles of Incorporation cancelling the rights, preferences and limitations of Series B Junior Participating Preferred Stock. Incorporated by reference to Exhibit 3.1 to our Form 8-K filed May 15, 2020.

3.2		Bylaws, with amendments. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-Q~~ 8-K filed ~~August 7, 2013.~~September 13, 2019.

4.1		Form of common stock certificate. Incorporated by reference to the correspondingly numbered exhibit to our Form10-Q filed November 7, 2013.

4.2		~~Supplement No. 1,~~Common Stock Purchase Warrant, dated ~~as of January 17, 2013, to the Indenture, dated as of January 17, 2013, between~~February 26, 2021, issued by HCI Group, Inc. ~~(formerly known as Homeowners Choice, Inc.) and The Bank of New York Mellon Trust Company, N.A., as Trustee. Incorporated by reference~~ to ~~the correspondingly numbered exhibit to our Form8-K~~ ~~filed January 17, 2013.~~

~~4.3~~		~~Form of 8.00% Senior Note due 2020 (included in Exhibit 4.2). Incorporated by reference to the correspondingly numbered exhibit to our Form8-K~~ ~~filed January 17, 2013.~~

~~4.4~~		Indenture, dated as of January 17, 2013, between HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) and The Bank of New York Mellon Trust Company, N.A. Incorporated by reference to Exhibit 4.4 to Amendment No. 1 to our Registration Statement on Form~~S-3~~ ~~(FileNo. 333-185228)~~ ~~filed December 10, 2012.~~

~~4.6~~		~~Form of Subordinated Indenture. Incorporated by reference to the correspondingly numbered exhibit to Amendment No. 1 to our Registration Statement on FormS-3~~ ~~(File No. 333-185228) filed December 10, 2012.~~

~~4.7~~		Rights Agreement, dated as of October 18, 2013, between HCI Group, Inc. and American Stock Transfer & Trust Company, LLC, which includes as Exhibit A thereto a summary of the terms of the Series B Junior Participating Preferred Stock, as Exhibit B thereto the Form of Right Certificate, and as Exhibit C thereto the Summary of Rights to Purchase Preferred Shares.CB Snowbird Holdings, L.P. Incorporated by reference to Exhibit 4.1 toof our Form8-K filed ~~October 18, 2013.~~March 1, 2021.



~~4.7.1~~ 4.3		~~Amendment,~~Indenture, dated ~~as of April 18, 2017, to the Rights Agreement,~~May 23, 2022, by and ~~between the Company and American Stock Transfer & Trust Company, LLC, dated as of October 18, 2013. Incorporated by reference to Exhibit 4.1 to our Form8-K~~ ~~filed April 24, 2017.~~

~~4.8~~		~~Indenture, dated December 11, 2013,~~ between HCI Group, Inc. and The Bank of New York Mellon Trust Company, N.A. ~~(including Global Note).~~

4.6		Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as amended. Incorporated by reference to ~~Exhibit 4.1~~the corresponding numbered exhibit to our Form~~8-K~~ 10-K filed ~~December~~March 12, ~~2013.~~2021.

4.9		See Exhibits3.1,3.1.1, 3.1.2 and3.2 of this report for provisions of the Articles of Incorporation, as amended, and our Bylaws, as amended, defining certain rights of security holders.

4.10		Indenture, dated March 3, 2017, between HCI Group, Inc. and The Bank of New York Mellon Trust Company, N.A. Incorporated by reference to Exhibit 4.1 of our Form8-K filed March 3, 2017.

4.11		Form of Global 4.25% Convertible Senior Note due 2037 (included in Exhibit 4.1). Incorporated by reference to Exhibit 4.1 of our Form8-K filed March 3, 2017.

10.1		Excess of Loss Retrocession Contract (flood), effective June 1, 2014, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-Q~~ ~~filed August 6, 2014.~~

10.2**		~~Executive~~Preferred Stock Purchase Agreement, dated ~~May 1, 2007 between~~February 26, 2021, among TypTap Insurance Group, Inc., HCI Group, Inc. ~~(formerly known as Homeowners Choice, Inc.)~~, and ~~Richard R. Allen. Incorporated by reference to the correspondingly numbered exhibit to our Registration Statement on FormS-1~~ ~~(File No. 333-150513), originally filed April 30, 2008, effective July 24, 2008, as amended.~~

~~10.3~~		Reimbursement Contract effective June 1, 2016 between Homeowners Choice Property & Casualty Insurance Company and the State Board of Administration which administers the Florida Hurricane Catastrophe Fund. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-Q~~ ~~filed August 3, 2016.~~

~~10.4~~		Reimbursement Contract effective June 1, 2017 between Homeowners Choice Property & Casualty Insurance Company and the State Board of Administration which administers the Florida Hurricane Catastrophe Fund.CB Snowbird Holdings, L.P. Incorporated by reference to the corresponding numbered exhibit to our Form~~10-Q~~ 8-K filed ~~August 3, 2017.~~March 1, 2021.

10.2		Amended and Restated Articles of Incorporation of TypTap Insurance Group, Inc. filed February 26, 2021. Incorporated by reference to the corresponding numbered exhibit to our Form 8-K filed March 1, 2021.

10.3		Shareholders Agreement, dated February 26, 2021, among TypTap Insurance Group, Inc., CB Snowbird Holdings, L.P., HCI Group, Inc., and the other shareholders party thereto. Incorporated by reference to the corresponding numbered exhibit to our Form 8-K filed March 1, 2021.


10.4		Parent Guaranty Agreement, dated February 26, 2021, between HCI Group, Inc. and CB Snowbird Holdings, L.P. Incorporated by reference to the corresponding numbered exhibit to our Form 8-K filed March 1, 2021.

10.5**		~~Restated~~ HCI Group, Inc. 2012 Omnibus Incentive ~~Plan.~~Plan as revised April 26, 2022. Incorporated by reference to ~~Exhibit 99.1 of~~the corresponding numbered exhibit to our Form~~8-K~~ 10-Q filed ~~March 23, 2017.~~May 6, 2022.



10.6**		HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) 2007 Stock Option and Incentive Plan. Incorporated by reference to the correspondingly numbered exhibit to our Form10-Q filed August 29, 2008.

10.7**		Executive Employment Agreement dated November 23, 2016 between Mark Harmsworth and HCI Group, Inc. Incorporated by reference to the corresponding numbered exhibit to our Form10-Q filed August 3, 2017.

~~10.8~~ 10.31		Working Layer Catastrophe Excess of Loss Reinsurance Contract, effective: June 1, 2016, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers (National Fire). Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-Q~~ ~~filed August 3, 2016.~~

~~10.9~~		Working Layer Catastrophe Excess of Loss Reinsurance Contract, effective June 1, 2016, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers (Claddaugh). Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-Q~~ ~~filed August 3, 2016.~~

~~10.10~~		Working Layer Catastrophe Excess of Loss Specific Retrocession Contract effective June 1, 2016 issued to Claddaugh Casualty Insurance Company Ltd. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-Q~~ ~~filed August 3, 2016.~~

~~10.11~~		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2016, issued to, Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-Q~~ ~~filed August 3, 2016.~~

~~10.12~~		Property Catastrophe First Excess of Loss Specific Retrocession Contract effective June 1, 2016 issued to Claddaugh Casualty Insurance Company Ltd. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-Q~~ ~~filed August 3, 2016.~~



~~10.13~~		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2016 by Homeowners Choice Property & Casualty Insurance Company, Inc. and subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-Q~~ ~~filed August 3, 2016.~~

~~10.14~~		Property Catastrophe Third Excess of Loss Reinsurance Contract effective June 1, 2016 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-Q~~ ~~filed August 3, 2016.~~

~~10.15~~		Property Catastrophe First Excess of Loss Reinsurance Contract effective June 1, 2016 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-Q~~ ~~filed August 3, 2016.~~

~~10.16~~		Working Layer Catastrophe Excess of Loss Specific Retrocession Contract effective June 1, 2017 issued to Claddaugh Casualty Insurance Company Ltd. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form~~10-Q~~ ~~filed August 3, 2017.~~

~~10.17~~		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2017 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding number exhibit to our Form~~10-Q~~ ~~filed August 3, 2017.~~

~~10.18~~		~~Property Catastrophe Second Event Excess of Loss Reinsurance Contract effective June 1, 2017~~2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form10-Q filed August ~~3, 2017.~~6, 2021.

~~10.19~~ 10.32		~~Reinstatement Premium Protection~~Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, ~~2017~~2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form10-Q filed August ~~3, 2017.~~6, 2021.

10.33		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.34		Joinder, Second Amendment to Credit Agreement and Modification of Other Loan Documents. Incorporated by reference to the corresponding numbered exhibit to our Form 8-K filed January 28, 2021.

10.40		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat) effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.41		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.42		Property Catastrophe First Excess of Loss Reinsurance Contract effective June 1, 2021 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.


10.43		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat) effective June 1, 2021 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.
~~10.23~~
10.44		~~Assumption Agreement~~7th Layer Non-Florida Property Catastrophe Excess of Loss Reinsurance Contract effective ~~October 15, 2014 by and between~~June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and ~~Citizens~~TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.45		Flood Property Catastrophe Excess of Loss Reinsurance Contract effective July 1, 2021 issued to Homeowners Choice Property & Casualty Insurance ~~Corporation.~~Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.48**		TypTap Insurance Group, Inc. 2021 Equity Incentive Plan. Incorporated by reference to Exhibit 10.5 of our Form 8-K filed March 1, 2021.

10.49**		Form of Restricted Stock Award Agreement of TypTap Insurance Group, Inc. Incorporated by reference to Exhibit 10.6 of our Form 8-K filed March 1, 2021.

10.50		Exchange Agreement, dated August 26, 2021, by and between HCI Group, Inc. and Citadel Equity Fund Ltd. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed November 9, 2021.

10.51**		Stock Option Agreement between Paresh Patel and TypTap Insurance Group, Inc. dated October 1, 2021. Incorporated by reference to Exhibit 99.1 to our Form 8-K filed October 7, 2021.

10.52**		TypTap Insurance Group, Inc. 2021 Omnibus Incentive Plan. Incorporated by reference to Exhibit 99.2 of our Form 8-K filed October 7, 2021.

10.53		Purchase Agreement, dated May 18, 2022, by and among HCI Group, Inc., JMP Securities LLC and Truist Securities, Inc., as representatives of the several purchasers named therein. Incorporated by reference to Exhibit 10.1 of our Form8-K filed ~~January 28, 2015.~~May 23, 2022.

10.28** 10.57		Restricted Stock Agreement dated May 8, 2012 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 30,000 shares of restricted common stock to Richard R. Allen. Incorporated by reference to Exhibit 10.28 of our Form~~8-K~~ ~~filed May 10, 2012.~~

10.30**		Restricted Stock Agreement dated May 8, 2012 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 20,000 shares of restricted common stock to Andrew L. Graham. Incorporated by reference to Exhibit 10.30 of our Form~~8-K~~ ~~filed May 10, 2012.~~

10.34**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 400,000 shares of restricted common stock to Paresh Patel. Incorporated by reference to Exhibit 10.34 of our Form~~8-K~~ ~~filed May 21, 2013. See Exhibit 10.90~~

10.35**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 24,000 shares of restricted common stock to Sanjay Madhu. Incorporated by reference to Exhibit 10.35 of our Form~~8-K~~ ~~filed May 21, 2013. See Exhibit 10.91~~

10.36**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 24,000 shares of restricted common stock to George Apostolou. Incorporated by reference to Exhibit 10.36 of our Form~~8-K~~ ~~filed May 21, 2013. See Exhibit 10.92~~

10.37**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 24,000 shares of restricted common stock to Harish Patel. Incorporated by reference to Exhibit 10.37 of our Form~~8-K~~ ~~filed May 21, 2013. See Exhibit 10.93~~

10.38**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 24,000 shares of restricted common stock to Gregory Politis. Incorporated by reference to Exhibit 10.38 of our Form~~8-K~~ ~~filed May 21, 2013. See Exhibit 10.94~~

10.39**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 24,000 shares of restricted common stock to Anthony Saravanos. Incorporated by reference to Exhibit 10.39 of our Form~~8-K~~ ~~filed May 21, 2013. See Exhibit 10.95~~



10.40**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 24,000 shares of restricted common stock to Martin Traber. Incorporated by reference to Exhibit 10.40 of our Form~~8-K~~ ~~filed May 21, 2013. See Exhibit 10.96~~

10.52**		~~Restricted Stock Agreement dated August 29, 2013 whereby HCI Group, Inc. issued 10,000 shares of restricted common stock to Anthony Saravanos. Incorporated by reference to Exhibit 10.52 of our Form8-K~~ ~~filed August 29, 2013.~~

10.53**		~~Restricted Stock Agreement dated November 12, 2013 whereby HCI Group, Inc. issued 24,000 shares of restricted common stock to Wayne Burks. Incorporated by reference to Exhibit 10.11 of our Form8-K~~ ~~filed November 13, 2013. See Exhibit 10.97~~

10.54**		Restricted Stock Agreement dated November 12, 2013 whereby HCI Group, Inc. issued 24,000 shares of restricted common stock to James J. Macchiarola. Incorporated by reference to Exhibit 10.12 of our Form~~8-K~~ ~~filed November 13, 2013. See Exhibit 10.98~~

~~10.56~~		Prepaid Forward Contract, dated December 5, 2013 and effective as of December 11, 2013, between HCI Group, Inc. and Deutsche Bank AG, London Branch. Incorporated by reference to Exhibit 10.1 of our Form~~8-K~~ ~~filed December 12, 2013.~~

~~10.57~~		Form of executive restricted stock award contract. Incorporated by reference to Exhibit 10.57 ofto our Form10-Q ~~for the quarter ended March 31, 2014~~ filed May 1, 2014.

10.58		Purchase Agreement, dated February 28, 2017, by and between HCI Group, Inc. and JMP Securities LLC and SunTrust Robinson Humphrey, Inc., as representatives of the several initial purchasers named therein. Incorporated by reference to Exhibit 10.1 of our Form8-K filed February 28, 2017.

10.59		Prepaid Forward Contract, dated February 28, 2017 and effective as of March 3, 2017, between HCI Group, Inc. and Societe Generale. Incorporated by reference to Exhibit 10.1 of our Form8-K filed March 3, 2017.

10.60		Credit Agreement, Promissory Note, Security and Pledge Agreement, dated December 5, 2018, between HCI Group, Inc. and Fifth Third Bank. Incorporated by reference to Exhibits 99.1, 99.2, and 99.3 of our Form 8-K filed December 6, 2018.

10.88**		Nonqualified Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated January 7, 2017. Incorporated by reference to ~~exhibit~~Exhibit 99.2 to our Form8-K filed January 11, 2017.

10.89**		~~Employment Agreement between Paresh Patel and HCI Group, Inc. dated December 30, 2016. Incorporated by reference to the exhibit numbered 99.1 to our Form8-K~~ ~~filed December 30, 2016.~~


10.99**
10.90**		Amendment dated March 2, 2016 to Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated May 16, 2013. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-K~~ ~~filed March 4, 2016.~~

10.91**		Amendment dated March 2, 2016 to Restricted Stock Award Contract between Sanjay Madhu and HCI Group, Inc. dated May 16, 2013. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-K~~ ~~filed March 4, 2016.~~

10.92**		Amendment dated March 2, 2016 to Restricted Stock Award Contract between George Apostolou and HCI Group, Inc. dated May 16, 2013. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-K~~ ~~filed March 4, 2016.~~

10.93**		Amendment dated March 2, 2016 to Restricted Stock Award Contract between Harish Patel and HCI Group, Inc. dated May 16, 2013. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-K~~ ~~filed March 4, 2016.~~

10.94**		Amendment dated March 2, 2016 to Restricted Stock Award Contract between Gregory Politis and HCI Group, Inc. dated May 16, 2013. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-K~~ ~~filed March 4, 2016.~~

10.95**		Amendment dated March 2, 2016 to Restricted Stock Award Contract between Anthony Saravanos and HCI Group, Inc. dated May 16, 2013. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-K~~ ~~filed March 4, 2016.~~

10.96**		Amendment dated March 2, 2016 to Restricted Stock Award Contract between Martin Traber and HCI Group, Inc. dated May 16, 2013. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-K~~ ~~filed March 4, 2016.~~

10.97**		Amendment dated March 2, 2016 to Restricted Stock Award Contract between Wayne Burks and HCI Group, Inc. dated November 12, 2013. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-K~~ ~~filed March 4, 2016.~~

10.98**		Amendment dated March 2, 2016 to Restricted Stock Award Contract between Jim Macchiarola and HCI Group, Inc. dated November 12, 2013. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-K~~ ~~filed March 4, 2016.~~

10.99**		Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated January 7, 2017. Incorporated by reference to ~~exhibit~~Exhibit 99.1 to our Form8-K filed January 11, 2017.



10.100* 10.101**		Restricted Stock Award Contract between ~~Mark Harmsworth~~Paresh Patel and HCI Group, Inc. dated ~~December 5, 2016.~~February 8, 2018. Incorporated by reference to Exhibit 99.1 to our Form 8-K filed February 14, 2018.

10.102**		Nonqualified Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated February 8, 2018. Incorporated by reference to Exhibit 99.2 to our Form 8-K filed February 14, 2018.

10.103**		Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated January 15, 2019. Incorporated by reference to Exhibit 99.1 to our Form 8-K filed January 22, 2019.

10.104**		Nonqualified Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated January 15, 2019. Incorporated by reference to Exhibit 99.2 to our Form 8-K filed January 22, 2019.

10.105**		Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated January 16, 2020. Incorporated by reference to Exhibit 99.1 to our Form 8-K filed January 23, 2020.

10.106**		Nonqualified Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated January 16, 2020. Incorporated by reference to Exhibit 99.2 to our Form 8-K filed January 23, 2020.

10.107		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2021 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form10-Q filed August ~~3, 2017.~~6, 2021.

10.108		Non-Florida Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.109		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2021 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.110		Non-Florida Reinstatement Premium Protection Reinsurance Contract effective June 1, 2021, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.111		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2021, issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.112		Top Layer Flood/Wind Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.


~~31.1~~ 10.113		Property Catastrophe First Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.114		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat) effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.115		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.116		Property Catastrophe First Excess of Loss Reinsurance Contract effective June 1, 2021 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.117		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat) effective June 1, 2021 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.118		Non-Florida Property Catastrophe $6MXS$4M Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.119		Non-Florida Reinstatement Premium Protection Reinsurance Contract (For $6MXS$4M Excess Cat) effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.120		Reimbursement Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by the State Board of Administration of the State of Florida. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.121		Reimbursement Contract effective June 1, 2021 issued to TypTap Insurance Company by the State Board of Administration of the State of Florida. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.122		Multi-Year Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.


10.123		Multi-Year Non-Florida Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2021 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 6, 2021.

10.124		Property Quota Share Reinsurance Contract effective December 31, 2020 issued to United Property and Casualty Insurance Company by Homeowners Choice Property & Casualty Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

10.125		Renewal Rights Agreement effective January 18, 2021 by and among United Property and Casualty Insurance Company, Inc., United Insurance Holdings Corp., United Insurance Management, L.C. and Homeowners Choice Property & Casualty Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

10.126		Property Quota Share Reinsurance Contract effective June 1, 2021 issued to United Property and Casualty Insurance Company by Homeowners Choice Property & Casualty Insurance Company and TypTap Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

10.127		Renewal Rights Agreement effective December 30, 2021 by and among United Property and Casualty Insurance Company, Inc., United Insurance Holdings Corp., United Insurance Management, L.C. and Homeowners Choice Property & Casualty Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

10.128		Property Quota Share Reinsurance Contract effective December 31, 2021 issued to United Property and Casualty Insurance Company, by Homeowners Choice Property & Casualty Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

10.129		Property Quota Share Reinsurance Contract effective June 1, 2022 issued to United Property and Casualty Insurance Company by TypTap Insurance Company.

10.131		Multi-Year Working Layer Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.132		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.133		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.134		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.135		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).


10.136		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2022 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.137		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2022 issued to TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.138		Non-Florida Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.139		Non-Florida Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.140		Sixth Layer Non-Florida Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.141		Non-Florida Reinstatement Premium Protection Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.142		Non-Florida Reinstatement Premium Protection Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.143		Flood Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.144		Property Catastrophe Shared Multi-Region Excess of Loss Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.145		Top Layer Flood/Wind Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2022 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.146		Reimbursement Contract effective June 1, 2022 between TypTap Insurance Company and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund.

10.147		Reimbursement Contract effective June 1, 2022 between Homeowners Choice Property & Casualty Insurance Company, Inc. and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund.



31.1		Certification of the Chief Executive Officer

31.2		Certification of the Chief Financial Officer

32.1		Written Statement of the Chief Executive Officer Pursuant to 18 U.S.C.ss.1350

32.2		Written Statement of the Chief Financial Officer Pursuant to 18 U.S.C.ss.1350

101.INS		Inline XBRL Instance ~~Document.~~Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL documents.

101.SCH		Inline XBRL Taxonomy Extension Schema.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase.

101.DEF		Inline XBRL Definition Linkbase.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

**	~~Management contract or compensatory plan.~~

** Management contract or compensatory plan.

73SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, who has signed this report on behalf of the Company.


	HCI GROUP, INC.

~~November 3, 2017~~	~~By:~~		~~/s/ Paresh Patel~~
			~~Paresh Patel~~
August 9, 2022	By:	/s/ Paresh Patel
		Paresh Patel
		Chief Executive Officer
			(Principal Executive Officer)

~~November 3, 2017~~	~~By:~~	August 9, 2022	~~/s/~~	By:	/s/ James Mark Harmsworth
			James Mark Harmsworth
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

A signed original of this document has been provided to HCI Group, Inc. and will be retained by HCI Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.


	Proceeds		Gross Realized Gains		Gross Realized Losses
Three months ended September 30, 2017
Fixed-maturity securities	$	2,765	$	97	$	(23	)

Equity securities	$	4,827	$	223	$	(525	)

Three months ended September 30, 2016
Fixed-maturity securities	$	3,891	$	196	$	—

Equity securities	$	5,000	$	491	$	(104	)

Nine months ended September 30, 2017
Fixed-maturity securities	$	9,638	$	126	$	(45	)

Equity securities	$	25,729	$	3,058	$	(865	)

Nine months ended September 30, 2016
Fixed-maturity securities	$	37,415	$	579	$	—

Equity securities	$	14,155	$	850	$	(530	)


	Less Than Twelve Months					Twelve Months or Longer					Total
As of September 30, 2017	Gross Unrealized Loss			Estimated Fair Value		Gross Unrealized Loss			Estimated Fair Value		Gross Unrealized Loss			Estimated Fair Value
Fixed-maturity securities
U.S. Treasury and U.S. government agencies	$	(112	)	$	45,344	$	—		$	—	$	(112	)	$	45,344
Corporate bonds		(530	)		49,789		(281	)		15,346		(811	)		65,135
State, municipalities, and political subdivisions		(29	)		4,332		(54	)		3,889		(83	)		8,221
Exchange-traded debt		(209	)		3,189		(2	)		80		(211	)		3,269
Redeemable preferred stock		(5	)		45		—			—		(5	)		45

Total fixed-maturity securities		(885	)		102,699		(337	)		19,315		(1,222	)		122,014
Equity securities		(545	)		11,154		(35	)		1,260		(580	)		12,414

Totalavailable-for-sale securities	$	(1,430	)	$	113,853	$	(372	)	$	20,575	$	(1,802	)	$	134,428


	Proceeds		Gross Realized Gains		Gross Realized Losses
Three months ended September 30, 2017
Equity securities	$	580	$	12	$	(10	)

Nine months ended September 30, 2017
Equity securities	$	580	$	12	$	(10	)


	September 30, 2017						December 31, 2016
Investment Strategy	Carrying Value		Unfunded Balance		(%)(a)		Carrying Value		Unfunded Balance		(%)(a)
Primarily in senior secured loans and, to a limited extent, in other debt and equity securities of private U.S. lower-middle-market companies. (b)(c)(e)	$	7,134	$	5,505		15.37	$	6,246	$	6,428		16.50
Value creation through active distressed debt investing primarily in bank loans, public and private corporate bonds, asset-backed securities, and equity securities received in connection with debt restructuring. (b)(d)(e)		7,630		1,746		1.76		7,358		1,360		1.76
Maximum long-term capital appreciation through long and short positions in equity and/or debt securities of publicly traded U.S. andnon-U.S. issuers, derivative instruments and certain other financial instruments. (f)		—		—		—		11,333		—		66.58
High returns and long-term capital appreciation through investments in the power, utility and energy industries, and in the infrastructure sector. (b)(g)(h)		6,148		3,766		0.18		4,326		5,766		0.18
Value-oriented investments in less liquid and mispriced senior and junior debts of private equity-backed companies. (b)(i)(j)		86		4,914		0.62		—		—		—

Total	$	20,998	$	15,931			$	29,263	$	13,554


	September 30, 2017		December 31, 2016
Balance Sheet:
Construction in progress - real estate	$	375	$	334
Property and equipment, net		1,213		1,654
Cash		110		179
Other		180		180

Total assets	$	1,878	$	2,347

Accounts payable	$	15	$	11
Other liabilities		14		—
Members’ capital		1,849		2,336

Total liabilities and members’ capital	$	1,878	$	2,347

Investment in unconsolidated joint venture, at equity*	$	1,664	$	2,102


	Three Months Ended September 30, 2017						Three Months Ended September 30, 2016
	Before Tax		Income Tax Expense (Benefit)		Net of Tax		Before Tax			Income Tax Expense (Benefit)			Net of Tax
Unrealized gain arising during the period	$	2,155	$	831	$	1,324	$	2,234		$	862		$	1,372
Other-than-temporary impairment loss		474		183		291		224			86			138
Call and repayment losses charged to investment income		—		—		—		3			1			2
Reclassification adjustment for realized losses (gains)		226		87		139		(583	)		(225	)		(358	)

Total other comprehensive income	$	2,855	$	1,101	$	1,754	$	1,878		$	724		$	1,154


	September 30, 2017			December 31, 2016
8% Senior Notes, redeemed in April 2017	$	—		$	40,250
3.875% Convertible Senior Notes, due March 15, 2019		89,990			89,990
4.25% Convertible Senior Notes, due March 1, 2037		143,750			—
3.95% Promissory note, due through February 17, 2020		9,417			—
4% Promissory note, due through February 1, 2031		8,468			8,821
3.75% Promissory note, due through September 1, 2036		8,692			8,924

Total principal amount		260,317			147,985
Less: unamortized discount and issuance costs		(24,006	)		(9,122	)

Total long-term debt	$	236,311		$	138,863


Due in 12 months following September 30,
2017	$	1,039
2018		91,070
2019		9,815
2020		906
2021		144,693
Thereafter		12,794

Total	$	260,317


	September 30, 2017			December 31 2016
Principal amount	$	233,740		$	89,990
Unamortized discount		(18,790	)		(6,795	)

Liability component – net carrying value before issuance costs	$	214,950		$	83,195

Equity component – conversion, net of offering costs	$	31,051		$	15,900


Three Months Ended September 30, 2016	Insurance Operations			Corporate/ Other(a)			Reclassification/ Elimination			Consolidated
Revenue:
Net premiums earned	$	63,300		$	—		$	—		$	63,300
Net investment income		2,316			989			(520	)		2,785
Net realized investment gains		532			51			—			583
Net other-than-temporary impairment losses		(225	)		1			—			(224	)
Policy fee income		972			—			—			972
Gain on bargain purchase		—			2,071			—			2,071
Other		106			2,001			(1,786	)		321

Total revenue		67,001			5,113			(2,306	)		69,808

Expenses:
Losses and loss adjustment expenses		25,909			—			—			25,909
Amortization of deferred policy acquisition costs		9,335			—			—			9,335
Interest expense		—			2,672			—			2,672
Depreciation and amortization		31			419			(147	)		303
Other		8,426			5,293			(2,159	)		11,560

Total expenses		43,701			8,384			(2,306	)		49,779

Income before income taxes	$	23,300		$	(3,271	)	$	—		$	20,029


Nine Months Ended September 30, 2016	Insurance Operations			Corporate/ Other(a)			Reclassification/ Elimination			Consolidated
Revenue:
Net premiums earned	$	180,275		$	—		$	—		$	180,275
Net investment income		5,802			876			(678	)		6,000
Net realized investment gains		856			43			—			899
Net other-than-temporary impairment losses		(1,426	)		(15	)		—			(1,441	)
Policy fee income		2,967			—			—			2,967
Gain on repurchases of convertible senior notes		—			153			—			153
Gain on bargain purchase		—			2,071			—			2,071
Other		543			5,808			(5,200	)		1,151

Total revenue		189,017			8,936			(5,878	)		192,075

Expenses:
Losses and loss adjustment expenses		79,261			—			—			79,261
Amortization of deferred policy acquisition costs		28,674			—			—			28,674
Interest expense		—			8,112			—			8,112
Depreciation and amortization		131			1,191			(335	)		987
Other		25,159			14,470			(5,543	)		34,086

Total expenses		133,225			23,773			(5,878	)		151,120

Income before income taxes	$	55,792		$	(14,837	)	$	—		$	40,955


	Three Months Ended September 30, 2017								Three Months Ended September 30, 2016
	Loss (Numerator)			Shares (Denominator)		Per Share Amount			Income (Numerator)			Shares (Denominator)		Per Share Amount
Net (loss) income	$	(40,546	)						$	11,333
Less: Loss (income) attributable to participating securities		2,737								(557	)

Basic (Loss) Earnings Per Share:
(Loss) income allocated to common stockholders		(37,809	)		8,519	$	(4.44	)		10,776			9,209	$	1.17

Effect of Dilutive Securities:
Stock options*		—			—					—			62
Convertible senior notes*		—			—					1,028			1,447

Diluted (Loss) Earnings Per Share:
(Loss) income available to common stockholders and assumed conversions	$	(37,809	)		8,519	$	(4.44	)	$	11,804			10,718	$	1.10


		Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2017			50,000		$	4.02		2.3 years	$	1,773
Granted	��		110,000		$	40.00

Outstanding at March 31, 2017			160,000		$	28.76		7.4 years	$	2,591
Exercised			(30,000	)	$	2.50

Outstanding at June 30, 2017			130,000		$	34.82		8.7 years	$	1,675

Outstanding at September 30, 2017			130,000		$	34.82		8.5 years	$	639

Exercisable at September 30, 2017			20,000		$	6.30		3.9 years	$	639

Outstanding at January 1, 2016			110,000		$	3.19		2.3 years	$	3,482
Outstanding at March 31, 2016			110,000		$	3.19		2.1 years	$	3,312

Outstanding at June 30, 2016			110,000		$	3.19		1.8 years	$	2,650

Outstanding at September 30, 2016			110,000		$	3.19		1.6 years	$	2,989

Exercisable at September 30, 2016			110,000		$	3.19		1.6 years	$	2,989


Due in 12 months following September 30,
2017*	$	21,971
2018*		2,571
2019*		1,929

Total	$	26,471


	Payment Due by Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating lease (1)	$	614		147		279		188		—
Service agreement (1)		107		23		50		34		—
Reinsurance contracts (2)		26,471		21,971		2,571		1,929		—
Unfunded capital commitments (3)		15,931		15,931		—		—		—
Long-term debt obligations (4)		300,645		12,163		116,816		155,828		15,838

Total	$	343,768		50,235		119,716		157,979		15,838


For the Month Ended	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)		Maximum Dollar Value of Shares That May Yet Be Purchased Under The Plans or Programs (b)
July 31, 2017		895	$	44.53		895	$	18,371
August 31, 2017		38,530	$	40.31		38,530	$	16,818
September 30, 2017		85,424	$	35.12		85,424	$	13,818

		124,849	$	36.79		124,849

Large accelerated filer ☐

Accelerated filer ☑

Non-accelerated filer ☐

~~Non-accelerated~~ ~~filer~~

Smaller reporting company

Emerging growth company