☑

☒	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~~2021

☐

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 as specified in its charter)

Florida

~~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 (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 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 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 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 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, no par value, outstanding on ~~October 26, 2017~~July 30, 2021 was ~~9,781,952.~~8,453,935.

HCI GROUP, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

					Page
			~~Page~~
	PART I – FINANCIAL INFORMATION

Item 1	Financial Statements
	Consolidated Balance Sheets: ~~September~~
	June 30, ~~2017~~2021 (unaudited) and December 31, ~~2016~~2020			1-2
	Consolidated Statements of Income:
	Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)			3
	Consolidated Statements of Comprehensive Income:
	Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)			4
	Consolidated Statement of Equity:
	Three months ended June 30, 2021 (unaudited)		5
	Consolidated Statement of Stockholders’ Equity:
	Three months ended June 30, 2020 (unaudited)		6
	Consolidated Statement of Equity:
	Six months ended June 30, 2021 (unaudited)		7
	Consolidated Statement of Stockholders’ Equity:
	Six months ended June 30, 2020 (unaudited)		8
	Consolidated Statements of Cash Flows: ~~Nine~~
	Six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (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~~	12-46

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations			~~45-60~~	47-60

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

Item 4	Controls and Procedures			63


	PART II – OTHER INFORMATION

Item 1	Legal Proceedings			63	64

Item 1A	Risk Factors			63	64

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds			64-65

Item 3	Defaults upon Senior Securities			65

Item 4	Mine Safety Disclosures			65

Item 5	Other Information			65

Item 6	Exhibits			66
		66-73
~~Signatures~~
Signatures			74

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)

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets ~~- continued~~

(Dollar amounts in thousands)

	June 30,		December 31,
	2021		2020
	(Unaudited)
Assets
Fixed-maturity securities, available for sale, at fair value (amortized cost: $45,031 and $70,265, respectively and allowance for credit losses: $0 and $588, respectively)	$	46,414	$	71,722
Equity securities, at fair value (cost: $39,603 and $47,029, respectively)		44,924		51,130
Limited partnership investments		26,305		27,691
Investment in unconsolidated joint venture, at equity		655		705
Real estate investments		73,812		74,472
Total investments		192,110		225,720
Cash and cash equivalents		626,286		431,341
Restricted cash		2,400		2,400
Accrued interest and dividends receivable		330		588
Income taxes receivable		—		4,554
Premiums receivable, net (allowance: $2,237 and $2,053, respectively)		69,121		68,382
Prepaid reinsurance premiums		762		36,376
Reinsurance recoverable, net of allowance for credit losses:
Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)		13,166		14,127
Unpaid losses and loss adjustment expenses (allowance: $57 and $85, respectively)		48,827		71,019
Deferred policy acquisition costs		44,427		43,858
Property and equipment, net		13,317		12,767
Right-of-use assets - operating leases		2,946		4,002
Intangible assets, net		10,933		3,568
Other assets		55,585		22,611
Total assets	$	1,080,210	$	941,313

(continued)

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets – (Continued)

(Dollar amounts in thousands)

	June 30,		December 31,
	2021		2020
	(Unaudited)
Liabilities and Equity
Losses and loss adjustment expenses	$	203,785	$	212,169
Unearned premiums		309,842		269,399
Advance premiums		21,225		11,370
Assumed reinsurance balances payable		87		87
Reinsurance payable on paid losses and loss adjustment expenses		7,398		—
Accrued expenses		11,776		10,181
Income tax payable		2,552		—
Deferred income taxes, net		7,050		11,925
Revolving credit facility		—		23,750
Long-term debt		160,569		156,511
Lease liabilities - operating leases		2,950		4,014
Other liabilities		46,856		40,771
Total liabilities		774,090		740,177
Commitments and contingencies (Note 21)
Redeemable noncontrolling interest (Note 18)		88,071		—
Equity:
Common stock (no par value, 40,000,000 shares authorized, 8,265,640 and 7,785,617 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively)		—		—
Additional paid-in capital		—		—
Retained income		215,612		199,592
Accumulated other comprehensive income, net of taxes		1,054		1,544
Total stockholders’ equity		216,666		201,136
Noncontrolling interests		1,383		—
Total equity		218,049		201,136
Total liabilities, redeemable noncontrolling interest and equity	$	1,080,210	$	941,313

   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
September 30, Nine Months Ended
September 30,
   2017 2016 2017 2016
Revenue

Gross premiums earned
   $ 88,669 $ 92,542 $ 270,376 $ 286,273
Premiums ceded
   (44,705 ) (29,242 ) (101,529 ) (105,998 )


Net premiums earned
   43,964 63,300 168,847 180,275
Net investment income
   2,878 2,785 8,522 6,000
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 )
Policy fee income
   905 972 2,721 2,967
Gain on repurchases of convertible senior notes
   —   —   —   153
Gain on bargain purchase
   —   2,071 —   2,071
Other
   369 321 1,207 1,151


Total revenue
   47,490 69,808 182,783 192,075


Expenses

Losses and loss adjustment expenses
   89,231 25,909 142,425 79,261
Policy acquisition and other underwriting expenses
   9,926 10,536 29,645 32,525
Salaries and wages
   4,605 5,945 15,051 17,009
Interest expense
   4,408 2,672 12,328 8,112
Loss on repurchases of senior notes
   —   —   743 —
Other operating expenses
   5,338 4,717 15,162 14,213


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


(Loss) income before income taxes
   (66,018 ) 20,029 (32,571 ) 40,955
Income tax (benefit) expense
   (25,472 ) 8,696 (13,587 ) 16,542


Net (loss) income
   $ (40,546 ) $ 11,333 $ (18,984 ) $ 24,413


Basic (loss) earnings per share
   $ (4.44 ) $ 1.17 $ (2.05 ) $ 2.48


Diluted (loss) earnings per share
   $ (4.44 ) $ 1.10 $ (2.05 ) $ 2.41


Dividends per share
   $ 0.35 $ 0.30 $ 1.05 $ 0.90

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Revenue
Gross premiums earned	$	139,440		$	107,803		$	270,382		$	200,168
Premiums ceded		(46,436	)		(34,354	)		(89,535	)		(65,073	)
Net premiums earned		93,004			73,449			180,847			135,095
Net investment income		2,635			1,604			7,229			1,412
Net realized investment gains (losses)		2,607			1,435			3,720			(809	)
Net unrealized investment gains (losses)		1,489			2,884			1,220			(1,921	)
Credit losses on investments		0			(87	)		0			(526	)
Policy fee income		992			847			1,962			1,676
Other		777			585			1,400			1,170
Total revenue		101,504			80,717			196,378			136,097
Expenses
Losses and loss adjustment expenses		55,917			39,843			101,668			67,921
Policy acquisition and other underwriting expenses		23,169			12,991			46,234			24,817
General and administrative personnel expenses		10,546			9,731			20,196			18,098
Interest expense		2,000			3,020			4,079			5,990
Loss on repurchases of convertible senior notes		0			150			0			150
Other operating expenses		4,775			3,159			9,002			6,641
Total expenses		96,407			68,894			181,179			123,617
Income before income taxes		5,097			11,823			15,199			12,480
Income tax expense		1,267			2,887			4,524			2,997
Net income		3,830			8,936			10,675			9,483
Net income attributable to redeemable noncontrolling interest (Note 18)		(2,179	)		0			(2,973	)		0
Net loss attributable to noncontrolling interests		266			0			363			0
Net income after noncontrolling interests	$	1,917		$	8,936		$	8,065		$	9,483
Basic earnings per share	$	0.25		$	1.16		$	1.02		$	1.23
Diluted earnings per share	$	0.24		$	1.08		$	0.98		$	1.23

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,
	2021			2020			2021			2020
Net income	$	3,830		$	8,936		$	10,675		$	9,483
Other comprehensive (loss) income:
Change in unrealized (loss) gain on investments:
Net unrealized gains (losses) arising during the period		99			3,280			(83	)		(191	)
Credit losses charged to income		0			87			0			526
Call and repayment gains charged to investment income		0			(150	)		(2	)		(216	)
Reclassification adjustment for net realized gains		(576	)		(1,427	)		(577	)		(1,154	)
Net change in unrealized (losses) gains		(477	)		1,790			(662	)		(1,035	)
Deferred income taxes on above change		117			(440	)		162			253
Total other comprehensive (loss) income, net of income taxes		(360	)		1,350			(500	)		(782	)
Comprehensive income		3,470			10,286			10,175			8,701
Comprehensive loss attributable to noncontrolling interests		275			0			373			0
Comprehensive income after noncontrolling interests	$	3,745		$	10,286		$	10,548		$	8,701

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

Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated ~~Statements~~Statement of ~~Cash Flows~~Equity

For the Three Months Ended June 30, 2021

(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 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			0		0			0			0			0			0			0
Forfeiture of restricted stock		(9,060	)		0		0			0			0			0			0			0
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 (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity

For the Three Months Ended June 30, 2020

(Unaudited)

(Dollar amounts in 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 March 31, 2020		7,735,204		$	—	$	—		$	179,210		$	46	$	179,256
Net income		—			—		—			8,936			—		8,936
Total other comprehensive income, net of income taxes		—			—		—			—			1,350		1,350
Issuance of restricted stock		145,000			0		0			0			0		0
Forfeiture of restricted stock		(5,220	)		0		0			0			0		0
Repurchase and retirement of common stock		(29,102	)		—		(1,309	)		—			—		(1,309	)
Repurchase and retirement of common stock under share repurchase plan		(51,834	)		—		(2,100	)		—			—		(2,100	)
Common stock dividends ($0.40 per share)		—			—		—			(3,067	)		—		(3,067	)
Stock-based compensation		—			—		2,019			—			—		2,019
Additional paid-in capital shortfall allocated to retained income		—			—		1,390			(1,390	)		—		—
Balance at June 30, 2020		7,794,048		$	—	$	—		$	183,689		$	1,396	$	185,085

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statement of Equity

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			0		0			0			0			0			0			0
Forfeiture of restricted stock		(11,110	)		0		0			0			0			0			0			0
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 18)		—			—		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 Statement of Stockholders’ Equity

For the Six Months Ended June 30, 2020

(Unaudited)

(Dollar amounts in 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, 2019		7,764,564		$	—	$	—		$	183,365		$	2,178		$	185,543
Net income		—			—		—			9,483			—			9,483
Total other comprehensive loss, net of income taxes		—			—		—			—			(782	)		(782	)
Cumulative effect on adoption of credit loss standard		—			—		—			(453	)					(453	)
Exercise of common stock options		10,000			—		63			—			—			63
Issuance of restricted stock		190,000			0		0			0			0			0
Forfeiture of restricted stock		(12,358	)		0		0			0			0			0
Repurchase and retirement of common stock		(29,473	)		—		(1,326	)		—			—			(1,326	)
Repurchase and retirement of common stock under share purchase plan		(128,685	)		—		(5,141	)		—			—			(5,141	)
Common stock dividends ($0.80 per share)		—			—		—			(6,162	)		—			(6,162	)
Stock-based compensation		—			—		3,860			—			—			3,860
Additional paid-in capital shortfall allocated to retained income		—			—		2,544			(2,544	)		—			—
Balance at June 30, 2020		7,794,048		$	—	$	—		$	183,689		$	1,396		$	185,085

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows ~~- continued~~

(Unaudited)

(Amounts in thousands)

	Six Months Ended
	June 30,
	2021			2020
Cash flows from operating activities:
Net income after noncontrolling interests	$	8,065		$	9,483
Net income attributable to noncontrolling interests		2,610			—
Net income		10,675			9,483
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation		6,497			3,860
Net amortization of premiums (accretion of discounts) on investments in fixed-maturity securities		144			(60	)
Depreciation and amortization		2,928			4,359
Deferred income tax (benefit) expense		(3,732	)		1,527
Net realized investment (gains) losses		(3,720	)		809
Net unrealized investment (gains) losses		(1,220	)		1,921
Credit loss expense - investments		—			526
Credit loss expense - reinsurance recoverable		(28	)		(349	)
Loss from unconsolidated joint venture		50			28
Net (income) loss from limited partnership interests		(2,359	)		2,747
Distributions received from limited partnership interests		1,792			578
Loss on repurchases of convertible senior notes		—			150
Foreign currency remeasurement loss		75			84
Other non-cash items		21			31
Changes in operating assets and liabilities:
Accrued interest and dividends receivable		258			703
Income taxes		7,106			(2,110	)
Premiums receivable, net		(739	)		(7,670	)
Prepaid reinsurance premiums		35,614			(9,167	)
Reinsurance recoverable		23,181			32,248
Deferred policy acquisition costs		(569	)		(7,527	)
Other assets		(33,622	)		5,235
Losses and loss adjustment expenses		(8,384	)		(3,535	)
Unearned premiums		40,443			48,071
Advance premiums		9,855			13,619
Assumed reinsurance balances payable		—			3
Reinsurance payable on paid losses and loss adjustment expenses		7,398			—
Accrued expenses and other liabilities		3,983			14,424
Net cash provided by operating activities		95,647			109,988

(continued)

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

	Six Months Ended
	June 30,
	2021			2020
Cash flows from investing activities:
Investments in limited partnership interests		(700	)		(1,470	)
Distributions received from limited partnership interests		2,653			314
Purchase of property and equipment		(1,275	)		(5,349	)
Purchase of real estate investments		(331	)		(2,522	)
Purchase of fixed-maturity securities		(6,338	)		(28,281	)
Purchase of equity securities		(45,040	)		(20,392	)
Purchase of short-term and other investments		(1,058	)		—
Proceeds from sales of fixed-maturity securities		14,680			78,186
Proceeds from calls, repayments and maturities of fixed-maturity securities		16,677			52,594
Proceeds from sales of equity securities		56,511			12,455
Proceeds from sales, redemptions and maturities of short-term and other investments		2,026			460
Net cash provided by investing activities		37,805			85,995
Cash flows from financing activities:
Cash dividends paid		(6,605	)		(6,315	)
Cash dividends received under share repurchase forward contract		153			153
Net (repayment) borrowing under revolving credit facility		(23,750	)		14,000
Proceeds from exercise of common stock options		—			63
Proceeds from issuance of redeemable noncontrolling interest and warrants		100,000			—
Issuance costs - redeemable noncontrolling interest		(6,262	)		—
Proceeds from issuance of long-term debt		—			10,000
Repayment of long-term debt		(480	)		(9,496	)
Repurchases of convertible senior notes		—			(4,459	)
Repurchases of common stock		(1,308	)		(1,326	)
Repurchases of common stock under share repurchase plan		—			(5,141	)
Purchase of noncontrolling interests		(58	)		—
Debt issuance costs		(152	)		(165	)
Net cash provided by (used in) financing activities		61,538			(2,686	)
Effect of exchange rate changes on cash		(45	)		(51	)
Net increase in cash, cash equivalents, and restricted cash		194,945			193,246
Cash, cash equivalents, and restricted cash at beginning of period		433,741			229,918
Cash, cash equivalents, and restricted cash at end of period	$	628,686		$	423,164

(continued)

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows – (Continued)

(Unaudited)

(Amounts in thousands)

	Six Months Ended
	June 30,
	2021			2020
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	1,150		$	3,902
Cash paid for interest	$	3,492		$	3,737
Non-cash investing and financing activities:
Unrealized loss on investments in available-for-sale securities, net of tax	$	(500	)	$	(782	)
Receivable from sales of equity securities	$	3,455		$	232
Payable on purchases of equity securities	$	32		$	203
Warrants issued in Centerbridge transaction	$	9,217		$	—
Acquisition of intangibles:
Common stock issued	$	5,410		$	—
Contingent consideration payable	$	2,419		$	—

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

HCI GROUP, INC. AND SUBSIDIARIES

~~Consolidated Statement of Stockholders’ Equity~~

~~Nine Months Ended September 30, 2017~~

~~(Unaudited)~~

~~(Dollar amounts in thousands)~~

   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

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

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Consolidated Statement of Stockholders’ Equity - continued~~

~~Nine Months Ended September 30, 2016~~

~~(Unaudited)~~

~~(Dollar amounts in thousands)~~

   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

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

~~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 several other states. The operations of both insurance subsidiaries are supported by HCI Group, Inc. and certain HCI subsidiaries. ~~During 2017,~~The Company emphasizes the use of internally developed technologies to collect and analyze claims and other supplemental data to generate savings and efficiency for the operations of the insurance subsidiaries.

In the first quarter of 2021, the Company reorganized its operations to focus on specific business segments, resulting in the creation of TypTap Insurance Group, Inc. (“TTIG”) with a separate workforce, board of directors and financial reporting structure. In February 2021, TTIG received a capital investment from a third party representing a minority interest as described in Note 18 -- “Redeemable Noncontrolling Interest.” 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’s reportable segments now include HCPCI ~~received regulatory approval to write residential property~~insurance operations, TypTap Group, real estate operations, and ~~casualty~~corporate and other. Real estate operations are conducted by Greenleaf Capital, LLC, the Company’s real estate subsidiary, which is primarily engaged in the businesses of owning and leasing real estate and operating marina facilities.

Assumed Business

Effective December 31, 2020, United Property & Casualty Insurance Company, an insurance subsidiary of United Insurance Holdings Corporation (“United”), ceded a portion of its personal lines insurance business in the states of ~~Arkansas, Maryland, North Carolina,~~Connecticut, New Jersey, ~~Pennsylvania, South Carolina~~Massachusetts, and ~~Texas.~~Rhode Island to HCPCI. Under the reinsurance agreement, HCPCI provides 69.5% quota share reinsurance on all of United’s in-force, new and renewal policies in those states from December 31, 2020 through May 31, 2021. In exchange, HCPCI paid United an allowance of $4,400 towards already purchased catastrophe reinsurance and a provisional ceding commission of 25% of premium. That percentage could increase up to 31.5% depending on the direct loss ratio results from the reinsured business.

On January 18, 2021, the Company entered into a renewal rights agreement with United in connection with the assumed business. Under the agreement, the Company acquired all rights to renew and/or replace United’s homeowners insurance policies at the end of their respective policy periods in the states of Connecticut, Massachusetts, New Jersey and Rhode Island. The policy replacement date is June 1, 2021 or such other date as mutually agreed by both parties. The agreement also contains a non-compete clause that does not permit United to engage in marketing, selling, writing, renewing, or servicing any homeowners insurance contracts in these states until July 1, 2024. In return, United received 100,000 shares of HCI’s common stock and will receive a 6% commission on any replacement premium in excess of $80,000. The total commission will not exceed $3,100.

The Company and United agreed to postpone the policy replacement date under the renewal rights agreement to a later date and the Company, through HCPCI and TypTap, entered into a new quota share reinsurance agreement in June 2021 to provide 100% reinsurance on all of United’s in-force, new and renewal policies in those states from June 1, 2021 through May 31, 2022. Under the new agreement, each insurance subsidiary assumes 50% of the business and pays United a ceding commission of 24% 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~~2021 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.~~2021. 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~~2020 included in the Company’s Form10-K, which was filed with the SEC on ~~February 22, 2017.~~March 12, 2021.

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, warrants, redeemable noncontrolling interest, 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.

Adoption of New Accounting Standards

Accounting Standards Update No. 2020-06. In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2020-06 (“ASU 2020-06”) Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2020-06 removes certain bifurcation models for convertible debt instruments and convertible preferred stock. Therefore, the embedded conversion features no longer are separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in-capital. The amendments also remove three settlement conditions that are required for equity contracts to qualify for the derivative scope exception and amend the derivative scope exception guidance for contracts in an entity’s own equity. In addition, the amendments expand disclosure requirements for convertible instruments and simplify areas of the guidance for diluted earnings-per-share calculations that are impacted by the amendments.

913

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~~The Company elected to early adopt this update on January 1, ~~2017,~~2021 using 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. Uponmethod. The adoption of this ~~standard,~~update increased long-term debt by $3,999 and simultaneously decreased beginning retained income and deferred income tax liabilities by $3,018 and $981, respectively. The if-converted method will be the only permissible method for computing the dilutive effect of a convertible debt instrument. Interest expense no longer includes amortization of debt discount.

Redeemable Noncontrolling Interest

Redeemable noncontrolling interest represents an economic interest in TTIG and is presented in the temporary equity (mezzanine) section of the consolidated balance sheet. The interest contains rights in dividends, voting, conversion, participation, liquidation preference and redemption. The redemption feature is not solely within the control of TTIG (See Note 18 -- “Redeemable Noncontrolling Interest”).

The redeemable noncontrolling interest is initially recorded at fair value and is decreased by related issuance costs. The fair value is estimated using a residual fair value approach. The effect of increasing dividend rates is accreted to the redeemable noncontrolling interest with a corresponding debit to retained income. The effective interest method is used for accretion over the period of the increasing dividend rates. The carrying value of the interest is also subsequently adjusted for accrued dividends and dividend payments. The Company has an option to pay the dividends in cash or make a payment in kind. The dividends are accrued monthly assuming that they will be settled in cash.

When the redemption is probable, the Company ~~elected~~elects 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~~redemption value ~~are reported in the consolidated statement of income~~immediately as ~~net unrealized investment gains or losses.~~

~~Long-Term Debt~~

~~Long-term debt is generally classified as a liability~~it occurs and carried at amortized cost, net of any discount and issuance costs. 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 determineadjust the carrying value of the ~~debt instrument’s equity component,~~interest to the maximum redemption value which is the higher of the redemption price or fair market value at the reporting date. Such changes in the redemption value are treated as dividends when calculating income available to common stockholders.

Noncontrolling Interests

The Company has noncontrolling interests attributable to TTIG. A noncontrolling interest arises when the Company has less than 100% of the voting rights and economic interests in a subsidiary. The noncontrolling interest is periodically adjusted for the expensing of TTIG’s restricted stock awards granted to its employees, the interest’s share of TTIG’s net income or loss to common stockholders and change in other comprehensive income or loss.

Stock-Based Compensation

The Company accounts for stock-based compensation under the fair value recognition provisions of U.S. GAAP which requires the measurement and recognition of compensation for all stock-based awards made to employees and directors based on estimated fair values. In accordance with U.S. GAAP, the fair value of stock-based awards is generally recognized as compensation expense over the requisite service period, which is defined as the period during which a recipient is required to provide service in exchange for an award. Forfeitures of the Company’s stock-based awards are accounted for as they occur. The Company uses a straight-line attribution method for all grants that include only a service condition. Restricted stock grants with market conditions are expensed over the derived service period. Expensing market-based awards may be expedited if the conditions are met sooner than anticipated. The Company’s outstanding stock-based awards include stock options and restricted stock awards with service and market conditions. Compensation expense related to all awards is included in ~~additionalpaid-in~~ ~~capital.~~

~~Any embedded feature other~~general and administrative personnel expenses. The Company receives a windfall tax benefit for certain stock option exercises and for restricted stock awards if these awards vest at a higher value than the ~~conversion option is evaluated~~value used to recognize compensation expense. In the event the restricted stock awards vest at ~~issuance~~a lower value than the value used to ~~determine if it is probable that such embedded feature will be exercised. If~~recognize compensation expense, the Company ~~concludes that~~experiences a tax shortfall. The Company recognizes tax windfalls and shortfalls in the ~~exercisability~~consolidated statements 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.~~income.

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 to issuing a debt instrument that embodies both liability and equity components are allocated~~Reclassification

In response to the ~~liability~~new reporting segment described in Note 1 -- “Nature of Operations,” the prior period segment information has been reclassified to conform with the current period presentation. TypTap and ~~equity components~~TypTap Management Company were removed from the segment previously referred to as Insurance Operations to form the new TypTap Group segment. The information technology companies which had previously been presented in ~~proportion~~the Corporate and Other segment were also added to the ~~allocation~~TypTap Group segment.

Note 3 -- Recent Accounting Pronouncements

Accounting Standards Update No. 2021-01. In January 2021, the FASB issued Accounting Standards Update No. 2021-01 (“ASU 2021-01”) Reference Rate Reform (Topic 848). This update refines the scope of ASC 848 and clarifies some of its guidance as part of the ~~proceeds and accounted~~Board’s monitoring of global reference rate reform activities. ASU 2021-01 permits entities to apply certain optional expedients to modifications of interest rate indexes used for ~~as debt issuance costs and equity issuance costs, respectively. Debt issuance costs are capitalized and presented~~margining, discounting or contract price alignment of certain derivatives in connection with reference rate reform activities under way in global financial markets. It also extends optional expedients to account for a derivative contract modified as a ~~deduction from the carrying value~~continuation of the ~~debt. Both debt discount~~existing contract and ~~deferred debt issuance costs are amortized~~ to ~~interest expense over the expected life~~continue hedge accounting when certain critical terms of a hedging relationship change to modifications made as part of the ~~debt instrument using the~~discounting transition. ASU 2021-01 is effective ~~interest method. Equity issuance costs are a reduction to the proceeds allocated to the equity component.~~

~~Common Share Repurchases~~

~~The Company primarily repurchases its common stock in the open market through share repurchase programs~~immediately 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 contractdoes not have any material impact 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.consolidated financial statements.

~~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 to conform to the current year presentation.~~

~~Note 3 — Recent Accounting Pronouncements~~

Accounting Standards Update No. ~~2017-13.~~ 2021-04. In ~~September 2017,~~May 2021, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued Accounting Standards UpdateNo. ~~2017-13~~2021-04 (“ASU~~2017-13”~~ 2021-04”), ~~Revenue Recognition~~ Earnings Per Share (Topic ~~605)~~260), ~~Revenue from Contracts with Customers~~Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic ~~606), Leases (Topic 840)~~718), and ~~Leases (Topic 842)~~Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40). ~~ASU2017-13~~ ~~adds SEC paragraphs pursuant~~This update clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The guidance clarifies whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the ~~SEC Staff Announcement at~~related earnings per share effects, if any, or (2) an expense and, if so, the ~~July 20, 2017 Emerging Issues Task Force meeting concerning~~manner and pattern of recognition. ASU 2021-04 is effective for the ~~transition related to Accounting Standards UpdatesNo. 2014-09,~~ ~~Revenue from Contracts~~Company beginning with ~~Customers (Topic 606)~~the first quarter of 2022 and~~No. 2016-02,~~ ~~Leases (Topic 842). ASU2017-13~~ ~~also supersedes SEC paragraphs pursuant to~~ will be applied prospectively. Early adoption is permitted. This guidance will not have a material impact on the rescission of SEC Staff Announcement, “Accounting for Management Fees Based on a Formula,” effective upon 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. ASU~~2017-13~~ 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 not anticipate significant impact from this guidance.Company’s consolidated financial statements.

11Note 4 -- Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Company’s consolidated balance sheets that sum to the total of the same such amounts shown in the statements of cash flows.

	June 30,		December 31,
	2021		2020
Cash and cash equivalents	$	626,286	$	431,341
Restricted cash		2,400		2,400
Total	$	628,686	$	433,741

Restricted cash primarily represents funds held by certain states in which the Company’s insurance subsidiaries conduct business to meet regulatory requirements.

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 —~~5 -- 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~~2021 and December 31, ~~2016,~~2020, 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		Allowance for			Gross Unrealized		Gross Unrealized			Estimated Fair
	Cost or Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value		Cost		Credit Loss			Gain		Loss			Value
*As of September 30, 2017*
Fixed-maturity securities
As of June 30, 2021
U.S. Treasury and U.S. government agencies	$	47,348	$	5	$	(112	)	$	47,241	$	13,866	$	—		$	133	$	(17	)	$	13,982
Corporate bonds		121,459		1,862		(811	)		122,510		26,187		—			979		(27	)		27,139
State, municipalities, and political subdivisions		74,924		2,099		(83	)		76,940
States, municipalities, and political subdivisions											1,756		—			69		—			1,825
Exchange-traded debt		9,293		194		(211	)		9,276		3,106		—			244		—			3,350
Redeemable preferred stock		138		2		(5	)		135		116		—			2		—			118

Total		253,162		4,162		(1,222	)		256,102	$	45,031	$	—		$	1,427	$	(44	)	$	46,414
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, 2020
U.S. Treasury and U.S. government agencies	$	1,975	$	—	$	(36	)	$	1,939	$	13,759	$	—		$	210	$	(1	)	$	13,968
Corporate bonds		75,538		607		(1,641	)		74,504		49,957		(579	)		1,570		(17	)		50,931
State, municipalities, and political subdivisions		78,018		776		(488	)		78,306
States, municipalities, and political subdivisions											3,023		—			60		(2	)		3,081
Exchange-traded debt		11,463		36		(237	)		11,262		3,491		(9	)		230		(5	)		3,707
Redeemable preferred stock		237		3		(3	)		237		35		—			—		—			35

Total		167,231		1,422		(2,405	)		166,248	$	70,265	$	(588	)	$	2,070	$	(25	)	$	71,722
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 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~~2021 and December 31, ~~2016~~2020 are as follows:

					June 30, 2021				December 31, 2020
	Amortized Cost		Estimated Fair Value		Cost or		Estimated		Cost or		Estimated
*As of September 30, 2017*
					Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale
Due in one year or less	$	30,082	$	30,115	$	10,160	$	10,235	$	21,122	$	21,258
Due after one year through five years		127,627		127,444		27,250		28,064		43,561		44,339
Due after five years through ten years		66,146		67,853		5,121		5,381		2,731		3,060
Due after ten years		29,307		30,690		2,500		2,734		2,851		3,065
					$	45,031	$	46,414	$	70,265	$	71,722
	$	253,162	$	256,102

1416

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 securities, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 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 )

~~Other-than-temporary Impairment~~

The Company regularly reviews its individual investment securities for other-than-temporary impairment. The Company considers various factors in determining whether 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.~~

			Gross Realized		Gross Realized
	Proceeds		Gains		Losses
Three months ended June 30, 2021	$	14,644	$	576	$	—
Three months ended June 30, 2020	$	74,137	$	1,653	$	(226	)
Six months ended June 30, 2021	$	14,680	$	577	$	—
Six months ended June 30, 2020	$	78,186	$	1,730	$	(576	)

~~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~~Gross Unrealized Losses for Available-for-Sale 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~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, 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

	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, 2021	Loss			Value		Loss		Value		Loss			Value
U.S. Treasury and U.S. government agencies	$	(17	)	$	3,055	$	—	$	—	$	(17	)	$	3,055
Corporate bonds		(27	)		2,520		—		—		(27	)		2,520
Exchange-traded debt		—			39		0		0		—			39
Total available-for-sale securities	$	(44	)	$	5,614	$	—	$	—	$	(44	)	$	5,614

	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, 2020	Loss			Value		Loss		Value		Loss			Value
U.S. Treasury and U.S. government agencies	$	(1	)	$	1,337	$	—	$	—	$	(1	)	$	1,337
Corporate bonds		(17	)		3,085		0		0		(17	)		3,085
States, municipalities, and political subdivisions		(2	)		1,268		—		—		(2	)		1,268
Exchange-traded debt		(5	)		336		0		0		(5	)		336
Total available-for-sale securities	$	(25	)	$	6,026	$	—	$	—	$	(25	)	$	6,026

At ~~September~~June 30, ~~2017,~~2021 and December 31, 2020, there were ~~127~~21 and 12 securities, respectively, 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)

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

The Company regularly reviews its individual investment securities for credit impairment. The Company considers various factors in determining whether a credit loss exists for each individual security, including-

•

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

•

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, 2021 and 2020:

2021

2020

Balance at January 1

$
588

$
0

Credit loss expense

—

439

Reductions for securities sold

(9
)

—

Balance at March 31

$
579

$
439

Credit loss expense

—

87

Reductions for securities exchanged

(579
)

—

Balance at June 30

$
0

$
526

b) Equity Securities

The Company holds investments in equity securities measured at fair values which are readily determinable. At June 30, 2021 and December 31, 2020, 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, 2021

$
39,603

$
5,520

$
(199
)

$
44,924

December 31, 2020

$
47,029

$
4,649

$
(548
)

$
51,130

HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(Amounts in thousands, except share and per share amounts, unless otherwise stated)
The table below presents the portion of unrealized gains and losses in the Company’s consolidated statements of income for the periods related to equity securities still held.

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Net gains (losses) recognized

$
3,069

$
2,892

$
3,536

$
(3,884
)
Exclude: Net realized gains (losses) recognized for
securities sold

1,580

8

2,316

(1,963
)
Net unrealized gains (losses) recognized

$
1,489

$
2,884

$
1,220

$
(1,921
)

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~~2021 and 2020 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, 2021	$	22,133	$	1,983	$	(403	)
Three months ended June 30, 2020	$	3,448	$	184	$	(176	)
Six months ended June 30, 2021	$	56,511	$	3,125	$	(809	)
Six months ended June 30, 2020	$	12,455	$	969	$	(2,932	)

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

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

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:

~~HCI GROUP, INC. AND SUBSIDIARIES~~

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

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

	June 30, 2021						December 31, 2020
	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)	$	6,408	$	2,085		15.37	$	8,131	$	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)		4,569		—		1.76		5,512		—		1.76
High returns and long-term capital appreciation through investments in the power, utility and energy industries, and in the infrastructure sector. (b)(f)(g)		6,657		1,401		0.18		6,513		1,401		0.18
Value-oriented investments in less liquid and mispriced senior and junior debts of private equity-backed companies. (b)(h)(i)		4,389		—		0.47		4,262		—		0.47
Value-oriented investments in mature real estate private equity funds and portfolio globally. (b)(j)		4,282		5,816		2.24		3,273		6,818		2.24
Total	$	26,305	$	9,302			$	27,691	$	10,304

   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

~~(a)~~

(a)

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

~~(b)~~

(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)~~

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

~~(d)~~

(c)

Expected to have a ~~three-year term from the end of~~ten-year term. Although the capital commitment period ~~which is March 31, 2018.~~has expired, there are still follow-on investments and pending commitments that require additional fundings.

~~(e)~~

(d)

Expected to have a three-year term from June 30, 2018. Although the capital commitment period has ended, the general partner could still request an additional funding of approximately $843 under certain circumstances.

(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)~~

(f)

Expected to have a~~10-year~~ ~~term and the~~ten-year term. The capital commitment ~~is expected to expire on June 30, 2020.~~period has expired but the general partner may request additional funding for follow-on investment.

~~(h)~~

(g)

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

~~(i)~~

(h)

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~~

(i)

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

(j)

Expected to ~~expire on December 1, 2018.~~have an eight-year term from November 27, 2019.

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 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,
	2021			2020			2021			2020
Operating results:
Total income	$	384,629		$	(1,230,124	)	$	373,681		$	(1,681,016	)
Total expenses		(25,208	)		(25,708	)		(80,720	)		(80,520	)
Net income (loss)	$	359,421		$	(1,255,832	)	$	292,961		$	(1,761,536	)

	June 30,		December 31,
	2021		2020
Balance sheet:
Total assets	$	5,733,215	$	5,529,199
Total liabilities	$	546,867	$	612,048

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 total cash distributions of $2,421 and $4,445, respectively, including returns on investment of $1,314 and $1,792, respectively.

For the three and six months ended June 30, 2020, the Company recognized net investment income of $188 and net investment loss of $2,747, respectively. During the three and six months ended June 30, 2020, the Company received total cash distributions of $196 and $892, respectively, including returns on investment of $196 and $578, respectively. At June 30, 2021 and December 31, 2020, the Company’s net cumulative contributed capital to the partnerships at each respective balance sheet date totaled $27,319 and $29,272, respectively, and the Company’s maximum exposure to loss aggregated $26,305 and $27,691, respectively.

d) Investment in Unconsolidated Joint Venture

Melbourne FMA, LLC, a wholly owned subsidiary, currently has an equity investment in FMKT Mel JV, a Florida limited liability company treated as a joint venture under U.S. GAAP. At June 30, 2021 and December 31, 2020, the Company’s maximum exposure to loss relating to the variable interest entity was $655 and $705, respectively, representing the carrying value of the investment. There were 0 cash distributions during the six months ended June 30, 2021 and 2020. At June 30, 2021 and December 31, 2020, there was 0 undistributed income from this equity method investment. The following tables provide FMJV’s summarized unaudited financial results and the unaudited financial positions:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Operating results:
Total revenues	$	—		$	—		$	—		$	—
Total expenses		(28	)		(13	)		(56	)		(32	)
Net loss	$	(28	)	$	(13	)	$	(56	)	$	(32	)
The Company’s share of net loss*	$	(25	)	$	(12	)	$	(50	)	$	(28	)

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

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~~

	June 30,		December 31,
	2021		2020
Balance sheet:
Property and equipment, net	$	686	$	705
Cash		42		70
Other		17		13
Total assets	$	745	$	788

Other liabilities	$	17	$	5
Members’ capital		728		783
Total liabilities and members’ capital	$	745	$	788
Investment in unconsolidated joint venture, at equity**	$	655	$	705

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

e) Real Estate Investments

Real estate investments consist of the ~~three~~following as of June 30, 2021 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 of returned capital 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.December 31, 2020:

	June 30,			December 31,
	2021			2020
Land	$	39,069		$	39,069
Land improvements		11,917			11,917
Buildings		29,097			29,115
Tenant and leasehold improvements		1,413			1,487
Other		1,286			1,465
Total, at cost		82,782			83,053
Less: accumulated depreciation and amortization		(8,970	)		(8,581	)
Real estate investments	$	73,812		$	74,472

For the ~~three and nine~~six months ended ~~September~~June 30, ~~2016,~~2021, the Company ~~recognized net investment income~~incurred a $21 loss on disposal of ~~$1,119~~assets related to a closure of a restaurant. Depreciation and ~~$54, respectively. During the three~~amortization expense related to real estate investments was $479 and nine months ended September 30, 2016, the Company received cash distributions of $384 and $428, respectively, of return on investment. At September 30, 2017 and December 31, 2016, the Company’s cumulative contributed capital to the partnerships existing at each respective balance sheet date totaled $19,569 and $31,946, respectively, and the Company’s maximum exposure to loss aggregated $20,998 and $29,263, respectively.

~~d) Investment in Unconsolidated Joint Venture~~

~~The Company has an equity investment in FMKT Mel JV, which is a 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~~$432 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 30, 2017 and December 31, 2016, the Company’s maximum exposure to loss relating to this variable interest entity was $1,664 and $2,102, respectively, representing the carrying value of the investment. At September 30, 2017, there was $0 of undistributed income 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~~June 30, ~~2017~~2021 and ~~2016. During~~2020, respectively, and $970 and $887 for the ~~nine~~six months ended ~~September~~June 30, ~~2017, the Company received a cash distribution of $564, representing a combined distribution of $147 in earnings~~2021 and $417 in capital as compared with no cash distribution during the nine months ended September 30, 2016. The following tables provide FMKT Mel JV’s summarized unaudited financial results and the unaudited financial positions:2020, respectively.

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 30, 2017 and December 31, 2016.

   September 30,
2017    December 31,
2016
Land
   $ 20,422    $ 17,592
Land improvements
   9,904    9,336
Buildings
   17,742    16,154
Tenant and leasehold improvements
   996    872
Construction in progress*
   —      3,404
Other
   2,911    2,683




Total, at cost
   51,975    50,041
Less: accumulated depreciation and amortization
   (3,014 )    (1,955 )




Real estate investments
   $ 48,961    $ 48,086

*	~~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.~~

Depreciation and amortization expense related to real estate investments was $374 and $126 for the three months ended September 30, 2017 and 2016, respectively, and $1,062 and $314 for the nine months ended September 30, 2017 and 2016, 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 (Loss)

Net investment income (loss), by source, is summarized 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			2021			2020			2021			2020
Available-for-sale securities:
Fixed-maturity securities	$	1,532		$	1,164		$	4,172		$	3,394
Available-for-sale fixed-maturity securities													$	384		$	1,243		$	825		$	2,758
Equity securities		790			817			2,461			2,552			340			299			691			634
Investment expense		(176	)		(165	)		(526	)		(488	)		(129	)		(124	)		(254	)		(242	)
Limited partnership investments		392			1,119			1,724			54			1,572			188			2,359			(2,747	)
Real estate investments		(292	)		(372	)		(856	)		(455	)		344			(346	)		3,341			(265	)
(Loss) income from unconsolidated joint venture		(16	)		(75	)		126			153
Loss from unconsolidated joint venture														(25	)		(12	)		(50	)		(28	)
Cash and cash equivalents		648			285			1,415			755			149			362			317			1,301
Other		—			12			6			35

Short-term investments														—			(6	)		—			1
Net investment income	$	2,878		$	2,785		$	8,522		$	6,000		$	2,635		$	1,604		$	7,229		$	1,412

22For 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.

~~HCI GROUP, INC. AND SUBSIDIARIES~~h) Other Investments

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

~~(Amounts~~time, the Company may invest in ~~thousands, except share~~financial assets other than stocks, mutual funds and ~~per share amounts, unless otherwise stated)~~

bonds. For the three and six months ended June 30, 2021, net realized gains related to other investments were $452 and $827, respectively. There were 0 net realized gains or losses related to other investments for the three and six months ended June 30, 2020.

Note ~~5 —~~6 -- 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 in the ~~unrealized other-than-temporary impairment~~allowance for 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, 2021									June 30, 2020
	Before			Income Tax			Net of			Before			Income Tax			Net of
	Tax			Effect			Tax			Tax			Effect			Tax
Net unrealized gains	$	99		$	25		$	74		$	3,280		$	805		$	2,475
Credit losses on investments		—			—			—			87			21			66
Call and repayment gains charged to investment income		—			(1	)		1			(150	)		(37	)		(113	)
Reclassification adjustment for realized gains		(576	)		(141	)		(435	)		(1,427	)		(349	)		(1,078	)
Total other comprehensive (losses) gains	$	(477	)	$	(117	)	$	(360	)	$	1,790		$	440		$	1,350

   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

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

	Six Months Ended									Six Months Ended
	June 30, 2021									June 30, 2020
	Before			Income Tax			Net of			Before			Income Tax			Net of
	Tax			Effect			Tax			Tax			Effect			Tax
Net unrealized losses	$	(83	)	$	(20	)	$	(63	)	$	(191	)	$	(46	)	$	(145	)
Credit losses on investments		—			—			—			526			129			397
Call and repayment gains charged to investment income		(2	)		(1	)		(1	)		(216	)		(53	)		(163	)
Reclassification adjustment for realized gains		(577	)		(141	)		(436	)		(1,154	)		(283	)		(871	)
Total other comprehensive losses	$	(662	)	$	(162	)	$	(500	)	$	(1,035	)	$	(253	)	$	(782	)

Note ~~6 —~~7 -- 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:

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.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

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~~

~~As described in Note 4 — “Investments” under~~ ~~Limited Partnership Investments~~, 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

The ~~interest rate on the~~ Company’s revolving credit facility ~~was~~is a variable-rate loan. The interest rate is periodically adjusted based on the London Interbank Offered Rate plus a spread. As a result, its carrying value ~~at December 31, 2016 approximated~~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% Senior Notes~~4.25% Convertible senior notes	2037	*	~~Closing~~ Quoted price ~~listed on the New York Stock Exchange~~
~~3.875% Convertible Senior Notes~~3.90% Promissory note	2032	~~2019~~	~~Quoted price at September 30, 2017;~~ 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~~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 information about the Company’s financial assets measured at estimated fair value on a recurring basis. The table indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016:~~2020:

										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, 2021
Financial Assets:
Cash and cash equivalents	$	292,438	$	—	$	—		$	292,438	$	626,286	$	—	$	—	$	626,286
Restricted cash										$	2,400	$	—	$	—	$	2,400
Fixed-maturity securities:
U.S. Treasury and U.S. government agencies		45,739		1,502		—			47,241	$	11,276	$	2,706	$	—	$	13,982
Corporate bonds		121,516		994		—			122,510		27,139		—		—		27,139
State, municipalities, and political subdivisions		—		76,940		—			76,940		—		1,825		—		1,825
Exchange-traded debt		9,276		—		—			9,276		3,350		—		—		3,350
Redeemable preferred stock		135		—		—			135		118		—		—		118

Total fixed-maturity securities		176,666		79,436		—			256,102
Total available-for-sale securities										$	41,883	$	4,531	$	—	$	46,414
Equity securities		63,023		—		—			63,023	$	44,924	$	—	$	—	$	44,924

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

Trading equity securities		1,003		—		—			1,003

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

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

Fair Value Measurements Using

(Level 1)

(Level 2)

(Level 3)

Total

As of December 31, 2020

Financial Assets:

Cash and cash equivalents

$
431,341

$
—

$
—

$
431,341

Restricted cash

$
2,400

$
—

$
—

$
2,400

Fixed-maturity securities:

U.S. Treasury and U.S. government agencies

$
11,236

$
2,732

$
—

$
13,968

Corporate bonds

50,931

—

—

50,931

State, municipalities, and political subdivisions

—

3,081

—

3,081

Exchange-traded debt

3,707

—

—

3,707

Redeemable preferred stock

35

—

—

35

Total available-for-sale securities

$
65,909

$
5,813

$
—

$
71,722

Equity securities

$
51,130

$
—

$
—

$
51,130

Assets and Liabilities Carried at Other Than Estimated 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~~2021 and December 31, ~~2016.~~2020:

   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, 2021
Financial Liabilities:
Long-term debt:
4.25% Convertible senior notes	$	138,484	$	—	$	229,141	$	—	$	229,141
3.90% Promissory note		9,454		—		—		10,700		10,700
3.75% Callable promissory note		7,329		—		—		8,099		8,099
4.55% Promissory note		5,268		—		—		6,255		6,255
Total long-term debt	$	160,535	$	—	$	229,141	$	25,054	$	254,195

   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, 2020
Financial Liabilities:
Revolving credit facility	$	23,750	$	—	$	23,750	$	—	$	23,750
Long-term debt:
4.25% Convertible senior notes	$	133,964	$	—	$	147,236	$	—	$	147,236
3.90% Promissory note		9,617		—		—		10,044		10,044
3.75% Callable promissory note		7,502		—		—		7,747		7,747
4.55% Promissory note		5,385		—		—		5,809		5,809
Total long-term debt	$	156,468	$	—	$	147,236	$	23,600	$	170,836

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Note ~~7 —~~8 -- Intangible Assets, Net

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

	June 30,			December 31,
	2021			2020
Anchor tenant relationships*	$	1,761		$	1,761
In-place leases		4,215			4,215
Policy renewal rights - United		7,634			—
Non-compete agreement - United		195			—
Total, at cost		13,805			5,976	��
Less: accumulated amortization		(2,872	)		(2,408	)
Intangible assets, net	$	10,933		$	3,568

The remaining weighted-average amortization periods for the intangible assets at June 30, 2021 are summarized in the table below:

Anchor tenant relationships (a)		12.8 years
In-place leases		10.0 years
Policy renewal rights - United		(c)

(a)

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

(b)

The entire amount was fully amortized in June 2021 due to its immateriality.

(c)

Will be amortized over four years after the policy replacement date.

The Company recorded intangible assets of $7,829 representing the renewal rights and non-compete agreement described in Note 1 -- “Nature of Operations” in exchange for 100,000 shares of HCI’s common stock and contingent consideration which is a 6% commission on any replacement premium in excess of $80,000. The contingent consideration was estimated at $2,419 which was included in other liabilities on the consolidated balance sheet. Due to the postponement of the renewal and/or replacement of United’s policies as described in Note 1 -- "Nature of Operations,” amortization of the policy renewal rights intangible asset has yet to begin.

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. Total consideration paid consisted of $5,410 worth of HCI’s common stock plus a contingent liability of $2,419.

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 -- Other Assets

The following table summarizes the Company’s other assets:

					June 30,		December 31,
	September 30, 2017		December 31, 2016		2021		2020
Funds held in a trust account*					$	43,395	$	—
Benefits receivable related to retrospective reinsurance contracts	$	1,969	$	5,810		455		10,920
Prepaid expenses		2,233		1,581		2,714		2,365
Deposits						499		445
Lease acquisition costs, net		580		615		475		453
Restricted cash		709		600
Other		5,970		2,736		8,047		8,428

Total other assets	$	11,461	$	11,342	$	55,585	$	22,611

* Represents a balance of unearned written premium, net of provisional commission and catastrophe cost allowance under the 69.5% reinsurance contract between HCPCI and United.

Note ~~8 —~~10 -- Revolving Credit Facility

In March 2021, the Company repaid the entire credit facility balance of $23,750. For the three months ended June 30, 2021 and 2020, interest expense was $25 and $162, respectively, including $24 and $40 of amortization of issuance costs, respectively. For the six months ended June 30, 2021 and 2020, interest expense was $129 and $315, respectively, including $49 and $79 of amortization of issuance costs, respectively. At June 30, 2021, the Company was in compliance with all required covenants with 0 borrowings outstanding. The borrowing capacity of the facility is now $65,000.

Note 11 -- Long-Term Debt

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

   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

	June 30,			December 31,
	2021			2020
4.25% Convertible senior notes, due March 1, 2037	$	139,200		$	139,200
3.90% Promissory note, due through April 1, 2032		9,606			9,777
3.75% Callable promissory note, due through September 1, 2036		7,428			7,607
4.55% Promissory note, due through August 1, 2036		5,349			5,470
Finance lease liabilities, due through August 15, 2023		34			43
Total principal amount		161,617			162,097
Less: unamortized discount and issuance costs*		(1,048	)		(5,586	)
Total long-term debt	$	160,569		$	156,511

* Effective January 1, 2021, the balance includes only unamortized issuance costs. See Adoption of New Accounting Standards in Note 2 -- “Summary of Significant Accounting Policies.”

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 future maturities of long-term debt as of ~~September~~June 30, ~~2017,~~2021, 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)~~

Due in 12 months following June 30,
2021	$	140,189
2022		1,024
2023		1,056
2024		1,095
2025		1,140
Thereafter		17,113
Total	$	161,617

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		2021		2020			2021		2020
Interest Expense:
Contractual interest	$	2,662	$	1,810	$	7,766		$	5,466	$	1,704	$	1,832		$	3,411	$	3,638
Non-cash expense (a)		1,746		862		4,623			2,646		271		1,068			539		2,120
Capitalized interest (b)		—		—		(61	)		—		—		(42	)		—		(83	)
										$	1,975	$	2,858		$	3,950	$	5,675
Total	$	4,408	$	2,672	$	12,328		$	8,112

~~(a)~~

~~Represents~~

(a)

Includes amortization of debt discount and issuance costs. Amortization of debt discount discontinued effective January 1, 2021. See Adoption of New Accounting Standards in Note 2 -- “Summary of Significant Accounting Policies” for additional information.

~~(b)~~

(b)

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

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, the Company issued 4.25% Convertible Notes ~~in a private offering for an aggregate principal amount of $143,750.~~. The net proceeds of the 4.25% Convertible Notes were $138,775 after $4,975 in related issuance and transaction costs. 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 Convertible Senior Notes rank equally in right of payment to the~~ Company’s existing and future unsecured and unsubordinated obligations. These Convertible Senior Notes do not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Company or any of its subsidiaries. The 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 indenture. These Convertible Senior Notes do not require a sinking fund to be established for the purpose of redemption. In conjunction with the issuances of the Convertible Senior Notes, the Company entered into prepaid share repurchase forward contracts and share repurchase agreements providing for the repurchase of shares of the Company’s common stock. See Note 14 — “Stockholders’ Equity” under~~Share Repurchase Agreements~~ ~~and~~~~Prepaid Share Repurchase Forward Contracts~~ ~~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 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~~recent cash dividends on common stock have exceeded ~~$0.275~~$0.35 per share, resulting in adjustments to the conversion rate of the ~~3.875%~~4.25% Convertible Notes. Accordingly, as of ~~September~~June 30, ~~2017,~~2021, the conversion rate of the Company’s ~~3.875%~~4.25% Convertible Notes was ~~16.1801~~16.4594 shares of common stock for each $1 in principal amount, which was the equivalent of approximately ~~$61.80~~$60.76 per share.

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

The holders of the Convertible Senior Notes may convert all or a portion of their Convertible Senior Notes during specified periods as follows: (1) during any calendar quarter commencing after the calendar quarter ending on the dates specified in each respective indenture, if the last reported sale price of2021, the Company’s common ~~stock~~shares traded above 130% of the conversion price for at least 20 trading days during the ~~period of~~final 30 ~~consecutive~~ trading days ~~ending on the last trading day~~ of the ~~immediately preceding calendar quarter is greater than 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 Convertible Senior Notes is less than 98% of the product of the last reported sale price and the conversion rate on each such trading day; (3) if specified corporate events, includingquarter. As a ~~change in control, occur; or (4) at any time on or after the dates specified in each respective indenture.~~

The note holders who elect to convert their Convertible Senior Notes in connection with a fundamental change as described in the indentures will be entitled to a “make-whole” adjustment in the form of an increase in the conversion rate. Upon conversion, the Company has options 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 30, 2017, none of the conditions allowing the holders of either class of the Convertible Senior Notes to convert had been met.

The Company determined that the 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 additional~~paid-in~~ ~~capital.~~

~~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 Convertible Senior Notes at par prior to the maturity date should any of the fundamental change events described in the indentures occur. The Company concluded that this embedded redemption feature is not a derivative financial instrument and that it is not probable at issuance that any of the 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.

~~Embedded Redemption Feature – Put Option of the Note Holder~~

~~At the option of the holders of~~result, the 4.25% Convertible Notes are convertible by all holders beginning July 1 through September 30, 2021 in accordance with the ~~Company is required to repurchase~~terms specified in the indenture.

As of June 30, 2021, the remaining amortization period of the debt issuance costs for ~~cash all or any portion of~~ the 4.25% Convertible Notes at par on March 1, 2022, March 1, 2027 or March 1, 2032. 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, the Company determined it is probable that the note holders will exercise this option. Thus, the Company amortizes the liability component and related issuance costs associated with the 4.25% Convertible Notes over the period from March 3, 2017 to March 1, 2022.

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

~~8% Senior Notes~~

On April 3, 2017, 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 issuance of the 4.25% Convertible Senior Notes.

~~3.95% Promissory Note~~

On February 27, 2017, the Company converted its outstanding revolving credit facility of $9,441 into a three-year mortgage loan primarily collateralized by a retail shopping center in Melbourne, Florida. Shortly after 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 of principal and interest is payable in 35 monthly installments beginning March 17, 2017 plus a final balloon payment of $8,891 including principal and unpaid interest payable on February 17, 2020. The promissory note may be repaid in part or in full at any time without penalty.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

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

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

8 months.

Note ~~9 —~~12 -- Reinsurance

The Company cedes a portion of its homeowners’ insurance exposure to other entities under catastrophe excess of loss reinsurance ~~treaties~~contracts and 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% ceding commission on ceded premiums written. ~~During the third quarter of 2017, the Company entered into a three-year~~The reinsurance premiums under one 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 value in force on the last day of the preceding quarter. ~~Effective September 1, 2017, the quota~~

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in 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~~1^st 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			2021			2020			2021			2020
Premiums Written:
Direct	$	94,935		$	93,282		$	301,930		$	308,682		$	143,224		$	171,906		$	253,355		$	248,478
Assumed		(63	)		(18	)		(1,184	)		(377	)		41,754			(25	)		57,471			(79	)

Gross written		94,872			93,264			300,746			308,305			184,978			171,881			310,826			248,399
Ceded		(44,704	)		(29,242	)		(101,528	)		(105,998	)		(46,436	)		(34,354	)		(89,535	)		(65,073	)

Net premiums written	$	50,168		$	64,022		$	199,218		$	202,307		$	138,542		$	137,527		$	221,291		$	183,326

Premiums Earned:
Direct	$	87,118		$	92,112		$	259,698		$	283,011		$	115,733		$	106,852		$	226,025		$	197,619
Assumed		1,551			430			10,678			3,262			23,707			951			44,357			2,549

Gross earned		88,669			92,542			270,376			286,273			139,440			107,803			270,382			200,168
Ceded		(44,705	)		(29,242	)		(101,529	)		(105,998	)		(46,436	)		(34,354	)		(89,535	)		(65,073	)

Net premiums earned	$	43,964		$	63,300		$	168,847		$	180,275		$	93,004		$	73,449		$	180,847		$	135,095

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, reinsurance recoveries~~2021, the Company recognized ceded losses of ~~$213,746~~$487 and ~~$213,751,~~$594, respectively, ~~were deducted from~~as a reduction in losses ~~incurred.~~and loss adjustment expenses. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2020, the Company recognized ceded losses of $11 and $349, respectively, as a reduction in losses and loss adjustment expenses. At June 30, 2021 and December 31, 2020, there were ~~no recoveries pertaining~~54 and 38 reinsurers, respectively, participating in the Company’s reinsurance program. Total net amounts recoverable and receivable from reinsurers at June 30, 2021 and December 31, 2020 were $61,993 and $85,146, respectively. Approximately 66.8% of the gross reinsurance recoverable balance at June 30, 2021 was receivable from three reinsurers, including the Florida Hurricane Catastrophe Fund, a state trust fund. Based on all available information considered in the rating-based method, the Company recognized decreases in credit loss expense of $16 and $28 for the three and six months ended June 30, 2021, respectively. For the three and six months ended June 30, 2020, the Company derecognized credit loss expenses of $325 and $349, respectively. Allowances for credit losses related to the reinsurance recoverable balance were $57 and $85 at June 30, 2021 and December 31, 2020, respectively.

The Company has reinsurance contracts that ~~were deducted from~~include retrospective provisions that adjust premiums in the event losses ~~incurred. The recoveries~~are minimal or zero. For the three and six months ended June 30, 2021, the Company recognized reductions in ~~2017 were~~premiums ceded of $3,575 and $8,255, respectively, related to ~~Hurricane Irma which~~these adjustments in the consolidated statements of income. For the three and six months ended June 30, 2020, the Company recognized reductions in premiums ceded of $3,240 and $5,760, respectively.

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~~2021 and December 31, ~~2016,~~2020, other assets included ~~$1,969~~$455 and ~~$5,810, respectively,~~$10,920, respectively. In June 2021, the Company received $18,720 of ~~which $393 and $1,043 related to~~premium refund under the retrospective reinsurance contract ~~with Oxbridge and prepaid reinsurance premiums included $484 and $2,152, respectively, of which $85 and $338 related to the contract with Oxbridge.~~that ended May 31, 2021. Management believes the credit risk associated with the collectability of ~~these~~ accrued benefits is minimal as the amount receivable is concentrated with one reinsurer and the Company monitors the creditworthiness of this reinsurer based on available information about the reinsurer’s financial ~~position.~~condition.

~~HCI GROUP, INC. AND SUBSIDIARIES~~

~~Notes~~Effective January 2021, the Company began providing quota share reinsurance on all in-force, new and renewal policies issued by United. The policies were issued in the states of Connecticut, New Jersey, Massachusetts and Rhode Island. For the three and six months ended June 30, 2021, assumed premiums written related to ~~Consolidated Financial Statements (unaudited)~~

~~(Amounts in thousands, except share~~United were $41,754 and ~~per share amounts, unless otherwise stated)~~

$57,471, respectively. At June 30, 2021, the Company had a net balance of $24,712 due from United, consisting of premiums receivable of $41,754 offset by ceding commission payable of $9,764 and payable on paid losses and loss adjustment expenses of $7,278.

Note ~~10 —~~13 -- 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.

Activity in the liability for ~~unpaid~~ losses and ~~loss adjustment expenses~~LAE is summarized 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			2021			2020			2021			2020
Gross balance, beginning of period	$	73,089		$	54,727		$	70,492		$	51,690
Less: reinsurance recoverable		5			—			—			—

Net balance, beginning of period		73,084			54,727			70,492			51,690
Net balance, beginning of period*													$	144,630		$	105,876		$	141,065		$	98,174
Incurred, net of reinsurance, related to:
Current period		78,337			21,283			123,710			68,703			51,310			40,493			93,230			66,296
Prior period		10,894			4,626			18,715			10,558			4,607			(650	)		8,438			1,625

Total incurred, net of reinsurance		89,231			25,909			142,425			79,261			55,917			39,843			101,668			67,921

Paid, net of reinsurance, related to:
Current period		(20,888	)		(16,078	)		(40,392	)		(38,674	)		(20,006	)		(11,329	)		(27,602	)		(15,813	)
Prior period		(10,484	)		(7,363	)		(41,582	)		(35,082	)		(25,640	)		(11,261	)		(60,230	)		(27,153	)

Total paid, net of reinsurance		(31,372	)		(23,441	)		(81,974	)		(73,756	)		(45,646	)		(22,590	)		(87,832	)		(42,966	)

Net balance, end of period		130,943			57,195			130,943			57,195			154,901			123,129			154,901			123,129
Add: reinsurance recoverable		213,729			—			213,729			—

Add: reinsurance recoverable before allowance for credit losses														48,884			88,033			48,884			88,033
Gross balance, end of period	$	344,672		$	57,195		$	344,672		$	57,195		$	203,785		$	211,162		$	203,785		$	211,162

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

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

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,~~2021, the Company ~~incurred $267,000 of estimated gross losses or $54,000 of estimated net~~recognized losses related to ~~Hurricane Irma~~prior periods of $4,607 and ~~experienced unfavorable development~~$8,438, respectively, primarily to increase the reserve for the 2020 loss year resulting from increased litigation. Losses and LAE for the six months ended June 30, 2021 included estimated losses, net of ~~$10,894 and $18,715, respectively,~~reinsurance, of approximately $23,500 related to policies assumed from United, approximately $2,600 of which ~~$9,442 and $17,438, respectively, pertain~~pertained to ~~claims in the 2015 and 2016 loss years.~~

~~HCI GROUP, INC. AND SUBSIDIARIES~~

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

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

TypTap.

Note ~~11 —~~14 -- 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 now 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~~2021 and ~~2016,~~2020, revenues from the ~~Company’s~~HCPCI insurance operations segment before intracompany elimination represented ~~96.1%~~77.6% and ~~94.8%~~86.6%, respectively, and revenues from the TypTap Group segment represented 20.3% and 11.1%, respectively, of total revenues of all operating segments. For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, revenues from the ~~Company’s~~HCPCI insurance operations segment before intracompany elimination represented ~~96.4%~~77.8% and 83.8%, respectively, and revenues from the TypTap Group segment represented 18.9% and 12.8%, respectively, of total revenues of all operating ~~segments in each of the periods.~~segments. At ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, HCPCI insurance operations’ total assets represented ~~90.7%~~61.4% and ~~87.9%~~68.9%, respectively, and TypTap Group’s total assets represented 25.4% and 16.7%, 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, 2021	Operations			Group			Estate(a)		Others(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		66,749			26,415			—		—			(160	)		93,004
Net income from investment portfolio		3,550			495			—		2,392			294			6,731
Policy fee income		701			291			—		—			—			992
Other		812			475			2,379		267			(3,156	)		777
Total revenue		71,812			27,676			2,379		2,659			(3,022	)		101,504
Expenses:
Losses and loss adjustment expenses		39,641			16,440			—		—			(164	)		55,917
Amortization of deferred policy acquisition costs		20,540			5,553			—		—			—			26,093
Other policy acquisition expenses		(5,070	)		2,021			—		—			125			(2,924	)
Interest expense		—			—			259		1,766			(25	)		2,000
Depreciation and amortization		18			312			574		364			(605	)		663
Personnel and other operating expenses		5,602			7,833			1,317		2,259			(2,353	)		14,658
Total expenses		60,731			32,159			2,150		4,389			(3,022	)		96,407
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

(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 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.

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
Revenue:

Net premiums earned
   $ 43,964    $ —      $ —      $ 43,964
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 )
Policy fee income
   905    —      —      905
Other
   85    2,706    (2,422 )    369








Total revenue
   46,827    3,393    (2,730 )    47,490








Expenses:

Losses and loss adjustment expenses
   89,231    —      —      89,231
Amortization of deferred policy acquisition costs
   9,031    —      —      9,031
Interest expense
   —      4,408    —      4,408
Depreciation and amortization
   33    785    (494 )    324
Other
   7,155    5,595    (2,236 )    10,514








Total expenses
   105,450    10,788    (2,730 )    113,508








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

													HCPCI
Three Months Ended September 30, 2016	Insurance Operations			Corporate/ Other(a)			Reclassification/ Elimination			Consolidated
													Insurance			TypTap			Real			Corporate/			Reclassification/
For Three Months Ended June 30, 2020													Operations			Group			Estate(a)			Others(b)			Elimination			Consolidated
Revenue:
Gross premiums earned (c)													$	90,220		$	18,380		$	—		$	—		$	(797	)	$	107,803
Premiums ceded														(30,037	)		(5,114	)		—			—			797			(34,354	)
Net premiums earned	$	63,300		$	—		$	—		$	63,300			60,183			13,266			—			—			—			73,449
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	)
Net income (loss) from investment portfolio														5,462			490			2			460			(578	)		5,836
Policy fee income		972			—			—			972			653			194			—			—			—			847
Gain on bargain purchase		—			2,071			—			2,071
Other		106			2,001			(1,786	)		321			441			19			2,419			50			(2,344	)		585

Total revenue		67,001			5,113			(2,306	)		69,808			66,739			13,969			2,421			510			(2,922	)		80,717

Expenses:
Losses and loss adjustment expenses		25,909			—			—			25,909			31,445			8,398			—			—			—			39,843
Amortization of deferred policy acquisition costs		9,335			—			—			9,335			9,014			3,497			—			—			—			12,511
Other policy acquisition expenses														922			(414	)		—			—			(28	)		480
Interest expense		—			2,672			—			2,672			—			1			498			2,742			(221	)		3,020
Depreciation and amortization		31			419			(147	)		303			19			275			639			143			(596	)		480
Other		8,426			5,293			(2,159	)		11,560

Loss on repurchases of convertible senior notes														—			—			—			150			—			150
Personnel and other operating expenses														5,250			4,252			1,406			3,579			(2,077	)		12,410
Total expenses		43,701			8,384			(2,306	)		49,779			46,650			16,009			2,543			6,614			(2,922	)		68,894

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

Income (loss) before income taxes													$	20,089		$	(2,040	)	$	(122	)	$	(6,104	)	$	—		$	11,823
Total revenue from non-affiliates (d)													$	66,480		$	14,088		$	1,954		$	436
Gross premiums written													$	154,918		$	16,964

~~(a)~~

(a)

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

(b)

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

(c)

Gross premiums earned consist of $89,423 from HCPCI and $797 from a reinsurance company.

(d)

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

3534

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

													HCPCI
Nine Months Ended September 30, 2017	Insurance Operations			Corporate/ Other(a)			Reclassification/ Elimination			Consolidated
													Insurance			TypTap			Real		Corporate/			Reclassification/
For Six Months Ended June 30, 2021													Operations			Group			Estate(a)		Others(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	$	168,847		$	—		$	—		$	168,847			135,290			45,717			—		—			(160	)		180,847
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 income from investment portfolio														4,430			831			—		3,887			3,021			12,169
Policy fee income		2,721			—			—			2,721			1,413			549			—		—			—			1,962
Other		428			8,063			(7,284	)		1,207			1,333			650			7,513		827			(8,923	)		1,400

Total revenue		180,488			10,309			(8,014	)		182,783			142,466			47,747			7,513		4,714			(6,062	)		196,378

Expenses:
Losses and loss adjustment expenses		142,425			—			—			142,425			73,080			28,752			—		—			(164	)		101,668
Amortization of deferred policy acquisition costs		26,668			—			—			26,668			33,287			10,190			—		—			—			43,477
Other policy acquisition expenses														(246	)		3,062			—		—			(59	)		2,757
Interest expense		—			12,328			—			12,328			—			90			741		3,518			(270	)		4,079
Loss on repurchases of senior notes		—			743			—			743
Depreciation and amortization		94			2,227			(1,425	)		896			38			600			1,161		540			(1,238	)		1,101
Other		22,601			16,282			(6,589	)		32,294

Personnel and other operating expenses														11,421			13,322			2,518		5,167			(4,331	)		28,097
Total expenses		191,788			31,580			(8,014	)		215,354			117,580			56,016			4,420		9,225			(6,062	)		181,179

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

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

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.

~~(a)~~

(b)

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

(c)

Gross premiums earned consist of $202,571 from HCPCI and ~~marina businesses.~~$4,800 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)

	HCPCI
	Insurance			TypTap			Real		Corporate/			Reclassification/
For Six Months Ended June 30, 2020	Operations			Group			Estate(a)		Others(b)			Elimination			Consolidated
Revenue:
Gross premiums earned (c)	$	165,990		$	34,975		$	—	$	—		$	(797	)	$	200,168
Premiums ceded		(56,963	)		(8,907	)		—		—			797			(65,073	)
Net premiums earned		109,027			26,068			—		—			—			135,095
Net income (loss) from investment portfolio		1,921			20			3		(3,054	)		(734	)		(1,844	)
Policy fee income		1,303			373			—		—			—			1,676
Other		672			63			4,978		1,405			(5,948	)		1,170
Total revenue		112,923			26,524			4,981		(1,649	)		(6,682	)		136,097
Expenses:
Losses and loss adjustment expenses		53,283			14,638			—		—			—			67,921
Amortization of deferred policy acquisition costs		16,670			6,698			—		—			—			23,368
Other policy acquisition expenses		1,629			(124	)		—		—			(56	)		1,449
Interest expense		—			1			971		5,459			(441	)		5,990
Depreciation and amortization		42			541			1,295		287			(1,208	)		957
Loss on repurchases of convertible senior notes		—			—			—		150			—			150
Personnel and other operating expenses		10,265			8,717			2,657		7,120			(4,977	)		23,782
Total expenses		81,889			30,471			4,923		13,016			(6,682	)		123,617
Income (loss) before income taxes	$	31,034		$	(3,947	)	$	58	$	(14,665	)	$	—		$	12,480
Total revenue from non-affiliates (d)	$	112,664		$	26,643		$	4,048	$	(2,204	)
Gross premiums written	$	213,040		$	35,359

(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 restaurant and marina businesses.

(c)

Gross premiums earned consist of $165,193 from HCPCI and $797 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 in the consolidated balance ~~sheets.~~sheets:

							June 30,			December 31,
	September 30, 2017			December 31, 2016			2021			2020
Segment:
Insurance Operations	$	871,601		$	651,927
Segments:
HCPCI Insurance Operations							$	633,201		$	648,600
TypTap Group								291,152			157,581
Real Estate Operations								128,873			128,383
Corporate and Other		213,299			116,849			62,226			29,022
Consolidation and Elimination		(55,647	)		(98,712	)		(35,242	)		(22,273	)

Total assets	$	1,029,253		$	670,064		$	1,080,210		$	941,313

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 —~~15 -- 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,
	2021		2020
Operating leases:
ROU Assets	$	2,946	$	4,002
Liabilities	$	2,950	$	4,014
Finance leases:
ROU Assets	$	79	$	79
Liabilities	$	34	$	43

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 63 months	Yes	(a), (b)
Office space	3 to 10 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, 2021, maturities of lease liabilities were as follows:

	Leases
	Operating		Finance
Due in 12 months following June 30,
2021	$	1,622	$	19
2022		1,422		14
2023		117		3
Total lease payments		3,161		36
Less: interest and foreign taxes		211		2
Total lease obligations	$	2,950	$	34

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,
	2021			2020		2021		2020
Lease costs:
Finance lease costs:
Amortization – ROU assets*	$	5		$	5	$	9	$	9
Interest expense		—			1		1		1
Operating lease costs*		391			78		845		156
Short-term lease costs*		113			42		150		91
Total lease costs	$	509		$	126	$	1,005	$	257
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – finance leases						$	1	$	1
Operating cash flows – operating leases						$	848	$	159
Financing cash flows – finance leases						$	9	$	8

	June 30, 2021
Weighted-average remaining lease term:
Finance leases (in years)		2.5
Operating leases (in years)		2.6
Weighted-average discount rate:
Finance leases		3.7	%
Operating leases		2.8	%

Included in other operating expenses of 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 16 -- Income Taxes

During the three months ended ~~September~~June 30, ~~2017,~~2021 and 2020, the Company recorded approximately ~~$25,472 of income tax benefits, which resulted in an effective tax rate of 38.6%. During the three months ended September 30, 2016, the Company recorded approximately $8,696~~$1,267 and $2,887 respectively, of income taxes, which resulted in an effective tax ~~rate~~rates of ~~43.4%.~~24.9% and 24.4%, respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021 and 2020, the Company recorded approximately ~~$13,587 of income tax benefits, resulting in an effective tax rate of 41.7%. During the nine months ended September 30, 2016, the Company recorded approximately $16,542~~$4,524 and $2,997, respectively, of income taxes, which resulted in aneffective tax rates of 29.8% and 24.0%, respectively. The increase in the effective tax rate ~~of 40.4%.~~in 2021 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. 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~~

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in ~~the process of gathering information.~~thousands, except share and per share amounts, unless otherwise stated)

Note ~~13 —~~17 -- Earnings Per Share

U.S. GAAP requires the Company to use thetwo-class method in computing basic earnings 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 per share during periods of net ~~income.~~income or loss. For a majority-owned subsidiary, its basic and diluted earnings 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 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, 2021							June 30, 2020
	Income			Shares (a)		Per Share		Income			Shares (a)		Per Share
	(Numerator)			(Denominator)		Amount		(Numerator)			(Denominator)		Amount
Net income	$	3,830						$	8,936
Less: Net income attributable to redeemable noncontrolling interest		(2,179	)						—
Less: TypTap Group's net loss attributable to non-HCI common stockholders and TypTap Group's participating securities		429							—
Net income attributable to HCI		2,080							8,936
Less: Income attributable to participating securities		(168	)						(465	)
Basic Earnings Per Share:
Income allocated to common stockholders		1,912			7,526	$	0.25		8,471			7,324	$	1.16
Effect of Dilutive Securities:
Stock options		—			175				—			4
Convertible senior notes* (b)		—			—				1,948			2,357
Warrants		—			247				—			—
Diluted Earnings Per Share:
Income available to common stockholders and assumed conversions	$	1,912			7,948	$	0.24	$	10,419			9,685	$	1.08

(a)

Shares in thousands.

(b)

See Adoption of New Accounting Standards under Note 2 -- “Summary of Significant Accounting Policies” for additional information.

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)

	Six Months Ended							Six Months Ended
	June 30, 2021							June 30, 2020
	Income			Shares (a)		Per Share		Income			Shares (a)		Per Share
	(Numerator)			(Denominator)		Amount		(Numerator)			(Denominator)		Amount
Net income	$	10,675						$	9,483
Less: Net income attributable to redeemable noncontrolling interest		(2,973	)						—
Less: TypTap Group's net loss attributable to non-HCI common stockholders and TypTap Group's participating securities		501							—
Net income attributable to HCI		8,203							9,483
Less: Income attributable to participating securities		(569	)						(472	)
Basic Earnings Per Share:
Income allocated to common stockholders		7,634			7,500	$	1.02		9,011			7,347	$	1.23
Effect of Dilutive Securities:
Stock options		—			141				—			6
Convertible senior notes* (b)		—			—				—			—
Warrants		—			161				—			—
Diluted Earnings Per Share:
Income available to common stockholders and assumed conversions	$	7,634			7,802	$	0.98	$	9,011			7,353	$	1.23

(a)

Shares in thousands.

(b)

See Adoption of New Accounting Standards under Note 2 -- “Summary of Significant Accounting Policies” for additional information.

*For the six months ended June 30, 2021 and 2020, respectively, convertible senior notes were excluded due to anti-dilutive effect.

Note 18 -- Redeemable Noncontrolling Interest

On February 26, 2021, TTIG completed a capital investment transaction with a fund associated with Centerbridge Partners, L.P. (collectively, the “Lead Investor”), a private investment management fund. Under the investment agreement, TTIG issued 9,000,000 voting shares of its Series A-1 Preferred Stock and 1,000,000 non-voting shares of its Series A-2 Preferred Stock (together “Series A ~~summary~~Preferred Stock”), $0.001 par value, at a price of $10 per share for total proceeds of $100,000. The proceeds will be used for TypTap’s operations and continued expansion. The Company incurred $6,262 of related issuance costs. In connection with the transaction, the Lead Investor was granted by HCI warrants to purchase 750,000 shares of HCI’s common stock with an exercise price of $54.40 per share. The warrants valued at $9,217 or $12.29 per warrant were immediately exercisable and will expire on the fourth anniversary of the ~~numerator~~date of issuance.

Dividends

Dividends accrue and ~~denominator~~accumulate from the date of issuance. Cumulative dividends are payable semi-annually in cash or paid-in-kind at TTIG’s option. Cash dividend rates are $0.50 per share in Year 1, $0.60 per share in Year 2, $0.75 per share in Year 3, and $0.95 per share in Year 4 and thereafter. The rates for paid-in-kind dividends are $0.60 per share in Year 1 and $0.70 per share in Year 2. In addition, the ~~basic~~Series A Preferred Stock will be paid dividends on an as-converted basis when and ~~diluted (loss) earnings per~~if TTIG declares common ~~share is presented below.~~stock dividends.

   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

*	~~Excluded in 2017 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)

Conversion Rights

The holders of TTIG’s Series A Preferred Stock have the right to convert the stock at any time into shares of TTIG’s common stock with an initial conversion rate of 1 to 1. The conversion rate will be adjusted under certain conditions. Unless converted earlier, all shares of Series A Preferred Stock will be automatically converted into shares of TTIG’s common stock at the then-applicable conversion rate upon (1) a qualified public offering of TTIG’s common stock with gross proceeds of not less than $250,000 with a price per share at least equal to 150% of the original purchase price of the Series A Preferred Stock, or (2) at the election of requisite holders of a majority of TTIG’s Series A Preferred Stock, whichever comes first.

Redemption Rights

On or after the fourth anniversary of the issuance date, TTIG’s Series A Preferred Stock is redeemable at the option of the holders at a price equal to the greater of (1) $10 per share plus any accrued but unpaid dividends and (2) a fair market value per share determined by an independent valuation firm selected by TTIG’s board of directors. Management determined that the redemption was not probable at June 30, 2021.

Guaranty by HCI

All payment obligations to the holders of TTIG’s Series A Preferred Stock are fully guaranteed by HCI as long as TTIG’s Series A Preferred Stock is outstanding. As the guarantor, HCI is subject to certain financial covenants.

Liquidation Preference

In the event of any liquidation, the Series A Preferred Stock ranks senior to TTIG’s common stock with respect to distribution rights.

Anti-Dilutive Protection

The holders of TTIG’s Series A Preferred Stock receive protection in the form of a down-round feature which will be triggered in the event that TTIG issues additional common equivalent shares at an effective price per share less than $10 per share.

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 the activity of redeemable noncontrolling interest during the six months ended June 30, 2021:


Balance at January 1, 2021	$	—
Initial proceeds from Centerbridge		100,000
Increase (decrease):
Proceeds allocated to warrants*		(9,217	)
Issuance costs		(6,262	)
Issuance costs allocated to warrants*		577
Accrued cash dividends		458
Accretion - increasing dividend rates		336
Balance at March 31, 2021	$	85,892
Increase (decrease):
Accrued cash dividends		1,250
Accretion - increasing dividend rates		929
Balance at June 30, 2021	$	88,071

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

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

Note ~~14 —~~ 19 -- Equity

Stockholders’ Equity

Common Stock

~~In December 2016,~~The Company’s 2020 stock repurchase plan was considered to be expired and there was no new stock repurchase plan approved by the ~~Company’s~~ Board of Directors ~~authorized~~during 2021.

On December 19, 2019, the Board of Directors decided to extend the term of the 2019 stock repurchase plan to March 15, 2020. On March 13, 2020, the Board approved a~~one-year~~ new stock repurchase plan for 2020 to repurchase up to $20,000 of the Company’s common shares before commissions and fees. During the three months ended ~~September~~June 30, ~~2017,~~2020, the Company repurchased and retired a total of ~~124,849~~51,834 shares at a weighted average price per share of ~~$36.79~~$40.48 under this authorized repurchase plan. The total cost of shares repurchased, inclusive of fees and commissions, during the three months ended ~~September~~June 30, ~~2017~~2020 was ~~$4,599,~~$2,100 or ~~$36.83~~$40.51 per share. During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, the Company repurchased and retired a total of ~~163,265~~128,685 shares at a weighted average price per share of ~~$37.86~~$39.92 under this authorized repurchase plan. The total cost of shares repurchased, inclusive of fees and commissions, during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 was ~~$6,189,~~$5,141 or ~~$37.91 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$39.95 per share.

On ~~October 19, 2017,~~April 28, 2021, 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 18, 2021 to ~~shareholders~~stockholders of record on ~~November 17, 2017.~~May 21, 2021.

~~Share Repurchase Agreements~~42

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

~~Prepaid Share Repurchase Forward Contracts~~

The Company has two outstanding prepaid share repurchase forward contracts, one of which was entered into with Deutsche Bank AG, London Branch in conjunction with the issuance of the 3.875% Convertible Notes. The other was entered into with 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 deliveries of the Company’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 shares of the Company’s

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Warrants

At June 30, 2021, there were warrants outstanding and exercisable to purchase 750,000 shares of HCI common stock. These warrants were issued by HCI to the Lead Investor described in Note 18 -- “Redeemable Noncontrolling Interest.”

Noncontrolling Interests

According to its amended Articles of Incorporation, TTIG is authorized to issue 183 million shares of common stock ~~which shares will be delivered over~~with a ~~settlement period in 2019. Pursuant to the forward contract entered into in March 2017 with Societe Generale, the Company prepaid $9,400~~par value of ~~the net proceeds of the offering to repurchase 191,100~~$0.001 per share, and 37,502,000 shares of ~~the Company’s~~preferred stock. In February 2021, TTIG issued 10 million shares of Series A Preferred Stock (see Note 18 -- “Redeemable Noncontrolling Interest”). At June 30, 2021, there were 81,090,585 shares of TTIG’s common stock outstanding, of which 6,090,585 shares ~~will be delivered over~~were not owned by HCI.

In May 2021, TTIG repurchased and retired 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~~total of ~~each forward counterparty, as well as early settlement or settlement with alternative consideration in the event~~52,015 shares 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~~stock surrendered by its employees to satisfy payroll tax liabilities associated with the ~~Company.~~vesting of restricted shares. The ~~shares to be purchased under the forward contracts will be treated as retired for financial statement purposes as~~total cost 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 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 and diluted earnings per share.purchasing noncontrolling interests was $58.

Note ~~15 —~~20 -- 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,~~2021, there were ~~1,995,107~~1,080,760 shares available for grant.

Stock Options

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

A summary of the stock option activity for the three and six months ended June 30, 2021 and 2020 is as follows (option amounts not in thousands):

						Weighted
				Weighted		Average
				Average		Remaining	Aggregate
	Number of			Exercise		Contractual	Intrinsic
	Options			Price		Term	Value
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

Outstanding at January 1, 2020		340,000		$	43.21	7.9 years	$	1,657
Granted		110,000		$	48.00
Exercised		(10,000	)	$	6.30
Outstanding at March 31, 2020		440,000		$	45.25	8.3 years	$	—
Outstanding at June 30, 2020		440,000		$	45.25	8.1 years	$	1,184
Exercisable at June 30, 2020		165,000		$	42.17	7.2 years	$	740

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~~The following table summarizes information about options exercised for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016 is as follows~~2020 (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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Options exercised		—		—		—		10,000
Total intrinsic value of exercised options	$	—	$	—	$	—	$	288
Tax benefits realized	$	—	$	—	$	—	$	71

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 no options exercised during the three and nine months ended September 30, 2016.

For the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, the Company recognized ~~$79~~$219 and ~~$0, respectively, of compensation expense. For the nine months ended September 30, 2017 and 2016, the Company recognized $228 and $0,~~$297, respectively, of compensation expense which was included in ~~other operating~~general and administrative personnel expenses. For the six months ended June 30, 2021 and 2020, the Company recognized $442 and $580, respectively, of compensation expense. Deferred tax benefits related to stock options were ~~$30~~$0 and $0$19 for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively, and ~~$88~~$1 and $0$38 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively. At ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, there was ~~$1,020~~$1,447 and ~~$0,~~$1,889, 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~~2.0 years.

The following table provides assumptions used in the Black-Scholes option-pricing model to estimate the fair value of the stock options granted during the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2020:

	2020
Expected dividend yield		~~3.53~~ 3.48	%
Expected volatility		~~42.86~~ 38.68	%
Risk-free interest rate		~~1.92~~ 1.63	%
Expected life (in years)		5

Restricted Stock Awards

From time to time, the Company has granted and may grant restricted stock awards to its 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~~

HCI GROUP, INC. AND SUBSIDIARIES

Notes 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.~~Consolidated Financial Statements (unaudited)

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

Information with respect to the activity of unvested restricted stock awards during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 is as follows:

						Number of			Weighted
	Number of Restricted Stock Awards			Weighted Average Grant Date Fair Value		Restricted			Average
Nonvested at January 1, 2017		542,503		$	30.81
						Stock			Grant Date
						Awards			Fair Value
Nonvested at January 1, 2021							423,787		$	43.79
Granted							548,086		$	36.95
Vested							(41,250	)	$	42.18
Cancelled							(141,600	)	$	43.76
Forfeited							(2,050	)	$	45.67
Nonvested at March 31, 2021							786,973		$	39.11
Granted							3,000		$	76.00
Vested							(68,541	)	$	43.80
Cancelled							(1,160	)	$	45.96
Forfeited							(9,060	)	$	46.44
Nonvested at June 30, 2021							711,212		$	38.71

Nonvested at January 1, 2020							396,760		$	41.71
Granted		45,000		$	40.15		45,000		$	44.97
Vested		(20,109	)	$	48.42		(31,250	)	$	40.97
Forfeited		(926	)	$	35.52		(7,138	)	$	42.60

Nonvested at March 31, 2017		566,468		$	30.92

Nonvested at March 31, 2020							403,372		$	42.12
Granted		109,936		$	44.05		145,000		$	45.59
Vested		(45,874	)	$	34.51		(104,926	)	$	41.16
Forfeited		(9,948	)	$	40.90		(5,220	)	$	43.75

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
Vested		(20,917	)	$	48.42
Cancelled		(160,000	)	$	26.27
Forfeited		(750	)	$	45.25

Nonvested at March 31, 2016		438,846		$	30.93

Granted		102,440		$	32.21
Vested		(24,235	)	$	37.34
Forfeited		(5,147	)	$	42.20

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, 2020							438,226		$	43.48

The Company recognized compensation expense related to restricted stock, which is included in ~~other operating~~general and administrative personnel expenses, of ~~$1,144~~$2,336 and ~~$1,124~~$1,722 for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively, and ~~$3,134~~$4,241 and ~~$3,072~~$3,280 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively. At ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, there was approximately ~~$10,208~~$24,919 and ~~$7,531,~~$13,666, 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.~~3.2 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~~2021 and ~~2016.~~2020.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Deferred tax benefits recognized	$	495	$	319	$	459	$	603
Tax benefits realized for restricted stock and paid dividends	$	1,357	$	1,186	$	1,412	$	1,239
Fair value of vested restricted stock	$	3,002	$	4,319	$	4,742	$	5,599

In February 2021, the Company cancelled 141,600 shares of restricted stock for employees who transitioned to TypTap Group (See Note 1 -- “Nature of Operations”). In exchange, these employees received replacement restricted stock issued under TTIG’s equity incentive plan.

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

On February 26, 2021, TTIG’s Board of Directors approved the 2021 Equity Incentive Plan (the “2021 Plan”) which is an incentive plan denominated in TTIG’s common shares. The 2021 Plan provides for broad-based equity awards to employees and nonemployee directors of TypTap Group. The maximum number of shares that may be issued under the 2021 Plan is 7,000,000 shares. In February 2021, TTIG issued a total of 5,749,300 shares of restricted stock to the employees who transitioned to TypTap Group. For the three months ended June 30, 2021, TypTap Group recognized compensation expense related to restricted stock of $1,599, and for the six months ended June 30, 2021, TypTap Group recognized compensation expense related to restricted stock of $1,814. At June 30, 2021, there was approximately $5,279 of total unrecognized compensation expense related to nonvested restricted stock.

Note ~~16 —~~21 -- Commitments and Contingencies

Obligations under Multi-Year Reinsurance Contracts

As of ~~September~~June 30, ~~2017,~~2021, the Company has contractual obligations related to ~~three~~2 multi-year reinsurance contracts. ~~Two of these contracts have effective dates of June 1, 2016 and the other has an effective date of July 1, 2017.~~ These contracts may be cancelled only with the other party’s ~~consent.~~consent or when their respective experience accounts are positive at the end of each contract year. The table below presents the future minimum aggregate ~~premiums amount~~premium amounts payable to the ~~reinsurers.~~reinsurer.

Due in 12 months following September 30,

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


Total
   $ 26,471

Due in 12 months following June 30,
2021	$	9,095
2022*		9,095
2023*		5,457
Total	$	23,647

*Premiums payable after ~~December~~May 31, ~~2017 under one contract~~2022 are estimated. ~~See Note 9 — “Reinsurance” for additional information.~~

Capital ~~Commitment~~Commitments

As described in Note ~~4 —~~5 -- “Investments” underLimited Partnership Investments, the Company is contractually committed to capital contributions for ~~four~~ limited partnership interests. At ~~September~~June 30, ~~2017,~~2021, there was an aggregate unfunded balance of ~~$15,931.~~$9,302.

Note ~~17 —~~22 -- Related Party Transactions

~~Claddaugh Casualty Insurance~~On February 12, 2021, the Company ~~Ltd.,~~committed to provide a revolving line of credit with borrowing capacity of up to $60,000 to TTIG and the credit line would be available until the earlier of June 30, 2022 and the securing of alternative financing. This commitment has ended on February 26, 2021 after the investment transaction described in Note 18 -- “Redeemable Noncontrolling Interest.”

Note 23 -- Subsequent Events

On July 7, 2021, the Company’s ~~Bermuda domiciled reinsurance subsidiary, has~~Board of Directors declared a ~~reinsurance agreement with Oxbridge Reinsurance Limited whereby a portion~~quarterly dividend of ~~the business assumed from the Company’s insurance subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., is ceded by Claddaugh~~$0.40 per common share. The dividends are payable on September 17, 2021 to ~~Oxbridge. With respect to the period from June 1, 2016 through May 31, 2017, Oxbridge assumed $6,000~~stockholders 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 the

~~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 are due under the Oxbridge reinsurance agreements. Among 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, the Company, through a wholly owned subsidiary, acquired commercial real estate in Tampa, Florida for a purchase price of $9,100. The acquired assets primarily consisted of land, building and~~in-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 Company early adopted in the fourth quarter of 2017. As a result, all transaction-related costs were allocated among the assets acquired.~~record on August 20, 2021.

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 12, 2021. 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 the novel coronavirus (“COVID-19”) 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

~~Insurance Operations~~

•

▪

Property and casualty insurance

▪

Reinsurance and other auxiliary operations

•

~~Reinsurance~~

TypTap Group

▪

Property and casualty insurance

▪

Information technology

Real Estate Operations

Other Operations

•

▪

~~Real estate~~

Holding company operations

•

~~Information technology~~

For the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, revenues from HCPCI insurance operations before intracompany elimination represented ~~96.1%~~77.6% and ~~94.8%~~86.6%, respectively, and revenues from TypTap Group represented 20.3% and 11.1%, respectively, of total revenues of all operating segments. For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, revenues from HCPCI insurance operations before intracompany elimination represented ~~96.4%~~77.8% and 83.8%, respectively, and revenues from TypTap Group represented 18.9% and 12.8%,

respectively, of total

revenues of all operating ~~segments in each of the periods.~~segments. At ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, HCPCI insurance operations’ total assets represented ~~90.7%~~61.4% and ~~89.8%~~68.9%, respectively, and TypTap Group’s total assets represented 25.4% and 16.7%, 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 —~~14 -- “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.

Effective January 2021, HCPCI ~~expects~~began providing 69.5% quota share reinsurance on all in-force, new and renewal policies issued by United Property & Casualty Insurance Company, a subsidiary of United Insurance Holdings Corporation (“United”) in the states of Connecticut, New Jersey, Massachusetts and Rhode Island. In exchange, HCPCI paid United an allowance of $4,400,000 towards previously purchased catastrophe reinsurance and a provisional ceding commission of 25% of premium. That percentage can increase up to ~~begin writing flood~~31.5% depending on the direct loss ratio results from the reinsured business.

We and United agreed to postpone the policy replacement date under the renewal rights agreement to a later date and we, through HCPCI and TypTap, entered into a new quota share reinsurance agreement in June 2021 to provide 100% reinsurance on all of United’s in-force, new and renewal policies in those states ~~during 2018.~~from June 1, 2021 through May 31, 2022. Under the new agreement, HCPCI assumes 50% of the business and pays United a ceding commission of 24% of premium. Annual premiums from the total assumed business approximate $120,000,000. HCPCI will receive 50% of the total premiums.

~~TypTap Insurance Company~~

~~TypTap Insurance Company was organized by HCI Group, Inc.~~Reinsurance and approved by the Florida Office of Insurance Regulation in January 2016 to transact insurance business in the state of Florida. TypTap began writing standalone flood coverage to Florida homeowners in March 2016.

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

~~Reinsurance~~other auxiliary operations

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

~~Other Operations~~

~~Real Estate~~Property and Casualty Insurance

Our ~~real estate operations consist of multiple properties we own~~subsidiary TTIG currently has four subsidiaries: TypTap Insurance Company (“TypTap”), TypTap Management Company, Exzeo USA, Inc., and ~~operate. Properties used~~Cypress Tech Development Company which also owns Exzeo Software Private Limited, a subsidiary domiciled in ~~operations consist~~India. TTIG is primarily engaged in the property and casualty insurance business and is currently using in-house developed technology to collect and analyze claims and other supplemental data to generate savings and efficiency for its insurance operations.

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 44,585 at June 30, 2021. TypTap has been successful in using internally developed proprietary technology to underwrite, select and write policies efficiently in Florida. As of July 26, 2021, TypTap has been approved to offer homeowners coverage in 15 states outside of Florida. In addition to the expansion in TypTap business, we also expect future growth from the United policies assigned to TypTap through the renewal rights agreement acquired by HCI.

In connection with the aforementioned new quota share agreement with United, TypTap assumes 50% of the business. TypTap will receive approximately $60,000,000 of annual premiums and pays a ~~secondary insurance operations site in Ocala, Florida. Properties held as investments include two retail shopping centers and a combined 24 acres~~ceding commission of ~~waterfront property where two marinas and one restaurant are located.~~24% 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.~~device. The operations, which are in Tampa, Florida and Noida, India, are focused on developing cloud-based, innovative products or 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~~SAMS^TM, ~~TypTap~~^TM,~~SAMS~~^TM,~~Exzeo~~Harmony, AtlasViewer and ClaimColony^®,~~Atlas Viewer~~^TM~~, and~~ ~~CasaClue~~^TM.

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 a secondary 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 for a reportable segment comprise the operations of this segment.

Recent Events

On ~~October 17, 2017, we acquired commercial real estate in Tampa, Florida for $9,215,000, including acquisition-related costs. The acquired assets primarily consisted of land, building andin-place~~ ~~lease agreements.~~

~~On October 19, 2017,~~July 7, 2021, 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 17, 2021 to stockholders of record on ~~November 17, 2017.~~

August 20, 2021.

RESULTS OF OPERATIONS

The following table summarizes our results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (dollar amounts in thousands, except per share amounts):

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2017 2016 2017 2016
Revenue

Gross premiums earned
   $ 88,669 $ 92,542 $ 270,376 $ 286,273
Premiums ceded
   (44,705 ) (29,242 ) (101,529 ) (105,998 )


Net premiums earned
   43,964 63,300 168,847 180,275
Net investment income
   2,878 2,785 8,522 6,000
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 )
Policy fee income
   905 972 2,721 2,967
Gain on repurchases of convertible senior notes
   —   —   —   153
Gain on bargain purchase
   —   2,071 —   2,071
Other income
   369 321 1,207 1,151


Total revenue
   47,490 69,808 182,783 192,075


Expenses

Losses and loss adjustment expenses
   89,231 25,909 142,425 79,261
Policy acquisition and other underwriting expenses
   9,926 10,536 29,645 32,525
Salaries and wages
   4,605 5,945 15,051 17,009
Interest expense
   4,408 2,672 12,328 8,112
Loss on repurchases of senior notes
   —   —   743 —
Other operating expenses
   5,338 4,717 15,162 14,213


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


(Loss) income before income taxes
   (66,018 ) 20,029 (32,571 ) 40,955
Income tax (benefit) expense
   (25,472 ) 8,696 (13,587 ) 16,542


Net (loss) income
   $ (40,546 ) $ 11,333 $ (18,984 ) $ 24,413


Ratios to Net Premiums Earned:

Loss Ratio
   202.96 % 40.93 % 84.35 % 43.97 %
Expense Ratio
   55.22 % 37.71 % 43.19 % 39.86 %


Combined Ratio
   258.18 % 78.64 % 127.54 % 83.83 %


Ratios to Gross Premiums Earned:

Loss Ratio
   100.63 % 28.00 % 52.68 % 27.69 %
Expense Ratio
   27.38 % 25.79 % 26.97 % 25.10 %


Combined Ratio
   128.01 % 53.79 % 79.65 % 52.79 %


(Loss) Earnings Per Share Data:

Basic
   $ (4.44 ) $ 1.17 $ (2.05 ) $ 2.48


Diluted
   $ (4.44 ) $ 1.10 $ (2.05 ) $ 2.41

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Revenue
Gross premiums earned	$	139,440		$	107,803		$	270,382		$	200,168
Premiums ceded		(46,436	)		(34,354	)		(89,535	)		(65,073	)
Net premiums earned		93,004			73,449			180,847			135,095
Net investment income		2,635			1,604			7,229			1,412
Net realized investment gains (losses)		2,607			1,435			3,720			(809	)
Net unrealized investment gains (losses)		1,489			2,884			1,220			(1,921	)
Credit losses on investments		—			(87	)		—			(526	)
Policy fee income		992			847			1,962			1,676
Other income		777			585			1,400			1,170
Total revenue		101,504			80,717			196,378			136,097
Expenses
Losses and loss adjustment expenses		55,917			39,843			101,668			67,921
Policy acquisition and other underwriting expenses		23,169			12,991			46,234			24,817
General and administrative personnel expenses		10,546			9,731			20,196			18,098
Interest expense		2,000			3,020			4,079			5,990
Loss on repurchases of convertible senior notes		—			150			—			150
Other operating expenses		4,775			3,159			9,002			6,641
Total expenses		96,407			68,894			181,179			123,617
Income before income taxes		5,097			11,823			15,199			12,480
Income tax expense		1,267			2,887			4,524			2,997
Net income		3,830			8,936			10,675			9,483
Net income attributable to noncontrolling interests		(1,913	)		—			(2,610	)		—
Net income after noncontrolling interests	$	1,917		$	8,936		$	8,065		$	9,483
Ratios to Net Premiums Earned:
Loss Ratio		60.12	%		54.25	%		56.22	%		50.28	%
Expense Ratio		43.54	%		39.55	%		43.97	%		41.23	%
Combined Ratio		103.66	%		93.80	%		100.19	%		91.51	%
Ratios to Gross Premiums Earned:
Loss Ratio		40.10	%		36.96	%		37.60	%		33.93	%
Expense Ratio		29.04	%		26.95	%		29.41	%		27.82	%
Combined Ratio		69.14	%		63.91	%		67.01	%		61.75	%
Earnings Per Share Data:
Basic	$	0.25		$	1.16		$	1.02		$	1.23
Diluted	$	0.24		$	1.08		$	0.98		$	1.23

Comparison of the Three Months ~~ended September~~Ended June 30, ~~2017 with~~2021 to the Three Months ~~ended September~~Ended June 30, ~~2016~~2020

Our results of operations for the three months ended ~~September~~June 30, ~~2017 reflected~~2021 reflect net ~~losses allocable to common stockholders~~income of approximately ~~$40,546,000,~~$3,830,000 or ~~$4.44 loss~~$0.24 diluted earnings per share, compared with ~~net income of~~ approximately ~~$11,333,000,~~$8,936,000 or ~~$1.10~~$1.08 diluted earnings per ~~diluted~~ share, for the three months ended ~~September~~June 30, ~~2016.~~2020. The quarter-over-quarter decrease in net income was primarily due to a ~~$63,322,000~~$16,074,000 increase in losses and loss adjustment expenses, ~~which included $54,000,000 of estimated net losses from Hurricane Irma,~~a $10,178,000 increase in policy acquisition and other underwriting expenses, and a ~~$15,463,000~~$1,616,000 increase in ~~ceded premiums, which included $12,464,000 of adjustments to ceded premiums related to retrospective provisions. The losses in the quarter were~~other operating expenses, offset by ~~$25,472,000~~an increase in net premiums earned of $19,555,000, an $895,000 increase in income ~~tax benefits.~~from our investment portfolio (consisting of net investment income/loss and net realized and unrealized gains/losses), and a $1,020,000 decrease in interest expense.

Revenue

~~Revenue~~

Gross Premiums Earned on a consolidated basis for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 were approximately ~~$88,669,000~~$139,440,000 and ~~$92,542,000,~~$107,803,000, 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 $100,440,000 for the three months ended ~~September~~June 30, ~~2017~~2021 compared to $89,423,000 for the three months ended June 30, 2020. The increase included $23,707,000 of gross premiums earned from the United insurance policies assumed. TypTap’s gross premiums earned were $39,000,000 versus $18,380,000 for the same comparative periods 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, 2021 and 2020 were approximately ~~$44,705,000~~$46,436,000 and ~~$29,242,000,~~$34,354,000, respectively, representing ~~50.4%~~33.3% and ~~31.6%~~31.9%, respectively, of gross premiums earned. The ~~$15,463,000~~$12,082,000 increase was primarily attributable to higher reinsurance costs for the ~~adjustment~~2021 contract year due to an increased overall reinsurance coverage amount as a result of ~~the previously accrued benefits~~premium growth and ~~deferred reinsurance~~expansion. Reinsurance costs were offset by a reduction in premiums ~~related~~ceded attributable to retrospective provisions under ~~certain~~multi-year reinsurance ~~contracts due to increased losses caused by Hurricane Irma.~~agreements.

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~~ For the three months ended ~~September~~June 30, ~~2017~~2021, premiums ceded included a decrease of $3,575,000 related to retrospective provisions compared with a decrease of $3,240,000 for the three months ended June 30, 2020. 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, 2021 and 2020 totaled approximately ~~$50,168,000~~$138,542,000 and ~~$64,022,000,~~$137,527,000, 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~~increase in ~~2017~~2021 resulted from ~~the~~an increase in gross premiums ~~ceded during~~written from the ~~period as described above.~~United insurance policies assumed and the growth of TypTap business. We had approximately ~~141,000~~150,000 policies in force at ~~September~~June 30, ~~2017~~2021 (excluding policies assumed from United) as compared with approximately ~~145,000~~164,000 policies in force at ~~September~~June 30, ~~2016.~~2020.

Net Premiums Earned for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 were approximately ~~$43,964,000~~$93,004,000 and ~~$63,300,000,~~$73,449,000, 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~~2021 and ~~2016~~2020 (amounts in thousands):


	Three Months Ended						Three Months Ended
	September 30,						June 30,
	2017			2016			2021			2020
Net Premiums Written	$	50,168		$	64,022		$	138,542		$	137,527
Increase in Unearned Premiums		(6,204	)		(722	)		(45,538	)		(64,078	)

Net Premiums Earned	$	43,964		$	63,300		$	93,004		$	73,449

Net ~~Other-Than-Temporary Impairment Losses~~Investment Income for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016 were~~2020 was approximately ~~$474,000~~$2,635,000 and ~~$224,000,~~$1,604,000, respectively. ~~During the third quarter of 2017, we recognized impairment losses specific~~The $1,031,000 increase was primarily attributable to ~~four equity securities. These equity securities were impaired because each security had been~~a $2,074,000 increase in income from limited partnership and real estate investments, offset by 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~~$859,000 decrease in interest income from fixed-maturity security ~~and four equity securities.~~

~~Expenses~~

~~Our~~~~Losses and Loss Adjustment Expenses~~~~amounted~~investments. See Net Investment Income (loss) under Note 5 -- “Investments” to ~~approximately $89,231,000 and $25,909,000~~ our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

Net Realized Investment Gains for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020 were approximately $2,607,000 and $1,435,000, respectively. ~~During~~The $1,172,000 increase was primarily attributable to net gains from selling equity securities.

Net Unrealized Investment Gains for the ~~third quarter~~three months ended June 30, 2021 and 2020 were approximately $1,489,000 and $2,884,000, respectively. The decrease was primarily due to the sales of ~~2017, our~~equity securities with aggregate net gains during the quarter.

Expenses

Our consolidated Losses and Loss Adjustment Expenses amounted to approximately $55,917,000 and $39,843,000 for the three months ended June 30, 2021 and 2020, respectively. HCPCI losses and loss adjustment expenses ~~included $54,000,000~~were $39,641,000 for the three months ended June 30, 2021 compared to $31,445,000 for the three months ended June 30, 2020. The increase was primarily due to $12,564,000 of ~~net estimated~~ losses ~~related~~attributable to Hurricane Irma and approximately $2,500,000 of additional losses related to Hurricane Matthew. In addition, we continued to strengthen our loss reserves in response to trends involving assignment of insurance benefits and related litigation. Our 2016 lossesthe United policies assumed. Losses and loss adjustment expenses ~~reflected initially estimated losses from Hurricane Hermine~~for TypTap were $16,440,000 versus $8,398,000 for the same comparative periods. The increase was attributable to the greater number of ~~approximately $2,500,000.~~TypTap policies in force. 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~~2021 and ~~2016 of~~2020 were approximately ~~$9,926,000~~$23,169,000 and ~~$10,536,000,~~$12,991,000 on a consolidated basis, respectively, and primarily reflect the amortization of deferred acquisition costs such as commissions payable to agents for production and renewal of policies, and premium taxes related to the policies that have renewed. The $610,000 decrease 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~~taxes. Policy acquisition expenses for HCPCI insurance operations were $15,470,000 for the three months ended ~~September~~June 30, ~~2017~~2021 compared to $9,936,000 for the three months ended June 30, 2020. The increase was due to amortization of increased costs associated with the policies assumed from United. TypTap Group policy acquisition expenses were $7,574,000 versus $3,083,000 for the same comparative periods, 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.

General and ~~2016~~Administrative Personnel Expenses for the three months ended June 30, 2021 and 2020 were approximately ~~$4,605,000~~$10,546,000 and ~~$5,945,000,~~$9,731,000, 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 $815,000 was primarily attributable to higher stock-based compensation expense, an increase in the headcount of temporary and full-time employees, merit increases for ~~senior management. As~~non-executive employees effective in late February 2021, and was offset by a reversal of September 30, 2017, we had approximately 250 employees located at our offices 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.accrued employee bonuses.

~~Interest~~Income Tax Expense for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 was approximately ~~$4,408,000~~$1,267,000 and $2,672,000, respectively. The increase was primarily attributable to the net increase 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.

~~Income Tax Benefit~~ ~~for the three months ended September 30, 2017 was approximately $25,472,000~~$2,887,000, respectively, for state, federal, and foreign income taxes resulting in an effective tax rate of ~~38.6%. This compared with approximately $8,696,000 of income tax expense~~24.9% for ~~the three months ended September 30, 2016, resulting in an effective tax rate of 43.4%.~~

2021 and 24.4% for 2020.

Ratios:

The loss ratio applicable to the three months ended ~~September~~June 30, ~~2017~~2021 (losses and loss adjustment expenses incurred related to net premiums earned) was ~~203.0%~~60.1% compared with ~~40.9%~~54.2% for the three months ended ~~September~~June 30, ~~2016.~~2020. The increase was primarily due to the increase in ~~2017 was attributable to~~ losses ~~related to Hurricane Irma~~ and ~~decreased~~loss adjustment expenses, offset in part by the increase in net premiums earned.

The expense ratio applicable to the three months ended ~~September~~June 30, ~~2017~~2021 (defined as underwriting expenses, ~~salaries~~general and ~~wages,~~administrative personnel expenses, interest and other operating expenses related to net premiums earned) was ~~55.2%~~43.6% compared with ~~37.7%~~39.6% for the three months ended ~~September~~June 30, ~~2016.~~2020. The increase in our expense ratio was primarily attributable to the increase in policy acquisition, underwriting and personnel expenses, offset by the increase in net premiums earned and the decrease in interest expense.

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~~2021 was ~~258.2%~~103.7% compared with ~~78.6%~~93.8% for the three months ended ~~September~~June 30, ~~2016.~~2020. The increase in 2021 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~~2021 was ~~128.0%~~69.1% compared with ~~53.8%~~63.9% for the three months ended ~~September~~June 30, ~~2016.~~2020. The increase in 2021 was ~~primarily~~ attributable to the ~~combined impact of decreased gross premiums earned, increased operating expenses and losses from Hurricane Irma.~~factors described above.

Comparison of the ~~Nine~~Six Months ~~ended September~~Ended June 30, ~~2017 with~~2021 to the ~~Nine~~Six Months ~~ended September~~Ended June 30, ~~2016~~2020

Our results of operations for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 reflect net ~~losses allocable to common stockholders~~income of approximately ~~$18,984,000,~~$10,675,000 or ~~$2.05 loss~~$0.98 diluted earnings per share, compared with ~~net income of~~ approximately ~~$24,413,000,~~$9,483,000 or ~~$2.41~~$1.23 diluted earnings per ~~diluted~~ share, for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020. The period-over-period ~~decrease~~increase in net income was primarily due to an increase in net ~~estimated~~premiums earned of $45,752,000, a $14,013,000 increase in income from our investment portfolio (consisting of net investment income/loss and net realized and unrealized gains/losses), offset by a $33,747,000 increase in losses ~~of approximately $54,000,000 resulting from Hurricane Irma.~~and loss adjustment expenses and a $21,417,000 increase in policy acquisition and other underwriting expenses.

Revenue

Gross Premiums Earned on a consolidated basis for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 were approximately ~~$270,376,000~~$270,382,000 and ~~$286,273,000,~~$200,168,000, 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 $202,571,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 compared to $165,193,000 for the six months ended June 30, 2020. The increase included $44,357,000 of gross premiums earned from the United insurance policies assumed. TypTap’s gross premiums earned were $67,811,000 versus $34,975,000 for the same comparative periods with the increase due to a greater number of policies in force from the growth in TypTap’s business.

Premiums Ceded for the six months ended June 30, 2021 and ~~2016~~2020 were approximately ~~$101,529,000~~$89,535,000 and ~~$105,998,000,~~$65,073,000, respectively, representing ~~37.6%~~33.1% and ~~37.0%~~32.5%, respectively, of gross premiums earned. The ~~percentage~~$24,462,000 increase ~~from the corresponding period in 2016~~ was primarily attributable to higher reinsurance costs for the ~~adjustments related~~2021 contract year due to ~~the~~increased overall reinsurance coverage amount as a result of premium growth and expansion. Reinsurance costs were offset by a reduction in premiums ceded attributable to retrospective provisions under ~~certain~~multi-year reinsurance ~~contracts offset in part by lower reinsurance costs as described earlier.~~ agreements.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, premiums ceded included a ~~net increase~~decrease of ~~approximately $5,509,000~~$8,255,000 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.~~$5,760,000 for the six months ended June 30, 2020. 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~~2021 and ~~2016~~2020 totaled approximately ~~$199,218,000~~$221,291,000 and ~~$202,307,000,~~$183,326,000, respectively. The ~~decrease~~$37,965,000 increase in ~~2017~~2021 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~~2021 and ~~2016~~2020 were approximately ~~$168,847,000~~180,847,000 and ~~$180,275,000,~~$135,095,000, 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~~2021 and ~~2016~~2020 (amounts in thousands):


	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2017			2016			2021			2020
Net Premiums Written	$	199,218		$	202,307		$	221,291		$	183,326
Increase in Unearned Premiums		(30,371	)		(22,032	)		(40,444	)		(48,231	)

Net Premiums Earned	$	168,847		$	180,275		$	180,847		$	135,095

Net Investment Incomefor the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 was approximately ~~$8,522,000~~$7,229,000 and ~~$6,000,000,~~$1,412,000, respectively. The $5,817,000 increase ~~in 2017~~ was primarily ~~due~~attributable to ~~$1,724,000 of income~~losses from limited partnership investments ~~compared with $54,000~~in 2020 due to the economic effects of ~~income during~~ the ~~corresponding period~~COVID-19 pandemic and a net gain of $2,790,000 recognized in ~~2016.~~2021 for a legal settlement received from The Kroger Co. See ~~Note 4 — “Investments” under~~Net Investment Income (loss) under Note 5 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form10-Q.

Net ~~Other-Than-Temporary Impairment Losses~~Unrealized Investment Gains for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016~~2021 were approximately ~~$864,000 and $1,441,000, respectively. During~~$1,220,000 versus net unrealized losses of $1,921,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017, we recognized impairment losses specific to two fixed-maturity securities and five equity securities.~~2020. The ~~fixed-maturity securities were subject to impairment resulting from our intention to sell these securities before their recovery. Five~~net unrealized investment loss for the six months ended June 30, 2020 reflects a deterioration in the fair value of equity securities ~~were impaired as a result of~~caused by the length of time each security had been in an unrealized loss position with no near-term prospect of recovery. During the nine months ended September 30, 2016, we recognized impairment losses specific to two fixed-maturity securities and 16 equity securities.COVID-19 pandemic.

~~Gain on Repurchases of Convertible Senior Notes~~ for the nine months ended September 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.

~~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

Our consolidated Losses and Loss Adjustment Expensesamounted to approximately ~~$142,425,000~~$101,668,000 and ~~$79,261,000, respectively,~~$67,921,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 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~~2020, respectively. HCPCI losses and loss adjustment expenses were ~~impacted by weather-related events including Hurricane Hermine.~~$73,080,000 for the six months ended June 30, 2021 compared to $53,283,000 for the six months ended June 30, 2020. The increase was primarily due to $23,509,000 of losses attributable to the United policies assumed. Losses and loss adjustment expenses for TypTap were $28,752,000 versus $14,638,000 for the same comparative periods. The increase was attributable to the greater number of TypTap policies in force. 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~~2021 and ~~2016~~2020 were approximately ~~$29,645,000~~$46,234,000 and ~~$32,525,000,~~$24,817,000 on a consolidated basis, respectively. Policy acquisition expenses for HCPCI insurance operations were $33,041,000 for the six months ended June 30, 2021 compared to $18,299,000 for the six months ended June 30, 2020. The increase was due to amortization of increased costs associated with the policies assumed from United. TypTap Group policy acquisition expenses were $13,252,000 versus $6,574,000 for the same comparative periods, 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.

General and Administrative Personnel Expenses for the six months ended June 30, 2021 and 2020 were approximately $20,196,000 and $18,098,000, respectively. The ~~$2,880,000 decrease from the corresponding period in 2016~~period-over-period increase of $2,098,000 was primarily attributable to ~~decreased commissions~~higher stock-based compensation expense, 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 2021, and ~~the effect~~was offset by a reversal of ~~the rate decrease.~~accrued employee bonuses.

~~Salaries and Wages~~Interest Expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016 were~~2020 was approximately ~~$15,051,000~~$4,079,000 and ~~$17,009,000,~~$5,990,000, respectively. The ~~$1,958,000~~ decrease from the corresponding period in 2016 was primarily attributable to the capitalization of approximately $1,360,000 of payroll costs related to a software development project for internal use and lower bonuses for senior management.

~~Loss on repurchases of Senior Notes~~ ~~for the nine months ended September 30, 2017 was approximately $743,000, resulting~~resulted from the early ~~extinguishment~~adoption of ~~our 8% Senior Notes. See~~ASC 2020-06 “Debt - Debt with Conversion and Other Options and Derivatives and Hedging – Contracts in Entity’s own Equity.” As described in Note ~~8 — “Long-Term Debt” under 8% Senior Notes~~2 -- “Summary of Significant Accounting Policies” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form~~10-Q.~~ 10-Q, ASU 2020-06 allows the reversal of discounts previously recorded to account for the cash conversion feature of convertible debt instruments. Our 4.25% convertible senior notes contain such a cash conversion feature and accordingly the discount was reversed January 1, 2021. As a result, interest expense no longer includes amounts representing the amortization of the discount.

Income Tax ~~Benefit~~Expensefor the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and 2020 was ~~$13,587,000~~approximately $4,524,000 and $2,997,000, respectively, 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%~~29.8% for ~~2017~~2021 and ~~40.4%~~24.0% for ~~2016.~~2020. The increase in the effective tax rate was primarily due to the non-deductibility of certain executive compensation.

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.~~2021 (losses and loss adjustment expenses incurred related to net premiums earned) was 56.2% compared with 50.3% for the six months ended June 30, 2020. The increase was primarily due to the increase in losses and loss adjustment expenses, ~~described above combined with the decrease in net premiums earned which was driven in large part~~offset 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~~2021 was ~~43.2%~~44.0% compared with ~~39.8%~~41.2% for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020. The increase in our expense ratio iswas primarily attributable to the ~~decrease~~increase in policy acquisition, underwriting and personnel expenses, offset by the increase in net premiums earned ~~as described above.~~and the decrease in interest expense.

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~~2021 was ~~127.5%~~100.2% compared with ~~83.8%~~91.5% for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020. The increase was attributable to the factors described above.

2020. The increase in 2021 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, typically occur during the period from June 1^st through November 30^th of each year. Winter storms in the northeast usually occur during the period between December 1^st and March 31^st of each year. Also, with our reinsurance treaty year typically effective June 1^st 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 1^st 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, 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:~~2021:


		Maturity Date	Interest Payment Due Date
~~3.875% Convertible Senior Notes~~		~~March 2019~~	~~March 15 and September 15~~
4.25% Convertible ~~Senior Notes~~senior notes		March 2037	March 1 and September 1
~~4% Promissory Note~~ 3.75% Callable promissory note	Through September 2036	~~Through February 2031~~	1^st day of each month
~~3.75% Callable~~ 4.55% Promissory ~~Note~~note	Through August 2036	~~Through September 2036~~	1^st day of each month
~~3.95%~~ 3.90% Promissory ~~Note~~note	Through April 2032	~~Through February 2020~~	17 1^thst day of each month
Finance leases	Through August 2023	Various
Revolving credit facility	Through December 2023	January 1, April 1, July 1, October 1

See Note ~~8 —~~11 -- “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~~five private equity funds managed by their general partners. ~~These~~Three of these funds have unexpired capital commitments which are callable at the discretion of the fund’s general partner for funding new investments or expenses of the fund. Although capital commitments for the remaining two funds have expired, the general partners may request additional funds under certain circumstances. At ~~September~~June 30, ~~2017,~~2021, there was an aggregate unfunded capital balance of ~~$15,931,000.~~$9,302,000. SeeLimited Partnership Investments under Note ~~4 —~~5 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form10-Q for additional information.

Real Estate Investments

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

~~In December 2016, our Board of Directors approved~~We currently have a~~one-year~~ ~~plan to repurchase up to $20,000,000 of common shares under~~ 90% equity interest in FMKT Mel JV, LLC, a Florida limited liability company for 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 30, 2017, there was approximately $13,818,000 available underare not the ~~plan. See Note 14 — “Stockholders’ Equity” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form10-Q.~~

~~Real Estate Development and Acquisition~~

We may contemplate the acquisition of land for future development through one of our existing joint ventures. Although we have no outstanding commitment to fund any future project and we expect to finance future development projects with cash fromprimary beneficiary. FMKT Mel JV’s real estate ~~operations and through property financings, we may be required to make additional capital contributions when warranted.~~

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.portfolio consists of outparcels for ground lease or sale. We have the option to ~~acquire~~take full ownership of these outparcels by acquiring the ~~joint venture partner’s interest in this project.~~remaining 10% interest. Alternatively, we may sell these outparcels and allocate the profits from the sale before liquidating FMKT Mel JV.

Sources and Uses of Cash

Cash Flows for the ~~Nine months ended September~~Six Months Ended June 30, ~~2017~~2021

Net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 was approximately ~~$51,393,000,~~$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 ~~$90,959,000~~$37,805,000 was primarily due to the ~~purchases~~proceeds from sales of~~available-for-sale~~ fixed-maturity and ~~trading~~equity securities of ~~$141,277,000,~~$71,191,000, the proceeds from redemptions and maturities of fixed-maturity securities of $16,677,000, and distributions received from limited partnership investments of ~~$2,623,000, and the real estate investments of $2,095,000,~~$2,653,000, offset by the ~~proceeds from sales~~purchases of~~available-for-sale~~ fixed-maturity and equity securities of ~~$35,367,000, the distributions of $11,758,000 from limited partnership investments~~$51,378,000, and the ~~redemptions~~purchases of property and ~~repayments~~equipment of ~~fixed-maturity securities of $8,786,000.~~$1,275,000. Net cash provided by financing activities totaled ~~$51,442,000,~~$61,538,000, which ~~was primarily due to the~~consisted of net proceeds of $93,738,000 from ~~issuance of 4.25% Convertible Senior Notes of $143,750,000,~~Centerbridge for investment in TTIG, offset by ~~$40,250,000 used in the repurchases of our 8% senior notes, $4,975,000 of related underwriting and issuance costs, $36,825,000 used in our share repurchases and $9,724,000~~$6,452,000 of net cash dividend ~~payments.~~

payments, net repayment of our revolving credit facility of $23,750,000, and $1,308,000 used in share repurchases.

Cash Flows for the ~~Nine months ended September~~Six Months Ended June 30, ~~2016~~2020

Net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2020 was approximately ~~$91,893,000,~~$109,988,000, which consisted primarily of cash received from net premiums written, reinsurance recoveries (of approximately $32,597,000) and $28,745,000 of net cash receipts from Anchor less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Due to the inclusion of the cash receipt from Anchor, net cash provided by operating activities was higher than usual. Net cash ~~used in~~provided by investing activities of ~~$46,875,000~~$85,995,000 was primarily due to the ~~purchases~~proceeds from sales of~~available-for-sale~~ fixed-maturity and equity securities of ~~$92,491,000,~~$90,641,000, and the proceeds from redemptions and maturities of fixed-maturity securities of $52,594,000, offset by the purchases of fixed-maturity and equity securities of $48,673,000, the purchase of real estate investments of $2,522,000, limited partnership investments of ~~$4,670,000, offset by~~$1,470,000, and the ~~proceeds from sales~~purchases of~~available-for-sale~~ ~~securities~~ property and equipment of ~~$51,570,000.~~$5,349,000. Net cash used in financing activities totaled ~~$20,868,000,~~$2,686,000, which ~~was primarily due~~consisted of $9,496,000 used to ~~$11,347,000 used in the repurchases of our convertible senior notes, $18,023,000 used in our share repurchase plan and $8,807,000~~repay a 3.95% promissory note, $6,162,000 of net cash dividend payments, $4,459,000 used to repurchase our 4.25% convertible senior notes, and $6,467,000 used in our share repurchases, offset by ~~$18,200,000 in aggregate~~the proceeds from ~~the~~ issuance of ~~two~~a 3.90% promissory ~~notes.~~note of $10,000,000 and draws from our revolving credit facility of $14,000,000.

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,~~2021, we had ~~$320,128,000~~$91,338,000 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. To maximize the gains from fixed-maturity investments in a low interest rate environment, we have decreased our holdings in fixed-maturity securities since the beginning of 2020.

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,~~2021, 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 —~~21 -- “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, 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 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~~2021, $154,219,000 of the total ~~$344,672,000~~$203,785,000 we have reserved for losses and loss adjustment expenses is attributable to our estimate of IBNR. The remaining ~~$130,847,000~~$49,566,000 relates to known cases which have been reported but not yet fully settled in which case we have established a reserve based on currently available information and our best estimate of the cost to settle each claim. At ~~September~~June 30, ~~2017, $16,688,000~~2021, $36,469,000 of the ~~$130,847,000~~$49,566,000 in reserves for known cases relates to claims incurred during prior years.

Our Reserves ~~increased~~decreased from ~~$70,492,000~~$212,169,000 at December 31, ~~2016~~2020 to ~~$344,672,000~~$203,785,000 at ~~September~~June 30, ~~2017.~~2021. The ~~$274,180,000 increase in our Reserves~~$8,384,000 decrease is comprised of ~~$297,047,000 in reserves related to claims occurring in the 2017 loss year offset by~~ reductions in our Reserves of ~~$13,765,000~~$22,222,000 specific to Hurricane Irma, Hurricane Michael and Hurricane Sally, and reductions in our non-catastrophe Reserves of $36,730,000 for ~~2016~~2020 and ~~$9,102,000~~$15,059,000 for ~~2015~~2019 and prior loss ~~years.~~years, offset by $65,627,000 in reserves established for the 2021 loss year. The ~~$297,047,000 in~~ Reserves established for ~~2017~~2021 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.~~2021. The decrease of ~~$22,867,000~~$74,011,000 specific to our ~~2016~~2020 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~~2021 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~~Two of our 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. 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, 2016,2021 and 2020, we accrued benefits of ~~$2,490,000.~~$3,575,000 and $3,240,000, 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,2021 and 2020, we accrued benefits of ~~$11,120,000 for the nine months ended September 30, 2016. For the nine months ended September 30, 2016, we~~$8,255,000 and $5,760,000, 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,~~2021, we had ~~$1,969,000~~$455,000 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~~agreement. In June 2021, we collected $18,720,000 of premium refund from a reinsurer for the ~~period~~reinsurance contract that ~~the increased coverage is applicable. At December~~ended May 31, ~~2016, we had $5,810,000 of accrued benefits and $2,152,000 of ceded premiums deferred related to these agreements.~~2021.

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

Stock-Based Compensation Expense

We account for stock-based compensation using a recognition method based on fair value. For restricted stock with service based vesting conditions, fair value is determined by the market price of the stock on the grant date. Compensation expense is then recognized ratably over the requisite or derived service period of the award. Restricted stock awards with market based vesting conditions require the use of a Monte Carlo simulation model with the assistance of a third-party valuation specialist to estimate the fair value and derived service period of the award. We then recognize the compensation expense ratably over this derived service period. Determining the appropriate fair value model and calculating the fair value of stock-based awards at the grant date requires considerable judgment, including estimating stock price volatility or derived service periods. We develop our estimates based on historical data and market information.

Acquired Intangible Assets

Acquired intangible assets represent the fair value of consideration we paid and are estimated to pay in exchange for the renewal rights and non-compete intangible assets acquired from the seller. In the renewal rights transaction, we purchased the right, but not the obligation, to offer homeowners insurance coverage to all current policyholders of the seller in certain states on the agreed-upon policy replacement date. The renewal rights agreement also contains a non-compete clause whereby the seller agrees not to offer homeowners insurance policies in these states through a specified date. We record intangible assets based on the fair value of the consideration we paid and are estimated to pay to the seller as provided in the renewal rights agreement with the seller. We engaged a third-party valuation specialist to assist with the allocation of the renewal rights and non-compete intangible assets acquired. Intangible assets are amortized over their estimated useful lives. Intangible assets are evaluated periodically to ensure that there is no impairment to carrying value and no change required in the amortization period.

Warrants and Redeemable Noncontrolling Interest

In the capital investment transaction completed by TTIG with a fund associated with Centerbridge Partners, L.P., TTIG issued 10,000,000 total shares of Series A Preferred Stock and HCI issued warrants to purchase 750,000 shares of HCI common stock, in exchange for proceeds of $100,000,000. Both the fair value and expected term of the warrants were estimated with assistance from a third-party valuation specialist using a Monte Carlo simulation model. Total proceeds from the capital investment transaction were allocated using the residual fair value method, first to the warrants issued based on their estimated fair value, with the residual proceeds being allocated to the fair value of Series A Preferred Stock. See Note 18 -- “Redeemable Noncontrolling Interest” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

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 12, 2021. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, there have been no other material changes with respect to any of our critical accounting policies.

RECENT ACCOUNTING PRONOUNCEMENTS

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 3 to our Notes to Unaudited Consolidated Financial Statements.

ITEM 3 –QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our investment ~~portfolio~~portfolios at ~~September~~June 30, ~~2017~~2021 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~~2021 (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	)%	$	43,367	$	(3,047	)		-6.56	%
200 basis point increase		240,087		(16,015	)		(6.25	)%		44,383		(2,031	)		-4.38	%
100 basis point increase		248,092		(8,010	)		(3.13	)%		45,398		(1,016	)		-2.19	%
100 basis point decrease		264,115		8,013			3.13	%		47,139		725			1.56	%
200 basis point decrease		271,506		15,404			6.02	%		47,440		1,026			2.21	%
300 basis point decrease		275,881		19,779			7.72	%		47,476		1,062			2.29	%

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~~2021 (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	$	681		2.0	$	698		2.0
AA+, AA, AA-		70,830		28		71,256		28		16,249		36.0		16,389		35.0
A+, A, A-		93,220		37		93,630		37		13,265		29.0		13,467		29.0
BBB+, BBB, BBB-		57,523		23		59,024		23		12,145		27.0		12,948		28.0
BB+, BB, BB-		9,446		4		9,647		4		2,050		5.0		2,260		5.0
B+, B, B-		6,133		2		6,130		2
CCC+, CC and Not rated		13,489		5		13,888		5		641		1.0		652		1.0

Total	$	253,162		100	$	256,102		100	$	45,031		100.0	$	46,414		100.0

Equity Price Risk

Our equity investment portfolio at ~~September~~June 30, ~~2017~~2021 included common stocks, perpetual preferred stocks, mutual funds and 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~~2021 (amounts in thousands):

							% of Total
					Estimated		Estimated
	Estimated Fair Value		% of Total Estimated Fair Value		Fair Value		Fair Value
Stocks by sector:
Financial	$	26,121		41	$	11,750		27
Industrial		5,378		8
Technology						3,362		7
Consumer		4,996		8		4,167		9
Energy		3,281		5
Other (1)		6,467		10		4,678		10
						23,957		53
		46,243		72

Mutual funds and Exchange traded funds by type:
Mutual funds and exchange traded funds by type:
Debt		16,840		27		20,380		46
Equity		943		1		587		1

		17,783		28

Total	$	64,026		100	$	44,924		100

~~(1)~~

(1)

Represents an aggregate of less than 5% sectors.

Foreign Currency Exchange Risk

At ~~September~~June 30, ~~2017,~~2021, 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~~2021 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~~With the exception of the item described below, there have been no material changes from 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 12, 2021.

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

(a)

Sales of Unregistered Securities and Use of Proceeds

On January 18, 2021, we issued 100,000 shares of our common stock to United in exchange for the renewal rights and non-compete agreement.

~~(a) Sales~~On February 26, 2021, warrants to purchase 750,000 shares of ~~Unregistered Securities and Use of Proceeds~~

~~All information related~~our common stock were issued to ~~sales of unregistered securities had been reported~~the lead investor in ~~a current report on Form8-K.~~our subsidiary’s capital investment transaction.

~~(b) Repurchases of Securities~~

(b)

Repurchases of Securities

The table below summarizes the number of common shares ~~repurchased during~~surrendered by employees to satisfy payroll tax liabilities associated with the ~~three months ended September 30, 2017 under a share repurchase plan~~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		or Programs
April 30, 2021		—	$	—		—	$	—
May 31, 2021		16,822	$	76.55		—	$	—
June 30, 2021		—	$	—		—	$	—
		16,822	$	76.55		—

~~(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.~~

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~~2021, our insurance subsidiaries paid ~~a $18,000,000 dividend~~dividends of $27,400,000 to HCI.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

~~ITEM 3~~

–~~DEFAULTS UPON SENIOR SECURITIES~~

None.

ITEM 4 – MINE SAFETY DISCLOSURES

~~ITEM 4~~

–~~MINE SAFETY DISCLOSURES~~

None.

ITEM 5 –OTHER INFORMATION

None.

ITEM 6 – EXHIBITS

~~ITEM 6~~

–~~EXHIBITS~~

The following documents are filed as part of this report:

EXHIBIT
~~EXHIBIT~~ NUMBER		DESCRIPTION

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		~~Bylaws.~~Bylaws, with amendments. Incorporated by reference to the correspondingly numbered exhibit to our Form~~10-Q~~ 8-Q 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~~ 4.6		~~Amendment, dated~~Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as ~~of April 18, 2017, to the Rights Agreement, by and between the Company and American Stock Transfer & Trust Company, LLC, dated as of October 18, 2013.~~amended. Incorporated by reference to ~~Exhibit 4.1~~the corresponding numbered exhibit to our Form~~8-K~~ 10-K filed ~~April 24, 2017.~~March 12, 2021.

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). Incorporated by reference to Exhibit 4.1 to our Form8-K filed December 12, 2013.

4.9		See Exhibits3.1,3.1.1 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.

EXHIBIT
NUMBER		DESCRIPTION

10.5**		Restated HCI Group, Inc. 2012 Omnibus Incentive Plan. Incorporated by reference to Exhibit 99.1 of our Form8-K filed March 23, 2017.



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		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 Form10-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~~(For First Excess Cat) (Arch), 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~~2020, 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 Form10-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~~TypTap 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 Form10-Q filed August ~~3, 2017.~~7, 2020.

~~10.17~~ 10.10		~~Property Catastrophe Excess of Loss~~Reinstatement Premium Protection Reinsurance Contract ~~effective~~(Chubb), effective: June 1, ~~2017~~2020, 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 Form10-Q~~ ~~filed August 3, 2017.~~

~~10.18~~		~~Property Catastrophe Second Event Excess of Loss Reinsurance Contract effective June 1, 2017 issued to Homeowners Choice Property & Casualty~~and TypTap 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.~~7, 2020.

~~10.19~~ 10.11		~~Reinstatement Premium Protection~~Property Catastrophe First Excess of Loss Reinsurance Contract, ~~effective~~effective: June 1, ~~2017~~2020, 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 Form10-Q filed August ~~3, 2017.~~7, 2020



~~10.23~~ 10.12		~~Assumption~~Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat), effective: June 1, 2020, 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 7, 2020.

10.13		Reinstatement Premium Protection Reinsurance Contract (For Working Layer Cat), effective: June 1, 2020, 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 7, 2020.

10.14		Property Catastrophe Excess of Loss Reinsurance Contract, effective: June 1, 2020, 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 7, 2020.

EXHIBIT
NUMBER		DESCRIPTION

10.15		Property Catastrophe First Excess of Loss Reinsurance Contract (Endurance), effective: June 1, 2020, 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 7, 2020.

10.16		Reinstatement Premium Protection Reinsurance Contract (Fidelis), effective: June 1, 2020, 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 7, 2020.

10.17		Property Catastrophe First Excess of Loss Reinsurance Contract, effective: June 1, 2020, 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 7, 2020.

10.18		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat) (Hiscox), effective: June 1, 2020, 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 7, 2020.

10.19		Reinstatement Premium Protection Reinsurance Contract (For Cat Excess) (Hiscox), effective: June 1, 2020, 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 7, 2020.

10.20		Reinstatement Premium Protection Reinsurance Contract (For Working Layer Cat) (Hiscox), effective: June 1, 2020, 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 7, 2020.

10.21		Reinstatement Premium Protection Reinsurance Contract (Horseshoe), effective: June 1, 2020, 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 7, 2020.

10.22		Property Catastrophe Excess of Loss Reinsurance Contract (Munich), effective: June 1, 2020, 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 7, 2020.

EXHIBIT
NUMBER		DESCRIPTION

10.23		Reinstatement Premium Protection Reinsurance Contract (For First Excess Cat), effective: June 1, 2020, 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 7, 2020.

10.24		Reinstatement Premium Protection Reinsurance Contract, effective: June 1, 2020, 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 7, 2020.

10.25		Top Layer Property Catastrophe Excess of Loss Reinsurance Contract, effective: June 1, 2020, 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 7, 2020.

10.26		Reinstatement Premium Protection Reinsurance Contract (Transatlantic), effective: June 1, 2020, 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 7, 2020.

10.27		Endorsement No. 1 to the Flood Catastrophe Excess of Loss Reinsurance Contract, effective: July 1, 2020, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and TypTap Insurance Company by National Liability and Fire Insurance Company. 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 7, 2020.

10.28		Working Layer Catastrophe Excess of Loss Reinsurance Contract, effective: June 1, 2020, 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 7, 2020.

10.29		Reimbursement Contract effective June 1, 2020 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 corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

10.30		Reimbursement Contract effective June 1, 2020 between TypTap Insurance Company and the State Board of Administration which administers the Florida Hurricane Catastrophe Fund. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 7, 2020.

10.31		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.

10.32		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.

EXHIBIT
NUMBER		DESCRIPTION

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.

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 ~~October 15, 2014~~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.

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.

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.

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.

10.44		7th Layer 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.

10.45		Flood 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.

10.46**		Written Description of Non-Employee Director Compensation Arrangement adopted September 9, 2019 establishing compensation of our non-employee directors. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed November 6, 2019.

10.47		Policy Replacement Agreement, dated February 12, 2020, by and between Homeowners Choice Property & Casualty Insurance Company, Inc. and ~~Citizens~~Anchor Property & Casualty Insurance ~~Corporation.~~Company together with Anchor Insurance Managers, Inc. Incorporated by reference to Exhibit ~~10.1~~99.1 of our Form8-K filed ~~January 28, 2015.~~February 14, 2020.

10.28* 10.48**		~~Restricted Stock Agreement dated May 8, 2012 whereby HCI~~TypTap Insurance Group, Inc. ~~(formerly known as Homeowners Choice, Inc.) issued 30,000 shares of restricted common stock to Richard R. Allen.~~2021 Equity Incentive Plan. Incorporated by reference to Exhibit ~~10.28~~10.5 of our Form8-K filed ~~May 10, 2012.~~March 1, 2021.

10.30* 10.49**		Form of Restricted Stock Award Agreement ~~dated May 8, 2012 whereby HCI~~of TypTap Insurance 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~~10.6 of our Form8-K filed ~~May 10, 2012.~~March 1, 2021.

10.34** 10.57		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 of our Form10-Q for the quarter ended March 31, 2014 filed May 1, 2014.

EXHIBIT
~~10.58~~ NUMBER		DESCRIPTION

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 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.



10.90* 10.99**		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 99.1 to our Form8-K filed January 11, 2017.



10.100**		Restricted Stock Award Contract between Mark Harmsworth and HCI Group, Inc. dated December 5, 2016. Incorporated by reference to the corresponding numbered exhibit to our Form10-Q filed August 3, 2017.

~~31.1~~ 10.101**		Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated 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.

EXHIBIT
NUMBER		DESCRIPTION

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

EXHIBIT
NUMBER		DESCRIPTION

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.

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.

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.

10.121		Reimbursement Contract effective June 1, 2021 issued to TypTap Insurance Company by the State Board of Administration of the State of Florida.

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.

10.123		Multi-Year 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.

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.

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~~ August 6, 2021	By:	/s/ Paresh Patel
		Paresh Patel
		Chief Executive Officer
		(Principal Executive Officer)

~~November 3, 2017~~ August 6, 2021	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.

Large accelerated filer☐

Accelerated filer☑

Non-accelerated filer ☐

~~Non-accelerated~~ ~~filer~~

Smaller reporting company

Emerging growth company