Thank you and good afternoon. Welcome to HCI Group's third quarter 2026 earnings call.

To access today's webcast, please visit the Investor Information section of our corporate website at www.hcigroup.com. Before we begin, I'd like to take the opportunity to remind our listeners that today's presentation and responses to questions may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995.

Words such as anticipate, estimate, expect, intend, plan, and project and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties.

Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have materially adverse effects on the company's business, financial condition, and results of operations.

HCI Group disclaims all obligations to update any forward-looking statements. Now with that, I'll turn the call over to Karin Coleman, Chief Operating Officer.

Thanks, Nat. Good afternoon and thank you for joining us for our third quarter earnings call.

Before Mark provides our financial results, we would like to express our thoughts and support for all of those impacted by Hurricane Isaias, including our policyholders, employees, and communities affected by the storm. Isaias made landfall in Florida on October 9th as a Category 2 storm, fortunately weakening from a Category 3 before reaching shore.

To date, HCI has received over 1,300 claims related to Isaias and have already distributed over 3,000 checks, and we continue to work closely with our policyholders as they repair their homes. With that, let me turn it over to Mark Harmsworth, our Chief Financial Officer, to go through this quarter's financial results.

Thanks, Karin. This was another very successful quarter for the company, with a low combined ratio, growing earnings, a very strong balance sheet, and strong returns on equity.

Pre-tax income in the quarter was more than $116 million, up from $91 million in the same quarter last year. Diluted earnings per share were $6.45, up from $4.90 in the third quarter of last year, and up from $5.60 in the second quarter of this year.

I've mentioned operational leverage and the earnings power of the company many times on these calls, and this is again very clear this quarter. Look at this quarter compared to the same quarter last year.

Gross premiums earned are up 5%, but net income is up 27%. Why?

Because investment income is up over 20%, reinsurance expenses are down, and expenses are growing slower than revenue. Now look at this quarter compared to the previous quarter of this year.

Gross premiums earned are down slightly, but net income is up for the same reasons. When premiums are growing, earnings are growing faster, and when premiums are down, it doesn't mean that earnings are down.

That is operational leverage and earnings power. Let's turn to the balance sheet for a minute, which continues to strengthen.

We have over $2.1 billion in cash and investments. Stockholder equity is well over $1 billion.

Debt-to-cap ratio is less than 6%, and book value per share is now over $90 and growing. As we discussed on our last call, while the growth in book value per share has been impressive, remember this does not include the unrealized gains on our ownership of Exzeo or on our real estate portfolio.

When these are included, pro forma book value per share is over $160. If you look at the larger population of public P&C companies, over the last three years after-tax returns on equity averaged less than 15%, and yet they trade at 2 times book value per share.

During that same three-year period, we, on the other hand, generated an after-tax rate of return well over 30%, and this was at a time when we experienced two major hurricanes. Despite that superior rate of return on equity, we are trading at a much lower multiple of adjusted book value per share.

That's the reason we've bought back 4% of the company so far this year. In terms of holding company liquidity, we've over $150 million of liquidity at the HCI level, even after the $80 million buyback.

Our insurance carriers have also never been stronger. We have over three quarters of a billion dollars in surplus in our various insurance companies.

Our ability to maintain a strong surplus position and still generate superior returns on equity shows the effectiveness of our capital strategy, which balances strong returns while having the financial strength to withstand major weather events and be there for our policyholders. One other note, Karin mentioned Hurricane Isaias in her opening remarks.

As we explained in a press release recently, our net loss for this storm in the fourth quarter will be $15 million, and that number will not change even if the gross loss changes. Wrapping up in the quarter, it's been another fantastic one for the company.

Revenue's growing, margins are expanding, we're generating record cash flows, have minimal debt, we continue to generate superior returns on capital, and we've bought back 4% of the company. With that, I'll hand it back to Karin.

Thanks, Mark. As market conditions have softened, we've been focused on executing our long-term strategy.

As we've mentioned in prior calls, this strategy is to keep attrition low, to have the agility to offer new products when prudent, to be efficient with operating expenses, and to have the discipline to patiently assess the market and deploy capital on opportunities that offer meaningful upside. Related to this strategy, in the quarter, gross written premiums were up 12% year-over-year as the new residential business at CORE continues its momentum.

This business has more than doubled since last quarter and is now averaging over $8 million a month. Underwriting continues to be a strength of ours, and with Exzeo, not only do we benefit from its technology and automation, but its ongoing innovations also ensure that we will be at the forefront of our industry as AI transforms it.

On the expense front, as Mark noted, we focus on cost management to further enhance our operating leverage. For reinsurance, which is our biggest expense, we benefit when reinsurance rates soften, but also utilize a multi-tower strategy to help mitigate the potential for higher losses from any one storm.

This strategy proved itself in the case of Hurricane Isaias. In addition, our sizable investment portfolio is another way we take advantage of market conditions to further strengthen the bottom line.

Lastly, since managing catastrophe risk is a critical part of our business, let me leave you with this: when Hurricane Irma hit, it took 36 months for book value to recover after the storm. For Hurricane Ian, it took us 15 months to return book value to its pre-storm level.

With Hurricanes Helene and Milton, it was 3 months, and now for Isaias, it will be just two weeks. Our strategy not only drives strong earnings in a softening market, but also demonstrates how durable these results are, even after factoring in the inevitable storm activity that comes with operating our business.

With that, let me turn it over to Paresh for some final thoughts.

Thank you, Karin. What we believe sets us apart is our ability to proactively position ourselves for future market conditions.

A few years ago, we understood that it was a good time to grow. We went on a growth upswing to strengthen our top line, and we nearly doubled the size of the company.

For a little over a year now, we have known that top-line growth will be more challenging going forward. As a result, 2026 has been about maintaining a stable level of business while focusing on operating leverage.

For 2027, we will do the same while expanding EPS leverage through an even lower share count, and all the while, while benefiting every month from our strong investment portfolio. Finally, we see an abundance of capital chasing premium in our space.

We also note the rapid influence of AI and its ability to be utilized in many innovative ways. We've always embraced disruption in the markets and emerging technologies.

You will recall, we started an insurance company when others were leaving the space. We started a technology company long before Insurtech was a fad.

We are working on the next-level innovation in both insurance and the technology space, and are looking forward to sharing those advancements with you soon. With that, I will turn the call over for questions.

Thank you. Good afternoon.

Afternoon, Mark.

Any changes in policy retention? I think you're talking about '26 and '27 using CORE to offset normal underlying policy losses.

Are you seeing any change in those retention numbers? The market seems like it's a little more competitive these days.

Not really. If you, Mark, it's Mark, if you look at the retention over say the last 12 months, or the attrition, let's say, is sort of 8%, 8.5%, somewhere in that range, and it has been fairly consistent throughout the year.

Okay. Then how should we think about rate going into 2027?

What is the influence of rate going to be on that book of business?

We do anticipate that rates should lower a bit, which isn't unexpected given reforms and other factors over the past few years, we will be working on that. Then,

Paresh, the tokenized reinsurance, is there anything to be done around the 1/1 renewals or is that a 6/1 event for you?

Good question. It's going to be a 6/1 event, because as we are testing this thing through an entire cycle, and the cycle will be over on 6/1, yeah, next year.

Very good. Then anything on the GEICO relationship?

I think it was been kind of deliberate heretofore, anything different you're seeing there?

Our CORE business continues to grow. Last quarter, we noted that we were doing about $6 million a month in CORE, and that has now increased to $8 million a month, so that continues to be very positive.

Very good. Thank you.

Thanks, Mark.

Hi. Thanks.

Good evening. I think last quarter Paresh said something about possibly seeing organic policy growth by end of the year.

I guess want to see if you saw any path towards that. Did anything happen this quarter for that, and is it still on track, do you think, by the end of this year?

We have narrowed the gap down tremendously, and it's going to be a close-run race as to whether we see it by the end of the year, but we are planning on hopefully having it in the near future, yeah?

Mike, it's Mark, just the organic growth, just to go back to something that Karin mentioned, we had said on the last call we were expecting about $6 million a month in written premium, and as Karin mentioned, that's been bigger than we thought in the $8 million range. That's where that organic growth that Paresh is talking about is coming from, is in the CORE business line.

It's been working really well.

Perfect. Thanks.

A quick one on that then, Mark, or anybody, does the GEICO partnership only flow through CORE or is that other carriers from HCI as well?

I think it flows through a number of different carriers.

Okay. Then maybe just lastly, I guess, on the expense side, you talked about leverage a lot.

Acquisition expenses are pretty flat. Your operating expenses aren't big at all and hardly moving.

I guess how do we think of those, both components of those, particularly as CORE grows and scales?

Mike, it's Mark. You're asking about which expenses?

The operating expense. It's about $26 million bucks, but how does that move as CORE scales and the impact on that?

Yeah. If you look over the history of, say, the last six, eight quarters, that number doesn't really move that much.

It's pretty flat. When it does grow, as I said in my earlier remarks, it grows slower than the revenue does.

The other thing is if you sort of wrap everything together and look at the combined ratio, we've mentioned a combined ratio expectation in the sort of 60% to 65% range, and we've been at the low end of that for a significant amount of time. Actually, I think we're in the high 50s this quarter.

Even as CORE is growing, those expenses are really not growing much. That's kind of what's creating that leverage that we talked about.

Okay. Great.

Good deal. Thank you very much.

Hey, thanks. Good afternoon.

Mark, it looks like cash continues to be put to use, invested in investments. Can you talk a little bit about new money rate versus book yield and kind of what we should expect on the NII line?

Yeah. I think Karin and Paresh both mentioned it, investment income has been growing pretty significantly, and that's really being driven just by cash flow.

We're generating about $75 million a quarter in positive cash flow, which, at our current yield of 4% or so is generating about $3 million per year of incremental investment income. That's been very positive.

Investment income is continuing to grow just because of that increase in the sort of cash and fixed-term investments balances, the total. We've also been sort of at different times increasing the amount that's invested in fixed-term securities over the last little while.

I think the overall yield is about 4.25% on total invested balances of about— and that's, obviously that's got the potential to go up, it has been increasing. If you look into next year, sort of we're benefiting from two things: one, the invested balances are going up; and two, you've got the potential for rates to go up a bit, but it's been a very good story for us.

Okay. Great.

Then maybe just one other one if I could. Obviously, elections last night, and if I'm reading kind of Florida right, seems like stability at the CFO office, but maybe end of a supermajority for the GOP.

Any takeaways as it relates to kind of your core markets, homeowners insurance, good, bad, or otherwise from kind of the changed landscape?

We don't see anything that's going to be impacting it here, especially in Florida. We've always had good working relationships with the regulators, and things seem to be pretty business as usual at this point.

All right, great. Thank you.

Hey, thanks. Good evening.

I guess first just sort of the Exzeo earnings release, there was a quote from Paresh saying AI will reshape the insurance industry not just in expense ratios, but in how coverage is bought and sold. Curious how you'd expand on how that relates to HCI.

Most of the discussion right now is around auto. You seem to think that could have an impact on home.

Just looking for you to elaborate. Thanks.

Yes. Look, very simply, AI is going to change things.

I actually decided my remarks in here as well, and we've always been more focused, even as HCI, on where the world is going to as opposed to where it is currently. If AI is going to reshape things, it's going to reshape homeowners and in some interesting ways.

We are going to, luckily, having Exzeo, we will be at the cutting edge of this just as a normal byproduct of who we are. The stuff you've heard about what AI might do to auto, I want to do that to home as well.

Interesting. Then I guess the gross loss ratios continue to be pretty strong.

Could you just given the rate environment talk a little bit about where those are running now and what's a reasonable expectation perhaps in 2027? It's

Mark. Loss ratio, it's been performing really well.

We've said for some time now, expect the loss ratio in the 20% to 25% range. That's still the case.

It can move around a little bit. We've been at the low end of that range now continuously for quite a while now.

I don't think I have anything really new to add to that. It's been pretty consistent.

If you look at the loss ratio for the first nine months of this year, it's exactly the same as the first nine months of last year, which is 21%. We sort of continue to be at that low end of the range, and that's our expectation still going forward.

Are you noticing anything in the data from a loss trend standpoint, whether it's frequency or severity, that's been unusual this year? Because obviously, really good results, but just I guess I'm a little surprised there hasn't been a little more deterioration toward that midpoint, 22.5%.

No, we follow the trends pretty carefully, obviously. There was a significant change as the legislative changes rolled through a few years back.

Since then, there hasn't really been a lot of change in either frequency or severity. You have a little bit of inflation on the severity side, of course, with cost of materials, but that's all sort of baked into that loss ratio range.

In terms of frequency and severity, it reset a few years back, and it can move around a bit quarter to quarter based on weather, but generally speaking, it's been very consistent for quite a while now.

Then lastly, maybe I missed it, but do you guys have a gross loss estimate peg for Isaias?

Yeah. A gross number?

No, it's too early to give that number. We'll be putting that in our K.

I think the most important thing there is the net loss, just because of how the reinsurance works for that event, the net loss that you're going to see in Q4 is $15 million, and it doesn't matter what the gross is. It's a little bit early to put a good number on that.

Obviously, we have a pretty good idea, but it's too early to publish a number. We'll do that in the K.

I think the most important thing is that doesn't change the net loss number, which is what flows through to the loss expenses in Q4.

That makes sense. Thanks, guys.

Thank you.

Thank you. On behalf of the entire management team, I would like to thank our shareholders, employees, agents, and most importantly, our policyholders for the ongoing and continued support.

Thank you.