Any rate changes in Florida’s admitted market will likely be minor through the rest of 2025, according to HCI’s chief executive.
Speaking to analysts on a conference call, CEO Paresh Patel said while there could be some “minor rate adjustments”, no major alterations are imminent. While reinsurance treaties could have some effect, he said nothing significant appears to be on the horizon, and that any changes would have to be approved by regulators.
“It's a mechanical thing that happens,” he said. “It will work itself through, and rates fluctuate slowly over periods of time, whereas our results tend to be much more volatile based on cat activity, but it's normal.”
He noted there’s “plenty of capacity out there” as the company negotiates its reinsurance treaties. “It's very oddly, one could almost say, a boring year in terms of placing reinsurance,” he said.
The comments came after the company experienced some deleterious effects from cat in recent quarters.
While HCI reported a combined ratio (CoR) of 57.8% for Q1 2025, the company posted CoRs of 103.5% and 106.6% in Q3 and Q4 2024, respectively, due partially to losses from Hurricane Milton.
CFO James Harmsworth attributed the 40% reduction year on year reduction in claims frequency from Q1 2024 in part to the “lull” that can sometimes follow a hurricane, as well as legislative changes and favorable weather conditions.
Harmsworth said the Q1 loss ratio of 19.7% “actually was pretty similar to what it was in the fourth quarter of last year when you adjust for Milton.”
He acknowledged that he expects the company to post an LR that may be four or five points higher for the same period in future years, “which I think is a little bit more reflective of where we're at”.
“Obviously, that's down significantly than it was before, but I think that's about where we are now,” he added.
While the executives touted the quarter’s results, they believe the best is yet to come for investors due to the coming spin-off of tech solutions subsidiary Exzeo. That process will involve shares of Exzeo currently held by HCI being distributed on a tax-free basis to HCI shareholders.
The splintering-off of Exzeo is expected to be completed by the end of 2025. Harmsworth noted the separation would result in “two separate public companies” with no consolidated operations.
The subsidiary’s CFO, Suela Bulku, said it currently manages $1.2bn in premium and posted $52mn in revenue for the quarter. Those numbers are healthy enough, Patel said, that the additional capital generated by an IPO was found to be unnecessary and the spin-off was determined to be the best option for shareholders.
He added that Exzeo had “proven its mettle in Florida” and would be looking to expand both its presence in the homeowners market as well as to other lines, while attracting non-HCI clients.
“There is a broad applicability of this technology across multiple geographies and multiple lines of business,” said Patel. “So that's the size of the opportunity we're looking at.”
Exzeo includes only a tech platform and insurance management operations and is not a carrier. Patel said the company’s success will lie in the volume of policies it administers.
“When you do that at great volume, it suddenly becomes incredibly powerful and incredibly valuable,” he said. “You see other marketplaces of this nature, whether you think of Uber, Lyft, Amazon or Spotify or any of those kinds of distribution platforms. You're paying by the transaction, but the transactions add up.”