What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-06 compared with 2020-08-07 · 317 added, 251 removed, 1002 unchanged (36% of the section changed)

4 unchanged sentences

(Dollar amounts in thousands)

Fixed-maturity securities, available for sale, at fair value

(amortized cost:

$ 98,669 and $ 199,954 , respectively and

allowance for credit losses:

September 30,

Fixed-maturity securities, available for sale, at fair value (amortized cost:

$ 199,954 , respectively and allowance for credit losses:

$ 596 and $ 0 , respectively)

25 unchanged sentences

(Dollar amounts in thousands)

September 30,

Liabilities and Stockholders’ Equity

12 unchanged sentences

7% Series A cumulative convertible preferred stock ( no par value, none and

1,500,000 shares authorized at June 30, 2020 and December 31, 2019, respectively,

no shares issued or outstanding)

1,500,000 shares authorized at September 30, 2020 and December 31, 2019,

respectively, no shares issued or outstanding)

Series B junior participating preferred stock ( no par value, none and

400,000 shares authorized at June 30, 2020 and December 31, 2019, respectively,

no shares issued or outstanding)

400,000 shares authorized at September 30, 2020 and December 31, 2019,

respectively, no shares issued or outstanding)

Preferred stock ( no par value, 20,000,000 and 18,100,000 shares authorized

at June 30, 2020 and December 31, 2019, respectively, no shares issued

at September 30, 2020 and December 31, 2019, respectively, no shares issued

or outstanding)

Common stock ( no par value, 40,000,000 shares authorized, 7,793,677 and

7,764,564 shares issued and outstanding at June 30, 2020 and

7,764,564 shares issued and outstanding at September 30, 2020 and

December 31, 2019, respectively)

10 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Gross premiums earned

6 unchanged sentences

Policy fee income

Gain on involuntary conversion

Total revenue

4 unchanged sentences

Loss on repurchases of convertible senior notes

Loss on extinguishment of debt

Other operating expenses

10 unchanged sentences

Three Months Ended

Six Months Ended

Other comprehensive income (loss):

Nine Months Ended

September 30,

Other comprehensive income:

Change in unrealized gain (loss) on investments:

Net unrealized gains (losses) arising during the period

Net unrealized gains arising during the period

Credit losses charged to income

Call and repayment (gains) losses charged to investment income

Reclassification adjustment for net realized gains

Call and repayment gains charged to investment income

Reclassification adjustment for net realized losses (gains)

Net change in unrealized gains (losses)

6 unchanged sentences

Consolidated Statement of Stockholders’ Equity

For the Three Months Ended June 30, 2020

For the Three Months Ended September 30, 2020

(Dollar amounts in thousands, except per share amount)

1 unchanged sentence

Stockholders’

Balance at March 31, 2020

Balance at June 30, 2020

Total other comprehensive income, net of

8 unchanged sentences

to retained income

Balance at June 30, 2020

Balance at September 30, 2020

See accompanying Notes to Consolidated Financial Statements.

2 unchanged sentences

Consolidated Statement of Stockholders’ Equity

For the Three Months Ended June 30, 2019

For the Three Months Ended September 30, 2019

(Dollar amounts in thousands, except per share amount)

1 unchanged sentence

Stockholders’

Balance at March 31, 2019

Balance at June 30, 2019

Total other comprehensive income, net of

Exercise of common stock options

Issuance of restricted stock

Forfeiture of restricted stock

Repurchase and retirement of common stock

Repurchase and retirement of common stock under

2 unchanged sentences

Stock-based compensation

Tax basis adjustment on equity method investment

Additional paid-in capital shortfall allocated

to retained income

Balance at June 30, 2019

Balance at September 30, 2019

See accompanying Notes to Consolidated Financial Statements.

2 unchanged sentences

Consolidated Statement of Stockholders’ Equity

For the Six Months Ended June 30, 2020

For the Nine Months Ended September 30, 2020

(Dollar amounts in thousands, except per share amount)

Comprehensive

(Loss) Income,

Income (Loss),

Stockholders’

12 unchanged sentences

to retained income

Balance at June 30, 2020

Balance at September 30, 2020

See accompanying Notes to Consolidated Financial Statements.

2 unchanged sentences

Consolidated Statement of Stockholders’ Equity

For the Six Months Ended June 30, 2019

For the Nine Months Ended September 30, 2019

(Dollar amounts in thousands, except per share amount)

12 unchanged sentences

Stock-based compensation

Tax basis adjustment on equity method investment

Additional paid-in capital shortfall allocated

to retained income

Balance at June 30, 2019

Balance at September 30, 2019

See accompanying Notes to Consolidated Financial Statements.

3 unchanged sentences

(Amounts in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

12 unchanged sentences

Loss on repurchases of convertible senior notes

Foreign currency remeasurement loss (gain)

Loss on extinguishment of debt

Gain on involuntary conversion

Foreign currency remeasurement loss.

Other non-cash items

15 unchanged sentences

(Amounts in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from investing activities:

6 unchanged sentences

Purchase of short-term and other investments

Compensation received for property condemned through eminent domain

Proceeds from sales of fixed-maturity securities

6 unchanged sentences

Cash dividends received under share repurchase forward contract

Proceeds from revolving credit facility

Net (repayment) borrowing under revolving credit facility

Proceeds from exercise of common stock options

15 unchanged sentences

Unrealized (loss) gain on investments in available-for-sale securities, net

Receivable from sales of equity securities

Receivable from maturities of fixed-maturity securities

Payable on purchases of equity securities

Addition to property and equipment under capital lease

See accompanying Notes to Consolidated Financial Statements.

10 unchanged sentences

TypTap offers standalone flood and homeowners multi-peril policies.

In October 2020, TypTap began applying to offer homeowners coverage in 20 states outside of Florida.

The operations of both insurance subsidiaries are supported by HCI Group, Inc.

3 unchanged sentences

On February 5, 2020, HCPCI entered into a policy replacement agreement with Anchor Property & Casualty Insurance Company (“Anchor”).

Under the agreement, Anchor cancelled all its policies as of April 1, 2020 and HCPCI offered short-term replacement policies to those policyholders, who are under no obligation to accept them.

Under the agreement, Anchor cancelled all its policies as of April 1, 2020 and HCPCI offered short-term replacement policies to those policyholders, who were under no obligation to accept them.

The replacement policies had substantially the same terms and rates as the cancelled polices and would expire on the same dates the cancelled policies would have expired had they not been cancelled.

10 unchanged sentences

In response to the pandemic, the Company temporarily closed its offices in Florida and asked employees to work from home.

The Company also closed temporarily its restaurant.

The Company also closed temporarily its restaurant, but later decided to exit the business permanently in October 2020.

Since then, some employees who have gone through the Company’s health safety training are allowed to alternate their work location between home and office.

2 unchanged sentences

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which is intended to provide fast and direct economic assistance for American workers and families, small businesses, and to preserve jobs in American industries.

The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property.

The CARES Act includes, among other

HCI GROUP, INC.

2 unchanged sentences

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

things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property.

The Company qualifies as a small business under the CARES Act but d id not apply for any of the government loan programs .

20 unchanged sentences

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 June 30, 2020 and the results of operations and cash flows for the periods presented.

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 30, 2020 and the results of operations and cash flows for the 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, 2020.

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, 2019 included in the Company’s Form 10-K, which was filed with the SEC on March 6, 2020.

The accompanying unaudited consolidated financial statements and

HCI GROUP, INC.

2 unchanged sentences

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

notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 201 9 included in the Company’s Form 10-K, which was filed with the SEC on March 6 , 20 20 .

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.

14 unchanged sentences

Any subsequent changes to the expected credit losses will be recognized in the Company’s consolidated statement 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)

Allowance for Credit Losses

5 unchanged sentences

Under the CECL model, the Company measures all expected credit losses related to relevant financial assets based on historical experience, current conditions, and reasonable and supportable forecasts which incorporate forward-looking information.

The Company primarily uses a discounted cash flow method and a rating-based method in estimating credit losses at a reporting date for financial assets under the scope of the CECL model.

The Company primarily uses a discounted cash flow method

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

and a rating-based method in estimating credit losses at a reporting date for financial assets under the scope of the CECL model.

The discounted cash flow method is a valuation method used to estimate the value of a financial asset based on its future cash flows.

10 unchanged sentences

Limited Partnership Investments

The Company has interests in limited partnerships that are not registered under the United Stated Securities Act of 1933, as amended, the securities laws of any state or the securities laws of any other jurisdictions.

The Company has interests in limited partnerships that are not registered under the United States Securities Act of 1933, as amended, the securities laws of any state or the securities laws of any other jurisdictions.

The partnership interests cannot be resold in the public market and any withdrawal is subject to the terms and conditions of the partnership agreement.

5 unchanged sentences

Net investment income or loss from limited partnerships represents a net aggregate amount of operating results allocated to the Company based on the percentage of ownership interest in each limited partnership.

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Pursuant to U.S.

7 unchanged sentences

If the policyholder does not pay the premium, the Company can cancel the policy and has no obligation to provide insurance coverage.

Unpaid renewal policies are cancelled at midnight on the last day of the period for which the policyholder has paid.

Unpaid renewal policies are cancelled at midnight on the last day of the period for which

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

the policyholder has paid.

The unearned premium liability for the cancelled policy is reversed along with the premium receivable balance.

3 unchanged sentences

The premium receivable balance, together with the unearned premium liability is then reduced by the computed amount.

At June 30, 2020 and December 31, 2019, allowances for uncollectible premiums were $ 1,034 and $ 528 , respectively.

At September 30, 2020 and December 31, 2019, allowances for uncollectible premiums were $ 2,369 and $ 528 , respectively.

Deferred Policy Acquisition Costs

7 unchanged sentences

The amount of amortization of DAC could be revised in the near term if any of the estimates discussed above are revised.

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Note 3 – Recent Accounting Pronouncements

Accounting Standards Update No.

In January 2020, the Financial Accounting Standards Board issued Accounting Standards Update No.

In January 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

2020-01 (“ASU 2020-01”) Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.

3 unchanged sentences

This guidance will not have a material impact on the Company’s 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)

Accounting Standards Update No.

In August 2020, the FASB issued A ccounting S tandards U pdate 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 remove s 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 simplif y areas of the guidance for diluted earnings-per-share calculations that are impacted by the amendments.

ASU 2020-06 is effective for the Company beginning with the first quarter of 2022 and will be applied prospectively.

Early adoption is permitted.

The Company is evaluating the impact of this update on its financial position.

Note 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.

September 30,

Cash and cash equivalents

1 unchanged sentence

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

To facilitate TypTap’s expansion plan to other states, the Company increased its funds held at the State of Florida by $ 1,700 during the third quarter of 2020.

HCI GROUP, INC.

5 unchanged sentences

The Company holds investments in fixed-maturity securities that are classified as available-for-sale.

At June 30, 2020 and December 31, 2019, the cost or amortized cost, allowance for credit loss, gross unrealized gains and losses, and estimated fair value of the Company’s available-for-sale securities by security type were as follows:

At September 30, 2020 and December 31, 2019, the cost or amortized cost, allowance for credit loss, gross unrealized gains and losses, and estimated fair value of the Company’s available-for-sale securities by security type were as follows:

Allowance for Credit

As of June 30, 2020

As of September 30, 2020

Treasury and U.S.

12 unchanged sentences

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 June 30, 2020 and December 31, 2019 are as follows:

As of June 30, 2020

The scheduled contractual maturities of fixed-maturity securities as of September 30, 2020 and December 31, 2019 are as follows:

As of September 30, 2020

Due in one year or less

12 unchanged sentences

Sales of Available-for-Sale Fixed-Maturity Securities

Proceeds received, and the gross realized gains and losses from sales of available-for-sale securities, for the three and six months ended June 30, 2020 and 2019 were as follows:

Three months ended June 30, 2020

Three months ended June 30, 2019

Six months ended June 30, 2020

Six months ended June 30, 2019

Proceeds received, and the gross realized gains and losses from sales of available-for-sale securities, for the three and nine months ended September 30, 2020 and 2019 were as follows:

Three months ended September 30, 2020

Three months ended September 30, 2019

Nine months ended September 30, 2020

Nine months ended September 30, 2019

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

Securities with gross unrealized loss positions at June 30, 2020 and December 31, 2019, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:

Securities with gross unrealized loss positions at September 30, 2020 and December 31, 2019, 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

As of June 30, 2020

As of September 30, 2020

Corporate bonds

State, municipalities, and political subdivisions

Exchange-traded debt

Redeemable preferred stock

At June 30, 2020, there were 25 securities in an unrealized loss position.

At September 30, 2020, there were 13 securities in an unrealized loss position.

Of these securities, none had been in an unrealized loss position for 12 months or longer.

20 unchanged sentences

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 summarized the activity in the allowance for credit losses of available-for-sale securities for the three and six months ended on June 30, 2020:

The table below summarized the activity in the allowance for credit losses of available-for-sale securities for the three and nine months ended on September 30, 2020:

Balance at January 1

3 unchanged sentences

Balance at June 30

Credit loss expense

Balance at September 30

b) Equity Securities

The Company holds investments in equity securities measured at fair values which are readily determinable.

At June 30, 2020 and December 31, 2019, the cost, gross unrealized gains and losses, and estimated fair value of the Company’s equity securities were as follows:

June 30, 2020

At September 30, 2020 and December 31, 2019, the cost, gross unrealized gains and losses, and estimated fair value of the Company’s equity securities were as follows:

September 30, 2020

December 31, 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 table below presents the portion of unrealized gains and losses in the Company’s consolidated statement of income for the periods related to equity securities still held.

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net gains (losses) recognized

2 unchanged sentences

Net unrealized gains (losses) recognized

Sales of Equity Securities

Proceeds received, and the gross realized gains and losses from sales of equity securities, for the three and nine months ended September 30, 2020 and 2019 were as follows:

Three months ended September 30, 2020

Three months ended September 30, 2019

Nine months ended September 30, 2020

Nine months ended September 30, 2019

HCI GROUP, INC.

2 unchanged sentences

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

Sales of Equity Securities

Proceeds received, and the gross realized gains and losses from sales of equity securities, for the three and six months ended June 30, 2020 and 2019 were as follows:

Three months ended June 30, 2020

Three months ended June 30, 2019

Six months ended June 30, 2020

Six months ended June 30, 2019

c ) Limited Partnership Investments

3 unchanged sentences

The following table provides information related to the Company’s investments in limited partnerships:

June 30, 2020

September 30, 2020

December 31, 2019

20 unchanged sentences

Distributions, except income from late admission of a new limited partner, will be received when underlying investments of the funds are liquidated.

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Expected to have a ten-year term.

A lthough the capital commitment period has expired, there are still follow-on in vest ments and pending commitments that require additional fundings.

Although the capital commitment period has expired, there are still follow-on investments and pending commitments that require additional fundings.

Expected to have a three-year term from June 30, 2018.

7 unchanged sentences

Expected to 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 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.

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating results:

1 unchanged sentence

Net (loss) income

September 30,

Balance Sheet:

Total liabilities

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.

For the three and six months ended June 30, 2019, the Company recognized net investment income of $ 1,043 and $ 832 , respectively, for these investments.

During the three and six months ended June 30, 2019, the Company received total cash distributions of $ 3,073 and $ 4,086 , respectively.

Cash distributions representing return on investment were $ 2,603 and $ 3,616 for the three and six months ended June 30, 2019, respectively.

At June 30, 2020 and December 31, 2019, the Company’s cumulative contributed capital to the partnerships at each respective balance sheet date totaled $ 30,998 and $ 29,528 , respectively, and the Company’s maximum exposure to loss aggregated $ 26,177 and $ 28,346 , respectively.

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

For the three and nine months ended September 30, 2020, the Company recognized net investment income of $ 689 and net investment loss of $ 2,058 , respectively, for these investments.

During the three and nine months ended September 30, 2020, the Company received total cash distributions of $ 850 and $ 1,742 , respectively, including returns on investment of $ 72 and $ 650 , respectively.

For the three and nine months ended September 30, 2019, the Company recognized net investment income of $ 476 and $ 1,308 , respectively.

During the three and nine months ended September 30, 2019, the Company received total cash distributions of $ 724 and $ 4,810 , respectively.

Cash distributions representing return on investment were $ 31 and $ 3,647 for the three and nine months ended September 30, 2019, respectively.

At September 30, 2020 and December 31, 2019, the Company’s net cumulative contributed capital to the partnerships at each respective balance sheet date totaled $ 28,976 and $ 27,117 , respectively, and the Company’s maximum exposure to loss aggregated $ 27,497 and $ 28,346 , 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.

At June 30, 2020 and December 31, 2019, the Company’s maximum exposure to loss relating to the variable interest entity was $ 734 and $ 762 , respectively, representing the carrying value of the investment.

There were no cash distributions during the six months ended June 30, 2020 and 2019.

At June 30, 2020 and December 31, 2019, there was no undistributed income from this equity method investment.

At September 30, 2020 and December 31, 2019, the Company’s maximum exposure to loss relating to the variable interest entity was $ 716 and $ 762 , respectively, representing the carrying value of the investment.

There were no cash distributions during the nine months ended September 30, 2020 and 2019.

At September 30, 2020 and December 31, 2019, there was no 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

Nine Months Ended

September 30,

Operating results:

3 unchanged sentences

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)

September 30,

Balance Sheet:

8 unchanged sentences

The proceeds from the sale are expected to exceed the property’s carrying value of $ 4,519 and, accordingly, no impairment loss was recognized on the classification of this property as held for sale.

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

f) Real Estate Investments

Real estate investments consist of the following as of June 30, 2020 and December 31, 2019.

Real estate investments consist of the following as of September 30, 2020 and December 31, 2019.

September 30,

Land improvements

3 unchanged sentences

Real estate investments

Depreciation and amortization expense related to real estate investments was $ 432 and $ 422 for the three months ended June 30, 2020 and 2019, respectively, and $ 887 and $ 754 for the six months ended June 30, 2020 and 2019, respectively.

In July 2020, a portion of undeveloped land with a carrying value of $ 443 was acquired by the Florida Department of Transportation (“FDOT”) as part of the agreement described in Note 9 – “Property and Equipment, Net.”

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Depreciation and amortization expense related to real estate investments was $ 431 and $ 379 for the three months ended September 30, 2020 and 2019 , respectively , and $ 1,318 and $ 1,133 for the nine months ended September 30, 2020 and 2019, respectively .

During the second quarter of 2020, the Company classified the investment property as described earlier to assets held for sale.

g) Net Investment (Loss) Income

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

g) Net Investment Income (Loss)

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Available-for-sale fixed-maturity securities

7 unchanged sentences

Net investment income

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Note 6 – Comprehensive Income (Loss)

4 unchanged sentences

Three Months Ended

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

Unrealized gains arising during the period

4 unchanged sentences

Total other comprehensive gains

Six Months Ended

June 30, 2020

June 30, 2019

Unrealized (losses) gains arising during the period

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Nine Months Ended

September 30, 2020

September 30, 2019

Unrealized (losses) gains arising during the

Change in allowance for credit losses

10 unchanged sentences

Inputs that are unobservable.

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Valuation Methodology

2 unchanged sentences

Their carrying value approximates fair value due to the short maturity and high liquidity of these funds.

Restricted cash

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

Short-term investments

5 unchanged sentences

Fair values are generally measured using quoted prices in active markets for identical securities or other inputs that are observable either 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.

In those instances where observable inputs are not available, fair values are

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

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.

8 unchanged sentences

As a result, its carrying value approximates fair value.

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

10 unchanged sentences

Discounted cash flow method/Level 3 inputs

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

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 June 30, 2020 and December 31, 2019:

The table indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of September 30, 2020 and December 31, 2019:

Fair Value Measurements Using

As of June 30, 2020

As of September 30, 2020

Financial Assets:

30 unchanged sentences

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 balance sheet at amounts other than fair value as of June 30, 2020 and December 31, 2019:

The following tables present fair value information for assets and liabilities that are carried on the balance sheet at amounts other than fair value as of September 30, 2020 and December 31, 2019:

Fair Value Measurements Using

As of June 30, 2020

As of September 30, 2020

Financial Liabilities:

3 unchanged sentences

3.90 % Promissory note

4 % Promissory note

3.75 % Callable promissory note

15 unchanged sentences

The Company agreed to pay Anchor a cash bonus of $ 50 per $1,000 of premium for all policies in forces at June 1, 2020 that were in compliance with the conditions stated in the agreement.

At June 30, 2020, other liabilities included $ 1,653 representing the remaining bonus payable to Anchor.

Note 9 – Property and Equipment, Net

2 unchanged sentences

The transaction was completed on May 18, 2020 and accounted for as an asset acquisition.

On July 24, 2020, the FDOT exercised the power of eminent domain under the Florida Constitution in order to acquire for a highway expansion project the property in Tampa, Florida where the Company’s headquarters is located for compensation of $ 44,000 , net of $ 3,500 in legal and related expenses.

Under the terms of the agreement, the FDOT assumed all contracts associated with this property, including the leases with existing tenants.

In addition, the Company agreed to donate a small portion of a separate tract of nearby undeveloped land it owns to the FDOT for the same expansion project.

The Company will have no later than

HCI GROUP, INC.

2 unchanged sentences

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

July 24, 2023 to vacate the property.

In connection with this transaction, the Company recognized a gain from involuntary conversion of $ 36,969 .

In addition, the Company used a portion of the proceeds to repay the 4 % Promissory Note as described in Note 12 – “Long-Term Debt.”

Note 10 – Other Assets

The following table summarizes the Company’s other assets.

September 30,

Benefits receivable related to retrospective

2 unchanged sentences

Lease acquisition costs, net

Right-of-use assets – operating leases

Total other assets

1 unchanged sentence

During the first quarter of 2020, the Company borrowed an additional amount of $ 14,000 for general business purposes.

For the three months ended June 30, 2020 and 2019, interest expense was $ 162 and $ 127 , respectively, including $ 40 of amortization of issuance costs in each of the periods.

For the six months ended June 30, 2020 and 2019, interest expense was $ 315 and $ 196 , respectively, including $ 79 of amortization of issuance costs in each of the periods.

At June 30, 2020, the Company was in compliance with all required covenants, and there were $ 23,750 of borrowings outstanding.

On August 11, 2020, the Company repaid the amount of $ 15,000 of its outstanding balance.

For the three months ended September 30, 2020 and 2019, interest expense was $ 108 and $ 132 , respectively, including $ 39 of amortization of issuance costs in each of the periods.

For the nine months ended September 30, 2020 and 2019, interest expense was $ 423 and $ 328 , respectively, including $ 118 of amortization of issuance costs in each of the periods.

At September 30, 2020, the Company was in compliance with all required covenants, and there were $ 8,750 of borrowings outstanding.

Note 12 – Long-Term Debt

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

September 30,

4.25 % Convertible senior notes, due March 1, 2037

3.95 % Promissory note, due through February 17, 2020

4 % Promissory note, due through February 1, 2031

4 % Promissory note, due through July 29, 2020

3.75 % Callable promissory note, due through September 1, 2036

9 unchanged sentences

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

The following table summarizes future maturities of long-term debt as of June 30, 2020, 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 June 30,

The following table summarizes future maturities of long-term debt as of September 30, 2020, 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,

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Interest Expense:

7 unchanged sentences

The Company’s recent cash dividends on common stock have exceeded $ 0.35 per share, resulting in adjustments to the conversion rate of the 4.25% Convertible Notes.

Accordingly, as of June 30, 2020, the conversion rate of the Company’s 4.25 % Convertible Notes was 16.4039 shares of common stock for each $1 in principal amount, which was the equivalent of approximately $ 60.96 per share.

Accordingly, as of September 30, 2020, the conversion rate of the Company’s 4.25 % Convertible Notes was 16.42 shares of common stock for each $1 in principal amount, which was the equivalent of approximately $ 60.91 per share.

In June 2020, the Company repurchased an aggregate of $ 4,550 in principal of the 4.25% Convertible Notes and recognized a $ 150 loss from the repurchases.

As of June 30, 2020, the remaining amortization period of the debt discount for 4.25% Convertible Notes was expected to be 1.7 years.

As of September 30, 2020, the remaining amortization period of the debt discount for 4.25% Convertible Notes was expected to be 1.4 years.

4% Promissory Note

In February 2020, the Company repaid its 3.95 % Promissory Note .

On July 29, 2020, the Company made an early repayment of its 4 % Promissory Note totaling $ 7,062 in principal plus accrued interest.

As a result, the Company incurred $ 98 of loss on extinguishment of debt.

The note was collateralized by the Company’s Tampa, Florida headquarters which was acquired by the FDOT in the eminent domain proceedings as described in Note 9 – “Property and Equipment, Net.”

3.95% Promissory Note

In February 2020, the Company repaid its 3.95 % Promissory Note for $ 8,891 including principal and unpaid interest payable at maturity date .

HCI GROUP, INC.

19 unchanged sentences

The Company purchases reinsurance each year taking into consideration probable maximum losses and reinsurance market conditions.

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Premiums Written:

3 unchanged sentences

Net premiums earned

During the three and six months ended June 30, 2020, ceded losses of $ 11 and $ 349 , respectively, were recognized as a reduction in losses and loss adjustment expenses.

There were no ceded losses recognized during the three and six months ended June 30, 2019.

At June 30, 2020 and December 31, 2019, there were 40 and 31 reinsurers, respectively, participating in the Company’s reinsurance program.

Total gross amounts recoverable and receivable from reinsurers at June 30, 2020 and December 31, 2019 were $ 100,430 and $ 132,678 , respectively.

Approximately 47.3 % of the reinsurance recoverable balance at June 30, 2020 was receivable from the Florida Hurricane Catastrophe Fund, a state trust fund.

Based on all available information considered in the rating-based method described in Note 2 -- “Summary of Significant Accounting Policies,” the Company recognized a decrease in credit loss expense of $ 325 and $ 349 for the three and six months ended June 30, 2020, respectively.

Allowances for credit losses related to the reinsurance recoverable balance were $ 104 and $ 0 at June 30, 2020 and December 31, 2019, respectively.

One of the reinsurance contracts includes retrospective provisions that adjust premiums in the event losses are minimal or zero.

For the three and six months ended June 30, 2020, the Company recognized reductions in premiums ceded of $ 3,240 and $ 5,760 , respectively, related to these adjustments in the consolidated statement of income.

For the three and six months ended June 30, 2019, the Company recognized net reductions in premiums ceded of $ 1,226 and $ 1,738 , respectively, related to these adjustments.

Amounts receivable pursuant to retrospective provisions are reflected in other assets.

At June 30, 2020 and December 31, 2019, other assets included $ 1,560 and $ 9,480 related to these adjustments, respectively.

In June 2020, the Company received $ 13,680 of premium refund under the retrospective reinsurance contract that ended May 31, 2020.

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 condition.

HCI GROUP, INC.

2 unchanged sentences

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

During the three and nine months ended September 30, 2020, the Company recognized ceded losses of $ 1,871 and $ 2,220 , respectively, as a reduction in losses and loss adjustment expenses, and ceded losses of $ 113,888 were recognized in each of the three and nine months ended September 30, 2019.

At September 30, 2020 and December 31, 2019, there were 38 and 31 reinsurers, respectively, participating in the Company’s reinsurance program.

Total gross amounts recoverable and receivable from reinsurers at September 30, 2020 and December 31, 2019 were $ 95,274 and $ 132,678 , respectively.

Approximately 58.6 % of the reinsurance recoverable balance at September 30, 2020 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 described in Note 2 – “Summary of Significant Accounting Policies,” the Company recognized a decrease in credit loss expense of $ 14 and $ 363 for the three and nine months ended September 30, 2020, respectively.

Allowances for credit losses related to the reinsurance recoverable balance were $ 90 and $ 0 at September 30, 2020 and December 31, 2019, respectively.

One of the reinsurance contracts includes retrospective provisions that adjust premiums in the event losses are minimal or zero.

For the three and nine months ended September 30, 2020, the Company recognized reductions in premiums ceded of $ 4,680 and $ 10,440 , respectively, related to these adjustments in the consolidated statement of income.

For the three and nine months ended September 30, 2019, the Company recognized net reductions in premiums ceded of $ 2,520 and $ 4,258 , respectively, related to these adjustments.

Amounts receivable pursuant to retrospective provisions are reflected in other assets.

At September 30, 2020 and December 31, 2019, other assets included $ 6,240 and $ 9,480 related to these adjustments, respectively.

In June 2020, the Company received $ 13,680 of premium refund under the retrospective reinsurance contract that ended May 31, 2020.

Note 14 – Losses and Loss Adjustment Expenses

4 unchanged sentences

However, the Company is unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net balance, beginning of period*

11 unchanged sentences

The establishment of loss reserves is an inherently uncertain process and changes in loss reserve estimates are expected as these estimates are subject to the outcome of future events.

Changes in estimates, or during which such estimates are adjusted.

During the three months ended June 30, 2020, the Company derecognized losses related to prior periods of $ 650 primarily to decrease the reserve for 2019 loss year.

For the six months ended June 30, 2020, the Company recognized losses related to prior periods of $ 1,625 for unfavorable development for 2019 resulting from litigation.

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

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 months ended September 30, 2020, the Company recognized losses related to prior periods of $ 1,200 primarily to increase the reserve for 2017, 2015 and prior loss years.

For the nine months ended September 30, 2020, the Company recognized losses related to prior periods of $ 2,825 for unfavorable development for 2019 and prior loss years resulting from litigation.

Estimated losses of $ 17,700 , net of reinsurance, related to Hurricane Sally are included in the 2020 loss year.

Note 15 – Segment Information

7 unchanged sentences

The Company’s chief executive officer, who serves as the Company’s chief operating decision maker, evaluates each division’s financial and operating performance based on revenue and operating income.

For the three months ended June 30, 2020 and 2019, revenues from the Company’s insurance operations before intracompany elimination represented 96.2 % and 95.2 %, respectively, of total revenues of all operating segments.

For the six months ended June 30, 2020 and 2019, revenues from the Company’s insurance operations before intracompany elimination represented 96.0 % and 94.9 %, respectively, of total revenues of all operating segments.

At June 30, 2020 and December 31, 2019, insurance operations’ total assets represented 85.9 % and 85.5 %, respectively, of the combined assets of all operating segments.

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

For the three months ended September 30, 2020 and 2019, revenues from the Company’s insurance operations before intracompany elimination represented 71.1 % and 95.2 %, respectively, of total revenues of all operating segments.

For the nine months ended September 30, 2020 and 2019, revenues from the Company’s insurance operations before intracompany elimination represented 86.2 % and 95.0 %, respectively, of total revenues of all operating segments.

At September 30, 2020 and December 31, 2019, insurance operations’ total assets represented 83.0 % and 85.5 %, respectively, of the combined assets of all operating segments.

The following tables present segment information reconciled to the Company’s consolidated statements of income.

2 unchanged sentences

Reclassification/

For Three Months Ended June 30, 2020

For Three Months Ended September 30, 2020

Net premiums earned

Net investment income (loss)

Net realized investment gains (losses)

Net realized investment gains

Net unrealized investment gains

1 unchanged sentence

Policy fee income

Gain on involuntary conversion

Total revenue

4 unchanged sentences

Total expenses

Income (loss) before income taxes

(Loss) income before income taxes

Total revenue from non-affiliates(c)

7 unchanged sentences

Reclassification/

For Three Months Ended June 30, 2019

For Three Months Ended September 30, 2019

Net premiums earned

Net investment income (loss)

Net realized investment losses

Net realized investment (loss) gains

Net unrealized investment gains

12 unchanged sentences

Reclassification/

For Six Months Ended June 30, 2020

For Nine Months Ended September 30, 2020

Net premiums earned

4 unchanged sentences

Policy fee income

Gain on involuntary conversion

Total revenue

14 unchanged sentences

Reclassification/

For Six Months Ended June 30, 2019

For Nine Months Ended September 30, 2019

Net premiums earned

15 unchanged sentences

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

September 30,

Insurance Operations

4 unchanged sentences

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

September 30,

Operating leases:

4 unchanged sentences

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

As a result of the change in ownership of the Company’s headquarters building through the eminent domain proceeding described in Note 9 -- “Property and Equipment, Net,” all existing intercompany operating leases related to this building that were previously eliminated on consolidation are now reflected on the balance sheet.

These leases were determined to be at market rates on the date of the ownership change.

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

4 unchanged sentences

1 to 63 months

Storage units (e)

3 to 10 years

6 unchanged sentences

There is a bargain purchase option.

The initial lease term has expired in May 2020 .

The lease was renewed for one year .

As of June 30, 2020, maturities of lease liabilities were as follows:

Due in 12 months following June 30,

As of September 30, 2020, maturities of lease liabilities were as follows:

Due in 12 months following September 30,

Total lease payments

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Finance lease costs:

9 unchanged sentences

Financing cash flows – finance leases

June 30, 2020

September 30, 2020

Weighted-average remaining lease term:

14 unchanged sentences

Note 17 -- Income Taxes

During the three months ended June 30, 2020 and 2019, the Company recorded approximately $ 2,887 and $ 2,762 respectively, of income taxes, which resulted in effective tax rates of 24.4 % and 26.8 %, respectively.

The decrease in the effective tax rate as compared with the corresponding period in the prior year was primarily attributable to the recognition of a refund from the State of Florida for 2018 income taxes.

During the three months ended September 30, 2020 and 2019, the Company recorded approximately $ 6,146 and $ 1,866 respectively, of income taxes, which resulted in effective tax rates of 28.5 % and 24.2 %, respectively.

The increase in the effective tax rate as compared with the corresponding period in the prior year was primarily attributable to the non-deductibility of certain executive compensation.

Furthermore, the Florida corporate income tax rate was reduced from 5.5 % to 4.458 % in September 2019.

During the six months ended June 30, 2020 and 2019, the Company recorded approximately $ 2,997 and $ 5,307 , respectively, of income taxes, which resulted in effective tax rates of 24.0 % and 27.1 %, respectively.

The decrease in the effective tax rate in 2020 as compared with the corresponding period in the prior year was

During the nine months ended September 30, 2020 and 2019, the Company recorded approximately $ 9,143 and $ 7,173 , respectively, of income taxes, which resulted in effective tax rates of 26.9 % and 26.3 %, respectively.

The slight increase in the effective tax rate in 2020 as compared with the corresponding period in the prior year was primarily attributable

HCI GROUP, INC.

2 unchanged sentences

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

primarily attributable to the recognition of the tax refund, the recognition of windfall tax benefits related to share-based awards, and the reduction in state corporate income tax rate.

to the non-deductibility of executive compensation, offset by the recognition of the tax refund from the State of Florida for 2018 income taxes , and the recognition of windfall tax benefits related to share-based awards.

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 and tax-exempt items.

6 unchanged sentences

Three Months Ended

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

(Denominator)

9 unchanged sentences

assumed conversions

Six Months Ended

June 30, 2020

June 30, 2019

Nine Months Ended

September 30, 2020

September 30, 2019

(Denominator)

9 unchanged sentences

assumed conversions

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

For the three months ended September 30, 2019, convertible senior notes were excluded due to anti-dilutive effect.

HCI GROUP, INC.

5 unchanged sentences

On March 13, 2020, the Board approved a 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 June 30, 2020, the Company repurchased and retired a total of 51,834 shares at a weighted average price per share of $ 40.48 under these authorized repurchase plans.

The total cost of shares repurchased, inclusive of fees and commissions, during the three months ended June 30, 2020 was $ 2,100 or $ 40.51 per share.

During the six months ended June 30, 2020, the Company repurchased and retired a total of 128,685 shares at a weighted average price per share of $ 39.92 under this authorized repurchase plan.

The total cost of shares repurchased, inclusive of fees and commissions, during the six months ended June 30, 2020 was $ 5,141 , or $ 39.95 per share.

During the three months ended September 30, 2020, the Company repurchased and retired a total of 457 shares at a weighted average price per share of $ 43.76 under the plan for 2020.

The total cost of shares repurchased, inclusive of fees and commissions, during the three months ended September 30, 2020 was $ 20 or $ 43.79 per share.

During the nine months ended September 30, 2020, the Company repurchased and retired a total of 129,142 shares at a weighted average price per share of $ 39.93 under these authorized repurchase plans.

The total cost of shares repurchased, inclusive of fees and commissions, during the nine months ended September 30, 2020 was $ 5,161 or $ 39.96 per share.

In December 2018, the Company’s Board of Directors authorized a plan for 2019 to repurchase up to $ 20,000 of the Company’s common shares before commissions and fees.

During the three months ended June 30, 2019, the Company repurchased and retired a total of 160,787 shares at a weighted average price per share of $ 41.44 under this authorized repurchase plan.

The total cost of shares repurchased, inclusive of fees and commissions, during the three months ended June 30, 2019 was $ 6,668 , or $ 41.47 per share.

During the six months ended June 30, 2019, the Company repurchased and retired a total of 192,576 shares at a weighted average price per share of $ 41.54 under this authorized repurchase plan.

The total cost of shares repurchased, inclusive of fees and commissions, during the six months ended June 30, 2019 was $ 8,006 , or $ 41.57 per share

On April 13, 2020, the Company’s Board of Directors declared a quarterly dividend of $ 0.40 per common share.

The dividends were paid on June 19, 2020 to stockholders of record on May 15, 2020 .

During the three months ended September 30, 2019, the Company repurchased and retired a total of 175,160 shares at a weighted average price per share of $ 40.99 under this authorized repurchase plan.

The total cost of shares repurchased, inclusive of fees and commissions, during the three months ended September 30, 2019 was $ 7,185 , or $ 41.02 per share.

During the nine months ended September 30, 2019, the Company repurchased and retired a total of 367,736 shares at a weighted average price per share of $ 41.28 under this authorized repurchase plan.

The total cost of shares repurchased, inclusive of fees and commissions, during the nine months ended September 30, 2019 was $ 15,191 , or $ 41.31 per share.

On July 2, 2020, the Company’s Board of Directors declared a quarterly dividend of $ 0.40 per common share.

The dividends were paid on September 18, 2020 to stockholders of record on August 21, 2020 .

Preferred Stock

4 unchanged sentences

Incentive Plans

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 is active and available for future grants.

At June 30, 2020, there were 1,474,162 shares available for grant.

The Company currently has outstanding stock-based awards granted under the 2012 Omnibus Incentive Plan which is currently active and available for future grants.

At September 30, 2020, there were 1,473,851 shares available for grant.

Stock Options

4 unchanged sentences

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

A summary of the stock option activity for the three and six months ended June 30, 2020 and 2019 is as follows (option amounts not in thousands):

A summary of the stock option activity for the three and nine months ended September 30, 2020 and 2019 is as follows (option amounts not in thousands):

Outstanding at January 1, 2020

1 unchanged sentence

Outstanding at June 30, 2020

Exercisable at June 30, 2020

Outstanding at September 30, 2020

Exercisable at September 30, 2020

Outstanding at January 1, 2019

1 unchanged sentence

Outstanding at June 30, 2019

Exercisable at June 30, 2019

The following table summarizes information about options exercised for the three and six months ended June 30, 2020 and 2019 (option amounts not in thousands):

Outstanding at September 30, 2019

Exercisable at September 30, 2019

The following table summarizes information about options exercised for the three and nine months ended September 30, 2020 and 2019 (option amounts not in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Options exercised

1 unchanged sentence

Tax benefits realized

For the three months ended June 30, 2020 and 2019, the Company recognized $ 297 and $ 200 , respectively, of compensation expense which was included in general and administrative personnel expenses.

For the six months ended June 30, 2020 and 2019, the Company recognized $ 580 and $ 425 , respectively, of compensation expense.

Deferred tax benefits related to stock options were $ 19 and $ 20 for the three months ended June 30, 2020 and 2019, respectively, and $ 38 and $ 39 for the six months ended June 30, 2020 and 2019, respectively.

At June 30, 2020 and December 31, 2019, there was $ 2,488 and $ 1,835 , respectively, of unrecognized compensation expense related to nonvested stock options.

For the three months ended September 30, 2020 and 2019, the Company recognized $ 300 and $ 222 , respectively, of compensation expense which was included in general and administrative personnel expenses.

For the nine months ended September 30, 2020 and 2019, the Company recognized $ 880 and $ 647 , respectively, of compensation expense.

Deferred tax benefits related to stock options were $ 19 and $ 18 for the three months ended September 30, 2020 and 2019, respectively, and $ 57 for each of the nine months ended September 30, 2020 and 2019, respectively.

The Company recognized a reduction in realized tax benefit of $ 3 in September 2019 resulting from the change in the Florida corporate income tax rate described in Note 17 – “Income Taxes.” At September 30, 2020 and December 31, 2019, there was $ 2,189 and $ 1,835 , 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 2.5 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 six months ended June 30, 2020 and 2019:

Expected dividend yield

Expected volatility

Risk-free interest rate

Expected life (in years)

HCI GROUP, INC.

2 unchanged sentences

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

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 months ended September 30, 2020 and 2019:

Expected dividend yield

Expected volatility

Risk-free interest rate

Expected life (in years)

Restricted Stock Awards

2 unchanged sentences

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.

Information with respect to the activity of unvested restricted stock awards during the three and six months ended June 30, 2020 and 2019 is as follows:

Information with respect to the activity of unvested restricted stock awards during the three and nine months ended September 30, 2020 and 2019 is as follows:

Nonvested at January 1, 2020

1 unchanged sentence

Nonvested at June 30, 2020

Nonvested at September 30, 2020

Nonvested at January 1, 2019

1 unchanged sentence

Nonvested at June 30, 2019

Nonvested at September 30, 2019

HCI GROUP, INC.

2 unchanged sentences

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

The Company recognized compensation expense related to restricted stock, which is included in general and administrative personnel expenses, of $ 1,722 and $ 1,269 for the three months ended June 30, 2020 and 2019, respectively, and $ 3,280 and $ 2,523 for the six months ended June 30, 2020 and 2019, respectively.

At June 30, 2020 and December 31, 2019, there was approximately $ 17,483 and $ 12,661 , respectively, of total unrecognized compensation expense related to nonvested restricted stock arrangements.

The Company recognized compensation expense related to restricted stock, which is included in general and administrative personnel expenses, of $ 1,862 and $ 1,524 for the three months ended September 30, 2020 and 2019, respectively, and $ 5,142 and $ 4,047 for the nine months ended September 30, 2020 and 2019, respectively.

At September 30, 2020 and December 31, 2019, there was approximately $ 15,658 and $ 12,661 , 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 2.8 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 six months ended June 30, 2020 and 2019.

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Deferred tax benefits recognized

4 unchanged sentences

The dividend payments associated with these awards were expensed when declared.

As a result, for the three months ended June 30, 2019, the Company recognized dividends of $ 113 related to these awards in general and administrative personnel expenses for $ 85 and in other operating expenses for $ 28 .

For the six months ended June 30, 2019, the Company recognized dividends of $ 227 in general and administrative personnel expenses for $ 170 and in other operating expenses for $ 57 .

As a result, for the three months ended September 30, 2019, the Company recognized dividends of $ 10 related to these awards in other operating expenses.

For the nine months ended September 30, 2019, the Company recognized dividends of $ 237 in general and administrative personnel expenses for $ 170 and in other operating expenses for $ 67 .

Note 21 -- Commitments and Contingencies

1 unchanged sentence

As described in Note 5 -- “Investments” under Limited Partnership Investments , the Company is contractually committed to capital contributions for limited partnership interests.

At June 30, 2020, there was an aggregate unfunded balance of $ 13,660 .

At September 30, 2020, there was an aggregate unfunded balance of $ 12,178 .

On April 1, 2020, Gulf to Bay LM, LLC, the Company’s wholly owned real estate subsidiary, sued Kroger Co.

1 unchanged sentence

Lucky’s filed for bankruptcy earlier this year.

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Note 22 -- Subsequent Events

On July 2, 2020 , the Company’s Board of Directors declared a quarterly dividend of $ 0.40 per common share.

The dividends are payable on September 18, 2020 to stockholders of record on August 21, 2020 .

On July 24, 2020, the Florida Department of Transportation (“FDOT”) exercised the power of eminent domain under the Florida Constitution in order to acquire for a highway expansion project the property in Tampa, Florida where the Company’s headquarters is located for compensation of $ 47,500 .

Under the terms of the agreement, the FDOT assumed all contracts associated with this property, including the leases with existing tenants.

In addition, the Company agreed to donate a small portion of a separate tract of nearby undeveloped land it owns to the FDOT for the same expansion project.

The Company will have no later than July 24, 2023 to vacate the property.

In connection with this transaction, the Company recognized a net gain from involuntary conversion of approximately $ 37,000 .

On July 29, 2020, the Company made an early repayment of its 4 % Promissory Note totaling $ 7,062 in principal plus accrued interest.

The note was collateralized by the Company’s Tampa, Florida headquarters which was acquired by the FDOT in the eminent domain proceedings .

On October 16, 2020 , the Company’s Board of Directors declared a quarterly dividend of $ 0.40 per common share.

The dividends are payable on December 18, 2020 to stockholders of record on November 20, 2020 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements