What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 410 added, 196 removed, 934 unchanged (39% of the section changed)

17 unchanged sentences

Income taxes receivable

Premiums receivable, net

Premiums receivable, net (allowance:

$ 2,237 and $ 2,053 , respectively)

Prepaid reinsurance premiums

19 unchanged sentences

Accrued expenses

Income tax payable

Deferred income taxes, net

7 unchanged sentences

Common stock ( no par value, 40,000,000 shares authorized, 8,265,640 and 7,785,617

shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)

shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively)

Additional paid-in capital

10 unchanged sentences

Three Months Ended

Six Months Ended

Gross premiums earned

1 unchanged sentence

Net premiums earned

Net investment income (loss)

Net investment income

Net realized investment gains (losses)

Net unrealized investment losses

Net unrealized investment gains (losses)

Credit losses on investments

5 unchanged sentences

Interest expense

Loss on repurchases of convertible senior notes

Other operating expenses

2 unchanged sentences

Income tax expense

Net income attributable to redeemable noncontrolling interest (Note 18)

Net income attributable to redeemable noncontrolling

interest (Note 18)

Net loss attributable to noncontrolling interests

Net income attributable to HCI

Net income after noncontrolling interests

Basic earnings per share

3 unchanged sentences

AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income

(Amounts in thousands)

Three Months Ended

Other comprehensive loss:

Change in unrealized loss on investments:

Net unrealized losses arising during the period

Six Months Ended

Other comprehensive (loss) income:

Change in unrealized (loss) gain on investments:

Net unrealized gains (losses) arising during the period

Credit losses charged to income

Call and repayment gains charged to investment income

Reclassification adjustment for net realized (gains) losses

Net change in unrealized losses

Reclassification adjustment for net realized gains

Net change in unrealized (losses) gains

Deferred income taxes on above change

Total other comprehensive loss, net of income taxes

Comprehensive income (loss)

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

Comprehensive income

Comprehensive loss attributable to noncontrolling interests

Comprehensive income (loss) attributable to HCI

Comprehensive income after noncontrolling interests

See accompanying Notes to Consolidated Financial Statements (unaudited).

2 unchanged sentences

Consolidated Statement of Equity

For the Three Months Ended March 31, 2021

For the Three Months Ended June 30, 2021

(Dollar amounts in thousands, except per share amount)

2 unchanged sentences

Noncontrolling

Balance at March 31, 2021

Net income (loss)

Net income attributable to redeemable

noncontrolling interest

Total other comprehensive loss, net of

Issuance of restricted stock

Forfeiture of restricted stock

Cancellation of restricted stock

Repurchase and retirement of common

Dilution from subsidiary stock-based

Common stock dividends ($ 0.40 per share)

Stock-based compensation

Additional paid-in capital shortfall

adjustment allocated to retained income

Balance at June 30, 2021

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

(Dollar amounts in thousands, except per share amount)

Comprehensive

Stockholders’

Balance at March 31, 2020

Total other comprehensive income, net of

Issuance of restricted stock

Forfeiture of restricted stock

Repurchase and retirement of common stock

Repurchase and retirement of common stock under

share repurchase plan

Common stock dividends ($ 0.40 per share)

Stock-based compensation

Additional paid-in capital shortfall allocated

to retained income

Balance at June 30, 2020

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

(Dollar amounts in thousands, except per share amount)

Comprehensive

Stockholders’

Noncontrolling

Balance at December 31, 2020

Net income (loss)

Net income attributable to redeemable

noncontrolling interest

Cumulative effect of change in accounting

6 unchanged sentences

Dilution from subsidiary stock-based

Issuance of warrants, net of issuance costs (Note 18)

Issuance of warrants, net of issuance costs

Common stock dividends ($ 0.80 per share)

2 unchanged sentences

adjustment allocated to retained income

Balance at March 31, 2021

Balance at June 30, 2021

See accompanying Notes to Consolidated Financial Statements (unaudited).

2 unchanged sentences

Consolidated Statement of Stockholders’ Equity

For the Three Months Ended March 31, 2020

For the Six Months Ended June 30, 2020

(Dollar amounts in thousands, except per share amount)

2 unchanged sentences

Balance at December 31, 2019

Total other comprehensive loss, net of

Total other comprehensive loss, net of income taxes

Cumulative effect on adoption of credit loss standard

4 unchanged sentences

Repurchase and retirement of common stock under

share repurchase plan

share purchase plan

Common stock dividends ($ 0.80 per share)

2 unchanged sentences

to retained income

Balance at March 31, 2020

Balance at June 30, 2020

See accompanying Notes to Consolidated Financial Statements (unaudited).

3 unchanged sentences

(Amounts in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Net income attributable to HCI

Net income after noncontrolling interests

Net income attributable to noncontrolling interests

4 unchanged sentences

Depreciation and amortization

Deferred income tax benefit

Deferred income tax (benefit) expense

Net realized investment (gains) losses

Net unrealized investment losses

Net unrealized investment (gains) losses

Credit loss expense - investments

3 unchanged sentences

Distributions received from limited partnership interests

Loss on repurchases of convertible senior notes

Foreign currency remeasurement loss

17 unchanged sentences

(Amounts in thousands)

Three Months Ended

Six Months Ended

Cash flows from investing activities:

16 unchanged sentences

Proceeds from exercise of common stock options

Proceeds from issuance of redeemable noncontrolling interest

Proceeds from issuance of redeemable noncontrolling interest and warrants

Issuance costs - redeemable noncontrolling interest

1 unchanged sentence

Repayment of long-term debt

Repurchases of convertible senior notes

Repurchases of common stock

Repurchases of common stock under share repurchase plan

Purchase of noncontrolling interests

Debt issuance costs

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash

6 unchanged sentences

(Amounts in thousands)

Three Months Ended

Six Months Ended

Supplemental disclosure of cash flow information:

4 unchanged sentences

Receivable from sales of equity securities

Receivable from maturities of fixed-maturity securities

Payable on purchases of equity securities

Payable on purchases of fixed-maturity securities

Warrants issued in Centerbridge transaction

14 unchanged sentences

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 insurance operations, TypTap Group, real estate operations, and 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 Connecticut, New Jersey, Massachusetts, and Rhode Island to HCPCI.

8 unchanged sentences

The total commission will not exceed $ 3,100 .

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.

TTIG and its subsidiaries are considered a new reporting segment known as TypTap Group.

The Company’s reportable segments now include HCPCI insurance operations, TypTap Group, real estate operations, and corporate and other.

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”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) for interim financial

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.

2 unchanged sentences

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

information, and the Securities and Exchange Commission (“SEC”) rules for interim financial reporting.

Note 2 -- Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements for HCI Group, Inc.

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 March 31 , 20 2 1 and the results of operations and cash flows for the interim 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 June 30, 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, 2021.

14 unchanged sentences

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.

The Company elected to early adopt this update on January 1, 2021 using the modified retrospective method.

The adoption of this update increased long-term debt by $ 4,000 and simultaneously decreased beginning retained income and deferred income tax liabilities by $ 3,018 and $ 982 , 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.

HCI GROUP, INC.

2 unchanged sentences

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

The Company elected to early adopt this update on January 1, 2021 using the modified retrospective method.

The adoption of this 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

45 unchanged sentences

ASU 2021-01 is effective immediately and does not have any material impact on the Company’s consolidated financial statements.

Accounting Standards Update No.

In May 2021, the FASB issued Accounting Standards Update No.

2021-04 (“ASU 2021-04”) Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40).

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 related earnings per share effects, if any, or (2) an expense and, if so, the manner and pattern of recognition.

ASU 2021-04 is effective for the Company beginning with the first quarter of 2022 and will be applied prospectively.

Early adoption is permitted.

This guidance will not have a material impact on the Company’s consolidated financial statements.

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

10 unchanged sentences

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

At March 31, 2021 and December 31, 2020, 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:

As of March 31, 2021

At June 30, 2021 and December 31, 2020, 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:

As of June 30, 2021

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 March 31, 2021 and December 31, 2020 are as follows:

The scheduled contractual maturities of fixed-maturity securities as of June 30, 2021 and December 31, 2020 are as follows:

June 30, 2021

December 31, 2020

Amortized Cost

10 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 months ended March 31, 2021 and 2020 were as follows:

Three months ended March 31, 2021

Three months ended March 31, 2020

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, 2021 and 2020 were as follows:

Three months ended June 30, 2021

Three months ended June 30, 2020

Six months ended June 30, 2021

Six months ended June 30, 2020

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

Securities with gross unrealized loss positions at March 31, 2021 and December 31, 2020, 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 June 30, 2021 and December 31, 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

As of March 31, 2021

As of June 30, 2021

Treasury and U.S.

9 unchanged sentences

Corporate bonds

States, municipalities, and political subdivisions

States, municipalities, and political

Exchange-traded debt

Total available-for-sale securities

At March 31, 2021 and December 31, 2020, there were 17 and 12 securities, respectively, in an unrealized loss position.

At June 30, 2021 and December 31, 2020, there were 21 and 12 securities, respectively, in an unrealized loss position.

HCI GROUP, INC.

10 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 months ended March 31, 2021 and 2020:

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:

Balance at January 1

2 unchanged sentences

Balance at March 31

Credit loss expense

Reductions for securities exchanged

Balance at June 30

b) Equity Securities

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

At March 31, 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:

March 31, 2021

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:

June 30, 2021

December 31, 2020

5 unchanged sentences

Three Months Ended

Six Months Ended

Net gains (losses) recognized

1 unchanged sentence

securities sold

Net unrealized losses recognized

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 months ended March 31, 2021 and 2020 were as follows:

Three months ended March 31, 2021

Three months ended March 31, 2020

Proceeds received, and the gross realized gains and losses from sales of equity securities, for the three and six months ended June 30, 2021 and 2020 were as follows:

Three months ended June 30, 2021

Three months ended June 30, 2020

Six months ended June 30, 2021

Six months ended June 30, 2020

HCI GROUP, INC.

7 unchanged sentences

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

March 31, 2021

June 30, 2021

December 31, 2020

38 unchanged sentences

Three Months Ended

Six Months Ended

Operating results:

Total expenses

Net (loss) income

Net income (loss)

Balance sheet:

Total liabilities

For the three months ended March 31, 2021, the Company recognized net investment income of $ 787 versus net investment loss of $ 2,935 for the three months ended March 31, 2020.

Included in the net investment loss for the three months ended March 31, 2020 was $ 2,968 of an estimated unfavorable change in net asset value due to the impact of COVID-19.

During the three months ended March 31, 2021 and 2020, the Company received total cash distributions of $ 2,024 and $ 696 , respectively, including returns on investment of $ 478 and $ 382 , respectively.

At March 31, 2021 and December 31, 2020, the Company’s net cumulative contributed capital to the partnerships at each respective balance sheet date totaled $ 27,998 and $ 29,272 , respectively, and the Company’s maximum exposure to loss aggregated $ 26,726 and $ 27,691 , respectively.

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

During the three and six months ended June 30, 2021, the Company received 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.

At March 31, 2021 and December 31, 2020, the Company’s maximum exposure to loss relating to the variable interest entity was $ 680 and $ 705 , respectively, representing the carrying value of the investment.

There were no cash distributions during the three months ended March 31, 2021 and 2020.

At March 31, 2021 and December 31, 2020, there was no undistributed income from this equity method investment.

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 no cash distributions during the six months ended June 30, 2021 and 2020.

At June 30, 2021 and December 31, 2020, 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

Operating results:

1 unchanged sentence

Total expenses

Net income (loss)

The Company’s share of net loss*

12 unchanged sentences

e) Real Estate Investments

Real estate investments consist of the following as of March 31, 2021 and December 31, 2020:

Real estate investments consist of the following as of June 30, 2021 and December 31, 2020:

Land improvements

3 unchanged sentences

Real estate investments

For the three months ended March 31, 2021, the Company incurred a $ 21 loss on disposal of assets related to a closure of a restaurant.

Depreciation and amortization expense related to real estate investments was $ 491 and $ 455 for the three months ended March 31, 2021 and 2020, respectively.

For the six months ended June 30, 2021, the Company incurred a $ 21 loss on disposal of assets related to a closure of a restaurant.

Depreciation and amortization expense related to real estate investments was $ 479 and $ 432 for the three months ended June 30, 2021 and 2020, respectively, and $ 970 and $ 887 for the six months ended June 30, 2021 and 2020, respectively.

HCI GROUP, INC.

5 unchanged sentences

Three Months Ended

Six Months Ended

Available-for-sale fixed-maturity securities

6 unchanged sentences

Short-term investments

Net investment income (loss)

For the three months ended March 31, 2021, income from real estate investments included a net gain of $ 2,790 resulting from a legal settlement with The Kroger Co.

Net investment income

For the six months ended June 30, 2021, income from real estate investments included a net gain of $ 2,790 resulting from a legal settlement with The Kroger Co.

in a lawsuit filed by a real estate subsidiary of the Company to enforce a guaranty of a commercial lease.

h) Other Investments

From time to time, the Company may invest in financial assets other than stocks, mutual funds and 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 no net realized gains or losses related to other investments for the three and six months ended June 30, 2020.

Note 6 -- Comprehensive Income (Loss)

4 unchanged sentences

Three Months Ended

March 31, 2021

March 31, 2020

Unrealized losses arising during the period

June 30, 2021

June 30, 2020

Net unrealized gains

Credit losses on investments

2 unchanged sentences

Reclassification adjustment for realized

(gains) losses

Total other comprehensive loss

Total other comprehensive (losses) gains

HCI GROUP, INC.

2 unchanged sentences

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

Six Months Ended

June 30, 2021

June 30, 2020

Net unrealized losses

Credit losses on investments

Call and repayment gains charged to

investment income

Reclassification adjustment for realized

Total other comprehensive losses

Note 7 -- Fair Value Measurements

18 unchanged sentences

The derived fair value estimates cannot be substantiated by comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange.

The estimated fair values for securities that do not trade on a daily basis are determined by management, utilizing prices obtained from an independent pricing service and information provided by brokers, which are level 2 inputs.

Management reviews the assumptions and methods utilized by the pricing service and then compares the relevant data and pricing to broker-provided data.

The Company gains assurance of the overall reasonableness and consistent application of the assumptions and methodologies and compliance with accounting standards for fair value determination through ongoing monitoring of the reported fair values.

HCI GROUP, INC.

2 unchanged sentences

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

Revolving C redit F acility

Management reviews the assumptions and methods utilized by the pricing service and then compares the relevant data and pricing to broker-provided data.

Revolving Credit Facility

The Company’s revolving credit facility is a variable-rate loan.

13 unchanged sentences

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 March 31, 2021 and December 31, 2020:

The table indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of June 30, 2021 and December 31, 2020:

Fair Value Measurements Using

As of March 31, 2021

As of June 30, 2021

Financial Assets:

29 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 consolidated balance sheets at amounts other than fair value as of March 31, 2021 and December 31, 2020:

The following tables present fair value information for assets and liabilities that are carried on the consolidated balance sheets at amounts other than fair value as of June 30, 2021 and December 31, 2020:

Fair Value Measurements Using

As of March 31, 2021

As of June 30, 2021

Financial Liabilities:

19 unchanged sentences

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

Note 8 -- Intangible Assets

Note 8 -- Intangible Assets, Net

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

6 unchanged sentences

Intangible assets, net

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

The remaining weighted-average amortization periods for the intangible assets at March 31, 2021 are summarized in the table below:

Anchor tenant relationships*

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

Anchor tenant relationships (a)

In-place leases

Policy renewal rights - United

Non-compete agreement - United

(a) The amortization period has not been determined as the attrition rate in those states needs further observation.

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

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

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.

Amortization of the intangible assets was expected to begin June 1, 2021 .

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 intangibles assets as an asset acquisition.

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 .

13 unchanged sentences

In March 2021, the Company repaid the entire credit facility balance of $ 23,750 .

For the three months ended March 31, 2021 and 2020, interest expense was $ 104 and $ 153 , respectively, including $ 25 and $ 39 of amortization of issuance costs, respectively.

At March 31, 2021, the Company was in compliance with all required covenants with no borrowings outstanding.

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 no borrowings outstanding.

The borrowing capacity of the facility is now $ 65,000 .

16 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 March 31, 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 March 31,

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

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

Three Months Ended

Six Months Ended

Interest Expense:

9 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 March 31, 2021, the conversion rate of the Company’s 4.25 % Convertible Notes was 16.45 shares of common stock for each $1 in principal amount, which was the equivalent of approximately $ 60.80 per share.

As of March 31, 2021, the remaining amortization period of the debt discount for 4.25% Convertible Notes was expected to be 1 year.

Accordingly, as of June 30, 2021, the conversion rate of the Company’s 4.25 % Convertible Notes was 16.4594 shares of common stock for each $1 in principal amount, which was the equivalent of approximately $ 60.76 per share.

During the second quarter of 2021, the Company’s common shares traded above 130 % of the conversion price for at least 20 trading days during the final 30 trading days of the quarter.

As a result, the 4.25 % Convertible Notes are convertible by all holders beginning July 1 through September 30, 2021 in accordance with the terms specified in the indenture.

As of June 30, 2021, the remaining amortization period of the debt issuance costs for the 4.25% Convertible Notes was expected to be 8 months.

Note 12 -- Reinsurance

10 unchanged sentences

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 1 st each year.

The Company contracts with a number of reinsurers to secure its annual reinsurance coverage, which generally becomes effective June 1 st of each year.

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

1 unchanged sentence

Three Months Ended

Six Months Ended

Premiums Written:

3 unchanged sentences

Net premiums earned

During the three months ended March 31, 2021 and 2020, the Company recognized ceded losses of $ 107 and $ 338 , respectively, as a reduction in losses and loss adjustment expenses.

At March 31, 2021 and December 31, 2020, there were 38 reinsurers participating in the Company’s reinsurance program.

Total gross amounts recoverable and receivable from reinsurers at March 31, 2021 and December 31, 2020 were $ 71,722 and $ 85,146 , respectively.

Approximately 61.3 % of the reinsurance recoverable balance at March 31, 2021 was receivable from two 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 $ 12 and $ 24 for the three months ended March 31, 2021 and 2020, respectively.

Allowances for credit losses related to the reinsurance recoverable balance were $ 73 and $ 85 at March 31, 2021 and December 31, 2020, respectively.

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

For the three months ended March 31, 2021 and 2020, the Company recognized reductions in premiums ceded of $ 4,680 and $ 2,520 , respectively, related to these adjustments in the consolidated statements of income.

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

At March 31, 2021 and December 31, 2020, other assets included $ 15,600 and $ 10,920 , respectively.

Management believes the credit risk associated with the collectability of these accrued benefits is minimal as the amount receivable is concentrated with one reinsurer and the Company monitors the creditworthiness of this reinsurer based on available information about the reinsurer’s financial condition.

During the three and six months ended June 30, 2021, the Company recognized ceded losses of $ 487 and $ 594 , respectively, as a reduction in losses and loss adjustment expenses.

During the three and six months ended June 30, 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 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 include retrospective provisions that adjust premiums in the event losses are minimal or zero.

For the three and six months ended June 30, 2021, the Company recognized reductions in premiums ceded of $ 3,575 and $ 8,255 , respectively, related to 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.

HCI GROUP, INC.

2 unchanged sentences

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

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

At June 30, 2021 and December 31, 2020, other assets included $ 455 and $ 10,920 , respectively.

In June 2021, the Company received $ 18,720 of premium refund under the retrospective reinsurance contract that ended May 31, 2021.

Management believes the credit risk associated with the collectability of 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.

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 months ended March 31, 2021, assumed premiums written related to United were $ 15,717 .

At March 31, 2021, the Company had a net balance of $ 2,024 due from United, consisting of premiums receivable of $ 5,788 offset by ceding commission payable of $ 1,447 and payable on paid losses and loss adjustment expenses of $ 2,317 .

For the three and six months ended June 30, 2021, assumed premiums written related to United were $ 41,754 and $ 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 13 -- Losses and Loss Adjustment Expenses

6 unchanged sentences

Three Months Ended

Six Months Ended

Net balance, beginning of period*

10 unchanged sentences

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

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

Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such estimates are adjusted.

During the three months ended March 31, 2021, the Company recognized losses related to prior periods of $ 3,831 primarily to increase the reserve for the 2020 loss year.

Losses and LAE for the three months ended March 31, 2021 included estimated losses, net of reinsurance, of approximately $ 11,000 related to policies assumed from United and approximately $ 12,299 related to TypTap.

HCI GROUP, INC.

2 unchanged sentences

(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 and six months ended June 30, 2021, the Company recognized losses related to prior periods of $ 4,607 and $ 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 reinsurance, of approximately $ 23,500 related to policies assumed from United, approximately $ 2,600 of which pertained to TypTap.

Note 14 -- Segment Information

11 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, 2021 and 2020, revenues from the HCPCI insurance operations segment before intracompany elimination represented 77.6 % and 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 six months ended June 30, 2021 and 2020, revenues from the HCPCI insurance operations segment before intracompany elimination represented 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.

At June 30, 2021 and December 31, 2020, HCPCI insurance operations’ total assets represented 61.4 % and 68.9 %, respectively, and TypTap Group’s total assets represented 25.4 % and 16.7 %, respectively, of the combined assets of all operating segments.

HCI GROUP, INC.

2 unchanged sentences

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

For the three months ended March 31, 2021 and 2020, revenues from the HCPCI insurance operations segment before intracompany elimination represented 77.7 % and 79.3 %, respectively, and revenues from the TypTap Group segment represented 17.2 % and 15.6 %, respectively, of total revenues of all operating segments.

At March 31, 2021 and December 31, 2020, HCPCI insurance operations’ total assets represented 62.2 % and 68.9 %, respectively, and TypTap Group’s total assets represented 23.9 % and 16.7 %, 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 March 31, 2021

For Three Months Ended June 30, 2021

Gross premiums earned (c)

23 unchanged sentences

Reclassification/

For Three Months Ended March 31, 2020

Gross premiums earned

For Three Months Ended June 30, 2020

Gross premiums earned (c)

Premiums ceded

Net premiums earned

Net (loss) income from investment portfolio

Net income (loss) from investment portfolio

Policy fee income

5 unchanged sentences

Depreciation and amortization

Loss on repurchases of convertible senior notes

Personnel and other operating expenses

1 unchanged sentence

Income (loss) before income taxes

Total revenue from non-affiliates(c)

Total revenue from non-affiliates (d)

Gross premiums written

1 unchanged sentence

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

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

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)

Reclassification/

For Six Months Ended June 30, 2021

Gross premiums earned (c)

Premiums ceded

Net premiums earned

Net income from investment portfolio

Policy fee income

Total revenue

Losses and loss adjustment expenses

Amortization of deferred policy acquisition costs

Other policy acquisition expenses

Interest expense

Depreciation and amortization

Personnel and other operating expenses

Total expenses

Income (loss) before income taxes

Total revenue from non-affiliates (d)

Gross premiums written

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

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

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

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)

Reclassification/

For Six Months Ended June 30, 2020

Gross premiums earned (c)

Premiums ceded

Net premiums earned

Net income (loss) from investment portfolio

Policy fee income

Total revenue

Losses and loss adjustment expenses

Amortization of deferred policy acquisition costs

Other policy acquisition expenses

Interest expense

Depreciation and amortization

Loss on repurchases of convertible senior notes

Personnel and other operating expenses

Total expenses

Income (loss) before income taxes

Total revenue from non-affiliates (d)

Gross premiums written

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

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

Gross premiums earned consist of $ 165,193 from HCPCI and $ 797 from a reinsurance company.

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:

25 unchanged sentences

There is a bargain purchase option.

As of March 31, 2021, maturities of lease liabilities were as follows:

Due in 12 months following March 31,

As of June 30, 2021, maturities of lease liabilities were as follows:

Due in 12 months following June 30,

Total lease payments

7 unchanged sentences

Three Months Ended

Six Months Ended

Finance lease costs:

4 unchanged sentences

Total lease costs

Cash paid for amounts included in the measurement of lease

Cash paid for amounts included in the

measurement of lease liabilities:

Operating cash flows – finance leases

1 unchanged sentence

Financing cash flows – finance leases

March 31, 2021

June 30, 2021

Weighted-average remaining lease term:

14 unchanged sentences

Note 16 -- Income Taxes

During the three months ended March 31, 2021 and 2020, the Company recorded approximately $ 3,257 and $ 110 respectively, of income taxes, which resulted in effective tax rates of 32.2 % and 16.7 %, respectively.

The increase in the effective tax rate as compared with the corresponding period in the prior year was primarily attributable to the derecognition of deferred tax assets attributable to unvested restricted stock that was cancelled in February 2021, offset by a slight decrease in non-deductibility of certain executive compensation.

During the three months ended June 30, 2021 and 2020, the Company recorded approximately $ 1,267 and $ 2,887 respectively, of income taxes, which resulted in effective tax rates of 24.9 % and 24.4 %, respectively.

During the six months ended June 30, 2021 and 2020, the Company recorded approximately $ 4,524 and $ 2,997 , respectively, of income taxes, which resulted in effective tax rates of 29.8 % and 24.0 %, respectively.

The increase in the effective tax rate 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 and tax-exempt items.

11 unchanged sentences

Three Months Ended

March 31, 2021

March 31, 2020

June 30, 2021

June 30, 2020

(Denominator)

Net income attributable to redeemable

noncontrolling interest

TypTap Group's net loss attributable to

non-HCI common stockholders and

TypTap Group's participating securities

Net income attributable to HCI

6 unchanged sentences

Diluted Earnings Per Share:

Income available to common stockholders

and assumed conversions

Shares in thousands.

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

June 30, 2021

June 30, 2020

(Denominator)

Net income attributable to redeemable

noncontrolling interest

TypTap Group's net loss attributable to

non-HCI common stockholders and

TypTap Group's participating securities

Net income attributable to HCI

Income attributable to participating

Basic Earnings Per Share:

Income allocated to common stockholders

Effect of Dilutive Securities:

Stock options

Convertible senior notes* (b)

Diluted Earnings Per Share:

Income available to common stockholders and

2 unchanged sentences

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

For the three months ended March 31, 2020, convertible senior notes were excluded due to anti-dilutive effect.

* 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.

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 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 future expansion.

The proceeds will be used for TypTap’s operations and continued expansion.

The Company incurred $ 6,262 of related issuance costs.

1 unchanged sentence

The warrants valued at $ 9,217 or $ 12.29 per warrant were immediately exercisable and will expire on the fourth anniversary of the date of issuance.

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Dividends accrue and accumulate from the date of issuance.

3 unchanged sentences

In addition, the Series A Preferred Stock will be paid dividends on an as-converted basis when and if TTIG declares common stock dividends.

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

4 unchanged sentences

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 March 31, 2021.

Management determined that the redemption was not probable at June 30, 2021.

Guaranty by HCI

4 unchanged sentences

Anti-Dilutive Protection

The holders of TTIG’s Series A Preferred Stock receive protection in 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.

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.

2 unchanged sentences

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

The following table summarizes the activity of redeemable noncontrolling interest during the three months ended March 31, 2021:

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

Balance at January 1, 2021

4 unchanged sentences

Issuance costs allocated to warrants*

Accrued dividends

Accrued cash dividends

Accretion - increasing dividend rates

Balance at March 31, 2021

Increase (decrease):

Accrued cash dividends

Accretion - increasing dividend rates

Balance at June 30, 2021

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

For the three months ended March 31, 2021, net income attributable to redeemable noncontrolling interest was $ 794 , consisting of accrued dividends of $ 458 and accretion related to increasing dividend rates of $ 336 .

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 19 -- Equity

Stockholders’ Equity

The Company’s 2020 stock repurchase plan was considered expired and there was no new stock repurchase plan approved by the Board of Directors during the first quarter of 2021.

The Company’s 2020 stock repurchase plan was considered to be expired and there was no new stock repurchase plan approved by the Board of Directors 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 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 March 31, 2020, the Company repurchased and retired a total of 76,851 shares at a weighted average price per share of $ 39.55 under these authorized repurchase plans.

The total cost of shares repurchased, inclusive of fees and commissions, during the three months ended March 31, 2020 was $ 3,041 or $ 39.58 per share.

On January 19, 2021 , the Company’s Board of Directors declared a quarterly dividend of $ 0.40 per common share.

The dividends were paid on March 19, 2021 to stockholders of record on February 19, 2021 .

At March 31, 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

TTIG is authorized to issue 175 million shares of common stock with a par value of $ 0.001 per share, and 25 million shares of preferred stock.

In February 2021, TTIG issued 10 million shares of Series A Preferred Stock (see Note 18 -- “Redeemable Noncontrolling Interest”).

At March 31, 2021, there were 80,749,300 shares of TTIG’s common stock outstanding, of which 5,749,300 shares were not owned by HCI.

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 this authorized repurchase plan.

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.

On April 28, 2021 , the Company’s Board of Directors declared a quarterly dividend of $ 0.40 per common share.

The dividends were paid on June 18, 2021 to stockholders of record on May 21, 2021 .

HCI GROUP, INC.

2 unchanged sentences

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

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 with a par value of $ 0.001 per share, and 37,502,000 shares of 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 were not owned by HCI.

In May 2021, TTIG repurchased and retired a total of 52,015 shares of its common stock surrendered by its employees to satisfy payroll tax liabilities associated with the vesting of restricted shares.

The total cost of purchasing noncontrolling interests was $ 58 .

Note 20 -- Stock-Based Compensation

1 unchanged sentence

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

At March 31, 2021, there were 1,073,540 shares available for grant.

At June 30, 2021, there were 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 months ended March 31, 2021 and 2020 is as follows (option amounts not in thousands):

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):

Outstanding at January 1, 2021

Outstanding at March 31, 2021

Exercisable at March 31, 2021

Outstanding at June 30, 2021

Exercisable at June 30, 2021

Outstanding at January 1, 2020

Outstanding at March 31, 2020

Exercisable at March 31, 2020

The following table summarizes information about options exercised for the three months ended March 31, 2021 and 2020 (option amounts not in thousands):

Outstanding at June 30, 2020

Exercisable at June 30, 2020

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 about options exercised for the three and six months ended June 30, 2021 and 2020 (option amounts not in thousands):

Three Months Ended

Six Months Ended

Options exercised

1 unchanged sentence

Tax benefits realized

For the three months ended March 31, 2021 and 2020, the Company recognized $ 223 and $ 283 , respectively, of compensation expense which was included in general and administrative personnel expenses.

Deferred tax benefits related to stock options were $ 1 and $ 19 for the three months ended March 31, 2021 and 2020, respectively.

At March 31, 2021 and December 31, 2020, there was $ 1,666 and $ 1,889 , respectively, of unrecognized compensation expense related to nonvested stock options.

For the three months ended June 30, 2021 and 2020, the Company recognized $ 219 and $ 297 , respectively, of compensation expense which was included in 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 $ 0 and $ 19 for the three months ended June 30, 2021 and 2020, respectively, and $ 1 and $ 38 for the six months ended June 30, 2021 and 2020, respectively.

At June 30, 2021 and December 31, 2020, there was $ 1,447 and $ 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 2.0 years.

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 assumptions used in the Black-Scholes option-pricing model to estimate the fair value of the stock options granted during the three months ended March 31, 2020:

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:

Expected dividend yield

7 unchanged sentences

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.

Information with respect to the activity of unvested restricted stock awards during the three months ended March 31, 2021 and 2020 is as follows:

Nonvested at January 1, 2021

Nonvested at March 31, 2021

Nonvested at January 1, 2020

Nonvested at March 31, 2020

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 $ 1,905 and $ 1,558 for the three months ended March 31, 2021 and 2020, respectively.

At March 31, 2021 and December 31, 2020, there was approximately $ 27,449 and $ 13,666 , respectively, of total unrecognized compensation expense related to nonvested restricted stock arrangements.

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

Nonvested at January 1, 2021

Nonvested at March 31, 2021

Nonvested at June 30, 2021

Nonvested at January 1, 2020

Nonvested at March 31, 2020

Nonvested at June 30, 2020

The Company recognized compensation expense related to restricted stock, which is included in general and administrative personnel expenses, of $ 2,336 and $ 1,722 for the three months ended June 30, 2021 and 2020, respectively, and $ 4,241 and $ 3,280 for the six months ended June 30, 2021 and 2020, respectively.

At June 30, 2021 and December 31, 2020, there was approximately $ 24,919 and $ 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 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 months ended March 31, 2021 and 2020.

Three Months Ended

Deferred tax benefits (derecognized) recognized

Six Months Ended

Deferred tax benefits recognized

Tax benefits realized for restricted stock

1 unchanged sentence

Fair value of vested restricted stock

In February 2021, the Company cancelled 141,600 shares of restricted stock for employees who transitioned to the TypTap Group (See Note 1 -- “Nature of Operations”).

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)

Subsidiary Equity Plan

3 unchanged sentences

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 March 31, 2021, TypTap Group recognized compensation expense related to restricted stock of $ 215 .

At March 31, 2021, there was approximately $ 6,617 of total unrecognized compensation expense related to nonvested restricted stock.

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 21 -- Commitments and Contingencies

Obligations under Multi-Year Reinsurance Contracts

As of June 30, 2021, the Company has contractual obligations related to two multi-year reinsurance contracts.

These contracts may be cancelled only with the other party’s consent or when their respective experience accounts are positive at the end of each contract year.

The table below presents the future minimum aggregate premium amounts payable to the reinsurer.

Due in 12 months following June 30,

*Premiums payable after May 31, 2022 are estimated.

Capital Commitments

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

At March 31, 2021, there was an aggregate unfunded balance of $ 9,861 .

At June 30, 2021, there was an aggregate unfunded balance of $ 9,302 .

Note 22 -- Related Party Transactions

1 unchanged sentence

This commitment has ended on February 26, 2021 after the investment transaction described in Note 18 -- “Redeemable Noncontrolling Interest.”

HCI GROUP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

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

Note 23 -- Subsequent Events

On April 28, 2021 , the Company’s Board of Directors declared a quarterly dividend of $ 0.40 per common share.

The dividends are payable on June 18, 2021 to stockholders of record on May 21, 2021 .

On July 7, 2021 , the Company’s Board of Directors declared a quarterly dividend of $ 0.40 per common share.

The dividends are payable on September 17, 2021 to stockholders of record on August 20, 2021 .

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