Q1 2026 HCI Group Inc Earnings Call

May 6, 2026

Operator: Good afternoon. Welcome to HCI Group's Q1 2026 Earnings Call. My name is Tom and I will be your conference operator. At this time, all participants will be in a listen-only mode. Before we begin today's call, I would like to remind everyone that this conference call is being recorded and will be available for replay through 6 June 2026, starting later today. The call is also being broadcast live via webcast and available via webcast replay until 6 May 2027 on the investor information section of HCI Group's website at www.hcigroup.com. I would now like to turn the call over to Nat Otis, HCI Investor Relations. Nat, please proceed.

Speaker #2: Before we begin today's call, I would like to remind everyone that this conference call is being recorded and will be available for replay through June 6th, 2026, starting later today.

Speaker #2: The call is also being broadcast live via webcast and available via webcast replay until May 6th, 2027, on the Investor Information section of HCI Group's website at www.hcigroup.com.

Speaker #2: I would now like to turn the call over to Nat Otis, HCI Investor Relations. Nat, please proceed. Thank you and good afternoon. Welcome to HCI Group's first quarter 2026 earnings call.

Nat Otis: Thank you and good afternoon. Welcome to HCI Group's Q1 2026 Earnings Call. To access today's webcast, please visit the investor information section of our corporate website at www.hcigroup.com. Before we begin, I'd like to take the opportunity to remind our listeners that today's presentation and responses to questions may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as anticipate, estimate, expect, intend, planned, and project and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission.

Speaker #2: To access today's webcast, please visit the Investor Information section of our corporate website at www.hcigroup.com. Before we begin, I'd like to take the opportunity to remind our listeners that today's presentation and responses to questions may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995.

Speaker #2: Words such as "anticipate," "estimate," "expect," "intend," "planned," and "project" and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather a subject to various risks and uncertainties.

Speaker #2: Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have materially adverse effects on the company's business, financial condition, and results of operations.

Nat Otis: Should any risks or uncertainties develop into actual events, these developments could have materially adverse effects on the company's business, financial condition, and results of operations. HCI Group disclaims all the obligations to update any forward-looking statements. Now, with that, I'll turn the call over to Mark Harmsworth, Chief Financial Officer.

Speaker #2: HCI Group disclaims all the obligations to update any forward-looking statements. Now, with that, I'll turn the call over to Mark Harmsworth, Chief Financial Officer.

Speaker #3: Thanks, Nat. Good afternoon, everyone, and thank you for taking the time to join us on our call today. This was another fantastic quarter. Pre-tax income grew by 15% from the same quarter last year to $115 million, and diluted earnings per share were $5.45.

Mark Harmsworth: Thanks, Matt. Good afternoon, everyone, and thank you for taking the time to join us on our call today. This was another fantastic quarter. Pre-tax income grew by 15% from the same quarter last year to $115 million, and diluted earnings per share were $5.45. This was the best Q1 ever for us as we continue to grow the top line, the bottom line, and return on equity. Gross premiums earned grew by just over 8%, reflecting the full impact of the assumptions we completed in 2025. Total revenue grew by just over 12% as investment income and other income grew significantly. The increase in other income reflects revenue that Exzeo and Griston are generating on non-HCI business.

Mark Harmsworth: Thanks, Nat. Good afternoon, everyone, and thank you for taking the time to join us on our call today. This was another fantastic quarter. Pre-tax income grew by 15% from the same quarter last year to $115 million, and diluted earnings per share were $5.45. This was the best Q1 ever for us as we continue to grow the top line, the bottom line, and return on equity. Gross premiums earned grew by just over 8%, reflecting the full impact of the assumptions we completed in 2025. Total revenue grew by just over 12% as investment income and other income grew significantly. The increase in other income reflects revenue that Exzeo and Griston are generating on non-HCI business.

Speaker #3: This was the best first quarter ever for us as we continue to grow the top line, the bottom line, and return on equity. Gross premiums earned grew by just over 8%, reflecting the full impact of the assumptions we completed in 2025.

Speaker #3: Total revenue grew by just over 12% as investment income and other income grew significantly. The increase in other income reflects revenue that Exio and Gristin are generating on non-HCI business.

Speaker #3: The loss ratio this quarter was 20%, about the same as the first quarter last year, reflecting continued low claims and litigation frequency. We've been talking about the combined ratio for a while now.

Mark Harmsworth: The loss ratio this quarter was 20%, about the same as Q1 last year, reflecting continued low claims and litigation frequency. We've been talking about the combined ratio for a while now. With where the business is, we're targeting a combined ratio of 60% ±5%. For the full year 2025, the combined ratio was about 57%, and it was 57% again this quarter, illustrating the quality of our underwriting and our operating efficiencies. Let's turn to the balance sheet for a minute. With growing earnings and prudent capital management, the balance sheet continues to strengthen. Stockholder equity has doubled over just the last year to over $1 billion. We have just under $2 billion of cash and fixed-term securities.

Speaker #3: With where the business is, we're targeting a combined ratio of 60% plus or minus 5%. For the full year 2025, the combined ratio was about 57%, and it was 57% again this quarter, illustrating the quality of our underwriting and our operating efficiencies.

Speaker #3: Let's turn to the balance sheet for a minute. With growing earnings and prudent capital management, the balance sheet continues to strengthen. Stockholder equity has doubled over just the last year, to over $1 billion.

Speaker #3: We have just under $2 billion of cash and fixed-term securities. Book value per share is now almost $85, and the debt-to-cap ratio is only 6%.

Mark Harmsworth: Book value per share is now almost $85, and the debt-to-cap ratio is only 6%. In addition to the strong consolidated balance sheet, the underwriters are stronger than ever. As I mentioned earlier, gross premiums are up by 8% or so, but total surplus has grown by 22% over the last year to well over a half a billion dollars. The gross leverage ratio is now less than 2.5, leaving plenty of room for additional growth without the need for surplus, for new capital, sorry, and gives us additional security if there's a storm. We also have significant surplus in Claddaugh, which gives us considerable flexibility in our upcoming reinsurance program.

Speaker #3: In addition to the strong consolidated balance sheet, the underwriters are stronger than ever. As I mentioned earlier, gross premiums are up by 8% or so, but total surplus has grown by 22% over the last year, to well over a half a billion dollars.

Speaker #3: The gross leverage ratio is now less than 2.5, leaving plenty of room for additional growth without the need for surplus for new capital and gives us additional security if there is a storm.

Speaker #3: We also have significant surplus in Clauda, which gives us considerable flexibility in our upcoming reinsurance program. As you know, we announced a buyback plan in March under which we were authorized to purchase up to $80 million of stock, and we have been actively buying back shares under that plan.

Mark Harmsworth: As you know, we announced a buyback plan in March under which we were authorized to purchase up to $80 million of stock. We have been actively buying back shares under that plan. As of the end of March, we had used $17.5 million of the authorization, buying back approximately 110,000 shares. Since the end of Q1, we have continued buying back shares. At the end of April, we were up to a cumulative total of 239,000 shares purchased and have used about $37.5 million of the $80 million. In terms of holding company liquidity, we have just under $200 million of liquidity at the HCI level. This does not include the 75 million shares we own of Exzeo, which now trade publicly.

Speaker #3: As of the end of March, we had used 17.5 million of the authorization, buying back approximately 110,000 shares. Since the end of the first quarter, we have continued buying back shares, and at the end of April, we were up to a cumulative total of 239,000 shares purchased, and have used about 37.5 million of the $80 million.

Speaker #3: In terms of holding company liquidity, we have just under $200 million of liquidity at the HCI level. This does not include the $75 million shares we own of Exio, which now trade publicly.

Speaker #3: Speaking of Exio, while our book value per share of almost $85 is impressive, I should mention that this does not include any unrealized gains on our ownership of Exio.

Mark Harmsworth: Speaking of Exzeo, while our book value per share of almost $85 is impressive, I should mention that this does not include any unrealized gains on our ownership of Exzeo. If the fair value of Exzeo and our real estate portfolio were added, pro forma book value per share would be almost $145. This means that we are trading only about 10% above book value while generating record earnings and 35% after-tax return on equity. Wrapping up on the quarter, this has been another fantastic one for the company. 2025 was a record year for HCI, and the Q1 of this year was even better. Revenue is growing, margins are expanding, we are generating record cash flows, have minimal debt, and are generating superior returns on capital. With that, I'll hand it over to Karin.

Speaker #3: If the fair value of Exio and our real estate portfolio were added, pro forma book value per share would be almost $145. This means that we're trading only about 10% above book value, while generating record earnings and 35% after-tax return on equity.

Speaker #3: Wrapping up on the quarter, this has been another fantastic one for the company. 2025 was a record year for HCI, and the first quarter of this year was even better.

Speaker #3: Revenue was growing, margins are expanding, we flows, have minimal debt, and are generating superior returns on capital, and with that, I'll hand it over to Karin.

Speaker #1: Thank you, Mark. We are very pleased with our start to 2026. We average more than $5.60 per share over the past five quarters and entered the second quarter with and we entered the second quarter with 1.3 billion in premiums in force, spread across four carriers.

Karin Coleman: Thank you, Mark. We are very pleased with our start to 2026. We averaged more than $5.60 per share over the past 5 quarters and entered Q2 with 1.3 billion in premiums in force spread across four carriers. It is important to point out that over half of our Citizens' takeouts in 2025 were done by Tailrow, our second reciprocal exchange. Tailrow is now well-positioned going forward with over $120 million of in-force premiums. All four of our carriers are now profitable inception to date, the last two having reached that milestone within a 12 to 15-month time span from inception. I bring this up to underscore our company philosophy. When we make strategic decisions, we take actions with purpose and precision.

Speaker #1: It is important to point out that over half of our Citizens Takeouts in 2025 were done by Tailro, our second reciprocal exchange. Tailro is now well-positioned going forward with over $120 million of in-force premiums.

Speaker #1: All four of our carriers are now profitable, inception to date. The last two having reached that milestone within a 12 to 15-month time span from inception.

Speaker #1: I bring this up to underscore our company philosophy. When we make strategic decisions, we take actions with purpose and precision. Execution is critical in our line of work.

Karin Coleman: Execution is critical in our line of work. In other words, starting an insurance carrier is not that challenging. Establishing a carrier that is profitable and in a relatively short period of time is much more difficult and takes experience, skill, as well as some finesse. With that in mind, I want to share that in Q1, we licensed a new reinsurance company, Fortex Reinsurance, domiciled in the Cayman Islands as a Class B insurer, making it our second reinsurance company and giving us even more flexibility to selectively retain risk and reduce the cost of third-party reinsurance. You may recall that our other reinsurer, Claddaugh, is domiciled in Bermuda and has been very advantageous in our reinsurance placements. Speaking of reinsurance, HCI is in the final phase of the June 1 reinsurance placements.

Speaker #1: In other words, starting an insurance carrier is not that challenging. Establishing a carrier that is profitable and in a relatively short period of time is much more difficult and takes experience, skill, as well as some finesse.

Speaker #1: With that in mind, I want to share that in the first quarter, we licensed a new reinsurance company for tax reinsurance, Domestile and the Cayman Islands, as a Class B insurer.

Speaker #1: Making it our second reinsurance company and giving us even more flexibility to selectively retain risk and reduce the cost of third-party reinsurance. You may recall that our other reinsurer, Cladow, is Domiciled in Bermuda and has been very advantageous in our reinsurance placements.

Speaker #1: Speaking of reinsurance, HCI is in the final phase of the June 1 reinsurance placements. We won't announce any specific details until everything is finalized.

Karin Coleman: We won't announce any specific details until everything is finalized since current market conditions are continuing to improve. As Mark noted, we announced the $80 million share repurchase authorization on 3 March, and immediately entered the market on the 4th. We're not shy about our view that shares of HCI offer great value at the current price. Consistently high return on equity, strong earnings generation, a track record of value creation, and our technology platform, Exzeo, are all compelling reasons for this confidence. In addition to earnings generation and value creation, HCI offers longer-term optionality as well. Historically, we have taken advantage of market dislocation, acting quickly to deploy capital when opportunities present themselves. There will be an inflection point for our industry.

Speaker #1: Since current market conditions are continuing to improve, as Mark noted, we announced the $80 million share repurchase authorization on March 3rd, and immediately entered the market on the 4th.

Speaker #1: We're not shy about our view that shares of HCI offer great value at the current price. Consistently high return on equity, strong earnings generation, a track record of value creation, and our technology platform, Exio, are all compelling reasons for this confidence.

Speaker #1: In addition to earnings generation and value creation, HCI offers longer-term optionality as well. Historically, we have taken advantage of market dislocation, acting quickly to deploy capital when opportunities present themselves.

Speaker #1: There will be an inflection point for our industry. In the meantime, we'll continue to serve our policyholders well, deliver strong operating results, return value to shareholders, and look for additional ways to drive long-term growth in a measurable way.

Karin Coleman: In the meantime, we'll continue to serve our policyholders well, deliver strong operating results, return value to shareholders, and look for additional ways to drive long-term growth in a measurable way. With that, let me turn it over to Paresh Patel for some final thoughts.

Speaker #1: With that, let me turn it over to Pareshbhai Patel for some final thoughts.

Speaker #2: Thanks, Karin. Mark and Karin just spent a few minutes talking about whether the company is at this time. Let me recap. Premiums are growing.

Paresh Patel: Thanks, Karin. Mark and Karin just spent a few minutes talking about where the company is at this time. Let me recap. Premiums are growing, reinsurance is moving in the right direction, the investment portfolio is making money, the loss ratio is stable, we are generating record earnings, and the balance sheet is strong and getting stronger. This is allowing us to do two things at the same time: buy back a portion of the company every month and still strengthen the balance sheet. Why are we doing this? Because we want to invest in a company at a terrific valuation, and this is a company that we know everything about. Simply put, we are investing in ourselves. At the current rate, we are buying back about 2% of the company every quarter.

Speaker #2: Reinsurance is moving in the right direction. The investment portfolio is making money. The loss ratio is stable. We are generating record earnings, and the balance sheet is strong and getting stronger.

Speaker #2: This has allowed us to do two things at the same time: buy back a portion of the company every month, and still strengthen the balance sheet.

Speaker #2: And why are we doing this? Because we want to invest in a company at a terrific valuation and this is a company that we know everything about.

Speaker #2: Simply put, we are investing in ourselves. At the current rate, we are buying back about 2% of the company every quarter. This means that every shareholder on this call will effectively own 2% more of the company at the end of every quarter than they did at the start.

Paresh Patel: This means that every shareholder on this call will effectively own 2% more of the company at the end of every quarter than they did at the start. We're doing this with only a portion of our earnings. With the rest of the earnings, we are further strengthening our balance sheet. This is planning for a better tomorrow because eventually an inflection point or an opportunity will come along. When it does, we will have a very robust balance sheet that will allow us to execute quickly and with great ease. What do we do until that opportunity or inflection point comes along? Mark outlined the value creation that Exzeo represents to the HCI shareholders. We grew Exzeo from just an idea to a $1.5 billion current valuation.

Speaker #2: And we are doing this with only a portion of our earnings. With the rest of the earnings, we are further strengthening our balance sheet.

Speaker #2: This is planning for a better tomorrow. Because eventually, an inflection point or an opportunity will come along. And when it does, we will have a very robust balance sheet that will allow us to execute quickly and with great ease.

Speaker #2: But what do we do until that opportunity or inflection point comes along? Mark outlined the value creation that Exio represents to the HCI shareholders.

Speaker #2: We grew Exio from about an idea from just an idea to a $1.5 billion current valuation. And what we're doing is we're working on the next thing.

Paresh Patel: What we're doing is we're working on the next thing. We are looking at 2 or 3 things that have the potential to be the next Exzeo-like asset. We have the resources to nurture these things to their full potential. Outcomes are not always certain, given our track record, I am very excited about the possibilities. That is what we are working on while we are waiting for the inflection point, and at the same time, we are acquiring valuable HCI shares. In summary, every day we come to work knowing our mission if things stay the same. We also know our mission and what we're going to do if conditions change. Finally, we're planting seeds for the long-term future. With that, I will turn it over for questions.

Speaker #2: We are looking at two or three things that have the potential to be the next Exio-like asset. We have the resources to nurture these things, to nurture these things, to their full potential.

Speaker #2: Outcomes are not always certain, but given our track record, I am very excited about the possibilities. So that is what we are working on while we are waiting for the inflection point.

Speaker #2: And at the same time, we are acquiring valuable HCI shares. In summary, every day we come to work knowing our mission, if things stay the same.

Speaker #2: We also know our mission and what we're going to do if conditions change. And finally, we're planting seeds for the long-term future. With that, I will turn it over for questions.

Speaker #3: Thank you. Ladies and gentlemen, the floor is now open for questions. If you would like to join the queue to ask a question at this time, please press *1 on your telephone keypad.

Operator: Thank you. Ladies and gentlemen, the floor is now open for questions. Our first question will come from Matt Carletti from Citizens JMP Securities. Matt, your line is live. Please go ahead.

Speaker #3: We do ask if listening on speakerphone today that you pick up your handset while asking your question to provide optimal sound quality. Once again, please press *1 on your telephone keypad at this time if you wish to join the queue to ask a question.

Speaker #3: Please hold a moment while we pull for questions. And our first question will come from Matt Carletti from Citizens Capital. Matt, your line is live.

Speaker #3: Please go ahead.

Speaker #4: Hey, thanks. Good afternoon.

Matthew Carletti: Hey, thanks. Good afternoon.

Speaker #5: Good afternoon, Matt. Either Parish or Karin, I guess. Maybe to start with a pretty simple one, which is just can you just update us on kind of how you see kind of the primary environment in Florida, not the reinsurance environment, but just kind of the primary environment for HCI and all its carriers?

Paresh Patel: Afternoon, Matt.

Matthew Carletti: Either Paresh or Karin, I guess, maybe just start with a pretty simple one, which is just, can you just update us on kind of how you see kind of the primary environment in Florida, not the reinsurance environment, but just kind of the primary environment for HCI and all its carriers?

Speaker #1: Sure. For HCI, we see stability in our premiums as it relates to previous quarters. And we anticipate that stability will remain there going forward.

Karin Coleman: Sure. For HCI, we see stability in our premiums as it relates to, you know, previous quarters. We anticipate that stability will remain there going forward.

Speaker #5: Okay. Great. And then Karin, you hit on starting a new reinsurer, which sounds like it's a captive, kind of alongside kind of a new cloud.

Matthew Carletti: Okay, great. Then Karin, you hit on starting a new reinsurer, which sounds like it's a captive, kind of alongside kind of a new Claddaugh. I guess, other than the domicile, why can you give us a little more color on why start a new reinsurer as opposed to just leveraging Claddaugh more?

Speaker #5: I guess other than the domicile, why can you give us a little more color on why start a new reinsurer as opposed to just leveraging cloud more?

Speaker #1: Sure. So, we have four carriers that we work with, and we find that that optionality really gives us an advantage through different market conditions. And so we feel that we have an opportunity to do something similar within the reinsurance space as well.

Karin Coleman: Sure. We, you know, we have four carriers that we have, and we find that that optionality really gives us an advantage, through different market conditions. We feel that we have an opportunity to do something similar within the reinsurance space as well and maybe have some additional flexibility within those reinsurance carriers.

Speaker #1: And maybe have some additional flexibility within those reinsurance carriers.

Speaker #5: Okay. Great. And then one last one, if I could, Parish, you at the end of your comments there kind of touched on looking at two or three possibly Exio-like opportunities.

Matthew Carletti: Okay, great. One last one, if I could. Paresh, you at the end of your comments there kind of touched on, you know, looking at 2 or 3 possibly Exzeo-like opportunities. Can you give us any more color? In particular, I'm just curious, you know, are they insurance-related? Obviously, HCI does more than just insurance. You've got real estate, you've got your hands in a few things. How should we think about it at a kind of 30,000-foot level?

Speaker #5: Can you give us any more color in particular? I'm just curious are they insurance-related or obviously HCI does more than just insurance? You've got real estate.

Speaker #5: You've got your hands on a few things. How should we think about it at a kind of 30,000-foot level?

Paresh Patel: Yeah, Matt, and we are leaving these conversations slightly vague because ideas come and go. The things we are looking at are insurance-related, but I don't mean like homeowners insurance in Florida. It's other lines of insurance and/or also other aspects of the insurance value chain. It's quite a broad net we're casting because growth isn't all about just doing more of the same. It's also being able to do new things. We are, you know, we are thinking about it in terms of what's going to be needed, what's going to be valuable a decade from now. Yeah?

Speaker #2: Yeah, Matt, we are leaving these conversations slightly vague because ideas come and go. But there are things we're looking at that are insurance-related. But I don't mean homeowner's insurance in Florida.

Speaker #2: It's other lines of insurance and/or also other aspects of the insurance value chain. So it's quite a broad net we are casting. Because growth isn't all about just doing more of the same.

Speaker #2: It's also being able to do new things. So we are thinking about it in terms of what's going to be needed, what's going to be valuable a decade from now.

Speaker #2: Yeah?

Speaker #5: Wonderful. Thank you for the answers. I appreciate it.

Matthew Carletti: Wonderful. Thank you for the answers. I appreciate it.

Speaker #2: Thank you.

Paresh Patel: Thank you.

Speaker #3: Thank you. Your next question is coming from Mark Hughes from Truist. Mark, your line is live. Please go ahead.

Operator: Thank you. Your next question is coming from Mark Hughes from Truist. Mark, your line is live. Please go ahead.

Speaker #6: Appreciate it. Good afternoon. What would your what was your combined ratio target? Someone sneezed just as you were giving the target.

Mark Hughes: Appreciate it. Good afternoon.

Paresh Patel: Good afternoon.

Mark Hughes: Mark, what was your combined ratio target? Someone sneezed just as you were giving the target. At least it sounded like a mic.

Speaker #2: Yeah. Yeah. 60%. And plus or minus 5. And we were 57% in Q1, which was pretty much the same as it was in full year 2025.

Mark Harmsworth: Yeah, yeah, 60%, and I, you know, ±5. We were 57% in Q1, which was pretty much the same as it was in full year 2025.

Speaker #3: And Karin, you talked about stable for HCI for, I think, a premiums. Is that the entire stable of companies, the tip-top homeowner's choice, etc.?

Mark Hughes: Karin, you talked about stable for HCI for, I think, premiums. Is that the entire stable of companies, the TypTap, Homeowners Choice, et cetera? Or you-

Speaker #3: Or you specifically referring to homeowners?

Karin Coleman: Yes. Yes.

Mark Hughes: specifically referring to Homeowners Choice?

Speaker #1: Yes. I'm talking about the whole enterprise. Yes.

Karin Coleman: That's talking about the whole enterprise, yes.

Speaker #3: Okay. And then with all that capital, are there opportunities these days for book rolls or M&A or is the industry just too profitable? Nobody wants to transact when they're making decent profits?

Mark Hughes: Okay. With all that capital, are there opportunities these days for book rolls or M&A, or is the industry just too profitable, nobody wants to transact when they're making decent profits?

Speaker #2: Mark, I would characterize it in the comments Karin made about the inflection point. There will be an inflection point. In terms of those kinds of things, we are now coming up on hurricane season.

Paresh Patel: Mark, I would characterize it in the comments Karin made about the inflection point. There will be an inflection point in terms of those kinds of things. We are now coming up on hurricane season. Would you want to expand through an acquisition coming into that? This is assuming it was Florida-based kind of thing. It's those kinds of items that also sort of play out here. There will be a time, there will be an opportunity, right? You have to time it at the right moment. Let me answer it a different way. We would like to do M&A the day after the storm as opposed to do an M&A the day before the storm. One creates a lot more headaches than the other one does. Yeah?

Speaker #2: Would you want to expand through an acquisition coming into that? This is assuming it was Florida-based kind of thing. But is those kinds of items that also sort of play out here?

Speaker #2: There will be a time. There will be an opportunity. Right? But you have to time it at the right moment. And let me answer it in a different way.

Speaker #2: We would like to do M&A the day after the storm as opposed to do an M&A the day before the storm. One creates a lot more headaches than the other one does.

Speaker #2: Yeah?

Speaker #3: Yeah.

Mark Hughes: Yeah. Well, what is your posture around the reinsurance renewals? It sounds like you would be perhaps retaining more risk with the capital and Claddaugh and the Fortex. Is that a fair statement?

Speaker #6: What is your posture around the reinsurance renewals? It sounds like you would be perhaps retaining more risk with the capital and quota and the foretex?

Speaker #6: Is that fair statement?

Paresh Patel: Yeah, I think you'll see the nuances of all of this stuff, when the reinsurance is placed. Yeah?

Speaker #2: Yeah. I think you'll see the nuances of all of this stuff. When the reinsurance is placed. Yeah?

Paresh Patel: Yeah, I think you'll see the nuances of all of this stuff, when the reinsurance is placed. Yeah?

Speaker #1: Yeah. We know the reinsurance market continues to softening. And so I don't know that we want to speculate on the final outcome at this point.

Karin Coleman: Yeah. The, we know the reinsurance market continues to softening, I don't know that we want to speculate on the final outcome at this point. Once we have that, we have the June 1 program finalized, we'll issue a press release, most likely in a few weeks.

Speaker #1: But once we have that final we have the June 1 program finalized, we'll issue a press release, most likely in a few weeks.

Speaker #3: Okay. But I think you said it continues to soften sounds like you're saying here in recent weeks.

Mark Hughes: Okay. I think you said it continues to soften. Sounds like you're saying here in recent weeks.

Speaker #1: Yes. Yes. That's why we're kind of in this position now.

Karin Coleman: Yes. Yes. That's why we're kind of in this position now.

Speaker #3: Yeah. I know Exio is going to have its own call. But as they execute, Mark, what does it do to the P&L? Just to geography of the P&L, if they're going to be growing their business, what line items are going to be most affected here?

Mark Hughes: Yeah. I know, Exzeo is going to have its own call, but as they execute, Mark, what does it do to the P&L, just the geography of the P&L, if they're going to be growing their business, what line items are going to be most affected here?

Speaker #2: Well, the other income, a lot of their revenue will flow through on a consolidated basis will flow through that other income line. That's why I kind of highlighted that for this quarter.

Mark Harmsworth: Well, the other income, a lot of their revenue on a consolidated basis, will flow through that other income line. That's why I kind of highlighted that for this quarter. Of course, you know, earnings, and still, you know, 85% of that is flowing through to earnings per share. In terms of revenue, as they grow, that other income line is the one that's the one that you'll see go up. It, I think, tripled quarter over quarter, and that's why I kind of pointed that out in my prepared remarks.

Speaker #2: And of course, earnings. And still, 80, 85 percent of that is flowing through to earnings per share. So but in terms of revenue, as they grow, that other income line is the one that will really that's the one that you'll see go up.

Speaker #2: And I think tripled quarter over quarter. And that's why I kind of pointed that out in my prepared remarks.

Speaker #3: Okay. And so this is kind of the starting point. And it's we'll presumably should go up from here as they execute. Okay. Yeah. Let's see.

Mark Hughes: Okay. This is kind of the starting point, and it's will presumably should go up from here as they execute. Okay.

Mark Harmsworth: Yeah.

Mark Hughes: Yeah. Let's see. I think that's good for me. Appreciate it. Thank you.

Speaker #3: I think that's good for me. Appreciate it. Thank you.

Speaker #2: Thanks, Mark.

Mark Harmsworth: Thanks, Mark.

Speaker #3: Thank you. And as a reminder, if you wish to join the queue to ask a question, you may press star 1 on your keypad. Once again, that'll be star 1 on your telephone keypad if you wish to join the queue to ask a question at this time.

Operator: Thank you. As a reminder, if you wish to join queue to ask a question, you may press star 1 on your keypad. Once again, that'll be star 1 on your telephone keypad if you wish to join queue to ask a question at this time. Our next question is coming from Michael Phillips from Oppenheimer. Michael, your line is live. Please go ahead.

Speaker #3: Our next question is coming from Michael Phillips from Oppenheimer. Michael, your line is live. Please go ahead.

Speaker #7: Thank you. Good afternoon, everybody. Mark, I wanted to just make sure I understand when you talk about that target combined ratio. The 57 this quarter, like you said, was kind of what you did in 2025.

Michael Phillips: Thank you. Good afternoon, everybody. Mark, I wanted to just make sure I understand when you talk about that target combined ratio. The 57 this quarter, like you said, was kinda what you did in 2025. When you say target, first off, you're referring to an accident year ex-CAT, correct?

Speaker #7: So when you say target, first off, you're referring to an accident year XCAT, correct?

Speaker #2: Yes.

Mark Harmsworth: Yes.

Speaker #7: Okay. And also, when you say target, are you thinking about a kind of a through a cycle, longer term? Are you referring to, "Hey, that's this year's target that maybe the next 18-month target?" Or what kind of timeframe do you mean when you say that?

Michael Phillips: Okay. Also when you say target, are you thinking about a kind of a through a cycle longer term? Are you referring to, hey, that's this year's target, then maybe the next 18-month target? Or what kind of timeframe do you mean when you, when you say that?

Speaker #2: Yeah. I mean, it's where we are now. I don't expect it to change significantly. I mean, the thing that can move it a little bit is weather, obviously.

Mark Harmsworth: Yeah, I mean, it's where we are now. I don't expect it to change significantly. I mean, the thing that can move it a little bit is weather, obviously, right? You know, I think for us right now, that's a pretty good target for the next, you know, certainly for this year.

Speaker #2: Right? But I think for us right now, that's a pretty good target for the next certainly for this year.

Speaker #7: Okay. Oh, good. That's what I meant. Just to be clear on my question, so no concerns on maybe pressure on that given where the rate environment is.

Michael Phillips: Okay. No, good. That's what I meant. Just to be clear on my question. No concerns on maybe pressure on that, given, you know, where the rate environment is. I know there's lots of good things happening in Florida, but the rate environment's softening. You don't foresee any pressure on that because of the rate environment?

Speaker #7: I know there's lots of good things happening in Florida. But the rate environment softening. And so there's you don't foresee any pressure on that because of the rate environment.

Speaker #2: Well, I think Karin talked about that. If you look at our average premium per policy, at the end of Q1, you compare it to a year ago, it's pretty much flat.

Mark Harmsworth: Well, I think Karin talked about that. You know, if you look at our average premium per policy at the end of Q1, you compare it to a year ago, it's pretty much flat.

Speaker #2: And as Karin across the book and as Karin suggested, we don't expect that to change considerably. So yeah. I mean, and obviously, we've taken that into account when we're talking about an estimated combined ratio.

Michael Phillips: Yeah.

Mark Harmsworth: As Karin suggested Across the book, we don't expect that to change considerably. Yeah, I mean, And, you know, obviously we've taken that into account when we're talking about an estimated combined ratio. The big mover is the loss ratio.

Speaker #2: The big mover is the loss ratio.

Speaker #7: Okay. Yeah. Cool. Thank you. And then maybe just last one, just changing gears. One of your new initiatives was the ENS company, the surplus lines company.

Michael Phillips: Okay. Yeah, cool. Thank you. Then maybe just last one, just changing gears. You've One of your new initiatives was the E&S company, the surplus lines company. Can you talk about that and kind of where you see that going in the near term? I think that just started pretty recently, last quarter or so. Just maybe tell us where that's at it.

Speaker #7: Can you talk about that and kind of where you see that going in the near term? I think that just started pretty recently, last quarter or so.

Speaker #7: So just neat to also where that's headed.

Speaker #2: It continues making progress. Right? One of the things we talked about using that for is maybe California or things of that nature. And California is a lovely place.

Paresh Patel: It continues making progress, right? One of the things we talked about using that for is maybe California or things of that nature. California's a lovely place. You know, things continue to evolve over there. I think, we just saw some headline the other day where 60 policyholders are suing their previous carriers for the losses in the California wildfires. You know, all of these things sort of make you make sure that you do your homework and diligence before you step into that. We're doing all those things. Yeah.

Speaker #2: And things continue to evolve over there. I think we just saw some headline the other day where 60 policyholders are suing their previous carriers for the losses in the California wildfires.

Speaker #2: All of these things sort of make you make sure that you do your homework and diligence before you step into that. So we're doing all those things.

Speaker #2: Yeah?

Speaker #6: So is that one of the two or three things you referred working on? Or is that kind of in the past?

Michael Phillips: Is that one of the two or three things you referred working on, or is that kind of, in the past?

Speaker #2: I don't recall enough. I don't think it is one of the three things we're talking about in the billion-dollar category kind of thing. Yet another something we're doing, just like Karin's new reinsurer Fortex Free.

Paresh Patel: I don't know. I don't think it is one of the three things we're talking about in the billion-dollar category kind of thing. It's yet another something we're doing, just like Karin's new reinsurer for tax-free. It's just yet another something we're doing besides the billion-dollar, you know, asset creation kind of things that we're talking about.

Speaker #2: It's just yet another something we're doing. Besides the billion-dollar asset creation kind of things that we're talking about.

Speaker #7: Okay. Cool. Thanks a lot. And congrats on great results again. Appreciate your time.

Michael Phillips: Okay, cool. Thanks a lot. Congrats on great results again. Appreciate your time.

Speaker #2: Thank you. Thank you.

Paresh Patel: Thank you.

Mark Harmsworth: Thank you.

Speaker #3: Thank you. And as a final reminder, if you wish to join Q to ask a question at this time, you may press star 1 on your telephone keypad.

Operator: Thank you. As a final reminder, if you wish to join queue to ask a question at this time, you may press star one on your telephone keypad. Once again, if there are any final questions from the audience, you may press star one on your telephone keypad at this time to join queue to ask a question. Please hold a moment while we poll for any final questions. There are no questions in queue at this time, and this does conclude our question and answer session. I would now like to turn the call back over to Paresh Patel, who has a few closing remarks.

Speaker #3: Once again, if there are any final questions from the audience, you may press star 1 on your telephone keypad at this time to join Q to ask a question.

Speaker #3: Please hold a moment while we pull for any final questions. And there are no questions in Q at this time. And this does conclude our question and answer session.

Speaker #3: I would now like to turn the call back over to Paresh Patel, who has a few closing remarks.

Speaker #2: Thank you. On behalf of the entire management team, I would like to thank our shareholders, employees, agents, and most importantly, our policyholders for their continued support as we embark on the next phase of our growth.

Paresh Patel: Thank you. On behalf of the entire management team, I would like to thank our shareholders, employees, agents, and most importantly, our policyholders for their continued support as we embark on the next phase of our growth. Thank you, and talk to you soon.

Speaker #2: Thank you. And talk to you soon.

Operator: Thank you. This concludes today's call. You may now disconnect. Thank you once again for your participation. Have a wonderful day.