HCI Group (HCI)

Insurance and technology company HCI Group (NYSE:HCI) fell short of the markets revenue expectations in Q3 CY2025, but sales rose 23.4% year on year to $216.4 million. Its GAAP profit of $4.90 per share was significantly above analysts’ consensus estimates.

Company Overview

Starting as a Florida "take-out" insurer that assumed policies from the state-backed Citizens Property Insurance Corporation, HCI Group (NYSE:HCI) provides property and casualty insurance, primarily homeowners coverage, while leveraging proprietary technology to improve underwriting and claims processing.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

HCI Group competes with other property and casualty insurers operating in Florida and the southeastern United States, including Universal Insurance Holdings (NYSE:UVE), United Insurance Holdings (NASDAQ:UIHC), Heritage Insurance Holdings (NYSE:HRTG), and larger national insurers like Allstate (NYSE:ALL) and State Farm.

Big picture, insurers generate revenue from three key sources. The first is the core business of underwriting policies. The second source is income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities. The third is fees from various sources such as policy administration, annuities, or other value-added services. Thankfully, HCI Group’s 21.9% annualized revenue growth over the last five years was incredible. Its growth surpassed the average insurance company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. HCI Group’s annualized revenue growth of 26.8% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, HCI Group generated an excellent 23.4% year-on-year revenue growth rate, but its $216.4 million of revenue fell short of Wall Street’s high expectations.

Net premiums earned made up 91.2% of the company’s total revenue during the last five years, meaning HCI Group lives and dies by its underwriting activities because non-insurance operations barely move the needle.

While insurers generate revenue from multiple sources, investors view net premiums earned as the cornerstone - its direct link to core operations stands in sharp contrast to the unpredictability of investment returns and fees.

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are:

• Gross premiums - what’s ceded to reinsurers as a risk mitigation and transfer strategy

HCI Group’s net premiums earned has grown at a 24.7% annualized rate over the last five years, much better than the broader insurance industry and faster than its total revenue.

When analyzing HCI Group’s net premiums earned over the last two years, we can see that growth accelerated to 28% annually. Since two-year net premiums earned grew faster than total revenue over this period, it's implied that other line items such as investment income grew at a slower rate. While these supplementary streams affect the bottom line, their contribution can fluctuate. Some firms have been more successful and consistent in investing their float over the long term, but sharp movements in the fixed income and equity markets can play a substantial role in short-term performance.

In Q3, HCI Group produced $195 million of net premiums earned, up a hearty 25.1% year on year. But this wasn’t enough juice to meet Wall Street Consensus estimates.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

Insurance companies are balance sheet businesses, where assets and liabilities define the economics. Interest income and expense should therefore be factored into the definition of profit but taxes - which are largely out of a company’s control - should not. This is pre-tax profit by definition.

Over the last four years, HCI Group’s pre-tax profit margin has fallen by 32.5 percentage points, going from 3.2% to 35.7%. It has also expanded by 22.6 percentage points on a two-year basis, showing its expenses have consistently grown at a slower rate than revenue. This typically signals prudent management.

HCI Group’s pre-tax profit margin came in at 41.9% this quarter. This result was 33.8 percentage points better than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

HCI Group’s EPS grew at an astounding 33.6% compounded annual growth rate over the last five years, higher than its 21.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For HCI Group, its two-year annual EPS growth of 89.6% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, HCI Group reported EPS of $4.90, up from $0.52 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects HCI Group’s full-year EPS of $15.60 to grow 2.9%.

Insurers are balance sheet businesses, collecting premiums upfront and paying out claims over time. Premiums collected but not yet paid out, often referred to as the float, are invested and create an asset base supported by a liability structure. Book value per share (BVPS) captures this dynamic by measuring these assets (investment portfolio, cash, reinsurance recoverables) less liabilities (claim reserves, debt, future policy benefits). BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality. While other (and more commonly known) per-share metrics like EPS can sometimes be lumpy due to reserve releases or one-time items and can be managed or skewed while still following accounting rules, BVPS reflects long-term capital growth and is harder to manipulate.

HCI Group’s BVPS grew at an incredible 19.9% annual clip over the last five years. BVPS growth has also accelerated recently, growing by 65.1% annually over the last two years from $23.27 to $63.41 per share.

Over the next 12 months, Consensus estimates call for HCI Group’s BVPS to grow by 15.7% to $59.43, top-notch growth rate.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

HCI Group currently has $71.08 million of debt and $821.8 million of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.2×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for an insurance business. Anything below 0.5× is a bonus.

Return on equity, or ROE, represents the ultimate measure of an insurer's effectiveness, quantifying how well it transforms shareholder investments into profits. Over the long term, insurance companies with robust ROE metrics typically deliver superior shareholder returns through a balanced approach to capital management.

Over the last five years, HCI Group has averaged an ROE of 14.9%, healthy for a company operating in a sector where the average shakes out around 12.5% and those putting up 20%+ are greatly admired. This shows HCI Group has a decent competitive moat.

We were impressed by how significantly HCI Group blew past analysts’ book value per share expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its revenue missed and its net premiums earned fell short of Wall Street’s estimates. Overall, we think this was still a solid quarter with some key areas of upside. The stock traded up 1.8% to $198.75 immediately after reporting.

Updated: December 4, 2025 at 11:16 PM EST

Before making an investment decision, investors should account for HCI Group’s business fundamentals and valuation in addition to what happened in the latest quarter.

There are multiple reasons why we think HCI Group is an elite insurance company. For starters, its revenue growth was exceptional over the last five years, and analysts believe it can continue growing at these levels. On top of that, its net premiums earned growth was exceptional over the last five years, and its improving combined ratio shows the business has become more productive.

HCI Group’s P/B ratio based on the next 12 months is 2.5x. You get what you pay for, and in this particular situation, HCI Group’s higher valuation multiple is justified. We think it’s one of the best businesses in our coverage and deserves a spot in your portfolio.

Wall Street analysts have a consensus one-year price target of $234 on the company (compared to the current share price of $173.12), implying they see 35.2% upside in buying HCI Group in the short term.