By Michael Loney

May 8 - (The Insurer) - HCI Group has improved its combined ratio 11 points to 56% in the first quarter, with the Florida carrier’s CEO also revealing that its Exzeo technology platform is ready to be spun off into its own public company.

Tampa-based HCI Group reported pre-tax income of $100.3 million for the quarter, up from $77.4 million in Q1 2024.

Net income of $74.2 million was up from $57.0 million in the prior-year period.

Diluted earnings per share were $5.35 compared with $3.81 diluted earnings per share in Q1 2024.

On an investor call Thursday, chief operating officer Karin Coleman said that the net combined ratio improved to 56% in the quarter, from 67% in the first quarter of 2024.

The gross loss ratio in the first quarter was 19.7% compared to 31.1% in the first quarter of 2024.

Gross written premiums were $117.1 million, up from $91.9 million in Q1 2024.

Homeowners Choice’s GWP increased to $117.1 million from $91.9 million, TypTap’s GWP fell to $142.4 million from $143.6 million, and Condo Owners Reciprocal Exchange’s GWP fell to $7.7 million from $19.5 million.

Tailrow Reciprocal Exchange had $22.0 million of GWP, compared with none in the prior-year period before its launch.

On the call, Coleman highlighted that Tailrow commenced operations in February by assuming approximately 14,000 policies and $35 million of premium from Citizens.

“We view Tailrow as an additional component of HCI's growth initiatives moving forward,” she said.

Consolidated gross premiums earned in the first quarter increased by 17.0% to $300.4 million, from $256.6 million in the first quarter of 2024. The growth was driven primarily by assumptions of policies from Citizens.

Losses and loss adjustment expenses in the first quarter of 2025 were $59.3 million compared with $79.9 million in the first quarter of 2024 despite the growth in gross premiums earned. The decrease was driven by a decline in claims and litigation frequency.

Premiums ceded for reinsurance were $99.6 million compared with $68.1 million in the first quarter of 2024. The increase was primarily attributable to higher reinsurance costs due to growth in the number of policies in force and total insured value.

“HCI Group had a terrific first quarter,” said chairman and CEO Paresh Patel in a statement.

He added: “We are happy to announce that Exzeo is ready to be a standalone company. Consequently, our board has determined to pursue a potential tax-free spin-off of Exzeo to existing HCI shareholders that, subject to customary conditions, is targeted for completion by the end of the year.”

HCI announced in February that it had split out its Exzeo technology platform into a standalone entity so it could service carriers outside of the Florida carrier’s umbrella.

On the investor call, Exzeo president Kevin Mitchell said the unit is “at its core, a technology company focused on developing solutions that help insurance clients reduce both their loss ratio expense ratio.”

Exzeo manages approximately $1.2 billion in premiums on its platform.

“Up to this point, premiums on Exzeo's platform have been tied to HCI but this is only a small fraction of the U.S. homeowners insurance market,” said Mitchell. “We see a massive opportunity to unleash our technology on the rest of the market that our technology does not currently touch.”

For the first quarter, Exzeo reported $52 million in revenue and $24 million in pretax income, assuming Exzeo operated as a stand-alone entity.

Also on the call, Patel said that Exzeo can bring its proven technology to a broader part of the market, which would be otherwise difficult to do under the HCI umbrella.

“The only question left to answer is, how do we make Exzeo that own company in a manner that enures to the benefit of the current HCI shareholders. We believe a spin-off of Exzeo into a separate public company is the best path forward, and that is what we are focused on at this time,” he said.

“HCI shareholders will benefit from both the continued performance of HCI and the unlocked future potential of Exzeo,” he added.

When asked about other ways that the unit could have been spun out, Patel said: “I think everybody had always thought about maybe we could do an IPO and then sell off or distribute the shares or do something on those lines. But those kinds of things are things you would do if you needed to raise capital in order for Exzeo to be healthy.

“It's already so healthy. We don't need additional capital for it.”