HCI Group, Inc. (NYSE:HCI) Files An 8-K Entry into a Material Definitive Agreement

HCI Group, Inc. (NYSE:HCI) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement

To mitigate risk from hurricanes and other catastrophes, each year HCI Group, Inc. and its wholly owned insurance subsidiaries implement a comprehensive reinsurance program whereby we pay premiums to other entities that agree to indemnify us against costs associated with policyholder claims caused by certain catastrophic events. We have secured our reinsurance program for the year June1, 2018 through May31, 2019 by entering into contracts with multiple private reinsurance companies and the State Board of Administration of Florida, which administers the Florida Hurricane Catastrophe Fund.

The private reinsurance companies include Sompo Holdings, Inc., MS Amlin AG, AXIS Specialty Limited, Renaissance Reinsurance Ltd., Chubb Tempest Reinsurance Ltd., Arch Reinsurance Ltd., Everest Reinsurance Company, various Lloyd’s syndicates and National Liability& Fire Insurance Company, which is an affiliate of Berkshire Hathaway, Inc. Historically, portions of the reinsurance program were secured through our own reinsurance subsidiary, Claddaugh Casualty Insurance Company Ltd. For the 2018-2019 year we retained no risk within Claddaugh.

The reinsurance contracts offer various coverages, limits, retentions, and durations. The private reinsurance contracts cover, in general, hurricanes, tropical storms, tornados, and other large events. The Florida Hurricane Catastrophe Fund contract covers storms designated as hurricanes by the National Hurricane Center. Our program provides coverage for an event up to $888million, which according to catastrophe models approved by the Florida Office of Insurance Regulation is sufficient to cover the probable maximum loss resulting from a 1 in191-yearevent based on projected exposure on September30, 2018. Furthermore, the total limit for all occurrences is $1.605billion. The reinsurance retention for the year is $16million in a first event and $16million in a second event. Our private reinsurers are AM Best rated‘A-’or better or have fully collateralized their potential obligations to us.

The Florida Hurricane Catastrophe Fund component of our program is estimated to cover 45% of $897million of first event loss in excess of $280million at a total estimated cost of approximately $26million.

Certain of our private reinsurance contracts are multi-year contracts that include retrospective provisions that adjust premiums in the event losses are minimal or zero.In accordance with generally accepted accounting principles, we will recognize an asset in the period in which the absence of loss experience obligates the reinsurer to pay cash or other consideration under the contract.On the contrary, we will derecognize such asset in the period in which a loss experience arises.Such adjustments to the asset, which accrue throughout the contract term, will negatively impact our operating results when a catastrophic loss event occurs. Total premiums for the contract year that began June1, 2018 are expected to be $125million. We expect to recognize net reinsurance premiums ceded of approximately $123million from June1, 2018 to May31, 2019 assuming no losses occur during that period.

Forward Looking Statements

This form8-Kmay contain forward-looking statements made to the Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “estimate,” “expect,” “intend,” “plan” 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. For example, there can be no assurance our coverages will be sufficient if a catastrophic event occurs or that we will not alter coverages and premiums under our reinsurance program as circumstances change. 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 material adverse effects on the company’s business, financial condition, and results of operations. HCI Group, Inc. disclaims all obligations to update any forward-looking statements.


About HCI Group, Inc. (NYSE:HCI)

HCI Group, Inc. (HCI) is a holding company. The Company is engaged in providing property and casualty insurance to homeowners, condominium owners, and tenants in the state of Florida through its subsidiaries. The Company operates through property and casualty insurance operations segment. The Company’s operations include Insurance Operations and Other Operations. The Company’s Insurance Operations include property and casualty insurance, and reinsurance. HCI’s Other Operations include information technology (IT) and real estate. The Company, through its subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., provides property and casualty insurance. Its real estate operations consist of properties it owns, operations located at those owned properties and investments in approximately three commercial development projects. Its IT operations are focused on developing cloud-based products or services, including Exzeo, Proplet and Atlas Viewer.

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