HCI Group, Inc. (HCI): what the price requires

At today's price, HCI Group, Inc. (HCI) is priced for 13.8% return on equity. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-19 · Source: https://boothcheck.com/report/HCI

Headline

FieldValue
TickerHCI
CompanyHCI Group, Inc.
Current price$182.02/sh
CompositionInsurance Operations 73% / Exzeo 19% / Reciprocal Exchange Operations 6% / Real Estate 1%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisfinancials
Return on equity needed13.8%
Return on equity now28.7%
ROE gap-14.9pp
Price-to-book2.13x

Solve inputs: computed at a 8.6% cost of equity with 4% terminal growth over a 5-year stage, on common book equity (FY2026); each 1pp of cost of equity moves the implied ROE ~2.1pp.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.25σ
cohort percentile (of 80 peers)60
sustained it ~10 years at this level64%
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset0.69x3justifies
Earnings0.49x2justifies
Relative0.67x3justifies
Growth0.98x1justifies

Families that justify the price: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.8%); the inversion above states its own rate.

Per-Model Detail (n=9)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
Bank Fair Value (P/TBV)—$470.900.39xyesTBVPS $84.27 × 5.59x (ROE (TTM) 28.7% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption))
Relative ValuationRelative$171.681.06xyesP/E 11x (static sector reference · 2026-04), scenarios: 8.9x / 11.0x / 13.1x (bear / base = reference held flat / bull), EV/EBITDA 22x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$262.450.69xyesBV/sh $84.45, ROE (TTM) 28.7%, ke 9.3%
Two-Stage Excess ReturnAsset$473.970.38xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$186.190.98xyesRev $0.9B, growth 24% (input: historical growth; tapered), Terminal P/S: 2.1x / 2.5x / 3.0x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair ValueRelative$273.360.67xyesEPS $22.78, growth 2% (input: historical EPS growth), PEG=3.75 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset——no—
Graham NumberAsset$208.050.87xyes√(22.5 × EPS $22.78 × BVPS $84.45) — Graham's conservative floor
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$735.030.25xyesEPS $22.78 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative——no—
PEG Fair ValueRelative$854.250.21xyesEPS $22.78 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$246.270.74xyesEPS $22.78 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Share count CAGR (dilution)0.3%

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

Bull Case

Start with the gap between what the market is paying and what the business is delivering. At about $163 (June 27, 2026) the price assumes HCI sustains a return on equity near 12.9%, while it has recently been earning closer to 28.7%. That is not a typical setup for a stock that the market treats as fairly valued; it is a company priced as if its profitability will more than halve, against a record of earning roughly double the assumed return. The first-quarter print made the point concretely: net income of $85 million, diluted EPS of $5.45, and a combined ratio of 57%, well inside the company's own 60% target. A combined ratio that low means HCI keeps more than 40 cents of every premium dollar after claims and expenses, an underwriting margin most insurers never see.

The engine behind that margin is disciplined underwriting in a market others fled. HCI writes Florida homeowners coverage across Homeowners Choice, TypTap, and Tailrow, and the company attributes its results to stable premium volumes and tight underwriting. The reinsurance program is the structural piece that makes the bet survivable: HCI buys catastrophe protection, including reimbursement coverage through the Florida Hurricane Catastrophe Fund administered by the "State Board of Administration of the State of Florida", which caps the loss from any single storm. Underwriting discipline plus a reinsurance backstop is how a Florida carrier earns a high return without betting the company on the weather.

The newer leg is technology. HCI's Exzeo subsidiary, its underwriting and claims software business, completed an IPO in November 2025 raising $168 million, with HCI retaining an 81.5% stake. That gives HCI both a public mark on a fast-growing insurtech asset and an increasing earnings contribution from the tech businesses, which carry different economics than underwriting. The book value compounds underneath all of it: shares have grown modestly while the company returns capital, and management bought back $37.5 million of stock in the quarter. A high-return underwriter with a separately valued tech franchise on top is a richer story than the insurance label alone suggests.

Bear Case

The hardest question for HCI is what management does with the capital its high returns throw off, because the returns themselves are the thing most exposed to a single bad year. HCI bought back $37.5 million of stock in the first quarter while the share count has still been rising at roughly a 7% annual pace, the result of equity used in the technology build and stock-based compensation. A high-return insurer that dilutes even as it repurchases is sending a mixed signal about whether the capital is being returned or recycled into the next venture. The Exzeo IPO sharpened the question: spinning out a fast-growing subsidiary creates a public mark, but it also moves value outside the wholly owned core and introduces minority interests into the consolidated numbers.

Underneath the capital question sits the structural one. HCI's own filing is blunt that its "insurance business is primarily in Florida. Thus, any catastrophic event or other condition affecting losses in Florida could adversely affect our financial condition and results." The 57% combined ratio that anchors the bull case is a benign-weather number; Florida property insurance is a business where one major hurricane can convert a banner year into a loss. The high recent return on equity is partly the reward for taking concentrated catastrophe risk, and the market's assumption that it fades toward 12.9% may simply be the recognition that 28.7% is not a through-the-cycle figure for a single-state catastrophe-exposed carrier.

The valuation does not offer much cushion against that. At about 1.9 times book, HCI sits in the upper half of its peer group's price-to-book, which is the market already crediting the high returns rather than discounting them. If a heavy storm season drives the combined ratio above 100% in any given year, both the earnings and the book value that supports the multiple take the hit at once, and the price-to-book that looked reasonable on 28.7% returns compresses fast. The reciprocal-exchange structure and the reinsurance program mitigate the tail, but they do not remove the core fact: this is a concentrated bet on Florida weather, priced for the good years.

Valuation

An insurer is worth the return it earns on its capital, so the right lens is price against book value, not an operating multiple. At about $163 HCI trades near 1.9 times book and the price implies a sustained return on equity of roughly 12.9%. The company has recently been earning about 28.7%, so the price is not asking the business to improve; it is assuming the high return fades by more than half. That is an unusual and arguably conservative bet, which is why the valuation methods line up the way they do.

Every family of method supports the price. The asset-value and earnings-power approaches, which read the insurer off its book and current returns, land above today's price; the relative-multiple and growth approaches reach it as well. There is no family calling the stock expensive. The peer-multiple read anchors on a sector P/E near 11 times, and HCI's underwriting profitability on a 57% combined ratio is far better than the typical carrier. The honest read is that the price is supported on multiple independent measures, with the upper-half price-to-book reflecting the market crediting the returns rather than stretching for them. The single thing the methods cannot price is the catastrophe tail, which does not show up in a normal year and dominates a bad one.

Solvency for an insurer is read on capital adequacy and payout capacity, not corporate leverage; for a float-funded balance sheet, net-debt and interest-coverage math do not apply. The relevant facts are the reinsurance program that caps single-event losses, the dividend and the $37.5 million of buybacks against earnings, and a share count rising about 7% a year from the technology build. What a buyer underwrites at this price is a high-return Florida underwriter that the market assumes reverts toward a normal return, with a separately valued technology stake as the upside and the next hurricane season as the risk the multiple does not see coming.

Catalysts

HCI delivered record first-quarter results in 2026: net income of $85 million, pre-tax income of $115 million, and diluted EPS of $5.45, with gross premiums earned of $326 million and a gross loss ratio of 20.1%. The combined ratio came in at 57%, inside the company's stated target of 60% plus or minus 5%. Three of the insurance carriers, Homeowners Choice, TypTap, and Tailrow, posted premium growth, while Condo Owners Reciprocal Exchange saw gross premium earned drop sharply year over year. Management credited stable premium volumes, disciplined underwriting, and a rising contribution from the technology businesses including Exzeo and Griston.

The structural development of the past two quarters was the Exzeo IPO in November 2025, which raised $168 million by selling 8 million shares at $21 each, with HCI retaining an 81.5% stake. That created a public valuation for the insurtech subsidiary and a growing technology earnings stream layered on the insurance core.

Capital return continued, with $37.5 million of stock repurchased in the quarter. The catalysts that matter most from here are the upcoming Florida hurricane season, which governs the combined ratio and the year's underwriting result, the renewal terms of the 2026-2027 reinsurance program, and the trajectory of the technology businesses now that Exzeo is publicly marked.

Peer Cohorts (Per Segment, With Filing Citations)

Insurance Operations (reported)

Exzeo (reported)

Reciprocal Exchange Operations (reported)

Real Estate (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

HCI FY2025 10-K · HCI Q1 2026 results, May 2026 · Exzeo IPO, November 2025 · HCI Q1 2026 earnings release, May 2026

View the full interactive HCI report on boothcheck