Khrom Investments Fund, LP on HCI Group
Thesis
Khrom's HCI thesis is built on a structurally improving Florida homeowners insurance market and HCI's ability to benefit disproportionately from that improvement. Legislative reforms have reduced litigation and claims costs, while the depopulation of Citizens gives HCI an opportunity to add attractive policies without normal acquisition costs. The fund believes HCI's underwriting discipline, balance sheet, technology and reinsurance protection can support rapid growth and strong profitability even through severe hurricane seasons. It also sees meaningful optionality in Exzeo, HCI's insurance technology platform, which is expanding its carrier base, agent count and managed premium while generating EBITDA margins above 50%. Khrom believes the market initially failed to recognize the value of Exzeo alongside the core insurance earnings power.
“Purchased at a low multiple of normalized earnings, HCI offered what we viewed as a rare combination: growing earnings, meaningful downside protection, and a source of value creation in Exzeo that the stock price ignored.”
Key risks
- Severe hurricane losses could overwhelm expected underwriting and reinsurance protection
- Reinsurance costs or Florida insurance economics could deteriorate
- Exzeo may not achieve the expected commercialization and valuation