HCI Group Inc. (NYSE: HCI) Q4 2020 earnings call dated Mar. 11, 2021.
Corporate Participants:
Rachel Swansiger — Investor Relations
Paresh Patel — Chairman and Chief Executive Officer
Mark Harmsworth — Chief Financial Officer
Analysts:
Matthew Carletti — JMP Securities — Analyst
Mark Hughes — Truist Securities — Analyst
Bill Broomall — Dowling & Partners — Analyst
Ronald Bobman — Capital Returns — Analyst
Presentation:
Operator
Good afternoon, and welcome to HCI Group’s Fourth Quarter and Full Year 2020 Earnings Call. My name is John, and I will be your conference operator this afternoon. At this time all participants will be in a listen-only mode. Before we begin today’s call, I would like to remind everyone that this conference call is being recorded and will be available for replay through April 11, 2021, starting later this evening. This call is also being broadcast live via webcast and available via webcast replay until March 11th, 2022 on the Investor Information section of HCI Group’s website at www.hcigroup.com.
I would now like to turn the conference over to Rachel Swansiger, Investor Relations for HCI. Rachel, please proceed.
Rachel Swansiger — Investor Relations
Thank you and good afternoon. Welcome to HCI Group’s fourth quarter and full year 2020 earnings call. With me on today’s call is Paresh Patel, our Chairman and Chief Executive Officer; and Mark Harmsworth, our Chief Financial Officer. Following Paresh’s opening remarks, Mark will review our financial performance for the fourth quarter and full year of 2020, and then turn the call back to Paresh for a look ahead. Finally, we will take your questions. To access today’s webcast, please visit the Investor Information section of our corporate website at www.hcigroup.com.
Before we begin, I would like to take the opportunity to remind our listeners that today’s presentation and responses to questions may contain forward-looking statements made pursuant 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. 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 disclaims all the obligations to update any forward-looking statements.
Now with that, I would like to turn the call over to Paresh Patel, our Chairman and CEO. Paresh?
Paresh Patel — Chairman and Chief Executive Officer
Thank you, Rachel, and welcome everyone. As you can imagine, we have a lot to discuss today. So I’m going to turn it right over to Mark to discuss our financial results for the quarter and for the year. Afterwards, I will discuss two major transactions, how they benefit HCI in the future and obviously discuss TypTap further.
Mark?
Mark Harmsworth — Chief Financial Officer
Thanks Paresh. 2020 was a very active hurricane season, with a record breaking 30 name storms, 12 of which made landfall in the United States. Despite this level of activity, HCI made money in every quarter and delivered a superior rate of return for our shareholders. In the fourth quarter, after-tax net income was $2.7 million and diluted earnings per share were $0.35. For the full year, after-tax net income was $27.6 million and diluted earnings per share were $3.49.
We started talking about growth a couple of years ago and in 2020, that growth accelerated. In Q4, gross written premiums were up 43% from the fourth quarter of last year. This does not include $44 million of premium from the UPC quota share agreement booked in the quarter. Homeowners Choice and TypTap are both growing. In Q4, gross written premiums for Homeowners Choice were up 24% over the same quarter last year, again, before taking into account the UPC deal. In TypTap, gross written premiums were up 75%, driven, of course, by the tremendous success of our homeowners business. For the full year, consolidated gross written premiums were up 26% and gross earned premiums were up 22%. Consolidated premiums in-force at the end of the year are up 20% from the end of last year.
I’ve mentioned the UPC deal a couple of times, so let me quickly clarify; as announced, we signed a quota share deal that runs from December 31st, 2020, to May 31st, 2021. We recorded about $44 million of gross written premiums in 2020, which is all unearned, I did not include this in the growth numbers that I mentioned earlier.
Our Real Estate division had a strong year in 2020. Our real estate subsidiary, Greenleaf, has been building a diverse real estate portfolio, which has grown to 10 properties. While our operating properties have positive cash flow and strong returns, the long-term strategy has always been capital appreciation. This year, we realized a gain of $37 million when we sold our Cypress Commons property, and even after selling it, our portfolio in Greenleaf still has a difference between appraised value and book value of over $30 million, and that unrealized gain is not included in book value.
Now just a few comments about surplus, reserves and capital. As we’ve mentioned many times, we have two well capitalized insurance companies, owned by a holding company with additional resources, if needed. In 2020, Homeowners Choice capitalized on its own strong financial position, by taking on two new books of business, the four states in New England from UPC, as well as the policies assumed from Anchor back in April. The strong surplus position of Homeowners Choice has been a real strategic advantage, because it has allowed us to capitalize on growth opportunities without capital from the holding company.
TypTap ended 2020 in a strong surplus position, but we have taken steps to accelerate its growth trajectory. The growth capital from Centerbridge sets TypTap on its mission of being a separately funded company, that will drive profitable growth and share appreciation for HCI. Our focus in the future will be the realization of that plan.
At the holding company level, in 2020, we renewed our credit facility with Fifth Third Bank. This is a tremendous vehicle for the company, as it gives us access to an inexpensive source of capital that we can deploy at any time. We have $65 million available and as we speak, there is nothing drawn on this facility.
As you know, stock buybacks have always been an important part of our capital plan. We’ve bought back more than 5 million shares at an average price of $35 since the plan began, and with the stock price where it is now, this has been a tremendous use of capital.
Just one final comment, which will be on reserves. It’s great to say that we have strong surplus and liquidity positions, but because two of our businesses are insurance companies, it’s important to know the reserve stand. At the end of 2020, our premiums in-force are 20% higher than at the end of last year, but our non-cat reserves are 35% higher, reflecting a continued conservative approach to reserving.
In summary, 2020 was another good year for us. We made money in a difficult environment. We are 20% bigger than a year ago. We’ve proven our ability to grow organically and through opportunistic acquisition, and we have the capital to continue on both fronts.
And with that, I’ll turn it back to Paresh.
Paresh Patel — Chairman and Chief Executive Officer
Thanks Mark. Obviously, 2020 was a very challenging year for most people. However, as Mark indicated, despite an active hurricane season and a year marked by COVID, we delivered profitable results in all four quarters, and we’ve begun 2021 with two important transactions.
First, as Mark mentioned earlier, we reached an agreement with UPC, better known as United Property and Casualty Insurance Company, transitioned to us, its personal lines business in four New England states, and the business in these states represents approximately $125 million of annual premiums. Our plan is to transition approximately $100 million of that business to TypTap with Homeowners Choice taking the rest.
Second, as many of you know, two weeks ago, we announced that TypTap received $100 million investment from Centerbridge Partners. Centerbridge acquired approximately 11.75% of TypTap Insurance Group, Inc., which comprises of our TypTap insurance operations and our Exzeo software development operations.
Centerbridge’s investment implies a post-money valuation for TypTap of approximately $850 million. For reference, that’s greater than the market capitalization of all of HCI today, and remember that HCI still owns over 80% of TypTap. If you bring out a calculator, based on this valuation, you might think that HCI’s share is undervalued. We would agree. Since the Centerbridge announcement, TypTap has seen its share of press coverage with TypTap being compared to other insurance technology companies.
Now is a good time to talk about the TypTap business opportunity. Historically, the insurance business has operated on a very thin margins and coupled with that, there is a lack of innovation and ongoing market consolidation in industry. TypTap recognized the opportunity to drive a more profitable outcome for the insurance company, by leveraging big data analytics and technology. Our solution to the problem has been quite straightforward. We pre-gather almost all of the data needed to furnish a quote, then we use automation that allows us to evaluate house level risk on a per house level. And finally, we have developed algorithms to help us price each risk adequately, while allowing us to capture enough margin in each policy for the occasional claims expense that is inevitably going to follow.
To drive this point home, let’s look at what happened yesterday. Yesterday, with fewer than 250 active agents, TypTap averaged a quote every 64 seconds and sold a policy every six minutes, generating over $1 million of gross written premium in a single day. It proves that our automated underwriting technology, can scale to large numbers with little incremental overhead.
Now let’s talk about performance; TypTap’s gross loss ratio in 2020, [Indecipherable] basis, was about 20% below that of the Florida industry on average. Other companies struggle with much higher growth loss ratios and then attempt to improve them to reach the industry average. TypTap is already running materially below the industry average. Now add all of those things together. We have 7x organic growth over the last two years, proven scalability, low customer acquisition costs, and we are looking at a total U.S. homeowners addressable market of approximately $105 billion, with a B, and the TypTap model has already been proven successful in Florida, which is one of the toughest markets in the nation. We have a very high level of confidence that we’ll be successful in other markets, as well as we expand nationally.
Finally, on that note, as we have stated before, we are exploring strategic opportunities for TypTap, which could include an initial public offering or even a SPAC merger. We will have more on that soon, as things progress.
And with that, we’re ready to open the call to your questions. Operator, please provide the appropriate instructions.
Questions and Answers:
Operator
[Operator Instructions] And your first question is coming from Matt Carletti from JMP. Matt, your line is live.
Matthew Carletti — JMP Securities — Analyst
Hey thanks. Good afternoon and good evening. Paresh, I wanted to ask, I guess, a high-level question to start. And really, it’s — just kind of asking you to put yourself in Centerbridge’s shoes a little bit. But the cusp of the question is, why did they bet $100 million on TypTap? And as you get into the valuation and so forth, can you peel back the onion a little bit in kind of the discussions you had with them around kind of, how you guys got to that number? And what I mean by that is, in terms of it, the horizon by which they’re looking, if that’s more of a near-term kind of into ’21, maybe ’22 number or kind of how your sense is of — at least how they’re thinking of it, and obviously, you were on the other side of that table?
Paresh Patel — Chairman and Chief Executive Officer
Matt, for reference, I think Centerbridge is a very large organization. I think they’re like $28 billion under management. I don’t want to speak for them, but my sense is $100 million might be their minimum investment.
Matthew Carletti — JMP Securities — Analyst
Fair enough.
Paresh Patel — Chairman and Chief Executive Officer
Fair enough? But the other side of that, I think in our conversations, I think they would tell you that why TypTap, why now? It’s because of the numbers I just — growing 7x and in a world where everybody struggles to reduce their loss ratio and maybe get it to the industry average, you have a company here that’s growing rapidly and the technology is obviously scalable, and the results, both in 2019 and in 2020, are something like 20 points below the peer group, right? When you are doing that, you’re on to something, and I think that’s fundamentally what they were grasping, yeah.
Matthew Carletti — JMP Securities — Analyst
Very good. Thank you. I got a couple other much more boring questions and probably more so for Mark, just kind of where you guys peg book value per share at the end of the quarter, as well as the TypTap surplus at 12/31 before the Centerbridge investment?
Mark Harmsworth — Chief Financial Officer
So hey Matt, it’s Mark. So first question I think was book value per share, $25.83 at the end of December. And your other question was, is it TypTap surplus?
Matthew Carletti — JMP Securities — Analyst
TypTap surplus, December 31, and that — that wouldn’t include Centerbridge, right? That was after that?
Mark Harmsworth — Chief Financial Officer
So, $38.5 million at the end of the year.
Matthew Carletti — JMP Securities — Analyst
All right. Wonderful. Thank you very much and congrats again, on a really nice deal with Centerbridge.
Paresh Patel — Chairman and Chief Executive Officer
Thank you.
Mark Harmsworth — Chief Financial Officer
Thanks, Matt.
Operator
Okay. Next question is coming from Mark Hughes from Truist. Mark, your line is live?
Mark Hughes — Truist Securities — Analyst
Yeah. Thank you. Good afternoon.
Paresh Patel — Chairman and Chief Executive Officer
Good afternoon, Mark.
Mark Hughes — Truist Securities — Analyst
Hello, Paresh. Hello, Mark. In thinking about the $850 million value for TypTap, how should we think about the value of the warrants?
Mark Harmsworth — Chief Financial Officer
It’s Mark. So obviously, we’ve got an idea of what we think those warrants are worth. But for accounting and auditing purposes, we’ve got to get those valued by a professional and then we have to get that audited as well. Sometimes those things don’t work as quickly as you’d want. I have to be a little careful what I say, because we’re in that process now. But I think a value in the sort of $10 to $15 per warrant is about the right range, and so if you pick the midpoint there, that’s about $10 million for all the warrants together.
A couple of — just a couple of — just to add a little bit of color to that though. That’s as of February 26, which is the closing date of the deal. Obviously, we entered into an LOI earlier than that in January some time, and the stock was a little bit lower. So the value of the warrant at that point would have been less than that. And the other thing too, is in order for them to execute on those warrants, they’ve got to write a check for $40 million, which will come in as equity into the company, and if we were to go and raise that kind of money, it would probably cost us $2 million, $3 million. So when you put it all together, the value of those warrants, somewhere between 5% and 10% of the total package, the total amount of the investment. Does that help?
Mark Hughes — Truist Securities — Analyst
It does. Thank you. What was the surplus at Homeowners Choice at year-end?
Mark Harmsworth — Chief Financial Officer
Just give me one second. It was $120 million.
Mark Hughes — Truist Securities — Analyst
And then your — the gross loss ratio of 20 points better than the industry, what would you suggest to the industry loss ratio for 2020?
Paresh Patel — Chairman and Chief Executive Officer
Yeah. Mark, the way we calculate this, just so that everybody does the same thing. Most of the industries, all the industries filed yellow books, which is a stat accounting for each insurance company, private or public at the end of February. So when you sort of get that across the industry, and then in there, they do — everybody sort of puts down their gross losses, they can do it very easily to get a gross loss ratio. We got to third parties. Basically, the gross loss ratio across the whole industry, and it comes out to be about 68% for 2020. TypTap’s number is something like 47%, I believe.
Mark Harmsworth — Chief Financial Officer
On a stat basis.
Paresh Patel — Chairman and Chief Executive Officer
On a stat basis. And again, this is a TypTap Insurance Company on a stat basis. So that, as you know, there’s multiple ways of measuring this, but that’s the measure we’re talking about.
Mark Hughes — Truist Securities — Analyst
Yeah. And you may not want to share this level of detail, but out of that 47 points, how much is the CAT losses?
Mark Harmsworth — Chief Financial Officer
In 2020? It would have been about maybe, 7% of that. Yeah, not a big number. Go ahead…
Paresh Patel — Chairman and Chief Executive Officer
Mark, we included that and did it on a gross basis because one presumes that 58% has some cat losses in it as well, right? So to make it a fair comparison, get them all in.
Mark Harmsworth — Chief Financial Officer
So that I did — it would have been about 42% if you take out the cat. So 47% versus 42%, I think that’s — it’s about 5% of it.
Mark Hughes — Truist Securities — Analyst
Yes. Okay. Understood. The earnings pattern for the UPC, you’ve got the unearned premium. Does that change the earnings pattern or do we just use the, call it, $125 million and you presumably earn that ratably over the quarters?
Mark Harmsworth — Chief Financial Officer
Yeah. It does. The way you would do it for the quota share, if you’re looking at the quota share or if you’re looking at the renewal rights. The better way to look at it is that, I think we said in the 8-K, $130 million, I think it’s about — as Paresh mentioned $125 million, I think that’s about the right number. So, you would just look at that ratably over the period. That’s the best way to look at it.
Paresh Patel — Chairman and Chief Executive Officer
To be pedantic about it, the quota share that’s in force right now is 69.5% of the $125 million, and that’s what you…
Mark Harmsworth — Chief Financial Officer
For five months. Yeah.
Paresh Patel — Chairman and Chief Executive Officer
For five months, so that’s what you would do from January through May. Starting in June, you would be doing — you’ll be amortizing $125 million on an annualized basis, yeah.
Mark Hughes — Truist Securities — Analyst
Okay. So again, to be clear, the quota share is $69.5 million, all of $125 million January through May, and then in June, it goes to 100% of $125 million, is that right?
Paresh Patel — Chairman and Chief Executive Officer
Yes.
Mark Hughes — Truist Securities — Analyst
Okay. Your thought on margin, I know with Anchor, there was anticipation of some initial dilution and, I don’t know with UPC, what your thoughts are? But when you take those two books of business combined, what does that do to loss ratio, and then what’s the trajectory from here, as presumably you refine those books?
Mark Harmsworth — Chief Financial Officer
So, if you — there is a couple of questions in there. If you think about the Anchor book, just as an example, we had talked about that when we did that deal. Obviously, the premiums were lower, there wasn’t as much margin there. If you look at it at the end of the year, we’ve got about 66% of the policies, but about 83% of the premium. So over time, that margin is starting to — that’s starting to improve.
So in the initial stages of the anchor deal, the loss ratios were obviously a little bit higher. We talked about that, I think, in earlier calls. But as those policies are starting to renew on to Homeowners Choice paper, you’re getting to similar loss ratios, as Homeowners Choice has. So if you sort of look — if you look forward and you blend those things together, I’ll take UPC out just for a second. If you look at Anchor and Homeowners Choice together, that blended loss ratio looking forward is probably in that — still in that 25% to 27% range, maybe a little bit towards the high end of that when you include Anchor. So does that help?
Mark Hughes — Truist Securities — Analyst
It does. And then when you include UPC in that?
Mark Harmsworth — Chief Financial Officer
Yeah. I mean the UPC loss ratio is going to be a little bit higher, but it’s only about 25% of the — if you look at the overall impact on the book, I don’t think it’s going to have a material impact on it. But it might get us closer to 29% on a consolidated basis, somewhere in that range.
Mark Hughes — Truist Securities — Analyst
Yeah. That’s very helpful. You mentioned IPO or SPAC merger. With this process, you were certainly good to your word of saying you’re exploring your options and have come up with a pretty striking transaction. Here, you mentioned the IPO or SPAC merger. Is that something you are working on in the near term? Is that something that is conceivably in process, or is that aspirational more in the ’22, ’23 timeframe?
Paresh Patel — Chairman and Chief Executive Officer
Simple way to answer that is, we receive a lot of inbound phone calls since the Centerbridge announcement, and one thing that you’ve known us — about us over the years, is we have always been opportunistic and when we’re offered an appropriately or a fairly priced deal that makes sense for us, we don’t say no, right? We wait such an opportunity and when that occurs, we will do that. Clearly, the markets are looking to these kinds of businesses in the moment. And when you sort of see the numbers that TypTap is putting up. It has to be a very desirable partner, frame [Phonetic] number of SPACs, yeah.
Mark Hughes — Truist Securities — Analyst
Understood. I’ll ask in the quarter, this is a small matter, but the G&A was — looked lower this quarter than we might have expected. I can’t remember whether there’s seasonality that might influence that, but was anything unusual there?
Mark Harmsworth — Chief Financial Officer
Yeah. It’s Mark. Just throughout the year, we make assumptions about what bonus expense will be and then the actual bonus expense gets trued up in Q4, and the bonus expense was less than what we’ve been accruing to. So there’s a reversal there in Q4. So that’s a little bit unusual.
Mark Hughes — Truist Securities — Analyst
Very good, thank you.
Paresh Patel — Chairman and Chief Executive Officer
Thank you.
Operator
Okay. Your next question is coming from Bill Broomall from Dowling & Partners. Bill, your line is live.
Bill Broomall — Dowling & Partners — Analyst
Great, thank you. My first question is on TypTap and how you think about that business. When we compare to what we hear from a lot of other insure tech, a lot of the discussion is centered around contribution margin, which is pretty favorable, but once you get down to the bottom line, a lot of companies do report a big loss coming through. But it sounds like you’re thinking about your model a little differently, in terms of matching — trying to write at a profit. Can you maybe talk about how you’re thinking about running TypTap versus what we might expect from other insure techs that are out there, from a profitability standpoint?
Paresh Patel — Chairman and Chief Executive Officer
Sure, Bill. The best way of thinking about this is, look at the U.S. homeowners business that’s there, totally on a national basis. It’s $105 billion with a B, as I said earlier. But if you look at the collective profit margins on that $105 billion, it’s basically a breakeven or a very slight 1% or 2% profitability kind of business. So if you just end up with 10% market share of that, you’re not going to get very far.
So that’s just the nature of that business. If you’re going to take on a big chunk of that business, you should figure out a way that you can say, I have a material different outcome than what the current players were having. And basically, you come down to two numbers that make all the difference in an insurance company, loss ratio and expense ratio. The expense ratio is corporate overhead and agent commissions and all those kinds of things. That, obviously, the company controls. But the much tougher one is the loss ratio, and what you sort of talked about contribution margin and everything else, is people generally sort of not paying a whole lot of attention to the loss ratio.
For anybody who has run an insurance company for a length of time will tell you, that it is the toughest thing to improve over time. And the amazing thing about what TypTap is doing is, the book is underwritten by computers, and the loss ratio isn’t industry average, 20 points below industry average. You can imagine that the industry is breakeven. What TypTap can do, is compete in the same space and have a 20-point advantage. Most businesses, if you’re given a 20-point advantage over most of your competition, it leads to some very favorable outcomes.
There are a lot of other people talking about disrupting the insurance business, but nobody has articulated or shown to your question, that they can actually outperform on the loss ratio side, which is really the key thing you have to do. And TypTap has done this, not only in 2019, but in 2020 [Indecipherable] scale. That’s the — that’s the wow [Phonetic]. That is what everybody else is trying to get to TypTap already has, or as my general counsel tends to tell me, everybody else is talking about sending a man to the moon. We have sent a man to the moon and brought him back safely, and here’s a picture.
Bill Broomall — Dowling & Partners — Analyst
Perfect. Thank you. That’s helpful. Maybe just my last one. I think in your prepared remarks, you talked about customer acquisition costs and where you think that stands. Could you give us a sense of where your advantage might be on that side for the business?
Paresh Patel — Chairman and Chief Executive Officer
Yeah. Again, we’ve taken things and — I can explain in very simple terms. If I’ve got a 20% advantage in the loss ratio category, what we do, is we take some of those savings. Some of that we share with the policyholder by charging rates that are lower than the competition, which is good, and we take some of the other savings and we share with our agency partners, the people who place the business with us, our agents and we pay them materially above market commissions for placing that business with us. So at the end of this, because of this technology, obviously, TypTap is winning because we have better numbers.
But we share the wealth with our agents who get better commissions and our policyholders who get lower rates, right. We make it very simple, but it’s a win-win-win for all people involved with TypTap, and I’ll build on that one other item, there is also talk about being asset-light or asset-heavy as an insurance company. We buy reinsurance, because we are in the state, Florida, which has to do that. But I will tell you that TypTap is five years old at this point. If TypTap had never bought any reinsurance, TypTap would actually have made more profit. Putting it differently, we don’t offset losses to our reinsurers, we actually send them premiums, a fraction of which we get back to cover any cat losses. So even our reinsurers benefit from being associated with TypTap, that’s what you call revolutionary.
Bill Broomall — Dowling & Partners — Analyst
Great. Thank you. That’s helpful. And my last question, just for Mark. Was there any development — reserve development in Q4?
Mark Harmsworth — Chief Financial Officer
No.
Bill Broomall — Dowling & Partners — Analyst
Great. Thank you very much.
Operator
Okay. The next question is coming from Ron Bobman from Capital Returns. Ron, please go ahead.
Ronald Bobman — Capital Returns — Analyst
Thanks. And congrats again on a tremendous milestone with TypTap’s progress and the financing. Paresh, I think you’ve — sorry, I think you’ve mentioned in the past, a 90% target combined for TypTap. Is my recollection right, and is that a sort of reasonable target and sort of expectation weather, complying for the next 12 months, or should I think of it as aspirational?
Mark Harmsworth — Chief Financial Officer
Hey Ron, it’s Mark. I think 9% is probably about right. The issue is, just sort of where exactly we are in the growth, because the policy acquisition expense or the customer acquisition is a little bit higher in the first year of the policy. So if you’re in a year where that is higher, then the combined ratio is likely to be a little bit less than that. But as that normalizes out 90% and possibly lower than that.
Paresh Patel — Chairman and Chief Executive Officer
Ron, let me give you that same answer in a slightly different fashion. We can — from what we’re seeing in the business, we can already achieve 90% combined very easily. What we are doing, is saying, that’s what we have and given the numbers we’re putting up, we’ve basically made a calculated decision to reinvest that additional 10% back into the business to grow more rapidly. So we are trying to maximize the rate of growth of TypTap, while keeping it at a breakeven basis. So we are reinvesting that to 10% to accelerate growth, whenever we take our foot of the gas, that 90% will pop right out.
Ronald Bobman — Capital Returns — Analyst
Okay. Got you. TypTap did $42 million in top line premiums in Q4. I would think that there’s not real seasonality to it, and that we should just keep seeing, hopefully, sequential growth. Is that — that’s a good assumption, isn’t it?
Paresh Patel — Chairman and Chief Executive Officer
It is. Except we are — we live in Florida, and hurricane season is from June to November, yeah. So we are aware of that and we add some seasonality to the book, as to when we take on more business when we take on less business, right? Because ultimately, we do have to make good underwriting decisions, yeah.
Ronald Bobman — Capital Returns — Analyst
Yeah. It sounds like the United-UPC assumption deal, the quota share and how it runs off and how you mentioned in the prepared remarks, Paresh, that I think $100 million of the $120 million is really earmarked for TypTap that — it seems to me that you’re going to meaningfully surpass a $200 million premium number at TypTap this calendar year, when you incorporate sort of organic growth plus those premiums that come over from those policies? Am I right about that?
Paresh Patel — Chairman and Chief Executive Officer
Absolutely. Yes. We continue to get opportunities advantages. So we have always sort of tried to double TypTap’s size every year. And I’d like to think that the 2021 target is easily, easily, not only attainable, but surpassable by a meaningful way, just because of the transaction — the UPC transaction.
Ronald Bobman — Capital Returns — Analyst
Yeah, it’s a giant step forward. Okay. And then lastly, could you just talk a little bit about the operational state of TypTap? I know you’ve mentioned, I think, on the deal call a couple of weeks ago, about how you’ve done everything to sort of set it up separate. Could you describe a little bit more about that? That’s it for me as far as questions. Thanks.
Paresh Patel — Chairman and Chief Executive Officer
Yeah. Sure. Absolutely. Look, to really — Mark had alluded earlier in his comments about TypTap being separately capitalized and almost running independently. So really, what we’ve done, as part of the Centerbridge transaction is — and people have probably seen a lot in the 8-K filing that we’ve done in the last two weeks. Effectively, every person employed by the HCI Group, was either made a member of the TypTap Insurance Group or stayed with the HCI Group. The only person who spans both groups, is myself. Everybody else is on one side or the other, and really, the reason for that, is that TypTap Insurance Group is now being built up to run, operate and be managed like a separate public traded independent company with its own audited financials, its own balance sheet and everything else.
So, we are actively walking down that path. And we’re doing that, because having already come from a public company background, we know it’s good governance. TypTap Insurance Group already has all wonderful things like Sarbanes Oxley, financial controls quarterly and month end closings, all built into it. So we are trying to make sure, in order to continue that, we have to [Indecipherable] on that. That’s fundamentally what’s going to — we’ve taken it to the extreme of even separating boards. The TypTap Insurance Group has its own board and HCI Group has its own board. And in doing so, the only common board members across the two companies are myself, as the HCI and TypTap Chairman, and a gentleman by the name of Eric Hoffman, who represents Centerbridge on both boards.
Ronald Bobman — Capital Returns — Analyst
Right. Okay. Thanks and again congrats. Tremendous.
Paresh Patel — Chairman and Chief Executive Officer
Thank you.
Operator
At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Rachel Swansiger, who has a few closing remarks.
Rachel Swansiger — Investor Relations
On behalf of the entire management team, I would like to thank our shareholders, employees, agents and most importantly, our policyholders for their continued support. We look forward to updating you on our progress in the near future.
Operator
[Operator Closing Remarks].