HCI WACC - Weighted Average Cost of Capital
The WACC of Hci Group Inc (HCI) is 6.8%.
| Range | Selected | |
| Cost of equity | 6.1% - 8.3% | 7.2% |
| Tax rate | 24.8% - 25.7% | 25.25% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 5.8% - 7.7% | 6.8% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.48 | 0.61 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.1% | 8.3% |
| Tax rate | 24.8% | 25.7% |
| Debt/Equity ratio | 0.13 | 0.13 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 5.8% | 7.7% |
| Selected WACC | 6.8% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| HCI | Hci Group Inc | 0.13 | 0.5 | 0.45 |
| AMBC | Ambac Financial Group Inc | 0.46 | 0.98 | 0.73 |
| AMSF | Amerisafe Inc | 0 | 0.32 | 0.32 |
| FACO | First Acceptance Corp | 0.58 | 0.09 | 0.06 |
| ITIC | Investors Title Co | 0 | 0.62 | 0.62 |
| KINS | Kingstone Companies Inc | 0.05 | 0.55 | 0.53 |
| MBI | MBIA Inc | 15.75 | 1.11 | 0.09 |
| NODK | NI Holdings Inc | 0 | 0.29 | 0.29 |
| NSEC | National Security Group Inc | 0.32 | -0.37 | -0.3 |
| PPHI | Positive Physicians Holdings Inc | 0 | -0.12 | -0.12 |
| Low | High | |
| Unlevered beta | 0.21 | 0.37 |
| Relevered beta | 0.22 | 0.42 |
| Adjusted relevered beta | 0.48 | 0.61 |
HCI's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for HCI:
cost_of_equity (7.20%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.48) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.