Exzeo Group [XZO]
As of 2026-07-29 · spot $16.455 · framework v1.5.1
This memo issues NO position verdict. No Long, Short, Watchlist or Avoid appears below. It states what a position would have to survive, and what constrains it. The book decides.
This is the constraint that governs everything else, and it fails before the thesis is even reached.
| Shares | % | |
|---|---|---|
| Shares outstanding | 90,918,430 | 100.0% |
| HCI Group | 75,000,000 | 82.5% |
| Executive officers & directors as a group (8 persons) | 3,576,883 | 4.0% |
| Implied free float | ~12.3m | ~13.5% |
| Shares actually sold in the IPO (all primary) | 8,000,000 | 8.8% |
Float market value at spot: roughly $135m (IPO shares) to $203m (implied float). The "$1.5bn market cap" is a control-block artifact. Only about one share in eight can trade.
| Measure | Value |
|---|---|
| IEX-only 60-day median dollar volume | $135,039/day |
| IEX-only 60-day mean dollar volume | $159,391/day |
| IEX-only 60-day mean share volume | 10,827 shares/day |
| Recent daily share volume (IEX, 20–28 Jul) | 5,975 – 11,130 |
The Alpaca account is not entitled to SIP historical data — the SIP request returned HTTP 403. Only IEX bars were retrievable. IEX typically prints 2–3% of consolidated volume, which implies consolidated ADV of roughly $4.5–6.8m/day.
This is an inference, not a measurement. It must not be used for sizing without a real consolidated ADV pull. It is stated here with its provenance precisely so it cannot be mistaken for data. The brief's warning about confident wrong numbers applies to this memo's own outputs as much as to the screen's.
On the $4.5–6.8m/day estimate, a position that could be exited in five days at 20% of ADV is roughly $4.5–6.8m. Against a name whose Downside Criteria case is a −46% permanent impairment triggered by a counterparty decision that would be announced in an 8-K with no warning, the exit is the binding problem: a gap-down in a 13.5%-float name with $135k/day of lit volume does not get sold into.
Size, if any, is constrained by exit-under-stress, not by conviction. Per the brief, size constrains position sizing, never admission — but here Liquidity is a BINDING Criteria in its own right and it fails on the float and exit test, independent of size.
No options chain was pulled for XZO. Under Liquidity Criteria, "any proposed options structure requires the actual chain pulled first — open interest and quoted size for the specific strikes and expiry… A vehicle that cannot be filled is not a vehicle." That requirement was not met, so no options structure is proposed, and none should be constructed from this memo. The prior on a 8.8%-float, 9-month-old NYSE listing is that any listed chain is uninvestable at size, but that prior is not evidence and this memo does not treat it as such.
| The bet | That HCI keeps paying Exzeo 21.5% of TTIC's premium indefinitely, and that Exzeo converts the $2.2m/quarter third-party beachhead into a real franchise. |
| The price | 5.30x EV/TTM revenue, 10.87x EV/TTM EBIT, 13.7x trailing earnings ex-cash. Genuinely not expensive. |
| The support | $329.9m net cash = 22.0% of market cap; no debt; $12m buyback authorised 2026-05-26 (~1% of shares, ~6–9% of float); CEO buying 2,000 shares/day under a 10b5-1 plan since 2026-03-18. |
| What breaks it | A single counterparty decision, disclosable on 120–180 days' notice, made by a board whose related-party approval policy states it has no standards, chaired by a man who is also CEO of the counterparty and owns >10% of it. |
The asymmetry is the point. The upside is a re-rating toward the 18x insurance-services median — roughly +50% over several years, and it requires the third-party business to become real. The downside is the take rate normalising toward what HCI charges its other subsidiaries — roughly −46%, and it requires nothing to happen except a decision that is now in HCI's economic interest.
Would invalidate the negative read (in order of force):
Would confirm it:
| Risk | Mechanism | Observable |
|---|---|---|
| Transfer-price reset | HCI now leaks 17.5% of every intercompany dollar to Exzeo minorities; it sets both sides | 8-K; Note 6 fee rates; TTIC revenue per unit of premium |
| Contract termination | 88.9% of FY2025 revenue on 120–180-day without-cause notice | 8-K |
| Florida premium cycle | Revenue = premium × take rate; falling homeowners rates cut revenue with no volume change. No rate data was pulled — this is a named mechanism, not an evidenced forecast | HCI's own premium disclosures |
| Catastrophe dependence | $1,200 + 10% of indemnity per CAT claim at TTIC; 6% of amounts incurred at HCM. A quiet storm season is a revenue headwind | Claim services & other tech services lines; "catastrophe" density up 8.7→13.1 per 10k words |
| Float / exit | 13.5% float, ~$135k/day lit volume | — |
| Dilution above $23 | 6.0m options (Patel 5.0m, Mitchell 1.0m) at $23.00, currently anti-dilutive | Diluted share count diverging from basic |
| Controls | 10-Q/A restated Adjusted EBITDA / Adjusted Revenue / margin tables eight days after filing | Future amendments; ICFR disclosure at first auditor attestation |
| Governance | Related-party approval policy with, by its own text, "no standards" | Proxy; audit committee composition |
Inverse-volatility sizing is the framework's active protection and it is doing real work here: 252-day realised volatility is 65.6%, which sizes the name down automatically. That is the interim control the Downside Criteria relies on while it remains MEASURED.
But volatility sizing protects against volatility, and the named downside here is a permanent impairment delivered as a single discontinuous event in a name with 13.5% float. Inverse-vol sizing does not price a gap that cannot be traded through. Whatever size the book's vol-scalar returns should be treated as a ceiling, not a target, and the Liquidity Criteria FAIL should be resolved with a real consolidated ADV measurement before any capital is committed.