• HCI Group Reports Fourth Quarter and Full Year 2023 Results

    Source: Nasdaq GlobeNewswire / 07 Mar 2024 15:15:01   America/Chicago

    Fourth Quarter Diluted EPS of $3.40
    Fourth Quarter Gross Loss Ratio of 30.4%
    Fourth Quarter Pre-Tax Income of $54.2 million

    TAMPA, Fla., March 07, 2024 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI), a holding company with operations in homeowners insurance, information technology services, real estate, and reinsurance, reported pre-tax income of $54.2 million and net income of $40.9 million, or $3.40 diluted earnings per share, in the fourth quarter of 2023, compared with net income of $2.7 million, or $0.18 diluted earnings per share, in the fourth quarter of 2022.

    Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the fourth quarter of 2023 was $38.8 million, or $3.22 diluted earnings per share compared with adjusted net income of $1.6 million, or $0.06 diluted earnings per share, in the fourth quarter of 2022. This press release includes an explanation of adjusted net income as well as a reconciliation to net income and earnings per share calculated in accordance with generally accepted accounting principles (known as “GAAP”).

    Management Commentary
    “Several major achievements were accomplished since the end of the third quarter, including completing four assumptions from Citizens, growing premiums-in-force by approximately 30%, further reducing the gross loss ratio to 30%, and commencing operations of a new insurance carrier,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “We also redeemed all outstanding preferred shares from Centerbridge and completed a secondary common stock offering for proceeds of $85 million.”

    Fourth Quarter 2023 Commentary
    Consolidated gross premiums earned in the fourth quarter increased to $215.2 million from $183.0 million in the fourth quarter of 2022. Gross premiums earned in the fourth quarter of 2023 include $23 million of premium from the assumption of policies from Citizens.

    Premiums ceded for reinsurance in the fourth quarter decreased to $66.6 million from $77.0 million in the fourth quarter of 2022. Premiums ceded represented 30.9% of gross premiums earned in the fourth quarter of 2023 compared with 42.1% in the fourth quarter of 2022.

    Net investment income in the fourth quarter was $10.3 million compared with $7.4 million in the fourth quarter of 2022. The increase was attributable to higher yields on fixed maturity securities, cash, and cash equivalents as well as a higher cash balance.

    Losses and loss adjustment expenses in the fourth quarter decreased to $65.4 million from $72.1 million in the fourth quarter of 2022. The gross loss ratio in the fourth quarter declined to 30.4% from 39.4% in the fourth quarter of 2022. The decrease is primarily due to the continued improvement in claims experience in Florida including lower claims and litigation frequency.

    Policy acquisition and other underwriting expenses in the fourth quarter decreased to $22.7 million from $24.0 million in the fourth quarter of 2022 and declined to 10.6% of gross premiums earned from 13.1%, reflecting lower commissions and lower policy acquisition expense related to policies assumed from Citizens.

    Full Year 2023 Results
    For the year ended December 31, 2023, the company reported net income of $89.3 million, or $7.62 diluted earnings per share, compared with a net loss of $54.6 million, or $6.24 loss per share, for the year ended December 31, 2022.

    Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the twelve-month period was $86.8 million, or $7.41 diluted earnings per share compared with adjusted net loss of $47.5 million, or $5.48 loss per share, in the same period of 2022. An explanation of this non-GAAP financial measure and reconciliations to the applicable GAAP numbers accompany this press release.

    Consolidated gross premiums earned for the twelve months of 2023 increased to $765.5 million from $724.7 million in the year ended December 31, 2022. Gross premiums earned for the twelve months of 2023 include $23 million of premium from the assumption of policies from Citizens.

    Premiums ceded for reinsurance for the twelve months of 2023 increased to $269.6 million from $261.1 million in the twelve months of 2022. Premiums ceded represented 35.2% and 36.0% of gross premiums earned in the twelve months of 2023 and 2022, respectively.

    Net investment income for the twelve months of 2023 increased to $46.2 million from $32.4 million in the twelve months of 2022. Results for the twelve months of 2023 included a $8.9 million gain from the sale of two real estate investment properties and results for the twelve months of 2022 included a $13.4 million gain from the sale of real estate investment property. Excluding real estate gains, net investment income for the twelve months of 2023 increased to $37.3 million from $19.0 million for the twelve months of 2022. The increase was attributable to higher yields on fixed maturity securities, cash, and cash equivalents as well as a higher cash balance.

    Losses and loss adjustment expenses for the twelve months of 2023 decreased to $254.6 million from $371.5 million in the twelve months of 2022. The twelve months of 2022 included $64.6 million of loss expense related to Hurricane Ian. After adjusting for this, the gross loss ratio for the twelve months of 2023 improved to 33% compared to an adjusted gross loss ratio of 42% for the twelve months of 2022 reflecting the continued improvement in claims experience in Florida including lower claims and litigation frequency.

    Policy acquisition and other underwriting expenses for the twelve months of 2023 decreased to $90.8 million from $105.0 million in the twelve months of 2022 and declined to 11.9% of gross premiums earned from 14.5%, reflecting lower commissions, the transition of business from United Property & Casualty Insurance Company and lower policy acquisition expenses related to the policies assumed from Citizens.

    Conference Call
    HCI Group will hold a conference call later today, March 7, 2024, to discuss these financial results. Chairman and Chief Executive Officer Paresh Patel, Chief Operating Officer Karin Coleman, and Chief Financial Officer Mark Harmsworth will host the call starting at 4:45 p.m. Eastern time.

    Interested parties can listen to the live presentation by dialing the listen-only number below or by clicking the webcast link available on the Investor Information section of the company's website at www.hcigroup.com.

    Listen-only toll-free number: (888) 506-0062
    Listen-only international number: (973) 528-0011
    Entry Code: 409252

    Please call the conference telephone number 10 minutes before the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.

    A replay of the call will be available by telephone after 8:00 p.m. Eastern time on the same day as the call and via the Investor Information section of the HCI Group website at www.hcigroup.com through March 7, 2025.

    Toll-free replay number: (877) 481-4010
    International replay number: (919) 882-2331
    Replay ID: 49845

    About HCI Group, Inc.
    HCI Group, Inc. owns subsidiaries engaged in diverse, yet complementary business activities, including homeowners insurance, information technology services, insurance management, real estate, and reinsurance. HCI’s leading insurance operation, TypTap Insurance Company, is a technology-driven homeowners insurance company. TypTap’s operations are powered in large part by insurance-related information technology developed by HCI’s software subsidiary, Exzeo USA, Inc. HCI’s largest subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., provides homeowners insurance primarily in Florida. HCI’s real estate subsidiary, Greenleaf Capital, LLC, owns and operates multiple properties in Florida, including office buildings, retail centers and marinas.

    The company's common shares trade on the New York Stock Exchange under the ticker symbol "HCI" and are included in the Russell 2000 and S&P SmallCap 600 Index. HCI Group, Inc. regularly publishes financial and other information in the Investor Information section of the company’s website. For more information about HCI Group and its subsidiaries, visit www.hcigroup.com.

    Forward-Looking Statements
    This news release may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "estimate," "expect," "intend," "plan," "confident," "prospects" 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. For example, the estimation of reserves for losses and loss adjustment expenses is an inherently imprecise process involving many assumptions and considerable management judgment. 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, Inc. disclaims all obligations to update any forward-looking statements.

    Company Contact:
    Bill Broomall, CFA
    Investor Relations
    HCI Group, Inc.
    Tel (813) 776-1012
    wbroomall@typtap.com

    Investor Relations Contact:
    Matt Glover
    Gateway Group, Inc.
    Tel (949) 574-3860
    HCI@gatewayir.com

    - Tables to follow -

     
     
     HCI GROUP, INC. AND SUBSIDIARIES
    Selected Financial Metrics
    (Dollar amounts in thousands, except per share amounts)
     
      FY 2023   Q4 2023  Q3 2023  Q2 2023  Q1 2023  FY 2022 
          (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)    
    Insurance Operations                   
    Gross Written Premiums:                   
    Homeowners Choice $535,070   $182,038  $127,334  $140,544  $85,153  $377,860 
    TypTap Insurance Company  363,552    138,482   70,931   39,438   114,701   348,159 
    Total Gross Written Premiums  898,622    320,520   198,265   179,982   199,854   726,019 
                        
    Gross Premiums Earned:                   
    Homeowners Choice  417,202    125,796   102,075   96,875   92,456   426,501 
    TypTap Insurance Company  348,310    89,394   86,233   85,071   87,612   298,215 
    Total Gross Premiums Earned  765,512    215,190   188,308   181,946   180,068   724,716 
                        
    Gross Premiums Earned Loss Ratio  33.3%   30.4%  35.4%  34.0%  33.6%  51.3%
                        
    Per Share Metrics                   
    GAAP Diluted EPS $7.62   $3.40  $1.34  $1.28  $1.54  $(6.24)
    Non-GAAP Adjusted Diluted EPS $7.41   $3.22  $1.41  $1.22  $1.50  $(5.48)
                        
    Dividends per share $1.60   $0.40  $0.40  $0.40  $0.40  $1.60 
                        
    Book value per share at the end of period $33.36   $33.36  $23.27  $21.92  $20.97  $18.91 
                        
    Shares outstanding at the end of period  9,738,183    9,738,183   8,590,824   8,594,764   8,596,673   8,598,682 


     
    HCI GROUP, INC. AND SUBSIDIARIES
    Consolidated Balance Sheets        
    (Dollar amounts in thousands)
     
      December 31, 2023  December 31, 2022 
           
    Assets      
    Fixed-maturity securities, available for sale, at fair value (amortized cost: $387,687 and $494,197, respectively and allowance for credit losses: $0 and $0, respectively) $383,238  $483,901 
    Equity securities, at fair value (cost: $44,011 and $36,272, respectively)  45,537   34,583 
    Limited partnership investments  23,583   25,702 
    Investment in unconsolidated joint venture, at equity     18 
    Real estate investments  67,893   71,388 
    Total investments  520,251   615,592 
           
    Cash and cash equivalents  536,478   234,863 
    Restricted cash  3,287   2,900 
    Receivable from maturities of fixed-maturity securities  91,085    
    Accrued interest and dividends receivable  3,507   1,952 
    Income taxes receivable     2,807 
    Deferred income taxes, net  512    
    Premiums receivable, net (allowance: $3,152 and $5,362, respectively)  38,037   34,998 
    Assumed premium receivable  19,954    
    Prepaid reinsurance premiums  86,232   66,627 
    Reinsurance recoverable, net of allowance for credit losses:      
    Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)  19,690   71,594 
    Unpaid losses and loss adjustment expenses (allowance: $118 and $454, respectively)  330,604   616,765 
    Deferred policy acquisition costs  42,910   45,522 
    Property and equipment, net  29,251   17,910 
    Right-of-use-assets - operating leases  1,407   777 
    Intangible assets, net  7,659   10,578 
    Funds withheld for assumed business  30,087   48,772 
    Other assets  50,365   31,671 
           
    Total assets $1,811,316  $1,803,328 
           
    Liabilities and Equity      
    Losses and loss adjustment expenses $585,073  $863,765 
    Unearned premiums  501,157   368,047 
    Advance premiums  15,895   18,587 
    Reinsurance payable on paid losses and loss adjustment expenses  3,145   8,606 
    Ceded reinsurance premiums payable  8,921   17,646 
    Assumed premiums payable  850    
    Accrued expenses  19,722   14,534 
    Income tax payable  7,702    
    Deferred income taxes, net     1,704 
    Reinsurance recovered in advance on unpaid losses     19,863 
    Long-term debt  208,495   211,687 
    Lease liabilities - operating leases  1,408   721 
    Other liabilities  35,623   23,361 
           
    Total liabilities  1,387,991   1,548,521 
           
    Commitments and contingencies      
    Redeemable noncontrolling interest  96,160   93,553 
           
    Equity:      
    Common stock, (no par value, 40,000,000 shares authorized, 9,738,183 and 8,598,682
    shares issued and outstanding in 2023 and 2022, respectively)
          
    Additional paid-in capital  89,568    
    Retained income  238,438   172,482 
    Accumulated other comprehensive loss, net of taxes  (3,163)  (9,886)
    Total stockholders' equity  324,843   162,596 
    Noncontrolling interests  2,322   (1,342)
    Total equity  327,165   161,254 
           
    Total liabilities, redeemable noncontrolling interest, and equity $1,811,316  $1,803,328 


     
    HCI GROUP, INC. AND SUBSIDIARIES
    Consolidated Statements of Income
    (Unaudited)
    (Dollar amounts in thousands, except per share amounts)
     
      Three Months Ended  Years Ended 
      December 31,  December 31, 
      2023  2022  2023  2022 
    Revenue            
                 
    Gross premiums earned $215,190  $182,954  $765,512  $724,716 
    Premiums ceded  (66,576)  (77,036)  (269,627)  (261,144)
                 
    Net premiums earned  148,614   105,918   495,885   463,572 
                 
    Net investment income  10,341   7,365   46,234   32,447 
    Net realized investment (losses) gains  (410)  17   (1,996)  (1,187)
    Net unrealized investment gains (losses)  2,830   1,004   3,215   (7,153)
    Policy fee income  1,053   1,099   4,704   4,279 
    Gain from remeasurement of contingent liabilities     3,117      3,117 
    Other  242   1,423   2,628   4,488 
                 
    Total revenue  162,670   119,943   550,670   499,563 
                 
    Expenses            
                 
    Losses and loss adjustment expenses  65,398   72,135   254,579   371,463 
    Policy acquisition and other underwriting expenses  22,716   24,028   90,822   104,977 
    General and administrative personnel expenses  12,230   11,328   53,868   56,511 
    Interest expense  2,822   2,839   11,117   7,768 
    Impairment loss     2,284      2,284 
    Other operating expenses  5,344   4,586   22,634   24,978 
                 
    Total expenses  108,510   117,200   433,020   567,981 
                 
    Income (loss) before income taxes  54,160   2,743   117,650   (68,418)
                 
    Income tax expense (benefit)  13,247   92   28,393   (13,815)
                 
    Net income (loss) $40,913  $2,651  $89,257  $(54,603)
    Net income attributable to redeemable noncontrolling interest  (2,360)  (2,305)  (9,370)  (9,106)
    Net (income) loss attributable to noncontrolling interests  (457)  1,180   (853)  5,198 
                 
    Net income (loss) after noncontrolling interests $38,096  $1,526  $79,034  $(58,511)
                 
    Basic earnings (loss) per share $4.31  $0.18  $9.13  $(6.24)
                 
    Diluted earnings (loss) per share $3.40  $0.18  $7.62  $(6.24)
                 
    Dividends per share $0.40  $0.40  $1.60  $1.60 


      
    HCI GROUP, INC. AND SUBSIDIARIES
    (Amounts in thousands, except per share amounts)
     
      
    A summary of the numerator and denominator of basic and diluted earnings per common share calculated in accordance with GAAP is presented below.

     
      Three Months Ended  Year Ended 
    GAAP December 31, 2023  December 31, 2023 
      Income  Shares (a)  Per Share  Income  Shares (a)  Per Share 
      (Numerator)  (Denominator)  Amount  (Numerator)  (Denominator)  Amount 
    Net income $40,913        $89,257       
    Less: Net income attributable to redeemable noncontrolling interest  (2,360)        (9,370)      
    Less: TypTap Group's net (income) attributable to non-HCI common stockholders and TypTap Group's participating securities  (457)        (853)      
    Net income attributable to HCI  38,096         79,034       
    Less: Income attributable to participating securities  (1,166)        (2,625)      
    Basic Earnings Per Share:                  
    Income allocated to common stockholders  36,930   8,567  $4.31   76,409   8,367  $9.13 
                       
    Effect of Dilutive Securities:                  
    Stock options     155         83    
    Convertible senior notes  1,938   2,538      7,732   2,538    
    Warrants     192         56    
                       
    Diluted Earnings Per Share:                  
    Income available to common stockholders and assumed conversions $38,868   11,452  $3.40  $84,141   11,044  $7.62 
                       
    (a) Shares in thousands. 
      

    Non-GAAP Financial Measures

    Adjusted net income is a Non-GAAP financial measure that removes from net income of HCI's portion of the effect of unrealized gains or losses on equity securities required to be included in results of operations in accordance with Accounting Standards Codification 321. HCI Group believes net income without the effect of volatility in equity prices more accurately depicts operating results. This financial measurement is not recognized in accordance with accounting principles generally accepted in the United States of America ("GAAP") and should not be viewed as an alternative to GAAP measures of performance. A reconciliation of GAAP Net income to Non-GAAP Adjusted net income and GAAP diluted earnings per share to Non-GAAP Adjusted diluted earnings per share is provided below.

    Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income

                     
      Three Months Ended Year Ended
      December 31, 2023 December 31, 2023
    GAAP Net income     $40,913     $89,257 
    Net unrealized investment gains $(2,830)    $(3,215)   
    Less: Tax effect at 25.041% $709     $805    
    Net adjustment to Net income    $(2,121)    $(2,410)
    Non-GAAP Adjusted Net income    $38,792     $86,847 


      
    HCI GROUP, INC. AND SUBSIDIARIES
    (Amounts in thousands, except per share amounts)
     
      
    A summary of the numerator and denominator of the basic and diluted earnings per common share calculated with the Non-GAAP financial measure Adjusted net income is presented below.

     
      Three Months Ended  Year Ended 
    Non-GAAP December 31, 2023  December 31, 2023 
      Income  Shares (a)  Per Share  Income  Shares (a)  Per Share 
      (Numerator)  (Denominator)  Amount  (Numerator)  (Denominator)  Amount 
    Adjusted net income (non-GAAP) $38,792        $86,847       
    Less: Net income attributable to redeemable noncontrolling interest  (2,360)       $(9,370)      
    Less: TypTap Group's net income attributable to non-HCI common stockholders and TypTap Group's participating securities  (433)        (841)      
    Net income attributable to HCI  35,999         76,636       
    Less: Income attributable to participating securities  (1,101)        (2,545)      
                       
    Basic Earnings Per Share before unrealized gains/losses on equity securities:                  
    Income allocated to common stockholders  34,898   8,567  $4.07   74,091   8,367  $8.86 
                       
    Effect of Dilutive Securities:                  
    Stock options     155         83    
    Convertible senior notes  1,938   2,538      7,732   2,538    
    Warrants     192         56    
                       
    Diluted Earnings Per Share before unrealized gains/losses on equity securities:                  
    Income available to common stockholders and assumed conversions $36,836  $11,452  $3.22  $81,823  $11,044  $7.41 
                       
    (a) Shares in thousands. 
      

    Reconciliation of GAAP Diluted EPS to Non-GAAP Adjusted Diluted EPS

      Three Months Ended Year Ended
      December 31, 2023 December 31, 2023
    GAAP diluted Earnings Per Share    $3.40     $7.62 
    Net unrealized investment gains $(0.25)    $(0.29)   
    Less: Tax effect at 25.041% $0.07     $0.08    
    Net adjustment to GAAP diluted EPS    $(0.18)    $(0.21)
    Non-GAAP Adjusted diluted EPS    $3.22     $7.41 


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