• HCI Group Reports Third Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 07 Nov 2023 16:15:00   America/New_York

    Third Quarter Pre-Tax Income of $20.1 million
    Third Quarter Diluted Earnings per Share of $1.34
    Year-to-date Diluted EPS of $4.16

    TAMPA, Fla., Nov. 07, 2023 (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 $20.1 million and net income of $15.7 million, or $1.34 diluted earnings per share, in the third quarter of 2023, compared with net loss of $51.5 million, or $5.66 loss per share, in the third quarter of 2022.

    Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the third quarter of 2023 was $16.5 million, or $1.41 diluted earnings per share compared with adjusted net loss of $51.2 million, or $5.62 loss per share, in the third 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
    “HCI delivered another quarter of strong earnings as the company benefited from an improved operating environment in Florida, and rising interest rates on our interest-bearing investments,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “We believe we are seeing the impact of insurance reforms recently enacted by the Florida Legislature. Our loss ratios, for example, are improving to profitable and sustainable levels. Ultimately, as a result of these reforms, we expect Florida consumers will benefit from a stabilized homeowners insurance market with greater choice and more competition. With a more favorable operating environment, we are currently expanding our Florida insurance businesses, which includes the assumption of policies from Citizens.”

    Third Quarter 2023 Commentary
    Consolidated gross premiums earned in the third quarter increased to $188.3 million from $181.7 million in the third quarter of 2022. The increase was primarily due to higher average premiums per policy offset in part by attrition in the number of policies in force.

    Premiums ceded for reinsurance in the third quarter decreased to $66.2 million from $74.7 million in the third quarter of 2022. Ceded premiums represented 35.1% of gross premiums earned in the third quarter of 2023 compared with 36.5% in the prior quarter and 41.1% in the third quarter of 2022.

    Net investment income for the third quarter was $9.4 million compared with $18.5 million in the third quarter of 2022. Results for the third quarter of 2022 included a $13.4 million gain from the sale of real estate investment property. Excluding the real estate gain in the prior year quarter, net investment income increased to $9.4 million from $5.1 million in the third quarter of 2022. The increase was primarily attributable to higher yields on fixed maturity securities, cash, and cash equivalents.

    Losses and loss adjustment expenses in the third quarter decreased to $66.7 million from $139.8 million in the third quarter of 2022. The third quarter of 2023 included $6.5 million of loss expense related to Hurricane Idalia and the third quarter of 2022 included $64.6 million of loss expense related to Hurricane Ian. After adjusting for these events, the gross loss ratio declined to 32% in the third quarter of 2023 from 41% in the third quarter of 2022 reflecting the continued improvement in claims experience in Florida driven by lower claims frequency as well as lower litigation.

    Policy acquisition and other underwriting expenses in the third quarter decreased to $22.8 million from $24.7 million in the third quarter of 2022 and declined to 12.1% of gross premiums earned from 13.6%, reflecting lower commissions and the transition of business from United Property & Casualty Insurance Company.

    General and administrative personnel expenses in the third quarter decreased to $13.9 million from $15.8 million in the third quarter of 2022.

    Year-to-Date 2023 Results
    For the nine months ended September 30, 2023, the company reported net income of $48.3 million, or $4.16 diluted earnings per share, compared with a net loss of $57.3 million, or $6.26 loss per share, for the nine months ended September 30, 2022.

    Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the nine-month period was $48.1 million, or $4.13 diluted earnings per share compared with adjusted net loss of $49.1 million, or $5.42 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 nine months of 2023 of $550.3 million increased from $541.8 million in the first nine months of 2022.The increase was primarily due to higher average premium per policy offset in part by attrition in the number of policies in force.

    Premiums ceded for reinsurance for the nine months of 2023 of $203.1 million increased from $184.1 million in the first nine months of 2022. Ceded premiums represented 36.9% and 34.0% of gross premiums earned in the first nine months of 2023 and 2022, respectively.

    Net investment income for the nine months of 2023 increased to $35.9 million from $25.1 million in the first nine months of 2022. Results for the first nine months of 2023 included a $8.9 million gain from the sale of two real estate investment properties and results for the first nine months of 2022 included a $13.4 million gain from the sale of real estate investment property. Excluding real estate gains, net investment income increased to $27.0 million for the first nine months of 2023 from $11.7 million for the first nine months of 2022. The increase was primarily attributable to higher yields on fixed maturity securities, cash, and cash equivalents.

    Losses and loss adjustment expenses for the nine months of 2023 decreased to $189.2 million from $299.3 million in the first nine months of 2022. The nine months of 2023 included $6.5 million of loss expense related to Hurricane Idalia and the nine months of 2022 included $64.6 million of loss expense related to Hurricane Ian. After adjusting for these events, the gross loss ratio declined to 33% for the nine months of 2023 from 43% for the nine months of 2022 reflecting the continued improvement in claims experience in Florida driven by lower claims frequency as well as lower litigation.

    Policy acquisition and other underwriting expenses for the nine months of 2023 decreased to $68.1 million from $80.9 million in the first nine months of 2022 and declined to 12.4% of gross premiums earned from 14.9%, reflecting lower commissions and the transition of business from United Property & Casualty Insurance Company.

    General and administrative expenses for the nine months of 2023 decreased to $41.6 million from $45.2 million in the first nine months of 2022.

    Conference Call
    HCI Group will hold a conference call later today, November 7, 2023, 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: 414822

    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 November 7, 2024.

    Toll-free replay number: (877) 481-4010
    International replay number: (919) 882-2331
    Replay ID: 49088

    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@gateway-grp.com

    - Tables to follow -


    HCI GROUP, INC. AND SUBSIDIARIES
    Selected Financial Metrics
    (Dollar amounts in thousands, except per share amounts)
     
     Q3 2023  Q3 2022  FY 2022 
     (Unaudited)  (Unaudited)    
    Insurance Operations        
    Gross Written Premiums:        
    Homeowners Choice$127,334  $119,400  $377,860 
    TypTap Insurance Company 70,931   71,781   348,159 
    Total Gross Written Premiums 198,265   191,181   726,019 
             
    Gross Premiums Earned:        
    Homeowners Choice 102,075   98,985   426,502 
    TypTap Insurance Company 86,233   82,728   298,214 
    Total Gross Premiums Earned 188,308   181,713   724,716 
             
    Gross Premiums Earned Loss Ratio 35.4%  76.9%  51.3%
             
    Per Share Metrics        
    GAAP Diluted EPS$1.34  $(5.66) $(6.24)
    Non-GAAP Adjusted Diluted EPS$1.41  $(5.62) $(5.48)
             
    Dividends per share$0.40  $0.40  $1.60 
             
    Book value per share at the end of period$23.27  $19.52  $18.91 
             
    Shares outstanding at the end of period 8,590,824   8,926,845   8,598,682 



    HCI GROUP, INC. AND SUBSIDIARIES
    Consolidated Balance Sheets
    (Dollar amounts in thousands)
     
     September 30, 2023  December 31, 2022 
     (Unaudited)    
    Assets     
    Fixed-maturity securities, available for sale, at fair value (amortized cost: $427,063 and $494,197, respectively and allowance for credit losses: $0 and $0, respectively)$418,676  $483,901 
    Equity securities, at fair value (cost: $41,244 and $36,272, respectively) 39,940   34,583 
    Limited partnership investments 23,174   25,702 
    Investment in unconsolidated joint venture, at equity    18 
    Real estate investments 45,269   71,388 
    Total investments 527,059   615,592 
          
    Cash and cash equivalents 324,019   234,863 
    Restricted cash 2,987   2,900 
    Receivable from maturities of fixed-maturity securities 53,000    
    Accrued interest and dividends receivable 3,891   1,952 
    Income taxes receivable 4,375   2,807 
    Premiums receivable, net (allowance: $3,581 and $5,362, respectively) 42,121   34,998 
    Prepaid reinsurance premiums 97,225   66,627 
    Reinsurance recoverable, net of allowance for credit losses:     
    Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively) 29,425   71,594 
    Unpaid losses and loss adjustment expenses (allowance: $319 and $454, respectively) 462,539   616,765 
    Deferred policy acquisition costs 45,032   45,522 
    Property and equipment, net 28,768   17,910 
    Right-of-use-assets - operating leases 1,460   777 
    Intangible assets, net 8,272   10,578 
    Funds withheld for assumed business 44,761   48,772 
    Other assets 48,698   31,671 
          
    Total assets$1,723,632  $1,803,328 
          
    Liabilities and Equity     
    Losses and loss adjustment expenses$709,089  $863,765 
    Unearned premiums 395,827   368,047 
    Advance premiums 32,250   18,587 
    Reinsurance payable on paid losses and loss adjustment expenses 7,043   8,606 
    Ceded reinsurance premiums payable 3   17,646 
    Accrued expenses 25,934   14,534 
    Reinsurance recovered in advance on unpaid losses    19,863 
    Deferred income taxes, net 4,945   1,704 
    Long-term debt 208,331   211,687 
    Lease liabilities - operating leases 1,457   721 
    Other liabilities 43,895   23,361 
          
    Total liabilities 1,428,774   1,548,521 
          
    Commitments and contingencies     
    Redeemable noncontrolling interest 93,801   93,553 
          
    Equity:     
    Common stock, (no par value, 40,000,000 shares authorized, 8,590,824 and 8,598,682
    shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively)
         
    Additional paid-in capital 2,171    
    Retained income 203,766   172,482 
    Accumulated other comprehensive loss, net of taxes (5,997)  (9,886)
    Total stockholders' equity 199,940   162,596 
    Noncontrolling interests 1,117   (1,342)
    Total equity 201,057   161,254 
          
    Total liabilities, redeemable noncontrolling interest, and equity$1,723,632  $1,803,328 



    HCI GROUP, INC. AND SUBSIDIARIES
    Consolidated Statements of Income
    (Unaudited)
    (Dollar amounts in thousands, except per share amounts)
          
     Three Months Ended  Nine Months Ended 
     September 30,  September 30, 
     2023  2022  2023  2022 
    Revenue           
                
    Gross premiums earned$188,308  $181,713  $550,322  $541,762 
    Premiums ceded (66,152)  (74,741)  (203,051)  (184,108)
                
    Net premiums earned 122,156   106,972   347,271   357,654 
                
    Net investment income 9,384   18,530   35,893   25,082 
    Net realized investment losses (207)  (884)  (1,586)  (1,204)
    Net unrealized investment (losses) gains (1,041)  (347)  385   (8,157)
    Policy fee income 1,092   1,071   3,651   3,180 
    Other 260   1,312   2,386   3,065 
                
    Total revenue 131,644   126,654   388,000   379,620 
                
    Expenses           
                
    Losses and loss adjustment expenses 66,726   139,794   189,181   299,328 
    Policy acquisition and other underwriting expenses 22,768   24,678   68,106   80,949 
    General and administrative personnel expenses 13,864   15,848   41,638   45,183 
    Interest expense 2,827   2,813   8,295   4,929 
    Other operating expenses 5,371   7,123   17,290   20,392 
                
    Total expenses 111,556   190,256   324,510   450,781 
                
    Income (loss) before income taxes 20,088   (63,602)  63,490   (71,161)
                
    Income tax expense (benefit) 4,419   (12,099)  15,146   (13,907)
                
    Net income (loss)$15,669  $(51,503) $48,344  $(57,254)
    Net income attributable to redeemable noncontrolling interest (2,349)  (2,285)  (7,010)  (6,801)
    Net (income) loss attributable to noncontrolling interests (163)  2,829   (396)  4,018 
                
    Net income (loss) after noncontrolling interests$13,157  $(50,959) $40,938  $(60,037)
                
    Basic earnings (loss) per share$1.53  $(5.66) $4.76  $(6.26)
                
    Diluted earnings (loss) per share$1.34  $(5.66) $4.16  $(6.26)
                
    Dividends per share$0.40  $0.40  $1.20  $1.20 



    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  Nine Months Ended 
    GAAPSeptember 30, 2023  September 30, 2023 
     Income  Shares (a)  Per Share  Income  Shares (a)  Per Share 
     (Numerator)  (Denominator)  Amount  (Numerator)  (Denominator)  Amount 
    Net income$15,669        $48,344       
    Less: Net income attributable to redeemable noncontrolling interest (2,349)        (7,010)      
    Less: TypTap Group's net (income) attributable to non-HCI common stockholders and TypTap Group's participating securities (163)        (396)      
    Net income attributable to HCI 13,157         40,938       
    Less: Income attributable to participating securities (411)        (1,395)      
    Basic Earnings Per Share:                 
    Income allocated to common stockholders 12,746   8,317  $1.53   39,543   8,299  $4.76 
                      
    Effect of Dilutive Securities: *                 
    Stock options    88         68    
    Convertible senior notes 1,927   2,538      5,771   2,538    
    Warrants    32             
                      
    Diluted Earnings Per Share:                 
    Income available to common stockholders and assumed conversions$14,673   10,975  $1.34  $45,314   10,905  $4.16 
                      
    (a) Shares in thousands. 
    * For the nine months ended September 30, 2023, warrants were excluded due to anti-dilutive effect. 


    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 Nine Months Ended
     September 30, 2023 September 30, 2023
    GAAP Net income    $15,669      $48,344 
    Net unrealized investment losses (gains)$1,041     $(385)   
    Less: Tax effect at 25.345%$(264)    $98    
    Net adjustment to Net income   $777      $(287)
    Non-GAAP Adjusted Net income   $16,446      $48,057 



    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  Nine Months Ended 
    Non-GAAPSeptember 30, 2023  September 30, 2023 
     Income  Shares (a)  Per Share  Income  Shares (a)  Per Share 
     (Numerator)  (Denominator)  Amount  (Numerator)  (Denominator)  Amount 
    Adjusted net income (non-GAAP)$16,446        $48,057       
    Less: Net income attributable to redeemable noncontrolling interest (2,349)       $(7,010)      
    Less: TypTap Group's net (income) loss attributable to non-HCI common stockholders and TypTap Group's participating securities (166)        (393)      
    Net income attributable to HCI 13,931         40,654       
    Less: Income attributable to participating securities (437)        (1,385)      
                      
    Basic Earnings Per Share before unrealized gains/losses on equity securities:                 
    Income allocated to common stockholders 13,494   8,317  $1.62   39,269   8,299  $4.73 
                      
    Effect of Dilutive Securities: *                 
    Stock options    88         68    
    Convertible senior notes 1,927   2,538      5,771   2,538    
    Warrants    32             
                      
    Diluted Earnings Per Share before unrealized gains/losses on equity securities:                 
    Income available to common stockholders and assumed conversions$15,421  $10,975  $1.41  $45,040  $10,905  $4.13 
                      
    (a) Shares in thousands. 
    * For the nine months ended September 30, 2023, warrants were excluded due to anti-dilutive effect. 


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

     Three Months Ended Nine Months Ended
     September 30, 2023 September 30, 2023
    GAAP diluted Earnings Per Share    $1.34      $4.16 
    Net unrealized investment losses (gains)$0.09      $(0.04)    
    Less: Tax effect at 25.345%$(0.02)     $0.01     
    Net adjustment to GAAP diluted EPS    $0.07      $(0.03)
    Non-GAAP Adjusted diluted EPS    $1.41      $4.13 


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