HCI Group Reports First Quarter 2023 Results
Pre-Tax Income of $23.1 million
First Quarter Gross Loss Ratio Improved to 33.6% from 40.6%
Greenleaf Sells Two Properties for a Gain of $8.9 Million
TAMPA, Fla., May 09, 2023 (GLOBE NEWSWIRE) — HCI Group, Inc. (NYSE:HCI), a holding company with operations in homeowners insurance, information technology services, real estate, and reinsurance, reported net income of $17.8 million, or $1.54 diluted earnings per share in the first quarter of 2023, compared with net income of $2.8 million, or $0.09 diluted earnings per share, in the first quarter of 2022.
Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the first quarter of 2023 was $17.4 million, or $1.50 diluted earnings per share, compared with adjusted net income of $5.5 million, or $0.34 diluted earnings per share, in the first 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
“We are starting to see the benefits of the company’s underwriting and rate actions as well as the bold leadership provided by the Florida Legislature in 2022,” said HCI Group Chairman and Chief Executive Officer Paresh Patel.
First Quarter 2023 Commentary
Consolidated gross premiums earned in the first quarter of 2023 increased to $180.1 million from $178.9 million in the first quarter of 2022. The increase was primarily due to higher average premium per policy offset by a decline in the number of policies in force.
Premiums ceded for reinsurance increased to $70.5 million from $53.2 million in the first quarter of 2022. Ceded premiums represented 39.2% and 29.7% of gross premiums earned in the first quarters of 2023 and 2022, respectively.
Net investment income increased to $17.7 million from $2.9 million in the first quarter of 2022. The increase included a gain of $8.9 million from the sale of two real estate investment properties at Greenleaf. Also included in investment income was interest income of $7.7 million, which increased from $0.6 million in the first quarter of 2022 reflecting higher yields on fixed maturity securities, cash, and cash equivalents.
Losses and loss adjustment expenses decreased to $60.6 million from $72.7 million in the same period of 2022. Losses and loss adjustment expenses as a percent of gross premiums earned declined to 33.6% from 40.6% in the first quarter of 2022. The decrease was driven by lower claims and litigation frequency in Florida.
Policy acquisition and other underwriting expenses decreased to $22.7 million from $29.4 million in the same quarter of 2022 and declined from 16.4% of gross premiums earned to 12.6%, reflecting a higher mix of renewal policies and lower commissions.
General and administrative personnel expenses decreased to $13.5 million from $14.0 million for the first quarter of 2022.
Conference Call
HCI Group will hold a conference call later today, May 9, 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.
A replay of the call will be available 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.
Listen-only toll-free number: (888) 506-0062
Listen-only international number: (973) 528-0011
Entry Code: 826822
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 May 9, 2024.
Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 48147
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:
Simon Rosenberg
Investor Relations
HCI Group, Inc.
Tel (813) 405-5261
srosenberg@hcigroup.com
Investor Relations Contact:
Matt Glover
Gateway Group, Inc.
Tel (949) 574-3860
HCI@gatewayir.com
| HCI GROUP, INC. AND SUBSIDIARIES | |||||||||||
| Selected Financial Metrics | |||||||||||
| (Dollar amounts in thousands, except per share amounts) | |||||||||||
| Q1 2023 | Q1 2022 | FY 2022 | |||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Insurance Operations | |||||||||||
| Gross Written Premiums: | |||||||||||
| Homeowners Choice | $ | 85,153 | $ | 91,141 | $ | 377,860 | |||||
| TypTap Insurance Company | 114,701 | 86,153 | 348,159 | ||||||||
| Total Gross Written Premiums | 199,854 | 177,294 | 726,019 | ||||||||
| Gross Premiums Earned: | |||||||||||
| Homeowners Choice | 92,456 | 118,303 | 426,502 | ||||||||
| TypTap Insurance Company | 87,612 | 60,622 | 298,214 | ||||||||
| Total Gross Premiums Earned | 180,068 | 178,925 | 724,716 | ||||||||
| Gross Premiums Earned Loss Ratio | 33.6 | % | 40.6 | % | 51.3 | % | |||||
| Per Share Metrics | |||||||||||
| GAAP Diluted EPS | $ | 1.54 | $ | 0.09 | $ | (6.24 | ) | ||||
| Non-GAAP Adjusted Diluted EPS | $ | 1.50 | $ | 0.34 | $ | (5.48 | ) | ||||
| Dividends per share | $ | 0.40 | $ | 0.40 | $ | 1.60 | |||||
| Book value per share at the end of period | $ | 20.97 | $ | 31.66 | $ | 18.91 | |||||
| Shares outstanding at the end of period | 8,596,673 | 10,125,927 | 8,598,682 | ||||||||
| HCI GROUP, INC. AND SUBSIDIARIES | |||||||
| Consolidated Balance Sheets | |||||||
| (Dollar amounts in thousands) | |||||||
| March 31, 2023 | December 31, 2022 | ||||||
| (Unaudited) | |||||||
| Assets | |||||||
| Fixed-maturity securities, available for sale, at fair value (amortized cost: $531,899 and $494,197, respectively and allowance for credit losses: $0 and $0, respectively) | $ | 524,756 | $ | 483,901 | |||
| Equity securities, at fair value (cost: $38,575 and $36,272, respectively) | 37,415 | 34,583 | |||||
| Limited partnership investments | 24,520 | 25,702 | |||||
| Investment in unconsolidated joint venture, at equity | — | 18 | |||||
| Real estate investments | 43,562 | 71,388 | |||||
| Total investments | 630,253 | 615,592 | |||||
| Cash and cash equivalents | 302,025 | 234,863 | |||||
| Restricted cash | 2,987 | 2,900 | |||||
| Accrued interest and dividends receivable | 2,525 | 1,952 | |||||
| Income taxes receivable | 707 | 2,807 | |||||
| Premiums receivable, net (allowance: $10,054 and $5,362, respectively) | 44,966 | 34,998 | |||||
| Prepaid reinsurance premiums | 27,063 | 66,627 | |||||
| Reinsurance recoverable, net of allowance for credit losses: | |||||||
| Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively) | 36,896 | 71,594 | |||||
| Unpaid losses and loss adjustment expenses (allowance: $453 and $454, respectively) | 559,804 | 616,765 | |||||
| Deferred policy acquisition costs | 46,632 | 45,522 | |||||
| Property and equipment, net | 26,734 | 17,910 | |||||
| Right-of-use-assets – operating leases | 1,466 | 777 | |||||
| Intangible assets, net | 7,686 | 10,578 | |||||
| Funds withheld for assumed business | 45,274 | 48,772 | |||||
| Other assets | 36,104 | 31,671 | |||||
| Total assets | $ | 1,771,122 | $ | 1,803,328 | |||
| Liabilities and Equity | |||||||
| Losses and loss adjustment expenses | $ | 806,308 | $ | 863,765 | |||
| Unearned premiums | 387,833 | 368,047 | |||||
| Advance premiums | 25,834 | 18,587 | |||||
| Reinsurance payable on paid losses and loss adjustment expenses | 7,043 | 8,606 | |||||
| Ceded reinsurance premiums payable | 14,123 | 17,646 | |||||
| Accrued expenses | 20,633 | 14,534 | |||||
| Reinsurance recovered in advance on unpaid losses | — | 19,863 | |||||
| Deferred income taxes, net | 3,160 | 1,704 | |||||
| Long-term debt | 196,158 | 211,687 | |||||
| Lease liabilities – operating leases | 1,422 | 721 | |||||
| Other liabilities | 35,886 | 23,361 | |||||
| Total liabilities | 1,498,400 | 1,548,521 | |||||
| Commitments and contingencies | |||||||
| Redeemable noncontrolling interest | 92,865 | 93,553 | |||||
| Equity: | |||||||
| Common stock, (no par value, 40,000,000 shares authorized, 8,596,673 and 8,598,682 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively) | — | — | |||||
| Additional paid-in capital | 332 | — | |||||
| Retained income | 185,028 | 172,482 | |||||
| Accumulated other comprehensive loss, net of taxes | (5,098 | ) | (9,886 | ) | |||
| Total stockholders’ equity | 180,262 | 162,596 | |||||
| Noncontrolling interests | (405 | ) | (1,342 | ) | |||
| Total equity | 179,857 | 161,254 | |||||
| Total liabilities, redeemable noncontrolling interest, and equity | $ | 1,771,122 | $ | 1,803,328 | |||
| HCI GROUP, INC. AND SUBSIDIARIES | |||||||
| Consolidated Statements of Income | |||||||
| (Unaudited) | |||||||
| (Dollar amounts in thousands, except per share amounts) | |||||||
| Three Months Ended | |||||||
| March 31, | |||||||
| 2023 | 2022 | ||||||
| Revenue | |||||||
| Gross premiums earned | $ | 180,068 | $ | 178,925 | |||
| Premiums ceded | (70,509 | ) | (53,162 | ) | |||
| Net premiums earned | 109,559 | 125,763 | |||||
| Net investment income | 17,715 | 2,868 | |||||
| Net realized investment losses | (1,149 | ) | (314 | ) | |||
| Net unrealized investment gains (losses) | 529 | (3,576 | ) | ||||
| Policy fee income | 1,090 | 1,057 | |||||
| Other | 1,285 | 1,242 | |||||
| Total revenue | 129,029 | 127,040 | |||||
| Expenses | |||||||
| Losses and loss adjustment expenses | 60,565 | 72,704 | |||||
| Policy acquisition and other underwriting expenses | 22,720 | 29,408 | |||||
| General and administrative personnel expenses | 13,502 | 14,034 | |||||
| Interest expense | 2,801 | 601 | |||||
| Other operating expenses | 6,305 | 6,292 | |||||
| Total expenses | 105,893 | 123,039 | |||||
| Income before income taxes | 23,136 | 4,001 | |||||
| Income tax expense | 5,343 | 1,210 | |||||
| Net income | $ | 17,793 | $ | 2,791 | |||
| Net income attributable to redeemable noncontrolling interest | (2,324 | ) | (2,248 | ) | |||
| Net (income) loss attributable to noncontrolling interests | (131 | ) | 360 | ||||
| Net income after noncontrolling interests | $ | 15,338 | $ | 903 | |||
| Basic earnings per share | $ | 1.78 | $ | 0.09 | |||
| Diluted earnings per share | $ | 1.54 | $ | 0.09 | |||
| Dividends per share | $ | 0.40 | $ | 0.40 | |||
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 | Three Months Ended | ||||||||||||||||||
| GAAP | March 31, 2023 | March 31, 2022 | |||||||||||||||||
| Income | Shares (a) | Per Share | Income | Shares (a) | Per Share | ||||||||||||||
| (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | ||||||||||||||
| Net income | $ | 17,793 | $ | 2,791 | |||||||||||||||
| Less: Net income attributable to redeemable noncontrolling interest | (2,324 | ) | (2,248 | ) | |||||||||||||||
| Less: TypTap Group’s net (income) loss attributable to non-HCI common stockholders and TypTap Group’s participating securities | (131 | ) | 360 | ||||||||||||||||
| Net income attributable to HCI | 15,338 | 903 | |||||||||||||||||
| Less: Income attributable to participating securities | (564 | ) | (52 | ) | |||||||||||||||
| Basic Earnings Per Share: | |||||||||||||||||||
| Income allocated to common stockholders | 14,774 | 8,278 | $ | 1.78 | 851 | 9,479 | $ | 0.09 | |||||||||||
| Effect of Dilutive Securities: * | |||||||||||||||||||
| Stock options | — | 45 | — | 135 | |||||||||||||||
| Convertible senior notes | 1,921 | 2,537 | — | — | |||||||||||||||
| Warrants | — | — | — | 153 | |||||||||||||||
| Diluted Earnings Per Share: | |||||||||||||||||||
| Income available to common stockholders and assumed conversions | $ | 16,695 | 10,860 | $ | 1.54 | $ | 851 | 9,767 | $ | 0.09 | |||||||||
| (a) Shares in thousands. | |||||||||||||||||||
| * For the three months ended March 31, 2023, warrants were excluded due to anti-dilutive effect. For the three months ended March 31, 2022, convertible senior notes 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 | Three Months Ended | ||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||
| GAAP Net income | $ | 17,793 | $ | 2,791 | |||||||||||
| Net unrealized investment (gains) losses | $ | (529 | ) | $ | 3,576 | ||||||||||
| Less: Tax effect at 25.345% | $ | 134 | $ | (906 | ) | ||||||||||
| Net adjustment to Net income | $ | (395 | ) | $ | 2,670 | ||||||||||
| Non-GAAP Adjusted Net income | $ | 17,398 | $ | 5,461 | |||||||||||
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 | Three Months Ended | ||||||||||||||||||
| Non-GAAP | March 31, 2023 | March 31, 2022 | |||||||||||||||||
| Income | Shares (a) | Per Share | Income | Shares (a) | Per Share | ||||||||||||||
| (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | ||||||||||||||
| Adjusted net income (non-GAAP) | $ | 17,398 | $ | 5,461 | |||||||||||||||
| Less: Net income attributable to redeemable noncontrolling interest | (2,324 | ) | $ | (2,248 | ) | ||||||||||||||
| Less: TypTap Group’s net (income) loss attributable to non-HCI common stockholders and TypTap Group’s participating securities | (127 | ) | 340 | ||||||||||||||||
| Net income attributable to HCI | 14,947 | 3,553 | |||||||||||||||||
| Less: Income attributable to participating securities | (550 | ) | (222 | ) | |||||||||||||||
| Basic Earnings Per Share before unrealized gains/losses on equity securities: | |||||||||||||||||||
| Income allocated to common stockholders | 14,397 | 8,278 | $ | 1.74 | 3,331 | 9,479 | $ | 0.35 | |||||||||||
| Effect of Dilutive Securities: * | |||||||||||||||||||
| Stock options | — | 45 | — | 135 | |||||||||||||||
| Convertible senior notes | 1,921 | 2,537 | — | — | |||||||||||||||
| Warrants | — | — | — | 153 | |||||||||||||||
| Diluted Earnings Per Share before unrealized gains/losses on equity securities: | |||||||||||||||||||
| Income available to common stockholders and assumed conversions | $ | 16,318 | $ | 10,860 | $ | 1.50 | $ | 3,331 | $ | 9,767 | $ | 0.34 | |||||||
| (a) Shares in thousands. | |||||||||||||||||||
| * For the three months ended March 31, 2023, warrants were excluded due to anti-dilutive effect. For the three months ended March 31, 2022, convertible senior notes were excluded due to anti-dilutive effect. | |||||||||||||||||||
Reconciliation of GAAP Diluted EPS to Non-GAAP Adjusted Diluted EPS
| Three Months Ended | Three Months Ended | ||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||
| GAAP diluted Earnings Per Share | $ | 1.54 | $ | 0.09 | |||||||||||
| Net unrealized investment (gains) losses | $ | (0.05 | ) | $ | 0.37 | ||||||||||
| Less: Tax effect at 25.345% | $ | 0.01 | $ | (0.12 | ) | ||||||||||
| Net adjustment to GAAP diluted EPS | $ | (0.04 | ) | $ | 0.25 | ||||||||||
| Non-GAAP Adjusted diluted EPS | $ | 1.50 | $ | 0.34 | |||||||||||
