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HCI Group Reports First Quarter 2024 Results
Source: Nasdaq GlobeNewswire / 08 May 2024 16:15:00 America/New_York
First Quarter Pre-Tax Income of $77.4 million
First Quarter Diluted EPS of $3.81
First Quarter Gross Loss Ratio of 31.1%TAMPA, Fla., May 08, 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 $77.4 million and net income of $57.0 million, or $3.81 diluted earnings per share, in the first quarter of 2024, compared with net income of $17.8 million, or $1.54 diluted earnings per share, in the first quarter of 2023.
Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the first quarter of 2024 was $55.0 million, or $3.65 diluted earnings per share compared with adjusted net income of $17.4 million, or $1.50 diluted earnings per share, in the first quarter of 2023. 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
“The strong results in the first quarter further reinforce the power of the technology that we’ve built. We’ve successfully added a significant amount of premium with almost no added expense, and we’ve launched a new carrier,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “The opportunity for the future is to further leverage our technology platform.”First Quarter 2024 Commentary
Consolidated gross premiums earned in the first quarter increased to $256.6 million from $180.1 million in the first quarter of 2023. Gross premiums earned in the first quarter of 2024 include $67.0 million of premium from the assumption of policies from Citizens Property Insurance Corporation.Premiums ceded for reinsurance in the first quarter decreased to $68.1 million from $70.5 million in the first quarter of 2023. Premiums ceded represented 26.5% of gross premiums earned in the first quarter of 2024 compared with 39.2% in the first quarter of 2023. The decrease in reinsurance cost as a percentage of gross premiums earned was due in part to the timing of the large assumption of premiums assumed from Citizens.
Net investment income in the first quarter was $14.1 million compared with $17.7 million in the first quarter of 2023. Net investment income in the first three months of 2023 included a gain of $8.9 million from the sale of two real estate investment properties. Excluding the real estate gain in the prior year quarter, net investment income increased to $14.1 million from $8.8 million. The increase was primarily attributable to higher balances of fixed maturity securities and cash combined with higher yields.
Losses and loss adjustment expenses in the first quarter were $79.9 million compared with $60.6 million in the first quarter of 2023. The increase in loss expense was due to the growth in policy count and premiums. The gross loss ratio in the first quarter was 31.1% down from 33.6% in the first quarter of 2023.
Policy acquisition and other underwriting expenses in the first quarter decreased to $22.1 million from $22.7 million in the first quarter of 2023 and declined to 8.6% of gross premiums earned from 12.6%, due in part to lower commissions and lower policy acquisition expense related to the timing of the assumption of policies from Citizens.
General and administrative personnel expenses in the first quarter increased to $16.3 million from $13.5 million in the first quarter of 2023. The increase was primarily attributable to an increase in employee incentive bonus and merit increases, offset by a decrease in stock-based compensation expense. General and administrative personnel expenses represented 6.3% of gross premiums earned in the first quarter of 2024 down from 7.5% in the first quarter of 2023.
Conference Call
HCI Group will hold a conference call later today, May 8, 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: 682325Please 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 8, 2025.
Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 50356About 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.comInvestor 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) Q1 2024 Q1 2023 FY 2023 (Unaudited) (Unaudited) Insurance Operations Gross Written Premiums: Homeowners Choice $ 91,875 $ 85,153 $ 535,070 TypTap Insurance Company 143,624 114,701 363,552 Condo Owners Reciprocal Exchange 19,487 - - Total Gross Written Premiums 254,986 199,854 898,622 Gross Premiums Earned: Homeowners Choice 149,271 92,456 417,202 TypTap Insurance Company 103,748 87,612 348,310 Condo Owners Reciprocal Exchange 3,625 - - Total Gross Premiums Earned 256,644 180,068 765,512 Gross Premiums Earned Loss Ratio 31.1 % 33.6 % 33.3 % Per Share Metrics GAAP Diluted EPS $ 3.81 $ 1.54 $ 7.62 Non-GAAP Adjusted Diluted EPS $ 3.65 $ 1.50 $ 7.41 Dividends per share $ 0.40 $ 0.40 $ 1.60 Book value per share at the end of period $ 38.50 $ 20.97 $ 33.36 Shares outstanding at the end of period 10,276,463 8,596,673 9,738,183 HCI GROUP, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollar amounts in thousands) March 31, 2024 December 31, 2023 (Unaudited) Assets Fixed-maturity securities, available for sale, at fair value (amortized cost: $475,170 and $387,687, respectively and allowance for credit losses: $0 and $0, respectively) $ 470,805 $ 383,238 Equity securities, at fair value (cost: $47,852 and $44,011, respectively) 52,013 45,537 Limited partnership investments 24,015 23,583 Real estate investments 69,096 67,893 Total investments 615,929 520,251 Cash and cash equivalents 655,384 536,478 Restricted cash 3,303 3,287 Receivable from maturities of fixed-maturity securities — 91,085 Accrued interest and dividends receivable 4,052 3,507 Income taxes receivable 651 — Deferred income taxes, net — 512 Premiums receivable, net (allowance: $3,443 and $3,152, respectively) 43,291 38,037 Assumed premium receivable — 19,954 Prepaid reinsurance premiums 34,125 86,232 Reinsurance recoverable, net of allowance for credit losses: Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively) 25,452 19,690 Unpaid losses and loss adjustment expenses (allowance: $69 and $118, respectively) 305,218 330,604 Deferred policy acquisition costs 45,152 42,910 Property and equipment, net 29,314 29,251 Right-of-use-assets - operating leases 1,352 1,407 Intangible assets, net 7,046 7,659 Funds withheld for assumed business 14,181 30,087 Other assets 57,184 50,365 Total assets $ 1,841,634 $ 1,811,316 Liabilities and Equity Losses and loss adjustment expenses $ 578,712 $ 585,073 Unearned premiums 499,499 501,157 Advance premiums 26,518 15,895 Reinsurance payable on paid losses and loss adjustment expenses — 3,145 Ceded reinsurance premiums payable 10,693 8,921 Assumed premiums payable 2,681 850 Accrued expenses 24,699 19,722 Income tax payable 23,184 7,702 Deferred income taxes, net 5,113 — Revolving credit facility 50,000 — Long-term debt 184,744 208,495 Lease liabilities - operating leases 1,357 1,408 Other liabilities 36,564 35,623 Total liabilities 1,443,764 1,387,991 Commitments and contingencies Redeemable noncontrolling interest — 96,160 Equity: Common stock, (no par value, 40,000,000 shares authorized, 10,276,463 and 9,738,183
shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively)— — Additional paid-in capital 116,728 89,568 Retained income 282,056 238,438 Accumulated other comprehensive loss, net of taxes (3,102 ) (3,163 ) Total stockholders' equity 395,682 324,843 Noncontrolling interests 2,188 2,322 Total equity 397,870 327,165 Total liabilities, redeemable noncontrolling interest, and equity $ 1,841,634 $ 1,811,316 HCI GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Income (Unaudited) (Dollar amounts in thousands, except per share amounts) Three Months Ended March 31, 2024 2023 Revenue Gross premiums earned $ 256,644 $ 180,068 Premiums ceded (68,106 ) (70,509 ) Net premiums earned 188,538 109,559 Net investment income 14,067 17,715 Net realized investment losses — (1,149 ) Net unrealized investment gains 2,635 529 Policy fee income 1,019 1,090 Other 355 1,285 Total revenue 206,614 129,029 Expenses Losses and loss adjustment expenses 79,922 60,565 Policy acquisition and other underwriting expenses 22,139 22,720 General and administrative personnel expenses 16,274 13,502 Interest expense 3,149 2,801 Other operating expenses 7,700 6,305 Total expenses 129,184 105,893 Income before income taxes 77,430 23,136 Income tax expense 20,474 5,343 Net income $ 56,956 $ 17,793 Net income attributable to redeemable noncontrolling interest (10,149 ) (2,324 ) Net loss (income) attributable to noncontrolling interests 804 (131 ) Net income after noncontrolling interests $ 47,611 $ 15,338 Basic earnings per share $ 4.76 $ 1.78 Diluted earnings per share $ 3.81 $ 1.54 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, 2024 March 31, 2023 Income Shares (a) Per Share Income Shares (a) Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Net income $ 56,956 $ 17,793 Less: Net income attributable to redeemable noncontrolling interest (10,149 ) (2,324 ) Less: Net loss (income) attributable to noncontrolling interests 804 (131 ) Net income attributable to HCI 47,611 15,338 Less: Income attributable to participating securities (1,218 ) (564 ) Basic Earnings Per Share: Income allocated to common stockholders 46,393 9,751 $ 4.76 14,774 8,278 $ 1.78 Effect of Dilutive Securities: Stock options — 280 — 45 Convertible senior notes 1,640 2,282 1,921 2,537 Warrants — 305 — — Diluted Earnings Per Share: Income available to common stockholders and assumed conversions $ 48,033 12,618 $ 3.81 $ 16,695 10,860 $ 1.54 (a) Shares in thousands. *For the three months ended March 31, 2023, warrants were excluded due to anti-dilutive effect
Non-GAAP Financial MeasuresAdjusted 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, 2024 March 31, 2023 GAAP Net income $ 56,956 $ 17,793 Net unrealized investment gains $ (2,635 ) $ (529 ) Less: Tax effect at 25.041% (Q1 2024) & 25.345% (Q1 2023) $ 660 $ 134 Net adjustment to Net income $ (1,975 ) $ (395 ) Non-GAAP Adjusted Net income $ 54,981 $ 17,398 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, 2024 March 31, 2023 Income Shares (a) Per Share Income Shares (a) Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Adjusted net income (non-GAAP) $ 54,981 $ 17,398 Less: Net income attributable to redeemable noncontrolling interest (10,149 ) $ (2,324 ) Less: Net loss (income) attributable to noncontrolling interests 815 (127 ) Net income attributable to HCI 45,647 14,947 Less: Income attributable to participating securities (1,168 ) (550 ) Basic Earnings Per Share before unrealized gains/losses on equity securities: Income allocated to common stockholders 44,479 9,751 $ 4.56 14,397 8,278 $ 1.74 Effect of Dilutive Securities: Stock options — 280 — 45 Convertible senior notes 1,640 2,282 1,921 2,537 Warrants — 305 — — Diluted Earnings Per Share before unrealized gains/losses on equity securities: Income available to common stockholders and assumed conversions $ 46,119 $ 12,618 $ 3.65 $ 16,318 $ 10,860 $ 1.50 (a) Shares in thousands. *For the three months ended March 31, 2023, warrants were excluded due to anti-dilutive effect
Reconciliation of GAAP Diluted EPS to Non-GAAP Adjusted Diluted EPSThree Months Ended Three Months Ended March 31, 2024 March 31, 2023 GAAP diluted Earnings Per Share $ 3.81 $ 1.54 Net unrealized investment gains $ (0.21 ) $ (0.05 ) Less: Tax effect at 25.041% (Q1 2024) & 25.345% (Q1 2023) $ 0.05 $ 0.01 Net adjustment to GAAP diluted EPS $ (0.16 ) $ (0.04 ) Non-GAAP Adjusted diluted EPS $ 3.65 $ 1.50 
