Hilltop Earnings Miss Estimates, Up YoY

Zacks

Hilltop Holdings Inc. (HTH) reported second-quarter 2013 operating earnings per share of 24 cents. Although the results were substantially below the Zacks Consensus Estimate of 31 cents, it improved from the loss of 19 cents in the year-ago quarter. Consequently, net income stood at $20.9 million, rebounding from a net loss of $10.7 million in the year-ago quarter.

Hilltop’s total revenue was $307.6 million, spiking from both the Zacks Consensus Estimate of $278 million and the year-ago quarter figure of $39.2 million. Net interest income rose to $68.4 million from $1.2 million in the year-ago quarter, while non-interest income jumped to $239.2 million from $38.0 million in the year-ago period.

The year-over-year upside was primarily attributable to robust growth in both interest and non-interest income primarily due to the inclusion of banking, mortgage origination and financial advisory operations through the acquisition of PlainsCapital Corp. in Nov 2012. The company experienced growth against the sequentially prior quarter as well.

However, Hilltop incurred provision for loan losses of $11.3 million in the reported quarter. Meanwhile, total interest expense surged 126.7% year over year to $7.7 million, whereas non-interest expenses radically amplified to $260.4 million from $55.2 million in the year-ago period.

Meanwhile, pre-tax loss from insurance operations widened to $20.7 million from $16.0 million in the year-ago quarter. Higher premiums were more than offset by higher catastrophe losses as well as underwriting, loss and loss adjusted expenses. Subsequently, combined ratio deteriorated to 158.2% from 141.8% in the prior-year quarter.

Financial Update

As on Jun 30, 2013, Hilltop held cash and due from banks of $596.4 million, down from $722 million as on Dec 31, 2012, along with a strong securities portfolio worth $1.1 billion, up from $1.08 billion at 2012-end.

Total shareholder equity stood at $1.2 billion at the end of Jun 2013, up from $1.15 billion at 2012-end. However, total assets improved to $7.40 billion from $7.29 billion at 2012-end, while total liabilities increased to $6.23 billion from $6.14 billion at 2012-end.

At the end of Jun 2013, operating cash flow stood at $14.6 million compared with cash outflow of $1.6 million at the end of Jun 2012. Hilltop held over $200 million of free cash at the end of Jun 2013, at par with 2012-level.

At Jun 2013-end, Hilltop’s insurance operations had a deposit in custody for various investments in State Insurance Departments with carrying values of $9.3 million, at par with 2012-level. Total deposits decreased to $4.5 billion from $4.7 billion at 2012-end.

Others

Apart from Hilltop, other outperformers of the insurance sector include ACE Ltd. (ACE), Chubb Corp. (CB) and Everest Re Ltd.(RE). All these stocks carry a Zacks Rank #2 (Buy).

Read the Full Research Report on CB

Read the Full Research Report on ACE

Read the Full Research Report on RE

Read the Full Research Report on HTH

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