Hilltop Tops on Solid Top-Line Hike

Zacks Equity Research

On Friday, Hilltop Holdings Inc. (HTH) filed its 10-K to report results for the quarter and year ending Dec 31, 2012. For fourth quarter 2012, the company’s net income attributable to common stockholders stood at $8.6 million or 10 cents per share, improving from an income of $5.0 million or 9 cents per share in the year-ago period. Earnings per share comfortably surpassed the Zacks Consensus Estimate of 8 cents as well.

Hilltop’s total revenue stood at $134.9 million, spiking from both the Zacks Consensus Estimate of $52.0 million and the year-ago quarter’s $38.2 million. The year-over-year upside was primarily attributable to robust growth in both interest and non-interest income primarily due to the acquisition of PlainsCapital Corp. in Dec 2012.

During the reported quarter, net interest income rose to $25.2 million from $0.9 million in the year-ago quarter, while non-interest income jumped to $109.7 million from $37.2 million in the year-ago period. However, Hilltop also incurred provision for loan losses of $3.8 million in the reported quarter.

Meanwhile, total interest expense increased 65.2% year over year to $3.8 million, whereas non-interest expenses radically amplified to $115.9 million from $30.4 million in the year-ago period.

Full-year Highlights

For full year 2012, Hilltop generated net loss attributable to common stockholders of $5.9 million or 10 cents per share. This was higher than $6.5 million or 12 cents per share reported in 2011 as well as the Zacks Consensus Estimate of a loss of 17 cents a share. Including special charges, reported net loss was $7.7 million in 2012.

Total revenue surged 75.9% year over year to $253.0 million in 2012, also outpacing the Zacks Consensus Estimate of $167 million. Net premiums earned increased 9.5% year over year to $146.7 million.

Meanwhile, net interest and non-interest expenses totaled $235.7 million in 2012 versus $164.3 million in 2011. Moreover, combined ratio deteriorated to 108.8% from 106.2% in 2011.

Financial Update

As on Dec 31, 2012, Hilltop held cash and cash equivalents of $725.2 million, up from $578.5 million as on Dec 31, 2011, along with a strong investment portfolio worth $1.1 billion.

Total shareholder’s equity stood at $1.15 billion at the end of 2012, jumping from $655.4 million at 2011-end. Total assets also surged to $7.29 billion at 2012-end from $925.4 at 2011-end, while total liabilities inflated to $6.14 billion from $270 million at 2011-end.

At 2012-end, book value per share increased to $12.34 from $11.60 at 2011-end. Operating cash flow stood at $113.9 million against an outflow $3.3 million at the end of 2011. Hilltop held about $200 million of free cash at the end of 2012.

At Dec 2012-end, Hilltop had a deposit in custody for various investments in State Insurance Departments with carrying values of $9.3 million.

The company’s share repurchase program, sanctioned in Nov 2011 and expired in Nov 2012, had shares worth $98.8 million remaining for buyback.

Moreover, on Nov 30, 2012, Hilltop completed the purchase of U.S.-based financial services company –PlainsCapital Corp. – for $813.5 million. This includes $311.8 million of cash, $387.6 million of stock and $144.1 million of Hilltop preferred stock under the Small Business Lending Fund program. The deal was announced in May 2012, while regulatory approvals were received in Nov 2012.

Others

While Hilltop carries a Zacks Rank #3 (Hold), other stocks that are outperforming in the insurance sector include EMC Insurance Group Inc. (EMCI), XL Group Plc (XL) and Amerisafe Inc. (AMSF). All these stocks carry a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on XL

Read the Full Research Report on AMSF

Read the Full Research Report on HTH

Read the Full Research Report on EMCI

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