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HCI Group Reports First Quarter 2022 Results

HCI Group, Inc.
HCI Group, Inc.

TAMPA, Fla., May 04, 2022 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI), a holding company with operations in homeowners insurance, information technology services, real estate, and reinsurance, reported results for the quarter ended March 31, 2022.

First Quarter 2022 - Financial Results
Net income for the first quarter of 2022 totaled $2.8 million or $0.09 diluted earnings per share compared with net income of $6.8 million or $0.75 diluted earnings per share in the first quarter of 2021. Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the first quarter of 2022 was $5.5 million or $0.34 diluted earnings per share compared with adjusted net income of $7.0 million or $0.77 diluted earnings per share in the first quarter of 2021. 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”).

Consolidated gross written premiums of $177.3 million for the first quarter of 2022 increased 40.9% from $125.8 million in the first quarter of 2021. Homeowners Choice gross written premiums grew from $81.0 million to $91.1 million, and TypTap Insurance Company gross written premiums grew from $44.8 million to $86.2 million.

Consolidated gross premiums earned of $178.9 million for the first quarter of 2022 increased 36.6% from $130.9 million in the first quarter of 2021. Homeowners Choice gross premiums earned grew from $102.1 million to $118.3 million, and TypTap gross premiums earned grew from $28.8 million to $60.6 million.

Premiums ceded for reinsurance for the first quarter of 2022 increased to $53.2 million from $43.1 million in the first quarter of 2021 and represented 29.7% and 32.9%, respectively, of gross premiums earned. The increase in reinsurance costs primarily reflects premium growth at both Homeowners Choice and TypTap.

Net investment income for the first quarter of 2022 was $2.9 million compared with $4.6 million in the first quarter of 2021. The decrease was primarily attributable to a $2.7 million decrease in income from real estate investments primarily due to a gain from a legal settlement in the first quarter of 2021, offset by a $1 million increase in income from limited partnership investments.

Net realized investment losses were $0.3 million in the first quarter of 2022 compared with $1.1 million of net realized investment gains in the first quarter of 2021. Net unrealized investment losses were $3.6 million in the first quarter of 2022 compared with net unrealized investment losses of $0.3 million in the first quarter of 2021.

Losses and loss adjustment expenses for the first quarter of 2022 were $72.7 million compared with $45.8 million in the same period of 2021. The increase was primarily attributable to the company’s growing premium base and weather-related losses in Florida.

Policy acquisition and other underwriting expenses for the first quarter of 2022 were $29.4 million compared with $23.1 million in the same quarter of 2021. The increase primarily relates to premium growth for both Homeowners Choice and TypTap.

General and administrative personnel expenses increased to $14.0 million in the first quarter of 2022 from $9.7 million for the first quarter of 2021 due primarily to higher stock-based compensation expense and an increase in payroll related to growth of the business.

Interest expense for the first quarter of 2022 was $0.6 million compared with $2.1 million in the same period of 2021. The decrease resulted from conversions of our 4.25% convertible senior notes to common stock during the second half of 2021.

Management Commentary
“In the first quarter, results across our geographic footprint again validated the effectiveness of the technology that we’ve built,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “We continue to execute on our nationwide expansion plan and because of the confidence we have in our technology capabilities, we plan to take advantage of potential opportunities in the future.”

Conference Call
HCI Group will hold a conference call tomorrow, May 5, 2022, 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 8:30 a.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: 655834

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 June 4, 2022.

Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 45165

About HCI Group, Inc.
HCI Group, Inc. owns subsidiaries engaged in diverse, yet complementary business activities, including homeowners insurance, reinsurance, real estate and information technology services. HCI’s leading insurance operation, TypTap Insurance Company, is a rapidly growing, technology-driven insurance company that is expanding nationwide to provide homeowners and flood insurance. 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

Media Contact:
Catherine Adcock
Gateway Group, Inc.
Tel (949) 574-6860
catherine@gatewayir.com

- Tables to follow -

HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)

March 31, 2022

December 31, 2021

(Unaudited)

Assets

Fixed-maturity securities, available for sale, at fair value (amortized cost: $153,776 and $41,953, respectively and allowance for credit losses: $0 and $0, respectively)

$

150,684

$

42,583

Equity securities, at fair value (cost: $39,316 and $46,276, respectively)

41,204

51,740

Limited partnership investments

28,166

28,133

Investment in unconsolidated joint venture, at equity

350

363

Real estate investments

73,387

73,896

Total investments

293,791

196,715

Cash and cash equivalents

569,040

628,943

Restricted cash

2,400

2,400

Accrued interest and dividends receivable

674

353

Income taxes receivable

4,084

Premiums receivable, net (allowance: $2,459 and $1,750, respectively)

39,890

68,157

Prepaid reinsurance premiums

11,561

26,355

Reinsurance recoverable, net of allowance for credit losses:

Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)

14,720

11,985

Unpaid losses and loss adjustment expenses (allowance: $79 and $90, respectively)

54,876

64,665

Deferred policy acquisition costs

53,670

57,695

Property and equipment, net

15,469

14,232

Right-of-use-assets - operating leases

2,673

2,204

Intangible assets, net

15,105

10,636

Funds withheld for assumed business

84,068

73,716

Other assets

17,313

14,717

Total assets

$

1,175,250

$

1,176,857

Liabilities and Equity

Losses and loss adjustment expenses

$

234,792

$

237,165

Unearned premiums

365,112

366,744

Advance premiums

23,898

13,771

Reinsurance payable on paid losses and loss adjustment expenses

6,657

4,017

Ceded reinsurance premiums payable

20,899

19,318

Accrued expenses

16,899

15,453

Income tax payable

3,061

Deferred income taxes, net

4,834

11,739

Revolving credit facility

15,000

15,000

Long-term debt

45,295

45,504

Lease liabilities - operating leases

2,662

2,203

Other liabilities

24,418

31,485

Total liabilities

763,527

762,399

Commitments and contingencies

Redeemable noncontrolling interest

89,695

89,955

Equity:

Common stock, (no par value, 40,000,000 shares authorized, 10,125,927 and 10,131,399
shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively)

Additional paid-in capital

79,131

76,077

Retained income

243,647

246,790

Accumulated other comprehensive (loss) income, net of taxes

(2,185

)

498

Total stockholders' equity

320,593

323,365

Noncontrolling interests

1,435

1,138

Total equity

322,028

324,503

Total liabilities, redeemable noncontrolling interest, and equity

$

1,175,250

$

1,176,857

HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(Dollar amounts in thousands, except per share amounts)

Three Months Ended

March 31,

2022

2021

Revenue

Gross premiums earned

$

178,925

$

130,942

Premiums ceded

(53,162

)

(43,099

)

Net premiums earned

125,763

87,843

Net investment income

2,868

4,594

Net realized investment (losses) gains

(314

)

1,113

Net unrealized investment losses

(3,576

)

(269

)

Policy fee income

1,057

970

Other

1,242

623

Total revenue

127,040

94,874

Expenses

Losses and loss adjustment expenses

72,704

45,751

Policy acquisition and other underwriting expenses

29,408

23,065

General and administrative personnel expenses

14,034

9,650

Interest expense

601

2,079

Other operating expenses

6,292

4,227

Total expenses

123,039

84,772

Income before income taxes

4,001

10,102

Income tax expense

1,210

3,257

Net income

$

2,791

$

6,845

Net income attributable to redeemable noncontrolling interest

(2,248

)

(794

)

Net loss attributable to noncontrolling interests

360

97

Net income after noncontrolling interests

$

903

$

6,148

Basic earnings per share

$

0.09

$

0.82

Diluted earnings per share

$

0.09

$

0.75

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 income per common share calculated in accordance with GAAP is presented below.

Three Months Ended

Three Months Ended

GAAP

March 31, 2022

March 31, 2021

Income

Shares (a)

Per Share

Income

Shares (a)

Per Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

Net income

$

2,791

$

6,845

Less: Net income attributable to redeemable noncontrolling interest

(2,248

)

(794

)

Less: TypTap Group's net loss attributable to non-HCI common stockholders and TypTap Group's participating securities

360

97

Net income attributable to HCI

903

6,148

Less: Income attributable to participating securities

(52

)

(18

)

Basic Earnings Per Share:

Income allocated to common stockholders

851

9,479

$

0.09

6,130

7,474

$

0.82

Effect of Dilutive Securities:

Stock options

135

96

Convertible senior notes*

1,312

2,288

Warrants

153

72

Diluted Earnings Per Share:

Income available to common stockholders and assumed conversions

$

851

9,767

$

0.09

$

7,442

9,930

$

0.75

(a) Shares in thousands.

* 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 (Loss) Income

Three Months Ended

Three Months Ended

March 31, 2022

March 31, 2021

GAAP Net income

$

2,791

$

6,845

Net unrealized investment losses

$

3,576

$

269

Less: Tax effect at 25.345% and 24.52182%, respectively

$

(906

)

$

(66

)

Net adjustment to Net income

$

2,670

$

203

Non-GAAP Adjusted Net income

$

5,461

$

7,048

HCI GROUP, INC. AND SUBSIDIARIES
(Amounts in thousands, except per share amounts)

A summary of the numerator and denominator of the basic and diluted income 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, 2022

March 31, 2021

Income

Shares (a)

Per Share

Income

Shares (a)

Per Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

Adjusted net income (non-GAAP)

$

5,461

$

7,048

Less: Net income attributable to redeemable noncontrolling interest

(2,248

)

$

(794

Less: TypTap Group's net loss attributable to non-HCI common stockholders and TypTap Group's participating securities

340

97

Net income attributable to HCI

3,553

6,351

Less: Income attributable to participating securities

(222

)

(31

Basic Earnings Per Share before unrealized gains/losses on equity securities:

Income allocated to common stockholders

3,331

9,479

$

0.35

6,320

7,474

$

0.85

Effect of Dilutive Securities:

Stock options

135

96

Convertible senior notes*

1,312

2,288

Warrants

153

72

Diluted Earnings Per Share before unrealized gains/losses on equity securities:

Income available to common stockholders and assumed conversions

$

3,331

$

9,767

$

0.34

$

7,632

$

9,930

$

0.77

(a) Shares in thousands.

* 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, 2022

March 31, 2021

GAAP diluted Earnings Per Share

$

0.09

$

0.75

Net unrealized investment losses

$

0.37

$

0.03

Less: Tax effect at 25.345% and 24.52182%, respectively

$

(0.12

)

$

(0.01

)

Net adjustment to GAAP diluted EPS

$

0.25

$

0.02

Non-GAAP Adjusted diluted EPS

$

0.34

$

0.77



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