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HCI Group's (HCI) Healthy Premiums Keep Growth Trend Alive

Zacks Equity Research

HCI Group, Inc. HCI has been displaying higher premiums over a considerable period of time and we expect the same to continue in the near term. This probable growth in future will primarily stem from TypTap Insurance Company, which is the property and casualty (P&C) insurer’s technology-based insurance unit.

The expansion of TypTap Insurance Company and its profitability streak in spite of the occurrence of five hurricanes will add fuel to the company’s solid premium trajectory. Notably, this insurance subsidiary’s contribution is anticipated to be the primary growth driver in 2019.

Given the rising interest rates, the insurer has been experiencing better investment results and we expect this momentum to continue in the future as well. An expected increase in limited partnership income and higher interest rates on fixed term securities, short-term investments and cash can lead to higher investment income in the near term.

Riding on the strength of sturdy premiums and healthier investment results, the company’s top line is estimated to grow going forward. This in turn, will accelerate the company’s overall growth, thereby invoking investors’ interest.

With respect to enhancing shareholder value, the company has been indulging in a few good shareholder-friendly moves like share buybacks and dividend payments. Such measures underscore the company’s strong liquidity position and in turn, not only retain the existing investors’ faith in the stock but also attract new ones.

Interestingly, the company has been focusing on lowering its share count through strategic buybacks. A lower share count translates into individual share representing a higher percentage of ownership. Hence, the company will be able to hike dividends without a significant increase in actual cash flows.

Additionally, a solid capital position aids the company to protect itself from market volatility while retaining its financial strength and flexibility required to pursue new opportunities.  

Shares of this Zacks Rank #2 (Buy) P&C insurer have surged 38.6% in a year’s time against the industry’s decline of 8.1%. We believe, the aforementioned positives will drive the stock higher in the near term.



For the P&C insurer, the Zacks Consensus Estimate for 2019 earnings stands at $4.50, indicating year-over-year growth of 28.6%.

Regarding its earnings history, the company delivered positive surprises in all the trailing four reported quarters, the average being 34.33%.

Other Stocks to Consider

Investors interested in some other top-ranked stocks from the same space can also consider Argo Group International Holdings, Ltd. ARGO, Mercury General Corporation MCY and Berkshire Hathaway Inc. BRK.B, each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Argo Group underwrites specialty insurance and reinsurance products in the property and casualty markets. The company delivered positive surprises in three of the trailing four reported quarters, the average beat being 13.57%.

Mercury General engages in writing personal automobile insurance in the United States. The company pulled off earnings surprises in two of the previous four reported quarters, the average beat being 1.26%.

Berkshire Hathaway engages in insurance, freight rail transportation and utility businesses. The company surpassed estimates in three of the preceding four reported quarters, the average beat being 4.31%.

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