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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.


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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