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
ResultsNet 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 CallHCI 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)
506-0062Listen-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)
481-4010International 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 StatementsThis
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
RosenbergInvestor RelationsHCI Group, Inc.Tel (813)
405-5261srosenberg@hcigroup.com
Investor Relations Contact:Matt
GloverGateway Group, Inc.Tel (949) 574-3860HCI@gatewayir.com
Media Contact:Catherine
AdcockGateway Group, Inc.Tel (949)
574-6860catherine@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 10,131,399shares 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
SUBSIDIARIESConsolidated 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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