Fourth Quarter Diluted EPS of $3.40
Fourth Quarter Gross Loss Ratio of 30.4%
Fourth Quarter Pre-Tax Income of $54.2 million
TAMPA, Fla., March 07, 2024 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI), a holding company with operations in homeowners insurance, information technology services, real estate, and reinsurance, reported pre-tax income of $54.2 million and net income of $40.9 million, or $3.40 diluted earnings per share, in the fourth quarter of 2023, compared with net income of $2.7 million, or $0.18 diluted earnings per share, in the fourth quarter of 2022.
Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the fourth quarter of 2023 was $38.8 million, or $3.22 diluted earnings per share compared with adjusted net income of $1.6 million, or $0.06 diluted earnings per share, in the fourth quarter of 2022. 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").
Management Commentary
"Several major achievements were accomplished since the end of the third quarter, including completing four assumptions from Citizens, growing premiums-in-force by approximately 30%, further reducing the gross loss ratio to 30%, and commencing operations of a new insurance carrier," said HCI Group Chairman and Chief Executive Officer Paresh Patel. "We also redeemed all outstanding preferred shares from Centerbridge and completed a secondary common stock offering for proceeds of $85 million."
Fourth Quarter 2023 Commentary
Consolidated gross premiums earned in the fourth quarter increased to $215.2 million from $183.0 million in the fourth quarter of 2022. Gross premiums earned in the fourth quarter of 2023 include $23 million of premium from the assumption of policies from Citizens.
Premiums ceded for reinsurance in the fourth quarter decreased to $66.6 million from $77.0 million in the fourth quarter of 2022. Premiums ceded represented 30.9% of gross premiums earned in the fourth quarter of 2023 compared with 42.1% in the fourth quarter of 2022.
Net investment income in the fourth quarter was $10.3 million compared with $7.4 million in the fourth quarter of 2022. The increase was attributable to higher yields on fixed maturity securities, cash, and cash equivalents as well as a higher cash balance.
Losses and loss adjustment expenses in the fourth quarter decreased to $65.4 million from $72.1 million in the fourth quarter of 2022. The gross loss ratio in the fourth quarter declined to 30.4% from 39.4% in the fourth quarter of 2022. The decrease is primarily due to the continued improvement in claims experience in Florida including lower claims and litigation frequency.
Policy acquisition and other underwriting expenses in the fourth quarter decreased to $22.7 million from $24.0 million in the fourth quarter of 2022 and declined to 10.6% of gross premiums earned from 13.1%, reflecting lower commissions and lower policy acquisition expense related to policies assumed from Citizens.
Full Year 2023 Results
For the year ended December 31, 2023, the company reported net income of $89.3 million, or $7.62 diluted earnings per share, compared with a net loss of $54.6 million, or $6.24 loss per share, for the year ended December 31, 2022.
Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the twelve-month period was $86.8 million, or $7.41 diluted earnings per share compared with adjusted net loss of $47.5 million, or $5.48 loss per share, in the same period of 2022. An explanation of this non-GAAP financial measure and reconciliations to the applicable GAAP numbers accompany this press release.
Consolidated gross premiums earned for the twelve months of 2023 increased to $765.5 million from $724.7 million in the year ended December 31, 2022. Gross premiums earned for the twelve months of 2023 include $23 million of premium from the assumption of policies from Citizens.
Premiums ceded for reinsurance for the twelve months of 2023 increased to $269.6 million from $261.1 million in the twelve months of 2022. Premiums ceded represented 35.2% and 36.0% of gross premiums earned in the twelve months of 2023 and 2022, respectively.
Net investment income for the twelve months of 2023 increased to $46.2 million from $32.4 million in the twelve months of 2022. Results for the twelve months of 2023 included a $8.9 million gain from the sale of two real estate investment properties and results for the twelve months of 2022 included a $13.4 million gain from the sale of real estate investment property. Excluding real estate gains, net investment income for the twelve months of 2023 increased to $37.3 million from $19.0 million for the twelve months of 2022. The increase was attributable to higher yields on fixed maturity securities, cash, and cash equivalents as well as a higher cash balance.
Losses and loss adjustment expenses for the twelve months of 2023 decreased to $254.6 million from $371.5 million in the twelve months of 2022. The twelve months of 2022 included $64.6 million of loss expense related to Hurricane Ian. After adjusting for this, the gross loss ratio for the twelve months of 2023 improved to 33% compared to an adjusted gross loss ratio of 42% for the twelve months of 2022 reflecting the continued improvement in claims experience in Florida including lower claims and litigation frequency.
Policy acquisition and other underwriting expenses for the twelve months of 2023 decreased to $90.8 million from $105.0 million in the twelve months of 2022 and declined to 11.9% of gross premiums earned from 14.5%, reflecting lower commissions, the transition of business from United Property & Casualty Insurance Company and lower policy acquisition expenses related to the policies assumed from Citizens.
Conference Call
HCI Group will hold a conference call later today, March 7, 2024, 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 4:45 p.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: 409252
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 March 7, 2025.
Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 49845
About HCI Group, Inc.
HCI Group, Inc. owns subsidiaries engaged in diverse, yet complementary business activities, including homeowners insurance, information technology services, insurance management, real estate, and reinsurance. HCI's leading insurance operation, TypTap Insurance Company, is a technology-driven homeowners insurance company. 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:
Bill Broomall, CFA
Investor Relations
HCI Group, Inc.
Tel (813) 776-1012
wbroomall@typtap.com
Investor Relations Contact:
Matt Glover
Gateway Group, Inc.
Tel (949) 574-3860
HCI@gatewayir.com
- Tables to follow -
| HCI GROUP, INC. AND SUBSIDIARIES Selected Financial Metrics (Dollar amounts in thousands, except per share amounts) | |||||||||||||||||||||||||
| FY 2023 | Q4 2023 | Q3 2023 | Q2 2023 | Q1 2023 | FY 2022 | ||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||
| Insurance Operations | |||||||||||||||||||||||||
| Gross Written Premiums: | |||||||||||||||||||||||||
| Homeowners Choice | $ | 535,070 | $ | 182,038 | $ | 127,334 | $ | 140,544 | $ | 85,153 | $ | 377,860 | |||||||||||||
| TypTap Insurance Company | 363,552 | 138,482 | 70,931 | 39,438 | 114,701 | 348,159 | |||||||||||||||||||
| Total Gross Written Premiums | 898,622 | 320,520 | 198,265 | 179,982 | 199,854 | 726,019 | |||||||||||||||||||
| Gross Premiums Earned: | |||||||||||||||||||||||||
| Homeowners Choice | 417,202 | 125,796 | 102,075 | 96,875 | 92,456 | 426,501 | |||||||||||||||||||
| TypTap Insurance Company | 348,310 | 89,394 | 86,233 | 85,071 | 87,612 | 298,215 | |||||||||||||||||||
| Total Gross Premiums Earned | 765,512 | 215,190 | 188,308 | 181,946 | 180,068 | 724,716 | |||||||||||||||||||
| Gross Premiums Earned Loss Ratio | 33.3 | % | 30.4 | % | 35.4 | % | 34.0 | % | 33.6 | % | 51.3 | % | |||||||||||||
| Per Share Metrics | |||||||||||||||||||||||||
| GAAP Diluted EPS | $ | 7.62 | $ | 3.40 | $ | 1.34 | $ | 1.28 | $ | 1.54 | $ | (6.24 | ) | ||||||||||||
| Non-GAAP Adjusted Diluted EPS | $ | 7.41 | $ | 3.22 | $ | 1.41 | $ | 1.22 | $ | 1.50 | $ | (5.48 | ) | ||||||||||||
| Dividends per share | $ | 1.60 | $ | 0.40 | $ | 0.40 | $ | 0.40 | $ | 0.40 | $ | 1.60 | |||||||||||||
| Book value per share at the end of period | $ | 33.36 | $ | 33.36 | $ | 23.27 | $ | 21.92 | $ | 20.97 | $ | 18.91 | |||||||||||||
| Shares outstanding at the end of period | 9,738,183 | 9,738,183 | 8,590,824 | 8,594,764 | 8,596,673 | 8,598,682 | |||||||||||||||||||
| HCI GROUP, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollar amounts in thousands) | ||||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Fixed-maturity securities, available for sale, at fair value (amortized cost: $387,687 and $494,197, respectively and allowance for credit losses: $0 and $0, respectively) | $ | 383,238 | $ | 483,901 | ||||
| Equity securities, at fair value (cost: $44,011 and $36,272, respectively) | 45,537 | 34,583 | ||||||
| Limited partnership investments | 23,583 | 25,702 | ||||||
| Investment in unconsolidated joint venture, at equity | - | 18 | ||||||
| Real estate investments | 67,893 | 71,388 | ||||||
| Total investments | 520,251 | 615,592 | ||||||
| Cash and cash equivalents | 536,478 | 234,863 | ||||||
| Restricted cash | 3,287 | 2,900 | ||||||
| Receivable from maturities of fixed-maturity securities | 91,085 | - | ||||||
| Accrued interest and dividends receivable | 3,507 | 1,952 | ||||||
| Income taxes receivable | - | 2,807 | ||||||
| Deferred income taxes, net | 512 | - | ||||||
| Premiums receivable, net (allowance: $3,152 and $5,362, respectively) | 38,037 | 34,998 | ||||||
| Assumed premium receivable | 19,954 | - | ||||||
| Prepaid reinsurance premiums | 86,232 | 66,627 | ||||||
| Reinsurance recoverable, net of allowance for credit losses: | ||||||||
| Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively) | 19,690 | 71,594 | ||||||
| Unpaid losses and loss adjustment expenses (allowance: $118 and $454, respectively) | 330,604 | 616,765 | ||||||
| Deferred policy acquisition costs | 42,910 | 45,522 | ||||||
| Property and equipment, net | 29,251 | 17,910 | ||||||
| Right-of-use-assets - operating leases | 1,407 | 777 | ||||||
| Intangible assets, net | 7,659 | 10,578 | ||||||
| Funds withheld for assumed business | 30,087 | 48,772 | ||||||
| Other assets | 50,365 | 31,671 | ||||||
| Total assets | $ | 1,811,316 | $ | 1,803,328 | ||||
| Liabilities and Equity | ||||||||
| Losses and loss adjustment expenses | $ | 585,073 | $ | 863,765 | ||||
| Unearned premiums | 501,157 | 368,047 | ||||||
| Advance premiums | 15,895 | 18,587 | ||||||
| Reinsurance payable on paid losses and loss adjustment expenses | 3,145 | 8,606 | ||||||
| Ceded reinsurance premiums payable | 8,921 | 17,646 | ||||||
| Assumed premiums payable | 850 | - | ||||||
| Accrued expenses | 19,722 | 14,534 | ||||||
| Income tax payable | 7,702 | - | ||||||
| Deferred income taxes, net | - | 1,704 | ||||||
| Reinsurance recovered in advance on unpaid losses | - | 19,863 | ||||||
| Long-term debt | 208,495 | 211,687 | ||||||
| Lease liabilities - operating leases | 1,408 | 721 | ||||||
| Other liabilities | 35,623 | 23,361 | ||||||
| Total liabilities | 1,387,991 | 1,548,521 | ||||||
| Commitments and contingencies | ||||||||
| Redeemable noncontrolling interest | 96,160 | 93,553 | ||||||
| Equity: | ||||||||
| Common stock, (no par value, 40,000,000 shares authorized, 9,738,183 and 8,598,682 shares issued and outstanding in 2023 and 2022, respectively) | - | - | ||||||
| Additional paid-in capital | 89,568 | - | ||||||
| Retained income | 238,438 | 172,482 | ||||||
| Accumulated other comprehensive loss, net of taxes | (3,163 | ) | (9,886 | ) | ||||
| Total stockholders' equity | 324,843 | 162,596 | ||||||
| Noncontrolling interests | 2,322 | (1,342 | ) | |||||
| Total equity | 327,165 | 161,254 | ||||||
| Total liabilities, redeemable noncontrolling interest, and equity | $ | 1,811,316 | $ | 1,803,328 | ||||
| HCI GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Income (Unaudited) (Dollar amounts in thousands, except per share amounts) | ||||||||||||||||
| Three Months Ended | Years Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | ||||||||||||||||
| Gross premiums earned | $ | 215,190 | $ | 182,954 | $ | 765,512 | $ | 724,716 | ||||||||
| Premiums ceded | (66,576 | ) | (77,036 | ) | (269,627 | ) | (261,144 | ) | ||||||||
| Net premiums earned | 148,614 | 105,918 | 495,885 | 463,572 | ||||||||||||
| Net investment income | 10,341 | 7,365 | 46,234 | 32,447 | ||||||||||||
| Net realized investment (losses) gains | (410 | ) | 17 | (1,996 | ) | (1,187 | ) | |||||||||
| Net unrealized investment gains (losses) | 2,830 | 1,004 | 3,215 | (7,153 | ) | |||||||||||
| Policy fee income | 1,053 | 1,099 | 4,704 | 4,279 | ||||||||||||
| Gain from remeasurement of contingent liabilities | - | 3,117 | - | 3,117 | ||||||||||||
| Other | 242 | 1,423 | 2,628 | 4,488 | ||||||||||||
| Total revenue | 162,670 | 119,943 | 550,670 | 499,563 | ||||||||||||
| Expenses | ||||||||||||||||
| Losses and loss adjustment expenses | 65,398 | 72,135 | 254,579 | 371,463 | ||||||||||||
| Policy acquisition and other underwriting expenses | 22,716 | 24,028 | 90,822 | 104,977 | ||||||||||||
| General and administrative personnel expenses | 12,230 | 11,328 | 53,868 | 56,511 | ||||||||||||
| Interest expense | 2,822 | 2,839 | 11,117 | 7,768 | ||||||||||||
| Impairment loss | - | 2,284 | - | 2,284 | ||||||||||||
| Other operating expenses | 5,344 | 4,586 | 22,634 | 24,978 | ||||||||||||
| Total expenses | 108,510 | 117,200 | 433,020 | 567,981 | ||||||||||||
| Income (loss) before income taxes | 54,160 | 2,743 | 117,650 | (68,418 | ) | |||||||||||
| Income tax expense (benefit) | 13,247 | 92 | 28,393 | (13,815 | ) | |||||||||||
| Net income (loss) | $ | 40,913 | $ | 2,651 | $ | 89,257 | $ | (54,603 | ) | |||||||
| Net income attributable to redeemable noncontrolling interest | (2,360 | ) | (2,305 | ) | (9,370 | ) | (9,106 | ) | ||||||||
| Net (income) loss attributable to noncontrolling interests | (457 | ) | 1,180 | (853 | ) | 5,198 | ||||||||||
| Net income (loss) after noncontrolling interests | $ | 38,096 | $ | 1,526 | $ | 79,034 | $ | (58,511 | ) | |||||||
| Basic earnings (loss) per share | $ | 4.31 | $ | 0.18 | $ | 9.13 | $ | (6.24 | ) | |||||||
| Diluted earnings (loss) per share | $ | 3.40 | $ | 0.18 | $ | 7.62 | $ | (6.24 | ) | |||||||
| Dividends per share | $ | 0.40 | $ | 0.40 | $ | 1.60 | $ | 1.60 | ||||||||
| HCI GROUP, INC. AND SUBSIDIARIES (Amounts in thousands, except per share amounts) | ||||||||||||||||||||||||
| A summary of the numerator and denominator of basic and diluted earnings per common share calculated in accordance with GAAP is presented below. | ||||||||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||||||
| GAAP | December 31, 2023 | December 31, 2023 | ||||||||||||||||||||||
| Income | Shares (a) | Per Share | Income | Shares (a) | Per Share | |||||||||||||||||||
| (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||||||||
| Net income | $ | 40,913 | $ | 89,257 | ||||||||||||||||||||
| Less: Net income attributable to redeemable noncontrolling interest | (2,360 | ) | (9,370 | ) | ||||||||||||||||||||
| Less: TypTap Group's net (income) attributable to non-HCI common stockholders and TypTap Group's participating securities | (457 | ) | (853 | ) | ||||||||||||||||||||
| Net income attributable to HCI | 38,096 | 79,034 | ||||||||||||||||||||||
| Less: Income attributable to participating securities | (1,166 | ) | (2,625 | ) | ||||||||||||||||||||
| Basic Earnings Per Share: | ||||||||||||||||||||||||
| Income allocated to common stockholders | 36,930 | 8,567 | $ | 4.31 | 76,409 | 8,367 | $ | 9.13 | ||||||||||||||||
| Effect of Dilutive Securities: | ||||||||||||||||||||||||
| Stock options | - | 155 | - | 83 | ||||||||||||||||||||
| Convertible senior notes | 1,938 | 2,538 | 7,732 | 2,538 | ||||||||||||||||||||
| Warrants | - | 192 | - | 56 | ||||||||||||||||||||
| Diluted Earnings Per Share: | ||||||||||||||||||||||||
| Income available to common stockholders and assumed conversions | $ | 38,868 | 11,452 | $ | 3.40 | $ | 84,141 | 11,044 | $ | 7.62 | ||||||||||||||
| (a) Shares in thousands. | ||||||||||||||||||||||||
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 Income
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, 2023 | December 31, 2023 | |||||||||||||||
| GAAP Net income | $ | 40,913 | $ | 89,257 | ||||||||||||
| Net unrealized investment gains | $ | (2,830 | ) | $ | (3,215 | ) | ||||||||||
| Less: Tax effect at 25.041% | $ | 709 | $ | 805 | ||||||||||||
| Net adjustment to Net income | $ | (2,121 | ) | $ | (2,410 | ) | ||||||||||
| Non-GAAP Adjusted Net income | $ | 38,792 | $ | 86,847 | ||||||||||||
| HCI GROUP, INC. AND SUBSIDIARIES (Amounts in thousands, except per share amounts) | ||||||||||||||||||||||||
| A summary of the numerator and denominator of the basic and diluted earnings per common share calculated with the Non-GAAP financial measure Adjusted net income is presented below. | ||||||||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||||||
| Non-GAAP | December 31, 2023 | December 31, 2023 | ||||||||||||||||||||||
| Income | Shares (a) | Per Share | Income | Shares (a) | Per Share | |||||||||||||||||||
| (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||||||||
| Adjusted net income (non-GAAP) | $ | 38,792 | $ | 86,847 | ||||||||||||||||||||
| Less: Net income attributable to redeemable noncontrolling interest | (2,360 | ) | $ | (9,370 | ) | |||||||||||||||||||
| Less: TypTap Group's net income attributable to non-HCI common stockholders and TypTap Group's participating securities | (433 | ) | (841 | ) | ||||||||||||||||||||
| Net income attributable to HCI | 35,999 | 76,636 | ||||||||||||||||||||||
| Less: Income attributable to participating securities | (1,101 | ) | (2,545 | ) | ||||||||||||||||||||
| Basic Earnings Per Share before unrealized gains/losses on equity securities: | ||||||||||||||||||||||||
| Income allocated to common stockholders | 34,898 | 8,567 | $ | 4.07 | 74,091 | 8,367 | $ | 8.86 | ||||||||||||||||
| Effect of Dilutive Securities: | ||||||||||||||||||||||||
| Stock options | - | 155 | - | 83 | ||||||||||||||||||||
| Convertible senior notes | 1,938 | 2,538 | 7,732 | 2,538 | ||||||||||||||||||||
| Warrants | - | 192 | - | 56 | ||||||||||||||||||||
| Diluted Earnings Per Share before unrealized gains/losses on equity securities: | ||||||||||||||||||||||||
| Income available to common stockholders and assumed conversions | $ | 36,836 | $ | 11,452 | $ | 3.22 | $ | 81,823 | $ | 11,044 | $ | 7.41 | ||||||||||||
| (a) Shares in thousands. | ||||||||||||||||||||||||
Reconciliation of GAAP Diluted EPS to Non-GAAP Adjusted Diluted EPS
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, 2023 | December 31, 2023 | |||||||||||||||
| GAAP diluted Earnings Per Share | $ | 3.40 | $ | 7.62 | ||||||||||||
| Net unrealized investment gains | $ | (0.25 | ) | $ | (0.29 | ) | ||||||||||
| Less: Tax effect at 25.041% | $ | 0.07 | $ | 0.08 | ||||||||||||
| Net adjustment to GAAP diluted EPS | $ | (0.18 | ) | $ | (0.21 | ) | ||||||||||
| Non-GAAP Adjusted diluted EPS | $ | 3.22 | $ | 7.41 | ||||||||||||
