TAMPA, Fla., May 02, 2019 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI), a holding company primarily engaged in homeowners insurance, with additional operations in reinsurance, real estate and information technology, reported results for the quarter ended March 31, 2019.

First Quarter 2019 - Financial Results
Net income for the first quarter of 2019 totaled $6.7 million or $0.82 diluted earnings per share compared with $10.8 million or $1.11 diluted earnings per share in the first quarter of 2018. Net income was negatively affected by $5.0 million of estimated losses from a late March hail storm, but benefited from $5.3 million of net unrealized gains on investment securities.

Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the quarter was $2.8 million or $0.35 diluted earnings per share compared with $12.7 million or $1.26 diluted earnings per share in the first quarter of 2018. The company has included in this press release an explanation of adjusted net income as well as a reconciliation to GAAP net income and earnings per share calculated in accordance with generally accepted accounting principles (known as “GAAP”). 

Consolidated gross premiums written were down 3.6% from $70.1 million in the first quarter of 2018 to $67.6 million for the first quarter of 2019; for the same period, gross premiums written for TypTap Insurance Company, HCI’s technology-driven insurance subsidiary, were up 184.5%.

Consolidated gross premiums earned were down 3.7% from $85.8 million in the first quarter of 2018 to $82.6 million for the first quarter of 2019; for the same period, gross premiums earned for TypTap were up 79.4%.

Net realized investment losses were $0.4 million compared with $2.2 million of net realized investment gains in the same period in 2018.

Net unrealized investment gains were $5.3 million compared with $2.6 million of net unrealized investment losses in the same period in 2018 representing a net favorable change in the fair value of equity securities.

Losses and loss adjustment expenses were $27.0 million compared with $19.7 million in the same period in 2018. During the first quarter of 2019, the company’s losses and loss adjustment expenses included $5.0 million related to a severe hail storm event in March.

Book value per share, defined as shareholders’ equity divided by common shares outstanding at the end of the period, was $22.37 at March 31, 2019 compared with $21.71 at December 31, 2018.

As previously announced, on March 15, 2019, the company repaid in cash at maturity all of its 3.875% Convertible Senior Notes, principal amount totaling $89.99 million. The impact will be to strengthen the balance sheet, reduce interest expense, reduce fully-diluted share count and increase fully-diluted earnings per share. 

First Quarter 2019 - Financial Ratios
The loss ratio (defined as losses and loss adjustment expenses related to net premiums earned) for the first quarter of 2019 was 52.7% compared with 36.7% for the first quarter of 2018. The increase was primarily due to the impact of the late March hail storm and a decrease in net premiums earned.

The expense ratio (defined as underwriting expenses, general and administrative personnel expenses, interest and other operating expenses related to net premiums earned) was 47.6% compared with 43.5% in the same period in 2018. The increase was primarily attributable to the decrease in net premiums earned.

The combined ratio (total of all expenses in relation to net premiums earned) is the measure of overall underwriting profitability before other income. The combined ratio for the first quarter of 2019 was 100.3% compared with 80.2% in the same prior year period.

Due to the impact reinsurance costs have on net premiums earned from period to period, the company believes the combined ratio measured to gross premiums earned is more relevant in assessing overall performance. The combined ratio to gross premiums earned was 62.2% for the quarter compared with 50.1% for the first quarter of 2018.

Management Commentary
“We are encouraged by the growth of TypTap, our technology-driven insurance subsidiary,” said Paresh Patel, HCI Group’s chairman and chief executive officer. “It demonstrates the power of our internally developed technology and moves us closer to becoming a technology company.”

Conference Call
HCI Group will hold a conference call later today, May 2, 2019, to discuss these financial results. Chairman and Chief Executive Officer Paresh Patel and Chief Financial Officer Mark Harmsworth will host the call starting at 4:45 p.m. Eastern time. A question and answer session will follow management's presentation.

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: (877) 407-8033

Listen-only international number: (201) 689-8033

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 Liolios Group 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 2, 2019.

Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 45782

About HCI Group, Inc.
HCI Group, Inc. owns subsidiaries engaged in diverse, yet complementary business activities. The most important of these business activities are insurance, the development of insurance-related information technology, or “InsurTech,” and the ownership and development of real estate. HCI’s largest subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., is a leading provider of homeowners’ insurance in Florida. HCI also has a rapidly growing, technology-driven insurance subsidiary called TypTap Insurance Company which provides homeowners’ and flood insurance primarily in Florida. TypTap’s operations are based in large part on information technology developed by HCI’s software subsidiary, Exzeo USA, Inc. HCI’s real estate subsidiary, Greenleaf Capital, owns and operates multiple properties in Florida, including office buildings and waterfront properties.  

The company's common shares trade on the New York Stock Exchange under the ticker symbol "HCI" and are included in the Russell 2000 Index and the 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:
Kevin Mitchell, Senior Vice President of Investor Relations
HCI Group, Inc.
Tel (813) 405-3603
kmitchell@hcigroup.com

Investor Relations Contact:
Matt Glover or Najim Mostamand, CFA
Liolios Group, Inc.
Tel (949) 574-3860
HCI@liolios.com

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HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)
			At March 31, 2019			At December 31, 2018
			(Unaudited)
Assets
Fixed-maturity securities, available for sale, at fair value
(amortized cost: $210,004 and $184,670, respectively)		$	210,728		$	182,723
Equity securities, at fair value (cost: $29,463 and $45,671, respectively)			30,228			41,143
Short-term investments			31,075			66,479
Limited partnership investments, at equity			31,830			32,293
Investment in unconsolidated joint venture, at equity			812			845
Assets held for sale			9,810			9,810
Real estate investments			63,309			54,490
Total investments			377,792			387,783
Cash and cash equivalents			177,965			239,458
Restricted cash			700			700
Accrued interest and dividends receivable			2,456			1,792
Income taxes receivable			-			971
Premiums receivable			16,888			16,667
Prepaid reinsurance premiums			7,364			17,932
Reinsurance recoverable:
Paid losses and loss adjustment expenses			19,432			11,151
Unpaid losses and loss adjustment expenses			86,208			112,760
Deferred policy acquisition costs			15,171			16,507
Property and equipment, net			13,584			13,338
Intangible assets, net			4,649			4,800
Other assets			11,198			9,004
Total assets		$	733,407		$	832,863
Liabilities and Stockholders’ Equity
Losses and loss adjustment expenses		$	184,661		$	207,586
Unearned premiums			143,300			157,729
Advance premiums			16,160			6,192
Assumed reinsurance balances payable			4			14
Accrued expenses			8,586			6,483
Income taxes payable			1,429			-
Deferred income taxes, net			1,857			1,068
Revolving credit facility			8,000			-
Long-term debt			161,623			250,150
Other liabilities			20,747			22,200
Total liabilities			546,367			651,422
Stockholders’ equity:
7% Series A cumulative convertible preferred stock (no par value,
1,500,000 shares authorized, no shares issued and outstanding)			—			—
Series B junior participating preferred stock (no par value, 400,000
shares authorized, no shares issued or outstanding)			—			—
Preferred stock (no par value, 18,100,000 shares authorized,
no shares issued or outstanding)			—			—
Common stock, (no par value, 40,000,000 shares authorized,
8,359,889 and 8,356,730 shares issued and outstanding at
March 31, 2019 and December 31, 2018, respectively)			—			—
Additional paid-in capital			103			—
Retained income			186,396			182,894
Accumulated other comprehensive (loss) income, net of taxes			541			(1,453	)
Total stockholders’ equity			187,040			181,441
Total liabilities and stockholders’ equity		$	733,407		$	832,863

 

HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Dollar amounts in thousands, except per share amounts)
		Three Months Ended
		March 31,
		2019					2018
		(Unaudited)
Revenue
Gross premiums earned		$	82,597			$	85,772
Premiums ceded			(31,413	)			(32,250	)
Net premiums earned			51,184				53,522
Net investment income			3,278				3,218
Net realized investment (losses) gains			(372	)			2,232
Net unrealized investment gains (losses)			5,293				(2,600	)
Net other-than-temporary impairment losses			-				(40	)
Policy fee income			795				865
Other			456				542
Total revenue			60,634				57,739
Expenses
Losses and loss adjustment expenses			26,996				19,655
Policy acquisition and other underwriting expenses			9,673				9,360
General and administrative personnel expenses			7,364				6,283
Interest expense			4,337				4,470
Other operating expenses			2,981				3,167
Total expenses			51,351				42,935
Income before income taxes			9,283				14,804
Income tax expense			2,545				4,013
Net income		$	6,738			$	10,791
Basic earnings per share		$	0.82			$	1.25
Diluted earnings per share		$	0.82			$	1.11
Dividends per share		$	0.40			$	0.35

 

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, 2019									March 31, 2018
	Income			Shares			Per Share			Income			Shares		Per Share
	(Numerator)			(Denominator)			Amount			(Numerator)			(Denominator)		Amount
Net income	$	6,738								$	10,791
Less: Income attributable to participating securities		(408	)								(701	)
Basic Earnings Per Share:
Income allocated to common stockholders		6,330			7,736		$	0.82			10,090			8,082		$	1.25
Effect of Dilutive Securities:
Stock options		--			19						--			17
Convertible senior notes*		--			--						3,133			3,799
Diluted Earnings Per Share:
Income available to common stockholders and assumed conversions	$	6,330			7,755		$	0.82		$	13,223			11,898		$	1.11
* For the three months ended March 31, 2019, 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 the effect of unrealized gains or losses on equity securities that are required to be included in results of operations in accordance with a new accounting standard effective January 1, 2018. HCI Group believes net income without the effect of volatility in equity prices is more comparable to prior period 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											Three Months Ended
	March 31, 2019											March 31, 2018
GAAP Net income					$	6,738										$	10,791
Net unrealized investment (gains) losses	$	(5,293	)									$	2,600
Less: Tax effect at 25.345%	$	1,342										$	(659	)
Net adjustment to Net income					$	(3,951	)									$	1,941
Non-GAAP Adjusted Net income					$	2,787										$	12,732
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, 2019											March 31, 2018
	Income				Shares				Per Share			Income				Shares			Per Share
	(Numerator)				(Denominator)				Amount			(Numerator)				(Denominator)			Amount
Adjusted net income (non-GAAP)	$	2,787										$	12,732
Less: Income attributable to participating securities		(103	)										(833	)
Basic Earnings Per Share before unrealized gains/losses on equity securities:
Income allocated to common stockholders		2,684				7,736			$	0.35			11,899				8,082		$	1.47
Effect of Dilutive Securities:
Stock options		--				19							--				17
Convertible senior notes*		--				--							3,133				3,799
Diluted Earnings Per Share before unrealized gains/losses on equity securities:
Income available to common stockholders and assumed conversions	$	2,684				7,755			$	0.35		$	15,032				11,898		$	1.26
* For the three months ended March 31, 2019, 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, 2019											March 31, 2018
GAAP diluted Earnings Per Share					$	0.82										$	1.11
Net unrealized investment (gains) losses	$	(0.68	)									$	0.22
Less: Tax effect at 25.345%	$	0.21										$	(0.07	)
Net adjustment to GAAP diluted EPS					$	(0.47	)									$	0.15
Non-GAAP Adjusted diluted EPS					$	0.35										$	1.26

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