HCI Group Reports First Quarter 2024 Results

First Quarter Pre-Tax Income of $77.4 million
First Quarter Diluted EPS of $3.81
First Quarter Gross Loss Ratio of 31.1%

TAMPA, Fla., May 08, 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 $77.4 million and net income of $57.0 million, or $3.81 diluted earnings per share, in the first quarter of 2024, compared with net income of $17.8 million, or $1.54 diluted earnings per share, in the first quarter of 2023.

Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the first quarter of 2024 was $55.0 million, or $3.65 diluted earnings per share compared with adjusted net income of $17.4 million, or $1.50 diluted earnings per share, in the first quarter of 2023. 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
“The strong results in the first quarter further reinforce the power of the technology that we’ve built. We’ve successfully added a significant amount of premium with almost no added expense, and we’ve launched a new carrier,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “The opportunity for the future is to further leverage our technology platform.”

First Quarter 2024 Commentary
Consolidated gross premiums earned in the first quarter increased to $256.6 million from $180.1 million in the first quarter of 2023. Gross premiums earned in the first quarter of 2024 include $67.0 million of premium from the assumption of policies from Citizens Property Insurance Corporation.

Premiums ceded for reinsurance in the first quarter decreased to $68.1 million from $70.5 million in the first quarter of 2023. Premiums ceded represented 26.5% of gross premiums earned in the first quarter of 2024 compared with 39.2% in the first quarter of 2023. The decrease in reinsurance cost as a percentage of gross premiums earned was due in part to the timing of the large assumption of premiums assumed from Citizens.

Net investment income in the first quarter was $14.1 million compared with $17.7 million in the first quarter of 2023. Net investment income in the first three months of 2023 included a gain of $8.9 million from the sale of two real estate investment properties. Excluding the real estate gain in the prior year quarter, net investment income increased to $14.1 million from $8.8 million. The increase was primarily attributable to higher balances of fixed maturity securities and cash combined with higher yields.

Losses and loss adjustment expenses in the first quarter were $79.9 million compared with $60.6 million in the first quarter of 2023.  The increase in loss expense was due to the growth in policy count and premiums. The gross loss ratio in the first quarter was 31.1% down from 33.6% in the first quarter of 2023.

Policy acquisition and other underwriting expenses in the first quarter decreased to $22.1 million from $22.7 million in the first quarter of 2023 and declined to 8.6% of gross premiums earned from 12.6%, due in part to lower commissions and lower policy acquisition expense related to the timing of the assumption of policies from Citizens.

General and administrative personnel expenses in the first quarter increased to $16.3 million from $13.5 million in the first quarter of 2023. The increase was primarily attributable to an increase in employee incentive bonus and merit increases, offset by a decrease in stock-based compensation expense. General and administrative personnel expenses represented 6.3% of gross premiums earned in the first quarter of 2024 down from 7.5% in the first quarter of 2023.

Conference Call
HCI Group will hold a conference call later today, May 8, 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: 682325

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 May 8, 2025.

Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 50356

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
[email protected]

Investor Relations Contact:
Matt Glover
Gateway Group, Inc.
Tel (949) 574-3860
[email protected]

 
– Tables to follow –
 
HCI GROUP, INC. AND SUBSIDIARIES
Selected Financial Metrics
(Dollar amounts in thousands, except per share amounts)
 
  Q1 2024     Q1 2023     FY 2023  
  (Unaudited)     (Unaudited)        
Insurance Operations                
Gross Written Premiums:                
Homeowners Choice $ 91,875     $ 85,153     $ 535,070  
TypTap Insurance Company   143,624       114,701       363,552  
Condo Owners Reciprocal Exchange   19,487              
Total Gross Written Premiums   254,986       199,854       898,622  
                 
Gross Premiums Earned:                
Homeowners Choice   149,271       92,456       417,202  
TypTap Insurance Company   103,748       87,612       348,310  
Condo Owners Reciprocal Exchange   3,625              
Total Gross Premiums Earned   256,644       180,068       765,512  
                 
Gross Premiums Earned Loss Ratio   31.1 %     33.6 %     33.3 %
                 
Per Share Metrics                
GAAP Diluted EPS $ 3.81     $ 1.54     $ 7.62  
Non-GAAP Adjusted Diluted EPS $ 3.65     $ 1.50     $ 7.41  
                 
Dividends per share $ 0.40     $ 0.40     $ 1.60  
                 
Book value per share at the end of period $ 38.50     $ 20.97     $ 33.36  
                 
Shares outstanding at the end of period   10,276,463       8,596,673       9,738,183  
 
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)
 
  March 31, 2024     December 31, 2023  
  (Unaudited)        
Assets          
Fixed-maturity securities, available for sale, at fair value (amortized cost: $475,170 and $387,687, respectively and allowance for credit losses: $0 and $0, respectively) $ 470,805     $ 383,238  
Equity securities, at fair value (cost: $47,852 and $44,011, respectively)   52,013       45,537  
Limited partnership investments   24,015       23,583  
Real estate investments   69,096       67,893  
Total investments   615,929       520,251  
           
Cash and cash equivalents   655,384       536,478  
Restricted cash   3,303       3,287  
Receivable from maturities of fixed-maturity securities         91,085  
Accrued interest and dividends receivable   4,052       3,507  
Income taxes receivable   651        
Deferred income taxes, net         512  
Premiums receivable, net (allowance: $3,443 and $3,152, respectively)   43,291       38,037  
Assumed premium receivable         19,954  
Prepaid reinsurance premiums   34,125       86,232  
Reinsurance recoverable, net of allowance for credit losses:          
Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)   25,452       19,690  
Unpaid losses and loss adjustment expenses (allowance: $69 and $118, respectively)   305,218       330,604  
Deferred policy acquisition costs   45,152       42,910  
Property and equipment, net   29,314       29,251  
Right-of-use-assets – operating leases   1,352       1,407  
Intangible assets, net   7,046       7,659  
Funds withheld for assumed business   14,181       30,087  
Other assets   57,184       50,365  
           
Total assets $ 1,841,634     $ 1,811,316  
           
Liabilities and Equity          
Losses and loss adjustment expenses $ 578,712     $ 585,073  
Unearned premiums   499,499       501,157  
Advance premiums   26,518       15,895  
Reinsurance payable on paid losses and loss adjustment expenses         3,145  
Ceded reinsurance premiums payable   10,693       8,921  
Assumed premiums payable   2,681       850  
Accrued expenses   24,699       19,722  
Income tax payable   23,184       7,702  
Deferred income taxes, net   5,113        
Revolving credit facility   50,000        
Long-term debt   184,744       208,495  
Lease liabilities – operating leases   1,357       1,408  
Other liabilities   36,564       35,623  
           
Total liabilities   1,443,764       1,387,991  
           
Commitments and contingencies          
Redeemable noncontrolling interest         96,160  
           
Equity:          
Common stock, (no par value, 40,000,000 shares authorized, 10,276,463 and 9,738,183
shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively)
         
Additional paid-in capital   116,728       89,568  
Retained income   282,056       238,438  
Accumulated other comprehensive loss, net of taxes   (3,102 )     (3,163 )
Total stockholders’ equity   395,682       324,843  
Noncontrolling interests   2,188       2,322  
Total equity   397,870       327,165  
           
Total liabilities, redeemable noncontrolling interest, and equity $ 1,841,634     $ 1,811,316  
 
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(Dollar amounts in thousands, except per share amounts)
 
  Three Months Ended  
  March 31,  
  2024     2023  
Revenue          
           
Gross premiums earned $ 256,644     $ 180,068  
Premiums ceded   (68,106 )     (70,509 )
           
Net premiums earned   188,538       109,559  
           
Net investment income   14,067       17,715  
Net realized investment losses         (1,149 )
Net unrealized investment gains   2,635       529  
Policy fee income   1,019       1,090  
Other   355       1,285  
           
Total revenue   206,614       129,029  
           
Expenses          
           
Losses and loss adjustment expenses   79,922       60,565  
Policy acquisition and other underwriting expenses   22,139       22,720  
General and administrative personnel expenses   16,274       13,502  
Interest expense   3,149       2,801  
Other operating expenses   7,700       6,305  
           
Total expenses   129,184       105,893  
           
Income before income taxes   77,430       23,136  
           
Income tax expense   20,474       5,343  
           
Net income $ 56,956     $ 17,793  
Net income attributable to redeemable noncontrolling interest   (10,149 )     (2,324 )
Net loss (income) attributable to noncontrolling interests   804       (131 )
           
Net income after noncontrolling interests $ 47,611     $ 15,338  
           
Basic earnings per share $ 4.76     $ 1.78  
           
Diluted earnings per share $ 3.81     $ 1.54  
           
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 earnings per common share calculated in accordance with GAAP is presented below.

  Three Months Ended     Three Months Ended  
GAAP March 31, 2024     March 31, 2023  
  Income     Shares (a)     Per Share     Income     Shares (a)     Per Share  
  (Numerator)     (Denominator)     Amount     (Numerator)     (Denominator)     Amount  
Net income $ 56,956                 $ 17,793              
Less: Net income attributable to redeemable noncontrolling interest   (10,149 )                 (2,324 )            
Less: Net loss (income) attributable to noncontrolling interests   804                   (131 )            
Net income attributable to HCI   47,611                   15,338              
Less: Income attributable to participating securities   (1,218 )                 (564 )            
Basic Earnings Per Share:                                  
Income allocated to common stockholders   46,393       9,751     $ 4.76       14,774       8,278     $ 1.78  
                                   
Effect of Dilutive Securities:                                  
Stock options         280                   45        
Convertible senior notes   1,640       2,282             1,921       2,537        
Warrants         305                          
                                   
Diluted Earnings Per Share:                                  
Income available to common stockholders and assumed conversions $ 48,033       12,618     $ 3.81     $ 16,695       10,860     $ 1.54  
                                   
(a) Shares in thousands.  
*For the three months ended March 31, 2023, warrants 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 Income

  Three Months Ended   Three Months Ended
  March 31, 2024   March 31, 2023
GAAP Net income         $ 56,956                     $ 17,793          
Net unrealized investment gains $ (2,635 )                 $ (529 )              
Less: Tax effect at 25.041% (Q1 2024) & 25.345% (Q1 2023) $ 660                   $ 134                
Net adjustment to Net income         $ (1,975 )                   $ (395 )        
Non-GAAP Adjusted Net income         $ 54,981                     $ 17,398          
 
 
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     Three Months Ended  
Non-GAAP March 31, 2024     March 31, 2023  
  Income     Shares (a)     Per Share     Income     Shares (a)     Per Share  
  (Numerator)     (Denominator)     Amount     (Numerator)     (Denominator)     Amount  
Adjusted net income (non-GAAP) $ 54,981                 $ 17,398              
Less: Net income attributable to redeemable noncontrolling interest   (10,149 )               $ (2,324 )            
Less: Net loss (income) attributable to noncontrolling interests   815                   (127 )            
Net income attributable to HCI   45,647                   14,947              
Less: Income attributable to participating securities   (1,168 )                 (550 )            
                                   
Basic Earnings Per Share before unrealized gains/losses on equity securities:                                  
Income allocated to common stockholders   44,479       9,751     $ 4.56       14,397       8,278     $ 1.74  
                                   
Effect of Dilutive Securities:                                  
Stock options         280                   45        
Convertible senior notes   1,640       2,282             1,921       2,537        
Warrants         305                          
                                   
Diluted Earnings Per Share before unrealized gains/losses on equity securities:                                  
Income available to common stockholders and assumed conversions $ 46,119     $ 12,618     $ 3.65     $ 16,318     $ 10,860     $ 1.50  
                                   
(a) Shares in thousands.  
*For the three months ended March 31, 2023, warrants 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, 2024   March 31, 2023
GAAP diluted Earnings Per Share         $ 3.81                     $ 1.54          
Net unrealized investment gains $ (0.21 )                 $ (0.05 )              
Less: Tax effect at 25.041% (Q1 2024) & 25.345% (Q1 2023) $ 0.05                   $ 0.01                
Net adjustment to GAAP diluted EPS         $ (0.16 )                   $ (0.04 )        
Non-GAAP Adjusted diluted EPS         $ 3.65                     $ 1.50          


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