HCI Group Reports Fourth Quarter and Full Year 2023 Results

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
[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)
 
    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  


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