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CST: 15/10/2019 04:34:43   

HCI Group Reports Fourth Quarter and Full Year 2018 Results

221 Days ago

TAMPA, Fla., March 07, 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 three and twelve months ended December 31, 2018.

Fourth Quarter 2018 - Financial Results
In the fourth quarter, the company had a net loss of $8.5 million or $0.95 loss per common share compared with net income of $12.1 million or $1.14 diluted earnings per common share in the fourth quarter of 2017. There were two primary reasons for the change: a pre-tax loss of $16.5 million for Hurricane Michael and a pre-tax $5.7 million unrealized investment loss on equity securities.

Adjusted net loss (a non-GAAP financial measure which excludes unrealized gains and losses on equity securities) for the quarter was $4.2 million or $0.48 per share. The company has included in this press release an explanation of adjusted net income/loss as well as a reconciliation to net income/loss and earnings/loss per share calculated in accordance with generally accepted accounting principles (known as “GAAP”). 

Consolidated gross premiums written were down 6% from $46.6 million in the fourth quarter of 2017 to $43.6 million for the fourth quarter of 2018; for the same period, gross premiums written for TypTap were up 100%.

Consolidated gross premiums earned were down 3% from $87.9 million in the fourth quarter of 2017 to $85.2 million for the fourth quarter of 2018; for the same period, gross premiums earned for TypTap were up 70%.  

Fourth Quarter 2018 - Financial Ratios
The loss ratio (defined as losses and loss adjustment expenses related to gross premiums earned) for the fourth quarter of 2018 was 49.4% compared with 26.4% for the fourth quarter of 2017, primarily due to Hurricane Michael.  

The combined ratio (total of all expenses in relation to net premiums earned) was 122.0% for the fourth quarter of 2018 compared with 80.1% in the fourth quarter of 2017, primarily due to Hurricane Michael.

Full Year 2018 - Financial Results
For the full year 2018, net income totaled $17.7 million or $2.34 diluted earnings per common share compared with a net loss of $6.9 million or $0.75 loss per common share in 2017. The primary reason for the improvement was a $56.3 million reduction in losses and loss adjustment expenses offset by a $10.2 million net unrealized investment loss related to the change in the value of equity securities. Adjusted net income for the year was $25.3 million or $3.23 per fully diluted share. An explanation of this non-GAAP financial measure and reconciliations to the applicable GAAP numbers accompany this press release. 

Consolidated gross premiums written for the year declined 3% from $347.3 million in 2017 to $336.4 million in 2018; gross premiums written for TypTap increased 67%.

Consolidated gross premiums earned for the year declined 4% from $358.3 million in 2017 to $343.1 million in 2018; gross premiums earned for TypTap increased 102%.

Full Year 2018 - Financial Ratios
The loss ratio for 2018 was 31.9% compared with 46.2% for 2017 for the reasons explained above.

The combined ratio for 2018 was 95.8% compared with 115.8% for 2017 primarily due to the decline in the loss ratio as explained above.

Book value per share, defined as shareholders’ equity divided by common shares outstanding, was $21.71 at December 31, 2018 compared with $22.14 at December 31, 2017.

Management Commentary
“We remain excited about our business model, and believe our technology and underwriting expertise will provide us with a competitive advantage as we deliver profitable growth,” said Paresh Patel, HCI Group’s chairman and chief executive officer.

Conference Call
HCI Group will hold a conference call later today, March 7, 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: 866-682-6100

Listen-only international number: 862-298-0702

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 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 April 7, 2019.

Toll-free replay number: 877-481-4010
International replay number: 919-882-2331
Replay ID: 43357

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. The company's largest subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., is a leading provider of property and casualty insurance in the state of Florida.

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

-   Tables to follow   -

 
HCI GROUP, INC. AND SUBSIDIARIES  
Consolidated Balance Sheets  
(Dollar amounts in thousands)
             
      At December, 2018   At December 31, 2017
             
Assets            
Fixed-maturity securities, available for sale, at fair value            
(amortized cost: $184,670 and $235,633, respectively)   $ 182,723     237,484  
Equity securities, at fair value (cost: $45,671 and $54,282, respectively)     41,143     59,956  
Short-term investments, at fair value     66,479     -  
Limited partnership investments, at equity     32,293     23,184  
Investment in unconsolidated joint venture, at equity     845     1,304  
Assets held for sale     9,810     -  
Real estate investments     54,490     58,358  
Total investments     387,783     380,286  
             
Cash and cash equivalents     239,458     255,884  
Restricted cash     700     809  
Accrued interest and dividends receivable     1,792     1,983  
Income taxes receivable     971     16,192  
Premiums receivable     16,667     17,807  
Prepaid reinsurance premiums     17,932     22,286  
Reinsurance recoverable:            
Paid losses and loss adjustment expenses     11,151     2,344  
Unpaid losses and loss adjustment expenses     112,760     100,760  
Deferred policy acquisition costs     16,507     16,712  
Property and equipment, net     13,338     12,465  
Intangible assets, net     4,800     4,995  
Other assets     9,004     9,741  
             
Total assets   $ 832,863     842,264  
             
Liabilities and Stockholders’ Equity            
Losses and loss adjustment expenses   $ 207,586     198,578  
Unearned premiums     157,729     164,896  
Advance premiums     6,192     4,948  
Assumed reinsurance balances payable     14     15  
Accrued expenses     6,483     6,035  
Reinsurance recovered in advance on unpaid losses     -     13,885  
Deferred income taxes, net     1,068     1,890  
Long-term debt     250,150     237,835  
Other liabilities     22,200     20,207  
             
Total liabilities     651,422     648,289  
             
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,            
8,356,730 and 8,762,416 shares issued and outstanding at            
December 31, 2018 and December 31, 2017, respectively)          
Additional paid-in capital          
Retained income     182,894     189,409  
Accumulated other comprehensive (loss) income, net of taxes     (1,453 )   4,566  
             
Total stockholders’ equity     181,441     193,975  
             
Total liabilities and stockholders’ equity   $ 832,863     842,264  
             

 

 
HCI GROUP, INC. AND SUBSIDIARIES  
Consolidated Statements of Income
(Dollar amounts in thousands, except per share amounts)  
                     
    Three Months Ended   Years Ended
    December 31,   December 31,
    2018   2017   2018   2017
                             
Revenue            
                     
Gross premiums earned   $ 85,211     87,877       343,065     358,253  
Premiums ceded     (32,453 )   (32,106 )     (129,643 )   (133,635 )
                     
Net premiums earned     52,758     55,771       213,422     224,618  
                     
Net investment income     4,910     2,917       16,581     11,439  
Net realized investment gains (losses)     (337 )   2,070       6,183     4,346  
Net unrealized investment (losses) gains     (5,655 )   18       (10,202 )   92  
Net other-than-temporary impairment losses     -     (603 )     (80 )   (1,467 )
Policy fee income     826     901       3,389     3,622  
Other     495     549       1,999     1,756  
                     
Total revenue     52,997     61,623       231,292     244,406  
                     
Expenses                    
                     
Losses and loss adjustment expenses     42,101     23,204       109,328     165,629  
Policy acquisition and other underwriting expenses     9,795     10,018       38,943     39,663  
General and administrative personnel expenses     5,004     4,106       25,908     25,127  
Interest expense     4,569     4,439       18,096     16,767  
Loss on repurchases of senior notes     -     -       -     743  
Impairment Loss     -     -       -     38  
Other operating expenses     2,873     2,909       12,115     12,063  
                     
Total expenses     64,342     44,676       204,390     260,030  
                     
Income (loss) before income taxes     (11,345 )   16,947       26,902     (15,624 )
                     
Income tax expense (benefit)     (2,879 )   4,856       9,177     (8,731 )
                     
Net income   $ (8,466 )   12,091       17,725     (6,893 )
                     
Basic earnings (loss) per share   $ (0.95 )   1.37       2.34     (0.75 )
                     
Diluted earnings (loss) per share   $ (0.95 )   1.14       2.34     (0.75 )
                     
Dividends per share   $ 0.375     0.35       1.475     1.40  
                     


 
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   Year Ended
GAAP December 31, 2018   December 31, 2018
  Income
  Shares
  Per Share
  Income
  Shares
  Per Share
  (Numerator)
  (Denominator)
  Amount
  (Numerator)
  (Denominator)
  Amount
Net (loss) income $ (8,466 )         $ 17,725        
Less: Loss attributable to participating securities*   1,095             717        
                                               
Basic Earnings Per Share:              
(Loss) income allocated to common stockholders   (7,371 )     7,720     $ (0.95 )     18,442       7,878     $ 2.34  
                                               
Effect of Dilutive Securities:**              
Stock options   --       --           --       17      
                                               
Diluted Earnings Per Share:              
Income available to common stockholders and assumed conversions $ (7,371 )     7,720     $ (0.95 )   $ 18,442       7,895     $ 2.34  
                                               
*Loss attributable to participating securities included the reclassification of cumulative dividends paid on certain restricted stock with market based vesting conditions from retained income to expense.
**Convertible senior notes were excluded due to antidilutive effect.
 

Non-GAAP Financial Measures
Adjusted net income/loss is a non-GAAP financial measure that removes from net income/loss the effect of unrealized gains and 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/loss 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/loss to non-GAAP Adjusted net income/loss and GAAP diluted earnings/loss per share to non-GAAP Adjusted diluted earnings/loss per share is provided below.

 
Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income  
  Three Months Ended   Year Ended
  December 31, 2018   December 31, 2018
               
GAAP Net (loss) income   $ (8,466 )         $ 17,725      
Add back: Net unrealized investment losses $ 5,655           $ 10,202        
Less: Tax effect at 25.345% $ (1,433 )         $ (2,586 )      
Net adjustment to Net (loss) income   $ 4,222           $ 7,616      
Non-GAAP Adjusted Net (loss) income   $ (4,244 )         $ 25,341      
               
               
               
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   Year Ended
Non-GAAP December 31, 2018   December 31, 2018
  Income
  Shares
  Per Share
  Income
  Shares
  Per Share
  (Numerator)
  (Denominator)
  Amount
  (Numerator)
  (Denominator)
  Amount
Adjusted net income (non-GAAP) $ (4,244 )         $ 25,341        
Less: Loss attributable to participating securities*   564             168        
                                               
Basic Earnings Per Share before unrealized gains/losses on equity securities:              
(Loss) income allocated to common stockholders   (3,680 )     7,720     $ (0.48 )     25,509       7,878     $ 3.24  
                                               
Effect of Dilutive Securities:              
Stock options   --       --           --       17      
                                               
Diluted Earnings Per Share before unrealized gains/losses on equity securities:              
(Loss) income available to common stockholders and assumed conversions $ (3,680 )     7,720     $ (0.48 )   $ 25,509       7,895     $ 3.23  
                                               
*Loss attributable to participating securities included the reclassification of cumulative dividends paid on certain restricted stock with market based vesting conditions from retained income to expense.
**Convertible senior notes were excluded due to antidilutive effect.
               
               
               
Reconciliation of GAAP Diluted EPS to non-GAAP Adjusted Diluted EPS    
  Three Months Ended   Year Ended
  December 31, 2018   December 31, 2018
GAAP diluted Earnings Per Share   $ (0.95 )         $ 2.34      
Add back: Net unrealized investment losses $ 0.73           $ 1.29        
Less: Tax effect at 25.345% $ (0.26 )         $ (0.40 )      
Net adjustment to GAAP diluted EPS   $ 0.47           $ 0.89      
Non-GAAP Adjusted diluted EPS   $ (0.48 )         $ 3.23      
               


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