HCI - HCI Group Reports First Quarter 2022 Results
TAMPA, Fla., May 04, 2022 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI) , a holding company with operations in homeowners insurance, information technology services, real estate, and reinsurance, reported results for the quarter ended March 31, 2022.
First Quarter 2022 - Financial Results
Net income for the first quarter of 2022 totaled $2.8 million or $0.09 diluted earnings per share compared with net income of $6.8 million or $0.75 diluted earnings per share in the first quarter of 2021. Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the first quarter of 2022 was $5.5 million or $0.34 diluted earnings per share compared with adjusted net income of $7.0 million or $0.77 diluted earnings per share in the first quarter of 2021. 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”).
Consolidated gross written premiums of $177.3 million for the first quarter of 2022 increased 40.9% from $125.8 million in the first quarter of 2021. Homeowners Choice gross written premiums grew from $81.0 million to $91.1 million, and TypTap Insurance Company gross written premiums grew from $44.8 million to $86.2 million.
Consolidated gross premiums earned of $178.9 million for the first quarter of 2022 increased 36.6% from $130.9 million in the first quarter of 2021. Homeowners Choice gross premiums earned grew from $102.1 million to $118.3 million, and TypTap gross premiums earned grew from $28.8 million to $60.6 million.
Premiums ceded for reinsurance for the first quarter of 2022 increased to $53.2 million from $43.1 million in the first quarter of 2021 and represented 29.7% and 32.9%, respectively, of gross premiums earned. The increase in reinsurance costs primarily reflects premium growth at both Homeowners Choice and TypTap.
Net investment income for the first quarter of 2022 was $2.9 million compared with $4.6 million in the first quarter of 2021. The decrease was primarily attributable to a $2.7 million decrease in income from real estate investments primarily due to a gain from a legal settlement in the first quarter of 2021, offset by a $1 million increase in income from limited partnership investments.
Net realized investment losses were $0.3 million in the first quarter of 2022 compared with $1.1 million of net realized investment gains in the first quarter of 2021. Net unrealized investment losses were $3.6 million in the first quarter of 2022 compared with net unrealized investment losses of $0.3 million in the first quarter of 2021.
Losses and loss adjustment expenses for the first quarter of 2022 were $72.7 million compared with $45.8 million in the same period of 2021. The increase was primarily attributable to the company’s growing premium base and weather-related losses in Florida.
Policy acquisition and other underwriting expenses for the first quarter of 2022 were $29.4 million compared with $23.1 million in the same quarter of 2021. The increase primarily relates to premium growth for both Homeowners Choice and TypTap.
General and administrative personnel expenses increased to $14.0 million in the first quarter of 2022 from $9.7 million for the first quarter of 2021 due primarily to higher stock-based compensation expense and an increase in payroll related to growth of the business.
Interest expense for the first quarter of 2022 was $0.6 million compared with $2.1 million in the same period of 2021. The decrease resulted from conversions of our 4.25% convertible senior notes to common stock during the second half of 2021.
Management Commentary
“In the first quarter, results across our geographic footprint again validated the effectiveness of the technology that we’ve built,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “We continue to execute on our nationwide expansion plan and because of the confidence we have in our technology capabilities, we plan to take advantage of potential opportunities in the future.”
Conference Call
HCI Group will hold a conference call tomorrow, May 5, 2022, 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 8:30 a.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: 655834
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 June 4, 2022.
Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 45165
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. HCI’s leading insurance operation, TypTap Insurance Company, is a rapidly growing, technology-driven insurance company that is expanding nationwide to provide homeowners and flood insurance. 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:
Simon Rosenberg
Investor Relations
HCI Group, Inc.
Tel (813) 405-5261
srosenberg@hcigroup.com
Investor Relations Contact:
Matt Glover
Gateway Group, Inc.
Tel (949) 574-3860
HCI@gatewayir.com
Media Contact:
Catherine Adcock
Gateway Group, Inc.
Tel (949) 574-6860
catherine@gatewayir.com
- Tables to follow -
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)
| March 31, 2022 |
| December 31, 2021 |
| (Unaudited) |
| Assets |
| Fixed-maturity securities, available for sale, at fair value (amortized cost: $153,776 and $41,953, respectively and allowance for credit losses: $0 and $0, respectively) |
| $ |
| 150,684 |
| $ |
| 42,583 |
| Equity securities, at fair value (cost: $39,316 and $46,276, respectively) |
| 41,204 |
| 51,740 |
| Limited partnership investments |
| 28,166 |
| 28,133 |
| Investment in unconsolidated joint venture, at equity |
| 350 |
| 363 |
| Real estate investments |
| 73,387 |
| 73,896 |
| Total investments |
| 293,791 |
| 196,715 |
| Cash and cash equivalents |
| 569,040 |
| 628,943 |
| Restricted cash |
| 2,400 |
| 2,400 |
| Accrued interest and dividends receivable |
| 674 |
| 353 |
| Income taxes receivable |
| — |
| 4,084 |
| Premiums receivable, net (allowance: $2,459 and $1,750, respectively) |
| 39,890 |
| 68,157 |
| Prepaid reinsurance premiums |
| 11,561 |
| 26,355 |
| Reinsurance recoverable, net of allowance for credit losses: |
| Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively) |
| 14,720 |
| 11,985 |
| Unpaid losses and loss adjustment expenses (allowance: $79 and $90, respectively) |
| 54,876 |
| 64,665 |
| Deferred policy acquisition costs |
| 53,670 |
| 57,695 |
| Property and equipment, net |
| 15,469 |
| 14,232 |
| Right-of-use-assets - operating leases |
| 2,673 |
| 2,204 |
| Intangible assets, net |
| 15,105 |
| 10,636 |
| Funds withheld for assumed business |
| 84,068 |
| 73,716 |
| Other assets |
| 17,313 |
| 14,717 |
| Total assets |
| $ |
| 1,175,250 |
| $ |
| 1,176,857 |
| Liabilities and Equity |
| Losses and loss adjustment expenses |
| $ |
| 234,792 |
| $ |
| 237,165 |
| Unearned premiums |
| 365,112 |
| 366,744 |
| Advance premiums |
| 23,898 |
| 13,771 |
| Reinsurance payable on paid losses and loss adjustment expenses |
| 6,657 |
| 4,017 |
| Ceded reinsurance premiums payable |
| 20,899 |
| 19,318 |
| Accrued expenses |
| 16,899 |
| 15,453 |
| Income tax payable |
| 3,061 |
| — |
| Deferred income taxes, net |
| 4,834 |
| 11,739 |
| Revolving credit facility |
| 15,000 |
| 15,000 |
| Long-term debt |
| 45,295 |
| 45,504 |
| Lease liabilities - operating leases |
| 2,662 |
| 2,203 |
| Other liabilities |
| 24,418 |
| 31,485 |
| Total liabilities |
| 763,527 |
| 762,399 |
| Commitments and contingencies |
| Redeemable noncontrolling interest |
| 89,695 |
| 89,955 |
| Equity: |
| Common stock, (no par value, 40,000,000 shares authorized, 10,125,927 and 10,131,399 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively) |
| — |
| — |
| Additional paid-in capital |
| 79,131 |
| 76,077 |
| Retained income |
| 243,647 |
| 246,790 |
| Accumulated other comprehensive (loss) income, net of taxes |
| (2,185 |
| ) |
| 498 |
| Total stockholders' equity |
| 320,593 |
| 323,365 |
| Noncontrolling interests |
| 1,435 |
| 1,138 |
| Total equity |
| 322,028 |
| 324,503 |
| Total liabilities, redeemable noncontrolling interest, and equity |
| $ |
| 1,175,250 |
| $ |
| 1,176,857 |
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(Dollar amounts in thousands, except per share amounts)
| Three Months Ended |
| March 31, |
| 2022 |
| 2021 |
| Revenue |
| Gross premiums earned |
| $ |
| 178,925 |
| $ |
| 130,942 |
| Premiums ceded |
| (53,162 |
| ) |
| (43,099 |
| ) |
| Net premiums earned |
| 125,763 |
| 87,843 |
| Net investment income |
| 2,868 |
| 4,594 |
| Net realized investment (losses) gains |
| (314 |
| ) |
| 1,113 |
| Net unrealized investment losses |
| (3,576 |
| ) |
| (269 |
| ) |
| Policy fee income |
| 1,057 |
| 970 |
| Other |
| 1,242 |
| 623 |
| Total revenue |
| 127,040 |
| 94,874 |
| Expenses |
| Losses and loss adjustment expenses |
| 72,704 |
| 45,751 |
| Policy acquisition and other underwriting expenses |
| 29,408 |
| 23,065 |
| General and administrative personnel expenses |
| 14,034 |
| 9,650 |
| Interest expense |
| 601 |
| 2,079 |
| Other operating expenses |
| 6,292 |
| 4,227 |
| Total expenses |
| 123,039 |
| 84,772 |
| Income before income taxes |
| 4,001 |
| 10,102 |
| Income tax expense |
| 1,210 |
| 3,257 |
| Net income |
| $ |
| 2,791 |
| $ |
| 6,845 |
| Net income attributable to redeemable noncontrolling interest |
| (2,248 |
| ) |
| (794 |
| ) |
| Net loss attributable to noncontrolling interests |
| 360 |
| 97 |
| Net income after noncontrolling interests |
| $ |
| 903 |
| $ |
| 6,148 |
| Basic earnings per share |
| $ |
| 0.09 |
| $ |
| 0.82 |
| Diluted earnings per share |
| $ |
| 0.09 |
| $ |
| 0.75 |
| 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 income per common share calculated in accordance with GAAP is presented below.
| Three Months Ended |
| Three Months Ended |
| GAAP |
| March 31, 2022 |
| March 31, 2021 |
| Income |
| Shares (a) |
| Per Share |
| Income |
| Shares (a) |
| Per Share |
| (Numerator) |
| (Denominator) |
| Amount |
| (Numerator) |
| (Denominator) |
| Amount |
| Net income |
| $ |
| 2,791 |
| $ |
| 6,845 |
| Less: Net income attributable to redeemable noncontrolling interest |
| (2,248 |
| ) |
| (794 |
| ) |
| Less: TypTap Group's net loss attributable to non-HCI common stockholders and TypTap Group's participating securities |
| 360 |
| 97 |
| Net income attributable to HCI |
| 903 |
| 6,148 |
| Less: Income attributable to participating securities |
| (52 |
| ) |
| (18 |
| ) |
| Basic Earnings Per Share: |
| Income allocated to common stockholders |
| 851 |
| 9,479 |
| $ |
| 0.09 |
| 6,130 |
| 7,474 |
| $ |
| 0.82 |
| Effect of Dilutive Securities: |
| Stock options |
| — |
| 135 |
| — |
| 96 |
| Convertible senior notes* |
| — |
| — |
| 1,312 |
| 2,288 |
| Warrants |
| — |
| 153 |
| — |
| 72 |
| Diluted Earnings Per Share: |
| Income available to common stockholders and assumed conversions |
| $ |
| 851 |
| 9,767 |
| $ |
| 0.09 |
| $ |
| 7,442 |
| 9,930 |
| $ |
| 0.75 |
| (a) Shares in thousands. |
| * For the three months ended March 31, 2022, 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 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 (Loss) Income
| Three Months Ended |
| Three Months Ended |
| March 31, 2022 |
| March 31, 2021 |
| GAAP Net income |
| $ |
| 2,791 |
| $ |
| 6,845 |
| Net unrealized investment losses |
| $ |
| 3,576 |
| $ |
| 269 |
| Less: Tax effect at 25.345% and 24.52182%, respectively |
| $ |
| (906 |
| ) |
| $ |
| (66 |
| ) |
| Net adjustment to Net income |
| $ |
| 2,670 |
| $ |
| 203 |
| Non-GAAP Adjusted Net income |
| $ |
| 5,461 |
| $ |
| 7,048 |
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, 2022 |
| March 31, 2021 |
| Income |
| Shares (a) |
| Per Share |
| Income |
| Shares (a) |
| Per Share |
| (Numerator) |
| (Denominator) |
| Amount |
| (Numerator) |
| (Denominator) |
| Amount |
| Adjusted net income (non-GAAP) |
| $ |
| 5,461 |
| $ |
| 7,048 |
| Less: Net income attributable to redeemable noncontrolling interest |
| (2,248 |
| ) |
| $ |
| (794 |
| Less: TypTap Group's net loss attributable to non-HCI common stockholders and TypTap Group's participating securities |
| 340 |
| 97 |
| Net income attributable to HCI |
| 3,553 |
| 6,351 |
| Less: Income attributable to participating securities |
| (222 |
| ) |
| (31 |
| Basic Earnings Per Share before unrealized gains/losses on equity securities: |
| Income allocated to common stockholders |
| 3,331 |
| 9,479 |
| $ |
| 0.35 |
| 6,320 |
| 7,474 |
| $ |
| 0.85 |
| Effect of Dilutive Securities: |
| Stock options |
| — |
| 135 |
| — |
| 96 |
| Convertible senior notes* |
| — |
| — |
| 1,312 |
| 2,288 |
| Warrants |
| — |
| 153 |
| — |
| 72 |
| Diluted Earnings Per Share before unrealized gains/losses on equity securities: |
| Income available to common stockholders and assumed conversions |
| $ |
| 3,331 |
| $ |
| 9,767 |
| $ |
| 0.34 |
| $ |
| 7,632 |
| $ |
| 9,930 |
| $ |
| 0.77 |
| (a) Shares in thousands. |
| * For the three months ended March 31, 2022, 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, 2022 |
| March 31, 2021 |
| GAAP diluted Earnings Per Share |
| $ |
| 0.09 |
| $ |
| 0.75 |
| Net unrealized investment losses |
| $ |
| 0.37 |
| $ |
| 0.03 |
| Less: Tax effect at 25.345% and 24.52182%, respectively |
| $ |
| (0.12 |
| ) |
| $ |
| (0.01 |
| ) |
| Net adjustment to GAAP diluted EPS |
| $ |
| 0.25 |
| $ |
| 0.02 |
| Non-GAAP Adjusted diluted EPS |
| $ |
| 0.34 |
| $ |
| 0.77 |