HCI - HCI Group Reports Fourth Quarter and Full Year 2018 Results
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 “GAAPâ€).
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 |