HCI - HCI Group Reports Fourth Quarter and Full Year 2020 Results
TAMPA, Fla., March 11, 2021 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI) , an InsurTech company with operations in insurance, software development and real estate, reported results for the three and twelve months ended December 31, 2020.
Fourth Quarter 2020 - Financial Results
Net income for the fourth quarter of 2020 totaled $2.7 million or $0.35 diluted earnings per share compared with $6.4 million or $0.82 diluted earnings per share in the fourth quarter of 2019. Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the quarter was $1.8 million or $0.22 diluted earnings per share compared with $5.9 million or $0.76 diluted earnings per share in the fourth quarter of 2019. The company has included in this press release 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 $139.3 million for the fourth quarter of 2020 were up 109.2% from $66.6 million in the fourth quarter of 2019. The increase was due to the growth of Homeowners Choice gross written premiums from $42.5 million to $97.2 million and the growth of TypTap Insurance Company gross written premium from $24 million to $42.1 million. Included in the gross written premiums of Homeowners Choice was $44.6 million assumed from United Property & Casualty Insurance Company as part of a quota share agreement.
Consolidated gross premiums earned of $109.1 million for the fourth quarter of 2020 were up 21.0% from $90.2 million in the fourth quarter of 2019.
Premiums ceded for reinsurance for the fourth quarter of 2020 increased to $44.2 million from $31.5 million in the fourth quarter of 2019 and represented 40.5% and 34.9%, respectively, of gross premiums earned.
Net investment income was $1.3 million compared with $2.5 million in the fourth quarter of 2019. The decrease was primarily due to a decrease in income from limited partnership investments and lower interest income from fixed-maturity securities and cash balances.
Net unrealized investment gains were $1.3 million in the fourth quarter of 2020 compared with $0.7 million in 2019.
Losses and loss adjustment expenses were $40.4 million compared with $28.9 million in the same period in 2019. The increase was driven by growth in gross premiums earned as well as reserves recorded for Tropical Storm Eta of $10.0 million. These increases were offset somewhat by lower prior year development.
Policy acquisition and other underwriting expenses were $14.8 million compared with $11.8 million in the same quarter of 2019. The increase primarily relates to growth in gross premiums earned.
Full Year 2020 - Financial Results
Net income for the twelve months ended December 31, 2020 totaled $27.6 million or $3.49 diluted earnings per share compared with $26.6 million or $3.31 diluted earnings per share for the twelve months ended December 31, 2019.
Adjusted net income (a non-GAAP measure which excludes unrealized gains or losses on equity securities) for the twelve-month period was $27.1 million or $3.44 diluted earnings per share compared with $20.6 million or $2.57 diluted earnings per share in the same period of 2019. An explanation of this non-GAAP financial measure and reconciliations to the applicable GAAP numbers accompany this press release.
Consolidated gross written premiums of $504.2 million for the year 2020 were up 38% from $364.9 million in 2019. The increase was due to the growth of Homeowners Choice gross written premiums from $304.7 million to $399.3 million and the growth of TypTap Insurance Company gross written premium from $60.3 million to $104.9 million. Included in the gross written premiums of Homeowners Choice was $44.6 million assumed from United Property & Casualty Insurance Company as part of a quota share agreement.
In-force premiums for TypTap at December 31, 2020 were $105.4 million compared with $59.6 million at December 31, 2019.
Gross premiums earned increased 21.6% to $415.9 million from $342.1 million in 2019.
Premiums ceded were $153.5 million or 36.9% of gross premiums earned compared with $125.8 million or 36.8% of gross premiums earned during 2019.
Net investment income was $4.6 million compared with $13.6 million in the year ended December 31, 2019. The decrease was primarily due to a decrease in income from limited partnership investments and lower interest income from fixed-maturity securities and cash balances.
The gain on involuntary conversion of $37.0 million for the year ended December 31, 2020 was attributable to an eminent domain proceeding by the Florida Department of Transportation related to a highway expansion project in Tampa, Florida.
Losses and loss adjustment expenses for the years ended December 31, 2020 and 2019 were $160.0 million and $107.5 million, respectively. The increase was driven by increases in gross premiums earned and losses related to Hurricane Sally of $20.3 million and losses related to Tropical Storm Eta of $10.0 million.
Policy acquisition and other underwriting expenses were $53.9 million compared with $42.5 million in 2019. The increase relates primarily to higher agent commission rates and property inspection costs associated with the organic growth of TypTap.
Management Commentary
“Despite the pandemic and the most active hurricane season on record, we were profitable in all four quarters and gross written premiums grew $139.2 million, driven primarily by organic policy growth at TypTap Insurance Company,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “We remain focused on generating profits and shareholder returns.”
Conference Call
HCI Group will hold a conference call later today, March 11, 2021, 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: (888) 506-0062
Listen-only international number: (973) 528-0011
Entry Code: 559623
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 April 11, 2021.
Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 39938
About HCI Group, Inc.
HCI Group, Inc. is an InsurTech company with operations in insurance, software development and real estate. 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:
Rachel Swansiger, Esq.
Investor Relations
HCI Group, Inc.
Tel (813) 405-3206
rswansiger@hcigroup.com
Investor Relations Contact:
Matt Glover
Gateway Investor Relations
Tel (949) 574-3860
HCI@gatewayir.com
Media Contact:
Amber Brinkley
Kippen Communications
Tel (727) 466-7695
amber@kippencommunications.com
- Tables to follow -
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)
| At December 31, 2020 |
| At December 31, 2019 |
| Assets |
| Fixed-maturity securities, available for sale, at fair value (amortized cost: $70,265 and $199,954, respectively) (allowance for credit losses: $588 and $0, respectively) |
| $ |
| 71,722 |
| $ |
| 202,839 |
| Equity securities, at fair value (cost: $47,029 and $31,863, respectively) |
| 51,130 |
| 35,285 |
| Short-term investments, at fair value |
| — |
| 491 |
| Limited partnership investments, at equity |
| 27,691 |
| 28,346 |
| Investment in unconsolidated joint venture, at equity |
| 705 |
| 762 |
| Real estate investments |
| 74,472 |
| 73,763 |
| Total investments |
| 225,720 |
| 341,486 |
| Cash and cash equivalents |
| 431,341 |
| 229,218 |
| Restricted cash |
| 2,400 |
| 700 |
| Accrued interest and dividends receivable |
| 588 |
| 1,616 |
| Income taxes receivable |
| 4,554 |
| 1,040 |
| Premiums receivable, net |
| 68,382 |
| 20,255 |
| Prepaid reinsurance premiums |
| 36,376 |
| 17,983 |
| Reinsurance recoverable, net of allowance for credit losses: |
| Paid losses and loss adjustment expenses (allowance: $0 in 2020 and 2019) |
| 14,127 |
| 16,155 |
| Unpaid losses and loss adjustment expenses (allowance: $85 and $0, respectively) |
| 71,019 |
| 116,523 |
| Deferred policy acquisition costs |
| 43,858 |
| 21,663 |
| Property and equipment, net |
| 12,767 |
| 14,698 |
| Right-of-use-assets - operating lease |
| 4,002 |
| 484 |
| Intangible assets, net |
| 3,568 |
| 4,192 |
| Other assets |
| 22,611 |
| 16,596 |
| Total assets |
| $ |
| 941,313 |
| $ |
| 802,609 |
| Liabilities and Stockholders’ Equity |
| Losses and loss adjustment expenses |
| $ |
| 212,169 |
| $ |
| 214,697 |
| Unearned premiums |
| 269,399 |
| 181,163 |
| Advance premiums |
| 11,370 |
| 5,589 |
| Assumed reinsurance balances payable |
| 87 |
| 76 |
| Accrued expenses |
| 10,181 |
| 10,059 |
| Deferred income taxes, net |
| 11,925 |
| 4,008 |
| Revolving credit facility |
| 23,750 |
| 9,750 |
| Long-term debt |
| 156,511 |
| 163,695 |
| Lease liabilities - operating leases |
| 4,014 |
| 513 |
| Other liabilities |
| 40,771 |
| 27,516 |
| Total liabilities |
| 740,177 |
| 617,066 |
| 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, 7,785,617 and 7,764,564 shares issued and outstanding in 2020 and 2019, respectively) |
| — |
| — |
| Additional paid-in capital |
| — |
| — |
| Retained income |
| 199,592 |
| 183,365 |
| Accumulated other comprehensive income, net of taxes |
| 1,544 |
| 2,178 |
| Total stockholders’ equity |
| 201,136 |
| 185,543 |
| Total liabilities and stockholders’ equity |
| $ |
| 941,313 |
| $ |
| 802,609 |
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, |
| 2020 |
| 2019 |
| 2020 |
| 2019 |
| Revenue |
| Gross premiums earned |
| $ |
| 109,057 |
| $ |
| 90,165 |
| $ |
| 415,918 |
| $ |
| 342,079 |
| Premiums ceded |
| (44,155 |
| ) |
| (31,467 |
| ) |
| (153,458 |
| ) |
| (125,765 |
| ) |
| Net premiums earned |
| 64,902 |
| 58,698 |
| 262,460 |
| 216,314 |
| Net investment income |
| 1,320 |
| 2,517 |
| 4,564 |
| 13,642 |
| Net realized investment gains (losses) |
| 1,632 |
| 281 |
| 1,000 |
| (254 |
| ) |
| Net unrealized investment gains |
| 1,260 |
| 689 |
| 679 |
| 7,950 |
| Net other-than-temporary impairment losses |
| — |
| (289 |
| ) |
| — |
| (289 |
| ) |
| Credit losses on investments |
| (15 |
| ) |
| — |
| (611 |
| ) |
| — |
| Policy fee income |
| 951 |
| 823 |
| 3,522 |
| 3,229 |
| Gain on involuntary conversion |
| — |
| — |
| 36,969 |
| — |
| Other |
| 263 |
| 512 |
| 1,854 |
| 1,882 |
| Total revenue |
| 70,313 |
| 63,231 |
| 310,437 |
| 242,474 |
| Expenses |
| Losses and loss adjustment expenses |
| 40,372 |
| 28,898 |
| 160,036 |
| 107,514 |
| Policy acquisition and other underwriting expenses |
| 14,832 |
| 11,759 |
| 53,859 |
| 42,497 |
| General and administrative personnel expenses |
| 5,860 |
| 7,799 |
| 33,829 |
| 31,112 |
| Interest expense |
| 2,888 |
| 2,927 |
| 11,734 |
| 13,055 |
| Loss on repurchases of convertible senior notes |
| — |
| — |
| 150 |
| — |
| Loss on extinguishment of debt |
| — |
| — |
| 98 |
| — |
| Other operating expenses |
| 3,449 |
| 3,072 |
| 13,803 |
| 12,203 |
| Total expenses |
| 67,401 |
| 54,455 |
| 273,509 |
| 206,381 |
| Income before income taxes |
| 2,912 |
| 8,776 |
| 36,928 |
| 36,093 |
| Income tax expense |
| 205 |
| 2,344 |
| 9,348 |
| 9,517 |
| Net income |
| $ |
| 2,707 |
| $ |
| 6,432 |
| $ |
| 27,580 |
| $ |
| 26,576 |
| Basic earnings per share |
| $ |
| 0.35 |
| $ |
| 0.84 |
| $ |
| 3.55 |
| $ |
| 3.32 |
| Diluted earnings per share |
| $ |
| 0.35 |
| $ |
| 0.82 |
| $ |
| 3.49 |
| $ |
| 3.31 |
| 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 share calculated in accordance with GAAP is presented below.
| Three Months Ended |
| Year Ended |
| GAAP |
| December 31, 2020 |
| December 31, 2020 |
| Income |
| Shares |
| Per Share |
| Income |
| Shares |
| Per Share |
| (Numerator) |
| (Denominator) |
| Amount |
| (Numerator) |
| (Denominator) |
| Amount |
| Net income |
| $ |
| 2,707 |
| $ |
| 27,580 |
| Less: Income attributable to participating securities |
| (145 |
| ) |
| (1,462 |
| ) |
| Basic Earnings Per Share: |
| Income allocated to common stockholders |
| 2,562 |
| 7,357 |
| $ |
| 0.35 |
| 26,118 |
| 7,351 |
| $ |
| 3.55 |
| Effect of Dilutive Securities: |
| Stock options |
| — |
| 39 |
| — |
| 23 |
| Convertible senior notes* |
| — |
| — |
| 7,705 |
| 2,320 |
| Diluted Earnings Per Share: |
| Income available to common stockholders and assumed conversions |
| $ |
| 2,562 |
| 7,396 |
| $ |
| 0.35 |
| $ |
| 33,823 |
| 9,694 |
| $ |
| 3.49 |
*For the three months ended December 31, 2020, 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 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, 2020 |
| December 31, 2020 |
| GAAP net income |
| $ |
| 2,707 |
| $ |
| 27,580 |
| Net unrealized investment losses (gains) |
| $ |
| (1,260 |
| ) |
| $ |
| (679 |
| ) |
| Less: Tax effect at 24.52182% |
| $ |
| 309 |
| $ |
| 167 |
| Net adjustment to Net income |
| $ |
| (951 |
| ) |
| $ |
| (512 |
| ) |
| Non-GAAP Adjusted Net income |
| $ |
| 1,756 |
| $ |
| 27,068 |
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 share calculated with the non-GAAP financial measure Adjusted net income is presented below.
| Three Months Ended |
| Year Ended |
| Non-GAAP |
| December 31, 2020 |
| December 31, 2020 |
| Income |
| Shares |
| Per Share |
| Income |
| Shares |
| Per Share |
| (Numerator) |
| (Denominator) |
| Amount |
| (Numerator) |
| (Denominator) |
| Amount |
| Adjusted net income (non-GAAP) |
| $ |
| 1,756 |
| $ |
| 27,068 |
| Less: Income attributable to participating securities |
| (92 |
| ) |
| (1,434 |
| ) |
| Basic Earnings Per Share before unrealized gains/losses on equity securities: |
| Income allocated to common stockholders |
| 1,664 |
| 7,357 |
| $ |
| 0.23 |
| 25,634 |
| 7,351 |
| $ |
| 3.49 |
| Effect of Dilutive Securities: |
| Stock options |
| — |
| 39 |
| — |
| 23 |
| Convertible senior notes* |
| — |
| — |
| 7,705 |
| 2,320 |
| Diluted Earnings Per Share before unrealized gains/losses on equity securities: |
| Income available to common stockholders and assumed conversions |
| $ |
| 1,664 |
| 7,396 |
| $ |
| 0.22 |
| $ |
| 33,339 |
| 9,694 |
| $ |
| 3.44 |
| *For the three months ended December 31, 2020, convertible senior notes were excluded due to anti-dilutive effect. |
Reconciliation of GAAP Diluted EPS to Non-GAAP Adjusted Diluted EPS
| Three Months Ended |
| Year Ended |
| December 31, 2020 |
| December 31, 2020 |
| GAAP diluted Earnings Per Share |
| $ |
| 0.35 |
| $ |
| 3.49 |
| Net unrealized investment losses (gains) |
| $ |
| (0.17 |
| ) |
| $ |
| (0.07 |
| ) |
| Less: Tax effect at 24.52182% |
| $ |
| 0.04 |
| $ |
| 0.02 |
| Net adjustment to GAAP diluted EPS |
| $ |
| (0.13 |
| ) |
| $ |
| (0.05 |
| ) |
| Non-GAAP Adjusted diluted EPS |
| $ |
| 0.22 |
| $ |
| 3.44 |