HCI - HCI Group Reports Fourth Quarter and Full Year 2021 Results
TAMPA, Fla., March 08, 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 three and twelve months ended December 31, 2021.
Fourth Quarter 2021 - Financial Results
Net income for the fourth quarter of 2021 totaled $1.4 million or $0.01 diluted earnings per share compared with net income of $2.7 million or $0.35 diluted earnings per share in the fourth quarter of 2020. Adjusted net loss (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the fourth quarter of 2021 was $0.1 million or $0.14 diluted loss per share compared with adjusted net income of $1.8 million or $0.22 diluted earnings per share in the fourth quarter of 2020. 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 $189.3 million for the fourth quarter of 2021 increased 35.9% from $139.3 million in the fourth quarter of 2020. Homeowners Choice gross premiums written grew from $97.2 million to $103.4 million and TypTap Insurance Company gross premiums written grew from $42.1 million to $85.9 million.
Consolidated gross premiums earned of $156.8 million for the fourth quarter of 2021 increased 43.8% from $109.1 million in the fourth quarter of 2020. Homeowners Choice gross premiums earned grew from $85.1 million to $100.3 million and TypTap gross premiums earned grew from $24.0 million to $56.5 million.
Premiums ceded for reinsurance for the fourth quarter of 2021 increased to $54.6 million from $44.2 million in the fourth quarter of 2020 and represented 34.8% and 40.5%, respectively, of gross premiums earned. The increase was a result of the growth in both Homeowners Choice and TypTap.
Net investment income increased to $2.6 million in the fourth quarter of 2021 from $1.3 million in the fourth quarter of 2020. This increase was due to an increase in income from limited partnership investments, real estate investments and an investment in an unconsolidated joint venture offset by a decrease in interest income from fixed-maturity security investments.
Net unrealized investment gains were $2.0 million in the fourth quarter of 2021 compared with $1.3 million of net unrealized investment gains for the fourth quarter of 2020.
Losses and loss adjustment expenses for the fourth quarter of 2021 were $63.2 million compared with $40.4 million in the same period of 2020. The increase was attributable to the company’s growing premium base and storm related losses from events in its four northeastern states.
Policy acquisition and other underwriting expenses for the fourth quarter of 2021 were $24.2 million compared with $14.8 million in the same quarter of 2020. The increase relates to the growth of TypTap, and the amortization of costs associated with the quota share arrangements with United Property & Casualty.
General and administrative personnel expenses increased to $13.7 million in the fourth quarter of 2021 from $5.9 million for the fourth quarter of 2020 due to staffing increases to establish TypTap Insurance Group and increased stock-based compensation expense.
Full Year 2021 - Financial Results
Net income for the year ended December 31, 2021 totaled $7.2 million or $0.21 diluted earnings per share compared with $27.6 million or $3.49 diluted earnings per share for the year ended December 31, 2020. The decrease in net income was primarily attributable to a one-time gain of $37.0 million on an involuntary sale of real estate included in the company’s 2020 results offset somewhat by an increase in net income from the company’s investment portfolio in 2021.
Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the year ended December 31, 2021 was $6.2 million or $0.10 diluted earnings per share compared with $27.1 million or $3.44 diluted earnings per share in the same period of 2020. An explanation of this non-GAAP financial measure and reconciliations to the applicable GAAP numbers accompany this press release.
Consolidated gross written premiums for the twelve-month periods increased 33.8% to $674.4 million in 2021 from $504.2 million in 2020. Homeowners Choice gross premiums written grew from $399.3 million to $426.9 million and TypTap gross premiums written grew from $104.9 million to $247.5 million.
Consolidated gross premiums earned for the year ended December 31, 2021 increased to $577.0 million from $415.9 million during the same period in 2020. Homeowners Choice gross premiums earned grew from $337.1 million to $401.1 million and TypTap gross premiums earned grew from $78.8 million to $175.9 million.
Premiums ceded for the year ended December 31, 2021 were $199.7 million or 34.6% of gross premiums earned compared with $153.5 million or 36.9% of gross premiums earned during the same period in 2020 as a result of the growth in both Homeowners Choice and TypTap.
Net investment income for the year ended December 31, 2021 was $12.3 million compared with $4.6 million for the year ended December 31, 2020. The $7.7 million increase was primarily due to an increase in income from limited partnership investments and an increase in net income from real estate investments.
Net realized investment gains for the year ended December 31, 2021 increased to $6.5 million from $1.0 million in the same period of 2020. This increase was primarily due to net gains from selling equity securities.
Losses and loss adjustment expenses for the years ended December 31, 2021 and 2020 were $227.5 million and $160.0 million, respectively. The increase was attributable to the company’s growing premium base and losses from the re-estimation of prior year storms Hurricane Sally and Tropical Storm Eta. The consolidated gross loss ratio was 39.4% in 2021 compared to 38.5% in 2020.
Policy acquisition and other underwriting expenses for the year ended December 31, 2021 were $93.7 million compared with $53.9 million in the same period in 2020. The increase relates to the growth of TypTap, and the amortization of increased costs associated with the quota share arrangements with United Property & Casualty.
Management Commentary
“In 2021 we grew our premiums by a third and we reported a profit for the year,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “Further, we deleveraged our balance sheet and grew book value by 24%. We enter 2022 poised for another year of profitable growth.”
Conference Call
HCI Group will hold a conference call tomorrow, March 9, 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: 823326
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 8, 2022.
Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 44444
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.
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)
| December 31, 2021 |
| December 31, 2020 |
| Assets |
| Fixed-maturity securities, available for sale, at fair value (amortized cost: $41,953 and $70,265, respectively and allowance for credit losses: $0 and $588, respectively) |
| $ |
| 42,583 |
| $ |
| 71,722 |
| Equity securities, at fair value (cost: $46,276 and $47,029, respectively) |
| 51,740 |
| 51,130 |
| Limited partnership investments |
| 28,133 |
| 27,691 |
| Investment in unconsolidated joint venture, at equity |
| 363 |
| 705 |
| Real estate investments |
| 73,896 |
| 74,472 |
| Total investments |
| 196,715 |
| 225,720 |
| Cash and cash equivalents |
| 628,943 |
| 431,341 |
| Restricted cash |
| 2,400 |
| 2,400 |
| Accrued interest and dividends receivable |
| 353 |
| 588 |
| Income taxes receivable |
| 4,084 |
| 4,554 |
| Premiums receivable, net (allowance: $1,750 and $2,053, respectively) |
| 68,157 |
| 68,382 |
| Prepaid reinsurance premiums |
| 26,355 |
| 36,376 |
| Reinsurance recoverable, net of allowance for credit losses: |
| Paid losses and loss adjustment expenses (allowance: $0 in 2021 and 2020) |
| 11,985 |
| 14,127 |
| Unpaid losses and loss adjustment expenses (allowance: $90 and $85, respectively) |
| 64,665 |
| 71,019 |
| Deferred policy acquisition costs |
| 57,695 |
| 43,858 |
| Property and equipment, net |
| 14,232 |
| 12,767 |
| Right-of-use-assets - operating leases |
| 2,204 |
| 4,002 |
| Intangible assets, net |
| 10,636 |
| 3,568 |
| Funds withheld for assumed business |
| 73,716 |
| — |
| Other assets |
| 14,717 |
| 22,611 |
| Total assets |
| $ |
| 1,176,857 |
| $ |
| 941,313 |
| Liabilities and Equity |
| Losses and loss adjustment expenses |
| $ |
| 237,165 |
| $ |
| 212,169 |
| Unearned premiums |
| 366,744 |
| 269,399 |
| Advance premiums |
| 13,771 |
| 11,370 |
| Assumed reinsurance balances payable |
| — |
| 87 |
| Reinsurance payable on paid losses and loss adjustment expenses |
| 4,017 |
| — |
| Ceded reinsurance premiums payable |
| 19,318 |
| 9,764 |
| Accrued expenses |
| 15,453 |
| 10,181 |
| Deferred income taxes, net |
| 11,739 |
| 11,925 |
| Revolving credit facility |
| 15,000 |
| 23,750 |
| Long-term debt |
| 45,504 |
| 156,511 |
| Lease liabilities - operating leases |
| 2,203 |
| 4,014 |
| Other liabilities |
| 31,485 |
| 31,007 |
| Total liabilities |
| 762,399 |
| 740,177 |
| Commitments and contingencies |
| Redeemable noncontrolling interest |
| 89,955 |
| — |
| Equity: |
| Common stock, (no par value, 40,000,000 shares authorized, 10,131,399 and 7,785,617 shares issued and outstanding in 2021 and 2020, respectively) |
| — |
| — |
| Additional paid-in capital |
| 76,077 |
| — |
| Retained income |
| 246,790 |
| 199,592 |
| Accumulated other comprehensive income, net of taxes |
| 498 |
| 1,544 |
| Total stockholders' equity |
| 323,365 |
| 201,136 |
| Noncontrolling interests |
| 1,138 |
| — |
| Total equity |
| 324,503 |
| 201,136 |
| Total liabilities, redeemable noncontrolling interest, and equity |
| $ |
| 1,176,857 |
| $ |
| 941,313 |
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, |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| Revenue |
| Gross premiums earned |
| $ |
| 156,853 |
| $ |
| 109,056 |
| $ |
| 577,044 |
| $ |
| 415,918 |
| Premiums ceded |
| (54,629 |
| ) |
| (44,154 |
| ) |
| (199,741 |
| ) |
| (153,458 |
| ) |
| Net premiums earned |
| 102,224 |
| 64,902 |
| 377,303 |
| 262,460 |
| Net investment income |
| 2,586 |
| 1,320 |
| 12,335 |
| 4,564 |
| Net realized investment gains (losses) |
| 1,520 |
| 1,632 |
| 6,472 |
| 1,000 |
| Net unrealized investment gains |
| 2,012 |
| 1,260 |
| 1,363 |
| 679 |
| Credit losses on investments |
| — |
| (15 |
| ) |
| — |
| (611 |
| ) |
| Policy fee income |
| 1,033 |
| 951 |
| 3,995 |
| 3,522 |
| Gain on involuntary conversion |
| — |
| — |
| — |
| 36,969 |
| Other |
| 2,945 |
| 263 |
| 6,447 |
| 1,854 |
| Total revenue |
| 112,320 |
| 70,313 |
| 407,915 |
| 310,437 |
| Expenses |
| Losses and loss adjustment expenses |
| 63,193 |
| 40,372 |
| 227,525 |
| 160,036 |
| Policy acquisition and other underwriting expenses |
| 24,158 |
| 14,832 |
| 93,732 |
| 53,859 |
| General and administrative personnel expenses |
| 13,695 |
| 5,860 |
| 45,428 |
| 33,829 |
| Interest expense |
| 657 |
| 2,888 |
| 6,400 |
| 11,734 |
| Loss on repurchases of convertible senior notes |
| — |
| — |
| — |
| 150 |
| Loss on extinguishment of debt |
| — |
| — |
| — |
| 98 |
| Debt conversion expense |
| 481 |
| — |
| 1,754 |
| — |
| Other operating expenses |
| 7,598 |
| 3,449 |
| 21,843 |
| 13,803 |
| Total expenses |
| 109,782 |
| 67,401 |
| 396,682 |
| 273,509 |
| Income before income taxes |
| 2,538 |
| 2,912 |
| 11,233 |
| 36,928 |
| Income tax expense |
| 1,103 |
| 205 |
| 3,991 |
| 9,348 |
| Net income |
| $ |
| 1,435 |
| $ |
| 2,707 |
| $ |
| 7,242 |
| $ |
| 27,580 |
| Net income attributable to redeemable noncontrolling interest |
| (2,224 |
| ) |
| — |
| (7,399 |
| ) |
| — |
| Net loss attributable to noncontrolling interests |
| 817 |
| — |
| 2,013 |
| — |
| Net income after noncontrolling interests |
| $ |
| 28 |
| $ |
| 2,707 |
| $ |
| 1,856 |
| $ |
| 27,580 |
| Basic earnings per share |
| $ |
| 0.01 |
| $ |
| 0.35 |
| $ |
| 0.23 |
| $ |
| 3.55 |
| Diluted earnings per share |
| $ |
| 0.01 |
| $ |
| 0.35 |
| $ |
| 0.21 |
| $ |
| 3.49 |
| 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 income per common share calculated in accordance with GAAP is presented below.
| Three Months Ended |
| Year Ended |
| GAAP |
| December 31, 2021 |
| December 31, 2021 |
| Loss |
| Shares (a) |
| Per Share |
| Income |
| Shares (a) |
| Per Share |
| (Numerator) |
| (Denominator) |
| Amount |
| (Numerator) |
| (Denominator) |
| Amount |
| Net income |
| $ |
| 1,435 |
| $ |
| 7,242 |
| Less: Net income attributable to redeemable noncontrolling interest |
| (2,224 |
| ) |
| (7,399 |
| ) |
| Less: TypTap Group's net loss attributable to non-HCI common stockholders and TypTap Group's participating securities |
| 882 |
| 2,013 |
| Net income attributable to HCI |
| 93 |
| 1,856 |
| Less: (loss) income attributable to participating securities |
| 1 |
| (24 |
| ) |
| Basic Earnings Per Share: |
| Income allocated to common stockholders |
| 94 |
| 9,326 |
| $ |
| 0.01 |
| 1,832 |
| 8,092 |
| $ |
| 0.23 |
| Effect of Dilutive Securities:* |
| Stock options |
| — |
| 260 |
| — |
| 207 |
| Warrants |
| — |
| 400 |
| — |
| 281 |
| Diluted Earnings Per Share: |
| Income available to common stockholders and assumed conversions |
| $ |
| 94 |
| 9,986 |
| $ |
| 0.01 |
| $ |
| 1,832 |
| 8,580 |
| $ |
| 0.21 |
| (a) Shares in thousands. |
| * Convertible senior notes were excluded due to anti-dilutive effect. |
Non-GAAP Financial Measures
Adjusted net (loss) 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 (loss) income and GAAP diluted earnings per share to non-GAAP Adjusted diluted (loss) earnings per share is provided below.
Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net (Loss) Income
| Three Months Ended |
| Year Ended |
| December 31, 2021 |
| December 31, 2021 |
| GAAP Net income |
| $ |
| 1,435 |
| $ |
| 7,242 |
| Net unrealized investment gains |
| $ |
| (2,012 |
| ) |
| $ |
| (1,363 |
| ) |
| Less: Tax effect at 23.79265% |
| $ |
| 479 |
| $ |
| 324 |
| Net adjustment to Net income |
| $ |
| (1,533 |
| ) |
| $ |
| (1,039 |
| ) |
| Non-GAAP Adjusted Net (loss) income |
| $ |
| (98 |
| ) |
| $ |
| 6,203 |
HCI GROUP, INC. AND SUBSIDIARIES
(Amounts in thousands, except per share amounts)
A summary of the numerator and denominator of the basic and diluted (loss) income per common share calculated with the Non-GAAP financial measure Adjusted net (loss) income is presented below.
| Three Months Ended |
| Year Ended |
| Non-GAAP |
| December 31, 2021 |
| December 31, 2021 |
| Loss |
| Shares (a) |
| Per Share |
| Income |
| Shares (a) |
| Per Share |
| (Numerator) |
| (Denominator) |
| Amount |
| (Numerator) |
| (Denominator) |
| Amount |
| Adjusted net (loss) income (non-GAAP) |
| $ |
| (98 |
| ) |
| $ |
| 6,203 |
| Less: Net income attributable to redeemable noncontrolling interest |
| (2,224 |
| ) |
| $ |
| (7,399 |
| ) |
| Less: TypTap Group's net loss attributable to non-HCI common stockholders and TypTap Group's participating securities |
| 892 |
| 2,024 |
| Net (loss) income attributable to HCI |
| (1,430 |
| ) |
| 828 |
| Less: Income attributable to participating securities |
| 105 |
| 55 |
| Basic Earnings Per Share before unrealized gains/losses on equity securities: |
| (Loss) income allocated to common stockholders |
| (1,325 |
| ) |
| 9,326 |
| $ |
| (0.14 |
| ) |
| 883 |
| 8,092 |
| $ |
| 0.11 |
| Effect of Dilutive Securities:* |
| Stock options** |
| — |
| — |
| — |
| 207 |
| Warrants** |
| — |
| — |
| — |
| 281 |
| Diluted Earnings Per Share before unrealized gains/losses on equity securities: |
| (Loss) income available to common stockholders and assumed conversions |
| $ |
| (1,325 |
| ) |
| $ |
| 9,326 |
| $ |
| (0.14 |
| ) |
| $ |
| 883 |
| $ |
| 8,580 |
| $ |
| 0.10 |
| (a) Shares in thousands. |
| * Convertible senior notes were excluded due to anti-dilutive effect. **For the three months ended December 31, 2021, stock options and warrants 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, 2021 |
| December 31, 2021 |
| GAAP diluted Earnings Per Share |
| $ |
| 0.01 |
| $ |
| 0.21 |
| Net unrealized investment gains |
| $ |
| (0.21 |
| ) |
| $ |
| (0.16 |
| ) |
| Less: Tax effect at 23.79265% |
| $ |
| 0.06 |
| $ |
| 0.05 |
| Net adjustment to GAAP diluted EPS |
| $ |
| (0.15 |
| ) |
| $ |
| (0.11 |
| ) |
| Non-GAAP Adjusted diluted EPS |
| $ |
| (0.14 |
| ) |
| $ |
| 0.10 |