EX-99 2 hci-ex99_1.htm EX-99.1 EX-99

 

Exhibit 99.1

 

img19850711_0.jpg 

 

HCI Group Reports First Quarter 2023 Results

 

Pre-Tax Income of $23.1 million

First Quarter Gross Loss Ratio Improved to 33.6% from 40.6%

Greenleaf Sells Two Properties for a Gain of $8.9 Million

Tampa, Fla. – May 9, 2023 – HCI Group, Inc. (NYSE:HCI), a holding company with operations in homeowners insurance, information technology services, real estate, and reinsurance, reported net income of $17.8 million, or $1.54 diluted earnings per share in the first quarter of 2023, compared with net income of $2.8 million, or $0.09 diluted earnings per share, in the first quarter of 2022.

Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the first quarter of 2023 was $17.4 million, or $1.50 diluted earnings per share, compared with adjusted net income of $5.5 million, or $0.34 diluted earnings per share, in the first quarter of 2022. 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”).

Management Commentary

“We are starting to see the benefits of the company’s underwriting and rate actions as well as the bold leadership provided by the Florida Legislature in 2022,” said HCI Group Chairman and Chief Executive Officer Paresh Patel.

First Quarter 2023 Commentary

Consolidated gross premiums earned in the first quarter of 2023 increased to $180.1 million from $178.9 million in the first quarter of 2022. The increase was primarily due to higher average premium per policy offset by a decline in the number of policies in force.

Premiums ceded for reinsurance increased to $70.5 million from $53.2 million in the first quarter of 2022. Ceded premiums represented 39.2% and 29.7% of gross premiums earned in the first quarters of 2023 and 2022, respectively.

Net investment income increased to $17.7 million from $2.9 million in the first quarter of 2022. The increase included a gain of $8.9 million from the sale of two real estate investment properties at Greenleaf. Also included in investment income was interest income of $7.7 million, which increased from $0.6 million in the first quarter of 2022 reflecting higher yields on fixed maturity securities, cash, and cash equivalents.

Losses and loss adjustment expenses decreased to $60.6 million from $72.7 million in the same period of 2022. Losses and loss adjustment expenses as a percent of gross premiums earned declined to 33.6% from 40.6% in the first quarter of 2022. The decrease was driven by lower claims and litigation frequency in Florida.

Policy acquisition and other underwriting expenses decreased to $22.7 million from $29.4 million in the same quarter of 2022 and declined from 16.4% of gross premiums earned to 12.6%, reflecting a higher mix of renewal policies and lower commissions.

General and administrative personnel expenses decreased to $13.5 million from $14.0 million for the first quarter of 2022.

Conference Call

HCI Group will hold a conference call later today, May 9, 2023, 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 4:45 p.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

1

 

Entry Code: 826822

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 May 9, 2024.

Toll-free replay number: (877) 481-4010

International replay number: (919) 882-2331

Replay ID: 48147

About HCI Group, Inc.

HCI Group, Inc. owns subsidiaries engaged in diverse, yet complementary business activities, including homeowners insurance, information technology services, insurance management, real estate, and reinsurance. HCI’s leading insurance operation, TypTap Insurance Company, is a technology-driven homeowners insurance company. 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

 

 

- Tables to follow -

 

2

 

HCI GROUP, INC. AND SUBSIDIARIES

Selected Financial Metrics

(Dollar amounts in thousands, except per share amounts)

 

 

 

Q1 2023

 

 

Q1 2022

 

 

FY 2022

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

 

Insurance Operations

 

 

 

 

 

 

 

 

 

Gross Written Premiums:

 

 

 

 

 

 

 

 

 

Homeowners Choice

 

$

85,153

 

 

$

91,141

 

 

$

377,860

 

TypTap Insurance Company

 

 

114,701

 

 

 

86,153

 

 

 

348,159

 

Total Gross Written Premiums

 

 

199,854

 

 

 

177,294

 

 

 

726,019

 

 

 

 

 

 

 

 

 

 

 

Gross Premiums Earned:

 

 

 

 

 

 

 

 

 

Homeowners Choice

 

 

92,456

 

 

 

118,303

 

 

 

426,502

 

TypTap Insurance Company

 

 

87,612

 

 

 

60,622

 

 

 

298,214

 

Total Gross Premiums Earned

 

 

180,068

 

 

 

178,925

 

 

 

724,716

 

 

 

 

 

 

 

 

 

 

 

Gross Premiums Earned Loss Ratio

 

 

33.6

%

 

 

40.6

%

 

 

51.3

%

 

 

 

 

 

 

 

 

 

 

Per Share Metrics

 

 

 

 

 

 

 

 

 

GAAP Diluted EPS

 

$

1.54

 

 

$

0.09

 

 

$

(6.24

)

Non-GAAP Adjusted Diluted EPS

 

$

1.50

 

 

$

0.34

 

 

$

(5.48

)

 

 

 

 

 

 

 

 

 

 

Dividends per share

 

$

0.40

 

 

$

0.40

 

 

$

1.60

 

 

 

 

 

 

 

 

 

 

 

Book value per share at the end of period

 

$

20.97

 

 

$

31.66

 

 

$

18.91

 

 

 

 

 

 

 

 

 

 

 

Shares outstanding at the end of period

 

 

8,596,673

 

 

 

10,125,927

 

 

 

8,598,682

 

3

 

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollar amounts in thousands)

 

 

 

March 31, 2023

 

 

December 31, 2022

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Fixed-maturity securities, available for sale, at fair value (amortized cost: $531,899 and $494,197, respectively and allowance for credit losses: $0 and $0, respectively)

 

$

524,756

 

 

$

483,901

 

Equity securities, at fair value (cost: $38,575 and $36,272, respectively)

 

 

37,415

 

 

 

34,583

 

Limited partnership investments

 

 

24,520

 

 

 

25,702

 

Investment in unconsolidated joint venture, at equity

 

 

—

 

 

 

18

 

Real estate investments

 

 

43,562

 

 

 

71,388

 

Total investments

 

 

630,253

 

 

 

615,592

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

302,025

 

 

 

234,863

 

Restricted cash

 

 

2,987

 

 

 

2,900

 

Accrued interest and dividends receivable

 

 

2,525

 

 

 

1,952

 

Income taxes receivable

 

 

707

 

 

 

2,807

 

Premiums receivable, net (allowance: $10,054 and $5,362, respectively)

 

 

44,966

 

 

 

34,998

 

Prepaid reinsurance premiums

 

 

27,063

 

 

 

66,627

 

Reinsurance recoverable, net of allowance for credit losses:

 

 

 

 

 

 

Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)

 

 

36,896

 

 

 

71,594

 

Unpaid losses and loss adjustment expenses (allowance: $453 and $454, respectively)

 

 

559,804

 

 

 

616,765

 

Deferred policy acquisition costs

 

 

46,632

 

 

 

45,522

 

Property and equipment, net

 

 

26,734

 

 

 

17,910

 

Right-of-use-assets - operating leases

 

 

1,466

 

 

 

777

 

Intangible assets, net

 

 

7,686

 

 

 

10,578

 

Funds withheld for assumed business

 

 

45,274

 

 

 

48,772

 

Other assets

 

 

36,104

 

 

 

31,671

 

 

 

 

 

 

 

 

Total assets

 

$

1,771,122

 

 

$

1,803,328

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

Losses and loss adjustment expenses

 

$

806,308

 

 

$

863,765

 

Unearned premiums

 

 

387,833

 

 

 

368,047

 

Advance premiums

 

 

25,834

 

 

 

18,587

 

Reinsurance payable on paid losses and loss adjustment expenses

 

 

7,043

 

 

 

8,606

 

Ceded reinsurance premiums payable

 

 

14,123

 

 

 

17,646

 

Accrued expenses

 

 

20,633

 

 

 

14,534

 

Reinsurance recovered in advance on unpaid losses

 

 

—

 

 

 

19,863

 

Deferred income taxes, net

 

 

3,160

 

 

 

1,704

 

Long-term debt

 

 

196,158

 

 

 

211,687

 

Lease liabilities - operating leases

 

 

1,422

 

 

 

721

 

Other liabilities

 

 

35,886

 

 

 

23,361

 

 

 

 

 

 

 

 

Total liabilities

 

 

1,498,400

 

 

 

1,548,521

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

92,865

 

 

 

93,553

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Common stock, (no par value, 40,000,000 shares authorized, 8,596,673 and 8,598,682
shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively)

 

 

—

 

 

 

—

 

Additional paid-in capital

 

 

332

 

 

 

—

 

Retained income

 

 

185,028

 

 

 

172,482

 

Accumulated other comprehensive loss, net of taxes

 

 

(5,098

)

 

 

(9,886

)

Total stockholders' equity

 

 

180,262

 

 

 

162,596

 

Noncontrolling interests

 

 

(405

)

 

 

(1,342

)

Total equity

 

 

179,857

 

 

 

161,254

 

 

 

 

 

 

 

 

Total liabilities, redeemable noncontrolling interest, and equity

 

$

1,771,122

 

 

$

1,803,328

 

 

4

 

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(Dollar amounts in thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premiums earned

 

$

180,068

 

 

$

178,925

 

Premiums ceded

 

 

(70,509

)

 

 

(53,162

)

 

 

 

 

 

 

 

Net premiums earned

 

 

109,559

 

 

 

125,763

 

 

 

 

 

 

 

 

Net investment income

 

 

17,715

 

 

 

2,868

 

Net realized investment losses

 

 

(1,149

)

 

 

(314

)

Net unrealized investment gains (losses)

 

 

529

 

 

 

(3,576

)

Policy fee income

 

 

1,090

 

 

 

1,057

 

Other

 

 

1,285

 

 

 

1,242

 

 

 

 

 

 

 

 

Total revenue

 

 

129,029

 

 

 

127,040

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses

 

 

60,565

 

 

 

72,704

 

Policy acquisition and other underwriting expenses

 

 

22,720

 

 

 

29,408

 

General and administrative personnel expenses

 

 

13,502

 

 

 

14,034

 

Interest expense

 

 

2,801

 

 

 

601

 

Other operating expenses

 

 

6,305

 

 

 

6,292

 

 

 

 

 

 

 

 

Total expenses

 

 

105,893

 

 

 

123,039

 

 

 

 

 

 

 

 

Income before income taxes

 

 

23,136

 

 

 

4,001

 

 

 

 

 

 

 

 

Income tax expense

 

 

5,343

 

 

 

1,210

 

 

 

 

 

 

 

 

Net income

 

$

17,793

 

 

$

2,791

 

Net income attributable to redeemable noncontrolling interest

 

 

(2,324

)

 

 

(2,248

)

Net (income) loss attributable to noncontrolling interests

 

 

(131

)

 

 

360

 

 

 

 

 

 

 

 

Net income after noncontrolling interests

 

$

15,338

 

 

$

903

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

1.78

 

 

$

0.09

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

1.54

 

 

$

0.09

 

 

 

 

 

 

 

 

Dividends per share

 

$

0.40

 

 

$

0.40

 

 

5

 

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 common share calculated in accordance with GAAP is presented below.

 

 

 

Three Months Ended

 

 

Three Months Ended

 

GAAP

 

March 31, 2023

 

 

March 31, 2022

 

 

 

Income

 

 

Shares (a)

 

 

Per Share

 

 

Income

 

 

Shares (a)

 

 

Per Share

 

 

 

(Numerator)

 

 

(Denominator)

 

 

Amount

 

 

(Numerator)

 

 

(Denominator)

 

 

Amount

 

Net income

 

$

17,793

 

 

 

 

 

 

 

 

$

2,791

 

 

 

 

 

 

 

Less: Net income attributable to redeemable noncontrolling interest

 

 

(2,324

)

 

 

 

 

 

 

 

 

(2,248

)

 

 

 

 

 

 

Less: TypTap Group's net (income) loss attributable to non-HCI common stockholders and TypTap Group's participating securities

 

 

(131

)

 

 

 

 

 

 

 

 

360

 

 

 

 

 

 

 

Net income attributable to HCI

 

 

15,338

 

 

 

 

 

 

 

 

 

903

 

 

 

 

 

 

 

Less: Income attributable to participating securities

 

 

(564

)

 

 

 

 

 

 

 

 

(52

)

 

 

 

 

 

 

Basic Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income allocated to common stockholders

 

 

14,774

 

 

 

8,278

 

 

$

1.78

 

 

 

851

 

 

 

9,479

 

 

$

0.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of Dilutive Securities: *

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

—

 

 

 

45

 

 

 

 

 

 

—

 

 

 

135

 

 

 

 

Convertible senior notes

 

 

1,921

 

 

 

2,537

 

 

 

 

 

 

—

 

 

 

—

 

 

 

 

Warrants

 

 

—

 

 

 

—

 

 

 

 

 

 

—

 

 

 

153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders and assumed conversions

 

$

16,695

 

 

 

10,860

 

 

$

1.54

 

 

$

851

 

 

 

9,767

 

 

$

0.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Shares in thousands.

 

* For the three months ended March 31, 2023, warrants were excluded due to anti-dilutive effect. 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 Income

 

 

 

Three Months Ended

 

Three Months Ended

 

 

March 31, 2023

 

March 31, 2022

GAAP Net income

 

 

 

 

$

17,793

 

 

 

 

 

 

 

$

2,791

 

 

 

Net unrealized investment (gains) losses

 

$

(529

)

 

 

 

 

 

 

$

3,576

 

 

 

 

 

 

Less: Tax effect at 25.345%

 

$

134

 

 

 

 

 

 

 

$

(906

)

 

 

 

 

 

Net adjustment to Net income

 

 

 

 

$

(395

)

 

 

 

 

 

 

$

2,670

 

 

 

Non-GAAP Adjusted Net income

 

 

 

 

$

17,398

 

 

 

 

 

 

 

$

5,461

 

 

 

 

6

 

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 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, 2023

 

 

March 31, 2022

 

 

 

Income

 

 

Shares (a)

 

 

Per Share

 

 

Income

 

 

Shares (a)

 

 

Per Share

 

 

 

(Numerator)

 

 

(Denominator)

 

 

Amount

 

 

(Numerator)

 

 

(Denominator)

 

 

Amount

 

Adjusted net income (non-GAAP)

 

$

17,398

 

 

 

 

 

 

 

 

$

5,461

 

 

 

 

 

 

 

Less: Net income attributable to redeemable noncontrolling interest

 

 

(2,324

)

 

 

 

 

 

 

 

$

(2,248

)

 

 

 

 

 

 

Less: TypTap Group's net (income) loss attributable to non-HCI common stockholders and TypTap Group's participating securities

 

 

(127

)

 

 

 

 

 

 

 

 

340

 

 

 

 

 

 

 

Net income attributable to HCI

 

 

14,947

 

 

 

 

 

 

 

 

 

3,553

 

 

 

 

 

 

 

Less: Income attributable to participating securities

 

 

(550

)

 

 

 

 

 

 

 

 

(222

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share before unrealized gains/losses on equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income allocated to common stockholders

 

 

14,397

 

 

 

8,278

 

 

$

1.74

 

 

 

3,331

 

 

 

9,479

 

 

$

0.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of Dilutive Securities: *

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

—

 

 

 

45

 

 

 

 

 

 

—

 

 

 

135

 

 

 

 

Convertible senior notes

 

 

1,921

 

 

 

2,537

 

 

 

 

 

 

—

 

 

 

—

 

 

 

 

Warrants

 

 

—

 

 

 

—

 

 

 

 

 

 

—

 

 

 

153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share before unrealized gains/losses on equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common stockholders and assumed conversions

 

$

16,318

 

 

$

10,860

 

 

$

1.50

 

 

$

3,331

 

 

$

9,767

 

 

$

0.34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Shares in thousands.

 

* For the three months ended March 31, 2023, warrants were excluded due to anti-dilutive effect. 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, 2023

 

March 31, 2022

GAAP diluted Earnings Per Share

 

 

 

 

$

1.54

 

 

 

 

 

 

 

$

0.09

 

 

 

Net unrealized investment (gains) losses

 

$

(0.05

)

 

 

 

 

 

 

$

0.37

 

 

 

 

 

 

Less: Tax effect at 25.345%

 

$

0.01

 

 

 

 

 

 

 

$

(0.12

)

 

 

 

 

 

Net adjustment to GAAP diluted EPS

 

 

 

 

$

(0.04

)

 

 

 

 

 

 

$

0.25

 

 

 

Non-GAAP Adjusted diluted EPS

 

 

 

 

$

1.50

 

 

 

 

 

 

 

$

0.34

 

 

 

 

7