HCI Group Reports Fourth Quarter and Full Year 2015 Results

Tampa, Florida, UNITED STATES


TAMPA, Fla., March 03, 2016 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI), a holding company primarily engaged in homeowners insurance, as well as reinsurance, real estate and information technology, reported results for the fourth quarter and full year ended December 31, 2015.

Fourth Quarter 2015 - Financial Results

Income available to common stockholders in the fourth quarter of 2015 totaled $11.1 million or $1.05 diluted earnings per common share compared with $14.6 million or $1.30 diluted earnings per common share in the fourth quarter of 2014.

Gross premiums earned in the fourth quarter of 2015 increased 11.5% to $101.9 million from $91.4 million in the same period in 2014. The increase was primarily due to premiums assumed from Citizens Property Insurance Corporation in December 2014 and subsequent renewals.

Premiums ceded in the fourth quarter of 2015 were $40.3 million or 39.6% of gross premiums earned, which increased from $29.7 million or 32.4% of gross premiums earned in the fourth quarter of 2014. The increase as a percentage of gross premiums earned is primarily due to a change in policy mix that occurred in December 2014 with our assumption of wind-only policies as well as an increase in coverage overall.

Net premiums earned (defined as gross premiums earned less premiums ceded to reinsurance companies) in the fourth quarter of 2015 were $61.6 million compared with $61.7 million in the same period in 2014.

Investment income in the fourth quarter of 2015 was $1.2 million compared with $1.4 million in the same period in 2014. Additionally, the company recognized net non-cash charges of $0.8 million in the fourth quarter of 2015 and $0.1 million in the fourth quarter of 2014 due to declines in the fair value of securities determined to be other than temporary.

Losses and loss adjustment expenses during the fourth quarter of 2015 were $21.4 million compared with $20.5 million in the same period in 2014.

Policy acquisition and other underwriting expenses in the fourth quarter of 2015 were $11.1 million compared with $9.3 million in the comparable period in 2014. The increase was primarily attributable to commissions and premium taxes related to the policies assumed in December 2014 from Citizens.

Salaries and wages during the fourth quarter of 2015 were $5.0 million compared with $3.9 million in the same period in 2014. The increase was attributable to an increase in employee headcount as well as merit increases during 2015.

Other operating expenses, which include a variety of general and administrative expenses, totaled $5.6 million in the fourth quarter of 2015 compared with $4.9 million in the fourth quarter of 2014. The increase was driven by an increase in professional fees.
                                                                                 
Fourth Quarter 2015 - Financial Ratios

The company’s loss ratio for the fourth quarter of 2015 (defined as losses and loss adjustment expenses related to net premiums earned) was 34.8% compared with 33.2% for the fourth quarter of 2014.

The expense ratio for the fourth quarter of 2015 (defined as underwriting expenses, salaries and wages, interest and other operating expenses related to net premiums earned) was 39.5% compared with 33.6% for the same prior year period.

Expressed as a total of all expenses related to net premiums earned, the combined loss and expense ratio was 74.3% for the fourth quarter of 2015 compared with 66.8% for the same year-ago period.

Full Year 2015 - Financial Results

Income available to common stockholders for 2015 totaled $65.9 million or $5.90 diluted earnings per common share compared with $62.7 million or $5.36 diluted earnings per common share for 2014.

Gross premiums earned in 2015 increased 15.8% to $423.1 million from $365.5 million in 2014. The increase was primarily due to premiums assumed from Citizens in December 2014.

Premiums ceded for 2015 were $140.6 million or 33.2% of gross premiums earned compared with $113.4 million or 31.0% of gross premiums earned for 2014.

Net premiums earned for 2015 increased 12.1% to $282.5 million from $252.1 million in 2014.

Investment income during 2015 totaled $3.4 million compared with $9.6 million in 2014 which included $4.7 million of net realized gains from investment sales. The decline was primarily due to net losses related to the company’s limited partnership investments. Additionally, the company recognized net non-cash charges of $4.7 million during 2015 and $0.1 million during 2014 due to declines in the fair value of securities determined to be other than temporary.

Losses and loss adjustment expenses for 2015 were $87.2 million compared with $79.5 million in 2014.  
The increase was primarily attributable to an increase in the number of claims reported in 2015 and subsequent development.

Policy acquisition and other underwriting expenses for 2015 were $42.0 million compared with $38.0 million for 2014.

Salaries and wages in 2015 totaled $20.1 million compared with $16.5 million in the same period in 2014.  The increase in 2015 is attributable to a ten percent increase in employee headcount as well as merit increases in 2015.

Other operating expenses in 2015 totaled $19.7 million compared with $20.8 million for 2014.

Full Year 2015 - Financial Ratios

The loss ratio for 2015 was 30.9% compared with 31.5% for 2014. Losses on our wind-only policies, which we assumed from Citizens in December 2014, were minimal. This benefit more than offset the development related to losses on our multi-peril policies. 

The expense ratio for 2015 was 32.7% compared with 34.0% for 2014.

The combined loss and expense ratio was 63.6% for 2015 compared with 65.5% for 2014.

Management Commentary

“2015 was a solid year for HCI with record earnings per share and our eighth consecutive year of profitability,” said Paresh Patel, HCI Group’s chairman and chief executive officer. “We are particularly pleased with these results as the environment in which we and other insurance companies operate has become more challenging.”

Conference Call

HCI Group will hold a conference call later today, March 3, 2016, to discuss these financial results. Chairman and chief executive officer, Paresh Patel, and chief financial officer, Richard Allen, 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: (877) 407-8033
Listen-only international number: (201) 689-8033
Conference ID: 13630109

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 3, 2016.

Toll-free replay number: (877) 660-6853
International replay number: (201) 612-7415
Conference ID: 13630109

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 S&P SmallCap 600 Index. Its 8% Senior Notes trade on the New York Stock Exchange under the ticker symbol "HCJ." For more information about HCI Group, 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. There can be no assurance, for example, that growth prospects and opportunities to add value will arise or that the company will capitalize on any such prospects or opportunities that do arise. 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.

 
HCI GROUP, INC. AND SUBSIDIARIES 
Consolidated Balance Sheets 
(Dollar amounts in thousands) 
      
      
   At December 31, 2015 At December 31, 2014
      
Assets     
Fixed-maturity securities, available for sale, at fair value     
(amortized cost: $128,614 and $96,163, respectively) $ 125,009  97,084
Equity securities, available for sale, at fair value     
(cost: $47,548 and $45,387, respectively)   48,237  45,550
Limited partnership investments, at equity   23,930  2,550
Investment in unconsolidated joint venture, at equity   4,787  4,477
Real estate investments (inclusive of $2,906 and $0 of consolidated variable     
interest entities, respectively)   30,954  19,138
Total investments   232,917  168,799
Cash and cash equivalents (inclusive of $57 and $0 of consolidated     
variable interest entities, respectively)   267,738  314,416
Accrued interest and dividends receivable   1,390  1,059
Premiums receivable   19,631  15,824
Prepaid reinsurance premiums   40,747  34,096
Income taxes receivable   1,858  2,624
Deferred income taxes, net   3,189  2,499
Deferred policy acquisition costs   18,602  15,014
Property and equipment, net   11,786  12,292
Other assets   39,128  31,934
      
Total assets $ 636,986  598,557
      
Liabilities and Stockholders’ Equity     
Losses and loss adjustment expenses $ 51,690  48,908
Unearned premiums   187,290  214,071
Advance premiums   4,983  4,380
Assumed reinsurance balances payable   1,084  218
Accrued expenses (inclusive of $21 and $0 of consolidated variable interest     
entities, respectively)   6,316  4,826
Long-term debt   129,429  125,886
Other liabilities (inclusive of $1,108 and $0 of consolidated variable interest     
entities, respectively)   18,472  17,683
      
Total liabilities   399,264  415,972
      
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,     
10,292,256 and 10,189,128 shares issued and outstanding in     
2015 and 2014, respectively)   
Additional paid-in capital   23,879  20,465
Retained income   215,634  161,454
Accumulated other comprehensive (loss) income, net of taxes   (1,791) 666
      
Total stockholders’ equity   237,722  182,585
      
Total liabilities and stockholders’ equity $ 636,986  598,557
      
      

 

  
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, 
  2015  2014    2015  2014  
  (Unaudited)       
Revenue     
              
Gross premiums earned $ 101,946   91,435    $ 423,120   365,488  
Premiums ceded   (40,320)  (29,659)     (140,614)  (113,423) 
              
Net premiums earned   61,626   61,776      282,506   252,065  
              
Net investment income   1,293   1,135      3,978   4,888  
Net realized investment (losses) gains   (45)  270      (608)  4,735  
Net other-than-temporary impairment losses recognized in income:             
Total other-than-temporary impairment losses   (810)  (107)     (5,275)  (107) 
Portion of loss recognized in other comprehensive income,             
before taxes   (2)      594   
Net other-than-temporary impairment losses   (812)  (107)     (4,681)  (107) 
Policy fee income   1,019   994      3,496   2,820  
Other   331   684      1,261   1,707  
              
Total revenue   63,412   64,752      285,952   266,108  
              
Expenses             
      
Losses and loss adjustment expenses   21,420   20,529      87,224   79,468  
Policy acquisition and other underwriting expenses   11,067   9,278      41,984   37,952  
Salaries and wages   4,966   3,869      20,140   16,483  
Interest expense   2,716   2,644      10,754   10,453  
Other operating expenses   5,618   4,938      19,658   20,790  
              
Total expenses   45,787   41,258      179,760   165,146  
              
Income before income taxes   17,625   23,494      106,192   100,962  
      
Income taxes   6,535   8,932      40,331   38,298  
              
Net income $ 11,090   14,562    $ 65,861   62,664  
              
Preferred stock dividends         4  
              
Income available to common stockholders $ 11,090   14,562    $ 65,861   62,668  
              
Basic earnings per common share $ 1.12   1.43    $ 6.51   5.90  
              
Diluted earnings per common share $ 1.05   1.30    $ 5.90   5.36  
              
Dividends per common share $ 0.30   0.27    $ 1.20   1.10  
              



        

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