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  
                   


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