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HCI Group Reports Third Quarter 2024 Results
Source: Nasdaq GlobeNewswire / 07 Nov 2024 15:15:00 America/Chicago
Pre-Tax Income of $14.1 million
Diluted EPS of $0.52TAMPA, Fla., Nov. 07, 2024 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI), a holding company with operations in homeowners insurance, information technology services, real estate, and reinsurance, reported pre-tax income of $14.1 million and net income of $9.4 million in the third quarter of 2024. Net income after noncontrolling interests was $5.7 million compared with $13.2 million in the third quarter of 2023. Diluted earnings per share were $0.52 in the third quarter of 2024, compared with $1.34 diluted earnings per share, in the third quarter of 2023.
Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the third quarter of 2024 was $8.9 million, or $0.47 diluted earnings per share compared with adjusted net income of $16.5 million, or $1.41 diluted earnings per share, in the third quarter of 2023. 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
“Despite Hurricanes Debby and Helene making landfall in the third quarter, the company reported positive earnings,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “Our balance sheet remains strong, our underlying business is performing well and we continue to grow. For example, in October we assumed approximately 42,000 policies from Citizens.”Third Quarter 2024 Commentary
Consolidated gross premiums earned in the third quarter increased to $265.5 million from $188.3 million in the third quarter of 2023 driven primarily by growth in Florida.Premiums ceded for reinsurance in the third quarter were $109.7 million compared with $66.2 million in the third quarter of 2023. The increase was attributable to increased reinsurance coverage due to growth in the number of policies in force and total insured value, along with the reversal of $12.3 million of previously accrued benefits related to retrospective provisions following the impact of Hurricane Helene. Premiums ceded represented 41.3% of gross premiums earned in the third quarter of 2024 compared with 35.1% in the third quarter of 2023.
Net investment income in the third quarter was $13.7 million compared with $9.4 million in the third quarter of 2023. The $4.3 million increase was primarily attributable to an increase in interest income from cash, cash equivalents and available-for-sale securities.
Losses and loss adjustment expenses in the third quarter were $105.7 million compared with $66.7 million in the third quarter of 2023. The loss ratio, as a percentage of gross premiums earned, in the third quarter was 39.8% compared to 35.4% in the third quarter of 2023. Loss and loss adjustment expenses included $40.0 million from Hurricane Helene and $6.5 million from Hurricane Debby.
Policy acquisition and other underwriting expenses in the third quarter were $26.1 million compared with $22.8 million in the third quarter of 2023, representing 9.8% of gross premiums earned in the third quarter of 2024 compared with 12.1% in the third quarter of 2023.
General and administrative personnel expenses in the third quarter increased to $19.2 million from $13.9 million in the third quarter of 2023. General and administrative personnel expenses represented 7.2% of gross premiums earned in the third quarter of 2024 down from 7.4% in the third quarter of 2023.
Year-to-Date 2024 Results
For the nine months ended September 30, 2024, the company reported pre-tax income of $167.5 million and net income of $123.4 million. Net income after noncontrolling interests was $107.4 million compared with $40.9 million for the nine months ended September 30, 2023. Diluted earnings per share were $8.59 for the nine months ended September 30, 2024, compared with $4.16 diluted earnings per share, for the nine months ended September 30, 2023.Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the nine-month period was $120.6 million, or $8.39 diluted earnings per share compared with adjusted net income of $48.1 million, or $4.13 diluted earnings per share, in the same period of 2023. An explanation of this non-GAAP financial measure and reconciliations to the applicable GAAP numbers accompany this press release.
Consolidated gross premiums earned for the nine months of 2024 increased to $785.7 million from $550.3 million in the same period of 2023 driven primarily by growth in Florida.
Premiums ceded for reinsurance for the nine months of 2024 were $254.5 million compared with $203.1 million for the nine months of 2023. The increase was attributable to increased reinsurance coverage due to growth in the number of policies in force and total insured value, along with the reversal of $12.3 million of previously accrued benefits related to retrospective provisions following the impact of Hurricane Helene. Premiums ceded represented 32.4% of gross premiums earned for the nine months of 2024 compared with 36.9% in the nine months of 2023.
Net investment income for the nine months of 2024 was $44.7 million compared with $35.9 million for the nine months of 2023. The increase was primarily attributable to an increase in interest income from cash, cash equivalents, and available-for-sale securities, offset by a decrease in income from real estate investments. Results for the first nine months of 2023 included a $8.9 million gain from the sale of two real estate investment properties.
Losses and loss adjustment expenses for the nine months of 2024 were $264.0 million compared with $189.2 million for the nine months of 2023. The loss ratio, as a percentage of gross premiums earned, decreased to 33.6% from 34.4% for the nine months ended September 30, 2023. The decline in the gross loss ratio was driven primarily by the continued decline of claims and litigation frequency in Florida. Loss and loss adjustment expenses for the nine months of 2024 included $40.0 million from Hurricane Helene and $6.5 million from Hurricane Debby.
Policy acquisition and other underwriting expenses for the nine months of 2024 were $71.7 million compared with $68.1 million for the nine months of 2023, representing 9.1% of gross premiums earned in the nine months of 2024 compared with 12.4% in the nine months of 2023.
General and administrative personnel expenses for the nine months of 2024 increased to $52.9 million from $41.6 million for the nine months of 2023. General and administrative personnel expenses represented 6.7% of gross premiums earned in the nine months of 2024 down from 7.6% in the nine months of 2023.
Conference Call
HCI Group will hold a conference call later today, November 7, 2024, 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
Entry Code: 821320Please 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 Group 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 November 7, 2025.
Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 51444About 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:
Bill Broomall, CFA
Investor Relations
HCI Group, Inc.
Tel (813) 776-1012
wbroomall@typtap.comInvestor Relations Contact:
Matt Glover
Gateway Group, Inc.
Tel (949) 574-3860
HCI@gateway-grp.com- Tables to follow - HCI GROUP, INC. AND SUBSIDIARIES
Selected Financial Metrics
(Dollar amounts in thousands, except per share amounts)Q3 2024 Q3 2023 (Unaudited) (Unaudited) Insurance Operations Gross Written Premiums: Homeowners Choice $ 165,208 $ 127,334 TypTap Insurance Company 93,716 70,931 Condo Owners Reciprocal Exchange 11,455 - Total Gross Written Premiums 270,379 198,265 Gross Premiums Earned: Homeowners Choice 139,822 102,076 TypTap Insurance Company 108,266 86,233 Condo Owners Reciprocal Exchange 17,430 - Total Gross Premiums Earned 265,518 188,309 Gross Premiums Earned Loss Ratio 39.8 % 35.4 % Per Share Metrics GAAP Diluted EPS $ 0.52 $ 1.34 Non-GAAP Adjusted Diluted EPS $ 0.47 $ 1.41 Dividends per share $ 0.40 $ 0.40 Book value per share at the end of period $ 43.45 $ 23.27 Shares outstanding at the end of period 10,479,076 8,590,824 HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)September 30, 2024 December 31, 2023 (Unaudited) Assets Fixed-maturity securities, available for sale, at fair value (amortized cost: $665,669 and $387,687, respectively and allowance for credit losses: $0 and $0, respectively) $ 668,231 $ 383,238 Equity securities, at fair value (cost: $50,982 and $44,011, respectively) 56,333 45,537 Limited partnership investments 21,497 23,583 Real estate investments 77,511 67,893 Total investments 823,572 520,251 Cash and cash equivalents 518,786 536,478 Restricted cash 3,310 3,287 Receivable from maturities of fixed-maturity securities — 91,085 Accrued interest and dividends receivable 6,382 3,507 Income taxes receivable 4,919 — Deferred income taxes, net — 512 Premiums receivable, net (allowance: $4,218 and $3,152, respectively) 59,183 38,037 Assumed premium receivable — 19,954 Prepaid reinsurance premiums 105,092 86,232 Reinsurance recoverable, net of allowance for credit losses: Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively) 27,518 19,690 Unpaid losses and loss adjustment expenses (allowance: $46 and $118, respectively) 273,053 330,604 Deferred policy acquisition costs 56,401 42,910 Property and equipment, net 29,452 29,251 Right-of-use-assets - operating leases 1,240 1,407 Intangible assets, net 5,820 7,659 Funds withheld for assumed business 14,527 30,087 Other assets 58,119 50,365 Total assets $ 1,987,374 $ 1,811,316 Liabilities and Equity Losses and loss adjustment expenses $ 612,354 $ 585,073 Unearned premiums 547,700 501,157 Advance premiums 37,767 15,895 Reinsurance payable on paid losses and loss adjustment expenses — 3,145 Ceded reinsurance premiums payable 7,168 8,921 Assumed premiums payable 315 850 Accrued expenses 37,121 19,722 Income tax payable — 7,702 Deferred income taxes, net 5,419 — Revolving credit facility 46,000 — Long-term debt 185,081 208,495 Lease liabilities - operating leases 1,250 1,408 Other liabilities 39,039 35,623 Total liabilities 1,519,214 1,387,991 Commitments and contingencies Redeemable noncontrolling interest 1,491 96,160 Equity: Common stock, (no par value, 40,000,000 shares authorized, 10,479,076 and 9,738,183 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively) — — Additional paid-in capital 119,971 89,568 Retained income 333,453 238,438 Accumulated other comprehensive loss, net of taxes 1,920 (3,163 ) Total stockholders' equity 455,344 324,843 Noncontrolling interests 11,325 2,322 Total equity 466,669 327,165 Total liabilities, redeemable noncontrolling interest, and equity $ 1,987,374 $ 1,811,316 HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(Dollar amounts in thousands, except per share amounts)Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 2024 2023 Revenue Gross premiums earned $ 265,518 $ 188,308 $ 785,723 $ 550,322 Premiums ceded (109,694 ) (66,152 ) (254,513 ) (203,051 ) Net premiums earned 155,824 122,156 531,210 347,271 Net investment income 13,714 9,384 44,662 35,893 Net realized investment gains (losses) 2,846 (207 ) 3,058 (1,586 ) Net unrealized investment gains 657 (1,041 ) 3,825 385 Policy fee income 1,229 1,092 3,337 3,651 Other 1,047 260 2,084 2,386 Total revenue 175,317 131,644 588,176 388,000 Expenses Losses and loss adjustment expenses 105,736 66,726 263,982 189,181 Policy acquisition and other underwriting expenses 26,104 22,768 71,695 68,106 General and administrative personnel expenses 19,175 13,864 52,920 41,638 Interest expense 3,421 2,827 10,022 8,295 Other operating expenses 6,801 5,371 22,021 17,290 Total expenses 161,237 111,556 420,640 324,510 Income before income taxes 14,080 20,088 167,536 63,490 Income tax expense 4,688 4,419 44,089 15,146 Net income $ 9,392 $ 15,669 $ 123,447 $ 48,344 Net income attributable to redeemable noncontrolling interests — (2,349 ) (10,149 ) (7,010 ) Net income attributable to noncontrolling interests (3,710 ) (163 ) (5,929 ) (396 ) Net income after noncontrolling interests $ 5,682 $ 13,157 $ 107,369 $ 40,938 Basic earnings per share $ 0.54 $ 1.53 $ 10.42 $ 4.76 Diluted earnings per share $ 0.52 $ 1.34 $ 8.59 $ 4.16 Dividends per share $ 0.40 $ 0.40 $ 1.20 $ 1.20 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 Nine Months Ended GAAP September 30, 2024 September 30, 2024 Income Shares (a) Per Share Income Shares (a) Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Net income $ 9,392 $ 123,447 Less: Net income attributable to redeemable noncontrolling interest — (10,149 ) Less: Net income attributable to noncontrolling interests (3,710 ) (5,929 ) Net income attributable to HCI 5,682 107,369 Less: Income attributable to participating securities (230 ) (3,744 ) Basic Earnings Per Share: Income allocated to common stockholders 5,452 10,050 $ 0.54 103,625 9,948 $ 10.42 Effect of Dilutive Securities: * Stock options — 269 — 283 Convertible senior notes — — 5,149 2,188 Warrants — 192 — 238 Diluted Earnings Per Share: Income available to common stockholders and assumed conversions $ 5,452 10,511 $ 0.52 $ 108,774 12,657 $ 8.59 (a) Shares in thousands. * For the three months ended September 30, 2024, convertible senior notes were excluded due to anti-dilutive effect.
Non-GAAP Financial MeasuresAdjusted 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 Nine Months Ended September 30, 2024 September 30, 2024 GAAP Net income $ 9,392 $ 123,447 Net unrealized investment gains $ (657 ) $ (3,825 ) Less: Tax effect at 25.041% $ 165 $ 958 Net adjustment to Net income $ (492 ) $ (2,867 ) Non-GAAP Adjusted Net income $ 8,900 $ 120,580 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 Nine Months Ended Non-GAAP September 30, 2024 September 30, 2024 Income Shares (a) Per Share Income Shares (a) Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Adjusted net income (non-GAAP) $ 8,900 $ 120,580 Less: Net income attributable to redeemable noncontrolling interest - $ (10,149 ) Less: Net loss (income) attributable to noncontrolling interests (3,710 ) (5,731 ) Net income attributable to HCI 5,190 104,700 Less: Income attributable to participating securities (209 ) (3,651 ) Basic Earnings Per Share before unrealized gains/losses on equity securities: Income allocated to common stockholders 4,981 10,050 $ 0.50 101,049 9,948 $ 10.16 Effect of Dilutive Securities: * Stock options — 269 — 283 Convertible senior notes — — 5,149 2,188 Warrants — 192 — 238 Diluted Earnings Per Share before unrealized gains/losses on equity securities: Income available to common stockholders and assumed conversions $ 4,981 10,511 $ 0.47 $ 106,198 12,657 $ 8.39 (a) Shares in thousands. * For the three months ended September 30, 2024, convertible senior notes were excluded due to anti-dilutive effect.
Reconciliation of GAAP Diluted EPS to Non-GAAP Adjusted Diluted EPSThree Months Ended Nine Months Ended September 30, 2024 September 30, 2024 GAAP diluted Earnings Per Share $ 0.52 $ 8.59 Net unrealized investment gains $ (0.06 ) $ (0.28 ) Less: Tax effect at 25.041% $ 0.01 $ 0.08 Net adjustment to GAAP diluted EPS $ (0.05 ) $ (0.20 ) Non-GAAP Adjusted diluted EPS $ 0.47 $ 8.39 
