Homeowners Choice Reports 2012 Third Quarter and Nine-Month Financial Results

Tue Nov 6, 2012 4:01pm EST

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TAMPA, Fla., Nov. 6, 2012 (GLOBE NEWSWIRE) -- Homeowners Choice, Inc. (NYSE:HCI), a leading provider of homeowners' insurance, today announced financial results for the three and nine months ended Sept. 30, 2012.

Third Quarter 2012 - Financial Results

Income available to common stockholders in the third quarter of 2012 was $2.8 million or $0.27 diluted earnings per common share, compared with $1.9 million or $0.27 diluted earnings per common share in the third quarter of 2011.

Gross premiums earned in the third quarter of 2012 increased 67.3% to $53.1 million from $31.7 million in the same year-ago period. The increase was primarily due to policies acquired from HomeWise Insurance Company.

Net premiums earned (defined as gross premiums earned less premiums ceded to reinsurance companies) in the third quarter of 2012 increased 65% to $30.6 million from $18.5 million in the same period in 2011. Reinsurance costs in the third quarter of 2012 were 42.4% of the company's gross premiums earned, compared with 41.6% during the same period in 2011.

Losses and loss adjustment expenses during the third quarter of 2012 were $15.0 million compared with $10.4 million in the same year-ago period. Losses and loss adjustment expenses in the third quarter of 2012 included approximately $3.2 million related to claims from Tropical Storm Debby and Tropical Storm Isaac, which occurred in late June and August 2012, respectively.

Policy acquisition and other underwriting expenses in the third quarter of 2012 were $6.6 million compared with $3.5 million in the comparable period in 2011. The increase was primarily due to commissions and premium taxes related to the increase in policy renewals in 2012. Other operating expenses, which include a variety of general and administrative costs, totaled $4.7 million in the third quarter of 2012 compared with $2.4 million in third quarter 2011.

Third Quarter 2012 - Financial Ratios

The company's loss ratio applicable to the third quarter of 2012 (defined as loss and loss adjustment expenses related to net premiums earned) was 49.1% compared with 56.3% in the third quarter of 2011.

The expense ratio applicable to the third quarter of 2012 (defined as policy acquisition and other underwriting expenses related to net premiums earned plus compensation, employee benefits and other operating expenses) was 37.1% compared with 32.3% in the same period in 2011.

Expressed as the total of all expenses related to net premiums earned, the 2012 combined loss and expense ratio to net premiums earned was 86.1% compared with 88.5% in the same period in 2011.

Nine Months Ended Sept. 30, 2012 - Financial Results

Income available to common stockholders for the nine months ended Sept. 30, 2012 was $16.8 million or $1.79 diluted earnings per common share, compared with $4.6 million or $0.70 diluted earnings per common share for the nine months ended Sept. 30, 2011.

Gross premiums earned for the nine months ended Sept. 30, 2012 increased 72.2% to $161.6 million from $93.9 million in the same period in 2011.

Net premiums earned for the nine months ended Sept. 30, 2012 increased 107.0% to $108.1 million from $52.2 million in the same period in 2011. Reinsurance costs for the nine months ended 2012 were 33.1% of the company's gross premiums earned, compared with 44.3% during the same period in 2011. The decrease was due to lower costs during the first five months of 2012 related to policies assumed from HomeWise, which were subject to minimal reinsurance premiums because they were acquired late in Florida's hurricane season.

Losses and loss adjustment expenses for the nine months ended Sept. 30, 2012 and 2011 were $50.4 million and $31.4 million, respectively. The company's losses for the nine months ended Sept. 30, 2012 included approximately $5.3 million related to claims from Tropical Storm Debby and Tropical Storm Isaac.

Policy acquisition and other underwriting expenses for the nine months ended Sept. 30, 2012 were $19.7 million compared with $10.6 million for the nine months ended Sept. 30, 2011. Other operating expenses totaled $13.4 million in the nine months ended Sept. 30, 2012 compared with $6.9 million in the nine months ended Sept. 30, 2011.

Nine Months Ended Sept. 30, 2012 - Financial Ratios

The company's loss ratio applicable to the nine months ended Sept. 30, 2012 was 46.6% compared with 60.0% in the nine months ended Sept. 30, 2011.

The expense ratio applicable to the nine months ended Sept. 30, 2012 was 30.6% compared with 33.5% in the same period in 2011.

Expressed as the total of all expenses related to net premiums earned, the 2012 combined loss and expense ratio to net premiums earned was 77.2% compared with 93.5% in the same period in 2011.

Management Commentary

"We are pleased to report strong quarterly and nine-month results despite the impact of tropical storms that occurred in June and August 2012," said Paresh Patel, Homeowners Choice chairman and chief executive officer. "We believe we have strong momentum to carry us forward into 2013 and we look forward to continuing profitable growth."

Conference Call

Homeowners Choice will hold a conference call later today (Nov. 6, 2012) to discuss these financial results. The company's chairman and chief executive officer Paresh Patel and chief financial officer Richard Allen will host the call starting at 4:30 p.m. Eastern Time. A question and answer session will follow management's presentation.

The conference call will be broadcast live on the following website at http://www.ir-site.com/hcpci/events.asp and will be available for replay until Feb. 6, 2013.

Those who wish to participate on the conference call should contact Jay Madhu, Homeowners Choice vice president of investor relations, at 813-405-3660 or jmadhu@hcpci.com.

For those who wish to listen to the call via telephone, please dial the listen-only telephone number below at least 5-10 minutes prior to the scheduled start time:

Toll-Free Number:  877-407-8992
International Number:  201-689-8033

About Homeowners Choice, Inc.

Homeowners Choice, Inc. is a Florida-based insurance holding company headquartered in Tampa. Through its subsidiary corporations, Homeowners Choice provides property and casualty homeowners' insurance, condominium owners' insurance and tenants' insurance. The company's common shares trade on the New York Stock Exchange under the ticker symbol "HCI" and are included in the Russell 2000 Index. Its Series A, cumulative redeemable preferred shares trade on the NASDAQ Capital Market under the ticker symbol "HCIIP." More information about Homeowners Choice is available at www.hcpci.com.

The Homeowners Choice, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6712

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" 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, there can be no assurance that the company will continue profitable growth. 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. Homeowners Choice, Inc. disclaims all obligations to update any forward-looking statements.

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES 
Condensed Consolidated Balance Sheets 
(Dollars in thousands, except share amounts) 
     
     
  September 30, 2012 December 31, 2011
  (Unaudited)  
Assets    
     
Fixed-maturity securities, available-for-sale, at fair value (amortized cost $38,624 and $34,147)  $ 41,397  34,642
Equity securities, available-for-sale, at fair value  9,522  5,207
Time deposits  7,267  12,427
Other investments  15,696  6,483
Total investments 73,882 58,759
Cash and cash equivalents  141,922  100,355
Accrued interest and dividends receivable  334  408
Premiums receivable  17,499  12,222
Assumed reinsurance balances receivable —   1,687
Prepaid reinsurance premiums  21,781  14,169
Deferred policy acquisition costs  12,548  12,321
Property and equipment, net  10,840  10,499
Goodwill  161  161
Income taxes receivable  1,495 — 
Deferred income taxes —   2,368
Other assets  1,849  1,869
     
Total assets  $ 282,311 214,818
     
Liabilities and Stockholders' Equity    
     
Losses and loss adjustment expenses 38,726 27,424
Unearned premiums 120,845 108,677
Advance premiums 6,702 2,132
Assumed reinsurance balances payable 1,329 — 
Accrued expenses 5,053  3,478
Deferred income taxes 977 — 
Dividends payable  98 218
Income taxes payable —  4,956
Other liabilities  7,494  4,103
     
Total liabilities 181,224 150,988
     
Stockholders' equity:    
7% Series A cumulative convertible preferred stock (liquidation preference $10.00 per share), no par value, 1,500,000 shares authorized, 331,525 and 1,247,700 shares issued and outstanding in 2012 and 2011, respectively —  — 
Preferred stock (no par value, 18,500,000 shares authorized, no shares issued or outstanding) —  — 
Common stock, (no par value, 40,000,000 shares authorized, 9,601,019 and 6,202,485 shares issued and outstanding in 2012 and 2011, respectively) —  — 
Additional paid-in capital 53,209 29,636
Retained earnings 46,045  33,986
Accumulated other comprehensive income  1,833  208
     
Total stockholders' equity 101,087 63,830
     
Total liabilities and stockholders' equity  $ 282,311 214,818
         
HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES 
Condensed Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share amounts) 
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2012 2011 2012 2011
         
Revenue        
         
Gross premiums earned  $ 53,109  31,741  $ 161,579  93,855
Premiums ceded  (22,506)  (13,211)  (53,475)  (41,607)
         
Net premiums earned  30,603  18,530  108,104  52,248
         
Net investment income  47  486  871  1,557
Policy fee income  624  424  2,167  1,278
Realized investment (losses) gains  (4) 123  26 416
Gain on bargain purchase —  —   179 936
Other  211  150  641  808
         
Total revenue  31,481  19,713  111,988  57,243
         
Expenses        
         
Losses and loss adjustment expenses  15,017  10,431  50,382  31,357
Policy acquisition and other underwriting expenses  6,611  3,529  19,690  10,572
Other operating expenses  4,728  2,447  13,401  6,932
         
Total expenses  26,356  16,407  83,473  48,861
         
Income before income taxes  5,125  3,306  28,515  8,382
         
Income taxes  2,299  1,232  11,459  3,214
         
Net income  $ 2,826  2,074  $ 17,056  5,168
         
Preferred stock dividends  (42)  (218)  (286)  (596)
         
Income available to common stockholders  $ 2,784  1,856  $ 16,770  4,572
         
Basic earnings per common share  $ 0.30  0.30  $ 2.08  0.75
         
Diluted earnings per common share  $ 0.27  0.27  $ 1.79  0.70
         
Dividends per common share  $ 0.20  0.10  $ 0.55  0.30
CONTACT: Media Contact:
         Suzie Boland
         RFB Communications Group
         813.259.0345
         sboland@rfbcommunications.com
         
         Investor Relations Contact:
         Jay Madhu
         Homeowners Choice, Inc.
         813.405.3660
         jmadhu@hcpci.com
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