HCI Group Reports Third Quarter and Nine-Month 2013 Results

Tue Nov 5, 2013 4:01pm EST

* Reuters is not responsible for the content in this press release.

TAMPA, Fla., Nov. 5, 2013 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI) reported results today for the three and nine months ended September 30, 2013.

Third Quarter 2013 - Financial Results

Income available to common stockholders in the third quarter of 2013 totaled $13.4 million or $1.13 diluted earnings per common share, compared with $2.8 million or $0.27 diluted earnings per common share in the third quarter of 2012.

Gross premiums earned in the third quarter of 2013 increased 53.0% to $81.2 million from $53.1 million in the same period in 2012. The increase was primarily due to policies assumed from Citizens Property Insurance Corporation in November 2012.

Net premiums earned (defined as gross premiums earned less premiums ceded to reinsurance companies) in the third quarter of 2013 increased 73.0% to $52.9 million from $30.6 million in the same period in 2012. Premiums ceded in the third quarter of 2013 were 34.8% of the company's gross premiums earned, compared with 42.4% during the same period in 2012.

Losses and loss adjustment expenses during the third quarter of 2013 were $14.5 million compared with $15.0 million in the same period in 2012.

Policy acquisition and other underwriting expenses in the third quarter of 2013 were $8.9 million compared with $6.6 million in the previous year period. The increase was primarily attributable to commissions and premium taxes related to an increase in policy renewals. Other operating expenses, which include a variety of general and administrative expenses, totaled $8.8 million in the third quarter of 2013 compared with $4.7 million in the third quarter of 2012. The change was primarily due to increases in compensation and related expenses.

Interest expense from the company's senior notes issued in January 2013 totaled $847,000 in the third quarter of 2013.

Third Quarter 2013 - Financial Ratios

The company's loss ratio applicable to the third quarter of 2013 (defined as losses and loss adjustment expenses related to net premiums earned) was 27.4% compared with 49.1% in the third quarter of 2012. The loss ratio was positively impacted by a significant increase in premiums earned during the third quarter of 2013 as compared with the third quarter of 2012. In addition, third quarter 2012 results included losses totaling approximately $3.2 million related to claims from Tropical Storm Debby and Tropical Storm Isaac, which occurred in June and August 2012, respectively.

The expense ratio applicable to the third quarter of 2013 (defined as underwriting expenses, interest and other operating expenses related to net premiums earned) was 35.0% compared with 37.0% in the same year-ago period.

Expressed as a total of all expenses related to net premiums earned, the combined loss and expense ratio to net premiums earned was 62.4% in the third quarter of 2013 compared with 86.1% in the same prior year period.

Nine Months Ended September 30, 2013 - Financial Results

Income available to common stockholders for the nine months ended September 30, 2013 totaled $49.9 million or $4.32 diluted earnings per common share, compared with $16.8 million or $1.79 diluted earnings per common share for the nine months ended September 30, 2012.

Gross premiums earned for the nine months ended September 30, 2013 increased 52.1% to $245.7 million from $161.6 million in the same prior year period. The increase was primarily due to policies assumed from Citizens Property Insurance Corporation in November 2012.

Net premiums earned for the nine months ended September 30, 2013 increased 58.0% to $170.8 million from $108.1 million in the same period in 2012. Premiums ceded for the nine months ended September 30, 2013 were 30.5% of the company's gross premiums earned, compared with 33.1% during the same period in 2012.

Losses and loss adjustment expenses for the nine months ended September 30, 2013 and 2012 were $47.8 million and $50.4 million, respectively.

Policy acquisition and other underwriting expenses for the nine months ended September 30, 2013 were $22.2 million compared with $19.7 million for the nine months ended September 30, 2012. Other operating expenses totaled $22.3 million for the nine months ended September 30, 2013 compared with $13.4 million for the nine months ended September 30, 2012.

Interest expense from the company's senior notes issued in January 2013 totaled $2.4 million for the nine months ended September 30, 2013.

Nine Months Ended September 30, 2013 - Financial Ratios

The company's loss ratio applicable to the nine months ended September 30, 2013 was 28.0% compared with 46.6% in the nine months ended September 30, 2012.

The expense ratio applicable to the nine months ended September 30, 2013 was 27.4% compared with 30.6% in the same period in 2012.

Expressed as a total of all expenses related to net premiums earned, the combined loss and expense ratio to net premiums earned was 55.4% in the nine months ended September 30, 2013 compared with 77.2% in the same period in 2012.

Management Commentary

"Our third quarter results continue to demonstrate the strength of our core insurance business," said Paresh Patel, HCI Group's chairman and chief executive officer. "We remain focused on maintaining strict underwriting standards, further capitalizing on the abundant opportunities in the market, and expanding and diversifying HCI through our information technology and real estate divisions."

Conference Call

HCI Group will hold a conference call later today, November 5, 2013, to discuss these financial results. Chairman and chief executive officer, Paresh Patel, and chief financial officer, Richard Allen, will host the call starting at 4:30 p.m. Eastern time. A question and answer session will follow management's presentation.

Dial-In Number: 877-407-9210
International Number: 201-689-8049

Investors or analysts that wish to participate in the question and answer portion of the call should contact Kevin Mitchell, vice president of investor relations at kmitchell@hcigroup.com or 813-405-3603.

The conference call will be broadcast simultaneously and available for replay via the investor section of the company's website at www.hcigroup.com.

Please call the conference telephone number 5 to 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 Group at 949-574-3860.

A replay of the call will be available after 8:00 p.m. Eastern time on the same day through November 13, 2013.

Replay Number: 877-660-6853
International Replay Number: 201-612-7415
Conference ID: 100524

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 Russell 2000 Index and S&P SmallCap 600 Index. Its 8% Senior Notes trade on the New York Stock Exchange under the ticker symbol "HCJ." Its 7% Series A, cumulative redeemable preferred shares trade on the NASDAQ Capital Market under the ticker symbol "HCIIP." 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. For example, there can be no assurance the company's core business will remain strong, that opportunities will remain abundant or the company will successfully expand and diversify through its information technology and real estate divisions. 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
(Amounts in thousands, except share amounts)
     
     
  At September 30, 2013 At December 31, 2012
  (Unaudited)  
Assets    
     
Fixed-maturity securities, available-for-sale, at fair value  $ 62,093   35,953
Equity securities, available-for-sale, at fair value  11,971  8,876
Other investments  16,458  16,087
Total investments 90,522 60,916
Cash and cash equivalents  273,878  230,214
Accrued interest and dividends receivable  572  375
Premiums and reinsurance receivable  24,600  10,642
Prepaid reinsurance premiums  32,535  9,112
Deferred policy acquisition costs  18,872  10,032
Property and equipment, net  13,163  10,853
Deferred income taxes  5,664  3,848
Other assets  8,548  2,296
     
Total assets  $ 468,354   338,288
     
Liabilities and Stockholders' Equity    
     
Losses and loss adjustment expenses  $ 43,524   41,168
Unearned premiums 188,120 154,249
Advance premiums 9,628 4,029
Assumed reinsurance balances payable 586 1,377
Accrued expenses 9,665 3,041
Dividends payable  26  42
Income taxes payable  1,260  8,813
Long-term debt  40,250
Other liabilities  8,762  4,316
     
Total liabilities 301,821 217,035
     
Stockholders' equity:    
7% Series A cumulative convertible preferred stock (liquidation preference $10.00 per share), no par value, 1,500,000 shares authorized, 149,919 and 241,182 shares issued and outstanding in 2013 and 2012
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, 11,476,835 and 10,877,537 shares issued and outstanding in 2013 and 2012)
Additional paid-in capital 67,292 63,875
Retained income 98,070 55,758
Accumulated other comprehensive income  1,171  1,620
     
Total stockholders' equity 166,533 121,253
     
Total liabilities and stockholders' equity  $ 468,354   338,288
 
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except per share amounts)
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2013 2012 2013 2012
         
Revenue        
         
Gross premiums earned  $ 81,244  53,109  $ 245,743  161,579
Premiums ceded  (28,310)  (22,506)  (74,923)  (53,475)
         
Net premiums earned  52,934  30,603  170,820  108,104
         
Net investment income  380  47  814  871
Policy fee income  815  624  3,013  2,167
Net realized investment gains (losses)  31  (4)  43 26
Gain on bargain purchase 179
Other  532  211  1,146  641
         
Total revenue  54,692  31,481  175,836  111,988
         
Expenses        
         
Losses and loss adjustment expenses  14,489  15,017  47,775  50,382
Policy acquisition and other underwriting expenses  8,887  6,611  22,163  19,690
Interest expense  847  2,379
Other operating expenses  8,825  4,728  22,298  13,401
         
Total expenses  33,048  26,356  94,615  83,473
         
Income before income taxes  21,644  5,125  81,221  28,515
         
Income taxes  8,266  2,299  31,221  11,459
         
Net income  $ 13,378  2,826  $ 50,000  17,056
         
Preferred stock dividends  (22)  (42)  (88)  (286)
         
Income available to common stockholders  $ 13,356  2,784  $ 49,912  16,770
         
Basic earnings per common share  $ 1.17  0.30  $ 4.46  2.08
         
Diluted earnings per common share  $ 1.13  0.27  $ 4.32  1.79
         
Dividends per common share  $ 0.22  0.20  $ 0.68  0.55
CONTACT: Company Contact:
         Kevin Mitchell, Vice President of Investor Relations
         HCI Group, Inc.
         Tel 813-405-3603
         kmitchell@hcigroup.com
         
         Investor Relations Contact:
         Matt Glover or Michael Koehler
         Liolios Group, Inc.
         Tel 949-574-3860
         hci@liolios.com
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