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| 8-K - FORM 8K - HCI Group, Inc. | d686029d8k.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
HCI Group Reports Fourth Quarter and Full Year 2013 Results
TAMPA, Fla. – March 4, 2014 – HCI Group, Inc. (NYSE:HCI) reported results today for the fourth quarter and year ended December 31, 2013.
Fourth Quarter 2013 - Financial Results
Income available to common stockholders in the fourth quarter of 2013 totaled $15.5 million or $1.31 diluted earnings per common share, up 18% and 10% respectively, compared with $13.1 million or $1.19 diluted earnings per common share in the fourth quarter of 2012.
Gross premiums earned in the fourth quarter of 2013 increased 26.9% to $91.4 million from $72.0 million in the same period in 2012. The increase was primarily due to policies assumed from Citizens Property Insurance Corporation in November 2013 combined with renewal premiums from policies assumed from Citizens in November 2012.
Net premiums earned (defined as gross premiums earned less premiums ceded to reinsurance companies) in the fourth quarter of 2013 increased 28.0% to $63.4 million from $49.6 million in the same period in 2012. Premiums ceded in the fourth quarter of 2013 were 30.6% of the company’s gross premiums earned, compared with 31.2% during the same period in 2012.
Net investment income in the fourth quarter of 2013 was $655,000 compared with $109,000 in the same period in 2012.
Losses and loss adjustment expenses during the fourth quarter of 2013 were $17.3 million compared with $15.9 million in the same period in 2012.
Policy acquisition and other underwriting expenses in the fourth quarter of 2013 were $9.5 million compared with $6.2 million in the comparable period in 2012. The increase was primarily attributable to commissions and premium taxes related to the increase in policy renewals in 2013.
Other operating expenses, which include a variety of general and administrative expenses, totaled $12.0 million in the fourth quarter of 2013 compared with $7.7 million in the fourth 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 2013 totaled $1.2 million in the fourth quarter of 2013.
Fourth quarter 2013 - Financial Ratios
The company’s loss ratio applicable to the fourth quarter of 2013 (defined as losses and loss adjustment expenses related to net premiums earned) was 27.4% compared with 32.1% in the fourth quarter of 2012. The loss ratio was positively impacted by a significant increase in premiums earned during the fourth quarter of 2013 as compared with the fourth quarter of 2012.
The expense ratio applicable to the fourth quarter of 2013 (defined as underwriting expenses, interest and other operating expenses related to net premiums earned) was 35.7% compared with 28.4% in the same prior year period.
Expressed as a total of all expenses related to net premiums earned, the combined loss and expense ratio to net premiums earned was 63.1% in the fourth quarter of 2013 compared with 60.6% in the same year-ago period.
Full Year 2013 - Financial Results
Income available to common stockholders for 2013 totaled $65.5 million or $5.63 diluted earnings per common share, compared with $29.8 million or $3.02 diluted earnings per common share for 2012.
Gross premiums earned in 2013 increased 44.3% to $337.1 million from $233.6 million in 2012. The increase was primarily due to renewal premiums of policies assumed from Citizens in November 2012 combined with premiums related to policies assumed from Citizens in November 2013.
Net premiums earned for 2013 increased 48.6% to $234.2 million from $157.7 million in 2012. Premiums ceded for 2013 were 30.5% of the company’s gross premiums earned, compared with 32.5% during 2012.
Net investment income in 2013 was $1.5 million, an increase from $980,000 in 2012.
Losses and loss adjustment expenses for 2013 were $65.1 million compared with $66.3 million in 2012. Loss and loss adjustment expenses in 2012 included approximately $3.5 million related to claims from Tropical Storms Debby and Isaac.
Policy acquisition and other underwriting expenses for 2013 were $31.6 million compared with $25.9 million for 2012. The 2012 expenses included a one-time charge of $1.2 million resulting from a change in accounting standards with respect to deferred acquisition costs. Other operating expenses in 2013 totaled $34.3 million compared with $21.1 million for 2012.
Interest expense from the company’s senior notes issued in 2013 totaled $3.6 million for 2013.
Full Year 2013 - Financial Ratios
The company’s loss ratio applicable to the year ended December 31, 2013 was 27.8% compared with 42.1% for the year ended December 31, 2012.
The expense ratio applicable to 2013 was 29.7% compared with 29.9% in 2012.
The combined loss and expense ratio to net premiums earned was 57.5% in 2013 compared with 72.0% in 2012.
Management Commentary
“2013 marked another record year for HCI Group,” said Paresh Patel, the company’s chairman and chief executive officer. “These results were driven by a 44% increase in gross premiums, coupled with our strong combined ratio during 2013. Our strong balance sheet with more than $293 million in cash gives us the financial flexibility to take advantage of accretive growth opportunities, while remaining focused on managing risk, costs and maintaining diligent underwriting standards.”
Conference Call
HCI Group will hold a conference call later today (March 4, 2014) 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) 407-8033
International number: (201) 689-8033
Investors or analysts that wish to participate in the Q&A portion of the call should contact Kevin Mitchell 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 March 11, 2014.
Toll-free replay number: (877) 660-6853
International replay number: (201) 612-7415
Conference ID: 13576705
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 accretive growth opportunities will 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.
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
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except share amounts)
| At December 31, 2013 | At December 31, 2012 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Fixed-maturity securities, available for sale, at fair value (amortized cost: $110,738 and $33,436, respectively) |
$ | 112,151 | 35,953 | |||||
| Equity securities, available for sale, at fair value (cost: $17,248 and $8,756, respectively) |
17,649 | 8,876 | ||||||
| Other investments |
16,228 | 16,087 | ||||||
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| Total investments |
146,028 | 60,916 | ||||||
| Cash and cash equivalents |
293,398 | 230,214 | ||||||
| Accrued interest and dividends receivable |
1,133 | 375 | ||||||
| Premiums receivable |
14,674 | 10,642 | ||||||
| Prepaid reinsurance premiums |
28,066 | 9,112 | ||||||
| Deferred policy acquisition costs |
14,071 | 10,032 | ||||||
| Property and equipment, net |
13,132 | 10,853 | ||||||
| Deferred income taxes, net |
— | 3,848 | ||||||
| Other assets |
15,814 | 2,296 | ||||||
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| Total assets |
$ | 526,316 | 338,288 | |||||
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| Liabilities and Stockholders’ Equity | ||||||||
| Losses and loss adjustment expenses |
$ | 43,686 | 41,168 | |||||
| Unearned premiums |
171,907 | 154,249 | ||||||
| Advance premiums |
4,504 | 4,029 | ||||||
| Assumed reinsurance balances payable |
4,660 | 1,377 | ||||||
| Accrued expenses |
4,032 | 3,041 | ||||||
| Dividends payable |
19 | 42 | ||||||
| Income taxes payable |
543 | 8,813 | ||||||
| Deferred income taxes, net |
2,740 | — | ||||||
| Long-term debt |
126,932 | — | ||||||
| Other liabilities |
6,772 | 4,316 | ||||||
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| Total liabilities |
365,795 | 217,035 | ||||||
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| Stockholders’ equity: |
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| 7% Series A cumulative convertible preferred stock (liquidation preference $10.00 per share), no par value, 1,500,000 shares authorized, 110,684 and 241,182 shares issued and outstanding in 2013 and 2012, respectively |
— | — | ||||||
| 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, 10,939,268 and 10,877,537 shares issued and outstanding in 2013 and 2012, respectively) |
— | — | ||||||
| Additional paid-in capital |
48,966 | 63,875 | ||||||
| Retained income |
110,441 | 55,758 | ||||||
| Accumulated other comprehensive income, net of taxes |
1,114 | 1,620 | ||||||
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| Total stockholders’ equity |
160,521 | 121,253 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 526,316 | 338,288 | |||||
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HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Amounts in thousands, except per share amounts)
| Three Months Ended | Years Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenue |
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| Gross premiums earned |
$ | 91,370 | 72,028 | $ | 337,113 | 233,607 | ||||||||||
| Premiums ceded |
(27,942 | ) | (22,464 | ) | (102,865 | ) | (75,939 | ) | ||||||||
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| Net premiums earned |
63,428 | 49,564 | 234,248 | 157,668 | ||||||||||||
| Net investment income |
655 | 109 | 1,469 | 980 | ||||||||||||
| Policy fee income |
85 | 371 | 3,098 | 2,538 | ||||||||||||
| Net realized investment gains |
37 | 250 | 80 | 276 | ||||||||||||
| Gain on bargain purchase |
— | — | — | 179 | ||||||||||||
| Other |
1,047 | 783 | 2,193 | 1,424 | ||||||||||||
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| Total revenue |
65,252 | 51,077 | 241,088 | 163,065 | ||||||||||||
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| Expenses |
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| Losses and loss adjustment expenses |
17,348 | 15,928 | 65,123 | 66,310 | ||||||||||||
| Policy acquisition and other underwriting |
9,456 | 6,240 | 31,619 | 25,930 | ||||||||||||
| Interest expense |
1,228 | — | 3,607 | — | ||||||||||||
| Goodwill impairment loss |
— | 161 | — | 161 | ||||||||||||
| Other operating expenses |
11,988 | 7,683 | 34,286 | 21,084 | ||||||||||||
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| Total expenses |
40,020 | 30,012 | 134,635 | 113,485 | ||||||||||||
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| Income before income taxes |
25,232 | 21,065 | 106,453 | 49,580 | ||||||||||||
| Income tax expense |
9,670 | 7,964 | 40,891 | 19,423 | ||||||||||||
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| Net income |
$ | 15,562 | 13,101 | $ | 65,562 | 30,157 | ||||||||||
| Preferred stock dividends |
(16 | ) | (36 | ) | (104 | ) | (322 | ) | ||||||||
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| Income available to common stockholders |
$ | 15,546 | 13,065 | $ | 65,458 | 29,835 | ||||||||||
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| Basic earnings per common share |
$ | 1.36 | 1.27 | $ | 5.82 | 3.45 | ||||||||||
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| Diluted earnings per common share |
$ | 1.31 | 1.19 | $ | 5.63 | 3.02 | ||||||||||
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| Dividends per common share |
$ | 0.27 | 0.33 | $ | 0.95 | 0.88 | ||||||||||
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