HCI Group Reports First Quarter 2022 Results

TAMPA, Fla., May 04, 2022 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI), a holding company with operations in homeowners insurance, information technology services, real estate, and reinsurance, reported results for the quarter ended March 31, 2022.

First Quarter 2022 - Financial Results
Net income for the first quarter of 2022 totaled $2.8 million or $0.09 diluted earnings per share compared with net income of $6.8 million or $0.75 diluted earnings per share in the first quarter of 2021. Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the first quarter of 2022 was $5.5 million or $0.34 diluted earnings per share compared with adjusted net income of $7.0 million or $0.77 diluted earnings per share in the first quarter of 2021. 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”).

Consolidated gross written premiums of $177.3 million for the first quarter of 2022 increased 40.9% from $125.8 million in the first quarter of 2021. Homeowners Choice gross written premiums grew from $81.0 million to $91.1 million, and TypTap Insurance Company gross written premiums grew from $44.8 million to $86.2 million.

Consolidated gross premiums earned of $178.9 million for the first quarter of 2022 increased 36.6% from $130.9 million in the first quarter of 2021. Homeowners Choice gross premiums earned grew from $102.1 million to $118.3 million, and TypTap gross premiums earned grew from $28.8 million to $60.6 million.

Premiums ceded for reinsurance for the first quarter of 2022 increased to $53.2 million from $43.1 million in the first quarter of 2021 and represented 29.7% and 32.9%, respectively, of gross premiums earned. The increase in reinsurance costs primarily reflects premium growth at both Homeowners Choice and TypTap.

Net investment income for the first quarter of 2022 was $2.9 million compared with $4.6 million in the first quarter of 2021. The decrease was primarily attributable to a $2.7 million decrease in income from real estate investments primarily due to a gain from a legal settlement in the first quarter of 2021, offset by a $1 million increase in income from limited partnership investments.

Net realized investment losses were $0.3 million in the first quarter of 2022 compared with $1.1 million of net realized investment gains in the first quarter of 2021. Net unrealized investment losses were $3.6 million in the first quarter of 2022 compared with net unrealized investment losses of $0.3 million in the first quarter of 2021.

Losses and loss adjustment expenses for the first quarter of 2022 were $72.7 million compared with $45.8 million in the same period of 2021. The increase was primarily attributable to the company’s growing premium base and weather-related losses in Florida.

Policy acquisition and other underwriting expenses for the first quarter of 2022 were $29.4 million compared with $23.1 million in the same quarter of 2021. The increase primarily relates to premium growth for both Homeowners Choice and TypTap.

General and administrative personnel expenses increased to $14.0 million in the first quarter of 2022 from $9.7 million for the first quarter of 2021 due primarily to higher stock-based compensation expense and an increase in payroll related to growth of the business.

Interest expense for the first quarter of 2022 was $0.6 million compared with $2.1 million in the same period of 2021. The decrease resulted from conversions of our 4.25% convertible senior notes to common stock during the second half of 2021.

Management Commentary
“In the first quarter, results across our geographic footprint again validated the effectiveness of the technology that we’ve built,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “We continue to execute on our nationwide expansion plan and because of the confidence we have in our technology capabilities, we plan to take advantage of potential opportunities in the future.”

Conference Call
HCI Group will hold a conference call tomorrow, May 5, 2022, 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 8:30 a.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: 655834

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 June 4, 2022.

Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 45165

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. 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:Simon RosenbergInvestor Relations
HCI Group, Inc.
Tel (813) 405-5261
srosenberg@hcigroup.com

Investor Relations Contact:Matt GloverGateway Group, Inc.
Tel (949) 574-3860
HCI@gatewayir.com

Media Contact:Catherine AdcockGateway Group, Inc.
Tel (949) 574-6860
catherine@gatewayir.com

- Tables to follow -

HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)


	March 31, 2022			December 31, 2021
	(Unaudited)
Assets
Fixed-maturity securities, available for sale, at fair value (amortized cost: $153,776 and $41,953, respectively and allowance for credit losses: $0 and $0, respectively)	$	150,684		$	42,583
Equity securities, at fair value (cost: $39,316 and $46,276, respectively)		41,204			51,740
Limited partnership investments		28,166			28,133
Investment in unconsolidated joint venture, at equity		350			363
Real estate investments		73,387			73,896
Total investments		293,791			196,715

Cash and cash equivalents		569,040			628,943
Restricted cash		2,400			2,400
Accrued interest and dividends receivable		674			353
Income taxes receivable		—			4,084
Premiums receivable, net (allowance: $2,459 and $1,750, respectively)		39,890			68,157
Prepaid reinsurance premiums		11,561			26,355
Reinsurance recoverable, net of allowance for credit losses:
Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)		14,720			11,985
Unpaid losses and loss adjustment expenses (allowance: $79 and $90, respectively)		54,876			64,665
Deferred policy acquisition costs		53,670			57,695
Property and equipment, net		15,469			14,232
Right-of-use-assets - operating leases		2,673			2,204
Intangible assets, net		15,105			10,636
Funds withheld for assumed business		84,068			73,716
Other assets		17,313			14,717

Total assets	$	1,175,250		$	1,176,857

Liabilities and Equity
Losses and loss adjustment expenses	$	234,792		$	237,165
Unearned premiums		365,112			366,744
Advance premiums		23,898			13,771
Reinsurance payable on paid losses and loss adjustment expenses		6,657			4,017
Ceded reinsurance premiums payable		20,899			19,318
Accrued expenses		16,899			15,453
Income tax payable		3,061			—
Deferred income taxes, net		4,834			11,739
Revolving credit facility		15,000			15,000
Long-term debt		45,295			45,504
Lease liabilities - operating leases		2,662			2,203
Other liabilities		24,418			31,485

Total liabilities		763,527			762,399

Commitments and contingencies
Redeemable noncontrolling interest		89,695			89,955

Equity:
Common stock, (no par value, 40,000,000 shares authorized, 10,125,927 and 10,131,399 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively)		—			—
Additional paid-in capital		79,131			76,077
Retained income		243,647			246,790
Accumulated other comprehensive (loss) income, net of taxes		(2,185	)		498
Total stockholders' equity		320,593			323,365
Noncontrolling interests		1,435			1,138
Total equity		322,028			324,503

Total liabilities, redeemable noncontrolling interest, and equity	$	1,175,250		$	1,176,857

HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(Dollar amounts in thousands, except per share amounts)


	Three Months Ended
	March 31,
	2022			2021
Revenue

Gross premiums earned	$	178,925		$	130,942
Premiums ceded		(53,162	)		(43,099	)

Net premiums earned		125,763			87,843

Net investment income		2,868			4,594
Net realized investment (losses) gains		(314	)		1,113
Net unrealized investment losses		(3,576	)		(269	)
Policy fee income		1,057			970
Other		1,242			623

Total revenue		127,040			94,874

Expenses

Losses and loss adjustment expenses		72,704			45,751
Policy acquisition and other underwriting expenses		29,408			23,065
General and administrative personnel expenses		14,034			9,650
Interest expense		601			2,079
Other operating expenses		6,292			4,227

Total expenses		123,039			84,772

Income before income taxes		4,001			10,102

Income tax expense		1,210			3,257

Net income	$	2,791		$	6,845
Net income attributable to redeemable noncontrolling interest		(2,248	)		(794	)
Net loss attributable to noncontrolling interests		360			97

Net income after noncontrolling interests	$	903		$	6,148

Basic earnings per share	$	0.09		$	0.82

Diluted earnings per share	$	0.09		$	0.75

Dividends per share	$	0.40		$	0.40

HCI GROUP, INC. AND SUBSIDIARIES
(Amounts in thousands, except per share amounts)

A summary of the numerator and denominator of basic and diluted income per common share calculated in accordance with GAAP is presented below.


	Three Months Ended						Three Months Ended
GAAP	March 31, 2022						March 31, 2021
	Income			Shares (a)	Per Share		Income			Shares (a)	Per Share
	(Numerator)			(Denominator)	Amount		(Numerator)			(Denominator)	Amount
Net income	$	2,791					$	6,845
Less: Net income attributable to redeemable noncontrolling interest		(2,248	)					(794	)
Less: TypTap Group's net loss attributable to non-HCI common stockholders and TypTap Group's participating securities		360						97
Net income attributable to HCI		903						6,148
Less: Income attributable to participating securities		(52	)					(18	)
Basic Earnings Per Share:
Income allocated to common stockholders		851		9,479	$	0.09		6,130		7,474	$	0.82

Effect of Dilutive Securities:
Stock options		—		135				—		96
Convertible senior notes*		—		—				1,312		2,288
Warrants		—		153				—		72

Diluted Earnings Per Share:
Income available to common stockholders and assumed conversions	$	851		9,767	$	0.09	$	7,442		9,930	$	0.75

(a) Shares in thousands.
* For the three months ended March 31, 2022, 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 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 (Loss) Income

	Three Months Ended					Three Months Ended
	March 31, 2022					March 31, 2021
GAAP Net income				$	2,791				$	6,845
Net unrealized investment losses	$	3,576				$	269
Less: Tax effect at 25.345% and 24.52182%, respectively	$	(906	)			$	(66	)
Net adjustment to Net income				$	2,670				$	203
Non-GAAP Adjusted Net income				$	5,461				$	7,048

HCI GROUP, INC. AND SUBSIDIARIES
(Amounts in thousands, except per share amounts)

A summary of the numerator and denominator of the basic and diluted income per common share calculated with the Non-GAAP financial measure Adjusted net income is presented below.

	Three Months Ended							Three Months Ended
Non-GAAP	March 31, 2022							March 31, 2021
	Income			Shares (a)		Per Share		Income		Shares (a)		Per Share
	(Numerator)			(Denominator)		Amount		(Numerator)		(Denominator)		Amount
Adjusted net income (non-GAAP)	$	5,461						$	7,048
Less: Net income attributable to redeemable noncontrolling interest		(2,248	)					$	(794
Less: TypTap Group's net loss attributable to non-HCI common stockholders and TypTap Group's participating securities		340							97
Net income attributable to HCI		3,553							6,351
Less: Income attributable to participating securities		(222	)						(31

Basic Earnings Per Share before unrealized gains/losses on equity securities:
Income allocated to common stockholders		3,331			9,479	$	0.35		6,320		7,474	$	0.85

Effect of Dilutive Securities:
Stock options		—			135				—		96
Convertible senior notes*		—			—				1,312		2,288
Warrants		—			153				—		72

Diluted Earnings Per Share before unrealized gains/losses on equity securities:
Income available to common stockholders and assumed conversions	$	3,331		$	9,767	$	0.34	$	7,632	$	9,930	$	0.77

(a) Shares in thousands.
* For the three months ended March 31, 2022, convertible senior notes were excluded due to anti-dilutive effect.

Reconciliation of GAAP Diluted EPS to Non-GAAP Adjusted Diluted EPS


	Three Months Ended					Three Months Ended
	March 31, 2022					March 31, 2021
GAAP diluted Earnings Per Share				$	0.09				$	0.75
Net unrealized investment losses	$	0.37				$	0.03
Less: Tax effect at 25.345% and 24.52182%, respectively	$	(0.12	)			$	(0.01	)
Net adjustment to GAAP diluted EPS				$	0.25				$	0.02
Non-GAAP Adjusted diluted EPS				$	0.34				$	0.77