HCI Group Reports Second Quarter 2022 Results
Gross Premiums Earned Grew 30%
Implemented Rate Increases to Offset Inflation
Management Commentary
“Inflation accelerated in the quarter which led to an increase in our gross loss ratio. We responded swiftly, increasing rates 10% at Homeowners Choice and 12% at TypTap effective August 2022,” said
“We remain optimistic about the future. In May, we raised over
Second Quarter 2022 Commentary
Consolidated gross written premiums of
Consolidated gross premiums earned of
Premiums ceded for reinsurance of
Net investment income of
Net realized and unrealized investment losses were
Losses and loss adjustment expenses of
Policy acquisition and other underwriting expenses of
General and administrative expenses of
Year-to-Date 2022 Results
For the six months ended
Consolidated gross written premiums of
Consolidated gross premiums earned of
Premiums ceded for reinsurance of
Net realized and unrealized investment losses were
Losses and loss adjustment expenses of
Policy acquisition and other underwriting expenses of
General and administrative expenses of
Conference Call
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: 781380
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
Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 46129
About
The company's common shares trade on the
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
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- Tables to follow -
Selected Financial Metrics
(Dollar amounts in thousands, except per share amounts)
| Q2 2022 | Q1 2022 | FY 2021 | ||||||||||
| (Unaudited) | (Unaudited) | |||||||||||
| Insurance Operations | ||||||||||||
| Gross Written Premiums: | ||||||||||||
| Homeowners Choice | $ | 113,139 | $ | 91,141 | $ | 426,910 | ||||||
| 73,013 | 86,153 | 247,479 | ||||||||||
| Total Gross Written Premiums | 186,152 | 177,294 | 674,389 | |||||||||
| Gross Premiums Earned: | ||||||||||||
| Homeowners Choice | 113,681 | 118,303 | 401,137 | |||||||||
| 67,443 | 60,622 | 175,907 | ||||||||||
| Total Gross Premiums Earned | 181,124 | 178,925 | 577,044 | |||||||||
| Gross Premiums Earned Loss Ratio | 47.9 | % | 40.6 | % | 39.4 | % | ||||||
| Per Share Metrics | ||||||||||||
| GAAP Diluted EPS | $ | (1.04 | ) | $ | 0.09 | $ | 0.21 | |||||
| Non-GAAP Adjusted Diluted EPS | $ | (0.71 | ) | $ | 0.34 | $ | 0.10 | |||||
| Dividends per share | $ | 0.40 | $ | 0.40 | $ | 1.60 | ||||||
| Book value per share at the end of period | $ | 26.39 | $ | 31.66 | $ | 31.92 | ||||||
| Shares outstanding at the end of period | 9,047,972 | 10,125,927 | 10,131,399 | |||||||||
Consolidated Balance Sheets
(Dollar amounts in thousands)
| (Unaudited) | ||||||||
| Assets | ||||||||
| Fixed-maturity securities, available for sale, at fair value (amortized cost: respectively and allowance for credit losses: |
$ | 398,571 | $ | 42,583 | ||||
| Equity securities, at fair value (cost: |
35,719 | 51,740 | ||||||
| Limited partnership investments | 26,695 | 28,133 | ||||||
| Investment in unconsolidated joint venture, at equity | 858 | 363 | ||||||
| Real estate investments | 72,723 | 73,896 | ||||||
| Total investments | 534,566 | 196,715 | ||||||
| Cash and cash equivalents | 360,488 | 628,943 | ||||||
| Restricted cash | 2,600 | 2,400 | ||||||
| Accrued interest and dividends receivable | 1,421 | 353 | ||||||
| Income taxes receivable | 1,789 | 4,084 | ||||||
| Premiums receivable, net (allowance: |
52,302 | 68,157 | ||||||
| Prepaid reinsurance premiums | 81,023 | 26,355 | ||||||
| Reinsurance recoverable, net of allowance for credit losses: | ||||||||
| Paid losses and loss adjustment expenses (allowance: |
11,134 | 11,985 | ||||||
| Unpaid losses and loss adjustment expenses (allowance: |
42,348 | 64,665 | ||||||
| Deferred policy acquisition costs | 48,305 | 57,695 | ||||||
| Property and equipment, net | 17,244 | 14,232 | ||||||
| Right-of-use-assets - operating leases | 1,861 | 2,204 | ||||||
| Intangible assets, net | 14,358 | 10,636 | ||||||
| Funds withheld for assumed business | 82,468 | 73,716 | ||||||
| Other assets | 28,796 | 14,717 | ||||||
| Total assets | $ | 1,280,703 | $ | 1,176,857 | ||||
| Liabilities and Equity | ||||||||
| Losses and loss adjustment expenses | $ | 238,824 | $ | 237,165 | ||||
| Unearned premiums | 370,140 | 366,744 | ||||||
| Advance premiums | 25,428 | 13,771 | ||||||
| Reinsurance payable on paid losses and loss adjustment expenses | 4,302 | 4,017 | ||||||
| Ceded reinsurance premiums payable | 24,641 | 19,318 | ||||||
| Accrued expenses | 17,093 | 15,453 | ||||||
| Deferred income taxes, net | 6,168 | 11,739 | ||||||
| Revolving credit facility | — | 15,000 | ||||||
| Long-term debt | 211,648 | 45,504 | ||||||
| Lease liabilities - operating leases | 1,824 | 2,203 | ||||||
| Other liabilities | 48,737 | 31,485 | ||||||
| Total liabilities | 948,805 | 762,399 | ||||||
| Commitments and contingencies | ||||||||
| Redeemable noncontrolling interest | 91,963 | 89,955 | ||||||
| Equity: | ||||||||
| Common stock, (no par value, 40,000,000 shares authorized, 9,047,972 and 10,131,399 shares issued and outstanding at |
— | — | ||||||
| Additional paid-in capital | 12,887 | 76,077 | ||||||
| Retained income | 229,621 | 246,790 | ||||||
| Accumulated other comprehensive (loss) income, net of taxes | (3,760 | ) | 498 | |||||
| Total stockholders' equity | 238,748 | 323,365 | ||||||
| Noncontrolling interests | 1,187 | 1,138 | ||||||
| Total equity | 239,935 | 324,503 | ||||||
| Total liabilities, redeemable noncontrolling interest, and equity | $ | 1,280,703 | $ | 1,176,857 | ||||
Consolidated Statements of Income
(Unaudited)
(Dollar amounts in thousands, except per share amounts)
| Three Months Ended | Six Months Ended | ||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Revenue | |||||||||||||||||
| Gross premiums earned | $ | 181,124 | $ | 139,440 | $ | 360,049 | $ | 270,382 | |||||||||
| Premiums ceded | (56,205 | ) | (46,436 | ) | (109,367 | ) | (89,535 | ) | |||||||||
| Net premiums earned | 124,919 | 93,004 | 250,682 | 180,847 | |||||||||||||
| Net investment income | 3,684 | 2,635 | 6,552 | 7,229 | |||||||||||||
| Net realized investment (losses) gains | (6 | ) | 2,607 | (320 | ) | 3,720 | |||||||||||
| Net unrealized investment (losses) gains | (4,234 | ) | 1,489 | (7,810 | ) | 1,220 | |||||||||||
| Policy fee income | 1,052 | 992 | 2,109 | 1,962 | |||||||||||||
| Other | 511 | 777 | 1,753 | 1,400 | |||||||||||||
| Total revenue | 125,926 | 101,504 | 252,966 | 196,378 | |||||||||||||
| Expenses | |||||||||||||||||
| Losses and loss adjustment expenses | 86,830 | 55,917 | 159,534 | 101,668 | |||||||||||||
| Policy acquisition and other underwriting expenses | 26,863 | 23,169 | 56,271 | 46,234 | |||||||||||||
| General and administrative personnel expenses | 15,301 | 10,546 | 29,335 | 20,196 | |||||||||||||
| Interest expense | 1,515 | 2,000 | 2,116 | 4,079 | |||||||||||||
| Other operating expenses | 6,977 | 4,775 | 13,269 | 9,002 | |||||||||||||
| Total expenses | 137,486 | 96,407 | 260,525 | 181,179 | |||||||||||||
| (Loss) income before income taxes | (11,560 | ) | 5,097 | (7,559 | ) | 15,199 | |||||||||||
| Income tax (benefit) expense | (3,018 | ) | 1,267 | (1,808 | ) | 4,524 | |||||||||||
| Net (loss) income | $ | (8,542 | ) | $ | 3,830 | $ | (5,751 | ) | $ | 10,675 | |||||||
| Net (loss) income attributable to redeemable noncontrolling interest | (2,268 | ) | (2,179 | ) | (4,516 | ) | (2,973 | ) | |||||||||
| Net loss attributable to noncontrolling interests | 829 | 266 | 1,189 | 363 | |||||||||||||
| Net income after noncontrolling interests | $ | (9,981 | ) | $ | 1,917 | $ | (9,078 | ) | $ | 8,065 | |||||||
| Basic (loss) earnings per share | $ | (1.04 | ) | $ | 0.25 | $ | (0.92 | ) | $ | 1.02 | |||||||
| Diluted (loss) earnings per share | $ | (1.04 | ) | $ | 0.24 | $ | (0.92 | ) | $ | 0.98 | |||||||
| Dividends per share | $ | 0.40 | $ | 0.40 | $ | 0.80 | $ | 0.80 | |||||||||
(Amounts in thousands, except per share amounts)
A summary of the numerator and denominator of basic and diluted earnings (loss) per common share calculated in accordance with GAAP is presented below.
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| GAAP | ||||||||||||||||||||||
| Loss | Shares (a) | Per Share | Loss | Shares (a) | Per Share | |||||||||||||||||
| (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||||||
| Net loss | $ | (8,542 | ) | $ | (5,751 | ) | ||||||||||||||||
| Less: Net income attributable to redeemable noncontrolling interest | (2,268 | ) | (4,516 | ) | ||||||||||||||||||
| Less: |
829 | 1,189 | ||||||||||||||||||||
| Net loss attributable to HCI | (9,981 | ) | (9,078 | ) | ||||||||||||||||||
| Less: Loss attributable to participating securities | 635 | 590 | ||||||||||||||||||||
| Basic Loss Per Share: | ||||||||||||||||||||||
| Loss allocated to common stockholders | (9,346 | ) | 9,022 | $ | (1.04 | ) | (8,488 | ) | 9,249 | $ | (0.92 | ) | ||||||||||
| Effect of |
||||||||||||||||||||||
| Stock options | — | — | — | — | ||||||||||||||||||
| Convertible senior notes | — | — | — | — | ||||||||||||||||||
| Warrants | — | — | — | — | ||||||||||||||||||
| Diluted Loss Per Share: | ||||||||||||||||||||||
| Loss available to common stockholders and assumed conversions | $ | (9,346 | ) | 9,022 | $ | (1.04 | ) | $ | (8,488 | ) | 9,249 | $ | (0.92 | ) | ||||||||
| (a) Shares in thousands. | ||||||||||||||||||||||
| * For the three and six months ended |
||||||||||||||||||||||
Non-GAAP Financial Measures
Adjusted net income (loss) is a Non-GAAP financial measure that removes from net income (loss) 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.
Reconciliation of GAAP Net Loss to Non-GAAP Adjusted Net (Loss) Income
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| GAAP Net loss | $ | (8,542 | ) | $ | (5,751 | ) | ||||||||||||||
| Net unrealized investment losses | $ | 4,234 | $ | 7,810 | ||||||||||||||||
| Less: Tax effect at 25.345% | $ | (1,073 | ) | $ | (1,979 | ) | ||||||||||||||
| Net adjustment to Net loss | $ | 3,161 | $ | 5,831 | ||||||||||||||||
| Non-GAAP Adjusted Net (loss) income | $ | (5,381 | ) | $ | 80 | |||||||||||||||
(Amounts in thousands, except per share amounts)
A summary of the numerator and denominator of the basic and diluted earnings (loss) per common share calculated with the Non-GAAP financial measure Adjusted net income (loss) is presented below.
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| Non-GAAP | ||||||||||||||||||||||
| Loss | Shares (a) | Per Share | Loss | Shares (a) | Per Share | |||||||||||||||||
| (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||||||
| Adjusted net (loss) income (non-GAAP) | $ | (5,381 | ) | $ | 80 | |||||||||||||||||
| Less: Net income attributable to redeemable noncontrolling interest | (2,268 | ) | (4,516 | ) | ||||||||||||||||||
| Less: |
810 | 1,153 | ||||||||||||||||||||
| Net loss attributable to HCI | (6,839 | ) | (3,283 | ) | ||||||||||||||||||
| Less: Loss attributable to participating securities | 437 | 220 | ||||||||||||||||||||
| Basic Loss Per Share before unrealized gains/losses on equity securities: | ||||||||||||||||||||||
| Loss allocated to common stockholders | (6,402 | ) | 9,022 | $ | (0.71 | ) | (3,063 | ) | 9,249 | $ | (0.33 | ) | ||||||||||
| Effect of |
||||||||||||||||||||||
| Stock options | — | — | — | — | ||||||||||||||||||
| Convertible senior notes | — | — | — | — | ||||||||||||||||||
| Warrants | — | — | — | — | ||||||||||||||||||
| Diluted Loss Per Share before unrealized gains/losses on equity securities: | ||||||||||||||||||||||
| Loss available to common stockholders and assumed conversions | $ | (6,402 | ) | $ | 9,022 | $ | (0.71 | ) | $ | (3,063 | ) | $ | 9,249 | $ | (0.33 | ) | ||||||
| (a) Shares in thousands. | ||||||||||||||||||||||
| * For the three and six months ended |
||||||||||||||||||||||
Reconciliation of GAAP Diluted EPS to Non-GAAP Adjusted Diluted EPS
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| GAAP diluted (Loss) Earnings Per Share | $ | (1.04 | ) | $ | (0.92 | ) | |||||||||||||
| Net unrealized investment losses | $ | 0.46 | $ | 0.84 | |||||||||||||||
| Less: Tax effect at 25.345% | $ | (0.13 | ) | $ | (0.25 | ) | |||||||||||||
| Net adjustment to GAAP diluted EPS | $ | 0.33 | $ | 0.59 | |||||||||||||||
| Non-GAAP Adjusted diluted EPS | $ | (0.71 | ) | $ | (0.33 | ) | |||||||||||||
Source:
ROOT, INC. – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations
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