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HCI Group Reports Second Quarter and Six-Month 2014 Results

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TAMPA, Fla., Aug. 5, 2014 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI) reported results today for the three and six months ended June 30, 2014.

Second Quarter 2014 - Financial Results

Income available to common stockholders in the second quarter of 2014 totaled $16.4 million or $1.39 diluted earnings per common share compared with $16.2 million or $1.40 diluted earnings per common share in the second quarter of 2013.

Gross premiums earned in the second quarter of 2014 increased 11.3% to $91.2 million from $82.0 million in the same period in 2013. The increase was primarily due to policies assumed from Citizens Property Insurance Corporation in November 2013.

Net premiums earned (defined as gross premiums earned less premiums ceded to reinsurance companies) in the second quarter of 2014 increased 9.3% to $62.6 million from $57.3 million in the same period in 2013. Premiums ceded in the second quarter of 2014 were $28.6 million, or 31.3% of the company's gross premiums earned, compared with $24.6 million, or 30.0% of the company's gross premiums earned, during the same period in 2013. Our reinsurance rates are based primarily on policy exposures reflected in gross premiums earned.

Net investment income in the second quarter of 2014 was $1.5 million compared with $295,000 in the same period in 2013. The increase was due to the increase in our investment portfolio, which has grown from $66.5 million at June 30, 2013 to $179.2 million at June 30, 2014.

Net realized investment gains were $1.2 million in the second quarter of 2014 compared to net realized investment losses of $8,000 in the same period in 2013.

Losses and loss adjustment expenses during the second quarter of 2014 were $18.4 million compared with $17.4 million in the same period in 2013.

Policy acquisition and other underwriting expenses in the second quarter of 2014 were $9.6 million compared with $7.3 million in the comparable period in 2013. The increase was primarily attributable to commissions and premium taxes related to an increase in policy renewals resulting from policies assumed from Citizens in 2012 and 2013. Other operating expenses, which include a variety of general and administrative expenses, totaled $9.4 million in the second quarter of 2014 compared with $7.4 million in the second quarter of 2013. The increase was primarily attributable to an additional $2.1 million in compensation and related expenses including approximately $1.5 million of accrued bonuses and stock-based compensation.

Interest expense totaled $2.6 million and $846,000 in the second quarter of 2014 and 2013, respectively. The increase was attributable to a $103 million convertible debt offering completed in December 2013.

Second Quarter 2014 - Financial Ratios

The company's loss ratio applicable to the three months ended June 30, 2014 (defined as losses and loss adjustment expenses related to net premiums earned) was 29.3% compared with 30.4% in the three months ended June 30, 2013.

The expense ratio applicable to the three months ended June 30, 2014 (defined as underwriting expenses, interest and other operating expenses related to net premiums earned) was 34.4% compared with 27.0% for the three months ended June 30, 2013.

Expressed as a total of all expenses in relation to net premiums earned, the combined loss and expense ratio to net premiums earned was 63.7% in the second quarter of 2014 compared with 57.4% for the three months ended June 30, 2013.

Six Months Ended June 30, 2014 - Financial Results

Income available to common stockholders for the six months ended June 30, 2014 totaled $34.1 million or $2.84 diluted earnings per common share, compared with $36.6 million or $3.20 diluted earnings per common share for the six months ended June 30, 2013.

Gross premiums earned for the six months ended June 30, 2014 increased 12.5% to $185.1 million from $164.5 million in the same year-ago period. The increase was primarily due to policies assumed from Citizens Property Insurance Corporation in November 2013.

Net premiums earned for the six months ended June 30, 2014 increased 9.5% to $129.0 million from $117.9 million in the same period in 2013. Premiums ceded for the six months ended June 30, 2014 were $56.1 million, or 30.3% of the company's gross premiums earned, compared with $46.6 million, or 28.3% of the company's gross premiums earned, during the same period in 2013.

Net investment income for the six months ended June 30, 2014 and 2013 was $2.5 million and $434,000, respectively.

Net realized investment gains were $1.2 million for the six months ended June 30, 2014 compared to net realized investment gains of $12,000 in the same period in 2013.

Losses and loss adjustment expenses for the six months ended June 30, 2014 and 2013 were $36.9 million and $33.3 million, respectively.

Policy acquisition and other underwriting expenses for the six months ended June 30, 2014 were $18.7 million compared with $13.3 million for the six months ended June 30, 2013. Other operating expenses totaled $18.9 million for the six months ended June 30, 2014 compared with $13.5 million for the six months ended June 30, 2013.

Interest expense from the company's senior notes issued in 2013 totaled $5.2 million for the six months ended June 30, 2014 compared with $1.5 million for the six months ended June 30, 2013.

Six Months Ended June 30, 2014 - Financial Ratios

The company's loss ratio applicable to the six months ended June 30, 2014 was 28.6% compared with 28.2% in the six months ended June 30, 2013.

The expense ratio applicable to the six months ended June 30, 2014 was 33.2% compared with 24.0% in the same period in 2013.

Expressed as a total of all expenses related to net premiums earned, the combined loss and expense ratio to net premiums earned was 61.8% in the six months ended June 30, 2014 compared with 52.2% in the same period in 2013.

Management Commentary

"The second quarter of 2014 was another successful quarter for HCI Group," said Paresh Patel, the company's chairman and chief executive officer. "Our insurance division continues to generate consistent results as we stay committed to our strict underwriting principles. Our strong balance sheet and solid management team provide great opportunities for growth."

Conference Call

HCI Group will hold a conference call later today (August 5, 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 simulcast 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 September 5, 2014.

Toll-free replay number: (877) 660-6853

International replay number: (201) 612-7415

Conference ID: 13587171

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 and 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 information technology or real estate will enhance growth and profitability prospects. 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
(Dollar amounts in thousands, except share amounts)
At June 30, 2014 At December 31, 2013
(Unaudited)
Assets
Fixed-maturity securities, available for sale, at fair value (amortized cost: $117,944 and $110,738, respectively) $ 122,430 112,151
Equity securities, available for sale, at fair value (cost: $35,791 and $17,248, respectively) 37,812 17,649
Real estate investments 18,938 16,228
Total investments 179,180 146,028
Cash and cash equivalents 302,048 293,398
Accrued interest and dividends receivable 1,263 1,133
Premiums receivable 28,762 14,674
Prepaid reinsurance premiums 33,277 28,066
Deferred policy acquisition costs 20,083 14,071
Property and equipment, net 12,643 13,132
Other assets 22,399 15,814
Total assets $ 599,655 526,316
Liabilities and Stockholders' Equity
Losses and loss adjustment expenses $ 43,044 43,686
Unearned premiums 206,657 171,907
Advance premiums 14,873 4,504
Assumed reinsurance balances payable 316 4,660
Accrued expenses 10,162 4,032
Dividends payable 3,111 19
Income taxes payable 103 543
Deferred income taxes, net 2,951 2,740
Long-term debt 128,205 126,932
Other liabilities 14,140 6,772
Total liabilities 423,562 365,795
Stockholders' equity:
7% Series A cumulative convertible preferred stock (liquidation preference $10.00 per share), no par value, 1,500,000 shares authorized, 0 and 110,684 shares issued and outstanding at June 30, 2014 and December 31, 2013, 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, 10,690,069 and 10,939,268 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively)
Additional paid-in capital 36,511 48,966
Retained income 135,585 110,441
Accumulated other comprehensive income, net of taxes 3,997 1,114
Total stockholders' equity 176,093 160,521
Total liabilities and stockholders' equity $ 599,655 526,316
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(Dollar amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
Revenue
Gross premiums earned $ 91,221 81,952 $ 185,109 164,499
Premiums ceded (28,572) (24,617) (56,080) (46,613)
Net premiums earned 62,649 57,335 129,029 117,886
Net investment income 1,481 295 2,540 434
Policy fee income 638 1,426 895 2,198
Net realized investment gains (losses) 1,167 (8) 1,171 12
Other 349 285 766 614
Total revenue 66,284 59,333 134,401 121,144
Expenses
Losses and loss adjustment expenses 18,383 17,414 36,948 33,286
Policy acquisition and other underwriting expenses 9,559 7,308 18,688 13,276
Interest expense 2,609 846 5,183 1,532
Other operating expenses 9,350 7,358 18,889 13,473
Total expenses 39,901 32,926 79,708 61,567
Income before income taxes 26,383 26,407 54,693 59,577
Income tax expense 9,953 10,172 20,643 22,955
Net income $ 16,430 16,235 $ 34,050 36,622
Preferred stock dividends 1 (32) 4 (66)
Income available to common stockholders $ 16,431 16,203 $ 34,054 36,556
Basic earnings per common share $ 1.53 1.44 $ 3.14 3.31
Diluted earnings per common share $ 1.39 1.40 $ 2.84 3.20
Dividends per common share $ 0.27 0.23 $ 0.55 0.45

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

Source:HCI Group, Inc.