×

HCI Group Reports Fourth Quarter and Full Year 2014 Results

TAMPA, Fla., March 5, 2015 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI) reported results today for the fourth quarter and year ended December 31, 2014.

Fourth Quarter 2014 - Financial Results

Income available to common stockholders in the fourth quarter of 2014 totaled $14.6 million or $1.30 diluted earnings per common share compared with $15.5 million or $1.31 diluted earnings per common share in the fourth quarter of 2013.

Gross premiums earned during the quarter ended December 31, 2014 was $91.4 million, consistent with $91.4 million during the comparable quarter in 2013.

Net premiums earned (defined as gross premiums earned less premiums ceded to reinsurance companies) in the fourth quarter of 2014 decreased 2.6% to $61.8 million from $63.4 million in the same period in 2013. Premiums ceded in the fourth quarter of 2014 were 32.4% of the company's gross premiums earned, compared with 30.6% during the same period in 2013.

Losses and loss adjustment expenses during the fourth quarter of 2014 were $20.5 million compared with $17.3 million in the same period in 2013. The increase was primarily attributable to loss development during the fourth quarter of 2014.

Salaries and wages during the fourth quarter of 2014 were $3.9 million compared with $4.9 million in the same period in 2013. The decrease in 2014 is primarily attributable to lower bonus costs in the fourth quarter of 2014 as compared with the fourth quarter of 2013.

Other operating expenses, which include a variety of general and administrative expenses, totaled $4.9 million in the fourth quarter of 2014 compared with $7.1 million in the fourth quarter of 2013.

Interest expense from the company's senior notes issued in 2013 totaled $2.6 million in the fourth quarter of 2014 compared with $1.2 million in the fourth quarter of 2013.

Fourth quarter 2014 - Financial Ratios

The company's loss ratio applicable to the fourth quarter of 2014 (defined as losses and loss adjustment expenses related to net premiums earned) was 33.2% compared with 27.4% in the fourth quarter of 2013.

The expense ratio applicable to the fourth quarter of 2014 (defined as underwriting expenses, salaries and wages, interest and other operating expenses related to net premiums earned) was 33.6% compared with 35.7% 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 66.8% in the fourth quarter of 2014 compared with 63.1% in the same year-ago period.

Full Year 2014 - Financial Results

Income available to common stockholders for 2014 totaled $62.7 million or $5.36 diluted earnings per common share compared with $65.5 million or $5.63 diluted earnings per common share for 2013.

Gross premiums earned in 2014 increased 8.4% to $365.5 million from $337.1 million in 2013. The increase in 2014 was primarily due to premiums of policies assumed from Citizens in November 2013 and December 2014.

Net premiums earned for 2014 increased 7.6% to $252.1 million from $234.2 million in 2013. Premiums ceded for 2014 were 31.0% of the company's gross premiums earned, compared with 30.5% during 2013.

Net investment income in 2014 was $4.8 million, an increase from $1.5 million in 2013. The increase in 2014 is primarily due to an increase in late 2013 in our investments in available-for-sale securities that comprise the majority of our investment portfolio and a change in the mix of our available-for-sale investments during 2014.

Net realized investment gains for the year ended December 31, 2014 were $4.7 million compared with approximately $80,000 in 2013. The increase in 2014 is due to sales of fixed-maturity securities primarily in the third quarter of 2014.

Losses and loss adjustment expenses for 2014 were $79.5 million compared with $65.1 million in 2013. Losses and loss adjustment expenses increased in 2014 primarily due to increased policy exposure from participation in the November 2013 assumption from Citizens and increases in frequency and severity of certain causes of losses.

Policy acquisition and other underwriting expenses for 2014 were $38.0 million compared with $31.6 million for 2013. The increase in 2014 is primarily attributable to commissions and premium taxes related to the policies assumed from Citizens in November 2013 that have renewed and are included in 2014 direct written premiums.

Salaries and wages in 2014 totaled $16.5 million compared with $14.7 million in the same period in 2013. The increase in 2014 is primarily due to a 13% increase in employee headcount at our Tampa, Florida headquarters.

Other operating expenses in 2014 totaled $20.8 million compared with $19.6 million for 2013. The increase in 2014 is primarily due to increases in stock-based compensation and employee benefit expenses.

Interest expense from the company's senior notes issued in 2013 totaled $10.5 million in 2014 compared with $3.6 million for 2013. Interest expense increased in 2014 due to $103.0 million of senior notes issued in December 2013.

Full Year 2014 - Financial Ratios

The company's loss ratio applicable to the year ended December 31, 2014 was 31.5% compared with 27.8% for the year ended December 31, 2013.

The expense ratio applicable to 2014 was 34.0% compared with 29.7% in 2013.

The combined loss and expense ratio to net premiums earned was 65.5% in 2013 compared with 57.5% in 2013.

Management Commentary

"2014 marked another successful year for HCI, highlighted by record gross premium of $365.5 million, an increase of over 8% from 2013," commented Paresh Patel, HCI Group's chairman and chief executive officer. "As we look into 2015 and beyond, we continue to patiently evaluate the marketplace and remain ideally positioned to capitalize on growth opportunities that will drive profitability and ultimately, shareholder value."

Conference Call

HCI management will host a conference call later today (March 5, 2015) to discuss these financial results followed by a question and answer session.

Interested parties can listen to the live presentation, which can be accessed 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: (877) 407-8033
Listen-only international number: (201) 689-8033
Conference ID: 13600979

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 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 April 6, 2015 and via the Investor Information section of the HCI Group website at www.hcigroup.com.

Toll-free replay number: (877) 660-6853
International replay number: (201) 612-7415
Conference ID: 13600979

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 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.

HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)
At December 31, 2014 At December 31, 2013
Assets
Fixed-maturity securities, available for sale, at fair value (amortized cost: $96,163 and $110,738, respectively) $ 97,084 112,151
Equity securities, available for sale, at fair value (cost: $45,387 and $17,248, respectively) 45,550 17,649
Limited partnership investment, at equity 2,550
Investment in joint venture, at equity 4,477
Real estate investments 19,138 16,228
Total investments 168,799 146,028
Cash and cash equivalents 314,716 293,398
Accrued interest and dividends receivable 1,059 1,133
Premiums receivable 15,824 14,674
Prepaid reinsurance premiums 34,096 28,066
Income taxes receivable 2,624
Deferred income taxes, net 2,499
Deferred policy acquisition costs 15,014 14,071
Property and equipment, net 12,292 13,132
Other assets 35,287 15,814
Total assets $ 602,210 526,316
Liabilities and Stockholders' Equity
Losses and loss adjustment expenses $ 48,908 43,686
Unearned premiums 214,071 171,907
Advance premiums 4,380 4,504
Assumed reinsurance balances payable 218 4,660
Accrued expenses 4,826 4,032
Dividends payable 19
Income taxes payable 543
Deferred income taxes, net 2,740
Long-term debt 129,539 126,932
Other liabilities 17,683 6,772
Total liabilities 419,625 365,795
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 December 31, 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, 10,189,128 and 10,939,268 shares issued and outstanding at December 31, 2014 and December 31, 2013, respectively)
Additional paid-in capital 20,465 48,966
Retained income 161,454 110,441
Accumulated other comprehensive income, net of taxes 666 1,114
Total stockholders' equity 182,585 160,521
Total liabilities and stockholders' equity $ 602,210 526,316
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Dollar amounts in thousands, except per share amounts)
Three Months Ended Years Ended
December 31, December 31,
2014 2013 2014 2013
(Unaudited) (Unaudited)
Revenue
Gross premiums earned $ 91,435 91,370 $ 365,488 337,113
Premiums ceded (29,659) (27,942) (113,423) (102,865)
Net premiums earned 61,776 63,428 252,065 234,248
Net investment income 1,028 655 4,781 1,469
Policy fee income 994 85 2,820 3,098
Net realized investment gains 270 37 4,735 80
Other 684 1,047 1,707 2,193
Total revenue 64,752 65,252 266,108 241,088
Expenses
Losses and loss adjustment expenses 20,529 17,348 79,468 65,123
Policy acquisition and other underwriting expenses 9,278 9,456 37,952 31,619
Salaries and wages 3,869 4,871 16,483 14,714
Interest expense 2,644 1,228 10,453 3,607
Other operating expenses 4,938 7,117 20,790 19,572
Total expenses 41,258 40,020 165,146 134,635
Income before income taxes 23,494 25,232 100,962 106,453
Income taxes 8,932 9,670 38,298 40,891
Net income $ 14,562 15,562 $ 62,664 65,562
Preferred stock dividends (16) 4 (104)
Income available to common stockholders $ 14,562 15,546 $ 62,668 65,458
Basic earnings per common share $ 1.43 1.36 $ 5.90 5.82
Diluted earnings per common share $ 1.30 1.31 $ 5.36 5.63
Dividends per common share $ 0.27 0.27 $ 1.10 0.95

CONTACT: Company Contact: Kevin Mitchell, Vice President of Investor Relations HCI Group, Inc. (813) 405-3603 kmitchell@hcigroup.com Investor Relations Contact: Michael Koehler Liolios Group, Inc. (949) 574-3860 hci@liolios.com

Source:HCI Group, Inc.