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| 8-K - FORM 8-K - HCI Group, Inc. | d148132d8k.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
HCI Group Reports Fourth Quarter and Full Year 2015 Results
TAMPA, Fla. – March 3, 2016 – HCI Group, Inc. (NYSE:HCI), a holding company primarily engaged in homeowners insurance, as well as reinsurance, real estate and information technology, reported results for the fourth quarter and full year ended December 31, 2015.
Fourth Quarter 2015—Financial Results
Income available to common stockholders in the fourth quarter of 2015 totaled $11.1 million or $1.05 diluted earnings per common share compared with $14.6 million or $1.30 diluted earnings per common share in the fourth quarter of 2014.
Gross premiums earned in the fourth quarter of 2015 increased 11.5% to $101.9 million from $91.4 million in the same period in 2014. The increase was primarily due to premiums assumed from Citizens Property Insurance Corporation in December 2014 and subsequent renewals.
Premiums ceded in the fourth quarter of 2015 were $40.3 million or 39.6% of gross premiums earned, which increased from $29.7 million or 32.4% of gross premiums earned in the fourth quarter of 2014. The increase as a percentage of gross premiums earned is primarily due to a change in policy mix that occurred in December 2014 with our assumption of wind-only policies as well as an increase in coverage overall.
Net premiums earned (defined as gross premiums earned less premiums ceded to reinsurance companies) in the fourth quarter of 2015 were $61.6 million compared with $61.7 million in the same period in 2014.
Investment income in the fourth quarter of 2015 was $1.2 million compared with $1.4 million in the same period in 2014. Additionally, the company recognized net non-cash charges of $0.8 million in the fourth quarter of 2015 and $0.1 million in the fourth quarter of 2014 due to declines in the fair value of securities determined to be other than temporary.
Losses and loss adjustment expenses during the fourth quarter of 2015 were $21.4 million compared with $20.5 million in the same period in 2014.
Policy acquisition and other underwriting expenses in the fourth quarter of 2015 were $11.1 million compared with $9.3 million in the comparable period in 2014. The increase was primarily attributable to commissions and premium taxes related to the policies assumed in December 2014 from Citizens.
Salaries and wages during the fourth quarter of 2015 were $5.0 million compared with $3.9 million in the same period in 2014. The increase was attributable to an increase in employee headcount as well as merit increases during 2015.
Other operating expenses, which include a variety of general and administrative expenses, totaled $5.6 million in the fourth quarter of 2015 compared with $4.9 million in the fourth quarter of 2014. The increase was driven by an increase in professional fees.
Fourth Quarter 2015—Financial Ratios
The company’s loss ratio for the fourth quarter of 2015 (defined as losses and loss adjustment expenses related to net premiums earned) was 34.8% compared with 33.2% for the fourth quarter of 2014.
The expense ratio for the fourth quarter of 2015 (defined as underwriting expenses, salaries and wages, interest and other operating expenses related to net premiums earned) was 39.5% compared with 33.6% for the same prior year period.
Expressed as a total of all expenses related to net premiums earned, the combined loss and expense ratio was 74.3% for the fourth quarter of 2015 compared with 66.8% for the same year-ago period.
Full Year 2015—Financial Results
Income available to common stockholders for 2015 totaled $65.9 million or $5.90 diluted earnings per common share compared with $62.7 million or $5.36 diluted earnings per common share for 2014.
Gross premiums earned in 2015 increased 15.8% to $423.1 million from $365.5 million in 2014. The increase was primarily due to premiums assumed from Citizens in December 2014.
Premiums ceded for 2015 were $140.6 million or 33.2% of gross premiums earned compared with $113.4 million or 31.0% of gross premiums earned for 2014.
Net premiums earned for 2015 increased 12.1% to $282.5 million from $252.1 million in 2014.
Investment income during 2015 totaled $3.4 million compared with $9.6 million in 2014 which included $4.7 million of net realized gains from investment sales. The decline was primarily due to net losses related to the company’s limited partnership investments. Additionally, the company recognized net non-cash charges of $4.7 million during 2015 and $0.1 million during 2014 due to declines in the fair value of securities determined to be other than temporary.
Losses and loss adjustment expenses for 2015 were $87.2 million compared with $79.5 million in 2014.
The increase was primarily attributable to an increase in the number of claims reported in 2015 and subsequent development.
Policy acquisition and other underwriting expenses for 2015 were $42.0 million compared with $38.0 million for 2014.
Salaries and wages in 2015 totaled $20.1 million compared with $16.5 million in the same period in 2014. The increase in 2015 is attributable to a ten percent increase in employee headcount as well as merit increases in 2015.
Other operating expenses in 2015 totaled $19.7 million compared with $20.8 million for 2014.
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Full Year 2015—Financial Ratios
The loss ratio for 2015 was 30.9% compared with 31.5% for 2014. Losses on our wind-only policies, which we assumed from Citizens in December 2014, were minimal. This benefit more than offset the development related to losses on our multi-peril policies.
The expense ratio for 2015 was 32.7% compared with 34.0% for 2014.
The combined loss and expense ratio was 63.6% for 2015 compared with 65.5% for 2014.
Management Commentary
“2015 was a solid year for HCI with record earnings per share and our eighth consecutive year of profitability,” said Paresh Patel, HCI Group’s chairman and chief executive officer. “We are particularly pleased with these results as the environment in which we and other insurance companies operate has become more challenging.”
Conference Call
HCI Group will hold a conference call later today, March 3, 2016, to discuss these financial results. Chairman and chief executive officer, Paresh Patel, and chief financial officer, Richard Allen, will host the call starting at 4:45 p.m. Eastern time. A question and answer session will follow management’s presentation.
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: (877) 407-8033
Listen-only international number: (201) 689-8033
Conference ID: 13630109
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 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 April 3, 2016.
Toll-free replay number: (877) 660-6853
International replay number: (201) 612-7415
Conference ID: 13630109
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.
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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 growth prospects and opportunities to add value will arise or that the company will capitalize on any such prospects or opportunities that do 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
-Tables to Follow-
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HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)
| At December 31, 2015 |
At December 31, 2014 |
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| Assets | ||||||||
| Fixed-maturity securities, available for sale, at fair value |
$ | 125,009 | 97,084 | |||||
| Equity securities, available for sale, at fair value |
48,237 | 45,550 | ||||||
| Limited partnership investments, at equity |
23,930 | 2,550 | ||||||
| Investment in unconsolidated joint venture, at equity |
4,787 | 4,477 | ||||||
| Real estate investments (inclusive of $2,906 and $0 of consolidated variable interest entities, respectively) |
30,954 | 19,138 | ||||||
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| Total investments |
232,917 | 168,799 | ||||||
| Cash and cash equivalents (inclusive of $57 and $0 of consolidated variable interest entities, respectively) |
267,738 | 314,416 | ||||||
| Accrued interest and dividends receivable |
1,390 | 1,059 | ||||||
| Premiums receivable |
19,631 | 15,824 | ||||||
| Prepaid reinsurance premiums |
40,747 | 34,096 | ||||||
| Income taxes receivable |
1,858 | 2,624 | ||||||
| Deferred income taxes, net |
3,189 | 2,499 | ||||||
| Deferred policy acquisition costs |
18,602 | 15,014 | ||||||
| Property and equipment, net |
11,786 | 12,292 | ||||||
| Other assets |
39,128 | 31,934 | ||||||
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| Total assets |
$ | 636,986 | 598,557 | |||||
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| Liabilities and Stockholders’ Equity | ||||||||
| Losses and loss adjustment expenses |
$ | 51,690 | 48,908 | |||||
| Unearned premiums |
187,290 | 214,071 | ||||||
| Advance premiums |
4,983 | 4,380 | ||||||
| Assumed reinsurance balances payable |
1,084 | 218 | ||||||
| Accrued expenses (inclusive of $21 and $0 of consolidated variable interest entities, respectively) |
6,316 | 4,826 | ||||||
| Long-term debt |
129,429 | 125,886 | ||||||
| Other liabilities (inclusive of $1,108 and $0 of consolidated variable interest entities, respectively) |
18,472 | 17,683 | ||||||
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| Total liabilities |
399,264 | 415,972 | ||||||
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| Stockholders’ equity: |
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| 7% Series A cumulative convertible preferred stock (no par value, 1,500,000 shares authorized, no shares issued and outstanding) |
— | — | ||||||
| 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, 10,292,256 and 10,189,128 shares issued and outstanding in 2015 and 2014, respectively) |
— | — | ||||||
| Additional paid-in capital |
23,879 | 20,465 | ||||||
| Retained income |
215,634 | 161,454 | ||||||
| Accumulated other comprehensive (loss) income, net of taxes |
(1,791 | ) | 666 | |||||
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| Total stockholders’ equity |
237,722 | 182,585 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 636,986 | 598,557 | |||||
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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, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| (Unaudited) | ||||||||||||||||
| Revenue |
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| Gross premiums earned |
$ | 101,946 | 91,435 | $ | 423,120 | 365,488 | ||||||||||
| Premiums ceded |
(40,320 | ) | (29,659 | ) | (140,614 | ) | (113,423 | ) | ||||||||
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| Net premiums earned |
61,626 | 61,776 | 282,506 | 252,065 | ||||||||||||
| Net investment income |
1,293 | 1,135 | 3,978 | 4,888 | ||||||||||||
| Net realized investment (losses) gains |
(45 | ) | 270 | (608 | ) | 4,735 | ||||||||||
| Net other-than-temporary impairment losses recognized in income: |
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| Total other-than-temporary impairment losses |
(810 | ) | (107 | ) | (5,275 | ) | (107 | ) | ||||||||
| Portion of loss recognized in other comprehensive income, before taxes |
(2 | ) | — | 594 | — | |||||||||||
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| Net other-than-temporary impairment losses |
(812 | ) | (107 | ) | (4,681 | ) | (107 | ) | ||||||||
| Policy fee income |
1,019 | 994 | 3,496 | 2,820 | ||||||||||||
| Other |
331 | 684 | 1,261 | 1,707 | ||||||||||||
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| Total revenue |
63,412 | 64,752 | 285,952 | 266,108 | ||||||||||||
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| Expenses |
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| Losses and loss adjustment expenses |
21,420 | 20,529 | 87,224 | 79,468 | ||||||||||||
| Policy acquisition and other underwriting expenses |
11,067 | 9,278 | 41,984 | 37,952 | ||||||||||||
| Salaries and wages |
4,966 | 3,869 | 20,140 | 16,483 | ||||||||||||
| Interest expense |
2,716 | 2,644 | 10,754 | 10,453 | ||||||||||||
| Other operating expenses |
5,618 | 4,938 | 19,658 | 20,790 | ||||||||||||
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| Total expenses |
45,787 | 41,258 | 179,760 | 165,146 | ||||||||||||
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| Income before income taxes |
17,625 | 23,494 | 106,192 | 100,962 | ||||||||||||
| Income taxes |
6,535 | 8,932 | 40,331 | 38,298 | ||||||||||||
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| Net income |
$ | 11,090 | 14,562 | $ | 65,861 | 62,664 | ||||||||||
| Preferred stock dividends |
— | — | — | 4 | ||||||||||||
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| Income available to common stockholders |
$ | 11,090 | 14,562 | $ | 65,861 | 62,668 | ||||||||||
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| Basic earnings per common share |
$ | 1.12 | 1.43 | $ | 6.51 | 5.90 | ||||||||||
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| Diluted earnings per common share |
$ | 1.05 | 1.30 | $ | 5.90 | 5.36 | ||||||||||
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| Dividends per common share |
$ | 0.30 | 0.27 | $ | 1.20 | 1.10 | ||||||||||
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