HCI Group Reports Second Quarter 2024 Results

Rhea-AI Summary

HCI Group reported strong Q2 2024 results with pre-tax income of $76 million and net income of $57.1 million. Diluted earnings per share reached $4.24, up from $1.28 in Q2 2023. The company's performance was driven by solid underwriting execution and technology advantages. Key highlights include:

- Gross premiums earned increased to $263.6 million from $181.9 million in Q2 2023
- Gross loss ratio improved to 29.7% from 34.0% in Q2 2023
- Net investment income rose to $16.9 million from $8.8 million in Q2 2023

HCI Group's growth was primarily attributed to expansion in Florida and the assumption of policies from Citizens. The company's CEO, Paresh Patel, emphasized the power of their technology and plans to explore new opportunities in future periods.

Positive

• Pre-tax income increased to $76 million in Q2 2024
• Diluted EPS grew to $4.24 from $1.28 year-over-year
• Gross premiums earned rose to $263.6 million, a 45% increase from Q2 2023
• Gross loss ratio improved to 29.7% from 34.0% in Q2 2023
• Net investment income increased by 92% to $16.9 million

Negative

• Losses and loss adjustment expenses increased to $78.3 million from $61.9 million in Q2 2023
• General and administrative personnel expenses rose to $17.5 million from $14.3 million in Q2 2023

Insights

Financial Analyst

HCI Group's Q2 2024 results demonstrate impressive financial performance, with significant improvements across key metrics. The company reported a $76.0 million pre-tax income and $57.1 million net income, translating to a substantial increase in diluted EPS to $4.24 from $1.28 year-over-year. The gross loss ratio improved to 29.7% from 34.0%, indicating enhanced underwriting efficiency.

Notably, consolidated gross premiums earned surged to $263.6 million, a 44.9% increase from Q2 2023. This growth, coupled with a lower percentage of premiums ceded for reinsurance (29.1% vs 36.5%), suggests improved risk management and potential for higher retained earnings. The significant boost in net investment income to $16.9 million further contributes to the company's strong financial position.

These results underscore HCI Group's effective execution of its growth strategy and technological advantages, positioning the company favorably in the competitive insurance market.

Insurance Industry Expert

HCI Group's Q2 2024 results reveal a remarkable improvement in underwriting performance, particularly in the Florida market. The decline in the gross loss ratio to 29.7% is exceptionally low for the property insurance sector, especially considering Florida's challenging climate risks. This suggests HCI's risk selection and pricing strategies are highly effective.

The company's ability to grow gross premiums by 44.9% while simultaneously reducing the percentage of premiums ceded for reinsurance is a significant achievement. It indicates improved negotiating power with reinsurers and potentially higher profit margins. The mention of "assumption of policies from Citizens" suggests HCI is capitalizing on market opportunities created by the state-backed insurer's depopulation efforts.

The continued decline in claims and litigation frequency in Florida is particularly noteworthy, as it contradicts industry trends of increasing litigation costs. This could be attributed to HCI's technological edge in claims processing and risk assessment, potentially giving them a sustainable competitive advantage in the market.

Tech Industry Analyst

HCI Group's Q2 2024 results highlight the transformative impact of technology in the insurance sector. CEO Paresh Patel's emphasis on the "power of our technology" driving profitability suggests that HCI's proprietary tech solutions are key differentiators in the market. This tech-driven approach appears to be yielding significant benefits in risk assessment, underwriting efficiency and claims management.

The impressive reduction in the gross loss ratio to 29.7% and the decline in claims and litigation frequency indicate that HCI's technology is likely enhancing predictive analytics for risk selection and pricing. Furthermore, the ability to rapidly scale operations, as evidenced by the 44.9% increase in gross premiums earned, suggests robust and scalable tech infrastructure.

Patel's statement about exploring "new ways to exploit our technology and capitalize on new opportunities" hints at potential future innovations. This could involve expanding into new insurance lines, leveraging AI for claims processing, or even licensing their technology to other insurers, opening up new revenue streams beyond traditional insurance operations.

Pre-Tax Income of $76 million
Diluted EPS of $4.24
Gross Loss Ratio of 29.7%

TAMPA, Fla., Aug. 08, 2024 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI), a holding company with operations in homeowners insurance, information technology services, real estate, and reinsurance, reported pre-tax income of $76.0 million and net income of $57.1 million in the second quarter of 2024. Net income after noncontrolling interests was $54.1 million compared with $12.4 million in the second quarter of 2023. Diluted earnings per share were $4.24 in the second quarter of 2024, compared with $1.28 diluted earnings per share, in the second quarter of 2023.

Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the second quarter of 2024 was $56.7 million, or $4.21 diluted earnings per share compared with adjusted net income of $14.2 million, or $1.22 diluted earnings per share, in the second quarter of 2023. 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”).

Management Commentary
“In the second quarter, HCI Group delivered another quarter of solid profitability driven by strong underwriting execution,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “The results highlight the power of our technology. In future periods, we plan not only to replicate this success but also to explore new ways to exploit our technology and capitalize on new opportunities.”

Second Quarter 2024 Commentary
Consolidated gross premiums earned in the second quarter increased to $263.6 million from $181.9 million in the second quarter of 2023 driven primarily by growth in Florida, including the assumption of policies from Citizens.

Premiums ceded for reinsurance in the second quarter were $76.7 million compared with $66.4 million in the second quarter of 2023. Premiums ceded represented 29.1% of gross premiums earned in the second quarter of 2024 compared with 36.5% in the second quarter of 2023.

Net investment income in the second quarter was $16.9 million compared with $8.8 million in the second quarter of 2023. The $8.1 million increase was primarily attributable to an increase in interest income from cash, cash equivalents, available-for-sale securities, and an increase in income from real estate investments.

Losses and loss adjustment expenses in the second quarter were $78.3 million compared with $61.9 million in the second quarter of 2023.  The gross loss ratio in the second quarter was 29.7% compared to 34.0% in the second quarter of 2023.  The decline in the gross loss ratio was driven primarily by the continued decline of claims and litigation frequency in Florida.

Policy acquisition and other underwriting expenses in the second quarter were $23.5 million compared with $22.6 million in the second quarter of 2023, representing 8.9% of gross premiums earned in the second quarter of 2024 compared with 12.4% in the second quarter of 2023.

General and administrative personnel expenses in the second quarter increased to $17.5 million from $14.3 million in the second quarter of 2023. General and administrative personnel expenses represented 6.6% of gross premiums earned in the second quarter of 2024 down from 7.8% in the second quarter of 2023.

Year-to-Date 2024 Results
For the six months ended June 30, 2024, the company reported pre-tax income of $153.5 million and net income of $114.1 million. Net income after noncontrolling interests was $101.7 million compared with $27.8 million for the first six months ended June 30, 2023. Diluted earnings per share were $8.04 for the first six months ended June 30, 2024, compared with $2.81 diluted earnings per share, for the six months ended June 30, 2023.

Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the six-month period was $111.7 million, or $7.86 diluted earnings per share compared with adjusted net income of $31.6 million, or $2.72 diluted earnings per share, in the same period of 2023. An explanation of this non-GAAP financial measure and reconciliations to the applicable GAAP numbers accompany this press release.

Consolidated gross premiums earned for the six months of 2024 increased to $520.2 million from $362.0 million in the same period of 2023 driven primarily by growth in Florida, including the assumption of policies from Citizens.

Premiums ceded for reinsurance for the six months of 2024 were $144.8 million compared with $136.9 million for the six months of 2023. Premiums ceded represented 27.8% of gross premiums earned for the six months of 2024 compared with 37.8% in the six months of 2023.

Net investment income for the six months of 2024 was $30.9 million compared with $26.5 million for the six months of 2023. The increase was primarily attributable to an increase in interest income from cash, cash equivalents, and available-for-sale securities, offset by a decrease in income from real estate investments.

Losses and loss adjustment expenses for the six months of 2024 were $158.2 million compared with $122.5 million for the six months of 2023.  The gross loss ratio decreased to 30.4% compared to 33.8% for the six months ended June 30, 2023. The decline in the gross loss ratio was driven primarily by the continued decline of claims and litigation frequency in Florida.

Policy acquisition and other underwriting expenses for the six months of 2024 were $45.6 million compared with $45.3 million for the six months of 2023, representing 8.8% of gross premiums earned in the six months of 2024 compared with 12.5% in the six months of 2023.

General and administrative personnel expenses for the six months of 2024 increased to $33.7 million from $27.8 million for the six months of 2023. General and administrative personnel expenses represented 6.5% of gross premiums earned in the six months of 2024 down from 7.7% in the six months of 2023.

Conference Call
HCI Group will hold a conference call later today, August 8, 2024, 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 4:45 p.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: 357144

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 August 8, 2025.

Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 50883

About HCI Group, Inc.
HCI Group, Inc. owns subsidiaries engaged in diverse, yet complementary business activities, including homeowners insurance, information technology services, insurance management, real estate, and reinsurance. HCI’s leading insurance operation, TypTap Insurance Company, is a technology-driven homeowners insurance company. 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:
Bill Broomall, CFA
Investor Relations
HCI Group, Inc.
Tel (813) 776-1012
wbroomall@typtap.com

Investor Relations Contact:
Matt Glover
Gateway Group, Inc.
Tel (949) 574-3860
HCI@gateway-grp.com

- Tables to follow -

HCI GROUP, INC. AND SUBSIDIARIES Selected Financial Metrics (Dollar amounts in thousands, except per share amounts)
		Q2 2024					Q2 2023
		(Unaudited)					(Unaudited)
Insurance Operations
Gross Written Premiums:
Homeowners Choice		$	191,775				$	140,544
TypTap Insurance Company			79,093					39,438
Condo Owners Reciprocal Exchange			36,034					-
Total Gross Written Premiums			306,902					179,982
Gross Premiums Earned:
Homeowners Choice			143,703					96,875
TypTap Insurance Company			107,055					85,071
Condo Owners Reciprocal Exchange			12,803					-
Total Gross Premiums Earned			263,561					181,946
Gross Premiums Earned Loss Ratio			29.7	%				34.0	%
Per Share Metrics
GAAP Diluted EPS		$	4.24				$	1.28
Non-GAAP Adjusted Diluted EPS		$	4.21				$	1.22
Dividends per share		$	0.40				$	0.40
Book value per share at the end of period		$	42.72				$	21.92
Shares outstanding at the end of period			10,472,741					8,594,764

HCI GROUP, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollar amounts in thousands)
		June 30, 2024				December 31, 2023
		(Unaudited)
Assets
Fixed-maturity securities, available for sale, at fair value (amortized cost: $643,892 and $387,687, respectively and allowance for credit losses: $0 and $0, respectively)		$	640,242			$	383,238
Equity securities, at fair value (cost: $49,192 and $44,011, respectively)			53,886				45,537
Limited partnership investments			21,856				23,583
Real estate investments			73,507				67,893
Total investments			789,491				520,251
Cash and cash equivalents			445,829				536,478
Restricted cash			3,303				3,287
Receivable from maturities of fixed-maturity securities			500				91,085
Accrued interest and dividends receivable			7,067				3,507
Income taxes receivable			2,820				—
Deferred income taxes, net			—				512
Premiums receivable, net (allowance: $4,321 and $3,152, respectively)			58,114				38,037
Assumed premium receivable			7,562				19,954
Prepaid reinsurance premiums			123,955				86,232
Reinsurance recoverable, net of allowance for credit losses:
Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)			23,367				19,690
Unpaid losses and loss adjustment expenses (allowance: $66 and $118, respectively)			279,795				330,604
Deferred policy acquisition costs			52,564				42,910
Property and equipment, net			29,449				29,251
Right-of-use-assets - operating leases			1,296				1,407
Intangible assets, net			6,432				7,659
Funds withheld for assumed business			14,353				30,087
Other assets			65,484				50,365
Total assets		$	1,911,381			$	1,811,316
Liabilities and Equity
Losses and loss adjustment expenses		$	571,646			$	585,073
Unearned premiums			542,839				501,157
Advance premiums			24,119				15,895
Reinsurance payable on paid losses and loss adjustment expenses			—				3,145
Ceded reinsurance premiums payable			7,950				8,921
Assumed premiums payable			—				850
Accrued expenses			27,860				19,722
Income tax payable			8,962				7,702
Deferred income taxes, net			4,328				—
Revolving credit facility			48,000				—
Long-term debt			184,912				208,495
Lease liabilities - operating leases			1,305				1,408
Other liabilities			35,426				35,623
Total liabilities			1,457,347				1,387,991
Commitments and contingencies
Redeemable noncontrolling interest			791				96,160
Equity:
Common stock, (no par value, 40,000,000 shares authorized, 10,472,741 and 9,738,183 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively)			—				—
Additional paid-in capital			117,968				89,568
Retained income			331,960				238,438
Accumulated other comprehensive loss, net of taxes			(2,579	)			(3,163	)
Total stockholders' equity			447,349				324,843
Noncontrolling interests			5,894				2,322
Total equity			453,243				327,165
Total liabilities, redeemable noncontrolling interest, and equity		$	1,911,381			$	1,811,316

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,
		2024				2023				2024				2023
Revenue
Gross premiums earned		$	263,561			$	181,946			$	520,205			$	362,014
Premiums ceded			(76,713	)			(66,390	)			(144,819	)			(136,899	)
Net premiums earned			186,848				115,556				375,386				225,115
Net investment income			16,881				8,794				30,948				26,509
Net realized investment gains (losses)			221				(230	)			212				(1,379	)
Net unrealized investment gains			533				897				3,168				1,426
Policy fee income			1,089				1,469				2,108				2,559
Other			682				841				1,037				2,126
Total revenue			206,254				127,327				412,859				256,356
Expenses
Losses and loss adjustment expenses			78,324				61,890				158,246				122,455
Policy acquisition and other underwriting expenses			23,452				22,618				45,591				45,338
General and administrative personnel expenses			17,471				14,272				33,745				27,774
Interest expense			3,452				2,667				6,601				5,468
Other operating expenses			7,520				5,614				15,220				11,919
Total expenses			130,219				107,061				259,403				212,954
Income before income taxes			76,026				20,266				153,456				43,402
Income tax expense			18,927				5,384				39,401				10,727
Net income		$	57,099			$	14,882			$	114,055			$	32,675
Net income attributable to redeemable noncontrolling interests			—				(2,337	)			(10,149	)			(4,661	)
Net income attributable to noncontrolling interests			(3,023	)			(102	)			(2,219	)			(233	)
Net income after noncontrolling interests		$	54,076			$	12,443			$	101,687			$	27,781
Basic earnings per share		$	5.18			$	1.45			$	9.95			$	3.23
Diluted earnings per share		$	4.24			$	1.28			$	8.04			$	2.81
Dividends per share		$	0.40			$	0.40			$	0.80			$	0.80

HCI GROUP, INC. AND SUBSIDIARIES (Amounts in thousands, except per share amounts)
A summary of the numerator and denominator of basic and diluted earnings per common share calculated in accordance with GAAP is presented below.
		Three Months Ended												Six Months Ended
GAAP		June 30, 2024												June 30, 2024
		Income				Shares (a)				Per Share				Income				Shares (a)				Per Share
		(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
Net income		$	57,099											$	114,055
Less: Net income attributable to redeemable noncontrolling interest			—												(10,149	)
Less: Net income attributable to noncontrolling interests			(3,023	)											(2,219	)
Net income attributable to HCI			54,076												101,687
Less: Income attributable to participating securities			(2,052	)											(3,243	)
Basic Earnings Per Share:
Income allocated to common stockholders			52,024				10,041			$	5.18				98,444				9,897			$	9.95
Effect of Dilutive Securities:
Stock options			—				298								—				290
Convertible senior notes			1,753				2,142								3,393				2,212
Warrants			—				215								—				262
Diluted Earnings Per Share:
Income available to common stockholders and assumed conversions		$	53,777				12,696			$	4.24			$	101,837				12,661			$	8.04
(a) Shares in thousands.

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 Income

		Three Months Ended										Six Months Ended
		June 30, 2024										June 30, 2024
GAAP Net income						$	57,099									$	114,055
Net unrealized investment gains		$	(533	)								$	(3,168	)
Less: Tax effect at 25.041%		$	133									$	793
Net adjustment to Net income						$	(400	)								$	(2,375	)
Non-GAAP Adjusted Net income						$	56,699									$	111,680

HCI GROUP, INC. AND SUBSIDIARIES (Amounts in thousands, except per share amounts)
A summary of the numerator and denominator of the basic and diluted earnings per common share calculated with the Non-GAAP financial measure Adjusted net income is presented below.
		Three Months Ended												Six Months Ended
Non-GAAP		June 30, 2024												June 30, 2024
		Income				Shares (a)				Per Share				Income				Shares (a)				Per Share
		(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
Adjusted net income (non-GAAP)		$	56,699											$	111,680
Less: Net income attributable to redeemable noncontrolling interest			-											$	(10,149	)
Less: Net loss (income) attributable to noncontrolling interests			(3,018	)											(2,206	)
Net income attributable to HCI			53,681												99,325
Less: Income attributable to participating securities			(2,037	)											(3,168	)
Basic Earnings Per Share before unrealized gains/losses on equity securities:
Income allocated to common stockholders			51,644				10,041			$	5.14				96,157				9,897			$	9.72
Effect of Dilutive Securities:
Stock options			—				298								—				290
Convertible senior notes			1,753				2,142								3,393				2,212
Warrants			—				215								—				262
Diluted Earnings Per Share before unrealized gains/losses on equity securities:
Income available to common stockholders and assumed conversions		$	53,397			$	12,696			$	4.21			$	99,550			$	12,661			$	7.86
(a) Shares in thousands.

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

		Three Months Ended										Six Months Ended
		June 30, 2024										June 30, 2024
GAAP diluted Earnings Per Share						$	4.24									$	8.04
Net unrealized investment gains		$	(0.04	)								$	(0.25	)
Less: Tax effect at 25.041%		$	0.01									$	0.07
Net adjustment to GAAP diluted EPS						$	(0.03	)								$	(0.18	)
Non-GAAP Adjusted diluted EPS						$	4.21									$	7.86

FAQ

What was HCI Group's diluted EPS for Q2 2024?

HCI Group reported diluted earnings per share of $4.24 for Q2 2024, compared to $1.28 in Q2 2023.

How did HCI Group's gross premiums earned change in Q2 2024?

HCI Group's gross premiums earned increased to $263.6 million in Q2 2024, up from $181.9 million in Q2 2023, primarily driven by growth in Florida.

What was HCI Group's gross loss ratio in Q2 2024?

HCI Group's gross loss ratio in Q2 2024 was 29.7%, an improvement from 34.0% in Q2 2023, driven by a decline in claims and litigation frequency in Florida.

How much did HCI Group's net investment income grow in Q2 2024?

HCI Group's net investment income grew to $16.9 million in Q2 2024, compared to $8.8 million in Q2 2023, an increase of $8.1 million.