TAMPA, Fla., March 07, 2019 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI), a holding company primarily engaged in homeowners insurance, with additional operations in reinsurance, real estate and information technology, reported results for the three and twelve months ended December 31, 2018.

Fourth Quarter 2018 - Financial Results
In the fourth quarter, the company had a net loss of $8.5 million or $0.95 loss per common share compared with net income of $12.1 million or $1.14 diluted earnings per common share in the fourth quarter of 2017. There were two primary reasons for the change: a pre-tax loss of $16.5 million for Hurricane Michael and a pre-tax $5.7 million unrealized investment loss on equity securities.

Adjusted net loss (a non-GAAP financial measure which excludes unrealized gains and losses on equity securities) for the quarter was $4.2 million or $0.48 per share. The company has included in this press release an explanation of adjusted net income/loss as well as a reconciliation to net income/loss and earnings/loss per share calculated in accordance with generally accepted accounting principles (known as “GAAP”). 

Consolidated gross premiums written were down 6% from $46.6 million in the fourth quarter of 2017 to $43.6 million for the fourth quarter of 2018; for the same period, gross premiums written for TypTap were up 100%.

Consolidated gross premiums earned were down 3% from $87.9 million in the fourth quarter of 2017 to $85.2 million for the fourth quarter of 2018; for the same period, gross premiums earned for TypTap were up 70%.  

Fourth Quarter 2018 - Financial Ratios
The loss ratio (defined as losses and loss adjustment expenses related to gross premiums earned) for the fourth quarter of 2018 was 49.4% compared with 26.4% for the fourth quarter of 2017, primarily due to Hurricane Michael.  

The combined ratio (total of all expenses in relation to net premiums earned) was 122.0% for the fourth quarter of 2018 compared with 80.1% in the fourth quarter of 2017, primarily due to Hurricane Michael.

Full Year 2018 - Financial Results
For the full year 2018, net income totaled $17.7 million or $2.34 diluted earnings per common share compared with a net loss of $6.9 million or $0.75 loss per common share in 2017. The primary reason for the improvement was a $56.3 million reduction in losses and loss adjustment expenses offset by a $10.2 million net unrealized investment loss related to the change in the value of equity securities. Adjusted net income for the year was $25.3 million or $3.23 per fully diluted share. An explanation of this non-GAAP financial measure and reconciliations to the applicable GAAP numbers accompany this press release. 

Consolidated gross premiums written for the year declined 3% from $347.3 million in 2017 to $336.4 million in 2018; gross premiums written for TypTap increased 67%.

Consolidated gross premiums earned for the year declined 4% from $358.3 million in 2017 to $343.1 million in 2018; gross premiums earned for TypTap increased 102%.

Full Year 2018 - Financial Ratios
The loss ratio for 2018 was 31.9% compared with 46.2% for 2017 for the reasons explained above.

The combined ratio for 2018 was 95.8% compared with 115.8% for 2017 primarily due to the decline in the loss ratio as explained above.

Book value per share, defined as shareholders’ equity divided by common shares outstanding, was $21.71 at December 31, 2018 compared with $22.14 at December 31, 2017.

Management Commentary
“We remain excited about our business model, and believe our technology and underwriting expertise will provide us with a competitive advantage as we deliver profitable growth,” said Paresh Patel, HCI Group’s chairman and chief executive officer.

Conference Call
HCI Group will hold a conference call later today, March 7, 2019, to discuss these financial results. Chairman and Chief Executive Officer Paresh Patel and Chief Financial Officer Mark Harmsworth 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: 866-682-6100

Listen-only international number: 862-298-0702

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 7, 2019.

Toll-free replay number: 877-481-4010
International replay number: 919-882-2331
Replay ID: 43357

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 Index and the 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:
Kevin Mitchell, Senior Vice President of Investor Relations
HCI Group, Inc.
Tel (813) 405-3603
kmitchell@hcigroup.com

Investor Relations Contact:
Matt Glover or Najim Mostamand, CFA
Liolios Group, Inc.
Tel (949) 574-3860
HCI@liolios.com

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HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)
			At December, 2018			At December 31, 2017
Assets
Fixed-maturity securities, available for sale, at fair value
(amortized cost: $184,670 and $235,633, respectively)		$	182,723			237,484
Equity securities, at fair value (cost: $45,671 and $54,282, respectively)			41,143			59,956
Short-term investments, at fair value			66,479			-
Limited partnership investments, at equity			32,293			23,184
Investment in unconsolidated joint venture, at equity			845			1,304
Assets held for sale			9,810			-
Real estate investments			54,490			58,358
Total investments			387,783			380,286
Cash and cash equivalents			239,458			255,884
Restricted cash			700			809
Accrued interest and dividends receivable			1,792			1,983
Income taxes receivable			971			16,192
Premiums receivable			16,667			17,807
Prepaid reinsurance premiums			17,932			22,286
Reinsurance recoverable:
Paid losses and loss adjustment expenses			11,151			2,344
Unpaid losses and loss adjustment expenses			112,760			100,760
Deferred policy acquisition costs			16,507			16,712
Property and equipment, net			13,338			12,465
Intangible assets, net			4,800			4,995
Other assets			9,004			9,741
Total assets		$	832,863			842,264
Liabilities and Stockholders’ Equity
Losses and loss adjustment expenses		$	207,586			198,578
Unearned premiums			157,729			164,896
Advance premiums			6,192			4,948
Assumed reinsurance balances payable			14			15
Accrued expenses			6,483			6,035
Reinsurance recovered in advance on unpaid losses			-			13,885
Deferred income taxes, net			1,068			1,890
Long-term debt			250,150			237,835
Other liabilities			22,200			20,207
Total liabilities			651,422			648,289
Stockholders’ equity:
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,
8,356,730 and 8,762,416 shares issued and outstanding at
December 31, 2018 and December 31, 2017, respectively)			—			—
Additional paid-in capital			—			—
Retained income			182,894			189,409
Accumulated other comprehensive (loss) income, net of taxes			(1,453	)		4,566
Total stockholders’ equity			181,441			193,975
Total liabilities and stockholders’ equity		$	832,863			842,264

 

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,
		2018				2017			2018				2017
Revenue
Gross premiums earned		$	85,211			87,877				343,065			358,253
Premiums ceded			(32,453	)		(32,106	)			(129,643	)		(133,635	)
Net premiums earned			52,758			55,771				213,422			224,618
Net investment income			4,910			2,917				16,581			11,439
Net realized investment gains (losses)			(337	)		2,070				6,183			4,346
Net unrealized investment (losses) gains			(5,655	)		18				(10,202	)		92
Net other-than-temporary impairment losses			-			(603	)			(80	)		(1,467	)
Policy fee income			826			901				3,389			3,622
Other			495			549				1,999			1,756
Total revenue			52,997			61,623				231,292			244,406
Expenses
Losses and loss adjustment expenses			42,101			23,204				109,328			165,629
Policy acquisition and other underwriting expenses			9,795			10,018				38,943			39,663
General and administrative personnel expenses			5,004			4,106				25,908			25,127
Interest expense			4,569			4,439				18,096			16,767
Loss on repurchases of senior notes			-			-				-			743
Impairment Loss			-			-				-			38
Other operating expenses			2,873			2,909				12,115			12,063
Total expenses			64,342			44,676				204,390			260,030
Income (loss) before income taxes			(11,345	)		16,947				26,902			(15,624	)
Income tax expense (benefit)			(2,879	)		4,856				9,177			(8,731	)
Net income		$	(8,466	)		12,091				17,725			(6,893	)
Basic earnings (loss) per share		$	(0.95	)		1.37				2.34			(0.75	)
Diluted earnings (loss) per share		$	(0.95	)		1.14				2.34			(0.75	)
Dividends per share		$	0.375			0.35				1.475			1.40

HCI GROUP, INC. AND SUBSIDIARIES
(Amounts in thousands, except per share amounts)
A summary of the numerator and denominator of basic and diluted income per common share calculated in accordance with GAAP is presented below.
	Three Months Ended												Year Ended
GAAP	December 31, 2018												December 31, 2018
	Income				Shares				Per Share				Income				Shares				Per Share
	(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
Net (loss) income	$	(8,466	)										$	17,725
Less: Loss attributable to participating securities*		1,095												717
Basic Earnings Per Share:
(Loss) income allocated to common stockholders		(7,371	)			7,720			$	(0.95	)			18,442				7,878			$	2.34
Effect of Dilutive Securities:**
Stock options		--				--								--				17
Diluted Earnings Per Share:
Income available to common stockholders and assumed conversions	$	(7,371	)			7,720			$	(0.95	)		$	18,442				7,895			$	2.34
*Loss attributable to participating securities included the reclassification of cumulative dividends paid on certain restricted stock with market based vesting conditions from retained income to expense.
**Convertible senior notes were excluded due to antidilutive effect.

Non-GAAP Financial Measures
Adjusted net income/loss is a non-GAAP financial measure that removes from net income/loss the effect of unrealized gains and losses on equity securities that are required to be included in results of operations in accordance with a new accounting standard effective January 1, 2018. HCI Group believes net income/loss without the effect of volatility in equity prices is more comparable to prior period 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/loss to non-GAAP Adjusted net income/loss and GAAP diluted earnings/loss per share to non-GAAP Adjusted diluted earnings/loss per share is provided below.

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income
	Three Months Ended												Year Ended
	December 31, 2018												December 31, 2018
GAAP Net (loss) income					$	(8,466	)										$	17,725
Add back: Net unrealized investment losses	$	5,655											$	10,202
Less: Tax effect at 25.345%	$	(1,433	)										$	(2,586	)
Net adjustment to Net (loss) income					$	4,222											$	7,616
Non-GAAP Adjusted Net (loss) income					$	(4,244	)										$	25,341
HCI GROUP, INC. AND SUBSIDIARIES
(Amounts in thousands, except per share amounts)
A summary of the numerator and denominator of the basic and diluted income per common share calculated with the non-GAAP financial measure Adjusted net income is presented below.
	Three Months Ended												Year Ended
Non-GAAP	December 31, 2018												December 31, 2018
	Income				Shares				Per Share				Income				Shares				Per Share
	(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
Adjusted net income (non-GAAP)	$	(4,244	)										$	25,341
Less: Loss attributable to participating securities*		564												168
Basic Earnings Per Share before unrealized gains/losses on equity securities:
(Loss) income allocated to common stockholders		(3,680	)			7,720			$	(0.48	)			25,509				7,878			$	3.24
Effect of Dilutive Securities:
Stock options		--				--								--				17
Diluted Earnings Per Share before unrealized gains/losses on equity securities:
(Loss) income available to common stockholders and assumed conversions	$	(3,680	)			7,720			$	(0.48	)		$	25,509				7,895			$	3.23
*Loss attributable to participating securities included the reclassification of cumulative dividends paid on certain restricted stock with market based vesting conditions from retained income to expense.
**Convertible senior notes were excluded due to antidilutive effect.
Reconciliation of GAAP Diluted EPS to non-GAAP Adjusted Diluted EPS
	Three Months Ended												Year Ended
	December 31, 2018												December 31, 2018
GAAP diluted Earnings Per Share					$	(0.95	)										$	2.34
Add back: Net unrealized investment losses	$	0.73											$	1.29
Less: Tax effect at 25.345%	$	(0.26	)										$	(0.40	)
Net adjustment to GAAP diluted EPS					$	0.47											$	0.89
Non-GAAP Adjusted diluted EPS					$	(0.48	)										$	3.23