Exhibit 99.1

 

LOGO

HCI Group Reports Fourth Quarter and Full Year 2017 Results

TAMPA, Fla. – March 6, 2018 – 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, 2017.

Fourth Quarter 2017 - Financial Results

Net income for the fourth quarter of 2017 totaled $12.1 million or $1.14 diluted earnings per share compared with $4.6 million or $0.47 diluted earnings per share in the fourth quarter of 2016.

Gross premiums earned totaled $87.9 million compared with $92.4 million in the same period in 2016. The decrease in 2017 was attributable primarily to policy attrition. Gross premiums written were $46.6 million compared with $58.9 million in the same quarter in 2016, due primarily to a smaller number of policies assumed from Citizens Property Insurance Corporation in the fourth quarter of 2017 compared with the fourth quarter of 2016.

Premiums ceded increased to $32.1 million or 36.5% of gross premiums earned from $29.1 million or 31.4% of gross premiums earned in the fourth quarter of 2016. The increase was primarily attributable to the adjustment to benefits and deferred reinsurance premiums related to retrospective provisions under certain reinsurance contracts.

Net premiums earned (defined as gross premiums earned less premiums ceded to reinsurance) were $55.8 million compared with $63.4 million in the same period in 2016.

Net premiums written (defined as gross premiums written less premiums ceded to reinsurance) were $14.5 million compared with $29.8 million in the same period in 2016.

Investment related income was $5.0 million compared with $4.8 million in the same period in 2016. Additionally, the company recognized net non-cash charges of $0.6 million in the fourth quarter of 2017 and $1.0 million in the fourth quarter of 2016 due to declines in the fair value of securities determined to be other than temporary.

Losses and loss adjustment expenses were $23.2 million compared with $45.4 million in the same period in 2016. The decrease was due to the impact of Hurricane Matthew and reserve strengthening in the fourth quarter of 2016.

Interest expense was $4.4 million compared with $3.0 million in the same period in 2016. The increase resulted from the issuance of $143.75 million of 4.25% convertible senior notes in March 2017, offset in part by the redemption of the company’s 8% senior notes in the amount of $40.25 million in April 2017.

Fourth Quarter 2017 - Financial Ratios

The loss ratio (defined as losses and loss adjustment expenses related to net premiums earned) for the fourth quarter of 2017 was 41.6% compared with 71.7% for the fourth quarter of 2016.

The expense ratio (defined as underwriting expenses, general and administrative personnel expenses, interest expenses, and other operating expenses related to net premiums earned) was 38.5% compared with 33.2% in the same prior year period.

Expressed as a total of all expenses related to net premiums earned, the combined loss and expense ratio was 80.1% compared with 104.9% in the same prior year period.


Full Year 2017 - Financial Results

Net loss for the year 2017 totaled $6.9 million or $0.75 diluted loss per common share compared with net income of $29.0 million or $2.92 diluted earnings per common share for 2016. The decline was primarily attributable to losses and loss adjustment expenses from Hurricane Irma, a decrease in gross premiums earned and an increase in interest expense resulting from the issuance of long-term debt in March 2017. These factors contributed to $15.6 million pre-tax operating losses in 2017 which resulted in $8.7 million of recognized income tax benefit, which included net positive tax effects of approximately $1.4 million due to the 2017 Tax Cuts and Jobs Act.

Gross premiums earned totaled $358.3 million compared with $378.7 million in 2016. The decrease in 2017 was primarily attributable to policy attrition. Gross premiums written were $347.4 million compared with $367.2 million in the same twelve-month period of 2016.

Premiums ceded were $133.6 million or 37.3% of gross premiums earned compared with $135.1 million or 35.7% of gross premiums earned during 2016. The percentage increase was primarily attributable to adjustments related to retrospective provisions under certain reinsurance contracts due to losses incurred by Hurricane Irma.

Net premiums earned decreased to $224.6 million from $243.6 million in 2016. Net premiums written were $213.8 million compared with $232.1 million in 2016.

Investment related income was $15.9 million compared with $11.7 million in 2016. The increase in 2017 was primarily due to increased income from limited partnership investments and greater realized net gains from the sale of securities. Additionally, the company recognized net non-cash charges of $1.5 million in 2017 and $2.5 million in 2016 due to declines in the fair value of securities determined to be other than temporary.

Losses and loss adjustment expenses for 2017 and 2016 were $165.6 million and $124.7 million, respectively. Losses and loss adjustment expenses in 2017 included $54 million of estimated net losses related to Hurricane Irma, an increase of $2.5 million to the company’s estimate of Hurricane Matthew losses, and reserve strengthening for prior years. Losses and loss adjustment expenses in 2016 were also impacted by weather related events.

Policy acquisition and other underwriting expenses were $39.7 million compared with $42.6 million for 2016.

General and administrative personnel expenses were $25.1 million compared with $26.2 million in 2016. The decrease was primarily attributable to capitalized payroll costs related to a software development project that began in the fourth quarter of 2016 and lower cash bonuses for senior management.

Book value per share, defined as shareholders’ equity divided by common shares outstanding, was $22.14 at December 31, 2017 compared with $25.23 at December 31, 2016.

Full Year 2017 - Financial Ratios

The loss ratio was 73.7% compared with 51.2% in 2016. The increase was primarily attributable to losses related to Hurricane Irma combined with the decrease in net premiums earned in 2017.

The expense ratio was 42% compared with 38.1% in 2016. The increase in 2017 was primarily attributable to the reduction in 2017 in net premiums earned. Expressed as a total of all expenses related to net premiums earned, the combined loss and expense ratio to net premiums earned was 115.8% compared with 89.3% in 2016.

Due to the impact that reinsurance costs have on net premiums earned from period to period, management believes the combined ratio measured to gross premiums earned is more relevant in assessing overall performance. The combined ratio to gross premiums earned for the year ended December 31, 2017 was 72.6% compared with 57.5% for the year ended December 31, 2016.


Management Commentary

“After Hurricane Irma we are back to earning profits and increasing book value,” said Paresh Patel, HCI’s chairman and chief executive officer. “Our enterprise continues to return value to shareholders through dividends and share buybacks.”

Conference Call

HCI Group will hold a conference call later today, March 6, 2018, 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: (877) 407-8033

Listen-only international number: (201) 689-8033

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 6, 2018.

Toll-free replay number: (877) 481-4010

International replay number: (919) 882-2331

Replay ID: 25394

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, 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

-     Tables to follow    -


HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollar amounts in thousands)

 

     At December 31, 2017      At December 31, 2016  

Assets

     

Fixed-maturity securities, available for sale, at fair value (amortized cost: $235,830 and $167,231, respectively)

   $ 237,484        166,248  

Equity securities, available for sale, at fair value (cost: $53,132 and $47,750, respectively)

     58,911        53,035  

Equity securities, trading, at fair value (cost: $953 and $0, respectively)

     1,045        —    

Limited partnership investments, at equity

     23,184        29,263  

Investment in unconsolidated joint venture, at equity

     1,304        2,102  

Real estate investments (inclusive of $4,680 and $3,404 of consolidated variable interest entities, respectively)

     58,358        48,086  
  

 

 

    

 

 

 

Total investments

     380,286        298,734  

Cash and cash equivalents (inclusive of $0 and $65 of consolidated variable interest entities, respectively)

     255,884        280,531  

Accrued interest and dividends receivable

     1,983        1,654  

Income taxes receivable

     16,192        2,811  

Premiums receivable

     17,807        17,276  

Prepaid reinsurance premiums

     22,286        24,554  

Reinsurance recoverable:

     

Paid losses and loss adjustment expenses

     2,344        —    

Unpaid losses and loss adjustment expenses

     100,760        —    

Deferred policy acquisition costs

     16,712        16,639  

Property and equipment, net

     12,465        11,374  

Intangible assets, net

     4,995        4,899  

Deferred income taxes, net

     —          250  

Other assets (inclusive of $152 and $0 of consolidated variable interest entities, respectively)

     10,550        11,342  
  

 

 

    

 

 

 

Total assets

   $ 842,264        670,064  
  

 

 

    

 

 

 

Liabilities and Stockholders’ Equity

     

Losses and loss adjustment expenses

   $ 198,578        70,492  

Unearned premiums

     164,896        175,803  

Advance premiums

     4,948        4,651  

Assumed reinsurance balances payable

     15        3,294  

Accrued expenses (inclusive of $21 and $68 of consolidated variable interest entities, respectively)

     6,035        6,513  

Reinsurance recovered in advance on unpaid losses

     13,885        —    

Deferred income taxes, net

     1,890        —    

Long-term debt

     237,835        138,863  

Other liabilities (inclusive of $160 and $11 of consolidated variable interest entities, respectively)

     20,207        26,702  
  

 

 

    

 

 

 

Total liabilities

     648,289        426,318  
  

 

 

    

 

 

 

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, 8,762,416 and 9,662,761 shares issued and outstanding in 2017 and 2016, respectively)

     —          —    

Additional paid-in capital

     —          8,139  

Retained income

     189,409        232,964  

Accumulated other comprehensive income, net of taxes

     4,566        2,643  
  

 

 

    

 

 

 

Total stockholders’ equity

     193,975        243,746  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 842,264        670,064  
  

 

 

    

 

 

 


HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(Dollar amounts in thousands, except per share amounts)

 

     Three Months Ended
December 31,
    Three Months Ended
September 31,
    Years Ended
December 31,
 
     2017     2016     2017     2016     2017     2016  

Revenue

            

Gross premiums earned

   $ 87,877       92,405     $ 88,669       92,542     $ 358,253       378,678  

Premiums ceded

     (32,106     (29,053     (44,705     (29,242     (133,635     (135,051
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

     55,771       63,352       43,964       63,300       224,618       243,627  

Net investment income

     2,917       3,087       2,878       2,785       11,439       9,087  

Net realized investment gains (losses)

     2,070       1,702       (226     583       4,346       2,601  

Net unrealized investment gains

     18       —         74       —         92       —    

Net other-than-temporary impairment losses recognized in income:

            

Total other-than-temporary impairment losses

     (252     (1,041     (474     (575     (1,116     (2,252

Portion of loss recognized in other comprehensive income, before taxes

     (351     —         —         351       (351     (230
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net other-than-temporary impairment losses

     (603     (1,041     (474     (224     (1,467     (2,482

Policy fee income

     901       947       905       972       3,622       3,914  

Gain on repurchases of convertible senior notes

     —         —         —         —         —         153  

Gain on bargain purchase

     —         —         —         2,071       —         2,071  

Gain on remeasurement of previously held interest

     —         4,005       —         —         —         4,005  

Other

     549       319       369       321       1,756       1,470  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     61,623       72,371       47,490       69,808       244,406       264,446  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

            

Losses and loss adjustment expenses

     23,204       45,406       89,231       25,909       165,629       124,667  

Policy acquisition and other underwriting expenses

     10,018       10,117       9,926       10,536       39,663       42,642  

General and administrative personnel expenses

     4,106       4,010       6,672       7,735       25,127       26,200  

Interest expense

     4,439       2,967       4,408       2,672       16,767       11,079  

Loss on repurchase of senior notes

     —         —         —         —         743       —    

Impairment Loss

     —         388       38       —         38       388  

Other operating expenses

     2,909       3,582       3,233       2,927       12,063       12,614  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     44,676       66,470       113,508       49,779       260,030       217,590  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) Income before income taxes

     16,947       5,901       (66,018     20,029       (15,624     46,856  

Income tax (benefit) expense

     4,856       1,293       (25,472     8,696       (8,731     17,835  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ 12,091       4,608     $ (40,546     11,333     $ (6,893     29,021  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic (loss) earnings per share

   $ 1.37       0.47     $ (4.44     1.17     $ (0.75     2.95  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted (loss) earnings per share

   $ 1.14       0.47     $ (4.44     1.10     $ (0.75     2.92  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Dividends per share

   $ 0.35       0.30     $ 0.35       0.30     $ 1.40       1.20  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


HCI GROUP, INC. AND SUBSIDIARIES

(Amounts in thousands, except per share amounts)

A summary of the numerator and denominator of the basic and diluted loss per common share is presented below.

 

     Three Months Ended
December 31, 2017
 
     Income (Loss)
(Numerator)
    Shares
(Denominator)
     Per Share
Amount
 

Net income

   $ 12,091       

Less: Income attributable to participating securities

     (823     
  

 

 

      

Basic Earnings Per Share:

       

Income allocated to common stockholders

     11,268       8,291      $ 1.37  
       

 

 

 

Effect of Dilutive Securities:

       

Stock options

     —         16     

Convertible senior notes

     2,556       3,796     
  

 

 

   

 

 

    

Diluted Earnings Per Share:

       

Income available to common stockholders and assumed conversions

   $ 13,824       12,103      $ 1.14  
  

 

 

   

 

 

    

 

 

 
     Year Ended
December 31, 2017
 
     Loss
(Numerator)
    Shares
(Denominator)
     Per Share
Amount
 

Net loss

   $ (6,893     

Less: Loss attributable to participating securities

     481       
  

 

 

      

Basic and Diluted Loss Per Share:

       

Loss available to common stockholders*

   $ (6,412     8,558      $ (0.75
  

 

 

   

 

 

    

 

 

 

 

* Stock options and convertible senior notes were excluded due to antidilutive effect.

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