HCI HCI Group Inc

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 $77.4 million and net income of $57.0 million, or $3.81 diluted earnings per share, in the first quarter of 2024, compared with net income of $17.8 million, or $1.54 diluted earnings per share, in the first quarter of 2023.

Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the first quarter of 2024 was $55.0 million, or $3.65 diluted earnings per share compared with adjusted net income of $17.4 million, or $1.50 diluted earnings per share, in the first 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“The strong results in the first quarter further reinforce the power of the technology that we’ve built. We’ve successfully added a significant amount of premium with almost no added expense, and we’ve launched a new carrier,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “The opportunity for the future is to further leverage our technology platform.”

First Quarter 2024 CommentaryConsolidated gross premiums earned in the first quarter increased to $256.6 million from $180.1 million in the first quarter of 2023. Gross premiums earned in the first quarter of 2024 include $67.0 million of premium from the assumption of policies from Citizens Property Insurance Corporation.

Premiums ceded for reinsurance in the first quarter decreased to $68.1 million from $70.5 million in the first quarter of 2023. Premiums ceded represented 26.5% of gross premiums earned in the first quarter of 2024 compared with 39.2% in the first quarter of 2023. The decrease in reinsurance cost as a percentage of gross premiums earned was due in part to the timing of the large assumption of premiums assumed from Citizens.

Net investment income in the first quarter was $14.1 million compared with $17.7 million in the first quarter of 2023. Net investment income in the first three months of 2023 included a gain of $8.9 million from the sale of two real estate investment properties. Excluding the real estate gain in the prior year quarter, net investment income increased to $14.1 million from $8.8 million. The increase was primarily attributable to higher balances of fixed maturity securities and cash combined with higher yields.

Losses and loss adjustment expenses in the first quarter were $79.9 million compared with $60.6 million in the first quarter of 2023.  The increase in loss expense was due to the growth in policy count and premiums. The gross loss ratio in the first quarter was 31.1% down from 33.6% in the first quarter of 2023.

Policy acquisition and other underwriting expenses in the first quarter decreased to $22.1 million from $22.7 million in the first quarter of 2023 and declined to 8.6% of gross premiums earned from 12.6%, due in part to lower commissions and lower policy acquisition expense related to the timing of the assumption of policies from Citizens.

General and administrative personnel expenses in the first quarter increased to $16.3 million from $13.5 million in the first quarter of 2023. The increase was primarily attributable to an increase in employee incentive bonus and merit increases, offset by a decrease in stock-based compensation expense. General and administrative personnel expenses represented 6.3% of gross premiums earned in the first quarter of 2024 down from 7.5% in the first quarter of 2023.

Conference CallHCI Group will hold a conference call later today, May 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) 506-0062Listen-only international number: (973) 528-0011Entry Code: 682325

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 May 8, 2025.

Toll-free replay number: (877) 481-4010International replay number: (919) 882-2331 Replay ID: 50356

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 StatementsThis 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, CFAInvestor RelationsHCI Group, Inc.Tel (813) 776-1012wbroomall@typtap.com

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

- Tables to follow -
HCI GROUP, INC. AND SUBSIDIARIES
Selected Financial Metrics
(Dollar amounts in thousands, except per share amounts)
	Q1 2024				Q1 2023				FY 2023
	(Unaudited)				(Unaudited)
Insurance Operations
Gross Written Premiums:
Homeowners Choice	$	91,875			$	85,153			$	535,070
TypTap Insurance Company		143,624				114,701				363,552
Condo Owners Reciprocal Exchange		19,487				-				-
Total Gross Written Premiums		254,986				199,854				898,622
Gross Premiums Earned:
Homeowners Choice		149,271				92,456				417,202
TypTap Insurance Company		103,748				87,612				348,310
Condo Owners Reciprocal Exchange		3,625				-				-
Total Gross Premiums Earned		256,644				180,068				765,512
Gross Premiums Earned Loss Ratio		31.1	%			33.6	%			33.3	%
Per Share Metrics
GAAP Diluted EPS	$	3.81			$	1.54			$	7.62
Non-GAAP Adjusted Diluted EPS	$	3.65			$	1.50			$	7.41
Dividends per share	$	0.40			$	0.40			$	1.60
Book value per share at the end of period	$	38.50			$	20.97			$	33.36
Shares outstanding at the end of period		10,276,463				8,596,673				9,738,183

HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)
	March 31, 2024				December 31, 2023
	(Unaudited)
Assets
Fixed-maturity securities, available for sale, at fair value (amortized cost: $475,170 and $387,687, respectively and allowance for credit losses: $0 and $0, respectively)	$	470,805			$	383,238
Equity securities, at fair value (cost: $47,852 and $44,011, respectively)		52,013				45,537
Limited partnership investments		24,015				23,583
Real estate investments		69,096				67,893
Total investments		615,929				520,251
Cash and cash equivalents		655,384				536,478
Restricted cash		3,303				3,287
Receivable from maturities of fixed-maturity securities		—				91,085
Accrued interest and dividends receivable		4,052				3,507
Income taxes receivable		651				—
Deferred income taxes, net		—				512
Premiums receivable, net (allowance: $3,443 and $3,152, respectively)		43,291				38,037
Assumed premium receivable		—				19,954
Prepaid reinsurance premiums		34,125				86,232
Reinsurance recoverable, net of allowance for credit losses:
Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)		25,452				19,690
Unpaid losses and loss adjustment expenses (allowance: $69 and $118, respectively)		305,218				330,604
Deferred policy acquisition costs		45,152				42,910
Property and equipment, net		29,314				29,251
Right-of-use-assets - operating leases		1,352				1,407
Intangible assets, net		7,046				7,659
Funds withheld for assumed business		14,181				30,087
Other assets		57,184				50,365
Total assets	$	1,841,634			$	1,811,316
Liabilities and Equity
Losses and loss adjustment expenses	$	578,712			$	585,073
Unearned premiums		499,499				501,157
Advance premiums		26,518				15,895
Reinsurance payable on paid losses and loss adjustment expenses		—				3,145
Ceded reinsurance premiums payable		10,693				8,921
Assumed premiums payable		2,681				850
Accrued expenses		24,699				19,722
Income tax payable		23,184				7,702
Deferred income taxes, net		5,113				—
Revolving credit facility		50,000				—
Long-term debt		184,744				208,495
Lease liabilities - operating leases		1,357				1,408
Other liabilities		36,564				35,623
Total liabilities		1,443,764				1,387,991
Commitments and contingencies
Redeemable noncontrolling interest		—				96,160
Equity:
Common stock, (no par value, 40,000,000 shares authorized, 10,276,463 and 9,738,183shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively)		—				—
Additional paid-in capital		116,728				89,568
Retained income		282,056				238,438
Accumulated other comprehensive loss, net of taxes		(3,102	)			(3,163	)
Total stockholders' equity		395,682				324,843
Noncontrolling interests		2,188				2,322
Total equity		397,870				327,165
Total liabilities, redeemable noncontrolling interest, and equity	$	1,841,634			$	1,811,316

HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(Dollar amounts in thousands, except per share amounts)
	Three Months Ended
	March 31,
	2024				2023
Revenue
Gross premiums earned	$	256,644			$	180,068
Premiums ceded		(68,106	)			(70,509	)
Net premiums earned		188,538				109,559
Net investment income		14,067				17,715
Net realized investment losses		—				(1,149	)
Net unrealized investment gains		2,635				529
Policy fee income		1,019				1,090
Other		355				1,285
Total revenue		206,614				129,029
Expenses
Losses and loss adjustment expenses		79,922				60,565
Policy acquisition and other underwriting expenses		22,139				22,720
General and administrative personnel expenses		16,274				13,502
Interest expense		3,149				2,801
Other operating expenses		7,700				6,305
Total expenses		129,184				105,893
Income before income taxes		77,430				23,136
Income tax expense		20,474				5,343
Net income	$	56,956			$	17,793
Net income attributable to redeemable noncontrolling interest		(10,149	)			(2,324	)
Net loss (income) attributable to noncontrolling interests		804				(131	)
Net income after noncontrolling interests	$	47,611			$	15,338
Basic earnings per share	$	4.76			$	1.78
Diluted earnings per share	$	3.81			$	1.54
Dividends per share	$	0.40			$	0.40
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												Three Months Ended
GAAP	March 31, 2024												March 31, 2023
	Income				Shares (a)				Per Share				Income				Shares (a)				Per Share
	(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
Net income	$	56,956											$	17,793
Less: Net income attributable to redeemable noncontrolling interest		(10,149	)											(2,324	)
Less: Net loss (income) attributable to noncontrolling interests		804												(131	)
Net income attributable to HCI		47,611												15,338
Less: Income attributable to participating securities		(1,218	)											(564	)
Basic Earnings Per Share:
Income allocated to common stockholders		46,393				9,751			$	4.76				14,774				8,278			$	1.78
Effect of Dilutive Securities:
Stock options		—				280								—				45
Convertible senior notes		1,640				2,282								1,921				2,537
Warrants		—				305								—				—
Diluted Earnings Per Share:
Income available to common stockholders and assumed conversions	$	48,033				12,618			$	3.81			$	16,695				10,860			$	1.54
(a) Shares in thousands.
*For the three months ended March 31, 2023, warrants were excluded due to anti-dilutive effect

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												Three Months Ended
	March 31, 2024												March 31, 2023
GAAP Net income					$	56,956											$	17,793
Net unrealized investment gains	$	(2,635	)										$	(529	)
Less: Tax effect at 25.041% (Q1 2024) & 25.345% (Q1 2023)	$	660											$	134
Net adjustment to Net income					$	(1,975	)										$	(395	)
Non-GAAP Adjusted Net income					$	54,981											$	17,398
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												Three Months Ended
Non-GAAP	March 31, 2024												March 31, 2023
	Income				Shares (a)				Per Share				Income				Shares (a)				Per Share
	(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
Adjusted net income (non-GAAP)	$	54,981											$	17,398
Less: Net income attributable to redeemable noncontrolling interest		(10,149	)										$	(2,324	)
Less: Net loss (income) attributable to noncontrolling interests		815												(127	)
Net income attributable to HCI		45,647												14,947
Less: Income attributable to participating securities		(1,168	)											(550	)
Basic Earnings Per Share before unrealized gains/losses on equity securities:
Income allocated to common stockholders		44,479				9,751			$	4.56				14,397				8,278			$	1.74
Effect of Dilutive Securities:
Stock options		—				280								—				45
Convertible senior notes		1,640				2,282								1,921				2,537
Warrants		—				305								—				—
Diluted Earnings Per Share before unrealized gains/losses on equity securities:
Income available to common stockholders and assumed conversions	$	46,119			$	12,618			$	3.65			$	16,318			$	10,860			$	1.50
(a) Shares in thousands.
*For the three months ended March 31, 2023, warrants were excluded due to anti-dilutive effect

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

	Three Months Ended												Three Months Ended
	March 31, 2024												March 31, 2023
GAAP diluted Earnings Per Share					$	3.81											$	1.54
Net unrealized investment gains	$	(0.21	)										$	(0.05	)
Less: Tax effect at 25.041% (Q1 2024) & 25.345% (Q1 2023)	$	0.05											$	0.01
Net adjustment to GAAP diluted EPS					$	(0.16	)										$	(0.04	)
Non-GAAP Adjusted diluted EPS					$	3.65											$	1.50