GlobeNewswire Inc | Mar 11, 2021 04:15PM EST

March 11, 2021

TAMPA, Fla., March 11, 2021 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI), an InsurTech company with operations in insurance, software development and real estate, reported results for the three and twelve months ended December 31, 2020.

Fourth Quarter 2020 - Financial ResultsNet income for the fourth quarter of 2020 totaled $2.7 million or $0.35 diluted earnings per share compared with $6.4 million or $0.82 diluted earnings per share in the fourth quarter of 2019. Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the quarter was $1.8 million or $0.22 diluted earnings per share compared with $5.9 million or $0.76 diluted earnings per share in the fourth quarter of 2019. The company has included in this press release 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).

Consolidated gross written premiums of $139.3 million for the fourth quarter of 2020 were up 109.2% from $66.6 million in the fourth quarter of 2019. The increase was due to the growth of Homeowners Choice gross written premiums from $42.5 million to $97.2 million and the growth of TypTap Insurance Company gross written premium from $24 million to $42.1 million. Included in the gross written premiums of Homeowners Choice was $44.6 million assumed from United Property & Casualty Insurance Company as part of a quota share agreement.

Consolidated gross premiums earned of $109.1 million for the fourth quarter of 2020 were up 21.0% from $90.2 million in the fourth quarter of 2019.

Premiums ceded for reinsurance for the fourth quarter of 2020 increased to $44.2 million from $31.5 million in the fourth quarter of 2019 and represented 40.5% and 34.9%, respectively, of gross premiums earned.

Net investment income was $1.3 million compared with $2.5 million in the fourth quarter of 2019. The decrease was primarily due to a decrease in income from limited partnership investments and lower interest income from fixed-maturity securities and cash balances.

Net unrealized investment gains were $1.3 million in the fourth quarter of 2020 compared with $0.7 million in 2019.

Losses and loss adjustment expenses were $40.4 million compared with $28.9 million in the same period in 2019. The increase was driven by growth in gross premiums earned as well as reserves recorded for Tropical Storm Eta of $10.0 million. These increases were offset somewhat by lower prior year development.

Policy acquisition and other underwriting expenses were $14.8 million compared with $11.8 million in the same quarter of 2019. The increase primarily relates to growth in gross premiums earned.

Full Year 2020 - Financial ResultsNet income for the twelve months ended December 31, 2020 totaled $27.6 million or $3.49 diluted earnings per share compared with $26.6 million or $3.31 diluted earnings per share for the twelve months ended December 31, 2019.

Adjusted net income (a non-GAAP measure which excludes unrealized gains or losses on equity securities) for the twelve-month period was $27.1 million or $3.44 diluted earnings per share compared with $20.6 million or $2.57 diluted earnings per share in the same period of 2019. An explanation of this non-GAAP financial measure and reconciliations to the applicable GAAP numbers accompany this press release.

Consolidated gross written premiums of $504.2 million for the year 2020 were up 38% from $364.9 million in 2019. The increase was due to the growth of Homeowners Choice gross written premiums from $304.7 million to $399.3 million and the growth of TypTap Insurance Company gross written premium from $60.3 million to $104.9 million. Included in the gross written premiums of Homeowners Choice was $44.6 million assumed from United Property & Casualty Insurance Company as part of a quota share agreement.

In-force premiums for TypTap at December 31, 2020 were $105.4 million compared with $59.6 million at December 31, 2019.

Gross premiums earned increased 21.6% to $415.9 million from $342.1 million in 2019.

Premiums ceded were $153.5 million or 36.9% of gross premiums earned compared with $125.8 million or 36.8% of gross premiums earned during 2019.

Net investment income was $4.6 million compared with $13.6 million in the year ended December 31, 2019. The decrease was primarily due to a decrease in income from limited partnership investments and lower interest income from fixed-maturity securities and cash balances.

The gain on involuntary conversion of $37.0 million for the year ended December 31, 2020 was attributable to an eminent domain proceeding by the Florida Department of Transportation related to a highway expansion project in Tampa, Florida.

Losses and loss adjustment expenses for the years ended December 31, 2020 and 2019 were $160.0 million and $107.5 million, respectively. The increase was driven by increases in gross premiums earned and losses related to Hurricane Sally of $20.3 million and losses related to Tropical Storm Eta of $10.0 million.

Policy acquisition and other underwriting expenses were $53.9 million compared with $42.5 million in 2019. The increase relates primarily to higher agent commission rates and property inspection costs associated with the organic growth of TypTap.

Management Commentary Despite the pandemic and the most active hurricane season on record, we were profitable in all four quarters and gross written premiums grew $139.2 million, driven primarily by organic policy growth at TypTap Insurance Company, said HCI Group Chairman and Chief Executive Officer Paresh Patel. We remain focused on generating profits and shareholder returns.

Conference CallHCI Group will hold a conference call later today, March 11, 2021, 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 theInvestor Informationsection of the company's website at www.hcigroup.com.

Listen-only toll-free number: (888) 506-0062Listen-only international number: (973) 528-0011 Entry Code: 559623

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 April 11, 2021.

Toll-free replay number: (877) 481-4010International replay number: (919) 882-2331 Replay ID: 39938

About HCI Group, Inc.

HCI Group, Inc. is an InsurTech company with operations in insurance, software development and real estate. HCIs leading insurance operation, TypTap Insurance Company, is a rapidly growing, technology-driven insurance company that is expanding nationwide to provide homeowners and flood insurance. TypTaps operations are powered in large part by insurance-related information technology developed by HCIs software subsidiary, Exzeo USA, Inc. HCIs largest subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., provides homeowners insurance primarily in Florida. HCIs 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 companys 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:Rachel Swansiger, Esq.Investor RelationsHCI Group, Inc.Tel (813) 405-3206rswansiger@hcigroup.com

Investor Relations Contact:Matt GloverGateway Investor RelationsTel (949) 574-3860HCI@gatewayir.com

Media Contact:Amber BrinkleyKippen CommunicationsTel (727) 466-7695amber@kippencommunications.com

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HCI GROUP, INC. AND SUBSIDIARIESConsolidated Balance Sheets

(Dollar amounts in thousands)

AtDecember31,2020 AtDecember31,2019 Assets Fixed-maturity securities,available for sale, at fairvalue (amortized cost: $70,265 $ 71,722 $ 202,839 and $199,954, respectively)(allowance for credit losses:$588 and $0, respectively)Equity securities, at fairvalue (cost: $47,029 and 51,130 35,285 $31,863, respectively)Short-term investments, at fair ? 491 valueLimited partnership 27,691 28,346 investments, at equityInvestment in unconsolidated 705 762 joint venture, at equityReal estate investments 74,472 73,763 Total investments 225,720 341,486 Cash and cash equivalents 431,341 229,218 Restricted cash 2,400 700 Accrued interest and dividends 588 1,616 receivableIncome taxes receivable 4,554 1,040 Premiums receivable, net 68,382 20,255 Prepaid reinsurance premiums 36,376 17,983 Reinsurance recoverable, net of allowance for credit losses:Paid losses and loss adjustmentexpenses (allowance: $0 in 2020 14,127 16,155 and 2019)Unpaid losses and lossadjustment expenses (allowance: 71,019 116,523 $85 and $0, respectively)Deferred policy acquisition 43,858 21,663 costsProperty and equipment, net 12,767 14,698 Right-of-use-assets - operating 4,002 484 leaseIntangible assets, net 3,568 4,192 Other assets 22,611 16,596 Total assets $ 941,313 $ 802,609 Liabilities and Stockholders? EquityLosses and loss adjustment $ 212,169 $ 214,697 expensesUnearned premiums 269,399 181,163 Advance premiums 11,370 5,589 Assumed reinsurance balances 87 76 payableAccrued expenses 10,181 10,059 Deferred income taxes, net 11,925 4,008 Revolving credit facility 23,750 9,750 Long-term debt 156,511 163,695 Lease liabilities - operating 4,014 513 leasesOther liabilities 40,771 27,516 Total liabilities 740,177 617,066 Stockholders? equity: 7% Series A cumulativeconvertible preferred stock (nopar value, 1,500,000 shares ? ? authorized, no shares issuedand outstanding)Series B junior participatingpreferred stock (no par value, ? ? 400,000 shares authorized, noshares issued or outstanding)Preferred stock (no par value,18,100,000 shares authorized, ? ? no shares issued oroutstanding)Common stock, (no par value,40,000,000 shares authorized,7,785,617 and 7,764,564 ? ? shares issued and outstandingin 2020 and 2019, respectively)Additional paid-in capital ? ? Retained income 199,592 183,365 Accumulated other comprehensive 1,544 2,178 income, net of taxes Total stockholders? equity 201,136 185,543 Total liabilities and $ 941,313 $ 802,609 stockholders? equity

HCI GROUP, INC. AND SUBSIDIARIESConsolidated Statements of Income(Unaudited)(Dollar amounts in thousands, except per share amounts)

Three Months Ended Years Ended December 31, December 31, 2020 2019 2020 2019 Revenue Gross premiums earned $ 109,057 $ 90,165 $ 415,918 $ 342,079 Premiums ceded (44,155 ) (31,467 ) (153,458 ) (125,765 ) Net premiums earned 64,902 58,698 262,460 216,314 Net investment income 1,320 2,517 4,564 13,642 Net realizedinvestment gains 1,632 281 1,000 (254 )(losses)Net unrealized 1,260 689 679 7,950 investment gainsNetother-than-temporary ? (289 ) ? (289 )impairment lossesCredit losses on (15 ) ? (611 ) ? investmentsPolicy fee income 951 823 3,522 3,229 Gain on involuntary ? ? 36,969 ? conversionOther 263 512 1,854 1,882 Total revenue 70,313 63,231 310,437 242,474 Expenses Losses and loss 40,372 28,898 160,036 107,514 adjustment expensesPolicy acquisitionand other 14,832 11,759 53,859 42,497 underwriting expensesGeneral andadministrative 5,860 7,799 33,829 31,112 personnel expensesInterest expense 2,888 2,927 11,734 13,055 Loss on repurchasesof convertible senior ? ? 150 ? notesLoss onextinguishment of ? ? 98 ? debtOther operating 3,449 3,072 13,803 12,203 expenses Total expenses 67,401 54,455 273,509 206,381 Income before income 2,912 8,776 36,928 36,093 taxes Income tax expense 205 2,344 9,348 9,517 Net income $ 2,707 $ 6,432 $ 27,580 $ 26,576 Basic earnings per $ 0.35 $ 0.84 $ 3.55 $ 3.32 share Diluted earnings per $ 0.35 $ 0.82 $ 3.49 $ 3.31 share Dividends per share $ 0.40 $ 0.40 $ 1.60 $ 1.60

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 share calculated in accordance with GAAP is presented below.

Three Months Ended Year Ended GAAP December 31, 2020 December 31, 2020 Income Shares Per Income Shares Per Share Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Net income $ 2,707 $ 27,580 Less: Incomeattributableto (145 ) (1,462 ) participatingsecurities BasicEarnings Per Share:Incomeallocated to 2,562 7,357 $ 0.35 26,118 7,351 $ 3.55 commonstockholders Effect ofDilutive Securities:Stock options ? 39 ? 23 Convertible ? ? 7,705 2,320 senior notes* DilutedEarnings Per Share:Incomeavailable tocommonstockholders $ 2,562 7,396 $ 0.35 $ 33,823 9,694 $ 3.49 andassumedconversions

*For the three months ended December 31, 2020, convertible senior notes 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 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 Year Ended December 31, 2020 December 31, 2020GAAP net income $ 2,707 $ 27,580 Net unrealizedinvestment losses $ (1,260 ) $ (679 ) (gains)Less: Tax effect $ 309 $ 167 at 24.52182%Net adjustment to $ (951 ) $ (512 )Net incomeNon-GAAP Adjusted $ 1,756 $ 27,068 Net income

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 share calculated with the non-GAAP financial measure Adjusted net income is presented below.

Three Months Ended Year Ended Non-GAAP December 31, 2020 December 31, 2020 Income Shares Per Income Shares Per Share Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Adjusted netincome $ 1,756 $ 27,068 (non-GAAP)Less: Incomeattributableto (92 ) (1,434 ) participatingsecurities BasicEarnings PerShare beforeunrealized gains/losseson equitysecurities:Incomeallocated to 1,664 7,357 $ 0.23 25,634 7,351 $ 3.49 commonstockholders Effect ofDilutive Securities:Stock options ? 39 ? 23 Convertible ? ? 7,705 2,320 senior notes* DilutedEarnings PerShare beforeunrealized gains/losseson equitysecurities:Incomeavailable tocommonstockholders $ 1,664 7,396 $ 0.22 $ 33,339 9,694 $ 3.44 andassumedconversions *For the three months ended December 31, 2020, convertible senior notes were excluded due to anti-dilutive effect.

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

Three Months Ended Year Ended December 31, 2020 December 31, 2020GAAP dilutedEarnings Per $ 0.35 $ 3.49 ShareNetunrealizedinvestment $ (0.17 ) $ (0.07 ) losses(gains)Less: Taxeffect at $ 0.04 $ 0.02 24.52182%Netadjustment to $ (0.13 ) $ (0.05 ) GAAP dilutedEPSNon-GAAPAdjusted $ 0.22 $ 3.44 diluted EPS