Yahoo Finance HCI Group Inc (HCI) (Q1 2024) Earnings Call Transcript Highlights: Strong Performance and ...
Pretax Income: $77.4 million
Earnings Per Share (EPS): $3.81
Dividend: $0.4 per share, marking the 54th consecutive quarterly dividend
In-force Premiums: Remained above $1 billion
Gross Loss Ratio: Improved to 31% from 34% in the previous year's quarter
Gross Premiums Earned: Increased by 42% compared to the same quarter last year
Investment Income: $14 million, up 40% from the previous quarter
Combined Ratio: Just under 67% this quarter
Consolidated Cash and Investments: Increased by $340 million over the last 12 months
Debt: Decreased by more than $60 million
Debt to Cap Ratio: Declined from 62% to 37%
Shareholder Equity: More than doubled to $395 million
Book Value Per Share: Increased from just under $21 to over $38
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
HCI Group Inc reported a strong pretax income of $77.4 million and earnings per share of $3.81 for the first quarter of 2024.
The company demonstrated solid premium growth, with gross premiums earned increasing by 42% compared to the same quarter last year.
HCI Group Inc successfully integrated technology to efficiently manage and grow its portfolio, particularly noting the seamless onboarding of 70,000 policies from Citizens.
The company's operational efficiencies were highlighted by a declining expense ratio, contributing to a lower combined ratio of just under 67% this quarter.
HCI Group Inc's balance sheet showed significant improvement, with consolidated cash and investments up by $340 million and shareholder equity more than doubling to $395 million.
Negative Points
Despite overall positive results, the company experienced modest weather-related losses in the quarter.
The gross loss ratio, although improved, was slightly higher than in Q4 due to weather impacts.
Reinsurance costs and the impact on future financial performance remain uncertain as negotiations are ongoing.
The company's reliance on technology, while beneficial, also poses risks if technological advancements do not keep pace with industry demands or fail to deliver expected efficiencies.
While HCI Group Inc has successfully managed large policy integrations, the scalability and integration risks associated with further rapid expansion could pose challenges.
Q & A Highlights
Q: Good afternoon, everybody. First question, Mark, when you mentioned the combined ratio expectations, you said low to mid 80s from what timeframe was that this year? Or just kind of it wasn't a longer-term timeframe? A: James Harmsworth, Hci Group Inc - Chief Financial Officer: No. I mean, I mean, this year like now because I think the point was it's obviously significantly lower than that right now. But once once we normalize in that toward the end of the second quarter with with reinsurance impact for the citizens policies that that's that. That's our expectation for combined ratio like the second half of the year.
Q: Okay. Great. Thank you. And then I guess just curious how you guys reinsurance renewals coming up pretty soon. How do you think about that given the big growth from Citizens? A: Paresh Patel, Hci Group Inc - SVP, Professional Services: So you need less just how are you thinking about the need for reinsurance relative to prior years because of some of my colleagues a look well, we have managed this business to grow from around EUR50 million of premium back in all27 the way to what it is now. So as the business grows and shrinks, which it has done occasionally as well we buy an appropriate amount of reinsurance. So yes, the business has grown, but we aren't in the market trying to buy an appropriate tower for the upcoming wind season. We are right in the middle of those negotiations and everything else. So the two items that are there is we are buying an appropriate topsides tower for the appropriate size business. The only item that is not finished yet is what will the cost of that center that reinsurance be, but one presumes because you're buying a lot more quantity, might be the overarching goal but it's a question of will go up as a percentage of revenue.
Q: Yes. Right. Okay. Good. Yes, thank you. And then I guess lastly, you mentioned the phone calls that are coming out and you're not looking to grow the Company policy by policy, but maybe looking to be more stuff. And I guess, are you also considering Are you getting any goals and would you consider maybe being Frontline for other homeowners companies that already write business that don't have your technology and in front for them as you expand outside of Florida and into more nationwide? Would that be an option? A: Paresh Patel, Hci Group Inc - SVP, Professional Services: Yes, there's there are a number of options that that people have approached us with and obviously we're evaluating them, including people wanting us to buy books of business or by small carriers kind of thing. So there's a broad range of options that are unfolding in front of us. Obviously, we're trying to make sure we are prudent as to where we deploy our technology so that it has maximum long-term value, but front and could be an example as well.
Q: Yes. Okay. Yes, sure. Thank you and my last one for now on just a numbers question. You had mentioned the in-force premium from core April to $55 million. I think before you said you were targeting around 75. Is that still the case for core ultimately? Yes, for the assets, you're correct, right? A: Paresh Patel, Hci Group Inc - SVP, Professional Services: Yes.
Q: Okay. And then did you give a earned premium number for that takeout this quarter? A: James Harmsworth, Hci Group Inc - Chief Financial Officer: And so that what I said was the bottom in earned premium. There's 67 million of that relates to Citizens' assumptions. And of that 67, 3.6 million of it is core.
Q: Yes, thanks. Good afternoon. I'm at the Paris afternoon from Paris, where you talk about, um, you're looking forward and opportunities to double triple the size of the company and you kind of hit those milestones. You asked a party how you view HCA kind of being similar or different. And I guess where I'm going with this is more more geography than anything else you and how much opportunity do you consider you continue to see in Florida. Is there a certain market share at which you feel like you've got enough of the market? Where do you kind of see Florida growing in lockstep with the rest of the country and not changing much. You just guys being bigger. A: Paresh Patel, Hci Group Inc - SVP, Professional Services: I meant if I was speaking, just geography-wise, right, when we talk about the $150 billion, probably about to 20 billion is in Florida?
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
