HCI 8-K
HCI Group, Inc. (HCI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (or Date of Earliest Event Reported):
(Exact Name of Registrant as Specified in Its Charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
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(Commission File Number) |
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(I.R.S. Employer Identification Number) |
(Address of Principal Executive Offices)
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(Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Item 2.02 Results of Operations and Financial Condition
On November 8, 2021, we released our earnings for the three and nine months ended September 30, 2021. We plan to host an earnings conference call on Tuesday, November 9, 2021 at 8:30 a.m. Eastern time during which our chief executive officer, chief operating officer and chief financial officer will discuss the results.
Interested parties may 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.
Date: Tuesday, November 9, 2021
Time: 8:30 a.m. Eastern time (5:30 a.m. Pacific time)
Listen-only toll-free number: (888) 506-0062
Listen-only international number: (973) 528-0011
Entry Code: 775232
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 December 9, 2021.
Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 42978
Our earnings release appears as Exhibit 99.1 to this form 8-K
Item 9.01 Exhibits.
Exhibit 99.1 Earnings Release
Exhibit 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 8, 2021.
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HCI GROUP, INC. |
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BY: |
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/s/ James Mark Harmsworth |
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Name: James Mark Harmsworth Title: Chief Financial Officer |
A signed original of this Form 8-K has been provided to HCI Group, Inc. and will be retained by HCI Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 99.1
HCI Group Reports Third Quarter 2021 Results
Tampa, Fla. – November 8, 2021 – HCI Group, Inc. (NYSE:HCI), a holding company with operations in homeowners insurance, software development and real estate, reported results for the three and nine months ended September 30, 2021.
Third Quarter 2021 - Financial Results
In the third quarter of 2021, the company experienced a net loss of $4.9 million or $0.72 diluted loss per share compared with net income of $15.4 million or $1.70 diluted earnings per share in the third quarter of 2020. The prior year quarter included a one-time gain of $37.0 million on an involuntary sale of real estate. Adjusted net loss (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the third quarter of 2021 was a loss of $3.5 million or $0.64 diluted loss per share compared with income of $14.4 million or $1.60 diluted earnings per share in the third quarter of 2020. 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”).
Even though the company recorded a net loss in the third quarter, book value per share increased by approximately 16% to $30.39 per share. A contributing factor to the increase was the conversion or exchange of a portion of the company’s convertible notes into or for common stock. In the third quarter, holders of the company’s convertible notes converted or exchanged $82.8 million in principal into approximately 1.36 million of the company’s common shares. The transactions increased shareholders’ equity by approximately $81.1 million (net of related transaction expenses). Additionally, these transactions decreased long-term debt by $82.5 million, accounting for a significant portion of the reduction of over 50% from the second quarter of 2021. The company recognized debt conversion expenses of approximately $1.3 million on these transactions in the third quarter. After these transactions, the number of common shares outstanding increased from 8,265,640 at the end of June 30, 2021 to 9,591,079 at the end of September 30, 2021.
Subsequent to third quarter, in the month of October the company converted or exchanged an additional $28 million principal amount of debt into approximately 459,000 of the company’s common shares.
Consolidated gross written premiums of $174.3 million for the third quarter of 2021 increased 49.6% from $116.5 million in the third quarter of 2020. The increase was due to the continued growth of TypTap Insurance Company, policies transitioned from Gulfstream Property & Casualty Insurance Company and a quota share reinsurance arrangement with United Property & Casualty Insurance Company.
Consolidated gross premiums earned of $149.8 million for the third quarter of 2021 increased 40.4% from $106.7 million in the third quarter of 2020. The increase was driven by the growth in Homeowners Choice gross premiums earned from $86.8 million to $98.3 million and the growth of TypTap gross premiums earned from $19.9 million to $51.5 million.
Premiums ceded for reinsurance for the third quarter of 2021 increased to $55.6 million from $44.2 million in the third quarter of 2020 as a result of the growth in both TypTap and Homeowners Choice and represented 37.1% and 41.5%, respectively, of gross premiums earned. Premiums ceded for reinsurance included a prorated share of an $8 million increase resulting from a periodic true-up of total insured value attributable to the growth of the company.
Net investment income increased to $2.5 million from $1.8 million in the third quarter of 2020. This increase was due to an increase in income from limited partnership investments, real estate investments and an investment in an unconsolidated joint venture offset by a decrease in interest income from fixed-maturity security investments.
Net realized investment gains for the third quarter of 2021 increased to $1.2 million from $0.2 million for the third quarter of 2020. This increase was primarily due to net gains from selling equity securities.
Net unrealized investment losses were $1.9 million in the third quarter of 2021 compared with $1.3 million of net unrealized investment gains for the third quarter of 2020.
1
Losses and loss adjustment expenses for the third quarter of 2021 were $62.7 million compared with $51.7 million in the same period of 2020. The increase in the dollars of losses was attributable to the company’s growing premium base, storm related losses of $6.5 million from events in our four northeastern states, and $6.5 million of losses from the re-estimation of losses from Hurricane Sally and Tropical Storm Eta.
Policy acquisition and other underwriting expenses for the third quarter of 2021 were $23.3 million compared with $14.2 million in the same quarter of 2020. The increase relates to the growth of TypTap and the amortization of increased costs associated with the quota share arrangement with United.
Nine Months Ended September 30, 2021 - Financial Results
Net income for the nine months ended September 30, 2021 totaled $5.8 million or $0.22 diluted earnings per share compared with $24.9 million or $3.03 diluted earnings per share for the nine months ended September 30, 2020. The decrease in net income was primarily due to an increase in losses and loss adjustment expenses of $44.7 million, a one-time gain of $37.0 million on an involuntary sale of real estate included in the company’s 2020 results, and a $30.5 million increase in policy acquisition and other underwriting expenses, offset by an increase in net premiums earned of $77.5 million and a $12.6 million increase in income from our investment portfolio.
Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the nine months ended September 30, 2021 was $6.3 million or $0.15 diluted earnings per share compared with $25.3 million or $3.07 diluted earnings per share in the same period of 2020. An explanation of this non-GAAP financial measure and reconciliations to the applicable GAAP numbers accompany this press release.
Consolidated gross written premiums for the nine-month periods increased 32.9% to $485.1 million in 2021 from $364.9 million in 2020. The increase was due to the continued growth of TypTap, policies transitioned from Gulfstream and to a quota share reinsurance arrangement with United.
Consolidated gross premiums earned for the nine months ended September 30, 2021 increased to $420.2 million from $306.9 million during the same nine-month period in 2020. The increase was primarily attributable to the quota share arrangement with United and the growth of TypTap’s business.
Premiums ceded for the nine months ended September 30, 2021 were $145.1 million or 34.5% of gross premiums earned compared with $109.3 million or 35.6% of gross premiums earned during the same period in 2020. Premiums ceded for reinsurance included a prorated share of an $8 million increase resulting from a periodic true-up of total insured value attributable to the growth of the company.
Net investment income for the nine months ended September 30, 2021 was $9.7 million compared with $3.2 million in the nine months ended September 30, 2020. The $6.5 million increase was primarily due to losses from limited partnership investments in 2020 due to the economic effects of the COVID-19 pandemic and a net gain of $2.8 million recognized in 2021 for a real estate investment legal settlement.
Losses and loss adjustment expenses for the nine months ended September 30, 2021 and 2020 were $164.3 million and $119.7 million, respectively. The increase in the dollars of losses was attributable to the company’s growing premium base, losses of $6.5 million from events in our four northeastern states, and $10.8 million of losses from the re-estimation of losses from Hurricane Sally and Tropical Storm Eta.
Policy acquisition and other underwriting expenses for the nine months ended September 30, 2021 were $69.6 million compared with $39.0 million in the same nine-month period in 2020. The increase relates to the growth of TypTap, and the amortization of increased costs associated with a quota share arrangement with United.
Management Commentary
“As TypTap continues to expand, we are making important investments to maximize TypTap’s opportunity,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “We are confident the long-term payback on these investments will outweigh any short-term impact.”
Conference Call
HCI Group will hold a conference call tomorrow, November 9, 2021, 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 8:30 a.m. Eastern time.
2
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) 506-0062
Listen-only international number: (973) 528-0011
Entry Code: 775232
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.comthrough December 9, 2021.
Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 42978
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. HCI’s leading insurance operation, TypTap Insurance Company, is a rapidly growing, technology-driven insurance company that is expanding nationwide to provide homeowners and flood insurance. 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 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.
Investor Relations Contact:
Matt Glover
Gateway Group, Inc.
Tel (949) 574-3860
Media Contact:
Jordan Schmidt
Gateway Group, Inc.
Tel (949) 386-6332
- Tables to follow -
3
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)
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September 30, 2021 |
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December 31, 2020 |
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(Unaudited) |
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Assets |
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Fixed-maturity securities, available for sale, at fair value (amortized cost: $45,016 and $70,265, respectively and allowance for credit losses: $0 and $588, respectively) |
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$ |
46,053 |
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$ |
71,722 |
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Equity securities, at fair value (cost: $46,771 and $47,029, respectively) |
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50,223 |
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51,130 |
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Limited partnership investments |
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26,039 |
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27,691 |
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Investment in unconsolidated joint venture, at equity |
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370 |
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705 |
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Real estate investments |
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73,663 |
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74,472 |
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Total investments |
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196,348 |
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225,720 |
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Cash and cash equivalents |
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569,134 |
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431,341 |
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Restricted cash |
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2,400 |
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2,400 |
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Accrued interest and dividends receivable |
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463 |
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588 |
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Income taxes receivable |
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— |
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4,554 |
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Premiums receivable, net (allowance: $3,756 and $2,053, respectively) |
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43,078 |
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68,382 |
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Prepaid reinsurance premiums |
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47,968 |
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36,376 |
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Reinsurance recoverable, net of allowance for credit losses: |
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Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively) |
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9,658 |
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14,127 |
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Unpaid losses and loss adjustment expenses (allowance: $44 and $85, respectively) |
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39,468 |
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71,019 |
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Deferred policy acquisition costs |
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47,129 |
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43,858 |
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Property and equipment, net |
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13,946 |
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12,767 |
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Right-of-use-assets - operating leases |
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2,576 |
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4,002 |
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Intangible assets, net |
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10,807 |
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3,568 |
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Funds held in trust for assumed business |
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79,965 |
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— |
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Other assets |
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13,174 |
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22,611 |
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Total assets |
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$ |
1,076,114 |
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$ |
941,313 |
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Liabilities and Equity |
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Losses and loss adjustment expenses |
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$ |
203,177 |
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$ |
212,169 |
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Unearned premiums |
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334,299 |
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269,399 |
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Advance premiums |
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19,062 |
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11,370 |
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Assumed reinsurance balances payable |
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88 |
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87 |
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Reinsurance payable on paid losses and loss adjustment expenses |
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4,727 |
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— |
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Accrued expenses |
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15,187 |
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10,181 |
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Income taxes payable |
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3,574 |
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— |
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Deferred income taxes, net |
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3,708 |
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11,925 |
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Revolving credit facility |
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— |
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23,750 |
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Long-term debt |
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78,083 |
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156,511 |
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Lease liabilities - operating leases |
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2,578 |
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4,014 |
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Other liabilities |
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31,372 |
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40,771 |
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Total liabilities |
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695,855 |
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740,177 |
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Commitments and contingencies |
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Redeemable noncontrolling interest |
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87,731 |
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— |
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Equity: |
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Common stock, (no par value, 40,000,000 shares authorized, 9,591,079 and 7,785,617 |
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— |
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— |
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Additional paid-in capital |
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39,905 |
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— |
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Retained income |
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250,808 |
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199,592 |
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Accumulated other comprehensive income, net of taxes |
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799 |
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1,544 |
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Total stockholders' equity |
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291,512 |
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201,136 |
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Noncontrolling interests |
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1,016 |
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— |
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Total equity |
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292,528 |
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201,136 |
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Total liabilities, redeemable noncontrolling interest, and equity |
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$ |
1,076,114 |
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$ |
941,313 |
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4
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(Dollar amounts in thousands, except per share amounts)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Revenue |
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Gross premiums earned |
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$ |
149,809 |
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$ |
106,694 |
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$ |
420,191 |
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$ |
306,862 |
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Premiums ceded |
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(55,577 |
) |
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(44,231 |
) |
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(145,112 |
) |
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(109,304 |
) |
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Net premiums earned |
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94,232 |
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62,463 |
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275,079 |
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197,558 |
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Net investment income |
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2,520 |
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1,832 |
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9,749 |
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3,244 |
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Net realized investment gains (losses) |
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1,232 |
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177 |
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4,952 |
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(632 |
) |
Net unrealized investment (losses) gains |
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(1,869 |
) |
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1,340 |
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(649 |
) |
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(581 |
) |
Credit losses on investments |
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— |
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(70 |
) |
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— |
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(596 |
) |
Policy fee income |
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1,000 |
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895 |
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2,962 |
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2,571 |
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Gain on involuntary conversion |
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— |
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36,969 |
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— |
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36,969 |
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Other |
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2,102 |
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|
421 |
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3,502 |
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1,591 |
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Total revenue |
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99,217 |
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104,027 |
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295,595 |
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240,124 |
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Expenses |
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Losses and loss adjustment expenses |
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62,664 |
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51,743 |
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164,332 |
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|
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|
119,664 |
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Policy acquisition and other underwriting expenses |
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23,340 |
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|
14,210 |
|
|
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69,574 |
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39,027 |
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General and administrative personnel expenses |
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11,537 |
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|
9,871 |
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31,733 |
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27,969 |
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Interest expense |
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1,664 |
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|
2,856 |
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5,743 |
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|
8,846 |
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Loss on repurchases of convertible senior notes |
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— |
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— |
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— |
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|
150 |
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Loss on extinguishment of debt |
|
|
— |
|
|
|
98 |
|
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— |
|
|
|
|
|
98 |
|
Debt conversion expense |
|
|
1,273 |
|
|
|
— |
|
|
|
|
1,273 |
|
|
|
|
|
— |
|
Other operating expenses |
|
|
5,243 |
|
|
|
3,713 |
|
|
|
|
14,245 |
|
|
|
|
|
10,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total expenses |
|
|
105,721 |
|
|
|
82,491 |
|
|
|
|
286,900 |
|
|
|
|
|
206,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) income before income taxes |
|
|
(6,504 |
) |
|
|
21,536 |
|
|
|
|
8,695 |
|
|
|
|
|
34,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax (benefit) expense |
|
|
(1,636 |
) |
|
|
6,146 |
|
|
|
|
2,888 |
|
|
|
|
|
9,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income |
|
$ |
(4,868 |
) |
|
$ |
15,390 |
|
|
|
$ |
5,807 |
|
|
|
|
$ |
24,873 |
|
Net income attributable to redeemable noncontrolling interest |
|
|
(2,202 |
) |
|
|
— |
|
|
|
|
(5,175 |
) |
|
|
|
|
— |
|
Net loss attributable to noncontrolling interests |
|
|
833 |
|
|
|
— |
|
|
|
|
1,196 |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income after noncontrolling interests |
|
$ |
(6,237 |
) |
|
$ |
15,390 |
|
|
|
$ |
1,828 |
|
|
|
|
$ |
24,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic (loss) earnings per share |
|
$ |
(0.72 |
) |
|
$ |
1.97 |
|
|
|
$ |
0.23 |
|
|
|
|
$ |
3.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted (loss) earnings per share |
|
$ |
(0.72 |
) |
|
$ |
1.70 |
|
|
|
$ |
0.22 |
|
|
|
|
$ |
3.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dividends per share |
|
$ |
0.40 |
|
|
$ |
0.40 |
|
|
|
$ |
1.20 |
|
|
|
|
$ |
1.20 |
|
5
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 |
|
|
Nine Months Ended |
|
||||||||||||||||||
GAAP |
|
September 30, 2021 |
|
|
September 30, 2021 |
|
||||||||||||||||||
|
|
Loss |
|
|
Shares (a) |
|
|
Per Share |
|
|
Income |
|
|
Shares (a) |
|
|
Per Share |
|
||||||
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
||||||
Net (loss) income |
|
$ |
(4,868 |
) |
|
|
|
|
|
|
|
$ |
5,807 |
|
|
|
|
|
|
|
||||
Less: Net income attributable to redeemable noncontrolling interest |
|
|
(2,202 |
) |
|
|
|
|
|
|
|
|
(5,175 |
) |
|
|
|
|
|
|
||||
Less: TypTap Group's net loss attributable to non-HCI common stockholders and TypTap Group's participating securities |
|
|
774 |
|
|
|
|
|
|
|
|
|
1,191 |
|
|
|
|
|
|
|
||||
Net (loss) income attributable to HCI |
|
|
(6,296 |
) |
|
|
|
|
|
|
|
|
1,823 |
|
|
|
|
|
|
|
||||
Less: (Loss) income attributable to participating securities |
|
|
537 |
|
|
|
|
|
|
|
|
|
(37 |
) |
|
|
|
|
|
|
||||
Basic (Loss) Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(Loss) income allocated to common stockholders |
|
|
(5,759 |
) |
|
|
8,023 |
|
|
$ |
(0.72 |
) |
|
|
1,786 |
|
|
|
7,676 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Effect of Dilutive Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Stock options* |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
182 |
|
|
|
|
||
Warrants* |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
234 |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Diluted (Loss) Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(Loss) income available to common stockholders and assumed conversions |
|
$ |
(5,759 |
) |
|
|
8,023 |
|
|
$ |
(0.72 |
) |
|
$ |
1,786 |
|
|
|
8,092 |
|
|
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(a) Shares in thousands. |
|
|||||||||||||||||||||||
* For the three months ended September 30, 2021, stock options and warrants were excluded due to anti-dilutive effect. |
|
|||||||||||||||||||||||
Non-GAAP Financial Measures
Adjusted net income (loss) is a non-GAAP financial measure that removes from net income (loss) HCI Group'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 (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 (Loss) Income to Non-GAAP Adjusted Net (Loss) Income
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||
|
|
September 30, 2021 |
|
September 30, 2021 |
||||||||||||||||
GAAP Net (loss) income |
|
|
|
|
$ |
(4,868 |
) |
|
|
|
|
|
|
$ |
5,807 |
|
|
|
||
Net unrealized investment losses |
|
$ |
1,869 |
|
|
|
|
|
|
|
$ |
649 |
|
|
|
|
|
|
||
Less: Tax effect at 24.52182% |
|
$ |
(458 |
) |
|
|
|
|
|
|
$ |
(159 |
) |
|
|
|
|
|
||
Net adjustment to Net (loss) income |
|
|
|
|
$ |
1,411 |
|
|
|
|
|
|
|
$ |
490 |
|
|
|
||
Non-GAAP Adjusted Net (loss) income |
|
|
|
|
$ |
(3,457 |
) |
|
|
|
|
|
|
$ |
6,297 |
|
|
|
||
6
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 |
|
|
Nine Months Ended |
|
||||||||||||||||||
Non-GAAP |
|
September 30, 2021 |
|
|
September 30, 2021 |
|
||||||||||||||||||
|
|
Loss |
|
|
Shares (a) |
|
|
Per Share |
|
|
Income |
|
|
Shares (a) |
|
|
Per Share |
|
||||||
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
||||||
Adjusted net (loss) income (non-GAAP) |
|
$ |
(3,457 |
) |
|
|
|
|
|
|
|
$ |
6,297 |
|
|
|
|
|
|
|
||||
Less: Net income attributable to redeemable noncontrolling interest |
|
|
(2,202 |
) |
|
|
|
|
|
|
|
$ |
(5,175 |
) |
|
|
|
|
|
|
||||
Less: TypTap Group's net loss attributable to non-HCI common stockholders and TypTap Group's participating securities |
|
|
42 |
|
|
|
|
|
|
|
|
|
41 |
|
|
|
|
|
|
|
||||
Net (loss) income attributable to HCI |
|
|
(5,617 |
) |
|
|
|
|
|
|
|
|
1,163 |
|
|
|
|
|
|
|
||||
Less: Income attributable to participating securities |
|
|
482 |
|
|
|
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic (Loss) Earnings Per Share before unrealized gains/losses on equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(Loss) income allocated to common stockholders |
|
|
(5,135 |
) |
|
|
8,023 |
|
|
$ |
(0.64 |
) |
|
|
1,179 |
|
|
|
7,676 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Effect of Dilutive Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Stock options* |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
182 |
|
|
|
|
||
Warrants* |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
234 |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Diluted (Loss) Earnings Per Share before unrealized gains/losses on equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(Loss) income available to common stockholders and assumed conversions |
|
$ |
(5,135 |
) |
|
$ |
8,023 |
|
|
$ |
(0.64 |
) |
|
$ |
1,179 |
|
|
$ |
8,092 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(a) Shares in thousands. |
|
|||||||||||||||||||||||
* For the three months ended September 30, 2021, stock options and warrants were excluded due to anti-dilutive effect. |
|
|||||||||||||||||||||||
Reconciliation of GAAP Diluted EPS to Non-GAAP Adjusted Diluted EPS
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||
|
|
September 30, 2021 |
|
September 30, 2021 |
||||||||||||||||
GAAP diluted (Loss) Earnings Per Share |
|
|
|
|
$ |
(0.72 |
) |
|
|
|
|
|
|
$ |
0.22 |
|
|
|
||
Net unrealized investment losses |
|
$ |
0.23 |
|
|
|
|
|
|
|
$ |
0.08 |
|
|
|
|
|
|
||
Less: Tax effect at 24.52182% |
|
$ |
(0.16 |
) |
|
|
|
|
|
|
$ |
(0.15 |
) |
|
|
|
|
|
||
Net adjustment to GAAP diluted EPS |
|
|
|
|
$ |
0.08 |
|
|
|
|
|
|
|
$ |
(0.07 |
) |
|
|
||
Non-GAAP Adjusted diluted EPS |
|
|
|
|
$ |
(0.64 |
) |
|
|
|
|
|
|
$ |
0.15 |
|
|
|
||
7