HCI reports $5 million Q4 operating income despite $78 million net Milton loss

By Michael Loney

Feb 27 - (The Insurer) - Florida carrier HCI Group has reported reduced Q4 operating income of $5.0 million, with the results including $78 million in net Hurricane Milton losses and a 4.4% increase in gross written premiums.

• Q4 $0.31 EPS compares to $3.22 in Q4 2023, beats -$2.98 consensus estimate

• GWP up 4.4% to $334.5 million in Q4, up 30% to $1.17 billion FY 2024

• Homeowners Choice Q4 GWP down 20% to $145.1 million, TypTap up 26% to $175.0 million

• Condo Owners Reciprocal Exchange GWP $14.4 million Q4, $81.4 million FY 2024

• Q4 includes a $78 million net Milton loss partially offset by $24.5 million favourable development

• CEO Patel: “We plan to keep rates flat for the foreseeable future”

Tampa-based HCI reported adjusted net income for the fourth quarter of $5.0 million, down from $38.8 million in the same period of 2023.

The $0.31 diluted earnings per share compared to $3.22 diluted earnings per share in the fourth quarter of 2023, but beat the expected $2.98 loss per share consensus estimate of six analysts tracked by MarketWatch.

GWP increased 4.4% to $334.5 million in the quarter, from $320.5 million in the prior-year period.

Homeowners Choice’s GWP dropped to $145.1 million from $182.0 million while TypTap’s GWP increased to $175.0 million from $138.5 million. Condo Owners Reciprocal Exchange reported GWP of $14.4 million in the quarter, having started operations earlier in the year.

HCI's consolidated gross premiums earned in the fourth quarter increased by 38.0% to $297.5 million from $215.2 million in the fourth quarter of 2023, driven primarily by assumptions of policies from state-run Citizens Property Insurance Corporation.

The gross premiums earned loss ratio was 37.2% in the fourth quarter, compared with 30.4% in Q4 2023.

Premiums ceded for reinsurance in the fourth quarter were $151.1 million compared with $66.6 million in the fourth quarter of 2023.

Q4 2024 included the reversal of $50.6 million of previously accrued benefits related to retrospective reinsurance provisions as a result of losses caused by Hurricane Milton.

Losses and loss adjustment expenses in the fourth quarter were $110.7 million compared with $65.4 million in the fourth quarter of 2023. Loss expenses in Q4 2024 included a net loss of $78.0 million from Hurricane Milton, partially offset by $24.5 million of favourable development mostly related to the 2024 accident year.

HCI in November last year had estimated that its Milton Q4 net expense was expected to be $128 million including a reversal of benefits under the multiyear reinsurance agreement, which is roughly in line with what it actually reported on Thursday.

For the full year, HCI’s GWP was $1.17 billion, up from $898.6 million.

Homeowners Choice’s GWP increased to $593.9 million for the year from $535.1 million in 2023, while TypTap GWP increased to $491.4 million from $363.6 million. Condo Owners’ GWP was $81.4 million in the year.

Consolidated gross premiums earned for 2024 increased by 41.5% to $1.08 billion from $765.5 million in 2023, driven primarily by growth in Florida due to assumptions of policies from Citizens Property Insurance Corporation.

The gross premiums earned loss ratio for the year was 34.6%, compared with 33.3% in 2023.

Premiums ceded for reinsurance for 2024 were $405.7 million compared with $269.6 million for 2023. The 12 months of 2024 included the reversal of $62.9 million of previously accrued benefits related to retrospective reinsurance provisions as a result of losses caused by Hurricanes Helene and Milton.

Losses and loss adjustment expenses for 2024 were $374.7 million compared with $254.6 million for 2023. Loss expense included $78.0 million from Hurricane Milton, $43.0 million from Hurricane Helene and $6.5 million from Hurricane Debby.

“Even with the hurricanes in 2024, HCI Group is unwavering in its commitment to Florida and supporting our existing and new policyholders. As part of our ongoing efforts, we plan to keep rates flat for the foreseeable future,” said HCI chairman and CEO Paresh Patel.

“Given an increased level of catastrophe activity across the country, we are taking initial steps to make our best-in-class technology available to other carriers and in additional geographies,” he added.

HCI announced earlier this week that its new reciprocal exchange Tailrow Insurance Exchange has officially begun operations after assuming nearly 14,000 policies from Florida's state-backed carrier Citizens Property Insurance Corporation.