HCI (HCI) 8-K HCI Group Reports Second Quarter and Six-Month 2014 Results

Exhibit 99.1

HCI Group Reports Second Quarter and Six-Month 2014 Results

Tampa, Fla. – August 5, 2014 – HCI Group, Inc. (NYSE:HCI) reported results today for the three and six months ended June 30, 2014.

Second Quarter 2014 - Financial Results

Income available to common stockholders in the second quarter of 2014 totaled $16.4 million or $1.39 diluted earnings per common share compared with $16.2 million or $1.40 diluted earnings per common share in the second quarter of 2013.

Gross premiums earned in the second quarter of 2014 increased 11.3% to $91.2 million from $82.0 million in the same period in 2013. The increase was primarily due to policies assumed from Citizens Property Insurance Corporation in November 2013.

Net premiums earned (defined as gross premiums earned less premiums ceded to reinsurance companies) in the second quarter of 2014 increased 9.3% to $62.6 million from $57.3 million in the same period in 2013. Premiums ceded in the second quarter of 2014 were $28.6 million, or 31.3% of the company’s gross premiums earned, compared with $24.6 million, or 30.0% of the company’s gross premiums earned, during the same period in 2013. Our reinsurance rates are based primarily on policy exposures reflected in gross premiums earned.

Net investment income in the second quarter of 2014 was $1.5 million compared with $295,000 in the same period in 2013. The increase was due to the increase in our investment portfolio, which has grown from $66.5 million at June 30, 2013 to $179.2 million at June 30, 2014.

Net realized investment gains were $1.2 million in the second quarter of 2014 compared to net realized investment losses of $8,000 in the same period in 2013.

Losses and loss adjustment expenses during the second quarter of 2014 were $18.4 million compared with $17.4 million in the same period in 2013.

Policy acquisition and other underwriting expenses in the second quarter of 2014 were $9.6 million compared with $7.3 million in the comparable period in 2013. The increase was primarily attributable to commissions and premium taxes related to an increase in policy renewals resulting from policies assumed from Citizens in 2012 and 2013. Other operating expenses, which include a variety of general and administrative expenses, totaled $9.4 million in the second quarter of 2014 compared with $7.4 million in the second quarter of 2013. The increase was primarily attributable to an additional $2.1 million in compensation and related expenses including approximately $1.5 million of accrued bonuses and stock-based compensation.

Interest expense totaled $2.6 million and $846,000 in the second quarter of 2014 and 2013, respectively. The increase was attributable to a $103 million convertible debt offering completed in December 2013.

Second Quarter 2014 - Financial Ratios

The company’s loss ratio applicable to the three months ended June 30, 2014 (defined as losses and loss adjustment expenses related to net premiums earned) was 29.3% compared with 30.4% in the three months ended June 30, 2013.

The expense ratio applicable to the three months ended June 30, 2014 (defined as underwriting expenses, interest and other operating expenses related to net premiums earned) was 34.4% compared with 27.0% for the three months ended June 30, 2013.

Expressed as a total of all expenses in relation to net premiums earned, the combined loss and expense ratio to net premiums earned was 63.7% in the second quarter of 2014 compared with 57.4% for the three months ended June 30, 2013.

Six Months Ended June 30, 2014 - Financial Results

Income available to common stockholders for the six months ended June 30, 2014 totaled $34.1 million or $2.84 diluted earnings per common share, compared with $36.6 million or $3.20 diluted earnings per common share for the six months ended June 30, 2013.

Gross premiums earned for the six months ended June 30, 2014 increased 12.5% to $185.1 million from $164.5 million in the same year-ago period. The increase was primarily due to policies assumed from Citizens Property Insurance Corporation in November 2013.

Net premiums earned for the six months ended June 30, 2014 increased 9.5% to $129.0 million from $117.9 million in the same period in 2013. Premiums ceded for the six months ended June 30, 2014 were $56.1 million, or 30.3% of the company’s gross premiums earned, compared with $46.6 million, or 28.3% of the company’s gross premiums earned, during the same period in 2013.

Net investment income for the six months ended June 30, 2014 and 2013 was $2.5 million and $434,000, respectively.

Net realized investment gains were $1.2 million for the six months ended June 30, 2014 compared to net realized investment gains of $12,000 in the same period in 2013.

Losses and loss adjustment expenses for the six months ended June 30, 2014 and 2013 were $36.9 million and $33.3 million, respectively.

Policy acquisition and other underwriting expenses for the six months ended June 30, 2014 were $18.7 million compared with $13.3 million for the six months ended June 30, 2013. Other operating expenses totaled $18.9 million for the six months ended June 30, 2014 compared with $13.5 million for the six months ended June 30, 2013.

Interest expense from the company’s senior notes issued in 2013 totaled $5.2 million for the six months ended June 30, 2014 compared with $1.5 million for the six months ended June 30, 2013.

Six Months Ended June 30, 2014 - Financial Ratios

The company’s loss ratio applicable to the six months ended June 30, 2014 was 28.6% compared with 28.2% in the six months ended June 30, 2013.

The expense ratio applicable to the six months ended June 30, 2014 was 33.2% compared with 24.0% in the same period in 2013.

Expressed as a total of all expenses related to net premiums earned, the combined loss and expense ratio to net premiums earned was 61.8% in the six months ended June 30, 2014 compared with 52.2% in the same period in 2013.

Management Commentary

“The second quarter of 2014 was another successful quarter for HCI Group,” said Paresh Patel, the company’s chairman and chief executive officer. “Our insurance division continues to generate consistent results as we stay committed to our strict underwriting principles. Our strong balance sheet and solid management team provide great opportunities for growth.”

Conference Call

HCI Group will hold a conference call later today (August 5, 2014) to discuss these financial results. Chairman and Chief Executive Officer Paresh Patel and Chief Financial Officer Richard Allen will host the call starting at 4:30 p.m. Eastern time. A question and answer session will follow management’s presentation.

Dial-in number: (877) 407-8033

International number: (201) 689-8033

Investors or analysts that wish to participate in the Q&A portion of the call should contact Kevin Mitchell at kmitchell@hcigroup.com or (813) 405-3603.

The conference call will be simulcast and available for replay via the investor section of the company’s website at www.hcigroup.com.

Please call the conference telephone number 5 to 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 Liolios Group at (949) 574-3860.

A replay of the call will be available after 8:00 p.m. Eastern time on the same day through September 5, 2014.

Toll-free replay number: (877) 660-6853

International replay number: (201) 612-7415

Conference ID: 13587171

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. The company’s largest subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., is a leading provider of property and casualty insurance in the state of Florida.

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. Its 8% Senior Notes trade on the New York Stock Exchange under the ticker symbol “HCJ.” For more information about HCI Group, 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. There can be no assurance, for example, that information technology or real estate will enhance growth and profitability prospects. 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:

Kevin Mitchell, Vice President of Investor Relations

HCI Group, Inc.

Tel (813) 405-3603

kmitchell@hcigroup.com

Investor Relations Contact:

Matt Glover or Michael Koehler

Liolios Group, Inc.

Tel (949) 574-3860

hci@liolios.com

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollar amounts in thousands, except share amounts)

	At June 30, 2014		At December 31, 2013
	(Unaudited)
Assets
Fixed-maturity securities, available for sale, at fair value (amortized cost: $117,944 and $110,738, respectively)	$	122,430		112,151
Equity securities, available for sale, at fair value (cost: $35,791 and $17,248, respectively)		37,812		17,649
Real estate investments		18,938		16,228
Total investments		179,180		146,028
Cash and cash equivalents		302,048		293,398
Accrued interest and dividends receivable		1,263		1,133
Premiums receivable		28,762		14,674
Prepaid reinsurance premiums		33,277		28,066
Deferred policy acquisition costs		20,083		14,071
Property and equipment, net		12,643		13,132
Other assets		22,399		15,814
Total assets	$	599,655		526,316
Liabilities and Stockholders’ Equity
Losses and loss adjustment expenses	$	43,044		43,686
Unearned premiums		206,657		171,907
Advance premiums		14,873		4,504
Assumed reinsurance balances payable		316		4,660
Accrued expenses		10,162		4,032
Dividends payable		3,111		19
Income taxes payable		103		543
Deferred income taxes, net		2,951		2,740
Long-term debt		128,205		126,932
Other liabilities		14,140		6,772
Total liabilities		423,562		365,795
Stockholders’ equity:
7% Series A cumulative convertible preferred stock (liquidation preference $10.00 per share), no par value, 1,500,000 shares authorized, 0 and 110,684 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively		—		—
Series B junior participating preferred stock (no par value, 400,000 shares authorized, no shares issued or outstanding)		—		—
Preferred stock (no par value 18,100,000 shares authorized, no shares issued or outstanding)		—		—
Common stock, (no par value, 40,000,000 shares authorized, 10,690,069 and 10,939,268 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively)		—		—
Additional paid-in capital		36,511		48,966
Retained income		135,585		110,441
Accumulated other comprehensive income, net of taxes		3,997		1,114
Total stockholders’ equity		176,093		160,521
Total liabilities and stockholders’ equity	$	599,655		526,316

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(Dollar amounts in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenue
Gross premiums earned	$	91,221			81,952		$	185,109			164,499
Premiums ceded		(28,572	)		(24,617	)		(56,080	)		(46,613	)
Net premiums earned		62,649			57,335			129,029			117,886
Net investment income		1,481			295			2,540			434
Policy fee income		638			1,426			895			2,198
Net realized investment gains (losses)		1,167			(8	)		1,171			12
Other		349			285			766			614
Total revenue		66,284			59,333			134,401			121,144
Expenses
Losses and loss adjustment expenses		18,383			17,414			36,948			33,286
Policy acquisition and other underwriting expenses		9,559			7,308			18,688			13,276
Interest expense		2,609			846			5,183			1,532
Other operating expenses		9,350			7,358			18,889			13,473
Total expenses		39,901			32,926			79,708			61,567
Income before income taxes		26,383			26,407			54,693			59,577
Income tax expense		9,953			10,172			20,643			22,955
Net income	$	16,430			16,235		$	34,050			36,622
Preferred stock dividends		1			(32	)		4			(66	)
Income available to common stockholders	$	16,431			16,203		$	34,054			36,556
Basic earnings per common share	$	1.53			1.44		$	3.14			3.31
Diluted earnings per common share	$	1.39			1.40		$	2.84			3.20
Dividends per common share	$	0.27			0.23		$	0.55			0.45