hci investor presentation-1-9-18 - amazon s3 investo… · book value/share2(mrq) $21.37...
TRANSCRIPT
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CorporatePresentationJanuary2018 NYSE:HCI
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NYSE:HCITM
ImportantCautionsRegardingForward-LookingStatementsThis presentation includes certain forward-looking statements and information, including statements regarding plans,strategies and expectations of HCI Group, Inc. (“HCI” or the “Company”). When used in this presentation, words such as“believes,” “anticipates,” “expects,” “estimates,” or words of similar meaning are generally intended to identifyforward-looking statements. All statements other than statements of historical fact included in this presentation areforward-looking statements. These forward-looking statements are subject to risks, uncertainties, assumptions andother factors, many of which are beyond the control of the Company. Important factors that could cause actual resultsto differ materially from those expressed or implied by the forward-looking statements are described in the Company’sfilings it makes from time to time with the Securities and Exchange Commission, including within the “Risk Factors”section of the Annual Report on Form 10-K for the year ended December 31, 2016 filed February 22, 2017.
©2018HCIGroup,Inc.AllRightsReserved
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NYSE:HCITMKeyCompanyStatisticsasofSept.30,2017
(1) Grossrevenue=totalrevenuebeforepremiumsceded(2) $193.1M/9.036M(3) PerAST;includes814,000sharessubjecttoprepaidforwardcontracts;sharesoutstandingperGAAPare9.036M(4) Asof9/30/17(5) PerNASDAQ.com
2
$64
$113$126
$149
$239
$344
$380
$427$399
'08 '09 '10 '11 '12 '13 '14 '15 '16
($M)GrossRevenues(1)
FiscalyearendedDecember31
StockPrice(1/8/18) $33.26
CurrentPricetoBook(P/B) 1.56x
52WeekLow/High $27.11/50.93
52WeekLow/HighP/B 1.35x/2.00x
CommonSharesOut.3 9.85M
FullyDilutedShareCt.4 12.35M
FreeFloat,est. 7.8M
Avg.DailyVol.(3mo.)5 172,511
MarketCapitalization $327.6M
GrossRevenue¹(TTM) $385.7M
EPS(TTM) ($1.58)
P/E(TTM) NM
DividendYield 4.2%
Cash(MRQ) $292.4M
TotalAssets(MRQ) $1,029.3M
TotalDebt(MRQ) $236.3M
BookValue/Share2 (MRQ) $21.37
Stockholders’Equity(MRQ) $193.1M
InstitutionalOwnership 73.4%
InsiderOwnership 20.7%
Employees 331
Founded/IPO 2006/2008 Sources:HCI,CapitalIQNM=notmeaningful;MRQ=mostrecentquarter;TTM=trailingtwelvemonths.MRQandTTMfiguresasofquarterend9/30/17
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NYSE:HCITMOurBusinessLines
HCIGroupownsenterprisesengagedindiverseyetcomplementarybusinessactivities
l Property&CasualtyInsurance:
l HomeownersChoice – homeownersinsurance
l TypTap InsuranceCompany – privatefloodinsuranceofferedthroughtheTypTap.comonlineplatform
l Reinsurance: Claddaugh,HCI’scaptivereinsurer,participatesinthereinsuranceprogramforHomeownersChoice
l RealEstate: GreenleafCapitalmanagesanddevelopsHCI’sgrowingrealestateportfolio
l Technology: Exzeo developsinnovativeproductsandvalue-addedservicesforHomeownersChoice,TypTapandtheinsuranceindustry
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NYSE:HCITM
Executed$144MConvertibleNotesOffering
KeyMilestones:GrowthThroughInnovation
4
LaunchedInformationTechnologyDivision(Exzeo)Executed$103MConvertibleNotesOffering
CompletedWind-OnlyCitizensAssumption
LaunchedTypTapfor PrivateFloodInsurance
ExecutedFollow-onOffering
LaunchedRealEstateDivision(Greenleaf)AcquiredHomeWiseInsuranceBookofBusiness
DeclaredFirstCashDividend
AnnouncedFirstShareBuyback
FormedCaptiveInsuranceDivision(Claddaugh)CompletedInitialPublicOffering
ExecutedonFirstCitizensAssumption
IncorporatedinFlorida
2016
2006
2007
2008
2009
2010
2011
2012
2013
2015
2017
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NYSE:HCITMInvestmentHighlights
l Top10 Floridahomeownersinsurer (1) ledbyveteranmanagementteamwithsuccessfulentrepreneurialtrackrecord
l Opportunity forcontinuedprofitablegrowthl Marketsharegainsinhomeownersinsurance through:M&A,leveragingindependentagents,
andfutureassumptionsfromCitizens
l ExpansionoffloodinsuranceinFloridaandothergeographies
l OpportunitiestoexpandoutsideofcoreFloridamarket(3)
l Expansionpossibilitiesinotherdivisions,suchasreinsurance,realestateandtechnology
l Disciplinedbusinessexecutionresultsinconsistentprofitability andbest-in-classmargins(2)
l Profitablein39oflast40quarters
l 28consecutivequartersofdividends
l Proprietarytechnologydevelopedin-houseprovidessustainablecompetitiveadvantage
l Well-structuredreinsuranceprogram protectscapitalbase
5
(1) Source:FloridaOfficeofInsuranceRegulationat6/30/17;excludesStateFarm(2) Ascomparedtopublicpeercompanies:FederatedNationalHoldingCompany(FNHC),HeritageInsuranceHoldings,Inc.(HRTG),UnitedInsuranceHoldings
Corp.(UIHC),UniversalInsuranceHoldings(UVE)(3) HomeownersChoicehasreceivedregulatoryapprovaltowritefloodinsurancepoliciesinArkansas,Maryland,NewJersey,North Carolina,Pennsylvania,
SouthCarolina,andTexas.
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NYSE:HCITMExpertiseDrivesProfitableResults
(1) Ascomparedtopublicpeercompanies:FederatedNationalHoldingCompany(FNHC),HeritageInsuranceHoldings,Inc.(HRTG),UnitedInsuranceHoldingsCorp.(UIHC),UniversalInsuranceHoldings(UVE)
Developedproprietaryriskselectiontechnologyandserviceprocessesthatdeliverindustry-leadingresults (1)
l Predictiveunderwritingmodel
l Analyzes48keydatapointsthroughproprietaryalgorithms
l Identifieshistoricallosstrendstoforecastfutureclaimsandprofitability
l Insourcingofallkeyfunctions
l In-housepolicyadministrationandclaimsprocessingfunctionsresultinbettercostcontainmentandlowerlosses
l Bettercustomerexperienceleadstohigherretentionrates
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NYSE:HCITMConservativeApproachtoRisk
*Source:FloridaOfficeofInsuranceRegulationat6/30/17;excludesStateFarm
HCIproactivelymanagesitsriskexposurethroughmultiplestrategies
l RiskSelection
l Premiumadequacy(sufficientpremiumforrisk)
l RiskManagement
l Non-catastrophicexposures(theft,fire&water)
l RiskAllocation
l Geographicdiversificationofpolicies
l RiskTransfer
l Reinsurancepartnerships
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FloridaP&CInsuranceMarketbyPremiums&RiskExposure*
FloridaP&CInsurer
AnnualPremiums
($M) Rank
RiskExposure
($B) Rank
Premiumper$250KofTIV Rank
Universal $896.9 1 $135.0 1 $1,660 3
Citizens 831.5 2 108.8 2 1,911 2
Heritage 528.0 3 92.0 5 1,435 4
FederatedNational 476.8 4 97.0 3 1,229 5
SecurityFirst 366.3 5 92.8 4 986 7
HomeownersChoice $350.3 6 $43.4 17 $2,020 1
United 308.4 7 72.7 6 1,061 6
HCIranks1st inpremiumsper$250,000oftotalinsurablevalue(TIV),whileranking6th bypremiumswritteninFloridaand17th by
riskexposure
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NYSE:HCITM
HomeownersChoice’sRecentPortfolioAcquisitionshaveIncreaseditsGeographic
Diversification
GeographicallyDiversifiedinFlorida
(1) HCIInternalData:Q3-17 8
PoliciesinForceDistributedAcrossAll67CountiesinFlorida,withOnlyFourCountiesIndividually
Accountingfor>10%
Broward(Ft.Lauderdale)
14%
Pinellas(St.Petersburg)
14%
PalmBeach(PalmBeach)
14%Miami-Dade(Miami)13%
AllOthers(63Counties)
45%
GeographicDiversification1 HomeownersChoiceInsuredValuebyCounty1
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NYSE:HCITMReinsurance:TransferringRisk
l HomeownersChoice’sreinsuranceprogramtransferscatastrophicriskto55highly-ratedorfullycollateralized reinsurancepartners
l The2017-2018programprovides$968millionofcatastrophiccoverage (1st eventcover)
l Grossreinsurancepremiumsof~$130millionandfirsteventretentionofonly$16millionforHomeownersChoice
l Since1964,inFloridatherehavebeenonly10stormsratedCategory3orhigherinFlorida
l HCI’scaptivereinsurer,Claddaugh,helpslowercostsbyretainingriskselectivelyfromyeartoyear;afterassumingclaimsforHurricanesIrmaandMatthew,netaftertaxcumulativesavingsareestimatedtobe$55.3million.
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NYSE:HCITM2017-2018ReinsuranceProgram
Note:Figurenotdrawntoscale(1) RMSRiskLinkv15.0Long-TermHurricane,withLossAmplification,excludingStormSurge,withoutSecondaryUncertainty(2) FloridaHurricaneCatastropheFund 10
ConservativeReinsuranceProgramProvidesProtectionAgainstCatastrophicEvents
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NYSE:HCITMCapitalizingonFloridaMarketOpportunity
l ~135,000policies inforce(1)
l AhighlyfragmentedmarketresultsinacquisitionopportunitiesforHCI
l Top10insurerscontrolonly46%
l Weakerplayersimpactedbyrecenthurricanesandneedforcapital
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FloridaP&CInsuranceMarketbyPremiumsWritten*
Rank FloridaP&CInsurer
AnnualizedPremiums
($M)
MarketShare(%)
1 Universal $896.9 9.0%
2 Citizens 831.5 8.3%
3 Heritage 528.0 5.3%
4 FederatedNational 476.8 4.8%
5 Security First 366.3 3.7
6 HomeownersChoice $350.3 3.5%7 United 308.4 3.1%
8 FirstProtective 285.3 2.9%
9 AmericanIntegrity 274.2 2.7%
10 USAA 258.7 2.6%
TotalforTop10Companies $4,576.4 45.8%
TotalforAllCompaniesinFL $10.002.2 100.0%
*Source:FloridaOfficeofInsuranceRegulationat6/30/17;excludesStateFarm(1) ExcludesTypTapInsuranceCo.
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NYSE:HCITMFloodInsurance:$1BMarketinFlorida
(1) HomeownersChoicehasreceivedregulatoryapprovaltowritefloodinsuranceinthefollowingstates:AR,MD,NC,NJ,PA,SC,andTX
(2) Source:FederalEmergencyManagementAgency,asof8/31/17(3) HomeownersChoicehasreceivedregulatoryapprovaltowriteflood
insuranceinthesetoptenstates(4) ThisincludesAR,MD,andPA.HomeownersChoicehasreceivedregulatory
approvaltowritefloodinsuranceinthesestates,whichhaveanaggregatewrittenpremiumin-forceof$117.1M
NationalFloodInsuranceProgram(NFIP)
l $23billionunderfunded
l Passedlegislationtocoverdeficit
l Increasingpremiumsupto25%peryear
HCI’sFloodInsuranceStrategy
l InitiallyfocusedonFlorida,withexpansionintootherstates(1)
l Offersuperiorcoverageandcompetitiverates
l Utilizein-housesoftwaretominimizeunderwritingcosts
l Limitednumberofcompetitors
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StateFloodInsuranceMarketbyPremiumsWritten(2)
Rank State PremiumsWritten($M)
1 Florida $944.5(3)
2 Texas 363.1(3)
3 Louisiana 354.0
4 NewJersey 224.8(3)
5 NewYork 205.7
6 California 192.4
7 SouthCarolina 134.8(3)
8 NorthCarolina 107.9(3)
9 Massachusetts 77.5
10 Virginia 77.3
Total forTop10States $2,682.1
TotalforOtherStates $830.7(4)
TotalforAllStates $3,512.8
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NYSE:HCITMTypTap:Technology-EnabledFloodInsurance
l 100%online-basedinsurancecompanypoweredbyproprietarytechnology
l CurrentlyservingFloridafloodinsurancemarketasalternativetopoliciesofferedbyNationalFloodInsuranceProgram(NFIP)l CosteffectivealternativetorisingratesofNFIP
product
l Threeeasystepsprovideaquoteinseconds:l TypeintheFloridaaddress
l Answerhowmanymonthsoutoftheyearthehomeislivedin
l Providehowmanyfloodclaimshavebeenreportedattheproperty
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FloodInsurance
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NYSE:HCITMLeveragingProprietaryTechnologyPlatform
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l Proplet: Enablesagentstheabilitytosearch,underwriteand purchaseinsurance
l Exzeo: Facilitatesacollaborative,real-time workenvironment
l Intelligentautomationforbusinessprocessesofinsuranceindustry
l AtlasViewer:Identify,trackandmanage dailyclaimsaswellasmajorclaimevents
HCI’stechnologydivisiondevelopsinnovativeproductsandoffersvalue-addedservicestoHomeownersChoice,TypTap,andtheinsuranceindustry
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NYSE:HCITMShareholderValueCreation
l Shareholdersbenefitfromfocusonprofitability
l Robustearningsprofilesupportsconservativeandstrongcapitalstructure
l Paid$13.6Mofdividendsoverthepast12months
l FocusonincreasingBookValueperShareandStockholders’Equity
l ShareRepurchaseActivity:l 2009/2011:Boughtback$~4Mof$6M
plan(519,463shares)
l 2013:Boughtback$30Minconnectionwithconvertibleoffering
l 2014/2015:Boughtback100%of$40Mplan(1,028,570shares)
l 2015/2016: Boughtback100%of$20Mplan(643,703shares)
l 2017:Boughtback$29.7Minconnectionwithconvertibleoffering,and$6.2Minconnectionwith2017$20Mplan
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$0.30$0.53
$0.88 $0.95$1.10 $1.20 $1.20
$1.401
2010 2011 2012 2013 2014 2015 2016 2017
AnnualDividendsPaidPerShare1(inDollars/Share)
$64
$121$161
$183
$238 $244
$193
$8.28$10.93
$14.68$17.92
$23.10$25.23
$21.37
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
2011 2012 2013 2014 2015 2016 9/30/17 $-
$30
$60
$90
$120
$150
$180
$210
$240
$270
TotalStockholders’Equity($millions)
&BookValue/CommonShare
Stockholders'EquityBV/CommonShare
15
(1) Basedonquarterlydividendspaidthrough9/30/17andannualizedforfullcalendaryear.
(2) Reflects$42MaftertaximpactofHurricaneIrma.
(2)
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NYSE:HCITMHighlyFocusedonProfitability
l PrudentriskmanagementenablespositivereturnseveninyearswithCATevents
l Predictiveunderwritingandtechnologyenablefocusonunderwritingmostprofitablebusiness
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$16
$50
$106 $101 $106
$47$36
2011 2012 2013 2014 2015 2016 YTD17*
Pre-TaxEarnings(1) ($M)
14%
25%
41% 34%
30%
12%
2011 2012 2013 2014 2015 2016
ReturnonEquity
55% 42%
28% 32% 31% 51%
33%
30%
30% 34% 33%
38%
88%
72%
58% 66% 64%
89%
2011 2012 2013 2014 2015 2016
CombinedGAAPUnderwritingRatios(2)
LossRatio ExpenseRatio
*AdjustedforIrmaimpact(1) YTD=theninemonthperiodendedSeptember30(2) Combinedratio=totalofallexpensesinrelationtonetpremiumsearned
ImpactedbyHurricaneMatthew
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NYSE:HCITM
3.1x
2.4x2.1x 2.0x
2.3x
2013 2014 2015 2016 9/30/2017
UnderwritingLeverage(1)
StrongandConservativeBalanceSheet
17(1) GrossWrittenPremiums/STATSurplus[HomeownersChoicePropertyandCasualtyInsuranceCo.](2) Underwritingleverage@9/30/17=Premiumsin-force/STATSurplus[HomeownersChoicePropertyandCasualtyInsuranceCo.]
l HCImaintainsastronger,moreconservativebalancesheetthanindustrypeers
l Highlevelofliquidityatholdingcompanyleveltotakeadvantageofmarketopportunities
l Morethanadequatecapitalinallinsurancecompanies
l HighcashpositionminimizescreditriskinoverallinvestmentportfolioandallowsHCItobenimbleincapitalizingonrisinginterestrates
l Conservativeunderwritingleveragereducespressureinachallengingunderwritingenvironment
HCIfocusesonmaintainingastrongbalancesheet asakeycomponentofitsstrategy
(2)
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NYSE:HCITM
ConservativeInvestmentPortfolioWellPositionedforRisingRates
(1) Asof9/30/17(2) Excludesotherthantemporaryimpairmentexpense(OTTI)(3) Includesinvestmentsinlimitedpartnerships,realestate,andjointventures
l Significantportfoliocashbalanceavailableforfutureinvestment(43%)(1)
l Generatedinvestmentrelatedincomeof$10.8millionthrough9/30/17and$6.9through9/30/16(2)
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HistoricalInvestmentPortfoliobyAsset Type(1)
$M 2012 2013 2014 2015 2016 9/30/17
Equity $8.9 3% $17.6 4% $45.6 10% $48.2 10% $53.0 9% $64.1 9%
RealEstate&Other(3) 16.1 6% 16.2 4% 26.1 5% 59.7 12% 79.6 14% 71.6 10%
FixedIncome 35.9 12% 112.2 25% 97.1 20% 125.0 25% 166.2 29% 256.1 38%
Cash 230.2 79% 293.4 67% 314.7 65% 267.7 53% 280.5 48% 292.4 43%
Total $291.1 100% $439.4 100% $483.5 100% $500.6 100% $579.3 100% $684.2 100%
Equity9% RealEstate&
Other10%
FixedIncome38%
Cash 43%
Asof9/30/17
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NYSE:HCITMExpandingRealEstateOpportunity
(1) BasedonNovember2015appraisal(CypressCommons)andMarch2017appraisal(Ocala)(2) BasedonMarch2017appraisal(3) BasedonApril2016appraisal(gainrecognizedQ32016)(4) BasedonOctober2014appraisal(gainrecognizedQ42016)(5) BasedonOctober2016appraisal(gainrecognizedQ42016)
GreenleafCapitalmanagesanddevelopsHCI’sgrowingrealestateportfolio
l Investmentphilosophyseeksimmediatecashflowandcapitalappreciationthroughopportunistictransactions
l Opportunitytoincreasereturnswithdebtfinancingatcurrentlyfavorablerates
l Estimated$30millionrealestatemarketvalueinexcessofcarryingamountnotrecognizedinstockholders’equity
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ExistingCommercialProperties
Property SizeNetBookValueas of9/30/17
MarketValue
ClassAOfficeBuildings 138,000Sq.Ft. $9.4M $20M (1)
Marina/Restaurant 10Acres,with12,500Sq. Ft.Restaurant 9.8M 26M (2)
LargeRegionalGrocery&OutParcels
16Acres,with61,400Sq.Ft.Retail 15.4M 16M (3)
Marina/Retail 9Acres,with 21,500Sq.Ft.Retail 8.1M 11M (4)
LargeRegionalGrocery&OutParcels
12Acres,with49,995Sq. Ft.Retail 16.0M 17M (5)
FuelStation&ConvenienceStore
8,000 Sq.Ft.Retail+GroundLease 4.5M 4.5M
Total $63.2M $94.5M.
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NYSE:HCITM
3
4
2
1
ProfitableStrategiesforFutureGrowth
GrowHomeownersInsuranceBookl Acquisitions: Utilizestrongbalancesheetandoperationalexpertisetotakeadvantage
ofacquisitionopportunitiesl NewStateExpansion: Exportcapabilitiestopenetrateattractivemarketsoutsideof
Floridal Organic: Originatenewpoliciesbyleveragingtechnologyplatform,potentialCitizens
takeouts andHomeownersChoice’snetworkof~3,600independentagents
CapitalizeonFirst-MoverAdvantageinPrivateFloodInsurancel Offerfloodinsurancetonewandexistingpolicyholdersfacingincreasingflood
insurancerates
ExecuteonEmergingRealEstateOpportunity
l Increaseourportfoliothroughanchortenantstrategyandotherrealestateventures
LeverageProprietaryTechnologyPlatforml Licenseinnovativeproductsandoffervalue-addedservicestoHomeownersChoice,
TypTapandtheinsuranceindustry20
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NYSE:HCITMCumulativeTotalReturn
CumulativeTotalReturnonInitialInvestmentof$1,000September2008toOctober2017
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
BerkshireHathawayInc.- A UnitedInsuranceHoldingsCorp.MarkelCorporation AlphabetInc.HCIGroup,Inc. AmazonUniversalInsuranceHoldings
$2,351$2,367$3,198
$4,758
$12,600
$14,363
$8,292
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NYSE:HCITMSeniorManagementTeam
22
PareshPatel MarkHarmsworth AndrewGraham
Chairman&CEO CFO GeneralCounsel
• Founder; Chairmansince2007 andCEOsince2011
• DesignedHCI’spolicyadministrationsystems,leveragingsoftwaredevelopmentexperience
• FoundedNorthStar Bankin2004andservedasDirectorfrom2006to2011
• CFOsince2017;previouslySeniorVP ofFinance
• FormersenioradvisortoStewartInformationServices(NYSE:STC)
• CFOofFirstAmericanTitleInsuranceCompanyfrom2006to2011
• SeniorEVPofFirstCanadianTitleInsuranceCompanyfrom2002to2006
• GeneralCounselsince2008
• Servedfrom1999to2007invariouscapacities,includingGeneralCounsel,forTrinsic
• Servedon InternalAuditCommitteeofHillsboroughCounty,Florida,since2011
• TrusteeofHillsboroughCommunityCollegefrom2007to2011
KevinMitchell AnthonySaravanos
VP ofInvestor Relations PresidentofGreenleafCapital
• VPofInvestorRelationssince2013
• AreaDirectorofFinancialInstitutionspractice atArthurJ.Gallagher(NYSE:AJG) from2008to2013
• EmployedbyOswaldCompanies,oneofthenation’slargestindependentinsurancebrokeragefirms,from2005to2008
• Directorsince2007; PresidentofGreenleafCapitalsince2013
• FormerVPoffull-servicerealestatefirminPalmHarbor,Florida,from2005to2013
• ManagingPartnerof13commercialCREentitiesinFloridaandNewYorksince2001
• DirectorofFirstHomeBanksince2011;Chairmansince2015
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NYSE:HCITMContactus
CompanyContactKevinMitchell,VPofInvestorRelationsHCIGroup,Inc.Tel(813)[email protected]
InvestorRelationsContactMattGloverandNajimMostamand,CFALiolios InvestorRelationsTel(949)[email protected]
23
HCIGroup,Inc.5300W.CypressStreet,Suite100Tampa,FL33607Tel(813)[email protected]
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