UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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): March 8, 2011
Homeowners Choice, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Florida | 001-34126 | 20-5961396 | ||
| (State or Other Jurisdiction of Incorporation or Organization) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
2340 Drew Street, Suite 200
Clearwater, Florida 33765
(Address of Principal Executive Offices)
(727) 213-3600
(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)) |
Section 2 – Financial Information
Item 2.02 Results of Operations and Financial Condition
On March 8, 2011, we released our earnings for the three months and 12 months ended December 31, 2011. We plan to host an earnings conference call that same day at 4:30 p.m. EDT during which our chief executive officer and chief financial officer will discuss the results. Interested parties are invited to listen to the call live over the Internet at http://www.ir-site.com/hcpci/events.asp. The call is also available by dialing (877) 407-9210 (toll-free). International participants should instead call (201) 689-8049. Participants should dial into the conference call approximately 10 minutes before the scheduled start time. Replays of the webcast will be available until April 9, 2011. Our earnings release appears as Exhibit 99.1.
Section 9 – Financial Statements and Exhibits
Item 9.01 Exhibits.
Exhibit 99.1 Earnings Release
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: March 8, 2011.
| HOMEOWNERS CHOICE, INC. | ||
| BY: | /s/ Richard R. Allen | |
| Name: | Richard R. Allen | |
| Title: | Chief Financial Officer | |
A signed original of this Form 8-K has been provided to Homeowners Choice, Inc. and will be retained by Homeowners Choice, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 99.1
FOR IMMEDIATE RELEASE
| Media Contact: | Investor Relations Contact: | |||
| Suzie Boland | Jay Madhu | |||
| RFB Communications Group | Homeowners Choice, Inc. | |||
| 813.259.0345 | 727.213.3660 | |||
| sboland@rfbcommunications.com | jmadhu@hcpci.com |
Homeowners Choice Reports Results for Fourth Quarter and Year 2010
Thirteenth Consecutive Quarter of Profitability, $54.8 Million in Cash on the Balance Sheet,
Per Share Book Value Increase of 6.8 percent in 2010 to $7.51
CLEARWATER, Fla. – (March 8, 2011) – Homeowners Choice, Inc. (Nasdaq:HCII), a Florida-based provider of homeowners’ insurance, today announced its results of operations for the three months and year ended Dec. 31, 2010.
Fourth Quarter 2010
Net income for the fourth quarter of 2010 was $1.8 million, or $0.27 per diluted share, compared with net income of $0.8 million, or $0.11 per diluted share, for the fourth quarter of 2009.
Gross premiums earned for the fourth quarter of 2010 increased to $30.0 million from $25.9 million in the prior year quarter. Net premiums earned (gross premiums earned reduced by premiums ceded to reinsurance companies that cover certain of the risks from hurricanes and other catastrophes) for the fourth quarter of 2010 increased 25 percent to $15.5 million from $12.4 million in the prior year quarter. During the fourth quarter of 2010, reinsurance costs were 49 percent of the company’s gross premiums earned, compared with 52.1 percent in the prior year quarter.
Homeowners Choice also reported investment income and other income of $390,000 and $820,000, respectively, for the fourth quarter of 2010. Investment income was $556,000 and no significant other income was reported in the prior year fourth quarter. In addition, the company reported realized gains on investments sold during the quarter ended Dec. 31, 2010 of $469,000. The company had no significant realized investment gains during 2009.
Losses and loss adjustment expenses for the fourth quarter were $8.2 million compared with $6.0 million in the prior year quarter. Policy acquisition and other underwriting expenses for the three months ended Dec. 31, 2010 and 2009 were $4.2 million and $3.9 million, respectively. Other operating expenses, which include a variety of general and administrative costs, for the three months ended Dec. 31, 2010 and 2009 were $1.9 million and $1.7 million, respectively.
Full Year 2010
For the year ended Dec. 31, 2010, net income was $5.4 million, or $0.81 per diluted share, a decline from net income of $10.9 million, or $1.52 per diluted share, for the year ended Dec. 31, 2009. Book value per share increased from $7.03 at Dec. 31, 2009 to $7.51 at Dec. 31, 2010, an increase of 6.8 percent.
Gross premiums earned for the year ended Dec. 31, 2010 increased by approximately 8.9 percent to $119.8 million from $110.0 million in the prior year. Net premiums earned for 2010 decreased 4.4 percent to $62.4 million from $65.3 million in the prior year. Investment income for the year ended Dec. 31, 2010 was $2.0 million compared with $1.8 million in the prior year. Realized Investment gains of $2.0 million were recognized in 2010.
Losses and loss adjustment expenses for the year ended Dec. 31, 2010 were $37.7 million compared with $35.2 million in the prior year. Policy acquisition and other underwriting expenses for 2010 and 2009 were $14.9 million and $9.6 million, respectively. Other operating expenses were $7.5 million for the year ended Dec. 31, 2010 compared with $5.8 million in the prior year.
Stockholders’ equity increased to $46.6 million at Dec. 31, 2010 from $45.4 million at Dec. 31, 2009. The company repurchased a total of 311,239 shares in 2010 in its share buyback program.
“I am pleased with our solid financial performance again this quarter, our 13th consecutive quarter of profitability,” said Homeowners Choice Chief Executive Officer F.X. McCahill. “Our gross premiums earned grew by 8.9 percent in 2010. However, we experienced a year-over-year decrease in net income due primarily to higher reinsurance rates that were in effect during the first five months of the year. We believe we are well positioned for our expansion into Alabama, which is planned for 2011. In addition, we recently announced our intention to issue our second quarterly dividend of $.10 per share, which will be paid in March 2011.”
Homeowners Choice Executive Chairman Paresh Patel added, “Our focus has always been on growing the company and increasing shareholder value. I am pleased with our progress in 2010 and looking forward to what lies ahead in 2011.”
Conference Call
The Company will host an earnings conference call today, March 8, 2011 at 4:30 p.m. EST to discuss its fourth quarter and 2010 results. Interested parties are invited to listen to the call live over the Internet at http://www.ir-site.com/hcpci/events.asp. The call is also available by dialing (877) 407-9210 (toll-free). International participants should instead call (201) 689-8049. Participants should dial into the conference call approximately 10 minutes before the scheduled start time. Replays of the webcast will be available until April 9, 2011.
About Homeowners Choice, Inc.
Homeowners Choice, Inc. is a Florida-based insurance holding company headquartered in Clearwater. Through its subsidiary corporations, Homeowners Choice provides property and casualty homeowners’ insurance, condominium owners’ insurance and tenants’ insurance. Founded in 2006, Homeowners Choice today serves approximately 65,000 policyholders throughout Florida representing approximately $135 million in annualized premiums. The company’s common shares trade on the NASDAQ Global Select Market under the ticker symbol HCII and are included in the Russell Microcap Index. Warrants trade on the same market under the ticker symbol HCIIW. More information about Homeowners Choice, Inc. is available at www.hcpci.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” 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 there can be no assurance that the company will add additional policies in 2010, that the company will continue to be profitable, that the company will be successful with its efforts to expand into Alabama, that strategic growth opportunities will arise or that the
company will pursue them when they do, or that the company will increase shareholder value. 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. Homeowners Choice, Inc. disclaims all obligations to update any forward-looking statements.
HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share amounts)
| At December 31, | ||||||||
| 2010 | 2009 | |||||||
| Assets | ||||||||
| Investments: |
||||||||
| Fixed maturity securities, held-to-maturity, at amortized cost (fair value $4,250) |
$ | — | 4,049 | |||||
| Fixed maturity securities, available-for-sale, at fair value (amortized cost $28,432 and $19,763) |
28,564 | 19,266 | ||||||
| Equity securities, available-for-sale, at fair value |
884 | — | ||||||
| Time deposits |
14,033 | 13,507 | ||||||
| Short-term investments |
— | 11,521 | ||||||
| Total investments |
43,481 | 48,343 | ||||||
| Cash and cash equivalents |
54,849 | 43,453 | ||||||
| Accrued interest and dividends receivable |
180 | 176 | ||||||
| Premiums receivable |
5,822 | 4,899 | ||||||
| Assumed reinsurance balances receivable |
26 | 19,525 | ||||||
| Prepaid reinsurance premiums |
17,787 | 7,205 | ||||||
| Deferred policy acquisition costs |
9,407 | 10,496 | ||||||
| Property and equipment, net |
7,755 | 399 | ||||||
| Deferred income taxes |
584 | 2,438 | ||||||
| Other assets |
1,057 | 958 | ||||||
| Total assets |
$ | 140,948 | 137,892 | |||||
| Liabilities and Stockholders’ Equity | ||||||||
| Losses and loss adjustment expenses |
22,146 | 19,178 | ||||||
| Unearned premiums |
65,034 | 68,509 | ||||||
| Advance premiums |
1,114 | 713 | ||||||
| Accrued expenses |
2,385 | 2,906 | ||||||
| Income taxes payable |
310 | 167 | ||||||
| Other liabilities |
3,330 | 1,041 | ||||||
| Total liabilities |
94,319 | 92,514 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock (no par value 20,000,000 shares authorized, no shares issued or outstanding) |
— | — | ||||||
| Common stock, (no par value, 40,000,000 shares authorized, 6,205,396 and 6,456,635 shares issued and outstanding in 2010 and 2009) |
— | — | ||||||
| Additional paid-in capital |
18,606 | 21,164 | ||||||
| Retained earnings |
28,065 | 24,520 | ||||||
| Accumulated other comprehensive loss |
(42 | ) | (306 | ) | ||||
| Total stockholders’ equity |
46,629 | 45,378 | ||||||
| Total liabilities and stockholders’ equity |
$ | 140,948 | 137,892 | |||||
HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Dollars in thousands, except per share amounts)
| Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (Unaudited) | ||||||||||||||||
| Revenue |
||||||||||||||||
| Gross premiums earned |
$ | 30,037 | 25,856 | $ | 119,757 | 110,011 | ||||||||||
| Premiums ceded |
(14,572 | ) | (13,475 | ) | (57,322 | ) | (44,674 | ) | ||||||||
| Net premiums earned |
15,465 | 12,381 | 62,435 | 65,337 | ||||||||||||
| Net investment income |
390 | 556 | 1,962 | 1,793 | ||||||||||||
| Realized investment gains |
469 | — | 2,003 | — | ||||||||||||
| Other |
820 | (15 | ) | 2,215 | 1,248 | |||||||||||
| Total revenue |
17,144 | 12,922 | 68,615 | 68,378 | ||||||||||||
| Expenses |
||||||||||||||||
| Losses and loss adjustment expenses |
8,208 | 5,953 | 37,667 | 35,230 | ||||||||||||
| Policy acquisition and other underwriting expenses |
4,189 | 3,940 | 14,878 | 9,611 | ||||||||||||
| Other operating expenses |
1,880 | 1,665 | 7,484 | 5,788 | ||||||||||||
| Total expenses |
14,277 | 11,558 | 60,029 | 50,629 | ||||||||||||
| Income before income taxes |
2,867 | 1,364 | 8,586 | 17,749 | ||||||||||||
| Income taxes |
1,083 | 557 | 3,164 | 6,839 | ||||||||||||
| Net income |
$ | 1,784 | 807 | $ | 5,422 | 10,910 | ||||||||||
| Basic earnings per share |
$ | 0.29 | 0.12 | $ | 0.88 | 1.62 | ||||||||||
| Diluted earnings per share |
$ | 0.27 | 0.11 | $ | 0.81 | 1.52 | ||||||||||
| Dividends per share |
$ | 0.30 | — | $ | 0.30 | — | ||||||||||