HCI beats Q2 estimates, cuts reinsurance costs, and adds GEICO distribution
Q2 earnings and revenue beat estimates HCI's second-quarter revenue rose 11.2% to $246.65 million and earnings per share came in at $5.60, beating the $4.97 analysts expected. Pretax income topped $110 million. Beating expectations makes the company look healthier than feared, which supports the stock price.
The quarter's beat is the core new financial result driving the stock.
Reinsurance costs fall, saving over $10 million a quarter HCI's new catastrophe reinsurance program cut ceded premiums by more than 10%, saving over $10 million each quarter. Reinsurance is backup coverage insurers buy; paying less for it lowers costs and lifts profit, which is good for the stock.
Lower reinsurance cost is a concrete, recurring profit driver disclosed this period.
GEICO starts selling HCI's product GEICO began selling HCI's new insurance product in July, a partnership whose benefits should show up starting in the third quarter. A big outside distributor can bring in more customers and premiums, giving HCI a new growth path beyond Florida.
The GEICO distribution deal is a new growth catalyst not in earlier reports.
Buyback done, but cash and loss ratio raise caution HCI finished its $80 million buyback early, repurchasing about 4% of shares, and book value per share jumped to $86.60. But cash fell to $872 million from $1.21 billion, the loss ratio ticked up to 22.2%, and catastrophe exposure remains a risk.
It gives the fair counterweight: capital returned and book value up, but liquidity and catastrophe risk are real.