HCI Group, Inc.’s (HCI) wholly-owned subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., was approved by the Florida Office of Insurance Regulation for 50,000 policies from Citizens Property Insurance Corporation, Florida's state-operated insurance company. Homeowners Choice, the principal operating subsidiary of HCI Group, started its operations in 2007. It provides property and casualty homeowners’ insurance, condominium-owners’ insurance and tenants’ insurance to property owners in Florida.
Out of the 50,000 policies approved, 27,000 are reserved for the citizens who might be at the risk of damage from hurricane/tornado (wind-based damage).
Assumable under Florida's "take-out" program, these policies are designed with a view to reduce the state's risk exposure by encouraging private insurance companies to accept policies from Citizens. As per the take-out rules, the affected policyholders can opt-out before or within 30 days of acceptance and stay with Citizens. With this, HCI Group minimizes the underwriting risks by considering only those policy holders who meet their criteria and policy selection guidelines.
In third-quarter 2014, HCI Group reported earnings of $1.23 per share, surpassing the Zacks Consensus Estimate by 10.8% and improving 8.8% year over year. The top line also outperformed the Zacks consensus estimate by 2.4% and improved 21.8% year over year. This improvement came on the back of 9.5% rise in gross premiums to $88.9 million owing to policies assumed from Citizens Property Insurance Corporation in Nov 2013.
Policies approval plays an important role in driving top-line growth. The company’s revenues have been showing consistent improvement over the past few years on the back of its strong underwriting results. The latest approval is expected to further augment the company’s revenue generation.
Currently, HCI Group carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Investors interested in the property and casualty insurance sector can consider better-ranked stocks like AmTrust Financial Services, Inc. (AFSI), Arch Capital Group Ltd. (ACGL) and Navigators Group Inc. (NAVG). All of these stocks sport a Zacks Rank #1 (Strong Buy).
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