Florida-based insurtech HCI Group has reported a dip in net income for the second quarter of 2021 to $3.8 million when compared with the prior year period, as its consolidated gross written premiums (GWP) climbed by 7.6% to $185 million.
Q2 2021 net income fell from the $8.9 million reported a year earlier, as adjusted net income declined from $6.8 million to $2.7 million.
While net income deteriorated year-on-year, GWP increased and HCI attributes this growth to its quota share reinsurance agreement with United Insurance Holdings Corp. (UPC Insurance), and continued growth of its TypTap business.
After closing a renewal rights transaction earlier in this year, HCI subsequently entered into an agreement with UPC Insurance under which it provides 100% quota share reinsurance on all in-force, new and renewal policies in the states of Connecticut, New Jersey, Massachusetts, and Rhode Island.
Consolidated gross premiums earned also increased year-on-year, by more than 29% to $139.4 million. HCI attributes this growth to a rise in premiums to $100.4 million at Homeowners Choice, and growth of premiums earned at TypTap to $39 million.
The expansion at both Homeowners Choice and TypTap also resulted in HCI ceding more premiums for reinsurance, which increased from $34.4 million in Q2 2020 to $46.4 million in Q2 2021.
Higher earned premiums during the quarter, coupled with the quota share with UPC Insurance, pushed up HCI’s loss and loss adjustment expenses to $55.9 million, compared with $39.8 million a year earlier.
On the asset side of its balance sheet, HCI has reported net investment income of $2.6 million versus $1.6 million in the prior year Q2, driven by an increase in income from limited partnership and real estate investments.
HCI Group Chairman and Chief Executive Officer (CEO), Paresh Patel, commented: “As TypTap continues to expand, we are making important investments to maximize TypTap’s opportunity. We are confident the long-term payback on these investments will outweigh any short-term impact.”
Despite falling in Q2, HCI’s net income for H1 2021 increased to $10.7 million from $9.5 million a year earlier. The insurer attributes this growth mostly to higher net premiums earned of $45.8 million, as well as a $14 million increase in income from its investment portfolio.
However, this is somewhat offset by a $33.7 million increase in loss and loss adjustment expenses for the six month period, and a $21.4 million increase in policy acquisition and other underwriting expenses.
