Over the past six months, HCI Group’s shares (currently trading at $151.50) have posted a disappointing 16.9% loss while the S&P 500 was flat. This might have investors contemplating their next move.
Following the drawdown, is now an opportune time to buy HCI? Find out in our full research report, it’s free.
Why Are We Positive On HCI Group?
Starting as a Florida "take-out" insurer that assumed policies from the state-backed Citizens Property Insurance Corporation, HCI Group (NYSE: HCI) provides property and casualty insurance, primarily homeowners coverage, while leveraging proprietary technology to improve underwriting and claims processing.
1. Net Premiums Earned Skyrocket, Fueling Growth Opportunities
When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.
HCI Group’s net premiums earned has grown at a 28.7% annualized rate over the last two years, much better than the broader insurance industry and in line with its total revenue.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
HCI Group’s EPS grew at 47.8% compounded annual growth rate over the last five years, higher than its 23.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Growing BVPS Reflects Strong Asset Base
For insurers, book value per share (BVPS) is a vital measure of financial health, representing the total assets available to shareholders after accounting for all liabilities, including policyholder reserves and claims obligations.
HCI Group’s BVPS increased by 25.4% annually over the last five years, and growth has recently accelerated as BVPS grew at an incredible 55% annual clip over the past two years (from $33.36 to $80.13 per share).
Final Judgment
These are just a few reasons why we think HCI Group is an elite insurance company. After the recent drawdown, the stock trades at 1.7× forward P/B (or $151.50 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
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