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Homeowners Choice

HCI

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Homeowners Choice, Inc. (HCI - Snapshot Report) has delivered positive earnings surprises for six consecutive quarters with an average beat of 47%. With expected earnings growth of 103.8% in 2012 and 24.8% in 2013, this Zacks #1 Rank (Strong Buy) property and casualty insurer offers solid growth opportunities.

Third Quarter Results

On November 6, Homeowners Choice reported third quarter net income of 27 cents per share, nearly 4% above the Zacks Consensus Estimate and in line with the year-ago earnings.

Revenue jumped 55% year over year to $31 million, driven by a 65% surge in net premiums earned and a 47% increase in policy fee income.

Gross premium earned shot up 67.3%, driven by policies acquired from HomeWise Insurance Company.

Loss ratio was 49.1%, down 720 basis points year over year. Expense ratio of 37.1% was up 480 basis points from the year-ago quarter.

On October 19, the board of directors approved a 12.5% increase in its dividend along with a special dividend. The increased dividend of 22.5 cents per share and the special dividend of 10 cents will be paid on December 21 to shareholders of record on November 16.

Positive Estimate Revisions

The Zacks Consensus Estimate for 2012 is currently pegged at $2.49, up 1.2% over the last 30 days as 2 of 3 estimates moved north. This suggests a year-over-year increase of 103.8%.

All three estimates for 2013 moved higher in the same timeframe, boosting the Zacks Consensus Estimate by 26.5% to $3.10. This represents a year-over-year increase of 25%.

Attractive Valuation

Shares of Homeowners Choice are roughly trading at 7.9x on a price-to-earnings basis (P/E), in line with the peer group average. On a price-to-book (P/B) basis, shares are trading at 1.8x compared with the peer group average of 0.8x.

Homeowners Choice has a trailing 12-month ROE of 26.4%, significantly higher than the peer group average of 6.2%.

Headquartered in Tampa, Florida, and founded in 2006, Homeowners Choice Inc. is an insurance holding company. The company provides property and casualty homeowners' insurance, condominium owners' insurance and tenants' insurance through its subsidiary. With operations in Florida, the company employs 199 people. Having a market capitalization of $191 million, it competes with EMC Insurance Group Inc. (EMCI) among others.


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