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Hilltop Holdings Inc. (HTH - Analyst Report) reported first-quarter 2013 operating earnings per share of 39 cents, outpacing the Zacks Consensus Estimate of 31 cents and the year-ago quarter figure of 1 cent. Net income stood at $32.4 million, significantly improving from $0.3 million in the year-ago quarter.

During the reported quarter, Hilltop’s total revenue was $280.5 million, spiking from both the Zacks Consensus Estimate of $273 million and the year-ago quarter’s $38.1 million. Net interest income rose to $67.2 million from $1.2 million in the year-ago quarter, while non-interest income jumped to $213.3 million from $36.9 million in the year-ago period.

The year-over-year upside was primarily attributable to robust growth in both interest and non-interest income primarily due to the inclusion of banking, mortgage origination and financial advisory operations through the acquisition of PlainsCapital Corp. in Nov 2012.

However, Hilltop also incurred provision for loan losses of $13 million in the reported quarter. Meanwhile, total interest expense surged 147.6% year over year to $7.3 million, whereas non-interest expenses radically amplified to $215 million from $37.6 million in the year-ago period.

Moreover, pre-tax income from insurance operations increased to $5.9 million from $0.5 million in the year-ago quarter. The appreciation was driven by higher premiums coupled with lower underwriting and loss and loss adjusted expenses. Subsequently, combined ratio improved to 88.7% from 99.6% in the prior-year quarter.

Financial Update

As on Mar 31, 2013, Hilltop held cash and due from banks of $588.8 million, down from $722 million as on Dec 31, 2012, along with a strong investment portfolio worth $1.2 billion, up from $1.1 billion at 2012-end.

Total shareholder equity stood at $1.18 billion at the end of Mar 2013, up from $1.15 billion at 2012-end. However, total assets dipped to $7.22 billion from $7.29 billion at 2012-end, while total liabilities declined to $6.04 billion from $6.14 billion at 2012-end.

At the end of Mar 2013, operating cash flow stood at $159.9 million compared with $2.6 million at the end of Mar 2012. Hilltop held about $200 million of free cash at the end of Mar 2013, at par with 2012-level.

At Mar 2013-end, Hilltop had a deposit in custody for various investments in State Insurance Departments with carrying values of $9.3 million. Total deposits increased to $4.76 billion from $4.7 billion at 2012-end.


Apart from Hilltop, other outperformers of the insurance sector include Montpelier Re (MRH - Analyst Report), Axis Capital Holders Ltd. (AXS - Analyst Report) and Amerisafe Inc. (AMSF - Analyst Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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