Recently, Hilltop Holdings Inc. (HTH) filed its 10-Q to report the first quarter results of 2010. Net loss attributable to common stockholders increased 71.3% to $2.09 million or 4 cents per share from a net loss of $1.22 million or 2 cents per share in the year-ago period. However, this came in line with the Zacks Consensus Estimate of a loss of 4 cents per share.
Results benefited from marginal growth in direct and net premiums written due to the development of additional insurance products and new agency relationships along with net realized gain and other income. However, this growth was offset by higher operating expenses and decline in premiums earned that led to a deteriorating bottom-line and a negative operating cash flow.
During the reported quarter, total revenue was $31.7 million, flat with the year-ago quarter. While net premiums earned declined 0.9% year-over-year to $28.1 million and net investment income fell 11.1% year-over-year to $1.6 million, this was partially offset by other income growth of 20% year-over-year to $1.8 million. Further, direct premiums written increased 3.0% year-over-year to $32.4 million and net premium written grew 3.2% year-over-year to $29.6 million.
Total operating expenses increased 4.4% year-over-year to $30.9 million, primarily due to the increase in loss and loss adjustment expenses coupled with general and administrative expenses.
Financials
As of Mar 31, 2010, Hilltop had investments of approximately $733 million in overnight deposits at JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC). These investments are in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit.
Additionally, as of Mar 31, 2010, Hilltop had cash and equivalents of $778.2 million (down from $790.0 million as of Dec 31, 2009) and investments $139.3 million, compared to $130.0 million as of Dec 31, 2009. The fair value of outstanding debt was $139.6 million, at the end of the reported quarter.
Further, as of Mar 31, 2010, cash used in operations was $0.7 million, compared to cash provided by operations of $10.7 million as of Mar 31, 2009. The decline was primarily due to reduced net income, decrease in related party payable and decrease in income taxes receivable.
Going forward, management of Hilltop continues to explore possible strategic investment and acquisition opportunities with its available cash. For this purpose, the company also plans to secure additional equity or debt financing sources, if required. While Hilltop remains sufficiently liquid, we believe that the sole dependence on subsidiary NLASCO continues to restrict its long-term growth.
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