Homeowners Choice Reports Second Quarter Earnings

Homeowners Choice, Inc. (NASDAQ:HCII), a Florida-based provider of homeowners’ insurance, today announced its results of operations for the three and six month periods ended June 30, 2009.

Net income for the second quarter of 2009 increased 7% to $3.0 million, or $0.42 per diluted share, compared with net income of $2.8 million, or $0.54 per diluted share, for the second quarter of 2008.

Net premiums earned for the second quarter of 2009 nearly doubled to $19.6 million from $9.8 million in the prior year quarter, primarily as a result of policy growth driven by the company’s assumption of policies from Citizens Property Insurance Corporation, Florida’s state-supported insurer. Homeowners Choice also reported investment income of $361,000 for the second quarter compared with $381,000 in the prior year period. Other income, which primarily represents policy fee income earned with respect to the issuance of renewal policies, was $376,000 in the second quarter of 2009 compared with $284,000 in the second quarter of 2008.

Losses and loss adjustment expenses for the second quarter were $12.6 million compared with $4.2 million in the prior year period. The increase reflects the impact of claims incurred and an increase in claim reserves resulting primarily from the increase in policies and insured values. Policy acquisition and other underwriting expenses for the second quarter of 2009 and 2008 were $1.6 million and $1.3 million, respectively. Other operating expenses, which include a variety of general and administrative costs, were $1.3 million in the second quarter compared with $469,000 in the prior year period.

For the six months ended June 30, 2009, net income increased 37.9% to $9.3 million, or $1.28 per diluted share, from net income of $6.7 million, or $1.30 per diluted share, for the year ago period. Net premiums earned for the first six months of 2009 increased 102.1% to $40.9 million from $20.3 million in the prior year period. Investment income for the six month period ended June 30, 2009 was $719,000 compared with $727,000 in the prior year period. Other income was $1.0 million for the six months ended June 30, 2009 compared with $403,000 in the prior year period. Losses and loss adjustment expenses for the six months ended June 30, 2009 were $22.6 million compared with $6.4 million in the prior year period. The increase reflects the increase in actual claims incurred as well as an increase in case reserves and the strengthening in reserves for incurred but not reported losses. Policy acquisition and other underwriting expenses for the six months ended June 30, 2009 and 2008 were $2.7 million and $2.9 million, respectively. Other operating expenses were $2.3 million for the six month period ended June 30, 2009 compared with $1.2 million in the prior year period.

“We are pleased to have reported our seventh consecutive quarter of profitability,” says Chief Executive Officer F.X. McCahill. “As expected, we experienced increased loss and loss adjustment expenses in the second quarter related to increased losses incurred and increased reserves, as well as some limited seasonality with the start of hurricane season in June. However, we remain well positioned to grow shareholder value over the long term.

“Our business strategy is one of prudent risk mitigation. As part of that strategy we attempt to ensure that we have adequate reinsurance in the event of a major storm. While this comes at a cost, we believe that this strategy protects the company and our policyholders. The rise in our insured values as well as increased reinsurance rates means reinsurance will be a greater percent of gross earned premiums as we move through the year. This is expected to lead to a decline in our net premiums earned and an increase in our loss ratio during the remaining months of 2009. We do, however, anticipate our underwriting results will remain profitable.

“To further manage our risks, we do not add new policies during hurricane season and consequently, we have seen, and expect to continue to see, a decline in the number of policies through the third quarter as a result of typical policy turnover. During the fourth quarter we expect to pursue policy growth by assuming additional policies from Citizens, adding voluntary policies through independent agents or by taking advantage of the anticipated pullback by larger national carriers. We believe with our existing systems and personnel we can handle a substantial increase in policies from current levels. We are confident that with our experienced management team and solid financial condition we are well positioned to compete and grow our market share in Florida.”

Conference Call

The Company will host an earnings conference call Tuesday, Aug. 11, 2009, at 4:30 p.m. E.D.T. to discuss its second quarter results. Interested parties are invited to listen to the call live over the Internet at http://www.ir-site.com/hcpci/events.asp. The call is also available by dialing (877) 407-9210 (toll-free). International participants should instead call (201) 689-8049. Participants should dial into the conference call approximately 10 minutes before the scheduled start time. Replays of the webcast will be available until Nov. 11, 2009.

About Homeowners Choice, Inc.

Homeowners Choice, Inc. is a Florida-based insurance holding company headquartered in Clearwater. Through its subsidiary corporations, Homeowners Choice provides property and casualty homeowners' insurance, condominium owners' insurance and tenants' insurance solely to Florida property owners. Founded in 2006, Homeowners Choice today serves approximately 60,000 policyholders throughout Florida representing approximately $100 million in annualized premiums. The company’s common shares trade on the NASDAQ Global Market under the ticker symbol HCII and were recently added to the Russell Microcap Index. Warrants trade on the same market under the ticker symbol HCIIW. More information about Homeowners Choice, Inc. is available at www.hcpci.com.

Forward-Looking Statements

This news release may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “estimate,” “expect,” “intend,” “plan” and “project” and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various risks and uncertainties. For example there can be no assurance that net premiums earned will decline and our loss ratio will increase during the remaining months of 2009, that our underwriting results will remain profitable or that the number of our policies will decline through the third quarter of 2009. Some of these risks and uncertainties are identified in the company’s filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the company’s business, financial condition, and results of operations. Homeowners Choice, Inc. disclaims all obligations to update any forward-looking statements.