HCI Investor Presentation - September 2019 FINAL · 2016 2015 2013 2012 2011 2010 2009 2008 2007 2006 Executed $144M Convertible Notes Offering Launched Information Technology Division

NYSE: HCI | December 2019

Investor Presentation

Important Cautions Regarding Forward-Looking Statements

2

This presentation includes certain forward‐looking statements and

information, including statements regarding plans, strategies and

expectations of HCI Group, Inc. (“HCI” or the “Company”). When

used in this presentation, words such as “believes,” “anticipates,”

“expects,” “estimates,” or words of similar meaning are generally

intended to identify forward‐looking statements. All statements

other than statements of historical fact included in this

presentation are forward‐looking statements. These

forward‐looking statements are subject to risks, uncertainties,

assumptions and other factors, many of which are beyond the

control of the Company. Important factors that could cause actual

results to differ materially from those expressed or implied by the

forward‐looking statements are described in the Company’s filings

it makes from time to time with the Securities and Exchange

Commission, including within the “Risk Factors” section of the

Annual Report on Form 10‐K for the year ended December 31,

2018 filed March 8, 2019.

Insurancecan no longer ignore technology

Insurance technology has changed a lot over time

P R E - 2 0 t h

C E N T U R Y

E A R LY 1 9 0 0 s

1 9 6 0 s 1 9 8 0 s T O D A Y

1. It’s confusing

2. Lacks transparency

3. Application & underwriting process is cumbersome

Traditional insurance has always faced many challenges:

5

Entering a New Era of Insurance:

InsurTech

E A S Y T O S I G N U P

C O N V E N I E N T C O S TE F F E C T I V E

F R I C T I O N L E S ST R A N S P A R E N T R E S P O N S I V E

Property & Casualty Insurance

Reinsurance

HCI at a GlanceStock Price (12/6/19) $45.94

Current Price to Book (12/6/19) 1.97x

Common Shares Out. (GAAP) 3 7.88M

Fully Diluted Share Ct.4 9.86M

Est. Market Capitalization (12/6/19) $362.2M

Gross Revenue (TTM) ¹ $359.0M

Fully Diluted EPS (Q3 2019) $0.73

P/E5 15.7x

Dividend Yield 3.5%

Book Value/Share2 (9/30/19) $23.37

Institutional Ownership 65.1%

Insider Ownership 22.6%

Founded/IPO 2006/2008Real Estate

(1) Gross revenue = total revenue before premiums ceded as of quarter end 9/30/19. (2) $184.2/7.88M. (3) 7.88M + 191,000 (shares subject to prepaid forward contract) = 8.07M common shares outstanding per AST as of 9/30/19. (4) As of 9/30/19. (5) Using Q3 2019 Annualized as Denominator; $45.94 / $2.92 = 15.7x.

Technology

Key Milestones: Growth Through Innovation

2019

2018

2017

2016

2015

2013

2012

2011

2010

2009

2008

2007

2006

Executed $144M Convertible Notes Offering

Launched Information Technology Division (Exzeo)Executed $103M Convertible Notes Offering

Completed Wind-Only Citizens Assumption

Launched TypTap for Private Flood Insurance

Executed Follow-on Offering

Launched Real Estate Division (Greenleaf)Acquired HomeWise Insurance Book of Business

Declared First Cash Dividend

Announced First Share Buyback

Formed Captive Insurance Division (Claddaugh)Completed Initial Public Offering

Executed on First Citizens Assumption

Incorporated in Florida

8

Launched TypTap Homeowners Product

Secured $65M Revolving Line of Credit

Repaid in Full (at Maturity) $89.9M of 3.875% Convertible Debt

Specialization Breeds SuccessHCI remains focused on high reward opportunities:

While the company will stay focused on Florida, it’s taking smart bets in other markets

Benefit of having this specialization, which differentiates us from our peers, is that we can maximize profits for shareholders by avoiding unnecessary risk

F L O R I D A H O M E O W N E R S ’ I N S U R A N C E M A R K E T

~ $10.0B

U . S . F L O O D I N S U R A N C E M A R K E T

~ $4.7B

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• Over 10 years of success, but are taking a fresh look at insurance

• Additional operations in technology, real estate and reinsurance

• Our disciplined execution has resulted in consistent profitability and best-in-class margins

• Strong track record of shareholder value creation:

F O U N D E D

2006

P R O F I T A B L E

46/48Q U A R T E R S

36C O N S E C U T I V E Q U A R T E R S O F

D I V I D E N D S

Track Record of Profitable Growth

$175 MILLION in buybacks

since inception

$95 MILLION in dividends paid since inception

10-YEARaverage return

on equity of 20%(1)

10(1) January 1, 2009 through December 31, 2018

How We’re Revolutionizing the Industry

Industry leading profitability

Multi-tiered growth strategy:

Expansion in product mix

Geographic expansion –9 additional states

Technology integration & implementation

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 $-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019

The Growth of TypTapGross Premiums Written by Quarter (Homeowners) Premiums in Force (Homeowners)

Total Premiums in Force

12

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019

Homeowners Flood

Our Business is Built on Trust & Partnership

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Reinsurance program transfers

catastrophic risk to 50+ HIGHLY-RATED

or fully collateralized partners

2019-2020 program provides

$901 MILLION OF CATASTROPHIC

COVERAGE (1st event)

Est. annual reinsurance premiums of

~$126 MILLION with first & second

event retention of only $16 MILLION

2019-2020 Property Cat Reinsurance Program

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$16M(3)

$268M

$901M

Mandatory

FHCF (2)

45% of

Est Combined

707.1M xs 252M

1:50 YR

1:100 YR

1:282 YR

1:323 YR

$459M

$959M

$16M (3)

$608M

1:100 YR

FHCF 45% of

58.1M xs 252M

1:144 YR

1:50 YR$268M

$459M

First Event Cover (1)

Second Event Cover Following a $901m Loss

Notes: (1) RMS RiskLink v18.0 Long-Term Hurricane, with Loss Amplification, excluding Storm Surge, without Secondary Uncertainty(2) Florida Hurricane Catastrophe Fund(3) HCI 3rd party reinsurance retention set at $16M

3rd Party Reinsurance

100% of $593m xs $16m3rd Party Reinsurance

100% of $566m xs $16m

Our Success So Far

$64

$121 $161

$183

$238 $244

$194 $181 $184

$8.28

$10.93

$14.68 $17.92

$23.10 $25.23

$22.14 $21.71 $23.37

$5.0 0

$10 .00

$15 .00

$20 .00

$25 .00

$30 .00

$35 .00

$40 .00

2011 2012 2013 2014 2015 2016 2017 2018 Q3 2019 $-

$30

$60

$90

$12 0

$15 0

$18 0

$21 0

$24 0

$27 0 Stockholders' Equity

BV/Common Share

$0.30$0.53

$0.88 $0.95$1.10 $1.20 $1.20

$1.40 $1.50 $1.60

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

36% 36% 38% 41% 37%

34% 33% 37%43% 45%

70% 69%75%

84% 82%

2014 2015 2016 2017 2018

Loss Ratio Expense Ratio

3.1x

2.4x2.1x 2.0x 2.2x 2.2x

2013 2014 2015 2016 2017 2018

Total Stockholders’ Equity ($M) & Book Value/Common Share Combined Underwriting Ratios (4)

Underwriting Leverage (1)Annual Dividends Per Share

(in Dollars/Share)

(1) Gross Written Premiums / STAT Surplus [Homeowners Choice Property and Casualty Insurance Co.]. (2) On April 16, 2018 HCI Board authorized an increase in the quarterly dividend to 37.5 cents per share. (3) On January 14, 2019, HCI Board authorized an increase in the quarterly dividend to 40 cents per share. (4) Combined ratio = total of all expenses in relation to net premiums earned. (5) Normalized for the impact of storms and accident year loss ratios updated to December 2018. (6) Drop of $50M reflects $44.9M of stock buybacks in 2017 [impact of buybacks = $2.25]

(5) (5) (5) (5) (5)

(2) (3)

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(6)

Conservative Investment Portfolio

(1) As of 9/30/19(2) Excludes other than temporary impairment expense (OTTI) and change in unrealized gain (loss) on investments(3) Includes investments in limited partnerships, real estate, and joint ventures(4) Repaid in full (at maturity) $89.9M of 3.875% convertible debt(5) Excludes real estate and joint ventures(6) Includes realized gain (loss) on investments and change in unrealized gain (loss) on investments

• Significant portfolio cash balance available for future investment (37%) (1)

• Generated investment related income of $22.8 million in 2018 and $15.8 million in 2017 (2)

• 2018: Book Yield = 2.95%(5); Economic Yield = 1.66%(6)

• 2019: Book Yield = 3.01%(5); Economic Yield = 6.05%(6)

$230.2

$293.4

$314.7 $267.7

$280.5

$255.8 $239.5

$214.6

$300.1

$450.2

$494.0 $510.5

$594.4

$649.7 $640.6

$576.1

2012 2013 2014 2015 2016 2017 2018 Q3 2019

$ in

Mill

ion

s

Historical Investment Portfolio by Asset Type(1)

Equity Real Estate & Other (3) Fixed Income Short Term Investments Cash

16

Cash 37%

Fixed Income

37%

Equity 6%

Real Estate & Other

20%

ST Investments

<1%

(4)

• Founder; Chairman since 2007 & CEO since 2011• Designed HCI’s policy administration systems, leveraging

software development experience• Founded NorthStar Bank in 2004 and served as Director (2006-

2011)

PARESH PATELChairman & Chief Executive Officer

• CFO since 2017; previously SVP of Finance• Former senior advisor to Stewart Information Services (NYSE: STC)• CFO of First American Title Insurance Company (2006-2011)• Senior EVP of First Canadian Title Insurance Company (2002-2006)

MARK HARMSWORTHChief Financial Officer

• Previously, EVP (2017-2019) and VP of Corporate Services (2009-2017)

• Former VP Strategic Alliances, TSIC, Inc. (2001-2009)• Served in various capacities at Florida Progress Corp (NYSE: FPC),

a utility holding company, now part of Duke Energy (NYSE: DUK) (1987-2000)

KARIN COLEMANPresident, Homeowners Choice

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• General Counsel since 2008• Served in various capacities, including General Counsel for Trinsic

(1999-2007)• Served on Internal Audit Committee of Hillsborough County, Florida,

since 2011• Hillsborough Community College trustee (2007-2011)

• Director since 2007; President of Greenleaf Capital since 2013• Former VP of full-service real estate firm in Palm Harbor, Florida (2005-

2013)• Managing Partner of 13 commercial CRE entities in Florida and New

York since 2001• Director of First Home Bank since 2011; Chairman since 2015

ANDREW GRAHAMGeneral Counsel

ANTHONY SARAVANOS President, Greenleaf Capital

KEVIN MITCHELLPresident, TypTap Insurance

Experienced & Focused Leadership Team

• Previously, SVP and VP of Investor Relations (2013-2019)• Former Area Director of Financial Institutions practice at Arthur J.

Gallagher (NYSE: AJG) (2008-2013)• Previously, employed by Oswald Companies, one of the nation’s largest

independent insurance brokerage firms (2005-2008)

Vision for the Future

Grow TypTap to $300M in revenue (from ~$40M today)

Dividends and share repurchases

Continued focus on profitability

Continue to grow the earnings power of the

company

Why Invest in HCI

1. Technology not reflected in current valuation

2. Operating cash to invest and grow our technology platform

3. Consistent track record of reducing the share count

4. Built an InsurTech platform that is profitable and has ability to scale

P R E M I U M S I N F O R C E ( Q 3 2 0 1 9 )

$40.2M

G R O S S W R I T T E N P R E M I U M( Q 3 2 0 1 9 )

$16.2MG R O S S W R I T T E N P R E M I U M

G R O W T H( Q 3 2 0 1 9 v s . Q 3 2 0 1 8 )

263%

19

20

Strict underwriting standards, excellent exposure management, and industry-leading claims technology ensure profitable policy selection and high customer retention

70% of Homeowners Choice policyholders have never filed a claim

Average customer stays with HCI for more than 6 years 0

5,000

10,000

15,000

20,000

25,000

30,000

1 2 3 4 5 6 7 8 9 10 11 12 13

*Po

licy

Co

un

t

# of years policyholder has been with HCPCIC

*Policy count as of YE2018

Policy Count by Number of Years with HCI

Insourced Business Model Ensures High Customer Retention

Specialization in Florida Breeds Success

75% of stochastic events

miss Florida

COASTALDistance to Gulf of Mexico: 0.385 miles (0.620 km)

Coastal vs Inland Construction: Hurricane Michael

INLAND Distance to Gulf of Mexico: 16.443 miles (26.462 km)

Leveraging Big Data Analytics and Technology Platform

HCI’s technology division develops innovative products and offers value-added services to Homeowners Choice, TypTap, and the insurance industry

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Enables underwriters the ability to evaluate individual risks before binding

5.3 million homes –every residential unit

in Florida

48 distinct risk attributes

>254 million data points

SELF-LEARNING PROCESSES

FORECASTING ALGORITHMS

GEO-SPATIAL TECHNOLOGY

Facilitates a collaborative, real-time work environment across policy issuance and claims administration

Allows underwriters and claims staff the ability to evaluate risk exposure and to identify, track, and measure claim activity

Proprietary multi-dimensional database of 48 different risk attributes for 5.3 million residential units in FL

Creating Value Through Real Estate

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Commercial Properties

PropertyLand Size

Combined Sq. Ft.

Net Book Value (1)

Appraised Value (2)

Class A Office Portfolio2- Prestigious Westshore Tampa Locations

1- Ocala Location12 Acres 228,000 sf $18M $31M

Anchored Retail Center Portfolio2- Grocery Anchored

2-Gas/Convenience Store Anchored37 Acres 120,000 sf 33M 39M

Waterfront Specialty Use PortfolioFeaturing:

Two Marinas Waterfront Restaurant

16 Acres 74,000 sf 18M 33M

Retail Center Under development

Clearwater, FL

5 Acres 68,000 sf 9M TBD

Waterfront Vacant LandUnder development – office/hotel/retail Westshore Tampa, FL

9 Acres 600,000 sf 9M TBD

Total 79 Acres +1 Million sf $86M $103M

(1) Value as of 9/30/2019, rounded to millions(2) Based on independent appraisals, rounded to millions

EXIS

TIN

GU

ND

ER

DEV

ELO

PM

ENT

Tenant partners include:

Greenleaf Capital manages and develops HCI’s growing real estate portfolio. Its holdings include a blend of properties with reliable cash flow and investment grade tenants, along with development opportunities that offer exceptional potential for appreciation in value.

⚫ 10 Commercial Properties

⚫ $5.1M Net Operating Income (NOI) from operating properties. Yield of 8% on cost basis, 12% levered.

⚫ ~ $120M Appraised Value, $86M Net Asset Value

⚫ Estimated $34 million real estate market value in excess of carrying amount, not recognized in stockholders’ equity. Approximately $3.24 after tax book value per share.

HCI GROUP, INC.

5300 W. Cypress Street, Suite 100

Tampa, FL 33607

Tel (813) 849-9500

www.hcigroup.com/

[email protected]

COMPANY CONTACT

Kevin Mitchell

President, TypTap Insurance

HCI GROUP, INC.

Tel (813) 405-3603

[email protected]

INVESTOR RELATIONS CONTACT

Matt Glover

Gateway Investor Relations

Tel (949) 574-3860

[email protected]

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