[PPT] - Investor Presentation NYSE: HCI | March 2020 Important Cautions PowerPoint Presentation

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NYSE: HCI | March 2020

Investor Presentation

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Important Cautions Regarding Forward- Looking Statements

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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

ther 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, 2019 filed March 6, 2020.

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Insurance can no longer ignore technology

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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 AY

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1. It’s confusing
2. Lacks transparency
3. Application & underwriting

process is cumbersome

Traditional insurance has always faced many challenges:

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

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Property & Casualty Insurance Reinsurance

HCI at a Glance

Stock Price (3/4/20) $44.35 Current Price to Book (3/4/20) 1.86x Common Shares Out. (GAAP) 3 7.76M Fully Diluted Share Ct.4 9.79M

Est. Market Capitalization (3/4/20)

$344.4M Gross Revenue (TTM) ¹ $368.2M Fully Diluted EPS (TTM) $3.31 P/E5 13.4x Dividend Yield 3.6% Book Value/Share2 (12/31/19) $23.90 Institutional Ownership 64.6% Insider Ownership 22.6% Founded/IPO 2006/2008

Real Estate

(1) Gross revenue = total revenue before premiums ceded as of quarter end 12/31/19. (2) $185.5M/7.76M. (3) 7.76M + 191,000 (shares subject to prepaid forward contract) = 7.96M common shares outstanding per AST as of 12/31/19. (4) As of 12/31/19. (5) $44.35 / $3.31 = 13.4x.

Technology

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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

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Launched TypTap Homeowners Product Secured $65M Revolving Line of Credit Repaid in Full (at Maturity) $89.9M of 3.875% Convertible Debt

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Specialization Breeds Success

HCI 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 TA B L E

47/49

Q U A R T E R S

37

C 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

$179 MILLION

in buybacks since inception

$98 MILLION

in dividends paid since inception

10-YEAR

average return

n equity of 20%(1)

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(1) January 1, 2010 through December 31, 2019

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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

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The Growth of TypTap

Gross Premiums Written by Quarter (Homeowners) Premiums in Force (Homeowners) Total Premiums in Force

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5,000,000

10,000,000 15,000,000 20,000,000 25,000,000 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019

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 50,000,000 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019

10,000,000

20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 HO Flood

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Our Business is Built

n Trust & Partnership

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Reinsurance program transfers catastrophic risk to 50+ HIGHLY-RATED

r 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

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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 $16m 3rd Party Reinsurance 100% of $566m xs $16m

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2.0x 2.2x 2.2x 1.9x

2016 2017 2018 2019

Our Success So Far

$64 $121 $161 $183 $238 $244 $194 $181 $186

$8.28 $10.93 $14.68 $17.92 $23.10 $25.23 $22.14 $21.71 $23.90

$5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00

2011 2012 2013 2014 2015 2016 2017 2018 2019

$- $30 $60 $90 $120 $150 $180 $210 $240 $270

Stockholders' Equity BV/Common Share

$0.53 $0.88 $0.95 $1.10 $1.20 $1.20 $1.40 $1.50 $1.60

2011 2012 2013 2014 2015 2016 2017 2018 2019

38% 41% 40% 45% 37% 43% 44% 45% 75% 84% 84% 90%

2016 2017 2018 2019 Loss Ratio Expense Ratio

Total Stockholders’ Equity ($M) & Book Value/Common Share Combined Non-CAT Underwriting Ratios (4) 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 2019. (6) Drop of $50M reflects $44.9M of stock buybacks in 2017 [impact of buybacks = $2.25]

(5) (5) (5) (5) (2) (3)

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(6)

Underwriting Leverage (1)

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Conservative Investment Portfolio

(1) As of 12/31/19 (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, change in unrealized gain (loss) on investments and other than temporary impairment expense (OTTI). Excludes real estate and joint ventures

Significant portfolio cash balance available for future

investment (39%) (1)

Generated net investment income of $13.6 million in

2019 and $16.5 million in 2018 (2)

2018: Book Yield = 2.95%(5); Economic Yield = 1.66%(6)
2019: Book Yield = 2.87%(5); Economic Yield = 5.33%(6)

$230.2 $293.4 $314.7 $267.7 $280.5 $255.8 $239.5 $229.2 $300.1 $450.2 $494.0 $510.5 $594.4 $649.7 $640.6 $583.3 2012 2013 2014 2015 2016 2017 2018 2019

$ in Millions

Historical Investment Portfolio by Asset Type(1)

Equity Real Estate & Other (3) Fixed Income Short Term Investments Cash 16 Cash 39% Fixed Income 35% Equity 6% Real Estate & Other 20% ST Investments <1%

(4)

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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 PATEL

Chairman & 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 HARMSWORTH

Chief 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 COLEMAN

President, 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 GRAHAM

General Counsel

ANTHONY SARAVANOS

President, Greenleaf Capital

KEVIN MITCHELL

President, 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)

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Vision for the Future

Grow TypTap to $300M in revenue Dividends and share repurchases Continued focus on profitability Continue to grow the earnings power of the company

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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 4 2 0 1 9 )

$59.6M

G R O S S W R I T T E N P R E M I U M ( Q 4 2 0 1 9 )

$24.0M

G 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 4 2 0 1 9 v s . Q 4 2 0 1 8 )

485%

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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

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 *Policy Count # 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

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Specialization in Florida Breeds Success

75%

f stochastic events

miss Florida

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COASTAL

Distance 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)

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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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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

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Creating Value Through Real Estate

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Commercial Properties

Property Land Size Combined

Sq. Ft.

Net Book Value (1) Appraised Value (2) Class A Office Portfolio

2- Prestigious Westshore Tampa Locations 1- Ocala Location

12 Acres 228,000 sf $18M $31M Anchored Retail Center Portfolio

2- Grocery Anchored 2-Gas/Convenience Store Anchored

37 Acres 120,000 sf 33M 41M Waterfront Specialty Use Portfolio

Featuring: Two Marinas Waterfront Restaurant

16 Acres 74,000 sf 17M 33M Retail Center

Under development Clearwater, FL

5 Acres 68,000 sf 10M TBD Waterfront Vacant Land

Under development – office/hotel/retail Westshore Tampa, FL

9 Acres 600,000 sf 9M TBD

Total

79 Acres +1 Million sf

$87M $105M

(1) Value as of 12/31/2019, rounded to millions (2) Based on independent appraisals, rounded to millions

EXISTING UNDER DEVELOPMENT 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

pportunities that offer exceptional potential for

appreciation in value.

⚫ 10 Commercial Properties ⚫ $5.2M Net Operating Income (NOI) from operating properties.

Yield of 9% on cost basis, 15% levered.

⚫ ~ $123M Appraised Value, $87M Net Asset Value ⚫ Estimated $37 million real estate market value in excess of

carrying amount, not recognized in stockholders’ equity. Approximately $3.57 after tax book value per share.

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HCI GROUP, INC.

5300 W. Cypress Street, Suite 100 Tampa, FL 33607 Tel (813) 849-9500 www.hcigroup.com/ contactus@hcigroup.com

COMPANY CONTACT

Rachel Swansiger, Esq. HCI GROUP, INC. Tel (813) 405-3206 rswansiger@hcigroup.com

INVESTOR RELATIONS CONTACT

Matt Glover Gateway Investor Relations Tel (949) 574-3860 hci@gatewayir.com

Investor Presentation NYSE: HCI | March 2020 Important Cautions - - PowerPoint PPT Presentation