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Call the phone number

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DEF 14A 1 d67873ddef14a.htm DEF 14A DEF 14A

SCHEDULE 14A

(Rule 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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HCI GROUP, INC.

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LOGO

Notice of 2021 Annual Meeting

and Proxy Statement

LOGO

April 29, 2021

Dear Fellow Shareholders,

The past year was a time of challenge and accomplishment for HCI. We successfully adapted our business operations to the COVID-19 pandemic, completed a planned relocation of our headquarters and, most significant, set the stage for a major investment by a leading private equity firm in TypTap Insurance Group, Inc., our fast growing, InsurTech business.

At the outset of the COVID-19 pandemic, we adapted by successfully transitioning to a work from home model. The transition was nearly seamless. Overall, our operations have been minimally affected by the pandemic. Another challenge last year was the weather. The year 2020 had a very active hurricane season. We, nevertheless, achieved financial success with a year over year stock price increase of 14.6% and an increase in total shareholder return that outperformed our core peer group.

During 2020, we also relocated our headquarters to 3802 Coconut Palm Drive, Tampa, Florida 33619, which is east of downtown Tampa. Our 2021 shareholders meeting will be held in the new headquarters. Please note that the meeting, to be held on June 3, 2021 at 3 p.m., will be formal and brief, due to COVID-19 concerns. If you decide to attend the meeting in person, please wear a mask and maintain social distancing.

As many of you know, in 2020, we sold our old Cypress Street headquarters property in Tampa to the State of Florida, which needs the property for an important transportation project. Under terms of the sale, we are entitled to use the property for up to three years. Also in 2020, we purchased an office building formerly used by Citizens Property Insurance Company, the state sponsored homeowners insurance company. For the interim, TypTap Insurance Group will continue to use the Cypress Street property as its headquarters. HCI, however, has permanently moved to the new location east of Tampa. We look forward post pandemic to showing you the new headquarters and the plans we have there.

This headquarters move is part of an overall restructuring plan whereby TypTap Insurance Group is to operate independently from HCI and have its own independent board of directors. On February 26, 2021, Centerbridge Partners, L.P., a large private investment firm, invested $100 million in TypTap Insurance Group. That investment implies a valuation for TypTap of approximately $850 million. As part of that transaction Eric Hoffman, a managing director at Centerbridge, joined HCI’s board of directors. Karin Coleman, our chief operating officer, also joined the board.

These are exciting times at HCI. It’s important that we hear from you in connection with the annual shareholders meeting. Please read the accompanying Proxy Statement and follow the voting instructions it contains so that your vote will be counted.

On behalf of the Board of Directors, I thank you for your investment in HCI.

Sincerely,

LOGO

Paresh Patel

Chairman of the Board

Chief Executive Officer

3802 Coconut Palm Drive

Tampa, Florida 33619

Addressing COVID-19 Challenges

As we finalized the 2021 Proxy Statement, the nation continued to experience the profound effects of the COVID-19 pandemic. Our reinsurance costs increased significantly during 2020 in part due to COVID-19, but we have not experienced a direct, material impact from increased claims and losses.

Fortunately, our investments in technology over many years have put us in a strong position to weather external disruptions. Our operations, including underwriting and claims processing, are continuing without interruption, and we continue to work closely with our policyholders and insurance agent partners.

Technology also enables our people to work remotely. We have exceptional people; they are vital to our success, and we are committed to supporting them at this critical time. We continue to monitor the situation and assess its impact on our communities, our people and the economy and will provide timely updates as events warrant.

LOGO

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Thursday, June 3, 2021

3 p.m. Eastern time

HCI Corporate Headquarters

3802 Coconut Palm Drive

Tampa, Florida 33619

The Annual Meeting of Shareholders of HCI Group, Inc. will be held at 3 p.m. Eastern time on Thursday, June 3, 2021 at HCI Corporate Headquarters, located at 3802 Coconut Palm Drive, Tampa, Florida 33619. Shareholders will be admitted beginning at 2:30 p.m. The principal purposes of the Annual Meeting will be to cover the following items of business:

To elect Class A directors

To ratify the appointment of Dixon Hughes Goodman, LLP as our independent registered public accounting firm for the year ending December 31, 2021

To approve, on an advisory basis, the compensation of our named executive officers

To transact such other business that may properly come before the meeting or any adjournments or postponements thereof

You may vote if you were a shareholder of record as of April 13, 2021.

Our 2020 Annual Report to Shareholders, which is not a part of this Proxy Statement, is enclosed.

It is important that your shares be represented at the Annual Meeting and voted in accordance with your instructions. Please indicate your instructions by promptly signing and dating the enclosed proxy card and mailing it in the enclosed postage-paid, pre-addressed envelope, or by following the instructions on the proxy card for telephone or internet voting.

Please note that COVID-19 health concerns and related government orders may inhibit the ability of shareholders, directors, officers and others to convene and interact. Accordingly, our Annual Meeting may be shortened to focus solely on the formal agenda items described above.

By Order of the Board of Directors,

LOGO

Andrew L. Graham

Secretary and General Counsel

TABLE OF CONTENTS


PROXY STATEMENT SUMMARY			1

Information About the Annual Meeting			1

Items of Business			1

How to Vote			1

Annual Meeting Rules of Conduct			2

IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS			2

FINANCIAL HIGHLIGHTS			3

SHAREHOLDER ENGAGEMENT			5

GOVERNANCE HIGHLIGHTS			7

MATTER NO. 1: ELECTION OF DIRECTORS			8

Resolution and Recommendation			8

Board of Directors			9

Board Committee Memberships			9

Director Tenure			9

Board Selection Process			10

Qualifications of Board Members			10

Diversity of Skills and Experience of Directors			10

Independent Directors			11

Director Election Results			11

Biographies of Directors Standing for Election (Class A)			12

Biographies of Directors Continuing in Office			13

Director Compensation			16

Principal Shareholders			17

MATTER NO. 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			19

Resolution and Recommendation			19

Auditing Fees			19

Pre-Approval Policies			20

Report of the Audit Committee			20

MATTER NO. 3: APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS			21

Resolution and Recommendation			21

Report of the Compensation Committee			22

Compensation Discussion and Analysis			22

Pay-for-Performance Framework			22

Principal Objectives and Approach			25

2020 Company Performance			27

Elements of Executive Compensation			27

Compensation Committee Engagement with Shareholders			27

2020 Compensation Plan Review			28

Compensation Process			29

Compensation Policies Related to Risk Management			30


Executive Officers of the Company			30

2020 Executive Pay Decisions			31

Executive Compensation Benefit Plans and Other Practices			33

Compensation Tables			35

Summary Compensation Table			35

Grants of Plan-Based Awards for 2020			36

Outstanding Equity Awards at December 31, 2020			37

Option Exercises and Stock Vested in 2020			38

CEO Pay Ratio			39

CORPORATE GOVERNANCE			40

Board of Directors			40

Board of Directors Leadership Structure			40

Board Meetings			41

Committees of the Board of Directors			41

Oversight of Environmental and Social Matters			45

Access to Independent Advisors			46

Director Attendance at Annual Meeting of Shareholders			46

Board of Directors Role in Risk Oversight			46

Communicating with the Board of Directors			47

Board Observer Program			47

Director Education			47

Annual Evaluations			47

Director Share Ownership Policy			48

CEO Share Ownership Policy			48

Transactions with Related Persons			48

Adverse Interests			48

Anti-Hedging Policy			48

Code of Ethics			48

Corporate Governance Guidelines			49

Section 16(a) Beneficial Ownership Reporting Compliance			49

Shareholder Proposals for Presentation at Next Year’s Annual Meeting			49

ABOUT THE ANNUAL MEETING			50

FORWARD-LOOKING STATEMENTS			54

APPENDIX

Appendix A: Reconciliation of Non-GAAP Financial Measures			A-1

PROXY STATEMENT SUMMARY

This summary highlights information that can be found elsewhere in this Proxy Statement. It does not contain all the information that you should consider. You should read the entire Proxy Statement before voting.

Information About the Annual Meeting



Annual Meeting of Shareholders

Time/Date		3 p.m. Eastern time on Thursday, June 3, 2021

Place		HCI Corporate Headquarters, 3802 Coconut Palm Drive, Tampa, Florida 33619

Record Date		April 13, 2021

Mailing Date		We began mailing this Proxy Statement on or about May 3, 2021

Items of Business



Item	The Board’s Recommendation	Page

1) To elect Class A directors	Vote FOR All	8

2) To ratify the appointment of Dixon Hughes Goodman, LLP as our independent registered public accounting firm for the year ending December 31, 2021	Vote FOR	19

3) To approve, on an advisory basis, the compensation of our named executive officers	Vote FOR	21

We do not anticipate that any other business matters will be brought before the meeting for a vote. However, if any other matters are presented, it is the intention of the persons named in the proxy to vote the proxy as recommended by the Board of Directors or, if no recommendation is given, in their own discretion using their best judgment.

How to Vote

Call the phone number listed on your proxy card or HCI’s proxy advisor, Alliance Advisors LLC, at 844-618-1694 (toll free in the United States).


HCI Group, Inc. 2021 Proxy Statement		1

PROXY STATEMENT SUMMARY

Annual Meeting Rules of Conduct

To ensure fair, orderly and constructive meetings, the Board of Directors has adopted rules of conduct for shareholder meetings, including that only shareholders of record as of the record date or their duly authorized representatives are entitled to vote or address the meeting; no one may address the meeting unless called upon by the presiding officer of the meeting; and the use of cameras, audio or video recording equipment, communications devices or similar equipment is prohibited. Individuals who violate these rules may be removed. (See “About the Annual Meeting: Are there rules of Conduct?”)

Important Notice Regarding Availability of Proxy Materials

Important Notice Regarding the Availability of Proxy Materials

for the Shareholder Meeting to be Held on June 3, 2021

This Proxy Statement and the 2020 Annual Report to Shareholders are available at

http://www.hcigroup.com/2021proxymaterials

Upon your written request, we will provide you with a copy of our 2020 Annual Report on Form 10-K, including exhibits, free of charge. Send your request to HCI Group, Inc., c/o Rachel Swansiger, Staff Attorney, 3802 Coconut Palm Drive, Tampa, Florida 33619.


2		HCI Group, Inc. 2021 Proxy Statement

PROXY STATEMENT SUMMARY

Financial Highlights

Our business performance in 2020 continued our long-term record of strong financial and operating results. Net income in 2020 was $27.6 MM, or $3.49 earnings per diluted common share, up from $26.6 MM in the previous year. We also maintained a strong balance sheet, paid $12.4 MM in dividends, and returned an additional $5.2 MM to shareholders in the form of share repurchases. TypTap Insurance Company, our technology-driven insurance subsidiary, increased gross earned premium 155% compared with 2019.

Over the past decade, HCI has delivered solid results for shareholders. Our Return on Equity (ROE) has averaged 19% over this period, and we have reported strong levels of Earnings Before Interest and Taxes (EBIT), despite several hurricanes that had a material impact on our core homeowners insurance business. The Company has been profitable in 51 of the last 53 quarters and has paid dividends in 42 consecutive quarters.

$27.6 MM Net Income in 2020,

or $3.49 earnings per diluted common share

19%

Return on Equity

(10-year average)

Profitable in 51 of the last 53 quarters

2.05x Share price to book value ratio for December 2020

$12.4 MM of Dividends

paid in 2020

consecutive quarters of dividends

74% increase in gross written premium for our technology-driven insurance subsidiary, TypTap Insurance Company, in 2020 compared with 2019

8% increase in book value, to $25.82 at December 31, 2020 from $23.90 at December 31, 2019

$295 MM returned to shareholders through dividends and share repurchases, inception through 2020


HCI Group, Inc. 2021 Proxy Statement		3

PROXY STATEMENT SUMMARY

LOGO


4		HCI Group, Inc. 2021 Proxy Statement

SHAREHOLDER ENGAGEMENT

Each year we engage in robust shareholder outreach efforts. The feedback we receive is valuable and informative, providing actionable items for positive change. Since the 2020 annual meeting, we reached out to our shareholders, focusing on our 30 largest shareholders, which represent approximately 72% of our outstanding common stock. During the past 12 months, the Chair of the Compensation Committee and our Investor Relations Staff spoke with seven shareholders representing nearly 36% of the Company’s outstanding common stock. During these conversations, we heard from shareholders regarding our Board composition, corporate governance policies and executive compensation practices, as well as our policies on corporate social and environmental (E&S) responsibility. Of the shareholders who declined our request for a call, many stated the reason for doing so was satisfaction with HCI’s overall approach to governance, compensation and E&S matters.

LOGO


HCI Group, Inc. 2021 Proxy Statement		5

SHAREHOLDER ENGAGEMENT

LOGO


6		HCI Group, Inc. 2021 Proxy Statement

GOVERNANCE HIGHLIGHTS

We are committed to maintaining a high standard of corporate governance to support the creation of shareholder value. We have a Lead Independent Director, a Board comprised of a majority of independent directors and a director share ownership requirement. More recently, the Board established a Share Ownership Policy for the Chief Executive Officer and created a Sustainability Committee to assist the Board in its oversight of environmental and social policies.

In 2020, Mr. Macchiarola and Ms. Spencer resigned from the Board, in order to add their valuable experience to the Board of TypTap Insurance Group, Inc. In February 2021, Karin Coleman, Chief Operating Officer, was appointed to the HCI Group Board. Additionally, Eric Hoffman, a managing director of Centerbridge Partners L.P., was appointed to the Board.

We have a Code of Conduct to ensure that the conduct of our employees, officers and directors remains in compliance with laws, regulations and ethical principles. Employees, officers and directors are prohibited from engaging in derivative trading or hedging of our securities. We do not have a shareholder rights plan (“poison pill”).

Our executive compensation programs are designed to align the interests of our executives with those of our shareholders and use a balanced mix of cash and long-term equity-based incentives that is benchmarked against our industry peers and will be tied to specific performance objectives beginning in 2021. We have a clawback policy that provides for pay reimbursement by an executive officer under appropriate circumstances.


HCI Group, Inc. 2021 Proxy Statement		7

MATTER NO. 1 ELECTION OF DIRECTORS

Three directors are to be elected at the Annual Meeting. In accordance with the Company’s articles of incorporation, the Board of Directors is divided into three classes. All directors within a class have the same three-year term of office. The class terms expire at successive annual meetings so that each year a class of directors is elected. The current terms of director classes expire in 2021 (Class A directors), 2022 (Class B directors) and 2023 (Class C directors). Each of the Class A directors elected at the 2021 Annual Meeting will be elected to serve a three-year term.

With the recommendation of the Governance and Nominating Committee, the Board of Directors has nominated the following persons to stand for election as Class A directors at the 2021 Annual Meeting of Shareholders, with terms expiring in 2024:

Karin Coleman

Eric Hoffman

Sue Watts

Each of the nominees for election as a director has consented to serve if elected. If, as a result of circumstances not now known or foreseen, one or more of the nominees should be unavailable or unwilling to serve as a director, proxies may be voted for the election of such other persons as the Board of Directors may select. The Board of Directors has no reason to believe that any of the nominees will be unable or unwilling to serve.

The persons named in the enclosed proxy card intend, unless otherwise directed, to vote such proxy “FOR” the election of Karin Coleman, Eric Hoffman and Sue Watts as Class A directors of HCI Group, Inc. The nominees receiving the three highest “FOR” vote totals will be elected as directors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF EACH OF THE

NOMINEES AS DIRECTORS OF THE COMPANY — ITEM 1 ON YOUR PROXY CARD.



15 Full Board meetings in 2020	63% of the Board contributes to gender or ethnic diversity	5 of 8 directors are independent


8		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 1 ELECTION OF DIRECTORS

Board of Directors

Director

Independent

Age

Director
Since

Primary Occupation

Nominees for Election:

Karin Coleman

2021

Chief Operating Officer, HCI Group Inc. President, Homeowners Choice Property & Casualty Insurance Company (HCPCI), a subsidiary of HCI Group Inc.

Eric Hoffman

Yes

2021

Managing Director at Centerbridge Partners.

Sue Watts

Yes

2019

Executive Vice President, Capgemini SE

Continuing in Office:

Paresh Patel

2007

Chairman and Chief Executive Officer, HCI Group, Inc.

Gregory Politis

Yes

2007

President, Xenia Management Corporation

Wayne Burks

Yes

2013

Director and Former Chief Financial Officer, Romark LC.

Jay Madhu

Yes

2007

President and Chief Executive Officer, Oxbridge Re Holdings Ltd.

Anthony Saravanos

2007

President, Greenleaf Capital, a subsidiary of HCI Group, Inc.

Board Committee Memberships


Director	Audit	Compensation	Governance & Nominating	Sustainability
Wayne Burks	Chair	Chair
Karin Coleman
Jay Madhu	Member			Chair
Eric Hoffman		Member	Member
Paresh Patel
Gregory Politis			Chair
Anthony Saravanos				Member
Sue Watts	Member	Member

Director Tenure



Average tenure 8.6 years				Average age 57.5 years

LOGO


HCI Group, Inc. 2021 Proxy Statement		9

MATTER NO. 1 ELECTION OF DIRECTORS

Board Selection Process

In accordance with the Company’s articles of incorporation, the Board of Directors is divided into three classes. Each class consists of two or three directors. All directors within a class have the same three-year terms of office. The class terms expire at successive annual shareholders’ meetings so that each year one class of directors is elected at the Annual Meeting. The Board does not believe arbitrary term limits on a director’s service are appropriate, nor does it believe that directors should expect to be re-nominated upon expiration of a three-year term. Each year the Board of Directors proposes a slate of nominees for election at the Annual Meeting.

The Governance and Nominating Committee is tasked with identifying and selecting individuals believed to be qualified as candidates to serve on the Board and recommending to the Board candidates to stand for election as directors at the Annual Meeting or, if applicable, at a special meeting of the shareholders. The Governance and Nominating Committee identifies director candidates in numerous ways. Generally, the candidates are known to and recommended by members of the Board of Directors or management. The Governance and Nominating Committee also considers director candidates recommended by shareholders. Shareholders may submit recommendations for Board nominees directly to the Board or at the Annual Meeting of Shareholders. See page 49 for information on submitting director nominations to the Board. A shareholder wishing to nominate an individual for election to the Board of Directors at the Annual Meeting rather than recommend a candidate to the Governance and Nominating Committee must comply with the advance notice requirements set forth in the Company’s bylaws, a copy of which can be found on the Company’s website, www.hcigroup.com, by selecting the “Investor Information” tab followed by “Corporate Governance.”

Qualifications of Board Members

In selecting individuals for Board membership, the Board of Directors considers a variety of attributes, criteria and factors, including experience, skills, expertise, diversity, personal and professional integrity, character, temperament, business judgment, time availability, dedication and conflicts of interest. At a minimum, director candidates must be at least 18 years of age, have sufficient time to devote to their Board duties and have such business, financial, technological or legal experience or education to enable them to make informed decisions on behalf of the Company. A majority of the Board members must be independent, as determined by the Board of Directors, in accordance with the listing standards of the New York Stock Exchange. In general, the Board affirmatively determines whether a director has any direct or indirect material relationship with the Company. All members of the Audit Committee, Compensation Committee, and Governance and Nominating Committee must be independent, with members of the Audit Committee and the Compensation Committee meeting higher levels of independence as required by the rules of the Securities and Exchange Commission. Members of the Audit Committee must be financially literate as determined by the Board and at least one member must be an Audit Committee Financial Expert as described in the rules of the U.S. Securities and Exchange Commission.

Diversity of Skills and Experience of Directors

Experience

& Expertise

Operations
Management
Experience

Gender/
Ethnic
Diversity

CEO
Leadership

Industry
Background*

Public
Company
Board
Service

Financial
Experience

Paresh Patel

✓

Anthony Saravanos

✓

Karin Coleman

✓

Wayne Burks

✓

Jay Madhu

✓

Gregory Politis

✓

Eric Hoffman

✓

Sue Watts

✓

*Includes experience in the areas of insurance, technology and real estate.


10		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 1 ELECTION OF DIRECTORS

Diversity and Board Tenure

We believe that a variety of perspectives, opinions and backgrounds among Board members is important to the Board’s ability to perform its duties. Our Board is diverse in terms of gender, ethnicity, culture, education and business backgrounds.

Board tenure diversity is equally important, as we seek to achieve an appropriate balance of years of service among Board members. Our senior directors have deep knowledge of our Company and business operations, while new directors provide fresh perspectives. Our current Board of Directors has an average tenure of 8.6 years.

Arrangements as to Selection and Nomination of Directors

We are not aware of any arrangements as to the selection and nomination of directors.

Independent Directors

Based upon recommendations of our Governance and Nominating Committee, the Board of Directors has determined that current directors Gregory Politis, Wayne Burks, Eric Hoffman, Jay Madhu and Sue Watts are “independent directors” meeting the independence tests set forth in Section 303A.02 of the New York Stock Exchange Listing Manual, including having no material relationship with the Company either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company. In the case of Mr. Madhu, the Board considered his role as a President and Chief Executive Officer of Oxbridge Re Holdings, which had a reinsurance agreement that terminated in 2018 with the Company’s subsidiary, Claddaugh Casualty Insurance Company Ltd. In the case of Mr. Hoffman, the Board considered his role as a Managing Director of Centerbridge Partners, which agreed to invest $100 MM in the Company’s subsidiary TypTap Insurance Group and under theagreement Mr. Hoffman would serve on the Company’s Board.

Director Election Results

At our 2020 Annual Meeting of Shareholders, Wayne Burks, Jay Madhu and Anthony Saravanos were re-elected to the Board with vote totals detailed below.


	2020
Director Nominee	For			Withheld

Wayne Burks		97.4	%		2.6	%

Jay Madhu		96.0	%		4.0	%

Anthony Saravanos		98.6	%		1.4	%


HCI Group, Inc. 2021 Proxy Statement		11

MATTER NO. 1 ELECTION OF DIRECTORS

Biographies of Directors Standing for Election (Class A)



Karin Coleman

*Karin Coleman, age 60, has served as a director and the Chief Operating Officer of the Company since February 2021 and since 2019 as President of the insurance subsidiary, Homeowners Choice Property & Casualty Insurance Company. She previously served as Executive Vice President of the Company. She joined the Company in 2009 as Vice President of Corporate Services overseeing strategic initiatives, human resources, regulatory and legislative affairs, vendor management and community relations. Prior to joining HCI, Ms. Coleman served nine years as Vice President of Strategic Alliances of Take Stock in Children, located in Miami, Florida, the state’s largest public-private partnership providing college access and assistance to at-risk children. Previously, she served in various corporate roles over 13 years at Florida Progress Corporation (NYSE: FPC), a Fortune 500 diversified holding company operating electric, energy, and energy transportation companies, now part of Duke Energy. Ms. Coleman holds a Bachelor of Arts degree in International Studies from the University of South Florida and is a Certified Senior Professional in Human Resources. Skills/Qualifications:* Mrs. Coleman brings considerable business, marketing, legislative and human resources experience to the Board of Directors. Her knowledge and management experience enhances her oversight of the Company’s business performance, as she has an essential understanding of business operations.				Chief Operating Officer President of HCPCI



Eric Hoffman

*Eric Hoffman,* age 34, has been a member of our Board of Directors and the Board of Directors of our subsidiary, TypTap Insurance Group, Inc., since February 26, 2021. Mr. Hoffman was appointed to the Board and is nominated for election pursuant a 2021 agreement with Centerbridge Partners, L.P., a New York City-based private investment firm. Under that agreement, among other things, Centerbridge made a substantial investment in TypTap Insurance Group, Inc. Since 2010, Mr. Hoffman has served in various capacities at Centerbridge, including currently as a Managing Director. From 2008 to 2010, he served as an Analyst for The Blackstone Group, a New York Stock Exchange listed investment firm. Mr. Hoffman serves on the boards of several other organizations unaffiliated with HCI, including, since 2021, as a director of Congressional Bancshares, Inc., a bank holding company based in Maryland, since 2018, as a director of Amedeo Capital Limited, a private worldwide financier and manager of aircraft leasing transactions; since 2013, as a director for Voyager Aviation Holdings, LLC, a privately held, Ireland-based global aviation investment firm; and since 2014, as a director of Beginning with Children Foundation, an education-focused not-for-profit organization. Previously, from 2019 to 2020, Mr. Hoffman served as a board observer at Root Inc., a mobile-app based auto insurance company, and, from 2015 to 2017, as a board member of Pocahontas Parkway, LLC, a transportation concession in Virginia. Mr. Hoffman graduated summa cum laude with a Bachelor of Science in Economics (concentration in finance and insurance) from the Wharton School at the University of Pennsylvania. Skills/Qualifications: Mr. Hoffman brings considerable experience, knowledge and education to our Board. In his current position at Centerbridge, he focuses primarily on investments in the financial services sector. His investment experience encompasses financial institutions, insurance and specialty finance companies. In earning his degree from the Wharton School, he concentrated in finance and insurance. His skills at reading and analyzing financial information, and his knowledge of insurance and finance will enhance board oversight of the Company’s performance and monitoring its financial disclosure and be particularly valuable when the Company considers financial transactions and business acquisitions.				Independent Committees: - Compensation - Governance & Nominating Other Public Company Boards: - Congressional Bancshares, Inc.


12		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 1 ELECTION OF DIRECTORS



Sue Watts

*Sue Watts, age 59, joined our Board of Directors in April 2019. Before that, beginning in October 2018, Ms. Watts participated in our Board Observer Program. She is currently a North America Business Unit Executive Vice President for Capgemini SE (EPA: CAP), a global technology services and digital transformation consulting firm. From 2014 through 2017, she served as Chief Operating Officer & Corporate Officer of Business Process Outsourcing for Xerox Corporation (NYSE: XRX). From 2010 through 2015, she served as Corporate Vice President of Application Services and as Chief Executive Officer of Americas Outsourcing for Capgemini. From 2009 through 2010, she served as Vice President of Americas Global Service for Orange Business Services, a global information technology and communications services provider. From 1985 through 2009, she served in many roles at Unisys Corporation. Ms. Watts earned her Bachelor of Science in Business from Indiana University and her Master of Business Administration from the University of Notre Dame with a concentration in Finance. Skills/Qualifications:* Ms. Watts brings to our Board of Directors more than three decades of experience in business operations, information technology and leadership. Her knowledge and experience enhance the Board’s oversight of our management, our business operations and the development and application of our technology.				Independent Committees: - Audit - Compensation Other Public Company Boards: - None

Biographies of Directors Continuing in Office

Directors whose present terms continue until 2022 (Class B)



Paresh Patel

*Paresh Patel, age 58, is a founder of the Company and currently serves as Chairman of the Board of Directors and Chief Executive Officer. He has been a director of the Company since its inception and has served as the Chairman of our Board of Directors since May 2007. He has served as Chief Executive Officer since 2011. From 2015 to 2019, he served as President of our insurance subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., a position he also held from 2011 to 2012. In addition, Mr. Patel is Chairman of the Board of TypTap Insurance Company, our technology-based homeowners and flood insurance subsidiary corporation formed in January 2016. Mr. Patel has broad experience in technology and finance. He developed and continues to oversee development of the Company’s policy administration systems. From 2011 to 2015, he served as Chairman of the Board of First Home Bancorp, Inc., a bank holding company in Seminole, Florida and from 2014 to December 2017 he served as Chairman of the Board of Directors of Oxbridge Re Holdings Limited, a NASDAQ-listed Cayman Islands reinsurance holding company. He was a founder of NorthStar Bank in Tampa, Florida and from 2006 to 2010 served on the Board of Directors of its parent company, NorthStar Banking Corporation. From 1998 to 2000, he was Director of Customer Care and Billing with Global Crossing. In that position, Mr. Patel defined business processes and systems, hired and trained department staff and led the integration of the customer care and billing systems with the systems of companies that Global Crossing acquired. As an independent software and systems consultant from 1991 to 1998, Mr. Patel worked with large international telephone companies. Mr. Patel holds a Bachelor’s and a Master’s degree in Electronic Engineering from the University of Cambridge in the United Kingdom. Skills/Qualifications:* Mr. Patel brings to the Board of Directors considerable experience in business, insurance, management, systems and technology, and because of those experiences and his education, he possesses knowledge and analytical and technology skills that are important to the operations of the Company, the oversight of its performance and the evaluation of its future growth opportunities. Furthermore, his performance as Chief Executive Officer has demonstrated an in-depth understanding of the Company’s insurance business. He is a founder of the Company and has a substantial personal investment in the Company.				Chairman of the Board and Chief Executive Officer


HCI Group, Inc. 2021 Proxy Statement		13

MATTER NO. 1 ELECTION OF DIRECTORS



Gregory Politis

*Gregory Politis, age 69, is a founder of the Company and has been a director since its inception. He has served also as the Board’s Lead Independent Director since 2017. Mr. Politis has been in the real estate business since 1974 and is President of Xenia Management Corporation, a real estate portfolio management company he established in 1988. Mr. Politis has interests in more than 50 real estate developments in the Miami-Dade County, Orlando and Greater Tampa Bay areas as well as in Montreal, Canada. Xenia Management Corporation is not affiliated with HCI Group, Inc. During his career, Mr. Politis has developed and retained ownership of retail, office and industrial spaces, with a primary focus on buildings housing federal and state government agencies. He is a founding member of the Hellenic American Board of Entrepreneurs and a recipient of the Building Owners and Managers Association (BOMA) Building of the Year Award. Mr. Politis has served as a director of NorthStar Bank and Florida Bank. Skills/Qualifications:* Mr. Politis brings considerable business, management and real estate experience to the Board of Directors. His business and management experience enhances his oversight of the Company’s business performance, as he has a fundamental understanding of business operations. Moreover, real estate experience has become increasingly important to the Company as it considers and makes significant real estate investments. Additionally, Mr. Politis has a substantial personal investment in the Company.				Independent Committees: - Governance & Nominating (Chair) Other Public Company Boards: - None

Directors whose present terms continue until 2023 (Class C)



Wayne Burks

*Wayne Burks, age 73, has been a director of our Company since June 2013. Since October 1, 2019, Mr. Burks has served as a Board member and as Chair of the Audit Committee for Romark LC. From July 2016 until July 1, 2019, Mr. Burks served as Vice President and Chief Financial Officer for Romark LC. From April 2012 to June 2016, he served as a director and the Chief Financial Officer for WRB Enterprises, Inc., a Tampa, Florida-based holding company with investments in Caribbean electric utilities, renewable energy development, cable television, real estate and financial institutions. From July 2010 to April 2012, he was a Principal of Sterling Financial Consulting where he provided financial and operational consulting services for privately held and pre-initial public offering stage companies. From December 2008 to June 2010, Mr. Burks served as Chief Financial Officer of Prepared Holdings, LLC, a Florida-based insurance holding company. He is a former Audit Partner of Coopers & Lybrand, where he performed auditing services for approximately 23 years. None of the foregoing companies is an affiliate of HCI Group, Inc. Mr. Burks earned a Bachelor of Science degree in Accounting and Business Administration at Troy University in Alabama. Skills/Qualifications:* Mr. Burks brings considerable business, accounting and financial experience to the Board of Directors. We believe his knowledge and experience as the Chief Financial Officer of a homeowners insurance company and also as an auditor with the ability to analyze financial information enhances the Board’s oversight of the Company’s business operations, financial disclosure, external auditors and the effectiveness of our internal controls. Mr. Burks serves as Chair of the Company’s Audit Committee and has been identified by the Board of Directors as an Audit Committee financial expert. He serves also on our Compensation Committee.				Independent Committees: - Audit (Chair) - Compensation (Chair) Other Public Company Boards: - None


14		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 1 ELECTION OF DIRECTORS



Jay Madhu

Jay Madhu, age 54, has been a director of our Company since May 2007. Mr. Madhu formerly served as President of our Real Estate Division and Vice President of Investor Relations, positions he held from June 2011 and February 2008, respectively, until his employment ended in 2013. He also served as our Vice President of Marketing from 2008 to 2011. Since 2013, Mr. Madhu has been President and Chief Executive Officer of Oxbridge Re Holdings Ltd., a NASDAQ-listed reinsurance holding company based in the Cayman Islands and he has served as their Chair of the Board of Directors as of March 2018. From 2012 to 2014, he served as a director for Moksha Re SPC Ltd., a Cayman Islands reinsurance company that ceased operations in 2014. During that time, he also served on the Board of Directors for Wheeler Real Estate Investment Trust, Inc., a publicly held real estate investment trust. During 2013, Mr. Madhu served as a director of First Home Bank in Seminole, Florida. As an owner and manager of commercial properties, Mr. Madhu has been President of 5th Avenue Group LC since 2002 and President of Forrest Terrace LC since 1999. He has also been President of The Mortgage Corporation Network (correspondent lenders) since 1996. Prior to that, Mr. Madhu was Vice President, Mortgage Division at First Trust Mortgage & Finance from 1994 to 1996; Vice President, Residential First Mortgage Division at Continental Management Associates Limited, Inc. from 1993 to 1994; and President at S&S Development, Inc. from 1991 to 1993. None of the foregoing companies is an affiliate of HCI Group, Inc. He attended Northwest Missouri State University where he studied marketing and management. Skills/Qualifications: Mr. Madhu brings considerable business, marketing, real estate and mortgage finance experience to the Board of Directors. Real estate experience has become increasingly important to the Company as it considers and makes significant real estate investments. Additionally, Mr. Madhu has a substantial personal investment in the Company.				Committees: - Sustainability (Chair) - Audit Other Public Company Boards: - Oxbridge Re Holdings Ltd.



Anthony Saravanos

Anthony Saravanos, age 50, has been a director of the Company since May 2007 and President of Greenleaf Capital, LLC, our real estate division, since 2013. Beginning in 2011, Mr. Saravanos has served as a director of First Home Bank in Seminole, Florida, and has also served as Chair of the Board of that bank’s holding company, First Home Bancorp, Inc., since 2015. He has been the managing partner of several commercial property entities since 2001 with a combined total of 13 properties in Florida and New York. From 2005 to 2013, Mr. Saravanos served as Vice President of The Boardwalk Company, a full-service commercial real estate company, located in Palm Harbor, Florida. From 1997 to 2001, he served as District Manager, Marketing and Sales, for DaimlerChrysler Motors Corporation in Malvern, Pennsylvania. Mr. Saravanos graduated from Ursinus College in Collegeville, Pennsylvania with a double major in Economics and Spanish. He earned a Master of Business Administration with an emphasis in marketing from Villanova University and was inducted into the Beta Gamma Sigma Honor Society. Mr. Saravanos also attended Quanaouac Institute in Cuernavaca, Mexico for intensive Spanish studies and a cultural immersion program. A licensed real estate broker, Mr. Saravanos is a Certified Commercial Investment Member as well as a Certified Development Design and Construction Professional. He was named #1 Top Producer for 2010 by the Florida Gulfcoast Commercial Association of Realtors in the General Brokerage Category. Since 2013, Mr. Saravanos has served as Vice President of the Greek Children’s Fund of Florida. Mr. Saravanos has also served as a Trustee on the Johns Hopkins All Children’s Foundation Board since 2017. Skills/Qualifications: Mr. Saravanos brings considerable business, management, finance, marketing and real estate experience and knowledge to the Board of Directors. Real estate experience has become increasingly important to the Company as it considers and makes significant real estate investments. As a District Manager for DaimlerChrysler Motors Corporation he was required to read, understand and analyze financial information, and this skill set is considered of importance in enhancing oversight of the Company’s performance, monitoring its financial disclosure and evaluating growth opportunities. Additionally, Mr. Saravanos has a substantial personal investment in the Company, and he played a large role in bringing initial investors to the Company.				Director; President of Real Estate Division Committees: - Sustainability


HCI Group, Inc. 2021 Proxy Statement		15

MATTER NO. 1 ELECTION OF DIRECTORS

Director Compensation

Directors who are employees of the Company do not receive any additional compensation for their service as directors. During 2019, the Compensation Committee reviewed and redesigned the compensation program for non-employee directors with the assistance of Pearl Meyer, a leading compensation firm, and input from our shareholders. The plan established in September 2019 provides better alignment with shareholder interests and market practice while placing overall compensation at the 50% percentile of the Company’s insurance industry peers. Each non-employee director receives a cash payment of $25,000 per quarter and an annual stock award equivalent to $25,000.

The following table sets forth information with respect to compensation earned by each of our directors (other than employee directors) during the year ended December 31, 2020.


Name	Fees Earned or Paid in Cash⁽¹⁾		Stock Awards⁽²⁾		Option Awards	Non-Equity Incentive Plan Compensation	Change in Pension Value and Non- qualified Deferred Compensation Earnings	All Other Compensation⁽³⁾		Total
George Apostolou⁽⁴⁾	$	75,000	$	24,990	—	—	—	$	684	$	100,674
Wayne Burks	$	100,000	$	24,990	—	—	—	$	894	$	125,884
James Macchiarola⁽⁵⁾	$	100,000	$	24,990	—	—	—	$	894	$	125,884
Jay Madhu	$	100,000	$	24,990	—	—	—	$	894	$	125,884
Harish Patel⁽⁴⁾	$	75,000	$	24,990	—	—	—	$	684	$	100,674
Gregory Politis	$	100,000	$	24,990	—	—	—	$	894	$	125,884
Loreen Spencer⁽⁵⁾	$	100,000	$	24,990	—	—	—	$	894	$	125,884
Sue Watts	$	100,000	$	24,990	—	—	—	$	894	$	125,884

⁽¹⁾	Each director received a cash payment of $25,000 for service during each quarter or portion thereof that he or she served as a director, which includes attendance at Board and committee meetings held during 2020.

⁽²⁾

In accordance with SEC reporting requirements, the amounts reported in this column represent the grant-date fair value of the entire award and were calculated utilizing the fair value recognition provisions of Accounting Standards Codification Topic 718 – “Compensation – Stock Compensation,” which requires the measurement and recognition of compensation for all stock-based awards made to employees and directors, including stock options and restricted stock issuances, based on estimated fair values. The assumptions used in calculating this amount are discussed in Note 21 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on March 12, 2021. The stock awards in this column are restricted stock grants which include only service conditions. The amounts reported in this column are based on the market value of the Company’s stock on the grant date. On June 4, 2020, each of the non-employee directors received a restricted stock grant of 524 shares. The restricted shares will vest on May 24, 2021.

⁽³⁾	All Other Compensation represents dividends paid on unvested restricted shares.

⁽⁴⁾	The stock awards granted to George Apostolou and Harish Patel were forfeited upon each director’s resignation in September 2020.

⁽⁵⁾	Stock awards granted to James Macchiarola and Loreen Spencer were retained upon their transfer to the Board of Directors of TypTap Insurance Group, Inc. in February 2021.

The aggregate number of stock awards outstanding for each non-employee director as of December 31, 2020 was as follows:


Name	Number of Options	Number of Restricted Shares

Wayne Burks	—	524⁽¹⁾

James Macchiarola	—	524⁽¹⁾

Jay Madhu	—	524⁽¹⁾

Gregory Politis	—	524⁽¹⁾

Loreen Spencer	—	524⁽¹⁾

Sue Watts	—	524⁽¹⁾

⁽¹⁾	On June 4, 2020, each of the non-employee directors received a restricted stock grant of 524 shares. The restricted shares will vest on May 24, 2021.


16		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 1 ELECTION OF DIRECTORS

Principal Shareholders

The following table sets forth information regarding the beneficial ownership of our common stock as of April 13, 2021 by:

•

Each person who is known by us to beneficially own more than 5% of our outstanding common stock

•

Each of our directors and named executive officers

•

All directors and named executive officers as a group

The number and percentage of shares beneficially owned are based on 8,483,782 common shares outstanding as of April 13, 2021. Information with respect to beneficial ownership has been furnished by each director, officer or beneficial owner of more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, which generally require that the individual have voting or investment power with respect to the shares. In computing the number of shares beneficially owned by an individual listed below and the percentage ownership of that individual, shares underlying options, warrants and convertible securities held by each individual that are exercisable or convertible within 60 days of April 13, 2021, are deemed owned and outstanding, but are not deemed outstanding for computing the percentage ownership of any other individual. Except as otherwise indicated in the footnotes to this table, or as required by applicable community property laws, all individuals listed have sole voting and investment power for all shares shown as beneficially owned by them. Unless otherwise indicated in the footnotes, the address for each principal shareholder is HCI Group, Inc., 3802 Coconut Palm Drive, Tampa, Florida 33619.


	Beneficially owned
Name and Address of Beneficial Owner	Number of Shares		Percent

Blackrock, Inc.⁽¹⁾		1,054,512		12.43	%

Dimensional Fund Advisors LP⁽²⁾		487,130		5.74	%

The Vanguard Group, Inc.⁽³⁾		436,641		5.15	%

Centerbridge Partners LP⁽⁴⁾		738,750		8.01	%

*Executive Officers and Directors*

Wayne Burks⁽⁵⁾		5,867		*

Karin Coleman⁽⁶⁾		97,676		1.15	%

Andrew L. Graham⁽⁷⁾		110,772		1.31	%

Mark Harmsworth⁽⁸⁾		101,859		1.20	%

Jay Madhu⁽⁹⁾		87,293		1.03	%

Paresh Patel⁽¹⁰⁾		1,110,000		12.68	%

Gregory Politis⁽¹¹⁾		407,117		4.80	%

Anthony Saravanos⁽¹²⁾		205,836		2.43	%

Susan Watts⁽¹³⁾		4,425		*

Eric Hoffman		0		*

All Executive Officers and Directors as a Group (10 individuals)		2,130,845		24.71	%

*	Less than 1.0%.

⁽¹⁾	This information is based on Schedule 13G/A filed with the Securities and Exchange Commission on January 26, 2021 by Blackrock, Inc., 55 East 52^nd Street, New York, New York 10055.

⁽²⁾	This information is based on Schedule 13G/A filed with the Securities and Exchange Commission on February 12, 2021 by Dimensional Fund Advisors LP, 6300 Bee Cave Road, Building One, Austin, Texas 78746.

⁽³⁾	This information is based on Schedule 13G/A filed with the Securities and Exchange Commission on February 10, 2021 by The Vanguard Group, Inc., 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

⁽⁴⁾	This information is based on Schedule 13D filed with the Securities and Exchange Commission on March 8, 2021 by Centerbridge Partners L.P., 375 Park Avenue, 11^th Floor, New York, NY 10152.

⁽⁵⁾	Includes 524 restricted shares.

⁽⁶⁾	Includes 79,500 restricted shares.


HCI Group, Inc. 2021 Proxy Statement		17

MATTER NO. 1 ELECTION OF DIRECTORS

⁽⁷⁾	Includes 3,115 shares held in Mr. Graham’s individual retirement account and 79,500 restricted shares. Of total shares held, 19,264 are pledged as security.

⁽⁸⁾	Includes 79,125 restricted shares.

⁽⁹⁾

Includes 75,000 shares held by Universal Finance & Investments, LLC, voting and investment power over which is held by Mr. Madhu; 2,803 shares held in Mr. Madhu’s individual retirement account; 524 restricted shares; and 267 shares held by Mr. Madhu’s son. Of the shares held, 73,880 are pledged as security.

⁽¹⁰⁾

Includes 447,000 shares held by Paresh & Neha Patel; 35,000 shares held in Mr. Patel’s individual retirement account; 275,000 shares issuable pursuant to options that are currently exercisable or become exercisable within 60 days; and 80,000 restricted shares. Excludes 165,000 shares issuable pursuant to options that are not currently exercisable or become exercisable within 60 days.

⁽¹¹⁾	Includes 200,000 shares held by Gregory & Rena Politis and 524 restricted shares. Of total shares held, 196,000 are pledged as security.

⁽¹²⁾

Includes 80,000 shares held by HC Investment LLC, voting and investment power over which is held by Mr. Saravanos; 1,200 shares held by Anthony & Maria Saravanos as custodian for their son, Kostos Anthony Saravanos; 1,200 shares held by Mr. Saravanos as custodian for his niece, Elliana Tuite; 1,200 shares held by Mr. Saravanos as custodian for his nephew, Nolan Tuite; 140 shares held in Mr. Saravanos’s individual retirement account and 79,500 restricted shares.

⁽¹³⁾	Includes 524 restricted shares.


18		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Company’s Audit Committee has appointed Dixon Hughes Goodman, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2021, and shareholders will be asked to ratify the Audit Committee’s appointment at the Annual Meeting. Regardless of the outcome of this vote, the Audit Committee will retain the sole authority to appoint the Company’s independent registered public accounting firm. If the appointment is not ratified, then the Audit Committee will reconsider its appointment. Even if the appointment is ratified, the Audit Committee may appoint a different independent registered public accounting firm for the Company.

Representatives from Dixon Hughes Goodman, LLP will be present at the Annual Meeting. They will have an opportunity to make a statement and will be available to respond to appropriate questions.

The persons named in the enclosed proxy card intend, unless otherwise directed, to vote such proxy “FOR” ratification of the appointment of Dixon Hughes Goodman, LLP as the Company’s independent registered public accounting firm. This proposal will be approved if the number of votes for the proposal exceeds the number of votes against the proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF

DIXON HUGHES GOODMAN, LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM — ITEM 2 ON YOUR PROXY CARD.

Auditing Fees

The following table sets forth the aggregate fees for services provided by Dixon Hughes Goodman, LLP, our principal accountant, related to the years ended December 31, 2020 and 2019:



	2020		2019

Audit Fees⁽¹⁾	$	453,945	$	390,000

All Other Fees⁽²⁾	$	98,500		—

Total	$	552,445	$	390,000

⁽¹⁾	Audit Fees represent fees billed for professional services rendered for the audit of our annual financial statements, review of our quarterly financial statements included in our quarterly reports on Form 10-Q, and audit services provided in connection with other statutory and regulatory filings.

⁽²⁾	All Other Fees represent fees billed for services provided to us not otherwise included in the category above.


HCI Group, Inc. 2021 Proxy Statement		19

MATTER NO. 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Pre-Approval Policies

All auditing and non-auditing services are pre-approved by the Audit Committee. The Audit Committee delegates this authority to the Chair of the Audit Committee for situations when pre-approval by the full Audit Committee is not convenient. Any decisions made by the Chair of the Audit Committee must be disclosed at the next Audit Committee meeting.

Report of the Audit Committee

To the Board of Directors of HCI Group, Inc.

The Audit Committee oversees the financial reporting processes of HCI Group, Inc. on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee has reviewed the audited financial statements in the Annual Report with management and discussed with management the quality, in addition to the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

The Audit Committee has reviewed with representatives of Dixon Hughes Goodman, LLP, the Company’s independent registered public accounting firm responsible for auditing the Company’s financial statements and expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States of America, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed under auditing standards adopted by the Public Company Accounting Oversight Board. The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence.

The Audit Committee has discussed with representatives of Dixon Hughes Goodman, LLP the overall scope and plans for their audit. The Audit Committee met with representatives of Dixon Hughes Goodman, LLP, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors the inclusion of the audited financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for filing with the Securities and Exchange Commission.

The Audit Committee has appointed Dixon Hughes Goodman, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2021.

AUDIT COMMITTEE

Wayne Burks, Chair

Jay Madhu

Sue Watts


20		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

We are seeking an advisory vote to approve the compensation of our named executive officers for 2020.

This say-on-pay vote is advisory and non-binding on our Board, but our Compensation Committee will take into consideration the outcome of the vote when making future compensation decisions. At the 2020 Annual Meeting of Shareholders, 78.1% of the votes cast favored our say-on-pay proposal.

Our Board believes that our current executive compensation program appropriately links the compensation realized by our executive officers to performance and properly aligns the interests of executive officers with those of our shareholders. A description of our executive compensation programs and a discussion of the pay decisions for 2020 for the Chief Executive Officer and our other named executive officers are included in Compensation Discussion and Analysis below.

Our Board recommends that our shareholders vote in favor of the following resolution:

“RESOLVED” that the shareholders approve compensation paid to the Company’s named executive officers as disclosed in the Company’s Proxy Statement with respect to the Company’s 2021 Annual Meeting of Shareholders pursuant to Item 402 of Regulation S-K including the Compensation Discussion and Analysis section, the Summary Compensation Table and other compensation tables and related discussion and disclosure.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL, ON AN ADVISORY BASIS, OF

THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY

STATEMENT — ITEM 3 ON YOUR PROXY CARD


HCI Group, Inc. 2021 Proxy Statement		21

MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Report of the Compensation Committee

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement. Based on such review and discussion, the Compensation Committee believes the Compensation Discussion and Analysis represents the intent and actions of the Compensation Committee with regard to executive compensation and has recommended to the Board of Directors that it be included in this Proxy Statement and incorporated by reference into the Company’s Form 10-K for the fiscal year ended December 31, 2020.

COMPENSATION COMMITTEE

Wayne Burks, Chair

Eric Hoffman

Sue Watts

Compensation Discussion and Analysis

The following discussion describes the principal objectives of our executive compensation programs with respect to our named executive officers, outlines the elements of those programs and describes how we believe they meet our objectives. Named executive officers include the Chief Executive Officer, the Chief Financial Officer and the three most highly compensated executive officers. The following individuals served as named executive officers during 2020:

Name and office

Paresh Patel, Chairman and Chief Executive Officer

Mark Harmsworth, Chief Financial Officer

Andrew L. Graham, Vice President, General Counsel and Corporate Secretary

Anthony Saravanos, Divisional President – Real Estate

Karin Coleman, Chief Operating Officer and President, Homeowners Choice Property & Casualty
Insurance Company, Inc. (HCPCI)⁽¹⁾

⁽¹⁾

Karin Coleman was appointed Chief Operating Officer of the Company in February 2021.

Under our Compensation Committee charter, the Compensation Committee has the authority to set the compensation of the named executive officers and to grant equity awards under the Company’s 2012 Omnibus Incentive Plan.

Pay-for-Performance Framework

Our compensation plans are designed to incentivize executive behavior that drives positive financial performance, which leads to increased shareholder returns. We believe our 2020 executive compensation decisions support this objective.

Performance on the Company’s financial and strategic goals is an important factor in our compensation decisions. The compensation awarded in 2020 to our Chief Executive Officer, Paresh Patel, and our other named executive officers reflects the Company’s accomplishments during the year and our pay-for-performance philosophy.

Our business performance in 2020 continued our long-term record of strong financial and operating results. Net income for 2020 totaled $27.6 MM, or $3.49 earnings per diluted share, compared with $26.6 MM in the previous year. We also maintained a strong balance sheet, paid $12.4 MM in dividends, and returned an additional $5.2 MM to shareholders in the form of share repurchases.


22		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

The Company has delivered strong financial results over the long term. As illustrated in the following charts, the Company’s Return on Equity (ROE) has averaged 19% over the past decade, and the Company has reported strong levels of Net Income and Earnings Before Interest and Taxes (EBIT)⁽¹⁾ as well, despite several hurricanes that had a material impact on our core homeowners insurance business.⁽²⁾ While hurricanes are a factor our management cannot control, management can control how they respond to those events. In the opinion of the Compensation Committee, the Company’s response to the hurricanes of 2016-2018 and 2020 was well-planned and well-executed.

LOGO

⁽¹⁾

Earnings Before Interest and Taxes (EBIT) is a financial measurement not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be viewed as an alternative to GAAP measures of performance. It excludes from net income or loss 1) interest expense, and 2) income tax expense, or income tax benefit in the case of a net loss. HCI believes this financial measurement is a preferable gauge of operating profit. A reconciliation of EBIT to GAAP net income/loss is provided in Appendix A.

⁽²⁾	Financial results for 2016, 2017, 2018 and 2020 were affected by Hurricane Matthew, Hurricane Irma, Hurricane Michael and Hurricane Sally, respectively.


HCI Group, Inc. 2021 Proxy Statement		23

MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

The Company’s share price performance and record of consistent dividend payments have provided solid returns to shareholders relative to its core peer group. The illustration below shows the cumulative total return performance of HCI shares was 79% compared with its core peers over the past five years.

Comparison of HCI to its core peer group using total shareholder return for the last five years:

LOGO

The compensation program for our CEO is designed to reward outstanding performance and align pay with the interests of shareholders. The majority of the CEO’s pay is “at risk” and includes performance-based cash and long-term equity awards. For 2020, 85% of Mr. Patel’s compensation was at-risk, as illustrated below.

LOGO


24		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Principal Objectives and Approach

In designing our executive compensation programs, the Compensation Committee’s principal objectives are to attract and retain highly skilled executives, incentivize executives to achieve strong corporate performance without encouraging excessive risk and align the interests of our executives with the interests of our shareholders.

Benchmarking

To attract and retain key executives, we carefully consider our market environment when setting pay levels for our executives, recognizing that we are in a highly competitive industry in which talented people are a significant driver of value.

In 2020, Pearl Meyer assisted the Compensation Committee in benchmarking and in conducting pay-level and incentive-design analysis. They used two groups of peer companies representing the principal potential talent market: the property and casualty insurance industry and the software industry. While the Company’s primary business is property and casualty insurance, its success relies on the development and implementation of custom software developed in house by our Exzeo software division. Pearl Meyer updated the insurance and software industry peer groups used to set the overall ranges of our executive compensation plan, and those groups comprise the following companies:

Insurance Industry

Amerisafe Inc.

*FedNat Holding Company

*Heritage Insurance Holding, Inc.

Invester Title Company

Kinsdale Capital Group

Lemonade, Inc.

NI Holdings, Inc.

Palomar Holdings, Inc.

Protective Insurance Corporation

*United Insurance Holdings Corp.

*Universal Insurance Holdings, Inc.

Software Industry

American Software, Inc.

AppFolio, Inc.

Benefitfocus, Inc.

Bottomline Technologies, Inc.

Ebix, Inc.

Majesco

MicroStrategy Incorporated

Q2 Holdings, Inc.

QAD, Inc.

Qualys, Inc.

Member of Core Peer Group.

The companies within each peer group are all U.S.-based publicly held companies similar in size to our Company.

Each year, the Committee benchmarks compensation using a core peer group of publicly held property and casualty insurance companies based in Florida (the Core Peer Group) because these companies are similar to us in terms of insurance services and market opportunity. The members of the Core Peer Group are indicated in the above table. The Committee reviews the compensation, financial performance and shareholder returns of these core peer companies during the process of finalizing the total compensation award for our Chief Executive Officer. The cash bonus and total compensation for our CEO may be higher or lower than the target reference point for Chief Executive Officers in the Core Peer Group because of factors such as performance and retention, as well as size and complexity of the job.


HCI Group, Inc. 2021 Proxy Statement		25

MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

The following table and chart show the compensation of Chief Executive Officers in our core peer group based on the disclosures in their proxy statements.


	(in $ thousands)
Company	Salary			Cash Bonus			Stock Awards			Equity Options Awards			Other			Total Compensation

2020 HCI		$	986.5		$	1,000.0		$	1,838.8		$	1,234.0		$	170.2		$	5,229.5

2019 HCI		$	950.0		$	1,550.0		$	1,917.6		$	1,345.3		$	313.8		$	6.076.7

FedNat Holding Company – 2019		$	1,000.0		$	—		$	700.0			—		$	16.8		$	1,716.8

Heritage Insurance Holdings, Inc. – 2019		$	2,302.5		$	3,750.0			—			—		$	23.8		$	6,076.3

United Insurance Holdings Corp. – 2019		$	1,000.0		$	857.8		$	765.0		$	255.0		$	45.1		$	2,922.9

Universal Insurance Holdings, Inc. – 2019		$	804.4		$	675.5		$	1,323.5		$	—		$	38.5		$	2,841.9

LOGO

The following table summarizes the share price performance and dividend payouts of companies in our Core Peer Group based on the disclosures in their financial statements.


Company	12/31/2020 Market Cap (in $ millions)			12/31/2019 Stock Price			12/31/2020 Stock Price			% Change			2020 Dividends per Share

HCI Group, Inc.		$	417.2		$	45.65		$	52.30		15	%		$	1.60

FedNat Holding Company		$	81.2		$	16.63		$	5.92		-64	%		$	0.36

Heritage Insurance Holdings, Inc.		$	281.1		$	13.25		$	10.13		-24	%		$	0.24

United Insurance Holdings Corp.		$	246.4		$	12.61		$	5.72		-55	%		$	0.24

Universal Insurance Holdings, Inc.		$	470.5		$	27.99		$	15.11		-46	%		$	0.77


26		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

2020 Company Performance

Our view of corporate performance includes not just financial measures but numerous nonfinancial, qualitative factors as well, including the Company’s success in creating and advancing strategic initiatives, planning for and responding to hurricanes and other catastrophic events, providing excellent customer service and passing regulatory examinations.

No formula or set of metrics can appropriately capture all the drivers of performance or substitute for sound management. Therefore, the Compensation Committee retains discretion in awarding cash, equity and other benefits to executives.

Our business performance in 2020 continued our long-term record of strong financial and operating results. Net income for 2020 totaled $27.6 MM or $3.49 earnings per diluted common share, compared with $26.6 MM in the previous year. We also maintained a strong balance sheet, paid $12.4 MM in dividends, and returned an additional $5.2 MM to shareholders in the form of share repurchases.

Over the long term, the Company has had consistent profitability, best-in-class profit margins and a record of consistent dividend payments. The Company has been profitable in 51 of the last 53 quarters and paid dividends in 42 consecutive quarters. Its Return on Equity (ROE) has averaged 19% over the past decade, and it has reported strong levels of Earnings Before Interest and Taxes (EBIT), despite several hurricanes that had a material impact on its core homeowners insurance business (see the charts under Pay-for-Performance on page 25). Hurricanes, of course, are a factor that heavily affects our financial results but which management cannot control. However, the response to those events is within management’s control. In the opinion of the Compensation Committee, the Company’s response to recent hurricanes was well planned and well executed.

Customer retention is also a key success factor for our business, and we are pleased that our HCPCI homeowners insurance policyholders have been insured by us for an average of approximately six and a half years. We believe customer retention indicates, among other things, an excellent level of customer service.

The Company had notable strategic achievements in 2020. TypTap Insurance Company, our technology-driven insurance subsidiary, increased gross premiums earned 155% over 2019. We also expanded the geographic reach of our core insurance business and now offer homeowners and flood insurance in six states. In addition, our real estate division completed several projects and acquisitions to add strategic balance and diversification.

Elements of Executive Compensation

The Compensation Committee uses a balanced set of pay elements to determine executive compensation levels, including base salaries, short-term cash performance bonuses and long-term equity incentives comprising restricted stock awards and, in the case of the Chief Executive Officer, stock purchase option awards. We believe these elements create appropriate incentives for driving strong corporate performance, align the interests of our executives with those of our shareholders, and enable us to retain and reward outstanding executive talent.

Compensation Committee Engagement with Shareholders

The Compensation Committee considers the opinions of shareholders in making compensation decisions. In 2017, the Chair of the Compensation Committee and our Investor Relations Staff established an ongoing program to speak with our shareholders twice annually – once during the “off season” and once prior to proxy voting. The purpose of the “off-season” conference calls is to understand investor perspectives regarding compensation, governance and any additional matters, and to update shareholders on our compensation and governance initiatives.

We focused the engagement program on our 30 largest shareholders, representing approximately 72% of our outstanding common stock. During the past 12 months, the Chair of the Compensation Committee and our Investor


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MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Relations Staff spoke with seven shareholders representing nearly 36% of the Company’s outstanding common stock. To assist with our shareholder engagement program, we have hired the proxy advisory firm Alliance Advisors. Shareholders were largely supportive of our executive compensation program and our commitment to continuing to strengthen the alignment between pay and performance. The Company adopted annual “Say on Pay” voting frequency in 2019 and received strong majority shareholder support for its executive compensation program in 2020.

2020 Compensation Plan Review

In 2020, following discussion with shareholders, the Compensation Committee decided to assess the compensation program for the CEO and our named executive officers and retained Pearl Meyer, a leading executive compensation firm to assist with this review. The purpose of the review was to understand current best practices in compensation design and to identify areas where the Company’s pay programs can be improved in order to strengthen alignment with shareholder interests and promote the long-term success of our strategy.

The Chair of the Compensation Committee and our Investor Relations Manager discussed the purpose and scope of the review and solicited input from investors during our engagement calls. Pearl Meyer completed the Executive Compensation Review with the Compensation Committee in October 2020.

Pearl Meyer’s analysis found that target total direct compensation (defined as the sum of base salary plus target short-term incentives plus long-term values) for Mr. Patel ranked between 50^th and 75^th percentile levels vs. Core Peer Group CEOs and below the 50^th percentile vs. broader market comparators within the property and casualty insurance and software services for other named executive officers. The study also found that our average overall Company financial performance and total shareholder returns ranked above the 50^th percentile vs. the Core Peer Group, while aggregate total compensation for named executive officers was at the 50^th percentile.

Based upon the results of this analysis, the Compensation Committee decided to implement base salary adjustments to improve pay competitiveness for all named executive officers with the exception of our CEO. These base salary adjustments were made in February 2021. The Compensation Committee also established a more structured framework for determining short-term and long-term incentive awards in 2021 and beyond, including a combination of service-based and performance-based equity grants for named executive officers. The Committee agreed to ensure that at least a portion of future equity awards for named executive officers will have performance-based as well as time-based vesting provisions. In February 2021, substantially all equity grants to our named executive officers (and all equity grants for Mr. Patel) will have performance-based vesting provisions tied to challenging stock price hurdles. The Compensation Committee believes these changes will help to further strengthen the alignment of pay with performance and shareholder interests.


28		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Compensation Process

The Compensation Committee uses a common-sense approach to setting executive compensation. It considers objective measures of business performance as well as the judgment and knowledge of Committee members as to the talents, work habits and contributions of our executive officers. The following provides an overview of the annual compensation process used for CEO compensation.

LOGO

Performance Measures

When determining executive compensation, the Compensation Committee examines Company performance on two financial metrics, Earnings Before Interest and Taxes (EBIT) and Return on Equity (ROE). We believe these measures most accurately reflect the performance of the business and the value created for shareholders.

In determining the Chief Executive Officer’s compensation, each year the Compensation Committee sets performance targets for EBIT and ROE to provide an appropriate incentive for achieving corporate goals. The Company’s actual results for EBIT and ROE are compared against the targets, and the Chief Executive Officer is eligible to receive a cash bonus based on a percentage of his base salary, provided certain minimum performance levels are achieved.

The Compensation Committee also awards equity compensation in the form of restricted stock and, in the case of the Chief Executive Officer, stock purchase options to create a significant incentive for achieving long-term financial and strategic goals and to retain talented executives. When determining equity awards, the Committee considers competitive market dynamics, peer-group compensation levels and the Company’s overall financial performance. Equity awards vest over a four-year period to enhance retention and alignment with shareholder interests.

Role of the Board of Directors and Management in Compensation Decisions

The Compensation Committee views the determination of compensation as a collaborative effort, and it welcomes and seeks input from executive officers, other directors and shareholders.

At least annually, before executive compensation is set for the year, the Compensation Committee discusses its compensation philosophy with the full Board of Directors and briefs the Board of Directors on the structure of the Company’s executive compensation programs. The Chair of the Compensation Committee maintains an open dialogue between the Compensation Committee and the Company’s largest shareholders with regard to executive compensation. The Chair reports to the Committee and the Board of Directors any material issues raised during shareholder discussions, and the Committee and the Board of Directors, in good faith, address those issues.


HCI Group, Inc. 2021 Proxy Statement		29

MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

In setting compensation for the named executive officers other than the Chief Executive Officer, the Compensation Committee invites the Chief Executive Officer to present his evaluation of each named executive officer’s performance

during the year and provide recommendations regarding each executive’s base salary, performance bonus and equity compensation. The Committee has full authority to accept, modify or reject these recommendations.

The Compensation Committee discusses Mr. Patel’s compensation and related proposals with him. Decisions regarding Mr. Patel’s compensation are made by the Committee and reviewed by the Board without Mr. Patel present.

Role of the Compensation Consultant

To assist in determining compensation of our CEO and named executive officers, the Company engages the services of leading compensation advisory firms. The Company retained Pearl Meyer in 2020 to understand market compensation practices and levels to help ensure our executive compensation programs are reasonably designed to attract and retain highly skilled executives in our competitive environment.

Compensation Policies Related to Risk Management

The Board of Directors has considered risks associated with the Company’s compensation policies and practices and identified no compensation policies or practices that are reasonably likely to have a material adverse effect on the Company.

Executive Officers of the Company

The following table provides information with respect to our named executive officers as of April 13, 2021:


Name	Age	Title

Paresh Patel	58	Chairman and Chief Executive Officer

Mark Harmsworth	57	Chief Financial Officer

Andrew L. Graham	63	Vice President, General Counsel and Corporate Secretary

Anthony Saravanos	50	Division President — Real Estate

Karin Coleman	60	Chief Operating Officer and President, HCPCI

Biographical information for Paresh Patel, Anthony Saravanos and Karin Coleman appears above under the heading Directors.

MARK HARMSWORTH

Chief Financial Officer

QUALIFICATIONS

Mark Harmsworth has served as the Chief Financial Officer of our Company since May 2017. He joined HCI in December 2016 as Senior Vice President of Finance. Prior to

that, Mr. Harmsworth was President of JMH Consultancy Group, where he served as consulting Chief Strategy Officer for Stewart Information Services, a New York Stock Exchange listed global real estate services company. Mr. Harmsworth has served in a range of executive leadership positions throughout his career, including Chief Financial Officer of First American Title Insurance Company, a global specialty insurance company; Senior Executive Vice President of First Canadian Title Insurance Company; and Executive Vice President of RE/MAX Ontario-Atlantic Canada Inc., a regional sub-franchisor of RE/MAX real estate brokerage services in eastern Canada, the eastern United States and Europe. Mr. Harmsworth is a Certified Public Accountant and holds a Bachelor of Commerce degree from the University of Toronto.


30		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

ANDREW L. GRAHAM

Vice President, General Counsel and Corporate Secretary

QUALIFICATIONS

Andrew L. Graham has served as our General Counsel and Corporate Secretary since June 1, 2008. Mr. Graham served from 1999 to 2007 in various capacities, including

General Counsel, for Trinsic, Inc. (previously named Z-Tel Technologies, Inc.), a publicly held provider of communications services headquartered in Tampa, Florida. From 2011 to 2016, Mr. Graham served on the Internal Audit Committee of Hillsborough County, Florida. From 2007 to 2011, he served on the Board of Trustees of Hillsborough Community College, a state institution serving more than 43,000 students annually. Since 2015, he has served as a director for LM Funding America, Inc., a NASDAQ listed specialty finance company headquartered in Tampa, Florida. Mr. Graham holds a Bachelor of Science degree with a major in Accounting from Florida State University and a Juris Doctor, as well as a Master of Laws (L.L.M.) in Taxation, from the University of Florida College of Law.

Arrangements as to Selection and Nomination of Executive Officers

We are aware of no arrangements as to the selection or appointment of executive officers.

2020 Executive Pay Decisions

The annual base salaries, annual cash performance bonuses and equity awards of our named executive officers in 2020 were as follows:


Name and Office	Base Salary ($)		Cash Bonus ($)		Equity Grant

Paresh Patel, Chairman and Chief Executive Officer		950,000		1,000,000		150,000	^(a)

Mark Harmsworth, Chief Financial Officer		320,000		93,750		3,500	^(b)

Andrew L. Graham, Vice President, General Counsel & Corporate Secretary		250,000		93,750		3,500	^(b)

Anthony Saravanos, Divisional President - Real Estate Division		225,000		93,750		3,500	^(b)

Karin Coleman, Chief Operating Officer and President, HCPCI^(c)		225,000		93,750		3,500	^(b)

^(a)	Represents 110,000 share purchase options and 40,000 restricted shares.

^(b)	Shares of restricted stock.

^(c)	Karin Coleman was appointed Chief Operating Officer of the Company in February 2021.

The annual base salary for Mr. Patel of $950,000 was unchanged from 2019, the amount provided in his 2016 employment agreement with the Company (see Employment Agreements). The base salary amount positions Mr. Patel at the lower level of the Core Peer Group. The annual base salaries for all other named executive officers were unchanged in 2020. Cash bonus awards for all other named executive officers reflected the achievement of the Company’s financial goals and individual performance.

2020 CEO Compensation Decisions

In 2020, the Compensation Committee established an incentive pay plan to outline the cash bonus available to be earned by Mr. Patel for 2020. Under the plan, the bonus was based on actual results compared against two performance measures, Earnings Before Interest and Taxes (EBIT) and Return on Equity (ROE), with each performance measure given equal weight. The 2020 targets were $42.0 MM for EBIT and 10.5% ROE. A bonus could be paid under either or both measures, but a threshold level of performance (equal to 70% of the applicable target) had to be reached for any bonus to be payable for each respective target.

The Compensation Committee concluded, following input from the compensation consultant and shareholders, that EBIT and ROE best represented the Company’s financial performance and thus served as appropriate metrics to link


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MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

the CEO’s pay with performance and align his interests with those of shareholders. The Committee set the potential bonus payout range at 50% to 200% of base salary, based on the achievement of EBIT and ROE targets, with no awards earned for below-threshold results. Target performance goals were designed to be both challenging and realistic and to reward the Chief Executive Officer for continued consistent performance. Maximum performance goals were designed to reward the CEO for extraordinary performance. The performance measures and possible bonus payouts are summarized below.


												Bonus Payouts at Levels Achieved:
Performance Measure	Weight			Performance Target				Actual Result				Threshold - 70% of Target is Achieved			Target - 100% is Achieved			Maximum - 200% of Target is Achieved

EBIT		50	%		$	42,000,000			$	49,727,000	⁽¹⁾		$	475,000		$	950,000		$	1,900,000

ROE		50	%			10.5	%			14.5	%		$	475,000		$	950,000		$	1,900,000

⁽¹⁾	Adjusted for bonus expense deducted from earnings.

In 2020, Mr. Patel achieved 118% of EBIT and 138% of ROE targets which resulted in an eligible award of $2,437,000. The Compensation Committee exercised its discretion, noting that EBIT was affected by a gain on the sale of a property in 2020, and awarded Mr. Patel a $1 MM cash bonus. During 2020, Mr. Patel was awarded 40,000 shares of restricted stock and 110,000 stock purchase options having an exercise price of $48 per share. Each award is subject to a four-year vesting period intended to encourage long-term performance and executive retention. The Committee plans to award new tranches of equity compensation annually, which we believe is an appropriate practice and consistent with our industry peers.

The Compensation Committee believes Mr. Patel’s total compensation recognizes his significant contributions to the Company’s success and creates strong incentives to achieve its long-term strategic goals and increase shareholder value. Over the past five years, Mr. Patel’s total compensation has varied according to the Company’s financial performance, which is consistent with our pay-for-performance philosophy. The following graph shows his annual cash bonus compared to ROE, a key performance measure.

LOGO


32		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Executive Compensation Benefit Plans and Other Practices

401(K) Plan

The Company has a 401(k) Safe Harbor Profit Sharing Plan that qualifies as a defined contribution plan under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, participating employees are eligible for Company matching and discretionary profit-sharing contributions. Plan participants may elect to defer up to one hundred percent of their pre-tax gross wages, subject to annual limitations. The Company matching contribution is limited to a maximum of four percent of the employee’s annual salary or wage and is fully vested when contributed. Eligibility and vesting of the Company’s discretionary profit-sharing contribution is subject to the plan participant’s years of service. There has been no discretionary profit-sharing contribution since the 401(k) Plan’s inception.

Employment Agreements

Compensation and other arrangements for certain executives are set forth in employment agreements, as described below.

Paresh Patel. On December 30, 2016, we entered into an employment agreement with Mr. Paresh Patel, our Chief Executive Officer. The agreement calls for a four-year term of employment beginning January 1, 2017 and will automatically renew for additional one-year terms unless either party delivers written notice of non-renewal to the other at least 90 days before expiration of the initial term or any renewal term. During the term of the agreement, Mr. Patel will be paid a base annual salary of $950,000 (or a higher amount as may be set from time to time by the Company’s Board of Directors). He will be entitled to any additional bonus compensation provided for by resolution of the Company’s Board of Directors or applicable committee of the Board of Directors. Mr. Patel will also be entitled to participate in our medical, dental, life, disability and retirement benefits plans, if any, upon substantially the same terms applicable to other Company executives.

Mark Harmsworth. On November 23, 2016, we entered into an employment agreement with Mr. Harmsworth, our Chief Financial Officer. Mr. Harmsworth initially served as Senior Vice President of Finance and assumed the role of Chief Financial Officer on May 16, 2017. The agreement calls for a four-year term of employment beginning on December 5, 2016 and will automatically renew for additional one-year terms unless either party delivers written notice of non-renewal at least 90 days before expiration of the initial term or any renewal term. During the term of the agreement, Mr. Harmsworth will be paid a base annual salary of $300,000 (or higher amount as may be set from time to time by the Company’s Board of Directors). Mr. Harmsworth was paid an initial signing bonus of $15,000 and an additional bonus of $25,000 after one month of employment. In 2017, Mr. Harmsworth was entitled to a bonus of not less than $100,000. He is entitled to any additional compensation provided by resolution of the Company’s Board of Directors or applicable committee of the Board of Directors. Mr. Harmsworth was awarded 40,000 shares of restricted stock subject to a four-year vesting period. He is also entitled to participate in our medical, dental, life, disability and retirement benefits plans, if any, upon substantially the same terms applicable to other Company executives.

Clawback Policy

Our Compensation Committee charter contains a clawback policy. It provides that in appropriate circumstances the Committee will require an executive officer to reimburse the Company for incentive compensation payments predicated upon financial results that were subsequently restated and filed with the Securities and Exchange Commission.

Accounting and Tax Considerations

In designing our compensation programs, we consider their potential accounting and tax effects on the Company and our employees. In allocating among different components of compensation, we consider the accounting expense and potential reward associated with each separate component of compensation.

To assist with the payment of their income taxes when their restricted shares vest or their stock options are exercised, our executives are entitled to surrender a portion of their holdings to the Company for the payment of taxes.


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MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Section 162(m) of the Internal Revenue Code [Section 162(m)] generally disallows a tax deduction to a public corporation for compensation over $1,000,000 paid in any fiscal year to a company’s Chief Executive Officer or other named executive officers (excluding the company’s principal financial officer, in the case of tax years commencing before 2018). However, in the case of tax years commencing before 2018, the statute exempted qualifying performance-based compensation from the deduction limitation if certain requirements were met. Section 162(m) was amended in December 2017 by the Tax Cuts and Jobs Act to eliminate the exemption for performance-based compensation (other than with respect to certain grandfathered arrangements entered into prior to November 2, 2017) and to expand the group of named executive officers who may be covered by the deduction limit under Section 162(m). For 2020, approximately $3,059,000 of HCI’s executive officer compensation was determined to be nondeductible under Section 162(m). The Compensation Committee expects in the future to authorize compensation in excess of $1,000,000 to one or more named executive officers that will not be deductible under Section 162(m) when it believes that doing so is in the best interests of HCI Group, Inc. and its shareholders.

Pension or Other Retirement Plan and Deferred Compensation Plans

Except for the Company’s 401(k) Safe Harbor Profit Sharing Plan described above under Compensation Discussion and Analysis, we have not had and currently do not have a pension or other retirement plan or a nonqualified deferred compensation plan. Accordingly, the pension benefit table, the nonqualified deferred compensation table, and any related disclosures have been omitted from the discussion below. The Company’s 401(k) Plan matching contributions are described in footnote 1 to the Summary Compensation Table on page 35.

Potential Payments Upon Termination or Change-in-Control

At December 31, 2020, Paresh Patel and Mark Harmsworth are the only named executive officers due cash compensation in the event of termination of employment.

In the event of termination without good cause, Mr. Patel will be entitled to accrued base salary, accrued vacation pay and other time off, each through the date of termination. He will also be entitled to severance compensation of his base salary for six months after the date of termination. If we terminate Mr. Patel’s employment for good cause, he will be entitled only to accrued base salary, accrued vacation pay and other paid time off, each through the date of termination. If Mr. Patel chooses to terminate his employment, he will be entitled to accrued base salary, accrued vacation pay and other paid time off, each through the date of termination. The agreement provides that during the time of Mr. Patel’s employment and for a period of six months after termination of employment, he will not enter into, engage in, be employed or consult with any business that competes with HCI.

Under his employment agreement, in the event of termination without good cause, Mr. Harmsworth is entitled to accrued base salary, accrued vacation pay and other time off, each through the date of termination. He will also be entitled to severance compensation of his base salary for 12 months after the date of termination. If we terminate Mr. Harmsworth’s employment for good cause, he will be entitled to only accrued base salary and accrued paid time off, each through the date of termination. If Mr. Harmsworth chooses to terminate his employment, he will be entitled to accrued base salary and accrued paid time off, each through the date of termination. The agreement provides that during the time of Mr. Harmsworth’s employment and for a period of 12 months after termination of employment, he will not enter into, engage in, be employed or consult with any business that competes with HCI.

Under our 2012 Omnibus Incentive Plan, restricted shares vest immediately upon a change of control unless the surviving entity assumes the obligation or issues replacement securities. Further, restricted shares vest immediately if the holder’s employment is terminated within 12 months after a change in control.


34		HCI Group, Inc. 2021 Proxy Statement

MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Summary Compensation Table

The following table provides summary information concerning compensation for services rendered in all capacities awarded to, earned by or paid to our named executive officers during the years ended December 31, 2020, 2019 and 2018. Note that Securities and Exchange Commission rules require us to report stock awards at the grant-date fair value of the entire award in the year of the grant rather than reporting this expense over the service period as we do for financial reporting purposes. Fair value of stock and option awards is estimated in accordance with Accounting Standards Codification (ASC) Topic 718 Compensation—Stock Compensation. Hence, in the table below, each amount appearing under Stock Awards and Option Awards is an estimate of the award’s fair value at the grant date, regardless of whether vesting has occurred. Stock awards included in the summary compensation below were, in all cases, restricted stock awards that contain service-only provisions. Thus, the values given for these awards are based on the value of the Company’s stock on the grant date. The actual values on the vesting date will almost certainly differ from the estimated values.

Name and Principal

Position

Year

Salary⁽¹⁾

Bonus

Stock
Awards

Option
Awards

All Other
Compensation⁽²⁾

Total

Paresh Patel

Chief Executive Officer

2020

986,539

1,000,000

1,838,800

⁽³⁾

1,233,898

⁽⁵⁾

170,230

5,229,467

2019

950,000

1,550,000

1,917,600

⁽⁴⁾

1,345,300

⁽⁵⁾

313,769

6,076,669

2018

950,000

569,000

1,396,800

⁽⁴⁾

939,400

⁽⁵⁾

407,519

4,262,719

Mark Harmsworth

Chief Financial Officer

2020

332,308

93,750

159,355

⁽³⁾

—

34,200

619,613

2019

320,000

125,000

144,550

⁽⁴⁾

—

47,100

636,650

2018

313,846

100,000

153,405

⁽⁴⁾

—

54,316

621,567

Andrew L. Graham

Vice President, General Counsel, and Corporate Secretary

2020

259,616

93,750

159,355

⁽³⁾

—

23,585

536,306

2019

250,000

125,000

144,550

⁽⁴⁾

—

22,200

541,750

2018

236,154

100,000

SEC Form DEF 14A filed by HCI Group, Inc.