HCI HCI Group Inc

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.

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 card accompanying this proxy statement 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

 

By Internet		By Phone		By Mail		In Person
www.proxyvote.com		Call the phone number listed on your proxy card		Follow the instructions on your proxy card		Vote by ballot at our Annual Meeting

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).

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

Upon your written request, we will provide you with a copy of our 2021 Annual Report on Form 10-K, including exhibits, free of charge. Send your request to HCI Group, Inc., c/o Simon Rosenberg, Director – Investor Relations, 3802 Coconut Palm Drive, Tampa, Florida 33619.

PROXY STATEMENT SUMMARY

Financial Highlights

Our business performance in 2021 continued our long-term record of strong financial and operating results. Net income in 2021 was $7.2 million, or $0.21 earnings per diluted common share. We also maintained a strong balance sheet and paid $13.8 million in dividends. TypTap Insurance Company, our technology-driven insurance subsidiary, increased gross earned premium 123% compared with 2020.

Over the past decade, HCI has delivered solid results for shareholders. Our return on equity (ROE) has averaged 17% over this period, and we have reported strong levels of earnings before interest and taxes (EBIT), despite several hurricanes and storms that had a material impact on our core homeowners insurance business. The Company has been profitable in 54 of the last 57 quarters and has paid dividends in 46 consecutive quarters.

PROXY STATEMENT SUMMARY

SHAREHOLDER ENGAGEMENT

Each year we engage in robust shareholder outreach efforts. The feedback we receive is valuable and informative. Since the 2021 annual meeting, we reached out to our largest shareholders representing approximately 67% of our outstanding common shares. During the past 12 months, Board members and our Investor Relations staff spoke with 19 shareholders representing nearly 44% 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 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 environmental and social matters.

SHAREHOLDER ENGAGEMENT

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 February 2021, Mr. Macchiarola and Ms. Spencer resigned from the Board, in order to add their valuable knowledge and experience to the Board of TypTap Insurance Group, Inc. In 2021, we added four new members to our Board: Karin Coleman, chief operating officer of HCI Group, Inc., Eric Hoffman, a managing director of Centerbridge Partners L.P., Peter Politis, real estate lawyer and Principal at Xenia Management Corporation, and Lauren Valiente, Of Counsel at Foley & Lardner LLP.

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 through a balanced mix of cash and long-term equity-based incentives that is benchmarked against our industry peers. We have a clawback policy that provides for pay reimbursement by an executive officer under appropriate circumstances.

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 2022 (Class B directors), 2023 (Class C directors) and 2024 (Class A directors). Each of the Class B directors elected at the 2022 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 B directors at the 2022 Annual Meeting of Shareholders, with terms expiring in 2025:

Paresh Patel

Gregory Politis

Lauren Valiente

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 Paresh Patel, Gregory Politis and Lauren Valiente as Class B directors of HCI Group, Inc. The nominees receiving the three highest “FOR” vote totals will be elected as directors.

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 three or four 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. Directors may be removed by shareholders at any time with or without cause

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

MATTER NO. 1 ELECTION OF DIRECTORS

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 51 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.

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

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 also 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 7.8 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, Sue Watts, Lauren Valiente, and Peter Politis 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. Hoffman, the Board considered his role as a Managing Director of Centerbridge Partners, which invested $100 million in the Company’s subsidiary, TypTap Insurance Group, and by agreement is entitled to appoint one director to the Company’s Board. In the case of Gregory Politis and Peter Politis, the Board considered their father-son relationship. Finally, in the case of Lauren Valiente, the Board considered her Of Counsel relationship with Foley & Lardner LLP, which provides legal services to the Company. Ms. Valiente provides no legal services to the Company. She is not a partner of the firm. She does not participate in profits at the firm or the fees derived from the Company. The fees Foley & Lardner derives from the Company are a small fraction of the firm’s annual revenues.

MATTER NO. 1 ELECTION OF DIRECTORS

MATTER NO. 1 ELECTION OF DIRECTORS

The number and percentage of shares beneficially owned are based on 10,125,318 common shares outstanding as of April 12, 2022. 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 12, 2022, 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.

MATTER NO. 1 ELECTION OF DIRECTORS

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, 2022. Dixon Hughes Goodman has announced its intent to merge with BKD LLP effective June 1, 2022, and as such we intend to appoint the newly merged firm as our independent registered public accounting firm for the year ending December 31, 2022. 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 or its successor entity are expected to be present at the Annual Meeting. They will have an opportunity to make a statement and will be available to respond to appropriate questions. However, COVID-19 concerns could limit their availability.

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, or its successor entity, 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.

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.

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 2021.

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 2021 Annual Meeting of Shareholders, 90.3% 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 2021 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 2022 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.

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

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

The Company has delivered positive financial results over the long term. The Company’s return on equity (ROE) has averaged 17% over the past decade, and as illustrated in the following chart, the Company has reported strong levels of net income and earnings before interest and taxes (EBIT) ⁽¹⁾ as well, all 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 the Company responds to those events. In the opinion of the Compensation Committee, the Company’s response to the hurricanes and tropical storms of 2016-2018 and 2020-2021 was well-planned and well-executed.

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 total shareholder return of HCI shares was 148% 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:

The compensation program for our chief executive officer is designed to reward outstanding performance and align pay with the interests of shareholders. During 2021, 90% of the chief executive officer’s pay was “at risk” in the form of restricted stock and stock option awards, as illustrated below.

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:

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.

The following table summarizes the share price performance and dividend payouts of companies in our Core Peer Group based on the disclosures in their filings with the Securities and Exchange Commission.

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

2021 Company Performance

Performance on the Company’s financial and strategic goals is an important factor in our compensation decisions. The compensation awarded in 2021 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 framework.

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 2021 continued our long-term record of positive financial and operating results. Net income for 2021 totaled $7.2 million or $0.21 earnings per diluted common share. We also paid $13.8 million in dividends while reducing long-term debt by 71% and growing book value per share 24%.

Over the long term, the Company has generated steady profitability, best-in-class profit margins and consistent dividend payments. The Company has been profitable in 54 of the last 57 quarters and paid dividends in 46 consecutive quarters. Its return on equity (ROE) has averaged 17% over the past decade, with 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 Homeowners Choice 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 2021. We achieved substantial operational autonomy of our TypTap Insurance Group subsidiary, establishing separate management teams and boards for both TypTap and HCI Group. TypTap began the year writing insurance in one state, and ended the year operating in twelve states, with plans for additional expansion in 2022. Growth at HCI also benefited from opportunistic transactions, including a second renewal rights agreement with United Property & Casualty Insurance Company. Finally, our real estate subsidiary, Greenleaf, earned a profit in 2021 reflecting operational improvements in its business.

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

We focused the engagement program on our largest shareholders, representing approximately 67% of our outstanding common stock. During the past 12 months, a board member and our Investor Relations Staff spoke with 19 shareholders representing nearly 44% 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 continue strengthening 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 2021 with over 90% of votes cast in support of our compensation.

2020 Compensation Plan Review

In 2020, following discussion with shareholders, the Compensation Committee decided to assess the compensation program for the chief executive officer 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 the 50^th and 75^th percentile levels vs. Core Peer Group chief executive officers 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 chief executive officer. 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 had performance-based vesting provisions tied to challenging stock price hurdles. The Compensation Committee believes these changes represent challenging goals and help to further align pay with performance and shareholder interests.

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 chief executive officer compensation.

Performance Measures

When determining executive compensation, the Compensation Committee awards equity compensation in the form of restricted stock and, in the case of the chief executive officer, stock purchase options as well. Restricted stock awards may vest over time or if the Company stock price reaches certain target levels. In either case, the awards create a significant incentive for achieving long-term financial and strategic goals and serve 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.

The Compensation Committee believes that reducing cash bonus compensation in favor of equity linked compensation further enhances alignment between our management team and our shareholders.

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 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.

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 chief executive officer and named executive officers, the Company engages the services of leading compensation advisory firms. The Company retained Pearl Meyer in 2020 to

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

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.

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. Since

2014, Mr. Harmsworth has served as President of JMH Consultancy Group, L.L.C., of which he is the sole member and through which, from 2014 to 2016, he served as consulting Chief Strategy Officer for Stewart Information Services Corporation, a New York Stock Exchange listed global real estate services company. Mr. Harmsworth has served in a range of executive leadership positions, including, from 2011 to 2013, as Chief Operating Officer for Ipromoteu.com, Inc., technology-enabled outsourced service provider to the promotional products industry headquartered in Wayland, Massachusetts; from 2006 to 2011, as Chief Financial Officer of First American Title Insurance Company, a global specialty insurance company headquartered in Santa Ana, California; from 2002 to 2006, as Senior Executive Vice President of First Canadian Title Insurance Company, a title insurance company located in Oakville, Ontario; and, from 1989 to 1999, as 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.

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. Since 2015, Mr. Graham has served as a director and Chairman of the

Audit Committee for LM Funding America, Inc. (NASDAQ: LMFA), a Nasdaq listed specialty finance company headquartered in Tampa, Florida. From 1999 to 2007, he served 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 over 46,000 students annually. Mr. Graham holds a Bachelor of Science degree with a major in accounting from Florida State University (1981) and a Juris Doctor (1987), as well as a Master of Laws (L.L.M.) (1988) 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.

In February 2021, Mr. Patel’s annual base salary was revised to consist of $250,000 from HCI Group and $350,000 from the HCI Group subsidiary TypTap Insurance Group, Inc. In October 2021, Mr. Patel’s annual base salary was further revised to consist of $475,000 from each of HCI Group and TypTap Insurance Group. Mr. Patel’s base salary positions him at the lower level of the Core Peer Group.

In February 2021, substantially all equity grants to our named executive officers had performance-based vesting provisions tied to challenging stock price hurdles. For the 20,000 restricted shares awarded to Mr. Patel in February 2021, 10,000 will vest on October 5, 2022, the first anniversary of the date on which applicable vesting conditions were met, and 10,000 will vest, if ever, one year after the market value per share of HCI stock equals or exceeds $140 for 30 consecutive trading days. For Mr. Patel’s grant of 1,480,935 restricted shares in TypTap Insurance Group, 206,215 will vest in 25% increments over four years beginning in 2022, 642,060 will vest, if ever, on the first anniversary of the date on which the TypTap stock value first equals or exceeds $15 for 30 consecutive trading days, and restrictions on the remaining 632,660 will vest, if ever, on the first anniversary of the date on which the TypTap stock value first equals or exceeds $20 for 30 consecutive trading days. Mr. Patel was also awarded 5,000,000 options on TypTap common stock at an exercise price of $23 per TypTap share. The stock options have a vesting

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

term of four years, with one fourth of the of the total option shares vesting on the first anniversary the grant and one sixteenth of the total option shares on the first day of each January, April, July, and October, thereafter. For the 71,000 restricted shares awarded to other executive officers, 3,000 shares vest in equal installments over four years, 34,000 vest one year after the market value per share of HCI stock equals or exceeds $105 for 30 consecutive trading days, and 34,000 vest one year after the market value per share of HCI stock equals or exceeds $140 for 30 consecutive trading days. The Compensation Committee believes these changes represent challenging goals and help to further align pay with performance and shareholder interests.

2021 CEO Bonus Decision

In considering whether to award a cash bonus to Mr. Patel for 2021, the Compensation Committee elected to use a holistic approach incorporating qualitative and quantitative factors. In its evaluation, the Committee considered past financial performance, new initiatives, changes in levels of responsibility, and industry conditions, among other factors. Although the Committee acknowledged improved results in many financial metrics and in certain qualitative aspects of the Company’s performance during 2021, it declined to use its discretion to award a bonus.

The Compensation Committee believes Mr. Patel’s total compensation recognizes his significant contributions to the Company’s success and creates strong incentives to achieve 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 with return on equity, a key performance measure.

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 vests according to a graduated schedule based on years of service. 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 our chief financial officer is set forth in an employment agreement, as described below.

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.

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

Section 162(m) of the Internal Revenue Code 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. For 2021, approximately $3,750,157 of HCI’s chief 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 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 39.

Potential Payments Upon Termination or Change-in-Control

At December 31, 2021, Mark Harmsworth is the only named executive officer due cash compensation in the event of termination of employment.

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.

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, 2021, 2020, and 2019. 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.