Investor Presentation NYSE: HCI | March 2020
Important Cautions This presentation includes certain forward‐looking statements and information, including statements regarding plans, strategies and Regarding Forward- expectations of HCI Group, Inc. (“HCI” or the “Company”). When used in this presentation, words such as “believes,” “anticipates,” Looking Statements “expects,” “estimates,” or words of similar meaning are generally intended to identify forward‐looking statements. All statements other than statements of historical fact included in this presentation are forward‐looking statements. These forward‐looking statements are subject to risks, uncertainties, assumptions and other factors, many of which are beyond the control of the Company. Important factors that could cause actual results to differ materially from those expressed or implied by the forward‐looking statements are described in the Company’s filings it makes from time to time with the Securities and Exchange Commission, including within the “Risk Factors” section of the Annual Report on Form 10‐K for the year ended December 31, 2019 filed March 6, 2020. 2
Insurance can no longer ignore technology
Insurance technology has changed a lot over time P R E - 2 0 t h E A R LY 1 9 6 0 s 1 9 8 0 s T O D AY 1 9 0 0 s C E N T U R Y
Traditional insurance has always faced many challenges: 1. It’s confusing 2. Lacks transparency 3. Application & underwriting process is cumbersome 5
Entering a New Era of Insurance: InsurTech E A S Y T O C O S T C O N V E N I E N T S I G N U P E F F E C T I V E F R I C T I O N L E S S R E S P O N S I V E T R A N S PA R E N T
HCI at a Glance Stock Price (3/4/20) $44.35 Current Price to Book (3/4/20) 1.86x Common Shares Out. (GAAP) 3 7.76M Fully Diluted Share Ct. 4 9.79M Est. Market Capitalization (3/4/20) $344.4M Property & Casualty Gross Revenue (TTM) ¹ $368.2M Technology Insurance Fully Diluted EPS (TTM) $3.31 P/E 5 13.4x Dividend Yield 3.6% Book Value/Share 2 (12/31/19) $23.90 Institutional Ownership 64.6% Insider Ownership 22.6% Real Estate Reinsurance Founded/IPO 2006/2008 (1) Gross revenue = total revenue before premiums ceded as of quarter end 12/31/19. (2) $185.5M/7.76M. (3) 7.76M + 191,000 (shares subject to prepaid forward contract) = 7.96M common shares outstanding per AST as of 12/31/19. (4) As of 12/31/19. (5) $44.35 / $3.31 = 13.4x.
Key 2019 Repaid in Full (at Maturity) $89.9M of 3.875% Convertible Debt Milestones: Launched TypTap Homeowners Product 2018 Secured $65M Revolving Line of Credit Growth 2017 Executed $144M Convertible Notes Offering Through 2016 Launched TypTap for Private Flood Insurance 2015 Innovation Completed Wind-Only Citizens Assumption Launched Information Technology Division (Exzeo) 2013 Executed $103M Convertible Notes Offering 2012 Executed Follow-on Offering Launched Real Estate Division (Greenleaf) 2011 Acquired HomeWise Insurance Book of Business 2010 Declared First Cash Dividend 2009 Announced First Share Buyback Formed Captive Insurance Division (Claddaugh) 2008 Completed Initial Public Offering 2007 Executed on First Citizens Assumption 2006 Incorporated in Florida 8
Specialization Breeds Success HCI remains focused on high reward opportunities: F L O R I D A H O M E O W N E R S ’ U . S . F L O O D I N S U R A N C E M A R K E T I N S U R A N C E M A R K E T ~ $10.0B ~ $4.7B While the company will stay focused on Florida, it’s taking smart bets in other markets Benefit of having this specialization, which differentiates us from our peers, is that we can maximize profits for shareholders by avoiding unnecessary risk 9
Track Record of Profitable Growth F O U N D E D 2006 • Over 10 years of success, but are taking a fresh look at insurance • Additional operations in technology, real estate and reinsurance P R O F I TA B L E 47/49 • Our disciplined execution has resulted in consistent profitability and best-in-class margins Q U A R T E R S • Strong track record of shareholder value creation: 37 C O N S E C U T I V E Q U A R T E R S O F D I V I D E N D S $98 MILLION $179 MILLION 10-YEAR in dividends paid in buybacks average return on equity of 20% (1) since inception since inception (1) January 1, 2010 through December 31, 2019 10
How We’re Revolutionizing the Industry Multi-tiered growth strategy: Geographic Technology Industry leading Expansion in expansion – profitability integration & product mix 9 additional implementation states
The Growth of TypTap Gross Premiums Written by Quarter (Homeowners) Premiums in Force (Homeowners) 50,000,000 25,000,000 45,000,000 40,000,000 20,000,000 35,000,000 30,000,000 15,000,000 25,000,000 20,000,000 10,000,000 15,000,000 10,000,000 5,000,000 5,000,000 - - Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Total Premiums in Force 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 - Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 HO Flood 12
Our Business is Built on Trust & Partnership Reinsurance program transfers catastrophic risk to 50+ HIGHLY-RATED or fully collateralized partners 2019-2020 program provides $901 MILLION OF CATASTROPHIC COVERAGE (1 st event) Est. annual reinsurance premiums of ~$126 MILLION with first & second event retention of only $16 MILLION 13
2019-2020 Property Cat Reinsurance Program First Event Cover (1) $959M 1:323 YR $901M 1:282 YR Second Event Cover Mandatory Following a $901m Loss FHCF (2) 45% of $608M 1:144 YR Est Combined 707.1M xs 252M $459M 1:100 YR $459M 1:100 YR FHCF 45% of $268M 1:50 YR $268M 1:50 YR 58.1M xs 252M 3 rd Party Reinsurance 3 rd Party Reinsurance 100% of $593m xs $16m 100% of $566m xs $16m $16M (3) $16M (3) Notes: (1) RMS RiskLink v18.0 Long-Term Hurricane, with Loss Amplification, excluding Storm Surge, without Secondary Uncertainty (2) Florida Hurricane Catastrophe Fund (3) HCI 3 rd party reinsurance retention set at $16M 14
Our Success So Far Total Stockholders’ Equity ($M) & Book Value/Common Share Combined Non-CAT Underwriting Ratios (4) Loss Ratio Expense Ratio Stockholders' Equity $238 $244 $270 $40.00 BV/Common Share 90% $240 84% 84% $194 $181 $186 $35.00 $161 $183 75% $210 $25.23 $30.00 $180 $21.71 $23.90 $23.10 $22.14 $121 45% 43% 44% $25.00 $150 37% $17.92 $120 $20.00 $14.68 $64 $90 $10.93 $15.00 $60 41% 45% $8.28 40% 38% $10.00 $30 $- $5.00 (6) (5) (5) (5) (5) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2016 2017 2018 2019 Underwriting Leverage (1) Annual Dividends Per Share (in Dollars/Share) $1.60 $1.50 2.2x 2.2x $1.40 $1.20 $1.20 $1.10 $0.95 $0.88 2.0x $0.53 1.9x (2) (3) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2016 2017 2018 2019 (1) Gross Written Premiums / STAT Surplus [Homeowners Choice Property and Casualty Insurance Co.]. (2) On April 16, 2018 HCI Board authorized an increase in the quarterly dividend to 37.5 cents per share. (3) On January 14, 2019, HCI Board authorized an increase in the quarterly dividend to 40 cents per share. 15 (4) Combined ratio = total of all expenses in relation to net premiums earned. (5) Normalized for the impact of storms and accident year loss ratios updated to December 2019. (6) Drop of $50M reflects $44.9M of stock buybacks in 2017 [impact of buybacks = $2.25]
Conservative Investment Portfolio • Historical Investment Portfolio by Asset Type (1) Significant portfolio cash balance available for future investment (39%) (1) • Generated net investment income of $13.6 million in $649.7 $640.6 2019 and $16.5 million in 2018 (2) $594.4 $583.3 $255.8 $239.5 • 2018: Book Yield = 2.95% (5) ; Economic Yield = 1.66% (6) $280.5 $229.2 $510.5 $494.0 • 2019: Book Yield = 2.87% (5) ; Economic Yield = 5.33% (6) $450.2 $267.7 $314.7 $ in Millions $293.4 Equity 6% $300.1 Real Estate & Other $230.2 20% Cash 39% ST Investments Fixed <1% Income 35% (4) 2012 2013 2014 2015 2016 2017 2018 2019 Equity Real Estate & Other (3) Fixed Income Short Term Investments Cash (1) As of 12/31/19 (2) Excludes other than temporary impairment expense (OTTI) and change in unrealized gain (loss) on investments (3) Includes investments in limited partnerships, real estate, and joint ventures (4) Repaid in full (at maturity) $89.9M of 3.875% convertible debt (5) Excludes real estate and joint ventures 16 (6) Includes realized gain (loss) on investments, change in unrealized gain (loss) on investments and other than temporary impairment expense (OTTI). Excludes real estate and joint ventures
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