Notice of and Proxy Statement
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HCI GROUP, INC.
(Name of Registrant as Specified in Its Charter)
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Notice of and Proxy Statement
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April 29, 20202021
Dear Fellow Shareholders,
Just as we continuously seek to improveThe 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 continuously seekrelocated our headquarters to improve our corporate governance practices. And we do3802 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 with input from you. We routinely reach outthe meeting, to shareholders. We’ve heard frombe 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 we’ve listened.maintain social distancing.
As a result,many of you know, in 20192020, we added two individualssold our old Cypress Street headquarters property in Tampa to our Boardthe State of Directors: Loreen Spencer, a retired former audit partner with Deloitte & Touche LLP, and Sue Watts,Florida, which needs the property for an executive at Capgemini SE, a global technology consulting firm. More recently, the board established a Chief Executive Officer Share Ownership Policy and a Sustainability Committeeimportant transportation project. Under terms of the Boardsale, 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 Directors. The Sustainability Committee looks at our environmental and social policies. You can read about our directors,Tampa. We look forward post pandemic to showing you the CEO Share Ownership Policynew headquarters and the Sustainability Committeeplans 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 accompanying Proxy Statement.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,
Paresh Patel
Chairman of the Board
Chief Executive Officer
5300 West Cypress Street, Suite 1003802 Coconut Palm Drive
Tampa, Florida 3360733619
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. |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Thursday, June 4, 20203, 2021
3 p.m. Eastern time
Cypress CommonsHCI Corporate Headquarters
5300 West Cypress Street, Suite 1053802 Coconut Palm Drive
Tampa, Florida 3360733619
The Annual Meeting of Shareholders of HCI Group, Inc. will be held at 3 p.m. Eastern time on Thursday, June 4, 20203, 2021 at Cypress Commons,HCI Corporate Headquarters, located at 5300 West Cypress Street, Suite 105,3802 Coconut Palm Drive, Tampa, Florida 33607.33619. 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:
| 1. | To elect Class |
| 2. | To ratify the appointment of Dixon Hughes Goodman, LLP as our independent registered public accounting firm for the year ending December 31, |
| 3. | To approve, on an advisory basis, the compensation of our named executive officers |
| 4. | 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 14, 2020.13, 2021.
Our 20192020 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 thatCOVID-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,
Andrew L. Graham
Secretary and General Counsel
| PROXY STATEMENT SUMMARY | 1 | |||
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| FINANCIAL HIGHLIGHTS | 3 | |||
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| MATTER NO. 1: ELECTION OF DIRECTORS | ||||
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| MATTER NO. 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 19 | |||
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| MATTER NO. 3: APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS | 21 | |||
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| CORPORATE GOVERNANCE | ||||
Shareholder Proposals for Presentation at Next Year’s Annual Meeting | ||||
| ABOUT THE ANNUAL MEETING | ||||
| FORWARD-LOOKING STATEMENTS | 54 | |||
| APPENDIX | ||||
| A-1 | ||||
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 | |
Place | ||
Record Date | April | |
Mailing Date | We began mailing this Proxy Statement on or about | |
Item | The Board’s Recommendation | Page | ||
1) To elect Class | Vote FOR All | |||
2) To ratify the appointment of Dixon Hughes Goodman, LLP as our independent registered public accounting firm for the year ending December 31, | Vote FOR | |||
3) To approve, on an advisory basis, the compensation of our named executive officers | VoteFOR | |||
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.
| By Internet | By Phone | By Mail | In Person | |||
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| 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 1866-613-3005844-618-1694 (toll free in the United States).
| HCI Group, Inc. | 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 4, 20203, 2021
This Proxy Statement and the 20192020 Annual Report to Shareholders are available at
http://www.hcigroup.com/2020proxymaterials2021proxymaterials
Upon your written request, we will provide you with a copy of our 20192020 Annual Report on Form10-K, including exhibits, free of charge. Send your request to HCI Group, Inc., c/o Rachel Swansiger, Staff Attorney, 5300 West Cypress Street, Suite 100,3802 Coconut Palm Drive, Tampa, Florida 33607.33619.
Forward-Looking Statements
This Proxy Statement may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as “project” and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various risks and uncertainties. For example, the declaration and payment of dividends is at the discretion of our Board of Directors. Our ability to pay dividends depends upon many factors, including the Company’s operating results; financial condition and capital requirements; the availability of cash from our subsidiaries; legal and regulatory constraints and requirements on the payment of dividends and such other factors as our Board of Directors may deem relevant. HCI Group, Inc. (the “Company,” “HCI,” “we” or “us” or when possessive “our”) disclaims all obligations to update any forward-looking statements.
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| 2 | HCI Group, Inc. |
PROXY STATEMENT SUMMARY
Our business performance in 20192020 continued our long-term record of strong financial and operating results. Net income in 20192020 was $26.6 million,$27.6 MM, or $3.31 diluted$3.49 earnings per diluted common share, up from $17.7 million$26.6 MM in the previous year. We also maintained a strong balance sheet, paid $13.0 million$12.4 MM in dividends, and returned an additional $18.8 million$5.2 MM to shareholders in the form of share repurchases. TypTap Insurance Company, our technology-driven insurance subsidiary, increased gross writtenearned premium 315%155% compared with 2018.2019.
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 4751 of the last 4953 quarters and has paid dividends in 3842 consecutive quarters.
or
| 19% Return on Equity (10-year average)
| Profitable in
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2.05x Share price to book value ratio
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paid in
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consecutive quarters of dividends
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| $
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| HCI Group, Inc. | 3 |
PROXY STATEMENT SUMMARY
| 4 | HCI Group, Inc. |
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 20192020 annual meeting, we have reached out to our shareholders, focusing on our 30 largest shareholders, which represent approximately 71%72% of our outstanding common stock. During the past 12 months, the Chair of the Compensation Committee and our Senior Vice President of Investor Relations Staff spoke with 7seven shareholders representing nearly 23.7%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.
| HCI Group, Inc. | 5 |
SHAREHOLDER ENGAGEMENT
| 6 | HCI Group, Inc.2021 Proxy Statement |
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 boardBoard comprised of a majority of independent directors and a director share ownership requirement. More recently, the boardBoard established a Share Ownership Policy for the Chief Executive Officer and created a Sustainability Committee to assist the boardBoard in its oversight of environmental and social policies.
We also took stepsIn 2020, Mr. Macchiarola and Ms. Spencer resigned from the Board, in order to improve the gender diversity of our board of directors. In 2019 we welcomedadd their valuable experience to the board Loreen Spencer,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 retired former audit partner with Deloitte & Touche LLP, and Sue Watts, an executive at Capgemini SE, a global technology consulting firm. Both new directors participated in our Board Observer Program, whichmanaging director of Centerbridge Partners L.P., was established in 2018appointed to identify high-potential director candidates.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.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. | 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 2020 (Class C directors), 2021 (Class A directors) and, 2022 (Class B directors) and 2023 (Class C directors). Each of the Class CA directors elected at the 20202021 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 forre-election election as Class CA directors at the 20202021 Annual Meeting of Shareholders, with terms expiring in 2023:2024:
Wayne BurksKarin Coleman
Jay MadhuEric Hoffman
Anthony SaravanosSue 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 Wayne Burks, Jay MadhuKarin Coleman, Eric Hoffman and Anthony SaravanosSue Watts as Class CA 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 VOTEFOR ELECTION OF EACH OF THE NOMINEES AS DIRECTORS OF THE COMPANY — ITEM 1 ON YOUR PROXY CARD. |
15 Full Board
in 2020 |
of the Board contributes to gender or ethnic diversity
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of directors are independent
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| 8 | HCI Group, Inc. |
MATTER NO. 1 ELECTION OF DIRECTORS
| Director | Independent | Age | Director Since | Primary Occupation | Independent | Age | Director Since | Primary Occupation | ||||||||||||||||||||
Nominees for Election: | Nominees for Election: | Nominees for Election: | ||||||||||||||||||||||||||
Karin Coleman | No | 60 | 2021 | Chief Operating Officer, HCI Group Inc. President, Homeowners Choice Property & Casualty Insurance Company (HCPCI), a subsidiary of HCI Group Inc. | ||||||||||||||||||||||||
Eric Hoffman |
| Yes |
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| 34 |
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| 2021 |
| Managing Director at Centerbridge Partners. | ||||||||||||||||||
Sue Watts |
| Yes |
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| 59 |
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| 2019 |
| Executive Vice President, Capgemini SE | ||||||||||||||||||
Continuing in Office: | Continuing in Office: | |||||||||||||||||||||||||||
Paresh Patel |
| No |
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| 58 |
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| 2007 |
| Chairman and Chief Executive Officer, HCI Group, Inc. | ||||||||||||||||||
Gregory Politis |
| Yes |
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| 69 |
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| 2007 |
| President, Xenia Management Corporation | ||||||||||||||||||
Wayne Burks | Yes | 72 | 2013 | Director and Former Chief Financial Officer, Romark LC. |
| Yes |
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| 73 |
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| 2013 |
| Director and Former Chief Financial Officer, Romark LC. | ||||||||||||||
Jay Madhu | No | 53 | 2007 | President and Chief Executive Officer, Oxbridge Re Holdings Ltd. |
| Yes |
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| 54 |
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| 2007 |
| President and Chief Executive Officer, Oxbridge Re Holdings Ltd. | ||||||||||||||
Anthony Saravanos | No | 49 | 2007 | President, Greenleaf Capital, a subsidiary of HCI Group, Inc. |
| No |
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| 50 |
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| 2007 |
| President, Greenleaf Capital, a subsidiary of HCI Group, Inc. | ||||||||||||||
Continuing in Office: | ||||||||||||||||||||||||||||
Paresh Patel | No | 57 | 2007 | Chairman and Chief Executive Officer, HCI Group, Inc. | ||||||||||||||||||||||||
James Macchiarola | Yes | 71 | 2013 | Retired Vice President, Orange Business Services | ||||||||||||||||||||||||
Gregory Politis | Yes | 68 | 2007 | President, Xenia Management Corporation | ||||||||||||||||||||||||
George Apostolou | Yes | 69 | 2007 | Founder, Apostolou Construction | ||||||||||||||||||||||||
Harish Patel | Yes | 63 | 2011 | Director, Medenet, Inc. | ||||||||||||||||||||||||
Loreen Spencer | Yes | 54 | 2019 | Retired Audit Partner, Deloitte & Touche LLP | ||||||||||||||||||||||||
Sue Watts | Yes | 58 | 2019 | Executive Vice President, Capgemini SE | ||||||||||||||||||||||||
| Director | Audit | Compensation | Governance & Nominating | Sustainability | ||||||
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Wayne Burks | Chair | Chair | ||||||||
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| Member | Chair | ||||||||
Eric Hoffman | Member | Member | ||||||||
Paresh Patel | ||||||||||
Gregory Politis | Chair | |||||||||
Anthony Saravanos | Member | |||||||||
| Member | Member |
8.6 years | Average age 57.5 years | ||||||
| HCI Group, Inc. | 9 |
MATTER NO. 1 ELECTION OF DIRECTORS
In accordance with the Company’s articles of incorporation, the Board of Directors is divided into three classes. Each class consists of threetwo or fourthree 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 bere-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
MATTER NO. 1 ELECTION OF DIRECTORS
Board nominees directly to the Board or at the Annual Meeting of Shareholders. See page 5249 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.comwww.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 | ||||||||||||||||||||||||||||||
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Paresh Patel | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||
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Anthony Saravanos | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||
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Karin Coleman | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||
Wayne Burks | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||
Jay Madhu | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||
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Gregory Politis | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||
Eric Hoffman | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||
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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 9.18.6 years.
Arrangements as to Selection and Nomination of Directors
We are not aware of any arrangements as to the selection and nomination of directors.
MATTER NO. 1 ELECTION OF DIRECTORS
Based upon recommendations of our Governance and Nominating Committee, the Board of Directors has determined that current directors George Apostolou,Gregory Politis, Wayne Burks, James Macchiarola, Harish M. Patel, Gregory Politis, Loreen Spencer,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. Apostolou,Madhu, the Board considered his role as a directorPresident and Chief Executive Officer of First Home Bank, whereOxbridge Re Holdings, which had a reinsurance agreement that terminated in 2018 with the Company’s subsidiary, Claddaugh Casualty Insurance Company had during 2019Ltd. In the case of Mr. Hoffman, the Board considered his role as much as approximately $13 milliona 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 deposit, and concluded that the amount of the deposits was not material to the Company or the bank.Company’s Board.
At our 20192020 Annual Meeting of Shareholders, George Apostolou, Paresh PatelWayne Burks, Jay Madhu and Gregory PolitisAnthony Saravanos werere-elected to the Board with vote totals detailed below.
| 2019 | ||||||||
Director Nominee | For | Withheld | ||||||
| George Apostolou | 96.7 | % | 3.3 | % | ||||
| Paresh Patel | 98.4 | % | 1.6 | % | ||||
| Gregory Politis | 96.4 | % | 3.6 | % | ||||
While we view these results as a significant improvement from previous years, we strive for continuous improvement and intend to continue our shareholder outreach and other efforts.
| 2018 | ||||||||
Director Nominee | For | Withheld | ||||||
| James Macchiarola | 53.6 | % | 46.4 | % | ||||
| Harish Patel | 60.2 | % | 39.8 | % | ||||
| 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. | 11 |
MATTER NO. 1 ELECTION OF DIRECTORS
Biographies of Directors Standing for Election (Class C)A)
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. Wattsbrings 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 | |||
| 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
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,
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. | |||
MATTER NO. 1 ELECTION OF DIRECTORS
| Anthony Saravanos | ||||
Anthony Saravanos,
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. |
MATTER NO. 1 ELECTION OF DIRECTORS
Biographies of Directors Continuing in Office
Directors whose present terms continue until 2021 (Class A)
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MATTER NO. 1 ELECTION OF DIRECTORS
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| 15 |
MATTER NO. 1 ELECTION OF DIRECTORS
Directors whose present terms continue until 2022 (Class B)
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MATTER NO. 1 ELECTION OF DIRECTORS
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MATTER NO. 1 ELECTION OF DIRECTORS
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 fornon-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. Eachnon-employee director receives a cash payment of $25,000 per quarter and an annual stock award ofequivalent 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, 2019.2020.
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 | 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 | $ | 100,000 | $ | 24,995 | — | — | — | $ | 9,837 | $ | 134,832 | $ | 75,000 |
| $ | 24,990 |
| — | — | — | $ | 684 |
| $ | 100,674 |
| |||||||||||||||||||||||||||||||
Wayne Burks | $ | 100,000 | $ | 24,995 | — | — | — | $ | 14,637 | $ | 139,632 | $ | 100,000 |
| $ | 24,990 |
| — | — | — | $ | 894 |
| $ | 125,884 |
| |||||||||||||||||||||||||||||||
James Macchiarola | $ | 100,000 | $ | 24,995 | — | — | — | $ | 14,637 | $ | 139,632 | $ | 100,000 |
| $ | 24,990 |
| — | — | — | $ | 894 |
| $ | 125,884 |
| |||||||||||||||||||||||||||||||
Jay Madhu | $ | 100,000 | $ | 24,995 | — | — | — | $ | 9,837 | $ | 134,832 | $ | 100,000 |
| $ | 24,990 |
| — | — | — | $ | 894 |
| $ | 125,884 |
| |||||||||||||||||||||||||||||||
Harish Patel | $ | 100,000 | $ | 24,995 | — | — | — | $ | 9,837 | $ | 134,832 | $ | 75,000 |
| $ | 24,990 |
| — | — | — | $ | 684 |
| $ | 100,674 |
| |||||||||||||||||||||||||||||||
Gregory Politis | $ | 100,000 | $ | 24,995 | — | — | — | $ | 9,837 | $ | 134,832 | $ | 100,000 |
| $ | 24,990 |
| — | — | — | $ | 894 |
| $ | 125,884 |
| |||||||||||||||||||||||||||||||
Loreen Spencer | $ | 74,028 | $ | 24,995 | — | — | — | $ | 237 | $ | 99,260 | $ | 100,000 |
| $ | 24,990 |
| — | — | — | $ | 894 |
| $ | 125,884 |
| |||||||||||||||||||||||||||||||
Sue Watts | $ | 74,028 | $ | 24,995 | — | — | — | $ | 237 | $ | 99,260 | $ | 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 |
| (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 Form10-K for the year ended December 31, |
| (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 eachnon-employee director as of December 31, 20192020 was as follows:
Name | Number of Options | Number of Restricted Shares | ||||||||
George Apostolou | — | 593 | (1) | |||||||
Wayne Burks | — | 593 | (1) | |||||||
James Macchiarola | — | 593 | (1) | |||||||
Jay Madhu | — | 593 | (1) | |||||||
Gregory Politis | — | 593 | (1) | |||||||
Harish Patel | 10,000 | (2) | 593 | (1) | ||||||
Loreen Spencer | — | 593 | (1) | |||||||
Sue Watts | — | 593 | (1) | |||||||
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. |
| HCI Group, Inc. |
MATTER NO. 1 ELECTION OF DIRECTORS
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The following table sets forth information regarding the beneficial ownership of our common stock as of April 10, 202013, 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 7,912,6498,483,782 common shares outstanding as of April 10, 2020.13, 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 10, 2020,13, 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., 5300 West Cypress Street, Suite 100,3802 Coconut Palm Drive, Tampa, Florida 33607.33619.
| Beneficially owned | ||||||||
| Name and Address of Beneficial Owner | Number of Shares | Percent | ||||||
Blackrock, Inc.(1) | 1,107,166 | 13.99 | % | |||||
Dimensional Fund Advisors LP(2) | 697,884 | 8.82 | % | |||||
The Vanguard Group, Inc.(3) | 469,998 | 5.94 | % | |||||
Executive Officers and Directors | ||||||||
George Apostolou(4) | 106,673 | 1.35 | % | |||||
Wayne Burks(5) | 5,343 | * | ||||||
Karin Coleman(6) | 23,732 | * | ||||||
Andrew L. Graham(7) | 36,937 | * | ||||||
Mark Harmsworth(8) | 32,070 | * | ||||||
James Macchiarola(5) | 9,593 | * | ||||||
Jay Madhu(9) | 86,769 | 1.10 | % | |||||
Harish M. Patel(10) | 101,888 | 1.29 | % | |||||
Paresh Patel(11) | 980,000 | 12.13 | % | |||||
Gregory Politis(12) | 406,593 | 5.14 | % | |||||
Anthony Saravanos(13) | 132,110 | 1.67 | % | |||||
Loreen Spencer(5) | 1,543 | * | ||||||
Susan Watts(5) | 2,567 | * | ||||||
All Executive Officers and Directors as a Group (13 individuals) | 1,925,818 | 24.10 | % | |||||
MATTER NO. 1 ELECTION OF DIRECTORS
| 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 |
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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 |
| (2) | This information is based on Schedule 13G/A filed with the Securities and Exchange Commission on February 12, |
| (3) | This information is based on Schedule 13G/A filed with the Securities and Exchange Commission on February |
| (4) |
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| (5) | Includes |
| (6) | Includes |
| HCI Group, Inc.2021 Proxy Statement | 17 |
MATTER NO. 1 ELECTION OF DIRECTORS
| (7) | Includes |
| (8) | Includes |
| (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; |
| (10) | Includes |
|
Includes 200,000 shares held by Gregory & Rena Politis and |
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 |
| (13) | Includes 524 restricted shares. |
| HCI Group, Inc. |
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, 2020,2021, 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 VOTEFOR RATIFICATION OF THE APPOINTMENT OF DIXON HUGHES GOODMAN, LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM — ITEM 2 ON YOUR PROXY CARD. |
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, 20192020 and 2018:2019:
2019 | 2018 | 2020 | 2019 | |||||||||||||
Audit Fees(1) | $ | 390,000 | $ | 385,000 | $ | 453,945 | $ | 390,000 | ||||||||
All Other Fees(2) | — | 9,000 | $ | 98,500 | — | |||||||||||
Total | $ | 390,000 | $ | 394,000 | $ | 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 Form10-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. |
MATTER NO. 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
All auditing andnon-auditing services arepre-approved by the Audit Committee. The Audit Committee delegates this authority to the Chair of the Audit Committee for situations whenpre-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.
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 Form10-K for the year ended December 31,
The Audit Committee has appointed Dixon Hughes Goodman, LLP as the Company’s independent registered public accounting firm for the year ending December 31,
AUDIT COMMITTEE Wayne Burks, Chair
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| HCI Group, Inc. |
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 2019.2020.
Thissay-on-pay vote is advisory andnon-binding on our Board, but our Compensation Committee will take into consideration the outcome of the vote when making future compensation decisions. At the 20192020 Annual Meeting of Shareholders, 94.16%78.1% of the votes cast favored oursay-on-pay proposal and 76.35% of the votes cast approved the Board recommendation to hold thesay-on-pay vote annually.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 20192020 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 20202021 Annual Meeting of Shareholders pursuant to Item 402 of RegulationS-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 VOTEFOR 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. |
MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
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 2019:2020:
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 |
Karin Coleman, |
| (1) |
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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.
Our compensation plans are designed to incentivize executive behavior that drives positive financial performance, which leads to increased shareholder returns. We believe our 20192020 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 20192020 to our Chief Executive Officer, Paresh Patel, and our other named executive officers reflects the Company’s accomplishments during the year and ourpay-for-performance philosophy.
Our business performance in 20192020 continued our long-term record of strong financial and operating results. Net income for 20192020 totaled $26.6 million,$27.6 MM, or $3.31 diluted$3.49 earnings per diluted share, up from $17.7 millioncompared with $26.6 MM in the previous year. We also maintained a strong balance sheet, paid $13.0 million$12.4 MM in dividends, and returned an additional $18.8 million$5.2 MM to shareholders in the form of share repurchases.
| HCI Group, Inc. |
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.
| (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 |
| HCI Group, Inc. |
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 and those ofwas 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:
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 2019, 84%2020, 85% of Mr. Patel’s compensation wasat-risk, as illustrated below.
| HCI Group, Inc. |
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 2016, Willis Towers Watson2020, Pearl Meyer assisted the Compensation Committee in benchmarking and in conductingpay-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. Willis Towers Watson first usedPearl Meyer updated the following insurance and software industry peer groups used to set the overall ranges of our executive compensation plan:plan, and those groups comprise the following companies:
Insurance Industry
*FedNat Holding Company
*Heritage Insurance Holding, Inc.
Invester Title Company Kinsdale Capital Group Lemonade, Inc.
Palomar Holdings, Inc. Protective Insurance Corporation
*United Insurance Holdings
*Universal Insurance
|
Software Industry
AppFolio, Inc. Benefitfocus, Inc.
Bottomline Technologies, Inc.
MicroStrategy Incorporated Q2 Holdings, 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 groupCore Peer Group are indicated in the above figure.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 groupCore Peer Group because of factors such as performance and retention, as well as size and complexity of the job.
| HCI Group, Inc. |
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 | ||||||||||||||||||
2019 HCI | $ | 950.0 | $ | 1,550.0 | $ | 1,917.6 | $ | 1,345.3 | $ | 313.8 | $ | 6.076.7 | ||||||||||||
2018 HCI | $ | 950.0 | $ | 569.0 | $ | 1,396.8 | $ | 939.4 | $ | 407.5 | $ | 4,262.7 | ||||||||||||
FedNat Holding Company - 2018 | $ | 1,000.0 | $ | 534.2 | $ | 872.8 | — | $ | 16.2 | $ | 2,423.2 | |||||||||||||
Heritage Insurance Holdings, Inc. - 2018 | $ | 2,205.0 | $ | 6,500 | — | — | $ | 30.0 | $ | 8,735.0 | ||||||||||||||
United Insurance Holdings Corp. - 2018 | $ | 1,000.0 | $ | 900.0 | $ | 1,343.8 | — | $ | 25.5 | $ | 3,269.3 | |||||||||||||
Universal Insurance Holdings, Inc. - 2018 | $ | 2,217.5 | $ | 6,606.5 | $ | 3,604.4 | $ | 5,433.9 | $ | 61.1 | $ | 17,923.4 | ||||||||||||
| (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 | ||||||||||||||||||
The following table summarizes the share price performance and dividend payouts of companies in our core peer groupCore Peer Group based on the disclosures in their financial statements.
Company | 12/31/2019 Market Cap | 12/31/2018 Stock Price | 12/31/2019 Stock Price | % Change | 2019 Dividends per Share | 12/31/2020 Market Cap | 12/31/2019 Stock Price | 12/31/2020 Stock Price | % Change | 2020 Dividends per Share | |||||||||||||||||||||||||||||||||||
HCI Group, Inc. | $ | 363.2 | $ | 50.81 | $ | 45.65 | -10 | % | $ | 1.60 | $ | 417.2 | $ | 45.65 | $ | 52.30 | 15 | % | $ | 1.60 | |||||||||||||||||||||||||
FedNat Holding Company | $ | 239.7 | $ | 19.92 | $ | 16.63 | -17 | % | $ | 0.33 | $ | 81.2 | $ | 16.63 | $ | 5.92 | -64 | % | $ | 0.36 | |||||||||||||||||||||||||
Heritage Insurance Holdings, Inc. | $ | 398.6 | $ | 14.72 | $ | 14.72 | -10 | % | $ | 0.24 | $ | 281.1 | $ | 13.25 | $ | 10.13 | -24 | % | $ | 0.24 | |||||||||||||||||||||||||
United Insurance Holdings Corp. | $ | 542.6 | $ | 16.62 | $ | 12.61 | -24 | % | $ | 0.24 | $ | 246.4 | $ | 12.61 | $ | 5.72 | -55 | % | $ | 0.24 | |||||||||||||||||||||||||
Universal Insurance Holdings, Inc. | $ | 913.5 | $ | 37.92 | $ | 27.99 | -26 | % | $ | 0.77 | $ | 470.5 | $ | 27.99 | $ | 15.11 | -46 | % | $ | 0.77 | |||||||||||||||||||||||||
| HCI Group, Inc. |
MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
Performance on the Company’s financial and strategic goals is an important factor in our compensation decisions. The compensation awarded in 20192020 to our Chief Executive Officer, Paresh Patel, and our other named executive officers reflects the Company’s accomplishments during the year and ourpay-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 20192020 continued our long-term record of strong financial and operating results. Net income for 20192020 totaled $26.6 million$27.6 MM or $3.31 diluted$3.49 earnings per diluted common share, up from $17.7 millioncompared with $26.6 MM in the previous year. We also maintained a strong balance sheet, paid $13.0 million$12.4 MM in dividends, and returned an additional $18.8 million$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 4751 of the last 4953 quarters and paid dividends in 3842 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 underPay-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 2019.2020. TypTap Insurance Company, our technology-driven insurance subsidiary, increased gross written premium 315%premiums earned 155% over 2018.2019. We also expanded the geographic reach of our core insurance business and now offer homeowners and flood insurance in fivesix states. In addition, our real estate division completed several projects and acquisitions to add strategic balance and diversification.
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 Senior Vice President of Investor Relations 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 71.2% of our outstanding common stock. During the past 12 months, the Chair of the Compensation Committee and our Senior Vice President of Investor Relations spoke with 7 shareholders representing nearly 23.7% of the Company’s outstanding common stock. To assist with our shareholder engagement program, we have hired the proxy advisory firm Alliance Advisors.
In 2020, 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 is 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.
MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
The Chair of the Compensation Committee and our Senior Vice President of Investor Relations discussed the purpose and scope of the review with investors during our engagement calls to solicit their input. We anticipate that the review will be completed in June 2020, and its findings will be incorporated in the Board’s annual compensation and budget planning process for 2021 as well as negotiations with the CEO on a new employment agreement.
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.
During 2016 andCompensation Committee Engagement with Shareholders
The Compensation Committee considers the opinions of shareholders in making compensation decisions. In 2017, the Chair of the Compensation Committee reviewed and redesignedour 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
| HCI Group, Inc.2021 Proxy Statement | 27 |
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 ofand our Chief Executive Officer, Paresh Patel, withcommitment to continuing to strengthen the assistance of Willis Towers Watson, a leading compensation firm, and input from shareholders. The plan established in 2017 strengthened the alignment of interests between Mr. Patel and shareholders and provided competitive compensation while ensuring a strong link between pay and performance. It also createdThe Company adopted annual “Say on Pay” voting frequency in 2019 and received strong majority shareholder support for its executive compensation program in 2020.
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 better balance relativeleading 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 core peer group. pay programs can be improved in order to strengthen alignment with shareholder interests and promote the long-term success of our strategy.
The Chief Executive’s 2019Chair 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 50th and 75th percentile levels vs. Core Peer Group CEOs and below the 50th 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 50th percentile vs. the Core Peer Group, while aggregate total compensation award includesfor named executive officers was at the 50th 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 cash bonus payment 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 that are consistentfor 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 the redesigned plan.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
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.
MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
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.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 Willis Towers Watson in 2016 and will be using 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.
MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
Executive Officers of the Company
The following table provides information with respect to our named executive officers as of April 14, 2020:13, 2021:
Name | Age | Title | ||
Paresh Patel | Chairman and Chief Executive Officer | |||
Mark Harmsworth | Chief Financial Officer | |||
Andrew L. Graham | Vice President, General Counsel and Corporate Secretary | |||
Anthony Saravanos | ||||
Karin Coleman | ||||
Biographical information for Messrs.Paresh Patel, Anthony Saravanos and SaravanosKarin 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 regionalsub-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 namedZ-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.
MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
 |
|
2017. In 2019, she was appointed as President of Homeowners Choice Property & Casualty Insurance Company, Inc. (HCPCI), HCI’s largest operating subsidiary. She joined the Company in 2009 as Vice President of Corporate Services. Ms. Coleman oversees human resources, regulatory and legislative affairs, vendor management and community relations. Prior to joining HCI, Ms. Coleman served nine years as Vice President of Take Stock in Children, located in Miami, Florida, the state’s largest public-private partnership providing college access and assistance toat-risk children, overseeing legislative and strategic partnerships. Previously, she served in various roles over 13 years at Florida Progress Corporation located in St. Petersburg, Florida. Ms. Coleman holds a Bachelor of Arts degree in International Studies from the University of South Florida and has earned her senior professional in human resources certification (SPHR).
Arrangements as to Selection and Nomination of Executive Officers
We are aware of no arrangements as to the selection or appointment of executive officers.
20192020 Executive Pay Decisions
The annual base salaries, annual cash performance bonuses and equity awards of our named executive officers in 20192020 were as follows:
Name and Office | Base Salary ($) | Cash Bonus ($) | Equity Grant | |||||||||
Paresh Patel, Chief Executive Officer | 950,000 | 1,550,000 | 150,000 | (a) | ||||||||
Mark Harmsworth, Chief Financial Officer | 320,000 | 125,000 | 3,500 | (b) | ||||||||
Andrew L. Graham, General Counsel | 250,000 | 125,000 | 3,500 | (b) | ||||||||
Anthony Saravanos, President - Real Estate Division | 225,000 | 125,000 | 3,500 | (b) | ||||||||
Karin Coleman, Executive Vice President and President HCPCI | 225,000 | 125,000 | 3,500 | (b) | ||||||||
Name and Office | Base Salary ($) | 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 2018,2019, 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.Core Peer Group. The annual base salaries for all other named executive officers were unchanged in 2019.2020. Cash bonus awards for all other named executive officers reflected the achievement of the Company’s financial goals and individual performance.
2020 CEO Cash Bonus and Equity Compensation Decisions
In April 2019,2020, the Compensation Committee established an incentive pay plan to outline the cash bonus available to be earned by Mr. Patel for 2019.2020. 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 20192020 targets were $58.5 million$42.0 MM for EBIT and 16.5%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
| HCI Group, Inc. |
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. The targets, and payouts at the lower levelswith no awards earned for below-threshold results. Target performance goals were designed to be reasonably achievedboth challenging and realistic and to reward the Chief Executive Officer for continued consistent performance. At the higher levels, theyMaximum 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: | 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 | Weight | Performance Target | Actual Result | Threshold - 70% of Target is Achieved | Target - 100% is Achieved | Maximum - 200% of Target is Achieved | ||||||||||||||||||||||||||||||||||||||||||
EBIT | 50 | % | $ | 58,500,000 | $ | 50,648,063 | (1) | $ | 475,000 | $ | 950,000 | $ | 1,900,000 | 50 | % | $ | 42,000,000 | $ | 49,727,000 | (1) | $ | 475,000 | $ | 950,000 | $ | 1,900,000 | ||||||||||||||||||||||||||||
ROE | 50 | % | 16.5 | % | 14.3 | % | $ | 475,000 | $ | 950,000 | $ | 1,900,000 | 50 | % | 10.5 | % | 14.5 | % | $ | 475,000 | $ | 950,000 | $ | 1,900,000 | ||||||||||||||||||||||||||||||
| (1) | Adjusted for bonus expense deducted from earnings. |
The Company’s 2019 financial performance was adversely affected by losses resulting from Florida hail storms during the first quarter. As a result,In 2020, Mr. Patel achieved 86%118% of both his EBIT and 138% of ROE targets which resulted in a cashan eligible award of $1,476,752. In addition,$2,437,000. The Compensation Committee exercised its discretion, noting that EBIT was affected by a gain on the Compensation Committeesale of a property in 2020, and awarded Mr. Patel a $73,248 discretionary bonus in recognition of his efforts related to the sharp growth in revenue in the TypTap business unit, bringing his total$1 MM cash compensation to $1,550,000. Inclusive of the discretionary bonus the CEO received 81.6% of the eligible bonus.
During 2019,2020, Mr. Patel was awarded 40,000 shares of restricted stock and 110,000 stock purchase options having an exercise price of $53$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 ourpay-for-performance philosophy. The following graph shows his annual cash bonus compared to ROE, a key performance measure.
Mr. Patel’s total compensation is in the middle range of compensation for Chief Executive Officers in our core peer group.
| HCI Group, Inc. |
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 theirpre-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 additionalone-year terms unless either party delivers written notice ofnon-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.OnNovember23,OnNovember23, 2016, we enteredintoenteredinto 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 additionalone-year terms unless either party delivers written notice ofnon-renewal at least 90 days before expiration of the initial term or any renewal term.Duringterm.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.
Mr. Harmsworth’s agreement regarding the 40,000 restricted shares awarded to him at the beginning of his employment provides that if his employment is terminated without good cause, then up to 10,000 of his remaining unvested shares will vest.
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.
MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
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.
| HCI Group, Inc.2021 Proxy Statement | 33 |
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 2019,2020, approximately $1,796,000$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 37.35.
Potential Payments Upon Termination orChange-in-Control
At December 31, 2019,2020, 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.
| HCI Group, Inc. |
MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
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 2018 and 2017.2018. 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 | Bonus | Stock Awards | Option Awards | All Other Compensation(1) | Total | Year | Salary(1) | Bonus | Stock Awards | Option Awards | All Other Compensation(2) | Total | ||||||||||||||||||||||||||||||||||||||||||
Paresh Patel Chief Executive Officer | 2019 | $ | 950,000 | $ | 1,550,000 | $ | 1,917,600 | (2) | $ | 1,345,300 | (4) | $ | 313,769 | $ | 6,076,669 |
|
2020 |
|
$ |
986,539 |
|
$ |
1,000,000 |
|
$ |
1,838,800 |
(3) |
$ |
1,233,898 |
(5) |
$ |
170,230 |
|
$ |
5,229,467 |
| ||||||||||||||||||||
| 2018 | $ | 950,000 | $ | 569,000 | $ | 1,396,800 | (3) | $ | 939,400 | (4) | $ | 407,519 | $ | 4,262,719 |
|
2019 |
|
$ |
950,000 |
|
$ |
1,550,000 |
|
$ |
1,917,600 |
(4) |
$ |
1,345,300 |
(5) |
$ |
313,769 |
|
$ |
6,076,669 |
| |||||||||||||||||||||
| 2017 | $ | 950,000 | — | $ | 1,588,400 | (3) | $ | 1,247,388 | (4) | $ | 344,769 | $ | 4,130,557 |
|
2018 |
|
$ |
950,000 |
|
$ |
569,000 |
|
$ |
1,396,800 |
(4) |
$ |
939,400 |
(5) |
$ |
407,519 |
|
$ |
4,262,719 |
| ||||||||||||||||||||||
Mark Harmsworth Chief Financial Officer | 2019 | $ | 320,000 | $ | 125,000 | $ | 144,550 | (2) | — | $ | 47,100 | $ | 636,650 |
|
2020 |
|
$ |
332,308 |
|
$ |
93,750 |
|
$ |
159,355 |
(3) |
|
— |
|
$ |
34,200 |
|
$ |
619,613 |
| ||||||||||||||||||||||
| 2018 | $ | 313,846 | $ | 100,000 | $ | 153,405 | (3) | — | $ | 54,316 | $ | 621,567 |
|
2019 |
|
$ |
320,000 |
|
$ |
125,000 |
|
$ |
144,550 |
(4) |
|
— |
|
$ |
47,100 |
|
$ |
636,650 |
| |||||||||||||||||||||||
| 2017 | $ | 300,000 | $ | 100,000 | $ | 44,050 | (3) | — | $ | 65,469 | $ | 509,519 |
|
2018 |
|
$ |
313,846 |
|
$ |
100,000 |
|
$ |
153,405 |
(4) |
|
— |
|
$ |
54,316 |
|
$ |
621,567 |
| |||||||||||||||||||||||
Andrew L. Graham General Counsel, and Corporate Secretary | 2019 | $ | 250,000 | $ | 125,000 | $ | 144,550 | (2) | — | $ | 22,200 | $ | 541,750 | |||||||||||||||||||||||||||||||||||||||||||
| 2018 | $ | 236,154 | $ | 100,000 | $ | 153,405 | (3) | — | $ | 18,962 | $ | 508,521 | ||||||||||||||||||||||||||||||||||||||||||||
| 2017 | $ | 205,000 | $ | 90,000 | $ | 110,125 | (3) | — | $ | 16,775 | $ | 421,900 | ||||||||||||||||||||||||||||||||||||||||||||
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 |
|
$ |
153,405 |
(4) |
|
— |
|
$ |
18,962 |
|
$ |
508,521 |
| ||||||||||||||||||||||||||||||||||||
Anthony Saravanos President, Real Estate Division | 2019 | $ | 225,000 | $ | 125,000 | $ | 144,550 | (2) | — | $ | 12,200 | $ | 506,750 | |||||||||||||||||||||||||||||||||||||||||||
| 2018 | $ | 209,615 | $ | 100,000 | $ | 153,405 | (3) | — | $ | 9,516 | $ | 472,536 | ||||||||||||||||||||||||||||||||||||||||||||
| 2017 | $ | 175,000 | $ | 90,000 | $ | 110,125 | (3) | — | $ | 18,375 | $ | 393,500 | ||||||||||||||||||||||||||||||||||||||||||||
Anthony Saravanos Divisional President, Real Estate Division |
|
2020 |
|
$ |
233,654 |
|
$ |
93,750 |
|
$ |
159,355 |
(3) |
|
— |
|
$ |
13,200 |
|
$ |
499,959 |
| |||||||||||||||||||||||||||||||||||
|
2019 |
|
$ |
225,000 |
|
$ |
125,000 |
|
$ |
144,550 |
(4) |
|
— |
|
$ |
12,200 |
|
$ |
506,750 |
| ||||||||||||||||||||||||||||||||||||
|
2018 |
|
$ |
209,615 |
|
$ |
100,000 |
|
$ |
153,405 |
(4) |
|
— |
|
$ |
9,516 |
|
$ |
472,536 |
| ||||||||||||||||||||||||||||||||||||
Karin Coleman Executive Vice President and President, HCPCI | 2019 | $ | 225,000 | $ | 125,000 | $ | 144,550 | (2) | — | $ | 21,200 | $ | 515,750 | |||||||||||||||||||||||||||||||||||||||||||
| 2018 | $ | 209,615 | $ | 100,000 | $ | 153,405 | (3) | — | $ | 17,900 | $ | 480,920 | ||||||||||||||||||||||||||||||||||||||||||||
| 2017 | $ | 175,000 | $ | 90,000 | $ | 110,125 | (3) | — | $ | 15,575 | $ | 390,700 | ||||||||||||||||||||||||||||||||||||||||||||
Karin Coleman Chief Operating Officer and President, HCPCI |
|
2020 |
|
$ |
233,654 |
|
$ |
93,750 |
|
$ |
159,355 |
(3) |
|
— |
|
$ |
22,546 |
|
$ |
509,305 |
| |||||||||||||||||||||||||||||||||||
|
2019 |
|
$ |
225,000 |
|
$ |
125,000 |
|
$ |
144,550 |
(4) |
|
— |
|
$ |
21,200 |
|
$ |
515,750 |
| ||||||||||||||||||||||||||||||||||||
|
2018 |
|
$ |
209,615 |
|
$ |
100,000 |
|
$ |
153,405 |
(4) |
|
— |
|
$ |
17,900 |
|
$ |
480,920 |
| ||||||||||||||||||||||||||||||||||||
| (1) | In 2020, the salary paid amount includes bi-weekly payroll paid 27 times during the year having the last payday paid on Thursday, December 31, 2020 rather than Friday, January 1, 2021. |
| (2) | In 2020, Mr. Patel received $160,000 in cash dividends on unvested restricted stock and $10,230 in Company contributions to our 401(k) Plan, Mr. Harmsworth received $27,800 in cash dividends on unvested restricted stock and $6,400 in Company contributions to our 401(k) Plan, Mr. Graham received $13,200 in cash dividends on unvested restricted stock and $10,385 in Company contributions to our 401(K) Plan, Mr. Saravanos received $13,200 in cash dividends on unvested restricted stock, and Ms. Coleman received $13,200 in cash dividends on unvested restricted stock and $9,346 in Company contributions to our 401(k) Plan. In 2019, Mr. Patel received $304,000 in cash dividends on unvested restricted stock and $9,269 in Company contributions to our 401(k) Plan, Mr. Harmsworth received $40,700 in cash dividends on unvested restricted stock and $6,400 in Company contributions to our 401(k) Plan, Mr. Graham received $12,200 in cash dividends on unvested restricted stock and $10,000 in Company contributions to our 401(k) Plan, Mr. Saravanos received $12,200 in cash dividends on unvested restricted stock, and Ms. Coleman received $12,200 in cash dividends on unvested restricted stock and $9,000 in Company contributions to our 401(k) Plan. In 2018, Mr. Patel received $398,250 in cash dividends on unvested restricted stock and $9,269 in Company contributions to our 401(k) Plan, Mr. Harmsworth received $48,163 in cash dividends on unvested restricted stock and $6,154 in Company contributions to our 401(k) Plan, Mr. Graham received $9,516 in cash dividends on unvested restricted stock and $9,446 in Company contributions to our 401(k) Plan, Mr. Saravanos received $9,516 in cash dividends on unvested restricted stock, and Ms. Coleman received $9,516 in cash dividends on unvested restricted stock and $8,385 in Company contributions to our 401(k) Plan. |
See the description, table and footnotes under Grants of Plan-Based Awards for |
See the description, table and footnotes under Outstanding Equity Awards at December 31, |
| HCI Group, Inc. |
MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
This amount was calculated in accordance with ASC Topic 718. The assumptions used in calculating the amount are discussed at Note 21 Stock-Based Compensation of the Consolidated Financial Statements included in our Annual Report on Form10-K for the year ended December 31, |
Grants of Plan-Based Awards for 20192020
The following table sets forth information regarding all Plan-Based Awards granted to our named executive officers during the year ended December 31, 2019.2020. The stock awards identified in the table below are also reported in the table that follows—Outstanding Equity Awards at December 31, 2019.2020.
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards | Grant Date Fair Value of Stock and Option Awards | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards | Grant Date Fair Value of Stock and Option Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Date Authorized | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | (#) | (#) | ($/share) | ($)(1) | Grant Date | Date Authorized | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | (#) | (#) | ($/share) | ($)(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Paresh Patel | 1/15/19 | 1/15/19 | — | — | — | — | — | — | 40,000 | (2) | — | — | 1,917,600 | 1/16/20 | 1/16/20 | — | — | — | — | — | — | 40,000 | (2) | — | — | 1,838,800 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Paresh Patel | 1/15/19 | 1/15/19 | — | — | — | — | — | — | — | 110,000 | (3) | $ | 53 | 1,345,300 | 1/16/20 | 1/16/20 | — | — | — | — | — | — | — | 110,000 | (3) | $ | 48 | 1,233,898 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mark Harmsworth | 6/14/19 | 6/14/19 | — | — | — | — | — | — | 3,500 | (4) | — | — | 144,550 | 5/26/20 | 5/26/20 | — | — | — | — | — | — | 3,500 | (4) | — | — | 159,355 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Andrew L. Graham | 6/14/19 | 6/14/19 | — | — | — | — | — | — | 3,500 | (4) | — | — | 144,550 | 5/26/20 | 5/26/20 | — | — | — | — | — | — | 3,500 | (4) | — | — | 159,355 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Anthony Saravanos | 6/14/19 | 6/14/19 | — | — | — | — | — | — | 3,500 | (4) | — | — | 144,550 | 5/26/20 | 5/26/20 | — | — | — | — | — | — | 3,500 | (4) | — | — | 159,355 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Karin Coleman | 6/14/19 | 6/14/19 | — | — | — | — | — | — | 3,500 | (4) | — | — | 144,550 | 5/26/20 | 5/26/20 | — | — | — | — | — | — | 3,500 | (4) | — | — | 159,355 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Represents the aggregate grant date fair value, calculated in accordance with ASC Topic 718, of restricted stock awards granted in |
| (2) | On January |
| (3) | On January |
| (4) | On |
| HCI Group, Inc. |
MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
Outstanding Equity Awards at December 31, 20192020
The following table sets forth information regarding outstanding stock option and restricted stock awards held by our named executive officers at December 31, 2019,2020, including the number of shares underlying both exercisable and unexercisable portions of each option as well as the exercise price and expiration date of each outstanding option.
| Name | Number of Securities Underlying Unexercised Options - Exercisable | Number of Securities Underlying Unexercised Options - Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | Number of Securities Underlying Unexercised Options - Exercisable | Number of Securities Underlying Unexercised Options - Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Paresh Patel | 82,500 | 27,500 | (2) | — | $ | 40 | 1/7/2027 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 55,000 | 55,000 | (2) | — | $ | 40 | 2/8/2028 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 55,000 | 55,000 | (2) | — | $ | 40 | 1/7/2027 | — | — | — | — | 27,500 | 82,500 | (2) | — | $ | 53 | 1/15/2029 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 27,500 | 82,500 | (2) | — | $ | 40 | 2/8/2028 | — | — | — | — | — | 110,000 | (2) | — | $ | 48 | 1/16/2030 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | 110,000 | (2) | — | $ | 53 | 1/15/2029 | — | — | — | — | — | — | — | — | — | 10,000 | (3) | 523,000 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 20,000 | (3) | 913,000 | — | — | — | — | — | — | — | 20,000 | (3) | 1,046,000 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 30,000 | (3) | 1,369,500 | — | — | — | — | — | — | — | 30,000 | (3) | 1,569,000 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 40,000 | (3) | 1,826,000 | — | — | — | — | — | — | 40,000 | (3) | 2,092,000 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mark Harmsworth | — | — | — | — | — | 10,000 | (4) | 456,500 | — | — | — | — | — | — | — | 250 | (4) | 13,075 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 500 | (5) | 22,825 | — | — | — | — | — | — | — | 1,750 | (5) | 91,525 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 2,625 | (6) | 119,831 | — | — | — | — | — | — | — | 2,625 | (6) | 137,288 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 3,500 | (7) | 159,775 | — | — | — | — | — | — | — | 3,500 | (7) | 183,050 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Andrew L. Graham | — | — | — | — | — | 625 | (8) | 28,531 | — | — | — | — | — | — | — | 625 | (8) | 32,688 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 1,250 | (9) | 57,063 | — | — | — | — | — | — | — | 1,750 | (5) | 91,525 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 2,625 | (6) | 119,831 | — | — | — | — | — | — | — | 2,625 | (6) | 137,288 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 3,500 | (7) | 159,775 | — | — | — | — | — | — | — | 3,500 | (7) | 183,050 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Anthony Saravanos | — | — | — | — | — | 625 | (8) | 28,531 | — | — | — | — | — | — | — | 625 | (8) | 32,688 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 1,250 | (9) | 57,063 | — | — | — | — | — | — | — | 1,750 | (5) | 91,525 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 2,625 | (6) | 119,831 | — | — | — | — | — | — | — | 2,625 | (6) | 137,288 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 3,500 | (7) | 159,775 | — | — | — | — | — | — | — | 3,500 | (7) | 183,050 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Karin Coleman | — | — | — | — | — | 625 | (8) | 28,531 | — | — | — | — | — | — | — | 625 | (8) | 32,688 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 1,250 | (9) | 57,063 | — | — | — | — | — | — | — | 1,750 | (5) | 91,525 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 2,625 | (6) | 119,831 | — | — | — | — | — | — | — | 2,625 | (6) | 137,288 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 3,500 | (7) | 159,775 | — | — | — | — | — | — | — | 3,500 | (7) | 183,050 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | The market value for the shares of stock that have not yet vested was determined using the closing market price of our common stock on December 31, |
| (2) | On January |
| HCI Group, Inc. |
MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
| January 15, 2019, Mr. Patel was granted 110,000 stock options with an exercise price of $53 and an expiration date of January 15, 2029. On January 16, 2020, Mr. Patel was granted 110,000 stock options with an exercise price of $48 and an expiration date of January 16, 2030. The options will vest in equal annual installments over four years, so long as Mr. Patel remains employed by the Company. |
| (3) | On January |
| (4) |
|
On June 6, 2017, Mr. Harmsworth was granted 1,000 restricted shares. Restrictions on 250 shares lapse on May 20 of each year beginning on May 20, 2018. Mr. Harmsworth has all the rights of a shareholder in connection with the restricted shares including the right to receive dividends at the same rate applicable to all common shareholders. |
On June 19, 2018, 3,500 restricted shares were granted to the named executive officer. Restrictions on 875 shares will lapse on May 20 of each year beginning on May 20, 2019. The officer has all the rights of a shareholder in connection with the restricted shares including the right to receive dividends at the same rate applicable to all common shareholders. |
On June 14, 2019, 3,500 restricted shares were granted to the named executive officer. Restrictions on 875 shares will lapse on May 20 of each year beginning on May 20, 2020. The officer has all the rights of a shareholder in connection with the restricted shares including the right to receive dividends at the same rate applicable to all common shareholders. |
On |
On June 6, 2017, 2,500 restricted shares were granted to the named executive officer. Restrictions on 625 shares lapse on May 20 of each year beginning on May 20, 2018. The officer has all the rights of a shareholder in connection with the restricted shares including the right to receive dividends at the same rate applicable to all common shareholders. |
Option Exercises and Stock Vested in 20192020
The following table sets forth information regarding option exercises and stock vested by our named executive officers during the year ended December 31, 2019.2020.
| Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||||||||||||||||||
| Paresh Patel | — | — | 20,000 | 973,000 | — | — | 30,000 | 1,362,900 | ||||||||||||||||||||||||||||
| Mark Harmsworth | — | — | 11,125 | (1) | 500,926 | — | — | 12,000 | (1) | 618,660 | ||||||||||||||||||||||||||
| Andrew L. Graham | — | — | 2,750 | (2) | 112,998 | — | — | 3,000 | (2) | 134,940 | ||||||||||||||||||||||||||
| Anthony Saravanos | — | — | 2,750 | (3) | 112,998 | — | — | 3,000 | (3) | 134,940 | ||||||||||||||||||||||||||
| Karin Coleman | — | — | 2,750 | (4) | 112,998 | — | — | 3,000 | (4) | 134,940 | ||||||||||||||||||||||||||
| (1) |
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| (2) |
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| (3) |
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| (4) |
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| HCI Group, Inc. |
MATTER NO. 3 APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
In accordance with Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of RegulationS-K, we are providing the following information about the ratio of the total annual compensation of our Chief Executive Officer, Paresh Patel, to the total annual compensation of our median employee. As permitted by Item 402(u), we are using the same median employee that we identified in our Proxy Statement for our 2018 Annual Meeting of Shareholders. We believe that there have been no changes in our employee population or employee compensation arrangements that would significantly impact the pay ratio.
For 2019,2020, our last completed fiscal year:
The median employee total annual compensation (excluding our Chief Executive Officer) was $41,017$66,586
Our Chief Executive Officer’s total annual compensation as reported in our 20192020 Summary Compensation Table was $6,076,669$5,229,467
The ratio of Chief Executive Officer to median employee total annual compensation was 14879 to 1
In determining the median employee, we prepared a list of employees as of December 31, 20172020 which consisted of a total of 412477 employees with 325359 located in the United States and 87 (21%118 (25%) located in India. We then identified our median employee based on total annual compensation calculated with the same methodology used for our named executive officers as set forth in our Summary Compensation Table. The components used to determine total annual compensation were annualized for those employees who were not employed for the full year of 2017.2020. We did not adjust for the difference in cost of living between India and the Tampa Bay area. To resolve the issue of selecting a median from an even number of data points, we selected the employee whose salary would yield a higher pay ratio. The median employee is based in the United States.
We have elected to disclose a supplemental ratio that includes the value of health care benefits paid by the Company. Because these benefits are provided on a broad,non-discretionary basis, the value is not required to be reported in the 20182020 Summary Compensation Table. However, if we include the value of these benefits, the median employee total annual compensation of our median employee would increase by $6,577be $73,065 and the total annual compensation of our CEO would increase by $6,577,$7,163, resulting in a ratio of our CEO’s annual total compensation to the annual total compensation of our median employee of 12872 to 1.
We believe that the pay ratio presented above is a reasonable estimate. Because the Securities and Exchange Commission rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies, exemptions, estimates and assumptions, this pay ratio may not be comparable to the pay ratio reported by other companies.
| HCI Group, Inc. |
We are committed to maintaining a high standard of corporate governance as an essential means of strengthening shareholder value. Accordingly, HCI has adopted the following policies and programs to promote effective corporate governance:
We have a strong Lead Independent Director position with a publicly available charter
A majority of our directors are independent
We prohibit derivative trading or hedging of our securities by our employees, officers, and Board members
We have no poison pill
Our Code of Conduct ensures the conduct of employees, officers and directors remains in compliance with laws, regulations and ethical principles
Our Chief Executive Officer is required to hold shares equaling three times his or her base salary within five years of becoming Chief Executive Officer
Within five years of joining the Board, each new director is expected to own at least $200,000 of our common stock
We established a Board Observer Program to prepare individuals to serve on public company boards, particularly individuals from under-represented communities, and broaden our pool of available Board candidates. In 2019, we appointed two new directors, both of whom are women and participated in the Board Observer Program.
HCI Group, Inc. conducts business through its officers and other employees under the direction of the Chief Executive Officer and with the oversight of the Board of Directors to enhance the long-term value of the Company for its shareholders. The members of Board of Directors are periodically elected by the shareholders to oversee management and to ensure that the long-term interests of the Company and its shareholders are being served. Each director is expected to perform as a director in good faith with the care an ordinarily prudent person in a like position would exercise under similar circumstances and in a manner the director reasonably believes to be in the best interests of the Company.
Board of Directors Leadership Structure
In our current Board leadership structure, Paresh Patel serves as Chairman of the Board and Chief Executive Officer. Mr. Patel’s role includes providing ongoing feedback on the direction and performance of the Company, serving as Chairman of regular meetings of the Board of Directors, setting the agenda of Board meetings and leading the Board of Directors in anticipating and responding to changes in our business. Mr. Patel also plays a significant role in formulating and executing the Company’s strategic plans, technology efforts and investment decisions. We believe Board oversight and planning is a collaborative effort among the directors, each of whom has unique skills, experience and education, and this structure facilitates collaboration and communication among the directors and management and makes best use of their respective skills.
The Board of Directors has established a Lead Independent Director position and adopted a Lead Independent Director Charter. The Lead Independent Director serves pursuant to that charter, which provides for the annual election of the Lead Independent Director by the independent directors. Our current Lead Independent Director is Gregory Politis. He was elected to that position in 2017 andre-elected in April of each year thereafter. The Board of Directors believes having a Lead Independent Director enhances management accountability to the Board of Directors.
Under the Lead Independent Director Charter, the Lead Independent Director has the following responsibilities:
To preside at all meetings of the Board of Directors at which the Chairman of the Board is not present, including executive sessions of the independent directors
| 40 | HCI Group, Inc.2021 Proxy Statement |
CORPORATE GOVERNANCE
To call meetings of the independent directors
To serve as the principal liaison between the Chairman of the Board and the independent directors, including providing the Chairman feedback after Board meetings
To be available, when appropriate, for consultation and direct communication with shareholders
CORPORATE GOVERNANCE
To lead the independent directors’ evaluation of the Chief Executive Officer’s effectiveness as Chairman of the Board and Chief Executive Officer
The Lead Independent Director also functions as a channel of communication between the Board and the Company’s shareholders and may be reached as described under Communicating with the Board of Directors on page 8.47. The Board of Directors continually reviews the effectiveness of this leadership structure to evaluate whether it remains appropriate for the Company and may determine to alter the structure at any time.
A current copy of the Lead Independent Director Charter is available on our website:www.hcigroup.com. Select “Investor Information” and then “Corporate Governance.”
The Board of Directors typically meets monthly, except in August, with additional meetings as necessary to review and discuss the performance of the Company, its plans and prospects and any immediate issues it faces.
In 2019, 102020,15 Board meetings were held. Each director attended at least 75% of the Board and applicable committee meetings. Directors are expected to attend all Board meetings with only occasional absences and to prepare by reading any materials presented to them in advance of the meetings. Directors are expected to participate fully in the activities of any Board committee to which they may be elected and likewise to attend and prepare for all committee meetings. In addition to its general oversight of management, the Board of Directors performs a number of specific functions, including:
| (a) | Selecting, evaluating and compensating the Chief Executive Officer and overseeing Chief Executive Officer succession planning |
| (b) | Providing counsel and oversight on the selection, evaluation, development and compensation of senior management |
| (c) | Reviewing, monitoring, providing counsel and, where appropriate, approving fundamental financial and business strategies and major corporate actions |
| (d) | Assessing major risks facing the Company and reviewing options for their mitigation |
| (e) | Ensuring processes are in place for maintaining the integrity of the Company with respect to its financial statements; compliance with law and ethics; relationships with customers, vendors and agents; and relationships with other interested parties |
Independent directors and othernon-management directors meet and communicate regularly without management participation.Non-management directors include directors who are not executive officers of the Company or otherwise employed by the Company but are not considered to be independent by virtue of a material relationship, former status, family membership or any other reason. The Lead Independent Director presides at meetings of independent directors.
Committees of the Board of Directors
The Board of Directors previously established three committees to assist the Board in performing its functions: the Audit Committee, the Compensation Committee, and the Governance and Nominating Committee. In addition, in March 2020 the Board established a new committee, the Sustainability Committee. The current charters of these committees are published on the Company’s website,www.hcigroup.com, and are mailed to shareholders on written request. The members and the chairmen of the Board committees are elected annually by the Board of Directors.
| HCI Group, Inc.2021 Proxy Statement | 41 |
CORPORATE GOVERNANCE
Audit Committee
The Company has a separately designated standing Audit Committee established in accordance with the Securities and Exchange Act of 1934. The Audit Committee’s responsibilities include the following:
Assisting our Board of Directors in its oversight of the quality and integrity of our accounting, auditing and reporting practices
CORPORATE GOVERNANCE
Overseeing the work of our internal accounting and auditing processes
Overseeing the implementation of new accounting standards
Discussing with management our processes to manage business and financial risk
Making appointment, compensation and retention decisions regarding the independent registered public accounting firm engaged by the Company
Overseeing the independent registered public accounting firm’s qualifications, performance and independence and overseeing their efforts to prepare or issue audit reports on our financial statements
Establishing and reviewing the adequacy of procedures for the receipt, retention and treatment of complaints received by our Company regarding accounting, internal accounting controls or auditing matters, as well as addressing confidential, anonymous submissions of concern by employees regarding questionable accounting or auditing matters
Reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures
Reviewing and discussing with management and the independent registered public accounting firm matters related to the conduct of the audit and on critical audit matters
The Audit Committee comprises three members: Wayne Burks, Chair, Loreen SpencerJay Madhu and Harish M. Patel.Sue Watts. Since our common shares are listed on the New York Stock Exchange, we are governed by its listing standards. Accordingly, each member of the Audit Committee meets the independence tests set forth in Section 303A.02 of the New York Stock Exchange Listing Manual and the criteria for independence set forth inRule 10A-3(b)(1) of the Securities and Exchange Commission. The Board of Directors has determined that Mr. Burks and Ms. Spencer qualifyqualifies as an Audit Committee financial experts.expert. The Audit Committee met formally fourfive times during 20192020 and otherwise acted by unanimous written consent. The Board of Directors has adopted a written Audit Committee Charter. A current copy of the charter is available on our websitewww.hcigroup.com. Click “Investor Information” and then “Corporate Governance.”
Compensation Committee
The Compensation Committee’s responsibilities include the following:
Reviewing and approving the compensation programs applicable to our executive officers
Recommending to the Board of Directors the executive compensation programs and periodically reviewing administration policies for the programs
Reviewing and approving the corporate goals and objectives relevant to the compensation of the executive officers; evaluating the performance of the executive officers in light of those goals, objectives and strategies; and setting the compensation level of the executive officers based on this evaluation
Reviewing on a periodic basis the operation of our executive compensation programs to determine whether they are properly coordinated and achieving their intended purposes
| 42 | HCI Group, Inc.2021 Proxy Statement |
CORPORATE GOVERNANCE
Administering and making awards under the Company’s 2012 Omnibus Incentive Plan, and monitoring and supervising the administration of any other benefit plans the Company may have
Reviewing and approving compensation of outside directors
The Compensation Committee has the authority to determine the compensation of the named executive officers and thenon-employee directors and to make equity awards under the Company’s 2012 Omnibus Incentive Plan. At least annually the Compensation Committee considers the results of the Company’s operations and its financial position and makes compensation determinations.
The Compensation Committee currently comprises three directors: James Macchiarola, Chair, Loreen Spencermembers: Wayne Burks, Eric Hoffman and Harish M. Patel,Sue Watts, each of whom meets the independence tests set forth in Section 303A.02 of the New York Stock Exchange Listing Manual. The Compensation Committee met formally fourthree times during 20192020 and otherwise acted by unanimous written consent. The Board of Directors has adopted a formal Compensation Committee Charter. A current copy of the charter is available on our website,www.hcigroup.com. Click “Investor Information” and then “Corporate Governance.” The Compensation Committee is committed to apay-for-performance focus and open communications with shareholders.
CORPORATE GOVERNANCE
Governance and Nominating Committee
The functions of the Governance and Nominating Committee include the following:
Establishing criteria for selection of potential directors, taking into account all factors it considers appropriate
Identifying and selecting individuals believed to be qualified as candidates to serve on the Board and recommending candidates to the Board to stand for election as directors at the Annual Meeting of Shareholders or, if applicable, at a special meeting of the shareholders
Recommending members of the Board to serve on the committees of the Board
Advancing the Board’s commitment to diversity by identifying outstanding individuals from diverse ethnic and cultural backgrounds for consideration as possible board members
Evaluating and ensuring the independence of each member of a Board committee that is required to be composed of independent directors
Developing and recommending to the Board a set of corporate governance principles appropriate for our Company and consistent with the applicable laws, regulations and listing requirements
Developing and recommending to the Board a Code of Conduct for our Company’s directors, officers and employees
Ensuring that the Company makes all appropriate disclosures regarding the process for nominating candidates for election to the Board, including any process for shareholder nominations, the criteria established by the committee in evaluating candidates for nomination for election to the Board, and any other disclosures required by applicable laws, regulations or listing standards
Reporting regularly to the Board regarding meetings of the Committee, other matters relevant to the Committee’s discharge of its responsibilities, and recommendations as the Committee may deem appropriate
The Governance and Nominating Committee currently comprises threetwo members: Sue Watts,Gregory Politis, Chair, James Macchiarola and George Apostolou,Eric Hoffman each of whom meets the independence tests set forth in Section 303A.02 of the New York Stock Exchange Listing Manual. The Governance and Nominating Committee held two meetingsone meeting in 2019.2020. The Board of Directors has adopted a written Governance and Nominating Committee Charter. A current copy of the charter is available on our website atwww.hcigroup.com. Click “Investor Information” and then “Corporate Governance.”
Each of the proposed director nominees was recommended by the Governance and Nominating Committee to the Board of Directors.
| HCI Group, Inc.2021 Proxy Statement | 43 |
CORPORATE GOVERNANCE
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. In evaluating director candidates, the Governance and Nominating Committee 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 and have such business, financial, technological or legal experience or education to enable them to make informed decisions on behalf of the Company. The Governance and Nominating Committee has not adopted a specific policy on diversity. However, in practice it has identified and recommended individuals of diverse ethnic, cultural and business backgrounds.
The Governance and Nominating Committee will consider director candidates recommended by shareholders. Any shareholder wishing to recommend one or more director candidates should send the recommendations before November 1 of the year preceding the next Annual Meeting of Shareholders to the Secretary of the Corporation, Andrew L. Graham, 5300 West Cypress Street, Suite 100,3802 Coconut Palm Drive, Tampa, Florida 33607.33619. Each recommendation should set forth the candidate’s name, age, business address, business telephone number, residence address, and principal occupation or employment and any other attributes or factors the shareholder wishes the Committee to consider, as well as the shareholder’s name, address and telephone number and the class and number of shares held. The
CORPORATE GOVERNANCE
Committee may require the recommended candidate to furnish additional information. The secretary will forward recommendations of qualified candidates to the Governance and Nominating Committee, and those candidates will be given the same consideration as all other candidates.
A shareholder wishing to nominate an individual for election to the Board of Directors at the Annual Meeting of Shareholders rather than recommend a candidate to the Governance and Nominating Committee must comply with the advance notice requirements set forth in our bylaws. See Shareholder Proposals for Presentation at the 20202022 Annual Meeting on page 5149 for further information.
Sustainability Committee
In March 2020, the Board created a Sustainability Committee to provide a greater focus and structure to carry out its oversight responsibilities on matters relating to environmental and social issues.
The functions of the Sustainability Committee include the following:
Providing oversight and guidance with respect to material environmental, social and other sustainability matters involving the Company
Receiving updates from management regarding the Company’s environmental, social and other sustainability activities
Reporting regularly to the Board regarding meetings of the Committee, other matters relevant to the Committee’s discharge of its responsibilities, and recommendations as the Committee may deem appropriate
Conducting or authorizing studies and investigations into any matter of interest or concern with respect to material environmental, social and other sustainability matters involving the Company
The Sustainability Committee is composed of two members: Jay Madhu, Chair, and Anthony Saravanos.
The Sustainability Committee held one meeting in 2020. As the nation continues to experience the profound effects of the COVID-19 pandemic, technology has enabled our people to work remotely. The Sustainability Committee has seen the benefits of the remote work on reducing the carbon footprint of the company and our operations have continued without interruption. Because of this, the Committee is recommending a permanent hybrid schedule of remote and in the office work once it is safe to return to the workplace. In the coming year the Committee expects to continue to provide advice to management regarding the Company’s efforts to continue to improve the environmental performance of its owned real estate and to mitigate its risk exposure to climate change. The Company mitigates its climate risk by offering insurance policies with only aone-year duration and securing reinsurance.
| 44 | HCI Group, Inc.2021 Proxy Statement |
CORPORATE GOVERNANCE
We support the recommendations developed by the Task Force on Climate-related Financial Disclosures (TCFD).Disclosures. As a leading property and casualty insurer, we believe we are well positioned to monitor industry developments and develop best practices in this area that will contribute to the effective management and reporting of climate-related risks and opportunities.
The Board recognizes that many shareholders are keenly interested in sustainability issues and the Company’s policies and actions. We are committed to providing regular updates to our shareholders on these matters.
Oversight of Environmental and Social Matters
HCI Group, Inc. is committed to operating with integrity, contributing to our community, promoting diversity in our Board and our workforce, and managing the environmental risks to the Company. In addition, we take proactive steps to secure our data and safeguard our customers’ data.
We believe ESGEnvironmental, Social and Governance (ESG) oversight begins at the top. In March 2020, our Board of Directors established the Sustainability Committee, which is tasked with providing oversight and guidance with respect to material environmental, social and other sustainability matters. Management subsequently ensures implementation of ESG policies at all levels of the Company and regularly reports to the Committee regarding the status of ESG initiatives. Our integrated approach ensures that we achieve our ESG goals.
Additionally, this year we formally adopted Company-wide Environmental and Human Rights Policies.
CORPORATE GOVERNANCE
In addition to the foregoing high level ESG developments, the following is a summary of our environmental and social policies and activities.
Environmental
The most material environmental risk to the Company is that of extreme weather. Notably, climate change may cause an increase in the number and intensity of extreme weather events that may affect our profitability. We work to mitigate this risk by offering insurance policies with only aone-year duration and securing reinsurance from other insurance companies that indemnify us against losses we might incur as the result of catastrophic events impacting our policyholders.
Social
Community Contribution
We believe in enriching our community through charitable work, including volunteer opportunities for our management and employees. The HCI Group Foundation contributes to charitable causes throughout our community, and our employees participate in dozens of local charities. Some examples include Paint Your Heart Out Tampa, Hope Children’s Home, Metropolitan Ministries of Tampa, One Blood Florida Blood Services, Habitat for Humanity and the Clearwater Jazz Foundation. Another charitable initiative encourages our partner agents to recommend their favorite causes, and the Foundation makes a contribution on their behalf. Charities like K9s for Warriors, Turkeys Take Flight and The Special Olympics benefit from this initiative and bring HCI and our partner agents closer to the communities we serve.
Work Environment
We adhere to a harassment prevention policy which details how to report and respond to harassment issues and prohibits any form of retaliation. This includes mandatory harassment prevention training for all employees.
We are committed to paying a living wage to all of our full-time employees. We offer competitive benefits to our employees including options for health coverage and short-term and long-term disability insurance at no cost to the employee. We also award restricted stock to employees to align their interests with shareholder interests.
| HCI Group, Inc.2021 Proxy Statement | 45 |
CORPORATE GOVERNANCE
Additionally, ourBravo program allows employees to earn paid time off as well as cash bonuses for engaging in charitable causes, continued education and professional development activities.
Diversity
We value a diverse and inclusive work environment. Our workforce comprises men and women of many races, religions, and national origins, and we forbid any form of discrimination based upon these factors.
CORPORATE GOVERNANCE
Our Board is highly diverse in terms of gender, ethnicity, culture, education and business backgrounds, and our U.S.-based workforce is 55%approximately 58% female and approximately 30%34% non-white. The graphics below do not account for our international workforce, which consists of 107118 employees located in Noida, India.
Access to Independent Advisors
The Board and its committees have the authority at any time to retain outside accounting, financial, compensation, recruiting, legal or other advisors. The Company will provide appropriate funding, as determined by the Board or any committee, to compensate such independent outside advisors, as well as to cover the ordinary administrative expenses incurred by the Board and its committees in carrying out their duties.
Director Attendance at Annual Meeting of Shareholders
Board members are encouraged but not required to attend the Annual Meeting of Shareholders. All ten of our directors sitting forDue to safety concerns resulting from the re-electionCOVID-19 or continuing in officepandemic, one director attended the 20192020 Annual Meeting.
Board of Directors Role in Risk Oversight
The Board of Directors plays a significant role in monitoring risks to the Company and directly reviews matters involving major risks. For example, the Board annually reviews the level and design of our reinsurance programs. Reinsurance is insurance we buy from other insurance companies to cover hurricanes and other catastrophes. The Board of Directors also typically approves strategic initiatives and large or unusual investments or expenditures of the Company’s resources.
Our Board of Directors oversees our cybersecurity efforts and receives ongoing reports on those efforts from management. We maintain policies designed to safeguard our data and the data of our customers. We have adopted a Cyber Incident Response Plan and engage in penetration testing, internal and external audits of our cybersecurity controls, and simulated cyberattack scenarios to gauge our preparedness for these situations. We also provide mandatory cybersecurity training for all employees. We carry Cyber Insurance which includes access to a Cyber Incident Response team in the case of a cyber event.
| 46 | HCI Group, Inc.2021 Proxy Statement |
CORPORATE GOVERNANCE
The Audit Committee, the Compensation Committee, and the Governance and Nominating Committee were established by the Board to assist in ensuring that material risks are identified and managed appropriately. The Board and its committees regularly review material operational, financial, compensation and compliance risks with executive management. The Audit Committee is responsible for assisting the Board of Directors in its oversight of the quality and integrity of our accounting, auditing and reporting practices, and discussing with management our processes to manage business and financial risk. The Compensation Committee considers risk in connection with its design of our
CORPORATE GOVERNANCE
compensation programs for our executives. The Governance and Nominating Committee regularly reviews the Company’s corporate governance structure and Board committee assignments. Each committee regularly reports to the full Board of Directors.
Communicating with the Board of Directors
We have established procedures by which shareholders may communicate with members of the Board of Directors, individually or as a group. Shareholders wishing to communicate with the Board of Directors or a specific member of the Board may send written communications addressed to: Board of Directors, HCI Group, Inc., c/o Andrew L. Graham, Secretary of the Corporation, 5300 West Cypress Street, Suite 100,3802 Coconut Palm Drive, Tampa, Florida 33607.33619. The mailing envelope should clearly specify the intended recipient or recipients, which may be the Board of Directors as a group or an individual member of the Board. The communication should include the shareholder’s name and the number of shares owned. Communications that are not racially, ethically or religiously offensive, commercial, pornographic, obscene, vulgar, profane, defamatory, abusive, harassing, threatening, malicious, false or frivolous in nature will be promptly forwarded to the specified members of the Board of Directors. We have also established procedures by which all interested parties (not just shareholders) may communicate directly with ournon-management or independent directors as a group. Any interested party wishing to communicate with ournon-management or independent directors as a group may send written communications addressed to: Board of Directors, HCI Group, Inc., c/o Andrew L. Graham, Secretary of the Corporation, 5300 West Cypress Street, Suite 100,3802 Coconut Palm Drive, Tampa, Florida 33607.33619. The mailing envelope should clearly specify the intended recipients, which may be thenon-management directors or the independent directors as a group. The Secretary will promptly forward the envelope for distribution to the intended recipients.
In 2018, we established a Board Observer Program to train selected individuals in public company board operations, governance and law, among other things, and prepare them to serve on public company boards. The program also provides for us a means to identify exceptionally well qualified candidates for our Board. In considering program participants, we emphasize segments of the population that may be underrepresented on public company boards. With limited exceptions, participants receive all board materials and are invited to attend and participate in all board meetings, although they do not have voting privileges.
The initial participants were Loreen Spencer and Sue Watts, both of whom were appointed to our Board of Directors. Loreen Spencer has since been appointed to our subsidiary TypTap Insurance Group, Inc.’s Board of Directors. Sue Watts has remained with HCI Group, Inc (See their biographiesSue Watt’s biography on page 12.)13). For the 2019-20202020-2021 year, the program includes one male and one female observer.
We engage in ongoing efforts to educate our directors on matters important to their service as directors. Our General Counsel advises each new director on fiduciary duties and securities-reporting requirements. When a director is appointed to a new committee of the Board, the General Counsel advises the committee on the role of that particular committee under law, rules and the committee’s charter.
The Board of Directors conducts an annual evaluation to determine if the Board and its committees are functioning effectively. Likewise, each Board committee conducts an annual self-evaluation to determine if it is functioning effectively.
| HCI Group, Inc.2021 Proxy Statement | 47 |
CORPORATE GOVERNANCE
Director Share Ownership Policy
We have a director share ownership policy that generally requires new directors to acquire $200,000 of the Company’s shares within five years of their initial election to the Board of Directors and then hold those shares until retirement from the Board.
CORPORATE GOVERNANCE
We believe ownership requirements align the interests of management and shareholders and promote a long-term focus. Under our CEO share ownership policy, the Chief Executive Officer is required to hold shares equal in value to three times his or her base salary.
Ownership arrangements counted toward meeting the requirement include shares owned by the Chief Executive Officer outright, shares owned jointly (or by the entireties) with the Chief Executive Officer’s spouse, restricted shares issued to the Chief Executive Officer by the company and shares held for the Chief Executive Officer in company-sponsored plans. The Chief Executive Officer will have five years from the date of becoming Chief Executive Officer to meet the applicable ownership requirement.
Mr. Patel currently meets this requirement and has never sold any of his shares.
Transactions with Related Persons
First Home Bank
During the first quarter of 2018,In December 2020, the Company purchasedsix-month certificatesentered into an agreement with Centerbridge Partners to invest $100 MM into the Company’s subsidiary TypTap Insurance Group Inc. Our director Eric Hoffman is also a managing director of deposit totaling approximately $15 million from First Home Bank in Seminole, Florida. Our directors, Anthony Saravanos and George Apostolou, are also directors of First Home Bank and its holding company. The deposits earned interest at the bank’s customary rates, which were competitive with other banks in the region. In May 2018, the Company moved the funds from the certificate of deposit accounts to a money market account. The Company has withdrawn this balance, and at December 31, 2019, the Company had no deposits with First Home Bank.Centerbridge Partners.
Policies for Approval or Ratification of Transactions with Related Persons
Our policy for approval or ratification of transactions with related persons is for those transactions to be reviewed and approved by a majority of disinterested directors. That policy is set forth in both our Code of Conduct (See Code of Ethics below) and our Corporate Governance Guidelines, which can be found atwww.hcigroup.com. Select “Investor Information,” “Corporate Governance,” and then “Corporate Governance Guidelines.” The policy provides no standards for approval. Directors apply individual judgment and discretion in deciding such matters.
We are not aware of any material proceedings in which an executive officer or director is a party adverse to the Company or has a material interest adverse to the Company.
To ensure the interests of our employees, officers and directors are aligned with the long-term interests of our shareholders, the Company has an anti-hedging policy that prohibits employees, officers and directors from directly or indirectly engaging in hedging transactions related to HCI’s securities. This includes the use of financial instruments such as exchange funds, prepaid variable forwards, equity swaps, puts, calls, collars, forwards and other derivative instruments, as well as the establishment of a short position in the Company’s securities.
We have adopted a Code of Ethics applicable to all employees and directors, including our Chief Executive Officer and Chief Financial Officer. The Code of Ethics is available on our website atwww.hcigroup.com. Select “Investor Information” at the top, then select “Corporate Governance” and then “Code of Conduct.” We intend to disclose any change to or waiver from our Code of Ethics by posting such change or waiver to our website in the same section described above.
| HCI Group, Inc. |
CORPORATE GOVERNANCE
Corporate Governance Guidelines
To promote effective governance of the Company, we have adopted Corporate Governance Guidelines. A current copy of our Corporate Governance Guidelines is available on our website:www.hcigroup.com. Select “Investor Information” at the top, then select “Corporate Governance” and then “Corporate Governance Guidelines.”
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 filed for the year 2019,2020, we believe all our directors, officers and beneficial owners complied with all Section 16(a) filing requirements applicable to them.them with the exception of Karin Coleman who filed one Form 4 251 days after the applicable due date for shares acquired automatically upon reinvestment of quarterly dividends received on her common stock. Ms. Coleman was unaware that dividends were being reinvested and filed a Form 4 once notified of the three automatic dividend reinvestment transactions.
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.
Shareholder Proposals for Presentation at Next Year’s Annual Meeting
Shareholder proposals intended to be considered for inclusion in next year’s Proxy Statement and form of proxy for presentation at the 20212022 Annual Meeting of Shareholders must comply with Securities and Exchange Commission Rule14a-8. The deadline for submitting such proposals is December 31, 2020January 4, 2022 (120 days before the date of this year’s mailing date without regard to the year), unless the date of the 20212022 Annual Meeting is more than 30 days before or after theone-year anniversary date of the 20202021 Annual Meeting, in which case proposals must be submitted a reasonable time before we print our proxy materials for the 20212022 Annual Meeting.
Shareholders wishing to submit proposals for the 20212022 Annual Meeting outside the process of Securities and Exchange Commission Rule14a-8 must comply with the advance notice and other provisions of Article II, Section 11 of our bylaws. To be timely, notice of the proposal must be received by the Company by March 16, 2021,20, 2022, unless the date of the 20212022 Annual Meeting is more than 30 days before or after theone-year anniversary date of the 20202021 Annual Meeting, in which case the notice must be delivered at least 45 days before the Company sends its proxy materials to shareholders for the 20212022 Annual Meeting.
Address proposals to HCI Group, Inc., Attention: Andrew L. Graham, Secretary of the Corporation, 5300 West Cypress Street, Suite 100,3802 Coconut Palm Drive, Tampa, Florida 33607.33619. The specific requirements for submitting shareholder proposals are set forth in Article II, Section 11 of our bylaws.
| HCI Group, Inc. |
When and where is the meeting?
Time
| 3 p.m. Eastern Time
| |
Date
| Thursday, June
| |
Place
| HCI Corporate Headquarters
| |
| ||
| Tampa, Florida |
What is the purpose of the meeting?
The principal purposes of the Annual Meeting are to elect three directors to the Company’s Board of Directors; ratify the appointment of Dixon Hughes Goodman, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2020;2021; and approve, on an advisory basis, the compensation of our named executive officers. In addition, our management will report on our performance during 2019,2020, discuss challenges ahead and respond to questions from shareholders. However, coronavirus concerns may hinder the ability of officers to interact with shareholders.
When were these materials mailed?
We began mailing this Proxy Statement on or about April 29, 2020.May 3, 2021.
Who is entitled to vote at the meeting?
Shareholders of record at the close of business on the record date, April 14, 2020,13, 2021, are entitled to vote in person or by proxy at the Annual Meeting. In general, shareholders are entitled to one vote per common share on each matter voted upon. In an election for directors, however, shareholders are entitled to vote the number of shares they own for as many director candidates as there are directors to be elected. The Board of Directors has determined that the Board of Directors should include three Class CA directorships. Accordingly, since three directors are to be elected at this Annual Meeting, in electing directors, each share held will entitle the shareholder to three votes, one per director. Shareholders may not cumulate their votes. As of April 14, 2020,13, 2021, there were common shares outstanding on the record date of 7,906,635.8,483,782.
What constitutes a quorum?
The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the shares outstanding will constitute a quorum, permitting us to conduct the business of the meeting. Proxies received but marked as “WITHHOLD AUTHORITY” and brokernon-votes will be included in the calculation of the number of shares considered to be present at the Annual Meeting but will not be counted for any other purpose. A brokernon-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular proposal and has not received instructions as to that proposal from the beneficial owner.
What is the difference between a shareholder of record and a beneficial owner?
If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, then you are a “shareholder of record.” This Notice of Meeting and Proxy Statement has been provided directly to you by HCI Group, Inc. You may vote by ballot at the meeting or vote by proxy. To vote by proxy, sign, date and return the enclosed proxy card or follow the instructions on the proxy card for voting by telephone or internet. Alternatively, you may provide your own proxy to anyone to represent you and vote on your behalf at the meeting.
| 50 | HCI Group, Inc.2021 Proxy Statement |
ABOUT THE ANNUAL MEETING
If your shares are held for you in a brokerage, bank, or other institutional account (that is, held in “street name”), then you are not a shareholder of record. Rather, the institution is the shareholder of record and you are the “beneficial owner” of the shares. The accompanying Notice of Meeting and this Proxy Statement have been forwarded to you by that institution. If you complete and properly sign the accompanying proxy card and return it in the enclosed envelope or follow the
ABOUT THE ANNUAL MEETING
instructions on the proxy card for voting by telephone or internet, the institution will cause your shares to be voted in accordance with your instructions. If you are a beneficial owner of shares and wish to vote in person at the Annual Meeting, then you must obtain a proxy, executed in your favor, from the shareholder of record (the institution).
How do I 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 | |||
By Ballot at the Meeting. If you are a shareholder of record and attend the Annual Meeting, you may vote in person by ballot at the Annual Meeting. To vote by ballot, you must register and confirm your shareholder status at the meeting. If the shareholder of record is a corporation, partnership, limited liability company or other entity of which you are an officer or other authorized person, then you should bring evidence of your authority to vote the shares on behalf of the entity. If your shares are held for you in a brokerage, bank, or other institutional account (that is, in “street name”), you must obtain a proxy, executed in your favor, from that institution (the shareholder of record) to vote your beneficially-owned shares by ballot at the Annual Meeting. In the election of directors (Matter No. 1), each share held by a shareholder of record will be entitled to three votes, one for each director to be elected. Your option with respect to each director will be to vote “FOR” the director or to abstain from voting. In the vote to ratify the appointment of Dixon Hughes Goodman, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 20202021 (Matter No. 2), each share held by a shareholder of record will be entitled to one vote. Your options will be to vote “FOR” or “AGAINST” or to “ABSTAIN.” With respect to the advisory vote related to the compensation of our named executive officers (Matter No. 3), each share held by a shareholder of record will be entitled to one vote. Your options will be to vote “FOR” or “AGAINST” or to “ABSTAIN.”
By Proxy. If you complete, sign, and return the accompanying proxy card or follow the instructions on the proxy card for voting by telephone or internet, then your shares will be voted as you direct. In the election of directors (Matter No. 1), your options with respect to each director are to direct a vote “FOR” or to “WITHHOLD AUTHORITY.” In the proposal to ratify the appointment of Dixon Hughes Goodman, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 20202021 (Matter No. 2), your options will be to direct votes “FOR” or “AGAINST” or to direct the proxy to “ABSTAIN” from voting on that proposal. With respect to the advisory vote related to compensation of our named executive officers (Matter No. 3), your options will be to direct votes “FOR” or “AGAINST” or to “ABSTAIN” from voting on that matter.
If you are a shareholder of record, then you may opt to deliver your completed proxy card in person at the Annual Meeting.
Can I vote by telephone or internet?
Yes. If you follow the instructions on the proxy card for voting by telephone or internet, your shares will be voted as you direct.
| HCI Group, Inc.2021 Proxy Statement | 51 |
ABOUT THE ANNUAL MEETING
What does it mean if I receive more than one proxy card?
When you own your shares in different ways, you will receive separate proxy cards for each mode of ownership. For example, you may own shares individually, as a joint tenant, in an individual retirement account, in trust, or in one or more brokerage accounts. You should complete, sign, and return each proxy card you receive or follow the telephone or internet instructions on each card. The instructions on each proxy card may differ. Be sure to follow the instructions on each card.
ABOUT THE ANNUAL MEETING
Can I change my vote or instruction?
Yes. You may follow the instructions on the proxy card to change your votes or instructions any time before midnight the day before the meeting.
In addition, if you are a shareholder of record, you may revoke your proxy any time before your shares are voted by filing with the secretary of the Company a written notice of revocation or submitting a duly executed proxy bearing a later date. If you file a notice of revocation, you may then vote (or abstain from voting) your shares in person at the Annual Meeting. If you submit a later dated proxy, then your shares will be voted in accordance with that later dated proxy. No such notice of revocation or later dated proxy, however, will be effective unless received by us at or before the Annual Meeting and before your shares have been voted at the meeting. Unless the proxy is revoked, the shares represented thereby will be voted at the Annual Meeting or any adjournment thereof as indicated on the proxy card. Sending in a proxy does not affect your right to vote in person if you attend the meeting, although attendance at the meeting will not by itself revoke a previously granted proxy.
If I submit a proxy card, how will my shares be voted?
Your shares will be voted as you instruct on the proxy card.
What happens if I submit a proxy card and do not give specific voting instructions?
If you are a shareholder of record and sign and return the proxy card without indicating your instructions, your shares will be voted in accordance with the recommendations of the Board of Directors. With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, at their own discretion. As of the date this Proxy Statement went to print, we did not know of any other matter to be raised at the Annual Meeting.
If you are a beneficial owner and you sign and return your proxy card without indicating your instructions, then your broker or nominee will vote, or not vote, in accordance with the rules of the New York Stock Exchange (provided the broker or nominee is a member of the New York Stock Exchange). If a voting matter is designated by the New York Stock Exchange as “routine” then your broker or nominee may vote or not vote in its own discretion. If a voting matter is designated“non-routine” by the New York Stock Exchange, then your broker or nominee cannot vote without your instructions.
Which voting matters are considered routine ornon-routine?
In general, uncontested matters and matters not involving a merger or consolidation or affecting substantially the rights or privileges of the stock are considered routine under the rules of the New York Stock Exchange. Accordingly, we expect the New York Stock Exchange will designate as routine the proposal to ratify the appointment of Dixon Hughes Goodman, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 20202021 (Matter No. 2) and brokers and other nominees will be permitted to vote on that matter. On the other hand, the New York Stock Exchange views matters involving the election of directors asnon-routine. Accordingly, the election of directors (Matter No. 1) and the approval, on an advisory basis, of the compensation of our named executive officers (Matter No. 3) will be designated by the New York Stock Exchange asnon-routine and brokers and other nominees will not be permitted to vote on these matters without instructions from the beneficial owner.
| 52 | HCI Group, Inc.2021 Proxy Statement |
ABOUT THE ANNUAL MEETING
What happens if I do not submit a proxy card and do not vote by telephone or internet?
If you are a shareholder of record and you neither designate a proxy nor attend the Annual Meeting, your shares will not be represented at the meeting. If you are the beneficial owner of shares held in the name of a member of the New York Stock Exchange, that member may vote in its discretion on matters deemed routine by the New York Stock Exchange. Without your instruction, the member may not vote on matters considered“non-routine.”
ABOUT THE ANNUAL MEETING
What are the Board’s recommendations?
The Board’s recommendations are set forth elsewhere in this Proxy Statement. In summary, the Board recommends votes:
| Ø | FOR election of the following nominees for director positions: |
Wayne BurksKarin Coleman
Jay MadhuEric Hoffman
Anthony SaravanosSue Watts
| Ø | FOR ratification of the appointment of Dixon Hughes Goodman, LLP as the Company’s independent registered public accounting firm for the year ending December 31, |
| Ø | FOR approval of the advisory vote related to the compensation of our named executive officers. |
What vote is required to approve each item?
Election of directors. In the election of directors, the three highest recipients of “FOR” votes will be elected. A properly executed proxy card marked “WITHHOLD AUTHORITY” with respect to the election of one or more director nominees will not be voted with respect to the director or directors indicated, even though it will be counted for purposes of determining whether there is a quorum present at the Annual Meeting.
Ratification of appointment of independent registered public accounting firm. The proposal to ratify the appointment of Dixon Hughes Goodman, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 20202021 will be approved if the number of votes for the proposal exceeds the number of votes against the proposal.
Approval, on an advisory basis, of the compensation of our named executive officers. With respect to the advisory vote related to the compensation of our named executive officers, the matter is approved if the number of votes for the proposal exceeds the number of votes against the proposal.
Other Matters. We do not anticipate other matters coming to a vote at the Annual Meeting. Should any other matter be brought to a vote, the matter will be approved if the number of votes favoring the matter exceeds the number of votes opposing the matter.
How will votes be counted?
All votes will be tabulated by the secretary of the Company. We have engaged Broadridge Financial Solutions, Inc. to collect and tabulate proxy instructions. Although abstentions and brokernon-votes are each included in the determination of the number of shares present, they are not counted on any matters brought before the meeting.
Who is paying for the preparation and mailing of the proxy materials and how will solicitations be made?
We will pay the expenses of soliciting proxies. Proxies may be solicited on our behalf by directors, officers, or employees in person or by mail, telephone, facsimile or electronic transmission. We have requested brokerage houses and other custodians, nominees, and fiduciaries to forward soliciting material to beneficial owners and have agreed to reimburse those institutions for theirout-of-pocket expenses. We have engaged Alliance Advisors LLC to assist with the solicitation of proxies for an estimated fee of $12,500 plus expenses.
| HCI Group, Inc.2021 Proxy Statement | 53 |
ABOUT THE ANNUAL MEETING
Are there rules of conduct?
To ensure fair, orderly and constructive meetings, the Board of Directors has adopted the following rules of conduct for shareholder meetings.
| 1. | All attendees must register before entering the meeting room. |
| 2. | The meeting will follow the schedule set forth on the agenda. |
ABOUT THE ANNUAL MEETING
| 3. | Only shareholders of record as of the record date or their duly authorized representatives are entitled to vote or address the meeting. |
| 4. | No business will come before the meeting except in compliance with Article II, Section 11 of our bylaws and its prior-notice requirements. |
| 5. | No one may address the meeting unless called upon by the presiding officer of the meeting. |
| 6. | Each speaker will be limited to three minutes and three questions. Questions and comments must be directly relevant to the Company’s business or operations. Questions or comments that are repetitious, relate to pending or threatened litigation, or deal with general economics, politics or public policy are prohibited. |
| 7. | Rude, disruptive behavior is prohibited. |
| 8. | The use of cameras, audio or video recording equipment, communications devices or similar equipment is prohibited. |
| 9. | Attendees who violate these rules may be removed. |
| 10. | The decisions of the presiding officer in interpreting and enforcing these rules of conduct will be final. |
This Proxy Statement may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” and “project” and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company’s other filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the company’s business, financial conditions, and results of operations. HCI Group, Inc. disclaims all obligations to update any forward-looking statements.
| HCI Group, Inc. |
APPENDIX A: Reconciliation ofNon-GAAP Financial Measures
Earnings Before Interest and Taxes (EBIT) is a financial measurement not recognized in accordance with generally accepted accounting principles (GAAP) in the United States of America 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 below.
(in millions) | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EBIT | $ | 8.6 | $ | 16.4 | $ | 49.6 | $ | 110.1 | $ | 111.4 | $ | 116.9 | $ | 57.9 | $ | 1.1 | $ | 45.0 | $ | 49.1 | $ | 16.4 | $ | 49.6 | $ | 110.1 | $ | 111.4 | $ | 116.9 | $ | 57.9 | $ | 1.1 | $ | 45.0 | $ | 49.1 | $ | 48.6 | ||||||||||||||||||||||||||||||||||||||||
Interest Expense | — | — | — | (3.6 | ) | (10.4 | ) | (10.7 | ) | (11.1 | ) | (16.7 | ) | (18.1 | ) | (13.0 | ) | — | — | (3.6 | ) | (10.4 | ) | (10.7 | ) | (11.1 | ) | (16.7 | ) | (18.1 | ) | (13.0 | ) | (11.7 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Income Tax (expense) benefit | (3.2 | ) | (6.4 | ) | (19.4 | ) | (40.9 | ) | (38.3 | ) | (40.3 | ) | (17.8 | ) | 8.7 | (9.2 | ) | (9.5 | ) | (6.4 | ) | (19.4 | ) | (40.9 | ) | (38.3 | ) | (40.3 | ) | (17.8 | ) | 8.7 | (9.2 | ) | (9.5 | ) | (9.3 | ) | ||||||||||||||||||||||||||||||||||||||||||
Net Income (loss) | $ | 5.4 | $ | 10.0 | $ | 30.2 | $ | 65.6 | $ | 62.7 | $ | 65.9 | $ | 29.0 | $ | (6.9 | ) | $ | 17.7 | $ | 26.6 | $ | 10.0 | $ | 30.2 | $ | 65.6 | $ | 62.7 | $ | 62.7 | $ | 29.0 | $ | (6.9 | ) | $ | 17.7 | $ | 26.6 | $ | 27.6 | ||||||||||||||||||||||||||||||||||||||
| HCI Group, Inc. | A-1 |
HCI GROUP, INC. 5300 W CYPRESS STREET, SUITE 1003802 COCONUT PALM DRIVE TAMPA, FL 3360733619 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before thecut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE -1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before thecut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. For All Withhold For All AllFor All Except To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees 01 Wayne Burks 02 Sanjay Madhu 03 Anthony Saravanos01) Karin Coleman 02) Eric Hoffman 03) Sue Watts The Board of Directors recommends you vote FOR proposals 2 and 3. For Against Abstain 2. Ratification of the appointment of Dixon Hughes Goodman, LLP as independent registered public accounting firm for fiscal year 2020.2021. 3. Approval, on an advisory basis, of the compensation of the named executive officers. NOTE: Such other business as may properly come before the meeting or any adjournment or postponement thereof. For Against Abstain Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. 0000456292_1 R1.0.1.18 Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 0000507480_1 R1.0.0.177
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice &and Proxy Statement and Annual Report is/ are available at www.proxyvote.com HCI GROUP, INC. Annual Meeting of Shareholders June 4, 20203, 2021 3:00 PM This proxy is solicited by the Board of Directors The shareholder(s) hereby appointsappoint(s) Paresh Patel and Andrew L. Graham, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizesauthorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of HCI GROUP, INC. that the shareholder(s) is/ are entitled to vote at the Annual Meeting of Shareholders to be held at 3:00 PM, EDT on June 4, 2020,3, 2021, at 5300 W. Cypress Street, Suite 105,3802 Coconut Palm Drive, Tampa, FL 33607,33619, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. 0000456292_2 R1.0.1.18 Continued and to be signed on reverse side 0000507480_2 R1.0.0.177
