Chairman Says Homeowners Choice Has Ample Capital for Citizens Take-Out

Nov 4, 2010

The following article was posted to on November 4, 2010:

Chairman said Homeowners Choice has Ample Capital for Citizens Take-Out

Florida-based Homeowners Choice Property & Casualty Insurance will assume 10,000 homeowners policies from the state-run insurer, Citizens Property Insurance Corp.

The holding company, Homeowners Choice Inc., has ample capital to take on additional business, said Paresh Patel, chairman of the board and executive chairman of strategic planning and investment. This marks Homeowners Choice’s eighth take-out from Citizens, said Patel.

“We respectfully disagree with people who think all take-outs are bad [business],” he said. “There is a way of doing this correctly, of having a win-win solution.”

The policyholders are located throughout Florida, as the company seeks to manage risk by limiting exposure in each county and through improved modeling.

Under the plan approved by Florida regulators, policyholders will have up to 30 days to decide whether they want to be insured by Homeowners Choice or stay with Citizens.

Jay Madhu, vice president of marketing and investor relations with Homeowners Choice, said it is an optimal time for the company to grow.

Patel said Homeowners Choice has seen an uptick in sinkhole claims, but the problem “hasn’t become an epidemic.”

In a filing with the U.S. Securities and Exchange Commission last month, Homeowners Choice said it entered into an agreement to purchase 1.5 million shares of United Insurance Holdings Corp. for $4.6 million from Synovus Financial Corp. In the filing, Homeowners said it signed the agreement, which is subject to regulatory approval, “as an indication of our serious interest in exploring with United the possibility [of] combining our companies.”

St. Petersburg, Fla.-based United Property & Casualty Insurance Co., a subsidiary of United Insurance Holdings, primarily writes homeowners insurance in Florida.

Founded in 2006, Homeowners Choice provides homeowners’ insurance, condominium owners’ insurance and tenants’ insurance solely in Florida. It currently has just more than 60,000 policyholders, Patel said.

In September, Florida Insurance Commissioner Kevin McCarty approved an average 10.3% homeowners rate increase for Citizens (BestWire, Sept. 24, 2010).

In midday trading on Nov. 4, shares of Homeowners Choice (NASDAQ: HCII | PowerRating) were selling for $7.60, down 1.27% from the previous close.

The top five writers in the Florida homeowners multiperil market in 2009 were State Farm Group, with a 15.09% market share; Citizens, with 13.44%; Universal Insurance Holdings Group, with 8.62%; USAA Group, with 5.9%; and St. Johns Insurance Co. Inc., with 4.59%, according to BestLink, which provides online access to A.M. Best Co.’s Global Insurance & Banking Database.

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