Chief Executive Officer: Homeowners Choice Plans ‘Prudent’ Growth in Florida

Jul 6, 2011

The following article was posted to insurancenewsnet website on July 6, 2011:

CEO:  Homeowners Choice Plans ‘Prudent’ Growth in Florida

By Diana Rosenberg

While Homeowners Choice Inc. seeks to grow its market share in Florida to 5%, it will do so in a “prudent fashion” and the company, which previously has grown through take-outs from Citizens Property Insurance Corp., has no immediate plans for additional take-outs, according to its new chief executive officer.

“We’re selectively adding [policyholders] as the right opportunities come along,” said Paresh Patel.

Patel on July 1 succeeded Francis X. McCahill III, who announced in April he was resigning as president, CEO and director (BestWire, July 1, 2011). Patel previously served as the company’s executive chairman of strategic planning, technology and investments.

The company’s book of business doesn’t change much year over year, and Homeowners Choice doesn’t add or drop policies based on factors like modeling changes or sinkhole risks, which Patel said is “not healthy for the industry.”

“We like the policyholders we have,” Patel said.

Homeowners Choice Property & Casualty Insurance, based in Clearwater, had a 1.68% market share in the Florida property market last year, according to BestLink, which provides online access to A.M. Best’s database of insurance information. It currently has 61,000 policyholders, representing approximately $130 million in annualized premiums.

Homeowners Choice Property & Casualty announced its eighth take-out from state-run Citizens late last year, assuming 10,000 homeowners policies (BestWire, Nov. 4, 2010).

Citizens was formed in 2002 by the combination of the Florida Residential Property and Casualty Joint Underwriting Association and the Florida Windstorm Underwriting Association. In its early years, it operated as the insurer of last resort, but after legislation that changed its mandate and capped rate increases, Citizens swelled to become Florida’s largest property insurer by market share, according to A.M. Best data. As of May 31, Citizens had more than 1.4 million policies, according to the insurer’s website.

State lawmakers failed to take action to shrink Citizens before adjourning for the term on May 6 (BestWire, May 12, 2011).

The property-insurance reform legislation recently signed into law by Gov. Rick Scott has many good provisions, Patel said, citing the requirement that hurricane claims be brought within three years, down from the previous five years; provisions to address sinkhole claims, and mandatory hold-back language for replacement costs of dwellings.

The latest release of hurricane modeling software from Risk Management Solutions Inc. is “neutral” to the company on a long-term basis, Patel said. RMS released version 11 in February (BestWire, Feb. 28, 2011). Since then, the model has been the subject of discussion in the insurance, reinsurance and brokerage industries (BestWire, May 9, 2011), as industry watchers debate its effects on inland risks, probable maximum loss estimates and reinsurance rates.

Homeowners Choice continues its plans to expand beyond Florida and hopes to be doing business in Alabama by the end of this year, Patel said.

In afternoon trading on July 6, shares of Homeowners Choice (NASDAQ: HCII) were trading at $6.75, up 0.45% from the previous close.

The top five writers in the Florida homeowners’ multiperil market in 2010 were Citizens Property Insurance Corp., with a 16.7% market share; State Farm Group, with 14.15%; Universal Insurance Holdings Group, with 8.71%; USAA Group, with 5.06%; and St. Johns Insurance Co. Inc., with 3.58%, according to BestLink.

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