Insurance Journal: Florida’s Federated National Gets $10 Million in Capital; Rating Affirmed

Apr 6, 2010

This article was published by the Insurance Journal on April 5, 2010.

Florida’s 21st Century Holding Co. announced that its subsidiary Federated National Insurance Co. (FNIC) has received a capital infusion of $10 million. The transaction follows the previously announced notice from Demotech, Inc., a rating agency, requiring that FNIC obtain additional capital of $10 million by March 31, 2010 to maintain its “A” rating with the rating agency.

The $10 million infusion consists of $5 million from 21st Century Holding Co. and a $5 million surplus note from American Vehicle Insurance Co. (AVIC), another wholly-owned subsidiary of the company.

The company said that the capital infusion has been approved by the Florida Office of Insurance Regulation (OIR), and Demotech has since affirmed FNIC’s “A” rating.

Under the terms provided by the Florida OIR, the company will temporarily suspend future dividends as a result of the surplus note until FNIC has reported two consecutive quarters of underwriting profitability. The complete terms of this capital infusion are currently under discussion with the Florida OIR, according to the announcement.

Michael H. Braun, 21st Century Holding Co. Chief Executive Officer and president, said, maintaining the Demotech rating is important to the firm.

“Our ‘A’ rating with Demotech is critical to our business plan and our ability to write and retain business. The rating is valued both by the insurance agents who sell and service our products and by the mortgage companies that underwrite our insureds. Although we will temporarily suspend payment of future dividends, the Board of Directors and management team remain committed to returning capital to shareholders through the use of a dividend, and we fully intend to reinstate it as soon as possible.”

21st Century Holding Co. said it also continues to work through due diligence and the regulatory approval process of its previously announced acquisition of HomeWise Insurance Co. and HomeWise Management Co. The agreement in principle includes a renewal rights agreement to acquire certain insurance policies from HomeWise Preferred Insurance Co. Terms of this proposed transaction were not disclosed. The company expects to close the transaction prior to June 1.

The acquisition of HomeWise is expected to generate approximately $100 million in additional annual premiums on a consolidated basis.

21st Century Holding Co., through its subsidiaries, underwrites commercial general liability insurance, commercial residential property, homeowners’ property and casualty insurance, flood insurance, inland marine, personal automobile insurance and commercial automobile insurance in the state of Florida. The company underwrites general liability coverage as an admitted carrier in the states of Alabama, Louisiana and Texas for more than 300 classes of business, including special events. The company is approved to operate as a surplus lines/non-admitted carrier in the states of Arkansas, California, Georgia, Kentucky, Maryland, Missouri, Nevada, Oklahoma, South Carolina, Tennessee, and Virginia and offering the same general liability products.