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Florida Property Insurers Top List of Fastest-growing P&C Carriers

Tuesday, April 29, 2014, By Tim Zawacki: Increasingly aggressive depopulation efforts by Citizens Property Insurance Corp. in combination with rising reinsurance market capacity contributed to sharp growth among several carriers primarily focused on the Florida residential and/or commercial property market in 2013.

Among SNL property and casualty groups and top-tier P&C entities that produced at least $10 million in net premiums written in 2012 and growth in both direct and net premiums written of at least 33% in 2013, one Florida-domiciled carrier generated the highest rates of increase in both measures of business volume. Several others also achieved expansion that stood out among their peers.

The P&C industry overall generated growth in net premiums written of nearly 4.7% in 2013, limited to those entities for which SNL has obtained data for each of the past two fiscal years.

A total of 116 individual P&C entities, limited to carriers with at least $10 million in net premiums written in 2012, generated growth in net premiums written of 33% or more in 2013, the threshold for an exceptional value under one of the NAIC’s Insurance Regulatory Information System, or IRIS, ratios. At the SNL P&C group or top-tier level, a total of 54 entities met or exceeded the 33% hurdle. When limiting those results to those entities that also produced growth in direct premiums written of 33% or more in 2013, the number of qualifying companies falls to 58 individual entities and 32 SNL P&C groups or top-tier entities.

Heritage Property & Casualty Insurance Co. ranked as the fastest-growing P&C group or top-tier company among those entities with at least $10 million in net premiums written in 2012.

The St. Petersburg, Fla.-based provider of personal residential insurance for single-family homeowners and condominium owners saw its direct premiums written soar to $122.5 million in 2013 from a de minimis sum in 2012. Net premiums written of $139.6 million represented a year-over-year jump of 208.5%. Heritage Property & Casualty had material net premiums written in 2012 due to the manner in which it accounted for the approximately 37,000 policies it assumed in December of that year from Citizens.

The company’s 2013 direct premiums written represented the sum of policies written in the voluntary market, which had increased to 11,159 policies in force as of Dec. 31, 2013, from just 145 a year earlier, and the renewals of business previously assumed from Citizens, according to the management’s discussion and analysis section of its annual statement. It also reported $95.1 million in assumed premiums written due to additional participation in Citizens depopulation in 2013 along with $78 million in ceded premiums written.

The initial public offering registration statement on Form S-1 recently filed with the SEC by Heritage Insurance Holdings LLC cites in a discussion of market conditions the combination of Citizens depopulation, the creation of Citizens’ Property Insurance Clearinghouse and “a substantial increase” in the availability of property-catastrophe reinsurance in the Florida market in recent years. The Heritage Property & Casualty parent said the insurer plans to increase its Florida policies in force through continued strategic assumption of business and the expansion of its voluntary market share through the broadening of its independent agent distribution network.

Heritage Property & Casualty is hardly alone in seeking to benefit from the tailwinds present in the Florida property insurance market. Among the P&C groups and top-tier companies meeting the aforementioned criteria, Florida-domiciled property writers Federated National Insurance Co. and People’s Trust Insurance Co. ranked No. 4 and No. 5, respectively, on the list of entities with the highest levels of growth in net premiums written. People’s Trust trailed only Heritage Property & Casualty on the basis of growth in direct premiums written, with Federated National placing seventh.

Deerfield Beach, Fla.-based People’s Trust had direct and net premiums written of $211.2 million and $131.8 million, respectively, in 2013, representing year-over-year increases of 230.9% and 136.9%. The company originally sourced business through an affiliated managing general agency, and it added distribution through independent agents beginning in 2012. The new channel grew quickly, accounting for approximately 57% of premiums written by People’s Trust in 2013, according to its 2013 MD&A.

Federated National, a unit of Federated National Holding Co., generated growth of 105.4% in direct premiums written and 137.1% in net premiums written. Unlike Heritage Property & Casualty and People’s Trust, however, Florida business was not the exclusive reason for the rapid growth. The company’s Florida direct premiums written nearly doubled, rising to $237.9 million in 2013 from $120.3 million in 2012, and it saw Texas business volume soar to $10.6 million from only about $435,000.

Homeowners multiperil premiums accounted for 92.8% of Federated National’s Florida business, while private-passenger auto physical damage and liability premiums represented 94.5% of the company’s Texas total.

A Florida-domiciled entity focused on nonstandard auto business produced the second-highest rate of growth in net premiums written, limited to entities meeting the aforementioned criteria. Doral, Fla.-based Windhaven Insurance Co.’s net premiums written soared 169.8% to $54.4 million, and direct premiums written rose 60.9% to $173.3 million as the company benefited from market dislocation.

“During 2012-2013, a significant number of carriers either left the geographic areas the company writes in or curtailed their policy issuance,” Windhaven said in its 2013 MD&A. The company also benefited from the launch of two new programs, “several” rate increases and a selective increase in the number of its authorized agent locations during the year.

A revision to its quota-share reinsurance treaties appears to have accounted for most of the large difference in Windhaven’s direct and net growth rates. The company increased its retention to 40%, effective Sept. 30, 2013, from 25% prior to that date.

Another Florida-domiciled carrier to generate one of the 10 highest rates of growth in direct premiums written based on the specified criteria actually writes no business in the Sunshine State, even though it holds an authorization to write residential property coverage there. Sarasota, Fla.-based Centauri Specialty Insurance Co. produced its $52.3 million in 2013 direct premiums written from the combination of Louisiana, Hawaii, Alabama, Mississippi and Oklahoma. The four states outside of Hawaii accounted for all of the company’s 77.2% increase in direct premiums written during the year.

Centauri Specialty reported in its 2013 MD&A that it received approval to write residential property insurance in South Carolina, North Carolina and Texas, and it expects to begin writing in those markets in the second half of 2014.

Several entities joined Heritage Property & Casualty and Federated National in producing top 10 growth rates in direct and net premiums written: the U.S. branch of Samsung Fire & Marine Insurance Co. Ltd., Essent Group Ltd.’s U.S. P&C subsidiaries and National Unity Insurance Co.

Samsung Fire & Marine writes a variety of commercial P&C coverages, including on behalf of various Samsung entities. The Essent companies specialize in private mortgage insurance.

San Antonio-based National Unity focuses on nonresident auto coverage for Mexico residents traveling into the United States, homeowners and auto insurance for Mexican citizens with second homes in this country, and commercial P&C products for Mexican trucking companies operating in the U.S. market. It has also expanded into the nonstandard auto market in various Southwestern states.

While the companies populating the list of the fastest-growing carriers in 2013 were generally small in size, limited in focus and/or just getting their businesses off the ground, several larger carriers generated noteworthy expansions during the year.

State Farm Mutual Automobile Insurance Co. produced by a wide margin its highest rates of growth in direct and net premiums written in 2013 in the last 10 years at 4.4% and 4.6%, respectively. Berkshire Hathaway Inc.’s GEICO Corp., as consolidated by SNL, expanded its direct and net premiums written at its fastest rates since 2005 at 11.4% apiece. The group led by United Services Automobile Association produced written premium growth of 9.6% on a direct basis and 11% on a net basis. The former rate of expansion was USAA’s strongest since 2003, and the latter was its best since 2002.

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