HCI to Acquire Policies of Florida’s Anchor P&C; Weston to Acquire Anchor Specialty

January 15, 2020 by

Two Florida-based homeowners insurers, Anchor Property & Casualty and Anchor Specialty Insurance, have succumbed to market pressures in the state and will be acquired by other companies.

Tampa, Fla.-based HCI Group has entered into a preliminary agreement for its subsidiary Homeowners Choice Property & Casualty Insurance Co. to acquire all the insurance policies of Anchor Property & Casualty Co., according to a statement from HCI.

Also, Weston Insurance of Coral Gables, Fla., which writes coastal property risks, will acquire another Anchor subsidiary, Anchor Specialty Insurance Co.

The acquisition of Anchor P&C’s policies was announced by HCI as ratings agency Demotech stated that the insurer would be downgraded from a Financial Stability Rating (FSR) of A, Exceptional, to M, Moderate. The ratings agency warned last week that it is reviewing the ratings of a number of Florida insurers and downgrades are possible. It did not name the insurers.

Anchor P&C, a St. Petersburg, Fla.-based provider of homeowners insurance, had 43,209 policies in force in Florida, representing approximately $69 million in annualized premium as of June 30, 2019, reports filed with insurance regulators show. It sold its products through independent agents in the state.

HCI did not disclose a purchase price for the Anchor portfolio.

HCI is an insurtech company with operations in insurance, software development and real estate. OIR lists its subsidiary Homeowners Choice Property & Casualty as the number six insurer in the state in terms of annualized premium with $310.9 million as of June 30, 2019. It had 108,217 policies in force as of that date as well.

Demotech said Anchor Property & Casualty’s ratings revision was based upon “significant alterations to its business model” and that Anchor P&C would cease writing new business in the “very near future,” sell off the unexpired period of its current policies in force and coordinate with the Florida regulators in the orderly runoff of its remaining liabilities.

“We have been briefed by Anchor personnel regarding the revisions to its business model. Although our review and analysis process was designed to evaluate carriers executing a business model that is forward focused, Anchor’s commitment to a ‘soft landing’ for existing policyholders and claimants convinced us to continue to review, analyze, and comment on its balance sheet integrity and operating results during its anticipated voluntary runoff,” Demotech President Joseph L. Petrelli said.

Update: The Florida Office of Insurance Regulation said Jan. 15 they received a Letter of Intent provided by the parties for HCI Group, Inc. to acquire Anchor Property and Casualty Insurance Company policies. The letter has been marked “trade secret” and is confidential.

“OIR is working with the companies to approve the run-off plan and ensure consumers have seamless access to coverage,” a spokeswoman said.

As of January 14, 2020, Anchor is no longer writing new business within the state of Florida. OIR anticipates the agreement to be finalized by mid-February.

Anchor Property & Casualty was first licensed in Florida in 2014 to write homeowners insurance. At the same time, the company was granted approval by the state to assume approximately 50,000 policies from the residual market insurer Citizens Property Insurance Corp. starting in 2015. The company said then it had $35 million in capital to carry out its growth plans.

Anchor P&C was one of 16 carriers Demotech held off on affirming in early 2018, saying at the time it was waiting until it had analyzed year-end financial information, revised business plans and operating agreements for the year before deciding whether to affirm or making ratings downgrades.

Soon after, Anchor was infused with $17 million in investment capital from private equity firm Ambina Partners and co-investor Atalaya Capital Management and its ‘A’ rating was eventually affirmed. However, a representative from Ambina told Insurance Journal in an e-mail that the company and its co-investor Atalaya “successfully exited our investment in Anchor in January 2019.”

Demotech announced that Anchor Specialty Insurance, another Anchor subsidiary that serves homeowners in areas with limited capacity, would be acquired by Weston Insurance Co. of Coral Gables, Fla.

Demotech said Anchor Specialty would maintain its Financial Stability Rating of A as a result of the acquisition.

“We have been frequently briefed by Anchor and Weston personnel throughout Weston’s due diligence and assured that both parties desire to effect a transaction that will enhance the 2019 year-end annual statement of Anchor Specialty Insurance Company. It appears that consumer, claimant, agency, and reinsurer relationships should be enhanced by the introduction of Weston’s ownership, management, expertise, philosophy, and financial resources,” Petrelli said. “It appears that consumer, claimant, agency, and reinsurer relationships should be enhanced by the introduction of Weston’s ownership, management, expertise, philosophy, and financial resources,”

Anchor Specialty has an additional office in Beaumont, Texas, and is licensed to do business in Arizona, Georgia, Kentucky, Louisiana, Mississippi, Nevada, New Mexico, Oklahoma, South Carolina and Texas.

Weston Insurance was formed in 2011 and began writing policies effective 2012. Weston is a focused specialty insurer, underwriting coverage for losses from low-frequency, high-severity natural perils, including hurricane, other windstorm, hail and flood, for properties located at or near the coast. Weston underwrites personal residential, commercial residential and commercial non-residential properties, and is currently admitted in five U.S. states: Florida, Texas, South Carolina, Mississippi and Alabama.

According to its website, Weston has aggregate claims paying resources of $1 billion as of Sept. 30, 2019, $93.2 million in admitted assets and $41 million of statutory policyholder surplus. The company is rated ‘A’ by Demotech.

The acquisition announcements come just a week after Insurance Journal reported that Demotech could downgrade as many as 18 of the 46 Florida domestic insurers it rates.

In a letter to Florida’s Citizens Property Insurance President and CEO Barry Gilway that was obtained by Insurance Journal, Petrelli outlined several factors in the state that were placing insurer ratings in jeopardy, including abuse of assignment of benefits agreements and first party litigation.

“The economics of the marketplace over the past several years have made it impossible for Demotech to sustain each of the Florida focused carriers that we review each quarter at a [FSR] of A, Exceptional,” he said.

Petrelli said that after Demotech reviewed the third quarter 2019 financials of carriers, it requested year-end projections of operating results for nearly half of the 40-plus carriers it reviews and rates.

“Having provided these carriers with ample time to implement revised business models, secure capital infusions, implement rate revisions, re-underwrite established books of business and utilize other enterprise risk management activities, it is apparent that few have returned to profitability,” Petrelli wrote.

Petrelli told Insurance Journal that Demotech would not disclose the names of the insurers ahead of time, but expected to downgrade two to four companies by the end of January and then another four to six by the end of March.

Related:

Popular Today