Business Monday

A look at the big 5 homeowner insurers in South Florida

Blue tarps, signifying roof damage, were seen across parts of South Florida and southwest Florida after Hurricane Wilma in 2005. Links to insurance company filings, OIR reports and other data are available on floir.com.
Blue tarps, signifying roof damage, were seen across parts of South Florida and southwest Florida after Hurricane Wilma in 2005. Links to insurance company filings, OIR reports and other data are available on floir.com.

Let’s take a look at the health of five of the biggest insurers in South Florida. The big two — the state-run Citizens Property Insurance and the private Universal Property & Casualty — are also the two largest in the state by number of policies, although Universal is the largest statewide.

The good news, if you are a policyholder of one of the largest private insurers: Only the state-run Citizens Property Insurance is seeking a rate increase at this time.

Want to do your own research? All of these companies, as well as 62 others, passed the Florida Office of Insurance Regulation’s Catastrophe Stress Test, and you can find more about the results, as well as other resources to research Florida insurance companies: floir.com/Sections/PandC/prepared.aspx. The web page lists a chart showing each company that participated in the 2015 Catastrophe Stress Test, allowing a comparison of policies in force, exposure amount and surplus, all with 2015 data. Results of the 2016 stress test will be available later this year. On this same web page, under the “Resources & Information” section, there are links to residential market share reports and a quarterly report noting for the “Significant Florida Residential Property Writers Surplus and Underwriting Results.” It also provides a link to “CHOICES”, which provides sample rates for both homeowners and auto insurance in Florida. Links to company filings, OIR reports and other data are also available on floir.com.

A note about ratings: Most of the companies tout ratings by Demotech, a financial analysis firm in Ohio. You’ll see them prominently displayed on their websites. However, nearly all of the companies in the market received an “A” — for excellent — so they were not included here. Weiss Ratings, of Palm Beach Gardens, has been analyzing Florida insurance companies, among other financial entities, for more than 20 years.

[Read related story: Will your homeowner insurance protect you if the Big One hits?]

Citizens Property Insurance

Number of policies in South Florida: 256,085*

Website: citizensfla.com

As the Florida takeouts have gained market share (takeout insurers are ones that have aggressively assumed policies from the state-run Citizens Property Insurance), Citizens has scaled back from 20 percent statewide market share in 2011 to 6 percent at year-end 2015 (but more than half of its policies are in South Florida, and it has 90 percent of market share in Monroe County). That was a good move, and Citizens’ risk profile and financial position improved substantially in recent years, ratings services said. As of June 30, 2015, Citizens had 489,138 in policies on its books with a total exposure of about $137 billion. This is down from its peak in 2011 when it had nearly 1.5 million policies with a total exposure of $511 billion. Its surplus has never been higher: about $7.4 billion, more than enough to ride out its share of a storm of the size of Andrew plus another smaller one or a series of hits such as in 2004 or 2005, CEO Barry Gilway has said.

Weiss Ratings gave the company a safety rating of A+. “Strong long-term capitalization index (10.0 on a scale of 0 to 10) based on excellent current risk-adjusted capital (severe and moderate loss scenarios). Furthermore, this high level of risk-adjusted capital has been consistently maintained in previous years. Excellent profitability with operating gains in each of the last five years,” Weiss said. Weiss also noted “superior liquidity with ample operational cash flow and liquid investments” and “excellent overall results on stability tests,” as well as a “history of adequate reserve strength as reserves have been consistently at an acceptable level.”

Citizens is currently seeking a 6.8 percent average statewide rate increase, with averages in Miami-Dade, Broward and Palm Beach ranging from 8.9 percent to 9.1 percent, which it says is because of “skyrocketing” non-weather water losses in South Florida. Citizens is seeking a 6.4 percent average rate increase in Monroe.

Universal Property & Casualty

Number of policies in South Florida: 198,940*

Website: universalproperty.com

Universal Property & Casualty has become the state’s largest insurer, and the second-largest in Miami-Dade and Broward counties behind Citizens. Headquartered in Fort Lauderdale, it’s a subsidiary of Universal Insurance Holdings, a publicly traded company. Public ownership provides greater financial flexibility to raise capital, but it remains unclear whether investors are prepared to replenish capital for these smaller underwriters following a large loss, Fitch Ratings said in a 2016 report about the Florida insurance market. The report also noted that the parent company is expanding geographically, which could be favorable for the health of the subsidiary.

According to Weiss Ratings, Universal Property & Casualty, which is not a takeout company, carries one of the lower ratings of the pack: a D. That is a rating of “weak,” indicating that Weiss believes the company demonstrates significant weaknesses that could negatively impact policyholders.

“We see that their stability is the challenge for them because of their very fast growth,” said Gavin Magor, senior financial analyst with Weiss Ratings. He said there are trends with its asset levels, income levels and expenses that are holding the company back.

The ratings service said the company showed “excessive premium growth and weak results on operational trends,” with operating losses during 2011 and 2012 and concerns about the financial strength of its re-insurers. Weiss’ report also said Universal Property & Casualty’s reserves have consistently been at acceptable levels and has good liquidity to handle a spike in claims.

Universal Property & Casualty recently withdrew its request for an 8.1 percent average rate hike throughout the tri-county region after state regulators questioned whether it was “unfairly discriminatory,” a Sun Sentinel report said. Universal had been seeking rate increases averaging 2.6 percent statewide for its multi-peril single-family home policies, effective Aug. 15.

Heritage Property & Casualty

Number of policies in South Florida: 98,992

Website: heritagepci.com

Heritage Property & Casualty, headquartered in Clearwater, made news this year, or rather its holding company CEO’s paycheck did. According to The Palm Beach Post, Heritage Insurance Group saw fit to give its CEO, Bruce Lucas, a huge pay increase, almost quadrupling his compensation from $7.1 million in 2014 to $27.3 million in 2015. A week after the Post’s article, Heritage withdrew its request for a 14.9 percent average statewide rate increase, which would have been about 8-10 percentage points higher in South Florida.

Heritage Property & Casualty, which launched in 2012 and has been actively taking out companies from the state-run Citizens, is a subsidiary of public company Heritage Insurance Group, which brings possible benefits. As with Universal, public ownership can provide greater financial flexibility to raise capital, but it remains unclear whether investors are prepared to replenish capital for these smaller underwriters following a large loss, Fitch Ratings said in its 2016 report about Florida insurers, and the parent company is expanding geographically.

Weiss Ratings gives the insurer a C+, one of the better ratings of the pack, and an improvement from C a year ago. Its report noted that the insurer showed good long-term capitalization based on “good current risk-adjusted capital” for severe-loss events, and it showed improvement over 2015 in this area. Reserves are sufficient to cover claims, the report said, and the insurer showed a good liquidity ranking with sufficient resources to handle a spike in claims. It noted losses in 2012 and in the first quarter of this year.

People’s Trust

Number of policies in South Florida: 61,731*

Website: peoplestrustinsurance.com

People’s Trust, headquartered in Deerfield Beach, is not a takeout company. It launched in 2008, and says it has a business model that features a simplified and more efficient way of handling claims.

Weiss Ratings gave the company a safety rating of C-, or fair, finding that the company had poor long-term capitalization and a history of deficient reserves, which can have an adverse impact on capital and profits. The report also noted “vulnerable liquidity, as a spike in claims may stretch capacity” and “good overall profitability index (5.6) despite operating losses during the first three months of 2016.”

Homeowners Choice

Number of policies in South Florida: 60,956*

Website: hcpci.com

Homeowner’s Choice, headquartered in Tampa and launched in 2007, is one of Florida’s takeout insurers. That is, it has aggressively assumed policies from the state-run Citizens.

After nearly a decade of D and D+ financial stability ratings by Weiss Ratings, Homeowners Choice received a C- in the first quarter, up from D+ in Q4 of 2015. Weiss said the insurer’s weak overall results on stability tests (2.9 on a scale of 0 to 10) including weak results on operational trends were holding it back. Weiss considers its reserve development fair, meaning it generally has been sufficient to cover claims. Long-term capitalization and profitability were ranked “good” despite some fluctuation in capital levels and operating losses in 2011. Weiss found the insurer to have excellent liquidity, with ample operational cash flow and liquid investments.

* Homeowner policies in force as of March 31, 2016, in Miami-Dade, Broward, Palm Beach and Monroe counties

Related stories from Miami Herald

  Comments