Florida’s Heritage Insurance Hopes to Raise $100 Million in IPO

By Michael Adams | April 25, 2014

A Florida property insurer that provides insurance coverage to 128,000 homeowners is planning to go public by issuing an initial public offering (IPO) that could result in the insurer raising up to $100 million in new capital.

Heritage Insurance Holdings, LLC, filed a preliminary prospectus with the Securities of Exchange Commission (SEC) earlier this month outlining the IPO.

The insurer, however, has yet to announce how many shares of stock it will sell and at what price. The IPO filing also does not include whether the stock will be traded on NASDAQ or NYSE stock exchanges.

The Clearwater, Florida-based Heritage is expected to be reorganized as a Delaware-based company under the name of Heritage Insurance Holdings Inc. after the IPO is issued.

The insurer stated it contemplates several uses for the proceeds, depending on the amount of capital it raises through the IPO.

“We intend to use a portion of the net proceeds from this offering to increase our statutory capital and surplus and enable us to write additional policies,” the filing states. “We may use this offering to pursue expansions of the insurance products that we offer in existing and new markets.”

Those additional products could include commercial residential and manufactured housing, along with other non-residential coverage such as general liability.

Heritage also stated it will use some of the funds to beef-up its reinsurance program, which largely depends on the Florida Hurricane Catastrophe Fund.

While its overall reinsurance program is not in place for the 2014 hurricane season, last year it had treaties with 13 private reinsurers. It also has coverage through its reinsurance subsidiary, Osprey Re. Ltd.

On April 17, the insurer entered into an agreement with a newly-formed Bermuda reinsurer, Citrus Re. Ltd, which will provide up to $150 million in coverage over a 3-year period. The money was raised through the issuance of catastrophic bonds.

Heritage Insurance was created in August 2012 and initially gained policyholders by removing them from the state’s residual market insurer, Citizens Property Insurance Corp., starting in December 2012.

As of December 31, 2013, the insurer had 128,000 homeowners and condominium owners’ policies in force, of which, more than 91 percent came from Citizens. According to the state Office of Insurance Regulation, that ranks Heritage 14th largest property insurer in the state with a 1.5 percent market share.

The insurer, however, said it plans to continue expanding into the voluntary market and participate in Citizens’ new clearinghouse where it will be able to submit quotes on applicants seeking coverage.

As an example of the insurer’s participation in the voluntary market, Heritage reported that as of the last quarter of 2013, it wrote over an average of 1,700 non-Citizens new policies monthly. Those policies were originated through a network of roughly 1,100 independent agents.

“The voluntary market is a significant component of our growth strategy,” stated Heritage.

Of Heritage’s 128,000 policies, more than 42,000 are located in South Florida in Palm Beach, Broward and Miami-Dade counties. Another 53,000 policies are located in the Tampa Bay region including, Pinellas, Hillsborough and Pasco counties.

As of December 2013, Heritage reported that it had gross premiums of $218 million and net income of $34.2 million. Its total assets equaled $280 million along with its current stockholders equity of $80 million.

Heritage is headed-up by Chairman and Chief Financial Officer Bruce Lucas, who was formerly chief investment officer of Infinity Investment Funds. Richard Widdicombe serves as chief financial officer and president. He was previously the risk manager for Homeowners Choice Property & Casualty Insurance Co.

Heritage has 90 full-time employees and is located on a 13-acre campus it purchased in Clearwater, Florida, for $9.8 million last year.

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