United Insurance Holdings Corp. (UPC Insurance Co.) has terminated its bid to acquire financially-troubled Sunshine State Insurance Co. (SSIC), a Florida property/casualty insurance company.
UPC’s intent to rescue Sunshine State was previously announced by the company on May 15, 2014.
UPC, based in St. Petersburg, said at the time that in addition to acquiring the firm, it would also make a capital infusion into SSIC to restore its Demotech financial rating and satisfy regulatory requirements.
The acquisition announcement by that May 15 date met the deadline of a March 11 consent order by the Florida Office of Insurance Regulation (OIR) and Commissioner Kevin McCarty that Sunshine State had to either raise capital to bring its surplus level to $15 million or present an agreement for the acquisition or recapitalization of the company.
That March consent order came after Sunshine State reported to the state in February that its 2013 financial statement would be late because it had discovered accounting errors relating to reinsurance contracts from 2008 to 2011 that required correction. The insurer told OIR that fixing the errors would negatively affect its surplus, as would fourth quarter losses.
The insurer agreed to stop writing new business as required under state law when surplus is impaired. It also agreed to halt payments to its owner, reinsurance broker US Re, and to all affiliates, while promising to honor all claims on its Florida policies.
SSIC, based in Jacksonville, Fla., offers homeowners, dwelling fire and federal flood insurance through 500 independent agents primarily in the Northeast and North Central territories of Florida. SSIC reported $68 million in gross written premium in 2013.
The March consent order said that if it was unable to raise capital or be acquired, Sunshine State would have to begin cancelling policies or transferring them to another licensed insurer and give its policyholders 45-day notice.
The path forward for Sunshine State and its customers is still being determined.
OIR is “exploring options to ensure a smooth transition for policyholders,” according to Harvey Bennett, OIR’s communications director.
For its part, UPC Insurance simply said that calling off the deal was in its best interests.
“While we are disappointed not to be able to move forward with this acquisition, we are confident that this decision is in the best interest of our shareholders,” said John Forney, president and CEO of UPC Insurance. “Our organic growth both in Florida and elsewhere continues to be robust, and that has always been the main driver of our policy growth. We will continue to seek other complementary growth opportunities, but we will always remain disciplined in our approach.”
UPC had said that the Sunshine acquisition would significantly improve its overall spread of risk and foster growth in a key part of Florida where UPC currently has limited exposure.
UPC Insurance is a property/casualty insurance holding company that uses independent agents and a group of wholly owned insurance subsidiaries. United Property & Casualty Insurance Co., the primary operating subsidiary of UPC Insurance, writes in Florida, Massachusetts, New Jersey, North Carolina, Rhode Island, South Carolina and Texas, and is licensed to write in Louisiana, Georgia and New Hampshire.