Florida’s 21st Century Drops Bid to Acquire HomeWise; Gets Rate Hike

Florida’s 21st Century Holding Co. has dropped its bid to acquire domestic property insurer HomeWise Holdings at the same time it reported that its own Florida property insurance unit it has received approval to raise rates 14.9 percent on some of its homeowners business.

Federated National Insurance Co., a wholly-owned subsidiary of 21st Century, said it has received approval from Florida’s Office of Insurance Regulation (OIR) for a premium rate increase for its homeowners business that was assumed from the state-backed Citizens Property Insurance Corp. The premium rate increase, which will average approximately 14.9 percent statewide, will be applied to policies with effective dates of July 1, 2010 and for both new and renewals. The policies subject to this rate increase currently represent approximately 16 percent of the policies in force.

Regarding the acquisition, the company said that, after due diligence, its agreement in principle to acquire certain businesses from HomeWise Holdings, Inc., which was originally announced on March 23, 2010, has been “terminated by mutual decision of the parties.”

Michael H. Braun, CEO and president of 21st Century Holding Co., said that the new 14.9 percent rate increase on Citizens’ accounts, combined with a statewide 19 percent increase on its voluntary homeowner policies that went into effect in the fourth quarter of 2009, will allow it to continue to generate more profitable premium throughout the year. The policies subject to the 19 percent rate increase represent about 84 percent of the policies in force.

“The company has faced significant challenges from reduced premiums and increased costs; however we feel that the worst is behind us. As we move forward, we anticipate that with stronger revenue momentum, more favorable reinsurance costs and more efficient exposure management, the company will see continued improvement in its operating margin through 2010,” Braun said.

Braun said that while his firm is no longer pursuing the HomeWise acquisition, it will continue to grow its existing lines of business and “seek opportunities where the business model and strategies enhance the value of the company.”

At the time the HomeWise acqusition plan was announced, Braun said HomeWise had a “high quality book of business” and the transaction would yield “substantial, immediate benefits for 21st Century Holding Co. shareholders.” He said there would be synergies including greater diversification of risk within Florida and into Louisiana, the ability to write more premium for each dollar spent on reinsurance and expense savings from combining the two companies. Braun said the deal would generate more than $100 million in annual premium.

HomeWise Insurance is based in Tampa and provides homeowners property coverage in Florida and Louisiana through a network of independent agents. It reported approximately $38.2 million in gross written premium in 2009, and statutory surplus of $20.3 million.

Earlier this year, HomeWise consolidated its business into a single operating unit. At that time, Dale Hammond, HomeWise president and CEO, said the company was financially sound and felt good about the Florida market.

21st Century also disclosed that it has settled a shareholder class action lawsuit for $2.4 million. 21st Century made no admission of liability or wrongdoing by the company or its officers and directors. The $2.4 million payment was fully funded by the company’s directors and officers insurance policy; therefore the settlement had no impact on 21st Century’s 2009 earnings and will have no effect on earnings going forward.

21st Century Holding, through its subsidiaries, underwrites commercial general liability insurance, commercial residential property, homeowners’ property and casualty insurance, flood insurance, inland marine, personal automobile insurance and commercial automobile insurance in Florida. The company underwrites general liability coverage as an admitted carrier in the states of Alabama, Louisiana and Texas for more than 300 classes of business, including special events. It is approved to operate as a surplus lines/non-admitted carrier in the states of Arkansas, California, Georgia, Kentucky, Maryland, Missouri, Nevada, Oklahoma, South Carolina, Tennessee, and Virginia and offering the same general liability products.