Anchor Property & Casualty Insurance Co. in St. Petersburg has a preliminary agreement to sell all its insurance policies to Homeowners Choice Property & Casualty Insurance Co.
Financial terms of the deal were not disclosed in a news release from HCI Group Inc. (NYSE: HCI), the Tampa-based parent of Homeowners Choice. HCI did not say when it expected the deal to close.
Anchor has made significant alternations to its business model, a separate news release from insurance rating agency Demotech said. Anchor will cease writing new business in the very near future, sell off the unexpired period of its current policies in force, and coordinate with the State of Florida Office of Insurance Regulation the orderly runoff of its remaining liabilities, according to Demotech.
The Florida Office of Insurance Regulation is working with the companies to approve the run-off plan and ensure consumers have seamless access to coverage, a spokeswoman for the state insurance office said. As of Jan. 14, Anchor is no longer writing new business within the state of Florida.The Florida Office of Insurance Regulations said it expects the agreement to be finalized by mid-February.
Separately, Anchor Specialty Insurance Co., with an office in Beaumont, Texas as well as in St. Petersburg, has a deal to be acquired by Weston Insurance Holdings Corp., Demotech said.
Anchor Specialty Insurance Co. was formed to provide insurance to homeowners living in areas where capacity is limited due to losses from storms and widespread disaster, while Anchor Property and Casualty Insurance Co. was formed to provide Florida residents with comprehensive home insurance.
Anchor did not return messages asking for comment.
Anchor, first licensed by Florida in October 2014, has its main office at 5959 Central Avenue. It sells policies in Florida, Texas and Louisiana, according to its website. The company raised more than $17 million in 2018 in a financing transaction led by private equity firm Ambina Partners LLC and co-investor Atalaya Capital Management LP, but Ambina Partner’s website said it has exited its Anchor holdings.
Anchor had 43,209 policies in force representing approximately $69 million in annualized premium as of June 30, HCI’s news release said.
HCI is an insurtech company with operations in insurance, software development and real estate. As of June 30, its Homeowners Choice subsidiary had 108,217 policies in force in Florida, with $310.9 million in annualized premium, according to the Office of Insurance Regulation.
The planned acquisition of Anchor policies by Homeowners Choice comes on the heels of a warning from Demotech to more than 40 Florida domestic insurers that conditions in the state’s insurance market are deteriorating, and that more than a dozen insurers could face a ratings downgrade in the next few months. The Dec. 20 warning from Demotech President Joe Petrelli was reported by Insurance Journal. Petrelli told Insurance Journal that the names of the insurers facing downgrades would not be disclosed.
Current market forces as well as financial metrics specific to several carriers have created a hazardous financial environment for many insurers, Petrelli told Insurance Journal.
Demotech revised its financial stability rating for Anchor Property & Casualty from A, indicating exceptional performance, to M, or moderate performance, on Jan. 14.
“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,” Petrelli said in the news release.
Demotech maintained its financial stability rating of A for Anchor Specialty.