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Tampa’s HCI expands outside of Florida as it picks up policies from UPC in St. Pete

Margie Manning



Paresh Patel

United Insurance Holdings in St. Petersburg is pulling back on its operations in part of the northeast United States.

The property and casualty firm has an agreement in principle to transfer its personal lines business in Connecticut, New Jersey, Massachusetts and Rhode Island to HCI Group, a Tampa-based insurtech.

The deal would allow United (Nasdaq: UIHC), a property and casualty insurance company that does business as UPC Insurance, to focus on growing its specialty commercial property business, at the same time it helps HCI (NYSE: HCI) boost its operations outside of Florida.

Paresh Patel, chairman and CEO of HCI, called it a win for both companies.

“It accelerates HCI’s plan to expand nationally by acquiring a seasoned book of business, established agent network and associated data. HCI has the financial strength to support and grow these new business opportunities,” Patel said in a news release.

The deal is one of several shifts occurring at UPC Insurance, in the wake of longtime CEO John Forney leaving the company in June. Dan Peed, an insurance industry veteran, took over as chairman and CEO.

Dan Peed, chairman and CEO, United Insurance Holdings.

Since then, there’s been some turnover in the executive ranks and UPC last month scrapped its plan for a new headquarters building in downtown St. Petersburg.

For the first nine months of 2020, UPC reported revenue of $605.4 million, down about 1.5 percent from the same period in 2019, and a net loss of $42 million. On Tuesday, UPC said three windstorms between October and the end of November likely would result in losses between $67 million and $79 million, after tax and before expected reinsurance recoveries.

HCI, which has real estate and technology operations in addition to insurance, posted 32 percent revenue growth in the first nine months of 2020, with $240.1 million in revenue from Jan. 1 through Sept. 30. HCI reported net income of $24.9 million for the first three quarters of 2020.

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The deal between UPC and HCI is complex and involves both stock and cash payments. It’s potentially worth up to about $24.6 million to UPC. Here’s how it breaks down.

• UPC will transfer about $130 million in annual premiums in the four states to HCI. 

• HCI will provide 69.5 percent quota share reinsurance — a type of shared risk arrangement— on all of UPC’s in-force, new and renewal policies in the four states from  Dec. 31 to May 31. UPC’s 30.5 percent quota share reinsurance with other reinsurers will remain in place.

• HCI will pay UPC a commission on premiums earned during the contract period. The estimated commission to UPC ranges from $13.8 million to $16.3 million.

• HCI will pay UPC a cash payment of up to $3.1 million, depending on the amount of premium transferred to HCI.

• HCI also will give UPC 100,000 shares of HCI stock, valued at about $5.2 million, based on the current stock price.

• UPC has agreed not to compete with HCI in the personal lines homeowners business in the four states until July 1, 2024.

A definitive agreement still needs to be hammered out, and regulators have to approve the deal. The quota share reinsurance agreement is expected to be effective by Dec. 31, according to UPC.

UPC’s financial advisor on the deal was Raymond James, and its legal advisor as Debevoise & Plumpton. Foley & Lardner was legal advisor to HCI.

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