As Heritage assumes $59 million in annualised premium from failed insurer Sunshine State Insurance, it looks forward to a positive effect on reinsurance costs.
Bruce Lucas, chairman and chief executive officer of Heritage, said: "We are extremely happy with the acquisition and there are a number of reasons to be excited about the transaction. There are numerous benefits for Heritage, especially when it comes to reinsurance which is our single largest expense. Only 5 percent of the SSIC policies are located in our most concentrated regions in Tampa Bay and the Tri-County in southeast Florida. As a result, Heritage significantly improved its spread of risk, which will positively impact future reinsurance costs."
“We maintain high levels of reinsurance that exceed regulatory requirements and we did not want to water down our reinsurance protection. As a result, we purchased an additional $135 million in coverage from private reinsurers and the Florida Hurricane Catastrophe Fund, which increases our total reinsurance protection to $990 million. Due to the reinsurance synergies from the transaction, we were able to realise advantageous pricing for this additional coverage."
Rich Widdicombe, president, added: "Our decision to add additional coverage is widely supported by Demotech and the Florida Office of Insurance Regulation. Both parties deserve a lot of credit and were instrumental in providing a solution for consumers in this time of need.
“The best way to improve profitability is to spread risk throughout Florida. By assuming a large book of business in areas of low concentration, many of our financial metrics will improve. That is especially the case with SSIC. For example, although our in-force premium jumped 23 percent, our Probable Maximum Loss only increased about 11 percent. This is a very impressive result and in terms of reinsurance synergies it is easily the best acquisition in Heritage's history."
Sunshine State, Heritage, North America, Bruce Lucas