Tampa-based HCI Group, the holding company for Homeowners Choice and TypTap property insurance companies, reported a $15.7 million net income in the third quarter, a strong improvement over Q3 last year, when the group saw a $52 million net loss.
“The company benefited from an improved operating environment in Florida and rising interest rates on our interest-bearing investments,” Group Chairman and CEO Paresh Patel said in a statement this week. “We believe we are seeing the impact of insurance reforms recently enacted by the Florida Legislature.”
Net investment income dropped compared to last year but policy acquisition costs and underwriting expenses also dropped slightly, thanks in part to lower commissions and the transition of business from now-defunct United Property & Casualty Insurance Co., HCI said in a press release before its earnings call.
Like many other carriers that have worked hard to manage Florida’s distressed marketplace and outsized claims litigation costs in recent years, HCI has significantly cut back on policies. In the third quarter this year, the group’s insurers held 194,000 policies in force, down from 246,000 in Q3 2022, according to the group’s third-quarter filing with the U.S. Securities and Exchange Commission.
A Florida Office of Insurance Regulation report shows TypTap as having 59,640 policies in Florida in the second quarter this year, and Homeowners Choice with 90,601, down slightly from the previous year. The number of homeowner policies held by TypTap was not reported.
At the same time, net premiums earned climbed, from $107 million last year to $122 million this year for the HCI carriers, thanks to premium increases. And losses plus loss adjustment expenses, which includes litigation costs, have dropped sharply in the last year, from $140 million to about $67 million in Q3 of 2023. For Homeowners Choice, the number fell from $73 million in the third quarter 2022 to less than $30 million in Q3 this year.
“The decrease was primarily attributable to a reduction in losses related to catastrophic events furthered by a lower number of policies in force and lower claims and litigation frequency,” the company said.
HCI’s loss ratio also fell, from 131% to 55%.
The group saw $42 million in losses from Hurricane Ian in the third quarter this year, a year after the storm came ashore near Fort Myers, Florida. And reinsurance price increases had something of an impact.
“Premiums ceded for the nine months ended September 30, 2023 and 2022 were approximately $203,051,000 and $184,108,000, respectively, representing 36.9% and 34.0%, respectively, of gross premiums earned,” the group’s SEC report noted. The increase was primarily due to higher reinsurance costs for 2023-2024 and an increased overall reinsurance coverage amount for Florida.
In 2023, Homeowners Choice and TypTap won regulator approval to stop writing flood insurance policies in Florida. “The reason for discontinuation is primarily attributable to the increased costs and reduced availability of flood reinsurance,” the SEC report notes. “The discontinuation does not have a material impact to the Company’s results of operations.”
HCI has grown steadily since 2006, when Homeowners Choice ws founded in Florida, partly through the formation of new companies, a technology division, and through the assumption of policies from Citizens Property Insurance Corp., United, Anchor Insurance and Gulfstream P&C Insurance, an investor presentation shows.
**Article obtained from: Insurance Journal, By: Insurance Journal Staff Reports, Published 11/09/2023
https://www.insurancejournal.com/news/southeast/2023/11/09/747727.htm
