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Clearwater's Homeowners Choice makes offer for 21st Century Holding Co.

As large out-of-state property insurers continue to shrink their presence in Florida, at least one homegrown insurer in the bay area has set its sights on growing fast.

Homeowners Choice Inc. of Clearwater said Tuesday that it wants to buy fellow homeowners insurer 21st Century Holding Co. of Fort Lauderdale for about $42 million in cash and stock. 21st Century has not responded to the offer.

If a merger with 21st Century goes through, Homeowners Choice would grow to about 100,000 policies, becoming one of the state's 15 biggest property insurers.

Several major property insurers based out of state are in the midst of dropping policies to reduce their exposure to hurricane damage in Florida. Illinois-based State Farm, the biggest private insurer in Florida, intends to exit the property market here entirely, and Ohio-based Nationwide recently said it is dropping another 60,000 homeowner policies.

Florida Insurance Consumer Advocate Sean Shaw welcomed news of a proposed merger, saying the property insurance market is "so messed up in Florida that any insurer doing anything (to grow) is good."

But the system won't work, he said, unless the state also persuades large insurers to stay so the state-run insurer of last resort, Citizens Property Insurance, isn't forced to absorb thousands of additional policies.

"We've got to figure out a way to have a balanced system," Shaw said. "People want the ability to choose from the well-capitalized, large insurance companies. … Those large companies have the resources to back themselves up. If these small Florida insurers go under, we'll get assessed."

Parish Patel, board chairman of Homeowners Choice, sent a letter to 21st Century board chairman Bruce Simberg offering $1 in cash and a half-share of Homeowners Choice common stock for each share of 21st Century stock. Based on Homeowners Choice's Friday closing price of $8.60, the proposed offer values 21st Century at $5.30 per share, a premium of about 36 percent over 21st Century's Friday close of $3.89.

The letter gives 21st Century until Nov. 2 to respond. Patel was noncommittal about whether he would seek a hostile takeover if rebuffed, saying, "We'll cross that bridge when we come it."

A spokesman for 21st Century could not be reached for comment. The company, which operates Federated National Insurance Co., has about 35,000 policies in Florida, including about 1,000 in the Tampa Bay area. Homeowners Choice has about 60,000 policyholders statewide paying about $100 million in annualized premiums.

Founded less than three years ago by a group of area investors that includes Tampa lawyer Martin Traber, Clearwater developer Gregory Politis and Patel, Home­owners Choice has been on a growth spree in its brief life. It first raised $12 million in a private placement offering, then went public last year, netting about $10 million toward its surplus.

By adding 21st Century, Home­owners Choice would also have an entry point to sell auto and general liability insurance plus gain access to selling insurance outside of Florida.

Patel said the combined company would have more than $120 million in capital.

"You also would have market assets north of $100 million, so Wall Street gets interested," he said. "All the debate going on has been about getting new capital coming into Florida for insurance. The only way to get new capital into Florida is through Wall Street."

Patel said a merger would leave plenty of room for growth, figuring an insurer would have to reach about 5 percent of the market, or nearly 250,000 policies, before risking overexposure.

Jeff Harrington can be reached at [email protected] or (727) 893-8242.

Clearwater's Homeowners Choice makes offer for 21st Century Holding Co. 10/13/09 [Last modified: Tuesday, October 13, 2009 10:35pm]
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