Florida’s Homeowners Choice Reports Profitable Q4, Year 2009

Homeowners Choice Inc., a Florida-based homeowners’ insurer, reported a profitable fourth quarter and year 2009.

Net income for the fourth quarter of 2009 was $807,000, compared to net income of $5.1 million for the fourth quarter of 2008.

Gross premiums earned for the fourth quarter of 2009 increased to $25.9 million from $24.5 million in the prior year quarter. Net premiums earned for the fourth quarter of 2009 decreased 35 percent to $12.4 million from $19.0 million in the prior year quarter.

“Net premiums earned” are gross premiums earned reduced by premiums ceded to reinsurance companies that cover certain risks from hurricanes and other catastrophes. During the fourth quarter of 2009, reinsurance costs were 52 percent of the company’s gross premiums earned compared to only 23 percent in the prior year quarter.

The company also reported investment income of $558,000 for the fourth quarter compared with $469,000 in the prior year fourth quarter.

Losses and loss adjustment expenses for the fourth quarter were $6.0 million compared with $10.5 million in the prior year quarter. Policy acquisition and other underwriting expenses for the fourth quarter of 2009 were $3.9 million. This compares to a $1.1 million net cost benefit realized during the fourth quarter of 2008 primarily due to a one-time, retroactive reduction of $3.6 million in the assumed commissions applicable to policies assumed from Citizens during 2008 and 2007. Other operating expenses, which include a variety of general and administrative costs, for the three months ended Dec. 31, 2009 and 2008 were $1.7 million and $1.4 million respectively.

Full Year 2009

For the year ended Dec. 31, 2009, net income was $10.9 million, a decline from net income of $12.7 million for the year ended Dec. 31, 2008.

Gross premiums earned for the year increased by approximately 78 percent to $110.0 million from $61.9 million in the prior year. Net premiums earned for 2009 increased 38 percent to $65.3 million from $47.3 million in the prior year. The company’s reinsurance costs increased significantly beginning June 1, 2009. Investment income for the year ended Dec. 31, 2009 was $1.8 million, up over 10 percent from the prior year amount of $1.6 million.

Losses and loss adjustment expenses for the year ended Dec. 31, 2009 were $35.2 million compared to $21.5 million in the prior year, which the company said reflects an increase in policies in force. Policy acquisition and other underwriting expenses for 2009 and 2008 were $9.6 million and $3.1 million, respectively. Other operating expenses were $5.8 million for the year ended Dec. 31, 2009 compared with $4.1 million in the prior year.

“We are pleased to report the tenth consecutive profitable quarter despite what has been a challenging environment because of legislatively mandated wind mitigation credits and rising reinsurance costs,” said Chief Executive Officer F.X. McCahill.

In December, the insurer assumed approximately 23,000 policies from Citizens, although after opt outs it retained approximately 18,000 policies. McCahill said the company expects to add more policies in 2010 now that it has received state approval for an average rate increase of 14 percent effective in April.

Founded in 2006, Homeowners Choice today has approximately 70,000 policyholders throughout Florida representing approximately $132 million in annualized premiums.

Source: Homeowners Choice

Topics Florida Profit Loss Reinsurance Homeowners