How Safe Is Your Florida Property Insurer In 2015?

May 29--PINELLAS PARK -- One company is so new it's not even on the sign in front of its official address in state corporate records. An employee at the front desk never heard of the CEO.

Another company did not exist three years ago. Now it cites trade-press reports declaring it the fastest-growing property insurer in the United States. The CEO's compensation grew more than 50 percent in one year past $7 million, disclosures in April show.

Either could become your new insurer under offers that automatically switch your policy unless you take pains to decline. Up to 45,000 customers of state-run insurer Citizens are getting offers from Mount Beacon Insurance Co. and Heritage Property & Casualty Insurance Co. in June.

Welcome to the 2015 hurricane season in Florida, home to the nation's highest premiums and an insurance market reinventing itself by the day.

Where does a consumer go to get information on these and other companies? One place to start is The Palm Beach Post's online property insurance guide, with financial strength grades from two ratings organization and state complaint information analyzed by the newspaper on more than 100 companies operating in Florida. The updated guide is available today at mypalmbeachpost.com.

Much of the change is fueled by record departures from Citizens. Florida's last-resort insurer now has fewer than 600,000 customers, down from a high near 1.5 million, the lowest total since its 2002 creation. With national brand-name insurers writing little or no new business, the options for consumers have largely come down to homegrown Florida companies.

Consumers benefit from the expanding choices, executives say.

"Many of our customers, including those in Palm Beach County, receive a lower rate at Heritage versus rates charged by Citizens," said Heritage Chairman and CEO Bruce Lucas.

Others see reasons for concern as Florida tries to make it a full decade without a direct hit from a hurricane. Eleven of 29 companies that took policies out of Citizens became insolvent, were ordered to stop writing business or were taken over by other companies between 2003 and 2009, the Personal Insurance Federation of Florida has warned. Its charter members include State Farm, Allstate and Progressive.

The Florida Property & Casualty Association, representing many Florida-based insurers, calls it misguided to disparage those who "worked so hard to re-create a market where all Floridians can obtain high quality home insurance at competitive prices."

Heritage, which had no customers three years ago, now ranks No. 4 in the state with about 220,000.

Company documents acknowledge most of its customers come from state-facilitated transactions involving Citizens and failed insurer Sunshine State. About 13 percent of its policies are considered "voluntary" choices by consumers in the open market, it says -- and its risk factors include a limited operating history and a concentration of policies in Florida only, not other states.

Mount Beacon is less than a year old, but by the start of 2015 it had 31,871 customers, including 1,624 in Palm Beach County.

Better check the address before asking for a company tour, though. A reporter could not find a Mount Beacon sign on a visit to the Pinellas Park address it listed in state corporate records filed April 29. Employees there said they work for a servicing agent for the insurer.

The company's website lists a P.O. box in St. Petersburg. CEO Kimo Winterbottom said by email the company is based in South Highpoint but he was not available for an interview.

Wherever its offices are, Mount Beacon's website says it offers "peace of mind on higher ground."

By contrast, Heritage, a publicly-traded firm on the New York Stock Exchange, has sparkling, modern headquarters offices in Clearwater. CEO Lucas enjoyed a boost in total compensation of more than 50 percent to more than $7.1 million in 2014, shareholder documents show. He holds company stock worth more than $40 million, records show.

Heritage contributed $110,000 to Gov. Rick Scott's Let's Get to Work committee shortly before it netted close to $30 million on a key 2013 deal to take up to 60,000 Citizens customers. Most companies don't get sweetener payments like that to take Citizens customers, though officials at the state-run insurer justified the deal approved in a contentious 3-2 board vote by saying it compensated the start-up company for special risks heading into hurricane season.

A trade publication, SNL, named Heritage the fastest-growing property and casualty insurer in the nation in 2014, a statement from the company noted. "Our first quarter was our best quarter in the company's history and produced record earnings of $30.1 million," Lucas said.

In some cases, family members of executives are also sharing in the good fortune. In March 2014, Heritage said it acquired the assets and personnel of SVM Restoration Services, Inc., a company that provides water mitigation and repair services to the company's policyholders, for $2.5 million in cash. The spouses of president Richard Widdicombe and former chief operating officer Kent Linder, who resigned in December, founded SVM Restoration Services and each held 33. 3 percent of its outstanding equity interests, records show.

Non-employee directors on the board are getting a pay raise as well in 2015, from $45,000 to $100,000, disclosures say.

The company has acknowledged "material weaknesses" in its internal control over financial reporting related to, among other things, accounting for stock-based compensation, equity transactions and income taxes. The company concluded the hiring of additional finance personnel and other steps "have been successful."

In addition to June offers, Heritage has been approved for up to 20,000 more Citizens takeouts in July, along with up to 10,000 by Southern Oak Insurance Co.

All companies offering property insurance in Florida must meet standards enforced by state regulators. Both insurers offering June takeouts have an A grade from ratings firm Demotech Inc., which says it dives deep into reinsurance agreements and other records to produce grades in which the public can have confidence.

The minimum requirements for an acceptable catastrophe property insurance program in Florida include the purchase of reinsurance to withstand a 1 in 100 year storm, a 1 in 50 year event, third event and the ability to purchase reinsurance for a fourth and subsequent events, said Demotech president Joe Petrelli.

"Mount Beacon and Heritage and every other carrier that we review and rate must meet or exceed these criteria," Petrelli said.

Weiss Ratings of Palm Beach Gardens offers a C grade for Heritage and says Mount Beacon is still too new for a rating, though it expects to have one soon.

Consumers want companies they can rely on, Weiss senior financial analyst Gavin Magor said.

"It's pretty clear not every insurance company can be rated A," Magor said. Close to 10 years without a hurricane in Florida has certainly helped bottom lines, he said, but "the exposure for a lot of the takeout companies, in our estimation, is still too high for their financial strength."

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