Shares of HCI Group, Inc. (HCI) rallied 2.2% in a single trading session to close at $45.97, after the company’s wholly owned subsidiary – Homeowners Choice Property & Casualty Insurance Company, Inc. – assumed 36,000 policies from Citizens Property Insurance Corporation, Florida.
Out of the total homeowners’ policies, 30,000 fall under the wind-only category. Notably, the policy assumption was approved in Oct 2014 by the Florida Office of Insurance Regulation.
In order to reduce Florida’s risk exposure, the state had initiated a “take-out” program. This agenda was executed by encouraging private insurers to takeover policies from Citizens. The aforementioned policies that were assumed by the HCI Group subsidiary were part of this take-out program. Meanwhile, individuals whose policies came under the take-out program were allowed to opt-out within 30 days after the policy assumption.
As per HCI Group’s management, the transaction is projected to lead to an increase in annualized gross premiums, taking the tally to $430 million. The figure also exceeds the highest gross premiums reached so far by Homeowners Choice. We expect this development to help the parent company as a whole in terms of premium growth, thereby contributing to overall growth.
HCI Group currently carries a Zacks Rank #3 (Hold). However, better-ranked property and casualty insurers that look attractive at current levels include AmTrust Financial Services, Inc. (AFSI), Navigators Group Inc. (NAVG) and ACE Limited (ACE). While AmTrust and Navigators sport a Zacks Rank #1 (Strong Buy), ACE has a Zacks Rank #2 (Buy).
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