Rate hikes coming

Insurance company Heritage Property & Casualty’s net income drops 63 percent.

Storm and water damage claims combined to depress by 63 percent the annual net income of Heritage Property & Casualty, which holds the third largest number of personal residential policies in South Florida.

Net income declined from $92.5 million in 2015 to $33.9 million last year, and the company experienced a $2.9 million net loss in the fourth quarter, primarily because of $19 million in losses from claims related to Hurricane Matthew, the company reported.

“2016 was a challenging year for the company,” Chairman and CEO Bruce Lucas said in a statement. “We had record tornadoes, two hurricanes, and significantly increased loss reserves in response to the current Florida claims environment. Despite these headwinds, we produced $33.9 million in net income, repurchased $25.6 million of our common stock, declared over $7 million in dividends, and delivered a 9.5% return on average equity.”

Net earnings per share declined from $3.05 in 2015 to $1.14 in 2016 and shareholders will receive a fourth-quarter dividend of $0.06 a share, the company said.

The company also said it has secured approval from state regulators for a statewide average rate increase of 9.9 percent for all of its multiperil homeowner policies.

Heritage customers in South Florida will see significantly higher premium increases, with consumers of its voluntary [or “preferred”] homeowner policies facing hikes ranging from 20 percent to 25 percent. Most tricounty homeowners with the company’s “select’ coverage — former customers of state-run Citizens Property Insurance Corp. — will see premiums increase 15 percent, the company said last year.

Like most insurers in Florida, Heritage blames the disproportionate rate increases in South Florida on heavier use of assignment of benefits by contractors and their attorneys. Contractors convince homeowners to sign over rights to their benefits as a condition of commencing work, then pursue claims from insurers through litigation — driving average claims costs higher in the region, insurers say.

Heritage was the third-largest insurer in the tricounty region with 80,534 personal residential policies at the end of 2016, according to data maintained by the state Office of Insurance Regulation. That was down from 96,179 at the end of 2015.

Last year, the company acknowledged it stopped writing new policies altogether in the tricounty region in 2016 and later resumed offering new policies to a “very select” number of homeowners through a small number of agents.

Heritage reported writing just 384 new policies in the region in the fourth quarter of 2016, compared to the previous quarter. Meanwhile, the two largest companies in South Florida added thousands more policies. Citizens added 11,522 in the last three months while Universal Property & Casualty added 16,400, according to state data.

Due to reducing exposure in South Florida, the tricounty region now comprises 18 percent of the company’s total insured value, Lucas said in the statement released by Heritage.