United (UPC) reviewing strategic & capital raising alternatives

In another sign of the still-challenging coastal and in particular Florida property insurance market, property and casualty (P&C) insurer United Insurance Holdings Corp. (UPC Insurance) has announced a strategic review of its options, including raising more capital.

United’s (UPC) Board is exploring a wide-range of options to shore up its business on a go-forward basis.

The company had only announced a plan to rationalise and consolidate its Florida property insurance writing back in April, then sold off its NFIP flood insurance book in June and finalised a much smaller reinsurance program as well last month.

Now, it seems the Board is looking for more options to improve the insurers prospects, with a lot on the table.

United (UPC) is looking at options ranging from a possible sale of the company, to a merger with another company, or potentially divesting another subsidiary.

In addition to this, the insurer is also considering a possible formation of a new Florida-domiciled reciprocal exchange, which would be following a trend seen in the market of late, where reciprocals have come into greater favour, it appears.

On top of this, capital raising alternatives are being explored, including a possible sale of equity, issuance of surplus notes or another financing option.

Finally, even strategic transactions are being considered, which presumably might require some financing alongside that route.

The company said that, “There can be no assurance that this process will result in the company pursuing a particular transaction and the company does not intend to disclose further developments unless and until it determines that further disclosure is appropriate or necessary.”

Insurance Advisory Partners, LLC has been retained by the insurer as a financial advisor to help it through the process, alongside Debevoise & Plimpton LLP as its legal counsel.

The business model selected by United (UPC) and operated over the last few years seems to need a tweak, or infusion of capital, to help make its longevity assured and to provide it a platform for growth, rather than just a shrunken business of more concentrated exposure.

This is a challenge facing many of the coastal P&C insurer specialists, with the higher cost of reinsurance likely to be a driver of these strategic discussions at this time as well.