July 13, 2017

Thoughts and perspectives on the “coastal state market”

Stonybrook issues letter from Joe Scheerer
NEW YORK, July 11, 2017

Dear friends and colleagues,

Stonybrook’s goal is to be a thoughtful strategic advisor to our clients and prospects. As such, we provide for your review a summary of the “Coastal State Perils” market, which is a key focus of our firm; please see attached. Importantly, the overview provides insights beyond Florida homeowners and explores on all regions of the country with a particular focus on CAT exposed areas.

Specifically, over the past three years the stock price performance of publicly traded insurers focused on this sector (see page seven) tracks largely in-line with the S&P 500, but trails SNL’s Insurance Company Index.  The deflationary trend of the trading multiples over the last 18 months (since 4Q 2015) may be largely due to the perceived conclusion of the “Florida Citizens de-pop strategy.” There may also be some concern of Assignment of Benefits in Florida, as those losses start to find their way into published financials.

Separately, the long anticipated Pacific Specialty (largely California personal lines and especially homeowners) transaction occurred, and at a full multiple. More broadly speaking, for the debt capital markets, there is more supply of capital than there is demand (i.e., there are more specialty finance organizations willing to lend than there are carriers wanting to borrow). 

The Stonybrook team would love the opportunity to discuss the attached with you – either in person or via conference call. Please let us know if you have interest continuing the conversation and we will get something on the calendar.  Please also look for the team at the “Insurance Journal and Demotech, Inc.’s Super Regional P/C Insurer Conference 2017 for C-Suite Professionals” in Lake Geneva, Wisconsin next week. 

We hope you find the attached insightful.

Joe Scheerer
[email protected]