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Poe has Citizens scrambling

As Poe fights the liquidation of its final affiliate, Citizens plans to hire most of its staff and occupy its offices.

By TOM ZUCCO
Published May 23, 2006

Citizens is trying to hire most of Poe's nearly 300-member staff and plans to use the company's building as it scrambles to transfer 320,000 policies from Poe to Citizens before Poe stops covering those policies June 30.

The transfer would make Tampa one of the three main offices for Citizens, the state-run property insurer for all those who cannot find coverage in the open market. With Florida's burgeoning insurance crisis, Citizens could have as many as 1.5-million policies, or more than a third of all homeowners' policies statewide, by yearend.

Citizens officials met Friday with about 120 Poe employees and were scheduled to meet with about the same number Monday as the state moves to take control of the last of three Poe companies.

Once the third largest private insurer in the state, Poe agreed May 12 to liquidate two of its three companies, Southern Family Insurance Co. and Atlantic Preferred Insurance Co., after regulators found the companies had inadequate capital.

That left tens of thousands of property owners with only one place to go: Citizens.

"We plan to have a Citizens office in Tampa within the Poe office or some other facility,'' Bruce Douglas, chairman of Citizens Board of Governors, said at a special meeting Monday to address the Poe liquidation.

Whether it buys, leases or rents the building, Citizens officials say they will be there permanently.

The cost to Citizens would be about $11-million, Douglas said. Ironically, the money would come from bonus payments held in an escrow account that was to be paid to Poe for taking policies out of Citizens.

It was those takeout policies, most of them in Miami-Dade and Broward counties, that got Poe in trouble after Hurricane Wilma struck last year.

Douglas didn't say when the office would open, but emphasized that using the same office and much of the same staff would make the transition easier.

About 250 full-time and about 40 part-time Poe employees will receive their final paychecks Friday.

The Poe cancellations become effective June 30, but the transition to Citizens has been anything but smooth.

The sticking point has been the third Poe company, Florida Preferred Property Co., a major player in Poe's takeout business.

Poe wants to earn a commission on about 80,000 Florida Preferred customers, even though they would become Citizens policyholders.

As Poe fights to save its remaining subsidiary, Citizens officials contend Poe is bogging down Citizens' efforts and putting policyholders at risk with the start of the 2006 hurricane less than two weeks away.

"We have lost some valuable time,'' Douglas said.

Douglas and the other seven board members unanimously agreed Monday that Citizens should not negotiate with Poe over commissions.

"They're in liquidation,'' said board member Jay Odom. "They certainly don't need to be in a position to earn a commission from us.''

Added board member John Collins: "Anything they (Poe) earn, they'd have to use to pay claims.''

The Florida Department of Financial Services, which was appointed receiver in the Poe case, has taken the company to court to force it to liquidate its companies and turn everything over to Citizens.

In late April, when it announced its action, the DFS recommended Florida Preferred enter rehabilitation June 1. "But we are now focused on getting them into liquidation as soon as possible,'' DFS spokeswoman Tami Torres said Monday.

A hearing on the liquidation is scheduled for May 30 in Leon County Circuit Court in Tallahassee.

Formed in 1996, Poe Financial Group is owned by former Tampa Mayor Bill Poe Sr. and his family. Much of its business model was based on assuming the high-risk policies covered by Citizens, for which Poe received millions of dollars in bonuses from Citizens.

But the eight storms that hit Florida in the past two years turned what appeared to be a smart gamble into a profound mistake.

Poe has been in trouble since at least last fall. According to the company's 2005 financial statement, Poe's three insurance companies paid out $2-billion in hurricane claims in 2004-2005, which led to a combined loss of more than $300-million.

As of April 25, when the state took control of two of the three Poe Group subsidiaries, about 1,100 claims were unresolved for Southern Family, about 6,500 were unresolved for Atlantic Preferred, and about 4,100 were unresolved for Florida Preferred.

But by Thursday, Florida regulators had used Poe funds to pay nearly $32-million in Southern Family claims and about $36-million in Atlantic Preferred claims.

Because Poe is contesting the Florida Preferred liquidation, the state has not addressed unresolved claims for that company.

Most of the claims for all three companies were for damage caused by Hurricane Wilma. The Tampa Bay area represents a relatively small slice of Poe's business, about 5,300 policies.

Initially, Citizens will assume Poe's policies and keep coverage and rates the same. As the policies come up for renewal, Citizens will write new policies at Citizens rates.

But Citizens will not pay any unresolved Poe claims. That responsibility falls to the Florida Insurance Guaranty Association, which was created by the Legislature to handle the claims of insolvent property and casualty insurance companies.

Because Poe had so many policies in high-risk areas, the liquidation could be more bad news for all Florida homeowners who have had to help pay down a staggering deficit in Citizens' account the past two years. By law, Citizens' deficits must be made up by an assessment on all Florida homeowner policies, regardless of the carrier.

With a base of about 850,000 policyholders and roughly 50,000 new policies coming in every month, Citizens is on pace to pass State Farm and become the largest property insurer in the state by this fall.

Adding the Poe policies, Citizens officials say, only adds to the problem.

"It's going to be a tough, tough job in Tampa,'' Douglas said Monday. "But we'll get it done.''

[Last modified May 23, 2006, 05:25:26]