Property insurance is starting to improve in many parts of the US, offering new growth opportunities, according to Gordy Bunch, CEO of The Woodlands Financial Group (TWFG). During the company’s recent earnings call, Bunch highlighted that while some regions are seeing better conditions, California continues to face significant challenges.
Bunch pointed out that the property market in California has not yet stabilized, largely due to the California FAIR Plan, which he described as taking on too much risk, similar to the situation faced by Citizens Property Insurance in Florida and Louisiana during tough times. He suggested that a rate increase could help bring balance back to the market.
The issues in California are closely linked to wildfire risks, the reliability of new catastrophe models, and the support from reinsurance. Bunch mentioned that filing new insurance programs in California is particularly tough, especially with a state-run plan in place.
Looking ahead, TWFG is considering a wrap-around product for the FAIR Plan if market conditions worsen. To tackle current capacity issues, the company has gained access to more secondary and tertiary property markets, which are now available to its agents.
In Florida, TWFG is looking to expand its footprint after maintaining a limited presence in a previously unstable market. Thanks to recent legislative changes, the company is now collaborating with various insurers to assist in taking policies out of Citizens Property Insurance Corp. Bunch expressed that TWFG is now more willing to engage in the Florida market than before.
In terms of financial performance, TWFG reported impressive results for 2024. Their total revenue for the fourth quarter rose by 30.8% to $51.7 million, up from $39.6 million the previous year. Net income also increased to $8.2 million, compared to $5.2 million from the same period last year. Commission income grew by 20.7% to $43.7 million, while contingent income saw a remarkable surge of 371.4%, reaching $5 million.
Overall, TWFG’s total written premium for the quarter rose by 20% to $361.4 million, with an organic revenue growth rate of 20.5%. Adjusted EBITDA increased significantly by 91.7% to $13.8 million.
As the property insurance landscape evolves, TWFG is poised to take advantage of new opportunities while addressing the ongoing challenges in key markets like California and Florida.