In reporting a $23.6 million fourth quarter loss compared to a gain of $34.2 million during the last quarter of 2009, Mercury General said it intends to begin giving its 8,000 policyholders a mandated 180-day notice of nonrenewal starting in March.

The Los Angeles-based insurer expects to be out of the Sunshine State by the second half of 2012.

Mr. Tirador echoed the observations of state officials and other insurance executives by noting that sinkhole claims are now coming from outside the traditional areas of Pasco and Hernando counties.

“We’re starting to see some claims—not only us, [but] by the industry—pop up in other areas of the state,” he said. “So we thought it was the most prudent move for us to exit the homeowners’ line.”

The company saw growth in automobile insurance in Florida, Mr. Tirador added.

The Florida Office of Insurance Regulation (OIR) said it received and is reviewing a notice of withdrawal from Mercury General subsidiary American Mercury Insurance Company but no official response has been given yet.

The letter from American Mercury is a look into the company's struggles in Florida the last several years, even without a major hurricane. From 2008 to 2010 the insurer has a combined ratio of 178.8, mostly due to sinkhole claims, it said. The combined ratio in 2010 was 266.7. The company tried to minimize its sinkhole exposure by removing sinkhole coverage at renewal, "However, despite our best efforts, sinkhole claims show no sign of abating," American Mercury wrote.

Even a 25 percent rate increase approved by the OIR effective Jan. 11 will not help. American General's latest analysis shows it needs an additional 49.7 percent rate increase, which would "result in continued shrinkage of the program and adverse selection, with the lower risk customers finding better alternatives with our competitors."

American Mercury's book of business in Florida is too small to get catastrophe reinsurance and it needs a substantial information technology upgrade -- an expenditure the company does not consider a "sound use of capital" in Florida.

Mercury General's results for the quarter were also impacted by severe rain in the company’s home state of California in December. As a result, the insurer received 1,500 more claims in December 2010 than the same month the year prior, Mr. Tirador said. Losses from the storms in California were about $25 million.

Net income for 2010 was $152.2 million, down significantly from a profit of $403.1 million in 2009.

Mercury General posted a fourth quarter combined ratio of 109.9 compared to 98.1 during the same period in 2009.

According to Highline Data, the Mercury General Group was 54^th among homeowners multiperil writers in Florida with a 0.2 percent market share.

Highline Data is owned by Summit Business Media, which also owns National Underwriter.