Following a rejection by 21st Century Holding Co. on a possible merger, Homeowners Choice, a Clearwater, Fla., property-casualty insurer, has dropped its bid for the company, but has not ruled out a “hostile acquisition” in the future.

Lauderdale Lakes, Fla.-based 21st Century Holding rejected the merger proposal last week, claiming its competitor “substantially undervalues” its assets and earnings potential, walking away from an estimated $42.5 million deal.

In a statement Nov. 4, Homeowners Choices said its offer to acquire 21st Century Holding expired two days earlier and “has ended for now” its efforts to merge the two companies.

Paresh Patel

Paresh Patel, chairman of the board of Homeowners Choice, issued a statement to the company’s shareholders, indicating that while the proposed merger “represented an opportunity to enhance shareholder value in continuance of our growth strategy,” the company has been profitable for eight consecutive quarters. Patel added that Homeowners Choice expects to be profitable in the third and fourth quarters of this year, as well.

Patel denied claims by 21st Century Holding of undervaluing the company, saying, “We believed we offered a fair price” to its shareholders based on data including assets, performance of their management team and future prospects.

“21st Century has been trading below book value for more than a year,” Patel said. “The market is substantially discounting the assets of 21st Century, perhaps because of past performance of its management and concerns for its future prospects.”

As for whether Homeowners Choice would consider “a hostile acquisition” of its competitor, Patel said, “We may do so at a later date, but the current answer is no.”

Patel concluded his letter by reassuring shareholders that the company “will continue to move forward.

“We have a proven strategy that produces above average results,” he said. “We do not need to develop alternative strategies in order to improve results.”

Homeowners Choice provides property-casualty homeowners’ insurance, condominium owners’ insurance and tenants’ insurance solely to Florida property owners, serving 53,000 policyholders throughout the state.