Hawaiian Insurance & Guaranty Co., the state's No. 4 insurer of homes, could find itself with a new owner as its Alabama-based parent company grapples with funding issues.

Its current owner, Vesta Insurance Group, is looking for ways to raise money and is considering a number of options, including selling the entire company or putting Hawaiian Insurance & Guaranty (HIG) on the market separately, HIG president and chief operating officer Ernest Fukeda Jr. said yesterday.

HIG, which covers about 33,000 homeowners in the state, is attracting interest from potential buyers both here and on the Mainland because it is profitable and has solid management, Fukeda said.

"We've done very well over the past five years," he said. "We've done very well in growth and profitability."

The possible recapitalization comes as Vesta tries to recover from losses from hurricanes that slammed into the Gulf Coast and Florida over the past two years. This month, independent rating company A.M. Best downgraded Vesta and its subsidiaries' financial strength ratings from B (fair) to C++ (marginal). The rating signals an insurer's ability to meet obligations to policyholders.

Vesta vice president John McCullough said HIG's rating was lowered because of issues affecting the parent company on the Mainland and not in Hawai'i. "Quite to the contrary, our Hawaiian company has been operating profitably," McCullough said in a telephone interview from Birmingham, Ala.

Vesta paid $35 million for HIG in 1995, about three years after the state declared the local insurer insolvent because of losses suffered from Hurricane Iniki. McCullough said Vesta has not set a deadline for recapitalizing the operations, either through a sale or other means.

"We're monitoring it and we'll see how it turns out," said state insurance commissioner J.P. Schmidt. He said he has been watching the situation closely and has been in contact with the company and an insurance agent association to talk about the situation. "At this point, I'm not particularly concerned about HIG. They're a good company in good shape."

The ratings downgrade has caused at least one local insurance agency to contact its customers with HIG policies, informing them the downgrade could affect HIG's ability to pay claims and advising them to call and talk about setting up coverage with a different insurer.

Fukeda said he has been meeting with insurance agents to tell them not to panic.

"We still maintain our reinsurance program, so if there is any kind of hurricane or catastrophe that comes through, we can pay all of our claims," Fukeda said.

Schmidt said the ability to get reinsurance is an indicator that HIG is in good condition. He said any sale, if it occurs, would have to be reviewed by his office.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.