Southern Fidelity Insurance Co. Inc. has merged with Tallahassee, Fla.-based Capitol Preferred Insurance Co. Inc., the Tampa Bay Times reported.

Capitol Preferred will no longer exist following the transaction, and all of its 82,800 policies will be moved to Southern Fidelity. A spokeswoman from the Florida Office of Insurance Regulation said there are no actions needed on the customers' part to maintain coverage.

James Graganella will continue to lead the combined entity following the merger, according to the report. Graganella is founder and CEO of the sister companies.

Southern Fidelity is currently under state supervision to gain financial stability, which includes a condition that requires the insurer to raise an undisclosed amount of additional capital by the end of 2020. Florida's insurance regulator said it could take any action it deems appropriate, including placing Southern Fidelity into receivership, should the insurer fail to bring in all of the capital it promised regulators.

The regulator previously allowed Capitol Preferred to cancel 23,800 homeowners' policies to maintain its financial stability. The merger cancels the regulator's orders for the company to file monthly financial statements and a revised business plan for how it intends to operate through 2023, according to the report.

Hudson Structured Capital Management Ltd. said Nov. 2 that it intends to acquire majority ownership of Southern Fidelity and its affiliated entities for undisclosed financial terms. The Bermuda-based asset manager would also provide the insurer a capital injection should the deal receive regulatory approval.

Mark Friedlander, the Florida representative for the Insurance Information Institute, said the key issue for the merger is for the two insurers to maintain solvency and continue to operate. Southern Fidelity and Capitol Preferred have reported multimillion-dollar losses for several years, posting collective losses of $40 million as of June 30, according to the report.