Mergers & Acquisitions
Summary of insurance industry mergers and acquisitions that come to our attention.;
Markel Corporation (NYSE – MKL) www.markelcorp.com completed the acquisition of Aspen Holdings, Inc. Aspen, which is headquartered in Omaha, Nebraska, writes in 31 states and operates primarily through FirstComp Insurance Company, a Nebraska-domiciled insurance company, and FirstComp Underwriters Group, Inc. and FirstComp Insurance Agency, Inc., which act as managing general agents. Aspen will continue to operate as a separate unit as part of Markel’s specialty admitted segment.
Fairfax Financial Holdings Limited (TSX: FFH and FFH.U), a Toronto-based financial services company, will acquire Zenith National Insurance Corp. (NYSE: ZNT). The deal, subject to regulatory approval, values Zenith at $38 per share - a premium of 31.4% over its close yesterday and an overall value of approximately $1.4 billion. Zenith will be a wholly owned subsidiary of the Fairfax.
Fairfax also owns Crum & Forester companies which include United States Fire Insurance Company, North River Insurance Company, TIG Insurance Company, and Oddesy Re.
AmTrust Financial Services Inc. entered into an agreement to acquire Swiss Reinsurance workers compensation business unit, CyberComp, in a renewal rights transaction.
CyberComp uses a fully digitalized platform to enter data, get quotes and issue policies within minutes, according to AmTrust. It has a distribution network of 13 regional wholesale agencies and more than 600 retail agents. CyberComp's net written premiums totaled about $100 million for the 12 months ended June 30, according to AmTrust.
Grain Dealers Mutual Insurance Co. will become part of The Main Street America Group from Jacksonville, FL.
Grain Dealers Mutual had assets in 2007 of $57.4 million, ranking it as the 10th-largest property-casualty insurer in the state. The company will maintain its Indy office and continue to sell insurance policies under the Grain Dealers Mutual name.
Liberty Mutual Group announced the retirement of the Wausau brand and the creation of a new commercial business unit, Liberty Mutual Middle Market. Wausau Insurance Company has been a wholly owned subsidiary of Liberty Mutual since 1999. www.libertymutualgroup.com/middlemarket
Pennsylvania-based Eastern Insurance Holdings, Inc. (Nasdaq: EIHI) has completed its acquisition of the outstanding stock of Indianapolis-based Employers Security Holding Company and subsidiaries. The $14.9 million deal includes the assumption of $2.7 million in debt and a cash purchase price component of $12.2 million.
AmCOMP, a North Palm Beach workers compensation holding company, agreed to be acquired for $194 million in cash by Reno, Nev.- based Employers Insurance of Nevada. AmCOMP collected $269 million in gross premiums in 2006, almost 40 percent of them in Florida. It reported net earnings of $16.5 million at the end of 2006, drastically up from the little more than $5 million it made in 2004. Indiana 2006 written premium totaled $26 million.
OneBeacon Insurance Company, a subsidiary of Hamilton, Bermuda-based White Mountains Insurance Group, Ltd., is acquiring Atlantic Specialty Insurance Company and the renewal rights commercial insurance business, including the unearned premiums on the book. Total gross written premium is approximately $450 million.
In October, Atlantic Mutual sold the renewal rights for its commercial lines inland marine and ocean cargo businesses to Travelers. The deal, at the time, totaled $110 million in net written premium.
Folksamerica Holdings Company Inc. will acquire California Indemnity Insurance Company Inc. (currently a WC subsidiary of Sierra Health Services Inc. Subject to regulator approval, Folksamerica will pay $15.5 million in cash up front and up to $64 million in performance-based payments, which will depend on California Indemnity's claims and other expenses, in January 2010.
Folksamerica is a subsidiary of White Mountains Insurance Group Ltd., Hamilton, Bermuda. California Indemnity is the parent company of Commercial Casualty Insurance Company, Sierra Insurance Company of Texas and CII Insurance Company.
St. Paul and Travelers merge - to be known as The St. Paul Travelers Companies (new symbol—STA—at the New York Stock Exchange). See news release on St Paul's website. Excerpts from the release:
The companies announced a merger agreement that will create the nation's second largest commercial insurer, to be known as The St. Paul Travelers Companies. It is expected to have total assets of $107 billion, shareholders' equity of $20 billion, total capital of $26 billion and net written premiums of $20 billion.
Transaction will be a tax-free, stock-for-stock merger. Holders of Travelers Class A and Class B common stock will each receive 0.4334 St. Paul common shares for each Travelers share. The transaction was completed 04/01/04.
The St. Paul Travelers Companies will remain a Minnesota corporation and will have its corporate headquarters in Saint Paul, Minnesota. Jay S. Fishman, 51, chairman and chief executive officer of The St. Paul, will serve as chief executive officer of the combined company.
Travelers announced the purchase of immediate renewal rights to Royal & SunAlliance USA's commercial lines national accounts, middle market and marine businesses, and standard and preferred personal lines businesses. The purchase will be a minimum payment of $25 million with another $35-40 million possible.
Indiana Farm Bureau Insurance Cos. completed the acquisition of Agway Insurance Co. (DeWitt, NY) for $21 million, with approval granted by the New York State Insurance Department.
Employers Insurance Company of Nevada (EICON) agreed to acquire Fremont Compensation Group's book of business effective 7/1/2002, subject to regulatory approval. EICON business has declined almost 75% since it went private three years ago and the Nevada WC market was opened up to all carriers. Fremont has been operating under the supervision of the California DOI.
Travelers Property Casualty Corp. (NYSE:TAP.a) reports its initial public offering (IPO) brought in $4.1 billion. Total shares sold were 231 million. Travelers' shares have a market value of $20 billion. On March 22, shares started at $18.50 and were trading at $20 this afternoon. Citigroup is spinning off Travelers by selling 20% of the company's stock and transferring its remaining majority interest in a tax-free transaction to Citigroup shareholders. Citigroup still owns 95% of the voting rights in Travelers until the transfer is complete. Travelers is currently rated A++ (Superior) by A.M. Best Co.
Kingsway Financial Services Inc. (TSE, NYSE:KFS) announced approval from the Illinois DOI to acquire American Country Holdings Inc. (NASDAQ:ACHI) and its subsidiary, American County Insurance Co.
Liberty Mutual Group received approval from the Massachusetts Insurance Commissioner to reorganize into a mutual holding company structure.
Citigroup (NYSE: C) announced it will spin off its subsidiary Travelers Property Casualty Corp. It will sell 20% of the company's stock in an initial public offering, and then spin off the remainder majority interest in a tax-free transaction to its shareholders.
Liberty Mutual will acquire the $1.5 billion property/casualty book of business from OneBeacon. The transfer will almost double Liberty's book.
White Mountains Insurance Group Ltd. (NYSE: WTM) acquired CGU Insurance Group, formerly the property/casualty subsidiary of the U.K.-based CGNU plc, for $2.17 billion.
Acceptance Insurance Companies Inc. (NYSE:AIF) announced its agreement to sell two wholly-owned insurance companies (Acceptance Indemnity Insurance Company and Acceptance Casualty Insurance Company) to McM Corporation, a Raleigh, NC based insurance holding company. McM owns Occidental Fire & Casualty Company of North Carolina and Wilshire Insurance Company. In addition, McM purchased a selected portfolio of the Company's P&C insurance programs managed and sold through retail and general agents.
Argonaut Group Inc. announced plans to purchase Front Royal Inc. for $165 million. Front Royal is a holding company. It's operating subsidiaries are, Colony Insurance Group, located in Richmond, Va., Rockwood Casualty Insurance Company, located in Rockwood, Pa., and The Redwoods Group, a managing general underwriter, headquartered in Morrisville, N.C. The companies wrote about $150 million in premium in 2000. In addition, Argonaut is working on a $40 million deal to acquire four companies owned by Canada's Queensway Financial Holdings Ltd.
American International Group Inc. (AIG) will start takeover discussions with U.S. insurer American General Corp., following its April 3 offer to buy the company for about $23 billion. Britain's Prudential Plc said it had filed a lawsuit against U.S. rival AIG in their multi-billion dollar insurance sector bid battle for American General Corp.
Indiana is among 31 states on the short end of the merger and acquisition game in 2000. Mergerstat [www.mergerstat.com] reports that Indiana ranks fifth on the losers list, with 32 more businesses being acquired than doing the acquiring.
Argonaut Group, Inc. (NASDAQ: AGII) today announced that its principal subsidiary, Argonaut Insurance Company, signed a letter of understanding with HIH America Insurance Group ("HIH America") to acquire the renewal rights and other tangible assets associated with its workers compensation business in its Southwest, Midwest and Hawaii regions. This agreement covers all existing business in Arizona, Colorado, Nevada, Illinois, Wisconsin, Michigan, and Hawaii.
As announced previously, HIH America has ceased writing new business in the U.S. through all of the group companies: HIH America Compensation & Liability Insurance Company, Great States Insurance Company; HIH America Compensation and Liability Company of Illinois; and HIH America Insurance Company of Hawaii Inc.
American International Group (NYSE: AIG) will acquire HSB Group, Inc. later this year. AIG is the leading U.S.-based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in the United States. HSB Group, Inc. is the parent company of The Hartford Steam Boiler Inspection and Insurance Company.
HIH Insurance Ltd. is withdrawing from the U.S. in the next three years as Australia's No. 2 general insurer moves to halt a 79 percent decline in its stock price this year. Sydney-based HIH, which last month announced the sale of its domestic retail business to Europe's No. 2 insurer Allianz AG, said it's selling its loss-making California workers' compensation business to Alaska National Insurance Co. for an undisclosed price. The remaining 40 percent of its U.S. business outside California will be run as a managing general agency in a three- year run-off. HIH has also stopped underwriting in the U.S. The workers compensation business is competitive and margins have been squeezed. HIH, which had about $831 million in its workers' compensation fund at June 30, said it was looking to sell the business.
State Auto Financial Corporation of Columbus, Ohio, (Nasdaq:STFC) and Meridian Insurance Group, Inc. (Nasdaq:MIGI) of Indianapolis; Meridian Mutual and State Auto agreed to merge the two mutual companies. In addition, outstanding publicly owned shares of MIGI are to be purchased by State Automobile Mutual for $30 per share upon the closing of the transaction.
Direct sales for the State Auto Companies totaled $746 million in 1999. Meridian's total 1999 sales were $302 million. The combined companies will be the 48th largest property/casualty insurance group in the United States.
MIGI is a holding company principally engaged in the property and casualty insurance business through its wholly owned subsidiaries, Meridian Security Insurance Company, Meridian Citizens Security Insurance Company, and Insurance Company of Ohio (ICO). Business is written primarily through nearly 1,400 independent insurance agencies.
STFC is a regional property and casualty insurance holding company engaged primarily in writing personal and commercial automobile, homeowners, commercial multi-peril, workers' compensation and fire insurance. The company currently markets its products through more than 13,100 agents associated with approximately 2,200 agencies in 26 states. Products are marketed primarily in the Midwest and Eastern United States, excluding New York, New Jersey and the New England states.
IBJ- Monroe Guaranty announced it will merge with Sarasota, Fla.-based FCCI Insurance Group. Monroe's 275 employees, who own all the shares of the company's stock, will be paid cash for their stock by an Indiana subsidiary of FCCI. Monroe Guaranty will keep its name and local headquarters.
Monroe Guaranty sells commercial property, liability and workers' compensation insurance through independent agents in Indiana, Ohio, Kentucky, Illinois and Michigan. FCCI specializes in workers' compensation insurance and does business in Florida, Georgia, Mississippi and Alabama. Monroe Guaranty had written premiums of $131 million and a policyholder surplus of $47 million in 1999.
The company posted losses in 1999 and 1998 as stiff competition in the property and casualty markets forced insurers nationwide to cut rates. The company exited two insurance lines -- insurance for nursing homes and for apartment properties -- in December and January to streamline costs.
FCCI employs about 600 people and wrote $248 million in premiums in 1999. It had a policyholder surplus of $330 million for the year.
Both companies are rated A-, or excellent, by A.M. Best, an independent insurance rating agency.
Frontier Insurance Group, Inc. (Frontier) (NYSE-FTR) announced today that it has completed the sale of Regency Insurance Company to Tomoka Re Holdings, Inc., an affiliate of Tower Hill Insurance Group, for $7.1 Million.
Kemper will buy Superior National Companies. The winner of the bid for the state-ceased Superior National Insurance Group companies have been chosen by the California DOI. Kemper is buying Superior National Insurance Co., Superior Pacific Casualty Co., California Compensation Insurance Co., and Combined Benefits Insurance Co.
National Underwriter - Conning & Company reported that mergers and acquisitions (M&As) involving property and casualty (P&C) insurers in 1999 fell for the first time since 1993. One reason for the decline is that some prior deals have left acquirers in worse shape than before the deals.
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US Investment Corporation, a Pennsylvania insurance holding company announced today that it signed a merger agreement with Berkshire Hathaway, Inc. on April 20, 2000. US Investment Corporation and its three insurance companies, United States Liability Insurance Company, Mount Vernon Fire Insurance Company and U.S. Underwriters Insurance Company will become wholly owned subsidiaries of Berkshire Hathaway (BRK). The parties expect merger approvals in the third quarter of this year.
Acceptance Insurance Companies Inc. (NYSE: AIF) and Clarendon Insurance Group announced today that they have signed a definitive contract for Clarendon's purchase of Redland Insurance Company. Clarendon National Insurance Company will purchase the stock of Redland for cash and Acceptance will retain all Redland assets associated with Acceptance's crop insurance operations. Acceptance retains an option to repurchase Redland under certain circumstances and will be appointed the exclusive representative of Redland for the business Acceptance currently writes through Redland. Upon closing Redland will cede most of its business to Clarendon, which maintains the rating of A (Excellent) from A.M. Best Company.
Clarendon Insurance Group is a subsidiary of Hannover Reinsurance, the world's fifth largest reinsurer. Acceptance Insurance Companies Inc. is an insurance holding company providing specialized crop, property and casualty insurance products throughout the United States. American Agrisurance, the company's wholly owned crop insurance marketing subsidiary, is a widely recognized leader in the crop insurance industry.
Travelers Property Casualty (NYSE: TAP) agreed to purchase Reliance Surety for $580 million. The transaction is expected to close by the end of the second quarter. Travelers is a member of Citigroup (NYSE: C). Reliance Group Holdings, Inc. (NYSE: REL) (www.rgh.com), has specialized property and casualty insurance operations and an information technology consulting company. Reliance Group's total 1999 revenues were $3.2 billion, and assets at year-end were $14.6 billion.
Humana Inc. sold its workers' compensation services unit, Workers' Compensation Services (Humana WCS) through a management buyout. Humana WCS, to be renamed at the close of the transaction, will be headquartered in Longwood, Florida. This sale, combined with the earlier sale of the PCA P&C workers' compensation insurance company, totally removes Humana from the WC market. Humana WCS has offices throughout the southeastern and midwestern United States. It is one of the largest WC service companies in the nation. The company serves over 18,000 business customers representing more than 450,000 employees in 17 states. Humana WCS provides integrated loss cost solutions, including claims and URAC-accredited managed care administration, litigation and fraud management, loss prevention, and return-to-work programs for self- insured employers, insurance companies, and other third-party payers. Website is http://www.humanawcs.com/
Humana Inc. sold its Physician Corporation of America (PCA) Property & Casualty Insurance unit for $125 million cash in order to focus on its core managed care businesses. PCA will be sold to White Mountains Insurance Group Ltd.'s FolksAmerica Holding unit. The company plans to take $400 million to $500 million in charges in the fourth quarter for the evaluation of goodwill and for the pretax $65 million loss on the sale of PCA.
Farmers Insurance Group in Los Angeles, a member of Zurich Financial Services Group bought Foremost Corp of America. Farmers Group now includes Farmers Insurance Exchange, Fire Insurance Exchange, Truck Insurance Exchange, and Foremost.