NU Online News Service, April 17, 12:00 p.m. EDT
Pennsylvania has become the first of four states needed to approve a merger between Nationwide Mutual Insurance Co. and Harleysville Mutual Insurance Co.
The deal is said to be valued at about $800 million.
Regulators in Michigan, Ohio and New Jersey still need to approve the transaction. A majority of Harleysville Mutual members also need to approve it.
If all approvals go through, Harleysville Mutual will merge with Columbus, Ohio-based Nationwide Mutual, and Harleysville Group, the publicly traded company, will become a newly-formed subsidiary of Nationwide Mutual under the terms of a deal announced last September. Public stockholders are set to receive $60 per share in cash.
As part of Pennsylvania Insurance Commissioner Mike Consedine’s nod, for three years Nationwide cannot close, re-domesticate or cease business activity from the corporate office inHarleysville,Pa.or any other location without his consent.
“Harleysville and Nationwide have complementary product lines, and together the companies offer more choices to policyholders,” Consedine says in a statement. “I also applaud Nationwide’s decision and commitment to preserve the Harleysville culture and to keep jobs here in Pennsylvania.”
Harleysville, which has operated since 1917, will continue to write business under its brand for at least two years, Consedine adds.
The companies say the combined operations will have an estimated net surplus of more than $13.5 billion and over $16 billion in annual direct-written premiums.
Moody’s Investors Service did not have great things to say about the deal when it was announced. The credit rating agency said negative implications of the merger offset the positives.
Nationwide’s surplus will only grow 3 percent but its gross premiums and gross loss reserves will increase 8 percent and 14 percent, respectively. Nationwide’s catastrophe exposure will also increase after integrating Harleysville policyholders in the Mid-Atlantic and Northeastern states.
Nationwide ended 2011 by turning a profit in the fourth quarter, although net income for the period was down 87 percent compared to 2010.
The insurer took a $582 million loss for the year due to a record amount of weather-related claims paid.