Executives at Munich Re said they see the $1.3 billion acquisition of Midland Company that was announced today as a logical step in their plans to broadly enter the United States insurance market, giving them access to sales outlets they did not have.

During a press conference, Peter R?der, the member of the board of management who will be responsible for overseeing the U.S. market, and Tony Kuczinski, the chief executive officer-elect of Munich Re America, discussed the decision to acquire the Cincinnati-based specialty insurer.

The deal, which is expected to be completed during the second quarter of next year, is still subject to shareholder and regulatory approvals.

As part of the transaction the German-based reinsurer in Munich will assume Midland's outstanding debt obligations of $100 million.

Mr. R?der said the deal will be funded with the insurer's own funds and that the acquisition is the next step in Munich Re's expansion plan.

He said the type of specialty businesses Midlands is involved in offers short-tail focus. He said the company plans to fully integrate Midlands into the Munich Re group as "part of our strategy to enhance profitability."

He also said the Midlands markets, which include a major book of business in manufactured housing and related fire and physical damage insurance, will help the U.S. operation with "sustained growth over market cycles."

The main focus for the future for Munich Re will be cross selling and development of new products as it attracts new producers.

But, said Mr. R?der, "we are still a major reinsurance player in the United States and will continue to be."

The deal, said Mr. Kuczinski, gives Munich Re access to distribution outlets it did not have before. The channel now includes managing general agents, specialty and independent agents, financial institutions, lenders, affinity groups, and manufacturers and dealers of home products.

One piece of Midland's business, barge transport, will be sold off, the executives said. They said it is a profitable business worth about $100 million, but it does not fit in with Munich Re's insurance portfolio.

The barge unit may be sold to the Hayden family, the executives said, which owns 45 percent of Midland's stock, but no final decision has been reached.

When asked about job cuts, Mr. Kuczinski said the business plan calls for growth and that no elimination of positions is contemplated. The company employees about 1,200 people he said.

"This deal allows us to complement what we do on the reinsurance side with minimal conflict," he said. "It is a plus, plus for them and us."

When asked if Munich Re paid too much for Midland, Mr. Kuczinski said "we are comfortable where [the price] is."

Midland's stock traded throughout the day on the NASDAQ well above $60 a share.

On news of the acquisition, A.M. Best Co. said it is keeping the financial strength rating of "A-plus (superior)" for Munich Re and "A (Excellent)" for Munich Re America unchanged.

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Munich Re Execs Call Midland Purchase A Logical Step

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