Merger-and-acquisition activity is heating up in the specialty lines insurance segment, with several carrier deals announced in the last few weeks.
RLI Acquires Contractors Bonding Insurance Co.
Peoria, Ill.-based insurer RLI Corp. said that it will acquire Contractors Bonding Insurance Co. (CBIC) through an acquisition of its holding company, Data and Staff Service Co. (DSS), for approximately $137 million in cash.
The acquisition, announced in late December 2010, is subject to regulatory approval and expected to close in the first quarter of 2011.
CBIC is a privately held, Seattle-based insurance company specializing in surety bonds and related niche property and casualty insurance products. The company serves more than 30,000 contractors and 4,000 insurance agents and brokers nationwide. CBIC operates 13 regional branch offices and is considered a leading writer of contractor license bonds in the Northwest, the company said.
“CBIC has a track record of success and provides new market and product expansion opportunities for RLI,” said Jonathan E. Michael, president and chief financial officer of RLI Corp. “The company’s geographic footprint, underwriting philosophy and culture align well with RLI’s business. We anticipate that the acquisition will be accretive to earnings within the first year of ownership.”
For the nine months ending September 30, 2010, CBIC’s GAAP financial results included total assets of $270 million and total revenue of $45 million. At closing, RLI said it expects shareholder’s equity to approximate $108 million. CBIC is rated “A (Excellent)” by A.M. Best Company and has achieved an underwriting profit in 13 of the last 14 years.
RLI is a specialty insurance company serving niche or underserved markets. With a diverse portfolio of property and casualty coverages and surety bonds, it has achieved an underwriting profit in 29 of the last 33 years, including the last 14.
HIIG Is New Holding Company For M&A Partners
Houston International Insurance Group is the new name for two companies following completion of the merger between Southwest Insurance Partners and Lightyear Delos Acquisition Corp.
HIIG is the parent company of the group’s property and casualty insurance companies, a life and health insurer, and its underwriting agency subsidiaries. The combined companies are admitted in 50 states and have surplus lines authority in 48 states for p&c business. Life and health insurance can be written in 42 states.
HIIG’s business primarily consists of small- and medium-size accounts written through its affiliated and nonaffiliated underwriting agencies. Some larger accounts will be written by the underwriting team in the Houston home office.
Stephen L. Way, chairman and chief executive of HIIG, said in a statement, “With the added dimension to our platform and the access to capital, we are in a strong position to continue to build for the future.”
Mr. Way added, “We anticipate making further transactions in the near term.”
HIIG is an insurance holding company headquartered in Houston with more than $1 billion in total assets, $625 million in investment assets, and more than $250 million in shareholders’ equity.
Best Places Clarendon Rating Under Review
A.M. Best Co. has placed Clarendon Insurance Group and its member companies under review with negative implications.
The Oldwick, N.J.-based insurance rating service has placed the “A-minus (Excellent)” financial strength rating under review after the insurer announced that its parent company, Hannover Re, planned to sell the operating companies of Clarendon to Enstar Group Ltd.
Best said the move reflects the uncertainties associated with the sale and changes that may be brought on by a change in ownership.
Clarendon consists of:
- Clarendon National Insurance Co.
- Clarendon America Insurance Co.
- Clarendon Select Insurance Co.
- Harbor Specialty Insurance Co.
The company is currently in run-off.
Hamilton, Bermuda-based Enstar said in a statement that it entered into an agreement to purchase Clarendon for approximately $200 million. The deal would be financed with a combination of a bank loan and cash on hand.
In a filing with the Securities and Exchange Commission, Enstar said the final price is subject to adjustment “based upon the consolidated surplus of the acquired company as of Dec. 31, 2010.
Enstar acquires and manages insurance and reinsurance companies in run-off, and also provides management and consulting services to the insurance industry.
(Clarendon rating reported by Mark E. Ruquet)
Everest Re Completes Acquisition Of Heartland
Everest Re Group has completed its previously announced potential acquisition of Topeka, Kan.-based managing general agency Heartland Crop Insurance for $55 million plus the agreed upon value of the net assets of Heartland.
The deal also includes an additional contingency of up to $13.5 million based on future performance, Hamilton, Bermuda-based Everest Re said.
Heartland is a specialty underwriter of crop insurance, offering multi-peril crop and crop-hail insurance products through its distribution network.
Joseph V. Taranto, Everest Re’s chairman and chief executive officer, said, “Heartland provides us the opportunity to grow and diversify our insurance platform into a market that has very attractive underwriting dynamics. The acquisition represents a key strategic step toward building out our insurance business into shorter-tail specialty lines and is expected to be accretive to earnings in the first year.”
ACE Completes Deal For Rain and Hail
Zurich-based insurer ACE Ltd. said it has completed its acquisition of Johnston, Iowa-based managing general agency Rain and Hail Insurance Service Inc. for approximately $1.1 billion in cash.
ACE said the purchase price reflects a dollar-for-dollar adjustment as required under the merger agreement to account for an increase to Rain and Hail’s book value that occurred between Dec. 31, 2009 and the closing of the transaction.
The company announced previously that the MGA would operate as a separate franchise.
“We are pleased to now officially welcome this fine organization to ACE,” said Evan G. Greenberg, chairman and chief executive officer of ACE, in a statement. “We look forward to the benefits that the combination of our two organizations will bring both in the near and longer term.”