Munich Re announced today that it is acquiring Cincinnati-based specialty insurer Midland Company for $1.3 billion.
The move follows the company's recent announcement that it planned to make a strategic realignment of the company's U.S. business.
Peter Roder, a Munich board member for the German reinsurer who will be responsible for overseeing the U.S. market, said, "We intend to grow profitably in the world's most important insurance market."
He added, "Establishing and building on a leading position in niche segments of the U.S. primary insurance market is a significant aspect of our strategy for the U.S.A. within our changing gear program."
In a separate statement, John W. Hayden, Midland president and chief executive officer, said, "We are very excited about this unique opportunity to take this premier specialty property and casualty insurance company and join forces with one of the largest reinsurance companies in the world."
He said the acquisition would allow the company to expand in ways it would not have been able to do without Munich Re's resources.
The deal calls for Midland's shareholders to receive $65 a share in cash, a 13.5 percent premium above yesterday's closing price of $57.27.
Munich Re will also assume all of Midland's outstanding debt obligations.
Midland's niche operations include insurance for manufactured housing and motor homes.
The company posted a combined ratio of 93 in 2006 and premium income of $832 million that year, Munich Re said.
In 2006, Munich Re wrote direct premiums per primary insurance of $747 million in the United States, and it estimated its total specialty at around $80 billion.
The deal is subject to shareholder approval and is expected to be completed in the second quarter of next year.
(This story was updated Oct. 18, at 12:30 p.m.)
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