WRM America Holdings LLC, a specialty-lines property and casualty insurance and risk-management holding company, has reached a definitive agreement to acquire Fidelity National Financial's flood and excess flood business—Fidelity National Indemnity Insurance Co. (FNII)—for $210 million.
WRM says FNII will operate as a wholly owned subsidiary of WRM America, continuing to be led by Patty Templeton-Jones and G. Michael Sloane, who will become members of WRM America senior management.
William Fishlinger, CEO and chairman of WRM America, says, "The addition of the largest provider of federal flood insurance through the NFIP to the WRM America family of companies is another step in our continued growth as a specialty-lines insurance company, is representative of our dedication to current and future public-private partnerships, and considerably increases our fee-for-service offering."
WRM Holdings was formed in 2008 by Wright Risk Management, a risk-financing and insurance-management company, and Aquiline Capital Partners, a New York-based private-equity firm, with initial plans to serve the education market and plans to grow into the not-for-profit and municipal markets nationally.
Sloane says that "as a specialty-lines P&C insurance company with a history of successfully managing public-private partnerships, WRM America is the ideal partner to support the growth of the FNII flood and excess flood business.
Fidelity National Financial Chair William P. Foley II notes that FNII has become the largest flood provider with a ten-year track record of profitability. "We feel this transaction is a great opportunity to realize the value of the business we have created and re-deploy the capital into other uses that can continue to create increased value for our shareholders," he says.
Fidelity National Financial is a leading provider of title insurance, mortgage services, specialty insurance and diversified services.
The two companies say that the FNII is the nation's largest provider of federal flood insurance through the National Flood Insurance Program, capturing more than 17 percent of the total "Write Your Own" program market in 2010 and offering NFIP and excess flood insurance through a national network of independent agents and brokers.
Reacting to the deal on Friday, Oldwick, N.J.-based A.M. Best put the "A-minus" financial-strength rating of Fidelity National Group under review with negative implications. The action "reflects the anticipated decline in Fidelity's operating performance as a result of losing the profitable flood business," Best says, adding that because "the company has lost its natural hedge with the sale of the flood business, management has implemented several initiatives designed to improve underwriting performance and enhance operating results."
Under the deal terms, WRM America will acquire FNII and Fidelity National Insurance Services for $210 million consisting of roughly $122.5 million in cash, $75 million in a seller note and $12.5 million in an expected cash dividend.
The transaction is expected to close in the fourth quarter, subject to regulatory approval. Central operations of the FNII flood business will remain headquartered in St. Petersburg, Fla., and the group will retain its 220 dedicated employees.
Prior to the deal, Uniondale, N.Y.-based WRM America was serving its clients through several operating companies, including insurers rated "A" and "A-minus." The companies include: Wright Risk Management, which manages the New York Schools Insurance Reciprocal, the New York Municipal Insurance Reciprocal and the New York State Municipal Workers' Compensation Alliance; RMI Consulting; and WRM America Indemnity Co.
WRM's lead shareholder, Aquiline Capital Partners LLC, is a global financial-services private-equity firm lead by Jeff Greenberg, investing in financial-services enterprises across industries such as property and casualty insurance, banking, securities, asset management, life insurance and financial technology. Aquiline seeks to add value to its portfolio companies through strategic, operational and financial guidance.
Among Aquiline's other investments in the P&C space are Validus Holdings, a Bermuda-based short-tail lines reinsurer which just made a $3.5 billion bid for Transatlantic Holdings, a New York-based casualty reinsurer, and TigerRisk, a Greenwich, Conn.-based reinsurance intermediary.
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