NU Online News Service, Sept. 20, 11:23 a.m. EST
Hamilton, Bermuda-based Montpelier Re Holdings Ltd. says it will sell its U.S. excess and surplus lines insurance business, Montpelier U.S. Insurance Company (MUSIC), to Selective Insurance Group.
Describing the reasons for selling MUSIC, Christopher L. Harris, president and CEO of Montpelier, says, "In the current environment, we believe now is an appropriate time to sharpen our underwriting focus on our core short-tail reinsurance lines. This transaction will make us more nimble and will allow us to redeploy additional capital into our Bermuda and London platforms, where we are seeing increasingly encouraging market conditions."
Branchville, N.J.-based Selective, meanwhile, says the acquisition will provide additional scale and geographic diversity to its new E&S business.
In July, Selective acquired the renewal rights for commercial-lines E&S policies written under contract binding authority by subsidiaries of Bermuda-based Alterra Capital Holdings Limited. At that time, Selective Chairman, President and CEO Gregory E. Murphy said, "As we execute on our strategy to introduce more products into our portfolio, we believe E&S is a natural extension of our current commercial-lines small business. Historically, the contract binding authority E&S business has been more profitable than the standard commercial-lines business, and this creates an opportunity to improve our revenue and underwriting margin."
Regarding the acquisition of MUSIC, Murphy says, "This acquisition includes an end-to-end information-technology solution and financial-reporting infrastructure that helps build the foundation we need to grow our contract binding authority business. These advanced systems will allow us to integrate our entire E&S business more quickly and efficiently."
Montpelier says consideration for the transaction will reflect MUSIC's net asset value at closing and will be payable in cash. Based on MUSIC's net asset value at June 30, the transaction is valued at approximately $55 million.
The transaction is expected to close in the 2011 fourth quarter.
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