Meadowbrook Acquires Remaining Earnings from U.S. Speciality Underwriters

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Southfield, Mich-based Meadowbrook Insurance Group, Inc. announced today its termination of the Management Agreement associated with its acquisition of the business of U.S. Specialty Underwriters, Inc. (USS).

As previously announced, in April 2007, the company entered into an agreement to acquire the excess workers’ compensation business of USSU for a purchase price of $23.0 million.

In conjunction with the acquisition, the company entered into a Management Agreement with USSU. Under the terms of the Management Agreement, USSU was responsible for the daily administration and management of the business. USSU’s consideration for the performance of its duties was in the form of a management fee payable by the company based on a share of net income before interest, taxes, depreciation, and amortization. The Company retained the option to terminate the Management Agreement, at its discretion, based on a multiple of the management fee calculated for the trailing twelve months.

Effective Jan. 31, 2008, the company exercised its option to terminate the Management Agreement for a termination payment of $21.5 million.

Commenting on the termination of the Management Agreement, Meadowbrook President and Chief Executive Officer Robert S. Cubbin stated: “As we anticipated, we have executed on the second half of the economics of the USSU transaction. To date, we have been very pleased with the execution of this acquisition and look forward to continued growth and solid performance in the excess workers’ compensation business.”

USSU is based in Cleveland, Ohio, and produces fee income for the company by underwriting excess workers’ compensation coverage for a select group of insurance companies.

Meadowbrook is a risk management organization, specializing in alternative risk management solutions for agents, professional/trade associations, and small to medium-sized insureds.

Source: Meadowbrook