The Kemper Insurance Companies announced plans to sell certain lines of its existing businesses to a new company being capitalized by private equity funds managed by Securitas Capital, LLC, a private equity investment firm affiliated with Swiss Re; The Cypress Group L.L.C.; Gilbert Global Equity Partners; and some members of Kemper’s existing management team.
Under the proposed transaction, the new company, which would operate under the Kemper name, would acquire the renewal rights to certain lines of the Kemper Insurance Companies. The lines of business included in the transaction are Kemper’s middle market offerings, such as workers’ compensation, package, auto and umbrella in support of these lines. The transaction will also include Kemper’s marine and small business accounts, professional liability business for architects and engineers, the Ohio-based GreatLand and Kemper’s fidelity and ERISA bond operations. These business lines generated approximately $1 billion in gross premiums in 2002.
The new company will be led by Robert Lindemann, senior vice president of Kemper and president of American Manufacturers’ Mutual Insurance Company, as well as other current Kemper executives. In addition, the management teams and much of the existing staff from the lines of business included in the transaction are expected to be involved in the newly formed company. The new company is expected to be capitalized with significant equity capital and supported by appropriate reinsurance.
Kemper is expected to receive $9 million (plus statutory surplus) for certain licensed insurance entities and a commission on renewals in the lines of business included in the transaction as well as other financial benefits.
John Shettle, Jr., senior managing director of Securitas Capital, indicated that he expects to close the transaction and have the new company running in the second quarter. “Since last fall we have been conducting extensive due diligence around Kemper’s business, and are impressed with the quality of the management team and the prospective operating results,” said Shettle. “We have shared our preliminary plans with A.M. Best and we expect that the new company would qualify for an ‘A-’ rating or better, which would enable us to grow what is already an attractive book of business. We are also very excited to be partnering with two high quality investors, The Cypress Group and Gilbert Global Equity Partners, in this transaction.”
The transaction is subject to satisfactory completion of due diligence by the parties involved, definitive documentation, regulatory and other approvals and consents as well as other conditions.
Securitas Capital, LLC is a private equity investment firm affiliated with Swiss Re. The firm is dedicated to investing in the insurance, risk management and financial services industries and manages investment funds with aggregate capital commitments of $600 million.
The Cypress Group L.L.C. manages two private equity funds with more than $3.5 billion in commitments. Cypress invests in privately negotiated transactions, targeting operating businesses and investing with management to foster continued growth.
Gilbert Global Equity Partners is an institutional investment firm that makes private equity and equity-related investments in both public and private companies around the world. Gilbert Global has a capital base of $1.2 billion. Its principal investors are Fortune 500 corporations, state and corporate pension funds, university endowments, insurance companies and financial institutions.