Alleghany Corp. has agreed to purchase all outstanding shares of California workers’ compensation writer Employers Direct Corp. for $195 million in cash.
EDC, which was founded in 2002, is an insurance holding company based in Agoura Hills, Calif. Through its wholly-owned subsidiary Employers Direct Insurance Co., it writes workers’ compensation on a direct basis in California.
EDC markets only in California where it reports insuring 740 of businesses with more than 130,000 employees. Its customers are California-based, mid-sized, private businesses. Its average policyholder pays annual premiums of about $240,000, according to the company.
At the end of 2005, EDC reported having more than $150 million in written workers’ compensation premiums.
Alleghany Corp., with $6.2 billion in assets and $2.5 billion in stockholders’ equity, is engaged in the property/ casualty insurance business through its subsidiary Alleghany Insurance Holdings LLC, which consists of RSUI Group, Capitol Transamerica Corp. and Darwin Professional Underwriters, Inc.
The approximately 175 employees of EDC are expected to remain with the company, as are its co-founders, Chairman, President and CEO James E. Little, and Vice Chairman, Executive Vice President and CFO Ronald A. Groden.
The transaction is between Alleghany Corp. and EDC shareholders, primarily Golden Gate Capital and a private equity fund managed by Swiss Re.
The transaction is subject to certain closing conditions, including the receipt of regulatory approvals. Upon closing, which is estimated to occur in the third quarter of 2007, Employers Direct will become an indirect wholly-owned subsidiary of Alleghany.
“Employers Direct has had substantial profitable growth during our nearly five years of operations, but the time had come to find an investor who could help us achieve our next level of growth. Alleghany provides Employers Direct with industry expertise, financial strength, and long-term stability,” Little said of the deal.
The insurance operating subsidiaries of Alleghany’s two wholly-owned insurance holding companies, Capitol Transamerica Corp. and RSUI Group, Inc., are all rated “A” by A.M. Best. Alleghany said it is currently in discussions with A.M. Best about obtaining a similar rating for EDC upon the closing of this transaction.