Florida-based national insurance broker Brown & Brown, Inc. has agreed to acquire The Wright Insurance Group, LLC for $602.5 million from Aquiline Capital Partners, Wright’s lead equity partner.
The Wright Insurance Group (TWIG), with $114 million in revenues, is a fee-based specialty insurance services company that underwrites and administers property/casualty risks through three distinct segments: Wright Flood, program services servicing reciprocals and self-insured groups and managing general agent services. It is the largest provider involved in the federal flood insurance program.
B&B will acquire 100 percent of the membership interests of TWIG and its subsidiaries, with the exception of WRM America Indemnity Co. (Uniondale, N.Y.).
The announcement said that Wright’s current leadership team will remain in place and will continue to operate from offices in Uniondale and Albany, New York, and St. Petersburg, Florida.
Wright’s operations will become part of Brown & Brown’s National Programs Division.
Wright’s public entity/program services/specialty operations in New York will report to Tony Grippa, regional vice president, and Wright’s flood program operations will report to Chris Walker, regional executive vice president.
The total net consideration to be paid for the ownership interests of Wright is $602.5 million. This amount is comprised of cash payments of $587.5 million for the program business, $7.5 million for Wright National Flood Insurance Co. (WNFIC) and $7.5 million for WNFIC statutory surplus, according to Brown & Brown.
Brown & Brown said it anticipates the transaction will yield future tax benefits in the amount of $108 million. In addition, contingent consideration of up to $37.5 million may be payable if Wright completes certain agreed upon acquisitions prior to closing. The transaction is expected to close in April of 2014 and is subject to customary closing conditions.
The transaction will be a cash acquisition (utilizing free cash and existing debt sources) and is not subject to financing conditions. The total consideration does not reflect any one-time transaction expenses, according to Brown & Brown.
A.M. Best Co. has placed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Wright National Flood Insurance Co. (WNFIC) in San Antonio, Tex. under review with developing implications.
A.M. Best said the ratings of WNFIC reflect its adequate risk-adjusted capitalization and relatively favorable operating results, as well as governmental support.
Offsetting these positive rating factors is the potential concentration of risk derived from excess flood policies, albeit small in nature, and changes in the macroeconomic environment, the rating agency said.
WNFIC derives significant revenue and fee-based income from its book of non-risk-bearing National Flood Insurance Program (NFIP) business, as well as from its excess flood coverage. A.M. Best said these factors are expected to significantly contribute to the company’s overall profitability. Upon completion of the proposed transaction with B&B, WNFIC is expected to continue its NFIP program, according to A.M. Best.