Southport Lane, a New York-based private equity firm, through its subsidiary Lonestar Holdco LLC, will acquire Dallas National Insurance Co., a Texas based property and casualty insurer.
Dallas National, a subsidiary of Dallas National Insurance Holdings, was founded in 2005. Terms of the deal were not disclosed.
While the transaction is subject to regulatory approval, it is anticipated to close early in the third quarter of this year.
“We are committed to providing additional capital to strengthen Dallas National and provide further security to policyholders,” said Glenn Weber, CEO of Southport Re, Southport Lane’s reinsurance affiliate in the acquisition announcement. “This acquisition underscores our long-term strategic interest in building a significant presence in the insurance sector. Dallas National enjoys a large pool of clients throughout the U.S., complementing our insurance and reinsurance operations.”
A.M. Best Co. recently downgraded the financial strength rating to B-(Fair) from B (Fair) and issuer credit rating to “bb-” from “bb” of Dallas National. The ratings agency said the action was the result of Dallas National’s deteriorated and unfavorable risk-adjusted capitalization following volatility in its underwriting performance in recent years.
A.M. Best said the company experienced significant underwriting loss in 2011, and strengthened its loss and loss adjustment expense reserves at year-end 2011, according to the ratings agency. These factors contributed to a sharp decline in policyholder surplus in 2011, according to A.M. Best.
Dallas National’s ratings will remain under review until the close of the transaction and the completion of A.M. Best’s analysis of its impact on the company’s ratings, the ratings agency said.