Carrier Stock Prices on the Rocks Thus Far in 2008 But M&As Robust

Stock Prices
Consistent with the market as a whole, the carrier sector has had a rocky start to the new year, trading down 10 percent.

M&A Activity
M&A activity in the property/casualty sector remained robust as the new year began. Employers Holdings Inc. (NYSE:EIG) announced that it executed a definitive agreement to acquire AmCOMP Inc. (Nasdaq:AMCP) for approximately $230 million, including the assumption of $37 million in debt. The acquisition will expand Employers’ workers’ compensation insurance operations to a total of 26 states. Employers will acquire all of AmCOMP’s outstanding common stock at a price of $12.50 per share. The deal follows six workers’ compensation transactions that were closed in 2007.

Earlier in January, North Pointe Holdings Corp. (Nasdaq:NPTE) announced it signed a definitive merger agreement to be acquired by QBE Holdings Inc., a subsidiary of QBE Insurance Group Ltd. Under the terms of the merger agreement, QBE will acquire all of North Pointe’s outstanding common shares for $16.00 per share. The purchase price represents an unusually high premium of 50 percent over the closing stock price of $10.65 on Jan. 2, 2008, as well as an above average earnings multiple of approximately 20x.

The Hanover Insurance Group Inc. (NYSE:THG) announced that it entered into a definitive agreement to acquire Verlan Holdings Inc. for $29 million. Verlan Holdings Inc. is a Silver Spring, Md.-based holding company that provides insurance to manufacturers and distributors of chemical-related products. Verlan Fire Insurance Co., its primary business, offers property coverage to small and medium-sized companies that manufacture, store, transport, and use chemicals such as paints and solvents. Verlan Fire is rated “A” (Excellent) by A.M. Best Co. and is licensed to write business in 27 states.

White Mountains Insurance Group Ltd. announced that White Mountains Re has acquired Bermuda-based Helicon Re Holdings Ltd. for $150 million. Helicon Re Holdings Ltd., parent of Helicon Reinsurance Company Ltd., had GAAP shareholders’ equity of approximately $153 million as of Nov. 30, 2007. In 2006 and 2007, Helicon Re provided quota share coverage to White Mountains Re. White Mountains Re did not renew the quota share for 2008 and Helicon Re was put into runoff.

In February, Meadowbrook Insurance Group Inc. (NYSE:MIG) and ProCentury Corp. (Nasdaq:PROS) announced they have executed a definitive merger agreement. Meadowbrook’s total gross written premium for 2007 was $346.5 million and ProCentury’s was $238.3 million. Total shareholders’ equity as of Dec. 31, 2007, for Meadowbrook and ProCentury was $301.9 million and $161.0 million, respectively. The acquisition will expand and complement Meadowbrook’s specialty lines capabilities with ProCentury’s insurance professionals and product expertise in the excess and surplus lines market.

Capital Raising
Mortgage insurer MGIC Investment Corp. (NYSE:MTG) has announced over $800 million in new capital raised. The net proceeds of the offerings will be used to increase the capital of Mortgage Guaranty Insurance Corp., MGIC’s principal insurance subsidiary, in order to enable it to expand the volume of its new business and for MGIC’s general corporate purposes.

Topics Mergers & Acquisitions Carriers