Insurers’ Stocks Down 14%; Middle Market Carriers Active in Intermediary Acquisitions

Stock Price: Commercial lines stocks mirrored those of major indices in 2008, trading down 14 percent.

Mergers & Acquisitions: Middle market carriers continue to be major players in the acquisition market as they look to wholesalers and managing general agencies (MGA) to add scale and distribution during the soft market. ProAssurance Corp. (NYSE:PRA) agreed to acquire Houston-based Mid-Continent General Agency Inc., an MGA that produces approximately $25 million a year in premiums from ancillary health care providers and other professional liability coverages. HCC Insurance Holdings Inc. (NYSE:HCC) also made two MGA/wholesaler acquisitions, picking up specialty divisions from Arrowhead General Insurance Agency and U.S. Risk Insurance Group Inc. Likewise, FCCI Mutual acquired Mississippi Insurance Managers. FCCI Mutual and Mississippi Insurance Managers jointly owned Brierfield Insurance Co. and as part of the transaction, FCCI acquired the remaining 20 percent of Brierfield. Also active in the carrier sector, the above mentioned HCC acquired California-based Surety Co. of the Pacific. HCC expects the acquisition to add $20 million of premium in 2009.

ProAssurance Corp. also announced two carrier acquisitions during the quarter. The PICA Group will become part of ProAssurance through an all cash, sponsored demutualization. A provider of professional liability to doctors of podiatric medicine, the PICA Group insures approximately 9,800 podiatric physicians in 47 states and the District of Columbia. PICA also insures other health care professionals and provides errors and omissions liability insurance for a small, but growing, number of independent insurance agents through its PACO subsidiary. PICA wrote $99 million in premium in 2007, has $284 million in total assets, and has maintained an A.M. Best rating of “A-” (excellent) for the past 13 years.

Earlier in the quarter ProAssurance announced it is expanding its legal professional liability business by purchasing the Georgia Lawyers Insurance Co. ProAssurance is also establishing new relationships with agencies that produce legal professional liability business in 11 additional jurisdictions in the Mid-Atlantic and the West. These moves complement its existing $10 million book of legal professional liability business in the Midwest. GLIC insures approximately 2,700 lawyers in Georgia and had direct written premium of approximately $5.5 million in 2007.

The fifth workers’ compensation transaction of 2008 was announced in October. Companion Property & Casualty Insurance Group announced that it has acquired all of the insurance and insurance-related service operations of AmFed Holding Co. Inc., the largest workers’ comp insurance and self-insurance administration company in Mississippi. The acquisition includes AmFed National Insurance Co. and AmFed Casualty Insurance Co., along with operating entities AmFed Cos. LLC and AmFed Insurance Services LLC. AmFed administers more than $75 million in annual premiums in Mississippi.

In November, State Automobile Mutual Insurance Co. agreed to acquire Rockhill Insurance Group of Kansas City, Mo. With approximately $122 million in capital and surplus, Rockhill writes approximately $135 million in specialty property/casualty direct written premium through four insurance company subsidiaries. Key business segments include commercial property, general liability for residential construction, commercial umbrella and surety; a monoline workers’ compensation company, RTW; and Absentia, a third party administrator providing workers’ compensation claim and loss control services. Rockhill writes business on a non-admitted basis in 49 states and the District of Columbia and is licensed on an admitted basis in 42 states and the District of Columbia. Rockhill was started in November 2005 with $145 million in capital from private equity investors.

Topics Mergers & Acquisitions Trends Carriers Commercial Lines Workers' Compensation Business Insurance Mississippi Insurance Wholesale