Mercury Casualty Co., the largest insurance subsidiary of Los Angeles-based Mercury General Corp., agreed to buy Auto Insurance Specialists Inc. from Aon Corp.
AIS is an independent broker and producer of automobile insurance in California. It reported $400 million of direct premiums written during 2007.
The transaction is expected to close in the first quarter of 2009.
The purchase price of the transaction is $120 million plus a potential earn out of up to $34.7 million, payable during the two-year period following the transaction closing date.
The sale includes business transacted under the Auto Insurance Specialists Inc., PoliSeek and Aon Recreation Insurance brands.
Mercury said it plans to finance the purchase through a term loan, the terms of which are under negotiation. The company said it expects the acquisition to be slightly accretive to earnings.
Aon said the sale is consistent with its previously announced plan to shape the firm around risk management and commercial lines insurance brokerage, reinsurance brokerage, and human capital consulting.
In a meeting with Insurance Brokers and Agents of the West President-Elect Rick Dinger, Mercury executives George Joseph, chairman of the board of directors, and Gabriel Tirador, president and CEO, re-affirmed their commitment to independent agents, the association reported.
“Mr. Joseph told us the independent agency channel was the only way Mercury wanted to conduct business. He also said the purchase of AIS and Mercury’s plan to have AIS operate as an independent agency will protect other independent agencies and the Mercury brand,” Dinger said.
Mercury General Corp. and its subsidiaries predominantly sell personal automobile and homeowners insurance through independent producers in several states.