DCAP Group Inc., an upstate New York franchiser of independent agencies, is ditching its franchise insurance business as part of a strategic move to exit the retail insurance business as it morphs into a reconstituted property/casualty insurer.
The move comes as the New York State Insurance Department approved a plan to convert Kingston, New York-based Commercial Mutual Insurance Co. (CMIC) to a stock property/casualty insurance company that will be 100 percent-owned by DCAP.
In April, DCAP sold its 16-location brokerage business in New York, and also announced it was seeking a buyer for its remaining Pennsylvania agencies – the Atlantic Agency — as it raised money in anticipation for the conversion of CMIC.
DCAP said the New York agencies — operating as Barry Scott Agency and DCAP Accurate Agency — were sold to NII BSA LLC of Montvale, New Jersey for around book value.
“This transaction, along with a contemplated future sale of our three remaining Pennsylvania retail agencies, will achieve our goal of narrowing the company’s focus and better deploying our capital,” said Barry Goldstein, chairman and chief executive officer of DCAP.
Goldstein is also chairman of the board for CMIC.
The conversion plan must still be approved by two-thirds of CMIC policyholders, who would share in a distribution of $534,000 from the sale.
The new insurer will be called Kingstone Insurance Co., while DCAP’s name will change to Kingstone Cos. Inc.
According to regulatory documents, the sale comes more than a decade after financial problems began to surface at CMIC, which was founded in 1886. In 1998 and 1999, the company received a total $3.75 million infusion of cash from Eagle Insurance Co., following a several-years long expansion into downstate New York.
In 2006, Eagle sold its interest in CMIC to DCAP. That same year, independent accounting firm Weiser pegged the value of CMIC at around $5.5 million, according to the New York Insurance Dept.
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