Munich Re to Acquire Midland Co.

October 17, 2007

It didn’t take Munich Re very long to make good on its intentions to expand in then U.S. P/C market (See IJ web site Oct. 9). The world’s second largest reinsurer announced today that it has “concluded an agreement with US primary insurance company Midland – via its subsidiary Munich-American Holding Corporation – under which Munich Re will acquire 100 percent of the shares in Midland.” The acquisition price has bee set at $65 per share for a total amount of $1.3 billion (€916.77 million).

The acquisition strengthens Munich Re’s position in a niche segment of the US primary insurance market. Peter Röder, Munich Re Board member who takes over sole responsibility for the US market as of January I, 2008, commented: “We intend to grow profitably in the world’s most important insurance market. Establishing and building on a leading position in niche segments of the US primary insurance market is a significant aspect of our strategy for the USA within our Changing Gear program.”

He added that the “specialized business model of insurers like Midland helps us to mitigate the volatility of our traditional reinsurance business.” Midland’s operations focus on specialty insurance, which includes niche segments such as insurance for manufactured housing and motor homes.

Midland will become part of Munich Re’s American Modern Insurance Group, which the bulletin noted had “been able to post high earnings in the last few years and low combined ratios (2006: 93.0 percent; 2005: 93.8 percent; 2004: 96.3 percent).”

Midland’s premium income was $832 million (€679 million) in 2006. It is “one of the leading US specialty insurers; in segments like manufactured house insurance, it ranks among the top three providers,” said the bulletin.” Midland operates through specialist companies and via various distribution channels. “With this set-up and a presence in 50 states, Midland is excellently positioned,” Röder noted.

He added that as far as the U.S. market is concerned “we are building on the existing expertise in Munich and at Munich Re America, which has been active in the primary insurance market via subsidiaries since 1995. Our objective is a leading position in specialized primary insurance segments.”

Source: Munich Re – www.munichre.com

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