Selective to Acquire Montpelier Re E&S Unit for $55M

September 21, 2011

Selective Insurance Group is acquiring Montpelier U.S. Insurance Company (acronym MUSIC), an excess-and-surplus lines unit from Montpelier Re U.S. Holdings Ltd., for $55 million. Selective said the deal would be completed before the end of the year, pending customary closing conditions and regulatory approvals.

The acquisition follows Selective’s earlier deal with Alterra Capital Holdings units to write commercial lines contract binding authority E&S policies, which was completed on Aug.1. (The Alterra commercial lines contract binding authority E&S business generated gross premiums written of $77 million in 2010.)

This latest acquisition of Montpelier U.S. Insurance Co.’s E&S lines unit will give Selective a new platform to grow its contract binding authority business.

“This acquisition of the MUSIC business is a very good timing for us because it provides the company and the infrastructure we needed to begin selling business from the Alterra renewal rights transaction that we conducted earlier in the summer,” Selective Insurance spokesperson Gail Petersen told Insurance Journal. Selective has been in the E&S business only since last month, when it made the renewal rights purchase from Alterra, she said.

“This is another product and service that we can provide to our agents and customers, which is part of our strategy to add more products and services to our portfolio and improve revenue and underwriting margin,” the Selective spokesperson said.

The latest acquisition includes an end-to-end information technology solution and financial reporting infrastructure that helps build the foundation Selective needs. These advanced systems will help Selective to integrate its entire E&S business more quickly and efficiently, according to the insurer.

In 2010, MUSIC generated $48 million in gross written premiums from its commercial lines contract binding authority E&S business. Montpelier Reinsurance Ltd. will retain all unearned premium reserves and all loss and loss expense reserve risk for any business written through closing. The deal is valued at $55 million, based on MUSIC’s net asset value, which includes tax benefit carry-forwards of $3 million, at June 30, 2011.

Selective will maintain the current operations in Scottsdale, Ariz., where the MUSIC office is located. Richard Nenaber, current president and CEO of MUSIC, will continue to lead the organization.

Founded in 1926, Selective Insurance Group is a Branchville, N.J.-based holding company for seven property/casualty insurance companies. Through independent agents, Selective offers primary and alternative market insurance for commercial and personal risks, and flood insurance underwritten by the National Flood Insurance Program.

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