Validus Holdings said it has agreed to acquire specialty insurer Western World Insurance Group for $690 million in a deal that leaves the management team and brand of the specialty insurer intact.
Under the deal terms, Western World’s owners will receive $690 million in cash in exchange for 100 percent of the outstanding stock of Western World. Validus said it intends to use existing funds for the transaction.
Western World, through its subsidiaries, is a specialty lines insurance company and a pioneer in the binding authority business model that has a 50-year track record of profitability, Validus said in a statement.
Western World, headquartered in Franklin Lakes, N.J., offers products on a surplus lines basis and on an admitted basis through its subsidiaries. Western World’s three operating companies are domiciled in New Hampshire.
Western World’s March 31, 2014 adjusted GAAP book value is estimated to be $518.3 million.
The announcement said that Western World will continue to operate as a standalone business within Validus, led by its current management team.
The transaction brings Validus a U.S. insurance carrier with longstanding agency and customer relationships, Validus said.
In a statement announcing the deal, Ed Noonan, Validus’ chairman and CEO, said, “Bringing together Validus, a leader in the short-tail insurance and reinsurance market, and Western World, with its excellent U.S. distribution platform, outstanding management and industry-leading technology, creates a franchise that will provide compelling products and services for our customers.”
Noonan has made no secret of his desire to acquire a U.S. insurance presence, complementing his group’s Bermuda reinsurance operations and London-based specialty insurance operation, Talbot Underwriters.
“The U.S. market is the world’s biggest. We really have never scratched the surface of it in our direct insurance operations,” he said during a first-quarter earnings conference call. “While the rate of increase for pricing in the U.S. is slowing,” he said, “it’s still positive. Rates are broadly attractive. So I would expect to see us expanding our footprint in the U.S. as a growth source,” he continued during the earnings call.
In Monday’s statement, Tom Mulligan, Western World CEO, called joining Validus “a great outcome for Western World.”
“Validus brings capital and expertise in short-tail classes of business, which will advance the competitive advantages in all of our underwriting divisions,” Mulligan said.
Validus anticipates the closing to take place near the end of the third quarter of 2014, subject to regulatory approvals and other customary closing conditions.
Validus Holdings Ltd. is a provider of reinsurance, insurance and insurance-linked securities management operating through three primary segments: Validus Reinsurance Ltd., Talbot Holdings Ltd. and AlphaCat Managers Ltd.
Validus Reinsurance Ltd. is a Bermuda-based reinsurer focused on short-tail lines of reinsurance.
Talbot Holdings Ltd. is the Bermuda parent of the specialty insurance group primarily operating within the Lloyd’s insurance market through Syndicate 1183.
AlphaCat Managers Ltd. is a Bermuda-based investment adviser managing capital for third parties and the group in insurance-linked securities and other property-catastrophe reinsurance investments.
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