Commercial auto insurer Lancer Insurance Co. has agreed to merge with another specialty insurer, Core Specialty, where it will operate under its own brand name as Core Specialty’s ninth specialty property/casualty business unit.
The deal marks Core Specialty’s first merger or acquisition since its recapitalization of StarStone U.S. in November 2020. The combined Lancer and Core Specialty will have more than $1 billion in equity capital and approximately 550 employees.
The transaction is expected to be accretive to Core Specialty’s earnings per share and return on equity in 2021. The merger was unanimously approved by both companies’ boards of directors and is expected to be completed during the third quarter of 2021.
The two companies previously partnered in January 2021 to launch an excess transportation program.
Lancer will bring Core Specialty more than 35 years of specialty commercial auto expertise that will extend the range of Core Specialty’s existing specialty P/C insurance portfolio.
Core Specialty said it operates through a business unit philosophy that allows its divisions local decision-making for underwriting, claims, and policy servicing.
Dave Delaney, Lancer’s CEO, will join the board of Core Specialty at closing and will work with teams on the integration of the businesses.
Matthew Jenkins, Lancer’s president and chief operating officer, will serve as president of Core Specialty’s Lancer Division after the closing.
Jeff Consolino will continue to lead the combined company as president and chief executive officer and Ed Noonan will continue as Core Specialty executive chairman.
“Core Specialty’s vision is to become the leading specialty insurer and the Lancer merger continues our very strong progress in our mission,” said Consolino.
Since the June 30, 2020 agreement by Core Specialty to recapitalize StarStone U.S., the company has grown from four business units through forming an excess and surplus property division, establishing a marine and energy division, separating and hiring new leadership for its errors and omissions, professional liability and directors and officers, management professional liability divisions and initiating an agriculture division.
Core Specialty operates through StarStone Specialty Insurance Co., a U.S. excess and surplus lines insurer, and StarStone National Insurance Co., a U.S. admitted markets insurer.
The Lancer Insurance Group is comprised of Lancer Indemnity Co. (New York), Lancer Insurance Co. (Illinois) and Lancer Insurance Company of New Jersey. While Lancer Indemnity Co. is currently a member of the Lancer Insurance Group, it is not being sold and is not part of the merger agreement.
Lancer Insurance Co. has served commercial transportation companies for more than 35 years, specializing in auto liability, physical damage, cargo and general liability coverages. The insurer has a network of 2,000 brokers.
Ratings firm AM Best has placed “under review with developing implications” the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of StarStone Specialty Insurance Co. and StarStone National Insurance Co., which are both domiciled in Wilmington, Delaware and subsidiaries of Core Specialty Insurance Holdings, Inc.
AM Best said the move reflects the “potential execution risks” associated with the two group’s merging, the need for AM Best to fully assess the financial and operational impacts of the merger, offset by the potential synergies recognized from this transaction.
Given that Core Specialty is in the early stages of a recapitalization plan, the relative rating of Lancer Insurance Group and the potential execution risk related to the merger of the organizations, AM Best said it does not anticipate “positive rating movement” at the immediate close of the merger. However, AM Best said it does anticipate that the “diversification of the business profile and the fortified management team could favorably impact rating dynamics as the new combined business model matures.”
AM Best has also placed “under review with developing implications” the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Lancer Indemnity Co. (New York), Lancer Insurance Co. (Illinois) and Lancer Insurance Company of New Jersey‚ collectively referred to as the Lancer Insurance Group.
While Lancer Indemnity Co. is a member of the Lancer Insurance Group, it is not being sold and is not part of the merger agreement. Post close, Lancer Indemnity Co. will no longer be part of the group or reinsured by Lancer Insurance Co., from which its rating was derived. Separately, AM Best said it will assign a stand-alone rating to Lancer Indemnity Co. once the merger is complete.
Lancer is being advised by Waller Helms Advisors and Dowling Hales as financial advisors, and Nixon Peabody LLP as transaction counsel. Core Specialty is being advised by J.P. Morgan as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP as transaction counsel.
Source: Core Specialty
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