Republic Companies Groups Notes Deal to Expand Relationship with TGA

November 14, 2005

Republic Companies Group Inc. has reached substantive agreement with regard to an expanded relationship with Texas General Agency Inc. (TGA), its largest managing general agency producer.

The contract will provide for continued participation by certain Republic insurance subsidiaries as policy issuing insurers for business produced by TGA for a three-year period following the pending acquisition of TGA by Hallmark Financial Services Inc. (Hallmark). The contract is contingent upon Hallmark completing the acquisition of TGA, the execution of definitive agreements and certain regulatory approvals.

Republic and TGA have had a continuous, mutually profitable business relationship since 1993 through an agency agreement that has been subject to annual review and negotiation. The TGA book of business has grown rapidly in recent years, from $31 million in 1999 to an estimated $120 million of gross premium in 2005. TGA specializes in light-to-medium size commercial automobile and general liability risks primarily in Texas.

For the 2005 year of account, Republic’s subsidiaries retain 40 percent of the net premium and underwriting risk of TGA’s production. Pursuant to the terms of the new contract, Republic’s subsidiaries will expand their net retention of the TGA book to a minimum of 50 percent and a maximum of 75 percent of total volume for 2006.

Republic will retain 40 percent to 50 percent of the TGA book of business in 2007 and a minimum of 30 percent in 2008. Additionally, Republic’s subsidiaries will continue to receive fees for issuing TGA’s book of business during the three year period.

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