Global Indemnity uses excess capital to buy American Reliable
Nasdaq-listed insurer Global Indemnity has agreed to acquire US carrier American Reliable from Assurant in a deal worth approximately $394mn - deploying a significant chunk of excess capital that has long hindered its return on equity.
The firm announced that its US division will pay approximately $114mn in cash to Assurant at the deal's closing - which could be increased to approximately $120mn to account for net earnings between 30 June and completion.
It will assume approximately $280mn in insurance-related liabilities, obligations and mandates.
American Reliable writes specialty personal lines and agricultural P&C insurance. The firm has offices in Scottsdale, Arizona, and Omaha, Nebraska.
Global Indemnity currently operates through businesses including Penn-America, Diamond State, United National, JH Ferguson and Bermuda-based River Re.
It writes non-standard US P&C covers, as well as cat, marine and casualty reinsurance.
Cindy Valko, Global Indemnity's CEO, said: "Strategically, American Reliable enhances Global's position in the US as a specialty personal, agricultural, and commercial property and casualty insurance provider.
"The combination of American Reliable with Global's Penn-America, United National and Diamond State operations will provide Global and American Reliable's employees and wholesale and MGA partners with complementary products, infrastructure and underwriting expertise."
Earlier in the year, The Insurance Insider revealed that Global Indemnity was under pressure from its investor base to make a deal due to its significant overcapitalisation.
At year-end the business had $873mn of shareholder equity and net written premiums of just $272mn - giving it an underwriting leverage of 0.3x.
Comparable businesses can typically secure net underwriting leverage of around 0.8x or 0.9x, suggesting that Global Indemnity has around 300 percent of the capital levels it would need to meet statutory levels and maintain a prudent buffer.
Aon Benfield Securities and Blackstone Advisory Partners advised Assurant.