Business Moves

Tokio Marine, Philadelphia Insurance

Japan’s Tokio Marine Holdings, Inc. has agreed to acquire Philadelphia Consolidated, a U.S. property/casualty insurance company offering specialty commercial property and casualty insurance to targeted markets.

The total transaction value is approximately $4.7 billion. It is considered the biggest acquisition of a U.S. company by a Japanese financial firm.

The cash transaction is expected to close in the fourth quarter of 2008.

For 2007, Philadelphia Consolidated reported total revenues increased 22 percent to $1.53 billion. Net earned premiums were $1.38 billion, up 18 percent from 2006. Net income increased 13 percent to $326.8 million.

It also reported a 74.8 percent combined ratio and an after tax return on equity near 23 percent for 2007.

The acquisition of Philadelphia Consolidated marks a significant expansion into the U.S. market and complements Tokio Marine’s recent international growth initiatives. Philadelphia Consolidated, whose subsidiaries include Philadelphia Insurance, has 47 offices and approximately 1,400 employees across the U.S.

“Expansion of revenue and profits from international business is the driving force of Tokio Marine’s mid to long term growth strategy,” said Shuzo Sumi, president of Tokio Marine. “The acquisition of Philadelphia Consolidated is consistent with our aspirations of expanding globally and realizing a well-balanced business portfolio.”

In March, Tokio Marine completed the acquisition of London-based Kiln, a major Lloyd’s insurer.

Philadelphia Consolidated is primarily a commercial lines writer; its personal lines business is currently in runoff mode. Its subsidiaries underwrite commercial property/casualty, professional liability and personal lines insurance products for select industries or niches including, among others, nonprofit organizations; the health, fitness and wellness industry; select classes of professional liability; the rental car industry; automobile leasing industry; and personal property and casualty insurance products for the homeowners and manufactured housing markets.

Philadelphia markets through a group of “preferred agents” and a broader network of independent agents.

Its subsidiaries include Philadelphia Indemnity Insurance Co., a Pennsylvania-domiciled property/casualty insurer; Philadelphia Insurance Co., a surplus lines insurer; Liberty American Select Insurance Co., a personal lines company for the Florida homeowners and manufactured housing markets that is also licensed as an admitted carrier in 10 other states; Liberty American Insurance Co., a Florida domiciled company for the homeowners and the manufactured housing markets which is licensed as an admitted carrier in Florida; Maguire Insurance Agency, Inc., a captive underwriting manager that produces insurance primarily for the account of the company’s insurance subsidiaries, and Liberty American Insurance Services, Inc., a managing general agency domiciled in Florida that produces personal lines insurance primarily for the homeowners and manufactured housing market in Florida.

The acquisition is subject to the approval of Philadelphia Consolidated shareholders and the approval of various regulatory authorities in Japan and the U.S., as well as other customary closing conditions.

Arthur J. Gallagher, Gale Smith & Co.

Itasca, Ill.-based Arthur J. Gallagher & Co. acquired Gale Smith & Company, Inc. of Brentwood, Tennessee. Terms of the transaction were not disclosed.

Gale Smith & Co. is a retail insurance broker throughout the central and mid-southern U.S. The company specializes in the construction, transportation, religious, and not-for-profit industries with a focus on larger accounts.

Clyde Redford, Marshall Brown, Bill Carpenter, Christie Reeves and their associates will continue to operate in the Brentwood location under the direction of Mitchel Brashier, southeastern regional manager of Gallagher’s retail property casualty brokerage operation..

Barry, Evans, Josephs & Snipes; Wachovia

Charlotte, N.C.-based Barry, Evans, Josephs & Snipes has reestablished itself as an independent firm following the purchase of the company name, certain accounts and other assets from Wachovia Corp.

Founded in 1982, Barry, Evans, Josephs & Snipes Inc. had operated as a Wachovia subsidiary since 1999. This subsidiary entity will continue to operate under a new name.

Hanover, North Carolina

Massachusetts-based The Hanover Insurance Group opened a new office in Charlotte, North Carolina. David Bradford, regional vice president, North Carolina, will continue to lead the company’s efforts in the state.

HCC Insurance

Houston-based HCC Insurance Holdings, Inc. reached a settlement with the U.S. Securities and Exchange Commission over its stock option granting practices.

HCC said it consented to a permanent injunction against future violations of the reporting, books and records, and internal controls provisions of the federal securities laws.

The company said it neither admitted nor denied the allegations contained in the SEC’s complaint.

The settlement resolves the previously disclosed SEC investigation into the company’s historical stock option granting practices. The SEC made no allegations of fraud against the company and the company was not required to pay any civil penalty, fine, or money damages as part of the settlement.

ACE Limited

ACE Limited completed the previously-announced re-domestication of the company from the Cayman Islands to Zurich, Switzerland.

ACE said it continues to be registered with the Securities and Exchange Commission and prepare its financial statements in U.S. dollars and in accordance with U.S. GAAP reporting. Shareholders will continue to receive dividends in U.S. dollars, and the company’s common shares will continue to trade on the New York Stock Exchange under the ticker symbol ACE.

The business of the ACE Group of Companies is not materially affected by the re-domestication, according to the company.

Royal Bank of Scotland

Royal Bank of Scotland looks increasingly likely to shelve plans to sell its insurance arm and turn instead to other smaller deals to top up its capital, reported Reuters.

RBS announced plans to sell Britain’s largest car insurer in April. But the operation’s trading conditions have deteriorated and its top suitors have pulled out — leaving the bank with the unpalatable prospect of selling an attractive asset at a steep discount to its target price tag of around $14 billion.

The outcome, bankers and analysts say, could be scrapping the sale of a unit that they say RBS was never keen to sell, boosting its balance sheet instead with other sales.

Zurich Financial Services had been seen as the front-runner to buy the insurance arm but pulled out last month, leaving Germany’s Allianz and U.S. firm Allstate as the last serious bidders, people familiar with the matter have said. Travelers has also been named as a suitor, though its interest has cooled.

Topics Florida USA North Carolina Japan