Commercial Insurers’ Stocks Flat in 2007; M&As Heat Up

Stock Prices: Commercial lines insurers’ stocks have been relatively flat in 2007. Chubb Corp. (NYSE:CB) posted the largest gain at 5 percent.

M&A Activity: The fourth quarter started with a bang as two large publicly traded companies were acquired by foreign insurers in October, a month in which approximately $4 billion in M&A activity occurred. In the largest investment in its history, MAPFRE S.A. announced the signing of a merger agreement with The Commerce Group Inc. (NYSE:CGI) in which MAPFRE would acquire 100 percent of Commerce. The shareholders of Commerce will receive $36.70 per share, which represents a 22.5 percent premium over the average share price of the previous 30 days. Commerce is the leading writer of non-life personal insurance lines in the state of Massachusetts. Also in October, Munich Re and The Midland Co. (Nasdaq:MLAN), a provider of specialty insurance products and services, signed a definitive merger agreement whereby Munich Re will acquire all of Midland’s outstanding stock. Stockholders of The Midland Co. will receive $65.00 in cash per share, a 13.5 percent premium above the Oct. 16, 2007 closing price of $57.27 and a 55 percent premium over Midland’s share price at the start of 2007.

ACE Ltd. (NYSE:ACE) announced that it signed a definitive agreement to acquire the high-net-worth personal lines business of the Atlantic Cos., headquartered in New York City and also known as Atlantic Mutual. This acquisition includes substantially all of the assets of the personal lines business of the Atlantic Cos., including certain systems, distribution arrangements and renewal rights.

Atlantic American Corp. (Nasdaq:AAME) announced that it entered into a definitive agreement with Columbia Mutual Insurance Co. of Columbia, Mo., to sell its regional property and casualty business unit. This unit consists of Georgia Casualty & Surety Co., Association Risk Management General Agency and Association Casualty Insurance Co. The purchase price, to be paid in cash, is equal to the adjusted statutory capital and surplus, as defined, of each company as of Dec. 31, 2007, plus $4.5 million.

Lastly, in the medical malpractice arena, The Doctors Co., a physician-owned medical malpractice carrier, became the largest insurer of physician and surgeon professional liability insurance in the United States following their announced acquisition of SCPIE Holdings Inc. (NYSE:SKP), a provider of health care liability insurance for $28.00 per share in cash. The price represents a premium of approximately 27 percent over the $22.09 per share closing price of SCPIE on Oct. 15, 2007, the last trading day prior to the announcement.

Capital Raising: Lightyear Capital LLC announced it has established Antares Holdings Limited, a newly formed Bermuda-based holding company whose businesses will include the sponsorship of a new Lloyd’s of London syndicate, Antares Syndicate 1274. Antares Syndicate 1274 has obtained approval, in principle, from the Lloyd’s Franchise Board to begin writing in 2008 with an underwriting capacity of GBP135 million (approximately US$270 million). The syndicate will be managed by Chaucer Syndicates Limited, a provider of third party syndicate services, and capital for it will be provided by Lightyear and its partners.

Also in the fourth quarter, Catlin Insurance Co. Ltd. issued catastrophe bonds with fully collateralized protection of $87.5 million for earthquake risk in the United States and $137.5 million for hurricane risk also in the United States.

LMC Capital LLC is a national investment banking firm focused exclusively on the insurance industry. Services include qualified, industry-specific advisory relating to mergers and acquisitions, capital raises and valuations. Phone: 704-943-2600. E-mail Info@LMCCapital.com. Web site: www.LMCCapital.com.

Topics Trends Mergers & Acquisitions USA Carriers Commercial Lines Business Insurance