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National Lloyds, American Summit to be acquired by ARC

A.M. Best expects ratings to remain stable

Affordable Residential Com-munities Inc. (ARC) of Englewood, Colo., announced it would buy Waco, Texas-based NLASCO Inc., a privately held property and casualty insurance holding company and the parent firm of National Lloyds Insurance Com-pany and American Summit Insurance Com-pany, ending months-long speculation surrounding the proposed acquisition.

A.M. Best Co. in an announcement commenting on the transaction said it expects National Lloyds, current financial strength rating of “A” (Excellent), and American Summit, current FSR of “B++” (Very Good), will continue to maintain favorable risk-adjusted capitalization and operating performance in line with their respective ratings.

Under the proposed transaction, NLASCO’s shareholders-C. Clifton Robinson and affiliates-will receive $105.75 million in cash and 1,218,880 shares of ARC common stock for a total consideration of $117.5 million.

Through National Lloyds and American Summit, NLASCO specializes in providing fire and homeowners insurance to low value dwellings and manufactured homes. National Lloyds primarily underwrites fire and homeowners insurance to low value dwellings through approximately 4,800 independent agents and is licensed in 18 states. It has a significant presence in Texas with approximately 3,300 independent agent relationships built over the past 40 years. American Summit primarily provides insurance products to the manufactured home market and is licensed in 27 states. The insurance companies share common underwriting, claims, administrative and financial management.

A.M. Best said it based its expectations on both companies operating as independent wholly owned subsidiaries of ARC with the existing NLASCO management and infrastructure remaining in place. Although growth is likely given the strategic opportunities associated with this transaction, A.M. Best anticipates growth will be measured and will not materially increase the overall risk profile of the statutory entities. While ARC maintains a relatively high financial leverage position, the majority of its debt is viewed by A.M. Best as operational given the predominately real-estate based activities of ARC.

According to ARC’s announcement, at the year ended Dec. 31, 2005, NLASCO had direct premiums written of $146.5 million, pretax income of $26.6 million and net income of $17.4 million and at Dec. 31, 2005, had a book value of $71 million. For the six months ending June 30, 2006, NLASCO had direct premiums written of $76 million, pretax income of $14.6 million and net income of $10.1 million and at June 30, 2006, had a book value of $78.3 million.

Affordable Residential Com-munities Inc., excluding discontinued operations, currently owns and operates approximately 57,350 homesites located in 276 communities in 24 states. The company said it is focused on the acquisition, renovation, repositioning and operation of primarily all-age manufactured home communities.

Topics AM Best