Recent Personal Lines Acquisitions Keep P/C Industry Busy

In the course of a week, two major property/casualty acquisitions were announced.

The Hartford announced it intended to acquire Navigators and Safeco announced it would acquire the personal auto and personal property book of business from QBE North America.

The Navigators Group announcement indicated the purchase by The Hartford would be an all-cash transaction in the amount of $2.1 billion.

Under the terms of the agreement, Navigators stockholders will receive $70.00 per share in cash upon the closing of the transaction. The $70.00 per share offer price represents a multiple of 1.78 times Navigators’ fully diluted tangible book value per share as of June 30, 2018 and an 18.6% premium to the 90-trading-day average stock price.

Stanley A. Galanski, Navigators president and CEO, said the transaction would create “exciting opportunities to deliver enhanced value to our brokers and policyholders.”

The Hartford’s Chairman and CEO Christopher Swift said the acquisition will help the insurer achieve its strategic and financial goals.

“It expands our product offerings and geographic reach, and adds tenured and proven underwriting and industry talent while strengthening our value proposition to agents and customers,” said Swift. “We are optimistic about our combined growth opportunities and expect the acquisition to generate attractive returns.”

The transaction, which was unanimously approved by Navigators’ Board of Directors, is subject to regulatory and stockholder approvals and other customary closing conditions, and is expected to close in the first half of 2019. Navigators expects to continue paying regular quarterly dividends consistent with past practice prior to closing. Completion of the transaction is not subject to any financing conditions.

Navigators’ founder, and shares controlled by other members of his family, which represent approximately 20 percent of total shares outstanding, have agreed to vote in support of Navigators’ transaction with The Hartford.

The agreement includes a “go-shop” provision designed to afford an opportunity for other potential acquirers to determine whether they are interested in proposing to acquire Navigators. Accordingly, for 30 days Navigators will have an opportunity to solicit competing acquisition proposals. If the Board of Directors accepts a competing proposal during the “go-shop” period that The Hartford does not match, the successful competing bidder would pay a termination fee to The Hartford.

Goldman Sachs & Co. LLC and Moelis & Company LLC acted as joint financial advisors and Sidley Austin LLP acted as legal advisor to Navigators in the transaction. Additional information regarding the transaction can be found in a Current Report on Form 8-K filed with the Securities and Exchange Commission and on Navigators’ website, navg.com, on the SEC Filings page, which can be accessed via the Investor Relations section menu.

Last week, QBE North America, an integrated specialist insurer, chose Safeco, a Liberty Mutual Company, to transition its personal lines business in 47 states. The agreement is effective August 15, 2018.

The personal insurance independent agency book of business, sold through more than 900 independent agents and brokers nationwide, consists of two primary lines of business: personal auto and personal property insurance. The agreement strengthens Safeco’s position in the personal insurance market and offers the insurer an opportunity to expand its distribution network. In addition, it enables QBE North America to focus on the businesses where it excels and can offer distinctive value to the market, including its specialty, core commercial, program, crop, Westwood and reinsurance businesses.

“As we sought to focus our strategy as an integrated specialist insurer, we thoughtfully chose Safeco for its ability to consistently deliver an experience of excellence to our agents and customers,” said Russ Johnston, CEO of QBE North America. “By intensifying our focus, we can leverage our applied expertise to innovate and deliver exceptional end-to-end solutions that not only meet but exceed customer expectations.”

“Safeco prides itself on providing innovative and industry-leading solutions to our agency partners. Our book transfer capabilities ensure a great experience for carriers, agents and customers alike,” said Gary Fischer, senior vice president of Distribution Strategy and Operations Support at Safeco Insurance. “Throughout this process, QBE’s dedication to their customers and independent agent partners has made this partnership particularly exciting to all of us as we work to provide a smooth transition.”

The terms of the transaction were not disclosed. Deutsche Bank Securities Inc. acted as exclusive financial advisor and Locke Lord LLP acted as legal counsel to QBE.