Arch Insurance North America, part of Bermuda's Arch Capital Group Ltd., announced it has entered into an agreement to acquire Allianz Global Corporate & Specialty's US MidCorp and Entertainment businesses for $450 million in cash.
The transaction includes a transfer of risk to Allianz, as Arch assumes approximately $2 billion in loss reserves related to the business. Combined with the cash payment from Arch and the estimated $1 billion of Allianz capital backing the business, Allianz Group's total deal value is expected to be his $1.4 billion.
The business subject to the sale is underwritten by Firefighters Fund Insurance Company and its subsidiaries, namely American Automobile Insurance Company, Chicago Insurance Company, Interstate Fire & Casualty Company, and National Surety Corporation. Together, these businesses generate total premiums of $1.7 billion. AGCS said in a statement that it was written in 2023. (AGCS is a specialist insurance company in the corporate and specialty insurance business of the Allianz Group. Allianz acquired Fireman's Fund in 1990.)
As part of the deal, approximately 500 Allianz employees, including underwriting, claims and other professional staff, will transfer to Arch, the companies said.
AGCS US said it will now focus on large enterprises and specialized businesses.
“This strategic step in our U.S. operations allows us to leverage our strengths in these important market areas where we have deep expertise to address our customers' most complex risks.” AGCS said Tracy Ryan, CEO of North America and member of AGCS. AGCS' Management Board said in a media statement.
“The acquisition of the MidCorp business significantly expands our presence in the U.S. middle market, where Arch is targeted for growth,” commented Matt Schulman, CEO of Arch Insurance North America.
“This transaction strengthens our distribution relationships, expands our product portfolio, and expands our ability to participate in underwriting-intensive mid-market lines. “We are also excited to add a market-leading entertainment business that complements ours,” he added.
The transaction is expected to close in the second half of 2024, subject to regulatory approvals.
Goldman Sachs & Co. LLC and JP Morgan Securities LLC are acting as financial advisors to Arch, and Willkie Farr & Gallagher LLP is acting as legal advisor to Arch.
Arch Insurance North America, which includes Arch's insurance operations in the United States and Canada, wrote approximately $5.8 billion in gross premiums in these regions in 2023. The company offers a variety of property and casualty and specialty insurance products across market segments. Its U.S. operations are handled by Arch Insurance Co., Arch Specialty Insurance Co., Arch Property & Casualty Insurance Co., and Arch Indemnity Insurance Co. Canadian operations are handled by Arch Insurance Canada Ltd.
In March 2023, Allianz announced that it would reorganize its global commercial insurance division, including AGCS, as one of its go-to-market businesses under the trading name Allianz Commercial.
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