Arch Insurance North America, part of Arch Capital Group Ltd., has entered into a master transaction agreement to acquire the US MidCorp and Entertainment insurance businesses – which includes select specialty insurance programs – from Allianz Global Corporate & Specialty SE (AGCS) for a $450 million cash consideration to Allianz.
According to the announcement, the transaction includes risk transfer for Allianz, as Arch is assuming approximately $2 billion of loss reserves associated with the business.
All together, the cash payment from Arch, along with an estimated $1.0 billion of Allianz capital supporting the business, is expected to result in $1.4 billion of total transaction value for Allianz Group.
However, the total transaction value is said to be $1.8 billion, with an additional $400 million of cash required to support the business, a presentation from Arch explains.
The businesses that are being acquired by Arch Insurance are written by Fireman’s Fund Insurance Company and its subsidiaries, and collectively totaled $1.7 billion of gross premium written in 2023.
From what Reinsurance News understands, approximately 500 individuals supporting the business, which includes underwriting, claims and other professional staff, are expected to become Arch Insurance employees as part of the transaction.
The transaction is estimated to close in the second half of 2024 and is subject to regulatory approvals.
Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are acting as financial advisors to Arch.
While, Willkie Farr & Gallagher LLP are serving as the company’s legal advisor.
Matt Shulman, CEO for Arch Insurance North America, commented: “The acquisition of the MidCorp business meaningfully expands our presence in the U.S. middle market, a targeted growth area for Arch. This transaction will enhance our distribution relationships, broaden our product suite and expand our ability to participate in these underwriting-intensive middle-market lines. We are also excited to add a market-leading Entertainment business that complements Arch Insurance’s existing portfolio of specialty products.”
Tracy Ryan, AGCS Chief Executive Officer for North America and member of AGCS’s Board of Management, said: “This strategic step for our U.S. business allows us to leverage our strengths in these important market segments, where we have deep expertise in addressing our clients’ most complex risks. We are proud of our employees who have served our U.S. MidCorp and Entertainment clients and brokers over the years. We are confident that they will be a strong addition to Arch, ensuring continuity for our partners.”
Nicolas Papadopoulo, CEO for Arch Worldwide Insurance Group, added: “Combining this platform, broad set of client relationships and talented employee-base with Arch’s capabilities creates an attractive middle-market business that should further establish Arch Insurance as a market leader in the specialty insurance space. We take pride in our client-focused, inclusive culture and look forward to incorporating the experience and expertise of our new colleagues as we continue to raise the bar and fulfill our brand promise of Pursuing Better Together.”
