Property and casualty insurer Core Specialty will acquire American Surety in a stock and cash transaction, marking the firm’s formation of a Bond, Credit & Guarantee subsegment, alongside other subsegments Property & Short-Tail, Specialty Casualty, and Fronted Programs.
Once the deal completes, which is expected in Q1 2024, American Surety will become the new Core Specialty Surety Division with two initial product lines: bail bonds and commercial surety bonds.
The new Bond, Credit & Guarantee subsegment will initially be comprised of the recently announced Mortgage Reinsurance Division and the Surety Division.
As part of the transaction, Core Specialty is providing a capital investment to American Surety before closing to be used to increase its capital base and for general corporate purposes.
American Surety will bring Core Specialty over three decades of surety expertise, and a Treasury-listing providing access to additional bonding opportunities.
It also brings $98 million in 2022 GAAP gross premiums written.
American Surety shareholders will receive a combination of cash at closing, plus an opportunity to earn shares of Core Specialty, although the number of shares received will depend upon the financial performance of the bail bonds and commercial surety bonds product lines during the five years following closing, explains the firm.
Jeff Consolino, Core Specialty’s Founder, President, and Chief Executive Officer, said: “We are delighted that American Surety will become our 15th Specialty Business Unit. We believe that the surety market represents a highly attractive market segment for us to enter given its strong underwriting profitability over time and barriers to entry.
“According to AM Best market data, the surety market included approximately $9 billion in direct premiums written in 2022 and produced a 10-year average combined ratio of 71%. We look forward to working with the American Surety team to further build this business.”
American Surety is being advised by Propel Advisory Group, Inc. as financial advisor, and Faegre Drinker Biddle & Reath LLP as transaction counsel.
Meanwhile, Core Specialty is being advised by Skadden, Arps, Slate, Meagher & Flom LLP as transaction counsel.
