American National Group is to transfer Specialty Markets Group (SMG), a writer of credit-related insurance products based in the US, to Core Specialty.
Mark Walker will join Core Specialty as President of the newly formed Financial Services Division, which will operate as Core Specialty’s 16th specialty business unit within its Bond, Credit & Guarantee subsegment.
This subsegment is comprised of the Financial Services Division, the recently announced Mortgage Reinsurance Division and, upon the completion of the American Surety Company transaction, the recently announced Surety Division.
The current staff at SMG will become employees of Core Specialty.
As part of the transfer, Core Specialty has agreed to pay American National a renewal rights premium for the SMG business renewed over a 12-month period. It has also agreed to assume the unearned premium reserve associated with the SMG business.
Under a Prospective Quota Share Reinsurance Agreement, American National will cede, and Core Specialty will reinsure, 100% of the SMG business (net of applicable reinsurance) commencing January 1, 2024 until such time that necessary Core Specialty product filings have been approved and Core Specialty is writing SMG new and renewal business.
Until this is completed, American National will continue to issue new and renewal policies for which it will receive a fronting fee. SMG produced $388mn of direct premiums written in 2023.
According to the announcement, Core Specialty has also agreed it will not acquire any insurance company entities as part of the transfer, it also noted that the transfer does not include loss reserves associated with SMG which will be retained by American National.
Jeff Consolino, Core Specialty’s Founder, President, and Chief Executive Officer, said: “We are pleased to work in collaboration with American National for a second time after the 2023 acquisition of the Medical Stop-Loss business.
“The Specialty Markets Group business is a line of business we know well and we are excited to add this product line to our Bond, Credit & Guarantee subsegment. The products offered by the Specialty Markets Group have shown strong profitability over time, and the transfer of this business will add further diversification to our company. I would like to welcome our new Specialty Markets Group colleagues to Core Specialty.”
Core Specialty expects the transfer to be accretive to its earnings per share and return on equity in 2024.
Mayer Brown and Skadden, Arps, Slate, Meagher & Flom LLP, advised Core Specialty and American National, respectively.
