Florida-based FedNat Holding Company has successfully completed its acquisition of the homeowners insurance operations 1347 Property Insurance Holdings, Inc. (1347 PIH) for $51 million.
The deal, first announced in February 2019, sees FedNat take over Maison Insurance Company, Maison Managers, Inc., and ClaimCor LLC (collectively Maison).
Maison is a property and casualty insurer focused primarily on coastal homeowners markets in Texas and Louisiana, with additional operations in Florida.
The $51 million purchase price was comprised of a 50/50 mix of cash and stock, including the issuance of 1,773,102 shares of FedNat common stock.
In addition, $18.0 million of outstanding surplus note obligations of Maison Insurance Company were repaid to 1347 PIH and were replaced with new surplus notes funded by FedNat.
“This acquisition represents a significant milestone in our long-term strategy to profitably expand FedNat’s core homeowners operations in the southeast United States,” said. Michael H. Braun, FedNat’s Chief Executive Officer.
“With the acquisition of Maison, we’ve grown our book of business in markets where we already operate and where we like the macro fundamentals, specifically Texas and Louisiana. Further, we will move quickly in integrating Maison to capture over $3 million in expected expense synergies from in-sourcing, which will be incremental to the $7 million of reinsurance synergies we’re already experiencing in this treaty year,” Braun explained.
“We expect the transaction to be accretive to EPS and ROE beginning in 2020 and beyond. Finally, we’re excited to welcome Doug Raucy and Dean Stroud and their team to the FedNat family.”
“FedNat is pleased to have 1347 PIH as a substantial shareholder in the Company,” added Bruce F. Simberg, Chairman of the Board of Directors of FedNat. “We are committed to creating value for our shareholders and believe the Maison acquisition will enable FedNat to build on our long-term track record of growth in book value per share.”
Douglas Raucy, President of Maison, also commented: “Mike and FedNat’s leadership have already proven to be great partners, and we cannot wait to fully integrate Maison into FedNat’s best-in-class operations.”
“Since Maison’s inception, our goal has been to establish ourselves in select homeowners insurance markets,” he said. “Now, we have the opportunity to significantly expand margins in our book of business, adopting FedNat’s prudent underwriting approach and reducing expenses in the near-term.”
Going forward, 1347 PIH will now operate as a diversified holding company of reinsurance and investment management businesses.
The Board of Directors will continue to evaluate the alternatives for the use of proceeds received from the sale of Maison, but expects to use a portion to help conduct the business of its reinsurance subsidiary, PIH Re Ltd., and to fund a new growth strategy focused on reinsurance, investment management and new investment opportunities.
As part of this transformation, 1347 PIH is considering changing its name, appointing a new President or executive officer, and evaluating options for a potential share buyback.
“The closing of this transaction represents a transformational change in 1347 PIH to a growth strategy focused on reinsurance and investment management,” said Kyle Cerminara, Chairman of 1347 PIH.
“The Board of Directors has been highly focused on building out this strategy and we will be providing a detailed outline for shareholders in the coming weeks. We look forward to our ownership of FedNat and believe Maison is in great hands with FedNat CEO Michael Braun and his management team.”
Raymond James & Associates served as exclusive financial advisor to FedNat while Nelson Mullins Riley & Scarborough LLP served as legal counsel.
