Ariel To Sell Valiant For $55 Million
Bermuda reinsurer Ariel Holdings Ltd. plans to sell Valiant Insurance Group Inc to First Mercury Financial Corp. for about $55 million.
First Mercury will purchase Valiant for an amount equal to Valiant’s tangible book value, which is anticipated to be approximately $55 million at closing. The Company will use cash from its insurance subsidiaries to complete the transaction. Under the terms of the agreement, Ariel has agreed to provide First Mercury with full protection related to the runoff of Valiant’s net loss and loss adjustment expense reserves and unearned premium reserves reflected on the closing date balance sheet. The transaction is subject to customary closing conditions and regulatory approvals and is anticipated to close in the fourth quarter of 2010.
The components of Valiant’s existing underwriting platform to be retained by First Mercury include primary and excess casualty, professional and management liability and marine classes of business. First Mercury intends to retain Valiant’s experienced underwriting teams that produce these classes of business. Classes of Valiant business that are not consistent with First Mercury’s specialty niche underwriting focus will be discontinued. Through May 31, 2010, gross written premiums for Valiant were approximately $34 million.
In the twelve months following the closing of the transaction, First Mercury anticipates that Valiant will write approximately $50 to $60 million of gross written premiums. Consistent with past practice to prudently use reinsurance on newer lines of business, First Mercury intends to retain approximately 33 percent of Valiant’s anticipated gross written premiums. The acquisition is expected to be accretive to First Mercury’s book value per share immediately at closing. First Mercury does not expect the transaction to have a material effect on 2010 earnings and expects the transaction to be modestly accretive to earnings in 2011.
