Medical professional liability insurer ProAssurance Corp. (NYSE: PRA) said it is acquiring monoline workers’ compensation insurer Eastern Insurance Holdings Inc. (NASDAQ: EIHI) in an all-cash transaction that values Eastern at $24.50 per share.
Eastern will become a wholly-owned subsidiary of ProAssurance. The transaction, with an aggregate value of approximately $205 million, is expected to close by January 1, 2014.
The board of directors of Lancaster, Pennsylvania-based Eastern has unanimously approved the merger and recommended that Eastern’s shareholders vote in favor of the transaction. Shareholder approval is not required for ProAssurance. The transaction is subject to customary conditions, including regulatory and Eastern shareholder approval.
The companies said there is no financing condition. Eastern will pay its previously announced September quarterly dividend of $0.11 per share and will be permitted to pay an additional $0.11 per share dividend if ProAssurance has not received regulatory approval for the transaction by December 31, 2013.
“This is another important strategic transaction for ProAssurance as we continue to build the insurance platform that will allow us to serve the needs of policyholders and shareholders in the years and decades ahead,” said ProAssurance Chairman and CEO W. Stancil Starnes.
Starnes said Eastern has a “strong, long-term position” in healthcare workers’ compensation that will allow Birmingham, Alabama-based ProAssurance to broaden the products it offers to its existing customers.
“Medical professional liability and workers’ compensation are ‘long-tailed’ lines which are best managed through core competencies that we both share, including disciplined underwriting, proactive risk management strategies, strong claims organizations, and a conservative approach to investing,” he said
Eastern President and CEO Michael Boguski called ProAssurance “the ideal long-term partner” for his firm.
ProAssurance said it will keep Eastern’s corporate office in Lancaster, Pennsylvania and its existing regional and satellite offices under the direction of Boguski and his management team.
“We are highly focused on acquiring companies with strong management and superior insurance expertise and have found that in the Eastern team,” said Starnes. “We are very pleased that Eastern’s senior executives have agreed to enter into long-term employment contracts in conjunction with the transaction.”
Eastern writes in 16 states in the Southeast, Midwest and Mid-Atlantic regions, with 65 percent of its business in Pennsylvania. About 9.2 percent is in Indiana, 6.6 percent in North Carolina and 4.3 percent in Virginia. In 2012, Eastern opened a Gulf South regional office in Mississippi and appointed additional agents in New Jersey, Georgia and Michigan.
In 2012, it saw its direct written premium grow 17.5 percent to top $180 million. Its combined ratio was 91.9. The company is rated “A” by A.M. Best.
Eastern Insurance Holdings includes:
ProAssurance operates in 50 states and the District of Columbia, writing medical professional liability principally through four subsidiaries: ProAssurance Indemnity Co. Inc., ProAssurance Casualty Co., Podiatry Insurance Co. of America (PICA) and its excess and surplus Lines carrier, ProAssurance Specialty Insurance Co. Inc. Its products liability for medical technology and life sciences is written through Medmarc Casualty Insurance Co. and Noetic Specialty Insurance Co. It also writes legal professional liability through a variety of its subsidiaries.
For the full year 2012, ProAssurance reported gross premiums of $536 million and net premiums earned of $551 million.
A.M. Best has assigned a rating of “A+” (Superior) to the ProAssurance Group (ProAssurance Casualty, ProAssurance Indemnity, and ProAssurance Specialty), and a rating of “A” (Excellent) to Medmarc Casualty Insurance Co., Noetic Specialty Insurance Co. and PICA. Fitch assigns a rating of “A” to ProAssurance Corp. and all subsidiaries.
ProAssurance Corp. is being advised in this transaction by Raymond James & Associates and the law firm of Burr & Forman, LLP. Eastern Insurance Holdings Inc. is being advised by Keefe, Bruyette & Woods, Inc. and the law firm of Stevens & Lee.