American Financial Group said that its commercial transportation specialist, National Interstate, will become the exclusive underwriter of Atlas Financial Holdings’ paratransit book of business.
The deal comes during a time of struggle for Atlas, which is evaluating a number of strategic options. Atlas reported a $21.2 million underwriting loss and 109.8 combined ratio in 2018, though both numbers are an improvement from the year before.
The National Interstate/Atlas transaction became effective on June 10, and National Interstate said it will begin issuing policies under the new arrangement in the 2019 third quarter. National Interstate added that most of Atlas Financial Holdings’ $110 million paratransit business will be eligible for quotation under this arrangement over the first 12 month after the agreement’s inception.
Carl H. Lindner III, Co-CEO of American Financial Group, said the deal supports his company’s solid background in passenger transportation insurance.
“Passenger transportation is a business we know well, and we are well-positioned to act on opportunities in a market that remains in a correction mode,” Lindner said in prepared remarks. “This paratransit book of business is a great strategic fit for AFG. It complements National Interstate’s existing paratransit book, and will allow us to grow our footprint within an existing specialty transportation niche that has performed very well for us. We look forward to working with Atlas and its agents to provide a smooth transition for policyholders.”
Strategic Options
Atlas, which primarily focuses on commercial auto insurance in the United States, entered the deal during a challenging period. In April, the Chicago-based company disclosed it was reviewing strategic alternatives including “reviewing its capital allocation and opportunities” and also a potential sale of the company itself or certain assets.
In an announcement on June 10, Atlas framed the arrangement with National Interstate as “an initial outcome of its strategic review.”
It framed the agreement as allowing for Atlas to be an underwriting manager for National Interstate and transition new and renewal paratransit business to National Interstate paper for this particular book of business.
According to Atlas, the strategic arrangement combines Atlas’ niche platform, including analytics and other technology with American Financial Group and National Interstate’s “strong financial position and disciplined underwriting focus.”
As part of the deal, American Financial Group has rights including a warrant to acquire 19.9 percent of the outstanding Atlas Financial Holdings common stock for $0.69 per share, and an option to purchase renewal rights owned by the company in the future. Atlas noted that the program will continue to focus on small fleet operations, and that its paratransit business produced about $110 million of its gross written premium in 2018.
Atlas added it is working to establish MGA relationships with its other lines of business as well.
Sources: Atlas Financial Holdings, American Financial Group/National Interstate