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Arch Insurance North America to Acquire Allianz’s U.S. MidCorp and Entertainment Insurance Businesses

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Arch Insurance, a part of Arch Capital Group (ACGL), is acquiring U.S. MidCorp and Entertainment insurance businesses from Allianz Global Corporate & Specialty SE for $450 million. The deal is estimated to require $1.4 billion in capital. The acquired businesses wrote $1.7 billion in gross premium in 2023, with 500 employees expected to join Arch. This move aims to expand Arch's presence in the middle market and enhance its product suite.
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The acquisition of AGCS's U.S. MidCorp and Entertainment insurance businesses by Arch Insurance represents a strategic move to solidify its position in the middle-market segment. The $1.7 billion gross premium written indicates a significant revenue stream and the integration of 500 professionals could potentially enhance operational efficiencies. This move aligns with Arch's history of sustained topline growth, indicating a calculated approach to expansion.

From a market perspective, the deal may alter competitive dynamics, potentially increasing Arch's market share and bargaining power. The addition of specialty programs may offer Arch a diversified portfolio, which is often attractive to investors seeking companies with a robust risk management strategy. However, the capital requirement of $1.4 billion to support the acquisition raises questions about the impact on Arch's financial leverage and return on investment, which stakeholders should monitor closely.

Arch Insurance's decision to invest $450 million in cash for the acquisition requires scrutiny of its capital allocation strategy. The investment represents a substantial cash outflow and the estimated $1.4 billion capital requirement suggests a significant commitment of resources. Investors should evaluate the expected return on this investment, considering the five-year streak of double-digit growth could be an indicator of a potentially accretive acquisition.

Furthermore, the deal's closing timeline, set for the second half of 2024, introduces a period of uncertainty during which market conditions could evolve. Regulatory approval processes also add a layer of risk. The involvement of reputable financial advisors such as Goldman Sachs and J.P. Morgan is reassuring, yet stakeholders should remain vigilant about the execution risks and the integration process of the acquired entities into Arch's operations.

The insurance sector is characterized by its reliance on underwriting expertise and distribution relationships. Arch's acquisition of a market-leading Entertainment business and expansion into middle-market lines should be evaluated for synergies in underwriting and claims handling. The move to enhance distribution relationships and product offerings is indicative of a strategy to capture a broader customer base and deepen market penetration.

However, the success of such integrations often hinges on the cultural fit and the smooth transition of employees. The commitment to 'Pursuing Better Together' suggests a focus on maintaining an inclusive culture, which is critical for retaining talent and ensuring business continuity. The long-term benefits of this acquisition will largely depend on Arch's ability to leverage the expertise of the new team and effectively integrate the specialty programs into its existing suite of products.

The transaction will enable further expansion into the middle-market property and casualty segment.

NEW YORK--(BUSINESS WIRE)-- Arch Insurance North America (Arch Insurance), part of Arch Capital Group Ltd. (Nasdaq: ACGL) (Arch), today announces it has entered into a master transaction agreement to acquire the U.S. MidCorp and Entertainment insurance businesses, including select specialty insurance programs, from Allianz Global Corporate & Specialty SE (AGCS) for a $450 million cash consideration to Allianz. Arch estimates its capital requirement to support the business will be approximately $1.4 billion.

The businesses being acquired are written by Fireman’s Fund Insurance Company and its subsidiaries and collectively totaled $1.7 billion of gross premium written in 2023. Approximately 500 individuals supporting the business, including underwriting, claims and other professional staff, are expected to become Arch Insurance employees as part of the transaction.

“The acquisition of the MidCorp business meaningfully expands our presence in the U.S. middle market, a targeted growth area for Arch,” said Matt Shulman, CEO for Arch Insurance North America. “This transaction will enhance our distribution relationships, broaden our product suite and expand our ability to participate in these underwriting-intensive middle-market lines. We are also excited to add a market-leading Entertainment business that complements Arch Insurance’s existing portfolio of specialty products.”

“We are proud of our employees who have served our U.S. MidCorp and Entertainment clients and brokers over the years,” said Tracy Ryan, AGCS Chief Executive Officer for North America and member of AGCS’s Board of Management. “We are confident that they will be a strong addition to Arch, ensuring continuity for our partners.”

Arch Insurance currently provides a wide range of property, casualty and specialty insurance options across market segments and wrote approximately $5.8 billion of gross premium in North America in 2023. This transaction builds upon Arch Insurance’s North America business that has delivered double-digit topline growth for five consecutive years.

“Combining this platform, broad set of client relationships and talented employee-base with Arch’s capabilities creates an attractive middle-market business that should further establish Arch Insurance as a market leader in the specialty insurance space,” said Nicolas Papadopoulo, CEO for Arch Worldwide Insurance Group. “We take pride in our client-focused, inclusive culture and look forward to incorporating the experience and expertise of our new colleagues as we continue to raise the bar and fulfill our brand promise of Pursuing Better Together.”

This transaction is expected to close in the second half of 2024 and is subject to regulatory approvals.

Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are acting as financial advisors to Arch, and Willkie Farr & Gallagher LLP is serving as the Company’s legal advisor.

An Arch slide presentation regarding the master transaction agreement and the related transactions described will be posted to the Presentations section of our website, https://ir.archgroup.com/news-events-presentations/presentations/default.aspx.

About Arch Insurance North America

Arch Insurance North America, part of Arch Capital Group Ltd., includes Arch’s insurance operations in the United States and Canada. Business in the U.S. is written by Arch Insurance Company, Arch Specialty Insurance Company, Arch Property & Casualty Insurance Company and Arch Indemnity Insurance Company. Business in Canada is written by Arch Insurance Canada Ltd.

About Arch Capital Group Ltd.

Arch Capital Group Ltd. (Nasdaq: ACGL) is a publicly listed Bermuda exempted company with approximately $21.1 billion in capital at Dec. 31, 2023. Arch, which is part of the S&P 500 Index, provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly owned subsidiaries.

About Allianz Commercial

Allianz Commercial is the center of expertise and global line of Allianz Group for insuring mid-sized businesses, large enterprises and specialist risks. Among our customers are the world’s largest consumer brands, financial institutions and industry players, the global aviation and shipping industry as well as family-owned and medium enterprises which are the backbone of the economy. We also cover unique risks such as offshore wind parks, infrastructure projects or Hollywood film productions. Powered by the employees, financial strength, and network of the world’s #1 insurance brand, we work together to help our customers prepare for what’s ahead: They trust us in providing a wide range of traditional and alternative risk transfer solutions, outstanding risk consulting and Multinational services as well as seamless claims handling. Allianz Commercial brings together the large corporate insurance business of Allianz Global Corporate & Specialty (AGCS) and the commercial insurance business of national Allianz Property & Casualty entities serving mid-sized companies. We are present in over 200 countries and territories either through our own teams or the Allianz Group network and partners. In 2023, the integrated business of Allianz Commercial generated around €18 billion in gross premium globally. https://commercial.allianz.com/

Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward−looking statements. This release or any other written or oral statements made by or on behalf of Arch Capital Group Ltd. and its subsidiaries may include forward−looking statements, which reflect the Company’s current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward−looking statements.

Forward−looking statements can generally be identified by the use of forward−looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or their negative or variations or similar terminology. Forward−looking statements involve the Company’s current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: adverse general economic and market conditions; increased competition; pricing and policy term trends; fluctuations in the actions of rating agencies and the Company’s ability to maintain and improve its ratings; investment performance; the loss of key personnel; the adequacy of the Company’s loss reserves, severity and/or frequency of losses, greater than expected loss ratios and adverse development on claim and/or claim expense liabilities; greater frequency or severity of unpredictable natural and man-made catastrophic events, including pandemics such as COVID-19; the impact of acts of terrorism and acts of war; changes in regulations and/or tax laws in the United States or elsewhere; ability to successfully integrate, establish and maintain operating procedures as well as integrate the businesses the Company has acquired or may acquire into the existing operations; changes in accounting principles or policies; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; availability and cost to the Company of reinsurance to manage our gross and net exposures; the failure of others to meet their obligations to the Company; an incident, disruption in operations or other cyber event caused by cyber attacks, the use of artificial intelligence technologies or other technology on the Company’s systems or those of the Company’s business partners and service providers, which could negatively impact the Company’s business and/or expose the Company to litigation; and other factors identified in our filings with the U.S. Securities and Exchange Commission (SEC).

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. All subsequent written and oral forward−looking statements attributable to us or persons acting on the Company’s behalf are expressly qualified in their entirety by these cautionary statements. The Company undertakes no obligation to publicly update or revise any forward−looking statement, whether as a result of new information, future events or otherwise.

Source — Arch Capital Group Ltd.
Tag — arch-corporate-insurance

Arch Media Contact:

Greg Hare

Arch Capital Services LLC

ghare@archgroup.com

Stephanie Perez

Arch Capital Services LLC

stperez@archgroup.com

Source: Arch Capital Group Ltd.

FAQ

What is Arch Capital Group 's ticker symbol?

The ticker symbol for Arch Capital Group is ACGL.

How much is Arch Insurance acquiring U.S. MidCorp and Entertainment insurance businesses for?

Arch Insurance is acquiring the businesses for $450 million.

How much capital is estimated to be required to support the business after the acquisition?

Approximately $1.4 billion in capital is estimated to be required to support the business.

How much gross premium did the acquired businesses write in 2023?

The acquired businesses wrote $1.7 billion in gross premium in 2023.

How many employees are expected to join Arch as part of the transaction?

Approximately 500 employees are expected to join Arch as part of the transaction.

When is the transaction expected to close?

The transaction is expected to close in the second half of 2024.

Who are the financial advisors to Arch in this transaction?

Goldman Sachs & Co. and J.P. Morgan Securities are acting as financial advisors to Arch.

Who is serving as the legal advisor to Arch in this transaction?

Willkie Farr & Gallagher LLP is serving as the Company’s legal advisor.

Arch Capital Group Ltd.

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