Kemper to Acquire Infinity in $1.4B Transaction
Kemper and Infinity announced that they have entered into a definitive merger agreement under which Kemper will acquire Infinity in a cash and stock transaction valued at approximately $1.4B, or $129.00 per share; the exchange ratio for stock consideration to be issued in the merger is fixed and was determined based on Kemper’s 20-trading day volume weighted average price as of February 12, 2018 of $64.40. Based on Kemper’s February 12, 2018 closing stock price of $57.75, the implied total consideration is approximately $1.3 billion, or $121.01 per Infinity share. The transaction creates a company with increased scale in nonstandard auto insurance and enhanced ability to serve policyholders .
Infinity is a provider of auto insurance focused on serving the specialty, nonstandard segment. With approximately 2,300 employees, 10,600 independent agents and $1.4 billion in 2017 direct written premiums, Infinity is one of the largest nonstandard auto insurers in the country.
“This compelling transaction combines two well-known brands with complementary strengths and cultures to form a leader in nonstandard auto insurance, and enhances Kemper’s overall growth opportunities, diversification, financial strength, and ability to serve policyholders,” said Joseph P. Lacher, Jr., Kemper’s President and Chief Executive Officer. “We look forward to welcoming the Infinity team to the Kemper family and working together to deliver greater choice to our policyholders through an expanded product offering and deeper relationships with our agent networks, while generating strong returns for our shareholders.”
Glen N. Godwin, Infinity Chief Executive Officer, added, “Together, our two companies have a terrific strategic and cultural fit. As part of a larger company, Infinity will have access to the capabilities and resources necessary to drive accelerated growth and better serve our policyholders and partner agents. In addition, Infinity shareholders will benefit from immediate and certain value for their shares as well as the opportunity to participate in the significant upside potential of the combined company.”
Compelling Strategic and Financial Benefits
- Combined company will have a more diversified portfolio with approximately $2.2 billion in nonstandard auto insurance premiums, an expanded customer reach through deeper agency relationships and greater efficiencies.
Broader Product Offering and Capabilities:
- Ability to leverage unique operational strengths, platforms, analytical capabilities and demographic insights to provide a unique set of products to our policyholders, while promoting growth of our business.
- More diversified suite of products across auto, home, life, and health insurance provides customers with greater choice at more competitive prices.
Enhanced Financial Position:
- The transaction is expected to be accretive to Kemper’s EPS in the first year, excluding Value of Business Acquired (“VOBA”) and one-time items, and is expected to be accretive to year two EPS by more than 10%, excluding restructuring and one-time items. Additionally, we expect the transaction to be accretive to return on average common equity (“ROACE”) by more than 30bps and accretive to return on average tangible common equity (“ROATCE”) by more than 400bps in year two following close.
- More balanced revenue mix and enhanced cash flow increases financial stability and provides additional resources to accelerate investments in growth.
- Expected to result in annual pre-tax cost savings of approximately $55 million, and an additional $5 to $10 million of pre-tax earnings resulting from the repositioning of Infinity’s investment portfolio. These are expected to be fully phased in by the end of the second year following close. These cost savings are expected to be achieved through the consolidation of redundant corporate functions and the optimization of the combined company’s systems, business processes and reinsurance programs.
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Kemper announced today that, as part of its response to the coronavirus (COVID-19) pandemic, it will provide a 15% credit to personal auto policyholders towards their April and May premiums, as well as committing $1 million to organizations focused on critical issues including food insecurity and supporting front-line medical personnel.