Heritage soon to operate in 12 states, as NBIC acquisition approved

by Artemis on November 27, 2017

Heritage Insurance Holdings, Inc., a key cedant for the alternative reinsurance and insurance-linked securities (ILS) market, will soon be operating out of twelve U.S states, having received approval for its acquisition of Narragansett Bay Insurance Company (NBIC).

Heritage began the process of acquiring specialty home insurer NBIC’s parent NBIC Holdings, Inc. in August for an acquisition price of $250 million.

Narrangasett Bay has operations in the U.S. northeastern states, an area Heritage was not active, so with this acquisition Heritage is set to become a super-regional property insurance carrier, gaining entry into New York, New Jersey, Connecticut, Rhode Island and Massachusetts.

Heritage now has approval from the Insurance Division of the Rhode Island Department of Business Regulation to proceed with its acquisition of NBIC Holdings, Inc., the insurer said today.

After the acquisition closes, which Heritage has set for the 30th November, the company will benefit from underwriting across 12 U.S. states and generate more than $900 million of gross premiums written. Heritage said that this would be “immediately accretive to earnings per share and return on average equity.”

The expansion means Heritage will become an even more important ceding company for its reinsurance capital partners, many of whom are in the ILS and alternative market.

Heritage already has a significant reinsurance arrangement which includes $737.5 million of in-force catastrophe bonds, and these outstanding cat bonds all have the flexibility for their covered area to be expanded at a bond reset.

So Heritage could elect to cover the Narrangasett Bay portfolio of risks in the U.S. northeast under its catastrophe bond arrangements by utilising the flexible reset it seems, once the acquisition is finalised at the end of this month.

Bruce Lucas, the Company’s Chairman and CEO, commented on the acquisition news, “I am very excited to close the acquisition of NBIC.  The acquisition represents a significant step forward for Heritage as we continue to diversify our top line growth and geographic diversification.  Upon closing, Heritage will have over $900 million in gross written premiums spread across twelve states. This is a major milestone in our evolution from a Florida insurer to a super regional insurer with approximately two-thirds of our total insured value outside of Florida.

“NBIC is a seasoned company with a strong track record and talented management team, and will be a important asset for the Company as we continue our growth.  We look forward to working with NBIC’s employees and agents as we continue to continue to build a best in class super regional insurer.”

Narrangasett Bay already has some multi-year reinsurance protection that needs to expire before Heritage can take full advantage of the cost-savings it could now make with the enlarged portfolio of risks it will command from December.

The company previously said that it expects to find “meaningful reinsurance and operating synergies” with an anticipated circa “$22.5 million in run-rate reinsurance synergies” possible.

Heritage had also said that its own reinsurance program has been structured in a manner that would make absorbing NBIC’s risk relatively straightforward, with only minimal incremental coverage increase required.

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