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American Financial Group, Inc. AFG intends to acquire part of property & casualty (P&C) insurer National Interstate Corporation NATL for $30.00 per share or $293 million in cash. The insurer will acquire only those shares that are not owned by Great American Insurance Company (“GAIC”), the wholly owned subsidiary of the acquirer. Presently, GAIC holds a 51% stake in National Interstate and has 11 directors in the board of the latter.
Based on National Interstate’s last closing price, the purchase consideration is at a premium of 37%. The per-share price translates into 1.70x National Interstate’s book value per share (excluding unrealized gains on fixed maturities) as of Dec 31, 2015, and a 25.9x 2015 net income from its operations per share. However, the acquisition is subject to approval from the special committee members appointed by National Interstate as well as the shareholders of the company.
This transaction is a win-win situation for both parties involved. While American Financial is prudently investing in business it is aware of, the company is also offering shareholders of National Interstate a premium pricing.
American Financial is a niche player in the P&C and annuity markets. The company has always eyed acquisitions to ramp up its inorganic profile. Over the past decade, the company has successfully made 11 acquisitions. Its previous takeover of Summit Holdings Southeast Inc., serves as another strategic fit. With the addition of Summit, the company included yet another specialty niche insurance business with a leading market position in the workers’ compensation business. Such strategic acquisitions also testify to the company’s judicious use of excess capital.
Acquisitions are a well-accepted growth strategy among insurers. Sun Life Assurance Company of Canada, the wholly owned subsidiary of Sun Life Financial Inc. SLF, acquired the employee benefits business of Assurant Inc. AIZ for $940 million.
American Financial presently carries a Zacks Rank #3 (Hold).
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SUN LIFE FINL (SLF): Free Stock Analysis Report
ASSURANT INC (AIZ): Free Stock Analysis Report
AMER FINL GROUP (AFG): Free Stock Analysis Report
NATL INTERST CP (NATL): Free Stock Analysis Report
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