Media Release: AGCS to focus on U.S. Large Corporate and Specialty insurance with sale of U.S. MidCorp and Entertainment businesses to Arch Insurance North America

Rhea-AI Summary

Allianz Global Corporate & Specialty SE (AGCS) has agreed to sell its Fireman’s Fund insurance businesses in the United States to Arch Insurance North America for $1.4 billion. The transaction includes a cash payment of $450 million and Arch assuming $2 billion of loss reserves. Approximately 500 employees will transfer to Arch as part of the deal. AGCS will focus on its Large Corporate and Specialty business in the U.S., leveraging its global capabilities.

Insights

Insurance Industry Analyst

The divestiture of Allianz's U.S. MidCorp and Entertainment insurance segments to Arch Insurance is a strategic realignment focusing on core strengths and market presence. By offloading these subsidiaries, Allianz is poised to concentrate on its Large Corporate and Specialty business, which aligns with its Allianz Commercial strategy. The sale includes a significant transfer of loss reserves, which suggests a move to streamline operations and reduce exposure to long-tail risks that are typical in the MidCorp and Entertainment sectors.

The transaction's value at $1.4 billion indicates Allianz's commitment to optimizing its capital allocation, which could lead to improved return on equity for shareholders in the long term. The movement of approximately 500 employees to Arch will also be a critical factor in maintaining service continuity, which is essential for retaining the existing customer base during the transition period.

Financial Analyst

From a financial perspective, the $450 million cash payment and the associated $1.0 billion of Allianz capital represent a substantial liquidity event. This transaction could potentially free up capital for Allianz, allowing for reinvestment in areas with higher growth prospects or returning value to shareholders. The assumption of $2 billion of loss reserves by Arch is a significant liability transfer, potentially improving Allianz's solvency ratios and financial stability.

It's important for investors to monitor the deployment of the freed-up capital and how effectively Allianz leverages its competitive advantages post-transaction. The focus on Large Corporate and Specialty business may drive profitability, considering the higher margins typically associated with specialty insurance products.

M&A Legal Expert

The transaction is subject to regulatory approvals, which is standard for deals of this magnitude in the insurance industry. Delays or challenges in obtaining these approvals could impact the expected close date in the second half of 2024. It is also worth noting the legal complexities involved in transferring insurance policies and loss reserves, which must be managed meticulously to avoid potential disputes or regulatory issues.

Furthermore, the integration of the transferred employees into Arch's operations will require careful legal navigation to ensure compliance with employment laws and contractual obligations. This human capital aspect is often underappreciated in M&A transactions but is important for maintaining operational excellence and client relationships.

• Allianz Global Corporate & Specialty SE (‘AGCS’) to sell its Fireman’s Fund insurance businesses in the United States to Arch Insurance North America for total transaction value of $1.4 billion
• AGCS will continue to leverage its competitive advantages in the strategically important U.S. insurance market through its Large Corporate and Specialty business as part of its Allianz Commercial strategy

MUNICH & NEW YORK--(BUSINESS WIRE)-- Allianz Global Corporate & Specialty SE (‘AGCS’), Allianz Group’s carrier for large corporate and specialty insurance, today announced an agreement to sell its U.S. MidCorp and Entertainment insurance businesses, underwritten via its Fireman’s Fund subsidiaries, to Arch Insurance North America, part of Arch Capital Group Ltd. (‘Arch’), for an agreed cash payment of $450 million reflecting the franchise value of the business. The transaction includes risk transfer for Allianz, as Arch is assuming approximately $2 billion of loss reserves associated with the business. The cash payment from Arch, together with an estimated $1.0 billion of Allianz capital supporting the business, is expected to result in $1.4 billion of total transaction value for Allianz Group. Approximately 500 employees from Allianz are expected to transfer to Arch as part of the agreement.

Going forward, AGCS U.S. will focus on its Large Corporate and Specialty business, where U.S. brokers and clients benefit from Allianz’s strong global and industry-specific capabilities across underwriting, claims, and risk consulting, including multinational insurance programs and alternative risk transfer.

“This strategic step for our U.S. business allows us to leverage our strengths in these important market segments, where we have deep expertise in addressing our clients' most complex risks,” said Tracy Ryan, AGCS Chief Executive Officer for North America and member of AGCS’s Board of Management. “We are proud of our employees who have served our U.S. MidCorp and Entertainment clients and brokers over the years. We are confident that they will be a strong addition to Arch, ensuring continuity for our partners.”

The businesses subject to sale are underwritten by Fireman’s Fund Insurance Company and its subsidiaries, namely American Automobile Insurance Company, Chicago Insurance Company, Interstate Fire & Casualty Company, and National Surety Corporation and collectively totaled $1.7 billion of gross premium written in 2023.

Subject to regulatory approvals, this transaction is expected to close in the second half of 2024.

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/

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.

These assessments are, as always, subject to the disclaimer provided below.

Cautionary note regarding forward-looking statements

This document includes forward-looking statements, such as prospects or expectations, that are based on management's current views and assumptions and subject to known and unknown risks and uncertainties. Actual results, performance figures, or events may differ significantly from those expressed or implied in such forward-looking statements.

Deviations may arise due to changes in factors including, but not limited to, the following: (i) the general economic and competitive situation in the Allianz’s core business and core markets, (ii) the performance of financial markets (in particular market volatility, liquidity, and credit events), (iii) adverse publicity, regulatory actions or litigation with respect to the Allianz Group, other well-known companies and the financial services industry generally, (iv) the frequency and severity of insured loss events, including those resulting from natural catastrophes, and the development of loss expenses, (v) mortality and morbidity levels and trends, (vi) persistency levels, (vii) the extent of credit defaults, (viii) interest rate levels, (ix) currency exchange rates, most notably the EUR/USD exchange rate, (x) changes in laws and regulations, including tax regulations, (xi) the impact of acquisitions including and related integration issues and reorganization measures, and (xii) the general competitive conditions that, in each individual case, apply at a local, regional, national, and/or global level. Many of these changes can be exacerbated by terrorist activities.

No duty to update

Allianz assumes no obligation to update any information or forward-looking statement contained herein, save for any information we are required to disclose by law.

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View source version on businesswire.com: https://www.businesswire.com/news/home/20240405865914/en/

Global/London: Hugo Kidston

Tel: +44 7881 803690

hugo.kidston@allianz.com



Munich: Philipp Keirath

Tel: +49 160 98 234 385

philipp.keirath@allianz.com



New York: Jo-Anne Chasen

Tel. +1 917 826 2183

jo-anne.chasen@agcs.allianz.com

Source: Allianz Global Corporate & Specialty SE

FAQ

What is the total transaction value for the sale of Allianz Global Corporate & Specialty SE's Fireman’s Fund insurance businesses in the United States to Arch Insurance North America?

The total transaction value is $1.4 billion, including a cash payment of $450 million.

How many employees are expected to transfer to Arch as part of the agreement?

Approximately 500 employees are expected to transfer to Arch.

What will Allianz Global Corporate & Specialty SE focus on in the U.S. after the sale of its Fireman’s Fund insurance businesses?

AGCS will focus on its Large Corporate and Specialty business in the U.S.

When is the expected closing date for the transaction between Allianz Global Corporate & Specialty SE and Arch Insurance North America?

The transaction is expected to close in the second half of 2024, subject to regulatory approvals.