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AmTrust Seeks Growth in P&C Business with Republic Buyout

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AmTrust Financial Services, Inc . AFSI has agreed to take over Republic Companies, Inc and its affiliates for about $233 million. The company will pay the consideration in cash and notes to the sellers - Delek Group Ltd. and Republic Insurance Holdings, LLC. The transaction, pending approvals, is expected to close in the first half of 2016.

AmTrust Financial will fund the transaction by $113 million in cash and $105 million in note. These notes, carrying an annual interest of 5.75%, are scheduled for maturity in four years.

With over a century in insurance business, Texas-based Republic generated total direct premiums of $711 million in 2014. Also, Republic provides insurance services to third parties. Since Republic largely operates in the Southwestern states, AmTrust Financial can draw leverage from its operations there. The acquisition also complements the acquirer's property and casualty, and service and fees businesses.

AmTrust Financial has always considered prudent acquisitions that diversify and enhance its capabilities. Last week, the company closed the buyout of Warranty Solutions, a Wells Fargo business from Wells Fargo & Company WFC for $158 million in cash. This buyout is expected to brace up its vehicle extended warranty business. Also, this August, AmTrust Financial agreed to buy Amsterdam-based N.V, Nationale Borg-Maatschappij and its affiliates from Egeria and HAL Investments. While this buyout will expand AmTrust's operations in more than 44 counties, it will also boost its surety and trade credit insurance business.

This Zacks Rank #2 (Buy) property and casualty insurer has been witnessing upward estimate revisions following a better-than-expected second quarter and endeavors to ramp up its operational profile. With a strong operating platform, sturdy balance sheets and initiatives to expedite growth track, the company seems well poised for long-term growth. The expected long-term earnings growth rate is currently pegged at 12%.

Following the inorganic route to ramp up the operational profile seems a well-accepted strategy among insurers as acquisitions rage this space. Recently, XL Innovate, the venture capital initiative of XL Group plc XL , acquired New Energy Risk, Inc. Also, United Insurance Holdings Corp. UIHC has agreed to take over Interboro Insurance Company for $57 million.

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XL GROUP PLC (XL): Free Stock Analysis Report

WELLS FARGO-NEW (WFC): Free Stock Analysis Report

AMTRUST FIN SVC (AFSI): Free Stock Analysis Report

UTD INSURANCE (UIHC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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