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United Insurance to Buy Interboro for a Wider New York Base

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United Insurance Holdings Corp.UIHC has agreed to take over Interboro Insurance Company for $57 million. Shares of United Insurance gained about 1.3% in the last two trading sessions on optimism surrounding the acquisition. However, the purchase consideration is subject to amendment depending on the change in Interboro's GAAP net book value of $40.7 million on closing.

United Insurance will fund the transaction with $48.5 million in cash and through an $8.5 million promissory note to Interboro, LLC, the parent company of Interboro Insurance. These notes, carrying annual interest of 6%, are scheduled for maturity within 18 months after closing of the transaction.

With over a century in the business, New York-based Interboro Insurance is the oldest insurance company on Long Island. The company is authorized to operate in New York, South Carolina, Alabama, Louisiana, and Washington, D.C.

Pursuant to the transaction, United Insurance will take over about $55.0 million of homeowners' insurance gross written premium volume in New York and South Carolina. This transaction is in sync with United Insurance's initiatives to expand in New York.

United Insurance remains committed to serve customers better through collaborations with brokers and policyholders in New York and at the same time expedite its growth trajectory. The personal auto and other non-homeowners lines of business will be retained within Interboro, LLC and its insurance subsidiaries.

United Insurance has always considered prudent acquisitions that diversify and enhance its capabilities. This February, the company closed the acquisition of Family Security Holdings, LLC for $9 million. The buyout helped United Insurance to penetrate the Hawaii homeowners' market.

Following weaker-than-expected second quarter results, the Zacks Consensus Estimate for 2015 and 2016 has moved south. This property and casualty insurer presently carries a Zacks Rank #5 (Strong Sell).With optimism over the current acquisition we expect analysts to pull their estimates up, exerting an upward pressure on the Zacks Rank.

Travelling 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, AmTrust Financial Services, Inc. AFSI will buy Republic Companies, Inc and its affiliates from Delek Group Ltd. and Republic Insurance Holdings, LLC for approximately $233 million. Tokio Marine Holdings, Inc. also got shareholders' approval to acquire the HCC Insurance Holdings, Inc. HCC for $7.5 billion in cash.

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XL GROUP PLC (XL): Free Stock Analysis Report

AMTRUST FIN SVC (AFSI): Free Stock Analysis Report

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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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