NORCAL Group to be acquired by ProAssurance

ProAssurance Corporation and NORCAL Group have signed a definitive agreement under which NORCAL will become a part of ProAssurance in a $450 million transaction following the demutualisation of NORCAL Mutual Insurance Company (NORCAL Mutual), NORCAL's ultimate controlling party. The demutualisation and the acquisition agreement are mutually contingent, and are subject to required regulatory and policyholder approvals.

ProAssurance said that, based on available estimates of premium, the combination of these companies is expected to create the nation's third largest specialty writer of liability insurance for healthcare professionals and facilities. The companies are targeting to close the transaction by the end of 2020, subject to required approvals.

This transaction is expected to deliver multiple strategic and financial benefits, including enhancements to scale and capabilities, access to the California physicians market at a time when the healthcare professional liability market is starting to harden, and an expected $18 million in pre-tax synergies.

“These synergies will consist of corporate and back-office expenses, staffing, and other cost areas such as technology and real-estate, along with consolidation of reinsurance and investments,” said ProAssurance. “We anticipate the transaction will be accretive to earnings in the second year of ownership, and generate highly attractive returns to shareholders over the longer term as well.”

Ned Rand, president and chief executive officer of ProAssurance, added: "Bringing together these two great organisations provides ProAssurance and NORCAL with a transformational opportunity to enhance the services we can deliver to our customers and distribution partners, while creating significant long-term value for ProAssurance shareholders.

"Much like ProAssurance's predecessors, NORCAL was founded by physicians in the 1970’s to serve the professional liability insurance needs of physicians. NORCAL's history and physician-focused culture make it a perfect fit for the ProAssurance family.

"For over 40 years, ProAssurance and its predecessors have navigated the peaks and valleys of the long cycle characteristic of our businesses. This announcement serves as an example of what we have always believed: it is during the most challenging stages of the long cycle that the greatest opportunities arise."

Scott Diener, president and chief executive officer of NORCAL, said, "We are thrilled to be partnering with ProAssurance. Given today’s challenging healthcare environment, both organisations will benefit significantly from the formation of this enhanced company. Combining with ProAssurance brings tremendous strategic value to NORCAL through increased financial strength, access to new and innovative products for policyholders, and the increased scale of our core services and data analytics. The completion of this transaction will enhance and expand NORCAL's ability to serve its customers in the highly competitive MPL industry as we strive to carry out our mission."

Mike Boguski, president of ProAssurance's Specialty Property & Casualty division, added: "This transaction is an exciting combination of healthcare professional liability industry leaders. Strategically, this combination provides us with a national platform, geographic diversification, deep penetration in the physician market, best in class talent, and access to high quality distribution partnerships. We look forward to working with the exceptional employees and distribution partners at NORCAL to create a premier organization to serve the evolving healthcare market on a national basis."

The boards of directors for both companies have unanimously approved the transaction, which now requires the approval of NORCAL Mutual policyholders and appropriate state and federal regulators. Eligible NORCAL Mutual policyholders will be asked to vote on the plan of conversion and at the same time will be asked to select how they will be compensated for their mutual company interest in NORCAL Mutual.