White Mountains To Own Bulk Stake In NSM Insurance For $388M

White Mountains Insurance Group, Ltd. (NYSE:WTM) has agreed to acquire a majority equity stake in NSM Insurance Group for $388 million. The transaction is expected to culminate by the second quarter of 2018, subject to closing conditions.

Rationale Behind the Transaction

NSM Insurance Group, a leading specialty insurance program administrator, placing in excess of $500 million in premiums. The company covers a wide range of specialty insurance sectors such as collector cars, non-profit organizations, sports & wellness centers, specialty real estate and pet insurance. By virtue of its expertise, the company acts as an intermediary in the specialty insurance market.

Addition of NSM Insurance Group to its portfolio will thus help White Mountains add capabilities to the same as well as enhance the company’s operations.

Moreover, NSM Insurance Group will leverage the acquirer’ strengths with long-term capital base to better serve the latter’s insurance carrier partners.

Notably, White Mountains intends to fund the acquisition through a combination of cash in hand and new debt issued by NSM Insurance Group.

The P&C insurer has been effecting strategic buyouts to fortify its business. Last October, the company announced to buy 50% equity stake in DavidShield to emerge as a global leader in the accident and health market.

Shares of White Mountains have underperformed the industry in a year. The Zacks Rank #5 (Strong Sell) stock has lost 6.8% versus the industry’s 17.3% rally.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Insurers Following Suit

Adhering to the organic path, operational profile enhancement seems a sagacious strategy adopted by insurers as acquisitions make waves in the insurance sphere. While in March, AXA Group inked a deal to buy XL Group Ltd (NYSE:XL) for $15.3 billion in cash, Fidelity National Financial, Inc. (NYSE:FNF) agreed to purchase Stewart Information Services Corporation (NYSE:STC) for a $1.2-billion cash-stock deal.

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