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ProAssurance (PRA) Concludes NORCAL Mutual Buyout for $441M

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ProAssurance Corporation (PRA - Free Report) has completed the NORCAL Mutual buyout for $441 million. The deal was closed on May 5, 2021. The transaction materialized  after NORCAL’s demutualization following its members’ approval at a special meeting on Apr 26.

ProAssurance has taken stake of  more than 98% of the NORCAL Insurance Company stock. Notably, the latter is the successor of NORCAL Mutual. The acquired entity is Pennsylvania-based and a leading writer of medical professional liability insurance writes across 39 states.

The takeover is expected to deepen ProAssurance’s concentration on Medical Professional Liability Insurance. It willenhance its size and scale in the MPLI space, thus making the combined entity a leading specialty writer of liability insurance for healthcare professionals and facilities in the nation.

It will definitely enhance the acquirer’s geographical footprint and efficiencies.

Policyholders are also expected to enjoy better services and financial security through this addition. On the contrary, NORCAL will be able to gain traction from ProAssurance’s financial flexibility, diverse risk-transfer capabilities and a focus on serving policyholders efficiently.

Policyholders who chose to get NORCAL stock and offer it to ProAssurance will receive their allotted share of the converted company’s equity in cash. They are qualified for a share of the Contingent Consideration in an amount worth approximately $83 million. It depends on NORCAL’s incurrence of ultimate net losses between Dec 31, 2020 and Dec 31, 2023.

Transaction Details

The acquirer is funding the deal with $248 million of cash on hand.

The outstanding base consideration of around $191 million is in the form of contribution certificates issued to specific NORCAL policyholders in the conversion of NORCAL Mutual and those instruments are an obligation of NORCAL Insurance Company.

ProAssurance’s boasts a strong inorganic growth story which includes a slew of successful acquisitions and integrations. Its financial size and strength it was instrumental on this front. The acquisitions of American Physicians Service Group in 2010 and Eastern Insurance Holdings in 2014 substantially strengthened its position in the workers’ compensation market.

All these initiatives poise the company well for growth.

Zacks Rank and Price Performance

Shares of this currently Zacks Rank #3 (Hold) company have surged 59.5% in the past year, outperforming its industry’s growth of 54%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other companies in the same space, such as American Financial Group, Inc. (AFG - Free Report) , Selective Insurance Group, Inc. (SIGI - Free Report) and RLI Corp. (RLI - Free Report) have also gained 102.6%, 63% and 57%, respectively.

While American Financial and Selective Insurance sport a Zacks Rank #1 (Strong Buy), RLI Corp. has a Zacks Rank #2 (Buy) at present.

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