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Arch Capital's (ACGL) Unit Completes Buyout of Somerset

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Arch Capital Group Ltd.’s (ACGL - Free Report) subsidiary Arch Reinsurance Ltd. (Arch Re) recently completed the buyout of Somerset Bridge Group Limited, Southern Rock Holdings Limited and affiliates (Somerset).

Somerset offers insurance services in the UK and specializes in private motor and commercial insurance. It remains focused on disciplined growth, by virtue of actuarial pricing strategy, customized pricing model and extensive internal, external datasets as well as modelling techniques. Having a proven track record of profitable growth, it emphasizes on improving customer experience and reducing costs with a diversified multi-channel distribution strategy through its well-established brands.

The transaction, announced on Jun 23, 2021, included buyout of Somerset’s motor managing general agent, distribution capabilities through direct and aggregator channels, affiliated insurer and fully integrated claims operation.

The transaction is a strategic fit for Arch Re, as the acquirer will leverage better insurance solutions, customer service, strong product and distribution capabilities of Somerset along with backing from Arch Capital Group’s financial strength.

Somerset’s full-value chain platform is expected to boost motor and distribution capabilities of Arch Re in the UK.

Furthermore, the deal will provide support to Arch Re’s UK motor coinsurance and reinsurance capacity with an integrated platform.

With the takeover of Somerset, customers, stakeholders and third-party capital providers will get an improved proposition from the combined entity backed by analytical capabilities and capital management of Arch.

The insurer has made significant efforts to boost its inorganic growth through strategic acquisitions. These, in turn, helped it expand internationally, add capabilities, enhance operations and diversify business.

In July 2021, Arch Capital completed the buyout of Watford Holdings, a multi-line Bermuda reinsurance company. In March 2021, the company entered into a share purchase agreement with the Westpac Group to acquire Westpac Lenders Mortgage Insurance Limited (WLMI) to expand in Australia and diversify earning streams at attractive risk-adjusted returns. The acquisition of WLMI is expected to fortify Arch Capital’s Australian LMI flow of business from Westpac Bank. It will further boost the insurance provider’s position as the only globally diversified insurer of mortgage credit risk.

Other Acquisitions in the Same Space

There have been a host of acquisitions in the insurance space of late, given its significant capital availability. Horace Mann Educators Corporation (HMN - Free Report) agreed to buy Madison National Life Insurance Company to boost its presence in the education market. State Auto Financial Corporation agreed to merge with Liberty Mutual Holding Company. Athene Holding Ltd. agreed to acquire Foundation Home Loans. The deal will offer Athene better investment opportunities in high-quality yield assets.

Price Performance

Shares of Arch Capital, currently carrying a Zacks Rank #2 (Buy), have gained 23.4% in the past year compared with the industry’s increase of 25%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

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