Liberty
Mutual to Acquire Safeco Insurance in $6.2B Deal
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Insurance Journal
April 23, 2008
Liberty Mutual Group has agreed
to acquire all outstanding shares of common stock of Safeco Corp. for
$68.25 per share in cash in a deal that will make Liberty Mutual the
fifth largest U.S. property/casualty insurer and second largest surety
writer.
The proposed transaction, which
is valued at approximately $6.2 billion, has been approved by the
boards of directors of both companies. It is subject to approval by
Safeco's shareholders as well as the customary regulatory approvals and
conditions. The transaction is expected to close by the end of the
third quarter of 2008. The transaction is not subject to financing
contingencies.
Currently, Liberty Mutual Group
is the sixth largest property and casualty insurer in the United States
based on the company's 2007 direct written premium of $20.2 billion,
while Safeco had 2007 direct written premium of $5.9 billion.
Following the transaction,
Safeco will become part of Liberty Mutual Group's Agency Markets
business unit. Liberty Mutual Agency Markets had revenues of $5.6
billion in 2007. Combined, the organization will have about 15,000
independent agencies.
Gary Gregg, president of
Liberty Mutual Agency Markets, said that with revenue approaching $12
billion, Agency Markets will rank third in personal and fifth in
commercial property and casualty products distributed through
independent agents in the United States.
In light of the proposed
transaction, Safeco has postponed its previously scheduled annual
meeting of shareholders to have been held on May 7, 2008. Safeco will
provide information on the timing of the annual and special shareholder
meeting to approve the transaction announced today when available.
Even before adding Safeco,
Liberty Mutual Agency Markets is the largest regional independent
agency force with $7.3 billion in premium.
Safeco sells personal auto and
homeowners' insurance, and also small-case commercial insurance and
surety products. Safeco reported strong full-year operating results,
with net income of $707 million and a combined loss and expense ratio
of 91.4 percent. At year-end 2007, Safeco's consolidated financial
leverage totaled 17.6 percent.
"The acquisition of Safeco
by Liberty will provide Liberty with greater personal insurance depth,
greater competitive presence in the Western U.S., and greater national
scale," said Standard & Poor's credit analyst Michael Gross.
The Safeco deal is the second
big acquisition in the past year for Liberty Mutual. The insurer
finalized its acquisition of Ohio Casualty Corp. last August. The
company then announced a realignment of its regional agency company
organization to make room for Ohio Casualty and its $1.4 billion in
premium.
That transaction was valued at
$2.7 billion. Liberty Mutual said it funded the purchase with cash on
hand and short-term debt. The value per share was $44.00.
For more Property & Casualty
headlines, visit www.insurancejournal.com.
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