Why Is RLI Corp. (RLI) Up 3.4% Since Last Earnings Report?
Kemper Corporation KMPR has acquired Infinity Property and Casualty Corporation for $1.6 billion. The acquisition will leverage the company’s efforts to be a market leader in nonstandard auto insurance space. The transaction was announced on Feb 13.
Infinity Property and Casualty flaunts its status as one of the largest nonstandard auto insurers in the country, having generated direct written premiums of $1.4 billion in 2017. The company provides auto insurance with focus on the specialty, nonstandard segment. Kemper has heightened its concentration levels on the nonstandard auto business to improve it considerably and therefore, this buyout acquisition seems a strategic fit.
Combination of the two companies with complementary strengths will augment Kemper’s growth opportunities, diversification, financial strength and its ability to serve policyholders better. Also, the combined entity will result in a diversified portfolio across auto, home, life and health insurance with about $2.2 billion in nonstandard auto insurance premiums.
The transaction will be accretive to the acquirer’s bottom line by 10% to return on average common equity by more than 30 basis points (bps) and to return on average tangible common equity by more than 400 bps in the second year. Also, the buyer will benefit from annual pre-tax cost savings of about $55 million and an additional $5-$10 million of pre-tax earnings, resulting from the repositioning of Infinity’s investment portfolio.
Also, a balanced revenue mix and an enhanced cash flow are expected to amplify the company’s financial stability and cushion its additional resources to accelerate investments in growth opportunities.
Concurrently, Kemper appointed Teresa A. Canida as a director of the company. Prior to this, Canida worked in the directorial capacity since 2009 at Infinity Property and Casualty. With Canida joining Kemper, the company will now have 11 board members.
Shares of the company have outperformed the industry since it announced its impending acquisition of Infinity Property and Casualty. This Zacks Rank #3 (Hold) insurer has surged 32.6% against the industry’s decline of 7.1%.
Insurers Following Suit
Given the insurance industry’s all-time high available capital resource, there is a conspicuous rage for consolidations in the space of late. Recently, Brown & Brown, Inc. BRO announced that it will acquire Health Special Risk to add capabilities to its special risk and accident & health portfolio. Last month, Assurant, Inc. AIZ bought The Warranty Group to reinforce its footprint as an ace provider in the vehicle protection business. Also, Arthur J. Gallagher & Co. AJG has acquired Finergy Solutions Pty Ltd and Avantek Pty Ltd.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Brown & Brown, Inc. (BRO) : Free Stock Analysis Report
Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report
Assurant, Inc. (AIZ) : Free Stock Analysis Report
Kemper Corporation (KMPR) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research