Recently, Markel Corporation (MKL) announced a definitive agreement with OneBeacon Insurance Group, Ltd. (OB) to purchase the latter’s subsidiary, Essentia Insurance Company. The transaction is expected to culminate in January next year, subject to the attainment of regulatory approval and other customary closing conditions. However, financial and other terms of the transaction were not divulged.
OneBeacon will continue to maintain the loss reserves and unearned premium reserves related to the business written by Essentia before the completion of the takeover. These reserves will be written off by the company in due course.
Currently, Essentia underwrites insurance solely for Hagerty Insurance Agency and Hagerty Classic Marine Insurance Agency. The company will continue to do so following the takeover.
However, OneBeacon is ending its exclusive underwriting arrangement with Hagerty Insurance Agency. These companies had a five-year old business relationship that is being terminated due to inability to reach mutually acceptable terms for an extension.
Hagerty is a privately-owned insurance provider for classic cars, vintage boats, motorcycles and related automotive collectibles. The company is the global leader in providing insurance coverage for classic vehicles and caters to the biggest network of classic car owners.
Markel aims to ensure a smooth transition so that it can offer the same specialized products and services and claim handling that the clients and agents of Hagerty are used to. Moreover, the company’s association with Hagerty is expected to be strong since both the companies deal with specialty and niche insurance markets and focus on providing insurance coverage for collector vehicles.
Markel, which competes with The Travelers Companies, Inc. (TRV) and Meadowbrook Insurance Group Inc. (MIG), carries a Zacks #1 Rank (short-term Strong Buy). We maintain a long-term ‘Outperform’ recommendation on the stock.
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