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United Fire Group Divets its Affiliate to Kuvare US Holdings

Zacks Equity Research

United Fire & Casualty Company, an affiliate of United Fire Group, Inc. UFCS, has reached a definitive agreement to divest its subsidiary United Life Insurance Company to Kuvare US Holdings, Inc. for a total cash consideration of $280 million. The divestiture is intended to intensify focus on its property and casualty business.

Details of the Deal

The sales consideration represents a multiple of 1.2 times GAAP book value and 1.4 times GAAP book value excluding unrealized investment gains of Kuvare US Holdings. United Fire intends to utilize the sale proceeds capital deployment like, share repurchases, payment of both regular as well as extraordinary dividends to shareholders and strategic buyouts.  

The transaction is anticipated to culminate in the first-half of 2018, subject to mandatory closing conditions and regulatory approvals.

This divestment will enable the company to further build on the success of its property and casualty operations. This in turn will position the company for increased profitability, consolidate financial performance as well as boost shareholders value.

With the sale, United Fire Group will continue to invest in its successful property and casualty as well as surety operations including enterprise analytics and a new multi-year technology platform, which will enhance its core underwriting decisions and productivity.

On the other hand, Kuvare US Holdings will benefit from United life’s exceptional employees’ deep distribution relationships and complementary product portfolio. This in turn will add capabilities to better serve its clients and distribution partners.

United Fire Group strives to grow via divestitures and organic initiatives as these diversify and strengthen its portfolio. The company will be able to concentrate in its core business segment which would poise it for its future growth and profitability thereby, strengthening its financial performance and enhancing value for shareholders.

United Fire Group strives to grow via divestitures and organic initiatives as these diversify and strengthen its portfolio. The company will be able to concentrate in its core business segment which would poise it for its future growth and profitability thereby, strengthening its financial performance and enhancing value for shareholders.

Share Price Movement

Shares of United Fire Group have outperformed the industry in a year’s time. While United Fire Group shares have gained 9.3%, the industry has registered an increase of 27.1%.Strategic acquisitions and disciplined capital management are expected to drive the stock higher in future.

 

Insurers are considering acquisitions and divestures to streamline operations, focus on core competency, add capabilities and expand internationally. This month Alleghany Corporation Y had reached an agreement to divest its Pacific Compensation Insurance Company to Copper Point Mutual Insurance Company. Brown & Brown, Inc BRO via its subsidiary, Pacific Resources Benefit Advisors, LLC, had closed the buyout of all the assets of Herronpalmer LLC to strengthen its foothold in the employee benefit program administration. Arthur J. Gallagher & Co. AJG has recently acquired Premier Insurance, LLC to shore up its Australian presence.

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