Ohio-based Motorists Mutual Insurance Co. has agreed to buy the stock of Consumers Insurance USA, which is based in Murfreesboro, Tenn.

Consumers Insurance will become a wholly owned subsidiary of Motorists Mutual under the agreement that is subject to stockholder approval and regulatory approval by Tennessee and Ohio regulators.

Consumers Insurance, which was formed in 1995 by a group of independent insurance agents, markets niche-oriented products including standard and non-standard personal auto, a program for used car dealers, commercial auto for small trucks and utility vehicles, repair garages, towing firms, and short-haul trucking. It sells through independent insurance agencies.

The company operates in the Southeast and Midwest states of Tennessee, Virginia, Missouri, Arkansas, Alabama, Indiana and Illinois. It writes $45 million in premiums annually and has assets of about $60 million.

The deal comes about one year after A.M. Best downgraded the issuer credit rating to “bbb” and affirmed the financial strength rating of B++ (Good) of Consumers Insurance USA and revised the outlook for both ratings to negative from stable. In April 2013, A.M. Best said the rating actions were primarily due to a significant weakening in Consumers’ risk-adjusted capitalization and unfavorable operating performance, along with continued adverse loss reserve development. As a result, policyholders’ surplus was down 13 percent in the past two years and profitability ratios had fallen below industry averages.

Motorists Mutual Insurance Co. is an affiliate of The Motorists Insurance Group, headquartered in Columbus, Ohio, which consists of 10 companies that market through 1,600 agencies across the Midwest, Northeast and Southeast regions. The group reported $1.7 billion in assets and $681 million in premiums at the end of 2013.

Motorists President and CEO David L. Kaufman said Consumers is a “strategic fit” for his company because it increases its geographic footprint into states where it wants to write business.

The plan calls for Consumers Insurance to pool its premium, losses and underwriting expenses with other companies in the Motorists group and share the group’s A (Excellent) rating from A.M. Best, according to the announcement.
Kaufman said that he does not anticipated any layoffs as a result of the purchase. “We anticipate there will be additional job growth opportunities for both organizations as Consumers Insurance expands its product offerings,” he said. “Our prior experience has shown our affiliation model provides the resources that contribute to new employment opportunities.”