Insurer Kemper Corp will acquire Infinity Property and Casualty Corp for about $1.3 billion in cash and stock to boost its nonstandard auto insurance business, the two companies said on Tuesday.
Kemper will offer $51.60 in cash and 1.2019 in common shares for each share of Infinity, adding to about $121 per share based on Kemper’s Tuesday close. The offer represents a premium of about 26 percent to Infinity’s latest close.
Infinity’s shares were up about 7 percent at $102.75 in trading after the bell, while those of Kemper were little changed.
Infinity shareholders will own about 20 percent of the combined company on a pro forma basis following the closure of the deal, which is expected in the third quarter.
The combined entity will have about $2.2 billion in nonstandard auto insurance premiums, the companies said.
Nonstandard auto insurance premiums are typically higher as they are sold to drivers who may have been denied coverage by standard insurers for poor driving records.
Infinity had 2,300 employees, 10,600 independent agents and $1.4 billion in direct written premiums in 2017.
The deal is expected to add to Kemper’s adjusted earnings per share from the first year and result in annual pre-tax cost savings of about $55 million.
Kemper will also increase the size of its board by one to add a director from Infinity.
Excluding catastrophe losses, Kemper booked $37 million in net income, or $0.71 per diluted share, during its 2017 fourth quarter. Catastrophe losses wiped out $33 million of that, however. Kemper’s combined ratio for Q4 was 104.7 versus 103.3 over the same period in 2016.
Kemper reported $120.9 million in net income for 2017, or $2.33 per share, with catastrophe losses factored out. Catastrophe losses and other loss adjustments wiped out $120.2 million of that total. Kemper’s combined ratio for 2017 was 105.6, on par with 2016.
*Carrier Management added Kemper’s financials to this story.