ProAssurance Corporation, a specialty insurer, has completed its acquisition of NORCAL Mutual (NORCAL).
NORCAL’s members approved the transaction at a special meeting held on 26 April with the acquisition later completing on 5 May.
Under terms of a previously announced agreement, NORCAL became part of ProAssurance following its demutualisation.
Through its tender offer to NORCAL policyholders who elected to receive stock in the conversion of NORCAL Mutual, ProAssurance has acquired over 98 per cent of the stock of NORCAL Insurance Company, the successor to NORCAL Mutual.
The base consideration for the transaction at closing is $441 million.
Policyholders who elected to receive NORCAL stock and tender it to ProAssurance will receive their allocated share of the converted company’s equity in cash, and are eligible for a share of contingent consideration in an amount of up to approximately $83 million depending upon development of NORCAL’s ultimate net losses between 31 December 2020 and 31 December 2023.
ProAssurance is funding the transaction with $248 million of cash on hand, and NORCAL will pay $2 million to policyholders who elected to receive the discounted cash option for their allocated share of the converted equity.
The remainder of the base consideration, approximately $191 million, is in the form of contribution certificates issued to certain NORCAL policyholders in the conversion of NORCAL Mutual, and those instruments are an obligation of NORCAL Insurance Company.
Base consideration and maximum contingent consideration are subject to non-material change as the equity allocation is reviewed and finalised post close.
Commenting on the transaction, Ned Rand, president and CEO of ProAssurance, says: the completion of the NORCAL transaction “marks a significant milestone in our Mission to ProtectOthers”.
Sandra Beretta, immediate past Chair of NORCAL’s board of directors, notes: “NORCAL has been a stable, longtime participant in the medical professional liability insurance marketplace, and the combination with ProAssurance will bring policyholders further confidence, knowing NORCAL will be able to offer them an even higher level of financial security and service.”
In 2017, NORCAL Mutual Insurance Company completed the acquisition of PPM Services, the holding company for Preferred Physicians Medical Risk Retention Group (PPM).
