Heritage Insurance, a property and casualty insurance company, has agreed to acquire NBIC, the parent company of Narragansett Bay Insurance Company (NBIC), a specialty underwriter of personal residential insurance products and services in states along the Eastern seaboard of the US.
The purchase price for the acquisition will be $250 million, subject to post-closing adjustments. The acquisition will be financed with $210 million in cash and $40 million of the Company's common stock.
The combined entity will be a leading super regional personal lines carrier, with a presence in 12 states and over $900 million of gross premiums written. The transaction is expected to be immediately accretive to earnings per share and ROE.
Bruce Lucas, the Company's Chairman and CEO, said, "We are very excited to join forces with NBIC, a seasoned company with a strong track record and talented management team. Completing this acquisition is the next critical step in executing our geographic diversification strategy. Post-transaction, we expect approximately 45% of our revenue to be generated outside of Florida, and Florida Tri-County personal lines policies will represent only approximately 7% of all total insured value, further hedging against assignment of benefits volatility.
We will also look to capitalize on the opportunity to expand the commercial residential expertise we have cultivated in our current markets to the Northeast. In 2018, we expect an approximately 50% increase in gross premiums written and net income as a result of the transaction. The new products, partnerships and bundled products that we will gain from the NBIC business make this transformative acquisition an important step in our continued growth. We look forward to working with NBIC's employees and agents for years to come."
The cash component of the consideration will be financed, in part, with cash on hand, including proceeds from the Company's senior secured notes issued in December 2016. The Company also intends to undertake, subject to market and other conditions, an offering of convertible senior notes coupled with a concurrent share repurchase. The transaction has been unanimously approved by the boards of directors of both Heritage and NBIC. The parties expect the transaction to close as soon as the fourth quarter of 2017, subject to customary closing conditions, including required regulatory approvals.
"NBIC has demonstrated strong and consistent financial performance over the past several years, and has grown to be a premier provider of homeowners insurance," said Todd Hart, CEO of NBIC. "We strongly believe that joining forces with Heritage will complement and strengthen our business, and position us to better serve our agents and policy holders."