Tokio Marine Holdings Inc. has agreed to buy U.S. high net worth insurer Privilege Underwriters Inc. and its specialty insurance subsidiaries, known as Pure Group, for $3.1 billion (approximately JPY 325.5B).
Tokio Marine will acquire 100% of Privilege Underwriters Inc.’s shares from existing shareholders that include Stone Point (51%), KKR (34%), AXA XL (10%), Pure management and others (5%).
The acquisition will be through Tokio Marine’s wholly owned subsidiary, HCC Insurance Holdings and is expected to close in the first quarter of 2020 subject to regulatory approvals. Tokio Marine said it will finance the acquisition using cash-on-hand and external financing.
For 2018, Pure reported fee income of $229 million, a before-tax profit of $73 million and $963 million premiums under management. Its business profile is composed of homeowners (57%), auto (23%), inland marine (9%), and other lines for high-net worth clients.
White Plains, New York-based Pure Group’s insurance contracts are written by the Privilege Underwriters Reciprocal Exchange. However, the reciprocal exchange is owned by policyholders and is not itself part of the acquisition. The exchange cedes the majority of its risk to the reinsurance market, and also shares with the insurance subsidiary of Pure Group. The capital of the reciprocal exchange is primarily contributed by the policyholders.
Pure Group’s major business is managing operations of the reciprocal exchange (including underwriting, claims and marketing). The management fees received in return for these services is the primary source of income for the Pure Group. Pure Group’s other income sources are fees from brokerage, fine arts claim services, and income/losses from the reinsurance business in which the insurance subsidiary assumes reinsurance premium from the reciprocal exchange…