Kemper Completes Acquisition of Specialty Auto Insurer Infinity P&C

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Chicago-based insurer Kemper Corp. has closed on its $1.6 billion acquisition of Birmingham-based nonstandard auto insurer Infinity Property and Casualty Corp.

The stock portion of the cash and stock deal announced in February was based on Kemper’s closing stock price of $75.65 on June 29, 2018. Kemper is funding the cash portion of the deal with a combination of cash on hand from the combined companies and other internal resources.

Infinity sells auto insurance in the specialty, nonstandard segment. It has approximately $1.4 billion in 2017 direct written premiums, 88 percent of which is nonstandard auto and the rest commercial vehicle and classic car business. For 2017, it reported operating net income of $44 million a combined ratio of 95.2. Slightly more than half (53 percent) of its business is in California, 31 percent in Florida, 12 percent in Texas and two percent in Arizona.

Infinity has 2,300 employees and 10,600 independent agents. One of its target markets is the Hispanic community and many of its employees are bilingual.

Kemper companies offer insurance for home, auto, life, health and valuables and are represented by 20,000 agents and brokers. The insurer employs 5,550 associates (2,000 of them in property/casualty).

The combined company will have a diversified portfolio across auto, home, life, and health insurance with approximately $2.2 billion in nonstandard auto insurance premiums, more agency relationships and greater efficiencies, according to the parties.

The companies say there is limited overlap in their agency forces and their products are complementary.

“The combination of our organizations will accelerate our ability to create a company with increased scale and better serve our policyholders,” said Joseph P. Lacher, Jr., Kemper’s president and chief executive officer.

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Related to the closing, Kemper announced the expansion of its board to 11 members with the election of Teresa A. Canida as a director of the combined company. Canida, who has served as an Infinity director since 2009, is a portfolio manager at Cito Capital Group.

Kemper reported $120.9 million in net income for 2017 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.

Kemper is expected to result in pre-tax earnings of $ 5 to $ 10 million resulting from the deal’s annual pre-tax cost savings of approximately $ 55 million and the repositioning of Infinity’s investment portfolio. They are expected to be fully phased at the end of the second year after closing. It is expected that cost savings will be realized by “merging the functions of the corporation and optimizing the systems of the joint company, business processes and reinsurance programs”.

The companies did not say if they did, they would result in resettlement or disruption of employees.

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