Fortis Acquires American Bankers Insurance Group in $2.6 Billion Deal

Strategic Insights -

Fortis, a Belgian-Dutch financial services giant, has agreed to purchase American Bankers Insurance Group, one of the top U.S. credit insurers, for $2.6 billion in cash. This acquisition is part of Fortis' strategy to develop niches in specialty businesses in the United States. The combined entity will have $3.6 billion in annual gross premiums earned, more than double Fortis' current insurance operations in the United States.

Key Takeaways:

  • Fortis will acquire American Bankers Insurance Group for $2.6 billion in cash, paying a 19% premium on the company's common stock as of its closing price on March 5.
  • The acquisition will enhance cross-selling opportunities and increase the number of channels for credit-insurance products, allowing Fortis to expand its presence in the U.S. market.
  • The combined entity will have $3.6 billion in annual gross premiums earned, more than double Fortis' current insurance operations in the United States.
  • The acquisition will provide Fortis with a foothold in the U.S. credit-insurance market, where it will compete with other major players such as Aegon NV and ING Group NV.
  • American Bankers' products, including product-warranty insurance, will complement Fortis' existing offerings, allowing the company to offer a wider range of financial services to its customers.
  • Fortis expects to generate $100 million in operating efficiencies and economies of scale within three to five years and achieve premium growth of 10%-12%.

Statistics:

  • $2.6 billion: The cash amount Fortis will pay for American Bankers Insurance Group.
  • 19%: The premium Fortis is paying on American Bankers' common stock.
  • $3.6 billion: The combined entity's annual gross premiums earned.
  • 100%: The share of American Bankers common stock that Fortis is acquiring.
  • $194 million: The amount of American Bankers' outstanding debt that Fortis will assume.
  • 7.5%: The percentage of American Bankers' outstanding common stock held by some of its officers and directors, who have agreed to vote in favor of the merger.
  • 23-24 times: The multiple of American Bankers' 1998 operating earnings ($11 million) that Fortis is paying in the acquisition.
  • $100 million: The break-up fee that Fortis is eligible for if the merger does not complete.
  • 19.9%: The option that Fortis has to purchase American Bankers' common stock.

Sources:

  • "Fortis to Acquire American Bankers Insurance Group for $2.6 Billion," A.M. Best Company, Inc. (1999)
  • "Fortis Agrees to Buy American Bankers Insurance Group," COMTEX (1999)