Tokio Marine Holdings, Inc. (TMHD) and Philadelphia Consolidated Holding Corp. (Philadelphia Consolidated) announce that they have entered into a definitive agreement under which TMHD will acquire all outstanding shares of Philadelphia Consolidated, a US P&C insurance company offering specialty commercial property and casualty (P&C) products and services for targeted markets, for $61.50 per share in cash, through TMHD’s wholly owned subsidiary, Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF). The total transaction value is approximately US $4.7 billion. The transaction is expected to close in the fourth quarter of 2008.
The acquisition of Philadelphia Consolidated marks Tokio Marine’s expansion into the US market and complements Tokio Marine’s recent international growth initiatives. Philadelphia Consolidated will provide Tokio Marine with a platform for their P&C business in the US.
“Expansion of revenue and profits from international business is the driving force of Tokio Marine’s mid to long term growth strategy,” says Shuzo Sumi, president of Tokio Marine. “The acquisition of Philadelphia Consolidated is consistent with our aspirations of expanding globally and realizing a well-balanced business portfolio. Combined with the recently completed acquisition of Kiln, we have established a strong presence in both key U.S. P&C and London insurance markets. With its disciplined, highly focused marketing and underwriting operations, Philadelphia Consolidated is an excellent strategic fit for us. When opportunities to acquire a premier organization arise, the best response is to act.”
“I founded this company in 1962,” says James J. Maguire, chairman of Philadelphia Consolidated. “This is a great opportunity for us to take the company to the next level, and as a demonstration of our commitment, the executive management team and I will be making a substantial investment in TMHD’s stock promptly after closing of the transaction, and I will become a member of the International Strategic Committee of Tokio Marine.”
“Philadelphia Consolidated’s management team is fully committed to the successful growth of the business and delivering a performance which will continue our superior level of achievement,” says James J. Maguire, Jr., CEO of Philadelphia Consolidated. “Joining the Tokio Marine Group with its international reach will fuel the next stage of our growth and will provide numerous benefits for our customers, brokers, agents and employees. Philadelphia Consolidated’s strong distribution relationships with brokers and agents and our local market knowledge acquired over almost 50 years will provide Tokio Marine with a substantial platform in its effort to realize superior growth and profitability in the U.S. and on an international scale. In addition, Tokio Marine’s credit quality and overall financial strength will open up additional avenues of expansion further enabling the combined company to generate enhanced returns.”
The profits/losses of Philadelphia Consolidated will be consolidated into TMHD’s financial statements from fiscal year 2009 and will deliver greater earnings consistency throughout the insurance pricing cycle. If Philadelphia Consolidated were included in TMHD’s 2008 financial statements on a pro forma basis, the adjusted earnings of Tokio Marine’s international business would have increased by approximately 95% from JPY31.7 billion (approximately $300 million) to approximately JPY62 billion (approximately $580 million).