US insurance giant Liberty Mutual buys Ironshore in $3bn deal

Liberty Mutual, the fourth-largest property and personal injury insurer in the US, has agreed to buy Ironshore from Fosun International for about $3 billion to expand in the specialty commercial market.

Ironshore will retain its management and brand after the completion of the deal, the buyer said in a statement on Monday. Fosun acquired Bermuda-based Ironshore in 2015 and then sought an exit after a ratings firm cited concerns about the parent company’s financial strength.

Ironshore has its European headquarters in Dublin where it employs a small number of people.

Policyholder-owned Liberty Mutual is known for providing home, motor and workers’ compensation coverage in the US. The Boston company is among insurers seeking growth in niches where there is more of an opportunity to stand out from competitors.

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Ironshore protects commercial policyholders against environmental risks, damage to satellites in launch or orbit, and losses tied to political turmoil in international markets. It also offers liability coverage to corporate executives and healthcare providers.

Book value

“The acquisition of Ironshore seems to have plenty of strategic merit, but it is notable that it will operate with an ongoing high degree of autonomy,” David Havens, a debt analyst at Imperial Capital, said in a note. “This will be a bit of an experiment in that regard for Liberty Mutual.”

The final price is subject to adjustments and will be 1.45 times the target company’s tangible book value at the end of this year. The deal is expected to be completed in the first half of 2017, according to the statement.

Fosun, led by billionaire chairman Guo Guangchang, announced a deal in May 2015 to buy the 80 per cent of Ironshore it didn't already own for at least $1.8 billion.

The Chinese company then opted to exit Ironshore, which filed for an initial public offering in July, after ratings firm AM Best assigned a negative outlook to the Bermuda-based business.

Ironshore was founded in December 2006 with more than $1 billion in private equity backing. Two years later, chief executive Kevin Kelley and president Shaun Kelly joined the property-and-casualty insurer from American International Group (AIG). – (Bloomberg)