Vermont Approves Union Mutual Affiliation With N&D Group

Vermont’s insurance regulator has approved an affiliation of Union Mutual Fire Insurance Co. with the Massachusetts-based mutual insurer Norfolk & Dedham Group.

Under the now-approved “acquisition of control” transaction that was proposed in April, Union Mutual and its wholly owned subsidiary, New England Guaranty Insurance Co., Inc. (NEG., both based in Montpelier, will join Norfolk & Dedham Mutual Fire Insurance Co., Fitchburg Mutual Insurance Co. and Dorchester Mutual Insurance Co., the current members of N&D Group.

The affiliation must still be approved by Massachusetts officials before the insurers can close the transaction. Massachusetts has not indicated when it will act, according to counsel for Union Mutual.

The combined group will write personal and commercial lines business in eight states with approximately $596 million in direct written premium and over $580 million in policyholder surplus. The group will have approximately 250 employees and 600 independent agents with 1,000 agency offices across the Northeast.

The companies will continue to market products under their existing brands in their respective marketplaces. After closing, they will also decide on a new group name for the affiliated organization.

N&D will maintain its headquarters in Dedham, Massachusetts, while Union Mutual will keep its headquarters in Montpelier, Vermont. The parties agree that the Montpelier office will kept for at least 10 years. If, however, maintaining the Montpelier office becomes “financially or operationally impracticable,” which means a decrease of more than 30% of the parties’ combined surplus, the group will relocate in or near Montpelier.

The affiliation will result in a new board of directors, with eight directors being associated with N&D and four with Union Mutual. By virtue of the new board, N&D will be deemed to have acquired “control” of the Vermont domestic insurers.

Joel Murray will remain president and CEO of N&D and Lisa Keysar will remain president and CEO of Union Mutual. Murray will serve as board chairman of the combined group.

No Harm

Commissioner Kevin Gaffney of the Department of Financial Regulation (DFR) approved the affiliation proposal in an order on September 25, finding it would not harm competition, consumers, or the financial condition of the companies.

Gaffney wrote in his order that given the “financial strength and experience” of the insurers, and the “cost savings, increased growth potential and other benefits” that the proposed affiliation is expected to generate for the domestic Insurers, the affiliation “will not be hazardous or prejudicial to the insurance-buying public.”

He noted that the cost savings are expected to come in part from reinsurance savings and integration of roles after retirements “but the greatest advantage is the ability for additional growth.”

Gaffney also found that the record demonstrates that there are “no plans or proposals to make any material changes to Union’s business or corporate structure or management that would be unfair or unreasonable to policyholders.”

The companies said there are no plans for any staff reductions or layoffs, and they promise to “use their best efforts to maintain compensation and benefits for all employees and staff subject to rate changes, availability and market conditions generally.”

According to the insurers’ proposal, they believe that “combining their strengths will provide substantial benefits to the members of both organizations and materially enhance the product offerings and services available to all members.”

After the transaction, the property/casualty insurers will participate in an intercompany pooling agreement effective Jan. 1, 2025, under which premiums, losses and expenses will be combined and pro-rated, with participation percentages based on the individual members’ policyholder surplus.

Community Mutual Insurance Co., a commercial lines affiliate of Union Mutual based in Latham, New York, is not part of the restructuring. According to the Vermont DFR, Community Mutual currently cedes 100% of its net premiums to Union Mutual through a reinsurance contract, and that contract is not expected to change.

The members of the N&D Group share underwriting and claims operations, and own the Newbury Corp., a subsidiary that provides management services. As part of the affiliation, Union Mutual will purchase an ownership interest in Newbury, and all employees will become employees of Newbury.

N&D Group’s direct written premium reached an all-time high of $368 million in 2023. Its policyholder surplus stands at $459 million, also a record high. N&D sells private passenger automobile, homeowners, commercial automobile, commercial multi-peril, and workers’ compensation policies, in Massachusetts, New Jersey and New Hampshire presently, with the bulk of its of business in Massachusetts

The Union Mutual companies write about $228 million in direct premium annually. Union Mutual is licensed in Vermont, New Hampshire, Maine, Connecticut, Massachusetts, Rhode Island and New York. Its subsidiary New England Guaranty Insurance Co. is licensed in Vermont, New Hampshire, Maine, Connecticut, Massachusetts, Rhode Island and New York.

The companies are rated A (Excellent) with a stable outlook by AM Best.

As this is a mutual insurer affiliation, there is no purchase price or consideration payable to the insurers.