Liberty Mutual to Acquire Ironshore from China’s Fosun for $3 Billion

Liberty Mutual Insurance has agreed to acquire specialty lines insurer Ironshore Inc. from China’s Fosun International Limited.

Liberty Mutual will acquire a 100 percent ownership interest in Ironshore. According to the announcement, the purchase price will equate to 1.45x Ironshore’s actual tangible book value as of year-end 2016, and is estimated to be approximately $3 billion. The purchase price is subject to closing price adjustments.

Once the transaction is closed, Ironshore will continue to operate with CEO Kevin H. Kelley, the same management team and brand name, but as part of the larger Liberty Mutual organization, which is growing its specialty lines operations. The transaction is expected to close in the first half of 2017.

“Ironshore has a track record of profitably underwriting global and diverse specialty risks insurance and is an ideal complement to Liberty Mutual, providing additional scale, expertise, innovation and market relationships to our $5 billion global specialty business,” said David H. Long, Liberty Mutual chairman and CEO.

Ironshore CEO Kelley called the transaction “beneficial for all three parties involved” in a statement. “We have aimed for the best possible outcome for our employees, clients and business partners and are confident this transaction achieves these goals and more,” he said.

“Ironshore will become part of another ‘A’ rated company with a global reach, a strong balance sheet, wide client base and a much greater capacity to drive profitable growth. In Ironshore, Liberty will gain access to a profitable specialty insurer that will
enhance Liberty’s current specialty markets profile. The transaction also speaks to the value of the Ironshore franchise and to Liberty’s view of the value that the management team brings to their organization,” Kelley said.

New York-based Ironshore, which was founded in 2006, had gross premiums written of $2.2 billion in 2015 and is among the largest excess and surplus lines insurers in the U.S. The company, which has approximately 800 employees located in 15 countries worldwide, is organized into three operating hubs based in the United States, Bermuda and London.

Last November, China’s Fosun International Ltd. paid $1.84 billion for the remaining 80 percent stake of Ironshore Inc. that it did not already own when it became a 20 percent owner earlier in the year. Last December, officials at the Committee on Foreign Investment in the United States (CFIUS), a government unit that oversees deals over national security concerns, contacted Fosun with concerns over how Fosun would operate Ironshore’s Wright & Co., which provides professional liability coverage to U.S. government employees including the Central Intelligence Agency, even though Wright was a small portion of Ironshore’s overall business.

After that inquiry, Fosun delayed its initial public offering of Ironshore.

The conflict was apparently eliminated last month when Starr Companies agreed to acquire Wright USA from Ironshore. Starr Companies is headed by Maurice Greenberg, former CEO of American International Group (AIG).

According to a spokesperson for Ironshore, the Wright acquisition by Starr has closed and the acquisition of Ironshore by Liberty Mutual does not affect this transaction.

In July 2015, A.M. Best placed Ironshore under review with negative implications due to the then-planned $1.84 billion acquisition of Ironshore by Fosun. A.M. Best said it was worried about Fosun’s credit profile and financial leverage and how it would affect the insurer. However this past June, A.M. Best changed its mind and restored the financial strength ratings of “A” (Excellent) and issuer credited ratings of “a” for Ironshore. A.M. Best said the affirmation of its ratings nearly a year later reflected its view “that Ironshore has strong standalone attributes as a specialty insurer, will continue to build a relevant franchise in the specialty sector and is capable of delivering strong operating results.”

However, A.M. Best said that negative outlook will hang over Ironshore for the foreseeable future due to “the drag related to the credit profile and high debt leverage measures” Fosun has.

Fosun has accumulated significant debt in a 20-year acquisition spree, mostly in Europe and the United States.

Ironshore was founded in December, 2006 by Robert Clements with more than $1 billion in private equity backing. Kelley joined the firm as CEO from Lexington Insurance, AIG’s surplus lines insurer, in 2008.

Boston-based Liberty Mutual is a diversified insurer with operations in 29 countries. As of December 31, 2015, Liberty Mutual had $121.7 billion in consolidated assets, $102.5 billion in consolidated liabilities, and $37.6 billion in annual consolidated revenue. Its growing surplus lines operation, Liberty International Underwriters, operates in 18 countries. In 2014, Liberty International contributed 16 percent of the company’s $36.3 billion in net written premium for the year.