Tokio Marine Holdings Inc. agreed to acquire high-net-worth specialist Privilege Underwriters Inc. and its subsidiaries, known as Pure Group, for about $3.1 billion.
The sale price equates to a price-to-earnings ratio of roughly 33x based on White Plains, N.Y.-based Pure Group's expected profit after tax of $95 million in 2020. Tokio Marine expects Pure Group's profit to rise to $200 million in 2023. Premiums under management amount to $963 million. The acquisition will be financed through Tokio Marine's cash on hand and external financing.
The selling shareholders include Stone Point, KKR and Axa XL.
Tokio Marine said it will expand Pure Group's customer base by strengthening the creditworthiness of the group as it leverages Tokio Marine's financial strength. Tokio Marine will provide reinsurance and others to Pure Group to increase its capacity and retain profit within the group. Also, the acquirer will implement cross-selling of specialty insurance products developed by its existing U.S. group companies to Pure Group customers.
The acquisition, which is being made through subsidiary HCC Insurance Holdings Inc., is expected to be completed in the first quarter of 2020, subject to regulatory approvals. Pure Group founder, President and CEO Ross Buchmueller, will continue to lead the organization as an independent operating unit within the Tokio Marine group.
Mitsubishi UFJ Morgan Stanley Securities Co. Ltd./Morgan Stanley & Co. LLC served as financial adviser to Tokio Marine. Sullivan & Cromwell LLP acted as legal adviser and KPMG LLP aided with accounting and tax. Skadden Arps Slate Meagher & From LLP served as legal adviser to Pure Group.
