August 17, 2010 - Fort Worth, Texas-based Hallmark Financial Services entered into an agreement for its unit Hallmark Insurance Co. to acquire nonstandard auto insurer State Auto National Insurance Co. from State Auto Financial Corp.
Fort Worth, Texas-based Hallmark Financial Services Inc. has entered into an agreement for its unit Hallmark Insurance Co. to acquire nonstandard auto insurer State Auto National Insurance Co. from State Auto Financial Corp.
According to an Aug. 9 news release, the purchase price for the acquisition will be $14 million in cash at closing plus an earnout of up to $2 million. Hallmark expects to fund the acquisition out of working capital.
The cash portion of the purchase price is subject to post-closing adjustment to the extent the statutory capital and surplus of State Auto National is greater or less than $10 million.
The earnout is payable quarterly in an amount equal to 2% of gross collected premiums on new or renewal personal lines insurance policies written by State Auto National agents during the three years following closing.
In connection with the closing, State Auto National will enter into reinsurance agreements with an affiliate of the seller. The affiliate will handle all claims and assume all liabilities arising under policies issued by State Auto National prior to the closing and during a transition period of up to six months after deal completion.
Columbus, Ohio-based State Auto National writes approximately $37 million in nonstandard automobile insurance coverage through independent agents in 21 states, approximately 80% of which is retained by State Auto Financial under its intercompany reinsurance pooling agreement with its parent, State Automobile Mutual Insurance Co.
Hallmark will not assume any staff, operating platforms or run-off exposure from State Auto Financial's existing operations, President and CEO Mark Morrison said in the release.
The deal should close later in 2010, subject to regulatory approval and other customary closing conditions.
