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Letter to the Editor
Friday September 5
Travelers Buys Renewal Rights to Royal & SunAlliance Commercial and Personal Lines
Travelers Property Casualty Corp. has purchased the renewal rights to Royal & SunAlliance USA's commercial lines national accounts, middle market and marine businesses, and standard and preferred personal lines businesses.Effective immediately, Travelers will begin the preparation for offering renewal policies to Royal & SunAlliance's customers, agents and brokers for these targeted lines of business, subject to Travelers underwriting guidelines. According to a press release, the benefits of this transaction include:
- An attractive purchase price.
- An ability to acquire up to approximately $1.5 billion in new net written premiums.
- Accretive to earnings in 2004 and provides incremental net income of approximately $50 to $60 million in 2005.
- Expanded distribution network in Personal Lines of a potential 500 new agents, to complement the 6,500 personal lines agents offering standard and preferred products.
- Expanded presence in Commercial Lines.
"This is a very attractive transaction that enhances our Personal Lines distribution network and expands our presence in Commercial Lines. This transaction is consistent with our strategy of supplementing internal growth through selected acquisitions that complement our core businesses," said Robert I. Lipp, Chairman and Chief Executive Officer. "Royal & SunAlliance's accounts are a great fit with ours, and we believe that their customers, agents and brokers will consider this an excellent opportunity to align themselves with Travelers. In addition, we look forward to welcoming many talented Royal & SunAlliance employees into the Travelers family to ensure a smooth transition for our new customers and to help us maintain and grow this business.
"Over the years, we have been very successful in acquiring and integrating books of business through renewal rights transactions. Our success is based on our ability to only write business that meets our underwriting standards and to achieve economies of scale by leveraging our claims handling, policy support centers, technology and infrastructure platforms," said Lipp.
The purchase price will consist of a minimum payment of $25 million, with a potential additional payment contingent on the volume of business actually written. The additional payment is currently estimated to be in the range of $35 million to $40 million.
Travelers Property Casualty is the second largest writer of homeowners and auto insurance through independent agents.
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