ProAssurance Corp., the seller of medical-liability coverage, agreed to buy Eastern Insurance Holdings Inc. for about $205 million in cash to expand in workers’ compensation coverage.
The deal values Eastern at $24.50 a share, compared with yesterday’s closing price of $21.16, and is expected to be completed by Jan. 1, Birmingham, Alabama-based ProAssurance said today in a statement.
ProAssurance, the fourth-largest seller of medical professional liability insurance in the U.S., has been expanding through acquisitions as part of a strategy to build its product mix and add clients. The company last year announced a deal to purchase Medmarc Insurance Group for $153.7 million to expand in medical technology coverage.
“Workers comp is a major area of expense and concern in health care,” ProAssurance Chief Executive Officer Stan Starnes said on a conference call today. “Adding the capability to provide that coverage to our policyholders and to introduce our products to Eastern’s policyholders will help us grow our business and deepen the relationships” with customers.
Eastern advanced 16 percent to $24.51 at 11:06 a.m. in New York. ProAssurance slipped 0.2 percent to $46.04.
The purchase “modestly diversifies PRA’s product mix,” Fitch Ratings said in a statement, using the ticker symbol for ProAssurance. “While these recent transactions offer potential benefits of premium diversification, PRA is exposed to several new risks in integrating and meeting profit objectives.”
Eastern posted net income of $10.4 million last year on revenue of $168.1 million. Shareholders’ equity, a measure of assets minus liabilities, was $140.8 million as June 30 at the Lancaster, Pennsylvania-based insurer. The company counts Pennsylvania, Indiana and North Carolina among its largest markets.
Raymond James Financial Inc. is ProAssurance’s banker, and Burr & Forman LLP is providing legal advice. Eastern is being advised by Stifel Financial Corp.’s Keefe Bruyette & Woods unit and the law firm of Stevens & Lee.