Jan. 9 (Bloomberg) -- American Financial Group Inc., the insurer run by Cincinnati’s Lindner family, agreed to buy Summit Holdings Southeast Inc. from Liberty Mutual Group Inc. for about $250 million to build its workers’ compensation business.
The total investment in Summit will be about $400 million, including a capital contribution at the completion of the all-cash deal, which is expected by June 30, American Financial said in statement today. The eventual purchase price is tied to fluctuations in Summit’s book value.
American Financial is expanding its operation protecting employers against the cost of worker injuries as the economy recovers and clients add staff. The insurer also provides annuities and crop insurance.
“New business opportunities, increased exposures from higher payroll and existing accounts, strong retentions and higher renewal pricing have contributed to the strong growth” in workers’ compensation, American Financial co-Chief Executive Officer Carl Lindner III said in an Oct. 30 earnings call.
The U.S. unemployment rate fell to 7 percent in November, the lowest since 2008. The number of applications for unemployment insurance payments declined by 15,000 to 330,000 in the week ended Jan. 4, the fewest since the end of November, the Labor Department said today.
The acquisition of the Lakeland, Florida-based business will fuel growth in the Southeastern U.S., American Financial said. Summit generates about $520 million in policy sales, according to the statement.
Lindner’s company ranked 19th in the U.S. in workers’ comp sales, with about $445 million, according to 2012 data from the National Association of Insurance Commissioners. Boston-based Liberty Mutual ranked first, with more than $4 billion.
“Our regional focus on selling multiline commercial accounts under a single brand makes the divestiture of Summit a logical step for us,” Rich Angevine, a spokesman for Liberty Mutual, said in an e-mail. Bank of America Merrill Lynch acted as financial adviser to Liberty Mutual, the company said in a separate statement.
American Financial rose 0.5 percent to close at $57.01 in New York. The shares have gained 39 percent in the past year. Liberty Mutual is owned by its policyholders.
Carl Lindner Jr., the founding chairman of American Financial, died in 2011 at age 92.
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