Shares of HCC Insurance Holdings Inc. (HCC) are on uptrend since the property and casualty insurer announced that it will buy Producers Ag Insurance Group, Inc. or ProAg from CUNA Mutual Group for $110 million in cash. Shares gained 1.2% to close at $48.88 in the last trading session. With this acquisition, HCC Insurance will also enter the crop insurance business.
Headquartered in Amarillo, TX, ProAg writes multi-peril crop, crop hail, named peril and livestock insurance. The company is the sixth largest writer of multi-peril crop insurance and crop hail insurance, with a 5% market share in 2013. Its earned premiums grossed $633.5 million last year.
HCC Insurance, on the other hand, has a diversified portfolio of specialty insurance businesses. It underwrites primarily noncorrelated specialty insurance products. The addition of crop insurance, also a non-correlated line of business, to its portfolio will further enrich its offerings.
The transaction, pending approvals, is expected to materialize in the first quarter of 2015. Also, being an all-cash transaction, it bears testimony to the solid liquidity of the acquirer. Following the completion, ProAg's management team will continue to operate the business.
HCC Insurance had earlier undertaken strategic initiatives that drove its operational results. Last year in May, it launched Construction Property Risks Division, expanding its specialty focus by developing its underwriting capability in builders’ risk insurance. In Dec 2012, it launched the Kidnap and Ransom insurance product.
There was no earnings momentum over the last 60 days. However, with optimism over the current acquisition we expect the analysts to pull up their estimates exerting upward pressure over its Zacks Rank. HCC Insurance presently carries a Zacks Rank #3 (Hold).
Better-ranked property and casualty insurers are Argo Group International Holdings Ltd. (AGII), Aspen Insurance Holdings Ltd. (AHL), and Atlas Financial Holdings, Inc. (AFH). All these stocks sport a Zacks Rank #1 (Strong Buy).
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