ProAssurance Corporation, the specialty insurer which runs a captive insurance solution called Inova, has acquired NORCAL Mutual, following overwhelming approval from NORCAL’s members.
The acquisition was completed on May 5, 2021. The base consideration for the transaction at closing is $441 million.
The deal will see NORCAL become part of ProAssurance, following its demutualisation. NORCAL policyholders elected to receive stock in the conversion of NORCAL Mutual, with ProAssurance acquiring over 98 percent of the stock of NORCAL Insurance Company, the successor to NORCAL Mutual.
Policyholders who elected to receive NORCAL stock and tender it to ProAssurance will receive their allocated share of the converted company’s equity in cash, and are eligible for a share of contingent consideration in an amount of up to approximately $83 million, depending upon development of NORCAL’s ultimate net losses between December 31, 2020 and December 31, 2023.
ProAssurance is funding the transaction with $248 million of cash on hand. NORCAL will pay $2 million to policyholders who elected to receive the discounted cash option for their allocated share of the converted equity. The remaining $191 million of the base consideration will come in the form of contribution certificates issued to certain NORCAL policyholders in the conversion of NORCAL Mutual.
Ned Rand, president and chief executive officer of ProAssurance, said the deal marks a significant milestone for the group. “NORCAL is one of the leading writers of medical professional liability insurance in the country,” he said. “We believe their contributions to our customers and culture will expand our product capabilities with broader geographic scale and efficiencies and will support a true nationwide platform to deliver value to our customers and stakeholders.”
Sandra Beretta, managing director and immediate past chair of NORCAL’s board of directors, said: “NORCAL has been a stable, longtime participant in the medical professional liability insurance marketplace, and the combination with ProAssurance will bring policyholders further confidence, knowing NORCAL will be able to offer them an even higher level of financial security and service.”
ProAssurance, NORCAL Mutual, Ned Rand, Sandra Beretta