“This acquisition offers us the opportunity to expand our agribusiness presence,” Dowd says. “We expect that the addition of Penn Millers to the ACE Group will produce results that are immediately accretive to our earnings, return on equity and book value per share.”

The transaction is expected to close by the end of the 2012 first quarter.

Penn Millers says the purchase price equates to $20.50 per share in cash. During the morning of Sept. 8, the company's shares were selling at $20.11, up more than 23 percent from the previous close.

Last month Penn Millers announced it authorized a review of strategic alternatives, including a sale, to increase shareholder value.

The company says its “cost structure has historically been challenged by a relative lack of scale,” and, like the rest of the property and casualty insurance industry, Penn Millers is “experiencing a protracted soft-pricing environment and increased catastrophic-storm activity.”

Penn Millers reported a net loss of $2.5 million for the 2011 first half, compared to a net loss of $1.5 million during the same time last year.

The company's second-quarter results (a net loss of $4.4 million) included losses from catastrophes that accounted for about 40 points of its 101.1 second-quarter loss ratio. Penn Millers' second-quarter combined ratio was 138.7.

Douglas A. Gaudet, president and CEO of Penn Millers, says in a statement that ACE's “national platform and product capabilities will provide strong growth opportunities to our well-established agency network.”