1347 Property Insurance Holdings, Inc. ("1347 PIH") has closed the sale of its homeowners' insurance operations (the "Asset Sale"), consisting of Maison Insurance Company, Maison Managers, Inc., and ClaimCor, LLC (collectively, "Maison"), to FedNat Holding Company.
1347 PIH said in a statement that the total consideration was paid in a combination of cash and stock valued at $51.0 million, consisting of $25.5 million of cash and 1,773,102 shares of FedNat stock. In addition, $18.0 million of outstanding surplus note obligations were repaid to 1347 PIH.
1347 PIH said that its estimated book value per share following the closing of the transaction was approximately $6.67 per share based on $40.4 million of estimated common equity post-closing and approximately 6.1 million shares outstanding.
1347 PIH said that it now will operate as a diversified holding company of reinsurance and investment management businesses focused on building a permanent and growing base of asymmetric risk/reward opportunities for its shareholders. According to 1347, the board of directors continues to evaluate the alternatives for the use of proceeds received from the sale of Maison, expected to include using a portion of the cash consideration to conduct the business of its reinsurance subsidiary, PIH Re Ltd., and funding the new growth strategy focused on reinsurance, investment management, and new investment opportunities. As part of this transformation, 1347 PIH continued, it is considering changing its name to be more consistent with its go-forward strategy, naming a new president or executive officer in addition to its current chief financial officer and controller, and "evaluating opportunities to maximize value for its current shareholders including share buybacks."
1347 PIH said that its board of directors is working with a strategic consulting firm and expects to finalize the go-forward strategic plan in the next few weeks. 1347 PIH also said that it expects to hold a conference call for shareholders to discuss its new strategic plan shortly after it is finalized.
Kyle Cerminara, chair of 1347 PIH, stated, "The closing of this transaction represents a transformational change in 1347 PIH to a growth strategy focused on reinsurance and investment management. The board of directors has been highly focused on building out this strategy and we will be providing a detailed outline for shareholders in the coming weeks. We look forward to our ownership of FedNat and believe Maison is in great hands with FedNat CEO Michael Braun and his management team."
The company reported the following deal terms and financial details:
- The $51.0 million purchase price was comprised of a 50/50 mix of cash and stock, including 1,773,102 shares of FedNat common stock, which represented approximately 12 percent of pro forma shares outstanding. The number of shares issued to 1347 PIH was based on the volume-weighted average closing price of FedNat common stock for the 20 trading days prior to closing. The resale of the shares issued will be enabled through a subsequent registration statement and will be subject to a five-year standstill agreement.
- Post close, 1347 PIH's cash was approximately $31.1 million and investments were $29.5 million, which included the previously mentioned FedNat common stock and private limited partnerships.
- The preferred shareholder equity was $17.5 million and the common shareholder equity was approximately $40.4 million.
- The estimated book value per share of 1347 PIH following the closing of the transaction was approximately $6.67 per share based on $40.4 million of common shareholder equity post-closing and approximately 6.1 million shares outstanding.
- In addition to the purchase price, 1347 PIH received five-year rights of first refusal to provide reinsurance on up to 7.5 percent of any layer in FedNat's catastrophe reinsurance program.
- 1347 PIH entered into a five-year agreement to provide investment advisory services to FedNat.
- 1347 PIH agreed to a non-compete for five years with respect to Alabama, Florida, Georgia, Louisiana, South Carolina, and Texas. The non-compete will not prohibit 1347 PIH from entering into reinsurance contracts in the states subject to non-competition.
- 1347 PIH retained its chief financial officer, John Hill, and its controller, Brian Bottjer, following the closing of the transaction.
Learn more: www.1347pih.com.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].