White Mountains Re Solutions Acquires Central National

Runoff specialist White Mountains Re Solutions, a subsidiary of White Mountains Re Ltd., said it's agreed to its sixth acquisition: Central National Insurance Company of Omaha.

In runoff since 1989, Central National has been operated under an order of rehabilitation in the State of Nebraska since 1990, and is owned by Drum Financial Corp. White Mountains agreed to pay about $5 million for the company, which had a statutory surplus of $13.3 million at Sept. 30.

"The insurance business is an easy business to get into but a hard one to get out of," Neal Wasserman, president of White Mountains Re Solutions, told BestWire. "We provide a means for owners to extract the capital they have in those companies once they stop writing business. We specialize in the acquisition of companies in runoff."

A couple of the companies White Mountain Re Solutions has acquired so far weren't technically in runoff until White Mountains acquired them, but the acquisition allowed the previous owner to exit the business, Wasserman said.

Acquiring companies in runoff can be a profitable business, and there's a fair amount of competition among other companies that seek to buy troubled companies at a discount and then oversee the runoff, he said.

Among other conditions, the Central National transaction is subject to the termination of the rehabilitation proceedings by the court and the approval of the Nebraska Department of Insurance.

Since 2001, White Mountains Re Solutions has completed five acquisitions, according to its Web site:

-- C-F Insurance Co., a California-domiciled runoff insurance company purchased from the California Farm Bureau Federation and Conservation & Liquidation Office of the California Insurance Department in 2001.

-- Imperial Casualty and Indemnity Co., a Nebraska-domiciled runoff insurance company purchased from British Petroleum Company North America in 2002.

-- Sierra Insurance Group Cos., four workers' compensation companies purchased from Nevada-based Sierra Health Services Inc. in 2004.

-- Tryg-Baltica Forsikring International, a Danish reinsurance company purchased from Tryg Vesta Group of Denmark in 2004.

-- Mutual Service Casualty Insurance Co., a Minnesota-domiciled mutual insurer that was converted to a stock company and then purchased in 2006. After closing, it was renamed Stockbridge Insurance Co.

White Mountains Re expects the Central National transaction to close during the first quarter of 2010 subject to regulatory approvals and other customary closing conditions.

White Mountains Re Ltd. is a wholly owned subsidiary of White Mountains Insurance Group Ltd. (NYSE: WTM). Most White Mountain subsidiaries currently have a Best's Financial Strength Rating of A or A- (Excellent).

White Mountains Insurance Group's stock was trading at $330 a share on the morning of Jan. 25, up 0.46%.

(By Meg Green, senior associate editor, BestWeek: [email protected])