German insurer Allianz Global Corporate & Specialty SE has agreed to sell its U.S. middle market and entertainment insurance business, which it underwrites through Fireman's Fund, to a subsidiary of Arch Capital Group for $450 million.
As part of the transaction, Arch Insurance North America will assume about $2 billion in loss reserves related to the business, which has gross premiums of about $1.7 billion in 2023, the Allianz SE unit said in a statement.
“Combining the cash payment from Arch and an estimated $1 billion of Allianz capital to support the business, the total transaction value for Allianz Group is expected to be $1.4 billion,” the statement said.
Around 500 AGCS staff are expected to join Arch.
Going forward, AGCS's focus in the U.S. will shift to larger commercial and specialty businesses, the company said.
“The acquisition of the Midcorp business significantly expands our presence in the U.S. middle market, a targeted growth area for Arch,” Matt Shulman, CEO of Arch Insurance North America, said in a separate statement.
The transaction is expected to close later this year.
Allianz bought Petaluma, Calif.-based Fireman's Fund in 1991 for about $3.3 billion.
The company has been restructuring over the past three decades, absorbing some of its commercial businesses into its AGCS division in 2014 and selling its high-net-worth personal lines business to a predecessor to Chubb for $365 million in 2015. In 2016, Allianz transferred about $2.2 billion of its Fireman's Funds business to a dissolved insurance company.
An Allianz spokesman said in an email that the sale to Arch would include most of Fireman's Fund's current business.
“A later stage of the transaction may involve a corporate acquisition of the Fireman's Fund companies, subject to the completion of their legal separation from Allianz,” he said.
Shares of Bermuda-based Arch were up about 3 percent in morning trading on Friday.