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$7.5 billion deal for HCC expands Tokio Marine's U.S. presence

$7.5 billion deal for HCC expands Tokio Marine's U.S. presence

Tokio Marine Holdings Inc.'s $7.5 billion cash purchase of U.S.-based specialty insurer HCC Insurance Holdings Inc. advances its international expansion efforts and increases its U.S. presence.

Tokio Marine will pay $78 per share, a 35.8% premium on the U.S. company's average value over the past month. Tokio Marine expects to complete the acquisition in the fourth quarter, it said in a statement.

The June 10 deal by Japan's largest insurer by market value is its biggest acquisition to date, Tokio Marine said. It will increase the proportion of Tokio Marine's overseas profit to 46% from the 38% projected for the current year, according to an investor presentation.

HCC will join Tokio Marine's other U.S. properties, Philadelphia Consolidated Holding Corp., which Tokio Marine bought for $4.7 billion in 2008, and Delphi Financial Group Inc., purchased for $2.7 billion in 2012.

“With strong business platforms in Japan and in international markets, the transaction solidifies Tokio Marine's standing as a truly global insurer with premier specialty franchises,” the company, which offers aviation, energy and marine coverage, said in a statement.

During the investor presentation, Tokio Marine said the “highly experienced HCC management team will continue to lead the business,” which had 2014 gross written premiums of $3 billion and a market capitalization of $5.5 billion, according to the presentation.

“It's a good deal for shareholders and a nice property for Tokio Marine,” Mark Dwelle, an insurance analyst at RBC Capital Markets, a unit of RBC Securities Inc. in Richmond, Virginia, said of the premium price for HCC.

“In line with the strategy to expand our international business, the acquisition enables Tokio Marine to build a more diversified and highly profitable global portfolio with low volatility, taking into account the nature of HCC's businesses which are largely noncorrelated, have limited catastrophe exposure and are less dependent on property and casualty market cycles,” Tsuyoshi Nagano, president of Tokio Marine, said in the company's statement.

Meanwhile, Standard & Poor's Financial Services L.L.C. put HCC Insurance Holdings Inc. stock on CreditWatch with negative implications, but with a limited downside.

“HCC continues to perform very well, meeting our expectations,” S&P said in its analyst note.HCC, based in Houston, has 2,500 employees and had $458 million in net income in 2014 on revenue of $2.7 billion.

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