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MDP to acquire majority stake in AmTrust’s U.S. fee business

Madison Dearborn Partners has agreed to acquire a majority stake in AmTrust Financial Services’ U.S-based fee businesses. The enterprise value of the deal is $1.15 billion. At the closing, AmTrust, a multinational insurance holding company, will receive gross cash proceeds of about $950 million and retain a 49 percent stake in the business. The transaction is expected to be completed in the first half of 2018. BofA Merrill Lynch is serving as financial adviser to AmTrust while Debevoise & Plimpton LLP is providing legal counsel. And, Kirkland & Ellis LLP is acting as legal adviser to MDP.


NEW YORK, Nov. 06, 2017 (GLOBE NEWSWIRE) — AmTrust Financial Services, Inc. (Nasdaq:AFSI) (the “Company” or “AmTrust”) and Madison Dearborn Partners (“MDP”), a private equity firm with significant insurance services expertise, today announced a definitive agreement under which AmTrust will transfer a 51% equity interest in certain of its U.S.-based fee businesses to MDP. The transaction values the business at $1.15 billion, plus up to an additional $50 million upon exit, subject to agreed thresholds.

Through a combination of MDP’s equity investment of approximately $210 million and debt borrowings by the new business, AmTrust will receive gross cash proceeds of approximately $950 million at closing, subject to post-closing purchase price adjustments, final tax and indebtedness calculations. AmTrust will also retain a 49% equity interest in the business, which will be accounted for under the equity method of accounting. AmTrust plans to use the net cash proceeds to continue to target an Operating ROE(1) of 12% to 15%, through organic growth and other capital allocation opportunities, including the optimization of its debt and capital structure, and considering alternative reinsurance arrangements. The U.S. fee businesses generated after-tax net income for AmTrust of approximately $53 million(4) in the LTM June 30, 2017 period, which the Company expects to offset with net investment income from investing the sale proceeds, as well as organic growth and operating returns generated from the higher capital base. AmTrust and MDP expect the existing premium generated by the U.S. fee businesses to continue to be supported by AmTrust’s underwriting platform. The Company expects these transferred fee businesses to produce approximately $750 – $800 million in gross written premium for AmTrust in 2018.

AmTrust estimates net tangible book value(2)(3) to increase by approximately $6.00 per share and net book value(3) to increase by approximately $3.50 per share (based on a share count of 195.8 million as of August 1, 2017) as a result of the transaction proceeds, subject to post-closing purchase price adjustments, and final tax and indebtedness calculations. As of June 30, 2017, there were goodwill and intangibles of approximately $482 million related to the transferred businesses that the Company expects will be deconsolidated from AmTrust’s balance sheet(5).

Under the agreement, AmTrust will have the opportunity to continue to be an important provider of insurance coverage related to the warranty and service contracts and the underwriter of the policies offered through the MGAs.

The fee-based businesses being acquired provide warranty and services contracts for the automotive, consumer products and specialty equipment industries, among others, and administer niche workers’ compensation and contractor liability coverage in the United States on behalf of AmTrust and other carriers. Collectively, these businesses have more than 1,500 employees, with additional corporate support employees who will join the new company. The portion of the U.S. fee businesses being sold will be part of a newly formed company that will be led by Stuart Hollander, who is currently President, Specialty Risk, North America at AmTrust and will become CEO of the new company.

The transaction excludes AmTrust’s European fee operations, AmTrust’s workers’ compensation assigned risk administration business, other fee businesses related to residual lines of business, and fee revenue generated from related parties or internal structuring.

The new company will operate under a new brand name, which will be announced at a later date.
Barry Zyskind, Chairman and Chief Executive Officer, AmTrust, said, “This transaction creates value for all parties. For AmTrust, it delivers on our stated objective to unlock the value of our Fee Businesses, while also enabling AmTrust to participate in the future success of the new company and ongoing upside as a significant shareholder. The transaction also aligns with our recent initiatives to further strengthen our balance sheet and simplify our organization, and provides us with capital to support AmTrust’s meaningful organic growth opportunities. As a deconsolidated business, we believe this portion of the U.S. Fee Businesses will be better able to pursue its growth avenues. We believe this transaction also demonstrates the value of the fee businesses in the U.S. and internationally that AmTrust is retaining.”

Adam Karkowsky, Executive Vice President and Chief Financial Officer, AmTrust, said, “The U.S.-based Fee Business is a market leader with a talented and experienced team who has cultivated a strong, growth-oriented culture, premier partnerships and numerous expansion and acquisition opportunities. MDP is a strong partner with deep insurance services expertise. MDP shares our vision for success and ongoing value creation, and has a strong commitment to our business partners, customers, and employees. We remain committed to supporting these businesses and our customers through our underwriting platform, products and services, as evidenced by the significant ownership stake we have retained in the new structure. We are very excited about the prospects of this business in its new form.”

“We are excited to partner with AmTrust and form this new company and have it be a part of our portfolio of leading insurance services providers,” said Vahe Dombalagian, a Managing Director on the MDP Financial & Transaction Services team. “MDP has extensive experience investing in this market sector and a proven track record of successfully managing corporate carve-outs. We will utilize our resources and expertise to sharpen the new company’s focus on accelerated product innovation and market expansion, unleashing the business’s full potential, and obtain synergies inherent in the business, creating more opportunities for employees and deepening our client-partner relationships. We look forward to great success working together with AmTrust and the new company’s executive team.”

MDP has a long history of successfully investing in companies in the insurance sector and partnering with them to accelerate growth and achieve significant long-term value appreciation. The firm’s notable investments in this sector include NFP Corp., Ardonagh, and Nevada Investments Topco Limited.

Pro Forma AmTrust: A Leading Multinational Property & Casualty Insurance Company
Mr. Zyskind said, “Since our founding 19 years ago, AmTrust has grown into a premier multinational property and casualty insurer and the 15th largest property and casualty writer in the United States. We look forward to continue creating value for our shareholders, partners and customers through operational excellence and building on our core strengths.”

Following the close of the transaction, AmTrust will remain a leading multinational insurance company with approximately 7,400 employees focused on serving small commercial businesses, lower risk industry classes and profitable niche opportunities.

The agreement with MDP announced today is consistent with a number of strategic initiatives undertaken by AmTrust in 2017 to support strong financial performance and position the Company for long-term value creation. These strategic initiatives include a capital raise of $300 million in May 2017 and the sale of the personal lines policy management system developed for National General Holdings for $200 million in September 2017.

Approvals and Closing Timeline

The transaction has been approved by AmTrust’s Board of Directors. It is expected to close in the first half of 2018, subject to customary closing conditions and regulatory approvals.

BofA Merrill Lynch is serving as financial advisor to AmTrust in connection with the transaction, and Debevoise & Plimpton LLP is legal counsel. Kirkland & Ellis LLP is acting as legal advisor to MDP.
AmTrust Supplemental Presentation:

A supplemental slide presentation on the transaction is available on the investor relations section of AmTrust’s website at This supplemental slide presentation includes reconciliations for the non-GAAP measures referenced in this press release.

About Madison Dearborn Partners, LLC
Madison Dearborn Partners, LLC (MDP), based in Chicago, is a leading private equity investment firm in the United States. Since MDP’s formation in 1992, the firm has raised seven funds with aggregate capital of approximately $23 billion and has completed approximately 130 investments. MDP is currently investing out of its most recent fund, $4.4 billion MDCP Fund VII, in businesses across a broad spectrum of industries, including financial and transaction services; basic industries; business and government services; health care; and telecom, media and technology (TMT) services. For more information, please visit

About AmTrust Financial Services, Inc.
AmTrust Financial Services, Inc., a multinational insurance holding company headquartered in New York, offers specialty property and casualty insurance products, including workers’ compensation, commercial automobile, general liability and extended service and warranty coverage through its primary insurance subsidiaries rated “A” (Excellent) by A.M. Best. AmTrust is included in the Fortune 500 list of largest companies. For more information about AmTrust visit