LOS ANGELES, Nov. 21 — Mercury Insurance Corporation (NYSE: MCY), a major writer of automobile insurance in California, with operations also in Georgia and Illinois, announced today that it has signed a definitive agreement to purchase for cash the American Fidelity Insurance Company (AFI), an independent agency insurer headquartered in Oklahoma City, Oklahoma. AFI and its wholly-owned subsidiaries write automobile and other lines of casualty insurance principally in Oklahoma, Texas and Kansas. The Company’s total written premium volume in 1995 was $90.0 million, of which approximately 47% was in the automobile lines. American Fidelity Insurance Company is now a part of the American Fidelity Group (AFG), which includes American Fidelity Assurance Company and other members that specialize in the life, health and rapidly expanding employee benefits marketplace.
The agreed upon purchase price of $34.8 million closely approximates AFI’s surplus at December 31, 1995, based on statutory insurance accounting. Mercury intends to fund the purchase with borrowings under an enlarged term loan facility.
Consummation of the transaction is subject to regulatory approval in Oklahoma, Kansas and Texas and is subject to expiration of the thirty day waiting period required by the Hart, Scott, Rodino Anti-Trust Improvements Act. Closing of the transaction is expected in late December 1996.
George Joseph, Chairman and CEO of Mercury General, said “This acquisition, the first in Mercury’s thirty-five year history, will permit the Company to enter additional automobile insurance markets without incurring the several years of start-up costs typically associated with new insurance operations.” Stanley A. Dickey, AFI’s President and Chief Executive Officer, will remain in that post. “Mercury expects to continue the operations with the current AFI management and staff,” said Joseph. Following completion of the purchase, the name of the acquired propertyand casualty group will be changed.
AFG Vice Chairman, Bill Cameron, reported that “the sale of the property and casualty operations will allow the American Fidelity Group to focus on its core employee benefit market.”
Mercury Insurance Corporation is an insurance holding company engaged primarily in writing of all risk classifications of automobile insurance in California. Mercury had total revenues of $777.1 million during the twelve months ended September 30,1996 and had total shareholders’ equity of $611.9 million at that date.