Fairfax Financial buys Allied World for $4.9bn

Canadian-based (re)insurer Fairfax Financial has agreed to buy Swiss-based insurer Allied World Assurance Company for $4.9bn in a cash and stock deal.

Fairfax will pay owners of Allied World $54 per share — $10 in cash and $44 in Fairfax stock. The offer amounts to an 18% premium above Allied World’s Friday closing price of $45.77.

The acquisition, which has been approved by both company’s boards, will see Allied World operate within the Fairfax group on a decentralised basis after closing. The deal is expected to close in Q2 2017. 

Fairfax said the purchase would diversify its group risk portfolio, and Allied World would leverage from its new owners’ presence in the international (re)insurance markets.

Fairfax chairman and chief executive Prem Watsa said: “We are excited to have Allied World join the Fairfax group.

“Allied World is a high-quality company with an excellent long-term track record and an outstanding management team led by Scott Carmilani.”

Carmilani, president, chief executive and chairman of Allied World, added: “We are strategically aligning ourselves with Fairfax, one of the premier companies in the insurance industry which has a great track record of supporting their operating companies and creating value for shareholders.

“The success of Fairfax’s decentralized approach in empowering their management teams to drive profitable underwriting and combining Fairfax’s investment philosophy will position us to create long-term value for shareholders. Fairfax provides a great home for Allied World to continue to build a strong business for our customers, business partners and employees.”