National General Soars on $4 Billion Allstate Acquisition

Shares of National General surge after insurance giant Allstate says it will acquire the company for about $4 billion in cash.

Shares of National General Holdings  (NGHC) - Get Report surged on Wednesday after insurance giant Allstate  (ALL) - Get Report announced that it will acquire the property and liability insurance provider for about $4 billion in cash.

National General stock surged 65% to $33.59 in trading on Wednesday after Allstate announced it will pay $34.50 a share for the company, about 69% more than the $20.41 closing price Tuesday. 

Allstate will fund the deal with $2.2 billion in cash resources and by issuing $1.5 billion in new senior debt.

The acquisition "accelerates Allstate's strategy to increase market share in personal property-liability and significantly expands our independent agent distribution," Allstate CEO Tom Wilson said in a statement.

“National General’s business and technology platforms will be utilized to further strengthen Allstate’s existing independent agent businesses,” he added.

The deal comes as insurance companies struggle to acclimate to the coronavirus pandemic, which has shifted both personal and business insurance needs and claims dramatically, particularly in the car and property insurance world.

Allstate and other auto insurers saw vehicle claims plummet during pandemic-related shutdown orders that kept people off the roads, and have even returned premiums to customers. On the business insurance side, widespread closures of everything from retail stores to office buildings have shifted needs for on-site commercial coverage.  

National General's gross premiums written were $5.6 billion in 2019, which generated $319 million in operating income, the companies said.

Shares of Allstate, meantime, were down 3.25% at $89.64 in trading on Wednesday. The stock has fallen about 18% year to date.