Fortegra Announces Twin Divestments - Analyst Blog
05 Dezember 2013 - 1:07PM
Zacks
Fortegra Financial Corporation (FRF) has inked
a deal to sell its subsidiaries Bliss & Glennon (B&G) and
eReinsure to AmWINS Group Inc. for an undisclosed amount. The
acquisition is expected to culminate within a month’s time. B&G
is a wholesale insurance broker in excess and surplus lines and
manages general agency. On the other hand, eReinsure manages the
placement of facultative reinsurance through an online
platform.
Divestiture of these two subsidiaries by Fortegra will allow the
company to intensify focus on its payment protection, service
contract and warranty products. These are deemed the major growth
drivers for Fortegra that will aid margin expansion going
forward.
Fortegra’s payment protection segment reported a 31.5%
year-over-year increase in its net revenue during the third quarter
of 2013.
Nonetheless, Bliss & Glennon and eReinsure together had
contributed favorably toward consolidating Fortegra’s market
position in the respective lines of business. Fortegra acquired
B&G from Willis Group Holdings Public Limited
Company (WSH) in Apr 2009. eReinsure had been taken over
in Mar 2011. These two subsidiaries have consistently garnered
growth in brokerage commissions and fees for Fortegra, in turn
driving the company’s top line.
Brokerage commissions and fees of Fortegra had increased 39.7% to
$34.4 million in 2011. $1 million worth of increase was contributed
by B&G, while the acquisition of eReinsure contributed $8.8
million in fees. In 2012, B&G contributed additional $1.3
million to the 2.6% increase in brokerage commissions and fees.
eReinsure’s declined by $0.4 million though during that period due
to lower license fees. However, for the first nine months of 2013,
both B&G and eReinsure contributed additional $0.9 million and
$0.2 million respectively to drive a 4.1% increase in total
brokerage commissions and fees of Fortegra.
Fortegra expects to use the net proceeds from the sellout to erase
some of its debt burdens. The company had total debt of $117.8
million as of Sep 30, 2013 which declined nearly 5.3% from 2012-end
level. The debt profile is expected to improve further and
strengthen Fortegra’s balance sheet in the coming quarters.
Fortegra presently carries a Zacks Rank #5 (Strong Sell). However,
better-ranked stocks in the multi-line insurance industry include
Old Republic International Corporation (ORI) and
Prudential plc (PUK). Both these stocks sport a
Zacks Rank #1 (Strong Buy).
FORTEGA FIN CP (FRF): Free Stock Analysis Report
OLD REP INTL (ORI): Free Stock Analysis Report
PRUDENTIAL PLC (PUK): Free Stock Analysis Report
WILLIS GP HLDGS (WSH): Free Stock Analysis Report
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