Atlas Financial Holdings Announces Letter of Intent for Sale of Gateway Insurance Company to Ride-Sharing Insurance Provider Buckle; Continues Strategic Transition Towards MGA Model
Atlas Financial Holdings, Inc. (NASDAQ: AFH) ("Atlas" or the "Company") today announced a non-binding letter of intent with Buckle, a technology-driven financial services company, to purchase the stock of Atlas' indirect subsidiary Gateway Insurance Company ("Gateway") and Gateway's corporate charter and state licenses from its statutory rehabilitator ("Rehabilitator") in a collaborative transaction described further below, as an important next step in Atlas' strategic plan. Buckle's core business focuses on part-time transportation network company ("TNC") drivers and is complimentary to Atlas' focus on full-time drivers in the Livery, Paratransit, Taxi and TNC segments.
As previously announced, Atlas' strategic focus includes transitioning business previously written on its wholly owned insurance subsidiaries, which are currently in rehabilitation, to alternative markets through the Company's wholly owned managing general agency ("MGA"), Anchor Group Management, Inc. ("AGMI"), to leverage the team, distribution systems and other resources aligned under this business unit.
This agreement includes the following components:
- Buckle entered a non-binding letter of intent ("LOI") to acquire the stock of Atlas' indirect subsidiary Gateway, and its corporate charter and forty-seven (47) state insurance licenses as well as state statutory deposits, subject to regulatory and other necessary approvals, for $4.7 million plus the value of all purchased deposits, such amount to be paid to the Rehabilitator for the benefit of the rehabilitation estate of Gateway, with a tentative closing date in March of 2020.
- Upon closing, Buckle plans to recapitalize Gateway to support the writing of new and renewal insurance policies, including non-paratransit policies for AGMI.
- Subject to its underwriting guidelines, AGMI will begin to transition the entirety of Atlas' expiring taxi, livery and other non-paratransit business from its pool of subsidiaries including American Country Insurance Company, American Service Insurance, Inc. and Gateway (collectively "the ASI Pool Companies") to a recapitalized Gateway operating under a resumptive corporate charter as the insurer under an MGA agreement. Under this minimum three-year arrangement, AGMI expects to be able to produce up to $100 million in annual premium for non-paratransit business using Gateway as one of its insurance markets.
- Buckle plans to hire the Atlas claims team currently working for the rehabilitation estates of the ASI Pool Companies, with the objective of continuing to provide best-in-class claims service. The claims team will continue to work from Atlas' offices and serve as a third-party claims administrator for the ASI Pool Companies supporting legacy Atlas insureds as well as business written by AGMI and Buckle via the resumptive Gateway on a post transaction basis.
- Atlas' subsidiaries will provide professional services to Buckle and Gateway on a post-closing basis under one or more service agreements which are subject to negotiation and any required regulatory approvals.
- Buckle will rent space in Atlas' headquarters building in Schaumburg, IL as well as additional space in the Company's Melville, NY office.
The LOI was executed by Buckle, the Atlas subsidiary which directly owns Gateway, and the Rehabilitator, and is non-binding and subject to negotiation of definitive agreements. Therefore, there can be no assurance that the transaction will be consummated on the terms described herein or at all. In addition, the transaction will be subject to court approval and a bid process established by the Rehabilitator and approved by the court. The description of the LOI contained herein is a summary only. The terms of the LOI and the bid process will be made publicly available by the Rehabilitator. Assuming the successful consummation of the transaction, Atlas and Buckle plan to explore other potential opportunities to build on this partnership.
Scott D. Wollney, President & CEO of Atlas, stated, "We are very excited about this proposed transaction which will provide many positive benefits to both companies, our employees, customers, investors, and other stakeholders. There are a number of synergies between Atlas and Buckle which we believe will result in a mutually beneficial long-term relationship as well. We are confident in our MGA strategy and this next step will build upon the progress we made in 2019 through our previously announced arrangement for paratransit business with American Financial Group, Inc. and its National Interstate subsidiary."
AGMI will continue to write New York area business along with select renewals outside of New York through the Company's wholly owned insurance company Global Liberty Insurance Company. Atlas continues to work constructively with insurance regulators with the objective of a successful rehabilitation of the ASI Pool Companies as this business is transitioned to strategic partners via Atlas' MGA model. Cash proceeds from the Gateway transaction will add to the statutory surplus of the ASI Pool Companies in rehabilitation.
About Buckle
Buckle provides technology-driven financial products and services to the shared economy. When delivering insurance, the company's goal is to offer streamlined and transparent transactions to those who turn their personal assets into revenue-driving opportunities. For more information on Buckle, visit www.buckleup.com and connect on Facebook and LinkedIn.
About Atlas
The primary business of Atlas is commercial automobile insurance in the United States, with a niche market orientation and focus on insurance for the "light" commercial automobile sector including taxi cabs, non-emergency para-transit, limousine/livery (including full-time transportation network company drivers) and business auto. For more information about Atlas, please visit www.atlas-fin.com.
Forward-Looking Statements
This release includes forward-looking statements regarding Atlas and its insurance subsidiaries and businesses. Such statements are based on the current expectations of the management of each entity. The words "anticipate," "expect," "believe," "may," "should," "estimate," "project," "outlook," "forecast" or similar words are used to identify such forward looking information. The forward-looking events and circumstances discussed in this release may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting the Companies, including risks regarding the insurance industry, economic factors and the equity markets generally and the risk factors discussed in the "Risk Factors" section of the Company's 2017 Annual Report on Form 10-K. No forward-looking statement can be guaranteed. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Atlas and its subsidiaries undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
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