AmTrust Financial Services has invested $53m in American Capital Acquisition Corporation (ACAC) in connection with its acquisition of GMAC's US Consumer Property and Casualty Insurance business.
Under the terms of the agreement AmTrust initially invested $53m in an 8% convertible preferred security that is equivalent to a 21.25% ownership interest in ACAC. The investment will be accounted for under the equity method.
According to AmTrust, the initial investment of $53m was more than the original $42m expectation. The increase reflects a high net closing book value of the acquired assets due to changes relating to the separation of the business from GMAC and high earnings than expected.
Barry Zyskind, president and CEO of AmTrust, said: “We are excited to have the opportunity to partner with ACAC while continuing to focus on delivering strong returns for our shareholders.
“In addition to the solid return on our investment, we will generate additional fee income as we leverage our expertise to build out a new technology platform and deliver asset management services as well as provide additional capital through our reinsurance quota share agreement.
“This transaction will be immediately accretive to AmTrust, and reflects our commitment to intelligent growth. In addition to generating solid returns, we gain access to ACAC’s distribution force of 10,500 agents with the opportunity to cross sell our AmTrust products.”