Mount Logan Capital (MLC) has entered into a non-binding agreement for the acquisition of all the equity of Ability Insurance Company for $20 million.
The transaction will be satisfied through the issuance of an unsecured promissory note in the amount of $15 million and $5 million of common shares of Mount Logan, a release said. It has also been planned that Mount Logan’s wholly owned subsidiary, Mount Logan Management, will manage a meaningful portion of Ability’s assets following the deal.
Domiciled in Nebraska, Ability is an insurer and reinsurer of long-term care policies. It has about $900 million of invested statutory assets as of December 31, 2020. It has been noted that Ability is unique in the insurance industry in that its long-term care portfolio’s morbidity risk has been largely reinsured to third parties; the company is also no longer re/insuring new long-term care risk.
Also, as part of the transaction, Mount Logan will further invest $10 million of capital into Ability the strengthen the latter’s balance sheet, as well as to launch a platform for the reinsurance of annuities. The platform is expected to reinsure $150 million of fixed annuities within six months following closure of the transaction.
Completion of the transaction will further progress Mount Logan in its transition into asset management and “builds on the experience of MLC’s management in directing the investment activity of insurance company assets,” said Mount Logan chairman and CEO Ted Goldthorpe.
Goldthorpe added that the proposed transaction is “beneficial” for Ability’s policyholders and “highly strategic” for MLC, which looks to use Ability as a growth platform.
The deal is subject to final approval of definitive agreement by the parties, as well as customary terms and conditions, and final approval of the Nebraska Department of Insurance and Neo Exchange. It is expected to close in the third quarter of 2021, assuming all approvals are received.