Eastern Alliance to stay 'local'
Technically, Eastern Alliance Insurance Group in Lancaster won't be a “local” company come Jan. 1.
The company will be owned by ProAssurance, an Alabama-based specialty insurance writer that specializes in specific areas of health care. ProAssurance agreed to buy Eastern's holding company for $205 million in September.
But that's only a technicality.
The reality is that nothing has changed at Eastern since the sale announcement, and no changes are planned, according to company officials on both sides of the deal. Eastern's 238 employees and executive staff all have kept their jobs. Every policyholder stayed with the company, and the company is keeping its name. Its seven corporate offices — including the headquarters in Lancaster — are all staying open and staffed.
Eastern Alliance, started in 1997, still will be, by almost every measure, a local company after the sale becomes official around Jan. 1.
"There are no changes for our employees, agents or customers," said Michael Boguski, president and CEO of Eastern Insurance Holdings Inc., the holding company of Eastern Alliance Insurance Group. "The only thing I would say is that all of us are going to benefit from the financial strength of ProAssurance."
Based in Birmingham, Ala., ProAssurance is a specialty writer of professional liability insurance and products liability insurance for medical technology and life sciences companies, according to spokesman Frank O'Neil.
Consolidations in health care organizations and individual health care plans have made the company look into the future and see the need to offer more services, including workers' compensation insurance, he said. The company didn't have the experience or expertise to get into the niche itself, but Eastern offered both. It has 20 percent of its policyholders — a group that includes about 3,000 in the midstate, Boguski said — in the health care field, O'Neil said.
Eastern deals solely in workers' compensation insurance.
"When we have the opportunity to bring an experienced, highly successful management team into our organization and get the benefit of a high-quality company, we're going to try and take advantage," O'Neil said. "Eastern will improve our company beyond just being a subsidiary. They have a very successful enterprise and a terrific management team with a stellar track record."
Since Eastern Insurance Holdings went public in 2006 as an $80 million company, Kevin Shook, the company's chief financial officer, said the company had received five to 10 buyout offers. Some of them were casual, others were "somewhat serious," he said.
Because the company was in such high demand, its stakeholders could weed through the offers that didn't result in the post-acquisition independence of Eastern. ProAssurance fit the bill, and also offered the stability of Eastern's employees, its brand and its customers.
"Eastern was made by its employees," Shook said. "Anyone that would have come in and changed the brand, I don't think they would have gotten what they set out to purchase."
The two sides first met in July 2012 as nothing more than "two companies that admired what we were doing in the spaces we were in," according to Boguski. By May the relationship moved far enough that negotiations started in earnest.
The framework took shape and, by September, the numbers were impressive: an all-cash deal of $24.50 per stock share, when the trading price was $18.75 and the company's tangible book value was $15.81 per share, Boguski said.
"They went 1.55 times more than the value," Boguski said, "when the last four (comparable) company deals were going for between 0.55 and 0.85 times the value. It was an attractive valuation and, just as important, it was a great long-term strategic plan for both companies."
All told, ProAssurance paid $205 million to acquire Eastern Insurance Holdings.
"There's a great long-term strategic plan in view," Boguski said. "We've got two companies with best-in-class cultures and now a very good product line and diversification."