Two mutual insurers — Northern Neck Insurance Co. and Frederick Mutual Insurance Co.— have announced they intend to affiliate, pending regulatory approval, in a move to grow across the Mid-Atlantic region.
While Northern Neck is acquiring Frederick Mutual, the two companies said in their joint announcement that they are “approaching this as an affiliation of two companies with complementary strengths and legacies.”
The partnership looks to unite Northern Neck’s personal lines focus with Frederick Mutual’s commercial lines expertise. The insurers will continue to operate under their existing brands.
Together, the companies will have more than 90 employees and 450 independent agency locations in Virginia, Maryland, Pennsylvania, Delaware, District of Columbia, and North Carolina.
According to AM Best, the transaction will be a stock purchase agreement. Frederick Mutual Insurance Co. is jointly owned by Frederick Mutual Group, Inc., a stock corporation with majority ownership, and Mutual Capital Investment Fund (MCIF). Northern Neck has agreed to purchase MCIF’s preferred stock. Upon closing, the preferred stock will convert to common stock. After the transaction closes, management intends to pool results for both companies.
“This is a transformative moment for both companies,” said Peter Cammarata, president and CEO of Northern Neck. “By joining forces, we will combine our strengths to create a compelling alternative in the marketplace — a dynamic mutual insurer focused on empowering agents, enhancing coverage and service for members, and providing great career opportunities for employees.”
“This partnership will allow us to grow while staying true to our mutual values,” said Nancy Newmister, president and CEO of Frederick Mutual. “Together, we’re unlocking new opportunities for growth through complementary product offerings, shared support services, and an unwavering focus on our agents and policyholders. Together, we will be a stronger, more agile organization ready to meet the evolving needs of our communities.”
As part of the agreement, Northern Neck will enter into a management agreement with Frederick Mutual, with Cammarata as president and CEO of both organizations, and Northern Neck’s board of directors providing unified governance.
Cammarata and Newmister will remain chief executives of their respective organizations until the transaction is finalized, and both will be involved in the integration process, the companies said.
Frederick Mutual will remain headquartered in Frederick, Maryland, where it has been since 1843. Northern Neck will continue operations from Irvington, Virginia, celebrating its 130th anniversary.
Upon learning of the planned affiliation, AM Best announced that Northern Neck’s credit ratings have been placed under review with negative implications. AM Best explained that the under review with negative implications status reflects “potential pressure on Northern Neck’s operating performance assessment” as it relates to the consolidated results of the prospective group, while also reflecting the need to evaluate medium-term strategic expectations.
The ratings agency also said that pooling is expected to provide broader product and geographic diversification, greater economies of scale and increased operational efficiencies.
AM Best said the ratings will remain under review pending regulatory approval and until AM Best “fully analyzes the impact of Northern Neck post-transaction rating fundamentals.”
The transaction is expected to close before the end of 2025.
Topics
Mergers & Acquisitions
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