Motor Club of America Announces Closing of North East Transaction
27 September 1999
Motor Club of America Announces Closing of North East Transaction, Appointment of Patrick J. Haveron as Chief Executive Officer and Third Quarter Charges
PARAMUS, N.J., Sept. 24 -- Motor Club of America
announced today that it had closed its acquisition of North
East Insurance Company . The Company also announced that its
Board of Directors is naming Patrick J. Haveron as Chief Executive Officer of
Motor Club of America. Haveron will be joining Stephen A. Gilbert in that
position.
Reporting on the closing of the North East transaction, Stephen A.
Gilbert, President and Chief Executive Officer of Motor Club, said, "We look
forward to embarking on a new era at North East which will maximize its
potential. We believe Motor Club offers North East the opportunity to
significantly improve its operations, particularly with regard to its
reinsurance programs and other elements of its cost structure. In addition,
Motor Club is making a $2 million contribution to the surplus of North East,
which will increase its surplus by more than a third. We look forward to Ron
Libby and his Maine-based North East team continuing to serve their Maine
agents and policyholders with not only its present product line, but also
enhanced commercial lines product offerings in the near future. We believe
this combination will enable Motor Club to bolster its returns, and strengthen
its operations by expanding its geographic scope and diversifying its
policyholder base."
Ronald A. Libby has been elected as President, Chief Operating Officer and
a Director of North East. Commenting on the closing of the transaction, Libby
said, "Our affiliation with Motor Club opens up a wide range of possibilities
for North East which we look forward to capitalizing on. We believe those
possibilities will begin to take shape very quickly and this represents a very
positive step for our Maine-based agents, policyholders and employees."
Gilbert continued, stating, "The North East transaction enables us to
begin our diversification of Motor Club outside the State of New Jersey, which
we plan to continue. This effort will be led by Pat Haveron, who will be
joining me as Chief Executive Officer of Motor Club."
Haveron will be responsible for Motor Club's merger and acquisition
efforts, including post-merger integration. For the present time, Haveron
will continue to oversee the financial management of the Company and remains
its Chief Financial Officer. The Company also announced that North East's
present Treasurer, Graham S. Payne, would be joining Motor Club as its
Controller and Chief Accounting Officer.
Haveron said, "We will continue to expand the Company outside the State of
New Jersey and pursue our plan of growth in the small commercial lines arena,
where our Preserver Insurance Company unit has excelled in recent years. As
we have said, we believe we can achieve both objectives through acquisitions
and while this market is very competitive, we look forward to carrying through
on this critical strategic effort."
Haveron joined Motor Club in 1988 as Controller and was appointed Chief
Financial Officer in 1993. He was also named Executive Vice President in 1996
and has been a director of Motor Club since 1992. He is a 1983 graduate of
the University of Scranton and is also a certified public accountant.
Motor Club has announced that First Union National Bank, the exchange
agent for the merger, will shortly be mailing exchange materials to North East
shareholders of record. Those who hold their North East shares in "street
name" will receive similar materials from their brokers soon thereafter.
As of the closing of the merger, North East's shares are no longer
publicly traded. The exchange materials permit North East shareholders to
exchange their North East shares for cash, an equivalent number of shares of
Motor Club common stock, or a combination thereof. However, only a maximum of
290,389 Motor Club shares will be issued. If, in the aggregate, North East
shareholders seek to receive more than this maximum, the number of Motor Club
shares issued to each electing shareholder will be reduced pro rata, with cash
substituted for the remainder. North East shareholders who fail to return
their completed election forms within 25 days of the mailing date will receive
only cash in exchange for their North East shares.
In connection with the closing of the North East transaction, Motor Club
reported that it would record charges during the 1999 third quarter of
approximately $1.3 million or $.63 per share, after federal income taxes, the
majority of which are severance costs at North East; these charges also
include Motor Club's own merger-related expenditures.
The Company also reported that its Motor Club of America Insurance Company
and Preserver Insurance Company operating units had presently suffered
approximately $485,000 or $.23 per share in net losses, after federal income
taxes, as a result of Hurricane Floyd. While claim reports are still being
submitted, the Company presently anticipates that the amount will not exceed
approximately $625,000 or $.30 per share, largely due to the protection
provided by its catastrophe coverage.
Motor Club of America is a property and casualty insurance holding
company, Motor Club of America Insurance Company writes personal automobile
insurance. Preserver Insurance Company writes small commercial and homeowners
insurance. The Companies are separately rated B+ (Very Good) by A.M. Best
Company ("Best"). North East writes personal automobile and small commercial
insurance and is presently rated B- (Fair) by Best.
Forward-Looking Statement Disclaimer: This press release contains
statements that are not historical facts and are considered "forward-looking
statements" (as defined in the Private Securities Litigation Reform Act of
1995), including statements concerning the expected benefits of the merger.
Consummation of the merger and future benefits therefrom involve various risks
and uncertainties, including the risk of material adverse changes in financial
markets or the condition of Motor Club and North East; risks associated with
Motor Club's and North East's entry into new markets; and state regulatory and
legislative actions which can affect the profitability of certain lines of
business and impeded the Companies' ability to charge adequate rates.