Two New England insurers want to join forces. Vermont’s Union Mutual and Massachusetts’ Norfolk & Dedham announced their intent to affiliate in a joint statement released Wednesday.
The contract between the two companies, signed last Friday, would have them pool their finances as part of a business partnership. The affiliation is subject to approval by the Vermont Department of Financial Regulation, a process which is expected to take several months and may involve a public hearing.
The two companies insure a range of both commercial and personal assets, such as homes and cars, as well as providing worker’s compensation and employment practices liability insurances.
Union Mutual will remain headquartered in Montpelier, according to the statement, and the combined group “will have approximately 250 employees.” No layoffs are planned, according to firm’s vice president Sarah Jarvis.
According to Jarvis, initial conversations about the new arrangement began in fall of 2022.
“This is not a case of either needing saving, this is about wanting to grow sustainably,” said Jarvis.
Union Mutual does business in seven northeastern states, whereas Norfolk & Dedham only operates in Massachusetts and New Jersey. However, the Massachusetts insurer has a much higher policyholder surplus, which is the amount of money in hand after it pays out customers’ claims. The surplus amount acts as a marker of the company’s financial strength in case of unexpected disaster.
According to their publicly available annual statements, Union Mutual posted a $116 million surplus in 2022. That same year, Norfolk & Dedham’s surplus was nearly four times bigger, at $434 million.
Union Mutual CEO Lisa Keysar and Norfolk & Dedham CEO Joel Murray wanted to combine the former company’s geographical diversity with the latter’s excess surplus, according to Jarvis. Together the firms would have 1,000 agency offices across the Northeast, the statement said.
Since both insurers are mutual companies — they are owned by their policyholders — they cannot merge or be acquired. Instead, they can enter into an affiliation.
Under this agreement, the two entities will remain legally distinct and continue to operate under their own brands. Keysar and Murray will also remain President and CEO of their respective companies.
However, the affiliation creates a joint board of directors. Norfolk & Dedham will have more members than Union Mutual on the board, with Murray sitting as Chair.
Also, AM Best, a prominent credit rating agency for the insurance industry, will rate the combined group — which does not yet have a name — as one organization. The agency stated on Wednesday that the rating of both companies remained unchanged with “Financial Strength Ratings of A (Excellent) and Long-Term Issuer Credit Ratings of “a” (Excellent),” and that the outlooks for both “are stable” in the wake of the affiliation announcement.
Jarvis indicated that the two firms also intend to move towards acting as a single employer for all staff at Union Mutual and Norfolk & Dedham.
“This is so that we can unify compensation, benefits and human resources,” she said.
Benefit values would not decrease for any employee, according to Jarvis. And all the accumulated paid time off and vacation days would carry forward under the affiliation agreement.
Union Mutual and Norfolk & Dedham would become effectively affiliated on the first Tuesday of the calendar month following regulatory approval.
