In a deal estimated at $180 million, New York-based Tower Group has agreed to purchase the personal lines division of OneBeacon Insurance Group, which includes two insurance companies and two management companies.

Under the terms of the agreement, Tower will pay $77.5 million to acquire the Massachusetts Homeland Insurance Co. and York Insurance Co. of Maine, as well management companies that are attorneys-in fact for Adirondack Insurance Exchange, a New York reciprocal insurer, and New Jersey Skylands Insurance Association, a New Jersey reciprocal insurer, and its New Jersey domiciled stock insurance subsidiary, New Jersey Skylands Insurance Co.

The acquired insurance companies write about $250 million of annual premiums, and the acquired management companies manage about $250 million in annual premium written through two reciprocal insurance companies, according to Tower.

Tower announced that it will write and manage the private passenger automobile, homeowners and package policies through the companies currently issuing these policies and combine its existing personal lines operations with the business being acquired.

The firm also will purchase the surplus notes issued by the two reciprocal insurers for an amount equal to the statutory surplus in the exchanges for $103 million.

Michael Lee, president and chief executive officer of Tower, said in a statement the transaction provides his company “with a unique opportunity to add a very high quality franchise to Tower’s group of companies.

“The transaction is consistent with our long term strategic plan to expand our diversified platform through acquisitions by strengthening our personal lines product offering, generating additional fee income from the management of the reciprocals and delivering greater value to our producers and customers,” he said. “We are also very pleased with our ability to gain access to OneBeacon’s robust personal lines operating platform, experienced management team and staff, as well as their long tenured producers throughout the Northeast.”

The transaction, subject to approvals by the appropriate regulatory agencies, is expected to close at the end of the second quarter of this year.

Mass. insurer gets ‘stronger’

Massachusetts-based OneBeacon said that all specialty lines, including collector care and boat business produced through its Hagerty Insurance, as well as the personal lines assigned risk business written through its AutoOne unit, will remain with the company and are not part of the announced transaction.

Mike Miller

Mike Miller, OneBeacon’s CEO, said the agreement “will complete OneBeacon’s transformation into a specialty company.

“We have had great success with our specialty teams since 2001 and we are excited about our future profitability and growth in those markets,” Miller said in a statement. “Additionally, the sale will free up significant capital which increases our financial flexibility, and also reduces our catastrophe exposure. This makes OneBeacon a much stronger and more focused company going forward.”

He added that through Tower, agents and customers will transform itself into a carrier “committed to building its personal lines presence.”

In reaction to the proposed deal, A.M. Best left the financial strength rating of “A-” (Excellent) and issuer credit ratings of “a-” for Tower Group Companies and its pooled members unchanged. The issuer credit ratings of “bbb-” of the public holding company, Tower Group, is also unchanged in light of the pending deal.