German insurer buys Brentwood's Windsor Health Group

A large German insurer agreed to buy managed-care company Windsor Health Group Inc. of Brentwood for $125 million in cash to expand its presence in the U.S. Medicare market.
Munich Re, also the world's biggest reinsurer, made its bid as size and efficiency become more important to Windsor and other providers of private Medicare plans amid cuts in government reimbursements.
"We'll be better able to absorb reimbursement reductions with greater efficiency and greater size," said Michael D. Bailey, president and chief executive of Windsor Health Plan Inc., Windsor Health Group's largest subsidiary.
Last year, the two companies entered an agreement under which Munich Re provided backup capital to help Windsor meet regulatory requirements.
"They've had a good working relationship, and Munich Re was able to get a good feel for the management team and the business plan," said Michael Devlin, managing partner of Pharos Capital Group, Windsor's largest outside shareholder.
"It makes sense given Munich Re's interest in the United States to bring this in their portfolio of U.S. investments."
In addition to Nashville-based Pharos, other large investors in Windsor include its chairman and chief executive, Philip Hertik; Bailey, the president and CEO of Windsor Health Plan; and Willis E. Jones III, its chief financial officer.
Vanderbilt University Medical Center and venture capital firm Delta Capital Management of Memphis also have small stakes.
Hertik, Bailey and Jones started Windsor in 2000 by acquiring a TennCare health plan from Vanderbilt University Medical Center. The company shifted its focus to the senior market, selling its first Medicare Advantage plan in 2006. Hertik also is a board member, investor and adviser to NeighborMD, a new company opening urgent care clinics that's led by former O'Charley's CEO Greg Burns.
The Windsor-Munich Re transaction is expected to close at the end of the year, pending regulatory approval. Afterward, Windsor will come under control of the German insurer's Munich Health North America Inc. subsidiary.
Over 75,000 members Windsor provides Medicare Advantage health, prescription drug plans and special needs plans to more than 75,000 members in Alabama, Arkansas, Mississippi, South Carolina and Tennessee. This year, the company expects earnings before interest, taxes, depreciation and amortization of $31 million and gross written premiums of about $420 million.
Munich Re said it plans to finance the purchase price from its existing resources. U.S. investor Warren Buffett recently raised his stake in Munich Re to more than 10 percent, with plans to acquire more.