On 25 September 2000, CGNU announced the sale, subject to completion, of its US General Business to White Mountains Insurance Group Ltd. for $2,063 million (£1,427 million) plus the repayment of an inter-company loan of $1,100 million (£761 million). CGNU announces today that it has agreed with White Mountains certain amendments to the sale and purchase agreement that will result in a $200 million (£138 million) additional cost to CGNU as detailed below. These amendments do not affect the nature of CGNU’s clean-cut exit from the US property and casualty market.
On 25 September 2000, CGNU announced the sale, subject to completion, of its US General Business to White Mountains Insurance Group Ltd. for $2,063 million (Ł1,427 million) plus the repayment of an inter-company loan of $1,100 million (Ł761 million). CGNU announces today that it has agreed with White Mountains certain amendments to the sale and purchase agreement that will result in a $200 million (Ł138 million) additional cost to CGNU as detailed below. These amendments do not affect the nature of CGNU’s clean-cut exit from the US property and casualty market.
The amendments arise from an analysis of the reserve position of the US General Business as part of the year-end closing. As a result of this analysis, the US General Business has strengthened its 31 December 2000 reserves and purchased reinsurance to provide some protection against further adverse developments. These actions in themselves do not affect the purchase price.
However, in order to facilitate timely satisfaction of the conditions to the transaction, CGNU and White Mountains have agreed to the following principal amendments:
Pre-closing adjustments equivalent to $200 million (Ł138 million) which will be borne by CGNU.
An increase in the proportion of the consideration to be satisfied in loan notes from $210 million to $260 million (Ł180 million) and an increase in the maturity of the loan notes from six months to eighteen months;
The US General Business to purchase certain reinsurance covers on closing in order to further protect its reserve position whilst not affecting the purchase price; and
Commitment of at least an additional $125 million (Ł86 million) from White Mountains towards the transaction.
Following these amendments, the lead arranger of White Mountains’ bank financing has committed to provide a financing facility of $875 million (Ł605 million), subject to certain conditions. The sale, as amended, is also subject to US regulatory approval.
CGNU and White Mountains remain enthusiastic and committed to completing the transaction, which is now expected to close in the first half of this financial year.
ENQUIRIES
Analysts/Investors
Mr Steve Riley, Investor Relations Director, CGNU
+44 (0)20 7662 8115
Media
Ms Hayley Stimpson, Director of External Affairs, CGNU +44 (0)20 7662 7544
Mr Alex Child-Villiers, Financial Dynamics
+44 (0)20 7269 7107
Note: a spot exchange rate of $1.4459 = Ł1 on 19 February 2001 has been used to convert dollar amounts into pounds sterling throughout this announcement