CGNU plc today announces that it has reached agreement in principle for the sale of Marlborough Underwriting Agency Ltd ("Marlborough"), its wholly owned Lloyd's managing agency, to the Berkshire Hathaway Group. Under the terms of the agreement the Berkshire Hathaway Group will also undertake, subject to Lloyd's approval, to replace CGNU as the provider of capacity to the Marlborough managed syndicates for 2001. As at 31 December 1999 Marlborough had audited net assets of £1.1 million.
CGNU plc today announces that it has reached agreement in principle for the sale of Marlborough Underwriting Agency Ltd ("Marlborough"), its wholly owned Lloyd's managing agency, to the Berkshire Hathaway Group. Under the terms of the agreement the Berkshire Hathaway Group will also undertake, subject to Lloyd's approval, to replace CGNU as the provider of capacity to the Marlborough managed syndicates for 2001. As at 31 December 1999 Marlborough had audited net assets of Ł1.1 million.
The sale of Marlborough follows CGNU's exit from the global risks market in August 2000 and will complete the group's withdrawal from London market business.
In order to secure protection against any adverse impact of the run-off of claims reserves held by CGNU in respect of London market business written prior to 1 October 2000, the date of exit, CGNU has also reached an agreement in principle for the purchase of reinsurance with the Berkshire Hathaway Group. This will provide cover of Ł1 billion in excess of CGNU's claims reserves of Ł1.2 billion.
A Ł448 million one off charge before tax (Ł322 million after tax) will be taken in CGNU's consolidated results for the nine months to 30 September 2000* in relation to its exit from London market business and associated reinsurance protection. Results for Marlborough and the other London market business for the nine month period will be reported separately as 'Operations to be discontinued.'
Bob Scott, group chief executive said: "These actions are consistent with the group's strategy of focusing its general insurance operations on personal and small commercial lines business. They will improve the quality of the group's future earnings by removing the uncertainties relating to London market risks and any further exposure to this business. This completes the major repositioning of general insurance business which would have any material financial consequence for the group."
Analyst/investor enquiries:
Steve Riley, Investor Relations Director.
Tel: +44 (0)20 7662 8115
Media enquiries:
Mike Biggs, Executive Director - UK General Insurance.
Tel: +44 (0)20 7662 2647
Hayley Stimpson, Director of External Affairs.
Tel: +44 (0)20 7662 7544
Alex Child-Villiers, Financial Dynamics.
Tel: +44 (0)20 7269 7107
Note to editors:
*to be announced on 8 November 2000
Marlborough Underwriting Agency Ltd is a Lloyd's managing agent for three active syndicates (syndicates 62,1047 and 1861) and two run-off syndicates (syndicates 744 and 1242) with managed capacity for the 2000 year of account of Ł285 million. Syndicate 1861 is a leading marine syndicate at Lloyd's with Ł150m of capacity and was formed for the 2000 year of account following the transfer of the CGU London market marine portfolio, previously transacted within the Institute of London Underwriters. Syndicate 62 underwrites a marine portfolio specialising in hull business. Its capacity for the year 2000 is Ł36 million. Syndicate 1047 underwrites a non-marine liability portfolio with a stamp capacity in 2000 of Ł32 million.
London market figures for the six months to 30 June 2000 were:
Net written premiums: Ł162 million
Underwriting loss: Ł31 million
Combined operating ratio: 122%
Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged in a number of diverse business activities. The most important of these is the property and casualty insurance business conducted on both a direct and reinsurance basis through a number of subsidiaries. Included in this group of subsidiaries is GEICO Corporation, the sixth largest auto insurer in the United States and General Re Corporation, one of the four largest reinsurers in the world and its wholly owned subsidiary of D. P. Mann Ltd., a Lloyd's managing agent. D.P. Mann is one of the largest syndicates at Lloyd's with a 2000 stamp capacity of over Ł257 million.
Its interests also include the Reinsurance Division of the Group, which specialises in the management and risk assumption of discontinued and run-off business on an international scale.
The Berkshire Hathaway Group, which has a combined surplus in excess of USD 40 billion, is one of the most strongly capitalised insurance/reinsurance groups in the world.
CGNU plc is the UK's largest insurance group and the world's sixth largest insurer based on gross worldwide premiums. The group was created from the merger of CGU and Norwich Union on 30 May 2000.