Guardian sells UK property underwriting business
Published:Friday | May 27, 2011 | 12:00 AM
Guardian Holdings Limited and their partners have agreed to dispose of subsidiary Jubilee Group Holdings, a Lloyd's of London business, as part of an ongoing strategic review of the company's operations, which will see the company exiting the European market.
The process of divesting its European assets has been ongoing for two years.
Jubilee Group is being sold to Ryan Specialty Group, a United Kingdom-based general underwriting agency specialising in financial products, for £35 million or TT$359 million.
Guardian is projecting a gain from the sale, which is subject to regulatory approval in the UK, saying it should add an estimated TT$0.30 to its earnings per share.
The transaction values the business at 2.33 times its book value, placing a premium on Jubilee Group Holdings, which exceeds comparable Lloyd's of London acquisitions, Guardian Holdings said.
The Trinidad-based Guardian, the single largest shareholder with a 40 per cent stake in Jubilee Group Holdings, supplied the majority of underwriting capital to the syndicates managed by Jubilee's managing agency, Jubilee Managing Agency Limited.
According to the Guardian statement to shareholders, over the signatures of chairman Arthur Lok Jack and chief executive officer Jeff Mack, £30 million (TT$308m) of underwriting capital has been committed to those syndicates. The money will flow back to Guardian Holdings over the next four years and those funds will be in addition to the proceeds received from the sale of Guardian Holdings' shares in Jubilee Group Holdings.
Guardian Holdings' participation at Lloyd's goes back to 2002 when it acquired NEMWIL, which in turn owned a Lloyd's corporate member through which a moderate underwriting commitment had been made.
The group's participation in the Lloyd's market was expanded when it acquired, with its minority partners, a 40 per cent stake in Appleclaim Limited and Jubilee Managing Agency Limited.
In 2003, Appleclaim expanded with its own acquisition from the St. Paul Insurance Group of the former Cassidy Davis businesses. Appleclaim was rebranded Jubilee Group Holdings in 2009. Acquisition of a Lloyd's managing agency was part of Guardian Holdings' expansion plans into developed markets, but in recent times it has been shedding assets it said have not been performing.
The directors said that in contrast to Guardian Holdings' acquisition of Zenith Insurance Company, the Gibraltar-based insurance carriers, which was sold in 2009 resulting in a TT$856 million write-down, Jubilee Group Holdings "has provided the group with an excellent return on capital".
Lok Jack said the companies remaining in the group's portfolio, which include Guardian Life and Guardian General, "will offer our shareholders the greatest return on capital." With the sale of Jubilee, he said, "we have essentially returned to our Caribbean roots," stopping short of admitting that the sale represents a pull back from Guardian Holdings' commitment to the European market.
Guardian Holdings reported what is said was a satisfying after-tax profit of TT$89.3 million for the quarter to the end of March 2011 against the backdrop of the second-worst quarter for catastrophe losses in the history of the insurance industry, the chairman said.
Lok Jack said the insurance industry faced an unprecedented level of catastrophe losses, the most extraordinary being the Japan earthquake and tsunami on March 11.
The chairman said the exposure to Guardian Holdings from non-Caribbean catastrophes came from two sources - Guardian Re, and the Lloyd's of London business, Jubilee - both of which write an international property book.
However, Lok Jack said that "as a result of our careful underwriting within these companies, GHL was able to avoid any large losses from these events", although to date they have one reported loss from Japan, which amounted to just over US$1 million.
Given the size of the Japan loss, he added, "it is still possible that we will receive notification of further claims, but we do not expect that these will have a material effect on our full-year results."