USF&G buys Ashley Palmer Managing agency for Lloyd's will widen the door to London

December 21, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

In an attempt to beef up its overseas insurance business, USF&G Corp. said yesterday that it has acquired Ashley Palmer Limited in an all-cash transaction.

The London-based firm manages four Lloyd's of London syndicates, which are pools of capital that USF&G will control. The money is generated from investors and used to insure everything from goods aboard ships to homes.

The four syndicates could write up to $300 million in premiums, which would mean a stream of fees for USF&G.

The Ashley Palmer acquisition is a "platform for doing more in the London market," said John Berger, president of F&G Re, USF&G's Morristown, N.J.-based wholly owned reinsurance subsidiary, which will oversee the London operations. "Well-run managing agencies at Lloyd's have been very profitable."

Shares of the Baltimore-based insurer rose 25 cents yesterday, to $20.625.

The Ashley Palmer transaction is subject to approval by Lloyd's, which is expected any day.

The firm's management will remain unchanged, and several of its executives will retain a 20 percent interest in the managing agency. The executives will report to Berger.

The transaction enables Ashley Palmer to "secure a stable long-term capital base," Martin Ashley, who will be deputy chairman of the operation, said in a press release.

Berger said plans to expand the Lloyd's operations are modest, but in the long term, USF&G plans to create its own syndicates.

"Longer term, the sky is the limit," he said.

One of the nation's largest property and casualty insurers with $14.5 billion in assets, USF&G became among the first companies in the world to establish a syndicate and managing agency at Lloyd's about a year ago. Lloyd's, the 300-year-old insurance market, has suffered heavy losses because of asbestos litigation, the Exxon Valdez oil spill and natural disasters that include Hurricanes Hugo and Andrew. Last December, USF&G formed a joint venture with Ashley Palmer to manage USF&G's participation at Lloyd's as sole corporate member of Syndicate 1211.

"This new position at Lloyd's demonstrates our strategy of prudently growing high-return, specialty businesses," said Andrew Stern, USF&G's senior vice president of strategic planning.

"It will allow us to deploy more capital into Lloyd's as conditions warrant."

Reinsurers such as F&G Re specialize in underwriting some of the risk taken on by insurance companies, with their revenues coming in part from premiums insurance companies pay them.

F&G Re has written $4.9 billion in premiums since 1984, and it is a highly profitable business line of USF&G's, making 6.5 cents for every $1 in premium written.

Pub Date: 12/21/96

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